Court of Justice of the European Communities (including Court of First Instance Decisions)

(Common agricultural policy Beef and veal Regulation (EC) No 795/2004 Article 3a Integrated administration and control system for certain Community aid schemes Single payment Determination of reference amount Reductions and exclusions)

In Case C-70/08,

REFERENCE for a preliminary ruling under Article 234 EC from the College van Beroep voor het bedrijfsleven (Netherlands), made by decision of 16 April 2008, received at the Court on 23 April 2008, in the proceedings

H.J. Nijemeisland

Minister van Landbouw, Natuur en Voedselkwaliteit,

composed of M. Ilešič, President of the Chamber, A. Tizzano and A. Borg Barthet (Rapporteur), Judges,

Advocate General: J. Kokott,

Registrar: R. Grass,

having regard to the written procedure,

after considering the observations submitted on behalf of:

the Netherlands Government, by C.M. Wissels and Y. de Vries, acting as Agents,

the Commission of the European Communities, by F. Clotuche'Duvieusart and S. Noe, acting as Agents,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

1. This reference for a preliminary ruling relates to the interpretation of Article 3a of Commission Regulation (EC) No 795/2004 of 21 April 2004 laying down detailed rules for the implementation of the single payment scheme provided for in Council Regulation (EC) No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers (OJ 2004 L 141, p. 1), as amended by Commission Regulation (EC) No 1974/2004 of 29 October 2004 (OJ 2004 L 345, p. 85; 'Regulation No 795/2004').
2. The reference has been made in the course of proceedings between Mr Nijemeisland and the Minister van Landbouw, Natuur en Voedselkwaliteit (Minister for Agriculture, Nature and Food Quality, 'the Minister') relating to the determination of a single payment on the basis of Council Regulation (EC) No 1782/2003 of 29 September 2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers and amending Regulations (EEC) No 2019/93, (EC) No 1452/2001, (EC) No 1453/2001, (EC) No 1454/2001, (EC-1868/94, (EC) No 1251/1999, (EC) No 1254/1999, (EC) No 1673/2000, (EEC) No 2358/71 and (EC) No 2529/2001 (OJ 2003 L 270, p. 1).

Legal context

Community rules

Regulation No 1782/2003

3. Regulation No 1782/2003 established, inter alia, an income support scheme for farmers. The second indent of Article 1 of that regulation designates the scheme as the 'single payment scheme'. Title III of the regulation deals with the scheme in question.
4. Article 33(1) of Regulation No 1782/2003 sets out the situations in which farmers can have access to the single payment scheme.
5. Article 33(1)(a) is worded as follows:

'Eligibility

1. Farmers shall have access to the single payment scheme if:

(a) they have been granted a payment in the reference period referred to in Article 38 under at least one of the support schemes referred to in Annex VI, ...'

6. The amount of the single payment, called 'the reference amount', is calculated in accordance with the method laid down in Article 37 of the regulation.
7. Article 37(1) of Regulation No 1782/2003 provides as follows:

'The reference amount shall be the three-year average of the total amounts of payments, which a farmer was granted under the support schemes referred to in Annex VI, calculated and adjusted according to Annex VII, in each calendar year of the reference period referred to in Article 38.'

8. The reference period referred to in Articles 33(1) and 37(1) of Regulation No 1782/2003 is defined in Article 38 of that regulation. That article states:

'Reference period

The reference period shall comprise the calendar years 2000, 2001 and 2002.'

9. Article 39 of the abovementioned regulation states that:

'In case of application of Articles 3 and 4 of Regulation (EC) No 1259/1999 during the reference period, the amounts referred to in Annex VII shall be those that would have been granted before application of the said Articles.'

Regulation No 795/2004

10. Regulation No 795/2004 contains implementing provisions relating to the single payment scheme provided for in Regulation No 1782/2003. Article 3a of Regulation No 795/2004 provides detailed rules for the method of calculation laid down in Article 37 of Regulation No 1782/2003 in the following terms:

'Determined hectares and animals

Without prejudice to the application of Annex VII of Regulation (EC) No 1782/2003, the number of hectares or animals for which a direct payment has been or should have been granted in the reference period to be taken into consideration for the purpose of establishing the reference amount referred to in Article 37(1) of that Regulation shall be the number of hectares or animals determined within the meaning of Article 2 points (r) and (s) of Regulation (EC) No 2419/2001 for each of the direct payments referred to in Annex VI of Regulation (EC) No 1782/2003.'

11. The fifth recital in the preamble to Regulation No 1974/2004 is worded as follows:

'Article 2(e) of Regulation (EC) No 1782/2003 provides that the payments in the reference period are those granted or to be granted in that period. Annex VII adds that reductions resulting from the application of base areas, ceilings or other quantitative limitations should be taken into account. It is therefore appropriate, for the sake of clarification, to specify that the reductions and exclusions applied under Commission Regulation (EC) No 2419/2001 should not be taken into consideration for all the direct payments referred to in Annex VI of Regulation (EC) No 1782/2003 in order not to perpetuate the reductions and exclusions applied in that period. Therefore the number of animals and hectares determined at the time of the establishment of the payment entitlements should be taken into consideration without prejudice to further controls and the application of Article 3(1) of Council Regulation (EC, Euratom) No 2988/95.'

Regulation (EC) No 2419/2001

12. The concepts of 'hectares determined' and 'animals determined', laid down in Regulation No 795/2004, are defined in Article 2(r) and (s) of Commission Regulation (EC) No 2419/2001 of 11 December 2001 laying down detailed rules for applying the integrated administration and control system for certain Community aid schemes established by Council Regulation (EEC) No 3508/92 (OJ 2001 L 327, p. 11). The definitions in question are worded as follows:

'(r) 'Area determined': the area for which all conditions laid down in the rules for the granting of the aid have been met;

(s) 'Animal determined': an animal for which all conditions laid down in the rules for the granting of the aid have been met'.

Regulation (EC) No 1254/1999

13. Article 23(1) of Council Regulation (EC) No 1254/1999 of 17 May 1999 on the common organisation of the market in beef and veal (OJ 1999 L 160, p. 21) provides:

'Where residues of substances prohibited under Council Directive 96/22/EC [OJ 1996 L 125, p. 3], or residues of substances authorised under the aforementioned act but used illegally, are detected pursuant to the relevant provisions of Directive 96/23/EC [OJ 1996 L 125, p. 10], in an animal belonging to the bovine herd of a producer, or where a non-authorised substance or product, or a substance or product authorised under Council Directive 96/22/EC but held illegally is found on the producer's holding in any form, the producer shall be excluded, for the calendar year of that discovery, from receiving the amounts provided for under this section.

In the event of a repeated infringement, the length of the exclusion period may, according to the seriousness of the offence, be extended to five years as from the year in which the repeated infringement was discovered.'

National legislation

14. The Regulation on CAP Income Support 2006 (Regeling GLB'inkomenssteun 2006) contains the rules for the implementation, inter alia, of Regulation No 1782/2003.

The main proceedings and the question referred to the Court

15. In the course of 2000, the Algemene Inspectiedienst (General Inspection Service of the Ministry of Agriculture) carried out an inspection at Mr Nijemeisland's holding. That inspection revealed the existence, on the applicant's holding, of clenbuterol in the urine of three bovine animals.
16. Clenbuterol is a substance prohibited by Council Directive 96/23/EC of 29 April 1996 on measures to monitor certain substances and residues thereof in live animals and animal products and repealing Directives 85/358/EEC and 86/469/EEC and Decisions 89/187/EEC and 91/664/EEC (OJ 1996 L 125, p. 10).
17. By decision of 6 July 2001, the Minister, pursuant to the Rules on EC animal premiums (Regeling dierlijke EG-premies), excluded Mr Nijemeisland from receiving aid for 2000 on the ground that he did not have any 'animals determined' for the year in question. The reason for the lack of animals determined is that Mr Nijemeisland had been excluded from receiving premiums for bovine animals pursuant to Article 23(1) of Regulation No 1254/1999. The number of bovine animals determined for 2000 was therefore fixed at zero.
18. Mr Nijemeisland brought a complaint against the decision of 6 July 2001. That complaint was declared unfounded by decision of 27 March 2002 and Mr Nijemeisland did not appeal against that decision.
19. By decision of 29 August 2006, the Minister, pursuant to Regulation No 1782/2003, determined the amount of the single payment due to Mr Nijemeisland. The Minister based the calculation provided for in Article 37(1) of the abovementioned regulation on zero bovine animals determined for the reference year 2000.
20. On 26 September 2006, Mr Nijemeisland brought a complaint against the decision of 29 August 2006. One of the grounds relied on in support of that complaint was that the Minister was wrong to consider that Mr Nijemeisland had no bovine animals determined in 2000. Mr Nijemeisland also relied on 'force majeure' within the meaning of Article 40 of Regulation No 1782/2003.
21. By decision of 21 November 2006, the Minister declared Mr Nijemeisland's complaint to be unfounded. Mr Nijemeisland then brought an action against that decision before the court making the reference. That court held that the decision of 27 May 2002 had become definitive. It also held that the plea based on force majeure could not be accepted, since it was raised out of time.
22. In those circumstances, the College van Beroep voor het bedrijfsleven decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:

'Must Article 3a of Regulation (EC) No 795/2004, read in conjunction with Article 2(r) and (s) of Regulation (EC) No 2419/2001, be interpreted as preventing only the perpetuation of a reduction or exclusion applied under Regulation (EC) No 2419/2001, or is that provision also applicable to reductions or exclusions applied on the basis of other regulations?'

The question referred for a preliminary ruling

23. By its question, the national court asks the Court essentially whether Article 3a of Regulation No 795/2004 is to be interpreted as meaning that reductions and exclusions based on Regulation No 1254/1999 are not to be taken into account in the calculation provided for in Article 37(1) of Regulation No 1782/2003.

Observations submitted to the Court

24. The Netherlands Government points to the absence of sufficient evidence in support of a broader interpretation of Article 3a of Regulation No 795/2004. The answer to the question referred should therefore be that the abovementioned article should be interpreted as meaning that a reduction or an exclusion applied on the basis of the provisions of Regulation No 2419/2001 must not be taken into account in the calculation provided for in Article 37(1) of Regulation No 1782/2003.
25. The Netherlands Government bases itself for that purpose on a strict interpretation of Article 3a of Regulation No 795/2004 and on the fifth recital in the preamble to Regulation No 1974/2004, which refers expressly to Regulation No 2419/2001.
26. The Commission of the European Communities considers that Article 3a of Regulation No 795/2004 must be interpreted as meaning that the exclusion of a producer, imposed pursuant to Article 23(1) of Regulation No 1254/1999, must not be taken into account in calculating the reference amount.
27. For that purpose, the Commission considers that Article 3a of Regulation No 795/2004 does not require that a payment should actually have been made in order to fix the number of animals determined and that the fifth recital in the preamble to Regulation No 1974/2004 must be read as seeking not to perpetuate all the reductions and exclusions applied in the reference period.
28. The Commission also invokes the principles of proportionality and legal certainty.

The Court's answer

29. Admittedly, the wording of Article 37(1) of Regulation No 1782/2003, which refers to 'the three-year average of the total amounts of payments', could suggest that only animals for which payments have actually been made can be taken into consideration in calculating a farmer's reference amount for the purposes of the single payment.
30. The same is true in regard to the provisions in the first paragraph of point C of Annex VII to Regulation No 1782/2003, to which Article 37(1) refers; those provisions state that the amount is to be calculated 'by multiplying the number of determined animals for which such a payment has been granted, respectively, in each year of the reference period, by the amounts per head established for the calendar year 2002'.
31. In the main proceedings, since the applicant was excluded from receiving aid for 2000, the national authorities interpreted the rules at issue in such a way as to reduce the applicant's reference amount and, consequently, make a permanent reduction in the income support he was entitled to claim.
32. However, that interpretation runs counter to the very wording of Article 3a of Regulation No 795/2004, which specifically defines the detailed rules for the implementation of the single payment scheme.
33. That article expressly provides, in regard to the calculation of the reference amount, that the number of animals for which a direct payment 'has been or should have been granted' is to be taken into consideration.
34. It follows that, for the purposes of calculating the reference amount referred to in Article 37(1) of Regulation No 1782/2003, it is not necessary that the direct payment in question should actually have been made to the farmer.
35. It is apparent, secondly, from the wording of Article 23(1) of Regulation No 1254/1999 that the consequence of the application of a penalty such as the one at issue in the main proceedings is to exclude the producer, irrespective of the number of animals concerned, from receiving the payments granted on the basis of that regulation. Such a penalty cannot therefore affect the determination of the number of animals to be taken into account for the purpose of fixing the abovementioned reference amount.
36. That interpretation is, in addition, in accordance with the wish of the Community legislature not to perpetuate penalties to the detriment of farmers beyond the initial penalty.
37. In particular, that intention is clear from the fifth recital in the preamble to Regulation No 1974/2004, which specifies that 'the reductions and exclusions applied under Commission Regulation (EC) No 2419/2001 should not be taken into consideration for all the direct payments referred to in Annex VI of Regulation (EC) No 1782/2003 in order not to perpetuate the reductions and exclusions applied in that period'.
38. It should also be noted that Article 39 of Regulation No 1782/2003 states that the amounts to be taken into consideration under Annex VII to the regulation are those that would have been granted before application of Articles 3 and 4 of Regulation No 1259/1999, which concern penalties and reductions for failure to comply with environmental measures or so-called 'modulation' measures, according to the specific characteristics of the holding. In that case, the legislature also rejected the idea, therefore, that such penalties and reductions should have an effect on the reference amount for the calculation of the single payment.
39. However, the objective of not making permanent the penalties imposed on farmers during the reference period can be attained only if it is applied to all reductions and exclusions whose effects are generally specific and limited in time, and not merely to those expressly mentioned in the abovementioned regulations.
40. Finally, such an interpretation is consistent with the principles of proportionality and legal certainty.
41. First, the principle of proportionality is a general principle of Community law that must be observed by the Community legislature and by the national legislatures and courts, in particular with regard to the common agricultural policy. That principle requires that measures adopted by Community institutions should not exceed the limits of what is appropriate and necessary in order to attain the objectives legitimately pursued by the legislation in question; when there is a choice between several appropriate measures, recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued (see Case C-34/06 Industria Lavorazione Carni Ovine [2008] ECR I-4129, paragraph 25).
42. Thus, Article 23(1) of Regulation No 1254/1999 provides, inter alia, that in the event of a repeated infringement, the length of the exclusion from receiving the direct payments at issue may be extended to five years. Consequently, after a first offence, that exclusion must have limited temporal effect.
43. Such considerations would carry all the more weight if the original exclusion during a calendar year pursuant to a penalty imposed under Article 23(1) of Regulation No 1254/1999 could cause a permanent reduction in the reference amount and therefore in the single payment, which could cause the farmer to be punished more than once for the same infringement and, consequently, to suffer financial consequences disproportionate to the aims of the penalty initially imposed.
44. Second, the principle of legal certainty, a general principle of Community law, requires that Community rules binding on individuals must be clear and precise so that they may know without ambiguity what are their rights and obligations and may take steps accordingly (see, in particular, Case 169/80 Gondrand and Garancini [1981] ECR 1931, paragraph 17).
45. In the main proceedings, Mr Nijemeisland accepted, without challenge and without admission of guilt, the penalty concerning the loss of the premium for one calendar year, imposed in accordance with the rules in force at the time. At that time, it was impossible for him to foresee that his decision might have consequences on future direct payments under rules adopted in 2003. Before the entry into force of Regulation No 1782/2003, the applicant could not foresee that his exclusion from receiving the premium would play a role in regard to the amount of the single payment and could therefore cause financial consequences unfavourable to him for several years.
46. It is clear from that assessment that Article 3a of Regulation No 795/2004 does not permit the exclusion from the calculation of the single premium of animals determined for a reference year where the producer concerned did not receive a premium for that year as a result of the application of a penalty under Article 23(1) of Regulation No 1254/1999.
47. In those circumstances, the answer to the question referred is that Article 3a of Regulation No 795/2004 must be interpreted as meaning that reductions and exclusions based on Regulation No 1254/1999 are not to be taken into account in the calculation provided for in Article 37(1) of Regulation No 1782/2003.

Costs

48. 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. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Fifth Chamber) hereby rules:

Article 3a of Commission Regulation (EC) No 795/2004 of 21 April 2004 laying down detailed rules for the implementation of the single payment scheme provided for in Council Regulation (EC) No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers, as amended by Commission Regulation (EC) No 1974/2004 of 29 October 2004, must be interpreted as meaning that reductions and exclusions based on Council Regulation (EC) No 1254/1999 of 17 May 1999 on the common organisation of the market in beef and veal are not to be taken into account in the calculation provided for in Article 37(1) of Regulation No 1782/2003.

[Signatures]

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* Language of the case: Dutch.