In Case C-81/91,
REFERENCE to the Court under Article 177 of the EEC Treaty by the College van Beroep voor het Bedrijfsleven for a preliminary ruling in the proceedings pending before that court between
T. Twijnstra
and
Minister van Landbouw, Natuurbeheer en Visserij
on the interpretation and validity of the third subparagraph of Article 3a(2) of Council Regulation (EEC) No 857/84 of 31 March 1984 laying down general rules for the application of the levy referred to in Article 5c of Regulation (EEC) No 804/68 in the milk and milk products sector (OJ 1984 L 90, p. 13), as amended by Council Regulation (EEC) No 764/89 of 20 March 1989 (OJ 1989 L 84, p. 2),
THE COURT (Third Chamber),
composed of: M. Zuleeg, President of Chamber, J.C. Moitinho de Almeida and F. Grévisse, Judges,
Advocate General: F.G. Jacobs,
Registrar: H. von Holstein, Deputy Registrar,
after considering the written observations submitted on behalf of:
° Mr Twijnstra by E.H. Pijnacker Hordijk, of the Amsterdam Bar,
° the Netherlands Government by B.R. Bot, Secretary General at the Ministry of Foreign Affairs, acting as Agent,
° the Council of the European Communities by G. Houttuin, of the Legal Service, acting as Agent,
° the Commission of the European Communities by its Legal Adviser, R. Fischer, acting as Agent,
having regard to the Report for the Hearing,
after hearing the oral observations of the plaintiff, of the Netherlands Government, represented by H.G.T.W. Knippenberg, Counsellor at the Netherlands Embassy in Luxembourg, acting as Agent, of the German Government, represented by C.D. Quassowski, Regierungsdirektor at the Federal Ministry of Economic Affairs, acting as Agent, of the Council and of the Commission at the hearing on 21 May 1992,
after hearing the Opinion of the Advocate General at the sitting on 2 July 1992,
gives the following
Judgment
1 By order of 23 January 1991, which was received at the Court on 27 February 1991, the College van Beroep voor het Bedrijfsleven referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty four questions on the interpretation and validity of the third subparagraph of Article 3a(2) of Council Regulation (EEC) No 857/84 of 31 March 1984 adopting general rules for the application of the levy referred to in Article 5c of Regulation (EEC) No 804/68 in the milk and milk products sector (OJ 1984 L 90, p. 13), as amended by Council Regulation (EEC) No 764/89 of 20 March 1989 (OJ 1989 L 84, p. 2).
2 The questions arose in proceedings between Mr Twijnstra, a farmer, and the Minister van Landbouw, Natuurbeheer en Visserij concerning a special reference quantity under the levy system.
3 In 1980, Mr Twijnstra gave a non-marketing undertaking under Council Regulation (EEC) No 1078/77 of 17 May 1987 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). He thereby undertook, in exchange for a non-marketing premium, not to deliver milk or milk products from his holding for the period 10 April 1980 to 9 April 1985.
4 In January 1984, that is, during the five-year non-marketing period, he sold part of the land belonging to his holding. The purchasers, who gave an undertaking to Mr Twijnstra and the competent Netherlands authority not to use that land for milk production before 10 April 1985, complied with their undertaking. The transferor therefore retained the full non-marketing premium pursuant to Article 6(2) of Regulation No 1078/77.
5 In 1988 Mr Twijnstra resumed milk production. In the meantime an additional levy on the quantities of milk delivered in excess of a given reference quantity had been introduced by Council Regulation (EEC) No 856/84 of 31 March 1984 amending Regulation (EEC) No 804/68 on the common organization of the market in milk and milk products (OJ 1984 L 90, p. 10) and the said Regulation No 857/84. In 1989 Mr Twijnstra asked to be granted a special reference quantity under Article 3a of that regulation.
6 By decision of the competent Netherlands authority, he was granted a provisional special reference quantity of 245 653 kg of milk for the marketing year 1989/90. As the quantity of milk on the basis of which the non-marketing premium had been determined was 591 905 kg, the competent Netherlands authority had made a deduction, when calculating the provisional special reference quantity to take account of the fact that part of the holding had been transferred in 1984.
7 After unsuccessfully lodging a complaint against that decision allocating him a reduced special reference quantity, Mr Twijnstra appealed against the decision to the College van Beroep voor het Bedrijfsleven on 13 June 1990.
8 Taking the view that the decision to be given depended on the interpretation and possibly the validity of the relevant Community rules, the College van Beroep voor het Bedrijfsleven stayed the proceedings and referred the following questions to the Court of Justice for a preliminary ruling under Article 177 of the EEC Treaty:
"1. In circumstances such as those described in Section Two of this judgment, is it permissible to give to the third subparagraph of Article 3a(2) of Council Regulation (EEC) No 857/84 an application which departs from the literal wording of that provision?
2. If Question 1 is answered in the affirmative:
Must the application to be given to that provision correspond to that given to it in the Netherlands on the basis of Article 5(1) of the Beschikking Superheffing SLOM-deelnemers (the implementing decree)?
3. If Question 1 is answered in the negative:
Does an application on the basis of the literal wording of the aforesaid Community provision mean that the transferee as defined in that provision can never claim a special reference quantity or can only do so if he has guaranteed his right to a premium by means of a private-law agreement with the transferor of land covered by the scheme?
4. Does an affirmative answer to Question 3, per se or in conjunction with other factors, lead to the conclusion that the aforesaid provision is invalid wholly or in part on the ground that it conflicts with Community law, in particular the principle that legitimate expectations should be protected?"
9 Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the Community provisions at issue, the course of the proceedings and the written observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.
The legislative framework
10 By the questions referred to the Court, which should be examined together, the national court essentially seeks to ascertain whether the third subparagraph of Article 3a(2) of Council Regulation No 857/84, as amended by Regulation No 764/89, allows the special reference quantity to be shared between the transferor and the transferee in the case of the partial transfer of a holding where the transferee agrees to fulfil the non-marketing undertaking entered into by the transferor under Council Regulation No 1078/77, or whether, at the risk of being declared invalid for breach of the principle of protection of legitimate expectations, it must be interpreted as meaning that the entire special reference quantity remains with the transferor.
11 It should be pointed out in limine that the Community rules on the additional levy on milk did not originally include any specific provision envisaging that a reference quantity would be granted to producers who, pursuant to an undertaking given under Regulation No 1078/77, had not delivered milk during the reference year chosen by the Member State concerned. In Case 120/86 Mulder v Minister van Landbouw en Visserij [1988] ECR 2321, paragraph 28, and Case 170/86 Von Deetzen v Hauptzollamt Hamburg-Jonas [1988] ECR 2355, paragraph 17, however, the Court declared that those rules were invalid on the ground that they had been adopted in breach of the principle of the protection of legitimate expectations.
12 In those judgments the Court held that a producer who had voluntarily ceased production for a time could not legitimately expect to be able to resume production under the same conditions as those which previously applied and not to be subject to any rules of market or structural policy adopted in the meantime (Mulder, paragraph 23; Von Deetzen, paragraph 12). On the other hand, the Court considered that where such a producer had been encouraged by a Community measure to suspend the marketing of his products for a limited period in the general interest and against payment of a premium he might legitimately expect not to be subject, upon the expiry of his undertaking, to restrictions which specifically affected him precisely because he had availed himself of the possibilities offered by the Community provisions (Mulder, paragraph 24; Von Deetzen, paragraph 13).
13 It was as a consequence of those judgments that on 20 March 1989 the Council adopted Regulation No 764/89. That regulation added a new Article 3a to Regulation No 857/84, providing in essence that producers who, pursuant to an undertaking given under Regulation No 1078/77, did not deliver milk during the reference year could, under certain conditions, obtain a special reference quantity calculated on the basis of the quantity of milk delivered or the quantity of milk equivalent sold by the producer during the twelve months preceding the month in which he applied for the non-marketing or conversion premium. Obtaining that special reference quantity is conditional upon having retained or acquired the right to the non-marketing premium, representing the consideration for the milk production abandoned under the non-marketing scheme.
14 It is clear from the first six recitals in the preamble to Regulation No 764/89, read together, that Article 3a is intended to reconcile the interests of producers, as defined in the Mulder and Von Deetzen judgments, and the aims pursued by the additional levy scheme for milk.
15 Among those aims it is necessary to mention in particular the overriding necessity of not jeopardizing the fragile stability which currently obtains in the milk products sector, as mentioned in the fifth recital in the preamble to Regulation No 764/89. Article 3a therefore ensures that the special reference quantities are not exceeded at either the individual or the national level.
16 That is the background to the third subparagraph of Article 3a(2) of Regulation No 857/84 governing the grant of the special reference quantity where part of the holding is transferred during the non-marketing period.
17 The third subparagraph of Article 3a(2) of Regulation No 857/84, first indent, provides that
"Where the producer has transferred part of his holding during the non-marketing or conversion period:
° the transferor' s special reference quantity ... shall be equal to 60% of the quantity for which entitlement to the premium has been retained,
° ..."
The second indent of the third subparagraph provides that the transferee may claim a special reference quantity equal to 60% of the quantity "for which entitlement to the premium has been acquired."
18 With regard to the allocation of the premium in the case of a partial transfer, Article 6(2) of Regulation No 1078/77 provides:
"Where only part of a holding is transferred, the applicant shall retain his right to the premium if the person to whom he has transferred the property undertakes in writing to continue to fulfil the undertakings entered into by his predecessor. Otherwise, a proportion of the sums already paid shall be refunded by the predecessor, such proportion to be calculated by reference to the area under forage transferred."
The interpretation of the third subparagraph of Article 3a(2) of Regulation No 857/84
19 The plaintiff, the Council and the Commission suggest that the two abovementioned provisions, read together, should be interpreted literally. According to that interpretation, it is the transferor alone who in this case may claim the entire special reference quantity. The transferee, by contrast, is completely excluded from the system of the special reference quantity.
20 That interpretation is based on the formal link established by Regulation No 764/89 between entitlement to a reference quantity and the grant of the non-marketing premium. According to Article 6(2) of Regulation No 1078/77, which determines what becomes of the premium in the event of a partial transfer, the transferor retains the entire premium if, where part of a holding is transferred, the transferee undertakes to fulfil the non-marketing undertaking.
21 It should be pointed out in the first place that that interpretation, if it were accepted, would mean that the second indent of the third subparagraph of Article 3a(2) of Regulation No 857/84, as amended, which provides for the allocation of a special reference quantity to the transferee where he has acquired entitlement to the premium, would be deprived of its meaning and purpose. Article 6(2) of Regulation No 1078/77 does not provide for the acquisition of the premium by the transferee in the case of a partial transfer.
22 The argument advanced by the Council and the Commission to the effect that the second indent concerns solely the special case of the transfer of the last part of the holding after a series of partial transfers is not supported by any specific provision in the applicable Community rules and, for the reasons explained by the Advocate General in paragraph 16 of his Opinion, is unconvincing.
23 In the second place, it should be pointed out that the proposed interpretation is incompatible with the principle of the protection of legitimate expectations on which the transferee may rely. As the transferee has acquired part of the transferor' s holding and has assumed the non-marketing undertaking, he may legitimately expect, like the producers referred to in the Mulder and Von Deetzen judgments, to be able to re-use the land transferred for the purpose of milk production once the non-marketing period has ended. To exclude the transferee from that possibility would be to ignore the principle of the protection of legitimate expectations.
24 The third subparagraph of Article 3a(2) of Regulation No 857/84 must be interpreted in a manner compatible with the principle of the protection of legitimate expectations, since that is one of the general principles of Community law.
25 Finally, the entire system of reference quantities is based on the general principle, laid down in Article 7 of Regulation No 857/84 and in Article 5 of Commission Regulation (EEC) No 1371/84 of 16 May 1984 laying down detailed rules for the application of the additional levy referred to in Article 5c of Regulation (EEC) No 804/68 (OJ 1984 L 132, p. 11), which provides that in the case of partial transfer of a holding the reference quantity is to be granted to the transferee in proportion to the land transferred. It does not appear from the statement of the reasons on which the regulation in question is based that the Community legislature intended to derogate from that general principle.
26 That general principle also enables respect for the transferee' s legitimate expectations to be reconciled with the overriding necessity of maintaining market stability.
27 In that respect, it should be noted that the interpretation of the provisions in question as meaning that the special reference quantity is to be shared between the transferor and the transferee in proportion to the land retained and the land transferred does not have the effect of exceeding the total special reference quantity which the owner could have claimed if there had been no transfer of part of his holding.
28 With regard to the transferor' s position, it should be observed that the interpretation of the third subparagraph of Article 3a(2) of Regulation No 857/84 as meaning that the special reference quantity is to be shared does not prejudice his rights. Regard being had to the fact that the general principle of proportionate allocation has governed the quota system since the entry into force of the additional levy scheme for milk, a producer who was originally precluded from receiving a milk quota owing to his participation in the non-marketing programme could not legitimately expect to be allocated the full special reference quantity after transferring part of his holding.
29 It follows from all the foregoing that the answer to the questions referred to the Court for a preliminary ruling must be that the third subparagraph of Article 3a(2) of Regulation No 857/84, as amended by Regulation No 764/89, must be interpreted as meaning that, in the event of the transfer of part of a holding where the transferee agrees to observe the non-marketing undertaking made by the transferor under Council Regulation No 1078/77, the special reference quantity may be divided between the transferor and the transferee on the basis of the proportion of the land transferred.
Costs
30 The costs incurred by the Netherlands and German Governments and by the Council and the Commission of the European Communities, which have 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 proceedings before the national court, the decision on costs is a matter for that court.
On those grounds,
THE COURT (Third Chamber)
in answer to the questions referred to it by the College van Beroep voor het Bedrijfsleven by order of 23 January 1992, hereby rules:
The third subparagraph of Article 3a(2) of Council Regulation No 857/84 of 31 March 1984 adopting general rules for the application of the levy referred to in Article 5c of Regulation (EEC) No 804/68 in the milk and milk products sector, as amended by Council Regulation No 764/89 of 20 March 1989, must be interpreted as meaning that, in the event of the transfer of part of a holding where the transferee agrees to observe the non-marketing undertaking made by the transferor under Council Regulation No 1078/77, the special reference quantity may be divided between the transferor and the transferee on the basis of the proportion of the land transferred.
