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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Odette N. Petridi (Agriculture) [1998] EUECJ C-324/96 (26 March 1998)
URL: http://www.bailii.org/eu/cases/EUECJ/1998/C32496.html
Cite as: [1998] EUECJ C-324/96
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JUDGMENT OF THE COURT (Fifth Chamber)

26 March 1998 (1)

(Common organisation of the markets - Raw tobacco - System of maximum guaranteed quantities - Validity of Council Regulations (EEC) Nos 1114/88, 1251/89 and 1252/89 and of Commission Regulation (EEC) No 2046/90)

In Case C-324/96,

REFERENCE to the Court under Article 177 of the EC Treaty by the Irinodikio, Echinos (Greece), for a preliminary ruling in the proceedings pending before that court between

Odette Nikou Petridi Anonymos Kapnemboriki AE

and

Athanasia Simou and Others,

on the validity of Council Regulation (EEC) No 1114/88 of 25 April 1988 amending Regulation (EEC) No 727/70 on the common organisation of the market in raw tobacco (OJ 1988 L 110, p. 35), Council Regulation (EEC) No 1251/89 of 3 May 1989 amending Regulation (EEC) No 727/70 (OJ 1989 L 129, p. 16), Council Regulation (EEC) No 1252/89 of 3 May 1989 fixing, for the 1989 harvest, the norm and intervention prices and the premiums granted to purchasers of leaf tobacco, the derived intervention prices for baled tobacco, the reference qualities, the production areas and the guaranteed maximum quantities and amending Regulations (EEC) No 1577/86, (EEC) No 1975/87 and (EEC) No 2268/88 (OJ

1989 L 129, p. 17), and of Commission Regulation (EEC) No 2046/90 of 18 July 1990 determining, for tobacco from the 1989 harvest, the quantity actually produced and the prices and premiums payable under the system of maximum guaranteed quantities (OJ 1990 L 187, p. 23), as well as on the interpretation of the second paragraph of clause 8 of the cultivation contract set out in the annex to Commission Regulation (EEC) No 4263/88 of 21 December 1988 amending Regulation (EEC) No 1726/70 on the procedure for granting the premium for leaf tobacco (OJ 1988 L 376, p. 34),

THE COURT (Fifth Chamber),

composed of: C. Gulmann, President of the Chamber, J.C. Moitinho de Almeida (Rapporteur), D.A.O. Edward, J.-P. Puissochet and P. Jann, Judges,

Advocate General: M.B. Elmer,


Registrar: L. Hewlett, Administrator,

after considering the written observations submitted on behalf of:

- Odette Nikou Petridi Anonymos Kapnemboriki AE, by N. Vassilakakis and E. Vassilakakis, of the Thessaloniki Bar, E. Pallioudi, of the Kavala Bar, and A. Kronshagen, of the Luxembourg Bar,

- the Greek Government, by D. Papageorgopoulos, State Legal Adviser, and P. Mylonopoulos, Legal Adviser, First Class, in the Special Community Legal Service of the Ministry of Foreign Affairs, acting as Agents,

- the Council of the European Union, by J. Carbery, Legal Adviser, and M. Vitsentzatos, of its Legal Service, acting as Agents,

- the Commission of the European Communities, by M. Condou-Durande, of its Legal Service, acting as Agent,

having regard to the Report for the Hearing,

after hearing the oral observations of Odette Nikou Petridi Anonymos Kapnemboriki AE, represented by N. Vassilakakis, E. Vassilakakis and E. Pallioudi; the Greek Government, represented by P. Mylonopoulos and F. Dedousi, Legal Executive within the State Legal Council, acting as Agent; the Council, represented by J. Carbery and M. Vitsentzatos; and the Commission, represented by M. Condou-Durande, at the hearing on 17 July 1997,

after hearing the Opinion of the Advocate General at the sitting on 2 October 1997,

gives the following

Judgment

  1. By judgment of 24 July 1995, received at the Court on 3 October 1996, the Irinodikio (Small Claims Court), Echinos, referred for a preliminary ruling under Article 177 of the EC Treaty five questions concerning the validity of Council Regulation (EEC) No 1114/88 of 25 April 1988 amending Regulation (EEC) No 727/70 on the common organisation of the market in raw tobacco (OJ 1988 L 110, p. 35), Council Regulation (EEC) No 1251/89 of 3 May 1989 amending Regulation (EEC) No 727/70 (OJ 1989 L 129, p. 16), Council Regulation (EEC) No 1252/89 of 3 May 1989 fixing, for the 1989 harvest, the norm and intervention prices and the premiums granted to purchasers of leaf tobacco, the derived intervention prices for baled tobacco, the reference qualities, the production areas and the guaranteed maximum quantities and amending Regulations (EEC) No 1577/86, (EEC) No 1975/87 and (EEC) No 2268/88 (OJ 1989 L 129, p. 17), and of Commission Regulation (EEC) No 2046/90 of 18 July 1990 determining, for tobacco from the 1989 harvest, the quantity actually produced and the prices and premiums payable under the system of maximum guaranteed quantities (OJ 1990 L 187, p. 23), as well as on the interpretation of the second paragraph of clause 8 of the cultivation contract set out in the annex to Commission Regulation (EEC) No 4263/88 of 21 December 1988 amending Regulation (EEC) No 1726/70 on the procedure for granting the premium for leaf tobacco (OJ 1988 L 376, p. 34).

  2. Those questions have arisen in proceedings between Odette Nikou Petridi Anonymos Kapnemboriki AE ('Petridi') and 16 tobacco producers, Athanasia Simou and Others ('Simou and Others'), following the reduction, pursuant to Regulation No 2046/90, in the premium paid for the Tsebelia variety on the basis of the maximum guaranteed quantities ('MGQs') set by Regulations Nos 1114/88, 1251/89 and 1252/89.

    The applicable legislation

  3. Regulation (EEC) No 727/70 of the Council of 21 April 1970 on the common organisation of the market in raw tobacco (OJ, English Special Edition 1970 (I), p. 206) established a system for supporting producers based on norm and intervention prices fixed annually by the Council for Community leaf tobacco.

  4. With a view to encouraging purchases from producers at as close as possible to the norm price, Article 3(1) of Regulation No 727/70 provided that a premium should be granted to persons who purchase leaf tobacco direct from Community producers, on condition, inter alia, that the purchaser has concluded a cultivation contract with the producer. The conditions and requirements relating to the cultivation contract have been defined by Regulation (EEC) No 1726/70 of the Commission of 25 August 1970 on the procedure for granting the premium for leaf tobacco (OJ, English Special Edition 1970 (II), p. 587).

  5. Subsequently, with a view to curbing any increase in tobacco production within the Community and at the same time discouraging the growing of varieties which are difficult to dispose of, Regulation No 1114/88 added the following paragraph (5) to Article 4 of Regulation No 727/70:

    'Each year and in accordance with the procedure provided for in Article 43(2) of the Treaty, the Council shall fix a maximum guaranteed quantity, in particular in the light of market requirements and the socio-economic and agricultural conditions of the regions concerned, for each variety or group of varieties of Community-produced tobacco for which prices and premiums are fixed. The overall maximum quantity for the Community shall be fixed at 385 000 tonnes of leaf tobacco for each of the 1988, 1989 and 1990 harvests.

    Without prejudice to Articles 12a and 13, for each 1% by which the maximum guaranteed quantity is exceeded per variety or group of varieties, the intervention prices and the premiums concerned shall suffer a reduction of 1%. A correction corresponding to the reduction of the premium shall be applied to the norm price of the harvest in question.

    The reductions referred to in the second subparagraph shall not exceed 5% for the 1988 harvest and 15% for the 1989 and 1990 harvests.

    For the purposes of applying this paragraph, the Commission shall establish before 31 July whether production exceeds the maximum guaranteed quantity for a variety or group of varieties.

    ...'

  6. Regulation No 4263/88, which amends Regulation No 1726/70, specifies the minimum requirements regarding the content of the European cultivation contract concluded between a producer and a tobacco processor with effect from the 1989 harvest and sets out, as an annex, a standard European cultivation contract featuring 14 mandatory clauses, clause 8 of which provides as follows:

    'The contract price for the reference quality indicated in the Community rules shall be ... per kilogram. Pursuant to Article 2b(4) of Regulation (EEC) No 1726/70,

    this price may under no circumstances be lower than the intervention price set, for the harvest in question, for tobacco of the variety indicated in paragraph 1 above.

    Notwithstanding the provisions of the preceding subparagraph, if the prices or the premium for the tobacco variety indicated in paragraph 1 are adjusted by a Community Regulation, the purchaser and the vendor shall renegotiate the contract price. Where those prices or premiums are adjusted pursuant to Article 4(5) of Regulation (EEC) No 727/70, the contract price shall be adjusted in line with the change in the price and premiums.'

  7. In order to allow planting to be planned, Regulation No 1251/89 amended the first subparagraph of Article 4(5) of Regulation No 727/70, as amended by Regulation No 1114/88. That provision now reads as follows:

    'The Council, acting as indicated in Article 43(2) of the Treaty, shall lay down every year, for each tobacco variety or group of varieties produced in the Community for which prices and premiums are fixed, a maximum guaranteed quantity for the following year's harvest, taking into account the market situation and the socio-economic and agricultural situation in the areas concerned. The Council shall set the maximum guaranteed quantities for the 1990 harvest at the same time as for the 1989 harvest. The overall maximum quantity for the Community is set for each of the 1988, 1989 and 1990 harvests at 385 000 tonnes of leaf tobacco.'

    9. Article 2 of Regulation No 1251/89 provided that it would enter into force on the third day following that of its publication in the Official Journal of the European Communities. Since it was published on 11 May 1989, Regulation No 1251/89 entered into force on 14 May 1989.

  9. Regulation No 1252/89 allocates, for each variety or group of varieties, the overall MGQ fixed at 385 000 tonnes by Regulation No 1114/88 for the 1989 tobacco harvest throughout the Community.

  10. Annexes IV and V to Regulation No 1252/89 lay down the prices, premiums and MGQs for the different varieties harvested, inter alia, in 1989. The MGQs for the Tsebelia and Mavra varieties were thereby fixed at 30 000 tonnes.

  11. The first paragraph of Article 5 provided that Regulation No 1252/89 'shall enter into force on the day of its publication in the Official Journal of the European Communities'. Having been published on 11 May 1989, Regulation No 1252/89 entered into force on that date.

  12. Pursuant to the fourth subparagraph of Article 4(5) of Regulation No 727/70, as amended, the Commission adopted Regulation No 2046/90 determining, for tobacco from the 1989 harvest, the quantity actually produced and the prices and

    premiums payable under the system of MGQs fixed according to varieties for that harvest by Regulation No 1252/89.

  13. Annex I to Regulation No 2046/90 stated that the MGQ of 30 000 tonnes fixed for the Tsebelia and Mavra varieties had been exceeded by a total of 44.1%, while Annex II reduced the norm and intervention prices and the premium amount by 15%, thereby setting them at ECU 2.806, 2.037 and 2.204 per kilogram for Tsebelia and at ECU 2.802, 1.989 and 1.802 per kilogram for Mavra.

    The dispute in the main proceedings

  14. In July 1989 Petridi concluded with Simou and Others a number of European cultivation contracts for raw tobacco in line with the European cultivation contract set out in the annex to Regulation No 4263/88. In those contracts, Simou and Others undertook to grow, on specified acreages, tobacco of the Tsebelia variety for the 1989 harvest and to sell the quantities produced to Petridi for a price of ECU 2.410 per kilogram, which might be reduced.

  15. Those contracts were based on payment to Petridi of a Community premium, which, when the contracts were concluded, amounted to ECU 2.593 per kilogram of tobacco. Petridi was required to pass on a large portion of that premium to Simou and Others in so far as it had to pay them a price which was at least equal to the intervention price of ECU 2.396 per kilogram of tobacco.

  16. In accordance with the model European cultivation contract set out in the annex to Regulation No 4263/88, a clause relating to renegotiation of the contract price between the purchaser and vendor in the event of a reduction in the prices or premium was included in those contracts.

  17. In May 1990 Petridi paid to Simou and Others the full price agreed for tobacco of the Tsebelia variety from the 1989 harvest specified in the above contracts and received the corresponding premium.

  18. As is already clear from paragraph 13 of the present judgment, the Commission, in Regulation No 2046/90, found subsequent to the harvest that the MGQ of 30 000 tonnes fixed for the Tsebelia and Mavra varieties had been exceeded by a total of 44.1% and accordingly reduced the premium initially granted by 15%. Petridi was thereupon requested by the National Tobacco Agency to repay 15% of the premium which it had received.

  19. On 26 November 1993 Petridi instituted proceedings against Simou and Others seeking an order requiring them to pay to it various amounts set out in its application by reason of the 15% reduction in the premium paid for the Tsebelia variety pursuant to the MGQs set by Regulations Nos 1114/88, 1251/89, 1252/89 and 2046/90.

  20. Simou and Others deny that they owe those amounts.

  21. The national court has doubts concerning the validity of Regulations Nos 1114/88, 1251/89, 1252/89 and 2046/90, which Petridi challenges, and in regard to the proper application of the clause contained in the cultivation contracts providing for an adjustment of the contract prices in the event of the prices or premium being changed.

  22. With particular regard to the validity of Regulations Nos 1251/89 and 1252/89, the national court refers to the judgment in Case C-368/89 Crispoltoni v Fattoria Autonoma Tabacchi di Cittą di Castello [1991] ECR I-3695 ('Crispoltoni I'), in which the Court declared invalid Regulation No 1114/88 and Council Regulation (EEC) No 2268/88 of 19 July 1988 fixing, for the 1988 harvest, the norm and intervention prices and the premiums granted to purchasers of leaf tobacco, the derived intervention prices for baled tobacco, the reference qualities, the production areas and the guaranteed maximum quantities and amending Regulation (EEC) No 1975/87 (OJ 1988 L 199, p. 20) in so far as they laid down a maximum guaranteed quantity for tobacco of the Bright variety harvested in 1988. The Court took the view that those regulations, which had been published on 29 April 1988 and 26 July 1988 respectively, that is to say, on dates by which the production choices had already been decided or made, had a retroactive effect which was not necessary for achieving their objective and which adversely affected the legitimate expectations of the traders concerned.

  23. In the present case, the national court notes that Regulation No 1251/89 is designed to ensure that the Council fixes MGQs one year prior to the harvest in question in order to allow planting to be planned. This was not the case with regard to the 1989 harvest since Regulation No 1252/89, fixing the MGQs according to variety or group of varieties for that harvest, was adopted on the same day as Regulation No 1251/89, namely 3 May 1989, and published on 11 May 1989.

  24. Since Simou and Others had, not only on 11 May 1989 but even on 3 May 1989, already planted tobacco of the Tsebelia variety for the 1989 harvest, the national court is unable to see how the objective of Regulation No 1251/89, namely the planning of planting, could have been achieved. The national court also points out that, in Greece, the European cultivation contracts, applied for the first time for the 1989 harvest, were signed late, in July 1989, after the tobacco producers had already planted the tobacco in question.

  25. Since its decision is not open to appeal under national law, the Irinodikio, Echinos, considers that it is obliged to refer the matter to the Court for a preliminary ruling. From the judgment making the reference it can be ascertained that the national court raises five questions, which may be framed as follows:

    1. Is Council Regulation No 1114/88 amending Regulation No 727/70 valid, inasmuch as it provides that, in the event of the maximum guaranteed quantity for the production of leaf tobacco in the whole of the Community being exceeded, the intervention prices and premiums are to be reduced, generally and without distinction, and irrespective of whether the producer did or did not exceed the quantity provided for?

    2. Are Regulations Nos 1251/89 and 1252/89 valid as regards the laying down of maximum guaranteed quantities for the Tsebelia tobacco variety of the 1989 harvest and does the application thereof infringe the general principles of the prohibition concerning retroactive application of Community legislation, the protection of the legitimate expectations of producers and purchasers and processors of tobacco, and the principle of legal certainty?

    3. If the reply to the preceding question is affirmative, then in view of the finding by the Commission of actual overproduction and an exceeding by 44.1% of the maximum guaranteed quantities of the Tsebelia and Mavra varieties in the 1989 harvest, and the imposition for that reason of a reduction in the premium and intervention price in the maximum amount of 15%, is Commission Regulation No 2046/90 valid and may we seek to apply clause 8, in particular the second paragraph, of the cultivation contracts entered into on the basis of Commission Regulation No 4263/88? If the prices or the premiums are adjusted pursuant to Article 4(5) of Regulation (EEC) No 727/70, is the contract price to be adjusted in line with the change in the price and premiums?

    4. Are the factors which in 1991 led the Court of Justice in Case C-368/89 to annul the regulation laying down maximum guaranteed quantities for the 1988 harvest of tobacco of the Bright variety likewise present in this case in view of the fact that the Commission made the same mistake in delaying the determination of maximum guaranteed quantities for the 1989 harvest?

    5. Finally, in the event that the Court of Justice should rule that the regulations in question are valid, who is ultimately liable to repay the amount by which the premium has been reduced?

  26. By those five questions, the national court is asking the Court to rule on the validity of Regulations Nos 1114/88, 1251/89, 1252/89 and 2046/90 and on the interpretation of the second paragraph of clause 8 of the cultivation contract set out in the annex to Regulation No 4263/88. In particular, the national court is seeking to ascertain, by its third and fifth questions, on the assumption that the regulations in issue are valid, who is required to repay the amounts corresponding to the reduction in the prices and premium decided on pursuant to Article 4(5) of Regulation No 727/70, as amended, and whether the second paragraph of clause 8 of the cultivation contract set out in the annex to Regulation No 4263/88 allows, in such a case, the

    contract price to be renegotiated in line with the reduction in the prices and premium.

    The validity of Regulation No 1114/88

  27. The national court first asks whether Regulation No 1114/88 is valid in so far as it fixes overall MGQs and provides for a general reduction in prices and premium if those MGQs are exceeded, irrespective of the production volume of each producer and without distinguishing between the different tobacco varieties.

  28. Petridi takes the view that the regulation thus leads to a disproportionate reduction in producers' income as a whole and has consequently a detrimental effect on the objectives of the common agricultural policy.

  29. As the Council and Commission point out, the Court, in paragraph 30 of its judgment in Joined Cases C-133/93, C-300/93 and C-362/93 Crispoltoni and Others v Fattoria Autonoma Tabacchi and Donatab [1994] ECR I-4863 ('Crispoltoni II'), ruled that such arguments were not capable of affecting the validity of Regulation No 1114/88.

  30. First, the Court referred, in paragraph 31 of that judgment, to the broad discretion which the Community institutions have in regard to the common agricultural policy, which reflects the responsibilities imposed on them. The Court also confirmed, in paragraph 32, that those institutions must secure the permanent harmonisation between the various objectives of the common agricultural policy set out in Article 39 of the Treaty, which may prove to be contradictory, and, where necessary, allow any one of them temporary priority in order to satisfy the demands of the economic factors or conditions in view of which their decisions are made, on condition, however, that such harmonisation does not have the effect of rendering impossible the realisation of the other objectives.

  31. As the Court pointed out in paragraph 34 of Crispoltoni II, pursuing the sole objective of ensuring a fair standard of living for producers and processors of raw tobacco, in particular by increasing their individual earnings, would involve a serious risk of rendering impossible, in a market characterised by excess production, the realisation of the objective of stabilising the market in raw tobacco pursued through the introduction of the MGQ system by Regulation No 1114/88, in accordance with one of the objectives of the common agricultural policy set out in Article 39 of the Treaty.

  32. The Court accordingly concluded, in paragraph 30 of the judgment in Crispoltoni II, that Regulation No 1114/88 was not incompatible with the objectives of the common agricultural policy set out in Article 39 of the Treaty.

  33. Second, the Court took the view, in paragraph 47 of Crispoltoni II, that, in adopting Regulation No 1114/88, the Council had acted not only in compliance with the principle of proportionality, in that it did not choose a measure which was manifestly inappropriate having regard to the objective pursued, but also in accordance with the need to effect the appropriate adjustments by degrees prescribed by Article 39(2)(b) of the Treaty.

  34. When the Council adopted Regulation No 1114/88 it was, as the Court pointed out in paragraph 46, entitled to consider, without making any manifest error of assessment, that the MGQ system was less onerous for tobacco growers than an individual quota system, since under the former the production of those concerned was not limited, in that they could always sell their products to the intervention agencies, although at a price or premium reduced by a maximum of 15%, while under the latter the growers receive no support for that part of their production which exceeded their individual quota. Moreover, the mere fact that the system had proved insufficiently effective was not enough to justify the conclusion that Regulation No 1114/88 was invalid.

  35. In the third place, the Court pointed out, in paragraph 52 of the judgment in Crispoltoni II, that the principle of non-discrimination does not preclude a Community regulation which introduced a system of guarantee thresholds for the entire Community market involving a reduction in the production aid of all the producers concerned, even if the exceeding of those thresholds was not due to an increase in their production. It held that, in such a system, all Community producers must together bear equally the consequences of the decisions which the Community institutions are led to adopt in order to respond to the risk of an imbalance which may arise on the market between production and outlets.

  36. Having regard to those same considerations, the reply to the national court must be that consideration of the question raised has disclosed no factor of such a kind as to affect the validity of Regulation No 1114/88.

    The validity of Regulations Nos 1251/89 and 1252/89

  37. By a second question, the national court asks whether Regulations Nos 1251/89 and 1252/89 are invalid inasmuch as they fix the MGQs for the 1989 harvest of Tsebelia tobacco, on the ground that they infringe the principles of non-retroactivity, protection of legitimate expectations and legal certainty.

  38. In this regard, Petridi and the Greek Government, referring to the judgment in Crispoltoni I, point out that Regulation No 1252/89 fixing the prices, premiums and MGQs according to varieties for the 1989 harvest was adopted on 3 May 1989 and published on 11 May 1989, whereas the selection of tobacco plants takes place in October of the preceding year and the transplanting of those tobacco varieties in the fields is carried out no later than the beginning of April in view of the

    favourable climatic conditions obtaining in Southern Greece where these varieties are grown. Consequently, when Regulation No 1252/89 was published, it was no longer possible to programme investments and overproduction of tobacco was inevitable.

  39. Petridi and the Greek Government also criticise the fixing of the entry into force of Regulation No 1251/89, establishing the principle that MGQs for each variety should be fixed one year in advance, on 14 May 1989, that is to say, three days after Regulation No 1252/89 allocating the MGQs for the 1989 harvest had come into force on 11 May 1989. In thus fixing the dates on which those two regulations entered into force, the Council, they claim, exceeded the limits of its discretion. In any event, the Council failed to give proper reasons for the choice of those dates by relying, in Regulation No 1251/89, on the need to allow for planting to be planned.

    Regulation No 1252/89

  40. It must first be borne in mind that, in Crispoltoni I, the Court held that Regulations Nos 1114/88 and 2268/88 were invalid in so far as they provided for a MGQ for Bright variety tobacco harvested in 1988.

  41. In paragraphs 14 to 16 of that judgment, the Court found that Regulations Nos 1114/88 and 2268/88 had a retroactive effect in so far as they provided for reductions in the intervention prices and premiums if the MGQ for Bright variety tobacco harvested in 1988 was exceeded, and in so far as they had been published at the end of April 1988 and the end of July 1988 respectively, that is to say, at a date when the seed beds for the current year had already been sown, in the first case, and transplantation of the young plants into the fields had already been completed, in the second case.

  42. In paragraph 17 of that judgment, the Court first pointed out that, although in general the principle of legal certainty precludes a Community measure from taking effect from a point in time before its publication, it may exceptionally be otherwise where the purpose to be achieved so demands and where the legitimate expectations of those concerned are duly respected.

  43. The Court went on to point out, in paragraph 18 of that judgment, that, by establishing a system of MGQs, Regulation No 1114/88 sought to curb any increase in the Community's tobacco production and at the same time to discourage the growing of varieties that are difficult to dispose of. Such a purpose, the Court stated, could not be achieved, with respect to the 1988 harvest of Bright variety tobacco, by the regulations published at the end of April and July of that year.

  44. The Court accordingly concluded, in paragraphs 20 and 21 of the judgment in Crispoltoni I, that Regulations Nos 1114/88 and 2268/88 could not be regarded as having retroactive effect in so far as the purpose to be achieved by those regulations did not so demand. The Court also held that those regulations had infringed the legitimate expectations of the traders concerned. Although those traders must have seen as foreseeable measures to limit any increase in production of varieties which were difficult to dispose of, they were entitled to expect that they would be notified in good time of any measures having effects on their investments. That, however, had not been the case.

  45. So, in its judgment in Crispoltoni I, the Court ruled on the retroactive application to the 1988 tobacco harvest of the MGQ system with which the traders concerned were unfamiliar, both in regard to the nature of the new measures for the organisation of the tobacco market in the Community and in respect of the date on which those measures were to come into effect.

  46. However, the adoption of Regulation No 1252/89, concerning the 1989 harvest, which is at the root of the present proceedings, occurred in a different context, in so far as that regulation forms part of a corpus of measures, in force since 1988, designed to limit tobacco production in the Community.

  47. Since the publication of Regulation No 1114/88 on 29 April 1988, the traders concerned were aware that an overall MGQ of 385 000 tonnes of tobacco for the Community had been fixed for each of the 1988, 1989 and 1990 harvests and that the MGQs according to varieties would be fixed by the Council each year within this unchanged overall MGQ.

  48. Likewise, those traders were aware, when they planned the 1989 harvest, that a MGQ of 33 000 tonnes of tobacco had been fixed by Regulation No 2268/88 for the 1988 harvest of the Mavra and Tsebelia varieties and that those varieties were proving difficult to dispose of, given that appreciable stocks had existed since 1987.

  49. From the time of publication of Regulations Nos 1114/88 and 2268/88 at the end of April and July 1988, the traders concerned were therefore aware of the policy of progressively reducing tobacco production within the Community in general and of reducing production of the Mavra and Tsebelia varieties in particular.

  50. It follows that the fixing, by Regulation No 1252/89, of the MGQ for the 1989 harvest of the Mavra and Tsebelia varieties was not unforeseeable for the traders concerned, who must have anticipated that the MGQ for the Mavra and Tsebelia varieties would be further reduced for the 1989 harvest. Their legitimate expectations were therefore respected.

  51. Furthermore, as prudent and well-informed traders, the producers in question could not, under any circumstances, plan a 1989 production exceeding the 1988 MGQ. As is clear from Regulation No 2046/90, actual production of tobacco of the Mavra

    and Tsebelia varieties increased to 43 236 tonnes. In thus exceeding by 40.1% in the 1989 harvest the MGQ fixed for the 1988 harvest, producers of tobacco of the Mavra and Tsebelia varieties therefore clearly did not behave as prudent and well-informed traders.

  52. As the Council and Commission point out, overproduction of the Mavra and Tsebelia varieties during the 1989 harvest was such that, even though the MGQ for those varieties had remained unchanged, the decision imposing the maximum 15% reduction in the prices and premium was inevitable.

  53. Moreover, it should be remembered that, by introducing the MGQ system, Regulation No 1114/88 sought to limit Community tobacco production to a quantity corresponding to an overall MGQ of 385 000 tonnes envisaged for each of the 1989, 1990 and 1991 harvests and to discourage production of varieties, such as Mavra and Tsebelia, which were difficult to dispose of. Such objectives, in particular the compliance with the overall MGQ of 385 000 tonnes fixed for the 1989 harvest, made it necessary for Regulation No 1252/89 to fix, even retroactively, a MGQ for the 1989 harvest of the Mavra and Tsebelia varieties.

  54. It was therefore necessary for Regulation No 1252/89 to have retroactive effect in order for it to achieve its objective, and the legitimate expectations of those concerned were duly respected.

    Regulation No 1251/89

  55. By Regulation No 1251/89, the Council amended Regulation No 727/70 and provided that MGQs would be fixed each year for the harvest in the following year.

  56. According to the first recital in the preamble to that regulation, this amendment seeks to 'allow planting to be planned'. That recital also states: 'the quantities for both the 1989 and 1990 harvests should therefore be fixed'.

  57. Furthermore, according to Article 2, Regulation No 1251/89 entered into force on 14 May 1989, that is to say, three days after Regulation No 1252/89 fixing the MGQs for the 1989 and 1990 harvests.

  58. It thus follows from the first recital in the preamble and from Article 2 of Regulation No 1251/89 that, according to the Council, the principle of fixing the MGQs according to varieties one year before the harvest, introduced by Regulation No 1252/89, was to be applied only prospectively, and for the first time in the 1990 harvest.

  59. The argument put forward by the Greek Government, to the effect that the Council applied Regulation No 1251/89 retroactively, cannot therefore be accepted.

  60. In those circumstances, it does not appear that, by fixing the entry into force of Regulation No 1251/89 at a date later than that of the entry into force of Regulation No 1252/89, in such a way that the principle of fixing MGQs according to varieties one year prior to the harvest applied for the first time only to the 1990 harvest, the Council exceeded the broad discretion which it enjoys in matters relating to the common agricultural policy or that it gave improper reasons for its choice.

  61. In light of the foregoing, the answer to the national court must be that consideration of the question raised has disclosed no factor of such a kind as to affect the validity of Regulations Nos 1251/89 and 1252/89.

    The validity of Regulation No 2046/90

  62. By a third question, the national court asks whether Regulation No 2046/90 is valid in so far as it states that the MGQ fixed at 30 000 tonnes for the 1989 harvest of the Tsebelia and Mavra varieties was exceeded by an overall figure of 44.1% and for that reason applies to the norm and intervention prices and to the amount of the premium the maximum reduction of 15% authorised for 1989 by Article 4(5) of Regulation No 727/70, as amended.

  63. In so far as consideration of Regulation No 1252/89 has disclosed no factor of such a kind as to affect its validity, the Commission could reasonably determine, in Regulation No 2046/90, the exact amount of the prices and premiums received by the producers on the basis of whether the MGQs by varieties fixed by Regulation No 1252/89 had or had not been exceeded and consequently to reduce by 15% the prices and premium after having ascertained that the MGQ fixed for the 1989 harvest of the Tsebelia and Mavra varieties had been exceeded by an overall amount of 44.1%.

  64. In those circumstances, the answer to be given to the national court must be that consideration of the question raised has disclosed no factor of such a kind as to affect the validity of Regulation No 2046/90.

    The interpretation of Regulation No 4263/88

  65. By a fourth question, the national court seeks to ascertain, in the event that the regulations in question are valid, who is required to repay the amounts corresponding to the reduction in the prices and premium decided on pursuant to Article 4(5) of Regulation No 727/70, as amended, and whether the second paragraph of clause 8 of the cultivation contract set out in the annex to Regulation No 4263/88 allows the contract price, in such a case, to be renegotiated in line with the reduction in the prices and premium.

  66. It should first be borne in mind that Regulation No 4263/88 specifies the mandatory minimum terms of the European cultivation contract concluded between a tobacco producer and a tobacco processor with effect from the 1989 harvest and sets out, in annex form, a standard European cultivation contract consisting of 14 mandatory clauses. These include clause 8, which provides inter alia that 'if the prices or the premium for the tobacco variety indicated in paragraph 1 are adjusted by a Community Regulation, the purchaser and the vendor shall renegotiate the contract price. Where those prices or premiums are adjusted pursuant to Article 4(5) of Regulation (EEC) No 727/70, the contract price shall be adjusted in line with the change in the price and premiums'.

  67. In so far as consideration of Regulations Nos 1114/88, 1251/89, 1252/89 and 2046/90 has failed to disclose any factor capable of affecting their validity, application of the second paragraph of clause 8 of the standard contract annexed to Regulation No 4263/88 may be called for so as to adjust the contract price in line with the change in the prices and premium. Such an adjustment follows logically from the determination, in line with the possible exceeding of the MGQ under the system established by Regulation No 1114/88, of the exact amount of the premium received by the processing undertaking and repaid in part to the producers of a tobacco variety.

  68. The Greek Government, however, argues that to allow the price paid to producers to be renegotiated would mean making it possible for processing undertakings to pass on to producers the obligation to repay any amount corresponding to a reduction in the premium which they have entered in their accounts and received in advance, contrary to the purpose of the premium, which is to increase tobacco producers' income.

  69. It should be pointed out in this regard that, as the Commission has correctly observed, the processing undertaking is required to repay the amounts corresponding to the reduction in the premium, in so far as it receives the premium, but may, in its turn, renegotiate the contract price with the tobacco producers in accordance with the second paragraph of clause 8 of the cultivation contract set out in the annex to Regulation No 4263/88.

  70. Such a renegotiation of the contract price following a reduction in the premium is consistent with the fact that, as pointed out in paragraph 35 of the present judgment, in a system of MGQs, all Community producers must together bear equally the consequences of the decisions which the Community institutions are led to adopt in order to respond to the risk of an imbalance which may arise on the market between production and outlets.

  71. The reply to the national court must therefore be that, although a processing undertaking is required to repay the amounts corresponding to the reduction in prices and the premium decided on pursuant to Article 4(5) of Regulation

    No 727/70, as amended, the second paragraph of clause 8 of the cultivation contract set out in the annex to Regulation No 4263/88 allows, in such a case, the contract price to be renegotiated between the processing undertaking and the tobacco producers in line with the reduction in the prices and premium.

    Costs

    72. 72. The costs incurred by the Greek Government, the Council of the European Union and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, 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 (Fifth Chamber),

    in answer to the questions referred to it by the Irinodikio, Echinos, by judgment of 24 July 1995, hereby rules:

    1. Consideration of the question raised has disclosed no factor of such a kind as to affect the validity of Council Regulation (EEC) No 1114/88 of 25 April 1988 amending Regulation (EEC) No 727/70 on the common organisation of the market in raw tobacco.

    2. Consideration of the question raised has disclosed no factor of such a kind as to affect the validity of Council Regulation (EEC) No 1251/89 of 3 May 1989 amending Regulation No 727/70 and of Council Regulation (EEC) No 1252/89 of 3 May 1989 fixing, for the 1989 harvest, the norm and intervention prices and the premiums granted to purchasers of leaf tobacco, the derived intervention prices for baled tobacco, the reference qualities, the production areas and the guaranteed maximum quantities and amending Regulations (EEC) No 1577/86, (EEC) No 1975/87 and (EEC) No 2268/88.

    3. Consideration of the question raised has disclosed no factor of such a kind as to affect the validity of Commission Regulation (EEC) No 2046/90 of 18 July 1990 determining, for tobacco from the 1989 harvest, the quantity actually produced and the prices and premiums payable under the system of maximum guaranteed quantities.

    4. Although a processing undertaking is required to repay the amounts corresponding to the reduction in prices and the premium decided on pursuant to Article 4(5) of Regulation No 727/70, as amended, the second

    paragraph of clause 8 of the cultivation contract set out in the annex to Regulation No 4263/88 allows, in such a case, the contract price to be renegotiated between the processing undertaking and the tobacco producers in line with the reduction in the prices and premium.

    Gulmann
    Moitinho de Almeida
    Edward

    Puissochet Jann

    Delivered in open court in Luxembourg on 26 March 1998.

    R. Grass C. Gulmann

    Registrar President of the Fifth Chamber

    1: Language of the case: Greek.

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