C-146/99

' 1 . Production aid shall be granted to processors who have paid producers for their raw materials a price not less than the minimum price under contracts between 2. The proceedings concern the system of producers or recognised producers' groups minimum prices and production aid prod- or associations thereof, on the one hand, ucts processed from fruit and vegetables, in and processors or processors' groups and this case tomatoes. The Commission and associations thereof, on the other hand, the Italian Republic disagree essentially on legally constituted in the Community.' whether and to what extent the payment of a minimum price to the producer precludes agreements between producers and proces- sers on the distribution of the various additional costs. 4. The first subparagraph of Article 4(1) 1 — Original language: German. and Article 5(1) of Regulation No 426/86, 2 — Commission Decision 1999/186/EC of 3 February 1999 as amended by Council Regulation (EEC) excluding from Communiry financing certain expenditure incurred by rhe Member States in respect of the Guarantee Section of the European Agricultural Guidance and Guar- antee Fund (EAGGF) (notified under document number C(1999) 208) (OJ 1999 L 61, p. 34). 3 — OJ 1986 L 49, p. 1.

I - 9159

OPINION OF MRS STIX-HACKL — CASE C-146/99

No 1202/90 of 7 May 1990, 4establish the shall be concluded in writing. The proces- criteria by which the Commission must fix sing contract may take the form of a the minimum price to be paid to the commitment to supply between, on the producers and the amount of production one hand, one or more producers and, on aid. the other hand, their recognised group or association, acting as processor.

I - 9160

ITALY v COMMISSION

(d) the schedule for delivery to the proces- price or, in the case of supply commitments, sor; a declaration by the producer that the processer paid or credited to him a price at least equal to the minimum price.

(e) the price to be paid to the other contracting party for the raw materials excluding, in particular, costs con- 10. Article 5(2) of Council Regulation nected with packing, loading, trans- (EEC) No 729/70 of 21 April 1970 on the port, unloading and the payment of financing of the common agricultural pol- taxes. Any such amounts shall be icy, 7as amended by Council Regulation indicated separately. No 1287/95 of 22 May 1995, 8 provides as follows:

...'

'The Commission, after consulting the Fund Committee:

III — Facts of the case and submissions of on the basis of the trade agreement. The the parties contracts stated, accordingly, that the pro- cessers would make the bins necessary for harvest and delivery of the raw material available to the producers; for their part, the producers were obliged to return those 11. On 17 July 1996 the Italian associa- bins, and to pay financial compensation for tions of producers and processers conclu- any loss or damage to them. ded a trade-management agreement for tomatoes intended for industrial processing for the 1996/97 marketing year 9(herein- after 'the trade agreement'), in accordance with Italian Law No 88/1988 on trade agreements. 14. In determining the total Italian expen- diture chargeable to the Fund, the Com- mission made financial corrections to the detriment of Italy, declaring not to be chargeable to the Fund the sum of ITL 7 421 939 820 for aid for the proces- 12. As regards methods of payment, Arti- sing of tomatoes — incomplete payment cle 11 of that agreement provides that the of transport costs to tomato producers by producer, in his capacity as vendor, is to processers in Italy (item 4.6.8 of the pay the 'cost of transport relating only to Summary Report for 1995). That amount the collection of the... bins... necessary for corresponds to a flat-rate correction delivery of the raw material to the proces- of 2 % of the t o t a l a m o u n t of sing undertaking.' In that case, however, it ITL 371 096 991 020. was expressly agreed that the 'transport cost' chargeable to the producers and producers' associations would not, under any circumstances, be higher than 35% of the documented cost of the overall trans- port, including carriage of the raw material from the place of harvest to the processing 15. In Summary Report No VI/6462/98, plant, as that amount, 'as the Community consolidated version of 12 January 1999, legislation provides, shall be paid by the on the results of the checks carried out for processing industry.' the clearance of the Guarantee Section of the EAGGF accounts for 1995, the Com- mission explained the financial correction as follows:

17. The Commission then argued that the practice defended by the Italian authorities, which the Commission considered to be contrary to the Community provisions, could be likened to an incomplete payment of the minimum price to producers for the raw materials supplied and thus gave the processers an unfair competitive advantage Taking account of the information avail- over corresponding undertakings in other able, Commission staff consider that Member States. breach of the Community rules can be likened to an incomplete payment of the minimum price to the producers for the raw materials supplied, and achieved for the processing companies an unfair compe- 18. The Commission accordingly adopted titive advantage in relation to other coun- the decision which is the subject of this tries' undertakings. action. The action was brought by applica- tion dated 17 April 1999, which was received at the Court of Justice on 21 April 1999.

1

19. The Italian Republic claims that the Court should:

16. On 18 May 1998 the Italian Republic applied to the Conciliation Body on that question. In its final report of 22 October (1) annul Commission Decision C(1999) 1998, the Conciliation Body reached the 208 Final of 3 February 1999, 10 which conclusion that Article 6(3)(e) of Regula- excludes from Community financing tion No 1558/91 was not without ambi- certain expenditure incurred by the guity and, at least at first sight, implied Member States in respect of the Guar- that, in accordance with the interpretation antee Section of the European Agricul- of the Italian Government, the costs for tural Guidance and Guarantee Fund additional services could be charged to the producers separately from the minimum price to be paid by the processers. How- 10 — Decision 1999/186/EC (OJ 1999 L 61, p. 34).

20. In the submission of the Italian Gov- ernment, the fact that Article 6(3)(e) of (2) order the Italian Republic to pay the Regulation No 1558/91 lists a number of costs. costs which cannot be included in the minimum price does not mean that those costs cannot under any circumstances be charged to the producer. The producer has to bear various costs during the course of his business activity. If Article 6(3)(e) of 23. The Commission argues, essentially, Regulation No 1558/91 were to be inter- that the sharing in the transport costs, even preted as meaning that all additional costs though it is limited to 35% of the docu- are to be paid exclusively by the processer, mented cost of the overall transport, ulti- it would have provided that the processing mately reduces the minimum price and contracts had to state a net price. therefore fails to comply with the require- ment that the minimum price be paid 'ex- producer', in accordance with Annex I to Regulation No 1398/96. The Commission also refers to the close link which exists, in its view, between the costs for use of the containers necessary for the transport of 21. According to the Italian Government, the raw material and the transport itself. the purpose of the provision in question is Finally, it emphasises the objective of merely to avoid possible breaches of the protecting producers through the minimum rules on minimum prices through practices price system.

I - 9164

ITALY v COMMISSION

IV — Assessment A — The nature of the charges in question

26. Therefore, the nature of the charges in question is a matter in issue. 29. It became clear at the hearing that the containers are not used for the transport of 11 — In the further course of my argument the charges to be the raw material from the producer to the indicated separately, as stated in Article 6(3)(e) of Regula- processer, as might be inferred from Arti- tion No 1558/91, will be called 'transport costs'. 12 — See Annex I to Regulation No 1398/96 (cited in footnote cle 11 of the trade agreement, but are used 5). only for harvesting the tomatoes. Accord- 13 — In the further course of my argument the costs relating to the supply of containers, charged in accordance with the ing to the representative of the Italian trade agreement, will be called 'the charges in question'. Government, who was not contradicted

I - 9165

OPINION OF MRS STIX-HACKL — CASE C-146/99

by the Commission on this point, that not want the charges in question to be transport is carried out in other, larger, assessed separately from the transport containers. From now on I shall therefore costs, the Commission expressly withdrew proceed, in principle, on the basis of that objection of inadmissibility. If it had that — so far as can be seen — undispu- not done so, it would have been proper to ted contention of the Italian Government. discuss whether that defence put forward by Italy constituted a new argument and not a new matter of law. 16

30. The charges in question can be seen to be linked by the abovementioned transport costs, 14 because the containers are neces- sary for the 'carriage of the raw material to the processer' 15 and the maximum flat-rate 33. Thus, the nature of the charges in percentage of those charges, 35%, is calcu- question remains unclear. If those charges lated directly on the basis of the overall were to constitute transport costs, their transport costs of the raw material. permissibility would be questionable, given the clear w o r d i n g of R e g u l a t i o n No 1398/96.

I - 9166

ITALY v COMMISSION

cle 11 of the trade agreement. That, in 38. However, if the containers were used turn, constitutes evidence of the link, for the transport of the raw material to the stressed by the Commission, between the processing undertakings, such a distinction transport and the supply of containers. between the service provided by the pro- cessers and the actual transport would no longer be sustainable. In saying this, I do not disregard the fact that the actual service provided by the processers — supply of containers — is not affected by the use of the containers. What, however, would 35. Nor is the Commission wrong in point- appear to be decisive in such a case is that ing out that Article 11 of the trade agree- the service in question provided by the ment itself includes the charges in question processers constitutes a necessary prerequi- in transport costs and makes the amount of site for the transport of the raw material. those charges dependent on the amount of the overall transport cost.

39. A further argument in favour of the Commission's submission might be derived from comparison with the law on the 36. However, this point appears to be less international sale of goods. Incoterms convincing if it is borne in mind that, for 2000 17 provide, in the case of sale 'ex the purposes of the minimum price regime, works' (EXW), that in the event of any the nature of the charges in question cannot doubt, the charges for the collection of the depend on how they are designated by the goods are to be paid by the purchaser. This contracting parties concerned and that the means that in such a case — correspond- calculation of those charges has to do, not ing to the sale of the raw material ex so much with their nature, but rather with producer — the transport costs would whether they are permissible in the light of include charges of the type in question. their actual financial effects on the produ- cers.

4 4 . A r t i c l e 6(3)(e) of R e g u l a t i o n No 1558/91, considered in itself, does not 4 2 . A r t i c l e 6 ( 3 ) ( e ) of R e g u l a t i o n enable any view to be taken on the No 1558/91 also contains a restriction, permissibility of a possible assumption of which is that the amounts in question must the burden of costs by the producer. be indicated separately 'if applicable'. This Accordingly, that provision cannot be con- restriction may mean that costs are to or sidered in isolation; instead, the assessment can be indicated only and exclusively where must be made in the light of a comprehen- the organisation of the market allows the sive analysis of the minimum-price regime producer to bear them. in question.

43. To that extent, therefore, the argument of the Italian Government does not appear 45. In the present case, it is clear from Annex I to Regulation No 1398/96 that the minimum price to be paid to the producer 18 — See above, point 3 et seq. is a price 'ex-producer', with the logical

I-9168

ITALY v COMMISSION

47. Consequently, for the purpose of veri- fying that the minimum price has in fact been paid to the producers, it is necessary to be able to distinguish, in the processing 51. That objection calls for closer exam- contracts, the price paid from other services ination. Even if the partial assumption of of a pecuniary nature. This point is rightly the charges by the producers were to be emphasised by the Italian Republic. regarded, in principle, as permissible, because it is directed to remunerating a particular service not ascribable to the transport of raw materials to the processer or to their processing, the question of the methods of calculation in invoicing that 48. It follows that, in principle, the mini- service to the producers none the less mum-price regime does not preclude the warrants consideration. producers from assuming additional costs, provided that those costs are clearly indi- cated in the processing contracts and the objective of the regime is not thereby compromised. 52. In that connection, it should be noted that Article 11 of the trade agreement, 19 — See above, point 24. 20 — C. Blumann, Politique agricole commune: Droit commu- concerning the calculation of the amount nautaire agricole et agro-alimentaire, 1996, point 500. due in respect of the charges in question,

I - 9169

OPINION OF MRS STK-HACKL — CASE C-146/99

53. In that respect, the Commission rightly points out that the system of minimum prices rules are mandatory in nature. It 55. Finally, for the application of the therefore does not accept that those rules minimum price regime it is irrelevant that may, directly or indirectly, be rendered the minimum price is initially credited to nugatory. That does not, admittedly, pre- the producers and then offset with credits clude, in principle, the participation of the from the processers for reimbursement of producers in certain additional costs not additional costs, or that it is paid from the directly related to transport and processing; outset only partially. nevertheless, that participation must be compatible with the minimum 'ex-produ- cer' price system. Consequently, the possi- bility — in the sense of covering costs — which in principle exists of invoicing to the producers costs for particular services not directly related to the transport and pro- cessing of the raw materials finds its limits once payment in full of the mandatory 56. Accordingly, notwithstanding the nat- minimum price might thereby be frustrated. ure of the charges in question, it is neces- sary to agree with the Commission where it found that the processing contracts con- cluded on the basis of the trade agreement led to 'incomplete payment of the mini- mum price to the producers'. As the minimum-price regime is mandatory, how- 54. That danger exists where the costs ever, the corresponding expenditure was invoiced to the producer do not correspond not incurred 'in accordance with the Com- to the expenditure actually incurred by the munity provisions' within the meaning of processer in carrying out the services in Article 5(2) of Regulation No 729/70, as question. Therefore, in so far as the trade amended by Regulation No 1287/95.

(2) The Italian Republic shall pay the costs.

I - 9171