Opinion of the Advocate-General
1 These are two test cases on the question whether national authorities can require farmers benefiting from direct income subsidies in the form of compensatory payments to pay for administrative costs where the relevant Community regulations provide that the amounts are to be paid in full to the beneficiaries. Mr Kellinghusen and Mr Ketelsen are farmers contesting before the Verwaltungsgericht (Administrative Court), Schleswig-Holstein the (relatively small) amounts to be paid in administrative fees for the processing of their claims for compensatory payments. Their cases are of wider significance since the Commission has initiated pre-litigation proceedings against the Federal Republic of Germany pursuant to Article 169 of the Treaty in relation to the charging of such fees by the Land Schleswig-Holstein, but has refrained from bringing an application before the Court under that article whilst awaiting the Court's judgment in the present cases.
2 The regulations in issue were adopted in the framework of the 1992 reform of the Common Agricultural Policy. The case of Mr Kellinghusen concerns Council Regulation (EEC) No 1765/92 of 30 June 1992 establishing a support system for producers of certain arable crops. (1) According to the second recital of the preamble the regulation aims to establish a new support system and the best way to achieve that objective is to approximate the Community prices of certain arable crops to the prices of the world market and to compensate the loss of income caused by the reduction of the institutional prices by a compensatory payment for producers who sow such products. The regulation thus sets up a system of compensatory payments, laying down in considerable detail the criteria governing such payments. In essence, the compensatory payments are fixed on a per hectare basis and are regionally differentiated (see Article 2(2)). The provision in issue in the case of Mr Kellinghusen is Article 15(3), under Title II `General and transitional provisions':
`The payments referred to in this Regulation are to be paid over to the beneficiaries in their entirety.'
3 The case of Mr Ketelsen concerns Regulation (EEC) No 805/68 of the Council of 27 June 1968 on the common organisation of the market in beef and veal, (2) as amended by Council Regulation (EEC) No 2066/92. (3) The preamble to the amending regulation states that in the context of measures to be applied in order to redress the situation of agriculture in general the intervention price for beef is to be reduced (second recital), and that, given the consequences for producers, substantial compensation should be granted in the form of premiums (third recital). The amending regulation sets up such a system of premiums, again in considerable detail, and introduces a new general provision, Article 30a:
`The amounts to be paid pursuant to this Regulation shall be paid in full to the beneficiaries.'
4 I will hereafter refer to Regulation No 1765/92 and Regulation No 805/68, as amended, as `the Regulations'.
5 In 1994 Mr Kellinghusen applied for compensatory payments under Regulation No 1765/92 to the defendant Amt für Land- und Wasserwirtschaft (Office for Agriculture and Water), Kiel, and Mr Ketelsen applied for such payments under Regulation No 805/68, as amended, to the defendant Amt für Land- und Wasserwirtschaft (Office for Agriculture and Water), Husum. The applications were approved, but in both cases a fee was charged pursuant to the Landesverordnung über Verwaltungsgebühren (Land Regulation on Administrative Fees) of the Land Schleswig-Holstein, which contains specific provisions on administrative fees to be paid by applicants for the compensatory payments provided for by the Regulations. In the case of Mr Kellinghusen the fee amounts to DM 788, made up of a basic fee of DM 80 and an additional amount of DM 3 per hectare of the area under crops, and corresponding to compensatory amounts of a total of DM 175 945.07. Mr Ketelsen received DM 23 305.92 as special premium for beef producers (for 67 cows), and was charged a fee of DM 214, made up of a basic fee of DM 80 and a fee per cow of DM 2.
6 The plaintiffs lodged complaints against those decisions on fees on the ground that the Regulations preclude the charging of fees. The defendants dismissed those complaints, taking the view that, as the Regulations did not contain any provisions on how the administrative expense incurred in examining applications for support payments was to be financed, the Member States and their regional subdivisions retained power to adopt appropriate rules on fees.
7 The plaintiffs then brought proceedings before the Verwaltungsgericht, Schleswig-Holstein. They argued that a prohibition of charging fees followed both from the wording of the provisions of the Regulations cited above and also from the spirit and purpose of those provisions, whose aim was to have equal implementation of the compensatory payments in the Member States.
8 According to the defendants, on the other hand, the provisions in issue were not to be construed as prohibiting Member States from charging fees but as prohibiting them from imposing certain charges which would be inappropriate to the objectives of the Community measures, such as parafiscal duties. The defendants further argued that, if the provisions in issue were to be interpreted as prohibiting the charging of fees, they were then invalid for breach of higher-ranking Community law in several respects. The defendants referred to the rule of cooperation embodied in Article 5 of the Treaty, and the principles of subsidiarity and proportionality expressed in Article 3b of the Treaty.
9 In the order for reference the Verwaltungsgericht clarifies the legal basis for the fees in issue, which is the Verwaltungskostengesetz des Landes Schleswig-Holstein (Law on Administrative Costs of the Land of Schleswig-Holstein). (4) The fees correspond in amount to the rules laid down by the legislature, in particular the principle of equivalence and the principle of covering costs.
10 The Verwaltungsgericht is of the opinion that the interpretation of the Regulations is not free from doubt. A strictly literal interpretation would probably argue against a prohibition of charging fees. On the other hand, a prohibition of charging fees would be consistent both with the general aims of the Treaty, including the avoidance of distortions of competition (Article 3g of the Treaty) and of discrimination (second subparagraph of Article 40(3) of the Treaty), and also with the specific objectives of the 1992 agricultural reform, namely to give farmers direct income-supporting benefits for certain agricultural products: the charging of fees reduces by the amount of the fees the compensation for disadvantages which the payment is intended to provide.
11 If the second interpretation is correct the Verwaltungsgericht has doubts on the validity of the provisions in issue, in line with the arguments of the defendants. Accordingly, it referred the following questions for a preliminary ruling:
In Case C-36/97:
`(1) Is Article 15(3) of Council Regulation (EEC) No 1765/92 ... to be interpreted as prohibiting the authorities in the Member States from charging applicants administrative fees for processing their applications for support payments, if those administrative fees correspond to the rates which are otherwise usual in national law and are so low that they are not capable of deterring applicants from applying for support payments?
(2) If question 1 is answered in the affirmative:
Does Article 15(3) of the said Council Regulation infringe higher-ranking Community law, in particular the principle of cooperation in good faith under Article 5 of the EC Treaty, the principle of proportionality under the third paragraph of Article 3b of the EC Treaty, and the principle of subsidiarity under the second paragraph of Article 3b of the EC Treaty?'
In Case C-37/97:
`(1) Is Article 30a of Council Regulation (EEC) No 805/68, as amended, (5) to be interpreted as prohibiting the authorities in the Member States from charging applicants administrative fees for processing their applications for aid, if those administrative fees correspond to the rates which are otherwise usual in national law and are so low that they are not capable of deterring applicants from applying for aid?
(2) If question 1 is answered in the affirmative:
Does Article 30a of the said Council Regulation infringe higher-ranking Community law, in particular the principle of cooperation in good faith under Article 5 of the EC Treaty, the principle of proportionality under the third paragraph of Article 3b of the EC Treaty, and the principle of subsidiarity under the second paragraph of Article 3b of the EC Treaty?'
12 Written and oral observations were submitted by the applicants and the defendants in the main proceedings, the Commission, the Council, the German Government, the Greek Government and the Swedish Government. As the questions in both cases are materially identical I will consider them together.
The first question
13 I agree with the Commission and the German Government that the terms of the provisions in issue are conclusive. By providing for the payment of the relevant amounts `in their entirety' and `in full' to the beneficiaries, the Regulations prohibit any deduction from the amounts received by the beneficiaries. Indeed the defendants in the main proceedings accept that view. They none the less contend that the provisions do not prohibit the levying of fees, but merely indicate that the payments should be made in full. However, it is clear that, if the prohibition on deductions is to be effective, it cannot be interpreted in a purely formal manner as covering only deductions which are actually made on the occasion of the payments. Thus the prohibition of any deduction must of necessity extend to all charges which are directly and inseparably linked to the amounts disbursed. That is clearly the case here: it is a farmer's application for compensatory payments under the Regulations which triggers the charging of the fees. That is in my view sufficient for the fees to come within the prohibition of any deduction.
14 At the hearing the Commission proposed a persuasive classification of the various charges which might be imposed by national authorities in connection with compensatory payments. The first type are fees for administrative costs such as those in issue in the present cases, which are in the Commission's view the type of charges most clearly prohibited by the Regulations. The second type are general taxes, for which the Court laid down the relevant criteria in Irish Creamery Milk Suppliers Association v Ireland (6) and Aliments Morvan. (7) The third type are other charges, such as those pursuant to national rules of set-off between fiscal debts owed under national law and compensatory payments to farmers, which were the subject of the recent Bent Jensen case (8) In his Opinion in that case Advocate General Fennelly also expresses the view that `special charges to compensate for national administrative costs ... would be clearly prohibited by Article 15(3)' of Regulation 1765/92. (9) In its judgment the Court did not deal with that issue. It did however state that the national rules of set-off were not such as to reduce the amounts received by way of compensatory payments. (10) It thus emphasised the importance of the requirement that the amounts are to be paid in full.
15 Such an interpretation of the provisions in issue is consonant with the aims of the Regulations and with the general aims of the Treaty in the field of agriculture. The Regulations establish a comprehensive system of compensatory payments, determining in considerable detail the criteria to be applied in calculating those payments to eligible farmers. It would be a derogation from the uniform rules governing compensatory payments to allow Member States the freedom to charge fees for administrative expenses, since that could lead to inequalities in the actual amounts which farmers in the various Member States receive. Such a derogation would have to be expressly provided for, which is not the case here. On the contrary, the Regulations expressly provide for full payment of the amounts. Such full payment also corresponds to the aim of replacing price support measures with direct income support. As farmers are not charged for the expenses which price support measures entail, it is consistent that they cannot be charged for the compensatory payments intended to replace price support.
16 The uniform character of the system of payments is also in conformity with the principle of equal treatment, which is a general principle of Community law, embodied, in the field of agriculture, in Article 40(3), second subparagraph, of the Treaty. It is also in conformity with the aim of undistorted competition expressed in Article 3(g) of the Treaty.
17 I find none of the arguments to the contrary persuasive.
18 I do not accept the defendants' argument, supported by the Greek and Swedish Governments, that the provisions in issue do not clearly prohibit the charging of costs and that a clear prohibition is required since the Court accepted in Denkavit Futtermittel v Germany that the Member States may impose charges for administrative costs. Denkavit concerned the charging of costs by national authorities for inspections in the context of aid for skimmed milk. In its judgment the Court held that the objectives of the scheme would not be jeopardised `if the charges which the undertaking is asked to pay represent the normal cost of inspections of that nature and are not so great as to be liable to deter undertakings from carrying on the activities which the aid is intended to encourage'. (11) The defendants maintain that the fees in issue are in accordance with those criteria. However, in Denkavit the Court first established that the regulation in issue (12) made no provision as to the costs of the inspections to be carried out by the Member States. Therefore, it did not prevent Member States either from carrying out such inspections free of charge or from requiring the undertakings in question to reimburse the expenditure which such inspections entailed. (13) It was only in such a context, where there were no provisions as to costs, nor provisions on full payment analogous to the provisions in issue in the present cases, that the Court stated that the Member States' freedom to charge undertakings could not be used in such a way as to jeopardise the objectives of the rules. I thus agree with the Council that the Court essentially left it to the Community legislature to determine whether national authorities are entitled to charge fees for administrative costs. (14)
19 The defendants also point out that the aims and meaning of the provisions in issue are not explained in the preamble, whereas a derogation from the general principle that the Member States are entitled to impose charges for administrative costs would have required explicit reasoning, in accordance with Article 190 of the Treaty. However, there is no such general principle in my view, and the fact that the provisions in issue are not clarified in the preamble is of course not such as to assist us in any way in the interpretation of those provisions. I further agree with the plaintiffs that the provisions on full payments are accessory in nature and did not require specific reasoning in the preamble so as to be valid.
20 The defendants also submit that the interpretation of the provisions which they propose finds support in the circumstance that not all the regulations of the Council in the 1992 agricultural reform package contain similar provisions. They refer in particular to Council Regulation (EEC) No 2069/92 of 30 June 1992 amending the common organisation of the market in sheepmeat and goatmeat. (15) It is thus clear, according to the defendants, that the provisions are purely declaratory and do not extend to fees for administrative costs.
21 However, I am unable to see how that conclusion follows. In my view it is open to the Community legislature simply to lay down, or not to lay down, rules on the matter, and it is only where no such rules are laid down that the principles stated in Denkavit (16) become operative. I do not see in what way a regulation not containing a provision requiring full payment is capable of assisting in the interpretation of regulations which do contain such provisions. Furthermore, at the hearing the Commission explained that the common market organisation for sheepmeat and goatmeat already provided for direct income subsidies before the 1992 reform, and that fewer inspections were required in that sector, which meant that the problem of fees for administrative costs was not likely to arise.
22 The defendants also argue that it is in the interests of the eligible farmers that a well-functioning administrative system is set up, that such a system entails considerable expenses, and that national authorities should be able to recover some of those expenses. That argument seems to suggest that the administrative system will be better organised if charges can be imposed. Such an approach would be unacceptable. The Member States are of course required to implement Community law in accordance with its requirements, and the quality of implementation cannot be dependent on where the administrative cost falls.
23 I thus conclude in answer to the first question in both cases that the Regulations are to be interpreted as prohibiting the authorities in the Member States from charging applicants administrative fees for processing their applications for compensatory payments and premiums.
The second question
24 The defendants in the main proceedings argue that, if the provisions in issue are to be interpreted as prohibiting the charging of administrative fees, they are in breach of higher-ranking principles of Community law. First, the prohibition is said to infringe the principle of cooperation in good faith under Article 5 of the Treaty. In the absence of a specific rule on the reimbursement of costs in respect of the considerable administrative expense involved in processing applications for the grant of Community agricultural support measures, the prohibition would constitute a failure by the Community institutions to observe the legitimate interests of the Member States. Secondly, such a prohibition, to be classified as an unnecessary interference in national administrative law, is said to infringe both the principle of proportionality laid down in the third paragraph and the principle of subsidiarity in the second paragraph of Article 3b of the Treaty.
25 Again I do not agree with the defendants' submissions.
26 Article 5 provides that `the Member States shall take all appropriate measures ... to ensure fulfilment of the obligations arising out of this Treaty or resulting from action taken by the institutions of the Community'. If the Regulations are to be interpreted as excluding the imposition of charges for costs, as I think they should, then it follows from Article 5 that the Member States should take all appropriate measures to fulfil that obligation. It is true that Article 5 also imposes on the Community institutions duties of cooperation with the authorities of the Member States. (17) However, I agree with the submissions of the Council and the Commission to the effect that Article 5 is not such as to limit the legislative competence of the Community. Pursuant to Article 40 of the Treaty the Community is to establish a common organisation of agricultural markets in order to attain the objectives of the common agricultural policy set out in Article 39 of the Treaty. The principle of cooperation plainly cannot preclude the Community institutions from providing that compensatory payments disbursed to farmers in the framework of such common organisations are to be paid in full to the beneficiaries, with a view to ensuring a uniform and non-discriminatory implementation of that system of payments.
27 Nor can there be any doubt that the Regulations are in accordance with the principle of subsidiarity. Article 3b, second paragraph, of the Treaty provides that, in areas which do not fall within its exclusive competence, the Community shall take action, in accordance with the principle of subsidiarity, only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community. The Council and the Commission argue that the principle of subsidiarity is inapplicable since the Regulations were adopted in 1992 and their validity can thus not be affected by subsequent modifications to the Treaty (since Article 3b took effect on 1 November 1993 by virtue of the entry into force of the Treaty on European Union). They also contend that the principle of subsidiarity does not apply in this area, in which, they argue, the Community has exclusive competence. In my view it is not even necessary to consider those arguments since it is clear that the Regulations are in any event in accordance with the principle of subsidiarity. As the German Government emphasises, the Community has broad competences in the field of agriculture, the Regulations were adopted in the framework and within the limits of those competences, and the objective of the prohibition of charging administrative fees, which is to ensure the uniform implementation of the system of compensatory payments, cannot be achieved by action at national level.
28 Moreover the prohibition does not infringe the principle of proportionality. The Court has held that, in order to establish whether a provision of Community law complies with that principle, it must be ascertained whether the means which it employs are suitable for the purpose of achieving the desired objective and whether they do not go beyond what is necessary to achieve it. (18) It is clear that the aim of ensuring full payment of the compensatory amounts to farmers cannot be attained otherwise than by providing that they should receive full payment.
29 I thus conclude that examination of the questions referred has disclosed no factor of such a kind as to affect the validity of the Regulations.
Conclusion
30 Accordingly I am of the opinion that the questions referred by the Verwaltungsgericht, Schleswig-Holstein should be answered as follows:
In Case C-36/97
(1) Article 15(3) of Council Regulation (EEC) No 1765/92 of 30 June 1992 establishing a support system for producers of certain arable crops must be interpreted as prohibiting the authorities in the Member States from charging administrative fees for processing applications for support payments, even if those administrative fees correspond to the rates which are otherwise usual in national law and are so low that they are not capable of deterring applicants from applying for support payments.
(2) Examination of the questions referred has disclosed no factor of such a kind as to affect the validity of the Regulation.
In Case C-37/97
(1) Article 30a of Council Regulation (EEC) No 805/68 of 27 June 1968 on the common organisation of the market in beef and veal, as amended by Council Regulation (EEC) No 2066/92, must be interpreted as prohibiting the authorities in the Member States from charging administrative fees for processing applications for aid, even if those administrative fees correspond to the rates which are otherwise usual in national law and are so low that they are not capable of deterring applicants from applying for aid.
(2) Examination of the questions referred has disclosed no factor of such a kind as to affect the validity of the Regulation.
(1) - OJ 1992 L 181, p. 12.
(2) - OJ, English Special Edition 1968(I), p. 187.
(3) - Council Regulation (EEC) No 2066/92 of 30 June 1992 amending Regulation (EEC) No 805/68 on the common organisation of the market in beef and veal and repealing Regulation (EEC) No 468/87 laying down general rules applying to the special premium for beef producers and Regulation (EEC) No 1357/80 introducing a system of premiums for maintaining suckler cows, OJ 1992 L 215, p. 49.
(4) - Law of 17 January 1974, GVOBl. Schl.-H. p. 37, as amended by the law of 18 December 1978, GVOBl. Schl.-H. 1979, p. 2.
(5) - The national court's question erroneously refers to Article 30a of Council Regulation (EEC) No 2066/92.
(6) - Joined Cases 36/80 and 71/80 [1981] ECR 735.
(7) - Case C-235/90 [1991] ECR I-5419.
(8) - Case C-132/95 Gardejer Bent Jensen and Korn- og Foderstofkompagniet v Landsbrugministeriet, EF-direktoratet, judgment of 19 May 1998.
(9) - Opinion of 27 November 1997, paragraph 39.
(10) - Paragraphs 58 to 62 of the judgment.
(11) - Case 233/81 [1982] ECR 2933, paragraph 10 of the judgment.
(12) - Commission Regulation (EEC) 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, OJ 1979 L 199, p. 1.
(13) - Paragraphs 7 and 8 of the judgment.
(14) - See also Case 31/78 Bussone v Italian Ministry for Agriculture and Forestry [1978] ECR 2429, paragraphs 12 to 25 of the judgment.
(15) - OJ 1992 L 215, p. 29.
(16) - Cited in note 11.
(17) - Case 230/81 Luxembourg v Parliament [1983] ECR 255, paragraph 37 of the judgment and Case C-2/88 Imm. Zwartveld and Others [1990] ECR I-3365, paragraph 17 of the Order.
(18) - See Case C-84/94 United Kingdom v Council [1996] ECR I-5755, paragraph 57 of the judgment, and Case C-233/94 Germany v Parliament and Council [1997] ECR I-2405, paragraph 54 of the judgment.
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