61997C0292

1. The present case calls for an examination of the procedure whereby the system of intervention in the milk and milk products sector was introduced in Sweden. Before the highest court in the administrative order in that country (Regeringsrätt) the question was raised whether the criteria applicable for the initial allocation to producers of individual reference quantities exempt from the additional levy (milk quotas) were compatible with Community law and, in particular, with the principle of equal treatment protected by Community law.

Swedish rules on the allocation of milk quotas

2. The basic provisions of Swedish law on the initial allocation of individual reference quantities were laid down in Regulation No 1714 of 1994, which entered into force on 1 January 1995, the date of the Kingdom of Sweden's accession to the European Union. This regulation provides that the Agricultural Office (Jordbruksverket) is to be responsible for ensuring compliance with the milk quota rules.

3. The first allocation of individual reference quantities for delivery was made, on a preliminary basis, for the period 1 April 1995 to 31 March 1996. This was done in accordance with the criteria which I shall now set out.

4. To be entitled to claim a quota each producer was required to have made actual deliveries of milk continuously between 1 March 1994 and 1 January 1995 (Article 5(1)) and to have met certain environmental requirements. Where a producer had suspended deliveries during this period the administration could grant him a quota provided that he had done so for reasons beyond his control or where there were other special circumstances (Article 5(2)).

5. The quotas of holdings which had not increased their production during the years 1991, 1992 and 1993 (normal producers) were calculated according to the average milk quantities delivered during the same reference period (Article 6). Apart from this general rule, the Swedish regulation distinguished three other categories of producers to whom three other methods of calculating the quota applied. These were new producers, producers who have increased their production and ecological producers.

6. New producers were those who had begun to make deliveries during the three years taken as the basis for the calculation (1991, 1992 or 1993). They were entitled to an annual quota (or, rather, a quota per milk year) of 7 398 kg of milk for each dairy cow, less 15%, a reduction described in the Swedish rules as the own risk deduction. At the producer's request the quota could, in the alternative, be calculated on the basis of the general criterion, that is on the basis of the average of his deliveries during the months of the reference period in which deliveries had been made (Article 10).

7. Producers who had increased production meant producers who during the reference period had invested in property in order to increase milk production or who, without acquiring land, had increased their dairy herd. Under Article 10 of the Swedish regulation any producer who had increased his production was entitled to a basic quota and an additional quota. The basic quota was calculated according to the general method, that is according to the average annual quantity of milk delivered during the reference period with the proviso that increased deliveries during that period were not taken into account. The additional quantity could consist, at the producer's choice, of the quantity of 7 398 kg of milk for each newly acquired cow, less 25%, or of a quantity of milk for each new cow arrived at by apportioning to the entire herd the average annual quantity delivered during the reference period, again less 25%.

8. Ecological producers, that is those producing organic milk, could request that their quotas be calculated not according to the general rule but according to their actual production in 1993 or 1994 (Article 7). Furthermore, if an ecological producer wished to accede to the special arrangements for new producers or producers who had increased their production the corresponding quota was allocated without the own risk reduction being applied (Articles 10 and 10a).

9. In January 1995 the Agricultural Office commenced the initial provisional allocation of individual reference quantities in accordance with the general criterion laid down in Article 6 (see point 5 above).

10. Between March and May 1995 the Agricultural Office completed the allocation of individual reference quantities to new producers in accordance with the criteria set out above. Before allocating quotas to producers who had increased their production it estimated the result of such allocation and concluded that if the allocation were completed in accordance with the rules in force the total individual quantities would exceed the total quota allocated to Sweden. The Swedish Government then decided to amend the milk quota rules by adopting Regulation No 812 of 1995, which entered into force on 1 July 1995. Under this provision the own risk reductions applicable to the categories of new producers and producers who had increased their production were increased. The reduction for new producers was increased from 15% to 30% and that for producers who had increased their production was increased from 25% to 55%. Furthermore, the latter producers were entitled to an additional quota only in respect of the proportion of their increased herds which exceeded 10% of the number of cows on the holding prior to expansion. The Agricultural Office amended the quotas granted on a provisional basis to bring them into line with these new criteria.

Facts and main proceedings

11. Kjell Karlsson and Lars-Göran Gustafsson are milk producers. Natanael Torarp was a milk producer until November 1994. They all live in the Jönköping area.

12. By decision of the Administrative Office of 19 January 1995 Mr Karlsson was allocated an annual quota of 38 797 kg of milk. This quantity reflected his average production in 1991, 1992 and 1993.

Mr Karlsson, who had made improvements to his holding and had increased the number of cows from seven to twelve, applied for the additional quota provided for in the Swedish rules for producers who had increased their production (see point 7 above). By decision of 29 August 1995 the Office granted his application and allocated him a quota of 48 553 kg. This allocation was made in accordance with the criteria laid down in Regulation No 812 of 1995. The rate of the own risk reduction was therefore 55%.

Mr Karlsson appealed to the competent administrative court (Länsrätt) and requested that the additional quota to which he was entitled as a producer who had increased his production be allocated in accordance with the original rules, that is subject to a reduction of 25%. His appeal was dismissed by judgment of 24 November 1995, which was upheld by decision of 2 April 1996 of the administrative court of appeal (Kammarrätt). Mr Karlsson appealed on a point of law to the Supreme Administrative Court (Regeringsrätt).

13. Lars-Göran Gustafsson, who was in the position of a new producer, that is one of those who had commenced production during the reference period, applied to the Agricultural Office for the corresponding quota. By decision of 23 March 1995 the Office informed him that his application had been successful and allocated him a quota of 251 532 kg of milk. This amount represented the quantity of 7 398 kg provided for in Article 10 of the regulation (see point 6 above) for each of the forty cows on the new holding less the 15% own risk reduction. On 3 July 1995 the Office amended the reference quantity allocated to Mr Gustafsson by reducing it to 207 144 kg pursuant to Regulation No 812, which increased the own risk reduction to 30% for that category of producer.

Mr Gustafsson appealed against the second decision and requested that he be awarded the quota originally allocated. His appeal was dismissed both at first instance and on appeal by judgments of 31 October 1995 and 10 April 1996 and Mr Gustafsson appealed on a point of law to the Supreme Administrative Court, where his appeal is now pending.

14. The third plaintiff in the main proceedings, Natanael Torarp, made deliveries of milk during the period 1991 to 1993. By decision of 19 January 1995 the Agricultural Office automatically allocated him the corresponding reference quantity. Mr Torarp then informed the authorities that he had ceased to produce milk on 12 November 1994 but that he wished to be allocated a quota calculated on the basis of the years during which he had actually produced milk. By decision of 29 March 1995 the Office, in reliance on Article 5 of the regulation on milk quotas (see point 4 above), withdrew the quota initially allocated to Mr Torarp and rejected his request since it considered that none of the special circumstances required by the rules in force governing the allocation of a quota to a producer who had interrupted deliveries applied. Mr Torarp then informed the Agricultural Office that he had decided to discontinue production because he had been seriously injured by a cow and had consequently been forced to sell his herd some days after the accident. The Agricultural Office maintained its decision.

Mr Torarp brought an action before the administrative court, which dismissed it by judgment of 26 October 1995. His appeal against that judgment was also dismissed, on 12 April 1996. Mr Torarp appealed further.

The question referred to the Court

15. The Supreme Administrative Court decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:

Do Council Regulation (EEC) No 3950/92 establishing an additional levy in the milk and milk products sector, Articles 5 and 40(3) of the EC Treaty and the fundamental Community law principle of equal treatment permit national provisions of a State which acceded to the Union on 1 January 1995 under which:

1. for producers who have not altered their production, average deliveries in 1991, 1992 and 1993 are adopted as the basis for the award of a milk quota;

2. producers who have commenced or increased production of milk between 1 January 1991 and 31 December 1994 must accept a reduction in milk quota, unlike milk producers whose production circumstances have not altered in that period and producers of ecologically produced milk, and that reduction is determined differently for producers who have commenced production than for those who have increased production; and

3. producers who delivered milk before the State's accession to the EC's milk quota system but who - for reasons outside their control - have not delivered milk throughout the necessary qualification period for the award of quotas (1 March 1994 to 1 January 1995) are refused a quota?

Applicable Community law

Provisions on the initial allocation of milk quotas

16. In order to reduce the imbalance between supply and demand for milk and milk products and the resulting structural surpluses, Regulation (EEC) No 856/84 modified the common organisation of the market in that sector by introducing an additional levy payable in certain circumstances in addition to the existing co-responsibility levy:

Under this new control mechanism, which was applicable with effect from 2 April 1984, milk production was made up as follows:

- a guaranteed total quantity for the Community as a whole was determined, constituting the guarantee threshold for milk production;

- this quantity was distributed between Member States on the basis of the quantities of milk delivered on their territory during the 1981 calendar year plus 1%, with the exception of the quantity intended for the Community reserve set up to meet the special needs of some Member States and certain producers;

- each Member State then distributed its guaranteed quantity among its producers and allocated each of them an individual reference quantity, commonly called the milk quota.

17. Any producer exceeding the reference quantity was required to pay an additional levy intended to finance the expenditure incurred in marketing the surplus production. The levy was to be paid by the producer (formula A) or paid by the purchaser of the milk and passed on to the producer (formula B), at the choice made by each Member State.

18. The general rules for the application of the additional levy scheme were established by the Council in Regulation (EEC) No 857/84. Under that regulation Member States were able to choose either 1981, 1982 or 1983 as the reference period for the purpose of calculating producers' individual reference quantities and also to create national reserves in order to take account of the special situations of some of their producers.

19. Article 3 of Regulation No 857/84 provided that, when allocating the reference quantities between the various producers, the Member States were to take into account the special situations of (a) producers who had adopted milk production development plans, (b) young farmers and (c) producers affected by exceptional events (natural disaster, destruction of resources or buildings, an epizootic) during the year taken as the reference period.

20. Article 4 of Regulation No 857/84 also provided that an additional reference quantity might be granted to producers undertaking farming as their main occupation.

21. Under Article 5 of Regulation No 857/84 the additional reference quantities awarded pursuant to Articles 3 and 4 could be granted only within the guaranteed global quantity allocated to the Member State concerned.

22. This additional levy scheme was established for a period of five years from 1 April 1984. The Council subsequently adopted Regulation (EEC) No 816/92 extending the additional levy scheme for a further year (from 1 April 1992 to 31 March 1993).

23. Regulation (EEC) No 3950/92 extended the application of the additional levy scheme for seven years and codified the existing provisions with the aim of simplifying and clarifying them. Article 12 of that regulation accordingly repealed Regulation No 857/84.

24. Article 4 of Regulation No 3950/92 provides that the individual reference quantities are to be equal to the quantities available on 31 March 1993, without prejudice to adjustments made at national level within the limits of the total quantity allocated to each Member State.

25. Article 5(1) provides that the Member States may replenish the national reserve following an across-the-board reduction in all the individual reference quantities in order to grant additional or specific quantities to producers determined in accordance with objective criteria agreed with the Commission.

Provisions applicable on the accession of the Kingdom of Sweden

26. The Kingdom of Sweden acceded to the European Communities on 1 January 1995. Pursuant to the Act concerning the conditions of accession to the European Union of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden, the guaranteed total quantity for Sweden was fixed at 3.3 million tonnes for deliveries and 3 000 tonnes for direct sales. These figures reflected total production in Sweden in 1992.

The principle of equal treatment in the application of the common agricultural policy

27. Under the second subparagraph of Article 40(3) of the EC Treaty any common organisation of the market is to be limited to pursuit of the objectives set out in Article 39 and is to exclude any discrimination between producers or consumers within the Community.

28. Article 39(1) of the Treaty provides that the specific objectives of the common agricultural policy are: to increase productivity, to ensure a fair standard of living for the agricultural community, to stabilise markets, to assure the availability of supplies and to ensure that supplies reach consumers at reasonable prices.

Analysis of the question referred to the Court

Preliminary question: Community rules on the initial allocation of milk quotas applicable to Sweden

29. Before answering the three-part question referred by the Regeringsrätt it is necessary to ascertain the precise legislative framework within which the Swedish authorities operated when they allocated initial reference quotas following accession.

30. In their written submissions the appellants in the main proceedings complain that the Swedish legislation is inconsistent with the Community rules on the allocation to individual producers of the total quantity for each Member State laid down in secondary legislation. In particular, they consider that there has been an infringement of Regulation No 856/84 (see point 16 above), which provides that Member States may choose between two formulas when introducing the additional levy scheme, and also of Article 5 of Regulation No 3950/92 (see point 21 above), pursuant to which a Member State may, in certain circumstances, make an across-the-board reduction in all the individual reference quantities in that State. Contrary to the latter provision, the Swedish authorities applied different types of reductions to different categories of producers.

31. The provisions on which they rely have no relevance to the present case.

32. Regulation No 856/84 inserted into Regulation No 804/68, which established the common organisation of the market in milk, a new Article 5c, pursuant to which the additional levy was introduced. It is true that this levy was originally borne, at the choice of the Member State, either by the producer (formula A) or by the purchaser (formula B) where the individual reference quantity was exceeded. Article 5c is silent as to the procedure for allocating the milk quotas, which is dealt with in Regulation No 857/84 (see point 18 above).

In any event, after being amended on a number of occasions, Article 5c was virtually deprived of its content, with effect from 1 April 1993, as a result of Regulation (EEC) No 2071/92. Thus Regulation No 856/84, on which the appellants rely, must be regarded as definitively repealed.

As to whether the cases of across-the-board reductions provided for in Article 5 of Regulation No 3950/92 are applicable in the present context, it must be said that it can be inferred from a mere reading of that provision that such measures are envisaged in a situation in which the initial quotas have already been allocated. Therefore this provision, too, has no relevance to the present case.

Consequently, since Regulation No 857/84 was expressly repealed with effect from 1 April 1993 (see point 23 above), and since Regulation No 3950/92, when dealing with the distribution of reference quantities, refers solely, in Article 4(1), to the situation existing on 31 March 1993, I consider that I may state that the only provision of secondary law on the initial allocation of quotas in force at the time of the accession of the Kingdom of Sweden was the one which provides that the total of the individual reference quantities of each Member State is not to exceed its total guaranteed quantity.

33. Unlike the position in Spain and Portugal - which acceded to the Communities while Regulation No 857/84 was in force - the national legislature, in the absence of Community rules governing the initial allocation of quotas, was entitled to adopt its own criteria, which in fact it did. The situation compared with Austria and Finland - which acceded to the Union at the same time as Sweden - was also different, since each had its own milk quota system, in force since 1974 and 1984 respectively.

Sweden's power to legislate on the allocation of quotas may be determined by inference a contrario from the case-law of the Court of Justice, which has consistently held that it is one of the fundamental characteristics of a common organisation of the market that in the sectors concerned the Member Sates can no longer take action through national provisions adopted unilaterally. Their legislative competence can only be residual; it is limited to situations which are not governed by the Community rules and to cases where those rules expressly give them power to act. Far from constituting an infringement of Article 5 of the Treaty, the introduction of those criteria for the allocation of quotas meets the obligation which that provision places on each Member State to ensure the application of Community law and, in particular, the effective functioning of the common organisation of the markets in milk and milk products. For the same reason the adoption and application of those criteria for the allocation of reference quantities constitute acts of Community law and their compliance with superior rules of the European order is subject to review by the Court of Justice.

34. It is against that legislative background that the question referred to the Court must be examined.

By its question the national court seeks to ascertain whether certain aspects of the Swedish rules on the initial allocation of milk quotas are compatible with Regulation No 3950/92, Articles 5 and 40(3) of the Treaty and the fundamental principles of Community law, such as the principle of equal treatment.

35. As I have said, in adopting criteria for the initial allocation of quotas the Swedish authorities were operating in an area in which no Community rules were in force, and therefore indisputably complied with Article 5 of the Treaty. I shall therefore confine my analysis of the question referred by the Regeringsrätt to the prohibition of discrimination between producers set out in Article 40(3) of the Treaty.

36. I should point out that, within the framework of the common agricultural policy, the fact that legislative competence - generally residual - may belong to the Member States in defined circumstances does not in any way presume that Community law has completely relinquished its jurisdiction in those matters. In each case the domestic rules must be guided by the specific objectives of the common agricultural policy set out in Article 39 of the Treaty (see point 28 above), which are essentially of an economic nature, in addition to the general objectives underlying the entire Community order. Those general objectives serve as guidelines for the application of the common agricultural policy and to supplement the list in Article 39.

First part of the question

37. By the first part of its question the Regeringsrätt queries the compatibility with Community law of a domestic rule which, in the case of a State which acceded to the European Union on 1 January 1995, provides that the milk quota is to be allocated, in the case of producers who have not altered their production, on the basis of the average quantities delivered in 1991, 1992 and 1993.

38. As I have already suggested (see point 35 above), of the provisions to which the national court refers only Article 40(3) of the Treaty is relevant, in so far as it provides that the common organisation of the agricultural markets shall exclude any discrimination between producers or consumers within the Community. That provision relates to all measures concerning the common organisation of the agricultural markets, irrespective of the authority which adopts them. Therefore it is also binding on the Member States when they participate in the implementation of the organisation of the market.

39. The prohibition of discrimination referred to in Article 40(3) of the Treaty, moreover, is merely a specific enunciation of the general principle of equality, one of the fundamental principles of the Community order. According to that principle, comparable situations are not to be treated differently unless such treatment is objectively justified.

40. The order of reference fails to indicate what the discriminatory element, unacceptable in Community law, present in the Swedish legislation on the choice of the reference period for the calculation of the individual quotas might be. The appellants claim that the choice as reference period of the period between 1991 and 1993 implies ipso facto discrimination between producers which is prejudicial to a certain number of new milk producers or those who have increased their production. They also criticise the adoption of the criterion of average annual production during that period rather than the solution adopted at the relevant time by Regulation No 857/84, which consisted in defining the individual reference quantity on the basis of the quantity of milk delivered or purchased (depending on whether formula A or formula B was used) during one of the three marketing years allowed (1981, 1982 or 1983).

41. To my mind the rule established in Sweden to determine the reference period is beyond reproach and perfectly consistent with the obligation to treat comparable situations in the same way and the corresponding prohibition on treating different situations in the same way unless there is objective justification for doing otherwise. As the Swedish Government points out, it accorded different treatment to different categories of producers. The classification of producers meets objective criteria. A distinction is drawn between: (a) producers who had not increased their production during the reference period; (b) those who had invested in property during the reference period with a view to increasing their milk production or who, without making such an investment, had increased their herd; (c) producers who had commenced production during the three years taken as the basis for calculation; and (d) milk producers using ecological methods.

42. As regards the first of these categories, to whom the first part of the question refers, no one alleges that the various producers who did not alter their production during the reference period were not treated on an equal basis or that the definition of the reference period, having regard to the structure of the Swedish market, gave rise to unjustified discrimination. Furthermore, the relatively less favourable situation of new producers and producers who had increased their production, which I shall analyse immediately below, does not in my opinion have any connection with the reference period chosen. Lastly, the choice of average production over three years rather than one year seems, in principle, more capable of reflecting the actual production capacity of each dairy farmer. Accordingly, it does not in itself give rise to any discrimination.

43. Consequently, the answer to the first part of the question referred to the Court should be that national legislation of a State which acceded to the Union on 1 January 1995, under which, for producers who had not altered their production, average deliveries in 1991, 1992 and 1993 are adopted as the basis for the award of a milk quota, is not contrary to Community law.

Second part of the question

44. The second part of the question referred by the Regeringsrätt raises the question of the compatibility with Community law of a national provision on the initial allocation of milk quotas which, in the case of a State which acceded to the European Union on 1 January 1995, accords different treatment to producers who have commenced production during the reference period and to those who have increased their production during that period and, in turn, treats both categories of producer less favourably than other producers whose production circumstances have not altered during the reference period or producers of milk by ecological methods.

45. It should be emphasised that in principle the four categories of producer referred to meet objectively defined criteria. As regards the justification for that classification and, in particular, the different treatment which it entails, it should be observed that, in comparison with what might be called the pivotal category of producers who have not altered their production during the reference period, the Swedish regulation on milk quotas penalises new producers and those who have increased their production, by applying certain corrective factors to their reference quantities, while at the same time it favours ecological producers, whose quantities are not reduced even though they commenced or increased their production between 1991 and 1993.

46. In my view it may be inferred that the penalty imposed by the Swedish rules consists essentially in disregarding any potential or actual increase in production when calculating the corresponding reference quantity.

Thus new producers could choose between an annual quota of 7 398 kg of milk per dairy cow, less 30%, and a quota calculated on the basis of the general criterion, that is, on the basis of the average deliveries during those months of the reference period in which the deliveries were made.

Producers who had increased their production were entitled to a basic quota and to an additional quota. The basic quota was calculated according to the general rule and therefore gave rise to no discrimination. The qualification was that, for the purpose of calculating the basic quota, increased production during the reference period was not taken into account. The increased amounts could provide the basis for an additional quota, which, at the producer's choice, could be either 7 398 kg of milk for each newly acquired cow, less 55%, or a quantity for each new cow obtained by apportioning the annual average deliveries during the reference period among the total number of dairy cattle, again less 55%. Furthermore, the right to an additional quota arose only in respect of the part of the increase which exceeded 10% of the number of cows on the holding prior to expansion.

In the case of young dairy cattle or new holdings, which in principle had not reached optimum yield, none of the formulas set out above allowed the producer to obtain a reference quantity covering total foreseeable deliveries. This potential increase explains, moreover, that the corrective factors applied to those farmers who commenced or increased their production before or during 1992, the year which served as the basis for calculating Sweden's overall quota.

47. According to the Swedish Government, the application of those penalties, known as own risk penalties, must be understood in the context of an increase in milk production during the reference period chosen, the effect of which was that if the total guaranteed quantity corresponding to production in 1992 (see point 26 above) had been shared uniformly among all producers, many holdings would not have received an adequate quota. The Swedish Government maintains that the prospect of accession meant that it is inconceivable that any producer could have increased his production capacity without being aware of the Community rules applicable in this area. Any increase therefore occurred in circumstances in which those concerned were aware of the risk involved, and this was a factor which [had] to be taken into account to a certain extent when the quotas were first distributed.

The Commission prefers to refer to an increase in production for what may have been speculative purposes.

In other words, in so far as those new producers and producers who had increased their production had a special responsibility for Sweden's total guaranteed quantity being exceeded, those categories - but not producers with stable production - were required to bear the corresponding reduction in individual reference quantities. The less favourable treatment given to new producers and producers who had increased their production therefore comes within the logic of the principal objective pursued by the introduction of the additional levy into the common organisation of the markets in milk and milk products, namely the reduction of structural surpluses. The inequality in treatment of those producers must therefore be regarded as justified.

48. Any restriction of a fundamental right, such as the right to own property, for the sake of an objective of general interest cannot be either disproportionate or unreasonable without infringing the principle of proportionality. According to the Swedish Government, the reduction which those operators had to bear was calculated specifically because of the surplus over Sweden's overall quota which they themselves had helped to create. It cannot therefore be described as disproportionate. In any event, issues such as the determination of the precise percentage of reduction or the procedure for allowing producers who have increased their production an additional quota fall within the broad discretion which the competent authorities must enjoy in matters relating to the common agricultural policy.

The fact that new producers were required to bear lower reductions than producers who had increased their production may, according to the Swedish Government, be explained by the national legislature's intention not to penalise excessively young farmers who were commencing production. This choice, as well as being objectively justified, is comparable with the choice made at Community level by Article 3 of Regulation No 857/84, which required Member States, when allocating reference quantities between the various producers, to take account of the special circumstances of, inter alios, young farmers (see point 19 above).

49. I therefore conclude that the more favourable treatment accorded under the Swedish legislation to farmers who have not helped create the surplus milk production is not contrary to Article 40(3) of the Treaty.

50. As regards the arrangements applicable to holdings which meet the so-called ecological requirements, I agree with the Commission that the order of reference does not provide sufficient information for us to know the exact nature of those requirements. For the purposes of my analysis, I shall proceed on the assumption that they are objective requirements to do with the protection of the environment. This appears to have been confirmed by the Swedish Government when it stated at the hearing that the category of ecological producers is subject to very strict requirements, the object of which is to clean up agricultural land.

51. As I have stated above (see point 36), the common agricultural policy does not pursue only the aims set out in Article 39 of the Treaty, but, like every Community policy, it is governed by all the objectives of the Community. The schemes for intervention in production are therefore at the same time effective instruments of restructuring with a view to those general objectives, which must include the protection of the environment.

52. The use of the scheme of the additional levy on milk for restructuring purposes is as old as the scheme itself. Thus Regulation No 857/84 authorised Member States, when allocating individual reference quantities, to take different circumstances into consideration: that the producers had drawn up a plan to develop production, that they were young farmers or that they undertook farming as their main occupation (see paragraphs 19 and 20 above). Moreover, Regulation No 3950/92 establishes a mechanism for transferring quotas to producers participating in programmes for the improvement of the environment.

53. Thus, in so far as the promotion of dairy farms employing ecological production methods may contribute to the protection of the environment, the relatively more favourable treatment accorded to that type of holding is justified by the general interest of the Community. Furthermore, the Swedish provisions are perfectly consistent with the spirit of Article 130t of the EC Treaty, which provides that the environmental protection measures adopted by the Community shall not prevent any Member State from maintaining or introducing more stringent protective measures.

54. I consider, therefore, that the more favourable treatment accorded under the Swedish regulations to certain farmers who produce milk according to ecological methods is not contrary to Article 40(3) of the Treaty.

55. The answer to the second part of the question referred to the Court should be that Article 40(3) of the Treaty does not preclude national provisions of a State which acceded to the European Union on 1 January 1995 under which producers who have commenced or increased production of milk during the reference period must accept a reduction of their milk quota, unlike milk producers whose production circumstances have not altered in that period and producers of ecologically produced milk, and that reduction is determined differently for producers who have commenced production than for those who have increased production.

Third part of the question

56. The third part of the question concerns the compatibility with Community law of a provision whereby producers who, after making deliveries of milk before the Member State joined the quota system, have, for reasons outside their control, not delivered milk throughout the necessary qualification period for the award of a reference quantity are refused a quota.

57. Unlike the other two questions examined above, the third question deals not with matters relating to the allocation of individual reference quantities but with the conditions necessary to be able to benefit from such quotas. Article 5 of the Swedish regulation on milk quotas made the allocation of a quota to a given producer conditional on his having made deliveries of milk actually and continuously between 1 March 1994 and 1 January 1995.

58. As formulated, the question strikes me as rather surprising, since the national court itself, in its account of the applicable domestic law, recognises that if the undertaking has discontinued supplies of milk in that period, it may, if it applies to the Jordbruksverket, nevertheless be awarded a quota if the interruption was caused by a circumstance outside the undertaking's control or if there are other special circumstances (see point 4 above).

The Swedish Government observed at the hearing, without being contradicted by those representing Mr Torarp, that Mr Torarp was refused a quota because he had no intention of resuming milk production but intended to lease the quantity awarded.

The doubts expressed by the Regeringsrätt must therefore be taken to refer to a situation in which, in response to the corresponding request, the competent agricultural authorities refused to award a quota even though the interruption was caused by circumstances outside the undertaking's control, as provided for in the Swedish provisions.

59. I consider, first, that the interpretation of the national criteria on eligibility for a quota on an exceptional basis where the general requirements have not been met is a matter for the competent legislature, in this case the Swedish State, within the discretion which it must be recognised as enjoying in such matters. It is for the national court to determine whether those criteria have been correctly applied in a specific case, taking into account, where necessary, the purpose and objectives of the provisions.

60. For the remainder, apart from the particular circumstances of Mr Torarp, the question of the compatibility with the superior principles of the Community order and, in particular, with the prohibition in Article 40(3) of the Treaty of a provision pursuant to which a given producer may be deprived of a reference quantity on the ground that, owing to circumstances outside his control, he has not made deliveries during the period of eligibility, may in my view be resolved in accordance with the principle laid down by the Court of Justice in Erpelding. It will be recalled that the question in that case was whether a provision which prevented a milk producer whose holding had been affected by exceptional events during the three reference years from choosing another year during which the holding had operated normally was contrary to Community law.

61. As in the Erpelding case, the possible infringement of Article 40(3) in the present case has its origin in the difference in treatment consisting in the fact that the applicable provision could have the effect that a producer who had not made deliveries during the period of eligibility was refused a reference quantity and thus penalised in comparison with those who had made deliveries during that period. As stated in the Erpelding judgment, such an effect is justified, however, by the need to limit the number of years which may be taken as reference years, in the interests of both legal certainty and the effectiveness of the additional levy system. The resulting difference in treatment is therefore objectively justified and may not be regarded as discriminatory within the meaning of the case-law of the Court of Justice.

62. That applies all the more in the case of producers who ceased production during the period of eligibility and have no intention of resuming production. Because they do not intend to continue production the fact that they are refused a quota does not cause them any financial loss other than the failure to profit resulting from, for example, the fact that they are unable to lease the quota. That profit is not protected by Community law.

The provisions in Article 3a of Regulation No 857/84, which allows the allocation of a special reference quantity to certain producers who had been unable to obtain a milk quota because they had not made deliveries or direct sales during the reference period, follow the same logic. Article 3a(3) provides that the definitive allocation of such a special quota is to be subject, inter alia, to the producer showing to the satisfaction of the competent authority that he has actually resumed production.

63. The answer to the third part of the question referred by the Regeringsrätt should therefore be that Article 40(3) of the Treaty does not, in the case of a State which acceded to the European Union on 1 January 1995, preclude a national rule which establishes that producers who delivered milk before the State's accession to the EC's milk quota system but who - for reasons outside their control - have not delivered milk throughout the necessary qualification period for the award of a reference quantity are refused a reference quantity.

Conclusion

64. In the light of the foregoing considerations, I propose that the Court answer the question referred by the Regeringsrätt as follows:

Article 40(3) of the Treaty and the prohibition on discrimination between producers laid down therein do not, in the case of a State which acceded to the European Union on 1 January 1995, preclude a national rule which establishes that:

- for producers who have not altered their production, average deliveries in 1991, 1992 and 1993 are adopted as the basis for the award of a milk quota;

- producers who have commenced or increased production of milk during the reference period must accept a reduction in their reference quantity, unlike producers whose production circumstances have not altered in that period and producers of ecologically produced milk, and that reduction is determined differently for producers who have commenced production than for those who have increased production;

- producers who delivered milk before the State's accession to the EC's milk quota system but who - for reasons outside their control - have not delivered milk throughout the necessary qualification period for the award of a quota are refused a reference quantity.