delivered on 31 January 1985 (*1)

Mr President,

Members of the Court,

In view of the structural surpluses on the market in milk products, Council Regulation No 1078/77 of 17 May 1977 (Official Journal 1977, L 131, p. 1) provides for the grant of a premium for the non-marketing of milk and milk products (the ‘non-marketing premium’). One of the conditions for the grant of that premium is that the would-be recipient must undertake not to market milk or milk products for five years. The plaintiff gave that undertaking but subsequently let his farm. The lessee gave a written undertaking that he would also observe the obligation entered into by the plaintiff and, as a result, the plaintiff was paid the premium, which amounted to DM 74202.54. In the course of 1981 the tenant decided to keep sheep and to sell the milk of those animals. The plaintiff asked the competent authorities whether that plan was compatible with the conditions laid down in Regulation No 1078/77 for the grant of the non-marketing premium. The proceedings brought in response to the negative answer given by the competent authority eventually led to the following question being referred to the Court for a preliminary ruling:

‘Are ewe's milk and ewe's milk products covered by the terms “milk and milk products” appearing in Article 2 (2) (a) of Council Regulation (EEC) No 1078/77 of 17 May 1977 introducing a system of premiums for the non-marketing of milk and milk products and for the conversion of dairy herds?’

2. The market for ewe's milk

According to the statistics presented to the Court, in 1977, the year in which the relevant Council regulation was adopted, production of ewe's milk in the Community amounted to 1505000 tonnes, essentially shared between Italy (563000 tonnes) and France (925000 tonnes). After the accession of Greece total production rose to 2492000 tonnes. In all three countries production is increasing each year by a few percentage points. Those figures must be compared with the figures for cow's milk production in the Community, which amounted to 96186000 tonnes in 1977 (deliveries to dairies: 86706000 tonnes) and 104451000 tonnes in 1981 (deliveries to dairies: 95751000 tonnes). (1) In 1977 roughly 1.5% and in 1981 roughly 2.2% of all production of cow's and ewe's milk was accounted for by ewe's milk. From 1973 to 1981 the average rate of increase in the total production of cow's milk in the Community was 1.6% a year. In addition to the above quantitative data, it should also be observed, as the Commission pointed out at the hearing, that the growing popularity of certain varieties of cheese traditionally made from ewe's milk (for example, Greek Feta) has led to a situation in which such demand can no longer be met by ewe's milk products with the result that cow's milk is partly used for this purpose. However, the opposite situation — the possibility of ewe's milk ousting cow's milk in cheese manufacture — does not obtain.

Those circumstances lead to three conclusions. First, ewe's milk production is insignificant as far as the common market in milk products is concerned. Expressed in terms of competition law, production of ewe's milk may justifiably be described as ‘negligible’. Secondly, the increasing production of ewe's milk is not contributing towards the surplus production of milk and milk products. Thirdly, it is not clear whether cow's milk and ewe's milk belong to the same market. Those conclusions are supported by the explanations given in the Commission's observations as to why the system of premiums was not extended to cover the non-marketing of ewe's milk. As far as Italy is concerned, it appears that under Decision 77/433/EEC of 15 June 1977 (Official Journal 1977, L 170, p. 30) the premium system was not applied at all owing to the decline in the number of dairy cattle. As far as France is concerned, where, according to the Commission, ewe's milk is used virtually exclusively for the production of Roquefort cheese, it was considered that, in view of the special status of Roquefort cheese in French law, it constituted no threat at all to cheeses made from cow's milk.

The Commission and the Land of Nordrhein-Westfalen contend that the question submitted to the Court should be answered in the affirmative. The Land of Nordrhein-Westfalen refers to the FAO Code of Principles on Milk and Dairy Products, photocopies of which are appended to its written observations.

However, I consider that those documents are not relevant in this case, since the object of the FAO Code is to prevent the use of misleading descriptions, particularly the use of descriptions such as ‘milk’ and ‘milk products’ for products not warranting those descriptions. There appears to be only an indirect connection between that object and the control of milk production. In any case, the FAO Code itself states that it is advisable to indicate the origin of milk if it has not been produced by cows, which tends to contradict rather than support the argument advanced by the Land of Nordrhein-Westfalen.

The Commission and the Land of Nordrhein-Westfalen both rely on the argument that the ‘basic’ regulation on the common organization of the market in milk and milk products, Regulation No 804/68 of the Council of 27 June 1968 (Official Journal, English Special Edition 1968 (I), p. 176), refers to Chapter 4 of the Common Customs Tariff, which refers to ‘milk’ and ‘milk products’ without drawing any distinction. However, that reference to the Common Customs Tariff is, in my view, far from decisive. First of all, the persuasiveness of that argument is lessened by the fact that Council Regulation No 1078/77 is not based on the ‘basic’ regulation, No 804/68, but directly on Article 43 of the EEC Treaty. This is because Regulation No 1078/72 lays down a kind of deficiency payment system. The only reference to Regulation No 804/68 is in the first recital, which states that ‘... the products covered by Council Regulation (EEC) No 804/68 ... are at present substantially and increasingly in surplus’. As I have already argued, that statement cannot apply to the production of ewe's milk, since ewe's milk is not contributing towards the overproduction. The reference indicates only the reasons for and the background to the measure in question; it does not necessarily indicate the substantive scope of Regulation No 1078/77.

The Commission further refers to the wording of Regulation No 1078/77, namely of Article 3 (2) (c) and Article 7 (f), which mention sheep. Although they do mention sheep, neither of the provisions concerns the non-marketing premium, the conditions for the grant of which are laid down in Article 2: they concern the conversion premium, which is dealt with in Article 3. Both references weaken rather than strengthen the Commission's case, for, according to the preamble, the aim of the conversion premium is the conversion of dairy herds to meat production. This is implemented in Article 3 (2) (c) by requiring the recipient of the premium to keep a specified number of bovine or ovine units for a specific period. The reduction of dairy herds and the keeping of sheep are therefore clearly compatible. Finally, the Commission refers to Article 4 (2) (b) of Regulation No 1391/78 (Official Journal 1978, L 167, p. 45), which lays down rules for the application of the system of premiums. That article provides that applications for the grant of both premiums must mention, inter alia, the total number of bovine animals and sheep. That argument does not hold good either. Article 4 (2) (b) also requires the following particulars to be given: (1) the number of dairy cows; (2) the number of other female bovine animals and (3) in the case of the conversion premium, the numbers of other animals. That provision also shows that the keeping of sheep is clearly considered relevant only in connection with the grant of the conversion premium.

Finally, I would point out the following fact: the second indent of Article 2 (2) (b) of Regulation No 1078/77 makes it a condition for the grant of the non-marketing premium that the producer must not lease his dairy cattle or entrust them to others, whether for a consideration or free of charge. The third indent of Article 2 (2) (b) prohibits the producer from disposing of his dairy cattle except for slaughter or for export. The term ‘dairy herd’ (Milchvieh) is defined in Article 1 (1) (b) of Regulation No 1391/78 as ‘all female domestic bovine animals at least six months old suitable for the production of milk for marketing’. Here again there is no reference at all to sheep.

In view of the foregoing, I consider the arguments of the Commission and of the Land of Nordrhein-Westfalen to the effect that in this context the terms ‘milk’ and ‘milk products’ cover ewe's milk to be unfounded in so far as they are based on the wording and scheme of the legislation. The plaintiff's arguments, which are also based on the wording of the legislation, to the effect that the terms ‘milk’ and ‘milk products’ do not cover ewe's milk or ewe's milk products in this context, do not therefore require further consideration. In my view, the quantitative and qualitative data on ewe's milk production which I set out earlier and the history of the origin of Regulation No 1078/77 lead to the conclusion that when the premium schemes were devised sheep raising was not a fundamental consideration. In any event, it is excluded from the premium system itself whilst the wording of the various provisions does not in the least provide any clear argument to the effect that the non-marketing of milk also covers ewe's milk. I agree with the Commission that the ultimate aim of the non-marketing premium might justify banning supplies of ewe's milk, although so far no very convincing economic arguments for doing so have been adduced. (2) However, I consider that a teleological interpretation can on no account ignore the context, origin and wording of Regulation No 1078/77, which all point in a different direction. So, in the interests of providing producers and traders with legal certainty, the regulation must be amended. Moreover, it appears to me to be for the legislature rather than for the Court to assess the soundness of the Commission's economic arguments.

I therefore propose that the Court should answer the question referred to it by the Oberverwaltungsgericht as follows:

The terms ‘milk or milk products’ appearing in Article 2 (2) (a) of Regulation (EEC) No 1078/77 do not cover ewe's milk.

*1 Translated from the Dutch.

1 See the Commission's annual reports on the agricultural situation in the Community.

2 In particular, the argument put forward at the hearing to the effect that increasing ewe's milk production makes the use of cow's milk in the manufacture of a substitute product for ‘genuine’ Greek Feta (made from ewe's milk) less possible is, in my view, unconvincing.