C-45/82

JUDGMENT OF 15. 3. 1983 — CASE 45/82

feed. It may be seen from the whole 3. Article 2 (5) of Regulation N o 986/68 corpus of the relevant rules that the laying down general rules for purpose of those rules is not solely the granting aid for skimmed milk and marketing of a product and the relief skimmed-milk powder for use as of pressure on the market in milk but animal feed, according to which "any also the employment of the product product referred to in paragraph (1) for useful economic ends, that is to in respect of which aid is granted may say to make available to breeders be used only as feed", applies equally compound animal feed which is rich to "skimmed-milk powder which has in high-quality protein and is been denatured", which is referred to reasonably priced. In those circum- in paragraph (1) (c) of the same stances the attainment of the objective article. Thus there is no difference of disposing of surplus skimmed milk in treatment between denatured is not, of itself, sufficient to warrant skimmed-milk powder and skimmed- the grant of Community aid in respect milk powder used for animal feed, of a product which is unfit for animal since both products must be capable consumption because it contains a of use as animal feed in order to be toxic substance. eligible for Community aid.

In Case 4 5 / 8 2

K I N G D O M OF T H E NETHERLANDS, represented by A. Bos, acting as Agent, with an address for service in L u x e m b o u r g at the Embassy of the N e t h e r l a n d s ,

applicant, v

COMMISSION O F T H E EUROPEAN COMMUNITIES, r e p r e s e n t e d by J e a n - F r a n ç o i s Verstrynge, a m e m b e r of its Legal D e p a r t m e n t , acting as Agent, with an address for service in L u x e m b o u r g at the office of Oreste M o n t a k o , a m e m b e r of its Legal D e p a r t m e n t , Jean M o n n e t Building, Kirchberg,

gives the following

JUDGMENT

Facts and Issues

I — Facts and written p r o c e d u r e the payments made, and in particular the annual accounts accompanied by the documents required for making up the (a) Introduction balance sheets. The Commission must make up the accounts of the authorities Regulation No 729/70/EEC of the and bodies on the basis of those Council of 21 April 1970 on the documents. financing of the common agricultural policy (Official Journal, English Special Edition 1970 (I), p. 218) contains provisions relating, inter alia, to the The present litigation concerns a financing of operations intended to payment made within the framework regulate the agricultural markets by the referred to above by the Netherlands Guarantee Section of the European Agri- Government in the form of an\ aid for cultural Guidance and Guarantee Fund the production of animal feeding-stuffs (hereinafter referred to as "the Fund"). from skimmed milk. Such aid is provided In particular under Articles 4 (2) and 5 for by Article 10 (1) of Regulation No (2) thereof the Commission must make 804/68/EEC of the Council of 27 June available to the Member States the 1968 on the common organization of the necessary credits so that the designated market in milk and milk products authorities and bodies may, in (Official Journal, English Special Edition accordance with Community rules and 1968 (I), p. 176), and the rules governing national legislation, make the payments its use in the financial year in question referred to in the regulation; for their were laid down in Regulation No part the Member States must ensure that 986/68/EEC of the Council of 15 July such credits are used without delay and 1968 (Official Journal, English Special solely for the purposes laid down and Edition 1968 (I), p. 260) and in Regu- must at regular intervals transmit to the lation No 990/72/EEC of the Commission the documents relating to Commission of 15 May 1972 (Official

Trouw en Co., a company manu- facturing compound feedingstuffs, whose registered office is at Putten in the The error was discovered only in July Netherlands, had at the time in question 1974 when it was reported that calves been using skimmed-milk powder for the which had been fed the product in manufacture of feed for calves to be used question became sick or died. Trouw en as a substitute for milk for many years Co. immediately ceased to manufacture and on a large scale in the context of the the feed in question and withdrew from aid system referred to above. the market consignments which had been manufactured during the period in question and had not yet been used by Article 4 (1) (a) of Regulation No the purchasers. Criminal legal proceed- 990/72, cited above, provides that in ings were brought against Trouw en Co. order to be eligible for Community aid by the authorities in the Netherlands for all compound feedingstuffs manu- breach of the Netherlands Veevoederver- factured from skimmed milk or ordening [Animal feed order] and in the skimmed-milk powder must contain, course of those proceedings (which were inter alia, at least 2 % of starch. In order not in fact pursued to their conclusion to satisfy that requirement Trouw en Co. because the Public Prosecutor withdrew

NETHERLANDS v COMMISSION

(c) Procedure Ill — Submissions and argu- m e n t s of t h e p a r t i e s Upon hearing the views of the Advocate General, the Court decided to open the oral procedure without any preparatory The Netherlands Government submits, as inquiry. However, it requested the the sole ground of its claim, that the Commission to produce two documents expenditure at issue was not cleared before the hearing. although it had been incurred in accordance with the provisions of the regulations in force at the time. Those provisions do not provide for the II — C o n c l u s i o n s of t h e p a r t i e s imposition of any condition regarding the quality of the animal feed. Thus the failure to clear that expenditure amounts The Government of the Netherlands to an infringement of Articles 3 and 5 of claims that the Court should: Regulation No 729/70, Article 2 of

JUDGMENT OF 15. 3. 1983 — CASE 45/82

Regulation No 986/68 and Article 4 of checks required by Article 8 of Regu- Regulation No 990/72. lation No 990/72;

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as feed: . . . to that end the conditions 2.5% of non-butyric fats and at which these products must satisfy should least 2 % of starch or puffed be specified; . . . consequently provision starch where 2.5 • kilogrammes should be made to ensure that aid is of lucerne meal or grass meal granted only for skimmed milk and are incorporated per 100 skimmed-milk powder processed into kilogrammes of skimmed-milk feedingstuffs in accordance with certain powder under the conditions requirements or for skimmed-milk referred to in Anicie 2 (1), powder used after denaturing; . . ., if skimmed-milk powder or skimmed milk is used in the manufacture of compound feedingstuffs, aid should be granted only (b) whose composition is typical of if those feedingstuffs conform to certain animal feedingstuffs, minimum standards as regards composition customarily observed in the industry . . .". (c) which can be used directly as feed and which will not be Article 1 (1) and (2) of the same regu- processed or mixed before they lation provides: reach the farm or breeding or fattening concern where they are used." "(1) Aid shall be granted for skimmed- milk powder which has either denatured . . . or been used in the manufacture of compound The Commission considers that a mere feedingstuffs under the conditions perusal of those provisions is sufficient to laid down in Article 4. show that the view that the Community regulations contain no requirement as to (2) Aid may be granted for skimmed the quality of compound feed manu- milk used in the manufacture of factured from skimmed milk and compound feedingstuffs meeting skimmed-milk powder has no jus- the definition in Article 4"; tification whatsoever. In fact, in the Commission's view, the fact which gives a right to Community aid consists of adding skimmed milk to a compound whilst Anicie 4 (1) of the regulation feed whose composition is typical of such states: feed and which may be used directly as cattle feed; thus if any substance is "(1) Compound feedingstuffs within the added to the compound feed, even meaning of Article 2 (1) (d) of accidentally, which prevents its being Regulation (EEC) No 986/68, shall used as animal feed it is no longer be products : eligible for aid.

for a product which is in surplus, but, on Minister for Agriculture, which was in the contrary, intended that the surplus force at the time, totally prohibited in milk should be used for sound Article 5 (1), inter alia, the manufacture commercial ends in such a way that, on of animal feed which contained mercury. the one hand, manufacturers should not The Commission therefore considers be prompted to increase production and, that, even from that point of view, it is on the other hand, the production of not possible to maintain that feed which meat at reasonable prices should be contains mercury complies with the

problem at issue. The staff of the Fund and that of Regulation No 990/72. In discovered the facts only when making a fact the wording of the earlier regu- check in April 1979. lations, which is practically identical, shows without any ambiguity that skimmed milk and skimmed-milk powder, in order to be eligible for aid, must be The Netherlands Government contends, used in the manufacture of compound in its reply, that it is not possible to animal feed whilst the wording employed deduce any argument in support of the in Regulation No 990/72 provides that Commission's view from the terms of that compound animal feed must be Article 10 (1) of Regulation No 804/68 capable of use directly as cattle feed. ("aid shall be granted for skimmed milk and skimmed-milk powder which . . . are for use as feedingstuffs if these products reach certain standards").

by national law. With regard to the surplus product other than its use for Netherlands the Verordening Veevoeder human consumption. That follows in 1970, adopted by the Produktschap voor particular from the rules on the dena- Veevoeder [Production board for animal turing of skimmed milk, whereby dena- feed] and approved on 17 September turing of itself gives a direct right to the 1970 under reference J 1740 by the aid, irrespective of the use of the

denatured milk as cattle feed. It is question does not reduce the cost of difficult to see why different rules should meat production in any way. Then again apply to the denaturing and the compound feed made from processed processing of skimmed milk. The skimmed milk may become incapable of requirements as regards the quality of use as animal feed for many reasons at the compound animal feed manufactured any time subsequent to its manufacture. by the processing of skimmed milk are Yet aid cannot be refused in such cases therefore solely intended to guarantee even though the objective of cheaper that the processed milk shall henceforth meat production cannot be attained. be capable only of use as animal feed. In those circumstances there is no doubt that had Trouw en Co. used denatured milk in manufacturing its feed for calves it would have been entitled to As regards national legislation, the Community aid even though the final Netherlands Government maintains that product could not have been used as Article 5 of the Verordening Veevoeder, cattle feed. There is no justification for 1970, cited above, does not contain an such different treatment. absolute ban on the addition of mercury to animal feed; at all events that prohibition relates to additions made consciously and not to accidental additions. Furthermore the seizure by the Then again the Commission itself admits Netherlands authorities of the feed that Community aid for the processing which was still in storage does not of skimmed milk is not subject to proof amount to an admission that the product that the final product has actually been was unfit for use, since the seizure was used as animal feed but simply that the simply carried out on the assumption compound feed must be "capable" of that there had been a breach of the such use. That admission deprives the relevant national provisions, although defendant's view on the purpose of the such a breach was never definitively relevant Community rules of any basis established. since the question of encouraging the production of meat at reasonable prices could not arise if use of the product as animal feed were not in fact required. As an alternative argument the applicant states that only one-third of the product in question was contaminated so that aid could only be refused to that extent and In addition it is not possible to maintain, no further. according to the applicant, that to grant aid even for the processing of skimmed milk into animal feed which does not reach certain standards will amount to giving additional encouragement to the Finally the Netherlands Government production of powdered milk of which reiterates its good faith in the matter; the there is already a surplus. In fact the aid aid was paid because, after careful is not intended to promote powdered consideration, it was thought to be due; skimmed milk but simply to ensure a if at any given time the authorities did price level for that product which will issue a written reservation with regard to allow it to compete with other products Trouw en Co. that is explained by the which are appreciably cheaper; fact that at that time the court had consequently the grant of the aid in ordered the seizure of the product but

the exact cause of the problem had not neither achieve those purposes nor been established and it was possible that compete in any way with other types of there might be irregularities which would cattle feed. The fact that the grant of the prevent the payment of aid; once it was aid does not depend on proof that the discovered that that was not the case final product has actually been used as the reservation was withdrawn. The animal feed does not prevent its being Commission for its part was certainly not stated that the Community rules do have "unaware" of the affair since much was the purposes referred to above. It is written about it in the press, in particular possible to encourage the production of in respect of the decision by Italy to meat at reasonable prices at the same close its borders to veal coming from time as ensuring that the processed the Netherlands, which it regarded as product made from surplus milk is dangerous to health. Furthermore the capable of use as animal feed. investigation carried out by the Fund's officers had been undertaken precisely because the Commission wished to know all the details of the affair. Then again it would have been pointless for the Netherlands authorities to inform the In particular the Commission emphasizes Fund of the reservation it had issued that in order to be eligible for aid the because it was a purely precautionary compound feed in question must, and temporary measure. pursuant to Article 4 (1) of Regulation N o 990/72, be composed in a manner typical of animal feedingstuffs and be capable of use directly as such. In fact feed which contains mercury complies with neither of those requirements. In its rejoinder the Commission contends that if the relevant Community rules are intended to encourage the disposal of surplus quantities of powdered milk their purpose is equally to enable products manufactured from processed surplus As regards the argument relating to the milk to be marketed in the normal rules on denaturing, the Commission manner and to encourage the production contends that Article 2 of Regulation of meat at a reasonable price. That is No 990/72 contains detailed provisions shown by the relationship laid down by whereby only products which may be fed Article 2 (3) of Regulation N o 986/68 to animals may be added to achieve the between the amount of the aid, the denaturing. It follows that those rules maximum price which may not be have the same objective as those on the exceeded and the price of comparable processing of skimmed milk. Compound feedingstuffs, and by the wording of the feed made with denatured milk to which second recital in the preamble to that mercury has been added does not regulation. comply with the requirements of the article referred to above, as milk which has not been properly denatured has been used to make the feed. In that sense the problem would be no different if Trouw en Co. had used denatured milk Animal feedingstuffs containing mercury, instead of skimmed-milk powder in its in so far as they are poisonous, can product. Furthermore it is irrelevant

Finally as regards the question of the view to be taken of the applicant's The Government of the Kingdom of the conduct the Commission emphasizes that Netherlands, represented by Adriaan the Netherlands authorities never Bos, acting as Agent, and the Com- informed the Fund's officers of the reser- mission of the European Communi- vations they had issued with regard to ties, represented by Jean-François Ver- Trouw en Co., and that that was a strynge, a member of its Legal breach of the obligations imposed by · Department, acting as Agent, presented Article 5 of the EEC Treaty and that the oral argument at the sitting on 23 reservation in question was not issued as November 1982. a precautionary measure on the seizure of the feed but later after the decision not to require reimbursement of the aid The Advocate General delivered her and precisely because the matter might opinion at the sitting on 18 January be disputed by the Commission. 1983.

JUDGMENT OF 15. 3. 1983 — CASE 45/82

Decision

1 By application lodged at the Court Registry on 5 February 1982, the Government of the Kingdom of the Netherlands brought an action under the first paragraph of Article 173 of the EEC Treaty for a declaration that Commission Decision 81/1047/EEC of 16 November 1981 concerning the clearance of the accounts presented by the Kingdom of the Netherlands in respect of the European Agricultural Guidance and Guarantee Fund, Guarantee Section, Expenditure for 1974 (Official Journal 1981, L 375, p. 33), was void inasmuch as the Commission had failed to clear an item of HFL 4 255 409.86 representing aid for the processing of skimmed-milk powder into animal feed.

6 For their part the Netherlands administrative authorities took preventive veterinary measures to limit the dangerous effects of putting contaminated feed on to the market but did not consider it necessary to require reimbursement of the Community aid already paid to Trouw en Co.

7 The Commission, relying on the provisions of Regulation N o 99Ö/72 which provide that a condition for the grant of Community aid is that the animal feed made with skimmed milk shall have a composition which is typical of animal feedingstuffs and shall be capable of use directly as feed, considered that those requirements had not been complied with in this case in view of the presence of a toxic substance in the feed, and therefore refused to clear the item in the accounts relating to that aid.

8 The Netherlands Government bases on the following arguments its application for a declaration that that decision to refuse clearance is void :

(a) The provisions of the relevant regulations are ambiguous and sometimes contradictory so that it is impossible to deduce from their wording a principle that animal feed made with skimmed milk must in order to be eligible for Community aid, comply with certain requirements as to its quality and composition.

(b) The said provisions should therefore be interpreted in the light of the aims of the Community legislature. Those were not to ensure that cattle received the correct nourishment but, in principle, to relieve the market in milk and to dispose of surplus produce.

(c) The said purpose was achieved in this case, since the skimmed milk was used in the manufacture of animal feed in such a way that it was no longer possible to use it for human consumption and the Community aid was therefore properly paid.

i2 In fact Regulation N o 986/68, which lays down general rules for granting the aid in question, provides, in Article 2 (4), that compound feedingstuffs in

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which skimmed milk is used must meet "minimum standards as to composition" in order to be eligible for aid. The same principle is laid down in the third and fifth recitals in the preamble to Regulation N o 990/72.

i3 Furthermore Article 1 (1) and (2) of Regulation No 990/72 provides that skimmed milk which has been used in the manufacture of compound animal feedingstuffs shall not be eligible for. aid unless the feed complies with the conditions laid down in Article 4. That provision, in laying down minimum requirements as regards the composition and quality of the feed in question, provides, inter alia, that it must be feed "whose composition is typical of animal feedingstuffs" and "which can be used directly as feed".

1 4 It follows that the aforementioned regulations lay down requirements as to quality and composition which are not complied with in the case of feed which is unfit for animal consumption because it contains a toxic substance in the proportions mentioned above.

is That finding is in agreement with national legislation to which Article 4 (3) of Regulation N o 990/72 refers in connection with composition considered "to be typical of compound feedingstuffs". In fact, the legislation in force in the Netherlands at the material time, that is to say Article 5 (1) of the Verordening Veevoeder 1970 [Animal feed order] of the Produktschap voor Veevoeder [Production board for animal feed], expressly prohibited the addition of any mercury to animal feed.

20 The applicant's final argument concerning its good faith and the absence of negligence on the part of the undertaking concerned is equally irrelevant, since the question is whether or not certain standards necessary for the grant of aid have been complied with. In that regard it is sufficient to state that the Netherlands Government has not shown that the good faith of the under- taking relieves the State concerned of the need to comply with the requirements for the grant of aid.

2i As the requirements laid down by the relevant regulations have not been complied with in this case it follows that the applicant's principal claim must be dismissed.

22 As regards the alternative claim seeking at least a partial clearance of the disputed item in the accounts it should be noted that the letter ot 20 November 1974 sent by the directorate of the Algemene Inspectie Dienst [General Inspection Department] of the Netherlands Ministry of Agriculture

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and Fisheries to the Produktschap voor Veevoeder and produced prior to the hearing by the Commission in response to the Court's questions, refers to the fact that 60 000 kg of contaminated starch were mixed with 173 000 kg of starch obtained elsewhere. In fact in that document the Ministry expresses the position as follows:

"The 60 000 kg of Amijei maize starch (contaminated starch) were mixed with 173 000 kg of starch obtained elsewhere and used at the same time between 28 May 1974 and 13 July 1974 in three production cycles to be processed into: Complete animal feed 7 385 300 kg Premixture 16 700 kg Feed for fur-bearing animals 42 000 kg 7 444 400 kg"

On those grounds,

THE COURT

hereby.

1. Dismisses the application;

2. Orders the Kingdom of the Netherlands to pay the costs.

Mertens de Wilmars Pescatore O'Keeffe Everling