Report of the Judge-Rapporteur in Case C-79/91

1. The relevant Community legislation

a) Council Regulation (EEC) No 856/84 of 31 March 1984 amending Regulation (EEC) No 804/68 on the common organization of the market in milk and milk products (OJ 1984 L 90, p. 10) introduced an ‘additional levy’ on the quantities of milk delivered which exceed a reference quantity to be determined.

b) General rules for the application of the additional levy were laid down in Council Regulation (EEC) No 857/84 of 31 March 1984 adopting general rules for the application of the levy referred to in Article 5c of Regulation (EEC) No 804/68 in the milk and milk products sector (OJ 1984 L 90, p. 13). This regulation determines, among other things, the reference quantity referred to in the basic Regulation No 856/84, that is, the quantity exempt from the additional levy. In principle, that quantity is equal to the quantity of milk or milk equivalent delivered by a producer (formula A) or purchased by a purchaser (formula B) during the 1981 calendar year, plus 1%. However, Member States may provide that on their territory the reference quantity is equal to the quantity of milk or milk equivalent delivered or purchased during the 1982 calendar year or the 1983 calendar year, weighted by a percentage established so as not to exceed the guaranteed quantity (Article 2(2)). Articles 3, 3a, 4 and 4a of Regulation No 857/84, as amended, allow Member States to take account of certain special situations when fixing the reference quantities or granting specific or additional reference quantities. Article 7(1) and (4) of Regulation No 857/84, as amended by Council Regulation (EEC) No 590/85 of 26 February 1985 (OJ 1985 L 68, p. 1), provides as follows: ‘1. Where a holding is sold, leased or transferred by inheritance, all or part of the corresponding reference quantity shall be transferred to the purchaser, tenant or heir according to procedures to be determined. ... 4. In the case of rural leases due to expire, where the lessee is not entitled to an extension of the lease on similar terms, Member States may provide that all or part of the reference quantity corresponding to the holding [or part thereof] which forms the subject of the lease shall be put at the disposal of the departing lessee if he intends to continue milk production. ...’ Article 12(d) of Regulation No 857/84 defines the concept of ‘holding’, within the meaning of this regulation, as follows:‘all the production units operated by the producer and located within the geographical territory of the Community’.

c) The rules for applying the scheme were laid down in Commission Regulation (EEC) No 1371/84 of 16 May 1984 laying down detailed rules for the application of the additional levy referred to in Article 5c of Regulation (EEC) No 804/68 (OJ 1984 L 132, p. 11). Article 5 of that regulation is worded as follows:

‘For the purposes of applying Article 7(1) of Regulation (EEC) No 857/84 ... the following rules shall apply to the transfer of reference quantities granted to producers and purchasers in application of formulas A and B and of reference quantities granted to producers selling for direct consumption:

1. Where an entire holding is sold, leased or transferred by inheritance, the corresponding reference quantity shall be transferred in full to the producer who takes over the holding.

2. Where one or several parts of a holding is sold, leased or transferred by inheritance, the corresponding reference quantity shall be distributed among the producers operating the holding in proportion to the areas used for milk production or according to other objective criteria laid down by Member States. Member States may disregard transferred parts the area of which used for milk production is less than a minimum size which they shall determine.

3. The provisions of subparagraphs 1 and 2 above shall also be applicable in other cases of transfer which, under the various national rules, have comparable legal effects as far as producers are concerned. Member States may apply the provisions of subparagraphs 1 and 2 in respect of transfers taking place during and after the reference period.’

Regulation No 1371/84 was replaced by Commission Regulation (EEC) No 1546/88 of 3 June 1988 laying down detailed rules for the application of the additional levy referred to in Article 5c of Regulation (EEC) No 804/68 (OJ 1988 L 139, p. 12) with effect from 4 June 1988. Article 7 of the new regulation essentially reiterates the provisions of Article 5 of the repealed legislation.

2. The dispute in the main proceedings

Walter Knüfer operated a dairy farm which had been leased to his family since the last century. The surface area of the farm was 10.2112 hectares, consisting of 0.2395 hectares of farmyard and buildings, 0.0879 hectares of woodland, 0.1059 hectares of paths and lanes and 9.7779 hectares of cultivatable land, including 0.06 hectares of garden adjoining the farmhouse. In addition to the above areas, which belonged to the lessor, Mr Knüfer also leased 4.75 hectares from a Mr Holsteg and 0.75 hectares from a Mr Neuenhaus. As a result, he had been granted milk reference quantities of 88300 kg.

The farm lease with Mr Holsteg was terminated by mutual agreement on 28 February 1987. On that occasion Mr Knüfer and the landowner agreed that a reference quantity of 23750 kg of milk (5000 kg/hectare, multiplied by 4.75 hectares) should be transferred to Mr Holsteg. The Land-wirtschaftskammer Rheinland (Chamber of Agriculture for the Rhineland) issued a certificate for this quantity in accordance with the German regulations adopted for the implementation of the additional levy scheme.

The father of Mr Buchmann gave notice of termination of the farm lease with effect from 1 November 1986, and the property covered by the lease was actually surrendered on 5 November 1986. On 14 October 1986 Mr Buchmann and his father signed an agreement for the transfer of the entire landed property, comprising about 130 hectares, to Mr Buchmann, on the understanding that the transfer of the property and its usage should take effect when the Landwirtschaftsgericht (Agricultural Tribunal) approved the assignment, as it did on 17 December 1986.

Mr Buchmann asked the Landwirtschaftskammer Rheinland to certify the transfer of a certain reference quantity as a result of the devolution to him of the entire holding until then held by his father and in respect of the property previously leased to Mr Knüfer.

As that request was not met in full, Mr Buchmann challenged the partial refusal.

The action was dismissed by the Verwaltungsgericht (Administrative Court). By decision of 29 June 1988, the Oberverwaltungs-gericht (Supreme Administrative Court) also rejected his appeal but varied the original judgment by declaring that under the German regulations implementing the Community scheme the defendant was required to issue a certificate showing the transfer of a reference quantity of 56387 kg of milk from Mr Knüfer to the father of Mr Buchmann on 5 November 1986 and from him to Mr Buchmann on 17 December 1986.

Mr Knüfer appealed on a point of law to the Bundes-verwaltungsgericht (Federal Administrative Court) while Mr Buchmann raised a procedural issue.

The Bundes-verwaltungsgericht considered that its decision depended on the interpretation of the concept of ‘areas used for milk production’ in Article 5(2) of Regulation No 1371/84. It therefore stayed the proceedings and made a reference to the Court under Article 177 of the EEC Treaty for a preliminary ruling on the following question:

‘Does the expression “areas used for milk production” in Article 5(2) of Regulation (EEC) No 1371/84 include the yard, buildings and road areas of the holding, as that term is used in that provision?’

In the grounds of the order for reference the national court states that the provisions of Article 5(2) of Regulation No 1371/84 are applicable in the event of the surrender of a leased holding, in accordance with Article 5(3) of Regulation No 1371/84. In this instance Article 5(2) of Regulation No 1371/84 must be applied, given the fact that, as a result of the termination of different rural leases, the holding of the lessor in the present case was taken over not by a single producer but by several producers, so that the reference quantity must in principle be distributed among the various producers operating the holding.

The Bundes-verwaltungsgericht adds that if it were necessary to apply in the present case not Regulation No 1371/84 but Regulation No 1546/88, the Court of Justice is invited to reply to the question put to it, bearing in mind the similar concept referred to in Article 7(2) of Regulation No 1546/88.

3. Procedure before the Court

The order for reference was received at the Court Registry on 26 February 1991.

Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted by Walter Buchmann, represented by Messrs Lukanow and Tönnesmann, of the Euskirchen Bar, and by the Commission of the European Communities, represented by its Legal Adviser, Dierk Booss, acting as Agent, assisted by Hans-Jürgen Rabe, of the Hamburg Bar.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided on 13 May 1992 to assign the case to the Third Chamber pursuant to Article 95 of the Rules of Procedure. In accordance with Article 104(4) of the Rules of Procedure, the Court (Third Chamber) decided that no oral procedure would be held.

II — Written observations

1. Mr Buchmann maintains that the definition of a holding as set out in Article 12(d) of Regulation No 857/84 should be taken as the basis for the reply to the question raised by the national court. According to this definition, a holding consists of ‘all the production units operated by the producer ...’. According to Mr Buchmann, the Court has consistently held that the buildings and their surroundings, including the cowshed and the other farm buildings necessary for milk production, together with the accommodation occupied by the farmer, are part of ‘all’ the production units operated by the producer. Moreover, according to the interpretation given in the judgment in Case 5/88 Wachauf v Germany [1989] ECR2609, even land which has never been used for milk production forms part of the holding of the milk producer. In the opinion of Mr Buchmann, it is therefore irrelevant to seek to determine whether the surface areas of the holding are considered as ‘fodder’ areas in that they constitute the cattle's main source of food. Mr Buchmann considers that as Regulation No 857/84 forms the legal basis of the restrictions on production in the dairy market, there is no need to rely on the implementing provisions contained in Commission Regulation No 1371/84 for purposes of interpretation. On the other hand, Article 3 of Regulation No 857/84, which relates to the choice of a different calendar reference year within the period from 1981 to 1983, provides indications to the effect that the exceptional events which may justify the choice of another calendar reference year may stem, inter alia, from the ‘accidental destruction of the producer's fodder resources or buildings used for dairy livestock’. According to Mr Buchmann, Article 5 of Regulation No 1371/84 is not open to a different interpretation. This provision relates to the lease or termination of the lease of a holding or part of a holding. In the latter case, the corresponding reference quantity is distributed among the producers operating the holding in proportion to the areas used for milk production (or according to other objective criteria laid down by Member States). Mr Buchmann states that the buildings and their surroundings, being part of a holding specialized in milk production, could be leased or sold separately without necessarily involving fodder areas on which no buildings stand. A milk producer who owns an entire holding with a reference quantity may be content to lease the areas to be used as pasture, or even the main part of a separate farm, as may occur, for example, when a holding is inherited or is being rationalized by a milk producer with two milk production holdings. According to Mr Buchmann, the buildings of a milk production holding and their surrounding areas are areas used for milk production, because if such a holding is viewed in economic terms milk cannot conceivably be produced permanently, in normal operating conditions, solely on the open-air areas intended for the basic feeding of the animals without the buildings and surrounding areas needed by the milk producer. In Mr Buchmann's view, the lanes serving the holding must also be included in the definition of areas used for milk production in so far as they are the property of the producer. Given that the dairy herd is regularly driven from the surrounding meadows to the cowshed for milking and that it must be able to reach the holding's pastures, the lanes giving access to the meadows and to the buildings and their surrounding areas form part of the areas used for milk production within the holding. Mr Buchmann adds that Article 5 of Regulation No 1371/84 should also be applied in the event of the surrender of a leased holding, without its being necessary to consider whether the lessee operated only this holding or also other areas of agricultural land. Given that the Community regulations contemplate only leasing to another party, the concept of a holding should be examined from the point of view of the lessor. However, the latter can let only his own holding, excluding areas leased from third parties, so that upon the surrender of the leased property the holding to be surrendered must be treated as a single holding. The unity of this holding, which has been leased and is to be surrendered, cannot be altered by the fact that during the term of the lease the lessee concluded other agricultural leases. In conclusion, Mr Buchmann proposes that the reply to the question put by the national court should be as follows:

‘The expression “areas used for milk production” in Article 5(1)(2) of Regulation No 1371/84 includes all the production units operated by the milk producer, including the farmyard with its buildings and the private paths attached to the agricultural holding’.

2. The Commission points out, by way of introduction, that in paragraph 15 of the Wachauf judgment, cited above, the Court stated that the surrender of a tenanted holding upon the expiry of a lease has comparable legal effects, within the meaning of Article 5(3) of Regulation No 1371/84, to those brought about by the transfer of the holding upon the grant of the lease and that consequently the surrender, upon the expiry of the lease, of leased agricultural production units is a case covered by Article 5(3). In the opinion of the Commission, this finding applies not only to the surrender of the entire tenanted holding (Article 5(1)) but also to the reversion of part of the holding to its owner upon expiry of the lease (Article 5(2)). The Commission further notes that the Federal Republic of Germany has not made use of the option available under Article 5(2) to provide for the reference quantity to be distributed according to objective criteria other than the areas used for milk production. Paragraph 7(2) and (3a) of the Milch-mengen-garantie-Verordnung (MGVO), as published on 20 December 1984 (Bundesgesetzblatt 1985, Part I, p. 6) and on 18 June 1986 (Bundesgesetzblatt 1986, Par-t I, p. 911), lays down provisions regulating only the consequences of the surrender of the tenanted property for the level of the reference quantity. It does not establish any other objective criterion for calculating the reference quantity, so that the applicable provisions are those of Article 5(2) of Regulation No 1371/84, which links the calculation of the reference quantity to the areas used for milk production. In the opinion of the Commission, an interpretation of Article 5(2) should begin with the wording of the paragraph. It is immediately apparent from the text that the areas used for milk production are strictly defined in relation to the area of the holding as a whole. The provision should therefore be interpreted as referring only to the areas that are used directly for milk production, that is to say as pasture or for growing fodder, excluding, for example, woodland. In the Commission's view, it follows that areas used indirectly in milk production, such as the farmyard, the buildings and the paths to the cowshed, should not be counted. According to the Commission, this interpretation is also supported by the fact that it is difficult to determine the extent to which the yard, buildings and path areas, which also serve other purposes, are used for milk production. Furthermore, neither the meaning nor the objective of Article 5(2) contradicts this interpretation. Article 7 of Regulation No 857/84 and Article 5 of Regulation No 1371/84 lay down the principle that the reference quantity is transferred with the area used for milk production. The owner or operator of the agricultural land must be able to continue to produce milk on the areas he takes over. It is therefore consistent with the spirit of Article 5(2) of Regulation No 1371/84 to consider only the fodder-growing areas used directly for milk production when distributing the reference quantity. Finally, the Commission refers to its Decision of 26 October 1989 (OJ 1989 L 391, p. 1) relating to the definitions of the characteristics to be used for Community surveys on the structure of agricultural holdings. This decision mentions among ‘other land’ not used for agricultural purposes, such as ‘land occupied by buildings, farmyards, tracks, ...’. It follows from these definitions that in principle the land occupied by buildings, farmyards and tracks is not considered as areas used for agricultural purposes, even though it contributes indirectly to farm production. The Commission adds that, as the Bundes-verwaltungsgericht raises the question of the temporal scope of Regulations Nos 1371/84 and 1546/88, it is necessary to refer to the established case-law of the Court, according to which laws amending a legislative provision apply, unless otherwise provided, to the future consequences of situations which arose under the former law (for example, the judgment in Case 1/73 Westzucker v Einfukr-und Vorratsstelle Zucker [1973] ECR 723). This means that from the date on which it entered into force (4 June 1988), Regulation No 1546/88, and in particular Article 7 thereof, was applicable. Moreover, it is for the national court to decide, in accordance with national procedural law, whether its judgment should be based on the legislation in force when the decision on the complaint was made or on that in force when it gives judgment. According to the Commission, however, there is no need in the present case to consider which law is applicable in the event of a legislative amendment, since the wording of Article 5(2) of Regulation No 1371/84, in so far as is relevant in the present case, has been incorporated in Article 7(2) of Regulation No 1546/88. In conclusion, the Commission proposes the following reply to the question referred by the national court:

‘The expression “areas used for milk production” in Article 5(2) of Regulation (EEC) No 1371/84 does not include the yard, buildings and road areas of the holding, as that term is used in that provision’.

M. Zuleeg

Judge-Rapporteur

1 Language of the case: German.