C-244/95

O P I N I O N OF MR ELMER — CASE C-244/95

OPINION OF ADVOCATE GENERAL ELMER delivered on 15 May 1997*

Introduction cedure for granting the premium for leaf tobacco 3 (hereinafter 'the implementing regulation'), contains, inter alia, the follow- ing provisions:

1. In this case the Diikitiko Protodikio (Administrative Court of First Instance) Athinon (Greece) asks the Court to give a preliminary ruling on the validity of Com- mission Regulation (EC) N o 3477/93 of 17 December 1993 concerning the agricultural 'Article 6 conversion rates to be applied in the tobacco sector * (hereinafter 'the conversion regu- lation')·

1. The right to the premium shall accrue as The relevant Community provisions soon as the tobacco ... leaves the place in which it was under supervision.

2. According to Regulation (EEC) N o 727/70 of the Council of 21 April 1970 on the common organization of the market in The event giving entitlement to the premium, raw tobacco 2 (hereinafter 'the basic regu- within the meaning of Article 6 of Regu- lation') a premium is to be payable to per- lation (EEC) N o 1134/68, shall be consid- sons w h o purchase tobacco direct from ered to have occurred on that date. Community tobacco producers.

"... that operative event does not meet the cri- teria laid down in Article 6 of Regulation (EEC) N o 3813/92 and must be amended at — the second subparagraph of Article 6(1) the end of the transitional period provided of [the implementing regulation], for by Regulation (EEC) N o 3820/92; ... therefore, in order to avoid market distortion with the tobacco from the 1993 harvest, 1 July 1993 should be the date determining the operative event for the premium for tobacco from harvests prior to 1993 leaving supervi- sion from that date;' (seventh recital)

Article 7

'Article 5

This regulation shall enter into force on the third day following its publication in the Official Journal of the European Communi- ties. 4

For tobacco from harvests prior to the 1993 harvest, leaving supervision from 1 July 1993, the agricultural conversion rate for the It shall apply with effect from 1 July 1993.' premium provided for in Article 3 of [the basic regulation] shall be the rate applicable on 1 July 1993. 4 — It was published on 18 December 1993.

I-6445

Does the draft of the above regulation, which was approved by the Manage- ment Committee for Tobacco as a draft measure not having retroactive effect by 7. The amount of the premium was calcu- reason of the time which had elapsed — lated on the basis of the agricultural conver- more than five months — from its sion rate resulting from application of the approval until it was adopted and pub- rule in the second subparagraph of Article lished, constitute a fresh draft regulation 6(1) of the implementing regulation, which having retroactive effect entailing its had been repealed. Under the new rule in invalidity, in view of the fact that such a Article 5 of the conversion regulation, the draft, that is to say having retroactive amount of the premium would have been effect, was not submitted to the compe- calculated on the basis of the agricultural tent Management Committee for conversion rate applicable on 1 July 1993, Tobacco, thus infringing Article 145, bringing the premium down to DR 564 570. third indent, second sentence of the

I-6446

MOSKOF v EOK

(b) Is the statement of reasons in [the conversion regulation] correct and sufficient in view of the fact that the Commission regulation in question, 3. Infringement of Article 3(l)(iv) of [the in not applying, as the operative basic regulation] as amended by Article event for the agricultural conversion 1 of Council Regulation N o 1329/90 rate under Article 6(1) of Council Regulation N o 3813/92, the event whereby the economic objective of the operation is attained, which in this case is when the raw tobacco In view of the fact that the provision in leaves the place in which it has been question enables purchasers to obtain placed under supervision, does not the premium provided the tobacco is state from which of the four criteria incorporated before the expiry of four in Article 6(2) the operative event years from the harvest concerned into

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OPINION OF MR ELMER — CASE C-244/95

In view of the fact that the above Treaty provision lays down as an objective of the common agricultural policy the sta- bilizing of markets, how is the retroac- 6. Infringement of the principle of the tive measure of freezing the agricultural protection of legitimate expectations conversion rate adopted by [the conver- sion regulation] consistent with that objective given that it results in passing on the harm suffered by processors t o producers, since it is impossible for the former to offer adequate prices for To what extent is there a breach of the tobacco from the harvest following principle of the protection of legitimate adoption of the regulation? expectations of the processing undertak- ings, in view of the fact that Article 5 of [the conversion regulation] overturned the regulatory framework of the com- mon organization of the market in tobacco based on [the basic regulation 5. Infringement of the principle of non- and the implementing regulation] which retroactivity of Community measures had been in force for over 20 years and had inspired reliance on a special level of stability in the rules, taking into account the fact that no transitional measures have been taken to facilitate the transition from the system laid Does [the conversion regulation], which down by [the basic regulation and the was published in the Official Journal implementing regulation] and also that,

I - 6448

MOSKOF v EOK

as Moskof alleges, the European cultiva- than, as stated in the recital, the purpose tion contracts for the 1992 harvest had of avoiding distortion of the market?' been concluded one-and-a-half years before Article 5 of [the conversion regu- lation] was adopted and the tobacco harvested and placed under supervision before 15 May 1993? General observations

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O P I N I O N OF MR ELMER — CASE C-244/95

When the tobacco subsequently left the place in which it was under supervision, a definitive calcula- tion of the amount of the premium payable to the undertaking was made on the basis of the rate obtaining at that time in accordance with the second subparagraph of Article 6(1) 13. Article 4(2) of Regulation (EEC) N o of the implementing regulation. 1134/68 of the Council 5 provides that, pur- suant to provisions on the common agricul- tural policy, amounts expressed in units of account are to be converted into national currency on the basis of the relationship 16. In countries whose currency had depre- between the unit of account and the national ciated, where the conversion rate increased currency obtaining at the time when the over time, a disparity arose between the transaction was carried out. It follows from advance on the premium and the definitive Article 6 that the time when the transaction amount of the premium.

under supervision. It follows that the pre- mium must be converted from units of 17. Council Regulation (EEC) N o 1676/85 8 account into national currency on the basis repealed Regulation N o 1134/68, and thus of the conversion rate obtaining at the time Article 4(2) thereof, according to which the when the tobacco left the place in which it amount expressed in units of account was to was under supervision, as the second sub- paragraph of Article 6(1) of the implement- ing regulation also expressly provides. 6 — Commission Regulation (EEC) N o 1075/78 of 23 May 1978 amending Regulation N o 1726/70 (OJ 1978 L 136, p. 5). 7 — The Court of Auditors considered that question at paragraph 3.4 of Special Report N o 8/93 of 21 December 1993 (OJ 1994 C 65, p. 1) and stated that 'this led to unjustified expen- 5 — Regulation (EEC) N o 1134/68 of the Council of 30 July diture'. 1968 laying down rules for the implementation of Regulation 8 — Council Regulation (EEC) N o 1676/85 of 11 June 1985 on (EEC) N o 653/68 on conditions for alterations to the value the value of the unit of account and the conversion rates to of the unit of account used for the common agricultural be applied for the purposes of the common agricultural policy (OJ, English Special Edition 1968 (II), p. 396). policy (OJ 1985 L 164, p. 1).

be converted into national currency on the when the tobacco left the place in which it basis of the conversion rate obtaining at the •was under supervision. time when the transaction was carried out (the event giving rise to the debt). Article 5(1 )(c) of Regulation N o 1676/85 in con- junction with Article 4 provides, instead, for the conversion to be made using the conver- sion rate applicable at the time when the event whereby the economic objective of the 19. Article 3 of the basic regulation was operation is attained occurs. amended by Council Regulation (EEC) N o 1329/90 10 so as to make payment of the pre- mium subject to the condition that first pro- cessors provide proof before the expiry of a period of four years following the year of harvest that the tobacco has been sold for incorporation into manufactured products or exported to third countries, or undertake themselves to incorporate the tobacco in the manufactured products or to export it to 18. The rules relating to premiums are third countries within the same period. intended to ensure that producers receive a fair remuneration for their products. In that respect, that economic goal is attained when first processors pay producers the minimum price fixed for the tobacco. In the light of the new rule in Article 5(l)(c) of Regulation N o 1676/85 in conjunction with Article 4, the amount in ecus, which replaced units of 20. Although Council Regulation (EEC) N o account in the common agricultural policy in 3813/92, n which entered into force on 1 1979, had thus to be converted into national January 1993, repealed the whole of Regu- currency at the time when the producer lation N o 1676/85, Article 6(1) took up the delivered the raw tobacco to the first proces- rule that the amount in ecus must be con- sor for payment. The second subparagraph verted into national currency using the con- of Article 6(1) of the implementing regu- version rate obtaining at the time when the lation was not, however, brought into con- event whereby the economic objective of the formity with the new rule in Regulation N o operation is attained occurs. Article 6(2) of 1676/85, 9 and the premium therefore contin- Regulation N o 3813/92 permits the Com- ued to be converted from ecus into national mission, in certain circumstances, to lay currency using the rate obtaining at the time down specific rules concerning the conver- sion rate which should be applied. Further- more, Article 11(2) permits the Commission

to derogate from the regulation in the event tobacco. Article 10(2) of Regulation N o of exceptional monetary practices liable to 1068/93 provides that the operative event for jeopardize the application of the legal instru- the agricultural conversion rate is the first ments relating to the common agricultural operation which occurs after the date of tak- policy. ing over of the products by the operator concerned. When applied to the tobacco sec- tor, those rules mean that the premium must be converted from ecus into national cur- rency at the time when the raw tobacco is delivered to the first processors. That provi- sion is therefore consistent with the basic rule contained in Article 6(1) of Council Regulation N o 3813/92 according to which 21. O n the same day that the Council the conversion is to be made using the con- adopted Regulation N o 3813/92, the Com- version rate obtaining at the time when the mission adopted Regulation (EEC) No economic objective of the operation is 3820/92, 1 2 Article 1 of which provides that attained (see point 18 above). up to the end of the 1992/1993 marketing year the provisions referring to Regulation N o 1676/85, together with any amendments, are to apply to the new Council Regulation N o 3813/92. By that rule the Commission retained the implementing measures under the old arrangements (including, in respect of the tobacco sector, the second subparagraph of Article 6(1) of the implementing regu- lation) until the end of the 1992/1993 mar- keting year, that is to say 1 July 1993, in order to facilitate transition towards the new agrimonetary arrangements. 23. The rule in Article 10(2) of Regulation N o 1068/93 applied not only to future har- vests, but also to tobacco from previous har- vests which had not yet left the place in which it was under supervision. In practice that meant tobacco delivered to first proces- sors between 1989 and 1992. Use of the conversion rate obtaining at the time when the tobacco was placed under supervision 22. In Regulation (EEC) N o 1068/93 » the (1989, 1990, 1991 or 1992), rather than that Commission laid down rules for the imple- obtaining more recently at the time when the mentation of Regulation N o 3813/92 which tobacco left the place in which it was under apply to all agricultural sectors, including supervision, seems to have been very detri- mental to first processors in countries whose currency had depreciated where the conver- sion rate had increased over time and first 12 — Commission Regulation (EEC) No 3820/92 of 28 Decem- ber 1992 on transitional measures for the application of the processors stockpiled tobacco, sometimes for agrimonetary arrangements laid down in Council Regu- four years, in order to reap the possible ben- lation No 3813/92 (OJ 1992 L 387, p. 22). 13 — Commission Regulation (EEC) No 1068/93 of 30 April efit of the steady increase in the conversion 1993 on detailed rules for determining and applying the rate. agricultural conversion rates (OJ 1993 L 108, p. 106).

24. Following the repeal and replacement of conversion rates increased over time, as the basic regulation in the meantime by a application of the rule in Article 10(2) of new organization of the market in 1993 14 Regulation N o 1068/93 (see in that respect according to which the premium is to be point 23 above). The scope of Article 1 is paid directly to producers, on 17 December thus expressly limited to the premiums and 1993 the Commission adopted the conver- amounts of premiums referred to in Regu- sion regulation which is intended, inter alia, lation N o 2075/92. to regulate conversion within the framework of the new organization of the market. In that respect, Article 1 of the regulation pro- vides that the premium or the advance on the premium is to be converted from ecus into national currency on the basis of the conver- sion rate valid on 1 August of the year of 26. In contrast, Article 5 of the conversion harvest, as regards deliveries up to 31 regulation provides that for tobacco from December of that year, and the rate valid on harvests prior to the 1993 harvest, leaving 1 January of the following year, as regards supervision from 1 July 1993, the agricultural later deliveries. Article 1, which applies only conversion rate applicable to the premium to agricultural conversion rates for tobacco, provided for in the basic regulation is to be thus derogates from the rule in Article 10(2) the rate applicable on 1 July 1993. That rule of Regulation N o 1068/93, which applies to means that the premium for tobacco deliv- all agricultural sectors, according to which ered to first processors between 1989 and the conversion is to be made on the basis of 1992, which has not yet left the place in the rate obtaining at the time when the which it was under supervision, is to be con- operator concerned takes over the products. verted from ecus into national currency o n the basis of the rate applicable on 1 July 1993. A derogation in favour of first proces- sors in countries whose currency has depre- ciated is thus made from the rule in Article 10(2) of Regulation N o 1068/93, according to which the conversion is to be made on the basis of the rate obtaining at the time when the tobacco was delivered to the first proces- 25. Even though Article 1 of the conversion sors. regulation derogates from the general rule in Article 10(2) of Regulation N o 1068/93, it clearly links the conversion rate to the time when the tobacco is delivered to the first processors. Application of Article 1 of the conversion regulation to tobacco delivered to first processors between 1989 and 1992 would thus have had the same negative con- 27. In 1994 Moskof received a premium of sequences for those traders in countries DR 1 793 340 for tobacco harvested in 1992. whose currency had depreciated, where That amount was mistakenly calculated, in accordance with the rule in the second sub- paragraph of Article 6(1) of the implement- ing regulation, on the basis of the conversion 14 — Council Regulation (EEC) N o 2075/92 of 30 June 1992 on rate obtaining in June 1994, when the the common organization of the market in raw tobacco (OJ 1992 L 215, p. 70). tobacco left the place in which it had been

31. Since 1 July 1993, there is therefore no 29. Moskof challenged the validity of both longer any legal basis for maintaining in Article 5 of the conversion regulation and force the second subparagraph of Article 6(1) the regulation as a whole and thus, also, the of the implementing regulation. Since it is validity of Article 6 thereof which repeals incompatible with Article 6(1) of Regulation the second subparagraph of Article 6(1) of N o 3813/92, the second subparagraph of the implementing regulation. Should the conversion regulation and, therefore, Article 6 thereof, be held to be wholly invalid, the second subparagraph of Article 6(1) of the 15 — In respect of tobacco.

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MOSKOF v EOK

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OPINION OF MR ELMER — CASE C-244/95

36. Furthermore, first processors could not legal certainty precludes a Community meas- have held a legitimate expectation in respect ure from taking effect before its publication, of a conversion rate or a specified amount, in it may exceptionally be otherwise where the so far as the conversion rate was known only purpose to be achieved so demands and •when the tobacco left the place in which it where the legitimate expectations of those had been under supervision and the amount concerned are duly protected. In my opinion of the premium depended on the conversion those conditions are satisfied in so far as the rate which happened to apply at that time. I n conversion regulation benefits first proces- practice, it was only a matter of speculation sors in countries •whose currency has depre- on the continuance of inflation. ciated (see point 28 above) and, as indicated at point 37, those traders had no grounds whatsoever for holding the slightest legiti- mate expectation.

37. In view of the foregoing, I do not see how there can have been any failure to pro- tect legitimate expectations.

42. If Article 7 of the conversion regulation speculation to be approximately E C U 50 had provided that it would apply from the million per annum. date on which it 'was published, and not from 1 July 1993, Article 10(2) of Regulation N o 1068/93 would have applied to tobacco leaving the place in which it was under supervision between 1 July 1993 and the date The question of infringement of Article of publication of the conversion regulation. 39(l)(c) of the Treaty In my opinion, that constitutes sufficient grounds for the retroactive effect. Even if that reasoning is not apparent from the recit- als in the preamble to the conversion regu- lation, the Court can establish that it exists 45. According to that provision, the objec- and thus exercise its power of review. tive of the common agricultural policy is, inter alia, to stabilize markets. Moskof and the Greek Government claim, amongst other arguments, that freezing the conversion rate at 1 July 1993 is contrary to that objective. The question of infringement of the prin- ciple of equal treatment

46. In my opinion, that plea is clearly unfounded. O n the contrary, freezing the conversion rate is more likely to stabilize 43. Moskof and the Greek Government markets than the previous arrangements, claim that Article 5 of the conversion regu- under which the fluctuating rate and specula- lation adversely affects first processors in tion determined the conduct of traders on countries whose currency has depreciated, the market. thereby infringing the principle of equal treatment.

first-stage processing, themselves to incorpo- subparagraph of Article 6(1) of the imple- rate the tobacco in the manufactured prod- menting regulation is based on Articles 4(2) ucts or to export it to third countries, within and 6 of Regulation N o 1134/68, according the same period. to which the conversion is to be made on the basis of the conversion rate obtaining at the time when the transaction is carried out. That fundamental principle was amended by Article 5 of Regulation N o 1676/85, which substituted the rule according to which the 48. Moskof and the Greek Government conversion is to be made at the time when claim that freezing the conversion rate at 1 the event whereby the economic objective of July 1993 is contrary to the right to choose the operation is attained occurs. That rule the time, within the prescribed period of was taken up in Article 6(1) of Regulation four years, when the tobacco leaves the place N o 3813/92. In view of that fact, it must in which it was under supervision and thus therefore be held that the explanation in the the decisive moment for calculating the con- seventh recital to the conversion regulation version rate. constitutes a correct and sufficient statement of reasons for the introduction of new rules concerning agricultural conversion rates.

49. In my opinion, freezing the conversion rate at 1 July 1993 does not affect the right to choose the time, within the prescribed period of four years, when the tobacco leaves the 51. The seventh recital to the conversion place in which it was under supervision. I regulation states that, in order to avoid mar- therefore consider there to be no infringe- ket distortion with the tobacco from the ment of that provision of the basic regu- 1993 harvest, 1 July 1993 should be the date lation. determining the operative event for the pre- mium for tobacco from harvests prior to 1993 leaving supervision from that date.

The question of the procedure before the 55. I would point out that there is no men- Management Committee tion in the minutes of the meetings of the Management Committee for Tobacco in the period between 11 June and 3 December 1993, which were produced during these proceedings, of the Commission withdraw- ing the draft which was approved on 11 June 1993 or in any other way •waiving its right to 53. O n 11 June 1993 the Management Com- adopt the version of the conversion regu- mittee for Tobacco, with the exception of the lation contained in that draft. Hellenic Republic and the Italian Republic, approved a draft conversion regulation. The Commission could then have adopted that regulation immediately and published it in the Official Journal before 1 July 1993, the date on which it was due to enter into force. The regulation •was not adopted until 17 56. The fact that the Commission submits a December 1993, however, and was published new proposal, seeking to obtain the support in the Official Journal on 18 December 1993. of the Hellenic Republic and of the Italian Republic by suggesting amendments to a draft measure which has been approved, does not in itself mean that it waives its right to adopt the version of the conversion regu- lation contained in the approved draft.

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OPINION OF MR ELMER — CASE C-244/95

58. In my opinion that statement was not a 60. As I said, the delay in adopting the con- statement of reasons, but merely repetition version regulation resulted in its having ret- of the provisions of Article 5 of the conver- roactive effect in so far as it provides that it sion regulation, so that its deletion does not is to apply with effect from 1 July 1993. The in any way constitute a failure to fulfil the draft conversion regulation was not resub- duty to state reasons. The amendment mitted to the Management Committee in should be considered to be a stylistic change. order for it to give an opinion on the retro- active effect.

61. In my opinion, the retroactive effect is purely a matter of form and, as stated at point 28 above, benefits first processors in 59. Accordingly, I consider that the fact that countries whose currency has depreciated. the Commission failed to submit the new Accordingly, the fact that the draft conver- wording of the seventh recital to the conver- sion regulation was not resubmitted to the sion regulation to the Management Commit- Management Committee for Tobacco does tee for Tobacco does not constitute sufficient not, in my opinion, constitute sufficient grounds for declaring the regulation invalid. grounds for declaring the regulation invalid.

Conclusion

62. I n t h e light of the foregoing I propose that the C o u r t give the following answer t o t h e q u e s t i o n s raised b y t h e Diikitiko P r o t o d i k i o :