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2. In fact, they did quite the opposite as, even in the preamble to the Treaty of R o m e , the signatories to t h a t Treaty declare themselves 'anxious to strengthen the unity of their economies and to ensure 5. It was likewise with that intention in their harmonious development by reducing mind that the European Regional Develop- the differences existing between the various ment Fund was established in 1975, 2the regions and the backwardness of the less- function of which is defined as 'the correc- favoured regions.' tion of the main regional imbalances in the Community'. On adoption of the Single European Act in 1986, a new title, Title V, relating to economic and social cohesion, was added to Part Three of the EEC Treaty, 3. That clearly stated intention not to leave which deals with Community policies, and certain regions behind on the road to contained an Article 130a, which provides e c o n o m i c g r o w t h w a s expressed, for that '[i]n order to promote its overall example, in the system of State aid laid harmonious development, the Community down by Article 92 of the EC Treaty (now, shall develop and pursue its actions leading after amendment, Article 87 EC). to the strengthening of its economic and social cohesion. In particular, the Commu- nity shall aim at reducing disparities between the various regions and the back- wardness of the least-favoured regions'. Additions have since been made on two 4. In addition to establishing the principle occasions to the second paragraph of that that such aid is to be prohibited in so far as

6. However, the Community institutions did not wait for those amendments to the Treaty to be made before introducing specific programmes designed to enable certain very remote regions to overcome '... this programme must be based on the their handicaps and, at the same time, be twofold principle that the Azores and fully integrated into the internal market. Madeira form an integral part of the Thus, after Council Decision 89/687/EEC Community and that the regional reality of 22 December 1989 establishing a pro- deriving from their particular geographical gramme of options specific to the remote situation must be recognised; and insular nature of the French overseas departments (POSEIDOM), 3 Council Decision 91/315/EEC of 26 June 1991 setting up a programme of options specific to the remote and insular nature of Madeira and the Azores (POSEIMA) 4 was adopted. ... the measures contained in the pro- gramme must accordingly take into account the special characteristics and constraints of the Azores and Madeira without undermining the integrity and coherence of the Community legal order;... 7. That measure was adopted as a fol- the economic effects of specific measures low-up to a joint declaration annexed to must therefore remain limited to the terri- tory of the Azores and Madeira without 3 — OJ 1989 I. .599, p. 39. 4 — O J 1991 I. 171, p. 10. 5 — OJ 19X5 1. .102, p. 2.V

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affecting directly the functioning of the nature and constraints of the Azores and common market; Madeira to be taken into account without undermining the integrity and coherence of the Community legal order.

— permitting, on equivalent terms, with- total volume of sugar refined in the out application of the amounts laid Azores does not exceed 10 000 tonnes, d o w n in the a f o r e m e n t i o n e d Article 240, the supply of Community products taken into intervention stor- age or available on the Community market.

Title V The principles underlying the application of this system will be as follows:

Specific measures to support products of Madeira and the Azores

— the quantities covered by this supply system will be determined annually in supply estimates, 14.4 Other measures to help support local production in the Azores may take the form of:

— in order to ensure that these measures — in the case of sugar beet: have an impact on the level of produc- tion costs and consumer prices, a mechanism will have to be set up to monitor this impact up to the end user stage, — flat-rate aid per hectare for the development of local production, subject to a limit on quantities corresponding to production of 10 000 tonnes of sugar;

— with respect to raw sugar supplies for the Azores, the system will be appli- cable until such time as local produc- tion of sugar beet is sufficient to satisfy — specific aid for the processing of local market needs and as long as the locally grown beet into white

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11. Under Title I of Regulation (EEC) 3. The arrangements provided for in this No 1600/92, headed 'Specific supply Article shall be implemented in such a way arrangements', Article 3 provides that: as to take account, without prejudice to paragraph 4, in particular, of:

' 1 . Levies and/or customs duties shall not — the specific requirements of the regions apply to direct import into the Azores and concerned and, in the case of products Madeira from third countries of products intended for processing, the specific covered by the specific supply arrange- quality requirements, ments, within the limit of the quantities determined in the supply balances.

— traditional trade flows with the rest of the Community. 2. To ensure coverage of the requirements referred to in Article 2 in terms of quantity, price and quality, with a view to ensure that the proportion of products supplied by the Community is preserved, supplies to these regions shall also be effected through the mobilisation of Community products held in intervention storage or available on 4. In the case of the supply of raw sugar to the Community market, on terms equival- the Azores, requirements shall be assessed ent, for the end user, to the advantage taking account of the development of local resulting from exemption from import sugarbeet production. The quantities duties on imports of products from third covered by the supply arrangements shall countries. be determined in such a way that the total annual volume of sugar refined in the Azores does not exceed 10 000 tonnes.

3. Detailed rules for the application of this Article shall be adopted in accordance with the procedure laid down in Article 41 of Regulation (EEC) No 1785/81.' 13. Under Title II, headed 'Measures to support products of the Azores and Madeira', Article 25, which forms part of Section 3 under the heading 'Measures to support products of the Azores', provides that: The main proceedings and the questions referred for a preliminary ruling

' 1 . Aid at a flat rate per hectare shall be 14. Only one sugar refinery, Sociedade de granted for the development of sugarbeet Indústrias Agricolas Açoreanas SA (here- production within the limit of an area inafter 'Sinaga'), is established in the corresponding to the production of Azores and therefore, apart from the end 10 000 tonnes of white sugar per year. consumer, it alone stands to gain from both

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the specific supply arrangements for raw ary to determine the precise meaning which sugar and the special aid for processing the Community legislature intended to give sugarbeet harvested in the Azores into to certain provisions of Regulation (EEC) white sugar. No 1600/92, the national court, by order of 11 July 2000, referred the following ques- tions to the Court of Justice for a pre- liminary ruling:

15. In 1998 Sinaga sold white sugar to an undertaking established in mainland Por- tugal. '1. Does the second paragraph of Article 8 of C o u n c i l R e g u l a t i o n (EEC) No 1600/92 of 15 June 1992 apply to:

(b) only to sugar added to products which include it (such as cakes, soft drinks etc.)? (Essentially, what 17. RAR is asking that court to exercise its is meant by the expression "prod- power to impose interim measures and ucts... are processed" contained in order Sinaga 'to cease marketing in main- that provision?) land Portugal refined sugar produced from raw sugarbeet which is imported by Sinaga free of levies under the Poseima programme or in respect of which it benefits from the aid granted for processing provided for in that programme'. 2. Are the sales referred to in 3 (below) covered by the concepts "traditional trade flows", "traditional exports" and "traditional... shipments" to "the rest of the Community", contained in the second indent of Article 3(3) and the 18. Taking the view that, in order to second paragraph of Article 8 of the resolve the dispute in question, it is necess- abovementioned regulation?

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3. Irrespective of the answers to the various possible interpretations of that preceding questions, does the legal regulation, the interpretation which framework in force, from September favours the Azores in general and Sinaga 1998 to date, allow Sinaga to sell in in particular should be preferred system- mainland Portugal sugar produced by atically in all matters concerning the it from sugarbeet harvested in the production and marketing of sugar. Azores and for the production of which it obtains Community aid under the Poseima programme?

21. In my view, the Court must not in its reasoning be guided by such an approach, which amounts to reasoning from prejudice in the literal sense of a 'pre-judgment'. 4. Again irrespective of the answers to the preceding questions, does the legal framework in force, from September 1998 to date, allow Sinaga to sell in mainland Portugal sugar produced by 22. Of course, there can be no question it from imported raw sugar which is either of going to the other extreme and exempt from levies under the Poseima favouring an interpretation designed to programme?' limit as much as possible the effects of the Poseima programme.

25. The specific rules adopted in respect of the Azores are no different from any other 29. By way of a second preliminary com- Community rules and must be considered ment I would like to mention that the without any form of preconception. discussion, to which the written procedure gave rise, of how, specifically, Regulation (EEC) No 1600/92 fits in with the common organisation of the markets in the sugar sector, and therefore with Council Regu- 26. Application of the traditional rules of lation (EEC) No 1785/81 of 30 June 1981 interpretation in examining the question as on the common organisation of the markets to what conditions attach to the advantages in the sugar sector, 7is not, in my view, granted to the economic operators of the central to the debate called for by the Azores and what limits the Community questions referred by the national court. legislature sought to impose, is not the expression of a wish to frustrate the intention of that legislature.

30. Since no one is maintaining that the Azores are quite simply excluded from the 27. In fact, legislative intent is, on the scope of the rules governing the common contrary, respected by keeping those organisation of the markets, it seems to me advantages within the limits which the unnecessary, in the light of the precise legislature itself defined after it had con- questions to be answered by the Court, to sidered what it was possible to accord by consider whether Regulation (EEC) way of the exception in order to promote No 1600/92 introduces derogating rules development in that territory, without at applying to the Azores or merely lays down the same time upsetting the delicate balance specific rules which apply exclusively of the common agricultural policy. within that territory.

provisions of Regulation (EEC) No 1600/92 The first question which apply to the production and market- ing of sugar in the Azores, provisions which are, as no one will deny, special in that they do not coincide with the rules laid down by Regulation (EEC) No 1785/81. Whether 33. As regards the first question, RAR they are defined as derogating or as special alone maintains that, for the purposes of provisions makes no difference in my view the application of Article 8 of Regulation to the interpretation dictated by their (EEC) No 1600/92, refined sugar cannot be wording and by their relationship with the regarded as a product obtained through other provisions which go to making up the processing and, therefore, that the second Poseima programme. paragraph of Article 8, which provides that '[wjhere the products in question are pro- cessed in the Azores and Madeira, the aforesaid prohibition shall not apply to traditional exports or shipments to the rest of the Community', does not cover white sugar produced in the Azores from the raw sugar covered by the specific supply arrangements laid down in Article 3 of that regulation.

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36. I do not believe that approach can the rest of the Community or in terms of seriously be adopted. export since, even after raw sugar has been processed into white sugar, exports and shipments are still prohibited unless they are effected in the context of traditional trade flows.

37. It can be refuted, without there even being any need to go into the detail of the arguments raised by Sinaga, the Portuguese Government and the Commission, by the 40. It may be noted for that matter that the following two considerations. First, under legislature ensured that there would be no the first paragraph of Article 8, it is the distortion of competition, even with regard actual products that have benefited from to those sales forming part of traditional the specific supply arrangements that may trade, as Article 9 of Regulation (EEC) not be re-exported or redispatched; how- No 1600/92 provides that a product which ever, white sugar is not raw sugar. Sec- has been processed and subsequently ondly, white sugar is the product obtained exported is not eligible for any refund on from the actual processing of raw sugar, exportation. which undoubtedly makes it a processed product as opposed to the product covered by the abovementioned arrangements.

46. Let me say at once that it is not easy to use. Although it goes back to 1907 and covers the year 1992, it provides no information on some years, for instance from 1948 to 1961, from 1970 to 1974, The second question 1982 and 1983 or from 1986 to 1989.

47. However, even in respect of the years 4 3 . I thus come to the second question in included in it, the table lacks clarity in so which the national court is seeking to far as it comprises three columns headed ascertain whether, in the light of a table 'Madeira', 'Mainland Portugal' and 'Ma- of statistics contained in its order for deira/Mainland Portugal' respectively, but reference, the view must be taken that, in it does not specify to what the 'Madeira/ the case of white sugar, it is possible to Mainland Portugal' column relates. speak of traditional trade flows within the meaning of the second indent of Article 3(3) of Regulation N o 1600/92, or of traditional exports or shipments to the rest of the Community within the meaning of the second paragraph of Article 8 of that regulation. 48. It might be assumed that, for each year, that column contains the total of the amounts entered in the other two columns. However, that clearly is not the case because, whilst figures are shown in the Mainland Portugal column from 1907 to 1947, there are no entries for those years in the third column. 44. I should point out at once that the table concerned provides information merely about sales to mainland Portugal and Madeira and that I do not see, therefore, how I could express a view on the existence of traditional exports, understood as mean- 49. Perhaps, then, it must be considered ing sales to third countries, which are, that the Madeira/Mainland Portugal col- moreover, wholly unrelated to the dispute u m n provides information about sales which gave rise to the questions put by the intended either for Madeira or for main- national court. land Portugal, but that the precise desti-

50. Be that as it may, it must be observed that although the Mainland Portugal col- 54. At the hearing Sinaga denied that such umn records regular sales between 1907 a prohibition ever existed and contended and 1947, albeit very variable in terms of that, as far as the years at issue were volume, there are no further entries in that concerned, what was involved was not the column for subsequent years, except for lifting of a prohibition but the abolition of 1984 and 1985 during which sales came to charges on importation. 3 024 000 kg and 6 175 250 kg respect- ively, which is not an inconsiderable vol- ume in view of the 10 000 tonnes produc- tion limit imposed on Sinaga under Regu- lation (EEC) No 1600/92. 55. However, whatever the cause of the interruption in sales between 1948 and 1983 may have been, that interruption is not disputed, any more than is the absence of any sales to mainland Portugal as from 1986.

51. As regards the Madeira column, there are no entries before 1981. Sales in respect of 2 236 850 kg are recorded for that year. There are entries of 184 660 kg for 1990, 56. Whilst, as the Commission pertinently 258 700 kg for 1991 and finally 30 000 kg suggests, the term 'tradition' must be con- for 1992. strued as meaning actions repeated over

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time or in the past and incorporating an cated to operators, it being sought to ensure idea of continuity and regularity over time, that the access of those operators to the I find great difficulty in accepting that market is not affected as a result of their traditional trade flows can be identified on being subject to Community rules which the basis of the table presented by the did not apply to them previously. national court.

61. I consider that approach to be reason- able in the sense that when the Community legislature sought to maintain traditional 58. The truth is that what is concerned here trade flows it was not for the purpose of is occasional trade rather than traditional acknowledging historical rights which trade flows, since there is neither continuity might be evidenced by shipments spanning nor regularity. The same conclusion would the period from 1907 to 1947 but, much be reached if one were to espouse the view more prosaically, as the Commission points held by RAR that, for it to be possible to out, in order to avoid taking away with one speak of traditional trade flows within the hand from the producers in the Azores meaning of Regulation (EEC) No 1600/92, what was given to them with the other it would be necessary to determine that hand, or, if one prefers, to prevent the trade had been conducted over the five or, introduction of the specific supply arrange- possibly, three years preceding the entry ments, designed in the interest of the into force of that regulation. islands, from backfiring on them owing to the loss of markets on which their products were regularly sold before the Poseima programme was put into effect; however, nor were the specific supply arrangements intended to disrupt the functioning of the 59. Those are the periods, according to Community market by opening up to RAR, that are customarily taken into con- Azores producers markets that they would sideration in the context of the common enter with an undeniable competitive agricultural policy when quotas are allo- advantage.

65. It may apply to other products in 69. In the case of the supply of raw sugar, respect of which traditional trade flows requirements cannot be assessed exclusively could in fact be found to exist. on the basis of local sugarbeet production because in t h a t way — bizarrely — demand would effectively be assessed in terms of supply. In assessing those require- ments, it is mandatory, as provided in Article 3(3), to take account of the specific 66. However, I consider it worth mention- requirements of the regions concerned as ing, even if it is of no practical consequence regards consumption; sugarbeet produced for the outcome of the case before the locally is also taken into account because it national court, that I cannot accept RAR's contributes to satisfying those require- argument that Article 3(3) does not apply ments.

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70. Imported raw sugar is intended to ments to the rest of the Community'. make it possible to make up white sugar Therefore, it logically follows from the deficit which is evident from a comparison conclusion I reached a little earlier as of consumption with the supply obtained regards the absence of traditional trade through the refining of sugarbeet harvested flows in white sugar to mainland Portugal locally. that Sinaga may not sell in mainland Portugal sugar which it has produced from imported raw sugar which is exempt from levies under the Poseima programme.

71. For all those reasons, I propose that the Court should answer the second question in the negative.

74. There is not the slightest ambiguity in Article 8 capable of casting doubt on the absolute nature of the prohibitions imposed by that provision.

Azores was sold in the past in mainland quantities of white sugar which were pro- Portugal must be regarded as a sufficient duced from raw sugar acquired under the basis for invoking the derogation from the specific supply arrangements and which it- prohibition against marketing outside the was permissible to export or dispatch to Azores' (point 72 of its observations). This, mainland Portugal could under no circum- unless I am mistaken, implies, first, that stances have exceeded the quantities cor- sales of sugar to mainland Portugal are a responding to those trade flows. sufficient basis for proving the existence of traditional trade flows and, secondly, that the reference made by the Community legislature to the existence of such flows has no consequences in terms of limiting the volumes which may be dispatched. Such reasoning clearly cannot be accepted 79. Since in my reply to the second ques- because it deprives the word 'traditional' of tion I considered that the existence of such any specific meaning. flows cannot be established in the case of white sugar, I can only find that the shipment to mainland Portugal of white sugar produced by Sinaga in the Azores from raw sugar imported under the specific supply arrangements is the subject of an absolute prohibition. 77. It may be noted, for that matter, that the Portuguese Government, which shares Sinaga's views on the other questions, confines itself to stating, with regard to the fourth question, that 'the Portuguese Republic takes the view that the sugar industry of the Azores is entitled to sell in mainland Portugal sugar produced from The third question imported raw sugar which is exempt from levies, under the conditions laid down in the second paragraph of Article 8 of Regulation (EEC) No 1600/92' (point 57 of its observations). 80. It remains for me to consider the third question, which is not without its dif- ficulties. As Sinaga, the Portuguese Govern- ment and the Commission point out, under Article 25 of Regulation (EEC) No 1600/92 the grant of aid at a flat rate per hectare for sugarbeet crops and of special aid for the 78. For my part, let me say it again, I processing of sugarbeet harvested in the consider that the derogation provided for Azores into white sugar is not coupled with by the Community legislature in favour of any prohibition against the export or ship- the traditional trade flows is intended to ment to mainland Portugal of white sugar maintain the status quo and nothing more; produced in the Azores from local sug- accordingly, if such flows did exist, the arbeet.

82. N o r are there any grounds for main- taining that, as a general rule, in the context of the common agricultural policy, the fact that aid has been granted in respect of a product entails a prohibition on marketing it outside its production area. 86. T h a t provision specifies that, with respect to the supply of raw sugar to the Azores, the system of specific supply arrangements 'will be applicable until such time as local production of sugar beet is sufficient to satisfy local market needs and 83. It is, admittedly, true that the principle as long as the total volume of sugar refined of the free movement of goods constitutes in the Azores does not exceed 10 000 one of the pillars of the common market. Is tonnes'. it necessary, then, in the light of those convergent factors, to agree with Sinaga, the Portuguese Government and the Com- mission that white sugar in respect of which the aid specified in Article 25 of Regulation (EEC) N o 1600/92 has been obtained, may be shipped without any restriction to mainland Portugal?

87. That very clearly signifies that the specific supply arrangements are, from the outset, intended to be temporary and are designed to offset the feebleness of sugar- beet production in the Azores in relation to 84. I do not think so. I share the view of local needs, production which is specifi- RAR that such freedom to market the cally intended to increase as a result of the products in question in mainland Portugal aid for production and for processing into would destroy the coherence of the Poseima white sugar, for which provision is made in programme. paragraph 14.4 of that annex.

94. For my part, I can see only two possibilities. The first is for the Court to take the view that although there is no 91. It is clear that if it were open to Sinaga express mention of such a prohibition to dispatch beyond the Azores, with a a n y w h e r e in R e g u l a t i o n (EEC) definite competitive advantage, sugar for No 1600/92, the interpretation of that w h i c h aid had been g r a n t e d u n d e r regulation in the light of the provisions of Article 25, it would not fail to do so. This Decision 91/315/EEC, which forms its legal

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basis, none the less leads to the conclusion 98. The second possibility is for the Court, that the regulation necessarily embodies instead of interpreting the regulation in that prohibition, even if only by impli- such a way that it does not appear to be cation. inconsistent with the decision, to take formal note of the inconsistency constituted by the absence in the regulation of any prohibition on marketing sugar in respect of which aid has been granted under Article 25 of that regulation elsewhere than in the Azores, and, shifting to the terrain of validity, to hold that the absence of a 95. That approach — there can be no prohibition constitutes an infringement of hiding the fact —• would have the dis- paragraph 9.2 of the annex to Decision advantage of obliging the Court to embark 91/315/EEC. upon an interpretation which would be exposed to criticism that it probably would not wish to incur.

99. For that transition from interpretation to assessment of validity, to which atten- tion was drawn at the hearing, authority 96. Such criticism would go to the fact may be found in the case-law of the that, whilst the Court had always asserted Court. 8 Apart from avoiding the disadvan- the fundamental nature of the principle of tage mentioned above, such a transition the free movement of goods and held that would hold the advantage of falling within derogations from that principle must be the very clear line of authority which construed narrowly, it would suddenly requires of an implementing provision break new ground by bringing to light observance of the limits defined in the implicit, or in any event unwritten, restric- legislation constituting its legal basis. tions of that principle.

(2) The information submitted by the referring court does not disclose the existence of traditional trade flows or traditional shipments to the rest of the Community within the meaning of the second indent of Article 3(3) or the second paragraph of Article 8 of Regulation (EEC) No 1600/92.

(3) White sugar produced in the Azores from sugarbeer harvested locally and for the production of which aid is granted in accordance with Article 25 of Regulation (EEC) No 1600/92 may not be marketed outside the local Azores market.

(4) White sugar produced in the Azores from raw sugar imported under the specific supply arrangements introduced in Title I of Regulation (EEC) N o 1600/92 may not be dispatched to mainland Portugal in the absence of traditional shipments within the meaning of the second paragraph of Article 8 of that regulation.

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