Roquette Frères SA v Office national interprofessionnel des céréales (ONIC) (47/86)

Contents

Judgment of the Court (Sixth Chamber)30 June 1987^noteIn Case 47/86REFERENCE to the Court under Article 177 of the EEC Treaty by the tribunal administratif (Administrative Court), Lille, for a preliminary ruling in the proceedings pending before that court betweenRoquette Frères SA, a company incorporated under French law whose registered office is in Lestrem (Pas-de-Calais),andOffice national interprofessionnel de céréales (ONIC) (National Cereals Trades Board)THE COURT (Sixth Chamber),composed of: C. Kakouris, President of the Chamber, T. Koopmans, O. Due, K. Bahlmann and G. C. Rodriguez Iglesias, Judges,Advocate General: C. O. LenzRegistrar: H. A. Rühi, Principal Administratorafter considering the observations submitted on behalf of— Roquette Frères SA, the plaintiff in the main proceedings, by Marcel Veroone and Jacques Dutat, of the Lille Bar, in the written procedure and by Jacques Dutat, with A. Baudelet, acting as expert, in the oral procedure,— the Commission, by Denise Sorasio, acting as Agent,having regard to the Report for the Hearing and further to the hearing on 20 January 1987,after hearing the Opinion of the Advocate General delivered at the sitting on 17 March 1987,gives the following

Judgment

1By a judgment of 5 December 1985, which was received at the Court on 18 February 1986, the tribunal administratif (Administrative Court), Lille, referred three questions to the Court for a preliminary ruling under Article 177 of the EEC Treaty on the validity and interpretation of Article 3 (3) of Commission Regulation No 1570/78 of 4 July 1978 laying down detailed rules for the application of Council Regulation No 2742/75 as regards production refunds on starches and repealing Regulation No 2026/75 (Official Journal 1978, L 185, p. 22).

2Those questions were raised in proceedings before that court between Roquette Frères SA, whose registered office is in Lestrem (Pas-de-Calais), and the Office national interprofessionnel de céréales (ONIC) (hereinafter referred to as ‘the Board’).

3Roquette Frères had, in accordance with Regulation No 1570/78, obtained payment from the Board of a production refund on a quantity of maize to be used in the manufacture of starch which had been placed under official supervision. At the same time Roquette Frères had lodged a security guaranteeing that the basic product would be processed which, pursuant to Article 3 (2) of the regulation, was equal to 105% of the amount of the production refund.

4When the processing into starch had been completed, the Board established that the quantity actually processed amounted to only 95.91% of the quantity of maize placed under official supervision and decided to release only part of the security up to a sum equal to the refund payable on the quantity actually processed and to regard the remaining part of the security as forfeit.

5That decision was based on Article 3 (3) of the contested regulation, which provides as follows:‘The security shall be released when:(a) the person entitled to the refund has furnished proof to the competent agency that at least 96% of the quantity of the basic product placed under supervision has been processedHowever, when a quantity equal to less than 96% of the amount of the basic product has been processed during this period, the security shall be released in respect of an amount equal to that of the production refund payable on the quantity of the basic product which has been processed.’

6Since Roquette Frères did not accept that, by virtue of a shortfall of 0.09% from the 96% laid down in the regulation, the processing operation should give rise to the forfeiture not just of the part of the security corresponding to that difference but also of the part corresponding to the tolerance of 4% (100% — 96%) and the additional 5%, in other words, in total a loss of 9.09% of the refund obtained, it brought proceedings before the tribunal administratif, Lille, for the annulment of the Board's decision.

7The tribunal administratif stayed the proceedings and asked the Court:(1) Is it possible for the provisions in Commission Regulation (EEC) No 1570/78 of 4 July 1978 that lay down detailed rules for the application of Article 8 (b) of Regulation (EEC) No 2742/75 of the Council of 29 October 1975 to provide only for the advance payment of production refunds before the product placed under supervision was processed and for the lodging of a security?(2) If so, is that interpretation of those provisions correct and not contrary to the principle that a sanction must be in proportion to the event which gives rise to its application where the quantity of the basic product processed is less than 96% of the quantity placed under supervision?(3) Is the difference between the provisions concerning release of securities in Regulation No 1570/78 and the corresponding provisions in Regulation No 1729/78 of 24 July 1978 on production refunds for sugar contrary to the principle of equality of treatment of manufacturers?’

8Reference is made to the Report for the Hearing for a fuller account of the provisions of Community law in question, the facts of the case and the observations of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

The first question

9Roquette Frères considers that in providing, in Regulation No 1570/78, that production refunds would be paid in advance and that it was mandatory for a security to be lodged, the Commission disregarded one of the alternatives which is implicit in Article 8 (b) of Regulation No 2742/75 of the Council of 29 October 1975 on production refunds in the cereals and rice sectors (Official Journal 1975, L 281, p. 57), namely the payment of the refund after the processing had taken place and therefore without a security being lodged beforehand.

10It should be recalled that the said Article 8 (b) provides that the Commission should adopt, in accordance with the so-called Management Committee procedure, ‘detailed rules for the application of [that] regulation, in particular as regards : ... (b) the granting of advances on production refunds which may involve the giving of security’. By that enabling provision, the Council left to the Commission's discretion the decision whether it was necessary to provide for other methods of payment and thus give traders a choice in that regard.

11It should be added that the system of advances introduced by Commission Regulation No 1570/78 is intended, according to the third recital in the preamble to that regulation, to enable the person entitled to the advance to make use of the amount of the refund at the earliest possible date and that the Commission, according to the replies it gave to the Court's questions, did not consider it necessary to lay down other methods of payment since experience has shown that traders always opt for the granting of advances if provision is made for that method of payment.

12In those circumstances it must be held that the Commission did not exceed the discretion conferred upon it by the Council.

13The answer to the first question referred to the Court must therefore be that Commission Regulation No 1570/78 of 4 July 1978 laying down detailed rules for the application of Regulation No 2742/85 of the Council as regards production refunds on starches did not infringe Article 8 of the aforementioned Council regulation by providing for the granting of advances together with the lodging of a security as the only method of payment of production refunds.

The second question

14The second question asks, first, what is the correct interpretation of Article 3 (3) (a) of Regulation No 1570/78 and, secondly, whether that provision is compatible with the principle of proportionality.

15Roquette Frères points out that the percentage of the basic product laid down in the provision reflects the wastage considered normal, which corresponds to the usual percentage of waste and dust contained in the basic product and that if the manufacturer, for reasons beyond his control, has processed less than 96% of the basic product, the provision should be interpreted in such a way that the wastage is disregarded and consequently the security is forfeited only in respect of the amount of the refund on the shortfall from the 96%.

16In the Commission's view Article 3 (3) (a) can only be interpreted strictly in accordance with its wording, which expressly states that when less than 96% of the basic product has been processed, the security is released only to an amount equal to that of the refund on the quantity actually processed.

17It must be held that there is no ambiguity in the wording of the provision. It expressly states that, in the specified cases, the security is to be released in respect of an amount equal to that of the production refund payable on the quantity of the basic product which has been processed. Furthermore, it follows from Article 3 (5) that the part of the security which is not released under the provisions of Article 3 is to be forfeited

18The question whether Article 3 (3) (a) is in conformity with the principle of proportionality must next be examined.

19It should be recalled that the Court has consistently held (see the recent judgment of the Court of 18 March 1987, Case 56/86 Société pour l'exportation des sucres SA [1987] ECR 1423) that in order to determine whether a provision of Community law is in conformity with the principle of proportionality it is necessary to verify whether the means which it employs are appropriate to achieve the objective pursued and whether or not they go beyond what is necessary to achieve it.

20With a view to proceeding to such an examination, it is necessary in this case to distinguish between, first, that part of the security which corresponds to the tolerance of 4% and, secondly, that part which corresponds to the additional 5% on top of the amount of the refund granted.

21As regards the part of the refund which corresponds to the tolerance, it must be held that the fixing of a maximum percentage of impurities contained in the basic product constitutes an appropriate method of ensuring that the product whose placing under official supervision gives rise to payment of the production refund is of normal quality and that production is carried out with the care normally expected of a prudent manufacturer. It has not been established in this case that the tolerance laid down by the contested provision was fixed at a level which was too low for such a manufacturer to comply with.

22It must also be pointed out that the objectives of fixing a maximum tolerance could not be fully realized if, when it was exceeded, the trader was still entitled to the part of the refund which corresponded to that tolerance. The provision that that part of the refund would be lost and an equivalent part of the security not released was in fact intended to give binding effect to the maximum tolerance and may not therefore be considered contrary to the principle of proportionality.

23As regards the loss of that part of the security corresponding to the additional 5%, it should be noted first of all that Article 3 (1) of Regulation No 1570/78 of the Commission merely refers to the ‘security guaranteeing the processing and/or use of the basic product’ and that neither the text nor the preamble of that regulation give any explicit indication of the purpose of the additional 5%. For its part, the abovementioned Article 8 (b) of Regulation No 2742/75 of the Council links the possibility of requiring that a security be lodged with the granting of advances, without however specifying the amount of any possible security.

24The mere fact that it is the granting of advances which is subject to the provision of a security would seem, nevertheless, to indicate that the purpose of the additional 5% in that security is to represent the financial benefit enjoyed by the trader by virtue of the amount of the refund being placed at his disposal prior to the processing entitling him to it. In fact, it is imperative for that benefit to be recovered if the processing has not taken place within the period of 90 days fixed by the regulation.

25However, the recovery of the benefit in its entirety is justified only if the entire refund paid must be repaid and the loss of the corresponding part of the security can be justified only to the extent to which the refund must be reimbursed.

26The Commission has nevertheless drawn the Court's attention to the fact that other Community rules provide for the lodging of a security even if the Community subsidy is not paid prior to the physical realization of the operation and that the security is then intended to ensure that only serious applications are made by undertakings and thus to allow provision to be made for the operations involved in the management of the market. The possibility that an additional percentage might be lost thus constitutes a measure intended to encourage undertakings to carry out the processing operations indicated in their applications.

27It must be pointed out, however, that even such an objective cannot justify the loss of the entire additional percentage where the undertaking has carried out the processing indicated in its request and the difference between the quantity actually processed and that anticipated is only minimal. In fact there is nothing in the file on the case to suggest that the loss of the additional percentage in proportion to the quantity not processed would not constitute a measure sufficient to ensure that applications made by undertakings were serious.

28It must therefore be held that the loss of that part of the security corresponding to the additional 5% is not necessary to the achievement of the objectives mentioned above and is therefore contrary to the principle of proportionality to the extent to which that loss is not calculated in proportion to the refund to be repaid. That conclusion is, moreover, confirmed by the fact that the regulation cited in the third question expressly provided for such a calculation in a case similar to the one before us.

29Consequently, the answer to the second question referred to the Court for a preliminary ruling must be that the second subparagraph of Article 3 (3) (a) of Commission Regulation No 1570/78 is invalid in so far as it fails to provide for the release of the part of the security corresponding to the additional 5% in proportion to the quantity of the basic product actually processed.

The third question

30The third question asks whether the difference between the provisions concerning release of securities in Regulation No 1570/78 and those in Commission Regulation No 1729/78 of 24 July 1978 laying down detailed rules of application in respect of production refunds for sugar used in the chemical industry (Official Journal 1978, L 201, p. 26) constitutes discrimination between producers prohibited by Article 40 (3) of the EEC Treaty.

31It follows from Regulation No 1729/78, cited above, that, as regards sugar placed under official supervision, the authorities of the Member States may advance to traders an amount equal to up to 80% of the production refund if a security is provided which ensures the repayment of the advance plus 5%. Under that regulation the security is forfeited only in proportion to the amount repayable which is calculated in proportion to the quantities not processed.

32There is no need to examine whether the situations are comparable; it suffices to hold that having regard to the reply to the second question there is no need to reply to the third question.

Costs

33The costs incurred by the Commission, which has submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.

Operative part

On those groundsTHE COURT (Sixth Chamber),in answer to the questions referred to it by the tribunal administratif, Lille, by a judgment of 5 December 1985, hereby rules:

(1).Commission Regulation No 1570/78 of 4 July 1978 laying down detailed rules for the application of Regulation No 2742/75 of the Council as regards production refunds on starches did not infringe Article 8 of the aforementioned Council regulation by providing for the granting of advances together with the lodging of a security as the only method of payment of production refunds;

(2).The second subparagraph of Article 3 (3) (a) of Commission Regulation No 1570/78 is invalid in so far as it fails to provide for the release of the part of the security corresponding to the additional 5% in proportion to the quantity of the basic product actually processed.

Delivered in open court in Luxembourg on 30 June 1987.