Report for the Hearing delivered in Case 128/87

I — Facts and procedure

1. Relevant legislation

(a) Community provisions

Council Regulation No 1562/78 of 29 June 1978 amending Regulation No 136/66/EEC on the establishment of a common organization of the market in oils and fats (Official Journal 1978, L 185, p. 1) set up a system of aid for the production of olive oil. To that end, Regulation No 1562/78 inserted a new Article 5 in Regulation No 136/66 (Official Journal, English Special Edition 1965-66, p. 221). That article provides that aid is to be granted, inter alia, to growers who are members of a producer group recognized under Council Regulation No 1360/78 of 19 June 1978 on producer groups and associations thereof (Official Journal 1978, L 166, p. 1). According to Article 1 of Regulation No 1360/78, the purpose of the regulation is to encourage the formation of producer groups and associations of such groups in order to remedy the structural deficiencies of the market in agricultural products. Title II of the regulation is concerned with the recognition of producer groups and associations of such groups and lays down, inter alia, the conditions for such recognition.

Regulation No 1360/78 was extended to cover olive oil by Regulation No 1917/80 (Official Journal 1980, L 186, p. 1) and was extended to Greece by the Act of Accession (Official Journal 1979, L 291, p. 127).

However, the implementation of Regulation No 1360/78 proved difficult in regard to the olive oil sector and the system of aid provided for in the new version of Article 5 of Regulation No 136/66 could not be implemented on schedule. In those circumstances, the Council adopted special measures for several marketing years, laying down provisional conditions for the recognition of producer organizations (see Regulation No 2752/78, Official Journal 1978, L 331, p. 8; Regulation No 2377/79, Official Journal 1979, L 274, p. 1; Regulation No 2528/80, Official Journal 1980, L 259, p. 1; and Regulation No 2989/81, Official Journal 1981, L 299, p. 15).

On 18 May 1982 the Council adopted Regulation No 1413/82 amending Regulation No 136/66 on the establishment of a common organization of the market in oils and fats (Official Journal 1982, L 162, p. 6). The fifth recital in the preamble to that regulation states that, in view of the problems of implementing Regulation No 1360/78 in certain Member States, it is to be feared that the system provided for in that regulation will not be applied in the near future and that, moreover, that system does not seem well suited to the special structure of olive oil production in Greece. According to the sixth recital, the system of aid for the production of olive oil cannot be effectively managed on the basis of the temporary measures applied to producer organizations. Lastly, the seventh recital states that a specific system should be introduced as a permanent arrangement, based on olive grower groups or associations of such groups, which would be responsible for carrying out certain operations relating to the implementation of the aid system. To that end, Regulation No 1413/82 inserted a new Article 20c in Regulation No 136/66. That provision lays down new criteria for the recognition of olive oil producer groups. Article 20c(4) provides that the Council is to adopt detailed rules for the application of that article.

On the basis of that provision, the Council adopted Regulation No 2261/84 of 17 July 1984 laying down general rules on the granting of aid for the production of olive oil and of aid to olive oil producer organizations (Official Journal 1984, L 208, p. 3). That regulation lays down additional criteria for the recognition of producer organizations and defines their tasks, such as, for example, checks on data provided by members applying for production aid and the coordination of aid applications. In order to ensure a smooth transition from the old to the new arrangements, Article 20 of the Regulation provides as follows:

Finally, on the basis of Articles 19 and 20 of Regulation No 2261/84, the Commission adopted two implementing regulations. Article 5 of Regulation No 2711/84 of 26 September 1984 laying down certain detailed rules for the application of Regulation (EEC) No 2261/84 for the 1984/85 marketing year as regards olive oil producer organizations and associations thereof (Official Journal 1984, L 258, p. 12) provides that if a Member State decides to avail itself of the possibility provided for in Article 20 of Regulation No 2261/84, it must submit the additional criteria for the recognition of producer organizations and associations of such organizations to the Commission by 30 September 1984 at the latest. Finally, Article 3 of Commission Regulation No 3061/84 of 31 October 1984 laying down detailed rules for the application of the system of production aid for olive oil (Official Journal 1984, L 288, p. 52) provides that a producer organization may not be recognized unless it has the appropriate administrative structure for the performance of the tasks with which it is entrusted, has the qualified staff necessary for the performance of such tasks, draws up a monthly report on its activities and keeps accounts relating to its management activities.

(b) Greek legislation

The Greek Minister for Agriculture adopted Order No 330358 of 25 October 1984 pursuant to Article 20 of Regulation No 2261/84. That order laid down additional criteria for the recognition of olive oil producer organizations in Greece. Paragraph 3 of that order is drafted in the following terms:

The Commission was given notice of that order on 19 September 1984.

2. Background to the dispute

On 20 November 1985, the Commission sent a letter to the Greek authorities under Article 169 of the EEC Treaty. It stated that the additional criteria laid down by the Ministry of Agriculture exceeded the limits of the powers granted to the Member States by Article 20 of Regulation No 2261/84 and that the concurrent application of those criteria introduced arbitrary discrimination between producers within the meaning of Article 40(3) of the Treaty. The criteria were designed to restrict recognition to associations of agricultural cooperatives, to the exclusion of all other forms of association, and had that effect.

The Greek Government replied on 14 February 1986. In its view, the criteria adopted did not exceed the powers defined in Article 20 of the regulation and did not infringe Article 40(3). On the contrary, the criteria adopted were essential to ensure the proper functioning of the aid system and to avoid irregularities which could arise, for example, in the event of a producer being a member of several organizations at the same time, the submission of double applications for aid and the setting up of temporary, fictitious or seasonal companies with the sole aim of enabling their founders to appropriate the percentage deducted from the aid in favour of the producer organization. Furthermore, the Greek Government argued that the Commission must be considered as being in agreement with the criteria at issue because it had not reacted to the notification of the order until February 1985, that is to say, until four months had gone by.

The Commission did not accept the Greek Government's arguments. On 28 November 1986 it delivered a reasoned opinion.

The Greek Government reacted to the reasoned opinion by a letter dated 12 February 1987. It maintained its point of view.

Under those circumstances, the Commission brought an action before the Court under the second paragraph of Article 169 of the Treaty.

3. Procedure

The Commission's application was received at the Court Registry on 15 April 1987.

The written procedure followed the normal course.

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.

II — Conclusions of the parties

The Commission claims that the Court should:

The Hellenic Republic contends that the Court should:

III — Submissions and arguments of the parties

The Commission claims that the Greek additional criteria go beyond the limits of the powers granted to the Member States under Article 20 of Regulation No 2261/84 and are incompatible with Article 40(3) of the Treaty.

In the first place, the Commission points out that the objectives of the reform of the system of production aid for olive oil introduced by Regulation No 2261/84 are to ensure that producer organizations are efficient and to improve the functioning of the aid system. The additional criteria laid down under Article 20 of the said regulation cannot go beyond what is necessary in order to achieve those objectives and to resolve the specific problems which have arisen in a Member State during the transition to the new system. However, the criteria laid down by the Greek Ministry of Agriculture are not linked to such specific problems. Their purpose and effect is to limit recognition of producer organizations solely to cooperatives. In support of that argument, the Commission analyses the Greek legislation on agricultural cooperatives. That legislation lays down the same criteria for the definition of cooperatives as have been laid down for the recognition of producer organizations. Furthermore, the Commission observes that the list of organizations recognized in Greece includes no organization which is not an agricultural cooperative.

In the second place, the Commission claims that the effect of those additional criteria is to reserve eligibility for the Community system to a single type of producer organization, which is incompatible with Article 40 (3) of the Treaty. In particular, recognition is refused, without any valid reason, to producer organizations which do not themselves produce and market olives and olive oil.

With regard to the Greek Government's argument based on the need to combat irregularities, the Commission observes that the Community rules themselves contain sufficient guarantees in that regard. It adds that the additional criteria have in fact had no influence on the quality of the checks laid down by the Community regulations. The reports made by an EAGGF team in Greece, which carried out checks on many associations and cooperatives recognized as producer organizations, show that the inspectors found instances of negligence and, in certain cases, of failure to fulfil the obligations laid down in the Community rules.

The Greek Government maintains that, according to the preambles to Council Regulations Nos 1413/82 and 2261/84 and Commission Regulations Nos 2711/84 and 3061/84, the additional criteria at issue are intended, on the one hand, to make the system of the grant of financial aid for olive oil transparent and, on the other, to overcome the structural deficiencies of producer organizations which have an effect on the supply and marketing of agricultural products through producer organizations and associations of such organizations. The criteria laid down by the Ministry of Agriculture were designed to achieve precisely those two objectives.

The Greek Government contends that Article 40(3) of the Treaty has not been infringed. The Greek authorities would recognize any legal entity which, inter alia, has an appropriate administrative structure for carrying out the tasks assigned to it, has the qualified staff necessary to fulfil its obligations, contributes by its activities to the attainment of the objectives set out in Article 39 of the Treaty, lays down common rules for the production and marketing of products and places its products on the market. According to the Greek Government, the application of those criteria is fully justified on objective grounds and, consequently, does not give rise to arbitrary discrimination between producers.

1 Language of the case: Greek.