C-424/85

FRICO v VOEDSELVOORZIENINGS IN- EN VERKOOPBUREAU

OPINION OF MR ADVOCATE GENERAL MISCHO delivered on 26 March 1987 *

Mr President, common organization of the market in Members of the Court, milk products;

1. The College van Beroep voor het (e) Article 190 of the EEC Treaty, for Bedrijfsleven (administrative court of last failure to state sufficient or correct instance in matters of trade and industry) reasons; has asked the Court whether Article 24 (3) of Regulation (EEC) No 685/69 of the Commission, 1 as amended by Regulation (f) the principle of legal certainty; (EEC) No 1746/84, 2is invalid in so far as it provides that the annual interest rate for (g) one or more other provisions of the the calculation of private-storage aid is to EEC Treaty or one or more of the prin­ be 7% in the case of butter stored in the ciples underlying the EEC Treaty. Federal Republic of Germany and 9.5% in the case of butter stored in the United Kingdom, whereas the rate is to be 10.5% 3. I propose to examine the arguments for butter stored in the other Member based on the principles of the single market States. and uniform prices (question (d)) with the other arguments to which they relate (questions (a) and (c)) and after that to deal 2. The Netherlands court would like to with the question of the statement of know in particular whether any or any reasons (question (e)). combination of the following provisions or principles have been infringed: 1. The validity of the provision in question examined in the light of Article 10 (1) of (a) Article 10 (1) of Regulation (EEC) No Regulation (EEC) No 985/68 of the Council 3 985/68 of the Council of 15 July 1968 and the principle of uniform prices laying down general rules for inter­ vention on the market in butter and cream; 4. Before examining this submission it is necessary to recall briefly the rationale of (b) Article 40 (3) of the EEC Treaty; the aid for the private storage of butter.

10. Article 10 (2) of that regulation provides that: 'If the state of the market so 6. It went on to point out that, according to requires, the amount of aid may be the sixth and last recitals in the preamble to amended for future contracts'. Regulation (EEC) No 985/68 of the Council, such measures 'must take account of the development of the market situation' and, 11. Through Article 29 of Regulation in the case of private storage in particular, (EEC) No 685/68 on detailed rules of 'must contribute to the attainment of a application for intervention on the market in balanced market'. 5 butter and cream, as amended by Regu­ lation (EEC) No 704/83, 6the Commission made the complementary or interdependent nature of public and private storage still 7. It was undoubtedly in order to attain more definite to the point of establishing those aims that it was provided that butter between those two systems a mechanism may be taken into store only in the months which is reminiscent of 'communicating of high milk production, namely between 1 vases'. April and 15 September of the same year. Removal from storage must take place in the autumn and winter. The main aim of private-storage aid is therefore to offset the 12. That article provides in effect that seasonal fluctuations in production and private-storage aid is to be increased or prices and to enable some of the surplus reduced in the event that the buying-in price butter to be withdrawn temporarily from the of butter by the intervention agencies is market. changed whilst the butter is in storage.

15. It follows from those principles that the rate of interest provided for in Article 24 (3) (d) of Regulation (EEC) No 685/69 of the 20. I will admit that the use of the Commission must be periodically adjusted singular — 'the amount of private-storage to the situation prevailing on the financial aid' — and the words 'shall be fixed for the markets. That conclusion is not contested by Community' may suggest that the Council the plaintiffs in the main proceedings who had in mind a single amount of aid valid for seek the application in their case of the all the Member States. In fact, that has been 'standard' rate of 10.5% laid down in the practice for many years (see, for the regulation in question, No 1746/84, example, Article 24 of the original version amending Article 24 of Regulation (EEC) of Regulation (EEC) No 685/69). No 685/69, and not the 11 % rate or even the 13% rate which were in force previously. 21. But although the third recital in the preamble to Regulation (EEC) No 804/68 16. It remains to ascertain whether the of the Council envisages 'a system principle that economic circumstances comprising a single target price for milk, a should be taken into account as much as single threshold price for each of the pilot possible can also lead to the introduction of products, and a single intervention price for different interest rates for each Member butter', there is no question of a single State, which the plaintiffs dispute. amount of private-storage aid in Regulation (EEC) No 804/68 or in Regulation (EEC) No 985/68. 17. A priori it would seem that if the Commission is under a duty to adjust the amount of the aid to the changing situation of the market in butter and to changes in 22. The ninth recital in the preamble to storage costs and to change it according to Regulation (EEC) No 985/68 reads as fluctuations in the intervention price, it is follows : also under a duty to fix the amount of the aid with reference to the 'real' storage costs which a trader must incur depending on the country in which he stores the butter if 'Whereas aid for the private storage of those costs vary considerably. butter and cream provided for in Article 6 (2) of Regulation (EEC) (EEC) No 804/68 should be granted in accordance with 18. However, against that proposition the Community provisions laying down in plaintiffs raise a number of objections which particular the precise conditions for granting must now be examined. such aid; whereas to ensure uniformity in

the Community provisions should be made into account their actual level is to be found for a Community form of storage contract in the recital quoted above. and a uniform method of calculating the amount of aid according to the cost of storage and market developments. ' 27. Furthermore, if the wording of Article 10 (1) had been an absolute obstacle to having different amounts of aid for each 23. The emphasis in that preamble is indis­ Member State, it would have prevented putably on uniformity in the Community account from being taken in 1973, as has and on a uniform method of calculating the been done, of the gradual alignment of amount of aid and there is no obligation to intervention prices in the acceding States to infer that the result of that calculation must those in force in the original Member be uniform throughout the Community, States. especially since express reference is made to storage costs and there is no reason why those costs should not be understood as actual costs. 28. However, the plaintiffs claim that, once a single target price and a single inter­ vention price exists in the Community, a 24. Moreover, it is interesting to note that single amount for private-storage aid must the taking into account of interest rates was also be fixed because 'both public inter­ introduced into the system in 1973 8at the vention and private storage contribute time of the first enlargement of the equally towards attaining the target price'. Community. The Commission stated at that time that 'because of the differences in the buying-in prices applied by the intervention 29. In this regard the following obser­ agencies in the new Member States, finance vations must be made: costs in respect of stored butter vary according to the level of the price applied; ... a distinction should, therefore, be made between storage costs as such, applicable (a) I have already pointed out that nowhere throughout the Community, and finance in the relevant regulations is there any costs, to be calculated on the basis of the mention of a single amount of private- buying-in price for butter applying in each storage aid but only of a uniform system Member State'. and a uniform method of calculating the amount of the aid with reference to storage costs and the changing market situation. 25. Historically, finance costs therefore varied at first according to the different levels of intervention prices in the new Member States. Only later did they vary (b) The single intervention price is in any according to the different levels of interest event taken as the basis for calculating rates. butter storage costs in the form of the 'buying-in price for butter, expressed in national currency, applied by the inter­ 26. Confirmation of the principle that vention agency of the Member State finance costs must be reimbursed by taking concerned'. 9

31. However, the question remains whether such a difference was justified in this case, that is to say whether the statement of 33. It is to be noted first of all that none of reasons for Commission Regulation (EEC) those reasons is contrary to the principles No 1746/84 was sufficient and correct. according to which stocks should be held on the most effective basis possible (third recital in the preamble to Regulation (EEC) No 985/68) in order to contribute to the 2. Was the statement of reasons for Regu- attainment of a balanced market (tenth lation (EEC) No 1746/84 sufficient and recital in the preamble to Regulation (EEC) correct? No 985/68). The requirement that private storage should function in an orderly way (ninth recital in the preamble to Regulation 32. In the preamble to Regulation (EEC) (EEC) No 985/68) excludes any idea of No 1746/84 the Commission gives the speculative transactions producing unjus­ following reasons: tified enrichment. The fixing of the amount of the aid with reference to the costs of storing butter and foreseeable price trends (a) ' ... in the light of the increase in butter (Article 10 of the same regulation) implies production and stocks, it is not advisable to that factors as significant as the variation in

OPINION OF MR MISCHO — JOINED CASES 424 AND 425/85

FRICO v VOEDSELVOORZIENINGS IN- EN VERKOOPBUREAU

they would obtain a competitive advantage account by traders and that factor is not at the expense of the Community, which decisive. would not be acceptable either.

46. There is no doubt that all of those 44. (c) As regards the question of specu­ factors play an important part. lative movements, it appears from the answer given by the plaintiffs in the main proceedings that they accept that such 47. However, it seems certain to me that in movements take place but that they do not a situation in which the advantages and agree that they are 'speculative'. In their disadvantages of storing butter privately in a view, the increase in the quantities of butter particular country balance one another and in private storage in the Member States a fortiori when most of the factors are with relatively low interest rates (the favourable to storing butter in that country, Netherlands, Federal Republic of Germany, a clear difference between the interest rate United Kingdom) is the result of a taken into account by the Community and deliberate decision taken by traders after the rate prevailing on the market in the weighing up the following factors: country in question must tilt the balance in favour of storing butter in that country.

the number of cold stores, 48. Moreover, the plaintiffs indirectly admit this in their answer to a question asked by the distance to cold stores and transport the Court when they state that 'it is obvious costs, that where the Community measure reduces the interest rate for private storage in a the price of butter at the time of entry into particular Member State as compared to the store, rate applicable in other Member States, storage in the first Member State becomes storage and removal costs, less attractive'.

51. To sum up, it may therefore be said that of discrimination on grounds of nationality the statement of reasons in Commission laid down in the first paragraph of Article 7 Regulation (EEC) No 1746/84 shows of the EEC Treaty, comparable situations 'clearly and unequivocally the reasoning of must not be treated differently and different the Community authority which adopted situations must not be treated in the same the contested measure so as to inform the way unless such treatment is objectively persons concerned of the justification for justified. It follows that the various elements the measure adopted and to enable the in the common organization of the markets, 10 Court to exercise its powers of review' such as protective measures, subsidies, aid and that the reasoning does not appear to and so on, may not be differentiated be wrong. according to region or according to other factors affecting production or consumption except by reference to objective criteria 3. Is the introduction of different interest which ensure a proportionate division of the rates compatible with Article 40 (3) of the advantages and disadvantages for those EEC Treaty? concerned without distinction between the territories of the Member States.' 52. According to Article 40 (3) of the EEC Treaty, which is merely a specific expression 55. It is to be noted first of all that the of the general principle of equal treatment present case does involve differentiation which is one of the fundamental principles based on objective criteria since the of Community law, the common organ­ Commission has taken into account the ization of the market must 'exclude any actual interest rates prevailing on the discrimination between producers or financial markets of the various Member consumers within the Community'. States.

. 'It is appropriate in the first place to point 57. (a) The plaintiffs in the main out that under the principle of non-discrimi­ proceedings maintain, however, that nation between Community producers or discrimination exists because in actual fact consumers, which is enshrined in the second there is no difference of situation between subparagraph of Article 40 (3) of the EEC traders storing butter in countries with low Treaty and which includes the prohibition interest rates and other traders. Companies which store butter privately in countries 10 — See in particular the judgment of 22 January 1986 in Case with high interest rates are free to choose 250/84 Eridania Zuccherifici Mationali SpA and Others vthe currency. They have no difficulty in Casia Conguaglio Zucchero and Others [1986] ECR 117, paragraphs 37 and 38 at p.134. 11 — Case 106/83 Sermide SpA v Cassa Conguaglio Zucchero and 12 — Case 50/73 Holtz & Willemsen GmbH v Council and Others [1984] ECR 4209. Commission [1974] ECR 675, paragraph 13 at p. 696.

FRICO v VOEDSELVOORZIENINGS IN- EN VERKOOPBUREAU

borrowing money in a currency with a rela­ sought the reimbursement of costs at the tively low interest rate and have their rate of 10.5%. There is therefore a contra­ financial costs reimbursed on the basis of diction in their reasoning on this point. the high rate in force in the country in which the butter is stored.

63. The same reasoning cannot be followed as far as the pound sterling is concerned, 60. The fact that it is theoretically possible but the interest rate adopted by the to borrow in a currency attracting a low Commission for that currency (9.5%) is interest rate is not sufficient, in my view, to only one percentage point below the prove that discrimination exists. After all, 'standard' rate (10.5%), which would Netherlands butter producers also have the probably make the operation less advant­ possibility of storing butter in Belgium, for ageous. example, and of receiving aid calculated on the basis of the 10.5% rate even if they have borrowed in the Netherlands at the rate of 7 %. It is therefore simply up to them to escape the alleged discrimination. 64. Taking everything into account I therefore consider that it cannot be regarded as an established fact that companies which store butter in countries with high interest rates generally borrow in 61. It is also to be noted that the logical currencies with low interest rates. conclusion which follows from the reasoning of the plaintiffs in the main proceedings is that the Commission ought to have extended the lower interest rate of 7 % to the entire Community. However, 65. The possibility that that is what happens before the Netherlands court the plaintiffs in some individual cases certainly cannot be

OPINION OF MR MISCHO — JOINED CASES 424 AND 425/85

FRICO v VOEDSELVOORZIENINGS IN-EN VERKOOPBUREAU

They point out that differential aid for the EEC Treaty and the principle of the private storage has not in fact been single market. introduced in any other sector.

76. (a) They consider that the application 72. On that point I should like to point out of different interest rates offends the that the obligation to stabilize markets does principle of the single market because such a not entail an obligation to introduce practice does not conform to one of its uniform intervention schemes in every necessary premises, namely the application sector or for every product. On the of a system of uniform prices. contrary, it presupposes the adaptation of those measures to the specific necessities of each sector and each product. 77. However, I consider that I have shown in Part 1 that the functioning of the system of single prices is not called in question in 73. To give one particularly striking any way in this case. example, there is practically no similarity between butter and cheeses such as Kefa- lotyri and Kasseri cheeses which are produced in only one Member State, are 78. (b) Next, the plaintiffs argue that the not the subject of any, or hardly any, trans­ differentiation in question could influence a frontier trade and which must be maintained trader's choice of country for storing his throughout storage 'in premises where goods and that it could thus create artificial 13 the maximum temperature is + 16 ° C' . patterns of trade which must be regarded as Therefore the storage of such products does a distortion of the common market. not involve the same financial costs at all.

but its scale has certainly been greatly 84. The plaintiff companies are already diminished. A Netherlands producer might confusing cost price with market price. We indeed be tempted to store his butter in have seen that the market price is slightly Belgium or in France because he would lower in countries with high interest rates. probably have no difficulty in obtaining In the first place, this has nothing to do credit in guilders from his usual bank. But with the different interest rates introduced in the event of a revaluation of the guilder by the Commission in the provision in in relation to the other currency, the value question. Secondly, it does not necessarily of his stock, expressed in guilders, would follow from that fact that a Netherlands diminish. Would he be prepared to take that producer would have greater difficulty in risk? Here we encounter the same uncer­ marketing his butter in France than a tainty as in the case of a French producer French producer. That depends essentially storing butter in France and borrowing in on the cost price of each producer. guilders.

85. We must also remember that private 81. At all events, it is certain that in order storage and importation are two quite to make operations of that kind impossible different things. Large quantities of butter it would be necessary to apply throughout are exported from one Member State to the Community the lowest interest rate another without ever entering subsidized existing in one of the Member States, which private storage. is the opposite of what the plaintiffs demand.

FRICO v VOEDSELVOORZIENINGS IN- EN VERKOOPBUREAU

producer wishes from the outset to sell his of Regulation (EEC) No 985/68 of the butter in France, he would not first store his Council) and consequently has nothing to butter in that Member State in order to do with the application of different interest obtain the amount of aid in force in France rates. whilst financing the storage in guilders. He would not therefore suffer any handicap (afterwards he could alternatively re-export 92. The question may be asked why private the butter to the Netherlands in order to storage in another Member State, which 14 benefit from the higher market price in that was also prohibited at the outset, is now country). permitted. That difference is probably justified by the fact that products which have been in private storage cannot be sold 88. It follows from all the foregoing that into intervention but must be put on the there is no convincing evidence that exports market. Consequently, a prohibition on of butter from Member States with low private storage in another Member State interest rates to Member States with high would, to a certain extent, represent an interest rates are impeded by the measure obstacle to trade. adopted by the Commission.

95. The CNTA judgment of 15 May 1975 91. The fact that a French exporter cannot 15 quoted by the plaintiffs cannot be regarded put his butter into public intervention in the Netherlands is the result of the absence of a 14 — Article 8 (4) of Regulation (EEC) No 985/68. Community inspection mark (Article 8 (4) 15 — Case 74/74 CNTA vCommission [1975] ECR 533.

OPINION OF MR MISCHO — JOINED CASES 424 AND 425/85

as a relevant precedent because the traders 99. Nevertheless, that was a prospect they concerned in that case had committed them­ should have reckoned with because Article selves in so far as they had already received 10 (2) of Regulation (EEC) No 985/68 of export certificates and provided security. the Council provides that 'if the state of the They had entered into firm commitments market so requires, the amount of aid may with the intervention agency and could not be amended for future [private storage] get out of them except by losing the contracts'. securities which they had provided. In the present case, some of the plaintiffs in the main proceedings had admittedly concluded contracts with other traders for the sale of 100. The circumstance that in the present the butter, but they had not yet put the case the reduction in interest rate was not butter into storage nor a fortiori submitted only linear but also differentiated does not an application for storage aid nor signed a alter the fact that a possible reduction in contract with the intervention agency. that rate was one of the possibilities with which prudent traders ought to have reckoned.

FRICO v VOEDSELVOORZIENINGS IN- EN VERKOOPBUREAU

given seven months before the publication interest rate applied in that currency for that of the contested measure. kind of transaction.

105. However, the regulation does not in 103. It must also be pointed out once more any way prohibit a trader from borrowing that the Commission could have adopted in another currency at another interest rate. the same measure by extending it to the entire Community, in which case the 106. The free movement of capital is not economic interests of the plaintiffs would therefore called in question and the have been affected in the same way. This submission alleging a breach of Article 67 submission must therefore be rejected as (1) must therefore also be rejected. well. 107. Before coming to my conclusion I would venture to express the opinion that 6. Is Regulation (EEC) No 1746/84 incom­ the taking into account of different rates of patible with Article 67 (1) of the EEC interest in the calculation of aid the purpose Treaty? of which is to reimburse the costs incurred by traders and which forms part of a 104. It is indisputable that Regulation mechanism for regulating markets is not of (EEC) No 1746/84 is implicitly based on such a nature as to call in question the the assumption that traders who store butter method of determining the interest rates in a given Member State cover their imposed by the Community institutions in financial costs by borrowing in the currency other spheres (in particular, interest on fines of that Member State at the most favourable which remain unpaid).