Summary
Parties
Grounds
Decision on costs
Operative part
Keywords
++++
1 . Measures adopted by the Community institutions - Regulations - Regulation derogating from earlier legislation - Effect on validity of earlier legislation - None
2 . Agriculture - Common organization of the markets - Milk and milk products - Aid for butter and concentrated butter for use in the manufacture of pastry products, ice-cream and other foodstuffs - Award of market butter to be processed into concentrated butter - Decision taken by successful tenderer on economic grounds not to process the butter but to purchase intervention butter prior to the introduction of a derogation allowing such a substitution - Forfeiture of the tendering security - Principles of proportionality and equal treatment - Whether breached - No breach - Possibility of suspending Community rules in an individual case for reasons of fairness - None
( Commission Regulations Nos 1932/81, Art . 12(1 ), and 2661/85 )
Summary
1 . The validity of a provision of general legislation cannot be made subject to the subsequent operation of a specific regulation which derogates from the general scheme in respect of certain expressly defined situations .
2 . Under the aid scheme for butter and concentrated butter for use in the manufacture of pastry products, ice-cream and other foodstuffs, the fact that by virtue of Article 12(1 ) of Regulation No 1932/81 an undertaking awarded market butter for processing into concentrated butter which decides on economic grounds not to comply with its obligation forfeits the tendering security, even where it had purchased intervention butter as a substitute for the butter for which it had successfully tendered and subsequently processed it in the proper manner, cannot be regarded as disproportionate, even though such substitution was subsequently authorized by Regulation No 2661/85 .
Such forfeiture of the security is an integral feature of a system which the trader has chosen voluntarily and in its own interest, and it takes place when the risk in respect of which the security had been lodged has in fact materialized .
Nor can forfeiture of the tendering security in such circumstances be considered to be discriminatory in so far as Regulation No 1932/81 treats in the same way all successful tenderers who are in a comparable situation, particularly with regard to forfeiture of the security in one of the cases set out in Article 12(1 ).
The application of that article cannot be suspended in an individual case for reasons of fairness in such a way as to avoid forfeiture of the security, since Community law does not recognize any general principle of objective fairness and traders, in taking part voluntarily and in their own interest in tendering procedures, must themselves assume the risks inherent in such operations, provided that the Commission does not change the economic position or the legislation in force in an unforeseeable and arbitrary manner .
Parties
In Case C-174/89
REFERENCE to the Court under Article 177 of the EEC Treaty by the Verwaltungsgericht ( Administrative Court ) Frankfurt am Main ( Federal Republic of Germany ) for a preliminary ruling in the proceedings pending before that court between
Hoche, whose registered office is in Neunkirchen-Speikern ( Federal Republic of Germany ),
and
Bundesanstalt fuer landwirtschaftliche Marktordnung ( Federal Office for the Organization of Agricultural Markets )
on the validity and application of Article 12(1 ) of Commission Regulation ( EEC ) No 1932/81 of 13 July 1981 on the granting of aid for butter and concentrated butter for use in the manufacture of pastry products, ice-cream and other foodstuffs ( Official Journal 1981, L 191, p . 6 ),
THE COURT ( Second Chamber )
composed of : F . A . Schockweiler, President of Chamber, G . F . Mancini and T . F . O' Higgins, Judges,
Advocate General : C . O . Lenz
Registrar : H . A . Ruehl, Principal Administrator
after considering the written observations submitted on behalf of
Hoche, by Guenther Beckstein, Hans-Otto Jordan and Peter Jungnickl, Rechtsanwaelte, Nuremberg ( Federal Republic of Germany ),
the Commission, by Dierk Booss, Legal Adviser, and Klaus-Dieter Borchardt, a member of its Legal Department, acting as Agents,
having regard to the Report for the Hearing,
after hearing the oral observations submitted on behalf of Hoche GmbH, represented by Cornelia Kienlein, Rechtsanwaeltin, Nuremberg, and by the Commission, represented by Dierk Booss and Soeren Bechsgaard, Adviser in the Directorate-General for Agriculture, at the hearing on 8 March 1990,
after hearing the opinion of the Advocate General delivered at the sitting on 2 May 1990,
gives the following
Judgment
Grounds
1 By an order of 20 April 1989, which was received at the Court on 22 May 1989, the Verwaltungsgericht ( Administrative Court ) Frankfurt am Main referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty two questions on the validity and, in the alternative, on the inapplicability for reasons of fairness in the case before it of Article 12(1 ) of Commission Regulation ( EEC ) No 1932/81 of 13 July 1981 on the granting of aid for butter and concentrated butter for use in the manufacture of pastry products, ice-cream and other foodstuffs ( Official Journal 1981, L 191, p . 6 ).
2 Those questions were raised in proceedings between Hoche GmbH ( hereinafter referred to as "Hoche ") and the Bundesanstalt fuer landwirtschaftliche Marktordnung ( Federal Office for the Organization of Agricultural Markets ) ( hereinafter referred to as "BALM ") concerning the repayment of tendering security lodged by Hoche which had been declared forfeit by the BALM pursuant to Article 12(1)(c ) of Regulation No 1932/81 .
3 That regulation is designed to promote the disposal of market butter by the grant of aid at a level determined in accordance with a tendering procedure participation which is open only to undertakings which either use the butter directly in the manufacture of pastry products, ice-cream or other foodstuffs or process market butter into concentrated butter intended for use in the manufacture of such products . In the latter case, the requirement that the butter be processed into concentrated butter is guaranteed by the lodging of processing security . The tendering security which the tenderer is required to submit in order to take part in the tendering procedure is released in respect of those quantities for which processing security has been lodged . Under Article 12(1)(c ) of Regulation No 1932/81, however, the tendering security is forfeit, except in cases of force majeure, in respect of any quantity for which the tenderer did not, within the period prescribed, lodge the processing security .
4 It appears from the documents before the Court relating to the main proceedings that Hoche, which is a butter processor, took part in March, April and May 1985 in individual invitations to tender Nos 76 to 81 organized pursuant to Regulation No 1932/81; it was awarded 1 672 tonnes of market butter which it undertook to process into concentrated butter and in respect of which it lodged the corresponding tendering security .
5 On 21 May 1985, the Commission, for reasons of market policy aimed at reducing stocks of intervention butter, lowered the minimum selling price for intervention butter from ECU 1.15 to 1.05 and raised butter processing costs from ECU 0.14 to 0.16 . This action resulted in a considerable disparity between the price levels of market butter and intervention butter; even taking into account the processing aid granted, market butter became 10.65% more expensive than intervention butter .
6 As a result of this price difference between market butter and intervention butter, it was no longer profitable to process market butter into concentrated butter . Accordingly, Hoche decided not to comply with the undertaking to process market butter which it had given pursuant to individual invitations to tender Nos 76 to 81 and instead supplied its needs with intervention butter . It placed in storage the market butter for which it had successfully tendered and did not lodge processing security in respect of those quantities .
7 On 20 September 1985 the Commission adopted Regulation ( EEC ) No 2661/85 derogating from Regulations ( EEC ) Nos 262/79 and 1932/81 as regards butter for use in the manufacture of pastry products, ice-cream and other foodstuffs ( Official Journal 1985, L 252, p . 13 ). In order to promote the disposal of stocks that regulation seeks to encourage traders to purchase intervention butter by providing that tenderers in individual invitations to tender Nos 76 to 81 may be released from their obligations under Regulation No 1932/81, so long as the processing period has not yet expired, on condition that they have been awarded contracts for intervention butter pursuant to Commission Regulation ( EEC ) No 262/79 of 12 February 1979 on the sale of butter at reduced prices for use in the manufacture of pastry products, ice-cream and other foodstuffs ( Official Journal 1979, L 41, p . 1 ) in respect of quantities of butter equivalent to 25% more than the quantity for which they have requested release from their obligations pursuant to Regulation No 1932/81 .
8 Following the entry into force of Regulation No 2661/85 on 21 September 1985, Hoche took advantage, with regard to part of the quantity of market butter covered by the processing obligation under Regulation No 1932/81, of the opportunity offered by Regulation No 2661/85 to convert the undertaking to process market butter into an offer to purchase intervention butter .
9 In accordance with Article 12(1 ) of Regulation No 1932/81, however, the BALM declared forfeit the tendering security in respect of the quantity of market butter for which Hoche had not lodged processing security and had not been released from its obligations under Regulation No 1932/81 because it had not availed itself of the option to convert under Regulation No 2661/85 . Hoche thereupon brought an action before the Verwaltungsgericht Frankfurt am Main for repayment of that security .
10 The national court, in the grounds of its order, has pointed out that the decision taken by the BALM to declare the tendering security forfeit was in accordance with Article 12(1 ) of Regulation No 1932/81 and that normally it would therefore have had no hesitation in dismissing the action brought by Hoche . However, it considers that the adoption by the Commission of Regulation No 2661/85 created a special situation in this case . The national court takes the view that under the conditions laid down in that regulation the forfeiture of the tendering security pursuant to Article 12(1 ) of Regulation No 1932/81 constituted, in the case of Hoche, a breach of the principles of proportionality and equal treatment, giving rise to doubt as to the validity or, at least, the applicability in this case of that provision of Regulation No 1932/81 .
11 In those circumstances, the Verwaltungsgericht Frankfurt am Main decided to stay the proceedings until the Court had given a preliminary ruling on the following questions :
"( a ) Is Article 12(1 ) of Regulation No 1932/81 invalid because it does not prevent forfeiture of the tendering security where an undertaking was, in 1985, awarded contracts in individual tendering procedures Nos 76 to 81, but instead of lodging processing security purchased and lawfully processed a quantity of intervention butter sold under Regulation No 262/79 equivalent to the contract quantity, prior to the entry into force of Regulation No 2661/85?
If the above question is answered in the negative :
( b ) In the circumstances set out in Question ( a ), is the application of Article 12(1 ) of Regulation No 1932/81 suspended in the individual case?"
12 Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the course of the procedure and the written observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court .
The first question
13 The national court has referred this question because it was uncertain as to the legality, in the circumstances of the case before it, of Article 12(1 ) of Regulation No 1932/81, in view of a possible breach of the principles of proportionality and equal treatment .
14 In this regard, the national court took the view that the principle of proportionality had been breached in the case before it . The purpose served by forfeiture of the tendering security, namely to ensure that market butter was processed into concentrated butter for use in the manufacture of foodstuffs, no longer existed when the tendering security lodged by Hoche was declared forfeit by the BALM . On the contrary, Regulation No 2661/85 confirms that, following the decision on 21 May 1985 to reduce the minimum selling price for intervention butter, the Commission no longer attached importance to the processing of market butter but sought to redirect demand towards the consumption of intervention butter . Hoche acted in accordance with that objective by obtaining supplies of intervention butter prior to the entry into force of Regulation No 2661/85, with the result that forfeiture of the tendering security cannot be justified in its case .
15 The national court also took the view that in the case before it there had been a failure to observe the principle of equal treatment inasmuch as Regulation No 2661/85 did not apply in equal measure to all tenderers under individual invitations to tender Nos 76 to 81 . Those traders in competition with Hoche who had not purchased intervention butter at the time the regulation came into force benefited in full from the opportunity to convert provided for by it and therefore did not have to suffer forfeiture of the tendering security, whereas Hoche, which had already obtained supplies of intervention butter before Regulation No 2661/85 entered into force, did suffer such forfeiture .
16 In order to reply to the first question referred by the national court, it should first be recalled that Article 12(1 ) of Regulation No 1932/81 provides as follows :
"Except in cases of force majeure, the tendering security shall be forfeit in respect of any quantity for which the tenderer :
( a ) withdrew the tender after the closing date for the submission of tenders, as specified in Article 4(2 ) and ( 3 ),
or
( b ) in the case of butter :
did not, within the period prescribed, process the butter into the products referred to in Article 2(1)(a ),
( c ) in the case of concentrated butter :
did not, within the period prescribed, lodge the processing security referred to in Article 7(2 )".
17 Examination of that text makes it clear that the provision contains an exhaustive list of grounds which may justify forfeiture of the tendering security lodged in connection with invitations to tender concerning the grant of aid for butter and concentrated butter .
18 It must further be observed that the situation in the main proceedings corresponds to the grounds for forfeiture of the tendering security set out in Article 12(1)(c ) of Regulation No 1932/81 . It was not disputed before the national court that Hoche did not lodge processing security for the quantities of market butter which it was awarded under individual invitations to tender Nos 76 to 81, since it had decided for business reasons not to process into concentrated butter the market butter which had been awarded to it . In those circumstances, the decision of the BALM to declare forfeit the tendering security lodged by Hoche is no more than the consequence in law of that undertaking' s conduct, having regard to Article 12(1)(c ) of Regulation No 1932/81 .
19 That legal consequence can be contrary to the principle of proportionality only if the means employed, in the present case the obligation to lodge security, was not appropriate to achieve the objective pursued or went beyond what was necessary to achieve it ( see, for example, the judgment of 18 November 1987 in Case 137/85 Maizena v BALM (( 1987 )) ECR 4587, paragraph 15 ).
20 It follows from Article 12(1 ) of Regulation No 1932/81 that the lodging of tendering security serves two purposes : first, to guarantee that undertakings which participate in an invitation to tender do not make sham tenders which might distort the basis on which aid is calculated, and, secondly, to ensure that traders use the market butter within the periods prescribed and in accordance with the provisions of Regulation No 1932/81 . In cases in which the market butter is not used directly in the manufacture of pastry products, ice-cream or other foodstuffs but is processed into concentrated butter for use in the manufacture of the products referred to in Regulation No 1932/81, the regulation lays down an obligation to lodge processing security designed to ensure that the concentrated butter is used in accordance with its provisions . Under Article 12(2)(c ) of that regulation, the tendering security is to be released immediately for quantities of concentrated butter in respect of which processing security has been lodged .
21 As it appears from the documents before the Court relating to the main proceedings that Hoche did not comply with its obligation to process into concentrated butter the market butter which it had been awarded pursuant to individual invitations to tender Nos 76 to 81 and to lodge processing security in respect of those quantities of butter, the forfeiture of the tendering security, which is an integral feature of a system which the trader chose voluntarily and in its own interest, cannot be regarded as disproportionate where the risk in respect of which it was lodged actually materializes .
22 Indeed, the national court itself declared in the grounds of the order making the reference that it would normally have no hesitation in dismissing the action brought by Hoche . The special circumstances which led that court in the main proceedings to take the view that forfeiture of the tendering security amounted to a breach of the principle of proportionality arose only because of the adoption of Regulation No 2661/85 .
23 It must be observed, however, that the validity of a provision of general legislation such as Article 12(1 ) of Regulation No 1932/81 cannot be made subject to the subsequent operation of a specific regulation, such as Regulation No 2661/85, which derogates from the general scheme in respect of certain expressly defined situations .
24 Similar considerations make it possible to dispel the national court' s concern regarding a possible failure to comply with the principle of equal treatment in the case before it .
25 As the Court has consistently held, that principle is breached only where comparable situations are treated differently or different situations are treated in the same way, unless such difference in treatment is objectively justified ( see, for instance, the judgment of 13 December 1984 in Case 106/83 Sermide v Cassa conguaglio zucchero (( 1984 )) ECR 4209, paragraph 28 ).
26 It is, however, not disputed that Regulation No 1932/81 treats in the same way all successful tenderers who are in a comparable situation, particularly with regard to forfeiture of the tendering security . In those circumstances, such forfeiture cannot be regarded as discriminatory .
27 A possible breach of the principle of equal treatment in a case such as that before the national court could therefore result only from the entry into force of Regulation No 2661/85 .
28 It must be reiterated in this regard ( see paragraph 23 above ) that a general provision cannot be rendered invalid by virtue of the subsequent adoption of a specific derogating provision .
29 It follows from all the foregoing that consideration of the first question raised by the national court has disclosed no factor of such a kind as to affect the validity of Article 12(1 ) of Regulation No 1932/81 on the ground that it does not preclude forfeiture of the tendering security where an undertaking was awarded contracts in 1985 pursuant to individual invitations to tender Nos 76 to 81 but did not lodge processing security and instead proceeded, before the entry into force of Regulation No 2661/85, to purchase a quantity of intervention butter corresponding to the contract quantity in accordance with Regulation No 262/79, and to process it in the proper manner .
The second question
30 In the grounds of the order making the reference, the national court stated that it did not consider it satisfactory that Article 12(1 ) of Regulation No 1932/81 should be declared invalid . For that reason, in the event that the first question should be answered in the negative, it referred a second question which seeks to ascertain whether the application of Article 12(1 ) of Regulation No 1932/81 may be suspended in an individual case for reasons of fairness .
31 In order to answer that question, it must first be recalled that the Court has already ruled that there is no such thing as a general principle of objective unfairness under Community law . The Court has held that there is no legal basis in Community law for exemption on grounds of natural justice from charges due under that law ( judgment of 28 June 1977 in Case 118/76 Balkan-Import-Export v Hauptzollamt Berlin-Packhof (( 1977 )) ECR 1177, paragraphs 8 and 10 ). The Court has also ruled that there is no general legal principle in Community law that a Community provision which is in force may not be applied by a national authority if it causes the person concerned hardship which the Community legislature would clearly have sought to avoid if it had envisaged that eventuality when enacting the provision ( judgment of 14 November 1985 in Case 299/84 Neumann v BALM (( 1985 )) ECR 3663, paragraph 33 ).
32 In so far as the doubts expressed by the national court as to the applicability in the case before it of Article 12(1 ) of Regulation No 1932/81 result from the adoption of Regulation No 2661/85, it must be observed that for reasons similar to those given in relation to the first question referred by the national court the applicability in an individual case of a general provision such as Article 12(1 ) of Regulation No 1932/81 cannot be affected by the subsequent adoption of a specific derogating measure such as Regulation No 2661/85 .
33 It should also be pointed out that the tendering system in issue in the main proceedings was not designed to ensure the continued enjoyment by tenderers of advantages which they may have enjoyed at any particular moment . On the contrary, the Commission, which was under an obligation to manage existing butter stocks in an efficient manner, had to adjust its policy to meet fluctuating market conditions ( see, most recently, the judgment of 14 February 1990 in Case C-350/88 Delacre and Others v Commission (( 1990 )) ECR I-395, paragraphs 26 and 32 to 34 ).
34 Consequently, in taking part voluntarily and in their own interest in tendering procedures such as those in issue in the main proceedings traders must themselves assume the risks inherent in such operations, provided that the Commission does not change the economic position or the legislation in force in an unforeseeable and arbitrary manner .
35 That cannot be concluded in the case before the national court . In view of the increase in the stocks of intervention butter, the Commission was quite entitled, in its discretion as the body responsible for managing butter stocks, to take the view that demand had to be redirected by means of a reduction in the minimum selling price of intervention butter . Furthermore, Hoche, as a prudent trader, was in a position to foresee that price reduction, since at the beginning of 1985 the Commission had published proposals in the Official Journal of the European Communities for an appreciable reduction in the price of intervention butter during the 1985/86 marketing year .
36 Accordingly, the reply to the second question referred by the national court must be that the application of Article 12(1 ) of Regulation No 1932/81 cannot be suspended in an individual case for reasons of fairness .
Decision on costs
Costs
37 The costs incurred by the Commission, which has submitted observations to the Court, are not recoverable . As these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court .
Operative part
On those grounds,
THE COURT ( Second Chamber ),
in answer to the questions referred to it by the Verwaltungsgericht Frankfurt am Main, by order of 20 April 1989, hereby rules :
( 1 ) Consideration of the first question raised by the national court has disclosed no factor of such a kind as to affect the validity of Article 12(1 ) of Commission Regulation ( EEC ) No 1932/81 of 13 July 1981 on the granting of aid for butter and concentrated butter for use in the manufacture of pastry products, ice-cream and other foodstuffs on the ground that it does not preclude forfeiture of the tendering security where an undertaking was awarded contracts in 1985 pursuant to individual invitations to tender Nos 76 to 81 but did not lodge the processing security and instead proceeded, before the entry into force of Commission Regulation ( EEC ) No 2661/85 of 20 September 1985 derogating from Regulations ( EEC ) Nos 262/79 and 1932/81 as regards butter for use in the manufacture of pastry products, ice-cream and other foodstuffs, to purchase a quantity of intervention butter corresponding to the contract quantity, in accordance with Commission Regulation ( EEC ) No 262/79 of 12 February 1979 on the sale of butter at reduced prices for use in the manufacture of pastry products, ice-cream and other foodstuffs, and to process it in the proper manner .
( 2 ) The application of Article 12(1 ) of Regulation ( EEC ) No 1932/81 cannot be suspended in an individual case for reasons of fairness .
Full & Egal Universal Law Academy