C-456/00

OPINION OF MR TIZZANO — CASE C-456/00

O P I N I O N O F ADVOCATE GENERAL TIZZANO delivered on 13 June 2002 1

1. By an action brought on 18 December tition shall apply to production of and 2000, the French Republic has sought, trade in agricultural products only to the pursuant to Article 230 EC, the annulment extent determined by the Council within of Commission Decision No 2001/52/EC the framework of Article 37(2) and (3) and of 20 September 2000 (hereinafter 'the in accordance with the procedure laid contested decision') 2declaring as incom- down therein, account being taken of the patible with the common market aid objectives set out in Article 33.' granted by France for the conversion of vineyards in Charentes and requiring recovery of the aid from the beneficiaries.

3. Article 87(1) EC provides:

I — Legal framework 'Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form what- soever which distorts or threatens to distort competition by favouring certain undertak- A — The provisions of the EC Treaty ings or the production of certain goods shall, insofar as it affects trade between Member States, be incompatible with the common market.' 2. The first paragraph of Article 36 EC provides:

4. Pursuant to Article 87(3)(c) 'aid to facilitate the development of certain econ- 'The provisions of the Chapter [of the omic activities or of certain economic present Treaty] relating to rules on compe- areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest' may be 1 — Original language: Italian. regarded as compatible with the common 2 — OJ 2001 L 17, p. 30. market.

However, authorisations for new plantings may be granted by Member States in respect of areas intended for the production 6. Regulation (EEC) No 822/87 4codified of quality wines psr [quality wines pro- and supplemented the basic provisions duced in specific regions] production of concerning the COM in wine in force at which the Commission has recognised, that time. The 14th recital of that regu- because of their qualitative features, as lation states that: being far below demand.'

The duration of that ban was subsequently '... the situation of the wine market with its extended on several occasions up to 31 Au- large surpluses is deteriorating very rapidly gust 2000. 5 and is likely... to jeopardise the attainment of the objectives of Article 39 of the Treaty (now Article 33 EC) because of the excess-

3 — Sec Council Regulation No 24/62 of 4 April 1962 on the 8. To the same end, Regulation No 822/87 gradual implementation of a common organisation of the lays down particularly stringent conditions wine market (OJ, English Special Edition 1959-1962) and Council Regulation No 816/70 of 28 April 1970 concerning additional provisions in regard to the common organisation of the wine market (OJ, English Special Edition 1970 (I), p. 234). 5 —See Article 1(1) of Council Regulation No 1627/98 of 4 — Council Regulation (EEC) No 822/87 of 16 March 1987 on 20 July 1998 amending Regulation (EEC) No 822/87 on the the common organisation of the market in wine (OJ 1987 common organisation of the wine market (OJ 1998 L 210, L 84, p. 1). p. 8).

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— are recognised as improving quality, 13. The 11th recital of Regulation No 1493/1999 states:

— are specifically authorised by the national authorities under the draft aid measure concerned'. 'to capitalise on and consolidate the improved market balance, and to better align supply on demand for different types of product, there should be a framework of measures on the management of wine- 11. The first paragraph of Article 5 of the growing potential, to include restrictions same regulation further provides that: on planting in the medium term, premiums for the permanent abandonment of wine- growing and support for the restructuring and conversion of vineyards'.

'The amount of aid granted per hectare of vineyard planted may not exceed 30% of the actual cost of grubbing-up and plant- ing'. 14. As regards the planting of new vine- yards, Article 2(1) of the Regulation pro- vides:

(b) The COM in wine governed by Regu- lation (EC) No 1493/1999

1 8 . C o m m i s s i o n R e g u l a t i o n (EC) No 1227/2000 of 31 May 2000 9 lays down detailed rules for the application of (a) varietal conversion, including by means Regulation No 1493/1999, particularly as of grafting on; regards production potential, and repeals, inter alia, Regulation No 2741/89. As regards the restructuring and conversion of vineyards, Article 13(c) provides that the Member States are to establish: (b) relocation of vineyards;

(c) improvements to vineyard manage- ment techniques related to the objec- tive of the system. 'rules limiting the use, in implementing a plan [of restructuring and conversion], of replanting rights which arise from grub- bing-up as set out in the plan where so doing would lead to a possible increase in The system shall not cover the normal renewal of vineyards which have come to 9 — OJ 2000 L 143, p. 1. Regulation last amended by Regu- the end of their natural life....' lation (EC) No 1253/2001 (OJ 2001 L 173, p. 31).

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the yield of the area covered by it. The rules 20. The system involved four separate aid shall be designed to ensure that the objec- measures, one of which consisted of a tive of the system is met, and in particular 'supplementary national aid for the to ensure that there is no overall increase in improvement of vine varieties' (hereinafter production potential in the Member State 'the aid for varietal conversion' or, more concerned'. simply, 'the aid'). I will limit my comments to that measure since it is with that measure that the contested decision is concerned.

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produced white wines which, on account of C O M established by Regulation their particular individual properties, are No 1493/1999, in particular the objec- intended for distillation into wine spirits. tives of preventing increased wine Apart from that exclusive outlet, the wines production and of adapting production in question are put solely to low value use to demand: on the one hand, it alleged as white wines with no geographic indi- that the planned reorientation of cation or as the basis for the manufacture production would eventually result in of sparkling wines. 12 a net growth in the quantity of 'vins de pays' offered on the market and, on the other, it could not be concluded from the data available that the market in 'vins de pays' would be capable of absorbing an increase in production;

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No 1493/1999 and to those of the previous COM in wine, when it concluded that the C O M e s t a b l i s h e d by R e g u l a t i o n aid in question did not satisfy the con­ No 822/87, which laid down the principle ditions laid down by the COM. In effect, it that production should not be increased. alleges that: According to the Commission, only meas­ ures taken within the framework of the COM could guarantee that the global interests of operators in the wine sector were taken into account. — the Commission was in error as to the applicable legislation by taking Regu­ lation No 1493/1999 into account, whereas the compatibility of the aid should have been assessed solely on the 30. Thus, since the aid for varietal con­ basis of the preceding Regulation version does not satisfy the conditions laid No 822/87; down by the COM in wine, it cannot benefit from the derogation provided for in Article 87(3)(c) EC. For those reasons, the Commission declared the aid incompatible with the common market and, since the aid had already been granted, ordered recovery from the beneficiaries of the amounts they — in any event, the Commission has had already received. infringed Regulation No 1493/1999 by making the compatibility of the aid dependent on reductions in produc­ tion areas and yields in respect of which no provisions are laid down by the regulation; 31. The contested decision (No C (2000) 2754) was communicated to the French Government on 10 October 2000.

— the Commission was mistaken in claiming that the aid did not comply with the criterion laid down by that regulation requiring the adaptation of production to demand; I I I— Legal analysis

35. However, the French Government underlines the particular nature of the case in question owing to the fact that the 33. Before examining the specific com­ Commission is obliged to apply the provi­ plaints raised by the French Government, sions of the COM which — as we will I should comment on the preliminary soon see — prevail over the competition question it raised concerning the scope of rules enshrined in the Treaty. It claims that the Court's jurisdiction over a Commission those provisions place considerable decision which, as in the case of the restraints on the Commission's activity, contested decision, is concerned with State thereby substantially reducing its discre­ aid in a sector governed by a COM. tionary power. Consequently, according to the French Government, in the present case the Court should exercise more assertive control over the Commission's action, assessing whether such action complies with the provisions of the COM.

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problems of interpretation of agricultural its effectiveness, unless this is expressly legislation referred to by the French Gov- provided for in those provisions. 19 ernment, which is at the centre of the dispute and therefore it is over the apprai- sal carried out by the Commission in that respect that the Court should exercise its control. 39. It follows, as the Commission itself correctly pointed out, that the Commission must exercise its discretionary power in the area specified by the provisions governing the relevant COM and therefore it cannot authorise State aid which is incompatible 37. For my part, I note at the outset that with a COM or which interferes with its the first paragraph of Article 36 EC, in proper functioning. It is, of course, for the recognising the priority of the common Court to verify whether the Commission agricultural policy with regard to the has infringed the provisions of the COM. objectives of the Treaty in the field of However, within that specific legislative competition, confers power on the Council framework, the nature of the economic to determine the extent to which such rules appraisal to be carried out by the Commis- are applicable in the agricultural sector. 17 sion for the proposes of Article 87(3) EC It follows that, in the context of a common does not change because, even within the organisation of agricultural markets, the context thus defined it remains an appraisal application of Articles 87 to 89 EC depends of the scope and effects of the aid. Con- on the provisions of the secondary law sequently, there is no change in the Com- adopted by the Council for the purpose of mission's discretionary power to carry out setting up such organisation and is there- such appraisal nor in the corresponding fore, as stated in the case-law referred to by limits of judicial review to which I referred both France and the Commission, subordi- earlier. nate to those provisions. 18

No 1493/1999, applicable at the time when the other hand, I note that it is settled the contested decision was adopted, case-law that the development of a plea whereas the aid plan had been drawn up already raised in the application, even when the previous Regulation No 822/87 though availing of arguments developed was in force, that being the regulation for the first time in the reply, does not applicable to the notification procedure constitute a 'new plea'. 21 It may easily be regarding the planned aid and which seen that, albeit in the alternative, the remained applicable during nearly the illegality of the contested decision on the whole of the period that the aid was under grounds of the alleged infringement of investigation. However, in its reply to the Regulation No 1493/1999 had already Commission's objections that Regulation been invoked by the French Government No 1493/1999 was still in force, albeit no in the originating application 22 and the longer applicable, when the investigation arguments adopted to that end in the reply procedure was initiated and as such represent the logical development of the required to be taken into account in assess- said complaint in response to the defences ing the aid, the French Government did not presented by the Commission in its state- maintain its complaint. 20 ment in defence. I therefore consider that the Commission's objection cannot be upheld.

41. However, the Commission objects that in its reply the French Government, in addition to altering its position regarding t h e a p p l i c a t i o n of R e g u l a t i o n No 1493/1999, also introduced new argu- C — On the alleged infringement of Regu- ments based specifically on that regulation lation No 1493/1999 regarding the reduc- in support of its position. The Commission tion of production areas and yields regards that as a change to the subject- matter of the dispute and therefore contests the admissibility of those arguments.

patible on the ground that it was not of a spirit (cognac), 23 which as such does accompanied by a sufficient reduction in not come within the products governed by production areas and yields. In its opinion, the COM in wine, towards vineyards the relationship established by the Com- designated for the production of normal mission between the conversion of a given 'vins de pays', included under the COM wine-growing area and the reduction of and intended to be released on the wine yields in other areas of non-converted land market. Thus, the aid would result in has no legal basis in the regulation. Further, increased production of the latter wines, according to the French Government, that thereby having an effect on the market regulation does not even impose, as the similar to that brought about by financing Commission appears to contend, any obli- the planting of new vineyards, prohibited gation to reduce the production areas (that by Article 2 of Regulation No 1493/1999 is to say the grubbing-up of vines) in an and previously prohibited by Regulation area at least equivalent to that of the No 822/87. The assessment of the aid as converted land. The French Government incompatible is therefore linked to the contends that Regulation No 1493/1999 increased production of normal wines, regards the grubbing-up and conversion of which is contrary to the principles of the vineyards as distinct and independent COM in wine. Consequently, the Commis- measures fulfilling different requirements. sion considered whether the French auth- On the other hand, France is not entitled to orities had provided for measures with a distort the nature of the measures intended view to offsetting the negative effects of the to encourage the grubbing-up of vines — aid, such as the reduction of yields and which according to the regulation in ques- production areas throughout the Charentes tion are optional — by making such meas- region as a whole, which for some time had ures mandatory and linking them to con- been producing a structural surplus, and version. not merely in the area being converted.

tion potential introduced by the COM. 47. In reality, as is sufficiently clear from That system was brought into effect start- the text of the contested decision, the ing from the 2000/2001 wine year, and Commission referred to the need to reduce thus subsequent to the granting of the aid in the production areas and yields in the question which, I reiterate, was made in the context of its own appraisal of the impact preceding 1998/1999 and 1999/2000 wine of the disputed aid in the wine sector. 26 years. On the other hand, Article 11 did not That is to say it called for a substantial lay down rules governing the granting of reduction in production areas and yields in national aid for the restructuring and con- the region of Charentes not because such version of vineyards, but established a was required by Article 11 of Regulation Community support system with the No 1493/1999, but because it considered financing of which, in accordance with that the negative impact brought about in Article 13 of the regulation, Member States the wine sector by the implementation of may not in principle compete. 24 the conversion measure could be offset by adopting appropriate measures, such as the abovementioned reduction. From that point of view, the Commission disregarded the arguments adduced by the French authorities during the investigatory pro- cedure, considering as inadequate the reductions proposed by those authorities in connection with the planned conversion.

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49. I am therefore of the opinion that the stagnant situation, or indeed decline, in the present complaint should be rejected. market has extended to various wine years, as confirmed by the very information pro- vided by the French Government. The Commission then contends that the wine market is currently undergoing a particu- larly difficult situation, as demonstrated by the fact that France and other Member States have requested the opening of the D — On the alleged mistaken assessment so-called crisis distillation measure pro- as regards the adjustment of production to vided for in Article 30 of Regulation demand No 1493/1999.

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that provision is concerned with table wine taining a balanced market, underpins sev- as a whole, thereby making it difficult to eral of the regulation's provisions) presup- determine the extent to which it concerns poses that, as regards the wine or wines the 'vins de pays' sector specifically, concerned, existing production is effec- important indications regarding the overall tively less than demand. 2 9To date, the development of the market may neverthe- French Government has not taken any less be inferred from it. I note that crisis specific step to demonstrate, on the one distillation is provided for under Article 30 hand, that growth is foreseeable in the of Regulation No 1493/1999 'in an excep- short or medium term in the present market tional case of market disturbance' with the situation or, on the other, that such growth precise objective of removing surplus wine would make it possible to release new products from the market into distillation. quantities of 'vins de pays' onto the market The manifest difficulties affecting the mar- without disrupting it and indeed even ket can also be clearly deduced from the require such new quantities to be released statements of reasons for the regulations onto the market. However, the factors employed to open the crisis distillation referred to in the preceding paragraph measure in France. 28 appear to me to point in precisely the opposite direction.

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the contested aid. First, it contests the that, just like any other wine, wines actual premiss on which the Commission intended for conversion into cognac are bases its reasoning in assessing the com- also governed by the COM in wine but, as patibility of the aid, namely that the aid the Commission correctly points out, would lead to a net increase in the quantity cognac is not so governed since it does of wine released on to the market, contrary not come within the class of agricultural to the principles of the COM in wine. 30 products within the meaning of Commu- Second, the French Government contends nity law. Thus, for the purpose of assessing that the Commission, by not taking into the effects of the conversion proposed by account the modest amount of the aid, has the French authorities, it is not a mistake to erroneously estimated its effects. Third, distinguish between the marketing of wine France complains that the contested as such on the wine market, which is decision does not provide a sufficient subject to the rules of the COM, and the statement of reasons. conversion of wine into cognac, which is an outlet outside the COM, given that the latter product does not come within the COM. Consequently, it is in no way a mistake to consider that any quantity of wine produced for sale on the wine market rather than for conversion into cognac represents, within the framework of the 57. (a) The first complaint deals, in par- COM, an additional quantity of wine and ticular, with the distinction made by the therefore is equivalent, in essence, to an Commission between wines intended for increase in wine production. conversion into cognac, which therefore have an outlet outside the wine market, and wines which on the contrary are sold on the wine market. The French Government contends, on the one hand, that all wines, irrespective of their intended use, are governed by the COM and thus it is mistaken to regard, as the Commission does, wines intended for the production of cognac as wines Outside the COM'. On the other hand, it refutes the claim that wines produced in Charentes from Ugni-blanc vines are used exclusively for that purpose.

61. Thus, in my opinion the reasoning followed by the Commission in reaching 60. Thus, the fact that the wines produced the conclusion that that aid would essen- in Charentes, in addition to being con- tially lead to a net increase in wine verted into cognac, are also directed to production is not mistaken. other uses, being sold as table wines or used in the production of other wines, certainly does not preclude their conversion produc- ing the effect indicated by the Commission of a net increase in the quantity of wine released on to the market. It is quite 62. (b) The French Government then con- possible that a certain amount of converted tends that the Commission overestimated wine may also involve vineyards whose the effects of the aid in the wine-growing sector, without taking into consideration the modest amount of the aid involved and 31 — Essentially it involves wine obtained from grapes which, like the Ugni-blanc variety concerned in tne present the fact that a relatively limited area would dispute, are classified as both wine-grape varieties and varieties for other uses, namely for the production of wine be affected by the conversion. 34 spirits in the case in point. The production of such wines exceeding the so-called 'quantity of wine normally pro- duced', determined in the various wine-growing areas on the basis of a production reference perioda having regard to the quantities absorbed by conversion into spirits, must be delivered to distillation [see Articles 52 to 57 of Commis- sion Regulation (EC) No 1623/2000 of 25 July 2000 concerning procedures for the application of Regulation (EC) No 1493/1999 on the common organisation of the market in wine with regard to market mechanisms 63. Even if one sets aside the doubts about (OJ 2000 L 194, p. 45), amended by Regulation (EC) No 2464/2001 (OJ 2001 L 331, p. 25)]. the admissibility of this complaint, of 32 — The objective of the mechanism in question can be clearly which there is in fact no trace in the seen from the statements of reasons for Regulations Nos application, I consider that the French 1493/1999 and 1623/2000. The 37th recital of Regulation No 1493/1999 states that 'the production of wine Government's position on this point is also obtained from grapes not classifica solely as wine-grape varieties should be directed in the first instance towards untenable. I note that one of the general traditional uses in the spirits sector and other traditional outlets; provisions should be made for the compulsory distillation of such wine produced in excess of the normal quantities directed towards such uses'. The 60th recital of Regulation No 1623/2000 then states that distillation '... 33 — Point 5 of the contested decision. See also point 1 of the plays a vital role in achieving balance on the market in letter from the French authorities of 28 July 1999, cited table wine and indirectly helps to adjust wine-growing above in footnote 12. potential to requirements'. 34 — See the third paragraph of point 5 (p. 9) of France's reply.

IV — Costs

64. (c) Finally, as regards the French com- plaint concerning the alleged inadequacy of 66. By virtue of Article 69(2) of the Rules the statement of reasons for the contested of Procedure, the unsuccessful party is to be decision, I must point out that the reason- ordered to pay the costs if they are applied ing followed by the Commission with for. Since I consider that the action brought regard to the effects of the aid on compe- by the French Republic should be dis- tition was stated in unequivocal terms, missed, I propose that France be ordered albeit somewhat concisely, in points 45 to pay the costs as requested by the and 46 of the contested decision. That said, Commission. however, I note that all the data employed by the Commission as the basis for making 36 — See, for example, Cases C-122/94 Commission v Council [1996] ECR I-881, paragraph 29; C-278/95 P Siemens v Commission [1997] ECR I-2507, paragraph 17; C-367/95 P Commision v Sytraval and Brink's france [1998] ECR 35 — See second and eleventh recitals of Regulation I-1719, paragraph 63 and, most recently, Italy v Commis- No 1993/1999. sion [2002] cited in footnote 15, paragraph 48.

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V — Conclusion

67. In light of the above, I therefore propose that the Court give judgment as follows: