61983C0059
OPINION OF ADVOCATE GENERAL SIR GORDON SLYNN
DELIVERED ON18 SEPTEMBER 1984
My Lords,
In the present proceedings the Applicant, Biovilac seeks recompense from the Commission under Article 215 (2) of the EEC Treaty for damage which it has allegedly suffered or will suffer as a result of sales of skimmed-milk powder from Community intervention stocks. It claims in the alternative damages flowing from an unlawful act by the Commission, and compensation to which it says it is entitled even if what the Commission did was lawful.
Biovilac is a Belgian company producing two types of animal feed which are in competition with skimmed-milk powder. Of these Kulactic has been on the market since 1978; more than 80% of the quantities sold are fed to piglets, 15% to poultry and the rest to other animals such as rabbits. Bioblanca has been on the market since 1980 and is fed exclusively to piglets.
Both products are based on whey, which falls under heading 04.02AI of the Common Customs Tariff. It is therefore, like skimmed-milk powder, comprised in the list of products covered by Council Regulation No 804/68 of 27 June 1968 on the common organization of the market in milk and milk products (Article 1 of that Regulation (Official Journal L 148, p. 13), though it is common ground between the parties that whey is a waste product generated in the production of cheese.
Regulation No 804/68 recites that the aim of the common agricultural policy is to attain the objectives set out in Article 39 of the Treaty and that in the milk sector “in order to stabilize markets and to ensure a fair standard of living for the agricultural community concerned”, intervention measures should be taken! Article 7 obliges intervention agencies to buy in skimmed-milk powder and to dispose of it in such a way as to avoid disturbing the balance of the market and to ensure equal access to the products for sale and equal treatment of purchasers. However “special measures may be taken for skimmed-milk powder which cannot be marketed on normal terms during a milk year”. Article 10 authorizes aids for skimmed-milk powder produced in the Community which are used for feeding stuffs.
Two different sets of Regulations followed. One set dealt with aids; the other with the fixing of low prices in special cases.
Council Regulation No 986/68 of 15 July 1968 (Official Journal L 169, p. 4) laid down general rules for granting aid for skimmed milk and skimmed-milk powder for use as feed.
By Commission Regulation No 1844/77 of 10 August 1977 (Official Journal L 205, p. 11) aids were to be granted for skimmed-milk powder intended as feed for animals other than young calves, excluding that sold under Regulations No 368/77 and 443/77.
Commission Regulation No 1725/79 of July 1979 Offcial Journal L 199, p. 1 permitted aids to be given for skimmed milk intended for feed for calves only if the skimmed-milk powder was denatured or used in the manufacture of compound feedingstuffs in prescribed ways. A quantity of such milk powder might be authorized for use for piglets and poultry by virtue of Commission Regulations Nos 1229/80 and 232/82 of 29 January 1982 (Official Journal 1980, L 124, p. 9, and Official Journal 1982, L 22, p. 53).
As to the second set of Regulations, Council Regulations No 1014/68 (Official Journal 1968, L 173, 1285/70 (Official Journal 1970, L 144, p. 1) authorized the selling of skimmed-milk powder bought in by intervention agencies, “in the latter regulation at a reduced price if it is intended as feed for swine and poultry”.
By 1977, stocks of skimmed-milk powder which could not be disposed of in a normal year were considerable, and there existed limited possiblities for disposal of it. Accordingly, pursuant to procedures previously authorized by Council Regulations Nos 1014/68 and 1285/70, the Commission issued Regulations Nos 368/77 and 443/77 (Official Journal 1977, L 52, p. 19, and L 58, p. 16) on the sale of skimmed-milk powder by tender or at a fixed price for use for feed for pigs and poultry. These were made on the basis that the powder must be sold at “a very low price” which allows it “to be competitive with other feedingstuffs”. Accordingly, in order to ensure that it was not diverted from its intended use, buyers were required to denature it or to incorporate it directly in compound feedingstuffs in such a way as to exclude, in particular, its use for calf feed. Formulae and methods were prescribed. These Regulations came into force respectively on 25 February and 3 March 1977 — i.e. before Biovilac began to market its two principal products.
By October 1979 stock levels had been reduced and accordingly Regulations No 368/77 and 443/77 were suspended “until further notice”. By July 1982 stocks had risen again and those Regulations were brought back into force by Commission Regulation No 1753/82 of 1 July 1982 as from 6 July 1982 (Official Journal 1982, L 193, p. 6). In October, since sales were not proceeding sufficiently quickly, it was decided that prices must be further reduced. At the same time it was appreciated that this very cheap milk powder was being used not only for “pigs” but also for “piglets”, which was no longer intended. Accordingly new denaturing formulae were adopted in order to prevent the very cheap powder being substituted for powder sold under the regulations providing for aids which sold at a substantially higher price. The aim was thus to feed piglets under Regulation No 1725/79 (aids) and pigs under Regulation Nos 368/77 and 443/77 (very low prices).
The applicant nevertheless contends that the new denaturing formulae did not in fact render the skimmed milk sold under the special scheme unfit for consumption by piglets. It therfore claims that the reintroduction of the special scheme as from the summer of 1982 has undermined the market for Bioblanca and Kulactic. Substantial quantities of these products were sold until the third quarter of 1982. Then it is said that sales fell, dramatically in early 1983, with a substantial likelihood that Biovilac would go out of business.
The Commission contests the admissibility of this action. Firstly, the Commission argues that the action is premature. Damage had not occourred when the application was made, it was merely feared. The applicant failed to specify any damage in the application and it cannot be allowed to indroduce details of alleged loss in its reply without any explanation. I do not accept that argument. As the Commission has itself pointed out, the Court has held that an action may be brought under Article 215 with respect to imminent damage foreseeable with sufficient certainty even if the damage cannot yet be precisely assessed: Cases 56 — 60/74 Kampffmeyer v Commission and Council [1976] ECR 711 and 44/76 Milch-, Fett- und Eier-Kontor v Commission and Council [1977] ECR 393. It follows a fortiori that an action can be brought where damage has already occurred but has not yet been precisely assessed. In any case, the applicant clearly alleged in the application that it was already suffering damages as a result of the sales from intervention, and made a broad estimate, although it failed to quantify the loss incurred to date; that was only done in the Reply. Even though it is desirable that full details of the damage should be given in the claim, in the circumstances of this case I consider that Biovilac was entitled to make a claim for damage on an estimate of the anticipated losses it would suffer and to give fuller details as they became available by the time of the reply.
In the circumstances it does not seem to me necessary, contrary to what the Commission suggests, to decide whether an action for imminent damage ever lies with respect to lawful acts. This is not simply an action for imminent damage: it is a claim for actual damage already suffered and continuing, even though the amounts are not specified fully.
The second ground on which the Commission contests the admissibility of the action is that, instead of bringing a direct action before this Court, the applicant should have brought an action against one or more national intervention boards before the national courts. I would also reject that submission. Firstly, it is not suggested in this case that the national authorities have done anything other than faithfully to implement the regulations complained of. That in itself is not decisive because there have been many cases of that kind which the Court has held inadmissible on the grounds now put forward by the Commission. However, where the applicant in such a case is claiming unliquidated damages rather than a specific sum, it is right to bring the action directly before this Court: Mr Advocate General Warner in Case 126/76 Dietz v Commission [1977] ECR 2431 at pp. 2448 to 2449. Secondly, there has been no contact between the applicant and the authorities of any Member State. The applicant has not entered into any transaction with them, nor was it required to do so. This case does not relate to any sum of money or other financial advantage withheld by the national authorities, as in the cases concerning agricultural levies and refunds. What is complained of here is the policy adopted by the Commission, not a specific implementation of it by a national authority. In view of this the Commission is the proper defendant. In Cases 197 to 200, 243, 245 and 247/80 Ludwigshafener Walzmühle v Commission and Council [1981] ECR 3211 at p. 3244, an action brought under Article 215 with respect to the threshold price for durum wheat, the applicants had not imported the wheat into the Community themselves and had therefore not paid the levies. Since no transaction between the applicant and the national authorities concerned had taken place, there was nothing they could litigate in the national courts and the action was admissible. The same in my view applies here.
Turning to the merits, there is a dispute between the parties as to whether in 1979 the price of Kulactic was higher or lower than skimmed-milk powder sold under Regulations Nos 368/77 and 443/77. If it was higher then the difference was, as I see it, very slight and the applicant clearly sold substantial quantities of its products, even if the profit margin in the early days was not very high, and even though it was encountering difficulties because of increased costs. It is clear, however, that the price of skimmed-milk powder sold under those Regulations between November 1982 (21 ECU per 100 kg) and February 1983 (19 ECU per 100 kg) was substantially lower than the prices of the applicant's products which were 27.92 ECU (or BFR 1200) per 100 kg. It is also clear that substantial quantities of milk powder were sold through the intervention agencies.
The Commission denies that the applicant has proved sufficiently that there were falls in the sale of its products to the extent alleged and in any event does not accept that it is established that any fall in sales by the applicant were due to the availability of this cheap milk powder. In so far as such fall occurred, it is said to be due to an increase in the price of the applicant's products far greater than was the annual rate of inflation.
Even though the price of the applicant's products did rise from BFR 650 to BFR 1200 between 1978 and 1982, I would accept that such rise was due particularly to the increased costs of lactosérum and energy. I am not satisfied by the Commission's assertion that the applicant had rendered itself less competitive than it needed to be by unduly increasing its prices.
It is also clear from the applicant's accounts that turnover increased between 1981 and 1983, as the Commission points out. I would, however, accept the applicant's explanation that this increase in turnover was due to the fact that it was obliged to sell substantial quantities of its products at unprofitable prices in order to dispose of them.
It seems to me that the applicant's evidence, particularly as explained at the hearing, that the fall in sales did occur and that substantial customers switched from the applicant's products to skimmed-milk powder, and as long as the latter was available at substantially lower prices, were likely to continue to use it in preference to the applicant's products, is to be accepted.
Even though I am not satisfied that the allegedly impending closure of the applicant's business was necessarily caused by the availability of the cheap milk powder, it seems to me, on the evidence before the Court, that some loss did result from the availability of cheap milk powder and that it is not possible to accept the Commission's argument that the whole case fails because there is no causative link between the lower price of the milk powder and the loss incurred. It is, therefore, necessary to consider the other issues raised.
The applicant attacks the basis of the Commission's regulations on technical grounds. It contends that the Commission was really aiming to exclude the use of this powder only for very young piglets — those up to about seven weeks old and weighing up to about 15 kg. What the Commission should have been doing was to exclude the use of the powder for animals up to 30 kg in weight since, on any view, these are “piglets” within the meaning of the regulations. The Commission's reply is that it is not possible to introduce denaturing elements into food for piglets between 15 and 30 kg which do not also render it inedible for animals over 30 kg. To this the applicant, in turn, replies that a colouring agent is available which would enable the Commission by inspection to control the use of the powder for those animals for whom it was intended.
The Commission's answer seems to me on the face of it reasonable. With over 2 million pig breeders, even if, as the applicant contends, the largest proportion of the animals are raised by a relatively small number of breeders, control would be very difficult and expensive even if the precise cost cannot be calculated in advance.
In summary, even if “piglets” could have been more precisely defined in the regulations in order to show which animals the Commission was really concerned to exclude, I would reject the applicant's arguments that the Commission adopted an approach, in concerning itself with young piglets, which was vitiated by any error in law or that it adopted technical methods of denaturing or control which were so inefficient or so unreasonable that they could not properly have been adopted. Subject to the broader questions as to whether authorization of the sale of milk powder so as to reduce the profitability of the applicant's business was unlawful, or whether, if lawful, it leads to a claim for compensation, it seems to me that what was done was within the Commission's discretion. The Commission was satisfied that for young pigs what was done, as far as it could technically be done, and even if it could not be 100% effective, was sufficient to achieve the Commission's aim of preventing the substitution of powders sold under Regulations Nos 368/77 and 443/77 for that subject to aids under Regulation No 1725/79.
The applicant contends that by undermining the market in its products, the Commission has failed to comply with its obligation to stabilize markets contained in Article 39 of the Treaty and in Regulation No 804/68 establishing the common market organization in milk and milk products.
Article 39 (1) (c) stipulates that one of the objectives of the common market organizations shall be to “stabilize markets”. I accept that to take steps which result in one product (whey-based animal feeds) becoming wholly uncompetitive, is capable of amounting to a destabilization of the market in animal foods. It may be possible to challenge the legality of a Community legislative instrument based directly or indirectly on Articles 38 to 47 on the grounds that it achieves none of the objectives set out in Article 39. However, in Case 5/67 Beus v Hauptzollamt München [1968] ECR 83 at p. 98 the Court held that the objectives set out in Article 39 “may not all be simultaneously and fully attained”. Accordingly, such an instrument may not be attacked on the mere grounds that, while it serves one or more of those objectives within reasonable limits, it fails to serve the particular objective of interest to the applicant. In the present case it seems clear that the sales of skimmed-milk powder at specially low prices from intervention formed part of the general strategy designed to ensure milk producers a fair income within the meaning of Article 39 (1) (b). In the light of the vast quantities of milk powder to be disposed of and the difficulties of disposing of them outside the Community or for other purposes inside the Community (other than by their destruction), it does not seem to me that it can be said that reasonable limits were exceeded in regard to the objectives set out in Article 39 (1) (b). Thus Biovilac's argument must in my view be rejected in so far as it concerns Article 39.
The applicant also relies in this respect on Regulations No 804/68. The fourth recital in the preamble refers to the objectives set out in Article 39 and refers to the need to stabilize markets in the milk sector. It is true that the first subparagraph of Article 7 (2) of the Regulation requires disposal of the milk powder to take place in such a way as to avoid disturbing the balance of the market.
The second sub-paragraph of Article 7 (2) (“special measures”) must, however, be taken to constitute a derogation from the first sub-paragraph, at least as regards the stability of the market; it may be otherwise with regard to the principle of equal access and equal treatment, since that would appear to be enshrined in Article 40 (3) of the Treaty and thus could not be waived in any case. In other words, the second subparagraph of Article 7 (2) is to be regarded as meaning that, when skimmed-milk powder cannot be marketed on normal terms during the marketing year, steps may be taken to ensure for milk producers a fair standard of living and to protect Community financial interests even if this has a destabilizing effect on the market. This was a special provision to be used in what was in effect a situation calling for urgent treatment. Consequently, it seems to me that the disputed sales from intervention do not infringe Regulation No 804/68.
Then the applicant claims that it has suffered discrimination contrary to the second sub-paragraph of Article 40 (3) of the Treaty. There can be no doubt that skimmed-milk powder has been more favourably treated than whey. Not only has skimmed-milk powder been brought into the intervention system, but it has also been sold off at specially low prices, with no doubt a substantial financial burden on the Community. On the other hand, whey has not benefited from any direct Community support whatsoever. Moreover, it is clear that the two products are in competition with each other, since both are fed in some form to pigs and other animals. The Commission's policy is clearly intended to favour the use of milk powder at the expense of vegetable products and in particular imported soya.
Yet that does not exhaust the issue. The Court has held that the prohibition on discrimination between producers enshrined in Article 40 (3) (ii) “requires that similar situations shall not be treated differently unless differentiation is objectively justified”: Cases 117/76 and 16/77 Ruckdeschel v Hauptzollamt St. Annen [1977] ECR 1753 at p. 1769 and Cases 103 and 104/77 Royal Scholten-Honig v IBAP [1978] ECR 2037 at p. 2072. In the present case it is common ground that whey is a waste product which in the ordinary course of events is disposed of as effluent, and Biovilac in its application says that it cannot expect the Community to subsidize its products. Milk, however, is, as a matter of Community policy, subject to intervention; the large quantities produced and bought in under that policy must be used or disposed of. Once converted into milk powder, for the purpose of being preserved and used, the only effective way of disposing of it is by use for animal feeds. For these reasons the two products, even if in competition are in my view subject to an objective difference which justifies a difference in treatment in the application of the intervention system under the common agricultural policy.
Next, Biovilac maintains that the disputed sales of skimmed-milk powder constitute an infringement of its right to property and its right to pursue its business activities freely. In this regard it relies on the judgment in Case 44/79 Hauer v Land Rheinland-Pfalz (1979) ECR 3727. The applicant claims to have suffered a loss as a result of the contested sales from intervention, which is sufficient even if the steps taken neither deprived it of any of its property nor prevented it from making use of any of its property. Furthermore, in Hauer, as in the earlier ruling in Case 4/73 No/dv Commission (1974) ECR 491, the Court impliedly held that the right to pursue business activities freely was guaranteed in the Community legal order, since it found that such a right was guaranteed by the constitutional law of several Member States. However, in both cases it points out that in those Member States the right thereby guaranteed did not constitute an unfettered prerogative but was subject to exceptions laid down in the public interest. On that basis in Nold the Court rejected an action for the annulment of a Commission Decision authorizing the Ruhr coal-selling agency to subject direct supplies of coal to the conclusion of fixed two-year contracts stipulating the purchase of at least 6000 metric tons per annum for the domestic and small consumer sector, although that quantity greatly exceeded the applicant's annual sales in that sector. In Hauer a prohibition on planting new vines during a period of three years was held to be valid on the same grounds.
In the present case the supposed interference with the applicant's business activities is not so direct as it was in Nold or Hauer where it consisted in the imposition of a direct restriction on those activities. Here it is alleged that by ordering the disputed sales from intervention the Commission has undermined Biovilac's trading position and the steps taken may lead to the collapse of its business. In other words, the supposed interference takes the form of an aid for skimmed-milk powder which has not been granted for whey. Thus the applicant's argument that its business activities have been undermined reflects in another form its contention that it has suffered discrimination contrary to the second sub-paragraph of Article 40 (3). I would therefore reject this argument on the same grounds. Equally even though this principle applies in a situation where property is expropriated arbitrarily, or even in the public interest, I do not read it as extending to cover a situation where commercial loss is suffered as the result of other products being made cheaper in the public interest unless there is unlawful discrimination.
Biovilac maintained at the hearing that the Commission had infringed the principle of legitimate expectation. It claimed to have relied on this argument in its written pleadings, though it seems to me to come in only indirectly. It was, however, held in Case 146/77 British Beefy IBAP[1978] ECR 1347 at p. 1355 that a person cannot rely on the principle of legitimate expectation when he ought to have known that the legislative change complained of was likely to occur. In the present case the fact that skimmed-milk powder was sold from intervention at specially low prices between 1977 and 1979 ought to have made Biovilac aware that such a scheme might be reintroduced at any time, since Regulation No 2307/79 merely suspended the two Regulations of 1977 “until further notice” without abolishing them. Biovilac says it could not have anticipated that the price of the powder would be so low subsequent to 1982. I do not think that it was entitled to proceed on the basis that if stocks rose, the Commission would not take further steps by reducing the prices still further in order to deal with them, even if the result of this was to exclude both vegetable-based products and whey-based products from the animal food market.
Lastly, on the law, Biovilac claims that even if the relevant acts of the Commission were lawful, it is nevertheless entitled to compensation. In so doing, it relies on the German legal concept of “Sonderopfer” (special sacrifice) and the equivalent French legal concept of “rupture de l'égalité devant les charges publiques” (unequal discharge of public burdens). By virtue of these concepts, an application for compensation may be brought with respect to a lawful act of the administration provided that the plaintiff can show that he has suffered particularly severe loss as a result of the act. In the present case there is in effect a claim that, if, in the Community interest, steps are taken which cause a business to suffer financial loss or to be run down, that can only happen subject to compensation. It is equivalent to the confiscation of the business and there can be no confiscation without compensation.
Mr Advocate General Mayras said in Cases 9 and 11/71 Compagnie d'Approvisionnement v Commission [1972] ECR 391 at p. 422, that Article 215 (2) is not expressly limited to unlawful acts so that there could be room for this concept in Community law. The Court, without deciding whether such an action lay in principle, held that “any liability for a valid legislative measure is inconceivable in a situation like that in the present case since the measures adopted by the Commission were only intended to alleviate, in the general economic interest, the consequences which resulted in particular for all French importers from the national decision to devalue the franc”. In Case 169/73 Compagnie Continentale v Commission [1975] ECR 117 at p. 141, Mr Advocate General Trabucchi subsequently expressed the view that in the passage just quoted the Court had implicitly accepted that such an action lay. To my mind the Court simply left the matter open.
In Case 44/79 Hauer at p. 3760, Mi-Advocate General Capotorti concluded that as a general rule the idea that the State may not expropriate property without compensation was enshrined in the constitutional laws of the Member States. On that view, if it were possible for the Community lawfully to expropriate property, then the owner would be entitled to compensation; such compensation could then be awarded in an action based on Article 215 (2). By the same token, it may well be that such an action would lie with respect to acts of the Council or the Commission restricting the owner's right to use his property.
It seems to me that, as regards Community acts affecting a person's business activities and causing economic loss, such an action, if existing at all, must be within a narrow compass. In particular, such compensation should not be awarded where the applicant knew or ought to have known of the risk involved when he first began to market his products. In the present case, Kulactic was first marketed in 1978 during the operation of the scheme of sales of skimmed-milk powder at specially low prices established by Regulations 368/77 and 443/77. Bioblanca was first marketed in 1980, when those regulations had been suspended, though only until further notice. The applicant should have been aware that they might be brought back into force at any time. The loss suffered is, in my opinion, within the commercial risk of an undertaking operating in existing market conditions. I would therefore reject this claim.
I conclude that, even though loss has been suffered, it is not due to an illegal act of the Commission, which acted within the discretion vested in it, nor does it call for compensation flowing from a lawful act.
Accordingly the claim should be dismissed and the applicant should pay the Commission's costs.