JUDGMENT OF 11. 1. 1973 — CASE 13/72 NETHERLANDS v COMMISSION

In Case 13/72

THE COURT composed of: R. Lecourt, President, R. Monaco and P. Pescatore, Presidents of Chambers, A. M. Donner and H. Kutscher (Rapporteur), Judges, Advocate-General: H. Mayras Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Facts and procedure

The facts and procedure may be summarized as follows:

1)

a) By Article 1 of Regulation No 25 of 4 April 1962, ‘on the financing of the common agricultural policy’ (OJ p. 991) the Council set up the ‘European Agricultural Guidance and Guarantee Fund’ (hereinafter called the ‘Fund’). Under Article 3 (1) of that Regulation, as amended by Article 8 (1) of Regulation No 130/66/EEC of the Council of 26 July 1966 (OJ No 165, p. 2965), ‘the following expenditure shall be eligible for aid from the Fund:

a) Refunds on exports to third countries, calculated in accordance with the provisions laid down in the Regulations on individual products on the basis of

i) the rate of refund of the Member State whose average refund is the lowest, and

ii) the net quantities exported up to and during the accounting period 1966/67 and the gross quantities exported subsequently;

b) to (d) …’

b) On the basis of the said Regulation, the Council, on 5 February 1964, adopted Regulation No 17/64/EEC ‘on the conditions for granting aid’ from the said Fund (OJ p. 586). Under Articles 9 and 10 of that Regulation — to which several amendments not affecting the present case were subsequently made — the Member States concerned shall, once a year, submit to the Commission an application for reimbursement of the expenditure incurred as a result of the above-mentioned refunds, which is to be taken over by the ‘Guarantee’ Section of the Fund, while the Commission shall decide, again annually, the aid to be granted from the Fund on the basis of those applications and after consultation with the Fund Committee (hereinafter called the ‘Committee’). Under the terms of Articles 24 et seq. of Regulation No 17/64, this Committee shall consist of representatives of the Member States and of the Commission (Article 25 (1)).

c) With particular reference to the sector of milk and milk products, the Council, on 5 February 1964, adopted Regulation No 13/64/EEC ‘on the gradual establishment of a common organization of the market’ in this sector (OJ p. 549). Under the terms of Article 14 (2) of that Regulation, ‘in order to permit of exports to third countries on the basis of prices ruling on the world market, the difference between those prices and the prices of the exporting Member State may be covered by a refund’.

2) In a letter in reply to Mr Mansholt, dated 24 June 1970, Mr Spierenburg maintained his point of view.

a) In 1966, when examining the accounting period 1963/64, the Committee discussed for the first time the question of whether expenditure incurred by a Member State, as a result of ‘refunds on exports’, in food aid programmes to third countries are eligible for aid from the Fund. It was then decided that this was so, taking into account the smallness of the amounts claimed and without, prejudice to any further decision on the subject in the future.

b) In 1968 and 1969, however, the opposite conclusion was reached concerning the accounting periods 1964/65 and 1965/66. In the Commission's report on the first of those periods, it is stated in particular on the subject of gifts of cereals made by France: During the Committee meeting dealing with the period 1964/65, the Chairman stated that the provisions in force only allowed the granting of refunds for commercial operations. At the meeting dealing with the period 1965/66, the representative of the Commission again explained the Commission's point of view.

‘It is for the Council to decide whether France may take this expenditure into account as ranking for refunds. During the present negotiations on food gifts of cereals within the framework of the implementation of the Kennedy Round, an opinion was expressed in favour of the financing of refunds FOB from the date of the entry into force of the agreement. On the other hand, expenditure ranking for refunds for the periods prior to that date are not eligible under the EAGGF without the sanction of a decision of the Council. Consequently, these refunds and quantities have been deducted from the respective figures for refunds and for trade submitted for the basic products non-durum wheat and maize’.

c) In a letter dated 9 February 1970 addressed to Mr Mansholt, then Vice-President of the Commission, the Permanent Representative of the Netherlands, Mr Spierenburg, criticized this point of view and invited the Commission to reconsider its position in the light of the Netherlands attitude, as set out in a memorandum annexed to the said letter. By letter dated 2 April 1970, Mr Mansholt replied:

that the Commission reserved the right to submit the problem to the Council; ‘only the Council has the power in law to pronounce on the question of financing deliveries under food aid programmes, as such deliveries cannot be considered as a trade export within the meaning of the organization of the Community market’;

that, further, such financing by the Fund ‘would result in certain Member States such as the Netherlands benefiting financially while others were placed at a disadvantage, because of the divergent administrative practices in the Member States’.

3) On 19 April 1972, the Netherlands Government commenced the present action for annulment of these decisions.

a) On 1 August 1969, the Netherlands Government submitted to the Commission an application for reimbursement of expenditure incurred by the Netherlands during the accounting period 1966/67, in particular as a result of refunds on exports to third countries. The explanatory statement accompanying that application contained the following remarks under point 5:

‘The Netherlands have… donated certain sums to the World Food Programme. Through the medium of the export trade, that organization has with these sums bought on the Netherlands market and despatched to developing countries the following quantities of products covered by the common organizations of the market existing at the time:

…

The exporters were granted a refund in respect of these exports in the normal way. The amounts of such refunds have been included in this statement’.

b) At the Committee meeting of 16 December 1971, dealing with the period 1966/67, the Chairman called attention to a working paper drawn up by the Commission's staff forming an ‘addendum’ to the ‘report on the conditions for granting aid from the European Agricultural Guidance and Guarantee Fund — Guarantee Section — for the accounting period 1966/67’; (‘Doc. No VI/4640/71 + addendum’). The authors of the addendum considered in particular that a food gift by its very nature constituted a gratuitous act which, as it was not a commercial operation, did not necessitate any refund for it to be completed; that such a gift did not fall within the definition contained in the Regulations on the common organization of the market; that, in view of this, the financing of expenditure equivalent to refunds could only be undertaken by the Commission on the basis of an act of the Council. So far as the above-mentioned report is concerned, it includes in respect of each State concerned, including the Netherlands, the details of food gifts which have been deducted from the applications for reimbursement, as to both the tonnage and the amount of the refunds. In the minutes of the above-mentioned meeting, the Netherlands delegation was recorded as stating that it ‘cannot agree with the opinion held by the Commission in this matter’.

c) On 26 January 1972, the Commission adopted the following two decisions:

Decision No 72/120/EEC, on the application of the Netherlands Government referred to in (a) above (hereinafter called the ‘aid decision’), determining the amount to be reimbursed to the Netherlands by the Fund, in particular as a result of refunds on exports to third countries, for the accounting period 1966/67 (OJ No L 61, p. 15); under the fifth consideration, it is stated ‘that the quantities exported by way of food gifts are not eligible for aid from the Fund, as expenditure on noncommercial operations cannot be considered as refunds on exports to third countries within the meaning of the Community rules’, and that ‘quantities and expenditure in relation to such gifts are therefore to be excluded from net exports and from the calculation of rates of refunds’;

Decision No 72/115/EEC, addressed to all the Member States, published in OJ No L 61 (p. 1) and hereinafter called the ‘average refunds decision’; this decision determines, for the above-mentioned period and in accordance with Article 3 (1) (a) of Regulation No 25, the amounts of the lowest average refunds for the various agricultural products taken into account; refunds in relation to food aid programmes were ignored for the purposes of this calculation.

4) The written procedure has been duly completed. On the report of the Judge Rapporteur, and after hearing the Advocate-General, the Court decided to open the oral procedure without a preparatory inquiry. The Netherlands Government was requested however to submit further and better particulars on the manner in which the operations in question were carried out in their various stages and, in particular, on who paid the purchase price and, where appropriate, on whose behalf this price was paid. The Commission was requested to place on file the working papers VI/4639/71 and VI/4640/71, drawn up by its staff for the purpose of preparing the contested decisions. The parties have complied with these requests. The parties presented oral argument at the hearing on 7 November 1972. The Advocate-General delivered his opinion at the hearing on 6 December 1972.

II — Submissions of the parties

The Netherlands Government submits:

a) that the ‘aid decision’ should be annulled, ‘insofar as the quantities of exports under the heading of food gifts and the expenditure thereby incurred have not been taken into consideration for the calculation of the rate of reimbursement of refunds on exports’;

b) that the ‘average refunds decision’ should be annulled, in the case where, and to the extent that, the amounts to be reimbursed to the applicant by virtue of the decision under (a) above are influenced by the fact that, in determining the lowest average refunds, the quantities of exports under the heading of food gifts were not taken into account in (the “average refunds decision”); and that the Commission should be ordered to pay the costs.

The Commission submits that the application should be dismissed as unfounded and that the Netherlands Government should be ordered to pay the costs.

III — Pleas and arguments of the parties

The grounds and arguments of the parties may be summarized as follows:

1. Generally

The Netherlands Government refers to its exchange of views with the Commission on the matter in dispute.

This case concerns expenditure incurred as a result of refunds on exports to developing countries, by way of food aid programmes, with which the Netherlands Government was concerned within the framework of the “World Food Programme”. The progress of events was as follows:

The Netherlands Government made available to the “World Food Programme” a certain sum of money, two-thirds of which was to be used for the purchase of goods, and one third for “cash and services”;

at the request of the “World Food Programme”, the Netherlands Ministry of Agriculture and Fisheries agreed to deliver, on fixed dates, certain quantities of goods to a country chosen by the said organization;

the Ministry then asked the competent “Produktschap” (public body with responsibility for economic administration in the agricultural sphere) to publish an invitation for tenders f.o.b. for the supplies in question; one of the conditions of this invitation for tenders was the grant t, o the tenderers of the refund in respect of exports to third countries, applicable at the time of export; the tenders were therefore submitted at the world market price;

the contract was then awarded to the firm submitting the lowest tender;

this firm received instructions specifying in particular that delivery must be made at the price indicated in the tender, that the firm would take part in the operation “as exporter”and that the invoice should be addressed to the above-mentioned “Produktschap”, for the attention of the Ministry of Agriculture and Fisheries; the export certificate in fact described the said firm as exporter;

the firm delivered the goods to Amsterdam for shipment to be undertaken by the Netherlands authorities, in accordance with an agreement made with the “World Food Programme”;

the Ministry then gave the order to pay the agreed purchase price to the firm from funds administered for this purpose by the Ministry, constituting the exchange value of the “commodity pledging” for 1966; at the same time the firm's invoice was sent to the appropriate department of the “World Food Programme”, indicating that the goods were to be paid for by the said Ministry, which had in fact been done, on behalf of the “World Food Programme”;

the competent Netherlands authority paid the refund to the exporting firm

The Commission submits that, at that time, certain Member States, including the Netherlands, made unilateral decisions — that is, without consulting the Commission or the other Member States — to grant food aid to third countries. It appears that the way in which these operations were organized differed from one Member State to another; in certain cases, the national authorities took over completely the task of carrying out these operations, while in others they restricted themselves to deciding on and financing the operations.

Subsequently, the Community itself became progressively concerned with food aid. The Commission enumerates the measures adopted to this end (agreements with the countries concerned or international organizations; Regulations of the Council); it emphasizes that at the time these steps were taken, the Community did not use the system of refunds on exports.

2. First plea: Infringement of essential procedural requirements

According to the Netherlands Government, the statement of reasons in the contested decisions does not give sufficient indication of the points of fact and law on which they are based. The reasoning expressed in the “aid decision” is laconic and the global reference to “Community legislation” is equivalent to a lack of reference; further, the Commission should at least have made known the final result of its calculations. As for the “average refunds decision”, it does not indicate in any way whether and, if so, how, in determining the lowest average refund, the Commission took into account quantities of exports under the heading of food gifts, and in what way it has “amended” the information supplied by the Member States on which the decision is based. Further, the Commission did not indicate precisely what amounts were actually deducted from the reimbursement applied for by the plaintiff and in what way these amounts were arrived at. According to the jurisprudence of the Court, the points of fact and law on which a Community act is based must be presented in a clear and precise manner, in order that the interested parties, as well as the Court, may be able to recognize the essential factors involved.

In this case, the reasons expressed in the various documents previously drawn up, on which the Commission relies, are scanty and imprecise:

the Commission's first standpoint, in 1968, was concerned exclusively with the cereals sector; the reasons then given (the requirement of a decision of the Council) did not appear in the “aid decision”;

Mr Mansholt's letter of 2 April 1970 and the “aid decision” are based on the non-commercial character of the deliveries in question, whereas the addendum of 1971 was based on the notion of a gratuitous act.

The Commission replies firstly by retracing the events leading up to the contested decisions. After the Member States had supplied the Commission with the data for determining the lowest average refunds and had submitted their applications for aid from the Fund, the Commission's staff drew up the working papers collating and harmonizing the said data, in particular documents VI/4639/71 and VI/4640/71 which the Commission has placed on file. The latter document gives details, as to both quantities and refunds, of the food gifts which were deducted from the applications for reimbursement. The Fund Committee examined and discussed these documents, also touching on the question of whether expenditure on food aid programmes should be taken into consideration or not, on which question the representative of the Netherlands Government clearly stated his position. Further, the Committee were consulted on the draft decisions, which subsequently, and without any amendment, became the contested decisions. The reasons for which the expenditure in question was not allowed are to be found in the addendum, the essential arguments of which are again brought up by the Commission.

As the Netherlands Government was closely involved in the process of drawing up the contested decisions, it is perfectly well able to acquaint itself with why, and to the extent of what amounts, expenditure referable to refunds made within the framework of food aid had not been taken into consideration. Decisions arrived at under such circumstances do not require detailed reasoning. The legal arguments presented by the Commission over the years are perfectly clear; they state that the existing system does not permit non-commercial operations, particularly gratuitous acts, to be taken into consideration, and that this position could only be changed by an act of the Council amending the said system. Referring more particularly to the “aid decision”, the fifth consideration, although succinct, is clear and to the point; in particular, the expression “Community rules” refers to the provisions governing the grant of refunds. Moreover, the Commission expressly referred to the provisions laid down in the matter by the basic Regulations, when discussing the problem in Committee. As for the objection that the decision should have indicated the final result of the calculations, the Commission would certainly have provided the information if the Netherlands Government had asked for it; further, this result was evident from the data given by the Commission to the Committee at the time of the discussions on the draft decision and had therefore been brought to the notice of the Netherlands Government officials. Under the terms of the 17th consideration of the preamble to Regulation No 17/64, the Committee was set up in order to provide “close cooperation between the Member States and the Commission”, “to facilitate the general working of the Fund”; discussion in the body of the Committee therefore offers the best opportunity to learn about details such as these.

Similar considerations apply to the “average refunds decision”. It goes without saying that if the Commission excludes the amounts in question from Community financing, it could not retain the corresponding exports in its

calculation of the lowest average refund, the determining factor on which that financing is based.

3. Second plea: Infringement of Regulation No 17/64 and of Article 14 (2) of Regulation No 13/64

The Netherlands Government submits that it would appear from the fifth consideration of the “aid decision” that the Commission itself admits that the operations in question constitute “exports” within the meaning of the Community rules. Moreover, this is the only admissible interpretation; in fact, no text adopted by the Council or the Commission limits the meaning of the word “exports” in such a way as not to include all operations, commercial or not, consisting in the despatch of goods from within the Community to a third country, otherwise than in transit. This is evident from the necessity to use a neutral and uniform term, as the texts in question subject the export of goods to rules of varying nature.

This proposition is supported by Community practice. Thus, Article 1 of Regulation No 2227/71/EEC of the Commission of 18 October 1971“on the levying of an export charge for powdered skim milk” (OJ L 234, p. 11), exempts “deliveries by the Community to developing countries under the food aid programme” from the export charge. It would appear from Article 19 of Regulation No 2637/70/EEC of 23 December 1970“on special rules for implementing the system of import, export and prior determination certificates for agricultural products” (OJ No L 283, p. 15) that deliveries made “under the food aid programme” require the presentation of an export certificate. These texts show that the expression “exports to third countries” includes operations under the food aid programme.

The payments in question were based on the combined provisions of Article 14 (2) of Regulation No 13/64 and Article 1 of Regulation No 56/66/EEC of the Commission of 23 May 1966“on calculating the maximum amount of refunds on exports of milk products to third countries” (OJ p. 1422/66), authorizing the principle of refunds and determining the maximum amounts of such refunds respectively. These Regulations contain no provision by virtue of which the refund cannot be granted in the case of exports under the heading of food gifts; further, it is incorrect to say that they have always been interpreted in that way by the Council and the Commission. As Article 14 (2) contains only a basic provision requiring subsequent implementation, such a restriction could only be imposed by application of Article 14 (4), under the terms of which the detailed rules for implementing that Article are to be laid down in accordance with the procedure set out in Article 25 of Regulation No 13/64, that is to say, by the Commission acting on the opinion of the Management Committee; none of the Regulations drawn up in this way, including the above-mentioned Regulation No 56/66, included the limitation now claimed by the Commission.

Furthermore, no Regulation ever laid down, in respect of the grant of the refund, the slightest condition attaching to the basic export operation; one can quote by way of example Regulation No 1041/67/EEC of the Commission of 21 December 1967“on detailed rules for the application of export refunds on products subject to a single price system” (OJ P. 9).

One cannot argue against this from the fact that, under the terms of Article 14 of Regulation No 13/64, the refund must “permit exports to third countries on the basis of prices ruling on the world market”. This provision is concerned with facilitating the movement of goods outwards on the basis of world market prices. The expression “on the basis of a price” is not synonymous with “at a price”. The difference existing between the level of prices on the domestic market and that of world market prices, and in particular the system of import levies, results in all exports, whether or not based on a commercial operation, being influenced by differences in price. The aim of the above-mentioned provision is not to facilitate exports, but to facilitate them on the basis of the prices ruling in world trade. The fact, which is indisputable, that these prices can only be determined on the basis of commercial operations, is irrelevant in the present case. Further, die covering of the said difference by a refund conforms to the objectives of the Community agricultural policy, even in cases such as those in question, since it helps to rid the Common Market of its surpluses. The Commission's attitude could result in the Member States, which wish t, o grant food aid, not considering themselves justified any more in making their purchases in the Common Market. To the extent of the quantities bought on the world market, there would be no more exports from the EEC, and the equivalent of such quantities would consequently continue to be a charge on the Fund.

It is strange that the Commission refuses to grant the refund in respect of humanitarian gifts when it grants them in the case of gifts made within the framework of an advertising campaign, and when the Fund bears the costs of destruction of agricultural products.

The Commission replies that, as Article 3 (1) of Regulation No 25 refers to the Regulations dealing with the organization of markets for the definition of measures the expenses of which are eligible for aid from the Fund, it suffices in this case to point out that the payments in dispute are not refunds on exports within the meaning of Article 14 (2) of Regulation No 13/64.

From the very wording of this provision, its sole objective is to facilitate commercial operations; in fact

only an export of a commercial nature can take place “on the basis of the prices ruling on the world market”, for it is only in this case that an operator within the Community sells to an operator in a third country, at a price necessarily aligned to world trade prices, in the absence of which the sale could not take place;

if the argument of the Netherlands Government were correct, the above-mentioned provision would not have used the word “permit”, as the gift, by definition gratuitous, could have been made whatever the financial burden incurred by the donor.

This argument is supported by Article 30 of Regulation No 13/64 which speaks of ‘the system of trade set up by this Regulation’, as well as by the 14th consideration of the same Regulation, under the terms of which the refunds must be allowed ‘in order to safeguard participation by the Member States in international trade in milk products’. It is also further supported by the subsequent rules, and particularly by the stated reasons for and the provisions of Regulation No 876/68/EEC of the Council of 28 June 1968, ‘laying down general rules for granting export refunds on milk and milk products and criteria for fixing the amount of such refunds’ (OJ No L 155, p. 1). Lastly, the Commission's viewpoint is supported by examination of the function of the refunds within the system of the organization of the markets, namely to maintain trade outlets and thus to contribute to stabilizing the domestic market and ensuring a fair standard of living for the agricultural population of the Community.

Further, when the Council, after the period now in question, decided to take food aid measures within the common organization of the markets, it did not make use of the system of refunds on exports, but adopted ad hoc provisions, for example, in the dairy sector, Articles 6 (3) and 7 (2) of Regulation No 804/68 of 27 June 1968 (OJ No L 148, p. 13) and also Regulation No 1399/69 of 17 July 1969 (OJ No L 179, p. 14). The Commission gives a detailed analysis of the Community Regulations dealing with food aid in the sectors of milk and milk products and cereals. It argues from this that the Council based itself on the opinion that, before those Regulations were adopted, the amounts of expenditure referable to national measures in food aid were not ‘refunds on exports’ within the meaning of Article 3 (1) (a) of Regulation No 25. It is particularly significant that under the terms of the second consideration of Regulation No 289/69/EEC of the Council amending Regulation No 120/67/EEC concerning the mobilization of cereals intended for food aid (OJ No L 41, p. 1), ‘that Regulation’ — that is, Regulation No 120/67 — ‘does not include the provisions necessary for implementing the food aid programme’.

The Commission's interpretation is not defeated by other provisions cited by the Netherlands Government:

As Article 14 (2) of Regulation No 13/64 itself contains the answer to the question in dispute, and as it has always been interpreted by the Council and the Commission as meaning that it concerns only commercial operations, one does not see why Regulations Nos 56/66 and 1041/67, adopted under this text, should have given precise details in respect of this.

This formality laid down by Article 19 of Regulation No 2637/70 — that is, that the export certificate issued within the framework of food aid operations must refer to ‘food aid’ — is linked with the decision of the Council to grant to these operations financial aid known as ‘refund f.o.b.’ (cf. title of Chapter I of Regulation No 2052/69/EEC of the Council of 17 October 1969‘on Community financing of expenditure resulting from the implementation of the agreement on food aid’, OJ No L 263, p. 6). The said Article therefore proves that such operations do not fall under the system of refunds on exports in question here.

As to Article 1 of Regulation No 2227/71, on export charges, the levy referred to cannot be compared to refunds on exports, as it is based automatically on the physical fact of a product leaving the customs territory of the Community, while the refunds are reserved for commercial operations and were optional at that time.

The fact that deliveries under food aid programmes help to reduce Community surpluses is not relevant as, during the transitional period, the Member States retained a significant amount of responsibility in determining agricultural policy. Further, the measures then taken by the Member States under food aid programmes were completely outside the scope of Community rules, so that, logically, the financial responsibility for those steps must rest with the Member States concerned. Furthermore such measures threaten to unsettle the domestic market (for example, by the fact that products might be withdrawn at an inopportune time or place) and to interfere with the patterns of trade with third countries; in certain cases, they could even be considered as infringing the Community rules on intervention measures and aid.

Finally, the Netherlands Government cannot claim that the Community should bear a part of the cost of gifts which it had unilaterally decided to grant for reasons of its own.

Grounds of Judgment

1. This application by the Government of the Kingdom of the Netherlands under Article 173 of the EEC Treaty is firstly for the annulment of Decision No 72/120/EEC of the Commission of 26 January 1972 (OJ No L 61, p. 15) (hereinafter called the ‘aid decision’), insofar as that decision refused the grant of aid from the European Agricultural Guidance and Guarantee Fund (hereinafter called the ‘Fund’) in respect of expenditure incurred by the Kingdom of the Netherlands as a result of refunds on exports to third countries under the heading of food gifts during the accounting period 1966/67.

2. The application is further for the annulment of Decision No 72/115/EEC of the Commission, of the same date, (OJ No L 61, p. 1) (hereinafter called the ‘average refunds decision’) — ‘in the case where, and to the extent that, the amounts to be reimbursed to the applicant by virtue of the (aid decision) are influenced by the fact that, in determining the lowest average refunds’ — the basic factor in the calculation of refunds on exports to third countries eligible for aid from the Fund, in accordance with Article 3 (1) of Regulation No 25 of the Council of 4 April 1962 (OJ p. 991), — 'the quantities of exports under the heading of food gifts … were not taken into account'.

On the first plea (Infringement of essential procedural requirements)

3. The Netherlands Government asserts that the disputed elements of these decisions are vitiated by infringement of essential procedural requirements, in that they have not been sufficiently reasoned, as required by Article 190 of the Treaty.

4. With regard to the ‘aid decision’, the Netherlands Government alleges that in order to explain the exclusion of the quantities of exports under the heading of food gifts, the stated reasons for that decision are restricted to the statement that those quantities ‘are not eligible for aid from the Fund, as expenditure on non-commercial operations cannot be considered as refunds on exports to third countries within the meaning of the Community rules’.

5. As to the theory that the expenditure in dispute is not eligible for aid from the Fund, the stated reasons for the decision set out succinctly, but clearly, the reasoning which guided the Commission.

6. The Netherlands Government could not be in doubt as to the scope of the reference to ‘Community rules’, as this expression obviously concerned the provisions authorizing the Member States to grant refunds on exports to third countries — thus, in the sector of milk and milk products, Article 14 (2) of Regulation No 13/64/EEC of the Council of 5 February 1964 (OJ p. 549/ — and Article 3 (1) of Regulation No 25 under the terms of which those refunds ‘are eligible for aid from the Fund’.

7. The reasoning of the decision did not differ substantially from the arguments previously advanced by the Commission.

8. With regard to the amounts deducted by the Commission from the sum applied for by the Netherlands Government, these were set out, together with the quantities of products to which they referred, in the Commission's report of 7 December 1971.

9. It is established by the Minutes of the 62nd Meeting of the Fund Committee that this report was included in the working papers submitted to those present at that Meeting, including the representatives of the said Government which thus had full knowledge of the figures involved.

10. Further, the Netherlands Government has not contested the accuracy of these figures.

11. The extent of the duty to state reasons, laid down by Article 190 of the Treaty, depends on the nature of the act in question and on the context in which it is adopted.

12. In the present case, it is not disputed that the Netherlands Government was closely involved in the process of making the contested decision and was therefore aware of the reason why the Commission did not consider that it should accede to the demand for reimbursement by the said Government, insofar as it referred to expenses incurred under a food aid programme.

13. In these circumstances, the contested decision must be held to be sufficiently reasoned.

14. With regard to the ‘average refunds decision’, the Netherlands Government alleges that it does not indicate whether and, if so, how the Commission, in determining the lowest average refund, took into account the quantities of products exported under the heading of food gifts, and in what manner it ‘amended’ the information from the Member States on which the decision is based.

15. Under the terms of Article 3 (1) of Regulation No 25, ‘The following expenditure shall be eligible for aid from the Fund … refunds on exports to third countries calculated’, inter alia,‘on the basis … of the rate of refund in the Member State whose average refund is the lowest’.

16. Since the Commission felt that certain expenditure could not be considered as refunds on exports, it could not then include this expenditure when calculating the lowest average refund.

17. The plea is therefore unfounded.

On the second plea (Infringement of Regulation No 17/64 and Article 14 (2) of Regulation No 13/64)

18. The Netherlands Government considers that the Commission has infringed the combined provisions of Regulation No 17/64/EEC of the Council of 5 February 1964 (OJ p. 586) and Article 14 (2) of Regulation No 13/64, by deciding that, since the expenditure incurred by the Netherlands Government under the heading of food gifts during the accounting period 1966/67 did not constitute refunds on exports within the meaning of those provisions, it did not confer a right to reimbursement from the Fund.

19. Under the terms of Article 3 (1) of Regulation No 25, ‘The following expenditure shall be eligible for aid from the Fund … refunds on exports to third countries’.

20. Under Article 9 (1) of Regulation No 17/64, on the conditions for granting aid from the Fund, the Member States concerned shall, once a year, submit to the Commission an application for reimbursement ‘of the expenditure incurred as a result of refunds on exports to third countries … relating to the period from 1 July to 30 June and which is to be taken over by the Guarantee Section of the Fund’, whilst under Article 10 of the same Regulation, ‘the Commission shall decide annually … after consultation with the Fund Committee, the aid to be granted from the Fund’, which it did for the accounting period 1966/67, by the contested ‘aid decision’.

21. With regard to the sector of milk and milk products, which alone concerns this case, Article 14 (2) of Regulation No 13/64 lays down that ‘in order to encourage exports to third countries on the basis of prices ruling on the world market, the difference between those prices and the prices in the exporting Member State may be covered by a refund’.

22. Regulations Nos 25 and 17/64 must be taken, in respect of the scope of the expression ‘refunds on exports to third countries’ as referring to the basic Community Regulations authorizing Member States to grant such refunds.

23. The question to be answered therefore is whether the expenditure in dispute constitutes refunds on exports to third countries, within the meaning of Article 14 (2) of Regulation No 13/64.

24. The Commission considers that this is not the case, since the objective of that provision is ‘to encourage exports to third countries on the basis of prices ruling on the world market’.

25. It follows from this wording (it is contended) that this provision is only concerned with making possible transactions made for valuable consideration, that is operations which, without a refund, could not have taken place because the price in the exporting Member State was not competitive on the world market.

26. It is true that Article 14 (2) of Regulation No 13/64 envisages first of all operations consisting in an exporter delivering milk or milk products to an importer in a third country, subject to payment by the latter of the world market price, and that this is confirmed by the fourteenth consideration of the same Regulation, whereby the grant of refunds must be allowed ‘in order to safeguard the participation of Member States in world trade in milk products’.

27. However, as this provision makes no distinction based on the legal nature of the underlying transactions for the deliveries to third countries, expenditure intended to compensate for the difference between the prices in the exporting Member State and the prices ruling in world trade cannot be excluded from the expression ‘refunds’, even though, as in this case, that State bought the products in question on the domestic market in order to deliver them, by way of gift, to the importing country or its nationals.

28. Further, the transactions thus entered into by the said State and the sellers constitute commercial operations.

29. Moreover, as Regulation No 13/64 was adopted on the basis of Articles 38 et seq. of the Treaty dealing with agriculture, it must be interpreted in the light of the objectives stated in Article 39, and in particular those which aim ‘to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture’, and ‘to stabilize markets’.

30. Article 14 (2) of Regulation No 13/64 must therefore be interpreted as encouraging all exports to third countries which contribute to the realization of those objectives.

31. Such was the case with the exports in dispute, as they comprised a preliminary purchase of the products in question on the domestic market and, therefore, contributed in maintaining or increasing sales possibilities for the farmers of the Member State concerned.

32. The fact that the Netherlands Government took the place of the importing country or its importers as buyer is not relevant, as the economic effect of creating and maintaining outlets to third countries for the said farmers is the same in either case.

33. Finally, the overall interpretation of Regulation No 13/64 cannot be distorted by considerations taken from Community acts deciding food aid programmes to be undertaken within the framework of the common organization of the agricultural markets, subsequently to the period under consideration.

34. It follows from this that the expenditure in dispute constitutes refunds on exports, within the meaning of Article 14 (2) of that Regulation, eligible for aid from the Fund under Article 3 (1) of Regulation No 25.

35. The application is therefore well-founded.

Costs

36. Under the terms of Article 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs.

37. The Commission has failed in its pleas.

38. It must therefore be ordered to pay the costs.

On those grounds, Upon reading the pleadings; Upon hearing the report of the Judge Rapporteur; Upon hearing the oral arguments of the parties; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles 38, 39, 173 and 190; Having regard to Regulation No 25 of the Council on the financing of the common agricultural policy (OJ of 4 April 1962, p. 991/62), especially Article 3; Having regard to Regulation No 13/64/EEC of the Council on the gradual establishment of a common organization of the markets in the sector of milk and milk products (OJ of 27 February 1964, p. 549/64), especially Article 14; Having regard to Regulation No 17/64/EEC of the Council on the conditions for granting aid from the European Agricultural Guidance and Guarantee Fund (OJ of 27 February 1964, p. 586/64), especially Articles 9 and 10; Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community; Having regard to the Rules of Procedure of the Court of Justice of the European Communities, especially Article 69; THE COURT hereby

1 Annuls Decision No 72/120/EEC of the Commission of 26 January 1972, on the granting of aid from the European Agricultural Guidance and Guarantee Fund — Guarantee Section — in respect of expenditure incurred by the Kingdom of the Netherlands as a result of refunds on exports to third countries (OJ No L 61, p. 15), to the extent that, in determining the amount of aid to be granted from the Fund in respect of those refunds, it did not take into account expenditure relating to products exported under the heading of food gifts.

2 Annuls Decision No 72/115/EEC of the Commission of 26 January 1972, on the determination of the lowest average refunds for financing refunds on exports to third countries for the accounting period 1966/67 (OJ No L 61, p. 1), to the extent that, in determining the lowest average refunds referred to in Article 3 (1) of Regulation No 25 of the Council of 4 April 1962 (OJ p. 991), it did not take into account the expenditure referred to in 1 above.

3 Orders the Commission of the European Communities to pay the costs.