In Case C-365/92,
REFERENCE to the Court under Article 177 of the EEC Treaty by the Verwaltungsgericht Hannover (Federal Republic of Germany) for a preliminary ruling in the proceedings pending before that court between
Henrik Schumacher
and
Bezirksregierung Hannover
on the interpretation and validity of certain provisions of Commission Regulation (EEC) No 714/89 of 20 March 1989 laying down detailed rules applying to the special premium for beef producers (OJ 1989 L 78, p. 38),
THE COURT (Fourth Chamber),
composed of: M. Diez de Velasco, President of the Chamber, C.N. Kakouris and P.J.G. Kapteyn, Judges,
Advocate General: M. Darmon,
Registrar: L. Hewlett, Administrator,
after considering the written observations submitted on behalf of:
° the Commission of the European Communities, by U. Woelker, of its Legal Service, acting as Agent,
having regard to the Report of the Judge-Rapporteur,
after hearing the Opinion of the Advocate General at the sitting on 29 September 1993,
gives the following
Judgment
1 By order of 29 November 1991, received at the Court on 18 September 1992, the Verwaltungsgericht Hannover referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty four questions on the interpretation and validity of certain provisions of Commission Regulation (EEC) No 714/89 of 20 March 1989 laying down detailed rules applying to the special premium for beef producers (OJ 1989 L 78, p. 38).
2 Those questions were raised in proceedings between Mr Schumacher, the owner of an agricultural holding, and the Bezirksregierung Hannover (hereinafter "the BZR"), concerning the latter' s refusal to grant him the special premium for beef producers.
3 Regulation (EEC) No 805/68 of the Council of 27 June 1968 on the common organization of the market in beef and veal (OJ, English Special Edition 1968 (I), p. 187), as amended by Council Regulation (EEC) No 467/87 of 10 February 1987 (OJ 1987 L 48, p. 1) introduced a system of special premiums for beef producers, inter alia, for animals whose fattening is almost completed. In accordance with the second sub-paragraph of Article 11(2) of Regulation No 714/89, a producer applying for one of those premiums must declare in his application that the animals concerned are at least 12 months old at the date of lodging of the application, that he is keeping them on his holding for at least one month and that the animals will be slaughtered or exported to third countries before 3 September 1989.
4 Article 8(1) of Regulation No 714/89 states that "The competent authority appointed by each Member State shall operate administrative checks and on-farm inspection in order to verify that the provisions governing the special premium are complied with".
5 A system of penalties is provided for by Article 9 of that regulation for failure to comply with the conditions for the grant of the premium. Under paragraphs (1) to (4) thereof:
"(1) Without prejudice to paragraphs 2, 3 and 4, where the number of eligible animals ascertained at the time of [inspection] (1) is lower than the number in respect of which the premium application was lodged, no premium shall be paid.
(2) If the reduction in the number of animals can be ascribed to natural circumstances affecting the herd, the premium shall be paid for the number of animals actually eligible (...).
(3) Entitlement to the premium shall subsist for the number of animals effectively eligible where (...) the producer has not been able to comply with the undertaking provided for in Article 2 (...).
(4) In cases other than those referred to in paragraphs 2 and 3 where the difference in the number of effectively eligible animals is less than 5% of the declared number or, at most, one animal if the number of animals declared is equal [to] or less than 20 head, the premium less 20% shall be paid for the number of eligible animals, provided that, according to the competent authority, there is no suggestion that a false declaration has been made either deliberately or through serious negligence".
6 By letter of 25 April 1989, Mr Schumacher applied to the BZR for the grant of a special premium for a total of 32 fattened male cattle, which were at least 12 months old and which were to be slaughtered before 3 September 1989.
7 According to the documents before the Court 27 animals were slaughtered between 20 June and 17 August 1989 and five others on 25 September 1989, that is to say, for the latter, 22 days after the final date laid down by Article 11(2) of Regulation No 714/89. The BZR rejected the application in its entirety pursuant to Article 9(1) of the regulation.
8 Mr Schumacher then challenged that decision before the Verwaltungsgericht Hannover, claiming that he was entitled to the special premium at least for the 27 animals slaughtered before the final date prescribed.
9 In its analysis of the case, the court of reference stated that the difference between the number of animals eligible (27) and the number for which the application for the premium had been lodged (32) could not be ascribed either to natural circumstances or to reasons of force majeure and that, accordingly, Article 9(2) and (3) of the Regulation in question did not apply. Article 9(4) was also inapplicable, since the difference was greater than 5%. As five animals out of 32 were involved, the difference amounted to some 15%.
10 According to the national court, only Article 9(1) of the regulation might prevent acceptance of the application for the special premium for 27 cattle. However, it expresses doubts as to the compatibility of that provision with the principle of proportionality.
11 In the light of those doubts, the national court decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
"(1) Is Article 9(1) of Commission Regulation (EEC) No 714/89 of 20 March 1989 (OJ 1989 L 78, p. 38) applicable to claims for the special premium under Article 11(2) of that Regulation?
(2) For the purposes of Article 9(1) of Regulation (EEC) No 714/89 does 'inspection' include verification of the documents submitted by the applicant to the competent authority as evidence that the conditions for entitlement are met?
(3) Does Article 9(1) of Regulation (EEC) No 714/89 also preclude the grant of a special premium for beef producers when the producer does not slaughter individual fattened animals or have them slaughtered within the period prescribed in Article 11(2) of Regulation (EEC) No 714/89, and Article 9(4) of Regulation (EEC) No 714/89 does not apply because the difference between the number of animals actually eligible and the number declared is more than one animal or is greater than 5%?
(4) If the answer to Question 3 is in the affirmative, does Article 9(1) of Regulation (EEC) No 714/89 breach the principle of proportionality in that respect?"
12 Reference is made to the Report of the Judge-Rapporteur for a fuller account of the facts, the course of the procedure and the written 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
13 Regulation No 714/89 sets out the conditions for granting the special premium for beef producers, which differ in the case of the transitional scheme applicable to Member States applying the premium for the first time or to animals whose fattening is almost completed (Article 11) from those applicable under the main scheme (Articles 2 and 8(2)).
14 Under both schemes, however, failure to comply with the conditions for granting the premium, and more particularly failure to comply with the conditions concerning eligibility of the animals, is covered by the system of penalties provided for in Article 9. Accordingly, that provision also applies where the ineligibility of an animal is the result of failure to arrange for its slaughter before the final date prescribed by the third indent of Article 11(2).
15 The answer to the first question is therefore that Article 9(1) of Regulation No 714/89 is applicable to claims for special premiums made under Article 11(2) thereof.
The second question
16 Under Article 8(1) of Regulation No 714/89, the national authorities appointed to verify that the provisions governing the special premium are complied with may operate either on-farm inspection or administrative checks.
17 As regards administrative checks, it is important to note that they include an examination of the documents submitted by the applicant for the premium for the purpose of proving that he fulfils the conditions specified.
18 It follows that the check thus carried out by the competent authority for the purpose of verifying the evidence put forward by the applicant to the effect that the animals have been slaughtered constitutes a check within the meaning of Article 8 and is ipso facto an "inspection" (2) for the purposes of Article 9(1) of Regulation No 714/89.
19 The answer to the second question is therefore that for the purposes of Article 9(1) of Regulation No 714/89 "inspection" includes examination of the documents submitted by the applicant to the competent authority as evidence that he fulfils the conditions specified.
The third question
20 Article 9(4) of Regulation No 714/89 applies where the difference between the number of animals declared and the number of animals actually eligible is less than 5% or no more than one animal, if the number of animals declared is equal to or less than 20 head and that difference may be ascribed to reasons other than those provided for under Article 9(2) and (3).
21 According to the order for reference the difference at issue in the main action cannot be ascribed either to natural circumstances or to reasons of force majeure; accordingly, paragraphs (2) and (3) of Article 9 of Regulation No 714/89 are not applicable.
22 In the main action the number of animals actually eligible is only 27 out of the 32 declared; consequently, the difference between the number of animals eligible and the number declared in the application is greater than 5%. It follows that Article 9(4) is not applicable either.
23 In those circumstances, there is no doubt that Article 9(1) is applicable in the main action. It is only where paragraphs (2), (3) and (4) of Article 9 are inapplicable that the penalty laid down in Article 9(1) must be applied.
24 The answer to the third question is therefore that Article 9(1) of Regulation No 714/89 precludes the granting of a special premium for beef producers where the producer does not slaughter the required number of fattened cattle, or have them slaughtered, within the period prescribed by Article 11(2) and where the difference between the number of animals declared and the number actually eligible is greater than 5%, that difference not being attributable to the causes referred to in Article 9(2) and (3).
The fourth question
25 The fourth question seeks, in essence, to ascertain whether Article 9(1) of Regulation No 714/89 is compatible with the principle of proportionality, in so far as it precludes payment of the premium in the event of failure, even in part, to comply with the time-limit prescribed in Article 11(2).
26 In order to determine whether that provision is consistent with the principle of proportionality, it must be ascertained whether the measures introduced by those provisions exceed the limits of what is appropriate and necessary in order to attain the objective pursued by the rules which have been breached. More particularly, it must be ascertained whether the means which the provision in question applies in order to achieve the aim pursued correspond to the importance of that aim and whether they are necessary in order to achieve it (see, in particular, the judgment in Case C-319/90 Otto Pressler Weingut-Weingrosskellerei v Federal Republic of Germany [1992] ECR I-203, at paragraph 12).
27 The fourth recital in the preamble to Regulation No 714/89 highlights the need to reinforce the measures for preventing and penalizing irregularities and frauds.
28 Article 9 indicates that the refusal to grant the whole of the premium is not the consequence of mere failure to comply with the final date for slaughter: the failure must also bring about a considerable reduction in the number of animals actually eligible, a reduction which cannot be ascribed either to natural circumstances affecting the herd (Article 9(2)) or to reasons of force majeure (Article 9(3)).
29 In respect of less significant infringements, that is, where the difference between the number of animals actually eligible and the number declared is less than 5%, or no more than one animal, if the number of animals declared is equal to or less than 20 head, and provided that that difference is not the result of a false declaration made deliberately or through negligence, the premium is merely reduced.
30 In the light of those considerations, it must be held that although the loss of the whole of the special premium in circumstances other than those referred to in Article 9(2), (3) and (4) is a severe penalty, that penalty is appropriate and necessary in order to achieve the objective of the regulation in question, which is to prevent irregularities and frauds.
31 The answer to the fourth question is therefore that Article 9(1) of Regulation No 714/89, in so far as it provides that no premium may be paid in the event of failure, even in part, to comply with the time-limit provided for in Article 11(2), is not contrary to the principle of proportionality.
Costs
32 The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court.
On those grounds,
THE COURT (Fourth Chamber),
in answer to the questions referred to it by the Verwaltungsgericht Hannover, by order of 29 November 1991, hereby rules:
1. Article 9(1) of Commission Regulation (EEC) No 714/89 of 20 March 1989 laying down detailed rules applying to the special premium for beef producers is applicable to claims for special premiums made under Article 11(2) of that regulation.
2. For the purposes of Article 9(1) of Regulation No 714/89 "inspection" includes verification of the documents submitted by the applicant to the competent authority as evidence that he fulfils the conditions specified.
3. Article 9(1) of Regulation No 714/89 precludes the granting of a special premium for beef producers where the producer does not slaughter the required number of fattened cattle, or have them slaughtered, within the period prescribed by Article 11(2) of that regulation and where the difference between the number of animals declared and the number actually eligible is greater than 5%, that difference not being attributable to the causes referred to in Article 9(2) and (3).
4. Article 9(1) of Regulation No 714/89, in so far as it provides that no premium may be paid in the event of failure, even in part, to comply with the time-limit provided for by Article 11(2) of that regulation, is not contrary to the principle of proportionality.
