61998C0372

1. This reference for a preliminary ruling concerns the provisions of Article 2 of Commission Regulation (EC) No 762/94 of 6 April 1994 laying down detailed rules for the application of Council Regulation (EEC) No 1765/92 with regard to the set-aside scheme. Those provisions define set-aside as the leaving fallow of an area which has been cultivated in the previous year with a view to a harvest. The High Court of Justice of England and Wales, Queen's Bench Division (Divisional Court), asks whether that expression is capable of covering land sown with a type of grass that was cut during the year preceding the set-aside period.

I - The Community law background

2. In 1992, the Common Agricultural Policy (CAP) was subject to a reform which included the creation or amendment of a certain number of aid schemes. That reform pursued essentially two objectives, namely to control the increase in the financial cost of the CAP and to avoid overproduction.

Regulation (EEC) No 1765/92

3. Regulation (EEC) No 1765/92, which came into force as from the 1993/1994 marketing year, established a new support system for producers of certain arable crops. It is designed to avoid overproduction in the sector concerned, ensure better market balances, and compensate for the loss of income caused by the reduction of the institutional prices by a compensatory payment for producers.

4. In order to achieve those aims, the Community legislature altered the principles governing the granting of aid for arable crops. Thus, since 1992, compensatory payments have been fixed on a per hectare basis, by reference to area and the productive capacity of the various regions of the Community. In addition, the legislature made the granting of compensatory payments subject to the obligation on the part of producers to set aside part of the land in their holding.

5. The preamble to Regulation No 1765/92 states that ... in order to benefit from the compensatory payments under the general scheme, producers must set aside a predetermined percentage of their arable area ....

6. Title I of the same regulation deals with compensatory payments.

Article 2(1) provides that Community producers of arable crops may apply for a compensatory payment under the conditions set out in this Title.

Under Article 2(2), The compensatory payment is granted for the area which is down to arable crops or subject to set-aside in accordance with Article 7 of this Regulation ....

Under Article 2(5), Producers applying for the compensatory payment under the general scheme shall be subject to an obligation to set aside part of the land of their holding from production and shall receive a compensation for this obligation.

Article 7 sets out the main provisions applicable to the set-aside of land. Article 7(4) states that The land set aside may be used for the provision of materials for the manufacture within the Community of products not primarily intended for human or animal consumption, provided that effective control systems are applied.

7. Annex I to Regulation No 1765/92 gives an exhaustive list of the agricultural products which fall within the definition of arable crops.

Regulation No 762/94

8. Regulation No 762/94 lays down the detailed rules for applying Regulation No 1765/92 in relation to set-aside.

9. The preamble to that regulation confirms that eligibility for the compensatory payment under the general scheme referred to in Article 2(5) of Regulation (EEC) No 1765/92 is subject to an obligation on the part of the producer concerned to set aside part of his land ....

10. Article 2 of Regulation No 762/94 defines set-aside as follows:

Without prejudice to Article 7(4) of Regulation (EEC) No 1765/92, "set-aside" means the leaving fallow of an area which has been cultivated in the previous year with a view to a harvest.

Regulations (EEC) Nos 3508/92 and 3887/92

11. Council Regulation (EEC) No 3508/92 establishes an integrated administration and control system for certain Community aid schemes and, in particular, the scheme established by Regulation No 1765/92.

12. Article 6 provides that, in order to be eligible under one or more aid schemes, each farmer is required to submit, for each year, an area aid application indicating the agricultural parcels, including areas under forage crops, covered by a set-aside measure for arable land and those laid fallow.

13. Regulation (EEC) No 3887/92 lays down detailed rules for applying the integrated administration and control system.

Article 4 specifies the information which must be contained in an area aid application. Article 6 requires administrative and on-the-spot checks to be made in such a way as to ensure effective verification of compliance with the conditions laid down for the granting of aid. Finally, Article 9 sets out the sanctions which apply where the area declared by the person concerned in the area aid application differs from the area actually determined by the competent authorities on inspection.

II - The facts and the procedure in the main action

14. The firm of J.H. Cooke & Sons (Cooke) owns and runs Bates Farm at Maer, in the United Kingdom.

15. On 16 April 1997, it submitted an area aid application to the Ministry of Agriculture, Fisheries and Food (the MAFF), the competent authority in England and Wales for managing the payments scheme in the arable crops sector.

16. The application submitted by Cooke sought a compensatory payment for an area of land set aside during 1997. It related to 60.64 hectares of cereal crops, 23.90 hectares of oilseed crops and 5 hectares of land which it had left fallow.

17. In 1996, the year before the set-aside period, the land in question had been sown with temporary grass and, more precisely, Italian rye-grass. Cooke states that that grass was cut and used for silage during that same year, namely 1996.

18. On 17 September 1997, the MAFF rejected Cooke's application on the ground that the land in question did not fulfil the conditions for being regarded as set-aside land. The MAFF took the view that, in the year preceding the set-aside period, the land had not been cultivated with a view to a harvest within the meaning of Article 2 of Regulation No 762/94. It therefore imposed a penalty on Cooke, which lost its entitlement to payment of the whole of the aid sought, namely GBP 28 000.

19. On 28 January 1998, Cooke obtained leave to bring an action before the national court. It challenges the MAFF's interpretation of Article 2 of Regulation No 762/94, maintaining that cultivation of the land in question by the sowing of temporary grass, which was cut and used for silage, in the year preceding the set-aside period was not capable of making the land ineligible as set-aside land the following year.

III - The question referred for a preliminary ruling

20. Taking the view that resolution of the dispute depended on an interpretation of the provisions referred to above, the High Court decided to stay the proceedings and refer the following question to the Court of Justice:

Is the expression "an area which has been cultivated in the previous year with a view to a harvest" in Article 2 of Commission Regulation (EC) No 762/94 of 6 April 1994 laying down detailed rules for the application of Council Regulation (EEC) No 1765/92 with regard to the set-aside scheme to be interpreted as including land which has been in grass the previous year, where the grass has been cut and used for silage?

IV - The reply to the question referred for a preliminary ruling

21. The national court asks whether Article 2 of Regulation No 762/94 must be interpreted in such a way that the expression an area which has been cultivated in the previous year with a view to a harvest covers land sown with a type of temporary grass that was cut and used for silage during the same year.

22. It should be noted that the terms of that question leave no ambiguity as to the subject-matter of this reference.

The Court is clearly being asked what rights are given to producers during the year which precedes the set-aside period. The High Court wishes to know whether, during that year, the persons concerned are authorised to grow temporary grass which is intended for cutting and use as silage. The Court is thus not being called upon to determine the type of crops which might be grown during the set-aside period proper.

23. During the procedure before the Court of Justice, the United Kingdom Government was the only intervener to propose a restrictive reading of Article 2 of Regulation No 762/94.

Effectively, the United Kingdom considers that, in order to benefit from a compensatory payment in respect of set-aside land, the land concerned must, in the year preceding the set-aside period, be sown with arable crops within the meaning of Regulation No 1765/92 or given over to crops intended exclusively for harvesting. The United Kingdom considers that Italian rye-grass does not meet that requirement because it can be used for two different purposes. It might not only be intended for harvesting, but could also be left as grassland for the grazing of cattle. In particular, the United Kingdom argues that Italian rye-grass does not constitute a proper crop within the meaning of Article 2 of Regulation No 762/94.

24. In accordance with the methods of interpretation of the Court of Justice, it needs to be examined whether the reading proposed by the United Kingdom is supported by the wording, scheme and aims of Regulation No 762/94.

The wording of Article 2 of Regulation No 762/94

25. It is well known that, when the Court of Justice is called upon to discern the meaning of a provision of Community law, it often makes a comparison between the language versions of the text to be interpreted.

In this case, however, that method of interpretation provides no additional indication as to the exact meaning of the expression an area cultivated with a view to a harvest. The other language versions of Article 2 of Regulation No 762/94 merely offer a literal equivalent to the French expression, using words which match perfectly at the semantic level.

26. In carrying out a statutory interpretation of the provision in question, I will therefore concentrate my analysis on the wording of the French version.

27. Article 2 of Regulation No 762/94 uses two words which are essential in this case. It provides that, in the year preceding the set-aside period, the area concerned must have been cultivée [cultivated] with a view to a récolte [harvest].

28. Taking guidance from the ordinary meaning of words, the word cultiver points to the fact that the land has been worked to make it produce plant products useful for the needs of mankind. The word thus assumes an action or intervention by man upon the earth with the aim of gathering a given plant product. Such intervention generally includes the sowing or planting in the earth of the plant variety sought.

The idea of a human action or intervention underlying the term cultiver thus excludes from the scope of Article 2 of Regulation No 762/94 land which is left in an abandoned state, or which is not worked, and which produces that which is not particularly sought by mankind.

29. Moreover, in accordance with the ordinary meaning of words, the expression récolte [harvest] designates the fact of recueillir [gathering] the products of the earth. That term also implies an intervention or action by man, which consists in gathering or collecting the products of the earth so as to keep them for future use. Such intervention generally includes the cutting or uprooting of plant matter present on the cultivated surface.

The idea of human intervention designed to gather the products of the earth also excludes from the scope of Article 2 of Regulation No 762/94 areas whose production of plant matter is eliminated by a natural process or the mere presence of animals. That would apply, in particular, to land left as grassland for grazing by cattle.

30. Apart from the two criteria cited above (namely the existence of culture and a récolte), the wording of Article 2 of Regulation No 762/94 does not impose any requirement concerning the variety of plant which must be grown on the land during the year preceding the set-aside period. In particular, the Community legislature has not expressly limited the scope of that provision to areas which were sown with arable crops within the meaning of Regulation No 1765/92 in the year preceding the set-aside period.

31. On a strictly literal interpretation, I therefore maintain that Article 2 of Regulation No 762/94 is capable of covering land which was sown with a type of temporary grass in the year preceding the set-aside period, where it is found that that grass was harvested.

32. Article 9 of Regulation No 1765/92 seems to me to confirm the literal reading of Article 2 of Regulation No 762/94.

33. By the provisions of that article, the Community legislature expressly excluded certain land and crops from the benefit of the support system established by Regulation No 1765/92. Article 9 provides that applications for the compensatory payment and for fulfilling the set-aside obligations may not be made in respect of land which was under permanent pasture, permanent crops, forest, or non-agricultural uses on 31 December 1991.

34. Article 9 shows that, where it intended to exclude certain crops from the benefit of the support system established by Regulation No 1765/92, the Community legislature took care to introduce express provisions to that effect.

35. In those circumstances, the absence of any other requirements as to the plant variety which must be cultivated in the year preceding the set-aside period seems to me to have been intentional. In other words, my view is that, apart from the land excluded by Article 9 of Regulation No 1765/92, the Community legislature did not intend to impose an obligation on farmers to grow a particular crop during the year immediately preceding the set-aside period.

The scheme of Regulation No 762/94

36. As we have seen, set-aside constitutes the cornerstone of the new support system for producers of arable crops. It fulfils two essential functions, since, first, it confers entitlement to a compensatory payment in the same way as a crop and, secondly, the entitlement of producers to the payment of aid for arable crops is dependent upon its existence.

37. In view of the importance of the two functions referred to above, the Community legislature precisely and comprehensively organised the system of obligations upon producers in relation to the set-aside of land.

Thus, Article 2 of Regulation No 1765/92 and Article 3 of Regulation No 762/94 lay down a minimum area and a maximum area for land which is left fallow; the area concerned must be less than a regional base area, but more than 0.3 contiguous hectares.

Moreover, Article 7(1) of Regulation No 1765/92 requires producers to set aside a pre-established percentage of the land in their holdings; that percentage, which was initially fixed at 15%, is regularly revised to reflect production and market trends.

The Community legislature has also set out the conditions concerning the use and care of the land during the set-aside period. Under Article 7(4) of Regulation No 1765/92, the land set aside may be used for the provision of materials for the manufacture of products not primarily intended for human or animal consumption. Apart from such use, however, the areas set aside may not be used for any other sort of agricultural production or put to any lucrative use incompatible with the growing of an arable crop. Article 3(2) of Regulation No 762/94 also provides that The areas set aside must be cared for so as to maintain good cropping conditions.

Finally, the provisions of Regulation No 762/94 fix the duration of the set-aside period; they provide that, to be considered under the scheme established by Regulation No 1765/92, the areas concerned must remain set aside for a period commencing on 15 January at the latest and ending on 31 August at the earliest.

38. Those provisions demonstrate that Regulations Nos 1765/92 and 762/94 set out clearly and comprehensively the conditions which the persons concerned must fulfil in order to benefit from the compensatory payments provided for by the support system. The Community legislature imposes a series of obligations on producers, compliance with which is compulsory in order to claim compensatory payments.

39. Concerning provisions of that kind, the Court has consistently held the principle of legal certainty - which constitutes a fundamental principle of Community law - requires that a rule imposing obligations on an individual must be clear and precise, so that he may be aware of his rights and obligations without ambiguity.

40. Therefore, any reading of Article 2 of Regulation No 762/94 which seeks to add to that text requirements which its wording - or other provisions - do not lay down clearly and precisely would be likely to infringe the principle of legal certainty. Indeed, such a reading would make producers no longer able to know precisely what their obligations were and consequently risk exposing them to sanctions which they could not reasonably foresee.

41. The general scheme of Regulation No 762/94 therefore confirms that Article 2 is capable of covering land such as that in issue in the main proceedings.

The aims of Regulation No 762/94

42. It is well known that Regulations Nos 1765/92 and 762/94 are aimed at compensating for loss of income resulting from the reduction in institutional prices by means of a compensatory payment to producers. But those two regulations are also aimed - and above all - at avoiding overproduction in the arable crops sector.

43. Thus, in the context of CAP reform, the setting aside of land has taken on a new face in that it has become an ordinary measure for regulating production. The Community legislature regards it as an instrument for managing arable crop production whose rate is likely to be changed in each marketing year on the basis of the market situation. Set-aside thus constitutes one of the main measures designed to reduce the excess production of Community agriculture.

44. As the Finnish Government has rightly remarked, an affirmative reply to the question referred would be likely to promote the attainment of that objective.

To be precise, it would authorise Community producers to benefit from compensatory payments in respect of areas set aside in circumstances where, in the year preceding the set-aside period, the land concerned was not given over to the production of arable crops within the meaning of Regulation No 1765/92. By contrast, removing the benefit of compensatory payments in those circumstances would risk encouraging farmers to sow their land with arable crops in the year preceding the set-aside period and thereby reducing the effectiveness of the system established by Regulation No 1765/92.

45. In the light of the above considerations, I therefore propose that the Court should reply, in answer to the question referred, that the first paragraph of Article 2 of Regulation No 762/94 must be interpreted as meaning that the expression an area which has been cultivated in the previous year with a view to a harvest includes land which was sown with a type of temporary grass where that grass has been harvested.

V - The possible limitation of the effects of the judgment to follow

46. In its written observations, the United Kingdom Government has drawn the Court's attention to the implications of this case.

It states that, since the entry into force of Regulation No 1765/92, it has refused to grant compensatory payments - in respect of set-aside areas - to producers who, in the year preceding the set-aside period, had sown their land with fodder crops, even where the crops had been harvested with a view to silage. The United Kingdom Government considers that, if the Court were to give an affirmative answer to the question referred, it would be obliged to re-examine all of the files handled since 1993 in order to check whether the refusal decisions concerned land sown with temporary grass, and whether that grass had been harvested. The administrative burden of such a re-examination would be considerable, since some 10 000 files were involved.

The United Kingdom Government has therefore expressly requested the Court to limit the temporal effects of the judgment, in the event that Article 2 of Regulation No 762/94 is interpreted as covering land such as that at issue in the main proceedings.

47. In accordance with consistent case-law, the Court may exceptionally, having regard to the general principle of legal certainty inherent in the Community legal order and the serious difficulties which its judgment may create as regards the past for legal relations established in good faith, find it necessary to limit the possibility for interested parties, relying on the Court's interpretation of a provision, to call in question those legal relations ....

48. For that purpose, the Court is concerned to establish that ... two essential criteria [are] fulfilled for deciding to impose such a limitation, namely that those concerned should have acted in good faith and that there should be a risk of serious difficulties.

49. The condition concerning good faith requires that the persons concerned might reasonably have been mistaken as to the applicability or the scope of the Community provision interpreted.

In this case, the documents before the Court show that, as from August 1992, the Commission knew that the British authorities took the view that land sown with temporary grass did not constitute an area cultivated with a view to a harvest within the meaning of Article 2 of Regulation No 762/94. Between 1992 and 1997, the British authorities regularly contacted the Commission to ask whether their interpretation of the disputed provisions was likely to raise difficulties with regard to Community law. At the hearing in this case, the Commission expressly confirmed that it never replied to those enquiries.

In those circumstances, I believe that the Commission's attitude may have led the persons concerned in the United Kingdom reasonably to consider that Article 2 of Regulation No 762/94 did not apply to land such as that at issue in the main proceedings.

50. However, I doubt whether the second condition, concerning the existence of serious difficulties, has been fulfilled. The United Kingdom Government has, it is true, set out the reasons why the judgment to follow risks imposing a considerable administrative burden on the competent authorities. It does not, however, appear to have put forward any specific evidence, in accordance with the case-law of the Court of Justice, to establish the existence of a genuine upheaval in its national administration.

51. On the basis of the information at my disposal, I therefore consider that there is no need for the Court to limit the effects of the judgment to follow.

Conclusion

52. In the light of the above considerations, I propose that the Court should rule as follows:

The first paragraph of Article 2 of Commission Regulation (EC) No 762/94 of 6 April 1994 laying down detailed rules for the application of Council Regulation (EEC) No 1765/92 with regard to the set-aside scheme must be interpreted as meaning that the expression an area which has been cultivated in the previous year with a view to a harvest includes land which has been sown with a type of temporary grass where that grass has been harvested.