Opinion of Mr Advocate General Van Gerven delivered on 16 December 1993. - Manfred Graff v Hauptzollamt Köln-Rheinau. - Reference for a preliminary ruling: Finanzgericht Düsseldorf - Germany. - Additional levy on milk - Calculation of the reference quantity - Taking account of a quantity produced in another Member State. - Case C-351/92.



European Court reports 1994 Page I-03361



Opinion of the Advocate-General

++++

Mr President,

Members of the Court,

1. The Finanzgericht (Finance Court) Duesseldorf has submitted to the Court by way of a reference for a preliminary ruling the following question:

"Is a failure to take account, when determining a reference quantity, of the milk production from a holding which is taken over and worked together with a holding situated in another Member State contrary to the principle of equal treatment and the second subparagraph of Article 40(3) of the EC Treaty, if it is only the fact that the holding taken over and worked with the other holding is situated in another Member State which precludes account being taken of it, as would otherwise be done under national law, resulting in a higher reference quantity?"

Before answering that question, I propose to give a brief outline of the dispute in the main proceedings and of the applicable legislation.

The dispute in the main proceedings

2. Mr Graff is a farmer from Simmerath (Germany) near the Belgian border. On his holding there he produced milk which he delivered to Milchversorgung Rheinland eG (hereinafter referred to as "Rheinland"), a milk cooperative. By lease of 1 November 1981, he sub-leased from his mother, who held the head lease from her parents, his grandparents' holding of 14 hectares in Raeren (Belgium). On the basis of that lease, Mr Graff worked the Belgian holding alongside his German holding.

The lessee who worked the Belgian holding before Mr Graff and his mother had produced in 1981 91 869 litres of milk which he delivered to the Walhorn Eupener Genossenschaftsmolkerei (hereinafter referred to as "the Belgian dairy") in Walhorn (Belgium). According to a certificate issued by the Belgian dairy, deliveries from the holding in 1982 still amounted to 8 236 litres and in 1983 they ceased altogether, with the result that the Belgian dairy did not allocate a reference quantity.

By letter of 25 June 1984 Rheinland informed Mr Graff that it was allocating to him a reference quantity of 368 900 kg for 1984/1985, based on milk deliveries of 405 305 kg in 1981 and of 398 796 kg in 1983.

Following prior audits of Rheinland, an investigation began at the end of 1988 which gave rise to the suspicion that the reference quantities for the producers delivering to Rheinland had been miscalculated. In the ensuing criminal proceedings, the Hauptzollamt Koeln-Rheinau examined all the reference quantities calculated by Rheinland. In so doing it became apparent that in 1981 Mr Graff had delivered only 335 305 kg to Rheinland (instead of 405 305 kg). Further, a letter was found from Mr Graff to Rheinland in which he asserted that in 1984 it was agreed between Rheinland and the Belgian dairy that, so far as the 1981 milk deliveries were concerned, account was to be taken of the fact that he was also working the holding in Raeren, and Mr Graff claimed to have been assured that that arrangement was lawful.

3. On the basis of those findings, the Hauptzollamt revoked by decision of 12 September 1990 the reference quantity allocated to Mr Graff, with retroactive effect, and reassessed it at 349 000 kg as at 2 April 1984, pursuant to the first subparagraph of Paragraph 10(1) of the Gesetz zur Durchfuehrung der Gemeinsamen Marktorganisation (Law on the Implementation of the Common Organization of the Market, hereinafter referred to as "the MOG") in conjunction with Paragraph 48(1) and (2) of the Verwaltungsverfahrensgesetz (Law on Administrative Procedure).

Mr Graff objected to that decision, producing the lease and a certificate from the Belgian dairy and pointing out that Rheinland had allocated the correct reference quantity to him for 1981, because the production of the previous lessee on the holding in Raeren had to be added to his own production.

On 19 June 1991 the Hauptzollamt rejected Mr Graff' s objection as unfounded. In its view, there was no legal basis for adding to the 1981 deliveries 70 000 kg on account of deliveries which had taken place in Belgium on another farm. Furthermore, under the Milch-Garantiemengen-Verordnung (Regulation on guaranteed quantities for milk, hereinafter referred to as "the MGVO"), (1) the quantity of milk delivered in Belgium could not in any way be taken into consideration because the MGVO could not be applied to holdings not subject to the MOG. Besides, even though the right to work the holding in Belgium had been assigned to Mr Graff in 1981, at the time of the entry into force of the additional levy scheme in 1984 milk deliveries had ceased so that earlier deliveries from that holding could no longer be taken into account.

Mr Graff brought an action against that decision before the Finanzgericht, in which he sought the annulment of the decision of 12 September 1990, as upheld on 19 June 1991.

The applicable legislation

4. The Court is familiar with the relevant Community legislation, namely Council Regulations (EEC) No 856/84 and No 857/84 of 31 March 1984 which were adopted at the time in order to curtail structural surpluses on the Community market in milk and milk products. (2) Nevertheless it is worth recalling briefly the relevant features of the system established by those regulations, as frequently amended.

The method applied by Regulation No 856/84 to restore the balance in the milk and milk products sector consists in the introduction for a period of five years of an additional levy on quantities of milk delivered beyond a guarantee threshold, initially fixed for the Community as a whole at 97.2 million tonnes. (3) To that end, Regulation No 856/84 inserted Article 5c in Regulation No 804/68, (4) which is the basic Community regulation for the milk and milk products sector. According to Article 5c(1), during five consecutive periods of 12 months, beginning on 1 April 1984, an additional levy is to be introduced payable by producers or purchasers of cow' s milk who exceed a reference quantity to be determined. That levy is fixed in accordance with formula A or formula B. Under formula A, which alone is relevant in these proceedings (see paragraph 6 below), the additional levy applies only to milk producers:

"Formula A

° A levy shall be payable by every milk producer on the quantities of milk and/or milk equivalent which he has delivered to a purchaser and which for the twelve months concerned exceed a reference quantity to be determined."

In accordance with Article 5c(3), the sum of those reference quantities may not exceed a guaranteed total quantity equal to the sum of the quantities of milk delivered to undertakings treating or processing milk or other milk products in the Member State concerned during the 1981 calendar year, plus 1%. Each Member State is allocated its own guaranteed total quantity: accordingly, Belgium was initially allocated a guaranteed total quantity of 3 106 000 tonnes, while Germany was allocated 23 248 000 tonnes.

5. The general rules for the application of that scheme are laid down in Regulation No 857/84. According to Article 2(1) of that regulation, the aforesaid reference quantity, where formula A is chosen, is

"equal to the quantity of milk or milk equivalent delivered by the producer during the 1981 calendar year (...), plus 1%".

Article 2(2), however, offers the Member States the possibility of using the 1983 calendar year for fixing the reference quantity, at least on condition that it is

"weighted by a percentage established so as not to exceed the guaranteed quantity defined in Article 5c of Regulation (EEC) No 804/68. This percentage may be varied on the basis of the level of deliveries of certain categories of persons liable for the levy, of the trend in deliveries in certain regions between 1981 and 1983 or of the trend in deliveries of certain categories of persons liable during this same period, under conditions to be determined according to procedures provided for in Article 30 of Regulation (EEC) No 804/68".

In addition, the Member States may, on the basis of Article 2(3) of that regulation, adapt the percentages referred to in paragraphs (1) and (2) to ensure the application of Articles 3 and 4 of the regulation. These are adaptations made in order to take account of certain special situations (Article 3) or to complete the restructuring of milk production (Article 4). However, Article 5 of the regulation expressly lays down that, for the purpose of applying Articles 3 and 4, additional reference quantities may be granted only within the limit of the guaranteed quantity referred to in Article 5c of Regulation No 804/68, which is allocated to the Member State in question.

6. So far as concerns national law, the following factors are to be noted. Both Belgium and Germany have opted for formula A. Accordingly, the two countries have availed themselves of the possibilities set out in Article 2(2) and (3) of Regulation No 857/84 and, in particular, have chosen 1983 as the reference year. In Germany, more particularly, the situation is as follows. Under indent (1) of the second subparagraph of Paragraph 4(2) of the MGVO, in calculating the reference quantity, a deduction must be made which increases in proportion to any increase in the producer' s milk production from 1981 to 1983. Under indent (2) of Paragraph 4(2) of the MGVO, however, if the producer has entirely taken over the right to work another holding after 1 January 1981, the milk production of that holding is to be added to that producer' s own production in 1981. As a result, the deduction on account of the increase in production under indent (1) of the second subparagraph of Paragraph 4(2) of the MGVO will normally be lower.

The Finanzgericht points out that if the holding taken over by Mr Graff in 1981 had been situated not in Belgium but in Germany, the production from that holding would also have had to be taken into account on the basis of the second subparagraph of Paragraph 4(2) of the MGVO. If that had been done, the reference quantity originally allocated to Mr Graff would have been correct.

Assessment of the question

7. The answer to the question submitted for a preliminary ruling raises two preliminary issues.

The first concerns the question whether, in refusing to take into account the milk production from Mr Graff' s Belgian holding, the German authorities relied on German law or directly on the Communities' additional levy scheme. The answer to that question is not very important: as the Council has rightly pointed out, even if the refusal is based on the German provisions adopted in implementation of the Community rules, the national authorities must take into account the principle of equal treatment contained in the second subparagraph of Article 40(3) of the EC Treaty and referred to in the question submitted. As the Court considered in its judgment in Klensch, that provision applies not only to action by the Community legislature but also

"covers all measures relating to the common organization of agricultural markets, irrespective of the authority which lays them down. Consequently, it is also binding on the Member States when they are implementing the said common organization of the markets." (5)

8. The next question, to which the Council draws attention in its written observations, is somewhat more awkward. The Council maintains that Regulation No 857/84 does indeed give the Member States the possibility of choosing between 1981, 1982 and 1983 as the reference year for fixing the individual quota, but that it does not permit them to take into account two reference years at the same time. The increase in the reference quantity which Mr Graff seeks in respect of his 1983 deliveries, on the basis of 1981 deliveries from his holding in Belgium, is, according to the Council, incompatible with the Community rule that only a single reference year may be taken into consideration. Regulation No 857/84 provides for only one exception to that rule, namely in Article 3(3). That provision permits producers whose milk production during the reference year selected has been affected by exceptional events (a serious natural disaster, destruction of the means of production, or an epizootic) to choose another calendar reference year within the 1981 to 1983 period.

9. Although the Community rules impose a single reference year, I cannot endorse the Council' s approach. The dispute in the main proceedings concerns the application, in accordance with the second subparagraph of Paragraph 4(2) of the MGVO, of a deduction in calculating the reference quantity to be fixed for 1983, in fulfilment of the condition laid down in Article 2(2) of Regulation No 857/84. According to that condition, a Member State which has chosen 1983 as the reference year must establish a percentage so as not to exceed the guaranteed quantity referred to in Article 5c (see paragraph 5 above). Article 2(2) expressly permits that percentage to be varied on the basis, inter alia, "of the trend in deliveries in certain regions between 1981 and 1983 or of the trend in deliveries of certain categories of persons liable during this same period". The procedure for deduction on account of the increase, laid down in the second subparagraph of Paragraph 4(2) of the MGVO, bears in my view directly on that point: it applies on the one hand to a situation involving an increase in milk production from 1981 to 1983 (indent 1), and on the other to a situation where the working of another holding has been taken over in its entirety during the same period (indent 2).

10. The question which the Court in substance has to contend with is whether Community law, in particular the principle of equal treatment and the second subparagraph of Article 40(3) of the EC Treaty, preclude a competent national authority from refusing to take account of milk production for 1981 from a holding situated in another Member State, even though it would do so in the case of milk production from a holding situated in that national authority' s own Member State. According to the aforesaid provision of Article 40, the common organization of agricultural markets must "be limited to pursuit of the objectives set out in Article 39 and ... exclude any discrimination between producers or consumers within the Community".

I propose to answer that question exclusively in relation to the second subparagraph of Article 40(3) of the EC Treaty. It is settled case-law that

"the prohibition of discrimination laid down in the aforesaid provision is merely a specific enunciation of the general principle of equality which is one of the fundamental principles of Community law". (6)

11. Is there any discrimination in this case, within the meaning of the aforesaid provision? According to the case-law of the Court

"discrimination within the meaning of Article 40 of the Treaty cannot occur if inequality in the treatment of undertakings corresponds to an inequality in the situations of such undertakings". (7)

On the other hand, discrimination consists essentially in

"the application of different rules to comparable situations or in the application of the same rule to differing situations". (8)

In my view there is indeed discrimination in this case. Taking over a holding on which milk is produced in another Member State strikes me as being wholly comparable to taking over a holding on which milk is produced in one' s own Member State. The mere fact that a holding within the Community is situated on the other side of a national border does not make the situation any different from the point of view of Community law.

12. Next, the question arises whether there is any possible justification for the discrimination found to exist. Once again it is necessary to take as a premiss the established case-law of the Court, according to which the second subparagraph of Article 40(3) of the EC Treaty

"does not prevent comparable situations from being treated differently if such a difference in treatment is objectively justified". (9)

I agree with the Council and the Commission that, in this case, a justification exists. Without wishing to express a view as to whether all their arguments are correct, I consider (see below) that an objective justification is inherent in the specific nature of the additional levy scheme established by the Community legislature.

13. As I recalled earlier (paragraph 4), the Community system of milk quotas takes as its premiss a guaranteed total quantity, calculated specifically for each Member State. According to the fifth recital in the preamble to Regulation No 856/84, the reason for the national apportionment of the overall Community quantity is that

"this quantity should be distributed among the Member States on the basis of deliveries on their territory during the 1981 calendar year, in order to ensure proper management and control of the system".

It is apparent from that recital, as well as from Article 5c(3) of Regulation No 804/68 (see also paragraph 4), that the focus of the additional levy scheme is essentially the territory of the various Member States since it is based for each State on the quantities of milk or other milk products delivered on the territory of the Member State concerned in 1981. This means that, in fixing the guaranteed total quantity for Belgium, account was taken of Mr Graff' s deliveries from his holding in Raeren whereas, in fixing the quantity for Germany, account was taken of deliveries from his holding in Simmerath. If the German authorities had been required to take into account his deliveries in Belgium, they would have had to grant him a reference quantity higher than is possible in proportionate terms within the total quantity for Germany guaranteed by Article 5c(3). That total quantity is allocated to each Member State by reference to 1981 deliveries in that State. Hence, the reckoning in a Member State, for the purpose of calculating that quantity, of deliveries which have already been taken into account in another Member State runs directly counter to the structure of the additional levy scheme based on national quotas.

The fact that, as the Finanzgericht points out, account taken in Germany of the quantities of milk produced by Mr Graff' s Belgian holding has not had any noticeable influence on the fixing of reference quantities allocated to others, cannot persuade me to take the oppositive view. It is not because the method of calculation adopted has no effect in a specific case that it may be considered permissible in general.

14. In the aforesaid recital in the preamble to Regulation No 856/84, the calculation based on national quotas is justified by the need to ensure proper management and control of the additional levy scheme. As the Council rightly points out, that scheme is based on close cooperation between the competent supervisory authorities of the Member States and the dairies which, where formula A is applied, are to collect the additional levy from the producers (Article 9(2) of Regulation No 857/84). It is evident, in my view, that if the dairies must also pay attention to deliveries made in a Member State other than their own, the management of the scheme and the prevention of fraud are rendered significantly more difficult, especially in Member States which have a long border with other Member States. In that connection, I am not swayed by the Finanzgericht' s observation that the German authorities can always call on the assistance of the Belgian authorities under Regulation (EEC) No 1468/81. (10) Such assistance cannot afford any guarantee of effective supervision, in view of the administrative efforts and the costs which it entails.

15. I conclude from the foregoing considerations that, under Community law in its present state, discrimination of the kind involved in the dispute in the main proceedings is justified by the structure, cast in the national mould, of the additional levy scheme ° a structure which the Court has never called in question in earlier judgments ° and by the need for the scheme to function properly. The fact that the proper functioning of the scheme is a mandatory requirement which may justify on objective grounds the differences of treatment which arise therefrom has already been acknowledged by the Court on several occasions. (11) It would of course be commendable, from the point of view of market integration, if the Community legislature had worked out satisfactory arrangements for a situation of the kind which has arisen in the main proceedings. The fact that it did not do so within the framework of Regulations No 856/84 and No 857/84 is unfortunate but it does not constitute a reason for opting in favour of the interpretation suggested by Mr Graff. (12)

Conclusion

16. I suggest that the Court answer the question submitted by the Finanzgericht as follows:

Having regard to the specific structure of the Community' s additional levy scheme, as set out in Regulation (EEC) No 856/84 and Regulation (EEC) No 857/84, it is not contrary to the second subparagraph of Article 40(3) of the EC Treaty not to take account of the milk production from a holding situated in another Member State and worked by the same milk producer, in determining the reference quantity to be allocated to that producer in a Member State.

(*) Original language: Dutch.

(1) - The MGVO was adopted on 25 May 1984 (BGBl 1984, I, p. 720). The latest version of the MGVO, according to the Commission, dates back to 16 July 1992 (BGBl 1992, I, p. 1324).

(2) - Council Regulation (EEC) No 856/84 of 31 March 1984 amending Regulation (EEC) No 804/68 on the common organization of the market in milk and milk products (OJ 1984 L 90, p. 10). Council Regulation (EEC) No 857/84 of 31 March 1984 adopting general rules for the application of the levy referred to in Article 5c of Regulation (EEC) No 804/68 in the milk and milk products sector (OJ 1984 L 90, p. 13).

(3) - See the fourth and fifth recitals in the preamble to Regulation No 856/84.

(4) - Council Regulation (EEC) No 804/68 of 27 June 1968 on the common organization of the market in milk and milk products (OJ, English Special Edition (1968), I, p. 176).

(5) - Judgment in Joined Cases 201/85 and 202/85 [1986] ECR 3477, at paragraph 8.

(6) - Judgment in Joined Cases 117/76 and 16/77 Ruckdeschel [1977] ECR 1753, at paragraph 7. Recently confirmed, inter alia, by the judgment in Joined Cases 279/84, 280/84, 285/84 and 286/84 Rau [1987] ECR 1069, at paragraph 28; in Case 84/87 Erpelding [1988] ECR 2647, at paragraph 29; in Joined Cases C-267/88 and C-285/88 Wuidart [1990] ECR I-435, at paragraph 13; in Case C-177/90 Kuehn [1992] ECR I-35, at paragraph 18; and in Case C-311/90 Hierl [1992] ECR I-2061, at paragraph 18.

(7) - Judgment in Case 230/78 Eridania [1979] ECR 2749, at paragraph 18.

(8) - Judgment in Case 283/83 Racke [1984] ECR 3791, at paragraph 7; judgment in Erpelding, cited above, at paragraph 29; judgment in Case C-85/90 Dowling [1992] ECR I-5303, at paragraph 21. On that point, in connection with Article 119 of the EEC Treaty, see paragraph 12 of my Opinion in Case C-132/92 Roberts.

(9) - Judgment in Rau, cited above, at paragraph 28; see, in addition, the judgment in Erpelding, cited above, at paragraph 29; the judgment in Wuidart, cited above, at paragraph 13. In paragraph 7 of its judgment in Ruckdeschel, the Court had already mentioned the possibility of justification on objective grounds. For the complete reference to those judgments, see footnote 6.

(10) - Council Regulation (EEC) No 1468/81 of 19 May 1981 on mutual assistance between the administrative authorities of the Member States and cooperation between the latter and the Commission to ensure the correct application of the law on customs or agricultural matters (OJ 1981 L 144, p. 1); amended by Council Regulation (EEC) No 945/87 of 30 March 1987 (OJ 1987 L 90, p. 3).

(11) - Judgment in Erpelding, cited in footnote 6, at paragraph 30; judgment in Case 113/88 Leukhardt [1989] ECR 1991, at paragraph 19; judgment in Kuehn, also cited in footnote 6, at paragraph 18; judgment in Dowling, cited in footnote 8, at paragraph 23.

(12) - See the judgment in Erpelding, cited above, at paragraph 28. See also paragraph 11 of my Opinion of 19 May 1993 in Case C-120/92 Schulz.