CELEX: 61998CJ0160
Sugar
Price regime
Marketing year 1997/98
Regionalisation
Deficit areas
Classification of Italy
Validity of Regulation (EC) No 1188/97 and Regulation (EEC) No 1785/81

Grounds
1 By order of 28 March 1998, received at the Court on 22 April 1998, the Giudice di Pace di Genova (Magistrate, Genoa) referred to the Court for a preliminary ruling under Article 177 EC of the EC Treaty (now Article 234 EC) two questions on the validity of Article 1(f) of Council Regulation (EC) No 1188/97 of 25 June 1997 fixing, for the 1997/98 marketing year, the derived intervention prices for white sugar, the intervention price for raw sugar, the minimum prices for A and B beet, and the amount of compensation for storage costs (OJ 1997 L 170, p. 3) and of Council Regulation (EEC) No 1785/81 of 30 June 1981 on the common organisation of the markets in the sugar sector (OJ 1981 L 177, p. 4), as amended by Council Regulation (EC) No 1101/95 of 24 April 1995 (OJ 1995 L 110, p. 1, hereinafter Regulation No 1785/81).
2 Those questions were raised in proceedings between Eridania SpA (hereinafter Eridania), a producer of sugar in Italy, and Azienda Agricola San Luca di Rumagnoli Viannj (hereinafter Agricola), a company which supplied it with sugarbeet, concerning the validity of the classification of Italy as a deficit area for the marketing year 1997/98 and, consequently, of the application of a derived intervention price for white sugar for the areas of that Member State and of increased minimum prices payable to sugarbeet producers.
The Community legislation
Regulation No 1785/81
3 In the context of the common organisation of the market in sugar (hereinafter the sugar COM), Title I of Regulation No 1785/81 established a price regime and Title III thereof a quota regime.
4 So far as the quota regime is concerned, a basic quota for national production is allocated to each Member State and is divided among national producers in the form of A and B production quotas. There is a guarantee that those two quotas will be disposed of - taking the form of an intervention price for white sugar - both on the Community market and in third countries.
5 As regards the price regime, Article 3 of Regulation No 1785/81 provides:
1. For white sugar there shall be fixed each year:
(a) an intervention price for the non-deficit area;
(b) a derived intervention price for each of the deficit areas.
...
4. The intervention price for white sugar shall be fixed before 1 August for the marketing year beginning on 1 July of the following year, in accordance with the procedure laid down in Article 43(2) of the Treaty.
...
5. The Council, acting by a qualified majority on a proposal from the Commission, shall fix ... the derived intervention prices each year at the same time as it fixes the intervention price for white sugar.
6 In order to provide producers with fair guarantees, a minimum price for sugarbeet is fixed each year, at the same time as the price for sugar, by reference to a basic price established in accordance with Article 4 of Regulation No 1785/81. With regard to the minimum prices for sugarbeet, Article 5 of that regulation provides:
1. There shall be fixed each year at the same time as the intervention price for white sugar a minimum price for A beet and a minimum price for B beet.
...
2. The minimum price for A beet shall be equal to 98% of the basic price for beet.
... the minimum price for B beet shall be equal to 68% of the basic price for beet.
3. For areas for which a derived intervention price for white sugar is fixed, the minimum prices for A beet and B beet shall be increased by an amount equal to the difference between the derived intervention price for the area in question and the intervention price, such amount being adjusted by the coefficient 1.30.
4. For the purposes of this Regulation, A beet and B beet shall mean all beet processed into A sugar and B sugar, respectively ...
...
7 Pursuant to Article 6 of Regulation No 1785/81:
1. ... sugar manufacturers buying beet:
...
shall be required to pay at least a minimum price ...
2. The minimum price referred to in paragraph 1 shall correspond:
(a) in the non-deficit areas to:
- the minimum price for A beet, in the case of beet to be processed into A sugar,
- the minimum price for B beet, in the case of beet to be processed into B sugar;
(b) in the deficit areas to:
- the minimum price for A beet adjusted in accordance with Article 5(3), in the case of beet to be processed into A sugar,
- the minimum price for B beet adjusted in accordance with Article 5(3), in the case of beet to be processed into B sugar.
...
8 Consequently, areas regarded as deficit areas within the meaning of the sugar COM have applied to them derived intervention prices under Article 3(1)(b) and (5) of Regulation No 1785/81 and minimum prices for beet increased in accordance with Article 5(3) of the same regulation.
9 That system is commonly known as regionalisation and enables higher prices than the corresponding prices for non-deficit areas to be fixed for deficit areas.
The regulations relating to the 1997/98 marketing year
10 On 25 June 1997 the Council adopted Regulation (EC) No 1187/97 fixing, for the 1997/98 marketing year, certain sugar prices and the standard quality of beet (OJ 1997 L 170, p. 1). Article 1(2) thereof fixes the intervention price for white sugar at ECU 63.19 per 100 kilograms and Article 2 fixes the basic price for beet at ECU 47.65 per tonne.
11 On the same day, the Council adopted Regulation No 1188/97. Article 1(f) thereof fixes the derived intervention price for white sugar at ECU 65.53 per 100 kilograms for all areas of Italy, which was classified as a deficit area of the Community. Article 3 of the regulation set the minimum price for A beet at ECU 46.72 per tonne and the minimum price for B beet at ECU 32.42 per tonne. In accordance with Article 5(3) of Regulation No 1785/81, the minimum prices applying in Italy comprised those sums increased by ECU 3.042.
12 The second and third recitals in the preamble to Regulation No 1188/97 state:
... Article 3(1) of Regulation (EEC) No 1785/81 provides that derived intervention prices for white sugar are to be fixed for each of the deficit areas ... for such fixing, it is appropriate that account be taken of the regional variations in the price of sugar, which, given a normal harvest and free movement of sugar, might be expected to occur in the price of sugar under natural conditions of price formation on the market;
... a deficit supply situation is to be foreseen in the areas of production in Italy, Ireland, the United Kingdom, Spain, Portugal and Finland.
The main proceedings and the questions referred for a preliminary ruling
13 For the purposes of supplying one of its factories, Eridania entered into a contract with Agricola for the 1997/98 sugar production year for the cultivation of sugarbeet. The contract provided that the beet would be sold at the prices and subject to the conditions laid down in Community and/or domestic legislation and/or the 1997/98 Inter-Trade Agreement.
14 Consequently, Eridania paid the minimum price for the beet, increased in accordance with Article 5(3) of Regulation No 1785/81, since at that time those prices were higher than the minimum prices applying in the non-deficit areas.
15 By the action that it brought before the national court, Eridania claimed repayment of ITL 1 224 242, which it had paid Agricola in respect of the increase of the beet price brought about by regionalisation.
16 The national court observes, with regard to the state of the sugar market in Italy, that in the past Italy manufactured less sugar than it consumed. As a result of the restructuring that has taken place in the Italian sugar industry over the past 25 years, the situation has gradually changed and the conditions for regionalisation have not been met since 1990. Regulation No 1101/95 maintained the system of regionalisation for the marketing years 1995/96 and 1996/97 notwithstanding the information available to the Community authorities.
17 It was in those circumstances that the Giudice di Pace di Genova, who entertained the same doubts as Eridania about the legality of maintaining the system of regionalisation for Italy, stayed proceedings and referred the following questions to the Court for a preliminary ruling:
1. Is Regulation (EC) No 1188/97 of 25 June 1997 (OJ of 28 June 1997), in particular Article 1(f) thereof, valid, especially in the light not only of Article 3(4) and (5) of Regulation No 1785/81 and Article 190 of the EC Treaty, but also of the correct appraisal of the facts as more fully set out in part I - "the principal plea in law" - of the section of this order entitled "Law"?
2. If the answer to the first question is in the affirmative, is Regulation (EEC) No 1785/81 of 30 June 1981 (OJ of 1 July 1981), as subsequently amended, and in particular Articles 3(1), 5(3) and 6(2) thereof, valid, in the light of Article 40 and Articles 30 to 36 of the EC Treaty, and consequently is Article 1(f) of Regulation (EC) No 1188/97 valid, in the light of the arguments more fully set out in part II - "the alternative plea in law" of the section of this order entitled "Law"?
18 It is appropriate to recall at the outset that on 6 July 2000 the Court delivered its judgment in Case C-289/97 Eridania [2000] ECR I-5409 (hereinafter the judgment of 6 July 2000), in which it answered questions similar to those raised in the case before the national court. By letter of 25 September 2000, the Court asked the Giudice di Pace di Genova to state whether, in the light of that judgment, it wished to maintain the present reference for a preliminary ruling. By letter of 20 October 2000, the national court informed the Court that, having regard in particular to the fact that the two cases concerned different marketing years, the reference would not be withdrawn.
The first question
The late adoption of Regulation No 1188/97 and inadequate statement of reasons as regards the application of regionalisation to Italy
19 It must be observed that the Court has already answered the first question in its judgment of 6 July 2000, in so far as Eridania had already complained in that case about the allegedly late adoption, in breach of Article 3(4) and (5) of Regulation No 1785/81, of Council Regulation (EC) No 1580/96 of 30 July 1996 fixing, for the 1996/97 marketing year, the derived intervention prices for white sugar, the intervention price for raw sugar, the minimum prices for A and B beet, and the amount of compensation for storage costs (OJ 1996 L 206, p. 9) and about the inadequate statement of reasons in that regulation as regards the application of regionalisation to Italy.
20 The Court held, at paragraph 34 of the judgment of 6 July 2000, that the deadline of 1 August in Article 3(4) and (5) of Regulation No 1785/81 is not peremptory and, therefore, that failure to adhere to that date cannot have the effect of rendering invalid Regulation No 1580/96 as regards the fixing therein of the intervention price after 1 August.
21 As regards the adequacy of the reasoning, the Court undertook a thorough review and pointed out, at paragraph 44 of the same judgment, that the reasons on which Regulation No 1580/96 was based, as regards the classification of Italy as a deficit area for the 1996/97 marketing year, met the requirements concerning statements of reasons laid down by the case-law of the Court.
22 The Court's analysis in its judgment of 6 July 2000, which concerns Regulation No 1580/96, is equally valid as regards Regulation No 1188/97. Apart from the fact that they concern different marketing years - Regulation No 1580/96 concerns 1996/97 and Regulation No 1188/97 concerns 1997/98 - those regulations are identical. They were both adopted after the expiry of the period prescribed in that regard by Article 3(4) and (5) of Regulation No 1785/81 and the reasoning, as expressed in the second and third recitals in the preamble to both regulations, is identical.
23 Since Eridania has not, on that point, put forward any arguments other than those considered by the Court in its judgment of 6 July 2000, the question may be adequately answered by referring to that judgment and affirming the answer given there.
The forecast of a deficit for the 1997/98 marketing year
24 The first question concerns, next, the correct appraisal of the data which gave rise to the forecast of a deficit for Italy for the 1997/98 marketing year. As regards the specific facts highlighted in the order for reference, that aspect of the question could not be addressed in the judgment of 6 July 2000, since the Court considered only whether the forecast of a deficit for the marketing year 1996/97 was founded.
Arguments of the parties
25 Eridania, considering the derived intervention price for white sugar of ECU 65.53 per 100 kilograms to be wholly unjustified, manifestly wrong and arbitrary, submits that the Council ignored or, in any event, distorted the factual evidence.
26 Eridania argues that the marketing years 1993/94, 1994/95 and 1996/97 closed with a production surplus. In its submission, it was quite impossible in those circumstances to forecast a deficit for the year 1997/98.
27 Eridania refers to a letter of 16 June 1997 by which the Italian Minister for Agriculture (the Minister) indicated to the Commission that for the marketing year 1997/98 sugar production was likely to be greater than forecast. Although he emphasised the difficulty of accurately estimating production levels because of the notorious unpredictability of national yields, the Minister nevertheless confirmed that production should not exceed the total of production quotas A and B, namely 1 568 250 tonnes. Eridania complains that the Council did not take that letter into account when, on 25 June 1997, it adopted Regulation No 1188/97. In any event, it should have asked the Minister for further details, particularly since, for some months, representatives from the Italian sugar industry had been repeating, with documents to support them, that Italy would produce a surplus.
28 Eridania also relies on the letter of 3 July 1997, sent by the Minister to the Commission, from which it is clear that the production to be taken into account was 1 568 000 tonnes.
29 In Eridania's submission, Regulation No 1188/97 should have been amended in the wake of that letter. Eridania draws attention to the fact that on that occasion both representatives from the Italian sugar industry and the European Sugar Manufacturers Committee (CEFS) had, before the regulation was adopted, sent the Community authorities documents which clearly showed that there would be a considerable surplus in the 1997/1998 marketing year.
30 The Council contends, in relation to the relevant date for evaluating the information, that the process involved in making the forecast is an ongoing one. In any event, the Council must take into account the latest available figures at the time when prices are fixed.
31 The Council observes that, for the 1997/98 marketing year, the figures indicated that there would be a deficit in Italy. The information provided by the Italian Government up to the date of adoption of Regulation No 1188/97, namely 25 June 1997, showed anticipated sugar production of 1 440 000 tonnes, together with 10 000 tonnes carried forward from the marketing year 1996/97, and sugar consumption of 1 483 000 tonnes, resulting in an anticipated deficit of 33 000 tonnes.
32 The Council denies that the Minister's letter of 16 June 1997 adjusted the production forecast of 1 440 000 tonnes for 1997/98. Although the letter stated that production would not exceed the maximum amount of 1 568 250 tonnes, it did not put an exact figure on estimated production. Nor did the Minister ask the Commission to substitute a new figure for the estimated figure previously provided.
33 Nor, when Italy's projected figures for 1997/98 were submitted at the meeting of the Management Committee for Sugar on 18 June 1997, had the Italian delegation put forward any other more exact figures.
34 The Minister, by letter of 3 July 1997, asked the Commission to replace the figure of 1 440 000 tonnes relating to sugar production forecast for Italy for 1997/98 with a figure of 1 568 000 tonnes. However, by then, Regulation No 1188/97 had already been adopted and the marketing year had begun.
35 In that regard, the Council submits that prices must, as a general rule, be fixed before the beginning of the marketing year and that data provided thereafter cannot be taken into account for the purpose of making forecasts. Thus, it was not possible to postpone the decision on prices until a date after the start of the marketing year.
36 The Commission also contends that, when Regulation No 1188/97 was adopted on 25 June 1997, all the available data suggested that actual production would be 1 440 000 tonnes.
37 The Commission does, however, acknowledge that, by its letter of 30 May 1997, the Associazione Nazionale tra gli Industriali dello Zucchero, dell'Alcool e del Lievito (Italian Sugar Manufacturers Association, hereinafter, the Assozucchero) had informed it, drawing on a study from the University of Bologna, that average yields in Italy suggested that production of 1 568 000 tonnes could be forecast for 1997/98, account being taken of the area under cultivation. However, according to the Commission's information, the Associazione nazionale bieticoltori (National Association of Beet Growers) had formally challenged the results of that study.
38 The Commission states that during the meeting of the Management Committee for Sugar on 11 June 1997, one of its representatives asked the Member States to carry out the necessary checks and provide updated forecasts. The Italian authorities stated, by letter of 16 June 1997, that it was not possible for them to provide fresh data on Italian production and stated that they were in favour of fixing regionalised prices. At the meeting of the Management Committee for Sugar on 18 June 1997, the Italian authorities did not adjust the figures that they had submitted, thus adhering until 2 July 1997 to a forecast of actual production of 1 440 000 tonnes. It was only in the letter of 3 July 1997 that the Italian authorities increased their production estimates.
Findings of the Court
39 Eridania is essentially complaining that the Council and the Commission relied, for the purpose of the forecast of production, on figures that did not reflect reality, since neither institution took account either of the revised estimates mentioned by the Minister in his letter of 16 June 1997 and spelled out more fully in his letter of 3 July 1997 or of the documents provided by the Italian sugar industry and CEFS, which clearly showed that the marketing year would produce a considerable surplus.
40 It is appropriate to observe, in limine, that, as the Court held at paragraph 47 of the judgment of 6 July 2000, the Council and the Commission are called on to examine the ratio between as yet unharvested production volumes and consumption which has not yet commenced and therefore must extrapolate on the basis of information notified by the Member States, which relates both to the current year, as far as the pattern of consumption is concerned, and to the prospects for the forthcoming year, as regards the pattern of available production.
41 Concerning, more specifically, the latest date by which those forecasts must be completed, it must be borne in mind that - as the Council has stated - intervention prices and minimum prices must be fixed before the start of the marketing year, namely 1 July, the date set by Article 2(1) of Regulation No 1785/81.
42 In this case, the Council adopted Regulation No 1188/97 on 25 June 1997 and thereby observed the time-limit of 1 July 1997, which marked the start of the marketing year 1997/98.
43 At that time the Council had in its possession figures which had been provided to it by the Member States pursuant to Commission Regulation (EC) No 779/96 of 29 April 1996 laying down detailed rules for the application of Council Regulation (EEC) No 1785/81 as regards communications in the sugar sector (OJ 1996 L 106, p. 9).
44 In accordance with the figures thus notified to the Commission by the Italian Government, estimated consumption, as calculated by the latter, amounted to 1 483 000 tonnes, a figure also made available to the Council. Moreover, Eridania does not dispute that figure.
45 On 25 June 1997 the Council also had in its possession an estimate showing production of 1 450 000 tonnes, composed, first, of estimated actual production of 1 440 000 tonnes for 1997/98 and, second, of 10 000 tonnes carried forward from the preceding marketing year. That estimate was submitted by the Italian Government at the meeting of the Management Committee for Sugar on 9 April 1997.
46 Basing itself on those figures, the Council could properly forecast a deficit in Italy for 1997/98.
47 It is, admittedly, indisputable that the Minister, by letter dated 16 June 1997, informed the Commission that the harvest prospects should probably be revised upwards. However, the Council cannot be criticised for not revising its estimate. In that letter the Italian Government confined itself to stating that the total of 1 568 250 tonnes, corresponding to A and B quotas allocated to Italy, would not in any event be exceeded but it did not provide a precise figure because of the notorious unpredictability of national yields. Moreover, Eridania does not dispute that the estimate was not backed up by figures.
48 The Italian Government did not produce any further figures at the last meeting of the Management Committee for Sugar on 18 June 1997, at which the intention was to check the forecasts for the last time.
49 Consequently, at the time when Regulation No 1188/97 was adopted by the Council, all that the Commission had available were the official figures obtained pursuant to Regulation No 779/96 and therefore it had no reason to revise the proposal for a Council regulation drawn up by it at the end of March 1997 (OJ 1997 C 101, p. 6).
50 That assessment of current production and future consumption, together with the subsequent proposal that Italy should be classified as a deficit area, cannot be invalidated on the ground that various trade associations comprised of sugar manufacturers had, on various occasions, told the Commission that the production estimates provided by the Italian Government were wholly unrealistic.
51 It is common ground, as is clear from the thorough analysis carried out by the Advocate General at points 34 to 36 of his Opinion, that the Assozucchero and CEFS sent numerous letters to the Commission and the Council, informing them that, from as early as January 1997, Italian sugar manufacturers had been forecasting sugar production of 1 560 000 tonnes, a production greater, consequently, than anticipated consumption of 1 483 000 tonnes.
52 Similarly, sugar manufacturers vigorously disputed the Commission's March 1997 proposals, which were based on the forecast that there would be a deficit. At the meeting on 14 April 1997 of the Advisory Committee on Sugar, set up under Article 40 of Regulation No 1785/81 by Commission Decision 87/75/EEC of 7 January 1987 (OJ 1987 L 45, p. 16), the representative from the Italian sugar industry stated that it was unthinkable that the Commission could have proposed regionalisation of the sugar price in Italy given that Italy was in surplus. Once again, as the Commission itself has revealed, the Assozucchero, by a letter of 30 May 1997 backed up by a study from the University of Bologna, put estimated production at 1 568 000 tonnes.
53 However, the representatives of the sugarbeet growers took issue with those repeated statements of the view that Italy should be classified as a surplus area.
54 Faced with that situation, the Commission had no alternative but to accept the figures provided by the Italian Government. The latter, when it forwarded those figures, was complying with an obligation laid down by Regulation No 779/96 and, could, on that occasion, not act otherwise than by rigorously complying with the obligation to cooperate in good faith embodied in Article 5 of the EC Treaty (now Article 10 EC).
55 Nor can the classification of Italy as a deficit area be regarded as invalid on the ground that the Council refused to alter its assessment after the Italian Government had, on 3 July 1997, provided it with figures putting estimated production at 1 568 000 tonnes.
56 It must be observed, first, that it is the Council's responsibility to fix intervention prices before the start of the marketing year, namely before 1 July. Second, there is no provision for prices to be altered after the marketing year has begun.
57 Consequently, the Council was not on any view required to revise its estimate and amend Regulation No 1188/97.
58 It follows from all the above findings that consideration of the estimate of sugar production available for 1997/98, made by the Commission at the time when intervention prices applicable to Italy were fixed and adopted by the Council, without modification, in Regulation No 1188/97, discloses no factor of such a kind as to affect the validity of the regulation.
The second question
59 The second question no longer needs to be considered in detail, since the Court has already considered essentially the same question in its judgment of 6 July 2000 and concluded that there were no factors of such a kind as to affect the validity of Regulation 1785/81. Neither the specific circumstances of the 1997/98 marketing year nor Eridania's arguments, identical to those put forward in the case giving rise to that judgment, are such as to alter or qualify the Court's answer.
60 The answer to the two questions referred by the national court must therefore be that consideration of those questions has disclosed no factor of such a kind as to affect the validity of Regulations Nos 1188/97 and 1785/81.
Decision on costs
Costs
61 The costs incurred by the Council and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court.
Operative part
On those grounds,
THE COURT (Sixth Chamber),
in answer to the questions referred to it by the Giudice di Pace di Genova by order of 28 March 1998, hereby rules:
Consideration of the questions submitted has disclosed no factor of such a kind as to affect the validity of Council Regulation (EC) No 1188/97 of 25 June 1997 fixing, for the 1997/98 marketing year, the derived intervention prices for white sugar, the intervention price for raw sugar, the minimum prices for A and B beet, and the amount of compensation for storage costs or of Council Regulation (EEC) No 1785/81 of 30 June 1981 on the common organisation of the markets in the sugar sector, as amended by Council Regulation (EC) No 1101/95 of 24 April 1995.