1 BY JUDGMENT OF 16 JUNE 1981 , WHICH WAS RECEIVED AT THE COURT ON 12 OCTOBER 1981 , THE TRIBUNAL ADMINISTRATIF ( ADMINISTRATIVE COURT ), PARIS , REFERRED TO THE COURT OF JUSTICE FOR A PRELIMINARY RULING UNDER ARTICLE 177 OF THE EEC TREATY TWO QUESTIONS ON THE INTERPRETATION AND VALIDITY OF COMMISSION REGULATION ( EEC ) NO 1844/77 OF 10 AUGUST 1977 ON THE GRANTING BY TENDER OF SPECIAL AID FOR SKIMMED-MILK POWDER INTENDED AS FEED FOR ANIMALS OTHER THAN YOUNG CALVES ( OFFICIAL JOURNAL 1977 , L 205 , P . 11 ).
2 THE QUESTIONS WERE RAISED IN A DISPUTE BETWEEN RU-MI SARL , ( HEREINAFTER REFERRED TO AS ' ' RU-MI ' ' ), THE PLAINTIFF IN THE MAIN PROCEEDINGS , AND THE FONDS D ' ORIENTATION ET DE REGULARISATION DES MARCHES AGRICOLES ( AGRICULTURAL MARKETS GUIDANCE AND STABILIZATION FUND , HEREINAFTER REFERRED TO AS ' ' THE FUND ' ' ) CONCERNING THE DEFENDANT ' S REFUSAL TO PAY TO THE PLAINTIFF THE SPECIAL AID PROVIDED FOR IN REGULATION NO 1844/77 ON THE GROUND THAT THE DENATURING WHICH THE GOODS IN QUESTION HAD UNDERGONE HAD FAILED TO SATISFY THE CONDITIONS LAID DOWN IN THAT REGULATION .
3 ARTICLE 1 OF REGULATION NO 1844/77 PROVIDES FOR SPECIAL AID FOR SKIMMED-MILK POWDER IF IT IS DENATURED IN ACCORDANCE WITH ONE OF THE FORMULAE GIVEN IN SECTION 1 OF THE ANNEX TO COMMISSION REGULATION ( EEC ) NO 368/77 OF 23 FEBRUARY 1977 ON THE SALE BY TENDER OF SKIMMED-MILK POWDER FOR USE IN FEED FOR PIGS AND POULTRY ( OFFICIAL JOURNAL 1977 , L 52 , P . 19 ), INCLUDING FORMULA I B , WHICH WAS APPLIED IN THE PRESENT CASE AND ACCORDING TO WHICH THE DENATURING IS CARRIED OUT BY THE ADDITION TO 100 KILOGRAMS OF SKIMMED-MILK POWDER OF AT LEAST :
' ' 20 KILOGRAMS OF FISH-MEAL EITHER NON-DEODORIZED OR STILL HAVING A STRONG SMELL ,
AND
300 G IRON , AS FERROUS SULPHATE HEPTAHYDRATE ,
AND
120 G COPPER AS COPPER-SULPHATE PENTAHYDRATE . ' '
TO THOSE REQUIREMENTS MUST BE ADDED THOSE OF SECTION 3 B OF THE SAME ANNEX ACCORDING TO WHICH THE ' ' COPPER SULPHATE . . . MUST BE FINELY GROUND AND MUST HAVE AT LEAST 30% OF ITS PARTICLES LESS THAN 200 MICRONS IN SIZE ' ' AND THOSE OF SECTION 3 D ACCORDING TO WHICH THE PRODUCTS TO BE ADDED TO SKIMMED-MILK POWDER MUST BE DISTRIBUTED IN A UNIFORM MANNER SO THAT IN TWO INDIVIDUAL SAMPLES OF 50 G , DRAWN AT RANDOM FROM A 25 KG PACKAGE , THERE ARE OBTAINED - BY CHEMICAL DETERMINATION - THE MAIN RESULTS AS ABOVE WITHIN TOLERABLE ERROR LIMITS SET BY THE METHOD OF ANALYSIS USED .
4 THE FILE ON THE CASE SHOWS THAT THE ANALYSIS OF THE PRODUCT IN QUESTION BY THE COMPETENT NATIONAL BODY YIELDED THE FOLLOWING RESULTS :
' ' THE MINIMUM QUANTITIES OF TRACERS INCORPORATED IN ACCORDANCE WITH FORMULA I B DEFINED IN THE ANNEX TO REGULATION NO 368/77 HAVE BEEN COMPLIED WITH ;
SIMILARLY , THE SPECIFICATIONS RELATING TO THE CHARACTERISTICS WHICH THE DENATURING AGENTS USED MUST POSSESS HAVE BEEN COMPLIED WITH AND , IN PARTICULAR , AT LEAST 30% OF THE COPPER SULPHATE GRANULES ARE LESS THAN 200 MICRONS IN SIZE ;
HOWEVER A SUBSTANTIAL VARIATION WAS FOUND IN THE SIZE OF COPPER SULPHATE GRANULES WITH LARGE UNCRUSHED CRYSTALS OF UP TO SEVERAL MILLIMETRES IN SIZE . AS A RESULT THIS COMPONENT WAS NOT DISTRIBUTED UNIFORMLY IN THE UNPRESERVED SAMPLE OF THE FINISHED PRODUCT WHICH WAS EXAMINED AND IN CONSEQUENCE THE RESULTS OF THE TWO TEST SAMPLES WERE CONSIDERABLY OUTSIDE THE NORMALLY PERMITTED LIMITS ( VARIATION OF 1 TO 5 ). IT IS POSSIBLE TO CONCLUDE FROM THIS THAT THE INCORPORATION OF THE COPPER SULPHATE IN THE MIXTURE WAS NOT PROPERLY CARRIED OUT . ' '
5 AFTER THOSE RESULTS AND THE FINDING THAT ' ' THE DENATURING AGENT HAD NOT BEEN EVENLY DISTRIBUTED IN THE MILK POWDER ' ' HAD BEEN COMMUNICATED TO IT BY THE FUND , THE COMMISSION STATED THAT , IN THE CIRCUMSTANCES , THE EAGGF ( EUROPEAN AGRICULTURAL GUIDANCE AND GUARANTEE FUND ) WAS UNABLE TO FINANCE THE AID IN QUESTION .
6 IN THE MEANTIME , RU-MI HAD BROUGHT AN ACTION BEFORE THE TRIBUNAL ADMINISTRATIF , PARIS , FOR THE ANNULMENT OF THE FUND ' S IMPLIED DECISION REJECTING ITS APPLICATION FOR THE ISSUE OF A DENATURING CERTIFICATE QUALIFYING IT TO RECEIVE PAYMENT OF THE SPECIAL AID PROVIDED FOR , AMOUNTING TO FF 270 100 , ON THE GROUND THAT THAT DECISION WAS ULTRA VIRES . IN SUPPORT OF ITS CLAIMS , RU-MI MAINTAINED IN PARTICULAR THAT THE APPLICATION BY THE FUND OF REGULATION NO 1844/77 IN THE PRESENT CASE , IN SPITE OF THE FACT THAT THE PRODUCT ' S LACK OF CONFORMITY WAS ONLY VERY SLIGHT , WAS CONTRARY TO THE OBJECTIVE OF THE REGULATION AND CONTRAVENED THE PRINCIPLE OF PROPORTIONALITY .
7 SINCE , IN ORDER TO DETERMINE WHETHER THAT ARGUMENT IS WELL FOUNDED , IT IS NECESSARY TO INTERPRET AND TO ASSESS THE VALIDITY OF THE REGULATION IN QUESTION , THE TRIBUNAL ADMINISTRATIF , PARIS , STAYED THE PROCEEDINGS AND REFERRED TO THE COURT THE FOLLOWING TWO QUESTIONS FOR A PRELIMINARY RULING :
' ' 1 . IS THE FACT THAT THE DENATURING OF THE PRODUCT IN QUESTION DEPARTS ONLY VERY SLIGHTLY FROM THE GENERALLY RECOGNIZED STANDARD SUFFICIENT TO OPERATE AS A TOTAL BAR AGAINST THE TRADER ' S RECEIVING THE BENEFIT OF THE SPECIAL AID INTRODUCED BY REGULATION NO 1844/77?
2.IF SO , DOES NOT THAT REGULATION CONTRAVENE THE PRINCIPLE OF PROPORTIONALITY AND IS IT VALID INASMUCH AS THE WORDING OF ARTICLES 13 ( 7 ) AND 14 ENABLES THE SAME SANCTION TO BE APPLIED BOTH WHEN NO DENATURING AT ALL HAS TAKEN PLACE AND WHERE DENATURING HAS BEEN CARRIED OUT BUT NOT WHOLLY IN THE PRESCRIBED MANNER?
' '
8 ACCORDING TO RU-MI , THE NATIONAL COURT FOUND THAT THE DENATURING OF THE PRODUCT DEPARTED ONLY VERY SLIGHTLY FROM THE GENERALLY RECOGNIZED STANDARD AND THAT THE SANCTION IMPOSED UNDER THE LEGISLATION COMPLAINED OF WAS WHOLLY OUT OF PROPORTION TO THE EXTENT OF THE VARIATION . THE SANCTION COULD NOT HAVE BEEN HARSHER EVEN IF NO DENATURING AT ALL HAD BEEN CARRIED OUT . THE COURT HAS UPHELD THE PRINCIPLE OF PROPORTIONALITY , IN PARTICULAR IN ITS JUDGMENT OF 20 FEBRUARY 1979 IN CASE 122/78 BUITONI ( 1979 ) ECR 677 . THE COMMISSION ITSELF HAS RECOGNIZED THAT PRINCIPLE IN CERTAIN CASES , FOR EXAMPLE IN CONNECTION WITH COMMISSION REGULATION ( EEC ) NO 1725/79 OF 26 JULY 1979 ON THE RULES FOR GRANTING AID TO SKIMMED MILK PROCESSED INTO COMPOUND FEEDINGSTUFFS AND SKIMMED-MILK POWDER INTENDED FOR FEED FOR CALVES ( OFFICIAL JOURNAL 1979 , L 199 , P . 1 ). COMMISSION REGULATION ( EEC ) NO 2851/80 OF 31 OCTOBER 1980 ( OFFICIAL JOURNAL 1980 , L 296 , P . 7 ) AMENDED THE FIRST-NAMED REGULATION BY THE ADDITION OF THE FOLLOWING PROVISIONS :
' ' WHERE IT IS FOUND THAT THE PRODUCT AS MANUFACTURED DOES NOT CONTAIN THE MINIMUM QUANTITY OF 60 KILOGRAMS OF SKIMMED-MILK POWDER REFERRED TO IN THE FIRST SUBPARAGRAPH AT ( A ), THE MEMBER STATES SHALL BE AUTHORIZED TO GRANT THE AID REDUCED BY 10% FOR THE SKIMMED-MILK POWDER ACTUALLY INCORPORATED , SUBJECT TO THE FOLLOWING CONDITIONS :
. . .
THE APPLICANT FOR AID MUST HAVE SUPPLIED PROOF THAT FAILURE TO COMPLY WITH THE MINIMUM LEVEL OF 60 KILOGRAMS IS THE RESULT NEITHER OF DELIBERATE BREACH OF THE RULES NOR OF SERIOUS NEGLIGENCE . ' '
9 THE COMMISSION OBSERVES THAT THE AID GRANTED FOR THE DENATURING OF SKIMMED-MILK POWDER INTENDED FOR FEED FOR ANIMALS OTHER THAN YOUNG CALVES IS CONSIDERABLY HIGHER THAN THE AMOUNT GRANTED IN THE CASE OF FEED FOR CALVES . IT INFERS THAT THE PURPOSE OF THE LEGISLATION COMPLAINED OF IS NOT MERELY TO ENSURE THAT DENATURING TAKES PLACE BUT THAT IT PREVENTS ANY DEVIATION FROM THE INTENDED USE OF THE PRODUCT .
10 IN ORDER TO ACHIEVE THAT OBJECTIVE , VARIOUS SYSTEMS OF SUPERVISION ARE POSSIBLE , IN PARTICULAR A SYSTEM INVOLVING THE EXERCISE OF CONTROL OVER THE FINAL USER AND PROVIDING FOR PAYMENT OF THE AID UPON PROOF BEING GIVEN THAT THE SKIMMED-MILK POWDER HAS BEEN CONSUMED BY ANIMALS OTHER THAN YOUNG CALVES . HOWEVER , SUCH A SYSTEM WOULD ENTAIL A VERY HIGH DEGREE OF SUPERVISION AT THE PREMISES OF ALL UNDERTAKINGS WHICH USE FEEDINGSTUFFS CONTAINING SKIMMED-MILK POWDER AND , IN VIEW OF THE VERY LARGE NUMBER OF TRADERS AND BREEDERS WHO WOULD HAVE TO BE SUPERVISED , THE COMMISSION TAKES THE VIEW THAT IT WOULD BE DIFFICULT TO OPERATE SUCH A SYSTEM IN PRACTICE .
11 HOWEVER , UNDER THE SYSTEM PRESCRIBED BY THE COMMUNITY LEGISLATION , IT IS SUFFICIENT TO SUPERVISE THE DENATURING OPERATION . ONCE THE DENATURING AGENTS DESIGNED TO PREVENT THE FINISHED PRODUCT FROM BEING USED AS FEED FOR YOUNG CALVES ARE INCORPORATED IN THE SKIMMED-MILK POWDER AND IT IS ESTABLISHED THAT THEY CAN NO LONGER BE SEPARATED FROM IT SUBSEQUENTLY , THE PRODUCT IS ALMOST CERTAIN TO BE USED FOR ITS INTENDED PURPOSE .
12 ACCORDINGLY , RU-MI ' S ARGUMENT TO THE EFFECT THAT A SYSTEM OF PARTIAL PAYMENT OF THE AID ON THE BASIS OF THE DEGREE OF CONFORMITY OF THE DENATURING OPERATION WOULD BE MORE APPROPRIATE FOR THE ATTAINMENT OF THE OBJECTIVES PURSUED CANNOT BE ACCEPTED . EVEN IF ONLY PART OF THE AID WERE PAID IN THE EVENT OF A SLIGHT LACK OF CONFORMITY IN THE DENATURING OPERATION , THERE WOULD STILL BE A RISK THAT THE PRODUCT MIGHT BE DIVERTED FROM ITS INTENDED USE .
13 THE ARGUMENT PUT FORWARD BY THE COMMISSION MUST BE ACCEPTED . IN VIEW OF THE AMOUNT OF THE AID GRANTED FOR THE PRODUCT INTENDED FOR FEED FOR ANIMALS OTHER THAN YOUNG CALVES AND IN VIEW OF THE RISK THAT IT MIGHT BE USED FOR OTHER , UNAUTHORIZED PURPOSES , THE COMMISSION WAS ENTITLED TO STRESS THE IMPORTANCE OF THE DENATURING OF SKIMMED-MILK POWDER BY LAYING DOWN STRICT CONDITIONS IN ORDER TO PREVENT ANY RISK OF UNAUTHORIZED USE OF THE PRODUCT .
14 ALTHOUGH , IN CERTAIN CASES , THE COURT HAS DECLARED VOID PROVISIONS WHICH IMPOSED THE SAME PENALTY BOTH FOR FAILURE TO FULFIL THE OBLIGATION WHICH THE SECURITY WAS INTENDED TO GUARANTEE AND FOR A FAR LESS SERIOUS BREACH SUCH AS FAILURE TO ADDUCE PROOF OF PERFORMANCE OF THE PRINCIPAL OBLIGATION WITHIN THE PERIOD PRESCRIBED , THE DECISIONS CONCERNED ARE NOT RELEVANT IN THIS CASE . THE COMMISSION WAS LEGALLY JUSTIFIED IN ADOPTING PROVISIONS WHICH ENTAIL WITHHOLDING OF THE AID AND LOSS OF THE SECURITY FOR FAILURE TO FULFIL THE PRINCIPAL OBLIGATION LAID DOWN IN THE TENDERING PROCEDURE AND WAS NOT OBLIGED TO VARY THE SEVERITY OF THE MEASURE IN QUESTION ACCORDING TO THE GRAVITY OF THE TENDERER ' S FAILURE TO COMPLY WITH THAT OBLIGATION . SUCH A MEASURE CANNOT BE REGARDED AS OUT OF PROPORTION TO THE OBJECTIVE PURSUED .
15 THE ANSWER TO THE QUESTIONS RAISED MUST THEREFORE BE THAT THE FACT THAT THE DENATURING DEPARTS EVEN TO A SLIGHT EXTENT FROM THE METHOD REFERRED TO IN REGULATION NO 1844/77 IS CAPABLE OF DEPRIVING THE TRADER OF THE ENTIRE BENEFIT OF THE SPECIAL AID PROVIDED FOR IN THAT REGULATION . CONSIDERATION OF THE PROVISIONS OF THE REGULATION HAS DISCLOSED NO FACTOR OF SUCH A NATURE AS TO AFFECT ITS VALIDITY .
COSTS
16 THE COSTS INCURRED BY THE COMMISSION OF THE EUROPEAN COMMUNITIES , WHICH HAS SUBMITTED OBSERVATIONS TO THE COURT , ARE NOT RECOVERABLE . AS 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 ( FIRST CHAMBER )
IN ANSWER TO THE QUESTIONS SUBMITTED TO IT BY THE TRIBUNAL ADMINISTRATIF , PARIS , BY JUDGMENT OF 16 JUNE 1981 HEREBY RULES :
THE FACT THAT THE DENATURING DEPARTS EVEN TO A SLIGHT EXTENT FROM THE METHOD REFERRED TO IN COMMISSION REGULATION ( EEC ) NO 1844/77 OF 10 AUGUST 1977 ON THE GRANTING BY TENDER OF SPECIAL AID FOR SKIMMED-MILK POWDER INTENDED AS FEED FOR ANIMALS OTHER THAN YOUNG CALVES ( OFFICIAL JOURNAL 1977 , L 205 , P . 11 ) IS CAPABLE OF DEPRIVING THE TRADER OF THE ENTIRE BENEFIT OF THE SPECIAL AID .
CONSIDERATION OF THE SECOND QUESTION HAS DISCLOSED NO FACTOR OF SUCH A NATURE AS TO AFFECT THE VALIDITY OF REGULATION NO 1844/77 .
