OPINION OF MR ADVOCATE-GENERAL MAYRAS

DELIVERED ON 28 APRIL 1977 ( 1 )

Mr President,

Members of the Court,

The request for a preliminary ruling made by the Gerechtshof, Amsterdam stems from criminal proceedings instituted before the Economische Politierechter (Judge in Economic Matters) of the Arrondissements-rechtbank (District Court) Haarlem, against Mr Beert van den Hazel, director of van den Hazel-Oostzaan B.V., for infringing the provisions of Article 2 (1) of the Verordening Produktie Slachtpluimveesector 1974 (Regulation concerning the Production of Poultry for Slaughter).

This Netherlands regulation was issued on 1 May by the Produktschap voor Pluimvee en Eieren (the Production Board for Poultry and Eggs), an institution governed by public law controlling the market in poultry and eggs, and published on 6 May in order to counter the fall in the price of poultrymeat following the surplus recorded on the Comunity market in this product.

Pursuant to this regulation, which only adopted quantitative criteria applicable to production omitting any criteria relating to quality or marketing, it was prohibited during every month in the second half of 1974 to slaughter more poultry than the quantity corresponding to the live-weight fixed by the Produktschap at 80 % of the average tonnage live-weight of poultry declared monthly for a reference period running from 1 July 1972 to 1 January 1974.

Infringements of this regulation are punishable by fines and, failing payment thereof, imprisonment. The court of first instance found that during July 1974 Van den Hazel-Oostzaan B.V. had slaughtered poultry corresponding to a live-weight of 684 tons whilst pursuant to the provisions of the regulations it should not have slaughtered more than 396 tons 470 kg, in accordance with the allocation form issued to it by the joint-trade organization.

For this infringement Mr Beert van den Hazel was fined 1000 guilders.

Nevertheless, the Openbaar Ministerie (Department of Public Prosecutions inter alia) doubted whether this regulation was compatible with the provisions of Community law, that is to say Regulation No 123/67 of the Council on the common organization of the market in poultrymeat and Articles 30 to 37 of the Treaty of Rome; it accordingly intervened and at its request the Gerechtshof (Regional Appeal Court), Amsterdam stayed the proceedings and submitted to the Court of Justice the following preliminary question:

‘Must the rules contained in the Verordening Produktie Slachtpluimveesector 1974 of the Produktschap voor Pluimvee en Eieren be regarded as being incompatible with Regulation No 123/67/EEC of the Council of the European Economic Community of 13 June 1967 on the common organization of the market in poultrymeat or with Articles 30 to 37 of the EEC Treaty?’

It is self-evident that the question must be reworded since the Court cannot directly appraise the validity under Community law of a national regulation.

However the Court can and indeed must provide an interpretation of Community law to enable the Netherlands court itself to give a ruling on the compatibility of the national provision with the relevant provisions of Community law.

Before interpreting the Community provision in question it is clearly necessary to analyse it.

The organization of the market in the poultrymeat sector was established by Regulation No 123/67 of the Council, the general provisions of which are the same as for the common organization of the egg sector.

Those two systems, together with the system for pigmeat, furthermore constitute an extension of the common organization of the market in cereals, Regulation No 120/67.

All those regulations were published in the same Journal Officiel of 19 June 1967.

It should be explained that the relevant regulation, like the other related provisions, was amended on several occasions and finally consolidated by Regulation No 2777/75.

However it is important to refer to the original provision in order to establish that this organization of the market in poultrymeat does not incorporate any system of intervention in any form whatsoever; in other words producers cannot sell their products to intervention agencies at a guaranteed price; likewise there are no aids for storage.

In the proposals which the Commission submitted to the Council it justified not resorting to intervention by the following considerations:

— the nature of production;

— the structure of production and of marketing in view of the methods employed by traders and producers;

— finally, the importance of variable elements in the production costs.

This shows clearly that, with regard to trade with third countries, the organization of the market is restricted to establishing levies, the amount of which varies in terms of the rates on the world market and to the granting of export refunds, the amount of which is fixed in terms of the need to export having regard to the state of the Community market.

When there are surpluses refunds are increased, as was the case in 1974.

With regard to the intra-Community market, that is to say, trade between Member States, the comon organization is characterized by the following factors:

(1) By the prohibition, pursuant to Article 13 of the basic regulation, of any customs duty or charge having equivalent effect and by the elimination of any quantitative restriction or measure having equivalent effect. It should be noted at this point that this latter prohibition can produce effects on the level of production itself and not merely on the marketing of the relevant products.

(2) It should also be noted that whilst, pursuant to Article 14 of the regulation, the provisions of the Treaty on state aids apply both to the production of and trade in poultrymeat this is subject to an express condition that the attainment of a single market is not jeopardized by granting such state aids.

Nevertheless, in order to facilitate the adjustment of supply to market requirements the Community legislature, in Article 2 of the basic regulation, has encouraged action by trade and joint-trade organizations, with the exception of action relating to withdrawal from the market and has retained the power of Community institutions themselves to take (Article 2 (1)) ‘measures to promote better organization of production, processing and marketing’ of the relevant products.

Consequently, it may be inferred from this provision in Article 2 that, on the one hand, it is lawful and in accordance with the Community system for certain trade and joint-trade organizations to take action capable of facilitating the adjustment of supply to market requirements even if, as I think, such action also covers production.

On the other hand, the withdrawal of products from the market both by trade and joint-trade organizations and by Member States or institutions governed by public law controlled by such States remains in any event strictly prohibited.

In 1974 there was a serious crisis on the market in the Community. Whilst in the foregoing year the price of broiler chicks remained practically stable, in 1974 the supply increased considerably which, despite the increase in the cost of energy and of fodder, entailed an appreciable fall in market prices whilst the production costs remained almost unchanged so that producers of poultry for slaughter made a loss in 1974.

The Commission was put on the alert by the agricultural institutions and, in spite of certain difficulties relating to the price of cereals on the world market, raised the amount of export refunds for poultrymeat but the crisis in production did not appreciably alter.

The Commission was thus obliged to require the trade and joint-trade organizations to take action with a view to re-establishing a better balance of the market.

The Commission also obtained from the Council, with the backing of the European Agricultural Guidance and Guarantee Fund, funds for publicity campaigns to promote the consumption of poultrymeat and pigmeat (Regulation No 2930/74 of the Council).

Those measures do not seem to have been very effective: this is shown by the fact that within the framework of the rules on poultry-breeding already in force in the Netherlands the competent authorities considered it necessary to impose upon producers restrictive measures establishing a quota for production.

As early as 1967 decisions to this effect had been adopted in the form of a temporary prohibition on incubating eggs for hatching; on 1 May 1974 even more Draconian measures were taken and the Produktschap placed a strict limitation on the number of fowls which might be slaughtered during a fixed period.

Those measures in fact give rise to two questions.

The first concerns the scope of the Community's basic Regulation No 123/67; is it restricted exclusively to trade in the products in question or does it also cover their production?

I think I can say that the first question can be resolved by applying to it the solution adopted by the Court in its judgment in the Van Haaster Case (Case 190/73, [1974] ECR 1123), delivered on 30 October 1974, following my opinion. In this case the question was whether limitation of the production of hyacinth bulbs by cultivation licences issued pursuant to national regulations might be introduced and maintained in force despite a common organization of the market in live trees and other plants, bulbs, roots and the like, cut-flowers and ornamental foliage.

The Court of Justice ruled clearly that the Member State in question, the Netherlands, did not have power to maintain a national system having the purpose of quantitatively restricting the cultivation, that is to say the production, of one of the products falling within a common organization of the market.

Likewise a national system having the purpose of imposing a quantitative restriction on the slaughter and consequently on the marketing of poultry seems to me contrary to the common organization of the market established by Regulation No 123/67 of the Council.

In fact, such an organization of the market cannot be restricted to the single concept of marketing the relevant products; it inevitably includes provisions directly affecting production and further the regulation in question indeed empowers the Community institutions to take specific measures relating to the organization of production.

Whilst it is regrettable that those measures have never seen the light of day it is none the less true that only the Council can adopt them, in accordance with the procedure laid down in Article 43 (2) of the Treaty.

Secondly, the absence from the common organization in question of any intervention machinery does not mean that it is left to Member States to alleviate unfavourable results stemming, indeed, not from a lacuna in the Community system but from the consequence of a conscious and considered view of the Council which, on a proposal from the Commission, intended to leave to supply and demand and to the action of traders and producers the task of ensuring that the market is balanced, at least with regard to intra-Community trade.

In consequence a national system of production quotas or, in the present case, of the slaughter of poultry, does not conform to the objectives of the common organization of the market.

Thirdly, Article 13 (1) of Regulation No 123/67 expressly prohibits quantitative restrictions on the products which it covers, a single exception being made in the case of the special provisions of the Protocol on the Grand Duchy of Luxembourg. This instrument provides that that Member State ‘shall take all measures of a structural, technical or economic nature that will make possible the progressive integration of its agriculture in the common market’.

The word ‘agriculture’ is used in its widest sense and concerns both the production and marketing of agricultural products.

Consequently, I consider that it is incorrect to maintain that Regulation No 123/67 only refers to the trade in the products concerned and not to their production and, on the contrary, I take the view that this common organization precludes any national system which could impede, directly or indirectly, actually or potentially, trade within the Community.

Our second question consists in examining whether the authors of Regulation No 123/67 intended that measures relating specifically to production should not be adopted by the Community authorities.

I have already said that such measures consisted in encouraging national ‘action by trade and joint-trade organizations’ whilst nevertheless excluding all action relating to withdrawal of the products in question from the market.

The Commission's representative did not fail to assert at the bar that in certain Member States trade or joint-trade agreements were concluded by such organizations in order to adjust supply to demand, that is, in real terms to reduce production capacities. He added that the endeavours of the trade organizations were assisted in certain Member States by the granting of subsidies from public funds.

I for my part consider that even if it is supposed that such subsidies were in fact granted to traders and producers, it may be doubted whether, as national aids prohibited under Community law, they are in accordance with Articles 92 and 93 of the Treaty. However, the Court is not required to settle this problem in the present case.

In response to a number of questions asked by Members of the Court at the conclusion of the hearing the representative of the Commission submitted replies which, to say the least, appeared somewhat embarrassed and evasive.

Thus the question was raised whether the position of the Netherlands authorities was not paradoxical: whilst restricting the production of poultrymeat on their territory it appears that they did not seek to check imports from other Member States; the very evasive reply submitted to this question was that in a highly integrated sector a national system which was only in force for a period of six months scarcely allowed importers to profit from restrictions on national production by increasing their imports.

With regard to classifying the agreements concluded at trade or joint-trade level in terms of Article 85 of the Treaty the Commission replied (although its representative declared that the matter had not been fully considered) that such agreements in any event fell outside the general prohibition in Article 85, and specifically because of Regulation No 26/62 of the Council on agreements relating to agriculture.

It was moreover the Commission itself which urged the trade organizations to conclude such agreements; the Commission took the appropriate steps and those concerned then adopted this course albeit in the form of negotiations under private law.

Nevertheless, it is in any event clear that in the Netherlands the trade organizations did not by themselves act in accordance with joint measures providing for a certain limitation of production and indeed the Produktschap, an institution governed by public law, was obliged to impose a quota on the slaughter of poultry.

The Commission was not notified until after their adoption, indeed after their publication, that the measures drawn up by the Produktschap had been taken. The Commission has told the Court that it was faced with a fait accompli.

The question then arises why, if the Commission from the outset considered that the provisions of Regulation No 123/67 of the Council did not permit the introduction of a national system intended to limit production, it failed to exercise the power conferred upon it by Article 169 of the Treaty, and give notice to the Netherlands Government that this national system governed by public law must be annulled or proceedings would be instituted against it on grounds of its failure to fulfil its obligations as a Member State.

The reply given to this question, with the utmost discretion, was that the Commission had not considered it appropriate to resort to such pressure: it preferred not to intervene.

I do not find any of these explanations convincing.

Finally, after considering the relevant provisions of Regulation No 123/67 the real problem seems whether the Produktschap, acting within the framework of its powers as a public authority and as the administrative authority for the relevant trades, has imposed upon the latter binding measures infringement of which would have been punished under criminal law, or whether it merely confirmed proposals or suggestions submitted to it by Netherlands traders and producers.

Ultimately, it is necessary to choose between the two arguments advanced by the Commission:

— recourse to a unilateral, binding regulation stemming from the implementation of a procedure governed by public law; or

— a simple agreement governed by private law which the Produktschap merely formulated and extended to all the producers and processors concerned.

I favour the first of those two solutions:

— In the first place because on reading the Produktschap's Regulation of 1974 it seems to me that this instrument without any shadow of doubt constitutes a regulation which, far from being concerned with the agreement of poultry producers or operators of poultry slaughter-houses indeed appears unilaterally to impose binding obligations, infringement of which is punishable under criminal law;

— Secondly, because the Council is in general unwilling to grant trade or joint-trade organizations governmental powers with regard to the organization of agricultural markets. They may only come in an advisory capacity.

In any event a task involving the exercise of governmental powers is never entrusted to trade organizations other than by an express provision.

Thus Regulation No 1035/72 on the common organization of the market in fruit and vegetables contains provisions whose purpose is to facilitate the formation and operation of groups of producers with wide powers of organization and of intervention with regard to the production and marketing of those products (Articles 13 et seq.).

Nevertheless the Council expressly retained power in this sphere to establish a uniform intervention system in accordance with the procedure under Article 43 (2) of the Treaty.

More often than not, the mere recognition of producer groups calls for a Community provision such as, in the case of hops, Regulation No 1351/72 of the Commission, adopted moreover on the authority of the Council, or, in relation to fishery products, Regulation No 2142/70 of the Council.

Ultimately it must be recognized that the responsibility for setting up or running markets in agricultural products cannot be entrusted to trade or joint-trade groups without a prior decision and proper authorization from the Community.

It is indeed necessary to prevent national trade organizations acting individually as this could give rise to discrimination between producers and consumers in the Community.

The Netherlands Government maintains that there is by definition no quantitative restriction at the marketing stage since the estimated production so far exceeded the probable outlets that even a 10 % limitation on production would have left a certain amount of surplus supply. I must confess to certain doubts on this view. The market of the Federal Republic of Germany, the principal outlet for Netherlands poultry, still presented opportunities and had not perhaps reached saturation point. In any case it is impossible to permit national authorities, and still less trade organizations to decide these issues by themselves.

Whilst Netherlands production of poultrymeat is sizeable it is not alone in the Common Market and, even on the assumption that the limitation in question is not discriminatory at national level, the possibility of its being discriminatory at Community level cannot be ruled out since the restrictions affecting Netherlands slaughter-houses were more stringent than those affecting slaughter-houses in other countries. The second subparagraph of Article 40 (3) of the Treaty provides that the common organization of the market, whatever form it may take, ‘shall exclude any discrimination between producers or consumers within the Community’.

Finally the Dutch Government maintains that ‘having regard to the period of validity of the system in question, that is to say, the time necessary to re-establish the balance between supply and demand which was disturbed by economic trends, the system does not constitute a restriction on competition’. However time has nothing to do with the matter: the shortness of the period of its applicability merely serves, at the very most, to establish the drastic nature of this system, and its re-introduction in other circumstances cannot be ruled out. Consequently, the distinction drawn in the judgment of the Court in the Kramer case (Paragraphs 56/59, [1976] ECR 1313) between the effect and the objectives of a short-term measure and those of a long-term measure do not seem to me conclusive. In any event the Kramer case was concerned with the objective of ‘conserving’ natural resources and the objective in the present case is entirely different.

In conclusion I should like to quote Paragraph 23 of the judgment of the Court of 16 March 1977(Commission v. France):‘it is precisely because of the transfer of powers to a Community, and the fundamental purpose of that transfer that, following the end of the transitional period’ — and, I would add, after the establishment of a European organization — ‘problems such as that with which this case is concerned may be solved solely by Community measures drawn up in the interests of all producers and consumers within the Community’.

The failure of the Council to take the meaures provided for by Article 2 (1) of Regulation No 123/67 does not imply that authorities, or trade organizations acting together, may sporadically adopt measures which may distort trade between Member States or prove ineffective.

Nevertheless the Netherlands authorities must ensure that the measures to be taken to implement the judgment of the Court of Justice are in accordance with the requirements of legal certainty especially in order to avoid calling in question the implementing provisions adopted pursuant to the national system in question for the sole reason that the latter is incompatible with Community law.

In conclusion I propose that the Court should rule that Regulation No 123/67 on the common organization of the market in poultrymeat excludes the existence of national systems imposing quantitative restrictions on the production of poultrymeat.

( 1 ) Translated from the French.