C-118/89

1. The Verwaltungsgericht (Administrative Court) Frankfurt am Main (Federal Republic of Germany) has, by order of 16 March 1990, referred to the Court for a preliminary ruling a question seeking to 3. Regulation N o 2499/82 laid down the ascertain whether the third subparagraph of provisions governing the system of Article 9(2) of Commission Regulation preventive distillation for the 1982/83 wine (EEC) N o 2499/82 of 15 September 1982 t year. The principle underlying that system is valid in so far as it provides for full had been laid down by Council Regulation recovery of aid paid to the distiller in the (EEC) N o 337/79 of 5 February 1979 2 as case where the latter has not, within a amended by Council Regulation (EEC) N o period of 90 days, paid to the wine 2144/82 of 27 July 1982. 3 Those provisions producer the minimum buying-in price as establish a system under which the producer laid down in that regulation. delivers to the distiller, pursuant to contracts between wine producers and distillers which have been approved by the competent inter­ vention agency, the quantity of wine contractually stipulated, in return for 2. This question arose in the context of a payment of a minimum buying-in price as dispute between the undertaking Firma Otto laid down in Article 5 of Regulation N o Lingenfelser (hereinafter referred to as 2499/82. Under Article 9(1) of the regu­ 'Lingenfelser'), a small distillery based in lation, the distiller is to pay that price not Achern-Grossweier, and the Bundesamt für later than 90 days after the wine has entered Ernährung und Forstwirtschaft (Federal the distillery, and is to receive aid from the Office for Food and Forestry), which is the intervention agency, in accordance with the competent intervention agency in the first subparagraph of Article 9(2) of the Federal Republic of Germany for the regulation, within 90 days of submitting purposes of the abovementioned regulation. proof of distillation. Finally, the distiller is In view of the fact that Lingenfelser had required under the third subparagraph of paid to the wine producers' group Article 9(2) to supply the intervention 'Deutsches Weintor' the minimum buying-in agency with proof that he has paid the price for three consignments of wine later minimum buying-in price within 90 days of than 90 days after the date of delivery of actual delivery of the wine; that provision each consignment, the intervention agency also stipulates that, if such proof is not demanded repayment of the aid which it submitted within 120 days of the date of had granted in respect of the three submission of the proof of distillation, 'the consignments in question. The appeal 2 — Regulation on the common organization of the market in * Original language: trench. wine(OJ L 54, 5.3.1979, p. 1). 1 — Regulation laying down provisions concerning prevenūve 3 — Regulation amending Regulation (EEC) N o 337/79 on the distillation for the 1982/83 wine year (OJ L 267, common organization of the market in wine (Oj L 227, 16.9.1982, p. 16). 3.8.1982, p. 1).

amounts paid shall be recovered by the fact, it provides formally for recovery by the intervention agency'. intervention agency of amounts already paid only in the case where the distiller fails, within 120 days of the date of submission of 4. In the present case, Lingenfelser paid the proof of distillation, to supply proof that he minimum buying-in price for the three has paid the minimum buying-in price not consignments of wine 92, 93 and 91 days later than 90 days following delivery of the after the actual delivery of the wine.

the wine. Must we consider a recovery of appears to be the standard practice in this kind to be based by implication on the business transactions within the Federal third subparagraph of Anicie 9(2), cited Republic of Germany, that the period above? The Commission, for its part, started to run from receipt of the producer's pointed out at the hearing that the inter- invoice, rather than from the date of actual vention agency may recover the full amount delivery. of aid if the conditions governing the granting thereof have not been satisfied,

6. The question referred by the Verwal- that traders are more likely to misinterpret tungsgericht concerns the validity of Regu- the provisions if all cases attracting such a lation N o 2499/82 inasmuch as that penalty are not set out. In the context of provides for total forfeiture of aid where rules which are liable to have serious conse- the period of 90 days for payment of quences for traders, I cannot feel that the the minimum buying-in price has been interpretation under which some of those

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them. I, for my pan, would prefer to take for preventive distillation by determining the the view in the present case that the penalty wines to which the scheme may apply and of total forfeiture of aid in the event of the buying-in price below which the price payment after the expiry of the 90-day paid by the distiller may not fall. Under period may be implicity inferred from the paragraph 5 of that article, 'The decision to third subparagraph of Article 9(2) of Regu- carry out the distillation . . . and the detailed lation No 2499/82, which provides for this rules for the application of this article shall penalty where proof is not supplied inside a be adopted in accordance with the specified period that the minimum buying-in procedure laid down in Article 67'.

337/79. The second ground relates to the Commission, and thus that the Commission principle of proportionality. exceeded the enabling powers conferred upon it, on the lack of purpose served by the introduction of the 90-day period. I do not believe that it is possible to enter into a 9. Let me say at the outset that the discussion before the Court on the degree arguments put forward by Lingenfelser of utility of the various periods laid down designed to persuade the Court to regard by Article 9 of Regulation No 2499/82, in the introduction of a maximum period of 90 order to decide whether the Commission days for payment of the minimum buying-in has kept within the scope of the enabling price to the purchaser as an 'over-regu- powers conferred on it by Regulation No lation' not covered by the enabling powers 337/79. Any discussion of this kind would conferred by Regulation No 337/79 have fail to take account of the wide discretion failed to convince me any more than they which, in this instance, has been given to convinced the Commission or the inter- the Commission in a sector which lies at the vention agency. heart of the common agricultural policy. This means that the review of validity which

has to be carried out in such a case clearly form of review to be envisaged in the matter cannot consist in examining the merits of of the Commission's compliance with the each measure. It must be confined to enabling powers conferred on it by the considering the question whether the limits Council, I do not believe that anything has of the discretion conferred o n the been put forward which could call in Commission have clearly been exceeded. I question the validity of the introduction of a do not believe that the Commission, by maximum period within which the producer prescribing a specific period within which must receive payment. the distiller must pay the minimum buying-in price to the producer, has laid down an implementing rule that is 14. It is now necessary to examine the manifestly alien to the system of preventive question whether or not total recovery of distillation, the general framework of which aid paid to the distiller is disproportionate has been fixed by the Council. Viewed in where the latter has failed to pay the the context of a policy of encouraging minimum buying-in price to the producer producers to withdraw their wine from the within the period of 90 days. market and deliver it for distillation, the prescribing of a period within which the producer may be assured of receiving from 15. It may be useful to review the prin- the distiller the minimum price provided for ciples which the case-law of the Court has by Regulation N o 337/79 does not in itself evolved on this question. Thus, in the case appear alien to the objectives pursued. of a penalty such as the non-release of a security because of failure to observe a period for submission of proof, the Court 12. I should add in this regard, and since took the view that it was necessary to the matter is of some relevance to the examine whether such a penalty present case, that the other periods mentioned in Article 9 of Regulation No 2499/82 do not at all appear, on a first 'exceeds what is appropriate and necessary reading, to overlap with the period of 90 to attain the objective sought'. 6 days at issue in this case. The maximum period of 90 days which runs from submission of the proof of distillation and With regard to the non-release of a security within which the intervention agency must on the ground of the trader's failure to pay the aid to the distiller, does not by itself submit proof that certain quantities of butter contain any guarantee as to the period had been processed within the period within which the producer is to receive the prescribed by Community rules, the Court minimum buying-in price. With regard to pointed out that the supervision of the period of 120 days which begins to run compliance with the principle of propor- from the same submission of proof, it is far tionality of a provision of Community law from obvious to me that the guarantees made it necessary which that period might, at first, offer for the producer are equivalent to those provided under a 90-day period which begins to run from the date of delivery of '. . . to establish, in the first place, whether the wine by him. the means it employs to achieve its aim correspond to the importance of the aim

and, in the second place, whether they are may be punished by total forfeiture of the necessary for its achievement'.7 security, without there being any breach of the principle of proportionality, or whether they are secondary obligations whose In its judgment of 24 September 1985 in infringement should not be punished with Man (Sugar) v IBAP, the Court, after the same rigour as is applied to the failure recalling what it had said relating to the to fulfil a principal obligation'.9 need to ascertain whether the means employed 'are appropriate and necessary to attain the objective sought', went on to point out in that regard that 17. The further clarification here, it seems to me, consists in a certain structuring of the distinction between a principal obli- 'where Community legislation makes a gation and a secondary obligation.

16. The Court's judgment of 27 November comply with a secondary obligation and 1986 in Maas v BALM supplied, I believe, with a principal obligation ought not to be some further clarification of the principles punished with equal severity. The Maas thus formulated. The Court there stated judgment appears to imply that breach of a that, in order to answer a question on principal obligation may, in principle, attract compliance with the principle of propor- a specific and heavy penalty, in that case the tionality, in a case where the period laid total forfeiture of a security.

paragraph 36. t — Cuc 181/84 [1985] ECK 2889, at p. 2903, paragraph 20. 9 — Case 21/85 [198«] ECR 3537, at p. 3556, paragraph 15.

18. We can see that, in those cases in Thus, the Court, bearing in mind the fact which the Court has ensured that the that in that case it was not disputed that the penalties for ancillary obligations are not as vessel arrived at the port of destination by severe as those for principal obligations, the the prescribed date, and concluding conse latter penalties more often than not involved quently that 'where the shipment period is total forfeiture. However, to say, as the exceeded by only a short time', forfeiture of Court has done in several judgments, that the security was not justified, provided that the penalty of total forfeiture, provided by a it did not impair 'the proper functioning of regulation in respect of a principal obli the food-aid system', introduced a qualifi gation, is disproportionate if, under the cation to treating, as a matter of principle, same regulation, it is also used to penalize total forfeiture as a proportionate penalty an obligation ancillary to the first, is, in my for breach of principal obligations.

Consequently, if it should be acknowledged, as it has by the Court, that there is still some need for pro 19. The judgment in Maas is itself portionality in cases where principal obli instructive in this regard. While it pointed gations have been breached, might it not be out in that case that the designation as a appropriate to emphasize the formulas used principal obligation could not be questioned in judgments prior to that in Maas? As we with regard to the obligation žo ship goods have seen, the case-law of the Court within a specified period, the Court went on presents two complementary formulas. to state that

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In particular by the desire not to exclude any that regard, the requirement that payment activity from the requirement of pro- be made within periods similar to those portionality, and that in that regard the which are normal in business may be flexibility of the two formulas set out above considered to be vital for the efficient is better suited to furthering that objective operation of the system of preventive distil- than is an excessively close association of lation. the concept of principle obligation with a particular type of penalty.

21. In order to verify in the present case in a way, that the most trifling failure to whether the principle of proportionality has observe the time-limit, even by one single been respected, it is first of all necessary to day, would result in the wine's not being define the objectives in furtherance of which paid for, in the context of preventive distil- the obligation at issue was laid down. As lation, under conditions comparable to this concerns the period of 90 days, it must those existing in normal business practice be examined in the light of the 11th recital and that the slightest tolerance in this in the preamble to Regulation No 2499/82, regard would dissuade producers from which states that ' . . . provision should be selling to distillers.

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OPINION OF MR DARMON —CASE C-118/89

23. Thus, although we must always bear in been distilled which differs from that mind the margin of discretion which the stipulated in the contract. It is provided that Commission has in laying down detailed the intervention agency is to pay the aid for legal rules for the common organization of the quantity of wine actually distilled, on the markets, it appears open to question condition that the difference between such even at first sight whether the penalty of quantity and the quantity contractually total forfeiture of the aid is absolutely provided for remains within a margin of necessary, where the prescribed period has 10%. Reasoning a contrario, we must been exceeded by a few days, in order to assume that if the difference exceeds 10%, ensure the efficient operation of the system the aid is no longer paid at all. It is perfectly of preventive distillation, and, under that understandable that the Community rules system, payment of the price to the should take account of circumstances producer under conditions comparable to outside the control of the operators in those in the trade. question which may lead to a reduction in the quantity of wine actually distilled. However, it is necessary to point out that,

None the the system, it is not at all obvious that a less, the primary objective of the system of reduction of aid according to the amount of preventive distillation remains the with- time by which the period has been exceeded drawal of wine from the market. The would not have made it possible to give the various arrangements laid down in Regu- desired guarantee. Under the system estab- lation No 2499/82 are intended to serve lished by Regulation N o 2499/82, it is the that objective. The Commission, however, certainty that aid will be paid which enables has taken the view that a quantitative the distiller to pay the minimum buying-in variation of not more than 10%, without price to the producer. The Agent of the verification of its causes, is compatible with Commission laid particular stress on this partial payment of the aid, whereas total point at the hearing. Thus, any reduction in forfeiture of the aid is the penalty attaching the amount of aid is likely to affect the to payment made, by no matter how short a profit which the distiller expects to make time, outside a period which relates, not to from the transaction. In those circum- the primary objective of the system of

preventive distillation, but rather to one ot disregard of the decided case-law to which the obligations which contribute towards the the Commission has referred. The third attainment of that objective. subparagraph of Article 9(2) is doubly pertinent in this respect, since it provides expressly for the total forfeiture of aid where proof that an ancillary obligation has 26. That leads me to think that if it is been carried out is not submitted within a possible, according to the Commission, to specified period, and implicitly prescribes accept that aid should be paid pro- the same penalty for the case in which the portionately in the case of a reduction in the obligation itself has not been carried out. quantity distilled of up to 10%, without the On a final note, I would point out that the fundamental objectives of the programme of question whether the system established by preventive distillation being thereby Regulation No 2499/82 is designed to endangered, it is difficult to accept that a prevent the distiller from receiving aid system entailing total forfeiture of aid for before he has paid the minimum price to the exceeding to the slightest extent the period producer, or whether, on the contrary, it is allowed to the distiller for making payment designed to allow him to receive that aid, is is absolutely indispensable for the purpose still, in the light of the documents relating of safeguarding those fundamental to the case and of the explanations objectives. In my view, it is not important to presented at the hearing, far from being consider whether human error in the form clarified. Both these possibilities can arise of lack of attention is less excusable than under the regulation depending on the chemical processes such as evaporation, as financial position and the good intentions of the Commission has suggested. What must the intervention agency.

27. To conclude my Opinion, I would like the Commission to determine the length of to make one final comment on the internal that period, it has not been shown that consistency of Regulation No 2499/82. It is exceeding the prescribed period, by no hard not to feel confused when confronted matter how short a time, adversely affected with this peculiar mixture of penalties the essential objectives of the system in such expressly prescribed and penalties which a way that it had to be penalized, in every have to be implied, and with the juxtapo- instance, by total forfeiture of the aid.

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OPINION OF MR DARMON — CASE C-l 18/89

29. I shall now conclude by proposing that the Court should rule as follows:

'The third subparagraph of Article 9(2) of Regulation (EEC) No 2499/82 is invalid in so far as it penalizes with total forfeiture of aid any failure to comply with the period prescribed for payment by the distiller of the minimum buying-in price to the producer.'

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