C-150/95

JUDGMENT OF 23. 10. 1997 — CASE C-150/95

J U D G M E N T O F T H E C O U R T (Sixth Chamber) 23 October 1997*

In Case C-150/95,

Portuguese Republic, represented by Professor João Mota de Campos, acting as Counsel, and Luís Fernandes, Director of the Legal Service of the European Com- munities Directorate-General in the Ministry of Foreign Affairs, acting as Agent, with an address for service in Luxembourg at the Portuguese Embassy, 33 Allée Scheffer,

applicant,

v

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PORTUGAL v COMMISSION

A P P L I C A T I O N for the annulment of Commission Regulation (EC) N o 307/95 of 14 February 1995 establishing corrected final regional reference amounts for producers of soya beans, rape seed, colza seed and sunflower seed for the 1994/95 marketing year (OJ 1995 L 36, p. 2), in so far as it reduces by 20% the final regional reference amounts for sunflower seeds produced in Portugal,

T H E C O U R T (Sixth Chamber),

composed of: H . Ragnemalm, President of the Chamber, R. Schintgen, G. F. Man- cini, P. J. G. Kapteyn (Rapporteur) and G. Hirsch, Judges,

Advocate General: C O . Lenz,

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JUDGMENT OF 23. 10. 1997 — CASE C-150/95

producers of soya beans, rape seed, colza seed and sunflower seed for the 1994/95 marketing year (OJ 1995 L 36, p. 2; 'the contested regulation'), in so far as it reduces by 20% the final regional reference amounts and, therefore, the compensa- tory payments for producers of sunflower seeds in Portugal.

2 The reduction at issue was imposed because, as is apparent from paragraph II. 1 of Annex I to the contested regulation, the Commission found that the maximum guaranteed area set for the production of sunflower seeds in Portugal had been exceeded by 20% in the 1994/95 marketing year.

3 The maximum guaranteed area laid down for Portugal, to which Annex I to the contested regulation refers, derives, first, from the Act concerning the conditions of accession of the Kingdom of Spain and the Portuguese Republic and the adjust- ments to the Treaties (OJ 1985 L 302, p. 23; 'the Act of Accession') and, secondly, from an agreement concluded between the European Community and the United States of America under the General Agreement on Tariffs and Trade (GATT), which was approved by Council Decision 93/355/EEC of 8 June 1993 concerning the conclusion of a memorandum of understanding on certain oil seeds between the European Economic Community and the United States of America within the framework of the GATT (OJ 1993 L 147, p. 25; 'the Blair House Agreement').

4 The Act of Accession lays down transitional measures concerning the application to Portugal of the support system for Community oil seed producers. At the time, that system was based on the establishment of maximum quantities qualifying for support, known as 'maximum guaranteed quantities'. In view of the special impor- tance of sunflower cultivation in Portugal, the Act of Accession laid down, in par- ticular, specific guarantee thresholds for Portuguese sunflower seed producers.

— 48 000 tonnes for sunflower seeds.

For the following marketing years these specific guarantee thresholds shall be determined according to criteria comparable to those adopted for fixing the guar- antee thresholds in the Community as at present constituted.

When a specific guarantee threshold is exceeded, the co-responsibility penalties shall be applied according to procedures which are similar to those applied in the Community as at present constituted and with the same ceiling.'

6 Pursuant to that provision, the thresholds fixed for Portuguese sunflower seed producers were increased to 90 000 tonnes for the 1990/91 and 1991/92 marketing years.

7 Subsequently, under the reform of the common agricultural policy, Council Regu- lation (EEC) N o 1765/92 of 30 June 1992 establishing a support system for pro- ducers of certain arable crops (OJ 1992 L 181, p. 12) provided for the guarantee thresholds no longer to be established by reference to quantity, but by reference to area.

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PORTUGAL v COMMISSION

12 Finally, Article 5 of that regulation sets out in detail the method of calculating compensatory payments. Special arrangements are made in that regard for Spain and Portugal. Article 5(2) provides:

'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 E C U 272 per hectare ...

Until the end of the 1994/95 marketing year, the compensation payment for non- professional producers of sunflower seed in Spain and Portugal will be fixed by the Commission in such a way as to avoid any distortion which might arise from tran- sitional arrangements for sunflower seed producers in these Member States.'

1 3 The Blair House Agreement was entered into after a GATT panel had concluded that the Community support system for oil seeds resulted in a reduction of the value of the tariff concessions granted by the Community to the United States of America in 1962.

is In paragraph 5, the separate base area is defined as follows:

'— A Community oil seed base area shall be established for which crop-specific oil seeds payments are made (the figures for EC-12 are set out in the Annex);

— for a particular marketing year the applicable EC-12 oil seeds base area 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.'

u Paragraph 6 of the Blair House Agreement makes crop-specific oil seed payments subject to a discipline additional to that provided for by Article 2(5) and (6) of Regulation N o 1765/92. It states:

(

— for every 1% of area planted benefiting from crop-specific oil seeds payments in excess of the Community oil seed base area (after reduction in conformity with paragraph 5) the compensatory payments to such oil seed producers shall be reduced by 1%;

iz The Annex to the Blair House Agreement sets, for the 1995/96 marketing year, a single base area of 5 128 000 hectares for oil seeds throughout the Community. For the 1994/95 marketing year, on the other hand, it set separate base areas for sun- flower seed cultivation in Spain (1 411 000 hectares), sunflower seed cultivation in Portugal (122 000 hectares) and oil seed crops in the Community of 12, other than sunflower seeds in Spain and Portugal (3 966 000 hectares). Note 1 at the foot of the annex states that those figures are to be reduced to reflect the annual set-aside rate for arable crops.

is The Blair House Agreement was implemented in the Community by Council Regulation (EC) N o 232/94 of 24 January 1994 amending Regulation (EEC) N o 1765/92 (OJ 1994 L 30, p. 7). By virtue of that regulation, the following sub- paragraphs were added at the end of Article 5(1) of Regulation N o 1765/92:

'(e) from the 1994/95 marketing year, maximum guaranteed areas (MGA) shall be established for the crop-specific oilseed payments. They shall be equal in size to the areas of land set out in Annex IV, reduced by the rate of rotational set-aside applicable for that marketing year, or by 10% if that rate is less than 10%. If after the application of Article 2(6) first indent those maximum guaranteed areas are exceeded, the Commission shall reduce the final regional reference amounts for oilseeds in accordance with the provisions of subpara- graphs (f) and (g);

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JUDGMENT OF 23. 10. 1997 — CASE C-150/95

Portugal, sunflower 122 000 —

EC 12, other 3 966 000 —

Total — 5128 000

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PORTUGAL v COMMISSION

That annex adopts the figures in the Annex to the Blair House Agreement and likewise sets at 122 000 hectares the area for sunflower seed cultivation in Portugal for the 1994/95 marketing year.

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JUDGMENT OF 23. 10. 1997 — CASE C-150/95

maximum guaranteed area relating to production in the Community of 12 other than of sunflower seeds in Spain and Portugal, in order to reduce the contribution of Spain and Ireland to the total overshoot of the maximum guaranteed area. Span- ish and Portuguese sunflower seed producers did not benefit from such compensa- tory adjustment using the unutilized areas of land in the other Member States.

23 The Portuguese Government submits in support of its application that the con- tested regulation infringes Regulation N o 1765/92, as amended by Regulation N o 232/94, because, first, the calculation of the amount by which the maximum guar- anteed area allocated to Portuguese sunflower seed farmers is exceeded is incorrect and, secondly, it wrongly excludes sunflower seed cultivation in Portugal from the compensatory adjustments for the overshoot of the national reference areas made by transferring unutilized areas of land in the other Member States. Also, should the Court take the view that the contested regulation merely applies Regulations N o 1765/92 and N o 232/94, the Portuguese Government, relying on Article 184 of the E C Treaty, pleads that the two latter regulations are unlawful.

Calculation of the overshoot of the maximum guaranteed area

24 The Portuguese Republic submits, first, that, in the contested regulation, the cal- culation of the amount by which the maximum guaranteed area allocated to Por- tuguese sunflower seed farmers for the 1994/95 marketing year is exceeded does not accord with the special arrangements which, by virtue of the Act of Accession and the Blair House Agreement, were made for Portugal by Regulation N o 1765/92, as amended by Regulation N o 232/94. In its view, that calculation contains three errors.

27 It points out that the second indent of paragraph 4 of the Blair House Agreement provides that, in recognition of the Treaties of Accession, the separate base area is not to be applied in full in Portugal until 1995/96. Furthermore, Annex IV to Regulation N o 1765/92, as amended by Regulation N o 232/94, which transposes the Annex to the Blair House Agreement, provides for a special status for Portugal until the end of the transitional period, inasmuch as it lays down a specific area, of 122 000 hectares, for sunflower seeds in the 1994/95 marketing year. Finally, it fol- lows from Annex IV that the reduction in the set-aside rate, referred to in Article 5(l)(e) of that regulation, which transposes the second indent of paragraph 5 of the Blair House Agreement, affects only the area appearing in the column for 'EC 12, other', namely 3 966 000 hectares, to the exclusion of the separate area of 122 000 hectares allocated solely to Portugal for sunflower seed cultivation.

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JUDGMENT OF 23. 10. 1997 — CASE C-150/95

28 In that regard, the Court finds that it is clear from the wording of Article 5(l)(e) of Regulation N o 1765/92, as amended by Regulation N o 232/94, that the reduction imposed therein applies equally to the area of 122 000 hectares allocated to Portu- gal for sunflower seed cultivation. Under that provision the maximum guaranteed areas are to be equal in size to the areas of land set out in Annex IV to the same regulation, reduced by the rate of rotational set-aside applicable to the marketing year in question. N o exception is made for the area of 122 000 hectares specified in Annex IV for Portuguese sunflower seed producers.

3i According to the Portuguese Government, the second error in calculation con- tained in the contested regulation is that, in determining the amount by which the maximum guaranteed area was exceeded, the area planted by small Portuguese producers was included within the total area farmed in Portugal.

32 The Portuguese Government refers to the distinction drawn in Article 2(5) of Regulation N o 1765/92 between small producers, who are covered by a simplified scheme, and all other producers, who are subject to a general scheme involving a set-aside requirement. The effect of Article 8(3) is that small producers under the simplified scheme are exempt from the set-aside obligation but, in return, receive lower compensatory payments. Therefore, the Portuguese Government concludes, the area farmed by small producers should not be taken into account when calcu- lating the amount by which the maximum guaranteed area is exceeded.

33 The Court observes that under Article 5(l)(e) of Regulation N o 1765/92, as amended by Regulation N o 232/94, which accurately transposed the Blair House Agreement in that respect, maximum guaranteed areas, which are equal in size to the areas of land set out in Annex IV, reduced by the set-aside rate or by 10% if that rate is less than 10%, are established 'for the crop-specific oilseed payments'. Small producers covered by the simplified scheme receive such payment, even though it is set at a different level from that paid to the other producers and they are not subject to the set-aside obligation.

34 It follows that small producers covered by the simplified scheme are also subject to the discipline of maximum guaranteed areas. The areas of land which they farmed in return for compensatory payments therefore had to be included within the total area farmed in Portugal when determining the extent to which the maximum

37 In that regard, the Court notes that the reduction which is made in the areas set out in Annex IV to Regulation N o 1765/92, as amended by Regulation N o 232/94, in order to determine the maximum guaranteed areas, and which is imposed in accordance with Article 5(l)(e) of the same regulation, does not represent a set- aside requirement. It follows that the exemption from that requirement, which small producers covered by the simplified scheme enjoy under Article 8(3) of Regulation N o 1765/92, is irrelevant to the calculation of the maximum guaranteed area for Portuguese sunflower seed producers.

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PORTUGAL v COMMISSION

38 Moreover, as stated in paragraph 28 of this judgment, it is clear from the wording of Article 5(l)(e) of Regulation N o 1765/92, as amended by Regulation N o 232/94, that the maximum guaranteed areas are equal in size to the areas of land set out in Annex IV to the same regulation — 122 000 hectares for sunflower seed cultivation in Portugal — reduced by the rate of rotational set-aside applicable to the market- ing year in question. The Blair House Agreement does not draw any distinction between the areas of land farmed by small producers who are covered by the sim- plified scheme and those farmed by producers falling within the general scheme.

39 Accordingly, the argument put forward by the Portuguese Government, to the effect that the area farmed by small producers was wrongly taken into account when the entire 122 000 hectares allocated to Portugal for sunflower seed cultiva- tion was reduced by 15%, must be rejected.

42 Thus, in paragraph II.3 of Annex I to the contested regulation, a transfer of unuti- lized areas of land was made, as regards production other than of sunflower seed in Spain and Portugal, to the national reference areas of Spain and Ireland (as well as to the United Kingdom in order to avoid an increase in the reduction of support as a result of the transfers to Spain and Ireland).

43 In its second plea the Portuguese Republic alleges that, in the contested regulation, the Commission wrongly excluded Portuguese sunflower seed cultivation from the compensatory adjustments for the overshoot of the national reference areas speci- fied in Annex V to Regulation N o 1765/92, as amended by Regulation N o 232/94, which were made, after deduction of the set-aside rate, by transferring unutilized areas of land within the maximum guaranteed area in the other Member States.

44 A c c o r d i n g t o t h e P o r t u g u e s e G o v e r n m e n t , the contested regulation t h u s infringes n o t o n l y Article 5(1 )(f) of Regulation N o 1765/92, as a m e n d e d b y Regulation N o 232/94, b u t also t h e principle of n o n - d i s c r i m i n a t i o n .

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PORTUGAL v COMMISSION

Infringement of Article 5(1 )(f) of Regulation No 1765/92

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JUDGMENT OF 23. 10. 1997 — CASE C-150/95

Community, because, under the Act of Accession, they continued to benefit from special arrangements involving the setting of a specific maximum guaranteed area.

49 Those transitional arrangements were intended to ensure that Portuguese sun- flower seed producers enjoyed some security of income, irrespective of develop- ments recorded in the other Member States. Thus, the establishment of a specific guarantee threshold made it possible, under the system prior to the adoption of Regulation N o 1765/92, for the amount of aid granted to Portuguese sunflower seed producers not to be affected when the maximum quantity laid down for the Community was exceeded. That aid could have been reduced only if Portugal had exceeded its own guarantee threshold. By contrast, the amount of aid paid to the other Community producers was in principle affected if the maximum guaranteed quantity fixed for the Community was exceeded, so that overproduction in the other Member States affected all producers (Article 1(4) of Council Regulation (EEC) N o 1454/86 of 13 May 1986 amending Regulation N o 136/66/EEC (OJ 1986 L 133, p. 8) and Article 1(8) of Council Regulation (EEC) N o 1915/87 of 2 July 1987 amending Regulation N o 136/66/EEC (OJ 1987 L 183, p. 7)).

so As the Advocate General has correctly pointed out in point 59 of his Opinion, the Commission was entitled, once the guarantee thresholds had been separated in that way, to maintain that separation not only when it proved advantageous to Portugal but also if Portugal exceeded its own specific guarantee threshold. The Commis- sion was accordingly entitled, when implementing the transitional arrangements, to restrict the transfer of unutilized areas of land to land falling within each of the three special base areas laid down, for the 1994/95 marketing year, in Annex V to Regulation N o 1765/92, as amended by Regulation N o 232/94.

54 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission has applied for costs and the Portuguese Repub- lic has been unsuccessful, the Portuguese Republic must be ordered to pay the costs. In accordance with the first subparagraph of Article 69(4), the Council of the European Union, which intervened in the proceedings, is to bear its own costs.

O n those grounds,

T H E C O U R T (Sixth Chamber)

hereby:

1. Dismisses the application;

2. Orders the Portuguese Republic to pay the costs;

R. Grass H . Ragnemalm

Registrar President of the Sixth Chamber

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