1 BY AN APPLICATION LODGED AT THE COURT REGISTRY ON 16 MAY 1984 THE ITALIAN REPUBLIC BROUGHT AN ACTION UNDER THE FIRST PARAGRAPH OF ARTICLE 173 OF THE EEC TREATY CLAIMING THAT THE COURT SHOULD DECLARE VOID COMMISSION DECISION NO 84/202/EEC OF 8 FEBRUARY 1984 ON THE CLEARANCE OF THE ACCOUNTS PRESENTED BY THE ITALIAN REPUBLIC IN RESPECT OF THE EUROPEAN AGRICULTURAL GUIDANCE AND GUARANTEE FUND , GUARANTEE SECTION , EXPENDITURE FOR 1978 , IN SO FAR AS THE COMMISSION THEREBY REFUSED TO ACCEPT AS CHARGEABLE TO THE FUND THE SUMS OF LIT 12 374 446 850 AS FINANCIAL COMPENSATION FOR FRUIT AND VEGETABLES PRODUCERS ' ORGANIZATIONS , LIT 305 825 498 FOR EXPENDITURE IN FINANCING CERTAIN SALES OF REDUCED-PRICE BUTTER AND LIT 797 492 672 FOR LOSSES INCURRED IN THE PROCESSING OF SKIMMED-MILK POWDER INTO ANIMAL FEEDINGSTUFFS . ( A ) PRODUCERS ' ORGANIZATIONS
2 REGULATION NO 1035/72 OF THE COUNCIL OF 18 MAY 1972 ON THE COMMON ORGANIZATION OF THE MARKET IN FRUIT AND VEGETABLES ( OFFICIAL JOURNAL , ENGLISH SPECIAL EDITION 1972 ( II ), P . 437 ) PROVIDES IN ARTICLE 13 FOR THE CREATION , ON THE INITIATIVE OF FRUIT AND VEGETABLE PRODUCERS , OF PRODUCERS ' ORGANIZATIONS FOR THE PURPOSE OF : ( A ) PROMOTING THE CONCENTRATION OF SUPPLIES AND THE REGULARIZATION OF PRICES AT THE PRODUCER STAGE IN RESPECT OF ONE OR MORE OF THE PRODUCTS REFERRED TO BY THE REGULATION ; AND ( B)MAKING SUITABLE TECHNICAL MEANS AVAILABLE TO PRODUCER MEMBERS FOR PRESENTING AND MARKETING THE RELEVANT PRODUCTS . UNDER THE SAME ARTICLE THE PRODUCERS ' ORGANIZATIONS MUST REQUIRE THEIR MEMBERS TO SELL THROUGH THEM THE TOTAL OUTPUT OF THE PRODUCT OR PRODUCTS BY REASON OF WHICH THEY HAVE BECOME MEMBERS ; AN ORGANIZATION MAY , HOWEVER , WAIVE THAT REQUIREMENT IN RESPECT OF CERTAIN QUANTITIES . IN ADDITION , THE ORGANIZATIONS MUST REQUIRE THEIR MEMBERS TO APPLY , WITH REGARD TO PRODUCTION AND MARKETING , THE RULES WHICH THEY HAVE ADOPTED FOR THE PURPOSE OF IMPROVING PRODUCT QUALITY AND ADAPTING THE VOLUME OF SUPPLY TO THE MARKET REQUIREMENTS .
3 UNDER ARTICLE 14 OF THE REGULATION , MEMBER STATES MAY GRANT AID TO PRODUCERS ' ORGANIZATIONS , DURING THE THREE YEARS FOLLOWING THE DATE ON WHICH THEY ARE ESTABLISHED , TO ENCOURAGE THEIR FORMATION AND TO FACILITATE THEIR OPERATION , PROVIDED THAT THE ORGANIZATIONS FURNISH ADEQUATE GUARANTEES AS REGARDS THE DURATION AND EFFECTIVENESS OF THEIR ACTIVITIES . FURTHERMORE , UNDER ARTICLE 18 MEMBER STATES MUST GRANT FINANCIAL COMPENSATION TO PRODUCERS ' ORGANIZATIONS WHICH INTERVENE IN ACCORDANCE WITH THE ARRANGEMENTS FOR WITHDRAWING THEIR MEMBERS ' PRODUCTS FROM THE MARKET PURSUANT TO ARTICLE 15 . THE EXPENDITURE THEREBY INCURRED IS ELIGIBLE FOR FINANCING BY THE GUARANTEE SECTION OF THE FUND .
4 THE DISPUTE CONCERNS THE FINANCIAL COMPENSATION PAID BY THE ITALIAN GOVERNMENT TO FOUR PRODUCERS ' ORGANIZATIONS WHICH , ACCORDING TO THE COMMISSION , DO NOT FULFIL THE CONDITIONS LAID DOWN BY REGULATION NO 1035/72 . THOSE ORGANIZATIONS ARE : THE ASSOCIAZIONE DI ZONA FRA PRODUTTORI ORTOFRUTTICOLI DELLE PROVINCIE DI MATERA E POTENZA , THE ASSOCIAZIONE DI ZONA FRA PRODUTTORI DI AGRUMI DELLE PROVINCIE DI CATANZARO , COSENZA E REGGIO CALABRIA , THE ASSOCIAZIONE INTERPROVINCIALE PRODUTTORI AGRUMICOLO ED ORTIFRUTTICOLI ' AIPAO ' , OF CATANIA , AND THE ASSOCIAZIONE CONSORZIO PROVINCIALE COOPERATIVE AGRICOLE ' ETNA ' , OF CATANIA .
5 THE SUMMARY REPORT FOR 1978/79 , PREPARED BY OFFICIALS OF THE COMMISSION FOLLOWING DISCUSSION WITH REPRESENTATIVES OF THE COMPETENT NATIONAL AUTHORITIES , STATES THAT , WHEN CLEARING THE ACCOUNTS FOR THE FINANCIAL YEARS 1973 TO 1977 , THE COMMISSION RESERVED ITS POSITION ON THE ELIGIBILITY OF CERTAIN ITEMS OF EXPENDITURE INCURRED IN ITALY IN CONNECTION WITH THE WITHDRAWAL OF FRUIT AND VEGETABLES FROM THE MARKET , PENDING THE OUTCOME OF AN INQUIRY CONDUCTED JOINTLY BY ITS OWN OFFICIALS AND THE ITALIAN AUTHORITIES . ON THE BASIS OF THAT INQUIRY IT CONCLUDED THAT , OUT OF THE 82 PRODUCERS ' ORGANIZATIONS SURVEYED , THE FUNCTIONING OF FOUR DID NOT COMPLY WITH COMMUNITY LEGISLATION . FINANCIAL COMPENSATION FOR THE WITHDRAWAL OF PRODUCTS FROM THE MARKET , ON THE OTHER HAND , COULD BE GRANTED ONLY TO ORGANIZATIONS WHICH OPERATED IN CONFORMITY WITH THE PROVISIONS OF REGULATION NO 1035/72 .
6 THE SUMMARY REPORT ALSO STATES THAT THE ITALIAN AUTHORITIES HAD DECIDED TO WITHDRAW RECOGNITION FROM THE FOUR ORGANIZATIONS IN QUESTION , SUCH RECOGNITION BEING NECESSARY UNDER ITALIAN LEGISLATION FOR CONFERRING ENTITLEMENT TO THE AID AND FINANCIAL COMPENSATION REFERRED TO BY REGULATION NO 1035/72 . NONE THE LESS , THE ITALIAN AUTHORITIES CONSIDERED THAT THE FOUR ORGANIZATIONS REMAINED COMPETENT TO CARRY OUT THEIR APPOINTED TASKS UNTIL RECOGNITION WAS WITHDRAWN FROM THEM IN JULY 1982 AND SEPTEMBER 1982 , AND THAT THEY WERE THEREFORE ENTITLED TO FINANCIAL COMPENSATION FOR THE EARLIER YEARS . INDEED , THE ITALIAN AUTHORITIES TOOK THE VIEW THAT IT WAS NOT POSSIBLE EX POST FACTO TO DENY THE LEGALITY OF THE OPERATIONS OR THE LIABILITY OF THE FUND TO BEAR THE EXPENDITURE THEREBY INVOLVED . THE COMMISSION DID NOT SHARE THAT VIEW , ARGUING THAT COMMUNITY AID COULD NOT BE DISBURSED UNLESS THE RECIPIENT FULFILLED THE CONDITIONS FOR PAYMENT .
7 IN ITS APPLICATION TO THE COURT THE ITALIAN GOVERNMENT MAINTAINS , IN THE FIRST PLACE , THAT FOR EACH OF THE FOUR ORGANIZATIONS IN QUESTION THE CONDITIONS LAID DOWN IN ARTICLE 13 OF REGULATION NO 1035/72 WERE SATISFIED . IN THAT CONNECTION IT COMPLAINS IN PARTICULAR THAT THE COMMISSION FAILED TO UNDERTAKE FURTHER INSPECTIONS OF THE FOUR ORGANIZATIONS , WHEREAS OTHER PRODUCERS ' ORGANIZATIONS IN ITALY HAD BEEN SUBJECTED TO REPEATED INSPECTIONS WHICH FINALLY ESTABLISHED THAT THEY WERE OPERATING IN CONFORMITY WITH COMMUNITY LEGISLATION . IN THE SECOND PLACE , THE ITALIAN GOVERNMENT OBSERVES THAT THE WITHDRAWAL OF RECOGNITION OCCURRED AFTER THE FINANCIAL YEARS COVERED BY THE PRESENT ACTION HAD ENDED , AND THAT CONSEQUENTLY THE OPERATIONS WHEREBY THE FOUR ORGANIZATIONS IN QUESTION HAD REMOVED PRODUCTS FROM THE MARKET DURING THE YEARS PRECEDING WITHDRAWAL OF RECOGNITION WERE STILL IN CONFORMITY WITH THE COMMUNITY REGULATIONS .
8 ON THE FIRST POINT THE ITALIAN GOVERNMENT MAINTAINS THAT THE COMMISSION ' S INITIAL FINDINGS ON THE FOUR ORGANIZATIONS WERE BASED ON THE VIEW THAT EVERY PRODUCERS ' ORGANIZATION HAD TO CONCENTRATE THE SUPPLY OF PRODUCTS FROM ITS MEMBERS AND TO MARKET THOSE PRODUCTS ITSELF . THAT VIEW WAS , HOWEVER , ABANDONED BY THE COMMISSION , WHICH FINALLY CONCEDED THAT SALES MIGHT BE TRANSACTED BY THE PRODUCERS THEMSELVES IF THEY OBSERVED THE CONDITIONS LAID DOWN BY THE ORGANIZATION . THAT BEING SO , THE OPERATIONS OF THE FOUR ORGANIZATIONS COMPLIED WITH ARTICLE 13 OF REGULATION NO 1035/72 . IN ANY EVENT , THE WITHDRAWAL OF PRODUCTS FROM THE MARKET , IN RESPECT OF WHICH THE FINANCIAL COMPENSATION WAS GRANTED , CONTRIBUTED FULLY TO THE ATTAINMENT OF THE OBJECTIVES PURSUED BY THE REGULATION .
9 THE COMMISSION BEGINS BY EXPRESSING ITS SURPRISE AT THE ITALIAN GOVERNMENT ' S POSITION , INASMUCH AS THE ITALIAN GOVERNMENT ITSELF WITHDREW RECOGNITION FROM THE FOUR ORGANIZATIONS ON THE GROUND THAT THEY DID NOT SATISFY THE CONDITIONS ENABLING THEM TO ENSURE THAT THEIR APPOINTED TASKS WERE BEING PROPERLY DISCHARGED . THE COMMISSION ADMITS THAT , IN SOME CASES , IT REVISED ITS INITIAL POSITION AFTER REALIZING THAT THE COMPLETE APPLICATION OF THE CRITERIA ADOPTED BY THE REGULATION TO THE WIDELY DIFFERING CIRCUMSTANCES OF THE VARIOUS REGIONS OF THE COMMUNITY COULD NOT BE OTHER THAN GRADUAL . IT NEVERTHELESS HOLDS TO THE VIEW THAT OPERATIONS IN WHICH PRODUCTS ARE WITHDRAWN FROM THE MARKET ARE NOT ELIGIBLE FOR COMMUNITY FINANCING UNLESS THEY FORM PART OF A WIDER PROGRAMME OF ACTIVITIES DESIGNED TO IMPROVE MARKET CONDITIONS ; REGULATION NO 1035/72 LAYS DOWN A FULL SET OF PROVISIONS GOVERNING PRODUCERS ' ORGANIZATIONS .
10 IN THAT REGARD THE COMMISSION POINTS OUT THAT ARTICLE 15 OF THE REGULATION PROVIDES THAT , FOR THE PURPOSE OF FINANCING WITHDRAWAL OPERATIONS , PRODUCERS ARE TO SET UP AN INTERVENTION FUND MAINTAINED BY CONTRIBUTIONS ASSESSED ON QUANTITIES OF PRODUCTS OFFERED FOR SALE . ACCORDING TO THE COMMISSION , COMMUNITY LEGISLATION THEREBY CREATES A CLOSE LINK BETWEEN THE VARIOUS ACTIVITIES OF THE ORGANIZATIONS , WHICH MUST SEEK TO IMPROVE PRODUCT QUALITY , CONCENTRATE SALES AND , IN EXCEPTIONAL CASES , WITHDRAW PRODUCTS FROM THE MARKET ( FINANCING SUCH WITHDRAWAL OUT OF THEIR SALES REVENUE ). ONLY ASSOCIATIONS WHICH ENGAGE IN ALL THOSE ACTIVITIES ARE PROPERLY CONSTITUTED FOR THE PURPOSES OF COMMUNITY LAW , AND ASSOCIATIONS WHICH ONLY UNDERTAKE THE WITHDRAWAL OF PRODUCTS - AS IS THE CASE WITH THE FOUR ORGANIZATIONS IN QUESTION - CANNOT FALL INTO THAT CATEGORY .
11 IT APPEARS FROM THE CORRESPONDENCE BETWEN THE ITALIAN GOVERNMENT AND THE COMMISSION , AS CONTAINED IN THE DOCUMENTS BEFORE THE COURT , THAT AT THE TIME IT WAS COMMON GROUND BETWEEN THE PARTIES THAT CERTAIN PRODUCERS ' ORGANIZATIONS IN ITALY , INCLUDING THE FOUR ORGANIZATIONS IN QUESTION , DID NOT SATISFY THE CONDITIONS LAID DOWN BY COMMUNITY RULES . IN PARTICULAR , THEIR OPERATIONS WERE FRAGMENTARY IN THE SENSE THAT THEY CARRIED OUT OPERATIONS TO WITHDRAW FRUIT AND VEGETABLES FROM THE MARKET WITHOUT ENGAGING IN ANY OTHER ACTIVITY . THUS THE ITALIAN GOVERNMENT ' S LETTER OF 27 MAY 1980 , WHICH GIVES AN ACCOUNT OF THE INQUIRY INTO PRODUCERS ' ORGANIZATIONS , STATES THAT FIVE ORGANIZATIONS , INCLUDING THE FOUR ORGANIZATIONS IN QUESTION , FAILED TO UNDERTAKE A RATIONALIZATION OF MARKETING ACTIVITIES , INASMUCH AS THEY WERE NOT IN A POSITION TO INSPECT THE PRODUCTS MARKETED BY THEIR MEMBERS . THE LETTER ADDS THAT IT IS DOUBTFUL WHETHER THOSE ORGANIZATIONS WOULD ADAPT THEMSELVES TO COMMUNITY LEGISLATION .
12 AT THE HEARING THE ITALIAN GOVERNMENT , WHILST ACKNOWLEDGING THE SHORTCOMINGS OF THE FOUR ORGANIZATIONS IN QUESTION AND THE DOUBTS WHICH MIGHT EXIST AS TO THEIR ABILITY TO ADAPT THEMSELVES TO COMMUNITY RULES , CONFINED ITSELF TO STATING THAT THEY WERE SUBJECTED TO REGULAR INSPECTIONS SO THAT THEY COULD BE PROGRESSIVELY BROUGHT INTO LINE , BUT THAT THE COMMISSION HAD UNILATERALLY TERMINATED THAT PROCESS OF ADAPTATION BY CALLING FOR THE WITHDRAWAL BY THE ITALIAN GOVERNMENT OF ITS RECOGNITION OF THE FOUR ORGANIZATIONS . THAT IS THEREFORE THE POINT WHICH SHOULD BE CONSIDERED .
13 IN THAT REGARD THE FOLLOWING POINTS EMERGE FROM THE DOCUMENTS LAID BEFORE THE COURT AND THE EXPLANATIONS GIVEN BY THE PARTIES : THE ABOVE-MENTIONED LETTER OF THE ITALIAN GOVERNMENT OF 27 MAY 1980 , IN WHICH IT CONCEDED THAT THE FOUR ORGANIZATIONS IN QUESTION HAD NOT BEEN OPERATING IN ACCORDANCE WITH THE COMMUNITY RULES , EXPRESSED THE ITALIAN AUTHORITIES ' WISH TO REFRAIN FOR THE TIME BEING FROM ADOPTING ANY MEASURES WITHDRAWING RECOGNITION FROM THEM ; THE ORGANIZATIONS WERE BEING SUBJECTED TO CONTINUOUS MONITORING AND THE COMMISSION WOULD BE INFORMED OF THE FINAL DECISIONS ADOPTED IN THE MATTER . IN THE MEANTIME THE ITALIAN GOVERNMENT HAD TAKEN A NUMBER OF STEPS TO ENSURE GREATER COMPLIANCE WITH THE COMMUNITY RULES , SUCH AS THE ISSUING OF A CIRCULAR CONTAINING DETAILED PROVISIONS CONCERNING THE FUNCTIONING OF THE PRODUCERS ' ORGANIZATIONS AND THE SETTING-UP OF REGIONAL SUPERVISORY COMMISSIONS . A LETTER FROM THE ITALIAN MINISTRY OF AGRICULTURE AND FORESTRY OF 15 SEPTEMBER 1980 SUPPLIED THE COMMISSION WITH THE FINDINGS OF AN INQUIRY INTO THE OPERATION OF PRODUCERS ' ORGANIZATIONS , CARRIED OUT JOINTLY BY ITALIAN CIVIL SERVANTS AND AGENTS OF THE COMMISSION . BY LETTER OF 11 NOVEMBER 1980 FROM THE RELEVANT DIRECTOR-GENERAL , THE COMMISSION INFORMED THE ITALIAN GOVERNMENT OF THE CONCLUSIONS WHICH IT HAD DRAWN FROM THE INQUIRY ; THE COMMISSION TOOK THE VIEW THAT 16 ORGANIZATIONS WHICH DID NOT OPERATE PROPERLY BUT WERE CAPABLE OF IMPROVEMENT SHOULD BE KEPT UNDER OBSERVATION FOR A YEAR , BUT THAT SEVEN OTHER ORGANIZATIONS - INCLUDING THE FOUR INVOLVED IN THIS DISPUTE - DID NOT CONFORM TO COMMUNITY RULES AND OFFERED NO APPARENT PROSPECT OF ADAPTING THEMSELVES SO AS TO COMPLY WITH THEM . THE LETTER ADDED THAT THE COMMISSION CONSIDERED THAT THE NATIONAL AUTHORITIES SHOULD ADOPT ALL THE MEASURES WHICH FOLLOWED FROM THE FAILURE ON THE PART OF THE ORGANIZATIONS TO COMPLY WITH THE REQUIREMENTS OF REGULATION NO 1035/72 ; IN PARTICULAR , NO INITIAL AID OR FINANCIAL COMPENSATION COULD BE PAID PURSUANT THERETO .
14 THE ITALIAN MINISTER REPLIED BY LETTER OF 27 DECEMBER 1980 , EXPRESSING HIS REGRET THAT THE COMMISSION HAD NOT GIVEN SUFFICIENT CONSIDERATION TO THE EXISTENCE OF CERTAIN ADVERSE FACTORS IN THE SOUTH OF ITALY WHICH HAD RESULTED IN MORE TIME BEING NEEDED TO OVERCOME THE INITIAL OPERATING DIFFICULTIES THAN IN THE NORTHERN REGIONS ; THE TASK WAS A LONG-TERM ONE WHICH WAS NOT YET FULLY ACCOMPLISHED . BY TELEX OF 16 JUNE 1981 THE ITALIAN GOVERNMENT COMMUNICATED ITS DECISION TO WITHDRAW RECOGNITION FROM THREE OF THE FOUR ORGANIZATIONS ; IN THE CASE OF THE FOURTH , AIPAO ( CATANIA ), THE TELEX STATED THAT THE INSPECTIONS CARRIED OUT HAD DISCLOSED THAT IT WAS OPERATING IN CONFORMITY WITH COMMUNITY LEGISLATION , ADDING THAT IT WOULD CONSEQUENTLY BE DESIRABLE TO CONDUCT A JOINT ON-THE-SPOT INSPECTION LATER ON . BY A LETTER OF 22 JUNE 1981 THE COMMISSION REPLIED THAT A SUBSEQUENT INSPECTION WAS POINTLESS . THE ITALIAN GOVERNMENT WITHDREW ITS RECOGNITION FROM THE ORGANIZATIONS IN QUESTION ON 25 JULY 1981 IN THE CASE OF ETNA ( CATANIA ) AND , IN THE CASE OF THE OTHER THREE ORGANIZATIONS , ON 10 SEPTEMBER 1982 .
15 THE CORRESPONDENCE REVEALS THAT THE ITALIAN GOVERNMENT , AFTER INITIALLY CONCEDING THAT THE FOUR ORGANIZATIONS DID NOT CONFORM TO COMMUNITY LEGISLATION AND DID NOT APPEAR CAPABLE OF ADAPTING THEMSELVES , THEN ASKED THAT THEY BE ALLOWED A FURTHER PERIOD TO ENABLE THEM TO DO SO ; SUBSEQUENTLY IT CONCLUDED THAT ONLY ONE OF THE FOUR , AIPAO ( CATANIA ), WAS OPERATING IN CONFORMITY WITH THE COMMUNITY PROVISIONS . FOR ITS PART , THE COMMISSION HAD MADE IT CLEAR IN A LETTER AS EARLY AS 11 NOVEMBER 1980 THAT IT REFUSED TO ACCEPT THAT THE OPERATIONS OF THE FOUR ORGANIZATIONS WERE IN CONFORMITY WITH COMMUNITY LAW , AND HAD INDICATED THAT ITS REFUSAL ALSO MEANT THAT IT REFUSED TO FINANCE ANY COMPENSATION WHICH MIGHT BE GRANTED TO THOSE ORGANIZATIONS . IF THEREFORE THE ITALIAN GOVERNMENT THOUGHT THAT IT HAD SOUND REASONS FOR REQUESTING A FURTHER PERIOD FOR ADAPTATION , IT SHOULD HAVE JUSTIFIED ITS REQUEST EITHER BY SUPPLYING EVIDENCE TO SHOW THAT THE FOUR ASSOCIATIONS - OR AIPAO ( CATANIA ) ALONE - WERE OPERATING BETTER , OR ELSE BY EXPLAINING IN WHAT RESPECT THEIR OPERATIONS HAD IMPROVED .
16 IT SHOULD FURTHER BE OBSERVED THAT THE ITALIAN GOVERNMENT CLAIMS TO HAVE BASED ITS OPINION CONCERNING THAT IMPROVEMENT ON A REPORT OF 16 DECEMBER 1980 PREPARED BY THE MINISTRY OF AGRICULTURE AND FORESTRY , BUT IT IS NOT DISPUTED THAT THE REPORT WAS NEVER DRAWN TO THE COMMISSION ' S ATTENTION BEFORE LEGAL PROCEEDINGS WERE COMMENCED . MOREOVER , THE COMMISSION OBSERVES THAT THE REPORT ADDS NO RELEVANT EVIDENCE TO THE FACTS AS KNOWN AT THE TIME .
17 THE COMMISSION WAS THEREFORE ENTITLED , AFTER AN EXTENDED PERIOD FOR ADJUSTMENT AND INSPECTION , TO REFUSE TO ORGANIZE NEW INQUIRIES SOLELY ON THE STRENGTH OF THE CLAIM FROM THE ITALIAN MINISTRY OF AGRICULTURE AND FORESTRY THAT THE OPERATION OF ONE OF THE FOUR ORGANIZATIONS , AIPAO ( CATANIA ), HAD PROVED TO BE IN CONFORMITY WITH THE COMMUNITY RULES .
18 CONSIDERATION REMAINS TO BE GIVEN TO THE ITALIAN GOVERNMENT ' S ARGUMENT THAT THE OPERATIONS INVOLVING THE WITHDRAWAL OF GOODS FROM THE MARKET BY THE ORGANIZATIONS IN QUESTION CONTINUED TO BE CONDUCTED IN CONFORMITY WITH COMMUNITY LAW UNTIL OFFICIAL RECOGNITION WAS WITHDRAWN FROM THOSE ORGANIZATIONS . THE ITALIAN GOVERNMENT MAINTAINS THAT A PRODUCERS ' ORGANIZATION IS OBLIGED , FROM THE DATE OF ITS RECOGNITION UNTIL SUCH TIME AS RECOGNITION IS WITHDRAWN , TO PERFORM THE FUNCTIONS ASSIGNED TO IT BY THE REGULATIONS ON FOOD AND VEGETABLES ENTITLEMENT TO COMPENSATION CANNOT THEREFORE BE FORFEITED IN RESPECT OF WITHDRAWALS CARRIED OUT WHEN THE ORGANIZATION STILL ENJOYED RECOGNITION .
19 THE COMMISSION , REFERRING TO THE PROVISIONS REGARDING THE FINANCING OF THE COMMON AGRICULTURAL POLICY AND TO THE CASE-LAW OF THE COURT , OBSERVES THAT REIMBURSEMENT BY THE FUND OF EXPENDITURE OCCASIONED BY THE IMPLEMENTATION OF THE COMMON AGRICULTURAL POLICY CANNOT BE ENVISAGED EXCEPT WHERE THE CONDITIONS LAID DOWN BY THE APPLICABLE COMMUNITY PROVISIONS ARE COMPLIED WITH .
20 IT SHOULD BE OBSERVED THAT REGULATION NO 1035/72 IMPOSES A NUMBER OF CONDITIONS ON PRODUCERS ' ORGANIZATIONS , BUT THAT THOSE CONDITIONS DO NOT ENTAIL ' RECOGNITION ' BY THE NATIONAL AUTHORITIES . THUS , IF THE ITALIAN GOVERNMENT , FOR REASONS OF ITS OWN , DECIDES FORMALLY TO RECOGNIZE THE ORGANIZATIONS WHICH , IN ITS OPINION , SATISFY THE CONDITIONS REQUIRED BY THE REGULATION , TO ENTER THE RECOGNIZED ORGANIZATIONS ON A LIST AND TO DELETE FROM THAT LIST THOSE WHICH , IN ITS OPINION , NO LONGER SATISFY THE CONDITIONS , THEREBY WITHDRAWING THEIR RECOGNITION , SUCH ADMINISTRATIVE FORMALITIES CANNOT IN ANY WAY AFFECT THE POSITION UNDER COMMUNITY LAW .
21 IN THIS INSTANCE , SINCE THE COURT HAS FOUND THAT THE COMMISSION WAS ENTITLED TO CONCLUDE THAT THE FOUR ASSOCIATIONS IN QUESTION HAD NEVER QUALIFIED AS ' PRODUCERS ' ORGANIZATIONS ' WITHIN THE MEANING OF ARTICLE 13 OF REGULATION NO 1035/72 , THEIR EXPENDITURE WAS NOT AT ANY TIME CHARGEABLE TO THE FUND .
22 IT FOLLOWS THAT THE ITALIAN GOVERNMENT ' S SUBMISSIONS REGARDING THE EXPENDITURE INCURRED BY THE PRODUCERS ' ORGANIZATIONS CANNOT BE ACCEPTED . ( B ) SALES OF BUTTER AT REDUCED PRICES
23 THIS PART OF THE APPLICATION IS CONCERNED WITH SALES OF REDUCED-PRICE BUTTER FROM INTERVENTION STOCKS , EFFECTED BY THE ITALIAN INTERVENTION AGENCY DURING THE 1978 FINANCIAL YEAR . THE SALES WERE BASED ON THREE REGULATIONS OF THE COMMISSION , NAMELY REGULATION NO 1282/72 OF 21 JUNE 1972 ON THE SALE OF BUTTER AT A REDUCED PRICE TO THE ARMY AND SIMILAR FORCES ( OFFICIAL JOURNAL , ENGLISH SPECIAL EDITION 1972 ( II ), P . 575 ), REGULATION NO 1717/72 OF 8 AUGUST 1972 ON THE SALE OF BUTTER AT A REDUCED PRICE TO NON-PROFIT-MAKING INSTITUTIONS AND ORGANIZATIONS ( OFFICIAL JOURNAL , ENGLISH SPECIAL EDITION 1972 ( III ), P . 849 ), AND REGULATION NO 2315/76 OF 24 SEPTEMBER 1976 ON THE SALE OF BUTTER FROM PUBLIC STOCKS ( OFFICIAL JOURNAL 1976 , L 261 , P . 12 ). THOSE THREE REGULATIONS EXPRESS THE PRICE OF THE BUTTER IN UNITS OF ACCOUNT .
24 FOR THE PURPOSE OF CONVERTING INTO NATIONAL CURRENCY THE PRICE OF THE BUTTER SOLD AS A RESULT OF THE AFORESAID TRANSACTIONS , THE INTERVENTION AGENCY APPLIED THE ' GREEN ' EXCHANGE RATE FOR THE ITALIAN LIRA AS AT THE DATE ON WHICH THE CONTRACT OF SALE WAS CONCLUDED . ACCORDING TO THE COMMISSION , THE INTERVENTION AGENCY SHOULD HAVE APPLIED THE EXCHANGE RATE PREVAILING ON THE DAY ON WHICH THE PURCHASER TOOK OVER THE BUTTER .
25 REGULATION NO 1134/68 OF THE COUNCIL OF 30 JULY 1968 LAYING DOWN RULES FOR THE IMPLEMENTATION OF REGULATION ( EEC ) NO 653/68 ON CONDITIONS FOR ALTERATIONS TO THE VALUE OF THE UNIT OF ACCOUNT USED FOR THE COMMON AGRICULTURAL POLICY ( OFFICIAL JOURNAL , ENGLISH SPECIAL EDITION 1968 ( II ), P . 396 ) PROVIDES IN ARTICLE 4 THAT , FOR TRANSACTIONS CARRIED OUT WITHIN THE FRAMEWORK OF THE COMMON AGRICULTURAL POLICY , THE EXCHANGE RATE TO BE APPLIED FOR THE CONVERSION OF FUNDS OWED BY A MEMBER STATE OR AN INTERVENTION AGENCY IS THE RATE ' WHICH OBTAINED AT THE TIME WHEN THE TRANSACTION . . . WAS CARRIED OUT ' . ACCORDING TO ARTICLE 6 , THE TIME WHEN A TRANSACTION IS CARRIED OUT IS TO BE REGARDED AS BEING ' THE DATE ON WHICH OCCURS THE EVENT ( BY VIRTUE OF ) WHICH THE AMOUNT INVOLVED IN THE TRANSACTION BECOMES DUE ' , AS DEFINED BY COMMUNITY RULES OR , ' IN THE ABSENCE OF AND PENDING ADOPTION OF SUCH RULES , BY THE RULES OF THE MEMBER STATE CONCERNED ' .
26 THE COMMISSION ' S SUMMARY REPORT FOR 1978/79 SHOWS THAT , ACCORDING NOT ONLY TO THE INFORMATION SUPPLIED BY THE COMMISSION REPRESENTATIVE TO MEMBERS OF THE MANAGEMENT COMMITTEE FOR MILK AND MILK PRODUCTS BUT ALSO TO THE REPLIES GIVEN BY THE COMMISSION ON SEVERAL OCCASIONS TO QUESTIONS FROM NATIONAL AUTHORITIES , THE ' TIME WHEN A TRANSACTION IS CARRIED OUT ' , WHICH DETERMINES THE AMOUNT PAYABLE , IS THE DAY ON WHICH THE PRODUCTS ARE TAKEN OVER BY THE PURCHASER . THAT INTERPRETATION IS NOT , HOWEVER , SHARED BY ALL THE MEMBER STATES .
27 THE ITALIAN GOVERNMENT ARGUES THAT , IN THE ABSENCE OF COMMUNITY LEGISLATION ON THE MATTER , THE DATE OF THE EVENT WHICH CAUSES THE AMOUNT INVOLVED IN A TRANSACTION TO BECOME DUE IS DETERMINED BY NATIONAL LAW PENDING THE ADOPTION OF COMMUNITY RULES ; UNDER ITALIAN LAW , THE DATE OF THAT EVENT IS THE DATE ON WHICH THE CONTRACT IS CONCLUDED .
28 THE ITALIAN GOVERNMENT ADDS THAT THE INTERPRETATION GIVEN BY THE COMMISSION WITHIN THE MANAGEMENT COMMITTEE HAD - WHATEVER ITS LEGAL VALUE - LOST ITS IMPORTANCE AS A RESULT OF THE ADOPTION , BY THE COMMISSION , OF REGULATION NO 2182/77 OF 30 SEPTEMBER 1977 LAYING DOWN DETAILED RULES FOR THE SALE OF FROZEN BEEF FROM INTERVENTION STOCKS ( OFFICIAL JOURNAL 1977 , L 251 , P . 60 ). UNDER ARTICLE 8 OF THAT REGULATION THE DATE OF THE EVENT WHICH CAUSES THE SELLING PRICE TO BECOME DUE IS THE DATE ON WHICH THE CONTRACT OF SALE IS CONCLUDED .
29 THE COMMISSION CONTENDS THAT IT IS NOT PERMISSIBLE TO RESORT TO NATIONAL LEGISLATION , SINCE THE REGULATIONS GOVERNING THE SALE OF BUTTER AT A REDUCED PRICE PROVIDE RULES FOR RESOLVING THE ISSUE . IT OBSERVES THAT THOSE REGULATIONS ALLOW THE PURCHASER TO REPUDIATE HIS CONTRACTUAL COMMITMENTS AT ANY TIME BEFORE THE PRICE IS PAID . IF HE DOES SO , HE FORFEITS THE SECURITY WHICH HE HAD TO PROVIDE UNDER REGULATION NO 2315/76 ; HOWEVER , THAT IS NOT THE CASE UNDER THE OTHER TWO REGULATIONS . THE SALE DOES NOT THEREFORE BECOME DEFINITIVE WHEN THE CONTRACT IS CONCLUDED BUT ONLY WHEN THE GOODS ARE TAKEN OVER BY THE PURCHASER .
30 THE COMMISSION ' S CONTENTION MUST BE REJECTED . IN PROVIDING THAT A TRANSACTION IS TO BE REGARDED AS BEING CARRIED OUT ON THE DATE ON WHICH OCCURS ' THE EVENT ( BY VIRTUE OF ) WHICH THE AMOUNT INVOLVED IN THE TRANSACTION BECOMES DUE ' , AS DEFINED BY COMMUNITY RULES OR , ' IN THE ABSENCE OF AND PENDING ADOPTION OF SUCH RULES ' , BY THE NATIONAL LAW OF THE MEMBER STATE CONCERNED , ARTICLE 6 OF REGULATION NO 1134/68 CLEARLY ENVISAGES COMMUNITY RULES DEFINING THE SAID EVENT , IN THE SAME WAY AS REGULATION NO 2182/77 HAS DEFINED THAT EVENT IN THE CASE OF BEEF AND VEAL . IN THE MILK-PRODUCTS SECTOR NO SUCH DEFINITION EXISTS , AND IT IS NOT POSSIBLE TO SUBSTITUTE FOR SUCH A DEFINITION A SET OF ARGUMENTS BASED ON THE RULES GOVERNING THE SALE OF BUTTER AT REDUCED PRICES , PARTICULARLY SINCE THE RULES CONTAINED IN THE VARIOUS REGULATIONS ARE NOT THE SAME .
31 THE ITALIAN GOVERNMENT HAS STATED THAT IT IS A PRACTICE CONSISTENT WITH ITALIAN LAW TO APPLY THE EXCHANGE RATE PREVAILING AT THE DATE ON WHICH THE CONTRACT IS CONCLUDED , AND THE COMMISSION HAS NOT CONTESTED THAT CLAIM . THAT BEING SO , IT APPEARS THAT THE ITALIAN REPUBLIC WAS JUSTIFIED IN APPLYING THE RATE PREVAILING AT THE DATE OF CONCLUSION OF THE CONTRACT , SINCE , IN THE ABSENCE OF COMMUNITY LEGISLATION ON THE MATTER , IT WAS ENTITLED TO APPLY ITS NATIONAL LAW .
32 IT FOLLOWS THAT THE EXPENDITURE ON SALES OF REDUCED-PRICE BUTTER WAS PROPERLY INCURRED , AND THAT THE COMMISSION DECISION MUST BE DECLARED VOID INASMUCH AS THE COMMISSION DID NOT ALLOW THAT EXPENDITURE TO BE CHARGED TO THE FUND . ( C ) PROCESSING OF SKIMMED-MILK POWDER
33 REGULATION NO 990/72 OF THE COMMISSION OF 15 MAY 1972 ON DETAILED RULES FOR GRANTING AID FOR SKIMMED MILK PROCESSED INTO COMPOUND FEEDINGSTUFFS AND FOR SKIMMED-MILK POWDER FOR USE AS FEED ( OFFICIAL JOURNAL , ENGLISH SPECIAL EDITION 1972 ( II ), P . 428 ) PROVIDES , IN ARTICLE 1 , THAT SKIMMED-MILK POWDER DOES NOT QUALIFY FOR AID UNTIL IT HAS BEEN USED IN THE MANUFACTURE OF COMPOUND FEEDINGSTUFFS FOR ANIMALS .
34 IN RESPECT OF THE FINANCIAL YEARS 1974 AND 1975 THE ITALIAN INTERVENTION AGENCY PAID OUT AID NOT ONLY FOR THE QUANTITIES OF SKIMMED-MILK POWDER ACTUALLY USED IN THE MANUFACTURE OF ANIMAL FEED BUT ALSO FOR THE SKIMMED-MILK POWDER LOST IN THE COURSE OF PROCESSING , SUBJECT TO A MAXIMUM LOSS OF 2% ; IT ARGUED THAT SUCH AN INCREASE HAD TRADITIONALLY BEEN ALLOWED IN ITALY . THE COMMISSION DID NOT ACCEPT THAT LINE OF ARGUMENT ; CONSEQUENTLY , IT REDUCED THE THE EXPENDITURE DECLARED UNDER REGULATION NO 990/72 BY AN AMOUNT EQUAL TO 2% . THE ITALIAN REPUBLIC BROUGHT ACTIONS AGAINST THOSE DECISIONS , BUT THE COURT DISMISSED THEM IN ITS JUDGMENTS OF 15 MARCH 1983 ( CASES 61 AND 62/82 , ( 1983 ) ECR 655 AND 687 ).
35 THE PRESENT CASE IS A SEQUEL TO THE COURT ' S DISPOSAL , IN THOSE TWO JUDGMENTS , OF A SUBSIDIARY ARGUMENT ADDUCED BY THE ITALIAN GOVERNMENT . THE ITALIAN REPUBLIC HAD MAINTAINED THAT , IN ANY EVENT , THE COMMISSION WAS NOT ENTITLED TO REDUCE THE EXPENDITURE IN QUESTION BY THE MAXIMUM MARGIN OF 2% LAID DOWN BY THE ITALIAN PROVISIONS , BUT ONLY BY AN AMOUNT EQUAL TO THE AVERAGE PERCENTAGE OF ACTUAL WASTE IN RESPECT OF WHICH AID HAD BEEN PAID . THE COURT , HOWEVER , FOUND THAT THE STATISTICAL TABLES SUPPLIED BY THE ITALIAN GOVERNMENT RELATED TO ONLY 25% OF THE TOTAL QUANTITY OF PROCESSED MILK POWDER AT ISSUE IN THE DISPUTE , AND THAT IN RELATION TO THAT QUANTITY THE AVERAGE LOSS AMOUNTED TO 1.745% IN 1974 AND 1.464% IN 1975 . THE COURT HELD THAT IN THE CIRCUMSTANCES IT HAD NOT BEEN ESTABLISHED THAT , OF THE TOTAL QUANTITY PROCESSED , THE PERCENTAGE OF ACTUAL WASTE DEVIATED TO ANY APPRECIABLE DEGREE FROM THE MAXIMUM RATE OF 2% WHICH WAS LAID DOWN BY THE ITALIAN PROVISIONS AND UPON WHICH THE COMMISSION BASED ITS DECISION WHEN IT CLEARED THE ACCOUNTS .
36 CASES 61 AND 62/82 WERE STILL PENDING BEFORE THE COURT WHEN THE ACCOUNTS FOR 1976 AND 1977 WERE INSPECTED . AS THE ITALIAN AUTHORITIES HAD OMITTED TO SUPPLY EVIDENCE AS TO THE PERCENTAGE OF ACTUAL WASTE , THE COMMISSION MADE A FLAT-RATE ADJUSTMENT OF 2% TO THE EXPENDITURE IN QUESTION FOR 1976 AND 1977 . ACCORDING TO THE COMMISSION ' S SUMMARY REPORT FOR 1976/77 , HOWEVER , THE DECISION TO DEDUCT THE AMOUNTS IN QUESTION WAS PROVISIONAL AND THE COMMISSION WOULD REVIEW ITS POSITION IN THE LIGHT OF THE DECISION OF THE COURT OF JUSTICE . IN ITS DECISIONS ON THE CLEARANCE OF THE ACCOUNTS FOR 1976 AND 1977 THE COMMISSION TOOK THE VIEW THAT NO FINAL DECISION COULD BE TAKEN ON PART OF THE EXPENDITURE DISALLOWED , BECAUSE FURTHER EXAMINATION WAS NECESSARY AND THE AMOUNT IN QUESTION COULD , IF NEED BE , BE RECOGNIZED WHEN THE ACCOUNTS FOR 1978 WERE CLEARED .
37 FOLLOWING THE JUDGMENTS OF 15 MARCH 1983 THE ITALIAN AUTHORITIES SENT THE COMMISSION , DURING THE INSPECTION OF THE ACCOUNTS FOR 1978 AND 1979 , A DETAILED TABLE OF ACTUAL LOSSES WHICH DISCLOSES THE FOLLOWING AVERAGE PERCENTAGES : 1976 ... 1.53% 1977 ... 1.15% 1978 ... 0.58% 1979 ... 0.73% . FOR THE FINANCIAL YEARS 1978 AND 1979 THE COMMISSION ACCEPTED THAT EVIDENCE AND REDUCED THE EXPENDITURE DECLARED IN RESPECT OF AID FOR THE PROCESSING OF SKIMMED-MILK POWDER ON THE BASIS OF THE PERCENTAGE FIGURES FOR ACTUAL LOSSES AS GIVEN BY THE ITALIAN GOVERNMENT .
38 FOR THE FINANCIAL YEARS 1976 AND 1977 THE COMMISSION MAINTAINED THE REDUCTION OF EXPENDITURE AT THE FLAT RATE OF 2% . IN THE SUMMARY REPORT FOR 1978/79 IT CLAIMED THAT IT COULD DO NO MORE THAN WAS PERMITTED BY THE JUDGMENTS OF THE COURT AND COULD NOT REVIVE ITS PREVIOUS DECISIONS OFFICIALLY CLOSING THE ACCOUNTS . THE REFERENCE TO THE POSSIBILITY OF A RE-EXAMINATION MADE IN THE DECISIONS FOR 1976 AND 1977 WAS MERELY DESIGNED TO AVOID FURTHER LEGAL ACTION IN RESPECT OF THOSE FINANCIAL YEARS ; IT WAS NOT INTENDED TO CREATE AN ADDITIONAL PERIOD FOR THE SUBMISSION OF EVIDENCE BY ITALY .
39 THE ITALIAN GOVERNMENT MAINTAINS THAT IT IS ONLY THAT PART OF THE EXPENDITURE WHICH RELATES TO THE ACTUAL LOSSES WHICH CANNOT BE CHARGED TO THE FUND , AND THAT THE COMMISSION ACCEPTED THAT VIEW FOR THE FINANCIAL YEARS 1978 AND 1979 . THE ITALIAN GOVERNMENT CLAIMS THAT THE ONLY REASON FOR WHICH THE COURT , IN ITS JUDGMENTS OF 15 MARCH 1983 , REJECTED ITS SUBSIDIARY CONTENTION WAS THAT IT HAD BEEN SUPPLIED WITH INCOMPLETE EVIDENCE , RELATING TO ONLY 25% OF THE PRODUCTION ; ITALY ' S CONTENTION WOULD THEREFORE HAVE BEEN UPHELD IF FULL AND COMPLETE EVIDENCE HAD BEEN SUBMITTED . ACCORDING TO THE ITALIAN GOVERNMENT , FULL AND COMPLETE EVIDENCE RELATING TO THE FINANCIAL YEARS 1976 TO 1979 WAS SUPPLIED IMMEDIATELY AFTER THE COURT ' S JUDGMENTS , AND ACCEPTED IN RESPECT OF 1978 AND 1979 . IN ITS DECISIONS ON THE CLEARANCE OF THE ACCOUNTS FOR 1976 AND 1977 THE COMMISSION INSERTED A RESERVATION DEFERRING THE ENTIRE QUESTION ; IT COULD NOT THEREFORE , ACCORDING TO THE ITALIAN GOVERNMENT , PLEAD THAT THOSE DECISIONS WERE FINAL .
40 THE COMMISSION TAKES THE VIEW THAT MEMBER STATES HAVE A SPECIFIC PERIOD WITHIN WHICH TO SUBMIT EVIDENCE OF EXPENDITURE INCURRED AND THAT THE JUDGMENTS OF THE COURT OF 15 MARCH 1983 DID NOT CREATE A FURTHER PERIOD FOR THE PRESENTATION OF EVIDENCE . THE FACT THAT AT THE TIME OF THE CLEARANCE OF THE ACCOUNTS FOR 1976 AND 1977 THE COMMISSION RESERVED ITSELF THE RIGHT TO REVISE ITS DECISIONS SHOULD THE COURT ACCEPT THE FLAT-RATE SYSTEM FOR DETERMINING PROCESSING LOSSES DOES NOT MEAN THAT IT WAS OBLIGED TO RECONSIDER ITS DECISIONS IN THE LIGHT OF FRESH EVIDENCE ON THE ACTUAL LOSSES SUFFERED .
41 IT SHOULD BE POINTED OUT THAT , WHILST THE COMMISSION IS WELL PLACED TO INTERPRET THE RESERVATION WHICH IT INSERTED AT THE TIME WHEN THE ACCOUNTS FOR 1976 AND 1977 WERE CLEARED , IT IS NONE THE LESS NECESSARY , BEFORE THE COMMISSION MAY BE ALLOWED TO RELY ON THAT INTERPRETATION VIS-A-VIS A MEMBER STATE , THAT IT SHOULD HAVE BEEN POSSIBLE FOR THAT MEMBER STATE TO INTERPRET IT IN THE SAME WAY . BY MERELY RESERVING ITSELF THE RIGHT TO REVIEW THE QUESTION , HOWEVER , THE COMMISSION DID NOT SIGNIFY AN INTENTION TO CLOSE THE MATTER AS FAR AS EVIDENCE OF ACTUAL LOSSES WAS CONCERNED . A MEMBER STATE WAS THUS ENTITLED TO INFER THAT THE REVIEW COULD EXTEND TO ANY QUESTION LEFT OPEN BY THE JUDGMENTS OF THE COURT DEALING WITH THE FINANCIAL YEARS 1974 AND 1975 .
42 SINCE , ON THAT POINT , THE ACCOUNTS HAD NOT BEEN CLOSED , THE COMMISSION WAS OBLIGED TO REVIEW THE QUESTION . BY PLEADING THAT THE ITALIAN GOVERNMENT WAS LATE IN SUBMITTING ITS EVIDENCE , THE COMMISSION EVADED THAT REVIEW . IN THE PARTICULAR CIRCUMSTANCES OF THE CASE SUCH A REFUSAL MUST BE REGARDED AS ILLEGAL .
43 IT IS FOR THE COMMISSION TO ADOPT A NEW DECISION AFTER CONSIDERING THE EVIDENCE SUBMITTED BY THE ITALIAN GOVERNMENT ON THE LOSSES INCURRED IN THE PROCESSING OF SKIMMED-MILK POWDER INTO ANIMAL FEEDINGSTUFFS .
44 IT FOLLOWS FROM THE FOREGOING THAT THE CONTESTED DECISION MUST BE DECLARED VOID IN SO FAR AS THE COMMISSION THEREBY REFUSED TO ACCEPT AS CHARGEABLE TO THE EUROPEAN AGRICULTURAL GUIDANCE AND GUARANTEE FUND EXPENDITURE OF LIT 305 825 498 INCURRED IN FINANCING SALES OF REDUCED-PRICE BUTTER AND EXPENDITURE OF LIT 797 492 672 IN RESPECT OF LOSSES SUFFERED IN THE PROCESSING OF SKIMMED-MILK POWDER INTO ANIMAL FEEDINGSTUFFS ; THE REMAINDER OF THE APPLICATION MUST BE DISMISSED .