Report for the Hearing delivered in Case 346/85

I — Facts

1. According to Article 1 (2) (b) and Article 3 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) intervention intended to stabilize the agricultural markets, undertaken according to Community rules within the framework of the common organization of agricultural markets, is financed out of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (hereinafter referred to as the Fund).

2. The main elements of a common fisheries policy were established in 1970 by Regulation No 2141/70 of the Council of 20 October 1970 laying down a common structural policy for the fishing industry 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), pp. 703 and 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 and Council Regulation No 101/76 of 19 January 1976 laying down a common structural policy for the fishing industry (Official Journal, L 20, pp. 1 and 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 submitted to 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. In Annex VI thereto it was stated that, pending the implementation of the Community measures then in preparation relating to the conservation of resources, the Member States would not take any unilateral measures in respect of the conservation of resources. It provided, however, that if no agreement was reached for 1977 within the international fisheries commissions and if subsequently no autonomous Community measures could be adopted immediately, the Member States could then adopt, as an interim measure and in a form which avoided discrimination, appropriate measures to ensure the protection of resources situated in the fishing rones off their coasts. Before adopting such measures, the Member State concerned would seek the approval of the Commission, which had to be consulted at all stages of the procedures.

7. On 18 February 1977 the Council adopted Regulation No 350/77 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 a 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 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 was to be vested 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 (Official Journal, C 158, p. 2) 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.

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. From 1 January 1982 until 31 March 1982 fishing activities in Community waters were once again governed by an interim Council decision, Decision 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.

15. 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.

16. In a telex message of 25 May 1984, in relation to the clearing of the Fund's accounts for 1980-81, the Commission informed the United Kingdom that some of the expenditure declared in the fisheries sector 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. The sum at issue was UKL 22169.79, relating to 74627 tonnes of cod and hake.

17. In a telex message of 12 June 1984 the United Kingdom requested further time to examine the issues raised by the Commission and contested the amount of hake. In a letter of 25 July 1984 the United Kingdom stated that it did not accept the validity of the Commission's declaration of 27 July 1981 and that Regulation No 3796/81, which introduced the rule restricting the financing of intervention measures to catches within the quotas, could not apply to 1981.

18. In a telex message of 24 August 1984 the Commission asked the United Kingdom for its views on the figures communicated to it.

19. In Decision 85/466/EEC of 28 August 1985 on the clearance of the accounts presented by the United Kingdom in respect of the Fund, expenditure for 1981 (Official Journal, L 267, p. 52), the Commission refused financing of UKL 12976.92 and UKL 3236.25 incurred by the United Kingdom in 1981 by way of financial compensation to producers' organizations in respect of compensation paid by them for the withdrawal of cod and hake respectively from the market.

II — Written procedure and conclusions of the parties

1. The application by the United Kingdom was lodged at the Court Registry on 15 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. The United Kingdom, the applicant, claims that the Court should:

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

III — Submissions and arguments of the parties

In support of its action, which is based on Article 173 of the EEC Treaty, the United Kingdom relies on four submissions:

A — Infringement of Article 43 of the EEC Treaty and Article 102 of the Act of Accession in conjunction with Reguhtions Nos 729/70, 1723/72 and 100/76

1. The United Kingdom submits that the Commission had no power to require Member States to observe the quotas which it had proposed in 1981 and that in seeking to make those quotas legally binding on Member States it infringed Article 43 of the Treaty and Article 102 of the Act of Accession. Since the quotas were not legally binding, the Commission was not entitled to give infringement of quotas as a ground for disallowing the expenditure against the Fund. The United Kingdom considers that in so doing the Commission infringed Articles 1, 3 and 5 of Regulation No 729/70, Article 8 of Regulation No 1723/72 and Regulation No 100/76.

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 — Infringement of Articles 1, 3 and 5 of Regulation No 729/70, Article 8 of Regulation No 1723/72 and Regulation No 100/76

1. The United Kingdom claims that even if the quotas proposed were legally binding there was no justification for disallowing the expenditure. The fact that a Member State has infringed a provision of the common agricultural policy does not of itself entitle the Commission to refuse to recognize sums as chargeable to the Fund.

2. The Commission considers 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 for quantities of fish caught in breach of a Community rule intended to conserve resources.

C — Misuse of powers

1. The United Kingdom claims that by seeking to enforce, through the machinery of the Fund, proposals that were not legally binding on the Member States, the Commission misused its powers of supervision under the Treaty.

2. The Commission has not specifically replied to that submission.

D — Infringement of essential procedural requirements

1. The United Kingdom claims that the decision fails to state reasons for the refusal to finance the relevant expenditure. The United Kingdom concedes that the Court held in its judgment of 27 January 1981 in Case 1251/79 Italy v Commission [1981] ECR 205 that the Commission need not state its reasons for refusing finance in the actual decision. In the context of the present case, however, the United Kingdom asks the Court to distinguish the earlier decisions and to hold that the Commission's reasons for disallowing the expenditure ought to have been stated in the decision in accordance with Article 190 of the Treaty. In any event, even if the Commission is entitled to rely on its summary report, that summary report is inadequately reasoned and lacks the necessary evidential foundation.

2. The Commission sees no reason for departing from the case cited. In the present case the invariable practice for the preparation of decisions on the clearance of the accounts was followed. In a series of bilateral discussions the United Kingdom has had ample opportunity not only to put its case, but also to question the Commission. There has also been considerábale correspondence. The Commission contends that as a result of those contacts and the summary report the United Kingdom was well aware of the reasons for the decision and that is also clear from the application.

1 Language of the Case: English.