1 By an order of 7 June 1988, received at the Court on 13 October 1988, the Court of Appeal of England and Wales referred to the Court of Justice under Article 177 of the EEC Treaty several questions on the interpretation of provisions of the EEC Treaty, of Council Regulation ( EEC ) No 3796/81 of 29 December 1981 on the common organization of the market in fishery products ( Official Journal 1981 L 379, p . 1, hereinafter referred to as "the basic regulation "), of Council Regulation ( EEC ) No 2202/82 of 28 July 1982 laying down general rules for the granting of financial compensation in respect of certain fishery products ( Official Journal 1982 L 235, p . 1 ) and of Commission Regulation ( EEC ) No 3137/82 of 19 November 1982 laying down detailed rules for the granting of financial compensation in respect of certain fishery products ( Official Journal 1982 L 335, p . 1 ).
2 The questions arose in proceedings concerning the refusal of the Intervention Board for Agricultural Produce ( hereinafter referred to as "the Intervention Board ") to pay financial compensation amounting to approximately UKL 80 000 in respect of fish withdrawn from the market during 1983 and 1984 by members of The Fish Producers' Organization Ltd and The Grimsby Fish Producers' Organization Ltd ( hereinafter referred to as "the Producers' Organizations ").
3 The Intervention Board' s refusal arose out of the failure of the Producers' Organizations during the period from September 1983 to December 1985 to comply with the marketing standards laid down in Council Regulation ( EEC ) No 103/76 of 19 January 1976 laying down certain common marketing standards for certain fresh or chilled fish ( Official Journal 1976 L 20, p . 29 ) with regard to fish put up for sale and not withdrawn from the market belonging to the same species as fish made subject to withdrawal .
4 The Intervention Board appealed against the judgment given at first instance on 12 June 1987, ordering it to pay the compensation in question, to the Court of Appeal, which decided to stay the proceedings until the Court of Justice had given a preliminary ruling on the following questions : "( 1 ) Are the provisions of the Treaty, Council Regulation ( EEC ) No 3796/81, Council Regulation ( EEC ) No 2202/82, and Commission Regulation ( EEC ) No 3137/82 to be interpreted as requiring a Member State to pay a producers' organization any financial compensation in respect of fish withdrawn at the Community withdrawal price, such fish having been properly graded and marketed in accordance with Council Regulation ( EEC ) No 103/76, if that producers' organization has failed to a significant extent to comply with the Community marketing standards laid down by that regulation in respect of other fish of the withdrawn species put up for sale but not withdrawn during the same period? ( 2 ) If the answer to Question 1 is that financial compensation must be paid to a producers' organization, is that compensation to be calculated : ( a ) by reference to the total quantity of fish of the relevant species put up for sale even if some of that quantity of fish of the relevant species was put up for sale in breach of Community marketing standards, or ( b ) by reference to the total quantity of fish of the relevant species put up for sale reduced pro tanto to reflect the quantity of fish of that species put up for sale in breach of Community marketing standards? ( 3 ) If the answer to Question 2 is that compensation is to be calculated by reference to the quantity of fish as reduced to reflect the quantity put up for sale in breach of Community marketing standards, is the burden upon the Member State to establish the extent of the producers' organization' s failure or upon the producers' organization to show the extent of its compliance? ( 4 ) To what extent, if any, can a failure by a producers' organization properly to grade fish put up for sale but not withdrawn in breach of Community marketing standards be said to be 'an infringement of limited importance of the rules for financial compensation' , within the meaning of Article 13 of Commission Regulation ( EEC ) No 3137/82? ( 5 ) If Article 13 of Commission Regulation ( EEC ) No 3137/82 may be applied to a failure properly to grade fish put up for sale, must the Member State before refusing to pay any compensation : ( a ) first consider whether the infringement is of limited importance, and in so doing ( b ) consider the quantity of fish of the relevant species put up for sale but not withdrawn which has not been properly graded?"
5 Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the course of 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
6 The Producers' Organizations contend, firstly, that the payment of financial compensation for fish withdrawn from the market is subject only to the conditions expressly laid down in Article 13(1 ) of the basic regulation, which are reiterated in Article 3 of Regulation ( EEC ) No 2202/82 and which, in their view, are satisfied in the present case . By taking the view that the financial compensation may only be granted if the Producers' Organization shows that all fish sold by its members, of the same species as that in respect of which the organization intervened during the period in question, conformed to Community marketing standards, the Intervention Board added a further condition to those laid down in Article 13 of the basic regulation . Such an interpretation hinders the objectives laid down in Article 39(1 ) of the EEC Treaty, inasmuch as it threatens the standard of living of fishermen, destabilizes the market in fish and does not ensure the availability of supplies of fish at reasonable prices to the consumer .
7 Secondly, the Producers' Organizations contend that, if Article 4 of the basic regulation, which imposes an obligation on Member States to ensure the observance of marketing standards and provides for specific penalties in the event of an infringement, is read in conjunction with Article 9 of Commission Regulation ( EEC ) No 2062/80 of 31 July 1980 on the conditions and procedure for granting or withdrawing recognition of producers' organizations and associations thereof in the fishing industry ( Official Journal 1980 L 200, p . 82 ), which requires Member States to withdraw recognition from producers' organizations which fail to observe those marketing standards, it may be concluded that, inasmuch as there are specific penalties for failure to comply with the common marketing rules, a refusal to pay financial compensation, which is not specifically provided for as a penalty, is excluded .
8 It should be observed first of all that, according to the third and fourth recitals in the preamble to the basic regulation, the application of common marketing standards constitutes an appropriate measure to encourage market stability . It should also have the effect of keeping products of unsatisfactory quality off the market and facilitating trade relations based on fair competition, thus helping to improve the profitability of production . The sixth recital also emphasizes the need to adjust supply to market requirements and to guarantee, as far as possible, a fair income to producers .
9 Secondly, the Community pricing system comprises, on the one hand, a guide price, fixed on the basis of the average of prices recorded on representative wholesale markets or in representative ports during the three fishing years immediately preceding the year for which the price is fixed ( Article 10(2 ) of the basic regulation ), and, on the other hand, a withdrawal price, arrived at by the application to an amount equal to at least 70% but not more than 90% of the guide price of a conversion factor varying according to the product category ( Article 12(1 ) of the basic regulation ).
10 It should be stated in this regard that an increase in supply as a result of products of inferior quality being put on the market has a negative impact on both prices, thus leading to a reduction in fishermen' s incomes and an increase in the volume of fish withdrawn .
11 Compliance with common marketing standards is thus essential to ensure the proper functioning of the common organization of the market in fishery products and in order to achieve the prime objectives of that common organization, namely, on the one hand, to improve the profitability of production and adjust demand to market requirements and, on the other hand, to guarantee a fair income to producers .
12 Even though the Community rules do not expressly provide, in the event of non-compliance with the common marketing standards in relation to fish put up for sale and not withdrawn from the market, belonging to the same species of fish withdrawn during the same period, for the withholding of the financial compensation for which intervening producers' organizations are eligible under Article 13(3 ) of the basic regulation and Article 4(1 ) of Regulation ( EEC ) No 2202/82, it nevertheless follows from the objectives pursued by the adoption of such standards that if the standards are not complied with, or at all events if they are not complied with "to a significant extent" as suggested in the order for reference, this must entail the withholding of the financial compensation .
13 The aforesaid provisions, which provide for financial compensation varying according to the ratio between the quantities of the product withdrawn and those put up for sale each year in accordance with the common marketing standards and rules, must, in the light of the foregoing considerations, be interpreted as meaning that the fact that quantities put up for sale and not withdrawn from the market do not conform to those rules and standards may not be disregarded . Nor is it permissible to draw from that fact the sole inference that the financial compensation must be fixed at an amount lower than that which would have been payable if the marketing rules had been observed in the case of all the quantities of the product in question .
14 As regards the argument based on the existence of specific penalties, in particular the withdrawal of recognition provided for in Article 9 of Regulation No 2062/80, it should be pointed out that the existence of this sanction, as well as the existence of other sanctions which may be provided for in the laws of the Member States, cannot exclude the withholding of financial compensation in the event of the infringement, to a significant extent, of certain rules whose observance is essential for the proper functioning of the common organization of the market in question .
15 The reply to be given to the first question must therefore be that the provisions of Council Regulation No 3796/81 of 29 December 1981 on the common organization of the market in fishery products and those of Council Regulation No 2202/82 of 28 July 1982 laying down general rules for the granting of financial compensation in respect of certain fishery products must be interpreted as meaning that no financial compensation is to be granted to a producers' organization for fish withdrawn at the Community withdrawal price, such fish having been graded and marketed in accordance with Council Regulation No 103/76 of 19 January 1976 laying down common marketing standards for certain fresh or chilled fish, if that producers' organization has failed to a significant extent to comply with the common marketing standards laid down by that regulation in respect of other fish of the withdrawn species put up for sale but not withdrawn during the same period . The second and third questions
16 Having regard to the reply given to the first question, it is not necessary to reply to the second and third questions . The fourth and fifth questions
17 By these questions the national court essentially seeks to ascertain to what extent the putting up for sale of a product which does not conform to Community marketing standards is to be regarded as an infringement of limited importance of the rules for financial compensation, within the meaning of Article 13(1 ) of Commission Regulation No 3137/82 of 19 November 1982 laying down detailed rules for the granting of financial compensation in respect of certain fishery products, and upon whom the burden of proving the limited extent of the infringement rests .
18 It should be stated that withholding financial compensation after a producers' organization has failed to comply with the common marketing standards in respect of fish put up for sale and not withdrawn from the market, belonging to the same species as fish withdrawn during the same period, may prove to be disproportionate in the event of an infringement of limited importance of those standards .
19 In such a case, it is appropriate to apply the aforementioned provision, which provides that : "In the event that a producers' organization or one of its members has committed an infringement of limited importance of the rules for financial compensation, and that organization can prove to the satisfaction of the Member State concerned that the infringement was committed without intent to defraud or in the absence of gross negligence, the Member State shall withhold an amount equal to 10% of the Community withdrawal price applicable to the quantities in question which have been withdrawn and which did not receive a carry-over premium ."
20 Having regard to the importance of compliance with marketing standards for the proper functioning of the common organization of the markets in question, an infringement is of limited importance, within the meaning of Article 13(1 ) of Regulation No 3137/82, if it is occasional and relates to minimal quantities of the product concerned and, secondly, is not of such a nature as to disturb the market .
21 Finally, it must be stated that it is for the producers' organization concerned, which, having failed to observe the common marketing standards, nevertheless asks for Article 13(1 ) of Regulation No 3137/82 to be applied in its case, to prove the limited importance of the infringement committed .
22 The reply to be given to the fourth and fifth questions must therefore be that the offering for sale of a product which does not conform to the common marketing standards is only to be regarded as an infringement of limited importance of the rules for financial compensation, within the meaning of Article 13(1 ) of Commission Regulation No 3137/82 of 19 November 1982 laying down detailed rules for the granting of financial compensation in respect of certain fishery products, if the infringement is occasional and relates to minimal quantities of the product in question and, secondly, is not of such a nature as to disturb the market . The burden of proving the limited importance of the infringement rests on the producers' organization concerned .