Kingdom of the Netherlands v Commission of the European Communities (C-22/89)

Contents

Judgment of the Court13 December 1990^noteIn Case C-22/89,Kingdom of the Netherlands, represented by J. W. de Zwaan and M. A. Fierstra, Deputy Legal Advisers at the Ministry of Foreign Affairs, acting as Agents, with an address for service in Luxembourg at the Dutch Embassy, 5 rue C. M. Spoo,vCommission of the European Communities, represented by R. C. Fischer, Legal Adviser, acting as Agent, with an address for service in Luxembourg at the office of Guido Berardis, a member of its Legal Department, Wagner Centre, Kirchberg,THE COURT,composed of: O. Due, President, G. F. Mancini, T. F. O'Higgins, J. C. Moitinho de Almeida, M. Diez de Velasco, Presidents of Chambers, F. A. Schockweiler, F. Grévisse, M. Zuleeg and P. J. G. Kapteyn, Judges,Advocate General: F. G. JacobsRegistrar: D. Louterman, Principal Administrator,having regard to the Report for the Hearing,having heard oral argument from the parties at the hearing on 14 June 1990,after hearing the Opinion of the Advocate General delivered at the sitting on 7 November 1990,gives the following

Judgment

1By application lodged at the Court Registry on 30 January 1989, the Kingdom of the Netherlands brought an action under the first paragraph of Article 173 of the EEC Treaty for a declaration that Commission Decision 88/630/EEC of 29 November 1988 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1986 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (hereinafter referred to as ‘the Fund’) (Official Journal 1988 L 353, p. 30) is void to the extent that it does not allow expenditure amounting to HFL 1624796 incurred by the Netherlands in buying in butter for public storage to be charged to the Fund on the ground that quality testing on the butter was carried out before the expiry of the storage test period of two months.

2Regulation (EEC) No 685/69 of the Commission of 14 April 1969 on detailed rules of application for intervention on the markets in butter and cream (Official Journal, English Special Edition 1969 (I), p. 194) establishes a scheme for the purchase by intervention agencies of butter intended for public storage. Article 6(1) of that regulation, as amended by Commission Regulation (EEC) No 1836/86 of 12 June 1986 (Official Journal 1986 L 158, p. 57), provides that the butter is to be put through a storage test period of two months starting from the day on which it enters the refrigerated storage depot. Article 6(2), as amended by Commission Regulation (EEC) No 1829/80 of 11 July 1980 (Official Journal 1980 L 178, p. 22), provides that by his offer the seller is to undertake that in the event of any abnormal deterioration in the quality of the butter he will take back the goods in question, reimburse any payment made in respect of the substandard goods and pay the storage costs.

3It appears from the documents before the Court that it was the practice of the Netherlands authorities to carry out the quality controls on butter in storage towards the end of the test period and not after its expiry.

4The Commission took the view that the testing of the keeping quality of butter delivered to intervention agencies was not to be carried out before the 60th day before the entry of the butter into the refrigerated storage depot and adopted the contested decision.

5The sum disallowed represents 0.25% of all expenditure on butter deliveries undergoing testing before the 60th day. According to the Commission, the figure of 0.25% corresponds to the quantities of butter failing to meet the required standard on a second examination carried out in Member States which performed the tests in accordance with Community law.

6In the Summary Report on the clearance of Fund accounts for 1986, the Commission referred to the Minutes of a meeting of the Management Committee for Milk and Milk Products held in 1985 at which it stated that the testing by the intervention agency had to be carried out at the end of the test period and to an interpretative note of 18 March 1986 in which it stated, with regard to Article 6(2) of Regulation No 685/69, that the seller was. to pay the storage costs if at the end of the probationary period it was established that the butter did not meet the quality requirements.

7Reference 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 submissions and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

8The Kingdom of the Netherlands advances three submissions in support of its action for annulment: breach of Regulation No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (Official Journal, English Special Edition 1970 (I), p. 218) and of Regulation No 685/69, breach of the principles of legal certainty and the protection of legitimate expectations and breach of Article 190 of the EEC Treaty regarding the obligation to state reasons.

9As regards the breach of Regulations Nos 729/70 and 685/69, the Kingdom of the Netherlands submits that upon a literal interpretation of Article 6 of Regulation No 685/69 it is clear that the testing of the quality of stored butter must be carried out during the test period and that that interpretation is also in accordance with the general scheme of the system set up by those regulations in so far as by the end of the test period the seller must know where he stands as regards the outcome of the transaction.

10The Commission replies that it is clear from both the letter and spirit of Article 6 of Regulation No 685/69 that the quality testing must be carried out after the test period has expired.

11It should be noted in this regard that Article 6 of Regulation No 685/69 provides in paragraph 1 that the butter is to be put through a storage test period of two months and in paragraph 2 that the seller is to enter into certain undertakings in the event that an abnormal deterioration in the quality of the butter occurs during the storage test period.

12The purpose of Article 6(1), in conjunction with Article 6(2), is accordingly to ensure that the butter has good keeping qualities before being finally taken over by the intervention agency and to make the seller bear the consequences of any abnormal deterioration in the quality of the butter that occurs during the storage test period.

13Having regard to that aim of Article 6, the testing of the keeping qualities of stored butter cannot be carried out before the end of the two-month test period.

14The Netherlands argues secondly that the Commission acted in breach of the principle of legal certainty and legitimate expectations by not calling in question until expenditure in relation to the Fund for the financial year 1986 was scrutinized the established practice of the Netherlands as well as of other Member States to carry out quality tests before the expiry of the test period. It also argues that the view taken by the Commission undermines the legal certainty of traders who should know upon the expiry of the test period where they stand as regards the outcome of butter sales to the intervention agency.

15It should be borne in mind in this regard, as the Commission has rightly pointed out, that the Kingdom of the Netherlands was duly informed, following the statements made by the Commission with regard to the interpretation of Article 6(1) of Regulation No 685/69 at the 726th meeting of the Management Committee for Milk and Milk Products held on 16 August 1985 and the interpretative note of 18 March 1986 on Article 6(2) of that regulation, that the keeping quality of butter was not to be determined before the expiry of the test period.

16As regards the question of the interests of the butter tenderer, the Commission pointed out in its statement of 1985 that the tests should not be organized in such a way as to impose on the seller an appreciable prolongation of the test period.

17However, protection of the trader's legitimate interest in knowing as soon as possible where he stands as regards the outcome of the transaction cannot justify an interpretation of Regulation No 685/69 which would release him from the obligation to assume until the end of the storage test period the detrimental consequences arising from any abnormal deterioration in the quality of the stored butter.

18Finally, as regards the objection raised by the Kingdom of the Netherlands that the Commission did not provide in the Summary Report adequate reasons for its decision, either in relation to the principle of disallowing expenditure relating to butter tested before the expiry of the test period or in relation to the figure of 0.25%, it is necessary to point out that the Court has consistently held (judgment in Case 1251/79 Italy y Commission [1981] ECR 205) that in the particular context of the preparation of decisions relating to the clearance of accounts the statement of reasons for a decision must be regarded as sufficient if the Member State to which the decision was addressed was closely involved in the process by which the decision came about and was aware of the reasons for which the Commission took the view that it must not charge the sum in dispute to the Fund.

19It should be noted in this regard that the Commission's Summary Report relating to the clearance of Fund accounts for 1986 expressly refers to the Minutes of the meeting of the Management Committee in 1985 and the interpretative note of 1986 of which the Kingdom of Netherlands had cognizance.

20As regards the percentage of disallowance, the Commission expressly stated in the 1986 Summary Report the considerations which led it to disallow 0.25% of the expenditure concerned.

21It follows from the facts set out above that the application must be dismissed.

Costs

22Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Since the Kingdom of the Netherlands 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 the Netherlands to pay the costs.

Delivered in open court in Luxembourg on 13 December 1990.