C-90/90

OPINION OF MR D A R M O N — J O I N E D CASES C-90/90 A N D C-91/90

O P I N I O N OF M R A D V O C A T E GENERAL D A R M O N delivered on 2 May 1991 *

Mr President, specific reference quantity to certain Members of the Court, categories of producers who, in view of their special circumstances, would be penalized by the criterion of reference to production in 1981: young farmers, 1. The market in milk is governed by producers who have adopted devel- complex rules aimed in particular at opment plans or those whose production controlling the significant structural has been significantly affected by an surpluses in production while taking into exceptional event occurring before or account the individual circumstances of during the reference year. certain categories of producers.

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NEU AND OTHERS

5. Thirteen milk producers established in the Grand Duchy decided to supply to the agricultural association Procola the milk which they had hitherto sold to its 2. Under formula B, where a purchaser competitor, Luxlait. By decisions of 22 replaces, wholly or in part, one or more February 1988 the Secretary of State purchasers, his annual reference quantity refused to transfer in full to Procola the shall be established: basic reference quantity of those producers' milk deliveries and the additional individual reference quantity of eleven of them.

— for the end of the current 12-month period, by taking into account all or part of the reference quantities on a pro rata 6. Those decisions were the subject of basis of the time still to run; proceedings before the Conseil d'Etat of the Grand Duchy of Luxembourg, which has asked the Court two questions aimed essen- tially at ascertaining: — for the following period of 12 months, by adopting all or part of the reference quantities of the purchaser or purchasers whom he replaces. — first, whether Article 7(3) applies 'when a producer changes his purchaser';

3. Member States may provide that part of the quantities concerned shall be added to the reserve referred to in Anicie 5 or to that — secondly, whether, in those circum- in Article 6(3), as the case may be. stances, an irreversible transfer to the national reserve of 1 0 % of the quota in question is contrary both to Articles 39 and 110 of the EEC Treaty and to the t principle of freedom to choose whom to do business with.

producer, who, on the expiry of a contract 11. Furthermore, as both the Luxembourg between himself and a dairy, decides to government and the Commission point out, change purchaser. :he applicability of Article 7(3) to the situ- ations envisaged by paragraph 2 is expressly mentioned by Article 6 of Commission Regulation (EEC) N o 1371/84 of 16 May 1984, 3 which provides that 8. First of all, I wish to consider two arguments based on the wording of the provisions in question. 'where formula B is applied, purchasers' reference quantities shall be adjusted to take account of: 9. On 31 March 1984, at the same time as Regulation (EEC) N o 856/84 inserted in Regulation (EEC) N o 804/68 Article 5C introducing the additional levy and laying down formulas A and B, the Council incor- porated the first version of Article 7 in Regulation N o 857/84, which was adopted for the application of that levy. That d) replacements as referred to in Article provision consisted of two paragraphs, also 7(2) of Regulation (EEC) N o 857/84, dealing with a situation 'where an under- including changes by producers from one taking is sold, leased or transferred by in- purchaser to another.4 heritance', and with a situation where a purchaser, 'under formula B . . . replaces, wholly or in part, one or more purchasers'. Those two paragraphs were followed, 12. The Court has already drawn certain initially, not by a paragraph 3 but by a final conclusions based on those provisions in its subparagraph worded as follows: 'Member case-law. In that regard, the Commission States may provide that a part of the quan- emphasizes the relevance of the Court's tities be added to the reserve referred to in judgment in Klensch,5 which lays down that Article 5.' The argument that the final provision did not apply to the situation envisaged in paragraph 2 is untenable. 'Article 7(2) of Regulation N o 857/84 in conjunction with Article 6(l)(d) of Commission Regulation (EEC) N o 1371/84 10. Article 7 was amended by Regulation of 16 May 1984 laying down detailed rules No 590/85. T h e sixth recital in the for the application of the additional levy preamble to that regulation justifies that referred to in Article 5c of Regulation amendment by referring to the situation of (EEC) No 804/68 . . . provides that, under certain lessees whose lease is due to expire formula B, the purchaser's reference and to that of certain producers who are quantity is to be adjusted, inter alia, in affected because their land is transferred to order to take account of changes by public authorities or for purposes of public use. There is no question here of excluding 3 — OJ 1984 L 132, p. 11. The provisions of that regulation, a producer who changes purchaser from the on this point, were fully incorporated in Regulation (EEC) No 1546/88 of 3 June 1988 (OJ 1988 L 139, p. 12). scope of the adjustment of quotas for the 4 — Emphasis added. benefit of the national reserve. 5 — Joined Cases 201/85 and 202/85 [1986] ECR 3477.

14. The irreversible nature of that allo- cation is in keeping with the rationale behind Article 7(3), as I have interpreted it. 17. Article 39 is relied upon in so far as its The national reserve is designed to mitigate aim is to ensure a fair standard of living for the rigidity of the system of milk quotas, so farmers. However, it cannot be interpreted that the situation of certain special as aiming to perpetuate certain existing situ- categories of producers can be taken into ations to the detriment of a dynamic agri- account. Is it conceivable that the specific cultural policy. Producers are not compelled reference quantities allocated to them from to change purchasers. If they do so, it is the national reserve can be withdrawn from because they expect to gain by it, which, such producers, for example young farmers from the viewpoint of the objectives pursued setting up after 31 December 1980, 7 solely by the common agricultural policy and the in order for the original quotas of the wide discretion which the Community farmers concerned to be restored? Most institutions enjoy in that sphere, 8 may place certainly not since, contrary to the ratio them under an obligation with regard to legis, that would be to jeopardize the other producers whose situation calls for viability of their holdings. Nor, as the support. The Commission very rightly points Luxembourg Government points out, do the out that Article 7(3) pursues an objective of relevant Community regulations impose any reallocation in favour of priority producers. temporal restriction on the transfer to the Besides, those producers are also affected by national reserve of a part of the reference Article 39(l)(b) of the EEC Treaty. quantity. 8 — Judgment in Joined Cases 279/84, 280/84, 285/84 and 286/B4 Rax v Commission [1987] ECR 1069, paragraph 6 — Parigraph 19. 14; judgment in Case C-359/89 SAFA [1991] ECR 1-1677, 7 — Article 3(2) of Regulation No 857/84. paragraph 16.

Accordingly, that provision, which cannot thereunder. Consequently, the right to be interpreted as an obstacle to the irre- property and the freedom to pursue a trade versible nature of the adjustment of the or profession may be restricted, particularly reference quantities complained of, does not in the context of a common organization of affect the validity of Article 7 of Regulation the market, provided that those restrictions N o 857/84. in fact correspond to objectives of general interest pursued by the Community and that they do not constitute a disproportionate and intolerable interference which infringes upon the very substance of the rights guaranteed'. " 18. For the same reasons, the validity of that article does not appear to be vitiated by the principle of freedom to choose whom to do business with. That principle, so formulated, does not appear in the Court's case-law. 9 It is doubtless just one manifes- 20. As I have just emphasized, the possi- tation of the principle of freedom to pursue bility of allocating to the national reserve a a trade or profession, which forms part of part of the previous reference quantity, and the general principles of Community law. 10 of doing so permanently, is designed to While the choice of trader is not prejudiced correct the harmful consequences that a by Article 7(3) of Regulation N o 857/84, rigid application of the system of milk the actual freedom to change contractors, quotas would inevitably produce with which is one of the conditions necessary for regard to certain categories of milk freedom of economic activity, is restricted producers, who are themselves equally by that provision. It would seem, however, entitled to rely on the benefit of both Article that such a restriction can be justified. 39 of the EEC Treaty and the principle of freedom to pursue an economic activity. Such a possibility is not a 'disproportionate and intolerable interference' which encroaches upon the 'very substance of the rights guaranteed'. In its judgment in 19. Let me point out that, as the Court has Eridania, n where the introduction of basic already held in its judgment in Schroder, quotas for sugar was criticized in the light of the same principle, the Court stated that

tuting an infringement of a fundamental 24. There is not doubt that the second point right'. ' 3 is more delicate. It cannot be ruled out that the fixing of a significant threshold may seriously hinder the freedom to pursue the economic activity in question. It is thus for the national legislature, when it decides to 21. Although the very principle of allo- make use of the possibility given to it by cating to the national reserve a part of the Article 7 of Regulation N o 857/84, to previous reference quantity would thus comply with both the abovementioned appear to be beyond criticism, that partial principle and those to be deduced from reallocation of the quotas within the Articles 39 and 40 (3) of the EEC Treaty. ' 5 guaranteed quantity of each of the Member The restrictions imposed on those principles States by means of the national reserve does must therefore not exceed what is strictly not substantially jeopardize, over and above necessary to achieve the objectives pursued. the requirements of due solidarity through reallocation, the normal development of milk-producing units. It is here that the problem arises of the assessment of the 10% threshold provided for not in the relevant Community regulations but in the national 25. The question whether the establishment measure. of a 10% threshold complies with the principle of proportionality comes within the jurisdiction of the national court. The structure of the market in question must be examined. If that market is characterized by very strong competition between different 22. In fixing such a threshold, national rules dairies, the advantages which a milk must, first and foremost, in accordance with producer might obtain by changing the requirements of Article 40(3) of the purchaser should not be seriously EEC Treaty and, more generally, by virtue jeopardized by the allocation of a significant of the general principle of equality which is part of his quota to the national reserve. one of the fundamental principles of The national court, which is in a position to Community law, exclude any discrimination carry out that economic analysis, must take between p r o d u c e r s . u They must also into consideration the number of dairies comply with the principle of proportionality. operating on the market, including those established in other Member States, and the degree of competition on that market; above all, it must weigh up the size of the adjustment of the reference quantities 23. There is little to say on the first point. imposed by the national legislation against Domestic rules such as those at issue in this the advantages which a change of purchaser case, provided they apply to every change of would bring to a producer, in order to purchaser, without reference to the identity ascertain whether the percentage deducted of the producers or the dairies concerned, has an appreciable effect on the conditions and provided they are actually applied in of competition between the various dairies. that way, would not appear to lead to The national court must also examine discrimination between producers. whether the allocation of a p a n of the

(2) An examination of the aforesaid provision has disclosed no factor of such a kind as to call in question its validity.

(3) It is for the national court to ascertain whether, in exercising the powers conferred upon the Member States by Article 7(3), national rules comply with the principle of non-discrimination laid down in the second subparagraph of Article 40(3) of the E E C Treaty and the principle of proportionality; in that regard it is for the national court to take into consideration the number of purchasers operating on the market in question, including those established in other Member States, and competition between them, to weigh up the advantage for the producer in resorting to a change of purchaser against the drawback resulting from the adjustment of the reference quantity, and finally to consider whether or not that adjustment applies to successive replacements of purchasers, no matter how long the period over which they may occur.'

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