C-199/90

However, if the proofs referred to in the first subparagraph are provided after the 2. During 1983/84 wine-growing season, deadline set in that subparagraph but before the distilleries were able to obtain an 1 February 1985, the amount to be released advance on this Community aid, provided shall be 8 0 % of the security, the difference that they furnished security. The general being forfeit. provisions governing this advance were laid down in Council Regulation (EEC) No 2179/83 of 25 July 1983, 2 Article 9 of If these proofs are not provided before which provides that a distiller may 'request 1 February 1985, the entire security shall be that an amount equal to the lesser sum of forfeit.' distillation aid fixed for the distillation operation in question in accordance with Article 8 (should) be advanced to him on 4. Since many distilleries were unable to condition that he has lodged for the benefit fulfil the requirements within the time-limits of the intervention agency security equal to laid down, the latter two time-limits were 110% of the aid,'y and the security is not extended by two months, to 31 December released unless proof is submitted within 1984 and 1 April 1985 respectively, by periods to be laid down that all the wine has Commission Regulation (EEC) N o 3501/83 of 12 December 1983. 5 * Original language: French. 1 — On the common organization of the market in wine (OJ 4 — Regulation of 22 August 1983 laying down, for the L 54, p. 1). 1983/84 wine-growing year, detailed implementing rules 2 — Laying down general rules for distillation operations concerning the distillation provided for in Article 11 of involving wine and the by-products of wine-making (OJ Regulation (EEC) N o 337/79 (OJ L 232, p. 5). L 212, p. 1). 5 — Regulation amending Regulation (EEC) N o 2373/83 (OJ 3 — My emphasis. L 350, p. 5).

10. Article 7(3) of Council Regulation 6. Italtrade submitted the documents No 2179/83 provides that ' . . . the measures proving payment of the price to the to be taken in the event of default on the producer to the AIMA two days late, on payment of the minimum buying-in price or 2 April 1985, in respect of a proportion of of lack of proof oí payment thereof shall be the contracts representing about 28 000 adopted under the implementing rules'. 7 hectolitres of wine. In view of the delay the AIMA retained the entire amount of the security relating to the contracts in question, in accordance with the third paragraph of 11. With regard specifically to the question Article 8(2) of Regulation No 2373/83. of advances, Article 9(2) of the same regu- lation provides that the security furnished by the distiller must not be released unless he submits proof of payment of the price to the producer and of completion of the distil- 7. In the context of proceedings instituted lation operations within periods to be by Italtrade to obtain the repayment of the determined. security 6 the Tribunale Civile, Rome, has asked the Court, first, whether the forfeiture of the entire security entails the loss of the right to apply for the aid (first 12. Having been expressly authorized to question), and secondly whether the penalty prescribe penalties for failure to submit laid down in Article 8 of Regulation proof, the Commission was necessarily N o 2373/83 is compatible with the empowered to prescribe penalties for delay principle of proportionality (second and in the submission of proof, since such delay third questions). constitutes failure to provide proof before the expiry of the period laid down for this purpose.

17. Quite naturally, the advance provisions require the constitution of security 'to ensure that the intervention agency is not exposed to unjustified risks'. n 15. D o the provisions of Article 8(2) of Regulation N o 2373/83 merely create a penalty which may involve the forfeiture of the entire security or do they also entail the loss of their right to aid? That is, in essence, the first question posed by the Italian court. 18. The security is therefore inherent in the advance and is merely part of the procedure of prefinancing. Thus, it is stated in the ninth recital in the preamble to Regulation No 2373/83 that 'provision should be made 16. An initial distinction must be drawn. for the minimum price guaranteed to Firstly, Regulations Nos 2179/83 and producers to be paid to them, as a general 2373/83 determine the conditions for enti- rule, within a period which will enable them tlement to the subsidy: the distiller must to obtain a profit comparable to that which adduce proof of the distillation, and the aid they would have obtained from a is paid within three months of submission of commercial sale; . . . in these circumstances, such proof. 8 Proof oí payment of the price it is essential to pay the aids due to them for to the producer must be submitted within the distillation in question at the earliest four months of submission of proof of opportunity, while guaranteeing that opera- distillation; if the distiller fails to do so, the tions are correctly carried out by means of an aid is lost partly or entirely, depending on appropriate system of security'. u the length of the delay in the presentation of proof. 9 I should call these the aid provisions. Secondly, the distiller may obtain an advance equal to the lowest amount of the aid, the only condition being that he must furnish security. I0 Both proof of distil- 19. Consequently, the sole purpose of the lation and proof of payment to the producer security is to ensure repayment of the had to be submitted before 31 December advance if it subsequently emerges that the 1984. The penalty for submission of proof aid was not payable.

20. The advance and the aid are therefore for the aid, but that the aid cannot be governed by different provisions with regard requested after the expiry of the periods laid to proof. However, no provision expressly down in Article 7(2) of that regulation, as excludes a recipient of an advance who has amended. suffered the penalty of complete loss of the security from the benefit of the aid. Never- theless, mere failure to observe time-limits may deprive him of access to it. 24. Both the second and the third questions require the Court to verify the compatibility of Article 8(2) of Regulation No 2373/83 with the principle of proportionality. I shall examine them together and suggest a single 21. In fact, distillation could not have taken reply. place after 31 August 1984, M since the producer had to be paid within three months of entry into the distillery, that is to say, by 30 November 1984. Proof of this payment of the price to the producer had to 25. It should be observed that in be submitted within four months of proof of accordance with the provisions of Council distillation and in any event by 28 February Regulation No 2179/83, the twentieth 1985. ' 5 Thereafter, the entire aid was recital in the preamble to which states that recovered by the intervention agency.16 This 'it is . . . advisable to make proportional is expressly provided by Article 7(2) of allowance for distillers who, although they Regulation N o 2373/83, as amended by have met their principal obligations, are late Regulation N o 3501/83. in furnishing proof thereof', Article 8(2) of Commission Regulation No 2373/83 provides that in the event of delay not exceeding three months in submitting proof of payment to the producers, only 20% of the security is forfeit, whereas the entire 22. Consequently, a recipient of an advance amount is lost in the event of longer delay. who furnished the proofs required after 28 February 1985 lost the security (or at least part of it) and was precluded from applying for aid. It should be remembered that Italtrade did not furnish proof of 26. Correspondingly, a distiller who has not payment to the producer until 2 April 1985. used the mechanism of the advance with security and has received aid loses 20% or 100% of it, depending on the length of the delay in presenting proof of payment to the producer. 1 7 23. I therefore suggest that the answer to the first question should be that forfeiture of the security as mentioned in Article 8(2) of Regulation N o 2373/83, as amended, does 27. The Court has held that with regard to not per se entail the loss of the right to apply a penalty such as forfeiture of the security for failure to observe a time-limit for the 14 — Anicie 3 of Regulation N o 2373/83, as amended. 15 — Article 7(2) of Regulation No 2373/83, as amended by submission of proof, it must be determined Anicie 1(2), first indent, of Regulation N o 3501/83. 16 — Ibidem. 17 — Anicie 7(2) of Regulation N o 2373/83.

28. The Court considered this question in Fromançais SA v FORMA (the intervention 29. Its approach has been the same with agency). 19 In order to reduce the surplus of regard to export refunds. Thus in Man butter, Regulation (EEC) No 1259/72 (Sugar)21 the exporters, whose tender for permitted certain processing undertakings in the export of sugar to non-Member States the Community to purchase butter at a had been successful, had furnished security reduced price by means of a tendering in order to obtain export refunds. The procedure. In return for the price reduction penalty for delay in the submission of the successful tenderer undertook to convert applications for export licences was the the butter into particular products. It had to forfeiture of the entire security. Having pay the reduced price and furnish security in found that the only purpose of these respect of the processing, covering the licences was to monitor exports and that difference between the market price of the they did not provide any important new butter and the minimum selling price. Since information, the Court held that: some of the butter purchased by Fromançais had not been converted within the periods allowed, the agency refused to release a portion of the security furnished. The Court held that: 'Although the Commission was entitled, in the interests of sound administration, to impose a time-limit for the submission of applications for export licences, the penalty imposed for failure to comply with that 'In order to establish whether a provision of time-limit should have been significantly less Community law is consonant with the severe for the traders concerned than principle of proportionality, it is necessary forfeiture of the entire security and it should to establish, in the first place, whether the have been more consonant with the practical means it employs to achieve its aim effects of such a failure.' u correspond to the importance of the aim and, in the second place, whether they are necessary for its achievement. 30. In the present case, the objective of setting a mandatory time-limit for submission of proof of distillation and of The provisions which require forfeiture of payment of the price to the producers is the security in full when the processing stated in the twentieth recital in the period is exceeded seek to prevent tenderers preamble to Regulation No 2179/83, according to which '. . . to qualify for the who acquire butter at a reduced price from aid, the parties concerned must lodge an accumulating stocks for speculative application accompanied by a number of purposes.' 20 supporting documents; . . . to ensure that the 18 — Case 122/78 Bmloni [1979] ECR 677, paragraph 16. 19 — Case 66/82 [1983] ECR 395. 21 — Case 181/84 [1985] ECR 2889. 20 — Paragraphs 8 and 9. 22 — Paragraph 30, my emphasis.

system operates uniformly in all Member 3 of Commission Regulation (EEC) States, time-limits for the lodging of No 499/76 2 5 made the loss of the entire applications and for the payment of aid to security furnished to cover the obligation to distillers should be laid down'. 2 3 The reason export the penalty for failure to observe the specified for setting mandatory time-limits time-limits specified for the submission of for the submission of proof of completion of import licences, imposed for the purposes of the operations are therefore good adminis- good administrative management, whereas trative management of the system of the penalty for failure to fulfil the main advances and observance of the principle of obligation to export was merely equal treatment among traders. There is a proportional to such failure. Buitoni had further raison d'être for the time-limits. obtained import licences and had completed During the relevant periods the security is the import operations within the period immobilized in the hands of the guarantor allowed, but had submitted proof late. The and the intervention agency has paid an intervention agency had refused to release advance the justification for which it cannot the security. The Court held that: yet verify and which it cannot recover. If the advance proves to have been unjustified, the intervention agency cannot recover the security until the period for the submission of proof has expired. In order to protect the '. . . that fixed penalty, which is applied to financial interests of the Community it was an infringement which is considerably less therefore necessary to prescribe a reasonable serious than that of failure to fulfil the ob- period for the submission of proof and to ligation which the security itself is intended impose for delay a penalty sufficiently to guarantee, and which is sanctioned by an dissuasive to prevent the distiller from essentially proportionate penalty, must seeking to obtain an advance that he would therefore be held to be excessively severe in be unable to justify or which he would relation to the objective of administrative justify only after excessive delay, in which efficiency in the context of the system of case the security would not cover the import and export licences.' 26 advance and the costs incurred by the Community.

breaching the principle of proportionality, obtain a profit comparable to that which he penalize failure to comply with the would have obtained from a commercial secondary obligation as severely as failure to sale. The fixing of a period within which the comply with a primary obligation.' 27 distiller must pay the buying-in price to the producer is therefore designed to encourage the latter to offer for distillation wines which may adversely affect the high quali- tative level of wines placed on the market. 33. The Court will observe in this respect that Regulation No 2373/83, the validity of certain provisions of which is challenged by Italtrade, prescribes progressive penalties In those circumstances, any period by which solely in the case of failure to fulfil ob- the time-limit for payment is exceeded, ligations with regard to the submission which does not result in the transactions of proof, which the Court regards as being carried out under conditions which secondary obligations. are appreciably different from those of normal commercial transactions, to the extent of discouraging the producer from offering his wine for distillation, cannot be regarded as jeopardizing the very objective 34. However, the Court has reduced the of the distillation scheme.' 29 scope of the distinction originally drawn between main obligations and secondary obligations. In particular, it has held that complete forfeiture (of aid or of a security) It should be observed that in that case the cannot be regarded automatically as an penalty for any delay beyond the period appropriate penalty for failure to fulfil main specified was complete forfeiture of the aid, obligations. Thus in Lingenfelser,1* without any intermediate period during regarding the Commission's regulation which only part of the aid was lost, and governing the preventive distillation of wine therefore there was no element of propor- for the 1982/83 season, it was held that tionality. complete forfeiture of the aid granted to the distiller as a penalty for a small delay in paying the producer, beyond the period of 35. Conversely, in Philipp Brothers, 30 the three months allowed, was disproportionate Court held that complete forfeiture of an in view of the purpose specified, even though export refund received in advance could be it was for the distiller's failure to fulfil his a valid penalty for a breach of a secondary main obligation: obligation. Commission Regulation (EEC) No 2730/79 of 21 November 1979 author- ized the Member States to advance to the exporter all or part of the amount of the 'It must be borne in mind, in this regard, refund upon completion of clearance of the that the purpose of prescribing a period for export through customs, provided that payment by the distiller of the buying-in security was furnished to cover the amount price to the producer is . . . to ensure that of the advance plus 15%. Philipp Brothers the minimum price guaranteed to the had obtained export licences for wheat, producer is paid to him, as a general rule, exported the wheat, furnished security and within a period which will enable him to received advances in respect of the refund.

38. Philipp Brothers could have obtained additional time, beyond the six-month period, in which to prove completion of the customs formalities, by showing that they had acted with all due diligence to obtain the relevant documents within the period prescribed. 33

39. The distillers covered by Regulation No 36. That case has a number of points in 2373/83 have not really benefited from any common with the present case. Both extension of time. In fact, although concern a system of advances in respect of Commission Regulation No 3501/83 Community aid of which the distiller or the postponed the deadlines originally specified exporter is not the sole ultimate beneficiary. for the submission of proof, it also In fact, the advance paid to the distiller postponed the time-limit for distilling. enables him to purchase wine at a price Consequently, all the operations were postponed by two months. 31 — Paragraph 38. 32 — Paragraph 40. 33 — Anide 31 of Regulation 2730/79/EEC.

I-5558

ITALTRADE

40. On the other hand, like all the distillers particularly long period granted to the concerned, Italtrade automatically had a distillers within which to submit proof. Until period of eight months within which to 31 December 1984 a distiller was not present proof, without having to take any exposed to any penalty. Until 1 April 1985 special steps. Regulation No 2373/83 the penalty was only partial forfeiture. It therefore instituted a system more was solely thereafter that the entire security favourable for distillers than that to which was forfeited. Philipp Brothers were subjected, which favoured only exporters who asked for additional time and who had showed diligence.

I - 5559

OPINION OF MR DARMON — CASE C-199/90

own funds. Moreover, advances were a amount to forfeiture of the entire security, voluntary system, the conditions, advantages is not disproportionate to the main objective and constraints of which were known to the envisaged, which is to ensure the satis- distiller and freely accepted by him. factory operation of the specific system of advances, while preserving the principle of 47. I think therefore that the penalty laid equal treatment for traders and protecting down in Article 8(2), even though it may the financial interests of the Community.

48. I therefore suggest that the Court reply as follows:

(1) Forfeiture of the security as laid down in Article 8(2) of Commission Regu- lation (EEC) N o 2373/83 of 22 August 1983, as amended by Article 1(3) of Commission Regulation (EEC) N o 3501/83 of 12 December 1983, does not per se entail the loss of the right to apply for the aid, but the aid cannot be requested after the expiry of the period laid down in Article 7(2) of Regulation N o 2373/83, as amended by Article 1(2) of Regulation No 3501/83.

(2) Consideration of the second and third questions has disclosed no factor capable of affecting the validity of Article 8 of Commission Regulation (EEC) N o 2373/83 of 22 August 1983, as amended by Article 1 of Regulation N o 3501/83.