1 BY TWO ORDERS OF 9 SEPTEMBER 1976 , RECEIVED AT THE COURT ON 18 OCTOBER 1976 , THE VERWALTUNGSGERICHT FRANKFURT AM MAIN REFERRED TO THE COURT UNDER ARTICLE 177 OF THE EEC TREATY QUESTIONS ON THE INTERPRETATION AND VALIDITY OF ARTICLE 18 OF REGULATION NO 1259/72 OF THE COMMISSION OF 16 JUNE 1972 ON THE DISPOSAL OF BUTTER AT A REDUCED PRICE TO CERTAIN COMMUNITY PROCESSING UNDERTAKINGS ( OJ , ENGLISH SPECIAL EDITION 1972 ( II ), P . 559 ) AS AMENDED BY ARTICLE 3 OF REGULATION NO 1237/73 OF THE COMMISSION OF 10 MAY 1973 ( OJ L 128 , P . 1 ).
2 SINCE THE SUBJECT-MATTER OF THE QUESTIONS RAISED BY THE TWO ORDERS IS THE SAME IT IS APPROPRIATE TO JOIN THE CASES FOR THE PURPOSES OF JUDGMENT .
3 THE QUESTIONS HAVE BEEN RAISED IN THE CONTEXT OF CASES RELATING TO DECISIONS UNDER WHICH THE COMPETENT NATIONAL INTERVENTION AGENCY DECLARED PART OF THE PROCESSING DEPOSIT LODGED BY AN UNDERTAKING WHICH HAD PURCHASED INTERVENTION BUTTER AT A REDUCED PRICE FORFEIT , ON THE GROUND THAT THE UNDERTAKING HAD NOT FULFILLED ITS OBLIGATION TO HAVE THE BUTTER PROCESSED IN ACCORDANCE WITH THE COMMUNITY RULES .
4 FOR THE PURPOSE OF CREATING FRESH OPPORTUNITIES FOR DISPOSING OF SURPLUS BUTTER THE COMMISSION ESTABLISHED BY REGULATION NO 1259/72 A SYSTEM INVOLVING THE SALE BY TENDER OF BUTTER AT A REDUCED PRICE TO CERTAIN PROCESSING UNDERTAKINGS IN THE COMMUNITY . ARTICLE 6 OF THAT REGULATION PROVIDES THAT A TENDERER MAY NOT TAKE PART IN THE INVITATION TO TENDER UNLESS HE GIVES CERTAIN UNDERTAKINGS CONSISTING MAINLY OF HAVING THE BUTTER PROCESSED INTO CONCENTRATED BUTTER ( ARTICLE 6 ( 1 ) ( A )), OF INCORPORATING CERTAIN SUBSTANCES THEREIN ( ARTICLE 6 ( 1 ) ( B )), HAVING THIS PRODUCT PROCESSED ONLY INTO CERTAIN SPECIFIC PRODUCTS , SUCH AS FINE BAKERS ' WARES AND DOING THIS WITHIN A PERIOD OF SIX MONTHS ( ARTICLE 6 ( 1 ) ( C )), KEEPING STOCK ACCOUNTS ( ARTICLE 6 ( 1 ) ( D )) AND LAYING DOWN THAT , FOR ANY SUBSEQUENT RESALE OF THE CONCENTRATED BUTTER , THE SAME REQUIREMENTS AS THOSE REFERRED TO UNDER ( C ) AND ( D ) SHOULD FORM PART OF THE CONTRACT OF SALE ( ARTICLE 6 ( 1 ) ( E )). TO ENSURE PERFORMANCE OF THE OBLIGATION TO PROCESS , THE SUCCESSFUL TENDERER MUST LODGE A DEPOSIT , THE AMOUNT OF WHICH IS FIXED AT A LEVEL INTENDED TO COVER THE DIFFERENCE BETWEEN THE MARKET PRICE OF THE BUTTER AND THE MINIMUM SALE PRICE ( ARTICLE 9 IN CONJUNCTION WITH ARTICLE 12 ). ARTICLE 18 ( 2 ) PROVIDES THAT EXCEPT IN CASES OF FORCE MAJEURE THE PROCESSING DEPOSIT SHALL BE RELEASED ONLY FOR QUANTITIES IN RESPECT OF WHICH THE SUCCESSFUL TENDERER HAS FURNISHED PROOF IN A SPECIFIC MANNER THAT THE CONDITIONS REFERRED TO IN ARTICLE 6 HAVE BEEN MET .
5 THE FIRST QUESTION PUT BY THE VERWALTUNGSGERICHT IS BASICALLY WHETHER THE SUCCESSFUL TENDERER WHO DOES NOT HIMSELF MANUFACTURE THE PROCESSED PRODUCTS HAS FURNISHED THE PROOF NECESSARY TO HAVE THE DEPOSIT RELEASED BY SHOWING THAT HE HAS SATISFIED THE OBLIGATIONS WHICH HE HAS UNDER ARTICLES 6 ( 1 ) ( A ), ( B ), ( D ) AND ( E ) OR WHETHER HE MUST PROVE THAT THE CONDITIONS LAID DOWN IN SUBPARAGRAPH ( C ) HAVE BEEN MET AS REGARDS THE NATURE OF THE PRODUCTS AND THE PERIOD FOR PROCESSING .
6 IN THIS RESPECT THE PLAINTIFFS IN THE MAIN ACTION HAVE CLAIMED THAT IT WOULD NOT BE LAWFUL TO MAKE THE SUCCESSFUL TENDERER FOR THE BUTTER LIABLE FOR THE FAILURE BY THE ULTIMATE USER OF THE PRODUCT TO FULFIL THE UNDERTAKINGS WITH REGARD TO THE PROCESSING IN VIEW OF THE FACT THAT THIS DEFAULT IS NOT THAT OF THE SUCCESSFUL TENDERER ; FURTHER , THAT IT APPEARS FROM ARTICLE 6 ( 1 ) ( E ) THAT WHERE THE ULTIMATE PROCESSING IS NOT DONE BY THE SUCCESSFUL TENDERER HIMSELF HE WILL HAVE SATISFIED HIS OBLIGATIONS IN RESPECT OF PROCESSING BY LAYING DOWN THAT , FOR ANY SUBSEQUENT RESALE , THE SAME REQUIREMENTS SHALL FORM PART OF THE CONTRACT OF SALE .
7 SUCH AN INTERPRETATION CANNOT BE UPHELD . ARTICLE 10 ( 5 ) PROVIDES THAT RIGHTS AND OBLIGATIONS ARISING OUT OF THE INVITATION TO TENDER SHALL NOT BE TRANSFERABLE . THE THIRD PARAGRAPH OF ARTICLE 18 ( 2 ) STIPULATES THAT THE MEMBER STATES MAY PROVIDE FOR THE PROOF TO BE CONSIDERED AS FURNISHED IF THE SELLER SUBMITS A STATEMENT FROM THE FINAL USER IN WHICH THE LATTER CONFIRMS HIS UNDERTAKING TO PROCESS THE PRODUCTS AND STATES THAT HE IS AWARE OF THE SANCTIONS HE MAY INCUR , DETERMINED BY THE MEMBER STATE CONCERNED , AND IT MUST BE CONCLUDED FROM THESE PROVISIONS THAT IN THE ABSENCE OF ANY SUCH RIGHT UNDER NATIONAL LAW THE SUCCESSFUL TENDERER CANNOT ESCAPE HIS OBLIGATIONS BY RELYING ON THE UNDERTAKING ENTERED INTO BY THE PURCHASER UNDER THE TERMS OF THE CONTRACT OF SALE . CONSIDERATION OF THE OBJECTIVE OF THE PROVISION IN QUESTION CONFIRMS THIS CONCLUSION . THE SYSTEM ESTABLISHED BY REGULATION NO 1259/72 IS A SPECIAL MEASURE INTENDED TO DISPOSE OF SURPLUS BUTTER TO THE FOOD INDUSTRY ON PARTICULARLY FAVOURABLE CONDITIONS . IT WAS THEREFORE NECESSARY TO TAKE APPROPRIATE PRECAUTIONS TO ENSURE THAT THE BUTTER SOLD ON THESE CONDITIONS DID NOT REACH THE NORMAL MARKET BUT WAS IN FACT PROCESSED WITHIN A PERIOD ALLOWING THE REGULARITY OF THE OPERATION TO BE CHECKED . THE EFFECTIVENESS OF THE SYSTEM OF CHECKING WOULD BE SERIOUSLY COMPROMISED IF THE ACCEPTANCE OF AN OBLIGATION TO PROCESS BY A SUBSEQUENT PURCHASER WHO WAS NOT HIMSELF UNDER ANY LEGAL OBLIGATION TO THE COMPETENT AUTHORITY WERE REGARDED AS SUFFICIENTLY DISCHARGING AN UNDERTAKING ENTERED INTO BY THE SUCCESSFUL TENDERER AGAINST A DEPOSIT .
8 IT IS THEREFORE APPROPRIATE TO REPLY TO THE FIRST QUESTION THAT ARTICLE 18 OF REGULATION NO 1259/72 AS AMENDED BY REGULATION NO 1237/73 MUST BE INTERPRETED AS MEANING THAT EVEN WHERE THE SUCCESSFUL TENDERER DOES NOT HIMSELF CARRY OUT PROCESSING IT IS NECESSARY TO ESTABLISH THAT THE PROCESSED PRODUCTS COMPLY WITH THE CONDITIONS LAID DOWN IN ARTICLE 6 ( 1 ) ( C ) OF THE REGULATION AND THAT THEY HAVE BEEN PRODUCED WITHIN THE PERIOD THEREIN PRESCRIBED BEFORE THE DEPOSIT MAY BE RELEASED .
9 THE SECOND QUESTION PUT BY THE VERWALTUNGSGERICHT IS WHETHER ARTICLE 18 SO INTERPRETED IS COMPATIBLE WITH SUPERIOR RULES OF COMMUNITY LAW AND IN PARTICULAR WITH THE PRINCIPLE OF PROPORTIONALITY .
10 THE LEGAL BASIS OF THE SYSTEM ESTABLISHED BY REGULATION NO 1259/72 IS , INTER ALIA , REGULATION NO 985/68 OF THE COUNCIL OF 15 JULY 1968 ( OJ , ENGLISH SPECIAL EDITION , 1968 ( I ), P . 256 ) AND IN PARTICULAR ARTICLE 7A INSERTED BY REGULATION NO 750/69 OF THE COUNCIL OF 22 APRIL 1969 ( OJ , ENGLISH SPECIAL EDITION 1969 ( I ), P . 204 ). THIS PROVIDES THAT THE COMMISSION SHALL EXAMINE THE SITUATION AND ADOPT APPROPRIATE MEASURES AS REGARDS PRODUCTS IN PUBLIC STORAGE WHICH CANNOT BE MARKETED ON NORMAL TERMS DURING A MILK YEAR . THERE IS NO REASON FOR THINKING THAT THE SYSTEM ESTABLISHED BY REGULATION NO 1259/72 , TAKEN AS A WHOLE AND MORE PARTICULARLY PROVIDING FOR THE LODGING OF A PROCESSING DEPOSIT , IS NOT AN APPROPRIATE MEASURE WITHIN THE MEANING OF ARTICLE 7A . THIS ARTICLE IS THEREFORE THE PROPER LEGAL BASIS FOR REGULATION NO 1259/72 THE ADOPTION OF WHICH IS IN ACCORDANCE WITH THE OPINION OF THE MANAGEMENT COMMITTEE FOR MILK AND MILK PRODUCTS .
11 AS REGARDS THE QUESTION OF PROPORTIONALITY IT IS APPROPRIATE TO CONSIDER WHETHER THE LODGING OF A PROCESSING DEPOSIT WHICH IS FORFEIT EVEN WHERE THE FAILURE OF THE SUCCESSFUL TENDERER TO FULFIL HIS UNDERTAKINGS IS DUE TO THE DEFAULT OF A SUBSEQUENT PURCHASER , EXCEEDS THE LIMITS WHICH ARE APPROPRIATE AND NECESSARY FOR ATTAINING THE OBJECTIVE DESIRED . IN THIS RESPECT IT IS NECESSARY TO TAKE INTO ACCOUNT THE CHARACTERISTICS OF THE PROCESSING DEPOSIT PROVIDED FOR BY REGULATION NO 1259/72 . ARTICLE 9 ( 2 ) SHOWS THAT THE DEPOSIT IS INTENDED TO COVER THE DIFFERENCE BETWEEN THE MARKET PRICE OF BUTTER AND THE MINIMUM SELLING PRICE FIXED FOR EACH TENDER . THE EFFECT OF FORFEITURE OF THE DEPOSIT WHERE THE OBLIGATION TO PROCESS IS NOT FULFILLED IS THEREFORE IN PRINCIPLE TO MAKE THE SUCCESSFUL TENDERER PAY A TOTAL AMOUNT EQUIVALENT TO THE MARKET PRICE OF THE BUTTER IN ACCORDANCE WITH THE CONTRACTUAL OBLIGATION WHICH HE HAS FREELY ENTERED INTO . IN THESE CIRCUMSTANCES THE FORFEITURE OF THE DEPOSIT CANNOT BE REGARDED AS IN THE NATURE OF A PENALTY FOR NOT FULFILLING AN INDEPENDENT OBLIGATION . IT MUST THEREFORE BE CONCLUDED THAT THE SYSTEM OF THE PROCESSING DEPOSIT ESTABLISHED BY REGULATION NO 1259/72 DOES NOT EXCEED WHAT IS APPROPRIATE AND NECESSARY TO ATTAIN THE OBJECTIVE DESIRED .
12 THE PLAINTIFFS IN THE MAIN ACTION HAVE CLAIMED THAT THE DEPOSIT IS FIXED AT A LEVEL HIGHER THAN THE DIFFERENCE BETWEEN THE MARKET PRICE OF BUTTER AND THE MINIMUM PRICE AND THAT THEY SUFFER A FINANCIAL DISADVANTAGE AS A RESULT . THIS QUESTION CONCERNS THE CORRECT APPLICATION OF ARTICLE 9 OF REGULATION NO 1259/72 AND NOT THE QUESTIONS WHICH ARE BEFORE THE COURT ON THE INTERPRETATION AND VALIDITY OF ARTICLE 18 .
13 IT MUST THEREFORE BE CONCLUDED THAT CONSIDERATION OF THE SECOND QUESTION RAISED BY THE VERWALTUNGSGERICHT HAS DISCLOSED NO FACTOR OF SUCH A KIND AS TO AFFECT THE VALIDITY OF THE SECOND SUBPARAGRAPH DOWN TO THE END OF INDENT ( A ) OF ARTICLE 18 ( 2 ) OF REGULATION NO 1259/72 .
COSTS
14 THE COSTS INCURRED BY THE COMMISSION OF THE EUROPEAN COMMUNITIES , WHICH HAS SUBMITTED OBSERVATIONS TO THE COURT , ARE NOT RECOVERABLE , AND AS THESE PROCEEDINGS ARE , IN SO FAR AS THE PARTIES TO THE MAIN ACTION ARE CONCERNED , IN THE NATURE OF A STEP IN THE ACTION BEFORE THE VERWALTUNGSGERICHT FRANKFURT AM MAIN , THE DECISION AS TO COSTS IS A MATTER FOR THAT COURT .
ON THOSE GROUNDS ,
THE COURT ( SECOND CHAMBER ),
IN ANSWER TO THE QUESTIONS REFERRED TO IT BY THE VERWALTUNGSGERICHT FRANKFURT AM MAIN BY ORDERS DATED 9 SEPTEMBER 1976 , HEREBY RULES :
1 . ARTICLE 18 OF REGULATION NO 1259/72 AS AMENDED BY REGULATION NO 1237/73 MUST BE INTERPRETED AS MEANING THAT EVEN WHERE THE SUCCESSFUL TENDERER DOES NOT HIMSELF CARRY OUT PROCESSING IT IS NECESSARY TO ESTABLISH THAT THE PROCESSED PRODUCTS COMPLY WITH THE CONDITIONS LAID DOWN IN ARTICLE 6 ( 1 ) ( C ) OF THE REGULATION AND THAT THEY HAVE BEEN PRODUCED WITHIN THE PERIOD PRESCRIBED BEFORE THE DEPOSIT MAY BE RELEASED .
2 . CONSIDERATION OF THE SECOND QUESTION RAISED BY THE VERWALTUNGSGERICHT HAS DISCLOSED NO FACTOR OF SUCH A KIND AS TO AFFECT THE VALIDITY OF THE SECOND SUBPARAGRAPH DOWN TO THE END OF INDENT ( A ) OF ARTICLE 18 ( 2 ) OF REGULATION NO 1259/72 .
