C-121/90

3. Member States may provide that part of the quantities concerned shall be added to the reserve referred to in Article 5 or that referred to in Article 6(3), as the case may be. 2. The Kantongerecht's questions concern, in particular, the interpretation of Article 7 of Commission Regulation No 1546/88 of 3 June 1988 (Official Journal 1988 L 139, p. 12), laying down detailed rules for the application of the additional levy. That regulation implemented Council Regulation No 857/84 of 31 March 1984 (Official Journal 1984 L 90, p. 13), which laid down general rules for the application of the levy. Article 7 of Regulation No 1546/88 4. In the case of rural leases due to expire, implements, in particular, Article 7 of Regu­ where the lessee is not entitled to an lation No 857/84, which provides for the extension of the lease on similar terms, transfer of quota in various circumstances. Member States may provide that all or part of the reference quantity corresponding to the holding or the part thereof which forms the subject of the lease shall be put at the disposal of the departing lessee if he intends to continue milk production. 3. Thus, Article 7 of Regulation No 857/84, as amended by Council Regulation No 590/85 of 26 February 1985 (Official Journal 1985 L 68, p. 1; corrigendum L 81, …' p. 41), provides that:

* Original language: English.

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4. The first paragraph of Article 7 of Regu­ have comparable legal effects as far as lation No 1546/88 provides that: producers are concerned.

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OPINION OF MR JACOBS — CASE C-121/90

begun dairy farming on the parcel which understood as including criteria based has reverted to him. The plaintiff has on verifiable factual circumstances, such therefore asked the Kantongerecht to as the existence of buildings, land, declare, in substance, that he is entitled to labour, machines or such like? have transferred to him the quota applicable to that parcel of land.

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10. It is to be noted that the formulation of particularly addressed by the United the first question assumes that no 'other Kingdom Government both in its written objective criteria' have been laid down in observations and in its oral submissions. the Netherlands for the purposes of point 2 of the transfer rules; and in its written observations, the Netherlands Government did state that no such criteria had been laid down. On the other hand, it appears that the relevant national legislation permits the parties themselves to determine by agreement the amount of quota transferred 12. According to the written observations of on the termination of a lease, at least within the United Kingdom, in applying the basic certain limits. The Commission expressed rule, account should be taken of the fact the view that such a system might amount that some areas of the holding may have to the laying down of 'other objective contributed more significantly to milk criteria', or might at least be consistent with production than others. Thus, the rule the opportunity afforded to Member States should be interpreted as permitting (but, in to lay down such criteria. In the present the United Kingdom's view, not necessarily case, however, it seems that no such as requiring) an apportionment of quota agreement has been reached. Thus, although which takes into account the fact that the I shall return later to the question of what part of the holding transferred may role the agreement of the parties can be contribute to a disproportionate extent allowed to play in the division of quota (see (whether disproportionately greater or below at paragraphs 25-27), for the present disproportionately less) to the total amount purposes it is safe to assume that there are of milk produced from the holding. It seems no 'other objective criteria' which are therefore that the United Kingdom would relevant to the division. interpret the basic rule as permitting, but not requiring, a distribution criterion expressed in terms of milk yield rather than surface area.

14. At the hearing, the United Kingdom construction to the basic rule, when appeared to go further, and argue not only Member States already enjoy the option of that the basic rule should be capable of laying down 'other objective criteria' in the being applied in such a way as to take milk light of national conditions and experience. yield into account, but that it must be so A Member State which considers that a applied. Only such an interpretation, it was strict division according to surface area said, would serve the policy of the legis­ would fail to do justice in a sufficient lation, which is to determine how much of number of cases is free to devise a more the quota is properly to be attributed to the elaborate criterion. It seems to me that the land which is transferred. Although the Community legislator intended to give the English version of the provision uses the Member States that freedom, without words 'in proportion to the areas used', however requiring them to adopt a more which might appear to suggest an approach complex criterion. it is therefore strictly related to surface area, it was argued unnecessary for a Member State to argue, as that the expression 'in proportion to' was the United Kingdom apparently wishes to misleading, and that other language versions do, that in providing for milk yield to be express a less stringent rule. The Dutch taken into account it has done nothing more version, in particular, uses the phrase 'op than implement the basic rule. basis van', which could be read as meaning 'according to' or 'on the basis of', rather than 'in proportion to'.

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departs from the territorial criterion which definitively. The possibility of participating is laid down by the basic rule; the solution in such a compensation scheme is of to the problem raised by the United particular importance to a lessee who loses Kingdom lieswith the national legislature, possession of his entire holding on expiry of which is free to lay down a criterion the lease, as was the case in Wacbauf. In a expressed in terms of milk yield if it sees fit. case such as the present one, however, in which part only of the holding has been lost, it might be thought that the option of receiving compensation for a complete cessation of milk production is a less satis­ factory means of protecting the rights of lessors who wish to continue dairy farming. 17. As we have already seen, the Kantongerecht's first question assumes that no such 'other objective criteria' have been laid down by the Netherlands. Given that, as I have argued, the basic rule is to be interpreted as leading to a transfer of quota strictly according to the areas used for milk production, the question arises whether an application of that rule in the present circumstances would be consistent with the 19. It appears furthermore that the Court's judgment in Case 5/88 Wacbauf Kantongerecht is concerned whether satis­ (cited above in paragraph 5). The factory protection can be given under the Kantongerecht's doubts appear to be basic rule to the rights of the departing prompted by the following considerations. lessees, given, in particular, their investment in buildings, machinery and livestock.

its judgment, however, the Court stated a the relevant provisions of Article 7 of Regu­ more general principle: lation No 1546/88. Thus, where part only of a holding reverts to the lessor, and no other objective criteria for the transfer of quota have been laid down by the Member State, quota is to be transferred in proportion to the areas used for milk '. . . it must be observed that Community production (subject to the Member State's rules which, upon the expiry of the lease, right to add part of the quantities concerned had the effect of depriving the lessee, to the reserve). Where all the land without compensation, of the fruits of his concerned is used for milk production, the labour and of his investments in the amount of quota transferred will be a tenanted holding would be incompatible proportion of the total quota equal to the with the requirements of the protection of proportion which the area of land trans­ fundamental rights in the Community legal ferred bears to the total area of the holding. order. Since those requirements are also Where part only of the land is so used, the binding on the Member States when they relevant proportion will be that which the implement Community rules, the Member part of the area transferred used for milk States must, as far as possible, apply those production bears to the part of the total rules in accordance with those area so used. It will then be for the national requirements.' court to determine what amount of compensation for loss of quota is appro­ priate in all the circumstances.

paragraph 19 of the judgment, cited above entire discretion, the amount of quota in paragraph 20. Other forms of compen­ which is to be transferred. It is one thing to sation are however in my view a matter for permit Member States to lay down 'other national law alone. Community law is objective criteria' for the division of quota, concerned with the allocation of quota and but quite another to allow Member States to the possible requirement of compensation leave the matter to the discretion of the for loss of quota, but not with compensation parties. That would be contrary both to the for other forms of loss or unjust enrichment. terms of the legislation, and especially to the notion of Objective criteria', and contrary also to what must be assumed to be the purpose of the legislation, namely to avoid manipulation of the quota system and to 24. Although, strictly speaking, the answer prevent trading in quotas. given above would be sufficient to dispose of the Kantongerecht's first question, various related issues were touched upon in the written observations and in argument before the Court, and it may be useful to comment on them. 27. Accordingly, while it may well be natural for the parties in the first instance to seek to reach agreement on the amount of quota to be transferred, any such agreement 25. In the first place, it appears from the must be based on the criterion laid down by written observations of the Netherlands the Community legislation or on such other Government that the legislation in force in criteria as have been laid down by Member the Netherlands allows the parties them­ States. Moreover, Member States must, in selves to determine by agreement the my view, take appropriate measures to amount of quota to be transferred on the ensure that such agreements are consistent termination of a lease of part of a larger with those criteria. If Member States do not holding. It seems that it is only in the take such measures, then it is impossible to absence of such an agreement that the see how the requirements of the Community national court will impose a solution in legislation can be satisfied. Such measures terms of the areas used for milk production, might also include the scrutiny of the terms with financial compensation paid to the of compensation agreed, in order to ensure departing lessee in appropriate circum­ that such agreements do not amount to a stances. Both the Netherlands Government disguised form of trading in quotas. and the Commission appear to regard such a system as consistent with the transfer rules.

to lay down in advance the criteria which the parties or to the discretion of the must be taken into account by the national national court. courts, just as it is for the Member State to decide, by choosing whether to implement Article 7(4) of Regulation No 857/84, whether the national courts should allow 30. As I have already suggested, the answer the departing lessee to keep all or part of to be given to such a question is that the the quota. criteria must be binding on the parties, rather than modifiable by agreement, and must be laid down in advance in the form of rules to be applied by the national court, The second question rather than left to its discretion in each indi­ vidual case. As the United Kingdom suggests, 'objective criteria' can be understood as including any verifiable 29. As we have seen, neither the Nether­ criteria relating to the objective properties lands Government nor the Kantongerecht of the holding and the farming activities suggests that the Netherlands has made use carried out thereon. I would add however of the option of laying down 'other that the criteria must be appropriate to the objective criteria'. The second question can object of achieving an equitable division of however be understood as asking whether quota. Clearly, such criteria could include such criteria have been laid down in circum­ those designed to ensure that the amount of stances where, under national law, the quota transferred reflects the contribution division of quota is left to the agreement of of the area in question to milk production.

(2) The objective criteria which the Member States are permitted to lay down pursuant to point 2 of the first paragraph of Article 7 of Regulation No 1546/88, must be understood as including any verifiable criteria which relate to the objective properties of the holding and the farming activities carried out thereon, and which are appropriate to the object of achieving an equitable division of the quota. Such criteria must take the form of binding rules laid down in advance by law, regulation or administrative provision.

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