Report for the Hearing delivered in Case 239/86

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; and (b) intervention intended to stabilize the agricultural markets. Article 2 provides that finance will be given for refunds on exports to third countries granted in accordance with the Community rules within the framework of the common organization of the agricultural markets. Article 3 provides that finance will also be given for intervention intended to stabilize the agricultural markets, undertaken according to Community rules within the framework of the common organization of agricultural markets.

2. The main elements of a common fisheries policy were established in 1970 by Regulation No 2141/70 of the Council of 20 October 1970 laying down a common structural policy for the fishing industry 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), pp. 703 and 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 and Council Regulation No 101/76 of 19 January 1976 laying down a common structural policy for the fishing industry (Official Journal, L 20, pp. 1 and 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. 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 the structural policies of Member States to promote harmonious and balanced development of the fishing 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 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 submitted to 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’. In Annex VI thereto ([1980] ECR 2408, 2nd column) it was stated that pending the implementation of the Community measures then in preparation relating to the conservation of resources, the Member States would not take any unilateral measures in respect of the conservation of resources. It provided, however, that if no agreement was 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 avoided 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 would seek the approval of the Commission, which had to be consulted at all stages of the procedures.

7. On 18 February 1977 the Council adopted Regulation No 350/77 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 a 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 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 was to be vested 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 (Official Journal, C 158, p. 2), 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. 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.

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). 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 to fix 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. 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.

14. Late in December 1981 Council Regulation No 3796/81 of 29 December 1981 on the common organization of the market in fishery products was published (Official Journal, L 379, p. 14). It repealed Regulation No 100/76 and, according to Article 37, was applicable from 1 June 1982. Article 26 (2) of the regulation 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 for the stock or group of stocks in question. Regulation No 100/76 contains no similar provision.

15. Fishing in Community waters was governed from 1 January 1982 to 30 June 1982 by the following interim Council decisions: 81/1052 of 29 December 1981 (Official Journal, L 379, p. 52), 82/207 of 31 March 1982 (Official Journal, L 99, p. 34), 82/271 of 29 April 1982 (Official Journal, L 120, p. 29) and 82/346 of 31 May 1982 (Official Journal, L 152, p. 12), according to which Member States were to apply the TACs proposed by the Commission on 24 July 1981 for their fishing.

16. On 18 and 21 June 1982 the Commission submitted to the Council its proposals for TACs and quotas for 1982 (Official Journal, C 228, p. 14, and C 233, p. 4), on which the Council was unable to reach agreement. However, on 29 June 1982 the Council adopted Decision 82/440 of 29 June 1982 (Official Journal, L 190, p. 9), in which it decided that from 1 July to 23 July 1982 Member States were to apply the TACs proposed by the Commission on 24 July 1981.

17. At the Council meeting of 21 July 1982 the Commission submitted a declaration (Official Journal, C 199, p. 21) in which it noted the failure of the Council to reach an agreement on the fixing of TACs and quotas. In order to enable the Community to discharge its responsibilities with regard to conservation from the date of the declaration until 30 September 1982, the Commission reminded the Member States that they not only had the right to adopt the necessary measures, subject to their approval by the Commission, but also the duty to take them in the collective interest, that being a duty which the Commission could require them to perform. The Commission declared that those rights and duties flowed from the Treaty, namely Article 5 (the duty of cooperation among the Member States) and Article 155 (the Commission's right and duty of supervision). In conclusion, the Commission declared that with a view to ensuring that the activities of the entire fishing fleet of the Member States were as orderly and stable as possible it would, in carrying out its duties and particularly when approving national conservation measures, act on the basis of the proposals which it had submitted to the Council.

18. The Council subsequently adopted other provisional measures for 1982 in the form of Decisions 82/498 of 21 July 1982 (Official Journal, L 216, p. 40), 82/650 of 20 September 1982 (Official Journal, L 274, p. 33), 82/739 of 26 October 1982 (Official Journal, L 312, p. 17) and 82/807 of 29 November 1982 (Official Journal, L 339, p. 57). By those decisions the Council decided, in view of the exclusive powers of the Community in the matter and the obligations of the Member States as defined by the Court of Justice, that from 24 July 1982 to 31 December 1982 the Member States were to conduct their fishing activities in accordance with the usual seasonal cycles, taking into account the TACs proposed by the Commission on 21 June 1982, as subsequently modified.

19. The Commission made a further declaration at the Council meeting of 21 December 1982 in which it requested the Member States, inter alia, to notify it without delay of the national conservation measures they planned to adopt. The Commission also declared that it was determined to use all the means in its power to ensure that the Member States fulfilled their obligations.

20. On 25 January 1983 the Council adopted Regulation No 170/83 of 25 January 1983 setting up a Community regime for the conservation and management of fishery resources (Official Journal, L 24, p. 1). Pursuant to Article 11 of that regulation the Council adopted Regulation No 172/83 of the same date fixing for certain fish stocks and groups of fish stocks occurring in the Community's fishing rone, total allowable catches for 1982, the share of those catches available to the Community, the allocation of that share between the Member States and the conditions under which the total allowable catches could be fished (Official Journal, L 24, p. 30).

21. On 10 July 1985 the Commission informed Ireland by letter that it could not finance intervention made in 1982 in respect of fish taken in excess of the quotas laid down in Regulation No 172/83; for three kinds of fish financing would have to be reduced by a total of IRL 492985.50.

22. Ireland replied by letter of 2 September 1985 that it did not accept the proposed amendments, which it considered to be without legal foundation and, without prejudice to that statement, supplied statistics to enable the Commission to adjust its figures. Following bilateral contacts with the Irish authorities the Commission reduced the sum disallowed to IRL 100829.05.

23. In a Summary Report on conclusions from the preliminary work for the clearance of the EAGGF Guarantee Section accounts for the year 1982, dated 20 March 1986, the Commission also suggested that finance should be refused in respect of the sum of IRL 42212 for export refunds on the ground that fishing quotas had been exceeded.

24. By Decision 86/445/EEC of 1 July 1986 on the clearance of the accounts presented by Ireland in respect of the European Agricultural Guidance and Guarantee Fund, Guarantee Section, expenditure for 1982 (Official Journal, L 256, p. 34), the Commission refused to finance intervention and withdrawals in the fishing sector to the amount of IRL 143041.05 on the ground that it had not been paid or incurred in accordance with the Community rules.

II — Written procedure and conclusions of the parties

1. The application by Ireland was lodged at the Court Registry on 9 September 1986.

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: (i) Declare, pursuant to Article 173 of the EEC Treaty, that the decision of the Commission of the European Communities of 1 July 1986, notified to Ireland on 3 July 1986, on the clearance of the accounts presented by Ireland in respect of the European Agricultural Guidance and Guarantee Fund, Guarantee Section, expenditure for 1982, is void in so far as the Commission has failed to charge to the Fund the sum of IRL 143041.05 for payments of financial compensation and export refunds made pursuant to the provisions of Council Regulation (EEC) No 100/76 on the common organization of the market in fishery products; (ii) Order the Commission to pay the costs.

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

III — Submissions and arguments of the parties

Ireland makes the following submissions in support of its application:

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

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

A — Lack of competence on the part of the Commission

1. Ireland relies on the legal argument adduced by it in Case 325/85 [1987] ECR 5041 which is generally applicable in this case, also, as the Commission appears in its declaration of 21 July 1982 to have taken essentially the same view as it adopted in its statement of 27 July 1981. In Case 325/85 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 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 the relevant year 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 [1980] 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 States 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 certain sums 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 which would have been legally binding. In consequence, there is no legal basis for the Commission's decision to disallow the sum at issue. In addition to the arguments adduced in Case 325/85, Ireland makes certain observations concerning Council Regulation No 172/83. Notwithstanding the fact that it purported to be retroactive, the regulation did not enter into force until 27 January 1983, so that for the whole of 1982 there was no legally binding instrument which fixed quotas in force in the Community. While the various interim decisions of the Council required Member States to conduct their fishing activities ‘taking into account the TACs proposed by the Commission’, Member States were unable throughout 1982 to ascertain with precision whether their fishing activities would lead to TACs being exceeded or might be in excess of quotas fixed subsequendy.

2. The Commission states that when in 1981 and 1982 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 Sutes 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 27, 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 which were incompatible with the 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 abide by its proposals in 1981 and 1982. 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 its judgment of 5 May 1981 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 the Commission, just as logically, requested the Member States to observe 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 calling for objections and reservations. The Commission states that that was the effect of its declarations to the Council in which it considered its proposals to be ‘legally binding’; it was 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 1982. 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 mean time 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. Moreover, the Council adopted the Commission's proposals in 1983.

B — The principle of legal certainty

1. Ireknd submits that throughout 1982 Regulation No 100/76 continued to serve as the legal basis for payment of financial compensation and export refunds. Neither the Commission's declaration of 21 July 1982, nor the decisions adopted by the Council in 1982, nor Regulation No 172/83 established a link between TACs or quotas and payments. It was not until 1 January 1983 that Regulation No 3796/81 established such a link, and then only for the payment of financial compensation. Ireland maintains that as far as 1982 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 by the Council and the amount of financial compensation or export refunds payable under Regulation No 100/76 would be made. In the circumstances, Ireland considers that the contested decision is 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 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 the judgment of 7 February 1979 in Case 11/76 Netherlands w Commission [1979] ECR 245. The Commission contends that the only expenditure which has been disallowed is that which must be presumed not to have been incurred in accordance with Community law, that is to say expenditure relating to catches in excess of the quotas allocated to Ireland for 1982. Every Member State was given the possibility of showing that the expenditure which it incurred in 1982 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 was 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 basis 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 submits that a provision expressly linking the granting of financial compensation and payment of refunds to observance of the quotas was not necessary in view of the general character of Regulation No 729/70 and the general principle of Community law contained in Article 3 of the regulation. In a Community based on the binding character of law it would be superfluous to insist that the institutions add, whenever they laid down conditions for expenditure, a clause stating that the Member State 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. It cannot be said, therefore, that the Commission failed to fulfil its obligations by not introducing into the technical rules a provision making express reference to observance of the quotas. Moreover, the Commission did not encourage any Member State to continue making payments despite the fact that the quota had been exceeded: quite the contrary. The Commission also rejects the argument that the Member States could not do otherwise than finance even fish caught after the quotas had been exceeded: (i) The arrival on the market of fish caught in excess of quotas was the result of a clear infringement by certain Member States; if those Member States had complied with the obligations imposed on them by Community law the fish would not have caused expenditure; (ii) In accordance with the general principles of law no one can be obliged to accept products which have been obtained in breach of the law; Article 26 (2) of Regulation No 3796/81 is a clear expression of this principle. Had Ireland adopted in due time measures forbidding fishing when the quotas proposed by the Commission had been exhausted, it would have been perfectly possible for it to refuse to accept fish caught in excess of the quotas. (iii) This case concerns financing by the Community of expenditure incurred by a Member State; the sole concern of it, therefore, is to ascertain whether that expenditure was incurred in conformity with Community law. Any difficulties which might occur on a national level are entirely irrelevant. In addition to the general position already set out by the Commission, it points out that in legal theory TACs and quotas did in fact exist for 1982, since the Council adopted them retroactively in 1983 by means of Regulation No 172/83. It is true that during 1982 the Irish authorities could not know what quotas the Council would adopt, but that should have been a motive for prudence on their part. Their argument is considerably weakened if a comparision is made of the quotas for haddock, herring and mackerel allocated to Ireland by the Council in Regulation No 172/83, which are either identical to or higher than the quotas proposed by the Commission in the final version of its proposal of 10 September 1982. Finally, the Commission submits that Ireland's argument with regard to Regulation No 3796/81 destroys part of its case. Regulation No 3796/81 came into force on 1 June 1982, as is clearly stated in Article 37 (2). As a result Ireland is bound, by its own admission, to accept the link between overfishing and EAGGF financing from 1 June 1982 at least.

C — The protection of legitimate expectations

1. Ireland states that during the whole of 1982 the question of quotas continued to be the subject of negotiations within the Council and no regulation or decision establishing a link between quotas and payment of financial compensation or export refunds was made. Ireland maintains that in the circumstances it could not have been expected to take measures to curtail the activities of Irish fishermen during that period, except in circumstances where it might have become clear that such activities would lead to TACs being exceeded. Had it done so, it would have been open to challenge in the national courts. Ireland submits that it was legitimate and reasonable at the time to expect that neither the Commission's declaration of 21 July 1982 nor the subsequent Council decisions fixing TACs would have the effect of rendering irrecoverable payments of financial compensation or export refunds made in relation to fish caught in excess of quotas which at that time were neither fixed nor ascertainable.

2. The Commission rejects Ireland's claim that it was legitimate and reasonable to expect that no legal consequences would flow from the Commission's declarations of 17 July 1981 and 21 December 1982, since the refusal of financing was clearly one of the means which the Commission had at its disposal for achieving its aims. It was open to Ireland to seek the Commission's view but it did not do so, and it is not open to it now to complain when EAGGF financing is refused.

F. Schockweiler

Judge-Rapporteur

1 Language of the Case: English.