CJEC, February 7, 1984, No 237-82

The court

1 By order of 14 september 1982 which was received at the court on 22 september 1982, the president of the arrondissementsrechtbank (district court), the hague, submitted for a preliminary ruling under article 177 of the eec treaty four questions concerning the interpretation of regulation (eec) no 804-68 of the council of 27 june 1968 on the common organization of the market in milk and milk products (official journal, english special edition 1968 (i), p. 176) and articles 30 and 34 of the eec treaty in order to determine whether netherlands legislation on the production of cheese is compatible with those provisions.

2 That legislation, which entered into force on 1 july 1982, was adopted on the basis of the landbouwkwaliteitswet (law on standards in agriculture) of 8 april 1971 (staatsblad, p. 371) whose purpose is to lay down rules on the quality of agricultural and fishery products. The legislation comprises, first of all, the landbouwkwaliteitsbesluit kaasprodukten (decree on standards in agriculture: cheese products) (staatsblad, p. 726) and, secondly, a ministerial order to the same effect entitled the landbouwkwaliteitsbeschikking kaasprodukten (order on standards in agriculture: cheese products) (nederlandse staatscourant no 251).

3 The legislation accordingly provides for an exhaustive list of the types of cheese which may be produced in the netherlands and which include essentially traditional dutch cheeses such as gouda and edam, in addition to cheddar and feta. There are precise requirements for each variety of cheese and the production of cheese which does not comply with those rules is forbidden.

4 The stichting centraal orgaan zuivelkontrole (central agency for the inspection of dairy produce, hereinafter referred to as ' ' the central agency ' '), a body incorporated under private law to which all undertakings engaged in the commercial produktion of cheese must be affiliated, supervises compliance with the rules on quality. The central agency collects from its members levies to cover the cost of supervision and inspection. All cheese must be marked in accordance with the rules adopted by the central agency and must, in addition, undergo inspection by sampling.

5 Those rules were contested by the plaintiffs in the main action, who are all wholesale dealers in cheese, on the ground that they infringe, in a number of ways, regulation no 804-68 on the common organization of the market in milk and milk products and articles 30 and 34 of the eec treaty which are concerned with measures having an effect equivalent to quantitative restrictions on imports and exports. The plaintiffs applied for an interlocutory order to the president of the arrondissementsrechtbank who submitted a reference to the court for a preliminary ruling on the interpretation of those provisions. The questions contained in the reference are as follows:

(a) Must regulation (eec) no 804-68 be interpreted as preventing a member state such as the netherlands from unilaterally adopting, with the purpose of promoting sales of cheese and cheese products, rules concerning the quality of those products, such as those contained in the legislation listed in part 1 of this order?

(b) If question (a) is answered in the negative, must articles 30 and 34 of the eec treaty be interpreted as preventing a member state such as the netherlands from unilaterally adopting, with the purpose of promoting sales of cheese and cheese products, rules concerning the quality of those products, such as those contained in the legislation listed in part 1 of this order?

(c) If question (b) is also answered in the negative, must the regulation mentioned in question (a) and the articles mentioned in question (b) be interpreted as preventing a member state such as the netherlands from adopting rules according to which only persons affiliated to an inspection agency are permitted to manufacture cheese products on a commercial basis, as provided in article 12 of the landbouwkwaliteitsbesluit kaasprodukten?

(d) Do general principles, in particular the principle of proportionality, to which the plaintiffs refer, have direct effect in a case such as this?

6 It must be observed at the outset that although the court is not empowered under article 177 of the treaty to give a ruling on the compatibility of the provisions of a national law with the treaty, it nevertheless has jurisdiction to provide the national court with all such matters relating to the interpretation of community law as may enable it to determine whether such compatibility exists.

7 It must also be emphasized in limine that, according to the documents before the court and the explanations provided during the oral procedure, the above-mentioned provisions of the netherlands legislation, since they relate to cheese producers alone, do not affect imports of cheese into the netherlands and apply without distinction to all netherlands cheese production regardless of its destination.

First question relating to regulation no 804-68

8 This question seeks in the first place to ascertain whether the member states are still empowered - after the adoption of the regulation on the common organization of the market in cheese - to intervene in the operation of that market and, in particular, to adopt measures which have the same purpose as the common organization, in particular as regards sales promotion. In the second place, the first question seeks to ascertain, on the assumption that the member states have retained the power to adopt such measures, whether legislation such as that at issue interferes with the objectives of the common organization of the market.

9 In order to reply to that question it is necessary to examine the functioning of the common organization of the market in cheese as provided for by regulation no 804-68. The common organization of the market does not in its present state contain any rule on the designation and quality of cheese. Nor does it establish an intervention system for cheese, except in the case of grana-padano and parmigiano-reggiano. However, provolone and long-keeping cheese benefit from certain market-support measures which take the form of aids for private storage. Import levies and export refunds are collected in dealings with non-member countries. The system thus established therefore differs from other organizations of the market which have as their purpose to support the market by maintaining prices at a given level through intervention buying or, more indirectly, by the fixing of minimum quality criteria.

10 As far as the powers of the member states are concerned, the plaintiffs in the main action contended that the member states may not adopt measures which pursue the same objective as the common organization of the market, in particular as regards sales promotion. For its part, the commission took the view that the restriction of the list of authorized cheeses encroaches upon the exclusive powers of the community to lay down rules concerning freedom of access to the market. The prohibition of the production and marketing of cheese not exhibiting the prescribed characteristics amounts, it claims, to a measure limiting production which has the same effect as an intervention measure and therefore comes within the scope of the community ' s powers.

11 The plaintiffs in the main action and the commission also consider that measures such as those at issue in the main proceedings obstruct the proper functioning of the common organization of the markets. In the first place, the restriction of the list of authorized cheeses is contrary to the principle of an open market to which every producer has free access. Secondly, in the commission ' s view, that restriction conflicts with the community policy of widening demand for cheese as much as possible by increasing the variety of products offered. Finally, the effect of the restrictions is to prevent the functioning in the netherlands of intervention measures, storage aids and export refunds provided for by the community.

12 That argument cannot be accepted. It is clear from the consistent case-law of the court that, once the community has adopted, pursuant to article 40 of the treaty, regulations 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 (judgment of 22 june 1979 in case 177-78 pigs and bacon commission v mccarren (1979) ecr 2161).

13 However, the fact that the legislation in question makes no mention of the designation and quality of cheese does not mean that the community has consciously and of necessity decided to impose on the member states in that sector an obligation to adhere to a system of absolute freedom of production. In the absence of any rule of community law on the quality of cheese products the court considers that the member states retain the power to apply rules of that kind to cheese producers established within their territory. That power extends not only to rules considered necessary for the protection of the consumer or public health but also to rules which a member state may wish to enact for the purpose of promoting the quality of domestic production. Such rules cannot however discriminate against imported products or hinder the importation of products from other member states. Finally, it must be pointed out that national rules on quality make it possible, pending the adoption of community rules, to achieve the objectives laid down by article 39 of the eec treaty and by the common organization of the market and to give specific form to the measures already adopted by the community.

14 It is also necessary to reject the commission ' s argument that the effect of the prohibition of the production of cheeses other than those exhaustively listed by the national legislation in question would be to exclude the possibilities of intervention provided for by the relevant community rules and thus to prevent that legislation from functioning properly. The aim of the intervention machinery is to restore the balance between supply and demand and national legislation which has as its long-term purpose to increase demand by making domestic cheese production more attractive to the consumer pursues in principle the same objective. In view of the very limited scope of the community market-support measures in the cheese sector, it is not incompatible with those measures to adopt national measures concerning quality which prohibit the production of cheeses of a type or quality other than those provided for by the national legislation.

15 Nor is it possible to accept the commission ' s argument to the effect that national legislation prohibiting the production of cheeses whose quality falls below the prescribed quality standards obstructs the community policy of increasing demand by widening the range of cheeses offered in the various member states. Neither the system established by, nor the provisions of, regulation no 804-68 stipulate that, within the common organization of the market and for the attainment of its objectives, priority must necessarily be given to increasing demand for milk products by widening the range of products offered rather than by improving the quality of a limited number of products, which is the method on which the national legislation in question is based.

16 Accordingly, in the light of all the foregoing considerations, the answer to the first question must be that regulation no 804-68 is to be interpreted as meaning that, in the absence of community rules, a member state may unilaterally adopt, with the purpose of promoting sales of cheese and cheese products, rules concerning the quality of cheeses produced within its territory including a ban on the production of cheeses other than those exhaustively listed.

Second question relating to articles 30 and 34 of the eec treaty

(a) Measures designed to improve quality

17 The second question seeks in substance to ascertain whether articles 30 and 34 of the eec treaty are to be interpreted as meaning that a member state may unilaterally adopt, with the purpose of promoting sales of cheese and cheese products, rules intended to improve the quality of domestic production together with rules on the compulsory use of stamps, marks or inspection documents.

18 The plaintiffs in the main action and the commission contended that a national measure designed to improve the quality of domestic production and thereby increase the sale of such products was capable of placing imports at a disadvantage and therefore constituted a measure having an effect equivalent to a quantitative restriction on imports.

19 It must be remembered in that respect that in its judgment of 24 november 1982 in case 249-81 commission v ireland (1982) ecr 4005, the court held that a publicity campaign to promote the sale and purchase of domestic products may, in certain circumstances, fall within the prohibition contained in article 30 of the treaty, if it is supported by the public authorities. The court has also ruled that a body which is set up by the government of a member state and is financed by a charge imposed on producers is under a duty not to engage in any advertising intended to discourage the purchase of products of other member states or to disparage those products in the eyes of consumers. Nor must such a body advise consumers to purchase domestic products solely by reason of their national origin (judgment of 13 december 1983 in case 222-82 apple and pear development council (1983) ecr 4083).

20 On the other hand, article 30 does not prevent the adoption of national rules which, whilst leaving imported products unaffected, have as their purpose to improve the quality of domestic production so as to make it more attractive to consumers. A measure of that kind complies with the requirement of sound and fair competition laid down by the treaty.

21 The plaintiffs in the main action and the commission also consider that certain specific aspects of the national legislation in question impair export possibilities and are therefore contrary to article 34 of the treaty. Thus the impossibility of producing new types of cheeses in the netherlands entails the loss of export opportunities in respect of such cheeses. As regards the cheeses which may still be produced, the new provisions have an impact on the cost of netherlands cheese and therefore on its competitiveness on foreign markets.

22 With regard to that argument, the court must state that it has repeatedly held (in particular in its judgment of 1 april 1982 in joined cases 141 to 143-81 holdijk (1982) ecr 1299) that article 34 of the treaty concerns national measures which have as their specific object or effect the restriction of patterns of exports and thereby the establishment of a difference in treatment between the domestic trade of a member state and its export trade, in such a way as to provide a special advantage for national production or for the domestic market of the state in question. That is not the case, however, where certain provisions lay down minimum standards of quality for cheese production, without making any distinction as to whether the cheese is intended for the domestic market or for export.

23 It must also be emphasized that article 34 does not have the effect of exempting producers from any rules which may, by affecting the conditions of production, have an impact on the volume or the cost of domestic production. A member state may legitimately pursue a policy based on quality in order to promote sales even if that policy exposes its producers to the risk of price competition from the producers of other member states who are not bound by the same standards of quality.

(b) Compulsory use of stamps, marks or inspection documents

24 In the commission ' s view the compulsory use of stamps, marks or inspection documents may make exports to other member states or to non-member countries more difficult or even impossible. The netherlands government, however, contends that no special inspection is prescribed and no inspection document is required on the exportation of cheese products. The products merely undergo an inspection by sampling and the results thereof are set out in a certificate.

25 It must be pointed out in that regard that article 34 of the treaty does not preclude the adoption of a national rule requiring producers to place on cheese a control stamp attesting compliance with national rules on quality, provided that such requirement applies without distinction to domestic production marketed in the member state concerned and production intended for export.

26 Nor does article 34 preclude the adoption of a national rule providing for samples to be taken, by an inspection agency which subsequently issues a document setting out the results of that inspection, of all cheese products intended for domestic consumption or for export.

27 However, it is contrary to article 34 to require inspection documents relating specifically to domestic production intended for export to the countries of the community (judgment of 3 february 1977 in case 53-76 bouhelier (1977) ecr 197).

28 Accordingly, the answer to the second question must be that articles 30 and 34 of the eec treaty are to be interpreted as meaning that a member state may unilaterally adopt, with the purpose of promoting sales of cheese and cheese products, rules which, whilst leaving imported products unaffected, are intended to improve the quality of domestic production so as to make it more attractive to consumers, and rules on the compulsory use of stamps, marks or inspection documents, provided that no distinction is drawn according to whether the cheese is intended for the domestic market or for export.

Third question relating to compulsory affiliation

29 The third question seeks in substance to ascertain whether regulation no 804-68 is to be interpreted as prohibiting the member states from requiring cheese producers to become members of an inspection agency.

30 The plaintiffs in the main action refer to the judgment of the court of 20 february 1980 in case 94-79 vriend (1980) ecr 327 in which the court held that the requirement of affiliation to a body approved by official authority in order to be able to market, re-sell, import, export or offer for export material for plant propagation was contrary to the principle of an open market on which the common organization of the market in the sector in question was based. The relevant legislation in this case is, in the plaintiff ' s view, similar to that which was at issue in the vriend case and compulsory registration by the producer must therefore be regarded as incompatible with community law.

31 According to the netherlands government, a distinction must be drawn between the requirement of affiliation at the marketing stage and the requirement of affiliation at the production stage. In that regard, the netherlands legislature took account of the court ' s ruling in the vriend case in limiting the scope of the rules to producers alone. It is essential to provide for adequate supervision of quality standards and, with that end in view, the netherlands opted in favour of compulsory affiliation to a body incorporated under private law.

32 The commission observes that compulsory affiliation applies also to traders, because the final stage of preparation, namely maturation, often takes place in their establishments, owing to the manufacturers ' lack of storage facilities. The commission considers that it is for the national court to decide, in the light of the vriend judgment, whether compulsory affiliation by producers may make it impossible for cheese to be marketed, re-sold, imported or exported.

33 Whether a requirement to become affiliated to an inspection agency approved by a member state is consistent with community law depends in the first place on whether the objectives pursued by the inspection agency itself are consistent with community law, a matter which the national court will have to determine in the light of the answer given to the first two questions.

34 If the national court concludes that the aims of the inspection agency are compatible with community law, it is for that court subsequently to ascertain whether the means chosen to ensure compliance with the national rules are capable of modifying patterns of imports and exports by preventing producers from marketing the products concerned freely.

35 In that regard it must be pointed out that there is nothing to prevent a member state from establishing an inspection agency and allowing it to exercise authority over producers, or even from requiring them to register with, or become affiliated to, that agency, provided that such measures are necessary to ensure compliance with the rules adopted in accordance with community law.

36 However, it is contrary to community law for a member state, either directly or through the intermediary of bodies established or approved by official authority, to reserve exclusively to persons affiliated to such bodies the right to market, re-sell, import, export and offer for export domestic cheese production. It is for the national court to ascertain whether that is the effect of the legislation submitted for its consideration, either because failure to register or to become affiliated results in a prohibition of carrying on business or because the requirement of affiliation goes beyond what is necessary to ensure compliance with the rules on quality. In particular, it is for the national court to ascertain whether, in order to ensure such compliance, the legislation must also apply to traders who are not engaged in the production of cheese or in processes assimilated to production, such as maturation.

37 The answer to the third question must therefore be that regulation no 804-68 is to be interpreted as meaning that it does not prevent a member state from requiring cheese producers to become affiliated to an inspection agency provided that the objectives pursued by that agency are consistent with community law and that the marketing, re-sale, import, export or offering for export of cheese products is not reserved exclusively to persons affiliated to that agency.

Fourth question relating to the general principles of community law

38 The fourth question seeks in substance to ascertain whether the member states, where they are empowered to lay down rules concerning the quality of cheese, are bound by the general principles of community law and in particular by the principle of proportionality.

39 In view of the answers given to the preceding questions, and in particular to the third question, it is unnecessary to give a separate answer to this question.

Costs

40 The costs incurred by the netherlands 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

In answer to the questions referred to it by the arrondissementsrechtbank, the hague, by order of 14 september 1982, hereby rules:

1. Regulation no 804-68 must be interpreted as meaning that, in the absence of community rules, a member state may unilaterally adopt, with the purpose of promoting sales of cheese and cheese products, rules concerning the quality of cheeses produced within its territory and including a ban on the production of cheeses other than those exhaustively listed.

2. Articles 30 and 34 of the eec treaty must be interpreted as meaning that a member state may unilaterally adopt, with the purpose of promoting sales of cheese and cheese products, rules which, whilst leaving imported products unaffected, are intended to improve the quality of domestic production so as to make it more attractive to consumers, and rules on the compulsory use of stamps, marks or inspection documents, provided that no distinction is drawn according to whether the cheese is intended for the domestic market or for export.

3. Regulation no 804-68 must be interpreted as meaning that it does not prevent a member state from requiring cheese producers to become affiliated to an inspection agency provided that the objectives pursued by that agency are consistent with community law and that the marketing, re-sale, import, export or offering for export of cheese products is not reserved exclusively to persons affiliated to that agency.