JUDGMENT OF 13. 2. 1980 — CASE 77/79 DAMAS v FORMA

In Case 77/79 REFERENCE to the Court pursuant to Article 177 of the EEC Treaty by the French Conseil d'État [Council of State] for a preliminary ruling in the proceedings pending before that court between

THE COURT (First Chamber) composed of: A. O'Keeffe, President of Chamber, G. Bosco and T. Koopmans, Judges, Advocate General : J.-P. Warner Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and Issues

I — Facts and written procedure

II — Written observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC

III — Oral procedure

Decision

(a) The first question

(b) The second question

Costs

I —. Facts and written procedure

1. On 6 October 1969 in order to reduce surplus milk production the Council adopted Regulation No 1975/69 introducing a system of premiums for slaughtering cows and for withholding milk and milk products from the market, detailed rules for the application of which were laid down by Regulation No 2195/69 of the Commission of 4 November 1969. The scheme was ended in 1971 by Regulation No 1290/71 of the Council. It was reintroduced in 1973 and remained in force until 31 December 1974. In 1977, by Regulation No 1078/77 of 17 May 1977 (Official Journal 1977, L 131, p. 1), the Council introduced a new system of premiums for the non-marketing of milk and milk products and for the conversion of dairy herds. That scheme is still in force.

2. Under the basic Regulation No 1975/69 and the implementing Regulation No 2195/69 the grant of the premium to farmers for withholding milk and milk products from the markets is subject in particular to:

3. On 2 April 1970 Marie-Louise Damas, the owner of a farm at Garderon, Bretagne d'Armagnac (Gers), and her tenant farmer, Angelo Arbusti, jointly applied for premiums for withholding milk and milk products from the market. In so doing they stated inter alia that the number of full-grown cattle kept on the farm on 31 August 1969, as on the date of submission of the application, was 23 animals of which 21 were dairy cows.

4. By decision of 16 March 1979 the Conseil d'État stayed proceedings and pursuant to Article 177 of the EEC Treaty referred the following questions to the Court of Justice:

5. A copy of the decision of the national court was received at the Court on 16 May 1979.

II —. Written observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC

III —. Oral procedure

1. By a decision of 16 March 1979, which was received at the Court on 16 May 1979, the Conseil d'État [Council of State] of the French Republic referred to the Court for a preliminary ruling two questions on the interpretation of Regulation (EEC) No 1975/69 of the Council of 6 October 1969 introducing a system of premiums for slaughtering cows and for withholding milk and milk products from the market (Official Journal, English Special Edition, Second Series, III, p. 38) and also of Regulation (EEC) No 2195/69 of the Commission of 4 November 1969 laying down detailed rules for the implementation of that system of premiums (Journal Officiel 1969, L 278, p. 6).

2. Those questions have been raised during proceedings arising out of a decision of the Fonds d'Orientation et de Régularisation des Marchés Agricoles [Fund for the Guidance and Stabilization of Agricultural Markets] (hereinafter referred to as the FORMA), which is the body responsible in France for the granting and payment of the premiums referred to in Regulation No 1975/69 of the Council, to take steps to recover from the appellant in the main action that part of the premium for withholding milk and milk products from the market which she had been paid on account.

3. Article 5 of Regulation No 1975/69 provides that farmers having more than ten dairy cows may, on application, receive a premium for withholding milk and milk products from the market. Article 6 thereof provides that the granting of the premium shall be subject, in particular, to a written undertaking from the recipient to discontinue fully and finally the sale of milk and milk products, including the disposal thereof free of charge, at the latest within six months of the date of the said undertaking. Article 7 of that regulation provides that the amount of the premium shall be 200 units of account per dairy cow kept on the farm at the date when the application is made and that the granting of the premium shall be restricted to the number of dairy cows on the farm managed by the recipient at an appointed date. Article 8 of the regulation, which deals with the procedure for paying the premium, provides that one half of the premium per dairy cow shall be paid in the three months following submission of the abovementioned undertaking and the second subparagraph of Article 8 (2) further provides that:

4. It emerges from the file on the case that, after the appellant in the main action had applied for a premium for withholding milk and milk products from the market, she gave on 8 April 1970 the undertaking provided for by Article 6 of Regulation No 1975/69 to discontinue fully and finally the disposal, even free of charge, of the abovementioned products at the latest within six months of the date when she gave the undertaking, that is, by 8 October 1970. In this way she obtained the premium in question and, as provided for in the first subparagraph of Article 8 (2) of the said regulation, received from the FORMA the first half of the premium. Since the FORMA took the view, on the basis of checks and investigations carried out by the competent authorities, that the person concerned had continued to supply milk after 8 October 1970, it took steps by means of an enforceable decision, served on 10 March 1972, to recover the said amount pursuant to Article 11 of Regulation No 1975/69 and Article 16 of Regulation No 2195/69. The person concerned contended that such recovery was not justified, her main submission being that she altogether ceased supplying milk as from 7 September 1970 and that, having in fact converted her dairy herd into adult bovine units, she was obliged to discontinue all direct involvement in the farm, sell her livestock and let the property on a farming lease dated 2 August 1971 which took effect retroactively from 1 November 1970.

5. In view of the argument put forward by the FORMA and challenged by the appellant, that the recipient of the premium continues to be bound by the undertaking which he gave if he disposes of the farm, the national court referred to the Court of Justice for a preliminary ruling the following questions:

(a). The first question

6. In order to enable an answer to this question to be given to the national court the rules at issue must be examined, principally in the light of the main objectives which they seek to attain. The preamble to Regulation (EEC) No 1975/69 of the Council states that, since the situation in milk and milk products in the Community is one of surpluses, that regulation aims at encouraging the tendency of certain categories of farmers in the Community to abandon milk production or the marketing of milk and milk products and for those purposes introduces a premium for slaughtering dairy cows as well as a premium for withholding the said products from the market. Viewed in the light of those objectives it is therefore apparent from Regulation No 1975/69 that the principal legal reason for the granting of the premium for withholding milk and milk products from the market and for the retention of that advantage is the actual discontinuation of all marketing of the said products for the period of five years specified in Article 11 of that regulation in respect of which the recipient has given an undertaking pursuant to Article 6. In this context the undertaking given by the recipient to desist from marketing the products in question is the principal means whereby Regulation No 1975/69 seeks to attain its objectives so that any failure to honour that undertaking, involving a disregard of those very objectives, makes the granting and retention of the benefit of the premium unjustified and destroys its legal foundation. In those circumstances the fact that during the abovementioned period the recipient handed over the management of the farm to a third party is not sufficient to release him from the undertaking which he gave and to vest in him unconditionally the payment on account as well as the other instalments of the premium paid to him, if the basic objective which Regulation No 1975/69 seeks to attain, namely the actual withholding of the products at issue from the market during the whole of the period under consideration, has been disregarded.

7. Those basic features of the system in question were confirmed by Regulation (EEC) No 1386/70 of the Council of 13 July 1970 (Official Journal, English Special Edition, Second Series, III, p. 48) and also by implementing Regulation (EEC) No 2240/70 of the Commission of 4 November 1970 which entered into force on 8 November 1970 (Journal Officiel 1970, L 242, p. 12). The former regulation, by introducing fresh provisions to cover the case of a successor to the farm or of force majeure, makes it quite clear in the first recital of the preamble thereto that the only circumstances which may justify noncompliance with the obligations undertaken by the recipient of the premium, as far as concerns the withholding of milk and milk products from the market, are those which are beyond his control, where the conditions for a case of force majeure within the meaning of Article 2 thereof are present. On the other hand, in the event of a farm passing to a successor, Article 1 of the same regulation, which has become Article 5 (2) of Regulation No 1975/69 as amended, expressly states that the recipient is only entitled to keep the part of the premium paid in advance in so far as the successor in title undertakes to assume the undertakings of his predecessor. Under Article 1 of Regulation (EEC) No 2240/70 the successor's undertaking does not discharge the predecessor in title unless the former has given his undertaking to the competent authority. Those provisions make it absolutely clear that, apart from exceptional circumstances, which are beyond the control of the recipient, such as cases of force majeure, the concern to ensure that the system in question achieves its full effect, namely the withholding of milk and milk products from the market during the whole of the period under consideration, is the underlying, fundamental criterion which determines the conditions governing the grant of the premium and the absolute entitlement of the recipient to retain the payment on account.

8. For those reasons the answer to the first question must be that the undertaking entered into by the recipient of a premium not to dispose of milk or milk products referred to in Article 6 of Regulation No 1975/69 of the Council of 6 October 1969 binds the recipient personally and does not attach to the property. In the event of a disposal of the property or of the right to farm the land, the recipient loses his entitlement to the premium and is bound to return to the competent authority the payment on account and any other instalment of the premium already received if the marketing of milk and milk products has not in fact ceased at the farm in question during the whole period under consideration.

(b). The second question

9. As the Court emphasized in its judgment of 1 March 1977 in Case 84/76 Collie [1977] ECR 361, the aim of Regulation No 1975/69 is not only to discourage the marketing of milk and milk products but also at the same time to encourage recipients of the premium to use their milk production for rearing cattle intended for the production of meat and to exploit effectively the capacity of their farms, especially as far as the production of beef and veal is concerned. It is for the very purpose of attaining that objective that the second subparagraph of Article 8 (2) imposes upon the recipient the obligation to hold, during the period of five years over which the payment of the premium is spread, a number of adult bovine units not less than the number of dairy cows which he held at the date of making the application and which gave entitlement to the premium, and makes the payment by instalments of the balance of the premium conditional on compliance with that obligation.

10. The pursuit of that objective does not make it necessary for the recipient to continue to hold during the period under consideration the dairy cows which were on the farm when the application was made and which gave entitlement to the premium. In fact Article 5 (2) (a) and Article 6 (1) of the implementing Regulation (EEC) No 2195/69 of the Commission provide, as far as concerns the slaughtering premiums, that, if the competent authority grants the applications which have been made, it shall take steps to mark all the dairy cows held on the farm and shall prepare identity cards of a given type in order to identify them. On the other hand, Article 14 (2) (a) of the same regulation provides, as far as concerns premiums for withholding milk and milk products from the market, that the competent authority only has to determine the number of dairy cows giving entitlement to the premium. Those different legal rules confirm that the obligation imposed by Article 8 (2) of Regulation No 1975/69 on the recipient of the premium to hold a specific number of adult bovine units relates solely to that number and is not linked to particular animals. Consequently the system introduced by Regulation No 1975/69 does not prevent the recipient from selling the dairy cows held on the farm when the application was made. The fact that the recipient may dispose of the cows in question implies that in the event of a disposal the undertaking which he has given to withhold milk and milk products from the market does not cover the livestock and that the burden of the undertaking does not automatically pass, as far as concerns the cows which have been sold, to the purchaser thereof.

11. The answer to the second question must therefore be that the obligation upon the recipient of the premium to hold a number of adult bovine units not less than the number of dairy cows held at the date of making the application is not linked to specific animals. In the event of the disposal of the dairy cows which were held on the farm at the time when the application was made and which gave entitlement to the premium, the burden of the undertaking given by the recipient to withhold milk and milk products from the market does not pass to the buyer of those cows by virtue of that disposal.

On those grounds, THE COURT (First Chamber), in answer to the questions referred to it by the Conseil d'État of the French Republic by a decision of 16 March 1979, hereby rules :

1 The undertaking entered into by the recipient of a premium not to dispose of milk or milk products referred to in Article 6 of Regulation No 1975/69 of the Council of 6 October 1969 binds the recipient personally and does not attach to the property. In the event of a disposal of the property or of the right to farm the land, the recipient loses his entitlement to the premium and is bound to return to the competent authority the payment on account and any other instalment of the premium already received if the marketing of milk and milk products has not in fact ceased at the farm in question during the whole period under consideration.

2 The obligation upon the recipient of the premium to hold a number of adult bovine units not less than the number of dairy cows held at the date of making the application is not linked to specific animals. In the event of the disposal of the dairy cows which were held on the farm at the time when the application was made and which gave entitlement to the premium, the burden of the undertaking given by the recipient to withhold milk and milk products from the market does not pass to the buyer of those cows by virtue of that disposal.