Cereol Italia Srl v Azienda Agricola Castello Sas.
Date: 1995-10-12
13 The first four questions submitted by the national court concern the validity of Article 29a of Regulation No 2537/89, as amended, and may be dealt with together.
14 The national court asks whether it was possible for the Commission, without exceeding the limits of the power delegated to it by Article 2(8) of Regulation No 1491/85 and without infringing the principle of proportionality, to provide that irregularities resulting from serious negligence on the part of the producer and concerning the obligation under Article 6(3) of Regulation No 2537/89 to inform the competent national agencies of changes to the areas sown should be penalized by the invalidity of the cultivation contract and the exclusion of the producer from entitlement to aid for the current marketing year and the following marketing year, as laid down in Article 29a(1) of that regulation.
15 Castello submits that this latter provision is invalid. It argues that a penalty as severe as loss of entitlement to aid may attach to the obligation to grow soya beans within the territory of the Community, which is the primary obligation under the system of aid introduced in 1985, but may not attach to the obligation to notify changes of a certain extent in the use of the areas sown, which is no more than a secondary obligation under the system of aid.
16 The Commission, on the other hand, takes the view that the provision in question is valid. It argues that the obligation to indicate changes made to the areas sown is essential in order to enable the competent public authorities to ensure that only beans actually produced within the territory of the Community will benefit from the aid, and that to penalize a breach of that obligation by loss of entitlement to aid for the current marketing year and the following marketing year does not infringe the principle of proportionality or exceed the ambit of the powers delegated to the Commission by the Council.
17 According to the information provided to the Court by the Commission, which has not been contested, soya beans harvested in the Community account for only a small percentage of the beans processed within the Community. Under a system such as that introduced by the Council in 1985, which provides that processors are to be granted aid according to the quantities of soya beans produced and processed within the Community, it is vital that the origin of the beans should be capable of verification in order to ensure that the aid benefits exclusively beans harvested within the Community, the only beans whose production is to be encouraged.
18 The information on areas sown, which must be included in the cultivation contracts, happens precisely to form part of the system of control and proof introduced in order to verify the origin of beans.
19 In order for the system to operate properly, it is necessary that such information should be reliable. If there is no reliable information on the areas sown, it will be difficult, in the light of the yields indicated in the cultivation contracts, to check that the quantities of beans declared by the first purchaser, which form the basis for calculating the amount of aid, have in fact been harvested within Community territory and not imported from non-member countries. In particular, as the Commission points out, it would not be possible, in the absence of such information, to cross-check other information which producers and first purchasers are otherwise required to provide to the competent national authorities, such as stock records and financial accounts.
20 The reliability of information on the areas sown can be guaranteed only if producers notify the competent national authorities of changes in the use of the areas indicated in the cultivation contract and which, pursuant to the first subparagraph of Article 6(3) of Regulation No 2537/89, as amended, must be used exclusively for the cultivation of soya beans, except in cases of force majeure.
21 It is for this purpose that the second subparagraph of Article 6(3) of Regulation No 2537/89 provides that producers must, by way of an amendment to the contract, indicate any change in the areas sown which may take place before the contract has been lodged with the competent national agency, and that the third subparagraph of Article 6(3) provides that changes in excess of a specified amount must be notified to that agency if they occur after the contract has been lodged.
22 The obligation imposed on the producer to declare changes to the competent agency, as provided for in Article 6(3) of Regulation No 2537/89, thus constitutes an obligation essential to the proper functioning of the system of aid and is therefore of fundamental importance to that system.
23 However, the first subparagraph of Article 29a(1) of Regulation No 2537/89, as amended, provides for failure to comply with that obligation to be penalized only if it is the result of deliberate conduct or serious negligence on the part of the producer. Furthermore, this provision must, in the light of Article 29a(4), be understood as allowing the competent national authorities to impose one or more of the penalties to which it refers, depending on the seriousness of the breach which the producer is alleged to have committed, as was argued by the Commission and accepted by Castello at the hearing.
24 The Court has consistently held that the infringement of obligations whose observance is of fundamental importance to the proper functioning of a Community system may be penalized by forfeiture of a right conferred by Community legislation, such as entitlement to aid (see the judgments to that effect in Case 122/78 Buitoni v FORMA [1979] ECR 677 and in Case 21/85 Maas v Bundesanstalt fuer landwirtschaftliche Marktordnung [1986] ECR 3537).
25 By providing for penalties which may go as far as forfeiture of entitlement to aid for the current marketing year and for the following marketing year in the case where a soya bean producer, deliberately or by reason of serious negligence on his part, breaches an obligation as important for the proper functioning of the aid system as is the obligation to notify changes in the areas sown, the Commission did not infringe the principle of proportionality or exceed the limits of the implementing powers conferred on it by Article 2(8) of Regulation No 1491/85, which include the power to provide for appropriate penalties (see the judgment in Case C-357/88 Hopermann v Bundesanstalt fuer landwirtschaftliche Marktordnung [1990] ECR I-1669, paragraph 7).
26 It is for the national court to determine whether a producer' s failure is the result of deliberate conduct or serious negligence on his part and whether the penalty chosen is, pursuant to Article 29a(4) of Regulation No 2537/89, as amended, proportionate to the failure established in the light of the need to ensure that the system of aid in question functions properly.
27 In those circumstances, the reply to the national court must be that examination of the first four questions referred for a preliminary ruling has revealed nothing capable of affecting the validity of Article 29a of Regulation No 2537/89, as amended by Regulation No 150/90.
The last three questions