C-2/92

OPINION OF MR GULMANN — CASE C-2/92

OPINION OF MR ADVOCATE GENERAL GULMANN delivered on 20 April 1993 *

Mr President, directly or indirectly, quotas are fixed (so- Members of the Court, called reference quantities) for milk produc­ tion on the individual holdings and a so-called additional levy is payable if those milk quotas are exceeded. The quotas are fixed on the basis of actual production in a specified reference year. 1. The question referred to this Court for a preliminary ruling by the High Court of Jus­ tice, Queen's Bench Division, in this case stems from the rules on milk quotas intro­ duced by the Community in 1984 in Council Regulations Nos 856/84 and 857/84.»

The milk quota scheme and its implications The scheme entails a very considerable limi­ when a tenancy comes to an end tation of the freedom of action that farmers should ideally enjoy and very large economic interests are at stake. If a holding is not allo­ cated a milk quota, it cannot profitably be used for milk production. A farmer who wishes to set up as a milk producer must 2. There is no need to describe the rules in acquire a holding to which a milk quota detail. They are familiar to the Court from attaches. the many cases to which they have given rise.

The aim of the scheme is to curb the growth of milk production and make possible struc­ tured development taking account of partic­ ular national and regional production condi­ tions. The essence of the scheme is that, 3. Not surprisingly the scheme has given rise to problems in the relationship between ten­ * Original language: Danish. ants and landlords of agricultural holdings. 1 — OJ 1984 L 90, pp. 10 and 13. The Court has already had occasion to rule

4. It is a key principle of the scheme that milk quotas run with the land. Article 7 (1) of Regulation No 857/84 thus provides that: 'Where an undertaking is sold, leased or transferred by inheritance, all or part of the corresponding reference quantity shall be 5. It has transpired in practice that the spe­ transferred to the purchaser, tenant or heir cial rules laid down in Article 4 (1) may also according to procedures to be determined'; be relevant to tenants. Under that provision, the Court has held that that principle also the Member States may, for the purposes of applies in cases where a tenancy has come to the restructuring of milk production, grant an end. 3For the rest, the original rules in compensation to producers undertaking to Regulation No 857/84 do not contain any discontinue milk production definitively. specific provisions for the relationship Under Article 4 (2), the reference quantities between landlords and tenants when the ten­ thus freed are, as necessary, to be added to ancy comes to an end. the national reserve for allocation to other producers in certain special cases. There is no need to expand on the interest that a tenant whose lease is coming to an end may have in 2 — Of primary importance for the present case arc the judg­ ments of the Court of Justice in Case 5/88 Wachauf [1989] seeking compensation for definitively dis­ ECR2609 and Case C-121/90 Posthumus [1991] ECR I-5833, both of which will be discussed later. The other judg­ continuing milk production. It is equally ments on the landlord/tenant relationship are the judgments unnecessary to explain that the landlord's of the Court of Justice in Case C-341/89 Ballmann [1991] ECR 1-25, Case C-177/90 Kiilm [1992] ECR 1-35, and the judgment in Case C-236/90 Maicr [1992] ECR 1-4483. See also the Opinion of Advocate General Lenz in Case C-98/91 Herbrmk (the Court has not yet given its judgment in that case). 4 — Sec the sixth recital in the preamble to Council Regulation 3 — Paragraph 13 of the judgment in Wachauf, cited above in No 590/85 of 26 February 1985 (OJ 1985 L 68, p. 1), and the footnote 2. Corrigendum (OJ 1985 Ĺ 81, p. 41).

6. On the basis of that review alone it can be concluded that the relevant Community rules do not entail any express obligation for the Member States to safeguard a tenant's economic interests in connection with milk 8. In 1962 the plaintiff in the main proceed­ quotas when his tenancy comes to an end. ings, Dennis Bostock, became the tenant of The specific rule in Article 7 (4) is certainly an agricultural holding that had previously expressly directed to resolving the tenant's been leased by his father and grandfather. problems but it does not oblige the Member In 1962 the holding had a herd of 40 cows. States to introduce the rules, which in any Mr Bostock expanded both the production event are of limited scope rendering them facilities and the herd considerably over the unattractive in all cases where a tenancy years and at the end of the tenancy there comes to an end but the tenant does not were 64 cows on the holding. On the intro­ wish to continue milk p-oduction on another duction of the milk quota scheme, he was undertaking. Moreover, the special compen­ allocated a milk quota corresponding to his sation scheme under Article 4 (1) is optional production in the reference year. In 1984, for the Member States and, in any event, it is largely on grounds of ill health, he decided left to them to lay down any detailed imple­ to surrender his tenancy of the holding to menting provisions. the landlord. The surrender took effect on the stipulated date of 25 March 1985 and, under the applicable rules on the matter, a special assessment was made of the parties' financial obligations. According to the infor­ mation before us, compensation for the milk quota was neither demanded nor paid. On the other hand, it is in my view clear that the Community rules do not preclude Mem­ ber States from adopting rules with the aim of protecting the economic interests of ten­ ants in connection with the situation that, when a tenancy comes to an end, the milk quotas remain attached to the undertaking Mr Bostock had considered the matter but that is being left. he and his advisers had discovered that there

10. It was not until after the judgment of the 9. However that legal position was regarded Court of 13 July 1989 in Wachauf that as unsatisfactory. For that reason, by the Mr Bostock became aware that it might be adoption of the Agriculture Act 1986, rules possible to make a claim for compensation were introduced making it possible, when a on the basis of Community law. Mr Bos­ tenancy came to an end, for the tenant to tock's attention focused on the Court's rul­ obtain compensation from the landlord for ing in paragraph 19 of that judgment that: the milk quota. Those rules came into force in September 1986 and sections 13 and 14 together with schedules 1 and 2 laid down detailed rules for the calculation of the com­ pensation. The main principles of those rules are as follows: the right to compensation is conditional on the milk quota having been allocated to the outgoing tenant during the 'Community rules which, upon the expiry of tenancy period; the compensation is calcu­ the lease, had the effect of depriving the les­ lated according to a standard formula on the see, without compensation, of the fruits of basis of a notional division between the ten­ his labour and of his investments in the ten­ ant and the landlord; and in the event that no anted holding would be incompatible with

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the requirements of the protection of funda­ The first question mental rights in the Community legal order. Since those requirements are also binding on the Member States when they implement Community rules, the Member States must, 6 13. The basis for this question is the factual as far as possible, apply those rules in accor­ situation confronting Mr Bostock, that is to dance with those requirements.' say a situation in which the milk quota was allocated during the tenancy and where, at the end of the tenancy, the quota passed to the landlord without compensation, and it is pointed out that the tenant was not in a posi­ tion to avail himself of the schemes referred to in Article 4 (1) and Article 7 (4) of Regu­ lation No 857/84.

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benveen April 1984, when the quota scheme which amended Regulation No 804/68 on came into effect, and September 1986, when the common organization of the market in the Agriculture Act 1986 came into force. It milk and milk products and introduced the is asked specifically whether such an obliga­ provision which is the basis for the milk tion can be inferred from the relevant Com­ quota scheme, Council Regulation munity regulations and/or the general princi­ No 857/84, which contains the basic rules on ples of Community law. the milk quota scheme, and Commission Regulation No 1371/84, which contains rules for the implementation of Regulation No 857/84. Those regulations yield no basis for a finding that Member States are under a duty to provide for the protection of a ten­ ant's economic interests when a tenancy comes to an end. As mentioned above, there 14. Mr Bostock contends in particular that are certain provisions in Regulation under Community law the fundamental No 857/84 which in some circumstances principles are binding on the Member States, could entail protection of a tenant's eco­ that those principles include the prohibition nomic interests but those are provisions of discrimination and respect for property, which the Member States may, but are not that the rules on compensation for milk obliged to, implement. If anything of signif­ quota are covered by Community law, and icance to the answer to the national court's that the Member States are therefore under question can be inferred from the scheme of an obligation to comply with those princi­ the regulation, it must, in my view, be that ples when they lay down national rules on on the contrary it is left to the individual compensation for tenants. According to Member States to decide whether, and if so Mr Bostock, Article 5 of the EEC Treaty to what extent, protection should be imposes a duty upon Member States to afforded to the economic interests of tenants. ensure the full application of Community law and that duty is incumbent both on administrative organs and on the national courts. It also follows from Community law, in Mr Bostock's view, that a legislature is obliged to amend its national legislation if the Court of Justice has held that it is incom­ patible with the Treaty.

'Where there is no agreement between the parties, in the case of rural leases due to I do not consider that those new provisions expire without any possibility of renewal on can be used as a significant aid to interpreta­ similar terms, or in situations involving com­ tion in order to resolve what is the decisive parable legal effects, the reference quantities question in the present case, namely whether available on the holdings in question shall be a positive duty may be derived from the transferred in whole or in part to the pro­ Community law principles on the protection ducers taking them over, in accordance with of fundamental rights for Member States to provisions adopted or to be adopted by the protect the economic interests of tenants Member States, taking account of the legiti­ when a tenancy comes to an end. Such a mate interests of the parties'. duty now follows, it seems, expressly from a regulation adopted by the Council but it cannot be concluded from that that the duty could not already have applied before on the basis of the general principles of Community law for the protection of fundamental rights. A corresponding duty to take account of 'the The new provision may signify that the legitimate interests of the parties' is con­ Council considered that it was necessary to tained in Article 8 of Regulation No 3950/92, lay down expressly such an obligation for which lays down rules corresponding to the Member States but it may also merely those in Article 4 of Regulation No 857/84. signify that the Council considered it appro­ priate to lay down that duty in express terms, even though it was already implicit in the general principles of Community law.

In response to that view, the Court of Jus­ tice, in paragraphs 17 and 18 of its judgment, 18. The Wachauf case concerned a question first referred to its consistent case-law under referred for a preliminary ruling by a Ger­ which fundamental rights form an integral man court. Mr Wachauf had operated an part of the general principles of the law, the agricultural holding as a tenant. The landlord observance of which the Court is to ensure had ended the tenancy. Mr Wachauf there­ and briefly reviewed the content of the rele­ upon applied for compensation for the defin­ vant fundamental rights. In paragraph 19 it itive discontinuance of milk production in stated that: 'Community rules which, upon pursuance of the applicable German rules on the expiry of the lease, had the effect of the matter. The authorities rejected the appli­ depriving the lessee, without compensation, cation because the landlord refused to give of the fruits of his labour and of his invest­ his consent and such consent was, under the ments in the tenanted holding would be German rules, a condition for such an appli­ incompatible with the requirements of the cation to be granted. The German court pro­ protection of fundamental rights in the ceeded on the basis of the fact that at the Community legal order. ... those require­ start of the tenancy the property let had not ments are also binding on the Member States been equipped for milk production and that when they implement Community rules ...'. it was Mr Wachauf who, during his tenancy, In paragraphs 20 and 21 it analysed the scope had laid the basis for milk production on the of Article 7 (4) and Article 4 (1) of Regula­ undertaking. The German court was uncer­ tion No 857/84 and held, in paragraph 22, tain how far the relevant Community rules, that: 'The Community regulations in ques­ under which the milk quota passes to the tion accordingly leave the competent landlord (the milk quota follows the land), national authorities a sufficiently wide mar­ were applicable in such circumstances. The gin of appreciation to enable them to apply Court of Justice held, in answer to the ques­ those rules in a manner consistent with the tions submitted to it, that the general rules of requirements of the protection of fundamen­ the regulation were also applicable in a situ­ tal rights, either by giving the lessee the ation such as that of Mr Wachauf. In its opportunity of keeping all or part of the ref­ order for reference, however, the German erence quantity if he intends to continue court had stated that such a result was unrea­ milk production, or by compensating him if sonable where the landlord had never pro­ he undertakes to abandon such production duced milk nor helped to build up a holding definitively'. It then held in paragraph 23: producing milk since the tenant would 'The submission that the rules in question

The substantive content of the fundamental rights established in the Wachauf case

Those differences signify on the face of it that there was greater concrete need for the protection of Mr Wachauf s interests than there is to protect those of Mr Bostock.

21. It follows from the Wachauf judgment that the Community law principles on the protection of fundamental rights imply that a tenant must be given compensation if, at the end of his tenancy, he is deprived 'of the But those differences cannot be of conclusive fruits of his labour and of his investments in significance as regards the answer to be given the tenanted holding'.

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22. It should be pointed out that the Com­ well be cases where the permanent loss to mission and the United Kingdom submitted the tenant of the use and value of the quota in that case that a milk quota is nothing but a on expiry of a tenancy can be viewed as a mechanism for regulating the market which measure of expropriation' (paragraph 24). cannot be regarded as an intangible asset giv­ ing rise to property rights.

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23. Since the question in this case is whether protect the interests of tenants but it must it follows from the fundamental rights ultimately be the Court of Justice which lays applying in the Community legal order that down the limits on that discretion, a not the Member States are obliged to adopt rules altogether easy task. corresponding to the Agriculture Act 1986, there is also no need in this case to consider further the substantive content of the funda­ mental right established by the Court. It may be presumed that the Agriculture Act 1986 affords tenants protection that complies with the requirements stemming from the funda­ mental right established by the Court. 25. Secondly, it should properly be pointed out that the United Kingdom is right in stat­ ing that the content of the fundamental right established by the Court must not be defined in such a way that there is an obligation to Nor have any doubts been voiced in the introduce a body of rules which precisely present case as to the compatibility with corresponds to those introduced in the Community law of the rules actually United Kingdom. The Member States must adopted. The dispute is only as to whether also, where appropriate, be able to imple­ rules corresponding to those adopted in 1986 ment adequate protection of the economic should also have been adopted for the period interests of tenants by adopting rules which prior to the entry into force of the 1986 cannot be said strictly to correspond to the rules. rules in the Agriculture Act 1986.

The question whether the fundamental 28. In his Opinion in Wachauf, Mr Advo­ rights applying under Community law are cate General Jacobs considered that it is pos­ binding on the Member States in a situation sible to infer from Community law an obli­ such as the present gation for Member States to protect the interests of tenants, even where the Member States have not made use of the possibilities of adopting rules envisaged in Article 4 (1) and Article 7 (4) of Regulation No 857/84. Accordingly, he proposed that the Court give inter alia the following answer to the questions submitted in that case: 'The princi­ ple of respect for the right to property guar­ 26. The key question must therefore be anteed by the Community legal order whether the fundamental premiss for that requires Member States to provide for finan­ argument — namely that under Community cial compensation by the landlord to a tenant law the Member States are under a duty to farmer who, on expiry of the lease of a hold­ protect the interests of tenants — is correct. ing, loses the right to exploit the quota, in a case where, having regard to the particular situation of the tenant farmer, failure to pro­ vide for compensation would result in a breach of that principle' (paragraph 31, point 4). 8

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10 mental rights in the Community legal order. ment of 18 June 1991 in the ERT case the The Court's finding that the fundamental Court held: rights in the Community legal order are 'binding on the Member States when they implement Community rules' was one of the premisses necessary in order for the Court to — first that 'fundamental rights form an reach that result and must presumably integral part of the general principles of merely be construed as referring to the fact law, the observance of which [the Court] that that duty applies when the Member ensures', and States implement rules on the basis of an express enabling provision in Community

question raised in this case. Human Rights has special significance in that respect (see in particular Case 222/84 Johnston v Chief Constable of the Royal Ulster Constabulary [1986] ECR1651, 9 — The judgment of the Court in the Posthumus case (see foot paragraph 18). It follows that, as the note 2) may possibly be an expression of the view that there is no general obligation incumbent upon Member States on Court held in its judgment in Case 5/88 the basis of Community law to protect the economic inter ests of tenants. That case concerned a dispute between the Wachauf v Federal Republic of Germany tenants of an agricultural holding and the purchaser of a small part of that holding and the question submitted con [1989] ECR2609, paragraphia the cerned in particular the calculation of the size of the milk Community cannot accept measures quota which the purchaser claimed should be transferred to

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It should also be pointed out that the Court The Court has held that the legislation of the has first and foremost had occasion to hold Member States may be assessed on the basis that fundamental rights form an integral part of the fundamental rights applying in the of Community law in order to ensure that Community legal order in at least two situa­ those fundamental rights are complied with tions: first, where the national legislation by the Community institutions in the exer­ implements Community rules (paragraph 19 cise of their powers under the Treaties. The of the judgment in Wachanf); secondly, but Court, which under Article 164 of the Treaty more indirectly, in cases where a Treaty pro­ is to 'ensure that in the interpretation and vision derogating from the principle of free­ application of this Treaty the law is dom of movement is relied on by a Member observed', must necessarily ensure that fun­ State in order to justify a restriction on free­ damental rights are respected by the Com­ dom of movement stemming from that munity institutions. It is particularly impor­ Member State's legislation. The more indi­ tant in this respect that the fundamental rect significance of the fundamental rights rights applying in the Community legal applying in the Community legal order in order have their basis not just in 'interna­ the latter group of cases results from the fact tional treaties for the protection of human that the Court uses the fundamental rights in rights on which the Member States have col­ order to give a restrictive or extensive inter­ laborated or of which they are signatories' pretation of the derogations laid down in the but also in 'the constitutional traditions Treaty from the principle of freedom of 12 common to the Member States'. movement.

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Agriculture Act 1986 are so closely con­ There are good grounds for leaving that task nected to Community law that they 'fall to the legal systems of the Member States. I within the scope of Community law'. The consider it neither necessary nor correct to issue is of fundamental significance because hold in this context that the Member States it is determinative for the division of powers must respect the fundamental rights applying between the Court of Justice and national in the Community legal order. courts as regards the protection of basic rights and the question is a difficult one to answer. The issue lies within an area where the Court must tread carefully. Similar ques­ tions may arise in the most diverse situations and it is important that the Court develop its case-law in the light of the cases that are sub­ mitted to it.

The fact that a legal problem has arisen as a result of the adoption of Community rules is, in my view, not in itself sufficient to entail that the solution adopted for that problem by the national authorities must necessarily respect the fundamental rights applying in the Community legal order. The starting point is that such problems can and should be resolved within the framework of the 33. A significant factor in this case is that in national legal systems in accordance with the setting up the milk quota scheme in 1984 the solutions which apply in the Member States Community legislature did not provide for a to corresponding problems that have arisen general duty incumbent on the Member on the basis of national legislation. States to protect the economic interests of tenants in connection with milk quotas.

It is also significant in this connection that down rules to protect the economic interests the fundamental rights applying in the Com of tenants in connection with the ending of munity legal order are based on the constitu tenancies. The Commission submits, how tional traditions common to the Member ever, that the position is different where the States — precisely because those traditions Member States lay down rules whose object are to be used as the basis for assessing the or effect is precisely to afford such protec legality of the rules of Community law tion. If the Member States lay down such which have to apply uniformly in all the rules, they must, according to the Commis Member States — and that that basis for the sion, respect the fundamental rights applying fundamental rights applying in the Commu in the Community legal order.

34. Moreover, I do not consider that support damental rights to the full. On the other for the contrary result can be derived from hand, the Commission's contention cannot the need to ensure uniform and effective in any event lead to more than a requirement application of the relevant Community rules that the content of the rules that are in fact on the milk quota scheme. In this area the adopted must comply with the fundamental Community legislature has largely left it to rights applying in the Community legal the Member States to implement the rules

The only criticism made of the United Kingdom authorities is that they did not adopt such protective measures right from the start of the milk quota scheme. I do not consider that it can be argued that the Mem ber States that have not adopted any such rules at all are not obliged to do so under 35. As mentioned above, the Commission Community law but that the Member States considers that it is not possible to infer from which later adopt the rules required are the Community regulations or the funda under a duty under Community law to make mental rights applying in the Community such rules apply right from the introduction legal order that a positive obligation is incumbent on the Member States to lay of the milk quota scheme.

The second question 37. In the course of this case it has been con­ tended — amongst others by the Commis­ sion — that it should be considered whether the prohibition of discrimination under Arti­ cle 40 (3) of the EEC Treaty and the princi­ ple of equal treatment under Community 38. The second question referred for a pre­ law entails that tenants whose tenancy came liminary ruling by the High Court is as fol­ to an end in the period between April 1984 lows: and September 1986 can derive rights from the rules in the Agriculture Act 1986. In my view that question must be answered in the negative. As established above, the Agricul­ ture Act 1986 was not adopted in compliance with a Community law duty to protect the 'In the absence of national measures of the economic interests of tenants and, taken in kind referred to in question (a) are Regula­ isolation, the principle of equal treatment tion No 804/68, Regulation No 857/84, Reg­ under Community law cannot entail a duty ulation No 1371/84 and/or the general prin­ for the national legislatures to make rules on ciples of Community law to be interpreted the protection of tenants applicable from a as conferring on a tenant a directly enforce­ certain time. In this instance, the national able right to claim compensation from his legislature refrained from giving the law ret­ landlord in the circumstances aforesaid?' roactive effect and in so doing it acted in accordance with the principle of legal cer­ tainty under which laws may be given retro­ active effect only in exceptional cases, only where the purpose of the law renders that necessary, and if due account is taken of the 39. The answer to this question in fact fol­ legitimate expectations of those who have lows from the answer given to the first acted in reliance on the existing rules. It is question. It is plain that the relevant Com-

— Those regulations and general principles of Community law cannot be inter­ preted as meaning that a tenant can invoke them directly as a basis for a claim for compensation against his landlord.

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