C-47/86

ROQUETTE FRÈRES v ONIC

OPINION OF MR ADVOCATE GENERAL LENZ delivered on 17 March 1987 *

Mr President, 4. Such rules were laid down in Members of the Court, Commission Regulation- No 1570/78. 3

OPINION OF MR LENZ —CASE 47/86

6. In December 1983 Roquette Frères, the submits that Commission Regulation plaintiff in the main proceedings, in No 1570/78 did not implement Article accordance with the above provisions, 8 (b) of Council Regulation No 2742/75 placed under supervision 12 427.003 tonnes correctly (because it did not also make of maize and lodged a security in the provision for payment of the refund, after amount of FF 1 644 222.90. When it was processing had taken place without the established that only 95.91% of the de lodging of a security). In addition, the clared amount had been processed, plaintiff is of the opinion that what the FF 1 501 880.10 of the security were Commission considers to be the correct released and, by decision of the French interpretation of its regulation must be intervention agency, Office national inter regarded as a breach of the principle of professionnel de céréales — ONIC proportionality and also as discrimination (National Cereals Trade Board, hereinafter against starch producers as compared with referred to as 'the Board') in February 1984, the sugar-processing chemical industry; FF 142 342.80 were declared forfeit (that is, for the latter Commission Regulation the amount of the security corresponding to No 1729/78

9. In view of the problems of Community law involved, by an Order of 5 December 1985 (lodged at the Court on 18 February 7. The Board came to that decision because 1986) the Administrative Tribunal, Lille, a telex from the Commission dated 20 decided to suspend the proceedings pending February 1978 expressly stated that when a preliminary ruling from the Court the quantity actually processed did not pursuant to Article 177 of the Treaty on the amount to 96 % of the quantity placed following three questions: under supervision, the refund should be calculated in respect of the quantity actually 4 — OJ 1978, L 201, p. 26 et seq.

(i) Is it possible for the provisions lodging of a security and did not also allow in Commission Regulation (EEC) for the possibility of the refund being paid No 1570/78 of 4 July 1978 that lay after processing had taken place, without a down detailed rules for the application security being lodged. of Article 8 (b) of Regulation (EEC) No 2742/75 of the Council of 29 October 1975 to provide only for the 12. In this connection Council Regulation advance payment of production refunds No 2742/75 is central — because it was before the product placed under super­ explicitly mentioned in the first question; it vision was processed and for the is primarily necessary to examine in the lodging of a security? context of that regulation whether Commission Regulation No 1570/78 is defective. (ii) If so, is that interpretation of those provisions correct and not contrary to the principle that a sanction must be in 13. The Commission has strongly proportion to the event which gives rise repudiated that claim and one can only to its application where the quantity of agree. the basic product processed is less than 96 % of the quantity placed under supervision? 14. I have already cited the relevant enabling provision, Article 8 (b) of Council Regulation No 2742/75. It provides that (iii) Is the difference between the provisions detailed rules should be adopted 'in concerning release of securities in particular as regards ... the granting of Regulation No 1570/78 and the corre­ advances on production refunds which may sponding provisions in Commission involve the giving of security'. That makes it Regulation No 1729/78 of 24 July clear that the Council itself envisaged first 1978 on production refunds for sugar and foremost a system of advances coupled contrary to the principle of equality of with the lodging of a security, obviously treatment of manufacturers?' because the economic sector in question was in general interested in obtaining a reduction in the costs they have to bear as 10. Having heard the observations of the early as possible in the form of production plaintiff in the main proceedings and the refunds. Although it must be acknowledged Commission, my views on the matter that this should not be understood as committing the Commission exclusively to the above method (as the Commission itself are as follows. concedes, payment of the refund after processing would certainly have been a possibility) no obligation could be read into B — Analysis the Council regulation for the Commission to provide for different methods of payment of the refund. 1. The first question 11. The first question concerns the problem of whether Commission Regulation 15. It should also be added that the Council No 1570/78 is open to criticism because it regulation does not necessarily imply, provided only for the advance payment of because it speaks of a security only in production refunds together with the connection with the granting of advances,

that under its arrangements a system of 18. As you know, the Commission securities was not warranted in any other maintains that its rules are not open to case (for example, where the refunds were serious criticism on this point either and granted after processing had taken place). once again, let me say right away that I can In fact it cannot be excluded that even in but concur. the last-mentioned case a system of securities might be justified in principle in order to ensure that only serious applications for refunds were made and developments in the market could be reliably forecast. It is also of note that the rules in force since 1986 under Commission 19. (a) I am persuaded by the view that Regulation No 2169/86 5are so framed, for discrimination does not exist whenever one they provide that although, as a rule, the set of rules differs from another, but only in refund is paid after processing (Article 9), in those cases where there are disadvantageous every case a security is to be lodged with consequences. However, that can hardly be the application (Article 4) and further, if an said to be the case if a provision selects only advance is made, a special security equal to one advantageous solution from several the sum advanced is to be lodged. possible solutions and excludes those which are disadvantageous. That would seem to be what the contested Commission regulation in fact did. In principle the payment of 16. It must therefore be concluded that production refunds after processing is unde­ Commission Regulation No 1570/78 niably disadvantageous as compared with cannot be held to be at variance with Regu­ the granting of advances, because producers lation No 2742/75 of the Council in so far thus bear the higher costs for the basic as it does not provide for the payment of products (which are purchased before they production refunds after processing has are placed under official supervision) until taken place without the lodging of a the processing is completed (for which security. purpose a period of 90 days from receipt of the application for placing under official supervision is laid down) and until the administrative procedure has run its course (whereas advances under Article 5 are paid 2. The third question within 30 days of receipt of the application for placing under official supervision).

principle of proportionality, a point to interpreted in a case where less than 96% of which I shall return later. the declared amount of the basic product is processed (that is, whether the refund in such circumstances was to be calculated in proportion to the quantity actually 21. (b) I also find the Commission's view processed and the security forfeited, to the that the principle of equal treatment should extent to which it exceeded the refund, be applied fully only within a market organ­ without any tolerance whatsoever). ization justifiable. Arrangements for pro­ Secondly, it is necessary to examine whether ducts belonging to different sectors (in this the system of securities thus understood case cereals, on the one hand, and sugar, on infringed the principle of proportionality, in the other) may well exhibit certain vari­ particular if, as in this case, it applied in all ations because every sector presents its own its rigour. particularities. In order to avoid being discriminatory, such arrangements certainly need not be identical in every detail, for example, as in the case in point, regarding the method of payment. 24. (a) In my opinion there is no difficulty in answering the first part of the above question. The system of security can, having regard to the wording of the provisions, in 22. Since, however, there must be a certain fact only be understood as meaning that interchangeability of the products (cereal because the refund was to be calculated on starch/sugar) in the chemical industry, great the basis of the quantity actually processed, care is indeed taken (as the Commission has the security was forfeited in respect of an emphasized), in setting the amount of the amount equal to the difference between the refund, that one product is not treated more amount of the security and the refund favourably than another, and consequently granted. A tolerance of 4 % (in respect of the system of refunds cannot be regarded the humidity content and impurities in the as an infringement of the prohibition of basic product) was allowed for basically discrimination. The regulation governing 'complete' processing only, and not propor­ cereals cannot therefore be said to be incompatible with the principle of equal tionately in respect of partial processing. treatment because it provided only for a system of advances together with the lodging of a security (compliance with which did not cause any particular difficulty 25. Reference may also be made to the fact provided that some care was taken) and did that the relevant rules provide for a form of not also allow for the possibility of payment penalty in the event of non-compliance with of the refund after processing had taken the conditions of processing, with the result place (which evidently was generally of no that in principle a strict interpretation is interest to the economic sectors in called for. It is also interesting to note that question). that was the intention of the Commission which played a major role in framing the rules, as is clear from the telexes put before the Court. 3. The second question

27. As there are two factors in the rules now before the Court (a tolerance threshold of 96 % and additional security of 5 % of 30. I agree with the Commission, however, the amount of the refund) to be examined, that in this respect the regulation in it seems appropriate — since both are question is not open to criticism. Even if criticized by the plaintiff — to consider each another criterion is thought to be appro­ of them separately in the light of the priate in the rules which are important in abovementioned criteria. connection with intervention, in my opinion there is no objection in principle if, in the context of rules on production subsidies (of which the refund is an example) more rigorous quality requirements are laid down, which has, in fact, been done indirectly in 28. (aa) As regards the prescribed tolerance the form of the abovementioned tolerance threshold of 96 %, the questions which arise threshold. It is also significant that in from Roquette's observations are, first, practice — according to the uncontradicted whether the margin is too narrow, and statement of the Commission — this has secondly, whether it is justifiable to ignore apparently never given rise to difficulties; in

7 — Judgment of 17 November 1986, A. Maas v Bundesanstalt 8 — OJ 1975, L 281, p. 22 et seq. fik landwirtschafiliche Marktordnung [1986] ECR 3537 at p. 3551. 9 — OJ 1977, L 174, p. 15 et seq.

ROQUETTE FRÈRES v ONIC

35. In this connection, the Commission has 33. As regards the second ofthese points, let primarily drawn attention to the fulfilment me say straightaway that the explanations of the obligation to carry out the processing given (processing of 96% was regarded as of cereals into starch; that was to be sufficient in view of the moisture-content of regarded as a fundamental obligation and the basic product and the impurities hence it was justified to impose a heavy contained therein) do not altogether clarify penalty to ensure its fulfilment. why that element was completely excluded in the case of partial processing, when — because impurities are also contained in small quantities — the logical 36. That does not, however, seem to me to conclusion would have been that the be convincing. Nowhere in the Commission processing of, for example, 48 % of the regulation at issue (or in a Council regu­ declared amount could be regarded as lation) is reference made to such an obli­ corresponding to an amount of 50%. The gation to carry out processing (such as is to only explanation must be that a margin of be found, for example, in the rules tolerance is considered appropriate only regarding the sale of butter at a reduced where the processing has been complete in price to the processing industry). Regulation principle — because in the Commission's No 1570/78, in its preamble, refers to view this represents the principal obligation ensuring that processing is carried out and, of the person entitled to the refund within in Article 3, speaks of the security guaran­ the meaning of the Court's case-law; teeing the processing. That is not the same accordingly, when the Commission makes as laying down an obligation to process. It no such allowance in the case of partial could just as well refer to compliance with

the conditions for the granting of the conjunction with the granting of advances (as refund, in other words, to ensure that the is borne out by the formulation of Article advance on the refund is not paid without 8 (b) of Council Regulation No 2742/75). due cause. The system is thus intended to ensure that, if processing is not carried out, the refund will be repaid and the person who receives the refund does not derive economic benefit from having the use in the intervening period of money to which ultimately he is not entitled. On that basis it must certainly 37. Nor does it appear that the Community be concluded that no objection may be might have sought to have the products in made to the principle of the lodging of a question taken off the market, to prevent security, but equally clearly doubts must be speculation for instance (a relevant entertained as to the size of the security. A consideration in the butter scheme rate of 5 % of the amount of the refund in 10 mentioned above ). Indeed, it is not easy respect of an advance over a period of two to imagine such an objective in respect of to three months means that if the processing products such as maize (where imports are is not carried out at all the charge levied necessary and refunds on production are corresponds to an annual interest rate of 20 also granted when imported goods are used). to 30%. If that already seems exorbitant, The purpose of the refund rules is not to the fact that the same amount of security is promote the use of maize produced in the forfeited if processing is only partially Community but to ensure that the prices carried out is even more excessive. It is of the Community's starch industry are therefore a breach of the principle of competitive with those of substitute proportionality that there is no graduation products. 11To achieve this objective it is of the penalty (even though it is clearly not necessary to impose an actionable impossible to differentiate every individual production obligation. It suffices to promise case under such rules). There can be no and grant payment as recompense to any doubt that in view of the abovementioned person who fulfils the conditions. That purpose it would be unjustifiable to apply a would seem to be case here. It is significant, supplementary penalty (in the form of not too, that in the case of sugar — reference taking into consideration the aforesaid may again be made to the rules applying to tolerance threshold of 96%) and that in any sugar which were considered in connection event, in a case such as this (where the with the examination of the requirement of processing shortfall was minimal) there are equal treatment — apparently no such need absolutely no grounds for depriving the arises either (because refunds are paid after recipient of the refund of a practically that event) even though surpluses of sugar non-existent interest gain. are produced.

the development of the market which is tioned tolerance threshold of 96% — in useful for the management of that market. excess of the 5% of the amount of the refund. Since the basic objective is pres­ umably only to be aware of how the market 40. Whereas the actual principle of applying is developing, for which absolute precision a penalty could probably be justified in that is surely not required, conduct which way (although legitimate doubts could be involves only an extremely minor failure to supported by the fact that such a need comply with the prescribed rules, such as apparently does not arise in the context that at issue in the main proceedings, can of the sugar market since Regulation hardly be described as deserving a penalty. No 1729/78 does not require that a security be lodged when the refund is paid after processing) nevertheless, as regards the 41. (cc) In respect of the second part of the assessment of the rules in question here it is second question I would agree that the rules at least significant that such a concern to on security in Article 3 of Regulation ensure that market data are available is No 1570/78 may be contrary to the doubtless one of lesser weight (for the principle of proportionality and, at least as purposes of the case-law cited). From that they stand in the regulation in question, standpoint it is hard to justify a should not have been applied in a case such penalty — here I return to the abovemen- as that in the main proceedings.

C — Conclusion

42. In view of the foregoing, I suggest that the questions put by the Administrative Court, Lille, should be answered as follows: