Birra Dreher SpA v Amministrazione delle Finanze dello Stato (162/73)

Contents

In Case 162/73Reference to the Court under Article 177 of the EEC Treaty by the Pretore di Roma (Stipendiary Magistrate of Rome) for a preliminary ruling in the application pending before him for an order of the court against the Amministrazione delle Finanze dello Stato (State Administration of Finance) byBIRRA DREHER SPA, whose registered office is in Venice,THE COURTcomposed of: R. Lecourt, President, M. Sørensen, President of Chamber, R. Monaco, P. Pescatore (Rapporteur), H. Kutscher, C. Ó Dálaigh and Lord Mackenzie Stuart, Judges,Advocate-General: H. MayrasRegistrar: A. Van Houttegives the following

Judgment

Issues of fact and of law

I —Facts and procedure

The facts and procedure may be summarized as follows:In the preamble to its Regulation No 359/67 of 25 July 1967 on the common organization of the market in rice (OJ No 174, p. 1) the Council expressed the view that, because of the special situation of the market in starches and, in particular, the need for that industry to keep prices competitive with those for substitute products, it was necessary to ensure that broken rice could be made available to industry at a lower price than the one which would result from applying the system of levies and common prices. It therefore instituted a production refund granted under Article 9 for broken rice used by the starch industry and by the brewing industry.Regulation No 367/67, also of 25 July 1967, fixing production refunds for maize groats and meal and broken rice used in the brewing industry (OJ No 174, p. 36) expressed the view that the production refund on maize groats and meal and broken rice for the brewing industry should be fixed at such a level as to achieve a balance between the costs of supplying the brewing industry with maize starch on the one hand and with maize groats and meal and broken rice on the other. This object, according to the Regulation, would be achieved by fixing the refund on maize for the manufacture of groats and meal at the same level as the refund on maize for the manufacture of starch and, on the other hand, by fixing the refund on broken rice at a level which reduces the price to the brewing industry to 8·30 u.a. per 100 kg; the authors of the Regulation took the view however that in view of the current state of the world market in broken rice, the refund on that product should be limited, so long as prices on the market remained high, in such a way as, first, to deter imports at prices below the world market level and, secondly, to prevent the financial burden of production refunds from becoming excessive.Consequently, as regards broken rice, Article 1 (2) of Regulation No 367/67 provided that Member States were to grant a production refund on broken rice used in the brewing industry equal to the difference per 100 kg between the threshold price for broken rice and 8·30 u.a.; if, however, the c.i.f. price was higher than 8·30 u.a., the production refund was to be equal to the difference between the threshold price and the c.i.f. price for broken rice.Under Article 2 of the Regulation, Member States were to take all necessary measures to ensure that refunds were limited to the quantities of broken rice actually used by the brewing industry in the Community.Regulation No 367/67 was amended by Regulation No 852/67 of the Council of 14 November 1967, on the production refund on broken rice used for the manufacture of starch and quellmehl and in the brewing industry (OJ No 278, P. 1).In the recitals of the preamble to this Regulation the Council recalled that the production refund must not exceed the difference between the threshold price and the c.i.f. price, its aim being to ensure that broken rice was made available in particular to the brewing industry at a price lower than that which would result from applying the system of levies and common prices; it took the view however that the refund should not have the effect that broken rice was made available to the industry at a price lower than that resulting from the world market situation alone and that consequently it was not necessary to grant a refund when the c.i.f. price was equal to or higher than the threshold price.Consequently Article 1 of Regulation No 852/67 provided that production refunds should not be granted when the c.i.f. price for broken rice was equal to or greater than the threshold price for that product.Measures for implementing these Regulations of the Council were the subject of Regulation No 2085/68 of the Commission of 20 December 1968 on certain detailed rules for granting the production refund on broken rice (OJ L 307, p. 11).As regards Community-produced broken rice, Article 1 (2) of this Regulation provides that the amount of the refund shall be that in force on the day of delivery to the brewing industry. Article 2 provides that the refund shall be paid by the Member State in whose territory the broken rice is produced only when that State has ascertained by checks that the broken rice has actually been used in the industry for which it was intended. According to Article 3 (2) of the Regulation, in order to receive payment of the refund, the producer of broken rice shall submit to the competent authorities an application to which must be appended his invoice to the industry using it, showing the date of delivery, or a true copy stating the quantity of broken rice sold and indicating the exact business name of the undertaking in question.On 10 September 1971 Birra Dreher, a joint stock company governed by Italian law, a brewery with registered office in Venice, bought and took delivery from the undertaking Riseria Fratelli Roncaia at Canedole di Roverbella (Mantua) at a price of 1955200 lire (9400 lire per quintal), of a consignment of 200 quintals of broken rice intended for use in the brewing of beer.Birra Dreher, in pursuance of Article 4 of a circular of the Italian Ministry of Finance, concerning production refunds for broken rice, presented to the Rome Intendenza di Finanza (Finance Administration) a request for payment of refunds amounting to 525000 lire.Payment of the refund to Birra Dreher was refused in pursuance of Article 4 of the Decree of the Minister of Finance of 10 June 1970, concerning production refunds for broken rice (Gazetta Ufficiale No 167 of 6 July 1970, p. 4408). This provision requires that when the request for payment of the refund is presented by the brewery using the broken rice it must be accompanied by the written agreement of the undertaking producing the rice. Birra Dreher was not in a position to produce this written agreement as the undertaking Riseria Fratelli Roncaia had apparently ceased all activity and its owners could not be traced.By an application for an order of the court made before the Pretura (Stipendiary Magistrate's Court), Rome, Birra Dreher asked that the State Finance Administration be ordered to pay it the sum of 525000 lire by way of production refund on the broken rice used by it.The Pretore, by order of 29 August 1973, decided, in pursuance of Article 177 of the EEC Treaty, to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:1. Whether, in granting special production refunds on broken rice used in the manufacture of beer, Regulation No 367/67 of EEC of the Council was intended to place broken rice, meant for use in this way, on the same level of competitiveness and cheapness as other cereals (particulary maize) for which similar refunds have been provided when they are used for the same purpose (manufacture of beer).2. Whether, in view of the intention referred to above, the provisions of Regulation No 367/67 ECC (especially the recital) and of Regulation No 2085/68 of the Commission should be-interpreted as meaning that, to encourage the use of broken rice produced in the Community in the manufacture of beer, it must be made possible for brewers to buy broken rice at a low price (for example 8·30 units of account per 100 kilogrammes), and in any case lower than the price the product could command if it had been put to a different use.3. If the answer to question 2 is in the affirmative, whether a brewer who has paid for the broken rice at the normal market price, which was fixed without taking any account whatever of the refund, is entitled to receive the refund, in view of the fact that the broken rice producer has already received the full price based on market quotations.4. If the answer to question 3 is in the affirmative, and bearing in mind that the Community rules governing the case in hand are directly applicable, whether Member States can, by internal legislation, make the exercise of the brewer's right to be paid the refunds provided under Regulation No 367/67 of the Council and No 2085/68 of the Commission dependent on written consent being given by the broken rice producers.The order of the Rome Pretore was lodged at the Court Registry on 4 September 1973.In pursuance of Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted on 14 November 1973 by the Commission of the European Communities and on 26 November 1973 by the plaintiff in the main action.Upon hearing the report of the Judge-Rapporteur and the opinion of the Advocate-General, the Court decided to open the oral procedure without any preparatory inquiry.The oral observations of the plaintiff in the main action, the Government of the Italian Republic and the Commission were presented at the hearing on 15 January 1974.The Advocate-General delivered his opinion at the hearing on 30 January 1974.In the proceedings before the Court the plaintiff company in the main action was represented by Giuseppe Fortini, advocate, Turin, and Enrico Massa, advocate, Rome, the Government of the Italian Republic by His Excellency Adolfo Maresca, the Ambassador, acting as Agent, assisted by Arturo Marzano, Acting State Advocate-General, and the Commission by its Legal Adviser, Jacques Bourgeois, acting as Agent, assisted by Giuliano Marenco, a member of its legal department.

II —Observations submitted to the Court

The written and oral observations submitted to the Court may be summarized as follows:

A —As to the reference to the Court

The Government of the Italian Republic states that the application for an order of the national court (‘en injonction’) which is a preliminary and summary procedure, does not allow of argument on both sides before that Court with regard to the formulation of the questions which the latter refers to the Court of Justice. To admit of the possibility of a reference to the Court in these conditions would amount to sanctioning inequality in the judicial process and would create discrimination between nationals of various Member States depending on differences in the national systems of judicial procedure.Birra Dreher, the plaintiff in the main action, points out that no rule of Community law prescribes that reference may be made to the Court of Justice in pursuance of Article 177 of the EEC Treaty only in cases when the party against which the application is made has participated in the drafting of the questions put by the national court.The Commission points out that the case law of the Court already makes it clear that the national court may refer questions to it for a preliminary ruling in cases involving an application for an order of the national court (‘en injonction’).

B —As to the questions put by the national court

Birra Dreher, the plaintiff in the main action, takes the view that the essential aim of production refunds for broken rice used by the brewing industry is to allow the latter to purchase broken rice at an advantageous price and that detailed rules laid down at national level cannot create an impediment to the grant of the refund to a brewery using such rice.

1.The aim for which the refund was instituted appears from the following considerations.(a) As far as concerns the objectives of the common agricultural policy as they are recorded in Article 39 (1) of the EEC Treaty, a comparison between Regulation No 367/67 and certain Regulations providing for refunds for other products shows that the production refund for broken rice used in the brewing industry was only instituted in order to ‘ensure reasonable prices in deliveries’ to users. This objective is expressly confirmed by the recitals in the preamble to Regulation No 852/67, according to which the aim of the refund is to permit broken rice to be made available to the industries using it at a price lower than that which would result from applying the system of levies and common prices. Regulation No 2085/68 provides additional confirmation of the intention of the Community institutions to ensure reasonable prices for users by means of the production refund: the import refund instituted by the latter can obviously only have the aim of encouraging Community importers of broken rice and, according to the actual words of one of the recitals in the preamble to the Regulation, it is intended to ensure that broken rice will not be affected by the levy; in other words its aim is to reduce the price to the user. A refund for broken rice produced in the Community could not have a different function.(b) The fact that the Community Regulations do not specify with precision the recipients of the refund is not unusual and is explained in particular by the confidence of the Community institutions in the workings of the market: natural market conditions ensure that the refund is automatically allocated to the final consignee without its being necessary to lay down provisions requiring this.As far as broken rice is concerned, the expression ‘production refund’ cannot be interpreted as equivalent to ‘refund to the producer’; the very fact that the Regulations prescribe a production refund in favour of importers excludes such equivalence. The most reasonable interpretation of Regulation No 367/67 leads to recognition that a private party entitled to collect the refund may be either the producer or the user, according to whether the price agreed between them does or does not take account of the amount of the refund; thus the free will of the parties gives appropriate effect to the aims which the Community Regulations have set themselves.This alternative is not excluded either by Regulation No 367/67 of the Council or by Regulation No 2085/68 of the Commission: the first realizes the intention to confer an advantage on the Community brewing industry, so that the persons entitled to the refund would be the brewers, whilst the second is based on the assumption that the agricultural producer lowers the price demanded of the brewers to the extent of the amount of the refund and thus ensures that the benefit of the refund is enjoyed by the person for whom it is actually intended.In a case where, as here, the user pays the producer of the broken rice a price which does not take the refund into account, the producer is not entitled to the refund, not having given the user the benefit of it; the objective purpose of the refund would be frustrated if it were equally granted to a producer who has not reduced the price demanded of the brewery to the level fixed by Community rules. In such a case the right to obtain the refund directly to the producer and therefore has the right to be reimbursed. The opposite proposition would lead to the absurd result that the user would have to pay for broken rice produced by the Community a price very considerably higher than that for broken rice imported from third countries.(c) The Commission's proposition, according to which the refund was instituted in the sole interests of the producer of the broken rice, cannot be accepted.From the point of view of pure logic it is appropriate to recognize that the allocation of a subsidy to the producer of broken rice — who moreover is generally not an agricultural producer but an industrialist — simply does not guarantee the sale of the broken rice on the market; to attain that objective it is necessary rather to arrange for the user to be enabled to acquire it at a competitive price by comparison with that for competing synthetic products.From the economic point of view, if the Commission's theory were correct it would be hard to understand why a refund is granted only for broken rice used by starch factories and breweries, whereas broken rice has other more important uses; recognition of this fact establishes that refunds have a purpose other than that of guaranteeing to the producer continuous market outlets at stable prices.Legally it would be absurd to think of granting to the producer a refund which would result in annihilating the effects of Community levies instituted to protect that very producer; moreover the fact that the refund is granted also to the importer contradicts the Commission's proposition.The Commission is confusing the real objective of the refund — to avoid agricultural products' being delivered at too high prices to the industry which uses them — with a contingent, marginal effect, namely wiping out as far as the user is concerned the effects of the refund granted on maize and common wheat intended for starch production.Regulation No 2085/68 of the Commission cannot be interpreted as reserving the grant of the refund only to the producer of broken rice, to the exclusion of the user; in this case it would have to be considered as void, as it would introduce a restriction contrary to Regulations Nos 367/67 and 852/67, which the Commission is prohibited from doing by Article 155 of the EEC Treaty.The Commission's proposition, in its extreme consequences, would result in the refund's being paid to the producer of the broken rice even if, as in the present case, he has received a price of 15 units of account per 100 kg, whereas, the Object of the refund is to reduce the purchase price of broken rice to 8·30 u.a. per 100 kg; the fact that the Commission itself refuses to admit this absurd consequence demonstrates the weakness of its arguments.

2.It would be normal that; with the refund being allocated, to the user, he should be required, in-order to receive it, to establish the reality of his right to credit. In this respect the question arises of the legality of Article 4, of the decree of, the Italian Minister of Finance of 10 June 1970 which requires the user of the broken rice to produce the express consent, in writing, of the producer.(a) At first sight this provision appears not to conflict with the Community Regulations: its aim is to guarantee that the producer is hot deprived of the refund, his consent establishing that, at the time of the fixing of the price, the parties freely disposed of the refund in favour of the user.(b) However, in certain cases the condition imposed upon the exercise of the right to refund creates a restraint on the operation of the Community rule; the latter would be observed if the user were authorized to establish his right to the refund not only by the written consent of the producer but also by any other means of proof offering a reasonable safeguard. In this respect it is appropriate to call attention to the fact that the general agreement concluded between the national associations of the brewery and rice industries provides that as from 1 October 1970 refunds for broken rice used in the brewing industry go entirely to the user and that to this intent the supplier is to place on the invoice an endorsement in favour of the user. In the present case there is no reason to make the user suffer the damaging consequences of a fact for which he is not responsible so long as he proves his right to the grant of the refund. The reference to the written consent of the producer of the broken rice can only constitute at the most a subsidiary proof in the event of its turning out, to be impossible to determine, in particular on the basis of the prices actually paid by the user and the market prices of broken rice, to whom the refund should be paid. In no case should the obligation to produce the written consent of the producer involve the latter's exclusive right to the refund.(c) Having regard to the aims of the Community, Regulations, the only means making it possible to establish, in the absence of a specific agreement between producer and user, to whom the right to the refund belongs, is to check which of the two contracting parties would suffer damage by not receiving it. When the producer of the broken rice has received from the user a sum considerably in excess of the threshold price he cannot be granted the refund as well; otherwise he would be enriched without any justification, whilst the user, having already paid a price much above the world market price, would in addition be deprived of the refund.(d) The condition imposed by the decree of the Minister of Finance thus has no purpose other than to afford sufficient evidence for the grant of the refund to the user; it cannot have the effect of depriving the latter of the right to the refund in the event of his not proving the written consent of the producer: it is sufficient for the grant of the refund that he should satisfy the conditions imposed by the Community by proving that the product was in fact used by the brewery and that the price paid was not reduced in consideration of the refund.

1.Article 3 (2) of Regulation No 2085/68 clearly specifies the producer of broken rice as the recipient of the refund; this provision is in conformity with the whole of the system of refunds and its spirit.(a) The fact that the refund is paid and the checks on the use of the broken rice are carried out by the Member State into whose territory the broken rice is imported or in which it is produced, even when it is intended for use in another Member State, proves that a direct link has been established between the refund and the production of the broken rice.(b) The refund was instituted to allow rice-producers, without themselves suffering any disadvantage, to market broken rice at a price which would be attractive for potential users, especially breweries. This view is confirmed by the restriction of the refund to the extent that prices for broken rice on the market are high and its suppression when the c.i.f. price is equal to or higher than the threshold price.

2.The Italian Government correctly applied Community rules by providing that application for the refund must be made by the producer of the broken rice, or else by the user on condition that he provides the express written consent of the producer; in such a case account will have been taken, with a view to simplification, of an assignment of the claim which has taken place between the producer and the user. But in the absence of such consent it must be assumed that the user has paid a normal price and has no right to the refund.

3.The first question put by the Rome Pretore thus requires an affirmative answer, it being understood, first, that the refund is intended to protect the interests of producers of broken rice and, secondly, that this protection must be viewed in relation not only to products similarly benefiting from a refund but also to other substitute products.To the second question it is appropriate to reply in the negative: the interests of brewers were not taken into account at the time of the inroduction of the refund; at the most there is an indirect interest.The reply to the third question should also be in the negative: the producer cannot lay claim to the refund when he has sold the broken rice at the full price; the brewer's rights cannot be superior to those of the person entitled to the refund.The fourth question is only a minor one. It leads however to a finding that any assignment of the right to a refund from the producer to the brewer is a matter for domestic law alone.

1.It is incontestable that the production refund for broken rice used in the brewing industry is granted to the producer of the broken rice: he is to be considered as the person entitled to the refund.(a) This finding follows from the actual wording of the rules in question. In particular Article 3 (2) of Regulation No 2085/68, laying down the detailed rules for granting the refund, takes account only of an application from the producer and does not envisage any application from the brewery.(b) The production of and trade in broken rice — a product appearing in Annex II to the EEC Treaty — come under the agricultural provisions of the Treaty; that is not the case with beer. No doubt it would have been possible, on the basis of Article 43 of the Treaty, to provide for the grant of the refund to manufacturers of a product not appearing in Annex II on condition that the economic advantage was to go entirely to the agricultural producer; for this purpose however it would have been necessary in this case for Regulation No 359/67 on the common organization; of the market in rice and Regulation No 367/67 fixing production refunds on broken rice used in the brewing industry to provide expressly for payment of the refund to the brewery. As this is not the case, Regulation No 2085/68, laying down the detailed rules for the refund, could not have provided otherwise.(c) The production refund for broken rice used in the brewing industry is, like the refund for. maize groats and meal intended for the same use, the necessary consequence of the production refund for maize and common wheat intended for the production of starch. The refund for the production of starch has disturbed the equilibrium in the use by the brewing industry of starch on the one hand and maize groats and meal and broken rice on the other; it was to restore this equilibrium in competition that a refund was instituted for the latter products. As it was a question of ensuring equality between the suppliers of various raw materials to the brewing industry it was logical that the refund for maize groats and meal and broken rice should be granted to the producer — who is in competition with the starch manufacturer, who himself enjoys a refund for this product. The objective pursued by means of the refund was not to help the purchaser or the user, but to assist the agricultural producer, to ensure a fair income for him by putting him back into a good competitive position for marketing broken rice as against other raw materials.(d) The fact that the refund is also granted for imported broken rice by no means proves that the refund was instituted for the benefit of breweries. Regulation No 359/67, in the words of Article 29, is to be ‘so applied that appropriate account is taken, at the same time;, of the objectives set out in Articles 39 and 110 of the Treaty’; this reference to Article 110 indicates that the refund for imported broken rice is not for protectionist ends, but is justified by objectives of commercial policy.

2.Neither the wording nor the objective of the Regulations regarding the production refund for broken rice requires that the benefit of this refund should accrue to the brewery using it.(a) No provision in any Regulation expressly provides that the refund granted to the producer of broken rice used in the brewing industry must in one way or another be transferred to the buyer or used to reduce the selling price. The producer simply has to provide proof that the broken rice for which he is applying for a refund has actually been used in the brewing industry.(b) The proof of the actual use of the broken rice by the brewing industry suffices to achieve the immediate objective of the rules regarding the refund. The refund is justified by the fact that starch, a product in competition with broken rice, is itself the object of a production refund; it is intended above all to re-establish the balance of competition between broken rice, maize groats and meal and starch as regards the market which, for all these products, is represented by the brewing industry.(c) The primary objective of the production refund, contrary to the opinion of the plaintiff in the main action, is not to allow breweries to acquire broken rice at a preferential price or to ensure for them the same supply price for all the raw materials used. No doubt the refund, intended essentially to re-establish the balance between the suppliers of the various raw materials used in the brewing industry, does tend to maintain in being the outlet for these raw materials provided by breweries, and which the intention was to protect by exerting an effect on the price structure of broken rice. But, instead of trying to ensure the achievement of this objective, which is a secondary one, by granting the brewery a right to the refund, the Community institutions relied on the effects of supply and demand on the market. In a free market the very existence of the refund has an influence on the price structure and competition has its effect between sellers of broken rice, between products which can technically be substituted for it and indeed between broken rice produced in the Community and imported broken rice, which, equally, enjoys a production refund.The fact that a brewery using broken rice does not derive any benefit from the grant of the production refund to the producer of the broken rice is not, in itself, contrary to the primary intention of the refund.

3.This conclusion is in fact equally valid in so far as and to the extent to which the functioning of the market has been able to take full effect and producer and brewer have been able to negotiate the sale price by taking the grant of the refund into account; when the parties to the contract have agreed, in negotiating the sale price, that the refund granted to the producer is to be transferred in whole or in part to the brewery using the broken rice, Community rules do not oppose the implementation of this agreement.Community Regulations, after determining the persons entitled to the refund, have entrusted its payment to Member States; the problems connected with an. assignment of claim from the producer to the user are thus entirely a matter of domestic law.

According to the Government of the Italian Republic, the only person entitled to the refund is the producer of the broken rice; the user can receive it only if he proves the existence of an assignment of the claim by the producer.The Commission of the European Communities describes the machinery of the Community rules regarding production refunds for broken rice used in the brewing industry and fits it into the background of the production refunds provided for in the cereal sector, in particular for maize and common wheat. The problems of interpretation raised in the present case bear essentially on two questions: first, to whom the production refund for broken rice used in the brewing industry is granted, and secondly, on the assumption that it is. granted to the producer, whether he is obliged to pass the benefit on to the brewery.

Grounds of judgment

1By Order of 29 August 1973, lodged at the Court Registry on 4 September 1973, the Pretore of Rome, called upon to give judgment in the matter of an application for an order of the court against the Administration of Finance, put a number of questions relating to the interpretation of certain provisions of Regulation No 367/67 of the Council of 25 July 1967 fixing production refunds on maize groats and meal and broken rice used in the brewing industry (OJ No 174, p. 36), and of Regulation No 2085/68 of the Commission of 20 December 1968 on certain detailed rules for granting the production refund on broken rice (OJ L 307, p. 11).

As to the jurisdiction of the Court

2The Government of the Italian Republic, in the course of the oral procedure, expressed doubts as to the jurisdiction of the Court to give a ruling in pursuance of Article 177 of the EEC Treaty on a preliminary question raised in the course of an application for an order of the court brought before the Pretore by an individual against the Administration.It makes the point in this connexion that such a procedure has not the characteristics of a normal defended action inasmuch as the Court, adjudicating simply on the basis of allegations presented by the plaintiff, can make an order against the other party without having given him the opportunity to present his observations. The proceedings are contested only in the event of the party against whom the order is made raising objections to the decision. In the course of the proceedings the party concerned has no opportunity to submit his observations on the expediency of a reference for a preliminary ruling or, if need be, to take part or collaborate with the national court in drawing up the questions to be referred to the Court of Justice.

3According to Article 177 of the Treaty, the procedure regarding preliminary rulings is open to any national court or tribunal. It is sufficient to determine that the Pretore, in hearing the application for the grant of an order, is exercising the functions of a court or tribunal within the meaning of Article 177 — as has moreover previously been decided — and that an interpretation of Community law has been considered by that court as essential for it to arrive at a decision, without its being necessary for the Court of Justice to consider the stage of the proceedings at which the question was put. Article 177 does not make the reference to the Court subject to whether the proceedings at the conclusion of which the national court has drawn up the reference for a preliminary ruling were or were not defended.

As to the substance of the case

4The questions put are directed substantially to enquiring whether the right to the refund laid down by Regulations Nos 367/67 and 2085/68 for broken rice used by the brewing industry is vested exclusively in the producer or whether the benefit of the refund may in certain circumstances be claimed directly by the brewery using the rice.Whereas the first and second questions relate to the economic objective pursued by the above Regulations,— the third question enquires whether a brewer who has paid for broken rice at the ‘normal’ market price — that is, the price fixed without taking account of the payment of the refund — can assert a right to benefit directly from it; and— the fourth question enquires whether Member States can, by domestic implementing legislation, make the exercise of any right on the part of the brewer to payment of the refund subject to the production of the written agreement of the producer of the broken rice.

5In pursuance of Article 9 of Regulation No 359/67 of the Council of 25 July 1967 on the common organization of the market in rice (OJ No 174, p. 1), a ‘production refund’ shall be granted for broken rice which has been used either by the starch industry or by the brewing industry.This provision corresponds to that of Article 11 of Regulation No 120/67 of the Council of 13 June 1967 on the common organization of the market in cereals (OJ No 117, p. 2269), which makes provision for a similar refund for maize and common wheat used by the starch industry as well as for maize used for the manufacture of maize groats and meal (gritz) used by the brewing industry.

6By virtue of Article 1 of Regulation No 367/67, Member States shall grant a production refund both for maize groats and meal and for broken rice used in the brewing industry. Article 2 of the same Regulation requires them in addition to take all necessary measures to ensure that the refunds are limited to the quantities of maize groats and meal and of broken rice actually used by that industry.

7In its turn Regulation No 2085/68 of the Commission lays down certain detailed rules for granting a refund on the importation or production of broken rice. In particular Article 3 (2) of this Regulation specifies that in order to receive payment of the refund the ‘producer’ of broken rice shall submit to the competent authorities an application accompanied by certain evidence intended to establish that the rice has been used for the purposes referred to in the Regulation.

8The wording of these different Regulations specifies beyond any possible doubt that they apply to production refunds and that the right to them is conferred on producers and not users. These provisions are explained by the economic objective of the rules in question which aim not at conferring an advantage on the brewing industry but at avoiding a situation whereby the determination of the price level of certain basic products — namely maize, common wheat and rice — might lead to the closing to these products of the outlets which the starch industry and the brewing industry represent for them.More particularly these provisions, by putting on a basis of equality the different products — maize groats and meal, broken rice and starch — used by the brewing industry, aim at preserving a balance between the outlets provided for the products in question by the starch industry and the brewing industry, starch being in its turn capable of being listed amongst the raw materials used by the latter industry.

9This intention is expressed in the preamble to Regulation No 367/67, according to which the refund in question ‘should be fixed at such a level as to achieve a balance between the costs of supplying the brewing industry with maize starch on the one hand and with maize groats and meal and broken rice on the other’.Although this system may allow the brewing industry to supply itself on conditions more favourable than those which would result from the general price system, this advantage can however only be conferred upon it through the intermediary of the market and not in the form of a right directly granted by the Regulations.

10This conclusion is not invalidated by the fact that Regulation No 2085/68 of the Commission grants the refund not only to the producer but also to the importer of broken rice. This implementing provision, necessitated by the fact that, for imported broken rice, the producer is outside the sphere of application of Community law, does not result in any modification in the nature of the refund, as a production refund, laid down by the basic Regulation No 359/67 and confirmed by the implementing Regulation No 367/67 of the Council.These particular detailed implementing rules introduced by the Regulation of the Commission in fact only aim at placing on a basis of equality imported broken rice and broken rice originating within the Community without at the same time altering the intrinsic nature of the refund. No argument can therefore be based on the fact that the brewer-user may occasionally be identical with the importer of the goods.

11Finally, a national implementing provision which recognizes a right to the refund on the part of the brewer using the broken rice only in the event of such right's having been expressly assigned to him by the producer cannot be considered as incompatible with the system set up by the Community's Regulations. In fact, since the brewer using the broken rice cannot avail himself of a right directly conferred by the said Regulations, such a right can only be vested in him by virtue of an express assignment by the producer.

12Consequently it is appropriate to reply to the questions put, in so far as they raise a legal problem of interpretation, that the brewer who has paid for broken rice at the market price not taking account of the refund cannot assert a direct right to benefit from the latter, and that a system permitting the transfer to the brewer of the right to the refund by virtue of the formal agreement of the producer, with the consequence that in the absence of such an agreement the brewer cannot assert any direct right, is not incompatible with those Regulations.

Costs

13The costs incurred by the Government of the Italian Republic and the Commission of the European Communities, which have submitted their observations to the Court, are not rocoverable, and as the proceedings are a step in the action pending before the Rome Pretore, it is for the latter to decide as to costs.

Operative part

On those grounds,Upon reading the pleadings;Upon hearing the report of the Judge-Rapporteur;Upon hearing the plaintiff in the main action, the Government of the Italian Republic and the Commission of the European Communities;Upon hearing the opinion of the Advocate-General;Having regard to the Treaty establishing the European Economic Community, especially Article 177;Having regard to Regulation No 367/67 of the Council of 25 July 1967 fixing production refunds on maize groats and meal and broken rice used in the brewing industry;Having regard to Regulation No 2085/68 of the Commission of 20 December 1968 on certain detailed rules for granting the production refund on broken rice;Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community, especially Article 20;Having regard to the Rules of Procedure of the Court of Justice of the European Communities;THE COURTin answer to the questions referred to it by the Pretore of Rome by order of 29 August 1973, hereby rules:

1.A brewer who has paid at the market price for broken rice intended for the brewing of beer cannot assert a direct right to the grant of the refund referred to in Article 9 of Regulation No 359/67 of 25 July 1967 and Regulation No 2085/68 of 20 December 1968;

2.Member States may, by domestic implementing measures, permit the transfer to breweries of the right to the refund by virtue of the formal consent of the producer.

Delivered in open court in Luxembourg on 21 February 1974.