1 BY TWO ORDERS OF 11 AUGUST 1983 , WHICH WERE RECEIVED AT THE COURT ON 7 AND 9 SEPTEMBER 1983 RESPECTIVELY , THE VERWALTUNGSGERICHT ( ADMINISTRATIVE COURT ) FRANKFURT-AM-MAIN REFERRED TO THE COURT FOR A PRELIMINARY RULING UNDER ARTICLE 177 OF THE EEC TREATY A QUESTION ON THE VALIDITY OF ARTICLE 5 ( 3 ) ( B ) OF COMMISSION REGULATION NO 2793/77 OF 15 DECEMBER 1977 ON DETAILED RULES OF APPLICATION FOR GRANTING SPECIAL AID FOR SKIMMED MILK FOR USE AS FEED FOR ANIMALS OTHER THAN YOUNG CALVES ( OFFICIAL JOURNAL 1977 , L 321 , P . 30 ).
2 SINCE THE QUESTIONS POSED BY THE TWO ORDERS WERE IDENTICAL , ON 19 OCTOBER 1983 THE COURT ORDERED THAT THE CASES SHOULD BE JOINED FOR THE PURPOSES OF THE PROCEEDINGS AND THE JUDGMENT .
3 THE QUESTION WAS RAISED IN THE COURSE OF LITIGATION REGARDING DECISIONS BY WHICH THE COMPETENT NATIONAL INTERVENTION AGENCY REQUIRED THE REPAYMENT BY THE DAIRIES CONCERNED OF ALL SPECIAL AIDS RECEIVED BY THEM IN RESPECT OF SKIMMED MILK SUPPLIED TO CERTAIN FARMERS .
4 WITH A VIEW TO PROMOTING MILK CONSUMPTION , ARTICLE 10 OF REGULATION NO 804/68 OF THE COUNCIL OF 27 JUNE 1968 ON THE COMMON ORGANIZATION OF THE MARKET IN MILK AND MILK-PRODUCTS ( OFFICIAL JOURNAL , ENGLISH SPECIAL EDITION 1968 ( I ), P . 176 ) PROVIDED FOR THE GRANTING OF AID FOR SKIMMED MILK PRODUCED IN THE COMMUNITY AND USED AS ANIMAL-FEED . THE ESSENTIAL RULES FOR THE PAYMENT OF THAT AID WERE LAID DOWN BY REGULATION NO 986/68 OF THE COUNCIL OF 15 JULY 1968 ( OFFICIAL JOURNAL , ENGLISH SPECIAL EDITION 1968 ( I ), P . 260 ).
5 THAT AID SYSTEM , WHICH WAS INITIALLY UNIFORM , WAS SUBDIVIDED BY COUNCIL REGULATION NO 876/77 , LAYING DOWN GENERAL RULES FOR GRANTING AID FOR SKIMMED MILK AND SKIMMED-MILK POWDER FOR USE AS FEED ( OFFICIAL JOURNAL 1977 , L 106 , P . 24 ). PURSUANT TO THAT REGULATION , SKIMMED MILK USED FOR FEEDING CALVES CONTINUED TO QUALIFY FOR THE AID AVAILABLE SINCE 1968 , WHILE A HIGHER AID , KNOWN AS ' ' SPECIAL AID ' ' , WAS ESTABLISHED FOR SKIMMED MILK USED FOR FEEDING ANIMALS OTHER THAN CALVES . THE GRANTING OF THAT ADDITIONAL BENEFIT WAS JUSTIFIED BY THE FACT THAT , WHEREAS FRESH SKIMMED MILK WAS IN ANY EVENT TRADITIONALLY USED FOR FEEDING CALVES , IT WAS NECESSARY TO PROVIDE A SPECIAL INCENTIVE TO ENSURE THAT SKIMMED MILK WAS ALSO USED IN LARGER QUANTITIES FOR FEEDING OTHER ANIMALS , IN PARTICULAR PIGS .
6 THE EXISTENCE SINCE 1977 OF TWO LEVELS OF AID LAID THE SYSTEM OPEN TO THE RISK OF ABUSE . IN PARTICULAR , ON FARMS KNOWN AS MIXED FARMS , THAT IS TO SAY THOSE ON WHICH CALVES AS WELL AS PIGS OR OTHER ANIMALS FOR SLAUGHTER ARE REARED , THERE MIGHT BE A TENDENCY TO OBTAIN SKIMMED MILK UNDER THE PARTICULARLY FAVOURABLE CONDITIONS GOVERNING THE SPECIAL AID AND TO USE THAT MILK FOR REARING CALVES . COMMISSION REGULATION NO 2793/77 OF 15 DECEMBER 1977 ON DETAILED RULES OF APPLICATION FOR GRANTING SPECIAL AID FOR SKIMMED MILK FOR USE AS FEED FOR ANIMALS OTHER THAN YOUNG CALVES ( OFFICIAL JOURNAL 1977 , L 321 , P . 30 ) WAS INTENDED IN PARTICULAR TO COUNTER THAT RISK .
7 ARTICLE 3 OF THAT REGULATION PROVIDES THAT THE SPECIAL AID IS TO BE GRANTED TO A DAIRY ONLY IF THE FOLLOWING CONDITIONS ARE SATISFIED : ( I ) THE SKIMMED MILK MUST BE COVERED BY AN UNDERTAKING ON THE PART OF THE FARMER . IN THAT REGARD , THE DAIRY CONCERNED MUST PRODUCE A DOCUMENT IN WHICH THE FARMER UNDERTAKES TO COMPLY WITH THE CONDITIONS LAID DOWN IN ARTICLE 4 OF THE REGULATION , NAMELY : TO USE THE SKIMMED MILK EXCLUSIVELY AS ANIMAL FEED AND ONLY ON THE FARM IN QUESTION ; TO TAKE DELIVERY OF A MINIMUM QUANTITY OF SKIMMED MILK NOT QUALIFYING FOR SPECIAL AID , IN THE CASE OF MIXED FARMS ; IN PRINCIPLE NOT TO KEEP YOUNG CALVES , IN THE CASE OF SPECIALIZED FARMS ; AND TO DECLARE BEFORE THE BEGINNING OF EACH QUARTER THE SIZE OF HIS HERD . ( II)THE SKIMMED MILK CONCERNED MUST BE DENATURED IN ACCORDANCE WITH CERTAIN SPECIFIED PROCESSES OR SUBJECTED TO AN ADMINISTRATIVE CONTROL PROVIDING EQUIVALENT GUARANTEES . ( III)THE DAIRIES MUST OBSERVE , IN RESPECT OF THAT SKIMMED MILK , A MAXIMUM SELLING PRICE WHICH IS FAVOURABLE FOR THE FARMER .
8 IN ACCORDANCE WITH ARTICLES 3 ( 1 ) AND 5 ( 3 ) OF THE REGULATION , THE APPLICATION FOR PAYMENT OF THE SPECIAL AID MUST BE SUBMITTED BY THE DAIRY AND THE SPECIAL AID IS GRANTED TO THE DAIRY .
9 FINALLY , ARTICLE 5 ( 3 ) ( B ) REQUIRES ANY DAIRY APPLYING FOR SPECIAL AID TO SUBMIT TOGETHER WITH ITS APPLICATION A DECLARATION THAT THE DAIRY WILL FORGO OR REPAY THE SPECIAL AID WHOLLY OR IN PART TO THE COMPETENT AUTHORITY IF IT IS FOUND THAT THE FARMER HAS NOT ABIDED BY ONE OF THE UNDERTAKINGS REFERRED TO IN ARTICLE 4 .
10 INSPECTIONS CARRIED OUT BY THE COMPETENT AUTHORITIES AT FARMS IN THE FEDERAL REPUBLIC OF GERMANY REVEALED THAT TWO DAIRIES , NORDBUTTER GMBH ( CASE 187/83 ) AND BAYERISCHE MILCHVERSORGUNGS GMBH ( CASE 190/83 ), HAD SUPPLIED SKIMMED MILK AT A REDUCED PRICE , THAT IS TO SAY , SKIMMED MILK COVERED BY THE SPECIAL AID , TO ONE OR MORE FARMERS WHO HAD NOT OBSERVED THE PROVISIONS OF ARTICLE 4 OF REGULATION NO 2793/77 , IN SPITE OF THE UNDERTAKINGS WHICH THEY HAD GIVEN . THE BUNDESAMT FUR ERNAHRUNG UND FORSTWIRTSCHAFT ( FEDERAL OFFICE FOR FOOD AND FORESTRY , HEREINAFTER REFERRED TO AS ' ' THE FEDERAL OFFICE ' ' ), FRANKFURT-AM-MAIN , REQUIRED THE DAIRIES CONCERNED TO REPAY THE WHOLE OF THE SPECIAL AID PAID TO THEM IN RESPECT OF THE SKIMMED MILK SUPPLIED TO THE FARMERS IN QUESTION .
11 THE DAIRIES BROUGHT ACTIONS AGAINST THOSE DECISIONS BEFORE THE VERWALTUNGSGERICHT FRANKFURT-AM-MAIN . THAT COURT EXPRESSED DOUBTS AS TO THE VALIDITY OF THE RULES ON LIABILITY LAID DOWN BY REGULATION NO 2793/77 AND CONSIDERED IT NECESSARY , BEFORE GIVING JUDGMENT , TO OBTAIN FROM THE COURT OF JUSTICE A PRELIMINARY RULING ON THE FOLLOWING QUESTION : IS ARTICLE 5 ( 3 ) ( B ) OF COMMISSION REGULATION ( EEC ) NO 2793/77 OF 15 DECEMBER 1977 ON DETAILED RULES OF APPLICATION FOR GRANTING SPECIAL AID FOR SKIMMED MILK FOR USE AS FEED FOR ANIMALS OTHER THAN YOUNG CALVES ( OFFICIAL JOURNAL 1977 , L 321 , P . 30 ) VALID IN SO FAR AS IT PROVIDES THAT A DAIRY IS RESPONSIBLE FOR UNDERTAKINGS GIVEN BY A FARMER WHEN IT IS UNABLE TO SUPERVISE THE FARMER ' S COMPLIANCE THEREWITH? ' '
12 THE ORDERS REQUESTING A PRELIMINARY RULING WERE ACCOMPANIED BY OBSERVATIONS FROM WHICH IT APPEARS THAT THE NATIONAL COURT CONSIDERS THAT THE RELEVANT PROVISION OF REGULATION NO 2793/77 IS CONTRARY TO THE GENERAL PRINCIPLES OF THE LAW OF LIABILITY RECOGNIZED BY COMMUNITY LAW , IN SO FAR AS IT MAY BE CONSTRUED AS HOLDING DAIRIES LIABLE FOR THE ACTIONS OF THIRD PARTIES WHICH THEY CANNOT SUPERVISE AND AGAINST THE CONSEQUENCES OF WHICH THEY CANNOT PROTECT THEMSELVES .
13 IT MUST BE POINTED OUT , FIRST , THAT ACCORDING TO ARTICLE 3 OF REGULATION NO 2793/77 IT IS THE DAIRIES WHO ARE THE SOLE RECIPIENTS OF THE SPECIAL AID ESTABLISHED BY THE COMMUNITY REGULATIONS , EVEN IF FROM THE ECONOMIC POINT OF VIEW FARMERS DERIVE CONSIDERABLE ADVANTAGE FROM THAT AID IN THE FORM OF PARTICULARLY ADVANTAGEOUS PRICES FOR THE SKIMMED MILK WHICH THEY BUY .
14 IT SHOULD BE NOTED , SECONDLY , THAT THE RELEVANT PROVISION OF REGULATION NO 2793/77 NEITHER IMPOSES , NOR SEEKS TO IMPOSE , A UNILATERAL OBLIGATION ON DAIRIES TO APPLY FOR THE SPECIAL AID WHICH IT ESTABLISHES .
15 IN FACT , THE DAIRIES TAKE PART IN THE COMMUNITY SCHEME FOR SPECIAL AID ON THE BASIS OF A COMMITMENT FREELY ENTERED INTO AND FOR THE SAKE OF THE ADVANTAGE WHICH THEY CAN DERIVE FROM IT . ONCE A DAIRY HAS DECIDED TO PARTICIPATE IN THE SCHEME ESTABLISHED BY THE AFORESAID REGULATION NO PROVISION OR GENERAL PRINCIPLE OF COMMUNITY LAW OBLIGES IT TO ENTER INTO CONTRACTS WITH ALL FARMERS WHO REQUEST SUPPLIES OF SKIMMED MILK BENEFITING FROM THE SPECIAL AID , OR PREVENTS IT FROM CHOOSING , ACCORDING TO OBJECTIVE AND NON-DISCRIMINATORY CRITERIA , THE FARMERS WITH WHOM IT WISHES TO DO BUSINESS .
16 THE COURT NOTES THAT , IN EXERCISING THAT CHOICE , A DAIRY MAY RESTRICT THE BENEFIT OF THE AID TO THOSE FARMERS WHO AGREE TO PERMIT VERIFICATION OF THEIR OBSERVANCE OF THE UNDERTAKINGS ENTERED INTO AND TO PROVIDE THE DAIRY WITH GUARANTEES INTENDED TO PROTECT IT AGAINST THE FINANCIAL CONSEQUENCES OF ANY BREACHES .
17 IN FACT , NO PROVISION OF COMMUNITY LAW PREVENTS DAIRIES FROM INCLUDING IN THE SUPPLY CONTRACT ENTERED INTO WITH EACH FARMER CLAUSES ACCORDING TO WHICH THE FARMER AGREES TO PERMIT A REPRESENTATIVE OF THE DAIRY TO ENTER THE FARM PREMISES AND UNDERTAKES TO SUBMIT ALL DOCUMENTS AND INFORMATION NEEDED AS EVIDENCE THAT THE MILK HAS BEEN USED IN ACCORDANCE WITH THE COMMUNITY REGULATIONS AND THE UNDERTAKINGS ENTERED INTO . NOTHING , MOREOVER , PREVENTS DAIRIES FROM MAKING THE CONCLUSION OF CONTRACTS SUBJECT TO THE INCLUSION OF CLAUSES INTENDED TO MAKE THE FARMERS THEMSELVES BEAR THE FINANCIAL CONSEQUENCES OF ANY BREACH OF THEIR UNDERTAKINGS , SUCH AS THE PROVISION OF SECURITY , BANK GUARANTEES OR EVEN AUTHORIZATION FOR COMPENSATORY DEDUCTIONS FROM THE MONTHLY PAYMENTS FOR MILK SUPPLIED , WHERE THE FARMERS IN QUESTION ARE ALSO THE DAIRY ' S SUPPLIERS .
18 IT FOLLOWS FROM THE FOREGOING THAT , IN REQUIRING ANY DAIRY APPLYING FOR THE SPECIAL AID TO ACCOMPANY ITS APPLICATION WITH A DECLARATION THAT THE DAIRY WILL FORGO OR REPAY THE SPECIAL AID IF IT IS FOUND THAT THE FARMER HAS NOT ABIDED BY ONE OF THE UNDERTAKINGS GIVEN BY HIM , ARTICLE 5 ( 3 ) ( B ) OF REGULATION NO 2793/77 IS NOT CONTRARY TO THE GENERAL PRINCIPLES OF THE LAW OF LIABILITY RECOGNIZED BY COMMUNITY LAW .
19 IT MUST THEREFORE BE CONCLUDED THAT NONE OF THE ARGUMENTS RAISED BY THE NATIONAL COURT IS OF SUCH A NATURE AS TO ENTAIL THE INVALIDITY OF THAT PROVISION OF REGULATION NO 2793/77 .