263/87 · GlobalLawDB

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Judgment of the Court11 May 1989^noteIn Case 263/87Kingdom of Denmark, represented by Laurids Mikaelsen, Legal Adviser at the Ministry of Foreign Affairs, acting as Agent, with an address for service in Luxembourg at the Danish Embassy,vCommission of the European Communities, represented by Peter Karpenstein and Johannes Føns Buhl, Legal Advisers in the Commission's Legal Department, acting as Agents, with an address for service in Luxembourg at the office of Georgios Kremlis, a member of the Commission's Legal Department, Wagner Centre, Kirchberg,THE COURTcomposed of: O. Due, President, R. Joliét, T. F. O'Higgins and F. Grévisse (Presidents of Chambers), Sir Gordon Slynn, G. F. Mancini, F. A. Schockweiler, J. C. Moitinho de Almeida and G. C. Rodríguez Iglesias, Judges,Advocate General: W. Van GervenRegistrar: H. A. Rühl, Principal Administratorhaving regard to the Report for the Hearing and further to the hearing on 11 January 1989,after hearing the Opinion of the Advocate General delivered at the sitting on 22 February 1989,gives the following

Judgment

1By application lodged at the Court Registry on 31 August 1987, the Kingdom of Denmark brought an action under the first paragraph of Article 173 of the EEC Treaty for the partial annulment of the Commission decision of 19 June 1987 (OJ L 195, p. 43) and of the Commission decisions of 18 August 1987 (OJ L 262, pp. 23 and 35) on the clearance of the accounts presented by the Member States in respect of the European Agricultural Guidance and Guarantee Fund, Guarantee Section, for the financial years 1983, 1984 and 1985.

2For the aforesaid financial years, the Danish authorities paid to exporters of hard granular cheeses produced in Denmark and marketed under the name ‘Dansk Grana’ or ‘Dansk Grana Padano’ export refunds set at the high rate provided for in the Commission regulations from time to time fixing the refunds in question for Grana Padano cheese bearing the code 47.10.11. The Commission agreed to reimburse to the Danish authorities only the refunds at the lower rate laid down for cheeses bearing the code 47.10.22.

3The Danish Government contends that the Commission's refusal to allow the high refund fixed for cheese bearing the code 47.10.11 to be applied to ‘Dansk Grana’ or ‘Dansk Grana Padano’ is contrary to Community law. In that regard, it relies essentially on two arguments.

4In the first place, it maintains that the Commission disregarded the wording of its own regulations from time to time fixing the refunds. The lists annexed to those regulations refer, without specifying the place of manufacture, to cheeses bearing the name ‘Grano Padano’, which is not, either under international law or under Community law, a designation of origin restricted to cheese produced in the Po valley.

5Next, if by using the name ‘Grana Padano’ the Commission did intend to restrict the higher refund to Grana Padano cheese produced in Italy, then it infringed Article 17(2) of Regulation (EEC) No 804/68 of the Council of 27 June 1968 on the common organization of the market in milk and milk products (Official Journal, English Special Edition 1968 (I), p. 176). That aniele provides that the refund must be the same for the whole Community. The principle of equal treatment thus laid down does not allow refunds fixed for cheeses which have the same external appearance (form, colour, size) and the same composition (fat and water content) to differ according to their place of manufacture.

6Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the course of the procedure and the arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

A —The first argument

7The argument based on the meaning of the designation ‘Grana Padano’ used in the Commission's periodical regulations fixing the refunds cannot be accepted.

8It must be pointed out that in all the periodical regulations prior to the adoption of Regulation (EEC) No 2822/79 of 14 December 1979 (Official Journal 1979, L 320, p. 20), the Commission designated cheese bearing the code 47.10.11 simply as ‘Grana’. The refunds for that cheese were the same as those for cheeses bearing the code 47.10.22.

9As it has explained, the Commission learned in 1979 that Grana-type cheeses were also produced in other parts of the Community and exported under the system of refunds. Those cheeses were sold at a lower price on the Community market than cheese produced in the provinces of the Po valley, which is protected in Italy by a designation of origin under Presidential Decree No 1269 of 30 October 1955 (GURI 1955 No 187, p. 2896).

10That cheese, which, together with Parmigiano Reggiano, is the only one to which the intervention system established by Article 5(2) and Article 8(1) of Regulation No 804/68 is applicable, must, in order to qualify for intervention, be produced from milk originating exclusively from its production area. That follows from the first indent of Article 2(1)(b) of Regulation (EEC) No 1107/68 of the Commission of 27 July 1968 on detailed rules of application for intervention on the market in Grana Padano and Parmigiano Reggiano cheeses (Official Journal, English Special Edition 1968 (II), p. 382), which provides that the Member States are to take ‘all measures necessary to ensure that... undertakings process only milk originating from their own collection area’. Italy is deficient in milk production so that Italian milk is more expensive than milk produced in other parts of the Community and the costs of Italian producers of Grana Padano are themselves higher.

11In those circumstances, the difference between the Community price and the lower world market price, which the refunds are intended to offset by virtue of Article 17(1) of Regulation No 804/68, is larger in the case of Grana Padano cheese produced in Italy than in the case of other cheeses.

12A special refund had to be introduced to compensate for that difference. In the periodical Regulation No 2822/79 of 14 December 1979, cited above, the Commission therefore made provision for the first time for a higher refund for cheese bearing the code 47.10.11 than for cheeses bearing the code 47.10.22. It also designated, likewise for the first time, cheese bearing the code 47.10.11 by the name ‘Grana Padano’. Initially, only the refunds for exports to the United States were fixed at a different rate. Since the adoption of Regulation No 739/80 of 27 March 1980 (Official Journal 1980, L 83, p. 36), a periodical regulation, the different rate also applies to exports to other countries.

13It follows that the designation ‘Grana Padano’, appearing since the end of 1979 in the lists of products annexed to the Commission's periodical regulations, is intended to cover only Grana Padano cheese produced in Italy.

14It therefore remains to consider whether by thus restricting the higher refund to Grana Padano cheese produced in Italy, the Commission has infringed Article 17(2) of Regulation No 804/68, according to which the refund must be the same for the whole Community.

B —The second argument

15With regard to the argument alleging a breach of the principle of equal treatment set out in Article 17(2) of Regulation No 804/68, it must be borne in mind first of all that milk itself, being a fresh product, is not suitable for intervention and that consequently the intervention system is applied to the main products derived from milk, namely butter and skimmed-milk powder. However, owing to the low production of those two products in Italy, the intervention system is applied there to a third product consisting of certain cheeses including, in particular, Grana Padano. In order for the intervention system to benefit Italian milk producers, for whom it was created, it was essential for Italian producers of Grana Padano to be required to use only milk from their own production area.

16It follows that it is the setting of a manufacturing standard, which must be complied with in order for the intervention system to function properly, and not the mere operation of market forces, which entails higher costs for Grana Padano produced in Italy than for Grana-type cheeses produced in other parts of the Community; those costs must therefore be offset by means of a higher refund.

17Since Grana Padano produced in Italy is subject on the Community market to legislative provisions different from those applicable to Grana-type cheeses produced in other parts of the Community, it is not contrary to the principle of equal treatment laid down by Article 17(2) of Regulation No 804/68 to treat Grana Padano more favourably as far as the refunds are concerned.

18Furthermore, Article 33 of that regulation provides that: ‘This regulation shall 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’. It follows that when fixing the export refunds the Commission is under an obligation to take account of commercial policy considerations as well.

19The Commission would be in breach of that obligation if it extended the higher refund fixed for Italian Grana Padano to Grana-type cheeses produced in other parts of the Community. That refund would go beyond the objective set out in Article 17(1) of Regulation No 804/68; it would do more than offset the difference between the Community price and the world price; it would make it possible for those cheeses to be sold below the world price, which could provoke a reaction by the Community's trading partners. Such a rate of refund might therefore jeopardize the attainment of one of the objectives of the common commercial policy set out in Article 110 of the Treaty, namely the harmonious development of world trade.

20Since the two arguments relied upon by the Kingdom of Denmark in support of its action have been rejected, the application must be dismissed.

Costs

21Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Since the applicant has failed in its submissions, it must be ordered to pay the costs.

Operative part

On those grounds,THE COURThereby:

(1).Dismisses the application;

(2).Orders the Kingdom of Denmark to pay the costs.

Delivered in open court in Luxembourg on 11 May 1989.