DELIVERED ON 30 JUNE 1982 (*1)

Mr President,

Members of the Court,

1.The Verwaltungsgericht [Administrative Court] Frankfurt am Main has applied to the Court under Article 177 of the EEC Treaty for a ruling on whether it is compatible with Community law for the Federal Republic of Germany to impose a charge for the costs of inspecting products under Article 10 of Commission Regulation (EEC) No 1725/79 of 26 July 1979 (Official Journal 1979, L 199, p. 1).

The facts may be summarized briefly. By a decision of 30 May 1980 the Bundesamt für Ernährung und Forstwirtschaft [Federal Office for Food and Forestry], Frankfurt am Main, charged Denkavit Futtermittel GmbH (hereinafter referred to as “Denkavit”), a manufacturer of milk-based feedingstuffs for calves, the sum of DM 329.90 relating to the costs of an inspection carried out on its premises in connection with the grant of Community aid. Denkavit lodged an objection against that decision, which was unsuccessful, and then brought proceedings before the local administrative court to have it set aside. By an order of 8 July 1981, that court referred to the Court of Justice the preliminary question mentioned above.

The legislative framework is straightforward. The principle of Community aids for skimmed milk and skimmed-milk powder produced in the Community and used as feedingstuffs for animals was laid down in Article 10 (1) of Regulation No 8D4/68 of the Council of 27 June 1968 (Official Journal, English Special Edition 1968 (I), p. 176). The general rules for granting 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); in particular, Article 3 (2) of the latter regulation made the payment of the aid provided for skimmed-milk powder subject to proof of denaturing or use in the manufacture of compound feedingstuffs; Article 3 (3) gave each Member State the task of ensuring by means of a public agency “compliance with the provisions of paragraph (2)”. Finally, with the adoption of Regulation No 1725/79 of 26 July 1979 the Commission laid down the rules for granting the aid in question, and in Article 10 of that regulation defined the kind of inspection measures to be carried out by the responsible agencies of the Member States, laying down, inter alia, (at paragraph 2 (b)), that the conditions of manufacture should be established by inspecting the basic product used and taking samples, and in addition by checking goods entering and leaving and by checking the accounts.

Under internal German law, the procedure for inspection was laid down by a regulation of 31 May 1977 adopted under the Law of 31 August 1972 implementing the common organization of the markets. Article 12 of that regulation provided that the costs incurred in packaging and transporting samples were to be refunded to the responsible offices together with the costs of inspecting the products.

2.The reference, which is at the origin of this case, is clearly formulated incorrectly since the procedure instituted by Article 177 of the EEC Treaty is not intended to be used for the purpose of assessing the compatibility with Community law of the conduct of a given Member State. However, the Court, as in many previous cases, will be able to deduce from that imprecise formulation the true and proper problem of interpretation of general interest which consists in establishing whether or not a Member State, in the context of the task of carrying out inspections given to it by Article 10 of Commission Regulation No 1725/79, is at liberty to demand reimbursement from the undertaking concerned of the costs incurred.

Following clarification of that point, it must first be examined whether, by adopting the aforementioned Regulation No 1725/79, the Commission laid down the rules for the grant of aids in such a way as to preclude the Member States from issuing also their own supplementary rules for implementing provisions, in particular as regards inspection measures.

There is certainly a number of cases where Community rules are complete: the characteristics of the products which may benefit from the aid (Article 1 of Commission Regulation No 1725/79 in conjunction with Articles 1 and 2 of Regulation No 986/68 of the Council of 15 July 1968); the procedure for denaturing (Article 3 of the Commission Regulation No 1725/79); the definition of compound feedingstuffs for animals (Articles 4 and 5 of the Commission regulation), and the mode of deliveries of such feedingstuffs (Articles 6 and 7); the conditions which must be satisfied by undertakings in order to qualify for the aid (Article 8) and to receive payment of it (Article 9); the subject-matter and technical criteria for the inspection to be carried out by the Member States (Article 10). Since however those supervisory powers imply activity on the part of the national administrative authorities it is clear that each Member State must be acknowledged as having the power to adopt the provisions necessary to regulate the formal and procedural aspects of that activity (without of course conflicting with any rule of Community law).

The order for reference, however, puts forward an argument, derived from Article 9 (4) of Regulation No 1725/79, as authority for denying that Member States are free to demand from the recipients of aid a refund of the costs of inspection. That provision, after establishing in the first subparagraph an assumption relating to the failure to comply with the provisions of the regulation, provides in the second subparagraph that the agency responsible for inspection shall, if the applicant so requests, carry out “a special investigation, the costs of which shall be borne by the Utter”, in order to prove that the failure to comply is in respect of a smaller quantity than that presumed. In Denkavit's view the fact that no provision similar to the aforementioned second subparagraph of Article 9 (4) appears in Article 10 of the Regulation has the effect of preventing the Member States from charging to the undertaking concerned the costs relating to normal inspection measures.

The Commission in its observations objected that that a contrario reasoning can apply only where the view is taken that the elements of a provision of an exceptional nature (Article 9 (4)) must equally figure in the general provision governing the inspection measures. In truth exceptional rules do not lend themselves either to an extension by analogy or to deducing arguments a contraria. None the less, the fact that the Commission considered it necessary to provide within the ambit of Article 9 (4) that the costs of a special investigation provided for therein must be borne by the undertaking requesting it does not preclude each Member State, in the context of implementing the system of inspections provided for by Article 10, from being free to decide whether or not to make the undertakings concerned pay the relevant costs. The regulation's silence on that point should not lead to the conclusion that it is something which falls outside the margin of discretion enjoyed by the Member States or that the Commission tacitly sought to preclude those States from being able to demand reimbursement.

3.We must now examine whether the charging to the undertakings of the costs relating to the mandatory inspection measures is capable of modifying the common prices of the products in question and thus jeopardizing attainment of the objective of the aid which the court making the reference identifies as the function of guaranteeing the target price. In that connection the Verwaltungsgericht Frankfurt referred to the judgment of the Court of Justice of 23 January 1975 in Case 31/75 Galli [1975] ECR 47, (cf. in particular paragraph 15) where it was held that “any national provisions, the effect of which is to distort the formation of prices” in that sector is incompatible with the rules of a common organization of the market involving price control. That principle should apply to any national measure which impedes, even if only indirectly, the formation of common prices, as would occur in the present case, since the mandatory reimbursement of the costs of inspection ends by reducing the amount of the aid in equal measure to the amount of those costs.

The national court doubted, however, whether the criterion laid down by the Court in its judgment of 30 November 1978 in Case 31/78 Bussone v Italian Ministry of Agriculture and Forestry [1978] ECR 2429 in particular at paragraphs 14 to 16 was applicable. In that case the Court was concerned with certain aspects of the common organization of the market in eggs and, after finding that Community law was silent as to the financing of the costs of supervision, acknowledged that Member States had the power to claim a consideration for the issue of labels subject to the condition however that that power should be used in such a way as not to jeopardize the objectives of the Community rules.

It seems to me that in fact the Bussone case cannot be relied upon in relation to the question at issue in view of the difference which exists between the organization of the market in eggs, which does not provide for standardized prices, and the organization of the market for milk products, which on the other hand includes a common system of prices. But I also think it is unjustified to rely on the principle enunciated in the Galli case. In fact, that decision, the scope of which was more clearly defined and circumscribed by ensuing judgments in Case 65/75 Tasca [1976] ECR 291 and in Joined Cases 88 to 90/75 SADAM [1976] ECR 323, concerned a type of public intervention having a direct influence on the formation of prices, since any proposal for alteration on the part of the major undertakings producing or distributing goods was “frozen” for a period of 60 days after notification of the proposal to the competent authorities and the latter were also given the opportunity of objecting to the modification within that period.

4.In the present case, however, the charging to the undertakings producing feedingstuffs of the costs of inspection encroaches only to a minimal extent upon their freedom to determine the various prices. It is true that the amount of the aid is reduced by the amount of the costs of inspections. It should, however, be borne in mind that, according to the calculations of the Commission, the negative effect of those costs on the amount of the aid is no more than 0.018%, whilst, according to Denkavit (which, although not contesting the Commission's calculation in relation to the consignment of goods in question, prefers to compare the costs of inspections with the aids received in the course of a year) that negative effect amounts to 0.13%. It does not seem to me that a charge of such modest proportions is capable of having a perceptible influence on the formation of prices, still less of jeopardizing the attainment of the objective of the aid.

4.The German court, however, wonders whether the fact that, of all the Member States, only the Federal Republic of Germany charges to undertakings the costs of inspections offends against the principle of equal treatment laid down in the second subparagraph of Article 40 (3) of the EEC Treaty. As the Court will remember, that provision provides that the common organization of the market “shall exclude any discrimination between producers or consumers within the Community”. That however does not preclude differences of treatment, within the context of the application of common rules, owing to the divergences between the internal legal systems of the Member States.

It is of course the national authorities which apply the common agricultural policy and in particular operate the machinery for intervening in the market and, for those purposes, undertakings enter into legal relationships directly with those authorities. The logical consequence of that system is that, in the absence of harmonization of all the branches of public law which come into play (for instance the numerous provisions which govern the actions of the public administration, public contracts, rights of action in favour of individuals and the like), certain differences of treatment between undertakings from one Member State to another remain possible and must be regarded as being compatible with Community law since they come about within the framework of provisions which reflect the discretionary powers still available to national authorities. In other words, to the extent to which the Community authorities, for reasons of necessity or expediency, consider it necessary to avail themselves of the collaboration of national authorities to put into effect Community intervention schemes and leave them free to regulate certain aspects relating to the application of the common rules, there may be slight differences in the treatment of traders in the various Member States, but those differences do not constitute an infringement of the abovementioned principle of nondiscrimination. The reason for their existence and their justification are to be found in the fact that it is impossible or inexpedient to subject the whole functioning of the common organization to a system of Community law or to make it dependent upon a complete harmonization of the internal laws in all the branches which are relevant to the application of provisions of Community law.

Finally, the court making the reference seems to be inclined to evaluate the present case in the light of the principle that the Member States may charge inspection costs only in consideration of services which may be regarded as having been rendered to the person concerned. Until now the Court has in fact only acknowledged that principle in connection with Article 9 of the EEC Treaty namely when it was necessary to interpret the concept of charges having an effect equivalent to customs duties, which of course are imposed on goods by reason of their crossing a frontier. But, according to the court making the reference, it may be inferred from the Bussone case and in particular from the juxtaposition of paragraphs 34 and 35 of the decision and the opinion of Mr Advocate General Reischl in that case that the abovementioned principle has a wider-ranging scope. In fact, in that case which concerned the justification for the payment claimed by a Member State for the release of the bands and labels provided for by Community provisions for the marketing of eggs, the Court stated inter alia, at paragraph 34: “Nor is it ruled out that in that case the costs of printing and distributing the bands and labels, and those arising from the implementation of the specific checks required by the basic regulations, should be regarded as a service rendered to the user such as to justify the imposition of a pecuniary charge, on condition that it does not exceed the real cost of the supervisory system in question.” From that citation may be inferred the principle asserted as to the relation between the pecuniary charge imposed by the State and the service rendered to the user and thus it is easy to arrive at the conclusion that the charge provided for in this case is unlawful since it is difficult to attribute to the inspections carried out on the basis of Commission Regulation No 1725/79 the nature of an individual service. In fact, although they constitute a precondition which every undertaking must satisfy in order to receive the aid, those inspections are founded on the general interest in guaranteeing respect for the provisions governing the machinery of Community support.

However, there is a further reason why the reasoning set out by the national court cannot be followed. In the first place, the principle that a pecuniary charge is only justified in so far as it is the consideration for a service rendered by the State must be rigorously applied in order to safeguard the free movement of goods, which constitutes one of the foundations of the common market, but that is no reason for extending that principle to the question of the costs relating to inspection operations on given products, which are not carried out in connection with their importation or exportation, but simply so as to ensure that a Community aid is correctly granted. In that respect I would add that the factor mentioned by Denkavit as to the substantial identity between the level of aids in question and that of Community export refunds, seems to me irrelevant. In the second place, the quotation referred to above from the Bussone judgment shows, from the way in which it is worded, that the Court confined itself to mentioning a case in which the costs in question were linked to a service rendered to the user but certainly did not elevate that case to a principle which might have a bearing on the solution to the question under examination.

The question, as appears from paragraph 26 of the decision in Bussone, consisted in establishing whether the directly applicable nature of the regulations, which were the subject of a request for interpretation, might be jeopardized “by the adoption of national provisions which, whilst purporting to implement the regulations in question, introduce additional conditions, such as those reserving to the public authorities the right to prepare and distribute bands and labels and making the issue of such bands and labels subject to the payment of a pecuniary consideration.” The Court's reply was based essentially on the two arguments which emerged from paragraphs 32 and 36 of the decision: on the one hand, namely, the fact that the regulation in question left to the Member States the task of adopting “the necessary legislative, regulatory, administrative and financial measures to ensure the effective application of the provisions of that regulation”; and, on the other hand, the consideration that the national rules for their implementation were in accordance with the purpose of Community rules, even if they introduced additional conditions and imposed the payment of a consideration which was not disproportionate to the cost of the supervisory system.

Following clarification of that point, the reasoning of the decision in the Bussone case may be adapted to the problem which we are examining (even if the difference found to exist between the rules which were the subject of interpretation in that case and the rules under discussion here did not enable us to extract directly from that decision the reply to be given to the Verwaltungsgericht Frankfurt). It may be said therefore that the immediate efficacy of Commission Regulation No 1725/79 is not impaired if a Member State requires the reimbursement of the inspection costs since that regulation, in providing for Member States to carry out inspections, did not preclude them from introducing additional detailed conditions of an administrative or procedural nature compatible with the objectives of the Community provisions. In connection with that compatibility a final consideration may be stated analogous to that expressed by the Court in paragraph 35 of its judgment in Bussone; the fact that receipt of the aid is made subject to the payment, by the recipient undertaking of a pecuniary charge proportionate to the normal cost of the inspections carried out by national authorities (and characterized by a very minor effect on the amount of the aid) does not disturb the functioning of the common organization of the market.

On the basis of the foregoing considerations I conclude by proposing that the Court should reply to the preliminary question referred to it by the Verwaltungsgericht Frankfurt am Main by order of 8 July 1981, by declaring that Community law does not preclude a Member State from requiring an undertaking concerned to reimburse the costs inherent in the inspection of products carried out in pursuance of Article 10 of Commission Regulation No 1725/79 of 26 July 1979, provided that the amount charged is proportionate to the normal cost of such inspections and has a minimal effect on the amount of the aid.

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Translated from the Italian.