C-44/89
ECLI:EU:C:1991:231
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OPINION OF MR JACOBS —CASE C-44/89
O P I N I O N O F M R A D V O C A T E G E N E R A L JACOBS delivered on 4 J u n e 1991 ""
My Lords, entered into a non-marketing undertaking in return for a premium, under Regulation No 1078/77. I shall call the quota available under the new Article 3a 'special quota'. Mr von Deetzen has now reached the age 1. This case is a sequel to Case 120/86 of retirement, and wishes to make Mulder v Minister van Landbouw en Visserij arrangements for his sons to take over the [1988] E C R 2321 and Case 170/86 Von farm. Deetzen v Hauptzollamt Hamburg-Jonas [1988] E C R 2355, in which the Court held that Council Regulation N o 857/84 of 31 March 1984 (Official Journal 1984 L 90, p. 13), as supplemented by Commission 3. On 19 December 1988, following the Regulation N o 1371/84 of 16 May 1984 judgment of the Court in Case 170/86 Von (Official Journal 1984 L 132, p. 11), was Deetzen (cited above), the Finanzgericht invalid in so far as it did not provide for the Hamburg originally referred the following allocation of a reference quantity ('quota') two questions to the Court for a preliminary to milk producers who had entered into an ruling: undertaking under Council Regulation No 1078/77 of 17 May 1977 (Official Journal 1977 L 131, p. 1). As a result of those judgments, both given on 28 April 1988, the Council adopted Regulation (1) Is Article 177 of the EEC Treaty to be No 764/89 of 20 March 1989 (Official interpreted as meaning that a further Journal 1989 L 84, p. 2), inserting an request for a preliminary ruling is Article 3a in Regulation N o 857/84, and permissible where the national court the Commission adopted Regulation cannot reach a decision because the No 1033/89 of 20 April 1989 (Official competent Community institutions have Journal 1989 L 110, p. 27), inserting an not enacted any legislation following a Article 7a in Commission Regulation declaration by the Court of Justice that No 1546/88 of 3 June 1988 (Official certain legislation is invalid, and Journal 1988 L 139, p. 12), the consoli- measures need to be adopted in order to dating regulation which replaced Regulation remedy that legal situation? N o 1371/84). I shall refer to those two new provisions as 'the new Article 3a' and 'the new Article 7a' respectively.
(2) If Question 1 is answered in the affirmative, what is the effect of the Court's judgment of 28 April 1988 in 2. The effect of the new legislation was to Case 170/86 inasmuch as the Council of make it possible for persons to receive a the European Communities has taken quota who, like Mr von Deetzen, had no action since then?
* Original language: English.
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Those questions obviously ceased to be concept of 'sale' to be interpreted as relevant when the Council and the including the arrangement of the Commission finally adopted the new legis- farm as a private firm [Gesellschaft lation in March and April 1989. By an bürgerlichen Rechts] of which the Order dated 8 August 1989, registered at producer to whom the special the Court on 20 October 1989, the Finanz- reference quantity is granted is a gericht accordingly withdrew the questions partner? previously referred and substituted the following:
Can a 'sale' be said to have occurred if the person having arranged his farm as a private firm ceases to be a (l)Are Council Regulation (EEC) partner of that firm on account of N o 857/84 of 31 March 1984, as death or for some other reason and amended by Council Regulation (EEC) his share accrues to the other N o 764/89 of 20 March 1989, and members? Commission Regulation (EEC) No 1033/89 of 20 April 1989, based upon it, valid in so far as the special reference quantity under Article 3a(2) is equal to only 6 0 % of the quantity of milk or milk (b) H o w are the words 'by any similar equivalent by reference to which the transaction' to be construed for the non-marketing or conversion premium purpose of the first paragraph of was established? Article 7a of Regulation No 1546/88 as amended by Regulation N o 1033/89? Do they cover the leasing of the farm to a person who, under the statutory rules of (2)Is the second paragraph of Article 3a(4) succession, stands to inherit from the of Regulation No 857/84, under which producer entitled to the special the special reference quantity is to be reference quantity? returned to the Community reserve if the holding is sold or leased before the end of the eighth period of application of the additional levy scheme, valid? The first question
(3)If Question 2 is answered in the 4. The first question referred by the Finanz- affirmative : gericht concerns the validity of a restriction on the amount of special quota which can be allocated, contained in paragraph 2 of the new Article 3a. By that paragraph, special quota was limited to 60% of milk (a) For the purposes of the second delivered or milk equivalent sold by the paragraph of Article 3a(4) of Regu- producer during the year preceding his lation N o 857/84 as amended by application for a non-marketing or Regulation No 764/89, is the conversion premium ('the 6 0 % rule').
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5. On 12 July 1980, Mr von Deetzen (Official Journal 1985 L 68, p. 1), provides was awarded a non-marketing premium that: calculated on the basis of his previous milk production of 190 665 kg, in return for which he was to refrain from production until 7 September 1985. Applying the 6 0 % 'Where a holding is sold, leased or trans- rule, on 20 June 1989 the Landwirtschafts- ferred by inheritance, all or part of the kammer Weser-Ems allocated him a special corresponding reference quantity shall be quota limited to 114 399 kg (i.e. 6 0 % of transferred to the purchaser, tenant or heir 190 665 kg). according to procedures to be determined.'
Those procedures are now to be found in Article 7 of Commission Regulation 6. Since the present questions were N o 1546/88, which in its first paragraph referred, however, the validity of the 6 0 % provides that: rule has been considered by the Court in Case C-189/89 Spagl and in Case C-217/89 Pastätter (judgments given on 11 December c
1990). In those cases the rule was held to be invalid, and it will suffice to follow those judgments in the present case. 1. Where an entire holding is sold, leased or transferred by inheritance, the corre- sponding reference quantity shall be transferred in full to the producer who The second question takes over the holding.
2. Where one or several parts of a holding is sold, leased or transferred by in- 7. The second question referred by the heritance, the corresponding reference Finanzgericht concerns the validity of the quantity shall be distributed among the provision in paragraph 4, second producers operating the holding in subparagraph, of the new Article 3a, proportion to the areas used for milk according to which special quota is to be production or according to other returned to the Community reserve 'where objective criteria laid down by Member the holding is sold or leased before the end States. ( . . . ) of the eighth period of application of the additional levy scheme' — i.e. before 1 April 1992 ('the forfeiture rule'). As the Finanz- 3. The provisions of points 1 and 2 . . . shall gericht points out, the sale or lease of a be applicable under the various national holding does not lead to such a forfeiture of rules, in other cases of transfer which quota in the case of producers who did not have comparable legal effects as far as have to rely upon the new Article 3 a to producers are concerned. receive their allocation. In the case of such producers, Article 7(1) of Regulation N o 857/84, as amended by Council Regu- lation N o 590/85 of 26 February 1985 >
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8. Detailed rules for the transmission of 'Whereas the quantities granted are not special quota were provided by the new intended to confer an undue advantage but Article 7a, which, it will be recalled, was must in fact be produced by those to whom inserted in Regulation No 1546/88 by they are allocated; whereas such quantities Regulation N o 1033/89. As we saw above, should therefore be made subject to certain Article 7 provides rules for the transmission restrictive conditions;'. of quota in the normal case. The first paragraph of Article 7a provides that special quota is transferred in accordance with the same rules 'in the event of the transfer of the holding by inheritance or by any similar transaction'. In such a case, therefore, there is no difference between rules applying to recipients of special quotas, and those There are, in fact, a number of such applying to producers who did not 'restrictive conditions' in the new Article 3a. participate in a non-marketing scheme. In In particular, applicants for special quota the light of point 3 of the first paragraph of must not have ceased farming or transferred Article 7 (cited above), a 'similar trans- the whole of their dairy enterprise before action' for the purposes of the new Article the end of the period of their 7a means one which has 'comparable legal non-marketing undertaking (Article effects as far as producers are concerned'. 3a(l)(a)); they must establish that they are able to produce on their holding up to the quantity requested (Article 3a(l)(b)); they must establish, within two years from 29 March 1989, that they have resumed sales or deliveries up to a level of at least 80% of the quantity provisionally allocated (Article 9. Where the holding is transferred by sale 3a(l) and (3); I note that 29 March 1989, or lease, however, different rules apply to the date of publication of the regulation in those who did not participate in a the Official Journal, is the earliest date for non-marketing scheme, on the one hand, applications for special quota, and and recipients of special quota, on the applications must be made within three other: only in the latter case is quota months of that date: see Article 3a(l)). forfeited under paragraph 4, second Unused quota may not be made the subject subparagraph, of the new Article 3a. The of a temporary transfer (Article 3a(4), first second and third paragraphs of the new subparagraph). Finally, the condition with Article 7a lay down detailed rules for the which we are presently concerned, the application of that provision. quota must be returned to the Community reserve if the holding is sold or leased before the end of the 'eighth period', i.e. before 1 April 1992 (Article 3a(4), second subparagraph).
10. What is the justification for this different treatment of producers who have been allocated special quotas, as opposed to those who did not participate in a non-marketing scheme? In the sixth recital to Regulation N o 764/89, the reasoning is 11. As the Council points out in its written expressed as follows: observations, these provisions are clearly
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designed to prevent the farmer obtaining a 13. It seems to me however that the scope special quota merely in order to increase the of the legitimate expectations at issue must market value of his holding, as opposed to be more carefully defined. In paragraph 15 making use of the quota by continuing to of its judgment in Case 170/86, the Court produce. Notwithstanding the doubts of the put the matter as follows: Finanzgericht, this reasoning appears to me to be sufficiently expressed in the sixth recital to Regulation N o 764/89 (cited above). Thus, the difference in treatment as between applicants for special quota, on the one hand, and quota holders who did not ' . . . a total and continuous exclusion . . . for participate in a non-marketing scheme, on the entire period of application of the regu- the other, can be explained by the fact that lations on the additional levy, preventing the the former group are proposing to return to producers concerned from resuming the milk production after participating in such a marketing of milk at the end of the scheme. The requirement that the holding is five-year period, was not an occurrence not to be sold or leased before 1 April 1992 which those producers could have foreseen can then be seen to be an integral part of a when they entered into an undertaking, for group of conditions which require an a limited period, not to deliver milk. There applicant for special quota genuinely to is nothing in the provisions of Regulation return to milk production at a level corre- N o 1078/77 or in its preamble to show that sponding to the quota for which he has the non-marketing undertaking entered into applied. under that regulation might, upon its expiry, entail a bar to resumption of the activity in question. Such an effect therefore frustrates those producers' legitimate expectation that the effects of the system to which they had rendered themselves subject would be limited.' (my emphasis)
12. It is true that in Case 170/86 (cited Similarly, in Case C-189/89 Spagla.no Case above in paragraph 1), Mr von Deetzen C-217/89 Pastätter (cited above in was held to have a legitimate expectation of paragraph 6), the Court found the 60% rule resuming production without being subject, to be invalid. The Court held that if special upon expiry of his non-marketing under- quota were to be limited to 6 0 % of previous taking, to 'restrictions which specifically production, the farmer returning to affect him precisely because he availed production would be subject to a limitation himself [of a non-marketing scheme]' (see on production which was more than twice paragraph 13 of the judgment). Furthermore the maximum reduction suffered by those it cannot be denied that the restrictive who had not participated in a conditions in the new Article 3a include non-marketing scheme (see paragaph 24 of restrictions which specifically affect those the judgment in Spagl, and paragraph 15 in returning to production after participation Pastätter). In other words, the farmer who in such a scheme. Only in the case of these had agreed to suspend production for a producers is the retention of quota linked limited period would find himself subject to with the use of the quota to farm. a further restriction on production which
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specifically affected him on his return to 15. It seems to me, therefore, that the farming activity. Thus, although Spagl and Commission is correct in saying that the Pastätter go further than Case 170/86, in legitimate expectation of those who that they were concerned with a restriction participated in a non-marketing scheme was not amounting to a total ban on milk that of returning to production after the production, they were none the less still non-marketing period had expired, rather concerned with the legitimate expectation of than that of being able to realize the market resuming production at the end of a value of the quota. Thus, when Mr von non-marketing period. Deetzen entered into his non-marketing undertaking, no legitimate expectation arose of reaping the incidental financial rewards of a quota system which, at the time the undertaking was entered into, was not yet in existence.
16. It follows that the legitimate expec- tations of a returning producer are not frus- 14. Such a legitimate expectation must be trated by conditions which are designed to taken to include, not only the return to ensure that his return is more than merely production of the farmer himself, but also transitory or partial. In particular, the that of an heir or similar successor: see Case condition that a holding should not be C-314/89 Rauh v Hauptzollamt Niimberg- transferred (except by inheritance or similar Fürth [1991] E C R 1-1647, judgment of transaction) before 1 April 1992, that is to 21 March 1991. In that case, the prospective say within three years of allocation of the heir of farmers who had participated in a special quota, cannot be said to frustrate the non-marketing scheme had taken over the legitimate expectations of the producer. holding from his parents after their non-marketing undertaking had expired, but before it had become possible to apply for a special quota. T h e Court held that the right to apply for a quota must be taken to extend, not only to farmers who had given 17. Nor, in my view, does such a condition the undertaking, but also to those who had infringe any other general principle of taken over the holding by inheritance or Community law. It is true that the similar transaction: see paragraph 23 of the restriction does treat recipients of special judgment. T h e rationale of the decision, in quota differently, in that they are subject to my view, is that in such a case, a producer's a limitation not imposed on other quota farming activities can be said to be holders. It seems to me however that this is continued by his or her successor, the a difference of treatment which does not producer accordingly having a legitimate constitute discrimination, since it can be expectation that farming could continue by justified by the different circumstances of that means. Such an expectation does not in the two groups of farmers. Those who were my opinion extend to the transfer of quota returning to production after the expiry of a to a person unconnected with the producer non-marketing undertaking were returning by means of a commercial transaction of at a time when the quota system had been in sale or lease. existence for a number of years, in the
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course of which quotas had become a that it can be said to infringe the principle valuable asset. It is for good reason, of proportionality. therefore, that such farmers were made subject to conditions preventing them from obtaining a purely financial advantage from the allocation of quota. There was no need to impose such conditions at the time quotas 20. In my opinion, therefore, no reason has were first introduced, when quotas had not been found to establish that the provision yet acquired a market value. referred to in the Finanzgericht's second question is invalid. It is therefore necessary to answer the remaining questions.
18. Furthermore, it does not seem to me that the forfeiture rule can be regarded as an unjustified impairment of the right to The third question property. It is true that it constitutes a temporary restriction on the profitable disposal of a farming business. In my view, however, the restriction is one which can be justified by the need to discourage a return 21. The third question, which is divided to production which has the sole purpose of into two parts, is concerned with the augmenting the value of a holding (by distinction between sale or lease, on the one receiving an allocation of quota), as hand, and transfer by inheritance, on the opposed to using the quota to farm. other. It will be remembered that it is only Allowing the transmission of quota in such in the former case that a transfer of the circumstances would have the consequence holding leads to a forfeiture of special of increasing the total pool of quota, to the quota. The object of the question is to prejudice of the Community's goal of determine how that rule applies in various controlling milk production. The only hypothetical situations. interest it would serve, on the other hand, would be that of the individual farmer hoping to make a speculative gain. As the Court pointed out in Case 265/87 Schröder v Hauptzollamt Gronau [1989] ECR 2237, the right to property, although forming part 22. In the main proceedings, Mr von of the general principles of law, is not an Deetzen is in effect seeking advice so as to absolute prerogative, and its exercise may be enable him to make arrangements to retire subject to limited restrictions in the general without forfeiting his quota. I do not think interest which do not impair the very that courts in all of the Member States substance of the right: see paragraph 15 of would consider themselves bound to answer the judgment. hypothetical questions in such circum- stances; but, under Article 177 of the Treaty, this is a matter for the national court. There may of course be circum- stances in which, in the context of a reference under Article 177, the Court will 19. Finally, given that the forfeiture rule decline to answer questions which are applies for a maximum period of three years entirely general or hypothetical: see Case from the allocation of quota, I do not think 244/80 Foglia v Novello [1981] ECR 3045,
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paragraph 18 of the judgment. Such circum- 25. It will be recalled that, by point 3 of the stances are however exceptional, and if the first paragraph of Article 7 of Regulation national court considers that the questions N o 1546/88, the rules for the transmission raised before it require to be answered, the of quota in that paragraph apply 'in other Court will not as a general rule refuse to do cases of transfer which have comparable so. On the other hand, where, as here, legal effects as far as producers are questions are referred on the effect of trans- concerned'. In the case of transfer of the actions whose precise details are unknown, holding 'by inheritance or by any similar it is evident that the Court will be able to transaction', the first paragraph of the new give only general guidelines on the Article 7a applies the same rules to the approach to be adopted by the national transmission of special quota. The second court. paragraph of Article 7a, on the other hand, refers simply to the case 'where the second subparagraph of Article 3a(4) . . . applies'. T h e second paragraph of the new Article 7a does not therefore expressly extend the forfeiture rule to transactions which are (a) The concept of'sale' 'similar' to a sale or a lease. In my view, however, such an extension is implicit in the scheme of the new Article 7a which, like Article 7 of the same regulation, has regard to the effects and not merely the form of the transactions in question. 23. In the first part of the question, the Finanzgericht asks whether the concept of 'sale' in paragraph 4, second subparagraph, of the new Article 3a covers the following transactions: (i) where the holding in question is arranged as a private firm of which the quota holder is a partner, and (ii) where he ceases to be a partner on account of death or for some other reason, and his share accrues to the other members. 26. It might be objected that the forfeiture rule is a restriction on the exercise of a quota holder's property rights, and that express provision would therefore be necessary before the rule could be extended to transactions with 'comparable legal 24. As we have seen, the forfeiture rule can effects' to a sale or a lease. In my view, be justified in terms of the objective of however, it is sufficient that the provisions preventing an undue advantage from in question lend themselves to such an accruing as a result of the allocation of the extended interpretation, having regard to quota. Such an advantage would arise where their wording, context and purpose. That the special quota is obtained in order to would be so even in the case of the impo- enhance the immediate market value of the sition of a penalty: see Case 117/83 holding, rather than in order to resume Kònecke v BALM [1984] E C R 3291, para- production. Conversely, there is no reason graphs 11-16 of the judgment; it is therefore for the quota to be forfeited as a result of a true a fortiori in the case of provisions transaction which is designed solely to which merely restrict the exercise of rights ensure that the quota holder or his heirs can for a limited period. As we have seen, the continue farming. purpose of the provisions is to prevent the
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immediate realization of the market value of of the quota will effectively be realized by a quota. Such a realization could be effected the quota holder; and this will no doubt by transactions with comparable legal generally be the case where the partnership effects to a sale or lease as easily as by sale is a commercial arrangement made between or lease themselves, and any narrower persons dealing at arm's length. A part- construction of the new Article 3a(4) and nership made with prospective heirs, on the the second paragraph of the new Article 7a other hand, may fall outside the definition would consequently defeat the clear of 'sale' or 'lease' by virtue of being a trans- objective of those provisions. action similar to inheritance: see below, paragraphs 32-33.
27. The concepts of 'sale' and 'lease' used in the new Article 3a are therefore to be taken to extend to transactions with 'comparable legal effects' on producers. 29. Similar principles will have to be applied They thus include, not only transactions by the national court in classifying trans- which have the form of a sale or a lease, but actions whereby the original quota holder also other transactions in which an interest ceases to be a partner in a firm. If the trans- in the holding is transferred from the quota action has the object or effect of enabling holder to another party, wherever such the quota holder to realize the value of his transactions are calculated to realize the interest by, for instance, being bought out commercial value of the quota. by the remaining partners, it is clear that it can properly be regarded as a 'sale' for the purposes of the forfeiture rule; although, as we have seen, an operation equivalent to a 'sale' or 'lease' may already have taken place at the time of the formation of the partnership. 28. Whether a transaction is designed solely to promote the continuance of farming by the original quota holder, as opposed to enabling him to realize the market value of the quota, can only be determined by means of an examination of the details of the transaction in question; and that is clearly a task for the national court. Where the trans- action consists in the formation of a part- 30. The Finanzgericht also mentions the nership, the answer to the question will case in which the quota holder ceases to be depend upon the details of the partnership a partner on account of death and his share agreement and its effects in national law. thereby accrues to the other partners. This Thus, the criterion to be applied is whether could, depending upon the circumstances, the formation of the partnership will lead to be more easily seen as 'sale' or as 'in- the exchange of quota, or of the profits heritance'; but the problem is, I think, derived from working the quota, for a share better discussed in the context of the second in other profits or assets. In such circum- part of the Finanzgericht's question (see stances, the commercial value of all or part below, paragraphs 35-36).
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(b) The concept of 'inheritance or... similar within the meaning of 'inheritance transaction' or . . . similar transaction' will depend upon the details of the arrangement in question. There are some transactions which would fall outside the scope of this expression, even if made with a prospective heir: for 31. It will be recalled that the first instance where the holding is sold at full paragraph of the new Article 7a provides market value. Again, it will be for the that, in the event of the transfer of the national court to examine the details of the holding 'by inheritance or by any similar transaction in order to determine which transaction', special quota is transferred in objective it is best calculated to serve. accordance with the usual rules applicable to quotas. Such transactions lead therefore to a transfer rather than to a forfeiture of quota. In the second part of its question, the Finanzgericht asks how the words 'by any similar transaction' are to be construed, and, in particular, whether they cover the 34. In the case of a lease of the holding to a lease of the farm to a statutory heir of the prospective heir, the transaction must again quota holder. not amount to an indirect means of realizing the value of the quota. Furthermore, the object of the transaction must be to allow farming to be taken over by the prospective heir. Thus, a lease to a 32. As in the case of the interpretation of prospective heir which does not terminate the notions of 'sale' and 'lease', it seems to during the lifetime of the quota holder, and me that the guiding principle should be which cannot be sublet or assigned during whether the transaction is one which is that period, could fairly be regarded as calculated to realize the market value of the coming within the meaning of 'inheritance quota, as opposed to assisting the continued or . . . similar transaction' for the purposes farming activity of the original quota of the first paragraph of the new Article 7a. holder. It is clear furthermore that in enacting Articles 7 and 7a of Regulation N o 1546/88, the Community legislator recognized that the quota holder's farming activities can be regarded as being continued by his heirs, who should accordingly be allowed to retain the benefit 35. On the other hand, not every trans- of the quota. mission of an interest consequent upon the death of the quota holder need be regarded as a transaction 'similar' to inheritance. T o return to the question of the transmission of a share in a partnership upon the death of a 33. In principle, therefore, transactions partner (see above, paragraph 30), there are 'similar' to inheritance can include clearly circumstances in which this could be arrangements made with a prospective heir an incident of a purely commercial during the lifetime of the quota holder: see arrangement. In such cases, however, it will Case C-314/89 Rauh, cited above at have to be considered whether a 'sale' took paragraph 14. Once again, however, place at the date of the formation of the whether a particular arrangement comes partnership, or at the date of the quota
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holder's death. Although the latter is the more naturally seen as an operation similar date where the quota holder's interest passes to inheritance, even if the passing of the to the other partners, an examination of the share to the other partners is a matter terms of the bargain made at the former expressly regulated by the partnership date might reveal that an operation equi- agreement, rather than by the will of the valent to a 'sale' had already taken place on quota holder. Again, the true nature of the that earlier occasion. transaction will have to be gathered from the terms of the bargain made at the time of formation of the partnership, and a relevant 36. In contrast, if the partnership is one transaction may be found already to have made with prospective heirs, the trans- taken place at the time the partnership was mission of the interest on death would be formed.
Conclusion
37. I am accordingly of the opinion that the questions referred by the Finanz- gericht should be answered as follows:
(1) Article 3a, paragraph 2, of Council Regulation N o 857/84 of 31 March 1984, as amended by Council Regulation N o 764/89 of 20 March 1989, is invalid in so far as it limits the special reference quantity under that provision to 60% of the quantity of milk delivered or the quantity of milk equivalent sold by the producer during the 12 calendar months preceding the application for the non-marketing or conversion premium.
(2) Examination of the questions referred has not revealed any factor of such a kind as to affect the validity of Article 3a(4), second subparagraph, of Regu- lation N o 857/84 as amended by Regulation N o 764/89.
(3) (a) For the purposes of the second subparagraph of Article 3a(4) of Regu- lation N o 857/84 as amended by Regulation N o 764/89, the concepts of 'sale' or Mease' must be interpreted as including transactions which are designed to realize the value of the quota, as opposed to facilitating the continuation of milk production from the holding by the quota holder or his prospective heirs.
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(b) The words 'transfer of the holding by inheritance or by any similar trans- action' in the first paragraph of Article 7a of Commission Regulation No 1546/88 of 3 June 1988, as amended by Commission Regulation No 1033/89 of 20 April 1989, must be interpreted as including trans- actions between the original quota holder and his prospective heirs which are designed to facilitate the continuation by them of production from the holding, as opposed to realizing the value of the quota.
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