Germany v Commission (Agriculture) [2003] EUECJ C-239/01 (30 September 2003)

Judgment By application lodged at the Court Registry on 14 June 2001, the Federal Republic of Germany brought an action under Article 230 EC for annulment of Article 5(5) of Commission Regulation (EC) No 690/2001 of 3 April 2001 on special market support measures in the beef sector (OJ 2001 L 95, p. 8) (the contested regulation), in so far as that provision requires each Member State concerned to finance 30% of the price of the meat purchased under that regulation. Legal background The EC Treaty The third indent of Article 202 EC states: To ensure that the objectives set out in this Treaty are attained the Council shall, in accordance with the provisions of this Treaty: ... - confer on the Commission, in the acts which the Council adopts, powers for the implementation of the rules which the Council lays down. ... The fourth indent of Article 211 EC states: In order to ensure the proper functioning and development of the common market, the Commission shall: ... - exercise the powers conferred on it by the Council for the implementation of the rules laid down by the latter. The regulations on the financing of the common agricultural policy Regulation (EEC) No 25 Regulation No 25 of the Council of 4 April 1962 on the financing of the common agricultural policy (OJ, English Special Edition 1959-1962, p. 126), last amended by Regulation (EEC) No 728/70 of the Council of 21 April 1970 (OJ, English Special Edition 1970(I), p. 214) (Regulation No 25), established the European Agricultural Guidance and Guarantee Fund (EAGGF), which forms part of the general budget of the European Communities, and laid down the principles applying to the financing of the common agricultural policy. Under Article 2(2) of Regulation No 25: Since at the single market stage price systems will be standardised and agricultural policy will be on a Community basis, the financial consequences thereof shall devolve upon the Community. The Fund shall accordingly finance: (a) refunds on exports to third countries; (b) intervention aimed at stabilising markets; (c) common measures adopted in order to attain the objectives set out in Article 39(1)(a) of the Treaty ... Regulation (EEC) No 1883/78 Pursuant to Article 2 of Council Regulation (EEC) No 1883/78 of 2 August 1978 laying down general rules for the financing of interventions by the European Agricultural Guidance and Guarantee Fund, Guarantee Section (OJ 1978 L 216, p. 1), last amended by Council Regulation (EC) No 1259/96 of 25 June 1996 (OJ 1996 L 163, p. 10) (Regulation No 1883/78): Where, within the framework of a common organisation of the market, a sum per unit is determined for an intervention measure, the resulting expenditure shall be met entirely by Community funds. Article 3 of Regulation No 1883/78 provides: Where, within the framework of a common organisation of the market, a sum per unit is not determined in respect of an intervention measure, the measure concerned shall be financed by the EAGGF, Guarantee Section, in accordance with the provisions contained in Articles 4 to 8. Articles 4 to 8 of Regulation No 1883/78 lay down the rules for calculating the intervention expenditure to be met from the Community budget and the arrangements for payment of such expenditure. Regulation (EC) No 1258/1999 The second recital in the preamble to Council Regulation (EC) No 1258/1999 of 17 May 1999 on the financing of the common agricultural policy (OJ 1999 L 160, p. 103) states: [w]hereas at the single market stage, in view of the fact that price systems are standardised and the agricultural policy is a Community policy, the financial consequences devolve upon the Community; whereas, in accordance with that principle as laid down in Article 2(2) of Regulation No 25, refunds on exports to third countries, intervention aimed at stabilising agricultural markets ... should be financed by the Guarantee section of the Fund in order to achieve the objectives set out in Article 33(1) of the Treaty. Under Article 1 of Regulation No 1258/1999: 1. The European Agricultural Guidance and Guarantee Fund (hereinafter called the Fund) shall form part of the general budget of the European Communities. It shall comprise two sections: - the Guarantee Section, - the Guidance Section. 2. The Guarantee Section shall finance: (a) refunds on exports to third countries; (b) intervention intended to stabilise the agricultural market[s]; (c) rural development measures outside Objective 1 programmes except the rural development Community initiative; (d) the Community's financial contribution towards specific veterinary measures, inspection measures in the veterinary field and programmes for the eradication and monitoring of animal diseases (veterinary measures) as well as towards plant health measures; ... 4. Expenditure relating to administrative costs and personnel borne by Member States and by recipients of aid from the Fund shall not be taken over by the Fund. Article 2(2) of Regulation No 1258/1999 provides: Intervention intended to stabilise the agricultural markets, undertaken in accordance with Community rules within the framework of the common organisation of agricultural markets, shall be financed under Article 1(2)(b). The regulations on the common organisation of the market in beef and veal Regulation (EC) No 1254/1999 The 31st recital in the preamble to Council Regulation (EC) No 1254/1999 of 17 May 1999 on the common organisation of the market in beef and veal (OJ 1999 L 160, p. 21) is worded as follows: [w]hereas it is appropriate to provide for measures to be taken when a substantial rise or fall in prices disturbs or threatens to disturb the Community market; whereas these measures may also include ad hoc intervention buying-in. The 36th recital in the preamble to Regulation No 1254/1999 states: [w]hereas expenditure incurred by the Member States as a result of the obligations arising out of the application of this regulation should be financed by the Community in accordance with Council Regulation (EC) No 1258/1999 of 17 May 1999 on the financing of the common agricultural policy. Under Article 38 of Regulation No 1254/1999: 1. When a substantial rise or fall in prices is recorded on the Community market and this situation is likely to continue, thereby disturbing or threatening to disturb the market, the necessary measures may be taken. 2. Detailed rules for the application of this article shall be adopted by the Commission in accordance with the procedure laid down in Article 43. According to Article 45 of Regulation No 1254/1999: Regulation (EC) No 1258/1999 and the provisions adopted in implementation thereof shall apply to the products listed in Article 1. Regulation (EC) No 2777/2000 On the basis of Article 38(2) of Regulation No 1254/1999, the Commission adopted Regulation (EC) No 2777/2000 of 18 December 2000 adopting exceptional support measures for the beef market (OJ 2000 L 321, p. 47), amended by Commission Regulation (EC) No 111/2001 of 19 January 2001 (OJ 2001 L 19, p. 11), which provided for a purchase scheme, from 1 January 2001 until 30 June 2001 at the latest, for destruction of animals aged more than 30 months and primarily animals which at slaughter are not tested for bovine spongiform encephalopathy (BSE). Article 4(2) of Regulation No 2777/2000 provided that, for each fully destroyed animal, the Community should co-finance, at a flat rate, 70% of the expenditure on purchasing the animal, leaving 30% to be financed by the national authorities. The contested regulation The contested regulation was adopted on the basis of Article 38(2) of Regulation No 1254/1999. It established a new special purchase scheme for meat from certain categories of bovine animals aged more than 30 months which have been tested for BSE, enabling Member States to store meat instead of destroying it. That scheme was to apply in all Member States except the United Kingdom from 1 July 2001 until 31 December 2001. Commission Regulation (EC) No 2595/2001 of 28 December 2001 amending Regulation (EC) No 690/2001 on special support measures in the beef sector (OJ 2001 L 345, p. 33) extended the application of the scheme introduced by the contested regulation until 31 March 2002. According to the fifth recital in the preamble to the contested regulation: [i]n view of the extent of the BSE crisis and in particular of its probable duration, and consequently of the magnitude of the efforts needed to support the market, it would be appropriate for such efforts to be shared between the Community and the Member States especially in view of the large number of animals expected to be purchased under the scheme as well as the limited nature of the budgetary resources available for Community financing. Article 1(1) of the contested regulation provides: Member States shall purchase chilled carcasses or half carcasses from bovine animals over 30 months of age of the following categories ... Article 2 of the contested regulation provides: 1. The purchase price for chilled carcasses to be bought in a Member State under this regulation shall be determined following a tender procedure. 2. Tendering shall be opened in a Member State which for two consecutive weeks [has] recorded the average market price for the reference class of category D equal to or below the trigger price listed in Annex I in respect of the Member State concerned ... According to Article 3(1) of the contested regulation: In the light of the tenders received under each individual invitation to tender and in accordance with the procedure laid down in Article 43 of Regulation (EC) No 1254/1999 a maximum buying-in price relating to the reference class shall be fixed. A different price may be set per Member State. The maximum price shall not exceed the trigger price plus EUR 14 per 100 kg carcass weight. Under Article 5 of the contested regulation: 1. The competent authority shall pay successful tenderers the price quoted in their tenders no later than 65 days after completion of take-over of the products concerned. 2. Only the quantity actually delivered and accepted shall be paid for within the limit of the quantity awarded. ... 5. The Community shall finance 70% of the price of the meat purchased under this regulation. The Member State concerned shall finance the remaining 30% as well as all costs related to the operations under Articles 6, 7, 8 and 9. Articles 6, 7, 8 and 9 of the contested regulation provide that the meat purchased under the support scheme established by that regulation may be eliminated or released by the competent authorities of the Member States, with or without prior storage. Under Article 10 of the contested regulation proceeds from sales of products in conformity with that regulation are to belong to the Member State concerned. Forms of order sought by the parties The Federal Republic of Germany claims that the Court should: - annul Article 5(5) of the contested regulation in so far as that provision requires each Member State concerned to finance 30% of the price of the meat purchased under that regulation (the disputed provision); - order the Commission to pay the costs. It states that, if its application is granted, the effects of the contested regulation should be maintained so as not to frustrate the legitimate expectations of the beneficiaries of support measures, and also to meet the requirements of the principle of legal certainty. In support of its action, the German Government raises three pleas: - first, the contested regulation is devoid of any valid legal basis, since the Commission has no power to provide for compulsory co-financing by the Member States in an implementing regulation such as the contested regulation; - second, the contested regulation infringes a number of financial provisions of the Treaty, namely Articles 268 EC to 270 EC; - third, the contested regulation infringes the obligation to state the reasons on which Community acts are based laid down by Article 253 EC. The Commission contends that the Court should: - dismiss the application; - order the Federal Republic of Germany to pay the costs. The Commission states that, should the application be granted, it supports the Federal Republic of Germany's suggestion that the effects of the contested regulation be maintained pursuant to the second paragraph of Article 231 EC. Admissibility The Court requested the parties to state their views on the effects of any annulment of the disputed provision and on the admissibility of the application in the light of the case-law according to which partial annulment of a Community act is possible only if the elements whose annulment is sought may be severed from the remainder of the act (see, in particular, Case C-29/99 Commission v Council [2002] ECR I-11221 , paragraphs 45 and 46). In the light of the observations submitted in that respect, it must be held that the disputed provision is severable from the remainder of the provisions of the contested regulation, because the annulment of that provision would not alter the substance of the regulation. As the Advocate General states in points 45 and 46 of his Opinion, the substance of the contested regulation consists in the establishment of a special purchase scheme for beef in order to respond to the BSE crisis. As confirmed by both the German and Danish Governments and the Commission, partial annulment of the contested regulation, in so far as Article 5(5) thereof requires each Member State concerned to finance 30% of the price of the meat purchased, would leave the substance of that regulation completely intact, since it would give rise only to financial compensation as between the Community and the Member States concerned. Admittedly, the Commission argues that without the disputed provision it would probably not have adopted the other provisions of the contested regulation in their current version, in particular Article 10 which, according to the Commission, forms a whole with the disputed provision from a financial point of view. However, as the Advocate General points out in point 48 of his Opinion, whether partial annulment would alter the substance of the contested measure is an objective criterion, and not a subjective criterion linked to the political intention of the authority which adopted the measure at issue. It follows from the foregoing that the application is admissible. The first plea Arguments of the parties The German Government submits that Regulation No 1254/1999, which is the legal basis of the contested regulation, does not contain any provision authorising the Commission to introduce, in a measure implementing that regulation, compulsory co-financing by the Member States such as that introduced by the disputed measure. Under Article 38(2) of Regulation No 1254/1999 the Commission is only empowered to adopt detailed rules for the application of Article 38(1), which provides for the adoption of the necessary measures when a substantial rise or fall in prices disturbs or threatens to disturb the Community market. According to the German Government, in empowering the Commission to adopt implementing measures the Council did not give it power to adopt measures which diverge from the basic regulation on an essential point, by introducing compulsory co-financing contrary to the principle of exclusive financing by the Community of all the support measures necessary for the market in beef and veal, a principle which may be inferred from the combined provisions of Regulations No 1254/1999 and No 1258/1999. The German Government adds that its analysis of the regulations cited is confirmed by Articles 2 and 3 of Regulation No 1883/78 which, although they distinguish between intervention measures in respect of which a sum per unit is determined and those in respect of which such a sum is not determined, provide in both cases that the expenditure in respect of the intervention measures is to be exclusively financed by the Community. The introduction by the contested regulation of compulsory co-financing also interferes, according to the German Government, with the institutional balance between the Council and the Commission laid down in Articles 202 EC and 211 EC. Providing in the disputed provision for compulsory co-financing by the Member States does not constitute implementation of a rule laid down by Regulation No 1254/1999, but an alteration of an essential rule of that regulation. The Commission argues, first, that Article 38 of Regulation No 1254/1999 authorises it to adopt all the measures necessary to protect the market from disturbances which affect or threaten it in the event of a substantial and persistent rise or fall in prices. That provision does not fix any condition other than the necessity of the measures in question. In the present case, the purchases of meat required by the contested regulation are undoubtedly appropriate for the purpose of contributing to the stabilisation of the Community beef market affected by the BSE crisis. Moreover, the Court has consistently held that the legality of a measure adopted in the field of the common agricultural policy could be affected only where it is manifestly inappropriate or where the institution which adopted it has manifestly exceeded the limits of its discretionary power. In those circumstances, the Commission takes the view that Article 38 of Regulation No 1254/1999, which conferred on it an exceptional power in order to resolve crisis situations, necessarily empowered it to derogate from the other provisions of that regulation, and in particular those in respect of financing, if that was found to be absolutely essential. Second, the Commission argues that, in adopting the contested provision, it did not infringe the rules on financing established by the Council. Although it is true that intervention to stabilise the agricultural markets is generally financed entirely by the Guarantee Section of the EAGGF, this is a practice and not a legal obligation. In particular, Article 1(2)(b) of Regulation No 1258/1999 cannot be interpreted as introducing such an obligation, since it does not expressly provide for the exclusive nature of Community financing. The Commission points out in that regard that the contested regulation is not the only example of compulsory co-financing of agricultural measures by the Member States. It cites as examples several Council regulations providing for such compulsory co-financing. It also refers to Commission Regulation No 2777/2000 which is, in a sense, the precursor of the contested regulation, pointing out that the Federal Republic of Germany did not challenge that regulation. The Commission argues that account must also be taken of Article 2 of Regulation No 1883/78. An a contrario interpretation of that provision shows clearly that there is no legal obligation for exclusive Community financing in the case of intervention measures not covered by that provision. Such, it submits, is true of the measure laid down by the contested regulation, which provides that the purchase price of the meat is to be determined on the basis of tendering and not according to a sum per unit determined in advance. Should the Court find that the Guarantee Section of the EAGGF has an obligation to finance in their entirety agricultural intervention measures, the Commission argues, in the alternative, that the derogation from that obligation by the disputed provision was necessary in this case and therefore covered by Article 38 of Regulation No 1254/1999. For timetable reasons, it had not been possible to take into consideration, when the budget for the 2001 financial year was drawn up, the additional costs caused to the Community by the new BSE crisis, and the funds originally earmarked for financing agricultural expenditure were therefore likely to be insufficient. Third, the Commission argues that the disputed provision does not alter an essential rule expressing a fundamental aim of the common agricultural policy in the beef and veal sector, but is only a specific measure applicable for six months. The Danish Government submits that, in Article 5(5) of the contested regulation, the Commission adopted a provision which derogates from the principle of complete financing by the Community of the common organisation of markets. That principle was already made explicit in the first Council regulation on the financing of the common agricultural policy, namely Regulation No 25, and is still in force today. Findings of the Court It must be stated at the outset that, according to settled case-law, it is clear from the Treaty context in which Article 211 EC must be placed and also from practical requirements that the concept of implementation must be given a wide interpretation. Since only the Commission is in a position to keep track of agricultural market trends and to act quickly when necessary, the Council may confer on it wide powers in that sphere. Consequently, the limits of those powers must be determined by reference amongst other things to the essential general aims of the market organisation (see Case C-478/93 Netherlands v Commission [1995] ECR I-3081, paragraph 30, and the case-law cited). Thus, the Court has held that, in matters relating to agriculture, the Commission is authorised to adopt all the implementing measures which are necessary or appropriate for the implementation of the basic legislation, provided that they are not contrary to such legislation or to the implementing legislation adopted by the Council (see, in particular, Case 121/83 Zuckerfabrik Franken [1984] ECR 2039, paragraph 13; Netherlands v Commission , cited above, paragraph 31, and Case C-356/97 Molkereigenossenschaft Wiedergeltingen [2000] ECR I-5461 , paragraph 24). In the present case the contested regulation was adopted by the Commission on the basis of Article 38(2) of Regulation No 1254/1999, which empowers it to adopt detailed rules for the application of that article in accordance with the committee procedure laid down in Article 43 of the regulation. Article 38(1) of Regulation 1254/1999 provides that when a substantial rise or fall in prices is recorded on the Community market and this situation is likely to continue, thereby disturbing or threatening to disturb the market, the necessary measures may be taken. The Federal Republic of Germany does not dispute that the special market support measures in the beef sector adopted in the contested regulation were necessary in order to address the significant fall in prices recorded in that sector because of the loss of consumer confidence in beef following the appearance of new cases of BSE. However, in accordance with the case-law mentioned in paragraph 55 of this judgment, and contrary to the Commission's submission on the matter, the fact that the measures at issue may be regarded as necessary measures within the meaning of Article 38(1) of Regulation No 1254/1999 does not remove the need to consider whether those implementing measures are contrary to the basic legislation which they implement. In that regard, the Federal Republic of Germany submits, in the first plea of its application, that Article 5(5) of the contested regulation is contrary to the basic legislation which that regulation seeks to implement, in so far as that provision requires each Member State concerned to finance 30% of the price of the meat purchased pursuant to that regulation. It takes the view that the introduction of such a method of financing into an implementing regulation adopted by the Commission is contrary to the provisions of Regulation No 1254/1999 and of the regulations on the financing of the common agricultural policy to which that regulation refers, which set out a rule under which all market support measures in the beef and veal sector should be exclusively financed by the Community. In order to assess the compatibility of the disputed provision with Regulation No 1254/1999, the scope of the Community provisions applicable to the financing of market support measures adopted in the beef sector must be determined. It must be pointed out in that regard that Article 45 of Regulation No 1245/1999 makes Regulation No 1258/1999 and the provisions adopted in the implementation thereof applicable to the products governed by the common organisation of the market in beef and veal. Article 1(2)(b) of Regulation No 1258/1999 provides that the Guarantee Section of the EAGGF is to finance intervention intended to stabilise the agricultural markets. Article 2(2) of that regulation states that the intervention in question is that undertaken in accordance with Community rules within the framework of the common organisation of agricultural markets. It is true, as the Commission submits, that although Article 1(2)(b) of Regulation No 1258/1999 establishes Community financing for intervention intended to stabilise the agricultural markets, that provision does not expressly provide that such financing is exclusive in nature. However, as the Advocate General states in points 83 to 89 of his Opinion, other provisions of the basic legislation make it possible to interpret that provision as meaning that market support measures in the beef and veal sector must be exclusively financed by the EAGGF. First of all, the 36th recital in the preamble to Regulation No 1254/1999 states that expenditure incurred by the Member States as a result of the obligations arising out of the application of that regulation should be financed by the Community in accordance with Regulation No 1258/1999. Next, the second recital in the preamble to Regulation No 1258/1999 makes reference to the principle that the financial consequences arising from the common agricultural policy devolve upon the Community, in accordance with Article 2(2) of Regulation No 25. That provision in fact states that the Community is to bear those financial consequences because, in particular, at the single market stage price systems will be standardised and Article 2(2)(b) mentions intervention aimed at stabilising markets among the measures which are to be financed by the EAGGF. Finally, the wording of Article 1(2)(b) of Regulation No 1258/1999, which provides that the EAGGF is to finance intervention intended to stabilise the agricultural market, is to be distinguished from the wording of Article 1(2)(d) which, as regards the financing of veterinary measures, provides only for EAGGF financing of the Community's financial contribution towards those measures. It must be added that although, unlike Article 2 of Regulation No 1883/78 which applies to the financing by the EAGGF Guarantee Section of intervention measures in respect of which a sum per unit is determined, Article 3 of that regulation does not expressly provide, in respect of other intervention measures, that they are to be totally covered by Community funds, it cannot be inferred, as the Commission submits, that in the latter case those measures should not be exclusively financed by the Community budget. Article 3 of Regulation No 1883/78 refers, as regards the financing of those measures, to Articles 4 to 8 of that regulation, which do not contain any provision setting aside the principle that the EAGGF Guarantee Section is to provide complete financing for intervention measures intended to stabilise agricultural markets. It must therefore be concluded that the Commission was obliged, in the contested regulation, to comply with the rule flowing from the basic legislation adopted by the Council, under which all Community support measures in the beef and veal sector must be exclusively financed by the Community. That conclusion is not called into question by the Commission's argument that several regulations adopted on agricultural matters by the Council, in the same way as Commission Regulation No 2777/2000, introduce compulsory co-financing by the Member States of the measures provided for by those regulations. First, the Council may decide to depart, in particular legislation, from a general rule which it itself introduced, whereas the Commission, unless expressly empowered to derogate from it, must observe a rule laid down in the Council's basic legislation that it is implementing. Second, as regards the introduction in Commission Regulation No 2777/2000 of compulsory co-financing by the Member States of the market support measures provided for by that regulation, suffice it to state that that precedent is not such as to enable the Commission to derogate from a rule of law to which it is subject (see, by analogy, Case C-426/93 Germany v Council [1995] ECR I-3723, paragraph 21). It is common ground that the disputed provision requires each Member State concerned to finance a portion of the market support measures introduced by the contested regulation and that Regulation No 1254/1999 does not contain any provision expressly authorising the Commission to derogate from the principle flowing from the basic legislation that all Community support measures in the beef and veal sector must be exclusively financed by the Community. It follows that the disputed provision is contrary to Regulation No 1254/1999. The fact, relied on by the Commission, that the contested regulation provides that it is to apply only for a period limited to six months has no bearing, in this case, on the assessment of its compatibility with Regulation No 1254/1999. It follows from all the foregoing considerations, without there being any need to examine the other pleas relied on by the German Government, that Article 5(5) of the contested regulation must be annulled in so far as that provision requires each Member State concerned to finance 30% of the price of the meat purchased under that regulation. Temporal limitation on the effects of the annulment Both the Federal Republic of Germany and the Commission request the Court to maintain the effects of the contested regulation in the event that the application is granted. It must be recalled, in that regard, that it is for the Court, in accordance with the second paragraph of Article 231 EC, to give a decision on the consequences of an annulment without being bound by the proposals formulated to that end by the parties (see Case C-284/90 Council v Parliament [1992] ECR I-2277 , paragraph 36). In this case, contrary to the German Government's submissions, annulment of the disputed provision does not affect the rights of those traders from whom the beef was purchased pursuant to the contested regulation. That being so, the Court finds that there is no reason of legal certainty which requires that the effects of the disputed provision be maintained despite its annulment. Costs 80. Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Federal Republic of Germany has applied for costs to be awarded against the Commission, and the latter has been unsuccessful, the Commission must be ordered to pay the costs. On those grounds, THE COURT (Full Court) hereby: 1. Annuls Article 5(5) of Commission Regulation (EC) No 690/2001 of 3 April 2001 on special market support measures in the beef sector in so far as that provision requires each Member State concerned to finance 30% of the price of the meat purchased under that regulation; 2. Orders the Commission of the European Communities to pay the costs. Rodríguez Iglesias Puissochet Wathelet Schingten Timmermans Gulmann Edward La Pergola Jann SkourisMacken Colnericvon Bahr Delivered in open court in Luxembourg on 30 September 2003. R. Grass G. C. Rodríguez Iglesias Registrar President 1: Language of the case: German. BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII