(a)

Council Regulation (EEC) No 1078/77 of 17 May 1977 introducing a system of premiums for the non-marketing of milk and milk products and for the conversion of dairy herds (OJ 1977 L 131, p. 1) set up inter alia a system of premiums (hereinafter: ‘conversion premiums’) for the conversion of dairy cattle to meat production.

Article 3(1) of that Regulation, as amended by Council Regulation (EEC) No 1041/78 of 22 May 1978 (OJ 1978 L 134, p. 9), is worded as follows:

‘To obtain the conversion premium, the producer must satisfy the competent authorities:

This condition must be satisfied on the date of approval of the application; failing this, the premium shall be reduced accordingly.’

Article 7 of the same Regulation requires inter alia‘a definition of the terms “in numbers appropriate” and “corresponding quantities” in ... Article 3(1)’ to be laid down in accordance with the procedure under Article 30 of Regulation (EEC) No 804/68 (the ‘management committee procedure’)(indent (b)).

(b)

That was the legal basis on which Commission Regulation (EEC) No 1391/78 of 23 June 1978 laying down amended rules for the application of the system of premiums for the non-marketing of milk and milk products and for the conversion of dairy herds (OJ 1978 L 167, p. 45) was adopted. Article 1(3) of Regulation No 1391/78 provides as follows:

‘In determining the quantity of milk on which the premium will be calculated:

1.

Mr Eddelbüttel observes that Article 3(1) of Regulation No 1078/77, as amended by Regulation No 1041/78, sets out the conditions under which the conversion premium is to be granted and the circumstances in which there may be grounds for reducing it. Once there is an entitlement under Article 3(1) to payment of the full premium, Article 1(3)(b) of Regulation No 1391/78 cannot operate so as to reduce it.

According to Mr Eddelbüttel, that point is clear from the very wording of the provision. Since the quantity of milk must, where appropriate, be reduced in accordance with Articles 2 and 3 of Regulation No 1078/77, the conditions for reduction contained in those articles must first be fulfilled. Article 1(3)(b) of Regulation No 1391/78 simply lists additional conditions which must be met before a reduction may be made. It is hard to see why the phrase ‘where appropriate’ should be included in Article 1(3)(b) if a reduction depended solely on the fulfilment of the conditions in Article 1(3)(b) itself.

In Mr Eddelbiittel's opinion the above interpretation is the only one which is compatible with the basic aim of the premium: it is intended to provide an incentive for refraining from marketing milk and milk products, since wide participation by milk producers in the scheme is needed if the desired reduction of the relevant surpluses is to be attained. That participation will not, however, be forthcoming unless the premium is reduced only in limited cases — that is, by way of exception — so that milk producers are not deterred from submitting their applications. Consequently, it must be assumed that the provisions of Article 1(3)(b) do not afford a further opportunity for reducing the premium but, on the contrary, seek to restrict that possibility.

That interpretation is also corroborated by the fact that the Commission of the European Communities had to admit in early 1978 that the adoption of Regulation No 1078/77 had not had the expected result — that is to say, the number of milk producers who had applied for the premium fell short of the expected number. In those circumstances it is hardly likely that Regulation No 1391/78 was intended to restrict still further the granting of premiums.

Mr Eddelbiittel also argues that Regulation No 1391/78 is merely an implementing regulation, so that its purpose may legitimately be supposed to be simply to give substance to the basic legislation. However, the second indent of Article 3(1) of Regulation No 1078/77, as amended by Regulation No 1041/78, does not require such implementation because its wording is sufficiently precise. Since in this case the applicant had, on the relevant date of 29 March 1979, at least 15 dairy cows, including in-calf heifers, on his holding, the conditions for the grant of the full premium were satisfied.

If the above interpretation were to be rejected, the question would then arise how the ‘appropriate number [of dairy cows]’ within the meaning of Article 1(3)(b) of Regulation No 1391/78 is to be construed. The wording of that provision suggests that it is simply the number of dairy cows that is to be taken into account. If their milk yield were equally important this should have been expressly stated so as to avoid giving too broad a scope to the wording of Article 1(3)(b).

2.

The Commission takes the view that Article 1(3) of Regulation No 1391/78 must be regarded as implementing the last indent of Article 3(1) and Article 4 of Regulation No 1078/77, as amended by Regulation No 1041/78. In its view, that Article lays down, for the purpose of calculating the premium, the principle that the quantity delivered, on the basis of which the premium is calculated, must correspond to the appropriate number of dairy cows.

Council Regulation No 1041/78, although it is a higher-ranking measure, does not invalidate Regulation No 1391/78 in this regard. The Commission Regulation is based on the opinion of the Management Committee, in accordance with Article 7(b) of Regulation No 1078/77. However, Regulation No 1041/78 did not amend Anicie 7(b), which was therefore still valid at the time when Regulation No 1391/78 was adopted.

The Commission claims that there is no higher rule of law which prevents the application of Anicie 1(3) of Regulation No 1391/78. Anicie 1(3) therefore applies even on the assumption that Anicie 3(1) of the Council Regulation makes no express provision for reducing the premium in this case.

The Commission explains that the alternative condition contained in Regulation No 1078/77 does not deal with the level of the premium but simply establishes the right to submit an application. Even if that alternative condition (namely a herd of at least 15 dairy cows) is fulfilled, the premium is calculated by reference to deliveries during the previous 12 months, provided that proof is given that the dairy cows still held allow that quantity to be produced.

In the circumstances of the present case, the Commission takes the view that the second alternative under Anicie 3(1) of Regulation No 1078/77 is irrelevant because the plaintiff based his application for a conversion premium on the quantity of milk actually delivered, not on the number of cows held. It follows that the plaintiff must prove that the number of dairy cows held at the time of approval of the application enabled him to deliver the quantities shown in the application. If that is not possible the premium is reduced proportionally.

If, on the other hand, a premium is to be granted on the basis of the higher delivered quantities stated by the applicant, he must, in the Commission's opinion, demonstrate that the yield of each cow corresponds to the quantity shown in the application.

It would be incompatible with the aim of the regulation to allow a combination of the two alternatives, permitting the applicant merely to show that he had a minimum herd of 15 dairy cows in order to qualify for a premium granted on the basis of a far higher delivered quantity, when his herd obviously did not enable him to achieve that quantity.

The Commission points out that Regulation No 1078/77 is designed to encourage producers to convert their dairy herds to meat production. The premium thus serves as compensation for the initial loss of the income derived from milk deliveries. The regulation does not, however, seek to confer a subsidy on all livestock farmers who have dairy cows but to grant a premium to those who convert their holdings by replacing the herds which have hitherto enabled them to produce and deliver a given quantity of milk.

In the Commission's opinion, it is in order to take account of the changes in the quality of the herd that the regulation demands that an appropriate number of dairy cows be held, corresponding to the quantities delivered. That is clear both from Anicie 3(1) of Regulation No 1078/77, as amended by Regulation No 1041/78, and from Article 1(3) of Regulation No 1391/78. Since the number of cows no longer corresponds to the quantity delivered, the premium must be reduced accordingly.

The Commission concludes that in the absence of actual evidence of the yield of each cow the term ‘appropriate’ in Article 1(3)(b) of Regulation No 1391/78 must be interpreted as referring to the average yield of a cow in the Member State in question, increased by a 10% margin of error.

—

Mr Eddelbiittel, the plaintiff in the main proceedings, by R. A. Petersen, Rechtsanwalt, Lüneburg,

—

the Commission of the European Communities by its Legal Adviser Dierk Booss, acting as Agent, assisted by Michael Schütte, Rechtsanwalt, Hamburg and Brussels,

1

By order dated 27 April 1989, which was received at the Court on 10 July 1989, the Bundesverwaltungsgericht (Federal Administrative Court) referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty two questions concerning the interpretation of Article 3(1) of Council Regulation (EEC) No 1078/77 of 17 May 1977 introducing a system of premiums for the non-marketing of milk and milk products and for the conversion of dairy herds (OJ 1977 L 131, p. 1), as amended by Council Regulation (EEC) No 1041/78 of 22 May 1978 (OJ 1978 L 134, p. 9), and the first indent of Article 1(3)(b) of Commission Regulation (EEC) No 1391/78 of 23 June 1978 laying down amended rules for the application of the system of premiums for the non-marketing of milk and milk products and for the conversion of dairy herds (OJ 1978 L 167, p. 45).

2

The questions arose in legal proceedings between Friedel Eddelbüttel, a farmer, and the Bezirksregierung (district administration) Lüneburg concerning a conversion premium which had been paid to Mr Eddelbüttel under those regulations.

3

Mr Eddelbüttel applied for payment of the premium on 29 March 1979. In his application submitted to the Bezirksregierung, he stated that he had 24 dairy cows on his farm and that during the 12 months preceding his application he had marketed 113059 litres of milk.

4

By a decision of 27 April 1979 the Bezirksregierung approved the application for premium with effect from 29 March 1979 and provisionally fixed the quantity of milk qualifying for the premium at the level stated in the application. By a decision of 15 May 1979, the Bezirksregierung paid Mr Eddelbüttel DM 40390.31 as the first instalment of the conversion premium.

5

The Bezirksregierung subsequently learnt that before submitting the application for premium Mr Eddelbüttel might have sold 10 high-yielding dairy cows and replaced them with cull cows; accordingly, by a decision of 31 August 1981, the Bezirksregierung revoked its decisions of 27 April and 15 May 1979 and fixed the quantity of milk qualifying for premium at 65951 litres and the amount of the first instalment of premium at DM 23993.68. By a decision of the same day, the Bezirksregierung called upon Mr Eddelbüttel to repay, with interest, the difference between that amount and the amount paid to him on 15 May 1979 on the ground that he had partially changed his dairy herd and therefore the quantity of milk declared when the application was submitted no longer corresponded to the production capacity of his farm.

6

After his administrative appeal against the decisions of 31 August 1981 was unsuccessful, Mr Eddelbüttel brought proceedings in the administrative courts.

7

The Bundesverwaltungsgericht, before which the matter came on an appeal on a point of law, took the view that the outcome of the litigation was dependent on the interpretation of certain provisions of the applicable Community legislation; it therefore stayed the proceedings and referred the following questions to the Court for a preliminary ruling:

‘Is the first indent of Article 1(3)(b) of Commission Regulation (EEC) No 1391/78 to be interpreted as meaning that in determining the quantity of milk a reduction may be made in circumstances where Article 3(1) of Council Regulation (EEC) No 1078/77 (as amended by Council Regulation (EEC) No 1041/78), cited in that indent, makes no provision for a reduced premium?

If the answer is in the affirmative, how is the word ‘appropriate’ in the first indent of Article 1(3)(b) of Regulation (EEC) No 1391/78 to be interpreted?’

8

Reference is made to the Report for the Hearing for a fuller account of the facts of the case before the national court, the relevant Community provisions, the course of the procedure and the observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

9

Having regard to the facts of the case, the first question is to be understood as seeking to ascertain whether the combined provisions of Article 3(1) of Council Regulation No 1078/77, as amended by Council Regulation No 1041/78, and the first indent of Anicie 1 (3)(b) of Commission Regulation No 1391/78 are to be interpreted as requiring the amount of the conversion premium to be reduced in so far as the number of dairy cows on the holding at the time of approval of the application, although 15 or more, is less than the number necessary to achieve the deliveries of milk or milk products on the basis of which the amount of the premium is calculated.

10

Article 3(1) of Regulation No 1078/77, as amended by Regulation No 1041/78, states that:

‘To obtain the conversion premium, the producer must satisfy the competent authorities :

This condition must be satisfied on the date of approval of the application; failing this, the premium shall be reduced accordingly.’

11

Article 1(3) of Commission Regulation No 1391/78, adopted pursuant to Article 7 of Council Regulation No 1078/77, states that:

‘In determining the quantity of milk on which the premium will be calculated:

12

It is evident from the foregoing provisions, in particular the first indent of Article 1(3)(b) of Regulation No 1391/78, that the quantity of milk to be taken into consideration in calculating the premium is as a rule equal to the quantity of milk actually delivered during the 12 calendar months preceding the submission of the application, but that that amount must be reduced proportionately in so far as the number of dairy cows on the holding at the time of approval of the application is less than the number of cows appropriate to the quantity of milk delivered.

13

It is not, however, entirely clear from the foregoing provisions whether the proportional reduction also applies if at the date of approval of the application the producer still satisfies the condition contained in the second indent of Article 3(1) of Regulation No 1078/77 that he should have at least 15 dairy cows on his holding. That question must therefore be assessed according to the context of the provisions and the objectives of the system of conversion premiums.

14

As is stated in the preamble to Regulation No 1078/77, the system is intended to encourage milk producers to convert their dairy herds to meat production so as to reduce the surpluses on the market for milk and milk products. The purpose of the relevant provisions is thus to ensure that when a producer is granted a conversion premium a quantity of milk equivalent to the quantity on the basis of which the amount of the premium is calculated is actually withdrawn from the market.

15

The achievement of that objective would be jeopardized if the premium was paid in full to a producer who, at the time of approval of the application, no longer had a dairy herd with a production capacity equivalent to that quantity of milk. In such a situation the possibility could not be excluded that all or part of the herd whose production was taken as the basis for calculating the premium might continue to be used for milk production by other farmers to whom the cows had been sold.

16

It follows from the foregoing observations that the conversion premium must be reduced proportionately to the full extent to which the production capacity of the herd on the holding at the time of approval of the application for premium is less than the production capacity which made possible the deliveries of milk forming the basis for calculating the amount of the premium. The reduction cannot therefore be prevented on the ground that the producer in question still has at least 15 dairy cows on his holding at the time of approval of the application.

17

For the foregoing reasons, the answer to the first question must be that the combined provisions of Article 3(1) of Council Regulation No 1078/77, as amended by Council Regulation No 1041/78 of 22 May 1978, and the first indent of Article 1(3)(b) of Commission Regulation No 1391/78 of 23 June 1978 must be interpreted as requiring the amount of the conversion premium to be reduced in so far as the number of dairy cows on the holding at the time of approval of the application, although 15 or more, is less than the number necessary to achieve the deliveries of milk or milk products on the basis of which the amount of the premium is calculated.

18

The second question concerns the meaning of the expression ‘appropriate number’ in the first indent of Article 1(3)(b) of Regulation No 1391/78.

19

As is evident from the reply given to the first question, that expression refers to the number of dairy cows necessary to achieve the deliveries of milk on the basis of which the amount of the premium is calculated.

20

It follows that an ‘appropriate number’ within the meaning of that provision must be the number of dairy cows corresponding to that volume of deliveries taking into account the particular circumstances of the holding in question.

21

The answer to the second question must therefore be that the expression ‘appropriate number’ in the first indent of Article 1(3)(b) of Commission Regulation No 1391/78 of 23 June 1978 must be interpreted as meaning the number of dairy cows which, taking into account the actual situation of the holding in question, is necessary to achieve the deliveries of milk or milk products on the basis of which the amount of the premium is calculated.

22

The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable. Since these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds,

THE COURT (Third Chamber),

in reply to the questions submitted to it by the Bundesverwaltungsgericht, by order of 17 April 1989, hereby rules: