Report for the Hearing delivered in Case 5/88

I — Facts and procedure

1. The Community provisions applicable

2. The German provisions implementing the Community rules

The Federal Republic of Germany made use of the power conferred by Article 4(l)(a) of Council Regulation No 857/84 to grant compensation to producers undertaking to discontinue milk production definitively by enacting the Gesetz über die Gewährung einer Vergütung für die Aufgabe der Milcherzeugung für den Markt (Law on compensation for the discontinuance of the production of milk for sale) of 17 July 1984 (Bundesgesetzblatt I, p. 942) and the Verordnung über die Gewährung einer Vergütung für die Aufgabe der Milcherzeugung für den Markt (Order on compensation for the discontinuance of the production of milk for sale) of 20 July 1984 (Bundesgesetzblatt I, p. 1023).

In order to be awarded compensation it is necessary, under Paragraph 3(1) of the implementing order, for the claimant to be a producer, within the meaning of Article 12(c) of Regulation No 857/84, and to undertake to discontinue milk production definitively within six months of the date on which compensation is awarded. Under Paragraph 3(2) of the implementing order a lessee of a holding within the meaning of Article 12(d) of Regulation No 857/84 must submit a written authorization from the lessor.

3. The dispute in the main proceedings

The main proceedings pending before the Verwaltungsgericht Frankfurt am Main are concerned with the question whether the Bundesamt für Ernährung und Forstwirtschaft is required to pay the farmer Hubert Wachauf compensation for definitive discontinuance of milk production under the Gesetz über die Gewährung einer Vergütung für die Aufgabe der Milcherzeugung für den Markt of 17 July 1984 and the implementing order of 20 July 1984 adopted pursuant thereto.

Mr Wachauf had leased a farm (land and buildings). The lease did not require him to engage in milk production. The elements normally required for milk production, that is to say, a herd of dairy cattle and the technical facilities for milk production, did not form part of the leased property.

The Bundesamt für Ernährung und Forstwirtschaft refuses to pay the compensation to Mr Wachauf because it takes the view that he must submit an authorization from the lessor under Paragraph 3(2) of the implementing order.

The Verwaltungsgericht has doubts as to whether the lessor's consent matters in this case. Since the lessor never himself engaged in milk production on the leased farm and the essential elements of a milk-production unit (dairy cows and so forth) had remained the property of the lessee, the lessor had possibly not let a milk-production holding within the meaning of Article 12(d) of Regulation No 857/84 but only an agricultural holding in which products other than milk could have been produced.

In the event that, regardless of that doubt, it must be assumed that the farm is a milk-production holding, the Verwaltungsgericht raises the question whether the surrender of the leased property constitutes a transfer having comparable legal effects, within the meaning of Article 5(3) of Regulation No 1371/84, with the legal result that upon surrender of the property the lessee's reference quantity is transferred to the lessor. A reversion to the lessor of the allocated reference quantity would appear justified only if the lessor had himself produced milk in the year in respect of which the reference quantity is determined so that he thus acquired a certain right of enjoyment. If, on the other hand, the lessor did not produce milk in the relevant reference year and did not otherwise contribute to the development of a milkproducing unit by the lessee, the transfer to the lessor of the reference quantity allocated to the lessee would deprive the lessee of the fruits of his labour. This would amount to unconstitutional expropriation without compensation.

In those circumstances, the Verwaltungsgericht Frankfurt am Main, by order of 17 December 1987, suspended the proceedings and submitted the following questions to the Court in accordance with Article 177 of the EEC Treaty:

4. Proceedings before the Court

The order for reference was registered at the Court on 8 January 1988.

In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the European Communities, written observations were submitted by the Bundesamt für Ernährung und Forstwirtschaft, represented by Dr Apelt, by the United Kingdom, represented by H. R. L. Purse, of the Treasury Solicitor's Department, and by the Commission of the European Communities, represented by its Legal Adviser, Peter Karpenstein.

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.

By decision of 7 December 1988 the Court assigned the case to the Third Chamber in accordance with Article 95 of the Rules of Procedure.

II — Written observations

1. The first question

The Bundesamt für Ernährung und Forstwirtschaft suggests that the first question should be answered in the affirmative. The United Kingdom and the Commission take a restrictive view in so far as they consider that the term in question, holding, covers only agricultural property which is suitable for milk production.

2. The second question

All the parties to the proceedings which have submitted observations are agreed that the second question should be answered in the affirmative.

1 Language of lhe case: German.