1 By judgment of 27 September 1992, received at the Court Registry on 9 October 1992, the Tribunal d' Instance, Béziers, referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty two questions on the interpretation of Article 7(1) of Council Regulation (EEC) No 1442/88 of 24 May 1988 on the granting, for the 1988/89 to 1995/96 wine years, of permanent abandonment premiums in respect of wine-growing areas (OJ 1988 L 132, p. 3).
2 Those questions were raised in proceedings brought by Roland Teulie, a wine grower, against the wine cooperative "Les Vignerons de Puissalicon" concerning the deduction for the benefit of the latter of 15% of the grubbing-up premium paid to Mr Teulie.
3 As is apparent from the first recital in the preamble thereto, Regulation No 1442/88 was adopted in order to curtail over-production of wine. In order to encourage permanent abandonment of wine-growing areas, the regulation provides for the grant of premiums known as grubbing-up premiums. Having established that the abandonment of wine-growing areas by growers who are members of cooperative organizations jointly processing grapes harvested by their members may reduce the quantities of grapes delivered and thereby increase processing costs, the Council took the view that it was fair to provide that such negative effects might be compensated for (see the eighth recital in the preamble to the regulation).
4 To that end, Article 7 of Regulation No 1442/88 provides: "1. Member States may provide that, for holders who are members of a wine cooperative or other association of wine-growers, the premiums provided for in Article 2(1) shall be reduced by up to 15 %. In such case, the sums corresponding to this reduction shall be paid to the cooperatives or associations in question. 2. Without prejudice to paragraph 1, Member States may provide for measures comprising national compensation for wine cooperatives and other associations of wine-growers who furnish proof that: ° they have had to reduce their activity as a result of the lower level of deliveries from their members following the grant of the permanent abandonment premium, ° the area cultivated by their members has been reduced by at least 10% compared with that cultivated during the 1987/88 wine year. The amount of the national compensation may not exceed the losses due to the reduction in activity. 3. Member States shall inform the Commission of any provisions they may adopt pursuant to this article."
5 The French Republic decided, pursuant to Article 7 of Regulation No 1442/88, to withhold 15% of the amount of the premiums and pay it to the cooperatives. The relevant amount is withheld pursuant to a formal decision of the governing board of the cooperative agreeing to accept the flat-rate compensation procedure provided for by the regulation and not to impose on any member who has permanently abandoned areas planted with vines the penalties laid down by the statutes of the cooperative for breach of members' supply commitments.
6 On 30 November 1988, Mr Teulie signed a grubbing-up declaration and as a result received an abandonment premium, of which 15% was paid direct to the wine cooperative "Les Vignerons de Puissalicon". Considering that that deduction in favour of the cooperative was contrary to Regulation No 1442/88, Mr Teulie brought an action before the Tribunal d' Instance, Béziers, which decided to stay the proceedings pending a preliminary ruling from the Court of Justice on the following questions: "1. Whether Article 7(1) of Council Regulation (EEC) No 1442/88 on the granting, for the 1988/89 to 1995/96 wine years, of permanent abandonment premiums in respect of wine-growing areas, like Article 7(2) thereof, requires it to be established that a cooperative has suffered loss before any reduction of the grubbing-up premium paid to any of its members; 2. Whether Article 7(1) must be interpreted as meaning that a Member State exercising the option should determine uniformly, subject to the 15% limit, the proportion of the premiums to be allocated to the wine cooperatives, or should make a decision concerning the principle of reducing the premium so as to render the reduction obligatory on its national territory, without fixing the rate thereof, whilst reserving the right to lay down detailed rules enabling the amount of the reduction to be determined in each individual case, within the range of 1% to 15% laid down by the regulation."
7 Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the procedure and the written observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court. The first question
8 It is clear from the wording of Article 7(1) of Regulation No 1442/88 that the grant of Community compensation which the Member States are authorized to introduce for the benefit of a wine cooperative is not subject to any prior condition requiring proof that the cooperative has suffered loss. By contrast, Article 7(2), which enables the Member States to supplement the Community compensation by paying national compensation, lays down two preconditions for the grant of such sums, as indicated above. Furthermore, the amount of the national compensation may not exceed the losses caused by the reduction in activity of the cooperative.
9 The fact that Article 7(1) of Regulation No 1442/88 lays down no precondition for the payment of a percentage of the premium to the wine cooperative is, as the Commission has correctly pointed out, attributable to the presumption made by the Community legislature that any permanent grubbing up of vines is liable adversely to affect a wine cooperative by increasing fixed costs for use of the processing facilities as a result of the reduction in deliveries.
10 On the other hand, in the case of Article 7(2) of the same regulation, a condition limiting the amount of national compensation paid to a cooperative to the losses due to the reduction of activity is necessary in order to ensure that the sum in question, added to the Community compensation, does not constitute a disguised aid liable to distort competition in the wine market.
11 The answer to the first question must therefore be that Article 7(1) of Regulation No 1442/88 does not, unlike Article 7(2) thereof, require it to be established that a cooperative has suffered loss before any reduction of the grubbing-up premium paid to any of its members. The second question
12 According to Mr Teulie, the French authorities' decision to fix a flat-rate of 15% for the deduction in favour of wine cooperatives is contrary to the principle of the direct applicability of regulations embodied in Article 189 of the Treaty. By virtue of that principle, the Member States are obliged to comply with the provisions of the regulation, according to which the deduction is to be within the range of 0 to 15%, by laying down detailed arrangements for their respective territories so that the exact amount of the deduction can be determined in each case.
13 It must be borne in mind that the fact that a regulation is directly applicable does not prevent its provisions from empowering a Member State to take implementing measures (see Case 230/78 Eridiana Zuccherifici [1979] ECR 2749, paragraph 34). That applies to Article 7 of Regulation No 1442/88. As is made clear in the last sentence of the eighth recital in the preamble thereto, the Council considered it appropriate, in view of the differences existing in wine-growing structures within the Community, that any compensation scheme should be adopted by the Member States.
14 Furthermore, the decision to empower the Member States to take implementing measures on the basis of Article 7 is also consonant with the aim of that provision. As the Commission has explained, the introduction of compensation for cooperatives is intended to counteract opposition in that sector to the policy of grubbing up. In view of the diversity of national situations, the Council allowed the Member States a degree of latitude regarding both the principle of Community and national compensation and the implementing arrangements. Each Member State was accordingly authorized to determine the level of compensation necessary to ensure that the wine cooperatives did not raise obstacles to the grubbing up of vines and that the objectives of the scheme of premiums established by Regulation No 1442/88 would therefore be attained.
15 It follows that the Member States were entitled to decide either to introduce flat-rate compensation equal to 15% of the premium or less, or to adjust the compensation by laying down criteria for calculation on a case-by-case basis. A flat-rate system has the advantage of being simple to manage and rapid, whereas any system involving adjustment of the percentages of premiums paid to the cooperatives according to their losses would be more complex and would be liable to provoke disputes concerning the evaluation of losses.
16 In those circumstances, the French authorities' decision to grant Community compensation to the wine cooperatives at the rate of 15% of the grubbing-up premium does not exceed the bounds of the discretion afforded them by Article 7 of Regulation No 1442/88.
17 Mr Teulie also claimed that the French authorities had neglected to communicate to the Commission the provisions adopted in implementation of Article 7 of Regulation No 1442/88 and that that infringement of Article 7(3) rendered inoperative the national measures providing for 15% of the grubbing-up premium to be withheld.
18 Even if it were assumed that the French Republic had failed in its duty of notification, it must be observed that, in view of the fact that the adoption of national measures for the implementation of Article 7(1) is not made conditional on their prior notification to the Commission, the notification requirement in question was imposed for the purposes of information only. Consequently, the absence of such notification does not affect the validity of the French measures providing for 15% of the grubbing-up premium to be withheld for the benefit of the wine cooperatives (see Joined Cases C-251/90 and C-252/90 Wood and Cowie [1992] ECR I-2873, paragraph 28).
19 The answer to the second question must therefore be that Article 7(1) of Regulation No 1442/88 is to be interpreted as allowing a Member State to determine uniformly, subject to the 15% limit, the proportion of the premiums to be allocated to the wine cooperatives.