Case C-375/05

Erhard Geuting

v

Direktor der Landwirtschaftskammer Nordrhein-Westfalen für den Bereich Landwirtschaft

(Reference for a preliminary ruling from the Bundesverwaltungsgericht)

(Beef and veal – Premium for maintaining suckler cows)

Judgment of the Court (First Chamber), 4 October 2007

Summary of the Judgment

1. Agriculture – Common organisation of the markets – Beef and veal – Premium for the maintenance of the suckler cow herd – In-calf heifer – Assimilation to a suckler cow

(Council Regulation No 805/68, Art. 4a, third indent, point (ii))

2. Agriculture – Common organisation of the markets – Beef and veal – Premium for the maintenance of the suckler cow herd

(Council Regulation No 3886/92, Art. 33(2) and (4))

3. Agriculture – Common organisation of the markets – Beef and veal – Premium for the maintenance of the suckler cow herd

(Commission Regulation No 3886/92, Art. 33(2))

4. Agriculture – Common organisation of the markets – Beef and veal – Premium for the maintenance of the suckler cow herd

(Council Regulation No 805/68, Art. 4f(4); Commission Regulation No 3886/92, Art. 33(4))

1. Point (ii) of the third indent of Article 4a of Regulation No 805/68 on the common organisation of the market in beef and veal, as amended by Regulation No 2222/96, must be interpreted as meaning that an in-calf heifer may be regarded as a suckler cow within the meaning of Section 1 of that regulation only if it replaces, after the premium application for the marketing year has been lodged, a suckler cow included in that application.

Moreover, an in-calf heifer which, for a marketing year, replaced a suckler cow in respect of which a premium application was made and which was accepted as being eligible for that premium may be regarded as a suckler cow within the meaning of the abovementioned provision, where it fulfils, in the following year, the requirements for replacing a suckler cow again. However, an in-calf heifer in respect of which a premium application has been made is not eligible for the premium if it calves before the deadline for lodging that application. Since the lodging of the premium application determines the start of the retention period and the number of suckler cows is ascertained at that time, it is also on that date that the animals must show all the characteristics necessary for eligibility.

(see paras 21, 26, 31, 33, operative part 1-3)

2. Article 33(2) and (4) of Commission Regulation No 3886/92 laying down detailed rules for the application of the premium schemes provided for in Regulation No 805/68 on the common organisation of the market in beef and veal and repealing Regulations No 1244/82 and No 714/89, as amended by Regulation No 2311/96, concerning the reversion of unused premium rights to the national reserve, is to be interpreted as meaning that a producer must be considered as not having made use of his premium rights during a marketing year if he has applied for a premium but his application has been rejected because the animals concerned were not eligible, and this is also the case if there is no indication of an improper application having been made.

Such an interpretation is not contrary to the principle of proportionality. Reversion to the national reserve of unused rights constitutes an appropriate means of achieving the objective of better mobilisation of premium rights which are available but not used.

(see paras 48, 50, operative part 4)

3. Neither the provisions of Regulation No 3886/92 laying down detailed rules for the application of the premium schemes provided for in Regulation No 805/68 and repealing Regulations No 1244/82 and No 714/89, as amended by Regulation No 2311/96, nor the recitals in its preamble determine the types of criterion to be taken into account to justify an exceptional case within the meaning of the second indent of Article 33(2) of the said regulation, which permits derogation from the rule that the unused part of premium rights is to revert to the national reserve. Since the Community legislature did not wish to give a more precise description of that notion or to attach to it particular criteria, it is for the national court to decide whether, in the light of all the duly justified circumstances of the situation of an applicant in a given case, an exceptional case exists which requires that the said derogatory provision be applied, whilst taking account of the need to apply that provision restrictively.

(see paras 52, 54, 57, operative part 5)

4. Article 33(4) of Regulation No 3886/92 laying down detailed rules for the application of the premium schemes provided for in Regulation No 805/68 and repealing Regulations No 1244/82 and No 714/89, as amended by Regulation No 2311/96, read in conjunction with Article 4f(4) of Regulation No 805/68, as amended by Regulation No 2222/96, is to be interpreted as meaning that Member States may, on expiry of the two-year exclusion period, grant to a producer, on a preferential basis, the premium rights which were withdrawn from him because he had made use of more than 70% but less than 90% of his premium rights in the 1998 marketing year. Where the Commission has not adopted measures relating to individual rights not used in 1997 and 1998 and returned to the national reserve, Member States retain full discretion with regard to the use of their national reserve.

(see paras 60-61, operative part 6)

JUDGMENT OF THE COURT (First Chamber)

4 October 2007 ( )

(Beef and veal – Premium for maintaining suckler cows)

In Case C‑375/05,

REFERENCE for a preliminary ruling under Article 234 EC, by the Bundesverwaltungsgericht (Germany), made by decision of 23 August 2005, received at the Court on 12 October 2005, in the proceedings

Erhard Geuting,

v

Direktor der Landwirtschaftskammer Nordrhein-Westfalen für den Bereich Landwirtschaft,

THE COURT (First Chamber),

composed of P. Jann, President of the Chamber, R. Schintgen, A. Borg Barthet (Rapporteur), M. Ilešič and E. Levits, Judges,

Advocate General: P. Mengozzi,

Registrar: R. Grass,

having regard to the written procedure,

after considering the observations submitted on behalf of:

– Mr Geuting, by F. Schulze, Rechtsanwalt,

– the Direktor der Landwirtschaftskammer Nordrhein-Westfalen für den Bereich Landwirtschaft, now the Direktor der Landwirtschaftskammer Nordrhein-Westfalen, by M. Günther, acting as Agent,

– the Belgian Government, by L. Van den Broeck, acting as Agent,

– the Commission of the European Communities, by C. Cattabriga and F. Erlbacher, acting as Agents,

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

gives the following

Judgment

1 This reference for a preliminary ruling concerns the interpretation of point (ii) of the third indent of Article 4a of Regulation (EEC) No 805/68 of the Council of 27 June 1968 on the common organisation of the market in beef and veal (OJ, English Special Edition 1968 (I), p. 187), as amended by Council Regulation (EC) No 2222/96 of 18 November 1996 (OJ 1996 L 296, p. 50; ‘Regulation No 805/68’) concerning the replacement of suckler cows, and of Article 33(2) and (4) of Commission Regulation (EEC) No 3886/92 of 23 December 1992 laying down detailed rules for the application of the premium schemes provided for in Council Regulation (EEC) No 805/68 and repealing Regulations (EEC) No 1244/82 and (EEC) No 714/89, as amended by Commission Regulation (EC) No 2311/96 of 2 December 1996 (OJ 1996 L 313, p. 9) (‘Regulation No 3886/92’), concerning the transfer of premium rights to the national reserve.

2 The reference was made in the course of proceedings between Mr Geuting and the Direktor der Landwirtschaftskammer Nordrhein-Westfalen für den Bereich Landwirtschaft (Director of the Chamber of Agriculture of Nordrhein-Westphalia for the agricultural sector), now the Direktor der Landwirtschaftskammer Nordrhein-Westfalen (Director of the Chamber of Agriculture of Nordrhein-Westphalia) concerning the application for the suckler cow premium made by Mr Geuting for the marketing year 1998.

Legal context

3 The third indent of Article 4a of Regulation No 805/68 defines the notion of ‘suckler cow’ as follows:

‘(i) a cow belonging to a meat breed or born of a cross with a meat breed, and belonging to a herd intended for rearing calves for meat production;

and

(ii) an in-calf heifer, meeting the same criteria, which replaces a suckler cow.’

4 The first subparagraph of Article 4d(5) of Regulation No 805/68 provides:

‘The premium shall be granted to any producer not supplying milk or milk products from his farm for 12 months from the day on which the application is lodged and who keeps for at least 6 consecutive months from the day on which the application is lodged a number of suckler cows at least equal to the number for which the premium was requested.’

5 Paragraphs 1, 2 and 4 of Article 4f of Regulation No 805/68 provide:

‘1. Each Member State shall set up an initial national reserve equal to at least 1% and at the most 3%, of the total number of animals for which a suckler cow premium has been granted under the reference year to producers whose holdings are situated in their territory. …

2. The Member States shall use their national reserves for granting, within the limits of those reserves, in particular rights to the producers referred to below:

(a) producers who applied for a premium before 1 January 1993 and who have proved to the satisfaction of the competent authority that the application of individual ceilings in accordance with Article 4d(2) would put at risk the viability of their holdings, taking account of the implementation of an investment programme in the beef and veal sector before 1 January 1993;

(b) producers who have submitted in respect of the reference year a premium application which as a result of exceptional circumstances does not correspond to the actual situation as established during the previous years;

(c) producers who have regularly submitted premium applications without, however, having submitted an application under the reference year;

(d) producers who submit a premium application for the first time during the year following the reference year or subsequent years;

(e) producers who have acquired part of the land previously used for cattle breeding by other producers.

…

4. Detailed rules for the application of this Article shall be adopted by the Commission in accordance with the procedure laid down in Article 27.

The same procedure shall be used for adopting:

– the measures applicable where, in a Member State, the national reserve is not used,

– measures relating to individual rights not used in 1997 and 1998 which have been returned to the national reserve,

– the transitional measures required to ease the passage from the pre-existing system to the system laid down in this Regulation, and, in particular, those measures concerning producers who benefited from the suckler cow premium for the first time under the year 1991 or 1992 in cases where one or either of these years directly succeeds the reference year chosen by the Member State concerned.’

6 Article 33 of Regulation No 3886/92 contains implementing provisions relating to the national reserve provided for in Article 4f of Regulation No 805/68. Article 33 provides as follows:

‘1. A producer holding rights may make use of them by either availing himself of those rights and/or leasing those rights to another producer.

2. Where a producer has not made use of at least 70% of his rights during each calendar year, the part not used shall be transferred to the national reserve, except:

– in the case of a producer holding a maximum of seven rights to premium. Where this producer has not made use of at least 70 % of his rights during each of two consecutive calendar years, the part not used during the last calendar year shall be transferred to the national reserve,

– in the case of a producer participating in an extensification programme recognised by the Commission,

– in the case of a producer participating in an early retirement scheme recognised by the Commission in which the transfer and/or temporary lease of rights is not obligatory,

or

– in duly justified exceptional cases.

…

4. In respect of 1997 and 1998, the figure of 70% mentioned in paragraph 2 and the first subparagraph of paragraph 3 shall be replaced by the figure of 90%. In this case, the rights transferred to the national reserve shall not be reallocated for 1998 or 1999.’

7 Article 10 of Commission Regulation (EEC) No 3887/92 of 23 December 1992 laying down detailed rules for applying the integrated administration and control system for certain Community aid schemes (OJ 1992 L 391, p. 36; ‘Regulation No 3887/92’) lays down the basis for calculation of premiums for which there is an individual limit and the reduction of premiums in certain cases. Article 10 provides:

‘…

2. If the number of animals declared in an aid application exceeds that found during checks the aid shall be calculated on the number of animals found. …

…

4. Male bovine animals present on the holding shall not be counted unless identified in the aid application, or, in the case where paragraph 3 is applied, those identified in the register.

However, a suckler cow declared for the premium or a bovine declared for the compensatory allowance provided for in Regulation (EEC) No 2328/91 may be replaced by another suckler cow or bovine respectively provided that replacement occurs within 20 days of the animal’s departure from the holding and that the replacement is entered in the private register not later than 3 days after the day of replacement.’

8 Pursuant to Article 1 of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests (OJ 1995 L 312, p. 1):

‘1. For the purposes of protecting the European Communities’ financial interests, general rules are hereby adopted relating to homogenous checks and to administrative measures and penalties concerning irregularities with regard to Community law.

2. ‘Irregularity’ shall mean any infringement of a provision of Community law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by them, either by reducing or losing revenue accruing from own resources collected directly on behalf of the Communities, or by an unjustified item of expenditure.’

9 Article 1 of Commission Regulation (EEC) No 1244/82 of 19 May 1982 laying down detailed rules implementing the system of premiums for maintaining suckler cows (OJ 1982 L 143, p. 20), as amended by Commission Regulation (EEC) No 2079/90 of 20 July 1990 (OJ 1990 L 190, p. 15) (‘Regulation No 1244/82’), provides as follows:

‘Applications for the premium for maintaining suckler cows shall be lodged annually between 15 June and 31 January with the competent authority designated by each Member State, in respect of suckler cows held on the day on which the application is lodged. However, Member States may determine, within that period, one or more periods for lodging applications.

The number of cows to be taken into account for granting the premium shall be equal to or less than the number of suckler cows, excluding heifers in calf, present on the farm at the time the application is lodged.

A producer may lodge only one application within the abovementioned period, that is between 15 June and 31 January.’

Facts and the questions referred

10 On 20 April 1998, the applicant in the main proceedings (‘the applicant’) applied under the 1998 marketing year for suckler cow premiums for a total of 64 suckler cows, stating that his individual ceiling was 65.3 rights to premium. Of these animals, 47 were clearly suckler cows and 17 were in-calf heifers which the applicant described in his application as replacement animals for suckler cows.

11 The applicant had already designated 10 of those 17 heifers during the previous retention period as replacements for suckler cows that had left his herd on 21 October 1997. The other seven heifers were said to replace suckler cows that had left the herd between 21 January and 17 April 1998. Of the in-calf heifers, 13 had calved before 15 May 1998, the end of the period for lodging premium applications.

12 By decision of 3 May 1999, the defendant in the main proceedings (‘the defendant’) reduced the applicant’s individual ceiling for premium rights to 47 suckler cows with effect from 10 June 1998, stating that the in-calf heifers could not be allowed as suckler cows. In its view, the applicant had not made use of at least 90% of his premium rights in the year 1998, which meant that the unused portion had to be transferred to the national reserve.

13 By decision of 23 August 2001, the defendant rejected in its entirety the applicant’s premium application for the marketing year 1998 and demanded the repayment of the advance made in respect thereof, together with interest, on the ground that the difference between the number of animals declared and the number of animals found was more than 20%.

14 The objections lodged by the applicant were rejected by the defendant by decisions of 5 November 1999 and 11 January 2002. Seised of the actions contesting those decisions, the Bundesverwaltungsgericht (Federal Administrative Court) decided to stay the proceedings and refer the following questions to the Court for a preliminary ruling:

‘1. [With regard to] the interpretation of point (ii) of the third indent of Article 4a of [Regulation No 805/68]:

(a) Is an in-calf heifer only a suckler cow within the meaning of Section 1 of [Regulation No 805/68] if it replaces a suckler cow for which an application for a premium has been made?

(b) Is an in-calf heifer also a suckler cow within the meaning of Section 1 of that regulation if, in the previous marketing year, it replaced a suckler cow for which an application for a premium had been made and was regarded as eligible for a premium?

(c) Is an in-calf heifer for which application for a premium has been made to be regarded at any rate as eligible for a premium if it calves before the end of the period for lodging premium applications?

2. [With regard to] the interpretation of Article 33(2) and (4) of [Regulation No 3886/92]:

(a) Has a producer not made use of premium rights during a marketing year if he has applied for a premium but his application has been rejected because the animals concerned were not eligible for premiums?

Is this also the case if there is no indication of an improper application having been made?

Would this be compatible with the Community principle of proportionality?

(b) Must Article 33(2) of [Regulation No 3886/92] be interpreted as meaning that, in an instance such as this, premium rights are maintained because it constitutes a (duly justified) exceptional case?

(c) Must premium rights that are withdrawn from a producer under Article 33(4) of [Regulation No 3886/92] because he made use of more than 70% but less than 90% of his premium rights in the 1998 marketing year be granted to that producer on a preferential basis on the expiry of the two-year exclusion period?’

The questions referred for a preliminary ruling

Question 1(a)

15 By this question, the national court asks whether an in-calf heifer is a suckler cow within the meaning of point (ii) of the third indent of Article 4a of Regulation No 805/68 only if it replaces a suckler cow for which an application for a premium has been made.

16 Firstly, in accordance with that provision, only an in-calf heifer which replaces a suckler cow may be regarded as a suckler cow within the meaning of that provision. However, the provision does not state whether the replacement must be of a suckler cow already included in the premium application or whether it may be of any suckler cow from the herd of the producer in question.

17 On the other hand, Article 10(4) of Regulation No 3887/92 expressly provides that only bovine animals identified in the aid application may be counted, while stating that those animals may be replaced by others provided that the replacement takes place within 20 days of the date on which they left the holding and that the replacement is entered in the individual register within 3 days. Consequently, it is impossible for an in-calf heifer to replace a suckler cow which was not included in the premium application.

18 With regard to the replacement date, the national court rightly notes that the wording of the third indent of Article 4a of Regulation No 805/68 does not state whether replacement must of necessity take place after the premium application is made or whether it may also be carried out during the preceding period. However, the subsequent development of Community law applicable to this domain gives clarification in this regard. Thus, Article 6(2) of Council Regulation (EC) No 1254/1999 of 17 May 1999 on the common organisation of the market in beef and veal (OJ 1999 L 160, p. 21), which from 1 January 2000 replaced Regulation No 805/68, henceforth permits the premium to be granted both for suckler cows and heifers. It is clear from the seventh recital in the preamble to Regulation No 1254/1999 that the legislature intended to give more flexibility to producers by extending eligibility for suckler cow premium to heifers meeting the same breeding requirements as suckler cows. Since the clear aim of the new legislation is to amend the former legislation by making heifers eligible for the premium application, it may be inferred that they were not subject to the earlier rules, which apply in the main proceedings.

19 The interpretation of point (ii) of the third indent of Article 4a of Regulation No 805/68 as meaning that in-calf heifers cannot be the subject of a premium application from the outset is also confirmed by the earlier law. The suckler cow premium was introduced by Council Regulation (EEC) No 1357/80 of 5 June 1980 introducing a system of premiums for maintaining suckler cows (OJ 1980 L 140, p. 1), which was supplemented by Regulation No 1244/82. The second subparagraph of Article 1(1) of the latter regulation states that ‘[t]he number of cows to be taken into account for granting the premium shall be equal to the number of suckler cows, excluding heifers in calf, present on the farm at the time the application is lodged’. Pursuant to that provision, a suckler cow premium application cannot be made for in-calf heifers. Subsequently, Regulation No 3886/92 repealed Regulation No 1244/82 whilst retaining, in essence, the suckler cow premium scheme as laid down in the latter regulation. The seventh recital in the preamble to Regulation No 3886/92 shows the intention of the community legislature in that regard to continue to apply the same administration rules which already applied to suckler cows under the old scheme. However, certain amendments were deliberately made, such as that relating to the eligible breeds. Since the provision concerning the non-eligibility of in-calf heifers was not included in those amendments, it may be inferred that, at that stage, the Community legislature did not intend to change that rule.

20 Thus, it is clear from the development of the Community law applicable in this domain that, in order for an in-calf heifer to be regarded as a suckler cow within the meaning of point (ii) of the third indent of Article 4a of Regulation No 805/68, the replacement must take place after the premium application has been made.

21 The answer to Question 1(a) must therefore be that point (ii) of the third indent of Article 4a of Regulation No 805/68 is to be interpreted as meaning that an in-calf heifer may be regarded as a suckler cow within the meaning of Section 1 of that regulation only if it replaces, after the premium application for the marketing year has been made, a suckler cow included in that application.

Question 1(b)

22 By this question, the national court asks whether an in-calf heifer is a suckler cow within the meaning of Regulation No 805/68 where it has replaced, for the preceding marketing year, a suckler cow for which a premium application was made and which was regarded as being eligible for that premium.

23 According to the defendant, that question must be answered in the negative. It takes the view that an affirmative answer would mean that replacement is a state which lasts until the in-calf heifer has calved, even if, in the meantime, a new marketing year has begun.

24 The defendant’s analysis must, however, be rejected since it is based on too narrow a view of the hypothetical cases covered by Question 1(b). Given that the gestation period of bovine animals is nine months, it is possible for an in-calf heifer to replace a suckler cow at the end of a marketing year and, during the following marketing year, not yet having calved, again replace another suckler cow which is included in the premium application for the second marketing year.

25 In that regard, the Commission observes rightly that the mere fact that the applicant designated certain in-calf heifers as replacement animals for 1997 does not prevent those heifers from replacing suckler cows again in 1998, which means that it is appropriate to check whether, in 1998, the heifers fulfilled the requirements for replacing suckler cows again. There is nothing in the applicable provisions to suggest that a single in-calf heifer may not replace suckler cows in two consecutive marketing years where it meets all the conditions in that regard and in particular those set out in the answer to Question 1(a).

26 Accordingly, the answer to Question 1(b) must be that an in-calf heifer which, for a marketing year, replaced a suckler cow in respect of which a premium application was made and which was accepted as being eligible for that premium may be regarded as a suckler cow within the meaning of point (ii) of the third indent of Article 4a of Regulation No 805/68 where it fulfils, in the following year, the requirements for replacing a suckler cow again.

Question 1(c)

27 By this question, the national court asks whether point (ii) of the third indent of Article 4a of Regulation No 805/68 must be interpreted as meaning that an in-calf heifer for which a premium application has been made is eligible for the premium where it calves before the deadline for lodging the premium application.

28 The applicant submits that the 13 heifers which calved before the deadline of 15 May 1998 must be accepted as eligible for the premium, since the fact that he made his application earlier, that is to say on 20 April 1998, should not prejudice his position.

29 It must therefore be ascertained whether the animals for which a premium application was made must possess all the characteristics required for their eligibility, in particular that of being no longer an in-calf heifer, but a suckler cow, when the premium application is made or whether it is sufficient that they satisfy those conditions on the date by which an application must be made. On that date, the 13 animals in question in the main proceedings had become suckler cows.

30 In that regard, firstly, it must be noted that the Court has held that the integrated administration and control system put in place by Regulation No 3887/92 requires that the information supplied by an applicant for aid be complete and accurate from the outset in order that he may make a proper application for the grant of compensatory payments and avoid the imposition of penalties. When submitting an application for aid, a farmer is required to declare the animals which satisfy the various conditions laid down by the Community rules on the grant of such aid (see, to that effect, Case C‑63/00 Schilling and Nehring [2002] ECR I‑4483, paragraphs 34 and 33).

31 Furthermore, Article 4d(5) of Regulation No 805/68 states that the premium is to be granted to any producer not supplying milk or milk products from his farm for 12 months from the day on which the application is lodged and who keeps for at least 6 consecutive months from the day on which the application is lodged a number of suckler cows at least equal to the number for which the premium was requested. Since the lodging of the premium application determines the start of the retention period and the number of suckler cows is ascertained at that time, it follows that it is also on that date that the animals must show all the characteristics necessary for eligibility.

32 Finally, in accordance with Article 41(2) of Regulation No 3886/92, Member States may provide that producers may lodge a fresh premium application for the new suckler cow, up to the limit of their individual ceiling, within the period laid down for the lodging of such applications. Irrespective of the question whether the Federal Republic of Germany has made use of that option, it is apparent from the documents before the Court that, in the present case, the applicant had the opportunity of lodging a premium application after the in-calf heifers had calved but before the deadline for lodging the application, so that such an application would have fulfilled the conditions required for the grant of premium rights.

33 Accordingly, the answer to Question 1(c) must be that point (ii) of the third indent of Article 4a of Regulation No 805/68 is to be interpreted as meaning that an in-calf heifer in respect of which a premium application has been made is not eligible for the premium if it calves before the deadline for lodging that application.

Question 2(a)

34 By this question, which relates to the interpretation of Article 33(2) and (4) of Regulation No 3886/92, the national court asks, essentially, whether a producer’s premium rights are to be regarded as used where he has indeed applied for premiums but his application has been rejected on the ground that the animals in question were not eligible. In the alternative, it asks whether a negative answer is to be maintained even where there is nothing to suggest that the application in question was improperly lodged and, in the affirmative, whether such a situation accords with the principle of proportionality.

35 The applicant made a suckler cow premium application for 64 animals, but was granted a premium in respect of only 47 of those animals, which represents less than 90% of the rights which he held. The question therefore arises whether, by making his application, he used his premium rights for all 64 animals or whether, as the defendant submits, there was merely an attempt to use those rights for 17 animals, such that the requirements laid down in Article 33(2) and (4) of Regulation No 3886/92 are met and the rights must, consequently, revert to the national reserve.

36 In that regard, the ninth recital in the preamble to Regulation No 3886/92 states that, ‘bearing in mind the regulating effect which the system of individual ceilings will have on the market, provision should be made for premium rights not used by their holder during a specific period to revert to the national reserve’. Furthermore, the fourth recital in the preamble to Commission Regulation (EC) No 1846/95 of 26 July 1995, amending Regulation No 3886/92 (OJ 1995 L 117, p. 28), which inserted paragraphs 1 to 3 of Article 33 of Regulation No 3886/92, refers to the intention ‘to ensure better mobilisation of the premium rights which are available but not used’. The aim of the system under which unused rights revert to the national reserve is therefore that all existing premium rights should be used efficiently in order to avoid a situation where some producers who do not use them immediately accumulate them and thus prevent other producers from benefiting from those rights. Thus, the premium rights held must reflect the true and actual situation of the holding.

37 At the time a premium application is made, it is impossible to know whether the situation described in the application actually corresponds to that of the holding. Moreover, in order for premium rights to be used, the holding’s situation must satisfy the requirements for the grant of the premiums sought, which requires an assessment by the competent national authorities. In circumstances such as those of the main proceedings, where the situation on the holding does not correspond to those conditions because the animals included in the premium application were not eligible for the premiums in question, the premium rights cannot be regarded as having been used.

38 The national court asks, inter alia, whether such an interpretation is in accordance with the principle of proportionality. That interpretation could, in its view, be tantamount in practice to an additional penalty for irregularities in the making of the application, a penalty so severe in the light of the longer-term consequences of reduction of the individual ceiling that it is contrary to the principle of proportionality.

39 That argument must, however, be rejected. It is apparent from the abovementioned recitals in the preambles to Regulations Nos 3886/92 and 1864/95 that the aim of the system under which premium rights revert to the national reserve is not to penalise abuse. Indeed, although that measure may entail unfavourable consequences for the producer concerned, it is not a penalty in the absence of an irregularity, within the meaning of Article 1 of Regulation No 2988/95, which the measure seeks to prevent and penalise. The only infringement of a provision of Community law resulting from an act or an omission on the part of an economic operator which has the effect of causing loss to the general budget of the Community and which is likely to constitute an irregularity within the meaning of Article 1(2) is the making of a premium application which contains false information. A producer who requests, in accordance with the requirements of Community law, premium rights for a number of suckler cows which is accurate but lower than his individual ceiling will find that his ceiling is reduced in the same way as the producer who has made a false application. Thus, the consequences are the same whether there was unlawful conduct or not. Since it appears that the measure in question does not seek to penalise an irregularity, it cannot be classified as a penalty within the meaning of Regulation No 2988/95.

40 Since they are not a penalty within the meaning of Regulation No 2988/95, the consequences provided for in Article 33(2) and (4) of Regulation No 3886/92 constitute merely a measure designed to adapt the individual ceiling to the actual situation of the holding.

41 Furthermore, since reduction of the individual ceiling as a result of reversion to the national reserve is not a penalty but a mere consequence of an objective situation, the intention behind the conduct which led to that reduction and the lawful or unlawful nature of that conduct are not relevant, which means that it is not necessary to consider whether a partly rejected premium application was made unlawfully or not.

42 Moreover, since it is not a penalty, the question whether the measure consisting in the reduction of the individual ceiling accords with the principle of proportionality arises in terms different from those suggested by the national court, since the question is not of the proportionality of the dual penalty but merely of the proportionality of the measure which follows from the reduction in the number of animals eligible.

43 The Court’s settled case-law on the principle of proportionality should first be recalled, as it applies in particular in the context of the common agricultural policy.

44 The Community legislature has a wide discretion in the domain, corresponding to the political responsibilities given to it by Articles 34 EC to 37 EC. Consequently, judicial review by the Community Court must be limited to verifying that the measure in question is not vitiated by any manifest error or misuse of powers and that the authority concerned has not manifestly exceeded the limits of its discretion (see, to that effect, Case C‑304/01 Spain v Commission [2004] ECR I‑7655, paragraph 23, and Case C‑310/04 Spain v Council [2006] ECR I‑7285, paragraph 96).

45 As to review of proportionality, it should be recalled that the principle of proportionality, which is one of the general principles of Community law, requires that acts adopted by Community institutions do not exceed the limits of what is appropriate and necessary in order to attain the legitimate objectives pursued by the legislation in question; where there is a choice between several appropriate measures, recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued (Case C‑189/01 Jippes and Others [2001] ECR I‑5689, paragraph 81 and the case-law cited, and Spain v Council, paragraph 97).

46 As regards judicial review of the implementation of that principle, bearing in mind the wide discretion enjoyed by the Community legislature where the common agricultural policy is concerned, the lawfulness of a measure adopted in that sphere can be affected only if the measure is manifestly inappropriate in terms of the objective which the competent institution is seeking to pursue (Case C‑344/04 IATA and ELFAA [2006] ECR I‑403, paragraph 80, and Spain v Council, paragraph 98).

47 What must be ascertained is therefore not whether the measure adopted by the legislature was the only measure possible or the best measure possible but whether it was manifestly inappropriate (Spain v Council, paragraph 99).

48 It is clear from paragraph 36 of the present judgment and from the recitals referred to therein that reversion to the national reserve of unused rights is intended to ensure that all premium rights are used efficiently. The measure constitutes the appropriate means of achieving the objective of better mobilisation of premium rights which are available but not used. The suggestion that that measure is manifestly inappropriate has not been made by any of the parties who have submitted observations to the Court.

49 Given that reversion to the national reserve is not a manifestly inappropriate means of achieving the objective pursued, the disputed measure is not contrary to the principle of proportionality.

50 The answer to Question 2(a) must therefore be that Article 33(2) and (4) of Regulation No 3886/92 is to be interpreted as meaning that a producer must be considered as not having made use of his premium rights during a marketing year if he has applied for a premium but his application has been rejected because the animals concerned were not eligible, and this is also the case if there is no indication of an improper application having been made. Such an interpretation is not contrary to the principle of proportionality.

Question 2(b)

51 By this question, the national court asks, in the alternative, whether circumstances such as those of the main proceedings can be accepted as constituting a duly justified exceptional case within the meaning of the last indent of Article 33(2) of Regulation No 3886/92.

52 Firstly, it should be noted that the existence of a duly justified exceptional case permits derogation from the rule that the unused part of premium rights is to revert to the national reserve and must therefore be interpreted strictly. Such strict interpretation is mandatory in view of the use, in that provision, of the term ‘exceptional’.

53 The last indent of Article 33(2) of Regulation No 3886/92 appears, in the light of the general scheme of that provision, to express a general principle of equity intended to cover situations other than those set out in the preceding indent, in which application of the general rule would give rise to be exceptional hardship but for which it is not possible to make specific provision in each case. Like the cases referred to in the preceding indents, these are situations in which it would be equitable for the producer to be permitted to make use of his premium rights at a later stage even though, for exceptional reasons, he is temporarily unable to use them.

54 Neither the provisions of that regulation nor the recitals in its preamble determine the types of criterion to be taken into account to justify such an exceptional case. The inescapable conclusion is therefore that the Community legislature did not wish to give a more precise description of that notion or to attach to it particular criteria. Account must therefore be taken of all the circumstances, both subjective and objective, in order to determine whether there are, among them, one or more factors which may show the existence of an exceptional case. That assessment can be carried out only on a case-by-case basis by the authorities empowered to apply the last indent of Article 33(2) of Regulation No 3886/92. It is for the national court, before which the dispute in the main proceedings has been brought and which alone is in a position to establish the relevant facts, to make that assessment in the context of the present action, taking account of the need to apply the provision restrictively.

55 In any event, in the absence of particular circumstances, an incorrect interpretation of the applicable legislation cannot constitute an exceptional case with the meaning of the last indent of Article 33(2) of Regulation No 3886/92.

56 Moreover, it should be noted that under the actual terms of that provision it is necessary, in order for it to be applied, that the producer should have duly provided evidence showing the way in which his situation is exceptional.

57 The answer to Question 2(b) must accordingly be that it is for the national court to decide whether, in the light of all the duly justified circumstances of the applicant’s situation, that situation constitutes an exceptional case in which the derogation provided for in the final indent of Article 33(2) of Regulation No 3886/92 falls to be applied, whilst taking account of the need to apply that provision restrictively.

Question 2(c)

58 Finally, the national court asks, also in the alternative, whether premium rights which have been withdrawn from a producer under Article 33(4) of Regulation No 3886/92 because he made use of more than 70% but less than 90% of his premium rights in the 1998 marketing year must be granted to that producer on a preferential basis on the expiry of the two-year exclusion period. According to the national court, the principle of proportionality could require preferential treatment to be given to former holders, since their situation was affected particularly badly by the increase in percentage of use from 70% to 90% in the context of the exceptional measures taken following the so-called ‘mad cow’ crisis.

59 The grant by the Member States of premium rights which form part of the national reserve is covered by Article 4f(2) of Regulation No 805/68, which lists the producers who may benefit therefrom. The use of the phrase ‘in particular’ in the wording of that provision shows that it is not an exhaustive list.

60 The Commission has rightly observed that the second indent of Article 4f(4) of Regulation No 805/68 empowered it to adopt measures relating to individual rights not used in 1997 and 1998 and returned to the national reserve, but that these measures were never adopted. Accordingly, the Member States retain full discretion with regard to the use of their national reserve. Consequently, they may provide for the preferential grant of premium rights to producers who have had to return their rights to that reserve on the ground that they had used at least 70% but less than 90% thereof during the 1998 marketing year.

61 Having regard to the foregoing, the answer to Question 2(c) must be that Article 33(4) of Regulation No 3886/92, read in conjunction with Article 4f(4) of Regulation No 805/68, is to be interpreted as meaning that Member States may, on expiry of the two-year exclusion period, grant to a producer, on a preferential basis, the premium rights which were withdrawn from him because he had made use of more than 70% but less than 90% of his premium rights in the 1998 marketing year.

Costs

62 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 (First Chamber) hereby rules:

1. Point (ii) of the third indent of Article 4a of Regulation (EEC) No 805/68 of the Council of 27 June 1968 on the common organisation of the market in beef and veal, as amended by Council Regulation (EC) No 2222/96 of 18 November 1996, must be interpreted as meaning that an in-calf heifer may be regarded as a suckler cow within the meaning of Section 1 of that regulation only if it replaces, after the premium application for the marketing year has been lodged, a suckler cow included in that application.

2. An in-calf heifer which, for a marketing year, replaced a suckler cow in respect of which a premium application was made and which was accepted as being eligible for that premium may be regarded as a suckler cow within the meaning of point (ii) of the third indent of Article 4a of Regulation No 805/68, as amended by Regulation No 2222/96, where it fulfils, in the following year, the requirements for replacing a suckler cow again.

3. Point (ii) of the third indent of Article 4a of Regulation No 805/68, as amended by Council Regulation (EC) No 2222/96, is to be interpreted as meaning that an in-calf heifer in respect of which a premium application has been made is not eligible for the premium if it calves before the deadline for lodging that application.

4. Article 33(2) and (4) of Commission Regulation (EEC) No 3886/92 of 23 December 1992 laying down detailed rules for the application of the premium schemes provided for in Regulation No 805/68 and repealing Regulations (EEC) No 1244/82 and (EEC) No 714/89, as amended by Commission Regulation (EC) No 2311/96 of 2 December 1996, is to be interpreted as meaning that a producer must be considered as not having made use of his premium rights during a marketing year if he has applied for a premium but his application has been rejected because the animals concerned were not eligible, and this is also the case if there is no indication of an improper application having been made. Such an interpretation is not contrary to the principle of proportionality.

5. It is for the national court to decide whether, in the light of all the duly justified circumstances of the situation of the applicant in the main proceedings, that situation constitutes an exceptional case in which the derogation provided for in the final indent of Article 33(2) of Regulation No 3886/92, as amended by Regulation No 2311/96, falls to be applied, whilst taking account of the need to apply that provision restrictively.

6. Article 33(4) of Regulation No 3886/92, as amended by Regulation No 2311/96, read in conjunction with Article 4f(4) of Regulation No 805/68, as amended by Regulation No 2222/96, is to be interpreted as meaning that Member States may, on expiry of the two-year exclusion period, grant to a producer, on a preferential basis, the premium rights which were withdrawn from him because he had made use of more than 70% but less than 90% of his premium rights in the 1998 marketing year.

[Signatures]