C-133/99

The first plea

3. On 17 April 1994 the Kingdom of the Netherlands brought an action for annul- 5. The correction challenged by the Netherlands Government that the Commis-

1 — Original language: French. 2 —OJ 1990 L 279, p. 22. 3 — OJ, English Special Edition 1970 (I), p. 218.

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sion made in its decision on the clearance of 83/417/EEC, 4which explicitly excludes its accounts for the Guarantee Section of the use, must be unconditionally applied. Fur- EAGGF for 1995 is based on consider- thermore, the production of EMST was ations which are very clearly set out in the considered not to be in conformity with the summary report on the results of inspec- provisions of Article 1(1) and (3) of Regu- tions concerning the clearance of the lation (EEC) No 2921/90. EAGGF Guarantee Section accounts for 1995. The report states at paragraph 4.3.1:

After careful consideration, the Commis- 4 — Council Directive of 25 July 198 Î on the approximation of sion concluded that the use of AAS could the laws or the Meniher States relating 1 to certain lacto- proteins (caseins and casemates) intendeu for human con- not be permitted because Council Directive sumption (OJ 1983 L 2.Í7, p. 25).

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AAS for the p e r i o d 15 O c t o b e r ified them are different and because one 1995-22 March 1996 must still be fixed relates to the composition of certain casei- and will be dealt with in a later ad hoc nates while the other relates to the permis- decision. It can be noted here that the sibility of a manufacturing process. I must correction for the use of AAS is only in therefore distinguish them in my analysis. respect of casein which was sold as edible for use in the EU.

8. I will begin by considering the observa- Correction: tions submitted on the problem of the presence of AAS in certain caseinates marketed in the Community as intended for human consumption. Use of AAS — NLG 32 746 529

EMST — NLG 6 436 077 9. The presence of AAS, which is not disputed at all by the Netherlands Govern- Total correction: ment, is not expressly prohibited by Regu- lation No 2921/90, whether one refers to Budget heading 2024— NLG 39 182 606' its various articles or to Annexes I, II and III on the composition requirements for caseins and caseinates eligible for aid.

13. In its application, the Netherlands Government, supported by the French 11. Section II of Annex II to the directive Government, disputes that the grant of sets out the standards applicable to edible aid is subject to compliance with the rules caseinates, which relate to: laid down in Directive 83/417 and submits in the alternative that the presence of AAS in caseinates does not prohibit the casei- nates from being marketed for human consumption.

(a) essential factors of composition;

14. Under its main submission, the Nether- lands Government puts forward two argu- ments. It states, first, that the legal basis (b) contaminants; and the purpose of Regulation No 2921/90 are different from those of Directive 83/417.

(c) impurities; 15. Regulation No 2921/90 forms part of the common organisation of the market in milk and milk products and is intended to achieve objectives of the common agricul- tural policy, since the aid provided for by (d) technological adjuvants of edible the regulation is aimed at stabilising quality; production prices for lactoproteins.

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23. According to the Netherlands Govern- ment, the existence of that proposal amounts to an acknowledgement by the 20. In order that compliance with the rules Commission that the necessary link laid down in Directive 91/628/EEC 6on between the regulation and the directive is that subject be a condition for the grant of missing.

6 — Council Directive of 19 November 1991 on the protection 7 — Council Regulation of 18 December 1997 amending Regu- of animals during transport and amending Directives lation (EEC) No 805/68 on the common organisation of the 91/425/EEC and 91/496/EEC (OJ 1991 L 340, p. 17). market in beef and veal (OJ 1997 L 356, p. 13).

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29. The Commission states that Commu- No 2921/90 should be regarded as specific nity law cannot be divided into strictly legislation derogating from a general provi- separate compartments, between which, in sion relating to the functioning of the the absence of express provision, there is no common market. communication.

30. In the Commission's submission, the 34. In the Commission's submission, the unity of Community law must be laid down argument which the Netherlands Govern- as a principle, each of the rules of Com- ment seeks to derive from the provisions munity law having to be interpreted, in the adopted in order to make payment of absence of an express provision to the export refunds for cattle subject to com- contrary, in the light of the others. pliance with the rules on the protection of animals during transport is entirely without merit because, concerning intra-Commu- nity transport, Directive 91/628 had no intrinsic link at all with the grant of 31. The fact that the aid in question falls refunds, which is dependent on the actual within the framework of pursuit of the arrival of the animals in a non-member objectives of the common agricultural pol- country, so that, if it were sought to require icy cannot lead to the grant of aid for a compliance with its provisions when ani- product whose sale on the Community mals were transported for export, that had market is prohibited by a directive that to be done by amending the provisions on falls within the policy of approximation of the grant of refunds. laws.

40. It should be stated at the outset that the Commission appears to put forward a weighty argument when it refers to the necessary unity of Community law. In the 37. First, the second proposal would never Community legal system as elsewhere, it is have been drawn up if the first had been not desirable for the left hand not to know submitted in the belief that its adoption what the right hand is doing, and the was necessary in order to create a link Commission is right to note that, as between the regulation and the directive, Article 38(2) of the Treaty states, 'save as and secondly, its preamble refers to the fact otherwise provided in Articles 39 to 46, the that caseinates must 'also meet the require- rules laid down for the establishment of the ments laid down in the directives on food- common market shall apply to agricultural stuffs and that, for supervision reasons, products'. specific provision should be made not to make the grant of aid subject to compliance with the requirements of those Directives'.

41. However, to go from there to main- taining, as the Commission does, that the fact that the regulation and the directive were adopted on two different legal bases, Articles 43 of the Treaty for one and 38. The Commission also observes that the Article 100 of the Treaty for the other, is Netherlands Government has still not pro- irrelevant entails taking a step before which duced any express statement on its part I hesitate in the present case. indicating that the grant of aid under Regulation No 2921/90 is not subject to compliance with the conditions under Directive 83/417. 42. As the Netherlands Government observes, the Court has held 8 that 'Ar- ticle 43 of the Treaty is the appropriate legal basis for any legislation concerning

44. But does adding a condition not, in fact, amount to amending the regulation, since it will lead to a refusal of aid for caseinates which, under the regulation alone, could have qualified for aid? 48. Consequently, it is my view that, even if the presence of AAS in caseinates intended for human consumption is pro- hibited by Directive 83/417, a matter which I will have to elucidate below when exam- ining the submission put forward in the alternative by the Netherlands Govern- 45. In light of the case-law cited above it ment, that prohibition does not justify the appears hardly practicable to accord a refusal of aid laid down by Regulation directive based on Article 100 of the Treaty No 2921/90 for caseinates sold for human such an effect in relation to a regulation consumption which meet the conditions based on Article 43 of the Treaty. prescribed by the regulation.

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49. Even if Regulation No 2921/90 must, 52. Article 3 provides: as the Commission submits, be interpreted in the light of Directive 83/417, that would still not, in my view, justify the contested decision.

'The names referred to in the Annexes shall be reserved for the products defined and must be used commercially to designate those products.' 50. Careful reading of the directive, in particular of Articles 2 and 3, reveals that the standards laid down by it apply only to products for which the designation 'edible casemates' is claimed. 53. The second indent in Article 2 leaves clearly open the possibility of marketing products which fall within the category of caseinates but are not capable of claiming the designation 'edible caseinates', pro- 51. Article 2 reads as follows: vided that their labelling does not, expressly or by implication, use that desig- nation.

58. It remains to consider, briefly, the parties' arguments on the two proposals 56. It is accordingly difficult to see how, to amend the regulation submitted in turn assuming that a link must be established by the Commission. between the regulation and the directive, the final use of the caseinate could affect the grant of aid. Aid is payable for all caseinates meeting the requirements of the regulation, but it is for the producer, when marketing them, to comply with the rules for the use of the designation 'edible caseinates' laid down by the directive. 59. Even though it appears to me to be difficult to draw definitive conclusions regarding the correct interpretation of Regulation No 2921/90 from texts which never got past the stage of Commission drafts and which were not presented until 1997, that is to say after the period to which the Commission's contested decision 57. The sale under that designation of relates, I consider that those drafts — caseinates containing a product unauth- essentially their preambles — support the orised by the directive clearly constitutes an Netherlands Government's case. It may be infringement of Community law, which recalled that in the preamble to the first every Member State is duty bound to make proposal, dated 3 October 1997, the Com- unlawful. If it does not do so, the Com- mission stated that 'experience has shown mission is certainly justified, as the French there to be a risk that caseins and caseinates Government most rightly observes, in ask- qualifying for aid but not complying with ing the Court of Justice to find that there the provisions of the directive may nonethe- has been a failure to fulfil obligations. less be marketed in the Community for What it cannot do on the other hand, in my human consumption; ... in order to avoid view, is to penalise that wrongful use of a that risk without having to introduce a designation by refusing to grant aid, given cumbersome and restrictive system of con- that aid is not limited to caseinates capable trol, it is appropriate to adapt the require- of claiming the designation 'edible casei- ments laid down under the aid regime to nates'. The regulation sets out the products those of the directive'.

65. This wording merely confirms that two sets of conditions are to be complied with,

62. In any event, the first proposal does not in any way state that the marketing in the 9 — Emphasis added.

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but does not establish that aid could be Directives on foodstuffs applying to casein granted only to caseinates intended for and caseinates shall not be a requirement human consumption that comply with the for the grant of aid.' requirements of the directives. In the sec- ond recital, it is stated, on the contrary, 'that Member States are required to ensure that the Directives are complied with by means of appropriate measures'. 10 That corresponds to the French Government's 69. Translated into familiar language, the line of argument, which I set out and text effectively states: if anyone could have approved of above. thought that the aid provided for by this regulation could be granted only for caseins and caseinates complying with the con- ditions laid down by the directives on foodstuffs, they are hereby informed that this is not the case! Put differently again: 66. The second recital then states: 'making there is not, and never has been, a link checks on the destination of products for between Regulation No 2921/90 and which aid is granted would unnecessarily Directive 83/417. complicate the aid payment procedure; ... as a result, specific provision should be made not to make the grant of aid subject [il convient de dissocier explicitement 11 l'octroi de l'aide ...] to compliance with the requirements of those Directives'. 70. Although I have thus reached the con- clusion that the contested decision is unlawful in so far as it deducts NLG 32 746 529 from sums due to the Netherlands because of the purportedly unlawful pay- 67. In other words, that separation was ment of aid for caseinates containing AAS, already implicit, but should now be made it is none the less necessary, for the sake of explicit. completeness, to consider the submission put forward by the Netherlands Govern- ment in the alternative, that Directive 83/417 does not prohibit the presence of AAS in edible caseinates. 68. Consequently, the Commission pro- posed adding the following subparagraph to Article 1(1) of the regulation:

72. As AAS does not play any role in the manufacture of caseinates, it cannot be classified as a technological adjuvant. In relation to caseinates, it should be classified as an additive. 76. The Commission puts forward an entirely opposing view. In its submission, the list of authorised substances in casei- nates set out in Annex II to Directive 83/417 is exhaustive. A caseinate contain- ing a substance not included in the list, 73. The N e t h e r l a n d s Government whatever the role played by that substance, acknowledges that the labelling used by does not comply with the directive's the undertaking alleged to have wrongly requirements. The Commission recalls that received aid states 'edible casëinate with in 1989 it had planned, at the request of processing aid aluminium ammonium French manufacturers, to authorise use of sulphate', but that merely provides the aluminium derivatives, in particular alu- information that AAS is a technological minium sulphate, but that, following a adjuvant for the purchaser's use of the meeting on the subject — at which a caseinate. representative of the Netherlands under- taking in question indeed participated — it decided, following the strong opposition which it had encountered, to abandon that proposal. 74. The presence of AAS in caseinates endows them with technical properties that prove useful in the manufacture of certain foodstuffs. Adding AAS after the end of the caseinate's manufacturing cycle is not as useful, since it is not possible to obtain a good level of homogeneity of the product. 77. As regards labelling, the Commission considers that the labelling used in the present case cannot remedy the fact that caseinates containing AAS cannot claim the

78. As regards Directive 74/329, the Com- mission doubts that Article 9 concerns the addition of AAS. Above all, however, one cannot lose sight of the fact that the precise rules on the composition and labelling of 82. At the time when that directive was caseinates laid down in Directive 83/417 drawn up, a clear distinction was not were adopted to protect public health. drawn between a technological adjuvant or processing aid and an additive, as is shown by the fact that the substances authorised by Annex I to the directive as technological adjuvants include substances which are clearly additives. The distinction between an additive and a technological adjuvant or processing aid was introduced 79. The point is to prevent caseinates used only by Council Directive 89/107/EEC of in foodstuffs for human consumption from 21 December 1988 on the approximation presenting a risk to public health. That is of the laws of the Member States concern- why caseinates can contain only substances ing food additives authorised for use in recognised as being harmless, which is foodstuffs intended for human consump- specifically not the case with regard to tion. 13 In that directive, food additive AAS. means 'any substance not normally con- sumed as a food in itself and not normally used as a characteristic ingredient of food whether or not it has nutritive value, the intentional addition of which to food for a technological purpose in the manufacture, processing, preparation, treatment, packag- ing, transport or storage of such food 80. Finally, the Commission raises the results, or may be reasonably expected to question whether AAS does in fact play result, in it or its by-products becoming no role in the manufacture of caseinates directly or indirectly a component of such produced by the undertaking in question, foods'. A processing aid is defined as 'any inasmuch as it alters the degree of acidity of substance not consumed as a food ingredi- the product, and therefore affects its final ent by itself, intentionally used in the properties, and observes that this question processing of raw materials, foods or their arises from the fact that the presence of ingredients, to fulfil a certain technological AAS is not necessarily desirable for all intended uses of caseinates produced by that undertaking. 13 —OJ 1989 L 40, p. 27.

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87. Faced with that uncertainty, a lawyer 91. The fact none the less remains that who is not privileged to be also a specialist Article 4 only sets out labelling rules for in the food industry is confronted with a caseinates 'without prejudice to Directive formidable problem. 79/112/EEC and without prejudice to the provisions to be adopted 14 by the Com- munity concerning the labelling of food- stuffs not intended for the ultimate con- sumer'.

88. Is the view to be taken that, in the absence of a prohibition, AAS must, by virtue of its quality as an additive for caseinates, be regarded as authorised or, on 92. However, I consider that the absence the contrary, that, given its dual nature, it from the directive of any requirement that has to be prohibited, since it is not included labelling mention additives in caseinates in the list of authorised technological can reasonably be interpreted as meaning adjuvants construed in a broad sense? that any substance not listed in Annex II is precluded.

94. I thus come to the conclusion that, as packed into bags. The collection takes regards the submission put forward in the place over several days, or even a week. alternative, the Netherlands Government is wrong, that is to say that the designation 'edible caseinate', as governed by Directive 83/417, may not be claimed for caseinates containing AAS. 97. The Commission bases its refusal to take on the cost on the fact that EMST is not a product meeting the requirements of Article 1 of Regulation No 2921/90, more specifically those laid down in Article 1(1) and (3) which provide: 95. However, as I have already stated above, I consider that the primary sub- mission put forward by the Netherlands Government is convincing and therefore that the presence of AAS in a caseinate used, after it has been marketed by the '1. Aid shall be granted to producers of manufacturing undertaking, for human casein and caseinates only if these products consumption does not make it unlawful to grant in respect of that caseinate the aid provided for in Regulation No 2921/90.

— have been produced from skimmed milk of Community origin or raw casein extracted from milk of Commu- nity origin,

Aid granted for EMST

— meet the composition requirements of Annex I, II or III,

96. I thus come to the second correction made by the Commission in respect of sums payable by the EAGGF to the Netherlands, which relates to the product called EMST. This product is manufactured, according to — are packaged as stipulated in Article 3. the Netherlands Government, from resi- dues of semi-finished products that arise during the manufacture of caseinates. The residues are collected and, once there is a certain quantity of them, they undergo final processing into caseinates before being

3. For the purposes of this Regulation a 99. The Commission responds to these production batch must consist of products arguments by stating first of all that it is of identical quality made on the same day. incorrect to claim that the residues However, where the total production of recovered are only semi-finished products casein and caseinates of the establishment which, since the drying cycle has not been concerned during the previous calendar completed, are not caseinates. They are year did not exceed 1 000 tonnes, the well and truly caseinates, lost during the production batch may consist of products final stage of the production process, which made during the same calendar week.' are then reintroduced into the production process — and not just in order to be dried to the desired degree since the material recovered contains impurities, which pre- suppose genuine reprocessing. This analysis of the EMST production process also allows the Commission to dispute that batches of EMST are made in a day. In its submission, these are batches made up of products made on different dates, which are collected in order to be processed into products eligible, from the point of view of their quality, for aid, an operation which Article 1(3) of Regulation No 2921/90 prohibits. 98. The Commission submits that EMST is a product made from caseinates and in batches which do not correspond to the production of a single day. The Nether- lands Government challenges that analysis, arguing, first, that EMST is made from residues of semi-finished products which, by definition, are not yet caseinates at the time of their collection given that this takes place before the end of the drying process and, second, that 'made' in Article 1(3) of the regulation must be understood as 'pre- pared' and EMST does not pose any problem from the point of view of the 100. This method is impermissible as it requirement laid down in that provision lends itself to speculation, because batches since batches of EMST products contain can be prepared at the time when the only caseinates whose production process, amount of aid is highest. As regards the ending with the products' being packed absence of objections on its part when the into bags, is carried out in a day. The Netherlands Government raised with it the Netherlands Government also refers to question of the interpretation of the qual- exchanges of correspondence between itself ifying conditions for aid under the regu- and the Commission, showing that the lation, the Commission categorically dis- Commission, duly informed of how EMST putes that its responses to ambiguous is produced, found no reason why that questions may, in good faith, be interpreted product should not be eligible for the aid as expressing any approval of the produc- provided for by the regulation. tion methods for EMST.

104. Secondly, it appears to me to be impermissible, once the method for calcu- lating the amount of aid has taken into account the losses rightly considered to be 103. Two factors at least convince me. inevitable in the production process, that First, I cannot support the Netherlands an undertaking, instead of reducing its Government in its contention that residues losses as far as possible, which it is entirely which are reused in order to make EMST entitled to do, should be able to do some- are not caseinates, as it appears to me that, thing entirely different, namely recover lost in arguing this, it is playing with words. It material in order to reintroduce it into the is true that those residues are not caseinates production process in such a way as to with the characteristics required for the avoid any losses. This method of achieving grant of aid. However, where Article 1(1) maximum profit goes beyond mere prohibits the production of caseinates eli- rationalisation of the production process. gible for aid from caseinates, it is clearly It infringes the rules set out in the regu- not directed at caseinates which already lation.

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105. I therefore conclude that the Nether- The second, third and fourth pleas lands Government is wrong in its challenge to the Commission's decision to reject the expenditure incurred in granting aid for EMST products.

Breach of Regulation No 729/70 and of certain general principles

108. The Netherlands Government's sec- ond plea alleges infringement of Article 5(2)(c) of Regulation No 729/70, as amended by Council Regulation (EC) No 1287/95 of 22 May 1995 amending Regulation No 729/70 on the financing of 106. Having thus completed the examin- the common agricultural policy, 1 5and ation of the lawfulness of the Commission's breach of the principle of cooperation in decision as to the substance, that is to say good faith, the principle of consultation as regards its compliance with the rules and the preventive approach. governing the grant of aid for caseinates, I am in a position to address the criticisms made by the Netherlands Government concerning the circumstances in which that decision was adopted.

113. In its rejoinder, the Commission expresses its surprise and indignation at 110. I observe at the outset that those that assertion, and I fully understand the principles, which are not contested by the Commission. I can only agree with the Commission, are only a guide for the Commission when it states that it was not conduct which the Commission and the in any way required to act on the comments Member States must adopt during the made by the conciliation body. It is one procedure for the clearance of accounts thing to agree to conciliation, that is to say and that, before it can be found that they to participate in a process intended to have been breached, a thorough examin- reconcile points of view and to seek a ation must be carried out of the circum- friendly solution which both the Member stances of the case. State and the Commission could endorse, but it is another to give up one's own decision-making power. Accordingly, one cannot infer an offhand attitude to the conciliation process from the fact that the Commission adhered to its initial position. 111. As regards cooperation in good faith and consultation, the Netherlands Govern- ment alleges, essentially, that the Commis- sion did not alter its position after the conciliation body submitted its report, which was, however, extremely critical of 114. The various exchanges of correspon- the Commission since it stated that the dence indeed contradict the Netherlands Commission's line of argument was not Government's claims. The Commission entirely clear, that the Commission had not took into account both the Netherlands shown that the Member States had to be Government's arguments and the report by familiar with its interpretation of Regu- the conciliation body, but simply was not lation No 2921/90, and that the Commis- persuaded that it should alter its point of sion's position on EMST appeared difficult view. to understand.

121. It is true that the Netherlands auth- orities asked the Commission whether it is possible to reprocess defective products in so far as they have not yet given rise to a 118. As regards AAS, the Commission's refusal to grant aid, but they did not defence is not absolutely convincing, as it expressly ask whether it is permissible to leaves unresolved the question whether the recover residues, which are inevitable in the Netherlands Government could not but be manufacturing process, in order to reintro- aware that products granted aid under duce them into that process, so they can Regulation No 2921/90 had to comply hardly seek today to interpret the Commis- with the requirements of Directive 83/417 sion's response as approving that practice.

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It should also be noted that the Commis- letters to the Netherlands Government did sion, in its responses, has always stressed the Commission, having regard to the the need to observe strictly the conditions questions to which it replied, provide laid down by the regulation, in particular assurances to the Netherlands Government as regards the composition of batches in as regards a right to aid for that type of respect of which aid is applied for. product.

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State to which the decision was calculating the amount of the correction addressed was closely involved in the made, that is to say the figures notified by process by which it came about and the Netherlands authorities and by DMV was aware of the reasons for which the Campina for the financial years 1993 to Commission took the view that it 1995 and, in the absence of notification, an should not charge the sum in dispute estimate of EMST production for the to the EAGGF (see, inter alia, Case financial year 1992. C-27/94 Netherlands v Commission [1998] ECR I-5581, paragraph 36).

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Conclusion

130. Consequently, I propose that the Court should:

— annul the Commission decision of 3 February 1999, notified on 12 February 1999, on the clearance of the accounts presented by the Member States in respect of the expenditure for 1995 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund in so far as it excludes the sum of NLG 32 746 529, concerning caseinates containing AAS, from the financing of expenditure declared by the Kingdom of the Netherlands in respect of aid for the processing of skimmed milk into casein and caseinates;

— dismiss the remainder of the application;