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

(Sugar Regulation (EC) No 318/2006 Article 16 Calculation of the production charge Inclusion of the quantity of quota sugar withdrawn from the market in the basis for assessment of the charge Principles of proportionality and non'discrimination)

In Case C-365/08,

REFERENCE for a preliminary ruling under Article 234 EC from the Verwaltungsgerichtshof (Austria), made by decision of 4 July 2008, received at the Court on 11 August 2008, in the proceedings

Agrana Zucker GmbH

v

Bundesminister für Land- und Forstwirtschaft, Umwelt und Wasserwirtschaft,

composed of J.'C. Bonichot, President of the Chamber, C. Toader, K. Schiemann, P. K�«ris (Rapporteur) and L. Bay Larsen, Judges,

Advocate General: V. Trstenjak,

Registrar: K. Malacek, Administrator,

having regard to the written procedure and further to the hearing on 19 November 2009,

after considering the observations submitted on behalf of:

Agrana Zucker GmbH, by W. Schwartz and H.'J. Prieß, Rechtsanwälte, and B. Kurzai and H. Husemeyer,

the Spanish Government, by F. Díez Moreno, acting as Agent,

the Lithuanian Government, by D. Kriauči�«nas, acting as Agent,

the Polish Government, by M. Dowgielewicz, acting as Agent,

the Council of the European Union, by M. Moore and Z. Kupčová, acting as Agents,

the Commission of the European Communities, by F. Erlbacher and P. Rossi, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 21 January 2010,

gives the following

1. This reference for a preliminary ruling concerns the interpretation and the validity of Article 16 of Council Regulation (EC) No 318/2006 of 20 February 2006 on the common organisation of the markets in the sugar sector (OJ 2006 L 58, p. 1).
2. The reference was made in the course of proceedings brought by Agrana Zucker GmbH ('Agrana Zucker') against a decision of the Bundesminister für Land- und Forstwirtschaft, Umwelt und Wasserwirtschaft (Federal Minister for Agriculture, Forestry, the Environment and Water Management) of 25 March 2008 relating to the amount of the production charge for the marketing year 2007/2008.

Legal context

Regulation No 318/2006

3. Regulation No 318/2006, adopted by the Council of the European Union within the framework of the reform of the common organisation of the markets in the sugar sector which took place during 2006, provided for new arrangements and reductions of the quotas. In addition, it established a charge called 'the production charge' and provided for new market tools to be managed by the European Commission, such as withdrawal from the market.
4. With regard to the production charge, recital 19 in the preamble to Regulation No 318/2006 states the following:

'A production charge should be introduced to contribute to the financing of the expenditure occurring under the common organisation of the markets in the sugar sector.'

5. Article 16 of the regulation, headed 'Production charge', provides:

'1. As from the marketing year 2007/2008, a production charge shall be levied on the sugar quota ... held by undertakings producing sugar ...

2. The production charge shall be set at EUR 12.00 per tonne of the quota sugar ...

3. The totality of the production charge paid in accordance with paragraph 1 shall be charged by the Member State to the undertakings on its territory according to the quota held during the marketing year concerned.

Payments shall be made by the undertakings by the end of February of the relevant marketing year at the latest.

4. Community sugar ... undertakings may require sugar-beet or sugar-cane growers or chicory suppliers to bear up to 50% of the production charge concerned.'

6. 'Quota sugar' is defined in Article 2(5) of Regulation No 318/2006 as meaning any quantity of sugar production attributed to a specific marketing year under the quota of the undertaking concerned.
7. Article 1(2) of Regulation No 318/2006 provides that a marketing year is to begin on 1 October and end on 30 September of the following year.
8. Concerning withdrawal from the market, recital 22 in the preamble to that regulation states the following:

'New market tools to be managed by the Commission should be introduced. ... [T]o maintain the structural balance of the markets in sugar at a price level close to the reference price, it should be possible for the Commission to decide to withdraw sugar from the market for as long as it takes for the market to rebalance.'

9. Article 19 of the regulation, headed 'Withdrawal of sugar', is worded in these terms:

'1 In order to preserve the structural balance of the market at a price level which is close to the reference price, taking into account the commitments of the Community resulting from agreements concluded in accordance with Article 300 of the [EC] Treaty, a percentage, common to all Member States, of quota sugar ... may be withdrawn from the market until the beginning of the following marketing year.

...

2. The withdrawal percentage referred to in paragraph 1 shall be determined by 31 October of the marketing year concerned at the latest on the basis of expected market trends during that marketing year.

3. Each undertaking provided with a quota shall store at its own expense during the period of withdrawal the quantities of sugar corresponding to the application of the percentage referred to in paragraph 1 to its production under quota for the marketing year concerned.

The sugar quantities withdrawn during a marketing year shall be treated as the first quantities produced under quota for the following marketing year. However, taking into account the expected sugar market trends, it may be decided, in accordance with the procedure referred to in Article 39(2), to consider, for the current and/or the following marketing year, all or part of the withdrawn sugar ... as:

surplus sugar ... available to become industrial sugar ...,

or

temporary quota production of which a part may be reserved for export respecting commitments of the Community resulting from agreements concluded under Article 300 of the Treaty.

...'

Regulation (EC) No 290/2007

10. Recital 8 in the preamble to Commission Regulation (EC) No 290/2007 of 16 March 2007 establishing, for the 2007/2008 marketing year, the percentage provided for in Article 19 of Regulation (EC) No 318/2006 (OJ 2007 L 78, p. 20), states the following:

'In the same context, account should be taken of the fact that the constraints associated with the preventative measure could have serious economic consequences for undertakings in Member States which have made particular efforts under the restructuring scheme established by Regulation (EC) No 320/2006. This effect would be contrary to the very objective of this scheme and of the common organisation of the markets in the sugar sector, which is to guarantee the viability and competitiveness of this sector. It is therefore necessary to provide for an exemption from applying the withdrawal percentage for the Member States in proportion to the percentage of the national quota which has been released under the above restructuring scheme.'

11. Article 1 of Regulation No 290/2007 provides:

'1. For the 2007/2008 marketing year, the percentage provided for in Article 19(1) of Regulation (EC) No 318/2006 shall be 13.5%.

2. By way of derogation from paragraph 1:

(a) the percentage laid down in that paragraph shall not apply to undertakings whose production is less than 86.5% of their quota for the 2007/2008 marketing year;

(b) for undertakings that produce a quantity equal to or higher than 86.5% of their quota for the 2007/2008 marketing year, the quantities produced over the 86.5% threshold shall be withdrawn;

(c) the percentage laid down in paragraph 1 shall not apply to quantities produced in the Member States in which at least 50% of the national sugar quota has been released from 1 July 2006 as a result of quotas being renounced under Article 3 of Regulation (EC) No 320/2006.

For the Member States in which at least 50% of the national sugar quota has been released from 1 July 2006 as a result of quotas being renounced under Article 3 of Regulation (EC) No 320/2006, the withdrawal percentage provided for in the first paragraph shall be reduced in proportion to the quotas released.

The percentage applicable under this point shall be as laid down in the Annex hereto.

...

4. The quantities withdrawn in accordance with paragraphs 2(b) and 3 shall be considered to be surplus sugar ... for the 2007/2008 marketing year available to become industrial sugar ...

...'

The dispute in the main proceedings and the questions referred for a preliminary ruling

12. In 2006, the competent administrative authority allocated to Agrana Zucker a quota of 405 812.4 tonnes for sugar production for the marketing years 2006/2007 to 2014/2015. For the marketing year 2007/2008, that administrative authority set, pursuant to Article 1(1) and (2)(b) of Regulation No 290/2007, the threshold for production under quota applicable to Agrana Zucker at 86.5% of its quota, that is, 351 027.73 tonnes, thereby imposing on that undertaking a withdrawal of 13.5%, that is, 54 784.67 tonnes of sugar.
13. By decision of 28 January 2008, Agrarmarkt Austria (the supervisory body) set the amount of the production charge payable by Agrana Zucker for the marketing year 2007/2008 at EUR 4 869 748.80 and requested Agrana Zucker to pay it that amount.
14. Since it objected that the production charge was calculated on the basis of the quota which had been allocated to it, and therefore included in that basis the 54 784.67 tonnes of withdrawn sugar which it could no longer sell as an amount of sugar produced under quota, Agrana Zucker brought a complaint against that decision of Agrarmarkt Austria to the Bundesminister für Land- und Forstwirtschaft, Umwelt und Wasserwirtschaft. The minister rejected the complaint by decision of 25 March 2008, which is the subject of the proceedings brought before the national court.
15. It is apparent from the order for reference that Agrana Zucker is claiming in the main proceedings that, by taking into account the quantity of sugar which was withdrawn from the market in the calculation of the production charge, the principles of proportionality and of non'discrimination, as enshrined in Article 34(2) EC, have been infringed. That infringement could have been avoided, in its view, if Article 16 of Regulation No 318/2006 had been interpreted in accordance with primary law.
16. The national court states, in essence, that, in the light of the legal views of the parties, the judgment in Joined Cases C-5/06 and C-23/06 to C-36/06 Zuckerfabrik Jülich and Others [2008] ECR I-3231, and the reservations expressed by the applicant in the main proceedings as to the validity of Article 16 of Regulation No 318/2006, the question raised in the context of European Union law cannot be resolved easily and has not been answered in the case'law of the Court.
17. In those circumstances, the Verwaltungsgerichtshof (Administrative Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

'(1) Must Article 16 of [Regulation No 318/2006] be interpreted as meaning that even a sugar quota which cannot be utilised as a consequence of a preventive withdrawal in accordance with Article 1 of [Regulation No 290/2007] must be included in the assessment of the production charge?

(2) In the event that the first question is answered in the affirmative:

Is Article 16 of [Regulation No 318/2006] compatible with primary law, in particular with the principle of proportionality and the principle of non-discrimination derived from Article 34 EC?'

The questions referred for a preliminary ruling

The first question

18. By its first question, the national court asks, in essence, whether Article 16 of Regulation No 318/2006 must be interpreted as meaning that the quantity of quota sugar withdrawn from the market pursuant to Article 19 of that regulation and Article 1 of Regulation No 290/2007 is included in the basis for assessment of the production charge.
19. The applicant in the main proceedings and the Spanish and Lithuanian Governments are of the view that the production charge applies to the quantity of quota sugar actually produced and capable of being disposed of as such, and not to the quota itself. It follows that the quantity of sugar withdrawn from the market should not be taken into account in order to determine the basis for assessment of the charge.
20. In that regard, it should be recalled that Article 16(1) of Regulation No 318/2006 provides that, as from the marketing year 2007/2008, a production charge is to be levied on the sugar quota held by undertakings producing sugar. That provision thus clearly indicates that the quota constitutes the basis for assessment of the production charge. It follows that the basis for assessment of the charge which is to be paid by the sugar producing undertaking is constituted by the sugar quota which was attributed to it for the marketing year concerned.
21. The term 'production charge' used in recital 19 in the preamble to Regulation No 318/2006 and in the heading and provisions of Article 16 of that regulation may lead to confusion as to the definition of the basis for assessment of that charge, since it appears to designate not a charge applying to a quota, but a charge applying to the commodities actually produced. The same is true of the wording of Article 16(2) of the regulation, under the terms of which the 'production charge shall be set at EUR 12.00 per tonne of the quota sugar', given that 'quota sugar' is defined in Article 2(5) of the regulation as being any quantity of sugar production attributed to a specific marketing year under the quota of the undertaking concerned.
22. However, as the Advocate General has pointed out in points 46 to 51 of her Opinion, the content and system of Article 16 of Regulation No 318/2006 show that the European Union legislature sought, within the framework of the reform of the common organisation of the markets in the sugar sector, to introduce a new charge having as its basis for assessment not the quantity of sugar actually produced but the sugar quota allocated. Whilst Article 16(1) lays down the principle of the levy of a charge on the sugar quota held by undertakings producing sugar, Article 16(2) has the sole objective of fixing the amount of that charge.
23. That analysis is confirmed by Article 16(3) of Regulation No 318/2006, which lays down detailed rules for the levy of the production charge. First, in its first paragraph, it provides that '[t]he totality of the production charge paid in accordance with paragraph 1 shall be charged by the Member State to the undertakings on its territory according to the quota held during the marketing year concerned'. Second, in its second paragraph, Article 16(3) requires that the payments are made by the undertakings by the end of the February of the relevant marketing year at the latest. However, at that date, the quantity produced for that year is not known, since, in accordance with Article 1(2) of the regulation, a marketing year is to begin on 1 October and end on 30 September of the following year.
24. In addition, it does not follow from Regulation No 318/2006 or from any other element that the European Union legislature intended to deduct from the basis for assessment of the production charge the quantity of quota sugar withdrawn from the market in accordance with Article 19 of that regulation. The theory that that charge applies only to the quantity of sugar corresponding to the difference between the sugar quota held and the quantity of quota sugar withdrawn from the market finds, in particular, no basis in Article 16 of the regulation analysed in paragraphs 20 to 23 above.
25. Consequently, the answer to the first question is that Article 16 of Regulation No 318/2006 must be interpreted as meaning that the quantity of quota sugar withdrawn from the market pursuant to Article 19 of that regulation and Article 1 of Regulation No 290/2007 is included in the basis for assessment of the production charge.

The second question

26. The second question concerns the validity of Article 16 of Regulation No 318/2006. In the event that the first question is answered in the affirmative, the national court seeks to know in particular whether that provision is valid in the light of the principles of proportionality and non'discrimination.

The validity of Article 16 of Regulation No 318/2006 in the light of the principle of proportionality

27. The applicant in the main proceedings claims, in essence, that the inclusion of the quantity of quota sugar withdrawn from the market in the basis for assessment of the production charge is contrary to the principle of proportionality, since it results in the payment of a charge on a quantity of sugar which was not produced and which thus does not exist, or else in the payment of a charge on a quantity of sugar actually produced but considered to be surplus sugar which could become industrial sugar sold at 50% of the price of quota sugar or be carried over as quota sugar to the following marketing year in the course of which the production charge will once more be levied on it. The charges thus imposed on sugar producing undertakings are not necessary to attain the objective pursued, as defined in recital 19 in the preamble to Regulation No 318/2006, since the income from the production charge exceeds the expenditure occurring under the common organisation of the markets in the sugar sector.
28. That position is shared by the Spanish, Lithuanian and Polish Governments, which also consider that the levying of the production charge on the quantity of quota sugar withdrawn from the market has the effect of requiring the undertakings concerned to bear a disproportionate financial burden. Referring, like the applicant in the main proceedings, to Zuckerfabrik Jülich and Others, the Lithuanian Government states in particular that, despite the wide discretion enjoyed by the institutions in this area, producers may not be burdened beyond the degree necessary to achieve the objective pursued by the levy. The Polish Government, which moreover states that the sugar withdrawn from the market does not generate any expense linked to the common organisation of the markets in the sugar sector, considers that the institutions do not have a wide discretion in the area, in view of the technical nature of the provision at issue.
29. In that regard, it should be recalled that the principle of proportionality, which is one of the general principles of European Union law, requires that acts adopted by institutions of the European Union do not exceed the limits of what is appropriate and necessary in order to attain the legitimate objectives pursued by the legislation in question; where 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 (Case C-33/08 Agrana Zucker [2009] ECR I-0000, paragraph 31 and the case-law cited).
30. As regards judicial review of the implementation of that principle, it is settled case'law that the European Union legislature enjoys a wide discretion where the common agricultural policy is concerned, and that, bearing that discretion in mind, the lawfulness of a measure adopted in that sphere can be affected only if the measure is manifestly inappropriate in terms of the objective which the competent institution is seeking to pursue (see Agrana Zucker, paragraph 32 and the case'law cited).
31. What must be ascertained is therefore not whether the measure adopted by the legislature was the only measure possible or the best measure possible but whether it was manifestly inappropriate (see Agrana Zucker, paragraph 33 and the case-law cited).
32. In the present case, it follows from recital 19 in the preamble to Regulation No 318/2006 that the production charge was introduced to contribute to the financing of the expenditure occurring under the common organisation of the markets in the sugar sector.
33. Since its basis for assessment is the quota attributed to the undertakings, that charge enables the European Union budget to obtain revenues which are stable in that they are not dependent on the quantities actually produced or any withdrawals from the market. Moreover, that determination of the basis for assessment of that charge enables those revenues to be levied during the marketing year, as provided for in Article 16(3) of Regulation No 318/2006.
34. As to the expenditure occurring in the context of the common organisation of the markets in the sugar sector mentioned in recital 19 in the preamble cited above, this cannot refer solely to export refunds of sugar and isoglucose, production refunds for the use of sugar in the chemical industry and the expenditure linked to storage measures, as the applicant in the main proceedings claims.
35. As the Advocate General has pointed out in points 38 to 40 and 81 to 84 of her Opinion, the reform of the common organisation of the markets in the sugar sector reflected the intention of the legislature, in the context of the new common agricultural policy, progressively to abandon the policy of price and production support in the sugar sector in favour of a policy of agricultural income support decoupled from production. A reduction of market support of sugar was partially offset by income support for agricultural undertakings in the form of direct 'decoupled' aid. The costs of the new measures, of which the direct decoupled payment was the major element, had to be offset, according to paragraph 5 of the Proposal for a Council Regulation on the common organisation of the markets in the sugar sector (COM(2005) 263 final), mainly by the savings resulting from a substantial reduction in export refund expenditure and the abolition of refining aid, the reform having to respect the status quo expenditure, as proposed at the time of the common agricultural policy proposals in January 2003.
36. Against that background, the objective referred to in recital 19 in the preamble to Regulation No 318/2006 must be understood as meaning that the production charge contributes to financing the various measures in the sugar sector, including the direct decoupled aid which accounts for the highest expenditure.
37. However, it is not contested that the income from the production charge is, for every marketing year, much lower than all that expenditure.
38. Clearly, then, the production charge can be distinguished from the measure at issue in Zuckerfabrik Jülich and Others, in which the Court held that the method of calculating contributions evaluated in paragraphs 57 to 60 of that judgment went beyond what was necessary to attain the objective of Council Regulation (EC) No 1260/2001 of 19 June 2001 on the common organisation of the markets in the sugar sector (OJ 2001 L 178, p. 1), which sought to make producers meet in full, in a fair yet efficient way, the cost of disposing of surpluses of Community production in accordance with the principle of self'financing.
39. As to the financial burden borne by the undertakings subject to the charge due to the inclusion of the quantity of quota sugar withdrawn from the market in the basis for assessment of the production charge, this is partially offset by the benefit which those undertakings derive from the withdrawal from the market, which aims, as is apparent from recital 22 in the preamble to, and Article 19(1) of, Regulation No 318/2006, to maintain the structural balance of the market at a price level close to the reference price, for as long as it takes for the market to rebalance. It should in addition be observed that, under Article 16(4) of that regulation, those undertakings may pass on to sugar-beet or sugar-cane growers or chicory suppliers up to 50% of the production charge concerned.
40. It follows from all the foregoing that the inclusion of the quantity of quota sugar withdrawn from the market in the basis for assessment of the production charge is not manifestly inappropriate for the attainment of the aim pursued and, consequently, cannot be considered to be contrary to the principle of proportionality.

The validity of Article 16 of Regulation No 318/2006 in the light of the principle of non-discrimination

41. The applicant in the main proceedings and the Lithuanian Government claim that the inclusion of the quantity of quota sugar withdrawn from the market in the basis for assessment of the production charge leads also to discrimination on grounds of nationality. As withdrawals from the market are effected, in accordance with Article 1(2) of Regulation No 290/2007, not by application of a uniform rate but according to different coefficients depending on the Member States, certain undertakings are subjected to a levy which is higher in relation to the quantity of sugar actually produced than that borne by other undertakings in a similar situation but established in another Member State.
42. In that regard, it should be noted that the Court has consistently held that the second subparagraph of Article 34(2) EC, which prohibits all discrimination in the context of the common agricultural policy, is merely a specific expression of the general principle of equal treatment, which requires that comparable situations not be treated differently and different situations not be treated alike unless such treatment is objectively justified (Agrana Zucker, paragraph 46 and the case-law cited).
43. In the present case, Article 1(1) of Regulation No 290/2007 fixes, for the 2007/2008 marketing year, the percentage, common to all the Member States, of quota sugar withdrawn from the market pursuant to Article 19(1) of Regulation (EC) No 318/2006 at 13.5%. By way of exception to that provision, Article 1(2)(c) of Regulation No 290/2007 provides, first, that that percentage is not to apply to quantities produced in the Member States in which at least 50% of the national sugar quota has been released from 1 July 2006 as a result of quotas being renounced under Article 3 of Council Regulation (EC) No 320/2006 of 20 February 2006 establishing a temporary scheme for the restructuring of the sugar industry in the Community and amending Regulation (EC) No 1290/2005 on the financing of the common agricultural policy (OJ 2006 L 58, p. 42), and, second, that that percentage is to be reduced in proportion to the quotas released for the Member States in which at least 50% of the national quota has been released from 1 July 2006.
44. It follows that the size of the withdrawal from the market imposed on undertakings for that marketing year may vary, inter alia, depending on the Member State in which they are established. Therefore, the part of the production charge which they are to pay which corresponds to the quantity of quota sugar withdrawn from the market will also be larger or smaller depending on the Member State in which they are established.
45. To that extent, the inclusion of the quantity of quota sugar withdrawn from the market in the basis for assessment of the production charge may result, due to the method for fixing that withdrawal, in different treatment for undertakings which may be in a similar situation but are established in different Member States.
46. Nevertheless, such treatment of undertakings appears to be objectively justified. As the division of the quotas between undertakings and the management of those quotas are ensured by the Member States, the renouncing of quotas is also organised by each Member State and will vary from one Member State to another. In that context, as is apparent from recital 8 in the preamble to Regulation No 290/2007, the Commission considered it necessary to take into consideration the fact that the constraints associated with the withdrawal could have serious economic consequences for undertakings in Member States which have made particular efforts under the restructuring scheme established by Regulation No 320/2006 and that such an effect would be contrary to the very objective of this scheme and of the common organisation of the markets in the sugar sector, which is to guarantee the viability and competitiveness of that sector. Thus, the object of the partial or total exemption from the application of the withdrawal percentage common to the Member States is to take into account the special efforts which Member States have made to release quotas definitively (see, by analogy, Agrana Zucker, paragraph 51).
47. It follows that the inclusion of the quantity of quota sugar withdrawn from the market in the basis for assessment of the production charge cannot be considered to be contrary to the principle of non'discrimination.
48. In the light of all of the foregoing, the reply to the second question is that an examination of that question has not revealed anything which might affect the validity of Article 16 of Regulation No 318/2006.

Costs

49. 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 (Fourth Chamber) hereby rules:

1. Article 16 of Council Regulation (EC) No 318/2006 of 20 February 2006 on the common organisation of the markets in the sugar sector must be interpreted as meaning that the quantity of quota sugar withdrawn from the market pursuant to Article 19 of that regulation and Article 1 of Commission Regulation (EC) No 290/2007 of 16 March 2007 establishing, for the 2007/2008 marketing year, the percentage provided for in Article 19 of Regulation (EC) No 318/2006 is included in the basis for assessment of the production charge.

2. Examination of the second question has not revealed anything which might affect the validity of Article 16 of Regulation No 318/2006.

[Signatures]

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* Language of the case: German.