# 62013CJ0135

JUDGMENT OF THE COURT (Ninth Chamber)

15 May 2014 (
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  )

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‛Agriculture — EAFRD — Regulation (EC) No 1698/2005 — Articles 20, 26 and 28 — Support for the modernisation of agricultural holdings and support for adding value to agricultural and forestry products — Eligibility conditions — Competence of the Member States — Support for the modernisation of existing mill capacity — Mills replaced with a single new mill, with no increase in capacity — Not included — Principle of equal treatment’

In Case C‐135/13,

REQUEST for a preliminary ruling under Article 267 TFEU from the Kúria (Hungary), made by decision of 31 January 2013, received at the Court on 18 March 2013, in the proceedings

Szatmári Malom Kft.

Szatmári Malom Kft.

v

Mezőgazdasági és Vidékfejlesztési Hivatal Központi Szerve,

Mezőgazdasági és Vidékfejlesztési Hivatal Központi Szerve,

THE COURT (Ninth Chamber),

composed of M. Safjan, President of the Chamber, A. Prechal (Rapporteur) and K. Jürimaë, Judges,

Advocate General: P. Cruz Villalón,

Registrar: I. Illéssy, Administrator,

having regard to the written procedure and further to the hearing on 6 March 2014,

after considering the observations submitted on behalf of:

| — | Szatmári Malom Kft., by F. Simonné dr. Zsúnyi, ügyvéd, |
| --- | --- |

—

Szatmári Malom Kft., by F. Simonné dr. Zsúnyi, ügyvéd,

| — | the Mezőgazdasági és Vidékfejlesztési Hivatal Központi Szerve, by A. Ivanovits, ügyvéd, |
| --- | --- |

—

the Mezőgazdasági és Vidékfejlesztési Hivatal Központi Szerve, by A. Ivanovits, ügyvéd,

| — | the Hungarian Government, by Z. Fehér and K. Szíjjártó, acting as Agents, |
| --- | --- |

—

the Hungarian Government, by Z. Fehér and K. Szíjjártó, acting as Agents,

| — | the Greek Government, by I. Chalkias and X. Basakou, acting as Agents, |
| --- | --- |

—

the Greek Government, by I. Chalkias and X. Basakou, acting as Agents,

| — | the European Commission, by A. Sipos, J. Aquilina and V. Bottka, acting as Agents, |
| --- | --- |

—

the European Commission, by A. Sipos, J. Aquilina and V. Bottka, acting as Agents,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

Judgment

Judgment

| 1 | This request for a preliminary ruling concerns the interpretation of Articles 20(b), 26(1)(a) and 28(1)(a) of Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) (OJ 2005 L 277, p. 1). |
| --- | --- |

1

This request for a preliminary ruling concerns the interpretation of Articles 20(b), 26(1)(a) and 28(1)(a) of Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) (OJ 2005 L 277, p. 1).

| 2 | The request has been made in proceedings between Szatmári Malom Kft and Mezőgazdasági és Vidékfejlesztési Hivatal Központi Szerve (the Agricultural and Rural Development Office; or ‘the defendant authority’) concerning that authority’s refusal to grant Szatmári Malom support under the EAFRD. |
| --- | --- |

2

The request has been made in proceedings between Szatmári Malom Kft and Mezőgazdasági és Vidékfejlesztési Hivatal Központi Szerve (the Agricultural and Rural Development Office; or ‘the defendant authority’) concerning that authority’s refusal to grant Szatmári Malom support under the EAFRD.

Legal context

Legal context

EU law

EU law

| 3 | Recitals 9, 11, 13, 20, 21, 23 and 61 in the preamble to Regulation No 1698/2005 state that:
  
  
  
  
  
  ‘(9) | On the basis of the strategic guidelines, each Member State should prepare its rural development national strategy plan constituting the reference framework for the preparation of the rural development programmes. ... |
| --- | --- | --- |

3

Recitals 9, 11, 13, 20, 21, 23 and 61 in the preamble to Regulation No 1698/2005 state that:

‘(9)

On the basis of the strategic guidelines, each Member State should prepare its rural development national strategy plan constituting the reference framework for the preparation of the rural development programmes. ...

...

| (11) | To ensure the sustainable development of rural areas it is necessary to focus on a limited number of core objectives at Community level relating to agricultural and forestry competitiveness, land management and environment, quality of life and diversification of activities in those areas, taking into account the diversity of situations, ranging from remote rural areas suffering from depopulation and decline to peri-urban rural areas under increasing pressure from urban centres. |
| --- | --- |

(11)

To ensure the sustainable development of rural areas it is necessary to focus on a limited number of core objectives at Community level relating to agricultural and forestry competitiveness, land management and environment, quality of life and diversification of activities in those areas, taking into account the diversity of situations, ranging from remote rural areas suffering from depopulation and decline to peri-urban rural areas under increasing pressure from urban centres.

...

| (13) | To achieve the objective of improving the competitiveness of the agricultural and forestry sectors it is important to build clear development strategies aimed at enhancing and adapting human potential, physical potential and the quality of agricultural production. |
| --- | --- |

(13)

To achieve the objective of improving the competitiveness of the agricultural and forestry sectors it is important to build clear development strategies aimed at enhancing and adapting human potential, physical potential and the quality of agricultural production.

...

| (20) | With regard to physical potential, a set of measures on the modernisation of agricultural holdings, improvement of the economic value of forests, adding value to agricultural and forestry products, promoting the development of new products, processes and technologies in the agriculture and food sector and in the forestry sector, improvement and development of agricultural and forestry infrastructure, restoring agricultural production potential damaged by natural disasters and introduction of appropriate prevention measures should be made available. |
| --- | --- |

(20)

With regard to physical potential, a set of measures on the modernisation of agricultural holdings, improvement of the economic value of forests, adding value to agricultural and forestry products, promoting the development of new products, processes and technologies in the agriculture and food sector and in the forestry sector, improvement and development of agricultural and forestry infrastructure, restoring agricultural production potential damaged by natural disasters and introduction of appropriate prevention measures should be made available.

| (21) | The purpose of Community farm investment aid is to modernise agricultural holdings to improve their economic performance through better use of the production factors including the introduction of new technologies and innovation, targeting quality, organic products and on/off-farm diversification, including non-food sectors and energy crops, as well as improving the environmental, occupational safety, hygiene and animal welfare status of agricultural holdings ... |
| --- | --- |

(21)

The purpose of Community farm investment aid is to modernise agricultural holdings to improve their economic performance through better use of the production factors including the introduction of new technologies and innovation, targeting quality, organic products and on/off-farm diversification, including non-food sectors and energy crops, as well as improving the environmental, occupational safety, hygiene and animal welfare status of agricultural holdings ...

...

| (23) | Improvements in the processing and marketing of primary agricultural and forestry products should be encouraged by means of support for investments aimed at improving efficiency in the processing and marketing sector, promoting the processing of agricultural and forestry production for renewable energy, introducing new technologies and innovation, opening new market opportunities for agricultural and forestry products, putting emphasis on quality, improving environmental protection, occupational safety, hygiene and animal welfare, as appropriate, by targeting, as a general rule, micro, small and medium-sized enterprises and other enterprises under a certain size, which are better placed to add value to local products ... |
| --- | --- |

(23)

Improvements in the processing and marketing of primary agricultural and forestry products should be encouraged by means of support for investments aimed at improving efficiency in the processing and marketing sector, promoting the processing of agricultural and forestry production for renewable energy, introducing new technologies and innovation, opening new market opportunities for agricultural and forestry products, putting emphasis on quality, improving environmental protection, occupational safety, hygiene and animal welfare, as appropriate, by targeting, as a general rule, micro, small and medium-sized enterprises and other enterprises under a certain size, which are better placed to add value to local products ...

...

| (61) | In accordance with the principle of subsidiarity and subject to exceptions, there should be national rules on the eligibility of expenditure.’ |
| --- | --- |

(61)

In accordance with the principle of subsidiarity and subject to exceptions, there should be national rules on the eligibility of expenditure.’

| 4 | Article 2(c), (d) and (e) of Regulation No 1698/2005 lay down the following definitions:
  ‘...
  
  
  
  
  
  (c) | “axis”: a coherent group of measures with specific goals resulting directly from their implementation and contributing to one or more of the objectives set out in Article 4; |
| --- | --- | --- |

4

Article 2(c), (d) and (e) of Regulation No 1698/2005 lay down the following definitions:

‘...

(c)

“axis”: a coherent group of measures with specific goals resulting directly from their implementation and contributing to one or more of the objectives set out in Article 4;

| (d) | “measure”: a set of operations contributing to the implementation of an axis ...; |
| --- | --- |

(d)

“measure”: a set of operations contributing to the implementation of an axis ...;

| (e) | “operation”: a project, contract or arrangement, or other action selected according to criteria laid down for the rural development programme concerned and implemented by one or more beneficiaries allowing achievement of the objectives set out in Article 4.’ |
| --- | --- |

(e)

“operation”: a project, contract or arrangement, or other action selected according to criteria laid down for the rural development programme concerned and implemented by one or more beneficiaries allowing achievement of the objectives set out in Article 4.’

| 5 | Under Article 11(1) and (2) of that regulation:
  ‘1.   Each Member State shall submit a national strategy plan indicating the priorities of the action of the EAFRD and of the Member State concerned taking into account the Community strategic guidelines, their specific objectives, the contribution from the EAFRD and the other financial resources.
  2.   ... It shall be implemented through the rural development programmes.’ |
| --- | --- |

5

Under Article 11(1) and (2) of that regulation:

‘1.   Each Member State shall submit a national strategy plan indicating the priorities of the action of the EAFRD and of the Member State concerned taking into account the Community strategic guidelines, their specific objectives, the contribution from the EAFRD and the other financial resources.

2.   ... It shall be implemented through the rural development programmes.’

| 6 | The first subparagraph of Article 15(1) of the regulation provides:
  ‘The EAFRD shall act in the Member States through rural development programmes. These programmes implement a rural development strategy through a set of measures grouped together in accordance with the axes defined in Title IV ...’ |
| --- | --- |

6

The first subparagraph of Article 15(1) of the regulation provides:

‘The EAFRD shall act in the Member States through rural development programmes. These programmes implement a rural development strategy through a set of measures grouped together in accordance with the axes defined in Title IV ...’

| 7 | Article 16(c) of Regulation No 1698/2005 states:
  ‘Each rural development programme shall include:
  ...
  
  
  
  
  
  (c) | information on the axes and measures proposed for each axis and their description ...’ |
| --- | --- | --- |

7

Article 16(c) of Regulation No 1698/2005 states:

‘Each rural development programme shall include:

...

(c)

information on the axes and measures proposed for each axis and their description ...’

| 8 | Article 18 of that regulation provides:
  ‘1.   Rural development programmes shall be established by a Member State ...
  ...
  3.   The Commission shall assess the proposed programmes on the basis of their consistency with the Community strategic guidelines, the national strategy plan and this Regulation.
  Where the Commission considers that a rural development programme is not consistent with the Community strategic guidelines, the national strategy plan or this Regulation, it shall request the Member State to revise the proposed programme accordingly.
  4.   Each rural development programme shall be approved in accordance with the procedure referred to in Article 90(2).’ |
| --- | --- |

8

Article 18 of that regulation provides:

‘1.   Rural development programmes shall be established by a Member State ...

...

3.   The Commission shall assess the proposed programmes on the basis of their consistency with the Community strategic guidelines, the national strategy plan and this Regulation.

Where the Commission considers that a rural development programme is not consistent with the Community strategic guidelines, the national strategy plan or this Regulation, it shall request the Member State to revise the proposed programme accordingly.

4.   Each rural development programme shall be approved in accordance with the procedure referred to in Article 90(2).’

| 9 | In Chapter 1 of Title IV of Regulation No 1698/2005, Article 20 of Section 1, entitled ‘Axis 1: Improving the competitiveness of the agricultural and forestry sector’, provides:
  ‘Support targeting the competitiveness of the agricultural and forestry sector shall concern:
  ...
  
  
  
  
  
  (b) | measures aimed at restructuring and developing physical potential and promoting innovation through:
  
  
  
  
  
  (i) | modernisation of agricultural holdings; |
| --- | --- | --- | --- |

9

In Chapter 1 of Title IV of Regulation No 1698/2005, Article 20 of Section 1, entitled ‘Axis 1: Improving the competitiveness of the agricultural and forestry sector’, provides:

‘Support targeting the competitiveness of the agricultural and forestry sector shall concern:

...

(b)

measures aimed at restructuring and developing physical potential and promoting innovation through:

(i)

modernisation of agricultural holdings;

...

| (iii) | adding value to agricultural and forestry products; |
| --- | --- |

(iii)

adding value to agricultural and forestry products;

...’

| 10 | Under paragraph 1 of Article 26 of that regulation, entitled ‘Modernisation of agricultural holdings’:
  ‘Support provided for in Article 20(b)(i) shall be granted for tangible and/or intangible investments which:
  
  
  
  
  
  (a) | improve the overall performance of the agricultural holding; ... |
| --- | --- | --- |

10

Under paragraph 1 of Article 26 of that regulation, entitled ‘Modernisation of agricultural holdings’:

‘Support provided for in Article 20(b)(i) shall be granted for tangible and/or intangible investments which:

(a)

improve the overall performance of the agricultural holding; ...

...’

| 11 | Under paragraph 1 of Article 28 of Regulation No 1698/2005, entitled ‘Adding value to agricultural and forestry products’:
  ‘Support provided for in Article 20(b)(iii), shall be granted for tangible and/or intangible investments which:
  
  
  
  
  
  (a) | improve the overall performance of the enterprise; |
| --- | --- | --- |

11

Under paragraph 1 of Article 28 of Regulation No 1698/2005, entitled ‘Adding value to agricultural and forestry products’:

‘Support provided for in Article 20(b)(iii), shall be granted for tangible and/or intangible investments which:

(a)

improve the overall performance of the enterprise;

| (b) | concern:
  
  
  
  
  
  — | the processing and/or marketing of products covered by Annex I to the Treaty, except fishery products, and of forestry products; ... |
| --- | --- | --- |

(b)

concern:

—

the processing and/or marketing of products covered by Annex I to the Treaty, except fishery products, and of forestry products; ...

...’

| 12 | Under the first subparagraph of Article 71(3) of Regulation No 1698/2005:
  ‘The rules on eligibility of expenditure shall be set at national level, subject to the special conditions laid down by this Regulation for certain rural development measures.’ |
| --- | --- |

12

Under the first subparagraph of Article 71(3) of Regulation No 1698/2005:

‘The rules on eligibility of expenditure shall be set at national level, subject to the special conditions laid down by this Regulation for certain rural development measures.’

Hungarian law

Hungarian law

| 13 | Under Paragraph 1 of Decree No 47/2008 of the Ministry for Agriculture and Rural Development of 17 April 2008 laying down conditions for the provision of support from the EAFRD for adding value to agricultural products (Az Európai Mezőgazdasági Vidékfejlesztési Alapból a mezőgazdasági termékek értéknöveléséhez nyújtandó támogatások részletes feltételeiről szóló 47/2008. (IV. 17.) FVM rendelet) (‘Decree No 47’):
  ‘The support is intended, through the improvement of the processing and marketing of agricultural products or through the introduction of new products, processes and technologies, to increase the overall yield and competitiveness of agricultural holdings and undertakings in the food industry, to improve the conditions of safety and food hygiene and to reduce the burden on the environment.’ |
| --- | --- |

13

Under Paragraph 1 of Decree No 47/2008 of the Ministry for Agriculture and Rural Development of 17 April 2008 laying down conditions for the provision of support from the EAFRD for adding value to agricultural products (Az Európai Mezőgazdasági Vidékfejlesztési Alapból a mezőgazdasági termékek értéknöveléséhez nyújtandó támogatások részletes feltételeiről szóló 47/2008. (IV. 17.) FVM rendelet) (‘Decree No 47’):

‘The support is intended, through the improvement of the processing and marketing of agricultural products or through the introduction of new products, processes and technologies, to increase the overall yield and competitiveness of agricultural holdings and undertakings in the food industry, to improve the conditions of safety and food hygiene and to reduce the burden on the environment.’

| 14 | Paragraph 6(3) of Decree No 47 provides:
  ‘In respect of products placed under subheadings [of the Combined Nomenclature (CN)] for which the code begins with 0203 or 0401, or from 1101 to 1104, or under subheadings CN 02063000 and CN 02068010, or subheadings between CN 02071110 and CN 02071499, support may, in the case of mills, milk processing plants and abattoirs, be granted only for operations for the modernisation of existing capacity.’ |
| --- | --- |

14

Paragraph 6(3) of Decree No 47 provides:

‘In respect of products placed under subheadings [of the Combined Nomenclature (CN)] for which the code begins with 0203 or 0401, or from 1101 to 1104, or under subheadings CN 02063000 and CN 02068010, or subheadings between CN 02071110 and CN 02071499, support may, in the case of mills, milk processing plants and abattoirs, be granted only for operations for the modernisation of existing capacity.’

| 15 | Under Paragraph 12 of that Decree:
  ‘The present Decree lays down the necessary provisions for the implementation of Articles 26 and 28 of Regulation [No 1698/2005].’ |
| --- | --- |

15

Under Paragraph 12 of that Decree:

‘The present Decree lays down the necessary provisions for the implementation of Articles 26 and 28 of Regulation [No 1698/2005].’

The dispute in the main proceedings and the questions referred for a preliminary ruling

The dispute in the main proceedings and the questions referred for a preliminary ruling

| 16 | On 30 November 2009, Szatmári Malom applied for support for adding value to agricultural products. According to its application, Szatmári Malom planned to establish a new mill in Veszprém-Kádárta (Hungary) to combine the capacity of three existing mills which would be closed down. |
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16

On 30 November 2009, Szatmári Malom applied for support for adding value to agricultural products. According to its application, Szatmári Malom planned to establish a new mill in Veszprém-Kádárta (Hungary) to combine the capacity of three existing mills which would be closed down.

| 17 | The defendant authority refused that application on the ground that, under Paragraph 6(3) of Decree No 47, support may be granted only for the modernisation of existing mills and not for the establishment of a new mill in a new location. |
| --- | --- |

17

The defendant authority refused that application on the ground that, under Paragraph 6(3) of Decree No 47, support may be granted only for the modernisation of existing mills and not for the establishment of a new mill in a new location.

| 18 | Szatmári Malom contested that decision before the Jász-Nagykun-Szolnok Megyei Bíróság (County Court of Jász-Nagykun-Szolnok). While acknowledging that the aim of the national legislation at issue is to prevent an increase in the number of milling undertakings, Szatmári Malom claimed in support of its action that use of the capacity released by closure of the existing mills would, in the circumstances, enable it to achieve the same production as before, but in more modern conditions, with a consequent improvement in the enterprise’s overall performance. |
| --- | --- |

18

Szatmári Malom contested that decision before the Jász-Nagykun-Szolnok Megyei Bíróság (County Court of Jász-Nagykun-Szolnok). While acknowledging that the aim of the national legislation at issue is to prevent an increase in the number of milling undertakings, Szatmári Malom claimed in support of its action that use of the capacity released by closure of the existing mills would, in the circumstances, enable it to achieve the same production as before, but in more modern conditions, with a consequent improvement in the enterprise’s overall performance.

| 19 | That action was dismissed by judgment of 14 November 2011. The Jász-Nagykun-Szolnok Megyei Bíróság held that Paragraphs 1 and 6(3) of Decree No 47 could not be construed as meaning that Paragraph 6(3) of Decree No 47 also allows support to be granted for development measures achieved through the use of capacity released by the closure of existing mills. In that regard, it noted in particular that Paragraph 12 of Decree No 47 states that it lays down the conditions for the implementation of Articles 26 and 28 of Regulation No 1698/2005 and that Article 20(b)(i) of that regulation, to which Article 26 thereof refers, ensures the implementation of modernisation measures, but not the creation of new production units. |
| --- | --- |

19

That action was dismissed by judgment of 14 November 2011. The Jász-Nagykun-Szolnok Megyei Bíróság held that Paragraphs 1 and 6(3) of Decree No 47 could not be construed as meaning that Paragraph 6(3) of Decree No 47 also allows support to be granted for development measures achieved through the use of capacity released by the closure of existing mills. In that regard, it noted in particular that Paragraph 12 of Decree No 47 states that it lays down the conditions for the implementation of Articles 26 and 28 of Regulation No 1698/2005 and that Article 20(b)(i) of that regulation, to which Article 26 thereof refers, ensures the implementation of modernisation measures, but not the creation of new production units.

| 20 | In support of the appeal which it brought against that judgment before the Kúria (Supreme Court of Hungary; or ‘the referring court’), Szatmári Malom submits in particular that the judgment at first instance is based on a misinterpretation of Regulation No 1698/2005. It specifically maintains that the Jász-Nagykun-Szolnok Megyei Bíróság was incorrect in referring to Article 20(b)(i) of that regulation, since the application for the support in question was submitted not in relation to the ‘modernisation of agricultural holdings’ referred to in that provision, but to ‘adding value to agricultural products’, a situation contemplated only in Article 28 of Regulation No 1698/2005, which provides for support to be granted to improve the overall performance of the enterprise. |
| --- | --- |

20

In support of the appeal which it brought against that judgment before the Kúria (Supreme Court of Hungary; or ‘the referring court’), Szatmári Malom submits in particular that the judgment at first instance is based on a misinterpretation of Regulation No 1698/2005. It specifically maintains that the Jász-Nagykun-Szolnok Megyei Bíróság was incorrect in referring to Article 20(b)(i) of that regulation, since the application for the support in question was submitted not in relation to the ‘modernisation of agricultural holdings’ referred to in that provision, but to ‘adding value to agricultural products’, a situation contemplated only in Article 28 of Regulation No 1698/2005, which provides for support to be granted to improve the overall performance of the enterprise.

| 21 | According to Szatmári Malom, the project at issue in the main proceedings meets the requirements of Article 28 of Regulation No 1698/2005 and, accordingly, the only way of ensuring, in accordance with the principle of the primacy of EU law, that Decree No 47 complied with that regulation would have been to construe the decree in such a way as to enable the support requested to be granted. |
| --- | --- |

21

According to Szatmári Malom, the project at issue in the main proceedings meets the requirements of Article 28 of Regulation No 1698/2005 and, accordingly, the only way of ensuring, in accordance with the principle of the primacy of EU law, that Decree No 47 complied with that regulation would have been to construe the decree in such a way as to enable the support requested to be granted.

| 22 | For its part, the defendant authority contends that its decision was based solely on Decree No 47 and that, accordingly, there was no need for the Jász-Nagykun-Szolnok Megyei Bíróság to interpret Regulation No 1698/2005. In any event, according to the defendant authority, Paragraph 6(3) of Decree No 47 complies with that regulation. |
| --- | --- |

22

For its part, the defendant authority contends that its decision was based solely on Decree No 47 and that, accordingly, there was no need for the Jász-Nagykun-Szolnok Megyei Bíróság to interpret Regulation No 1698/2005. In any event, according to the defendant authority, Paragraph 6(3) of Decree No 47 complies with that regulation.

| 23 | Against that background, the Kúria decided to stay proceedings and to refer the following questions to the Court for a preliminary ruling:
  
  
  
  
  
  ‘(1) | May a situation where a business operator, having closed down previous holdings, wishes to establish a new holding without increasing existing capacity be deemed to fall within the concept of improving overall performance of the agricultural holding under Article 26(1)(a) of [Regulation No 1698/2005]? |
| --- | --- | --- |

23

Against that background, the Kúria decided to stay proceedings and to refer the following questions to the Court for a preliminary ruling:

‘(1)

May a situation where a business operator, having closed down previous holdings, wishes to establish a new holding without increasing existing capacity be deemed to fall within the concept of improving overall performance of the agricultural holding under Article 26(1)(a) of [Regulation No 1698/2005]?

| (2) | May the investment to be made by the applicant be interpreted as investment for the purpose of improving overall performance of the enterprise within the meaning of Articles 20(b)(iii) and 28(1)(a) of [Regulation No 1698/2005]? |
| --- | --- |

(2)

May the investment to be made by the applicant be interpreted as investment for the purpose of improving overall performance of the enterprise within the meaning of Articles 20(b)(iii) and 28(1)(a) of [Regulation No 1698/2005]?

| (3) | Is Paragraph 6(3) of [Decree No 47] compatible with Article 28(1)(a) of [Regulation No 1698/2005] in that, as regards mills, only support for operations for the purpose of modernising existing capacity is granted? Does [Regulation No 1698/2005] empower the national legislature to exclude certain types of development from support for economic reasons?’ |
| --- | --- |

(3)

Is Paragraph 6(3) of [Decree No 47] compatible with Article 28(1)(a) of [Regulation No 1698/2005] in that, as regards mills, only support for operations for the purpose of modernising existing capacity is granted? Does [Regulation No 1698/2005] empower the national legislature to exclude certain types of development from support for economic reasons?’

Consideration of the questions referred

Consideration of the questions referred

Question 1

Question 1

| 24 | By its first question, the national court asks, in essence, whether Article 26(1)(a) of Regulation No 1698/2005 must be interpreted as meaning that the concept of improvement in the overall performance of the agricultural holding, for the purposes of that provision, may cover an operation whereby an undertaking whose business is the operation of mills closes old mills in order to replace them with a new mill, but with no increase in existing capacity. |
| --- | --- |

24

By its first question, the national court asks, in essence, whether Article 26(1)(a) of Regulation No 1698/2005 must be interpreted as meaning that the concept of improvement in the overall performance of the agricultural holding, for the purposes of that provision, may cover an operation whereby an undertaking whose business is the operation of mills closes old mills in order to replace them with a new mill, but with no increase in existing capacity.

| 25 | It should be noted at the outset that, as can be seen from its actual wording, Article 26(1)(a) of Regulation No 1698/2005 refers — as, moreover, does Article 20(b)(i) of Regulation No 1698/2005, whose scope it determines — to ‘agricultural holdings’. |
| --- | --- |

25

It should be noted at the outset that, as can be seen from its actual wording, Article 26(1)(a) of Regulation No 1698/2005 refers — as, moreover, does Article 20(b)(i) of Regulation No 1698/2005, whose scope it determines — to ‘agricultural holdings’.

| 26 | In its observations, the Commission argues in that regard that mills cannot be regarded as agricultural holdings for the purposes of those provisions and, accordingly, those provisions are not intended to apply to an operation of the kind at issue in the main proceedings. |
| --- | --- |

26

In its observations, the Commission argues in that regard that mills cannot be regarded as agricultural holdings for the purposes of those provisions and, accordingly, those provisions are not intended to apply to an operation of the kind at issue in the main proceedings.

| 27 | In that regard, it should be recalled at the outset that, as stated in recital 61 to Regulation No 1698/2005 and in Article 71(3) thereof, while the rules on the eligibility of expenditure are, as a general rule, to be set at national level, that situation is subject to the special conditions laid down in that regulation for certain rural development measures (Case C‐592/11 Ketelä
  EU:C:2012:673, paragraph 38). |
| --- | --- |

27

In that regard, it should be recalled at the outset that, as stated in recital 61 to Regulation No 1698/2005 and in Article 71(3) thereof, while the rules on the eligibility of expenditure are, as a general rule, to be set at national level, that situation is subject to the special conditions laid down in that regulation for certain rural development measures (Case C‐592/11 Ketelä
  EU:C:2012:673, paragraph 38).

Ketelä

| 28 | Support for the modernisation of agricultural holdings, as provided for under Articles 20(b)(i) and 26 of Regulation No 1698/2005, relates to such a measure and the related eligibility condition that the support must be attributed to an ‘agricultural holding’ is a special condition of that measure. |
| --- | --- |

28

Support for the modernisation of agricultural holdings, as provided for under Articles 20(b)(i) and 26 of Regulation No 1698/2005, relates to such a measure and the related eligibility condition that the support must be attributed to an ‘agricultural holding’ is a special condition of that measure.

| 29 | Moreover, it should be borne in mind that, according to settled case-law, the need for a uniform application of EU law and the principle of equality require that the terms of a provision of EU law which makes no express reference to the law of the Member States for the purposes of determining its meaning and scope must normally be given an independent and uniform interpretation throughout the European Union (see, inter alia, Case C‐592/11 Ketelä
  EU:C:2012:673, paragraph 34 and the case-law cited). |
| --- | --- |

29

Moreover, it should be borne in mind that, according to settled case-law, the need for a uniform application of EU law and the principle of equality require that the terms of a provision of EU law which makes no express reference to the law of the Member States for the purposes of determining its meaning and scope must normally be given an independent and uniform interpretation throughout the European Union (see, inter alia, Case C‐592/11 Ketelä
  EU:C:2012:673, paragraph 34 and the case-law cited).

Ketelä

| 30 | The concept of ‘agricultural holding’ is not defined in any way in Regulation No 1698/2005. |
| --- | --- |

30

The concept of ‘agricultural holding’ is not defined in any way in Regulation No 1698/2005.

| 31 | In such circumstances, the meaning and scope of terms for which EU law provides no definition must be determined by reference to their usual meaning in everyday language, while account is also taken of the context in which they occur and the purposes of the rules of which they form part (Case C‐592/11 Ketelä
  EU:C:2012:673, paragraph 51 and the case-law cited). |
| --- | --- |

31

In such circumstances, the meaning and scope of terms for which EU law provides no definition must be determined by reference to their usual meaning in everyday language, while account is also taken of the context in which they occur and the purposes of the rules of which they form part (Case C‐592/11 Ketelä
  EU:C:2012:673, paragraph 51 and the case-law cited).

Ketelä

| 32 | As regards the terms used in Article 26 of Regulation No 1698/2005, it must be borne in mind that the Court has held that the scope of an expression such as ‘agricultural holding’ may, in particular, vary according to the specific objectives pursued by the rules of EU law in question (see Case 85/77 Azienda Avicola Sant’Anna
  EU:C:1978:38, paragraph 9). |
| --- | --- |

32

As regards the terms used in Article 26 of Regulation No 1698/2005, it must be borne in mind that the Court has held that the scope of an expression such as ‘agricultural holding’ may, in particular, vary according to the specific objectives pursued by the rules of EU law in question (see Case 85/77 Azienda Avicola Sant’Anna
  EU:C:1978:38, paragraph 9).

Azienda Avicola Sant’Anna

| 33 | As regards the context in which Article 26 of Regulation No 1698/2005 arises, it is clear from recitals 13 and 20 to Regulation No 1698/2005 and from Article 20(b)(i) and (iii) of that regulation that, by specifying the various types of measure for enhancing and adapting the physical potential, the EU legislature has made a distinction between measures to modernise agricultural holdings and measures to add value to agricultural products. |
| --- | --- |

33

As regards the context in which Article 26 of Regulation No 1698/2005 arises, it is clear from recitals 13 and 20 to Regulation No 1698/2005 and from Article 20(b)(i) and (iii) of that regulation that, by specifying the various types of measure for enhancing and adapting the physical potential, the EU legislature has made a distinction between measures to modernise agricultural holdings and measures to add value to agricultural products.

| 34 | Those two types of operation are, moreover, the subject of two distinct provisions, namely, Articles 26 and 28 of Regulation No 1698/2005, intended to specify certain characteristics that those operations must respectively possess. |
| --- | --- |

34

Those two types of operation are, moreover, the subject of two distinct provisions, namely, Articles 26 and 28 of Regulation No 1698/2005, intended to specify certain characteristics that those operations must respectively possess.

| 35 | In that regard, Article 26 of Regulation No 1698/2005 indicates that the operations eligible for support for the modernisation of agricultural holdings are to be tangible and/or intangible investments which, inter alia, improve the ‘overall performance of the agricultural holding’, while Article 28 of that regulation specifies that the operations eligible for support for adding value to agricultural products are to be tangible and/or intangible investments which improve the ‘overall performance of the enterprise’ and concern, in particular, the ‘processing and/or marketing of [agricultural] products covered by Annex I to the Treaty’. |
| --- | --- |

35

In that regard, Article 26 of Regulation No 1698/2005 indicates that the operations eligible for support for the modernisation of agricultural holdings are to be tangible and/or intangible investments which, inter alia, improve the ‘overall performance of the agricultural holding’, while Article 28 of that regulation specifies that the operations eligible for support for adding value to agricultural products are to be tangible and/or intangible investments which improve the ‘overall performance of the enterprise’ and concern, in particular, the ‘processing and/or marketing of [agricultural] products covered by Annex I to the Treaty’.

| 36 | Furthermore, it should be noted that recital 21 in the preamble to Regulation No 1698/2005 categorises support for the modernisation of agricultural holdings, referred to in Articles 20(b)(i) and 26 of that regulation, as ‘farm investment aid’ and, in that respect, refers in particular to better use of the ‘production factors’ and the need to target ‘organic products’ and ‘on/off diversification, including non-food sectors and energy crops’. |
| --- | --- |

36

Furthermore, it should be noted that recital 21 in the preamble to Regulation No 1698/2005 categorises support for the modernisation of agricultural holdings, referred to in Articles 20(b)(i) and 26 of that regulation, as ‘farm investment aid’ and, in that respect, refers in particular to better use of the ‘production factors’ and the need to target ‘organic products’ and ‘on/off diversification, including non-food sectors and energy crops’.

| 37 | Recital 23 to Regulation No 1698/2005, which concerns support for adding value to agricultural products, specifies that that support is designed to encourage improvements in the ‘processing’ and marketing of ‘primary agricultural ... products’ by means of support for investments aimed, inter alia, at improving efficiency in the ‘processing’ and marketing sector. |
| --- | --- |

37

Recital 23 to Regulation No 1698/2005, which concerns support for adding value to agricultural products, specifies that that support is designed to encourage improvements in the ‘processing’ and marketing of ‘primary agricultural ... products’ by means of support for investments aimed, inter alia, at improving efficiency in the ‘processing’ and marketing sector.

| 38 | It follows from the distinction thus drawn by the EU legislature and from all the specifications made in Articles 26 and 28 of Regulation No 1698/2005 and in recitals 21 and 23 thereto that, in the regulatory context established by that regulation, the term ‘agricultural holdings’ as used in Articles 20(b)(i) and 26 of the regulation should be understood as referring to a holding that is engaged in the production of primary agricultural products (see also, to that effect, as regards earlier legislation relating to the two types of support examined here, Case 107/80 Cattaneo Adorno v Commission
  EU:C:1981:127, paragraphs 19 and 21). |
| --- | --- |

38

It follows from the distinction thus drawn by the EU legislature and from all the specifications made in Articles 26 and 28 of Regulation No 1698/2005 and in recitals 21 and 23 thereto that, in the regulatory context established by that regulation, the term ‘agricultural holdings’ as used in Articles 20(b)(i) and 26 of the regulation should be understood as referring to a holding that is engaged in the production of primary agricultural products (see also, to that effect, as regards earlier legislation relating to the two types of support examined here, Case 107/80 Cattaneo Adorno v Commission
  EU:C:1981:127, paragraphs 19 and 21).

Cattaneo Adorno

Commission

| 39 | In those circumstances, it is clear that an undertaking such as Szatmári Malom, which does not produce primary agricultural products, but operates mills in which it processes such products, does not constitute an ‘agricultural holding’ for the purposes of Article 26 of Regulation No 1698/2005. |
| --- | --- |

39

In those circumstances, it is clear that an undertaking such as Szatmári Malom, which does not produce primary agricultural products, but operates mills in which it processes such products, does not constitute an ‘agricultural holding’ for the purposes of Article 26 of Regulation No 1698/2005.

| 40 | On the other hand, such an undertaking falls within the scope of Articles 20(b)(iii) and 28(1) of that regulation and may therefore receive support under those provisions. |
| --- | --- |

40

On the other hand, such an undertaking falls within the scope of Articles 20(b)(iii) and 28(1) of that regulation and may therefore receive support under those provisions.

| 41 | In the light of all the foregoing, the answer to Question 1 is that Article 26(1)(a) of Regulation No 1698/2005 must be interpreted as meaning that the concept of improvement in the overall performance of the agricultural holding, as referred to in that provision, cannot cover an operation whereby an undertaking whose business is the operation of mills closes old mills in order to replace them with a new mill, but with no increase in existing capacity. |
| --- | --- |

41

In the light of all the foregoing, the answer to Question 1 is that Article 26(1)(a) of Regulation No 1698/2005 must be interpreted as meaning that the concept of improvement in the overall performance of the agricultural holding, as referred to in that provision, cannot cover an operation whereby an undertaking whose business is the operation of mills closes old mills in order to replace them with a new mill, but with no increase in existing capacity.

Question 2

Question 2

| 42 | By its second question, the referring court asks, in essence, whether Articles 20(b)(iii) and 28(1)(a) of Regulation No 1698/2005 must be interpreted as meaning that an operation consisting in the closure of old mills and their replacement with a new mill, but with no increase in existing capacity, is capable of improving the overall performance of the enterprise for the purposes of the latter provision. |
| --- | --- |

42

By its second question, the referring court asks, in essence, whether Articles 20(b)(iii) and 28(1)(a) of Regulation No 1698/2005 must be interpreted as meaning that an operation consisting in the closure of old mills and their replacement with a new mill, but with no increase in existing capacity, is capable of improving the overall performance of the enterprise for the purposes of the latter provision.

| 43 | In that regard, it has already been noted in paragraph 40 above that an undertaking which operates one or more mills and is therefore active in the sector of the processing of primary agricultural products may, falling within the scope of Articles 20(b)(iii) and 28(1)(a) of Regulation No 1698/2005, receive support under those provisions. Likewise, it is common ground that an operation such as that at issue in the main proceedings embodies a tangible investment which meets the condition, laid down in Article 28(1)(b) of Regulation No 1698/2005, of concerning the processing of products covered by Annex I to the Treaty. |
| --- | --- |

43

In that regard, it has already been noted in paragraph 40 above that an undertaking which operates one or more mills and is therefore active in the sector of the processing of primary agricultural products may, falling within the scope of Articles 20(b)(iii) and 28(1)(a) of Regulation No 1698/2005, receive support under those provisions. Likewise, it is common ground that an operation such as that at issue in the main proceedings embodies a tangible investment which meets the condition, laid down in Article 28(1)(b) of Regulation No 1698/2005, of concerning the processing of products covered by Annex I to the Treaty.

| 44 | As for the question whether such an operation may lead to an ‘improvement in the overall performance’ of that undertaking, for the purposes of Article 28(1)(a) of Regulation No 1698/2005, it must be noted that there is nothing in the wording of Article 28(1) to suggest that the support referred to in that provision should be ruled out in cases where the undertaking concerned achieves such an improvement in performance by replacing one or more existing processing facilities with a new facility. |
| --- | --- |

44

As for the question whether such an operation may lead to an ‘improvement in the overall performance’ of that undertaking, for the purposes of Article 28(1)(a) of Regulation No 1698/2005, it must be noted that there is nothing in the wording of Article 28(1) to suggest that the support referred to in that provision should be ruled out in cases where the undertaking concerned achieves such an improvement in performance by replacing one or more existing processing facilities with a new facility.

| 45 | Nor — as the Commission, among others, has correctly argued — can such a restrictive interpretation of Article 28(1) of Regulation No 1698/2005 be justified in terms of the objectives pursued by that provision. |
| --- | --- |

45

Nor — as the Commission, among others, has correctly argued — can such a restrictive interpretation of Article 28(1) of Regulation No 1698/2005 be justified in terms of the objectives pursued by that provision.

| 46 | As is clear from Articles 20(b)(iii) and 28(1) of Regulation No 1698/2005, read in the light of recitals 13, 20 and 23 thereto, one of the aims of the support measures referred to in those provisions is to improve the processing of primary agricultural products by supporting investments intended to improve efficiency in the processing sector, in order to add value to agricultural products and in that way to contribute to the attainment of the objective of that regulation, which is to improve the competitiveness of the agricultural sector. |
| --- | --- |

46

As is clear from Articles 20(b)(iii) and 28(1) of Regulation No 1698/2005, read in the light of recitals 13, 20 and 23 thereto, one of the aims of the support measures referred to in those provisions is to improve the processing of primary agricultural products by supporting investments intended to improve efficiency in the processing sector, in order to add value to agricultural products and in that way to contribute to the attainment of the objective of that regulation, which is to improve the competitiveness of the agricultural sector.

| 47 | It is clear that improving the performance of a processing undertaking operating one or more mills by replacing existing facilities with a new facility may contribute to the pursuit of such objectives. |
| --- | --- |

47

It is clear that improving the performance of a processing undertaking operating one or more mills by replacing existing facilities with a new facility may contribute to the pursuit of such objectives.

| 48 | In the light of the foregoing, the answer to Question 2 is that Articles 20(b)(iii) and 28(1)(a) of Regulation No 1698/2005 must be interpreted as meaning that an operation consisting in the closure of old mills and their replacement with a new mill, but with no increase in existing capacity, may improve the overall performance of the enterprise for the purposes of the latter provision. |
| --- | --- |

48

In the light of the foregoing, the answer to Question 2 is that Articles 20(b)(iii) and 28(1)(a) of Regulation No 1698/2005 must be interpreted as meaning that an operation consisting in the closure of old mills and their replacement with a new mill, but with no increase in existing capacity, may improve the overall performance of the enterprise for the purposes of the latter provision.

Question 3

Question 3

| 49 | First of all, it should be recalled that, under Paragraph 6(3) of Decree No 47, support for adding value to agricultural products may, in the case of mills, be granted only for operations intended to modernise their existing capacity. |
| --- | --- |

49

First of all, it should be recalled that, under Paragraph 6(3) of Decree No 47, support for adding value to agricultural products may, in the case of mills, be granted only for operations intended to modernise their existing capacity.

| 50 | As regards the purpose of that limitation — and even though, in that regard, the national court refers in its question, in general terms, to economic grounds justifying the exclusion of certain development measures — it would appear from the information given in the order for reference and reproduced in paragraph 18 above that that limitation was essentially prompted by a desire not to encourage an increase in the number of mills in operation. |
| --- | --- |

50

As regards the purpose of that limitation — and even though, in that regard, the national court refers in its question, in general terms, to economic grounds justifying the exclusion of certain development measures — it would appear from the information given in the order for reference and reproduced in paragraph 18 above that that limitation was essentially prompted by a desire not to encourage an increase in the number of mills in operation.

| 51 | Questioned on this point at the hearing, the Hungarian Government confirmed that the limitation is in fact intended to avoid encouraging, through the grant of support, the emergence of additional processing capacity in the milling sector. |
| --- | --- |

51

Questioned on this point at the hearing, the Hungarian Government confirmed that the limitation is in fact intended to avoid encouraging, through the grant of support, the emergence of additional processing capacity in the milling sector.

| 52 | Moreover, both the Hungarian Government and the Commission have noted in this regard that, according to the Hungarian rural development plan established under Article 18 of Regulation No 1698/2005, the milling sector in Hungary is characterised by significant under-utilisation of existing capacity. |
| --- | --- |

52

Moreover, both the Hungarian Government and the Commission have noted in this regard that, according to the Hungarian rural development plan established under Article 18 of Regulation No 1698/2005, the milling sector in Hungary is characterised by significant under-utilisation of existing capacity.

| 53 | In the light of the foregoing, Question 3 must be understood as asking essentially whether Article 28(1)(a) of Regulation No 1698/2005 must be interpreted as precluding the adoption of national legislation, such as that at issue in the main proceedings, introducing support for the adding of value to agricultural products, which, as regards milling undertakings, can be granted only for operations intended to modernise the existing capacity of those mills and not for those involving the creation of new capacity. |
| --- | --- |

53

In the light of the foregoing, Question 3 must be understood as asking essentially whether Article 28(1)(a) of Regulation No 1698/2005 must be interpreted as precluding the adoption of national legislation, such as that at issue in the main proceedings, introducing support for the adding of value to agricultural products, which, as regards milling undertakings, can be granted only for operations intended to modernise the existing capacity of those mills and not for those involving the creation of new capacity.

| 54 | In that regard, it should first of all be borne in mind that, although, by virtue of the very nature of regulations and of their function in the system of sources of EU law, the provisions of regulations generally have immediate effect in the national legal systems, without the need for the national authorities to adopt implementing measures, some of their provisions may nevertheless require, for their application, the adoption of implementing measures by the Member States (see, to that effect, inter alia, Case C‐592/11 Ketelä
  EU:C:2012:673, paragraph 35 and the case-law cited). |
| --- | --- |

54

In that regard, it should first of all be borne in mind that, although, by virtue of the very nature of regulations and of their function in the system of sources of EU law, the provisions of regulations generally have immediate effect in the national legal systems, without the need for the national authorities to adopt implementing measures, some of their provisions may nevertheless require, for their application, the adoption of implementing measures by the Member States (see, to that effect, inter alia, Case C‐592/11 Ketelä
  EU:C:2012:673, paragraph 35 and the case-law cited).

Ketelä

| 55 | In that regard, it is settled law that Member States may adopt implementing measures for a regulation provided that they do not thereby obstruct its direct applicability or conceal its Community nature; that they specify that they are acting in exercise of a discretion granted to them under that regulation; and that they adhere to the parameters laid down thereunder (see, to that effect, inter alia, Case C‐592/11 Ketelä
  EU:C:2012:673, paragraph 36 and the case-law cited). |
| --- | --- |

55

In that regard, it is settled law that Member States may adopt implementing measures for a regulation provided that they do not thereby obstruct its direct applicability or conceal its Community nature; that they specify that they are acting in exercise of a discretion granted to them under that regulation; and that they adhere to the parameters laid down thereunder (see, to that effect, inter alia, Case C‐592/11 Ketelä
  EU:C:2012:673, paragraph 36 and the case-law cited).

Ketelä

| 56 | As regards, more specifically, Regulation No 1698/2005, it has already been stated in paragraph 27 above that it can be seen from recital 61 to that Regulation and Article 71(3) thereof that, subject to special conditions established thereunder for certain rural development measures, the rules on the eligibility of expenditure are, as a general rule, to be set at national level. |
| --- | --- |

56

As regards, more specifically, Regulation No 1698/2005, it has already been stated in paragraph 27 above that it can be seen from recital 61 to that Regulation and Article 71(3) thereof that, subject to special conditions established thereunder for certain rural development measures, the rules on the eligibility of expenditure are, as a general rule, to be set at national level.

| 57 | In the present case, the requirement laid down in Article 28(1)(a) of Regulation No 1698/2005 — in accordance with which the planned operation must be of such a kind as to ensure an improvement in the overall performance of the enterprise — admittedly constitutes such a special condition and, accordingly, an eligibility condition in respect of the support referred to in that provision. |
| --- | --- |

57

In the present case, the requirement laid down in Article 28(1)(a) of Regulation No 1698/2005 — in accordance with which the planned operation must be of such a kind as to ensure an improvement in the overall performance of the enterprise — admittedly constitutes such a special condition and, accordingly, an eligibility condition in respect of the support referred to in that provision.

| 58 | In no way does it follow from that requirement, however, that any kind of investment that enables a processing undertaking, such as an undertaking operating one or more mills, to improve its overall performance must necessarily be able to receive support under that provision. |
| --- | --- |

58

In no way does it follow from that requirement, however, that any kind of investment that enables a processing undertaking, such as an undertaking operating one or more mills, to improve its overall performance must necessarily be able to receive support under that provision.

| 59 | It should be recalled that, as regards funding to be established under Regulation No 1698/2005 and as is apparent from Articles 16 and 18 thereof, in particular, Member States are required to establish their own rural development programmes including, inter alia, information on the ‘measures proposed for each axis and their description’, and those programmes then have to undergo the evaluation and approval procedures laid down in Article 18. |
| --- | --- |

59

It should be recalled that, as regards funding to be established under Regulation No 1698/2005 and as is apparent from Articles 16 and 18 thereof, in particular, Member States are required to establish their own rural development programmes including, inter alia, information on the ‘measures proposed for each axis and their description’, and those programmes then have to undergo the evaluation and approval procedures laid down in Article 18.

| 60 | In that context, and as has just been recalled in paragraphs 55 and 56 above, it remains open to Member States to lay down, for the grant of support financed by the EAFRD, eligibility conditions additional to those laid down in Regulation No 1698/2005, provided that, in so doing, they specify that they are acting in exercise of a discretion granted to them under that regulation and that they adhere to the parameters laid down thereunder. |
| --- | --- |

60

In that context, and as has just been recalled in paragraphs 55 and 56 above, it remains open to Member States to lay down, for the grant of support financed by the EAFRD, eligibility conditions additional to those laid down in Regulation No 1698/2005, provided that, in so doing, they specify that they are acting in exercise of a discretion granted to them under that regulation and that they adhere to the parameters laid down thereunder.

| 61 | In the present case, as is apparent from paragraphs 49 to 51 above, the Hungarian authorities have made provision, through the adoption of Paragraph 6(3) of Decree No 47, to the effect that support designed to add value to agricultural products — such as the support referred to in Article 28(1)(a) of Regulation No 1698/2005 — may, as regards mills, be granted only for operations intended to modernise their existing capacity, the essential purpose of that provision being to avoid encouraging, through the grant of such support, an increase in the existing capacity in that sector. |
| --- | --- |

61

In the present case, as is apparent from paragraphs 49 to 51 above, the Hungarian authorities have made provision, through the adoption of Paragraph 6(3) of Decree No 47, to the effect that support designed to add value to agricultural products — such as the support referred to in Article 28(1)(a) of Regulation No 1698/2005 — may, as regards mills, be granted only for operations intended to modernise their existing capacity, the essential purpose of that provision being to avoid encouraging, through the grant of such support, an increase in the existing capacity in that sector.

| 62 | There is no indication in the evidence before the Court that, by laying down an eligibility condition of that nature for the support concerned, the Hungarian authorities exceeded the broad discretion granted to them by Regulation No 1698/2005 for the purpose, inter alia — and as stated in recital 11 to that regulation — of taking into account the diversity of situations existing in the regions concerned; nor is there anything to suggest that they did not adhere to the parameters laid down in that regulation. |
| --- | --- |

62

There is no indication in the evidence before the Court that, by laying down an eligibility condition of that nature for the support concerned, the Hungarian authorities exceeded the broad discretion granted to them by Regulation No 1698/2005 for the purpose, inter alia — and as stated in recital 11 to that regulation — of taking into account the diversity of situations existing in the regions concerned; nor is there anything to suggest that they did not adhere to the parameters laid down in that regulation.

| 63 | In that regard, it emerges in particular from the explanations provided by the Hungarian Government and the Commission, referred to in paragraph 52 above, that, in the present case, such a limitation is accounted for by the under-utilisation of existing capacity, a situation that characterises the milling sector in Hungary. |
| --- | --- |

63

In that regard, it emerges in particular from the explanations provided by the Hungarian Government and the Commission, referred to in paragraph 52 above, that, in the present case, such a limitation is accounted for by the under-utilisation of existing capacity, a situation that characterises the milling sector in Hungary.

| 64 | However, as the referring court notes, a special feature of the operation at issue in the main proceedings is that the new milling facility that it creates is brought into existence through the replacement of existing milling facilities under closure, and there is no attendant increase in existing capacity. |
| --- | --- |

64

However, as the referring court notes, a special feature of the operation at issue in the main proceedings is that the new milling facility that it creates is brought into existence through the replacement of existing milling facilities under closure, and there is no attendant increase in existing capacity.

| 65 | In that connection — and as regards, as in the present case, support granted under Regulation No 1698/2005 — it should be borne in mind that, under Article 51(1) of the Charter of Fundamental Rights of the European Union, the provisions of the Charter are to apply to the Member States only when they are implementing EU law. With such an implementation, Member States are likewise required to ensure observance of the general principles of that law, such as the principle of equal treatment enshrined in Article 20 of the Charter (Order in Case C‐24/13 Dél-Zempléni Nektár Leader Nonprofit
  EU:C:2014:40, paragraph 17 and the case-law cited). |
| --- | --- |

65

In that connection — and as regards, as in the present case, support granted under Regulation No 1698/2005 — it should be borne in mind that, under Article 51(1) of the Charter of Fundamental Rights of the European Union, the provisions of the Charter are to apply to the Member States only when they are implementing EU law. With such an implementation, Member States are likewise required to ensure observance of the general principles of that law, such as the principle of equal treatment enshrined in Article 20 of the Charter (Order in Case C‐24/13 Dél-Zempléni Nektár Leader Nonprofit
  EU:C:2014:40, paragraph 17 and the case-law cited).

Dél-Zempléni Nektár Leader Nonprofit

| 66 | According to settled case-law, the principle of equal treatment requires that comparable situations must not be treated differently, and that different situations must not be treated in the same way, unless such treatment is objectively justified (see, inter alia, Case C‐127/07 Arcelor Atlantique and Lorraine and Others
  EU:C:2008:728, paragraph 23 and the case-law cited, and Case C‐401/11 Soukupová
  EU:C:2013:223, paragraph 29 and the case-law cited). |
| --- | --- |

66

According to settled case-law, the principle of equal treatment requires that comparable situations must not be treated differently, and that different situations must not be treated in the same way, unless such treatment is objectively justified (see, inter alia, Case C‐127/07 Arcelor Atlantique and Lorraine and Others
  EU:C:2008:728, paragraph 23 and the case-law cited, and Case C‐401/11 Soukupová
  EU:C:2013:223, paragraph 29 and the case-law cited).

Arcelor Atlantique and Lorraine and Others

Soukupová

| 67 | In that regard, the elements that characterise different situations and, accordingly, their comparability must in particular be determined and assessed in the light of the subject-matter and purpose of the EU act that makes the distinction in question (see, inter alia, Case C‐195/12 IBV & Cie
  EU:C:2013:598, paragraphs 52 and 53 and the case-law cited). |
| --- | --- |

67

In that regard, the elements that characterise different situations and, accordingly, their comparability must in particular be determined and assessed in the light of the subject-matter and purpose of the EU act that makes the distinction in question (see, inter alia, Case C‐195/12 IBV & Cie
  EU:C:2013:598, paragraphs 52 and 53 and the case-law cited).

IBV & Cie

| 68 | As regards the objective served in the present case by the eligibility condition at issue, it has already been stated that it appears designed to ensure that the support scheme concerned contributes to improving the overall performance of undertakings active in the milling sector, while not encouraging the creation of new capacity in a sector characterised by under-utilisation of existing capacity. |
| --- | --- |

68

As regards the objective served in the present case by the eligibility condition at issue, it has already been stated that it appears designed to ensure that the support scheme concerned contributes to improving the overall performance of undertakings active in the milling sector, while not encouraging the creation of new capacity in a sector characterised by under-utilisation of existing capacity.

| 69 | Without prejudice to the final assessment on that point, which is a matter for the referring court, it appears that, in the light of that objective, the situation in which one or more milling facilities are closed in order to be replaced with a new milling facility, but with no increase in existing capacity, may be regarded as comparable to the situation in which pre-existing milling facilities are modernised and, accordingly, the exclusion of the first situation from the support scheme is contrary to the principle of equal treatment. |
| --- | --- |

69

Without prejudice to the final assessment on that point, which is a matter for the referring court, it appears that, in the light of that objective, the situation in which one or more milling facilities are closed in order to be replaced with a new milling facility, but with no increase in existing capacity, may be regarded as comparable to the situation in which pre-existing milling facilities are modernised and, accordingly, the exclusion of the first situation from the support scheme is contrary to the principle of equal treatment.

| 70 | In that context, it should be borne in mind, lastly, that it is settled law that, when national courts apply domestic law, it is binding upon them to interpret that law, so far as is possible, in such a way as to ensure compliance with EU law. That obligation to interpret national law in conformity with EU law is inherent in the system of the Treaty on the Functioning of the European Union, since it enables national courts, for the matters within their jurisdiction, to ensure the full effectiveness of EU law when they determine the disputes before them (see, inter alia, Case C‐138/12 Rusedespred
  EU:C:2013:233, paragraph 37 and the case-law cited). |
| --- | --- |

70

In that context, it should be borne in mind, lastly, that it is settled law that, when national courts apply domestic law, it is binding upon them to interpret that law, so far as is possible, in such a way as to ensure compliance with EU law. That obligation to interpret national law in conformity with EU law is inherent in the system of the Treaty on the Functioning of the European Union, since it enables national courts, for the matters within their jurisdiction, to ensure the full effectiveness of EU law when they determine the disputes before them (see, inter alia, Case C‐138/12 Rusedespred
  EU:C:2013:233, paragraph 37 and the case-law cited).

Rusedespred

| 71 | In the light of all the foregoing, the answer to Question 3 is that Article 28(1)(a) of Regulation No 1698/2005 must be interpreted as not precluding, in principle, the adoption of national legislation, such as that at issue in the main proceedings, introducing support for the adding of value to agricultural products, which, as regards milling undertakings, can be granted only for operations intended to modernise the existing capacity of those mills and not for those involving the creation of new capacity. However, when considering a situation such as that at issue in the main proceedings, in which one or more milling facilities are closed in order to be replaced with a new milling facility, but with no increase in existing capacity, it is for the national court to ensure that such legislation is applied in such a way as to ensure observance of the principle of equal treatment. |
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71

In the light of all the foregoing, the answer to Question 3 is that Article 28(1)(a) of Regulation No 1698/2005 must be interpreted as not precluding, in principle, the adoption of national legislation, such as that at issue in the main proceedings, introducing support for the adding of value to agricultural products, which, as regards milling undertakings, can be granted only for operations intended to modernise the existing capacity of those mills and not for those involving the creation of new capacity. However, when considering a situation such as that at issue in the main proceedings, in which one or more milling facilities are closed in order to be replaced with a new milling facility, but with no increase in existing capacity, it is for the national court to ensure that such legislation is applied in such a way as to ensure observance of the principle of equal treatment.

Costs

Costs

| 72 | 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. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. |
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72

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. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

| | On those grounds, the Court (Ninth Chamber) hereby rules: |
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On those grounds, the Court (Ninth Chamber) hereby rules:

| | 1. | Article 26(1)(a) of Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) must be interpreted as meaning that the concept of improvement in the overall performance of the agricultural holding, as referred to in that provision, cannot cover an operation whereby an undertaking whose business is the operation of mills closes old mills in order to replace them with a new mill, but with no increase in existing capacity. |
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1.

1.

Article 26(1)(a) of Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) must be interpreted as meaning that the concept of improvement in the overall performance of the agricultural holding, as referred to in that provision, cannot cover an operation whereby an undertaking whose business is the operation of mills closes old mills in order to replace them with a new mill, but with no increase in existing capacity.

Article 26(1)(a) of Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) must be interpreted as meaning that the concept of improvement in the overall performance of the agricultural holding, as referred to in that provision, cannot cover an operation whereby an undertaking whose business is the operation of mills closes old mills in order to replace them with a new mill, but with no increase in existing capacity.

| | 2. | Articles 20(b)(iii) and 28(1)(a) of Regulation No 1698/2005 must be interpreted as meaning that an operation consisting in the closure of old mills and their replacement with a new mill, but with no increase in existing capacity, may improve the overall performance of the enterprise for the purposes of the latter provision. |
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2.

2.

Articles 20(b)(iii) and 28(1)(a) of Regulation No 1698/2005 must be interpreted as meaning that an operation consisting in the closure of old mills and their replacement with a new mill, but with no increase in existing capacity, may improve the overall performance of the enterprise for the purposes of the latter provision.

Articles 20(b)(iii) and 28(1)(a) of Regulation No 1698/2005 must be interpreted as meaning that an operation consisting in the closure of old mills and their replacement with a new mill, but with no increase in existing capacity, may improve the overall performance of the enterprise for the purposes of the latter provision.

| | 3. | Article 28(1)(a) of Regulation No 1698/2005 must be interpreted as not precluding, in principle, the adoption of national legislation, such as that at issue in the main proceedings, introducing support for the adding of value to agricultural products, which, as regards milling undertakings, can be granted only for operations intended to modernise the existing capacity of those mills and not for those involving the creation of new capacity. However, when considering a situation such as that at issue in the main proceedings, in which one or more milling facilities are closed in order to be replaced with a new milling facility, but with no increase in existing capacity, it is for the national court to ensure that such legislation is applied in such a way as to ensure observance of the principle of equal treatment. |
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3.

3.

Article 28(1)(a) of Regulation No 1698/2005 must be interpreted as not precluding, in principle, the adoption of national legislation, such as that at issue in the main proceedings, introducing support for the adding of value to agricultural products, which, as regards milling undertakings, can be granted only for operations intended to modernise the existing capacity of those mills and not for those involving the creation of new capacity. However, when considering a situation such as that at issue in the main proceedings, in which one or more milling facilities are closed in order to be replaced with a new milling facility, but with no increase in existing capacity, it is for the national court to ensure that such legislation is applied in such a way as to ensure observance of the principle of equal treatment.

Article 28(1)(a) of Regulation No 1698/2005 must be interpreted as not precluding, in principle, the adoption of national legislation, such as that at issue in the main proceedings, introducing support for the adding of value to agricultural products, which, as regards milling undertakings, can be granted only for operations intended to modernise the existing capacity of those mills and not for those involving the creation of new capacity. However, when considering a situation such as that at issue in the main proceedings, in which one or more milling facilities are closed in order to be replaced with a new milling facility, but with no increase in existing capacity, it is for the national court to ensure that such legislation is applied in such a way as to ensure observance of the principle of equal treatment.

| | [Signatures] |
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[Signatures]

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  )	Language of the case: Hungarian.

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