In Case 203/86
Kingdom of Spain, represented by the Minister for Foreign Affairs, whose office is at 82, calle Francisco Silvela, Madrid, in the person of Luis Javier Casanova Ferndndez, Secretary-General for the European Communities, acting as Agent, assisted by Rafael Garcia-Valdecasas Fernandez, a Member of the State Legal Department for matters before the Court of Justice of the European Communities at the State Secretariat for the European Communities, by Alfonso Dastis Quecedo, Adviser in the Directorate-General for Coordination in Matters involving Community Law and Institutions, and by Francisco Lamas Garcia Pardo, Head of the Milk and Milk Products Department in the Ministry of Agriculture, Fisheries and Food, with an address for service in Luxembourg at the Spanish Embassy in Luxembourg, 4 and 6 boulevard Emmanuel-Servais, 2535 Luxembourg,
Council of the European Communities, represented by Antonio Sacchettini, Director in the Council’ s Legal Department and Arthur Brautigam, Principal Administrator in the same department, acting as Agents, assisted by Carmen Lépez, of the Madrid Bar, with an address for service in Luxembourg at the office of Joerg Kaeser, Director of the Legal Affairs Directorate of the European Investment Bank, 100 boulevard Konrad-Adenauer,
Commission of the European Communities, represented by Denise Sorasio, a Legal Adviser in the Commission’ s Legal Department, and by Daniel Calleja, a member of that department, acting as Agents, with an address for service in Luxembourg at the office of Georgios Kremlis, also a member of the Commission’ s Legal Department, Jean Monnet Building, Kirchberg,
APPLICATION for a declaration that Council Regulation No 1335/86 of 6 May 1986 amending Regulation ( EEC ) No 804/68 on the common organization of the market in milk and milk products ( Official Journal 1986, L 119, p . 19 ) and Council Regulation ( EEC ) No 1343/86 of 6 May 1986 amending Regulation ( EEC ) No 857/84 adopting general rules for the application of the levy referred to in Article 5 c of Regulation ( EEC ) No 804/68 in the milk and milk products sector ( Official Journal 1986, L 119, p . 34) are void,
composed of : Lord Mackenzie Stuart, President, G . Bosco and J . C . Moitinho de Almeida ( Presidents of Chamber ), T . Koopmans, U . Everling, Y . Galmot and F . A . Schockweiler, Judges,
Advocate General : M . Darmon
Registrar : B.. Pastor, Administrator
having regard to the Report for the Hearing and further to the hearing on 16 December 1987,
after hearing the Opinion of the Advocate General delivered at the sitting on 25 February 1988,
gives the following
By an application lodged at the Court Registry on 4 August 1986 the Kingdom of Spain brought an action under the first paragraph of Article 173 of the EEC Treaty for a declaration that Council Regulation ( EEC ) No 1335/86 of 6 May 1986 amending Regulation ( EEC ) No 804/68 on the common organization of the market in milk and milk products ( Official Journal 1986, L 119, p . 19) and Council Regulation No 1343/86 of 6 May 1986 amending Regulation ( EEC ) No 857/84 adopting general rules for the application of the levy referred to in Article 5 c of Regulation ( EEC ) No 804/68 in the milk and milk products sector ( Official Journal 1986, L 119, p . 34), are void .
According to the Kingdom of Spain, the contested regulations are unlawful because they provide for a 3% reduction in the total guaranteed quantities, allocated to Spain under the Act of Accession, for milk delivered to dairies and milk sold directly to consumers .
Reference is made to the Report for the Hearing for the facts of the case and the submissions and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court .
I - Submissions directed at both the contested regulations
(a) Infringement of essential procedural requirements
The Kingdom of Spain submits that, by adopting the contested regulations by a qualified majority and against Spain’ s vote, the Council infringed essential procedural requirements . In its view, the total guaranteed quantities fixed in the Act of Accession constitute conditions for the admission of the new Member State and accordingly form part of an agreement between the Member States and the State seeking membership which could not be amended without the consent of all the contracting parties .
It should be noted in this respect, as the Council correctly pointed out, that under Article 8 of the Act of Accession the institutions are empowered to amend in the future, under the procedure normally applicable to amendments of provisions of secondary legislation, the measures adopted by them which were amended under the Act of Accession .
It follows that the total guaranteed quantities applicable to Spain, which are set out in Annex I, Chapter XIV of the Act of Accession in the form of amendments to Council Regulations Nos 804/68 and 857/84 could be altered under the procedure followed .
Accordingly, the submission based on the infringement of essential procedural requirements must be rejected .
(b) Infringement of Article 39 (1) (b) of the EEC Treaty
The Kingdom of Spain considers that the 3% reduction of the total guaranteed quantities allocated to Spain under the Act of Accession is contrary to the fundamental objective of the common agricultural policy which, as stated in Article 39 (1) (b) of the Treaty, is intended to ensure a fair standard of living for the agricultural community . It refers in particular to the economic and social consequences which such a reduction would entail in certain Spanish regions in which the milk sector, which consists essentially of small-scale family farms, accounts for approximately 70% of agricultural activity . In addition, it argues that, from the point of view of the national economy in general, the development of the scheme for the repurchasing of milk quotas established by Council Regulation No 1336/86 of 6 May 1986 fixing compensation for the definitive discontinuation of milk production ( Official Journal 1986, L 119, p . 21) means a reduction in Spanish milk production having, in the Kingdom of Spain’ s view, unfavourable social and economic effects for producers who cease production .
The Council contends that, in the exercise of its discretionary power, it has to reconcile the different objectives set out in Article 39 of the Treaty by giving, in this instance, priority to the stabilization of the market . It points out, however, that other measures have been provided for in order to ensure that the 3% reduction of total guaranteed quantities does not affect the level of quotas for individual producers .
With regard to this issue, it should be observed in the first place that the Court has consistently held that in pursuing the objectives of the common agricultural policy the Community institutions must secure the permanent harmonization made necessary by any conflicts between those objectives taken individually and, where necessary, allow any one of them temporary priority in order to satisfy the demands of the economic factors or conditions in view of which their decisions are made ( see in particular the judgment of 20 October 1977 in Case 29/77 Roquette Fréres v France (( 1977 )) ECR 1835 ).
The contested regulations must be considered in the context of the Community system of rules of which they form part . The disputed reduction constitutes a measure which is part of the additional levy scheme set up under Council Regulations Nos 856/84 and 857/84 of 31 March 1984 which are intended to stabilize the market in milk products, in which structural surpluses resulting from an imbalance between supply and demand are endemic . In order to achieve this objective and in the light of market changes, it appeared necessary to reduce the total guaranteed quantities by 3 %.
It should be further noted that the Council adopted, on the same day, the contested regulations and Regulation No 1336/86 establishing a Community scheme for the repurchasing of reference quantities from individual producers, with the aim of ensuring that their quotas are not affected or at least are not substantially reduced .
In addition, and in order to allow farmers to adapt themselves progressively to the new situation, it was provided that the system introduced by the two contested regulations would not enter into force until one year after their publication and then only by degrees .
Finally, the Council explained, without being contradicted by the Kingdom of Spain, that the adoption of the contested regulations was justified on the ground that the other alternative solution, consisting in a reduction of the intervention prices for milk products, would have had much more negative effects on farmers' incomes than those produced by the disputed regulations .
In those circumstances, it cannot be held that, by deciding to reduce the total guaranteed quantities by 3%, the Council acted in breach of Article 39 of the Treaty .
The submission alleging an infringement of Article 39 ( 1) (b) of the Treaty must therefore be rejected .
(c) Breach of the principle of legitimate expectations
The Kingdom of Spain submits that the alteration, only a few months after accession, of the total guaranteed quantities laid down in the Act of Accession flies in the face of the legitimate expectation, held by Spain and Spanish economic operators, that those quantities would be maintained, as conditions for accession, during the adjustment period accorded the acceding State for the milk sector or, at least, during the five-year period provided for in this respect by Regulations Nos 856/84 and 857/84 . It stresses, in addition, that Spanish operators could rely on an interest meriting protection arising from the existence of national legislation, pre-dating Spain’ s accession, promoting the expansion of Spanish milk production .
The Council and the Commission contend, in substance, that the principle of legitimate expectations cannot prevent the adoption of measures required in order to adapt the milk sector to current realities .
It should be noted that, as the Court has consistently held, the field of application of the principle of legitimate expectations cannot be extended to the point of generally preventing new rules from applying to the future effects of situations which arose under the earlier rules, especially in a field such as the common organization of the markets, the purpose of which necessarily involves constant adjustment to the variations of the economic situations in the various agricultural sectors ( see in particular the judgment of 14 January 1987 in Case 278/84 Federal Republic of Germany v Commission (( 1987 )) ECR 1).
That rule cannot be set aside by reason of the fact that the total guaranteed quantities allocated to the Kingdom of Spain were fixed in the Act of Accession, which amended Regulations Nos 804/68 and 857/84 on this point . Indeed, as has been noted above, the provisions of that Act whose purpose or effect is to repeal or amend, otherwise than on a transitional basis, measures taken by the Community institutions may, pursuant to Article 8 of the Act, be amended under the rules laid down for the amendment of provisions of secondary legislation .
It follows from the foregoing that the submission alleging a breach of the principle of legitimate expectations must be rejected .
(d) Breach of the principle of non-discrimination
The Kingdom of Spain maintains that the contested regulations contravene the principle of non-discrimination on the ground that they apply without distinction to all the milk producers of the Member States of the Community, whereas the specific situation of the Spanish milk sector required different treatment . In this respect, the Kingdom of Spain points out, in the first place, that Spain, which has a milk production deficit, played no part in the creation of Community surpluses and did not benefit from the price support mechanisms set up by the common organization of the market in question and that, secondly, the production structures of the Spanish milk sector were much less efficient than the Community average .
The adoption of the contested regulations, without regard being had to those objective factors, constitutes, in the view of the Kingdom of Spain, arbitrary action by the Council . In addition, those regulations, which mean a reduction in milk production, cause damage to Spanish operators and discriminate against them permanently .
The Council, supported by the Commission, maintains that, when exercising the discretionary power which it has for the purpose of assessing economic data and factual situations, it reached the conclusion that the situation prevailing in the Spanish milk sector was no different from that prevailing in the same sector in other Member States and that consequently the adoption of special rules for Spain was not justified . The argument that Spain had not contributed to the creation of Community surpluses is, in their view, contrary to the principle of solidarity .
It should be noted in the first place that the Court has consistently held that the principle of non-discrimination between producers or consumers in the Community, laid down in the second subparagraph of Article 40 ( 3 ) of the Treaty, means that comparable situations are not to be treated differently and that different situations are not to be treated alike unless such treatment is objectively justified . It follows that the measures taken under the common organization of the market, and in particular its intervention mechanisms, must not be differentiated according to regions and other conditions relating to production or consumption, except on the basis of objective criteria which ensure that the advantages and disadvantages are distributed proportionately among those concerned, without any distinction being made between the territories of the Member States .
In this regard, it must be stated that, in finding that the characteristics of the Spanish milk sector referred to by the Kingdom of Spain were not such as to justify a different treatment and thus to exempt that country from the uniform application of the reduction in the total guaranteed quantities throughout the Community, the Council did not commit a manifest error in the assessment of the facts .
First of all, as regards the production structures of the Spanish milk sector, the Council correctly points out and the Kingdom of Spain agrees that the specific nature of this sector was recognized in the Act of Accession and that appropriate transitional mechanisms were provided for .
Next, as regards the fact that Spanish farmers have not benefited from the price support mechanisms set up under the common organization of the market in milk products, it must be pointed out, in the first instance, that the conditions fixed for the milk sector, as for other Spanish agricultural and industrial sectors, were different from those applying in the same sectors in the Community and, secondly, that Spain accepted, subject to the transitional provisions provided for in the Act of Accession, the application of the "acquis communautaire ".
Finally, the Kingdom of Spain' s argument that the principle of non-discrimination requires that the reduction of milk production should not be applied to Spain because that State has a milk production deficit and has not contributed to the Community surpluses cannot be accepted either . The reduction of total guaranteed quantities is a measure intended to deal with the imbalance between the supply of and demand for milk products and requires, as the Court held in its judgment of 9 July 1985 in Case 179/84 Bozetti v Invernizzi SpA (( 1985 )) ECR 2301, a concerted effort by all the Community producers in equal measure .
It follows from the foregoing that the submission alleging a breach of the principle of non-discrimination must be rejected .
Il - Submissions directed against Regulation No 1343/86
(a) Failure to consult the European Parliament
The Kingdom of Spain argues that since Regulation No 1343/86 was adopted by the Council without following the consultation procedure provided for in Article 43 (2 ) of the Treaty it must be regarded as void on the ground that essential procedural requirements have been infringed . It points out, in particular, that Council Regulation No 1335/86, which contains a measure having similar effects to that provided for in Regulation No 1343/86, was adopted following consultation with the European Parliament .
The Council, supported by the Commission, takes the view that it was not under a duty to consult the European Parliament because Regulation No 1343/86, like Regulation No 857/84, is a regulation giving effect to the rules laid down in the primary legislation . It also observes that, in the opinion which it gave on the "1986/87 price package", the European Parliament proposed that there should be a new general 3% reduction of milk quotas ( Official Journal 1986, C 120, p . 88, point 76 ).
It must be observed in the first place that the contested regulation amends Regulation No 857/84 adopted on the basis of Article 5 c of the basic regulation and in accordance with the procedure laid down therein . That procedure, unlike that provided for in Article 43 ( 2.) of the Treaty, does not require consultation of the European Parliament .
Secondly, as the Court has consistently held ( judgment of 16 June 1987 in Case 46/86 Romkes v Officier van Justitie (( 1987 )) ECR 2671 ), the Council cannot be required to draw up all the details of the regulations concerning the common agricultural policy according to the procedure laid down in Article 43 of the Treaty . It is sufficient for the purposes of that provision that the basic elements of the matter to be dealt with have been adopted in accordance with that procedure; the provisions implementing the basic regulations may, however, be adopted on the basis of those regulations either by the Commission or by the Council according to a procedure different from that laid down in Article 43 . The Spanish Government has not shown that the fixing of the total guaranteed quantities for direct sales constituted a basic element of the legislation in question .
Consequently, it appears that the contested regulation, which implements Article 5 c of Regulation No 804/68, was properly adopted by the Council, in accordance with the criteria laid down by the basic regulation governing the milk sector and that, accordingly, the submission alleging a failure to comply with the requirements of Article 43 (2 ) of the Treaty must be rejected .
(b) Infringement of Article 190 of the EEC Treaty
The Kingdom of Spain maintains that Regulation No 1343/86 infringes Article 190 of the EEC Treaty because it contains no reference in its preamble to Article 43 (2) of the Treaty . According to the Kingdom of Spain, Article 190 requires an indication of the provision of the Treaty on which the institutions base their power to enact secondary legislation .
As the Council has correctly argued, Regulation No 1343/86 is an implementing regulation which satisfies the requirement that the legal basis be indicated if the provision of the basic regulation pursuant to which it was adopted is referred to in the preamble . It is expressly stated in its preamble that Regulation No 1343/86 is based on Article 5 c (6 ) of Regulation No 804/68 .
Consequently, the submission alleging an infringement of Article 190 of the Treaty must also be rejected .
It follows from the foregoing that the application must be dismissed in its entirety .
Decision on costs
Under Article 69 ( 2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs . Since the Kingdom of Spain has failed in its submissions, it must be ordered to pay the costs, including those of the intervener .
On those grounds,
(1) Dismisses the application;
(2) Orders the Kingdom of Spain to pay the costs, including those of the intervener .