Judgment of the Court (Second Chamber) of 24 January 1991.#Société industrielle de transformation de produits agricoles (SITPA) v Office national interprofessionnel des fruits, des légumes et de l'horticulture (Oniflhor).#Reference for a preliminary ruling: Tribunal administratif de Dijon - France.#Regulations - Aid for tomato processing - Validity.#Case C-27/90.

1.

Council Regulation (EEC) No 516/77 of 14 March 1977 on the common organization of the market in products processed from fruit and vegetables (OJ 1977, L 73, p. 1), as amended, and Council Regulation (EEC) No 426/86 of 24 February 1986 (OJ 1986, L 49, p. 1), which replaced Regulation No 516/77, established a system of production aid to make up the difference between the price of certain products processed from fruit and vegetables harvested in the Community and the price of such products imported from non-member countries.

Anide 3(3) of Regulation No 516/77, as amended by Council Regulation (EEC) No 988/84 of 31 March 1984 (OJ 1984, L 103, p. 11), and Anicie 2(3) of Regulation No 426/86 provide:

‘Where the Community production potential for a product... is likely to cause a major imbalance between production and market outlets, the Council, acting by a qualified majority on a proposal from the Commission, may take appropriate measures, in particular by limiting production aid to a specified quantity ... ’.

2.

Article 1 of Council Regulation (EEC) No 989/84 of 31 March 1984 introducing a system of guarantee thresholds for certain processed fruit and vegetable products (OJ 1984, L 103, p. 19), which was adopted on the basis of Regulation No 516/77, fixed the quantity of processed tomato products corresponding to 4700000 tonnes of fresh tomatoes as the guarantee threshold for each marketing year.

Pursuant to Article 2(1), if the guarantee threshold for processed tomato products is exceeded, the aid is to be reduced for the following marketing year in accordance with the extent of the excess. Article 2(2) provides that the extent to which the threshold has been exceeded as referred to in paragraph 1 is to be calculated on the basis of the average of the quantities produced during the three marketing years preceding the marketing year for which aid is to be fixed.

3.

Commission Regulation (EEC) No 1599/84 of 5 June 1984 laying down detailed rules for the application of the system of production aid for products processed from fruit and vegetables (OJ 1984, L 152, p. 16) determines the obligations of processors and the responsibilities of States in the management of the system.

4.

When it was found that production had increased spectacularly and the guarantee thresholds had been substantially exceeded in the 1982/83 and 1983/84 marketing years the Council adopted Regulation (EEC) No 1320/85 of 23 May 1985 on temporary measures for production aid to processed tomato products (OJ 1985, L 137, p. 41), limiting production aid for all processing undertakings in each Member State to a specific quantity fixed separately for undertakings situated in France, Greece and Italy by reference to the 1982/83 marketing year.

5.

For each marketing year the Commission fixed the minimum price to be paid to producers for tomatoes and the amount of production aid for products processed from tomatoes :

Since excesses had been recorded in the previous marketing years the Commission proceeded in respect of the 1984/85, 1985/86, 1986/87 and 1987/88 marketing years to make the reductions provided for in Article 2 of Regulation No 989/84.

6.

The Société industrielle de transformation de produits agricoles (hereinafter referred to as ‘Sitpa’) considered that the regulations by which the Commission had fixed aid subject to reduction were invalid and by letter dated 24 August 1988 requested the Office national interprofessionnel des fruits, des légumes et de l'horticulture (National Fruit, Vegetable and Horticultural Trades Office, hereinafter referred to as ‘Oniflhor’) to refund the difference between aid at the full rate which would have been paid in the absence of a reduction and the aid which was in fact paid. On 19 September 1988 Oniflhor rejected that request on the ground that it was not able to pay additional aid above the level fixed in those regulations.

7.

On appeal against that decision, the Tribunal administratif, Dijon, by decision of 26 December 1989, stayed the proceedings pursuant to Article 177 of the EEC Treaty until such time as the Court should have given a preliminary ruling on the validity, in relation to Article 190 of the EEC Treaty and the prohibition of discrimination contained in the Treaty, of Council Regulation (EEC) No 989/84 and Commission Regulations Nos 1925/84, 2222/85, 2077/86 and 2160/87 and, in the event of those regulations being unlawful, on the financial consequences of their unlawfulness on the obligations of Oniflhor.

8.

The judgment of the Tribunal administratif, Dijon, was received at the Court Registry on 26 January 1990.

9.

Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the European Communities written observations were lodged on 9 April 1990 by the Commission of the European Communities, represented by Patrick Hetsch, a member of its Legal Department, acting as Agent, on 10 April 1990 by the Council of the European Communities, represented by Bernhard Schloh, an adviser in its Legal Department, acting as Agent, and on 23 April 1990 by Sitpa, the plaintiff in the main proceedings, represented by Nicole Coutrelis, of the Paris Bar.

10.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General the Court decided to open the oral procedure without any preparatory inquiry.

11.

Pursuant to Article 95(1) and (2) of the Rules of Procedure the Court, by decision of 13 June 1990, assigned the case to the Second Chamber.

1.

Sitpa, the plaintiff in the main proceedings, observes that Article 2(3) of Regulation No 426/86 provides for the adoption of appropriate measures and ‘in particular’ the limitation of aid to a specified quantity. The decision to reduce the nominal amount of aid in Regulation No 989/84 is not per se contrary to Regulation No 426/86, but pursuant to Article 190 of the EEC Treaty reasons ought to be given for it.

Regulation No 989/84 simply refers to the nature of the market in processed tomato products without specifying the reasons for a reduction in the nominal amount of aid.

Since in view of Article 190 of the EEC Treaty Regulation No 989/84 is invalid, the reductions made by the Commission on the basis of it for the 1984/85 to 1987/88 marketing years are also invalid.

Sitpa makes a detailed analysis of those regulations from the point of the obligation to state reasons and concludes that in particular as regards Regulations Nos 1925/84 and 2222/85 the Commission gives no particulars of the amount by which the guarantee threshold was exceeded or of the method used in calculating the aid. Article 2(2) of Regulation No 989/84 requires that the extent to which the threshold has been exceeded is to be calculated on the basis of the average of the quantities produced during the three marketing years preceding the marketing year for which aid is to be fixed. In the regulations in question, the Commission, while claiming to comply with Article 2(2), states that it is the production for the 1983/84 marketing year which exceeds the threshold.

Regulations Nos 2077/86 and 2160/87 are open to the same criticism even though the drafting is less contradictory as regards the reference years.

Regulation No 2160/87, moreover, contains a factual mistake in that it wrongly states that the Commission found that the guarantee threshold had been exceeded for each category of products processed from tomatoes.

In those circumstances it is impossible for the Court to review the lawfulness of the regulations in question, which constitutes an infringement of Article 190 of the EEC Treaty.

Sitpa also observes that in adopting the contested regulations the Commission committed a manifest error of assessment of the facts. As a result of large frauds committed in Italy and Greece the declarations of the quantities processed in those States were overstated, and the Commission could not rely on those declarations in determining that the guarantee threshold had been exceeded.

2.

The Council and the Commission observe that the requirement to state reasons, according to the case-law of the Court, is intended to allow those concerned to know the reasons for the measure adopted and enable the Court to review the validity of the measure. According to the Council, the preamble to Regulation No 989/84 clearly and unambiguously shows that the guarantee threshold system, which had already existed for two years when the contested regulation was adopted, was being maintained, that the risk of imbalance between production and market outlets was a real one and that the appropriate response was a reduction in production aid ‘depending on the extent to which the thresholds have been exceeded’. Similarly, the Commission considers that as regards Article 2(3) of Regulation No 426/86 the description of the nature of the market in the preamble to Regulation No 989/84 together with the available production data explain the choice of a system reducing aid.

As regards the annual regulations by which it fixed the aid, the Commission observes that for each of the marketing years in question it observed the framework laid down by Regulation No 989/84 concerning the manner of calculating the extent to which the guarantee threshold was exceeded and the reduction to be made. Examination of the regulations in question clearly shows that it was indeed in relation to the average Community production for the previous three years that the aid was reduced on each occasion, on the basis of the total excess production observed and in proportion to the extent to which each type of production for which thresholds had been fixed was exceeded.

The fact that Regulation No 2160/87 wrongly states that production of each group of tomato-based products exceeded the threshold is of no consequence, since traders were in a position to check, on the basis of the items of information available, the types of finished products for which there was a reduction in aid as a result of the threshold being exceeded.

The Court has held that the obligation to state reasons cannot be extended to require specification of the often very numerous and complex matters of fact or of law dealt with in regulations, provided that the latter fall within the general scheme of the body of measures of which they form part (see the judgment in Case 250/84 Eridania v Cassa conguaglio zucchero [1986] ECR 117 and the judgment in Case 167/88 Association générale des producteurs de blé et autres céréales v Office national interprofessionnel des céréales [1989] ECR 1653).

1.

Sitpa observes that the reductions which have affected all Community producers are due to overstated data notified to the Commission as a result of frauds committed in Italy and Greece. In breach of the prohibition of discrimination enshrined in the second paragraph of Article 40(3) of the EEC Treaty, according to which different situations must not be treated similarly unless such treatment is objectively justified, French processors, who are in no way responsible for the excesses recorded by the Commission, have been unfairly penalized. Moreover, from 1985 onwards, the Commission, by Regulation No 1320/85, in accordance with the primary provision in Article 2(3) of Regulation No 426/86, introduced a quota system restricting aid to a specific quantity of products, which has the advantage of not uniformly penalizing all manufacturers without regard to their actual conduct.

Sitpa therefore concludes that Regulations Nos 989/84, 1925/84, 2222/85, 2077/86 and 2160/87 are invalid under the prohibition of discrimination.

2.

The Council observes that Regulation No 989/84, which is of general application and contains no direct or indirect reference to any Member State, in no way infringes the prohibition of discrimination. The Council therefore concludes that Regulation No 989/84 is valid.

3.

The Commission states that the annual regulations fixing aid were adopted on the basis of data forwarded by the Member States which there is no reason to regard as incorrect. The data forwarded by the national authorities were trustworthy and those authorities exercised their responsibilities in relation to checking.

The danger of an imbalance between supply and market outlets as a result of the considerable increase in harvest and manufacture up to the 1984/85 marketing year was reduced, first by the introduction of guarantee thresholds and the reduction of aid and then by the introduction of a production quota system. It is clear from the statistics for Italy and Greece, by marketing year, showing the trends in harvest, manufacture, balance of trade and quantities available, that the measures introduced were effective. In particular, the reduction in unsold stocks from the 1985/86 marketing year onwards is clear evidence not of a general and manifest overstatement of processing data but of a real increase in supply resulting from an increase in the quantities harvested and processed, which was reabsorbed from 1985/86 onwards as a result of the intervention measures adopted by the Commission.

The guarantee thresholds and the reductions in aid made when thresholds are exceeded apply to every trader in the Community. Any other solution would have given rise to distortion of competition which would have been incompatible both with the objectives of Article 39 of the Treaty and with the principle of free movement of agricultural goods and the prohibition of discrimination.

Any fraud, assuming it to be established, is in any event attributable only to a few processors. Any corrections to which such fraud might have given rise would therefore not have benefited French processors alone.

In those circumstances the Commission contends that both Regulation No 989/84 and the implementing Regulations Nos 1925/84, 2222/85, 2077/86 and 2160/87 are valid.

1.

Sitpa observes that the Court has consistently held (judgments in Joined Cases 66/79, 127/79 and 128/79 Amministrazione delle finanze v Salumi [1980] ECR 1237 and Case 61/79 Amministrazione delle finanze dello Stato v Denkavit Italiana [1980] ECR 1205) that any finding of invalidity by the Court applies ex tunc. As regards the pecuniary consequences resulting from such invalidity it is clear from the judgment in Joined Cases 117/76 and 16/77 Ruckdeschel v Hauptzollamt Hamburg-St. Annen and Diamalt AG v Hauptzollamt Itzehoe [1977] ECR 1753 that it is for the competent authorities of the Community to adopt the necessary measures.

2.

The Council observes that since there is no doubt about the validity of the regulations in question the second branch of the question put by the national court does not call for an answer.

3.

The Commission, while sharing the Council's main position, observes in the alternative that the Court has consistently held that it is for the national courts to determine the consequences, including the financial consequences, in their legal system of a declaration of invalidity made by the Court (judgments in Case 23/75 Rey Soda v Cassa conguaglio zucchero [1975] ECR 1279 and Case 130/79 Express Dairy Foods v Intervention Board for Agricultural Produce [1980] ECR 1887). In particular circumstances the Court has required the competent institutions to adopt the measures necessary to remedy the unlawfulness of the measures, applying, by way of analogy, the provisions of the second paragraph of Article 174 of the EEC Treaty (see the judgment in Ruckdeschel, supra, and the judgment in Case 300/86 Van Landschoot v Mera [1988] ECR 3443).