In Case C-44/89,
REFERENCE to the Court under Article 177 of the EEC Treaty by the Finanzgericht (Finance Court) Hamburg for a preliminary ruling in the proceedings pending before that court between
Georg von Deetzen
and
Hauptzollamt (Principal Customs Office) Oldenburg,
on the validity and interpretation of certain provisions of Community law concerning the additional levy in the milk and milk products sector,
THE COURT (Fifth Chamber),
composed of: Sir Gordon Slynn, acting as President of the Chamber, F. Grévisse, J.C. Moitinho de Almeida, G.C. Rodríguez Iglesias and M. Zuleeg, Judges,
Advocate General: F.G. Jacobs,
Registrar: J.A. Pompe, Deputy Registrar,
after considering the observations submitted on behalf of
- the Council of the European Communities, by Arthur Brautigam, a member of the Council' s Legal Service, acting as Agent,
- the Commission of the European Communities, by D. Booss, Legal Adviser, acting as Agent,
having regard to the Report for the Hearing,
after hearing oral argument from Mr von Deetzen, represented by E.H. Pijnacker Hordijk, of the Amsterdam Bar, and the Council at the hearing on 30 April 1991,
after hearing the Opinion of the Advocate General at the sitting on 4 June 1991,
gives the following
Judgment
1 By order of 8 August 1989, which was received at the Court Registry on 20 October 1989, superseding an order of 19 December 1988, received at the Court Registry on 20 February 1989, the Finanzgericht Hamburg referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty three questions on the validity and interpretation of certain provisions of the Community legislation on the additional levy on milk.
2 The questions were raised in proceedings brought by Georg von Deetzen, a farmer, against the Hauptzollamt Oldenburg concerning a reference quantity under the additional levy scheme applicable to milk.
3 Mr von Deetzen was granted a non-marketing premium under Council Regulation (EEC) No 1078/77 of 17 May 1977 introducing a system of premiums for the non-marketing of milk and milk products and for the conversion of dairy herds (Official Journal 1977 L 131, p. 1). The grant of the premium was conditional upon his not producing milk or milk products for a period of five years ending on 7 September 1985.
4 After the expiry of that period, Mr von Deetzen applied to the Hauptzollamt Oldenburg for the allocation of a reference quantity of 190 665 kg of milk under the additional levy scheme for milk which had been introduced in the meantime. That quantity corresponded to the one used for calculation of the non-marketing premium. His application was refused on the ground that the Community legislation then in force did not enable him to be granted a reference quantity since he had not delivered milk or milk products when the new scheme came into operation.
5 In the course of the proceedings brought by Mr von Deetzen against the rejection of his application, the Finanzgericht Hamburg had, by order of 26 June 1986, referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a question on the validity of the Community legislation on the additional levy on milk, giving rise to the judgment of the Court of 28 April 1988 in Case 170/86 von Deetzen v Hauptzollamt Hamburg-Jonas [1988] ECR 2355. In that judgment, and in the judgment of the same date in Case 120/86 Mulder v Minister van Landbouw en Visserij [1988] ECR 2321, the Court held that the provisions in question were invalid, for breach of the principle of the protection of legitimate expectations, in so far as they did not provide for the allocation of a reference quantity to producers who, pursuant to an undertaking entered into under Council Regulation (EEC) No 1078/77, did not deliver milk during the reference year adopted by the Member State concerned.
6 Following those judgments, the Council adopted Regulation (EEC) No 764/89 of 20 March 1989 amending Regulation (EEC) No 857/84 laying down 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 (Official Journal 1989 L 84, p. 2). That regulation added a new Article 3a to Council Regulation No 857/84 of 31 March 1984 (Official Journal 1984 L 90, p. 13), which provides essentially that milk producers who, pursuant to an undertaking entered into under Regulation No 1078/77, did not deliver milk during the reference year are to receive, subject to certain conditions, a special reference quantity. Pursuant to Article 3a(2), that quantity is to be equal to 60% of the quantity of milk delivered or the quantity of milk equivalent sold by the producer during the 12 months preceding the month in which the application for the non-marketing or conversion premium was made. However, by virtue of the second subparagraph of Article 3a(4), where the holding was sold or leased before the end of the eighth period of application of the additional levy scheme, that is to say before 1 April 1992, the special reference quantity was to be returned to the Community reserve.
7 The detailed rules for the application of the abovementioned legislation were laid down by Commission Regulation (EEC) No 1033/89 of 20 April 1989 amending Regulation (EEC) No 1546/88 laying down detailed rules for the application of the additional levy referred to in Article 5c of Regulation (EEC) No 804/68 (Official Journal 1989 L 110, p. 27). That regulation added a new Article 7a to Commission Regulation (EEC) No 1546/88 of 3 June 1988 (Official Journal 1988 L 139, p. 12), which provides in particular that the special reference quantity allocated in accordance with Article 3a of Regulation No 857/84 is, in the event of the transfer of the holding by inheritance or by any similar transaction, to be transferred to the producer who takes over the holding, provided that the latter undertakes to comply with the undertakings of his predecessor.
8 Under those new rules, the Hauptzollamt Oldenburg, reversing its initial decision rejecting the application, granted Mr von Deetzen a special reference quantity of 114 399 kg of milk, corresponding to 60% of the quantity applied for, 190 665 kg.
9 In those circumstances, the Finanzgericht Hamburg, by order of 8 August 1989, superseding a previous order of 19 December 1988, again sought a ruling from the Court under Article 177 of the EEC Treaty, on the following questions:
"(1) Are Council Regulation (EEC) No 857/84 of 31 March 1984, as amended by Council Regulation (EEC) No 764/89 of 20 March 1989, and Commission Regulation (EEC) No 1033/89 of 20 April 1989, based upon it, valid in so far as the special reference quantity under Article 3a(2) is equal to only 60% of the quantity of milk or milk equivalent by reference to which the non-marketing or conversion premium was established?
(2) Is the second paragraph of Article 3a(4) of Regulation No 857/84, under which the special reference quantity is to be returned to the Community reserve if the holding is sold or leased before the end of the eighth period of application of the additional levy scheme, valid?
(3) If Question 2 is answered in the affirmative,
(a) For the purposes of the second paragraph of Article 3a(4) of Regulation No 857/84, as amended by Regulation No 764/89, is the concept of 'sale' to be interpreted as including the arrangement of the farm as a private firm (Gesellschaft buergerlichen Rechts) of which the producer to whom the special reference quantity is granted is a partner?
Can a 'sale' be said to have occurred if the person having arranged his farm as a private firm ceases to be a partner in that firm on account of death or for some other reason and his share accrues to the other members?
(b) How are the words 'by any similar transaction' to be construed for the purposes of the first paragraph of Article 7a of Regulation No 1546/88, as amended by Regulation No 1033/89? Do they cover the leasing of a farm to a person who, under the statutory rules of succession, stands to inherit from the producer entitled to the special reference quantity?"
10 Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the relevant Community provisions, the procedure and the observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.
The first question
11 The first question seeks essentially to determine whether Article 3a(2) of Regulation No 857/84, which was inserted therein by Regulation No 764/89, as supplemented by Regulation No 1546/88, in the version resulting from Regulation No 1033/89, is valid in so far as it limits the special reference quantity provided for in that provision to 60% of the quantity of milk delivered or milk equivalent sold by the producer during the 12 months preceding the month in which the application for the non-marketing or conversion premium was made.
12 It must be remembered that in its judgments of 11 December 1990 in Case C-189/89 Spagl v Hauptzollamt Rosenheim [1990] ECR I-4539, paragraph 30, and Case C-217/89 Pastaetter v Hauptzollamt Bad Reichenhall [1990] ECR I-4585, paragraph 21, the Court held that "Article 3a(2) of Council Regulation (EEC) No 857/84 of 31 March 1984, as amended by Council Regulation (EEC) No 764/89 of 20 March 1989, is invalid in so far as it restricts the special reference quantity provided for in that provision to 60% of the quantity of milk delivered or the quantity of milk equivalent sold by the producer during the 12 calendar months preceding the month in which the application for the non-marketing or conversion premium was made".
13 In the grounds of the judgments cited above, the Court found, essentially, that the application to the producers covered by Article 3a of a reduction rate of 40% which, far from corresponding to a value that was representative of the rates applicable to the producers who had delivered milk during the reference year adopted by the Member State concerned, was more than double the highest total of such rates, was to be regarded as a restriction which specifically affected the first-mentioned category of producers by the very reason of their undertaking as to non-marketing or conversion. It followed that the contested 60% rule frustrated the legitimate expectations which the producers concerned were entitled to entertain as to the limited nature of their undertakings and therefore had to be declared invalid for breach of the principle of the protection of legitimate expectations (Spagl, paragraphs 24 and 29; Pastaetter, paragraphs 15 and 20).
14 The same considerations apply to Regulation No 1546/88, as amended by Regulation No 1033/89, in so far as they implement Article 3a(2) of Regulation No 857/84.
15 For those reasons, it must be stated in reply to the first question that Article 3a(2) of Council Regulation (EEC) No 857/84 of 31 March 1984, inserted in that regulation by Council Regulation (EEC) No 764/89 of 20 March 1989, as supplemented by Commission Regulation (EEC) No 1546/88 of 3 June 1988, as amended by Commission Regulation (EEC) No 1033/89 of 20 April 1989, is invalid in so far as it limits the specific reference quantity laid down by that provision to 60% of the quantity of milk delivered or the quantity of milk equivalent sold by the producer during the 12 calendar months preceding the making of the application for the non-marketing or conversion premium.
The second question
16 The second question concerns the validity of the second subparagraph of Article 3a(4) of Regulation No 857/84, as amended by Regulation No 764/89.
17 According to that provision, where the holding is sold or leased before the end of the eighth period of application of the additional levy scheme, the special reference quantity granted under Article 3a(1) to (3) is to be returned to the Community reserve. However, where only part of the holding is sold or leased, only the part of the special reference quantity corresponding to the feed-crop area sold or leased is to be returned to the Community reserve.
18 In its order for reference, the national court expresses doubts as to the validity of those rules on the ground that they place the producers concerned at a disadvantage by comparison with the other milk producers, whose reference quantity is not lost in the event of the transfer of their holdings, and that the impossibility of transferring the special reference quantity to the purchaser or lessee may cause the producers concerned to suffer a substantial financial loss. The national court also observes that the preamble to Regulation No 764/89 does not state the reasons on which the provisions concerned are based.
19 Since Regulation No 764/89, which introduced the provision at issue, was adopted in order to bring the Community legislation into conformity with the Mulder and von Deetzen judgments cited above, it is necessary to consider that validity of that provision, first, in relation to the principle of the protection of legitimate expectations which was applied in those judgments.
20 In those judgments, the Court found, first, that a producer who has voluntarily ceased production for a certain period cannot legitimately expect to be able to resume production under the same conditions as those which previously applied and not to be subject to any rules of market or structural policy adopted in the meantime (Mulder, paragraph 23; von Deetzen, paragraph 12), but, on the other hand, that where such a producer has been encouraged by a Community measure to suspend marketing for a limited period in the general interest and against payment of a premium he may legitimately expect not to be subject, upon the expiry of his undertaking, to restrictions which specifically affect him precisely because he availed himself of the possibilities offered by the Community provisions (Mulder, paragraph 24; von Deetzen, paragraph 13).
21 The second subparagraph of Article 3a(4) of Regulation No 857/84, as amended, does not give rise, for the producers concerned, to specific restrictions of that kind which are incompatible with the requirements of protection of their legitimate expectations. Whilst those producers were legitimately entitled to expect to be able to resume the marketing of milk at the end of their non-marketing or conversion period, and to carry on that activity under conditions that involved no discrimination between them and other milk producers, they could not thereby expect that a common organization of the market would confer on them a commercial advantage which did not derive from their occupational activity. Those producers could not therefore expect to be in a position to dispose, for profit, of an advantage, such as the allocation of a reference quantity under the additional levy scheme, when that advantage had been conferred on them specifically in order to enable them to resume their occupational activity.
22 The fact that the producers concerned are unable to transfer the special reference quantity allocated to them to the purchaser or lessee of the holding in question does not therefore frustrate the legitimate expectations which those producers might have regarding the limited effects of the non-marketing or conversion scheme to which they rendered themselves subject. The argument concerning a breach of the principle of the protection of legitimate expectations must therefore be dismissed.
23 It is necessary to consider, secondly, whether the contested rules might be contrary to the prohibition of discrimination between Community producers laid down in Article 40(3) of the EEC Treaty. The Court has consistently held (see in particular the judgment in Joined Cases 201 and 202/85 Klensh and Others v Secrétaire d' Etat à l' Agriculture et à la Viticulture [1986] ECR 3477, paragraph 9) that that prohibition is merely a specific enunciation of the general principle of equality which is one of the fundamental principles of Community law. That principle requires that similar situations should not be treated differently unless differentiation is objectively justified.
24 In the present case, the refusal to afford the producers who received a special reference quantity under the contested provision the possibility of transferring that quantity to a purchaser or lessee of their holdings, even though such a possibility is available to those who received reference quantities under other provisions of the Community legislation, is justified by the need to prevent the former from seeking the allocation of a special reference quantity in order, not to resume the marketing of milk on an enduring basis, but to derive from that allocation a purely financial advantage by realizing the marketable value which the reference quantities have acquired in the meantime.
25 That difference of treatment is objectively justified and cannot therefore be described as discriminatory within the meaning of the case-law of the Court.
26 In the third place, it is necessary to consider whether the contested legislation affects the right to property. The Court has consistently recognized that right (see, in particular, the judgment in Case 265/87 Schraeder v Hauptzollamt Gronau [1989] ECR 2237) as forming part of the general principles of Community law.
27 It must be emphasized in the first place that the right to property thus safeguarded within the Community legal order does not comprehend the right to dispose, for profit, of an advantage, such as the reference quantities allocated in the framework of the common organization of a market, which does not derive from the assets or occupational activity of the person concerned.
28 As regards any investments made in their holdings by the producers concerned, which are liable to lose their value if the reference quantity is not transferred with the holding to which it relates, it has been consistently held that fundamental rights, and more particularly the right to property, are not unfettered prerogatives but must be viewed in relation to their social function. Consequently, restrictions may be imposed on the exercise of that right, particularly in the context of the common organization of a market, provided that those restrictions correspond to objectives of general interest pursued by the Community and do not constitute disproportionate and intolerable interference which undermines the very substance of the right guaranteed (see in particular Schraeder, cited above, paragraph 15).
29 In the light of the foregoing, it must be stated that the rule according to which the special reference quantities in question are to be returned to the Community reserve if the holding is sold or leased before 1 April 1992 reflects the concern to obviate the allocation of such quantities to farmers who do not intend to resume the marketing of milk on an enduring basis but merely seek to obtain a financial advantage from the allocation of a reference quantity under the legislation governing the marketing of milk. It is therefore justified by the fact that it pursues an aim which is in the general interest. Moreover, the owners concerned may turn their holdings to account in the normal way by exploiting the opportunity made available to them by the allocation of a reference quantity, that is to say by managing their holdings themselves or by transferring them by way of inheritance or a similar transaction, since in the latter case they may transfer the quantities in question to their heirs or similar beneficiaries.
30 Thus, the argument as to breach of the right to property likewise cannot be upheld.
31 Finally, there is no apparent inadequacy in the statement of the reasons on which the contested legislation is based.
32 The sixth recital in the preamble to Regulation No 764/89 indicates in that regard that "the quantities granted are not intended to confer an undue advantage but must in fact be produced by those to whom they are allocated" and "such quantities should therefore be made subject to certain restrictive conditions". That statement of reasons, succinct though it may be, is sufficient to satisfy the requirements laid down in Article 190 of the EEC Treaty since it enables the Court to undertake its review of legality and allows individuals to avail themselves of their rights.
33 For those reasons, it must be stated in reply to the second question that an examination, on the basis of the circumstances mentioned in the order making the reference for a preliminary ruling, of the second subparagraph of Article 3a(4) of Council Regulation (EEC) No 857/84 of 31 March 1984, as amended by Council Regulation (EEC) No 764/89 of 20 March 1989, has disclosed no factor of such a kind as to affect its validity.
The third question
34 The third question concerns the scope of the terms "sold" and "leased" as used in the second subparagraph of Article 3a(4) of Regulation No 857/84, in the version inserted by Regulation No 764/89, and also the scope of the term "any similar transaction" used in the first subparagraph of Article 7a of Regulation No 1546/88, in the version inserted by Regulation No 1033/89, having regard to certain hypothetical cases involving in particular the contribution of a holding to a private company and the lease of the holding to the person likely to succeed to the estate of the producer in question.
35 It must be borne in mind that the second subparagraph of Article 3a(4) of Regulation No 857/84, as amended, provides essentially that, if the holding or part of it is sold or leased before the end of the eighth period of application of the additional levy scheme, the special reference quantity is to return, wholly or in part, to the Community reserve. On the other hand, the first subparagraph of Article 7a of Regulation No 1546/88, as amended, provides essentially that in the event of transfer of the holding by inheritance or by any similar transaction the reference quantity is to be transferred to the producer who takes over the holding, provided that he undertakes in writing to comply with the undertakings given by his predecessor.
36 An analysis of the abovementioned provisions, taken together, shows that, whilst they allow a producer to whom a special reference quantity has been allocated to transfer it, following the transfer of the holding to which it is attached, to his heirs or similar beneficiaries so as to enable them to pursue the marketing of milk under the same conditions as the transferor, they do not allow such a producer to transfer the special reference quantity granted to him to other persons.
37 Since the legislation at issue is framed in that way, the terms "sold" and "leased" used in the second subparagraph of Article 3a(4) of Regulation No 857/84, as amended, must be construed as referring to any transfer, for consideration, of the ownership of or right to use the holding, whatever the legal basis of the transfer, with the exception of those cases in which it is the result of a "similar transaction" within the meaning of the first subparagraph of Article 7a of Regulation No 1546/88, as amended.
38 The term "similar transaction" must be interpreted as referring to any transaction, whatever its legal basis, which produces effects comparable to those of inheritance. It thus embraces, in particular, transactions concluded in respect of the holding concerned between a producer and the potential beneficiary of his estate, provided that the terms of the transaction in question are such that, according to its purpose and subject-matter, the main intention is that the holding should continue to be exploited by the potential beneficiary and not that the marketable value of the holding should be realized by the person from whom he stands to inherit.
39 It follows that neither the contribution of a holding to a private company in which the producer to whom the special reference quantity was granted has a share nor the fact that, under German law, the latter' s share in the company accrues to the other members following his death or withdrawal from the company nor the leasing of the holding to the potential beneficiary of the estate of the producer to whom the special reference quantity was granted can be excluded from the definition of "any similar transaction", provided that the conditions of the contract embodying the transaction in question are such that they place the potential beneficiary in a privileged position compared with that of an operator taking over a comparable holding on an arm' s length basis.
40 In the context of the cooperation provided for by Article 177 of the EEC Treaty between the national court and the Court of Justice, it is for the national court to establish whether the criteria expounded above are satisfied in the factual circumstances described in the order for reference, having regard to all the factual and legal aspects of the transactions concerned.
41 Accordingly, it must be stated in reply to the third question that the concepts of "sale" and "lease" within the meaning of the second subparagraph of Article 3a(4) of Council Regulation (EEC) No 857/84 of 31 March 1984, inserted in that regulation by Council Regulation (EEC) No 764/89 of 20 March 1989, must be interpreted as referring to every transfer, for consideration, of the ownership of, or the right to use, the holding, with the exception, however, of cases in which such a transfer arises from a transaction "similar" to inheritance within the meaning of the first paragraph of Article 7a of Commission Regulation (EEC) No 1546/88 of 3 June 1988, inserted in that regulation by Commission Regulation (EEC) No 1033/89 of 20 April 1989. The last-mentioned concept must be interpreted as referring to every transaction which entails effects similar to those of inheritance, regardless of the form in which such transaction is effected.
Costs
42 The costs incurred by the Council of the European Communities and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.
On those grounds,
THE COURT (Fifth Chamber),
in answer to the questions referred to it by the Finanzgericht Hamburg by order of 8 August 1989, hereby rules:
1. Article 3a(2) of Council Regulation (EEC) No 857/84 of 31 March 1984, inserted in that regulation by Council Regulation (EEC) No 764/89 of 20 March 1989, as supplemented by Commission Regulation (EEC) No 1546/88 of 3 June 1988, as amended by Commission Regulation (EEC) No 1033/89 of 20 April 1989, is invalid in so far as it limits the specific reference quantity laid down by that provision to 60% of the quantity of milk delivered or the quantity of milk equivalent sold by the producer during the 12 calendar months preceding the making of the application for the non-marketing or conversion premium;
2. An examination, on the basis of the circumstances mentioned in the order making the reference for a preliminary ruling, of the second subparagraph of Article 3a(4) of Council Regulation (EEC) No 857/84 of 31 March 1984, as amended by Council Regulation (EEC) No 764/89 of 20 March 1989, has disclosed no factor of such a kind as to affect its validity;
3. The concepts of "sale" and "lease" within the meaning of the second subparagraph of Article 3a(4) of Council Regulation (EEC) No 857/84 of 31 March 1984, inserted in that regulation by Council Regulation (EEC) No 764/89 of 20 March 1989, must be interpreted as referring to every transfer, for consideration, of the ownership of or the right to use the holding, with the exception, however, of cases in which such a transfer arises from a transaction "similar" to inheritance within the meaning of the first paragraph of Article 7a of Commission Regulation (EEC) No 1546/88 of 3 June 1988, inserted in that regulation by Commission Regulation (EEC) No 1033/89 of 20 April 1989. The last-mentioned concept must be interpreted as referring to every transaction which entails effects similar to those of inheritance, regardless of the form in which such transaction is effected.
