6.

In a further question the Pretore asks the Court whether, as from the expiry of the period which was laid down by Article 22(2) of Regulation (EEC) No 804/68 and extended by Article 2 of Regulation (EEC) No 2622/69, that is to say, from 1 April 1970, it is necessary to take the view that, in view of Articles 5 and 37 of the EEC Treaty, there was a prohibition on restrictions on the importation and sale of milk. Of the questions raised in the present case this is the one which appears to me to require the greatest thought. I think that it necessitates an examination in several stages. (a) First of all the relationship between the provisions of Article 37 and the special provisions regarding agriculture set out in Title II of Part 2 of the Treaty must be analysed generally. In that respect the Court will remember that SAIL claims that where a monopoly extends to trade in agricultural products it is necessary in any case that the resulting discriminations should have been abolished at the latest by the end of the transitional period. It considers, in other words, that since Article 37(4) is a special provision governing monopolies in agricultural products, it must prevail over the other provisions on agriculture and to support this view it relies on the fact that that paragraph provides that in the application of the rules concerning monopolies there should be ‘equivalent safeguards for the employment and standards of living of the producers concerned’. The Commission, on the other hand, considers that the special rules on agriculture must in any case prevail over the general provisions of the Treaty and that the monopolies which form an integral part of national organizations of the market may be retained as they are until their replacement by common organizations of the market, that is to say, if necessary after the end of the transitional period. In view of this controversy I was, at first, impressed by the arguments of SAIL which point out that in speaking of equivalent safeguards for the employment and standard of living of agricultural producers Article 37(4) uses words identical to those used by Article 43(3) in respect of the substitution of a common organization of the market for national organizations. However, having compared all the arguments put forward and taken account of the general structure of the title concerning agriculture and the underlying purpose of the rules which it lays down, I think that I must agree with the argument of the Commission and acknowledge that the provisions on agriculture must in principle prevail over the other rules of the Treaty, including that which is laid down in Article 37. A point which appears to me to be significant in this respect is the quite general terms in which Article 38(2) provides that ‘the rules laid down for the establishment of the common market shall apply to agricultural products’ only ‘save as otherwise provided in Articles 39 to 46’. It is plain that the rules thus referred to also include those laid down by Article 37. Next it is important to note that it follows from the provisions of the title concerning agriculture, especially from Article 43(3) and from Article 45, that the national organizations of the market could continue to exist, with all that they involved as derogations from the rules of the Treaty, until they were replaced by the common organizations envisaged in Article 40. Since Articles 43 and 45 mention no date, that substitution did not necessarily have to occur before the end of the transitional period (that is a point to which I will return later). Furthermore, the reservations with regard to long-term agreements mentioned in Article 45 also warrant the conclusion that certain types of discrimination may continue beyond that date. It appears, consequently, that the physical and temporal scope of the derogating provisions laid down with regard to agriculture is very wide. Therefore it is hardly conceivable that precisely in cases where monopolies operate in agriculture and where therefore it may be assumed that the products and interests are particularly important, regard should be had to the period laid down in Article 37 for the elimination of discrimination. In fact, in order to avoid such an absurd result (to use the Commission's expression), the only reasonable interpretation which can be given to Article 37(4) is that this article applies only to cases in which the rule relating to monopolies is applicable, in cases, for example, where, since the monopolies which extend to agricultural products are not part of a national organization of the market, there can be no question of relying on the special provisions relating to agriculture. (b) As I am thus led to accept that the special provisions of the Title relating to agriculture may exclude the application of Article 37 of the Treaty, I should now consider whether the latter are applicable in respect of the milk centres which in Italy have an exclusive right of sale. In that respect, it is clear that the Court cannot consider whether the system of milk centres forms an integral part of a national organization of the market, because that would amount to carrying out the application of the law which the Court is prohibited from doing within the framework of Article 177. The matter to be specified is what is understood by organization of the market within the meaning of the Treaty so as to enable the national court to determine the nature of the national rules in question having regard to Articles 43 and 45 of the Treaty. For this purpose I can first of all refer to some guidance which the Court has given on the concept of organization of the market in Joined Cases 90 and 91/63 ([1964] ECR 625, 13 November 1964, EEC Commission v Luxembourg and Belgium—licence charges for certain milk products). It is interesting to point out next the considerations put forward by the Commission relating to the definition of this concept, according to which it is possible to speak of organization of the market when there are rules which govern the market in an agricultural product and provide safeguards for the employment and the standard of living of the producers concerned and ensure the sale of the products in question at stable and remunerative prices. Regarded in this light it must be accepted (I can allow myself at least this comment within the framework of my opinion) that it is possible that, as the Italian Government and the Commission have both emphasized, the rules governing the Italian milk centres constitute important factors in an organization of the market. In fact the exclusive right of sale granted to the centres and the requirement imposed upon them to purchase milk produced in the reserved area ensures a sales outlet. Furthermore, it may be assumed that agricultural producers who for their part are not required to sell to the centres exercise an influence on price formation and that the machinery in question therefore also ensures reasonable prices. This means that there is no reason why the special rules laid down in respect of agriculture cannot apply to the situation at issue before the court making the reference. (c) On the basis of this finding I shall now consider the rules which the national court mentioned in its third question. In this respect the Court will recall that the fourth subparagraph of Article 22(2) of Regulation No 804/68 had authorized the Italian Republic to maintain until 31 December 1969 measures regulating the supply of drinking milk to certain areas and that, by means of Regulation (EEC) No 2622/69 of 21 December 1969, 31 March 1970 was substituted for 31 December 1969. In the absence of other provisions of Italian legislation which may be taken into account, there seems to be no doubt that those Community regulations could have referred only to the system applicable to the milk centres or at least to certain aspects of the functioning of these centres and, in particular, to the exclusive right of sale which was granted to them for certain areas. However the point at which the controversy becomes keen is when the scope of that temporary authorization has to be determined; whether (as the Commission and SAIL consider) that authorization implies that upon the expiry of the period for which it was granted the provisions of Article 37 of the Treaty are to be applied, or whether (as the Italian Government believes) it is necessary to consider that, for certain reasons which I shall examine later, the expiration of that period does not involve the duty to apply the general rules of the Treaty. The examination of this problem calls for a somewhat closer investigation. As you know, on 27 June 1968 the Council adopted Regulation (EEC) No 804/68, which is intended to determine the definitive organization of the market in milk and milk products, in order to replace Regulation No 13/64 (OJ No 34, 1964, p. 549), the objective of which was the progressive establishment of a common organization of the market in milk. But that organization of the market was not complete; it revealed certain lacunae precisely as regards drinking milk, the product in question in the case before the national court. Because certain difficulties of definition and certain problems of the protection of health had arisen regarding this product, the Council decided by Article 22(2) of Regulation (EEC) No 804/68 that the Community system of supplementary measures for products falling within heading 04.01 of the Common Customs Tariff should be adopted before 1 April 1969 and applied not later than 1 January 1970. This paragraph provided also that the Council would adopt transitional provisions for intra-Community trade in milk of a specified quality and that these provisions would be applicable not later than 1 January 1969. Article 22 further provides that ‘Until these transitional provisions are applied Member States may retain for such products the quantitative restrictions and measures having equivalent effect operative at the time of the entry into force of this regulation’. However, the difficulties which emerged during the later stages of the deliberations prevented the time-table thus laid down from being adhered to. In fact rules governing drinking milk were first drawn up in Regulation (EEC) No 1411/71 of 29 June 1971 (OJ English Special Edition 1971 (IT), p. 412) and the application of those rules depends on the adoption of supplementary general rules. Article 10 of Regulation (EEC) No 1411/71 provides that the rules in question must begin to apply not later than 31 March 1972. The quantitative restrictions which Article 22(2) of Regulation (EEC) No 804/68 permits to be maintained must also be abolished by this date at the latest. In view of this situation one fact must first be established: in fact (as I have already indicated) no objection can be made that the organization of the market in milk was not completed until after the expiration of the transitional period. It would be useless to object that Article 40 of the Treaty provides that the common agricultural policy must be worked out during the transitional period and that it must be brought into force by the end of that period at the latest. It is impossible in fact, interpreting the wording of Article 40 strictly, to claim that the national organizations of the market should have been replaced immediately and at the latest by the end of the transitional period, since in this respect Article 43(2) makes provision for the determination of the necessary dates and details including the adaptation measures to be laid down with regard to the national organizations of the market. This argument gains further support from the fact that several provisions of the Title concerning agriculture (for example Articles 42, 44 and 45) make provision for derogations which may continue beyond the end of the transitional period. On this assumption, the decisive question is then whether it is necessary to take the view that the national organization of the market in milk (provided that it exists) may, with all its detailed rules by virtue of a unilateral voluntary measure of the State, continue to be applied as long as is necessary, that is to say, until the completion of the common organization of the market, and that, consequently, the application of the general provisions of the Treaty, including those laid down in Article 37, is excluded. That, as you know, is the argument of the Italian Government which accordingly claims to acknowledge the authorization granted by Regulation (EEC) No 804/68 and extended by Regulation (EEC) No 2622/69 as being of a declaratory nature only. To this SAIL replies that the existence of certain elements of a common organization of the market is a sufficient condition and that even if there exists only an incomplete organization as, in this case, that which has been established by Regulation (EEC) No 804/68, this makes it justifiable to require the adaptation of national provisions on monopolies. As for the Commission, it considers that from the time when a common organization of the market has been started, if only in the form of a partial organization, only the Community retains regulatory and discretionary powers with regard to the sector in question and national measures relating to the organization of the market are applicable only by virtue of an authorization by the Community. The Commission submits that, accordingly, the authorization laid down in Regulation (EEC) No 804/68 and the periods applicable thereto must be considered as of a constitutive nature. On this crucial point, I must say immediately that after considering all the arguments carefully I am obliged once more to endorse the opinion of the Commission. It seems in fact that one can only agree with the argument that the derogating provision which permits the provisional maintenance of national organizations of the market is to be interpreted strictly particularly because it is only contained by implication in Article 43 of the Treaty. Furthermore, in view of the requirements of legal certainty, it seems reasonable to accept that the Member States cannot unilaterally and without a measure of Community law continue to apply their national rules on the organization of the market where the essential components of a common organization of the market have already come into existence. In fact, far from its being necessary, with regard to the replacement of the national organizations of the market, for the common organization to be a faithful reproduction down to the smallest detail, all that is required is that ‘equivalent safeguards for the employment and standard of living of the producers concerned’ are created and that ‘conditions for trade within the Community similar to those existing in a national market’ are ensured. It is obvious that such criteria imply a discretion which can clearly be exercised only by the competent authorities of the Community. If, consequently, a Member State considers that a common organization of the market does not ensure safeguards equivalent to those of the national organizations it must raise this objection either when the common organization is created, or, if appropriate, by bringing the matter before the Court, if the Council has overruled its objection. But I cannot see how, on the sole basis of the imprecise wording of Article 43 of the Treaty, it could be permitted to maintain certain elements of its national organization of the market without the consent of the Community instititutions. Consequently the only conclusion which I can reach in the present context is that the authorization contained in Article 22 of Regulation (EEC) No 804/68 and the period laid down by that article and by Regulation (EEC) No 2622/69 are of a constitutive nature. However this is not sufficient to warrant the definitive conclusion that since the authorization had ceased at the expiration of those periods, the rules laid down by Article 37 in respect of monopolies could consequently apply. Such a deduction still in fact encounters several other problems. The first is a problem of interpretation raised in respect of those periods by the Italian Government. The latter considers that it is a mistake to refer solely to the expiry of the periods because account must be taken of the general structure of Article 22 of Regulation (EEC) No 804 which shows that in fact the authorization is subject to the fulfilment of a condition, that is to say, the adoption of supplementary measures which had to be taken with regard to drinking milk. It must be conceded that at first sight this argument may be impressive, both because Article 22(1) provides that the supplementary measures must be adopted before 1 April 1969 and because they must be applied not later than 1 January 1970, that is to say, exactly on the date prescribed for the expiry of the period laid down in the authorization. Ultimately, however, it appears that this reasoning is unsound and it is easy to demonstrate this by means of two arguments. First, it is necessary to note the method by which Article 22 has arranged the maintenance of quantitative restrictions: this is permitted until the implementation of the transitional system provided for in the second subparagraph of Article 22(2). In my opinion it may immediately be concluded from this that the Council would certainly have adopted similar wording for the authorization provided for in the fourth subparagraph if in fact, as the Italian Government claims, it had intended to link its authorization to the adoption of supplementary provisions. Secondly, (and this is perhaps even more significant), although at the date of the extension of the period of the validity of the authorization, that is to say, when Regulation (EEC) No 2622/69 of 21 December 1969 was adopted, it was clearly not expected that those supplementary provisions would be laid down in the near future, the authorization was nevertheless extended for only three months. Furthermore, the recitals in the preamble to Regulation (EEC) No 2622/69 refer only to the fact that the milk marketing year was in progress, without mention of the absence of the supplementary provisions which the Italian Government claims to be the decisive factor. Consequently it appears that, in fact, the interpretation attempted by that Government cannot lead to the conclusion that the periods in question have not really expired. The second problem arises from the fact that, in its turn, Regulation (EEC) No 1411/71 containing supplementary provisions for drinking milk authorized the Italian Republic ‘to maintain until 31 March 1973 the provisions applying on 31 March 1970 to those milk centres which were at 31 March 1970 supplying drinking milk to certain communes under those provisions’. This leads to the question whether this regulation had the effect of retroactively authorizing the retention of the system of milk centres and whether the view should be taken, which is that of the Italian Government, that Article 37 of the Treaty cannot be applied until after the expiry of the period thus laid down in Regulation (EEC) No 1411/71 or whether that conclusion can be avoided either by a suitable interpretation of Article 9 of the said Regulation (EEC) No 1411/71 or by taking the view that this provision is invalid (which ultimately is what SAIL maintains). In fact the Pretore di Bari has not asked you that question. But it may be accepted that he would have done so if he had known of Regulation (EEC) No 1411/71 before giving the judgment in which he made the reference to the Court. (As you know, the regulation in question was published in the Official Journal of the European Communities on the very day of this judgment). Therefore there is certainly nothing to prevent me from extending my examination to Regulation (EEC) No 1411/71 in order to reply correctly and fully to the questions referred by the Italian court. There is furthermore all the more reason to do so since this problem does not present any undue difficulties. Thus, first of all I do not consider that there is any reason to throw doubt upon the validity of Regulation (EEC) No 1411/71, at least with regard to the provisions thereof which apply to this case (because I do not have to concern myself here with the question whether the derogation authorized in favour of the Italian Republic may, on the grounds relied upon by the Council in support of its regulation, remain in force beyond the date of the application of the common organization of the market in drinking milk). On the other hand I consider that a reasonable interpretation shows that the Council did not intend to make the derogation which it authorized retroactive to 1 April 1970. If in fact such was its intention, it should have expressed it formally (but, in that case the validity of the regulation might be exposed to criticism, since in the meanwhile it might have become possible for those concerned to derive rights directly from the Treaty and to rely upon them in order to escape prosecution by the State). In fact, not only has the Council made no such formal provision but further, contrary to what the Italian Government believed, it is impossible to say that Article 9 of Regulation (EEC) No 1411/71 replaced Article 22 of Regulation (EEC) No 804/68, because the new regulation merely reaffirmed that the provisions applying to the Italian milk centres could be maintained. In this respect, in view of Article 10 of Regulation (EEC) No 1411/71, it is even possible to consider that Article 9 is also only applicable as from the adoption of the general rules provided for in Article 4. If, however, taking account in particular of the fact that Article 9 applies to measuresalready in force, that result is to be avoided, the only conclusion which may be accepted is that the authorization laid down in Article 9 took effect from the entry into force of the regulation, that is to say on the third day following that of its publication in the Official Journal of the European Communities. Nor, therefore, can an examination of Regulation (EEC) No 1411/71 provide grounds for the assertion that the expiry of the period laid down in Regulation (EEC) No 2622/69 is unimportant in evaluating the situation on which the Pretore di Bari is required to give judgment. In consequence, at the end of all these considerations, there is no escaping the conclusion that since there was no authorization as required by Community law for the maintenance of national measures concerning the organization of the market in April 1970, the provisions of Article 37 of the EEC Treaty, with which the exclusive right of sale granted by Italian law to the milk centres is incompatible, consequently applied.