JUDGMENT OF 27. 1. 1981 — CASE 1251/79 ITALY v COMMISSION

In Case 1251/79

THE COURT composed of: P. Pescatore, President of the Second Chamber, Acting as President, Lord Mackenzie Stuart and T. Koopmans (Presidents of Chambers), A. O'Keeffe, G. Bosco, A. Touffait and O. Due, Judges, Advocate General: G. Reischl Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and Issues

I — Facts and written procedure

A — Legislative framework

B — The facts

II — Conclusions of the parties

III — Submissions and arguments of the parties

(a) Statement of reasons on which the decision was based

(b) The term conclusion of the contract

(c) The purpose of the regulations in question

(d) The alleged breach of the principle of the protection of legitimate expectation

IV — The parties presented oral argument at the sitting on 15 October 1980.

Decision

Costs

I —. Facts and written procedure

A —. Legislative framework

1. Article 5 of Regulation (EEC) No 816/70 of the Council of 28 April 1970, laying down additional provisions for the common organization of the market in wine (Official Journal, English Special Edition 1970 (I), p. 234), provides that aid shall be granted under certain conditions in respect of the private storage of certain table wines. Under Article 5 (5) of the regulation the grant of the aid is conditional upon the conclusion of storage contracts between the intervention agencies designated by the Member States and producers who apply for them. These may be long-term contracts or short-term contracts, as the case may be.

2. Under Article 5 (1) of Regulation No 816/70 private storage aid is to be granted when forward estimates show that the quantity available at the beginning of the wine-growing year exceeds total foreseeable requirements for that year by more than five months' consumption. The second subparagraph of Article 5 (5) of that regulation, as amended by Regulation (EEC) No 2504/71 of the Council of 22 November 1971 (Official Journal, English Special Edition 1971 (III), p. 962), provides as follows :

3. By Regulation (EEC) No 2722/71 of the Council of 20 December 1971 (Official Journal, English Special Edition 1971, p. 1004), which came into force on 23 December 1971, the Council amended the requirement for the conclusion of long-term contracts as from the 1971/72 wine-growing year, replacing the words five months in Article 5 (1) of Regulation No 816/70 by four months. According to the first recital of the preamble to Regulation No 2722/71, this reduction proved necessary because, despite the exceptional harvest, the procedure for long-term private storage contracts had not been able to operate in the 1970/71 wine-growing year.

4. Regulation (EEC) No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (Official Journal, English Special Edition 1970 (I), p. 218) provides for a system of direct Community financing of refunds on exports to non-member countries and of intervention by the Guarantee Section of the European Agricultural Guidance and Guarantee Fund for the purpose of stabilizing agricultural markets.

B —. The facts

1. By decision of 12 October 1979, notified to the Government of the Italian Republic by letter of 18 October 1979, the Commission determined the total expenditure by the Italian Republic recognized as chargeable to the Guarantee Section of the European Agricultural Guidance and Guarantee Fund.

2. The source of the dispute is a conflict of opinion on the interpretation of the provisions inserted into Article 8 (1) of Regulation No 1437/70 by Regulation No 176/72.

3. The application was lodged at the Court Registry on 28 December 1979.

II —. Conclusions of the parties

III —. Submissions and arguments of the parties

(a). Statement of reasons on which the decision was based

(b). The term conclusion of the contract

(c). The purpose of the regulations in question

(d). The alleged breach of the principle of the protection of legitimate expectation

IV —. The parties presented oral argument at the sitting on 15 October 1980.

1. By application lodged at the Court Registry on 28 December 1979, the Italian Republic brought an action under Article 173 of the EEC Treaty for a declaration that Commission Decision 79/898/EEC of 12 October 1979 concerning the clearance of the accounts presented by the Italian Republic in respect of the European Agricultural Guidance and Guarantee Fund, Guarantee Section, Expenditure for 1973 (Official Journal 1979, L 278, p. 19) is void, in so far as the Commission did not accept as chargeable to the Fund the sum of LIT 604863175 in respect of the payment of aid under long-term storage contracts for wine for the 1971/72 wine-growing year.

2. Article 5 (5) of Regulation (EEC) No 816/70 of the Council of 28 April 1970, laying down additional provisions for the common organization of the market in wine (Official Journal, English Special Edition 1970 (I), p. 234), makes the grant of the storage aid conditional on the conclusion of long-term or short-term storage contracts. The same provision, as amended by Regulation (EEC) No 2504/71 of the Council of 22 November 1971 (Official Journal, English Special Edition 1971 (III), p. 962), states that long-term contracts shall be valid for a minimum period of nine months and that such contracts may only be entered into during the period from 16 December to 15 February of the same wine-growing year. With regard to the application of that provision, Article 8 (1) of Regulation (EEC) No 1437/70 of the Commission of 20 July 1970, on storage contracts for table wine (Official Journal, English Special Edition 1970 (II), p. 469), provides that a contract may not be concluded for a period beginning before the date of the conclusion of the contract.

3. For the 1971/72 wine-growing year Regulation No 2837/71 of the Commission of 27 December 1971, granting aid for the private long-term storage of certain table wines (Journal Officiel L 285, p. 78), made possible the conclusion of long-term storage contracts for certain types of table wine.

4. During the period within which long-term contracts for that wine-growing year could be concluded the Commission adopted Regulation (EEC) No 176/72 of 26 January 1972 supplementing Regulation (EEC) No 1437/70 on storage contracts for table wine (Official Journal, English Special Edition 1965—1972, p. 44), which added the following paragraphs to Article 8 (1), cited above, of the latter regulation:

5. The expenditure which is the subject of the application represents the amount, of aid paid under long-term storage contracts for table wine for the 1971/72 wine-growing year by the Azienda di Stato per gli Interventi nel Mercato Agricolo (hereinafter referred to as AIMA), which is the Italian intervention agency competent to conclude storage contracts and to pay the aid relating thereto. In the contested decision the Commission refused to charge that expenditure to the Fund, having established that the Italian authorities had failed to observe the rules governing the grant of the aid in question by entering into long-term contracts after 15 February 1972, which was the final date for the conclusion of those contracts under the applicable Community regulations.

6. The Italian Government puts forward three submissions in support of its application, concerning respectively the statement of reasons on which the contested decision was based, the interpretation of the applicable Community regulations, and the protection of legitimate expectation. It is convenient to deal with the second submission first.

7. The Italian Government explains that the act which it describes as the formal execution (stipulazione formale) of the contract by AIMA could only occur at the end of a procedure consisting of various stages: first, the submission through the provincial agricultural inspectorates of an application by the producer concerned, containing all the information referred to in Regulation No 1437/70; secondly, verification at the place of storage of the correctness of that information by the competent provincial inspectorate and the forwarding by the latter of the file to AIMA; finally, the drawing up by AIMA of a list of conditions and of an instrument of acceptance, which it sent to the producer concerned for authentication by the signature of a notary. The government admits that in the case of the long-term contracts referred to in the application that formal execution occurred after the final date of 15 February 1972.

8. The Italian Government maintains, however, that the contracts in question were concluded between 16 December 1971 and 15 February 1972, even if their formal execution occurred subsequently. It relies for that purpose on the general rules of the law on contract, according to which a contract is concluded at the point at which the intentions of the two parties concur. By publicly announcing the possibility of concluding long-term contracts on conditions laid down by the Community regulations, the intervention agencies make an offer to the public, which is accepted by the wine producer as soon as his application is submitted.

9. The Italian Government acknowledges that after the submission of the application the intervention agency must verify various items of information in order to check whether the application complies with the applicable Community regulations, but it takes the view that if that examination produces a negative result that must be regarded as a condition subsequent of an already concluded contract.

10. It is important to emphasize first that the long-term storage aid for table wine is intended, as the Commission rightly argued, to allow the removal from the market, in a situation of considerable surplus, of the excess quantities from the beginning of the wine-growing year until the following wine harvest, with the particular objective of stabilizing the markets. The requirement that the long-term contracts must be concluded between 16 December and 15 February of the same wine-growing year, and also the period of validity of nine months laid down for those contracts, are aimed at achieving that objective. It is in that context that the term conclusion of the contract must be understood.

11. It must then be borne in mind that the inspections and verifications which have to be carried out by the intervention agency or, as in this case, by the provincial agricultural inspectorates acting on behalf of the competent intervention agency are designed to establish whether the application submitted by the wine producer satisfies the essential conditions laid down by the Community regulations and to determine for that purpose, in particular, whether the product is table wine of the category covered by those regulations, whether the producer who made the application is the owner of the wine and whether the wine is stored in bulk.

12. Under those circumstances an interpretation of the term conclusion of the contract which would enable a right to the Community aid to be established, even before it was determined that the conditions governing that aid were fulfilled, cannot be accepted. Indeed, the result of such an interpretation would be that the action needed in order to verify whether those conditions were fulfilled could take place at any time during the nine months' period of validity laid down for the contract, or even after the expiry of that period.

13. It follows from that that there are no grounds for drawing a distinction between the conclusion of the contract and its formal execution. Moreover, Article 9 of Regulation No 1437/70, which lays down the written form for the contract, is based on the assumption that the contract does not become perfect until the preparation of the written instrument, after verification of all the relevant information by the intervention agency. The argument put forward by the Italian Government must therefore be rejected.

14. The Italian Government also submits that Regulation No 176/72 of the Commission made possible the conclusion of long-term contracts after 15 February 1972. The retroactive effect provided for by that regulation would serve no purpose if the contracts had nevertheless to be concluded before that date.

15. That argument cannot be accepted. Regulation No 176/72 of the Commission amended Article 8 (1) of Regulation No 1437/70, a provision which is concerned only with the commencement of the period of nine months for which a contract may be concluded. But the period during which the contracts must be concluded (the period between 16 December and 15 February) was unaffected by that amendment; that period was determined by Council regulations, in particular by Regulations Nos 816/70 and 2504/71.

16. The third submission concerns the protection of legitimate expectation. The Italian Government maintains that the Commission adopted Regulation No 176/72 in order to take account of the difficulties encountered by AIMA, which had indicated that its action in the field of storage contracts was subject to delays, in particular owing to the considerable period of time which elapsed between the date of the application and that of the formal conclusion of the instrument incorporating the contract. The Commission thus gave the impression that it was acceding to AIMA's request by adopting Regulation No 176/72 and is no longer entitled to seek refuge behind arguments of a formal nature in order to contest the validity, under the Community regulations, of the contracts formally concluded after 15 February 1972.

17. It follows from the considerations regarding the second submission that the practice followed by the Italian authorities arises from an incorrect interpretation of Community law. In such a case the Commission is not obliged to charge expenditure incurred on that basis to the Fund unless the incorrect interpretation may be attributed to a Community institution.

18. The Italian Government informed the Court that the request by AIMA to which it refers was made orally and that no written documents exist relating to that request. However, the Commission supplied the Court with the minutes of the 56th meeting of the Management Committee for Wine held in December 1971, which indicate that the Italian delegation requested that the period of validity of a contract might be allowed to commence on the date of the application and not necessarily on the date of the conclusion of the contract in order to take account of the fact that the Italian intervention agency was overburdened with work. By altering the beginning of the period of validity of the nine-month contracts, Regulation No 176/72 gave effect to that request.

19. From those circumstances it is clear that the Italian Government has not been able to establish that its incorrect interpretation of Regulation No 176/72 was attributable to the conduct of the Commission.

20. Finally, the submission based on the insufficient statement of the reasons on which the contested decision was based must be considered. In so far as this submission concerns the interpretation of Regulation No 176/72, the problem has already been dealt with above; for the rest, it must be said that it disregards the fact that the Italian Government was closely involved in the process by which the decision came about and that it was therefore aware of the reasons for which the Commission took the view that it must not charge the sum in dispute to the Fund.

21. Under those circumstances, and in the particular context of the preparation of the decisions concerning the clearance of accounts, the statement of the reasons on which the contested decision was based must be regarded as sufficient.

22. It follows that the application must be dismissed.

23. Under Article 69 (2) of the Rules of Procedure, the unsuccessful party must be ordered to pay the costs; since the applicant's action has failed, it must be ordered to pay the costs.

On those grounds, THE COURT hereby:

1 Dismisses the application;

2 Orders the applicant to pay the costs.