Opinion of Mr Advocate General Van Gerven

Mr President,

Members of the Court,

1. By Decision 89/627/EEC of 15 November 1989 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1987 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund, the Commission among other things charged expenditure of FF 10569874 to the French Republic. That amount corresponds to the additional levies applicable to the quantities of milk collected during the third period of application of the levy (1986/1987) and considered to exceed (by 5192 tonnes) the guaranteed total quantity set for deliveries by Article 5c(3) of Council Regulation (EEC) No 804/68.

The principal submission

2. In order to understand the principal submission, it should be borne in mind that Regulation (EEC) No 856/84 imposed an additional levy on quantities of milk delivered or sold in excess of a determined reference quantity. The levy is applicable whatever method of marketing production is used: delivery to a purchaser (dairy) or direct sale for consumption. There is, however, a clear distinction depending on the method chosen. Thus a producer who, during the reference period, marketed his production simultaneously by both methods has two individual reference quantities, one for deliveries and the other for direct sales.

3. Initially, the levy system made no provision for transferring reference quantities from one sector of activity to another according to the producers' marketing requirements. It catered only for producers who cease, totally or partially, either their direct sales or their deliveries. Article 4(5) of Commission Regulation (EEC) No 1371/84, applicable during the period covered by the contested decision, provides that:

4. In the light of the fluctuations in the relative proportions of the two commercial activities and in order to enable producers with two reference quantities to adapt to certain specific marketing requirements (see the fifth recital in the preamble to Regulation (EEC) No 590/85), the Council inserted in Regulation No 857/84 a provision enabling the producers concerned to transfer reference quantities from one sector of activity to another. The relevant provision is the new Article 6a, which provides that:

5. The parties interpret Article 6a of Regulation No 857/84 quite differently. They agree, however, on a number of points.

6. This dispute arises from the examination by European Agricultural Guidance and Guarantee Fund (hereafter EAGGF) inspectors of 72 files of transfers authorized by the French authorities under Article 6a of Regulation No 857/84. The inspectors found that in 29 cases the producers had definitively ceased direct sales. The Agent for the Commission stated at the hearing that that finding was based on the requests for transfer themselves, since they referred to the definitive cessation of direct sales activity, at times from the first year of the levy system. It follows — and the French Government has not disputed this — that the transfers granted to those 29 producers were not in compliance with the rules.

7. However, that is not the approach which the Commission has chosen to take. On the basis of information obtained from the French authorities, it found that, out of a net total quantity of 72100 tonnes transferred under Article 6a, 28540 tonnes (39%) related to producers who had transferred the greatest possible quantity from direct sales to deliveries. The proportion of those transfers to total transfers granted during the 1986/1987 marketing year (39%) was the same as the proportion of the files in which the EAGGF inspectors had found that direct sales activities had definitively ceased to all the files which they had examined (40%).

8. I agree with the French Government that that interpretation by the Commission of Article 6a of Regulation No 857/84 is not correct. That article is intended to grant some flexibility to those producers with two reference quantities who, although they may maintain the level of their milk production, must, in the words of the provision, adapt to changes in their marketing requirements. Furthermore, the increase of one of the two reference quantities shall be subject to a reduction of the same amount in the other reference quantity during the same twelvemonth period. The terms in which the first paragraph of Article 6a is couched accordingly indicate the two fundamental conditions governing transfers under that article. There must be a producer who is temporarily experiencing difficulties in marketing his production by direct sales, but who intends to take up that activity again, at the same level as before the request for transfer, once those difficulties have disappeared. Furthermore, the transfer cannot lead to an increase in the total reference quantity of the individual producer concerned. In other words, the producer is authorized not to increase but to maintain the volume of production which he can market levy free.

9. In my view, the condition for which the Commission argues, namely that the producer must not only have two reference quantities but also actually carry out the two marketing activities during the same twelvemonth period, is not inherent either in the terms or in the purpose of Article 6a of Regulation No 857/84. The French Government claims, correctly, that the effects of a change in marketing requirements may extend over several marketing years. As an example of this, it posits a producer who has obtained, along with a reference quantity for deliveries, a quantity for direct sales because of its sales to a public body (local authority, hospital, school and so on) under a contract for which it had tendered. The producer may involuntarily lose that contract for several years, while retaining the hope — and the necessary material infrastructure for when the time comes — of regaining the contract in a subsequent tender.

10. A consequence of the interpretation advocated by the Commission would be that a producer in a situation of the kind described above would no longer be able to benefit from a transfer under Article 6a of Regulation No 857/84 if within twelve months he had not found another outlet for the milk products to be sold for direct consumption. The definitive cessation system provided for by Article 5 of Regulation No 1546/88 would therefore have to be applied to him. His reference quantity for direct sales would accordingly be abolished so that, in view of the dissuasive nature of the levy, he would be deprived of the fruits of his labour and of his investments — in the words used by the Court in Wachauf v Bundesamt fiir Ernährung und Forstwirtschaft — in carrying on not only direct sales of his milk but also the business of milk production itself to the extent of the direct sales reference quantity, although he did not at any time intend to suspend or reduce such production.

The alternative submission

11. I will restrict myself to a brief consideration of the alternative submission, given that it is relevant only if, contrary to my proposal, the principal submission is not accepted by the Court.

Conclusion

12. I propose that the Court annul Commission Decision 89/627/EEC of 15 November 1989 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1987 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund, in so far as it imposes on France an additional levy for 1986/1987 of FF 10569874 on account of the refusal to accept transfers amounting to 28540 tonnes under Article 6a of Council Regulation (EEC) No 857/84. I also propose that the Court order the Commission to pay the costs.

1 Original language: French.

2 OJ L 359, p. 23.

3 Regulation of 27 June 1968 on the common organization of the market in milk and milk product; (OJ, English Special Edition 1968 (I), p. 176). Article 5c was inserted by Council Regulation (EEC) No 856/84 of 31 March 1984 amending Regulation (EEC) No 804/68 (OJ L 90, p. 10).

4 Regulation of 31 March 1984 adopting ¡jenerał rules for the application of the levy referred to in Article 5c of Regulation (EEC) No 804/68 in the milk and milk products senor (OJ L 90, p. 13). Article 6a was inserted by Council Regulation (EEC) No 590/85 of 26 February 1985 amending Regulation (EEC) No 857/84 (OJ L 68, p. 1).

5 Regulation of 16 May 1984 laying down detailed rules for the application of the additional levy referred to in Article 5c of Regulation (EEC) No 804/68 (OJ L 132, p. 11).

6 Since then, the provisions of Regulation No 1371/84 have been consolidated by Commission Regulation (EEC) No 1546/88 of 3 June 1988 (OJ L 139, p. 12). The provision corresponding to Article 4(5) of Regulation No 1371/84 is Article 5(5).

7 Anicie 4(6) of Regulation No 1371/84 (now Article 5(6) of Regulation No 1546/88) makes similar provision for the case — which is not relevant here — of producers who, having obtained a reference quantity for deliveries, cease deliveries to a purchaser.

8 It is true thai, in its rejoinder, the Commission raised a question concerning the lawfulness of a limitation in transferable quantities. That question, however, falls outside the scope of these proceedings.

9 Section 4.3.11.4 of the Summary Report concerning the results of inspections for the clearance of EAGGF, Guarantee Section, accounts for the 1987 financial year (Doc VI/200/89 — FR — Add 2 Rev 1(1) of 5 October 1989) (hereinafter Summary Report). That section of the Summary Report is attached as Annex I to the Commission's defence. The finding is in the sixth paragraph of section 4.3.11.4(ii).

10 See the seventh paragraph of section 4.3.11.4(ii) of the Summary Report. The relevant criterion — producers who have transferred the greatest possible quantity from the quantities for direct sales — is explained by the limit imposed in France on the transferable quantity of 97% (99% in mounuin areas) of the basic reference quantity (see paragraph 5).

11 See the seventh paragraph of section 4.3.11.4(ii) of the Summary Report.

12 See the third paragraph of section 4.3.11.4(ii) of the Summary Report.

13 The fifth recital in the preamble to Regulation No 590/85 states that fluctuations of the respective portions of their two economic activities must be taken into account.

14 Cast 5/88 [1989] ECR 2609. The words quoted arc lake from paragraph 19 of lhe judgment.