1 By order of 14 June 1989, which was received at the Court Registry on 10 July 1989, the Finanzgericht Muenchen referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a question on the validity of Article 3a(2 ) of Council Regulation No 857/84 of 31 March 1984 adopting general rules for the application of the levy referred to in Article 5c of Regulation ( EEC ) No 804/68 in the milk and milk products sector, as amended by Council Regulation ( EEC ) No 764/89 of 20 March 1989 ( Official Journal 1989 L 84, p . 2 ).
2 The question was raised in proceedings brought by Josef Pastaetter, a farmer, against Hauptzollamt Bad Reichenhall concerning a reference quantity under the additional levy scheme applicable to milk .
3 Mr Pastaetter was granted a conversion premium under 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 ( Official Journal 1977 L 131, p . 1 ). The conversion period for which he had to undertake not to dispose of milk or milk products from his farm ended on 31 December 1984 .
4 Mr Pastaetter then asked the competent German authorities to grant him a reference quantity, under the additional levy scheme for milk . His request was refused on the ground that he had delivered no milk in 1983, the reference year adopted by the Federal Republic of Germany, and that his circumstances did not justify his being granted a reference quantity on an exceptional basis or an additonal reference quantity . Mr Pastaetter lodged a complaint against that decision, without success, and then commenced proceedings before the Finanzgericht Muenchen .
5 Considering that the decision to be given depended on the validity of the applicable Community provisions, the Finanzgericht Muenchen stayed the proceedings and referred the following question to the Court for a preliminary ruling under Article 177 of the EEC Treaty : "Is Council Regulation ( EEC ) No 857/84 of 31 March 1984, as amended by Council Regulation ( EEC ) No 764/89 of 20 March 1989, valid in so far as the special reference quantity is equal, under Article 3a(2 ), to only 60% of the quantity of milk or milk equivalent used as the basis for the non-marketing or conversion premium?"
6 Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the relevant Community provisions, the course of the procedure before the national court and the observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court .
7 The question submitted by the national court is essentially whether Article 3a(2 ) of Council Regulation ( EEC ) No 857/84 of 31 March 1984, as amended, is valid in so far as it restricts the special reference quantity provided for in that provision to 60% of the quantity of milk delivered or the quantity of milk equivalent sold by the producer during the 12 calendar months preceding the month in which the application for the non-marketing or conversion premium was made .
8 It must first be noted that the Community legislation on the additional levy on milk did not originally contain any specific provision for the grant of a reference quantity to producers who had not, pursuant to an undertaking given under Regulation No 1078/77, delivered milk during the reference year adopted by the Member State concerned . However, in its judgments in Case 120/86 Mulder [1988] ECR 2321, paragraph 28, and Case 170/86 von Deetzen [1988] ECR 2355, paragraph 17, the Court declared those provisions invalid for breach of the principle of legitimate expectations in so far as they did not provide for the allocation of such a reference quantity .
9 In those judgments, the Court stated, on the one hand, that a producer who had voluntarily ceased production for a certain period could not legitimately expect to resume production under the same conditions as those which previously applied and not to be subject to any rules of market or structural policy adopted in the meantime ( Mulder, paragraph 23; von Deetzen, paragraph 12 ), but, on the other hand, that where such a producer had been encouraged by a Community measure to suspend marketing for a limited period in the general interest and against payment of a premium he could legitimately expect not to be subject, on the expiry of his undertaking, to restrictions which specifically affected him by very reason of the fact that he had availed himself of the possibilities offered by the Community provisions ( Mulder, paragraph 24; von Deetzen, paragraph 13 ).
10 It was in consequence of those judgments that the Council adopted Regulation No 764/89 on 20 March 1989 . That regulation added a new Article 3a to Regulation No 857/84, providing essentially that producers who have not, pursuant to an undertaking given under Regulation No 1078/77, delivered milk during the reference year are to receive, in certain circumstances, a special reference quantity . Pursuant to Article 3a(2 ), that quantity is to be "equal to 60% of the quantity of milk delivered or the quantity of milk equivalent sold by the producer during the 12 calendar months preceding the month in which the application for the non-marketing or conversion premium was made, as determined by the competent authority concerned pursuant to Article 5(1)(e ) of Regulation ( EEC ) No 1391/78, as last amended by Regulation ( EEC ) No 84/83, and for which the producer has not lost his entitlement to the premium ".
11 Since Regulation No 764/89 was adopted in order to bring the provisions at issue into line with the Mulder and von Deetzen judgments cited above, the validity of Article 3a(2 ) must first be considered having regard to the principles applied in those judgments and in particular the principle of the protection of legitimate expectations .
12 It must be observed in the first place that the producers covered by Article 3a of Regulation No 857/84 as amended, did not, by contrast with the producers referred to in Article 2 of that regulation, deliver any milk during the reference year adopted by the Member State concerned . The Community legislature could not therefore calculate their special reference quantities according to the volume of deliveries made by them during that year but was obliged to use, and did use, other factors, such as the volume of their deliveries during a representative period preceding the period of non-marketing or conversion . In following that course, it could validly apply to such quantities a reduction coefficient designed to ensure that the category of producers concerned was not accorded an undue advantage by comparison with the producers who continued to deliver milk during the reference year .
13 It must be made clear, however, that where a reduction of that kind is applied, the principle of the protection of legitimate expectations precludes the rate of reduction from being fixed at such a high level, by comparison with those applicable to producers whose reference quantities are fixed pursuant to Article 2 of Regulation No 857/84, that its application amounts to a restriction which specifically affects them by very reason of the undertaking given by them under Regulation No 1078/77 .
14 The reduction of 40% provided for in Article 3a(2 ) of Regulation No 857/84 does not satisfy those requirements . It appears from the information produced by the Commission at the request of the Court that the reduction coefficients applicable to producers whose reference quantities are fixed on the basis of the milk deliveries made during the reference year vary in the different Member States, pursuant to Article 2(2 ) and ( 3 ) of Regulation No 857/84, according to categories of producer or the regions . However, it also appears from that information that in no case does the total of the reductions applicable to the producers referred to by Article 2, including those resulting from a reduction of the aggregate guaranteed quantities and the suspension of part of the reference quantities during the implementation of the scheme, exceed 17.5 %.
15 In those circumstances, the application to the producers covered by Article 3a of a reduction of 40% which, far from being representative of the rates applicable to the producers covered by Article 2, is more than double the highest total of such rates, must be regarded as a restriction which specifically affects the first-mentioned category of producers by very reason of their undertaking as to non-marketing or conversion .
16 The Council and the Commission objected that the reduction applicable pursuant to Article 3a(2 ) cannot be compared with the reductions applicable to those producers who continued to deliver milk during the reference year . The reference quantities of the latter category are calculated on the basis of the deliveries made during a calendar year comprised within the period from 1981 to 1983, that is to say relatively recent figures, whereas the special reference quantities for the first-mentioned category are based on the volumes of deliveries made before an undertaking was given pursuant to Regulation No 1078/77, that is to say figures which date back many years .
17 That argument cannot justify the difference in the contested reduction . It is apparent from a table produced by the Commission during the proceedings that milk deliveries, both in the Community in general and on individual holdings, increased constantly between 1977, the year in which Regulation No 1078/77 came into force, and 1983, the last calendar year available as a reference year .
18 The Council and the Commission also objected that it was not possible to attribute to the category of producers in question special reference quantities of more than 60% of milk deliveries made prior to the period of non-marketing or conversion without undermining the objective of the additional levy scheme for milk, which is to deal with structural surpluses in the market in milk and milk products . The Commission stated that, according to its estimates, it was to be anticipated that the volume of milk covered by the requests for the grant of a special reference quantity made by the producers who had given an undertaking under Regulation No 1078/77 would be approximately one million tonnes . Since the Community legislature considered that an additional quantity of milk of 600 000 tonnes was the largest quantity compatible with the objective of the scheme, it had increased the Community reserve by that quantity, whilst at the same time keeping the reference quantity of the other producers unchanged .
19 That argument likewise cannot justify the contested provisions . Even if an increase larger than the Community reserve could not be contemplated without the risk of disturbing the balance of the milk market, the fact remains that it would have been sufficient to reduce the reference quantities of the other producers proportionally by a corresponding amount, so as to be able to allocate larger reference quantities to the producers who gave an undertaking under Regulation No 1078/77 .
20 It follows that the contested 60% rule detracts from the legitimate expectations which the producers concerned were entitled to entertain as to the limited nature of their undertakings . The contested provision must therefore be declared void for breach of the principle of the protection of legitimate expectations, and it is unnecessary therefore to consider the other arguments concerning its validity put forward in the course of the proceedings .
21 For those reasons it must be stated in reply to the question submitted that Article 3a(2 ) of Council Regulation No 857/84 of 31 March 1984, as amended by Council Regulation No 764/89 of 20 March 1989, is invalid in so far as it restricts the special reference quantity provided for in that provision to 60% of the quantity of milk delivered or the quantity of milk equivalent sold by the producer during the 12 calendar months preceding the month in which the application for the non-marketing or conversion premium was made .