CJEC, April 7, 1992, No C-61/90

THE COURT,

1. By application lodged at the Court Registry on 12 March 1990, the Commission brought an action under Article 169 of the EEC Treaty for a declaration that:

- by promoting, through the Central Office for the Management of National Products (hereinafter referred to as "KYDEP"), exports of cereals and processed cereals-based products and making good the deficits which KYDEP thereby incurred by means of direct and indirect aid measures, including the fixing of prices of cereals for the milling and processing industries partly below the established intervention prices fixed by the Community (programme contracts);

- by inducing KYDEP to deliver 340 000 tonnes of wheat into Community intervention in 1982 and covering KYDEP' s losses incurred thereby;

- by failing to notify the Commission of those aids and other measures it took between 1982 and 1986; and

- by failing to cooperate with the Commission,

the Hellenic Republic has failed to fulfil its obligations under Community law, in particular Regulation (EEC) No 2727-75 of the Council of 29 October 1975 on the common organization of the market in cereals (Official Journal 1975 L 281, p. 1), the relevant implementing regulations and Articles 93 and 5 of the EEC Treaty.

2. According to the Commission, the Greek authorities intervened on the market in common wheat and durum wheat, in particular by encouraging exports, so as to help KYDEP to dispose of its stocks.

3. The Commission formed the view that these instances of intervention failed to meet the obligations arising for the Member States from the rules of the common organization of the market in cereals, governed by the aforesaid Regulation No 2727-75 and that, in addition, the Hellenic Republic had failed to comply with the provisions of Articles 5 and 93 (3) of the Treaty. It accordingly instituted proceedings against the Hellenic Republic for failure to fulfil its obligations.

4. Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the procedure and the pleas in law and arguments of the parties, which are hereinafter mentioned or discussed only in so far as is necessary for the reasoning of the Court.

The object of the proceedings

5. The Commission's action must be regarded as seeking to establish three distinct failures to comply with obligations.

6. The first such failure relates to the infringement of the provisions of the aforesaid Regulation No 2727-75, arising from the intervention of the Greek authorities on the market in cereals. The Commission refers in the first place to the various measures adopted by the authorities to encourage exports of wheat and in particular to the "programme contracts", concluded under the aegis of the State, by which KYDEP undertook to sell wheat, at prices fixed below the Community intervention prices, to the millers and processing industries. It refers also to the fact that KYDEP's deficit, arising from those measures, was made good by the State. Finally the Commission refers to the fact that the Greek authorities, whilst bearing the cost of the transaction, encouraged KYDEP in 1982 to deliver 340 000 tonnes of wheat into Community intervention.

7. The second failure alleged consists of the infringement of the provisions of Article 93 (3) of the Treaty arising from the omission to notify the Commission of the State aids thus granted.

8. The last failure alleged by the Commission concerns the infringement of the provisions of Article 5 of the Treaty and Article 24 of Regulation No 2727-75 arising from the Greek authorities' refusal to cooperate with the Commission so as to allow it to obtain information on the manner in which KYDEP operated.

9. The proceedings must be restricted to the precise heads of claim set out in the application. The arguments put forward by the Commission in its pleadings, involving the whole of the financial relations between the State and KYDEP, cannot therefore be taken into account by the Court except in so far as they relate directly to those heads of claim. Furthermore, the arguments by which the Commission alleges the incompatibility with Articles 10 and 11 of Regulation No 2727-75 of the aid granted to producers as a result of the high level of the prices at which KYDEP, on the instructions of the Greek authorities, was purchasing cereals, must be excluded from consideration on the ground that they constitute a separate head of claim not set out in the application.

10. The period to which the action relates is also restricted, since it covers the years 1982 to 1986. The head of claim relating to the infringement of Regulation No 2727-75 must therefore be considered in relation to the provisions of that regulation as they applied during that period, in the version resulting in particular from the amendments effected by Council Regulations (EEC) No 1143-76 of 17 May 1976 (Official Journal 1976 L 130, p. 1), No 1151-77 of 17 May 1977 (Official Journal 1977 L 136, p. 1), No 1870-80 of 15 July 1980 (Official Journal 1980 L 184, p. 1), No 1187-81 of 28 April 1981 (Official Journal 1981 L 121, p. 1), No 1451-82 of 18 May 1982 (Official Journal 1982 L 164, p. 1), No 1018-84 of 31 March 1984 (Official Journal 1984 L 107, p. 1), No 3793-85 of 20 December 1985 (Official Journal 1985 L 367, p. 19) and No 1579-86 of 23 May 1986 (Official Journal 1986 L 139, p. 29).

The intervention of the Greek authorities on the market in cereals

11. According to the Commission, KYDEP had accumulated great quantities of wheat and as from 1982 had difficulties in disposing of its stocks. As a result of those difficulties programme contracts were concluded between the State, KYDEP and the traders. By those contracts KYDEP undertook to sell its stocks of common wheat and durum wheat to traders on price and credit conditions which were advantageous as compared with those of the market. In return the traders undertook to export the wheat, subject to a certain time-limit, in the form of flour, meal or pasta. Financing was affected by credits granted by the Agricultural Bank of Greece or by other banks acting subject to conditions defined by the Bank of Greece. The State, for its part, made itself responsible for the deficit which KYDEP incurred by these transactions. Further, with a view to disposing of its stocks, KYDEP itself exported flour in 1984, 1985 and 1986, whilst the State paid a subsidy of DR 2.45 per kilogram of flour exported. Finally the part played by the Greek authorities also took the form of inducing KYDEP in 1982 to deliver 340 000 tonnes of wheat into Community intervention, whilst the State covered the difference between the cost price of the wheat and the intervention price.

12. In its pleadings the Hellenic Republic disputes the substance of the allegations made against it and contends that the Commission, which in particular does not produce copies of the programme contracts to which it refers, adduces no evidence capable of justifying its allegations. Although the defendant acknowledges that two draft programme contracts were prepared at the request of the traders to help them to retain their traditional outlet in Algeria for flour exports, it claims that those contracts did not "materialize" by reason of the opposition of the Community authorities. Moreover the Commission's application is vague, inasmuch as it does not indicate clearly which provisions of the aforesaid Regulation No 2727-75 have been infringed.

13. Contrary to the Hellenic Republic's contention in the latter plea, the Commission's application is sufficiently precise to enable the Court to decide whether it is justified.

14. It is therefore appropriate to consider in turn whether the Greek authorities intervened as described by the Commission and, to the extent to which such intervention is established, its compatibility with the provisions of Regulation No 2727-75.

15. In support of its allegations the Commission has produced several documents originating in particular with KYDEP. In the absence of precise and detailed proof by the Hellenic Republic, the arguments on which it relies in denying that these documents possess any probative value cannot be upheld. The fact that the version of the report of the 36th general meeting of KYDEP produced by the Commission does not correspond to the official version of the report does not by itself make it possible to disregard the information contained in the document produced.

16. It is also appropriate to take into account the documents requested by the Court as part of the written procedure, which were produced by the defendant only during the oral procedure after the time allowed had expired.

17. As the Court stated in the judgment in Case C-32-89 Greece v Commission [1991] ECR I-1321, paragraphs 10 and 11, as is shown by the internal note of 6 June 1985 from KYDEP' s director general to its board, the report of the 36th general meeting of that body, the analytical report of KYDEP' s balance sheet accounts for 1988, the lines of reasoning of the order of 26 November 1982 of the Minister for Economic Affairs setting up a committee composed of representatives of the public authorities, the Bank of Greece and the president of KYDEP to examine the undertakings' export offers for wheat and flour and, finally, as the representative of the Hellenic Republic eventually partially admitted in his observations during the oral procedure, programme contracts were signed between the State, KYDEP and the private traders and were executed during the period in question.

18. These programme contracts related to sales of wheat by KYDEP to private traders, on condition that they exported the products in question. In 1982 and 1984, two programme contracts related to the export in the form of flour of 500 000 and 400 000 tonnes of common wheat. In 1985 two new contracts were concluded, relating to 15 000 and 78 000 tonnes of durum wheat, to be exported in the form of pasta products and meal.

19. The purpose of concluding these programme contracts was to facilitate the disposal of stocks accumulated since 1982 by reason of the high prices at which KYDEP, in accordance with the instructions of the Greek authorities, was purchasing wheat from the producers. The conditions offered to the private traders were accordingly advantageous since, as demonstrated for example by the two copies of the contracts concluded between KYDEP and millers, put before the Court by the Commission, and by the letter of 23 December 1982 from the Minister for Economic Affairs addressed to the Bank of Greece, the sale prices were below the market prices and the purchasers had an eight-months' interest-free credit, counting from the date of delivery, to pay for their purchases. To finance these transactions KYDEP enjoyed, as proved by memorandum No 156 of 16 December 1982 from the Governor of the Bank of Greece, credit at preferential rates from the Agricultural Bank of Greece, itself financed, for these transactions, by the Bank of Greece. Moreover the State made good KYDEP's deficit arising from the performance of these programme contracts.

20. As regards more particularly the programme contracts concluded with the manufacturers of pasta products, it may be seen from memorandum No 2 of 31 January 1984 from the Governor of the Bank of Greece, that these manufacturers enjoyed advantageous credit conditions granted by the commercial banks on conditions laid down by the Bank of Greece.

21. It follows also from the documents produced, and particularly from the report of its 36th general meeting that KYDEP on the one hand itself exported wheat in 1984 under one programme contract with the benefit of State subsidies and on the other hand delivered 340 000 tonnes of wheat into Community intervention in 1982 with the encouragement of the Greek authorities, whilst the State made up the difference between the cost price and the intervention price.

22. With regard to whether such State intervention is compatible with the provisions of Regulation No 2727-75, it should be noted that the common organizations of the markets are based on the concept of an open market to which every producer has free access under genuinely competitive conditions and the functioning of which is regulated solely by the instruments provided for in those organizations. In particular, in sectors covered by a common organization of the market, and a fortiori when that organization is based, as in the present case, on a common price system, Member States can no longer take action, through national provisions adopted unilaterally, affecting the machinery of price-formation as established under the common organization (judgment in Case C-35-88 Commission v Greece [1990] ECR I-3125, paragraph 29).

23. The intervention of the Greek authorities in the circumstances described above, in a field in which Community legislation is exhaustive, was in breach of the rules governing the common organization of the markets. Such instances of intervention were contrary to the competitive system of price-formation and the exclusive nature of Community intervention as provided in particular by Articles 3, 7 and 8 of that regulation, quoted by the applicant. In other respects they caused distortion in the application of the system of Community export refunds provided for by Article 16 of that regulation.

24. For all those reasons it must be held that, by promoting exports of wheat and processed products by various measures such as programme contracts through the intermediary of KYDEP, by making good the deficits which KYDEP thereby incurred, by inducing KYDEP to deliver 340 000 tonnes into Community intervention whilst covering the difference between the cost price and the intervention price during the period from 1982 to 1986, the Hellenic Republic has failed to fulfil its obligations under the provisions of Regulation No 2727-75 of the Council of 29 October 1975.

The failure to notify the aids

25. It should be recalled at the outset that the Commission may avail itself of the procedure under Article 169 of the Treaty when it seeks a finding by the Court that a Member State is in breach of Article 93 (3) of the Treaty, which obliges Member States to inform the Commission of any plans to grant or alter aid within the meaning of Article 92 of the Treaty (judgment in Case C-35-88 Commission v Greece, previously cited, paragraph 34). The defendant is accordingly not justified in contending that such a claim of failure to fulfil obligations on the basis of Article 169 of the Treaty is inadmissible.

26. In this case it is not contested that the transfers of credits and State aids enjoyed by KYDEP and the various facilities and advantageous credit conditions granted to KYDEP and to the private traders constitute, in the circumstances previously described, aids granted by States within the meaning of Article 92 of the Treaty.

27. Nor is it contested that such aids were not previously notified in the conditions laid down by Article 93 (3) of the Treaty.

28. Consequently it is appropriate to declare that, by failing to inform the Commission, during the years 1982 to 1986, of the plans to grant aids to KYDEP and to the private traders for the sale and export of wheat, the Hellenic Republic has failed to fulfil its obligations under Article 93 (3) of the Treaty.

29. As the Court has consistently held, an application brought under Article 169 of the EEC Treaty may be based only on the arguments and submissions already set forth in the reasoned opinion (judgment in Case C-347-88 Commission v Greece [1990] ECR I-4747, paragraph 16).

30. It should be pointed out that, in its reasoned opinion, the Commission did not expressly refer to a failure of the Greek authorities to comply with the provisions of Article 24 of the aforesaid Regulation No 2727-75 or of Article 5 of the Treaty arising from a refusal to cooperate by the Greek authorities, which did not supply the documents regarding KYDEP and which also opposed an inquiry on the spot by the Commission's officers. The Commission merely observed, in arguments contained in the opinion, that "the Greek authorities had not supplied the required information as to the market prices applicable on their territory". Such a reference cannot, by itself, be regarded as a formulation of the complaint referred to above as it was put forward by the Commission in the proceedings which it has brought before the Court.

31 It follows that the head of claim seeking a declaration of a failure to comply with obligations in this latter respect is inadmissible.

Costs

32. Under Article 69 (2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. As the Hellenic Republic has essentially failed in its submissions, it must be ordered to pay the costs.

On those grounds,

THE COURT

hereby:

1. Declares that, by promoting exports of wheat and processed products by various measures such as programme contracts, through the intermediary of KYDEP, by making good the deficits which KYDEP thereby incurred, by inducing KYDEP to deliver 340 000 tonnes into Community intervention whilst covering the difference between the cost price and the intervention price during the period from 1982 to 1986, the Hellenic Republic has failed to fulfil its obligations under the provisions of Regulation (EEC) No 2727-75 of the Council of 29 October 1975 on the common organization of the market in cereals;

2. Declares that, by failing to inform the Commission during the years 1982 to 1986 of the plans to grant aids to KYDEP and to the private traders for the sale and export of wheat, the Hellenic Republic has failed to fulfil its obligations under Article 93 (3) of the Treaty;

3. Dismisses the remainder of the Commission's heads of claim;

4. Orders the Hellenic Republic to pay the costs.