C-256/85

ITALY v COMMISSION

OPINION OF MR ADVOCATE GENERAL DA CRUZ VILAÇA delivered on 2 June 1987 *

Mr President, large groups: one comprises the basic regu­ Members of the Court, lations, that is to say those which lay down measures of a general character and apply as a whole to several years; the other group 1. In this action the Italian Government comprises those which are intended to cover asks the Court to declare void the specific situations and ultimately form the Commission Decision of 7 June 1985 — basis of the day-to-day and case-by-case C(85) 839 final — fixing a standard amount implementation of the principles laid down for the repayment of expenditure resulting by the first group. As we shall see, the from the treatment of denatured or present case may be resolved by verifying coloured cereals with a view to their use in the relationship established between the two animal feeds. groups of measures and deciding whether or not that relationship was respected.

understood. They can be divided into two 3 — Official Journal, English Special Edition 1972 (30/31.12.1972), p. 28. 4 — Official Journal 1981, L 327, p. 1. * Translated from the Portugese. 5 — Official Journal 1983, L 138, p. 63.

OPINION OF MR DA CRUZ VILAÇA — CASE 256/85

common wheat from the French inter­ III — Analysis of the arguments of the vention agency to the Italian intervention parties agency for use in animal feed), Commission 6 Regulation No 2794/83 of 6 October 1983 (adopted pursuant to Article 1 (6) of Regu­ lation No 1322/83, which in particular 10. A — Let us start with the argument strengthens the surveillance of the use made which seems easiest to deal with: Italy's of the cereals by requiring colouring — claim that there has been a misuse of Article 5) and, finally, the Commission powers. Decisions of 15 November 1982 and 7 June 1985 (laying down the standard amounts for calculating the losses of the intervention agencies, adopted on the basis of Regulation 11. According to the Italian Government, No 1883/78). the Commission, by including colouring among the 'material operations arising from ... storage' mentioned in Article 6 of Regulation No 1883/78 and by increasing II — The dispute between the parties by the fixed amount of ECU 1.17 per tonne the 'expenses of withdrawal from stock' (apparently purporting to supplement the content of the Decision of 15 November 7. Having identified the subject-matter of 1982) misinterpreted and misapplied Article the action and having regard to its legis­ 6 of Regulation No 1883/78, disregarding lative background, let us now consider the Annex I to Regulation No 3247/81 and points on which the parties disagree. arrogating to itself the power to calculate the costs in question on a flat-rate basis.

14. In implementing Regulations Nos 19. B — (1) According to the Italian 1883/78 and 3247/81, it is incumbent on Government, Articles 4 and 6 of Regulation the Commission to adopt the proper No 1883/78 and Annex I to Regulation No measures for fixing the amounts to be 3247/81 have been infringed and financed and to determine, in each case, misapplied. The Italian Government bases what classification is to be accorded to each that view on a number of considerations: type of expenditure which should be financed by the EAGGF, having regard to the rules laid down and the principles and (a) Pursuant to Article 6 of Regulation No general conditions for financing established 1883/78 'material operations arising from at an earlier stage. the storage and, where appropriate, processing of intervention products shall be financed by the EAGGF, Guarantee Section, by means of standard amounts

Italian Government's view, the operation of colouring prescribed by the Commission for the purposes of sale, to facilitate surveillance 16. However, the Italian Government does of the use of the product transferred from not even produce prima-facie evidence to one intervention agency to another, is not supports its allegation of misuse of powers. included among the operations mentioned in Article 6, which does not extend to all the material operations relating to the Community intervention measure, but only 17. In fact, it does not even claim that, if an the material operations arising from the error exists, it was brought about by the storage and processing of intervention Commission's taking a course departing products. from the straightforward application of the general rules for financing or by 'inex cusably negligent' conduct on its part. (b) In support of that view, Italy relies on Moreover, it was a cost not specifically the wording of Article 4 (1) of Regulation classified in the regulations, in respect of No 1883/78 — ' .

18. The allegation of misuse of powers amounts (point I-1), non-standard amounts must thus be regarded as totally unfounded, being envisaged for transport expenses and it is therefore necessary to determine (point I-2) without any provision being whether there has been any infringement of made for the reimbursement of other a legal provision. expenses (point I-3). For the Italian

Government, the expenses of colouring, amounts, including information on the real which do not fall within any of the specified cost of the operations (see the 'working categories, must be covered by point 1-3 document' of 28 September 1982 and the ('other expenses') which are to be reim­ questionnaire which are annexed to the bursed in full; application) and that, accordingly, it should only be possible for those standard amounts to be determined, for each period, after the (c) In the applicant's view, it is also real costs of the operations are established. significant that the Commission itself laid In the case of new operations — such as down in Article 5 of Regulation No colouring — it is not therefore surprising 2794/83 that the colouring should be that the amounts should be determined after 'carried out at minimum expense': if reim­ the first operations are carried out, so that bursement were on a flat-rate basis, those the costs involved can be determined; as words would be devoid of purpose. regards the more usual operations, the amounts are determined by reference to previous information, and are merely adjusted. Similarly, the Italian Government relies upon Article 1 (3) of Regulation No 1463/83, which lays down detailed arrangements for the application of Regu­ 23. In those circumstances, it is likewise not surprising that Article 5 of Regulation No lation No 1322/82 (transfer of common 2794/83 should contain, with respect to the wheat of bread-making quality to Italy) and expenses of colouring, a requirement in which there is a similar recommendation identical to that laid down in Article 1 of ('keep transport costs to a minimum'), and Regulation No 1463/83 regarding the no standard amount was fixed for the reim­ transport expenses mentioned therein, for bursement of such expenses. which Regulation No 3247/81 (Article 5 and Annex I, 1, 2) expressly allows full reimbursement. 20. (2) As regards the considerations set out in paragraph (c), the Commission's obser­ vations appear to me to negate their 24. For the latter category of expenses, persuasive effects. standard amounts moreover could not easily be fixed, since they relate to an activity carried out in two Member States. 21. As the Commission points out, even where reimbursement is effected by means of standard amounts which are uniform 25. That does not occur in the case of the throughout the Community, they are based expenses of colouring and accordingly the on the real costs, adjusted by an appropriate argument based on the wording of the weighting; it is thus wholly logical for the provision does not stand up. Member States to be required to incur the lowest possible costs, since the burden of reimbursement will be correspondingly 26. (3) As regards the argument set out in smaller. paragraphs (a) and (b), it may be accepted that the Italian Government is partly right, but not wholly so.

28. It seems clear that, both from the all relate, moreover, to operations which are standpoint of timing and from the func clearly connected with withdrawal from or tional point of view, they differ from the entry into stock and with storage, which category in which the Commission purports, cannot be said of colouring operations. initially, to place them ('withdrawal from stock'). 33. At least, it cannot be said of the latter operations any more than it can of those of 'processing', 'preparation', 'drying', 'special

34. In addition, there is no good reason for assimilating colouring to a 'processing' operation so as to include it in paragraph 30. It is true that, in so far as colouring is (d) of point I-1 of Annex I. Not only does required by the Community rules, it is colouring not alter the intrinsic charac logical that the products should not be teristics of the product, it does not even permitted to leave the warehouse until the affect its economic value in relation to its operation has been carried out. possible uses, since rather than preventing it from being put to other final uses, it merely facilitates verification of such use.

32. Moreover, the Commission itself—in material operation of colouring must neces the questionnaire and in the instructions for sarily be covered by point I-3 of Annex I determining the standard amounts referred ('Other costs deriving from operations to earlier — specifies the expenses which it provided for in Community regulations'). considers to be included in the costs of entry into and withdrawal from stock and does not include among them those in 36. As the Commission explained, that is a respect of colouring or any others which, by residual heading intended to cover, when their nature, are regarded as equivalent (the the accounts are submitted, costs incurred in reference to 'supervision expenses' would connection with operations arising from the appear to cover direct checks of the evolution of the CAP which could not be quantity and physical condition of the specificially foreseen. goods and not the operations intended to enable the subsequent use made of the goods to be verified). The categories of 37. There is nothing to exclude colouring expenditure mentioned by the Commission costs from that category.

47. It is true that Article 4 (1) refers to 41. Article 5 of Regulation No 2794/83, intervention measures which involve 'the which laid down the colouring requirement, buying and storage of products' and not gives no clarification as to the appropriate 'storage' and 'processing', as in the case of method of financing since, as we have seen, Article 6. the last reference made in it to colouring 'at minimum cost' is compatible both with reimbursement by standard amounts and 48. It is, however, irrefutable that Regu­ with full reimbursement. lation No 3247/81, adopted pursuant to Article 4 (3) of Regulation No 1883/78, covers a wide range of matters, including, in addition to expenses incurred in respect of 42. We must therefore have recourse to storage, those resulting from processing and other elements of inteipretation. other operations, both of which are reim­ bursed by means of standard amounts.

49. In other words, the mere fact that a 43. It should be borne in mind that Regu­ category of expenditure is not mentioned lation No 3247/81, of which the Annex I expressly in Article 4 ( 1 ) does not bring that which we are reviewing forms part, was category within Article 4 (2) (financing in adopted by the Council pursuant to Anicie full of net expenditure). Everything 4 (3) of Regulation No 1883/78. That depends, therefore, upon the provision means that, even if those regulations are which covers it or upon the nature of the regarded as being of equal rank, the first expenditure.

ITALY v COMMISSION

52. In such cases, the problem lies in the fact that — as the Commission emphasized 55. The methods of determining the in the explanatory memorandum for its standard amounts were, moreover, perfected 1972 proposal — when carrying out most of over the years and thus it was possible to their operations, the intervention agencies apply that system of reimbursement defini­ incur costs whose extent depends not only tively, in Article 6 of Regulation No on the objective economic circumstances 1883/78, to 'material operations arising (technical characteristics, storage capacity, from storage and, where appropriate, wage levels, commercial practices, insurance processing'. costs, and so forth) but also on the choices made by the authorities in the Member States (intervention measures taken direct 56. Both the wording of Article 6 and the by the public authorities as to the type of whole legislative approach adopted in the agreement or contract to be concluded with various regulations defining the operations semi-public or private bodies, domestic concerned and determining the methods by administrative provisions, administrative and which they are to be financed are far from commercial usage, and so forth). In the perfect. result, situations vary widely as between the Member States and the sectors involved, leading to significant differences in the costs 57. It must, however, be concluded that the of the same operation (the difference may legislature wished to adopt — for the be as much as threefold) and, at times, it is material operations arising from storage, difficult to determine the full cost (for processing and related operations — a example, certain expenses in respect of general rule that financing should be by technical controls are incurred by adminis­ means of standard amounts. trations in certain countries, without separate accounts being kept of the costs). 58. The exceptions to that general rule 53. It is not therefore surprising that, for must, therefore, be laid down clearly. This expenditure of that kind, the rules was done in the case of the costs of previously applicable in each sector, which transport between two intervention

66. By choosing standard amounts rather than full reimbursement, the Commission elected to interpret the existing law 61. C — A few words are called for (although, as demonstrated by Italy's action, regarding the Italian Government's it is open to challenge), without taking it reference to the 'retroactive nature' of the upon itself to make innovations within the Commission Decision of 7 June 1983, in so sphere of the applicable regulations. far as it introduced the standard amount for colouring costs after the operation had actually been carried out. For that reason, Italy concluded its submissions by calling 67. But does the Italian Republic not have for the annulment of the contested decision grounds for claiming legitimate expec­ 'at least in so far as it applies with retro­ tations, so that it might be concluded that active effect to the colouring operation the Commission, by applying its Decision of provided for in Commission Regulation 7 June 1983 to the operation in question, (EEC) No 2794/83'. infringed the principle that such expec­ tations should be protected?

62. Some clarification of this aspect of the 68. In particular, could Italy not maintain, matter is called for. with success, that the last sentence of Article

ITALY v COMMISSION

(b) Since at least 15 December 1983, the It should be noted in that connection that Commission had announced (Annex 3 the Management Committees, whose to the application) that adjustment of purpose is to involve the Member States in the standard amounts for colouring the process of implementing the common expenses would be considered, with agricultural policy, do not have any retroactive effect, at the next review of decision-making powers in any circum­ the standard amounts, which was stances; such powers, as the Court has envisaged for the beginning of 1984. emphasized, 8 are vested in the Com- According to the Commission, the adjustment would, as in the case of the 8 — Judgments of 17 December 1970 in Case 25/70 Einfuhr- previous determinations, be based on und Vorratsstelle and 30/70 Scheer [1970] ECR 1161 and 1183; judgment of 14 March 1973 in Case 57/72 West- inquiries made of the intervention zucker [1973] ECR 321.

OPINION OF MR DA CRUZ VILAÇA —CASE 256/85

IV — Conclusion

In view of all the foregoing considerations , I am of the opinion that the action brought by the Italian Republic must be held to be unfounded and the applicant should be ordered to pay the costs.

9 — Judgment of 30 October 1975 in Case 23/75 Rey Soda [1975] ECR 1279, at p. 1302. 10 — Judgment of 5 April 1979 in Case 95/78 Dulciora [19791 ECR 1549, at p. 1568.