Opinion of Mr Advocate General Tesauro delivered on 6 March 1990. - The Queen v Intervention Board for Agricultural Produce, ex parte The Fish Producers and The Grimsby Fish Producers' Organization Ltd. - Reference for a preliminary ruling: Court of Appeal - United Kingdom. - Common agricultural policy - Financial compensation in respect of certain fishery products. - Case C-301/88.



European Court reports 1990 Page I-03803



Opinion of the Advocate-General

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Mr President,

Members of the Court,

1 . The Court of Appeal, London, has referred to the Court of Justice for a preliminary ruling five questions concerning the interpretation of certain provisions of Council Regulation ( EEC ) No 3796/81 of 29 December 1981 on the common organization of the market in fishery products ( 1 ) ( hereinafter referred to as "the basic regulation "), Council Regulation ( EEC ) No 2202/82 of 28 July 1982 laying down general rules for the granting of financial compensation in respect of certain fishery products, ( 2 ) and Commission Regulation ( EEC ) No 3137/82 of 19 November 1982 laying down detailed rules for the granting of financial compensation in respect of certain fishery products . ( 3 ).

2 . I do not intend to embark on a detailed description of the legislation in issue, a full account of which is given in the Report for the Hearing, to which I refer for further details .

Nevertheless, to place in their precise context the questions referred to the Court requires a summary account to be given of the general outline of the organization of the market in fishery products, and of the objectives pursued thereby .

3 . The central concern of the legislation before the Court is reflected in the finding that, in order to improve the profitability of production in the fishing industry, it is necessary for there to be fair competition in that market between products of good quality and uniform standard ( fourth recital in the preamble to the basic regulation ).

To that end, the basic regulation provides for common marketing standards to be laid down ( Title I ) and imposes on the Member States the obligation to inspect the relevant products for conformity with those standards, and to take appropriate measures to penalize infringements ( Article 4 ).

4 . Given the special features of the market in fishery products, it was considered that the formation of producers' organizations, whose members would be bound by certain rules in the matter of production and marketing, would contribute to the attainment of those objectives ( sixth recital in the preamble to the basic regulation ).

In order to facilitate the formation and operation of those organizations, the basic regulation allows Member States to make aid available, which is partly financed by the Community ( seventh recital and Title II ).

5 . The legislation in issue also provides for the determination of a withdrawal price below which the producers' organizations may intervene, by withdrawing from the market the products of their own members which have not reached the price indicated, and at the same time receive financial compensation ( imputed finally to the Community budget ) in respect of quantities withdrawn ( Articles 9, 12 and 13 of the basic regulation ).

As is apparent from the 15th recital in the preamble to the basic regulation, the provision of financial compensation is intended to encourage fishermen to join the producers' organizations .

6 . Finally, Article 13(3 ) of the basic regulation provides for financial compensation to be reduced in proportion to the volume of withdrawals, thereby encouraging fishermen to adjust their deliveries to market requirements ( 17th recital ).

7 . The summary account given above, although necessarily brief and selective, seems to me to bring out with sufficient clarity the essence and purpose of the Community scheme, that is to say the achievement of market stability, brought about principally by means of producers' organizations .

8 . I therefore now move on to summarize the facts underlying the dispute in the main proceedings .

At the end of 1985, the Intervention Board for Agricultural Produce ( hereinafter referred to as "IBAP ") decided to grant no financial compensation to two producers' organizations, the Fish Producers' Organization Ltd and the Grimsby Fish Producers' Organization Ltd, for most species withdrawn between September 1983 and December 1985 . That decision was based on a finding that the fish put on the market by those organizations during the period in question, except in the case of the fish withdrawn for which compensation was claimed, significantly failed to observe the marketing standards laid down by the Community legislation .

The High Court found in favour of the two producers' organizations but the IBAP appealed against that judgment .

Considering that the essential issue in the proceedings related to the extent to which the Community provisions on quality control and those on compensation were interlinked, the Court of Appeal, by judgment of 7 June 1988, stayed the proceedings and referred the questions to the Court which form the subject-matter of these proceedings .

9 . In its first question, the Court of Appeal asks whether the provisions of the EEC Treaty, the basic regulation, Council Regulation No 2202/82 and Commission Regulation No 3137/82 are to be interpreted as requiring a Member State to pay to a producers' organization financial compensation in respect of withdrawals of fish which have been graded and marketed in accordance with Council Regulation ( EEC ) No 103/76, ( 4 ) if that producers' organization has failed to a significant extent to comply with the Community marketing standards laid down by the latter regulation in respect of other fish of the withdrawn species put up for sale but not withdrawn during the same period .

10 . I would say straight away that, even on the level of strict logic, it seems at the very least strange for someone, on the one hand, to alter the market mechanisms by marketing a product which does not comply with the quality standards, thereby increasing supplies and depressing prices, and, on the other hand, to claim compensation for that portion of production complying with Community marketing standards which it has not been possible to sell at the withdrawal price .

Were such a manner of proceeding to be tolerated, fishermen would be more and more induced to put up for sale fish of poor quality and to withdraw fish complying with the quality standards . It would in fact be a specific application of the well-known "Gresham' s law", according to which "bad money drives out good money", inasmuch as the poor quality fish would tend to push out from the market the better quality fish .

11 . Coming now to the strictly legal aspects of the interpretation of the provisions at issue, I must straight away point out that the arguments put forward by the producers' organizations in support of a construction of the legislation in question which would allow the financial compensation claimed to be granted to them, appear to me not at all convincing .

The organizations in question are maintaining in effect that the payment of financial compensation for fish withdrawn from the market is subject only to the conditions expressly laid down in Article 13(1 ) of the basic regulation and reproduced in Article 3 of Council Regulation No 2202/82, and those conditions are said to have been complied with in this case .

They add that, were their right to compensation in such circumstances to be denied, that would constitute the unlawful addition of a supplementary condition for receipt of financial compensation, which is not provided for by Community legislation .

In this respect attention is drawn to the duty imposed by the basic regulation on the Member States to ensure compliance with the marketing standards and to provide for specific penalties for non-compliance with those standards ( Article 4 ).

It is argued that that provision, in conjunction with the obligation which Article 9 of Commission Regulation ( EEC ) No 2062/80 ( 5 ) lays upon Member States to withdraw recognition from producers' organizations which fail to observe Community standards of marketing, shows that the legislature has laid down specific penalties for such infringements, which is all the more reason for precluding the application of a penalty which is not specifically provided for, such as the withholding of financial compensation .

12 . Although such arguments are not at first sight entirely without foundation, they do not, in my view, do adequate justice to a systematic interpretation of the provisions relied on .

Whilst it is true that observance by the producers' organizations of the provisions relating to the marketing of products is not a specific condition, as laid down by Article 13 of the basic regulation, for receiving compensation, it is, however, the case that observance of those standards is a more general pre-condition which is essential for ensuring the proper functioning of the Community scheme as described above in the context of which the producers' organizations play a central role .

13 . A closer analysis of the provisions relating to the common organization of the market in fishery products enables the correctness of this proposition to be demonstrated .

In the first place, the marketing of products which do not comply with the quality standards alters the whole system of Community prices .

As provided for in Article 10(2 ) of the basic regulation, the guide price is in fact based on the average of prices recorded on representative wholesale markets or in representative ports during the last three fishing years .

However, an increase in supplies stemming from the placing on the market of poor quality products has a negative effect on market prices and thus on the guide price .

Not only that, but the withdrawal price itself which, under the terms of Article 12 of the basic regulation, is determined on the basis of the guide price, will eventually be affected by the same negative consequences and will be fixed at a lower level .

It is true, as the producers' organizations assert, that the Community legislation requires Member States themselves to ensure compliance with the marketing standards for the products in question, but it is also true that, as explained earlier, the producers' organizations bear equal responsibilities in the task of ensuring the observance of such standards, which is in fact their principal raison d' être .

14 . Secondly, the system of calculating and paying financial compensation presupposes that all the fish placed on the market and not withdrawn have been correctly graded .

Article 13(3 ) of the basic regulation in fact determines the amount of compensation by referring to the fish withdrawn as a percentage of the annual quantities of the product concerned which are put up for sale in accordance with Community marketing standards .

Nor does it seem to me to be possible to accept the argument, put forward by the producers' organizations, to the effect that, in order to ensure compliance with the operative part of the provision in question, it is sufficient to calculate financial compensation by reference to the total quantities of fish of a given species put up for sale, but reduced in such a way as to reflect the quantity of fish of that species put up for sale in breach of the Community marketing standards .

Leaving aside the problem relating to the burden of proof, I consider that the solution proposed, although it may appear attractive at first sight, is not such as to assure the proper functioning of the system and, therefore, does not guarantee that the amount of the compensation is that which would in fact have been payable if the Community system had been fully complied with .

Suffice it to observe in this connection that the placing of a greater quantity of fish on the market depresses the level of prices and consequently causes an increase in the volume of fish withdrawn .

In other words, the failure to comply with the marketing standards, thereby altering the balance of the market, makes it impossible to calculate correctly the amount of financial compensation to be paid to the producers' organizations .

15 . It should also be borne in mind that other provisions contained in the legislation in issue, such as for example Article 6 of Commission Regulation No 3137/82, which provides that producers' organizations are to keep a register showing, in addition to the quantities withdrawn from the market, the monthly quantities put up for sale during the fishing year, clearly proceed on the assumption that the quantities marketed are in compliance with the rules laying down the quality requirements for the products in question .

16 . As regards finally the existence of specific penalties for breach of the obligation to observe the marketing standards and, in particular, the provision for withdrawal of recognition from the association which is liable for that offence, it does not seem to me, in the light of the considerations set out above, that that can entail an obligation on the national authorities to grant financial compensation even where there has been a significant failure to comply with the standards in question .

It should, however, be observed that withdrawal of recognition represents an extreme penalty which testifies once again to the importance attached by the legislature to observance of those standards and to the role which producers' organizations are called upon to play in this context . Withdrawal of recognition is intended in practice to exclude a body which has proved to be without utility, if not harmful, since it has failed in the performance of those duties of supervision for which it was specifically set up .

17 . To that it may be added that, to allow financial compensation to be paid to a producers' organization which, having failed significantly to observe Community marketing standards, has conducted itself in a manner which is incompatible with the objectives pursued by the Community scheme would be to introduce a further element disruptive of the market in fishery products, inasmuch as it would penalize other organizations which have borne the costs necessary for ensuring compliance with the marketing standards on the part of their own members .

18 . The considerations set out in relation to the first question make it unnecessary for me to examine the second and third questions raised by the national court . ( 6 ) I turn therefore to a consideration of the fourth and fifth questions in which the Court is asked whether, and to what extent, the failure by a producers' organization properly to grade fish put up for sale, but not withdrawn, in breach of Community marketing standards can be said to be "an infringement of limited importance of the rules for financial compensation", within the meaning of Article 13 of Commission Regulation No 3137/82; and, if that article may be applied to a failure properly to grade fish put up for sale, whether the Member State, before refusing to pay any compensation, must : ( a ) first consider whether the infringement is of limited importance, and in so doing, ( b ) consider the quantity of fish of the relevant species put up for sale but not withdrawn which has not been properly graded .

19 . Under the provision to which the national court makes reference, where a producers' organization or one of its members has committed an infringement of limited importance of the rules for financial compensation, and that organization can prove to the satisfaction of the Member State concerned that the infringement was committed without intent to defraud or in the absence of gross negligence, the Member State is to withhold an amount equal to 10% of the Community withdrawal price applicable to the quantities in question which have been withdrawn and which did not receive a carry-over premium .

The literal wording of the provision and the wording of the penultimate recital in the preamble to the instrument in question, according to which in the case of an infraction of limited importance of the financial rules of compensation, taking into account the innovative nature of the said rules, the minimal financial advantage resulting from this infraction should not be sanctioned by the total suppression of the right to financial compensation but only by a standard reduction thereof, lead me to conclude, like the Commission, that a failure to comply with the marketing standards, because it entails consequences for financial compensation, is covered by the expression "an infringement ... of the rules for financial compensation", to which the provision refers .

20 . Having said that, I would add straightaway that the very formulation of that question puzzles me somewhat, as the Court of Appeal itself stated that the organizations in question had failed to a significant extent to comply with the Community marketing standards, and I find it hard to understand how an infringement may at the same time be significant and of limited importance .

In any event I consider that, in the case of a failure to comply with quality standards, an infringement of limited importance must be understood as a failure in respect of an extremely limited quantity of products, which is therefore not such as to constitute a disruptive factor for the market .

21 . As regards finally the determination of the importance of the infringement, it does not seem to me that it falls to the national authorities to carry out that task .

Article 13 of Commission Regulation No 3137/82 is in fact a derogation from the more general principle according to which an infringement of the rules on financial compensation entails the loss of the benefit in question .

Whenever the competent authorities have, accordingly, ascertained that a producers' organization has failed to apply the Community marketing standards, it is for the organization itself to raise an objection and to demonstrate the limited importance of the infringement committed .

22 . In the light of the considerations developed above, I accordingly propose that the Court should give the following replies to the questions raised by the Court of Appeal :

"( 1 ) The provisions of Council Regulation ( EEC ) No 3796/81, Council Regulation ( EEC ) No 2202/82 and Commission Regulation ( EEC ) No 3137/82 must be interpreted as meaning that they preclude a Member State from paying to a producers' organization financial compensation in respect of fish withdrawn at the Community withdrawal price, such fish having been properly graded and marketed in accordance with Council Regulation ( EEC ) No 103/76, where that producers' organization has failed to a significant extent to comply with the Community marketing standards laid down by that regulation in respect of other fish of the withdrawn species put up for sale but not withdrawn during the same period .

( 2 ) The failure by a producers' organization properly to grade fish put up for sale but not withdrawn in breach of Community marketing standards may be regarded as 'an infringement of limited importance of the rules for financial compensation' , within the meaning of Article 13 of Commission Regulation No 3137/82, only when that infringement relates to an extremely limited quantity of products which is not such as to constitute a disruptive factor for the market . The failure, to a significant extent, to comply with the Community marketing standards may in no event constitute a limited infringement within the meaning of the abovementioned provision .

( 3 ) The burden of proof that the infringement committed is 'of limited importance' , within the meaning of Article 13 of Commission Regulation No 3137/82, must be borne by the producers' organizations ."

(*) Original language : Italian .

( 1 ) OJ 1981 L 379, p . 1 .

( 2 ) OJ 1982 L 235, p . 1 .

( 3 ) OJ 1982 L 335, p . 1 .

( 4 ) OJ 1976 L 20, p . 29 .

( 5 ) OJ 1980 L 200, p . 82 .

( 6 ) The questions raised were the following :

"( 2 ) If the answer to Question 1 is that financial compensation must be paid to a producers' organization, is that compensation to be calculated :

( a ) by reference to the total quantity of fish of the relevant species put up for sale even if some of that quantity of fish of the relevant species was put up for sale in breach of Community marketing standards, or

( b ) by reference to the total quantity of fish of the relevant species put up for sale reduced pro tanto to reflect the quantity of fish of that species put up for sale in breach of Community marketing standards .

( 3 ) If the answer to Question 2 is that compensation is to be calculated by reference to the quantity of fish as reduced to reflect the quantity put up for sale in breach of Community marketing standards, is the burden upon the Member State to establish the extent of the producers' organization' s failure or upon the producers' organization to show the extent of its compliance?"