Katholische Kirchengemeinde St. Martinus Elten v Landwirtschaftskammer Rheinland. [1997] EUECJ C-463/93 (23 January 1997)

Judgment 1 By order of 18 November 1993, received at the Court on 13 December 1993, the Verwaltungsgericht Düsseldorf (Düsseldorf Administrative Court) referred to the Court for a preliminary ruling under Article 177 of the EC Treaty a question on the interpretation of the rules governing the additional levy on milk introduced by Council Regulation (EEC) No 856/84 of 31 March 1984 amending Regulation (EEC) No 804/68 on the common organization of the market in milk and milk products (OJ 1984 L 90, p. 10), Council Regulation (EEC) No 857/84 of 31 March 1984 adopting general rules for the application of the levy referred to in Article 5c of Regulation (EEC) No 804/68 (OJ 1984 L 90, p. 13), as amended by Council Regulation (EEC) No 590/85 of 26 February 1985 amending Regulation (EEC) No 857/84 (OJ 1985 L 68, p. 1), and Commission Regulation (EEC) No 1546/88 of 3 June 1988 laying down detailed rules for the application of the additional levy referred to in Article 5c of Regulation (EEC) No 804/68 (OJ 1988 L 139, p. 12). 2 That question has been raised in proceedings, following the termination of a lease, between Katholische Kirchengemeinde St. Martinus Elten (Catholic Church Parish of St. Martinus, Elten, hereinafter `the Kirchengemeinde') and Landwirtschaftskammer Rheinland (Rhineland Chamber of Agriculture, hereinafter `the Landwirtschaftskammer') concerning the attachment of a reference quantity to leased land situated partly in Germany and partly in the Netherlands. 3 According to its own statements, the Kirchengemeinde is the owner of grazing land of approximately 23.7 hectares. The larger part, about 17.7 hectares, is situated in the Netherlands, the remainder in Germany. The land was all let on a long-term lease. The lessee, who was himself the owner of a holding of approximately 1.07 hectares situated in Germany, used the land for the production of milk which he delivered to a German dairy. 4 In order to limit the production of milk and milk products within the Community, Regulation No 856/84 inserted into Regulation (EEC) No 804/68 of the Council of 27 June 1968 on the common organization of the market in milk and milk products (OJ, English Special Edition 1968 (I), p. 176) an Article 5c providing for an additional levy where the quantities of milk produced exceed a reference quantity to be determined. According to formula A of that system, for which the Federal Republic of Germany and the Kingdom of the Netherlands opted, the reference quantity exempt from the additional levy is in principle equal to the quantity of milk delivered by a producer during the reference year. Germany opted for 1983 as the reference year. 5 Article 5c(3) of Regulation No 804/68 provides that `the sum of the reference quantities ... may not exceed a guaranteed total quantity equal to the sum of quantities of milk delivered to undertakings treating or processing milk or other milk products in each Member State during the 1981 calendar year, plus 1%'. 6 In 1984 the lessee was thus allocated a reference quantity by the Landwirtschaftskammer. The reference quantity, which was calculated on the basis of his total milk production during the reference year, was then 182 000 kg. 7 After the death of the lessee in 1989, the reference quantity, which had been corrected to 191 004 kg, was first transferred by the Landwirtschaftskammer to a partnership (Gesellschaft bürgerlichen Rechts) set up by the lessee's heir and Mr Derksen, a party joined in the main proceedings, with a view to joint management of their reference quantities. After the dissolution of the partnership on 15 November 1990 following the termination of the lease, Mr Derksen then acquired the land belonging to the heir together with her reference quantities, and in response to his application of 13 December 1990 the reference quantities held by the heir were transferred to him in addition to his own reference quantities. 8 On 5 December 1991 the Kirchengemeinde applied, with respect to the land in the Netherlands, for a certificate in accordance with Article 9(2)(3) of the Milch-Garantiemengen-Verordnung (Regulation on guaranteed quantities for milk) that after termination of the lease and transfer to itself of the use of the agricultural land in the Netherlands it was entitled to the reference quantities. 9 That application was rejected by the Landwirtschaftskammer on the ground that, because a guaranteed total quantity was allocated to each Member State, the principle that the reference quantity is attached to the land used was necessarily limited to national territory, so that it was not permissible to attach a German milk quota to land situated outside Germany. 10 In those circumstances, the Kirchengemeinde brought proceedings in the Verwaltungsgericht. In its order for reference, that court expresses doubts as to the lawfulness of the Landwirtschaftskammer's rejection of the application. It is apparent from its order that the Verwaltungsgericht considers that if the land were situated in Germany, not in the Netherlands, the Landwirtschaftskammer would be obliged to issue a certificate of transfer for part of the reference quantity, proportionate to the surface area of the land owned by the Kirchengemeinde. 11 The Verwaltungsgericht Düsseldorf therefore stayed the proceedings and referred the following question to the Court for a preliminary ruling under Article 177 of the Treaty: `Could the milk reference quantity allocated on 2 April 1984 to a German milk producer with a farm in Germany and with leased land in Germany and the Netherlands who delivers to a German purchaser be attached in part to the land leased by that milk producer in the Netherlands, with the result that on termination of the lease the corresponding reference quantity passes to the lessor, or could the quota allocated to the German milk producer be attached only to land in Germany?' 12 By that question the national court is essentially asking which parts of leased land used for milk production a reference quantity is attached to, where part of the land is situated in another Member State. It also wishes to know the rules applicable to such a reference quantity in the event of the lease being terminated. Attachment of a milk quota to land situated in another Member State 13 It is apparent from the order for reference that the question relates to the principle governing the milk quota system, namely that a reference quantity is attached, at the time when it is granted, to the land used by the holder for milk production. That principle is, according to the national court, laid down by the Community rules on the additional levy. 14 The principle that a reference quantity is attached to the land follows from Article 2 of Regulation No 857/84 read together with Article 12(c) and (d) of that regulation. 15 Article 2(1) of Regulation No 857/84 provides, with respect to formula A, that `the reference quantity ... [is to] be equal to the quantity of milk or milk equivalent delivered by the producer during the 1981 calendar year ... plus 1%'. 16 Article 12(c) of Regulation No 857/84 defines a producer as `a natural or legal person or group of natural or legal persons farming a holding located within the geographical territory of the Community ...'. Article 12(d) defines a holding as `all the production units operated by the producer and located within the geographical territory of the Community'. 17 The definitions of `producer' and, consequently, `holding' in Article 12(c) and (d) of Regulation No 857/84 show, according to the judgment in Case C-236/90 Maier v Freistaat Bayern [1992] ECR I-4483 , paragraph 11, that the term `producer' refers only to farmers who, for the purposes of milk production, operate a set of production units on their own account. 18 If in its judgment in Maier (paragraphs 11 and 12) the Court held that it is the lessee, not the lessor, who is the producer, the same must apply in the case of a farmer who produces a quantity of milk from the parcels of owned and leased land which he operates himself in his capacity of owner and lessee respectively. 19 With respect more particularly to the conditions to be satisfied by the aggregation of production units operated by the producer, namely the various plots of land owned and leased, the Landwirtschaftskammer in its oral observations and Mr Derksen consider that a reference quantity can be attached only to land situated in the Member State which has allocated it. They argue that restricting the attachment of a quota to land situated within the Member State which allocated the quota is necessary in order to ensure that the total quantity guaranteed to each Member State remains stable. The Kirchengemeinde and the Commission, on the other hand, reject the idea that there is any territorial principle in the allocation of milk quotas. 20 The latter argument must be accepted. 21 It follows from the judgment in Wachauf v Bundesamt für Ernährung und Forstwirtschaft [1989] ECR 2609 , paragraph 9, that Article 12(d) of Regulation No 857/84 relates to all production units which satisfy two conditions: namely, that they must be operated by a producer, that is to say, a person who sells milk or other milk products directly to the consumer or who supplies the purchaser (Article 12(c) of Regulation No 857/84), and must be located within the geographical territory of the Community. 22 The concept of operation is therefore not subject to the condition that, where land is leased, the production units concerned must be located in the territory of the Member State where the milk is delivered and which allocated the reference quota. So, the reference quota system does not preclude part of the production units being located in a Member State other than that in which the dairy to which the milk is delivered is located. 23 Consequently, Articles 2(1) and 12(c) and (d) together lay down the principle that the reference quantity is allocated to the land, in that it is established by reference to all the plots of land which a producer has operated for milk production purposes during the reference year. 24 This principle, that the reference quantity is attached to the land which was being operated at the time when the reference quantity was allocated, is in fact reflected in the general principle that, in the case of the partial transfer of a holding, the reference quantity is to be allocated to the transferee in proportion to the land transferred (judgment in Case C-81/91 Twijnstra v Minister van Landbouw, Natuurbeheer en Visserij [1993] ECR I-2455 , paragraph 25). 25 As to the consequences of that interpretation, it should be observed that in the present case the reference quota system, as so interpreted, prejudices neither the mandatory requirements relating to the maintenance of the stability of the allocation of guaranteed total quantities to each Member State, as the Landwirtschaftskammer and Mr Derksen claim, nor, more particularly, the aim of the reference quantity system, namely to limit Community milk production. 26 Under Article 5c(3) of Regulation No 804/68, the sum of the individual reference quantities allocated by a Member State may not exceed the total quantity guaranteed to that Member State. The guaranteed total quantity thus has the consequence of limiting production in each Member State to the quantities of milk produced in 1981. 27 On the assumption - which is not contradicted by any of the documents in the case - that in 1981 the producer's entire milk production, including the part corresponding to the land located in the other Member State, was supplied to a dairy in the Member State concerned, it is - unlike in Case C-351/92 Graff v Hauptzollamt Köln-Rheinau [1994] ECR I-3361 - included in the calculation of that Member State's guaranteed total quantity. Through the subsequent grant of a reference quantity corresponding to the quantity thus taken into account in the determination of the guaranteed total quantity, any risk of the guaranteed total quantity being exceeded appears to be excluded. 28 The answer to the first part of the question must therefore be that the reference quantity allocated to a producer by a Member State in 1984 under the additional levy system is attached to all the land owned or leased which is operated by the producer for milk production, even if part of the land is situated in another Member State. Rules applicable on termination of a lease 29 To give a proper answer to this part of the question, on the rules applicable on termination of a lease, it should first be noted that Article 7 of Regulation No 857/84 and Article 7 of Regulation No 1546/88 make it clear that if a holding is sold, leased or transmitted by inheritance, the corresponding reference quantity is in principle transferred in whole or in part to the purchaser, tenant or heir. 30 As to expiry of a lease, the Court in the Wachauf judgment, paragraph 13, interpreted Article 7(1) and (4) of Regulation No 857/84, considered as a whole, as meaning that the Community legislature intended that at the end of the lease the reference quantity should in principle revert to the lessor who retakes possession of the holding, subject, however, to the Member States' power to allocate all or part of the reference quantity to the departing lessee. 31 More specifically, on the basis of Article 5(3) of Commission Regulation (EEC) No 1371/84 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 1984 L 132, p. 11), which was applicable at the material time and which is now point 3 of the first paragraph of Article 7 of Regulation No 1546/88, the Court held in Wachauf, paragraph 15, that the surrender of a tenanted holding on the expiry of the lease has comparable legal effects, within the meaning of Article 5(3) of Regulation No 1371/84, to those brought about by the transfer of the holding on the grant of the lease, since both transactions entail a change in the possession of the production units in question within the contractual relations created by the lease. Consequently, the surrender, upon the expiry of the lease, of leased agricultural production units is a case covered by Article 5(3) of Regulation No 1371/84, provided that on the grant of the lease their transfer falls under Article 5(1), which is the case where a holding within the meaning of Article 12(d) of Regulation No 857/84, as interpreted above in reply to the Verwaltungsgericht's question, is involved. 32 It follows that, while questions relating to the lease, in particular its termination, are governed by the national law applicable in the main proceedings, the consequences as regards the reference quantities are prescribed by the Community rules on the additional levy. 33 Consequently, as the Advocate General states in point 26 of his Opinion, when a tenant leaves a holding, the reference quantities available to him revert in principle to the owner, unless the Member States exercise their option under Article 7(4) of Regulation No 857/84, as amended by Regulation No 590/85, and point 4 of the first paragraph of Article 7 of Regulation No 1546/88. 34 In the present case, the question whether the option under Article 7(4) of Regulation No 857/84, as amended by Regulation No 590/85, and point 4 of the first paragraph of Article 7 of Regulation No 1546/88 was exercised in favour of the departing tenant is of no relevance. It follows from the wording of Article 7(4) of Regulation No 857/84, as amended, that that option concerns a departing tenant only if he intends to continue milk production. It appears from the documents in the case that the heir does not intend to continue milk production after selling her holding. 35 The answer must therefore be that on expiry of a lease the reference quota reverts to the lessor, where the former lessee does not intend to continue milk production. Costs 36 The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. On those grounds, THE COURT (Sixth Chamber), in answer to the question referred to it by the Verwaltungsgericht Düsseldorf, by order of 18 November 1993, hereby rules: The reference quantity allocated to a producer by a Member State in 1984 under the additional levy system is attached to all the land, owned or leased, which is operated by the producer for milk production, even if part of the land is situated in another Member State. On expiry of a lease, the reference quantity reverts to the lessor, where the former lessee does not intend to continue milk production. © European Communities, 2001 All rights reserved BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII