C-113/82

In Case 113/82

COMMISSION OF THE EUROPEAN COMMUNITIES, represented by Götz zur Hausen and Hans Peter Hartvig, members of its Legal Department, with an address for service in Luxembourg at the office of Oreste Montako, Jean Monnet Building, Kirchberg,

applicant,

v

FEDERAL REPUBLIC OF GERMANY, represented by Jochim Sedemund, Rechtsanwalt, Cologne, acting as Agent, with an address for service in Luxembourg at the Embassy of the Federal Republic of Germany,

defendant,

gives the following

JUDGMENT

Facts and Issues

The facts of the case, the course of the measures in the hop sector (Official procedure and the conclusions, Journal 1977, L 261, p. 1) have been submissions and arguments of the parties applied. may be summarized as follows : Regulation No 1696/71, which tem­ porarily prohibits any increase in the areas planted with hops, provides for the I — Facts and written procedure payment of aid to recognized producer groups for conversion to other varieties This dispute relates to structural and for the reorganization of hop measures in the hop sector and in gardens. The detailed provisions for the particular to the manner in which the grant of such aid are contained in Regu­ provisions of Regulation (EEC) No lation No 2253/77, Article 3 of which 1696/71 of the Council of 26 July 1971 provides that aid for conversion to other on the common organization of the varieties and for reorganization of hop market in hops (Official Journal, English gardens is to be granted to recognized Special Edition 1971 (II), p. 634) and of producer groups on presentation to the Council Regulation (EEC) No 2253/77 authorities appointed by the Member of 11 October 1977 on structural States of a plan entailing at least a 40%

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" For a period of three years following implementation of these plans the By a letter of 21 December 1979, the recognized producer group shall not Commission drew the attention of the plant hops of an acreage greater than Government of the Federal Republic of that provided for in the plans. Fur­ Germany to the fact that the government thermore, during that period no hops of the Land of Bavaria was interpreting shall be replanted in the area from which the provisions of Community law with hops have been grubbed up ." regard to the aid in question in the sense that they give rise to obligations only for hop growers, in their capacity as Subsequently, by letter of 5 December members of a recognized producer 1978, the Bavarian Minister for Agri­ group, who have actually participated in culture informed the recognized a reorganization plan of that group. The producer groups in question that consequence of such an interpretation Paragraph 2.6 of those directives was to would be that hop growers would be be supplemented as follows: able to extend their area prior to the effluxion of the period of three years "An organization which is involved in provided by Article 4 of Regulation No one of the three steps for which aid may 2253/77 although they were members of be granted shall not extend the area a recognized producer group which had under hops after the plan has been effected a reorganization plan. As the implemented for a period of three years Commission considered that the after such implementation. That period obligations arising from that regulation, shall begin to run on the implementation in particular the prohibition of any of the plan relating to the organization increase in the area planted with hops, in question." applied to recognized producer groups as such, it requested the German authorities The letter recalls that, by virtue of to take the necessary steps to prevent the Article 4 of Regulation No 2253/77, a planned increases from taking place.

By letter dated 14 May 1980 the II — Conclusions of the parties Commission requested the Government of the Federal Republic of Germany under the first paragraph of Article 169 The Commission of the European of the Treaty to submit its observations Communities claims that the Court on the Commission's opinion that the should: implementing directives issued by the Bavarian authorities were incompatible 1. Declare that the Federal Republic of . with Article 4 of Regulation No Germany, by not ensuring that the 2253/77. prohibition, contained in Article 4 of Council Regulation No 2253/77 of In its reply dated 19 June 1980 the 11 October 1977, of any increase in German Government maintained in full the areas planted with hops was the position it had adopted in its letter of observed by the recognized producer 4 February 1980. groups, as such, in the event of the grant of aids, has failed to fulfil its On 8 April 1981 the Commission obligations under the EEC Treaty; delivered its reasoned opinion under the first paragraph of Article 169 of the Treaty to the German Government. The 2. Order the Federal Republic of government was requested to take the Germany to pay the costs. necesary measures to comply with the reasoned opinion within one month. The Government of the Federal Republic By a letter of 2 June 1981 the German of Germany contends that the Court Government informed the Commission should: that it continued to hold the opinion it had expressed in its letters of 4 February 1. Dismiss the application; and 19 June 1980.

2. Order the applicant to pay the costs. Since the Commission considered that the Bavarian directives of 25 January 1978, and in particular Paragraph 2.6 thereof as amended on 5 December 1978 were incompatible with Article 4 of IΙΙ — Submissions and argu­ Regulation No 2253/77, it brought this ments of the parties action before the Court under the second paragraph of Article 169 of the Treaty. The Commission's application was The applicant, the Commission of the lodged at the Court Registry on European Communities, explains that the 25 March 1982. problem to which the present case relates

Next the Commission emphasizes the importance which it attaches to the role of producer groups in achieving the objectives of the common organization In support of its argument the of the market in hops. In fact it is for Commission submits first that the such groups to submit reorganization consequences arising from the contested plans to the competent authorities of the circular are contrary to the literal Member States and to distribute the aid wording of Article 4 and to the which they receive; equally it is at them objectives which led to its adoption. that the prohibition, contained in Arti­ According to the wording of Article 4 cle 4 of Regulation No 2253/77, of any the prohibition of any increase in the increase in the areas planted with hops is areas planted with hops is expressly directed. Thus the scheme and structure directed at producer groups, as such, and of the regulations adopted in the hop not at individual producers. A literal sector permit the formulation of an interpretation of that article accords with important rule according to which the the objectives of the aid system, which is provisions of Community law in relation not simply to pay a grubbing-up grant to recognized producer groups apply to but is to encourage producer groups to them, as such, without making any produce plans themselves and thus to distinction between members of those assume obligations in return for the aid. groups. There is no reason to regard

JUDGMENT OF 19. 4. 1983 — CASE 113/83

It still necessary to provide that areas on which contends, however, that the opinion grubbing operations are carried out shall expressed by the Commission cannot be not be re-planted with hops for a period reconciled with the words of the of three years." provision themselves or with the factual and consistent link which exists between The defendant emphasizes that ac Articles 3 and 4 of that regulation. The cording to that wording Article 4 must defendant states first that the prohibition relate solely to areas on which grubbing of any increase in the areas planted with operations are carried out amounting to hops, as expressed in Article 4, relates 40% of the areas covered by the plan.

group. Since both provisions, namely the reorganization plan does not Articles 3 and 4, refer without any doubt necessarily cover all the land belonging to the same plan, it appears to the to the members of the group. Once defendant inconceivable that the Article 3 was amended so that the areas expression "area covered by the plan" covered by the plan no longer coincided could have one meaning in Article 3 and with the total area of the producer a different one in Article 4. group, it was clear that, in the mind of Community legislature, the prohibition, The Government of the Federal Republic contained in Articled, of any-increase in of Germany next contends that the the area planted with hops could only Commission's argument conflicts with relate to the areas planted by those

If it were otherwise the system would, The Commission emphasizes the furthermore, be such as to give rise to difference between structural aids in the objections of a constitutional nature: an hop sector and other subsidies granted extension of the restrictions relating to for the purpose of reducing productive planting to hop growers who had neither capacity. The defendant has compared participated in a plan nor benefited from the two systems and concluded that the aid would actually have to be regarded obligation to reduce capacity is always as an infringement of the right to imposed only on those producers who property. Finally the German apply for aid. However, the Commission Government explains that a producer considers that comparison to be group may neither force its members to unconvincing. First, it states that the participate in a reorganization plan nor purpose of the system of aids in the hop impose on the majority of its members, sector is not solely the reduction of against their will and without capacity but equally the adoption of compensation, any restriction on their structural measures improving pro­ enjoyment of their areas. duction. Secondly, the comparison has no probative value since in the other systems aid is granted not to a producer In its reply the Commission insists that group within the framework of a plan only its interpretation of Article 4 of presented by that group but to individual Regulation No 2253/77 is in conformity producers carrying out specific projects

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sector. In that sector producer groups producer group may only expect disad have a particularly decisive role to play. vantages (namely the prohibition of any Regulation No 1696/71 provided that increase in the cultivated area) from the those groups must be formed, in implementation of a plan. particular, for the purpose of "joint adaptation of their production to the Finally the Commission notes that the requirements of the market" and defendant has not contested the "improvement of production by argument that the interpretation of

producers. Thus it is the producer group which draws up the plan and, of its own In its rejoinder the Government of the motion, abides by the obligations arising Federal Republic of Germany repeats, in from Article 4 of Regulation No essence, the argument that the 2253/77. Commission cannot in any case rely on the wording of Article 4 of Regulation No 2253/77. It adds that the Next the Commission contests the Commission's point of view mistakes the defendant's argument to the effect that a logical link between Articles 3 and 4. minority of producers participating Futhermore, the defendant emphasizes directly in the reorganization plan that the Commission does not attach any cannot impose on the majority economic importance in its reply to the recital in sacrifices in the form of a prohibition the preamble relating to Article 4 from without compensation of an increase in which it is quite clear that the Council the area planted with hops. The did not intend the prohibition of any Commission states that the obligations increase in the area under hops to apply of a producer group are fixed by to the total area of the producer group. the articles of association of that group. In that connection the Commission cites the articles of association of Equally the Commission continues to fail the Hopfenverwertungsgenossenschaft to appreciate the logical coherence of the Hallertau eG, the most important hop- whole corpus of rules in the hop sector; producer group in Bavaria and in the if its view, which would result in a Federal Republic of Germany. In that general cessation of planting, were producer group reorganization plans are correct, there would be no explanation adopted by a simple majority vote so that for the fact that the Council did not no plan within the meaning of Articles 3 simply extend the prohibition of planting and 4 of Regulation No 2253/77 may be which had been in force until the end of adopted without the agreement of a 1979.

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Decision

1 By application lodged at the Court Registry on 25 March 1982, the Commission of the European Communities brought an action under Article 169 or the EEC Treaty for a declaration that the Federal Republic of

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Germany, by not ensuring that the prohibition, contained in. Article 4 of Council Regulation (EEC) No 2253/77 of 11 October 1977 on structural measures in the hop sector (Official Journal 1977, L 261, p. 1), of any increase in the areas planted with hops was observed by the producer groups, as such, in the event of the grant of aids, has failed to fulfil its obligations under the Treaty.

2 Regulation No 2253/77 lays down the detailed rules for the application of Articles 8 and 9 of Regulation (EEC) No 1696/71 of the Council of 26 July 1971 on the common organization of the market in hops (Official Journal, English Special Edition 1971 (II), p. 634). Article 8 relates to the grant of aid to recognized producer groups to encourage their formation and to facilitate their operation. Article 9 relates to the grant of aid to producer groups for operations to be used for changing to different varieties and for reorganizing hop gardens.

3 Article 9 of Regulation No 1696/71 was amended by Council Regulation (EEC) No 1170/77 of 17 May 1977 (Official Journal 1977, L 137, p. 7). Paragraph (3) thereof, in its amended form, provides that the Member States may grant to recognized producer groups aid for conversion to other varieties and the reorganization of hop gardens, provided that such operations entail a reduction of at least 40 % in the area concerned.

7 Regulation No 2253/77 provides first, in Article 3, that such aid is to be granted on presentation to the authorities appointed by the Member States of a plan for conversion to other varieties and for the reorganization of hop gardens "which entails at least a 40 % reduction in the total area registered as at 30 June 1977 to which the plan applies".

8 The regulation goes on to provide, in Article 4, that "for a period of three years following implementation of the plan to convert to other varieties or to reorganize hop gardens, a recognized producer group may not plant with hops an area greater that that resulting from the application of that plan".

9 The Commission is of the opinion that the prohibition, contained in Article 4 of Regulation No 2253/77, of any increase in the areas planted with hops applies to a producer group, as such, where that group has presented the plan relating to structural measures for the purpose of obtaining aid. Since the prohibition contained in Article 4 has that general application no member of the producer group has the right to extend his area planted with hops during the three years following the implementation of the plan.

10 After establishing that the directives by which the Minister for Agriculture of the Land of Bavaria instructed recognized groups in Bavaria as to their obligations arising from the implementation of a conversion and reorgani­ zation plan were not in compliance with the prohibition contained in Article 4, interpreted as aforesaid, the Commission entered into correspondence

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14 The German Government is of the opinion, on the other hand, that the prohibition, contained in Article 4, of any increase in the area planted must have the same scope as the reduction in the area planted contained in Article 3, which refers to a part of "the total area ... to which the plan applies" and therefore relates only to producers whose land is involved in the plan.

15 In addition the Commission cites the objectives of the system of aids for conversion and reorganization. The purpose of that system, which was established to deal with marketing difficulties which had arisen in the hop market, was to combine an improvement in the quality of production with a

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substantial reduction in converted acreage in order to achieve a balance between supply and demand. The requirement contained in Article 9 of Regulation No 1696/71 of a reduction of at least 40 % in the area concerned loses all meaning if it is possible to compensate for that reduction by an increase in the area planted with hops by the members of the producer group who have not participated directly in the reorganization.

16 The German Government maintains that the purpose of the system of aids is to encourage the voluntary cooperation of the producers in putting structural measures into effect. Such systems, which also include premiums for the slaughter of dairy cows and subsidies for the destruction of inland waterway vessels, do not restrict the commercial freedom of those producers who do not receive Community aid.

17 In order to determine the scope of Article 4 of Regulation No 2253/77, the interpretation of which is in dispute, it is necessary to consider the purpose of the system of aids for conversion and reorganization within the context of the whole organization of the market in hops as modified by Regulation No 1170/77.

22 Secondly, the arguments of the German Government would have the effect of allowing producers who have combined in a producer group to carry out grubbing-up operations on the land of some of them and of receiving the corresponding Community aid whilst at the same time allowing an increase in the area planted with hops belonging to other members of the same group. Such a situation would be manifestly contrary to one of the principal objectives of the 1977 rules, which is to reduce the supply of hops by restricting the total area planted.

23 Consequently, Article 4 of Regulation No 2253/77 must be interpreted as meaning that the prohibition therein contained of an increase in the area planted with hops applies to all the producers who are members of the recognized producer group receiving the aid, whether or not those members are individually concerned with the structural measures in question.

24 The German Government also contends that such an interpretation of Article 4 of Regulation No 2253/77 infringes a fundamental right, namely the right to property, since those producers who have neither taken part in the implementation of the structural measures nor have received the corresponding aid are nevertheless under an obligation not to increase their areas under hops.

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25 That argument, however, is based on a misconception as to the position occupied by the producer group within the framework of the Community rules in the hop sector. It is for the competent bodies within the producer group to decide whether or not it is appropriate to undertake the subsidized operations of conversion and reorganization and who thus bind the group and the whole of its members to bear the corresponding burdens. The individual producer is bound by such decisions as he is by any other decision validly taken by those bodies under the general rules governing associations of persons.

1. Declares that the Federal Republic of Germany by not ensuring that the prohibition contained in Article 4 of Council Regulation No 2253//77 of 11 October 1977 1977,, of any increase in the areas planted with

OPINION OF SIR GORDON SLYNN — CASE 113/83

hops was observed by the producer groups established within its territory, in the event of the grant of aids for conversion to other varieties and for reorganization of hop gardens, has failed to fulfil its obligations under the EEC Treaty;

2. Orders the defendant to pay the costs.

Mertens de Wilmars Pescatore O'Keeffe

Bosco Koopmans Due Bahlmann