Report for the Hearing delivered in Case 278/84

I — Facts and issues

1. The Community system of common prices for agricultural products was initially based on prices fixed for all Member States in units of account (replaced in 1979 by the ECU). The prices were converted into national currency on the basis of fixed parities notified to and accepted by the International Monetary Fund.

2. In order to overcome the difficulties caused by monetary compensatory amounts and to reintegrate the agricultural sector into the general economy by aligning the representative rates on the actual rates (the central rates), the Council adopted Regulation No 855/84 of 31 March 1984 on the calculation and the dismantlement of the monetary compensatory amounts applying to certain agricultural products (Official Journal 1984, L 90, p. 1). That regulation provides on the one hand for changes in the calculation of the monetary compensatory amounts (Article 1) and on the other for alteration of the representative rates and compensatory measures (Articles 2 to 6).

3. The detailed rules to which Article 6 of Regulation No 974/71 in turn refers are contained in Article 26 of Regulation No 2727/75 of the Council of 29 October 1975 on the common organization of the market in cereals (Official Journal 1975, L 281, p. 1). The so-called Management Committee procedure involves referring the matter to a committee, composed of representatives of the Member States, presided over by a representative of the Commission; the committee then has to deliver an opinion on the draft measures submitted by the Commission. Article 26 (2) stipulates that the committee has to deliver its opinion within a time-limit set by the chairman according to the urgency of the matter. If the committee does not deliver an opinion within the prescribed period the Commission may adopt the measures in question.

4. Regulation No 855/84 entered into force on 1 April 1984.

5. On 14 September 1984 the Commission published the following notice in Official Journal L 244, p. 45:

6. By a telex message of 18 September 1984, received by the competent authorities of the Federal Republic of Germany at 12.36 p.m. the same day, the members of the Agri-monetary Management Committee (cereals and sugar sectors) were invited to a meeting to be held at 10 a.m. on 20 September 1984. According to the notice of meeting the first matter on the agenda was an opinion on a proposal for a Commission regulation on transitional measures in view of the revaluation of the representative rate of the Deutschmark ... on 1 January 1985. The draft was not included with the notice of meeting.

7. On 20 September 1984 the Commission adopted Regulation No 2677/84 on transitional measures in readiness for the revaluation of the representative rate for the German mark on 1 January 1985, which was published in the Official Journal of 21 September 1984 (L 253, p. 31) and entered into force the same day. The regulation contains certain transitional provisions specific to the cereals, sugar and potato starch sectors.

II — Written procedure and conclusions of the parties

1. By an application received at the Court Registry on 23 November 1984 the Government of the Federal Republic of Germany brought an action for a declaration that Articles 1, 2 and 3 of Regulation No 2677/84 were void.

2. By a separate document received at the Court Registry on the same day the applicant applied under the second paragraph of Article 185 of the Treaty and Article 83 of the Rules of Procedure for a suspension of the operation of the said articles of Regulation No 2677/84.

3. After hearing the parties on 10 December 1984 the President of the Court, by order of 13 December 1984, dismissed the application for interim measures.

4. Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry. The parties were invited to answer in writing certain questions. They replied within the prescribed period.

5. The Federal Republic of Germany claims that the Court should:

6. The Commission contends that the Court should:

III — Submissions and arguments of the parties

In support of its application the Federal Republic of Germany makes the following submissions:

(i) Infringement of essential procedural requirements (fourth subparagraph of Article 155 of the Treaty in conjunction with Article 6 of Regulation No 974/71 and Article 26 of Regulation No 2727/75 in the preparation of Regulation No 2677/84)

1. In the opinion of the German Government the members of the Management Committees and in particular the German members were not given a sufficient opportunity prior to the adoption of Regulation No 2677/84 to prepare themselves properly in relation to the draft regulation and its adoption. Regulation No 2677/84, which was adopted under the procedure referred to in Article 6 of Regulation No 974/71 and Article 26 of Regulation No 2727/75, was therefore adopted in infringement of essential procedural requirements.

2. The Commission denies that the procedure at the meeting of the Management Committees was vitiated for irregularity.

(ii) Lack of an enabling basis (infringement of the fourth indent of Article 155 of the EEC Treaty in conjunction with Article 7 of Council Regulation No 855/84) and breach of the principle that monetary compensatory amounts are to be financed by the Community

1. The German Government states that under the terms of the fourth indent of Article 155 of the Treaty the Commission may adopt transitional provisions only in so far as it is empowered to do so by the Council. In adopting the provisions at issue the Commission did not avail itself of the power under Article 7 of Regulation No 855/84 under which it was obliged to provide compensation to the marketing and processing industry for a fall in prices.

2. The Commission denies the applicant's claim that Article 7 of Regulation No 855/84 was intended to provide compensation for the fall in prices as the applicant requested. The applicant's claim is incompatible both with the background to and the actual wording of Article 7.

(iii) Unlawful amendment of Council Regulation No 855/84 (fourth indent of Article 155 of the Treaty and Article 7 of Regulation No 855/84)

1. The German Government is of the opinion that Regulation No 2677/84 amends the meaning and scope of Regulation No 855/84 in breach of the general principle of Community law that the Commission, in exercising the powers conferred on it under the fourth indent of Article 155 of the Treaty for the implementation of the rules laid down by the Council, may not supplement, restrict or alter them (see Case 37/85 Bagusat KG v Hauptzollamt Berlin-Packhof [\975] ECR 1339).

2. In the Commission's view it is essential to determine whether the contested rules are within the limits of the powers conferred by Article 7 of Regulation No 855/84. The Commision thinks they are.

(iv) Breach of the principle of nondiscrimination (second subparagraph of Article 40 (3) of the EEC Treaty)

(a) Invalidity of Article 1 (1) of Regulation No 2677/84

1. The German Government claims that the transitional measures laid down for the cereals sector by Article 1 (1) of Regulation No 2677/84 take no account of distinctions which should be drawn between the various parts of the marketing and processing industry in Germany. It thus infringes the prohibition of discrimination contained in the second subparagraph of Article 40 (3) of the Treaty which inter alia prohibits any discrimination between producers or consumers within any Member State of the Community (see Case 139/77 Denkavit v Finanzamt Warendorf [197S] ECR 1317).

2. The Commission contends that the applicant's claim is unfounded because the quota allocated by the Commission for intervention at the previous price in the Federal Republic was not fully used. The German Government did not say that the quantity of cereals from areas where the harvest was late exceeded the unused amount of 200000 tonnes and was all intended for intervention. A large part of the cereals was of such poor quality that it did not satisfy the conditions for intervention.

(b) Invalidity of Article 3 (2) of Regulation No 2677/84

1. The German Government alleges that the transitional provision of Article 3 (2) of Regulation No 2677/84 discriminates against manufacturers of potato starch in relation to manufacturers of other starches, in particular maize or cereal starch, and thus infringes the second subparagraph of Article 40 (3) of the Treaty. Potato starch competes with maize and cereal starch on the Community market and under the rules applicable until the entry into force of Regulation No 2677/84 there was a balanced relationship between the prices of those various products. Following the alteration of the representative rate and the dismantling of the monetary compensatory amounts that balance was disturbed and the transitional provision of Article 3 (2) of Regulation No 2677/84 is not sufficient to overcome that disturbance.

2. The Commission contends that the claim that there is discrimination against potato starch in comparison with maize and cereal starch is not substantiated. It has not been shown that during the last months of 1984 German potato starch manufacturers could obtain only a 5% lower price for their products than the prices obtainable until then.

(v) Invalidity of Article 3 (1) of Regulation No 2677/84 as being self-contradictory

1. The German Government considers that there are inconsistencies in the rule laid down by Article 3 (1) of Regulation No 2677/84 which is thus in breach of the principle that provisions should not be self-contradictory.

2. The Commission argues that the applicant's claim is unjustified if the actual position is borne in mind. The new rate adopted applies only to the calculation of the purchase price for the purposes of intervention. Intervention as a means for regulating the market in the sugar sector has not been used for some years. There was therefore no fear of an automatic reduction in the market price in the sugar sector. According to the Commission's information the German price of sugar could have been maintained until 31 December 1981 at a higher level than the old intervention price.

(vi) Invalidity of the rules contained in Article 3 (1) and (2) of Regulation No 2677/84 as being in breach of the principle of the protection of legitimate expectation

The German Government claims that the transitional provisions of Article 3 (1) and (2) of Regulation No 2677/84, which reduced the minimum prices for sugarbeet and potatoes respectively, are contrary to the principle of the protection of legitimate expectation. The provisions apply retroactively to contracts already made and to some extent already performed.

The German Government says that sugarbeet and potato farmers had arranged their affairs in the spring of 1984 on the basis of decisions taken in relation to prices by the Agricultural Ministers who always fix minimum prices one year in advance. As far as the German Government knows, the contracts provide for fixed rates expressed in German marks and not, as the Commission wrongly claims, in ECU.

The judgments of the Court cited by the Commission are no justification for the retroactive involvement of contracts already made. In view of the fact that minimum prices are fixed in the spring and apply throughout the whole marketing year, it is not correct to settle the problem of the price reduction as the Commission has done. There should have been transitional measures exempting firm contracts already made so that legitimate expectations should not be disappointed.

2. The Commission states that the price in contracts between the German sugar and potato starch industries and beet and potato farmers are expressed only in ECU. The equivalent value in German marks is mentioned only as a guide. Since prices expressed in ECU have not been altered, the claim that existing contracts have been affected is unfounded.

IV — Questions put to the parties

The Court requested the following information and documents from the parties.

1. The German Government was invited to produce a summary of

2. The German Government was also asked to answer the following questions:

Question 1.1

The Commission was invited to produce the minutes of the meetings of 20 September 1984 of the Agri-monetary Management Committee and the Cereals and Sugar Management Committees.

The German Government gave the Court its answers to the above questions in a letter dated 17 April 1986 which may be summarized as follows:

Question 1.1

Since the quantities offered in each case exceeded the maximum quantities authorized by paragraph 2 of the amended regulation on the implementation of intervention in respect of cereals pursuant to Regulation No 2677/84, the intervention related solely to a percentage of the quantities offered; the percentage is apparent from the abovementioned notices of the Bundesanstalt für landwirtschaftliche Marktordnung of 19 November and 14 December 1984.

The additional quantities which in the absence of the abovementioned limit would most probably have been offered to intervention were estimated at 3.8 million tonnes, a figure determined on the basis of the experience of past years and taking into account the record harvest in the Federal Republic of Germany (3.5 million tonnes more than that of the previous year) and in the rest of the Community, especially France.

Question 1.2

The quantity of wheat which was the subject of intervention as wheat of bread-making quality was some 700000 tonnes.

The total quantity of cereals sold between the start of the harvest and 20 September 1984, after deducting the quantity of wheat of bread-making quality as above, may be estimated as follows (tonnes):

Wheat:

3133000 = 30.6% of the 1984 harvest

Rye: 902000 = 46.0% of the 1984 harvest

Barley:

3035000 = 29.5% of the 1984 harvest

Oats:

209000 = 7.0% of the 1984 harvest

Total:

7279000 = 28.6% of the 1984 harvest

V — Oral procedure

At the hearing the German Government stated that the Commission could amend a Council regulation only if it was expressly empowered to do so. In contrast to Article 6 of Regulation No 974/71, the basic regulation on monetary compensatory amounts, Article 7 of Regulation No 855/84 conferred no such power.

The Commission pointed out in particular that Article 6 of Regulation No 974/71 was concerned with implementing rules, which were something quite different from the transitional measures referred to in Article 7 of Regulation No 855/84. Furthermore, the Commission recalled that the German Government itself, at the European Council meeting of 25 and 26 June 1984 at Fontainebleau, had stated that in the second half of 1984 the market would already largely discount the 5% reduction in prices envisaged for 1 January 1985. In those circumstances there was no particular reason to provide compensation for traders and processors since the processing industry had already adapted to that situation or had been able to buy at lower prices.

1 Language of the Case: German.

2 The market and intervention prices given for sugar relate solely to white sugar since unrefined sugar was not the subject of any commercial dealings in the Federal Republic of Germany. The market price of white sugar includes the charge for storage costs payable by the seller. Besides the intervention price the table thus also shows in brackets the intervention price increased by the said charge.

3 There is no market price for sugarbeet sold to sugar refineries at a price fixed before the harvest.

4 The minimum prices of A and B sugarbeet are average prices obtained by weighting the various conversion rates in force.

8 Since the market prices of potatoes are not part of official statistics only the production prices can be shown.

10 There are no minimum prices for potatoes other than for those intended for starch production The production prices for potatoes do not differ from the minimum prices plus the production refunds provided for in Article 3 of Regulation No 2742/75. The minimum prices for the 1984/85 marketing year are average prices obtained by weighting the various conversion rates in force durine that year