OPINION OF MR ADVOCATE GENERAL REISCHL
DELIVERED ON 21 JANUARY 1982 ( 1 )
Mr President,
Members of the Court,
The reference for a preliminary ruling under consideration today concerns the Community regulations on the denaturing of sugar for animal feed, which the Court of Justice has had to consider on a number of occasions and the functioning of which I may therefore presume to be familiar in so far as its essential features are concerned.
The facts of the case are as follows:
In 1972 the plaintiff in the main action, Zuckerfabrik Franken GmbH, obtained denaturing premium certificates for a total of 114550 tonnes of sugar from the Einfuhr- und Vorratsstelle für Zucker [Sugar Import and Storage Authority], whose successor in law, the Bundesanstalt für landwirtschaftliche Marktordnung (to which I shall refer as “the intervention agency”) represents the Federal Republic of Germany, which is the defendant in the main action. The plaintiff converted the sugar, in accordance with the provisions of Regulation (EEC) No 100/72 of the Commission of 14 January 1972 laying down detailed rules on the denaturing of sugar for animal feed (Official Journal, English Special Edition 1972 (I), p. 21) and Regulation (EEC) No 1542/72 of the Commission of 24 July 1972 fixing the denaturing premium for sugar intended for animal feed (Official Journal, English Special Edition 1972 (III), p. 739), into bee sugar as provided for in the respective annexes to those regulations, and the intervention agency then granted a denaturing premium amounting to DM 35618,70.
The plaintiff sold the denatured sugar to an agricultural dealer and included in the contract of sale the following clause drawing the attention of the dealer to the fact that the merchandise might only be used for the feeding of bees:
“I/we hereby acknowledge that the denatured sugar which is the subject-matter of the present contract must be used only for the feeding of bees and that proof that it has been so used may be required.
If I/we fail to produce, or to produce in due time, such proof when requested I/we accept full responsibility for the consequences.”
An inspection carried out by the Hauptzollamt [Principal Customs Office] Würzburg at an iron foundry in 1974 revealed however that the bee sugar had been used not for feeding bees but as core-binder for foundries. The intervention agency thereupon demanded that the plaintiff return the denaturing premium, as required by the first sentence of Paragraph 10 (1) of the German regulation of 13 May 1970 on the grant of premiums for denaturing sugar to be used for animal feed (Bundesanzeiger No 89 of 16 May 1970. p. 1), which provides that “zu Unrecht empfangene Prämien [sind] zurückzuzahlen ...” [wrongly paid premiums must be repaid].
The plaintiff brought an action before the Verwaltungsgericht [Administrative Court] Frankfurt am Main contesting the demand for repayment.
That court is in doubt as to whether or not the plaintiff was in fact entitled to receive the denaturing premium under the relevant provisions of Community law, in particular Regulation No 100/72. Contrary to the view expressed by the Hessischer Verwaltungsgerichtshof [Administrative Court, Hesse] in another case (see judgment of 18 February 1980, No VIII OE 20/79), the court is inclined to the view that use of the bee sugar for the designated purpose is not a prerequisite for entitlement to the denaturing premium. That is supported by, in particular, the wording of Article 14 (1) (b) of Regulation No 100/72 itself, which states that the issue of the certificate entails “the obligation to denature the sugar under the conditions laid down in the certificate”, with no reference to the need to ensure its proper use. Accordingly the plaintiff is liable even for the conduct of third parties only if use for the designated purpose is a condition of entitlement to the denaturing premium.
On that basis the First Chamber of the Verwaltungsgericht Frankfun stayed the proceedings by order of 26 February 1981 and referred the following question to the Court of Justice for a preliminary ruling under Article 177 of the EEC Treaty:
“Is the recipient of a denaturing premium certificate under Regulation (EEC) No 100/72 of the Commission of 14 January 1972 laying down detailed rules on the denaturing of sugar for animal feed (Official Journal, English Special Edition 1972 (I), p. 21) obliged by the wording of Article 14 (1) (b) thereof to use the denatured sugar only for animal feed and is he liable for any use otherwise than for that purpose by third parties?”
My opinion is as follows:
1.
The court making the reference is required to rule on the legality of the demand for repayment based on Anicie 10 (1) of the German regulation on denaturing premiums. The demand for repayment is lawful only if the recipient wrongly received the premium within the meaning of that regulation. Whether that requirement of fact has been satisfied may only be judged in the light of the relevant provisions of Community law which are to be construed by the Court of Justice in the present proceedings.
Since it is the repayment which is at issue it would be more correct to ask, not what are the conditions for payment of the denaturing premium, but rather what are the prerequisites for entitlement to a premium under Community law, satisfaction of which precludes any request that the recipient repay it. It is in this sense, too, that one should construe the question asked by the court making the reference, which seeks to clarify whether, over and above the duties which arise pursuant to Article 14 (1) (b) of Regulation No 100/72 upon the issue of a denaturing premium certificate, the recipient of a premium must guarantee that the denatured sugar will actually be used for animal feed. If the answer to that question is in the affirmative it remains to consider whether the recipient of a denaturing premium is also liable tor any use otherwise than for that purpose by third parties with whom he has no business relationship.
2.
In the first part of the question, which concerns the extent of the legal obligations of the recipient of a denaturing premium, the court making the reference expresses doubts as to whether actual use of the denatured sugar as animal feed constitutes a prerequisite for the grant of a denaturing premium. In its view, which is shared by the plaintiff in the main action, that possibility is excluded principally by the fact that Articles 14 and 21 of Regulation No 100/72 of the Commission, which list the conditions of entitlement to the denaturing premium, do not refer to the duty to ensure use for the designated purpose. Where an obligation is imposed on traders, however, the requirement of legal certainty requires that the wording of the provisions be unequivocal. It is in any event only fair for unclear and ambiguous legal provisions to be interpreted against the Community or the State which is responsible for implementing such provisions.
That argument must certainly be endorsed inasmuch as the wording of the provisions in question alone does not in fact indicate that ensuring that the sugar is put to its intended use constitutes an unconditional prerequisite for the grant of the premium. On closer examination of the provisions in question, however, it will be found that they are not intended to lay down definitive conditions for the grant of a premium, their purpose being merely to define more closely the conditions governing payment of the premium.
(a)
The regulation in question shows that traders must be in possession of a denaturing premium certificate in order to qualify for payment of a denaturing premium. The issue of such a certificate confers, pursuant to the general provision contained in Article 14 (1) (a), the right to payment of the premiums after denaturing. In order to ensure that the quantity of sugar indicated in the certificate is also actually withdrawn from the market subparagraph (b) of the regulation, which constitutes, as it were, the reverse side of the coin, provides that the certificate entails the obligation to denature the sugar under the conditions laid down in the certificate, but nothing is said as to the other conditions which must be satisfied in order for the recipient ultimately to become eligible for the premium.
Similarly, by virtue of Article 18 (3) of the regulation, the required deposit is released as soon as the sugar has been denatured under those conditions.
Article 21 (2) (a) of the regulation then ensures that the denaturing takes place in the proper fashion, as regards the establishment and the process concerned, by making payment conditional upon the sugar's being denatured under supervision in an approved establishment and by one of the processes listed in the annex. Even Article 24 of the regulation, as its wording shows, is concerned merely with a detail as to the time when payment is to be made inasmuch as it provides that the premium is to be paid at the earliest after proof is furnished that the sugar has been denatured in the proper fashion and at the latest at the end of the month following production of such proof.
Since those provisions are thus concerned merely with the detailed procedures for payment, which are clearly so designed as to fix the time of payment of the premium as soon as possible after completion of the denaturing process in order to avoid any greater costs for the denaturing undertakings, the legislature had no compelling reason in this context to mention any duty to ensure that correct use be made of the product. Hence the absence of a provision to that effect does not justify the inference that the legislature wished to exclude such a requirement.
Since the time of payment is governed by the regulation itself there is also no justification, contrary to the view of the court making the reference and the plaintiff in the main action, for the assumption that the payment constitutes an unlawful advance within the meaning of Article 24 (2) of the regulation. On the contrary, the sense and purpose of that provision, as shown by both its position and the twelfth recital in the preamble to the regulation, is to prevent premiums from being paid before denaturing has been completed in the proper manner.
(b)
Since the provisions themselves do not provide any indication as to whether use of the denatured sugar for a purpose other than that intended extinguishes any justification for granting the premium, it remains to be considered whether the answer to the question what are the legal conditions governing the grant of the premium may not be inferred from other provisions or from the general context of the regulations on denaturing
The first provision to be looked at in this context is Article 19 (1) of the Commission regulation, which provides:
“The Member States shall appoint competent agencies to supervise denaturing and to ensure that the denatured sugar is only used for animal feeds.”
The first part of that provision concerns supervision of denaturing in accordance with the relevant provisions which, as we have seen, is the prerequisite for payment of the denaturing premium. In the second part the Member States are further empowered and required to ensure that the product is used for its intended purpose. The introduction of such supervision, to be carried out after the denaturing, is proof of the fact that, apart from ensuring that denaturing was carried out correctly, in other words, that the sugar was withdrawn from the food sector, the essential concern of the Community legislature was that it should be put to its intended use.
Furthermore, as was also pointed out, and rightly so, by the Commission and the intervention agency, there is no sense in having supervision unless the negative findings resulting from it have at least some consequences. There is no need for me to explain in detail why simply checking the use, when no consequence is attached to abuse, would not guarantee that the sugar was put to its intended use.
That interpretation, based on the wording alone, is supported, moreover, by the preamble to the Commission's regulation. Thus in the sixth recital in the preamble it is stated that only sugar “intended for animal feed” is eligible for a denaturing premium One cannot interpret that, as the plaintiff in the main action seeks to do, as meaning that it is sufficient for the recipient of the premium to give sufficient indication of the intended use. Were one to be content with that requirement the door would be wide open to abuse. In order to guarantee that the sugar really is used for animal feed the Commission stipulates in the seventh recital in the preamble that “Member States must take all necessary measures to ensure that it is used for” that purpose.
That the grant of the denaturing premium is only justified in the eyes of Community law if, after denaturing, the sugar is actually used for animal feed, becomes abundantly clear on examination of the Commission's implementing regulation in the light of Regulation (EEC) No 2049/69 of the Council of 17 October 1969 laying down general rules on the denaturing of sugar for animal feed (Official Journal, English Special Edition 1969(11) p. 441).
According to the first sentence of Article 1 (2) of the Council regulation “sugar in respect of which a denaturing premium has been granted shall be used only for animal feed”. The court making the reference and the plaintiff in the main action consider the provision to be merely a rule which lays a duty upon the Commission, and which is not linked to the provision of any specific penalties, as is indicated by the words “shall ... only” and by the second sentence, which states that “the denaturing method used shall be determined with this end in view”. They consider that if, however, denaturing is not sufficient to ensure proper compliance with the rule whereby the Council laid a duty upon the Commission, the traders ought not to be held responsible for this.
The first point about that submission is that although the use of the words “shall ... only” indicates primarily a prohibition, as the court making the reference rightly states, it also serves to stipulate that in order to qualify for a premium the denatured sugar must not be used for any pupose other than animal feed or, in other words, that that is the use to which it must be put.
Moreover, the question whether the provision is to be considered as a rule imposing a duty or merely laying down a procedural requirement need not, in my opinion, be examined since its wording is in any case sufficiently clear and compelling to yield an unequivocal interpretation of the implementing regulation of the Commission discussed above.
The same conclusion is to be derived from the sense and purpose of the rules governing denaturing premiums as revealed, in particular, in the preamble to the Council regulation. The plaintiff in the main action is in error here in considering that the purpose of the regulation is primarily to relieve congestion on the sugar market, and that the policy of subsidizing denaturing “for animal feed” is of minor importance. That is contradicted not only by the passages of the provisions referred to above but also by the fact that both in the Council regulation and in the Commission regulation the recitals in the preamble relating to the use of the sugar always precede the recitals dealing with the relief of congestion on the sugar market. Thus the second recital in the preamble to the Council regulation provides, before there has been any mention of ways of selling sugar surpluses:
“... to prevent a premium being paid in respect of sugar not used for feed, there should be provisions to ensure that it is used for the purpose intended and that denatured sugar which has benefited from a premium can be used for animal feed only; ... it might be desirable to specif)- that the denatured sugar should be used as feed for certain types of animal”.
That the denaturing premium is part of the policy of providing subsidies in order to enable sugar to compete as animal feed and as an additive to animal feed against other animal feeds may also be deduced indirectly from the basis of calculation referred to in Article 3 of the Council regulation which provides inter alia that the criteria for determining the amount of the premium are to be based on the foreseeable market price for animal feedingstuffs with which the denatured sugar will have to compete and the relative nutritive value of denatured sugar and competing animal feedingstuffs. Such an aim — reducing the price by paying sugar manufacturers a premium — would be frustrated, however, if cheaper sugar destined for animal feed could be used, with corresponding profits for the traders concerned, to satisfy different needs which otherwise could be satisfied only by sugar not reduced in price by the grant of premiums.
The final argument is that, were the sole purpose of the regulations to relieve congestion on the sugar market the provisions regarding supervision of the use of denatured sugar for animal feed would be pointless.
As the Commission and the intervention agency both maintain, it must therefore be assumed that the denaturing premium was designed to relieve congestion on the market in sugar intended for human consumption by diverting some of that sugar for use as animal feed. But there can be a lawful subsidizing of sugar, that is to say, in conformity with that aim, only if the sugar in respect of which a subsidy is granted is actually used for the intended purpose. It is that sense and purpose of the rules which must ultimately, I think, — were the wording considered abiguous — convince the informed observer that the premium is payable only subject to the denatured sugar's being used for its intended purpose. That means that, conversely, on a reasonable construction of the whole body of rules on the subject, if other use was made of the sugar there should no longer be any justification for payment of the premium and it should be repaid.
(c)
That conclusion is not invalidated, as the court making the reference and the plaintiff in the main action believe, by any legal comparison, according to system, between the denaturing provisions at issue here and the provisions contained in other regulations. In the first place, those regulations (I have in mind the reference to Commission Regulation (EEC) No 1687/76 of 30 June 1976 laying down common detailed rules for verifying the use and/or destination of products from intervention (Official Journal L 190, of 14 July 1976, p. 1)) have a different content, and in the second place it is clear that the Community legislature has in the meantime come to the conclusion that scrupulous supervision of the goods is necessary to prevent abuse, as, for instance, is apparent from Commission Regulation (EEC) No 649/78 of 31 March 1978 on the sale at reduced prices of intervention butter for direct consumption as concentrated butter.
(d)
The interpretation advanced here corresponds to the view adopted by the Member States in which denaturing took place to any appreciable degree during the years in question (according to statements made by the Commission these were, apart from the Federal Republic of Germany, France, Belgium and the Netherlands), as reflected in the measures in force in those countries for supervising the use to which the sugar was finally put, that using the denatured sugar for the purpose intended was a prerequisite for the lawful grant of the denaturing premium.
Last but not least it is clear that the plaintiff in the main action, as is shown in the contractual clause quoted at the beginning of this opinion, attributed the same meaning to the denaturing rules, inasmuch as it expressly drew the attention of the buyer of the goods to the fact that proof might have to be produced that the sugar had been used for the intended purpose.
3.
Since the first part of the question which has been referred to the Court for a preliminary ruling must therefore be answered in the affirmative it remains to be examined whether the recipient of the denaturing premium may be asked to repay it even when a third party to whom he is not bound by contract has used the dentured sugar otherwise than for its intended purpose. It must be borne in mind that Regulation No 100/72 contains no corresponding provision such as that contained in the subsequent regulation, Commission Regulation (EEC) No 1320/77 of 20 June 1977 opening an invitation to tender for the purpose of determining premiums for white sugar for feeding to bees (Official Journal L 152 of 21 June 1977, p. 18), according to which if the undertaking to denature has not been complied with “... the Member State which paid the premium shall require the person who was entitled to the denaturing premium to repay it.” However the intervention agency which adopted the contested decision to demand repayment would like to have Paragraph 10 (1) of the German regulation on denaturing premiums interpreted to that effect. The second part of the question may therefore only be understood as a request by the court making the reference, which must decide whether the German rules are compatible with Community law, for clarification of the question whether rules such as those laid down in paragraph 10 (1) of the German regulation on denaturing premiums are compatible with the provisions of Community law.
The plaintiff in the main action submits in the alternative that it may not be held liable for misuse of the denatured sugar by subsequent purchasers because such an obligation ought to have been set out clearly and unambiguously in the legal provisions. On that basis a demand for repayment is excluded in this instance on grounds of legal clarity and certainty in the law.
In regard to that submission, which concerns the question whether the recipient of a wrongly-paid premium may be asked to repay it when, without any fault on his part, third parties have used the denatured sugar for an unauthorized purpose, it should be pointed out that, as the Court stated in Case 57/72 (Westzucker GmbH v Einfuhr- und Vorratsstelle fur Zucker, judgment of 14 March 1973 [1973] ECR 321), Article 9 (8) of Regulation No 1009/67 of the Council of 18 December 1967 on the common organization of the market in sugar (Official Journal, English Special Edition 1967, p. 304) enables the Commission to exercise the powers necessary to ensure the functioning of the system of denaturing premiums. In the absense of any suitable administrative infrastructure the Commission therefore empowered and required the Member States, in Article 19 of Regulation No 100/72, to adopt all the necessary measures to ensure “that the denatured sugar is only used for animal feed”.
Whilst that regulation, unlike the subsequently adopted Regulation No 1320/77 to which I have already referred, does not expressly state that premiums received in error must be repaid, it cannot be denied that just such a duty to repay accords with the sense and purpose, as well as with the manner of operation of the provisions in question, and must therefore be considered as a measure which is necessary in order to ensure the proper functioning of the system of denaturing premiums. In that regard it must first be borne in mind that in Case 216/78 (Nicolai Beljazky v Hauptzollamt Aachen-Süd, judgment of 28 June 1979 [1979] ECR 2273) and in Case 217/78 (SA Nicolas Corman & Fils v Hauptzollamt Aachen-Süd, judgment of 28 June 1979 [1979] ECR 2287) the Court held that a request for additional payment of monetary compensatory amounts for failure to comply with a prescribed purpose was lawful even in the absence of provision for such legal consequences in Regulation No 1259/72, the regulation which made special provision for the reduced amount and which was at issue in those cases.
The fact that supervision is purposeless unless it has the consequence that premiums must be repaid must also be taken into account. To that extent I am of the opinion, unlike the plaintiff in the main action, that the considerations expressed in Joined Cases 99 and 100/76 (NV Roomboterfabriek “De Beste Boter” and Firma Jose/Hoche, Bntterscbmelzwerk v Bundesanstalt für landwirtschaftliche Marktordnung, judgment of 11 May 1977 [1977] ECR 861) and in Case 42/79 (Milch-, Fett- und Eier-Kontor GmbH v Bundesanstalt für landwirtschaftliche Marktordnung, judgment of 13 December 1979 [1979] ECR 3703), which were likewise concerned with ensuring compliance with the legally prescribed use on resale, are unquestionably applicable in the present case. In each of the above-mentioned cases the question was whether the purchaser of butter from storage was liable for the conduct of third parties. In contrast to Regulation No 100/72 which is at issue today, the regulations which gave rise to those judgments, Regulation No 1259/72 of the Commission of 16 July 1972 (Official Journal, English Special Edition, 1972 (II), p. 559) and Regulation No 1308/68 of the Commission of 28 August 1968 (Journal Officiel 214 of 28 August 1968, p. 10 ( 2 )) also contained detailed rules to ensure compliance with the prescribed purpose. Recourse to those judgments is justified, however, because both cases called for a decision on instances of resale which were not expressly covered by the provisions on penalties. In both cases the Court stated, referring to the efficacy of the system of supervision, that the purchaser of butter from storage was not relieved of his obligations in that connection on reselling the goods and that accordingly his duty to ensure compliance with the prescribed purpose remained in force.
The position here is no different. The denaturing rules for sugar also constitute an exceptional measure which was intended to ensure the transfer of excess sugar on particularly favourable conditions to the animal feedingstuffs sector. Accordingly, the adoption of suitable precautionary supervisory measures was required in order to ensure that sugar sold in that manner and on those conditions did not reach the normal market but was actually used as animal feed. Were the buyer able to relieve himself of that obligation entailed in the purchase of sugar at reduced prices by reselling the sugar, such a possibility would for obvious reasons constitute a loophole in the rules introduced by Regulation No 100/72 capable of jeopardizing the aims and operation of those rules. There can therefore be no objection if, in order to counteract such a risk of abuse, Member States insist on the liability of the recipient of the premiums for misuse of the goods even when such misuse is attributable to third parties.
In these circumstances there can also be no question of a breach of the principle of legal certainty or legal clarity or even, as the court making the reference thinks, of the principle nulla poena sine culpa. As I have already stated, the general framework of the provisions in question, viewed in the light of the aims of the denaturing rules, make it sufficiently plain and clear — we are, after all, concerned here with the administration of a system of benefits — that the premium is payable only on condition that the denatured sugar is put to its intended use. Morevoer, it was expressly stated in the denaturing premium certificates which gave rise to the present case that premiums received without justification must be repaid.
It is also apparent that the plaintiff was aware, as the clause in which it sought to protect itself financially shows, that by making payment subject to completion of denaturing the Community had entrusted it with Community resources for which it was answerable. If repayment of the premiums is requested bacause the use with which they are connected was disregarded there can be no question of any blame or poena within the meaning of the principle referred to above.
For the reasons given above the allegation that there has been an infringement of the principle of proportionality is similarly misplaced. In view of the fact that the plaintiff in the main action participated in the denaturing scheme of its own free will and with knowledge of the duty to repay which existed in certain circumstances, I concur with the Commission and the intervention agency in their opinion that the imposition of such a duty on denaturing undertakings is not a measure in excess of what is appropriate and necessary in order to achieve the twofold aim of the system of denaturing premiums, namely to relieve congestion on the sugar market and to make cheap sugar available for animal feed.
4.
In conclusion I suggest that the question raised by the court making the reference should be answered as follows:
By virtue of Regulation No 2049/69 of the Council and Regulation No 100/72 of the Commission the recipient of a denaturing premium is under a duty to use the sugar exclusively for animal feed or to ensure that it is so used. National rules to the effect that the recipient must repay the premium if the sugar is used for another purpose by the recipient himself or by third parties do not conflict with the above-mentioned regulations.
( 1 ) Translated from the German
( 2 ) Translator's note There is no authentic English translation of this regulation
Full & Egal Universal Law Academy