C-169/82

ITALIAN REPUBLIC, in the person of its Agent , A. Squillante, Head of the Department for Contentious Diplomatic Affairs, Treaties and Legislative Matters , represented and assisted by O . Fiumara , Avvocato dello Stato , with an address for service in Luxembourg at the Italian Embassy , 5 Rue Marie- Adélaïde ,

defendant ,

APPLICATION for a declaration that the Italian Republic has failed to fulfil its obligations under the EEC Treaty by adopting Sicilian Regional Laws No 47 of 27 May 1980 , No 49 of 4 June 1980 and No 83 of 12 August 1980, granting aid in support of certain agricultural activities in Sicily, and by delaying notification to the Commission of the adoption of those Laws ,

COMMISSION / ITALY

THE COURT

composed of: J. Mertens de Wilmars, President, T. Koopmans and Y. Galmot (Presidents of Chambers), Lord Mackenzie Stuart, G. Bosco, U. Everling and C. Kakouris, Judges,

JUDGMENT OF 27. 3. 1984 — CASE 169/82

that Law provide for the payment of aid provisions relating to the common for the disposal to cooperatives of table organization of agricultural markets; grapes intended for vinification. Articles accordingly, it requested the Italian 8 and 9 are concerned with the grant of Government, by letter of 19 June 1981, aid, in respect of tomatoes intended for to submit its observations concerning processing, to associated producers and Laws Nos 49 and 83 within four weeks the cooperatives to which they belong. and, by letter of 8 October 1981, to do Similarly, Articles 10 and 11 of the same the same with regard to Law No 47 Law provide for the grant of loans at within 15 days. reduced interest rates to canning under­ takings established within the Sicilian Region which undertake to pay the purchase price of Sicilian tomatoes The Italian Government transmitted its within a short period. Further aid for reply by telex on 13 October 1981 as citrus-fruit producers who are members regards Laws Nos 49 and 83 and on of cooperatives is provided for by Article 30 October 1981 as regards Law No 47. 12 (1) of Law No 83, and under Articles In its reply, the Italian Government 15 and 17 subsidies are to be granted for considered in general that the measures the disposal of almonds, hazel-nuts and adopted were in conformity with the pistachio nuts to cooperatives and their Community rules. Only in respect of consortia and also to producer as­ Articles 9, 10 and 11 of Law No 83 did sociations for the gathering, preservation it give the Commission an assurance that and collective sale of those products. it would approach the Sicilian regional administration in order to prevent the renewal of the intervention measures in question.

orities had also been requested to bring No 1035/72 of 20 May 1972 and the Sicilian agricultural legislation into No 1360/78 of 19 June 1978; line with the Community rules in all essential respects. Moreover, in view of (2) Order the Italian Republic to pay the the formal undertakings given by the costs. Sicilian regional administration, by a communication of 24 March 1982, to 2. The Italian Government contends suspend the initiation of new procedures that the Court should take formal note, for the implementation of the con­ in so far as is necessary, of the fact that tested measures and to re-examine the measures granting aid were notified, the legislation in force, the Italian albeit belatedly, to the Commission and Government considered that it had dismiss the remainder of the application. complied with the Commission's reasoned opinion.

JUDGMENT OF 27. 3. 1984 — CASE 169/82

COMMISSION / ITALY

(c) The aid for tomatoes intended for (e) Article 12, which introduces aid for processing, which is provided for by citrus-fruit producers who are members Articles 8 and 9 of the same law, is of cooperatives, and Articles 15 and 17, also an unlawful measure involving in­ which provide for the grant of subsidies tervention in an area which is exclusively for the disposal of almonds, hazel-nuts reserved to the Community. The and pistachio nuts to cooperatives Commission contends that such aid is and the like, and also to producer unauthorized under the common organ­ associations, constitute supplementary ization of the market in products measures adopted unilaterally which processed from fruit and vegetables. are incompatible with the Community Regulation No 516/77 (Official Journal measures regulating the organization of 1977, L 73, p. 1) established a common the market in fruit and vegetables system of production aid for certain inasmuch as they distort competition. processed products, including products processed from tomatoes. That system provides for the grant of aid to pro­ cessors who have entered into contracts The application docs not contain any providing for regular supplies to industry specific observations concerning Law No at a minimum purchase price for pro­ 49 of 12 August 1980. ducers.

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capable of preventing any future in­ Italy of its obligations, in the light of fringement. the undertakings given by the Sicilian Region not to apply the provisions in question. Legislation may be formally amended only in accordance with the 2. In its defence, the Italian legislative procedures laid down. Government does not consider the regional measures concerned in depth since, in view of the assurances given by As regards the Commission's contention the Sicilian Region not to apply the that the Sicilian region renewed some of measures provided for by the contested the contested measures by adopting Law laws and to reconsider the whole No 97, which is currently in force, the question with a view to bringing regional Italian Government observes that the legislation into line with Community reasoned opinion and its reply thereto legislation, any discussion of that point postdate that Law and that any reference serves no purpose. Furthermore, the to it is meaningless. Furthermore, the Italian Government regards the ap­ Sicilian Region's undertaking not to plication as unfounded on the ground implement the contested measures refers that it has already complied with the to the aid and not to the measures, with Commission's reasoned opinion promptly the result that it also encompasses the and in accordance with its terms. provisions renewing those measures which are embodied in Law No 97.

By way of jusitification for its failure to put an end to the alleged infringement in the past, the Italian Government 3. In its reply, the Commission puts contends that the reasoned opinion forward the argument summarized be­ concerns only the future and does not low: apply to relations already entered into. Moreover, it is difficult or even impossible to demand repayment of aid (a) The undertakings given by the which has actually been paid. In any Sicilian Region to suspend "the initiation event, the contested provisions were of new implementing procedures" are applied in. the past only to a very limited insufficient to put an end to the extent. infringement.

financing operations relating to 1980 and the provisions to be necessary, as is 1981 and, secondly, a large number of conceded even by the Commission, the measures in question would, if then- which maintains that the crucial factor is application had not been suspended, the suspension of payments. In that continue to permit the initiation of new regard the Italian Government points out financing operations (which are not, in that such suspension also extended to the the Commission's view, "new im­ procedures which had already been set in plementing procedures"). motion, with the result that all further payments were frozen. No further contribution was granted under the contested provisions, either those com­ (b) Only the definitive repeal of the plained of or those contained in laws provisions in question would in law bring renewing earlier measures. Since the the infringement to an end, particularly undertaking given by the Sicilian Region in the context of a system of regional was and is being honoured, no further autonomy. Until such time as that measure, of a formal nature, appears to situation is remedied within the national be necessary for the time being. legal system of the Italian Republic, there will be a conflict with the relevant Community legislation likely to disrupt, at least potentially, the correct and prompt application thereof. Furthermore, Next, the Italian Government considers the Commission concludes that, during the question of the compatibility of the the period granted to the defendant in measures complained of with Com­ order to give it sufficient opportunity to munity law, whilst emphasizing that this initiate the national procedures required substantive question should not be to comply with the reasoned opinion, examined in these proceedings. Whilst no new factor demonstrating the stressing the objectives of the measures defendant's intention to comply with the adopted in the light of their socio­ relevant Community legislation came to economic context (the role still played by light. the peasant farmer in Sicilian agriculture, desire to promote the formation of cooperatives and associations, very limited possibility of self-financing and the impossibility of obtaining normal 4. The Italian Government points out, agricultural loans), the Italian Govern­ in its rejoinder, that it has never ment maintains that the provisions in acknowledged that the regional measures question are not incompatible with the in question constitute an infringement. It relevant provisions of Community law. approached the regional authorities only In particular, it makes the following in order to ensure that the contested observations: provisions were re-examined in ac­ cordance with the wishes of the Com­ mission. In its opinion, the provisions are in no way incompatible with the provisions governing the common or­ (a) Article 10 of Law No 47 does not ganizations of the markets. introduce a new form of aid but merely confirms the aid already available, which is in any case extremely limited, serves to maintain a balance in the region and Furthermore, the Italian Government could not be abolished without creating does not consider the formal repeal of disruption.

(c) The same considerations apply in (f) Articles 15 and 17 similarly renew the case of Articles 8 and 9 of Law No aid already available in a very limited 83. Article 9 in particular, which provides sector which does not form part of a for a similarly small contribution to the common organization of the market. It management costs of associations, is is more appropriate to regard the aid concerned with the functioning of in question as a measure designed to associations and is not directly aimed at promote ecological and environmental the relevant market sectors. balance rather than as an economic measure. (d) As regards Articles 2, 10 and 11 of Law No 83, they must be regarded as V — Oral procedure being intended to facilitate access to agricultural loans and not as granting At the sitting on 25 October 1983 oral aid supplementary to the Community argument was presented for the measures in the wine and tobacco Government of the Italian Republic, by sectors. In the Community, the con­ O. Fiumara, Avvocato dello Stato, and ditions governing access to loans differ for the Commission of the European from one country to another and, in the Communities by G. Campogrande, a opinion of the Italian Government, member of the Commission's Legal pending harmonization at Community Department. level of the national aid systems in force, it is necessary to limit the interest paid by The Advocate General delivered his farmers, who would otherwise be unable opinion at the sitting on 7 December to obtain loans at normal rates, a 1983.

Decision

1 By application lodged at the Court Registry on 15 June 1982 the Commission of the European Communities brought an action under Article 169 of the EEC Treaty for a declaration that the Italian Republic , by giving notice to the Commission of the draft laws which subsequently became

4 In its application, the Commission charges the Italian Republic with two categories of infringement with respect to the provisions of Community law in question: first, the failure to notify the Commission in sufficient time of the draft laws in question, which, contrary to Article 93 (3) of the Treaty, were not notified until after their promulgation, and, secondly, the grant of aid by certain provisions of the regional Laws contrary to the Community provisions relating to the common organization of agricultural markets. It is therefore necessary to consider both categories of infringement.

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5 According to Article 42 of the EEC Treaty, the provisions of Article 93 thereof, like all the provisions of the Chapter relating to the rules of competition, are applicable "to production of and trade in agricultural products only to the extent determined by the Council within the framework of" the provisions relating to the agricultural policy.

Failure to notify the Commission in sufficient time

6 Article 10 of Sicilian Regional Law No 47 of 27 May 1980, Sicilian Regional Law No 49 of 4 June 1980 and Articles 2, 3, 8 to 12, 15 and 17 of Sicilian Regional Law No 83 of 12 August 1980 renewed certain measures granting aid for durum wheat, table grapes, wine, tomatoes, citrus fruits and almonds, hazel-nuts and pistachio nuts.

7 The products in question are covered by the common organizations of the markets established by the following regulatoins :

9 It should be noted in that regard that the Italian Government itself acknowledges that the measures in question provide for the grant of aid and that they were not notified to the Commission until after their promulgation. However, it contends that the adoption of the Laws in question should be regarded as a single simplifying procedure connected with the establishment of the budget by means of the substantial renewal of existing provisions which are well know and are not contested at Community level.

10 None of those contentions can relieve the Italian Republic of the obligation imposed upon it by Article 93 (3) of the Treaty to notify the Commission in sufficient time of any draft laws granting aid.

11 It follows from the foregoing that the Italian Republic, by failing to notify the Commission of the draft laws in question until after their adoption as Laws No 47/80, No 49/80 and No 83/80, has failed to fulfil its obligations under Article 93 (3) of the Treaty.

Compatibility of the aid granted with the relevant Community legislation

Admissibility

12 The Italian Government maintains that the part of the application which concerns the second category of infringement must be dismissed by virtue of the second paragraph of Article 169 of the Treaty, because the Commission stated in its reasoned opinion that "only the immediate suspension of the application of the provisions in question can prevent any future infringement". The Italian Government contends that, as a result of its intervention, the Sicilian regional authorities suspended the application of the provisions in question and therefore the request contained in the reasoned opinion was complied with.

i6 In that regard the Commission maintains that the relevant Community regu­ lations cover in a complete and comprehensive manner the organization of agricultural markets in the products referred to above and the aid applicable thereto, with the result that the measures in question are incompatible with those regulations since they are contrary to the objectives pursued by the Community legislature and are capable of distorting competition, jeopardizing the effectiveness of the Community intervention measures and introducing a disruptive factor in the market trend.

Compatibility of Article 10 of Regional Law No 47 / 80 with Regulation No 2727 / 75

i7 Article 10 of Regional Law No 47/80 provides for the renewal and, in part, also the increase of aid for the production of durum wheat. In the

COMMISSION / ITALY

Commission's view, no such aid is provided for by Regulation No 2727/75 of the Council on the common organization of the market in cereals, which established a complete and comprehensive system denying the Member States any additional power to influence the formation of prices at production level.

.8 It is clear from Regulation No 2727/75, and in particular from Article 2 thereof, that the regulation provides for a system of prices and other measures intended to establish a system of uniform prices for cereals throughout the Community. Article 10 provides for the grant on certain conditions of aid of a uniform amount for the whole Community for the production of durum wheat. It follows from that system that any support measure must be decided upon at Community level in order to avoid the risk of jeopardizing the functioning of the system by the grant of additional aid.

23 The Italian Government, however, contends that the measure in question is designed to promote the formation of agricultural associations, thereby fa­ cilitating the disposal of table grapes for processing and subsequently distillation, as provided for by the relevant Community legislation.

24 The arguments put forward by the Italian Government cannot be accepted . It is clear from Article 2 of the regional law in question , read in conjunction with Article 3 thereof, that by the processing of table grapes the regional legislature means vinification and not distillation, which is a stage subsequent to vinification.

25 It is clear particularly from recitals 20 to 26 in the preamble to Regulation No 337/79 that the Community wishes to restrict the vine varieties intended for the production of table wines and also the production of table wines, because they are considered to be of insufficient quality. In that connection, the ninth recital also contemplates the distillation of such wines — described in the regulation itself as a preventive measure — "at a buying-in price which is not such as to encourage production of wine of insufficient quality".

26 For those purposes , Article 6 (2) of the regulation excludes table wines from all intervention measures , with the exception of those provided for by the regulation itself which are not applicable in this case. Article 15, which provides for the implementation of the provisions laying down the conditions for the distillation of table wines , also provides in paragraph (2) (b) that those conditions " shall not be such as to encourage the production of wine of insufficient quality ".

3i Articles 8 and 9 of Regional Law No 83/80 provide for the grant of aid to associations of tomato producers and to producer cooperatives in order to promote the processing of tomatoes by canning undertakings. In that regard, the Commission raises the same objection as before, namely that the measure in question amounts to State intervention in an area wholly regulated by the common organization of the market, in particular by Regulation No 516/77.

32 The Italian Government, whilst acknowledging that the measures in question provide for the grant of aid, contends that their purpose is to promote the development of the cooperative movement without intervening directly in the market sector regulated by the Community measures.

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33 Articles 3 a to 3 c of Regulation No 516/77, which were added by Council Regulation (EEC) No 1152/78 (Official Journal 1978, L 144, p. 1), lay down a comprehensive set of Community rules on the market in products processed from fruit and vegetables, including tomatoes, which are intended to stabilize the Community market by means of a Community system of prices and aid and preclude the grant of further aid by the Member States,

34 The detailed rules for the application of the articles in question are set out in Article 20 of the regulation , which provides for the intervention of Community bodies .

35 It therefore follows that the aid granted by the Italian Republic is incompatible with the relevant Community legislation and that that State has consequently failed to fulfil an obligation under the Treaty.

(a) producers must have been paid the minimum price;

(b) the products must have been processed; and

(c) products after processing must comply with the quality standards in force.

The Commission does not explain how, notwithstanding the three conditions required, compliance with one condition alone, namely verification of due payment of the minimum prices, can entitle the canning undertaking concerned to payment of the Community aid.

40 Consequently, the arguments put forward by the Commission cannot be accepted. This part of the application must therefore be dismissed.

Compatibility of Article 12 of Regional Law No 83 / 80 with Regulation No 1035 / 72

45 Articles 15 and 17 of Regional Law No 83 / 80 provide for the allocation of funds for almonds , hazel-nuts and pistachio nuts . The Commission maintains that the measures constitute aid to cooperatives and their consortia designed to bring about structural improvements in production and are incompatible with Regulation No 1035 / 72 .

46 The Italian Government on the other hand contends, first, that the measures are protective measures adopted in support of endangered crops cultivated on a small scale and to promote ecological and environmental balance and, secondly, that the measures relate to a sector which does not seem to form part of a common organization of the market.

47 As far as the latter argument is concerned, it must be pointed out that the products in question fall within the scope of Regulation No 1035/72, as is clear from Article 1 thereof in conjunction with headings Nos 08.05 A, B and D of the Common Customs Tariff.

48 However, in this part of its application also, the Commission has failed to explain why the allocation of the funds in question is in the nature of aid to cooperatives. Moreover, the Commission has not identified the provision of the regulation with which the aid is alleged to be incompatible, regard being

COMMISSION / ITALY

had to the fact that Article 14 of the regulation authorizes the grant of aid to producer organizations on certain conditions.

THE COURT

hereby:

1. Declares that the Italian Republic has failed to fulfil its obligations under the EEC Treaty by failing to notify to the Commission the draft laws which subsequently became Sicilian Regional Laws No 47/80 (Article 10), No 49/80 and No 83/80 (Articles 2, 3, 8 to 12, 15 and 17) until after their adoption;

2. Declares that the Italian Republic has failed to fulfil its obligations under the Treaty as a result of the adoption by the Sicilian Region of the measures provided for by Article 10 of Regional Law No 47/80 and by Articles 2, 3, 8 and 9 of Regional Law No 83/80.

OPINION OF MR VERLOREN VAN THEMAAT — CASE 169/82

3. Dismisses the remainder of the application;

Principal Administrator President

OPINION OF MR ADVOCATE GENERAL VERLOREN VAN THEMAAT 1 DELIVERED ON 7 DECEMBER 1983

Mr President, Regional Laws No 47 of 27 May Members of the Court, 1980, No 49 of 4 June 1980 and No 83 of 12 August 1980 after their adoption, has failed to fulfil its obligations under Article 93 (3) of 1. Introduction the EEC Treaty;

(b) by adopting measures involving intervention in support of agriculture 1.1. The application such äs those provided for in Article 10 of Sicilian Regional Law No 47 In its application of 10 June 1982 (Case and in Articles 2, 3, 8, 9, 10, 11, 12, 169/82) the Commission requests the 15 and 17 of Sicilian Regional Law Court to declare that the Italian No 83, has failed to fulfil its Republic: obligations under Article 5 of the EEC Treaty, in conjunction with Regulations (EEC) No 2227/75, No (a) by giving notice of the draft laws 337/79, No 516/77, No 1035/72 which subsequently became Sicilian and No 1360/78.

1 — Translated from the Dutch.