JUDGMENT OF 8. 11. 1977 - CASE 36/77 AIMA v GRECO

In Case 36/77 Reference to the Court under Article 177 of the EEC Treaty by the Combined Civil Chambers of the Corte Suprema di Cassazione of Italy for a preliminary ruling in the appeal pending before that court between

THE COURT composed of: H. Kutscher, President, M. Sørensen and G. Bosco, Presidents of Chambers, A. M. Donner, J. Mertens de Wilmars, P. Pescatore, Lord Mackenzie Stuart, A. O'Keeffe and A. Touffait, Judges, Advocate-General: G. Reischl Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and issues

The facts, the procedure and the observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC may be summarized as follows:

I — Facts and procedure

During the 1967/68 oil marketing year when the olives were already ripe, Mr Greco, who runs an oil producing undertaking at Melendugno (Lecce), in order to obtain the produce of the said marketing year, took a lease of olive-groves on estates situate in the Manduria district comprising about 130 hectares with 7000 trees. After he had harvested the olives and produced the olive oil he applied to the Azienda di Stato per gli Interventi sul Mercato Agricolo (the Italian Agency for Intervention on the Agricultural Market, hereinafter referred to as ‘the AIMA’) for the subsidy provided for olive oil. That application was refused on the ground that the applicant was not the producer of the olives.

Mr Greco then commenced legal proceedings against the AIMA in the Tribunale di Lecce, which by its judgment of 30 June 1970 to 21 January 1971 ordered the AIMA to pay Mr Greco the sum of Lit 45325000 together with interest. The Corte d'Apello, Lecce, upheld this order by its judgment of 27 June to 27 July 1972 in which it declared that Mr Greco could be regarded as a producer because he had taken part in the production cycle, albeit only during the second phase. Subsequently the Corte Suprema di Cassazione (Combined Civil Chambers) by Order No 34374 made on 18 December 1975 (Giurisprudenza Costituzionale 1976, II. p. 439), having found that certain provisions of Decree Law No 1051 of 21 November 1967, which in the meantime had been consolidated with its amendments as Law No 10 of 18 January 1968 (‘Provisions for the grant of the price subsidy for olive oil produced in the 1967/68 marketing year’), are a ‘derogation from the Community rules in this field’, referred the question whether the said provisions were constitutional to the Corte Costituzionale (the Constitutional Court), which in its judgment No 203 delivered on (15 July) 18 July 1976 (Giurisprudenza Costituzionale 1976, I. p. 1292) declared that those provisions were unconstitutional in so far as they replaced the directly applicable corresponding provisions of Community Regulations Nos 136/66/EEC and 754/67/EEC.

The Corte Suprema di Cassazione, which was thus required to reconsider the disputed question whether Mr Greco was a producer, by its Order of 9 December 1976 then stayed proceedings again and asked the Court of Justice to interpret the expression ‘producers of olive oil’ contained in Article 10 (1) and (2) of Regulation No 136/66/EEC of the Council of 22 September 1966 in conjunction with Regulation No 754/67/EEC of the Council of 26 October 1967, the preamble whereof also refers to ‘producers of olive oil’ and in particular to rule.

a) whether the expression ‘producers of olive oil’ is equivalent for the purposes of the provisions laid down in the said Community regulations to that of ‘olive producers’ and

b) whether a person who, having acquired olives on the tree which are already ripe, has them harvested and extracts the oil from them, is also a producer of olive oil.

The Corte Suprema di Cassazione went on to say that ‘In the proceedings before the Court of Justice of the EEC it will be possible to consider the question, which has remained undecided, of the invalidity of the Community provisions implementing the beforementioned regulations on which the AIMA has relied in support of its own interpretation, in so far as it shall appear to be relevant having regard to the specific arguments submitted by the parties before the court.’

The order of the Corte Suprema di Cassazione making the reference was received at the Court Registry on 17 March 1977.

On hearing the report of the Judge-Rapporteur and the views of the Advocate-General the Court decided to open the oral procedure without any preparatory inquiry.

II — Summary of the written observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC

Observations of Mr Greco

Mr Greco first of all summarizes the applicable Community regulations and points out that the price subsidy for olive oil was introduced pursuant to Article 10 (1) of Regulation No 136/66/EEC, which states that ‘where the production target price is higher than the market target price ruling at the beginning of the marketing year, a subsidy equal to the difference between these two prices shall be granted to producers of olive oil extracted within the Community from olives harvested within the Community’.

He then refers to Article 5 of the same regulation which reads ‘The production target price shall be fixed at a level which is fair to producers, account being taken of the need to keep Community production at the required level’.

For the 1967/68 marketing year the production target price and the market target price were fixed, pursuant to Article 4 of the aforementioned regulation, by Regulation No 778/67/EEC of the Council of 27 October 1967. Furthermore, Regulation No 754/67/EEC of the Council of 26 October 1967 stated (in Article 1) that the subsidy referred to in Article 10 of Regulation No 136/66/EEC ‘shall be granted for olive oil’, (in Article 2) that ‘the subsidy shall be granted on application by the persons concerned in the olive oil producing areas of the Community’, (in Article 3) that ‘While awaiting the establishment of a Community control system each producer Member State shall introduce an administrative control system to ensure that the product referred to in Article 1 qualifies for the subsidy’ and that This control system must, in particular, enable the quantity of olive oil in respect of which an application for a subsidy is made to be correlated to the quantity of olives harvested in the Community and used to produce it. This latter provision was inserted for the express purpose of excluding from the subsidy oil produced from olives grown outside the Community.

The provisions set out in Regulation No 754/67/EEC replaced those of Regulation No 168/66/EEC of the Council of 27 October 1966 which also stated (in Article 1 thereof) that the subsidy referred to in Article 10 of Regulation No 136/66/EEC was to be granted in the case of olive oil.

All the successive Council regulations refer exclusively and invariably, on the one hand, to olive oil, which alone qualifies for the subsidy, and, on the other hand, to producers of olive oil, who alone receive the subsidy.

All these provisions make it clear that the Member States have been entrusted only with the task of supervision and have not been given the power to lay down implementing rules. The Council has reserved part of that power to itself and has conferred another part thereof upon the Commission.

The AIMA argued before the Corte Costituzionale and also during the second phase of the proceedings before the Combined Civil Chambers of the Corte Suprema di Cassazione that appearances are deceptive and that Article 10 of Regulation No 136/66/EEC was in fact to be given an interpretation contrary to the literal meaning of its text. Further, it maintained that under the provisions of Regulation No 754/67/EEC not only supervisory powers but also the absolute power to decide without any interference who is to receive the subsidy, whether the olive oil manufacturers or the olive producers, had been delegated to the Member States.

The rules in question certainly do not have the meaning which the AIMA gives them. The construction which the latter puts forward is not only inconsistent with the actual wording of the provision but also with all the other provisions of the regulations adopted subsequently by the Council and also by the Commission and especially with the rule laid down in Article 10 (3) of Regulation No 136/66/EEC, which entrusts to the Commission and not to the Member States the task of defining the detailed rules for the application of that article in accordance with the procedure laid down in Article 38 of the said regulation, that is to say with the assistance of a Management Committee consisting of representatives of all the Member States and not of one Member State alone.

Mr Greco draws particular attention to the provisions of Regulation No 754/67, upon which AIMA relies, in order to refute the merits of the argument of the opposing party and submits that a strict construction of the preamble to and provisions of that regulation clearly excludes any delegation of the legislative powers of the Council to the Member States and especially any delegation including the power to distort completely the letter and spirit of Article 10 of the basic Regulation No 136/66/EEC.

This conclusion is also said to be confirmed by the following findings:

1) If Regulation No 754/67 had, by the expedient of an unlawful delegation of legislative powers, authorized the Member States to amend or even merely to supplement the provisions of Article 10 of the basic Regulation No 136/66/EEC, it would, according to Mr Greco, undoubtedly have been illegal, because it is clearly a straightforward implementing regulation. Having regard, on the one hand, to the express reference to Article 10 (2) of Regulation No 136/66/EEC and, on the other hand, to the wording of its preamble and its provisions it would be entirely wrong to give that regulation a meaning which would make it plainly illegal.

2) To assert (as the AIMA has done) that the problem of ascertaining to whom the subsidy should in practice be paid only arises as a matter of secondary importance when an application for the subsidy is made is tantamount to disregarding both the meaning of Article 10 of Regulation No 136/66/EEC and of the provisions of Regulation No 754/67/EEC.

3) The AIMA cites Article 3 of Regulation No 754/67 in support of its argument that by adopting that regulation the Council delegated the legislative powers which it had previously, in the basic regulation, reserved to itself. That article merely entrusts to the Member States, while they await the introduction of a Community control system, the task of undertaking the supervision necessary to ensure that the product (that is to say the oil and not the olives) in fact qualifies for the subsidy. By the same token, a comparison with Article 1 as well as the recitals to that regulation makes it quite clear that the aim of the said supervision is to prevent the subsidy from being granted for oil extracted from olives grown outside the Community or olive oil in respect of which the subsidy has already been paid.

4) As far as concerns the AIMA's submissions on the economic objectives of the price subsidy for olive oil, they no longer have much relevance, because such submissions do not and cannot justify an interpretation which is inconsistent with the spirit and letter of the provisions.

Mr Greco then deals with the AIMA's argument that the most recent rules adopted by the Council and the Commission indicate quite clearly that it is the olive growers and not the producers who are entitled to the price subsidy and that those provisions are to be regarded as an ‘authentic interpretation’ of the preceding rules; he makes the following observations:

a) In the first place, the dispute should be decided with reference to the Community rules in force when it arose and not on the basis of the later rules. Moreover, the Corte Suprema di cassazione was not wrong to ask only that Article 10 (1) and (2) of Regulation No 136/66/EEC, read together with Regulation No 754/67/EEC, be interpreted. Mr Greco does not object to the Court of Justice interpreting the later rules as well but, in order to protect his interests in this dispute against all contingencies both as regards procedural matters and on the substance of the case, he formally requests the Court to draw a clear distinction between the interpretation of the rules applicable to the facts of this case and that of the rules adopted subsequently.

b) In the second place, if the Community rules contained in the later regulations, which are all (including those adopted by the Council) regulations implementing the basic Regulation No 136/66/EEC, had the scope attributed to them by the AIMA (that is to say, if they were either amendments or authentic interpretations of the basic rules), they would have to be regarded as illegal because they are inconsistent with the unambiguous meaning of Article 10 of Regulation No 136/66/EEC, which clearly emerges from its letter and spirit. In this connexion Mr Greco draws attention to the Court's case-law on implementing regulations of the Council in its judgment of 10 March 1971 in Case 38/70 and on regulations of the Commission in its judgment of 30 October 1975. Mr Greco then refers to the passage in the order making the reference where the Corte Suprema di Cassazione stated that in the proceedings before the Court of Justice of the EEC it would also be possible to consider the question, which remains undecided, of the invalidity of Community provisions implementing the beforementioned regulations on which the AIMA has relied in support of its interpretation, in so far as it appears to be relevant having regard to the arguments put before the Court by the parties. He infers from this that, although, strictly speaking, the operative part of the said order contains only a request for an interpretation of Regulations Nos 136/66/EEC and 754/67/EEC, the Combined Civil Chambers — in the unlikely event of the AIMA's argument being considered — also wished to bring the plea of illegality to the notice of the Court of Justice, even if only by way of a supposition and as a very subsidiary point.

c) In the third place, in order to be able to speak of an authentic interpretation it is essential that the most recent rule clarifying the scope of the earliest rule and the earliest rule as interpreted by the most recent rule should derive from the same legislative source. In this case only a provision contained in later regulations adopted by the Council itself acting in the full sovereign power of its legislative competence can be presumed to be an authentic interpretation of any provision contained in Regulation No 136/66/EEC, which the Council also adopted in pursuance of the full sovereign power of the legislative competence conferred upon it by the Treaty. On the other hand, the character of an authentic interpretation could not possibly be ascribed to a provision contained in a Commission regulation. The same applies to the implementing regulations adopted by the Council, not pursuant to the full sovereign power of its legislative competence, but merely for the purpose of giving effect to them in accordance with the specific provisions of Article 10 (2) of Regulation No 136/66/EEC.

Mr Greco, after making a rigorous analysis of the provisions referred to by AIMA, asserts that none of them in fact has the scope which the latter claims for it.

Finally, as for the French Order of 10 August 1967 on the enforcement of the Community rules relating to subsidies for producers of olive oil, to which the AIMA referred during the proceedings before the national court in order to substantiate its assertion that in France also the price subsidy is paid to producers of olives and not to producers of olive oil, Mr Greco points out, on the one hand, that that French order seems to have a very different scope and, on the other hand, that the fact that there has been an infringement in another Member State similar to that which has occurred in Italy, or that in any case there have been similar errors of interpretation of the same Community rules, is certainly not a sufficiently strong argument to justify either the misinterpretation or the infringement.

Finally, Mr Greco suggests the following answer to the questions referred by the Corte Suprema di Cassazione:

a) The rules applicable to the dispute between the AIMA and Mr Greco, namely Article 10 of Regulation No 136/66/EEC of the Council (read as a whole and in particular together with Articles 1 and 3 thereof) and Regulation No 830/67/EEC of the Commission, must be interpreted as meaning that the price subsidy for olive oil is to be paid to producers of oil, in proportion to the quantity of olive oil obtained by pressing olives produced within the Community, with the exception only of olive oil in respect of which a price subsidy has already been granted and of olive oil which has been extracted from olives produced outside the Community. On the other hand, the price subsidy cannot be paid to olive growers on the basis of abstract production and productivity figures which are used not to calculate the subsidy but only as a subordinate factor for the purpose of verifying the entitlement of the producer of olive oil to the subsidy in respect of the entire quantity of olive oil which he declares that he has produced.

b) All the provisions of the subsequent implementing regulations adopted by the. Council and the Commission, without prejudice to more detailed particulars and more important obligations, all of which are designed to maintain a stricter control over the amount of olive oil produced, upon which the producers' entitlement to the price subsidy is based, must be interpreted in the same way.

Observations of the Government of the Italian Republic

The Government of the Italian Republic observes on the first question that a systematic interpretation of all the Community provisions referred to in the order making the reference as well as those relating to the same question adopted subsequently leads to the inescapable conclusion that it is the producer of olives who is entitled to claim the olive-oil subsidy. In accordance with the objectives to be attained by supporting agricultural production, which are to be found in the Community rules in this field, it is in fact necessary to treat as ‘producers of olive oil’ only those persons who, having produced the olives, extract the oil directly therefrom or entrust the pressing thereof to third parties, and not those persons who extract the olive oil, no matter how the olives were acquired (produced directly or purchased from third parties).

Moreover, this is the interpretation which the two Member States in which olive oil is produced (Italy and France) adopted from the outset in the provisions which they notified to the Commission. No observation has been made in this connexion and similarly no amendment, which those Member States would then have had to introduce, was decided upon as provided for under the procedure laid down in Article 38 of Regulation No 136/66/EEC. Thus the Commission itself has also made it quite clear that from the very beginning it agreed with the interpretation put forward by the Government of the Italian Republic.

The Government of the Italian Republic makes special reference, in support of its argument, to the recitals of Regulation No 136/66/EEC and to the objectives of Article 10 as they appear to it to be set out in the preamble thereto. Article 10 is certainly not in principle designed to grant subsidies or premiums to certain persons who form part of the oil production cycle to the exclusion of other persons who also form part thereof but in another capacity. According to the objectives of that provision the expression ‘producers of olive oil’ merely specifies objectively the branch of the economy which it is intended to subsidize and does not differentiate between the various persons who are commercially active in that sector. Viewed in this light the designation of the person to whom the subsidy is in fact to be paid is plainly of secondary importance. The sole aim of the Community legislature when the basic regulation was adopted was to ensure that the subsidy provided for is purely for the benefit of production effected within the Community from olives harvested in the Community. The later question, namely to whom the subsidy has in practice to be paid, is merely subsidiary, arising only as a matter of implementation, and should be answered after taking into account the requirements of and the objectives pursued by the basic regulation.

In this connexion the specific and mandatory designation of the person for whom the payments are intended was to be decided by the measures referred to in Article 10 (2) to be adopted by the Council and also by the detailed rules for the application of the said article, to be adopted by the Commission pursuant to subparagraph (3) thereof and in accordance with the so-called Management Committee procedure.

It remains true that Article 10 (1) clearly lays down a binding principle to the effect that Community aid is on no account to be restricted to subsidizing the olive processing industries but that its principal and most important task is to give effective support to the farmers who produce the olives for crushing. Moreover, the opinion of the European Parliament on the draft regulation in question (OJ No 119 of 3. 7. 1965, p. 2040/65) takes the same view.

As for Regulation No 754/67/EEC of the Council of 26 October 1967, the Government of the Italian Republic lays special emphasis on the provisions of Article 2 thereof, which in its view distinguishes individually the person to whom the application is submitted in the Member State where the olive growing areas are situate. In other words the meaning of that article is that when olives are harvested in one Member State and processed into olive in another Member State the payment of the subsidy falls within the competence of the first Member State. On the other hand, this Article 2 clearly designates the producer of the olives processed into olive oil as the person entitled to submit an application for a subsidy (and therefore to receive the corresponding amount). If that were not the position it would be absurd to require the processing industries (which might also be located in areas where olives are not produced) to submit their applications in the areas where olives are produced. By stating where the application has to be made Article 2 also indicates clearly, although by implication, who has to submit the application and who can accept it.

This conclusion, which the Government of the Italian Republic considers to be a complete answer to the first question for an interpretation referred by the Corte Suprema di Cassazione, is corroborated by a number of other findings.

In the first place, a logical analysis of Article 3 of Regulation No 754/67/EEC shows that, when that regulation provided that Member States shall ensure by a control system that the quantity of olive oil in respect of which an application for a subsidy is made corresponds to the quantity of olives harvested in the Community and used to produce it, it designated the producer of the olives which are processed into olive oil as the person who may apply for a subsidy and has to supply the necessary particulars to substantiate the production of his olive grove.

There is another aspect. If the provisions of Regulation No 754/67/EEC (supplemented by the implementing provisions contained in Regulaion No 830/67/EEC of the Commission of 9. November 1967) were not regarded as sufficient to support the view that the person entitled to apply for a subsidy is the olive producer, the conclusion would be inescapable that there are no mandatory Community provisions covering this point and that the Member States may at their discretion designate, in accordance with the essential requirements of the control system which they have to introduce, the operator involved in the olive-oil production cycle who is entitled to apply for and receive the Comunity subsidy.

There is every reason to suppose that these circumstances do not arise in practice and that the provisions of Regulations Nos 754/67/EEC of the Council and 830/67/EEC of the Council and 830/67/EEC of the Commission are more than sufficient to justify the view that producers of olives processed into olive oil are entitled to apply for and obtain payment of the Community subsidy.

Finally, the Government of the Italian Republic maintains that its opinion is confirmed by the provisions adopted for the marketing years after 1967/68, which it analyses in detail. It is clear that the Council regulations within the meaning of Article 10 (2) of Regulation No 136/66/EEC have always regarded producers of processed olives as being those entitled to apply for the subsidy, in the same way as the implementing regulations adopted by the Commission pursuant to Article 10 (2) also contain provisions which presuppose or even expressly confirm the right of olive producers in this respect.

With reference to the question of the validity of the Community provisions implementing Article 10 of Regulation No 136/66/EEC, which was included in the order making the reference and is to be answered if this should prove to be necessary, the Government of the Italian Republic submits that Article 10, if it is correctly interpreted, is not inconsistent with those implementing provisions. The regulations adoped by the Council pursuant to the said Article 10 (2) in fact have the same formal validity as the basic regulation and can in any case never be regarded as invalidated by any breach of the preceding provision. The Commission's regulations can at all events only be regarded as the expression of the lawful exercise of the wide legislative power which has been conferred upon the Commission in order to lay down, through the Management Committee procedure, the detailed rules for the application of Article 10.

As far as the second question referred by the Corte Suprema di Cassazione is concerned the Government of the Italian Republic takes the view that it must definitely be answered in the negative. According to the preceding observations the person who may apply for a subsidy is obviously the producer of the olives from which the oil is extracted, and it is clearly impossible to confuse that producer and the mere purchaser of the product. Only the person who cultivates the olive trees until they bear ripe olives can therefore be regarded as a producer, and not the person who buys the olives when they are ripe, no matter whether the purchase takes place before or after they are harvested.

The recitals of the preamble to Regulation No 136/66/EEC clearly indicate that it was the express intention of the Community legislature to support ‘olive growing’ by appropriate measures because olive growing and olive oil production are of special economic importance in certain regions of the Community. It would therefore be in no way consistent with the objectives of the basic regulation to grant the subsidy to a person who plays no part in the production of olives and whose role is limited to purchasing the product from others when it is already ripe.

This view is moreover confirmed by Regulation (EEC) No 3423/73 of the Commission of 18 December 1973 which in its Article 2 (3) expressly acknowledges that ‘producers who have sold their olives’ are entitled to apply for the subsidy, while going on to say that in such a case the application must include particulars of the purchaser. Although that regulation refers to a marketing year other than that with which this case is concerned, there is no doubt that it is relevant for the purpose of interpreting the basic and implementing provisions applicable for the 1967/68 marketing year.

Finally, the Government of the Italian Republic suggests that the following answers be given to the questions referred to the Court by the Corte Suprema di Cassazione:

a) the person entitled to apply for the olive-oil subsidy, in accordance with the combined provisions of Article 10 of Regulation No 136/66/EEC of 22 September 1966 and of the later Regulation No 754/67/EEC of 26 October 1967, is the producer of the olives from which the oil has been extracted.

b) In the event of the sale of olives on the tree which are already ripe it is the producer, and not the purchaser, who is entitled to apply for the subsidy.

Written observations of the Commission

The Commission first of all draws attention to Regulation No 136/66/EEC which the Council adopted on the basis of Articles 42 and 43 of the Treaty which established the common organization of the market in oils and fats.

In the case of olive oil, the level of income considered to be fair for producers is determined by fixing a production target price. However, the Community legislature considered that it was impossible to arrange for the market price to reach the level considered to be fair for producers. It therefore decided to enable producers to earn the income considered to be fair partly on the market and partly by means of a subsidy equal to the difference between the production market price and the market target price. The latter is fixed at a level which allows production to be marketed in the ordinary way and as a general rule at a level below that of the production target price.

However, in order that the producer's income may approximate to the income considered to be fair the actual market price must not fall too far below the market target price. To this end the legislature provided for the classic instruments of intervention on the domestic market and a levy on imports from third countries.

With special reference to the reply to be given to the questions referred to the Court the Commission considers that the starting point must be the provision which provides for the subsidy, that is to say Article 10 of Regulation No 136/66/EEC; this latter article mentions ‘producer of olive oil’. The purpose of using that expression was not, however, to restrict the right to receive the subsidy to producers of olive oil to the exclusion of producers of olives. It is true that for the 1967/68 marketing year the subsidy was payable to producers of olive oil, but that was one of the consequences flowing from the provisions of Article 10 aforesaid read together with Regulation No 754/67/EEC of the Council on olive oil subsidies, and not from the said Article 10 alone.

On the other hand, as from the 1973/74 marketing year Regulation (EEC) No 3209/73 (OJ L 327 of 28. 11. 1973, p. 15) conferred upon producers of olives the right to receive the subsidy. That new system is also compatible with Article 10 of Regulation No 136/66/EEC, because the aim of that article, as one of the provisions of a basic regulation, was not to determine once and for all the legal details relating to the payment of the subsidy but, in accordance with the legislative technique normally used by Community regulations dealing with agriculture, to define such arrangements from the standpoint of their economic function. It had to be made clear for this purpose not only that the subsidy was to be calculated with reference to the quantity of oil but also that it would be granted only if the oil was in fact produced, in other words, entitlement to the subsidy arises (whoever the recipient may be) only after the olives have been processed into oil.

In the case of the 1967/68 marketing year the Commission makes special reference to Regulation No 754/67/EEC, Article 2 whereof provides:

‘The subsidies shall be granted on application by the persons concerned in the olive oil producing areas of the Community’.

The provisions of that article read together with Article 10 of Regulation No 136/66/EEC permit the assertion to be made that the ‘persons concerned’, who are entitled to apply for subsidies and who in the final analysis have therefore the right to receive them for the marketing year in question, were the producers of olive oil. However, the reference in Article 10 to producers is somewhat ‘weak’ and its main purpose is not to designate the person in whom the right is vested but to lay down the basic condition for the existence of that right (namely, the extraction of the oil from the olives). This view is moreover confirmed by the fact that in the actual world of commerce the olive producer and the producer of olive oil are usually the same person and Regulation No 136/66/EEC was drawn up on that basis.

The changes in the system for the granting of subsidies introduced by Regulation (EEC) No 3209/73 and the actual grant of the subsidies as from the 1973/74 marketing year to olive producers were decided upon solely because of the progressive alteration of that commercial fact, when it became apparent that an increasing number of olive producers were selling their production so that the olive producer and the producer of olive oil were no longer the same person. In these circumstances the payment of subsidies to olive-oil producers does not in fact permit the attainment of the objective of the rules, which is to ensure a certain level of income for agricultural producers.

As for the first question, the Commission, after drawing attention to the fact that, if the Court were to accept the conclusion that the subsidies for the 1967/68 marketing year had to be granted to producers of olive oil, it would be unnecessary to consider it, merely points out that, since the harvesting of the olives is the principal operation involved in the production of olives, and since it accounts for more than 50 % of production costs, it cannot be said that the person who buys ripe olives on the tree and harvests them is not a producer of olives.

Finally, the Commission suggests that the questions referred by the Corte Suprema di Cassazione be answered as follows:

‘Under the provisions of Article 10 of Regulation No. 136/66/EEC, read together with Article 2 of Regulation No. 754/67/EEC, olive-oil subsidies for the 1967/68 agricultural marketing year are to be granted to producers of olive oil.’

III — Oral procedure

At the hearing on 21 September 1977 Mr Greco, represented by N. Catalano, of the Rome Bar, the Government of the Italian Republic, represented by M. Conti, vice-Avocato dello Stato, and the Commission of the European Communities, represented by its Legal Adviser, G. Marenco, submitted their oral arguments.

The Advocate-General delivered his opinion at the hearing on 11 October 1977.

Decision

1. By order of 9 December 1976, which reached the Court on 17 March 1977, the Corte Suprema di Cassazione of Italy has referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty two questions concerning the interpretation of the expression ‘producers of olive oil’, contained in certain provisions of Regulation No 136/66/EEC of the Council of 22 September 1966 on the establishment of a common organization of the market in oils and fats (OJ, English Special Edition 1965-1966, p. 221) and of Regulation No 754/67/EEC of the Council of 26 October 1967 on olive-oil subsidies (JO No 260 of 27. 10. 1967, p. 2).

2. The first question referred by the national court is whether the expression ‘producers of olive oil’ is equivalent to the expression ‘olive producers’ for the purposes of Regulations Nos 136/66 and 754/67.

3. By its second question it asks whether a person who, having acquired olives on the tree which are already ripe, has them harvested and extracts the oil from them, is also a producer of olive oil.

4. The Court's file shows that those questions have been referred in the context of proceedings between the manager of an oil producing undertaking, the respondent in the main action, who took a lease during the 1967/68 oil marketing year of certain olive groves where the olives had already ripened and who produced olive oil from the olives which he harvested himself, and the Azienda di Stato per gli Interventi sul Mercato Agricolo (AIMA), the Italian Intervention Agency, the appellant in the main action which, in reliance on national legislative provisions providing, inter alia, for payment of the subsidy to producers of olives, refused to grant the respondent the subsidy provided for by Article 10 of Regulation No 136/66 on the ground that he was not the producer of the olives.

5. The question to be determined by the national court is who is entitled to the subsidy provided for by those rules pursuant to the relevant Community provisions.

6. Since the main action is concerned with the 1967/68 oil marketing year it is appropriate to consider the provisions in force at that time, namely the basic Regulation No 136/66 and Regulation No 754/67.

7. Regulation No 136/66 established a common organization of the market in oils and fats and applies, inter alia, to oil seeds and oleaginous fruit (including olives) and their oils.

8. The fourth recital of its preamble states that ‘olive growing and olive-oil production are of special economic importance in certain regions of the Community …’.

9. The fifth recital of the preamble to the regulation indicates that the level of income regarded as being fair for Community producers may be ‘determined by a production target price in the case of olive oil and by a target price in the case of oil seeds’.

10. As the Council expressly referred to ‘olive growing and olive-oil production’ and declared that it intended to introduce a regulatory system for incomes based on the processed product constituted by olive oil — in complete contrast, moreover, to the system proposed for oleaginous fruit, which is centred on the basic product — it drew a clear distinction between two economic activities.

11. That distinction is not affected by the fact, which has been accepted by the appellant in the main action as well as by the Commission, that when the regulation entered into force olive oil was in the ordinary course produced by the olive grower or on his behalf.

12. Furthermore, that distinction has been confirmed by the European Parliament which, in its opinion on a draft regulation on the common organization of the market in oils and fats (JO No 119 of 3. 7. 1965, p. 2040/65), proposed that the regulation be supplemented by a provision allowing olive producers and processors to enter into special agreements for the purpose of ensuring that olive growers benefit from the subsidy — a proposal which the Council did not accept.

13. Under the system introduced by the organization of the market established by the regulation the income considered to be fair for producers of olive oil is to be earned partly on the market and partly by means of a subsidy equivalent to the difference between the production target price, being the price which ensures that fair income, and the market target price, which is the price permitting normal marketing to be carried out.

14. Since the market target price of olive oil cannot achieve its objective unless the price actually ruling on the market is as close as possible to the market price, the regulation provides for stabilizing machinery in the form of intervention on the domestic market and of a levy on imports from third countries.

15. The subsidy referred to above is provided for in Article 10 (1) of Regulation No 136/66 which reads:

‘Where the production target price is higher than the market target price ruling at the beginning of the marketing year, a subsidy equal to the difference between these two prices shall be granted to producers of olive oil extracted within the Community from olives harvested within the Community …’.

16. Article 10 (2) thereof provides that the principles governing the grant of the subsidy provided for in paragraph (1) shall be defiped by the Council acting in accordance with the voting procedure laid down in Article 43 of the Treaty and that acting in accordance with the same procedure, the Council shall adopt measures to ensure that olive-oil producers receive this subsidy only in respect of oils which meet the conditions set out in paragraph (1).

17. According to those provisions, which refer to the end product, namely olive oil, and which are further corroborated by the abovementioned clear distinction between olive producers and processors, the expression ‘producers of olive oil’ can only be interpreted as referring to those persons who extract the olive oil and it is therefore the producers of the processed product who are entitled to the subsidy.

18. This finding is confirmed by the wording of Regulation No 754/67 on olive-oil subsidies which was adopted pursuant to Article 10 (2) of Regulation No 136/66.

19. Indeed, that regulation provides, at Article 1, that ‘The subsidy shall be granted for olive oil’ and, at Article 3, that ‘While awaiting the establishment of a Community control system each producer Member State shall introduce an administrative control system to ensure that the product referred to in Article 1 qualifies for the subsidy’.

20. Furthermore, the recitals of the preamble to the said regulation state, inter alia, that the principles according to which the subsidy is granted to olive-oil producers must be defined and that measures must be adopted which are to ensure that that subsidy is granted only for olive oil which is produced within the Community from olives harvested in the Community, and they stipulate that it is appropriate to restrict the grant of subsidies to the quantities of oil to which the applications made in the oil producing areas refer.

21. Since Regulation No 754/67 provides that the subsidy shall be granted in respect of olive oil it draws the same distinction between the basic product and the processed product as does the basic regulation.

22. It is clear from the foregoing that the answer to the first question must be that the expression ‘producers of olive oil’ within the meaning of Article 10 of Regulation No 136/66 and of Regulation No 754/67 must be interpreted as referring to producers of the processed product, namely olive oil, and the olive oil subsidy for the 1967/68 oil marketing year must therefore be granted to those producers.

23. Consequently the second question is no longer relevant.

Costs

24. The costs incurred by the Government of the Italian Republic and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable.

25. As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds, THE COURT in answer to the questions referred to it by the Corte Suprema di Cassazione of Italy by order of 9 December 1976, hereby rules: