Opinion of Mr Advocate General Van Gerven delivered on 13 December 1989. - The Queen v Dairy Produce Quota Tribunal for England and Wales, ex parte: Hall & Sons (Dairy Farmers) Ltd. - Reference for a preliminary ruling: High Court of justice, Queen's Bench Division - United Kingdom. - Agriculture - Application of the levy in the milk and milk products sector - Rules for calculating the reference quantities to be assigned toa milk producer. - Case C-174/88.



European Court reports 1990 Page I-02237



Opinion of the Advocate-General

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Mr President,

Members of the Court,

1 . In this reference for a preliminary ruling from the High Court, London, the Court of Justice is once again being called upon to consider the detailed rules governing the additional levy on milk deliveries which the Council introduced in 1984 in order to restore the balance in the dairy sector . That levy was introduced by Council Regulation ( EEC ) No 856/84 of 31 March 1984 ( 1 ) by the insertion of Article 5c in the basic regulation, No 804/68 . ( 2 ) Council Regulation ( EEC ) No 857/84 of 31 March 1984 ( 3 ) laid down general rules for the application of the levy .

The reference for a preliminary ruling concerns the system of levies which is applicable to producers who sell milk or milk products direct to the consumer and which the Court has not so far had occasion to consider . More particularly, the High Court wishes to ascertain whether

"the reference quantity to be assigned to a producer of milk and milk products ... is to be calculated by reference to all the direct sales made by the producer in the relevant calendar year or else by reference only to the direct sales made by him during that period out of the milk produced by himself ".

Background

2 . The system concerning the imposition of an additional levy draws a distinction between two categories of producers of milk or other dairy products . The first category - by far the largest - consists of producers who deliver their products to an undertaking or a group which purchases milk or other dairy products for treatment or processing ( deliveries to dairies ). The Member States have the possibility of applying the levy to that category of producers in accordance with either of two formulas ( see Article 5c(1 ) of Regulation ( EEC ) No 804/68 ). According to formula A, each milk producer is assigned a reference quantity which is calculated on the basis of the quantities of milk or milk equivalent delivered by him to a dairy during a reference period . If the deliveries exceed that reference quantity, the producer is liable to pay an additional levy on the excess . According to formula B, for which the United Kingdom has opted, each dairy is assigned a reference quantity which is calculated on the basis of the quantities of milk or milk equivalent delivered to it by affiliated producers during a reference period . If deliveries exceed that reference quantity, the dairy is liable to pay an additional levy on the excess, on the understanding that the levy must be passed on only to those producers who have increased their deliveries in proportion to their contribution to the excess over the dairy' s reference quantity .

3 . The second category - to which Hall & Sons ( Dairy Farmers ) Ltd ( hereinafter referred to as "Hall ") belongs - consists of producers who sell milk or other dairy products direct to the consumer . That category of producers may also be liable to pay an additional levy, where the quantities sold exceed the reference quantity assigned ( see Article 5c(2 ) of Regulation No 804/68 ). Article 6 of Regulation No 857/84 contains a number of provisions for the application of the system to that category of producers . Article 6(1 ) lays down the rules concerning the reference quantity to be assigned to each producer selling direct to the consumer :

"Each producer of milk and milk products referred to in Article 5c(2 ) of Regulation ( EEC ) No 804/68 shall be assigned a reference quantity corresponding to the direct sales made by the producer during the 1981 calendar year, increased by 1 %."

Article 6(2 ) imposes on the Member States an obligation, in assigning individual reference quantities, not to exceed the total quantity . ( 4 ) Article 6(3 ) lays down that a number of provisions of Regulation No 857/84 which are aimed at the first category of producers are to apply to the producers referred to in Article 6 under rules to be determined . The provisions in question are Articles 3 and 4 ( which permit the Member States to adjust the individual reference quantities in order to take account of the special situation of certain producers ) and Article 7 ( which deals with the transfer of reference quantities in the event of the sale, lease or transfer of an undertaking by inheritance ). Finally, Article 12 of Regulation No 857/84 contains a number of definitions . Article 12(h ) defines the "milk or milk equivalent sold directly to consumption" as

"milk or milk products processed into milk equivalent, sold without going through an undertaking treating or processing milk ".

4 . Article 6 of Regulation No 857/84 was amended by Council Regulation ( EEC ) No 590/85 of 26 February 1985 . ( 5 ) That regulation was adopted after the competent authorities in the United Kingdom had assigned the reference quantity contested by Hall . It seems to me, therefore, that the interpretation sought by the High Court relates to the original version of Article 6 of Regulation No 857/84 and not to that provision as amended by Regulation No 590/85 . In any event, the amendments made by the latter regulation do not, in my view, in any way affect the problem of interpretation now before the Court .

5 . In the aforesaid definition of the phrase "milk ... sold directly to consumption", the origin of the milk sold is not expressly defined . More particularly, that definition does not expressly state that the milk sold must be produced on the milk producer' s holding, that is to say by the cows on that holding . Nor do the other provisions governing the additional levy, and in particular Article 6 of Regulation No 857/84 governing the individual reference quantity to be assigned, expressly state that the reference quantity is assigned to producers on the basis of their own milk production . In its reference for a ruling on interpretation the High Court in fact seeks to ascertain whether, when a reference quantity is assigned to a producer who sells milk direct to the consumer, it is necessary to take account only of the milk produced on that producer' s own holding ( as the Dairy Produce Quota Tribunal for England and Wales stated in the main proceedings, a view shared by the United Kingdom and the Commission as is apparent from the observations submitted by them in these proceedings ), or whether all direct sales made by the producer, including sales of quantities of milk purchased by him from third parties, are to be taken into account ( as Hall contends ).

6 . I would refer to the Report for the Hearing for a more detailed account of the relevant legislation, the facts in the main proceedings, the course of the procedure and the observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court .

Assessment

7 . Hall' s contention is essentially that, since there is no express provision to the effect that the milk sold direct to the consumer must be produced on the producer' s holding, Article 6(1 ) of Regulation No 857/84 must be interpreted as meaning that each producer must be assigned a reference quantity corresponding to all his direct sales to the consumer, including sales of quantities of milk purchased by the producer from third parties .

For my part, I do not share the view that the wording of Article 6(1 ) is not open to any other interpretation . That provision expressly states that it must be a producer who sells direct to the consumer . It is apparent from the definition of "producer" in Article 12(c ) of Regulation No 857/84 read in conjunction with the definition of "holding" in Article 12(d ) that a producer is a farmer who operates ( milk ) production units . A literal interpretation of Article 6(1 ), as meaning that a reference quantity is assigned on the basis of direct sales made by the producer as a producer, is in my view just as, if not more cogent than an interpretation according to which the reference quantity is fixed on the basis of sales of goods in which the producer acted not in his capacity as producer but merely as an intermediary .

8 . Hall' s contention is, in my view, untenable if account is taken not only of the wording but also of the aim of and the relationship between the provisions concerning the additional levy .

The first subparagraph of Article 5c(1 ) of Regulation No 804/68 defines the aim of the additional levy as follows :

"The objective of the said levy shall be to curb the increase in milk production while at the same time permitting the structural developments and adjustments required, having regard to the diversity of the situations among individual Member States, regions and collection areas in the Community ."

For its part the Court has described the aim of that levy in its judgment of 17 May 1988 in Case 84/87 Erpelding ( 6 ) in the following terms :

"... the purpose of the additional levy system is to re-establish, by limiting milk production, the balance between supply and demand in the milk market, which is characterized by structural surpluses . This measure, therefore, is within the ambit of the objectives of rational development of milk production and, by contributing to a stabilization of the income of the agricultural community affected, that of ensuring a fair standard of living for the agricultural community" ( paragraph 26 ).

9 . In order to achieve that purpose, the Council has opted for a system whereby reference quantities ( usually referred to as production quotas ) are assigned to individual producers or to their dairies . If those quantities are exceeded, an additional levy is imposed . It follows from the nature of the method chosen and the objective which it pursues that the reference quantities are established on the basis of the data pertaining to the primary market in milk production and not on the basis of the data pertaining to the secondary market on which the milk produced is bought and sold . From that point of view - and by analogy with the system applicable to deliveries to dairies - the Council has set up a system governing direct sales to the consumer which is aimed only at primary milk production .

The corner-stone of that system is the obligation on the part of the Member States, in assigning individual reference quantities, not to exceed a total quantity per Member State . ( 7 ) That ceiling was established by increasing the reference quantity for 1981 by 1 %. ( 8 ) Although that total reference quantity is not further defined, it follows from the nature and purpose of the additional levy and also from the figures set out in the annex to Regulation No 857/84 that this ceiling was established taking into account the total quantity of milk which was produced by the producers concerned together on their holdings and which was sold by them direct to the consumer in 1981 . Within the limits of that national reference quantity each producer is assigned an individual reference quantity which in principle also takes into account the figures for 1981, increased by 1 %. ( 9 )

A further point is that the other provisions of Regulation No 857/84 are also conceived in terms of milk production . I would recall that the Member State can adjust the individual reference quantities by taking into account the special situation of certain producers . Producers who have submitted a milk production development plan thus qualify for a special or an additional reference quantity . ( 10 ) Another reference year may be taken into account for producers whose milk production during the reference year selected has been affected by exceptional events . ( 11 ) In order to complete the restucturing of milk production the Member States may adopt specific rules, including the grant of compensation to producers undertaking to discontinue milk production definitively . ( 12 )

10 . Therefore, in the light of the wording, the purpose and the structure of the system under consideration, I have come to the conclusion that Article 6(1 ) of Regulation No 857/84 must be interpreted as meaning that a reference quantity is to be assigned to the producer on the basis of the milk or milk products sold by him direct to the consumer during the reference year in question out of the milk produced by the cows on his own holding .

11 . The interpretation suggested by Hall is, in my view, incompatible with the purpose and structure of the system established . As Hall concedes in its submissions to the Court, the effect of the interpretation which it advocates is that a single quantity of milk produced could be taken into account twice over - or even more often in my view - for the purposes of the grant of an individual reference quantity . Such an interpretation would enable a producer to create additional reference quantities by means of buying and selling operations, which in itself is already contrary to the aim of the system which is to restrict production .

Furthermore, it is necessary to take account of the obligation on the part of the Member States, in assigning individual reference quantities, not to exceed the national reference quantity . As stated earlier, that national reference quantity was established taking into account the sum of the individual reference quantities for 1981, more particularly the total quantity of milk produced on their holdings and sold by producers direct to the consumer in 1981 . The counting of a quantity of milk twice over, as a result of the interpretation advocated by Hall, would lead to a situation in which producers who sell only their own milk production ( by far the majority within the category of producers who sell direct to the consumer ) would have to be assigned lower individual reference quantities in order for them to remain within the limits of the national reference quantity . Hall' s interpretation would therefore favour those who act as intermediaries and place a typical farming activity such as cattle breeding at a disadvantage . For that reason such an interpretation would also appear to be contrary to the social objectives of the common agricultural policy .

12 . Finally, I wish to point out that even the system applicable to producers who supply dairies does not expressly provide that the individual reference quantity is to be fixed on the basis of their own production . The interpretation advocated by Hall would therefore not only affect the sector of direct sales to the consumer, which is smaller in absolute terms, but also disrupt the system of restricting production in that sector as a whole .

Conclusion

13 . For the aforesaid reasons I suggest that the Court answer the question submitted for a preliminary ruling as follows :

"Article 6(1 ) of Council Regulation ( EEC ) No 857/84 of 31 March 1984 must be interpreted as meaning that a producer of milk and milk products, within the meaning of Article 5c(2 ) of Regulation ( EEC ) No 804/68, is to be assigned a reference quantity on the basis of the milk or milk products sold by him direct to the consumer during the reference year in question out of the milk produced by the cows on his own holding ."

(*) Original language : Dutch .

( 1 ) 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 ).

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

( 3 ) 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 ).

( 4 ) In the case of the United Kingdom that quantity amounts to 187 000 tonnes ( see the annex to Regulation No 857/84 ). Compare this with the total quantity of 15 698 000 tonnes of milk for delivery to dairies which was assigned to the United Kingdom for the first year ( see Article 5c(3 ) of Regulation No 804/68 ).

( 5 ) Council Regulation ( EEC ) No 590/85 of 26 February 1985 amending Regulation ( EEC ) No 857/84 laying down general rules for the application of the levy referred to in Article 5c of Regulation ( EEC ) No . 804/68 in the milk and milk product sector ( OJ 1985, L 68, p . 1 ).

( 6 ) Judgment of 17 May 1988 in Case 84/87 Erpelding (( 1988 )) ECR 2647 .

( 7 ) Article 6(2 ) of Regulation ( EEC ) No 857/84 and the annex thereto .

( 8 ) See the fifth recital in the preamble to Regulation ( EEC ) No 857/84 .

( 9 ) Article 6(1 ) and ( 2 ) of Regulation ( EEC ) No 857/84 .

( 10 ) Articles 3(1 ) and 4(1)(b ) of Regulation ( EEC ) No 857/84 .

( 11 ) Article 3(3 ) of Regulation ( EEC ) No 857/84 .

( 12 ) Article 4(1)(a ) of Regulation ( EEC ) No 857/84 .