Opinion of the Advocate-General
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My Lords,
1. The plaintiff in the national proceedings, Mr Twijnstra, is a farmer in the Netherlands. In 1980 he entered into an agreement for the slaughter or conversion of his dairy herd with the competent Dutch authority. Under that agreement he undertook to deliver no milk from his holding during the period from 10 April 1980 to 10 April 1985 in return for a conversion premium. The agreement was concluded in accordance with Council Regulation (EEC) No 1078/77 of 17 May 1977 introducing a system of premiums for the non-marketing of milk and milk products and for the conversion of dairy herds (OJ 1977 L 131, p. 1). At the beginning of January 1984 Mr Twijnstra sold part of the land covered by the agreement. The purchasers gave an undertaking not to use the land for milk production before 10 April 1985. They honoured that undertaking. Mr Twijnstra thus retained the conversion premium in full, in accordance with Article 6 of Regulation No 1078/77, which provides:
"1. Any person who takes over an agricultural holding may undertake in writing to continue to carry out the undertakings given by his predecessor.
In such case, the sums already paid shall remain the property of the latter and the balance shall be paid to his successor.
Otherwise, the sums already paid shall be refunded by the predecessor.
2. Where only part of a holding is transferred, the applicant shall retain his right to the premium if the person to whom he has transferred the property undertakes in writing to continue to fulfil the undertakings entered into by his predecessor. Otherwise, a proportion of the sums already paid shall be refunded by the predecessor, such proportion to be calculated by reference to the area under forage transferred."
2. In 1988 Mr Twijnstra resumed milk production. In the meantime an additional levy on milk production had been introduced by Council Regulations (EEC) No 856/84 (OJ 1984 L 90, p. 10) and No 857/84 (OJ 1984 L 90, p. 13). Farmers were given a reference quantity, based on their production in a specific period (known as the reference period), and the additional levy was charged on production in excess of the reference quantity. Those regulations did not originally provide for the granting of a reference quantity to farmers who, like Mr Twijnstra, had produced no milk in the reference period as a result of having entered into a non-marketing or conversion agreement. By judgments of 28 April 1988 in Case 120/86 Mulder v Minister van Landbouw en Visserij [1988] ECR 2321 and Case 170/86 von Deetzen v Hauptzollamt Hamburg-Jonas [1988] ECR 2355, the Court declared Regulation No 857/84 invalid in so far as it failed to provide for the granting of a reference quantity to such persons, who had a legitimate expectation, according to the Court, that they would be allowed to resume milk production at the end of the period covered by a non-marketing or conversion agreement.
3. Following the judgments in Mulder and von Deetzen the Council adopted Regulation (EEC) No 764/89 of 20 March 1989 (OJ 1989 L 84, p. 2), which added to Regulation No 857/84 an Article 3a providing for a special reference quantity to be granted to farmers who had previously been unable to obtain one as a result of a non-marketing or conversion agreement. The special reference quantity was to be 60% of the quantity of milk delivered during the 12 months preceding the month in which the application for the non-marketing or conversion premium was made (Article 3a(2) of Regulation No 857/84). By judgments of 11 December 1990 in Case C-189/89 Spagl v Hauptzollamt Rosenheim [1990] ECR I-4539 and Case C-217/89 Pastaetter v Hauptzollamt Bad Reichenhall [1990] ECR I-4585 the Court declared that provision invalid in so far as it limited the special reference quantity to 60% of the quantity delivered during the 12 months in question. On 13 June 1991 Council Regulation (EEC) No 1639/91 (OJ 1991 L 150, p. 35) was adopted for the purpose of implementing those judgments.
4. On 22 June 1989 Mr Twijnstra applied for a special reference quantity. By decision of 11 August 1989 the Director for Agriculture, Nature and Outdoor Recreation in the province of Friesland awarded Mr Twijnstra a provisional reference quantity of 245 653 kg for the 1989/90 marketing year. Mr Twijnstra contested that decision on the ground that the reference quantity was not calculated on the correct basis. The decision was confirmed by the Minister for Agriculture, Conservation and Fisheries, who is the defendant in the national proceedings. The defendant considered that the plaintiff was not entitled to a reference quantity of 60% of the whole of the quantity which he delivered in the 12 months preceding the application for a conversion premium. Instead he considered that that quantity must be reduced proportionately in respect of the land which Mr Twijnstra had sold in January 1984. The defendant relied in that regard on Article 5(1) of the Beschikking superheffing SLOM-deelnemers (Netherlands Decree on the application of the super-levy to participants in a scheme for the slaughter or conversion of dairy herds), which in his view correctly implements the third subparagraph of Article 3a(2) of Regulation No 857/84.
5. The third subparagraph of Article 3a(2) of Regulation No 857/84 provided (before its amendment by Regulation No 1639/91):
"Where the producer has transferred part of his holding during the non-marketing or conversion period:
° the transferor' s special reference quantity as established above shall be equal to 60% of the quantity for which entitlement to the premium has been retained,
° the transferee' s special reference quantity as established above shall be equal to 60% of the quantity for which entitlement to the premium has been acquired."
6. Article 5(1) of the Beschikking Superheffing SLOM-deelnemers provides that, where the producer transfers part of his holding during the non-marketing or conversion period, the special reference quantity is to be divided between the transferor and the transferee: the transferor is to be given a reference quantity corresponding to the extent to which he retains obligations resulting from the non-marketing or conversion agreement, while the transferee is to be given a reference quantity corresponding to the extent to which he acquires rights and obligations under the agreement. The effect of this provision appears to be that the transferee, provided he has honoured the agreement, receives a proportion of the special reference quantity corresponding to the proportion of the holding acquired by him. The transferor' s special reference quantity is reduced by the same amount.
7. Mr Twijnstra appealed against the defendant' s decision to the College van Beroep voor het Bedrijfsleven. He pleaded two submissions:
In the first place, Article 3a(2) of Regulation No 857/84 is invalid, in so far as it limits his special reference quantity to 60% of the milk produced by him in the 12 months preceding the application for the non-marketing premium.
Secondly, the defendant' s decision is contrary to the wording of Article 3a(2), third subparagraph, in so far as it reduced Mr Twijnstra' s special reference quantity in respect of the part of the holding sold by him during the period of the non-marketing agreement.
8. The College van Beroep voor het Bedrijfsleven recognized that the first submission was well founded in view of the Spagl and Pastaetter judgments, but considered that the second submission raised a number of questions concerning the interpretation and validity of Article 3a(2) of Regulation No 857/84. It has referred the following questions to the Court for a preliminary ruling under Article 177 of the EEC Treaty:
"(1. Under circumstances such as those described in Section Two of this judgment [i.e. the circumstances described in paragraphs 1 to 4 above], is it permissible to give to the third subparagraph of Article 3a(2) of Council Regulation (EEC) No 857/84 an application which departs from the literal wording of that provision?
(2) If Question 1 is answered in the affirmative:
Must the application to be given to that provision correspond to that given to it in the Netherlands on the basis of Article 5(1) of the Beschikking superheffing SLOM-deelnemers?
(3) If Question 1 is answered in the negative:
Does an application on the basis of the literal wording of the aforesaid Community provision mean that the transferee as defined in that provision can never claim a special reference quantity or can only do so if he has guaranteed his right to a conversion premium by means of a private-law agreement with the transferor of land covered by a conversion scheme?
(4) Does an affirmative answer to Question 3, per se or in conjunction with other factors, lead to the conclusion that the aforesaid provision is invalid wholly or in part on the ground that it conflicts with Community law, in particular with the principle that legitimate expectations should be protected?"
9. It may be noted that similar questions have been raised by a German court ° the Verwaltungsgericht Oldenburg ° in Case C-175/91 Ahlers and Gruenefeld.
Questions (1) and (2)
10. The literal meaning of Article 3a(2), third subparagraph, of Regulation No 857/84 is perfectly clear. That provision means that a person in Mr Twijnstra' s position should be given a special reference quantity equal to 60% of the milk delivered by him during the 12 months preceding his application for a conversion premium. No reduction is to be made on account of his having sold part of his holding during the period of validity of the conversion agreement, since he retained the right to the premium by virtue of Article 6(2) of Regulation No 1078/77. And the person to whom he sold part of the holding is not entitled to a special reference quantity in respect of that land, since he did not acquire entitlement to any part of the premium.
11. However, the Dutch authorities propose that Article 3a(2), third subparagraph, should not be interpreted literally. Instead it should be read as meaning that the special reference quantity granted in respect of Mr Twijnstra' s production in the 12 months preceding his application for a conversion premium should be apportioned between him and the persons who purchased part of his holding on the basis of the surface area held by Mr Twijnstra and the purchasers respectively. The Dutch Government draws attention to an apparent incongruity in the applicable legislation: Article 3a(2), third subparagraph, of Regulation No 857/84 implies that where part of a holding is transferred during the non-marketing or conversion period the special reference quantity is to be apportioned between the transferor and the transferee on the basis of the share of the premium to which each is entitled; however, Article 6(2) of Regulation No 1078/77 does not provide that the transferee of part of a holding acquires entitlement to a share of the premium. The Dutch Government suggests that Article 6(2) leaves the parties free to determine whether the transferee becomes entitled to a share of the premium. But if that is the case and if the right to a specific reference quantity depends on the right to the premium, the legitimate expectations of the transferee might be frustrated, since he would be unable to obtain a special reference quantity unless he had secured for himself entitlement to a share of the premium. The Dutch Government maintains that in view of the rationale of the provision in question the decisive criterion is the surface area of the productive land held by the transferor and the transferee respectively. In the proceedings before the national court the defendant Minister argued that when the Council inserted Article 3a into Regulation No 857/84 it must have been under the misapprehension that the transferee of part of a holding covered by a non-marketing or conversion agreement automatically became entitled to a proportionate share of the premium, provided that he assumed the transferor' s obligations under the agreement.
12. The Council and Commission deny, in their written observations, that the Community legislature was under such a misapprehension when Article 3a was added to Regulation No 857/84. They contend that when that article speaks of entitlement to part of the premium being acquired by the transferee of part of a holding it is referring exclusively to the situation that occurs when a holding is disposed of through a series of partial transfers; the transferor loses the right to a proportion of the premium after each partial transfer unless the transferee undertakes to respect the non-marketing or conversion agreement (Regulation No 1078/77, Article 6(2)); when the final parcel of land is transferred, the transaction is treated as a transfer of the whole of the holding under Article 6(1) of Regulation No 1078/77, with the result that the transferee, if he undertakes to honour the agreement, becomes entitled to the outstanding payments of premium, in so far as the transferor has not already lost entitlement to the premium as a result of the previous transfers. According to the Council and Commission, that is the only situation in which the transferee of part of the holding can become entitled to part of the premium and that is the situation referred to in Article 3a(2), third subparagraph, second indent, of Regulation No 857/84.
13. The Council and Commission also maintain that, when Article 3a(2), third subparagraph, speaks of entitlement to the premium, that is a reference to entitlement vis-à-vis the competent authority, not entitlement vis-à-vis the other party to the transfer by virtue of a private-law agreement. Thus the transferee of part of a holding does not acquire "entitlement to the premium" within the meaning of that provision simply because the transferor undertakes to pay the premium to him.
14. The Council and Commission contend that there is therefore no reason to depart from the literal meaning of Article 3a(2), third subparagraph. The transferor of part of the holding who retains the entitlement to the whole of the premium is entitled to the whole of the special reference quantity and the transferee is not entitled to any part of the special reference quantity. The transferee has no legitimate expectation of receiving a special reference quantity because he has not been induced by the Community to enter into a non-marketing or conversion agreement. Although that may result in a producer being given a special reference quantity based on his production on a holding far larger than his present holding, that is not a serious consequence because Article 3a(1) requires the producer to establish that he is able to produce milk on his holding up to the reference quantity requested and Article 3a(3) requires him to establish that his deliveries have attained 80% of the reference quantity in order for the provisional reference quantity to become definitive.
15. At the hearing the Agents for the Council and Commission made it clear that, in their view, Article 3a is capable of conferring a special reference quantity on the transferee who takes the whole of the holding and on the transferee who takes the final portion of the holding after a series of partial transfers; however, where there is such a series of partial transfers none of the transferees, other than the last in the series, may acquire a special reference quantity under Article 3a(2). The Council and Commission seek to justify the different treatment of the various categories of transferee on the ground that, under Article 6(2) of Regulation No 1078/77, the transferee of part of a holding does not become entitled to the premium and is not obliged, vis-à-vis the competent authority, to refrain from producing milk on the holding; he cannot therefore be said to have been induced by the Community to refrain from milk production and so does not have a legitimate expectation that he will be allowed to produce milk on the holding. On the other hand, the transferee of the whole holding and the transferee who takes the last part of the holding after a series of partial transfers may plead the principle of legitimate expectations because they do become entitled to part of the premium under Article 6(1) of Regulation No 1078/77 and become obliged, vis-à-vis the competent authority, to refrain from milk production on the holding.
16. I remain unconvinced by the Council and Commission' s attempt to explain away the apparent incoherence of the applicable legislation. Article 3a(2), third subparagraph, certainly seems to posit that the transferor and transferee are both entitled to a share of the premium and are therefore both eligible for a special reference quantity. The suggestion that the second indent of that provision applies only to the transferee of the final part of the holding after a series of partial transfers is particularly unconvincing. In such a situation the original producer would disappear from the stage entirely and the third subparagraph of Article 3a(2) does not seem to apply at all. In fact, that provision assumes that the original producer is still very much in the centre of the stage. It starts with the words: "Where the producer has transferred part of his holding during the non-marketing or conversion period ...". That clearly implies that the producer has retained part of the holding. If the author of this provision had wished to legislate for the situation that occurs when the producer has disposed of his entire holding during the non-marketing or conversion period, either by a single operation or by a series of partial transfers, he would surely have chosen words more appropriate to his purpose.
17. In spite of the incongruity of the applicable legislation I do not see how the provision in question can be given an interpretation, in the context of the present case, which departs from the natural meaning of the terms used. Article 3a(2), third subparagraph, first indent, states that "the transferor' s special reference quantity ... shall be equal to 60% of the quantity for which entitlement to the premium has been retained". The meaning of those words could not be plainer. A producer in Mr Twijnstra' s situation has retained entitlement to the whole of the premium and so qualifies for the whole of the special reference quantity. The purchasers of part of his holding did not acquire entitlement to any of the premium and so do not qualify for a special reference quantity under Article 3a(2).
18. Arguably, that is not the most logical solution, since it means that a producer who has disposed of part of his holding during the non-marketing or conversion period may be entitled to a special reference quantity which exceeds the amount that he can produce on the land covered by the non-marketing or conversion agreement. Arguably, it would have been more logical to apportion the special reference quantity between the transferor and the transferee on the basis of their respective shares of the land covered by the non-marketing or conversion agreement. However, that is not the solution adopted by the relevant legislation and such arguments cannot justify depriving Mr Twijnstra of the benefit of a provision which clearly and unambiguously entitles him to a special reference quantity based on the whole of his production in the 12 months preceding his application for a conversion premium. Legislation which limits the producer' s freedom to use his land for the purpose of a legitimate economic activity, even though the limitation is in principle justified in the general interest, should not be construed restrictively in a manner detrimental to the interests of the producer. In any event, the view taken by the Dutch Government amounts to more than a restrictive interpretation; it distorts the natural meaning of a wholly unambiguous provision.
Questions (3) and (4)
19. Questions (3) and (4) are concerned with the possible right of the transferee to a special reference quantity. It will be clear from what has been said above that Article 3a(2) of Regulation No 857/84, in conjunction with Article 6(2) of Regulation No 1078/77, does not make any provision for the granting of a special reference quantity to a person who acquires part of a holding covered by a non-marketing or conversion agreement (except, on the analysis proposed by the Council and Commission, where the transferee acquires the final portion of the holding after a series of partial transfers). The existence of a private-law agreement whereby the transferor agrees to assign to the transferee his right to the premium or to pay him an equivalent sum of money cannot change matters. When Article 3a(2), third subparagraph, second indent, speaks of the transferee' s "entitlement to the premium", that must in my view be taken to mean entitlement vis-à-vis the competent authority and cannot be construed as a reference to a contractual right against the transferor. As we have seen, the transferee of part of a holding cannot acquire entitlement, in that sense, to part of the premium under Article 6(2) of Regulation No 1078/77.
20. If therefore the transferee of part of a holding is to claim a special reference quantity, he will do so not on the basis of the wording of Regulation No 857/84 but solely by virtue of the principle of legitimate expectations. The question whether he may invoke that principle raises a number of difficult issues which it would not in my view be appropriate to resolve in these proceedings, since the rights of the transferee are not in issue here. The essential point to bear in mind is that, if the transferee is entitled to a special reference quantity by virtue of the principle of legitimate expectations, that does not mean that the special reference quantity granted to the transferor has to be reduced by a corresponding amount. The Community legislature would in that event have to find some means of satisfying the transferee' s legitimate expectations, while at the same time safeguarding the acquired rights of the transferor. Once that point is borne in mind, it becomes unnecessary to answer questions (3) and (4).
Conclusion
21. Accordingly, I am of the opinion that the questions referred to the Court by the College van Beroep voor het Bedrijfsleven should be answered as follows:
A milk producer who entered into a non-marketing or conversion agreement under Regulation No 1078/77 and transferred part of his holding to another person during the period of validity of that agreement but retained entitlement to the whole of the non-marketing or conversion premium, pursuant to Article 6(2) of Regulation No 1078/77, is entitled to the whole of the special reference quantity provided for in Article 3a(2) of Regulation No 857/84.
(*) Original language: English.
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