C-1251/79

JUDGMENT OF 27. 1. 1981 — CASE 1251/79

In Case 1251/79

ITALIAN REPUBLIC, represented by Arnaldo Squillante, Consigliere di Stato, acting as Agent, assisted by Oscar Fiumara, Avvocato dello Stato, with an address for service in Luxembourg at the Italian Embassy, applicant, v

COMMISSION OF THE EUROPEAN COMMUNITIES, represented by its Legal Adviser, Richard Wainwright, acting as Agent, assisted by Guido Berardis and Gianluigi Campogrande, members of its Legal Department, with an address for service in Luxembourg at the office of its Legal Adviser, Mario Cervino, Jean Monnet Building, Kirchberg,

defendant,

APPLICATION for a declaration that Commission Decision 79/898/EEC of 12 October 1979 concerning the clearance of the accounts presented by the Italian Republic in respect of the European Agricultural Guidance and Guarantee Fund, Guarantee Section, Expenditure for 1973 (Official Journal 1979, L 278, p. 19) is void, in so far as it excludes from the expenditure recognized as chargeable to the Fund the sum of LIT 604 863 175 in respect of the payment of aid under long-term storage contracts for wine for the 1971/72 wine-growing year,

Facts and Issues

The facts of the case, the course of "In the case provided for in paragraph the procedure and the conclusions, (1), contracts shall be valid for a submissions and arguments of the parties minimum period of nine months. Such may be summarized as follows : contracts (hereinafter called 'long-term contracts') may only be entered into during the period from 16 December to 15 February of the same wine-growing I — Facts and written p r o c e d u r e year".

JUDGMENT OF 27. 1. 1981 — CASE 1251/79

23 December 1971, the Council As the second recital of the preamble to amended the requirement for the Regulation No 176/72 indicates, the conclusion of long-term contracts as Commission took the view that for the from the 1971/72 wine-growing year, 1971/72 wine-growing year the way in replacing the words "five months" in which the intervention agencies operated Article 5 (1) of Regulation No 816/70 in one producer Member State did not by "four months". According to the first yet permit storage contracts to be recital of the preamble to Regulation No concluded promptly after the pres- 2722/71, this reduction proved necessary entation of the application and that to because, despite the exceptional harvest, mitigate the consequences of that the procedure for long-term private situation for producers in that Member storage contracts had not been able to State provision should be made for a operate in the 1970/71 wine-growing measure of retroactivity in respect of year. contracts for which applications were received after 30 November 1971. Next, the conclusion of long-term storage contracts for the 1971/72 wine- This action concerns long-term storage growing year was made possible by contracts covered by Article 5 (1) of Regulation No 2837/71 of the Regulation No 816/70, which, following Commission of 27 December 1971 the adoption of Regulation No 2837/71, granting aid for the private long-term were concluded pursuant to Regulation storage of certain table wines (Journal No 176/72. Officiel 1971, No L 285, p. 78), which entered into force on 30 December 1971.

ITALY v COMMISSION

According to Article 8 of Regulation inafter referred to as "AIMA") of aid for (EEC) No 1723/72 of the Commission the long-term storage of wine for the of 26 July 1972 on making up accounts 1971/72 wine-growing year, in respect for the European Agricultural Guidance of which the Government of the Italian and Guarantee Fund, Guarantee Section Republic requested the clearance of the (Official Journal, English Special accounts for the 1973 financial year. Edition, Second Series III), the decision clearing the accounts includes the determination of the amount of 2. The source of the dispute is a expenditure incurred in each Member conflict of opinion on the interpretation State during the year in question of the provisions inserted into Article 8 recognized as chargeable to the (1) of Regulation No 1437/70 by Regu- Guarantee Section of the Fund. lation N o 176/72.

During the preparation of the clearance B — The facts of the accounts in respect of the Guarantee Section of the Fund for the 1973 financial year, the Commission 1. By decision of 12 October 1979, examined the application of those notified to the Government of the Italian provisions by AIMA. In the Draft Republic by letter of 18 October 1979, Summary Report on the conclusions the Commission determined the total from the preliminary work for the expenditure by the Italian Republic clearance of the EAGGF Guarantee recognized as chargeable to the Section accounts for the year 1973 Guarantee Section of the European Agri- (Document No VI/369/79, p. 39) it cultural Guidance and Guarantee Fund. adopted the following position on the matter:

Community rules, and nearly all the parties to produce further infor- contracts began on a date after the mation on the reasons for the adoption permitted limit under the maximum of Regulation N o 176/72 and on the backdating of 30 days provided for in storage contracts relating to the Regulation (EEC) N o 176/72 in respect contested amount of aid. of applications submitted between 30 December 1971 and 15 February 1972. The replies given indicate that at the meeting of the Management Committee Proper application of Community rules for Wine on 22 December 1971 the required that the exceptional provisions Italian delegation asked whether, as had of Regulation (EEC) N o 176/72 be read been possible for the previous year, the with the general rule contained in the date of validity of the contracts could be basic regulation; as a result these that of the application and not contracts would in any case have had to necessarily that of the conclusion of the be concluded within the authorized contracts. On that occasion the Italian period and the initial date could be delegation explained that AIMA was either that on which the application was overburdened with work and that the submitted or the 30th day before the Italian wine producers would be date of conclusion. Accounts for 1973 adversely affected if it were not possible have been amended accordingly." to consider their applications for that reason.

By a memorandum of 7 July 1979 the Italian agriculture authority disputed the As regards the second question, a view taken by the Commission and synopsis of the contracts concluded by submitted that the aid had been paid in AIMA for the 1971/72 wine-growing accordance with the Community and year lodged by the applicant indicates national rules in force. It confirmed its the following: position during the meeting of the Fund Committee on 11 July 1979, which was devoted to the examination of the draft — The amount of aid in dispute relates for the clearance of the accounts for the to approximately 100 long-term 1973 financial year. storage contracts;

II — C o n c l u s i o n s of t h e p a r t i e s contested decision was based is plainly insufficient. The applicant claims that the Court Although the fourth recital in the should: preamble to the decision states that the Member State was informed in detail of — Declare the decision of the the deduction made and that it was able Commission of the European to give its views thereon, there is no Communities of 12 October 1979 explanation of the reasons which led the void in so far as it excludes from the Commission to maintain the exclusion expenditure chargeable to the despite the detailed observations of the European Agricultural Guidance and national authority concerned. Guarantee Fund the sum of LIT 604 863 175; The defendant considers that this submission is unfounded. It accepts that — Order the defendant to pay the costs. the decision does not include a detailed account of the specific reasons which The defendant contends that the Court determined its content, but contends that should: such an account would have required an extremely long and complicated — Dismiss the application; statement of reasons.

JUDGMENT OF 27. 1. 1981 — CASE 1251/79

(b) The term "conclusion of the contract" Regulation No 2837/71, which entered into force on 30 December 1971. The applicant states first that after the adoption of Regulation No 2837/71 AIMA paid the aid under each contract AIMA took the appropriate measures in respect of a period beginning 30 days with a view to granting the aid to the before the formal execution thereof. producers. The applications for aid must be submitted in duplicate to AIMA through the provincial agricultural Pursuant to Article 5 (5) of Regulation inspectorates, which must verify the No 816/70, cited above, the aid was paid correctness of the information declared under contracts for which application at the place of storage and forward the was made and accepted before original application together with its own 15 February, although the formal report to AIMA within a period not execution of the contract was subsequent exceeding five days following the day on to that date. which the application is received.

AIMA then draws up the contract The applicant maintains that it cannot provided for by the Community regu- subscribe to the Commission's argument lations and sends it to the producer to the effect that the contracts were concerned for the purpose of its auth- "concluded" on a date subsequent to entication by the signature of a notary. 15 February contrary to the conditions The period of nine months laid down by laid down by Article 5 (5) of Regulation the Community regulations begins to run No 816/70. from the date of that signature. The aid is paid for the corresponding period, Article 8 of Regulation No 1437/70 It submits that the contracts in question having been construed as meaning that were all "concluded" during the period the contract may only have effect from from 16 December to 15 February, even the day on which it is concluded by a if their "formal execution" took place formal instrument. later.

with producers who apply for them, that "a contract may not be concluded storage contracts". In Italy, after the for a period beginning before the date of adoption of Regulation No 2837/71, the conclusion of the contract", cannot once an application was submitted in the preclude the interpretation which it form prescribed by the Community suggests. Whilst that provision was not provisions, it was immediately accepted felicitously phrased, it would appear, by the intervention agency, provided that none the less, that when it speaks of a its content complied with the require- contract being "concluded", it is ments laid down by the Community referring to the decisive moment from

As soon as it is established that that undertaking has been observed, the intervention agency The defendant, for its part, observes that pays aid to the producer, which is the function of the storage contract is to certainly not the counterpart of a benefit, create reciprocal obligations between the but merely a contribution by way of producer, who untertakes to store a incentive. Under Article 1333 of the certain quantity of table wine and not to Italian Civil Code, once an offer by a place it on the market for a certain producer to make such an undertaking period, on the one hand, and the has been submitted in due and proper intervention agency, on the other, which form to the intervention agency, the undertakes to pay the prescribed aid, contract must be regarded as concluded. after establishing that the conditions According to this proposition too, the relating thereto are fulfilled. storage contracts were concluded before

It admits that in the case in question such crystallization took place without The defendant points out that, before the exception after 15 February. formal conclusion of the contract, the producer who applies for it, is not yet certain that the intervention agency will Finally, the applicant points out that the conclude the contract; in those circum- first subparagraph of Article 8 (1) of stances, he may freely dispose of his Regulation No 1437/70, which provides product. Cases are not uncommon where

the producer in fact sells his wine during N o 176/72, to grant a derogation from the period between the submission of the the rule in the first subparagraph of application and the date fixed for the Article 8 (1) of Regulation N o 1437/70, formal conclusion of the contract. The having regard to the assertion by the intervention agency, for its part, enjoys a Italian authorities that they were not in a certain discretion concerning the verifi- position to carry out immediately the cation of the conditions which must be verifications required for the conclusion fulfilled under the Community regu- of the contracts, and also for the reasons lations applicable. stated in the preamble to Regulation N o

acceptable. Indeed, the manifestation of 176/72 provided for a legal fiction in the the two parties' intentions can occur only sense that it dissociated the time, at which when the contract is formally executed, the contract was formally concluded because it is only from that moment on from that at which it took effect, that the contracting parties are bound to bringing the latter forward to the time at observe their respective obligations. which the application was received, whilst limiting the retroactivity to not more than 30 days.

inconceivable. Moreover, even if it were accepted that the verification must The defendant states further that it had precede the conclusion of the contract, decided, by the adoption of Regulation instead of being intended as a condition

subsequent of a contract already their produce well before 15 February concluded, in practice such verification 1972, even if the execution of formal was carried out immediately after the contracts, which determined the submission of the application by the beginning of the period of storage, took provincial agricultural inspectorate, place after some months' delay. acting on behalf of AIMA. On the one hand, the producers were Under the contractual scheme adopted obliged to store their produce for a much by the Community regulations, the longer period than that laid down by the concurrence of the parties' intentions, Community regulations, since Regulation which, under Article 1326 of the Italian N o 176/72 does not allow their Civil Code, of itself determines the contracts to be back-dated by more than conclusion of the contract, occurs when one month. On the other hand, the the application from the producer longer withdrawal of the product from reaches the intervention agency or, at the the market certainly helped to stabilize latest, when it is established by that prices. If, in the final analysis, AIMA had agency that the application complies with not concluded the storage contracts with the legal conditions. In the cases in the producers, the aim of the regulations question, those dates were prior to would not have been achieved, and the 15 February. adoption of Regulation No 176/72 would have served no purpose. In its rejoinder, the defendant maintains that in the system established by the In interpreting the Community regu- Community rules the formal conclusion lations excessive formalism, which of the storage contract between the distorts their scope and their effects, producer and the competent intervention must therefore be avoided. agency constitutes the essential condition for the grant of aid. As regards the achievement of the objectives of the Community regulations, (c) The purpose of the regulations in the defendant asserts that the argument put forward by the applicant is question untenable. It points out that, as the inspections carried out by the Fund The applicant recalls that the objective of clearly indicated, the contracts for the the Community regulations is to 1971/72 wine-growing year were withdraw from the market surplus concluded with considerable delays, quantities of wine, by virtue of the which in some cases even extended storage commitment which the producers beyond the normal period of validity of assume, when the greatest surplus nine months, reckoning from 15 appears, namely between 16 December February 1972. During those delays the and 15 February, and for a minimum applicant producers considered that they period of nine months, that is to say were free to market their products, until the new wine harvest. It emphasizes which they in fact did in certain cases. that that aim was fully achieved in the Such a situation is likely to prejudice the case in question. attainment of the objective of the regu- lations in question.

promote the additional function of the AIMA to alter the procedure followed storage contracts, which consists in and to "execute formal contracts" before ensuring accurate knowledge of the 15 February. market with a view to new measures of intervention. By reason both of the imperfect wording of the Community rules and in view of the confirmation, implied at least, (d) The alleged breach of the principle of of AIMA's interpretation by the the protection of legitimate expectation Commission, that allegedly incorrect interpretation must be deemed to be Finally, the applicant relies, in the alter- attributable to the Community native, on the judgments of 7 February institutions. 1979, in which the Court stated that the rules of Regulation (EEC) No 729/70 The defendant states that it never must be interpreted as meaning that the supported, even by implication, a view Commission is bound to charge to the which was different from the one which Fund expenditure incurred by Member it is defending in this case. It authorized States in a manner which did not comply the derogation contained in Regulation with the Community rules as a result of No 176/72 fully aware that the final an erroneous interpretation thereof, date for the conclusion of the contracts when the incorrect application of was 15 February 1972. Community law is attributable to an institution of the Community (Case 11/76 Netherlands v Commission [1979] Furthermore, the derogations previously ECR 245, and Case 18/76 Federal authorized for the 1970/71 wine- Republic of Germany v Commission growing year, as formulated in Regu- [1979] ECR 343). lation (EEC) No 436/71 of the Commission of 26 February 1971 (Official Journal, English Special Edition In this regard, the applicant claims that it 1971 (I), p. 101) and Regulation (EEC) was the lack of clarity of the Community No 617/71 of the Commission of 24 regulations which gave rise to the March 1971 (Official Journal, English difficulties. The problem of the damage Special Edition 1971 (I), p. 165) plainly incurred by producers as a result of the reveal the clear distinction made between foreseeable delay in the execution of a the application by the producer and the formal contract, which gave rise to the conclusion of the contract. The adoption of Regulation No 176/72, is provisions of those regulations show that closely linked with AIMA's belief that AIMA could not be unaware of the the period of storage begins to run when Commission's view on that matter. the formal contract is executed and not from the date when the contract is concluded. IV — The parties presented oral By enacting Regulation No 176/72 the argument at the sitting on 15 October Commission adopted the view taken by 1980. AIMA with which it was perfectly familiar. If AIMA's conception was based on an incorrect interpretation The Advocate General delivered his of the Community regulations, the opinion at the sitting on 16 December Commission should have requested 1980.

2 Article 5 (5) of Regulation (EEC) N o 816/70 of the Council of 28 April 1970, laying down additional provisions for the common organization of the market in wine (Official Journal, English Special Edition 1970 (I), p. 234), makes the grant of the storage aid conditional on the conclusion of long- term or short-term storage contracts. The same provision, as amended by Regulation (EEC) N o 2504/71 of the Council of 22 November 1971 (Official Journal, English Special Edition 1971 (III), p. 962), states that long- term contracts shall be valid for a minimum period of nine months and that such contracts may only be entered into during the period from 16 December to 15 February of the same wine-growing year. With regard to the application of that provision, Article 8 (1) of Regulation (EEC) N o 1437/70 of the Commission of 20 July 1970, on storage contracts for table wine (Official Journal, English Special Edition 1970 (II), p. 469), provides that a contract may not be concluded for a period beginning before the date of the conclusion of the contract.

3 For the 1971/72 wine-growing year Regulation No 2837/71 of the Commission of 27 December 1971, granting aid for the private long-term storage of certain table wines (Journal Officiel L 285, p. 78), made possible the conclusion of long-term storage contracts for certain types of table wine.

4 During the period within which long-term contracts for that wine-growing year could be concluded the Commission adopted Regulation (EEC) N o 176/72 of 26 January 1972 supplementing Regulation (EEC) N o 1437/70 on storage contracts for table wine (Official Journal, English Special Edition 1965—1972, p. 44), which added the following paragraphs to Article 8 (1), cited above, of the latter regulation:

7 The Italian Government explains that the act which it describes as the "formal execution" (stipulazione formale) of the contract by AIMA could only occur at the end of a procedure consisting of various stages: first, the submission through the provincial agricultural inspectorates of an application by the producer concerned, containing all the information referred to in Regulation N o 1437/70; secondly, verification at the place of storage of the correctness of that information by the competent provincial inspectorate and the forwarding by the latter of the file to AIMA; finally, the drawing up by AIMA of a list of conditions and of an instrument of acceptance, which it sent to the producer concerned for authentication by the signature of a notary. The government admits that in the case of the long-term contracts referred to in the application that "formal execution" occurred after the final date of 15 February 1972.

ITALY v COMMISSION

8 The Italian Government maintains, however, that the contracts in question were “concluded” between 16 December 1971 and 15 February 1972, even if their “formal execution” occurred subsequently. It relies for that purpose on the general rules of the law on contract, according to which a contract is concluded at the point at which the intentions of the two parties concur. By publicly announcing the possibility of concluding long-term contracts on conditions laid down by the Community regulations, the intervention agencies make an offer to the public, which is accepted by the wine producer as soon as his application is submitted.

JUDGMENT OF 17. 1. 1981 — CASE 1251/79

12 Under those circumstances an interpretation of the term "conclusion" of the contract which would enable a right to the Community aid to be established, even before it was determined that the conditions governing that aid were fulfilled, cannot be accepted. Indeed, the result of such an interpretation would be that the action needed in order to verify whether those conditions were fulfilled could take place at any time during the nine months' period of validity laid down for the contract, or even after the expiry of that period.

1 3 It follows from that that there are no grounds for drawing a distinction between the "conclusion" of the contract and its "formal execution". Moreover, Article 9 of Regulation No 1437/70, which lays down the written form for the contract, is based on the assumption that the contract does not become perfect until the preparation of the written instrument, after veri- fication of all the relevant information by the intervention agency. The argument put forward by the Italian Government must therefore be rejected.

1 4 The Italian Government also submits that Regulation No 176/72 of the Commission made possible the conclusion of long-term contracts after 15 February 1972. The retroactive effect provided for by that regulation would serve no purpose if the contracts had nevertheless to be concluded before that date.

15 That argument cannot be accepted. Regulation No 176/72 of the Commission amended Article 8 (1) of Regulation No 1437/70, a provision which is concerned only with the commencement of the period of nine months for which a contract may be concluded. But the period during which the contracts must be concluded (the period between 16 December and 15 February) was unaffected by that amendment; that period was determined by Council regulations, in particular by Regulations Nos 816/70 and 2504/71.

19 From those circumstances it is clear that the Italian Government has not been able to establish that its incorrect interpretation of Regulation No 176/72 was attributable to the conduct of the Commission.

20 Finally, the submission based on the insufficient statement of the reasons on which the contested decision was based must be considered. In so far as this submission concerns the interpretation of Regulation No 176/72, the problem has already been dealt with above; for the rest, it must be said that it disregards the fact that the Italian Government was closely involved in the process by which the decision came about and that it was therefore aware of the reasons for which the Commission took the view that it must not charge the sum in dispute to the Fund.

JUDGMENT OF 27. 1. 1981 — CASE 1251/79

2i Under those circumstances, and in the particular context of the preparation of the decisions concerning the clearance of accounts, the statement of the reasons on which the contested decision was based must be regarded as sufficient.

22 It follows that the application must be dismissed.

Costs

Pescatore Mackenzie Stuart Koopmans

O'Keeffe Bosco Touffait Due

Delivered in open court in Luxembourg on 27 January 1981.

A. Van Houtte P. Pescatore Registrar President of the Second Chamber, Acting as President