61972J0013

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1 . ACTS OF AN INSTITUTION - STATEMENT OF REASONS - OBLIGATION - EXTENT

( EEC TREATY, ART . 190 )

2 . AGRICULTURE - COMMON AGRICULTURAL POLICY - FINANCING - REFUNDS ON EXPORTS TO THIRD COUNTRIES WITHIN THE MEANING OF REGULATIONS NO 25/62 AND 17/64 OF THE COUNCIL - EFFECT

3 . AGRICULTURE - COMMON ORGANIZATION OF THE MARKETS - MILK - COMMUNITY RULES - INTERPRETATION - CRITERIA - ART . 14 ( 2 ) OF REGULATION NO 13 OF THE COUNCIL - OBJECTIVE - EXPORTS TO THIRD COUNTRIES - REFUNDS - MEANING

1 . THE EXTENT OF THE OBLIGATION TO STATE REASONS, ESTABLISHED BY ARTICLE 190 OF THE EEC TREATY, DEPENDS ON THE NATURE OF THE ACT IN QUESTION AND ON THE CONTEXT IN WHICH IT WAS ADOPTED .

2 . REGULATION NO 25 OF THE COUNCIL OF 4 APRIL 1962 ON THE FINANCING OF THE COMMON AGRICULTURAL POLICY ( OJ P . 991 ), AND REGULATION NO 17/64/EEC OF THE COUNCIL OF 5 FEBRUARY 1964 ON THE CONDITIONS FOR GRANTING AID FROM THE EUROPEAN AGRICULTURAL GUIDANCE AND GUARANTEE FUND ( OJ P . 586 ), MUST BE UNDERSTOOD, IN RESPECT OF THE EXPRESSION " REFUNDS ON EXPORTS TO THIRD COUNTRIES " , AS REFERRING TO THE BASIC COMMUNITY RULES AUTHORIZING THE MEMBER STATES TO GRANT SUCH REFUNDS .

3 . ( A ) REGULATION NO 13/64/EEC OF THE COUNCIL OF 5 FEBRUARY 1964 ON THE GRADUAL ESTABLISHMENT OF A COMMON ORGANIZATION OF THE MARKETS IN THE SECTOR OF MILK AND MILK PRODUCTS ( OJ P . 549 ), MUST BE INTERPRETED IN THE LIGHT OF THE OBJECTIVES SET OUT IN ARTICLE 39 OF THE EEC TREATY, IN PARTICULAR THOSE AIMING TO " ENSURE A FAIR STANDARD OF LIVING FOR THE AGRICULTURAL COMMUNITY, IN PARTICULAR BY INCREASING THE INDIVIDUAL EARNINGS OF PERSONS ENGAGED IN AGRICULTURE " AND TO " STABILIZE MARKETS " . HENCE, ARTICLE 14 ( 2 ) OF THAT REGULATION MUST BE VIEWED AS ENCOURAGING ALL EXPORTS TO THIRD COUNTRIES WHICH CONTRIBUTE TO THE REALIZATION OF THOSE OBJECTIVES .

( B ) AS ARTICLE 14 ( 2 ) MAKES NO DISTINCTION BASED ON THE LEGAL NATURE OF TRANSACTIONS WHICH FORM THE BASIS OF THE DELIVERIES MADE TO THIRD COUNTRIES, EXPENDITURE WITH A VIEW TO COMPENSATING THE DIFFERENCE BETWEEN THE PRICES IN THE EXPORTING MEMBER STATE AND THE PRICES RULING IN THE WORLD TRADE CANNOT BE EXCLUDED FROM THE EXPRESSION " REFUNDS " , EVEN IF THAT STATE HAS BOUGHT THE PRODUCTS IN QUESTION ON THE DOMESTIC MARKET IN ORDER TO DELIVER THEM, BY WAY OF GIFT, TO THE IMPORTING COUNTRY OR ITS NATIONALS .

IN CASE 13/72

GOVERNMENT OF THE KINGDOM OF THE NETHERLANDS, REPRESENTED BY W . RIPHAGEN, LEGAL ADVISER TO THE MINISTRY OF FOREIGN AFFAIRS AND, IN THE ORAL PROCEDURE, BY J . WEBER, DEPUTY DIRECTOR IN THE MINISTRY OF AGRICULTURE AND FISHERIES, ACTING AS AGENTS, HAVING CHOSEN AS ITS ADDRESS FOR SERVICE IN LUXEMBOURG THE NETHERLANDS EMBASSY, 5 RUE SPOO, APPLICANT,

V

COMMISSION OF THE EUROPEAN COMMUNITIES, REPRESENTED BY ITS LEGAL ADVISERS, G . OLMI AND J . H . J . BOURGEOIS, ACTING AS AGENTS, HAVING CHOSEN ITS ADDRESS FOR SERVICE IN LUXEMBOURG AT THE OFFICES OF ITS LEGAL ADVISER, EMILE REUTER, 4 BOULEVARD ROYAL, DEFENDANT,

APPLICATION FOR ANNULMENT OF :

- DECISION NO 72/120/EEC OF THE COMMISSION OF 26 JANUARY 1972 ON THE GRANTING OF AID FROM THE EUROPEAN AGRICULTURAL GUIDANCE AND GUARANTEE FUND, GUARANTEE SECTION, FOR THE EXPENDITURE INCURRED BY THE KINGDOM OF THE NETHERLANDS, PARTICULARLY AS A RESULT OF REFUNDS ON EXPORTS TO THIRD COUNTRIES DURING THE ACCOUNTING PERIOD 1966/67 ( OJ NO L 61, P . 15 );

- DECISION NO 72/115/EEC OF THE COMMISSION OF 26 JANUARY 1972 DETERMINING THE LOWEST AVERAGE REFUNDS FOR FINANCING REFUNDS ON EXPORTS TO THIRD COUNTRIES DURING THE ACCOUNTING PERIOD 1966/67 ( OJ NO L 61, P . 1 );

1 THIS APPLICATION BY THE GOVERNMENT OF THE KINGDOM OF THE NETHERLANDS UNDER ARTICLE 173 OF THE EEC TREATY IS FIRSTLY FOR THE ANNULMENT OF DECISION NO 72/120/EEC OF THE COMMISSION OF 26 JANUARY 1972 ( OJ NO L 61, P . 15 ) ( HEREINAFTER CALLED THE " AID DECISION "), INSOFAR AS THAT DECISION REFUSED THE GRANT OF AID FROM THE EUROPEAN AGRICULTURAL GUIDANCE AND GUARANTEE FUND ( HEREINAFTER CALLED THE " FUND ") IN RESPECT OF EXPENDITURE INCURRED BY THE KINGDOM OF THE NETHERLANDS AS A RESULT OF REFUNDS ON EXPORTS TO THIRD COUNTRIES UNDER THE HEADING OF FOOD GIFTS DURING THE ACCOUNTING PERIOD 1966/67 .

2 THE APPLICATION IS FURTHER FOR THE ANNULMENT OF DECISION NO 72/115/EEC OF THE COMMISSION, OF THE SAME DATE, ( OJ NO L 61, P . 1 ) ( HEREINAFTER CALLED THE " AVERAGE REFUNDS DECISION ") - " IN THE CASE WHERE, AND TO THE EXTENT THAT, THE AMOUNTS TO BE REIMBURSED TO THE APPLICANT BY VIRTUE OF THE ( AID DECISION ) ARE INFLUENCED BY THE FACT THAT, IN DETERMINING THE LOWEST AVERAGE REFUNDS " - THE BASIC FACTOR IN THE CALCULATION OF REFUNDS ON EXPORTS TO THIRD COUNTRIES ELIGIBLE FOR AID FROM THE FUND, IN ACCORDANCE WITH ARTICLE 3 ( 1 ) OF REGULATION NO 25 OF THE COUNCIL OF 4 APRIL 1962 ( OJ P . 991 ), - " THE QUANTITIES OF EXPORTS UNDER THE HEADING OF FOOD GIFTS ... WERE NOT TAKEN INTO ACCOUNT ".

ON THE FIRST PLEA ( INFRINGEMENT OF ESSENTIAL PROCEDURAL REQUIREMENTS )

3 THE NETHERLANDS GOVERNMENT ASSERTS THAT THE DISPUTED ELEMENTS OF THESE DECISIONS ARE VITIATED BY INFRINGEMENT OF ESSENTIAL PROCEDURAL REQUIREMENTS, IN THAT THEY HAVE NOT BEEN SUFFICIENTLY REASONED, AS REQUIRED BY ARTICLE 190 OF THE TREATY .

4 WITH REGARD TO THE " AID DECISION ", THE NETHERLANDS GOVERNMENT ALLEGES THAT IN ORDER TO EXPLAIN THE EXCLUSION OF THE QUANTITIES OF EXPORTS UNDER THE HEADING OF FOOD GIFTS, THE STATED REASONS FOR THAT DECISION ARE RESTRICTED TO THE STATEMENT THAT THOSE QUANTITIES " ARE NOT ELIGIBLE FOR AID FROM THE FUND, AS EXPENDITURE ON NON-COMMERCIAL OPERATIONS CANNOT BE CONSIDERED AS REFUNDS ON EXPORTS TO THIRD COUNTRIES WITHIN THE MEANING OF THE COMMUNITY RULES ".

5 AS TO THE THEORY THAT THE EXPENDITURE IN DISPUTE IS NOT ELIGIBLE FOR AID FROM THE FUND, THE STATED REASONS FOR THE DECISION SET OUT SUCCINCTLY, BUT CLEARLY, THE REASONING WHICH GUIDED THE COMMISSION .

6 THE NETHERLANDS GOVERNMENT COULD NOT BE IN DOUBT AS TO THE SCOPE OF THE REFERENCE TO " COMMUNITY RULES ", AS THIS EXPRESSION OBVIOUSLY CONCERNED THE PROVISIONS AUTHORIZING THE MEMBER STATES TO GRANT REFUNDS ON EXPORTS TO THIRD COUNTRIES - THUS, IN THE SECTOR OF MILK AND MILK PRODUCTS, ARTICLE 14 ( 2 ) OF REGULATION NO 13/64/EEC OF THE COUNCIL OF 5 FEBRUARY 1964 ( OJ P . 549 / - AND ARTICLE 3 ( 1 ) OF REGULATION NO 25 UNDER THE TERMS OF WHICH THOSE REFUNDS " ARE ELIGIBLE FOR AID FROM THE FUND ".

7 THE REASONING OF THE DECISION DID NOT DIFFER SUBSTANTIALLY FROM THE ARGUMENTS PREVIOUSLY ADVANCED BY THE COMMISSION .

8 WITH REGARD TO THE AMOUNTS DEDUCTED BY THE COMMISSION FROM THE SUM APPLIED FOR BY THE NETHERLANDS GOVERNMENT, THESE WERE SET OUT, TOGETHER WITH THE QUANTITIES OF PRODUCTS TO WHICH THEY REFERRED, IN THE COMMISSION' S REPORT OF 7 DECEMBER 1971 .

9 IT IS ESTABLISHED BY THE MINUTES OF THE 62ND MEETING OF THE FUND COMMITTEE THAT THIS REPORT WAS INCLUDED IN THE WORKING PAPERS SUBMITTED TO THOSE PRESENT AT THAT MEETING, INCLUDING THE REPRESENTATIVES OF THE SAID GOVERNMENT WHICH THUS HAD FULL KNOWLEDGE OF THE FIGURES INVOLVED .

10 FURTHER, THE NETHERLANDS GOVERNMENT HAS NOT CONTESTED THE ACCURACY OF THESE FIGURES .

11 THE EXTENT OF THE DUTY TO STATE REASONS, LAID DOWN BY ARTICLE 190 OF THE TREATY, DEPENDS ON THE NATURE OF THE ACT IN QUESTION AND ON THE CONTEXT IN WHICH IT IS ADOPTED .

12 IN THE PRESENT CASE, IT IS NOT DISPUTED THAT THE NETHERLANDS GOVERNMENT WAS CLOSELY INVOLVED IN THE PROCESS OF MAKING THE CONTESTED DECISION AND WAS THEREFORE AWARE OF THE REASON WHY THE COMMISSION DID NOT CONSIDER THAT IT SHOULD ACCEDE TO THE DEMAND FOR REIMBURSEMENT BY THE SAID GOVERNMENT, INSOFAR AS IT REFERRED TO EXPENSES INCURRED UNDER A FOOD AID PROGRAMME .

13 IN THESE CIRCUMSTANCES, THE CONTESTED DECISION MUST BE HELD TO BE SUFFICIENTLY REASONED .

14 WITH REGARD TO THE " AVERAGE REFUNDS DECISION ", THE NETHERLANDS GOVERNMENT ALLEGES THAT IT DOES NOT INDICATE WHETHER AND, IF SO, HOW THE COMMISSION, IN DETERMINING THE LOWEST AVERAGE REFUND, TOOK INTO ACCOUNT THE QUANTITIES OF PRODUCTS EXPORTED UNDER THE HEADING OF FOOD GIFTS, AND IN WHAT MANNER IT " AMENDED " THE INFORMATION FROM THE MEMBER STATES ON WHICH THE DECISION IS BASED .

15 UNDER THE TERMS OF ARTICLE 3 ( 1 ) OF REGULATION NO 25, " THE FOLLOWING EXPENDITURE SHALL BE ELIGIBLE FOR AID FROM THE FUND ... REFUNDS ON EXPORTS TO THIRD COUNTRIES CALCULATED ", INTER ALIA, " ON THE BASIS ... OF THE RATE OF REFUND IN THE MEMBER STATE WHOSE AVERAGE REFUND IS THE LOWEST ".

16 SINCE THE COMMISSION FELT THAT CERTAIN EXPENDITURE COULD NOT BE CONSIDERED AS REFUNDS ON EXPORTS, IT COULD NOT THEN INCLUDE THIS EXPENDITURE WHEN CALCULATING THE LOWEST AVERAGE REFUND .

17 THE PLEA IS THEREFORE UNFOUNDED .

ON THE SECOND PLEA ( INFRINGEMENT OF REGULATION NO 17/64 AND ARTICLE 14 ( 2 ) OF REGULATION NO 13/64 )

18 THE NETHERLANDS GOVERNMENT CONSIDERS THAT THE COMMISSION HAS INFRINGED THE COMBINED PROVISIONS OF REGULATION NO 17/64/EEC OF THE COUNCIL OF 5 FEBRUARY 1964 ( OJ P . 586 ) AND ARTICLE 14 ( 2 ) OF REGULATION NO 13/64, BY DECIDING THAT, SINCE THE EXPENDITURE INCURRED BY THE NETHERLANDS GOVERNMENT UNDER THE HEADING OF FOOD GIFTS DURING THE ACCOUNTING PERIOD 1966/67 DID NOT CONSTITUTE REFUNDS ON EXPORTS WITHIN THE MEANING OF THOSE PROVISIONS, IT DID NOT CONFER A RIGHT TO REIMBURSEMENT FROM THE FUND .

19 UNDER THE TERMS OF ARTICLE 3 ( 1 ) OF REGULATION NO 25, " THE FOLLOWING EXPENDITURE SHALL BE ELIGIBLE FOR AID FROM THE FUND ... REFUNDS ON EXPORTS TO THIRD COUNTRIES ".

20 UNDER ARTICLE 9 ( 1 ) OF REGULATION NO 17/64, ON THE CONDITIONS FOR GRANTING AID FROM THE FUND, THE MEMBER STATES CONCERNED SHALL, ONCE A YEAR, SUBMIT TO THE COMMISSION AN APPLICATION FOR REIMBURSEMENT " OF THE EXPENDITURE INCURRED AS A RESULT OF REFUNDS ON EXPORTS TO THIRD COUNTRIES ... RELATING TO THE PERIOD FROM 1 JULY TO 30 JUNE AND WHICH IS TO BE TAKEN OVER BY THE GUARANTEE SECTION OF THE FUND ", WHILST UNDER ARTICLE 10 OF THE SAME REGULATION, " THE COMMISSION SHALL DECIDE ANNUALLY ... AFTER CONSULTATION WITH THE FUND COMMITTEE, THE AID TO BE GRANTED FROM THE FUND ", WHICH IT DID FOR THE ACCOUNTING PERIOD 1966/67, BY THE CONTESTED " AID DECISION ".

21 WITH REGARD TO THE SECTOR OF MILK AND MILK PRODUCTS, WHICH ALONE CONCERNS THIS CASE, ARTICLE 14 ( 2 ) OF REGULATION NO 13/64 LAYS DOWN THAT " IN ORDER TO ENCOURAGE EXPORTS TO THIRD COUNTRIES ON THE BASIS OF PRICES RULING ON THE WORLD MARKET, THE DIFFERENCE BETWEEN THOSE PRICES AND THE PRICES IN THE EXPORTING MEMBER STATE MAY BE COVERED BY A REFUND ".

22 REGULATIONS NOS 25 AND 17/64 MUST BE TAKEN, IN RESPECT OF THE SCOPE OF THE EXPRESSION " REFUNDS ON EXPORTS TO THIRD COUNTRIES " AS REFERRING TO THE BASIC COMMUNITY REGULATIONS AUTHORIZING MEMBER STATES TO GRANT SUCH REFUNDS .

23 THE QUESTION TO BE ANSWERED THEREFORE IS WHETHER THE EXPENDITURE IN DISPUTE CONSTITUTES REFUNDS ON EXPORTS TO THIRD COUNTRIES, WITHIN THE MEANING OF ARTICLE 14 ( 2 ) OF REGULATION NO 13/64 .

24 THE COMMISSION CONSIDERS THAT THIS IS NOT THE CASE, SINCE THE OBJECTIVE OF THAT PROVISION IS " TO ENCOURAGE EXPORTS TO THIRD COUNTRIES ON THE BASIS OF PRICES RULING ON THE WORLD MARKET ".

25 IT FOLLOWS FROM THIS WORDING ( IT IS CONTENDED ) THAT THIS PROVISION IS ONLY CONCERNED WITH MAKING POSSIBLE TRANSACTIONS MADE FOR VALUABLE CONSIDERATION, THAT IS OPERATIONS WHICH, WITHOUT A REFUND, COULD NOT HAVE TAKEN PLACE BECAUSE THE PRICE IN THE EXPORTING MEMBER STATE WAS NOT COMPETITIVE ON THE WORLD MARKET .

26 IT IS TRUE THAT ARTICLE 14 ( 2 ) OF REGULATION NO 13/64 ENVISAGES FIRST OF ALL OPERATIONS CONSISTING IN AN EXPORTER DELIVERING MILK OR MILK PRODUCTS TO AN IMPORTER IN A THIRD COUNTRY, SUBJECT TO PAYMENT BY THE LATTER OF THE WORLD MARKET PRICE, AND THAT THIS IS CONFIRMED BY THE FOURTEENTH CONSIDERATION OF THE SAME REGULATION, WHEREBY THE GRANT OF REFUNDS MUST BE ALLOWED " IN ORDER TO SAFEGUARD THE PARTICIPATION OF MEMBER STATES IN WORLD TRADE IN MILK PRODUCTS ".

27 HOWEVER, AS THIS PROVISION MAKES NO DISTINCTION BASED ON THE LEGAL NATURE OF THE UNDERLYING TRANSACTIONS FOR THE DELIVERIES TO THIRD COUNTRIES, EXPENDITURE INTENDED TO COMPENSATE FOR THE DIFFERENCE BETWEEN THE PRICES IN THE EXPORTING MEMBER STATE AND THE PRICES RULING IN WORLD TRADE CANNOT BE EXCLUDED FROM THE EXPRESSION " REFUNDS ", EVEN THOUGH, AS IN THIS CASE, THAT STATE BOUGHT THE PRODUCTS IN QUESTION ON THE DOMESTIC MARKET IN ORDER TO DELIVER THEM, BY WAY OF GIFT, TO THE IMPORTING COUNTRY OR ITS NATIONALS .

28 FURTHER, THE TRANSACTIONS THUS ENTERED INTO BY THE SAID STATE AND THE SELLERS CONSTITUTE COMMERCIAL OPERATIONS .

29 MOREOVER, AS REGULATION NO 13/64 WAS ADOPTED ON THE BASIS OF ARTICLES 38 ET SEQ . OF THE TREATY DEALING WITH AGRICULTURE, IT MUST BE INTERPRETED IN THE LIGHT OF THE OBJECTIVES STATED IN ARTICLE 39, AND IN PARTICULAR THOSE WHICH AIM " TO ENSURE A FAIR STANDARD OF LIVING FOR THE AGRICULTURAL COMMUNITY, IN PARTICULAR BY INCREASING THE INDIVIDUAL EARNINGS OF PERSONS ENGAGED IN AGRICULTURE ", AND " TO STABILIZE MARKETS ".

30 ARTICLE 14 ( 2 ) OF REGULATION NO 13/64 MUST THEREFORE BE INTERPRETED AS ENCOURAGING ALL EXPORTS TO THIRD COUNTRIES WHICH CONTRIBUTE TO THE REALIZATION OF THOSE OBJECTIVES .

31 SUCH WAS THE CASE WITH THE EXPORTS IN DISPUTE, AS THEY COMPRISED A PRELIMINARY PURCHASE OF THE PRODUCTS IN QUESTION ON THE DOMESTIC MARKET AND, THEREFORE, CONTRIBUTED IN MAINTAINING OR INCREASING SALES POSSIBILITIES FOR THE FARMERS OF THE MEMBER STATE CONCERNED .

32 THE FACT THAT THE NETHERLANDS GOVERNMENT TOOK THE PLACE OF THE IMPORTING COUNTRY OR ITS IMPORTERS AS BUYER IS NOT RELEVANT, AS THE ECONOMIC EFFECT OF CREATING AND MAINTAINING OUTLETS TO THIRD COUNTRIES FOR THE SAID FARMERS IS THE SAME IN EITHER CASE .

33 FINALLY, THE OVERALL INTERPRETATION OF REGULATION NO 13/64 CANNOT BE DISTORTED BY CONSIDERATIONS TAKEN FROM COMMUNITY ACTS DECIDING FOOD AID PROGRAMMES TO BE UNDERTAKEN WITHIN THE FRAMEWORK OF THE COMMON ORGANIZATION OF THE AGRICULTURAL MARKETS, SUBSEQUENTLY TO THE PERIOD UNDER CONSIDERATION .

34 IT FOLLOWS FROM THIS THAT THE EXPENDITURE IN DISPUTE CONSTITUTES REFUNDS ON EXPORTS, WITHIN THE MEANING OF ARTICLE 14 ( 2 ) OF THAT REGULATION, ELIGIBLE FOR AID FROM THE FUND UNDER ARTICLE 3 ( 1 ) OF REGULATION NO 25 .

35 THE APPLICATION IS THEREFORE WELL-FOUNDED .

36 UNDER THE TERMS OF ARTICLE 69 ( 2 ) OF THE RULES OF PROCEDURE THE UNSUCCESSFUL PARTY SHALL BE ORDERED TO PAY THE COSTS .

37 THE COMMISSION HAS FAILED IN ITS PLEAS .

38 IT MUST THEREFORE BE ORDERED TO PAY THE COSTS .

THE COURT

HEREBY

1 . ANNULS DECISION NO 72/120/EEC OF THE COMMISSION OF 26 JANUARY 1972, ON THE GRANTING OF AID FROM THE EUROPEAN AGRICULTURAL GUIDANCE AND GUARANTEE FUND - GUARANTEE SECTION - IN RESPECT OF EXPENDITURE INCURRED BY THE KINGDOM OF THE NETHERLANDS AS A RESULT OF REFUNDS ON EXPORTS TO THIRD COUNTRIES ( OJ NO L 61, P . 15 ), TO THE EXTENT THAT, IN DETERMINING THE AMOUNT OF AID TO BE GRANTED FROM THE FUND IN RESPECT OF THOSE REFUNDS, IT DID NOT TAKE INTO ACCOUNT EXPENDITURE RELATING TO PRODUCTS EXPORTED UNDER THE HEADING OF FOOD GIFTS .

2 . ANNULS DECISION NO 72/115/EEC OF THE COMMISSION OF 26 JANUARY 1972, ON THE DETERMINATION OF THE LOWEST AVERAGE REFUNDS FOR FINANCING REFUNDS ON EXPORTS TO THIRD COUNTRIES FOR THE ACCOUNTING PERIOD 1966/67 ( OJ NO L 61, P . 1 ), TO THE EXTENT THAT, IN DETERMINING THE LOWEST AVERAGE REFUNDS REFERRED TO IN ARTICLE 3 ( 1 ) OF REGULATION NO 25 OF THE COUNCIL OF 4 APRIL 1962 ( OJ P . 991 ), IT DID NOT TAKE INTO ACCOUNT THE EXPENDITURE REFERRED TO IN 1 ABOVE .

3 . ORDERS THE COMMISSION OF THE EUROPEAN COMMUNITIES TO PAY THE COSTS .