C-107/80

JUDGMENT OF 3. 6. 1981 — CASE 107/80

basic agricultural products in order to (EEC) No 355/77 is concerned with raise the profitability of farms to a improving the processing and suitable level, whereas Regulation marketing of agricultural products.

In Case 107/80

GIACOMO CATTANEO ADORNO, of Gabiano Monferrato, Italy, represented by Emilio Cappelli and Paolo de Caterini of the Rome Bar, acting as Agents, with an address for service in Luxembourg at the Chambers of Charles Turk, 4 Rue Nicolas Welter, applicant, supported by

T H E GOVERNMENT OF THE ITALIAN REPUBLIC, represented by Oscar Fiumara, Avvocato dello Stato, acting as Agent, with an address for service at the Italian Embassy in Luxembourg, intervener,

v

gives the following

JUDGMENT

Facts and Issues

The facts of the case, the course of the for the proper working of the common procedure, the conclusions and the market. submissions and arguments of the parties may be summarized as follows: Such a measure is provided for by Council Regulation (EEC) No 355/77 of 15 February 1977 on common measures to improve the conditions under which agricultural products are processed and I — Facts and procedure marketed (Official Journal 1977, L 51, p. 1), as last amended by the Act concerning the Conditions of Accession 1. Articles 1 (3) and 6 of Regulation of the Hellenic Republic and the (EEC) No 729/70 of the Council of Adjustments to the Treaties (Official 21 April 1980 on the financing of the Journal 1979, L 291, p. 17). The regu- common agricultural policy (Official lation provides for the award of capital Journal, English Special Edition 1970 (I), grants for investment projects which p. 218) provides that the Guidance form part of specific programmes drawn Section of the European Agricultural up by the Member States relating to Guidance and Guarantee Fund [here- facilities for processing and marketing inafter referred to as "the Fund"] shall agricultural products. In order to be finance common measures decided on by eligible for a contribution from the Fund the Council in accordance with the projects must, pursuant to Article 9 (1): procedure laid down in the third sub- paragraph of Article 43 (2) of the Treaty in order to achieve the objectives set out "contribute to improving the situation of in Article 39 (1) (a) of the Treaty, the basic agricultural production sector including structural adaptation necessary in question; in particular they must

"Projects which are eligible for Community aid under other common On 30 April 1979 Mr Cattaneo Adorno measures within the meaning of Article 6 submitted through the Italian Govern- (1) of Regulation (EEC) No 729/70 ment in accordance with Article 13 of shall not come within the scope of this Regulation No 355/77 an application for regulation". aid from the Fund made in accordance with the rules laid down in Commission Regulation N o 219/78 of 13 January The measures laid down in Council 1978 on applications for aid from the Directive 72/159/EEC of 17 April 1972 Guidance Section of the European Agri- on the modernization of farms (Official cultural Guidance and Guarantee Fund Journal, English Special Edition 1972 for projects to improve the conditions (II), p. 324) as last amended by Council under which agricultural products are Directive 80/370 of 26 March 1980 processed and marketed (Official Journal (Official Journal 1980, L 90, p. 43) 1975, L 35, p. 10). The application constitute together another common concerns an investment project for the measure within the meaning of Article 6 creation of a new wine-making centre of Regulation (EEC) N o 729/70. Under designed to improve the processing into the terms of that directive Member States wine of the grapes produced on the are to introduce a system of selective farm, to rationalize the storage and pres- incentives to farms suitable for develop- ervation of the wine, to improve ment, designed to encourage their transport between the various terrains operation and development under and to shorten the marketing channels rational conditions. According to Articles for the wine. In his application Mr 2 and 4 of the directive farms are Cattaneo Adorno stated that he intended considered suitable for development by means of this new venture to ration- where the farmer draws up a plan for the alize the process of making wine from development of the farm business which the grapes produced on his farm and to shows that, upon its completion, the improve marketing channels for the farm undergoing modernization will be wine, at the same time improving the capable of attaining as a minimum a level quality, presentation and market of earned income comparable to that preparation of his product.

The applicant's submissions are directed 3. By an application which was lodged primarily against the interpretation of at the Court Registry on 3 April 1980 law on which the Commission's disputed the applicant brought the present decision was based. In rejecting the proceedings under Article 173 of the application under Article 15 (2) of Regu- Treaty for a declaration that the decision lation No 355/77 on the ground that the of the Commission contained in the project fell within the scope of Directive letter of 24 January 1980 was void. 72/159/EEC on the modernization of farms the Commission made a By an application which was lodged at hypothetical and unjustifiable distinction the Court Registry on 4 August 1980 the between the scope of the regulation and Government of the Italian Republic that of the directive. The applicant applied to intervene. It was permitted to makes five submissions in support of his do so by an order of the Court of objections. 17 September 1980. First, he claims that the project which was submitted cannot be classified as a On hearing the report of the Judge- plan for improving existing farm Rapporteur and the views of the structures, but is directed, rather, Advocate General the Court decided to towards the creation of a new unit of open the oral procedure without any production for processing and marketing. preparatory inquiry. However, it In view of the extent and nature of its requested the Commission to produce features the project is certainly capable the complete file on the application for of contributing towards "the achieve- aid. ment of improvement and rationalization of processing and marketing structures in respect of agricultural products and of [having] a lasting beneficial effect on II — C o n c l u s i o n s of t h e p a r t i e s agriculture" (fourth recital in the preamble to Regulation No 355/77). The applicant claims that the Court should: Secondly, the decision is vitiated by infringements of essential procedural requirements, in the first place, because — Declare the impugned decision void it contains an insufficient statement of under Articles 173 and 174 of the the reasons on which it is based, and in EEC Treaty; the second place, because it was adopted without the prior opinion of the — Order the Commission to pay the Standing Committee on Agricultural costs. Structures, as required by Articles 14 and

22 of Regulation (EEC) N o 355/77, between those who are farmers and having been obtained. those who are not. In his opinion the application for aid would certainly have been accepted if it had been submitted by someone who was not a farmer, but it In the third submission the applicant was classed with those applications claims that Directive 72/159/EEC concerning the modernization of farm provides for a system of selective structures solely because it was submitted incentives to farms "suitable for by a farmer. development" and where the farmer has an income below that which is aimed at by the modernization. Contrary to what has been maintained by the Commission, The defendant opens its case by setting therefore, the directive cannot apply to out its views on the relationship between farmers who, like the applicant, run Directive 72/159/EEC and Regulation advanced and competitive agricultural No 355/77. undertakings. The regulation, by contrast, covers exclusively improve- ments to agricultural processing and marketing structures; consequently the Originally measures relating to agri- projects which are submitted must be cultural structures, including their financing, were covered in a general assessed solely in the light of their fashion by Part Two of Regulation N o capacity for achieving those ends, 17/64 of the Council of 5 February 1964 without consideration of the circum- on the conditions for granting aid from stances connected with the income and the European Agricultural Guidance development of the undertakings in and Guarantee Fund (Official Journal, question. English Special Edition 1963-1964, p. 103). Article 6 of Regulation (EEC) No 729/70 on the financing of the common agricultural policy, however, provided Next he points out that under the for the progressive substitution of provisions in Directive 72/159/EEC it is financing of common measures for the for the national authorities to determine financing of the measures envisaged in who are to be the actual beneficiaries Regulation N o 17/64. By contrast of the system of structural aid. The Directive 72/159/EEC, which constitutes Commission may not substitute itself for a common measure within the meaning those authorities; it has therefore no of Article 6 of Regulation (EEC) N o power to adopt a different decision, once 729/70, laid down exhaustive rules of the appropriate national institutions have Community policy in relation to the given the favourable opinion which modernization of farms. Hence the accompanies the application sent to the directive constitutes a lex specialis Commission, on the question whether covering exclusively part of the general the project involved is in conformity with sphere covered by Regulation No 17/64. the programmes for rationalizing the development and marketing of agri- cultural products provided for in Title I of Regulation (EEC) No 355/77. Bearing in mind the aims of the directive and the principle laid down in Article 38 (1) of the Treaty, the concept of the "modernization of farms" must embrace Lastly, the applicant considers that the any operation concerned with developing Commission's decision discriminates an undertaking, covering both the

production and the initial processing and relating to the status of the applicant, or marketing of the products of the under- to his business, have been met. taking in question, provided that the operation satisfies the concept of a "plan for the development" of a farm business referred to in Article 2 (d) of the directive and provided that it is carried It adds that its interpretation is out by a farmer without altering the supported first by a consideration which strictly agricultural character of his is historical in character, namely that

part, introduced another common taking no account of considerations measure within the meaning of Article 6 relating to the status of the beneficiary, of Regulation (EEC) N o 729/70, the which is referred to in Article 19 of the purpose of which was to improve the regulation, or the form of the business in conditions for processing and marketing question. Moreover, as far as the system of agricultural products. It thus covers of common measures is concerned, it another portion of the general sphere of is inconceivable that the legislature application of Regulation N o 17/64. intended to allow aid on the more However, as compared with the above- advantageous terms of the regulation to mentioned directive the regulation go to investments concerned exclusively constitutes a piece of legislation which is with the modernization of a farm when not special, but complementary.

JUDGMENT OF 3. 6. 1981 — CASE 107/80

As to the alleged failure to state the reasons on which the decision challenged Apart from that no proof has been put was based the defendant considers that forward of the facts relied upon as the wording of its letter of 24 January regards the applicant's income. More- 1980 was sufficient to enable both the over, the project submitted by the addressee and the courts to reconstruct applicant was classified as one eligible the process of reasoning which led it to for the aid provided for in the directive that decision. and hence excluded from the scope of

CATTANEO ADORNO v COMMISSION

Regulation (EEC) N o 355/77 on the itself in its memorandum "Agriculture basis of considerations having to do with 80" of 1968 (Mansholt Plan N o 2) in the nature and intended use of the favour of large-scale agriculture based investment, that is to say, regardless of on profitable and competitive farming. the farm's profitability.

That was the premise on which the three The Commission did not, therefore, directives of 1972 on agricultural proceed to identify the beneficiary, structures were adopted, as also, sub- which according to the fourth submission sequently, the directives relating to it has no power to do. disadvantaged and hill regions and those concerning re-afforestation and technical assistance. Regulation (EEC) No 355/77 was adopted in the same context.

In his reply the applicant observes, first, that the description of the Community system relating to agricultural structures On those grounds the applicant contests presented by the Commission does not the arguments put forward by the reflect the aims of the common agri- defendant concerning the relationship cultural policy which underline it. In a between the regulation and the directive. brief sketch of the parallel development of market and pricing policy on the one hand, and structural policy on the other, the applicant emphasizes the funda- It refers in that regard first to Title II of mental choice made by the Commission Directive 72/159/EEC asserting that it

JUDGMENT OF 3. 6. 1981 — CASE 107/80

As to the third submission the plaintiff observes, further, that no provision of Community law prevents a farm which is itself well developed, efficient and As to the allegedly complementary competitive from being eligible for aid nature of Regulation (EEC) No 355/77 "after the production stage", without its the applicant claims that Article 15 (2), being necessary for the benefit gained interpreted in the light of all the therefrom to be shared directly with other producers. Community rules concerning agricultural structures and the logic of the regulation itself, contains merely a prohibition against the aggregation of aids for a single project. The regulation constitutes in fact a piece of special legislation governing market structures and the In connection with the submission purpose of Article 15 (2) is to avoid concerning lack of competence it refers aggregation of aids in cases where a to the "division of powers between the project concerning market structures officers of the Commission and the coincides with a development project. national administrations" long since

CATTANEO ADORNO v COMMISSION

JUDGMENT OF 3. 6. 1981 — CASE 107/80

Regulation (EEC) N o 355/77 the Fund is defined in very general terms Ín intervener draws a twofold distinction. It Article 19 thereof. observes, first, that according to the fifth recital in the preamble the directive is designed to encourage "rational methods of production" through "reform of the structure of agricultural production". The regulation, by contrast, is designed to encourage the "improvement and rationalization of processing and market- ing structures in respect of agricultural products" and to ensure "a lasting In the opinion of the Italian Goveamment beneficial effect on agriculture" (fourth Article 15 (2) of the regulation is recital). The two instruments have intended to prohibit the accumulation of therefore two specific, and separate, double benefit where a project has spheres of application. However, owing features which satisfy simultaneously the to the interrelationship of those two criteria of the directive and those of the spheres overlapping may occur. Thus, for regulation. It remains to be seen whether instance, a development project under the project which is in theory eligible for the directive may concern likewise the the benefits provided for by the two initial processing of products and affect provisions in question should be granted the marketing of such products. By such benefit wholly under one or other contrast an investment project within the of those instruments on a test of priority meaning of the regulation not only or, on the contrary, partly under one enables wider markets to be opened up and partly under the other, according to but equally "improves the return whether the various operations planned obtained [on products], thus contributing fall within the respective aims of each of towards increased . . . productivity" (first the provisions. recital).

Furthermore, the argument that the area improvement of facilities for processing covered by Community action in favour and marketing agricultural products and of farming as such is exclusively catered the action envisaged by the regulation is for by the directive appears to be of a complementary nature, it must be illogical inasmuch as Regulation (EEC) stressed that whether or not the directive No 355/77 makes provision for applies must be decided not in the ambitious investment projects requiring abstract, as maintained by the Com- financial contribution considerably mission, but on the basis of the greater than that required for a simple individual case. In addition, where the development project. directive does not apply — and that is a decision which is solely for the national Finally, there is no support to be found authorities to make — the regulation in the wording of Article 9 of the regu- may apply. lation for the argument that the grant of economic aid provided for by the regu- lation for producers other than the IV — Oral procedure person who is eligible depends on whether the latter intends to process and market his own products or also those of The parties presented oral argument at others. the sitting on 25 February 1981.

Accordingly, even if the scope of the The Advocate General delivered his directive is held to extend to the opinion at the sitting on 8 April 1981.

Decision

1 By an application lodged at the Court Registry on 3 April 1980 Mr Cattaneo - Adorno brought an action under the second paragraph of Article 173 of the EEC Treaty for a declaration that the Commission's decision of 24 January 1980, refusing to grant aid from the Guidance Section of the European Agri- cultural Guidance and Guarantee Fund [hereinafter referred to as "the Fund"] for an investment project submitted by the applicant under Council Regulation (EEC) N o 355/77 of 15 February 1977 on common measures to improve the conditions under which agricultural products are processed and marketed (Official Journal, L 51, p. 1), is void.

4 The five submissions made relied upon by the applicant are based, in order, on infringement of Regulation (EEC) No 355/77, in particular Articles 1, 6 and 15 (2); on the failure to state the reasons on which the decision in question is based; on the misapplication of Directive 72/159/EEC, especially Articles 1 and 2; on the Commission's lack of power to determine those who are eligible to receive aid under the directive; and on breach of the principle of non-discrimination.

5 Since the dispute is principally concerned with defining the scope of each of Regulation No 355/77 and Directive 72/159/EEC, it is convenient to commence with an examination of the first and third submissions taken together.

6 The applicant claims that Directive 72/159/EEC is not applicable to his case. The system of incentives laid down in that directive is designed in fact to enable "farms suitable for development" to adapt themselves to economic

CATTANEO ADORNO v COMMISSION

progress through an appropriate development scheme. The farms which may benefit from the system under the directive are those where the farmer's earned income is below the level of a fair return, or where the structure is such as to jeopardize the maintenance of that income at such a level. Those conditions are not met in the case of operators who, like the applicant, run farms where an earned income has been achieved which is comparable to, or even greater than, that received for non-agricultural work in the region in question.

7 The applicant further maintains that in those circumstances his case is not caught by Article 15 (2) of Regulation (EEC) No 355/77. That provision, according to which projects "which are eligible for Community aid under other common measures" within the meaning of Regulation (EEC) N o 729/70 do not come within the scope of Regulation (EEC) No 355/77, is solely designed to prevent the aggregation of Community aids for the accomplishment of one and the same project.

10 In addition, the Commission claims that the aid provided for in the directive is meant to finance farms whereas the contributions envisaged in the regu- lation are intended for non-farming activities concerned with initial processing or marketing, even where these are carried out by persons who at the same time follow an agricultural occupation. The true purpose of Regu- lation (EEC) No 355/77 is not to ensure an adequate income for farmers but to improve market structures. That has lead the Commission to conclude that a farmer is not eligible for the aid provided for by the regulation unless he is planning, by improving his facilities for initial processing or marketing, to alter the balance of his activities in such a way as to direct them clearly towards processing and marketing products from other farms. That is not the case of the project submitted by the applicant.

1 1 That last argument must be considered first, for if it is "well founded it is decisive, the applicant not having claimed that the project he submitted was designed to direct his farming activities clearly towards processing and marketing products from farms other than his own.

12 An analysis of the text of, and preamble to, Regulation (EEC) No 355/77 does not support the conclusions maintained by the Commission. According to Article 19 the aid from the Fund provided for by the regulation may be granted to, among others, natural persons who are ultimately responsible for the cost of carrying out the project. Article 6 provides that for the purposes of the regulation "project" means inter alia, any project involving private material investment relating wholly or in part to buildings or equipment for rationalizing or developing storage, market preparation, preservation or

JUDGMENT OF 3. 6. 1981 — CASE 107/80

16 According to the file submitted to the Commission by the applicant the project at issue is not principally aimed at developing those activities which are related to production of the basic product, that is to say, grapes, but to rationalizing the storage and preservation of the wine, improving the quality, presentation and market preparation of wine products and shortening the marketing chain. It follows from the foregoing considerations that such efforts to rationalize are precisely those which are covered by Regulation (EEC) No 355/77 and that in principle the project which was submitted by the applicant must be considered to be an investment project within the meaning of Article 6 of that regulation.

17 That being so, it must be established whether Article 15 (2) of the regulation, which excludes from the scope of the regulation projects which are eligible for Community aid under other common measures, is applicable in the present instance, and it must be ascertained in particular whether the project submitted by the applicant may be classed as a modernization project under Directive 72/159/EEC.

18 The purpose of Directive 72/159/EEC is to initiate the reform of agri- cultural structures. The fifth recital in the preamble states that such reform should be directed towards the formation and development of farms capable of adjusting to economic developments, that is to say, those on which the farmer has adequate occupational skill and competence, on which prof- itability is verified by accounts and which are capable, through the adoption of rational methods of production, of ensuring a fair income and satisfactory working conditions for persons working thereon. Articles 2, 3, 4, 11 and 12 deal with those different factors, whilst other provisions provide for aid in relation to schemes for irrigation or for land reparcelling and for the con- struction of farm buildings or for land improvement operations.

Costs

24 Pursuant to Article 69 (2) of the Rules of Procedures the unsuccessful party is to be ordered to pay the costs. Since the defendant has been unsuccessful it must be ordered to pay the costs, excluding those of the intervener, who has made no application for them.

On those grounds,

THE COURT

hereby rules :

1. The Commission's decision of 24 January 1980 refusing aid from the Guidance Section of the European Agricultural Guidance and Guarantee Fund for an investment project submitted by the applicant under Council Regulation No 355/77 of 15 February 1977 on common measures to improve the conditions under which agricultural products are processed and marketed (Official Journal 1977, L 51, p. 1) is declared void.

OPINION OF MR ADVOCATE GENERAL CAPOTORTI D E L I V E R E D O N 8 A P R I L 1981 1

Mr President, improve the conditions under which Members of the Court, agricultural products are processed and marketed). 1. This opinion concerns an action brought by a private individual under the second paragraph of Article 173 of the The applicant asked for financial aid EEC Treaty. The applicant, Mr from the European Agricultural Cattaneo Adorno, is an Italian national Guidance and Guarantee Fund [herein- and the proprietor of an agricultural after referred to as "the Fund"] for an estate in Piedmont which produces investment project designed to improve mainly wine; his action is for the and expand the manufacture and annulment of the Commission's decision marketing of wine from the grapes of 24 January 1980 rejecting the produced on his farm. He proposed the application for aid which he submitted construction of a wine-making centre on 30 January 1979 pursuant to Council [Enopolio] to replace the old wine- Regulation N o 355/77 of 15 February making facilities, and to modernize not 1977 (concerning common measures to only the production but also the preser-

1 — Translated from the Italian.