Opinion of Mr Advocate General Jacobs delivered on 6 July 1989. - Commission of the European Communities v Hellenic Republic. - Failure to fulfil an obligation - Agriculture - National intervention scheme for inferior-quality durum wheat. - Case C-281/87.



European Court reports 1989 Page 04015



Opinion of the Advocate-General

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My Lords,

1 . In these proceedings under Article 169 of the EEC Treaty, the Commission seeks a declaration that by instructing KYDEP ( an organization of agricultural cooperatives ) to purchase inferior-quality durum wheat of the 1982 harvest, without respecting the Community intervention criteria, Greece has failed to fulfil its obligations under Council Regulation ( EEC ) No 2727/75 on the common organization of the market in cereals ( Official Journal 1975, L 281, p . 1 ).

The legal and factual background

2 . Title I of Regulation No 2727/75 ( as amended ) provides for a single price system for cereals, including durum wheat . Under that system, the Council inter alia fixes annually a single intervention price for durum wheat for all Community intervention centres ( Article 3 ). Under Article 7(1 ), the intervention agencies designated by the Member States are obliged to buy in cereals which are offered to them and have been harvested in the Community, provided that the offers comply with conditions, in particular in respect of quality and quantity, to be determined in accordance with paragraph 5 . Article 7(5 ) provides for the adoption by the Commission in accordance with the management committee procedure of detailed rules concerning inter alia the minimum quality and quantity required of each cereal in order for it to be eligible for intervention and the procedures and conditions for taking over by intervention agencies .

3 . Commission Regulation ( EEC ) No 1569/77 fixing the procedures and conditions for the taking over of cereals by intervention agencies ( Official Journal 1977, L 174, p . 15 ) inter alia lays down the minimum quality requirements which cereals, including durum wheat, must meet in order to be accepted for intervention ( Article 2 and the annex ). In respect of certain definitions used in those quality criteria, Regulation No 1569/77 cross-refers to Annex I to Council Regulation ( EEC ) No 2731/75 fixing standard qualities for common wheat, rye, barley, maize and durum wheat ( Official Journal 1975, L 281, p . 22 ).

4 . Article 2 of the Greek Law No 1541/85 on cooperative agricultural organizations provides for three levels of cooperatives . At the first, lowest level are agricultural cooperatives composed of individual producers . At the second, intermediate level are regional associations of agricultural cooperatives . At the third and highest level are national organizations of associations of agricultural cooperatives established on a sectoral basis in respect of particular products or branches of production . Under Article 52 of the law, the activities of third-level agricultural cooperatives include that of functioning, with the authorization of the Minister of Agriculture, as an intervention agency for the sector or product in question .

5 . KYDEP is a third-level organization of agricultural cooperatives for the cereals, vegetables and animal feed sector . It appears from the file that the principal functions of KYDEP are the purchase of its members' produce and the collection, storage and marketing of that produce . It further appears from the file that since the Greek accession to the EEC in 1981, KYDEP has operated as an EEC intervention agency for the cereals and rice sector by virtue of an agency agreement with the department of the Greek Ministry of Agriculture responsible for EEC intervention measures . KYDEP' s designation as EEC intervention agency is effected by a decision of the Minister of Agriculture which is renewed annually .

6 . In the summer of 1982 the Greek Minister for Agriculture adopted two decrees concerning intervention in respect of cereals in the 1982/83 marketing year . Decree No 468082 of 23 June 1982 laid down the qualitative requirements and procedures in respect of intervention buying of wheat, rye and barley on behalf of the intervention agency . Decree No 469049 of 2 July 1982 was concerned with the organization of intervention in respect of the taking over of the autumn 1982 cereals harvest . The recitals to both decrees refer to the relevant Community legislation and to the designation of KYDEP as intervention agent for the cereals and rice sector . The conformity of those two decrees with the Community legislation is not in dispute in these proceedings .

7 . On 7 July 1982, shortly after the adoption of the abovementioned decrees, the Minister for Agriculture addressed to KYDEP Circular 41032 (" the circular "). The circular was headed : "Purpose : Taking over of inferior-quality durum wheat of the 1982 harvest" and its opening paragraph read as follows :

"After the measures announced for the collection of inferior-quality durum wheat of the 1982 harvest, and following the Decrees Nos 468082 of 23 June 1982 and 469049 of 2 July 1982, we request you to proceed as follows to the purchase of all consignments of the said inferior-quality durum wheat ."

The circular is then divided into two subsections, the first dealing with durum wheat for processing and the second with durum wheat destined exclusively for use as animal feed . The circular lists minimum quality criteria in respect of each category and in respect of durum wheat for processing also sets out the conditions under which the purchase price will be reduced or alternatively under which a bonus will be paid . The concluding paragraph of the circular states that the durum wheat of the two categories described must be taken over only from producers and from threshing enterprises and their staff and that merchants are excluded . The circular was copied for information to the regional directorates of the Ministry of Agriculture .

Admissibility

8 . In its defence to these proceedings, the Greek Government raises an issue of admissibility . It points out that the Commission founds its case on three documents, namely the circular, a report of KYDEP' s legal department dated 4 November 1985 and an internal note of KYDEP' s general administration dated 6 June 1985 . Greece argues that those documents relate to KYDEP' s functioning as a commercial undertaking and must be viewed as covered by commercial confidentiality . The documents had moreover been obtained by the Commission in an unlawful or illicit fashion . The Commission in its reply denies that the documents were improperly obtained .

9 . As regards the question of commercial secrecy, it is sufficient to state that while that might be a ground for the confidential treatment of documents disclosed to the Court, it cannot be treated as a ground for the exclusion of documents from evidence . In any event, the report of 4 November 1985 and the internal note of 6 June 1985 referred to are relied on by the Commission in its application merely in support of the assertion that in the cereals sector KYDEP acts not only on its own account but also carries out the instructions of the Greek Government, a fact which is hardly in dispute between the parties . As for the circular, on the assumption that it did amount to an instruction to intervene, then it clearly contemplated the exercise by KYDEP of a public function, i.e . intervention, and cannot be regarded as confidential; on the assumption that it was intended purely to provide information for Greek producers concerning the quality differences between wheat suitable for processing and that suitable for animal feed ( as the Greek Government suggests ), it is again difficult to see why such information should be regarded as confidential .

10 . While the improper obtaining of documents can in principle provide a basis for excluding such documents from evidence, it is for the Greek Government to establish that the Commission acted improperly . In fact, it has done nothing more than make assertions to that effect . In any event, as already stated, the two internal KYDEP documents are of little relevance to the proceedings, and the circular, whatever its purpose, cannot be viewed as of an internal or confidential nature .

Substance

11 . The application in this case essentially makes two allegations . The first, principal allegation is that the circular amounted to an instruction to KYDEP to carry out a national intervention measure . The second, subsidiary allegation is that the wheat purchased in accordance with the circular was subsequently sold into Community intervention, in breach of Community quality norms . This subsidiary allegation does not feature in the summary of the declaration sought by the Commission which is given at the beginning and end of the application . Moreover, at the hearing the Commission agent acknowledged that the Commission' s case rests essentially on the issue of the circular and that the alleged sale of the wheat into Community intervention must be seen purely as an aggravating factor . I will therefore deal only briefly with the question of the destination of the wheat after first considering the primary issue of the circular .

12 . The parties are essentially in dispute about the purpose of the circular . The Commission argues that the circular was a clear instruction to KYDEP to purchase the 1982 harvest in accordance with the conditions as to quality, etc . set out therein . Since those conditions were different from ( and, in practice, less strict than ) the Community intervention criteria, the circular amounted to an instruction to carry out a national intervention measure which was both in itself contrary to the common organization of the market in cereals and which was capable of interfering with the Community intervention measures adopted pursuant to that common organization . The Greek Government has however consistently argued that the circular served an informative and explanatory function . It explains that in the course of the 1981/82 marketing year three regions of the country suffered severe drought . As a result, the durum wheat harvest was small and of poor quality . Merchants bought up the harvest at low prices, telling producers that it was only fit for animal feed . Subsequently the producers learned that the wheat had been sold by the merchants for industrial processing . Under pressure from their members the producers' organizations sought clarification from the authorities as to the quality and other characteristics which would permit producers to distinguish between durum wheat suitable for processing and that suitable for animal feed, as well as indications concerning price formation . The circular contained precisely that information and was sent to KYDEP with a view to its further circulation to KYDEP' s member associations and eventually to individual producers .

13 . In my view, there can be no doubt that the circular did have the purpose ascribed to it by the Commission . This is already apparent from the title and the opening and concluding paragraphs of the circular, described above at paragraph 7 . The first paragraph contains a clear request to purchase a particular harvest and the final paragraph includes instructions as to eligible vendors . Both those paragraphs would be superfluous if the circular was indeed purely intended for the information of producers . The penultimate paragraph of the circular, which deals with the storage of the wheat, would also be unnecessary in such a case . The circular was moreover addressed to KYDEP, and although it was copied for information to the regional directorates for agriculture, it contained no request or instruction that any part of its contents should be transmitted to agricultural cooperatives at a lower level or to producers .

14 . In answer to a written question from the Court, the Commission has indicated the ways in which the quality criteria set out in the circular differ from the criteria applicable for Community intervention . It points out, for example, that subsection 1 of the circular, dealing with durum wheat for processing, lays down the following requirements : ( a ) a specific minimum weight of 74 kilogrammes per hectolitre; ( b ) a maximum of 60% of "mitadiné" grains; and ( c ) a maximum of 10% of grains of common wheat . In contrast, Regulation No 1569/77 at the relevant time required : ( a ) a specific minimum weight of 76 kilogrammes per hectolitre; ( b ) a maximum of 50% of "mitadiné" grains; and ( c ) a maximum of 4% of grains of common wheat . Subsection 2 of the circular, dealing with durum wheat destined exclusively for use in animal feed, lays down that no account need be taken of specific weight, of the content of "mitadiné" grains or of mottled grains of durum wheat, whereas Regulation No 1569/77 lays down specific maxima or minima in respect of those matters . The circular furthermore fixes the maximum content of broken grains of durum wheat at 8%, and the maximum content of common wheat at 20%, instead of the maxima of 5 and 4% respectively required by the regulation .

15 . In respect of certain matters the circular purports to incorporate by reference the requirements of Community legislation . For instance, in regard to durum wheat for use in animal feed, the circular, after setting out certain quality criteria which diverge from the Community rules, states that "the other characteristics are those applicable in the case of intervention on behalf of the EAGGF ". Those references to the Community requirements only serve to highlight the fact that the other criteria set out in the circular differ from the Community ones and that what is in issue is essentially a national intervention measure .

16 . According to the well-established case-law of the Court, the existence of a common organization of the market precludes national measures in the areas covered unless the Community legislation provides otherwise . The Court has moreover repeatedly ruled that once a common organization of the market has been established, Member States must refrain from taking any measures which might derogate from or harm that organization . ( See, for example, Case 111/76 Officier van Justitie v Van den Hazel (( 1977 )) ECR 901; Case 177/78 Pigs and Bacon Commission v MacCarren (( 1979 )) ECR 2161 ). There can be no doubt that Regulation No 2727/75, in conjunction with Regulation No 1569/77, lays down a complete system as regards intervention in the cereals market and that parallel national measures are therefore excluded . A national intervention measure which, as in this case, supplements Community intervention measures and sets lower intervention requirements, is moreover clearly capable of interfering with the operation of the common organization . In particular, by taking off the market inferior-quality durum wheat which might not otherwise find an outlet, such a measure is capable of exerting an upward influence on market prices for durum wheat in general and thus of interfering with the operation of Community intervention in respect of wheat which does meet Community intervention standards . In the longer term, by encouraging farmers to produce more durum wheat, such a measure could result in an increased burden on Community intervention . In addition, by in effect providing a subsidy for producers of inferior-quality durum wheat, a measure of this type is capable of distorting conditions of competition between producers .

17 . As the Commission points out in its reply, Article 2(4 ) of Regulation No 1569/77 provides for the possibility of derogation from some of the quality requirements for Community intervention "in the event of particularly unfavourable climatic conditions ". Following the drought in 1981/82, it was open to the Greek Government to invoke that provision rather than to adopt its own derogating measures .

18 . As regards the question of what happened to the wheat bought up by KYDEP in accordance with the circular, the Commission argues that this was subsequently sold into Community intervention in defiance of the Community intervention requirements considered above . In this regard, the Commission relies on the Court' s judgment of 21 February 1989 in Case 214/86 Greece v Commission and on extracts from a report presented by the general administration of KYDEP to the KYDEP general assembly on 12 December 1986 . The Greek Government however argues that the wheat was sold by KYDEP on the open market ( thus acknowledging, at least implicitly, that wheat was purchased in accordance with the circular ).

19 . At the hearing, in reply to a question, the agent for the Greek Government stated that the total durum wheat harvest in 1982 was some 800 000 tonnes . The judgment in Case 214/86, while not specifically concerned with the circular, established that some 700 000 tonnes of that harvest was sold into Community intervention and that of that quantity 90% did not meet the Community qualitative requirements ( paragraphs 12 to 20 of the judgment ). At the same time, the section on durum wheat in the report to the KYDEP general assembly of 12 December 1986 makes it plain that quantities of durum wheat of the 1982 harvest were purchased specifically by KYDEP and then sold into Community intervention . At page 30 of the French translation of that report, provided by the Commission, it is stated that :

"In 1982, 275 000 tonnes (( of durum wheat )) were collected and practically the total amount of the available quantities was delivered into Community intervention . The shortfall in respect of the purchase price was met by the government ."

20 . Taken together, these indications in my view give rise to a strong inference that the wheat purchased under the circular was sold, in whole or in part, into Community intervention . However, as mentioned above ( paragraph 11 ) this issue does not form part of the formal declaration sought against Greece, and it is therefore not necessary to reach a firm conclusion .

21 . Accordingly, I conclude that the Commission is entitled to a declaration to the effect that by instructing KYDEP to purchase quantities of inferior-quality durum wheat from the 1982 harvest without respecting the conditions for Community intervention, the Hellenic Republic has failed to fulfil its obligations under Council Regulation ( EEC ) No 2727/75 on the common organization of the market in cereals; and that the Hellenic Republic should be ordered to pay the costs .

(*) Original language : English .