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

OPINION OF ADVOCATE GENERAL

Mazák

delivered on 4 February 2010 (1)

Case C-434/08

Arnold and Johann Harms in their capacity as a partnership under German civil law

v

Freerk Heidinga

(Reference for a preliminary ruling from the Oberlandesgericht Oldenburg (Germany))

(Common agricultural policy Single payment scheme Regulation (EC) No 1782/2003 Transfer of payment entitlements)

1. This reference for a preliminary ruling from the Oberlandesgericht Oldenburg (Oldenburg Higher Regional Court) (Germany) concerns the interpretation of Article 46(2) of Council Regulation (EC) No 1782/2003. (2)
2. The referring court wishes to know whether that provision precludes either (i) contractual arrangements outwardly effecting a complete and definitive transfer of payment entitlements, but stipulating according to an internal agreement between the parties that the seller is to remain the beneficial owner of those payment entitlements, whereby the purchaser, in his capacity as the person formally entitled to them, is to activate the payment entitlements through cultivation of the corresponding land and to pass on to the seller the full amount of the single payments made to him, or (ii) contractual arrangements pursuant to which area payments are transferred to the purchaser in such a way that he remains under an ongoing obligation to pay to the seller a part of the single payments (the farm-specific part). Should the Court's answer be in the affirmative, the referring court asks whether such contractual arrangements are invalid.

I The Community legal framework

3. The Regulation provides for an income support for farmers called the single payment scheme ('the SPS').
4. As regards eligibility, Article 33(1) of the Regulation (in the version applicable to the facts in the main proceedings) states that 'farmers shall have access to the [SPS] 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, or

(b) they have received the holding or part of the holding, by way of actual or anticipated inheritance, by a farmer who met the conditions referred to in point (a), or

(c) they have received a payment entitlement from the national reserve or by transfer.'

5. With regard to the transfer of payment entitlements, Article 46 of the Regulation provides:

'1. Payment entitlements may only be transferred to another farmer established within the same Member State except in case of transfer by actual or anticipated inheritance.

However, even in the case of actual or anticipated inheritance, payment entitlements may only be used in the Member State where the payment entitlements were established.

A Member State may decide that payment entitlements may only be transferred or used within one and the same region.

2. Payment entitlements may be transferred by sale or any other definitive transfer with or without land. In contrast, lease or similar types of transactions shall be allowed only if the payment entitlements transferred are accompanied by the transfer of an equivalent number of eligible hectares.

Except in case of force majeure or exceptional circumstances as referred to in Article 40(4), a farmer may transfer his payment entitlements without land only after he has used, within the meaning of Article 44, at least 80% of his payment entitlements during at least one calendar year or, after he has given up voluntarily to the national reserve all the payment entitlements he has not used in the first year of application of the [SPS].

3. In case of sale of payment entitlements, with or without land, Member States may, acting in compliance with the general principle of Community law, decide that part of the payment entitlements sold revert to the national reserve or that their unit value is reduced in favour of the national reserve, according to criteria to be fixed by the Commission in accordance with the procedure referred to in Article 144(2).'

II Factual and procedural background and the question referred

6. Amkeline Gertha Harms and Johann Harms, a partner in the appellant in the main proceedings, ('the sellers') sold to Freerk Heidinga, the respondent in the main proceedings ('the purchaser') by way of a deed of sale drawn up by a notary and dated 8 November 2005 arable land located in Schirum and Wiesens (Germany) together with residential and farm buildings. In addition, they sold the farm's fodder stocks, milk reference quantities and payment entitlements, which had been applied for. The total purchase price amounted to EUR 690 000. (3) As regards the payment entitlements, paragraph 9 of the deed of sale contained the following provisions:

'It is standard practice in [Germany], as a result of the reform of the Common Agricultural Policy (CAP reform), to allocate payment entitlements ... from 1 January 2005 onwards in the form of regionally uniform premiums for arable land and permanent pastures together with farm-specific top-up payments. In the light of the above, the parties to the contract agree as follows:

The sellers have submitted applications under the 2005 CAP application procedure. By the present contract, the sellers transfer to the purchaser all payment entitlements to be allocated to them on the ground that they farm the land that is the subject of this sale as well as the land that the sellers leased or, as the case may be, was made available for their use, and which the purchaser is taking over. The payment entitlements are transferred free of charge.

With the exception of the payment entitlements for set-aside land, the payment entitlements include farm-specific top-up payments. ...

Once the payment entitlements have been definitively determined and allocated, the sellers shall inform the purchaser of the amount within two weeks of having been notified, but at the latest on 15 January 2006.

The parties agree to enter, by 15 February 2006, into a contract drawn up on the basis of the conditions agreed above for the transfer of the actual payment entitlements that will set out the features by which those entitlements can be identified and the amount.

Within one month of entering into the above contract, the parties shall register the transfer with the relevant regional authority or, as the case may be, register the procedure of which they have been given notice with the Central Database of the Integrated Administration and Control System.

The parties agree between themselves that the purchaser shall be entitled to 40 payment entitlements in respect of arable land and 40 payment entitlements in respect of permanent pasture as well as only that part of the farm-specific payment entitlements ('top-ups') that is allotted in respect of the milk reference quantities (approximately 622 000 kg) transferred to the purchaser under a lease in the context of the farm purchase.

The purchaser hereby agrees to pass on to the sellers once annual disbursements have been made the payments received in relation to land-related or farm-specific payment entitlements exceeding the above (approximately 15 payment entitlements in respect of arable land, approximately 15 payment entitlements in respect of permanent pasture and milk compensation payments for approximately 1 000 000 kg of milk reference quantities).'

7. The deed of sale was executed and the arable land sold under the contract transferred into the name of the purchaser. In addition, on 1 April 2006, 111.79 payment entitlements were assigned to the purchaser. The purchaser now operates the acquired farm as a partnership under civil law, together with another party.
8. In connection with the land purchase deed and a related agreement of 6 January 2006 concerning the acquisition of rent payments, the appellant in the main proceedings brought an action to enforce its claim to the payment of residual rent for a milk reference quantity amounting to EUR 4 378.16 and the claim ceded to it to single payments disbursed for the year 2006 totalling EUR 40 823.05, which were due to the sellers pursuant to the internal agreement between the parties. The appellant in the main proceedings based the latter claim, part of which is still the subject of the appeal proceedings in the main action, on paragraph 9 of the deed of sale cited above and the internal agreement between the parties to the deed of sale which envisaged that single payments would be passed on to the sellers.
9. The Landgericht Aurich (Aurich Regional Court) granted the application for payment resulting from the transfer of rent claims, but dismissed the other part of the application, especially in so far as it sought to enforce claims for single payments to be passed on. It based its decision on the assumption that the claims arising under paragraph 9 of the deed of sale had been satisfied with the assignment back to the sellers or, as the case may be, the appellant in the main proceedings, of payment entitlements relating to 29.79 hectares.
10. That is the judgment against which the appellant in the main proceedings has brought its appeal. The appellant in the main proceedings claims that the Oberlandesgericht Oldenburg should amend the judgment of the Landgericht and order the purchaser to pay to the sellers an additional EUR 23 113.73, together with interest at 5% above base rate from 2 February 2007 onwards. The purchaser claims that the appeal should be dismissed.
11. According to the referring court, the success of the appeal depends on the validity of the contractual agreement set out in paragraph 9 of the deed of sale of 8 November 2005.
12. Having serious doubts as to the validity of this contractual arrangement in the light of Article 46 of the Regulation in particular in view of the limited range of methods by which payment entitlements may be transferred under that provision and of the clear objective which the direct support scheme seeks to fulfil, which may not have been achieved here the Oberlandesgericht Oldenburg decided that it was necessary to refer the following question to the Court for a preliminary ruling:

'Is Article 46(2) of [Regulation No 1782/2003] to be interpreted as meaning that the following contractual arrangements are incompatible with that provision and hence invalid: contractual arrangements outwardly effecting a complete and definitive transfer of payment entitlements, but stipulating according to an internal agreement between the parties that the seller is to remain the beneficial owner of those payment entitlements, whereby the purchaser, in his capacity as the person formally entitled to them, is to activate the payment entitlements through cultivation of the corresponding land and to pass on to the seller the full amount of the single payments made to him, or contractual arrangements pursuant to which area payments are transferred to the purchaser in such a way that he remains under an ongoing obligation to pay to the seller a part of the single payments (the farm-specific part), at any rate once those payments have been activated and disbursed?'

13. The parties submitted oral argument at the hearing which took place on 3 December 2009.

III Assessment

A Principal arguments of the parties

14. The appellant in the main proceedings, a partnership under German civil law consisting of Arnold and Johann Harms, contests the facts set out in the order for reference and submits that the question referred does not correspond to the factual background of the case in the main proceedings.
15. According to the appellant in the main proceedings, Community law expressly provides, in Article 46(2) of the Regulation, for the possibility of transferring payment entitlements by sale to another farmer. The validity of such a contractual arrangement should neither be subject to any additional condition under public law nor be subject to a requirement for prior administrative authorisation. It contends that Community law does not contain any provision as to how payment under a contract for sale of the type at issue in the main proceedings should be determined. The sale of payment entitlements should proceed exclusively according to civil law principles, under which freedom of contract prevails and the parties to a contract should be free to determine the type of remuneration. Therefore, those parties should be at liberty to agree not on a single payment but on payment in the form of successive instalments. That does not undermine the objective of Article 46(2) of the Regulation and, in any event, it remains open to the purchaser to rescind such an agreement.
16. The appellant in the main proceedings also submits that there is no infringement of the legal requirement that payment entitlements should not be transferred unless they are accompanied by the transfer of an equivalent number of eligible hectares. It contends that the objective of that provision is the avoidance of a situation whereby the right to receive the payment entitlements is transferred under a permanent or long-term arrangement that is merely economic in nature. Indeed, the right to the payment entitlements would, on termination of the lease, revert to the owner of the land, who could then transfer them on to another person. This is, however, precisely what the sellers in the present case cannot do. The payment entitlements have been transferred permanently to the purchaser. The latter can transfer those entitlements to other persons. In any event, in the case in the main proceedings the payment entitlements were transferred to the purchaser along with the entire farm, including the agricultural land.
17. Thus, the appellant in the main proceedings asks the Court to declare the question referred for a preliminary ruling inadmissible. In the alternative, it submits that Article 46(2) of the Regulation does not preclude a contractual arrangement such as the one in the main proceedings, pursuant to which the consideration for the transfer of payment entitlements to the purchaser is the obligation of the purchaser to pay to the seller a part of the single payments to be allocated to the purchaser in the future.
18. The German Government contends that Article 46(2) of the Regulation does not preclude an arrangement for transfer such as the one in the main proceedings, since such an arrangement is valid as an 'other definitive transfer' within the meaning of the first sentence of the first paragraph of Article 46(2) of the Regulation. The purchaser and the seller are entitled, under the rules governing freedom of contract, to adopt private law conditions for the transfer of payment entitlements; such agreements are unaffected by the rules governing the SPS in so far as they do not infringe the provisions of Community law and do not run counter to the aims of the SPS subsidy. The rules provide that a farmer, in this case the purchaser, is to be granted a single farm payment on a retrospective basis, provided that he has fulfilled the relevant conditions in his farm. According to Community law, the recipient of the support is free to decide how the payment should be utilised. It follows that that payment may also be used to pay the person who sold him the payment entitlements. The German Government concludes that Article 46(2) of the Regulation does not preclude agreements such as the one at issue in the main proceedings.
19. The Commission is of the opinion that, in the present case, the transfer and activation of the payment entitlements led to a failure to comply with the principles of the SPS. It submits that the parties in the main proceedings entered into a legal act by which provisions of the Regulation were circumvented. The Commission proposes that the Court should answer the question referred to the effect that Article 46(1) and (2), read in conjunction with Article 2(a) and (c) and Article 33(1)(c) of the Regulation, should be interpreted as meaning that contractual arrangements such as those in the main proceedings are incompatible with the above provisions.

B Appraisal

20. The referring court wishes to know whether Article 46(2) of the Regulation precludes contractual arrangements such as those in the main proceedings and, if so, whether these are invalid.
21. In particular, in its question, the referring court distinguishes between two types of arrangements: (i) those which outwardly effected a complete and definitive transfer of payment entitlements, but stipulated internally as between the parties that the seller is to remain the beneficial owner of those payment entitlements, whereby the purchaser, in his capacity as the person formally entitled to them, is to activate the payment entitlements through cultivation of the corresponding land and to pass on to the seller the full amount of the single payments made to him; and (ii) contractual arrangements pursuant to which area payments are transferred to the purchaser in such a way that he remains under an ongoing obligation to pay to the seller a part of the single payments (the farm-specific part). I consider, however, that for the purposes of the present case the two types of arrangements cited in the question referred do not differ from a legal point of view.
22. First, I shall deal with the argument of the appellant in the main proceedings that the question referred is inadmissible on the ground that it does not correspond to the factual background of the case in the main proceedings.
23. In this regard, it is sufficient to point out that it is not for the Court of Justice to establish the facts relevant to the decision in the main proceedings. The Court has held that it 'must take account, under the division of jurisdiction between the Community Courts and the national courts, of the factual ... context, as described in the order for reference, in which the question put to it is set'. (4) The Court cannot take account of observations from interested parties within the meaning of Article 23 of the Statute of the Court which take issue with that context. (5) Therefore, the objection of inadmissibility cannot be upheld and it is appropriate for the Court to examine the questions referred for a preliminary ruling against the factual framework as defined by the Oberlandesgericht Oldenburg in its order for reference.

1. A preliminary remark on the Single Payment Scheme

24. First of all, it is only farmers who have received a payment entitlement by transfer or from the national reserve who are eligible to have access to the SPS. (6) Only those persons are considered to be 'farmers' who exercise an 'agricultural activity' within the meaning of the Regulation. (7) However, the mere fact that a farmer has obtained payment entitlements does not automatically result in him receiving actual support connected with those entitlements. To benefit from single payments, the farmer is required not only to hold the payment entitlements but also to activate them by having at his disposal a corresponding amount of hectares of agricultural land and by complying with other management requirements such as conditions imposed under environmental and animal protection and food safety laws (so-called cross-compliance). (8)

2. The core issue: interpretation of Article 46(2) of the Regulation

25. In spite of the wording of the question referred and its link with the contractual arrangement(s) (9) entered into by the sellers and the purchaser, I consider that the Court should concentrate in full only on the interpretation of Article 46(2) of the Regulation. While the factual background of the case in the main proceedings needs to be taken into account, the Court should only do so as far as is necessary correctly to interpret the above provision.
26. It is clear from the wording itself of the second paragraph of Article 249 EC that Community regulations are directly applicable in all Member States. In view of the very nature of regulations and of their function in the system of sources of Community law, the provisions of those regulations generally have immediate effect in the national legal systems without its being necessary for the national authorities to adopt measures of application. It is true that the Court has acknowledged that in exceptional cases, 'some of their provisions may none the less necessitate, for their implementation, the adoption of measures of application by the Member States'. (10) However, I do not consider that this is the case with Article 46(2) of the Regulation. Therefore, it is sufficient to concentrate on Article 46(2) of the Regulation without it being necessary to consider any potential national implementing measures.
27. Article 46(2) of the Regulation provides that payment entitlements may be transferred 'by sale or any other definitive transfer' with or without land. However, transfers which are not definitive leases or similar types of transactions are allowed only if the payment entitlements transferred are accompanied by the transfer of an equivalent number of eligible hectares.
28. In my view, it is not necessary for the purposes of the present case to consider other conditions for transfers of payment entitlements which are stipulated in the Regulation, because the referring court has not requested their interpretation. In any event, I consider that consideration of them is not necessary for the interpretation of Article 46(2) of the Regulation.
29. It follows that the core issue of the present case is the interpretation of the phrase 'sale or any other definitive transfer [of payment entitlements]' contained in Article 46(2) of the Regulation.
30. For the purposes of that interpretation it is necessary to give full consideration to the purpose of the regime governing payment entitlements and the rules governing their transfer.
31. First, the purpose of a payment entitlement, when coupled to an eligible hectare, is to create a right to the payment of the amount fixed by the payment entitlement. (11) As was mentioned in point 24 above, the SPS is intended for farmers and, in particular, for those farmers who are active. (12) It may be pointed out here that unlike production rights (droits à produire) and premium rights (droits à prime), which stem from the common agricultural policy reforms of 1992 and 1999 the single farm payments are solely 'an income support for farmers'. (13)
32. Secondly, as regards their transfer, it is clear that the Community legislature intended payment entitlements to be transferable and traded in. The single farm payment was broken down into payment entitlements precisely so as to facilitate its transfer. (14) Indeed, contrary to milk quotas for example, payment entitlements may in principle be freely transferred and are not linked to specific agricultural land. However, the Regulation lays down clear rules governing and limiting that transfer: in particular, they may be transferred only to other farmers. (15)
33. The option to transfer payment entitlements and trade in them conceals, however, the possibility of seeking to attain an aim different from the one that the Community legislature intended; in fact, one that it has clearly sought to avoid.
34. In that connection, recital 30 in the preamble to the Regulation states that '... to avoid speculative transfers leading to the accumulation of payment entitlements without a corresponding agricultural basis, in granting aid, it is appropriate to provide for a link between entitlements and a certain number of eligible hectares, as well as the possibility of limiting the transfer of entitlements within a region ...'.
35. It follows that the basic objective underlying the detailed provisions on transfers of payment entitlements is to avoid transfers that are speculative in nature. As has been seen, the aim pursued by the SPS is to provide income support to active farmers, (16) and not to persons who, by trading in payment entitlements, pursue other financial interests outside the sphere of agriculture. (17) Indeed, the Regulation seeks to avoid single payments being given to persons who do not exercise an agricultural activity within the meaning of the Regulation and who should, therefore, not benefit from Community financing in this area. (18)
36. It appears that the Community legislature was concerned about manoeuvres to circumvent the provisions of the Regulation and that there was a real desire to prevent and repress fraud, (19) not least because the risk of speculation is omnipresent in a regime which is decoupled from production. (20)
37. In that regard, one of the most important restrictions imposed on transfers of payment entitlements is the requirement that unless one is concerned with leases or similar non-definitive transactions which must be accompanied by the transfer of an equivalent number of eligible hectares transfers of payment entitlements must be complete and definitive.
38. It follows that the original holder and seller of the payment entitlements must unconditionally relinquish his right to the payment entitlements when selling them to another farmer, with the result that the transfer has the effect of creating a new right to the payment entitlements in favour of the purchaser, who can then proceed to activate them. Indeed, it is the latter who should obtain the corresponding sums (single payments) to support his income because he is the person exploiting the agricultural land concerned. (21) The right to be paid sums pursuant to payment entitlements must clearly be inseparable from legal ownership of the payment entitlements.
39. If, because of its legal consequences and legal effects, (22) a transfer of payment entitlements does not result in an absolute relinquishment of the right to be paid sums pursuant to those payment entitlements on the part of the seller and in a creation of a corresponding right to be paid sums pursuant to those payment entitlements (23) on the part of the purchaser for instance, by reason of an internal agreement between them (accidentalia negotii) then the conditions for a lawful transfer of payment entitlements have not been fulfilled.
40. Such is precisely the case where the seller of the payment entitlements insists in the deed of sale on retaining the right to be paid sums pursuant to those payment entitlements, since the right to be paid sums pursuant to payment entitlements is inseparable from the legal ownership of the payment entitlements, irrespective of whether the right to be paid such sums concerns all or only a part of payment entitlements thus transferred.
41. Therefore, I agree with the referring court's concern that the contractual arrangement entered into in the present case raises the question whether the formal transfer of payment entitlements to which, in actual fact, the seller is to remain entitled pursuant to an internal agreement between the parties, and the agreement that the purchaser would cultivate land corresponding to the payment entitlements in compliance with the Regulation (24) creates in the present case a form of transfer (a 'transfer to a trustee') that no longer meets the conditions laid down by Article 46(2) of the Regulation, that is to say: sale or any other 'definitive' transfer. Indeed, as far as can be seen the result of the transaction is that the corresponding sums (single payments) permanently fail to achieve their purpose as subsidies, that is to say, income support for the farmer actually cultivating the land corresponding to the payment entitlements. Instead, it follows from the deed of sale that the corresponding sums (single payments), or their part, are to be given to another person on a permanent basis. (25)
42. It follows from the foregoing considerations that Article 46(2) of the Regulation is to be interpreted as meaning that a sale or any other definitive transfer of payment entitlements with or without land must ensure that the seller or transferor of those payment entitlements may not retain to any extent whatsoever, by contract or by a provision in a contract, the right to be paid sums pursuant to those payment entitlements (single payments), since the right to be paid sums pursuant to payment entitlements (single payments) is inseparable from legal ownership of the payment entitlements.
43. However, it is for the national court alone to determine the legal consequences for the contractual arrangements in question and for the clause concerned that are to be drawn from the above interpretation of Article 46(2) of the Regulation.

IV Conclusion

44. Therefore, I suggest that the Court answer the question of the Oberlandesgericht Oldenburg as follows:

Article 46(2) 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 Regulation (EEC) No 2019/93 and various other regulations, is to be interpreted as meaning that a sale or any other definitive transfer of payment entitlements with or without land must ensure that the seller or transferor of those payment entitlements may not retain to any extent whatsoever, by contract or by a provision in a contract, the right to be paid sums pursuant to those payment entitlements, since the right to be paid sums pursuant to payment entitlements is inseparable from legal ownership of the payment entitlements.

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1 Original language: English.

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2 Regulation 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) ('the Regulation').

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3 In addition to the approximately 9.6 hectares of land owned by the sellers and sold under the deed of sale, the sellers, in order to operate the farm, had leased an additional approximately 100 hectares of arable land from several lessors or, as the case may be, had entered into agreements with landowners for the use of land. Under the deed of sale, the purchaser was to take over this additional land pursuant to agreements with the owners or, as the case may be, the beneficial owners. The sellers made a commitment to assist as far as possible with those arrangements.

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4 See Case C-153/02 Neri [2003] ECR I-13555, paragraphs 33 to 36.

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5 See, inter alia, Case 104/77 Oehlschläger [1978] ECR 791, paragraph 4; Case 17/81 Pabst & Richarz [1982] ECR 1331, paragraphs 10 to 12; Joined Cases C-482/01 and C-493/01 Orfanopoulos and Oliveri [2004] ECR I-5257, paragraph 42; Case C-145/03 Keller [2005] ECR I-2529, paragraphs 32 to 34; Case C-267/03 Lindberg [2005] ECR I-3247, paragraphs 41 and 42; and my Opinion in Case C-305/08 CoNISMa [2009] ECR I-0000, footnote 12.

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6 See Article 33(1)(c), read in conjunction with Article 2(a) and (c), of the Regulation. The latter article provides for a definition of 'farmer' and of 'agricultural activity', respectively.

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7 That is to say an activity which concerns the production, rearing or growing of agricultural products, or maintaining the land in good agricultural and environmental condition.

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8 Reference is made here to Article 1 et seq., read in conjunction with Annex III, and Articles 33, 36, 43 et seq. of the Regulation. As regards the obligation actually to use the payment entitlements on a corresponding amount of hectares, one may perhaps draw a parallel with the comparable obligation to produce which attaches to an attribution of milk quotas. A farmer may be granted compensation for definitive discontinuation of all milk production only if, on the date of his application, he is producing milk in his capacity as a producer within the meaning of Article 12(c) of Regulation No 857/84 and if he possesses an individual reference quantity in respect of direct sales. Where, however, a farmer has spontaneously ceased milk production, he is no longer a producer for the purposes of those provisions. See Case C-152/95 Macon and Others [1997] ECR I-5429. See also Case C-275/05 Kibler [2006] ECR I-10569, paragraph 24.

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9 It may be noted here that, according to the reference for a preliminary ruling, the appellant in the main proceedings is a society to which both sellers ceded the relevant claims arising under the deed of sale by way of a written deed of assignment dated 29 January 2007.

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10 See Case C-403/98 Azienda Agricola Monte Arcosu [2001] ECR I-103, paragraph 26.

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11 See Article 44 of the Regulation.

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12 This is important, because the whole scheme of and thinking behind the recent reform of the common agricultural policy was that the previous principle of providing support for the production of (specific) agricultural products should be abandoned and a system put in place for providing support for the person operating the agricultural undertaking. Hence, farmers are allowed flexibility in their production decisions while being guaranteed income stability which is in line with the objectives pursued by the common agricultural policy within the meaning of Article 33 EC. The reform was intended to make European agriculture more competitive, sustainable and market-oriented.

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13 See Article 1 of the Regulation. In this connection, I consider that as a general rule payment entitlements should belong to the farmer and not to the landowner or the lessor. In addition, it may be noted here that it appears that single payments have become an essential part of farmers' income. See 'Les 50 ans de la Politique agricole commune et du Comité européen de droit rural Un droit rural évolué en Europe', European Council for Agricultural Law, L'Harmattan, Paris, 2008, p. 416.

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14 See recital 30 in the preamble to the Regulation.

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15 Who need to be established within the same Member State. See Article 46(1) of the Regulation.

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16 That is to say those actually exercising an agricultural activity, as defined by the Regulation. The same principle applies, for example, to milk quotas. Transfers of the latter cannot be made to non-producers, in order to avoid speculation in those premium rights. See in this respect, inter alia, Barthélemy, D. and David, J. (ed.), L'agriculture européenne et les droits à produire, INRA, Paris, 1999, p. 172.

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17 For instance, in 'Vente et droits à paiement unique (visite d'un Huron au royaume des imprimés)', Droit rural, no 348, December 2006, étude 34, J.-J. Barbiéri reports that during the transitional period the French Ministry of Agriculture made it be known that payment entitlements without agricultural land 'were useless', in order to dissuade speculative manoeuvres.

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18 The Commission refers in this respect to Article 33(1)(b) of the Regulation.

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19 See Gadbin, D., 'Les droits à paiement unique, pour qui, pourquoi?'; Droit rural, no 334, June 2005, colloque 8. For illustration, reference may be made to: (i) recital 21 in the preamble to the Regulation ('... in order to avoid misallocations of Community funds, no support payments should be made to farmers who have artificially created the conditions required to obtain such payments'); and (ii) Article 29 of the Regulation ('... no payment shall be made in favour of beneficiaries for whom it is established that they artificially created the conditions required for obtaining such payments with a view to obtaining an advantage contrary to the objectives of that support scheme'). These provisions mirror the Court's case-law on abuse of law. See, inter alia, Case C-44/89 von Deetzen ('von Deetzen II') [1991] ECR I-5119, paragraphs 24 to 29; Case C-313/99 Mulligan and Others [2002] ECR I-5719, paragraph 30 and the case-law cited; Case C-255/02 Halifax and Others [2006] ECR I-1609, paragraph 69 and the case-law cited; Case C-279/05 Vonk Dairy Products [2007] ECR I-239, paragraph 33 and the case-law cited; and Case C-278/06 Otten [2007] ECR I-4513, paragraph 39 and the case-law cited.

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20 See Bianchi, D., La politique agricole commune (PAC) Toute la PAC, rien d'autre que la PAC, Bruylant, 2006, p. 332.

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21 That is why the purchaser should not only be the holder of the payment entitlements from a legal perspective but also the beneficiary of the single payment from an economic point of view. Payment entitlements should not be separated into nominal ownership and beneficial ownership, allowing the single payments to be passed on ultimately to a person who does not cultivate the corresponding land.

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22 It is not important how those legal consequences and legal effects were triggered, because what is at issue here is responsibility for the outcome of the transaction and not its form or incidental elements. This is typical of legal situations where parties deal with claims which have their legal basis in public law and this is clearly the case with payment entitlements under the Regulation. In other words, if the transfer has not resulted in a complete and definitive transfer of payment entitlements and therefore a definitive transfer of the right to be paid sums pursuant to those payment entitlements, then it is legally irrelevant whether the parties acted negligently or intentionally. What matters is the fact that as a result of their arrangement there was no definitive transfer.

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23 Provided that any other applicable conditions are fulfilled.

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24 That is to say, in accordance with the cultivation requirements laid down in Article 3 of the Regulation.

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25 The Commission may well be right when it submits that, the payment entitlements having been transferred free of charge, the purchaser and new holder of the payment entitlements would appear to play the role of a 'man of straw' for the benefit of the seller who, from an economic point of view, continues receiving the single payment while neither its amount nor the duration are limited even though it would appear from the order for reference that he is no longer a farmer, within the meaning of Article 33(1)(c), read in conjunction with Article 2(a) and (c) of the Regulation; or, in any event, not on the land concerned.