In Case C-22/94,
REFERENCE to the Court under Article 177 of the EC Treaty by the High Court of Ireland for a preliminary ruling in the proceedings pending before that court between
Irish Farmers Association and Others
and
Minister for Agriculture, Food and Forestry, Ireland and the Attorney General
on the validity, first, of Article 5c(3)(g) of Regulation (EEC) No 804/68 of the Council of 27 June 1968 on the common organisation of the market in milk and milk products (OJ, English Special Edition 1968 (I), p. 176), as inserted by Article 1(3) of Council Regulation (EEC) No 816/92 of 31 March 1992 amending Regulation (EEC) No 804/68 (OJ 1992 L 86, p. 83) and, secondly, of Article 3 of Council Regulation (EEC) No 3950/92 of 28 December 1992 establishing an additional levy in the milk and milk products sector (OJ 1992 L 405, p. 1), as amended by Article 1 of Council Regulation (EEC) No 1560/93 of 14 June 1993 amending Regulation (EEC) No 3950/92 (OJ 1993 L 154, p. 30),
THE COURT
(Sixth Chamber),
composed of: J.L. Murray, President of the Fourth Chamber, acting as President of the Sixth Chamber, C.N. Kakouris, P.J.G. Kapteyn, G. Hirsch (Rapporteur) and H. Ragnemalm, Judges,
Advocate General: D. Ruiz-Jarabo Colomer,
Registrar: H. von Holstein, Deputy Registrar,
after considering the written observations submitted on behalf of:
- the Irish Farmers Association and Others, by James O'Reilly SC, and John Gleeson, Barrister, instructed by John J. O'Hare & Co., Solicitors,
- the Council of the European Union, by Arthur Brautigam, Legal Adviser, and Michael Bishop, of its Legal Service, acting as Agents,
- the Commission of the European Communities, by Xavier Lewis, of its Legal Service, acting as Agent,
having regard to the Report for the Hearing,
after hearing the oral observations of the Irish Farmers Association and Others, represented by James O'Reilly and John Gleeson; the Minister for Agriculture, Food and Forestry (Ireland) and the Attorney General, represented by Carroll Moran, Barrister; the Council, represented by Arthur Brautigam; and the Commission, represented by Gérard Rozet, Legal Adviser, acting as Agent, and Xavier Lewis, at the hearing on 27 June 1996,
after hearing the Opinion of the Advocate General at the sitting on 11 July 1996,
gives the following
Judgment
1 By judgment of 12 November 1993, received at the Court on 24 January 1994, the High Court of Ireland referred to the Court for a preliminary ruling under Article 177 of the EC Treaty two questions on the validity, first, of Article 5c(3)(g) of Regulation (EEC) No 804/68 of the Council of 27 June 1968 on the common organisation of the market in milk and milk products (OJ, English Special Edition 1968 (I), p. 176), as inserted by Article 1(3) of Council Regulation (EEC) No 816/92 of 31 March 1992 amending Regulation (EEC) No 804/68 (OJ 1992 L 86, p. 83) and, secondly, of Article 3 of Council Regulation (EEC) No 3950/92 of 28 December 1992 establishing an additional levy in the milk and milk products sector (OJ 1992 L 405, p. 1), as amended by Article 1 of Council Regulation (EEC) No 1560/93 of 14 June 1993 amending Regulation (EEC) No 3950/92 (OJ 1993 L 154, p. 30).
2 Those questions were raised in the course of a dispute between the Irish Farmers Association and four milk producers and the Minister for Agriculture, Food and Forestry (Ireland) and the Attorney General (hereinafter `the Minister') concerning the temporary withdrawal of 4.5% of the reference quantities pursuant to Council Regulation (EEC) No 775/87 of 16 March 1987 temporarily withdrawing a proportion of the reference quantities mentioned in Article 5c(1) of Regulation (EEC) No 804/68 (OJ 1987 L 78, p. 5), which withdrawal was made permanent without providing for compensation for the milk producers concerned.
3 In order to deal with structural surpluses in the market in milk and milk products, an additional levy on quantities of milk delivered which, according to Formula B, exceed a reference quantity to be determined for each purchaser within the limit of a guaranteed total quantity fixed for each Member State was introduced by Council Regulation (EEC) No 856/84 of 31 March 1984 amending Regulation (EEC) No 804/68 (OJ 1984 L 90, p. 10). The reference quantity exempt from the additional levy is, according to Article 2(1) of 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), equal to the quantity of milk or milk equivalent purchased by a purchaser during the reference year chosen by the Member States from 1981, 1982 or 1983.
4 On account of the continuing excess milk production, the Community was forced on several occasions to reduce further the total quantity initially fixed for the Member States. In order to achieve various reductions at the level of individual producers, the Community introduced, in the context of the additional levy scheme, various measures, such as the programme for the definitive discontinuation of milk production or for the mandatory reduction in reference quantities initially granted, or a combination of those programmes.
5 Amongst those programmes and measures intended to reduce milk production, Regulation No 775/87 temporarily withdrew 4% of each reference quantity for the 1987/88 period and 5.5% for the 1988/89 period. In return for that temporary suspension, compensation was provided for at a rate of ECU 10 per 100 kilograms for each of those periods.
6 In the context of the extension by three years of the additional levy scheme by Council Regulation (EEC) No 1109/88 of 25 April 1988 amending Regulation (EEC) No 804/68 (OJ 1988 L 110, p. 27), that is until 31 March 1992, Council Regulation (EEC) No 1111/88 of 25 April 1988 amending Regulation (EEC) No 775/87 (OJ 1988 L 110, p. 30) maintained the temporary withdrawal of 5.5% for the years 1989/90, 1990/91 and 1991/92 while none the less changing the nature of the compensation. Henceforth it was to consist in direct payment to producers of a degressive sum. Council Regulation (EEC) No 3882/89 of 11 December 1989 amending Regulation (EEC) No 775/87 (OJ 1989 L 378, p. 6) then reduced to 4.5% the percentage of quantities temporarily suspended and increased at the same time the compensation provided for under Regulation No 1111/88. None the less, the compensation remained degressive.
7 Pursuant to those regulations, compensation was paid in Ireland in order to offset the consequences of the temporary withdrawal of the reference quantities during the period from 1 April 1987 to 31 March 1992. Thus, the milk producers who are the plaintiffs in the main proceedings (hereinafter `the plaintiffs in the main proceedings') received compensation of ECU 44.5 per 100 kg of milk during the period in which 4.5% was temporarily suspended.
8 For the subsequent period from 1 April 1992 to 31 March 1993, Regulation No 816/92 inserted point (g) into Article 5c(3) of Regulation No 804/68, worded as follows:
`(g) for the 12-month period from 1 April 1992 to 31 March 1993, and without prejudice during that period, taking account of the Commission proposals in connection with the reform of the CAP, to a 1% reduction calculated on the basis of the quantity referred to in the second subparagraph of this paragraph, the total quantity, expressed in thousands of tonnes, shall be:
...
Ireland 4 725.600
...
The quantities referred to in Regulation (EEC) No 775/87 which are not included in the first subparagraph are as follows in thousands of tonnes:
...
Ireland 237.600
...
The Council shall take a final decision on the future of these quantities in the context of the reform of the CAP'.
The second recital in the preamble to Regulation No 816/92 states with regard to the quantities temporarily withdrawn that, `owing to persisting surpluses, 4.5% of the reference quantities for deliveries are not included for the ninth period in the guaranteed total quantities; ... in the course of the reform of the CAP, the Council will decide definitively what is to happen with these quantities ...'.
9 With effect from 1 April 1993, Regulation No 3950/92 reintroduced an additional levy scheme for seven consecutive years. In laying down the guaranteed total quantities for the period 1993/94, henceforth provided for in Article 3 of Regulation No 3950/92, Council Regulation (EEC) No 748/93 of 17 March 1993 amending Regulation (EEC) No 3950/92 (OJ 1993 L 77, p. 16), like Regulation No 816/92, also excluded the quantities which were temporarily withdrawn.
10 Finally, Regulation No 1560/93 adjusted the guaranteed total quantities by replacing Article 3 with a new provision. In relation to the temporary suspension, the second recital in the preamble to Regulation No 1560/93 states that `Regulation (EEC) No 816/92, which extended the additional levy scheme established by Article 5c of Regulation (EEC) No 804/68, pending a decision in the context of the reform of the common agricultural policy, did not adopt, in the guaranteed total quantities for the ninth period, the quantities previously suspended on account of the continuing surplus situation which called for the 4.5% suspension of the deliveries reference quantities to be consolidated into a definitive reduction of the guaranteed total quantities; ... in the regulations finally adopted in the milk and milk products sector to implement the reform of the common agricultural policy ... the quantities concerned have no longer been retained'.
11 Under the new additional levy scheme, in force from 1 April 1993, the plaintiffs in the main proceedings asked the Minister by letter of 28 April 1993 to return the 4.5% of definitive reference quantities temporarily suspended between 1 April 1987 and 31 March 1992 or, in the alternative, to compensate them in respect of the loss and damage suffered as a result of the permanent withdrawal of that percentage of their reference quantities.
12 Following the rejection of their request by the Minister on the basis of Regulations Nos 3950/92 and 748/93, the plaintiffs in the main proceedings brought an action on 10 May 1993 before the High Court. They challenge in particular the validity of Regulations Nos 3950/92 and 1560/93, the latter having been adopted after they commenced proceedings in the national court.
13 The High Court stayed the proceedings and referred the following two questions to the Court of Justice:
`1. Is Article 5c(3)(g) of Council Regulation (EEC) No 804/68 on the common organization of the market in milk and milk products as inserted by Article 1(3) of Council Regulation (EEC) No 816/92 invalid and contrary to Community law in so far as the reference quantities allocated for 1992/93 excluded the 4.5% of reference quantities temporarily suspended pursuant to Council Regulation (EEC) No 775/87 as amended, without the payment of compensation to producers?
2. Is Article 3 of Council Regulation (EEC) No 3950/92 as inserted by Article 1 of Council Regulation (EEC) No 1560/93 invalid and contrary to Community law in so far as the reference quantities allocated therein exclude the 4.5% of reference quantities previously temporarily suspended pursuant to Council Regulation (EEC) No 775/87 as amended, without the payment of compensation therefor?'
14 In the order for reference, the High Court observes that as a matter of probability the plaintiffs in the main proceedings did not expect the return of the reference quantities withdrawn in 1992 and in 1993, but did expect compensation if that quantity were to be permanently withdrawn. The High Court found that Irish producers did not apparently suffer any financial loss since reduction in quotas, as a result of the permanent withdrawal of 4.5% of the reference quantity, led to an increase in price. Moreover, the national court found the market value of the quota at present attached to land to be IRL 2 per gallon and that it probably did not suffer any reduction.
15 In those circumstances the High Court referred two questions, which should be considered together, asking essentially whether, first, Article 5c(3)(g) of Regulation No 804/68, inserted by Regulation No 816/92 and, second, Article 3 of Regulation No 3950/92, amended by Regulation No 1560/93, are invalid inasmuch as they permanently exclude from the reference quantity, from 1 April 1993, a quantity amounting to 4.5% until then temporarily withdrawn, without providing for payment of compensation to the producers.
16 The plaintiffs in the main proceedings challenge the validity of those provisions on grounds of general principles and fundamental rights which the Court has recognized as forming part of Community law and whose observance is ensured by it (see Case 5/88 Wachauf v Bundesamt für Ernährung und Forstwirtschaft [1989] ECR 2609 and Case C-2/92 The Queen v Ministry of Agriculture, Fisheries and Food, ex parte Bostock [1994] ECR I-955).
The principle of the protection of legitimate expectations
17 The plaintiffs in the main proceedings rely in the first place on the general principle of Community law that legitimate expectations must be protected, a principle which they consider has been breached in this case. They claim that they could have expected, on the basis of the wording and the content of Regulation No 775/87 and the amending regulations covering the period up to the end of March 1993, that the withdrawal at issue would remain temporary and provisional. All the measures, both of permanent withdrawal and of temporary suspension, provided for in the context of the programmes intended to continue the reduction of the reference quantities were accompanied by compensation. Therefore, they could legitimately expect, in the event that the temporary withdrawal became permanent, that the quantities withdrawn would be restored or that their permanent loss would be compensated.
18 Those arguments based on the alleged breach of the principle of the protection of legitimate expectations cannot be upheld.
19 According to the consistent case-law of the Court, in the sphere of the common organization of the markets, whose purpose involves constant adjustments to meet changes in the economic situation, economic operators cannot legitimately expect that they will not be subject to restrictions arising out of future rules of market or structural policy. The principle of the protection of legitimate expectations may be invoked as against Community rules only to the extent that the Community itself has previously created a situation which can give rise to a legitimate expectation (see Case C-177/90 Kühn v Landwirtschaftskammer Weser-Ems [1992] ECR I-35, paragraphs 13 and 14, and Case C-63/93 Duff and Others v Minister for Agriculture and Food, Ireland, and the Attorney General [1996] ECR I-569, paragraph 20).
20 However, the Council and the Commission did not create a situation in which milk producers could legitimately expect restoration of the reference quantities temporarily withdrawn, or compensation if the reduction of 4.5% of the reference quantities became permanent.
21 It is certainly possible that the description of the suspension effected by Regulation No 775/87 as temporary may have instilled the idea that the suspended quantity would be restored. None the less, it was provided that the arrangements for temporary withdrawal would expire, initially after two periods under Regulation No 775/87 and, after an extension, at the end of three further periods under Regulation No 1111/88, on the dates on which the reference quantities arrangements were themselves to end. The duration of the arrangements for temporary withdrawal was therefore intrinsically linked, from its entry into force as well as from its renewal, to the duration of the additional levy scheme.
22 Milk producers could not expect that, on the indicated dates, the quantities which had been withdrawn until then would be restored or that their permanent loss would be compensated. Even before the date on which the withdrawal arrangements introduced by Regulation No 775/87 were to expire, the withdrawal arrangements were extended by Regulation No 1111/88 in the context of the extension of the levy scheme. Finally when the schemes thus extended expired, that is to say, on 31 March 1992, the Irish milk producers could not have been unaware of the continuing surplus in milk production and, therefore, of the need to maintain the levy scheme.
23 Even if the Community regulations prior to Regulation No 816/92 made no mention, in view of the continuing surpluses on the milk market, of the consequences of the expiry both of the additional levy scheme in general and of the temporary withdrawal in particular, it should be observed that the debate on the reform of the Common Agricultural Policy had begun some time before that expiry and that the Commission had submitted on 11 November 1991, in the context of its proposals on the reform of the Common Agricultural Policy, Proposal for a Regulation 91/C 337/04 establishing an additional levy in the milk and milk products sector (OJ 1991 C 337, p. 35). That proposal provides in particular in the fourth recital in the preamble that `because of persisting surpluses the suspension of 4.5% of the reference quantities for deliveries must be converted to a definitive reduction in the guaranteed total quantities'.
24 So far as concerns in particular the compensation which producers could expect in the event of conversion to a definitive reduction, it should be pointed out that, according to the first recital in the preamble to Regulation No 775/87, the compensation was proportionate to the additional burden placed on producers. However, although the degressive nature of the compensation granted to offset the effect of the temporary withdrawal, under Regulation No 1111/88, is an indication of the fact that the burden placed on producers in the context of that withdrawal diminishes with time, the producers concerned should have been aware that compensation would be abolished sooner or later, particularly because of the additional fact that definitive cessation of production gave rise to compensation only for a limited period.
25 The Court has consistently held that any trader in regard to whom an institution has given rise to justified hopes may rely on the principle of the protection of legitimate expectations. On the other hand, if a prudent and discriminating trader could have foreseen the adoption of a Community measure likely to affect his interests, he cannot plead that principle if the measure is adopted (Case 265/85 Van den Bergh en Jurgens and Van Dijk Food Products v Commission [1987] ECR 1155, paragraph 44). In view of the foregoing considerations, the plaintiffs in the main proceedings had sufficient information to enable them to anticipate, particularly in view of the continuing surpluses on the market, the subsequent reductions, the gradual decrease in compensation and the Commission's proposal for a regulation of 11 November 1991 to adopt the measures which appear in Regulations Nos 816/92 and 1560/93.
Right to property
26 The plaintiffs in the main proceedings argue that the permanent withdrawal of 4.5% of their reference quantities without compensation infringes the right to property.
27 That argument cannot be upheld, either. The right to property is certainly one of the fundamental rights whose observance is ensured by the Court. Such rights are not, however, absolute rights but must be considered in relation to their social function. Consequently, restrictions may be imposed on the exercise of those rights, in particular in the context of a common organization of the markets, provided that those restrictions in fact correspond to objectives of general interest pursued by the Community and do not constitute, with regard to the aim pursued, a disproportionate and intolerable interference, impairing the very substance of those rights (Kühn, cited above, paragraph 16).
28 Having regard to those criteria, it must be held that, first, the regulations in question form part of a body of legislation intended to remedy the surpluses on the milk and milk products market and that they therefore correspond to aims pursued by the Community in the general interest.
29 Secondly, conversion into a definitive reduction without compensation does not affect the actual substance of that right inasmuch as the Irish producers were able to continue to pursue their trade or profession as milk producers. Moreover, the reduction in milk production led to an increase in the price of milk, thus compensating, at least in part, the loss suffered.
The principle of proportionality
30 Contrary to the contentions of the plaintiffs in the main proceedings, the conversion of the temporary withdrawal coupled with a proportionate compensation into a permanent reduction without compensation does not infringe the principle of proportionality.
31 Within the framework of the Community legislature's broad discretionary powers in the field of the common agricultural policy, the conversion of a temporary withdrawal of the reference quantities after five years does not seem an inappropriate means of achieving the aim of the additional milk levy scheme, which is to reduce milk production further and permanently. By comparison with the result sought, conversion into a reduction without compensation is not disproportionate, particularly in view of the fact that producers' reference quantities have not been substantially affected and they have received, for five years, compensation proportionate to the additional burden placed on them in the past but which it is no longer deemed necessary to continue.
The principle of equal treatment
32 The plaintiffs in the main proceedings claim to have suffered discrimination by comparison with, first, producers receiving compensation for permanently ceasing milk production and, secondly, producers in other Member States. Unlike the plaintiffs in the main proceedings, persons receiving compensation for permanent cessation received compensation in respect of all their reference quantities, including the 4.5% which had been temporarily withdrawn. In relation to producers from other Member States, they point out the importance of milk production in Ireland which, unlike that of other Member States on the Mediterranean, constitutes a considerable proportion of the agricultural production of the country as a whole. Furthermore, they observe that certain Member States were allocated under Regulation No 1560/93 a 10% increase of their guaranteed total quantity, as opposed to the 0.6% increase granted to Ireland, even though one of those Member States implemented Regulations Nos 856/84 and 857/84 belatedly and had then mismanaged the additional levy scheme.
33 Those arguments cannot be upheld.
34 The Court has consistently held that the principle of non-discrimination between producers or consumers in the Community, laid down in the second subparagraph of Article 40(3) of the EC Treaty, means that comparable situations are not to be treated differently and that different situations are not to be treated alike unless such treatment is objectively justified (see Case 203/86 Spain v Council [1988] ECR 4563, paragraph 25).
35 However, to compare the situation of a beneficiary of the definitive discontinuation of milk production programme with that of a producer who remains active, such as the plaintiffs in the main proceedings, makes it appear that the two categories of producers were compensated for the suspended quantities. In fact, while the suspended quantity was included in the calculation of the quantity to be compensated upon definitive discontinuation, the producer who remained active received compensation for the suspended quantity until the end of the eighth period.
36 Moreover, it appears from the observations of the Council and the Commission that Ireland's specific situation by comparison with producers of other Member States was already acknowledged when the guaranteed total quantity was fixed for that Member State.
37 Finally, the plaintiffs in the main proceedings cannot allege that the increase in the guaranteed total quantity of certain Member States was greater for the simple reason that the situation and the trends in those Member States were different to those of Ireland.
The obligation to state reasons
38 The argument put forward by the plaintiffs in the main proceedings that the obligation to state reasons laid down in Article 190 of the EC Treaty was breached must also be disregarded.
39 It is settled case-law that the statement of reasons required by Article 190 of the Treaty must show clearly and unequivocally the reasoning of the institution which enacted the measure so as to inform the persons concerned of the justification for the measure adopted and to enable the Court to exercise its powers of review. It is not necessary, however, for details of all relevant factual and legal aspects to be given, in so far as the question whether the statement of the grounds for a decision meets the requirements of Article 190 of the Treaty must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (see Case C-478/93 Netherlands v Commission [1995] ECR I-3081, paragraphs 48 and 49).
40 As the Advocate General observed at point 44 of his Opinion, the statement of grounds for Regulation No 1560/93 meets the requirements laid down by the Court inasmuch as the second recital thereof sets out in a clear and unequivocal fashion the background to the conversion into a definitive reduction without compensation.
41 On the other hand, by indicating only at the second recital in the preamble to Regulation No 816/92 the reference quantities which are no longer included in the guaranteed total quantities, the wording alone of that regulation does not make it possible to know clearly the grounds for the measure taken. However, in accordance with the principles laid down in Netherlands v Commission, cited above, and reiterated at paragraph 39 of this judgment, the circumstances in which the regulation was adopted, namely the degressive nature of the compensation, the temporal limits on all compensation provided for as part of the reduction programmes and the possibility of renewing the additional levy scheme under the conditions indicated in the Commission's proposal for a regulation of 11 November 1991, enabled the plaintiffs in the main proceedings to know the reasons for the adoption of the criticized measures in the context of Regulation No 816/92.
42 It is apparent from the foregoing considerations as a whole that, in so far as those provisions converted the temporary withdrawal of a percentage of the reference quantity within the meaning of Regulation No 775/87, without compensation, into a definitive reduction, consideration of the general principles of Community law such as the protection of legitimate expectations, non-discrimination and proportionality as well as consideration of the fundamental right to property has disclosed no factor capable of affecting the validity of, first, Article 5c(3)(g) of Regulation No 804/68 of the Council, as inserted by Article 1(3) of Council Regulation No 816/92 and, secondly, Article 3 of Council Regulation No 3950/92, as amended by Article 1 of Council Regulation No 1560/93.
Costs
43 The costs incurred by the Council of the European Union 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
(Sixth Chamber),
in answer to the questions referred to it by the High Court of Ireland by judgment of 12 November 1993, hereby rules:
In so far as those provisions converted the temporary withdrawal of a percentage of the reference quantity within the meaning of Council Regulation (EEC) No 775/87 of 16 March 1987 temporarily withdrawing a proportion of the reference quantities mentioned in Article 5c(1) of Regulation (EEC) No 804/68 on the common organization of the market in milk and milk products, without compensation, into a definitive reduction, consideration of the general principles of Community law such as the protection of legitimate expectations, non-discrimination and proportionality as well as consideration of the fundamental right to property has disclosed no factor capable of affecting the validity of, first, Article 5c(3)(g) of Regulation (EEC) No 804/68 of the Council of 27 June 1968 on the common organisation of the market in milk and milk products, as inserted by Article 1(3) of Council Regulation (EEC) No 816/92 of 31 March 1992 amending Regulation (EEC) No 804/68 and, secondly, Article 3 of Council Regulation (EEC) No 3950/92 of 28 December 1992 establishing an additional levy in the milk and milk products sector, as amended by Article 1 of Council Regulation (EEC) No 1560/93 of 14 June 1993 amending Regulation (EEC) No 3950/92.
