Report for the Hearing in Case C-314/89

I — Facts and procedure

1. The relevant Community provisions

2. The main proceedings

The plaintiff in the main proceedings, Siegfried Rauh, runs a small farm which he took over on 1 January 1985 as future heir (Hoferbe) under a contract of usufruct with his parents.

As from the time he took over the farm in 1985 Mr Rauh has sought to obtain the grant of a reference quantity for milk production exempt from the additional levy. The quantity he requested was refused on the grounds that he could show no milk production for his farm as a result of a non-marketing undertaking applying during the 1983 reference year and no hardship clause was envisaged for cases where milk production was resumed after the end of the non-marketing period.

It appears from the documents in the case that the non-marketing undertaking had been given by Mr Rauh's parents, who, in return for payment of a non-marketing premium, had undertaken not to market milk or milk products during a period of five years ending on 21 December 1984.

Following the judgments of the Court of Justice of 28 April 1988 in Case 120/86 Mulder v Minister van Landbouw en Visserij [1988] ECR 2321 and in Case 170/86 Von Deelzen v Hauptzollamt Hamburg-Jonas [1988] ECR 2355, the aforesaid Regulation No 764/89 recognized the right of producers whose non-marketing period expired after 31 December 1983 (that is, after the reference year adopted by the Federal Republic of Germany) to be granted a special reference quantity. Mr Rauh thereupon again requested a reference quantity. That request was rejected by the competent German authority on the grounds that Mr Rauh had taken over the holding after the expiry of the non-marketing period and that he could not therefore derive any right under Regulation No 764/89.

The dispute before the Finanzgericht München relates to the German authorities' refusal to grant Mr Rauh a special reference quantity exempt from the additional levy on milk pursuant to Regulation No 764/89.

The Finanzgericht München considered that its decision depended on the interpretation and on the validity of provisions of the Community rules on the additional levy on milk and therefore stayed proceedings and referred the following questions to the Court of Justice for a preliminary ruling under Article 177 of the EEC Treaty:

In the grounds for its order for reference, the Finanzgericht München states that in its view Article 3a(1) of Regulation No 857/84, as amended by Regulation No 764/89, also allows for the grant of a special reference quantity to an heir who does not take over the farm until the expiry of the reconversion or non-marketing period. In the event that interpretation of the provision does not allow of such a grant, the Finanzgericht München has doubts as to the compatibility of that provision with the principle of the protection of legitimate expectations, the guaranteed right of ownership and the principle of equality.

3. Procedure before the Court

The order for reference was received at the Court's Registry on 24 October 1989.

Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted by: Mr Rauh, represented by G. Gorewoda and H. Heinrich, Rechtsanwälte of Munich, the Council of the European Communities, represented by A. Brautigam, Principal Administrator in the Council's Legal Department, acting as Agent, and the Commission of the European Communities, represented by its Legal Adviser, D. Booß, and K.-D. Borchardt, a member of the Commission's Legal Department, acting as Agents.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided on 4 July 1990, pursuant to Article 95 of the Rules of Procedure, to assign the case to the Fifth Chamber and to open the oral procedure without any preparatory inquiry.

II — Written observations

1. Question 1

2. Question 2

Legitimate expectations cannot, in the Commission's view, be acquired after the expiry of the non-marketing period, even by way of exclusive succession, since there is no longer a case of a trader who gave up marketing and thus the very basis for the formation of legitimate expectations is lacking.

The answer depends on the legal nature of the possibility of resuming milk production after the expiry of the non-marketing period. A distinction must here be drawn between recognizing guaranteed legal situations as vested rights and, on a lower level, the creation of a potentiality which is not consolidated into a guaranteed legal situation until the person concerned takes steps in order to realize the possibilities open to him.

The legitimate expectations of a farmer who gave a non-marketing undertaking goes no further than the possibility of resuming milk production, and is subject to the condition that he can show that he intends and is indeed able to produce on his holding all of the reference quantity applied for. There is not yet any question of the immediate vesting of a right; a farmer who has given a non-marketing undertaking is simply in a position capable in principle of leading to the acquisition of a guaranteed legal position but before such a position can materialize the person concerned must still take appropriate economic steps. It is only legitimate expectations in that sense, therefore, which may be taken into account for transfer by way of inheritance or by a similar transaction.

In the Commission's view the Finanzgericht failed to appreciate the limits on the protection of legitimate expectations by holding that the legitimate expectation of a farmer who had given a non-marketing undertaking extended to the resumption of milk production by his successor. Such an expectation meriting protection relates exclusively to the possibility of resumption of production by the producer who himself acquired such an expectation on giving the non-marketing undertaking. The further expectancy that the same possibility will be open to his successor qualifies for legal protection only when steps are taken which lead to the materialization of the existing expectation by producing legal situations capable of being transferred to the successor.

Such a case is not comparable, in the Commission's view, with succession or transfer by a similar transaction before the expiry of the non-marketing period. In such a case the right of the successor to the grant of a special reference quantity rests not on the expectation of the transferor but it is the person concerned himself who is in the position of a trader who has ceased marketing and may, therefore, seek the grant of a special reference quantity in reliance on a right vested in him himself.

As regards the right of property ownership, the Commission points out that the legal situation challenged by the plaintiff does not deny him his right of property ownership nor does it restrict his capacity to enjoy it in a manner going to the essence of the property right.

Moreover it is only legal situations actually in existence on the date of succession or of the act of transfer which, as certain property rights, can be transferred to the successor by way of inheritance or a similar transaction. The possibility, related to the status of a trader who has ceased marketing, of requesting a special reference quantity does not become a guaranteed and transferable property right until the person entitled, that is to say the trader who ceased marketing, takes appropriate steps which in this context take the form of proof of the intention and the real possibility of resuming milk production.

Therefore it is only where the expectation of the possibility of resuming milk production is given concrete form, whether by an application for a special reference quantity or by the installation of the equipment for resuming milk production, that a legal situation can arise which is transferable to the successor by way of inheritance or by a similar transaction.

On the other hand if no steps are taken to give concrete form to the wish to resume milk production, the existing situation regarding legitimate expectations remains a mere possibility of acquiring a special reference quantity which does not enjoy any particular protection from the point of view of transfer of property by way of succession.

As regards, finally, the principle of equality, the Commission denies that the different treatment of heirs according to whether succession takes place before or after the expiry of the non-marketing period and before or after the grant of a special reference quantity constitutes discrimination.

Whereas heirs who succeed to the testator during the non-marketing period can claim an individual right to the grant of a special reference quantity, heirs to whom the holding was transferred only after the expiry of the non-marketing period take over the holding in the legal state it was in at the time of transfer. Unlike the former, the latter take over the holding without being subject to any non-marketing obligation whatsoever and they are, therefore, in theory in a similar position to young farmers who wish to start milk production. To recognize their right to the grant of a special reference quantity inherited from the testator would precisely lead to heirs being placed in an unjustifiably favourable position by comparison with the aforementioned young farmers.

In short, the Commission proposes the following answer to Question 2:

1 Language of the case: German.