1 By order of 19 March 1996, received at the Court on 3 June 1996, the Bundesfinanzhof (Federal Finance Court) referred to the Court for a preliminary ruling under Article 177 of the EC Treaty a question on the validity of the first paragraph of Article 3 and Article 4(1) of Council Regulation (EEC) No 3950/92 of 28 December 1992 establishing an additional levy in the milk and milk products sector (OJ 1992 L 405, p. 1).
2 That question was raised in proceedings brought by Stefan Demand, a milk producer, against Hauptzollamt Trier (Principal Customs Office, Trier, hereinafter `the HZA Trier') concerning a reduction of 4.74% applied to his delivery reference quantity with effect from 1 April 1993.
3 That reduction of Mr Demand's individual reference quantity was made pursuant to the combined provisions of Article 4(1) of Regulation No 3950/92 and paragraph 4(1) of the Milch-Garantiemengen-Verordnung (Guaranteed Milk Quantities Order), as amended by the 27th amendment order (BGBl. 1993 I, p. 374). Community law
4 Article 1 of Regulation No 3950/92 extended for a period of seven years the additional milk levy scheme established for five consecutive periods of 12 months with effect from 1 April 1982 by Council Regulation (EEC) No 856/84 of 31 March 1984 amending Regulation (EEC) No 804/68 on the common organisation of the market in milk and milk products (OJ 1984 L 90, p. 10) which, after several extensions, had ceased to apply on 31 March 1993.
5 The abovementioned additional levy is payable on all quantities of milk delivered in excess of a reference quantity to be determined for each producer or buyer within the limit of a total quantity guaranteed for each Member State. The reference quantity exempt from the additional levy was, under Article 2 of Council Regulation (EEC) 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 (OJ 1984 L 90, p. 13), equal to the quantity of milk or milk equivalent delivered or purchased, in accordance with the relevant formula, during the reference year. That year had been chosen by the Member States from the years 1981 to 1983. The Federal Republic of Germany opted for 1983.
6 On account of continuing excess milk production, the Community was forced to reduce further the total quantity initially guaranteed to Member States. In order to achieve certain reductions at the level of individual producers, the Community introduced, in the context of the additional levy scheme, various measures, such as programmes for definitive discontinuation of milk production or for mandatory reduction of the reference quantity initially granted, or a combination of those programmes.
7 Thus, excluding any reduction of the total guaranteed quantity in exchange for compensation, as decided on in 1986, Council Regulation (EEC) No 775/87 of 16 March 1987 temporarily withdrawing a proportion of the reference quantities mentioned in Article 5c(1) of Regulation (EEC) No 804/68 (OJ 1987 L 78, p. 5) temporarily withdrew reference quantities of 4% for the 1987/88 marketing year and of 5.5% for the following year. In exchange for that temporary withdrawal, provision was made for compensation of ECU 10 per 100 kilograms for each of those periods.
8 In the context of the first extension of the initial levy scheme, that withdrawal was maintained until 31 March 1992 by Council Regulation (EEC) No 1111/88 of 25 April 1988 amending Regulation No 775/87 (OJ 1988 L 110, p. 30) at the rate of 5.5% for the periods from 1989 to 1992, but the nature of the compensation was changed. Henceforth it was to consist in direct payment to producers of a degressive sum. Thus, the degressive compensation was changed to ECU 8 per 100 kilograms for the 1989/90 marketing year, to ECU 7 per 100 kilograms for the next year and to ECU 6 per 100 kilograms for the 1991/92 year.
9 In connection with the reduction of 1% of the total guaranteed quantity, Council Regulation (EEC) No 3882/89 of 11 December 1989 amending Regulation No 775/87 (OJ 1989 L 378, p. 6) reduced to 4.5% the percentage of reference quantities temporarily suspended and at the same time increased the compensation provided for in Regulation No 1111/88. Thus, the rate of compensation was increased to ECU 10 per 100 kilograms for the 1989/90 marketing year, to ECU 8.5 per 100 kilograms for the following year and to ECU 7 per 100 kilograms for the 1991/92 year.
10 After a further reduction of 2% in the total guaranteed quantities, made by Council Regulation (EEC) No 1630/91 of 13 June 1991 amending Regulation No 804/68 (OJ 1991 L 150, p. 19), Council Regulation (EEC) No 816/92 of 31 March 1992 amending Regulation (EEC) No 804/68 (OJ 1992 L 86, p. 83) extended the application of the rules on the additional levy which were to expire on 31 March 1992. That extension was limited to a single milk marketing year because of the Council's intention to adopt new rules to apply until the year 2000 in the context of reform of the common agricultural policy.
11 Pursuant to Article 1 of Regulation No 816/92, which inserted in Regulation (EEC) No 804/68 of the Council of 27 June 1968 (OJ, English Special Edition 1968 (I), p. 176) an Article 5c(3)(g), the temporarily withdrawn reference quantities were not retained in the total guaranteed quantities. The practical consequence of this was that individual reference quantities were reduced without compensation. However, it was the Council's intention to decide definitively on the future of the withdrawn reference quantities in the context of reform of the common agricultural policy.
12 The new scheme introduced by Regulation No 3950/92 codifies the provisions on reference quantities and additional levies. However, the rules announced in the context of reform of the common agricultural policy concerning the definitive treatment of the temporarily withdrawn reference quantities do not appear in that regulation.
13 As regards the withdrawn quantities, Article 3 of Regulation No 3950/92 provides: `The sum of the individual reference quantities of the same type may not exceed the corresponding total quantities to be determined for each Member State. ...'
14 Article 4 of Regulation No 3950/92 provides: `1. The individual reference quantity available on the holding shall be equal to the quantity available on 31 March 1993 and shall be adjusted, where appropriate, for each of the periods concerned, so that the sum of the individual reference quantities of the same type does not exceed the corresponding total quantities referred to in Article 3, taking account of any reductions made for allocation to the national reserve provided for in Article 5. ...'
15 Council Regulation (EEC) No 748/93 of 17 March 1993 amending Regulation No 3950/92 (OJ 1993 L 77, p. 16) likewise did not, when establishing the total guaranteed quantities, for 1993/94 only, take account of the 4.5% of the reference quantities already excluded for the previous year by Regulation No 816/92.
16 Next, Council Regulation (EEC) No 1560/93 of 14 June 1993 amending Regulation No 3950/92 (OJ 1993 L 154, p. 30) fixed the total guaranteed quantities for each Member State, stating, in the second recital in the preamble thereto, that `the temporary suspension of a part of the reference quantities ... under Regulation (EEC) No 775/87 was dictated by the market situation; ... a downward sliding indemnity was granted to producers for five years for the quantities thus suspended; ... Regulation (EEC) No 816/92, which extended the additional levy scheme ... did not adopt ... the quantities previously suspended on account of the continuing surplus situation which called for the 4.5% suspension of the deliveries reference quantities to be consolidated into a definitive reduction of the guaranteed total quantities; ... in the regulations finally adopted in the milk and milk products sector to implement the reform of the common agricultural policy ... the quantities concerned have no longer been retained'.
17 The individual reference quantity of the plaintiff in the main proceedings, the reduction of which is at issue, includes inter alia an additional reference quantity which enabled him to increase his initial reference quantity. He acquired that additional quantity, for DM 1.60 per kilogram of milk, in the 1990/91 marketing year, as part of an operation undertaken at national, or regional, level for the purpose of reducing the individual reference quantities. German law and the national proceedings
18 That operation was provided for by an order (`Verwaltungsvorschrift') of the Ministry of Agriculture, Viticulture and Forests of Land Rheinland-Pfalz of 19 March 1991 relating to the grant of compensation for definitive discontinuation of milk production intended for the market and the allocation of additional delivery reference quantities (MinBl., Rheinland-Pfalz 1991, p. 163, hereinafter `the Order'). As appears from paragraph 1.1 thereof, the Order was adopted on the basis, in particular, of Article 4(1)(a) and (c) of Regulation No 857/84, as amended by Council Regulation (EEC) No 1183/90 of 7 May 1990 (OJ 1990 L 119, p. 27).
19 Article 4(1) of Regulation No 857/84, as amended, provides: `In order to complete the restructuring of milk production at national or regional level or at the level of the collecting areas, the Member States may, in connection with the application of formulas A and B: (a) - grant to producers undertaking to discontinue milk production definitively compensation paid in one or more annual payments; - grant to producers undertaking to discontinue definitively part of their milk production compensation to be paid in one or more annual instalments; (b) ... (c) grant producers undertaking farming as their main occupation an additional reference quantity, whether their herd fulfils the conditions set out in paragraph (b) or not.'
20 Under the Order, the operation was twofold. First, each producer prepared definitively to discontinue milk production was offered compensation of DM 1.60 per kilogram of his guaranteed quantity.
21 Since the operation resulted in a reduction greater than that initially envisaged, the German authorities offered the surplus to those producers who wished to increase their quota against payment of a sum equal to the amount paid by Land Rheinland-Pfalz by way of compensation to producers who had discontinued milk production. To that end, a producer wishing to acquire an additional reference quantity was required, under paragraph 3.1.2, to conclude an assignment contract with a producer who was discontinuing production and pay the price to the relevant public authority.
22 By decision of 13 December 1993, the HZA Trier confirmed the reduction of 4.74% applied by the dairy concerned, which affects without distinction both the initial reference quantities and the additional quantities acquired by the plaintiff in the main proceedings in the context of the operation undertaken in the 1990/91 marketing year.
23 His action against the decision of the HZA Trier having been dismissed by judgment of the Finanzgericht Rheinland-Pfalz, the plaintiff in the main proceedings brought an appeal on a point of law before the Bundesfinanzhof. The question submitted for a preliminary ruling
24 Considering that the outcome of the proceedings before it depended on the validity of the combined provisions of the first paragraph of Article 3 and Article 4(1) of Regulation No 3950/92, the Bundesfinanzhof referred the following question to the Court of Justice: `Are the combined provisions of Article 4(1) and the first paragraph of Article 3 of Regulation (EEC) No 3950/92 - whereby the suspension, under Article 5c(3)(g) of Regulation (EEC) No 804/68 as amended by Regulation (EEC) No 816/92, of part of the reference quantities allocated to producers was transformed without compensation into a permanent reduction of those reference quantities, without exempting from that reduction at least additional quantities acquired by producers - compatible with Community law, and in particular with the right to the protection of property and the principles of equal treatment and protection of legitimate expectations?'
25 The question whether the conversion of the temporary suspension of a percentage of the reference quantity into a definitive reduction without compensation is valid has already been examined by the Court of Justice in the case which gave rise to its judgment of 15 April 1997 in Case C-22/94 Irish Farmers' Association v Minster for Agriculture, Food and Forestry [1997] ECR I-1809, which was pending when the Bundesfinanzhof submitted its request for a preliminary ruling and to which that Court referred in the grounds of its order for reference.
26 In its judgment in Irish Farmers' Association, the Court held that, in so far as the provisions of Article 5c(3)(g) of Regulation No 804/68, inserted by Article 1(3) of Regulation No 816/92, and of Article 3 of Regulation No 3950/92, as amended by Article 1 of Regulation No 1560/93, converted the temporary withdrawal of a percentage of the reference quantity within the meaning of Regulation No 775/87, without compensation, into a definitive reduction, consideration of the general principles of Community law such as the protection of legitimate expectations, non-discrimination and proportionality as well as consideration of the fundamental right to property had disclosed no factor capable of affecting the validity of those provisions.
27 On 22 April 1997, the Court forwarded a copy of the Irish Farmers' Association judgment to the Bundesfinanzhof and asked it whether it wished to maintain its request for a preliminary ruling.
28 By letter of 30 July 1997, the Bundesfinanzhof informed the Court that, having regard in particular to the principles of the right to the protection of property and protection of legitimate expectations relied on by the plaintiff in the main proceedings in relation to the additional milk quotas acquired on the basis of the allocations made by Land Rheinland-Pfalz, it maintained its request for a preliminary ruling.
29 In view of that answer, it is appropriate to treat the question submitted as relating only to the additional reference quantities which the plaintiff in the main proceedings acquired for the price of DM 1.60 per kilogram of milk. The additional reference quantities
30 As the Advocate General stated in point 29 of his Opinion, the present case raises no new issue such as to change the conclusion reached by the Court in its judgment in Irish Farmers' Association as regards validity of the conversion scheme and the definitive reduction at issue in the main proceedings.
31 Nor can the validity of Articles 3 and 4 of Regulation No 3950/92 be called in question as regards the additional reference quantities which the plaintiff in the main proceedings was able to obtain only against payment of a sum of DM 1.60 per kilogram to the competent authority.
32 In that connection, it must be borne in mind at the outset that the additional reference quantities were not dealt with only in the judgment in Irish Farmers' Association and Others, cited above, but also in the judgments of the Court of First Instance in Joined Cases T-466/93, T-469/93, T-473/93, T-474/93 and T-477/93 O'Dwyer and Others v Council [1995] ECR II-2071 and Case T-119/95 Hauer v Council and Commission [1998] ECR II-2713, in which the validity of Regulation No 816/92 was contested.
33 A Member State has such reference quantities available for reallocation only to the extent to which reference quantities initially granted to other producers have been released by the latter. As is clear from Article 5c(1) of Regulation No 804/68, inserted by Regulation No 856/84, the sum of all the individual reference quantities granted constitutes the total guaranteed quantity which may not be exceeded. Thus, the competent German authority was able to grant the plaintiff in the main proceedings only reference quantities which other producers chose not to produce any longer.
34 However, and quite apart from the fact that the amount paid by the plaintiff in the main proceedings is, in this case, equal to the sum paid by the competent authority by way of compensation for discontinuing production, the Community milk quota scheme creates no legal link between the two actions.
35 Whilst the Community additional levy scheme in certain specific cases authorises the Member States, subject to observance of the total guaranteed quantity, to reallocate reference quantities which have been released, without transfer of the land with which they are associated, it does not lay down the detailed arrangements for such reallocation. Therefore, it is incumbent on the Member States, in the exercise of that authorisation, to determine the procedures for reallocation, in compliance with general principles and fundamental rights upheld in Community law by decisions of the Court of Justice (see in particular Case 5/88 Wachauf [1989] ECR 2609 and Case C-2/92 Bostock [1994] ECR I-955) and, in that context, to rule whether or not any payment must be made in consideration of the reallocation.
36 In that regard, it must be pointed out that, in the case of the purchase of agricultural land, since the existence of a milk quota is one of the factors in determining the value of the land, agricultural land with quotas is more expensive than land without quotas.
37 It follows that the procedure for granting individual reference quantities has no influence on their legal nature. Consequently, additional reference quantities are no different from initial reference quantities, both being subject to the same rules concerning temporary suspension and definitive reduction.
38 On the other hand, it would be contrary to the spirit and purpose of the additional levy scheme to exclude from a temporary suspension programme, followed by definitive reduction, reference quantities which, after being withdrawn from the market, are readmitted to it before reallocation to other producers. Since the purchase of an additional reference quantity is an economic option which enables producers to increase their volume of deliveries, those producers contribute to increasing the structural surplus in the sector. There is therefore good reason for them to be required to participate in the reduction effort asked of producers.
39 As the Advocate General stated in point 34 of his Opinion, the plaintiff in the main proceedings enjoys, in such circumstances, the same prerogatives and is subject to the same restrictions in respect of that additional reference quantity as any other producer in possession of an initial reference quantity. The right to property and the principle of proportionality
40 With regard more particularly to the right to property, which, according to the plaintiff in the main proceedings, has been infringed, the Court held, in paragraphs 28 and 29 of Irish Farmers' Association, cited above, that the regulations in question form part of a body of legislation intended to remedy the surpluses on the milk market and therefore correspond to aims pursued by the Community in the general interest and that the conversion into a definitive reduction without compensation does not affect the actual substance of that right.
41 It must be added that, regardless of the legal nature to be attributed to an additional reference quantity, but having regard to the persistence of surpluses, a definitive withdrawal of 4.74% of an additional reference quantity appears to be appropriate and necessary to achieve the aim of that measure, namely an enduring reduction of the surpluses.
42 The Community legislature has not thus exceeded the bounds of the latitude available to it, the definitive reduction of 4.74% both of the initial quantity and of the additional quantity not being disproportionate to the aim pursued. The principle of protection of legitimate expectations
43 The plaintiff in the main proceedings alleges breach of the principle of the protection of legitimate expectations through application of the conversion measure in question to additional reference quantities. However, the provisions at issue disclose no factor of such a kind as to enable producers in the circumstances of the plaintiff in the main proceedings to entertain legitimate expectations that such an additional reference quantity would be treated differently by reason of the way in which it was acquired and would therefore be excluded from the measure in question.
44 It follows from the foregoing that consideration of the general principles of Community law, and in particular those of the protection of legitimate expectations and of the fundamental right to property, has not disclosed any factor of such a kind as to affect the validity of the first paragraph of Article 3 and Article 4(1) of Regulation No 3950/92 in so far as those articles converted, without compensation, temporary suspension of a percentage of the additional reference quantity granted in return for payment into a definitive reduction.