delivered on 11 December 1985 (*1)

Mr President,

Members of the Court,

I — Introduction

By application lodged on 17 May 1984 the United Kingdom requested the Court to declare void two Commission decisions concerning the clearance of the United Kingdom's accounts in respect of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (hereinafter referred to as ‘the Fund’).

The decisions in question are:

—Decision No 84/212/EEC of 8 February 1984 on the clearance of the accounts presented by the United Kingdom for the 1978 financial year. The applicant seeks a declaration that this decision is void in so far as the Commission refused to allow expenditure of UKL 389674.76 on seed aid and expenditure of UKL 1662 for sales of skimmed-milk powder from intervention stocks to be charged to the Fund;

—Decision No 84/213/EEC of 8 February 1984 on the clearance of the accounts presented by the United Kingdom for the 1979 financial year. The applicant seeks a declaration that this decision is void in so far as the Commission refused to allow expenditure of UKL 879175.26 on seed aid, expenditure of UKL 71946.92 for sales of skimmed-milk powder from intervention stocks and expenditure of UKL 586171.56 for sales of butter from intervention stocks to be charged to the Fund.

The dispute is therefore concerned with two separate matters, namely the payment of seed production aid and the sale of butter and skimmed-milk powder from intervention stocks.

II — Seed aid

This part of the application raises the question whether Community law allows two forms of aid to be granted for the same products at different stages of marketing.

(a) The seed aid scheme

Regulation (EEC) No 2358/71 of the Council of 26 October 1971 (Official Journal, English Special Edition, 1971 (III), p. 894) establishes a common organization of the market in seeds. That market organization covers dried leguminous vegetables for sowing (ex heading 07.05 of the Common Customs Tariff). Article 3 of the regulation provides that aid may be granted to supplement income where the market for those products does not provide producers with a fair income. According to the second recital in the preamble to the regulation, seed aid is necessary in order to keep Community prices competitive with prices for such products on the world market. Regulation (EEC) No 1674/72 of the Council of 2 August 1972 (Official Journal, English Special Edition, 1972 (HI), p. 827) lays down general rules for the grant of such aid. More detailed implementing provisions were laid down by Regulation (EEC) No 1686/72 of the Commission (Official Journal, English Special Edition, 1972 (III), p. 831).

(b) The aid scheme for peas and field beans

Council Regulation (EEC) No 1119/78 of 22 May 1978 (Official Journal 1978, L 142, p. 8) establishes an aid scheme for peas and field beans used in the feeding of animals. It is clear from the preamble to that regulation that the purpose of the scheme was to encourage the use of leguminous vegetables for animal feed, since this was of increasing importance to the Community. According to Article 1, the aid is granted for peas, excluding chick peas, falling under subheading 07.05 B I of the Common Customs Tariff and for field beans falling under tariff subheading 07.05 B III. The aid is granted to manufacturers of animal feedingstuffs. One of the conditions for the grant of the aid is that the manufacturers must have concluded contracts with the producers concerned providing for the payment to the latter of a minimum price. General provisions to give effect to that aid scheme were laid down by Regulation (EEC) No 1418/78, which was replaced by Regulation (EEC) No 2036/82. In contrast to the regulation previously in force, Regulation No 2036/82 provides in Article 12 that the aid may not be granted for products which are eligible for seed aid under Regulation No 2358/71. The 15th recital in the preamble to Regulation No 2036/82 states that, since the purpose of the aid for peas and field beans to be used for human or animal consumption is not the same as that of aid for peas and field beans to be used as seed, it should be expressly stipulated, in the interests of clarity, that only one type of aid may be granted in respect of such products.

2. The dispute

The dispute is concerned with the fact that in 1978 and 1979 the United Kingdom, by granting aid both under Regulation No 2358/71 and Regulation No 1119/78, granted two forms of aid for the production of peas and field beans. The question of dual aid ultimately led, following correspondence and meetings between the United Kingdom and the Commission, to the adoption of Regulation No 2036/82.

The United Kingdom contends that the Commission's refusal to allow the expenditure in question to be charged to the Fund is unlawful inasmuch as it is based on an incorrect interpretation of the regulations concerned. In the alternative, the United Kingdom contends that the Commission aroused the expectation that the expenditure in question would be regarded as lawful.

In order to resolve the question of interpretation at issue it is important to determine the precise scope of the two aid schemes. The relevant Council regulations both refer to heading 07.05 of the Common Customs Tariff, which reads as follows:

‘07.05 Dried leguminous vegetables, shelled, whether or not skinned or split:

For sowing:

II. Other

II. Lentils

III. Other.’

Article 1 of Regulation No 2358/71 refers to dried leguminous vegetables for sowing ex heading 07.05. It is immediately apparent from the use of the word ‘ex’ that this reference does not encompass the entire heading. The addition of the phrase ‘for sowing’ is not therefore accidental but clearly has as its purpose, having regard to the wording of heading 07.05, to restrict the aid to products falling under subheading 07.05 A. Article 1 of Regulation No 1119/78, on the other hand, refers to subheadings 07.05 B I and B III of the Common Customs Tariff (peas and field beans).

Further guidance on this question of interpretation can be obtained by examining the objectives pursued by the two aid schemes. The seed aid scheme is intended to supplement producers' income in order to ensure that Community seed production remains competitive on the world market. The aid scheme for peas and field beans is designed to provide production aid in order to encourage the production of those products and, according to the preamble to Regulation No 1119/78, to make them an attractive alternative to oilseed meals imported free of duty. The production aid for peas and field beans is also intended for producers, since manufacturers of animal feeding-stuffs are required by Article 2 (2) of the regulation to pay a specified minimum price to producers in order to qualify for the aid. According to the same provision, the express purpose of that minimum price is likewise to supplement income. It is clear from that provision that the two aid schemes must be viewed separately. If producers of peas and field beans intended for use as animal feed received direct income-support aid under Regulation No 2358/71 and hence were already assured of a fair income, the system of ‘passing on’ established by Regulation No 1119/78 would be unnecessary.

In my view, therefore, even before the adoption of Regulation No 2036/82, there could be no question of the same seed qualifying for two forms of aid.

That conclusion is unaffected by the United Kingdom's argument that entitlement to aid under the seed aid scheme does not depend on the use to which the seed is to be put. It is clear, as I stated earlier, that the aid is intended for seed to be used for sowing. That is also apparent from the system established by Regulation No 2358/71 and the implementing provisions embodied in Regulations No 1674/72 and No 1686/72. Those measures are based on the assumption that the aid is granted only for seed certified on the basis of the provisions of Directive No 66/401 /EEC (Official Journal, English Special Edition 1965-1966, p. 132); this is reflected in the system of growing contracts or growing declarations. Such a system is unnecessary for seed intended for use as animal feed. In adopting the rules it was evidently assumed that by basing the aid on that system it would be granted for the purpose for which it was introduced. The fact that seed in respect of which such aid had been granted was none the less used as animal feed is to be regarded as a lacuna in the scheme. That the United Kingdom also perceived that danger is clear from the fact that even before the feed aid scheme was introduced it informed the Commission of the risk that growers would have their crop certified even though a substantial part of it would have to be used as animal feed. I would add that this was clearly not a problem at the time of the introduction of the seed aid scheme but only became important in later years. Moreover, reference should also be made in that connection to the fact that Article 5 of Regulation No 1674/72 requires the Member States to introduce a system of administrative supervision to ensure that the conditions laid down for the granting of aid are fulfilled.

Article 12 of Regulation No 2036/82 must in my view be regarded as a declaratory provision. That is emphasized by the fact that, according to the preamble to the regulation, that provision was added ‘in the interests of clarity’ The United Kingdom has argued that those words were wrongly included in the regulation, but I share the Commission's view that, unless the regulation provides otherwise, they must be taken to reflect the Council's wishes. If the United Kingdom considered that the Council had acted wrongly, it could have pressed for the amendment of the regulation or instituted proceedings before the Court of Justice.

In the alternative, the United Kingdom pleads that the Commission led it to expect that cumulative payments of aid would be considered lawful. This submission is based firstly on the consideration that the Commission allegedly gave no indication, at least prior to the meeting on 16 October 1980, that the payment of dual aid was unlawful. This argument must in my view be rejected outright. The question whether the grant of aid is or was unlawful does not depend on the Commission's point of view, but is determined by the regulations applicable. Nor was there any question of neglect on the part of the Commission. When the problem of dual aid arose in 1980, the Commission did not hesitate, once an internal investigation had been carried out by the relevant departments, to adopt an unequivocal position.

Secondly, the United Kingdom refers to the different proposals tabled by the Commission between the end of 1980 and the middle of 1982 in order to resolve the problem of dual aid. In its view, it may be inferred from those proposals that the Commission had previously assumed that the payment of dual aid was lawful. This argument cannot be upheld either. Even if the Commission's efforts are open to that interpretation, which in my view is by no means certain, statements made after the aid was granted — in 1978 and 1979 — cannot remedy the illegality thereof by creating the expectation that the aid would be considered lawful.

III — The dispute concerning the sale of skimmed-milk powder and butter

This part of the application is concerned with the consequences of an alteration in the representative exchange rate applied under the common agricultural policy. The question at issue is which date is to be taken into account for the conversion into national currency of prices expressed in units of account.

(a) Value of the unit of account

Regulation (EEC) No 1134/68 of the Council (Official Journal, English Special Edition, 1968 (II), p. 396) lays down rules for the implementation of Regulation (EEC) No 653/68 (Official Journal, English Special Edition, 1968 (I), p. 121) on conditions for alterations to the value of the unit of account applied in the agricultural sector. Article 4 of Regulation No 1134/68 provides that, for transactions carried out under the common agricultural policy, the conversion of units of account into national currency is to be made on the basis of the relationship obtaining at the time when the transaction was carried out. Article 6 of that regulation provides that ‘the time when a transaction is carried out shall be considered as being the date on which occurs the event, as defined by Community rules or, in the absence of and pending adoption of such rules, by the rules of the Member State concerned, in which the amount involved in the transaction becomes due and payable’. For the sake of conciseness that event is normally referred to as ‘the operative event’.

(b) Sales of skimmed-milk powder and butter

The regulations concerning sales of skimmed-milk powder and butter in force at the material time were as follows:

Regulation (EEC) No 1282/72 on the sale of butter at a reduced price to the army and similar forces (Official Journal, English Special Edition, 1972 (II), p. 575);

Regulation (EEC) No 1717/72 on the sale of butter at a reduced price to non-profitmaking institutions and organizations (Official Journal, English Special Edition, 1972 (III), p. 849);

Regulation (EEC) No 2213/76 on the sale of skimmed-milk powder from public storage (Official Journal 1976, L 249, p. 6);

Regulation (EEC) No 443/77 on the sale at a fixed price of skimmed-milk powder for use in feed for pigs and poultry (Official Journal 1977, L 58, p. 16);

Regulation (EEC) No 649/78 on the sale at reduced prices of intervention butter for direct consumption as concentrated butter (Official Journal 1978, L 86, p. 33).

2. The dispute

In the financial years in question, the Intervention Board for Agricultural Produce (hereinafter referred to as ‘the Board’) applied the representative rate which was in force on the date when it received and accepted the purchase offer. As a result of the devaluation at regular intervals of the green pound during that period the purchase prices charged by the Board were lower than they would have been had the rate in force on the date of removal of the goods from intervention storage been applied. The Commission refused to allow the expenditure incurred as a result of the differences in the rates to be charged to the Fund. According to the Commission, the last-mentioned rate should have been applied. The United Kingdom contends that, in the absence of Community provisions defining the operative event, national rules are applicable, with the result that the Commission's interpretation is incorrect. In the alternative, the United Kingdom pleads an excusable error, responsibility for which lies with the Commission.

Before I tackle this question of interpretation, I would draw the Court's attention to the Opinion of Advocate General Sir Gordon Slynn of 23 October 1985 in Joined Cases 129 and 130/84 (Italy v Commission), in which a similar problem arose.

The first question which arises is whether Articles 4 and 6 of Regulation No 1134/68 provide any indication permitting the operative event to be identified for the purposes of the sale of skimmed-milk powder and butter under the five regulations referred to earlier. In my view they do not. Article 6 of that regulation contains only an abstract definition of the term. As the Commission has pointed out, the English language version differs in that respect from the other language versions. In his Opinion in Case 80/76 (Kerry Milk v Minister for Agriculture and Fisheries [1977] ECR 425), Mr Advocate General Capotorti discussed the matter at some length. However, the difference in the wording of the English text is not relevant in the present case since the operative event is defined in abstract terms and can be applied to a specific situation only on the basis of more detailed rules.

For the purpose of defining the operative event, Article 6 of Regulation No 1134/68 refers in the first place to provisions of Community law. According to the Commission, this must be taken to be a reference to the five regulations which I mentioned earlier concerning the sale of butter and skimmed-milk powder. In its view, it follows from the system established by those regulations that the operative event is the date of removal from public storage. Under that system the purchaser can unilaterally terminate the contract, as long as the purchase price or the balance thereof has not yet been paid. Removal from storage presupposes that the purchase price has been paid and that the contract has therefore become final. The Commission previously expressed the same view at the 442nd meeting of the relevant management committee. I would add, however, that that cannot be treated as a legislative act for the purposes of Article 6 of Regulation No 1134/68.

I cannot endorse the view expressed by the Commission. In none of the five regulations concerned is there an express or implied reference enabling the operative event to be identified. It could equally be inferred from those regulations that the operative event is the conclusion of the contract of sale since the rights and obligations of the parties arise thereunder. The fact that a conditional right is involved — conditional on the purchaser not terminating the contract — in no way detracts from that view. I do not consider that the five regulations can be regarded as ‘Community rules’ within the meaning of Article 6 of Regulation No 1134/68. That interpretation is also supported by the legislation concerning the operative event in the cereals and rice sector and in the beef sector. In both cases the operative event is defined in more detail by a separate Commission regulation, namely No 1003/81 (Official Journal 1981, L 100, p. 11) and No 2182/77 (Official Journal 1977, L 251, p. 60). Without wishing to transpose those provisions to this case, it is possible in my view to infer from them that specific legislation may be necessary in order to identify the operative event.

Since it is clear in my view that in the dairy sector there are no specific provisions enabling the operative event to be identified, there remains the question whether the national rules defining the operative event as the conclusion of the contract are to be regarded as unlawful. I do not think so. Regulation No 1134/68 was repealed by Regulation (EEC) No 1676/85 (Official Journal 1985, L 164, p. 1). In Article 5 of the latter regulation the various operative events are defined more clearly than was formerly the case. Article 5 states that, as regards the amounts indicated in contracts, the operative event means the conclusion of the contract, unless otherwise provided. Although that regulation does not apply to this case, it shows that it is possible to treat the conclusion of the contract as the operative event. Accordingly, in my view, the choice of that event by the United Kingdom must be considered lawful in the absence of Community rules.

IV — Conclusion

In conclusion I propose that:

(1) Decisions No 84/212/EEC and No 84/213/EEC of 8 February 1984 should be declared void in so far as they do not allow expenditure in respect of sales of skimmed-milk powder from intervention stocks to be charged to the European Agricultural Guidance and Guarantee Fund;

(2) For the rest, the application should be dismissed;

(3) The parties should be ordered to bear their own costs.

*1 Translated from the Dutch.