Jean-Francois Deschamps and others v Office national interprofessionnel des viandes, de l'elevage et de l'aviculture (Ofival). [1989] EUECJ R-181/88 (13 December 1989)

Judgment 1 By judgments of 28 June and 19 July 1988, which were received at the Court on 4 July and 3 August 1988, respectively, the tribunal administratif, Dijon, and the tribunal administratif, Amiens, referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a question on the validity of Articles 5 and 9 of Council Regulation ( EEC ) No 1837/80 of 27 June 1980 on the common organization of the market in sheepmeat and goatmeat ( Official Journal L 183, p . 1 ), as amended by Council Regulation ( EEC ) No 871/84 of 31 March 1984 ( Official Journal L 90, p . 35 ). 2 That question arose in three actions for annulment brought by three French sheepmeat producers against decisions of the director of the Office national interprofessionnel des viandes, de l' élevage et de l' aviculture ( hereinafter referred to as "Ofival "), fixing the amount of the premium to offset loss of income suffered by each of those producers which was to be paid to them for the 1986 marketing year under Article 5 of Regulation No 1837/80 . 3 In contesting those decisions, the plaintiffs in the main proceedings argued that they were based on an unlawful regulation, namely Council Regulation No 1837/80, inasmuch as Article 9 of that regulation, as amended by Council Regulation No 871/84, provides that the United Kingdom may choose between two different schemes for offsetting the loss of income, namely an annual ewe premium and a variable slaughter premium, whereas under Article 5 of the same regulation, the other Member States may only apply one scheme, namely the annual ewe premium . 4 In order to determine whether the submissions put forward by the plaintiffs in the main proceedings were well founded, the tribunal administratif de Dijon ( Cases C-181/88 and C-182/88 ) decided to stay the proceedings until the Court of Justice had given a preliminary ruling on "the validity of Articles 5 and 9 of Council Regulation No 1837/80 of 27 June 1980, as amended by Council Regulation No 871/84 of 31 March 1984, in the light of the principles of non-discrimination, equal treatment and the free movement of goods laid down in the Treaty establishing the European Economic Community ". 5 In the same context, the tribunal administratif d' Amiens ( Case C-218/88 ) asked the Court to give a preliminary ruling on the following question : "Are Articles 5 and 9 of Regulation No 1837/80, as amended by Regulation No 871/84, contrary to the principles of non-discrimination between producers and the free movement of goods laid down in the second and third subparagraphs of Article 40(3 ), and Article 30 of the Treaty of Rome, in so far as they provide for two systems of compensation for loss of income and afford the possibility of a choice between them to one Member State alone ?". 6 Reference is made to the Report for the Hearing for a fuller account of the facts of the cases, the relevant Community rules, the course of the procedure and the written observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court . The validity of the rules in the light of the principles of equal treatment and non-discrimination 7 It should be pointed out that Regulation No 1837/80 on the common organization of the market in sheepmeat and goatmeat, as amended, provides for three market support mechanisms : the annual ewe premium, intervention measures and the variable slaughter premium . 8 The annual ewe premium, which is intended to offset the loss of income suffered by producers during a given marketing year, is paid at the end of the year in question . The premium corresponds to any difference there may be between the basic price fixed annually by the Council and the arithmetical mean of the market prices recorded for each region during the marketing year ( Article 5(2 ) ). 9 However, the Commission may, during the marketing year, authorize the Member States to make a payment on account in favour of producers of sheepmeat situated in the less-favoured farming areas as defined by applying Article 3(3 ), ( 4 ) and ( 5 ) of Council Directive 75/268/EEC of 28 April 1975 on mountain and hill farming and farming in certain less-favoured areas ( Official Journal L 128, p . 1; Article 5(4 ) of Regulation No 1837/80, as amended by Regulation No 871/84 ). 10 The intervention measures may be taken in the form of private storage aid or purchases by the intervention agencies . At the request of one or more Member States, the purchases may be made where, during the period 15 July to 15 December of each year, the market price is equal to or less than a seasonally adjusted intervention price corresponding to 85% of the seasonally adjusted basic price and at the same time the price recorded on the representative markets of a given region is equal to or less than the seasonally adjusted intervention price ( Articles 6 and 7 ). 11 The variable slaughter premium is paid during the course of the marketing year . It covers the difference between the seasonally adjusted guide level, that is to say, 85% of the seasonally adjusted basic price, and the market price recorded in region 5, that is to say, Great Britain . That premium may be granted only by the United Kingdom and on the condition that purchases are not made by the intervention agencies in accordance with Article 6(1)(b ) of Regulation No 1837/80 . The annual ewe premium which may be granted at the end of the marketing year is reduced, in accordance with rules laid down in Article 5(6 ) of the same regulation, by the amount of variable slaughter premiums actually paid during the marketing year . 12 If the variable slaughter premium be paid, an amount equivalent thereto is charged upon exportation (" claw-back", Article 9(3 ) and ( 4 ) of Regulation No 1837/80 ). However, according to Commission Regulation ( EEC ) No 3191/80 of 9 December 1980 on transitional measures concerning non-recovery of the variable slaughter premium for sheepmeat and goatmeat products exported from the Community ( Official Journal L 332, p . 14 ), as amended by Commission Regulation ( EEC ) No 1558/82 of 17 June 1982 ( Official Journal L 172, p . 21 ), the variable slaughter premium is not recovered if the products in question are exported from the Community . 13 The plaintiffs in the main proceedings and the Government of the French Republic consider that the removal of the right of the Member States, except that of the United Kingdom ( region 5 ), to opt for the application of the variable slaughter premium places British producers in a more favourable situation than other Community producers . The variable slaughter premium, which is calculated weekly and paid very rapidly, permits producers who produce "out of season", such as the plaintiffs in the main proceedings, to obtain compensation for the actual difference between the guaranteed price and the market price at the time when their lambs are marketed . In so far as the compensating premium corresponds to the annual arithmetical mean of the national weekly payments, the French "out-of-season" producer who sold his animals in a week in which the payments were very much below the basic price would receive an amount less than the seasonally adjusted guaranteed level, as fixed by the Community authorities . It follows that if they had been compensated on the basis of the conditions applied in Great Britain, the plaintiffs in the main proceedings would have obtained significantly higher compensation than that granted them by Ofival . 14 It also follows from the application of the variable slaughter premium and the suspension of the claw-back rules as far as British exports to non-member countries are concerned that producers in region 5 can sell at very low prices and that, consequently, the penetration of markets of non-member countries by producers in other regions of the Community is made impossible . 15 According to the plaintiffs in the main proceedings and the French Government, the provisions of Articles 5 to 9 of Regulation No 1837/80 infringe the prohibition of discrimination laid down in Articles 7 and 40(3 ) of the Treaty inasmuch as the distinction drawn between the Member States by those provisions is not justified by objective circumstances . 16 It should be pointed out first, as the Court held in its judgment of 15 September 1982 in Case 106/81 Julius Kind KG v EEC (( 1982 )) ECR 2885, the possibility which the Member States have of choosing between two intervention methods, namely the variable slaughter premium and intervention buying, both of which are brought into operation by the same price level, is not discriminatory if it is necessary in order to take account of the different market situations in the Community . 17 It follows that the question to be considered is solely whether the regulation at issue, by permitting a single Member State to pay the variable slaughter premium in a given region, infringed the principle of equal treatment, of which Article 40(3 ) is merely one expression . 18 In that regard, it should be borne in mind that, according to that principle, similar situations are not to be treated differently unless there is an objective justification for that difference . 19 The rules applying to trade with non-member countries, which include voluntary restraint agreements accompanied by undertakings to respect traditional trade patterns and, in exchange, a 10% reduction in ad valorem duty, as consolidated in the GATT, mean that market prices in region 5, which imports more sheepmeat from non-member countries than any other region, are significantly lower than in the other regions . Such a market requires support measures, such as the variable slaughter premium, the purpose of which is not to support price levels, which is the purpose of purchases by the intervention agencies and storage aid, but to grant financial aid to producers without influencing market prices . 20 It should be pointed out that, as a result of traditional trade patterns, market prices in region 5 are consistently lower than the guide price, which gives rise to payment of the variable premium . The Member States have never paid that premium in the other regions when they could have done so . 21 It was after noting those specific charecteristics of the British market that the Community legislature added to the measures contained in Regulation No 871/84, which were designed to ensure the unity of the common market organization in question, the removal of the option to pay the variable slaughter premium in all regions, with the exception of region 5, on the ground that only the market in that region required support measures of that kind . 22 As is pointed out above, in certain other regions in which producers are also subject to unfavourable conditions, early payment of the annual ewe premium may be granted ( 75% in 1986 ). The same advance payment may be granted as State aid in other areas if circumstances justify it . That was the case in France until the end of the 1985/86 marketing year, since the market was characterized, on the one hand, by two consecutive periods of drought in 1985 and 1986, which forced producers to slaughter a large part of their flocks and even to go into debt to buy fodder and, on the other, by the considerable fall in the value of the pound sterling, which enabled sheepmeat to be supplied on the French market at relatively low prices ( Council Decision of 16 December 1986, Official Journal L 382, p . 3 ). 23 It should also be pointed out that the suspension of the claw-back arrangement as regards British exports to non-member countries was necessary, in the Commission' s view, in order to maintain traditional export patterns from Great Britain . In the absence of an export refund scheme, as provided for in Article 17 of Regulation No 1837/80, the claw-back would have put those patterns in jeopardy, since world market prices were below Community prices . 24 Finally, it should be observed that comparison between the variable slaughter premium and the annual ewe premium does not permit the conclusion to be drawn that the former gives advantages to "out-of-season" producers and that, therefore, the possibility of paying it to producers in a single region is contrary to the principle of equal treatment . In principle, "out-of-season" producers in other regions can also benefit from intervention buying, the trigger threshold for which is the same as that for the variable slaughter premium . However, such intervention measures have not been adopted because in the other regions the market price is, in general, above the threshold at which the application of such measures is triggered, that is to say they are higher than 85% of the seasonally adjusted basic price . 25 Under those circumstances and having regard to the institutions' discretion in implementing a common market organization and to Article 39(2 ) of the Treaty, according to which "in working out the common agricultural policy and the special methods for its application" account is to be taken of "structural and natural disparities between the various agricultural regions" and the "need to effect the appropriate adjustments by degrees", the option given to a Member State to pay the variable slaughter premium in a given region does not infringe the principle of equal treatment . The validity of the rules in the light of the principle of free movement 26 According to the plaintiffs in the main proceedings and the Government of the French Republic, the fact that the variable slaughter premium was paid exclusively to British producers constitutes an infringenment of the principle of free movement . Those producers enjoy what amounts to an interest-free loan and can always take advantage of price adjustments at the level of the guide price, which gives them advantages which producers in other regions do not enjoy . Consequently, prices are lower on the British market, which hinders exports from other Member States to the British market and favours British exports to non-Member countries 27 As regards intra-Community trade, it should be borne in mind first of all that the purpose of claw-back, which occurs when products leave region 5 and corresponds to a fraction of the variable slaughter premium, is to offset exactly the effects of that premium and thus permit products from the region in which that premium is paid to be exported to other Member States without disturbing their market . 28 Secondly, the level of prices on the British market, which is alleged to be the cause of that market being closed to imports from the other Member States, is the consequence of the rules applicable to trade with non-member countries, the modification of which has not yet proved possible . 29 It follows that Articles 5 and 9 of Regulation No 1837/80 do not infringe the principle of free movement . 30 As regards trade with non-member countries, to which the principle of free movement does not apply, reference should be made to what has been said above concerning the alleged infringement of the principle of equal treatment . 31 It follows from the foregoing considerations that the answer to be given to the tribunal administratif de Dijon and the tribunal administratif d' Amiens should therefore be that consideration of the questions raised has disclosed no factor of such a kind as to affect the validity of Articles 5 and 9 of Council Regulation No 1837/80 of 27 June 1980, as amended by Council Regulation No 871/74 of 31 March 1984 . Costs 32 The costs incurred by French Government, the United Kingdom, and the Council and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable . Since these proceedings are, in so far as the parties to the main actions are concerned, in the nature of a step in the proceedings pending before the national courts, the decision on costs is a matter for those courts . On those grounds, THE COURT ( Fifth Chamber ), in answer to the questions submitted to it by the tribunal administratif de Dijon and the tribunal administratif d' Amiens, by judgments of 28 June and 19 July 1988, hereby rules : Consideration of the questions raised has disclosed no factor of such a kind as to affect the validity of Articles 5 and 9 of Council Regulation ( EEC ) No 1837/80 of 27 June 1980, as amended by Council Regulation ( EEC ) No 871/74 of 31 March 1984 . © European Communities, 2001 All rights reserved BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII