JUDGMENT OF 24. 4. 1980 — CASE 72/79 COMMISSION ν ITALY
In Case 72/79
THE COURT, composed of: H. Kutscher, President, A. O'Keeffe and A. Touffait (Presidents of Chambers), J. Mertens de Wilmars, P. Pescatore, Lord Mackenzie Stuart, G. Bosco, T. Koopmans and O. Due, Judges, Advocate General: H. Mayras Registrar: J. A. Pompe, Deputy Registrar
gives the following
JUDGMENT
Facts and Issues
The facts of the case, the course of the procedure and the conclusions, submissions and arguments of the parties may be summarized as follows:
I — Facts and procedure
(a) Facts
By a decision adopted on 1 October 1976 by the Comitato Interministeriale dei Prezzi [Inter-departmental Price Committee hereinafter referred to as “the Price Committee”] as No 24/1976 (Gazzetta Ufficiale No 264 of 4 October 1976, p. 7201) the Italian Government inter alia decided on the following contributions for storage costs of sugar:
“5. For the 1976/77 marketing year the direct and indirect contributions of the Cassa Conguaglio Zucchero [The Sugar Equalization Fund, hereinafter referred to as “the Fund”] to be paid in accordance with the procedures laid down in Point 6 of Decision No 1195 of the Interdepartmental Price Committee supplemented by the measures set out below shall be as follows: ... (c) The payment to the processing industry on the basis of the total quantity of sugar produced in Italy in the course of the 1976/77 marketing year, expressed as quintals of white sugar, of a compensatory allowance corresponding to the difference between the financial charges borne by it and the monthly amount of Lit 212.82 per quintal laid down by the Community provisions. Any alteration in this latter amount shall entail a corresponding alteration of the amount of the compensatoiy allowance. The financial charges borne by the national industry shall be calculated each month by applying to the derived intervention price for Italy the rate prevailing with the best solvent customer (prime rate) in force on the fifteenth day of each month less two points. For the calculation of the amounts provided above the Sugar Equalization Fund shall apply the system established in implementation of the provisions of Article 8 concerning storage costs of Regulation (EEC) No 3330/74; the payments to which the sugar manufacturers are entitled shall be effected within 25 days of transmission of the file... 6. The Sugar Equalization Fund is authorized to reserve for the 1976/77 marketing year a credit of Lit 300 per tonne of beet having a sugar content of 16%, that is to say, Lit 238.68 per net quintal of white sugar, to be set against the adaptation aids provided for in Article 38 of Regulation (EEC) No 3330/74 as amended by Article 4 of Regulation (EEC) No 1487/76 granted to beet producers for the total quantity of sugar coming within the quantity of 13300000 quintals provided for by the above-mentioned Community provisions. The Sugar Equalization Fund shall credit the manufacturers concerned, from and within the limits of the above-mentioned credit, for the account of the beet producers, with the following charges corresponding to any excess production of sugar: (a) By the end of each month an amount corresponding to 60% of the monthly Community amount not reimbursed for storage costs for the total quantities of sugar carried forward to subsequent marketing years... If the credit reserved is not entirely exhausted the balance shall be held at the disposal of producers.”
Similar measures were enacted for the 1977/78 year by Decision No 37/1977 of the Price Committee dated 26 July 1977 (Gazzetta Ufficiale No 207 of 29 July 1977, p. 5678). Paragraph 5 (f) provides inter alia for the reimbursement of storage costs for the total quantity of sugar produced in the course of the year “as well as for the sugar produced in 1976/77 and still in store at 1 July 1977” and paragraph 6 (a) provides for a contribution to the storage costs “for all surplus sugar produced”, which does not qualify for the Community reimbursement.
In contrast to the previous decision the later one states with regard to the measures provided for in paragraph 6 (a) that the Fund “shall be authorized to reserve from a special fund” the amount to be set against the adaption aids granted to beet producers. It further states :
“The credits reserved to that fund — which shall be distinct for accounting purposes — shall be increased by the Equalization Fund by the amount of interest calculated at the rate charged by the banks on the credits of the Equalization Fund less two points for the reimbursement of the costs of administering the special fund... If such credits should prove to be larger than required to cover the charges resulting for producers from any surpluses they shall be reduced and the compensatory allowance provided for at paragraph 5 (a) for beet producers shall be adjusted in proportion to that reduction. The President of the Price Committee shall be empowered to adopt the necessary implementing provisions. If the amount of the credits reserved should prove insufficient for full coverage of the charges of the agricultural sector the difference shall be made up in accordance with the means prescribed by the inter-trade agreement of 1977”.
(b) The regulations concerned
Articles 8 and 31 of Regulation (EEC) No 3330/74 of the Council of 19 December 1974 on the common organization of the market in sugar (Official Journal 1974, L 359, p. 1) provide as follows:
“(1) Subject to Article 31 (2), storage costs for white sugar [and] raw sugar... manufactured from beet or cane harvested in the Community, shall be reimbursed at a flat rate by the Member States... The amount of the reimbursement shall be the same for the entire Community”.
“(2) Undertakings may carry forward part of their production to the following marketing year only if: They have notified the Member State concerned before 1 February of the quantity to be carried forward; They keep the quantity carried forward in store from 1 February to 31 January of the following year; storage costs for this period shall not be refunded under the provisions of Article 8”.
Article 2 of Regulation (EEC) No 748/68 of the Council of 18 June 1968 laying down general rules for postponing part of the sugar production to the following marketing year (Official Journal, English Special Edition 1968 (I), p. 129) provides that:
“(1) The manufacturer may require beet or cane sellers to reimburse part of the storage costs in respect of the quantity of beet or cane corresponding to the quantity of sugar carried forward to the following marketing year up to a maximum amount to be calculated on the basis of the reimbursement referred to in Article 8 of Regulation No 1009/67/EEC [now replaced by Regulation No 3330/74] and of the percentages referred to in Article 27 (4) and (5) of that regulation. (2) The maximun amount referred to in paragraph (1) shall be fixed per metric ton of beet and per month before 1 January in respect of the carry-forward of sugar produced during the current marketing year”.
(c) Procedure
By a letter of 23 March 1977 pursuant to the first paragraph of Article 169 of the EEC Treaty the Commission notified the Italian Republic that the two measures were incompatible with the relevant Community provisions and in particular with Articles 8 and 31 (2) of Regulation No 3330/74. It invited the Italian Republic to submit its observations.
These observations were submitted by a letter dated 10 June 1977 from the permanent representative of Italy to the European Communities.
On 28 July 1978 the Commission delivered to the Italian Government the reasoned opinion provided for in Article 169 of the Treaty and concluded that:
“The Italian Republic, on the one hand by granting to sugar manufacturers an amount covering the difference between the rate of the financial charges borne by them for financing their storage costs and the rate laid down by the Community provisions for calculating the reimbursement of such storage costs and on the other hand by paying to the manufacturers of quantities of sugar carried forward an amount corresponding to 60% of the monthly amount fixed by the Community under the arrangements for compensating storage costs, has infringed Articles 8 and 31 (2) of Regulation No 3330/74 on the common organization of the market in sugar”.
The Italian Republic was consequently invited to adopt the necessary measures to comply with the reasoned opinion within a period of three months from its notification.
No such measures were adopted within the period laid down. On 12 February 1979 the Italian Republic sent the Commission a letter in which it maintained that the national measures were not contrary to the relevant Community provisions.
The Commission instituted these proceedings on 2 May 1979.
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 — Conclusions of the parties
The applicant claims that the Court should:
Declare that the Italian Republic, both by granting to sugar manufacturers an amount corresponding to the difference between the percentage of the charges borne by them in financing their storage costs and the percentage laid down by the Community rules for calculating the reimbursement of such costs, and by paying to producers of sugar carried forward an amount corresponding to 60% of the monthly amount fixed by the Community within the framework of the system for reimbursement of storage costs, has infringed Articles 8 and 31 (2) of Regulation No 3330/74 on the common organization of the market in sugar;
Order the defendant to pay the costs.
The defendant contends that the Court should:
Declare that the application, in so far as it relates to the alleged infringement of Article 8, is inadmissible or, in the alternative, unfounded;
Dismiss the application in so far as it concerns the alleged infringement of Article 31 (2) of the said regulation;
Order the applicant to pay the costs.
III — Submissions and arguments of the parties
(a) The infringement of Article 8 of Regulation No 3330/74
Admissibility
The defendant claims that the national measures in the nature of aids must be judged in accordance with the procedure and the criteria laid down in Articles 92, 93 and 94 of the EEC Treaty. This is indicated by Article 41 of Regulation No 3330/74 according to which those articles of the Treaty are to apply to the production of and trade in the said products “save as otherwise provided”. Furthermore the Commission itself, in its letter of 23 March 1977 (cf. above, I (c)), considered that the national measures in question constituted aids.
The defendant accordingly considers that the adoption of the procedure under Article 169 of the Treaty is premature since the procedure under Article 93 (2) of the Treaty has not yet been initiated.
According to the defendant the measures of the Price Committee provide primarily for the allocation of the reimbursement granted by Article 8 of Regulation No 3330/74. The supplement provided for in the national measures constitutes a measure of a different nature which cannot be interpreted under Article 8 but can only be appraised in the light of Article 92 of the Treaty and in accordance with the procedure prescribed in Article 93 (2).
The applicant considers that a national aid for the benefit of agricultural products coming under a common organization of the market is in any event incompatible with the common market if it infringes the provisions of the Treaty other than those of Article 92 or of secondary rules of law such as those governing the common organization of the market (judgment of 26 June 1979 in Case 177/78, Pigs and Bacon Commission ν McCarren [1979] ECR 2161; judgment of 13 March 1979 in Case 91/79, Hansen [1979] ECR 935). It follows that a measure of this nature may be considered within the framework both of the procedure laid down in Article 93 and of the procedure under Article 169.
The applicant emphasizes that the application is in fact intended to obtain a declaration, as to the substance, that there has been an infringement of Article 8 of Regulation No 3330/74.
The defendant considers that Article 8 of Regulation No 3330/74 requires the Member States to reimburse sugar manufacturers' storage costs at a flat rate, by an amount which is to be the same for the entire Community.
The entire legislative content of the relevant part of Article 8 consists in the imposition of this positive obligation on the Member States.
In particular the provision does not add to the obligation to reimburse the costs a specific prohibition on all aids by Member States intended to compensate for any heavier charges. It is furthermore understandable that Article 8 should not expressly provide for such a prohibition in view of the general prohibition contained in Article 92, the provisions of which are expressly declared by Article 41 of Regulation No 3330/74 to apply to the common organization of the market in sugar.
In those circumstances a Member State which grants aids to compensate for heavier charges concerning storage costs may infringe the prohibition set out in Article 92 of the Treaty but it does not directly infringe Article 8 of the basic regulation which does not in fact contain any prohibition on aids in the title in question.
It follows from the foregoing that the legality of the Price Committee decisions can only be appraised within the framework of Article 92 of the Treaty and in accordance with the procedure laid down in Article 93.
Furthermore the Commission in fact took the same view concerning national aids which it considered had been granted in excess of the maxima for the amounts and quantities laid down in Article 38 of Regulation No 3330/74, as subsequently amended.
Substance
The applicant claims that the measure enacted by the Italian Republic (in paragraphs 5 (e) and 5 (f) of the two Price Committee decisions) infringes Article 8 of Regulation No 3330/74 since it does not observe either the principle of reimbursing storage costs at a flat rate or the principle whereby “the amount of the reimbursement shall be the same for the entire Community”. On the one hand the compensation is in fact calculated each month in terms of the variations in the financial burdens of the processing industry; on the other that compensation is in addition to the Community reimbursement, thereby infringing the rule that the reimbursement shall be the same for the entire Community.
The applicant maintains that the system of compensating for the storage costs of sugar was set up and organized on the basis of Community regulations. In the application of such provisions by the Member States the national authorities may not modify their structure or effect.
A Member State may not amend by national measures the appraisal of the economic circumstances which vary at different times and from country to country, as such an appraisal forms the basis of the solution adopted at Community level. The Treaty contains the instruments and guarantees for the proper adjustment of Community legislation to changed circumstances.
Furthermore the rates of interest did not increase more in Italy than elsewhere between the time of the adoption of the Community measure in question and that of the adoption of the Price Committee decision. In the form which it had at the time Article 8 of Regulation No 3330/74 was adopted on 22 June 1976 (as amended by Regulation No 1487/76, (Official Journal 1976, L 167, p. 9)) and the Price Committee decision dates from 1 October 1976.
The defendant claims that the objective of Article 8 is to stabilize the market by avoiding general and immediate recourse to intervention conditions and to the immediate sale of the products. The Italian measure conduces to the attainment of the objective referred to in Article 8 by preventing sugar produced in Italy from reaching the intervention agencies in its totality and at once, in view of the high storage costs resulting from an increase in the financial charges.
The national measures of support are explained by the handicap suffered by Italian producers through the higher charges linked to storage. Using the information provided by the application of the arrangements for flat-rate reimbursement provided for in Article 8 of Regulation No 3330/74 Italy grants support intended to eliminate or reduce the above-mentioned handicap.
In this connexion no decision has been taken by the Community authorities on the ground that Article 8 of Regulation No 3330/74 is not intended to reimburse storage costs.
The Commission has now changed its attitude and relies upon the prohibition contained in Article 8 in order to contest a measure which, according to the view which it previously took, fell clearly outside the scope of the said Article 8.
The problem of the higher storage costs does not stem from the adoption of Regulation No 1487/76. It was already in existence before that time.
The extension of the “aid” to imported sugar after the 1978/1979 sugar year (in accordance with the Price Committee Decision of 26 May 1978, Gazzetta Ufficiale No 159) shows that the support in question constitutes an aid intended to offset the higher storage costs. It does not depart from the objective referred to in Article 8 of Regulation No 3330/74.
The applicant, in its reply, states that Article 8 is intended to ensure a regular supply of sugar throughout the sugar-marketing year. Strictly interpreted, so far as it derogates from the prohibition on aids the article lays down exhaustive provisions concerning the whole system of contributions to the cost of storing sugar regardless of the nature and objectives thereof and whatever may be the factors which determine the costs. If this were not so it would be impossible to explain the reference in that provision to Article 31 (2) which governs any reimbursements of storage costs which differ as to their origin, nature and objectives from those of storage costs in general. If the Community legislature had not intended that Article 8 should be a principal rule of a general nature it would not have been necessary to make express provision in the body of that article for a case which, by its origin, nature and objective was in no way connected with it; the provision in Article 31 would have been sufficient by itself.
Since Article 8 is to be strictly interpreted and since it governs all types of contributions to storage costs an infringement of that article is committed each time the contribution granted fails to observe the limits and conditions laid down therein since considerations as to the nature or objective of the reimbursement are irrelevant in this connexion.
The applicant considers that the nature and objectives of the Italian measure are identical to those of the reimbursement effected under Article 8, as is shown by the content of the national provisions and by the method of calculation used to determine the contribution in question.
The quantitative difference between the costs borne by the sugar producers constitutes a factor which could not be taken into consideration precisely because of the decision of the Community legislature to grant a flat-rate reimbursement identical for all the Member States.
The applicant maintains that the Member States cannot take measures which are intended to supplement a Community provision or modify its scope.
The defendant maintains that Article 8 does not prohibit compensation by means of national aids for heavier charges relating to storage.
The defendant provides further details in addition to the differences set out in the statement of defence, namely that the national measure is financed from State funds whilst the system of compensation provided for in Article 8 of Regulation No 3330/74 is financed from contributions paid by sugar manufacturers themselves.
It is impossible to take the system of calculation adopted in the Price Committee decisions as a basis for deducing that the nature and the objective of the Community measure and the national measure are identical. That system of calculation was in fact chosen solely to facilitate accounting with regard to the payment of the aid.
(b) The infringement of Article 31 (2) of Regulation No 3330/74
The applicant claims that the partial compensation for the storage costs of sugar carried forward (Article 6 (2) of the Price Committee decisions) constitutes an infringement of Article 31 (2) of Regulation No 3330/74 since that provision expressly prohibits reimbursement for sugar carried forward.
Pursuant to Article 2 of Regulation No 748/68 the sugar manufacturer may require the beet producer to reimburse storage costs in respect of sugar carried forward on the basis of a contract or within the limits fixed by the Community institutions.
According to the Italian Republic agreements to that effect were concluded between representatives of the beet producers and sugar manufacturers for the two marketing years 1976/77 and 1977/78 which was confirmed in the inter-trade agreements for those two years. The content of these agreements was then adopted in Articles 6 (a) of the Price Committee decisions.
The applicant nevertheless observes that in this matter the inter-trade agreements are not by themselves binding on all producers. The producers are free to apply the clauses provided on this point by the agreements or to arrange their affairs otherwise. The inter-trade agreement does not thus constitute by itself the contractual basis prescribed in Article 2 of Regulation No 748/68.
It is thus the intervention of the State agencies which must be considered as constituting measures creating obligations erga omnes from which individual traders cannot contract out. Those measures were enacted by the Italian State in order to make provision, for the benefit of producers of sugar carried over, for reimbursement which should on the contrary have been negotiated freely between individual traders. By that expedient reimbursement was excepted from the scope of the system of free individual negotiation.
The applicant considers that the national measure is consequently at variance with Article 31 (2) of Regulation No 3330/74 and cannot be considered as authorized by the provisions of Article 2 of Regulation No 748/68.
The defendant claims that the decisions of the Price Committee merely authorize the Sugar Equalization Fund (an administrative agency) to reserve a share of the adaptation aids already recognized and allocated to beet producers. These decisions then authorize the Fund to pay to the sugar manufacturers concerned for the account of the beet producers an amount corresponding to 60% of the monthly Community amount not reimbursed for storage expenses for the entire production of surplus sugar not qualifying for that reimbursement, to be set against the reserved share. The Fund keeps separate books for the fund formed by the expedient of the reserve.
Those provisions as a whole indicate that the two Price Committee decisions are solely intended to authorize the Equalization Fund, acting as the agent of the beet producers, to manage a fund formed through the reserve obtained from the sums allocated to the beet producers. It accordingly does not constitute an operation for the account of the State.
The share of the adaptation aids concerning beet was allocated entirely to the beet producers who enjoyed it without restrictions. Of these sums the beet producers permitted, through obligations undertaken in the context of inter-trade agreements and private contracts which referred to such agreements, the reservation of a share from the special fund and its management for their own account by the Equalization Fund.
The two Price Committee decisions thus cannot be considered as measures constituting the obligation to make a reimbursement imposed upon the beet producers. The obligation has a contractual basis of its own which existed prior to the adoption of the Price Committee decisions. The national measures do not have binding effect. The defendant maintains that there is nothing to prevent the categories of traders concerned from undertaking the obligation to repay within the context of inter-trade agreements to which individual contracts conform.
The applicant, in its reply, states that Regulation No 748/68 is based on the idea that the sugar manufacturer and the beet producer are free to negotiate. In Italy the situation is different. After the repeal of the provisions concerning the regulation by law of collective labour relations by Decreto Legislativo Luogotenenziale [decree of the interim government] No 369 of 23 November 1944 a constant distinguishing feat of the sugar market in Italy has always been a tendency to impose charges on beet producers by measures applicable erga omnes adopted not in the form of a law of the Parliament but in accordance with complex administrative procedures in which trade associations, which do not necessarily include all traders in the various sectors, and agencies of the central administration participate. Such a practice has already been held improper by the Italian Constitutional Court (Judgment No 35 of 9 to 24 June 1961, (Foro Italiano, I, 1051)). With regard to the present proceedings the Italian Republic is adopting the same method with this system of the inter-trade agreement, the content of which forms an integral part of the Price Committee measures. Thus it imposes on all beet producers a charge enabling producers' storage costs for sugar carried forward to be met whilst such producers are thus excepted from the need for negotiations covered exclusively by private law and their attendant risks.
Both the imposition of the charge and its general application in the form of a measure of public law and the facilities and the guarantee which are thereby provided for sugar producers are contrary to the tenor of Articles 8 and 31 (2) of Regulation No 3330/74.
According to the applicant it is the decisions of the Price Committee which confer upon the Fund the power which it claims and to which all beet producers are subject without having any means of avoiding it. It observes that the inter-trade agreement is not binding in this matter on all beet producers, but only the members of the associations participating in the agreement.
Furthermore the payment to sugar producers is effected automatically for all the sugar carried forward and up to the amount corresponding to the maximum authorized (but not required) by the Community provisions.
At least to the extent of the part of the reimbursement corresponding to the credits reserved at the expense of the beet producers who:
Do not belong to trade organizations; or
Might (but for the decisions of the Price Committee) put forward objections based on private law against the reimbursement or the fixing of its amount at the maximum authorized level,
the payment effected automatically by the Fund certainly does not constitute the performance of a legal mandate conferred by the person concerned but on the contrary is the fulfilment of a legal obligation imposed by the Price Committee.
The two decisions of the Price Committee impose upon all beet producers (whether or not their beet is used for the production of sugar which is carried forward) the burden of the credit reserved by the Fund for the financing of the reimbursement in question.
The defendant, in its rejoinder, maintains that the reserve of Lit 300 and the deduction of that amount from the aid paid to beet producers are not imposed by the decision of the Price Committee but are based on the inter-trade agreement. The Equalization Fund must credit the beet producers with the interest on the sums transferred to reserve, it must collect an amount for the management of the special fund and reimburse any surplus from that fund to the beet producers.
The infringement with which the Italian Republic is charged is that of having paid to producers of sugar carried forward an amount corresponding to 60% of the monthly amount fixed by the Community within the framework of the arrangements for reimbursing storage costs. This means that such reimbursement is effected by a measure for which its own agencies were liable and with State resources. Accordingly questions concerning the efficacy of the inter-trade agreement and the compatibility of its content with Regulation No 748/68 fall outside the framework of this action.
Thus the reference to the case-law of the Italian Constitutional Court is in fact irrelevant.
According to the defendant's information all the individual contracts for the sale of sugar-beet to the sugar manufacturers contain a clause referring to the inter-trade agreement.
IV — Oral procedure
At the sitting held on 6 December 1979 the parties presented oral argument.
The Advocate General delivered his opinion at the sitting on 24 January 1980.
Decision
1. By an application received at the Court Registry on 2 May 1979 the Commission applied to the Court under Article 169 of the EEC Treaty for a declaration that the Republic of Italy has failed to fulfil its obligations under the Treaty by deciding to reimburse producers of sugar certain storage costs for the 1976/77 and 1977/78 marketing years in breach of Articles 8 and 31 (2) of Regulation No 3330/74 of the Council of 19 December 1974 on the common organization of the market in sugar (Official Journal 1974, L 359, p. 1).
2. The Commission complains that the Italian Republic has committed two distinct infringements of Regulation No 3330/74: on the one hand inasmuch as it has enacted and implemented a measure providing supplementary reimbursement of the storage costs for sugar produced in Italy, in breach of Article 8 of the regulation, and on the other inasmuch as it has enacted and implemented a measure providing partial reimbursement of the storage costs for sugar carried forward to the succeeding sugar-marketing year in breach of Article 31 (2) of the regulation.
3. Article 8 (1) of Regulation No 3330/74 provides that, subject to Article 31 (2), storage costs for white sugar, raw sugar and certain syrups produced prior to the crystallizing stage, manufactured from beet or cane harvested in the Community, shall be reimbursed at a flat rate by the Member States and that the amount of the reimbursement shall be the same for the entire Community. Article 8 (2) adds that the amount of the reimbursement shall be fixed each year in accordance with the procedure laid down in Article 36 of the regulation, the so-called Management Committee procedure.
4. The Commission claims that through Decision No 24/1976 of the Comitato Interministeriale dei Prezzi [Inter-departmental Price Committee, hereinafter referred to as “the Price Committee”] (Gazzetta Ufficiale No 264 of 4 October 1976, p. 7201) the Italian Government decided to grant to the sugar-processing industry a compensatory allowance corresponding to the difference between the financial charges borne by that industry for the storage costs of sugar produced in Italy and the amount of the reimbursement fixed by the Community provisions. The above-mentioned decision states that any adjustment of that latter amount is to entail a corresponding adjustment of the compensatory allowance. That decision, which applied to the 1976/77 marketing year, was replaced by a similar decision for the 1977/78 marketing year (Decision No 37/1977 of the Price Committee, Gazzetta Ufficiale No 207 of 29 July 1977, p. 5678).
5. According to the Commission these decisions infringe Article 8 of Regulation No 3330/74. On the one hand they fail to observe the principle of flat-rate reimbursement since the compensatory allowance for which they make provision is calculated in terms of variations in the financial burdens of the processing industry. On the other hand they are contrary to the rule that the reimbursement shall be the same for the entire Community since the compensatory allowance is in addition to the Community reimbursement.
6. Article 31 (1) of Regulation No 3330/74 provides that, in certain cases, undertakings may carry forward a specified part of their production which is outside the basic quota to the following marketing year, to be treated as part of that year's production. Article 31 (2) adds that the quantity carried forward must be kept in store from 1 February to 31 January of the following year and that storage costs for that period shall not be refunded under the provisions of Article 8.
7. The Commission considers that that latter provision expressly prohibits all refunds of the storage costs of sugar carried forward. It complains that the Italian Government has decided to grant to the sugar producers concerned, through the intermediary of the Cassa Conguaglio Zucchero [the Sugar Equalization Fund, hereinafter referred to as “the Fund”] for the storage costs of all the quantities of sugar carried forward to subsequent years, an amount corresponding to 60% of the monthly amount of the Community reimbursement which is fixed only where sugar is not carried forward.
8. The above-mentioned Decision No 24/1976 of the Price Committee provides that the Fund shall grant that amount to the sugar manufacturers concerned up to the limits of a credit which the Fund is authorized to pay out of the adaptation aids granted to beet producers in accordance with Article 38 of Regulation No 3330/74. For the 1977/78 marketing year Decision No 37/1977 of the Price Committee authorizes the Fund to reserve a special fund to be set against the adaptation aids granted to beet producers and to make the partial reimbursement of the storage costs of sugar carried forward payable out of that special fund.
9. The Italian Government does not dispute the facts alleged by the Commission. In its defence it relies first of all upon the inadmissibility of the application in so far as it relates to the infringement of Article 8 of the basic regulation. In the alternative, and with regard to the substance of the case, it places a different interpretation upon the relevant Community provisions and concludes on that basis that the measures in question are in accordance with Community law. With regard to the reimbursement of the storage costs of sugar carried forward it claims that this partial compensation is provided not by the Italian State but by the Fund acting as the administrator of a fund set up from private resources.
Admissibility
10. According to the Italian Government the supplementary reimbursement of the storage costs of sugar produced in Italy in accordance with the decision of the Price Committee is intended to compensate for the differences between the financial charges for storage which the processing industry in Italy must bear and those which are taken into consideration within the framework of reimbursement measures at Community level. Accordingly the supplementary national measures must be classified as aids within the meaning of Articles 92 and 93 of the EEC Treaty. In those circumstances the compatibility of those national measures with the provisions of the Treaty and with those laid down for the implementation of the common agricultural policy may only be appraised in accordance with the procedure provided for in Articles 92 and 93 of the Treaty and the criteria laid down therein.
11. The Italian Government further claims that the Commission recognized both in the procedure before the matter was referred to the Court and in its application initiating proceedings that the national measures in question constitute aids within the meaning of the Treaty. As the Commission has not instituted the procedures referred to in Article 93 of the Treaty this application based on Article 169 of the Treaty is alleged to be premature and accordingly inadmissible.
12. These two arguments cannot be upheld. The Commission rightly maintains that the Council is entitled to lay down, within the context of the regulations establishing the common organization of the markets in agricultural products, provisions prohibiting wholly or partially certain forms of national aids for the production or marketing of the products in question and that an infringement of such a prohibition may be dealt with within the specific framework of such an organization. In fact the existence of the special procedure laid down in Article 93 of the Treaty for appraising the compatibility of national systems of aid with the common market cannot affect the necessity for Member States to observe the rules on the common organization of the market.
13. Regulation No 3330/74 contains various provisions on aids in the sugar sector. This is so, for example, in the case of Article 8 on the flat-rate reimbursement of storage costs and of Article 38 which provides for the grant of adaptation aids by the Italian Republic. Although Article 41 of the regulation provides that Article 92 and 93 of the Treaty shall apply to the production of and trade in the products covered by the common organization of the market in sugar it does so subject to an express reservation concerning any provisions to the contrary in the same regulation. The question whether Article 8 of the regulation must be considered as such a contrary provision pertains to the substance of the action which it is appropriate to examine now.
The infringement of Article 8 of Regulation No 3330/74
14. The Italian Government admits that Article 8 of Regulation No 3330/74 makes provision for a flat-rate, uniform reimbursement of storage costs. Nevertheless that provision must, it claims, be interpreted in the light of its objective, which is to stabilize the market. If the storage costs were not refunded the products in question would in fact be placed on the market immediately or sold to intervention agencies, a situation which would be liable to cause imbalance of the market. The basic regulation has as its objective the adoption of measures appropriate to stabilizing the market. The Italian Government recalls that, according to the recitals in the preamble to the regulation, that objective may be attained by intervention arrangements as well as by a system compensating for storage costs. The granting of a supplementary compensatory allowance by the Italian authorities is intended to attain the same objective. Far from being contrary to the Community system, that grant thus contributes to its proper operation.
15. The Commission disputes that point of view. It considers that the nature and objective of the compensatory allowance in dispute are identical to those of the refund effected pursuant to Article 8 of the regulation. That provision is to be narrowly interpreted because it constitutes an exception to the general prohibition on aids; it is intended to lay down exhaustive rules for the entire system of contributions to storage costs.
16. It is the case that the system of compensation for storage costs for sugar laid down by Regulation No 3330/74 was conceived in order to attain the objectives of that regulation which include inter alia the stabilization of the market in sugar. By establishing a uniform flat-rate refund for the whole Community, the amount of which is fixed annually by the Community institutions, the regulation however states that these objectives must be attained in the same way in all Member States.
17. It is thus necessary to uphold the argument of the Commission that Article 8 of the regulation lays down exhaustively the provisions applicable to the reimbursement of storage costs.
18. The Italian Government further maintains that its national measures are necessary in view of the particularly heavy financial charges borne in Italy by undertakings sorting sugar since the rate of interest there is much higher than in the other Member States of the Community. That circumstance, whose importance was moreover recognized by the Commission, nevertheless cannot justify an interpretation of Article 8 of Regulation No 3330/74 which would be contrary to its letter and spirit. It is for the Council to appraise within the framework of the common organization of the market in sugar whether the special economic circumstances obtaining in one of the Member States justify adjustments to the Community system.
19. It must thus be declared that the Italian Republic, by granting to sugar manufacturers for the 1976/77 and 1977/78 marketing years a compensatory allowance for the storage costs of sugar produced in Italy in addition to the reimbursement provided for by the relevant Community provisions, has failed to fulfil one of its obligations under the Treaty.
The infringement of Article 31 (2) of Regulation No 3330/74
20. According to the Italian Government the above-mentioned Decisions Nos 24/1976 and 31/1977 of the Price Committee did not provide for a partial refund of the storage costs of sugar carried forward but authorized the Sugar Equalization Fund, a public undertaking, to reserve in the form of a credit or of a special fund a share of the adaptation aids granted to beet producers and then to grant a reimbursement to the sugar manufacturers concerned, for the account of such producers. The levy from the aids intended for beet producers, the setting up of the special fund and the partial reimbursement to sugar manufacturers of the storage costs of sugar carried forward were not laid down by the decisions of the Price Committee but by inter-trade agreements between the organizations representing the sugar industry and those representing the beet producers. The Italian Government recalls in this connexion that Article 2 of Regulation (EEC) No 748/68 of the Council of 18 June 1968 laying down general rules for postponing part of the sugar production to the following marketing year (Official Journal, English Special Edition 1968 (I), p. 129) enables sugar manufacturers to require beet or cane sellers to bear part of the storage costs where sugar is carried forward to the following marketing year.
21. The Commission admits that the resources required by the reimbursement in question do not come from the State budget. Nevertheless it maintains that the special Fund set up to pay for the reimbursement is financed by a specific charge laid down pursuant to the measures adopted by the Price Committee. The inter-trade agreement to which reference is made form part of a system of administrative procedures resulting in a body of decisions which are binding on all sugar manufacturers and beet producers. In those circumstances the Commission claims that the participation of the beet producers is not voluntary since the financial charge in question is imposed upon them.
22. At the request of the Court the Italian Government produced the inter-trade agreements for the 1976/77 and 1977/78 marketing years.
23. Consideration of these documents has established that in fact the intervention of the Italian authorities was not restricted to authorizing the Fund to act as the agent of the parties to the inter-trade agreements. In fact the agreements contain various features which are foreign to an agreement voluntarily entered into by private undertakings. Thus it was the Minister for Agriculture who declared that the agreement had been concluded and that in the circumstances in which it was concluded it was binding erga omnes; for the agreement relating to the 1977/78 year that declaration is preceded by a preamble which, the Minister states, forms an integral part of the agreement; the agreements enter into force at the time of the adoption of the implementing measures by the Price Committee; and the agreements set up a “joint committee” presided over by a representative of the minister which is to promote the implementation of the provisions of the agreement and to lay down certain implementing rules.
24. It follows that the conclusion and the implementation of the inter-trade agreements, the operations of the Fund and the measures adopted by the Price Committee and by the Minister for Agriculture are connected by links so close that they are inseparable. It must accordingly be declared that the inter-trade agreements form part of a body of measures which are intended to provide support for the Italian sugar industry and that the Italian Government is responsible for them.
25. In those circumstances the partial reimbursement of the storage costs for sugar carried forward cannot be considered as the voluntary participation of beet producers in the storage costs for the purpose of Article 2 of the said Regulation No 748/68. On the contrary that reimbursement must be defined as a special means of aid in the sugar sector organized by the Italian public authorities and at variance with Article 31 (2) of Regulation No 3330/74 which must be understood as prohibiting the Member States from reimbursing the storage costs of sugar where it is carried forward to the following marketing year.
26. It must thus be declared that the Italian Republic, by granting to sugar producers for the 1976/77 and 1977/78 marketing years a partial reimbursement of the storage costs of sugar carried forward to the following marketing year, has failed to fulfil one of its obligations under the Treaty.
Costs
27. Pursuant to Article 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs.
28. Since the defendant has failed in its submission it must be ordered to pay the costs.
On those grounds, THE COURT hereby:
1 Declares that the Italian Republic, by granting to sugar manufacturers for the 1976/77 and 1977/78 marketing years a compensatory allowance for the storage costs of sugar produced in Italy in addition to the reimbursement provided for by the relevant Community provisions, has failed to fulfil one of its obligations under the Treaty;
2 Declares that the Italian Republic, by granting to sugar producers for the 1976/77 and 1977/78 marketing years a partial reimbursement of the storage costs of sugar carried forward to the following marketing year, has failed to fulfil one of its obligations under the Treaty;
3 Orders the defendant to pay the costs.
1 As amended by Regulation (EEC) No 2829/71 of 24 December 1971 (Official Journal, English Special Edition 1971 (III), p. 1037).