C-263/87

DENMARK v COMMISSION

OPINION OF MR ADVOCATE GENERAL VAN GERVEN delivered on 22 February 1989 *

Mr President, 30 % or more). The Commission considers Members of the Court, that Denmark has wrongly applied the higher tariff corresponding to subheading 04.04 E I ex (a) 1. In its Summary Repon concerning the conclusions resulting from the clearance of the accounts of the EAGGF for 1983, the Commission states, in that regard, that:

1. The Danish Government seeks on the basis of Article 173 of the EEC Treaty the partial annulment of the Commission decisions of 19 June and 18 August 1987 on the clearance of the accounts presented by the Member States in respect of the 'Tariff subheading 04.04 E I ex (a) 1 is European Agricultural Guidance and reserved for Grana Padano- and Guarantee Fund, Guarantee Section, for the Parmigiano Reggiano-type cheeses which financial years 1983, 1984 and 1985 meet certain production and quality respectively. 1 That government objects to standards and which are manufactured in the Commission's refusal to allow certain parts of Italy. The Commission has Community financing in respect of already notified those standards to the DKR 4 710 776, DKR 1 007 099 and Member States with reference to an irregu­ DKR 1 525 762, paid by Denmark by way larity. Cheese exported from Denmark did of export refunds for Grana Padano. not satisfy those standards and therefore had to be classified under tariff subheading 04.04 E I ex (a) 3'. 2

Legislation

DENMARK v COMMISSION

Member State in which Grana Padano and 1(c) shall be fixed at levels which will give Parmigiano Reggiano cheeses qualifying to milk producers in areas of the Community bear the designation of origin are where such cheeses qualifying to bear the produced ... '. Then there is Regulation designation of origin are produced the same (EEC) No 971/68 of the Council of 15 July long-term security as regards milk prices to 1968 laying down general rules for inter­ producers as that provided by the inter­ vention on the market in Grana Padano and vention measures in respect of skimmed Parmigiano Reggiano cheeses. 6Both Article milk and butter'. 1 and Article 10 of that regulation refer to the intervention agency, which clearly means the Italian intervention agency. Accordingly, Article 2(2)(a) and (b) of Regulation (EEC) No 1107/68 of the Commission of 27 July 1968 on detailed rules of application for intervention on the market in Grana Padano and Parmigiano Reggiano cheeses 7refers to a quality grade The reason for Italy's decision to treat ('scelto O / ľ ) for Grana Padano which is certain types of cheese (Grana Padano and derived from the Italian legislation in force Parmigiano Reggiano) as derived products in 1968. 8 which also qualify for intervention, alongside butter and skimmed-milk powder, is the fact that those two products are manufactured in small quantities in Italy and the consequential need for that country to add a representative product for the manufacture of which only milk may be used which is produced in certain parts of 9 Italy. Italian milk producers are thus

According to prices for the cheeses specified in paragraph the Commission's contention, which has not been chal- lenged, that indent refers to Presidential Decree No 1269 of 30 October 1955, mentioned in the preceding footnote, 6 — OJ OJ,, English Special Edition 1968 (I), p. 251 251. . which defines the areas in which Grana Padano must be OJ,, English Special Edition 1968 (II 7 — OJ ), p. 382 II), 382.

. The author author,, like the Commission in this allowed to settle, is partially skimmed by hand'). The case,, refers to Presidential Decree No 1269 of 30 October case conclusion can be drawn from the existence of that 1955,, published in Gazzetta 1955 ufficiale della Repubblica provision concerning the milk to be used and from the italiana (GURI GURI), ), 1955 1955,, No 295 295,, p. 4401 4401.

That up in accordance with Article 4 of that law (see GURI GURI,, conclusion is supported by the definitions of 'denomi- 1955,, No 187 1955 187,, p. 2896 ), to the types of cheese produced 2896), nazioni di origine' and 'denominazioni tipiche' in Article2 provinces:: Alessandria within the territory of the following provinces Alessandria,, of Law No 125, referred to in the preceding footnote, Asti,, Cuneo Asti Cuneo,, Novara Novara,, Tonno Tonno,, Vercelli Vercelli,, Bergamo Bergamo,, Brescia Brescia,, which lays down that the product characteristics which the Como,, Cremona Como Cremona,, Mantova Mantova,, on the left bank of the River types of cheese in question must exhibit in order to qualify

OPINION OF MR VAN GERVEN —CASE 263/87

accorded the same 'long-term security' with is described simply as 'Grana'. It is only regard to the price of milk as is accorded to since 1980 that the description in the annex producers elsewhere in the Community. has been amended to 'Grana Padano' and that different refunds are specified for tariff subheadings 04.04 E I ex (a) 1 (Grana Padano) and 04.04 E I ex (a) 3 (Other 12 cheeses). In subsequent regulations on the fixing of refunds, including Regulation (EEC) No 33/82 of 7 January 1982 13— that is to say the regulation that was in force at the commencement of the material period — there is still no reference 7. I now turn to the regulations concerning to Grana Padano or to designations of refunds. Whereas, as stated earlier, Article 5 origin either in the preamble or in the text concerning intervention prices (Title I) and and the difference of treatment is still Article 8 concerning intervention mech­ apparent in the annex inasmuch as different anisms (Title II) of Regulation No 804/68 refunds are specified for the two aforesaid expressly refer to Grana Padano 'qualifying tariff headings. In the Nimexe nomenclature to bear the designation of origin', the the description used is still simply 'Grana', 1 4

provisions concerning the rules on trade which leads to confusion in the light of with third countries and thus relating to Article 19 of Regulation No 804/68. 15 In refunds (Title III) make no reference to the Commission's Explanatory Notes to the Grana Padano (and Title IV containing Common Customs Tariff, 'Grana' in general provisions does not refer to it subheading 04.04 E is described as a type of either). Nor does Regulation (EEC) No cheese of which both 'Parmigiano 876/68 of the Council of 28 June 1968 Reggiano' and 'Grana Padano' are sub­ laying down general rules for granting divisions, whereas in subheading export refunds on milk and milk products 04.04 E II ex (a) 'Grana' is described and criteria for fixing the amount of such simply as a hard cheese alongside 10 refunds refer either to Grana Padano or 'Parmigiano Reggiano'. to designations of origin.

9. The Danish Government deduces an argument a contrario from the differences outlined between the rules on intervention At the hearing, the Commission gave and the rules on refunds. That argument must, in its view, lead to the conclusion that reasons connected with commercial policy all cheeses which can, under the national for its attitude. In 1979 it had noticed that rules in force, be called 'Grana Padano' Belgian producers manufactured and must be be eligible for the higher refund exported a cheese of the type at issue to the (since 1 January 1980) for subheading United States. Since the production of that 04.04 E I ex (a) 1. (Belgian) cheese was not subject to the obli­ gation that milk from a specified (Italian) region must be used, the producers could produce it more cheaply and undercut the Italian products sold on the United States market, to the annoyance of the United States trading partner. In order to preserve good relations with the United States and in order to continue its support for milk The applicant's argument is as follows. production in Italy by the grant of 16 Neither the designation 'Grana Padano' refunds, the Commission found it nor, to be sure, the phrase 'qualifying to necessary to draw a distinction as from 1 bear the designation of origin' are to be January 1980 between Italian Grana Padano 17 found either in the provisions on refunds in and other Grana-type cheeses. It put that Regulation No 804/68, or in Council Regu­ lation No 876/68 laying down general 16 — No support was in faci provided under the intervention system: supra, point 4. provisions concerning refunds, or in the 17 — As from the same date other Italian Grana-type cheeses, in preamble to or text of the Commission's particular Grana Veneziano and Grana Lombardo (which, as was stated at the hearing, are said to account for regulations on the fixing of refunds. Clearly approximately 5% of Italian production), could still qualify it is otherwise under the intervention only for the lower refund on the same fooling as non-Italian Grana-type cheeses. system, whose unequivocal provisions

10. The aforesaid question is also central to the Danish Government's reasoning. It refers to Article 17(2) of Regulation No 804/68 of the Council, according to which I am not swayed by that reasoning a the refund is to be the same for the whole contrario. In my view, it is impossible to Community but may be varied according to draw any conclusions one way or the other use or destination. This is an instance from the fact that the rules on refunds for involving the application of the principle of milk and milk products initially contained equality, as it is generally applied to the no reference to Grana Padano with a desig­ common agricultural policy. The Danish nation of origin. Admittedly, in the regu­ Government contends, not without 19 lations of the Council that reference does reason, that this principle must be applied not appear in connection with refunds. Does as a guideline for interpretation where the this mean, however, that the Commission wording of a regulation is open to two should not, by analogy with the rules on interpretations. In this case, the Danish intervention, have applied that reference in Government uses that as an argument in support of its reasoning a contrario: since it 18 — In order to reinforce its argument a contrario, Denmark refers to the case of 'Prosciutto di Parma' and 'Prosciutto 19 — See the judgment of 25 November 1986 in Joined Cases di San Daniele', two types of ham protected in Italy by a 201 and 202/85 Klensch [1986] ECR 3477, paragraph 21, designation of origin for which there is a special system of in which the Court stated that 'when it is necessary to refunds based on regulations expressly adopted by the interpret a provision of secondary Community law, pref­ Commission and not simply on different tariff headings in erence should as far as possible be given to the interpre­ an annex (see Commission Regulation (EEC) No 3037/87 tation which renders the provision consistent with the of 9 October 1987 fixing the export refunds on pigmeat, Treaty; in this case regard must be had specifically to the OJ L 288, 10.10.1987, p. 13). However, that comparison is requirement not to discriminate between producers within not of great value since there is for those products only a the Community which is laid down in Article 40(3) of the system of refunds and not an intervention system. EEC Treaty'.

That is a weighty argument, particularly since, if accepted in its entirety — that is to say, if the distinction between types of Grana were to be considered contrary to the general principle of equality {infra, point 13) — it could call in question the whole system, including the rules on inter­ vention, a consequence which the Danish Government did not wish (or dare) to draw 20 either and which is therefore not an issue 12. I am inclined to agree with the in these proceedings (infra, point 14). Commission's reasoning. Once it is estab­ lished that the Grana Padano in question deserves to be protected within the internal organization of the market, it must also be supported for purposes of export to foreign markets, if it is still to be competitive 21 there. In the circumstances, however, that 11. The Commission rejects the Danish Government's argument and maintains that 21 — In that connection reference may be made to Anicie 33 of Regulation No 804/68 which permits by way of a general Grana Padano with an Italian designation provision (that is therefore also applicable to export refunds) 'appropriate account' to be taken 'at the same of origin is a different product from other time' of agricultural and commercial policy objectives. cheeses of the same kind. Naturally, the However, I can find little or no basis in the case-law of the Court to substantiate the existence of an 'intrinsic' Commission relies not on differences as to connection, as emphasized by the Commission, between intervention mechanisms ana refunds. The Court does content, for evidently there are none (supra, acknowledge the existence of a connection between export point 3), but on the fact that Grana Padano refunds and import levies with a view to combating abuses (see the judgment of 7 July 1981 in Case 158/80 Rtwe with an Italian designation of origin is [1981] ECR 1805, paragraph 22). However, the Court subject to quite different statutory does not acknowledge the existence of any such connection between refunds and monetary compensatory amounts (see provisions. The Commission has in mind, in the judgmcnt of 5 March 1980 in Case 38/79 Butler- und Eitrzenlnle NORDMARK[1980] ECR 643, paragraphs 7 to 9). particular, the obligation to use for the Some support for the view that there is a link between intervention mechanisms and refunds is provided by paragraph 10 of the Court's judgment of 4 March 1980 in 20 — A possible factor here, as the Danish Government has itself Case 49/79 / W [ 1980 ] ECR 569: the prices obtained pointed out in iti application, is that in the dairy sector in by individual producers are indirectly determined by the Denmark there is also an intervention system which refers combination of intervention in the market ano the to national quality or approval standards for a certain type arrangements for the Community's external trade . . . '. of butter ('lurmærket').

22 — Notwithstanding the preparatory work carried out at the Commission's behest (Eugen Ulmer: The law on unfair competition in the Member States of the EEC, Part I: comparative survey, 1965, Study undertaken at the request of the Commission of the European Communities by the Max-Planck-Institut für ausländisches und internationales Patent-, Urheber- und Wettbewerbsrecht, München, in particular No 432), no harmonization has been achieved with regard to designations of origin, indications of provenance and so on (see Written Question No 250/86, OJ C 290, 17.11.1986, p. 36). Designations of origin exist In its reasoning, the Commission refers to in the legal systems of some Member States, and to a lesser extent or not at all in that of others (see in that regard: Italian legislation on the quality and desig­ Jean Pierre Cochet: La notion d'appellation d'orìgine en droit communautaire, 1985, and Klaus-Jürgen Kraatz: Der nation of origin of Italian Grana Padano Schutz geographischer Weinbezeichnungen im Recht der which predates the EEC Treaty. As stated Europäischen Gemeinschaften, 1980).

and more favourable treatment with regard 26 — Apart from the two judgments referred to in the two preceding footnotes, reference must be made in this to export refunds. connection to the Court's judgment of 20 February 1975 in Case 12/74 Commission v Germany [1975] ECR 181.

DENMARK v COMMISSION

although I am still left with certain market in milk and milk products and misgivings which are considered below. following the accession of Member States in which there are probably areas where milk and cheese are produced in similar circum­ stances — it is still consistent with the principle of equality to maintain preferential treatment which refers to national legis­ lation concerning the designation of origin The principle of equality for certain types of cheese without providing the same possibility for products from other parts of the Community in which production or consumption may be affected by similar factors. My reservations in that regard are all the greater since the Court has made it clear in a recent 13. My reservations are connected with the judgment that the broad discretion which, established case-law of the Court according to an earlier judgment, the concerning the prohibition of discrimination Community institutions enjoy with regard to between Community producers, as laid the implementation of the common agri­ down in Article 40(3) of the EEC Treaty. cultural policy diminishes as the integration 28 The Court has held that: of the market increases.

OPINION OF MR VAN GERVEN —CASE 263/87

Conclusion

15. On the basis of the arguments put forward, I have come to the conclusion that the action for annulment brought by the Danish Government should be dismissed and that Denmark should be ordered to pay the costs.