Court of Justice 21-02-1974 ECLI:EU:C:1974:17

The aim for which the refund was instituted appears from the following considerations.

1. As far as concerns the objectives of the common agricultural policy as they are recorded in Article 39 (1) of the EEC Treaty, a comparison between Regulation No 367/67 and certain Regulations providing for refunds for other products shows that the production refund for broken rice used in the brewing industry was only instituted in order to ‘ensure reasonable prices in deliveries’ to users. This objective is expressly confirmed by the recitals in the preamble to Regulation No 852/67, according to which the aim of the refund is to permit broken rice to be made available to the industries using it at a price lower than that which would result from applying the system of levies and common prices. Regulation No 2085/68 provides additional confirmation of the intention of the Community institutions to ensure reasonable prices for users by means of the production refund: the import refund instituted by the latter can obviously only have the aim of encouraging Community importers of broken rice and, according to the actual words of one of the recitals in the preamble to the Regulation, it is intended to ensure that broken rice will not be affected by the levy; in other words its aim is to reduce the price to the user. A refund for broken rice produced in the Community could not have a different function.

2. The fact that the Community Regulations do not specify with precision the recipients of the refund is not unusual and is explained in particular by the confidence of the Community institutions in the workings of the market: natural market conditions ensure that the refund is automatically allocated to the final consignee without its being necessary to lay down provisions requiring this.

   As far as broken rice is concerned, the expression ‘production refund’ cannot be interpreted as equivalent to ‘refund to the producer’; the very fact that the Regulations prescribe a production refund in favour of importers excludes such equivalence. The most reasonable interpretation of Regulation No 367/67 leads to recognition that a private party entitled to collect the refund may be either the producer or the user, according to whether the price agreed between them does or does not take account of the amount of the refund; thus the free will of the parties gives appropriate effect to the aims which the Community Regulations have set themselves.

   This alternative is not excluded either by Regulation No 367/67 of the Council or by Regulation No 2085/68 of the Commission: the first realizes the intention to confer an advantage on the Community brewing industry, so that the persons entitled to the refund would be the brewers, whilst the second is based on the assumption that the agricultural producer lowers the price demanded of the brewers to the extent of the amount of the refund and thus ensures that the benefit of the refund is enjoyed by the person for whom it is actually intended.

   In a case where, as here, the user pays the producer of the broken rice a price which does not take the refund into account, the producer is not entitled to the refund, not having given the user the benefit of it; the objective purpose of the refund would be frustrated if it were equally granted to a producer who has not reduced the price demanded of the brewery to the level fixed by Community rules. In such a case the right to obtain the refund directly to the producer and therefore has the right to be reimbursed. The opposite proposition would lead to the absurd result that the user would have to pay for broken rice produced by the Community a price very considerably higher than that for broken rice imported from third countries.

3. The Commission's proposition, according to which the refund was instituted in the sole interests of the producer of the broken rice, cannot be accepted.

   From the point of view of pure logic it is appropriate to recognize that the allocation of a subsidy to the producer of broken rice — who moreover is generally not an agricultural producer but an industrialist — simply does not guarantee the sale of the broken rice on the market; to attain that objective it is necessary rather to arrange for the user to be enabled to acquire it at a competitive price by comparison with that for competing synthetic products.

   From the economic point of view, if the Commission's theory were correct it would be hard to understand why a refund is granted only for broken rice used by starch factories and breweries, whereas broken rice has other more important uses; recognition of this fact establishes that refunds have a purpose other than that of guaranteeing to the producer continuous market outlets at stable prices.

   Legally it would be absurd to think of granting to the producer a refund which would result in annihilating the effects of Community levies instituted to protect that very producer; moreover the fact that the refund is granted also to the importer contradicts the Commission's proposition.

   The Commission is confusing the real objective of the refund — to avoid agricultural products' being delivered at too high prices to the industry which uses them — with a contingent, marginal effect, namely wiping out as far as the user is concerned the effects of the refund granted on maize and common wheat intended for starch production.

   Regulation No 2085/68 of the Commission cannot be interpreted as reserving the grant of the refund only to the producer of broken rice, to the exclusion of the user; in this case it would have to be considered as void, as it would introduce a restriction contrary to Regulations Nos 367/67 and 852/67, which the Commission is prohibited from doing by Article 155 of the EEC Treaty.

   The Commission's proposition, in its extreme consequences, would result in the refund's being paid to the producer of the broken rice even if, as in the present case, he has received a price of 15 units of account per 100 kg, whereas, the Object of the refund is to reduce the purchase price of broken rice to , u.a. per 100 kg; the fact that the Commission itself refuses to admit this absurd consequence demonstrates the weakness of its arguments.

It would be normal that; with the refund being allocated, to the user, he should be required, in-order to receive it, to establish the reality of his right to credit. In this respect the question arises of the legality of Article 4, of the decree of, the Italian Minister of Finance of 10 June 1970 which requires the user of the broken rice to produce the express consent, in writing, of the producer.

1. At first sight this provision appears not to conflict with the Community Regulations: its aim is to guarantee that the producer is hot deprived of the refund, his consent establishing that, at the time of the fixing of the price, the parties freely disposed of the refund in favour of the user.

2. However, in certain cases the condition imposed upon the exercise of the right to refund creates a restraint on the operation of the Community rule; the latter would be observed if the user were authorized to establish his right to the refund not only by the written consent of the producer but also by any other means of proof offering a reasonable safeguard. In this respect it is appropriate to call attention to the fact that the general agreement concluded between the national associations of the brewery and rice industries provides that as from 1 October 1970 refunds for broken rice used in the brewing industry go entirely to the user and that to this intent the supplier is to place on the invoice an endorsement in favour of the user. In the present case there is no reason to make the user suffer the damaging consequences of a fact for which he is not responsible so long as he proves his right to the grant of the refund. The reference to the written consent of the producer of the broken rice can only constitute at the most a subsidiary proof in the event of its turning out, to be impossible to determine, in particular on the basis of the prices actually paid by the user and the market prices of broken rice, to whom the refund should be paid. In no case should the obligation to produce the written consent of the producer involve the latter's exclusive right to the refund.

3. Having regard to the aims of the Community, Regulations, the only means making it possible to establish, in the absence of a specific agreement between producer and user, to whom the right to the refund belongs, is to check which of the two contracting parties would suffer damage by not receiving it. When the producer of the broken rice has received from the user a sum considerably in excess of the threshold price he cannot be granted the refund as well; otherwise he would be enriched without any justification, whilst the user, having already paid a price much above the world market price, would in addition be deprived of the refund.

4. The condition imposed by the decree of the Minister of Finance thus has no purpose other than to afford sufficient evidence for the grant of the refund to the user; it cannot have the effect of depriving the latter of the right to the refund in the event of his not proving the written consent of the producer: it is sufficient for the grant of the refund that he should satisfy the conditions imposed by the Community by proving that the product was in fact used by the brewery and that the price paid was not reduced in consideration of the refund.

Article 3 (2) of Regulation No 2085/68 clearly specifies the producer of broken rice as the recipient of the refund; this provision is in conformity with the whole of the system of refunds and its spirit.

1. The fact that the refund is paid and the checks on the use of the broken rice are carried out by the Member State into whose territory the broken rice is imported or in which it is produced, even when it is intended for use in another Member State, proves that a direct link has been established between the refund and the production of the broken rice.

2. The refund was instituted to allow rice-producers, without themselves suffering any disadvantage, to market broken rice at a price which would be attractive for potential users, especially breweries. This view is confirmed by the restriction of the refund to the extent that prices for broken rice on the market are high and its suppression when the c.i.f. price is equal to or higher than the threshold price.

The Italian Government correctly applied Community rules by providing that application for the refund must be made by the producer of the broken rice, or else by the user on condition that he provides the express written consent of the producer; in such a case account will have been taken, with a view to simplification, of an assignment of the claim which has taken place between the producer and the user. But in the absence of such consent it must be assumed that the user has paid a normal price and has no right to the refund.

The first question put by the Rome Pretore thus requires an affirmative answer, it being understood, first, that the refund is intended to protect the interests of producers of broken rice and, secondly, that this protection must be viewed in relation not only to products similarly benefiting from a refund but also to other substitute products.

To the second question it is appropriate to reply in the negative: the interests of brewers were not taken into account at the time of the inroduction of the refund; at the most there is an indirect interest.

The reply to the third question should also be in the negative: the producer cannot lay claim to the refund when he has sold the broken rice at the full price; the brewer's rights cannot be superior to those of the person entitled to the refund.

The fourth question is only a minor one. It leads however to a finding that any assignment of the right to a refund from the producer to the brewer is a matter for domestic law alone.

It is incontestable that the production refund for broken rice used in the brewing industry is granted to the producer of the broken rice: he is to be considered as the person entitled to the refund.

1. This finding follows from the actual wording of the rules in question. In particular Article 3 (2) of Regulation No 2085/68, laying down the detailed rules for granting the refund, takes account only of an application from the producer and does not envisage any application from the brewery.

2. The production of and trade in broken rice — a product appearing in Annex II to the EEC Treaty — come under the agricultural provisions of the Treaty; that is not the case with beer. No doubt it would have been possible, on the basis of Article 43 of the Treaty, to provide for the grant of the refund to manufacturers of a product not appearing in Annex II on condition that the economic advantage was to go entirely to the agricultural producer; for this purpose however it would have been necessary in this case for Regulation No 359/67 on the common organization; of the market in rice and Regulation No 367/67 fixing production refunds on broken rice used in the brewing industry to provide expressly for payment of the refund to the brewery. As this is not the case, Regulation No 2085/68, laying down the detailed rules for the refund, could not have provided otherwise.

3. The production refund for broken rice used in the brewing industry is, like the refund for. maize groats and meal intended for the same use, the necessary consequence of the production refund for maize and common wheat intended for the production of starch. The refund for the production of starch has disturbed the equilibrium in the use by the brewing industry of starch on the one hand and maize groats and meal and broken rice on the other; it was to restore this equilibrium in competition that a refund was instituted for the latter products. As it was a question of ensuring equality between the suppliers of various raw materials to the brewing industry it was logical that the refund for maize groats and meal and broken rice should be granted to the producer — who is in competition with the starch manufacturer, who himself enjoys a refund for this product. The objective pursued by means of the refund was not to help the purchaser or the user, but to assist the agricultural producer, to ensure a fair income for him by putting him back into a good competitive position for marketing broken rice as against other raw materials.

4. The fact that the refund is also granted for imported broken rice by no means proves that the refund was instituted for the benefit of breweries. Regulation No 359/67, in the words of Article 29, is to be ‘so applied that appropriate account is taken, at the same time;, of the objectives set out in Articles 39 and 110 of the Treaty’; this reference to Article 110 indicates that the refund for imported broken rice is not for protectionist ends, but is justified by objectives of commercial policy.

Neither the wording nor the objective of the Regulations regarding the production refund for broken rice requires that the benefit of this refund should accrue to the brewery using it.

1. No provision in any Regulation expressly provides that the refund granted to the producer of broken rice used in the brewing industry must in one way or another be transferred to the buyer or used to reduce the selling price. The producer simply has to provide proof that the broken rice for which he is applying for a refund has actually been used in the brewing industry.

2. The proof of the actual use of the broken rice by the brewing industry suffices to achieve the immediate objective of the rules regarding the refund. The refund is justified by the fact that starch, a product in competition with broken rice, is itself the object of a production refund; it is intended above all to re-establish the balance of competition between broken rice, maize groats and meal and starch as regards the market which, for all these products, is represented by the brewing industry.

3. The primary objective of the production refund, contrary to the opinion of the plaintiff in the main action, is not to allow breweries to acquire broken rice at a preferential price or to ensure for them the same supply price for all the raw materials used. No doubt the refund, intended essentially to re-establish the balance between the suppliers of the various raw materials used in the brewing industry, does tend to maintain in being the outlet for these raw materials provided by breweries, and which the intention was to protect by exerting an effect on the price structure of broken rice. But, instead of trying to ensure the achievement of this objective, which is a secondary one, by granting the brewery a right to the refund, the Community institutions relied on the effects of supply and demand on the market. In a free market the very existence of the refund has an influence on the price structure and competition has its effect between sellers of broken rice, between products which can technically be substituted for it and indeed between broken rice produced in the Community and imported broken rice, which, equally, enjoys a production refund.

The fact that a brewery using broken rice does not derive any benefit from the grant of the production refund to the producer of the broken rice is not, in itself, contrary to the primary intention of the refund.

This conclusion is in fact equally valid in so far as and to the extent to which the functioning of the market has been able to take full effect and producer and brewer have been able to negotiate the sale price by taking the grant of the refund into account; when the parties to the contract have agreed, in negotiating the sale price, that the refund granted to the producer is to be transferred in whole or in part to the brewery using the broken rice, Community rules do not oppose the implementation of this agreement.

Community Regulations, after determining the persons entitled to the refund, have entrusted its payment to Member States; the problems connected with an. assignment of claim from the producer to the user are thus entirely a matter of domestic law.