Report for the Hearing in Case C-61/90
I — Legal background and background to the dispute
1. Legal background
As regards the EEC Treaty, the parties to the dispute refer to the provisions of Article 40 on the common organization of the markets in agriculture, of Articles 92 and 93 on State aids and of Article 5 on the duty of Member States to cooperate with the Community institutions.
The dispute falls within the framework of the application of Regulation (EEC) No 2727/75 of the Council of 29 October 1975 on the common organization of the market in cereals (Official Journal 1975 L 281, p. 1).
Particular reference is made for the purposes of the proceedings to the provisions of Articles 3, 7, 8, 10, 11, 16 and 24 of the regulation in the version applicable during the period covered by the dispute (1982 to 1986).
Article 3 of Regulation No 2727/75 was amended by:
Council Regulation (EEC) No 1143/76 of 17 May 1976 (Official Journal 1976 L 130, p. 1);
Council Regulation (EEC) No 1151/77 of 17 May 1977 (Official Journal 1977 L 136, p. 1);
Council Regulation (EEC) No 1870/80 of 15 July 1980 (Official Journal 1980 L 184, p. 1);
Council Regulation (EEC) No 1451/82 of 18 May 1982 (Official Journal 1982 L 164, p. 1);
Council Regulation (EEC) No 1018/84 of 31 March 1984 (Official Journal 1984 L 107, p. 1);
Council Regulation (EEC) No 1579/86 of 23 May 1986 (Official Journal 1986 L 139, p. 29).
Article 7 of Regulation No 2727/75 was amended by Regulations Nos 1143/76 and 1579/86, referred to above.
Article 8 of Regulation No 2727/75 was amended by Regulations Nos 1143/76, 1151/77 and 1018/84, referred to above, by Council Regulation (EEC) No 3793/85 of 20 December 1985 (Official Journal 1985 L 367, p. 19) and by Regulation No 1579/86, referred to above.
Article 10 of Regulation No 2727/75 was amended by Regulations Nos 1143/76, 1151/77 and 1451/82, referred to above.
Article 11 of Regulation No 2727/75 was amended by Regulation No 1870/80, referred to above.
Article 16 of Regulation No 2727/75 was amended by Council Regulation No 1187/81 of 28 April 1981 (Official Journal 1981 L 121, p. 1).
The original version of Article 24 of Regulation No 2727/75 was not amended.
2. Background to the dispute
(a). By telex message of 23 December 1985, the Commission, with reference to complaints sent to it by private traders, asked the Hellenic Republic for information on: two ‘programme contracts’ signed by the Minister for Economic Affairs, one for the export of 40000 tonnes of meal (the equivalent of 78000 tonnes of durum wheat) and the other for the export of 15000 tonnes of pasta products; the circumstances in which the Minister for Economic Affairs, following an approach from the Minister for Agriculture, had agreed to a request from KYDEP to make good the deficits arising from the transactions involving durum wheat; the circumstances in which the State made a contribution to KYDEP's expenses arising from KYDEP's application of government policy with regard to producers' income.
(b). In its reply dated 14 March 1986, the Hellenic Republic denied the existence of the programme contracts referred to by the Commission. According to the Hellenic Republic, draft programme contracts had been drawn up at the request of traders owing to difficulties encountered in the export of cereals. However, they had never progressed beyond draft form and so the Commission had not been informed of them. Moreover, there was no plan to allow for KYDEP's deficits to be made good from public funds.
(c). A formal notice dated 2 September 1987 was sent to the Hellenic Republic. On the basis of documents which, for the most part, had been sent in by complainants, the Commission claimed that the Greek State had in various ways helped KYDEP to export common and durum wheat and had thus disregarded the provisions of the aforesaid Regulation No 2727/75 and of Article 93(3) of the Treaty with regard to the notification of State aids. The Commission also claimed that Article 5 of the Treaty had been infringed in view of the fact that the Hellenic Republic had refused to provide it with precise information with regard to the links between KYDEP and the State.
(d). The Hellenic Republic, through its permanent representative with the European Communities, replied to the formal notice by a letter of 13 January 1988. The letter gave details of KYDEP's legal status. It was also stated that the programme contracts to which the Commission referred were actually informal agreements between KYDEP and the millers in the execution of which the State played no part.
(e). On the basis of the first paragraph of Article 169 of the Treaty the Commission delivered a reasoned opinion dated 5 December 1988 reiterating, for the period 1982 to 1986, the complaints mentioned in the formal notice alleging disregard of the provisions of the said Regulation No 2727/75 and of Article 93(3) of the Treaty.
(f). As the reasoned opinion had no effect and remained unanswered, the Commission brought this action, which was registered at the Court on 12 March 1990, for a declaration of a failure to fulfil obligations. On hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry. However, it requested the Commission and the Hellenic Republic to answer a number of questions.
II — Forms of order sought by the parties
The Commission claims that the Court should:
declare that:
by promoting, through KYDEP, exports of cereals and processed cereals-based products and making good the deficits which KYDEP thereby incurred by means of direct and indirect aid measures, including the fixing of prices of cereals for the milling and processing industries partly below the intervention prices fixed by the Community (programme contracts);
by inducing KYDEP to deliver 340000 tonnes of wheat into Community intervention in 1982 and covering KYDEP's losses incurred thereby;
by failing to notify the Commission of those aids and other measures it took between 1982 and 1986; and
by failing to cooperate with the Commission,
the Hellenic Republic has failed to fulfil its obligations under Community law, in particular Regulation (EEC) No 2727/75 on the common organization of the market in cereals, the relevant implementing regulations and Articles 93 and 5 of the EEC Treaty;
order the Hellenic Republic to pay the costs.
The Hellenic Republic contends that the Court should:
dismiss the application;
order the Commission to pay the costs.
III — Summary of the submissions and arguments of the parties
Other proceedings before the Court in which KYDEP's operations have been called in question and their joinder with this action
The Commission refers to Cases C-35/88, C-32/89 and C-110/89 as well as to Case 281/87 concerning KYDEP's commercial activities and the financial links between KYDEP and the State.
According to the applicant, these proceedings have certain points in common with Case C-32/89 in which the Hellenic Republic claimed that Decision 88/630/EEC on the clearance of the accounts in respect of the expenditure for 1986 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (hereinafter referred to as ‘the EAGGF’) should be declared void. In that decision the EAGGF refused to accept certain expenditure as being chargeable to it in view of the existence of four programme contracts executed by KYDEP for.the purpose of exporting common and durum wheat.
The facts of that latter case on programme contracts are identical with those in this action. The Commission states that it nevertheless has an interest in bringing such an action on the basis of Article 169 of the Treaty (judgments in Joined Cases 15 and 16/76 France v Commission [1979] ECR 321 and in Case 240/86 Commission v Greece [1988] ECR 1835 at paragraphs 14 and 15).
The Commission takes the view that there are no grounds for joining these proceedings with the other cases calling KYDEP's operations in question as those other cases are, as far as some of them are concerned, res judicata.
The Hellenic Republic suggests that in view of the related nature of Cases C-35/88, C-32/89, C-110/89 and C-385/89 with this case the Court should order their joinder.
It states, moreover, that the solutions found in Joined Cases 15 and 16/76 and 240/86 cannot be transposed to this case.
The failure to fulfil obligations resulting from an intervention by the Greek authorities on the market in cereals
1. The facts in dispute
The Commission's arguments are directed both to defining the facts to which the complaint relates and to rejecting the submission put forward by the Hellenic Republic in its defence to the effect that the application, as far as this complaint is concerned, is vague.
(a) The facts referred to by the Commission
— The programme contracts
1. By the expression ‘programme contracts’ the Commission ‘refers, in general, to the collaboration and the formal (and informal) agreements between the Greek authorities (Ministry of Economic Affairs, the office for promoting exports and, occasionally, the Ministry of Agriculture), the representatives of the Greek millers and KYDEP, under which KYDEP undertakes to sell its stocks of common and durum wheat to the millers on privileged conditions, financed by the Greek State, on condition that the flour, meal and manufactured pasta products are exported. Such contracts are called programme contracts because they constitute a kind of programme for the sale of KYDEP's cereals stocks, in which provision is made for the quantities of cereals to be marketed each year, the conditions and method of financing and the like.’
2. According to the Commission, programme contracts were concluded between the State, the millers and KYDEP from 1982 to 1986. In executing these programme contracts KYDEP concluded contracts under private law with traders in conditions which were to their advantage. Two examples of these contracts under private law are included ín the documents before the Court.
3. Because of the Greek authorities' refusal to cooperate, the applicant has not been able to put before the Court a copy of the programme contracts. However, their existence is proved: (i) by the content of the clauses of the contracts concluded between KYDEP and the private traders: they required the purchaser to mill and export the flour within a given period. It was provided that fines should be paid to KYDEP and the State if the exporter did not repatriate the foreign currency. Finally, one of the clauses of the contracts allowed the purchaser eight months' interest-free credit before paying the purchase price. Such clauses had no relation to KYDEP's commercial or financial interests. They were justified only in relation to the programme contracts for the performance of which those contracts had been signed; (ii) by the amount of the sale prices for wheat laid down in the contracts concluded between KYDEP and the private traders: the sale price laid down in the two contracts before the Court was DR 14650 per tonne for a good quality product, whereas the Community intervention price, which is generally an indication of the price applied in the, trade was then DR 14763 (in January 1983) and DR 16012 (in February 1983). Those price conditions, added to the eight months' interest-free credit, were obviously to the disadvantage of any exporters who obtained supplies on normal market conditions; (iii) by KYDEP's internal documents produced by the Commission: those documents, which were sent to the Commission by complainants, show that as from 1982 KYDEP was faced with very serious problems in the collection, storage and marketing of wheat. That situation was the result of an increase in the stocks arising, on the one hand, from the duty imposed on KYDEP by ministerial circular to purchase large quantities of durum wheat from the 1982 harvest (sec, on this point, the judgment in Case C-281/87 Commission v Greece [1989] ECR 4015) and, on the other hand, from the high prices at which KYDEP, at the request of the Greek authorities, had purchased the wheat during the 1982 harvest. The marketing of the stocks was all the more necessary because the increase in interest rates in 1983 was to result in a considerable increase in storage costs (see, on this point, the judgment in Case 57/86 Greece v Commission [1988] ECR 2855). As shown by the report of the 36th general meeting of KYDEP and its internal memorandum dated 16 April 1984, KYDEP wished at all costs to process its stocks into flour and export them at prices subsidized by the State so as to reduce its management costs and to free space in its warehouses for subsequent harvests; (iv) by the analytical report of KYDEP's balance-sheet accounts for the 1988 financial year. That report, signed by the assistant managing director of KYDEP, refers in particular, on the subject of sums due from the State, to two programme contracts signed with the Ministry of Economic Affairs concerning cereals from the 1982 and 1983 harvests. The sums owed amounted to DR 4208976152 and DR 139 575 642. That document also refers to debit balances which were ‘covered’ by funds from the State budget.
4. These programme contracts are appropriate to the exercise of public authority by the State itself or to financial bodies acting on its instructions and for its abcount. It is, moreover, significant to note that, at the time these contracts were concluded, account was taken of factors, such as the level of employment among mill and dock workers in Greece, which had no bearing on KYDEP's commercial interests (see, on this point, KYDEP's memorandum of 16 April 1984).
5. Programme contracts similar to the previous programme contracts were also concluded for the processing of durum wheat to be exported as pasta products. It may be seen from Memorandum No 2 of 31 January 1984 from the Governor of the Bank of Greece that the Bank had, on the instructions of the Ministry of Economic Affairs, agreed that the commercial banks might provide finance on advantageous terms for pasta manufacturers purchasing their durum wheat from KYDEP for processing and export. The aids granted to KYDEP for export of flour In 1984, 1985 and 1986, KYDEP, in view of the financial requirements of the private exporters, took it upon itself, as shown by the report of its 36th general meeting, to export flour. A subsidy of DR 2.45 per kg of flour exported was paid it by the State. The circumstances in which 340000 tonnes of wheat were delivered by KYDEP into Community intervention The delivery into Community intervention was effected in 1982 on instructions from the Greek Government. The State made itself responsible for the difference between the cost price and the intervention price (report of KYDEP's 36th general meeting). The privileged relations between the State and KYDEP As is shown by the developments already described, there are privileged organic and financial links between the State and KYDEP. Thus the State collaborated closely with KYDEP at the time of the conclusion of the programme contracts. The State covered the deficits resulting from the performance of the programme contracts and also the deficits arising from KYDEP's other operations in the cereals sector. To prove the existence of these privileged links, already referred to in Cases C-35/88 and C-32/89, the Commission refers particularly to: (1) Memorandum No 156 of 16 December 1982 from the Governor of the Bank of Greece. That document shows that KYDEP, on the instructions of the Greek Government, concluded contracts with the private traders for the execution of the programme contracts relating to the milling and export of the wheat by granting considerable credit facilities to the exporters. The Agricultural Bank, on the instructions of the Bank of Greece — that is, in fact, on the instructions of the Greek Government (for the relationship between the State and the Bank of Greece, see the judgment in Case 57/86 Greece v Commission, previously cited) — covered, by the grant of preferential financing, KYDEP's deficits resulting from the facilities KYDEP had offered to the exporters. The Bank of Greece itself reimbursed the Agricultural Bank to the extent of the preferential financing it had granted KYDEP; (2) the analytical report of KYDEP's balance-sheet accounts for the financial year 1988. That report states that, by decree of the Minister for Economic Affairs, a committee was set up composed of representatives of the office for the promotion of exports, the Ministry of Economic Affairs and KYDEP. The committee's task was to negotiate with the Greek millers to persuade them, in return for the payment of a subsidy from the Ministry of Economic Affairs, to buy from KYDEP the wheal from the 1982 and 1983 harvests for processing and export; (3) The letters exchanged between KYDEP and the millers' federations. These letters show the close interplay between the Greek authorities and KYDEP. Thus, in the event of difficulties in the performance of a contract concluded between an exporter and KYDEP, the Ministry of Economic Affairs could prolong the period for performance of the contract. On the other hand it was KYDEP which, in its letter of 12 December 1983 to the crushing mills and millers' federations, specified the supporting documents to be sent to it under the contracts under private law concluded for the performance of the programme contracts for the milling and export of common wheat from the 1982 harvest. Apart from these precisely specified facts, the Commission asks the Court to take into account, in giving judgment in these proceedings, KYDEP's operations in general and to consider as a whole the practical and legal links between KYDEP and the State. The various heads of claim all relate to State intervention on the market in cereals through the intermediary of KYDEP. (b) Contrary to the Hellenic Republic's assertion, the application is not ‘vague’ as regards the description of the facts at issue. The documents produced in support of the action, on which the defendant offers no explanation, are, moreover, convincing. It is entirely the defendant's fault that the Commission has been unable to produce copies of the programme contracts. The documents produced by the Commission and more particularly the two contracts concluded by KYDEP with private traders prove that programme contracts were concluded and executed. Contrary to the defendant's allegation, KYDEP's deficits arising from the performance of the programme contracts are detailed in the application. In any event, regard being had to the nature of the alleged failure to comply with obligations, there is no need to mention the exact calculation of the amount of the deficits. Finally the differences between the version of the report of KYDEP's 36th general meeting put before the Court by the Commission and the official version of the report are not significant and do not make it possible to invalidate the Commission's arguments.
The Hellenic Republic challenges the substance of the allegations against it.
a) With regard to the existence and performance of the programme contracts, it states that its point of view has already been set out in Cases C-32/89 and C-385/89. It denies that these contracts even existed and emphasizes that the Commission, on which the burden of proof rests, produces no clear and specific evidence in support of its allegations. The application, in so far as it relates to the aspect of failure to fulfil obligations, is so vague as to warrant its dismissal by the Court.
b) As regards the question of proof of the allegations, the defendant puts forward the following arguments:
the Commission cannot validly maintain the existence of programme contracts which it has not been able to produce to the Court and the content of which it cannot therefore know. The contracts under private law produced by the applicant do not make it possible to deduce that such programme contracts existed;
the exact amounts of KYDEP's deficits allegedly covered by the State are not mentioned in the application;
the version of the report of KYDEP's 36th general meeting produced by the Commission, on which the Commission relies, differs in important respects from the official version of the report;
the two programme contracts relating to the sale of durum wheat to which the Commission particularly refers never ‘materialized’. The Greek traders had asked for these contracts to be concluded because of difficulties concerning exports of meal to Algeria. It was becoming difficult to maintain this traditional market outlet in the absence of Community aids. When it was informed of this situation by the Greek authorities, the management committee did not give any positive reply. Consequently the programme contracts never materialized and no subsidy was paid.
It should be noted, moreover, that if those contracts had materialized and if public funds had been transferred to KYDEP in connection with their execution, KYDEP would not have had a claim against the State amounting to DR 4344000000 (the actual existence of this debt is demonstrated by a document which the Commission produced in Case C-35/88).
Indeed, it is impossible to accept, in the absence of an actual payment of the sums of money in question by the State, that the contracts were performed and that a State aid was paid;
in general KYDEP's internal documents produced to the Court do not prove that the programme contracts materialized or that funds were actually transferred from the State budget to KYDEP as part of the execution of such contracts.
2. The disregard of the rules of the common organization of the markets
In support of its case, the Commission refers, on the one hand, to the general principles applicable to the common organization of the markets in the cereals sector and, on the other hand, to the exact provisions of the said Regulation No 2727/75 which were disregarded by the Hellenic Republic.
a) The general principles governing a common organization of the markets such as that in the cereals sector arc as follows: the absence of any national intervention scheme and of any measure derogating from or impairing the common organization of the markets, the existence of an open market to which every producer has free access and the functioning of which is regulated solely by the instruments provided for by that organization, a prohibition of the offering by Member Slates of any special advantage to their producers or cooperatives, in particular by the grant of export subsidies (see in this connection the judgments in Case C-281/87 Commission v Greece, previously cited, at paragraph 16, and in Case C-35/88 Commission v Greece [1990] ECR I-3125 at paragraphs 29 and 30). These principles were disregarded by the programme contracts mentioned above, which set up a national intervention scheme and distorted the rules of competition by granting a special advantage to exporters who obtained their supplies from KYDEP.
b) Regard being had to the developments already described, the Commission thinks it is not necessary to specify which provisions of Regulation No 2727/75 have been infringed in order to prove that its claims are well founded. In any event it gives the following information on that point:
the credit facilities granted by KYDEP to purchasers of cereals during the period 1982 to 1986 on the instructions of the State and with State finance distorted the Community price system and the intervention system and infringed in particular Articles 3, 7, 8 and 10 of Regulation No 2727/75 as amended by Regulation No 1143/76, previously cited;
these credit facilities also resulted in a distortion in the application of the system of Community export refunds laid down by Article 16 of the regulation;
the high prices at which KYDEP had purchased cereals from the 1982 harvest represented in fact a production refund which is not envisaged by Article 11 of the regulation (as amended by Regulation No 1870/80, already cited) and which was contrary to Article 10, defining the conditions on which a production aid for durum wheat is authorized.
The Commission emphasizes that the complaints must be examined in the light of the provisions of the said Regulation No 2727/75 as amended during the period in question, which extends from 1982 to 1986.
Contrary to the defendant's contention, the provisions referred to were not substantially amended during that period (see in that connection the judgment in Case C-35/88 Commission v Greece, previously cited, and Mr Mischo's Opinion).
The Hellenic Republic claims that the Commission does not relate the facts in dispute to the specific provisions of the said Regulation No 2727/75.
There is no connection between those facts and the version of those articles mentioned by the applicant which were in force at the time.
Article 3, in the version in force until May 1986, prior to the said Regulation No 1579/86, specifies the dates of the marketing year.
Articles 7, 8, 10, 11 and 16 of Regulation No 2727/75 were the subject of a series of amendments and the provisions of those articles which are alleged to have been disregarded are not clearly apparent.
Article 8 is an enabling provision which does not lay clown specific rules.
The Commission's application, in so far as it relates to this allegation of failure to fulfil obligations, is as a result equally vague as regards the provisions of Community law which have, it is alleged, been infringed. The Commission itself acknowledges that an application must be drawn up in such a way as to make it possible to distinguish the complaints on which the applicant intends to rely. In this case that condition is obviously not met.
The failure to fulfil obligations as a result of the omission to notify aids
1. According to the Commission, it is apparent from the Court's consistent case-law that interest rebates or other preferential conditions for financing exports constitute State aids incompatible with the common market (judgments in Joined Cases 6 and 11/69 Commission v France [1969] ECR 523 and in Case 57/86 Greece v Commission [1988] ECR 2855). According to the case-law there is no need to make a distinction between cases in which the aid is granted directly by the State and those in which it is granted by public or private bodies established or designated by the State as responsible for administering the aid. The aids previously mentioned are, accordingly, State aids of which the Commission ought to have been informed in the circumstances envisaged in Article 93(3) of the EEC Treaty. An action brought by the Commission on the basis of Article 169 of the Treaty for a declaration that there has been such a failure to fulfil obligations is admissible (judgment in Case C-35/88 Commission v Greece, previously cited, at paragraphs 34 to 37).
2. The Hellenic Republic relies on the judgments in Case 74/76 Ianelli & Volpi v Aleroni [1977] ECR 557 at paragraphs 11 and 12 and in Case 290/83 Commission v France [1985] ECR 439 at paragraph 16, in contending that claims for a declaration that there has been such a failure to fulfil obligations are inadmissible. Only the specific procedure laid clown by Article 93(2) of the Treaty and not that of Article 169, is applicable when the compatibility of an aid with the common market is at issue.
The failure to fulfil obligations arising from the Hellenic Republic's lack of cooperation
1. The facts in dispute
According to the Commission, the Greek authorities:
obstinately refused to send the Commission all the information requested or to reply to the Commission's objections. Lord Cockfield, a Member of the Commission, asked for information on the working of KYDEP, and by letter dated 14 March 1985 the Greek Minister for Agriculture referred the Commission to KYDEP which itself provided no precise reply;
obstructed the holding of an inquiry on the spot concerning KYDEP. The Commission's telex messages of 7 and 28 April 1986 asking the Greek Minister for Agriculture for authorization to conduct such an inquiry did not meet with agreement;
refused to provide the decrees and decisions concerning the instances in which KYDEP intervened on the market in cereals;
continued, in the replies to the telex message of 23 December 1985, in the reply to the formal notice of 2 September 1987 and in the written observations submitted to the Court, to disguise the truth about the programme contracts in spite of the documents held by the Commission.
The Hellenic Republic disputes the substance of the facts alleged against it.
Thus the Greek authorities replied, by a letter of 14 March 1986, to the Commission's telex message of 23 December 1985 requesting information on the programme contracts.
Furthermore, the Hellenic Republic never refused to co-operate or to supply information to the Community institutions. The Commission was able to make on-the-spot checks. As regards KYDEP in particular, it is a legal person under private law which the State cannot subject to control. The Commission, to which KYDEP has already sent its accounts, could use other legal methods provided by Community law to keep a check on KYDEP.
Finally it should be noted that there was a letter of 8 April 1985 from the Greek Minister for Agriculture to Lord Cockfield.
2. The failures to fulfil obligations
The Commission claims that the facts to which it refers constitute a failure to fulfil obligations under Article 24 of Regulation No 2727/75. That article, which was not amended during the period in question, imposes on Member States an obligation to communicate all information relating to the operation of the market in cereals.
These facts also constitute a failure to comply with the provisions of Article 5 of the Treaty (judgment in Case C-35/88, previously cited, at paragraph 38 et seq.).
The Hellenic Republic largely restricts itself to challenging the substance of the facts in dispute. With regard to Article 24 of the said Regulation No 2727/75, it does, however, claim that the procedure of Article 26, to which Article 24 refers, was not followed.
IV — Answers to questions put by the Court
A — Questions to the Commission
First question
The Commission was asked to indicate, and to specify the purpose of, the various programme contracts which it claims were concluded and performed during the period 1982 to 1986.
Answer
In the Commission's opinion the following programme contracts were concluded and executed during the years 1982 to 1986.
1. 1982
1.1. A contract was signed by KYDEP and the millers' federation on the instructions and for the account of the Ministry of Economic Affairs concerning the milling of 500 tonnes of common wheat with a requirement to export the resultant product within eight months from receipt of the raw materials. This contract represented a total charge to the Hellenic Republic of DR 1500000000.
1.2. Other contracts must have been concluded between KYDEP and the Hellenic Republic and subsequently performed. Annex XII to the application deals with a sum owed to KYDEP by the Hellenic Republic in respect of programme contracts concluded with the Ministry of Economic Affairs amounting to DR 4208976152. The Commission is not aware of the exact number of these contracts and does not know whether they are related to common or durum wheat.
2. 1983
One or more contracts must have been concluded between KYDEP and the Hellenic Republic and subsequently performed. Annex XII to the application deals with a sum owed to KYDEP by the Hellenic Republic in respect of programme contracts concluded with the Ministry of Economic Affairs amounting to DR 139575642. The Commission does not know whether these contracts related to common or durum wheat.
3. 1984
3.1. A contract was signed by KYDEP and the Hellenic Republic for the milling of 400000 or 435000 tonnes of common wheat. This contract represented a total charge to the Hellenic Republic of DR 710 million.
3.2. A contract must also have been signed by KYDEP and the millers' federation in August 1984, as specified in Annex XII to the application. The Commission does not know cither the exact number of tonnes, the type of cereals concerned or the total cost to the Hellenic Republic of this contract.
3.3. At two points in Annex XII to the application it is specified that KYDEP's deficit arising from the milling of cereals amounts to DR 1555996988 for 1984/1985. It is not clear whether this deficit comes from the contracts mentioned in paragraphs 3.1 and 3.2 above or from other contracts.
4. 1985
4.1. A contract was signed by KYDEP and the Ministry of Economic Affairs relating to the export of 40000 tonnes of meal, the equivalent of 78000 tonnes of durum wheat (Annex IV to the application).
4.2. A contract was signed by KYDEP and the Ministry of Economic Affairs relating to the export of 8900 tonnes of pasta products, the equivalent of 15000 tonnes of durum wheat (Annex IV to the application). The manufacturers of pasta products bought these quantities from KYDEP on the terms of Memorandum No 2 of 31 January 1984 from the Governor of the Bank of Greece (Annex XIII to the application).
5. 1986
One or more contracts must have been concluded between KYDEP and the Ministry of Economic Affairs and subsequently performed. Annex XII to the application specifies that the administrative deficit resulting from the milling of cereals from the 1986 harvest amounts to DR 1084620220.
The Commission emphasizes that in its judgment in Case C-32/89 Greece v Commission [1991] ECR I-1321 the Court has already decided as to the existence of the four contracts referred to in paragraphs 1.1, 3.1, 4.1 and 4.2 above. Moreover, as the Court also stated in that judgment, the Hellenic Republic has not put forward any evidence to the effect that relations between KYDEP and the Greek authorities, as they appear from the actions described in the Commission's application, changed during the period 1982 to 1986 or before proceedings were brought in 1990. It must therefore be accepted that during the period in question the Greek authorities had full control of the transactions carried out by KYDEP and covered its deficits.
Second question
The Commission was asked to show, with regard to the exports of flour allegedly carried out by KYDEP itself with the aid of subsidies granted by the State:
whether such exports were effected in the course of performance of one or more programme contracts;
what specific documents make it possible, in the Commission's view, to prove that the transactions in question were effected and subsidized in 1985 and 1986.
Answer
Answer
Referring to the answers which it gave to the first question, the Commission states that KYDEP itself exported flour with the aid of subsidies granted by the State. There was certainly more than one programme contract. The Commission does not know the exact number because of the very complicated arrangements used by KYDEP for the milling and export of the cereals. For a description of the system, from KYDEP's point of view, the Commission refers to Annex XII to the application. Taking as its sole criterion the deficit shown for each financial year in KYDEP's balance-sheets, the Commission concludes that seven contracts in all were concluded and performed by KYDEP itself during the years 1982 to 1986, according to the description given above.
As regards the documents making it possible to prove that KYDEP performed the contracts mentioned above, the Commission refers to the answers given to the first question.
Third question
The Commission was asked to specify the aids of which, in its view, it should have been informed in pursuance of the provisions of Article 93(3) of the EEC Treaty, stating in particular who received these aids (KYDEP, the wheat producers, exporters or others).
1. The main characteristic of KYDEP's working during the period in question was that its deficits were systematically covered by the State budget (see in this connection Cases C-35/88, C-32/89 and C-110/89). During the period concerned KYDEP operated on the market in cereals on the instructions and for the account of the Hellenic Republic (Annexes IV, X and XII to the application). The Hellenic Republic should have provided information on the ministerial decrees under which the State covered KYDEP's deficits. The Commission adds that there is no doubt, moreover, that the coverage of KYDEP's deficits by the State budget constituted an aid granted by a State within the meaning of Article 92(1) of the Treaty and ought to have been reported in pursuance of Article 93(3) (judgment in Case C-35/88 Commission v Greece [1990] ECR I-3125 at paragraph 35). The aids granted during the period in question took the form inter alia of an eight months' interest-free credit for payment by the millers of the purchase price of the wheat (Annexes IIa and lib to the application). The millers and exporters were the immediate and final recipients of these aids, whilst KYDEP itself had the indirect benefit of coverage of its deficits. The abovementioned aid granted to the millers had the effect of making attractive, that is, of reducing, the purchase price of cereals from KYDEP, which had previously paid the producers purchase prices in excess of the Community intervention prices. Without the artificial reduction of the price of the cereals owing to this aid it would not have been financially possible for KYDEP to sell the wheat concerned to the millers and exporters. The Commission could therefore state that the aid was passed on in the last resort, by means of this very complicated machinery, to the cereal producers themselves, since KYDEP had bought the cereals from them at prices in excess of Community intervention prices (see in this connection Annex XII to the application). Apart from the aids described above, the Hellenic Republic ought to have reported the following aids and documents: Memorandum No 156 of 16 December 1982 from the Governor of the Bank of Greece, by which the Agricultural Bank extended the duration of the finance it was granting to KYDEP ‘by the length of time needed for covering the credits granted by KYDEP to the purchasers of wheat’, with an interest rebate similar to that fixed by Memorandum No 3 of 3 July 1982 from the Governor of the Bank of Greece (Annex XVI to the application). KYDEP itself was the final recipient of that aid owing to a very complicated mechanism for coverage of its deficits by the Agricultural Bank and the equivalent coverage of the latter's deficits by means of its refinancing by the Bank of Greece. The Bank of Greece indisputably acted on the instructions and for the account of the Hellenic Republic; Memorandum No 2 of 31 January 1984 from the Governor of the Bank of Greece agreeing that the commercial banks should finance the purchase by the manufacturers of pasta products of 40000 tonnes of durum wheat exclusively from KYDEP. The State aid consisted in the grant of finance at a low rate of interest (21.5%) which might be used to cover up to 100% of the purchase price of the aforementioned quantity of wheat from KYDEP. The manufacturers of pasta products were the final and direct recipients of this aid, from which KYDEP benefited indirectly through having the opportunity to market its surpluses during that period; the aid mentioned on page 12 of Annex X to the application, by which the Greek Government covered the difference between the purchase price and the Community intervention price to the extent of 346000 tonnes of wheat for 1982. It appears that KYDEP purchased that quantity of wheat from the producers at a price in excess of that which it had itself received in delivering the wheat into Community intervention. As shown in Annex X to the application, that difference was covered by the Greek Treasury. Consequently KYDEP is the immediate recipient of that aid, whereas it seems that finally the aid was indirectly passed on to the producers, who enjoyed purchase prices higher than those they would have obtained if they had delivered their production direct into Community intervention.
B — Questions to the Hellenic Republic
First question
The Hellenic Republic was asked to state whether the clauses of the contracts produced by the Commission in support of its application (Annexes IIa and lib to the application) and more particularly the provisions of Articles 4, 6 and 10 of those contracts corresponded to the usual clauses of the contracts concluded between KYDEP and the exporters, and if not what were the reasons justifying those clauses.
Answer
The Hellenic Republic states that it passed the questions on to KYDEP, which is a legal person under private law and did not reply. It is therefore impossible for the Hellenic Republic, on the basis of the documents before the Court, to form any opinion as to whether or not the clauses in the contracts are customary.
Second question
The Hellenic Republic was asked to produce to the Court the following documents:
the special decision of the prices and incomes committee mentioned on page 44 of the analytical report of KYDEP's 1988 balance-sheet accounts (Annex XII to the application);
the decree of the Minister for Economic Affairs setting up the committee referred to on pages 70 and 71 of the analytical report of KYDEP's 1988 balance-sheet accounts (mentioned above);
document No 3588/C 1071 of 30 December 1983 from the Ministry of Economic Affairs mentioned in the citations to Memorandum No 2 of 31 January 1984 from the Governor of the Bank of Greece (Annex XIII to the application);
the proposal from the Ministry of Economic Affairs mentioned in the citations to Memorandum No 156 of 24 December 1982 from the Director of the Bank of Greece (Annex XVI to the application);
Memorandum No 3 of 3 July 1982 from the Governor of the Bank of Greece mentioned in Article 2 of Memorandum No 156 of 24 December 1982, mentioned above.
Answer
The Hellenic Republic states that these documents are not in its file on the case. They were requested from the departments responsible, which did not, however, provide them within the prescribed period.
F. Grévisse
Judge-Rapporteur
1 Language of the case: Greek.