Nordbutter GmbH & Co. KG v Federal Republic of Germany (9/85)

Contents

Judgment of the Court (First Chamber)8 October 1986^noteIn Case 9/85Reference to the Court under Article 177 of the EEC Treaty by the Verwaltungsgericht [Administrative Court] Frankfurt am Main for a preliminary ruling in the proceedings pending before that court betweenNordbutter GmbH & Co. KG, Rendsburg,andFederal Republic of Germany, represented by the Bundesamt für Ernährung und Forstwirtschaft [Federal Board for Food and Forestry]THE COURT (First Chamber)composed of: R. Joliét, President of Chamber, G. Bosco and T. Koopmans, Judges,Advocate General: G. F. ManciniRegistrar: H. A. Rühi, Principal Administratorafter considering the observations submitted on behalf of— the defendant in the main proceedings, by the Bundesamt für Ernährung und Forstwirtschaft, represented by G. Siebert in the written procedure, and by Mr Bergemann, in the oral procedure,— the Commission of the European Communities, by its Legal Advisers, D. Boos and P. Karpenstein, acting as Agents, in the written procedure and, in the oral procedure, by D. Boos,having regard to the Report for the Hearing and further to the hearing on 6 February 1986,after hearing the Opinion of the Advocate General delivered at the sitting on 27 May 1986,gives the following

Judgment

1By an order of 13 December 1984, which was received at the Court on 17 January 1985, the Verwaltungsgericht Frankfurt am Main referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty various questions as to the interpretation and validity of Articles 4 and 5 of Commission Regulation (EEC) No 2793/77 of 15 December 1977 on detailed rules of application for granting special aid for skimmed milk for use as feed for animals other than young calves, as amended by Commission Regulation (EEC) No 188/83 of 26 January 1983 amending for the 12th time Regulation No 2793/77 (Official Journal 1983, L 25, p. 14).

2The dispute in the main proceedings concerns a demand for the repayment of aid which had been accorded to a dairy, Nordbutter GmbH and Co. KG, as special aid for skimmed milk used as feed for animals other than young calves. The demand for repayment was issued by the German Intervention agency, the Bundesamt für Ernährung und Forstwirtschaft [Federal Board for Food and Forestry, hereinafter referred to as ‘the Board’]. In the course of inspections carried out at dairy farms with which the dairy had concluded contracts for the supply of skimmed milk qualifying for the special aid, the Board discovered that certain of the farmers had failed to comply with the requirements laid down by the Community provisions.

3The special aid is granted to dairies which sell skimmed milk at a fixed maximum price to farmers who use it as feed for animals other than young calves. In order to prevent farmers from obtaining skimmed milk on the especially advantageous terms of the special aid and using it to feed calves, a system of supervision was established for, in particular, mixed farms, in other words farms on which calves and other animals are kept at the same time. Thus Article 3 of Commission Regulation No 2793/77, which lays down detailed rules for a system of supervision, provides that special aid is to be granted to a dairy only in respect of skimmed milk covered by an undertaking on the part of the farmer to comply with the requirements laid down in Article 4 of the regulation.

4As regards mixed farms, Article 4 (1) (c) of the regulation requires the farmer: to forward to the dairy a statement of the size of his herd at the time of the application for delivery; to declare to the dairy, before the beginning of each quarter, ‘the maximum number of calves less than four months old which will be kept on the farm during the quarter in question’; and to take delivery for each calf so declared of a minimum quantity of skimmed milk not qualifying for special aid equal to 6 kg per day or 180 kg per month. Article 4 (3), inserted by Regulation No 188/83, adds that the special aid is to be reduced by 10% for the period concerned ‘where a statement made to a dairy of the size of the herd or the maximum number of calves is not forwarded on time but not more than 10 days late’.

5It appears from the documents before the Court that in this case, according to the findings made by the competent departments of the Board, various farmers were 12 or 13 days late in making their declarations as to the size of their herd, whilst other farmers had declared fewer young calves than were actually kept during the period in question.

6Nordbutter contested the demand for repayment in full of the special aid obtained for the period concerned in respect of skimmed milk supplied to the farmers in question. In the first place it maintained that it was disproportionate to require the repayment in full of the special aid even where the farmers had merely failed to respect the 10-day period laid down in Article 4 (3) of Regulation No 2793/77. Secondly, it argued that the intervention agency's method of calculating the ‘maximum number of calves less than four months old’ within the meaning of Article 4 (1) (c) of that regulation was erroneous. The relevant figure was not simply the total number of young calves kept during the period in question but the number of young calves present on the day in that period when that number was at its highest.

7In order to resolve those problems the Verwaltungsgericht Frankfurt am Main, before which the dispute came, referred the following question to the Court of Justice for a preliminary ruling:(1) How is the expression ‘maximum number’ contained in the second indent of Article 4 (1) (c) of Commission Regulation No 2793/77 of 15 December 1977 to be interpreted?(2) Is the rule embodied in Article 4 (3) of Regulation No 2793/77, as amended by Article 1 (1) (b) of Commission Regulation No 188/83 of 26 January 1983, incompatible with the principle of proportionality in so far as it provides that the aid is to be withheld solely on the ground that the size of a herd or the maximum number of young calves is notified to the dairy more than 10 days late?(3) Is it compatible with the principle of proportionality to withhold or to reclaim the full amount of the aid where the information supplied by the farmer was incorrect, with the result that in the calculation of special aid pursuant to the third indent of Article 4 (1) (c) fewer calves were taken into account than were actually kept on the farm, or is the special aid to be forfeited only in respect of the difference between the amount which should have been paid on the basis of the real size of the herd and the amount actually paid?(4) Is it within the discretion of the authorities to withhold or to reclaim the special aid wholly or in part pursuant to Article 5 (3) (b) of Regulation No 2793/77?(5) If Question 4 is answered in the negative, in what circumstances and to what extent may the special aid be withheld or reclaimed in part only?’

The first question

8In setting out the grounds on which it based its decision to submit this question, the national court expressed the fear that a literal interpretation of the expression ‘maximum number’ in Article 4 (1) (c) might operate to the disadvantage of farms on which the maximum number of calves were present for only a few days of the period in question. Those farms would have to buy much more skimmed milk not qualifying for the payment of special aid than they actually needed for feeding the calves.

9In that respect it should be noted that the declaration of the maximum number of calves present during a quarter is one of the obligations imposed on farmers in order to prevent skimmed milk obtained on advantageous terms from being diverted from its intended purpose and used, in particular, to feed young calves. Since it is impossible to determine on a mixed farm whether the skimmed milk delivered by the dairy has actually been used to feed animals other than young calves, Regulation No 2793/77 introduced a system which operates by way of a standard deduction. That system is based on the assumption that it is possible to determine the quantity of skimmed milk not consumed by animals other than young calves by multiplying certain verifiable data (the number of days in a quarter, a fixed number of kilogrammes per day and the number of calves corresponding to the ‘maximum number of calves... kept on the farm’ during that quarter).

10In those circumstances the reference to the ‘maximum number’ rather than the total number or average number of young calves can be interpreted only as the highest number of calves kept on the farm in question at any moment during the quarter. Indeed that is the only interpretation which makes it possible for the competent bodies to determine in a relatively easy way whether farmers have abided by their undertakings.

11Consequently, in reply to the first question it must be stated that the expression ‘maximum number of calves less than four months old which will be kept on the farm during the quarter in question’, contained in Article 4 (1) (c) of Regulation No 2793/77, must be interpreted as referring to the highest number of calves kept on the farm concerned on any day in that quarter.

The second and third questions

12It appears from the order requesting the preliminary ruling that the second and third questions are intended to obtain an interpretation of Community agricultural provisions which is consistent with the principle of proportionality. The national court recognizes that, following the amendment made by Regulation No 188/83, the aid is not withheld in full, but only reduced by 10%, where the delay in submitting the declarations does not exceed 10 days. It considers, however, that it is difficult to see why entitlement to special aid should be completely extinguished after more than 10 days.

13Similarly, the national court raises the question why an incorrect statement regarding the number of young calves should entail the loss of all entitlement to special aid. Where the farmer declares fewer young calves than are actually kept, application of the principle of proportionality would suggest rather that the amount of aid should be reduced by the difference between the amount actually paid and the amount which ought to have been paid on the basis of the real size of the herd.

14The Commission argues in that respect that compliance with the time-limits and the provision of accurate information are essential elements in the aid system in question since together they ensure that it is possible to verify whether the deductions effected on the basis of the size of the herd of young calves have been correctly calculated. With reference to inaccurate statements, the Commission contends that the loss of all the advantages accorded under the aid system is the sole means of guaranteeing the proper functioning of the system, since no other penalty is capable of inducing farmers to provide correct information, in particular regarding the maximum number of young calves.

15It should be recalled in that respect that in 1968 the Community regulations already provided for the grant of aid for skimmed milk used for animal feed, with a view, inter alia, to reducing the milk surplus in the Community. Since it became clear that skimmed milk was traditionally used as feed for calves, in 1977 the Community regulations introduced a special incentive for the use of skimmed milk as feed for other animals, in particular pigs. The dual nature of the aid laid it open to the risk of abuse and that risk was particularly great in connection with mixed farms.

16It follows that, without a reliable and simple system of supervision, the aid scheme could no longer operate. The operation of the scheme would be jeopardized if farmers were not induced to comply fully with their undertakings, in particular with regard to the truth of declarations made and time-limits within which such declarations are to be submitted.

17As far as time-limits are concerned, it should be recalled that the regulation itself provides that where such time-limits are exceeded by less than 10 days the special aid is not withheld in its entirety. Thus the Community rules take into account the considerable disadvantage represented by the loss of the entire aid where the time-limits prescribed have been exceeded only slightly. In the preamble to Regulation No 188/83 it is acknowledged that the strict application of time-limits where they are exceeded only slightly would entail loss of the full amount of the aid and it is stated that ‘the aid should be reduced in line with the seriousness of the failure to observe’ the obligations in question. In those circumstances it is not for the Court to consider whether the legislative bodies of the Community should have provided that time-limits were ‘only slightly exceeded’ where they were exceeded by 12 or 13 days rather than 10 days.

18Accordingly, the reply to the second and third questions must be that the loss of the full amount of the special aid where the declarations made concerning the number of calves kept on a mixed farm are incorrect or where the period laid down in Article 4 of Regulation No 2793/77 is exceeded by more than 10 days is not contrary to the principle of proportionality.

The fourth and fifth questions

19The fourth and fifth questions concern the interpretation of Article 5 (3) (b) of Regulation No 2793/77. According to that provision any application for the payment of special aid submitted by the dairy to the competent authority is to be accompanied by a declaration that the dairy will, as appropriate, forego or repay the special aid ‘wholly or in part’ to the competent authority if it is found that the farmer has not abided by one of the undertakings referred to in Article 4 of the regulation.

20The national court seeks to establish in particular whether it is within the discretion of the competent authorities to reclaim the aid wholly or in part. If it is not, the national court wishes to know in what circumstances special aid may be reclaimed only in part.

21In that respect it should be recalled that, under the scheme of special aid for skimmed milk for use as feed for animals other than young calves, the aid is granted not to individual farmers but to the dairy. However, the obligation to repay the aid is linked to the individual farmer's failure to abide by his undertaking. In those circumstances the fact that the dairy has made a single application cannot mean that the failure on the part of an individual farmer to abide by his undertakings entails the loss of the full amount of the aid even where that aid has been granted in respect of other farmers. The dairy is therefore required to repay only the amounts which correspond to the undertaking which has not been respected, and the application remains valid for the undertakings which have been respected.

22In reply to the fourth and fifth questions it should therefore be stated that the ‘partial’ repayment of the special aid referred to in Article 5 (3) (b) of Regulation No 2793/77 concerns cases where the application for aid submitted by the dairy covers undertakings entered into by several farmers of whom only some have abided by their undertakings.

Costs

23The costs incurred by the Commission, which has submitted observations to the Court, are not recoverable. Since these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the proceedings pending before the national court, the decision as to costs is matter for that court.

Operative part

On those grounds,THE COURT (First Chamber),in answer to the questions submitted to it by the Verwaltungsgericht Frankfurt am Main by an order of 13 December 1984, hereby rules:

(1).The expression ‘maximum number of calves less than 4 months old which will be kept on the farm during the quarter in question’, contained in Article 4 (1) (c) of Commission Regulation (EEC) No 2793/77 of 15 December 1977 (Official Journal 1977, L 321, p. 30), refers to the highest number of calves kept on the farm concerned on any day in that quarter.

(2).The loss of the full amount of the special aid where the declarations made concerning the number of calves kept on a mixed farm are incorrect or where the period laid down in Article 4 of Regulation No 2793/77 is exceeded by more than 10 days is not contrary to the principle of proportionality.

(3).The partial repayment of the special aid referred to in Article 5 (3) (b) of Regulation No 2793/77 concerns cases where the application for aid submitted by the dairy covers undertakings entered into by several farmers, of whom only some have abided by their undertakings.

Delivered in open court in Luxembourg on 8 October 1986.