C-277/98

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cing of the common agricultural policy. 3 6. The Spanish Government has intervened The sums in question are the result neither in the proceedings in support of the French of irregularities nor of negligence within Government. By order of the President of the meaning of Regulation 729/70, and will the Court of 17 December 1998 the King- not be payable until an enforceable judg- dom of Spain was granted leave to inter- ment has made it possible to recover them. vene. No hearing has taken place in the course of the proceedings.

4. The French Republic is asking the Court of Justice: I I — The relevant legislation

— partially to annul the relevant part of (1) Supplementary levy for milk Commission Decision 98/358/EC of 6 May 1998 in so far as it applies 'negative corrections' in respect of 7. Council Regulation (EEC) No 856/84 of sums the recovery of which is the 31 March 1984 amending Regulation subject of proceedings before the com- (EEC) No 804/68 on the common organi- petent national courts. sation of the market in milk and milk products. 4

5. The Commission is asking the Court: Article 1 introduces the following addi- tional article into Regulation No 804/68:

— The producer liable to the levy shall pass on the burden in the price paid to those producers who have increased The levy system shall be implemented in their deliveries, in proportion to their each region of the territory of the Member contribution to the purchaser's refer- States in accordance with one of the ence quantity being exceeded. following formulas:

2. The levy shall also be payable by every milk producer on the quantities of milk and/or milk equivalent he has sold for Formula A direct consumption and which, during the 12 months concerned, exceed a reference quantity to be determined.

— A levy shall be payable by every milk producer on the quantities of milk and/ or milk equivalent which he has deliv- ered to a purchaser and which for the 3. Subject to paragraph 4, the sum of the 12 months concerned exceed a refer- reference quantities referred to in para- ence quantity to be determined. graph 1 may not exceed a guaranteed total quantity equal to the sum of quantities of milk delivered to undertakings treating or processing milk or other milk products in each Member State during the 1981 calen- dar year, plus 1%.

Formula B

The guaranteed total quantity shall be as follows: — A levy shall be payable by every purchaser of milk or other milk pro- ducts on the quantities of milk or milk equivalent which have been delivered to him by a producer and which,

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4. Member States shall be authorised, for 5 — OJ 1984 L 90, p. 13. 6 — Council Regulation No 1305/85 of 23 May 1985 amending the first two periods of 12 months, to Regulation No 857/84 of 31 March 1984 adopting general allocate the levy collected to financing of rules for the application of the levy referred to in Article 5c of Regulation (EEC) No 804/68 (OJ 1985 L 137, p. 12). the measures referred to in Article 4(1)(a).

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This provision shall be applicable only to transmit to the competent agency a state- the extent that the quantities actually ment indicating: delivered to purchasers and the quantities of direct sales actually effected do not exceed, respectively, the overall guaranteed quantity referred to in Article 5c(3) of Regulation (EEC) No 804/68 and the total quantity referred to in Article 6(2) of this regulation for the Member State concerned.

— in cases where formula B is applied, for Where one or other of those quantities is all producers taken together, the quan- exceeded, the amount of the levy collected tities of milk or milk equivalent pur- corresponding to the amount of the excess chased during the first half of the year; recorded shall be paid over to the Commu- the statement shall also indicate the nity.' quantities bought by the buyer during the first half of the year, expressed as a percentage of the buyer's annual refer- ence quantity. 9. Commission Regulation (EEC) No 1546/88 of 3 June 1988 laying down detailed rules for the application of the additional levy referred to in Article 5c of Regulation (EEC) No 804/68. 7 2. Purchasers shall, within 45 days follow- ing the end of each 12-month period, transmit to the competent agency a state- ment indicating:

(b) ...

3. ...

2. ...

4. The purchasers referred to in paragraphs 1, 2 and 3 shall pay any levy amount due to the competent agency within three months 3. Member States shall transmit to the following the end of each 12-month period. Commission:

Article 19

— at the end of each of the 12-month periods concerned, all relevant infor- mation concerning the implementation 1. Member States shall adopt whatever of the provision referred to in the additional measures are required: second indent and, in respect of the first 12-month period, before 1 Febru- ary 1986,

3. ...

'Article 1 4. ...

1. The European Agricultural Guidance and Guarantee Fund (hereinafter called "the Fund") shall form part of the budget of the Communities. Article 3

It shall comprise two sections: 1. Intervention intended to stabilise the agricultural markets, undertaken according to Community rules within the framework of the common organisation of agricultural markets, shall be financed under Arti- — the Guarantee Section; cle 1(2)(b).

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3. ...

3. The authorities and bodies shall at least once a year draw up reports and a summary of accounts relating to the expenditure referred to in paragraph 1.... (Articles 6 and 7)

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Article 8 The sums recovered shall be paid to the paying 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, regulation or administrative action shall take the measures necessary to:

3. ...' — satisfy themselves that transactions financed by the Fund are actually carried out and are executed correctly;

In addition, Article 5 was reworded, and III — Submissions of the parties Article 5(2)(c) inserted as follows:

(1) The French Government 'Article 5

1. ... 12. Relying on Regulation No 729/70, as amended by Regulation No 1287/95, as well as the Court's case-law, the French Government contends that, in the process of clearing the accounts,9 the Commission 2. The Commission, after consulting the can exclude only expenditure incurred as a Fund Committee: result of the irregular or negligent applica- tion of Community law. As regards Arti- cle 8(2) of Regulation No 729/70, the French Government maintains that the amounts at issue in Decision 98/358 are the result neither of irregularities nor of (a) ... negligence.

(b) ...

15. The sums at issue cannot, however, be treated as if they stemmed from irregula- rities identified when checks were carried 14. In France, the way in which the system out. The supplementary levy is not part of of reference quantities, commonly known the regular revenue of the Community as the quota system, operates is that a budget. It has to be paid only where the reference quantity is first assigned to the Member State's total guaranteed quantity purchasers of milk. 12 The purchasers are has been exceeded. Before the system of then responsible for assigning individual additional levies, applicable in the milk reference quantities to the producers. For sector from 1992, 13 was introduced, only each milk year, which lasts from 1 April to the sums collected by the Member States 31 March of the following year, a compar- were taken into account. The Commission ison is drawn up between the reference also makes a distinction between the situa- quantity and the actual quantity of milk tion before and after 1992. produced. At the end of each milk year, the Office national interprofessionnel du lait et des produits laitiers (ONILAIT) informs every purchaser both of the final quantity of milk available to it and the extent to which this tallies with the actual quantity produced, that is to say, where necessary, whether the total of the individual refer- ence quantities has been exceeded. The 16. To avoid any misunderstanding, the amount of the supplementary levy is deter- French Government notes that it too con- mined on the basis of any excess, and it is siders that the sums will be payable as soon payable by the purchaser. ONILAIT noti- as they are able to be collected on the basis fies the purchaser of the supplementary levy of an enforceable judgment. But Regulation and issues a demand for payment, which No 729/70 does not permit the Commis- the purchaser can challenge before the sion to charge to a Member State sums administrative courts. The sums charged which that State is not in a position to collect.

18. It is in any event a fact that the 21. The French Government goes on to Commission has, on several occasions, explain the system for recovering claims amended the rules governing the recovery arising out of a public-law obligation. On of sums which are the subject of legal completion of the administrative proce- proceedings. As of May 1993, the effect of dure, the director of ONILAIT is, for the Commission's internal administrative example, authorised to issue an enforceable procedures was artificially to freeze the order, which can be challenged in the sums: that was the result of the court administrative courts. Interfering with that proceedings and the setting of a time-limit procedure would be contrary to the princi- for paying over the sums collected for the ple of the separation of powers, which is a milk years 1988/89 to 1992/93 at 30 June general principle of Community law, flow- of the next milk year. ing from the common constitutional tradi- tions of the Member States.

which they apply in comparable cases that is to say for the levy to be imposed on concerning purely national financial bene- purchasers. 15 Pursuant to Article 15(4) of fits, there is in principle no reason to Regulation No 1546/88, purchasers have assume that those rules and procedures to pay the levy within three months of the are contrary to the national authorities' end of every 12-month period. Pursuant to duty under Article 8 of Regulation Article 19( 1 )(a) of that same regulation, the No 729/70 to recover sums irregularly Member States must take the additional granted and that consequently they reduce measures necessary 'to ensure collection of the effectiveness of Community law...' the levy'. According to the second subpara- graph of Article 9(4) of Regulation No 857/84 as amended by Regulation No 1305/85 'the amount of the levy col- lected corresponding to the amount of the excess recorded shall be paid over to the Community'.

23. In addition, the French Government again submits that the need for an efficient system, as emphasised by the Commission, is guaranteed in France. Of all the Member States with significant levels of milk pro- duction, France has exceeded its quota on the fewest occasions. Moreover, the sums in 25. Collection of the levy plays a key role question are not unusually high and are, in the milk quota system. That it is after all, the subject of only 11 court collected promptly and in full is therefore actions. crucial to the operation of the system. The levy is, for example, fundamentally differ- ent from an aid scheme.

27. If the total guaranteed quantity has not concedes that it allowed a certain degree of been exceeded in a milk year, the Member flexibility in relation to pending legal States do not have to pay a levy to the proceedings. However, the Member States Community. If, however, the total guaran- were aware of this approach, which was to teed quantity is exceeded, the additional their benefit. But a Member State cannot levy has to be paid over to the Community. rely on the maintenance of a practice in The amount of the levy is determined on order to challenge the sums being taken the basis of the information provided by the into account at a later juncture. That would Member States pursuant to Article 19(3) of be tantamount to the Member State no Regulation No 1546/88. The Member longer being required to collect the levies. It State is required to ensure that all the levies would also mean that the Commission was due are collected. The Member States can never entitled to impose a time-limit. be exempted only in cases in which it is established that the sums cannot be col- lected, but there has been no negligence on the part of the Member State concerned. 30. The mere fact that certain sums have not been collected over a period of between 6 and 12 years shows that the French authorities did not exercise the necessary diligence. 28. The fact that a purchaser challenges the amount of the levy imposed on him has no bearing on the obligation of the Member State, vis-à-vis the Community, to take responsibility for the whole amount of the 31. Finally, the Commission's change in levies due. The outcome of an individual practice has not affected the financial legal action can affect the responsibility of situation of the Member States. The inclu- the Member State only if, as a result, the sion of negative corrections in a clearance figure for the total quantity delivered has to of accounts means that the sums subse- be amended. Until that happens, the Com- quently collected are channelled to the mission can rely on the data provided by national budget. But if they cannot be the national authorities. That in no way collected, they are borne by the Commu- interferes with the separation of powers. nity budget, provided they are not attribu- The clearance of accounts affects only the table to negligence on the part of the relationship between the Community and Member State. The Member State is there- the Member State; it has no impact on the fore treated in the same way as if Arti- relationship between the person liable for cle 8(2) of Regulation No 729/70 were the levy and the Member State concerned. being applied.

36. The problem can be resolved only if the Member State's obligations in relation to the Community in the context of the 34. The Spanish Government first draws imposition of the additional levy are attention to the legal basis of the additional defined. The Commission's approach can milk levy.16 In the context of the EAGGF 17 be endorsed only if the Member State has clearance of accounts, none of those provi- an obligation to pay in relation to the sions permit charges to be imposed in Community — independent of the obliga- respect of levies which it has not been tion of the producer or purchaser to pay. possible to collect because of pending legal Only subject to that condition, can the proceedings. It is the producers or purcha- Commission offset its annual debt in rela- sers who are liable for the levy. The tion to the Member State (reimbursement obligation of the Member States in relation by the EAGGF of the payments disbursed to the Community consists in demanding by the Member State) with its claim against payment with the requisite diligence in the Member States arising out of the supplementary milk levy.

16 — See Regulation No 804/68 as amended by Regulation No 856/84 and Résiliation No 857/84. 1 8 — J o i n e d Cases 205/82 to 215/82 (cited in footnote 14 1 7 — European Agricultural Guidance and Guarantee Fund. above).

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39. As it is not possible to identify an explicit legal basis establishing a specific obligation to pay incumbent on the Mem- 42. In Spain, the person liable for the levy ber State, the question arises whether the could challenge it before the courts in the Commission's approach may be justified same way as it could a tax demand under for reasons inherent in the system. In that national law. connection, however, the Spanish Govern- ment contends that the Community's finan- cial interests have not been damaged. The 19 — Joined Cases 205/82 to 215/82 (cited in footnote 14 Community has not incurred any expendi- above).

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consequently, also a matter for the Member levy in the milk sector' introduced in States — in the light of the requirements of 1992, 2 8this was subsumed in the total Community law. guaranteed quantities of the Member States.

48. Article 5c(5) of Regulation No 804/68, as amended by Regulation 856/84, contains 46. There is in any event an upper limit, set a theoretical classification of the additional out in Article 5c(3) of Regulation milk levy. According to that provision, the No 804/68, as amended by Regulation levies referred to in Article 5c are to be No 856/84. According to that provision, considered as 'intervention measures the sum of the individual reference quan- designed to regulate agricultural markets'. tities referred to in paragraph 1, that is to In addition, it stipulates the use to which say the reference quantity of the producers the monies are to be put, stating that they or of the purchasers, depending on the are 'to be allocated to the financing of formula selected, may not exceed a 'total expenditure in the milk and milk products guaranteed quantity' of the Member State. sector'. Article 9(4) of Regulation The 'total guaranteed quantity' is basically No 857/84, as amended by Regulation determined by reference to milk production No 1305/85 (see point 8 above), contains in a reference year (1981 or 1983), 26 and, further rules in this regard. in that connection, the total guaranteed quantity of the Member States may not, in turn, exceed a total guaranteed quantity at Community level. In order to ensure this, it was necessary to lay down 'total guaran- teed quantities' for each Member State, and 49. The fact that the levy is classified as an that was done in the second subparagraph intervention measure to regulate the agri- of Article 5c(3) of Regulation No 804/68, cultural markets means that it can be as amended by Regulation No 856/84. included in the Commission's annual clear- ance of accounts in relation to the Member States on the financing of the common agricultural policy.

the Communities. It basically divides the 52. It has also to be borne in mind that the Fund into the Guarantee Section and the additional milk levy falls within the context Guidance Section. In accordance with Arti- of the common organisation of the market cle 1(2), the Guarantee Section is to in milk and milk products, with the con- finance, inter alia, 'intervention intended sequence that an intervention measure for to stabilise the agricultural markets'. 29 milk basically applies, and the further Article 3 of the regulation stipulates that consequence of guaranteed prices for milk intervention intended to stabilise the agri- and milk products. 30 Only the surplus milk cultural markets, undertaken according to produced in excess of the fixed reference the Community rules within the framework quantity is subject to the additional levy. To of the common organisation of the agricul- an extent, then, it falls outside the frame- tural markets, is to be financed. By defining work of the guaranteed prices. The addi- the additional milk levy in Article 5c(5) of tional milk levy can therefore also be Regulation No 804/68, as amended by construed as one less expense. Regulation No 856/84, in the context of the organisations of the market in milk and milk products, as an intervention measure intended to stabilise the agricultural mar- kets, the Community legislature assigned it, for accounting purposes, to the European Agricultural Guidance and Guarantee Fund. 53. Pursuant to Article 4(1) of Regulation No 729/70, the Member States are to designate the authorities and bodies which they shall empower to effect the payments in respect of the levy at issue. Pursuant to Article 4(2), the Commission is to make available to Member States the credits necessary to make the payments. Pursuant 51. The fact that the Fund usually takes to Article 4(3), the bodies and authorities responsibility for expenditure advanced by in the Member States are to draw up the Member States in the form of the reports and a summary of accounts at least intervention measures intended to stabilise once a year. the agricultural markets, whereas the addi- tional milk levies constitutes revenue, is merely an accounting detail, given that the additional levy is treated as negative expen- diture. Once the additional levy has been defined as an intervention measure inten- ded to stabilise the agricultural markets and, consequently, assigned to the Eur- 54. Pursuant to Article 5(2)(b) of Regula- opean Agricultural Guidance and Guaran- tion 729/70, the Commission is to make up tee Fund, its further administrative and the accounts of the authorities and bodies, budgetary treatment follows from that on the basis of the documents referred to in basic classification, which derives from paragraph 1, before the end of the follow- the relevant provisions. ing year. Pursuant to Article 5(2)(c) of

55. On the basis of the abovementioned 57. Since the Decision at issue was specifi- provisions, the Commission adopted Deci- cally based on Regulation No 729/70, the sion 98/358 at issue, as is clear from the first step is to seek to identify a legal basis first, second and fifth recitals of the deci- for the negative corrections in that regula- sion. According to the ninth recital: tion. The French Government rightly cites in this connection Article 8 of Regulation No 729/70. Article 8(1) sets out the obli- gations of the Member States: they are, namely, to take, in accordance with national provisions laid down by law, regulation or administrative action, the measures necessary to satisfy themselves 'Whereas corrections are necessary in that transactions financed by the Fund are respect of the supplementary levies for milk actually carried out and are executed for the milk years 1985/1986 to 1992/1993 correctly; to prevent and deal with irregu- which are still outstanding because of legal larities; and to recover sums lost as a result disputes between buyers/producers and the of irregularities or negligence. According to competent authorities of certain Member the second subparagraph of Article 8(1), States; whereas these negative corrections the Member States are required to inform for France, [Belgium, Luxembourg, United the Commission of the measures taken for Kingdom and the Netherlands] amount to those purposes, 'in particular of the state of FRF 114 387 058; whereas the Commis- the administrative and judicial procedures'. sion nevertheless reserves the possibility to re-examine the corrections made under this clearance of accounts if, following the outcome of the legal proceedings, amounts are considered not to be due or to be non- recoverable.'

63. But Article 15(4)(1) makes specific pro- vision only for the purchaser's duty to pay as the person liable for the supplementary levy. It says nothing about the way in which 60. The French Government contends that, pending legal proceedings are to be handled since neither irregularities nor negligence in the context of the clearance of accounts. have been laid at the door of the French The Commission's argument could, how- authorities, the supplementary levies as yet ever, be construed to the effect that — to be collected cannot be charged to the since the deadline by which the person French Republic. As far as the legal pro- liable for the levy is required to pay it is ceedings which remain pending are con- clearly stated — it has to be assumed that, cerned, the abovementioned provision as of that deadline, the Member State can requires only that the French Republic be considered already to have collected the provide information. monies or, if it has not, it must bear the consequences. However, it remains unclear whether the Member State has to act as guarantor in this way because it is pre- sumed that negligence or irregularities can be imputed to it or because, once the time- limit for payment accorded to the person liable for that payment has expired, the 61. Viewed in the light of Article 8 of Member State is deemed to have a specific Regulation No 729/70, that line of argu- obligation to pay in relation to the Com- ment carries conviction. munity.

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66. Therefore, the only question is whether the obligation on the Member States to pay over to the Community budget the supple- mentary milk levy that has been or is to be 65. It is, however, hard to identify irregu- collected is an independent obligation, larities, since the second subparagraph of which stands alone from the obligation to Regulation No 729/70 specifically provides pay attaching to the person liable for the only for a duty to furnish information payment. The Commission has not cited a where proceedings are pending. The dura- legal basis for that. A legal basis is, tion of just one set of proceedings would however, discernible in the second subpara- then have to be deemed to constitute graph of Article 9(4) of Regulation negligence. That raises particular difficul- No 857/84, as amended by Regulation ties if, in the context of national court No 1305/85. According to that provision, proceedings, these cases are not unusually as referred to in point 8 above: prolonged as compared with purely national litigation. Provided the proceed- ings are being properly conducted, the time they take — however inconvenient in the individual case — cannot be held to con- stitute negligence or irregularities on the part of the Member State. So long as, in accordance with the judgment in Deutsche 'Where one or other of those quantities is Milchkontor, 31 the national courts and the exceeded,33 the amount of the levy col- national authorities apply the 'same rules lected corresponding to the amount of the and procedures' 32 when collecting levies as excess recorded shall be paid over to the those which they apply in comparable cases Community.'

69. In the context of the rules on the common organisation of the market in milk and milk products, the total guaran- teed quantity has yet another function, however. As I mentioned above, 35 it indi- 72. The abovementioned second subpara- cates the total volume of milk production graph of Article 9(4) of Regulation for which a Community price guarantee is No 857/84 was first introduced by Regula- assured. tion No 1305/85 for the purpose of deter- mining the use to which the levy could be put for two years. The Member States were permitted to use the monies to finance the 'milk annuity' within the meaning of Arti- cle 4(1)(a) of Regulation No 857/84. 36 On 70. The dominant factors here are the the basis of that provision therefore, it can regulatory function of the price guarantee, on the one hand, and the upper limit of the 36 — Article 4(1 Mal of Regulation No 857/S4 provides: '(1) in order to complete the restructuring of milk production at national or regional level or at tile level of the collecting areas, the Memher States may in connection 34 — For the sake of simplicity. I shall refer only to THE Total with the application of formulas A and B: guaranteed quantity and not the total of the reference (a) grant to producers undertaking to guarantee to quantities for direct sales. discontinue milk production definitively compensation 3.5 — See point 52 above. paid in one or more annual payments.'

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certainly not be assumed that the amount to pay. Since that provision was not of the levy to be paid to the Community, adopted until 1988, it does not regulate equivalent to the excess production that has the period between the introduction of the been established, has obligatorily to be paid additional milk levy in 1984 and the in all cases in which the total guaranteed adoption of this provision, cited as the quantity is exceeded. legal basis for the alleged obligation incum- bent on the Member States.

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78. That confirms, as is quite clear from France, ONILAIT — have already deman- the relevant Community provisions, that, ded payment of the outstanding levies and under Community law, the producer or are maintaining that position before the purchaser of the milk is obliged to pay the administrative court, as the proceedings levy, and the Member States' obligation to would otherwise have been terminated. pay derives from the obligation incumbent on the purchaser or producer.

81. As it has also to be assumed that the 79. The obligation is provided for in the existence of Member States' obligation to basic regulation 38 and confirmed in the pay in relation to the Community depends subsequent regulations. 39 Even the system on the original obligation to pay incumbent of additional levies in the milk sector, on the producers or purchasers, the Mem- which has been in force since 1992 and is ber State cannot be charged sums on which therefore not material to this case because an enforceable decision has yet to be taken. of the period of time at issue, retained the The complaint of the French Government basic principle that the producer or pur- must therefore be upheld. chaser is liable for the levy. 40

(2) order the Commission to bear its own costs and to pay those of the French Republic;

(3) order the Kingdom of Spain to bear its own costs.

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