Opinion of Mr Advocate General
Mr President,
Members of the Court,
In this case, an Italian court has submitted a number of questions to the Court of Justice concerning the system of production levies on sugar, the object of which to cover the costs incurred by the Community in connection with the disposal of sugar. Before I consider those questions, it is necessary in my view to give a brief summary of the relevant Community legislation.
1. Relevant Community legislation
The common organization of the market in sugar was originally established by Regulation No 1009/67/EEC of the Council (Official Journal, English Special Edition 1967, p. 304). It was replaced by Regulation No 3330/74 (Official Journal 1974, L 359, p. 1). That regulation was in its turn replaced, as from 1 July 1981, by Council Regulation (EEC) No 1785/81 (Official Journal 1981, L 177, p. 1), which is currently in force. However, for reasons which I shall explain, Regulation No 3330/74 still plays a crucial role in these proceedings.
As the Court is aware, the distinctive feature of the organization of the market in sugar is a system of production quotas laid down by Article 23 et seq. of Regulation No 3330/74. Under that system a production quota is established every year for each undertaking and is subdivided into an A and a B quota. The A quota corresponds more or less to the quantity of sugar which is expected to be disposed of on the common market, such disposal being guaranteed by the intervention price. The B quota corresponds to the quantity of sugar which may be produced in excess of the A quota and which may be exported with the aid of refunds paid by the Community. Sugar produced in excess of the maximum quota (C quota sugar) may not be disposed of on the common market. Therefore such sugar can only be exported, but without benefiting from refunds.
One of the principles underlying the organization of the market in sugar is that the cost of the disposal of sugar — mainly the financing of export refunds — is borne by the producers collectively by means of a production levy. Under Regulation No 3330/74 that levy was imposed only in respect of B quota sugar and the amount of the levy was not to exceed 30% of the intervention price. Losses not covered by the system were borne ultimately by the European Agricultural Guidance and Guarantee Fund (EAGGF). Regulation No 1785/81 provides that the producers are to bear the entire cost of financing, hence inter alia the imposition of a production levy also in respect of A quota sugar, at a rate not exceeding 2% of the intervention price.
In Regulation No 3330/74 that levy was provided for by Article 27. Detailed rules for the charging of the levy were laid down by Regulation No 700/73 of the Commission (Official Journal 1973, L 67, p. 12), the validity of which was extended by Article 44 (4) of Regulation No 3330/74. Article 7 of Regulation No 700/73 makes provision for the calculation of the annual production levy. That provision reads as follow:
According to that provision, the levy is based on two factors, a quantitative factor (subparagraph 2 (a)) and a financial factor (subparagraph 2 (b)). The quantitative factor is the amount of sugar qualifying for export refunds. The financial factor is a standard amount: the average loss on export refunds per 100 kg of sugar in respect of a given quantity of sugar exported during a given period. That reference period runs from 1 October to 30 September. The average loss per 100 kg of sugar, calculated in the manner described, is multiplied by the quantitative factor and that gives the total loss resulting from the disposal of the guaranteed quantities of sugar. That amount is apportioned over B quota sugar pursuant to Regulation No 3330/74.
Regulation (EEC) No 3358/81 of 25 November 1981 (Official Journal 1981, L 339, p. 17) fixed the levy at 3.407 ECU per 100 kg of white sugar for the 1980/81 and the 1981/82 sugar marketing years, which each ran from 1 July to 30 June. Regulation No 3330/74 was repealed as from 30 June 1981 and was replaced by Regulation No 1785/81, with the result that the basis for Regulation No 700/73 was also removed. However, Regulation No 3358/81 extended the application of the rules contained in the last-mentioned regulation to the calculation of the levy for the 1980/1981 marketing year. That regulation was based on Article 48 of Regulation No 1785/81. The new rules for fixing the production levy laid down by Article 28 of Regulation No 1785/81 did not become applicable until the 1981/82 marketing year.
2. The facts and the questions submitted
By a notice of assessment dated 10 May 1982 Sermide was instructed to pay its share of the production levy, namely LIT 321000850, in respect of the B quota sugar produced in the 1980/1981 marketing year. That amount was later reduced to LIT 261515085. In proceedings challenging that notice of assessment, Sermide contested the validity of Article 1 of Regulation No 3358/81 (the amount of the production levy per 100 kg of sugar for 1980/81) and of Article 7 of Regulation No 700/73 (the method of calculation). By order of 28 March 1983 the Tribunale di Genova referred the following questions to the Court for a preliminary ruling:
It is clear from the explanation given by the national court that those questions are concerned with the calculation of the financial factor in the production levy. The first two questions relate to the reference period running from 1 October to 30 September. The national court considers that this gives rise to discrimination for a number of reasons, particularly in relation to Italian producers, since the sugar marketing year runs from 1 July to 30 June. The third question is concerned with the term disposal in Article 7 (2) (b) of Regulation No 700/73. The national court questions whether such disposal must be calculated on the basis of the quantity actually exported or on the basis of the quantity which is the subject of export obligations.
3. The order in which the questions may best be dealt with
The questions submitted by the national court are concerned in the first place with the possibility that Regulation No 3358/81 may be unlawful as being contrary to Article 28 of the new basic regulation, namely Regulation No 1785/81 (Question 1 (d)). That question asks in effect what rules Regulation No 3358/81 was supposed to apply. Secondly, the national court asks whether the application by Regulation No 3358/81 of the reference period specified in Article 7 (2) of clear from the observations submitted that that question consists of two parts. To begin with, the Italian Government and Sermide consider that the reference period discriminates against them, in view of the specific features of the Italian sugar market. They also contend that, in connexion with the production levy for the following marketing year (1981/82), that is to say as a result of the application of the new basic regulation, No 1785/81, they are adversely affected by partially overlapping reference periods. Thirdly, in its final question, the national court seeks an interpretation of the term disposal in Article 7 (2) (b) of Regulation No 700/73, Article 27 (2) of Regulation No 3330/74 and Article 28 of Regulation No 1785/81: does that concept include the quantity actually exported or only the quantity which is the subject of export obligations (Question 3)? I propose to consider the questions in that order. The answer to Question 2 in the order for reference follows naturally from the answer to Question 1.
4. Regulation No 3358/81 as a transitional measure
Before I suggest a practical solution to the questions submitted, in my view, it is necessary in the first place, as I said earlier, to consider whether the relationship inferred by the national court in Question 1 (d) between Article 28 of Regulation No 1785/81 and Regulation No 3358/81 actually exists. In fact, there is no such relationship. Regulation No 3358/81, according to the preamble thereto, is based on Article 48 of the new basic regulation, which reads as follows:
Regulation No 3358/81 is therefore a transitional measure with the peculiarity that it is based on a provision of a new regulation but extends the validity of certain parts of the old, repealed regulation for a specific period. In terms of legislative technique, this is an anomaly and by no means a textbook example of transparency, although it is understandable, having regard to the alternatives open to the Commission. It is clear that the production levy for the period from 1 July 1980 to 30 June 1981 had to be fixed by reference to the criteria contained in the old basic regulation, No 3330/74, and in the relevant implementing regulations, because the new basic regulation did not become applicable to the production levy until the beginning of the 1981/82 sugar marketing year. However, the levy is fixed retroactively, following the expiry of the sugar maketing year. In this case, therefore, it was fixed under the new basic regulation, No 1785/81 (on 1 July 1981). That problem could have been resolved under the old basic regulation, No 3330/74, by the inclusion in Regulation No 1785/81 itself of a transitional rule retaining part of Regulation No 3330/74 whilst at the same time removing or adapting the relevant provisions of the new regulation. The unqualified application of Regulation No 3330/74 would have been impossible in view of its repeal. The fact that the Commission chose not to adopt that course of action, which would have had to be implemented by the Council, and adopted instead a transitional measure on the basis of Article 48 of the new basic regulation, constitutes in my view a choice of legislative technique which is acceptable in every respect. That measure is also acceptable in the light of the conditions laid down by Article 48, since the application of the old criteria for the calculation of the production levy was necessary. In the light of those considerations, and having regard to Article 48 of Regulation No 1785/81, Regulation No 3358/81 is clearly lawful in my opinion. There is another aspect of Article 28 of Regulation No 3358/81 (namely the double levy entailed thereby) to which I shall return in due course.
5. The reference period referred to in Article 7 (2) of Regulation No 700/73 and the prohibition of discrimination
5.1. The plaintiff in the main proceedings and the Italian Government raised a number of general objections against the validity of Regulation No 700/73 which are connected with the fact that Italian sugar production is not sufficient to meet demand. To begin with, they contend that sugar producers in areas where demand exceeds supply are not obliged to contribute towards financing the disposal of excess production since responsibility for the excess production lies not with them but with undertakings operating in surplus-producing areas. At first sight, that argument seems reasonable but closer scrutiny shows that it is fundamentally contrary to the basic principle of a common market. The common organizations of the market are based on the principle of a single market in which there are no longer any differences based on nationality. It is that single market which as a whole is characterized by excess production. The machinery for eliminating surpluses also operates to the benefit of the whole market since it supports the intervention system, which constitutes a gurantee for all producers. If the market organization is based on a system whereby producers collectively finance disposal costs, exemption therefrom for certain producers solely by virtue of their geographical location in the market would in fact constitute discrimination and consequently a distortion of competition. I would add that the arguments put forward by the Italian parties are bound to fail also in practical terms since under the system of production quotas, which is not contested as such, it is impossible to determine which undertakings are responsible for the excess production. An A quota and a B quota are allocated to all undertakings and if they exceed their A quota, their excess production is by definition for export, regardless of their geographical location.
5.2. More specifically, the Italian parties contend that they are adversely affected by the reference period which runs from 1 October to 30 September. In Italy, the sugar marketing year runs approximately from 1 July to 30 June, whilst in northern Europe it runs approximately from 1 October to 30 September. Since Italian producers have virtually exhausted their stocks by 30 June, they are no longer able to take advantage of the new and generally higher intervention prices which come into force on 1 July. Producers located in northern Europe do not exhaust their stocks until 30 September and therefore benefit for a further three months from the new prices for the old crop. Since the higher prices also entail higher refunds (if the world market price remains unchanged or declines), leading to higher costs of disposal, undertakings in the south pay for the disposal of sugar produced by undertakings in the north. I am not swayed by that argument for the following reasons. In the north a sugar producer benefits during those months from the new prices and refunds, but on the other hand he benefits from the old prices and refunds for only nine months. In the south, an undertaking starts to benefit immediately on 1 July, as regards its new crop, from the new prices and refunds, whilst in the north an undertaking does not benefit therefrom until 1 October. Moreover, it must be borne in mind that the sugar marketing year runs from 1 July to 30 June mainly for the benefit of Italian producers, whilst in countries in northern Europe production is concentrated essentially in the period from 1 October to 30 September. Since, as I said earlier, they also export their sugar after the expiry of the reference period from 1 July to 30 June, it is only natural that the Commission determined in Regulation No 700/73 that the period was to run from 1 October to 30 September. I therefore consider that not even this specific objection supports the view that the system in question has a discriminatory effect.
5.3. The Italian parties maintain however that the application of the reference period from 1 October to 30 September for the 1980/81 marketing year is also unlawful in the light of the reference period fixed by the new basic regulation. Article 28 of Regulation No 1785/81 provides that the new reference period for the calculation of the production levy for the 1981/82 marketing year is to coincide with the previous marketing year. The reason for that amendment — which is not contested in itself — is not entirely clear. If I. have properly understood the Commission's submissions on this point, the amendment is connected with the fact that, under the new system, A quota sugar is also subject to the levy. The Italian parties contend that the third quarter of 1981 was taken into account twice in the calculation of the production levy, that is to say under the old reference period (1 October 1980 to 30 September 1981) and under the new reference period (1 July 1981 to 30 June 1982). Although Italian undertakings did not export any sugar in that quarter, they allegedly had to bear the twofold burden resulting from the sugar exported during that period by undertakings in northern Europe. Initially the Commission wrongly left that contention unanswered and only dealt with it in response to an express question from the Court.
6. The meaning of the term disposal in Article 7 (2) of Regulation No 700/73
The term disposal in Article 27 of Regulation No 3330/74 and in Article 7 (2) of Regulation No 700/73 is not defined. It is common ground in any event that the term applies to exports. The Commission has interpreted — and applied — the term as denoting the quantity which is the subject of existing export obligations and has referred, in that connection, to the export licences issued. The Italian parties contend however that the term relates to the quantity actually exported. In their view, that provides a more accurate picture of the true state of affairs, since in the third quarter of 1981 licences issued in respect of 360000 tonnes of sugar were revoked, without challenge on the part of the Commission. It is not clear, however, in what way the Italian parties were adversely affected by this. Where export licences are issued and then revoked, no refunds are paid, which implies that in the calculation carried out on the basis of the licences issued the average loss decreases.
Be that as it may, I consider that, as far as this point is concerned, the contention of the Italian parties is unfounded. According to the well-established case-law of the Court, the Commission may, for the purpose of quantifying and calculating import and export patterns, avail itself of, and rely on, the information resulting from the system of import and export licences. In that connection I would refer to the judgments of the Court in Case 11/70 (Internationale Handelsgesellschaft v Einfuhr- und Vorratsstelle Getreide, [1970] ECR 1125) and in Case 25/70 (Einfuhr-und Vorratsstelle v Köster, [1970] ECR 1161), in which the Court held inter alia that the provision of such information is one of the aims of the licensing system. From that point of view, I do not regard Regulation No 3358/81 as unlawful. If, however, the Court shares my opinion that Article 1 of that regulation is void on other grounds, the third question submitted by the national court does not call for an express answer.
7. Conclusion
To summarize, the questions submitted should, in my opinion, be answered in the following manner:
1 Translated from the Dutch.
2 Naturally that double levy could also be corrected by means of an adjustment in the levy for the following year. The choice between those two possibilities of adjustment may, in my view, be left to the competent institutions.