Report for the Hearing delivered in Case 141/87
I — Legal framework and background to the dispute
A — The Community rules
a) In Regulation No 24 of 4 April 1962 (Official Journal, English Special Edition 1959-62, p. 123), the Council of the European Economic Community took the first steps towards the creation of a common organization of the market in wine. According to Article 4 of that regulation, Community rules were to be adopted regarding ‘quality wines produced in specified regions’. The rules to be adopted were to take into account ‘traditional conditions of production’ and be based on the following factors: demarcation of the area of production, vine varieties, cultivation methods, wine-making methods, minimum natural alcoholic strength, yield per hectare, analysis and assesment of organoleptic characteristics. Article 4(3) also provided that the Member States could take account, in addition to the above factors, of ‘fair and traditional customs’.
b) However, comprehensive rules governing quality wines produced in specified regions were adopted only in Regulation No 817/70 of the Council of 28 April 1970 (Official Journal, English Special Edition 1970 (I), p. 252). That regulation, which in regard to the delimitation of areas of production merely developed the principles established as from 1962, was replaced by Council Regulation No 338/79 of 5 February 1979 (Official Journal L 54, 5.3.1979, p. 48), which carries over the most important provisions of the regulation of 28 April 1970. It is the provisions of the 1979 regulation which are applicable to the proceedings pending before the Court. However, it should be pointed out that that regulation was itself replaced by Regulation No 823/87 of 16 March 1987, Articles 1 to 3 of which reproduce verbatim a substantial part of its provisions (Official Journal, L 84, p. 59).
According to the second paragraph of Article 1 of Regulation No 338/79, ‘quality wines produced in specified regions means wines which satisfy the provisions of this regulation and those national rules adopted pursuant thereto’ (those provisions are identical to those of Article 1 of Regulation No 823/87).
According to Article 3(2) of Regulation No 338/79, ‘each specified region shall be precisely demarcated, as far as possible on the basis of the individual vineyard or vineyard plot. Such demarcation shall be effected by each of the Member States concerned and shall take into account the factors which contribute towards the quality of the wines produced in those regions, such as the nature of the soil and subsoil, the climate and the situation of the individual vineyard or vineyard plot’. (Those provisions are identical to those of Article 3 of Regulation No 823/87.)
Article 3(1) defines the expression ‘specified region’. It provides that that expression ‘means a wine-growing area or combination of wine-growing areas which produces wine possessing special quality characteristics and whose name is used to designate those of its wines which are defined in Article 1’. Article 2 of Regulation No 338/79 (the provisions of which are identical to those of Article 2 of Regulation No 823/87) sets out the factors which may be taken into account in determining quality wines produced in specified regions. Account is to be taken of ‘the traditional conditions of production’ and the determination is to be based on the following factors:
i) demarcation of the area of production,
ii) vine varieties,
iii) cultivation methods,
iv) wine-making methods,
v) minimum natural alcoholic strength by volume,
vi) yield per hectare,
vii) analysis and assessment of organoleptic characteristics.
Article 2(2) provides that the Member States may determine other conditions of production, ‘taking into account fair and traditional practices’.
B — Background to the dispute
The Commission does not deny that the general Italian rules on ‘quality wines produced in specified regions’, that is to say, wines having a registered designation of origin, are in conformity with the Community rules. However, it considers that in the actual demarcation of the area of production of the wine known as ‘Caldaro’ or ‘Lago di Caldaro’, the Italian Republic did not comply with the criteria laid down in the Community rules and in its own rules.
A decree of the President of the Republic of 23 March 1970 (GURI 115, 9.5.1970, p. 2872) defined the area of production of grapes to be used in the making of ‘Lago di Caldaro’ wine. That decree was intended to implement a decree of the President of the Republic of 12 July 1963 (Supplemento ordinario alla GURI 188, 15.7.1963, p. 3), adopted on the basis of enabling Law No 116 of 3 February 1963 (GURI 58, 1.3.1963, p. 1104) which determines the demarcation of the area of production of wines having a ‘denominazione d'origine controllata’, in accordance with Community rules of 1962. The area of production thus defined includes territory located in two categories of local administrative areas. On the one hand, 12 areas in the province of Bolzano and, on the other, seven in the province of Trento, namely Rovere della Luna, Faedo, San Michele all'Adige, Lavis, Giovo, Lisignago and Cembra. By a decree of the President of the Republic of 22 September 1981 (GURI 92, 3.4.1982, p. 2607), the area of production in Lavis and Giovo was extended and two other local administrative areas in the province of Trento were added to the area of production, namely Mezzocorona and Faver.
That demarcation gave rise to many protests as early as 1970 on the ground that it was not traditional to market under the names ‘Caldaro’ or ‘Lago di Caldaro’ wine made from grapes produced in local administrative areas situated in the province of Trento.
That is the position defended by the Commission. It considers that the designation should be reserved for wines produced from grapes harvested in certain local administrative areas in the province of Bolzano. It claims that it is not traditional to market under that name wine coming from the province of Trento and that the characteristics of the soil in those areas is not the same as that of the soil in the areas in the province of Bolzano.
It therefore argues that the demarcation of the area of production has been made contrary to the provisions of Regulation No 338/79.
C — The procedure for failure to fulfil obligations
In a letter of 18 November 1983, the Commission informed the Italian Republic that it considered that the demarcation of the area of production of the wine known as ‘Caldaro’ or ‘Lago di Caldaro’ made by the decree of 23 March 1970, as amended by the decree of 22 September 1981, was not in accordance with the provisions of Regulation No 338/79 and it called upon the Italian Republic to submit its observations within two months.
The Italian Republic put forward its observations and added to them in a further letter, dated 23 July 1984, stating that it considered that the area of production of the wine in question had been demarcated in accordance with the provisions of the Italian and Community rules.
Under those circumstances, the Commission, on 17 July 1985, delivered the reasoned opinion provided for in Article 169 of the Treaty. Since the Italian Republic refused to comply with the reasoned opinion, the Commission brought an action before the Court, which was received at the Court Registry on 7 May 1987.
II — Conclusions of the parties
The Commission claims that the Court should:
i) declare that by including in the area of production of ‘Caldaro’ or ‘Lago di Caldaro’ DOC wine certain districts in which wine has not traditionally been marketed under that denomination, districts which, moreover, lack homogeneity with those of the traditional Caldaro areas and thus produced wines whose chemical and organoleptic characteristics differ from those of wines from that area, the Italian Republic has failed to fulfil its obligations under Anieles 2 and 3 of Regulation (EEC) No 823/87 (formerly Regulation No 338/79);
ii) order the defendant to pay the costs.
The Italian Republic contends that the Court should:
i) dismiss the application and order the Commission to pay the costs.
Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General the Court decided to open the oral procedure and called upon the parties to reply to a series of questions within one month. The parties submitted their replies within the time allowed.
III — Summary of the observations submitted to the Court
A — The need for Member States to comply with the factors constituting the concept of ‘specified region’
a) The Commission points out that there are two different wine markets: that for quality wine, in which demand is high and supply limited, and that for ordinary wines, where the situation is the reverse. Quality wines are the subject of special rules dealing with quality wines produced in specified regions (hereinafter referred to as ‘quality wines psr’). Those rules are based on the geographical origin of the wine. The Community rules lay down the general framework and, within that framework, it is for the Member States to determine the individual areas of production. The Commission points out that the ‘specified region’ is the factor which makes it possible, in the first place, to distinguish and characterize a quality wine psr. The demarcation of the region must, on the one hand, be selective in nature, and on the other, contribute to characterizing and individualizing a wine which has its own personality. Consequently, the area demarcated must be homogeneous in character, which must also be true in regard to the other factors composing the definition of quality wine psr such as vine varieties, cultivation methods, etc. Two limitations on the Member States may be deduced from the whole body of Community provisions and they are essential. The first is that the use of the designation must correspond to tradition and the second is that the area of production and, consequently, the wine coming from that area, must have homogeneous characteristics. Those limitations follow from Articles 1 to 3 of Regulation No 338/79, which refers to ‘traditional conditions of production’ and ‘fair and traditional practices’, and Article 3(2), which provides that the demarcation of the area of production must take into account ‘the factors which contribute towards the quality of the wines produced in those regions’, a quality which is linked to the characteristics of the soil: the nature of the soil and subsoil, the climate and the situation of the individual vineyard or vineyard plots. It is therefore for the Commission and, if necessary, for the Court of Justice, to verify whether Member States, in demarcating areas of production for quality wines produced in specified regions, have in fact taken account of the various factors provided for under the Community rules.
b) The Italian Republic disagrees with the latter contention. It states that the Community rules leave the Member States the power to demarcate the areas of production for quality wines subject only to the condition that they take into account, in the exercise of that power, the factors provided for under Community rules. Consequently, the only review which may be carried out by the Commission, or by the Court of Justice if proceedings are brought before it, is to verify whether the Member State in question has taken account of the factors provided for in Community rules. On the other hand, it does not consider that the Commission, or the Court, may call into question the technical findings and the assessment of the facts by the Member State in question. According to the Italian Government, it is therefore necessary ‘first to establish the limits within which the Community rules permit the Commission to exercise its discretion and, consequently, the Court to exercise its powers of judicial review’. In that regard, the Italian authorities contend that it is not disputed that account was taken of all the factors provided for in the Community rules, which, in essence have been taken over in the Italian rules resulting from the abovementioned decree of 12 July 1963.
B — The question of the actual compliance on the part of the Italian Republic with the conditions laid down in the Community rules for the demarcation of a ‘specified region’
The Commission claims that the contested demarcation does not take account of ‘traditional conditions of production’ and that it does not comply with the condition of homogeneity of the area of production under Articles 2 and 3 of Regulation No 338/79.
1. Absence of tradition
The Commission points out that under the Italian rules, an area of production may include not merely the district indicated by the designation of origin in question but also the neighbouring districts, provided that analogous natural conditions exist there and that on the date on which the decree of 12 July 1963 entered into force wine marketed under the same designation had been produced there for at least 10 years.
However, it considers that it is not possible to speak of a practice going back to at least 1953 in regard to ‘Caldaro’ or ‘Lago di Caldaro’ wines in respect of the local administrative areas situated in the province of Trento.
The Commission claims that the production of wine in the area around Lake Caldaro is a centuries-old tradition. The wine is a red wine obtained from ‘Schiava’ vines. That wine has long had major markets in Switzerland, Austria and the Federal Republic of Germany, in which it is known under the name ‘Kälterer’ or ‘Kalterersee’. The Commission points out that in the local administrative areas in the province of Trento which are today included in the area of production of ‘Caldaro’, Schiava grapes were not particularly common before 1960 and the wine produced in those areas was sold under the different name of ‘Sorni’ (which is a locality in the local administrative area of Lavis).
In any event, when, in 1959, the Italian and German Governments agreed to use the indication ‘Auslese’ (selection) in addition to the geographical designation ‘Caldaro’ or ‘Kälterer’, they decided that the wine had to come exclusively from localities bordering the lake or from adjacent localities. It was after the adoption of the decree of 12 July 1963 that various traders in the province of Trento asked that the designation ‘Caldaro’ should also apply to local administrative areas in that province. The Commission points out that, in an Opinion of 20 June 1966, the Regional Agricultural Committee for the Trentino-Alto Adige region (which includes the provinces of Trento and Bolzano) disapproved the inclusion of the administrative areas in the province of Trento in the Caldaro production area.
It was the National Committee for the Protection of Designations of Origin which proposed the inclusion in the area of production of three local administrative areas in the province of Trento and excluded four other areas in the province of Bolzano. It was as a result of that deliberation that the contested decree of 23 March 1970 was adopted.
The Commission also bases itself on various publications on the subject of wines to show that the designation ‘Caldaro’ was not used for wines produced in Trentino, the normal designation for such wines being ‘Sorni’. Finally, although the Commission accepts that many wine producers in the province of Bolzano bought wine in Trentino which was later marketed in various places under the designation ‘Caldaro’, it considered that such unfair and fraudulent practices can in no circumstances constitute a tradition within the meaning of Regulation No 338/79.
2. Lack of homogeneity of the area of production
The Commission points out that according to Regulation No 338/79, in particular Article 3 thereof, the demarcation of an area of production must be carried out in the light of factors such as the nature of the soil and subsoil, the climate and the situation of the individual vineyard, which give rise to a certain homogeneity the consequence of which is that the wine coming from such an area is of a particular quality.
However, the Commission claims that that homogeneity does not exist between the local administrative areas in the province of Bolzano and those situated in the province of Trento and that, on the contrary, there are substantial differences between them.
The Commission bases its analysis both on the nature of the soil and subsoil and on the climate.
It points out that the soil of the local administrative areas of Giovo, Faver and Lavis is porphyritic in nature, whereas in the Caldaro area the land is calcareo-morainic.
With regard to the climate, the Commission argues that there are significant differences as regards both rainfall and sunshine and in the situation of the individual vineyards or vineyard plots. Referring to various sources, the Commission points out first that rainfall is significantly higher in the region of Trento and San Michele than in that of Bolzano. With regard to sunshine, the table produced shows that the amount of sunshine is significantly higher in Bolzano than in San Michele. Finally, it is pointed out that in the Caldaro area, most of the vineyards or vineyard plots are at an altitude of 200 to 400 metres whereas in the areas of production in the province of Trento, they reach 650 metres.
The Commission therefore considers that there are significant differences between the Caldaro region and the districts of the local administrative areas in the province of Trento which the Italian rules place in the Caldaro production area and those differences are all the more significant because the Caldaro region is particularly favourably situated by virtue of the fact that the valley of the Adige is, at that point, wide and faces south whereas the Val di Cembra, where most of the areas of Trento included in the production area are situated, is bounded on the south by a fairly high range of mountains and certain areas of land in which vines have been planted do not even face south.
Consequently, the two regions, even though they are only about 30 kilometres apart, are in fact quite different. That difference is reflected in a difference of quality of wines produced, the Trentino wine having a higher level of acidity and a lower phosphate content.
The Italian Republic contends that the contested rules were adopted as a result of detailed studies and of opinions of the competent regional bodies. The contested demarcation is in accordance with the Italian rules.
With regard to the use of the name ‘Caldaro’ or ‘Lago di Caldaro’, the Italian Republic relies on the existence of invoices supplied by wine producers and on a report of the President of the Regional Subcommittee for the Study of the Designation ‘Caldaro’ and maintains that, for many years, a wine similar to ‘Caldaro’ has been marketed under that name in local administrative areas in the province of Trento. In particular, it was common for traders in the province of Bolzano to buy wine from the province of Trento and sell or export it as ‘Lago di Caldaro’.
The absence of any reference to ‘Caldaro’ or ‘Lago di Caldaro’ in various publications concerning the Trentino region does not prove anything inasmuch as those publications were concerned with wine in bottles whereas the wine in question was sold in bulk.
With regard to environmental difference, the Italian Republic points out first that the Bolzano meteorological station is far from the vineyards and that, consequently, the information supplied by it cannot usefully be employed to establish comparisons.
With regard to the nature of the soil and subsoil, the geological nature and origin of the land in which the vines producing ‘Caldaro’ are planted are practically identical in the two provinces. In both areas the land is of dolomitic origin. Although land of porphyritic origin may be found in a small part of the Cembra valley in the province of Trento, it is in fact to be found principally in various local administrative areas of the province of Bolzano.
With regard to the climate, the Italian Republic considers that there is no significant difference. The only difference — a small one — is in regard to sunshine. That said, the Italian Republic contends that if the period from April to September, which is the most important for vines, is examined separately, the statistics recorded in the two provinces are practically similar.
With regard to altitude, the vineyards in the province of Trento are situated at an altitude of between 230 and 600 metres at most, which does not disclose any significant difference vis-à-vis the land planted with vines in the region of Bolzano. Furthermore, the limit of 600 metres is the result of the Italian rules applicable to the area of production at issue.
Finally, the decree of 1970, which was not amended on that point by the decree of 1981, expressly provides that the environmental conditions of the vineyards concerned and the manner in which the vines are cultivated there must be traditional and that the vineyards must be well exposed and situated at an altitude not exceeding 600 metres. Similarly, Article 7 of the production regulation fixes the upper limit of acidity at 4 per 1000. No rules, and in particular no Community rules, prescribe a phosphate content.
Finally, the Italian Republic adds that the local administrative area of Faver was never included in the area of production and that certain areas in the province of Bolzano are further from Lake Caldaro than a number in the province of Trento.
C — The economic context and consequences
The Commission insists that its application is not merely a reflection of local rivalries but that the economic interests at stake are important. The significant extension of the area of production of ‘Caldaro’ brought about by the 1970 decree has had pernicious economic consequences. In 1978, production of ‘Caldaro’ in Trentino was greater than 54000 hectolitres and has unfailingly increased since then (55442 hectolitres in 1985).
Even before the extension of the area of production in 1981, ‘Caldaro’ from Trentino was sold at a price one-third below that of ‘Caldaro’ from the Alto Adige. It therefore caused the price of the latter to drop. During the last 10 years, the price relationship between ‘Caldaro’, on the one hand, and ‘Bardolino’ and ‘Valpolicella’ (wines comparable from the point of view of type and destination) changed from 2: 1 to 1:1. Furthermore, exports of ‘Caldaro’ have fallen.
The Commission considers, in brief, that the Community rules, the purpose of which was to avoid confusion which could damage traders, have not been complied with and have been used, in the case of ‘Caldaro’, to legalize abuses committed by unscrupulous traders which are in fact the very abuses which the Community rules were intended to eliminate.
The Italian Republic rejects those assertions in their entirety. It considers, in particular, that no evidence has been produced that the fall in the price of ‘Caldaro’ or in exports are attributable to the inclusion of certain local administrative areas in the province of Trento in the ‘Caldaro’ production area.
D — The burden of proof
The Commission claims that the dispute is concerned exclusively with issues of fact the resolution of which is particularly complex because it entails not merely verifications but also a technical assessment of the facts. It did indeed propose to the Italian Republic that an expert's report be obtained, but the Italian Republic refused to accept that proposal.
The Commission considers that in a case of this kind, where the facts and technical data to be collated are specific to Italian territory, the Italian Republic should share the burden of proof in order to complete the information which the Court must have at its disposal.
Since the Commission has put forward solid evidence, it is for the Italian Republic, if it intends to contest that evidence, itself to supply proof that the demarcation of the ‘Caldana’ area of production is in conformity with Community law. In the alternative, the Commission asks the Court to order that an expert's report be obtained.
The Government of the Italian Republic contends that it is for the Commission to prove that the Italian Republic did not take into account the factors of which it was required to take account by Community law for the purpose of demarcating the area of production. It also contends that, far from refusing to cooperate with the Commission, it provided the latter with all the documents proving that the demarcation had been correctly carried out.
Should the Court wish to review the facts of the case, the Italian Republic, in the alternative, asks that the Commission be ordered to produce all those documents.
IV — Replies to questions put by the Court
A — The Commission 's replies
a) The Court of Justice asked the Commission to forward to it the various items of information supplied by the Italian Republic concerning, on the one hand, the geological and climatic situation of the areas of production in question and, on the other hand, the traditional nature of the use of the designation ‘Caldaro’ in the areas at issue and, finally, comparative statistics for the various wines in question. The Court asked the Commission to make precise comments on the various items of information if necessary.
b) In a document received at the Court Registry on 30 June 1988, the Commission supplied the Court with the items of information for which it had called. These are:
1) tables drawn up by Mr Claudio Aielli concerning the climate in the Trentino-Al to Adige region;
2) an analytical table showing 44 ‘Lago di Caldaro Scelto’ 1982 wines;
3) an analytical table showing wines the alcoholic strength of which has been measured in Babo degrees and multiplied by 0.65;
4) various invoices issued by the Cantina Cooperativa fra Viticoltori di Mezzocorona;
5) a report drawn up by Mr De Francesco and Mr Striuli under the title ‘Inquiry into the preparation of “Auslese” wine in the Trentino-Alto Adige region’.
The Commission concentrated its comments on the first two series of documents. It points out first that the only climatological tables of interest are those which deal with precipitation and sunshine. From that point of view, it can be seen that precipitation is greater in San Michele, in Trentino, than in Bolzano, whereas the number of hours of sunshine is greater in Bolzano. That explains why the wines from the classic ‘Caldaro’ region are different in character from those produced in the more southerly region.
The Commission claims secondly that the analytical table of 44 ‘Lago di Caldaro Scelto’ wines submitted by Italy shows that Trentino wines have a greater acidity than those produced in the Alto Adige.
B— The Italian Republic's replies
The Court asked the Italian Republic:
1) to provide all those precise factors on which it bases its view that the designations ‘Caldaro’ or ‘Lago di Caldaro’ are traditional in the areas of Trentino concerned;
2) to reply precisely to the Commission's claims to the effect that the marketing by wine merchants in the Bolzano area of wines from Trentino under the designations ‘Caldaro’ or ‘Lago di Caldaro’ constitutes an abusive and unfair practice;
3) to explain precisely:
i) why it considers that the differences in soil and subsoil and in altitude between the contested areas and the other areas are not significant;
ii) what are the data regarding climate which are to be taken into consideration if, in its contention, statistics from the Bolzano meteorological station are not relevant and what is the content of such data;
iii) on what factors it bases its contention that wines produced in the entire area demarcated by the decrees of 1970 and 1981 are homogeneous;
iv) precisely what local administrative areas are included in the area of production, since it contends that Faver is not included;
4) to produce the judgments of the Italian Consiglo di Statto (State Council) of 9 June 1972 and 13 February 1973 cited in the defence at p. 7;
5) To produce a map or maps clearly showing the various areas of production and their location in the entire region concerned, appropriately marked (if possible, with lines indicating differences of altitude).
The Italian Republic replied as follows:
1) It begins by recalling the factors on which it based its view that the designations ‘Caldaro’ or ‘Lago di Caldaro’ are traditional in the regions at issue. They are the factors indicated in the letter of 23 July 1984 from the Italian Permanent Representation (No 6087), which was produced by the applicant in Annex 4 to the application. That letter refers to a considerable number of documents sent to the Commission and to copies of invoices and studies of the preparation of ‘Auslese’ wine in the Trentino-Alto Adige region.
2) The Italian Republic produces a series of invoices which, it contends, show that during the period from 1952 to 1969, winegrowers in Trentino were already marketing both in Italy and abroad wine designated ‘Lago di Caldaro’ or ‘Caldaro’. It states that the Commission's claims to the effect that the marketing of wines originating in the province of Trento by Bolzano wine merchants was irregular are not supported by any precise evidence. It adds that the transfers of wine which may have taken place from the province of Trento to the province of Bolzano under the designations ‘Caldaro’ or ‘Lago di Caldaro’ were not improper because those designations have traditionally been used in the province of Trento. Finally, it observes that, from that point of view, the rules of the local wine cooperatives which marketed ‘Caldaro’ wine prohibit the purchase of grapes and wine from persons other than the members of those cooperatives, who have always come from the area in Trentino at issue.
3) With regard to information on geology, climate and the contested homogeneity of the area in question, the Italian Republic makes the following comments.
i) The production of ‘Caldaro’ grapes takes place under the same conditions in the province of Bolzano as in the province of Trento. The two areas of production cover both calcareous dolomitic areas and porphyritic quartziferous areas of the ‘Alto Adige porphyritic formation’.
ii) The altitude of the areas of production under consideration is between 200 and 400 metres; only certain limited areas rise to greater heights.
iii) From the point of view of climate, the Italian Republic points out that the only official station collecting climatic information in the area of production of ‘Caldaro’ wine is at San Michele all'Adige. It considers that the data supplied by the Bolzano meteorological station are not relevant because, on the one hand, Bolzano is outside the area of production and, on the other, that area enjoys very special climatic conditions.
In any event, the climatic differences are minimal and thus are not likely to influence the organoleptic characteristics of the grapes or of the wine.
Furthermore, from the point of view of rainfall levels, if the information concerning Bolzano and Trento is compared with the information for Caldaro rather than with that for San Michele all'Adige, the figures are much more similar because the monthly average rainfall in millimetres is 829 in Caldaro (as against 704 in Bolzano and 943 in San Michele all'Adige). It is all the more important to take into consideration inasmuch as the differences appear negligible during the growing season (from April to September) whereas they are greater during the winter months.
The Italian Republic concludes that there is a genuine homogeneity between the wines produced in the area under consideration even if that homogeneity cannot be equated with genuine identity, since small differences may exist between the various wines.
Finally, the Italian Republic states that the local administrative area of Faver was never included in the area of production and it produces the decision of the Consiglio di Stato of 9 June 1972 (No 39) which the Court asked it to supply.
F. Grévisse
Judge-Rapporteur
1 Language of the case. Italian.