C-305/85

Mr President, 3. Regulation No 1837/80 was amended on Members of the Court, several occasions during a transitional period, in particular by Regulation No 871/84 of 31 March 1984, cited above. It is the system resulting from that amendment which we are particularly concerned with 1. I — In the applications which I am about here. to examine, the United Kingdom seeks the annulment of Commission Regulation (EEC) No 1989/85 of 18 July 1985 1 and Commission Regulation (EEC) No 728/86 2 4. That system is described in a clear and of 11 March 1986 fixing the amount of the annual premium payable per ewe for region comprehensive manner in the Report for the 5 (Great Britain) in the 1984/85 and 1985 Hearing. For that reason I shall lay marketing years, as provided for by Article emphasis solely on those points which are 5 of Council Regulation (EEC) No 1837/80 directly relevant for the solution of the of 27 June 1980 on the common organ­ dispute in these proceedings. ization of the market in sheepmeat and goatmeat, 3 as amended by Council Regu­ lation (EEC) No 871/84 of 31 March 1984. 4 5. In addition to other intervention measures, provided for in Article 6 (private storage aid and intervention purchases), the aforesaid legislation establishes two types of 2. II — The aforesaid common organ­ production premiums: an annual premium ization was established for the purpose per ewe, intended to compensate for any (which has probably not been achieved 5) loss of income which might derive from the of facilitating the adjustment of supply establishment of the common organization todemand and progressively bringing of the market (Article 5 of Regulation No together the markets of the various regions 1837/80, as amended by Regulation No so as to achieve a single market and a single 871/84), and a variable weekly premium for pricing system for the Community as a the slaughter of sheep. The latter premium whole. Initially, the Community was divided may be paid in Great Britain (region 5), into five regions, later increased to six with provided that country does not resort to Great Britain constituting region 5. intervention purchases and the prices recorded in the representative markets of * Translated from the Portuguese. the region fall below a 'guide level' corre­ 1 — Official Journal 1985, L 186, p. 22. sponding to 85 % of the basic price, as 2 — Official Journal 1986, L 69, p. 6. provided for by the regulation. The 3 — Official Journal 1980, L 183, p. 1. premium is equal to the difference between 4 — Official Journal 1984, L 90, p. 35. the seasonalized guide level and the market 5 — See the Special Report of the Court of Auditors (84/C 234/01), Official Journal 1984, C 234, p. 1. price (Article 9 (1) and (2)).

6. Where the variable premium is paid the supervisory system known as 'special (Article 9 (3)), an amount equivalent to the export certification' (SEC) in 'the total premium actually granted will have to be amount of the premiums actually granted' collected, in a manner to be determined by (the numerator) and excluded the the Commission, when the products in production corresponding thereto when question leave the aforesaid region (the calculating 'the production of ... animals 'clawback' mechanism) in order to avoid for which the variable premium may be paid distortions of competition. The Court has when slaughter takes place or, as the case already recognized the legality of that may be, when they are first put on the mechanism in its judgment of 15 September market' (the denominator). 6 1982 in Case 106/81 Kind v EEC, and its field of application is at present under consideration in Cases 61/86 and 162/86. 10. The problem arises because it is for the United Kingdom under Article 1 (2) of Commission Regulation (EEC) No 1633/84 of 8 June 1984 laying down detailed rules 7. In order to prevent the accumulation of for applying the variable slaughter premium the two types of premium, Article 5 (6) of for sheep and repealing Regulation (EEC) Regulation No 1837/80, as amended by No 2661/80 7 to choose from among the Regulation No 871/84, provides that the animals which meet the standards laid down weighted average of the variable premiums in Article 1 (1) of that regulation those actually granted is to be deducted from the which are eligible for the premium, and it is loss of income which is the basis for calcu­ not generally granted for the slaughter of lating the annual premium. That weighted ewes. However, ewes intended to be average, expressed per 100 kilograms of exported live or as carcasses are auto­ carcass weight, is to be obtained 'by matically subject to the payment of an dividing the total amount of the premiums amount equivalent to the 'clawback' actually granted by the production of the premium. Hence the premium is granted, animals for which the variable premium may upon exportation, by offsetting the corre­ be paid when slaughter takes place or, as sponding amount, the animals or carcasses the case may be, when they are first put on being subject to SEC arrangements until the market'. then.

13. 1. The Commission acknowledges that 17. 2. The wording used in Article 5 (6) of the premiums granted as a result of the issue Regulation No 1837/80 to define the of a certificate under the SEC arrangements divisor restates the two alternative criteria constitute a 'variable premium' for the which, under the rules in question, must be purposes of the Community legislation at satisfied for the grant of any variable issue, otherwise it would not have included premium. them in the dividend, that is to say the 'total amount of premiums actually granted', referred to in Article 5 (6). 18. Those criteria are set out in Article 9 (1) (as amended) of Regulation No 14. Moreover, the United Kingdom has, in 1837/80 — 'a premium for the slaughter of my view, given a satisfactory explanation of sheep' — and in Article 1 (3) of Regulation the nature and function of the premium No 1633/84 — 'the premium shall be linked to the issue of SEC certificates; it granted when the animal is first placed on the market with a view to slaughter'. may be paid 'when slaughter takes place', at which time a check is carried out to ensure that the conditions for the grant of the premium are satisfied, and in practice it is granted by offsetting the 'clawback' charge 19. Accordingly, those two criteria may not st as m tne payable upon exportation (ju , be relied upon in order to exclude any remaining cases, the premium is generally category of meat or animals in respect of granted four weeks after the issue of the which a certificate has been issued in Great certificate). Britain, since a category not covered by Article 5 (6) would not be eligible for a certificate entitling it to the variable 15. The United Kingdom established the premium. system in question in the exercise of the discretion conferred upon it by Article 1 (2) of Regulation No 1633/84. 20. 3. If the amount of the variable premiums paid under the SEC arrangements 16. The SEC system was abolished in stages is included in the dividend, the exclusion by Commission Regulation (EEC) No from the divisor of the meat and the animals 3451/85 of 6 December 1985 8 and which gave rise to those payments is at first

21. I would recall that the first subparagraph of Article 5 (6) provides that 26. That, however, is ex post facto reasoning 'the weighted average of the variable and the Commission is unable to show that premiums actually granted' is to be that factor — even on the assumption that it deducted from the loss of income, whilst the constitutes in practice a supplementary second subparagraph of that provision privilege not justified by reasons connected merely explains how that weighted average with the specific situation prevailing in is to be obtained. region 5 — originated from any intention on the part of the legislature (the Council) to offset the advantage by reducing the 22. Without considering in detail the nature denominator in the fraction through the of the distinction between a weighted exclusion of certain kinds of meat. average and a simple arithmetical average, it must be borne in mind that, in order to calculate the average speed of a vehicle 27. There is no reason why the advantage travelling between two cities, weighted represented by the advance payment of according to the state of the road, the time variable premiums should be neutralized by taken to drive along unsurfaced stretches of distorting the calculation of the weighted road or through towns and villages should average which must be applied by virtue of not be excluded from the total duration of Article 5 (6). As that advantage must be the trip if the total distance is included in compensated for, it would be far more the calculation, otherwise the result would logical to do so by means of a deduction be distorted. from the amount of the payments on account referred to in Article 5 (4), but no such deduction would appear to have been 23. In this case a consequence of that kind made. would be acceptable only if it were justified beyond doubt by substantial reasons of a very weighty nature (whether economic or 28. It should be noted, however, that the otherwise). aforesaid advantage is lawfully provided for in respect of region 5 and that there is no provision in the regulation which unequi­ 24. The Commission has not succeeded in vocally requires that advantage to be demonstrating — even though it was neutralized when the final amount of the requested to do so at the hearing annual premium is calculated. itself — that such reasons exist, having merely attempted to put forward expla­ natory arguments ex post facto and relied 29. Moreover, it is difficult to understand upon circumstances connected with the why — if that is the reasoning behind the origin of the provision in question. system advocated by the Commission — only the ewe-meat eligible for the 'SEC premiums' was excluded, and not all the 25. 4. That explanation relates to the fact other meat from animals whose breeders that the variable premium constitutes, for were entitled to variable slaughter premiums Great Britain, a payment on account which by virtue of measures other than the SEC is additional to payments on account arrangements, since those breeders too received by that region over and above the would qualify for advance payments of that amount of the annual premium under kind.

31. It must be said that that contention is not really consistent with the contention which I examined in the previous paragraph. 35. However, if the situation is set in the Hence there is no way of knowing the true context of the Commission's attitude of reason for which the text was amended and, forebearance with regard to the position consequently, the scope of the provision in adopted by the French delegation, it is question remains in doubt. necessary to decide between two possible solutions: either producers in Great Britain were deriving an unlawful and unjustified advantage which should be abolished or, on 32. In any event, even that interpretation of the contrary, that advantage was lawful and the meaning and purpose of the amendment justified and its inclusion in the 'total to the draft text cannot, in my view, serve amount of the premiums actually granted' on its own and in the absence of other implied that the animals or the meat corre­ substantial reasons to justify a construction sponding thereto had to be included in the of the provision in question which destroys divisor in order to calculate the average. its internal cohesion and leads, by an illogical method of reasoning, to anomalous results. 36. In any event, as the Commission's inter­ pretation is unreasonable, the illogical solution would at least have to fall clearly within the terms of the provision in 33. If, in order to take account of the question, which, as we have seen, is not the comments of the French delegation, the case either. meat or the animals eligible for 'SEC premiums' were to be excluded from the divisor in the fraction, it follows logically that the amount of the premiums would 37. That requirement of clarity is all the have to be excluded from the dividend, but more justifiable as the Commission's this was not done by the Commission. proposal in its initial version ('production which gave rise to payment of the premiums') undoubtedly sought to include 'SEC meat' in the denominator, and it 34. As the United Kingdom points out, cannot be assumed that the amendment moreover, the problem raised by France was made to the text was intended to do more more involved than the mere composition of than dispel the doubts that had been raised the fraction in Article 5 (6) and it affected rather than (equivocally) make any the very legality of the 'application of the substantive alteration to the wording used.