Report for the Hearing delivered in Case 348/85
I — Facts
1. Article 1 (2) (b) 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) is to finance (a) refunds to third countries, and (b) intervention intended to stabilize the agricultural markets.
2. The main elements of a common fisheries policy 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 structural 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 in the preamble 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. 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 zones 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 its 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 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 interim 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 29 May 1984 in relation to the clearing of the Fund's accounts for 1980-81, the Commission informed the Kingdom of Denmark 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 law. The catches not covered by the quotas set 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 for calculating the expenditure declared ineligible and the financial consequences.
17. In a letter of 14 June 1984 the Kingdom of Denmark rejected the Commission's view of the law but did not comment on the figures.
18. By Decision 85/451 of 28 August 1985 on the clearance of the accounts presented by the Kingdom of Denmark in respect of the Fund, expenditure for 1981 (Official Journal, L 267, p. 10), the Commission refused to recognize as chargeable to the Fund:
II — Written procedure and conclusions of the parties
1. The application of the Kingdom of Denmark was lodged at the Court Registry on 16 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 Kingdom of Denmark, the applicant, claims that the Court should:
4. The Commission, the defendant, contends that the Court should:
III — Submissions and arguments of the parties
The Kingdom of Denmark's application, which is based on Article 173 of the EEC Treaty, alleges an infringement of the Treaty and the rules of law relating to its application.
The Kingdom of Denmark, which for the main part alleges an infringement of Regulation No 729/70, puts forward its submissions and arguments under four heads :
A proposal by the Commission constitutes neither applicable Community law nor a set of Community rules within the meaning of Regulation No 729/70,
There is no connection between rules relating to quotas and the correct use of the common organization of the agricultural markets within the meaning of Regulation No 729/70;
The infringement of Article 5 of Regulation No 729/70 prevents the Commission from putting forward in 1985 a new view of the law in relation to the clearance of the accounts for 1981;
The deduction is incorrect in so far as the Commission has not taken into account the quantities withdrawn or exported before the quotas referred to were exhausted.
A — The status in Community law of the Commission's proposal for quotas
1. The Kingdom of Denmark considers that in its case-law the Court has clearly rejected the Commission's view that a proposal by the Commission should be part of the Community rules and thereby give rise to rights and obligations for the Member States. There is no authority for the proposition that special circumstances may transform a proposal by the Commission into a binding legal measure.
2. In response the Commission states that it wishes first to explain that the position it adopted in 1981 in relation to TACs and quotas is legally correct. In requesting the Member States in 1981 to apply its proposals on TACs and quotas it expressly referred to the case-law of the Court. In paragraph 25 of its judgment of 10 July 1980 in Case 32/79 (cited above) the Court defined the obligations of the Member States as follows: Both Article 102 of the Act of Accession and Council Regulation (EEC) No 101/76, in particular Article 4 thereof, in the same way as Annex VI to the Hague Resolution and the Council Regulation of 31 January 1978, are based on the twofold assumption that measures must be adopted so as to meet established conservation needs and that if those measures cannot be introduced in good time on a Community basis the Member States not only have the right but are also under a duty to act in the interests of the Community.
B — The rektionship between quotas and the rules of the common organization of the market under Regulation No 729/70
1. The Danish Government claims that even if it is possible to prove that in 1981 a Member State made catches of fish in breach of the Community law applicable in 1981, the legal basis of which the Commission must substantiate, such a finding does not allow the Commission to refuse Community funding for expenditure incurred by Denmark on the basis of and in compliance with the organization of the market applicable in 1981 and the relevant implementing regulations. There is no connection between the question of the extent to which a particular fishing operation in 1981 was consistent with the Community law in force and the question to what extent the expenditure in issue was incurred in accordance with the Community rules under the common organization of the agricultural markets. The applicant points out that the legal structures in relation to fishing, which were not fully worked out in 1981, are very different from the legal structures in relation to agriculture.
2. In answer the Commission states that, even in the absence of a rule laying down for 1981 a connection between observance of the quotas and Community financing, Regulation No 729/70 must be interpreted as meaning that the Commission had not only a right but also an obligation to exclude from Community financing expenditure in the fisheries sector which had been incurred in relation to fish caught in breach of a Community rule aimed at preserving the biological resources of the sea.
C — Infringement of Article í of Regulation No 729170
The Danish Government states that according to Article 5 of Regulation No 729/70 the Commission must make up the accounts before the end of the following year. In the present case the year following 1981 expired on 31 December 1982. Although the Danish Government forwarded the necessary documents, the Commission did not make up the accounts for 1981 until its decision of 28 August 1985, that is after a serious delay for which Denmark was in no way responsible.
The Danish Government considers that the aim of Article 5 must have been to impose on the Commission an obligation to act, backed by a legal sanction. The sanction does not consist of invalidity but in preventing the Commission from advancing a new view of the law.
The Danish Government must acccept the delay, in clarifying technical or similar problems but it cannot accept that fundamental questions of law should be raised with retroactive effect in relation to the clearance of the accounts long after the decisions taken by the national administration. In the present case the Commission did not put forward its point of view that there was a connection between any excess fishing and financing of expenditure until its telex message of 29 May 1984. The applicant claims that by reason of the delay the Commission is not entitled to raise that issue in respect of the clearance of the accounts for 1981.
2. The Commission regrets that because of the considerable increase in the cases it has had to deal with it was not able to clear the accounts for 1981 before 31 December 1982 in accordance with Article 5 of Regulation No 729/70. It however denies that such delay can have the result of preventing it from taking into account the fact that legally binding quotas were exceeded by the applicant.
D — Correctness of the disallowances
1. The Danish Government claims that in the Commission's own view the quantities withdrawn or exported at a time when the quotas had not been exhausted ought to be financed by the Community. The Commission applied that principle in clearing the accounts for 1982 as is shown by its letter of 5 August 1985 annexed to the application. The Danish Government also annexes to its application a summary of the fishing showing the amounts withdrawn or exported before the quotas were exhausted and contained in the Commission's proposal for 1981. It follows that in relation to financial compensation DKR 3214012.05 were used to finance quantities withdrawn at a time when the proposed quotas had not yet been exhausted and that with regard to refunds DKR 1454631.19 were used to finance refunds at a time when the proposed quotas had not yet been exhausted. That is the reason for which the Danish Government claims in the alternative that the Commission decision should be declared void in so far as it does not take account of such expenditure.
2. While reserving its position on the correctness of the information and the figures submitted the Commission contends that it cannot accept a reduction in the disallowances in the present case.
1 Language of the Case: Danish.