61988J0035

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1 . Aid granted by States - Assessment of an aid scheme in the light of Community rules other than the rules under Article 92 of the Treaty - Infringement of the rules on a common organization of the agricultural markets - Use of the procedure under Article 169 - Permissible

( EEC Treaty, Arts 92, 93(2 ) and 169 )

2 . Agriculture - Common organization of the markets - Price formation -National measures - Incompatible with Community legislation

3 . Aid granted by States - Plans to grant or alter aid - Notification to the Commission - Obligation - Non-compliance - Use of the procedure under Article 169 - Permissible

( EEC Treaty, Arts 93(3 ) and 169 )

4 . Member States - Obligations - Cooperation in investigations into failure to fulfil obligations

( EEC Treaty, Arts 5 and 169 )

1 . The fact that Article 93(2 ) of the EEC Treaty set up a procedure specifically adapted to the special problems created by State aid with regard to competition in the common market in no way precludes the compatibility of an aid scheme in relation to Community rules other than those contained in Article 92, and in particular the rules on a common organization of the market, from being assessed under the infringement procedure under Article 169 .

2 . The common organizations of the markets are based on the concept of an open market to which every producer has free access under genuinely competitive conditions and the functioning of which is regulated solely by the instruments provided for in those organizations . In particular, in sectors covered by a common organization of the market, and a fortiori when that organization is based on a common price system, Member States can no longer take action, through national provisions adopted unilaterally affecting the machinery of price-formation as established under the common organization .

3 . The Commission may avail itself of the procedure under Article 169 of the Treaty when it seeks a finding by the Court that a Member State is in breach of Article 93(3 ) of the Treaty, which obliges Member States to inform the Commission of any plans to grant or alter aid within the meaning of Article 92 of the Treaty .

4 . Failure by a Member State to cooperate with the Commission when the Commission is investigating whether that Member State has breached its obligations in a manner liable to be the subject of proceedings under Article 169 of the Treaty constitutes an infringement of the Member State' s obligations under the first paragraph of Article 5 of the Treaty . That lack of cooperation is all the more serious if it persists before the Court, when infringement proceedings are brought .

In Case C-35/88,

Commission of the European Communities, represented by Xenophon A . Yataganas and Theofanis Christoforou, members of its Legal Department and by Mihail Vilaras, an Assessor in the Greek Council of State, seconded to the Commission' s Legal Department, acting as Agents, with an address for service in Luxembourg at the office of Georgios Kremlis, a member of the Legal Department, Wagner Centre, Kirchberg,

applicant,

v

Hellenic Republic, represented by Yannos Cranidiotis, a Private Secretary in the Ministry of Foreign Affairs, assisted by Constantinos Stavropoulos, a lawyer in the European Communities Department of the Ministry of Foreign Affairs, Ilias Laios, Legal Adviser in the Ministry of Agriculture, and Meletis Tsotsanis, Head of Legal Affairs at the Ministry of Agriculture, acting as Agents, with an address for service in Luxembourg at the Greek Embassy, 117 Val Sainte-Croix,

defendant,

APPLICATION for a declaration that, by intervening in the market in feed grain, and in particular by giving the Central Office for the Management of National Products ( Kydep ) instructions to buy and sell feed grain at prices and on conditions laid down by the Greek Government, by covering the deficit arising from those transactions from State resources and by promoting the preferential financing by the Agricultural Bank of Greece of Kydep' s operations on the market in feed grain, the Hellenic Republic has failed to fulfil its obligations under Regulation ( EEC ) No 2727/75 of the Council of 29 October 1975 on the common organization of the market in cereals ( Official Journal 1975 L 281, p . 1 ), as amended, its implementing regulations, and Articles 5 and 93 of the EEC Treaty,

THE COURT

composed of : O . Due, President, C . N . Kakouris and M . Zuleeg ( Presidents of Chambers ), J . C . Moitinho de Almeida, G . C . Rodríguez Iglesias, F . Grévisse and M . Díez de Velasco, Judges,

Advocate General : J . Mischo

Registrar : J . A . Pompe, Deputy Registrar,

having regard to the Report for the Hearing,

after hearing the arguments of the parties' representatives at the hearing on 3 April 1990,

after hearing the Opinion of the Advocate General delivered at the sitting on 23 May 1990,

gives the following

Judgment

1 By application lodged at the Court Registry on 2 February 1988, the Commission of the European Communities brought an action under Article 169 of the EEC Treaty for a declaration that, by intervening in the market in feed grain, and in particular by giving the Central Office for the Management of National Products ( hereinafter referred to as "Kydep ") instructions to buy and sell feed grain at prices and on conditions laid down by the Greek Government, by covering the deficit arising from such transactions from State resources and by promoting the preferential financing by the Agricultural Bank of Greece of Kydep' s operations on the market in feed grain, the Hellenic Republic had failed to fulfil its obligations under Regulation ( EEC ) No 2727/75 of the Council of 29 October 1975 on the common organization of the market in cereals ( Official Journal 1975 L 281, p . 1 ), as amended, its implementing regulations and Articles 5 and 93 of the EEC Treaty .

2 According to the Commission, the conditions governing the handling of feed grain on the Greek market were laid down by the State, acting in particular through a committee created by Joint Decision No A6-2028 of 17 March 1981 of the Ministers for Agriculture and Trade ( published in Efimeris tis Kyverniseos tis Ellinikis Dimokratias of 31 March 1981, p . 1826 ) and consisting of representatives of the ministries concerned and Kydep . The Commission further claims that Kydep itself, a central cooperative organization embracing unions of cooperatives, was the body giving effect to the committee' s decisions . Accordingly, the deficit arising from Kydep' s transactions on the market in feed grain, due to its selling the grain at a loss, was covered by funds provided from the State budget . In conducting those transactions Kydep further enjoyed preferential financing terms accorded by the Agricultural Bank of Greece .

3 The Commission took the view that such intervention by the State was in breach of the obligations arising from the existence of the common organization of the market in cereals, set up by the aforesaid Regulation No 2727/75 of the Council of 29 October 1975, and that the Hellenic Republic had also infringed Articles 5 and 93 of the EEC Treaty and it therefore commenced proceedings against that Member State for failure to fulfil its obligations .

4 Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the course of the procedure, and the submissions and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court .

Subject of the application

5 The Commission is asking the Court for a finding of three separate infringements, namely, first, of the provisions of Regulation No 2727/75 by virtue of State intervention on the market in feed grain and more particularly of Articles 3, 5, 6, 7, 8, 12 et seq . and 24 thereof; secondly, Article 93(3 ) of the EEC Treaty, in that the Commission was not notified in advance of the State aid allegedly enjoyed by Kydep; and lastly, Article 5 of the EEC Treaty . On that last head, the Commission, referring to the first paragraph of Article 5, cites the failure of the Greek authorities to cooperate in the investigation which it conducted into the feed-grain market of the Hellenic Republic and, referring to the second paragraph of Article 5, pleads that the State intervention alleged amounts to a set of measures liable to jeopardize the attainment of the objectives of the Treaty .

6 It should be pointed out that this action relates, as the Commission' s representative expressly stated during the oral procedure, to the period from 1 January 1981 to 26 March 1984 - the date of the first formal notice sent to the Hellenic Republic .

7 Consequently, the complaint of non-compliance with Regulation No 2727/75 must be considered in the light of the provisions of that regulation as they applied during that period, as amended in particular by Council Regulations ( EEC ) Nos 1143/76 of 17 May 1976 ( Official Journal 1976 L 130, p . 1 ), 1151/77 of 17 May 1977 ( Official Journal 1977 L 136, p . 1 ), 1254/78 of 12 June 1978 ( Official Journal 1978 L 156, p . 1 ), 1870/80 of 15 July 1980 ( Official Journal 1980 L 184, p . 1 ), 3808/81 of 21 December 1981 ( Official Journal 1981 L 382, p . 37 ) and 1451/82 of 18 May 1982 ( Official Journal 1982 L 164, p . 1 ).

Infringement of Regulation No 2727/75

Admissibility

8 The Hellenic Republic contends that, in so far as the Commission' s application seeks a declaration by the Court that Regulation No 2727/75 has been infringed, it is inadmissible .

9 According to the defendant, the State intervention at issue here, if it were substantiated, would centre on the absorption by the national budget of the deficit incurred by Kydep as a result of its selling feed grain at a loss . The aid thereby granted would constitute State aid within the meaning of Article 92 of the Treaty, and only the procedure laid down in Article 93(2 ) of the Treaty would be applicable, to the exclusion of inter alia the procedure under Article 169 of the Treaty .

10 In this connection it must be noted that under Article 42 of the Treaty the provisions of the chapter relating to rules on competition - that is, Articles 85 to 94 as a whole - apply to production of and trade in agricultural products only to the extent determined by the Council within the framework of the provisions adopted for the organization of the agricultural markets . On the basis of Article 42 of the Treaty, Article 22 of Regulation No 2727/75 provides that Articles 92 to 94 of the Treaty are to apply to the production of and trade in cereals "save as otherwise provided in this regulation ".

11 However, the Court has consistently held that the appropriate procedure for obtaining a declaration that the rules of the common organization of the markets have been infringed is the procedure for a declaration against Member States under Article 169 of the Treaty . Although, according to that case-law, Article 93(2 ) of the Treaty set up a procedure specifically adapted to the special problems created by State aid with regard to competition in the common market, the existence of that procedure in no way prevents the compatibility of an aid scheme in relation to Community rules other than those contained in Article 92 from being assessed under the procedure provided for in Article 169 ( see judgments in Case 72/79 Commission v Italy [1980] ECR 1411 and Case 290/83 Commission v France [1985] ECR 439 ).

12 In those circumstances, the point relied on by the Hellenic Republic, namely that the contested State intervention would - if substantiated - include an aid scheme, does not prevent the Commission from challenging the compatibility of such intervention with the rules governing the common organization of the market in cereals by using the procedure under Article 169 of the Treaty .

13 The objection of inadmissibility raised by the defendant must therefore be rejected .

Substance

14 Until the accession of the Hellenic Republic to the European Communities, Kydep had bought, stored and distributed feed grain on behalf of the State .

15 On accession, the Greek State, by the aforesaid Decision No A6-2028 of the Ministers for Agriculture and Trade of 17 March 1981, sold to Kydep the stocks of feed grain belonging to it, as listed in an inventory drawn up on 31 December 1980 .

16 The committee set up by the same decision had the task of supervising Kydep' s management and disposal of the grain stocks thus sold to it .

17 The Hellenic Republic contends that the State' s intervention on the market in feed grain, through that committee and Kydep, covered only the quantities of grain which had been the subject of the abovementioned decision of 17 March 1981 .

18 The Commission, on the other hand, claims that the intervention of the Greek authorities after the accession of the Hellenic Republic covered the entire market in feed grain .

19 The Court proposes to establish, first, whether the Greek authorities did indeed intervene in the manner alleged by the Commission, and secondly, if that intervention is proved, whether it is compatible with Regulation No 2727/75 .

20 In support of its allegations, the Commission has produced various documents, including a report dated 4 November 1985 of Kydep' s legal department and the report on the occasion of Kydep' s 36th general meeting held on 12 and 13 December 1986, which contains statements by those in charge of Kydep showing that it was indeed responsible for implementing the decisions adopted by the national authorities in respect of the market in feed grain .

21 The production by the Greek Government, at the express request of the Court, of decisions taken by Greek ministers or committees operating under their supervision has corroborated the information contained in those documents and disclosed further details .

22 In the first place, it is clear from those decisions that the Greek authorities fixed the selling prices and quantities of feed grain sold by Kydep to stock breeders and undertakings producing compound feedingstuffs for animals . Of particular note in this regard is Decision No 1761 of the Finance Committee of 24 September 1981, paragraph 1 of which "lays down a standard price of DR 10 per kg for the sale, through Kydep, of feed grain ( maize, barley, etc .) to breeders of cattle and poultry and to the animal feed industry ..." and also the decision of the Minister for Agriculture of 29 July 1982 setting out precisely, according to animal species, the quantities of feed grain which could be sold by Kydep to stock breeders .

23 In the second place, the State covered the deficit incurred by Kydep on account of the standard practice imposed upon it of selling at a loss . Paragraph 3 of the aforesaid Decision No 1761 of the Finance Committee is particularly explicit on this point, since it "permits the difference between the cost price resulting from the purchase, storage and transportation of the goods by Kydep and the selling price of DR 10 per kg to be covered by the loan made by the Bank of Greece to the Agricultural Bank of Greece, to be borne by the State budget and to be charged to the current expenditure account for 1982 ".

24 It is also clear from Decision No 1761, and from the decision contained in the letter of 2 April 1982 sent by the Finance Committee to the Bank of Greece, that Kydep was guaranteed by the State so that it could be given loans by the Bank of Greece, acting through the Agricultural Bank of Greece, to finance its operations on the market in feed grain .

25 As far as the price at which Kydep purchased the feed grain is concerned, the documents before the Court disclose a body of consistent indications from which it may be deduced that that price too was fixed by the Greek authorities .

26 Particular attention should be drawn to the statements to that effect contained in the report of Kydep' s legal department and in the report on the occasion of its 36th general meeting, both of which were mentioned earlier . It must further be noted that, inasmuch as the State covered, in whole or in part, the difference between the cost price and the selling price of the feed grain, it could not leave Kydep at liberty to determine the price level at which it bought grain from the producers . That is precisely the purport of Report No 189 of 14 February 1984 from the Committee created by Decision No A6-2028, which dealt both with "the determination of the purchase price for maize, barley and wheat" and with "the amount ultimately absorbed by the State for 1982 in connection with the management of feed grain ".

27 Lastly, it must be pointed out that - as is clear from the second subparagraph of paragraph 1 of Decision 1761 of the Finance Committee, referring to feed grain "purchased from 1 January 1981 onwards", the content of which is not contradicted by any other document before the Court - the intervention of the Greek authorities extended to the entire market in feed grain and was not by any means limited, contrary to the defendant' s contentions, to cereals produced or purchased before the accession of the Hellenic Republic to the European Communities .

28 In view of the conclusive nature of the decisions cited above, and other similar documents before the Court, it must be accepted that, during the period to which this action relates, the Greek authorities, by means of price-fixing measures and financial support measures, controlled Kydep' s operations on the market in feed grain .

29 With regard to whether such State intervention is compatible with Regulation No 2727/75, it should be noted that the common organizations of the markets are based on the concept of an open market to which every producer has free access under genuinely competitive conditions and the functioning of which is regulated solely by the instruments provided for in those organizations . In particular, in sectors covered by a common organization of the market, and a fortiori when that organization is based, as in the present case, on a common price system, Member States can no longer take action, through national provisions adopted unilaterally, affecting the machinery of price-formation as established under the common organization ( judgment in Case C-281/87 Commission v Greece [1989] ECR 4015, paragraph 16 ).

30 The intervention of the Greek authorities in the circumstances described above, in a field in which Community legislation is exhaustive, disregarded the rules governing the common organization of the markets . Kydep' s fixing by administrative measures of the purchase price and selling price of feed grain, and the financial support granted to it, disregarded both the competitive system of price-formation and the exclusive nature of Community intervention as envisaged in particular by Articles 3, 5, 6, 7 and 8 of Regulation No 2727/75 . Neither the allegedly special position of Greek farms nor short-term factors such as drought, nor exceptional circumstances such as the difficulties due to the consequences of the Chernobyl catastrophe can, contrary to the contentions of the Greek Government, justify any price-intervention measures which have not been decided on at Community level in accordance with the rules on the common organization of the markets .

31 As regards the infringement of Article 12 et seq . of Regulation No 2727/75, concerning relations with non-member countries, the Commission is claiming only, according to the explanations given by its representative during the oral procedure, that the procedural rules in those provisions have not been observed . As the Commission admitted at the hearing, the submission is not supported by sufficiently clear evidence to be regarded as well founded .

32 In its answers to the questions put by the Court, the Commission also referred to non-compliance with Article 24 of Regulation No 2727/75, which requires the Member States to communicate to the Commission information on the application of the rules for the common organization of the markets . In support of its submission the Commission argued that the Greek authorities had refused to communicate information to it during its investigation into the functioning of Kydep . These complaints against the Hellenic Republic relate, as the Commission itself stated during the pre-litigation stage and in its pleadings, to the alleged failure to comply with the duty of cooperation under the first paragraph of Article 5 of the Treaty . Accordingly, they will be considered under this separate head of complaint .

33 On all those grounds it must be concluded that, by intervening with regard to the conditions under which Kydep bought and sold feed grain, by adopting budgetary measures to cover the deficit incurred by Kydep as a result of its intervention on the market in feed grain and by enabling Kydep to obtain loans from the Bank of Greece by virtue of a State guarantee, the Hellenic Republic has failed to fulfil its obligations under Regulation ( EEC ) No 2727/75 of the Council of 29 October 1975 on the common organization of the market on cereals, as amended .

Infringement of the provisions of Article 93(3 ) of the Treaty

34 It should be recalled at the outset that the Commission may avail itself of the procedure under Article 169 of the Treaty when it seeks a finding by the Court that a Member State is in breach of Article 93(3 ) of the Treaty, which obliges Member States to inform the Commission of any plans to grant or alter aid within the meaning of Article 92 of the Treaty ( judgment in Case 169/82 Commission v Italy [1984] ECR 1603 ).

35 The Hellenic Republic has not disputed, as a matter of law, that the subsidies granted to Kydep to enable it to cover the operating deficit from selling feed grain at a loss may be described as State aid within the meaning of Article 92 of the Treaty . On the contrary, the defendant argued that they should be so classified in support of its objection that the first head of complaint raised by the Commission was inadmissible .

36 Nor is it disputed that the aid was not notified in advance as prescribed by Article 93(3 ).

37 Consequently, it must be concluded that, by not notifying to the Commission plans for aid to Kydep for the purchase and sale of feed grain, the Hellenic Republic has failed to fulfil its obligations under Article 93(3 ) of the EEC Treaty .

Infringement of Article 5 of the Treaty

38 In the first place, the Commission maintains that the Hellenic Republic has failed to fulfil its obligations under the first paragraph of Article 5 of the EEC Treaty by refusing to communicate to the Commission information on the functioning of Kydep and administrative decisions regarding the organization of the market in feed grain in Greece .

39 It should be noted that during the investigation conducted as part of the procedure which led to the commencement of these proceedings, the Greek Government did not communicate to the Commission the unpublished ministerial decisions or the decisions of the committees working under ministerial supervision, regarding the conditions for Kydep' s intervention on the market in feed grain .

40 That omission, by preventing the Commission from acquainting itself with the whole complex relationship between the Greek State and Kydep, must be regarded as a refusal to cooperate with that institution .

41 That lack of cooperation is all the more serious for having persisted in the proceedings before the Court . When the Court requested it to produce the decisions in question, the Greek Government did not, within the period originally prescribed, produce those documents or answer the specific questions put to it . It was only after the first hearing, during which the Court, exceptionally, granted the Greek Government a further period for compliance, that the defendant responded to the Court' s requests .

42 It must therefore be concluded that, by not communicating to the Commission the decisions of the Greek authorities relating to the conditions of Kydep' s intervention on the market in feed grain, the Hellenic Republic has failed to fulfil its obligations under the first paragraph of Article 5 of the EEC Treaty .

43 Finally, with regard to the infringement of the second paragraph of Article 5 of the Treaty, it is unnecessary to hold that there has been any breach of the general obligations prescribed therein as distinct from the infringements already established of the more specific Community obligations incumbent upon the Hellenic Republic .

Costs

44 Under Article 69(2 ) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs . Since the Hellenic Republic has failed in its submissions, it must be ordered to pay the costs .

On those grounds,

THE COURT

hereby :

( 1 ) Declares that, by intervening with regard to the conditions under which Kydep bought and sold feed grain, by adopting budgetary measures to cover the deficit incurred by Kydep as a result of its intervention on the market in feed grain and by enabling Kydep to obtain loans from the Bank of Greece by virtue of a State guarantee, the Hellenic Republic has failed to fulfil its obligations under Regulation ( EEC ) No 2727/75 of the Council of 29 October 1975 on the common organization of the market in cereals, as amended;

( 2 ) Declares that, by not notifying to the Commission plans for aid to Kydep for the purchase and sale of feed grain, the Hellenic Republic has failed to fulfil its obligations under Article 93(3 ) of the EEC Treaty;

( 3 ) Declares that, by not communicating to the Commission the decisions of the Greek authorities relating to the conditions of Kydep' s intervention on the market in feed grain, the Hellenic Republic has failed to fulfil its obligations under the first paragraph of Article 5 of the EEC Treaty;

( 4 ) Orders the Hellenic Republic to pay the costs .