C-150/95

OPINION OF MR LENZ — CASE C-150/95

OPINION OF ADVOCATE GENERAL LENZ delivered on 15 April 1997 *

Contents

A — Facts I -5866

B — Analysis 1-5873

I. Calculation of the overshoot of the maximum guaranteed area I - 5873

1. Discrimination against Portuguese producers I - 5884

2. Infringement of Regulation N o 1765/92 I - 5886 3. Plea of illegality in relation to the exclusion of Portugal from the possibility of compensatory adjustment for the overshoot of the maximum guaranteed area 1-5886 l C — Conclusion " 5887

A — Facts compensatory payments made to Portuguese s u n f l o w e r seed p r o d u c e r s . T h a t r e d u c t i o n 1. By this application the P o r t u g u e s e resulted from C o m m i s s i o n R e g u l a t i o n ( E C ) R e p u b l i c challenges a 2 0 % r e d u c t i o n in N o 307/95 of 14 F e b r u a r y 1995 establishing c o r r e c t e d final regional reference a m o u n t s for p r o d u c e r s of soya beans, rape seed, colza * Original language: Gentian. seed a n d sunflower seed for the 1994/95

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marketing year. * As is apparent from Annex — 48 000 tonnes for sunflower seeds. I to that regulation, the Commission found that the maximum guaranteed area set for sunflower seed production in Portugal had been exceeded by 20%, which led it to reduce the final regional reference amounts, For the following marketing years these spe- and thus the compensatory payments as well, cific guarantee thresholds shall be deter- by the same percentage. mined according to criteria comparable to those adopted for fixing the guarantee thresholds in the Community as at present constituted.

1 — OJ 1995 L 36, p. 2. 2 — OJ 1985 L 302, p. 23. 3 — OJ 1992 L 181, p. 12.

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4. Under Article 2(5) compensatory pay- payments. In that regard too, special ments may be made by two different meth- arrangements are made for Spain and Portu- ods: a general scheme open to all producers gal. Article 5(2) provides: and a simplified scheme open to small pro- ducers. Producers applying for a compensa- tory payment under the general scheme are subject to an obligation to set aside part of their holding from production and receive a compensatory payment in return. 'For Spain and Portugal a national projected reference amount for producers of sunflower seed will be set as the point of departure for regionalization within those Member States. The amount for Portugal will be set at ECU 272 per hectare ...

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nity had granted to the United States in — for a particular marketing year the 1962. 4 Paragraph 4 of this 'memorandum of applicable EC-12 oil seeds base area understanding' on oil seeds provides: shall be reduced to reflect the annual set-aside rate for arable crops fixed by the Council. In no year, however, shall the reduction be less than 10% of the base.'

'The Community shall introduce a separate base area (SBA) for producers benefiting from the crop-specific oil seeds payments system which shall respect the following 9. Paragraph 6 makes crop-specific oil seed principles: payments subject to an additional discipline:

'— For every 1 % of area planted benefiting — progressive implementation to affect from crop-specific oil seeds payments in those crops planted for harvest in 1994 excess of the Community oil seed base and subsequent years, area (after reduction in conformity with paragraph 5) the compensatory pay- ments to such oil seed producers shall be reduced by 1%;

— in recognition of the Treaties of Acces- sion, full implementation for Spain and Portugal will commence in 1995/96.' — any such decreases in compensatory payments applied to area planted above the SBA shall be applied in the same marketing year; In paragraph 5, the separate base area is defined as follows:

(Soya beans, rape and colza seeds and sunflower seeds)

Reference year ' 2 '

Member State/oil seed 1995/96 and 1994/95 subsequent years (3)

Hectares

SPAIN Sunflower seed 1 411 000 —

PORTUGAL Sunflower seed 122 000 —

11. The Blair House Agreement was finally mum guaranteed areas, the Commission transposed into Community law by Council shall reduce, by 1 % for each percentage Regulation (EC) N o 232/94. 5 By virtue of point by which the maximum guaran- that regulation, the following provisions teed area is exceeded, the relevant final were added at the end of Article 5(1) of regional reference amounts for that year. Regulation N o 1765/92: With effect from the 1994/95 marketing year, if the maximum guaranteed area is exceeded by more than a threshold per- centage, special rules shall apply. Up to the threshold percentage, the reduction of the final regional reference amounts shall be uniform in all Member States. Beyond the threshold percentage, appropriate additional reductions shall apply in those Member States which have exceeded the national reference '(e) from the 1994/95 marketing year, maxi- areas set out in Annex V, reduced by the mum guaranteed areas (MGA) shall be rate referred to in subparagraph (e). The established for the crop-specific oilseed Commission shall, in accordance with payments. They shall be equal in size to the procedure laid down in Article 38 of the areas of land set out in Annex IV, Regulation 136/66/EEC, establish the reduced by the rate of rotational set- size and distribution of the appropriate aside applicable for that marketing year, reductions to be applied and shall, in or by 10% if that rate is less than 10%. particular, ensure that the weighted If after the application of Article 2(6) average reduction for the Community first indent those maximum guaranteed as a whole is equal to the percentage by areas are exceeded, the Commission which the maximum guaranteed area shall reduce the final regional reference has been exceeded; amounts for oilseeds in accordance with the provisions of subparagraphs (f) and (g);

Areas to be taken into account for the calculation of oilseeds maximum guaranteed areas

1995/96 and Member State/oilseed area in hectare 1994/95 subsequent years

Spain, sunflower 1411 000 —

Portugal, sunflower 122 000 —

EC 12, other 3 966 000 —

Total — 5128 000

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15. The Portuguese Republic challenges that The Council has intervened in support of the reduction. In its view, Regulation N o 307/95 Commission's claims and contends that the is void because it infringes Regulation N o plea of illegality should be rejected. 1765/92, as amended by Regulation N o 232/94. At the same time, in case Regulation N o 307/95 in fact merely implements the two latter regulations, it pleads pursuant to Article 184 of the EC Treaty that the latter two regulations are unlawful. B — Analysis

16. The Portuguese Republic claims that the Court should: I. Calculation of the overshoot of the maxi- mum guaranteed area

1. Reduction of the area allocated to Portugal second indent of paragraph 4 of the agree- ment, 8 which states that, in recognition of the Treaties of Accession, the separate base area is not to be implemented in full in Spain and Portugal until 1995/96. Furthermore, it is apparent from the annex to the memoran- dum of understanding that, here too, Portu- gal is accorded a special status in that a sepa- rate area of 122 000 hectares for 1994/95 is 19. According to the Portuguese Republic, laid down for Portuguese sunflower seeds. 9 the first error in calculation lies in the fact In the view of the Portuguese Republic, it that the area laid down for Portugal was also follows from the annex that that area is reduced at all. It refers in that regard to the inviolable, that is to say, is not subject to set- special arrangements made for Portugal in aside. Under the second indent of paragraph the Act of Accession. As it submits, and is 5, the applicable EC-12 oil seed base area is not disputed, those arrangements were to be reduced to reflect the set-aside rate. As intended to prevent Portugal from being the annex shows, that relates to the area in affected by the reduction in official prices the left-hand column for 'EC-12 Other', and, hence, in subsidies, in that sector. The which is given as 3 966 000 hectares. 10 Since arrangements involved the initial setting of a Portugal does not produce any other oil separate threshold value for Portuguese sun- seeds and an area is set especially for Portu- flower seeds. That threshold value was to guese sunflower seeds, which does not fall remain until the expiry of the transitional under EC-12, set-aside does not apply either period, that is to say until the end of the to that separate area of 122 000 hectares. 1994/95 marketing year. In Portugal's view, those special arrangements are inviolable until the expiry of the transitional period. They were accordingly respected on the transition from maximum quantities to maxi- mum guaranteed areas under the reform of the common agricultural policy. Regulation N o 1765/92, which was adopted as part of that reform, sets a separate reference amount for Portuguese sunflower seed producers. 7

because, in Annex IV to that regulation, a 23. The Commission — in my opinion separate area of 122 000 hectares for 1994/95 rightly — takes a different view. It contends is again set for Portugal. n Since Portugal is that the area of 122 000 hectares set for Por- not included in the area for the Community tugal is likewise subject to set-aside. In its as a whole until 1995/96 (as is apparent from opinion, that follows from both Regulation the annexes to the memorandum of under- N o 1765/92, as amended by Regulation N o standing and to Regulation N o 232/94), 12 it 232/94, and the Blair House Agreement. is only from that point onwards that it is subject to the set-aside obligation. Until then, that is to say, until the expiry of the transitional period, the inviolable special arrangements for Portugal apply. That also accords with the second indent of paragraph 24. The Commission does not dispute that 4 of the memorandum of understanding on the Act of Accession included special oil seeds which does not envisage full imple- arrangements for Portugal but refers to the mentation for Portugal until 1995/96. 13 third and fourth paragraphs of Article 294 thereof, according to which the specific guar- antee thresholds laid down for the following marketing years are to be determined according to criteria comparable to those adopted for fixing the guarantee thresholds in the rest of the Community. 1 4 The Com- mission states that the threshold of 48 000 tonnes fixed for the 1986/87 marketing year was increased to 90 000 tonnes for 1990/91 and 1991/92 pursuant to that provision. Fur- thermore, the maximum guaranteed quanti- ties were converted into maximum guaran- teed areas. The fourth paragraph of Article 294 even makes the specific guarantee threshold subject to the co-responsibility penalties in accordance with the procedures which are generally applied in the Commu- 22. Portugal is persuaded, therefore, that the nity. ]5 area of 122 000 hectares is not affected by set-aside. In its view, the Commission was thus wrong to reduce that area by 15% and, for that reason, the resulting 20% overshoot is inconsistent with the Blair House Agree- ment, the Act of Accession and, in particular, Regulations N o 1765/92 and N o 232/94. 25. It follows, at least, that the specific guar- Accordingly, Regulation N o 307/95 infringes antee threshold laid down in Article 294 does those regulations. not have to remain unaltered. In other words, even if the special arrangements laid

26. Nor, in my view, does it follow from the Blair House Agreement that the maximum area for Portugal which it lays down is not subject to set-aside. Under the second indent of paragraph 5 of the memorandum of understanding the EC-12 oil seeds base area applicable in a particular marketing year is to be reduced to reflect the annual set-aside 27. That analysis also accords with the spirit rate. 1 7 That does not refer, however, as the and purpose of the Blair House Agreement. Portuguese Republic contends, to the area The objective of that agreement was to cut laid down for 1994/95 for 'EC-12 Other', Community oil seed subsidies. Since those that is to say 3 966 000 hectares. It is, on the payments are by area, that could be achieved contrary, a reference to the total EC-12 area by fixing or possibly reducing the area in given in the annex, that is to say to the total question. Thus, the area in respect of which of the three separate areas specified in the subsidies may still be paid is fixed for the first column of the annex. 1 8 The heading of Community as a whole. That area serves as the annex, which reads 'EC-12 oil seed sepa- the reference area. It is given as a single area rate base area system', also points to that for the years from 1995/96 onwards and is conclusion. Under the second indent of para- broken down into separate areas for 1994/95. graph 5, that base area is subject to set-aside. The second indent of paragraphs provides It relates, as is clear from the text in brackets that the applicable EC-12 oil seeds base area following the heading, to soya beans, rape is to be reduced; while, from 1995/96 and colza seeds and sunflower seeds, and onwards, that relates to the total area, for therefore also to Portuguese sunflower seeds. 1994/95 it relates to the sum of the indi- vidual areas, that is to say each individual area is reduced. That is the only way of 16 — See point 2 above, third and fourth paragraphs of Article achieving the objective of the agreement — 294. to fix and reduce the area qualifying for sub- 17 — See point 8 above. sidy. 18 — See point 10 above.

29. That does not conflict with paragraph 4 of the memorandum of understanding, under which there is not to be full implementation in Spain and Portugal until 1995/96 onwards. 19 The Portuguese Republic con- tends that if the area set for Portugal is also subject to set-aside from 1994/95, there is no further element which applies to Portugal for 31. N o r does it follow from Regulation N o the first time from 1995/96. In other words, 1765/92, as amended by Regulation N o the Blair House arrangements are, in that 232/94, that the area laid down for Portugal case, fully implemented in Portugal from is not subject to set-aside. The tenth recital 1994/95. in the preamble to Regulation N o 1765/92 admittedly states that rules must be estab- lished in order to take into account the specific situation in Spain and Portugal, including the different rates of progress towards integration as foreseen in the Act of Accession. It is, however, clear from Article 5(1 )(e), 20 as inserted by Regulation 30. In my opinion, that argument cannot be N o 232/94, that set-aside also applies to the accepted. O n the contrary, the special area set for Portugal. That provision states arrangements under which an area continues that the maximum guaranteed areas are to be to be set separately for Portugal are equal in size to the areas of land set out in respected until the end of 1994/95. As has Annex IV, reduced by the rate of rotational been explained above, nothing else is laid set-aside applicable for that marketing year. down in the Act of Accession. There too, an In my view, that makes it quite clear that the

33. That conclusion is also disputed by Por- tugal inasmuch as it submits that, in Regu- lation N o 307/95, the Commission went beyond the Blair House Agreement by adopting a set-aside rate of 15% instead of 35. In case the Court finds that the area allo- the rate of 10% laid down in that agreement. cated to Portugal is nevertheless subject to That submission cannot be accepted because set-aside, the Portuguese Republic submits it is clear from both the agreement and that a further mistake was made in the calcu- Regulation N o 232/94 that the areas must be lation of the overshoot of the maximum reduced by the annual set-aside rate fixed by guaranteed area. In its view, it was not open the Council, but not by less than 10%. 21 to the Commission to include the area Under Article 7(1) of Regulation N o farmed by small Portuguese producers 1765/92 22 the set-aside rate with effect from within the total area farmed in Portugal. The the sowings for the 1993/94 marketing year Portuguese Republic's submission that small onwards is 15%. The Commission applied Portuguese producers farmed 21 397 hectares in 1994/95 has not been challenged. If that amount is subtracted from the area consid- 21 — Second indent of paragraph 5 of the Blair House Agree- ered by the Commission to be the total area ment and Article 5(l)(e) of Regulation No 1765/92, as farmed, the result is that professional pro- amended by Regulation No 232/94. 22 — OJ 1992 L 181, p. 12. ducers governed by the general scheme

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25 — Second subparagraph of Article 2(5). 23 — Article 2(5); see point 4 above. 26 — See point 8 above. 24 — Second subparagraph of Article 2(5) and Article 7(1); see 27 — See point 8 above. points 4 and 33 above. 28 — See point 9 above.

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clear by Article 2(5) and the second subpara- producers must be deducted from that graph of Article 5(2) of Regulation N o amount. The Portuguese Republic states that 1765/92, also receive compensatory pay- small producers farmed 21 397 hectares in ments, should not be included in the calcula- 1994/95. If that area is subtracted from tion of the overshoot of the maximum area. 122 000 hectares, an area of 100 603 hectares If the areas farmed by those small producers for reduction is obtained. O n reduction of were not taken into account when calculat- that area by 15%, an area of 85 513 hectares ing the overshoot, the area laid down in the is arrived at. According to the Portuguese Blair House Agreement could continue to be Republic, the sum of that area and the area exceeded at will, which would mean that the farmed by small producers, that is to say a objective of the agreement might not be total of 106 910 hectares, is the area which attained. was allowed to be farmed in the 1994/95 marketing year. If that figure forms the basis for the calculation, the result is that Portugal did not exceed the area by 20%, but only by 17%.

38. Nor, moreover, does Regulation N o 1765/92 give a different result, as the new Article 5(1 )(e) and (f) 29 inserted therein adopt in that regard the provisions of the Blair House Agreement.

contained in Article 8(1) of Regulation N o is brought about by a reduction of the base 1765/92, which states that small producers area. That means that the subsidies granted may apply for the compensatory payment by the Community are to be cut as a whole. under the simplified scheme. 30 That is inter- Against that background, it is, however, not preted by the Court of Justice as meaning clear why only the area farmed by other pro- that small producers are also entitled to ducers should be reduced. That would mean choose the general scheme for the making of that only the subsidies paid to those produc- compensatory payments. 31 Small producers ers would be cut, while small producers are thus not automatically excluded from would receive the same high amount of sub- set-aside. It is, however, important that small sidy; that is all the less evident inasmuch as producers and other producers alike receive — as demonstrated above — small producers compensatory payments. The regulation lays are not given any form of preferential treat- down that other producers must in addition ment under Regulation N o 1765/92 either. set aside a specified percentage of their hold- ing, for which they are also compensated. 32 The set-aside is rotational. Small producers thus receive a lower compensatory payment than other producers; the latter, however, must set aside part of their holding on a rotational basis. In that regard, they are not subject to any additional obligation for which no compensation is payable.

48. A plea of illegality is a separate head of 4. Plea of illegality in relation to calculation claim. 34 In this case, the possibility of the of the overshoot of the maximum guaranteed applicant's pleading that the Council regula- area tions are unlawful as a means of challenging Regulation N o 307/95 cannot be entirely excluded. O n the other hand, if such a plea were allowed in this case the time-limit for bringing actions laid down by the fifth para- graph of Article 173 of the EC Treaty would be circumvented. In the Council's view, moreover, infringement of the Blair House Agreement cannot be pleaded in this case 45. Should the Court conclude that the because that agreement has no direct effect. Regulation N o 307/95 is compatible with The applicant disagrees with that view. In its Council Regulations N o 1765/92 and N o opinion, the decisive issue is not whether the 232/94, Portugal pleads under Article 184 agreement has direct effect. Rather, the case that the latter are unlawful because they is concerned with the examination of Com- offend against the Blair House Agreement munity rules to see whether they are consis- and the Act of Accession. However, it was tent with the agreement. only in its reply that it asserted for the first time that the Act of Accession was infringed.

49. It can, however, be stated in the light of the above that the Blair House Agreement was not infringed in any event. It follows, moreover, from the consideration of the 46. According to the Council, that amounts applicant's ancillary plea that the Council to the introduction of a new plea in law, regulations are entirely consistent with the which under Article 42(2) of the Rules of Blair House Agreement. Also, as the Procedure of the Court of Justice is not per- Commission righdy states, neither the missible. It also maintains that infringement Blair House Agreement nor Regulation of the Blair House Agreement cannot be pleaded, because that agreement has no direct effect in Community law but must 34 — Opinion of Advocate General Reischl in Case 92/78 Sim- first be implemented by regulation. menthal v Commission [1979] ECR 777, at p. 813.

50. I conclude, therefore, that, as regards the calculation of the overshoot of the maximum guaranteed area, no infringement of the Council regulations, the Blair House Agree- ment or the Act of Accession can be dis- cerned. 'Whereas, within the MGA covering produc- tion other than of sunflower seed in Spain and Portugal, in cases where Member States have large percentage overshoots of very small national reference areas, and where these overshoots represent few hectares, the II. Exclusion of Portugal from the possibility reductions in support to be applied in these of compensatory adjustment of the maximum Member States should not be excessive; guaranteed area by transferring the unuti- whereas some of the non-allocated area of lized area Und within this MGA 36 may be transferred temporarily to the national reference areas of these Member States in order to reduce their contributions towards the total overshoot of the MGA.'

51. In addition to the errors in calculation 35 — See point 11 above. which it pleads, the applicant also relies on a 36 — Emphasis added.

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1. Discrimination against Portuguese pro- ducers 55. The Commission's justification for this is that separate arrangements continue to apply to Spain and Portugal under the Act of Accession, on the basis of which they were allocated separate areas. Compensatory adjustments cannot be made between those 53. In the applicant's view, Portugal was separate arrangements, or rather those sepa- wrongly excluded from that system of com- rate areas, and the area otherwise set for the pensatory adjustment, contrary to the prin- Member States. ciple of equality. If Portugal — in the appli- cant's view wrongly — is treated no differently from the other Member States in relation to the calculation of the reduction of the reference amounts, there is, it submits, no reason to exclude it from the benefit of that system of compensatory adjustment. 56. That still does not explain entirely why part of the area laid down for the other Member States which remained undistrib- uted could not be allocated to Portugal. That could amount to discrimination against 54. It is true that — as already demonstrated — in the 1994/95 marketing year Portugal is not yet treated in the same way as the other 37 — Annex V to Regulation No 232/94.

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Portuguese producers. For there to be dis- 58. The applicant does not deny that Portu- crimination, however, producers in compa- gal, unlike the other Member States, did not rable positions must be treated differently. have its aid reduced. It attributes that to the The Commission disputes that Portuguese fact that all the other Member States producers are in a comparable position to exceeded their maximum quantities while that of the other producers in the Commu- Portugal itself adhered to the maximum nity, because special arrangements continue quantity allocated to it. to apply to Portugal.

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Portugal itself responsible for its own area, it 3. Plea of illegality in relation to the exclu- must also be consistently observed by the sion of Portugal from the possibility of com- Commission. In other words, that separation pensatory adjustment for the overshoot of cannot be upheld only when it is advanta- the maximum guaranteed area geous to Portugal. O n the contrary, Portugal is also to be regarded as entirely responsible for its area when it has exceeded it.

62. In case Regulation N o 307/95 should be found compatible with Regulation N o 1765/92, the applicant pleaded in its reply 60. It follows that Portugal is not in a com- that the latter was unlawful because it parable position to that of the other Com- infringed the Blair House Agreement and the munity producers. For that reason dissimilar principle of non-discrimination and thus also treatment cannot be regarded as discrimi- rendered Regulation N o 307/95 unlawful. nation.

C — Conclusion

65. I therefore p r o p o s e that the C o u r t should:

(1) dismiss t h e application;

(2) o r d e r t h e P o r t u g u e s e R e p u b l i c t o p a y the costs.

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