61999CC0428_EN
Opinion of the Advocate-General
Opinion of the Advocate-General
1. In 1996, as one of a series of measures to prevent the spread of bovine spongiform encephalitis (BSE), the Netherlands Government ordered the slaughter of British-born calves in its territory and provided for compensation to be paid to farmers. The basis for calculating the amount of compensation was subsequently changed as a result of retroactive Community legislation. A farmer whose compensation was assessed initially on the first basis objects to its reassessment on the second basis.
2. In those circumstances, the College van Beroep voor het Bedrijfsleven (Commercial Court of Appeal) wishes to know whether the Netherlands authorities were entitled to adopt the original national rules and, depending on the answer to that question, whether Community law precludes payment in accordance with those rules, in particular in the light of a possible legitimate expectation based on the initial assessment.
Community legislation
State aid and the common organisation of the market in beef and veal
3. Under Article 92 of the EC Treaty (now, after amendment, Article 87 EC), any aid granted by a Member State or through State resources which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods is deemed to be incompatible with the common market in so far as it affects trade between Member States. However, inter alia, aid to make good the damage caused by natural disasters or exceptional occurrences is deemed compatible with the common market.
4. Under Article 93(3) of the EC Treaty (now Article 88(3) EC), the Commission must be given advance notice of any plans to grant or alter aid. If it considers that a plan is not compatible with the common market, it must decide, after allowing the parties concerned to submit their comments, whether the aid must be abolished or altered. The Member State concerned may not put its proposed measures into effect until a final decision has been reached.
5. The common organisation of the market in beef and veal is governed by Council Regulation No 805/68, as amended. The 15th recital in the preamble to that regulation states that the establishment of a single market based on a common price system would be jeopardised by the granting of certain aids, so that the Treaty provisions relating to State aid should be made to apply to beef and veal; that application is embodied in Article 24.
6. Article 23 of Regulation No 805/68, as amended by Regulation No 1261/71, provides: In order to take account of the restrictions on free circulation which may result from the application of measures for combating the spread of diseases in animals, exceptional measures of support for the market affected by those restrictions may be taken in accordance with the procedure provided for in Article 27. Those measures may only be taken in so far as, and for as long as, is strictly necessary for the support of that market.
7. The preamble to Regulation No 1261/71, which introduced the applicable version of Article 23 of Regulation No 805/68, points out that exceptional measures, justifiable on the grounds of protection of animal health and life, often impede the functioning of the common agricultural policy; in most cases the most effective and financially the least onerous solution involves special measures which however, if carried out autonomously by Member States, conflict with Community provisions; and to remedy those disadvantages it is necessary to ensure close cooperation between Member States and the Commission, and rapid implementation of exceptional measures of market support.
Public and animal health
8. Article 8(1)(a) of Council Directive 90/425/EEC provides, inter alia:
If, during a check carried out at the place of destination of a consignment or during transport, the competent authorities of a Member State establish
(a) the presence of agents responsible for a disease referred to in Directive 82/894/EEC, as last amended by Commission Decision 90/134/EEC, a zoonosis or disease, or any cause likely to constitute a serious hazard to animals or humans, or that the products come from a region contaminated by an epizootic disease, they shall order that the animal or consignment of animals be put in quarantine at the nearest quarantine station or slaughtered and/or destroyed.
Costs relating to the measures provided for in the first subparagraph shall be borne by the consignor or his representative or the person responsible for the products or animals.
...
The protective measures provided for in Article 10 may be applied.
...
9. Article 10 of the directive concerns measures to be taken in the event of an outbreak of an animal disease. Under Article 10(1), any Member State in which there is an outbreak of any animal disease referred to in Directive 82/894, or any zoonosis, disease or other cause likely to constitute a serious hazard to animals or to human health, must immediately notify the other Member States and the Commission. A Member State of destination may, on serious public or animal health grounds, take interim protective measures pending the adoption of measures by the Commission and must notify those measures to the Commission and the other Member States without delay. Under Article 10(4), the Commission is required to monitor the situation and take whatever measures are necessary.
The BSE crisis
10. On 20 March 1996, in the context of a high incidence of BSE, the United Kingdom Government informed the Commission that it had taken certain measures as a result of new information on the appearance of certain cases of Creutzfeldt-Jakob disease in humans, possibly linked to BSE. As a result, other Member States decided to ban imports of live bovine animals and beef and veal from the United Kingdom. In Decision 96/239, the Commission pointed out that although a definitive stance on the transmissibility of BSE to humans was not then possible, a risk of transmission could not be excluded. Since the resulting uncertainty had created serious concern among consumers, the Commission decided, as an emergency measure, to ban the transport of all bovine animals and all beef and veal or derived products from the United Kingdom to the other Member States.
11. Some three weeks later, the Commission adopted Regulation (EC) No 717/96 on the basis of Article 23 of Regulation No 805/68. The preamble to that regulation refers to the ban on exports from the United Kingdom but points out that calves born there had been exported to other Member States for fattening prior to the introduction of the ban. The possibility that such calves might enter the food chain had led to a lack of consumer confidence in beef and a disturbance of the markets in Belgium, France and the Netherlands. It was therefore necessary to take exceptional measures to support those markets by establishing a Community co-financed scheme authorising those Member States to purchase the animals concerned with a view to killing and subsequently destroying them. The price paid to producers was to compensate them for not selling the calves in question, and it was appropriate to base that price on the most recently observed price of carcases of calves on the Community market, namely ECU 2.8 per kilogram live weight.
12. Thus, Article 1(1) of Regulation No 717/96 authorised the competent national authorities to purchase any bovine animal aged six months or less on 20 March 1996 and present on that date on a holding located in their territory, presented to them by any producer, which could be proved by him to have been born in the United Kingdom. Under Article 2, the price to be paid was ECU 2.8 per kilogram live weight, to be cofinanced by the Community at a rate of 70%. Article 3 provided that Belgium, France and the Netherlands were to adopt all measures necessary to ensure proper application of, and full compliance with, the regulation, and to inform the Commission as soon as possible of the measures taken and of any amendments thereto.
13. In accordance with Article 7, Regulation No 717/96 entered into force on the day of its publication in the Official Journal of the European Communities, namely 20 April 1996, but was to be applicable from 11 April 1996.
Netherlands legislation
14. The Netherlands authorities had, however, already taken measures to deal with the serious health concerns then prevalent. On 3 April 1996, under the Netherlands legislation on livestock and animal health and well-being, the Minister for Agriculture, Nature Management and Fisheries, acting in concertation with the State Secretary for Public Health and Sport, adopted a decree by virtue of which calves born in the United Kingdom were to be slaughtered.
15. The explanatory memorandum to that decree stated: the measure entailing the slaughtering of animals is based on Article 8(1)(a) of Directive 90/425/EEC under which the Member States must slaughter and/or destroy animals if, during a check carried out at the place of destination, the animals are found to come from a region contaminated by an epizootic disease.
16. Rules governing the payment of compensation to the owners of slaughtered calves were also adopted on 3 April and came into force on 9 April 1996. Under those rules as initially adopted, the amount of compensation was to be the commercial value of the calves determined, on the basis of an expert appraisal, prior to their removal from the holding where they were kept. With effect from 17 April 1996, a proviso was added to the effect that, as soon as an amount for compensation is determined under European legislation, that amount shall apply. The rules were further amended on 26 April 1996 to the effect that compensation was to be ECU 2.8 per kilogram live weight, calculated in accordance with Article 2(1) of Regulation No 717/96. That amendment was to apply with retroactive effect as from 11 April 1996.
17. The compensation rules (apparently in the form initially adopted) were notified to the Commission by letter of 15 April 1996 from the office of the Netherlands Permanent Representative. The letter stated that the rules were as far as possible in line with the scheme of existing provisions governing compensation in the case of preventive measures following an outbreak of animal disease.
The dispute in the main proceedings
18. On 19 April 1996, calves belonging to H. van den Bor BV (Van den Bor) were valued by an expert at NLG 619 001.25, prior to their purchase for slaughter, and Van den Bor was issued with a statement by the area director of the national livestock and meat inspection service confirming that valuation as the amount which would be paid in compensation. It appears that the calves were actually bought in by the national intervention agency on 25 April 1996.
19. On 4 June 1996, the intervention agency sent Van den Bor a confirmation of the purchase, stating that the price paid would be NLG 5.99 (equivalent to ECU 2.8) per kilogram live weight. On that basis, a total of NLG 609 266.10 was apparently paid.
20. Van den Bor unsuccessfully challenged that reassessment. The decision rejecting the challenge pointed out in particular that, when the area director issued his statement on 19 April 1996, the compensation system had already been changed and the change had been given adequate publicity, having been published, inter alia, in the Staatscourant on 16 April.
21. Appealing to the College van Beroep voor het Bedrijfsleven, Van den Bor argues essentially that neither the valuer nor the official of the inspection service gave any information of the change in the rules, and apparently themselves remained unaware of the change for a further two weeks during which valuation of British-born calves continued. In those circumstances, Van den Bor had a legitimate expectation that the amount of the valuation would be paid.
22. The College took the view that if national law alone were applicable, Van den Bor would have such a legitimate expectation. That might not however be the case if the intervention agency were obliged by Community law to assess the compensation as it finally did. In that regard, a number of questions arose, in particular as to the competence of the Netherlands authorities to adopt their own rules pending the adoption of Community legislation. The national court therefore stayed the proceedings and requested the Court of Justice to give a preliminary ruling on the following questions:
1. Was the Netherlands Minister for Agriculture, Nature Management and Fisheries authorised, pending enactment of Community rules in the matter, to adopt national rules enabling compensation to be paid in respect of loss suffered by the person concerned as a result of the slaughter of British calves, as occurred in the case of the decisions by the abovementioned Minister of 3 April 1996?
2. If the answer to Question 1 is in the negative, does Community law preclude the honouring of the expectation raised by a decision under the abovementioned national rules that a specified amount of compensation will be paid, which if solely national law were applicable, would have to be regarded as justified?
3. If Question 1 is answered in the affirmative, does Community law, and in particular Regulation No 717/96, preclude the compensation to the appellant from being determined in accordance with the abovementioned national rules?
23. Written observations have been submitted by the Netherlands Government and the Commission, both of which presented oral argument at the hearing. Van den Bor has made no submissions to the Court.
Analysis
The first question: competence to adopt national rules
24. As I have noted at paragraph 19 of my Opinion in Denkavit, it is clear from the Court's consistent case-law that, where there is a common organisation of the market, the competence of the Member States to take independent action in the sector concerned is limited to cases where the specific matter is not regulated at Community level or where specific competence is granted by Community law. However, they are obliged to take whatever steps are necessary to ensure implementation of the Community rules. In any event, they may not take any measures which undermine, create exceptions to or interfere with the proper functioning of the common organisation.
25. For the reasons given in paragraphs 23 to 32 of that Opinion, I consider that Article 8(1)(a) of Directive 90/425 provided in principle a sufficient legal basis in Community law for the Netherlands authorities to order the slaughter and destruction of calves from a region contaminated by BSE, and it was expressly on that basis that the Netherlands rules on slaughter were adopted. In addition, prior to the adoption of measures by the Commission (in the shape of Regulation No 717/96), Article 10(1) of the same directive allowed Member States to take interim protective measures.
26. However, the present case concerns not the rules ordering the slaughter of calves but those, enacted on the same day, providing for compensation to be paid to their owners. Could they too be adopted on the same, or any other, basis?
- Health protection
27. The Netherlands Government has argued essentially, in particular at the hearing, that the compensation scheme was inseparable from the public-health aim pursued by the compulsory slaughter. To order slaughter on such a large scale without paying compensation to owners would entail a serious risk that the origin of calves would be concealed and their meat would find its way on to the market, in direct conflict with the aim sought.
28. The Commission does not deny that risk but none the less considers that the aim of paying compensation was twofold. In addition to the public-health aim there was a market-regulation aim, in that it was necessary to stabilise the market by reassuring consumers that the meat they bought could not be contaminated. The latter aim was more important and must determine how the compensation is to be categorised.
29. I cannot agree with the Commission that the market-regulation aspect must prevail over the health protection aspect so that no authority for the payment of compensation could be derived from Directive 90/425. If it was justified to protect public health by ensuring that no meat from possibly suspect calves entered the food chain and if the promise of compensation was necessary to avert the risk of non-compliance with the slaughtering requirements, then the fact that such measures may also have contributed to the stabilisation of a severely disturbed market cannot negate the authority conferred by Articles 8(1)(a) and/or 10(1) of Directive 90/425 - always provided that the aim of protecting public health was not merely ancillary or incidental to the pursuit of a different aim. Here, the explanatory memorandum to the decision setting up the compensation scheme refers exclusively to health concerns and to Directive 90/425.
30. I consider that in the wholly exceptional circumstances prevailing at the time there was justification for the Netherlands Government to seek to eliminate all meat from British-born calves completely from the food chain, on public-health grounds. It will be recalled that there was great uncertainty then as to the precise mode of transmission of BSE among cattle and the duration of the incubation period, together with serious concern over the emerging risk that it could be transmitted to humans in the form of a fatal, incurable and particularly distressing disease.
31. Moreover, the situation was addressed also by the Community as primarily a matter of health protection and not market intervention. At its extraordinary meeting of 1 to 3 April 1996, the Council emphasised its determination to put in place all the necessary measures to ensure that public health is safeguarded. The overriding objective is a high level of health protection based on the best available scientific evidence. And, as the Court held in July of that year, in Decision 96/239 the Commission had regard above all to protecting public health in the context of the internal market, as it is moreover obliged to do pursuant to Directives 90/425 and 89/662.
32. I further consider that there was justification for providing for compensation to be paid to producers in that context. No matter how convinced he may be of the need to safeguard public health, no producer can view with equanimity the destruction of his livestock, which will entail severe financial hardship, possibly even ruin, if it is not compensated. Yet he may have no automatic right to compensation. The Netherlands Government has stressed in its observations in Denkavit and in Booker Aquaculture that in general each individual must bear the damage he has personally suffered and that losses due to disease or suspected disease are in principle normal farming risks. In those circumstances, it is easy to imagine that some producers might be tempted to circumvent the slaughter requirement by disguising the origin of their calves, with the result that meat from those calves might enter the food chain untraced. Until such time as Community compensation has been adopted, the assurance of national compensation seems a very appropriate means of averting that risk.
33. It is perhaps worth noting that Article 8(1)(a) of Directive 90/425 provides that costs (in French, frais) relating to the measures are to be borne by the person responsible for the animals, but I do not consider the term to refer to the damage suffered as a result of their loss - compensation for such loss is a standard feature of both national and Community measures (including Regulation No 717/96) in such circumstances. The term costs in my view refers rather to such items as the expense incurred in conveying animals to the designated slaughterhouse.
34. It may be borne in mind in that context that the Netherlands Government did not seek to apply its own compensation scheme in preference to the Community scheme under Regulation No 717/96. When it was known that a Community regulation would be adopted, the rules were amended to provide for a future change and, once the regulation was adopted, it was complied with in full. It appears moreover from the case-file and from what the Netherlands Government said at the hearing that no compensation was ever paid out on the basis of the original national scheme but only in line with Regulation No 717/96.
35. I thus take the view that the Netherlands Government was authorised by Directive 90/425 to provide for the payment of compensation to owners of slaughtered calves, on public-health grounds, pending the adoption of a Community compensation scheme. That view is unaffected by the fact that the compensation contributed also to other objectives such as market stabilisation or support.
36. However, if the Court should not take the same view, the compensation must be examined in the light of the rules on market intervention and State aid.
- Market intervention and State aid
37. In the hypothesis that the compensation scheme falls to be assessed in the light of the rules on the common organisation of the market in beef and veal and on State aid, it cannot in my view be held that the Netherlands Government was entitled to implement its own scheme.
38. Such a scheme is clearly a matter for the Commission and not for the Member States under the terms of Article 23 of Regulation No 805/68. In addition, involving as it did payments by a Member State favouring a category of producers engaged in trade with other Member States, it fell within the definition in Article 92(1) of the EC Treaty and was thus also caught by Article 24 of Regulation No 805/68.
39. The scheme might none the less have been regarded as aid to make good the damage caused by natural disasters or exceptional occurrences and thus as compatible with the common market by virtue of Article 92(2)(b) of the EC Treaty. In that case, however, Article 93(3) requires the Member State to inform the Commission in advance of its plans to grant aid and to refrain from implementing the aid until the Commission (or the Council, as the case may be) has given its decision.
40. The Commission asserts that the scheme was not properly notified, but has not elaborated on its grounds for that assertion. The Netherlands Government has produced a letter dated 15 April 1996 from the office of its Permanent Representative to the Commission's Director-General for Agriculture, informing the latter of the scheme, a copy of which was apparently attached. That letter was apparently not in any format approved by the Commission, such as that set out in Annex II to its letter to Member States of 2 August 1995, omitted much of the information to be given in accordance with that annex, and was not sent to the Secretariat-General of the Commission as requested therein. However, those requirements are not contained in any legally binding document, and the Court has stated that in order for a notification to be regarded as complete, it is sufficient if it contains such information as will enable the Commission to form a prima facie opinion of the compatibility of the aid with the Treaty. In those circumstances, the Court does not have enough evidence here to conclude that the Netherlands scheme in issue was not adequately notified to the Commission for the purposes of Article 93(3) of the EC Treaty.
41. However, it is agreed that no decision approving the scheme was ever adopted, and it appears that the Netherlands Government at no time sought to implement it until it had been brought into line with the provisions of Regulation No 717/96, thus complying with Regulation No 805/68 and obviating any further need for notification or approval.
The second and third questions: legitimate expectation
42. First of all, it is not for the Court to interpret the Netherlands law on the protection of legitimate expectations. None the less, I would venture to suggest that it is a generous rule under which an individual may legitimately expect that the precise amount mentioned as payable to him in a document issued by the administration will in fact be paid to him when (i) the provisions governing the determination of that amount have previously been amended, with due publicity, to the effect that the final amount is likely to be assessed on a different basis and (ii) the individual has taken no step or decision to his detriment in reliance on the document in question but (iii) has merely complied with a requirement which he could not lawfully have avoided whatever the amount mentioned.
43. Next, it may be noted that, as regards legitimate expectation in Community law, most if not all of the Court's case-law relating to payments by national authorities concerns situations in which aid has been unlawfully paid out and should be recovered. The present situation differs in that Van den Bor wishes to rely on what is merely an alleged assurance that a certain amount will be paid.
44. In the context of the recovery of aid unlawfully paid out, the Court has stated that the Community legal order cannot preclude national legislation which provides that the principles of the protection of legitimate expectations and legal certainty are to be observed with regard to recovery but that in view of the mandatory nature of the supervision of State aid by the Commission under Article 93 of the Treaty, undertakings to which aid has been granted may not, in principle, entertain a legitimate expectation that the aid is lawful unless it has been granted in compliance with the procedure laid down in that article. A diligent businessman should normally be able to determine whether that procedure has been followed.
45. In the light of that case-law, it is clear that, if the compensation scheme were deemed to constitute State aid which was not properly notified to the Commission, then Van den Bor could place no reliance whatever on any expectation that it would be paid.
46. If, however, it is regarded as either aid which was properly notified or (as I suggest) a legitimate part of a health-protection measure authorised under Directive 90/425, then the key to the problem lies in the retroactive effect of Regulation No 717/96.
47. Once that regulation had become applicable, Member States were in principle precluded from applying any national measure (whatever its categorisation) which derogated from it. It will be recalled that Regulation No 717/96 was adopted on 19 April 1996, entered into force on 20 April and was applicable from 11 April. The valuation document given to Van den Bor was issued on 19 April, thus after the date from which the regulation was to become applicable but before that on which it was published and entered into force.
48. The Court has consistently held that, although in general the principle of legal certainty precludes a Community measure from taking effect from a point in time before its publication, it may exceptionally be otherwise where (i) the purpose to be achieved so demands and (ii) the legitimate expectations of those concerned are duly respected.
49. In the present case, the first of those two conditions seems to be fulfilled. The principal purpose of the regulation, as is clear from its title and preamble, was to provide market support in three Member States, in particular by ensuring that those Member States did not bear the full burden of compensating producers affected by the necessary slaughter measures but that the Community could contribute to overall expenditure at a rate of 70%, as it had in similar cases in the past. Since at least the Netherlands Government had already started to implement a slaughter programme, retroactive effect was necessary in order to authorise the Community contribution.
50. I consider that the second condition was fulfilled also. The expectation which Netherlands producers could entertain on 19 April 1996 was that they would receive full compensation for the calves slaughtered but that the amount payable was likely to be calculated on the basis of a Community measure shortly to be adopted. The original Netherlands rules provided for full compensation on the basis of the commercial value of the calves as assessed prior to their removal from the holding, whereas Regulation No 717/96 provided for full compensation on the basis of the most recently observed price of carcases of calves on the Community market, in terms of kilograms live weight. Clearly, the amounts determined were likely to be very similar in both cases and it is noteworthy that, for Van den Bor, the difference seems to have been slight. In many cases, the result of the Community rules may simply have been a more precise determination of the amount appraised by the expert valuer; in some, a fixed price per kilogram live weight may have been more favourable to the producer than an expert valuation, since under the Netherlands scheme the latter was to be reduced if the general condition of the animal warranted it. In those circumstances, I take the view that the legitimate expectations of Netherlands calf producers were respected and that the retroactive effect of Regulation No 717/96 was justified.
51. That being so, the Netherlands authorities were required to comply with the provisions of that regulation when implementing their compensation scheme as from 11 April 1996.
Conclusion
52. In the light of all the above considerations, I am of the opinion that the Court should answer the questions raised by the College voor Beroep van het Bedrijfsleven as follows:
The Netherlands Minister for Agriculture, Nature Management and Fisheries was authorised, under Article 8(1)(a) and/or Article 10(1) of Council Directive 90/425/EEC, to adopt on 3 April 1996 national rules enabling compensation to be paid in respect of loss suffered as a result of the slaughter of British-born calves on public-health grounds. However, from the time when Commission Regulation (EEC) No 717/96 became applicable on 11 April 1996, the Netherlands authorities were precluded from implementing those rules in a manner inconsistent with that regulation.