Report for the Hearing delivered in Case C-234/88
I — The relevant rules, the facts of the case and the preliminary question
The relevant rules
1. Under Article 9 of Regulation (EEC) No 2727/75 of the Council of 29 October 1975 on the common organization of the market in cereals (Official Journal 1975, L 281, p. 1) a carryover payment may be granted in respect of stocks remaining at the end of the marketing year of rye harvested in the Community. Before 15 March of each year the Council is to decide whether the carryover payments should be granted. The Commission is authorized to adopt the detailed rules for the application of Article 9, in accordance with the management committee procedure.
2. According to the preamble to Commission Regulation (EEC) No 2124/85 of 26 July 1985 on precautionary measures in the cereals sector other than durum wheat (Official Journal 1985, L 198, p. 31), the purpose of the carryover payment is to prevent massive inflows to intervention at the end of the marketing year.
3. Under the power granted to it by Regulation No 2727/75, the Commission adopted Regulation (EEC) No 1821/81 of 2 July 1981 laying down the conditions for granting carryover payments for certain cereals in stock at the end of the marketing year.
4. The first recital in the preamble to the regulation states that to simplify administration, in particular as regards supervision, the carryover payment should be granted at the trade or processing stage and, in the case of rye, supervision requirements are such that the payment should be made only to the milling industry.
5. The third recital in the preamble to the regulation states that, on account of the connection between the arrangements for intervention and those for carryover payments, the carryover payments should be granted only if the cereals offered comply with the quality requirements for intervention.
6. Lastly, the ninth recital in the preamble to the regulation states as follows:
7. Article 1 of the regulation gives effect to the requirements set out in the first recital and provides as follows:
8. As regards the quality requirement referred to in the third recital, the second subparagraph of Article 2(2) provides as follows: In respect of rye held by the milling industry at the end of the season, milling for human consumption shall be accepted as proof of sufficient quality.
9. As regards the obligation imposed on the Member States to carry out checks, Article 8 provides that ... the competent authority of each Member State shall carry out the necessary checks. It shall for this purpose adopt all the measures necessary to take account of the special conditions within its territory, particularly with regard to variation and movement of stocks and the time for which the stocks are subject to check... .
10. Lastly, Annex II to the regulation provides, as the minimum information to be supplied when applying for a carryover payment, for a declaration that, in the case of rye, it will be milled for human consumption.
11. With regard to the 1984/1985 marketing year, which under Article 3 of Regulation No 2727/75 commenced on 1 August and ended on 31 July, no agreement was reached by the Council on the intervention prices for cereals or the amount of the carryover payment to be granted.
12. In order to ensure continuity of the operation of the common organization of the market in cereals, the Commission adopted Regulation No 2124/85, as a precaution and without prejudice to the decisions to be taken by the Council.
13. By Article 4 of that regulation, the Commission authorized the Member States to grant a carryover payment infer alia for rye and fixed the method of calculating the payment. The Commission again stated that the milling of rye with a view to human consumption was to be taken as proof of sufficient quality and stated that proof of such milling was to be given by the end of 1985 at the latest. It also stated that the provisions of Regulation No 1821/81 applied to the carryover payment in question.
The facts of the case and the preliminary question
14. On 5 August 1985, Wilhelm-Lampe-Mühle, a German milling undertaking (hereinafter referred to as Lampe-Mühle), applied to the Bundesanstalt für landwirtschaftliche Marktordnung (Federal Office for the Organization of Agricultural Markets, hereinafter referred to as the Federal Office), the competent agency in the Federal Republic of Germany, for a carryover payment in respect of 320.08 tonnes of bread rye owned by it on 31 July 1985 and stored in its warehouse on that date. After lodging its application, Lampe-Mühle sold the rye in question to seven other milling undertakings, which carried out the milling. No attempt was made to conceal these facts; indeed, the declaration of milling which must be produced by the applicant for payment bore the name of the milling undertaking by which the rye was milled.
15. By decision of 7 November 1985, the Federal Office refused to grant the payment applied for; in its opinion, the relevant Community rules required, for supervision purposes, that the undertaking applying for a carryover payment should itself mill the quantities of rye in respect of which an application had been made.
16. After its application was rejected, Lampe-Mühle brought proceedings before the Verwaltungsgericht Frankfurt am Main, which stated first that the Hessische Verwaltungsgerichtshof (Higher Administrative Court, Hessen) had decided, by judgment of 30 May 1983, that Article 1(b) of Commission Regulation (EEC) No 1554/73 of 7 June 1973 laying down the conditions for granting carryover payments for stocks of rye remaining at the end of the 1972/73 marketing year required that the milling undertaking receiving the carryover payment should itself mill the rye.
17. The provision in question read as follows :
18. Considering that the terms of Article 1(b) of Regulation No 1821/81 did not clearly impose on the undertaking an obligation to mill the rye in respect of which it had applied for a carryover payment, the Verwaltungsgericht, by order of 8 August 1988, stayed the proceedings and referred to the Court the following question for a preliminary ruling:
19. The order was lodged at the Court Registry on 16 August 1988.
II — Written procedure
1. In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the European Communities, written observations were submitted, on 27 October 1988, by the Commission of the European Communities, represented by Bernhard Jansen, a Member of its Legal Department, acting as Agent, on 3 November 1988, by Lampe-Mühle, plaintiff in the main proceedings, represented by Messrs Modest and Others, Rechtsanwälte, Hamburg, and on 8 November 1988 by the Bundesanstalt für landwirtschaftliche Marktordnung, defendant in the main proceedings, represented by Barbara Heymann, acting as Agent.
2. Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided on 6 July 1989 to assign the case to the Fourth Chamber pursuant to Article 95(1) of the Rules of Procedure and to open the oral procedure without any preparatory inquiry.
Written observations submitted to the Court
3. Lampe-Mühle states that it is not contested that the rye in respect of which it claims a carryover payment was harvested in the Community, was owned by it, was stored in its warehouse on 31 July 1985 and was milled, by other milling undertakings, for human consumption.
4. Article 7 of Regulation No 2727/75, as amended, provides that intervention agencies may buy in cereals only between 1 August or 1 October and 31 May of each marketing year, in order to encourage traders, in a market with surplus production such as the Community market, to look for outlets. Article 9 of Regulation No 2727/75 introduced a carryover payment for cereals in stock at the end of the marketing year, in order to facilitate the transition between two marketing years.
5. Lampe-Mühle states that according to the recitals in the preamble to Regulation No 1821/81 the carryover payments should be granted only if the cereals comply with the quality requirements for intervention, and the milling of rye for human consumption is proof of sufficient quality and is therefore simply a criterion of quality.
6. According to Lampe-Mühle, it does not follow from Article 1(b) of Regulation No 1821/81 or from any other provision of that regulation that an undertaking applying for a carryover payment must itself mill the rye. Although the category of undertakings entitled to the carryover payment is limited under Article 1(b) to milling undertakings, this is solely because of supervision requirements and does not require any other interpretation of the provision in question.
7. Lampe-Mühle states that the milling declaration submitted by it under the German rules indicates at the top left-hand side the name and address of the applicant and at the bottom the signature and stamp of the undertaking which carried out the milling. If it had had the rye milled on its behalf by another undertaking but had remained the owner of the rye, the declaration in question would have been identical to the one which was submitted.
8. Lampe-Mühle concludes that in the three situations which might have arisen in this case, namely where the applicant for the payment in question remains owner of the rye and itself carries out the milling, where the applicant has the rye milled on its behalf by another undertaking but remains owner of the rye and where the undertaking sells the rye to a milling undertaking which carries out the milling, it is always the undertaking applying for payment which must produce proof that the rye was milled for human consumption.
9. Proof of milling is the means of proving that the quality of the rye is sufficient and is the decisive factor under Article 4(3) of Commission Regulation No 2124/85 for granting the payment applied for. It is for the national court to check whether the rye was actually milled.
10. Article 1 of Regulation No 1821/81 therefore refers solely to the ownership of the rye on 31 July, at the end of the marketing year, and not to ownership at the time when the rye is milled.
11. If the Court were to consider that the provision in question could be interpreted in two different ways, Lampe-Mühle claims that any interpretation other than that which it has put forward would constitute discrimination in favour of undertakings applying for a carryover payment for common wheat or maize and would thus infringe Article 40(3) of the Treaty. It is clear that, so far as common wheat and maize are concerned, it is solely ownership on 31 July of the marketing year that is relevant.
12. To treat rye differently would not be justified, since the milling of rye for human consumption is only a simpler way of proving its quality.
13. Lampe-Mühler therefore concludes that under the Community rules it is sufficient that the rye was milled by an undertaking other than that which applied for payment, to which it was sold by the undertaking applying for a carryover payment.
14. The Federal Office, defendant in the main proceedings, claims that Lampe-Mühle, by not itself milling the rye, failed to satisfy the conditions laid down by Regulation No 1821/81.
15. The Federal Office contends that it is impossible to ascertain from the provisions of Regulation No 1821/81 alone whether the rye must be milled by the undertaking which applied for the payment in question. Those provisions must therefore be interpreted by reference to the objectives which they are designed to attain. However, the fact that Article 1(b) of Regulation No 1821/81 is drafted in such a way as to require that the rye should be milled before referring to the ownership of the stocks of rye is an indication that the milling must be carried out by the undertaking which applies for payment.
16. The Federal Office refers to the first and ninth recitals in the preamble to the regulation and concludes that supervision is of critical importance as regards the granting of the carryover payment. That is why, in the case of rye, the persons entitled to the payment are restricted by Regulation No 1821/81 to milling undertakings alone. This need for supervision is expressed in Article 8(1) of the same regulation, which expressly confers powers on the national authorities.
17. Under Regulation No 1821/81, the supervision in question relates to two main points: the precise determination of the stocks of rye which qualify for the payment and confirmation that the rye is of sufficient quality.
18. In view of these supervision requirements, the German rules adopted pursuant to Article 8(1) of Regulation No 1821/81 created a system of supervision centred on the person or undertaking entitled to the payment in question.
19. Thus the rules in question provide inter alia that in its application for payment the applicant undertaking must declare that the rye will be milled by me/us for human consumption. By submitting such an application, an undertaking therefore agrees itself to mill the rye.
20. The Federal Office also contends that the German rules impose obligations solely on the undertaking applying for the payment in question and not on persons to whom the applicant may have sold the rye. Such persons are not bound to keep the accounts required or make the returns provided for. The records which they are required to keep under commercial or fiscal law cannot supply the specific information which is essential in this case.
21. The interpretation put forward by Lampe-Mühle would vastly extend the category of persons who would have to be subject to supervision and would thus be contrary to the need to simplify administration and supervision. Lastly, there would in principle be no guarantee that the rye sold would actually be milled. Even a contractual obligation to do so would not be an adequate guarantee.
22. The milling of the rye is not merely proof of its quality but is above all a condition for granting the carryover payment in question.
23. The Federal Office therefore concludes that the rye for which a carryover payment is requested must not only be owned by the applicant undertaking at the end of the marketing year but must also be milled by that undertaking.
24. The Commission states that the rule laid down in Article 1(b) of Regulation No 1821/81 is designed to ensure that the carryover payment in question is granted for stocks of rye intended for human consumption. Proof of milling is accepted as proof that the rye was for human consumption. This less stringent rule on the proof to be provided must not, however, facilitate fraud; for that reason, the category of persons entitled to the payment was restricted by Regulation No 1821/81 to milling undertakings.
25. Article 1(b) must therefore be interpreted on the basis of this supervision requirement in accordance with the judgments of the Court, which has stated that the interpretation of rules on agriculture must also take account of supervision requirements (judgment °f 12 December 1985 in Case 276/84 Metelmann v Hauptzollamt Hamburg-Jonas [1985] ECR 4057).
26. The Commission recognizes that the words owned by them on the above date in Article 1(b) of Regulation No 1821/81 refer to 31 July, the date cited in Article 1(a), and not as might be thought from the German version of Article 1(b), to the date on which the rye is milled.
27. The Commission states that although the rye need not, at the time of milling, still be owned by the milling undertaking which applied for the payment, it must at least be milled by that undertaking. Otherwise, the rule that milling undertakings alone are entitled to the carryover payment would have no meaning and would even be discriminatory.
28. According to the Commission this is the interpretation dictated by supervision requirements, since it is not reasonably possible to check that a quantity of rye milled by one undertaking is the same consignment of rye which, on 31 July was in the stocks of another undertaking; a fortiori, that must be the case where the original quantity of rye is milled by a number of other undertakings.
29. The Commission therefore concludes that by reason of supervision requirements it must at all times be possible to check that the rye in respect of which a carryover payment is applied for is in the stocks of the undertaking which applied for the payment in question, from the end of the marketing year until milling; consequently, the rye must be milled by the undertaking which applied for the payment.
1 Language of the case: German.