Lithuania v Commission (Agriculture) [2012] EUECJ T-262/07 (29 March 2012)

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(Agriculture - Common organisation of the markets - Measures to be adopted as a result of the accession of new Member States - 2003 Act of Accession - Determination of surplus stocks of agricultural products other than sugar, and the financial consequences of their elimination - Objective pursued by a provision of primary law - Decision 2007/361/EC)

1 In the round of enlargement of the European Union which resulted in the accession, on 1 May 2004, of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic ('the new Member States') to the European Union ('the accession'), the European Union and the new Member States entered into negotiations on a number of issues, grouped into negotiating chapters. The negotiations in the context of the chapter relating to agriculture related inter alia to the legal position of the stocks of agricultural products in free circulation exceeding the quantity which could be regarded as constituting a normal carryover of stock ('the surpluses') within the territory of the new Member States at the date of accession.

2 That issue is governed, pursuant to Article 22 of the Act concerning the conditions of accession of the new Member States and the adjustments to the Treaties on which the European Union is founded (OJ 2003 L 236, p. 39) ('the Act of Accession'), by point 4 of Annex IV to the Act of Accession (OJ 2003 L 236, p. 798), which provides:

3 On 4 May 2007, the Commission of the European Communities adopted, on the basis of point 4(4) of Annex IV to the Act of Accession, Decision 2007/361/EC on the determination of surplus stocks of agricultural products other than sugar and the financial consequences of their elimination in relation to the accession of the new Member States (OJ 2007 L 138, p. 14) ('the contested decision').

4 In recitals 11 and 12 in the preamble to the contested decision, the Commission stated:

6 The quantities and amounts referred to in Article 1 of the contested decision regarding the nine new Member States mentioned in Article 3 of that decision were set out in the Annex thereto. As regards the Republic of Lithuania, they were specified as follows:

7 By application lodged at the Registry of the General Court on 13 July 2007, the Republic of Lithuania brought an action under Article 230 EC for annulment of the contested decision.

8 By documents lodged at the Registry of the Court on 24 and 29 October 2007 respectively, the Slovak Republic and the Republic of Poland sought leave to intervene in the present proceedings in support of the form of order sought by the Republic of Lithuania. Leave was granted by order of the President of the First Chamber of the General Court of 18 January 2008.

9 On 29 February and 6 March 2008, the Republic of Poland and the Slovak Republic lodged, respectively, statements in intervention. On 20 June 2008, the Republic of Lithuania submitted its observations on those statements in intervention. On 2 and 23 July 2008, the Commission submitted its observations, respectively, on the statements in intervention of the Slovak Republic and the Republic of Poland.

10 Following changes in the composition of the Chambers of the General Court, the Judge-Rapporteur was assigned to the Eighth Chamber, to which the present case was thus allocated.

11 On 10 March 2011, the Court put a number of questions in writing to the parties, which complied with that request within the prescribed period.

12 Upon hearing the report of the Judge-Rapporteur, the Court decided to open the oral procedure.

13 The parties presented oral argument and their answers to the questions put by the Court at the hearing on 13 April 2011.

14 The Republic of Lithuania, supported by the Republic of Poland and by the Slovak Republic, claims that the Court should:

16 The Republic of Lithuania's arguments may be grouped, in essence, into seven pleas in law, alleging, first, that the Commission did not have the power to adopt the contested decision and infringement of point 4(2) of Annex IV to the Act of Accession; secondly, reliance on the wrong legal basis and failure to comply with the time-limit referred to in Article 41 of the Act of Accession; thirdly, infringement of the principle of legal certainty; fourthly, infringement of the prohibition of discrimination; fifthly, infringement of the principles of transparency and of sound administration; sixthly, an insufficient statement of reasons; and, seventhly, manifest errors of assessment.

17 By its first plea, the Republic of Lithuania submits, in essence, that point 4(4) of Annex IV to the Act of Accession, the legal basis for the contested decision, does not confer on the Commission the power to require the new Member States to pay to the Community budget the amounts provided for by that decision.

18 As was pointed out in paragraph 2 above, point 4(4) of Annex IV to the Act of Accession provides that the Commission is to implement and apply point 4(2) of Annex IV. Those provisions thus make the Commission responsible for establishing a system designed to ensure that the surpluses existing within the territory of the new Member States at the date of accession are eliminated at the expense of those Member States.

19 The Republic of Lithuania does not dispute as such the Commission's power to act in order to implement point 4(2) of Annex IV to the Act of Accession, but submits that the method chosen by the Commission for that purpose is contrary to that provision.

20 According to the Republic of Lithuania, the provision at issue above all imposes an obligation on the new Member States to eliminate the surpluses at their expense. It was for that purpose that implementing powers were conferred on the Commission. They include inter alia the power to establish the concept of 'normal carryover stock', the methods for calculating the stock carried over and the detailed rules for monitoring elimination. The financial amounts referred to by the contested decision cannot be imposed in the exercise of those implementing powers and are punitive in nature since they do not offset damage caused to the Community or to its operators. In any event, the Commission has not provided any evidence of the existence of damage. The punitive nature of the amounts is particularly obvious as regards agricultural products not subject to export refunds.

21 The Republic of Poland and the Slovak Republic concur with the Republic of Lithuania's arguments. They add that point 4(2) of Annex IV to the Act of Accession establishes an obligation to 'physically' eliminate the surpluses.

22 The Commission submits that the detailed rules for elimination of the surpluses are not specified in point 4(2) of Annex IV to the Act of Accession. Consequently, that provision is compatible with any conceivable form of elimination, including the straightforward absorption of the surpluses by the market. Such absorption gives rise to definite, but not quantifiable, economic effects, which have to be regarded as the cost of eliminating the surpluses. Point 4(2) of Annex IV to the Act of Accession must therefore be interpreted as meaning that the Commission is required to calculate that cost in a reasonable manner and to ensure that it is borne by the new Member States by means of the payment of a financial amount to the Community budget.

23 It must therefore be stated that the applicant's position in the present case differs fundamentally from that of the Commission on the question of what action the Commission could take to implement point 4(2) of Annex IV to the Act of Accession.

24 In order to examine the arguments of the parties on the compatibility of the contested decision with point 4(2) of Annex IV to the Act of Accession, it is necessary to set out, first of all, the various measures taken by the Commission before the adoption of the contested decision that relate to the surpluses existing within the territory of the new Member States at the date of accession.

Preliminary observations concerning the measures taken by the Commission before the adoption of the contested decision

25 Article 2(3) of the Treaty between the Kingdom of Belgium, the Kingdom of Denmark, the Federal Republic of Germany, the Hellenic Republic, the Kingdom of Spain, the French Republic, Ireland, the Italian Republic, the Grand Duchy of Luxembourg, the Kingdom of the Netherlands, the Republic of Austria, the Portuguese Republic, the Republic of Finland, the Kingdom of Sweden, the United Kingdom of Great Britain and Northern Ireland (Member States of the European Union) and the new Member States concerning the accession of the new Member States to the European Union (OJ 2003 L 236, p. 17) ('the Treaty of Accession'), signed at Athens on 16 April 2003, provides that the institutions of the Union may adopt before accession the measures referred to inter alia in Article 41 of and Annex IV to the Act of Accession. The first paragraph of Article 41 of that Act provides that the transitional measures necessary to facilitate the transition from the existing regime in the new Member States to that resulting from the application of the common agricultural policy (CAP) under the conditions set out in that Act may be taken by the Commission during a period of three years following the date of accession and their application is to be limited to that period.

26 On 10 November 2003, the Commission adopted, on the basis of Article 2(3) of the Treaty of Accession and the first paragraph of Article 41 of the Act of Accession, Regulation (EC) No 1972/2003 on transitional measures to be adopted in respect of trade in agricultural products on account of the accession of the new Member States (OJ 2003 L 293, p. 3).

27 As is apparent from recital 1 in the preamble to that regulation, transitional measures were to be adopted in order to avoid the risk of deflection of trade affecting the common organisation of agricultural markets due to the accession. Recital 3 in the preamble to the regulation states that such deflections often involve products which are moved artificially with a view to enlargement and thus do not form part of the normal stocks of the State concerned, although surplus stocks may also result from national production. Finally, it is stated that provision should accordingly be made for deterrent charges to be levied on surplus stocks in the new Member States.

28 Article 4 of Regulation No 1972/2003, as last amended by Commission Regulation (EC) No 735/2004 of 20 April 2004 (OJ 2004 L 114, p. 13), provides for a system of charges on surplus stocks of certain agricultural products in free circulation within the territory of the new Member States at the date of accession. Article 4(1) states that, without prejudice to Point 4 of Annex IV to the Act of Accession, and where stricter legislation does not apply at national level, the new Member States are to levy charges on holders of such stocks. Article 4(3) of Regulation No 1972/2003, as amended, lays down the amount of the charge in question and provides that the revenue of the charge is to be assigned to the national budget of the new Member State concerned. Lastly, Article 4(5) of the regulation contains a list, which is different for each new Member State, of the agricultural products to which the charge applies.

29 As a result of the measures provided for by Regulation No 1972/2003, the holders of surplus stocks of a number of agricultural products other than sugar in the new Member States were therefore informed of the fact that they were to be liable, after accession, to a charge proportionate to the volume of their surplus stocks.

30 Although the measures provided for in Regulation No 1972/2003 do not relate directly to the elimination of the surpluses that is provided for by point 4(2) of Annex IV to the Act of Accession, there is a link, as the Republic of Lithuania submits, between those measures and that provision. The imposition of the charge in question reduces the burden of the obligation referred to in point 4(2) of Annex IV to the Act of Accession to eliminate the surpluses. First, the existence of the charge was capable of deterring operators in the new Member States from establishing surplus stocks, which was, in principle, to reduce the quantities which had finally to be eliminated after accession. Secondly, the resources generated by the charge could confer additional revenue on those Member States and thus reduce the actual cost of their obligation to bear the costs of eliminating the surpluses.

31 On 14 January 2004, the Commission adopted, also on the basis of Article 2(3) of the Treaty of Accession and the first paragraph of Article 41 of the Act of Accession, Regulation (EC) No 60/2004 laying down transitional measures in the sugar sector by reason of the accession of the new Member States (OJ 2004 L 9, p. 8).

32 Article 6(1) of Regulation No 60/2004, as amended by Commission Regulation (EC) No 651/2005 of 28 April 2005 (OJ 2005 L 108, p. 3), provides that the Commission must determine by 31 May 2005 at the latest the quantity of sugar as such or in processed products, isoglucose and fructose exceeding the quantity considered as being normal carryover stock existing within the territory of each new Member State ('the surplus of sugar') at 1 May 2004. That provision also sets out the way in which the Commission must determine that surplus.

33 Article 6(2) of Regulation No 60/2004, as amended, provides that each new Member State concerned must ensure, without Community intervention, the elimination from the market of a quantity of sugar or isoglucose equal to its surplus of sugar. The elimination may be carried out, by 30 November 2005 at the latest, by export of that surplus without refund from the Community, by its use in the sector of combustibles or by its denaturation.

34 Under Article 6(3) of the Regulation, each new Member State must dispose on 1 May 2004 of a system for the identification of surplus stocks of sugar as such or in processed products, isoglucose and fructose, at the level of the main operators concerned, which it must use to compel those operators to eliminate from the market at their own expense a quantity of sugar or isoglucose equivalent to their surplus stock. Those operators must provide the proof of that elimination. Otherwise, the new Member State must require those operators to pay a financial contribution proportionate to the non-eliminated quantity, which is to be assigned to its national budget.

35 Article 7(1) of Regulation No 60/2004, as amended, provides that, by 31 March 2006 at the latest, the new Member States must provide proof to the Commission of the elimination of their surplus of sugar. Article 7(2) of the regulation provides that each new Member State concerned must be charged an amount proportionate to that part of its surplus of sugar for which proof of elimination has not been provided within the prescribed period. That amount will be assigned to the Community budget and taken into account for the calculation of the production levies for the marketing year 2004/05.

36 On 31 May 2005, the Commission calculated the surplus of sugar of each new Member State by adopting Regulation (EC) No 832/2005 on the determination of surplus quantities of sugar, isoglucose and fructose for the new Member States (OJ 2005 L 138, p. 3). Article 1 of that regulation established the quantity of sugar required to be eliminated from the Community market by each of the five new Member States which were finally found to have a surplus of sugar.

37 Pursuant to the measures provided for by Regulation No 60/2004 and Regulation No 832/2005, those five new Member States were thus required to ensure that their surplus of sugar was withdrawn from the market or, otherwise, to pay a financial amount to the Community budget, which would be taken into account for the calculation of certain levies which had to be paid by European Union producers.

The compatibility of the 'elimination' mechanism provided for by the contested decision with point 4(2) of Annex IV to the Act of Accession

38 The arguments put forward by the parties must be examined in the light of the general context of the provisions and measures set out above which were adopted for the purpose of managing the surpluses in the context of the accession, in order to answer the question whether the method of elimination provided for by the contested decision is compatible with point 4(2) of Annex IV to the Act of Accession.

39 It is apparent that the positions of the parties, summarised in paragraphs 19 to 22 above, differ in particular as regards the meaning which should be given to the term 'eliminated' used in point 4(2) of Annex IV to the Act of Accession.

40 Since there is no relevant definition under European Union law of what is meant by 'to eliminate', the meaning and scope of that term must be determined by considering the general context in which it is used and its usual meaning in everyday language (Case 349/85 Denmark v Commission [1988] ECR 169, paragraph 9; Case C-164/98 P DIR International Film and Others v Commission [2000] ECR I-447, paragraph 26; and Case C-431/04 Massachusetts Institute of Technology [2006] ECR I-4089, paragraph 17). As regards agricultural products, it must be observed that, in everyday language, the term 'eliminated', as used in point 4(2) of Annex IV to the Act of Accession, has the meaning of 'destroyed' or 'taken off the market'.

41 Furthermore, agricultural products in free circulation within the territory of the Member States are intended to be absorbed by the market. Consequently, the statement in point 4(2) of Annex IV to the Act of Accession that the surpluses must be eliminated cannot be understood as referring to the absorption of the surpluses by the market. If the authors of the Act of Accession had wanted to impose an obligation on the new Member States to pay into the Community budget a financial amount intended to offset the cost of that absorption, they would have stated that those Member States were required to pay into the Community budget a financial amount calculated on the basis of the volume of their surpluses.

42 In that regard, it must moreover be pointed out that the Commission has not identified any travaux préparatoires or documents capable of showing that, at the time of the adoption of point 4(2) of Annex IV to the Act of Accession, it was the intention of the authors of that Act to permit the Commission to implement a system under which the obligation to eliminate the surpluses referred to in that Annex could be understood as a straightforward obligation to pay into the Community budget a financial amount calculated on the basis of the volume of those surpluses.

43 As regards the purpose of point 4(2) of Annex IV to the Act of Accession, the Court has held that, so far as sugar is concerned, it is primarily to prevent disruption to the functioning of the mechanisms provided for by the common organisation of the market in sugar and, in particular, disruption affecting price formation and arising as a result of the accumulation of abnormal quantities of sugar in the new Member States before their accession to the European Union (Case T-324/05 Estonia v Commission [2009] ECR II-3681, paragraph 119). It must therefore be held that point 4(2) of Annex IV to the Act of Accession has the same purpose, mutatis mutandis, as regard agricultural products other than sugar.

44 In that regard, it must be pointed out that, as the Commission states, the sale within the internal market of any surplus of an agricultural product within the territory of a new Member State at the date of accession is liable to affect the price of that product after accession. Since, in normal circumstances, an increase in the supply of a product results, if demand for it remains steady, in a decrease in its price, the price received by European Union producers after accession is bound to be lower than the price which they would have received if the surplus in question had not been sold.

45 The fact that that disruption of the price formation mechanisms has taken place does not, however, mean that the price of agricultural products in respect of which surpluses were found to exist in the territory of the new Member States at the date of accession will, after 1 May 2004, be lower than the prices charged before that date. It might even be higher. The price level after the date of accession will merely be lower than the level which it could have reached, as the Commission correctly states. The arguments of the Republic of Lithuania and the interveners, supported by reports produced by certain European institutions, seeking to show that the arrival on the internal market of the surpluses at issue and their possible sale did not give rise to either falls in prices or disruption to the agricultural markets are therefore irrelevant.

46 As the Commission correctly states, the authors of the Act of Accession could not be unaware of the fact that the surpluses existing within the territory of the new Member States at the date of accession could disrupt price formation mechanisms as from 1 May 2004, since the Act of Accession does not provide for any mechanism capable of ensuring that all the surplus stocks would be completely eliminated by 30 April 2004 at the latest and point 4(2) of Annex IV to that Act states that the surpluses are products 'in free circulation' from that date, which implies that those products may be marketed immediately. In order to safeguard the effectiveness of point 4(2) of Annex IV to the Act of Accession, the purpose of that provision must therefore be regarded as being not only that of preventing the disruption caused by the sale of the surpluses on the internal market, but also that of correcting the effects of that disruption.

47 It is apparent from the analysis of point 4(2) of Annex IV to the Act of Accession, carried out above in the light of the context of that provision and of its wording and purpose, that the arrangements that the Commission is responsible for implementing under point 4(4) of that Annex serve to ensure either that the disruption caused by the sale of those surpluses on the internal market is prevented or that the economic effects of that disruption are compensated for and that, under that system, the surpluses existing within the territory of the new Member States on 1 May 2004 are in principle withdrawn from the market at their expense, inter alia by the export of the surpluses outside of the internal market or by the destruction of those surpluses.

48 Lastly, it must be observed, first, that point 4(2) of Annex IV to the Act of Accession does not state, contrary to what the Republic of Lithuania maintains, that the new Member States are required to eliminate the surpluses themselves and, secondly, that the Commission, when exercising the powers regarding the CAP which the Act of Accession conferred on it for implementation of the rules laid down by that Act, may consider it necessary to exercise a broad discretion, so that the legality of a measure adopted in that sphere can be affected only if the measure is manifestly inappropriate having regard to the objective which the competent institution is seeking to pursue (judgment of 2 October 2009 in Joined Cases T-300/05 and T-316/05 Cyprus v Commission, not published in the ECR, paragraph 100). Consequently, it is conceivable that a system under which, first, the Community ensures that the surpluses existing within the territory of the new Member States at the date of accession are destroyed or exported outside of the internal market and, secondly, the cost of those operations is then passed on to the new Member States is also compatible with point 4(2) of Annex IV to the Act of Accession.

49 The system provided for by the contested decision for the elimination of surpluses of agricultural products other than sugar is not based on the destruction or the export outside of the internal market of those surpluses. It is a system by which the surpluses may become permanently integrated in that market as from 1 May 2004. The obligation of the new Member States to bear the expense of eliminating those surpluses takes the form of a straightforward obligation to pay into the Community budget a financial amount calculated on the basis of the volume of the surpluses of each agricultural product concerned. According to the contested decision, that financial amount is calculated, for each product for which export refunds existed in the year after accession, by multiplying the quantity of surpluses found to exist by the average export refund during that year. In the case of products not subject to such refunds, that financial amount is calculated by multiplying the quantity of surpluses found to exist by the difference between the average price of the product in question on the international market and the average price of that product on the internal market (see paragraph 4 above).

50 The financial amounts provided for by the contested decision thus reflect the cost which would have had to be borne by the Community budget if the Community had financed the export outside of the internal market of the surpluses found to exist. However, the contested decision does not provide for such export. It does not state that the surpluses were exported by means of Community financing, the cost of which should be borne by the new Member States. It is not apparent from the case-file in the present case that those exports took place or that other measures for eliminating the surpluses were taken; or that they were financed by the Community budget. Lastly, in its answers to the written questions posed by the Court, the Commission was not able to state whether the sale on the internal market of the surpluses in question would have given rise to losses or direct expenses for the Community budget which could be regarded as expenses of eliminating those surpluses.

51 Consequently, the amounts referred to by the contested decision cannot be regarded as the consideration for, or meeting of the cost of, certain elimination operations undertaken by the Community. It is a straightforward obligation to pay imposed on the new Member States for the benefit of the Community.

52 Even though the Commission, as has been pointed out previously, has a broad discretion in the implementation of point 4(2) of Annex IV to the Act of Accession, it cannot, under that provision, impose a straightforward obligation to pay on the new Member States for the benefit of the Community unless that obligation to pay may be regarded as constituting a financial contribution to cover the expenses of the elimination of the surpluses from the internal market.

53 Nevertheless, the Commission submits in essence that the measure provided for by the contested decision is the only one which can ensure that the objective pursued by point 4(2) of Annex IV to the Act of Accession is achieved, so that the Court should hold that that provision and the contested decision are compatible. The Commission submits three arguments in support of this.

54 The first argument put forward by the Commission is that as the surpluses existing within the territory of the new Member States at the date of accession were instantaneously absorbed by the internal market on 1 May 2004 and may have been marketed, or even consumed, it is a practical impossibility to eliminate them from the internal market by destruction or unsubsidised export after that date.

55 That argument is based in essence on the premiss that the products considered to be surplus within a new Member State on 1 May 2004 were the same products which had to be eliminated at the expense of that State under point 4(2) of Annex IV to the Act of Accession. That presupposes that the goods which are part of the stock regarded as surplus on 1 May 2004 and those which are part of the stock which has to be eliminated under point 4(2) of Annex IV to the Act of Accession are 'identical'.

56 However, the stock to be eliminated under that provision, on the ground that it exceeds the quantity which could be regarded as constituting a normal carryover of stock, does not consist of certain products which are identifiable after accession. It is impossible to distinguish, within the stock of an agricultural product in respect of which surpluses have been found to exist, the surplus stock or parts of surplus stock from that which is not surplus. Consequently, it must be held that point 4(2) of Annex IV to the Act of Accession requires the elimination of a quantity of agricultural products equivalent to that which was found to be surplus and not the elimination of some identifiable units of those products. It is, in that regard, of no account whether that equivalent quantity was purchased or produced before or after accession.

57 The Commission itself established, as regards the surpluses of sugar existing within the territory of the new Member States at the date of accession, a system for the elimination from the internal market, by destruction or unsubsidised export, of those surpluses which was based not on the elimination of the sugar considered surplus at 1 May 2004, but on the elimination of an equivalent quantity of sugar, even sugar bought or produced after that date (see, to that effect, Estonia v Commission, paragraph 43 above, paragraphs 168 to 171).

58 As has been stated in paragraphs 32 and 33 above, Article 6(1) and (2) of Regulation No 60/2004 provides that the Commission must determine the surpluses of sugar existing within the territory of each new Member State at 1 May 2004 and imposes on the Member States a deadline for ensuring, without Community intervention, the elimination from the market of a quantity of sugar 'equal' to those surpluses, by export without refund, use in the sector of combustibles or denaturation.

59 Likewise, under Article 6(3) of Regulation No 60/2004, each new Member States must dispose on 1 May 2004 of a system for the identification of surplus stocks of sugar as such or in processed products, isoglucose and fructose, at the level of the main operators concerned, which it is to use to compel those operators to eliminate from the market at their own expense a quantity of sugar or isoglucose 'equivalent' to their surplus stock.

60 Consequently, it must be held that point 4(2) of Annex IV to the Act of Accession provides for a system for the elimination from the internal market of agricultural products other than sugar, despite the fact that the surpluses of those products existing within the territory of the new Member States at 1 May 2004 may have been absorbed by the internal market immediately after that date.

61 The first argument put forward by the Commission for the purpose of showing that the measure provided for by the contested decision is the only one which can ensure that the objective pursued by point 4(2) of Annex IV to the Act of Accession is achieved must therefore be regarded as unfounded.

62 The second argument put forward for that purpose by the Commission is that the organisation of a system for the elimination from the internal market, by destruction or unsubsidised export, of the surpluses of products other than sugar would be excessively expensive and difficult to achieve since, first, an ad hoc operation would be involved requiring the setting up of complex mechanisms for making an inventory of, tracking and monitoring the existing stocks and, secondly, the number of producers is too great to allow those surpluses to be identified in practice. Those characteristics are different from those which exist in the market for sugar. On the market for sugar, which is very concentrated and regulated, the number of producers is limited and there are permanent mechanisms for monitoring the quantities of sugar produced in each marketing year and mechanisms for the physical elimination of the quantities produced in excess of the quotas authorised under the instruments for the regulation of that market.

63 In that regard, it must be held that the expense of a measure which has to be adopted under a provision of primary law, such as point 4(2) of Annex IV to the Act of Accession, cannot result in the conclusion that that measure is not capable of ensuring that the objective pursued by that provision is attained and even less in the conclusion that that provision must be interpreted as requiring the adoption of a different measure.

64 Admittedly, in accordance with the principle of proportionality, which is one of the general principles of European Union law, acts adopted by the European Union institutions must not exceed the limits of what is appropriate and necessary in order to attain the legitimate objectives pursued by the legislation in question; where there is a choice between several appropriate measures, recourse must be had to the least onerous; and the disadvantages caused must not be disproportionate to the aims pursued (see Case C-33/08 Agrana Zucker [2009] ECR I-5035, paragraph 31 and the case-law cited). Consequently, if two different measures were capable of attaining the objective pursued by point 4(2) of Annex IV to the Act of Accession, the Commission would be required to adopt the less expensive measure. However, that measure would, in any event, have to be compatible with the provision itself.

65 As regards the practical impossibility of organising a system for the elimination from the internal market of surpluses of products other than sugar, the only factor which the Commission invokes is the fragmentation of the markets in agricultural products other than sugar as regards the operators. There is nothing to indicate that, in spite of that fragmentation, the Commission could not have ensured the elimination from the internal market of the surpluses of those products existing at 1 May 2004 within the territory of the new Member States by providing for a system under which the Member State concerned could meet its obligation of elimination by acquiring a quantity equal to that of the surplus in order to eliminate it by destruction or unsubsidised export. That quantity could be acquired, if necessary, at the Community market price, from commercial operators in the Member State concerned or from other Community operators (see, in that regard, Estonia v Commission, paragraph 43 above, paragraph 178).

66 Also, it must be pointed out that the new Member States were required to carry out, under Article 4(4) of Regulation No 1972/2003, as amended, an inventory of stocks of agricultural products other than sugar existing within their territory at 1 May 2004 and, with the exception of those quantities in public stocks as referred to in Article 5 of that regulation, to notify the Commission of the quantities of products in surplus stocks by 31 October 2004 at the latest. The Commission does not explain why that inventory, which it considered it possible to carry out at the time of the adoption of Regulation No 1972/2003, could not have enabled the new Member States to ensure the elimination of a substantial part of the surpluses in the possession of their operators.

67 The second argument put forward by the Commission for the purpose of showing that the measure provided for by the contested decision is the only one which can ensure that the objective pursued by point 4(2) of Annex IV to the Act of Accession is achieved must therefore be rejected.

68 The third argument put forward by the Commission for that purpose is that, at the time of the adoption of the contested decision, the surpluses existing within the territory of the new Member States had already been absorbed by the internal market and that they had therefore been affecting the price formation mechanisms in respect of agricultural products for a long time. The Commission consequently submits that, after accession, it could only request the new Member States to pay compensation equivalent to the damage caused.

69 By that argument, the Commission is in actual fact claiming that a system for the elimination from the internal market of the surpluses, by destruction or unsubsidised export, would not make it possible to attain the objective pursued by point 4(2) of Annex IV to the Act of Accession, as defined in paragraphs 43 to 46 above, and that the measure provided for by the contested decision is by contrast capable of attaining that objective.

70 Contrary to what the Commission maintains, the elimination of the surpluses, by destruction or unsubsidised export outside of the internal market, contributes to correction of the economic disruption linked to the existence of the surpluses within the territory of the new Member States at the date of accession even after the sale of the surpluses on the market has taken place. The elimination of the surpluses may generate an increase in demand on the internal market for the agricultural products concerned and, consequently, offset, wholly or in part, the adverse effect of the existence of the surpluses on the stability of the markets concerned (see, as regards the market for sugar, Estonia v Commission, paragraph 43 above, paragraph 178; see also, as regards other agricultural products, the Opinion of Advocate General Mischo in Case C-179/00 Weidacher [2002] ECR I-501, point 55).

71 Consequently, contrary to what the Commission submits, the implementation, after accession, of a system for the elimination from the internal market, by destruction or unsubsidised export, of the surpluses existing within the territory of the new Member States at 1 May 2004 is capable of attaining the objective pursued by point 4(2) of Annex IV to the Act of Accession.

72 It is true that it is conceivable that the straightforward payment of a financial amount by the new Member States may also, in some circumstances, correct the disruption to the price formation mechanisms caused by the accumulation of abnormal stocks within the territory of those Member States before accession and therefore ensure the attainment of the objective pursued by point 4(2) of Annex IV to the Act of Accession. The payment of that amount could offset the economic loss suffered by operators who had to bear prices lower than those which would otherwise have been reached. That payment could also finance measures for stabilising the markets concerned.

73 However, first, the straightforward payment to the Community budget of the financial amounts referred to by the contested decision is not capable of ensuring compensation for the operators who have suffered the economic effects of the sale of the surpluses and cannot have the slightest effect on the price level of agricultural products after accession.

74 Secondly, even though, as the Commission submits, the costs associated with the mechanisms for stabilising the agricultural markets are of necessity financed by the Community budget, there is not an automatic and, even less, a direct, relationship between the creation of an additional contribution on the part of the new Member States to the Community budget and the establishment of new stabilising mechanisms or the strengthening of the existing mechanisms.

75 Lastly, it is admittedly conceivable that the existence of an obligation for the new Member States to pay a financial amount to the Community budget may be regarded as a supplementary mechanism, in the context of a system for the physical elimination of surpluses, needed to ensure that the necessary additional cost of dealing with any disruption to the agricultural markets caused by surpluses that have not been eliminated from the internal market in a manner consistent with the rules provided for by that system does not fall on the Community budget or on Community producers but on the Member States concerned (see, to that effect, Estonia v Commission, paragraph 43 above, paragraph 180).

76 Such a supplementary mechanism was provided for by the Commission as regards sugar by adopting Article 7(2) of Regulation No 60/2004, as amended, under which, where the new Member States were not capable of providing the Commission with proof of elimination of the surplus of sugar it had found to exist, they had to pay to the Community budget a financial amount which would be taken into account for the calculation of the production levies for the marketing year 2004/05.

77 Nevertheless, the financial amounts referred to by the contested decision do not constitute such a supplementary mechanism. On the contrary, the obligation to pay those financial amounts replaces the elimination from the internal market of the surpluses in question and constitutes the only 'elimination' mechanism provided for by the contested decision. Likewise, as has been stated previously, that obligation does not in itself constitute any direct benefit for Community producers.

78 Consequently, it must be held that the third argument put forward by the Commission to show that the measure provided for by the contested decision is the only one which can ensure that the objective pursued by point 4(2) of Annex IV to the Act of Accession is achieved must be regarded as unfounded.

79 It follows from all of the foregoing that the payment of a financial amount to the Community budget imposed on the new Member States by the contested decision is not compatible with point 4(2) of Annex IV to the Act of Accession. That measure could not therefore be adopted on the basis of point 4(4) of Annex IV to that Act. In so far as it alleges infringement of those provisions, the first plea must therefore be upheld.

80 The contested decision must therefore be annulled, in accordance with the principal head of claim of the Republic of Lithuania, and there is no need to examine the other pleas it put forward.

81 Under Article 87(2) of the Rules of Procedure of the General Court, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the Republic of Lithuania.

82 Under the first subparagraph of Article 87(4) of the Rules of Procedure, Member States intervening in proceedings are to bear their own costs. The Slovak Republic and the Republic of Poland must therefore be ordered to bear their own costs.

1. Annuls Commission Decision 2007/361/EC of 4 May 2007 on the determination of surplus stocks of agricultural products other than sugar and the financial consequences of their elimination in relation to the accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia;

2. Orders the European Commission to bear its own costs and to pay those incurred by the Republic of Lithuania;

3. Orders the Slovak Republic and the Republic of Poland to bear their own costs.

Product Group	Quantity in tonnes	Amount in 1 000 EUR
Milk	2 804	2 971
Fruits	658	180
Rice	569	30
Total		3 181

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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Lithuania v Commission (Agriculture) [2012] EUECJ T-262/07 (29 March 2012) URL: http://www.bailii.org/eu/cases/EUECJ/2012/T26207.html Cite as: [2012] EUECJ T-262/07, [2012] EUECJ T-262/7

Court of Justice of the European Communities (including Court of First Instance Decisions)