CJEC, 5th chamber, November 25, 1986, No 148-85

The court

1 By judgment of 17 april 1985 which was received at the court registry on 17 may 1985, the tribunal de grande instance (regional court), macon, referred to the court for a preliminary ruling under article 177 of the eec treaty a question on the interpretation of articles 30 to 37 of the eec treaty and of regulation n°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).

2 That question was raised in the course of proceedings brought by the direction generale des impots (general tax directorate) and the procureur de la republique (state prosecutor) against marie-louise Forest and sa Minoterie Forest for a breach of the french legislation establishing flour-milling quotas.

3 The french legislation at issue, which consists mainly of a decree of 24 april 1936 and an order of 27 june 1938, both amended subsequently, provides for the allo cation to each mill of an annual milling quota for common wheat to be processed into flour intended for domestic human consumption, on the basis of its annual production during the reference years 1927 to 1935. A mill which exceeds its quota is subject to a fine and the surplus flour is confiscated. A mill may increase its milling quota only under certain specific conditions, mainly by acquiring milling rights on the market. Such negotiable milling rights, separate from the mill, may be sold by a miller to any other miller who wishes to increase the quantities of wheat which he is authorized to mill.

4 In 1983 and 1984 Minoterie Forest exceeded its milling quota without covering the surplus by acquiring milling rights. Forest argued that the national legislation was incompatible with community law, in particular article 85 of the eec treaty and the common organization of the market in cereals.

5 The tribunal de grande instance, macon, considered that those circumstances gave rise to a problem of interpretation of community law; it therefore stayed the proceedings and referred the following question to the court for a preliminary ruling:

' must the french legislation enacted by the decree of 24 april 1936, as amended in particular by decree n°61-1033 of 11 september 1961, introducing wheat-milling quotas and limiting the production capacity of mills, be judged contrary to regulation (eec) n°2727-75 of the council on the common organization of the market in cereals or to articles 30 to 37 of the eec treaty?

'

6 Under article 177 of the eec treaty the court has no jurisdiction to rule on the compatibility of national legislation with community law. It may however provide the national court with an interpretation of community law which will enable that court to resolve the issue of law with which it is faced.

7 The question referred by the tribunal de grande instance, macon, may therefore be understood as seeking to know whether national measures imposing milling quotas such as those at issue in the main proceedings are contrary to regulation n°2727-75 of the council and articles 30 to 37 of the eec treaty, on a true construction of those provisions.

Scope of the common organization of the market in cereals 8 in order to reply to the first part of that question, it is necessary to examine the functioning of the common organization of the market in cereals as laid down by regulation n°2727-75. As appears from article 1 of the regulation, that organization comprises a price and trading system. Wheat flour is one of the products covered by the organization of the market.

9 With regard to trade, regulation n°2727-75 provides for a number of measures concerning imports and exports to and from non-member countries: the issue of import and export licences, the charging of a levy, the possible granting of a refund and the application of safeguard measures. The imposition of a milling quota does not interfere in any way whatsoever with the functioning of those mechanisms.

10 With reference to the price system it should be emphasized that regulation n°2727-75 provides for the setting of prices for cereals, not for flour, the price of which reflects supply and demand on the internal market of the community. Although it is therefore true that a system of milling quotas does not directly affect the application of the price system for wheat, Forest has argued that the system in question has an indirect effect inasmuch as restriction of milling capacity diminishes demand for wheat.

11 It must be pointed out in that regard that it is clear from statistics furnished by the french government and by the commission, statistics which were not challenged by Forest, that the total quantity of milling rights under the system in question has always exceeded to a considerable extent the quantity of wheat necessary to cover domestic human consumption in the member state concerned. Furthermore, the legislation in question does not concern the production of flour intended for export or for animal feed. Consequently, the milling quota system does not constitute a restriction on flour production and does not limit the possibilities for disposing of wheat. There is therefore no evidence to support the conclusion that the system in question has any influence on wheat prices in the framework of the common organization of the market.

12 Forest also argued that a national system of milling quotas is incompatible with the common organization of the market because it is contrary to the objectives and principles of the common agricultural policy laid down in article 39 of the eec treaty and that in a field covered by a common organization of the market the member states retain no residual competence to adopt measures which are neither expressly nor implicitly reserved to them under the community legislation.

13 It should be pointed out in that regard that a system of milling quotas referring exclusively to domestic human consumption in the member state concerned, under which the total quantity of quotas is in fact considerably greater than the quantity necessary to meet such consumption, does not restrict wheat production and has no deleterious effect on agricultural productivity. A national measure of that kind is therefore not in itself contrary to the objectives of the common agricultural policy or to the general objectives of the treaty.

14 As the court has already held in its judgment of 7 february 1984 (case 237-83 jongeneel kaas v netherlands (1984) ecr 483), where a regulation exists establishing a common organization of the market in a given sector, member states are under an obligation to refrain from taking any measures which might undermine or create exceptions to it. It is clear from that judgment, however, that the fact that the regulation in question is silent on the matter provides no ground for the conclusion that member states may no longer take measures in the sector. On the contrary, since the community legislature has not adopted rules governing the flour-milling sector, the member states remain competent to take such measures as they consider appropriate to improve structures in that sector, so long as they observe the mechanisms and principles governing the common organization of the market.

15 It follows from the foregoing that regulation n°2727-75 does not prevent a member state from adopting a system of quotas for the milling of wheat applying only to domestic human consumption in the member state concerned, under which the total quantity of quotas is in fact considerably greater than the quantity necessary to meet such consumption.

The scope of articles 30 to 37 of the eec treaty 16 this part of the question essentially concerns the interpretation of article 30 of the treaty. Article 37 of the treaty is not relevant, since the legislation in question does not establish any state monopoly of a commercial character. With regard to article 34 it need merely be pointed out that the milling quotas in question apply only to the milling of common wheat into flour intended for domestic human consumption and not for export.

17 With regard to the question whether such legislation should be regarded as a measure having equivalent effect to a quantitative restriction on imports for the purposes of article 30 of the eec treaty, it should be pointed out first of all that the system in question does not affect the possibility of importing flour intended for human consumption from other member states.

18 With regard to the effects which such a system, applicable without distinction to the milling of domestic and imported wheat, may have on the market for wheat, Forest considers that it affects trade in cereals in so far as by restricting the ability of mills to buy wheat for milling it may restrict wheat imports.

19 It must be pointed out that even though a restriction on the quantities of wheat which may be milled may prevent millers from buying wheat, millers are free to buy imported wheat to cover part or all of their requirements. It therefore appears that such a system of quotas at the level of flour production in fact has no effect on wheat imports and is not likely to impede trade between member states.

20 It follows that such legislation cannot be regarded as a measure having equivalent effect to a quantitative restriction on imports for the purposes of article 30 of the eec treaty.

21 The answer to the question referred by the tribunal de grande instance, macon, must therefore be that neither regulation n°2727-75 of the council of 29 october 1975 on the common organization of the market in cereals nor articles 30 to 37 of the eec treaty prevent a member state from adopting a system of quotas for the milling of wheat, restricted to the manufacture of flour for domestic consumption, under which the total quantity covered by such quotas is in fact considerably in excess of the quantity necessary to meet that consumption.

Costs

22 The costs incurred by the french government and by the commission of the european communities, which have submitted observations to the court, are not recoverable. As these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

On those grounds,

The court (fifth chamber)

In answer to the questions referred to it by the tribunal de grande instance, macon, by a judgment of 17 april 1985, hereby rules:

Neither regulation n°2727-75 of the council of 27 october 1975 on the common organization of the market in cereals nor articles 30 to 37 of the eec treaty prevent a member state from adopting a system of quotas for the milling of wheat, restricted to the manufacture of flour for domestic consumption, under which the total quantity covered by such quotas is in fact considerably in excess of the quantity necesssary to meet that consumption.