Opinion of Mr Advocate General Gulmann
Mr President,
Members of the Court,
1. The question referred to this Court for a preliminary ruling by the High Court of Justice, Queen's Bench Division, in this case stems from the rules on milk quotas introduced by the Community in 1984 in Council Regulations Nos 856/84 and 857/84.
The milk quota scheme and its implications when a tenancy comes to an end
2. There is no need to describe the rules in detail. They are familiar to the Court from the many cases to which they have given rise.
3. Not surprisingly the scheme has given rise to problems in the relationship between tenants and landlords of agricultural holdings. The Court has already had occasion to rule on such questions in a large number of cases. The Court has ruled inter alia on whether and if so to what extent a requirement can be inferred from Community law that, when a tenancy comes to an end, the landlord is obliged to give the tenant economic compensation in cases where the milk quota attaching to the property was allocated to the tenant but passes to the landlord at the end of the tenancy.
4. It is a key principle of the scheme that milk quotas run with the land. Article 7 (1) of Regulation No 857/84 thus provides that: Where an undertaking is sold, leased or transferred by inheritance, all or part of the corresponding reference quantity shall be transferred to the purchaser, tenant or heir according to procedures to be determined; the Court has held that that principle also applies in cases where a tenancy has come to an end. For the rest, the original rules in Regulation No 857/84 do not contain any specific provisions for the relationship between landlords and tenants when the tenancy comes to an end.
5. It has transpired in practice that the special rules laid down in Article 4 (1) may also be relevant to tenants. Under that provision, the Member States may, for the purposes of the restructuring of milk production, grant compensation to producers undertaking to discontinue milk production definitively. Under Article 4 (2), the reference quantities thus freed are, as necessary, to be added to the national reserve for allocation to other producers in certain special cases. There is no need to expand on the interest that a tenant whose lease is coming to an end may have in seeking compensation for definitively discontinuing milk production. It is equally unnecessary to explain that the landlord's interests must also be safeguarded in this connection. No specific rules are laid down in the applicable regulations as to how that conflict of interests is to be resolved. Just as it is left to the Member States themselves to decide whether actual compensation schemes should be introduced, the Member States have autonomy to lay down specific rules on the implementation of any such schemes.
6. On the basis of that review alone it can be concluded that the relevant Community rules do not entail any express obligation for the Member States to safeguard a tenant's economic interests in connection with milk quotas when his tenancy comes to an end. The specific rule in Article 7 (4) is certainly expressly directed to resolving the tenant's problems but it does not oblige the Member States to introduce the rules, which in any event are of limited scope rendering them unattractive in all cases where a tenancy comes to an end but the tenant does not wish to continue milk production on another undertaking. Moreover, the special compensation scheme under Article 4 (1) is optional for the Member States and, in any event, it is left to them to lay down any detailed implementing provisions.
7. The key question in this case is whether it may be possible to deduce from the relevant Community provisions or from the Community law principles for the protection of fundamental rights that Member States have an obligation to protect the economic interests of tenants, and, if so, to what extent and under what conditions.
The facts of the case and the national legislation
8. In 1962 the plaintiff in the main proceedings, Dennis Bostock, became the tenant of an agricultural holding that had previously been leased by his father and grandfather. In 1962 the holding had a herd of 40 cows. Mr Bostock expanded both the production facilities and the herd considerably over the years and at the end of the tenancy there were 64 cows on the holding. On the introduction of the milk quota scheme, he was allocated a milk quota corresponding to his production in the reference year. In 1984, largely on grounds of ill health, he decided to surrender his tenancy of the holding to the landlord. The surrender took effect on the stipulated date of 25 March 1985 and, under the applicable rules on the matter, a special assessment was made of the parties' financial obligations. According to the information before us, compensation for the milk quota was neither demanded nor paid.
9. However that legal position was regarded as unsatisfactory. For that reason, by the adoption of the Agriculture Act 1986, rules were introduced making it possible, when a tenancy came to an end, for the tenant to obtain compensation from the landlord for the milk quota. Those rules came into force in September 1986 and sections 13 and 14 together with schedules 1 and 2 laid down detailed rules for the calculation of the compensation. The main principles of those rules are as follows: the right to compensation is conditional on the milk quota having been allocated to the outgoing tenant during the tenancy period; the compensation is calculated according to a standard formula on the basis of a notional division between the tenant and the landlord; and in the event that no agreement can be reached, either of the parties can demand that the dispute be resolved by arbitration. It has been said in these proceedings before the Court that that scheme constitutes an appropriate basis for affording reasonable protection to the economic interests of the tenant.
10. It was not until after the judgment of the Court of 13 July 1989 in Wachauf that Mr Bostock became aware that it might be possible to make a claim for compensation on the basis of Community law. Mr Bostock's attention focused on the Court's ruling in paragraph 19 of that judgment that:
11. On that basis in May 1990 Mr Bostock brought proceedings against the Ministry of Agriculture before the High Court claiming that the Government be required to make suitable provision for compensation to be paid to tenants surrendering holdings between April 1984 and September 1986. He submitted that that could be achieved by extending the compensation provisions of the Agriculture Act 1986 to such tenants or alternatively by introducing some other appropriate measures.
12. The High Court has referred two questions to the Court of Justice for a preliminary ruling.
The first question
13. The basis for this question is the factual situation confronting Mr Bostock, that is to say a situation in which the milk quota was allocated during the tenancy and where, at the end of the tenancy, the quota passed to the landlord without compensation, and it is pointed out that the tenant was not in a position to avail himself of the schemes referred to in Article 4 (1) and Article 7 (4) of Regulation No 857/84.
14. Mr Bostock contends in particular that under Community law the fundamental principles are binding on the Member States, that those principles include the prohibition of discrimination and respect for property, that the rules on compensation for milk quota are covered by Community law, and that the Member States are therefore under an obligation to comply with those principles when they lay down national rules on compensation for tenants. According to Mr Bostock, Article 5 of the EEC Treaty imposes a duty upon Member States to ensure the full application of Community law and that duty is incumbent both on administrative organs and on the national courts. It also follows from Community law, in Mr Bostock's view, that a legislature is obliged to amend its national legislation if the Court of Justice has held that it is incompatible with the Treaty.
15. It is appropriate to state at the outset that an affirmative answer to the national court's question cannot be inferred from the provisions in the regulations specifically cited in the question. The regulations concerned are Council Regulation No 856/84, which amended Regulation No 804/68 on the common organization of the market in milk and milk products and introduced the provision which is the basis for the milk quota scheme, Council Regulation No 857/84, which contains the basic rules on the milk quota scheme, and Commission Regulation No 1371/84, which contains rules for the implementation of Regulation No 857/84. Those regulations yield no basis for a finding that Member States are under a duty to provide for the protection of a tenant's economic interests when a tenancy comes to an end. As mentioned above, there are certain provisions in Regulation No 857/84 which in some circumstances could entail protection of a tenant's economic interests but those are provisions which the Member States may, but are not obliged to, implement. If anything of significance to the answer to the national court's question can be inferred from the scheme of the regulation, it must, in my view, be that on the contrary it is left to the individual Member States to decide whether, and if so to what extent, protection should be afforded to the economic interests of tenants.
16. It may be appropriate to point out in this connection that Council Regulation No 857/84 has been repealed and replaced by Council Regulation No 3950/92 of 28 December 1992 establishing an additional levy in the milk and milk products sector. That regulation modifies somewhat the principles in Regulation No 857/84 that are of significance in a case such as this.
17. Before I turn to consider the question whether in the situation where a tenancy comes to an end, obligations for the Member States may be inferred on the basis of the fundamental rights applying under the Community legal order, it is appropriate first to analyse the judgment of the Court of Justice in the Wachaiif case and then to consider briefly the substantive content of the obligation to protect the interests of tenants that may be inferred from the fundamental rights applicable under Community law.
The Wachanf case
18. The Wachauf case concerned a question referred for a preliminary ruling by a German court. Mr Wachauf had operated an agricultural holding as a tenant. The landlord had ended the tenancy. Mr Wachauf thereupon applied for compensation for the definitive discontinuance of milk production in pursuance of the applicable German rules on the matter. The authorities rejected the application because the landlord refused to give his consent and such consent was, under the German rules, a condition for such an application to be granted. The German court proceeded on the basis of the fact that at the start of the tenancy the property let had not been equipped for milk production and that it was Mr Wachauf who, during his tenancy, had laid the basis for milk production on the undertaking. The German court was uncertain how far the relevant Community rules, under which the milk quota passes to the landlord (the milk quota follows the land), were applicable in such circumstances. The Court of Justice held, in answer to the questions submitted to it, that the general rules of the regulation were also applicable in a situation such as that of Mr Wachauf. In its order for reference, however, the German court had stated that such a result was unreasonable where the landlord had never produced milk nor helped to build up a holding producing milk since the tenant would thereby be deprived of the fruits of his labours without any compensation, which would be contrary to the German Constitution.
19. Clearly there are major differences between the Wachauf case and this case. The Wachauf case concerned the application of the rules concerning compensation on the occasion of definitive discontinuance of milk production. In this case Mr Bostock refrained from applying for such compensation from the outset because he considered, rightly according to the information given, that it was not possible for him to avail himself of the United Kingdom outgoer's scheme. In the Wachauf case, the tenancy was ended by the landlord whereas in this case it was Mr Bostock who terminated the tenancy agreement. In the Wachauf case, milk production on the holding was established in its entirely by the tenant while Mr Bostock has merely increased the milk production already in place on the holding at the start of his tenancy.
20. The essential basis for the question submitted is without doubt the Court's ruling in paragraph 19 of the Wachauf judgment that a duty to protect the economic interests of tenants can be inferred from the fundamental rights applying in the Community legal order and that duty also applies to Member States when they implement Community provisions.
The substantive content of the fundamental rights established in the Wachauf case
21. It follows from the Wachauf judgment that the Community law principles on the protection of fundamental rights imply that a tenant must be given compensation if, at the end of his tenancy, he is deprived of the fruits of his labour and of his investments in the tenanted holding.
22. It should be pointed out that the Commission and the United Kingdom submitted in that case that a milk quota is nothing but a mechanism for regulating the market which cannot be regarded as an intangible asset giving rise to property rights.
23. Since the question in this case is whether it follows from the fundamental rights applying in the Community legal order that the Member States are obliged to adopt rules corresponding to the Agriculture Act 1986, there is also no need in this case to consider further the substantive content of the fundamental right established by the Court. It may be presumed that the Agriculture Act 1986 affords tenants protection that complies with the requirements stemming from the fundamental right established by the Court.
24. None the less it is still appropriate to make two remarks concerning the substantive content of the fundamental right that may be of relevance in the event that the Court should find that it follows from Community law that the Member States have a general duty to adopt rules to protect the economic interests of tenants.
25. Secondly, it should properly be pointed out that the United Kingdom is right in stating that the content of the fundamental right established by the Court must not be defined in such a way that there is an obligation to introduce a body of rules which precisely corresponds to those introduced in the United Kingdom. The Member States must also, where appropriate, be able to implement adequate protection of the economic interests of tenants by adopting rules which cannot be said strictly to correspond to the rules in the Agriculture Act 1986.
The question whether the fundamental rights applying under Community law are binding on the Member States in a situation such as the present
26. The key question must therefore be whether the fundamental premiss for that argument — namely that under Community law the Member States are under a duty to protect the interests of tenants — is correct.
27. As mentioned above, Mr Bostock considers that that premiss is already implicit in the judgment in Wachattf where it was held that the fundamental rights applying in the Community legal order are also binding on the Member States when they implement Community rules. The United Kingdom contends that it is not possible to infer such a general obligation for the Member States and points out in this connection that the judgment in Wacbauf can only be construed as meaning that Member States are under such a duty when they implement Community provisions which are specifically envisaged in Community regulations. The Commission — so far as I have understood it — is of the view that under Community law there is no general obligation for Member States to protect the fundamental rights of tenants but that, on the other hand, such a duty arises when the Member States introduce rules with the object or effect of protecting the economic interests of tenants.
28. In his Opinion in Wachauf, Mr Advocate General Jacobs considered that it is possible to infer from Community law an obligation for Member States to protect the interests of tenants, even where the Member States have not made use of the possibilities of adopting rules envisaged in Article 4 (1) and Article 7 (4) of Regulation No 857/84. Accordingly, he proposed that the Court give inter alia the following answer to the questions submitted in that case: The principle of respect for the right to property guaranteed by the Community legal order requires Member States to provide for financial compensation by the landlord to a tenant farmer who, on expiry of the lease of a holding, loses the right to exploit the quota, in a case where, having regard to the particular situation of the tenant farmer, failure to provide for compensation would result in a breach of that principle (paragraph 31, point 4).
29. The judgment of the Court in Wachauf cannot, in my opinion, be cited in support of the view that it follows from the fundamental rights applicable in the Community legal order that there is a duty incumbent on the Member States to implement general protection of the economic interests of tenants in connection with milk quotas. As mentioned above the Court held that the Community provisions in question leave the national authorities a sufficiently wide margin of appreciation to enable them to apply those rules in a manner consistent with the requirements of the protection of fundamental rights, either by giving the tenant the opportunity of keeping all or part of the reference quantity if he intends to continue milk production, or by compensating him if he undertakes to abandon such production definitively and that there is therefore no conflict between those Community rules and the requirements of the protection of fundamental rights in the Community legal order. The Court's finding that the fundamental rights in the Community legal order are binding on the Member States when they implement Community rules was one of the premisses necessary in order for the Court to reach that result and must presumably merely be construed as referring to the fact that that duty applies when the Member States implement rules on the basis of an express enabling provision in Community law.
30. On the other hand, however, it would be incorrect to presume that in the Wachauf judgment the Court adopted a view on the question raised in this case.
31. According to the Court's consistent case-law, the fundamental rights applying in the Community legal order cannot be used to assess the lawfulness of national legislation which lies outside Community law. The Court thus stated in its judgment in the ERT case: As the Court has held (see the judgment in Joined Cases 60/84 and 61/84 Cinéthèque v Fédération Nationale des Cinémas Français [1985] ECR 2605, paragraph 25, and the judgment in Case 12/86 Demirel v Stadt Schwäbisch Gmünd [1987] ECR 3719, paragraph 28), it has no power to examine the compatibility with the European Convention on Human Rights of national rules which do not fall within the scope of Community law (paragraph 42). That was reiterated by the Court in paragraph 31 of its judgment in Case C-159/90.
32. The key question in this case is whether rules such as those adopted in the
33. A significant factor in this case is that in setting up the milk quota scheme in 1984 the Community legislature did not provide for a general duty incumbent on the Member States to protect the economic interests of tenants in connection with milk quotas.
34. Moreover, I do not consider that support for the contrary result can be derived from the need to ensure uniform and effective application of the relevant Community rules on the milk quota scheme. In this area the Community legislature has largely left it to the Member States to implement the rules under the regulations in accordance with the particular circumstances applying in their respective countries and quite different solutions have actually been chosen by the various Member States within the framework laid down by the Community regulations.
35. As mentioned above, the Commission considers that it is not possible to infer from the Community regulations or the fundamental rights applying in the Community legal order that a positive obligation is incumbent on the Member States to lay down rules to protect the economic interests of tenants in connection with the ending of tenancies. The Commission submits, however, that the position is different where the Member States lay down rules whose object or effect is precisely to afford such protection. If the Member States lay down such rules, they must, according to the Commission, respect the fundamental rights applying in the Community legal order. That view is understandable, but in my opinion it is not tenable. It is hardly a conclusive argument against the Commission's view that it appears illogical that a Member State which has adopted no rules at all for the protection of the economic interests of tenants is not thereby acting in breach of the fundamental rights applying in the Community legal order whereas a Member State which has sought in its legislation to lay down certain protective rules must comply with those fundamental rights to the full. On the other hand, the Commission's contention cannot in any event lead to more than a requirement that the content of the rules that are in fact adopted must comply with the fundamental rights applying in the Community legal order. But it is undisputed in this context that the content of the rules adopted in the United Kingdom in 1986 complied with the Community law requirement on the protection of the fruits of the labours of the tenant and so on. The dispute is not as to the content of those rules but as to their temporal scope. The only criticism made of the United Kingdom authorities is that they did not adopt such protective measures right from the start of the milk quota scheme. I do not consider that it can be argued that the Member States that have not adopted any such rules at all are not obliged to do so under Community law but that the Member States which later adopt the rules required are under a duty under Community law to make such rules apply right from the introduction of the milk quota scheme.
36. To summarize therefore, my view is that no duty can be inferred either from the relevant Community regulations or from the fundamental rights applying in the Community legal order for Member States to protect the economic interests of tenants when their tenancies come to an end as regards the milk quotas allocated to them. Such protection must be obtained within the individual Member States' legal systems in accordance with the constitutional rules applying in those States.
37. In the course of this case it has been contended — amongst others by the Commission — that it should be considered whether the prohibition of discrimination under Article 40 (3) of the EEC Treaty and the principle of equal treatment under Community law entails that tenants whose tenancy came to an end in the period between April 1984 and September 1986 can derive rights from the rules in the Agriculture Act 1986. In my view that question must be answered in the negative. As established above, the Agriculture Act 1986 was not adopted in compliance with a Community law duty to protect the economic interests of tenants and, taken in isolation, the principle of equal treatment under Community law cannot entail a duty for the national legislatures to make rules on the protection of tenants applicable from a certain time. In this instance, the national legislature refrained from giving the law retroactive effect and in so doing it acted in accordance with the principle of legal certainty under which laws may be given retroactive effect only in exceptional cases, only where the purpose of the law renders that necessary, and if due account is taken of the legitimate expectations of those who have acted in reliance on the existing rules. It is difficult to imagine cases where there is a breach of the principle of equal treatment because the legislature failed to give rules retroactive effect and I consider that, in any event, no such circumstances exist in a situation such as this.
The second question
38. The second question referred for a preliminary ruling by the High Court is as follows:
39. The answer to this question in fact follows from the answer given to the first question. It is plain that the relevant Community regulations do not contain any rules that can be relied on as a legal basis for a claim for compensation by a tenant in proceedings against a landlord in connection with the loss of milk quotas and if the principles applying in the Community legal order for the protection of fundamental rights cannot be relied upon as giving rise to a duty for the authorities of Member States, still less can they be relied on as creating obligations in proceedings between tenants and landlords. There is therefore no need to express a view on the question, which is in fact of fundamental importance and of some difficulty, whether the Community law principles regarding the protection of fundamental rights may in some cases be relied on as creating obligations in proceedings between individuals and not just in proceedings between individuals and the authorities which are the primary addressees of fundamental rights.
Conclusion
40. I therefore propose that the Court give the following answers to the questions submitted by the High Court:
1 Original language: Danish.
2 OJ 1984 L 90, pp. 10 and 13.
3 Of primary importance for the present case arc the judgments of the Court of Justice in Case 5/88 Wachauf [1989] ECR 2609 and Case C-121/90 Posthumus [1991] ECR I-5833, both of which will be discussed later. The other judgments on the landlord/tenant relationship are the judgments of the Court of Justice in Case C-341/89 Ballmann [1991] ECR I-25, Case C-177/90 Kiilm [1992] ECR I-35, and the judgment in Case C-236/90 Maicr [1992] ECR I-4483. See also the Opinion of Advocate General Lenz in Case C-98/91 Herbrmk (the Court has not yet given its judgment in that case).
4 Paragraph 13 of the judgment in Wachauf, cited above in footnote 2.
5 Sec the sixth recital in the preamble to Council Regulation No 590/85 of 26 February 1985 (OJ 1985 L 68, p. 1), and the Corrigendum (OJ 1985 Ĺ 81, p. 41).
6 The High Court has stated that there are 60 other tenants in the same situation as Mr Bostock who have brought proceedings against their landlords in order to obtain compensation corresponding to that under the Agriculture Act 1986. Those cases have been stayed pending a decision by the Court of Justice on the questions referred to it in this case.
7 The question is worded as follows: ‘Are Council Regulation (EEC) No 804/68, Council Regulation (EEC) No 857/84, Commission Regulation (EEC) No 1371/84 and/or the general principles of Community law to be interpreted as having placed on a Member State the obligation to adopt in respect of the period April 1984 (when the system of reference quantities came into force) to September 1986 (when the compensation provisions of the Agriculture Act 1986 came into force in the United Kingdom) measures similar to those adopted in the United Kingdom by means of the Agriculture Act 1986 in respect of the period from September 1986 entitling a tenant to receive compensation from his landlord in circumstances where: (i) a reference quantity had been allocated to the tenant in respect of the holding pursuant to the said regulations, (ii) the tenant surrendered is lease to the landlord during the period in question, (iii) on the surrender of the lease the reference quantity passed with the holding to the landlord, (iv) the situation fell outside Article 7 (4) of Regulation No 857/84 as amended by Council Regulation (EEC) No 590/85 and in any event the Member State concerned had not exorcised the power conferred by that provision to put some or all of the reference quantity at the disposal of the departing tenant, (v) the Member State concerned operated an outgoers scheme pursuant to Article 4 (1) (a) of Regulation No 857/84 but the tenant was required to obtain the permission of the landlord to participate in the scheme, applications to participate in the scheme were not being accepted at the time when the tenant surrendered the lease and the scheme was limited in terms of the money available in outgoers compensation?.
8 OJ 1992 L 405, p. 1.
9 He reiterated that view in his Opinion in the Posthumus case cited in footnote 2, above; sec in particular paragraphs 19 to 22.
10 The judgment of the Court in the Posthumus case (see footnote 2) may possibly be an expression of the view that there is no general obligation incumbent upon Member States on the basis of Community law to protect the economic interests of tenants. That case concerned a dispute between the tenants of an agricultural holding and the purchaser of a small part of that holding and the question submitted concerned in particular the calculation of the size of the milk quota which the purchaser claimed should be transferred to him. The court making the reference had stated, with reference to the Wachauf judgment, that it might be incompatible with the rights of the tenants if a proportionate part of the milk quota was transferred to the purchaser. As mentioned above, Mr Advocate General Jacobs considered that it was incumbent on the national legal orders to protect the tenants' rights in those circumstances. The Court did not express a view on that question and resolved the matter by interpreting the relevant provisions of the regulations which laid down the criteria for the allocation of the milk quota.
11 Case C-260/89 ERT [1991] ECR I-2925.
12 Case C-159/90 Crogan [1991] ECR I-4685.
13 In paragraph 43 in the ERT the Court held: In particular, where a Member State relies on the combined provisions of Articles 56 and 66 in order to justify rules which are likely to obstruct the exercise of the freedom to provide services, such justification, provided for by Community law, must be interpreted in the light of the general principles of law and in particular of fundamental rights. In its judgment in Joined Cases 201 and 202/85 Klensch [1986] ECR 3503, the Court held that the prohibition of discrimination laid down in Article 40 (3) of the EEC Treaty is merely a specifie enunciation of the general principle of equality which is one of the fundamental principles of Community law and that: That provision covers all measures relating to the common organization of agricultural markets, irrespective of the authority which lays them down. Consequently, it is also binding on the Member States when they arc implementing the said common organization of the markets (paragraphs 8 and 9). In his Opinion in Case C-168/91 Komtantinidis [1993] ECR I-1191 Mr Advocate General Jacobs expresses the view that an employed person or a self-employed person who relies on Articles 48, 52 and 59 of the Treaty in connection with employment or an occupation in another Member State is entitled to assume that, wherever he goes to earn his living in the European Community, he will be treated in accordance with a common code of fundamental values, in particular those laid down in the European Convention on Human Rights (paragraph 46). In its judgment in that case on 30 March 1993 the Court did not adopt a view on that suggestion which, in my opinion, is too far-reaching.