C-117/83

o n t h e interpretation a n d validity of Regulation N o 1071/68 of t h e Commission of 25 July 1968 laying d o w n detailed rules for granting private storage aid for beef a n d veal (Official Journal, English Special Edition 1968 (II), p . 354) as regards t h e possibility of declaring forfeit a n d recovering a deposit after it has been wrongly released,

T H E C O U R T (Fifth Chamber)

c o m p o s e d of: Lord Mackenzie Stuart, President, Y. G a l m o t (President of C h a m b e r ) , O . D u e , U . Everling a n d C . Kakouris, Judges,

A d v o c a t e General : P . VerLoren v a n T h e m a a t Registrar: J. A. P o m p e , Deputy Registrar

gives t h e following

JUDGMENT

with the defendant in the main action, nature of the deposit in question. After the Bundesanstalt für landwirtschaftliche observing that Regulation No 1071/68 Marktordnung [Federal Office for the provides no authority for revoking Organization of Agricultural Markets, decisions releasing deposits and that hereinafter referred to as "the de- there is no other source of such authority fendant"], to store for four months 150 in Community law, the national court tonnes of fresh beef originating in the proceeds to consider whether there is Community and falling within tariff any authority in German law for heading 02.01 A II (a) 1 (bb) II of the revoking a decision to release a deposit. Common Customs Tariff. In fact the In the present case the national court plaintiff had put into storage frozen considers that the legal nature of the boned forequarters of beef which had deposit is such as to exclude the been imported into the Community from application of Article 48 of the German the People's Republic of China.

In such a case the defendant can no longer obtain satisfaction from the deposit since A final judgment of the Landgericht it no longer exists but it may exercise its [Regional Court] Bremen sentenced the right to impose a penalty and require the partners and employees of Karl Könecke plaintiff to pay the fine. GmbH & Co. KG who were responsible to imprisonment and fines for the said acts. If in fact it is a fine, the national court queries whether such a provision is The Verwaltungsgericht Frankfurt am compatible with superior rules of Main is in considerable doubt as to the Community law. If so, it is not

compatible with the general principles of 4. If either the first or the second law which are applicable in the criminal question is answered in the affirm- laws of the Member States of the ative: What is the nature of the Community and which, pursuant to the claim secured by the deposit referred judgment of the Court of Justice of to in Article 4 of Regulation (EEC) 14 May 1974 in Case 4/73 (Nold v No 1071/68? Commission [1974] ECR 491), also obtain in Community law. There are 5. If the answer to the fourth question four main principles, which in the is that the claim secured by the Federal Republic of Germany have the deposit is a claim for a penalty: Do status of constitutional law: Article 4 of Regulation (EEC) No 1071/68 and the penalty provided (a) in dubio pro reo, for therein infringe superior rules of Community law?" (b) nulla poena sine culpa, (c) the principle of proportionality, The request for a preliminary ruling was (d) ne bis in idem. received at the Court Registry on 27 June 1983. In the light of those considerations the national court has referred the following Pursuant to Article 20 of the Protocol on questions to the Court of Justice for a the Statute of the Court of Justice of the preliminary ruling: EEC written observations were lodged at the Court by the Government of the " 1 . Does Article 4 of Regulation (EEC) Federal Republic of Germany, rep- N o 1071/68 of the Commission of resented by M. Seidel, Ministerialrat in 25 July 1968 laying down detailed the Federal Ministry for Economic rules for granting private storage aid Affairs, and E. Röder, Regierungs- for beef and veal (Official Journal, direktor in the same Ministry; and by the English Special Edition 1968 (II), p. Commission, represented by J. Sack, a 354) enable the national intervention member of its Legal Department, acting agencies, after the period of storage as Agent. has been completed, to recover a deposit which has been wrongly By order of 7 December 1983 the Court released? decided to assign the case to the Fifth Chamber. 2. If the first question is answered in the negative: Are national rules Upon hearing the report of the Judge- under which it is possible to revoke a Rapporteur and the views of the wrongful decision releasing a deposit Advocate General the Court decided to and to reclaim the amount of the open the oral procedure without any deposit after the period of storage preparatory inquiry. However, it re- has expired compatible with Com- quested the Commission to provide munity law? written replies to a number of questions before 21 January 1984. 3. If the second question is answered in the affirmative: Are national rules such as those described in the second II — W r i t t e n o b s e r v a t i o n s lod- question which make revocation of ged w i t h t h e C o u r t a decision releasing a deposit and hence recovery of that deposit subject to the discretion of the In its written observations the intervention agency compatible with Government of the Federal Republic of Community law? Germany proposes that the first question

It proposes that the second question Accordingly, the German Government should be answered in the affirmative considers that breaches must be taken and on that issue refers to the decisions into account even after release of the of the Court of Justice (see the judgment deposit, for otherwise there would be of 21 September 1983 in Joined Cases disregard of the principles of equal 205 to 215/82 Deutsche Milchkontor treatment and uniform application of [1983] ECR 2633). The power of the Community law if only breaches Member States extends not only to discovered during the period of storage the adoption of procedural provisions were penalized. Thus Community law relating to the recovery of sums wrongly not only allows, but indeed requires, paid but also to the adoption of sub- Member States to reclaim a deposit stantive rules. On that issue the German wrongly released. Government refers to the judgment of 12 June 1980 in Joined Cases 119 and 126/79 Lippische Hauptgenossenschaft [1980] ECR 1863), especially paragraph 10 (at p. 1879) and the Opinion of the The German Government proposes that Advocate General (at p. 1884). the third question should be answered in the negative. As in its answer to the second question, it observes that the principles of equal treatment and uniform application of Community law do not permit repayment of the amount It considers that the principles laid down of the deposit to be left to the discretion in those decisions in relation to the of the national intervention agencies. On recovery of sums wrongly paid may be that issue it refers to the judgment of 6 extended to the case of a deposit May 1982 in Joined Cases 146, 192 and wrongly released. The nature of the 193/81 (BayWa AG v Bundesanstalt fiir deposit is no obstacle. The Government landwirtschaftliche Marktordnung [1982] also refers to the judgment of 17 ECR 1503), in particular paragraph 30 December 1970 in Case 11/70 (Inter- of the decision (at p. 1535). nationale Handelsgesellschaft v Einfuhr- und Vorratsstelle fiir Getreide und Fut- termittel [1970] ECR 1125), especially paragraph 18 (at. p. 1136) according to which a deposit is merely a guarantee As regards the fourth question the that an undertaking voluntarily assumed German Government observes that the will be carried out. The German deposit provided for in Article 4 of Government maintains that the deposit in Regulation No 1071/68 is intended to the present case is intended to guarantee ensure that the storer performs his con- not only "any future (pecuniary) right", tractual obligations in order that the as the national court considers, but also purpose of the aid for storage, which is

an instrument for regulating the market, Hamburg-Ericus [1982] ECR 1389, in may be achieved. In its view neither particular paragraph 12 at p. 1397) and repayment of the aid nor claims for the aforementioned judgment in damages are measures sufficient to guard Fromançais (especially paragraph 7 et against infringements in this field. If, for seq.). example, the storer prematurely sold the beef and veal stored he would not have to pay damages in the absence of quantifiable damage. The deposit is therefore a necessary sanction to prevent speculative transactions in respect of The German Government maintians that stored meat; see in that respect the deposit is necesary to prevent specu paragraph 12 of the judgment of lation in stored beef and veal and 23 February 1983 in Case 66/82 according to the aforementioned judg- (Fromançais [1983] ECR 395). ments the argument that the means are disproportionate to the ends is not valid. Furthermore, it must be observed in the present case that breach of the storer's obligations was also at the origin of the criminal conviction of the persons acting The German Government observes on behalf of the plaintiff. further that the right secured by the deposit, which may most easily be compared with the right secured by a contractual penalty, is not a sanction of criminal law (see the aforementioned judgment in Internationale Handels- The Commission observes at the outset gesellschaft). that the drafting of Regulation N o 1071/68 was not perfect as regards legal terminology. Although Article 3 (1) (e) and Article 4 thereof speak of a "deposit" the term is at least to some extent incorrect. In the Commission's The German Government proposes that view the deposit system involves two the fifth question should be answered in elements: in making the contract the the negative. It states that the sanction storer of meat consents to a contractual represented by the deposit is not a penal penalty and the payment thereof is sanction. The principle of proportionality guaranteed by a deposit. From the point must be observed, however, even in the of view of the wording only the second absence of a penal sanction, and in order element of the system is clearly expressed to do so it is necessary to consider in the regulation but there is no doubt whether the means adopted are necessary about the existence of a system of con- for and commensurate with the purpose tractual penalties. It is apparent from to be achieved. On that issue it refers to Article 4 (2) of Regulation No 989/68 of the judgments of the Court of 11 May the Council of 15 July 1968 laying down 1977 in Joined Cases 99 and 100/76 (De general rules for granting private storage Beste Boter v Bundesanstalt för landwirt- aid for beef and veal (Official Journal, schaftliche Marktordnung [1977] ECR English Special Edition 1968 (I), p. 264) 861, in particular paragraph 11 at and Regulation No 1071/68 which refers p. 872), 29 April 1982 in Case 147/81 thereto that the deposit is not intended (Merkur Fleisch-Import v Hauptzollamt to ensure repayment of aid wrongly

allocated but constitutes an additional With regard to the second and third sanction in the event that the contractual questions the Commission is of the obligations are not observed. That is the opinion that national laws permitting the typical function of a contractual penalty recovery of the deposit cannot be based in civil law. That being so, the question on Community law. If, on the other of the recovery of the deposit does not hand, such provisions deal with the arise. application of a contractual penalty as outlined above they are not only permissible but mandatory under Community law. There is no discretion in the matter since the amount of the contractual penalty is in any event Although the deposit system in fact payable when the contractual obligations implies the storer's consent to a stipu- are not observed. Discretion would lead lation providing for a contractual to objectively unjustifiable discrimination penalty, the simple release of the deposit within the common market (cf. the does not mean that the contractual judgment in the aforesaid BayWa case). penalty can no longer be claimed. If it appears that the penalty is in fact applicable because the storer has failed tó meet his obligations under the contract, payment of the corresponding amount may be demanded independently of whether or not the deposit provided The Commission therefore proposes that to guarantee the payment has been the second and third questions should be wrongly released. Release of the deposit answered as follows: national legislation simply removes the guarantee and not authorizing the revocation of an the substantive right which is the subject irregular decision to release a deposit of the consent given to the stipulation pursuant to Regulation No 1071/68 and providing for a contractual penalty. recovery of the amount of the deposit is not compatible with Community law. However, even after release of the deposit the competent intervention agency has a duty to recover the amount of the contractual penalty payable under In the Commission's view Article 4 (3) of Regulation No 1071/68. Regulation No 1071/68 must be interpreted as meaning that the amount of the contractual penalty may be claimed if the obligations provided for in the contract are not observed. The first and fourth questions must therefore be answered as follows: Article 4 of Regu- As regards the fifth question the lation No 1071/68 does not authorize Commission considers that if the Court national intervention agencies to recover were to declare Article 4 of Regulation deposits wrongly released thereunder. No 1071/68 invalid inasmuch as it Nevertheless, the fact that a deposit has provides for a contractual penalty, the been wrongly released does not prevent judgment would have to apply equally to the imposition of the contractual penalty Article 4 (2) of Regulation No 989/68 of incurred under Article 4 (3) of the regu- the Council of 15 July 1968 laying down lation even after release of the deposit general rules for granting private storage guaranteeing the penalty. aid for beef and veal.

As regards the alleged infringement of the principle ne bis in idem the The Commission observes that if there Commission points out that the national were no sanction apart from the recovery court is once again in error in treating of the aid in the event of breach of the the contractual penalty of civil law as a contract of storage there would be a criminal penalty. If that were correct it great temptation, for example, to remove would not be possible to impose two the goods from storage before the expiry separate penalties for the same offence. of the period provided for and the However, as between contractual and Commission would then not have a criminal penalties the principle ne bis in reliable general view of the market trend; idem does not apply. thus the whole policy of storage would be placed in jeopardy. The Commission refers to the aforesaid judgment of 17 December 1970 in Case 11/70 (Inter- As for the principle of proportionality nationale Handelsgesellschaft). the Commission considers that the present case does not in fact require consideration of the proportionality of the provisions contained in Article 4 of As regards the specific points put Regulation N o 1071/68. According to forward by the national court in relation the Commission the plaintiff seriously to the legal validity of Article 4 of Regu- breached its contractual obligations in lation N o 1071/68 the Commission two respects and as appears from considers that the argument of breach of the criminal conviction it did so the principle in dubio pro reo cannot be intentionally: it did not store fresh meat

2 Those questions were raised in proceedings between a German undertaking (the plaintiff) and the Bundesanstalt für landwirtschaftliche Marktordnung (the defendant). The plaintiff had undertaken, pursuant to Regulation N o 1071/68, to store for four months a specific quantity of fresh beef

JUDGMENT OF 25. 9. 1984 — CASE 117/83

originating in the Community and, upon the expiry of the storage period, had obtained the release of the deposit which it had lodged, in accordance with Article 4 of the regulation, in the form of a bank guarantee.

3 Subsequently, the customs inspection authorities discovered that the plaintiff had stored frozen meat orginating in the People's Republic of China. As a result the defendant revoked its decisions granting the aid and releasing the deposit; it demanded repayment of the aid and declared the deposit to be forfeit. It stated that the amount of the deposit would be set off against a claim for the same amount which the plaintiff held against the defendant. Following criminal proceedings the partners and certain employees of the plaintiff undertaking were sentenced to imprisonment or fines in respect of the matters which led to the loss of the deposit.

4 The decision forfeiting the deposit was challenged in proceedings before the Verwaltungsgericht, which took the view that Regulation No 1071/68 contained no legal basis for revoking the decision releasing the deposit and that there was no such basis either in other Community provisions, including Article 8 of Regulation 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).

3. If the second question is answered in the affirmative: Are national rules such as those described in the second question which make revocation of a decision releasing a deposit and hence recovery of that deposit subject to the discretion of the intervention agency compatible with Community law?

4. If either the first or the second question is answered in the affirmative: What is the nature of the claim secured by the deposit referred to in Article 4 of Regulation (EEC) N o 1071/68?

5. If the answer to the fourth question is that the claim secured by the deposit is a claim for a penalty: Do Article 4 of Regulation (EEC) No 1071/68 and the penalty provided for therein infringe superior rules of Community law?"

T h e first a n d f o u r t h q u e s t i o n s

7 It is appropriate to begin by considering the issues raised by the first and fourth questions, in order to determine whether Community law provides an adequate legal basis either for revoking a decision releasing a deposit or for demanding payment of a sum equal to the deposit wrongly released.

s In the observations which it submitted to the Court the Government of the Federal Republic of Germany proposes that the first question should be answered in the negative because Article 4 of Regulation N o 1071/68 does not cover the case of a deposit wrongly released. In its opinion, there are no provisions of Community law on the matter. On the other hand, it considers

n In that respect it must be emphasized that a penalty, even of a non-criminal nature, cannot be imposed unless it rests on a clear and unambiguous legal basis. T o answer the first and fourth questions it is therefore necessary to consider whether such a basis is to be found in Article 4 of Regulation N o 1071/68 interpreted in the light of its wording, context and purpose.

KÖNECKE v BALM

i2 Article 4 is worded as follows:

"1. When a contract is concluded a deposit in an amount not exceeding 50% of the amount of aid specified in the contract shall be lodged by the storer in cash or in the form of a guarantee issued by a credit institution meeting the requirements of each Member State.

2. The amount of the deposit shall be fixed when the amount of aid is fixed or when tenders are invited.

3. The deposit shall be forfeited in full if the obligations imposed by the contract are not fulfilled; however, if less than 90% of the quantity agreed in the contract has been taken in store and stored within the time-limits laid down the deposit shall be forfeited proportionately to the missing part of the quantity referred to in Article 3 (1) (a).

is In the same way the system of deposits established in connection with private storage is intended to ensure that the trader performs his obligations in accordance with the Community regulations and the terms of the relevant contract. That objective does not support an interpretation of Article 4 (3) of Regulation N o 1071/68 to the effect that an amount equivalent to the deposit must be paid if the deposit is wrongly released after the period of storage has expired. At that stage the undertaking to store can no longer be performed and the payment can no longer serve to guarantee that the operation takes place but would simply constitute a penalty for failure to perform the undertaking.

u As the German Government has pointed out, the absence of such a penalty may represent a lacuna in the deposit system, because a person who obtains the release of the deposit by means of false statements avoids losing it. That argument would be capable of supporting the interpretation favoured by the German Government and by the Commission if the provisions in question lent themselves to such an interpretation, having regard to their wording and the objective pursued. However, it is not sufficient on its own to provide a clear and unambiguous basis for the imposition of a penalty.

i7 It follows that the answer to the first and fourth questions must be that Article 4 of Regulation No 1071/68 of the Commission of 25 July 1968 laying down detailed rules for granting private storage aid for beef and veal does not authorize the national intervention agencies, after the expiry of the period of storage, to recover deposits which have been wrongly released or to impose on traders pecuniary penalties of an amount equal to the deposits so released.

2i On the latter issue the national court rightly refers to Article 8 of Regulation No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy, which provides that "the Member States in accordance with national provisions laid down by law, regulation or administrative action shall take the measures necessary to . . . recover sums lost as a result of irregularities". However, as the Verwaltungsgericht observed, that provision refers to the recovery of sums paid by the European Agricultural Guidance and Guarantee Fund and cannot be extended to the recovery of a

JUDGMENT OF 25. 9. 1984 — CASE 117/83

penalty which has no legal basis in the Community legislation, even if in practice the sum thus recovered would ultimately be deducted by the national authorities from the expenditure financed by the Fund.

22 It must be added that Article 8 also requires Member States to take proceedings, pursuant to their national law, in connection with irregularities committed.in relation to sums granted. The finding made above does not affect the right and the duty of the national authorities to take proceedings against a trader who has obtained the release of the deposit by fraudulent means. In the absence of a provision allowing the authorities to claim repayment of a sum equivalent to the deposit released, such action provides at least a partial remedy for the difficulty alluded to by the German Government.

23 The answer to the second question must therefore be that national legislation under which it is possible to revoke a wrongful decision releasing a deposit and to reclaim the amount of the deposit after the period of storage has expired is incompatible with Community law; however, that circumstance does not affect the right and the duty of the national authorities to take proceedings, in accordance with national law, against a trader who has obtained the release of the deposit by fraudulent means.

in answer to the questions submitted to it by the Verwaltungsgericht Frankfurt am Main by order of 26 May 1983, hereby rules:

1. Article 4 of Regulation No 1071/68 of the Commission of 25 July 1968 laying down detailed rules for granting private storage aid for beef and veal does not authorize the national intervention agencies, after the expiry of the period of storage, to recover deposits which have been wrongly released or to impose on traders pecuniary penalties of an amount equal to the deposits so released.

2. National legislation under which it is possible to revoke a wrongful decision releasing a deposit and to reclaim the amount of the deposit after the period of storage has expired is incompatible with Community law; however, that circumstance does not affect the right and the duty of the national authorities to take proceedings, in accordance with national law, against a trader who has obtained the release of the deposit by fraudulent means.

Mackenzie Stuart Galmot

Due Everling Kakouris

Delivered in open court in Luxembourg on 25 September 1984.