Case C-34/08, Azienda Agricola Disarò Antonio and Others

Validity of Regulation 1788/2003 on milk levy upheld

This reference for a preliminary ruling concerned the validity of Regulation 1788/2003 establishing a levy in the milk and milk products sector. The claimants in the main proceedings were milk producers and members of Cooperativa Milka, a cooperative society which, by virtue of its status as ‘first purchaser’, was responsible for collecting the levy in accordance with Art. 11(1) of Regulation 1788/2003. Considerable sums were being demanded from those companies by way of that levy.

The claimants in the main proceedings objected to those sums before the Italian courts, contesting the validity of Regulation 1788/2003, as well as the criterion on the basis of which, under that regulation, the guaranteed total quantity for the whole of the Community was to be allocated between the Member States and, more specifically, the way in which that criterion had been applied in the case of the Italian Republic.

They submitted in essence that, for the purposes of determining the ‘national reference quantity’ as fixed by Regulation 1788/2003, account ought also to have been taken of the fact that the Italian Republic had a milk production deficit. They furthermore questioned whether Regulation 1788/2003 was compatible with the objectives of the common agricultural policy as laid down in Art. 33 EC.

The national court first of all asked whether the fact that Regulation 1788/2003 did not take into account, for the purposes of determining the national reference quantity, the fact that the Member State concerned had a milk production deficit was capable of affecting the compatibility of that regulation with the objectives laid down, in particular, in Art. 33(1)(a) and (b) EC. Furthermore, the national court asked whether Regulation 1788/2003 infringed the principle of non‑discrimination or the principle of proportionality, or Art. 33 EC.

Whether fact Member State had milk production deficit relevant factor
The Court pointed out that the main purpose of Regulation 1788/2003, as described in the third recital in the preamble thereto, was to address the imbalance between supply and demand in the context of milk products with regard to both reductions and increases in the reference quantity. In order to achieve that purpose, a concerted effort was required by all Community producers in equal measure (see Case 179/84 Bozzetti [1985]).

The Court argued that the mechanism of the common agricultural market was predicated on the assumption that, where domestic demand for milk exceeded supply, the Member States could import milk, especially from Member States where demand was lower than supply.

The Court therefore found that the fact that a Member State had a milk production deficit was not a relevant factor for the purposes of determining the national reference quantity (see also Case C‑203/86 Spain v Council [1988]).

Compatibility of Regulation 1788/2003 with Article 33(1) EC
With regard to the question whether Regulation 1788/2003 was compatible with the objectives of the common agricultural policy as laid down in Art. 33 EC, the Court of Justice reiterated that the Community legislature enjoyed a wide discretion in matters concerning the common agricultural policy, commensurate with the political responsibilities given to it by Arts 34 EC to 37 EC (see
Joined Cases C-37/06 and C‑58/06 Viamex Agrar Handel and ZVK [2008]).

As regards, more specifically, the objectives of the common agricultural policy as laid down in Art. 33 EC, the Court held that the Community institutions must make sure that a way was found to pursue those objectives in harmony and on an ongoing basis, where this became necessary as a result of conflicts which might arise between those objectives when they were pursued in isolation, and, where necessary, gave any one of them temporary priority in order to satisfy the demands of the economic factors or conditions in the light of which their decisions were made (see, in particular, Case C-311/90 Hierl [1992]).

The Court found that, by temporarily according priority to the objective of “stabilising markets” as laid down in Art. 33(1) EC, the Council had not exceeded its discretion by adopting Regulation 1788/2003.

Principle of non‑discrimination
The Court stressed that under the second subparagraph of Art. 34(2) EC, the common organisation of agricultural markets must exclude any discrimination between producers and consumers within the Community. It reiterated that the principle of non-discrimination required that comparable situations must not be treated differently and that different situations must not be treated in the same way unless such treatment was objectively justified (see Case C‑273/04 Poland v Council [2007], on which I wrote this post).

The Court held that even if Regulation 1788/2003, which applied to all recipients of reference quotas alike, did in fact place a heavier burden on small producers than on large producers, the fact that a measure adopted within the framework of the common organisation of the market might affect producers in different ways, depending upon the particular nature of their production, did not constitute discrimination if that measure was determined on the basis of objective criteria which were adapted to meet the needs of the general common organisation of the market. The Court argued that that was true of the milk quota and levy system, which was arranged in such a way that national and individual reference quantities were set at such a level that their total did not exceed the overall guaranteed reference quantity for each Member State. It followed that Regulation 1788/2003 was compatible with the principle of non‑discrimination.

Proportionality principle
The Court finally held that it was necessary to adopt Regulation 1788/2003 in order to reduce the imbalance between supply and demand on the milk and milk products market, as well as the resulting structural surplused , in order to achieve better market equilibrium. It followed that Regulation 1788/2003 was also compatible with the principle of proportionality.

Text of Judgment

Case C‑504/07, Antrop and Others

Court further clarifies Altmark criteria

Carris was a public undertaking which, by administrative contract, obtained a public service concession for passenger transport by bus , electric vehicles and mechanical lifts within the administrative limits of the city of Lisbon.

The STCP was a public undertaking which held a public service concession for passenger transport within the administrative limits of the city of Oporto, pursuant to a law converting a municipal service into a limited company.

In accordance with its public service obligations, Carris was, inter alia, required to ensure that the conceded service operated smoothly and continuously under the price conditions specified by the awarding authority.

The STCP, for its part, was a public undertaking which held a public service concession for passenger transport within the administrative limits of the city of Oporto, pursuant to a law converting a municipal service into a limited company.

In return for the provision of the urban passenger transport services, Carris and the STCP had, for many years, enjoyed various advantages awarded by the State. These consisted of, inter alia, compensation payments, capital injections and State credit guarantees.

Outside the geographical limits of the areas covered by their respective concessions, Carris and the STCP, without being subject to a public service obligation, also operated bus routes on which other undertakings were active, inter alia Antrop and Others.

Those latter undertakings provided transport services under the public service delegation regime and were subject to rules concerning routes, times and fares. The activity of Carris and SCTP on those routes led Antrop and Others to claim a distortion of competition and challenge Resolution 52/2003.

Antrop and Others submitted that their only resource was operating revenue from the fares charged, so that operating losses from their activity were covered exclusively by their own capital, whereas any losses, the investment costs and the capital costs of Carris and the STCP were covered by public subsidy. The award of that subsidy was consequently a factor distorting competition.

Therefore, the appellants in the main proceedings claimed that the part of Resolution 52/2003 under challenge infringed the national legislation relating to competition and the provisions of Community law on State aid, in particular Arts 86 EC, 87(1) EC, 88 EC and 89 EC, Regulations 1191/69 and Regulation 1107/70.

In those circumstances, the issue was raised before the national court of the need for an order for reference to the Court of Justice. The referring Court inter alia asked whether the grant by a Member State of compensation payments, such as those at issue in the main proceedings, to transport undertakings holding a public service concession and which were entitled, within specific urban districts, to carry on their activity on an exclusive basis because of the public service obligations to which they were subject, constituted State aid prohibited by Art. 87(1) EC where, in addition, those undertakings also carried on their activity in competition with private operators outside those specified districts and where it was not possible to calculate the additional cost deriving from the performance of the public service obligations.

The Court reiterated that Article 87 EC was one of the general provisions of the Treaty on State aid, whereas Art. 73 EC created an exception in the field of transport to the general rules applicable to State aid, by providing that aids which met the needs of coordination of transport or represented reimbursement for the discharge of certain obligations inherent in the concept of a public service were compatible with the Treaty. The Court also reiterated that Regulation 1191/69 established a system which the Member States must comply with when they consider imposing public service obligations on undertakings in the land transport sector (see Case C-280/00, Altmark Trans and Regierungspräsidium Magdeburg (2003)).

Art. 10 of Regulation 1191/69 provided, inter alia, that the amount of the compensation must, in the case of an obligation to operate or to carry, be equal to the difference between the reduction in financial burden and the reduction in revenue of the undertaking if the whole or the relevant part of the obligation in question were terminated for the period of time under consideration. However, where the calculation of economic disadvantage was made by allocating among the various parts of its transport activities the total costs borne by the undertaking in respect of those transport activities, the amount of the compensation was to be equal to the difference between the costs allotable to that part of the undertaking’s activities affected by the public service obligation and the corresponding revenue.

Since the activities of Carris and the STPC outside their respective areas of exclusivity were not subject to a public service obligation, it was not possible to ascertain on the basis of reliable data from the accounts of those two undertakings the difference between the costs imputable to the parts of their activities in the areas covered by the respective concessions and the corresponding income. Consequently, it was not possible to calculate the additional cost deriving from the performance of public service obligations by those undertakings.

The Court held that, accordingly, the requirement set out in Art. 10 of Regulation 1191/69 was not fulfilled, since the costs imputable to the part of the activity of Carris and the STPC carried out in the areas in which each was granted an exclusive concession could not be clearly established.

The Court reiterated that in such a case, since the compensation payments paid to those undertakings were not granted in accordance with Regulation 1191/69, they were consequently not compatible with Community law and it was therefore unnecessary to examine them in the light of the Treaty provisions relating to State aid, in particular Art. 87(1) EC (see Altmark, paragraph 65).

The Court concluded that Regulation 1191/69 precluded the grant of compensation payments, such as those at issue in the main proceedings, where it was not possible to determine the amount of the costs imputable to the activity of the undertakings concerned carried out in the performance of their public service obligations. The Court held that where a national court found certain aid measures to be incompatible with Regulation 1191/69, it was a matter for that court to establish all the consequences, under national law, as regards the validity of the acts giving effect to those measures.

Text of judgment

Case C‑241/07, JK Otsa Talu OÜ v PRIA

Court confirms principles of equal treatment, protection of legitimate expectations, and others, applying to implementing measures

This case concerned the interpretation of Regulation 1257/1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF).

On 26 May 2005, Agrofarm submitted an application to the PRIA for area payments and support for environmentally-favourable production. Having already made the necessary preparations in 2004, Agrofarm was ready to give a commitment to implement that type of production in order to obtain rural development support. However, the application was rejected and Agrofarm appealed.

The referring court asked whether the provisions of Art. 24(1) of Regulation 1257/1999, read in conjunction with Arts 37(4) and 39 thereof, precluded a Member State from changing, on the ground of insufficient budgetary resources, the conditions for the grant of rural development support in order to restrict the class of eligible applicants to farmers already concerned by a decision to grant such support in the previous budgetary year.

The Court first of held that, in order to guarantee the transparency of the measures contemplated, the Member States were to establish, in accordance with Art. 41 of Regulation 1257/1999, rural development plans, including, inter alia, the description of the support measures for rural development such as agri-environmental measures and an indicative overall financial table summarizing the national and Community financial resources.

Those programs were to be submitted to the Commission which must appraise the plans to determine whether they were consistent with the regulation, although that approval did not confer on them the nature of an act of Community law (see, to that effect, Case C-336/00 Huber [2002]). The Member States must try to manage their financial resources adequately so as to enable each eligible applicant, within the meaning of that regulation, to benefit from rural development support.

However, the Court held that Member States might lay down further or more restrictive conditions for granting Community support for rural development provided that such conditions were consistent with the objectives and requirements laid down in the regulation and that support measures might, where necessary, be subsequently revised by the Member States in order to ensure compatibility and consistency.

The Court furthermore reiterated that, subject to the compatibility and consistency with the objectives and provisions of Regulation 1257/1999, and compliance with the general principles of Community law, with which the Member States must comply when they implement Community rules (see, to that effect, Joined Cases C-181/04 to C-183/04 Elmeka (2006)), such as the principles of equal treatment, the protection of legitimate expectations, and proportionality, the national authorities had the option of using a measure other than the one provided for in the Development Plan.

The Court reiterated that the principle of equal treatment required that comparable situations must not be treated differently and that different situations must not be treated in the same way unless such treatment was objectively justified (Joined Cases C-453/03, C-11/04, C-12/04 and C-194/04 ABNA and Others [2005]).

The Court held that a farmer who submitted an application for rural development support for the first time was not in the same situation as a farmer who, in accordance with a decision already made, was bound to comply with a certain number of obligations with respect to his commitment to engage in environmentally-favourable farming.

As regards the principle of the protection of legitimate expectations, the Court held that, in the field of the common agricultural policy, economic operators were not justified in having a legitimate expectation that an existing situation which was capable of being altered by the competent authorities in the exercise of their discretionary power would be maintained (see Case C-310/04 Spain v Council [2006]).

The Court concluded that Article 24(1) of Regulation 1257/1999, read in conjunction with Arts 37(4) and 39 thereof, did not preclude a Member State from restricting, on account of insufficient budgetary resources, the class of recipients of rural development support to farmers already concerned by a decision to grant such support in the previous budgetary year.

Text of Judgment