Opinion of Mr Advocate General Van Gerven

Mr President,

Members of the Court,

1. In this reference for a preliminary ruling from the High Court, London, the Court of Justice is once again being called upon to consider the detailed rules governing the additional levy on milk deliveries which the Council introduced in 1984 in order to restore the balance in the dairy sector. That levy was introduced by Council Regulation (EEC) No 856/84 of 31 March 1984 by the insertion of Article 5c in the basic regulation, No 804/68. Council Regulation (EEC) No 857/84 of 31 March 1984 laid down general rules for the application of the levy.

Background

2. The system concerning the imposition of an additional levy draws a distinction between two categories of producers of milk or other dairy products. The first category — by far the largest — consists of producers who deliver their products to an undertaking or a group which purchases milk or other dairy products for treatment or processing (deliveries to dairies). The Member States have the possibility of applying the levy to that category of producers in accordance with either of two formulas (see Article 5c(l) of Regulation (EEC) No 804/68). According to formula A, each milk producer is assigned a reference quantity which is calculated on the basis of the quantities of milk or milk equivalent delivered by him to a dairy during a reference period. If the deliveries exceed that reference quantity, the producer is liable to pay an additional levy, on the excess. According to formula B, for which the United Kingdom has opted, each dairy is assigned a reference quantity which is calculated on the basis of the quantities of milk or milk equivalent delivered to it by affiliated producers during a reference period. If deliveries exceed that reference quantity, the dairy is liable to pay an additional levy on the excess, on the understanding that the levy must be passed on only to those producers who have increased their deliveries in proportion to their contribution to the excess over the dairy's reference quantity.

3. The second category — to which Hall & Sons (Dairy Farmers) Ltd (hereinafter referred to as Hall) belongs — consists of producers who sell milk or other dairy products direct to the consumer. That category of producers may also be liable to pay an additional levy, where the quantities sold exceed the reference quantity assigned (see Article 5c(2) of Regulation No 804/68). Article 6 of Regulation No 857/84 contains a number of provisions for the application of the system to that category of producers. Article 6(1) lays down the rules concerning the reference quantity to be assigned to each producer selling direct to the consumer:

4. Article 6 of Regulation No 857/84 was amended by Council Regulation (EEC) No 590/85 of 26 February 1985. That regulation was adopted after the competent authorities in the United Kingdom had assigned the reference quantity contested by Hall. It seems to me, therefore, that the interpretation sought by the High Court relates to the original version of Article 6 of Regulation No 857/84 and not to that provision as amended by Regulation No 590/85. In any event, the amendments made by the latter regulation do not, in my view, in any way affect the problem of interpretation now before the Court.

5. In the aforesaid definition of the phrase milk ... sold directly to consumption, the origin of the milk sold is not expressly defined. More particularly, that definition does not expressly state that the milk sold must be produced on the milk producer's holding, that is to say by the cows on that holding. Nor do the other provisions governing the additional levy, and in particular Article 6 of Regulation No 857/84 governing the individual reference quantity to be assigned, expressly state that the reference quantity is assigned to producers on the basis of their own milk production. In its reference for a ruling on interpretation the High Court in fact seeks to ascertain whether, when a reference quantity is assigned to a producer who sells milk direct to the consumer, it is necessary to take account only of the milk produced on that producer's own holding (as the Dairy Produce Quota Tribunal for England and Wales stated in the main proceedings, a view shared by the United Kingdom and the Commission as is apparent from the observations submitted by them in these proceedings), or whether all direct sales made by the producer, including sales of quantities of milk purchased by him from third parties, are to be taken into account (as Hall contends).

6. I would refer to the Report for the Hearing for a more detailed account of the relevant legislation, the facts in the main proceedings, the course of the procedure and the observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

Assessment

7. Hall's contention is essentially that, since there is no express provision to the effect that the milk sold direct to the consumer must be produced on the producer's holding, Article 6(1) of Regulation No 857/84 must be interpreted as meaning that each producer must be assigned a reference quantity corresponding to all his direct sales to the consumer, including sales of quantities of milk purchased by the producer from third parties.

8. Hall's contention is, in my view, untenable if account is taken not only of the wording but also of the aim of and the relationship between the provisions concerning the additional levy.

9. In order to achieve that purpose, the Council has opted for a system whereby reference quantities (usually referred to as production quotas) are assigned to individual producers or to their dairies. If those quantities are exceeded, an additional levy is imposed. It follows from the nature of the method chosen and the objective which it pursues that the reference quantities are established on the basis of the data pertaining to the primary market in milk production and not on the basis of the data pertaining to the secondary market on which the milk produced is bought and sold. From that point of view — and by analogy with the system applicable to deliveries to dairies — the Council has set up a system governing direct sales to the consumer which is aimed only at primary milk production.

10. Therefore, in the light of the wording, the purpose and the structure of the system under consideration, I have come to the conclusion that Article 6(1) of Regulation No 857/84 must be interpreted as meaning that a reference quantity is to be assigned to the producer on the basis of the milk or milk products sold by him direct to the consumer during the reference year in question out of the milk produced by the cows on his own holding.

11. The interpretation suggested by Hall is, in my view, incompatible with the purpose and structure of the system established. As Hall concedes in its submissions to the Court, the effect of the interpretation which it advocates is that a single quantity of milk produced could be taken into account twice over — or even more often in my view — for the purposes of the grant of an individual reference quantity. Such an interpretation would enable a producer to create additional reference quantities by means of buying and selling operations, which in itself is already contrary to the aim of the system which is to restria production.

12. Finally, I wish to point out that even the system applicable to producers who supply dairies does not expressly provide that the individual reference quantity is to be fixed on the basis of their own production. The interpretation advocated by Hall would therefore not only affect the sector of direct sales to the consumer, which is smaller in absolute terms, but also disrupt the system of restricting production in that sector as a whole.

Conclusion

13. For the aforesaid reasons I suggest that the Court answer the question submitted for a preliminary ruling as follows:

1 Original language: Dutch.

2 Council Regulation (EEC) No 856/84 of 31 March 1984 amending Regulation (EEC) No 804/68 on the common organization of the market in milk and milk products (OJ 1984, L 90, p. 10).

3 Regulation (EEC) No 804/68 of the Council of 27 June 1968 on the common organization of the market in milk and milk products (OJ, English Special Edition 1968 (I), p. 176).

4 Council Regulation (EEC) No 857/84 of 31 March 1984 adopting general rules for the application of the levy referred to in Article 5c of Regulation (EEC) No 804/68 in the milk and milk products sector (OJ 1984, L 90, p. 13).

5 Council Regulation (EEC) No 857/84 of 31 March 1984 adopting general rules for the application of the levy referred to in Article 5c of Regulation (EEC) No 804/68 in the milk and milk products sector (OJ 1984, L 90, p. 13).

6 In the case of the United Kingdom thai quantity amounts to 187000 tonnes (see the annex to Regulation No 857/84). Compare this with the total quantity of 15698000 tonnes of milk for delivery to dairies which was assigned to the United Kingdom for the first year (see Article 5c(3) of Regulation No 804/68).

7 Council Regulation (EEC) No 590/85 of 26 February 1985 amending Regulation (EEC) No 857/84 laying down general rules for the application of the levy referred to in Article 5c of Regulation (EEC) No 804/68 in the milk and milk product sector (OJ 1985, L 68, p. 1).

8 Judgment of 17 May 1988 in Case 84/87 Erpclding [1988] ECR 2647.

9 Article 6(2) of Reguládon (EEC) No 857/84 and the annex thereto.

10 See the fifth recital in the preamble to Regulation (EEC) No 857/84.

11 Article 6(1) and (2) of Regulation (EEC) No 857/84.

12 Article 3(1) and 4(1 Hb) of Regulation (EEC) No 857/84.

13 Article 3(3) of Regulation (EEC) No 857/84.

14 Article 4(l)(a) of Regulation (EEC) No 857/84.