**Case C-560/07**

**Balbiino AS**

**v**

**Põllumajandusminister**

**and**

**Maksu- ja Tolliameti Põhja maksu- ja tollikeskus**

(Reference for a preliminary ruling from the Tallinna Halduskohus)

(Accession of Estonia – Transitional measures – Agricultural products – Sugar – Surplus stocks – Regulations (EC) Nos 1972/2003, 60/2004 and 832/2005)

Summary of the Judgment

1.        *Accession of new Member States to the Communities – Estonia – Agriculture – Common organisation of the markets – Transitional
measures concerning trade in agricultural products*

*(Commission Regulations No 1972/2003, Art. 4(1) and (2), No 60/2004, Art. 6(3), and No 832/2005)*

2.        *Accession of new Member States to the Communities – Estonia – Agriculture – Common organisation of the markets – Transitional
measures concerning trade in agricultural products*

*(Commission Regulation No 1972/2003)*

3.        *Accession of new Member States to the Communities – Estonia – Agriculture – Common organisation of the markets – Transitional
measures concerning trade in agricultural products*

*(Commission Regulations No 1972/2003, Art. 4, and No 60/2004, Art. 6)*

4.        *Accession of new Member States to the Communities – Estonia – Agriculture – Common organisation of the markets – Transitional
measures concerning trade in agricultural products*

*(Commission Regulations No 1972/2003 and No 60/2004)*

5.        *Accession of new Member States to the Communities – Estonia – Agriculture – Common organisation of the markets – Transitional
measures concerning trade in agricultural products*

*(Commission Regulation No 60/2004, Art. 6(3))*

6.        *Accession of new Member States to the Communities – Estonia – Agriculture – Common organisation of the markets – Transitional
measures concerning trade in agricultural products*

*(Commission Regulation No 1972/2003, Art. 10)*

1.        Article 4(1) and (2) of Regulation No 1972/2003 on transitional measures to be adopted in respect of trade in agricultural
products on account of the accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia
and Slovakia, Article 6(3) of Regulation No 60/2004 laying down transitional measures in the sugar sector by reason of the
accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia, and Regulation
No 832/2005 on the determination of surplus quantities of sugar, isoglucose and fructose for the Czech Republic, Estonia,
Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia do not preclude a national measure under which an
operator’s surplus stock is determined by deducting from the stock actually held on 1 May 2004 the transitional stock defined
as the average stock on 1 May of the previous four years of activity multiplied by a coefficient of 1.2 corresponding to the
growth of agricultural production observed in the Member State in question during that period.

When the new Member States determine surplus stocks of agricultural products under Regulation No 1972/2003 and stocks of sugar
under Regulations No 60/2004 and No 832/2005, in the absence of more precise rules they have a discretion as to defining the
relevant period, the method of calculating the averages of stocks available and the system for identifying excess stocks,
in compliance with the objectives pursued by those regulations and the general principles of Community law.

(see paras 37-38, 40, 51, operative part 1)

2.        Regulation No 1972/2003 on transitional measures to be adopted in respect of trade in agricultural products on account of
the accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia does
not preclude the entire stock held by an operator on 1 May 2004 from being regarded as surplus stock if it is shown, on the
basis of consistent evidence, that that stock is not normal in relation to the operator’s activity and has been built up for
speculative purposes in order to benefit from the effect of accession on agricultural prices.

(see paras 58-59, operative part 2)

3.        Article 4 of Regulation No 1972/2003 on transitional measures to be adopted in respect of trade in agricultural products on
account of the accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia
and Article 6 of Regulation No 60/2004 laying down transitional measures in the sugar sector by reason of the accession of
the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia do not preclude a national
measure under which an operator who has commenced an activity less than one year before 1 May 2004 is required to prove that
the amount of stock he held at that date corresponds to the stock normally produced, sold, transferred or acquired for payment
or without payment.

There is no reason to suppose that the general principles of Community law and the objectives pursued by the regulations in
question have been disregarded by such a national measure, since the State, because the activity in question is new, does
not have any relevant factors of comparison.

(see paras 63-64, operative part 3)

4.        Regulation No 1972/2003 on transitional measures to be adopted in respect of trade in agricultural products on account of
the accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia and
Regulation No 60/2004 laying down transitional measures in the sugar sector by reason of the accession of the Czech Republic,
Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia do not preclude the levying of a charge
on an operator’s surplus stock even if he is able to prove that he obtained no advantage when marketing that stock after 1
May 2004.

Regulations No 1972/2003 and No 60/2004 aim not to penalise speculative conduct but to protect the common organisation of
agricultural markets, in this case the market in sugar and associated products. The instruments introduced in that respect
by those regulations apply to all surplus stocks within the meaning of those regulations, regardless of whether the holders
of the stocks have actually derived an advantage from marketing them.

(see paras 70-72, operative part 4)

5.        Article 6(3) of Regulation No 60/2004 laying down transitional measures in the sugar sector by reason of the accession of
the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia cannot be interpreted
as meaning that an increase in an operator’s storage capacity in the year preceding accession justifies a reduction of the
surplus stock, regardless of the subsequent development of the economic activity of the holder of the stock, the volume processed
and the amount of the stock.

That provision confines itself to requiring the Member States concerned to take operators’ storage capacities into account
in their overall assessment of all the relevant factors for the purpose of identifying surplus stocks. Those Member States
are not, however, obliged under that provision to reduce systematically the surplus quantities of operators whose storage
capacities have increased. Only if the increase in storage capacity has been accompanied by an increase in the level of subsequent
activity does that factor have to be taken into account for assessing whether the stock held on 1 May 2004 is normal or surplus
stock.

(see paras 77-78, operative part 5)

6.        Article 10 of Regulation No 1972/2003 on transitional measures to be adopted in respect of trade in agricultural products
on account of the accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and
Slovakia does not preclude the validity of a tax notice received by an operator who is liable to pay the surplus stock charge
after 30 April 2007, where it is shown that the notice was issued by the national authorities on or before that date.

(see paras 84-85, operative part 6)

JUDGMENT OF THE COURT (Third Chamber)

4 June 2009 (*)

(Accession of Estonia – Transitional measures – Agricultural products – Sugar – Surplus stocks – Regulations (EC) Nos 1972/2003, 60/2004 and 832/2005)

In Case C‐560/07,

REFERENCE for a preliminary ruling under Article 234 EC from the Tallinna Halduskohus (Estonia), made by decision of 28 November
2007, received at the Court on 18 December 2007, in the proceedings

**Balbiino AS**

v

**Põllumajandusminister,**

**Maksu- ja Tolliameti Põhja maksu- ja tollikeskus,**

THE COURT (Third Chamber),

composed of A. Rosas, President of Chamber, A. Ó Caoimh, J.N. Cunha Rodrigues, U. Lõhmus and P. Lindh (Rapporteur), Judges,

Advocate General: D. Ruiz-Jarabo Colomer,

Registrar: R. Şereş, Administrator,

having regard to the written procedure and further to the hearing on 18 December 2008,

after considering the observations submitted on behalf of:

–        Balbiino AS, by K. Lind, vandeadvokaat,

–        the Estonian Government,, by L. Uibo, acting as Agent,

–        the Cypriot Government, by A. Pantazi-Lamprou, acting as Agent,

–        the Lithuanian Government, by D. Kriaučiūnas and R. Mackevičienė, acting as Agents,

–        the Commission of the European Communities, by K. Saaremäel-Stoilov and H. Tserepa-Lacombe, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 17 February 2009,

gives the following

**Judgment**

1        This reference for a preliminary ruling concerns the interpretation of Commission Regulation (EC) No 1972/2003 of 10 November
2003 on transitional measures to be adopted in respect of trade in agricultural products on account of the accession of the
Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia (OJ 2003 L 293, p. 3), Commission
Regulation (EC) No 60/2004 of 14 January 2004 laying down transitional measures in the sugar sector by reason of the accession
of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia (OJ 2004 L 9, p. 8)
and Commission Regulation (EC) No 832/2005 of 31 May 2005 on the determination of surplus quantities of sugar, isoglucose
and fructose for the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia (OJ
2005 L 138, p. 3).

2        The reference was made in the course of proceedings between Balbiino AS (‘Balbiino’) and the Põllumajandusminister (Minister
for Agriculture) and Maksu- ja Tolliameti Põhja maksu- ja tollikeskus (Northern Tax and Customs Centre of the Tax and Customs
Office) concerning charges on surplus stocks.

**Legal context**

*Community legislation*

3        The first paragraph of Article 41 of the Act concerning the conditions of accession of the Czech Republic, the Republic of
Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic
of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic and the adjustments to the Treaties on
which the European Union is founded (OJ 2003 L 236, p. 33) allows the Commission of the European Communities to adopt measures
to facilitate the transition of the new Member States to the regime of the common agricultural policy. Those transitional
measures ‘may be taken during a period of three years following the date of accession and their application shall be limited
to that period.’ The Commission adopted Regulations Nos 1972/2003 and 60/2004 in reliance inter alia on that provision.

Regulation No 1972/2003

4        As stated in recital 1 in the preamble to Regulation No 1972/2003, the regulation aims to ‘avoid the risk of deflection of
trade, affecting the common organisation of agricultural markets due to the accession of 10 new States to the European Union
on 1 May 2004’. In view of that risk, recital 3 in the preamble declares that provisions should be made for ‘deterrent charges
to be levied on surplus stocks in the new Member States’.

5        To that end, Article 4(1) of Regulation No 1972/2003 requires the new Member States to levy charges on holders of surplus
stocks at 1 May 2004 of products in free circulation.

6        Article 4(2) of the regulation provides:

‘In order to determine the surplus stock of each holder, the new Member States shall take into account, in particular:

(a)      averages of stocks available in the years preceding accession;

(b)      the pattern of trade in the years preceding accession;

(c)      the circumstances in which stocks were built up.

The notion surplus stocks applies to products imported into the new Member States or originating from the new Member States.
The notion surplus stocks applies also to products intended for the market of the new Member States.

...’

7        In order to ensure that the charge on surplus stocks is correctly applied, Article 4(4) of the regulation requires the new
Member States to carry out without delay an inventory of stocks available as at 1 May 2004, and to notify the Commission of
the quantity of products in surplus stocks by 31 July 2004 at the latest.

8        In accordance with Article 10 of Regulation No 1972/2003, it applied from 1 May 2004 to 30 April 2007.

Regulation No 60/2004

9        As the risk of speculation was thought to be particularly high in the sugar market, the Commission adopted specific measures
by Regulation No 60/2004. In accordance with Article 6(1) of that regulation:

‘The Commission determines by 31 October 2004 at the latest, for each new Member State, ... the quantity of sugar as such or
in processed products, isoglucose and fructose exceeding the quantity considered as being normal carry-over stock at 1 May
2004 and which has to be eliminated from the market at the expense of the new Member States.

To determine this surplus quantity, account is in particular taken of the development during the year preceding accession
in relation to the previous years of:

(a)      imported and exported quantities of sugar as such or in processed products, isoglucose and fructose;

(b)      production, consumption and stocks of sugar and isoglucose;

(c)      the circumstances in which stocks were built up.’

10      Article 6(2) of Regulation No 60/2004 requires the new Member States to eliminate from the market, by 30 April 2005 at the
latest, the quantities of sugar or isoglucose determined by the Commission as surplus quantities for each of those States.

11      Article 6(3) of the regulation provides:

‘For the application of paragraph 2, the competent authorities of the new Member States shall dispose on 1 May 2004 of a system
for the identification of traded or produced surplus quantities of sugar as such or in processed products, isoglucose or fructose,
at the level of the main operators concerned. That system may in particular rely on import tracking, fiscal monitoring, surveys
based on operators’ accounts and physical stocks, and include measures such as risk guarantees. The system of identification
shall be based on risk assessment that takes due account in particular of the following criteria:

–        type of activity of the operators concerned,

–        capacity of storage facilities,

–        level of activities.

The new Member State shall use that system to compel the operators concerned to eliminate from the market at their own expense
an equivalent quantity of sugar or isoglucose of their determined individual surplus quantity. The operators concerned shall
provide the proof, to the satisfaction of the new Member State, that products were eliminated from the market by 30 April
2005 at the latest.

In case such proof is not provided, the new Member State shall charge an amount equal to the quantity in question multiplied
by the highest import charges applicable to the product concerned during the period from 1 May 2004 to 30 April 2005, increased
by EUR 1.21/100 kg in white sugar or dry matter equivalent.

The amount referred to in the third subparagraph shall be assigned to the national budget of the new Member State.’

Regulation No 832/2005

12      By Regulation No 832/2005 the Commission fixed the surplus quantities of sugar to be eliminated by each new Member State.
Recital 3 in the preamble to that regulation reads as follows:

‘In general, surplus quantities of sugar are considered to result from the development of production plus import minus export
for the period from 1 May 2003 to 30 April 2004, compared to the average of the same quantities for the same period of the
three previous years. Specific circumstances of stock-piling were also taken into consideration as provided for in Article
6(1)(c) of Regulation (EC) No 60/2004, especially the decrease in the level of stocks during that period.’

*National legislation*

13      On 7 April 2004 the Riigikogu (Parliament) adopted the Üleliigse laovaru tasu seadus (Law on the surplus stock charge, RT
I 2004, 30, 203).

14      By judgment of 5 October 2006 the Riigikohus (Supreme Court) declared Paragraph 6(1) of that law inapplicable as being contrary
to Regulation No 1972/2003. The court found that the requirement, introduced by that provision, of applying a coefficient
of 1.2 in calculating the transitional stock did not allow a sufficiently differentiated treatment of each operator.

15      In order to give effect to that judgment, the Riigikogu made several amendments to that law on 25 January 2007. The law, in
the version applicable in the main proceedings (RT I 2007, 12, 65, ‘the ÜLTS’), entered into force on 16 February 2007, and
applies retrospectively to situations that have arisen from 1 May 2004.

16      Under Paragraph 7 of the ÜLTS, the ‘surplus stock’ is equal to the difference between the stock actually held on 1 May 2004
and the transitional stock.

17      Paragraph 6 of the ÜLTS defines the ‘transitional stock’ as the annual average stock held during the four years preceding
the accession of the Republic of Estonia to the Union (2000 to 2003) multiplied by 1.2. To mitigate the strictness of that
rule for operators who did not carry on a relevant activity during those four reference years, Paragraph 6 provides for two
special rules for calculating the transitional stock. First, an operator whose activity in the relevant market has started
after 2003 must show that his stock at 1 May 2004 is equal to ‘the stock ... customarily produced, sold, or otherwise transferred
or acquired by him for payment or without payment’. Second, for operators who have carried on business for at least one year,
the transitional stock is ‘the average stock on 1 May of the last years of operation’ or the stock on 1 May 2003, multiplied
by 1.2.

18      Under Paragraph 10 of the ÜLTS, the transitional stock and the surplus stock are calculated by the Ministry of Agriculture
on the basis of the operator’s declarations. If the operator makes a reasoned application, the ministry can take account of
certain factors which may explain an increase in stocks not caused by speculation, such as the growth of the operator’s production,
processing or sales volume in the previous year, the maturation period of agricultural products, the fact that the stocks
were built up before the third quarter of 2003, the reduction of the export or sales volume for reasons independent of the
operator, or other circumstances independent of the operator.

19      Those provisions are supplemented by Paragraph 23 of the ÜLTS, which defines a number of circumstances in which the transitional
stock may be revised upwards if it is attributable to the development of the economic operator’s activity in the period from
1 May 2003 to 1 May 2006.

20      In the case of sugar, it follows from Paragraph 14 of the ÜLTS that the amount of the surplus stock charge is the amount laid
down in Article 6(3) of Regulation No 60/2004.

**The main proceedings and the order for reference**

21      Balbiino is an Estonian undertaking which sells frozen foods and produces ice cream. In the period from 2000 to 2003 Balbiino
modernised its production and storage installations. It thus opened a new storage complex. On 1 May 2004 it had more than
100 tonnes of sugar stocks, which was nearly nine times the quantity ordinarily held at that time, whether before (2000 to
2003) or after (2005 and 2006) the accession of the Republic of Estonia to the Union. Balbiino also developed a frozen food
wholesaling activity.

22      On 29 October 2004 the Põllumajandusminister (Minister for Agriculture) determined that Balbiino was in possession of about
400 tonnes of surplus stocks of 13 kinds of agricultural product (sugar, chocolate, butter, frozen meat, cheese).

23      Balbiino brought proceedings against that decision in the Tallinna Halduskohus.

24      After various events the Minister for Agriculture, by decision of 19 April 2007, determined Balbiino’s surplus stock. The
legal base of that decision was Regulations Nos 1972/2003 and 60/2004 and Paragraphs 6, 7(1) and (2), 10(2) and 23 of the
ÜLTS.

25      By tax notice of 30 April 2007, the tax authorities fixed at EEK 1 243 867 (approximately EUR 77 000) the amount of the surplus
stock charge due from Balbiino. Balbiino brought proceedings against that tax notice and against the decision of 19 April
2007 in the Tallinna Halduskohus, which has doubts as to the compatibility of the ÜLTS with Community law.

26      In those circumstances the Tallinna Halduskohus decided to stay the proceedings and refer the following questions to the Court
for a preliminary ruling:

‘1.      Does the law of the European Union, in particular Article 6(1) of [Regulation No 60/2004] in conjunction with recital 3 in
the preamble to [Regulation No 832/2005] and Article 4(1) and (2) of [Regulation No 1972/2003], preclude the ascertainment
of the amount of an operator’s surplus stock by automatically deducting from the [transitional stock] the average stock as
at 1 May of the operator’s years of activity preceding 1 May 2004, but not more than four years of activity, multiplied by
1.2?

If the answer is in the affirmative, would the answer be different if in determining the transitional stock and surplus stock
it were possible also to take into account the growth of the operator’s production, processing or sales volume, the maturation
period of the agricultural product, the time when the stocks were built up, and other circumstances independent of the operator?

2.      It is compatible with the law of the European Union, in particular the objective of [Regulation No 1972/2003], to regard the
entire stock of an agricultural product in the operator’s possession as at 1 May 2004 as the operator’s surplus stock?

3.      If the operator started to deal in the corresponding agricultural product less than one year before 1 May 2004, does the law
of the European Union, in particular Article 4 of [Regulation No 1972/2003] and Article 6 of [Regulation No 60/2004], preclude
that operator himself having to prove that the amount of the stock of the agricultural product in his possession on 1 May
2004 is equivalent to the amount of the stock of the agricultural product customarily produced, sold, or otherwise transferred
or acquired by him for payment or without payment?

If the answer is in the affirmative, would the answer be different if, regardless of the operator’s obligation to provide
proof, the administrative body had an obligation to take into account, on the basis of the declaration of the agricultural
product submitted by the operator, in assessing the operator’s transitional stock and surplus stock, the growth of the operator’s
production, processing or sales volume and stock after 1 May 2004?

4.      Is it compatible with the objective of [Regulation No 1972/2003] and [Regulation No 60/2004] to levy the surplus stock charge
where the operator is found to have a surplus stock as at 1 May 2004 but the operator shows that he has not obtained a real
advantage in terms of a price difference from marketing the surplus stock after 1 May 2004?

5.      May the provisions of Article 6(3) of [Regulation No 60/2004], under which account is taken, in determining surplus quantities
of sugar, isoglucose or fructose, inter alia of storage capacities, be interpreted as meaning that in a situation in which
the operator’s storage capacities have increased during the year preceding accession that is a basis for reducing the surplus
stock of the agricultural product in the possession of the operator as at 1 May 2004, regardless of the operator’s economic
activity, the volume of the agricultural product processed and the amount of stocks of the agricultural product in the years
of activity preceding 1 May 2004 and during the two years following 1 May 2004?

6.      Does Article 10 of [Regulation No 1972/2003] preclude the recovery of a surplus stock charge from an operator by a tax notice
in a situation in which the tax notice was indeed drawn up while the regulation was applicable, on 30 April 2007, but according
to national law became enforceable against the operator after the final date of application of [that] regulation, and national
law does not establish a time-limit for recovery of the stock charge?’

**The questions referred for a preliminary ruling**

*Preliminary issue*

27      Balbiino argues that Regulations Nos 1972/2003 and 60/2004 cannot be enforced against it in so far as, at the date of accession
of the Republic of Estonia to the Union, they had not been published in Estonian in the *Official Journal of the European Union*. It relies on the judgment in Case C‐161/06 *Skoma-Lux* [2007] ECR I‐10841, which was delivered after the order for reference was made.

28      Balbiino submits that the fact that those regulations cannot be enforced also precludes the application of the ÜLTS, since
the ÜLTS, published officially in its original version on 27 April 2004, contains numerous references to Regulations Nos 1972/2003
and 60/2004. It says that the late publication of the ÜLTS did not enable economic operators to be informed early enough of
the system of surplus stock charges applicable from 1 May 2004.

29      Although the order for reference does not address this question, in order to provide the referring court with guidance, it
should be recalled that an act of a Community institution, such as Regulations Nos 1972/2003 and 60/2004, cannot be enforced
against natural and legal persons in a Member State before they have the opportunity to make themselves acquainted with it
by its proper publication in the *Official Journal of the European Union* (Case 98/78 *Racke* [1979] ECR 69, paragraph 15, and *Skoma-Lux*, paragraph 37).

30      Thus the Court has held that Article 58 of the Act of Accession mentioned in paragraph 3 above precludes the obligations contained
in Community legislation which has not been published in the *Official Journal of the European Union* in the language of a new Member State from being imposed on individuals in that State, even though those persons could have
learned of that legislation by other means. However, the fact that a Community regulation is not enforceable against individuals
in a Member State in the language of which it has not been published has no bearing on the fact that, as part of the *acquis communautaire*, its provisions are binding on the Member State concerned as from its accession (*Skoma-Lux*, paragraphs 51 and 59).

31      By adopting the original version of the ÜLTS on 7 April 2004, the Republic of Estonia implemented the obligations under Regulations
Nos 1972/2003 and 60/2004 by introducing a charge on surplus stocks of agricultural products and defining how it was to be
calculated. The ÜLTS thus creates obligations for individuals in Estonia, notwithstanding the fact that those regulations
cannot be enforced against them before they have had an opportunity to learn of them by proper publication in the *Official Journal of the European Union* in the language of that Member State.

32      In those circumstances, the rule stated in *Skoma-Lux* does not preclude the enforcement against individuals of those of the provisions of Regulations Nos 1972/2003 and 60/2004
which were taken up in the ÜLTS. That rule might nevertheless remain of residual application if certain provisions of those
regulations which were not implemented by the ÜLTS were relied on by the Estonian authorities against individuals before the
official publication of the regulations in Estonian. As the Advocate General observes in point 40 of his Opinion, it will
be for the national court, if necessary, to interpret the ÜLTS in order to ascertain whether such circumstances exist.

*Question 1*

33      Although the wording of Question 1 refers expressly to the interpretation of Article 6(1) of Regulation No 60/2004, the question
should be read as relating to Article 6(3) of that regulation, which concerns the determination by the Member States of the
surplus quantities of sugar and associated products held by individual economic operators.

34      The referring court asks essentially whether Article 4(1) and (2) of Regulation No 1972/2003, Article 6(3) of Regulation No
60/2004, and Regulation No 832/2005, in particular recital 3 in the preamble, preclude the method used in the ÜLTS for calculating
the surplus stock of an operator by deducting from the stock actually held on 1 May 2004 the transitional stock defined as
the average stock on 1 May of the previous four years of activity multiplied by a coefficient of 1.2. If so, it asks whether
the answer would be the same if it were possible, in addition to that coefficient, also to take into consideration other factors
independent of the operator, such as a growth in the production, processing or sales volume, an extension of the maturation
period of agricultural products, and certain features of the way in which the stocks were built up.

35      This first question concerns two elements relevant to the calculation of transitional stocks. The first is the use of a fixed
date, in this case 1 May, for determining the average stock held during the four years preceding 1 May 2004, and the second
is the use of the coefficient of 1.2. These two elements should be considered in turn.

36      As regards, first, the use of the date of 1 May for determining the average stock built up during the period from 2000 to
2003, Balbiino complains of the arbitrariness of that choice, which penalises it especially because of the cyclical and seasonal
nature of the production of ice cream. It says that, as demand for that product reaches a peak between May and August, the
date of 1 May corresponds to the period during which stocks are highest.

37      It should be observed to begin with that Article 4(2) of Regulation No 1972/2003 provides that, to determine each holder’s
surplus stock, the new Member States are to take into account in particular the ‘averages of stocks available in the years
preceding accession’. In the absence of more precise rules as to the relevant period or the method of calculating the averages
of stocks available, such a formulation gives the Member States a discretion in defining the criteria on the basis of which
those elements are implemented, in compliance with the objectives pursued by the regulation and the general principles of
Community law (see, to that effect, Case C‐313/99 *Mulligan and Others* [2002] ECR I‐5719, paragraphs 33 to 36).

38      The same applies in relation to the stocks of sugar and associated products governed by Regulation No 60/2004. Article 6(3)
of that regulation confines itself to providing that the competent authorities of the new Member States ‘shall dispose on
1 May 2004 of a system for the identification of ... surplus quantities’ at the level of the main operators concerned, and that
that system may in particular ‘rely on import tracking, fiscal monitoring, surveys based on operators’ accounts and physical
stocks’ and must take into account the type and level of activities of the operators concerned and the capacity of storage
facilities.

39      It should also be noted that, for sugar and associated products covered by Regulation No 60/2004, Article 6(1) of that regulation
provides, with respect to the determination by the Commission of the national surplus quantities as at 1 May 2004, that account
is taken in particular of the development during the year preceding accession in relation to the previous years of imported
and exported quantities, production, consumption and stocks, and the circumstances in which stocks were built up. To ensure
the implementation of that provision, Article 8 of that regulation provides in particular that the new Member States are to
communicate to the Commission, by 31 July 2004 at the latest, the quantities of sugar imported, exported, produced and consumed
for the period from 1 May 2003 to 30 April 2004 and the stocks held on 1 May each year for the period from 1 May 2000 to 1
May 2004.

40      In accordance with that method, the Commission determined the surplus quantities which had to be eliminated in each new Member
State, by Regulation No 832/2005. Recital 3 in the preamble to that regulation states that ‘surplus quantities of sugar ...
result from the development of production plus import minus export for the period from 1 May 2003 to 30 April 2004, compared
to the average of the same quantities for the same period of the three previous years’.

41      It follows that none of the provisions of Regulations Nos 1972/2003, 60/2004 and 832/2005 which have been considered precludes
a method such as that used in the ÜLTS which consists in calculating the transitional stock on the basis of the quantities
actually held by operators on 1 May of the years 2000 to 2003 inclusive.

42      It must therefore be concluded that neither Article 4(1) and (2) of Regulation No 1972/2003 nor Article 6(3) of Regulation
No 60/2004 nor Regulation No 832/2005 precludes the taking into account in the ÜLTS of 1 May as the reference date for determining
surplus stocks.

43      The referring court is uncertain, second, as to the lawfulness from the point of view of Community law of the use of a coefficient
of 1.2 for calculating the transitional stock. It points out in this respect that in its judgment of 5 October 2006 the Riigikohus
held that the use of that coefficient was contrary to Article 4(2) of Regulation No 1972/2003 because it did not allow the
surplus stock to be determined in the light of all the circumstances peculiar to each operator.

44      Balbiino submits essentially that the ÜLTS is disproportionate and contrary to the principle of equal treatment, in that it
uniformly applies a coefficient of 1.2 without adequately taking into consideration the differences that may exist between
one product and another or the circumstances in which the stocks concerned have been built up. It submits that it would be
more appropriate to use a coefficient of 1.33, in view of the development of markets in agricultural products in Estonia from
2000 to 2004.

45      The Estonian Government defends the lawfulness of the coefficient of 1.2, which it regards as consistent with the objectives
pursued by Regulations Nos 1972/2003 and 60/2004. It maintains, as does the Lithuanian Government, that those regulations
do not restrict or exclude the use of such a coefficient, and leave the Member States free to choose the method of calculation
suited to local circumstances. The coefficient allows the transitional stocks of all operators to be increased so as to take
account of economic growth during the years preceding accession to the Union.

46      After supporting Balbiino’s position in its pleadings, the Commission at the hearing adopted the position of the Estonian
and Lithuanian Governments, provided that the uniform application of the coefficient of 1.2 does not prevent all the individual
circumstances independent of operators from being taken into consideration.

47      It must be noted that Article 4(2) of Regulation No 1972/2003 and Article 6(3) of Regulation No 60/2004 do not contain any
provision requiring the Member States to apply, or prohibiting them from applying, a coefficient uniformly to operators’ transitional
stocks for the purpose of calculating the surplus stock. Those provisions set out a non-exhaustive list of certain criteria
for the calculation of operators’ surplus stocks, while leaving the Member States the option of supplementing them as they
think fit. As has already been stated in paragraphs 37 and 38 above, the Member States have a discretion in this respect.

48      Applying a coefficient of 1.2 to the transitional stock is prima facie favourable to operators, since it tends to reduce the
surplus stock. According to the Estonian Government, the coefficient was fixed on the basis of the rate of growth of Estonian
agricultural production observed during the period from 2000 to 2004. The coefficient thus makes it possible to update the
average stock on 1 May of the years 2000 to 2003 in the light of that rate of growth and to determine a transitional stock
– and hence a surplus stock – which reflects proportionately the development of growth observed across the whole agricultural
sector in Estonia from 1 May 2000 to 1 May 2004. It thus helps to establish an objective basis of comparison between the stock
on 1 May 2004 and the average stock on 1 May of the previous four years.

49      Having regard to those characteristics, the choice of such a coefficient does not undermine the objectives pursued by Regulations
Nos 1972/2003 and 60/2004 and does not infringe the principles of proportionality and equal treatment.

50      It must there therefore be concluded that neither Article 4(2) of Regulation No 1972/2003 nor Article 6(3) of Regulation No
60/2004 precludes the application of a coefficient such as that used in the ÜLTS for the purpose of calculating the transitional
stock.

51      In those circumstances, the answer to Question 1 is that Article 4(1) and (2) of Regulation No 1972/2003, Article 6(3) of
Regulation No 60/2004, and Regulation No 832/2005 do not preclude a national measure, such as the ÜLTS, under which an operator’s
surplus stock is determined by deducting from the stock actually held on 1 May 2004 the transitional stock defined as the
average stock on 1 May of the previous four years of activity multiplied by a coefficient of 1.2 corresponding to the growth
of agricultural production observed in the Member State in question during that period.

52      In view of this answer, there is no need to consider the second part of Question 1.

*Question 2*

53      By its second question the referring court seeks to know whether it is consistent with Regulation No 1972/2003 to regard as
surplus stock the entire stock held by an operator on 1 May 2004.

54      Balbiino submits that, in so far as the objective of Regulation No 1972/2003 is to avoid speculation in agricultural products,
it is essential to determine whether the stock held by an operator on 1 May 2004 caused distortion of the market or led to
speculation. There must therefore be an examination, on a case-by-case basis, of the circumstances in which the stocks were
built up and of whether the operator made or could have made speculative gains.

55      According to the Estonian Government, it is clear that the entire stock held by an operator on 1 May 2004 can be regarded
as surplus stock, where it is shown that it was acquired with a view to speculation.

56      The Commission recalls that the Member States must observe the principle of proportionality when they apply Regulation No
1972/2003. It submits that they are therefore required to examine, on a case-by-case basis, whether there are less stringent
means by which the objectives of that regulation could be achieved, on the basis of all the circumstances relating to the
building up of stocks of agricultural products before 1 May 2004.

57      It is apparent from recitals 1 and 3 in the preamble to Regulation No 1972/2003 that its objective is to preserve the common
organisation of markets by avoiding, by means of a system of deterrent charges on surplus stocks in the new Member States,
certain agricultural products being moved artificially to those States with a view to enlargement. The aim is thus to prevent
abnormal patterns of trade from disrupting the common organisation of markets.

58      Regulation No 1972/2003 requires the Member States to levy charges on the surplus stocks which they identify on the basis
of a list of criteria set out in Article 4(2) of the regulation. Those criteria include the circumstances prevailing when
the stocks were built up and the pattern of trade during the years preceding accession. While that list is not exhaustive,
that provision, read in the light of the objective of preserving the common organisation of markets, shows that Regulation
No 1972/2003 does not prohibit an operator’s entire stock from being regarded as surplus stock if, in the light of all the
relevant circumstances, it is apparent that it was built up before 1 May 2004, not as part of the normal development of a
commercial activity, but in order to benefit from the effect of accession on agricultural prices.

59      Consequently, the answer to Question 2 is that Regulation No 1972/2003 does not preclude the entire stock held by an operator
on 1 May 2004 from being regarded as surplus stock if it is shown, on the basis of consistent evidence, that that stock is
not normal in relation to the operator’s activity and has been built up for speculative purposes.

*Question 3*

60      By its third question the referring court asks the Court as to the burden of proof in relation to whether stocks are surplus
stocks. The question seeks to determine whether Article 4 of Regulation No 1972/2003 and Article 6 of Regulation No 60/2004
preclude an operator who has commenced an activity less than one year before 1 May 2004 from being required to prove that
the amount of stock he held at that date corresponds to the stock normally produced, sold, transferred or acquired for payment
or without payment.

61      Balbiino submits that Community law precludes the burden of proof from being laid exclusively on the operators. They should
be presumed to act in good faith, so that it is for the national authorities to prove that the stock ascertained on 1 May
2004 is surplus stock.

62      The Estonian Government and the Commission argue that, in the absence of Community rules on the distribution of the burden
of proof between the operators and the national authorities, the definition of such rules is a matter for the Member States,
who have a margin of discretion. The Commission notes that the Member States are obliged to ensure equal treatment of operators
and compliance with the principle of sound administration.

63      It is clear that neither Regulation No 1972/2003 nor Regulation No 60/2004 contains provisions governing the distribution
of the burden of proof between economic operators and the national authorities responsible for levying the surplus stock charge.
As those regulations are silent, the question must be decided in accordance with national law, subject to compliance with
the general principle of Community law and the objectives pursued by the regulations in question. In the present case, there
is no reason to suppose that those principles and objectives have been disregarded by a national measure which places on the
operator the burden of proving that the stock held on 1 May 2004 is normal stock, since the State, because the activity in
question is new, does not have any relevant factors of comparison.

64      The answer to Question 3 is therefore that Article 4 of Regulation No 1972/2003 and Article 6 of Regulation No 60/2004 do
not preclude a national measure under which an operator who has commenced an activity less than one year before 1 May 2004
is required to prove that the amount of stock he held at that date corresponds to the stock normally produced, sold, transferred
or acquired for payment or without payment.

65      In view of this answer, there is no need to consider the second part of Question 3.

*Question 4*

66      The referring court entertains doubts as to whether the existence of surplus stock on 1 May 2004 suffices for levying a charge
on an operator, or whether it is also necessary to ascertain that the operator derived an advantage from marketing the stock.
It seeks an interpretation of Regulations Nos 1972/2003 and 60/2004 in order to determine whether the possession of surplus
stock may exceptionally not give rise to a charge where the operator is able to prove that he obtained no advantage when marketing
that stock after 1 May 2004.

67      Balbiino submits that in that situation Regulations Nos 1972/2003 and 60/2004 do not allow the national authorities to levy
a charge on the surplus stock.

68      The Estonian Government and the Commission do not agree. According to the Commission, operators cannot be exempted from the
deterrent measures introduced by Regulations Nos 1972/2003 and 60/2004 on the ground that they have not derived an advantage
from selling their stock. The aim of those regulations is not to penalise the conduct of operators but to preserve the proper
functioning of the common organisation of markets, in the general interest of the European Community.

69      As already stated in paragraph 57 above, Regulation No 1972/2003 aims to avoid abnormal patterns of trade disrupting the common
organisation of markets. The regulation does not intend to penalise speculative conduct on the part of operators but, first,
to prevent, by a system of deterrent charges, stocks from being built up for speculative purposes and, second, to neutralise
the economic advantages anticipated by those holding them (see, by analogy, Case C‐179/00 *Weidacher* [2002] ECR I‐501, paragraphs 22, 28 and 42).

70      As to Regulation No 60/2004, recitals 5 and 8 in its preamble show that it likewise pursues the aim of preserving the common
organisation of the market in sugar, because of ‘a considerable risk of disruption on the markets in the sugar sector by products
being introduced into the new Member States before their accession for speculation purposes’. Like Regulation No 1972/2003,
Regulation No 60/2004 thus aims not to penalise speculative conduct but to protect the common organisation of agricultural
markets, in this case the market in sugar and associated products.

71      Consequently, whether it is the surplus stock charge established by Regulation No 1972/2003 or the measures introduced by
Regulation No 60/2004 to eliminate stocks of sugar and other products which are concerned, those instruments which are intended
to protect the common organisation of markets apply to all surplus stocks within the meaning of those regulations, regardless
of whether the holders of the stocks have actually derived an advantage from marketing them.

72      The answer to Question 4 is therefore that Regulations Nos 1972/2003 and 60/2004 do not preclude the levying of a charge on
an operator’s surplus stock even if he is able to prove that he obtained no advantage when marketing that stock after 1 May
2004.

*Question 5*

73      Among the factors which the new Member States can take into consideration for identifying surplus quantities of sugar, Article
6(3) of Regulation No 60/2004 mentions, in addition to the type and level of activities of the operators concerned, the ‘capacity
of storage facilities’.

74      By its fifth question the referring court seeks to determine whether that factor can be applied independently, regardless
of the development of the operator’s economic activity, so that an increase in storage capacity in the year preceding accession
may lead to a reduction in the quantity of stock regarded as surplus stock.

75      The question arises from the fact that, in the main proceedings, the Minister for Agriculture refused to increase Balbiino’s
transitional stock despite the increase in its storage capacity following the construction of a new storage complex in 2003.
According to the referring court, the minister considered that from 2000 to 2006 the stock of sugar held by Balbiino had stayed
at comparable levels apart from the peak on 1 May 2004, on which date the stock of sugar was more than nine times higher than
usual. In those circumstances the minister considered that in stable conditions, regardless of the existence of the new storage
complex, Balbiino did not acquire or hold large stocks of sugar in the ordinary course of its business.

76      Balbiino, the Estonian Government and the Commission all agree in considering that an increase in storage capacity, a factor
mentioned in Article 6(3) of Regulation No 60/2004, is one of the factors to be taken into account for determining the surplus
stock.

77      It must be observed that Article 6(3) of Regulation No 60/2004 requires the new Member States to identify the excess quantities
of sugar or isoglucose, taking ‘due account’ of the type and level of activities of the operators concerned and the ‘capacity
of storage facilities’. That provision thus confines itself to requiring the Member States concerned to take operators’ storage
capacities into account in their overall assessment of all the relevant factors for the purpose of identifying surplus stocks.
Those Member States are not, however, obliged under that provision to reduce systematically the surplus quantities of operators
whose storage capacities have increased. Only if the increase in storage capacity has been accompanied by an increase in the
level of subsequent activity does that factor have to be taken into account for assessing whether the stock held on 1 May
2004 is normal or surplus stock.

78      Consequently, the answer to Question 5 is that Article 6(3) of Regulation No 60/2004 cannot be interpreted as meaning that
an increase in an operator’s storage capacity in the year preceding accession justifies a reduction of the surplus stock,
regardless of the subsequent development of the economic activity of the holder of the stock, the volume processed and the
amount of the stock.

*Question 6*

79      The referring court seeks essentially to know whether Article 10 of Regulation No 1972/2003 precludes the enforceability of
a tax notice demanding a surplus stock charge which, although issued during the period of application of that regulation,
was not received by the addressee until after that period.

80      Balbiino submits that, since, under Article 10 of Regulation No 1972/2003, that regulation does not apply after 30 April 2007,
a Member State may not, where the national legislation is silent, recover a surplus stock charge after that date. It relies
in this respect on the principle of legal certainty.

81      The Commission shares the opinion of the Estonian and Lithuanian Governments that Regulation No 1972/2003 requires the new
Member States to take implementing measures to determine surplus stocks by 30 April 2007, but does not require that all the
individual situations are the subject of a final decision before that date, or that the fiscal obligation imposed on operators
depends on the date of receipt of a tax notice.

82      It should be recalled that Article 4(1) of Regulation No 1972/2003 provides that ‘the new Member States shall levy charges
on holders of surplus stocks at 1 May 2004 of products in free circulation’. In accordance with Article 10, the regulation
was applicable from 1 May 2004 to 30 April 2007 inclusive. During that period, the new Member States were thus obliged under
Article 4 of the regulation to levy charges on holders of surplus stocks, after determining their quantities of surplus stock
and the amount of the charge. The new Member States could thus, from 1 May 2004 to 30 April 2007, issue tax notices against
the holders of surplus stocks.

83      Regulation No 1972/2003 does not, however, contain any provision requiring those tax notices to be enforced during that period.
To impose such an obligation would amount in practice to reducing the effective extent of the period of application of that
regulation, and would, as the Advocate General observes in point 95 of his Opinion, entail a risk of time-wasting manoeuvres
on the part of the taxable persons. The enforcement after 30 April 2007 of tax notices issued before then does not compromise
legal certainty or the objective pursued by the regulation of preventing the risk of undermining the common organisation of
agricultural markets.

84      As to the question whether a tax notice issued before the end of the period of application of Regulation No 1972/2003 but
received by the addressee afterwards must be regarded as valid in view of the expiry of the period of application of the regulation,
it is clear that the regulation does not contain any provision on the point. In the absence of special provisions, it must
be considered, for reasons analogous to those set out in the preceding paragraph, that Article 10 of Regulation No 1972/2003
does not preclude the validity of a tax notice received by an operator who is liable to pay the surplus stock charge after
30 April 2007, where it is shown that the notice was issued by the national authorities on or before that date.

85      Consequently, the answer to Question 6 is that Article 10 of Regulation No 1972/2003 does not preclude the validity of a tax
notice received by an operator who is liable to pay the surplus stock charge after 30 April 2007, where it is shown that the
notice was issued by the national authorities on or before that date.

**Costs**

86      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 (Third Chamber) hereby rules:

1.      **Article 4(1) and (2) of Commission Regulation (EC) No 1972/2003 of 10 November 2003 on transitional measures to be adopted
in respect of trade in agricultural products on account of the accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania,
Hungary, Malta, Poland, Slovenia and Slovakia, Article 6(3) of Commission Regulation (EC) No 60/2004 of 14 January 2004 laying
down transitional measures in the sugar sector by reason of the accession of the Czech Republic, Estonia, Cyprus, Latvia,
Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia, and Commission Regulation (EC) No 832/2005 of 31 May 2005 on the
determination of surplus quantities of sugar, isoglucose and fructose for the Czech Republic, Estonia, Cyprus, Latvia, Lithuania,
Hungary, Malta, Poland, Slovenia and Slovakia do not preclude a national measure, such as the Law on the surplus stock charge
(Üleliigse laovaru tasu seadus) of 7 April 2004, as amended on 25 January 2007, under which an operator’s surplus stock is
determined by deducting from the stock actually held on 1 May 2004 the transitional stock defined as the average stock on
1 May of the previous four years of activity multiplied by a coefficient of 1.2 corresponding to the growth of agricultural
production observed in the Member State in question during that period.**

2.      **Regulation No 1972/2003 does not preclude the entire stock held by an operator on 1 May 2004 from being regarded as surplus
stock if it is shown, on the basis of consistent evidence, that that stock is not normal in relation to the operator’s activity
and has been built up for speculative purposes.**

3.      **Article 4 of Regulation No 1972/2003 and Article 6 of Regulation No 60/2004 do not preclude a national measure under which
an operator who has commenced an activity less than one year before 1 May 2004 is required to prove that the amount of stock
he held at that date corresponds to the stock normally produced, sold, transferred or acquired for payment or without payment.**

4.      **Regulations Nos 1972/2003 and 60/2004 do not preclude the levying of a charge on an operator’s surplus stock even if he is
able to prove that he obtained no advantage when marketing that stock after 1 May 2004.**

5.      **Article 6(3) of Regulation No 60/2004 cannot be interpreted as meaning that an increase in an operator’s storage capacity
in the year preceding accession justifies a reduction of the surplus stock, regardless of the subsequent development of the
economic activity of the holder of the stock, the volume processed and the amount of the stock.**

6.      **Article 10 of Regulation No 1972/2003 does not preclude the validity of a tax notice received by an operator who is liable
to pay the surplus stock charge after 30 April 2007, where it is shown that the notice was issued by the national authorities
on or before that date.**

[Signatures]

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- Language of the case: Estonian.