Proposal for a COUNCIL REGULATION (EEC) providing for an offer of compensation to certain producers of milk or milk products temporarily prevented from carrying on their trade
Date: 1993-04-21
Institutions: European Commission
Subjects: agricultural quota, cessation of farming, dairy production, farmer, indemnification, sale

COMMISSION  OF  THE  EUROPEAN  COMMUNITIES 

COM(93) 161 final 

Brussels, 21 April  1993 

Proposal  for a 

COUNCIL REGULATION  (EEC) 

providing  for an offer of compensation  to certain producers 

of milk or milk products temporarily  prevented  from 

carrying on their trade 

(presented by the  Commission) 

- 2 -

EXPLANATORY  MEMORANDUM 

I. INTRODUCTION 

When  the  additional  levy  scheme  in  the  milk  and  milk  products  sector 
was  introduced  in  1984  the  Community  legislation  did  not  provide  for 
the  allocation  of  a  reference  quantity  to  producers  who  had  not 
delivered  or sold milk during the reference year  adopted  by the Member 
State  as  a  result  of  a  prior  undertaking  not  to  market  milk  or  milk 
products or to convert dairy herds.  The reference year was 1983 in all 
cases. 

The  Court  of  Justice,  in  its  Mulder  and  Von  Deetzen  judgments  of 
28 April  1988  (Cases  C-120  and  C-170/86),  declared  the  legislation 
invalid  because  it  infringed  the  principle  of  the  protection  of  the 
legitimate expectations of the producers concerned  in not providing  for 
the allocation of reference quantities to them. 

As  a  result  of  the  judgments  the  Council  amended  Regulation  (EEC) 
No 857/84  adopting  general  rules  for the application  of the  additional 
levy  in  the  milk  and  milk  products  sector(*)  by  adopting  Regulation 
(EEC)  No 764/89(2),  which  added  an  "Article  3a"  to  the  former 
Regulation.  That  Article  in  turn  was  declared  partly  invalid  by  the 
Court  in  its  Spagl  and  Pastâtter  judgments  of  11 December  1990  (Cases 
C-189  and  C-217/89)  as  being  too  restrictive  with  regard  to  the 
producers  concerned.  To  remedy  that  situation,  the  Council  adopted 
Regulation  (EEC) No 1639/91(3) which  amended  Article  3a  of  Regulation 
(EEC)  No 857/84.  In  other  words,  after  some  delay,  two  series  of 
allocations  of  "special"  reference  quantities  were  made  to  the  "SLOM" 
producers. 

In  March  1989  and  February  1990  respectively  five  of  these  SLOM 
producers  again  applied  to  the  Court  under  Article  215  of  the  EEC 
Treaty to rule that the Community  should make good  the damage they had 
suffered  as  a  result  of  the  exclusion  they  had  undergone  under  the 
terms of the original Community  legislation.  In its judgment of  19 May 
1992  in Joined  Cases C-104/89 and C-37/90, Mulder  et al  and Heinemann, 
the  Court  ordered  the  Commission  and  the  Council  to  make  good  the 
damage  suffered  by  the  five  applicants  insofar  as  the  original 
Community  legislation did not provide for the allocation of a reference 
quantity  to  producers  who,  pursuant  to  an  undertaking  given  not  to 
deliver milk or to convert dairy herds, did not deliver any milk during 
the reference year adopted by the Member State concerned. 

It should be borne in mind that about 120 000 producers participated  in 
the  SLOM  scheme  introduced  by  Council  Regulation  (EEC)  No 1078/77(4) 
and  that  about  12 000  of  them  reverted  to  milk  production  after  the 
above Council  Regulations,  (EEC) Nos  764/89 and  1639/91, were  adopted. 
These twelve thousand  are thus potential beneficiaries of the  judgment 
made on 19 May  1992 on the award of damages. 

(1)  OJ No L 90, 1.4.1984, p. 13. 
(2)  OJ No L 84, 20.3.1989, p. 2. 
(3)  OJ No L 150, 15.6.1991, p. 35. 
(4)  OJ No L 131, 26.5.1977, p. 1. 

-  3 -

Of  the  twelve  thousand  producers,  about  three  hundred  have  already 
applied to the Court  for damages.  The Court has suspended proceedings, 
firstly pending  its own decision in principle on the first  applications 
and secondly, since its decision  in principle was a condemnation of the 
institutions, pending an overall  solution to the problem. 

As  well  as  the  three  hundred  producers,  about  three  thousand  have  to 
date submitted applications to either the Council or the Commission. 

After  the  Court's  judgment  and  given  the  number  of  applications 
pending, the institutions could not remain silent.  They declared their 
position  in  a Communication  published  in Official  Journal  No  C 198 of 
5 August  1992 (5) in  which  they  undertook  to  give  full  effect  to  the 
judgment  of  19  May  1992  and  granted  a  suspension  for  the  future  and 
erga  omnes  of  the  time bar  on entitlement  to  claim  damages  pending  an 
overall  solution.  The  solution  is  contained  in  the  present  draft 
Council Regulation. 

3.  The text comprises two sections: 

A  legal  section,  which  as  regards  content  and  form  regulates  the 
terms  for  awarding  damages.  Point  II  below  is  a  detailed 
explanation of its contents. 

A  financial  section  which,  albeit  very  brief  in  the  text,  is  the 
result  of  much  research  into  devising  a  calculation  method  then 
setting  the  figures  which  appear  in  the  Annex  to  the  Regulation. 
Point  III  below  sets  out  the  details.  Given  the  some  12 000 
potentially  eligible producers, the proposed  solution has had to be 
based on an overall approach.  While account is not therefore taken 
of the situation of every injured producer, the calculation  factors 
adopted  are  designed  to  work  in  favour  of  the  clear  majority  of 
those concerned. 

II. LEGAL ASPECTS 

1.  The principle 

The  solution  adopted  is to make  an offer via the Member  States  to  all 
the  producers  concerned  which  is  to  be  accepted  in  full  and  final 
settlement.  If  the  producer  refuses  to  settle,  he  will  have  no 
alternative  but  to  prove  before  the Court  of  Justice  that  his  loss  is 
greater  than  the  offer,  with  all  the  attendant  costs,  risks  and 
increased  delay  in  payment.  Given  that  the  compensation  has  been 
generously  calculated,  it  is hoped that the majority  of the  cases will 
be settled  in this way. 

2.  An examination, article by article 

The  definition  of  producers  concerned  given  in  Article  1  is  taken  in 
very precise wording  from the Court of Justice's judgment.  The fact of 
not  having  received  a  reference  quantity  is  the  consequence  of  not 
having  been  able  to  deliver  or  sell  milk  or  milk  products  during  the 
reference  year.  The text  thus  refers, as did  the  Court, to  the  event 
causing the damage. 

(5)  OJ No C 198, 5.8.1992, p. 

- 4 -

Article  2  establishes  a direct  link between  actual  resumption  of  milk 
production  and  the  existence  of  an  injury  which  consisted  in the  fact 
of  not  having  been  able  to  resume  milk  production  in  good  time.  The 
term  "definitive" qualifying the reference quantity allocated refers to 
the  "provisional"  nature  of  the  initial  allocation  of  the  quantity 
which does not become definitive  until after  a trial production period 
to which  a number of obligations  attach.  Non-compliance  with  them may 
mean  loss  of  the  quantity  or  a  reduction  of  the  definitive  quantity. 
This will have consequences  for the calculation of the quantity used as 
a basis for calculating the compensation. 

Although  the  first  series  of  SLOM  producers  received  a  definitive 
allocation  of  quantities  on  29 March  1991,  this  is  not  true  of  the 
second  series, whose  right  remains  provisional  until  1 July  1993.  It 
is therefore necessary to make different provisions taking  into account 
this time lag. 

Article 3 may appear superfluous  in that  it merely states the principle 
existing  in each of the national  legal  systems regarding  the voluntary 
transfer  of  claims  or the transfer  of  claims  as the  result, say, of  a 
death.  The  Article's  inclusion  is  justified  by  the  need  to  make  it 
clear  to  national  administrations  that  an  applicant  for  compensation 
may be someone other than the producer  and to specify  how to deal with 
such a situation. 

The  producers  may  not  participate  in a programme  of  cessation  of  milk 
production  nor sell or  lease their holding  in its entirety, even after 
the  definitive  allocation  of  quantities, on pain  of  the withdrawal  of 
their  quantities,  which  thus  revert  to  the  national  reserve.  As 
always, the aim of these rules  is to exclude  from the applicants  those 
who  merely  wish  to  speculate  based  on  the  allocation  of  quotas.  Such 
conduct  also  precludes  the  existence  of  an  injury  to  be  compensated. 
This  is what  is stated  in Articles  4 and  5.  These  requirements  expire 
on  31 March  1992  in respect of the producers benefiting  from the  first 
Regulation, No 764/89, in other words, the date has already passed, and 
on  1 July  1994  for  those  benefiting  from  the  second  Regulation, 
No 1639/91.  The  fact  that  that  date  has  yet  to  expire  is  the  reason 
why  an application, under these conditions, will be admissible only on 
condition that the prescribed obligations be respected within that time 
limit. 

Article  6 defines the quantity on the basis of which the amount of the 
compensation  can  be  fixed.  Some  of  the  different  elements  of  that 
quantity were imposed by the Court judgment. 

The  terminus  a  quo  is  the  quantity  used  to  calculate  the  premium 
granted under Regulation  (EEC) No 1078/77.  This is the last production 
reference  available.  That  quantity  is  increased  by  1%.  The  original 
quota rules gave Member States the choice of  1981, 1982 or  1983 as the 
national reference year.  If 1981 was chosen the quantity was  increased 
by 1%.  The Court therefore feels that, in application of the principle 
of equal treatment, the SLOM producers should benefit  from the 1%. 

-  5 -

In  addition,  when  the  milk  quotas  were  first  implemented  the  Member 
States had the obligation under  certain conditions  and the right under 
others  to  reduce  the  reference  quantities  by  a  percentage  to  be 
determined.  The  obligation  referred  to  the  necessity,  if  the  Member 
State chose  1983 as the reference year, for example, that the total of 
the  reference  quantities  should  not  exceed  the  overall  national 
guaranteed  quantity  set  in the  legislation  on the basis  of  1981 +  1%. 
Since  productivity  increased  everywhere  between  1981  and  1983  there 
could  only be equality between the quantity based  on 1981 + 1% and the 
sum  of  the  quantities  allocated  on  the  basis  of  individual 
deliveries/sales  in 1983 if the quantities were reduced by a percentage 
which  one  could  define  as  an  abatement  owing  to  an  increase  in 
productivity. The Court has ruled that that abatement cannot be applied 
to  the  SLOM  producers.  On  the  other  hand,  in  order  to  establish  a 
national reserve, Member  States could apply other  abatements  differing 
according to category  of producer or size of holding.  The Court  ruled 
that  such  abatements  must  be  applied  to  SLOM  producers'  special 
quantities. 

It  should  be  noted  that  the Court  judgment  which  is being  implemented 
here  in  respect  of  damages  is  more  generous  than  the  previous  Court 
decisions  on  the  amount  of  the  quantities  to  be  allocated  for 
production. 

Article  7  lists  the  various  cases  in  which  the  quantity  to  be 
compensated  is  likely  to  be  reduced.  The  figure  of  80%  refers  to  a 
provision  of  Article  3a  of  Regulation  (EEC) No 857/84  under  the  terms 
of  which,  once  production  of  80%  of  the  quantity  provisionally 
allocated  is  exceeded,  the  producer  definitively  receives  the  entire 
quantity  allocated  provisionally.  On the other hand,  if production  is 
lower  than  80%  he  receives  only  the  quantity  actually  produced.  It 
seems  normal  to  measure  the  reparable  damage  taking  into  account  the 
above factors. 

Article  8  defines  the  period  during  which  the  damage  was  suffered. 
Normally,  it can be postulated  that the damage commenced  at the end of 
the obligation  not to deliver milk or to convert dairy  herds and ended 
either on the date of entry into force of Regulation  (EEC) No 764/89 or 
on the date of entry  into force of Regulation  (EEC) No 1639/91. 

However,  the  above  is  valid  without  prejudice  to  the  rules  governing 
application  of the period during which the applicant must  act  to avoid 
being time barred  in his claim.  Article 43 of the Statute of the Court 
of  Justice  provides  for  a  time  limit  of  five  years  within  which  to 
institute  proceedings  from  the  occurrence  of  the  event  giving  rise 
thereto. It can be accepted that if such an event recurs day after day, 
as  is  the  case  here,  the  event  does  not  cease  until  the  activity 
concerned  is resumed. 

In  accordance  with  the  terms  of  the  Communication  of  the  Council  and 
the  Commission  published  on  5 August  1992  in the  Official  Journal, it 
has been acknowledged that the five-year time limit was interrupted  for 
the future on the date of any application addressed to the  institutions 
or  on  5 August  1992  at  the  latest.  The  aim  of  this  was  to  stem  the 
flow  of  applications  which  had  by  then  reached  about  2 000  and  to 
provide  reassurance  to  the  producers.  As  a  result, the  time  limit  is 
currently  interrupted  and  will  not  recommence  until  the  expiry  of  the 
time  limit  for  submission of applications  for damages  as stipulated  in 
the  present  proposal  and  for  producers  who  have  not  made  an  approach 
prior to the expiry of the time limit. 

- 6 

Article  9 provides  for the  case where  production  was  resumed  prior  to 
the allocation of a special provisional reference quantity.  The period 
in  question  here  is that  in which  the  damage  is  claimed  to  have  been 
suffered.  If, however, production did in fact take place the damage is 
reduced accordingly or completely  annulled. 

Articles  10 and Article  11 set out the procedure to be  followed  by the 
Member  States. Articles  12  and  13  lay  down the  provisions  relating  to 
calculation  of the total amount  of compensation.  These  are set out  in 
detail in Section III of this Explanatory Memorandum. 

Article  14 represents the conclusion  of the entire procedure  described 
above.  A  figure  will  be  proposed  to  the  producer  on  behalf  of  the 
Commission.  The  former  will  then  have  two  months  to  accept  it. 
Acceptance  involves  signature  of  a  receipt  in  full  and  complete 
settlement  and  relinquishment  in  the  future  of  any  claim  whatever  in 
respect  of  the  damage.  Non-acceptance  of  the  offer  within  the  time 
limit,  either  explicitly  or  tacitly  by  silence  on  the  part  of  the 
producer,  will  then  involve  the  producer  in  putting  his  claim  for 
actual  damages  before  the  Court,  it  being  specified  that  the 
institutions  will  not  in  the  future  be  bound  by  the  offer  which  was 
made and refused  in any future legal proceedings. 

Article 15 comprises two sections dealing with the allocation of powers 
to  the  Commission.  Firstly,  the  Commission  must  be  able  to  adopt 
detailed rules for applying the Regulation adopted by the Council; this 
is  the  traditional  formula.  The  reference  to  the  fees  of  appointed 
agents  is  made  for  two  reasons:  the  Community  has  every  interest  in 
lawyers'  not  dragging  producers  into  actions  before  the  Court  of 
Justice, which  is unnecessary  since the  institutions'  communication  in 
the  Official  Journal  of  5 August  1992.  In  addition,  the  same  lawyer 
may  represent  several  hundred producers  so the reimbursement  should  be 
made  a  flat-rate  sum.  The  interested  parties  are  therefore  duly 
apprised,  each  in regard  to  his own  case, about  the way  in which  this 
question will be settled. 

The  second  part  of  Article  15  is  a  clause  relating  to  force  majeure 
which  would  apply  to  highly  marginal  cases  not  settled  by  the  present 
Regulation.  The  Commission  feels  that  it  must  be  able  to  deal  with 
dossiers  worthy  of  interest  but  falling  outside  the  strict  framework 
established  by  the  Council,  for  reasons  both  of  equity  and  of 
simplicity. 

Article  16  states  that  the  payment  of  compensation  is  an  intervention 
measure,  as  is  clear  from  the  legal  basis  chosen,  i.e.  Article  43  of 
the  EC  Treaty.  For  budgetary  reasons,  all  the  expenditure  should  be 
committed  during  the  1993 budget  year  even  if, because  of  a  carrying-
forward  of appropriations, the payment  itself  does not occur until the 
1994 budget year. 

-  7 -

III. FINANCIAL ASPECTS 

1.  Calculation  of  the  compensation  offer  should  be based  on  paragraph  26 
of  the  judgment  of  19 May  1992.  This  stipulates  that  the  difference 
between the following two figures is to be calculated: 

- 

one: the  income  which  the  non-marketer  would  have  obtained  from 
milk  deliveries  had  he  not  been  unlawfully  excluded  from  milk 
production  for a specific period; 

two: the income which the non-marketer actually obtained during the 
period of his exclusion or - if higher - the  income which he could 
have obtained given equivalent efforts. 

Determining  these  figures  is  a  very  difficult  process.  Even  income 
from milk deliveries  cannot be determined directly  from the milk price 
paid out by the relevant dairy to its associated producers.  Production 
costs  vary  from  one  holding  to  the  next;  for  instance,  they  vary 
according  to  the  size  of  the  holding,  the  production  method  and  the 
skill  of  the  farmer.  Using  these  criteria  alone,  incomes  fluctuating 
between  ECU 6  and  14  per  100  kg  milk  are  found  for  the  year  1988/89 
within relatively  small regions. 

Secondly, the milk  prices  actually  paid  out  are  anything  but  uniform. 
Their  main  determinant  is  the  production  capacity  of  the  dairy;  the 
market  support  measures  for butter  and  skimmed-milk powder  implemented 
by  the Community  have only  a  limited  bearing on the price paid  to  the 
milk  producer.  This  price  may  vary  by  up  to  10%  even  between 
neighbouring dairies. 

The situation of individual non-marketers varies not merely  in terms of 
their  hypothetically  obtainable  income,  but  also  in  terms  of 
opportunities  to  obtain  income  from  other  sources.  In  this  case  the 
main  factor  is  the  holding's  structure  and  position,  which  are  the 
decisive  factors  in  its  opportunities  for  making  alternative  use  of 
available  agricultural  resources.  In  some  cases  pasture  was  turned 
into  arable  land,  in  others  the  alternative  use  was  restricted  to 
keeping  suckler  cows,  sheep or  fattening  bulls.  Geographical  location 
is also  important  for the  availability  of  other  sources  of  income, in 
particular  the  existence  of  industrial  job  opportunities  in  the 
vicinity.  The  possibility  of  direct  marketing  of  special  crops  in 
nearby centres of consumption should also be considered.  Ultimately, a 
non-marketer's  opportunities  of  obtaining  non-agricultural  income will 
be  greatly  affected  by  his  personal  circumstances,  particularly  his 
professional qualifications or the existence of retraining facilities. 

All  in all, the factors to be taken  into account  in determining  income 
from  potential  milk  deliveries  and  from  other  sources  of  income  are 
extremely  varied.  Calculating  them  in  each  individual  case  would 
require  so  much  time,  labour  and  expense  that  it  would  prejudice  the 
interests  of  the  farmer  in  obtaining  compensation  as  quickly  as 
possible. 

Because  of  these  problems  and  the  number  of  people  eligible  for 
compensation  as  a  result  of  the  19  May  ruling  (about  12 000)  only  a 
broad  approach  will  be  possible  under  the  present  compensation 
arrangements, i.e. flat-rate calculations.  That will of necessity mean 
that  not  all  the  particular  features  of  each  individual  case  can  be 
taken  into account.  To avoid wherever possible any disadvantages which 
might  result  from that approach, solutions which were  in the  interests 
of  the  parties  concerned  were  selected  in  the  calculation  of  the 
various factors. 

4.  The  planned  compensation  amounts  are  based  on  the  following 

cons iderat ions: 

(a) Paragraph  28  of  the  19  May  judgment  states  that  the  compensation 
calculation  must  be  based  on  the  reference  quantity  to  which  the 
non-marketer was entitled.  Thus, the compensation  is not based  on 
the  number  and  yield  of  the  cows  present  at  the  time  the 
undertaking  not  to  market  was  entered  into,  but  merely  on  the 
quantity  of milk which, according to Community  rules, the producer 
excluded  from  production  could  have  marketed  during  the 
compensation  period.  Consequently  all  calculations  are  based  on 
compensation per 100 kg non-marketed milk. 

(b) The basis for calculating the potential income from milk deliveries 
was  the  gross  margin  from  dairy  farming,  a  method  which  on  the 
income side covers sales of milk, calves born to dairy cows and the 
residual value of the dairy cow, and on the expenditure side covers 
deduction  of  variable  costs (**).  Since  variable  costs  cease  to 
exist  as  soon  as  production  is  stopped,  they  were  disregarded  in 
the  calculation  of  loss  of  income.  In  contrast,  fixed  costs  for 
land,  labour  and  capital  were  not  deducted.  In  economic  terms, 
therefore,  the  gross  margin  on  which  the  calculation  was  based 
represents  the  margin  which  a  milk  producer  needs  to  cover  his 
fixed costs  (land, labour, capital). 

The  figures  in  Table  1  give  the  gross  margins  per  100  kg  milk 
produced  in budget  ecus(7). 

(6)  For  details  of  the  method  see  Commission  Decision  85/377/EEC, 

OJ No L 220, 17.8.1985. 

(7)  The conversion rates used  for the years in question can be found  in the 

annexed table. 

Table  1 : Gross margin in ECU  (budget)  per  100  kg of milk 

-  9  -

Member State 
Belgique/Belgiê 
Danmark 
Deutschiand 
France 
Ireland 
Luxembourg 
Nederiand 
United Kingdom 

Source: FADN 

1990/91 
23.7 
23.1 
21.7 
21.4 
23.7 
28.7 
21.5 
18.9 

1989/90 
24.8 
23.8 
23.1 
20.8 
26.5 
27.3 
23.7 
19.3 

1988/89 

1987/88 

1986/87 

22.2 
21.2 
22.1 
20.2 
23.9 
23.6 
22.8 
18.7 

18.9 
19.0 
19.6 
19.0 
20.9 
22.0 
21.2 
15.8 

18.7 
18.6 
19.2 
20.0 
19.6 
20.5 
19.0 
14.6 

1985/86 
18.1 
18.0 
18.8 
19.6 
20.9 
17.8 
16.5 
16.7 

1984/85 
16.5 
16.1 
17.5 
17.9 
19.0 
17.0 
15.8 
14.3 

The data  In Table  1 are based on  the Farm Accountancy  Data Network 
(FADN)1.  The gross margins were calculated  using data  transmitted 
by  the Member  States under  the FADN system  in accordance with  the 
above method. 

However,  it should  be noted  that  it was not  possible  to derive the 
gross margins directly  from  the accounting data.  Special 
calculations still  had  to be made concerning  allocation of variable 
costs to dairy  farming and estimation of  the value of calves and 
cull  cows.  On  the other  hand, use of  FADN  results ensured  that a 
uniform  database could be used  for all Member  States. 

(c)  To test  the reliability of  the gross margins per  100 kg milk shown 

in Table  1 a credibility  test was carried out using  the standard 
gross margins  (SGMs) for dairy cows published  in Official  Journal 
C 268/91  (J/07).  The figures  in Table  1 were converted  to a gross 
margin per  cow and compared  with  the SGMs  in the above publication. 
The gross margins given  in Table  1 for  France and  Ireland were a few 
percent  higher  than the maximum SGMs  for  those countries.  In the 
cases of  the Netherlands and Luxembourg,  for which only national 
average SGMs were given, the gross margins  lay above  the averages. 
The maxima  for Denmark  and  the United Kingdom were also almost 
reached, which  indicates that  the gross margins  in Table  1 are on 
the whole realistic and  if anything  somewhat  generous  in the final 
analysis.  Only  in the case of Germany  are the maximum  SGMs above 
the figures obtained  from  the FADN data.  However, these are only 
regional  peaks which are  in no way  representative of  the average 
yield  In Germany.  The gross margins obtained  from  the FADN data are 
almost  double the minimum SGM  for  Germany. 

See FADN  Handbook. 
1990. 

Commission of  the European Communities,  Luxembourg, 

bi< 

(d) There  are  two  reasons  for  not  basing  the  calculation  of 
compensation  directly on the above standard gross margins: firstly, 
the  figures  in  OJ  No  C  268/91  are  based  on  the  average  for  the 
years 1985-87, while  1988/89 must  in the first  instance be used  for 
the compensation  arrangements because of the time bar question; and 
secondly,  the  figures  in  the  above  publication  relate  to  gross 
margins  per  cow.  Because  of  the  very  varied  milk  yields  per  cow 
throughout  the  Community  it  is  not  possible  to  convert  the  gross 
margins  per  100  kg  milk  on  the  basis  of  the  data  published  in 
OJ No C 268/91.  In the light of the above it seems appropriate not 
simply  to  use  the  often  very  different  gross  margins  as  the 
calculation  basis  but  merely  to  use  them  for  comparison  purposes 
with the figures obtained  from the FADN. 

(e) According  to  the  calculation  method  given  in  paragraph  26  of  the 
19 May  ruling,  income  from  replacement  activities  must  be  deducted 
from potential  income, in other words, according  to the method used 
here,  from  the  gross  margins  shown  in  Table  1.  In  the  Court's 
view,  the  question  of  whether  a  non-marketer  actually  obtained 
alternative  income  during  the  compensation  period  and  if  so,  how 
much,  is  not  the  decisive  factor  in  itself.  Paragraph  33  of  the 
ruling  stipulates  that  the  decisive  factor  should  be  the  income 
that  a non-marketer  could  have obtained  if  he  had  made  reasonable 
efforts  to find an alternative source of income.  It is clear that 
this reasoning  prevents  the calculation  from being  based  merely  on 
the  actual  alternative  income obtained  by  the  non-marketer  during 
the compensation period. 

(8)  See FADN Handbook.  Commission of the European Communities, Luxembourg, 

1990. 

- 10 -

(f) In  contrast  to  what  has  been  claimed  by  many  non-marketers,  the 
compensation  sum  ultimately  to  be  paid  to  them  cannot  merely  be 
calculated  by  simply  comparing  the  gross  margins  from  milk 
deliveries with  those obtained  from  fattening  bulls, keeping  sheep 
or  cereal  farming.  Such  an  approach  is  clearly  wrong  because 
giving  up  milk  production  liberates  the  production  factors  (land, 
labour  and  capital)  in  such  a  combination  that  they  could  not  be 
fully  exploited  if  only  a  single  alternative  form  of  production 
were  employed  (e.g.  fattening  bulls).  A  non-marketer  desirous  of 
limiting  the extent of the damage would  therefore  have had  to seek 
combinations  which  enabled  him,  as  far  as  possible,  to  use  the 
three production  factors  (land, labour and capital) released to the 
full.  In  view  of  the  variety  of  alternative  sources  of 
agricultural  and  non-agricultural  income  it  is  only  possible  to 
arrive  at  a  calculation  method  valid  for  all  non-marketers  by 
disregarding  specific  forms of alternative production and assigning 
a financial value to the production  factors liberated. 

(g) The  reasoning  developed  at  (f) above  also  holds  for  producers  who 
had  accepted  the  conversion  premium.  Unlike  producers  who  had 
taken the non-marketing premium, the undertaking  for those with the 
conversion  premium  was  only  of  four  years  duration  and  in  most 
cases expired  in 1983/84, i.e. at a time when those  concerned  knew 
that  they  were  not  eligible  for  the  allocation  of  an  individual 
reference quantity.  At the end of their four-year undertaking, the 
producers who had opted  for the conversion premium  found themselves 
also  free  to  choose  an  alternative  activity  in  which  they  could 
fully  exploit  the  production  factors  (land,  labour  and  capital). 
The  calculation  rules  pertaining  to  the  non-marketing  premium  can 
thus  also  be  applied  to  those  producers  who  had  taken  the 
conversion premium. 

(h) As  has  already  been  pointed  out, land,  labour  and  capital  are  the 
main production factors in agriculture.  The profitability of their 
use  is  largely  dependent  on  the  size  of  the  holding.  The 
assumption  can  be  made  for  the  standard  production  method 
considered  here  (stall  housing)  that  efficiency  increases  with 
increased  production.  On  holdings  with  milk  production  in  excess 
of  120 000 kg the Community  average  labour  requirement  is about  60 
hours  per  annum;  in  contrast,  holdings  producing  less  than  50 000 
kg milk per  annum require  about  80 hours per  cow  (for Germany  see, 
for  example,  the  KTBL  Taschenbuch  Landwirtschaft,  Daten  fur  die 
Betriebskalkulation, 14th edition, 1988, pp. 200-201). As a result, 
relatively  large  holdings  ceasing  milk  production  liberate  fewer 
working  hours  per  100  kg  milk  than  smaller  holdings.  It  is 
therefore  essential  to  make  a  distinction  according  to  the  non-
marketers'  reference  quantities  in  the  compensation  arrangements; 
in addition, this is the only criterion which meets the requirement 
of paragraph 32 of the 19 May 1992 ruling, which involves using the 
profitability  of  a  "representative  farm"  for  the  non-marketer  in 
question as a basis for the calculation. 

11 

(i) In  the  case  of  the  production  factor,  labour,  the  criterion 
proposed  is the average gross hourly wages for agricultural  workers 
in  the  Member  States  (Table  2 ).  These  data  were  calculated  by 
Eurostat  on the basis of a Community  survey for 1984, 1986 and  1988 
(Eurostat,  Earnings  in  Agriculture,  1986  and  1988).  The  hourly 
wages given  in national  currencies have been converted  into  budget 
ecus  using  the  annual  average  of the daily  currency  rates  for  the 
years  in  question  (for conversion  rates  see the  Commission  Report 
on  the  Agricultural  Situation  in  the  Community,  1989,  Table 1 ). 
The hourly wage rates for 1985, 1987 and 1989 were  estimated. 

Table 2  : Wage  costs In E CU  txidgel}  per  lOO kg of  m lk 

-  12 

-

I 
Member State 
Betglqua/Belgié 
Danmark 
Deutschland*1 
France 
Ireland 
Luxembourg *2 
Nederland 
United Kingdom 

Member State 
Belglque/Betgie 
Oanmark 
Deutschland*1 
France 
Ireland 
Luxembourg *2 
Nederland 
United Kingdom 

1990/81 

<50000kg  <120000kg  >120000kg 
6.8 
85 
75 
55 
5.7 
65 
6.6 
6.1 

7.8 
11J8 
8.1 
es 
6.6 
7.4 
7.7 
7.1 
1886/87 

85 
1 32 
10.4 
75 
75 
85 
85 
8.1 

<5000Qkg 
82 
12X1 
1 32 
8.1 
75 
8.7 
85 
7.7 

1869/80 

:120000kg  >120000kg 
6.8 
9.0 
7.7 
6.0 
5.6 
65 
6.4 
5.7 

8.0 
1 05 
8.0 
7X1 
6.6 
7 J6 
7.4 
6.7 
1865/86 

1988/89 

1987/88 

<50000kg  <120000kg  >12O00Qkg 
65 
8.4 
7.4 
6.0 
5.7 
65 
65 
5.4 

8.1 
85 
«.7 
7X1 
65 
75 
75 
65 

82 
1 12 
85 
8.0 
75 
8.7 
8.4 
72 

<50000kg  < 120000 kg  > 120000 kg 
6.9 
7.9 
75 
6.0 
5.7 
6.4 
62 
5.1 

82 
1 05 
1 05 
6.0 
7.8 
85 
85 
65 

8.1 
82 
8.8 
75 
6.7 
75 
75 
5.8 

<50000kg  <120000kg  > 120000 kg 
65 
72 
6.8 
8.4 
55 
6.4 
8.1 
4.7 

7.8 
8.4 
8.1 
7.4 
6.8 
75 
72 
5.4 

OJO 
85 
82 
85 
7.7 
8J8 
82 
82 

<50000kg  <120000kg  >120000kgl  <50000kq 
8.1 
82 
85 
7.7 
75 
8.7 
8.1 
6.4 

6.5 
8.7 
65 
6.1 
5.4 
OS 
8.1 
43 

8.7 
8.8 
8.0 
8.1 
72 
85 
82 
6.4 

75 
75 
78 
7.1 
6.3 
75 
72 
55 

1984/85 

<120000 kg  >120000 kg 

8.0 
72 
7.7 
65 
8.1 
75 
7.1 
5.6 

Labour/cow in h/year.  <  50000  k g-
Labour/cow In h/year.  < 120000 kg  -
Labour/cow Inn/year:  > 120000  k g-

80 
70 
60 

• 1:  StatistJsches Jahrbuch ûberEmahrung. LaivMrtschaftijndForsten  1991. Tab. 363. 
•2: Belgium wages rates have been used lor calculating the wage costs In ECU/100 kg milk. 
Way of calculation: Labour/cow In h/year •  Wage per h /  MSk Production per cow 

Sources: 
FADN; 
Wages: Earnings In agriculture 1888, Eurostat, Series 3C,  p 5; 
Labour requirement per cow: KTBL-Taschenbuch Landwirtschaft, Oaten fur die Betriebskalkulation  1888, p200. 

( J)  For  the  production  factor 

land  the  rent  customary 

question  was  used.  Since  a g r i c u l t u r al 
periods  of  several  years  the  average  rents  for  the  years  1987/88  and 
1988/89  were  used  for  each  Member  S t a te  ( c f.  Table  3 ). 

is  generally 

land 

in  the  country 

in 
leased  for 

Table 3  : Rent costs in ECU  (budget)  per 100  kg  of  milk 

Member State 
Belgique/Belgiê 
Danmark 
Deutschiand 
France 
Ireland 
Luxembourg 
Nederiand 
I United Kingdom 

I" 

| 

Rent/ha 
91 
205 
179 
78 
112 
120 
275 
JO 

LU/ha 
2.5 
2.9 
1.9 
1.4 
1.4 
1.7 
2.6 
1^ 

Milk/ha  Rent costs 
in 100 kg  per 100 kg 
0.8 
1.2 
1.9 
1.1 
1.9 
1.5 
1.7 
0.7 

111 
171 
94 
68 
58 
82 
165 
102 

Way of calculation:  1.) Milk/ha =  LU/ha * Milk production percow; 
2.) Rent costs =  rent per ha/milk per ha. 

Source: FADN 

For  non-marketers, only  the particularly  low rents  for  absolute 
pasture  (I.e. not useable  for arable  farming) were  used;  this  is 
pasture  for which  there  is no milk  quota.  This  criterion  is a 
considerable  benefit  to non-marketers  with  ploughable  pasture  land 

-  12 _ Wi 

(k) For  non-marketers,  no  allowance  was  made  for  alternative  income 
from  the  capital  liberated  on  cessation  of  production.  This  is 
because  non-marketers  had  to  indicate  their  willingness  to  resume 
milk production and therefore the possibility of  alternative use of 
the capital was greatly reduced, although not entirely ruled out. 

(1) Breaking  down  holding  size  according  to  milk  production  largely 
conforms to the non-marketing premium system.  Only the alternative 
income  for the  smallest  producers  (<  30 000 kg  milk) was  omitted, 
since  these  holdings, with  5-6  cows,  are  not  typical  of  northern 
European countries.  Because  of the relatively  low productivity  of 
labour on  such  small  holdings  a relatively  large  amount of  labour 
is  liberated  on  cessation  of milk  production;* as  a  result,  income 
from  replacement  activities  per  100  kg  milk  is  very  high. 
Compensating  these  small producers by  placing them  in the  category 
proposed here  (< 50 000 kg) would work to their advantage. 

It should  also  be  noted  that  a production method  typical of  small 
and medium-sized  holdings  (stall housing) was used as the basis for 
calculating  the  labour  requirement  in  hours  per  cow.  Large 
holdings with  a milk production  of  over  250 000 or  300 000 kg  can 
manage with  a  relatively  low  labour  requirement  of  about  35  hours 
per cow per annum because they can use different production methods 
(e.g. loose pen barns).  Such holdings are also more easily able to 
find alternative  uses  for the  factors  liberated.  As a result, the 
wage and rent  figures used  to calculate the alternative  income  for 
large  holdings  in  particular  will  be  clearly  lower  than  actual 
income.  In  the  end,  this  will  compensate  for  the  on  average 
somewhat high estimate of the labour requirement per cow. 

-  13 -

(m) The  above  rent  and  wage  figures  had  to  be  included  in  the 

calculation  of  alternative  income  irrespective  of  whether  a  non-
marketer  actually  rented out the liberated  land  or  entered  into an 
employment  contract.  The  reason  for this  is the  indisputable  fact 
that  production  factors  were  liberated  upon  cessation  of  milk 
production,  and they have an economic value which  must  be credited 
to the non-marketer  in each case.  If he does not make use of these 
values  he  will  in  all  probability  not  have  made  the  increased 
efforts  he  should  have made  to  limit  the  extent  of  the  damage  to 
him. 

(n) The  fact that only average wages and rents are used  in the proposed 

calculation  will  work  to  the  advantage  of  most  of  the  non-
marketers,  for wages and rents are only paid  if the employer/lessee 
sees  the  prospect  of  an  income  exceeding  the  sums  in  question. 
That  there  is  a  market  for  rented  land  and  agricultural  workers 
confirms  the  existence  of  agricultural  production  methods  which 
will  produce  an alternative  income exceeding  the  rents or wages in 
question. 

(o)  Table 4 shows  income from  replacement  activities per  100 kg mi Ik in 
budget ecus.  The figures are arrived at by adding together  the wage 
and rent costs shown  in Tables 2 and 3 respectively.  As would  be 
expected  from  the differences  In  labour productivity, the 
alternative  income per  100 kg milk  is lower  for  large holdings  than 
for sma11 ones. 

Table 4  : Aï: 3%-nathre Income In E CU  (budget) per  100 kg of milk according to farni size* 

1880/81 

1888/80 

1888/88 

Member State 
Belgique/Belglê 
Denmark 
Oeutschland 
France 
Ireland 
Luxembourg 
Nederland 
United Kingdom 

Member State 
Belgique/Belgiê 
Denmark 
Oeutschland 
France 
Ireland 
Luxembourg 
Nederland 
United Kingdom 

<S0O0Okg  <120000kg  > 120000 kg 
75 
11.1 
8.7 
75 
75 
75 
85 
65 

85 
14.4 
1 25 
85 
85 
85 
1 05 
85 

8.7 
125 
1 15 
85 
85 
85 
8.4 
75 

1886/87 

<50000kg  <120000kg  > 120000 kg 
75 
6.4 
85 
75 
7.7 
75 
75 
5.4 

85 
1 05 
11.1 
85 
8.7 
1 05 
85 
65 

8.7 
85 
105 
85 
8.7 
85 
85 
6.1 

< 5 0 0 0 0 kg  < 120000kg  > 120000kg 
7.7 
1 02 
85 
72 
75 
85 
8.0 
8.4 

10.0 
1 32 
12.1 
82 
85 
1 02 
1 02 
85 

85 
11.7 
1 05 
82 
65 
8.1 
8.1 
7.4 
188986 

< 5 0 0 0 0 kg  <120000kg  > 120000 kg 
75 
75 
8.7 
72 
7.4 
75 
75 
55 

85 
10.1 
1 05 
85 
82 
10.1 
85 
7.1 

8.4 
85 
85 
62 
65 
85 
65 
65 

<50000kg  <120000kg  > 120000kg 
7.7 
85 
85 
72 
75 
85 
85 
6.1 

10.0 
12.4 
1 15 
82 
85 
1 02 
10.1 
75 

85 
1 15 
1 05 
82 
8.6 
8.1 
85 
75 

1884/85 

<50000kg  <120000kg  > 120030kg 
7.7 
7.4 
85 
85 
72 
85 
75 
55 

10.0 
8.4 
10.7 
85 
65 
10.1 
85 
7.1 

85 
8.4 
85 
75 
6.1 
8.1 
85 
65 

1887/1886 
<50000kg  <120000kg  >120000kg 
7.7 
8.1 
8.4 
72 
7.7 
75 
75 
5.8 

85 
10.4 
10.7 
82 
8.8 
85 
85 
6.6 

1 05 
11.7 
1 15 
82 
85 
1 05 
1 05 
75 

Way of calculation: Alternative Income -  Wage Costs +  Rent Costs 

Source: s. Table 2 and 3. 

(p)  Analysis  of  gross  margins  has 

indicated  that  differences  w i t h in 

individual  Member  States  are  much  greater 
calculated  for  each  Member  S t a t e. 
to  use  an  average  weighted  according  to  milk  production  for 
compensation  periods 
in  question  and  the  holding  sizes  used 
above  for  the  Member  States  a f f e c t ed  by  the  compensation  scheme. 

than  the  averages 
It  was  therefore  f e lt  appropriate 

the 
in  (h) 

Table  y-Losses in green  ECU  per  100  kg of milk,  EUR8*  Average 

Year 

I 

Farm-Size 

1990/91 
1989/90 
1988/89 
1987/88 
1986/87 
1985/86 
1984/85 

<50000 kg 
9.4 
10.4 
9.9 
8.1 
7.8 
8.6 
7^4 

<120000 kg 
10.3 
11.3 
10.8 
9 
8.7 
9.5 
8.3 

>120000 kg 
11.2 
12.3 
11.8 
9.9 
9.6 
10.4 
9^ 

I 

=Belgium, Denmark, Germany, France, Ireland, Luxembourg, Netherlands, UK. 

To  conclude,  Table  5  alone  constitutes  the  Annex  to  the  proposal 
for a Regulation  and the figures therein must be used by the Member 
States in calculating each individual compensation  sum. 

Average  rates  used  for  conversion  of  national  currencies  into  ecus  in  the 
calculation  of  the  FADN  gross  margins 

JfAB. 

' 1 9 8 4/ 85  ! _1985/86  j__1986/87  _l_ 1987/88  l_1988/89  1 1989/90  ! 1990/91_  I 199 l/9 2*_i-

2 , 2 3 4 40 

GERMANY ~~=T=~= I S =~= r~~~T 
I 
1 . 7 - 3 0 .6 
i 
FRANCE 
1 
1 . 1 - 3 1 . 1 21 
ITALY 
" 
l.T-31.12!  1381,381  I 1447,987  ! 1461,874  I 1494,708  I 1537,333  I 1510,469  I 1521,941  I 1533,235  ] 

7 
I  2 , 0 5 6 7 81 

7 
I  2 , 0 5 2 5 07 

7 
I  2 , 0 4 7 0 56 

!  6 , 7 9 9 76 
7 

I  6 , 9 2 8 48 
7 

7 
I  2 , 0 8 5 33 

7 
i  2 , 0 7 1 79 

~"" 
l  2 , 0 7 8 36 

I 
i 
"~"7 

I  6 , 9 1 4 1 59 

I  6 , 9 7 3 3 35 

1  7 , 0 2 3 8 69 

!  7 , 0 3 6 43 

6 , 7 9 5 02 

2 , 1 9 0 92 

6 , 8 7 1 65 

7 

7 

7 

7 

7 

j 

I 

I 

I 

I 

I 

] 

I 

] 

j 

l ? ^ -1^^  I 45,0821  I 44,7506  1 43,3588  I 43,1625  ! 43,538 

! 43,00838  1 42,35358  I 42,15573 

\ 

" 

7 

7" 

DJXE^B5URG"7 
1.5-30.4  I 45,0821  I 44,7506  ! 43,3588  I 43,1625  I 43,538 
NETHERLANDS! 
1 . 5 - 3 0 .4 
DRftWARK 
1 . 7 - 3 0 .6 
I 
TRPl AND 
1 . 1 - 3 1 . 1 21  0 , 7 2 5 9 42 
_ 
_____ 

! 
I  2 , 4 8 5 71 
I 

I  2 , 5 2 0 85 
I 
I  8 , 0 5 3 92 

" 
7 
I  2 , 3 3 0 06 

i 
l  0 , 7 7 5 6 71 
_ 

l 
!  0 , 7 7 5 4 43 
_ 

; 
:  0 , 7 3 3 5 26 
_ 

7 
I  2 , 3 6 6 28 

!  8 , C C 2 61 

!  7 , 8 6 0 13 

!  7 , 9 4 0 47 

I  8 , 0 3 0 59 

I  2 , 3 4 34 

7 

7 

7 

! 

! 

! 

7"""" 

7 
I 43,00838  I 42,35358  I 42,15573 1 
7 
I"" 
I  2 , 3 1 8 34 

I  2 , 3 0 6 6 24 

I  2 , 3 1 7 10 

~~"7 

7 

7 

7 

j 

i 

! 

I 

I  7 , 9 2 2 98 

I  7 , 8 8 2 8 36 

I  7 , 9 2 4 6 47 

!  0 , 7 7 6 8 18 

I  0 , 7 6 7 7 69 

!  0 , 7 6 7 8 08 

l 
_ 

i 
_ 

! 
_ 

] 

] 

-

; 

• 

i 

I 
!  C , ~ 1 5 16  " 
_ 
!  C S ^ I S "1! 

1 . 3 - 2 8 .2 

!  0 , 5 9 8 2 95 

:  C , 6 8 8 4 53 

!  0 , 6 9 7 2 29 

!  0 , 6 5 6 0 18 

!  0 , 6 8 6 8 98 

I  0 , 7 1 0 4 74 

!  0 , 7 0 2 6 24 

; 

I 

r,OFFQF 
1.1-3*1.12  1  8 8 , 3 4 03 
'SPAÏV 
1.1-31.121  126,5693  : 125.1645  : 137,4563  l 142,1915  l 137,6007  I 130,4058  ! 129,3156  ! 128,4685  ; 
PORTUGAL ~"7 
" 
1.1-31.12 I 115,6801  !  12:. 2515  : 147,0884  I 162,5811  ! 170,0592  i 173,4131  ! 181,1076  ! 178,6141  ; 

" 7"  " 
l  1 6 7 , 5 7 56 
7 

7 
I  1 5 6 , 2 2 04 
7 

7 
.  1 3 7 , 4 2 46 
7 

: 
" 
:  1 C 5 , ~ 3 9: 
7 

I  2 2 5 , 2 1 57 
7~"7 

~! 
:  2 0 1 , 4 12 

I  1 7 8 , 8 4 04 

'"7 

7 

7 

~ 

7 

7 

7 

7 

7 

7 

7 

T 

I 

; 

SOURCE:  CRONOS  ICG:  *  finished  on  19  August  1992, 

16 

Proposal  for a 
COUNCIL REGULATION  (EEC) 

providing  for an offer of compensation to certain producers 
of milk or milk products temporarily prevented  from 
carrying on their trade 

THE COUNCIL OF THE EUROPEAN  COMMUNITIES, 

Having  regard  to  the  Treaty  establishing  the  European  Economic  Community, 

and in particular Article 43 thereof, 

Having regard to the proposal  from the Commission^1), 

Having regard to the opinion of the European Parliament^)  f 

Having regard to the opinion of the Economic and Social  Committee(^), 

Whereas  when  the  additional  levy  scheme was  introduced  in  1984  in the milk 

and  milk  products  sector  the  Community  legislation  did  not  provide  for  the 

allocation of an individual reference quantity to producers who, as a result 

of  a  prior  undertaking  pursuant  to  Council  Regulation  (EEC)  No 1078/77  of 

17 May  1977  introducing  a  system  of  premiums  for  the  non-marketing  of  milk 

and  milk  products  and  for  the  conversion  of  dairy  herds(4),  had  not 

delivered  or  sold  milk  during  the  reference  year  adopted  by  the  Member 

State; 

Whereas,  on the application  of  five producers, the Court  of Justice,  in its 

judgment  of  19  May  1992  in  Joined  Cases  C-104/89  and  C-37/90,  ordered  the 

Community  to make  good the damage the  said  producers  had  suffered  in so far 

as  the  original  Community  legislation  did  not  in  fact  provide  for  the 

allocation of an individual reference quantity to them; 

Whereas  in  a  Communication  published  in  the  Official  Journal  on  5  August 

1992^5)  the  institutions  undertook  to  comply  in  full  with  the  judgment  of 

19 May  1992 as regards all potentially  qualifying producers; 

(1)  OJ No C 
(2)  OJ No C 
(3)  OJ No C 
(4)  OJ No L 131, 26.5.1977, p. 1. 
(5)  OJ No C 198, 5.8.1992, p. 4. 

-  17 -

Whereas  the  sheer  number  of  those  potentially  eligible  makes  it  impossible 

to  take  each  case  into  account  on  an  individual  basis  and  necessitates  a 

solution  based  on  a  flat-rate  approach, to be  expressed  in the  form  of  an 

offer  from  the  institutions  to be  accepted  in  full  and  final  settlement  or 

else  rejected;  whereas  the  factors  on  the  basis  of  which  the  offer  is 

calculated  should be set out; 

Whereas  a direct  link should be drawn between the actual  resumption  of milk 

production  in  full  compliance with the Community  provisions which  permitted 

such resumption and the existence of an injury consisting  in the fact of not 

having been able to resume milk production  in good time, despite the wishes 

of  the  person  concerned; whereas,  in  the  same  spirit  and  to  ensure  that  a 

producer  has  not  resumed  activity  with  the  sole  aim  of  speculating  on  the 

supposed  asset  value  of  the  reference  quantity  allocated  to  him,  both  the 

broad entitlement to compensation and the amount of that compensation  should 

be subject to certain conditions; 

Whereas,  subject  to  the  above,  the  quantity  to  be  compensated  must  be 

calculated  in  accordance  with  the  principles  underlying  the  terms  of  the 

Court j udgment; 

Whereas in their Communication of 5 August  1992 the institutions waived, for 

the  benefit  of  potential  beneficiaries  and  for  the  future,  their  right  to 

plead  the  five-year  time  bar  on  claims,  laid  down  in  Article  43  of  the 

Statute of the Court of Justice; whereas it can furthermore be accepted that 

in  the  present  case  the  injury  ended  only  upon  resumption  of  milk 

production; whereas, therefore,  for the benefit  of  all those  concerned, the 

period  for which  compensation  is being  offered  and  the  circumstances  under 

which the time bar on entitlement may once again come  into effect  should  be 

stated; 

Whereas under the terms of the Court  judgment the amount of the  compensation 

must  equal  the  difference  between, on the one  hand,  the  income which  those 

concerned  would  have  received  from  marketing  milk  had  they  not  been 

prevented  from  doing  so  and,  on  the  other  hand,  the  income  which  they 

actually  obtained  during  the  same period  or  could  have  obtained  by  showing 

reasonable diligence; 

-  18 -

Whereas  the  number  of  variables  to  be  considered  first  of  all  in 

reconstituting  the  income  from milk production  and  secondly  in  establishing 

alternative  sources  of  income would  lead  in the  end  to  the merits  of  each 

case  being  looked  at  separately, which  cannot  reasonably  be  expected  given 

the  sheer  number  of  producers  involved;  whereas  only  a  comprehensive 

estimate  of  the  damage  is  thus  feasible; whereas  to  avoid  underestimating 

the  injury,  however,  the  various  factors  chosen  for  calculating  the 

compensation operate as a general rule to the benefit of the applicants; 

Whereas  the  potential  revenue  from  marketing  is  calculated  from  the  gross 

margin for dairy  farming, which on the receipts side includes sales of milk, 

calves  born  to  dairy  cows  and  the  residual  value  of  the  dairy  cow,  and  on 

the  expenses  side  deducts  only  the  variable  costs  which  are  immediately 

eliminated  when milk  production  ceases  and  not  the  fixed  costs  relating  to 

land, labour and capital; 

Whereas,  in  calculating  the  replacement  income,  no  account  was  taken, 

inter alia,  of  the  alternative  income  from  the  capital  released  by 

abandoning  milk production, on the basis that the producer  concerned  wanted 

eventually  to  resume  such  production  and  that  the  options  for  using  the 

capital otherwise were accordingly  limited; 

Whereas  under  the  terms  of  this  Regulation  the  Member  States  have  all  the 

information  required  to  calculate,  once  the  application  is  accepted,  not 

only  the  quantity  to  be  compensated  but  also  the  period  concerned  and  the 

final  amount  of  compensation  to  be  offered  on  behalf  of  the  institutions; 

whereas  in  fact  the  operation  can  be  carried  out  only  with  the  aid  and 

through  the  agency  of  the Member  States, which  are  indeed  the  sole  holders 

of  the  individual  items  of  information  required  to  calculate  each 

compensation  sum; 

Whereas,  should  the  settlement  of  some  cases  require  the  Member  States  to 

seek  the  opinion  of  the  institutions  -  especially  where  such  cases  fall 

outside  the  scope  of  this  Regulation  although  qualifying  on  their  specific 

merits  for acceptance - the Commission  should have responsibility  for making 

the required decision, 

HAS ADOPTED THIS REGULATION: 

- 19 -

Article 1 

Compensation  on the terms  set out  in this Regulation  shall be granted to 

those producers who have suffered loss as a result of being prevented by an 

undertaking given under Council Regulation (EEC) No 1078/77 from delivering 

or selling milk or milk products during the reference year selected by the 

Member State concerned under the additional levy scheme in the milk and milk 

products sector. 

Article 2 

An application for compensation shall be deemed eligible if it is submitted 

by a producer who has been allocated a definitive special reference quantity 

under the conditions  set out in Article 3a(3) of Council Regulation  (EEC) 
No 857/84(6), either on 29 March 1991 by virtue of Council Regulation (EEC) 
No 764/89 (7) or  on  1 July  1993  by  virtue  of  Council  Regulation  (EEC) 
No 1639/91(8). 

Article 3 

If  the  applicant  for  compensation  and  the person  to  whom  the  definitive 

special reference quantity has been allocated are not one and the same, the 

competent  authority  referred  to  in Article  10  shall  decide  to  allow  or 

refuse the application after verifying: 

- 

in the case of the producer receiving the reference quantity, that he 

satisfies  the  conditions  in  this  Regulation  governing  the  right  to 

compensât ion; 

in the  case of  the  applicant  for  compensation, that  the entitlement 

under which he is applying for compensation is a legitimate one. 

(6)  OJ No L 90, 1.4.1984, p. 13. 
(7)  OJ No L 84, 29.3.1989, p. 2. 
(8)  OJ No L 150, 15.6.1991, p. 35. 

-  20 -

Article 4 

Notwithstanding  Article  2,  an  application  shall  not  be  accepted  if  the 

producer  who  has received  the definitive  allocation  of  a reference  quantity 

under  Regulation  (EEC)  No 764/89  either  has  not  complied  with  his 

undertaking  not  to  take  part  in  any  programme  of  cessation  of  milk 

production  until  31 March  1992  or  has  sold  or  leased  all  his  holding  prior 

to that date. 

Article 5 

An application made by a producer who will receive the definitive  allocation 

of the reference quantity by virtue of Regulation  (EEC) No 1639/91 on 1 July 

1993  shall  be  accepted  on  condition  that  he  does  not  take  part  in  any 

programme  of cessation of milk production and that  he does not  sell or  lease 

his holding  in its entirety on or before  1 July 1994. 

Article 6 

The competent  authority referred to in Article  10 shall determine the annual 

quantity  to  be  compensated  on  the  basis  of  the  quantity  used  to  calculate 

the premium granted pursuant to Regulation  (EEC) No 1078/77, increased by 1% 

and  reduced  by  a  percentage  representing  the  reductions  applied  in  each 

Member  State  to  the  reference  quantities  of  producers  established  in 

accordance with Articles 2 and 6 of Regulation  (EEC) No 857/84. 

Article 7 

If  the  definitive  special  quantity  allocated  pursuant  to  Article  3a  of 

Regulation  (EEC)  No 857/84  is  less  than  80%  of  the  provisional  special 

quantity  or  if the  holding  is  sold  or  leased  in part  prior  to  1 April  1992 

or  prior  to  1 July  1994  (as  the  case  may  be), the  annual  quantity  to  be 

compensated  shall  be  reduced  by  the  quantity  returned  to  the  national 

reserve. 

Article 8 

1.  The  compensation  shall  be  granted  only  for  the  period  for  which  the 

right to compensation  is not  time-barred. 

-  21 -

2. 

For  the  purpose  of  determining  the  period  for  which  the  compensation 

shall be offered: 

(a) the  date  of  interruption  of  the  five-year  time  bar  set  by  Article 

43 of the Statute of the Court of Justice  shall be the date of the 

application  addressed  to one of the  institutions  of  the  Community, 

or in the case of an action brought before the Court of Justice the 

date on which the application  is entered  in its register, or at the 

latest  the date of the Communication  published  in Official  Journal 

No C 198 of 5 August 1992; 

(b) the  date  of  commencement  of  the  compensation  period  shall  be  five 

years  prior  to  the  date  of  interruption  of  the  bar,  but  may  not 

fall before  2 April  1984 or the date on which the  non-marketing  or 

conversion undertaking  expired; 

(c) The date of  termination  of  the compensation  period  shall  be either 

29 March  1989  for  those  producers  who  received  the  special 

reference  quantity  by  virtue  of  Regulation  (EEC)  No 764/89  or 

13 July  1991 for those producers who received the special  reference 

quantity by virtue of Regulation  (EEC) No 1639/91. 

Article 9 

If  production  was  resumed  prior  to  allocation  of  the  provisional  special 

quantity  the  quantity  to  be  compensated  shall  be  reduced  for  the  period 

concerned by the quantities delivered  or sold directly before that date. 

Article  10 

1.  The  application  for  compensation  must  be  addressed  to  the  competent 

authority  designated  for  that  purpose  in  each  Member  State,  using  a 

form drawn up by that authority. 

2. 

Where a producer derives his right to a special reference quantity  from 

Regulation  (EEC)  No 764/89  he  shall  send  his  application  to  the 

competent  authority  by  31 July  1993  at  the  latest; that  date  shall  be 

replaced  by  31 August  1993  if  the  right  was  obtained  by  virtue  of 

Regulation  (EEC) No 1639/91. 

- 22 -

The  limitation  period  under  Article  43  of  the  Statute  of  the  Court 

shall  start  to run afresh  for all producers  on whichever  of the two 

dates  referred  to  in the  first  subparagraph  is  appropriate,  if the 

application referred to in that subparagraph has not been made prior to 

such date, save where  the  limitation  period  has been  interrupted  by 

virtue  of  the  said  Article  43  by  an  application  to  the  Court  of 

Justice. 

Article 11 

The competent authority referred to in Article 10 shall check the accuracy 

of the information provided by the producer and shall calculate the amount 

of the compensation on the basis of the quantity and the period in respect 

of  which  compensation  is  due, using  the  amounts  specified  in  the  Annex 

hereto* 

% ^^ 

Article 12 

The amount of the compensation shall be increased by default interest of 8% 

from 19 May 1992. 

Article 13 

The  total  amount  of  the  compensation  shall  be  converted  into  national 

currency using the agricultural  conversion  rate applicable on the date on 

which this Regulation enters into force. 

Article 14 

Within  a  maximum  of  four  months  from  receipt  of  the  application  the 

competent  authority  referred  to  in Article  10  shall, in  the  name  and on 

behalf of the Council and the Commission, make an offer of compensation to 

the producer, accompanied by a receipt in full and final settlement. 

Where the producer derives his right to a special reference quantity: 

from  Regulation  (EEC) No 764/89, the  compensation  shall  be  paid  on 

receipt  of  the  returned  receipt,  duly  approved  and  signed  by  the 

producer; 

-  23 -

from  Regulation  (EEC) No 1639/91, the  compensation  shall  be  paid - on 

condition  that  the  receipt  has  been  returned  duly  approved  and  signed 

by  the  producer - after  1 July  1994,  so  as  to  allow  the  competent 

authority  to  check  that  Articles  5  and  7  have  been  complied  with, 

unless the producer  lodges with that authority  a security  amounting to 

115%  of  the  compensation  fixed  prior  to  the  application  of  the 

abovementioned  Articles,  as  a  guarantee  of  compliance  with  the 

conditions set out in those Articles. 

Failure to accept the offer within two months of its receipt  shall mean that 

it  shall  not  be  binding  in  the  future  on  the  Community  institutions 

concerned. 

Acceptance of the offer by the return to the competent authority of the duly 

approved  and  signed  receipt  shall  imply the  relinquishment  of  any  claim  of 

whatever  nature  against  the  Community  institutions  in  respect  of  the  loss 

defined  in Article 1. 

Article 15 

Detailed rules for the application of this Regulation, and in particular the 

provisions  regarding  payment  of  the  costs  of  producers'  agents  incurred 

prior  to  5 August  1992,  shall  be  adopted  by  the  Commission  in  accordance 

with  the  procedure  laid  down  in  Article  30  of  Council  Regulation  (EEC) 

No 804/68(9).  The  Commission,  following  the  same procedure  and  at  the  duly 

reasoned  request  of  a Member  State, may  in exceptional  circumstances  allow 

the  eligibility  of  applications  not  covered  by  the  cases  provided  for  in 

this Regulation. 

Article 16 

Financing  of  the  payments made  pursuant  to  this Regulation  shall  be  deemed 

to  be  intervention  within  the  meaning  of  Article  3  of  Council  Regulation 

(EEC) No  729/70(10). 

(9)  OJ NO L 148, 26.6.1968, p. 13. 
(10) OJ No L 94, 28.4.1970, p. 13. 

-  24 -

Expenditure  must  be  committed  against  1993  appropriations  on  the  basis  of 

applications  received  by the Member  States, the total  amount of which  shall 

be notified  to the Commission  not  later than  30 September  1993.  The paying 

agencies must effect the payments before 15 October 1994. 

Article 17 

This  Regulation  shall  enter  into  force  on  the  third  day  following  its 

publication in the Official Journal of the European Communities. 

This Regulation  shall be binding  in  its entirety  and directly  applicable  in 

all Member States. 

Done at Brussels, 

For the Council 

-  zç 

Annex 

Compensation to be offered  pursuant  to Article  11 (ECU per 100 kg of milk) 

Year 

I 

Farm-Size 

1990/91 
1989/90 
1988/89 
1987/88 
1986/87 
1985/86 
11984/85 

<50000 kg 
9.4 
10.4 
9.9 
8.1 
7.8 
8.6 
7,4 

< 120000 kg 
10.3 
11.3 
10.8 
9 
8.7 
9.5 
&3 

> 120000 kg 
11.2 
12.3 
11.8 
9.9 
9.6 
10.4 
^3 

I 

-  26 

F i n a n c i al 

S t a t e m e nt 

Date  :  17.3.1993 

1. BUDGET HEADING  :  B1-2090 

APPROPRIATIONS:  (PDSAB) ECU 255 ml 11 ion 

2. TITLE : 

Draft Council  Regulation  providing  for an offer of compensation  to certain producers of milk or milk 
products  temporarily prevented  from carrying on their  trade 

3. LEGAL BASIS :  Article 43 of the Treaty 

4. AIMS 

As a result of the Court of Justice  judgment of 19 May 1992 concerning  certain milk producers 
excluded  from the allocation of a reference quantity,  this measure makes good the injury  suffered 
by the said producers  (known as SLOM producers)  through the offer of flat—rate compensation. 

5. FINANCIAL  IMPLICATIONS 

PERIOD OF 12 MONTHS 

CURRENT FINANCIAL  YEAR 

(  1993  ) 

FOLLOWING FINANCIAL  YEAR 

(  1994 

) 

5.0 EXPENDITURE 

- CHARGED TO THE EC BUDGET 

(INTERVENTIONS) 

+ ECU 255 million 

+ ECU 255 mil lion 

p.m. 

5.1  REVENUE 

- OWN RESOURCES OF THE EC 
(LEVIES/CUSTOMS  DUTIES) 

-  NATIONAL 

5.0.1  ESTIMATED  EXPENDITURE 
5.1.1  ESTIMATED  REVENUE 

5.2 METHOD OF CALCULATION 

See annex 

6.0 CAN THE^PROJECT BE FINANCED FROM APPROPRIATIONS ENTERED  IN THE RELEVANT CHAPTER OF THE CURRENT BUDGET ? 

6.1 CAN THE PROJECT BE FINANCED BY TRANSFER  BETWEEN CHAPTERS OF THE CURRENT BUDGET ? 

6.2 WILL A SUPPLEMENTARY BUDGET BE NECESSARY ? 

6.3 WILL FUTURE BUDGET APPROPRIATIONS BE NECESSARY ? 

COMMENTS : 

YES 

NO 

NO 

ISSN 0254-1475 

COM(93) 161 final 

DOCUMENTS 

EN 

03 

Catalogue number : CB-CO-93-198-EN-C 

ISBN 92-77-55069-4 

Office for Official Publications of the European Commiiitfties 

L-2985 Luxembourg