delivered on 26 June 1985 (*1)

Mr President,

Members of the Court,

1. In the context of proceedings between Continental Irish Meat Limited and the Minister for Agriculture, the Supreme Court of Ireland has asked this Court to interpret Article 2 a of Regulation No 974/71 of the Council of 12 May 1971 on certain measures of conjunctural policy to be taken in agriculture following the temporary widening of the margins of fluctuation for the currencies of certain Member States (Official Journal, English Special Edition 1971 (I), p. 257), as amended by Article 2 of Regulation No 1112/73 of the Council of 30 April 1973 (Official Journal 1973, L 114, p. 4). That provision provides that ‘Where a product exported from one Member State has been imported into a Member State which has to grant a compensatory amount upon importation, the exporting... State may, by agreement with the importing... State, pay the compensatory amount which should be granted by [the latter]... The... amount shall be converted on the basis of the market rate of the relevant currencies as recorded over a period to be determined. Exporting... States which exercise this option shall inform the Commission accordingly’.

In particular, this Court must determine whether the intervention agency of a Member State, when paying monetary compensatory amounts due upon importation into another Member State in accordance with Article 2 a, acts in the same capacity as that in which it acts when collecting monetary compensatory amounts due on exports.

2. During the period October 1976 to July 1977, Continental Irish Meat Limited (hereinafter referred to as ‘Irish Meat’) exported beef under the system of monetary compensatory amounts from Ireland to the United Kingdom and Italy. As a result of the transactions concerned, Irish Meat became liable to the Ministry of Agriculture (which in Ireland is the intervention agency) for export monetary amounts totalling IRL 164337.40; in the meantime, it became entitled to receive import monetary compensatory amounts in respect of transactions with the United Kingdom totalling UKL 192662.20 and in respect of transactions with Italy totalling LIT 6293252. Under the agreements concluded pursuant to Article 2 a, the monetary compensatory amounts paid by the United Kingdom and Italy, the importing States, were to be paid by Ireland, the exporting State. At that time the United Kingdom and Irish currencies were on a par, and therefore only the Italian currency was converted. On 24 January 1978 the Ministry of Agriculture paid Irish Meat (which from 5 May 1977 was in receivership and in voluntary liquidation) IRL 32470.25, being the difference between the sums which it had to pay, on the one hand in respect of import monetary compensatory amounts and, on the other, in respect of export monetary compensatory amounts. In other words, the intervention agency raised a setoff against the claims of Irish Meat.

At that stage, Irish Meat brought an action claiming that no right of setoff existed. In its opinion, when the Ministry of Agriculture levies monetary compensatory amounts on exports from Ireland, it acts as an intervention agency; but when it pays import monetary compensatory amounts, it acts, by contrast, as an agent of the importing States. Under Irish law, this difference of legal capacity precludes any setoff.

When the matter was brought before it, the Supreme Court of Ireland considered itself unable to resolve the dispute without an interpretation from this Court of Article 2 a of Regulation No 974/71. By order of 21 February 1984 it therefore stayed the proceedings and, pursuant to Article 177 of the EEC Treaty, requested the Court to answer the following question: ‘Is Article 2 a of Council Regulation (EEC) No 974/71, as amended by Article 2 of Council Regulation (EEC) No 1112/73, to be interpreted to the effect that an exporting Member State which has entered into an agreement with an importing Member State for the payment of a compensatory amount, which should be granted by the importing Member State, is to be regarded as acting as agent of the said importing Member State in making or becoming liable for payment?’

3. For a better understanding of this question, it is appropriate to recall the rules on monetary compensatory amounts referred to therein. I shall do so merely in outline since they have already been considered by the Court, specifically with respect to the provision with which the national court's question is concerned (see judgments of 18 September 1980 in Case 795/79 Pesch v Hoofdprodiiktscbaap voor Akkerbouwproduken [1980] ECR 2705 and of 1 October 1981 in Case 196/80 Anglo-Irish Meat Company Limited v Minister for Agriculture [1981] ECR 2263).

Pursuant to Article 1 (1) of Regulation No 974/71 of the Council, as amended by Regulation No 509/73 (Official Journal 1973, L 50, p. 1), ‘If, for the purposes of commercial transactions, a Member State allows the exchange rate of its currency to fluctuate by a margin wider than that permitted by international rules in force on 12 May 1971, (a) the Member State whose currency increases in value beyond the permitted fluctuation margin shall charge on imports and grant on exports, (b) the Member State whose currency decreases beyond the [said] limit... shall charge on exports and grant on imports, compensatory amounts for the products referred to in paragraph (2), in trade with the Member States and third countries’.

In the circumstances described in subparagraph (b), it is as a rule the exporting State which levies the monetary compensatory amounts due, once the customs formalities have been completed and the product has left its territory (see Article 10 (1) of Regulation No 1380/75 of the Commission of 29 May 1975, which was in force at the material time — Official Journal 1979, L 139, p. 37). The monetary compensatory amounts granted upon importation must, on the other hand, be paid when the customs formalities have been completed and the duties and charges having equivalent effect payable in the importing State have been charged (Article 10 (2) of Regulation No 1380/75). As a rule, the monetary compensatory amounts are paid direct by the importing State. Moreover, as I have stated, Article 2 a of Regulation No 974/71 enables the exporting and importing States to agree that the monetary compensatory amounts payable by the importing State are to be paid by the exporting State.

That arrangement has made it possible to resolve, in part, the difficult problem arising from the use of different conversion rates (agricultural or budgetary) in calculating monetary compensatory amounts. For that purpose, in fact, the Member States used to employ the agricultural conversion rate. But, being charged to the Community budget, monetary compensatory amounts were then calculated according to the gold parities of the currencies of the Member States. As a result, the Community was subject to a greater burden where monetary compensatory amounts were granted by a State whose currency was falling in value and the agricultural conversion rate was lower than the budgetary conversion rate. It was specifically to restrict that loss that the Community requested certain exporting States to pay the monetary compensatory amounts due from the importing State in cases where the latter's currency was weaker than their own.

4. As has been pointed out by the Commission of the European Communities and the United Kingdom, the wording of the question submitted by the national court gives the impression that it seeks clarification as to the concept of agency under Irish law. Needless to say, the Court is not permitted to answer such a question under Article 177. However, it is quite legitimate for the Court to recast the question, so as to focus upon the matters involving an interpretation of Community law (see among others the judgment of 12 July 1973 in Case 11/73 Getreide Import GmbH v Einfithr- und Vorratsstelle für Getreide und Futtermittel [1973] ECR 919).

It appears clear to me, inter alia from the facts which emerged during the oral procedure, that what the national court actually wants to know is whether the intervention agency of a State, when paying the import monetary compensatory amounts due from another State in accordance with Article 2 a, acts in the same legal capacity as when it levies the export monetary compensatory amounts and, therefore, whether the sums involved may be set off against each other. In those terms the question is correctly framed and it is proper to answer it.

5. In this case, Irish Meat has repeated the argument which it put forward in the main proceedings: when levying export monetary compensatory amounts the intervention agency acts in its own right; when it pays import monetary compensatory amounts, it acts on behalf of the importing State. In other words, the claim is enforceable by, and the debt payable to, the same body, but each is ascribable to a different right: it is not therefore permissible to set one off against the other.

In support of that view, the plaintiff refers to the judgments of the Court in the Pesch and Anglo-Irish Meat cases. Both were concerned with problems of customs classification of particular goods and certain procedures for the application of monetary compensatory amounts. In the first case, the Court ruled that Article 2 a ‘did not intend to transfer to the exporting... State responsibility for “granting” monetary compensatory amounts on importation into another Member State but only to allow [it] the opportunity to “pay”, by agreement with [it] and on its behalf, the monetary compensatory amount on importation which the importing Member State itself is required to grant’ (paragraph 8). And the second judgment states that, in paying the monetary compensatory amounts payable by the importing State under Article 2 a, the exporting State ‘is bound by the tariff classification’ adopted by the [importing State] and may pay the monetary compensatory amounts due from [it] only at the rate which corresponds to the [said] classification' (paragraph 32). And that is not all.

Likewise in the Anglo-Irish Meat case, the Commission itself stated that, in the context of Article 2 a, ‘the exporting Member State is no more than the paying agent’ of the importing State; and Advocate General Sir Gordon Slynn made a statement to the same effect.

The opposite view — that the exporting State is not the agent of the importer and that setoff is therefore possible — is taken by the defendant in the main proceedings, the United Kingdom and the Commission. However, they put forward differing arguments in support of that view. The Irish Minister considers that under the rules in force he is directly and principally liable to Irish Meat in respect of the monetary compensatory amounts and is accountable to the European Agricultural Guidance and Guarantee Fund (EAGGF). That fact means that the relationship which is established between the exporting State and the importing State cannot be described as one of agency. Moreover, in DEKA (judgment of 1 March 1983 in Case 250/78 [1983] ECR 421), the Court ruled that the Community rules ‘may... give rise, as between authorities and traders, to reciprocal and even related claims which are an appropriate subject for setoff’; and it added that ‘In the case of an insolvent trader, such a setoff may... constitute the only practicable way open to the authorities to recover the wrongly paid sums’ (paragraphs 13 and 14).

According to the United Kingdom, there is nothing in the Community rules to indicate that the exporting State acts on behalf of the importing State when paying the monetary compensatory amounts due from the latter. The arrangement provided for in Article 2 a is purely administrative and has no effect on intra-Community trade or any implications for Community financing. It is therefore irrelevant to inquire into the legal nature of the relationship between the intervention agency of the exporting State and the importing State. In any event, that relationship cannot be classified as one of agency since the normal incidents of such a relationship (payment, control and the right to lay down implementing provisions) are entirely lacking. The agency's right to levy export monetary compensatory amounts and its obligation to pay import monetary compensatory amounts derive from the same Community provision, as is shown by the fact that they are accounted for on the basis of Community funds and recorded in the accounts of the exporting State even in the case of import monetary compensatory amounts covered by Article 2 a (see Article 5 (1) of Regulation No 729/70). On the other hand, setoff is wholly legitimate, precisely because its purpose is to ensure proper management of Community funds in accordance with the rule in the DEKA judgment.

Finally, in the view of the Commission, it is only possible to answer the question submitted by the Irish court if the paying and levying of monetary compensatory amounts are viewed in the context of the common agricultural policy. As is well known, that policy is administered by the Member States through intervention agencies. Those bodies, moreover, pay or levy import or export monetary compensatory amounts on the basis of the European legislation, having recourse to Community funds such as those of the EAGGF. Therefore they act on behalf of the Community. In support of its view, the Commission refers to Article 7 (2) of Regulation No 974/71, as amended by Regulation No 2746/72 of 19 December 1972 (Official Journal, English Special Edition, 1972 (28 to 30 December), p. 64), which provides that: ‘With effect from 1 January 1973, for the purposes of the financing of the common agricultural policy, the... amounts charged or granted in trade with Member States shall be treated as part of the expenditure on intervention intended to stabilize the agricultural markets’. The accounting treatment of monetary compensatory amounts also provides support for that view. The sums paid pursuant to Article 2 a by the exporting State (like those levied on imports) are entered in the accounts presented annually by the exporting State to the Community and do not appear in the accounts of the importing State. In short, the intervention agency acts as agent of the Community in both cases: it is therefore entitled to have recourse to setoff.

6. Under the laws of numerous Member States, setoff is possible so long as (a) the parties represent two separate centres of economic interest in which, depending upon the viewpoint, each of them may be classified as the debtor or the creditor; (b) in both centres, the credit and the debit attach to a person acting in the same legal capacity. However, different rules apply to setoffs between the State and economic operators. Thus, in some systems (France, Italy, the Netherlands and Belgium) only the public authorities have a right of setoff; on the other hand, under German and English law private individuals may also have a right of setoff, provided that the debit and the credit are enforced against the same fund (Paragraph 395 of the BGB and Article 35 (2) of the Crown Proceedings Act 1947).

In the light of those considerations, I shall examine the provision on which the national court seeks a ruling. In my opinion, it is ‘neutral’ with respect to the problem in this case; that is, it enables States to agree that payment of the monetary compensatory amounts due from the importing State is to be made by the exporting State, but it does not qualify the legal position of the exporting State or of the latter's intervention agency. However, in its interpretation of that provision in the Pesch judgment, the Court ruled that the procedure under that provision allows the exporting State the possibility of paying the import monetary compensatory amounts ‘on... behalf’ of the importing State (Pesch judgment). Can it be deduced therefrom, as Irish Meat maintains, that by using those words the Court intended to indicate that the relations between the two States were based on the concept of agency?

I do not think so; that is to say I consider that those words were not used in a technical sense. As we have already seen, in the later case of Anglo-Irish Meat, the Commission explained those words by describing the exporting State as the ‘paying agent’ of the importing State, whereas the plaintiff and the defendant regarded the national intervention agencies as agents of the EAGGF. Faced with those conflicting views, the Court could have repeated, and perhaps even clarified, the rule laid down in Pesch. However, the Court did not do so, precisely — I presume — because the arguments put forward by the parties made the Court aware of the interpretative difficulties which might result. Moreover, the meaning which the Commission then read into it and which Irish Meat now reads into it is untenable. It is ruled out not only by the arguments of the United Kingdom but also by the fact that, once the agreement referred to in Article 2 a is concluded and the tariff classification and the figure for the monetary compensatory amounts have been determined by the customs authorities in the importing State, no relationship exists between the intervention agency in the exporting State and the importing State.

The solution to this problem must therefore be sought elsewhere, and specifically in the legislation governing the common agricultural policy and the financing thereof. In other words, it seems to me that the argument put forward by the Commission in this case, to the effect that, when paying and collecting import and export monetary compensatory amounts, the intervention agencies operate as ‘agents of the Community’, is substantially correct. However, that argument requires to be examined in some detail. In particular, it is necessary to consider whether it conflicts with the consistent case-law of the Court to the effect that the national administration enjoys complete independence from the Community authorities.

Let me say immediately that, in my opinion, there is no conflict. In the recent judgment in Eurico (18 October 1984 in Case 109/83 [1984] ECR 3581) and in earlier judgments (22 January 1976 in Case 60/75 Russo [1976] ECR 45; 13 February 1979 in Case 101/78 Granaria [1979] ECR 623; 27 March 1980 in Case 133/79 Sucrimex [1980] ECR 1299; 10 June 1982 in Case 217/81 Interagra [1982] ECR 2233), the Court has held, with respect to various losses suffered by private individuals as a result of implementation of the common agricultural policy, that, regardless of the role played by the Commission, it is the intervention agencies of the State concerned which are responsible. Although I understand the reasons for the Court's upholding that rule, it does not seem to me that it can remove or detract from the Community basis of the agricultural policy. That policy is determined by the Community and it is the Community that lays down the rules governing it. The role assigned to the Member States therefore is merely that of executives.

It should be added that, with respect to the financing of that policy, monetary compensatory amounts are regarded as a means of regulating the agricultural markets (Article 7 (2) of Regulation No 974/71, as amended by Regulation No 2746/72) and that they are therefore charged to the Community budget (items relating to the EAGGF). The only responsibility of the Member States is to designate the authorities and bodies which are to effect the payments for which the Commission makes funds available (Articles 4 and 5 of Regulation No 729/70 of the Council of 21 April 1970). That, it seems to me, provides a sufficient foundation for the view that, by administering the monetary compensatory amounts (and thus also when paying import monetary compensatory amounts to an undertaking which is liable to them for export monetary compensatory amounts), the Member States discharge the function of paying agents to which the Community advances funds.

7. It follows from all those considerations that, at least in those countries whose laws governing setoff follow the pattern outlined above, setoff is possible. And indeed the right of setoff is particularly useful — and conducive to fulfilment of the need to make the best use of Community funds — where, as in the present case, an insolvent undertaking is involved. Only by that means — and I shall use words similar to those of the DEKA judgment — is it in fact possible to ensure that the solvent creditor-debtor is not obliged to make the payment incumbent upon it where the insolvency of the other party prevents it from satisfying its own claim.

In view of all the preceding considerations, I propose that the Court should give the following reply to the question submitted by the Supreme Court of Ireland for a preliminary ruling by Order of 21 February 1984 in the case of Continental Irish Meat Limited against Minister for Agriculture :

‘The intervention agency of an exporting Member State, when paying monetary compensatory amounts due upon importation into another Member State pursuant to Article 2 a of Regulation (EEC) No 974/71, as amended by Article 2 of Regulation (EEC) No 1112/73, and when charging export monetary compensatory amounts to the same undertaking, acts on behalf of the Community and may, if appropriate, extinguish the claim of that undertaking by setoff of their respective debts.’

(*) Translated from the Italian.