C-205/82

DEUTSCHE MILCHKONTOR v GERMANY

5. Member States must verify by means having regard in particular to the of appropriate controls that skimmed- circumstances and techniques avail­ milk powder complies with the able. relevant Community rules so as to ensure that Community aids are not paid in respect of products for which It is for the national court to they ought not to be granted. It is for determine the consequences of any the national court to determine the failure to fulfil that duty on the basis controls necessary for this purpose of the relevant national law.

In Joined Cases 205 to 215 / 82

REFERENCE to the Court under Article 177 of the EEC Treaty by the Verwaltungsgericht [Administrative Court ] Frankfurt am Main , for a pre­ liminary ruling in the proceedings pending before that court between

DEUTSCHE MILCHKONTOR GMBH ( 205 / 82 ),

E. KAMPFFMEYER ( 206 / 82 ),

HEMO MOHR KG ( 213 / 82 ),

DENKAVIT FUTTERMILCH GMBH ( 214 / 82 ),

DMV LAGEREI- UND VERWALTUNGSGESELLSCHAFT MBH ( 215 / 82 )

and

FEDERAL REPUBLIC OF GERMANY , represented by the Bundesamt für Ernährung und Forstwirtschaft [Federal Office for Food and Forestry ],

on the interpretation of various principles of Community law relating to claims for the recovery of aids unduly granted for skimmed-milk powder which has been processed into animal feed,

Facts and Issues

The facts of the case, the course of laying down general rules for granting the procedure and the observations aid for skimmed milk and skimmed-milk submitted under Article 20 of the powder for use as feed (Official Journal, Protocol on the Statute of the Court of English Special Edition, Í968 (I), p. 260) Justice of the European Economic as amended by Regulation (EEC) No Community may be summarized as 472/75 of 27 February 1975 (Official follows : Journal 1975, L 52, p. 22) and by Regu­ lation (EEC) No 876/77 of 26 April 1977 (Official Journal 1977, L 106, p. 24), for the purposes of that regulation: I — Facts and written procedure

skimmed-milk powder comes from laid down in this regulation are complied public stocks. This moisture content with." shall apply at a stage and in conditions to be defined." Aids for the processing of skimmed-milk powder into compound feedingstuffs are Under Article 2 (1) (c) of that regulation paid in the Federal Republic of Germany the use of the skimmed-milk powder in by the Bundesamt für Ernährung und the manufacture of compound feeding- Forstwirtschaft (hereinafter referred to as stuffs is a precondition for the grant of "the Federal Office"), the defendant in aid for skimmed-milk powder. Under the action before the national court. As Article 3 (2) of that regulation aid is to part of the intervention system for regu­ be paid only when proof of such use has lating agricultural markets, the aids are been given. paid by the Guarantee Section of the European Agricultural Guidance and At the material time the preconditions Guarantee Fund in accordance with for the grant of aid were laid down in Regulation (EEC) No 729/70 of the detail in Regulation (EEC) No 990/72 Council of 21 April 1970 on the of the Commission of 15 May 1972 on financing of the common agricultural detailed rules for granting aid for policy (Official Journal, English Special skimmed milk processed into compound Edition, 1970 (I), p. 218). feedingstuffs and for skimmed-milk powder for use as feed (Official Journal, Article 8 of that regulation contains the English Special Edition, 1972 (II), p. following provisions : 428). One of those preconditions is that the compound feedingstuffs must contain "(1) The Member States in accordance at least 60 % by weight of skimmed-milk with national provisions laid down powder. An undertaking manufacturing by law, regulation or administrative compound feedingstuffs will be granted action shall take the measures the aid only if it is authorized in that necessary to : behalf by the competent authority of the Member State on whose territory the Satisfy themselves that transactions manufacture is carried out and satisfies financed by the Fund are actually - certain conditions. Under Commission carried out and are executed Regulation (EEC) No 1624/76 of 2 July correctly; 1976 concerning special arrangements for the payment of aid for skimmed-milk Prevent and deal with irregularities; powder denatured or processed into compound feedingstuffs in the territory Recover sums lost as a result of of another Member State, the aid may irregularities or negligence. also exceptionally be granted for skimmed-milk powder which is de­ The Member States shall inform the spatched from one Member State to Italy Commission of the measures taken provided that its use there in the manu­ for those purposes and in particular facture of compound feedingstuffs is of the state of the administrative guaranteed. and judicial procedures.

The sums recovered shall be paid to In July 1978 during inquiries at Auetal the paying authorities or bodies and by one of the defendant's inspectors, deducted by them from the ex­ suspicions were for the first time aroused penditure financed by the Fund." that Auetal was not using skimmed milk alone in the manufacture of spray-dried skimmed-milk powder. The inspector was struck by the regular purchase of a 2. The facts underlying the action before product described as "dried-milk the national court product", an expression which is not in common use in the trade, and certain peculiarities in the production methods The plaintiff undertakings in the main employed by Auetal. He therefore actions are partly manufacturers of proposed in his inspection report that compound feedingstuffs which use inquiry should be made of the supplier of skimmed-milk powder in the manu­ the "dried-milk product", which how­ facture of compound feedingstuffs, ever was not done. Samples, which the partly trading companies which, under inspector had taken, were examined by the terms of Commission Regulation No the Hessische landwirtschaftliche Unter­ 1624/76, exported to Italy for the manu­ suchungsanstalt [Institute for Agri­ facture of compound feedingstuffs cultural Analysis, Hesse] in Kassel, but skimmed-milk powder which they no peculiarities were found. themselves obtained from other under­ takings. From the end of 1977 until the middle of 1979 the plaintiffs received Not until May 1979 were inquiries from the Bundesamt für Ernährung und started into the provenance of the Forstwirtschaft in pursuance of the "dried-milk product". Thereupon the Community provisions set out above aids German prosecuting authorities dis- - for skimmed-milk powder for use as covered that Auetal, in addition to nor­ feed. mal spray-dried skimmed-milk powder, had, since the end of 1977, also been producing in considerable quantities, by Some of the plaintiffs obtained from the means of a special process, a powder manufacturing company Auetal-Beyer (hereinafter, referred to as "Auetal KG (hereinafter referred to as "Auetal") powder") and selling it under the the so-called "spray-dried skimmed-milk description "spray-dried skimmed-milk powder" which qualifies for aid. In other powder" although in fact it consisted cases the plaintiffs obtained skimmed- only as to 38.4% of skimmed-milk milk powder for their use from trading powder within the meaning of the term companies which in their turn had as understood in the trade. As to the obtained skimmed-milk powder from rest, the Auetal powder consisted of the Auetal. In the proceedings before the so-called "dried-milk product" obtained national court it is however specifically from third parties which contained as to contested whether and to what extent 56 % powdered whey, as to 31 % sodium the skimmed-milk powder obtained by caseinate and as to 13 % lactose. After the plaintiffs did in fact come from the "dried-milk product" had been Auetal or from other manufacturers. In dissolved in skimmed milk and once

Whether and, if so, to what extent the plaintiffs had received and used normal The Verwaltungsgericht Frankfurt am spray-dried skimmed-milk powder or Main took the view that in the light of Auetal powder is not clear. Community law the legal position was not free from doubt. By orders . in the same terms dated 3 June 1982 it After the questionable operations carried therefore referred the following ques­ out by Auetal had been uncovered the tions to the Court of Justice for a pre­ defendant cancelled the notices granting liminary ruling pursuant to Article 177 of the plaintiffs the aid for skimmed-milk the EEC Treaty: powder and demanded repayment of the aid on the ground that the conditions for its grant had not been satisfied because " 1 . Does a product consisting of a the plaintiffs had used Auetal powder spray-dried mixture of skimmed milk which did not attract aid. The defendant and a dried-milk product come relied upon Paragraph 9 of the German within the definition of skimmed- regulation relating to the grant of aids milk powder laid down in Article 1 for skimmed milk, skimmed-milk (c) of Regulation (EEC) No 986/68 powder, casein and caseinates (BGBl I, of the Council of 15 July 1968

JUDGMENT OF 21. 9. 1983 — JOINED CASES 205 TO 215/82

DEUTSCHE MILCHKONTOR v GERMANY

Where a period of one year has supervisory duties, in view of the fact elapsed beginning with the point in that possible failings of the defendant time at which the authority received might have been causally responsible for knowledge of facts justifying the the unjustified grant of aid, and that the revocation of an unlawful notice defendant may be liable. Since some granting aid, irrespective of whether 85 % of total skimmed-milk powder the person concerned knew that such production in the Federal Republic of facts had come to the notice of the Germany is the subject of Community authority (Paragraph 48 (4) of the subsidies in some form or other it was Verwaltungsverfahrensgesetz) ; the defendant's duty to supervise the manufacture of skimmed-milk powder as Where the authority knew, or did well. The supervision of production by not know as a result of gross observation of the production process negligence, that it was granting the was the only practicable means, at the material time, of preventing improper aid unlawfully (sixth sentence of operations. Paragraph 48 (2) of the Verwaltungs­ verfahrensgesetz in conjunction with Paragraph 814 of the Bürgerliches Gesetzbuch [German Civil Code]?" Third question:

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Presumably, however, the principle of the rule of law dictates that, even if the question of the burden of proof is to be determined Sixth question: according to Community law, where there are no special written rules, the inability to prove a fact must go against the party seeking to derive from it a legal The Court has acknowledged that the consequence which is favourable to him. principle of the protection of legitimate expectation is recognized also by Com munity law. It has, however, not hitherto defined the general- criteria for the Fifth question: application of that principle.

Court] (of 17 March 1977 — VII C The judgment of the Court of 6 May 64.75 — Gasöl Betriebsbeihilfe), it would 1982 in Joined Cases 146, 192 and be possible to deny that there had been a 193/81 BayWa AG v Bundesanstalt für loss of enrichment by pointing to a landwirtschaftliche Marktordnung [1982] continuing competitive advantage over ECR 1503 has however given rise to competitors since there are presumably certain doubts. It is true that that no competitors manufacturing cattle feed judgment may be interpreted as meaning without aids for skimmed-milk powder. that Article 8 (1) of Regulation (EEC) As to the secondary question whether No 729/70 is a reference to those rules recovery is precluded if the authority which lay down under what conditions knew, or did not know as a result of national authorities may claim back a gross negligence, that it was granting the payment of money made under public aid improperly, in the present case it is law, but not as a reference to national not inconceivable that, following the rules laying down whether and to what report of the inquiries of July 1978, extent authorities may at their discretion failure to know of the adulterations waive claims for recovery out of mere carried out at Auetal was in any event considerations of expediency. It might grossly negligent with the result that the however also be concluded that the principle of good faith, to the extent to reference to national law is not to be which it is recognized in Community understood as a reference to substantive law, might preclude a claim for recovery.

Seventh question: 2. Has secured the administrative The national court takes the view that, measure by giving information as a result of considerations founded on which was incorrect or in­ German constitutional law, the claim for complete in a material respect; recovery must, if national law were applied, be governed by Paragraph 48 of the Verwaltungsverfahrensgesetz, con­ 3. Knew, or did not know as a trary to the opinion of the defendant result of gross negligence, that which had founded its claim for recovery the administrative measure was on Paragraph 9 of the German regu­ unlawful. lation governing the grant of aids for skimmed milk, skimmed-milk powder, caseine and caseinates dated 31 May In the circumstances referred to in 1977. The wording of Paragraph 48 is as sub-subparagraph 3 hereof the follows : administrative measure shall in general be revoked with retroactive "(1) An unlawful administrative effect. In so far as the ad­ measure, even after it is no longer ministrative measure has been open to challenge, may be revoked, revoked, payments already made wholly or in part, with prospective thereunder shall be reimbursed. As or retrospective effect. An admin­ to the amount of restitution the istrative measure which has provisions of the Bürgerliches founded or confirmed a right or a Gesetzbuch [Civil Code] relating to legally material advantage (admin­ the restitution of unjustified istrative measure granting a benefit) enrichment shall apply so far as may be revoked only subject to the relevant. If the conditions men­ restrictions of subparagraphs (2) tioned in sub-subparagraph 3 and (4) hereof. hereof are satisfied the person liable to make the restitution cannot (2) An unlawful administrative measure plead loss of the enrichment if he which grants a non-recurring or knew, or did not know as a result continuous monetary payment or a of gross negligence, the circum­ divisible payment in kind or forms stances leading to the illegality of the basis thereof, may not be the administrative measure. The revoked, in so far as the beneficiary amount of restitution shall be has relied upon the administrative determined by the authority at the measure's being maintained in force time of the revocation of the and that expectation, weighed administrative measure. against the public interest in revocation, is worthy of protection. Expectation is in general worthy of (3) ... protection, where the beneficiary has used the benefits granted or has made some disposition of them (4) If the authority receives knowledge affecting his resources which he of facts justifying the revocation of either cannot reverse or can reverse an unlawful administrative measure, only by incurring unreasonable revocation shall be permissible only disadvantages. The beneficiary can­ within a period of one year from not rely on expectation, where he the time at which such facts came to its notice, save in the circum­ 1. Has secured the administrative stances referred to in the third measure by intentional decep­ sentence of subparagraph (2) tion, threats or corrupt practices; hereof, sub-subparagraph 1."

Under that provision a claim for 4. The procedure before the Court of recovery of a sum of money unduly paid Justice is conditional first upon revocation of the administrative measure by which the The orders for reference were lodged at aid was granted, which is only possible if the Court Registry on 11 August 1982. the expectation of the beneficiary of retaining the payment is not worthy of By order of 22 September 1982 the protection in the specific case. That has Court joined the present cases for the to be decided by a process, which is open purposes of the procedure and the to full judicial review, of weighing the decision. protection of legitimate expectation with the public interest in the revocation of In pursuance of Article 20 of the the administrative measure whereby, as Protocol on the Statute of the Court of regards the public interest, other than Justice of the EEC written observations purely fiscal considerations must be were submitted to the Court by taken into account.

GmbH & Co. KG, Piange Kraftfut result of gross negligence, the circum terwerke GmbH & Co. KG, Firma stances leading to the illegality of the Josera-Werk and Hemo Mohr KG, administrative measure. Finally, regard represented by Volker Schiller, Rechts must also be had to the principle of good anwalt, Cologne; Denkavit Futtermittel faith which finds recognition in the rule GmbH , represented by Dietrich Ehle, contained in Paragraph 814 of the Bür Rechtsanwalt, Cologne; Frischli-Milch- gerliches Gesetzbuch [Civil Code] to werke Holtorf + Schäkel KG, which the sixth sentence of Paragraph 48 represented by Paul Bornemann, (2) of the Verwaltungsverfahrensgesetz Rechtsanwalt, Munich; DMV Lagerei- refers. That provision is as follows : und Verwaltungsgesellschaft mbH, represented by Helmut Grzebatzki, Rechtsanwalt, Duisburg; the Govern ment of the Federal Republic of "A benefit provided in order to fulfil an Germany, represented by Martin Seidel obligation may not be claimed back if and Ernst Roder, acting as Agents; the the person providing the benefit knew Government of the United Kingdom, that he was not obliged to provide it." represented by R .

DEUTSCHE MILCHKONTOR v GERMANY

Article 95 of the Rules of Procedure and methods of examination, the Auetal to open the oral procedure without any powder did not have the same charac­ preparatory inquiry. teristics and quality as unadulterated skimmed-milk powder because the caseinate contained in the Auetal powder is not capable of curdling and therefore has a lower nutritional value for calves.

II — Written observations

JUDGMENT OF 21. 9. 1983 — JOINED CASES 205 TO 215/82

. the best method which could therefore Kampffmeyer, Schwarzwaldmilch GmbH, be laid down as mandatory for all Inntaler Mischfutter GmbH & Co. KG, Member States. Denkavit Futtermittel GmbH, DMV Lagerei- und Verwaltungsgesellschaft mbH, the Federal Republic of Germany 2. First question and the Commission of the European Communities take the view that the first question referred to the Court should be The plaintiff Frischli-Mikhwerke Holtorf answered in the negative. + Schäkel KG is of the opinion that the first question referred to the Court by the Verwaltungsgericht Frankfurt am The plaintiffs mentioned in the preceding Main should be answered in the affirm paragraph reach that conclusion from the ative. Under German municipal law (cf. wording and meaning of the definitions regulation relating to milk products of in Article 1 of Regulation (EEC) No 15 July 1970, BGBl. I, p. 1150, last 986/68. It is plain from the clear and amended by regulation of 22 December unequivocal wording of that provision 1981, BGBl I, p. 1667), the determining that skimmed-milk powder may only be factor in the case of dried-milk products produced from pure milk.

prices. ance with the practice of dairies, which has been followed for decades, all milk delivered to them is first separated, that The Federal Republic of Germany takes is to say divided into skimmed milk and the view that the definition of milk cream, is stored in separate tanks and is contained in Article 1 of Regulation only later reconstituted according to the (EEC) No 986/68 relates solely to the particular production requirements. The method of obtaining milk and not to the lawfulness of reconstituting the different material composition of the end product. components of milk into a single milk That corresponds to the meaning of the product is tacitly acknowledged both by term "milk" in tariff heading 04.01 of national and Community law. Since the Common Customs Tariff and Article Regulation (EEC) No 986/68 contains 3 (1) (a) of Regulation (EEC) No no separate provisions relating to the 1411/71 of the Council of 29 June 1971

laying down additional rules on the The United Kingdom and the plaintiffs common organization-of the market in Helmut Becker GmbH & Co. KG, Piange milk and milk products for products Kraßfutterwerke GmbH & Co. KG, falling within tariff heading 04.01 Firma /osera-Werk and Hemo Mohr KG (Official Journal, English Special Edition express no views on the first question. 1971 (II), p. 412) and must likewise The last-mentioned plaintiffs, however, apply to the definition of skimmed-milk submit that in interpreting Article 1 (d) powder. of Regulation (EEC) No 986/68 care should be taken to ensure that no unreasonable risks, which may escape control, arise for Community citizens. If The Commission argues that Auetal such risks were not prevented by an powder is not skimmed-milk powder interpretation of that provision as because foreign matter is added to the relating merely to a given material skimmed milk used. Skimmed-milk composition of the final product that powder differs from skimmed milk only may be achieved by excluding such risks inasmuch as water and if appropriate also a part of the fat content have been in the context of the claim for recovery. removed from it. No other substance such as "dried-milk product" may, however, be added to it as happened in the case of Auetal powder. Contrary to the assumption of the Verwaltungs­ 3. Second question gericht there were at the material time generally known methods of analysis for proving the existence of improper operations of the kind in question. There is nothing to suggest that the regulation The pkintiffs in the main action and the was intended to be valid only in so far as Commission take the view that the its observance could be ensured by second question should be answered in means of chemical analysis of the the affirmative. An obligation exists on products. What is important above all is the part of Member States to supervise supervision on the premises. Any other the production of skimmed-milk powder. interpretation would run counter to the meaning of the provision since the effectiveness of the system of aids would be considerably reduced if aids were also paid for product components which are Deutsche Milchkontor GmbH is, however, not the subject of intervention in the of the opinion that that obligation is' milk sector. The aid provisions are not founded not on Article 10 of Regulation intended to guarantee a certain quality (EEC) No 990/72 but on Article 8 of of feedingstuffs but rather to remove Regulation (EEC) No 729/70 pursuant from the market for human consumption to which Member States must take the skimmed-milk powder as a product measures necessary "to prevent ... ir­ subject to intervention which is available regularities". in surplus. Article 1 of Regulation (EEC) No 986/68 relates solely to the complete milk-yield of the cow and not to sub­ stances derived from it, so that the admixture to milk of individual sub­ Firma E. Kampffmeyer, Schwarzwaldmilch stances previously removed from it is GmbH and Inntaler Mischfittter GmbH & excluded. Co. KG submit that, according to the spirit and intendment of Article 10 of

Frischli-Milchwerke Holtorf + Schäkel Helmut Becker GmbH & Co. KG, Piange KG submits above all that skimmed-milk Krafifutterwerke GmbH & Co. KG, powder is almost exclusively used in the Firma Josera-Werk and Hemo Mohr KG subsidized sector and that supervision of point out that, by its very wording, production at least at the material time Article 10 of Regulation (EEC) No was the only practicable method of 990/72 is not restricted to the super­ avoiding improper operations. vision of manufacturers of feedingstuffs. Only by inspections of the manufacturers of skimmed-milk powder is it possible to ensure that aids are paid only for genuine skimmed-milk powder and that an aid is not "paid more than once for one and the same product", a danger referred to in the third recital in the preamble to Regulation (EEC) No Denkavit Futtermittel GmbH and DMV 990/72. It is impossible for manufac­ Lagerei- und Verwaltungsgesellscka.fi mbH turers of feedingstuffs to verify whether emphasize that only the competent skimmed-milk powder is eligible for aid. authority and not the producers of feedingstuffs is authorized and in a That can be done only by supervision of position to supervise the production of the production of skimmed-milk powder skimmed-milk powder on the premises and inspection of the production process and in that way to prevent improper in the production plant. It also accords

DEUTSCHE MILCHKONTOR v GERMANY

operations. Furthermore in the present imposed on Member States by Article 10 case major factors gave rise to the of the regulation does not include the suspicion that adulterations were being duty of supervising the production of carried out at Auetal. skimmed-milk powder in the production plant.

4. Third question The Federal Republic of Germany and the United Kingdom are of the opinion that the second question should be answered Deutsche Milchkontor GmbH, Firma E. in the negative. Kampjfmeyer, Schwarzwaldmilch GmbH, Inntaler Mischfutter GmbH & Co. KG, Helmut Becker GmbH & Co. KG, Piange Kraftfutterwerke GmbH & Co. KG, The Federal Republic of Germany takes Firma Josera-Werk, Hemo Mohr KG, the view that the content of Regulation Denkavit Futtermittel GmbH and DMV (EEC) No 990/72 is confined to the Lagerei- und Verwaltungsgesellschaft mbH matter stated in the title of the regu­ contend first that the third question lation, that is to say to the denaturing of submitted by the Verwaltungsgericht skimmed-milk powder and its processing consists of two part-questions namely, into compound feedingstuffs. That regu­ first, whether the duty to supervise the lation is therefore not concerned in any way with the composition of skimmed- manufacturer of skimmed-milk powder milk powder. Accordingly, the duty applies also in respect of manufacturers of feedingstuffs and secondly whether

JUDGMENT OF 21. 9. 1983 - JOINED CASES 205 TO 215/82

In the context of the intervention system set The plaintiffs Denkavit Futtermittel up in the public interest, manufacturers GmbH and DMV Lagerei- und Verwal- of feedingstuffs are used to a certain tungsgesellschafi mbH add that where extent as a channel of communication, appropriate it is for the Community and because although the aid is paid to them the Member State concerned, within in the first instance it has to be passed on the context of the so-called "balancing to their customers and they therefore of accounts" to agree on the legal obtain no benefit from it. In fact it is the consequences flowing from the inability milk producers who benefit from the aid to claim recovery. In no event ought since their products are thereby made such a burden to be imposed upon third marketable. Manufacturers of feeding parties who are not involved. stuffs in such a situation are in need of protection because they themselves are not in a position to ensure the proper Firma E. Kampffmeyer, Schwarzwaldmilch manufacture of the skimmed-milk GmbH and Inntaler Mischfutter GmbH & powder and because, in view of the Co. KG state that in the regulation of amount of the aid, they are unable to the milk market responsibility for the bear the risk of a claim for recovery of sale of surplus milk has been taken away aid which might threaten their existence. from the milk producer by the auth Moreover, the principle of equal orities. Therefore the risk of the im treatment requires that all manufacturers proper production of skimmed-milk of feedingstuffs as a result of their incor powder should fall solely on the poration into the intervention system supervising authorities. A claim for recov should receive equal treatment and that ery of unduly paid aids from recipients only ascertainable and calculable risks of aid in good faith is therefore also should be imposed on them. precluded even where the authorities are guilty of no fault. If negligent conduct on the part of the authority is required then it is clear from the judgment of the As to the second part-question as to the Court of 5 March 1980 in Case 265/78 consequences flowing from a breach of Ferwerda [1980] ECR 617 that there is that duty of care Deutsche Milchkontor nothing in Community law to make it GmbH, Helmut Becker GmbH & Co.

DEUTSCHE MILCHKONTOR v GERMANY

In the special case governed by Regu­ lation No 1624/76 (exports to Italy) the 5. Fourth question question of proof is specifically provided for in that regulation. Even if aids have been paid for skimmed-milk powder As a preliminary, Denkavit Futtermittel which is denatured or processed in Italy GmbH, DMV Lagerei- und Verwaltungs- the preconditions for the grant of the aid

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are entirely satisfied only if and in so far provision of national law of that kind is as the skimmed-milk powder has in fact to be found in Paragraph 9 (1) of the been processed, which in that regulation German regulation relating to the grant is guaranteed by a provision for security. of aids for skimmed milk, skimmed-milk That security is released when proof is powder, caseine and caseinates of given that the relevant amount of 31 May 1977 which provides that the skimmed-milk powder has been pro­ recipient of aid shall, even after receipt cessed. Once the processing undertakings of payment of the aid, bear the burden supplied in Italy have given the necessary of proof of the existence of the evidence to the Italian authorities that is preconditions for the grant of aid until accepted as evidence that the relevant the expiry of the third calendar year skimmed-milk powder was not adult­ after the year in which the aid was paid. erated. If that proof given to the Italian authorities is adequate it must be available too to the German exporter as against the Federal Office.

DEUTSCHE MILCHKONTOR v GERMANY

6. Fifth question In the United Kingdoms view the Member States are not obliged under Article 8 of Regulation No 729/70 to take steps to recover amounts if it is The plainfiiffs in the main actions, the clear that the applicable provisions of Federal Republic of Germany, the United national law preclude such recovery.

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Helmut Becker GmbH & Co. KG, Piange Kraftfutterwerke GmbH & Co. KG, Firma Josera-Werk and Hemo Mohr KG 8. Seventh question additionally submit ex abundanti cautela that the protection of legitimate expectation is one of the fundamental principles of Community law and that The plaintiffs in the main actions take the the principles known to Community law view that there are no objections under of proportionality and the prohibition of Community law to the provisions of excessive requirements also preclude the Paragraph 48 of the Verwaltungsverfah­ imposition of an unlimited risk which rensgesetz [Law on administrative threatens the existence of undertakings procedure] in its various component and cannot be avoided by them. The parts.

DEUTSCHE MILCHKONTOR v GERMANY

The question raised in the fourth Helmut Becker GmbH & Co. KG, Piange subquestion as to the exclusion under Kraftfutterwerke GmbH & Co. KG, Paragraph 814 of the Bürgerliches Firma Josera- Werk, Hemo Mohr KG and Gesetzbuch [Civil Code] of a claim for Denkavit Futtermittel GmbH essentially recovery where the authority knew or, as state the following: a result of gross negligence, was unaware of the lack of legal justification is closely allied with the question as to the The question raised in subquestion 1 as consequences flowing from a breach of to the permissibility of national pro­ the duty of supervision under Article 10 visions governing the protection of legitimate expectation was given an affir­ of Regulation (EEC) No 990/72 by the mative reply in the judgment of the authority. In the case of such a breach of Court of 5 March 1980 in the Ferwerda duty the national authority is responsible case, previously cited. Furthermore, it to the Community in the context of the accords with principles of Community balancing of accounts for the financial law that a claim for recovery should be consequences of irregularities and precluded in such cases. negligence. On the other hand to lay the burden of those consequences on the manufacturers of feedingstuffs would The question raised by subquestion 2 as offend against elementary principles of to the permissibility of national pro­ justice. In the view of Denkavit Futt- visions relating to loss of enrichment ermittel GmbH the duty imposed on may also be answered in the affirmative national authorities to avoid any under the principles laid down by the diminution of the effectiveness of above-mentioned judgment. Moreover, Community law implies that a claim for such provisions are actually required by recovery must be regarded as unac­ Community law. In that connection it is ceptable even in the case of ordinary not possible to find that a recipient of negligence by the authority in not

The United Kingdom confines itself to As to the applicability of national law the the observation that a national legal Court expressed its opinion inter alia in provision such as the one in the present the judgments of 12 June 1980 in Case case must be tested for its compatibility 130/79 Express Dairy Foods [1980] ECR with the two requirements under 1887 and 6 May 1982 in the BayWa Community law that it may neither case, already cited. However, the precise discriminate nor prejudice the attainment definition of the limits set by Community of the objectives of Community law. law in practice raises insuperable problems. In so far as the Court in a given case has no opportunity of expressing its view on a decision by the The Commission first submits that the implementing authority or by the four separate aspects of the seventh national court a Member State bears the question all relate to the concept of the financial risk that the decision may not protection of legitimate expectation in be regarded as being in conformity with claims for recovery of payments made Community law when a decision is taken without justification from public funds about the clearance of accounts by the and demonstrate how well developed Community in which case financing by that principle has become particularly in the Community is refused. German administrative procedure. That it must be possible for national laws in laying down rules governing claims for recovery made by authorities to have The grounds on which, pursuant to regard to the principle of the protection Paragraph 48 of the Verwaltungsverfah­ of legitimate expectation flows from the rensgesetz, a claim for recovery is validity of that principle in Community precluded correspond to generally rec­ law itself, as has been recognized by the ognized principles. However, there is no Court of Justice. However, Community provision corresponding to that article at law does not allow Member States an Community level. Nor is it clear unlimited margin of discretion. The specifically how the Court intends to efficacy of Article 8 of Regulation No ensure the equal treatment of traders in 729/70 may not be frustrated by national the different Member States required by measures. The requirement made by its judgment of 6 May 1982 in the Community law that national measures BayWa case and the most uniform governing claims for recovery must be

effective is based not merely on the has acted negligently a claim for financial interests of the European Agri recovery is still necessary, since that cultural Guidance and Guarantee Fund provision lays down who has to bear the but also on the principle of the equal financial consequences if it is not treatment of the traders concerned in the possible to recover the amounts paid. whole Community. That means that even Since reference is also made to cases in in cases where in the end no burden is which the national authority is re placed on the Community budget an aid sponsible for the erroneous payment unduly granted must be claimed back so recovery is also in principle required in as not to distort market conditions such cases. If it were otherwise there within the Community. would be a danger that the number of disputes between the Commission and Member States as to whether a national Such considerations would preclude for authority was at fault in not acting example a duty to claim recovery quickly enough would increase con exercisable within too short a period siderably. under national law.

conditions. However, it would have been for the Community legislature to lay For the same reasons it does not accord down clear criteria under Community with Community law for a Member State law in that connection. Therefore, in not to make a claim for recovery of an adopting provisions in implementation of aid granted without legal basis simply on Article 8 of Regulation No 729/70 the the ground that its authorities knew or Member States enjoy a certain margin of ought to have known that there was no discretion which must not be too closely entitlement to the aid. If it were circumscribed. otherwise Member States would be able definitively to distort market conditions by conduct incompatible with the Com In view of the multiplicity of conceivable

However, it must be cases where the national administration ensured that in weighing the public

1 By 11 orders dated 3 June 1982, which were received at the Court on 11 August 1982, the Verwaltungsgericht [Administrative Court] Frankfurt am Main referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty questions as to the interpretation of various provisions of Regulation (EEC) No 986/68 of the Council of 15 July 1968 laying down general rules for granting aid for skimmed milk and skimmed-milk powder for use as feed (Official Journal, English Special Edition 1968 (I), p. 260), Regulation (EEC) No 990/72 of the Commission of 15 May 1972 on detailed rules for granting aid for skimmed milk processed into compound feedingstuffs and for skimmed-milk powder for use as feed (Official Journal, English Special Edition 1972 (II), p. 428) and Regulation (EEC) No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (Official Journal, English Special Edition 1970 (I), p. 218), and as to the principles of Community law regarding the recovery of unduly-paid aids.

2 Those questions were raised in disputes pending before the Verwaltungs­ gericht [Administrative Court] Frankfurt am Main between the Bundesamt für Ernährung und Forstwirtschaft [Federal Office for Food and Forestry],

DEUTSCHE MILCHKONTOR v GERMANY

4 In 1978 and 1979 Auetal used, besides skimmed milk, large quantities of a product composed of 56 % powdered whey, 31 % sodium caseinate and 13 % lactose to make skimmed-milk powder. As regards its content of protein, carbohydrates and so forth, the composition of the powder made in that way was the same as that of skimmed-milk powder made from fresh skimmed milk. The issue in the main proceedings is, depending on the case, whether and to what extent the plaintiffs received and used for the processing and exportation of the skimmed-milk powder in question normal skimmed-milk powder supplied by Auetal or another supplier or powder made by Auetal using the particular method described above and put on the market as skimmed-milk powder.

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5 The Verwaltungsgericht found that at the material time neither the under­ takings in the milk product industry nor the public laboratories were able, using the methods of chemical analysis habitually employed at that time, to detect any difference between skimmed-milk powder made from fresh skimmed milk and the powder made by Auetal using the particular method in question. The plaintiffs in the main proceedings therefore argue that they could not tell whether or not they were receiving and using a product other than skimmed-milk powder made from fresh skimmed milk.

6 The use of that particular manufacturing method by Auetal was discovered by the competent German authorities in May 1979. The parties to the main proceedings are at odds on the question whether its use might and ought to have been discovered earlier as some evidence of unusual manufacturing processes had previously been found. Following the discovery the Bundesamt für Ernährung und Forstwirtschaft decided to cancel the notices granting aid and to demand repayment of the sums unduly paid under those notices on the ground that the conditions for the grant of aids, namely the use of skimmed-milk powder in the prescribed quantity at least, were not fulfilled because the plaintiff undertakings had used, at least in part, powder made by Auetal.

3. Does Article 10 of the last aforementioned regulation enure for the benefit of the recipients of aid as third parties, that is, may they invoke failings of the authorities in that respect so as to preclude a demand for repayment?

4. Does Community law, in particular Article 8 (1) of Regulation (EEC) No 729/70 of the Council of 21 April 1970, contain rules governing the substantive burden of proof or are those rules determined by national law as regards the question whether, in a given case, aids for skimmed milk and skimmed-milk powder for use as feed under Regulation No 986/68 of the Council, and Commission regulations adopted in implementation thereof, have been unlawfully granted? If Community law contains rules governing the burden of proof: What are those rules?

5. Does Article 8 (1) of Regulation No 729/70 of the Council of 21 April 1970 provide a direct legal basis upon which national authorities may demand reimbursement of aid granted unlawfully with the result that the factual preconditions to be satisfied for such a demand are definitively laid down in that provision?

6. If the fifth question is answered in the affirmative: Within what provisions, if appropriate supplemented by unwritten legal principles of Community law, is the expectation of the recipient of aid protected and if so under what conditions and to what extent? May the recipient of aid in particular under certain circumstances plead loss of enrichment and is there such a loss where the recipient of aid has passed the aid on in the selling price? Is recovery precluded where the authority knew, or did not know as a result of gross negligence, that it was granting the aid unlawfully?

9 The first of those questions concerns the conditions upon which aids are granted whilst the second to seventh questions are concerned with various aspects of the recovery of aids by national authorities where they have been paid without the conditions for their grant having been fulfilled. To make it easier to formulate the relevant principles with the aid of which the national court should be able to decide the cases before it the questions submitted will be rearranged and dealt with in the following order:

The conditions upon which aids are granted (first question);

The extent to which Community law and national law apply to the question of the recovery of unduly-paid aids (fifth and sixth questions);

DEUTSCHE MILCHKONTOR v GERMANY

The protection of legitimate expectation and assurance of legal certainty in the recovery of unduly-paid aids (seventh question);

The burden of proof in the recovery of unduly-paid aids (fourth question);

13 The.literal. interpretation -is supported by the purpose of the system of aids in question, which, under the intervention system established by Regulation No 804/68 of the Council, is to enable milk to be disposed of at the price

JUDGMENT OF 21. 9. 1983 — JOINED CASES 205 TO 215/82

fixed within the common organization of the market in milk and milk products. It would be contrary to that objective for aids for skimmed-milk powder to be attracted by a product made from substances no longer on the milk market or in respect of which similar aids have already been granted when they were manufactured, as is the case where skimmed milk is processed into casein and caseinate in accordance with Article 11 of Regu­ lation No 804/68 of the Council.

H The answer to' the first question must therefore be that a product consisting of a spray-dried mixture of skimmed milk and a powder composed of whey, sodium caseinate and lactose is not skimmed-milk powder for the purposes of the Community regulations governing aid for skimmed-milk powder and, more particularly, of Article 1 of Regulation (EEC) No 986/68 of the Council of 15 July 1968 even if its composition is the same as that of skimmed-milk powder made from cow's milk.

The extent to which Community law and national law apply to the question of the recovery of unduly-paid aids

is According to the explanations provided by the national court, its fifth question is in substance whether Community law and in particular Article 8 (1) of Regulation No 729/70 of the Council of 21 April 1970 directly auth­ orizes the competent national authorities to demand repayment of aids unduly paid, so that the substantive conditions for a right of recovery are exhaustively set out in that provision, or whether recovery is governed by the rules and procedures laid down by national legislation; if it is, the court wishes to know what limits are placed on the application of national law.

i9 In accordance with those principles the Court has repeatedly held (on 5 March 1980 in Case 265/78 H. Ferwerda BVv Produktschap voor Vee en Vlees [1980] ECR 617, on 12 June 1980 in Joined Cases 119 and 126/79 Lippische Hauptgenossenscha.fi eG and Another v Bundesanstalt fiir landwirt- schaftliche Marktordnung [1980] ECR 1863 and on 6 May 1982 in Case 54/81 Firma Wilhelm Fromme v Bundesanstalt fur landwirtschaftliche Markt- ordnung [1982] ECR 1449 and Joined Case 146, 192 and 193/81 BayWa AG and Others v Bundesanstalt für landwirtschaftliche Marktordnung [1982] ECR 1503) that in the absence of provisions of Community law disputes con­ cerning the recovery of amounts unduly paid under Community law must be decided by national courts pursuant to their own national law subject to the

JUDGMENT OF 21. 9. 1983 — JOINED CASES 205 TO 215/82

limits imposed by Community law inasmuch as the rules and procedures laid down by national law must not have the effect of making it virtually impossible to implement Community regulations and national legislation must be applied in a manner which is not discriminatory compared to pro­ cedures for deciding similar but purely national disputes.

20 If follows that Article 8 (1) of Regulation No 729/70 does not govern the relations between the intervention agencies and the traders concerned and in particular it does not constitute a legal basis authorizing the national auth­ orities to bring actions to recover unduly-paid aids from their recipients; such actions are governed by national law.

2i Although as a result of such reliance on national law the conditions for the recovery of unduly-paid aids may vary to some extent from one Member State to another, the effect of such differences, which moreover in the present state of development of Community law are inevitable, is reduced by the limits to which the. Court has subjected the application of national law in the decisions cited above.

24 However, if disparities in the legislation of Member States proved to be such as to compromise the equal treatment of producers and traders in different Member States or distort or impair the functioning of the common market, it would be for the competent Community institutions to adopt the provisions needed to remedy such disparities.

25 The answer to the fifth question of the Verwaltungsgericht Frankfurt am Main must therefore be that in the present state of Community law sums unduly paid by way of aids under the Community regulations are recovered by the national authorities according to the rules and procedures laid down by national legislation subject to the limits imposed by Community law on such an application of national law.

26 In view of that answer to the fifth question, the sixth question, which is subject to the premise that the recovery of unduly-granted aids is governed by rules and procedures laid down by Community law, has no purpose.

The protection of legitimate expectation and assurance of legal certainty in the recovery of unduly-paid aids

27 The national court's seventh question is in substance whether the restrictions which Community law places on the application of national law may exclude consideration of the protection of legitimate expectation and assurance of legal certainty in the recovery of aids unduly paid.

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DEUTSCHE MILCHKONTOR v GERMANY

30 The first point to be made in this regard is that the principles of the protection of legitimate expectation and assurance of legal certainty are part of the legal order of the Community. The fact that national legislation provides for the same principles to be observed in a matter such as the recovery of unduly-paid Community aids cannot, therefore, be considered contrary to that same legal order. Moreover, it is clear from a study of the national laws of the Member States regarding the revocation of administrative decisions and the recovery of financial benefits which have been unduly paid by public authorities that the concern to strike a balance, albeit in different ways, between the principle of legality on the one hand and the principles of legal certainty and the protection of legitimate expectation on the other is common the laws of the Member States.

3i Where the rules and procedures applied by the national authorities in the recovery of Community aids are the same as those which they apply in comparable cases concerning purely national financial benefits, there is in principle no reason to assume that those rules and procedures are contrary to the national authorities' duty under Article 8 of Regulation No 729/70 to recover sums irregularly granted and that consequently they reduce the effectiveness of Community law. This applies in particular to grounds for excluding recovery where these are related to the administration's own conduct and it can therefore prevent them from occurring.

32 It should be added , however , that the principle that national legislation must be applied without discrimination compared to purely national procedures of the same kind requires the interests of the Community to be taken fully into consideration in the application of a provision which , like the first sentence of Paragraph 48 (2) of the Verwaltungsverfahrensgesetz , requires the various interests in question , namely on the one hand the public interest in the revocation of the measure and on the other hand the protection of the legitimate expectation of the person to whom it is addressed , to be weighed up against one another before the decision is revoked .

36 As regards the law applicable for this purpose , it must be observed that in referring to national law as regards the recovery , of aids unduly paid Article 8 (1) of Regulation No 729 / 70 makes no distinction between the substantive conditions for their recovery and the rules of procedure and form which must be followed in recovering them . Those conditions and rules, including those allocating the burden of proof, are therefore all determined by national law, subject to the restrictions referred to above which may derive from Community law in this regard . The information given in the orders for reference as to the exact terms of the relevant rules of national law does not enable the Court to formulate any further guidelines for the interpretation of Community law in this regard .

DEUTSCHE MILCHKONTOR v GERMANY

37 However, the plaintiffs Deutsche Milchkontor GmbH , Firma E. Kampff- meyer, Schwarzwaldmilch GmbH and Inntaler Mischfutter GmbH & Co. KG further contend that Community law is applicable, in the case of exports of skimmed-milk powder to Italy under the provisions of Commission Regu­ lation No 1624/76, as regards the proof that the exported product met the requirements of the Community regulations. They argue that such proof is provided by the fact that the Italian consignees submitted the necessary evidence to the Italian authorities in order to obtain the release of the security required by that regulation.

38 The point to be made with regard to that argument is that the evidence submitted in accordance with Regulation No 1624/76 to the authorities in the Member States of destination relates to the denaturing or processing of the skimmed-milk powder by the importer, its purpose being to obtain the release of the security held by the authorities of that Member State. It does not relate to the question whether the skimmed-milk powder exported for the purposes of denaturing or processing met the conditions laid down by Regulation No 986/68 for the grant of aids in the exporting Member State.

43 Consequently , Member States must verify by means of appropriate controls that skimmed-milk powder complies with the relevant Community rules so as to ensure that Community aids are not paid in respect of products for which they ought not to be granted. It is for the national court to determine the controls necessary for this purpose having regard in particular to the circumstances of the case and the techniques available at the time.

44 As regards the consequences of a failure to exercise such supervision for the recovery of sums unduly paid and in particular the question whether the recipients of the aids may rely on the failure as a defence to an action for recovery, it follows from the foregoing statements regarding the extent to which Community law and national law are applicable to the question of the recovery of unduly-paid aids and from the principles of the protection of legitimate expectation and assurance of legal certainty that in the present state of development of Community law those consequences are determined by national law and not by Community law. It is therefore likewise the task of the national courts to determine them on the basis of the relevant national law.

45 The answer to the second and third questions must therefore be that the national authorities must monitor the manufacture of skimmed-milk powder by conducting inspections at the manufacturer's premises if this is necessary to ensure that the Community rules are observed. It is for the national court to determine the consequences of any failure to fulfil that duty on the basis of the relevant national law.

in answer to the questions submitted to it by the Verwaltungsgericht Frankfurt am Main by orders of 3 June 1982, hereby rules:

1. A product consisting of a spray-dried mixture of skimmed milk and a powder composed of whey, sodium caseinate and lactose is not skimmed-milk powder for the purposes of the Community regulations governing aid for skimmed-milk powder and, more particularly, of Article 1 of Regulation (EEC) No 986/68 of the Council of 15 July 1968 even if its composition is the same as that of skimmed-milk powder made from cow's milk.

2. In the present state of Community law sums unduly paid by way of aids under the Community regulations are recovered by the national authorities according to the rules and procedures laid down by national legislation subject to the limits imposed by Community law on such an application of national law.

3. Community law does not prevent national law from having regard, in excluding the recovery of unduly-paid aids, to such considerations as the protection of legitimate expectation, the loss of unjustified enrichment, the passing of a time-limit or the fact that the administration knew, or was unaware owing to gross negligence on its part, that it was wrong in granting the aids in question, provided however that the conditions laid down are the same as for the recovery of purely national financial benefits and the interests of the Community are taken fully into account.

4. The burden of proof in the recovery of aids unduly paid is determined by national law subject to any restrictions which may derive from Community law in this regard.

OPINION OF MR ADVOCATE GENERAL VERLOREN VAN THEMAAT DELIVERED ON 8 JUNE 1983 *

Mr President, laid down in Article 8 of Regulation Members of the Court, (EEC) No 729/70 of the Council of 21 April 1970 (Official Journal, English 1. Introduction Special Edition 1970 (I), p. 218) requiring Member States inter alia to 1.1. Summary of previous decisions "recover sums lost as a result of irregu­ larities or negligence" in connection with In Joined Cases 205 to 215/82 the Court the financing of the common agricultural is once again confronted with a number policy. In my Opinion in Case 54/81 of legal issues concerning the obligation Fromme [1982] ECR 1449 at p. 1466.

1 — Translated from the Dutch.