1 BY ORDER DATED 8 JULY 1974, RECEIVED AT THE COURT REGISTRY ON 17 OCTOBER 1974, THE HESSISCHER VERWALTUNGSGERICHTSHOF REFERRED TWO QUESTIONS ON THE VALIDITY OF REGULATION NO 849/70 OF THE COMMISSION OF 11 MAY 1970, AMENDING REGULATIONS NO 1403/69 AND NO 1404/69 ON THE DENATURING OF COMMON WHEAT ( OJ L 102, P . 7 ). ON THE FIRST QUESTION ( STATEMENT OF REASONS AND MATERIAL JUSTIFICATION OF REGULATION NO 849/70 )
2 THE COURT IS ASKED BY THE FIRST QUESTION WHETHER REGULATION NO 849/70 IS INVALID ( A ) BY REASON OF AN INSUFFICIENT STATEMENT OF REASONS, OR ( B ) BY REASON OF THE NON-FULFILMENT OF THE CONDITIONS OF ARTICLE 4 ( 1 ), SECOND SENTENCE, OF REGULATION NO 172/67 OF THE COUNCIL OF 27 JUNE 1967 ON THE GENERAL RULES GOVERNING THE DENATURING OF WHEAT ( OJ P . 2602 ), AMENDED BY ARTICLE 1 OF REGULATION NO 644/68 OF THE COUNCIL OF 29 MAY 1968 ( OJ L 122, P . 3 ).
3 ARTICLE 7 OF REGULATION NO 120/67 OF THE COUNCIL OF 13 JUNE 1967 ON THE COMMON ORGANIZATION OF THE MARKETS IN CEREALS ( OJ 1967, P . 2269 ) PROVIDES, WITHIN THE FRAMEWORK OF INTERVENTION MEASURES, THE POSSIBILITY OF THE GRANT OF A DENATURING PREMIUM FOR COMMON WHEAT . UNDER THE SAME ARTICLE THE COMMISSION IS INSTRUCTED TO ADOPT GENERAL RULES GOVERNING THE CONDITIONS FOR THE GRANT OF DENATURING PREMIUMS AND THE AMOUNT THEREOF, IN ACCORDANCE WITH THE GENERAL RULES ADOPTED BY THE COUNCIL . THESE RULES ARE THE SUBJECT-MATTER OF REGULATION NO 172/67 . ARTICLE 4 ( 1 ) OF THAT REGULATION PROVIDES THAT 'THE DENATURING PREMIUM FOR COMMON WHEAT, THE AMOUNT OF WHICH MAY VARY, SHALL BE FIXED BEFORE THE BEGINNING OF AND FOR THE DURATION OF EACH MARKETING YEAR ...'. SINCE THE APPLICATION OF THIS RULE HAD CAUSED MARKET DISTURBANCES AS A RESULT OF SHORT-TERM CHANGES THAT HAD OCCURRED DURING THE MARKETING YEAR, REGULATION NO 644/68, BY ARTICLE 1 THEREOF, SUPPLEMENTED ARTICLE 4 ( 1 ) OF REGULATION NO 172/67 BY ADDING THAT THE DENATURING PREMIUM 'MAY BE ADJUSTED DURING THE CROP YEAR WHERE THE BALANCE OF THE MARKET IN CEREALS IS LIKELY TO BE DISTURBED '. FINALLY, THE PROCEDURES FOR THE GRANT OF THESE PREMIUMS WERE LAID DOWN IN RESPECT OF THE PERIOD IN QUESTION BY REGULATION NO 1403/69 OF THE COMMISSION OF 18 JULY 1969 ( OJ L 180, P . 3 ).
4 UNDER THE PROVISIONS OF ARTICLE 3 OF REGULATION NO 172/67 'CEREALS FOR DENATURING MUST BE OF A MINIMUM QUALITY AND QUANTITY TO BE DETERMINED '. GIVING EFFECT TO THIS PROVISION, REGULATION NO 1403/69 ADOPTS A CERTAIN NUMBER OF QUALITATIVE CRITERIA CONNECTED WITH, INTER ALIA, THE SPECIFIC WEIGHT OF THE GOODS TO BE DENATURED . MORE PARTICULARLY, FOR THE PURPOSE OF ENCOURAGING THE MARKETING OF COMMON WHEAT HAVING A SPECIFIC WEIGHT IN EXCESS OF 77 KG/HL, THE SECOND ARTICLE 4 ( 2 ) IN CONJUNCTION WITH ANNEX II OF THAT REGULATION PROVIDES FOR AN INCREASE IN THE DENATURING PREMIUM RANGING FROM 0.5 PER CENT TO 2 PER CENT OF THE BASIC INTERVENTION PRICE DEPENDING ON THE SPECIFIC WEIGHT . REGULATION NO 849/70 DISCONTINUED THIS INCREASE WITH EFFECT FROM 1 JUNE 1970 BY REPEALING ARTICLE 4 ( 2 ) AND ANNEX II OF REGULATION NO 1403/69 .
5 BEFORE THE NATIONAL COURT THE VALIDITY OF THIS REGULATION WAS DISPUTED ON THE GROUNDS OF INSUFFICIENT STATEMENT OF REASONS AND THAT THE CONDITION LAID DOWN BY REGULATION NO 644/68 - THAT 'THE BALANCE OF THE MARKET IN CEREALS IS LIKELY TO BE DISTURBED' - WAS NOT IN FACT FULFILLED .
6 THE STATEMENT OF REASONS IN REGULATION NO 849/70 MUST BE CONSIDERED AND ASSESSED IN THE CONTEXT OF THE COMPLEX OF REGULATIONS OF WHICH THIS ACT IS AN INTEGRAL PART . THE PREAMBLES TO REGULATION NO 172/67 AND 644/68 BRING OUT BOTH THE GENERAL OBJECTIVE OF THE DENATURING OPERATIONS - TO SUSTAIN THE PRICE OF CEREALS OF BREAD-MAKING QUALITY - AND THE MORE SPECIFIC NEED FOR TAKING INTO ACCOUNT THE QUALITATIVE CHARACTERISTICS OF THE GOODS SUBJECTED TO DENATURING, LINKED TO THE WISH TO AVOID DISTURBING BY THE OPERATIONS THE BALANCE OF THE WHOLE CEREALS MARKET . IN THIS CONNEXION THE SECOND RECITAL OF THE REGULATION IN QUESTION, VIZ . NO 849/70, REFERS TO THE FACT THAT 'PRESENT CIRCUMSTANCES IN THE MARKET IN CEREALS OF BREAD-MAKING QUALITY, AND IN PARTICULAR THE SATISFACTORY PROGRESS MADE IN THE DISPOSAL OF SURPLUSES OF COMMON WHEAT OF A HIGH SPECIFIC WEIGHT, MAY DISTURB THE MARKET IN THAT CEREALS WHERE DENATURING IS STILL ENCOURAGED '. WHEN CONSIDERED IN THE CONTEXT OF THE SYSTEM IN WHICH IT TOOK EFFECT, THE DISCONTINUANCE OF THE INCREASE IN THE PREMIUM OBVIOUSLY HAS THE PURPOSE, BY DISCONTINUING THE INDUCEMENT TO DENATURE CERTAIN QUALITIES OF WHEAT OF BREAD-MAKING QUALITY, OF AVOIDING THE DISTURBANCES WHICH THE COUNCIL REGULATION HAS IN MIND . BEING THUS SPECIFICALLY LINKED TO THE CRITERION WHICH, UNDER ARTICLE 1 OF REGULATION NO 644/68, ALLOWS AN ADJUSTMENT OF THE DENATURING PREMIUM DURING THE MARKETING YEAR, REGULATION NO 849/70 FULFILLS THE REQUIREMENT OF STATEMENT OF REASONS LAID DOWN BY ARTICLE 190 OF THE TREATY . ITS VALIDITY CANNOT THEREFORE BE ATTACKED UNDER THIS HEADING .
7 THE QUESTION IS THEREFORE LIMITED TO ITS SECOND PART, VIZ . WHETHER REGULATION NO 849/70 IS MATERIALLY JUSTIFIED IN THE LIGHT OF THE REQUIREMENT UNDER ARTICLE 1 OF REGULATION NO 644/68 WHICH PERMITS AN ADJUSTMENT OF THE AMOUNT OF THE PREMIUMS DURING THE CROP YEAR ONLY 'WHERE THE BALANCE OF THE MARKET IN CEREALS IS LIKELY TO BE DISTURBED '. IN ORDER TO DETERMINE WHETHER SUCH A THREAT EXISTS, THE COMMISSION HAD TO CONSIDER - BEARING IN MIND THE OBJECTIVES WHICH THE COUNCIL ASSIGNED TO THE SYSTEM OF DENATURING PREMIUMS - BOTH THE EVOLUTION OF THE MARKET IN CEREALS OF BREAD-MAKING QUALITY AND THE EFFECT OF DENATURING OPERATIONS ON THE EVOLUTION OF THE MARKET IN FODDER CEREALS . IN SUBORDINATING THE MODIFICATION OF PREMIUMS TO THE EXISTENCE OF A 'LIKELIHOOD OF DISTURBANCE', ARTICLE 1 OF REGULATION NO 644/68 LIMITS ITSELF IN THIS RESPECT TO A REASONABLE FORECAST ON THE PART OF THE COMMISSION WITHOUT REQUIRING - AS WAS ALLEGED BY THE PLAINTIFF IN THE NATIONAL PROCEEDINGS - THAT THERE SHOULD BE A PRESENT AND EVEN GRAVE DISTURBANCE .
8 IN ORDER TO DEAL WITH SUCH A LIKELIHOOD THE COMMISSION IS FREE TO USE DIFFERENT MEANS HAVING THE PURPOSE OF INFLUENCING THE EVOLUTION OF THE MARKET, SUCH AS THE MODIFICATION OF THE BASIC AMOUNT OF THE DENATURING PREMIUM, THE MODIFICATION OR DISCONTINUANCE OF THE INCREASES IN THAT PREMIUM, RESTRICTING OR STOPPING DELIVERIES OF WHEAT FOR DENATURING BY THE INTERVENTION AGENCIES OR A CHANGE IN THE CONDITIONS OF TRADE WITH THIRD COUNTRIES . THUS THE COMMISSION ENJOYS A SIGNIFICANT FREEDOM OF EVALUATION BOTH AS REGARDS THE TAKING INTO ACCOUNT OF POSSIBLE FACTORS OF DISTURBANCE AND IN CHOOSING THE MEANS FOR DEALING WITH THEM, WHICH MUST BE EXERCISED IN THE LIGHT OF THE OBJECTIVES OF THE ECONOMIC POLICY LAID DOWN BY REGULATION NO 120/67 IN THE FRAMEWORK OF THE COMMON AGRICULTURAL POLICY .
9 WHEN EXAMINING THE LAWFULNESS OF THE EXERCISE OF SUCH FREEDOM, THE COURTS CANNOT SUBSTITUTE THEIR OWN EVALUATION OF THE MATTER FOR THAT OF THE COMPETENT AUTHORITY, BUT MUST RESTRICT THEMSELVES TO EXAMINING WHETHER THE EVALUATION OF THE COMPETENT AUTHORITY CONTAINS A PATENT ERROR OR CONSTITUTES A MISUSE OF POWER . THE ALLEGATIONS OF THE PLAINTIFF IN THE MAIN ACTION HAVE REVEALED NO INDICATION OF SUCH AN ERROR OR SUCH A MISUSE OF POWER . IT IS NOT IN DISPUTE THAT AT THE TIME OF THE MEASURE IN QUESTION THERE EXISTED ON THE MARKET A CERTAIN TENSION AS REGARDS THE SUPPLY OF CEREALS OF BREAD-MAKING QUALITY BELONGING TO THE TYPE OF GOODS THE DENATURING OF WHICH GAVE RISE TO PAYMENT OF AN INCREASED PREMIUM UNDER ARTICLE 4 ( 2 ) AND ANNEX II OF REGULATION NO 1403/69 . IN THE CHOICE OF MEANS FOR THE PURPOSE OF DEALING WITH THE SITUATION, THE COMMISSION WAS ENTITLED TO PREFER THE DISCONTINUANCE OF AN INCREASE IN THE PREMIUM RATHER THAN A MODIFICATION OF THE AMOUNT OF THE BASIC PREMIUM OR, AS WAS SUGGESTED BY THE PLAINTIFF IN THE MAIN ACTION, FAVOURING THE IMPORTATION OF GOODS OF THE SAME TYPE FROM THIRD COUNTRIES .
10 ACCORDINGLY, IT APPEARS THAT THE VALIDITY OF REGULATION NO 849/70 CANNOT BE QUESTIONED FROM THE POINT OF VIEW OF THE CRITERION OF 'LIKELIHOOD OF DISTURBANCE' TO WHICH REGULATION NO 644/68 SUBORDINATED THE MODIFICATION OF THE AMOUNT OF THE DENATURING PREMIUMS DURING THE COURSE OF THE CEREAL MARKETING YEAR . ON THE SECOND QUESTION ( THE EFFECT OF THE DISCONTINUANCE OF THE INCREASE OF PREMIUMS ON PENDING CONTRACTS )
11 AS A SUBSIDIARY QUESTION THE COURT WAS ASKED WHETHER ARTICLES 1 AND 2 OF REGULATION NO 849/70 WERE IN ANY CASE INVALID IN SO FAR AS THEY LAID DOWN THAT THE INCREASED DENATURING PREMIUM SHOULD BE DISCONTINUED EVEN IN RESPECT OF COMMON WHEAT WITH A SPECIFIC WEIGHT EXCEEDING 77 KG/HL WHICH HAD ALREADY BEEN PURCHASED BY THE DENATURER BEFORE THAT REGULATION CAME INTO FORCE .
12 THE REGULATION IN QUESTION IS DATED 11 MAY 1970, IT WAS PUBLISHED IN THE OFFICIAL JOURNAL OF 12 MAY 1970, UNDER THE PROVISIONS OF ARTICLE 3 THEREOF, IT CAME INTO FORCE ON THE THIRD DAY FOLLOWING ITS PUBLICATION AND UNDER ARTICLE 1 THE DISCONTINUANCE OF THE INCREASE IN PREMIUM CAME INTO FORCE ON 1 JUNE 1970 . ACCORDINGLY, IT FALLS TO BE EXAMINED WHETHER THE PERIOD INTERVENING BETWEEN PUBLICATION OF THE REGULATION AND THE DISCONTINUANCE OF THE PREMIUM WAS SUFFICIENT TO ALLOW AN ENTERPRISE UNDER NORMAL CONDITIONS TO COMPLETE THE DENATURING OPERATIONS WHICH IT HAD ALREADY UNDERTAKEN IN RELIANCE ON THE PREVIOUS REGULATIONS .
13 ARTICLE 4 OF REGULATION NO 172/67, IN ITS ORIGINAL VERSION, SUGGESTS THAT IT IS NORMAL FOR DENATURING OPERATIONS TO BE DETERMINED IN THE CONTEXT OF THE CEREAL MARKETING YEAR . THIS VIEW WAS NOT FUNDAMENTALLY CHANGED BY REGULATION NO 644/68, ARTICLE 1 OF WHICH TREATS ADJUSTMENTS IN THE DENATURING SYSTEM DURING THE CROP YEAR AS EXCEPTIONAL, BEARING IN MIND THAT THEY CAN ONLY OCCUR IN THE EVENT OF A LIKELIHOOD OF DISTURBANCE ON THE MARKET . IT CANNOT THEREFORE BE CONSIDERED ABNORMAL FOR A DENATURING UNDERTAKING TO ARRANGE ITS PROJECTS IN THE LIGHT OF THE ENTIRE CROP YEAR .
14 ACCORDINGLY, FOR THE SAKE OF LEGAL CERTAINTY, REGULATION NO 849/70 HAD TO BE APPLIED IN SUCH A WAY THAT THERE MIGHT STILL BENEFIT FROM THE SYSTEM UNDER ARTICLE 4 ( 2 ) OF REGULATION NO 1403/69 THOSE QUANTITIES OF GOODS IN RESPECT OF WHICH IT WAS ESTABLISHED THAT THEY WERE PURCHASED BEFORE THE COMING INTO FORCE OF REGULATION NO 849/70, PROVIDED THE REQUEST UNDER ARTICLE 4 ( 2 ) OF REGULATION NO 172/67 WAS MADE TO THE INTERVENTION AGENCY BEFORE THE EXPIRY OF THE TIME-LIMIT ARISING FROM REGULATION NO 849/70, I.E . BEFORE 1 JUNE 1970 . INTERPRETED IN THIS WAY, REGULATION NO 849/70 CONTAINS NO PROVISION THE VALIDITY OF WHICH COULD BE DOUBTED .