C-132/95

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OPINION OF MR FENNEIXY - CASE C-132/95

6 mined for the region concerned. This case, states that '[t]he payments referred to in amount, and the related compensation for this Regulation are to be paid over to the set-aside obligations, may be changed in the beneficiaries in their entirety'. Article 2(2) of light of developments in production, pro Regulation No 615/92 provided, similarly, 7 ductivity and the markets. Where the sum that '[t]he payments referred to in this Regu of the individual areas for which aid is lation shall be made to producers without claimed is greater than the regional base area any deductions except as otherwise provided in which arable crops were grown or which in this Regulation'. were subject to publicly funded set-aside in the reference period 1989/91, the area eligible for aid is proportionately reduced or, in sub sequent years, proportionate increases in

9 territory, in which case individual produc vided for, to whom the Commission would ers can apply for aid only in respect of the make available the necessary credits. The sec area attributed to them. ond indent of Article 4(2) provided that '[t]he Member States shall ensure that those credits are used without delay and solely for the purposes laid down'. After the end of the 1987 financial year, the Member States were required to mobilise the financial resources to cover the necessary expenditure, in accordance with the needs of their disbursing authorities, while the Commission made

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Article 8 of Regulation No 729/70 provided The sums recovered shall be paid to the pay­ at the relevant time: ing authorities or bodies and deducted by them from the expenditure financed by the Fund.'

'(1) The Member States in accordance with national provisions laid down by law, regu­ lation or administrative action shall take the measures necessary to:

— satisfy themselves that transactions 6. Article 14 of Commission Regulation financed by the [European Agricultural (EEC) No 3887/92 of 23 December 1992 Guidance and Guarantee] Fund are actu­ laying down detailed rules for applying the ally carried out and are executed cor­ integrated administration and control system rectly; for certain Community aid schemes 13 is concerned with reimbursement of wrongly paid aids. Article 14(2) provides as follows:

— prevent and deal with irregularities;

7. Under general principles of Danish law, public authorities are entitled to recover fis­ cal debts owed to them by the beneficiaries of public aid in three ways. First, a public authority, like any creditor, may seek the attachment of aid monies owed to its debtor, which, if resisted by the debtor, requires an order of a competent court. The normal rules of priority apply. The aid will be paid directly to the grantee of such an attachment 10. However, set-off is in certain cases pre­ order. cluded by social and general consider­ 15 ations. It is not the practice to set off debts to private parties arising under the law of property (e. g. for the supply of goods and services or under contracts) against other 16 debts, such as fiscal debts. In addition, it appears that the State's practice with regard 8. Secondly, the debtor may voluntarily to economic subsidies has varied. In certain assign his interest in the monies owed to him fields, set-off has not been operated in the or expected to be owed to him by a public past as regards subventions for specific authority to his creditors, including public projects, on the grounds that the project authorities. In the case of an assignment to a might not otherwise be completed. Law number of creditors, the rules of priority No 284 of 27 April 1994 provides for set-off apply. In the case of an assignment to a pri­ in certain specified cases of amounts not to vate creditor, the assignee will then be exceed 20% of such subventions, although it entitled to claim the aid in question directly appears that this is without prejudice to the from the responsible public authority. State's general entitlement to set off the full amount. Subventions within the province of the Ministry of Agriculture which are sub­ ject, in practice, to this limited form of set­ off include those for the development of

agricultural or fishery products, whether in national authority responsible for granting respect of projects in primary agriculture or compensatory payments, sought advice from those concerning the processing of such the Commission's Directorate-General for products. It appears that set-off does not Agriculture in July 1992 regarding this prac­ take place at all in respect of subventions tice, in the light of Regulation No 615/92. outside the scope of Law No 284. The latter advised in a letter of 12 November 1992 that, where national law permitted such set-off, there was no objection to it under Community law so long as the procedure was applied neutrally, without discrimination as between debts arising under Community and national law, and the Community pay­ 11. The assignment of a debt will not nor­ ments regime was not thereby rendered mally affect the right of set-off. Where a impossible. Articles 2(2) of Regulation creditor assigns a debt to a third party, the No 615/92 and 15(3) of the Regulation, it debtor may still claim set-off between that said, required only that no deduction for debt and monies owed to him by the original administrative expenses or other reasons creditor save where the latter debt arose after could be made from the amounts owed to he knew or could have known of the assign­ producers. However, on 7 October 1994, the ment. If, at the time the debtor knew or Directorate-General, upon further consider­ ought to have known of the assignment, the ation of the issue by the Commission's Legal assigned debt was not yet due, the debtor Service, advised the Danish Ministry of Agri­ can still proceed to set it off against the origi­ culture of the reversal of its earlier 'provi­ nal creditor's debt to him where the latter sional view'. The Commission's Legal Ser­ debt becomes due, at the latest, on the same vice had advised that the set-off of other 17 day as the assigned debt. debts against monies owed under the Regu­ lation was not permissible, due to the requirement in Article 15(3) that aids be paid in their entirety. Furthermore, the system of set-off would undermine the efficacy of the regime, as Member States would be enabled to recover fiscal debts from producers with­ (iii) The facts out following normal recovery procedures, in a way which was not possible under the 18 previous price-support regime. The Dan­ ish State thereupon desisted from the prac­ tice, without accepting the correctness of the Commission's view.

14. The Korn-og Foderstofkompagniet A/S 2. (a) Is it of any significance for the (hereinafter 'KFK'), a farm supplies com­ answer to Questioni whether the pany, had, for its part, received an assign­ amount of aid under Community ment in spring 1993 from a farmer, Mr Sten- law is paid in advance by the Mem­ holt, of aid monies which would be owed to ber State which has a claim to be him at the end of the season (DKR 45 574), reimbursed for the aid paid out only in order to pay for certain supplies. How­ if the rules of Community law on ever, the Danish State was able to set off that payment are satisfied, and which amount against Mr Stenholťs debts to the must itself defray the expenditure State under a debt-conversion loan dating involved in the administration of the from 1984, when his total debts to both pub­ support system? lic and private creditors were reduced in a procedure akin to bankruptcy.

(b) Is it of any significance for the answer to Question 1 that under the Member State's rules on set­ 15. Both Mr Jensen and KFK initiated pro­ off it is a condition for effecting ceedings before the Østre Landsret (Eastern set-off that there be reciprocity Regional Court, hereinafter 'the national between the debtor under the court') for the payment to them by the EC principal claim and the creditor Directorate of the Ministry of Agriculture under the counterclaim? (hereinafter 'the Ministry') of the aids in

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An answer is desired in particu­ 16. Written observations were submitted by lar to the question whether the Mr Jensen, the EC Directorate of the Danish Member States have greater Ministry of Agriculture, the Commission, scope to effect set-off if all or the Kingdom of Denmark, the Republic of part of the sum to be set off con­ Finland, Ireland, the Kingdom of Sweden stitutes part of the Community's and the United Kingdom of Great Britain own income. and Northern Ireland. Oral observations were submitted by Mr Jensen, KFK, the Ministry, the Commission, the Kingdom of Denmark, the Republic of Finland, the French Republic, the Hellenic Republic and Ireland. 3. If Questions 1 and 2(a) to 2(d) are answered to the effect that set-off is in general possible, or possible subject to certain conditions, is Article 15(3) of Council Regulation No 1765/92 to be 17. Generally speaking, all of the Member interpreted as meaning that a Member States which have submitted observations, as State is precluded from requiring a well as the Ministry, support the possibility national intervention agency to effect of set-off of compensatory payments under set-off in the case of a beneficiary of the Regulation against fiscal debts, for compensatory payments with outstand­ largely similar reasons, although they do not ing debts to the State which could oth­ all make submissions regarding all of the erwise be involved in set-off? questions referred by the national court. I

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Questions 1 and 3 19. Mr Jensen submits that, irrespective of whether reciprocity between the debts in question is required by Community law or merely by Danish law, this condition is not satisfied in the present case. The aid scheme established by the Regulation is regulated, paid for and supervised by the Community. He and KFK state that the aid scheme is merely managed by the Member States, and 18. Mr Jensen, KFK and the Commission that aids must be passed on faithfully to its submit that Article 15(3) of the Regulation 19 intended beneficiaries. It is immaterial, contains a clear prohibition of set-off. The therefore, whether the Member State's capac­ set-off and, thus, satisfaction of a counter- ity is described as that of an agent or inter­ debt cannot be deemed to be equivalent to mediary, as the aid is really owed by a third payment in the absence of receipt of the party, the Community. Mr Jensen and KFK monies in question. The Commission argues argue that set-off by the State must be pro­ that the farmer should receive the money in hibited in all cases, as a Member State cannot the same way as if he had sold his produce. The farmer should have a choice regarding its expenditure, rather than having a particu­ lar use of the money imposed unilaterally. 19 — Case C-186/93 UNAPROL v AIMA [1994] ECR I-3615.

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21. However, Mr Jensen, KFK and the Commission all argue that the application of national set-off rules in the present case would prejudice the achievement of the objective of the Regulation, which is to make a direct contribution to farmers' incomes and to compensate for losses from the scaling down of price guarantees and export refunds. The aid is an integral part of the credit base of farming enterprises. This would be threat­ 20. The Commission states that there is no ened if their cash-flow were to be cut off, general Community-law obstacle to the whereas the former intervention system, imposition or recovery of national taxes in being indirect, did not lend itself to the use the agricultural sector, in the light of its close of set-off by the State. KFK observes that a 21 links with the economy as a whole, so long mortgage on the crop alone does not provide as the structure of the market or the func­ sufficient security because of the reduction in tioning of market mechanisms established by prices entailed by the agricultural reforms, the common organisation of the markets is and submits that farmers should be able to not thereby undermined. There are no Com­ choose the creditors to whom they grant munity rules regarding set-off of Commu­ security. Mr Jensen and the Commission also nity aids against national fiscal debts, though point out that attachment of debts would Article 14 of Regulation No 3887/92 and the remain possible and claim that this is a more decisions of the Court in DEKA v EEC 22 transparent procedure which is open to all and Continental Irish Meat v Minister for creditors. 2 Agriculture 3permit set-off in cases where the reciprocal debts concerned arise pursuant

ciently precise to give rise to a prohibition of for the Regulation is cited in support of this set-off of fiscal debts against aid. There is view. nothing in the recitals in the preamble to the Regulation to suggest any such legislative intention. Variations on the formula used in Article 15(3) are to be found in other legisla­ tion, such as Article 2(2) of Regulation No 615/92 and Article 7(2) of Commission Regulation (EEC) No 84/93 of 19 January 24. The Member States argue that, in the 1993 on the specific aid to be granted to pro­ 24 absence of Community rules, national rules ducer groups in the raw tobacco sector. can continue to apply, provided they are The Commission's 'linguistic' interpretation non-discriminatory and do not undermine of the article would lead to legal uncertainty, 26 the common organisation of the market. as it would never be clear in any given case The Court's case-law recognises the possibil­ whether the operation of set-off would 27 ity of set-off, and its operation in the cir­ prejudice the wider objectives of the aid cumstances of the present case is no differ­ scheme. ent, in principle, from set-off in respect of wrongly paid Community aid pursuant to Article 14(2) of Regulation No 3887/92. The provision for set-off in that provision applies both to schemes which are wholly financed by the Community and to those which are co-funded by the Community and the Mem­ ber States. The universal right, in the Mem­ ber States' legal systems, to set-off or to similar types of debt recovery procedure should be considered to give rise to a general principle of Community law in its favour. In the light of the principle of subsidiarity, any applicable national rules would have to be 23. The Member States argue that set-off excluded expressly. results in the full payment of aid to the affected farmer: in so far as his indebtedness is reduced by that entire amount, he is thereby enriched. Payment can take place other than by the issuing of a cheque or other banking transaction. Thus, set-off is neutral in its effects. Article 15(3) of the Regulation is designed to prohibit, in reality, 25. The consequences for debt collection of the deduction by the Member States from the agricultural reforms were not discussed aid payments of administrative charges, which are not financed by the Community, or of special taxes, as distinct from those of general application. The Commission com­ 25 — COM(91) 379 final, 18 October 1991, Reform of the com- mon agricultural policy. munication which accompanied the proposal 26 Case 33/76 Reive v Landwirtschaftskammer Saarland [1976] ECK. 1989; Case 45/76 Comet v Produktschap voor Siergewassen [1976] ECR2043; Case 199/82 Amministrazi- one delle Finanze dello Stato v San Giorgio [1983] ECR 3595. 27 — DEKA v EEC, cited in footnote 22 above. 24 — OJ 1993 L 12, p. 5.

26. Prior to the reforms, there was nothing to prevent set-off of debts by operators, such as KFK, against producers under the former system of indirect agricultural aids, nor does anything appear to preclude the operation of set-off by private actors such as banks under the new regime. Furthermore, set-off was 27. The Member States emphasise the poten­ possible as between public authorities and tial significance of this case for other types of the operators under the price-support sys­ debt recovery, such as attachment. They take tem. In any event, a new system may give the view that the logic of the Commission's rise to new consequences for beneficiaries arguments would lead to the condemnation when managed within the framework of a of all types of seizure of aid, even by private national legal system. The exclusion of the parties, and would extend to set-off in favour operation of set-off by Member State tax of the Community, which has already been authorities would unjustifiably discriminate expressly approved by the Court. The exclu­ in favour of, and give a competitive advan­ sion of any type of aid seizure for the pur­ tage to, those farmers who do not pay their poses of debt recovery could make it more taxes, to the detriment of the public treasury, difficult for farmers to obtain credit. In the of other categories of taxpayer, such as sala­ alternative, continued acceptance of other ried persons, and of farmers who punctually debt recovery procedures such as attachment pay their taxes. Furthermore, private credi­ would demonstrate the benefits of set-off, tors such as KFK, who are not even the which is speedier and involves no additional cost for affected farmers. The Commission's preference for judicial recovery procedures 28 — Case 297/82 Samvirkende Danske Landboforeninger v Ministry of Fiscal Affairs [1983] ECR 3299. 29 — Article 39(2)(c) of the Treaty; Joined Cases 36/80 and 71/80 huh Creamery Milk Suppliers Association v Ireland [1981] 30 — Case 120/78 Rewe-Zentral v Bundesmonopolverwaltung für ECR 735. Branntwein ('Cassis de Dijon') [1979] ECR 649.

28. Regarding Question 2(a), Mr Jensen sub­ mits that it is irrelevant that Member States 30. In response to Question 2(b), Mr Jensen advance the necessary monies for aid pay­ argues that the general principle of equality ments from their own resources, as they have requires that reciprocity of debts be a con­ a right to claim a full reimbursement from dition of acceptance by Community law of the Community. The change in payment the possibility of set-off. While the Court procedure in 1988 (replacing the former sys­ cannot interpret the Danish rules in this tem of advance payment by the Community regard, it should make a finding as to the 31 to the Member States) cannot have altered capacity in which the Ministry acts when the nature of the agency relationship managing Community aid schemes. Set-off between the Member States and the Com­ would result in unacceptable inequality as munity. The fact that Member States can between Member States, due to divergent only claim reimbursement if aid has been practices. paid out in conformity with Community rules is in no way inconsistent with such an agency relationship. The Commission took the view at the oral hearing that the principle of reciprocity was not, in itself, a barrier to set-off because the Member State acted on its 32 own account in distributing aid. 31. The Ministry agrees that the Court should only rule on whether aid monies are owed to the farmer by the Member State act­ ing in its own capacity (on which it favours a positive response, however), and that conse­ quential questions of national law, regarding, for example, whether the State constitutes a 29. The Ministry, Denmark and Finland single juridical entity, should be left to be argue that the debts in question are owed decided by the national court. The United

34. Mr Jensen suggests that the Court should declare, in response to Question 2(d), that there is nothing in Community law 32. Mr Jensen and the Commission argue, in which indicates that Member States should respect of Question 2(c), that the operation resort to otherwise impermissible recovery of set-off in respect of direct agricultural aids 36 techniques in respect of fiscal debts which is discriminatory, and therefore unlawful, contribute to the Community's own because equivalent national subventions are resources. In any event, only approximately either not subject to set-off at all or are sub­ 1.4% of VAT receipts form part of the Com­ ject to set-off limited to 20% of the total munity's own resources. amount. The Commission adds that the highly discretionary manner in which set-off is operated would, in any event, create a per­ manent risk of discrimination. In the alterna­ tive, Mr Jensen states that aid payments should be deemed to relate to the law of property, so that they cannot be set off against fiscal debts.

35. The Ministry submits that, if set-off of fiscal debts against Community agricultural aids is not generally permissible, it should, at least, be possible in respect of taxes which contribute to the Community's own resources. It observes that Council Regu­ 33. The Ministry argues that, although it is lation (EEC, Euratom) No 1552/89 of for the national court to undertake a 29 May 1989 implementing Decision 88/376 comparison of Community agricultural aids EEC, Euratom on the system of the Com­ 37 munities' own resources requires Member States to do all in their power to collect the 34 — See Eurico v Commission, cited in footnote 32 above; and taxes in question. Continental Irish Meat v Minisier for Agriculture, cited in footnote 23 above. 35 — UNAPROL v AIMA, cited in footnote 19 above. 36 — Joined Cases 146/81, 192/81 and 193/81 BayWa v Balm [1982] ECR 1503. 37 — OJ 1989 L 155, p. 1.

the application has taken place. Both Ireland Question 4 and the United Kingdom submit that pay­ ment should take place within a reasonable period after the completion of the examina­ tion of the aid application, subject to obser­ vance of the final deadline imposed by Article 10(1). 36. Mr Jensen submits that, where examina­ tion of an aid application has been com­ pleted, it is contrary to Article 10(1) of the Regulation for payment to be delayed, even before the final deadline set out in that pro­ vision, in order to permit an additional check for possible fiscal debts. This delay serves Member States' unilateral interests, and is contrary to the requirement in Article 4(2) of IV — Analysis Regulation No 729/70 that Member States ensure that payments are made without delay and solely for the purposes laid down. Furthermore, such delays result in inequality of treatment, because they will vary as 38 between different Member States. Mr Jensen has sought interest from the Min­ istry from the date on which the examination of his aid application ended. The Commis­ 38. The first three questions referred by the sion, on the other hand, takes the view that national court all concern the question Article 10(1) of the Regulation has no signifi­ whether there are any obstacles to the appli­ cance for the present case independently of cation of the Danish rules on set-off in the Article 15(3). circumstances of the present case, either, firstly, on the basis of its inconsistency with Community law in general, taking into account factors such as the capacity in which the Ministry acts when distributing Commu­ nity aids, or, secondly, on the particular basis of the operation of the Danish rule of reci­ procity, the allegedly discriminatory manner 37. The Ministry remarks that the Regu­ in which set-off is operated, and the legal lation contains no special rules on the pro­ basis of the fiscal debt which is satisfied by cessing of applications, and that the Member way of set-off, or, thirdly, on the basis of its States have a wide margin of appreciation inconsistency with Article 15(3) of the Regu­ regarding the manner in which they manage lation. I shall, therefore, treat these three 39 the payment of aids, provided the deadline questions together, although it will be conve­ is respected. It is for the national court to nient to examine first Question 3 regarding determine whether a speedy examination of Article 15(3), since that provision is claimed to amount to an express negation of set-off, followed by the more general Questioni 38 — Joined Cases 205/82 to 215/82 Deutsche Milchkontor v and then the more specific queries in Germany [1983] ECK. 2633. Question 2. I will then examine separately 39 — UNAPROL v AIMA, cited in footnote 19 above.

Question 4, which relates to the manner in to his own assets'. There would be no which set-off is operated, and needs to be question of the aid not being considered to answered only if set-off is permissible. have been paid in full if it were transferred to the beneficiary, formed (perhaps only momentarily) part of his assets and were then seized or attached, against his will, for the benefit of any creditor. Execution before the actual transfer of money differs little, Questions 1, 2 and 3 from the point of view of the degree of lib­ erty enjoyed by the beneficiary in respect of his assets, from any form of post-payment 41 execution. Furthermore, there is no evi­ dence that the Community legislature intended, in adopting the rather laconic Article 15(3), to limit the widely varying debt-recovery methods which exist in national law. I conclude, therefore, that 39. The text of Article 15(3) of the Regu­ Article 15(3) of the Regulation does not pro­ lation, cited particularly by the Commission, hibit the setting off, under national rules, of does not expressly mention set-off. The aid under the Regulation against prior debts crediting of the aid to the beneficiary by way to the State, where that is provided for by of set-off against and, pro tanto, discharge of national law and the beneficiary of the aid is an existing fiscal debt to the State responsible credited with its full value. for granting the aid is clearly distinguishable from the deduction of special administrative fees or taxes from the aid, which are the only forms of deduction mentioned in the Com­ mission communication accompanying its proposal for the Regulation. However, the imposition of special charges to compensate for national administrative costs would secure no benefit of equal value for the ben­ eficiary, and would be clearly prohibited by Article 15(3). In the case of set-off, the ben­ eficiary receives the entire monetary value of the aid, although he does not have full con­ trol over its disposal. The same would be true in the case of attachment of the aid to discharge a debt, or of any other process of execution applied against the beneficiary or 40. I now turn to the more fundamental his assets either in anticipation of or after inquiry required by Question 1, namely actual payment. These are all consequences whether the application of national rules on of the fact that, as Advocate General Mancini set-off in the context of the Regulation is put it in DEKA v EEC, 'a person who is contrary to Community law. under an obligation to make a monetary payment offers his creditors a hind of general guarantee in the form of his assets .... [T]he 40 — Cited in footnote 22 above, p. 439 of the Opinion. debtor is in a subordinate position in regard 41 — Regarding its effects on creditors, see paragraphs 47 to 54 below.

41. It is one of the fundamental characteris recognition of the Member States' compe tics of a common organisation of the market tence to pursue and protect their own fiscal that the Member States are deprived of their interests may, indeed, be flanked by recog nition of a distinct Community interest in powers unilaterally to regulate the sector the fiscal efficacy of the Member States, not concerned. The Court said of Member States 42 only because VAT and customs duties con in Case48/85 Commission v Germany, tribute to the Community's own resources, '[t]heir legislative competence can only be or because coordination of Member State residual; it is limited to situations which are economic policies, including levels of public not governed by the Community rules and indebtedness, is a matter of common concern to cases where those rules expressly give in a developing economic and monetary them power to act'. The latter situation is union,

On the other hand, nothing in the common organi within the scope of that principle, provided sation of markets deprives Member States of they are, otherwise, compatible with Com their right generally to legislate in respect of munity law. independent aspects of national policy. The Court has, for example, ruled that the impo sition of a temporary excise tax on agricul tural produce or a land tax on agricultural property, in pursuance of a national incomes policy designed to share the burden of taxa tion, is not, in principle, incompatible with Community law. The common agricultural policy is not intended to shield its beneficia ries from the effects of distinct national poli

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50 achieve their ends'. Such interference could, in the case of a national tax, be mani fested by an effect on price levels, on sup 'In the first place the application of national plies on the market, or on the structure of law must not affect the scope and effective agricultural production or of agricultural ness of Community law. That would be the 51 holdings. case in particular if the application of national law made it impossible in practice to recover sums irregularly granted .

49 rights conferred by Community law'. 50 — Irish Creamery Milk Suppliers Association v Ireland, cited in footnote 29 above, paragraph 15 of the judgment; sec also Samvirkende Danske Landboforeninger v Ministry of Fiscal Affairs, cited in footnote 28 above, paragraph 11. The Court has not found that the liability to pay national taxes of farmers in receipt of Community support is contrary to the 48 — Cited in footnote 38 above, paragraphs 22 and 23 of the requirement in the applicable version of Article 4(2) of judement; sec also Balkan-Itnport-Export v Hauptzollamt Regulation No 729/70 that Member States use credits made Berlin-Packhof, cited in footnote 43 above, paragraph 5; available by the Commission 'solely for the purposes laid Bay Wa v Bairn, cited in footnote 36 above, paragraph 29; down'. and Case C-34/89 Italy v Commission, cited in footnote 20 above, paragraph 9. 51 — Irish Creamery Milk Suppliers Assonatimi v Ireland, cited in footnote 29 above, paragraph 22 of the judgment; Sam- 49 — Amministrazione delle Finanze dello Stato v San Giorgio, virkende Danske Landboforeninger v Ministry of Fiscal cited above, paragraph 12 of the judgment. Affairs, cited in footnote 28 above, paragraphs 14 to 16.

46. In Continental Irish Meat v Minister f or 56 Agriculture, the Court accepted, without objection, the application of national set-off rules in respect of monetary compensatory amounts owed, respectively, by and to the intervention agency of the Member State concerned. Two points may be made. First, the operation of set-off is permitted for cer­ tain schemes by Article 14(2) of Regulation 45. The Court has already indicated in No 3887/92. Wrongly paid aids may be DEKA v EEC that, in the case of an insol­ deducted from aids still to be paid. vent trader, set-off by the Community of a Article 14(2) of Regulation No 3887/92 does reciprocal or related claim may be the only not, in my view, exclude, by a contrario rea­ practicable way to recover wrongly paid soning, the operation of set-off in other con­ sums which are owed directly to the Com­ texts. This much is clear, of course, from the 52 munity. Advocate General Mancini had continuing applicability of the Court's own suggested in his Opinion that, in order to case-law in the matter, but also from the ensure uniformity throughout the Commu­ context of that provision. Article 14 of Regu­ nity, such a right of set-off should be deemed lation No 3887/92 is concerned generally to be based on a general principle common with the recovery of wrongly paid sums, and to the legal systems of the Member States, set-off is permitted as an alternative to other and applied to claims having their basis in forms of recovery. It should not, therefore, 53 Community law. The same reasoning be read as prejudging the issue in respect of 54 clearly underlies the judgment. The Court debts arising outside the particular context noted that Community rules on production with which it is concerned. Secondly, if and export refunds could give rise not only Community law permits set-off, either to debts which could be raised by traders directly in the Community's own favour, or against the administering authorities, but also by the Member States in contexts where both debt and counter-debt arise under a Community scheme, then the Community's

fiscal control dictates that set-off of aid while an excess of applications relative to the under the Regulation against fiscal debts due area forming the basis of the compensation to a Member State should be permitted pur­ calculation will lead to proportionate aid suant to national rules, unless there is com­ reductions for all and, eventually, to pelling evidence of a detrimental impact on increased, uncompensated set-aside. 59 Thus, the scope and effectiveness of Community contrary to the arguments of Mr Jensen and law, including that of the Regulation. KFK, the Regulation is not designed to pro­ No distinction of principle should, in my tect every individual farmer against any drop view, be drawn, in the absence of a clear con­ in disposable income. Furthermore, no such trary indication, between a debt owed to a entitlement arises from Community law gen­ Member State authority charged with the erally. 60 I accept the arguments advanced by recovery of Community funds and one the Member States that farmers were both charged with the collection of taxes, such as directly and indirectly subject to the vagaries would permit the first but not the second to of set-off procedures under the old regime. 61

withhold payment by way of set-off in dis­ Operators could set off the aid-subsidised charge of a debt admittedly due. To hold prices owed to producers against debts owed otherwise would invert the San Giorgio rules to them. Moreover, the intervention agency by requiring national law to give preferential of each Member State could operate set-off treatment to Community-law debts. of price support aid against amounts owed by operators. In a situation of insolvency, this would inevitably have resulted in a loss to the operators' other creditors, possibly including farmers to whom payment for pro­ 62 duce was due.

49. As I have already pointed out, set-off results in the farmer being credited with the full amount of the aid in question, although his freedom to dispose of it as he pleases is 51. The degree of protection of a farmer's restricted. In this, he is already at an advan­ private creditors has been linked to the func­ tage relative to other forms of deduction tioning of the Regulation, however, through which are, in principle, permitted by Com­ the invocation of the need for liquidity. The munity law, such as the levying of taxation, interest of banks or supply companies in which actually reduce the value of the aid to offering credit to farmers is said to be 63 the farmer. The deduction of aid monies at reduced if either their expectation of being source to satisfy existing tax debts, in a fash­ able to attach aid, or their formal entitlement ion which ensures that the full value of the to the aid through the operation of an aid none the less accrues to the farmer, hav­ assignment, is endangered by the interven­ ing regard to his liabilities as well as his dis­ tion of set-off operated by the State, to the posable income, does not appear any more ultimate detriment of farmers. There is noth­ likely to affect the objectives of the common ing to suggest that the Regulation is con­ organisation of the market than such direct cerned with farmers' liquidity as such. This taxation. depends on many structural factors as well as the level of price or aid they receive — fac­ tors like seasonality, levels of interest rates, land values and so on. Putting the matter bluntly, the Community can hardly intend to contribute to farmers' liquidity by enabling them to delay or defeat legitimate tax claims against them. 50. Furthermore, not surprisingly, nobody has contested the right of creditors generally to avail of attachment or other forms of execution or judicial attachment, against the debtor farmer's will. The distinguishing

grounds which were equally applicable to — a practice which the Court has not found set-off by other parties and to attachment objectionable per se, in other contexts — that could ultimately have a much more detri­ one creditor has the good fortune to find mental effect on farmers' creditworthiness himself in such a privileged position, relative and liquidity than continued recourse by the to others. It is important not to view that State to one among a number of forms of privilege in isolation from others which may recovery provided for in national law. exist. All forms of security are contingent on some kind of privileged access to the means of recovering the debt in question. Other creditors may have organised their affairs in order to have equally privileged access to other assets of the farmer. These might include ensuring that they owe him amounts for produce which match the credit granted, retaining title in equipment supplied or securing a mortgage on the farmer's lands, crops or other property. The argument against such privileged access, by the State or any other creditor, is essentially an argument based on fairness, relative to other creditors, 53. Set-off is of importance only in situa­ rather than one touching on the proper func­ tions of actual or impending insolvency. Its tioning of the Regulation. I can only repeat application to mutual running accounts that there is no apparent need in Community between traders is routine and uncontrover- law to disturb the balance drawn by the vari­ sial, because it suits the convenience of both ous national legal systems between the parties. It is inherently unlikely that the entitlements of different types of creditor, insolvent farmer, or one in financial diffi­ secured or unsecured. The same is true of the culty, would personally enjoy the free dis­ relative status in national law of the right to posal of the aid monies. The various forms of set-off and of rights under arrangements set-off and recovery which exist in the legal with creditors such as that which was appar­ systems of the Member States are all con­ ently concluded by Mr Jensen. cerned with managing the risks posed to 64 creditors by insolvency. The possibility of set-off grants an advantage to the creditor whose debtor's debt to him is matched, in whole or in part, by a debt he owes to his debtor, of which he can take advantage to alleviate that risk. It has been asserted that the State should not be permitted to exploit its privileged access to aid monies by way of set-off. However, it is in the nature of set-off

(for taxes, customs duties, or other dues), they are the bodies which are responsible, in the general interest, for the payment and dis­ tribution of various types of aid and benefit (economic, social security, and so on) to wide sections of the population. The fact that the State may have privileged access to vari­ ous types of public aid, including Community-funded aid, cannot, therefore, 56. Finally, my response to the argument be examined in isolation from the fact that it that permitting set-off in this case will result has the burden of collecting taxes and other in widespread differences in treatment as dues which ultimately go to fund such aids, between the different national legal systems, as well as the machinery for administering leading to a disruption in the functioning of them. While their functions are very differ­ the common organisation of the markets is ent, no cogent argument has been advanced that, if the disparities prove to be such as to to suggest why the benefits of risk manage­ compromise the equal treatment of produc­ ment pursuant to ordinary national debt- ers in different Member States or to distort recovery rules should be denied to the State, or impair the functioning of the common whose role entails that it be both creditor market, it is not for the Court to exclude the application of all such national rules on debt and debtor, while they can continue to be recovery, but for the Community legislature granted to creditors who freely accept the to adopt the provisions needed to remedy risk of advancing credit to freely contracting 66 such disparities. economic actors such as farmers.

60. In UNAPROL v AIMA, 69 for example, the Court noted that Community law did not regulate the right to retain interest earned on sums held by a national interven­ tion agency pending disbursement to benefi­ 59. The Court indicated in DEKA v EEC ciaries in the form of aid. The existence of that 'reciprocal or even related claims are an such a right was thus a matter to be settled appropriate subject of set-off' in Community by national law, provided that the rules in 67 law. As disclosed in the case-law, reciproc­ question did not jeopardise the uniform ity requirements exist in the various national legal systems which permit set-off, although they vary greatly in detail. In some Member 68 — The situation is different, of course, where set-off is oper­ ated directly by the Community itself, as in DEKA v EEC, in which case, in the absence of specific rules, a Community standard must be devised based on the general principles common to the laws of the Member States. — Cited in footnote 22 above, paragraph 13 of the judgment. 69 — Case C-186/93, cited in footnote 19 above.

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62. It may be helpful, none the less, to state my view on the capacity in which the authorities designated by Member States act, as a matter of Community law, when they pay out monies under the Regulation, in case the Court should decide that the capacity in which these agencies act when granting aid monies is independently significant, or in case it might be useful to the national court in applying the national rules. In my opin­ ion, the relationship of the Member States 72 and their agencies with the Community in this context differs little from that which 63. The Court has often stated that the com­ arises when they take steps to comply with mon agricultural policy operates on the basis any obligation imposed by Community law, be it the collection of VAT, the enforcement

73 — Case 217/81 Interagra v Commission [1982] ECB. 2233, paragraph 7 of the judgment; Case 133/79 Sucrimex v Com- mission [1980] ECB. 1299. 70 — Paragraphs 24, 25 and 28 of the judgment. 74 Eurico v Commission, cited in footnote 32 above, para­ 71 — Paragraph 12 of the judgment. graph 18 of the judgment; Case 60/75 Russo v AIMA [1976] 72 As I have already pointed out, the relationship of the vari­ ECB 45; Case 101/78 Granaria v Hoofdproduktschap voor ous branches of the State inter se is determined by national Akkerbouwprodukten [1979] ECR623 ; Sucrimex, cited rules on reciprocity. above; Interagra, cited above.

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65. The first possibly discriminatory aspect of the application of the Danish rules relates to the existence of what is referred to in the order for reference as an exception for gen­ eral and social considerations. While the pre­ 64. Here the national court raises the ques­ cise nature of this exception is unclear, tion of discrimination and, in particular, that unlawful discrimination would exist if it of the significance of a limitation in practice were not also available, in so far as it is appli­ of set-off of certain national environmental cable, to the process of set-off of fiscal debts and development subsidies against their ben­ against Community agricultural aids. If, for eficiaries' fiscal debts to the State. Any ques­ example, the exception permits, or requires, tion of discrimination can only be resolved the personal circumstances of the debtor to be taken into account, it would be contrary to Community law for a farmer to be deprived of the full sum of aid, by virtue of 75 — UNAPROL v AIMA, cited in footnote 19 above, para­ his fiscal debts, while another person, in a graph 27 of the judgment; Balkan-Impon-Export v Haupl- zollamt Bcrlin-Packhof, cited in footnote 43 above, para­ similar position, or even the same person, graph 5. Sec also the discussion by Advocate General van Gcrvcn in paragraphs 14 and 15 of his Opinion in could claim a derogation in respect of all or UNAPROL v AIMA. part of a debt owed by the State under 76 — i ed o tn te 20 abov Ct in f o o e , paragraph ID of the judgment. I his division of powers is also evidenced by the supervi­ national law. If, on the other hand, entire sory regime established by Article 9 of Regulation categories of payments by the State, such as, No 729/70. Sec Case C-366/88 France v Commission [1990] ECR I-3571, paragraphs 20 to 23 of the judgment. for example, salaries, pensions or social

66. Secondly, the exceptional treatment of certain national economic subventions must be examined. At the time when the set-offs at issue in the present case were effected, it appears that at least certain of such subven­ tions were not, in practice, subject to set-off at all, for fear of giving rise to a disincentive to implementing the projects in question. Certain of the exempted subventions related to projects in the agricultural sector, regard­ 67. The existence of discretion on the part of ing both primary production and secondary the Danish authorities regarding the applica- processing. It is not necessary, in my view, for the exempted national aids to be compa­ rable in all respects and in detail with aids granted under the Regulation, in order for a 77 — Cited in footnote 26 above, p. 3634 of the Opinion. See also Toincd Cases 117/76 and 16/77 Rnckdeschel v Hauptzollamt finding of discrimination to be made. As Hamburg St. Annen [1977] ECR 1753, paragraph 7 of the judgment. Advocate General Mancini observed in 78 — Case 250/83 [1985] ECR 131, paragraph 8 of the judgment Amministrazione delle Finanze dello Stato v (emphasis added).

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79 — BayWa v Balm, cited in footnote 36 above, paragraph 30 of the judgment; Deutsche Milcbkontor v Germany, cited in footnote 38 above, paragraph 22. 80 — Balkan-Imporl-Export v Hauptzollamt Berlin-Packhof, cited in footnote 43 above, paragraph 5 of the judgment. 81 — Case C-290/91 Peter v Hauplzollamt Regensburg [1993] ECR I-2981, paragraph 11 of the judgment. Advocate Gen­ eral Jacobs distinguishes an equitable discretion from a dis­ 68. In the light of the foregoing discussion, I cretion as to the expediency of waiver of recovery at para­ do not think that it is necessary for the graph 22 of his Opinion. 82 — Case 113/81 Reichelt v Hauplzollamt Berlin-Süd [1982] application of non-discriminatory national ECR 1957, paragraph 16 of the judgment. set-off rules to aids under the Regulation

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used without delay. Although this provision resources, it still testifies to the Communi­ has been deprived of much of its effect by ty's interest in the prompt payment of, inter the fact that the Member States have, since alia, sums intended to stabilise agricultural 1988, received advances only in respect of markets. Furthermore, the delay in question expenditure already incurred out of national is probably objectively unnecessary.

V — Conclusion

70 In the light of the foregoing, I propose that the Court answer the questions referred by the Østre Landsret as follows:

(1) It is not contrary to Article 15(3) of Council Regulation (EEC) No 1765/92 of 30 June 1992 establishing a support system for producers of certain arable crops for a Member State, pursuant to national rules, to set off, without addi­ tional cost, compensatory payments to which a farmer is entitled under that Regulation against fiscal debts owed by that farmer to the Member State;

(6) The answer given at point (3) is not affected by the legal basis for the out­ standing debt to the State against which set-off is to be effected nor, in par­ ticular, by the fact that part of the sum to be set off constitutes part of the Community's own resources;

(7) It is for the national court to determine whether national subventions, which are subjected, in practice, to set-off in an amount not exceeding 20% of the sum involved, are comparable to compensatory payments under Regulation No 1765/92, for the purpose of establishing whether the national rules on set­ off are applied in a discriminatory fashion. It is, equally, for the national court to determine, for the same purpose, whether compensatory payments under that Regulation are comparable to certain other types of payment in respect of which set-off is restricted on social grounds;

(8) It is contrary to Community law for the disbursement of compensatory pay­ ments under Regulation No 1765/92 to be delayed in order to permit an inves­ tigation of whether the State has outstanding claims against the beneficiary in respect of which it wishes to effect a set-off.

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