JUDGMENT OF 19. 10. 1977 - JOINED CASES 124/76 AND 20/77 MOULINS PONT-À-MOUSSON v OFFICE INTERPROFESSIONNEL DES CÉRÉALES

In Joined Cases 124/76 and 20/77 REFERENCE to the Court under Article 177 of the EEC Treaty by the Tribunal Administratif (Administrative Court), Nancy, for a preliminary ruling in the action (Case 124/76) pending before that court between

THE COURT composed of: H. Kutscher, President, M. Sørensen and G. Bosco, Presidents of Chambers, A. M. Donner, P. Pescatore, J. Mertens de Wilmars, Lord Mackenzie Stuart, A. O'Keeffe und A. Touffait, Judges, Advocate-General: F. Capotorti Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and issues

I — Facts and procedure

II — Written observations submitted to the Court

III — Written replies to the questions put by the Court

IV — Oral procedure

Decision

Costs

I —. Facts and procedure

1. The manufacture of beer involves the use, in addition to malt, of starch products derived from coarse-grained cereals capable of being processed into alcohol during fermentation: maize groats and maize meal (hereinafter called gritz) manufactured by the maize industry, starch produced by the starch manufacturing industry, and other starch products (broken rice, wheat flour etc.).

2. Gritz is manufactured by the maize industry by a purely mechanical method of processing maize grains. The brewing industry represents an important market for gritz.

3. Regulation No 19 of the Council of 4 April 1962 on the progressive establishment of the common organization of the market in cereals (JO of 20. 4. 1962, p. 933), introduced a system of levies for certain cereal products. Article 24 of the regulation provided however that the Council might adopt measures derogating from that system.

4. On 5 February 1976 (Case 124/76) and 10 February 1976 (Case 20/77) the respective plaintiffs in the main actions, who are producers of gritz, applied to the defendant in the main actions for the sums of FF 413221 and FF 708060 as production refunds for the quantities of maize utilized by them between 1 August and 31 December 1975 for the manufacture of gritz for the brewing industry. These applications were rejected on the ground that Community regulations no longer provided for the grant of production refunds for gritz.

5. Holding that the cases raised questions of interpretation of Community law, the Tribunal Administratif, Nancy, and the Tribunal Administratif, Chalons-sur-Marne, by orders dated respectively 25 November 1976 and 1 February 1977, stayed the proceedings and requested the Court of Justice under Article 177 of the EEC Treaty to give a preliminary ruling:

6. The orders making the references were registered at the Court Registry on 21 December 1976 and 8 February 1977 respectively.

7. The question of the abolition of the production refund for gritz is also the main issue in Joined Cases 64 and 113/76, Dumortier Frères et Maïseries du Nord v Council.

II —. Written observations submitted to the Court

1. The plaintiffs in the main actions claim that Regulation (EEC) No 665/75 is invalid in that it provides for the abolition of the production refund for gritz.

2. The Council considers that the Court should reject all the arguments relied upon by the plaintiffs in the main actions before the courts making the references.

3. (a) On the question as to the precise circumstances in which Regulation (EEC) No 665/75 was adopted, the Commission states that it can only refer to the explanations supplied on this subject by the Council which the latter set out in its defence in Case 64/76. The Commission confirms however that one of its members took the action described in the Council's defence, that is to say, proposed the abolition of the production refund for products used in the maize industry for the manufacture of gritz for the brewing industry. As regards the adoption of Regulation (EEC) No 2727/75 the Commission explains that, as this was a consolidating regulation, it in fact did no more than repeat the provisions which were in force on that date; Article 11 of its (unpublished) proposal dated 12 June 1975 was therefore consistent with Article 11 of Regulation No 120/67/EEC, as amended by Regulation (EEC) No 665/75, referred to above. There was therefore no amendment of the Commission's proposal on that point (b) As regards the alleged breach by Regulations (EEC) Nos 665/75 and 2727/75 of the principle of equality of treatment, the Commission disputes the arguments of the plaintiffs in the main actions in terms both of the economic grounds and the submissions relied upon. (c) According to the Commission the available economic information does not go to prove that after 1 August 1975 the competitive position of the maize industry in France became weaker in respect of its supply of gritz to the breweries. On the contrary it is established that, in the first place, gritz supplies by the French manufacturers to the breweries rose from 87946 tonnes in 1974/75 to 89300 tonnes in 1975/76 and, secondly, there has since August 1975 been virtually no use of gritz instead of starch by the consuming industry. This last statement can be explained by the investment outlay necessary to substitute starch for gritz in the process of the manufacture of beer because starch requires a better filter system. Furthermore, gritz is more easily handled than starch which, being a powder, tends to stick. (d) The Commission is unable to agree that the common agricultural policy must in all circumstances comply with the principle of free competition, at least in so far as the principle is based on Articles 85 et seq. of the Treaty. To do otherwise would be to misinterpret Article 42 of the Treaty. In any event the Commission regards it as an exaggeration to claim, as do the plaintiffs in the main actions, that each and every intervention measure must in no way affect normal conditions of intra-Community competition. Such a requirement goes further than compliance with the non-discrimination rule as set out in the second subparagraph of Article 40 (3) of the Treaty. Moreover the rule must be considered in relation to the other objectives laid down in Article 39. The Court has recognized that there may be some conflict between these various objectives, with the result that the Community legislature is recognized by the Court as having a wide discretion both in choosing between the objectives of Article 39, for example, in the judgment of 24 October 1973 in Balkan-Import-Export v Hauptzollamt Berlin-Packhof [1973] ECR 1091, and in choosing the means of attaining them, for example, in the judgment of 13 June 1972 in Cie d'Approvisionnement v Commission [1972] ECR 391. Against this background the Council's decision to abolish the production refund on gritz must be viewed in terms of a whole range of economic choices made by the Community legislature: exclusion of quellmehl from the list of products qualifying for refund (Regulation (EEC) No 1125/74) and reduction in the amount of the refunds granted for maize for use in the manufacture of starch and for gritz (Regulation (EEC) No 3113/74). Such choices fall within the normal scope of the discretion which the institutions of the Community are recognized as having for the purpose of the conduct of economic policy in general and the control of the common agricultural policy in particular. (e) Finally the Commission suggests that the plaintiffs in the main actions may be relying on a sort of prescriptive right to the production refund. In this connexion it points out that, in its decisions, the Court has recognized that even the concept of stabilization of the markets, embodied in Article 39 (1) (c) of the Treaty, cannot wholly cover the maintenance of positions already established under previous market conditions: judgment of the Court of 2 June 1976 in Joined Cases 56 to 60/74, Kampffmeyer v Commission and Council [1976] ECR 711).

III —. Written replies to the questions put by the Court

1. The Court requested the Commission to make a statement before the hearing in regard to:

2. The Court also asked the parties and the Council to comment before the hearing on the statistics showing that the supply of gritz by the French producers to breweries rose from 87946 tonnes in 1974/75 to 89300 tonnes (+ 1·50 %) in 1975/76 whereas supplies to the brewing industry by millers in the north region fell from 27708 tonnes in 1974/75 to 21401 tonnes in 1975/76.

IV —. Oral procedure

1. By orders dated respectively 25 November 1976 and 1 February 1977, which reached the Court on 21 December 1976 and 8 February 1977, the Tribunal Administratif, Nancy, and the Tribunal Administratif, Châlons-sur-Marne, asked the Court under Article 177 of the EEC Treaty for a ruling on the validity of Regulations (EEC) Nos 665/75 of the Council of 4 March 1975 amending Regulation No 120/67/EEC on the common organization of the market in cereals (OJ L 72 of 20.3.1975, p. 14) and Regulation (EEC) No 2727/75 of 29 October 1975 on the common organization of the market in cereals (OJ L 281 of 1.11.1975, p. 1) in that they provide for the abolition of the production refund previously established for the benefit of manufacturers of maize groats and meal for the brewing industry.

2. Since the questions submitted by the two national courts are identical in content and purpose, it is proper to join the cases for the purposes of the judgment.

3. The questions were referred in connexion with proceedings for payment of a production refund for maize for the brewing industry which were brought against the competent national authorities by manufacturers of maize groats and meal (gritz) who claim that the provisions which abolished the production refund in that branch of industry while maintaining it for maize starch constitute discrimination contrary to the second subparagraph of Article 40 (3) of the Treaty.

4. The production refund for maize groats and meal used by the brewing industry was first introduced as discretionary by Regulation No 11/65/EEC of the Council of 26 January 1965 (JO of 5.2.1965, p. 251) and subsequently as compulsory by Article 11 of Regulation No 120/67/EEC of the Council of 13 June 1967 (OJ, English Special Edition 1967, p. 33).

5. The first recital in the preamble to Regulation No 11/65/EEC states that the refund was introduced because of the difficulties created as regards the use of maize groats and meal in the brewing industry, by reason of the competition from products with a similar use.

6. Regulation No 120/67/EEC gave the same reason when, in its tenth recital, it referred to the possibility of interchangeability of starches with maize and groats and meal.

7. With the object of achieving a balance between brewery prices for supplies of maize starch, on the one hand and of maize groats and meal on the other, Regulation No 138/67/EEC of the Council of 13 June 1967 (JO of 22.6.1967, p. 2404) fixing the production refund in respect of maize groats and meal used by the brewing industry fixed the refunds for the two products at the same level.

8. These identical arrangements for the two products were maintained until 1 August 1975, the date of entry into force of Regulation (EEC) No 665/75 whereby Article 11 of Regulation No 120/67/EEC was replaced by a new text which, while making the grant of a production refund for starch discretionary, no longer provided for a production refund in the case of maize groats and meal for the brewing industry.

9. The only reason for this change, contained in the second recital in the preamble to Regulation (EEC) No 665/75 was that, it no longer appears necessary to grant a refund for the production of maize groats and meal for use by the brewing industry in the manufacture of beer'.

10. By virtue of the possibility provided for by the new wording of Article 11 of Regulation No 120/67/EEC, a production refund for maize for use in the manufacture of starch was fixed by Regulation (EEC) No 1955/75 of the Council of 22 July 1975 (OJ L 200 of 31.7.1975, p. 1) and the regulations which subsequently replaced it.

11. The system thus established, which provided for a discretionary refund for maize for use in the manufacture of starch but for none in the case of maize for the brewing industry, was continued by Article 11 of the new basic Regulation No 2727/75 of 29 October 1975 on the common organization of the market in cereals (OJ L 281 of 1.11.1975, p. 1).

12. Nevertheless the Commission which, apparently, did not consider the different treatment of the two products to be justified, submitted to the Council on 20 June 1975 a proposal for a regulation which would reintroduce the refund for maize groats and meal for the brewing industry on the ground that the absence of such a refund could, in the circumstances likely to obtain, disturb the balance between the cost of supplying the brewing industry with maize starch on the one hand, and with maize groats and meal on the other (OJ C 159 of 16.7.1975, p. 9).

13. Nothing came of the proposal submitted to the Council on these lines.

14. The second subparagraph of Article 40 (3) of the Treaty provides that the common organization of agricultural markets shall exclude any discrimination between producers or consumers within the Community.

15. Whilst this wording undoubtedly prohibits any discrimination between producers of the same product it does not refer in such clear terms to the relationship between different industrial or trade sectors in the sphere of processed agricultural products.

16. This does not alter the fact that the prohibition of discrimination laid down in the provision cited is merely a specific enunciation of the general principle of equality which is one of the fundamental principles of Community law.

17. This principle requires that similar situations shall not be treated differently unless differentiation is objectively justified.

18. It must therefore be ascertained whether maize groats and meal on the one hand and maize starch on the other are in comparable situations, in particular in the sense that starch can be substituted for maize groats and meal in the production of beer and that the choice of the brewing industry between the two products mainly depends upon the cost of supply.

19. In this connexion the Council's representative before the Court denied the existence of such a relationship between the two products.

20. On the other hand it is clear that the Commission's action in this field over the years was invariably based on the possibility of interchangeability between the two products in the manufacture of beer.

21. This possibility of interchangeability was confirmed during the proceedings by the statements put in by the plaintiffs in the main actions which emanated not only from their brewer customers but also from independent experts on brewing.

22. In view in particular of the length of time during which the two products were given equality of treatment with regard to production refunds, it has not been established that there are objective circumstances which could have justified altering the previous system as was done by Regulation (EEC) No 665/75 which put an end to this equality of treatment.

23. It is clear from the foregoing that the abolition as a result of Regulation (EEC) No 66/75 of the refund for maize groats and meal, while, under the terms of that regulation in conjunction with Regulation (EEC) No 1955/75, the refund was maintained for maize starch amounts to a disregard of the principle of equality.

24. In the particular circumstances of the case, however, this finding of illegality does not inevitably involve a declaration that a provision of Regulation (EEC) No .665/75 is invalid.

25. It must first of all be borne in mind that the amendment of Article 11 of Regulation No 120/67/EEC effected by Article 3 of Regulation (EEC) No 665/75 took the form not of the deletion of that part of the text which relates to maize groats and meal for use by the brewing industry but of the replacement of the previous wording by a new wording in which there is no mention of those products.

26. Thus the provision is unlawful because of something for which it makes no provisions rather than on account of any part of its wording.

27. However, this unlawfulness cannot be removed merely by the fact that the Court, in proceedings under Article 177, rules that the contested provision is in part or in whole invalid.

28. On the other hand, the conclusion must be drawn that, in law, the situation created by Article 3 of Regulation (EEC) No 665/75, whereby the previous text was replaced by a new wording of Article 11 of Regulation No 120/67/EEC, is incompatibile with the principle of equality and that it is for the competent institutions of the Community to adopt the necessary measures to correct this incompatibility.

29. The need for a reply to this effect to the questions asked is borne out by the existence of several courses of action which would enable the two products in question once again to be treated equally and to make good any damage sustained by those concerned and by the fact that it is for the institutions reponsible for the common agricultural policy to assess the economic and political considerations on which this choice of action depends.

30. The costs incurred by the Council and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable.

31. As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national courts, the decision on costs is a matter for those courts.

On those grounds, THE COURT in answer to the questions referred to it by the Tribunaux Administratifs, Nancy and Châlons-sur-Marne, by orders of 25 November 1976 and 1 February 1977, hereby rules:

1 The provisions of Article 11 of Regulation No 120/67/EEC of the Council of 13 June 1967 as worded with effect from 1 August 1975 following the amendment made by Article 3 of Regulation (EEC) No 665/75 of the Council of 4 March 1975 and repeated in Regulation (EEC) No 2727/75 of the Council of 29 October 1975, in conjunction with Regulation (EEC) No 1955/75 of the Council of 22 July 1975 and the subsequent regulations which replaced it, are incompatible with the principle of equality in so far as they provide for a difference of treatment in respect of production refunds between maize groats and meal for the brewing industry and maize starch.

2 It is for the institutions competent in matters of common agricultural policy to adopt the measures necessary to correct this incompatibility.