Summary
Parties
Grounds
Decision on costs
Operative part
Keywords
1. Agriculture - Common organisation of the markets - Beef and veal - Export refunds - Special refunds on certain cuts of boned meat - Conditions for granting - Need for each piece of meat to be individually wrapped regardless of its nature
(Commission Regulation No 1964/82, Art. 1)
2. Agriculture - Common organisation of the markets - Beef and veal - Export refunds - Special refunds on certain cuts of boned meat - Exclusion of trimmings whose weight is below a certain limit - Permissible
(Commission Regulation No 1964/82, Arts 7 and 8)
3. Agriculture - Common organisation of the markets - Beef and veal - Private storage aid - Storage aid in respect of carcases, half-carcases, hindquarters and forequarters from adult male bovine animals - Exclusion of trimmings left over from cutting or boning
(Commission Regulation No 2675/88, Art. 4(4))
4. Agriculture - Common organisation of the markets - Beef and veal - Export refunds - Special refunds on certain cuts of boned meat - Carton of meat containing items prohibited by the legislation - Loss of entitlement to a refund in respect of the entire carton and forfeiture of the related security - Discretion enjoyed by the competent authority
(Council Regulation No 565/80; Commission Regulations No 1964/82 and No 3665/87)
5. Agriculture - Common organisation of the markets - Beef and veal - Private storage aid - Storage aid in respect of carcases, half-carcases, hindquarters and forequarters from adult male bovine animals - Carton of meat containing items prohibited by the legislation - Loss of entitlement to aid in respect of the entire carton and forfeiture of the related security - Discretion enjoyed by the competent authority
(Commission Regulations No 1091/80, No 2220/85 and No 2675/88)
6. Agriculture - Common organisation of the markets - Beef and veal - Export refunds - Special refunds on certain cuts of boned meat - Private storage aid - Storage aid in respect of carcases, half-carcases, hindquarters and forequarters from adult male bovine animals - Checks on cartons of meat revealing a deliberate and persistent policy of infringement of the legislation - Extrapolation of the results of those checks across the production of the plants concerned - Permissible
(Council Regulation No 565/80; Commission Regulations No 1091/80, No 1964/82, No 2220/85, No 2675/88 and No 3665/87)
7. Agriculture - Common organisation of the markets - Beef and veal - Private storage aid - Storage aid in respect of carcases, half-carcases, hindquarters and forequarters from adult male bovine animals - Sampling checks revealing a deliberate and persistent policy of infringement of the legislation - Extrapolation of the results of those checks across a body of products - Loss of entitlement to aid in respect of that body of products and forfeiture of the related security - Discretion enjoyed by the competent authority
(Commission Regulations No 1091/80, Art. 5(2)(c), and No 2675/88, Art. 4(4))
Summary
1. On a proper construction of Article 1 of Regulation No 1964/82 laying down the conditions for granting special export refunds on certain cuts of boned meat of bovine animals, as amended by Regulation No 3169/87, every piece of meat must be individually wrapped, whatever its size, weight and nature, and without distinguishing, in particular, between scraps and trimmings.
( see para. 43 and operative part 1 )
2. On a proper construction of Articles 7 and 8 of Regulation No 1964/82 laying down the conditions for granting special export refunds on certain cuts of boned meat of bovine animals, as amended by Regulation No 3169/87, the Member States have the right to exclude from entitlement to special export refunds trimmings whose weight is below a certain limit, such as a limit of 100 grams.
( see para. 43 and operative part 2)
3. On a proper construction of Article 4(4) of Regulation No 2675/88 providing for the grant of private storage aid fixed at a standard rate in advance in respect of carcases, half-carcases, hindquarters and forequarters from adult male bovine animals, as amended by Regulation No 3258/88, trimmings left over from cutting or boning, whatever their weight, do not qualify for private storage aid under contracts entered into pursuant to that regulation.
( see para. 53 and operative part 3 )
4. On a proper construction of Regulation No 1964/82 laying down the conditions for granting special export refunds on certain cuts of boned meat of bovine animals, as amended by Regulation No 3169/87, of Regulation No 565/80 on the advance payment of export refunds in respect of agricultural products, as amended by Regulation No 2026/83, and of Regulation No 3665/87 laying down common detailed rules for the application of the system of export refunds on agricultural products, as amended by Regulation No 3494/88 and Regulation No 3993/88, where the competent authority establishes that a carton of meat subject to the scheme covered by Regulation No 1964/82 contains items prohibited by the legislation, whether trimmings rolled up within other pieces of meat, separate pieces of fat rolled up within pieces of meat, or non-individually wrapped pieces of meat, those regulations permit it to hold that the entire contents of the carton do not qualify for special export refunds and to forfeit the security given for the advance payment made in respect of that carton plus 20%.
( see para. 64 and operative part 4 )
5. On a proper construction of Regulation No 2675/88 providing for the grant of private storage aid fixed at a standard rate in advance in respect of carcases, half-carcases, hindquarters and forequarters from adult male bovine animals, as amended by Regulation No 3258/88, of Regulation No 1091/80 laying down detailed rules for granting private storage aid for beef and veal, and of Regulation No 2220/85 laying down common detailed rules for the application of the system of securities for agricultural products, as amended by Regulation No 1181/87, where the competent authority establishes that a carton of meat subject to the scheme covered by Regulation No 2675/88 contains items prohibited by Article 4(4) thereof, such as trimmings or pieces of fat rolled up within pieces of meat, those regulations permit it to hold that the entire contents of the carton do not qualify for private storage aid and to forfeit the security given for the advance payment made in respect of that carton plus 20%.
( see para. 75 and operative part 5 )
6. On a proper construction of Regulation No 1964/82 laying down the conditions for granting special export refunds on certain cuts of boned meat of bovine animals, as amended by Regulation No 3169/87, of Regulation No 2675/88 providing for the grant of private storage aid fixed at a standard rate in advance in respect of carcases, half-carcases, hindquarters and forequarters from adult male bovine animals, as amended by Regulation No 3258/88, of Regulation No 565/80 on the advance payment of export refunds in respect of agricultural products, as amended by Regulation No 2026/83, of Regulation No 2220/85 laying down common detailed rules for the application of the system of securities for agricultural products, as amended by Regulation No 1181/87, of Regulation No 3665/87 laying down common detailed rules for the application of the system of export refunds on agricultural products, as amended by Regulation No 3494/88 and Regulation No 3993/88, and of Regulation No 1091/80 laying down detailed rules for granting private storage aid for beef and veal, where checks relating to cartons of meat reveal evidence in particular production plants of a deliberate and persistent policy of infringement of Regulations No 1964/82 and No 2675/88, the competent authority may extrapolate the results of those checks across the production of the production plants in question.
( see para. 88 and operative part 6 )
7. Where the sampling checks have revealed evidence of a deliberate and persistent policy of storing material which does not qualify for the private storage aid scheme by virtue of Article 4(4) of Regulation No 2675/88, the competent authority is permitted to refuse to grant private storage aid and to forfeit the security in its entirety, pursuant to Article 5(2)(c) of Regulation No 1091/80, in respect of the whole of the material to which it has extrapolated the results of the check.
( see para. 88 and operative part 7 )
Parties
In Case C-436/98,
REFERENCE to the Court under Article 177 of the EC Treaty (now Article 234 EC) by the Supreme Court (Ireland) for a preliminary ruling in the proceedings pending before that court between
HMIL Ltd
and
Minister for Agriculture, Food and Forestry,
on the interpretation of Commission Regulation (EEC) No 1964/82 of 20 July 1982 laying down the conditions for granting special export refunds on certain cuts of boned meat of bovine animals (OJ 1982 L 212, p. 48, and the corrigendum at OJ 1982 L 273, p. 43), as amended by Commission Regulation (EEC) No 3169/87 of 23 October 1987 amending Regulations (EEC) No 32/82, (EEC) No 1964/82 and (EEC) No 74/84 in the matter of customs export formalities for certain beef on which special refunds are granted (OJ 1987 L 301, p. 21), and of Commission Regulation (EEC) No 2675/88 of 29 August 1988 providing for the grant of private storage aid fixed at a standard rate in advance in respect of carcases, half-carcases, hindquarters and forequarters from adult male bovine animals (OJ 1988 L 239, p. 20), as amended by Commission Regulation (EEC) No 3258/88 of 21 October 1988 (OJ 1988 L 289, p. 52),
THE COURT (Fifth Chamber),
composed of: A. La Pergola, President of the Chamber, D.A.O. Edward and L. Sevón (Rapporteur), Judges,
Advocate General: G. Cosmas,
Registrar: H.A. Rühl, Principal Administrator,
after considering the written observations submitted on behalf of:
- HMIL Ltd, by P. Sreenan SC and R. Brady SC, instructed by C. McDonnell, Solicitor,
- the Minister for Agriculture, Food and Forestry, by M.A. Buckley, Chief State Solicitor, acting as Agent,
- the Commission of the European Communities, by P. Oliver, Legal Adviser, acting as Agent,
having regard to the Report for the Hearing,
after hearing the oral observations of HMIL Ltd, represented by C. McDonnell and P. Sreenan; the Minister for Agriculture, Food and Forestry, represented by M. Finlay SC; and the Commission, represented by P. Oliver, at the hearing on 9 March 2000,
after hearing the Opinion of the Advocate General at the sitting on 11 May 2000,
gives the following
Judgment
Grounds
1 By order of 23 July 1998, received at the Court of Justice on 3 December 1998, the Supreme Court referred to the Court for a preliminary ruling under Article 177 of the EC Treaty (now Article 234 EC) a number of questions on the interpretation of Commission Regulation (EEC) No 1964/82 of 20 July 1982 laying down the conditions for granting special export refunds on certain cuts of boned meat of bovine animals (OJ 1982 L 212, p. 48, and the corrigendum at OJ 1982 L 273, p. 43), as amended by Commission Regulation (EEC) No 3169/87 of 23 October 1987 amending Regulations (EEC) No 32/82, (EEC) No 1964/82 and (EEC) No 74/84 in the matter of customs export formalities for certain beef on which special refunds are granted (OJ 1987 L 301, p. 21) (hereinafter Regulation No 1964/82), and of Commission Regulation (EEC) No 2675/88 of 29 August 1988 providing for the grant of private storage aid fixed at a standard rate in advance in respect of carcases, half-carcases, hindquarters and forequarters from adult male bovine animals (OJ 1988 L 239, p. 20), as amended by Commission Regulation (EEC) No 3258/88 of 21 October 1988 (OJ 1988 L 289, p. 52) (hereinafter Regulation No 2675/88).
2 Those questions have been raised in proceedings between HMIL Ltd (hereinafter HMIL), a company engaged in purchasing, boning and trading of beef, and the Minister for Agriculture, Food and Forestry (hereinafter the Minister) concerning the application of those Community regulations.
Relevant provisions
3 Two subsidy schemes are at issue in the present case.
Special export refunds
4 At the time of the facts in the main proceedings, the special export refund scheme was governed by Regulation No 1964/82.
5 The relevant provisions of that regulation are as follows:
Article 1
Individually wrapped boneless cuts from fresh or chilled hindquarters of adult male cattle shall, when the terms of this Regulation are complied with, qualify for special export refunds.
...
Article 2
1. The operator shall submit to the competent authorities indicated by the Member States a declaration stating his intention to bone hindquarters as defined in Article 1 under the terms of this Regulation and to export the entire quantity of boned pieces obtained, each piece being individually wrapped.
2. ...
...
Article 6
Without prejudice to the application of the provisions of Regulation (EEC) No 2730/79, the grant of the special refund shall be conditional, except in circumstances of force majeure, on exportation of the total quantity of meat produced by boning covered by the abovementioned supervision.
The operator may, however, sell within the Community bones, large tendons, cartilages, pieces of fat and other scraps left over from boning.
Article 7
1. By way of derogation from Articles 2(3) and 4(1), Member States may make provision for appropriate control measures in place of the supervision by the competent authorities of the boning of the hindquarters, and in particular:
- ...
- that detailed rules for trimming and packaging be established, together with a description of the different cuts to be obtained,
- ...
Article 8
The Member States shall determine the conditions for supervision and shall inform the Commission accordingly. They shall take all necessary measures to make substitution of the products in question impossible, in particular by identification of each piece of meat. No meat other than that covered by this Regulation, with the exception of pigmeat, may be present in the boning room when the meat in question is being boned, trimmed or packaged.
The bags, cartons or other packaging material in which the boned cuts are placed shall be officially sealed by the competent authorities and bear particulars enabling the boned meat to be identified, in particular the net weight, the type and the number of cuts and a serial number.
6 The special export refund could be paid in advance. In that case, a security equal to the amount of the advance plus 20% had to be provided.
7 That security was governed by the following regulations:
(1) Council Regulation (EEC) No 565/80 of 4 March 1980 on the advance payment of export refunds in respect of agricultural products (OJ 1980 L 62, p. 5), as amended by Council Regulation (EEC) No 2026/83 of 18 July 1983 (OJ 1983 L 199, p. 12) (hereinafter Regulation No 565/80);
(2) Commission Regulation (EEC) No 2220/85 of 22 July 1985 laying down common detailed rules for the application of the system of securities for agricultural products (OJ 1985 L 205, p. 5), as amended by Commission Regulation (EEC) No 1181/87 of 29 April 1987 (OJ 1987 L 113, p. 31) (hereinafter Regulation No 2220/85); and
(3) Commission Regulation (EEC) No 3665/87 of 27 November 1987 laying down common detailed rules for the application of the system of export refunds on agricultural products (OJ 1987 L 351, p. 1, and the corrigendum at OJ 1988 L 337, p. 29), as amended by Commission Regulation (EEC) No 3494/88 of 9 November 1988 (OJ 1988 L 306, p. 24) and Commission Regulation (EEC) No 3993/88 of 21 December 1988 (OJ 1988 L 354, p. 22) (hereinafter Regulation No 3665/87).
Private storage aid
8 Private storage aid was provided for by Regulation No 2675/88.
9 The recitals in the preamble to that regulation refer, inter alia, to Commission Regulation (EEC) No 1091/80 of 2 May 1980 laying down detailed rules for granting private storage aid for beef and veal (OJ 1980 L 114, p. 18).
10 Article 2(2) of Regulation No 2675/88 provides:
Private storage can only be granted for meat classified in accordance with the Community scale for the carcase classification as laid down in Regulation (EEC) No 1208/81 ...
11 Article 2(2) of Council Regulation (EEC) No 1208/81 of 28 April 1981 determining the Community scale for the classification of carcases of adult bovine animals (OJ 1988 L 123, p. 3, and the corrigendum at OJ 1986 L 35, p. 12) states:
... the carcase shall be presented ...
- ...
- without cod fat,
- ...
12 Article 4(4) of Regulation No 2675/88 provides:
The large tendons, cartilages, pieces of fat and other scraps left over from cutting [or] boning may not be stored.
13 Article 5(2) of Regulation No 2675/88 provides that the aid may be paid in advance, at the storer's request, on condition that he lodges a security equal to the advance payment plus 20%.
14 That security was governed by Article 5(2) and by Regulations No 2220/85 and No 3665/87.
15 Article 10 of Regulation No 2675/88 fixes the amount of the security referred to in Article 4(2) of Regulation No 1091/80.
16 Article 5 of Regulation No 1091/80 provides:
1. The amount of the security shall not exceed 30% of the amount of aid applied for.
2. Except in cases of force majeure:
(a) the security shall be forfeit proportionately to the shortfall on the quantity agreed in the contract if less than 90% of that quantity is entered into storage within the time-limits laid down and remains stored for the stipulated period in accordance with Article 3(2)(a);
(b) if any of the obligations laid down in Article 3(2)(b), (c), (d) and (e) are not complied with, the competent authority of the Member State concerned shall declare the security wholly or partially forfeit, depending on the gravity of the breach of contract; the competent authorities of the Member States shall notify monthly the Commission of such cases, the circumstances and the action taken;
(c) where the other obligations are not complied with, the security shall be totally forfeit.
3. The security shall be released as soon as it is established that the conditions of the contract have been fulfilled, or in the event of an application for a contract or a tender being refused.
The main proceedings and questions referred for a preliminary ruling
17 It is apparent from the order for reference that in 1988 HMIL participated in both the subsidy schemes described in paragraphs 4 to 16 of this judgment.
18 HMIL declared some 13 000 tonnes of beef for special export refunds under Regulation No 1964/82 and entered into bonds in respect of that beef. It received IEP 16 270 139.96 in special refunds.
19 It also entered into 138 private storage contracts pursuant to Regulation No 2675/88 in respect of the same beef. It received IEP 5 376 259.13 in private storage aid.
20 Checks carried out by the Minister between April and September 1989 revealed that, in seven production plants used by HMIL, certain of its cartons examined included pieces of beef which in the Minister's view were not individually wrapped, as well as cod fat, scraps and trimmings wrapped inside the cuts known as plate and flank and mid rib. The Minister also claimed that in four of those production units the level of scraps and trimmings and non-individually wrapped pieces was extremely high.
21 On 17 May 1991, the Minister wrote to HMIL seeking repayment of:
- IEP 1 135 967.93 in respect of special export refunds (including the 20% advance payment premium);
- IEP 241 021.03 in respect of private storage aid (including the 20% advance payment premium); and
- IEP 148 759.97 in respect of private storage contract securities declared forfeit in relation to plate and flank and mid rib production at the Sallins, Athy, Tunney and Ballymahon production plants of HMIL.
22 In his letter, the Minister set out the method used to determine the amount of the sums demanded:
(a) all cartons found to contain trimmings or fat were excluded from private storage aid and export refunds, and the 20% advance payment premium was also deemed to be recoverable;
(b) all cartons found to contain non-individually wrapped pieces of meat were excluded from export refunds and the 20% advance payment premium was also deemed to be recoverable;
(c) the sampling results were extrapolated across the total plate and flank and mid rib production at each of the HMIL production units concerned with separate calculations for each production unit;
(d) the extrapolation method for private storage aid involved the exclusion from that aid and the regulatory premium of the percentage by weight of trimmings found relative to the weight of the cartons sampled;
(e) the extrapolation method for export refunds involved the exclusion from those refunds and the regulatory premium of the percentage by weight of trimmings and non-individually wrapped pieces found relative to the weight of the carton sampled;
(f) where the weight of trimmings in any carton was greater than or equal to 3 kg, the weight of the entire carton was included in the extrapolation calculation;
(g) where cod fat had been discovered, the weight of the entire carton was included in the extrapolation exercise for private storage aid and export refunds;
(h) an average weight per carton was established for each production unit, and the exclusion of cartons and the extrapolation procedure were based on those average weights;
(i) the seriousness of the regulatory breaches in respect of the plate and flank and mid rib production of the Sallins, Athy, Tunney and Ballymahon plants of HMIL were, in the Minister's view, such as to warrant forfeiture of the private storage contract securities in respect of the bone-in equivalent of such production at those production units.
23 On 13 June 1991, HMIL brought an action before the High Court (Ireland).
24 According to the order for reference, the issues raised by that action may be regarded as falling under three headings:
(1) the proper construction of Regulation No 1964/82 with regard to the requirement of individual wrapping and to the question whether trimmings are eligible for special export refunds;
(2) the proper construction of Regulation No 2675/88 with regard to the question whether trimmings are eligible for private storage aid; and
(3) if HMIL infringed those regulations, the legality of the financial corrections sought to be imposed by the Minister, and the limitations contended for by HMIL on any financial corrections which might be imposed by him.
25 By judgment of 8 February 1996 the High Court found for HMIL, holding, inter alia, that unwrapped trimmings could be rolled up inside plate and flank which was then wrapped, without infringing Regulation No 1964/82, and that trimmings were eligible for private storage aid under Regulation No 2675/88. So far as necessary, the High Court examined the Minister's system for financial corrections and found it to be fundamentally flawed in so many respects that it had to be condemned in its entirety.
26 The Minister appealed against that decision to the Supreme Court. That court decided to stay proceedings and refer the following questions to the Court of Justice for a preliminary ruling:
1. Is Commission Regulation (EEC) No 1964/82 and in particular Article 1 thereof, to be construed as meaning that trimmings of less than 100 grams, when rolled up inside a cut of plate and flank from fresh or chilled hindquarters of adult male cattle, which rolled-up cut is then wrapped, do or do not qualify for special export refunds pursuant to the said regulation?
2. Is Commission Regulation (EEC) No 1964/82 and in particular Article 1 thereof, to be construed as meaning that trimmings/detached pieces of meat of greater than 100 grams when rolled up inside a cut of plate or flank from fresh or chilled hindquarter of adult male cattle, which rolled-up cut is then wrapped, do or do not qualify for special export refunds pursuant to the said regulation?
3. Is Commission Regulation (EEC) No 1964/82 and in particular Article 1 thereof, to be construed as meaning that each piece or cut of plate and flank must be individually wrapped or that in addition, trimmings may be rolled up inside a piece or cut of plate and flank and such rolled-up piece or cut may then be wrapped?
4. Is Commission Regulation (EEC) No 2675/88 and in particular Article 4(4) thereof, to be construed as permitting or not permitting the storage of trimmings of less than 100 grams resulting from the cutting and deboning for the purpose of obtaining private storage aid under contracts entered into pursuant to the said regulation?
5. (a) Where upon examination of one or more boxes of meat placed under customs control for the purpose of obtaining special export refunds pursuant to Regulation No 1964/82, it is discovered that the contents of such boxes include trimmings rolled within plate and flank or mid rib and if the inclusion of such trimmings is contrary to Regulation No 1964/82, do Regulations No 565/80 and No 3665/87 permit the competent authority to reject the contents of the entire box as not qualifying for special export refunds and to forfeit the security given for the advance payment made in respect of such box plus 20%?
(b) Where upon examination of one or more boxes of meat placed under customs control for the purpose of obtaining special export refunds pursuant to Regulation No 1964/82, it is discovered that the contents of such boxes include separate pieces of fat rolled within plate or flank or mid rib contrary to Regulation No 1964/82, do Regulations No 565/80 and No 3665/87 permit the competent authority to reject the contents of the entire box as not qualifying for special export refunds and to forfeit the security given for the advance payment made in respect of such box plus 20%?
(c) Where upon examination of one or more boxes of meat placed under customs control for the purpose of obtaining special export refunds pursuant to Regulation No 1964/82, it is discovered that the contents of such boxes include non-individually wrapped pieces of meat contrary to Regulation No 1964/82, do Regulations No 565/80 and No 3665/87 permit the competent authority to reject the contents of the entire box as not qualifying for special export refunds and to forfeit the security given for the advance payment made in respect of such box plus 20%?
6. (a) Where upon an examination of one or more boxes of meat placed in store under Regulation No 2675/88 for the purpose of obtaining private storage aid, it is discovered that the contents of such boxes include trimmings rolled within plate and flank or mid rib and if the inclusion of such trimmings [is] contrary to Article 4(4) of Regulation No 2675/88, do Regulations No 2220/85 and No 2675/88 permit the competent authority to reject the contents of the entire box for the purposes of private storage aid and to forfeit the security for the advance payment made in respect of such box plus 20%?
(b) Where upon an examination of one or more boxes of meat placed in store under Regulation No 2675/88 for the purpose of obtaining private storage aid, it is discovered that the contents of such boxes include separate pieces of fat rolled within plate and flank or mid rib contrary to Article 4(4) of Regulation No 2675/88, do Regulations No 2220/85 and No 2675/88 permit the competent authority to reject the contents of the entire box for the purposes of private storage aid and to forfeit the security for the advance payment made in respect of such box plus 20%?
7. Where upon such an examination of boxes placed under customs control for the purpose of obtaining special export refunds pursuant to Regulation No 1964/82, it is discovered that a certain number of boxes contain ineligible material rolled up inside a cut of meat and there is evidence of a deliberate persistent policy by the operator of rolling up such ineligible material inside particular cuts of meat in particular production plants, is the competent authority authorised pursuant to Regulations No 565/80, No 3665/87 and No 1964/82 to extrapolate the results of the sample across the production of such cuts in the particular production units and to reject as eligible for export refunds, a quantity of meat based on such extrapolation and to forfeit the security for the advance payment made in respect of such quantity plus 20% or is the competent authority confined to extrapolating the results of the examination of boxes in one export refund bond across the production of the relevant cuts within that export refund bond as the case may be?
8. Where boxes placed in storage under Regulation No 2675/88 for the purpose of obtaining private storage aid have been examined and a certain number of such boxes have been found to contain ineligible material contrary to Regulation No 2675/88 and there is evidence of a deliberate and persistent policy of including such ineligible material rolled up inside particular cuts in particular production plants, is the competent authority entitled pursuant to Regulations No 2220/85 and No 2675/88 to extrapolate the results of such examination across the production of such cuts in the particular production plants and to reject as eligible for private storage aid a quantity of meat based on such extrapolation and to forfeit the securities given in respect of the advance payments made on such quantities plus 20%, or is the competent authority confined to extrapolating the results of the examination of boxes in one APS [private storage aid] contract across the production of the relevant cuts within that APS contract as the case may be?
9. Where there is evidence of a persistent and deliberate policy by an operator to include in boxes of particular cuts of boneless meat in particular production plants, material which may not be stored pursuant to Article 4(4) of Regulation No 2675/88 and the APS contract entered into by the operator with the competent authority and examination revealed significant quantities of such ineligible material has been stored, does Regulation No 1091/80, and in particular Article 5(2)(c) thereof, authorise the competent authority to forfeit the amount of the contract securities referable to the production of the relevant cuts of meat in such production plants?
Consideration of the questions
27 It is appropriate to consider the first three questions together, then to examine in turn the fourth, fifth and sixth questions, and last to consider the final three questions together.
Questions 1, 2 and 3
28 By these questions, the national court essentially asks, first, to what extent Article 1 of Regulation No 1964/82 requires certain pieces or cuts of beef and trimmings to be individually wrapped in order to qualify for special export refunds, and, second, whether it is possible to draw a distinction according to whether the pieces weigh more or less than 100 grams.
29 As is clear both from the order for reference and from the observations submitted, the reason for the distinction drawn in the first and second questions between trimmings of less than 100 grams and trimmings or detached pieces of meat of more than 100 grams is that, in the course of the investigation in 1989, the Minister clarified that trimmings were scraps or pieces of meat of 100 grams or less. Financial corrections were not made in respect of special export refunds for pieces of meat in excess of 100 grams if they were individually wrapped.
30 HMIL proposes that, in answer to those questions, it should be stated, first, that the weight of trimmings is not relevant in determining whether or not meat qualifies for special export refunds pursuant to Regulation No 1964/82 and, second, that the requirements of that regulation are satisfied where trimmings are rolled up inside a piece or cut of plate and flank or mid rib and that piece or cut is then wrapped.
31 HMIL explains that, given the speed at which work is performed in deboning halls, small pieces of meat inevitably become detached in the course of the process. These pieces, which are edible and of considerable value, are called trimmings. They must be distinguished from scraps, which are inedible material such as cartilage, tendons and pieces of pure fat or bits which have fallen onto the floor.
32 HMIL adds that plate and flank is a low-quality cut which is long and thin and is used for hamburgers and sausages. The practice is to present it rolled and then wrapped in polythene. It is customary to place the trimmings in the plate and flank and then to roll and wrap them as one.
33 In HMIL's submission, the second paragraph of Article 6 of Regulation No 1964/82, which authorises operators to sell, inter alia, scraps within the Community, concerns only scraps and not trimmings. Operators cannot make the choice provided for by that provision in relation to trimmings. They are required to export them.
34 It also submits that the requirement, laid down in the first paragraph of Article 1 of Regulation No 1964/82, for boneless cuts to be wrapped does not prohibit the rolling up of trimmings inside plate and flank, in accordance with usual practice, so as to produce just a single wrapped piece. The objective of that regulation, which is to prevent substitution, is still achieved, since the wrapping and labelling take place under the supervision of officers of the competent authorities. A requirement to wrap each of the pieces like sweets in a carton is unreasonable and unjustified. That work would be needless for the exporter and bothersome for the purchaser, and would add significantly to the risk of spoilage and food poisoning for no benefit.
35 The Minister and the Commission submit that it follows from the very wording of Regulation No 1964/82 that each piece of meat, however small, had to be individually wrapped. That requirement meets the objective, expressed in the eighth recital in the preamble to the regulation and in Article 8, of identifying each piece in order to avoid any possibility of products being substituted. Given the sizeable amounts of the special refunds, exporters can be required to apply Community rules as they stand even if they regard those rules as contrary to commercial practice and customer expectations. The fact that it is commercial practice for trimmings to be rolled up inside a cut of plate and flank is therefore immaterial having regard to the wording and objective of the regulation.
36 The Minister and the Commission contend that there is no difference between trimmings and scraps. There is no justification for construing the English word scraps to mean pieces of meat unfit for human consumption. Although that word is used in the second paragraph of Article 6 of the English language version of Regulation No 1964/82, that does not mean that the pieces called trimmings or trims do not fall within that provision. The other language versions of the regulation bear out this interpretation.
37 The Commission points out that Article 7(1) of Regulation No 1964/82 empowered the Member States to adopt measures for controlling trimming, while Article 8 required them to take all necessary measures to make the substitution of pieces of meat impossible. Read together, those provisions permitted a Member State to exclude trimmings below a certain threshold from special export refunds, particularly in view of the difficulty of identifying such trimmings. The Commission considers that it was reasonable to set this threshold at 100 grams.
38 The Court finds that it is sufficiently clear from the wording of Article 2(1) of Regulation No 1964/82 that each piece of meat had to be individually wrapped. The regulation provides for no exception in that regard, whatever the size, weight or nature of the piece. In particular, it draws no distinction between scraps and trimmings.
39 The prohibition on wrapping two different pieces of meat together is confirmed by the wording of the first paragraph of Article 8 of Regulation No 1964/82, according to which substitution of the products in question must be made impossible by identification of each piece of meat.
40 The practice of wrapping several pieces together, should its existence be proved, does not affect the interpretation of that regulation, whose wording is clear. If an operator elects to receive subsidies granted pursuant to Community legislation, it is for him to comply with the conditions of grant laid down by that legislation.
41 The argument that the objective of avoiding the substitution of pieces would still be achieved because the wrapping and labelling operations are supervised by officers of the competent authorities cannot be accepted. The officers cannot check each of those operations individually. Nor do checks on operations remove the need to comply with the letter of Regulation No 1964/82.
42 Finally, it follows from Articles 7 and 8 of Regulation No 1964/82 that the Member States had the right to exclude from entitlement to special export refunds trimmings whose weight was below a certain limit, for example a limit of 100 grams, having regard to the practical difficulty of identifying each small piece of meat.
43 The answer to the first three questions must therefore be that, on a proper construction of Article 1 of Regulation No 1964/82, every piece of meat had to be individually wrapped, whatever its size, weight and nature, and without distinguishing, in particular, between scraps and trimmings.
On a proper construction of Articles 7 and 8 of the same regulation, the Member States had the right to exclude from entitlement to special export refunds trimmings whose weight was below a certain limit, such as a limit of 100 grams.
Question 4
44 By its fourth question, the national court asks essentially whether, on a proper construction of Article 4(4) of Regulation No 2675/88, trimmings weighing less than 100 grams left over from cutting or boning qualify for private storage aid under contracts entered into pursuant to that regulation.
45 HMIL submits that Article 4(4) of Regulation No 2675/88 must be interpreted in a manner which is consistent with Article 6 of Regulation No 1964/82 and that there is no logical reason for excluding lean meat trimmings from private storage aid.
46 It contests the rule applied by the Minister under which trimmings weighing less than 100 grams are not eligible for aid. The application of such a rule infringes the principle of legal certainty and the prohibition on retrospectivity.
47 The Minister considers that, since the term other scraps left over from cutting or boning was not defined in Article 4(4) of Regulation 2675/88, it was for him, as competent authority, to specify the rules for the application of that provision. He thus had the power to specify that the lean trimmings excluded by Article 4(4) were those weighing no more than 100 grams.
48 The Commission, on the other hand, points out that Regulation No 2675/88 contained no provisions equivalent to Articles 7 and 8 of Regulation No 1964/82 empowering the Member States to adopt implementing measures. Therefore, the Member States were not entitled to grant private storage aid in respect of trimmings, however small.
49 It should be noted that Regulations No 1964/82 and No 2675/88 contained different rules governing the pieces left over from cutting, whether called trimmings or scraps. While the second paragraph of Article 6 of Regulation No 1964/82 gave the operator the choice of exporting scraps or selling them himself within the Community, Article 4(4) of Regulation No 2675/88 excluded them from the private storage aid scheme.
50 Nor did Regulation No 2675/88 contain provisions equivalent to Articles 7 and 8 of Regulation No 1964/82 empowering the Member States to adopt implementing measures and, in particular, to grant private storage aid in respect of trimmings exceeding a certain weight limit despite the prohibition laid down in Article 4(4) of Regulation No 2675/88.
51 Regulations No 1964/82 and No 2675/88 established subsidy schemes whose objectives differed and which therefore contained different conditions of grant. If an operator wished to receive both forms of subsidy cumulatively in respect of the same product, it was for him to ensure that that product complied with the conditions of grant under both sets of rules.
52 Irrespective of the fact that the national court does not ask the Court of Justice about the interpretation of the principle of legal certainty and the prohibition on retrospectivity, it is sufficient to observe that it is clear from the wording of Article 4(4) of Regulation No 2675/88 that trimmings are excluded from the private storage aid scheme.
53 Accordingly, the answer to the fourth question must be that, on a proper construction of Article 4(4) of Regulation No 2675/88, trimmings left over from cutting or boning, whatever their weight, did not qualify for private storage aid under contracts entered into pursuant to that regulation.
Question 5
54 By its fifth question, which is divided into three parts, the national court asks essentially whether, on a proper construction of Regulations No 1964/82, No 565/80 and No 3665/87, where the competent authority establishes that a carton of meat subject to the scheme covered by Regulation No 1964/82 contains items prohibited by the legislation, Regulations No 565/80 and No 3665/87 permit it to hold that the entire contents of the carton do not qualify for special export refunds and to forfeit the security given for the advance payment made in respect of that carton plus 20%. The question is in three parts because of the possibility that the answer may differ depending on the nature of the material found in the carton: trimmings rolled up within other pieces of meat, separate pieces of fat rolled up within pieces of meat, or non-individually wrapped pieces of meat.
55 According to HMIL, disallowance of the entire weight of a carton because it contains even a tiny amount of ineligible material is contrary to the principle of proportionality. Nor does anything in the applicable regulations confer the right to reject meat of unimpeachable quality which complies with the provisions of those regulations on the ground that the carton contains a certain quantity of ineligible material. Such a penalty would have no legal basis and its imposition would thus infringe the principle of legal certainty.
56 The Minister and the Commission, on the other hand, propose the answer that, in each of the three cases envisaged by the national court, Regulations No 565/80 and No 3665/87 permit the competent authority to hold that the entire contents of the carton do not qualify for special export refunds and to forfeit the security given for the advance payment made in respect of that carton plus 20%.
57 The Commission points out that the obligation under Article 2(1) of Regulation No 1964/82 to wrap each piece of meat individually is fundamental to the requirements of that regulation. The same is true of the obligation to include only pieces of meat which comply with the applicable nomenclature, to the exclusion of separate pieces of fat. The disallowance by the competent authority of a whole carton when it contains pieces which do not comply with the legislation and forfeiture of the security in its entirety therefore constitute measures proportionate to the gravity of the infringement.
58 The Minister and the Commission also consider that, having regard to the second paragraph of Article 8 of Regulation No 1964/82, which provides that the bags, cartons or other packaging material in which the boned cuts are placed shall be officially sealed, each carton was rightly taken as the basic unit of disallowance.
59 Finally, the Minister observes that, having regard to Regulations No 565/80, No 2220/85 and No 3665/87, it was for HMIL to establish that it was entitled to export refunds. Accordingly, in so far as the Minister examined HMIL's cartons and found one or more, but not necessarily all, of the pieces of plate and flank wrapped therein to be in breach of the applicable regulations, there was, in his view, nothing in Regulation No 1964/82 which entitled HMIL to an export refund on any remaining material in the same carton.
60 As the Advocate General states in point 76 of his Opinion, a finding that the operator has infringed the rules laid down in Regulation No 1964/82 brings about the consequences set out in detail in Regulations No 565/80, No 2220/85 and No 3665/87, which permit the competent authority to reject the entire contents of the carton as not meeting the conditions for the grant of special export refunds and to forfeit the security given for the advance payment in respect of the cartons plus 20%.
61 The obligations to export only pieces of meat which comply with the nomenclature and satisfy the requirement in Article 2(1) of Regulation No 1964/82 are fundamental to the special export refund scheme laid down by that regulation.
62 It follows that the discovery of pieces not satisfying those requirements, such as non-individually wrapped pieces of meat, trimmings rolled up within other pieces of meat, or separate pieces of fat, justifies the refusal to grant special export refunds and forfeiture of the security given for the advance payment, increased by 20%.
63 Since the second paragraph of Article 8 of Regulation No 1964/82 expressly requires that the cartons in which the boned cuts are to be placed must be officially sealed by the Minister and bear particulars enabling the boned meat to be identified, in particular the net weight, the type and the number of cuts and a serial number, the competent authorities could correctly take those cartons as the basic unit for supervision and application of the special export refund scheme, without infringing the principle of proportionality.
64 The answer to the fifth question must therefore be that, on a proper construction of Regulations No 1964/82, No 565/80 and No 3665/87, where the competent authority establishes that a carton of meat subject to the scheme covered by Regulation No 1964/82 contains items prohibited by the legislation, whether trimmings rolled up within other pieces of meat, separate pieces of fat rolled up within pieces of meat, or non-individually wrapped pieces of meat, those regulations permit it to hold that the entire contents of the carton do not qualify for special export refunds and to forfeit the security given for the advance payment made in respect of that carton plus 20%.
Question 6
65 By its sixth question, which is divided into two parts, the national court asks essentially whether, on a proper construction of Regulations No 2675/88 and No 2220/85, where the competent authority establishes that a carton of meat subject to the scheme covered by Regulation No 2675/88 contains items prohibited by Article 4(4) thereof, those regulations permit it to hold that the entire contents of the carton do not qualify for private storage aid and to forfeit the security given for the advance payment made in respect of that carton plus 20%. The question is in two parts because of the possibility that the answer may differ depending on the nature of the material found in the carton: trimmings or separate pieces of fat rolled up within pieces of meat.
66 HMIL considers that, for the same reasons as those set out under the fifth question, Regulations No 2220/85 and No 2675/88 do not permit the competent authority to exclude the entire contents of the carton from private storage aid but only to exclude the weight of the ineligible material.
67 The Minister and the Commission, on the other hand, submit that, in both cases referred to by the national court, the applicable provisions permitted the competent authority to exclude the entire contents of the carton from private storage aid and to forfeit the security given for the advance payment made in respect of that carton plus 20%.
68 The Minister also maintains that it is for HMIL to establish that it was entitled under Regulation No 2675/88 to be paid aid on material placed in an officially sealed carton alongside ineligible material.
69 The Commission adds that, under Article 5(2)(c) of Regulation No 1091/80, the entire security was forfeited if obligations imposed by Regulation No 2675/88 were infringed.
70 With regard to the basic unit of disallowance, the Commission considers that the Minister's approach of taking a carton as the basic unit is more favourable to HMIL than the approach suggested by Article 6(3) of Regulation No 2675/88, namely that the relevant unit is the lot, defined as a quantity which is placed in storage on a given day.
71 It should be observed that trimmings were excluded from the private storage aid scheme, in accordance with Article 4(4) of Regulation No 2675/88, as were separate pieces of fat, in accordance with Article 2(2) of that regulation in conjunction with Article 2(2) of Regulation No 1208/81, read together with Article 4(4) of Regulation No 2675/88.
72 Compliance with those legislative provisions is a fundamental requirement of the scheme established by Regulation No 2675/88.
73 Failure to comply with them therefore justifies a refusal to grant private storage aid and forfeiture of the security given for the advance payment, increased by 20%.
74 As regards the basic unit of disallowance for material which does not comply with the conditions of the private storage aid scheme, Article 6(3) of Regulation No 2675/88 refers to the concept of the lot, defined as a quantity which is placed in storage on a given day. Since the lot could have served as the basic unit of disallowance, the competent authority certainly did not infringe the principle of proportionality in choosing to adopt the carton as the unit of disallowance.
75 The answer to the sixth question must therefore be that, on a proper construction of Regulations No 2675/88, No 1091/80 and No 2220/85, where the competent authority establishes that a carton of meat subject to the scheme covered by Regulation No 2675/88 contains items prohibited by Article 4(4) thereof, such as trimmings or separate pieces of fat rolled up within pieces of meat, those regulations permit it to hold that the entire contents of the carton do not qualify for private storage aid and to forfeit the security given for the advance payment made in respect of that carton plus 20%.
Questions 7, 8 and 9
76 By these questions, the national court asks essentially whether, on a proper construction of the Community regulations, where checks relating to cartons of meat reveal evidence in particular production plants of a deliberate and persistent policy of infringement of Regulations No 1964/82 and No 2675/88, the competent authority may extrapolate the results of those checks across the production of the production plants in question or whether it is confined to extrapolating those results across the production within an export refund bond, as regards Regulation No 1964/82, or within a private storage contract, as regards Regulation No 2675/88. The ninth question relates specifically to extrapolation of the result with regard to forfeiture of the security referred to in Article 5(2)(c) of Regulation No 1091/80.
77 In HMIL's submission, extrapolating the result of checks across production plants without regard to the individual contracts means that a rate of infringement is imputed to certain contracts on the basis of infringements found in other contracts. Such a system has no legal basis and undermines the system of securities, which guarantee the performance of particular contracts, be they contracts for private storage or export refund contracts.
78 With regard to Article 5(2)(c) of Regulation No 1091/80, HMIL contends that the other obligations referred to in that provision can only be those referred to in Article 3(2)(a) to (e) of that regulation, that is to say essentially: (i) the obligation to take the agreed quantity of products into storage within the time-limits laid down; (ii) the obligation to store them for the stipulated period; (iii) the obligation not to alter them in any way during that period; (iv) the obligation not to exchange them for other products during that period; and (v) the obligation not to transfer them from one store to another during that period.
79 The Minister and the Commission, on the other hand, consider that, inasmuch as checks revealed evidence of a deliberate and persistent policy on the part of the trader to commit breaches of the kind at issue in the main proceedings, the competent authorities were entitled to extrapolate those findings to other cartons, including those covered by other contracts or bonds.
80 The Minister points out that HMIL had seven separate production plants and that the checks related to 2 400 cartons of plate and flank and mid rib across all its production plants. Examination revealed significant levels of breaches of Regulations No 1964/82 and No 2675/88 in all the plants, the level of breaches varying from one plant to another. The cartons examined related to 67 of the 138 private storage contracts fulfilled in 1988 by HMIL.
81 The Commission observes that the Court has approved the practice of extrapolation on numerous occasions. In that connection it cites Case C-55/91 Italy v Commission [1993] ECR I-4813 and Case C-413/92 Germany v Commission [1994] ECR I-3781.
82 With regard to Article 5(2)(c) of Regulation No 1091/80, the Minister considers that there is nothing in that provision which suggests that its scope is confined to the obligations referred to by HMIL. The Commission has already asserted in connection with examination of the sixth question that under Article 5(2)(c) the entire security was forfeited if obligations imposed by Regulation No 2675/88 were infringed.
83 It is settled case-law that the competent authorities may carry out sampling checks and make an appropriate extrapolation of the results of those checks, in accordance with the law of probability (see, to that effect, Italy v Commission, cited above, paragraph 22, and Germany v Commission, cited above, paragraph 13).
84 A fortiori, extrapolation is justified where checks reveal a deliberate and persistent policy of breach of the Community rules.
85 If the checks show that such a policy is implemented in particular in certain production plants, it is appropriate to extrapolate the results of the checks to the entire production of those plants. The competent authority is therefore not required to confine extrapolation of those results to production within an export refund bond, as regards Regulation No 1964/82, or within a private storage contract, as regards Regulation No 2675/88.
86 Where sampling checks have revealed evidence of a deliberate and persistent policy of storing material which does not qualify for the private storage aid scheme by virtue of Article 4(4) of Regulation No 2675/88, the competent authority is permitted to refuse to grant private storage aid and to forfeit the security in its entirety, pursuant to Article 5(2)(c) of Regulation No 1091/80, in respect of the whole of the material to which it has extrapolated the results of the check.
87 It is for the national court to establish whether in the present case the checks were sufficient and reliable and the extrapolation method was valid.
88 The answer to the seventh, eighth and ninth questions must therefore be that, on a proper construction of the Community regulations, where checks relating to cartons of meat reveal evidence in particular production plants of a deliberate and persistent policy of infringement of Regulations No 1964/82 and No 2675/88, the competent authority may extrapolate the results of those checks across the production of the production plants in question.
Where the sampling checks have revealed evidence of a deliberate and persistent policy of storing material which does not qualify for the private storage aid scheme by virtue of Article 4(4) of Regulation No 2675/88, the competent authority is permitted to refuse to grant private storage aid and to forfeit the security in its entirety, pursuant to Article 5(2)(c) of Regulation No 1091/80, in respect of the whole of the material to which it has extrapolated the results of the check.
Decision on costs
Costs
89 The costs incurred by the Commission, which has submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, 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 (Fifth Chamber),
in answer to the questions referred to it by the Supreme Court by order of 23 July 1998, hereby rules:
1. On a proper construction of Article 1 of Commission Regulation (EEC) No 1964/82 of 20 July 1982 laying down the conditions for granting special export refunds on certain cuts of boned meat of bovine animals, as amended by Commission Regulation (EEC) No 3169/87 of 23 October 1987 amending Regulations (EEC) No 32/82, (EEC) No 1964/82 and (EEC) No 74/84 in the matter of customs export formalities for certain beef on which special refunds are granted, every piece of meat had to be individually wrapped, whatever its size, weight and nature, and without distinguishing, in particular, between scraps and trimmings.
2. On a proper construction of Articles 7 and 8 of the same regulation, the Member States had the right to exclude from entitlement to special export refunds trimmings whose weight was below a certain limit, such as a limit of 100 grams.
3. On a proper construction of Article 4(4) of Commission Regulation (EEC) No 2675/88 of 29 August 1988 providing for the grant of private storage aid fixed at a standard rate in advance in respect of carcases, half-carcases, hindquarters and forequarters from adult male bovine animals, as amended by Commission Regulation (EEC) No 3258/88 of 21 October 1988, trimmings left over from cutting or boning, whatever their weight, did not qualify for private storage aid under contracts entered into pursuant to that regulation.
4. On a proper construction of Regulation No 1964/82, of Council Regulation (EEC) No 565/80 of 4 March 1980 on the advance payment of export refunds in respect of agricultural products, as amended by Council Regulation (EEC) No 2026/83 of 18 July 1983, and of Commission Regulation (EEC) No 3665/87 of 27 November 1987 laying down common detailed rules for the application of the system of export refunds on agricultural products, as amended by Commission Regulation (EEC) No 3494/88 of 9 November 1988 and Commission Regulation (EEC) No 3993/88 of 21 December 1988, where the competent authority establishes that a carton of meat subject to the scheme covered by Regulation No 1964/82 contains items prohibited by the legislation, whether trimmings rolled up within other pieces of meat, separate pieces of fat rolled up within pieces of meat, or non-individually wrapped pieces of meat, those regulations permit it to hold that the entire contents of the carton do not qualify for special export refunds and to forfeit the security given for the advance payment made in respect of that carton plus 20%.
5. On a proper construction of Regulation No 2675/88, of Commission Regulation (EEC) No 1091/80 of 2 May 1980 laying down detailed rules for granting private storage aid for beef and veal and of Commission Regulation (EEC) No 2220/85 of 22 July 1985 laying down common detailed rules for the application of the system of securities for agricultural products, as amended by Commission Regulation (EEC) No 1181/87 of 29 April 1987, where the competent authority establishes that a carton of meat subject to the scheme covered by Regulation No 2675/88 contains items prohibited by Article 4(4) thereof, such as trimmings or separate pieces of fat rolled up within pieces of meat, those regulations permit it to hold that the entire contents of the carton do not qualify for private storage aid and to forfeit the security given for the advance payment made in respect of that carton plus 20%.
6. On a proper construction of the Community regulations, where checks relating to cartons of meat reveal evidence in particular production plants of a deliberate and persistent policy of infringement of Regulations No 1964/82 and No 2675/88, the competent authority may extrapolate the results of those checks across the production of the production plants in question.
7. Where the sampling checks have revealed evidence of a deliberate and persistent policy of storing material which does not qualify for the private storage aid scheme by virtue of Article 4(4) of Regulation No 2675/88, the competent authority is permitted to refuse to grant private storage aid and to forfeit the security in its entirety, pursuant to Article 5(2)(c) of Regulation No 1091/80, in respect of the whole of the material to which it has extrapolated the results of the check.
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