Court of Justice 04-07-1984 ECLI:EU:C:1984:238

The facts may be summarized as follows :

In the early part of 1976, the Council of the European Communities declared that it proposed, by way of Community action, to grant 3 750 tonnes of husked long-grain rice to the Republic of the Niger under its 1975/76 food-aid programme.

On 10 September 1976, the Commission therefore adopted Decision 76/748/EEC, addressed to the Italian Republic, relating to the urgent supply of husked long-grain rice as food aid to the Republic of the Niger (Official Journal 1976, L 259, p. 22). In view of the need to provide aid rapidly, the Commission considered it necessary to have recourse to contracts by mutual agreements and provided therefore, in Article 1 of the aforementioned decision, that the Italian intervention agency, the Ente Nazionale Risi (hereinafter referred to as “ENR”, should conclude a private contract for the purchase on the Community market of 3 750 metric tonnes of husked long-grain rice for delivery to the Republic of the Niger.

The ENR concluded a contract with Eurico srl covering purchase and delivery of the rice in accordance with the terms of the decision.

The authorities in the country of destination criticized the quality of the product, and the ENR, on the Commission's instructions, initially suspended payment of the entire sum due (LIT 1 770 000 000) and later made only a part-payment of LIT 1 500 000 000.

Eurico then brought an action before the Tribunale di Milano [District Court, Milan] against the ENR for payment of the difference of-LIT 270 000 000- plus compensation for monetary depreciation and interest.

By judgment of 19 June 1980, the action was dismissed on the ground that the ENR was not a proper defendant. The reason for the Tribunale's decision was that it considered that the ENR had acted as a duly authorized representative of the Commission. Because it had attached the Commission decision of 10 September 1976 to the public invitation to tender, the ENR had acted in the name of the Commission. Furthermore, the Commission had been involved in the performance of the contract at every stage and gave orders to the ENR, which were always complied with.

Eurico appealed against that judgment to the Corte d'Appello [Court of Appeal], Milan, and at the same time instituted proceedings against the Commission before the Tribunale di Milano for payment of LIT 283 000 000 plus compensation for monetary depreciation and interest.

In those proceedings, which gave rise to this reference for a preliminary ruling, the Commission objected that it was not a proper defendant. It maintained that the Italian State and the ENR, as contractual parties, were the only proper defendants, since Community law entrusts to the Member States the task of carrying out all operations connected with implementation of the food-aid programme of the EEC.

The national Courtis of the opinion that the Commission, and therefore, pursuant to Article 211 of the EEC Treaty, the European Economic Community, is bound to fulfil its contractual obligations in the capacity of party to the contract only if the ENR, when entering into the contract in question, acted as a duly authorized representative of the Commission.

Since, in the view of the Tribunale di Milano, it is not clear whether or not the ENR is a duly authorized representative of the EEC, that court, by order of 24 March 1983, stayed the proceedings and referred the following question to the Court of Justice for a preliminary ruling under Article 177 of the EEC Treaty:

“Was the Ente Nazionale Risi, the Italian intervention agency, expressly or by implication vested with specific authority to act in the name of the EEC [‘mandato con rappresentanza’] for the purpose of concluding the private contract for the purchase of 3 750 metric tonnes of husked long-grain rice intended for the Republic of the Niger by virtue of the Commission decision of 10 December 1976 (Official Journal of the European Communities of 23. 9. 1976) and the legislative measures referred to therein?”

My opinion on that question is as follows :

The court making the reference correctly takes the view that in principle it has jurisdiction in regard to the contractual liability of the Community pursuant to the first paragraph of'Article 215, Article 183 and Article 211 of the EEC Treaty.

However, such liability could arise only if the Commission used the ENR as its agent for conclusion of the contract in question. The question whether the ENR is to be regarded as the agent of the Commission within the meaning of the Italian Civil Code cannot, as the parties to the main proceedings have stressed, be decided by the Court of Justice in a preliminary ruling. In particular, it is not for the Court of Justice to establish or appraise the facts of the case, that being a matter reserved exclusively to the national court. Under Article 177 of the EEC Treaty, it only has jurisdiction to interpret Community law.

Consequently, the Milan court's question relates only to whether or not, by virtue of the provisions of Community law on food aid, the Italian intervention agency responsible for carrying out the Community action had been entrusted with the task of concluding the contract in question as a representative of the Community.

In the view both of the national court and of the plaintiff in the main proceedings, an affirmative answer to the question is suggested essentially by the fact that the food aid was granted in fulfilment of an international convention binding on the Community. The reason for the inclusion of food aid in the Community policy regarding the market in rice is, in the opinion of the court, principally that mobilization of substantial quantities of rice might have an effect on the common market in that product. Accordingly it is necessary to proceed on the basis that, in the case of food aid, national intervention agencies cooperate directly with the EEC regarding the mobilization of products and do not, as in the case of Community intervention in agriculture, act on behalf and in the interests of the Member States. Finally, it is not clear from the regulations on Community financing of expenditure in respect of food aid that the intervention agencies did not act as agents for the Community in such cases.

On the other hand, the defendant in the main proceedings argues that, at least at the time in question, the food-aid programme was closely linked to the common agricultural policy. Consequently, it comes to the conclusion, after an analysis of the essential principles of the Community rules on agriculture and the apportionment of liability between the Community and the Member States in the light of the caselaw of the Court of Justice on this problem, that the implementation of the Community provisions concerning food aid falls solely within the powers of the designated internal State agencies. Consequently, the ENR, in accordance with the provisions of Community law regarding the division of powers, did not act as the representative of the Commission when it concluded the contract with the plaintiff in the main action.

In assessing that argument, it must first be stated that the division of powers between the Community and the Member States is exclusively regulated by Community law and not by the private law of the Member States. The division of contractual liability between the organs of the Community and the Member States corresponds to the division of powers laid down in Community law, which will now be examined.

1. The EEC Treaty contains no express provision dealing with the powers of the Community in regard to food-aid policy. However, a series of factors, such as the powers of the Community in relation to agricultural policy, trade policy and the association of the overseas countries and territories (Part IV of the EEC Treaty), which is a matter of development policy, and the accords which have been entered into on the basis of that association suggest that the Community, as well as the Member States, has powers in relation to food aid.

   To this end, the original regulation, Regulation No 359/67/EEC of the Council of 25 July 1967 on the common organization of the market in rice (Official Journal, English Special Edition 1967, p. 193), as amended by Regulation No 668/75 (Official Journal 1975, L 72, p. 18), contained a provision on the mobilization of rice for food aid. Similarly, Article 25 of the regulation now in force, namely Council Regulation No 1418/76 of 21 June 1976 on the common organization of the market in rice (Official Journal 1976, L 166, p. 1, hereinafter referred to as the “rice market regulation”) provides, inter alia, that rice may be made available for food-aid programmes, being either purchased on the Community market or obtained from stocks held in store by the intervention agencies. According to Article 25 (2), the conditions under which products may be made available and, in particular, under which they may be bought on the Community market or obtained from the stocks of the in-, tervention agencies is to be determined by the Council, acting on a proposal from the Commission.

   The Council availed itself of this possibility and adopted Regulation No 2750/75 of 29 October 1975 fixing criteria for the mobilization of cereals intended as food aid (Official Journal 1975, L 281, p. 89). The sense and purpose of this regulation is, inter alia, as the second recital states, to avoid disturbance of the market in cereals caused by withdrawals of cereals intended as food aid. To that end, Article 4 provides that the buying-in operations referred to in the regulation are to be carried' out, in Community territory, by the intervention agencies by inviting tenders for the supply of the product. Finally, Article 6 of the aforementioned regulation provides that for a Community action, the Commission is to determine the conditions governing mobilization after considering the market situation and in accordance with the procedure laid down in the rice market regulation. Article 7 (4) empowers the Commission, as soon as the principle of an emergency Community action has been adopted, to decide which Member State is to be responsible for carrying out the action.

   Since, in the opinion of the Council, use of the tendering procedure provided for in the aforementioned regulation did not always permit the objectives of flexibility and speed to be met, it made provision, by means of Regulation No 696/76 (of 25. 3. 1976, derogating from Regulation No 2750/75 in respect of mobilization procedures for cereals to be supplied as food aid, Official Journal L 83, p. 8) for another procedure to be used in certain exceptional cases.

   The Commission made use of that possibility in the decision of 12 September 1976 which is now before the Court.

   The aforementioned legislation, pursuant to which that decision was adopted and which is based solely on the provisions of the Treaty regarding agriculture, in itself shows clearly, in my opinion, that Community food aid, at least as regards mobilization of cereals, was, at the material time, part of the common agricultural policy.

   It also indicates that the Community, having no executive agencies of its own, has relied on the cooperation of the State intervention agencies for the implementation of its food-aid policy, just as it does for the agricultural policy. Even if those intervention agencies implement Community law, autonomously and directly, that is, without the instrumentality of the Member States, they continue to be executive agencies of the State, acting not as agents of the Commission but as representatives of their respective Member States.

   That fact is also apparent from the Italian legislative provisions conferring the status of intervention agency on the ENR (Ministerial Decree of 22. 10. 1964 and Ministerial Decree of 27. 10. 1967) by virtue of which the ENR, when discharging the functions provided for in the rice market regulation as an intervention agency, acts on behalf, in the interests and under the control of the Italian State.

   Finally, the case-law of the Court of Justice concerning the non-contractual liability of the Community in relation to the agricultural policy, which is applicable mutatis mutandis to this case, takes account of that division of powers. As the Court has clearly stated in a consistent line of decisions (see in particular Cases 12/79 and 217/81^(*)), the purpose of the action for damages provided for in Articles 178 and 215 of the EEC Treaty is not to enable the Court to examine the validity of decisions taken by national intervention agencies responsible for the implementation of certain measures within the framework of the common agricultural policy. This Court, in applying Community law, has thus always regarded the activity of the intervention agencies within the framework of the common agricultural policy as an administrative activity of the Member States, judicial review of which is a matter for the national courts.

   The situation cannot, however, be any different where the national intervention agencies, in implementation of the tasks entrusted to them in connection with the Community food-aid policy, conclude contracts with traders. In such cases, they likewise do not act as agents of the Commission but rather as representatives of the Member State of which they are public authorities.

2. Finally, the division of powers between the Community and the Member States in the area of food aid also takes account of the way in which the Community is financed. That system, which is closely related to the financing system for the Common Agricultural Policy, also shows clearly that the ENR, when implementing the Commission decision in question, is not, under Community law, to be regarded as the agent of the Commission.

   Community expenditure on food aid has been financed, since 1 January 1975, on the basis of Regulation No 2681/74 of the Council of 21 October 1974 (Official Journal L 288, p. 1, hereinafter referred to as “the Financing Regulation”). The resources made available by the Community for financing food aid are transferred to the Member States and, as is apparent from Article 2 of the regulation, are charged partly to the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) and partly to Title 9 (chapter on food aid expenditure) of the Community budget. According to Article 3 (1) of the regulation, the Member States to designate the departments and bodies empowered to make payments in respect of the expenditure referred to in the regulation. According to paragraph (2) of the same article, the Commission is to grant advances to the Member States concerned periodically and at their request and is to audit the accounts of the Member States after consulting the committee referred to in Article 11 of Regulation No 729/70 of the Council on the financing of the common agricultural policy (Official Journal, English Special Edition 1970 (I), p. 218). As is apparent from Article 3 (3) of Commission Regulation No 249/77 of 2 February 1977 laying down detailed rules for the implementation of Regulation No 2681/74 (Official Journal 1977, L 34, p. 21), payment for the services of the successful tenderer or operator is then to be made by the Member State which has applied for the advance.

   According to Article 4 of the Financing Regulation, Articles 8 and 9 of Regulation No 729/70 on the financing of the common agricultural policy are applicable by analogy to expenditure in respect of food aid. Consequently, the Member States are to take the measures necessary, in accordance with national provisions laid down by law, regulation or administrative action, (1) to satisfy themselves that transactions financed by the Fund are actually carried out and are executed correctly, (2). to prevent and deal with irregularities; and (3) to recover sums lost as a result of irregularities or negligence. The Member States are to inform the Commission of the measures taken for those purposes and in particular of the state of the administrative and judicial procedures, Article 8 (2) of Regulation No 729/70 provides that in the absence of total recovery, the financial consequences of irregularities or negligence are to be borne by the Community, with the exception of the consequences of irregularities or negligence attributable to administrative authorities or other bodies of the Member States.

3. In the light of that division of powers, it was, finally, no more than logical that the Commission decision of 10 September 1976, which provided for the food aid in question, was, according to Article 6, addressed to the Italian Republic and not the the ENR. It follows from that fact, as the national court has correctly noted, that, pursuant to the fourth paragraph of Article 189 of the EEC Treaty, the decision was binding only upon the Italian Republic and not upon the ENR, which was also named in it. The reference to the national intervention agency which was to be responsible for implementation of the decision was appropriate because that agency, both under Community law and, as the national court has stated (order for reference, p. 5), under Italian law, had the power to purchase the goods in question on behalf of the Italian State and also because, in view of the urgency, the measure had to be taken quickly.

Those provisions show clearly that it is primarily the Member States which are responsible for the proper use of the funds made available by the Community for financing Community food aid. Essentially therefore it is the responsibility of the Member States, represented, where appropriate, by their intervention agencies, to reduce the purchase price in accordance with national law in cases of unsatisfactory performance of the contract. The proper legal remedy where such measures are involved is, as this Court has consistently held — albeit in the context of the activity of intervention agencies as independent bodies (see in particular Cases 99/74, 101/78 and 133/79^(*)) — an action before the national courts against the Member States or their intervention agencies. If the Commission were to be regarded as a proper defendant in such proceedings, it would mean that, contrary to the terms, meaning and purpose of the mobilization and financing system laid down in Community law, the Community, rather than the competent authorities of the Member State concerned, might have to pay the amounts alleged to be due under the contracts.

Finally, it is necessary briefly to consider whether, as the plaintiff in the main action contends, the behaviour of the Commission during the performance of the contract was of such a nature as to influence the apportionment of liability between the organs of the Community and the Member States.

In the view of the plaintiff, because the Commission intervened directly in the inspection of the goods in question and decided on the arrangements for payment, it gave the impression that it intended to be directly responsible for all rights and obligations deriving from the contract concluded by the ENR.

1. As regards inspection of the goods, it should be noted that Article 9 of Regulation No 729/70, which, by virtue of Article 4 of the Financing Regulation, applies by analogy to expenditure such as that in the present case, grants the Commission, as well as the Member States, the right to undertake such inspections as it considers necessary within the framework of the management of Community financing. Pursuant to paragraph (2) of that article, the officials instructed by the Commission to carry out inspections on the spot may in particular check whether administrative practices are in accordance with Community rules, whether the requisite supporting documents exist and tally with the transactions financed by the Fund and the conditions under which transactions financed by the Fund are carried out and checked.

   It is logical to grant such a right of inspection in particular because, when the accounts of the Member States concerning the financing of food aid are audited, the Community has to pay only if the food-aid programme has been carried out in conformity with the provisions of Community law. As the Court stated in Case 819/79^(*), the function of a Commission decision relating to the clearance of accounts in respect of expenditure financed by the EAGGF is to establish whether the expenditure was incurred by the national authorities in accordance with Community provisions. As the Court emphasized in that case, if that condition is disregarded, the expenditure incurred therein may not, in principle, be charged to the EAGGF.

   The fact that the Commission did not give notice to the Italian Republic before the inspection, as required by the second paragraph of that article, can in no way affect its right to take such supervisory measures. Because of the marking that the decision in question required to be printed on the sacks, “Riz — don de la Communauté européenne à la République du Niger”, it was obvious, in particular, thatfthëTcönipetëht authorities in the country of destination would in the first place address any complaint about the quality of the rice to the Commission. The fact that the Commission, which was best placed to carry out the supervisory measures, acted quickly, is likewise not open to criticism, not least, in view of the urgency of the situation. In particular it should also be borne in mind in that connection that it took samples of the rice not only on its own behalf but also on that of the Italian State to which any irregularity in the implementation of the Commission decision of 10 September 1976 would have had to be imputed when the accounts were audited.

2. The Commission's instruction to the ENR or to the Italian Republic to suspend payments must also be seen in this context. Once it is admitted that the implementation of the Community provisions regarding food aid in the form of rice are the responsibility of the State agencies designated for that purpose it follows that the Commission had no right to give instructions as to the way in which the payments should be made. In this case, as in the Sucrimex^(*) and Interagra^(*) cases, the view must therefore be taken that the Commission was entitled only to express its opinion, which, however, could not bind the national authorities. As this Court emphasized in the aforementioned cases, such instructions form part of the internal cooperation between the Commission and the national bodies responsible for applying Community law in this field. It cannot however be deduced from that cooperation that, under Community law, the ENR was acting as agent for the Commission in the implementation of the food aid in question.

3. To take up one of the final arguments put forward by the defendant, an essential feature of an agency contract is that the principal must himself have the right to take the action which he has instructed the agent to carry out. That condition is not satisfied in this case because, as has been shown, according to the division of powers laid down in Community law, the Commission could not itself perform the task which it entrusted to the ENR by means of the decision addressed to the Italian Republic.

In conclusion, I propose that the Court of Justice reply to the question referred to it as follows :

The law to be applied to the legal relationships between the Commission and the ENR with regard to the conclusion of the contract for the purchase of 3 750 tonnes of husked long-grain rice for delivery to the Republic of the Niger pursuant to Commission Decision 76/748/EEC of 10 September 1976 is not the national — in this case Italian — private law of agency, but rather the rules of Community law on the division of powers between the organs and authorities of the Community and those of the Member States. Under Community law, the ENR was acting on its own behalf.