Report for the Hearing delivered in Case 325/85

I — Facts

1. Article 1 (2) of Regulation No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (Official Journal, English Special Edition 1970 (I), p. 218) provides that the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (hereinafter referred to as ‘the Fund’) shall finance : (a) refunds on exports to third countries; (b) intervention intended to stabilize the agricultural markets. According to Article 3, intervention intended to stabilize the agricultural markets, undertaken according to Community rules within the framework of the common organization of agricultural markets, is to be financed under Article 1 (2) (b). Article 5 (2) (b) provides that the Commission must clear the accounts of the authorities and bodies responsible for the payment of the expenses referred to in Article 3 before the end of the following year and on the basis of the annual accounts. Article 8 (a) of Regulation No 1723/72 of the Commission of 26 July 1972 on the clearance of the accounts of the Fund (Official Journal, English Special Edition (Second Series) III, p. 109) provides that the decisions on the clearance of accounts referred to in Article 5 (2) (b) of Regulation No 729/70 should include determination of the amount of expenditure incurred in each Member State during the relevant year and recognized as chargeable to the Fund.

2. The main elements of a common fisheries policy for fishing were set out in 1970 by Regulation No 2141/70 of the Council of 20 October 1970 laying down a common structural policy for the fishing industry (Official Journal, English Special Edition 1970 (III), p. 703) and Regulation No 2142/70 of the Council of 20 October 1970 on the common organization of the market in fishery products (Official Journal, English Special Edition 1970 (III), p. 707). Articles 100 to 102 of the Act of Accession of 1972 confirmed and partly amended them in relation to access to fish stocks. In particular Article 102 provided that from the sixth year after accession at the latest, the Council, acting on a proposal from the Commission, was to determine conditions for fishing with a view to ensuring protection of the fishing grounds and conservation of the biological resources of the sea.

3. Regulations Nos 2141/70 and 2142/70 were replaced by Council Regulation No 100/76 of 19 January 1976 on the common organization of the market in fishery products (Official Journal, L 20, p. 1) and Council Regulation No 101/76 of 19 January 1976 laying down a common strutturai policy for the fishing industry (Official Journal, L 20, p. 19). The last recital in the preamble to Regulation No 100/76 stated that the expenditure incurred by the Member States as a result of the obligations arising out of the application of the regulation was to fall on the Community in accordance with the provisions of Articles 2 and 3 of Regulation No 729/70. Regulation No 100/76 contained no provision similar to Article 26 (2) of Council Regulation No 3796/81 of 29 December 1981 on the common organization of the market in fishery products (Official Journal, L 379, p. 1), which was applicable from 1982. Article 26 (2) provides that intervention measures are to be financed in respect of products from a stock or group of stocks only up to the limit of any quantities allocated to the Member State in question from the total volume of allowable catches of the stock or group of stocks in question. Article 1 of Regulation No 101/76 provided that common rules should be laid down for fishing in maritime waters and specific measures should be adopted for appropriate action and the coordination of structural policies of Member States for the fishing industry to promote harmonious and balanced development of that industry within the general economy and to encourage rational use of the biological resources of the sea and of inland waters. Article 4 provided that where there was a risk of over-fishing of certain stocks in the maritime waters of the Member States referred to in Article 2 the Council, acting in accordance with the procedure provided for in Article 43 (2) of the Treaty on a proposal from the Commission, could adopt the necessary conservation measures. In particular, those measures could include restrictions relating to the catching of certain species, to areas, to fishing seasons, to methods of fishing and to fishing gear.

4. On 6 April 1976 the Council adopted Regulation No 811/76 temporarily authorizing certain systems of catch quotas in the fisheries sector (Official Journal, L 94, p. 1), in which it authorized Member States to limit catches of their fishing fleets in accordance with international undertakings contracted or to be contracted. The first recital to the regulation stated that ‘the fishery resources of the sea would be considerably endangered if catches were not controlled; ... the rational development of the production of fishery products might be disturbed if no limit were placed on the size of landings’.

5. On 6 October 1976 the Commission sent the Council a proposal for a regulation establishing a Community system of conservation and management of fishery resources, on which the Council was not able to reach agreement, however, until 1983.

6. On 3 November 1976 the Council adopted what is known as the ‘Hague Resolution’. Annex VI thereto reads as follows :

‘Pending the implementation of the Community measures at present in preparation relating to the conservation of resources, the Member States will not take any unilateral measures in respect of the conservation of resources.

However, if no agreement is reached for 1977 within the international fisheries commissions and if subsequently no autonomous Community measures could be adopted immediately, the Member States could then adopt, as an interim measure and in a form which avoids discrimination, appropriate measures to ensure the protection of resources situated in the fishing zones off their coasts.

Before adopting such measures, the Member States concerned will seek the approval of the Commission, which must be consulted at all stages of the procedures.

Any such measures shall not prejudice the guidelines to be adopted for the implementation of Community provisions on the conservation of resources.’

7. On 18 February 1977 the Council adopted Regulation No 350/77 based on Article 103 of the EEC Treaty and Article 102 of the Act of Accession, laying down certain interim measures for the conservation and management of fishery resources (Official Journal, L 48, p. 28), applicable until 31 December 1977 at the latest.

8. At a meeting on 31 January 1978 the Council approved the Commission communication according to which, in the absence of a common system, national measures could only be taken in so far as they were strictly necessary for the conservation and management of fishery resources and were nondiscriminatory and in conformity with the Treaty, and if the approval of the Commission had been sought beforehand (Official Journal, C 154, p. 5).

9. On 19 December 1978 the Council adopted interim measures applicable until a definitive agreement was reached or, at the latest, until the end of March 1979.

10. On 1 January 1979 the transitional period provided for in Article 102 of the 1972 Act of Accession expired. On that date power to take measures intended to conserve maritime resources, within the framework of the common fisheries policy, was to vest fully and definitively in the Community. Because it was not able to reach agreement on the Commission's proposals, the Council adopted fresh interim measures in 1979 and in March 1980.

11. On 30 May 1980 the Council adopted a declaration concerning the common fisheries policy, in which it undertook to adopt a common overall fisheries policy by 1 January 1981 at the latest. In compliance with the Treaties and in conformity with the Resolution of 3 November 1976 (the Hague Agreement) the policy was to be based inter alia on rational and nondiscriminatory Community measures for the management of resources, the conservation and reconstitution of stocks and fair distribution of catches (Official Journal, C 158, p. 2). Council Decision 80/601 of 16 June 1980 (Official Journal, L 160, p. 48) referred to that declaration and adopted fresh interim measures applicable until 31 July 1980. Council Decision 80/993 of 28 October 1980, based on the Treaties, concerned fishery activities in waters under the sovereignty or jurisdiction of Member States and was adopted on a temporary basis pending the adoption of permanent Community measures (Official Journal, L 298, p. 38); it provided for the following interim measures, applicable until 20 December 1980: At its meeting on 15 to 17 December 1980 the Council adopted a declaration in the minutes to the effect that the Member States would conduct their fishing activities in such a way that the catches made by their ships during the interim period would take into account the total allowable catches (TACs) submitted for 1981 by the Commission to the Council in its proposals of 18 November and 16 December 1980.

‘(1) Member States shall conduct their fishing activities in such a way as to take into account the total allowable catches (TACs) and the part of the TACs made available to third countries under agreements or arrangements made with them, as given in Regulation (EEC) No 754/80, and in the Commission's amended proposals of 12 September and 24 October 1980, and shall inform the Commission in accordance with Regulation (EEC) No 753/80. The catches taken in the interim period will be offset against the allocations eventually decided upon by the Council for 1980.

2) As regards the technical measures for the conservation and surveillance of fishery resources in geographical areas not covered by Council Regulation (EEC) No 2527/80, Member States shall apply the same measures as they applied on 3 November 1976, and other measures taken in accordance with the procedures and criteria of Annex VI to the Council Resolution of 3 November 1976.’

12. In the conservation of resources the Community had also to take into account its international obligations. In 1981 the Community was a party to a convention on multilateral cooperation in the North-West Atlantic Fisheries and to bilateral treaties with Canada, Spain, the United States, the Faeroe Islands and Norway.

13. In 1981 the Commission repeatedly amended its TAC proposals and ultimately submitted to the Council on 24 July 1981: (i) a proposal for a regulation concerning, for certain fish stocks occurring in the Community fishing zone, the fixing of the total allowable catches for 1981 and the shares available to the Community (Official Journal, C 224, p. 2); (ii) an amendment to the proposal for a Council regulation fixing the conditions governing fishing operations when taking the total allowable catches for 1981 (Official Journal, C 224, p. 10), the proposal submitted to the Council on 6 March 1981 (Official Journal, C 224, p. 7); and (iii) a proposal for a regulation concerning the distribution among the Member States of the total catch possibilities available to the Community in 1981 of stocks or groups of stocks occurring in the Community fishing zone (Official Journal, C 224, p. 11). The regulations were to enter into force on 1 January 1981. In a declaration submitted to the Council on 27 July 1981 (Official Journal, C 224, p. 1) the Commission set out the position resulting from the absence of agreement on its proposals for fixing the TACs and quotas for 1981. The Commission recalled that it had certain rights and duties under Article 155 of the Treaty, as had been confirmed by the Court inter alia in its judgment of 5 May 1981 in Case 804/79 Commission v United Kingdom [1981] ECR 1045. In view of the overriding public interest and as a precautionary measure, pending a final decision by the Council, the Commission therefore called upon all Member States in pursuance of their rights and duties to conduct their fishing activities in such a way as to ensure compliance with the Commission's proposals by vessels which flew their flag or were registered in their territory. The Commission also declared that it was determined to use all the means in its power to ensure the respect by Member States of those proposals, which it considered in the circumstances to be legally binding upon the Member States. It is apparent from the minutes of the Council meeting on 27 July 1981 (PV/Cons. 37th Fishing 197, 8682/81, pp. 8 and 9) that the Commission's declaration was challenged by the Council's legal department and various Member States, and that finally the Council agreed to discuss the TACs and quotas proposed for 1981 at its next meeting. In a letter to the Member States dated 28 July 1981 the Commission drew attention to its declaration and added that it believed it was obliged not merely to approve or disapprove in the light of its proposals national measures as and when they might be submitted, but also to require all Member States to take steps to comply with those proposals. The Commission stated that its position was dictated by the necessity of controlling fishing activity in the interim period; pending the next meeting of the Council the Commission intended to give its approval to catches which amounted to not more than three-quarters of the amount of the quotas proposed by the Commission. The Commission called upon all Member States to indicate not later than 24 August 1981 the measures which they proposed to take in order to ensure that the general rule was respected in the interim period.

14. On 29 July 1981 the Commission drew Ireland's attention to its letter of 28 July 1981 and asked it to apply appropriate measures compatible with the proposal made by the Commission in respect of herring fishing during the interim period until the next fisheries council. The Commission stated that it would not approve fishing during the interim period greater than two-thirds of the proposed quota. On 31 August 1981 Ireland replied that it did not accept that the Commission's declaration of 27 July 1981 was legally binding on Member States; in addition the proposed quotas were clearly inconsistent with the Hague Resolution of 3 November 1976 in so far as they concerned the development of the Irish fishing industry.

15. From 1 January 1982 until 31 March 1982 fishing activities in Community waters were once again governed by an interim Council decision, Decision No 81/1052 of 29 December 1981 (Official Journal, L 379, p. 52) requiring the Member States to take into account the TACs proposed by the Commission on 24 July 1981. Subsequently the Council adopted other provisional measures for 1982.

16. On 25 January 1983 the Council adopted Regulation No 170/83 of 25 January 1983 establishing a Community system for the conservation and management of fishery resources (Official Journal, L 24, p. 1). Article 3 provides for the fixing of the TACs and Article 4 for the distribution of the available share of the TACs between Member States. In application of that regulation the Council subsequently fixed the necessary TACs and quotas. However, it did not fix them for 1981.

17. In a telex message of 25 May 1984 the Commission informed the Irish authorities that some of the expenditure declared in the fisheries sector for 1981 could not be borne by the Fund since it had not been incurred in accordance with Community rules. The catches not covered by the quotas provided for by the Commission were not eligible for Community financing unless it was shown that the quantities at issue had not caused expense to the Community. The message set out the method of calculating the expenditure declared ineligible and the financial consequences. Ireland was requested to let the Commission have its observations before 15 June 1984.

18. On 13 June 1984 Ireland challenged the Commission's view that part of the expenditure declared was not incurred in accordance with Community rules, and the binding nature of the quotas proposed by the Commission in July 1981. It also challenged the method of calculation and the figures put forward by the Commission. In a letter of 7 September 1984 Ireland reiterated its position with regard to the Commission's view and supplied statistics of the amounts allegedly caught in excess of the quotas and the financial compensation after withdrawal, which amounted to IRL 100873.33.

19. In Decision 85/458/EEC of 28 August 1985 on the clearance of the accounts presented by Ireland in respect of the Fund, expenditure for 1981 (Official Journal, L 267, p. 30), the Commission refused financing of IRL 100873.33 incurred by Ireland in 1981 by way of financial compensation to producers' organizations in respect of indemnities paid by them for the withdrawal of cod, haddock, whiting, herring and mackerel from the market.

II — Written procedure and conclusions of the parties

1. The application by Ireland was lodged at the Court Registry on 5 November 1985.

2. Upon 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.

3. Ireland, the applicant, claims that the Court should: (1) Declare pursuant to Article 173 of the EEC Treaty that Decision No 85/458/EEC of the Commission of the European Communities of 28 August 1985, notified to Ireland on 5 September 1985, on the clearance of the accounts presented by Ireland in respect of the European Agricultural Guidance and Guarantee Fund, Guarantee Section, expenditure for 1981, is void in so far as the Commission has failed to charge to the Fund the sum of IRL 100873.33 for payments of financial compensation made pursuant to the provisions of Council Regulation (EEC) No 100/76 on the common organization of the market in fishery products; (2) Order the defendant to pay the costs.

4. The Commission, the defendant, contends that the Court should: (1) Dismiss the application as unfounded; (2) Order the applicant to pay the costs.

III — Submissions and arguments of the parties

Ireland makes the following submissions in support of its application:

1) Primarily, lack of competence on the part of the Commission.

2) Alternatively, infringement of the rules of law on the application of the Treaty, namely the principle of legal certainty and the principle of legitimate expectations.

A — Lack of competence on the part of the Commission

1. Ireland states that to justify the legally binding nature of its proposals of 24 July 1981 the Commission by implication alleged that Article 155 of the EEC Treaty gave it power to adopt rules such as those set out in its proposals notwithstanding lack of agreement between the Member States. Article 155 gives the Commission an important role in ensuring the functioning and the development of the common market, but the Commission may not exceed the limits of its powers. As the Court recognized in paragraph 6 of its judgment of 6 July 1982 in Joined Cases 188 to 190/80 France, Italy and the United Kingdom v Commission [1982] ECR 2545, the Commission's power to adopt decisions in carrying out the role entrusted to it is not unlimited and the Commission may not rely on Article 155 to justify decisions in areas within the competence of the Council. The very existence of Article 145 of the Treaty is evidence that the authors of the Treaty did not intend Article 155 to have such a far-reaching effect. In the judgment of 5 May 1981 in Case 804/79 (cited above) the Court recognized the separate roles of the Council and the Commission even where the failure of the Council to act had, for the time being, obstructed development of a common policy. The ‘essential balances’ referred to in paragraph 23 of the judgment can only be the different roles attributed by the Treaty to the Council and the Commission. Ireland submits that the Commission had neither the competence nor the authority to usurp the role of adopting for 1981 decisions relating to TACs and quotas simply by reason of the fact that the Council had not taken action in the area for that period. Neither Case 32/79 (Commission v United Kingdom [1981] ECR 2403) nor the aforementioned Case 804/79 supports the Commission's position since in each one the Court was concerned principally with the rights of Member Sutes to enact fishery conservation measures on a unilateral basis where the Council had failed to act. Ireland points out that the Court declined in Case 804/79 to hold that the Commission could exercise legislative power in relation to fisheries conservation in the Community in the event of failure by the Council to act. On the contrary, in paragraphs 23, 30, and 32 the Court recognized that all the parties concerned, Member States, the Commission and the Council, had different roles to play in the resolution of any problem that arose from the Council's inaction. In paragraph 32 the Court referred to the ‘process of cooperation’ which should take place between Member States and the Commission should the Council fail to act. Although only national measures were considered by the Court, Ireland submits that a similar process of cooperation should take place before the Commission would be entitled in law to enact measures which it considered appropriate. No such ‘process of cooperation’ took place in the present case. Ireland asserts that in so far as the Commission's decision disallowed the sum of IRL 100873.33, it should, to be valid, have rested on a legally binding act of a Community institution. The Commission's proposals led to no regulation or decision giving effect to them and which would have been legally binding. In consequence, there is no legal basis for the Commission's decision to disallow the sum at issue.

2. The Commission states that when in 1981 it requested the Member States to apply its proposals for TACs and quotas it expressly referred to the case-law of the Court. In paragraph 25 of its judgment of 10 July 1980 in Case 32/79 (cited above) the Court defined the obligations of the Member States as follows: ‘Both Article 102 of the Act of Accession and Council Regulation (EEC) No 101/76, in particular Article 4 thereof, in the same way as Annex VI to the Hague Resolution and the Council declaration of 31 January 1978, are based on the twofold assumption that measures must be adopted ... so as to meet established conservation needs and that if those measures cannot be introduced in good time on a Community basis the Member States not only have the right but are also under a duty to act in the interests of the Community.’ In its judgment of 5 May 1981 in Case 804/79 the Court stated that failure of the Council to act could not in any case restore to the Member States the power and freedom to act unilaterally in this field (paragraph 20) and that conservation measures must be defined by means of all the available elements of law, even though fragmentary, and by having regard to the structural principles on which the Community is founded. Those principles require the Community to retain in all circumstances its capacity to comply with its responsibilities, subject to the observance of the essential balances intended by the Treaty (paragraph 23). In paragraph 25. of its judgment the Court referred to the Commission's proposals with regard to the interim measures adopted by the Council, and several times mentioned the Commission's role when the Member States adopted conservation measures (paragraphs 17, 28 and 30 to 32); in paragraph 31 it referred to the obligation of all Member States in the circumstances to undertake detailed consultations with the Commission and to seek its approval in good faith, and their duty not to adopt national conservation measures in spite of objections, reservations or conditions which might be formulated by the Commission. In view of those judgments the Commission considers itself justified in having asked the Member States to respect its proposals in 1981. It is clear both from Article 102 of the Act of Accession and from the different measures adopted by the Council on the conservation of maritime resources that such conservation constitutes one of the fundamental objectives of the Community fisheries policy. As the Council itself has on several occasions admitted, the biological resources of the sea would be greatly threatened by uncontrolled catches. Whilst the competence in this area belongs to the Community, therefore, it is for the Member States to implement Community conservation measures. This obligation continues to exist even when the Council fails to act, as the Court stated in Case 804/79. The Council's failure to act cannot in any case restore to the Member States the freedom to act unilaterally in this field. It is clear that such measures cannot have any useful effect unless they are applied throughout the maritime area concerned. It follows, therefore, not only that the Member States cannot adopt conservation measures at will but also that they must adopt the provisions necessary to ensure that their fishing activities do not cause irremediable harm to the resources of fishing waters, whether they are Community fishing waters or not. The Commission states that conservation measures must be implemented in accordance with the rules adopted by the Council on the basis of Article 43 of the EEC Treaty. When it was unable to adopt the necessary rules for implementing Community policy on the conservation of resources, it was logical for the Council to adopt interim decisions in order to safeguard the situation. In the absence of any such decisions in 1981 the Commission, just as logically, requested the Member States to respect the TACs and quotas recommended in its own proposals. The Court emphasized, in particular in paragraphs 27 to 31 of its judgment of 5 May 1981 in Case 804/79, the need for the Member States, in the absence of appropriate action by the Council, to take their conservation measures in collaboration with the Commission. They must not only consult the Commission and seek its agreement, but also take account of the objections, reservations or conditions which the Commission might formulate. The Commission contends that it would have been guilty of poor management if it had waited for the Member States to inform it of their intentions before making known to each of them its objections or reservations. To wait would have been pointless if a Member State had decided to take no action. Only a general assessment was possible, and that general assessment was contained in the proposals. Any national measure which was inconsistent with it was considered automatically as subject to objections and reservations. The Commission states that that was the effect of its declaration to the Council on 27 July 1981 in which it considered its proposals to be ‘legally binding’. However, the declaration is merely the logical conclusion of the reasoning set out above. The importance of the Commission's proposals in this area was emphasized by the Court, which in paragraph 25 of the judgment in Case 804/79 pointed out the reference made to them in the interim decisions of the Council. The Commission states that that was precisely the case in the decision and declaration adopted by the Council at the end of 1980, which enjoined the Member States to conform to the proposals which the Commission had submitted to the Council for 1981. In the absence of an interim decision by the Council, the Commission considers that it was justified in referring to its proposals, which it had in the meantime amended in view of scientific opinions obtained from international organizations of which either the Community or the Member States were members and from its own Scientific and Technical Committee for Fisheries. The Commission's proposals concerning conservation measures also took account of the Community's obligations to nonmember countries and international fishing organizations.

B — The principle of legal certainty

1. Ireland stales that Regulation No 100/76 was not replaced until 1982, when Regulation No 3796/81 came into force. It was not until that date that a link between quotas and the amount of financial compensation payable for fish withdrawn from the market was made. Ireland maintains that as far as 1981 is concerned, the Member States could not have anticipated that as a matter of law a link between the quotas which were still being considered and negotiated at the Council and the amount of financial compensation payable under Regulation No 100/76 would be made. Any Community decision which relies for its legal basis on circumstances such as those in the present case must be deemed to be incompatible with the principle of legal certainty.

2. The Commission contends that it was perfectly entitled to take account of the fact that the fishing quota had been exceeded when it was clearing the accounts, even in the absence of a specific rule establishing for 1981 a link between observance of the quotas and Community financing. Regulation No 729/70 must be interpreted as meaning that the Commission had not only the right but also the obligation to exclude from financing expenditure incurred in the fisheries sector for quantities of fish caught in breach of a Community rule intended to conserve the resources of the sea. The Commission points out that by virtue of Article 3 of Regulation No 729/70 intervention intended to stabilize agricultural markets can only be financed if such intervention is undertaken according to Community rules within the framework of the common organization of agricultural markets. The application of this provision is sufficient to justify the contested decision. The phrase ‘according to Community rules’ certainly does not mean that it is sufficient to show that the expenses have been incurred within the framework of the common agricultural policy or in pursuit of one of its objectives. The phrase has always been interpreted to mean that in order to be financed out of the Fund, expenses must have been incurred in complete conformity with the Community law in force. The Court has given a very precise interpretation of that phrase in Case 11/76 {Netherlands w Commission [1979] ECR 245). The Commission contends that the only expenditure which has been disallowed is that which it must be supposed was not incurred in accordance with Community law, that is to say expenditure relating to catches in excess of the quotas proposed by the Commission. Every Member State was given the possibility of showing that the expenditure which it incurred in 1981 concerned fish legally caught. Where the Member State was able to show that the fish had been legally caught the Commission accepted the expenditure relating thereto. The Commission contends that nowhere in Regulation No 729/70 is it stated that only the violation of a technical rule concerning the material and formal conditions for the payment of some expense can lead to that expenditure being disallowed. The wording of Article 3 of the Regulation, which uses the plural (‘Community rules’) and the judgments of the Court of 7 February 1979 in Joined Cases 15 and 16/76 France v Commission [1979] ECR 321 and 27 February 1985 in Case 55/83 Italy v Commission [1985] ECR 683 argue against that view. Any act of a Member State which is contrary to Community law can give rise to a refusal of Community financing. The Commission emphasizes that the position taken by Ireland contradicts the principle of equal treatment between fishermen set out in Article 40 (3) of the EEC Treaty. By allowing vessels flying its flag to exceed the quotas attributed to it a Member State puts its fishermen in a more advantageous situation when compared with fishermen of a State which abides by the Community rules. The resulting distortion of competition would be aggravated if the Community were obliged to finance such conduct. That is precisely what the Court stated in paragraph 9 of its judgment of 7 February 1979 in Case 11/76. The fact that fish caught in excess of quotas were marketed is the result of unilateral action by Ireland incompatible with the common policy. The expenditure incurred by Ireland for such fish must be regarded as ‘amounts which the national authorities wrongly believe themselves authorized to pay in the context of the common organization of the markets’ within the meaning of the case-law of the Court. The Commission submits that Article 40 (3) of the EEC Treaty makes it clear that a common organization may include all the measures which the Council considers necessary to attain the objectives set out in Article 39 of the Treaty. Nowhere is it said that those measures must all figure in a single act. Since Regulations Nos 2142/70 and 100/76 have as their legal base Article 40 of the Treaty, their purpose is to achieve some of the aims of the common agricultural policy, and it is clear that Community fishermen could not be guaranteed sufficient yields if the rules concerning conservation of stocks were not strictly observed by all Member States. The failure to observe the quotas proposed by the Commission must be regarded in the circumstances as a violation of a rule which is part of the common organization of the agricultural market within the meaning of Article 3 of Regulation No 729/70. The Commission admits that there was not in 1981 any provision which expressly linked payment of financial compensation to respect of the quotas. However, in view of the general character of Regulation No 729/70 and the general principle of Community law in Article 3 thereof such a provision was not necessary. In a Community which is based on the force of law it would be superfluous to insist that the institutions add, wherever they laid down conditions for some expenditure, a clause stating that the Member States must respect not only the conditions laid down but also all the legally binding rules governing the sector. In the Commission's opinion such a clause can be implied and it underlies every technical rule. The Commission thus considers that Article 26 (2) of Regulation No 3796/81 is not relevant in the present case. The regulation neither increased nor diminished the scope of Regulation No 729/70. The Commission considers that the aim of Article 26 (2) is to ensure that the Member States refuse to their fishermen or producers' organizations any intervention buying of fish which has been caught in excess of the quotas. The article seems therefore to concern, in the first instance, relations between the Member States and their subjects. In any case, Regulation No 3796/81 did not enter into force until 1982.

C — The principle of the protection of. legitimate expectations

1. Ireland cites Case 1251/79 Italy v Commission [1981] ECR 205 as authority for the proposition that by declaring that its fishery conservation proposals were binding on Ireland and the other Member States during the final quarter of 1981 notwithstanding the fact that the Council was in the course of negotiation, the Commission created in Ireland a reasonable and legitimate expectation that the Commission's declaration was not legally binding and that no further action would be taken in respect of it. The fact that no Commission regulation or decision embodying the proposals issued from the Commission within a reasonable period of time following the meeting of 27 July 1981 reinforced Ireland's expectations in this regard. Ireland pleads, therefore, that in those circumstances it could not have been expected to take restrictive measures to curtail the activities of fishermen in Ireland during that period. Had it done so, in the absence of an ascertainable Community decision, it might have been challenged in the national courts. Ireland submits that in the absence of a regulation or decision from the Council or the Commission it was legitimate and reasonable for it to expect at the time that no legal consequence would flow from the Commission's declaration of 27 July 1981.

2. In its defence the Commission points out that it stated expressly in the declaration of 27 July 1981 that it was determined to use all the means in its power to ensure the respect by Member States of its proposals, which it considered to be legally binding upon them. Refusal of financing is clearly one of the means which the Commission has of achieving its aims. In view of the extremely clear statement in the declaration of 27 July 1981, Ireland cannot claim that it was led by the Commission to believe that there would be no consequences with regard to financing out of the Fund. It was always open to Ireland to seek the Commission's view on the point but it did not do so. The Commission contends that it cannot be said that it has failed to fulfil its obligations by not introducing into the technical rules governing intervention a provision referring expressly to the need to observe the quotas, for it was entitled to expect that the Member States would scrupulously observe their Community obligations. The Commission did not encourage any Member State to make payments after the quota concerned had been exceeded. Quite the contrary: it indicated in good time its intention of ensuring by all the means at its disposal that its proposals would be respected. The Commission cannot accept the argument that Member States could not do otherwise than finance fish caught after the quotas had been exhausted without an amendment of the technical rules concerning the conditions for payment of financial compensation. The marketing of fish caught in excess of quotas is the result of a clear infringement by a Member State; it is therefore reasonable that the resulting financial burden should be borne by that State. In accordance with general principles of law no one can be obliged to accept products obtained contrary to the law in force. If Ireland had adopted in due time measures forbidding fishing it would have been perfectly able to refuse fish caught in excess of quotas. The present case is concerned solely with the financing by the Community of expenditure incurred by a Member State; all that is necessary, therefore, is to ascertain whether the expenditure was incurred in accordance with Community law.

F. Schockweiler

Judge-Rapporteur

1 Language of the Case: English.