Report for the Hearing in Case C-61/90
I — Legal background and background to the dispute
1. Legal background
As regards the EEC Treaty, the parties to the dispute refer to the provisions of Article 40 on the common organization of the markets in agriculture, of Articles 92 and 93 on State aids and of Article 5 on the duty of Member States to cooperate with the Community institutions.
The dispute falls within the framework of the application 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).
Particular reference is made for the purposes of the proceedings to the provisions of Articles 3, 7, 8, 10, 11, 16 and 24 of the regulation in the version applicable during the period covered by the dispute (1982 to 1986).
Article 3 of Regulation No 2727/75 was amended by:
Article 7 of Regulation No 2727/75 was amended by Regulations Nos 1143/76 and 1579/86, referred to above.
Article 8 of Regulation No 2727/75 was amended by Regulations Nos 1143/76, 1151/77 and 1018/84, referred to above, by Council Regulation (EEC) No 3793/85 of 20 December 1985 (Official Journal 1985 L 367, p. 19) and by Regulation No 1579/86, referred to above.
Article 10 of Regulation No 2727/75 was amended by Regulations Nos 1143/76, 1151/77 and 1451/82, referred to above.
Article 11 of Regulation No 2727/75 was amended by Regulation No 1870/80, referred to above.
Article 16 of Regulation No 2727/75 was amended by Council Regulation No 1187/81 of 28 April 1981 (Official Journal 1981 L 121, p. 1).
The original version of Article 24 of Regulation No 2727/75 was not amended.
2. Background to the dispute
(a). By telex message of 23 December 1985, the Commission, with reference to complaints sent to it by private traders, asked the Hellenic Republic for information on:
(b). In its reply dated 14 March 1986, the Hellenic Republic denied the existence of the programme contracts referred to by the Commission.
(c). A formal notice dated 2 September 1987 was sent to the Hellenic Republic. On the basis of documents which, for the most part, had been sent in by complainants, the Commission claimed that the Greek State had in various ways helped KYDEP to export common and durum wheat and had thus disregarded the provisions of the aforesaid Regulation No 2727/75 and of Article 93(3) of the Treaty with regard to the notification of State aids.
(d). The Hellenic Republic, through its permanent representative with the European Communities, replied to the formal notice by a letter of 13 January 1988.
(e). On the basis of the first paragraph of Article 169 of the Treaty the Commission delivered a reasoned opinion dated 5 December 1988 reiterating, for the period 1982 to 1986, the complaints mentioned in the formal notice alleging disregard of the provisions of the said Regulation No 2727/75 and of Article 93(3) of the Treaty.
(f). As the reasoned opinion had no effect and remained unanswered, the Commission brought this action, which was registered at the Court on 12 March 1990, for a declaration of a failure to fulfil obligations.
II — Forms of order sought by the parties
The Commission claims that the Court should:
the Hellenic Republic has failed to fulfil its obligations under Community law, in particular Regulation (EEC) No 2727/75 on the common organization of the market in cereals, the relevant implementing regulations and Articles 93 and 5 of the EEC Treaty;
The Hellenic Republic contends that the Court should:
III — Summary of the submissions and arguments of the parties
Other proceedings before the Court in which KYDEP's operations have been called in question and their joinder with this action
The Commission refers to Cases C-35/88, C-32/89 and C-110/89 as well as to Case 281/87 concerning KYDEP's commercial activities and the financial links between KYDEP and the State.
According to the applicant, these proceedings have certain points in common with Case C-32/89 in which the Hellenic Republic claimed that Decision 88/630/EEC on the clearance of the accounts in respect of the expenditure for 1986 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (hereinafter referred to as the EAGGF) should be declared void. In that decision the EAGGF refused to accept certain expenditure as being chargeable to it in view of the existence of four programme contracts executed by KYDEP for.the purpose of exporting common and durum wheat.
The facts of that latter case on programme contracts are identical with those in this action. The Commission states that it nevertheless has an interest in bringing such an action on the basis of Article 169 of the Treaty (judgments in Joined Cases 15 and 16/76 France v Commission [1979] ECR 321 and in Case 240/86 Commission v Greece [1988] ECR 1835 at paragraphs 14 and 15).
The Commission takes the view that there are no grounds for joining these proceedings with the other cases calling KYDEP's operations in question as those other cases are, as far as some of them are concerned, res judicata.
The Hellenic Republic suggests that in view of the related nature of Cases C-35/88, C-32/89, C-110/89 and C-385/89 with this case the Court should order their joinder.
It states, moreover, that the solutions found in Joined Cases 15 and 16/76 and 240/86 cannot be transposed to this case.
The failure to fulfil obligations resulting from an intervention by the Greek authorities on the market in cereals
1. The facts in dispute
(a) The facts referred to by the Commission
The Commission's arguments are directed both to defining the facts to which the complaint relates and to rejecting the submission put forward by the Hellenic Republic in its defence to the effect that the application, as far as this complaint is concerned, is vague.
(a) The facts referred to by the Commission
— The programme contracts
1. By the expression programme contracts the Commission refers, in general, to the collaboration and the formal (and informal) agreements between the Greek authorities (Ministry of Economic Affairs, the office for promoting exports and, occasionally, the Ministry of Agriculture), the representatives of the Greek millers and KYDEP, under which KYDEP undertakes to sell its stocks of common and durum wheat to the millers on privileged conditions, financed by the Greek State, on condition that the flour, meal and manufactured pasta products are exported. Such contracts are called programme contracts because they constitute a kind of programme for the sale of KYDEP's cereals stocks, in which provision is made for the quantities of cereals to be marketed each year, the conditions and method of financing and the like.
2. According to the Commission, programme contracts were concluded between the State, the millers and KYDEP from 1982 to 1986.
3. Because of the Greek authorities' refusal to cooperate, the applicant has not been able to put before the Court a copy of the programme contracts. However, their existence is proved:
4. These programme contracts are appropriate to the exercise of public authority by the State itself or to financial bodies acting on its instructions and for its abcount. It is, moreover, significant to note that, at the time these contracts were concluded, account was taken of factors, such as the level of employment among mill and dock workers in Greece, which had no bearing on KYDEP's commercial interests (see, on this point, KYDEP's memorandum of 16 April 1984).
5. Programme contracts similar to the previous programme contracts were also concluded for the processing of durum wheat to be exported as pasta products.
The Hellenic Republic challenges the substance of the allegations against it.
It should be noted, moreover, that if those contracts had materialized and if public funds had been transferred to KYDEP in connection with their execution, KYDEP would not have had a claim against the State amounting to DR 4344000000 (the actual existence of this debt is demonstrated by a document which the Commission produced in Case C-35/88).
Indeed, it is impossible to accept, in the absence of an actual payment of the sums of money in question by the State, that the contracts were performed and that a State aid was paid;
2. The disregard of the rules of the common organization of the markets
In support of its case, the Commission refers, on the one hand, to the general principles applicable to the common organization of the markets in the cereals sector and, on the other hand, to the exact provisions of the said Regulation No 2727/75 which were disregarded by the Hellenic Republic.
The Commission emphasizes that the complaints must be examined in the light of the provisions of the said Regulation No 2727/75 as amended during the period in question, which extends from 1982 to 1986.
Contrary to the defendant's contention, the provisions referred to were not substantially amended during that period (see in that connection the judgment in Case C-35/88 Commission v Greece, previously cited, and Mr Mischo's Opinion).
The Hellenic Republic claims that the Commission does not relate the facts in dispute to the specific provisions of the said Regulation No 2727/75.
There is no connection between those facts and the version of those articles mentioned by the applicant which were in force at the time.
Article 3, in the version in force until May 1986, prior to the said Regulation No 1579/86, specifies the dates of the marketing year.
Articles 7, 8, 10, 11 and 16 of Regulation No 2727/75 were the subject of a series of amendments and the provisions of those articles which are alleged to have been disregarded are not clearly apparent.
Article 8 is an enabling provision which does not lay clown specific rules.
The Commission's application, in so far as it relates to this allegation of failure to fulfil obligations, is as a result equally vague as regards the provisions of Community law which have, it is alleged, been infringed. The Commission itself acknowledges that an application must be drawn up in such a way as to make it possible to distinguish the complaints on which the applicant intends to rely. In this case that condition is obviously not met.
The failure to fulfil obligations as a result of the omission to notify aids
1. According to the Commission, it is apparent from the Court's consistent case-law that interest rebates or other preferential conditions for financing exports constitute State aids incompatible with the common market (judgments in Joined Cases 6 and 11/69 Commission v France [1969] ECR 523 and in Case 57/86 Greece v Commission [1988] ECR 2855).
2. The Hellenic Republic relies on the judgments in Case 74/76 Ianelli & Volpi v Aleroni [1977] ECR 557 at paragraphs 11 and 12 and in Case 290/83 Commission v France [1985] ECR 439 at paragraph 16, in contending that claims for a declaration that there has been such a failure to fulfil obligations are inadmissible. Only the specific procedure laid clown by Article 93(2) of the Treaty and not that of Article 169, is applicable when the compatibility of an aid with the common market is at issue.
The failure to fulfil obligations arising from the Hellenic Republic's lack of cooperation
1. The facts in dispute
According to the Commission, the Greek authorities:
The Hellenic Republic disputes the substance of the facts alleged against it.
Thus the Greek authorities replied, by a letter of 14 March 1986, to the Commission's telex message of 23 December 1985 requesting information on the programme contracts.
Furthermore, the Hellenic Republic never refused to co-operate or to supply information to the Community institutions. The Commission was able to make on-the-spot checks. As regards KYDEP in particular, it is a legal person under private law which the State cannot subject to control. The Commission, to which KYDEP has already sent its accounts, could use other legal methods provided by Community law to keep a check on KYDEP.
Finally it should be noted that there was a letter of 8 April 1985 from the Greek Minister for Agriculture to Lord Cockfield.
2. The failures to fulfil obligations
The Commission claims that the facts to which it refers constitute a failure to fulfil obligations under Article 24 of Regulation No 2727/75. That article, which was not amended during the period in question, imposes on Member States an obligation to communicate all information relating to the operation of the market in cereals.
These facts also constitute a failure to comply with the provisions of Article 5 of the Treaty (judgment in Case C-35/88, previously cited, at paragraph 38 et seq.).
The Hellenic Republic largely restricts itself to challenging the substance of the facts in dispute. With regard to Article 24 of the said Regulation No 2727/75, it does, however, claim that the procedure of Article 26, to which Article 24 refers, was not followed.
IV — Answers to questions put by the Court
A — Questions to the Commission
First question
The Commission was asked to indicate, and to specify the purpose of, the various programme contracts which it claims were concluded and performed during the period 1982 to 1986.
Answer
1. 1982
In the Commission's opinion the following programme contracts were concluded and executed during the years 1982 to 1986.
1. 1982
1.1. A contract was signed by KYDEP and the millers' federation on the instructions and for the account of the Ministry of Economic Affairs concerning the milling of 500 tonnes of common wheat with a requirement to export the resultant product within eight months from receipt of the raw materials. This contract represented a total charge to the Hellenic Republic of DR 1500000000.
1.2. Other contracts must have been concluded between KYDEP and the Hellenic Republic and subsequently performed. Annex XII to the application deals with a sum owed to KYDEP by the Hellenic Republic in respect of programme contracts concluded with the Ministry of Economic Affairs amounting to DR 4208976152. The Commission is not aware of the exact number of these contracts and does not know whether they are related to common or durum wheat.
2. 1983
One or more contracts must have been concluded between KYDEP and the Hellenic Republic and subsequently performed. Annex XII to the application deals with a sum owed to KYDEP by the Hellenic Republic in respect of programme contracts concluded with the Ministry of Economic Affairs amounting to DR 139575642. The Commission does not know whether these contracts related to common or durum wheat.
3. 1984
3.1. A contract was signed by KYDEP and the Hellenic Republic for the milling of 400000 or 435000 tonnes of common wheat. This contract represented a total charge to the Hellenic Republic of DR 710 million.
3.2. A contract must also have been signed by KYDEP and the millers' federation in August 1984, as specified in Annex XII to the application. The Commission does not know cither the exact number of tonnes, the type of cereals concerned or the total cost to the Hellenic Republic of this contract.
3.3. At two points in Annex XII to the application it is specified that KYDEP's deficit arising from the milling of cereals amounts to DR 1555996988 for 1984/1985. It is not clear whether this deficit comes from the contracts mentioned in paragraphs 3.1 and 3.2 above or from other contracts.
4. 1985
4.1. A contract was signed by KYDEP and the Ministry of Economic Affairs relating to the export of 40000 tonnes of meal, the equivalent of 78000 tonnes of durum wheat (Annex IV to the application).
4.2. A contract was signed by KYDEP and the Ministry of Economic Affairs relating to the export of 8900 tonnes of pasta products, the equivalent of 15000 tonnes of durum wheat (Annex IV to the application). The manufacturers of pasta products bought these quantities from KYDEP on the terms of Memorandum No 2 of 31 January 1984 from the Governor of the Bank of Greece (Annex XIII to the application).
5. 1986
One or more contracts must have been concluded between KYDEP and the Ministry of Economic Affairs and subsequently performed. Annex XII to the application specifies that the administrative deficit resulting from the milling of cereals from the 1986 harvest amounts to DR 1084620220.
The Commission emphasizes that in its judgment in Case C-32/89 Greece v Commission [1991] ECR I-1321 the Court has already decided as to the existence of the four contracts referred to in paragraphs 1.1, 3.1, 4.1 and 4.2 above. Moreover, as the Court also stated in that judgment, the Hellenic Republic has not put forward any evidence to the effect that relations between KYDEP and the Greek authorities, as they appear from the actions described in the Commission's application, changed during the period 1982 to 1986 or before proceedings were brought in 1990. It must therefore be accepted that during the period in question the Greek authorities had full control of the transactions carried out by KYDEP and covered its deficits.
Second question
The Commission was asked to show, with regard to the exports of flour allegedly carried out by KYDEP itself with the aid of subsidies granted by the State:
Answer
Answer
Referring to the answers which it gave to the first question, the Commission states that KYDEP itself exported flour with the aid of subsidies granted by the State. There was certainly more than one programme contract. The Commission does not know the exact number because of the very complicated arrangements used by KYDEP for the milling and export of the cereals. For a description of the system, from KYDEP's point of view, the Commission refers to Annex XII to the application. Taking as its sole criterion the deficit shown for each financial year in KYDEP's balance-sheets, the Commission concludes that seven contracts in all were concluded and performed by KYDEP itself during the years 1982 to 1986, according to the description given above.
As regards the documents making it possible to prove that KYDEP performed the contracts mentioned above, the Commission refers to the answers given to the first question.
Third question
The Commission was asked to specify the aids of which, in its view, it should have been informed in pursuance of the provisions of Article 93(3) of the EEC Treaty, stating in particular who received these aids (KYDEP, the wheat producers, exporters or others).
1. The main characteristic of KYDEP's working during the period in question was that its deficits were systematically covered by the State budget (see in this connection Cases C-35/88, C-32/89 and C-110/89). During the period concerned KYDEP operated on the market in cereals on the instructions and for the account of the Hellenic Republic (Annexes IV, X and XII to the application). The Hellenic Republic should have provided information on the ministerial decrees under which the State covered KYDEP's deficits. The Commission adds that there is no doubt, moreover, that the coverage of KYDEP's deficits by the State budget constituted an aid granted by a State within the meaning of Article 92(1) of the Treaty and ought to have been reported in pursuance of Article 93(3) (judgment in Case C-35/88 Commission v Greece [1990] ECR I-3125 at paragraph 35).
B — Questions to the Hellenic Republic
First question
The Hellenic Republic was asked to state whether the clauses of the contracts produced by the Commission in support of its application (Annexes IIa and lib to the application) and more particularly the provisions of Articles 4, 6 and 10 of those contracts corresponded to the usual clauses of the contracts concluded between KYDEP and the exporters, and if not what were the reasons justifying those clauses.
Answer
The Hellenic Republic states that it passed the questions on to KYDEP, which is a legal person under private law and did not reply. It is therefore impossible for the Hellenic Republic, on the basis of the documents before the Court, to form any opinion as to whether or not the clauses in the contracts are customary.
Second question
The Hellenic Republic was asked to produce to the Court the following documents:
Answer
The Hellenic Republic states that these documents are not in its file on the case. They were requested from the departments responsible, which did not, however, provide them within the prescribed period.
1 Language of the case: Greek.