C-345/88

2. Council Regulation (EEC) No 804/68 of 27 June 1968 on the common organ­ 3. Controls were necessary in order to isation of the market in milk and milk ensure that skimmed milk qualifying for products (Official Journal, English Special special aid was used for the purpose Edition 1968 (I), p. 176) provides in intended and not, for instance, used to feed Article 10 for the grant of aid for skimmed calves. To that end, Commission Regulation milk manufactured in the Community for (EEC) No 2793/77 of 15 December 1977 use as animal feed. Under Article 10(2), the on detailed rules for granting special aid for Council is to adopt general rules governing skimmed milk for use as feed for animals the aid and in particular the conditions other than young calves (Official Journal under which the aid may be granted. Under 1977, L 321, p. 30) provides in Article 10(3), the Commission is to lay Article 3(1)(a) that the special aid shall be down detailed rules for the application of granted to a dairy only in respect of that article. Council Regulation (EEC) skimmed milk covered by an undertaking on No 986/68 of 15 July 1968 lays down the part of the farmer which satisfies the general rules for granting aid for skimmed conditions of Article 4 of the regulation. milk and skimmed-milk powder for use as According to Article 4(1)(b) second indent, feed (Official Journal, English Special in the case of a specialized farm (i.e., a farm Edition 1968 (I), p. 260). Initially, the level on which in principle only animals

* Original language: English.

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5. Under Article 5(3) of Regulation 7. In 1979 and 1980, Butterabsatz No 2793/77, an application for payment of Osnabrück Emsland ('Butterabsatz'), which special aid submitted by the dairy to the operates a dairy at Beesten (Lower Saxony),

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for the period from September 1979 to September 1980. However, in July 1980 the Bundesamt carried out an inspection at the premises of Butterabsatz in relation to the period September 1979 to May 1980 inclusive, and found that five pig-breeders to whom the dairy had supplied skimmed 9. Butterabsatz brought an action chal milk had not forwarded the necessary lenging the greater part of the demands for statements as to herd size, in writing and repayment (some DM 135 000) and at first using the prescribed forms, before the instance the Verwaltungsgericht (Adminis beginning of each calendar quarter.

However, and forwarded the missing statements as to it dismissed the appeal as regards the second herd size on the basis of information demand, relating to the period from January supplied by the farmers by telephone. A to September 1980, on the ground that, further inspection carried out in June 1981 since at that time the Federal Republic had and relating to the period June 1980 to May not made a valid choice between quarterly 1981 found that the necessary statements in and yearly statements as provided for in respect of the fourth quarter of 1980 and Regulation No 1438/79, a legal vacuum the first quarter of 1981 had been duly had arisen, and farmers were relieved of the forwarded to the dairy. The inspections did obligation to supply quarterly statements not reveal any breach of the fundamental from 1 January 1980. In that context, the requirements of the aid scheme, namely the Verwaltungsgerichtshof had regard to a requirement that the skimmed milk be used Circular 6/1979, dated 5 November 1979, to feed animals other than young calves. which was drawn up and sent by the Bundesamt to the dairies participating in the

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of the possibility, provided by that regu­ applying for special aid must submit a lation, of extending the time-limit for the declaration that it will repay the special forwarding of statements of herd size. The aid if a farmer has, inter alia, failed to Verwaltungsgerichtshof ruled that while the abide by the undertaking given circular was clearly intended to represent an pursuant to the second indent of exercise of the option, it did not amount to Article 4(1)(b) to supply before the a valid exercise because the Bundesamt was beginning of each quarter a statement not competent to make the choice; of the size of his herd, on the grounds moreover, the circular was not in the appro­ that it infringes the principle of pro­ priate legal form and had not been portionality inasmuch as the dairy must communicated to the persons most directly undertake to repay in its entirety the concerned, i.e. the pig farmers. special aid in respect of the farmer and calendar quarter in question even when the farmer has only slightly exceeded the prescribed period for the statement (by a few days) and it is established that he has duly used the subsidized slummed milk as animal feed? 10. Faced with an appeal and cross-appeal on points of law, the Bundesverwaltungs­ gericht (Federal Administrative Court) referred to this Court the following questions:

(3) Is Article 1(3) of Commission Regu­ lation (EEC) No 1438/79 of 11 July 1979 to be interpreted as meaning

'(1) Is Article 5(3)(b) of Commission Regu­ lation (EEC) No 2793/77 of 15 December 1977 invalid in so far as it provides that it is a condition for the (a) that the obligations imposed on a grant of special aid that a dairy farmer until 31 December 1979 by applying for special aid shall submit a the second indent of Article 4(1)(b) declaration that it will repay the special of Regulation (EEC) No 2793/77 aid if a farmer has not abided by one of to supply a statement of the size of the undertakings under Anicie 4, on his herd every quarter lapsed on the grounds that the Commission was 1 January 1980, or not empowered by Article 10(3) of Regulation (EEC) No 804/68 of the Council of 27 June 1968 to adopt a substantive provision such as that?

(4) Is the first sentence of Article 5(4) of 12. As regards the Commission's powers to Regulation (EEC) No 2793/77 to be adopt Article 5(3)(b), Butterabsatz argues interpreted as meaning that it is for the Council to lay down the conditions for the grant of the special aid and that by in effect imposing a new, supplementary condition for the grant of the aid the Commission has exceeded its powers (a) that the term "undertaking referred to adopt implementing measures. At the to in Article 4" means the obli­ hearing, counsel for Butterabsatz also gations imposed on farmers by pointed out that Council Regulation (EEC) Article 4 as revised from time to No 2128/84, which came into force on time, or 29 July 1984, (Official Journal 1984, L 196, p. 6) had amended Regulation No 986/68 by providing (in Article 3(2) second subparagraph of the amended regu­ lation) that: 'if necessary, additional (b) that the commitments contained in conditions for the payment of the aid may farmers' undertakings given prior be laid down in accordance with the to 1 January 1980, and in procedure provided for in Article 30 of particular the commitment to Regulation No 804/68' (i.e. in accordance supply quarterly statements as to with the management committee proce­ herd size, should remain valid even dure). In the view of Butterabsatz, the when the underlying obligations on implication is that a power to lay down the part of the farms, set out in additional conditions did not exist Article 4, are altered or lapse as a previously. result of subsequent amendments to Article 4 — in this case, by Article 1(3) of Regulation (EEC) No 1438/79?' 13. In my opinion, these arguments cannot be accepted. As the Bundesamt and the Commission point out, according to the established case-law of the Court, the The first question concept of implementation within the meaning of Article 155 of the Treaty must be given a wide interpretation (see, in particular, Case 23/75 Rey Soda v Cassa Conguaglio Zucchero [1975] ECR 1279). In 11 . The first question is concerned with the exercising its powers of implementation in validity of the rule in Article 5(3)(b) of the context of an agricultural market the Regulation No 2793/77 that an application Commission is authorized to adopt all the for special aid must be accompanied by a measures which are necessary or appropriate declaration that the dairy will forgo or for the implementation of the basic Council repay the aid if it is found that the farmer legislation, provided that those measures do has not abided by one of the undertakings not conflict with that Council legislation or referred to in Article 4 of that regulation, with implementing legislation adopted by and asks whether the Commission, in the Council (see Case 121/83 Zuckerfabrik imposing such a requirement, exceeded the Franken v Hauptzollamt Würzburg [1984] powers granted to it by Article 10(3) of ECR 2039, and the judgment of 14 Regulation No 804/68 to adopt detailed February 1989 in Case 13/88 Knoeckel rules for the application of the aid system. v Hauptzollamt Landau [1989] ECR 337).

16. The second question is also concerned with the validity of Article 5(3)(b) of Regu­ lation No 2793/77 and asks whether that provision is compatible with the principle of 15. Nor, in my view, does the conferment proportionality in so far as it could result in on the Commission, by Regulation the dairy being required to repay the whole No 2128/84, of an express power to adopt of the aid in respect of the farmer and 'additional conditions' alter this position. calendar quarter in question even if the Regulation No 2128/84, which applied farmer is only a few days late in submitting only until the end of the 1985/86 milk the quarterly statement of herd size and marketing year, introduced a differentiated even if he has duly used the skimmed milk system of aid for skimmed-milk powder for the purpose intended by the legislation. used in the manufacture of compound feed- ingstuffs in place of the single aid which had existed previously. To take account of this expansion of the aid scheme, it replaced Articles 2, 2a and 3 of Regulation 17. Two preliminary points need to be No 986/68. The recitals of Regulation made in regard to this question. The first is No 2128/84 do not explain the purpose of that the whole issue of proportionality can the power to adopt additional conditions, only be seen as relevant in relation to the but since the regulation is entirely statements of herd size for the third quarter concerned with the new, differentiated of 1980 which were outstanding when the system of aid for skimmed-milk powder, it Bundesamt commenced its inspection of the

18. The precise extent of the delay is also crucial to the possibility of the retroactive application of Regulation No 188/83, which amends Regulation No 2793/77 by 20. Before answering that question, it is in providing for a 10% reduction in the my view necessary to define more precisely amount of the aid where the statement is the notion of 'a few days" delay as referred forwarded not more than 10 days late. to by the national court. In my opinion, that According to Article 2 of Regulation notion, for the purposes of this case, must No 188/83, the possibility of a reduced be understood to mean a delay of up to 10 entitlement to aid can be invoked, at the days. It is of course correct that the 10-day request of the applicants, in respect of period of grace was not introduced until the 'applications for aid already submitted adoption of Regulation No 188/83. under Regulation No 2793/77'. In the However, when called upon to decide upon Commission's view, it should be possible for the compatibility of that very 10-day rule the aid applications at issue in the present with the principle of proportionality, the case to benefit from that provision, since, in Court in Case 9/85 Nordbutter v Germany, view of the dispute as to recovery, they had already cited, found that the loss of the full not resulted in a final decision at the time of amount of the special aid was not incom­ the entry into force of Regulation patible with the principle of proportionality No 188/83. The Court has not been asked where, in the context of mixed farms, the to rule on this question, and it will be for relevant declarations required by the same the national court to determine whether legislation were made more than 10 days Butterabsatz can rely on Regulation late. In my view, the implication must be No 188/83 in this case: in any event, as that, even in relation to events which took already indicated, the possibility of invoking place before the adoption of Regulation a reduced entitlement to aid by virtue of No 188/83, the maximum extent of the that regulation is relevant in relation only to permissible delay must be taken to be 10 the statements for the third quarter of 1980, days. and then only if those statements are found by the national court to have been forwarded within 10 days of the due date, i.e. 1 July 1980.

that the whole of the aid was to be forfeited of the opinion that Article 5(3)(b) of Regu­ where statements of herd size were not lation No 2793/77, before the amendment, submitted by the due date. According to the with effect from 30 January 1983, of established case-law of the Court, in order Article 4 of Regulation No 2793/77 by to determine whether a provision of Regulation No 188/83, was invalid to the Community legislation infringes the extent that it resulted in the forfeiture by principle of proportionality, it is necessary the dairy of the whole sum of the aid in to ascertain whether the means which it respect of the farmer and calendar quarter employs are appropriate and necessary to in question, in a case where the farmer only attain the objective sought. Where slightly exceeded the deadline for Community legislation establishes a submission of the statement (by a period not distinction between a primary obligation, exceeding 10 days) and where there was no compliance with which is necessary to attain doubt that the primary obligations of the the objective sought, and a secondary obli­ scheme had been complied with. gation, essentially of an administrative nature, that legislation cannot, without breaching the principle of proportionality, penalize failure to comply with the secondary obligation as severely as failure to comply with the primary obligation (see, for example Case 240/78 Atalanta v Produkt- schap voor Vee en Vlees [1979] ECR 2137, 23. In my view the disproportionate and Case 181/84 E. D. F. Man (Sugar) Ltd character of the original provision is v Intervention Board for Agricultural Produce implicitly confirmed by the introduction of a [1985] ECR 2889). provision for partial forfeiture in Regulation No 188/83, and by the judgment in Case 9/85 Nordbutter v Germany, cited above, where the Court found that the Community rules as modified 'take into account the considerable disadvantage represented by the loss of the entire aid where the time-limits prescribed have been exceeded only slightly' (at paragraph 17 of 22. In terms of the overall scheme of the the judgment). relevant Community legislation in this case, the farmer's obligation, in Article 4(1 )(b) of Regulation No 2'93/77, to submit advance quarterly staterne ts as to herd size must be seen as an obligation of a secondary, administrative nature designed to ensure the proper functioning of the scheme and in particular to avoid abuse; yet in the original 24. For the sake of completeness, I would version of the regulation, even a minor add that if some or all of the statements of breach of that obligation attracted, by virtue herd size for the third quarter of 1980 are of Article 5(3)(b), the same sanction as the found by the national court to have been breach by the farmer of the other, more submitted within 10 days of the due date, fundamental obligations contained in and if a retroactive application of Regu­ Article 4, such as, in the case of specialized lation No 188/83 is not found to be farms, the obligations not to keep young possible, then the dairy will be entitled to calves and to use the skimmed milk as feed the full amount of the aid in respect of the for animals other than calves. I am therefore statements in question.

27. In the light of the above, an answer to question 4 appears unnecessary. If the circular amounted to a valid exercise of the 26. Both questions appear to assume that Member State's choice, then there was no the relevant Member State, the Federal change in the legal situation of the German Republic of Germany, did not exercise its farmers affected by the aid scheme. option between quarterly and annual However, even if the circular was not valid, statements before 1 January 1980. In this there was, as already stated, no question of context, it will be recalled that the Verwal­ a legal vacuum arising as a consequence of tungsgerichtshof in its judgment of 9 June the coming into force of Regulation 1986 in the course of the national No 1438/79, so that the farmer's under­ proceedings took the view that the taking to supply quarterly statements Bundesamt circular of 5 November 1979, continued as before.

28 . Accordingly I would give the following answers to the questions referred by the Bundesverwaltungsgericht :

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'(1) Article 5(3)(b) of Commission Regulation No 2793/77, in the version of the regulation in force before 30 January 1983, must be regarded as invalid on the ground that it infringed the principle of proportionality in so far as it provided that a dairy applying for special aid had to repay the whole of the special aid in respect of the farmer and calendar quarter in question if a farmer had failed to abide by the undertaking given pursuant to the second indent of Article 4(1)(b) to supply before the beginning of each quarter a statement of the size of his herd, even if the farmer had only slightly exceeded the prescribed period for the statement (by 10 days or less) and it had been established that the farmer had otherwise complied with the obligations of the special aid scheme.