C-403/99

1 — Original language: Spanish. 2 — Case C-100/99 [2001] ECR I-5217, p . I-5219.

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the new unit of account of the common below that applicable previously, the Mem- agricultural policy, in place of the ecu. ber State concerned may make compensa- tory payments to farmers in three succes- sive tranches lasting 12 months each, starting on the date of the operative event.' This compensation must be granted in the form of an addition to the direct aid whose amount has decreased in national currency. 5. Council Regulation (EC) No 2799/98 3 accordingly provided that prices and amounts fixed in legal instruments relating to the common agricultural policy should be expressed in euro (Article 2(1)). Aid, like other payments, is granted to farmers in participating Member States in euros, while in all other cases it is converted into national currency by means of the applic- able exchange rate (Article 2(2)). The 8. It is quite clear that, since the introduc- applicant is one of the participating Mem- tion of the euro, these variations cannot ber States. arise in relation to the Member States by which it was adopted because, since its introduction, the single currency has been used to express amounts relating to the common agricultural policy.

10. Among those provisions, Article 3(1) 13. Article 5 of Regulation No 2813/98 of Regulation No 2800/98 provided that provides that, in the case of participating compensatory aid was to be granted where Member States, for the purpose of convert- 'the conversion rate for the euro into ing aid into national currency, the conver- national currency units... applicable on sion rates for the euro, fixed irrevocably by the day of the operative event in 1999 [to the Council, are to apply. direct aid] is lower than the rate applied previously'. The amount of the compensa- tion was calculated pursuant to Article 5 of Regulation No 2799/98. 14. Article 6 of Regulation No 2813/98, the correct interpretation of which is at issue between the parties, provides:

In other words, the legislature decided to equate possible falls in the conversion rate resulting from the replacement of the ecu by the euro with a hypothetical revaluation 'The maximum amount of the compensa- of the currency of payment and, as far as tory aid referred to in Article 4(2) resulting the present proceedings are concerned, the from a reduction in the agricultural con- arrangements they applied were identical. version rate frozen until 1 January 1999 shall be increased by the inverse of the relation between the rate referred to in Article 5 and the agricultural conversion rate referred to above.' 11. In implementation of the transitional legislation, the Commission adopted Reg- ulation (EC) No 2813/98. 7

18. For its part, the Commission argues that Article 6 of Regulation No 2813/98 is exceptional in nature and applies only to direct aid subject to a frozen conversion rate where the date of the operative event was 1 January 1999.

Analysis of the application

19. The Commission explains in detail the l e g i s l a t i v e origin of R e g u l a t i o n No 2813/98, the principal stages of which 16. The Italian Government puts forward can be summarised as follows: two pleas in law to substantiate its applica- tion for annulment. According to the first plea in law, Regulation No 1639/1999 is invalid because it is contrary to the provi- sions of Regulation N°s 2799/98, 2800/98 and 2813/98, because it does not contain an adequate statement of reasons and — pursuant to Article 3 of Regulation because its adoption involved a misuse of (EC) No 1527/95 9 and subsequent powers. According to the second plea in analogous provisions, the Community law, the defect justifying the annulment of legislature froze the conversion rate Regulation No 1639/1999 arises from an infringement of the principle of equal treatment of Community farmers, laid 9 — Council Regulation of 29 June 1995 regulating compensa- tion for reductions in the agricultural conversion rates of down in Article 34 EC. certain national currencies (OJ 1995 L 148, p. 1).

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applicable to direct aid up to and — that measure was only to have including 1 January 1999; favoured farmers whose subsidies had changed as a result of the introduction of the euro, in other words from 1 January 1999, and who were also entitled to expect freezing of their direct aid, in other words, up to and including 1 January 1999; — in accordance with Article 123(4) EC, the Commission provided in Article 5 of Regulation No 2813/98 that, from 1 January 1999, the applicable conver- sion rate, irrevocably approved by the — for those reasons, Regulation Council, would apply to direct aid to No 1639/1999, the purpose of which participating Member States; is to calculate the amount of aid where the operative event occurred after 1 January — that is to say, on 1 July 1999 — does not apply the corrective increase.

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appropriate to replace it with the presumed ceedings, the Italian Government ques- intention of the legislature, which would tioned the relevance and plausibility of have to be inferred from the preparatory the Commission's explanation, formulating documents. its own theory concerning the reasons for the introduction of the corrective increase. That argument, which, unlike the Commis- sion's contention, has no basis anywhere in the pleadings, should, in any event, be ruled out of time, since it was put forward after expiry of the period allowed for submis- Furthermore — the Italian Government sions by the parties. goes on to say •— the same problem of legitimate expectations arises, in similar terms, in the case of farmers whose entitle- ment to aid arises after 1 January.

tional compensatory aid provided for in includes the provision whose interpretation Article 4(2) of the same regulation, to is in dispute, contains the implementing which Article 6 refers. However, no useful rules for all direct aid the entitlement to guidance can be found in the wording of which arose in 1999. Article 4(2) either, since it merely deter- mines the method of calculating the transi- tional compensatory aid by reference to the ordinary arrangements laid down in Arti- cle 5(2) of Regulation No 2799/98. Arti- cle 4(1) of Regulation No 2813/98 alone points us in the right direction: Article 6, 29. However, doubts soon begin to emerge. together with the remaining provisions of Title II, is one of the 'detailed rules for granting the compensatory aid referred to in Article 3 of R e g u l a t i o n (EC) No 2800/98'. Article 3(1) of Regulation No 2800/98 restricts the granting of com- 30. First, Title II of Regulation pensatory aid to situations where 'the No 2813/98 states that it implements Arti- conversion rate for the euro into national cle 3 of Council Regulation No 2800/98, currency units or the exchange rate for the which thus appears to become the legal euro into national currency applicable on basis for Title II. However, there is no the day of the operative event in 1999... is provision in that regulation authorising the lower than the rate applied previously'. 11 Commission to determine the corrective Although the purpose of the words I have increase under Article 6. The validity of highlighted appears only to be to determine Article 6 would be open to question, there the applicable exchange rate in temporal being no provision for it in the enabling terms, given that the conversion rates are legislation, were it not for the fact that fixed and irrevocable, it can be inferred neither party has raised the point and, in from the scheme of the transitional particular, the fact that Regulation arrangements that the aid to which they No 2799/98, which in principle concerns refer is all aid for which the operative event the agrimonetary arrangements for the took place in 1999, and that aid alone. euro, contains, in its Article 10(1), a cur- ious enabling clause which, in broader terms than usual, empowers the Commis- sion to adopt the transitional measures which 'prove necessary to facilitate the initial application of [Regulation No 2799/98]', which will 'remain applic- able for the period strictly necessary to facilitate the introduction of the new arrangements'. While it is true that the purpose of Regulation No 2813/98 is to implement Regulation No 2800/98, it is 28. That being the situation, it appears that also true that Regulation No 2800/98 Title II of Regulation No 2813/98, which refers to Regulation No 2799/98 as regards calculating the amount of the aid. This complex series of references could be used 11 — Emphasis added. by the Commission to create the arrange-

ments for corrective increases, relying on 32. Second, I would point out that the Article 10 of Regulation No 2799/98. This, wording of Article 6 of Regulation in all probability, is how the second refer- No 2813/98 is unusual, if one accepts the ence in the preamble to Regulation applicant government's interpretation as No 2813/98, which mentions Regulation correct. What the provision actually states No 2799/98, 'and, in particular, Article 10 is that there will be an increase in 'the thereof', should be interpreted. maximum amount of the compensatory aid referred to in Article 4(2) resulting from a reduction in the agricultural conversion rate frozen until 1 January 1999'. 12 If, as Italy claims, the increase were to apply to all direct aid the entitlement to which arose in 1999, that clarification would be super- fluous because, under Regulation No 1527/95 and other relevant provisions, 31. These considerations lead me to con- all direct aid granted under the common clude that, appearances notwithstanding, agricultural policy was frozen until 1 Jan- the legal basis for Article 6 of Regulation uary 1999. No 2813/98 is not Article 3 of Regulation No 2800/98 but rather Article 10 of Reg- ulation No 2799/98. Consequently, rather than the reference to 'the day of the operative event in 1999' in Article 3 of Regulation No 2800/98, I prefer the state- ment in Article 10 of Regulation No 2799/98 that the measures will remain applicable 'for the period strictly necessary 33. It is necessary to go beyond that first to facilitate the introduction of the new superficial reading to understand that the arrangements'. This limited power of inter- significant, defining element of the provi- vention is not conducive to the interpreta- sion is not so much the 'compensatory aid' tion put forward by the Italian Govern- as the 'reduction' which gives rise to it: the ment, which, by extending the corrective compensatory aid which results from a increase to all aid for which the operative reduction in the frozen conversion rate is event occurred in 1999, amounts to a eligible for the corrective increase. It so redefinition of the method of calculating happens that reducción, réduction, reduc- the amount of compensatory aid, and is tion, riduzione and Verringerung — to cite different from the method laid down by the just the main language versions — all Council in Article 5 of Regulation contain the same ambiguity; the word No 2799/98. 'reduction' implies both the action and the effect of reducing. There is, thus, no distinction between the action designed to make a specific variable smaller — such as the adoption of a lower conversion rate by the legislature — and the outcome of that action. It is this aspect of the word which, at first sight, makes the Italian Govern-

In other words, for the purposes of the arrangements for direct aid, variations in 34. Therefore, of the possible interpreta- the rates applied to the common agricul- tions of Article 6 of Regulation tural policy as a result of the adoption of No 2800/98, only intervention by the leg- the euro are similar to an evolution of the islature, in the form of lowering the agri- exchange rates in line with the market. cultural conversion rates which it had itself However, this evolution is characterised by previously frozen, amounts to a reduction the fact that it is subject to rises and falls in in the strict sense indicated above. If a relation to the earlier prevailing situation, comparison of the frozen agricultural con- rather than to increases and reductions. version rate with the exchange rate applic- able on a date after the freeze on rates was lifted — as contemplated in Article 5(2) of Regulation No 2799/98, to which Regula- tion No 2813/98 refers — indicated a downward trend, that would, perhaps, involve a 'decrease' but never, in the 36. The interpretation which I propose is, absence of a subject to whom the action furthermore, supported by the legislature's could be imputed, a 'reduction'. choice of terminology which is, on the whole, consistent. Article 5(1) of Regula- tion No 2799/98, in describing situations 13 — Tims, we talk about 'reducing inflation', 'reducing the where there is an entitlement to grant money supply' and 'reducing unemployment'. compensatory aid, talks not of a reduction

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39. It can therefore be inferred from the arguments relating to this aspect of the 37. I do acknowledge, however, that it is application that an interpretation in accor- not uncommon for 'reduction' to be dance with the wording of Article 6 of used — albeit incorrectly — intransitively Regulation No 2813/98, compatible with and that there is no shortage of contra- the historical and teleological explanation dictions in the wording of Community put forward by the Commission, which has legislation in the different languages. not been validly contested by the Italian Government, is, at least, possible and must accordingly be preferred by virtue of the presumption of legality which attaches to legal instruments adopted by the competent authority. An interpretation along those lines complies, moreover, with the enabling rule upon which the contested provision is 38. In any event, the other aspects of a based, namely, Article 10(1) of Regulation literal interpretation lead me to the same No 2799/98, pursuant to which the transi- conclusion as the semantic analysis above. I tional measures necessary will remain refer to the punctuation marks — or, 'applicable for the period strictly necessary rather, to their absence — in the single to facilitate the introduction of the new sentence of Article 6 of Regulation arrangements'. No 2813/98. In order for the applicant's claim to be successful, the phrase 'frozen until 1 January 1999' would need to serve an unequivocally epithetic function, for which it would need to be placed between commas. Then, irrespective of the meaning assigned to the word 'reduction', the cir- 40. As part of this first plea in law, the cumstances covered could be taken to Italian Government also argues that Reg- include any change in the agricultural conversion rate, which just happened to have been frozen until the date indicated. 14 — In fact, 'the rate which was frozen' is not the same as 'the The absence of commas means that there is rate, which was frozen', and likewise the phrase 'European currencies which were devalued' should not be confused a precise definition of the conversion rate with 'European currencies, which were devalued'. The first construction singles out the subject, whereas the second whose decrease — or reduction, if that merely characterises it but lacks the capacity to define.

43. The second plea in law must accord- 41. It appears from the various stages of ingly be rejected. the written procedure that the Italian Government also contests Regulation No 1639/1999 on the ground that it brea- ches the principle of equal treatment for farmers laid down in Article 34 EC. There would be intolerable discrimination between the treatment of farmers in receipt of direct aid for which the operative event was 1 January 1999, and to whom the Costs increase prescribed by Article 6 of Regula- tion No 2813/98 would therefore apply — under Regulation (EC) No 755/1999 15 — and that of farmers who, by virtue of 44. Since I have proposed that the applica- tion be dismissed in its entirety, the Italian 15 — Commission Regulation of 12 April 1999 fixing the maximum compensatory aid resulting from the rates for Government should be ordered to pay the the conversion of the euro into national currency units and costs, pursuant to Article 69(2) of the Rules the exchange rates applicahle on 1 and 3 January 1999 (OJ 1999 L 98, p. 8). of Procedure.

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Conclusion

45. In view of all the foregoing considerations, I propose that the Court of Justice dismiss the action brought by the Italian Government and order the Italian Government to pay the costs.

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