C-165/95

JUDGMENT OF 16. 10. 1997 — CASE C-165/95

J U D G M E N T O F T H E C O U R T (Sixth Chamber) 16 October 1997*

In Case C-165/95,

R E F E R E N C E to the Court under Article 177 of the EC Treaty by the High Court of Justice, Queen's Bench Division (United Kingdom), for a preliminary ruling in the proceedings pending before that court between

The Queen

and

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

composed of: H. Ragnemalm, President of the Chamber, G. F. Mancini and G. Hirsch (Rapporteur), Judges,

Advocate General: G. Tesauro, Registrar: L. Hewlett, Administrator,

after considering the written observations submitted on behalf of:

— Benjamin Lay, Donald Gage and David Gage, by Richard Gordon Q C , and Alan MacLean, Barrister, instructed by Dawson & Co., Solicitors,

— the United Kingdom Government, by Stephen Braviner, of the Treasury Solicitor's Department, acting as Agent, and Christopher Vajda, Barrister,

represented by Stephanie Ridley, of the Treasury Solicitor's Department, acting as Agent, and Christopher Vajda, Barrister, the Council, represented by Jan-Peter Hix, and the Commission, represented by Hans-Jürgen Rabe, at the hearing on 13 March 1997,

after hearing the Opinion of the Advocate General at the sitting on 29 April 1997,

gives the following

Judgment

1 By order of 26 April 1995, received at the Court on 30 May 1995, the High Court of Justice, Queen's Bench Division, referred to the Court for a preliminary ruling under Article 177 of the EC Treaty three questions on the interpretation of Articles 1(2) and 2 of Council Regulation (EEC) N o 2055/93 of 19 July 1993 allo- cating a special reference quantity to certain producers of milk and milk products (OJ 1993 L 187, p. 8).

2 Those questions were raised in proceedings between, first, Benjamin Lay, and, sec- ond, Donald Gage and David Gage, all of them milk producers ('the applicants in the main proceedings') and the Ministry of Agriculture, Fisheries and Food ('MAFF') concerning a special reference quantity which they requested after pur- chasing, in Mr Lay's case, or leasing, in the case of Donald and David Gage, part of a holding subject to an undertaking not to market milk under Council Regu- lation (EEC) N o 1078/77 of 17 May 1977 introducing a system of premiums for the non-marketing of milk and milk products and for the conversion of dairy herds (OJ 1977 L 131, p. 1).

7 In 1984, on account of a persistent imbalance between supply and demand in the milk sector, a system of additional levies was introduced by Council Regulation (EEC) N o 856/84 of 31 March 1984 amending Regulation (EEC) N o 804/68 on the common organization of the market in milk and milk products (OJ 1984 L 90, p. 10), and Council Regulation (EEC) N o 857/84 of 31 March 1984 adopting gen- eral rules for the application of the levy referred to in Article 5c of Regulation (EEC) N o 804/68 in the milk and milk products sector (OJ 1984 L 90, p. 13). In accordance with Article 5c of Regulation (EEC) N o 804/68 of the Council of 27 June 1968 (OJ, English Special Edition 1968 (I), p. 176), as amended by Regulation N o 856/84, an additional levy is payable for quantities of milk in excess of a refer- ence quantity to be determined, on the basis either of the quantity of milk or milk equivalent delivered by a producer (Formula A) or of the quantity bought by a purchaser during a reference year (Formula B).

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JUDGMENT OF 16. 10. 1997 — CASE C-165/95

8 Since they had entered the temporary non-marketing scheme under Regulation N o 1078/77 and therefore produced no milk during the reference year, the appli- cants in the main proceedings — who were accordingly 'SLOM producers' — for that reason did not obtain reference quantities under the additional levy scheme.

9 In its judgments in Case 120/86 Mulder v Minister van Landbouw en Visserij [1988] ECR 2321 and Case 170/86 Von Deetzen v Hauptzollamt Hamburg-Jonas [1988] ECR 2355, the Court ruled that Regulation N o 857/84 was invalid in so far as it did not provide for the allocation of a reference quantity to SLOM producers.

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i3 As from 1 April 1993 Council Regulation (EEC) N o 3950/92 of 28 December 1992 establishing an additional levy in the milk and milk products sector (OJ 1992 L 405, p. 1) renewed, with some amendments, the additional levy scheme intro- duced by Regulations N o 856/84 and N o 857/84, which had in the meantime reached its term.

u In its judgment in Case C-81/91 Twijnstra v Minister van Landbouw, Natuurbe- heer en Visserij [1993] ECR 1-2455 the Court ruled that the third subparagraph of Article 3a(2) of Council Regulation N o 857/84 of 31 March 1984, as amended by Council Regulation N o 764/89 of 20 March 1989, must be interpreted as meaning that, in the event of the transfer of part of a holding where the transferee agrees to observe the non-marketing undertaking made by the transferor under Council Regulation N o 1078/77, the special reference quantity may be divided between the transferor and the transferee on the basis of the proportion of the land transferred.

is As a result of that judgment, Regulation N o 2055/93, which is central to this action, introduced inter alia rules for calculating the special reference quantity where part of a holding is transferred.

16 Those were the relevant provisions when the applicants in the main proceedings requested, in 1993 and 1994 respectively, the grant of special reference quantities. Thus, on 24 December 1993 Mr Lay was granted a special reference quantity of 73 871 litres of milk corresponding, according to what he has said, to the milk produced by 14 cows. Similarly, on 26 May 1994, after their request had been reconsidered, Donald and David Gage were allocated a reference quantity of 14 725 litres.

— in proportion to the areas under forage referred to in Article 1 (1) (d) of Regulation (EEC) N o 1391/78 and transferred in accordance with the provi- sions of Article 7 of Regulation (EEC) N o 3950/92.

…'.

20 Where a special reference quantity has not yet been allocated, such a quantity is granted to the transferee in accordance with the rules laid down in Article 1(1) and the first paragraph of Article 2 of Regulation N o 2055/93.

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R y MAFF, EX PARTE LAY AND OTHERS

21 Article 1(1) of Regulation N o 2055/93 provides:

»

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23 Article l(l)(d) of Commission Regulation (EEC) N o 1391/78 of 23 June 1978 lay- ing down amended rules for the application of the system of premiums for the non-marketing of milk and milk products and for the conversion of dairy herds (OJ 1978 L 167, p. 45), to which the above provisions refer, contains the following definition:

'(d) "area under forage" means the total agricultural area farmed by a producer within the meaning of Article 5 (a) of Regulation (EEC) no 1078/77'.

24 The producer mentioned in the provision cited in the foregoing paragraph is defined in Article 5(a) of Regulation N o 1078/77 as follows:

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26 Article 9(c) of the same regulation adds:

'For the purposes of this regulation:

(c) "producer" means a natural or legal person or a group of natural or legal per- sons farming a holding within the geographical territory of the Community:

— selling milk or other milk products directly to the consumer,

(2) If the answer to Question 1 is in the negative, are Articles 1(2) and 2 of Coun- cil Regulation (EEC) N o 2055/93 invalid as contravening the general prin- ciples of Community law on legitimate expectation, proportionality and respect for property?

(3) If the answers to Questions 1 and 2 are in the negative, in determining a part transferee's entitlement to a reference quantity under Articles 1(2) and 2 of Council Regulation (EEC) N o 2055/93 is a Member State entitled to appor- tion the reference quantity between transferor and part transferee in propor- tion to that part of the transferor's holding transferred to the transferee?'

Interpretation of Articles 1(2) and 2 of Regulation N o 2055/93 (Questions 1 and 3)

28 By its first and third questions, which it is appropriate to deal with together, the national court is in substance asking whether, on a proper construction of Articles 1(2) and 2 of Regulation N o 2055/93, and in particular the term 'areas under for- age' which appears in those provisions, where part of a mixed holding is trans- ferred, the special reference quantity must be apportioned between the transferor and transferee, or allocated to the transferee, in proportion to the part of the hold- ing directly or indirectly given over to dairy production at the time when the non- marketing undertaking was entered into pursuant to Regulation N o 1078/77, or whether that quantity must be apportioned, or allocated, in proportion to the total area of the holding.

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JUDGMENT OF 16. 10. 1997 — CASE C-165/95

34 However, in Twijnstra the general principle that a reference quantity is attached to the land, as expressed in particular in Case C-463/93 St. Martinus Elten [1997] E C R 1-255, paragraph 14, was formulated in relation only to the transfer of part of a holding all of which was given over to dairy production. Accordingly that judg- ment did not deal with the case, such as that in point in the main proceedings, where part of a mixed holding is transferred.

35 It should be noted that where part of a holding is transferred Article 7(1) of Regu- lation N o 3950/92 and Article 7 of Regulation N o 1546/88, which repeat the gen- eral principle laid down in Article 7 of Regulation N o 857/84 and Article 5 of Regulation N o 1371/84, provide for the transfer of part of milk quotas on the basis of or 'taking account of the areas used for dairy production or other objective cri- teria'.

36 I t follows from the w o r d i n g of t h o s e p r o v i s i o n s t h a t b y linking t h e reference quantities strictly to the areas used for dairy production every producer resuming milk production in the capacity of transferee or transferor is guaranteed to be able to produce the proportion of the milk quantity corresponding to the proportion of the land originally given over to dairy production which he has acquired or retained.

37 T h a t literal interpretation is in k e e p i n g w i t h t h e p u r p o s e of the a b o v e m e n t i o n e d p r o v i s i o n s , n a m e l y t o p r o t e c t the legitimate expectations o n w h i c h t h e transferee m a y rely. Since the transferee has acquired p a r t of a h o l d i n g previously used for m i l k p r o d u c t i o n and has assumed the n o n - m a r k e t i n g u n d e r t a k i n g , he m a y legiti- m a t e l y expect t o b e able t o re-use t h e l a n d transferred for the p u r p o s e of m i l k p r o d u c t i o n (see, to t h a t effect, Twijnstra, cited above, p a r a g r a p h 2 3 .

42 It shows that special reference quantities are to be allocated in proportion to the areas under forage referred to in Article l(l)(d) of Regulation N o 1391/78, which was adopted in order to implement the non-marketing premium scheme and defines that term as the total agricultural area farmed by a producer within the meaning of Article 5(a) of Regulation N o 1078/77.

43 Thus the term 'areas under forage' merely denotes the total agricultural area which is farmed by a person having the status of producer within the meaning of Article 5(a) of Regulation N o 1078/77. A farmer can have that status only if he raises cattle, as specified in that provision, and, still more specifically, in the context of the allocation of a special reference quantity, only where he sells or delivers milk as a producer within the meaning of Article 9(c) of Regulation N o 3950/92, to which Article 1(1) of Regulation N o 2055/93 refers.

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44 That interpretation is further borne out by the fact that Article 1(2) of Regulation N o 2055/93 refers to Article 7 of Regulation N o 3950/92 which provides that when a holding is transferred, the reference quantity is to be transferred taking account of the areas used for dairy production or other objective criteria and, where applicable, of any agreement between the parties. Thus, as the Advocate General points out in section 11 of his Opinion, so far as concerns the requirement to take account of the areas used for dairy production, the transfer of a reference quantity where a holding is transferred and the transfer of part of a special refer- ence quantity where part of a holding is transferred are treated on the same foot- ing.

49 It is true that, where part of a mixed holding is transferred, the interpretation sug­ gested by the United Kingdom Government, the Council and the Commission enables the special reference quantities to which the transferee is entitled to be fixed unequivocally, thus precluding in advance, so far as is possible, any dispute as to the use of the agricultural areas farmed at the beginning of the non-marketing period.

so N o n e the less, in the light of the foregoing considerations, the mere possibility that the parties might disagree as to the areas to be taken into account when calculating the special reference quantities cannot justify an interpretation which is contrary to the principle of the protection of legitimate expectations.

5i Third, the Council and the Commission submit that the interpretation adopted is not capable of reconciling the interests of the transferor and transferee, on the one hand, and the objectives pursued by the additional levy system, on the other.

52 In response to that argument, it must be observed that the method of allocation or apportionment resulting from this judgment enables those who, in their capacity as transferors and transferees, hold lands of a farm which were originally given over to dairy production to resume milk production to the extent to which those lands contributed to dairy production. In contrast, the holder of the lands, whether transferor or transferee, is barred from entitlement to a reference quantity in so far as they were not originally used for dairy production.

53 Accordingly, the interpretation adopted by the Court does not create the risk either of causing the total quantity to be exceeded to which the owner would have been entitled if he had not transferred part of his holding or of undermining the objectives of the levy system, whether by allowing, following the transfer of part

Costs

56 The costs incurred by the United Kingdom Government, by the Council of the European Union and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these pro- ceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

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O n those grounds,

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

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