OPINION OF MR ADVOCATE-GENERAL MAYRAS

DELIVERED ON 11 JUNE 1974 (*1)

Mr President,

Members of the Court,

Introduction

The cultivation in the Netherlands of hyacinth bulbs either for the purpose of marketing them in that state or for producing cut flowers is governed by a Regulation on 29 June 1971 by the Netherlands organization for the production of ornamental flowers — a trade organization under public law — approved by the Minister of Agriculture and Fisheries.

Such cultivation is conditional upon the obtaining of a cultivation licence granted by the organization, for each cultivation year, firstly to bulbgrowers who prove that they had legally grown hyacinth bulbs during the previous cultivation year and' thereafter, under certain conditions, also to new producers and in particular those who by way of transfer acquired the right to cultivate.

Each licence lays down the area on which the holder may exercise his right of cultivation.

We are therefore dealing with a system which tends not only to control the production of bulbs but also to limit it.

Infringements are punishable by fines.

Mr Van Haaster, a producer of hyacinth bulbs and flowers, was summoned to appear before the police court magistrate in economic matters (Economische Politierechter) of Haarlem for having grown hyacinths without being in possession of a valid licence.

Relying upon Regulation No 234/68 of the Council dated 27 February 1968 on the establishment of a common organization of the market in live trees and other plants, bulbs, roots and the like, cut flowers and ornamental foliage, the defendant argued that the requirement of a cultivation licence was contrary to provisions in this Regulation in that it prohibits, in the internal trade of the Community in these products, any quantitative restriction or measure having equivalent effect.

The national court has referred to you the question whether the Dutch Regulation can be reconciled with the Community provisions.

One must express satisfaction at this request for a preliminary ruling since, on the same question, another economic police court magistrate, — the magistrate for the district of Alkmaar — several weeks before, on 5 November 1973, without referring to this Court, gave a decision to the effect that the Dutch regulation was clearly contrary to Community law and on those grounds discharged another grower summoned for the same offence.

Admittedly, this Court cannot rule directly on whether a national provision is contrary to a Community Regulation, but the elements of fact and of law that emerge from the Court file allow one to reframe the question referred, within the framework of the Article 177 procedure.

In fact it amounts to whether in the abstract the prohibition of quantitative restrictions or of measures having an equivalent effect, under Article 10 (1) of Regulation No 234/68, in trade between Member States must be interpreted as applying also to national measures imposing production quotas.

So as to enable the Court to reply in a helpful way to the judge who referred the case, it is appropriate to analyse the Dutch rules governing hyacinth bulb production and to examine their effect in the light of Community regulations.

I —

This national system contains the following elements:

The standardization of goods offered; the reasons for and the advantages of this aim are evident: an improvement of the merchantable quality (sound condition, absence of virus and standard quality). In practice this objective is guaranteed by the requirement for a permit and for a phytosanitary certificate as a condition for exporting the bulbs.

Coupled with the first objective, the control of cultivation: a system of limiting or of laying down production quotas by means of cultivation licences, which implies measuring and precise delimitation of the cultivated surfaces; the fines imposed for infringing the cultivation licences are in proportion to the excess area. Keeping the register of cultivation licences is a matter for the organization, as is also the prosecution of offences.

As a corollary to the system of control of production, there is the intervention system. During periods when there is a surplus supply, measures are taken in order to avoid excessive losses. The organization maintains for ornamental plants both flower bulbs and cut flowers a ‘surplus fund’ (Bloembollensurplusfonds): when the price falls below a certain level, the goods are withdrawn from auction. The same applies to bulbs which do not reach the minimum size and which are not therefore ‘merchantable’, except where these bulbs change hands between horticulturists. In fact these bulbs have a sufficient possibility of flowering and the few losses that possibly occur do not prevent their transplantation from being profitable.

This fund is financed from contributions payable by all parties who participate in the production and sale of flower bulbs. Nevertheless, we do not know exactly what classes of horticulturists (bulbgrowers or flowergrowers) are entitled to offer bulbs to the intervention system and are subject to payment of the contribution.

Finally, thanks to government subsidies paid for purposes of research and publicity, the fund also participates in promoting the marketing of hyacinths in pots, by reducing prices and covering sales risks.

The organization is therefore competent to:

—grant cultivation licences,

—fix intervention prices in the Netherlands,

—make use of and manage the support fund,

—participate in the laying down of conditions for export (conditions for delivery and of payment).

It obviously also participates at Community level in fixing minimum export prices to third countries and in fixing minimum sizes of bulbs.

The cultivation of hyacinth bulbs in the Netherlands takes place in a strictly delimited area; the saleable bulbs must be prepared for sale and disposed of within three to four months following the harvest. Strict adherence to sales procedure is ensured by the fact that the major part of production is exported and must on this occasion pass the inspection services at the frontier.

The meticulous and efficient nature of this whole organization in conjunction with the natural production capacity explains the dominant position at present enjoyed by the Netherlands in the sector of hyacinth bulb production, a production the value of which is of some importance — the ‘home consumption’ of bulbs only accounts for a small proportion, when compared with exports. An important proportion of hyacinth flowers produced in other Member States is derived from ‘merchandise’ imported from the Netherlands, and thereafter grown under glass or planted in the open.

II —

Let us now turn to the common organization of the market in the sector of live trees and other plants, bulbs, roots and the like, cut flowers and ornamental foliage, established by Regulation No 234/68 of the Council of 27 February 1968, which has been in operation since 1 July 1968.

Compared with other organizations of the market, this system is less detailed.

Nevertheless it provides for the adoption of supplementary Community measures:

With a view to improving the quality of the products (Article 3 of Regulation No 234/68: the determination of standards of quality). This was in fact done by Regulation No 315/68 of 12 March 1968. In practice this means that with a view to preventing the sale to the final user of bulbs (‘dry goods’) smaller in size than would definitely guarantee flowering and so as to avoid a lowering of European quality standards, any marketing and export of bulbs smaller than certain sizes, is prohibited. This Regulation seems therefore in itself to have the effect of limiting the cultivated area: in its absence and if the export of this preparation material were allowed without any limit being imposed, this would probably result in a proliferation of areas under cultivation. Besides, it has an effect of stabilizing prices on the markets.

So as to maintain and develop the export of bulbs intended for cultivation of flowers to third countries and consequently, to stabilize prices, the basic Regulation (Article 7) provides for the setting up of a minimum price system for exports to third countries. Various implementing Regulations of the Commission subsequently laid down prices in respect of each marketing year.

Finally, Article 2 of the basic Regulation provides for the adoption of Community measures for encouraging action by trade and joint trade organizations so as to promote a better organization of production, and Article 12 provides, without in this respect laying down any time limits, that the Council shall make such further provisions as are necessary for completing the provisions of the Regulation ‘as may be required in the light of experience’. It appears that no provision has in this respect been made at Community level.

As a counterpart to these provisions, Article 10 of the Regulation — by a clause that can also be found in the other common organizations of the markets — prohibits, in the internal trade of the Community, not only the levying of any customs duty or charge having equivalent effect but also any quantitative restriction or measure having equivalent effect, except in respect of certain products, particularly as regards what is called materials for the vegetative preparation of the vine. As regards potted plants and sapling fruit trees the necessary measures with a view to approximating the national provisions designed to maintain or improve the technical or genetic level of production had to be taken before 31 December 1968 (Article 10, last paragraph, and Article 18).

III —

Two questions therefore arise:

Does such a system of cultivation licences amount only to a ‘quantitative restriction or measure having equivalent effect’ on production in Member States?

Does the Regulation, in particular Article 10, have no other scope than that of Articles 30 et seq. of the Treaty, that is to say the prohibition of restrictions which arise only at the stage of exporting the products?

As regards the first point, it seems to me that a system of cultivation licences, even if the concessions granted — on payment of a substantial duty — are not completely made use of, constitutes in itself a measure that amounts to imposing production quotas and which by reason of this very fact has a potential effect upon the marketing of the product under review. In this respect the Court by its judgment in the Geddo case of 12 July 1973 (Case 2/73, [1973] E.C.R. 865) found that ‘measures having equivalent effect not only take the form of the restraint described [total or partial restraint of imports or exports]; whatever the description or techniques employed they can also consist of encumbrances having the same effect’. Admittedly, the Court made this statement in connexion with a financial charge payable upon certain products at the time of the contract relating thereto, but it seems to me perfectly applicable to a system of production quotas.

Whilst recognizing this, the Commission nevertheless adds that ‘national regulations by which a State quantitatively limits certain productions cannot normally be termed quantitative restrictions or measures having equivalent effect (already condemned by Article 30 et seq. of the Treaty)’.

The Commission considers that the scope of the prohibition of quantitative restrictions (or of any measure having equivalent effect) in the internal trade of the Community, contained in Article 10 of the Regulation, is no different from that of the prohibition of quantitative restrictions upon export (or any measure having equivalent effect) as between Member States, contained in Article 34 of the Treaty.

Nevertheless the Court found by its Judgment in the <span class="italic">Bilger</span> case of 18 March 1970 (Rec. 1970, p. 136) that the expression ‘relate either to imports or to exports’ has a narrower meaning than the expression ‘affect trade between Member States’.

Admittedly, what was involved in that case was the assessment of a contract for delivery in the light of the competition rules. But the Court did on that occasion emphasize that the notion of ‘internal trade of the Community’ and that of ‘import and export between Member States’ do not overlap. An agreement to impose production quotas between undertakings might affect internal trade and it is not therefore impossible that restrictions on production laid down by a Member State might affect the internal trade of the Community.

I consider therefore that the prohibition in Article 10 of the Regulation has a scope wider than that of Article 34, all the more so, since it appears in a common organization of the market.

And there is more to this.

The common organizations of the markets in the field of agriculture cover not only trade in agricultural products, but also their production.

Admittedly, bearing in mind the important differences that exist between Member States in the field of national organizations of the market, as well as the diversity of conditions that govern the trade in agricultural products — i.e. differences which relate <span class="italic">inter alia</span> to the very nature of the goods concerned — it is provided in the framework of the common agricultural policy that the common organization can take several forms (Article 40 (2)).

By definition, any common organization of the market must, in order to replace existing national organizations, include equivalent safeguards for the employment and standard of living of the producers concerned (Article 43 (3)).

In the sector under consideration, I am of the opinion that Article 43 (3) was put into operation by Regulation No 234/68. It follows that any quantitative restriction of production is henceforth prohibited in this sector, the only permissible exceptions being those which arise from the elimination of products not in conformity with Community standards or from derogations justified by Article 36, or further, such as are the subject-matter of express provisions.

As from 1 July 1968, the markets in live trees and other plants, bulbs, roots and the like, cut flowers and ornamental foliage became the subject-matter of a definitive, though in certain respects perhaps still incomplete organization. A <span class="italic">fortiori</span>, this must be so at the end of the transitional period: if no complementary measure was taken, this is because it was not thought necessary to adopt one.

By its Judgment in the <span class="italic">S.A.l.L.</span> case of 21 March 1972 (Rec. 1972, p. 119) the Court found that in such a case it is solely for the Community authorities to decide on the provisional maintenance of any national system of organization, intervention or control relating to the products in question. One can likewise derive arguments from the Judgment in the <span class="italic">Grosoli</span> case of 12 December 1973, (Case 131/73, [1973] E.C.R. 155) by which the Court found that the absence of Community provisions for determining the appropriation of an import quota for an agricultural product does not allow a Member State itself to take restrictive measures of a kind affecting the objectives of the agricultural policy pursued by the Community authorities.

Likewise, one cannot, because of the absence in Regulation No 234/68 of any formal prohibition of a national provision (such as the prohibition in Article 12 of Regulation No 727/70 of the Council of 21 April 1970 on the common organization of the market in raw tobacco, provisions which give certain persons the exclusive right to grow tobacco) argue that such a provision is compatible with the application of the Regulation in question. Nor can one base an argument on the tolerance of the Community authorities when faced with this kind of situation.

It is said that there is nothing to show that up to the present time this system has caused difficulties in the distribution of competing products of the importing Member States. This is not at all surprising, given the dominant position of the Netherlands in the field of hyacinth bulb production. But it is not only a matter of this: in the first place it is admittedly necessary for the producers of other Member States to be able to acquire, if not in their own countries, then at least in the Netherlands, all the bulbs for the production of cut flowers or for reproduction which they may require and under the same conditions as their Dutch competitors; but it is also necessary that there should be no discrimination between producers in the Netherlands. And the present case, in the light of the precedents quoted by Mr Van Haaster, shows that this is not so. It has become impossible, in particular due to the system of cultivation licences. If it does not directly establish a case of quantitative restrictions upon exportation, yet such a system, by limiting production, necessarily results in reducing the quantities of goods capable of being injected into the trade between Member States.

In my opinion therefore the Court should rule that the combined provisions of Article 10 of Regulation No 234/68 and of the other Articles of this Regulation are incompatible with a system of cultivation licences for hyacinth bulbs.

*

Language of the case: English.