C-273/81

on the validity of the following regulations:

Regulation (EEC) No 987/68 of the Council of 15 July 1968 laying down general rules for granting aid for skimmed milk processed into casein or caseinates (Official Journal, English Special Edition 1968 (I), p. 262); and

Regulation (EEC) No 756/70 of the Commission of 24 April 1970 on granting aid for skimmed milk processed into casein and caseinates (Official Journal, English Special Edition 1970 (I), p. 201),

THE COURT (First chamber)

composed of: A. O'Keeffe, President of Chamber, G. Bosco and T. Koopmans, Judges,

Advocate General: S. Rozès Registrar: P. Heim

Article 2 (2) of Regulation No 756/70, By letter of 14 August 1979, the Fonds as amended by Article 1 (2) of Regu- d'Orientation et de Régularisation des lation No 455/73 and by Article 1 of Marchés Agricoles [Agricultural Markets Regulation No 2940/73 of the Com- Guidance and Stabilization Fund, herein- mission of 29 October 1973 (Official after referred to as "the Fund"], the Journal 1973, L 301, p. 23), lays down in French intervention agency, informed the its final subparagraph that in order to Société that since the lot in question was benefit from the aid "the caseins and substandard it would not be subsidized. caseinates mentioned in (a) to (0 of the On 20 August 1979, the Fund pointed

JUDGMENT OF 2. 12. 1982 — CASE 27J/8I

out that the aid would be granted only in regulations are thus valid inasmuch as respect of such processed quantities as they provide no distinction as to the were strictly in compliance with the sanction in the case where skimmed milk criteria as to quality laid down by Regu- is not processed and in the case where lation No 756/70 of the Commission, after processing the product deviates excluding any quantities processed in the slightly from the formula laid down in second half of June 1979. the provisions of the regulations."

SOCIÉTÉ LAITIERE DE GACÊ v FORMA

sought to achieve two objectives which justification for withholding the vary considerably in importance. requested aid in its entirety.

The chief aim of the regulation Only a failure to effect processing could providing for the aid in question is to justify a refusal to grant an aid for the encourage producers to process skimmed manufacture of caseinates. The milk into caseins or caseinates. imposition of a fine to penalize a slight departure from the criteria would be quite sufficient to ensure that the processing operations are carried out The secondary aim consists in properly. encouraging producers to comply in the manufcture of the processed product with the criteria as to quality which The Société emphasizes that such a would enable them to obtain an aid solution was adopted by the Commission varying in amount according to the in Regulation (EEC) No 1725/79 of 26 result achieved. July 1979 on the rules for granting aid to skimmed milk processed into compound feeding-stuffs and skimmed-milk powder Failure to comply with the criteria intended for feed for calves (Official relating to quality cannot therefore lead Journal, L 199, p. 1) which lays down to the aid's being withheld in its entirety, that the amount of aid is to be reduced especially since in the present case, by a certain percentage in respect of such neither the Community nor the pur- quantity of the processed product as fails chasers of the caseins at issue have to meet the requirements of the regu- suffered the slightest loss as a result. lation.

The Société adds that if it had processed the skimmed milk into products other The Fund is of the opinion that, by than caseinates, the consequences for it laying down the principle of a variation would have been far less damaging since in the aid according to the product it would have suffered merely a which results from the processing of reduction in the aid amounting in skimmed milk and according to the absolute terms to between FF 50 000 and quality of that product, the aforesaid 60 000. A penalty of that amount would provision accurately reflects the desire to be sufficiently severe to encourage establish a relationship between the undertakings to exercise care in quality of the product resulting from the supervising the manufacture of their processing and the aid granted. products but would remain consistent with the principle of proportionality. To withhold the aid in its entirety because the product departs slightly from the The Fund considers that to lay down the criteria laid down is however a measure principle of a variation in the aid cannot likely to place the undertaking in be contrary to the principle of pro- difficulty; such a risk cannot be justified portionality or be regarded as excessive either by the seriousness of the in relation to the objective pursued, infringement or by any damage caused especially since such variation is regarded to the Community which has not as a possibility and not as an obligation. suffered any loss. As far as the Société is concerned, the loss incurred as a result of the Fund's refusal to grant it the aid applied for amounts to FF 1 326 117.28, As regards the question of the validity in a sum greater than the company's share the light of the principle of pro- capital of FF 1 000 000. The Société, portionality of Article 2 of Regulation which had in accordance with Article 2 No 756/70 which precludes (in the (2) of Regulation No 987/68 already version which was in force when the included the aid in the purchase price events at issue occurred), without any paid to the suppliers of skimmed milk, possible variation, payment of the aid has been unable to compensate for the unless the caseins and caseinates meet all difference between that price and the the requirements as to composition set resale price of the finished product which out in the annexes to the regulation, no is much lower. reply is given by the Fund on the ground that the problem is a serious and an awkward one which it is for the Court to resolve.

It recalls that the said regulation does liberty to organize its commercial not contain any criteria as to quality with activities as it sees fit, though it may not which the products must comply in order qualify for an aid provided for by the to qualify for an aid but merely provides Community legislation if those activities in Article 3 (1) that the aid may vary fail to satisfy the conditions for payment according to the products obtained of such aid. (casein or caseinates) or according to the quality of those products. Next, addressing itself to the question put to the Court, the Commission In the Council's opinion, the question of questions whether Regulations Nos validity can refer only to Regulation No 987/68 and 756/70 may be regarded as 756/70 of the Commission which alone having contravened the principle of contains specific criteria for determining proportionality. both the grant of the aid and the variation of the aid according to the quality of the product. The Commission begins by observing that the processing of skimmed milk is not the only objective pursued by the The Commission of the European Community legislation. That legislation Communities considers it appropriate pursues another parallel objective to begin by making some remarks concerning the quality of caseins and concerning the facts of the case. caseinates in order to ensure and to widen sales outlets for skimmed milk and to restrict the amounts of aid to be paid It strongly disagrees with the argument in respe« of that product. that a difference of 0.6% in the degree of moisture in a caseinate may be regarded as negligible. The water In order to attain those objectives, the content of caseinates is an essential Community legislation provides for feature of their quality in view of the fact a system laying down minimum re- that it may, in cases where it exceeds quirements as to quality which are to be certain maximum figures, lead to an met by processed products with the alteration in the taste and thus to a result that the aid may not be paid in the restriction in the use of the product. event of non-compliance with those Variations which may appear to be slight requirements. may therefore have appreciable reper- cussions on the quality of the product and on its competitiveness on the The Commission takes the view that the Community or world market. methods adopted by the Community legislation are necessary, sufficient and not excessive in relation to the objectives In another remark, the Commission pursued. considers the nature of the refusal to allocate an aid. Contrary to the opinion expressed by the Société and the national They are necessary inasmuch as the court, the Commission takes the view quality of the processed product could that such refusal can in no way be not be guaranteed if compliance with a regarded as a sanction the purpose of maximum water content were not which is to penalize the failure to fulfil compulsory although such a guarantee is an obligation created by Community law. indispensable to maintain a sales outlet In practice, every undertaking is at for skimmed milk.

Decision

1 By judgment of 16 June 1981, which was received at the Court on 12 October 1981, the Tribunal Administratif [Administrative Court], Paris, referred to the Court of Justice for a preliminary ruling under Anicie 177 of the EEC Treaty a question on the validity of Regulation (EEC) No 987/68 of the Council of 15 July 1968 laying down general rules for granting aid for skimmed milk processed into casein or caseinates (Official Journal, English Special Edition 1968 (I), p. 262) and of Regulation (EEC) No 756/70 of the Commission of 24 April 1970 on granting aid for skimmed milk processed into casein and caseinates (Official Journal, English Special Edition 1970 (I), p. 201), as amended by Regulation (EEC) No 455/73 of the Commission of 31 January 1973 (Official Journal 1973, L 53, p. 8) and by Regulation (EEC) N o 2940/73 of the Commission of 29 October 1973 (Official Journal 1973, L 301, p. 23).

SOCIÉTÉ LAITIERE DE GACĒ v FORMA

2 The question was raised in a dispute pending before the national court between Société Laitière de Gacé (hereinafter referred to as "the Société") and the Fonds d'Orientation et de Régularisation des Marchés Agricoles [Agricultural Markets Guidance and Stabilization Fund, hereinafter referred to as "the Fund"] concerning the defendant's refusal to pay the plaintiff Community aid for 85 625 kg of caseinates manufactured from skimmed milk, in the second week of June 1979.

j As a result of the incorrect setting of the drier in the factory manufacturing the caseinates, which the producer failed to notice, the water content of the products in question exceeded by ,Q.6°/o the minimum water content of 6% prescribed by Annexes I, II and HI of Regulation N o 756/70 of the Commission in the version which was in force at the time; the Fund therefore took the view that the caseinates did not satisfy the conditions required in order to benefit from the Community aid in view of the fact that, according to Regulation No 756/70, only caseins and caseinates which "correspond to the specifications laid down in the annexes" qualify for the aid.

7 Regulation (EEC) No 804/68 of the Council of 27 June 1968 on the common organization of the market in milk and milk products (Official Journal, English Special Edition 1968 (I), p. 176) provides, in Article 11 (1), that aid is to be granted for Community-produced skimmed milk processed into casein "if such milk and the casein produced from it reach certain standards", to be defined in subsequent regulations. Regulation No 987/68 extends to caseinates the same treatment as that accorded to casein. Amongst the conditions which must be satisfied if the aid is to be granted, Regulation No 756/70 includes those relating to quality set out in the annexes thereto.

8 The Société argues that maintenance of high quality in the production of caseinates by imposition of the requirement that the maximum water content must be complied with is a secondary objective compared with the promotion of the processing of skimmed milk into caseinates and that, accordingly, the refusal to grant any aid whatever where the maximum water content is exceeded is quite out of proportion if it is used to ensure the attainment of an objective which is of marginal importance when the principal objective of the Community legislation is achieved in its entirety. The Commission, however, contends that the two objectives in question are of equal importance and that their attainment can and must be guaranteed by the same means.

9 It must be emphasized in that regard that maintenance of the quality of the product constitutes a fundamental objective of the Community legislation in question. One of the general aims of the common organization of agri- cultural markets is to ensure the production of high quality casein and caseinates which, as is apparent from the fifth recital in the preamble to Regulation No 987/68 leads, in particular, "to better outlets and better returns on the sale of skimmed milks". The choice of that objective, as a result of which on the market the products in question are described by reference to their quality, is fully justified.

JUDGMENT OF 2. 12. 1982 — CASE 273/81

is That argument would be relevant only if caseinates for human consumption were always sold almost as soon as they had been manufactured and were never stored for more than a short period. The Société, which put forward that argument, has itself stated that "caseinate manufactured directly from fresh milk is in most cases used very soon after production and is not intended to be stored for long periods". The Société therefore recognizes that, in certain cases, storage for long periods cannot be ruled out. In those circumstances, the requirement relating to the maximum water content must be strictly complied with in order to prevent the risk of any deterioration in the taste of the product.

i6 In the light of all the foregoing considerations, the conclusion must be drawn that the provisions of Regulation No 756/70, which makes the grant of aid conditional upon strict compliance with the maximum water content, are not contrary to the principle of proportionality. The Commission was justified in taking the view that in order to sell the products in question the maintenance of high quality was necessary and that the grant of aid at a reduced rate for a product of substandard quality was not in keeping with that aim.

i7 Accordingly, the answer to the question submitted by the Tribunal Administratif, Paris, must be that consideration of the question raised has disclosed no factor of such a kind as to affect the validity either of Regu- lation (EEC) No 987/68 of the Council providing for aid for the processing of skimmed milk into casein and caseinates, or of Regulation (EEC) No 756/70 of the Commission laying down criteria regarding the quality of the processed product.

Consideration of the question raised has disclosed no factor of such a kind as to affect the validity either of Regulation (EEC) No 987/68 of the Council providing for aid for the processing of skimmed milk into casein and caseinates, or of Regulation (EEC) No 756/70 of the Commission laying down criteria regarding the quality of the processed product.

O'Keeffe Bosco Koopmans

Delivered in open court in Luxembourg on 2 December 1982.

For the Registrar H. A. Rühi A. O'Keeffe Principal Administrator President of the First Chamber

O P I N I O N OF MRS ADVOCATE GENERAL ROZÈS DELIVERED O N 23 SEPTEMBER 1982 '

Mr President, referred to as "the Société") is, as I Members of the Court, stated in my opinion in Case 272/81 RU-MI Sari, very similar to that case although, for the reasons which I gave in Case 273/81, in which the plaintiff is that opinion, this case must be dealt with Société Laitière de Gacé (hereinafter separately.