Report for the Hearing delivered in Case 325/85

I — Facts

1. Article 1 (2) of Regulation 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 that the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (hereinafter referred to as the Fund) shall finance :

2. The main elements of a common fisheries policy for fishing were set out in 1970 by Regulation No 2141/70 of the Council of 20 October 1970 laying down a common structural policy for the fishing industry (Official Journal, English Special Edition 1970 (III), p. 703) and Regulation No 2142/70 of the Council of 20 October 1970 on the common organization of the market in fishery products (Official Journal, English Special Edition 1970 (III), p. 707). Articles 100 to 102 of the Act of Accession of 1972 confirmed and partly amended them in relation to access to fish stocks. In particular Article 102 provided that from the sixth year after accession at the latest, the Council, acting on a proposal from the Commission, was to determine conditions for fishing with a view to ensuring protection of the fishing grounds and conservation of the biological resources of the sea.

3. Regulations Nos 2141/70 and 2142/70 were replaced by Council Regulation No 100/76 of 19 January 1976 on the common organization of the market in fishery products (Official Journal, L 20, p. 1) and Council Regulation No 101/76 of 19 January 1976 laying down a common strutturai policy for the fishing industry (Official Journal, L 20, p. 19).

4. On 6 April 1976 the Council adopted Regulation No 811/76 temporarily authorizing certain systems of catch quotas in the fisheries sector (Official Journal, L 94, p. 1), in which it authorized Member States to limit catches of their fishing fleets in accordance with international undertakings contracted or to be contracted. The first recital to the regulation stated that the fishery resources of the sea would be considerably endangered if catches were not controlled; ... the rational development of the production of fishery products might be disturbed if no limit were placed on the size of landings.

5. On 6 October 1976 the Commission sent the Council a proposal for a regulation establishing a Community system of conservation and management of fishery resources, on which the Council was not able to reach agreement, however, until 1983.

6. On 3 November 1976 the Council adopted what is known as the Hague Resolution. Annex VI thereto reads as follows :

7. On 18 February 1977 the Council adopted Regulation No 350/77 based on Article 103 of the EEC Treaty and Article 102 of the Act of Accession, laying down certain interim measures for the conservation and management of fishery resources (Official Journal, L 48, p. 28), applicable until 31 December 1977 at the latest.

8. At a meeting on 31 January 1978 the Council approved the Commission communication according to which, in the absence of a common system, national measures could only be taken in so far as they were strictly necessary for the conservation and management of fishery resources and were nondiscriminatory and in conformity with the Treaty, and if the approval of the Commission had been sought beforehand (Official Journal, C 154, p. 5).

9. On 19 December 1978 the Council adopted interim measures applicable until a definitive agreement was reached or, at the latest, until the end of March 1979.

10. On 1 January 1979 the transitional period provided for in Article 102 of the 1972 Act of Accession expired. On that date power to take measures intended to conserve maritime resources, within the framework of the common fisheries policy, was to vest fully and definitively in the Community. Because it was not able to reach agreement on the Commission's proposals, the Council adopted fresh interim measures in 1979 and in March 1980.

11. On 30 May 1980 the Council adopted a declaration concerning the common fisheries policy, in which it undertook to adopt a common overall fisheries policy by 1 January 1981 at the latest. In compliance with the Treaties and in conformity with the Resolution of 3 November 1976 (the Hague Agreement) the policy was to be based inter alia on rational and nondiscriminatory Community measures for the management of resources, the conservation and reconstitution of stocks and fair distribution of catches (Official Journal, C 158, p. 2).

12. In the conservation of resources the Community had also to take into account its international obligations.

13. In 1981 the Commission repeatedly amended its TAC proposals and ultimately submitted to the Council on 24 July 1981:

14. On 29 July 1981 the Commission drew Ireland's attention to its letter of 28 July 1981 and asked it to apply appropriate measures compatible with the proposal made by the Commission in respect of herring fishing during the interim period until the next fisheries council. The Commission stated that it would not approve fishing during the interim period greater than two-thirds of the proposed quota.

15. From 1 January 1982 until 31 March 1982 fishing activities in Community waters were once again governed by an interim Council decision, Decision No 81/1052 of 29 December 1981 (Official Journal, L 379, p. 52) requiring the Member States to take into account the TACs proposed by the Commission on 24 July 1981. Subsequently the Council adopted other provisional measures for 1982.

16. On 25 January 1983 the Council adopted Regulation No 170/83 of 25 January 1983 establishing a Community system for the conservation and management of fishery resources (Official Journal, L 24, p. 1). Article 3 provides for the fixing of the TACs and Article 4 for the distribution of the available share of the TACs between Member States. In application of that regulation the Council subsequently fixed the necessary TACs and quotas. However, it did not fix them for 1981.

17. In a telex message of 25 May 1984 the Commission informed the Irish authorities that some of the expenditure declared in the fisheries sector for 1981 could not be borne by the Fund since it had not been incurred in accordance with Community rules. The catches not covered by the quotas provided for by the Commission were not eligible for Community financing unless it was shown that the quantities at issue had not caused expense to the Community. The message set out the method of calculating the expenditure declared ineligible and the financial consequences. Ireland was requested to let the Commission have its observations before 15 June 1984.

18. On 13 June 1984 Ireland challenged the Commission's view that part of the expenditure declared was not incurred in accordance with Community rules, and the binding nature of the quotas proposed by the Commission in July 1981. It also challenged the method of calculation and the figures put forward by the Commission.

19. In Decision 85/458/EEC of 28 August 1985 on the clearance of the accounts presented by Ireland in respect of the Fund, expenditure for 1981 (Official Journal, L 267, p. 30), the Commission refused financing of IRL 100873.33 incurred by Ireland in 1981 by way of financial compensation to producers' organizations in respect of indemnities paid by them for the withdrawal of cod, haddock, whiting, herring and mackerel from the market.

II — Written procedure and conclusions of the parties

1. The application by Ireland was lodged at the Court Registry on 5 November 1985.

2. 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.

3. Ireland, the applicant, claims that the Court should:

4. The Commission, the defendant, contends that the Court should:

III — Submissions and arguments of the parties

Ireland makes the following submissions in support of its application:

A — Lack of competence on the part of the Commission

1. Ireland states that to justify the legally binding nature of its proposals of 24 July 1981 the Commission by implication alleged that Article 155 of the EEC Treaty gave it power to adopt rules such as those set out in its proposals notwithstanding lack of agreement between the Member States. Article 155 gives the Commission an important role in ensuring the functioning and the development of the common market, but the Commission may not exceed the limits of its powers.

2. The Commission states that when in 1981 it requested the Member States to apply its proposals for TACs and quotas it expressly referred to the case-law of the Court.

B — The principle of legal certainty

1. Ireland stales that Regulation No 100/76 was not replaced until 1982, when Regulation No 3796/81 came into force. It was not until that date that a link between quotas and the amount of financial compensation payable for fish withdrawn from the market was made.

2. The Commission contends that it was perfectly entitled to take account of the fact that the fishing quota had been exceeded when it was clearing the accounts, even in the absence of a specific rule establishing for 1981 a link between observance of the quotas and Community financing. Regulation No 729/70 must be interpreted as meaning that the Commission had not only the right but also the obligation to exclude from financing expenditure incurred in the fisheries sector for quantities of fish caught in breach of a Community rule intended to conserve the resources of the sea.

C — The principle of the protection of. legitimate expectations

1. Ireland cites Case 1251/79 Italy v Commission [1981] ECR 205 as authority for the proposition that by declaring that its fishery conservation proposals were binding on Ireland and the other Member States during the final quarter of 1981 notwithstanding the fact that the Council was in the course of negotiation, the Commission created in Ireland a reasonable and legitimate expectation that the Commission's declaration was not legally binding and that no further action would be taken in respect of it.

2. In its defence the Commission points out that it stated expressly in the declaration of 27 July 1981 that it was determined to use all the means in its power to ensure the respect by Member States of its proposals, which it considered to be legally binding upon them. Refusal of financing is clearly one of the means which the Commission has of achieving its aims.

1 Language of the Case: English.