JUDGMENT OF 2. 12. 1982 — CASE 272/81 RUMI v FORMA
In Case 272/81 REFERENCE to the Court under Article 177 of the EEC Treaty by the Tribunal Administratif [Administrative Court], Paris, for a preliminary ruling in the action pending before that court between
THE COURT (First Chamber) composed of: A. O'Keeffe, President of Chamber, G. Bosco and T. Koopmans, Judges, Advocate General : S. Rozès Registrar: P. Heim
gives the following
JUDGMENT
Facts and Issues
The facts of the case, the course of 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 written procedure
Article 1 of Commission Regulation No 1844/77 of 10 August 1977 on the granting by tender of special aid for skimmed-milk powder intended as feed for animals other than young calves (Official Journal, L 205, p. 11) provides for the grant of special aid for skimmed-milk powder if it is denatured in accordance with one of the formulae referred to in Anide 9 (2) of the regulation, excluding skimmed-milk powder sold pursuant to Regulations (EEC) No 368/77 (Official Journal 1977, L 52, p. 19) and (EEC) No 443/77 (Official Journal 1977, L 58, p. 16), in other words milk for use in feed for pigs and poultry.
Article 9 (2) of Regulation No 1844/77 lays down that denaturing is to be carried out in a denaturing centre approved in accordance with Article 10 of the regulation, which meets the conditions set out in Article 12. The agency responsible for the supervision of denaturing is required, after checking that denaturing has been effected in accordance with the regulation, to issue to the person concerned a denaturing certificate specifying the quantities of skimmed-milk powder which have been denatured and the date of such denaturing (Article 13 (7)). Article 14 provides that payment of the special aid is to be made on presentation of the certificate referred to in Article 13 (7) at most one month from the date of receipt of the certificate by the agency authorized to grant aid.
RUMI Sari [hereinafter referred to as “RUMI”], which specializes in the importation and exportation of dairy products and products derived therefrom and in the ingredients of cattle feeds, was declared successful tenderer on 14 May 1979 for 250 tonnes of skimmed-milk powder (buttermilk) pursuant to Regulation No 1844/77.
The proposed aid amounted to FF 507.40 per 100 kg whereas the tendering and denaturing security amounted to FF 328 per tonne.
By contraa dated 22 and 28 May 1979 RUMI sold to the Biard company 50000 kg of buttermilk in its natural
sute, out of the quantity which was the subject of the tendering procedure, at a price net of aid, on condition that the purchaser carried out the denaturing in accordance with the provisions of Regulation No 1844/77. On 30 May, RUMI applied to the Interlait company for permission to process the skimmed-milk into powder; Interlait was entrusted by the Fonds d'Orientation et de Régularisation des Marchés Agricoles [Agricultural Markets Guidance and Stabilization Fund hereinafter referred to as “the Fund”] with the supervision of the performance of the denaturing contracts awarded and, by a permit dated 6 June 1979, authorized RUMI to process, in accordance with Formula I B, 50 tonnes of skimmed-milk powder, to which it had acquired title, on the express condition that the processing would take place in the presence of an approved supervisor in the week from 11 to 16 June 1979 on premises belonging to the Biard company.
The denaturing operations were carried out as planned and samples of the processed product were taken by the representatives of Interlait.
By letter of 21 August 1979, Interlait informed RUMI that in the light of checks carried out by the laboratories of the Bureau des Produits Laitiers [Dairy Products Board] (BPL) on representative samples taken during the operation involving the denaturing of skimmed-milk powder, it was unable to issue the denaturing certificate in view of the size of the copper sulphate granules which resulted in the formation of a composite mixture thus precluding a thorough test. By the same letter, Interlait informed RUMI that, unless the Fund expressed a different opinion, the security lodged for those quantities of skimmed-milk powder when the contract was awarded would not be refunded in respect of the quantity in question.
By letter of 17 September 1979, RUMI requested the Fund and Interlait to issue the denaturing certificates, pay over the denaturing premium and release the security. RUMI reiterated its views in its letter of 17 January 1980 addressed to the Fund. By telex message of 7 February 1980, the Fund sought the Commission's opinion concerning the application of the relèvent Regulations Nos 1844/77 and 368/77. In the course of discussions with the Fund, the Commission stated that it was unable to express such an opinion unless additional information was provided.
In a letter of 19 May 1980; BPL's Director of Quality Control wrote:
“However, a substantial variation was found in the size of copper sulphate granules with large uncrushed crystals of up to several millimetres in size. As a result this component was not distributed uniformly in the unpreserved sample of the finished product which was examined and in consequence the results of the two test samples were considerably outside the normally permitted limits (variation of 1 to 5). It is possible to conclude from this that the incorporation of the copper sulphate in the mixture was not properly carried out.”
By telex of 17 June 1980, the Fund informed the Commission that:
“Our laboratories have notified us of the results yielded by the two sets of analyses carried out and can certify that: 1. The minimum quantities of tracers incorporated in accordance with Formula I B defined in the Annex to Regulation No 368/77 have been complied with; 2. Similary, the specifications relating to the characteristics which the denaturing agents used must possess have been complied with and, in particular, at least 30 % of the copper sulphate granules are less than 200 microns in size. However our laboratories have observed during the first set of analyses an uneven distribution of copper sulphate pentahydrae in the sample of the finished product particularly as a result of the presence of large crystals.”
Subsequently, by telex message of 7 August 1980, the Commission replied to the Fund in the following terms:
“Further to your request sent by the telex messages under reference, I wish to inform you that pursuant to the two regulations in question, Nos 1844/77 and 368/77, the special aid is paid and the tendering and denaturing security is released only on presentation of the denaturing certificate provided for by Article 13 (7) of Regulation No 1844/77. In your telex of 17 June 1980 you stated that the agency responsible for supervision of denaturing had established that the minimum quantities of tracers required and the granular size of the denaturing agent were correct but that the agent had not been evenly distributed in the milk powder in accordance with the provisions of point 3 of the Annex to Regulation No 368/77. On the basis of that information alone and the certificate validating it, the EAGGF [European Agricultural Guidance and Guarantee Fund] will not be able to finance the aid in question. However, the Commission emphasizes that no decision is given regarding the trader's entitlement to the aid, which may depend on factors other than those determined at Community level. This is without prejudice to the Commission's position in the event of the contents of the certificate being contradicted by the results of a detailed investigation.”
In the absence of any response to its application to the Fund, RUMI brought an action before the Tribunal Administratif, Paris, for the annulment of the implied decision rejecting its complaint.
By judgment of 16 June 1981, the Tribunal Administratif, Paris, decided:
To dismiss the action in so far as it was directed against the Interlait company;
As regards the argument based on a breach of the principle of proportionality, to seek a preliminary ruling from the Court of Justice on the following questions:
“1. Is the fact that the denaturing of the product in question departs only very slightly from the generally recognized standard sufficient to operate as a toul bar against the trader's receiving the benefit of the special aid introduced by Regulation No 1844/77? 2. If so, does not that regulation contravene the principle of proportionality and is it valid inasmuch as the wording of Articles 13 (7) and 14 enables the same sanction to be applied both where no denaturing at all has taken place and where denaturing has been carried out but not wholly in the prescribed manner?”
The judgment making the reference was received at the Court Registry on 12 October 1981.
In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted by Messrs Funck-Brentano and Partners, Advocates, Paris; by the Fund, represented by Philippe Villey, Advocate at the Cour d'Appel [Court of Appeal], Paris; and by the Commission of the European Communities, represented by Jean-Francois Verstrynge, a member of its Legal Department, acting as Agent.
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 and, in accordance with Article 95 (1) and (2) of the Rules of Procedure, to assign the case to the First Chamber.
II — Written observations submitted to the Court
RUMI points out that the purpose of Regulation No 1844/77 is to ensure that skimmed-milk powder is denatured in return for payment of an aid to whoever assumes responsibility for the denaturing. The regulation makes no provision for any margin of error or modified sanction which takes account of the degree of the product's lack of conformity.
In subsequent regulations concerning the denaturing of skimmed-milk powder, the Commission complied with the principle of proportionality. In Commission Regulation No 1725/79 of 26 July. 1979 on the rules for granting aid to skimmed milk processed into compound feedingstuffs and skimmed-milk powder intended for feed for calves (Official Journal 1979, L 199, p. 1), as last amended by Commission Regulation No 2651/80 of 31 October 1980 (Official Journal 1980, L 296, p. 7), the principle of proportionality is applied as regards the amount of aid granted in cases in which the denatured product is not in conformity with the formula set out in the annex to the regulation.
Those two regulations differ from those the validity of which is challenged by RUMI in so far as they regulate the denaturing of skimmed-milk powder intended for feed for young calves. However, there is no reason why different systems should be applied to undertakings according to whether the product which they denature is intended for calves of for other animals.
The principle of proportionality was clearly defined by the Court in its judgment in Case 122/78, Buitoni [1979] ECR 677. It was given general application by the Council as well as by the Commission. It was applied in relation to directives determining margins within which material errors are permitted and in relation to granu of aid for the denaturing of skimmed-milk powder.
RUMI therefore contends that Regulation No 1844/77:
Must be applied in a flexible manner in compliance with the principle of proportionality by taking into account the fact that the denaturing of the product concerned departs only very sligthly from the generally recognized standard and must permit payment of the aid cases such as that outlined ;
Must be declared void on the ground that it infringes the principle of proportionality inasmuch as the wording of Articles 13 (7) and 14 enables a sanction to be applied which is commensurate with the failure to carry out denaturing whereas a fixed and therefore more rigid sanction is applied when denaturing has been carried out but not wholly in the prescribed manner.
The Fund considers that the first question raised by the Tribunal
Administratif, Paris may be answered only in the affirmative.
It is immediately apparent from a reading of Articles 13 and 14 of Regulation No 184/77 that:
Following supervision of the denaturing (or direct incorporation) by the competent authority of the Member State concerned, the latter issues to the person concerned a denaturing certificate “after checking that denaturing has been effected in accordance with this regulation” (Article 13 (7));
Payment of the special aid is made on presentation of the certificate referred to in Article 13 (7) ... (Article 14).
Article 9 of the same regulation defines denaturing by specifying that it is carried out either:
In accordance with one of the formulae set out in Section 1 of the annex to Regultion No 368/77, with the rules set out in Section 3 thereof in an approved denaturing centre ..., or
By direct incorporation in a feedingstuff under the conditions laid down in Article 11 of this regulation and in accordance with Section 2 of the annex to Regulation No 369/77, with the rules set out in Section 3 thereof ... (Article 9 (2)).
Thus a failure to comply with the rules on the denaturing of skimmed-milk powder precludes the finding by the agency responsible for supervision that the denaturing is in conformity with the rules and consequently precludes the issue of the denaturing certificate. Moreover, unless a denaturing certificate is issued, no payment is made by the intervention agency.
With regard to the second question, the Fund leaves it to the Court to determine the validity of the regulation in the light of the principle of proportionality.
In its observations, the Commission makes two preliminary remarks on the facts:
a) There is a difference between the facts as described by the agency responsible for supervision and the facts as outlined in the first question submitted for a preliminary ruling by the national court. The agency responsible for supervision takes the view that “a substantial variation was found in the size of the ... granules” ... and ... that “the results of the two test samples were considerably outside the normally permitted limits ...” whereas the national court considers that the denaturing of the product concerned departs only very slightly from the generally recognized standard. The Commission observes that variations which might ostensibly seem slight sometimes have appreciable consequences as far as the supervision of the denaturing operations is concerned. For example, if the copper sulphate crystals are several millimetres in size instead of the required size, which should be less than-200 microns, that could lead to a situation where it might be possible to sift and thus separate the crystals from the skimmed-milk powder. Similarly, the need to provide for a uniform distribution of the denaturing agent which should be finely ground has as its purpose to prevent the denaturing agents from being separated by any chemical or physical processes.
b) It should also be pointed out that the discrepancy established by the analysis carried out in this case is such that it cannot be explained by reference to the margins of error allowed for by the method of analysis used. According to the Commission, a distribution which is considerably outside the normally permitted limits may not be described as a minimum margin of error allowed for by certain methods of analysis. In considering the legal aspects, the Commission points out that the principle of proportionality is one of the general principles of law of which the Court ensures observance. The Commission considers that an examination of any breach of the principle of proportionality should be extremely detailed. To begin with, the objective pursued in the public interest as well as the actual method used to attain it must be correctly determined. Next, it is necessary to consider the lack of proportion between the method used and the objective pursued and to establish the manifest nature or the seriousness, or both, of the imbalance which may adversely affect those concerned.
1. The objective pursued in the public interest must be correctly determined
The purpose of Regulation No 1844/77 is to set up a system of special aid for the sale of skimmed-milk powder by providing for the allocation of different premiums according to whether or not the quantities of skimmed milk are intended as feed for young calves. Consequently, the Commission considers that it is impossible to share RUMI's reasoning to the effect that the sole objective pursued by the rules in question is the denaturing of skimmed-milk powder. The objective of the Community rules is not merely to ensure the denaturing of skimmed-milk powder but denaturing which precludes any deviation from the intended use of the product. The purpose of those rules is to prevent increased amounts of aid from being granted for the sale of skimmed-milk powder intended as feed for young calves.
2. Determination of the actual methods used
The objective of the regulation may be achieved in several ways. It is possible to envisage a system whereby direct control would be exercised over the use to which the skimmed-milk powder is put by the final consumer and which would provide for payment of the aid after proof has been adduced that the skimmed-milk powder has been consumed by animals other than young calves. Such a system would entail a very high degree of supervision at all undertakings which use feedingstuffs containing skimmed-milk powder.
In view of the very large number of undertakings and breeders over which control would have to be exercised in those circumstances, the Commission took the view that it would be difficult to operate such a system in practice. Under the system selected by the Community rules which confines control to the denaturing operation and leaves undertakings at liberty thereafter, it is sufficient to limit supervision to the denaturing operation. That system of supervision entails a strict application of the methods of denaturing and in particular of the dimensions and the distribution of the copper sulphate granules since that is the product which renders the skimmed-milk powder unsuitable for consumption by young calves.
3. Consideration of the lack of proportion between the objectives and the methods
The Commission contends that there is no imbalance between the methods adopted by the Community rules and the objectives pursued. Those methods are necessary, adequate and not excessive.
They are necessary since, in the absence of a denaturing process of that kind, the use to which the processed product is put cannot be guaranteed. They are adequate since there is no reason to doubt that the product is certain to be used for its intended purpose once the denaturing operation has been correctly carried out. They are not excessive since it is impossible to envisage any other measures enabling the same objectives to be achieved more easily. To allow the use of copper sulphate crystals of larger dimensions or crystals which have not been finely ground and uniformly distributed would lead to a situation in which it might subsequently be possible to separate the denaturing product from the skimmed-milk powder either by sifting or by other chemical or physical processes.
In such circumstances, the denaturing operation's lack of conformity with the rules is quite sufficient to justify a refusal to issue the denaturing certificate provided for in Article 13 (7) of Regulation No 1844/77 which would result in the aid's not being allocated.
The Commission rejects RUMI's reasoning which seeks to establish that a system involving payment of part of the aid on the basis of the degree of conformity of the denaturing operation with the rules is more appropriate for the achievement of the objective pursued. Even in the case of payment of part of the aid where there has been a slight departure from the general rules in the denaturing operation there is'a risk that the product might be used for a purpose other than that for which it is intended and it is necessary to recall that the objective is not to ensure any sort of denaturing at a uniform rate of aid but to ensure denaturing for a specific purpose excluding use as feed for young calves and a fortiori as food for human consumption. Furthermore, the methods adopted by the Community rules are not excessive, having regard to the fact that it is very easy to remedy the denaturing operation's lack of conformity. If the copper sulphate crystals are too large or unevenly distributed, it is sufficient to crush them and produce a new mixture of the processed product. That remedy is excluded in the present case solely in consequence of RUMI's sale of the goods to Biard and the latter's release of the goods for consumption without awaiting the results of the analysis carried out by BPL, and as a result of its own failure to carry out an analysis of the product which would have enabled it to detect the lack of conformity without delay.
4. Establishing the manifest nature or seriousness, or both, of the imbalance
The Commission considers that the methods adopted are not disproportionate to the objectives pursued by the Community rules. However, even if there were considered to be a lack of proportion, it would still be necessary to establish that it was manifest or serious, or both. That requirement has already been laid down in the case-law of the Court.
Thus, for example, in Case 240/78 Atalanta [1979] ECR 2137 the Court did not hesitate to point to the manifest lack of proportion between the Council regulation, which provided for the retention of the security in whole or in pan, and the Commission regulation which provided only for the retention of the security in its entirety.
Similarly, in its judgment in the aforesaid Buitoni case, the Court expressed the following view in connection with the lack of proportion between the penalties concerned:
“That fixed penalty, which is applied to an infringement which is considerably less serious than that of failure to fulfil the obligation which the security itself is intended to guarantee, which is sanctioned by an essentially proportionate penalty, must therefore be held to be excessively severe in relation to the objectives of administrative efficiency in the context of the system of import and export licences.”
Again, in its judgment of 29 October 1980 in Case 138/79 Roquette [1980] ECR 3333, the Court considered, in connection with the Council regulation fixing isoglucose quotas, that the Council cannot be expected...
“to have regard to the reasons, commercial choices and internal policy of each individual undertaking when it adopts measures of a general interest to prevent the uncontrolled isoglucose production from jeopardizing the sugar policy of the Community.”
Accordingly, the Commission proposes that the Court should reply as follows to the two questions referred to it for a preliminary ruling:
“1. The fact that the denaturing of the product in question departs from the strict application of the denaturing method provided for by the Community rules is sufficient to operate as a total bar against the producer's receiving the benefit of the special aid introduced by Regulation No 1844/77. 2. The provisions of Articles 13 (7) and 14 of that regulation do not infringe the principle of proportionality inasmuch as they permit a situation where no denaturing at all has taken place and a situation where denaturing has been carried out but not wholly in the prescribed manner to be attended by the same consequence.”
III — Oral procedure
At the sitting on 17 June 1982 oral argument was presented by the following: L. Funck-Brentano, for RUMI; P. Villey, for the Fund; and Jean-François Verstrynge, for the Commission of the European Communities.
The Advocate General delivered her opinion at the sitting on 23 September 1982.
Decision
1. By judgment of 16 June 1981, which was received at the Court on 12 October 1981, the Tribunal Administratif [Administrative Court], Paris, referred to the Court of Justice for a preliminary ruling under Article 1 77 of the EEC Treaty two questions on the interpretation and validity of Commission Regulation (EEC) No 1844/77 of 10 August 1977 on the granting by tender of special aid for skimmed-milk powder intended as feed for animals other than young calves (Official Journal 1977, L 205, p. 11).
2. The questions were raised in a dispute between RUMI Sari, [hereinafter referred to as “RUMI”], the plaintiff in the main proceedings, and the Fonds d'Orientation et de Régularisation des Marchés Agricoles [Agricultural Markets Guidance and Stabilization Fund, hereinafter referred to as “the Fund”] concerning the defendant's refusal to pay to the plaintiff the special aid provided for in Regulation No 1844/77 on the ground that the denaturing which the goods in question had undergone had failed to satisfy the conditions laid down in that regulation.
3. Article 1 of Regulation No 1844/77 provides for special aid for skimmed-milk powder if it is denatured in accordance with one of the formulae given in Section 1 of the Annex to Commission Regulation (EEC) No 368/77 of 23 February 1977 on the sale by tender of skimmed-milk powder for use in feed for pigs and poultry (Official Journal 1977, L 52, p. 19), including Formula I B, which was applied in the present case and according to which the denaturing is carried out by the addition to 100 kilograms of skimmed-milk powder of at least: To those requirements must be added those of Section 3 B of the same annex according to which the “copper sulphate... must be finely ground and must have at least 30% of its particles less than 200 microns in size” and those of Section 3 D according to which the products to be added to skimmed-milk powder must be distributed in a uniform manner so that in two individual samples of 50 g, drawn at random from a 25 kg package, there are obtained — by chemical determination — the main results as above within tolerable error limits set by the method of analysis used.
“ 20 kilograms of fishmeal either non-deodorized or still having a strong smell,
and
300 g iron, as ferrous sulphate heptahydrate,
and
120 g copper as copper-sulphate pentahydrate.”
4. The file on the case shows that the analysis of the product in question by the competent national body yielded the following results:
“The minimum quantities of tracers incorporated in accordance with Formula IB defined in the Annex to Regulation No 368/77 have been complied with;
Similarly, the specifications relating to the characteristics which the denaturing agents used must possess have been complied with and, in particular, at least 30% of the copper sulphate granules are less than 200 microns in size;
However a substantial variation was found in the size of copper sulphate granules with large uncrushed crystals of up to several millimetres in size. As a result this component was not distributed uniformly in the unpreserved sample of the finished product which was examined and in consequence the results of the two test samples were considerably outside the normally permitted limits (variation of 1 to 5). It is possible to conclude from this that the incorporation of the copper sulphate in the mixture was not properly carried out.”
5. After those results and the finding that “the denaturing agent had not been evenly distributed in the milk powder” had been communicated to it by the Fund, the Commission stated that, in the circumstances, the EAGGF [European Agricultural Guidance and Guarantee Fund] was unable to finance the aid in question.
6. In the meantime, RUMI had brought an action before the Tribunal Administratif, Paris, for the annulment of the Fund's implied decision rejecting its application for the issue of a denaturing certificate qualifying it to receive payment of the special aid provided for, amounting to FF 270100, on the ground that that decision was ultra vires. In support of its claims, RUMI maintained in particular that the application by the Fund of Regulation No 1844/77 in the present case, in spite of the fact that the product's lack of conformity was only very slight, was contrary to the objective of the regulation and contravened the principle of proportionality.
7. Since, in order to determine whether that argument is well founded, it is necessary to interpret and to assess the validity of the regulation in question, the Tribunal Administratif, Paris, stayed the proceedings and referred to the Court the following two questions for a preliminary ruling:
“1. Is the fact that the denaturing of the product in question departs only very slightly from the generally recognized standard sufficient to operate as a total bar against the trader's receiving the benefit of the special aid introduced by Regulation No 1844/77?
2. If so, does not that regulation contravene the principle of proportionality and is it valid inasmuch as the wording of Articles 13 (7) and 14 enables the same sanction to be applied both when no denaturing at all has taken place and where denaturing has been carried out but not wholly in the prescribed manner?”
8. According to RUMI, the national court found that the denaturing of the product departed only very slightly from the generally recognized standard and that the sanction imposed under the legislation complained of was wholly out of proportion to the extent of the variation. The sanction could not have been harsher even if no denaturing at all had been carried out. The Court has upheld the principle of proportionality, in particular in its judgment of 20 February 1979 in Case 122/78 Buitoni [1979] ECR 677. The Commission itself has recognized that principle in certain cases, for example in connection with Commission Regulation (EEC) No 1725/79 of 26 July 1979 on the rules for granting aid to skimmed milk processed into compound feedingstuffs and skimmed-milk powder intended for feed for calves (Official Journal 1979, L 199, p. 1). Commission Regulation (EEC) No 2851/80 of 31 October 1980 (Official Journal 1980, L 296, p. 7) amended the first-named regulation by the addition of the following provisions:
“Where it is found that the product as manufactured does not contain the minimum quantity of 60 kilograms of skimmed-milk powder referred to in the first subparagraph at (a), the Member States shall be authorized to grant the aid reduced by 10% for the skimmed-milk powder actually incorporated, subject to the following conditions:
...
The applicant for aid must have supplied proof that failure to comply with the minimum level of 60 kilograms is the result neither of deliberate breach of the rules nor of serious negligence.”
9. The Commission observes that the aid granted for the denaturing of skimmed-milk powder intended for feed for animals other than young calves is considerably higher than the amount granted in the case of feed for calves. It infers that the purpose of the legislation complained of is not merely to ensure that denaturing takes place but that it prevents any deviation from the intended use of the product.
10. In order to achieve that objective, various systems of supervision are possible, in particular a system involving the exercise of control over the final user and providing for payment of the aid upon proof being given that the skimmed-milk powder has been consumed by animals other than young calves. However, such a system would entail a very high degree of supervision at the premises of all undertakings which use feedingstuffs containing skimmed-milk powder and, in view of the very large number of traders and breeders who would have to be supervised, the Commission takes the view that it would be difficult to operate such a system in practice.
11. However, under the system prescribed by the Community legislation, it is sufficient to supervise the denaturing operation. Once the denaturing agents designed to prevent the finished product from being used as feed for young calves are incorporated in the skimmed-milk powder and it is established that they can no longer be separated from it subsequently, the product is almost certain to be used for its intended purpose.
12. Accordingly, RUMI's argument to the effect that a system of partial payment of the aid on the basis of the degree of conformity of the denaturing operation would be more appropriate for the attainment of the objectives pursued cannot be accepted. Even if only pan of the aid were paid in the event of a slight lack of conformity in the denaturing operation, there would still be a risk that the product might be diverted from its intended use.
13. The argument put forward by the Commission must be accepted. In view of the amount of the aid granted for the product intended for feed for animals other than young calves and in view of the risk that it might be used for other, unauthorized purposes, the Commission was entitled to stress the importance of the denaturing of skimmed-milk powder by laying down strict conditions in order to prevent any risk of unauthorized use of the product.
14. Although, in certain cases, the Court has declared void provisions which imposed the same penalty both for failure to fulfil the obligation which the security was intended to guarantee and for a far less serious breach such as failure to adduce proof of performance of the principal obligation within the period prescribed, the decisions concerned are not relevant in this case. The Commission was legally justified in adopting provisions which entail withholding of the aid and loss of the security for failure to fulfil the principal obligation laid down in the tendering procedure and was not obliged to vary the severity of the measure in question according to the gravity of the tenderer's failure to comply with that obligation. Such a measure cannot be regarded as out of proportion to the objective pursued.
15. The answer to the questions raised must therefore be that the fact that the denaturing departs even to a slight extent from the method referred to in Regulation No 1844/77 is capable of depriving the trader of the entire benefit of the special aid provided for in that regulation. Consideration of the provisions of the regulation has disclosed no factor of such a nature as to affect its validity.
Costs
16. The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main proceedings 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 (First Chamber) in answer to the questions submitted to it by the Tribunal Administratif, Paris, by judgment of 16 June 1981 hereby rules: