Opinion of Mr Advocate General Van Gerven

Mr President,

Members of the Court,

1. In order to restore the balance in the dairy sector which was suffering from major structural surpluses, the Council adopted on 31 March 1984 Regulation Nos 856/84 and 857/84 which introduced for an initial period of five years a levy on quantities of milk delivered beyond a threshold guarantee. The Court has already given several preliminary rulings on questions relating to various aspects of these stringent provisions. In the present cases the cour d'appel, Rennes, raises a question on the specific provisions relating to producers having a development plan.

The relevant legislation

2. The questions submitted by the national court relate to the first two years in which the scheme for controlling milk production was implemented. Therefore, it is enough if I give an account of the legislation applicable at that time.

The Community provisions

3. Under the terms of Article 5c of Council Regulation 804/68, as amended by the aforementioned Regulation No 856/84, a levy is imposed on quantities of milk delivered which exceed a predetermined reference quantity. This levy is payable either by milk producers (formula A) or by purchasers of milk (dairies) who pass it on exclusively to the producers who have increased their deliveries, in proportion to their contribution to the purchaser's reference quantity being exceeded (formula B).

4. Exceptions to this general scheme are provided for or may be provided for (see below at paragraph 15) in order to take into account certain specific situations, in particular the case of producers having a development plan. Their Community status was defined by Council Directive 72/159/EEC. This instrument required Member States to introduce a system of incentives for farms which are capable, through the adoption of rational methods of production, of assuring a fair income and satisfactory working conditions for persons working them. Pursuant to the directive, persons wishing to benefit from incentive measures must enclose with their application a development plan projected over a maximum period of six years, in which the production objectives to be achieved must be stated together with the investment necessary for this purpose. When the development plan has been approved by the competent authority of the Member State, the holders of such plans may receive aid in the form of interest rate subsidies in respect of loans taken out in order to carry out the developments provided for.

5. The operative provisions adopted by the Council in order to take account of the specific situation of holders of a development plan are as follows.

The French rules

6. The measures adopted in France in order to implement the Community provisions are contained in Decree No 84-661 of 17 July 1984 and, in respect of the first two years of implementation referred to by the national court, the decrees of 22 November 1984 and 10 July 1985.

7. As regards the implementation of the general scheme, it is enough to outline the two fundamental decisions taken by France.

8. The position of producers having development plans was regulated by Decree No 83-442 of 1 June 1983 whose purpose is to implement Directive 72/159/EEC. This decree makes the receipt of investment aid subject in particular to a commitment by the farmer to carry out a modernization programme within the period provided for (normally six years) in his development plan.

9. Decree No 84-661 gives an outline of the general context in which purchasers grant, besides a basic reference quantity calculated as stated above, additional reference quantities to certain categories of producer who are in a special situation and which I may hereinafter designate by the expression priority producers. Producers who adopt a development plan pursuant to the decree of 1 June 1983 form one of the categories of producer who may thus benefit from additional reference quantities. Producers whose deliveries during the year 1983 were greater than 200000 litres of milk are however excluded. Unless an exception is made in an individual case, such producers may not be allocated additional reference quantities before 1 April 1986. At the hearing, the representatives of the French Government stated that the fixing of such a ceiling enabled sufficient quantities to be made available in favour of the greatest number of priority producers, whilst at the same time observing the guaranteed total quantity.

10. In respect of the first period of implementation (April 1984 to March 1985), the decree of 22 November 1984 applied this enabling provision in the following manner.

11. As regards the second period of implementation (April 1985 to March 1986), the decree of 10 July 1985 makes provision for other detailed rules of implementation.

The main proceedings

12. In the main proceedings 15 milk producers from the departement of the Côtes du Nord, who all have a development plan adopted between 1980 and 1983, are challenging the levy imposed by their dairy in respect of the marketing year 1985/86. I should point out that none of the plaintiffs in the main proceedings had completely implemented his development plan in 1981 or 1982. I would also observe that, in the relevant period, all the plaintiffs produced a quantity of milk greater than 200000 litres.

13. In the context of these proceedings, the cour d'appel, Rennes, referred the following questions to the Court of Justice for a preliminary ruling:

Analysis of the first question

14. The first question has two limbs. They seem to me to be as follows:

The allocation of a single fixed reference quantity

15. In replying to this question, it is first necessary to determine whether Article 3 of Regulation No 857/84 imposes on Member States a requirement to allocate an additional reference quantity to producers having a development plan or whether it merely grants the right to do so.

16. Having thus given the reply that the measures provided for in Article 3(1) of Regulation No 857/84 are adopted under a power left to the Member States, I think it may be inferred that the Member States may also fix a ceiling beyond which no additional reference quantity may be allocated. The fixing of such a ceiling may be necessary in the context of the adjudications to be carried out by the Member States between priority and non-priority producers, or between categories of priority producers, in order to observe the threshold of the guaranteed total quantity.

17. It seems to me that the foregoing considerations provide the reply which should be given to the national court to assist it in resolving the disputes in the main proceedings. In fact, I would recall that all the plaintiffs in the main proceedings produced, during the marketing year 1985/86, quantities greater than 200000 litres of milk. To the extent to which the exclusion of this category of producer from the benefit of the special regime for holders of a development plan is in conformity with the Community provisions, the question as to the validity of the allocation of a single fixed reference quantity is no longer relevant to the plaintiffs in the main proceedings. Moreover, I think it is open to question whether the French rules for the marketing year 1985/86 do in fact provide for such a single fixed allocation in favour of holders of a development plan. Although it is true that the decree of 22 November 1984 provided for a single fixed allocation of 9500 litres to be given to all persons concerned whose production was lower than 200000 litres, that single fixed allocation is not contained in the decree of 10 July 1985 which lays down the rules pursuant to which dairies imposed a levy on the plaintiffs in the main proceedings. The representatives of the French Government stated at the hearing that the single fixed figure of 9500 litres was discontinued for the marketing year 1985/86 and replaced by a recommendation to take account of the production objectives laid down in each development plan (see paragraph 11 above).

18. Should the Court deem it necessary, however, to reply to the question relating to the allocation of a single fixed reference quantity, I set out my opinion below.

The choice of 1983 as the sole reference year

19. I also wonder whether the question relating to the choice of 1983 as the reference year, with no provision for derogation for holders of a development plan completed in 1981 or 1982, is necessary in the context of the main proceedings. In fact, none of the plaintiffs in the main proceedings are in the position of having completed their development plan in 1981 or 1982.

20. The second indent of Article 3(1) of Regulation No 857/84 seems to me to have been intended, in the first place, to deal with the situation of certain holders of development plans whose farm is situated in a Member State which has chosen 1981 as the reference year. In this case, it is logical to permit the Member State concerned to grant additional reference quantities to producers who have completed their development plan after 1 January 1981, given that their basic reference quantity was fixed at that time on the basis of milk production which was destined to grow and takes no account of the consistent production rate to be achieved at the end of the development plan.

21. In any event, Regulation No 857/84, in my view, precludes a different reference year from that chosen by the Member State for producers in general from being taken into account in favour of holders of a development plan. Article 2 of the regulation requires Member States to choose a reference year from amongst the calendar years 1981 to 1983. Once that choice has been made, a different reference year may still be taken into account in favour of producers affected by exceptional events (Article 3(3)). On the other hand, Regulation No 857/84 does not permit the reference year chosen by the Member State to be derogated from in favour of holders of a development plan. The Court expressly so held in its judgment of 17 May 1988 in Case 84/87 Erpelding [1988] ECR 2647:

Examination of the second question

22. In its second question, as I construe it, the Rennes Court of Appeal asks the Court whether the Community provisions preclude the retention within dairies of a proportion of the individual reference quantities which are freed by affiliated producers who have definitively discontinued production (90% pursuant to the decree of 22 November 1984, 80% pursuant to the decree of 10 July 1985), only the balance being assigned to the national reserve.

23. The reply to this question may be derived, in my view, from Article 4(2) of Regulation No 857/84:

24. Pursuant to Article 4(2), as interpreted by the judgment in the Klensch case, all individual reference quantities belonging to producers who have discontinued production must therefore be assigned to the national reserve. I see only one exception to that rule, namely in the case where quantities available in the national reserve, other than those coming from the discontinuance of production, would be sufficient to satisfy the needs of priority producers as defined by the Member State in pursuance of Articles 3 and 4 of Regulation No 857/84 (see the words as necessary appearing in Article 4(2)). Apart from this situation, the quantities freed (in respect of which, I would recall, the farmers who abandon production may be granted compensation) must be reallocated solely to producers who, in accordance with the decision of the Member State, may receive additional reference quantities. Moreover, this reallocation may not create discrimination between priority producers by making the additional reference quantity to be allocated to them dependent on the volume of quantities freed at the level of the purchasers to whom they are affiliated.

25. That interpretation based on the judgment in the Klensch case does not, however, appear to me to be incompatible with the decentralized management of reference quantities freed in a Member State which has opted for formula B. In particular, the operative arrangements which were introduced in France for the marketing year 1985/86, which consist in keeping 80% of the reference quantities freed within the dairies and transferring the balance to the national reserve, do not appear to me to conflict with the Community provisions providing that the following conditions are satisfied. In the first place, purchasers must reallocate the quantities freed that are not transferred to the national reserve only to producers entitled to receive additional reference quantities. Secondly, the maintenance of a proportion of the freed quantities with the purchasers must provisionally be in the nature of an advance deduction. In other words, if that proportion exceeds the quantities which are necessary for granting, in accordance with the decision of the Member State, additional reference quantities to the producers concerned, the balance must be transferred to the national reserve. Conversely, if that proportion is insufficient for granting, in accordance with the decision of the Member State, the additional reference quantities provided for in favour of the affiliated priority producers and the national reserve also proves inadequate in that respect, the decentralized management system must allow for a subsequent reduction of the percentage of freed quantities retained with purchasers who have been able to satisfy the needs of priority producers affiliated to them, in such a way as retroactively to neutralize the differences in treatment as between producers according to the purchaser to whom they are affiliated.

Examination of the third question

26. Article 5c of Regulation No 804/68 fixed the total quantity guaranteed to Member States which had to be taken into consideration as from the second year of implementation at a level lower than that fixed for the first year of implementation. That is the reason why the French Government, in respect of the 1985/86 marketing year, fixed the reference quantity for purchasers and affiliated producers at the level fixed for the preceding year less 1% (except in mountain areas) (see paragraph 7 above). In this context, I interpret the third question submitted by the national court as raising the problem whether the Community provisions themselves have not infringed the principle of the protection of legitimate expectation.

27. Although it is true that Directive 72/159/EEC requires Member States to have development plans approved by their competent authorities, such approval does not confer upon the persons concerned the right to achieve the production objectives laid down in those plans. Approval is limited, in my view, to conferring on holders of a development plan the right to received certain aid, inter alia in the form of interest rate subsidies, whilst leaving economic and financial responsibility for the farm in the hands of the farmers concerned.

28. It is nevertheless true that Directive 72/159/EEC undeniably did encourage a large number of farmers to invest in the modernization of their farms with a view to achieving sufficient levels of income in the future. When a limitation on the production of such farmers is imposed on the basis of a reference year prior to the year of completion of their development plan, that is to say at a time when production will not normally have reached the level of profitability forecast for the time of the plan's expiry, it is clear that this limitation produces effects which are harsher for them than for producers whose production has remained constant. Therefore, observance of the principle of legitimate expectation was particularly necessary, which the Council was aware of, as we will see below.

29. In its judgment of 16 May 1979 in Case 84/78 Tomadini v Amministrazione delle finanze dello Stato [1979] ECR 1801, the Court reiterated the scope of the principle of legitimate expectation:

30. In conclusion, I suggest that the Court reply to the questions referred for a preliminary ruling in the following manner:

1 Original language: French.

2 Council Regulation No 856/84/EEC of 31 March 1984 amending Regulation No 804/68/EEC on the common organization of the market in milk and milk products (OJ 1984, L 90, p. 10). Council Regulation No 857/84/EEC of 31 March 1984 adopting general rules for the application of the levy referred to in Article 5c of Regulation (EEC) No 804/64 in the milk and milk products sector (OJ 1984, L 90, p. 13).

3 Judgment of 25 November 1986 in Joined Cases 201 and 202/85 Klensch and Others v Secrétaire de l'Etat [1986] ĘCR 3477; Judgment of 28 April 1988 in Case 102/86 Mulder [1988] ECR 2321 ; Judgment of 28 April 1988 in Case 107/86 Von Deelzen [1988] ECR 2355; Judgment of 28 April 1988 in Case 61/76 thevenot and Others [1988] ECR 2375; Judgment of 17 May 1988 in Case 84/87 Erpelding [1988] ECR 2647.

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

5 Article 1(1).

6 Article 2(1).

7 Article 2(2).

8 Article 5c(3) of Regulation No 804/68.

9 The other producers who arc, or may be, entitled to exceptional treatment are (i) those who have carried out investments without a development plan, if the Member State has sufficient information (second subparagraph of Article 3(1) of Regulation No 857/84); (ii) young farmers setting up after 1980 (Article 3(2) of Regulation No 857/84), (iii) producers whose milk production has been affected by exceptional events during lhe reference year (Article 3(3) of Regulation No 857/84); (iv) producers operating under a development plan approval, after 1 April 1984, under Directive 72/159/EEC, on condition that the plan meets certain criteria (Article 4(l)(b) of Regulation No 857/84); (v) other producers carrying on farming as their mam occupation, provided that the benefit of the derogation is enjoyed within the context of the restructuring of their milk production (Article 4(l)(c) of Regulation No 857/84).

10 Council Directive 72/159/EEC of 17 April 1972 on the modernization of farms (OJ, English Special Edition 1972 (II), p. 324)

11 See the fifth recital in the preamble to the directive

12 See above (point 4 and footnote No 8) the list of categories of producers laid down in Articles 3 and 4 of Regulation No 857/84 who are, or may be, entitled to exceptional treatment.

13 This provision was inserted into Regulation No 857/84 by Council Regulation (EEC) No 590/85 of 26 February 1985 (OJ 1985, L 68, p. 1). The provision was initially for a period of 12 months, but was then extended for a second period of 12 months by Council Regulation (EEC) No 1305/85 of 23 May 1985 (OJ 1985, L 137, p. 12).

14 Decree No 84-661 of 17 July 1984 on controlling lhe production of cow's milk and tne means of recovery of an additional levy on purchasers and producers of cow's milk (JORF, 21.7 1984, p 2373)

15 Decree of 22 November 1984 on the determination of reference quantities for purchasers of milk for the period from 2 April 1984 to 31 March 1985 (JORF, 29 11 1984, p 3660)

16 Decree of 10 July 1985 on the determination of reference quantities for purchasers of milk for the period from 1 April 1985 to 31 March 1986 (JORF, 14 7 1985, p 7979)

17 Article 2 of Decree No 84-661

18 Article 17 of Decree No 84-661

19 Article 3(l)(a) of the Decree of 22 November 1984

20 Anieles 2 and 3(l)(b) of tlie Decree of 10 July 1985

21 Thus it seems likely thai the French Government used the following formula 1983 -2% = 1981 + 1%.

22 At the hearing the representatives of the French Government stated that the reference quantity for purchasers was fixed, at the end of the 1984-85 marketing year, at a slightly lower level (-0.8%) than that provider] for in Decree No 85-661 (1983 -2%), in order to enable increased reference quantities to be granted to producers who had endured climatic catastrophes and were entitled to request that a different reference year be taken into account.

23 Decree No 83-442 of 1 June 1983 on the modernization of farm-holdings (JORF, 3. 6. 1983). This decree replaced the earlier regulations which went back to 1974.

24 Article 5 of Decree No 84-661. The other priority producers provided for in that article are: (i) producers entitled to aid in favour of farmers in difficulty and whose recovery programme provides for an increase in production; (ii) young farmers setting up after 31 December 1980 who meet certain criteria; (iii) producers who before 1 April 1984 committed investments in order to develop their milk production and who meet certain criteria.

25 Article 4(6) of Decree No 84-661.

26 Article 2 of the Decree of 22 November 1984.

27 Article 3(l)(c) of the Decree of 22 November 1984.

28 Last paragraph of Article 3 of ihc Decree of 22 November 1184

29 Article 4(3) of the Decree of 22 November 1984 Certain young farmers and producers in particularly difficult economic and social situations have prior entitlement to any such additional reference.

30 Article 5(2) and (3) of the Decree of 22 November 1984.

31 Article 7 of the Decree of 22 November 1984.

32 Article 2(1) of the Decree of 10 July 1985.

33 Article 3(l)(b) of the Decree of 10 July 1985

34 Article 3(2) of the Decree of 10 July 1985

35 Article 3(3) of the Decree of 10 July 1985.

36 Article 4 of the Decree of 10 July 1985.

37 Article 5 of the Decree of 10 July 1985.

38 See the Decree of 4 July 1986 on the determination of the levy on producers and purchasers of milk who have exceeded their reference quantities (JORF, 23. 7. 1986, p. 9098).

39 Pursuant to Article 2(2) o( Regulation No 857/84, Member States may vary the percentage weighting applied to the production of the reference year chosen, in accordance with the level of deliveries of certain categories of producers.

40 The national court's statement that the Decree of 10 July 1985 permitted an increase in production limited to lo/o for the marketing year 1985/86 seems to me to be incorrect.

41 The objective underlying such approval is set out in the ninth recital in the preamble to Directive 72/159/EEC which Slates that it is to ensure that public money allocated for the development of farms is indeed used for the benefits of farms which satisfy the required conditions... .

42 Sec the 11th recital in the preamble to Directive 72/159/EEC.

43 See the judgment of 27 September 1979 in Case 230/78 Eridania [1979] ECR 2749, at paragraph 22.