Opinion of the Advocate-General
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My Lords,
1 . This case concerns a marking requirement laid down in the Community rules for the granting of aid in respect of skimmed-milk powder used to make feedingstuffs for calves . Under Article 1(1)(a ) of Commission Regulation No 1725/79 of 26 July 1979 on the rules for granting aid to skimmed milk processed into compound feedingstuffs and skimmed-milk powder intended for feed for calves ( Official Journal 1979, L 199, p . 1 ), skimmed-milk powder used in the manufacture of compound feedingstuffs may qualify for aid only if it has been used in the manufacture of such feedingstuffs under the conditions laid down in Article 4 . Article 4(4)(b ) provides as follows :
"For the manufacture of compound feedingstuffs, within the meaning of paragraph 1, skimmed-milk powder incorporated in a mixture may not be used unless :
( a ) ...
( b ) the package containing the mixture bears in clearly legible form :
- one or more of the following statements :
' Mixture intended for the manufacture of compound feedingstuffs - Regulation ( EEC ) No 1725/79' ;
...
' Mélange destiné à la fabrication d' aliments composés - règlement ( CEE ) n° 1725/79' ;
...
- an indication of the skimmed-milk powder content, the mineral salts and added sucrose content, and the fatty matter content, including liposoluble technical agents ."
2 . Schweizerische Lactina Panchaud AG (" Lactina ") is a German company based at Kehl which makes feedingstuffs for calves out of skimmed-milk powder . In 1983 Lactina used as raw material skimmed-milk powder incorporated in mixtures which it had bought from a French producer . When that mixture reached Lactina from the French producer, it was in paper bags . The bags themselves had no writing on them but sewn into the upper seam of the bags were labels stating the various component parts of the mixture and bearing the statement "Mélange destiné à la fabrication d' aliments pour animaux - règlement ( CEE ) n° 1725/79 ". During a factory inspection carried out on 23 November 1983 inspectors from the Bundesamt fuer Ernaehrung und Forstwirtschaft ( Federal Office for Food and Forestry ) (" the Bundesamt ") came across the bags with the sewn-in labels, took the view that such marking by labels instead of by statements on the bags did not fulfil the requirement under Article 4(4)(b ) and therefore refused Lactina aid under Regulation No 1725/79 in respect of 5 700 kg of skimmed-milk powder .
3 . Lactina commenced proceedings claiming payment of that aid against the Federal Republic of Germany, represented by the Bundesamt . It relied in particular on the interpretation placed on the relevant provision of Regulation No 1725/79 by the French counterpart of the Bundesamt, the Fonds d' orientation et de régularisation des marchés agricoles (" Forma "). On page 4 of its Circular 09-83 PL/03 of 17 May 1983 dealing with this subject, Forma stated : "The package containing the mixture must bear either directly, or on a label attached to the closing system, (( the prescribed statement ))". Lactina argued that it was sufficient to comply with Article 4(4)(b ) if a label bearing the prescribed statement was attached to the package .
4 . The dispute came before the Verwaltungsgericht Frankfurt am Main, which took the view that the wording of the relevant provision of Regulation No 1725/79 was not clear . Accordingly, it referred the case to the Court for a preliminary ruling on the following question :
"Is the condition laid down in Article 4(4)(b ) of Commission Regulation ( EEC ) No 1725/79 of 26 July 1979, to the effect that the package containing the mixture must bear certain statements, satisfied if the statements are on labels which are firmly sewn into the upper seam of the paper bags?"
5 . Lactina, in its observations to the Court, merely insists upon the divergence between the French practice and the German practice in applying the Community regulation; it argues that such a divergence, if it is not unlawful, brings about a distortion of competition within the EEC . It is no doubt implicit in its observations that it maintains that the labelling in question did fulfil the requirements of the regulation and therefore that it should be paid the aid in question .
6 . The Bundesamt contends, as it did before the national court, that the statements must be written or printed on the package, here on the paper bag itself .
7 . The Commission advocates a strict view of the requirement in question and proposes the following answer to the question : "Article 4(4)(b ) of Regulation ( EEC ) No 1725/79 must be interpreted as meaning that the statements must be firmly affixed on the package and may not be on labels which are firmly sewn into the upper seam of the paper bags ."
8 . Approaching Article 4(4)(b ) from a literal point of view, one can readily understand why the national court felt constrained to seek a preliminary ruling, for the phrase "the package containing the mixture bears in clearly legible form ... one or more of the following statements" is ambiguous . On a narrow construction, the word "package" might be taken to refer to the bag itself exclusive of any label appended to it, in which case a statement printed on a label could not be said to be "borne" by the package . However, it is equally possible to read the word "package" in a broad sense as meaning the whole of the packaging including any labels appended . The fact that Forma apparently read Article 4(4)(b ) in that sense indicates that a broad construction is by no means implausible, though of course Forma' s circular cannot have the effect of binding the German authorities in the manner that Lactina seems to suggest . As I understand them, the same ambiguity is to be found in the French and German versions of the phrase in question : "les emballages contenant le mélange portent, clairement lisibles, l' une ou plusieurs des inscriptions suivantes" and "die die Mischung enthaltenden Verpackungen gut leserlich eine oder mehrere der nachstehenden Aufschriften tragen ". Moreover, this ambiguity is confirmed, as I shall seek to show, by the position taken by the Commission itself, the author of the regulation . Indeed both the Commission and the Bundesamt, while maintaining that the requirement at issue is not satisfied by labelling in the present case, have accepted that the same requirement should be interpreted as being satisfied by labelling in other contexts . In view of that ambiguity, a purely literal interpretation of the provision in question is not sufficient to dispose of the case . It is therefore necessary to examine the provision in the light of its context and purpose .
9 . Article 4(4)(b ) applies to mixtures incorporating skimmed-milk powder, which are intermediate products . The rules governing the packaging of the end-product - namely compound feedingstuffs - are to be found in Article 4(2 ) and ( 3 ). Article 4(2 ) provides that compound feedingstuffs shall "be packed in bags ... on which (( certain statements )) shall be printed, in clearly legible characters ". In addition, Article 4(3 ) provides that Member States may specify "the detailed rules for marking the packages as prescribed in paragraph 2, as well as additional information which may be given on a label ". The contrast between the clarity of those provisions and the ambiguity of Article 4(4)(b ) is clear . Less clear are the conclusions to be drawn from it, for the a contrario arguments cut both ways . On the one hand, it might be said that, if the draftsman had wished to authorize labelling in Article 4(4)(b ), he would have used the clear words that he used in Article 4(3 ). On the other hand, it might be said that, if his intention was to require a printed message on the bags themselves, he would have used the clear words that he used in Article 4(2 ).
10 . A further argument that is worth noting in this context is that the word "packages" in Article 4(3 ) is used to indicate the "bags" referred to in Article 4(2 ) whereas the "label" mentioned in Article 4(3 ) is referred to as a separate, additional matter . If it is given the same sense as it has in Article 4(3 ), the word "package" in Article 4(4)(b ) therefore indicates the bags containing the goods to the exclusion of any label appended to the bags . However, that argument has lost much of its force since Article 4(2 ) was amended by Commission Regulation ( EEC ) No 3368/88 of 28 October 1988 ( Official Journal 1988, L 296, p . 50 ). In its original version, Article 4(2 ) required four items of information ( points ( a ), ( b ), ( c ) and ( d ) ) to be printed on the bags of compound feedingstuff . Since the amendment, only the information referred to in points ( a ) and ( b ) need be printed on the bags; with regard to the other items of information, a new subparagraph has been added to Article 4(2 ) stating as follows :
"In addition, packages must indicate in clearly legible characters the skimmed-milk powder content and the month and year of manufacture of the compound feedingstuffs :
( i ) either on the label inserted in the closing device,
( ii ) or printed on the package itself ."
The French version of the new subparagraph is worded as follows :
"En outre, les emballages doivent porter en caractères clairement lisibles l' indication de la teneur en lait écrémé en poudre ainsi que le mois et l' année de fabrication des aliments composés :
- soit sur l' étiquette prise dans le système de fermeture,
- soit par impression sur l' emballage lui-même ."
It is significant that the French text uses the words "les emballages doivent porter ..." to mean either that the information in question may be printed on the package itself or that it may be on a label inserted in the closing device . It is difficult therefore to accept that the same words, when used in Article 4(4)(b ), can have only the first of those two meanings . On the contrary, the amending provisions show that the requirement in issue can be satisfied by an appropriate label .
11 . In any event, the argument of the Bundesamt and the Commission, to the effect that the requirements of Article 4(4)(b ) are not satisfied by labelling, is undermined by their own observations . From the observations of the Bundesamt and from the Commission' s reply to a question put at the hearing, it appeared that the Commission had taken the view that, while labelling did not satisfy those requirements in relation to the statement prescribed by the first indent of Article 4(4)(b ), the information referred to in the second indent might optionally be written on a label attached to the bag . In my view, if the phrase in question may properly be given that meaning in relation to the second indent, it may properly be given the same meaning in relation to the first indent . No reason was advanced to justify a different interpretation . On the contrary, the Commission stated in its written observations ( paragraph 3, fourth subparagraph ) that one item of information referred to in the second indent ( namely, the skimmed-milk powder content ) is crucial inasmuch as the grant of aid and the amount thereof depend on it .
12 . Moreover, since on the view I take the phrase must be given the same meaning in relation to both indents, and since the Bundesamt has no doubt acted on the interpretation furnished by the Commission and has granted aid in cases where the information referred to in the second indent was given on labels, great uncertainty would be caused if the Court were now to rule that labelling did not satisfy the requirements of the regulation in relation to the first indent . Since there is already considerable confusion caused by the drafting of the legislation and by the Commission' s inconsistent interpretation of it, it would be wrong in my view to accept the narrower interpretation where the broader interpretation is at least equally defensible .
13 . There is a further point which is not without significance . While the Bundesamt insists that the prescribed statement must be printed or written on the bag, the Commission indicates in its proposed reply to the question asked by the national court that it would consider acceptable a statement "firmly affixed on the package", thus suggesting that the requirement can be satisfied by something other than words printed on the bag . At the hearing it even suggested that a sticker fixed with industrial adhesive would be acceptable . In the circumstances one is entitled to ask why a label sewn into the seam of the bag does not constitute such a statement "firmly affixed on the package ".
14 . For the above reasons, I am predisposed to accept the broader interpretation of the regulation .
15 . It remains to be seen whether that interpretation of Article 4(4)(b ) is consistent with the purpose of the provision and with the approach followed in similar cases by the Court . The purpose of the provision is set out in the third recital in the preamble to Regulation No 1725/79, which states that "there should ... be appropriate provisions to prevent aid being paid more than once for one and the same product", and in the fifth recital, which states that "for the purposes of control it must also be specified that the products should be packaged in such a way as to enable them to be identified ". The Commission contends that such purposes are less well served by a label sewn into the seam of the bag than by a statement "firmly affixed on the package", since labels can easily be torn off and substituted . The Commission has not, however, produced any convincing argument to show why labelling is less satisfactory than some of the other methods that it seems willing to countenance . Nor - as I have already observed - has the Commission shown why, if labelling is unsatisfactory as regards the first indent, it is acceptable as regards the second indent .
16 . Turning finally to the case-law, I find nothing in any previous judgment of the Court to shake the view that I have reached as to the correct interpretation of the provision in question . It is true that there are a number of judgments establishing a general principle to the effect that, where the Community taxpayers' money is being handed out in the form of subsidies of one kind or another, the relevant legislation should be construed narrowly and its requirements complied with strictly . In Joined Cases 146, 192 and 193/81 BayWa v BALM (( 1982 )) ECR 1503, at p . 1529, paragraph 10, the Court spoke of "the principle consistently referred to in the case-law of the Court to the effect that provisions of Community law and, in particular, of Council or Commission regulations which create a right to benefits financed by Community funds must be given a strict interpretation ". In Case 11/76 Netherlands v Commission (( 1979 )) ECR 245, at p . 279, paragraph 9, the Court recognized the need for a "strict interpretation of the conditions under which expenditure is to be borne by the EAGGF ". Finally, in Case 18/76 Germany v Commission (( 1979 )) ECR 343, the Court held that "the formalities relating to proof must be strictly adhered to in order for traders to receive the financial benefits granted within the framework of the common agricultural policy ". Further cases are cited by Advocate General Mischo in his Opinion in Case 143/85 Corman v OBEA (( 1986 )) ECR 2873, at p . 2885 .
17 . The Corman case is of particular interest not only because it displays some striking parallels with the present case but also because it demonstrates that the principle of strict interpretation and strict compliance laid down in the other cases that I have cited is by no means absolute . Corman concerned sales of butter from intervention stocks subject to a condition that the purchaser would process it into butteroil and make it available to consumers in plastic packs bearing on the upper surface the words "butteroil for cooking ". ( It is noteworthy that the word "bear" was used in the regulation in issue in that case, as it is in Regulation No 1725/79 .) The Court held that such a requirement was satisfied when the words in question appeared, not on the pack itself, but on a sheet of foil placed between the butter and the transparent lid that sealed the pack . The Court observed, in paragraph 23 of the judgment, that it had not been established that such a system of packaging was liable to facilitate fraud . It might well be contended that there is little difference between a label sewn into the upper seam of a bag of skimmed-milk powder and a sheet of foil inserted under the lid of a tub of butteroil .
18 . The conclusions that may be drawn from the cases reviewed above are as follows : on the one hand, legislation creating a right to benefits financed by Community funds must be interpreted strictly; on the other hand, it should not be interpreted more strictly than is necessary, having regard to its purpose . Applying these principles to the present case, I conclude that the question whether the requirement under Article 4(4)(b ) of Regulation No 1725/79 is satisfied does not depend on whether the marking is effected by means of labelling or by some other method, but on whether it constitutes an effective means of identifying the package and preventing fraud . Whether that test is satisfied in the particular circumstances of the present case is a question of fact to be answered by the national court .
19 . I am accordingly of the opinion that the question referred to the Court by the Verwaltungsgericht Frankfurt am Main should be answered as follows :
"The condition laid down in Article 4(4)(b ) of Commission Regulation ( EEC ) No 1725/79, to the effect that the package containing the mixture incorporating skimmed-milk powder must bear certain statements, is satisfied if the statements are on labels which are firmly sewn into the upper seam of the packages, provided that such labels are adequate for the purpose of identifying the packages and preventing fraud ."
(*) Original language : English .
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