Opinion of Mr advocate general Reischl

Mr President,

Members of the Court,

As the Court is already aware from other cases, the German mark was revalued as from 27 October 1969 in relation to the official parity applicable until that date. Since the Community agricultural prices are linked to units of account, this monetary measure was bound to entail loss of income for German agriculture if the value of the units of account remained unchanged: in fact the net profit in German marks on products coming within the organizations of the market fell by approximately 9 %.

The Council gave this matter its attention at its meeting on 27 October 1969. It refused both to alter the unit of account, because it would have involved an increase in prices in other Member States and incentives to production, and to introduce compensatory measures at the borders requested by the Federal Republic of Germany. It decided rather to grant aid which was intended to be financed chiefly by the Federal Republic of Germany. The Federal Republic of Germany was authorized solely until the aid came into force to increase the intervention and buying-in prices and to apply a system of import levies and export subsidies. In this way the existing level of prices was maintained until 31 December 1969

So far as the grant of aid was concerned, which was intended to compensate for the loss of income, Regulation No 2464/69 of the Council of 9 December 1969 on measures to be taken in agriculture as a result of the revaluation of the German mark (Official Journal, English Special Edition 1969 (II), p. 527) was adopted. It contained an authorization to grant aid to German agricultural producers as from 1 January 1970. In this connexion it was provided that the aid could reach the amount of DM 1700000000 for each budgetary year from 1970 to 1973 and that the Community, in other words the European Agricultural Guidance and Guarantee Fund, would contribute to the financing as stipulated. In particular, Article 1 (3) of the regulation provided as follows:

This measure was extended by Council decision of 21 January 1974, not published, Article 1 of which provided as follows:

On 23 December 1969 the German Gesetz über einen Ausgleich für Folgen der Aufwertung der Deutschen Mark auf dem Gebiet der Landwirtschaft (hereinafter referred to as the Aufwertungsausgleichgesetz) (Law on compensation for the effects of the revaluation of the German mark on agriculture) was adopted on the basis of the above-mentioned regulation. Article 4 thereof provided that agricultural undertakings within the meaning of Article 24 (2) of the Umsatzsteuergesetz (Law on turnover tax) may reduce turnover tax by 3 %. Under Article 24 (2) (2) of the Umsatzsteuergesetz of 29 May 1967Establishments which breed and keep livestock, in so far as their livestock satisfies the criteria of agricultural use in accordance with Article 51 and 51 (a) of the Bewertungsgesetz (Law on valuation) are deemed to be agricultural and forestry undertakings. Article 51 (1) of the above-mentioned Bewertungsgesetz provides as follows:

According to these German provisions the plaintiff in the main action did not benefit from the compensation for the effects of the revaluation of the German mark. In addition to the manufacturing of animal feeding-stuffs, it engages in the fattening of calves with feeding-stuffs containing milk powder in substitution for other protein which it produces itself. The plaintiff does this however without using any agricultural land by buying calves, having them reared on the basis of contracts for fattening which it enters into with farmers, and then selling them after four months to slaughterhouses. For that reason it is taxed as an industrial undertaking and the tax office therefore refused the application made in its tax declaration for 1974 for an aid amounting to 3 % of the turnover from fattened calves.

The plaintiff therefore appealed to the Finanzgericht Münster after unsuccessfully lodging an objection.

In its view the Aufwertungsausgleichgesetz is incompatible with Community law. The latter makes no distinction between agricultural and industrial livestock keepers; in particular the organization of the market in beef and veal which is of interest in this case (Regulation No 805/68, Official Journal, English Special Edition 1968 (I), p. 187) contains a guarantee to all producers. Accordingly, and because they are equally affected by the revaluation, the concept of agricultural producers contained in Regulation No 2464/69 also includes industrial livestock keepers. In addition it is necessary to object to the restrictive use of the authorization made by the Federal Republic of Germany from the point of view of Article 40 (prohibition against different treatment of producers) and, since intra-Community trade is hindered by distortions in competition, from that of the prohibition against measures having an effect equivalent to quantitative restrictions.

The defendant Finanzamt Warendorf contradicts this view. In its opinion the fact that Regulation No 2464/69 contains only an authorization, in other words, sets the bounds within which the German legislature had a margin of discretion, is important. It is impossible to speak of an infringement of the prohibition on discrimination, first because the criterion for the differentiation is not linked to nationality and secondly because industrial undertakings can adapt themselves more easily to changes in market conditions and cost situations. It is equally impossible to speak of an infringement against the prohibition on measures having an effect equivalent to quantitative restrictions on imports, for that prohibition generally covers only access by foreign products to the domestic market, which is irrelevant in the present case.

The Finanzgericht Warendorf stayed the proceedings by order of 26 September 1977 and referred to the Court of Justice under Article 177 of the EEC Treaty the following questions for a preliminary ruling:

My opinion on these questions is as follows:

1. It follows from the account of the facts that Regulation No 2464/69 was only applicable up to and including 1973. The application for tax reduction which is to be dealt with in the main action related, on the other hand, to 1974. Therefore the Council decision of 21 January 1974 is primarily the determining factor with regard to this request, so far as Community law is concerned. Accordingly, it is necessary to relate the questions which have been submitted to this Court principally to that decision. This does not however basically alter the task of the Court of Justice. In fact, the expression agricultural producers is used in the above-mentioned decision. In addition, it is clear that the decision, which was adopted on the basis of Article 3 of Regulation No 2464/69, was intended essentially to extend the period for which the regulation was applicable and that therefore the expression agricultural producers has the same scope as it has in Regulation No 2464/69.

2. So far as the interpretation of the above-mentioned expression is concerned, the plaintiff emphasizes from the outset that it should not be concluded from the use of the word German in Article 1 of Regulation No 2464/69 that a reference is thereby made to German law. This adjective, it claims, is in fact intended only to delimit the territorial scope of the regulation; moreover, it is however necessary to assume that the expression agricultural producers has a meaning under Community law.

3. In view of this conclusion an examination of the further questions referred to the Court might seem superfluous as they were only raised in case the first question was answered in the affirmative, in other words if it were answered to the effect that industrial livestock keepers must also be deemed to be agricultural producers within the meaning of the regulation. I should like however to continue the examination of the remaining questions from two aspects:

4. Finally I propose that the questions put by the Finanzgericht Münster should be answered as follows:

1 Transisted from the German.