Court of Justice 27-11-1984 ECLI:EU:C:1984:358

Admissibility

The Commission expresses serious doubts as to the admissibility of the application. Regulation No 2239/81 repealed Regulation No 71/81, which was a regulation in the proper sense of the term. Regulation No 2238/81 is a management measure relating to the olive oil market which takes no special account of the relatively few traders who might consider themselves directly concerned. Moreover, the applicants did not acquire individual rights and the traders who were excluded from the sale brought proceedings before the national courts, which shows that the Commission's action affected a much wider group of persons than the applicants.

Since the Commission is convinced that its action is well founded from the economic and legal points of view, it does not wish to insist on this aspect of the case which is a procedural matter and which the Commission submits for the Court's consideration.

The applicants contest the objection raised by the Commission. They contend that the two regulations at issue are in fact decisions. The content of Regulation No 2238/81 is general and abstract only in appearance. In fact, it was an act of authority whose content was specific and concrete and which was addressed only to the six undertakings who had been allocated lots, and to AIMA, and by virtue of which the existing concrete relations, which were already of a contractual nature, were destroyed. Regulation No 2239/81 provides expressly for a sale by tender in which only those companies which had been allocated lots in accordance with Regulation No 71/81 were invited to take part. The applicants are thus directly and individually concerned by that regulation.

The applicants cite the past decisions of the Court in support of their argument.

The Commission replies that the contested regulation is general in character and was adopted solely to meet the imperative requirements of the public interest and not in order trt affect any particular trader. The regulation directly affects the market position of all other traders in the olive oil sector.

Breach of essential procedural requirements

The applicants state that the procedure laid down in Article 38 of Regulation No 136/66 (Official Journal, English Special Edition 1965-1966, p. 221) was not followed by the Commission. That article requires that the opinion of the Management Committee for Oils and Fats be obtained before measures are adopted. If there is disagreement, the question must be referred to the Council. While the measures provided for in Regulation No 71/81 were adopted in accordance with the opinion of the Committee, Regulation No 2238/81 expressly states that the Committee had not delivered an opinion, and that the earlier opinion stood.

The Commission points out that the applicants are mistaken. The recital in question does not mean that the Committee was not consulted, but, on the contrary, that there was no majority for or against the draft regulation after consultation had taken place. In that case, the Commission was entitled to adopt the regulation. It is only in the case of a majority against the draft regulation that the matter must be referred to the Council for a decision.

The applicants reply that the Commission was only entitled to take decisions after the Management Committee had expressed an opinion in favour of the draft regulation. In any event, the Commission could not decide without having considered the opinion of the Management Committee.

The Commission maintains that Article 38 of Regulation No 136/66 permits the Commission to adopt measures if the opinion of the Management Committee is favourable to the proposal or if there is no majority of either 45 votes in favour or 45 votes against.

Unlawfulness on the grounds of infringement of acquired rights

The applicants contend that Regulation No 2238/81 appears to be flatly contrary to the general principle that repeal of measures which affect the established position of third parties is unlawful. Such repeal is unlawful, and the Commission does not have the power to adopt such a measure because the Council could not have delegated power to the Commission so to infringe acquired rights of third parties.

The applicants have acquired all the rights of the purchaser under the contracts of sale which were concluded following the offer made to the public by the notice of sale, the applications to purchase which were properly submitted and the drawing of lots.

Since the lots were expressly identified in the notice of sale, the applicants have become owners of the lots pursuant to Article 1376 of the Italian Civil Code, which provides that ownership is acquired by simple consent in the case of a contract of sale in respect of a specified object.

Since by virtue of its entry into force Regulation No 71/81 had become a rule of Italian domestic law, it is obvious that the lawfulness of its repeal must be considered on the basis of the principles of Italian law.

In Italian law, repeal of an administrative measure can only take effect ex nunc and cannot affect events which have already taken place. There is all the more reason therefore for those limits to apply in Community law.

The repeal of Regulation No 71/81 entailed infringement of the acquired rights of the applicants, which is not in conformity with the case-law of the Court of Justice, in particular with the judgment of 6 March 1979 (Case 92/78 Simmenthal v Commission [1979], ECR 777).

If Regulation No 2238/81 is to be regarded as a kind of expropriation measure, it is unlawful because of the absence of compensation.

The Commission relies on Regulation No 136/66 as subsequently amended (see in particular Council Regulation No 1562/78 of 29 June 1978, Official Journal L 1985, p. 1), which fixes a target price intended to ensure that producers obtain a fair income. To achieve that end, stabilizing machinery is provided for, which includes the purchase of oil by intervention agencies and its sale in the Community under conditions which do not disturb the market (Articles 8 and 12).

The Commission points out that intervention has the double purpose of supporting the market price by withdrawing surplus quantities and of putting the product back on the market when that appears to be appropriate, great care being taken to avoid disturbing the market. The purchases and sales carried out by the intervention agency do not merely constitute successive transfers of ownership. They must be regarded as “public law relationship” which permit the public authorities to withdraw from contractual obligations if the situation changes in such a way that the public interest can only be served if the contract is rescinded or amended.

At Community level, the Commission considers that it has an obligation to ensure that the common market organizations continue to function correctly, and to that end to adopt any measures which may be necessary to avoid disturbances.

The Commission doubts that the drawing of lots gave rise to a right of ownership in favour of the applicants.

The sale procedure laid down in Regulation No 71/81 consisted of several phases, followed by the allocation of the goods by means of a registered letter signed by the Director-General of AIMA. That letter of allocation closes the procedure and declares the person to whom the lot has been allocated owner of it. It is also from the date of receipt of that letter that the person to whom the lot has been allocated becomes bound by the obligations arising from that allocation, that is, he must provide a guarantee and be present when the containers are sealed.

Only then is the contractual relationship complete, since the public authorities have decided definitively that the operation, which constitutes an act of management of the olive oil market and not simply a sale which has no other purpose, is appropriate.

It must be recognized that the Commission has the power and the duty (confirmed by Article 12 (2) of Regulation No 136/66) to ensure, in the exercise of its discretion in economic matters, that agricultural management measures are appropriate, particularly when, as in this case, the applicant had no right of ownership.

Even if the applicants had become owners of the goods, the Commission considers that it was entitled to expropriate them. All national legal systems permit the public authorities to expropriate the property of a private individual, upon payment of fair compensation, when the public interest requires it. The Commission considers that it has sufficiently proved the existence of such a public interest.

The applicants received fair compensation in that they were given the first opportunity of acquiring the olive oil, at a price which was, to be sure, above the earlier price but which still left them a more than sufficient profit margin. If, for one reason or another, one of the companies had not obtained one of the lots, the Commission would have granted it appropriate compensation in another form.

The applicants reply that both Regulation No 71/81 and the notice of sale issued by AIMA on 28 January 1981 referred expressly to a “sale” and to a “contract” the execution of which was to be guaranteed, and provided that in case of delay, the oil was to remain in storage at the “purchaser's” risk. If the guarantee was not provided, AIMA could have regarded the sale as automatically “terminated”, which presupposes the existence of a complete, previously concluded contract.

Regulation No 2238/81 also speaks of a “sale” which must be cancelled. That regulation contains provisions which are retroactively applicable to the relationship between AIMA and the six undertakings which had already been established.

The effects of Regulation No 71/81 were exhausted by the sale of the olive oil by AIMA. The Commission cannot therefore adopt measures which alter those effects.

The principles that measures may not be retroactive and that acquired rights must be respected are recognized in both national law and Community law. Acquired property rights must be all the more respected because Community law protects the legitimate expectation of private individuals.

In the “common market”, the basic principle of a “market” namely, the sacrosanct character of contractual relations, must be respected.

The idea that giving the owner who has been deprived of his property the opportunity to buy back the same goods can be called “compensation” is so absurd and iniquitous as to require no comment.

The Commission's arguments regarding public law contracts are quite extraordinary. The reference to planning law, governed by the public interest, is not relevant in the context of private law contracts.

In the reply and the rejoinder, the parties exchanged observations on the question of whether the sealing of the containers and the provision of guarantees took place in the context of the first sale.

The Commission contends that the Commission's power and duty to ensure that agricultural management measures are appropriate was exercised in the context or a complex sale procedure culminating in the “allocation” of the goods, which constituted the final and definitive manifestation of the will of the public authorities to carry out the intended operation, exclusively in the public interest. It was only then that the contractual relationship was complete.

The Commission does not agree with the applicants' statements that Regulation No 71/81 no longer has legal effect. Above and beyond the allocation of the goods, the payment of the guarantees, the sealing of the containers and the periodic withdrawal of oil have yet to take place.

The Commission endorses the applicants' arguments regarding the public interest and planning law, and sees in them a confirmation of its own position.

Even if there was an expropriation, the Commission is of the opinion that the applicants' rights received adequate consideration in relation to the public interest.

They were offered compensation in a special form based, on the one hand, on the public interest which was protected by virtue of the higher selling price and, on the other, the private interest of the applicants, which was not to be paid enormous sums of money as compensation but rather to obtain considerable quantities of olive oil on favourable terms so as to carry on their own production. The Commission could have offered the oil for sale again to a larger number of traders, which would have further reduced the opportunities open to the applicants.

Insufficient statement of reasons and error regarding disturbance of the market

The applicants maintain that the recitals in the preamble to Regulation No 2238/81 do not make clear either the scope or the nature of the events relied upon and limit themselves to an allusion which is so vague as to be capable of being used for any measure, at any time, in any place and under any circumstances.

The Commission did not indicate the reason for its sudden change of view after a period in which it had not reacted, even though it was aware of what was happening.

The applicants contest the Commission's statements regarding developments on the market and the effect on it of the sale of the olive oil. The Commission started from false premises and made manifest errors of fact.

The Commission bases its argument on an increase in the market prices for olive oil. However, those increases were foreseeable both because of the general trend of the market and because of the prices fixed by the Council for the 1980-81 marketing year, with the regular increases provided for in Article 9 of Regulation No 136/66.

The quantity in question constitutes no more than 7% of the annual consumption of olive oil in Italy and could not all be put on the market at the same time.

Regulation No 71/81 also provides that all the oil may be sold to a single purchaser.

The effect of a sale at a favourable price is not a disturbance of the market but an increase in the profit margins of the applicants because prices are determined on the basis of supply and demand.

The Commission replies that it considered it essential to cancel the sale of the olive oil because the procedure had taken longer than could have been foreseen and therefore the sale would have been carried out at a time when conditions were radically different from what they had been initially, with the result that the sale would have seriously disturbed the olive oil market. The Commission therefore exercised the discretion which the Court has recognized that it has in regard to the management of economic matters which are complex and difficult to understand.

At the time of the sale at LIT 210 000 per 100 kg, the intervention price (December 1980) was about LIT 200 000. The market price for refined oil was approximately LIT 220 000, which would have permitted a substantial profit to be made.

After the delays in the tendering procedure, conditions on the market had radically changed. On the one hand, the 1980-81 harvest was much smaller than expected, and on the other, prices had increased to an unforeseeable degree, because of the lower production, the limited quantities of lampante grade olive oil available on the world market and, partly, because ot the devaluation of the green lira.

The conditions of sale, which were already favourable, thus became unreasonably so, and that situation would have permitted a limited number of traders not only to make enormous profits at the expense of the European taxpayer, but also to dominate the olive oil market in Italy by excluding from that market all other traders, who could obtain that type of oil only on much less favourable terms.

With regard to the statement of reasons for the decision, it is perhaps succinct but it is not for that reason insufficient. The six companies involved know what the situation is.

The applicants reply that the Commission asked AIMA to carry out the drawing of lots at the end of May and that the Commissioner, Mr Dalsager, confirmed the sale of the olive oil when he replied, on 22 June, to a question from the European Parliament. The unforeseeable effects to which the Commission refers in justification of its action took place before that confirmation.

The Commission's argument that the 1980/81 harvest showed signs of being far below expectations is not mentioned in the preambles to the contested measures.

The figures provided by the Commission regarding prices, costs and profits are incorrect.

Contrary to the Commission's forecast, the oil in question was placed on the market, following the order of the President of the Court of 21 August 1981, without producing catastrophic effects.

The Commission considers that the applicants are seeking to draw unreasonable conclusions from Commissioner Dalsager's answer. His reply was that when Regulation No 71/81 was adopted, the conditions for a sale existed. The fact that that answer is dated 22 June 1981 proves nothing. The Commission's decisions require serious consideration and it can take some considerable time to bring them to fruition.

The Commission contests the applicants' statement that the oil was placed on the market without causing any disturbance whatsoever. The market price for lampante grade olive oil was about LIT 235 000—236 000 and was rising (it had reached about LIT 240 000 in March 1982) because of the persistent shortage on the market, whilst the intervention price had increased rapidly, reaching LIT 242 000 in March 1982. On the other hand, the market price for refined oil has fallen regularly since the oil purchased by the applicants in this case and in Case 232/81 was placed on the market.

For that reason, other traders are in difficulties. Because they are obliged to obtain supplies on the market at a higher price, they have had to reduce the price of their refined products and thus reduce their profit margins.

Those difficulties would have been even greater if the market price for lampante grade oil had been closer to the intervention price instead of moving away from it, a phenomenon which is totally unwarranted in a healthy market.

Misuse of powers

The applicants allege that the purpose of the contested regulations was not to protect the market but to legitimate the failure to execute a contract, to deprive the applicants of profits justified by the commercial risk involved and to favour another, clearly-defined group.

The Commission has also failed to observe Article 42 of the Treaty, which lays down the general principle that the competition rules do not apply to production of and trade in agricultural products, since the alleged disturbances in the market are merely the effect of competition in a situation typical of all sales by tender.

The Commission replies that its purpose was to avoid serious disturbances on the market caused by marketing an enormous quantity of oil at a derisoiy price. Reduction of the applicants' huge profit margin was a secondary factor and not a major objective.

The reliance on Article 42 of the Treaty is misplaced because Regulation No 26 of the Council extended application of most of the competition rules to agriculture, and in any event those rules are not relevant.

The concept of “disturbance” is relied upon in Article 12 (2) of Regulation No 136/66, which deals with the sale of olive oil by the intervention agencies.