CJEC, November 29, 1978, No 83-78

1 By a judgment of 19 September 1977 enclosed with a covering letter of 10 March 1978 and received at the Court on 16 March the resident magistrate, Armagh, referred to the Court in pursuance of article 177 of the treaty a number of questions concerning the interpretation of regulation No 2759-75 of the council of 29 October 1975 on the common organization of the market in Pigmeat (official journal No l 282, p.1) and a number of provisions of the treaty relating to the abolition of quantitative restrictions (article 30 et seq.) To the common agricultural policy (in particular article 40), to the provisions relating to state monopolies and undertakings having special or exclusive rights (articles 37 and 90) as well as to the rules of competition (articles 85 and 86) and to regulation No 26 of the council of 4 April 1962 applying certain rules of competition to production of and trade in agricultural products (official journal, English special edition 1959-1962, p.129).

2 These questions were raised in the context of the prosecution of a pig producer for offences against local legislation in force in northern Ireland relating to the marketing of Pigmeat, setting up the pigs marketing scheme, administered by the pigs marketing board (hereinafter referred to as ''the board'') created by the same legislation, which is composed partly of producers and partly of representatives of the department of agriculture and supervised by the department.

3 It appears from the information contained in the judgment referring the matter to the Court of justice that this scheme applies to fat pigs, known as '' bacon pigs '', defined by the relevant legislation as being pigs weighing over 77 kg live weight.

4 Such pigs may be sold by producers only to or through the agency of the board.

5 The board has the sole right to market bacon pigs and the power to determine prices payable to producers and all other conditions of sale.

6 For this purpose the relevant legislation forbids the sale of such pigs-subject to certain exceptions-by persons other than producers registered with the board and prohibits all sales by such producers otherwise than to or through the agency of the board.

7 These provisions were supplemented by the movement of pigs regulations 1972, which forbid the transportation of bacon pigs unless to a purchasing centre of the board and covered by a transport authorization issued by the board.

8 Offences against the provisions referred to above are punishable by a fine and-or imprisonment and-or the forfeiture of the pigs in question.

9 It appears from the judgment referring the matter to the Court that the defendant in the main proceedings, who on 12 January 1977 transported 75 bacon pigs without being covered by an authorization from the board, is being prosecuted following a complaint by the board to the resident magistrate, Armagh, for a breach of regulation 4 (1) of the movement of pigs regulations (northern Ireland) 1972 and of section 17 (4 a) of the agricultural marketing act (northern Ireland) 1964, as subsequently amended.

10 At the same time the board claimed the forfeiture of the goods but subsequently withdrew the claim as the defendant had for his part agreed to plead guilty.

11 The defendant argued in his defence before the resident magistrate that the provisions of the pigs marketing scheme and the movement of pigs regulations under which he was charged were incompatible with the provisions of community law, in particular with the regulations on the common organization of the market in Pigmeat and the provisions of the treaty with regard to competition.

12 The board claimed that the pigs marketing scheme was compatible with the common market and referred to article 37 of the EEC treaty dealing with state monopolies of a commercial character and to article 44 of the act of accession which prescribes a period expiring on 31 December 1977 for the adjustment of such monopolies to the requirements of the common market.

13 In view of this conflict of arguments the resident magistrate took the view that as the complaint was brought before him on the basis of criminal legislation the application of which might involve for the defendant a fine or imprisonment or both it was important to know whether or not such a conviction would be compatible with community law.

14 With a view to clarifying this question the resident magistrate, in a judgment of 19 september 1977, decided to refer the matter to the Court of justice in pursuance of article 177 of the EEC treaty for a ruling as to whether the conviction of the defendant in accordance with the legislation applicable in northern Ireland would be compatible with community law.

15 In the body of the judgment the resident magistrate set out the following questions:

''Is the pigs marketing board (northern Ireland) 'an undertaking'? It is a ' national market organization '? Is it a 'state monopoly of a commercial character'? Is it all three or is it a combination of any two?

(1) if it is an ' undertaking ' is it an undertaking within the meaning and intention of articles 85 and 86? If it is, then in view of the provisions of its scheme the board's activities clearly violate these articles-particularly article 85 (1) (a), (b) and (c).

(2)if it is a ' national market organization ', does it fall within article 2 of regulation No 26 so as to be in a position to attract the exemptions provided for there? In my opinion this particular regulation only applies to national market organizations which are established by agreement and about which there is nothing compulsory. The board administers its scheme by compulsion and restrictions e.g. ' A producer who is neither a registered producer nor a person exempt from registration shall not sell any pigs. ' But even if the board falls within the meaning and intention of article 2 of regulation No 26, no evidence has been produced, nor has research on my part been able to throw up any decision of the common market Commission relating to the exemption of the board from the operation of article 85 of the treaty of Rome.

(3)if it is a 'state monopoly of a commercial character' does it fall within the meaning of article 37 (1) of the treaty of Rome so as to gain the protection of article 44 of the treaty of accession which provides for a transition period up to 31 December 1977?

(4)if it is a 'state monopoly of a commercial character' within article 37 of the treaty of Rome and the period of grace for adjustment does not expire until 31 December 1977, does this save it from the immediate effect of articles 85 and 86 until that date? Or can it be argued that ' undertakings ' within the meaning of articles 85 and 86 can be construed to include state monopolies? Counsel for the board argued that the term ' undertakings ' is not defined but is used as distinct from 'state monopolies'.

(5)do the board's activities fall within the provisions of article 85 (3) so as to exempt it from the provisions of paragraph (1)? This point was not raised. If the board is exempt from the application of article 85 by the operation of paragraph (3) it has no need to fall back on the ' transitional period ' argument.

(6)and what about article 8 of the treaty of Rome which provides that-

(1) the common market shall be progressively established during a transitional period of 12 years; and

(2)to each stage there shall be assigned a set of actions to be initiated and carried through concurrently. ' ?

Does this provision affect the present case?

16 The board appealed by way of case stated against this judgment to the northern Ireland Court of appeal, Belfast, asking whether the magistrate's Court was legally entitled to refer the matter to the Court of justice of the European Communities and whether a question regarding the interpretation of the treaty had in fact arisen in the proceedings before the magistrate's Court; if the answer was in the affirmative, whether a decision on that point was necessary to enable the magistrate to give judgment; and finally whether the magistrate's Court had properly exercised its discretion to refer the matter to the Court of justice.

17 The Court of appeal, after setting out the grounds which led the resident magistrate to make use of the procedure for a preliminary ruling under article 177, and taking the view that it was within the magistrate's discretion to clarify the legal questions relating to the exercise of his own jurisdiction, refused, by judgment of 8 March 1978, to entertain the board's case stated.

18 On 10 March 1978 the resident magistrate sent his judgment of 19 September 1977 to the Court of justice under cover of a letter in which it was stated that '' a point has arisen... As to whether the domestic Court has jurisdiction to proceed under certain Northern Ireland legislation '' and that the facts of the case and the questions arising in the judgment of 19 September 1977 '' also, incidentally, raise the following questions:

1. Are articles 30, 31, 32, 34, 37, 40, 41, 42, 43, 85, 86 and 90 of the treaty establishing the European Economic Community directly applicable so as to confer on individuals rights enforceable by them in the Courts of the united kingdom?

2. Are regulations Nos 121-67, 2759-75 and all other regulations on the common organization of the market in Pigmeat adopted in accordance with the treaty establishing the European Economic Community directly applicable so as to confer on individuals rights enforceable by them in the Courts of the united kingdom?

3. Is the pigs marketing scheme in Northern Ireland, upon the proper interpretation of the articles and regulations alone, or any relevant community law, in contravention of the rules of community law?

4. Under the above articles, regulation or any relevant community law can a member state be authorized:

(a) to continue a national organization of the market at a time when the common organization of the market is in force?

(b)to compel producers within its jurisdiction to become registered producers with the pigs marketing board (northern Ireland) before they can sell pigs?

(c)to compel producers within the jurisdiction to enter into contracts with the board and sell pigs solely to the board at prices and in numbers fixed by the board?

(d)to permit the board by way of an express or implied intervention measure to buy every pig regulated by the scheme?

5. Does imposition of the aforesaid obligations relating to the total regulation of numbers of pigs produced, sales and controlled prices, constitute infringement of community law in so far as they may represent measures having an effect equivalent to a quantitative restriction on exports, bearing in mind that the northern Ireland legislation in question has as one of its main aims and effects the prevention of exportation of pigs to the Republic of Ireland?

6. Was the united kingdom covered on the date of accession by a common organization of the market in so far as agriculture was concerned, and in relation in particular to Pigmeat and live pigs, and if so did it apply from 1 February 1973?

7. Was the United Kingdom government entitled to introduce the movement of pigs regulations (Northern Ireland) 1972 in the month of may 1972?

''

19 The United Kingdom government has put forward, both in its written observations and in its oral statements before the Court, a number of considerations regarding the questions raised by the resident magistrate.

20 It claims that, on the one hand, the questions included in the judgment of 19 September 1977 are for the most part not just questions of interpretation but questions relating to the application of community law and that as such they cannot be decided by the Court of justice.

21 On the other hand, the questions formulated in the covering letter of 10 March 1978, which are described by the magistrate himself as having arisen only '' incidentally '', cannot be considered as having been validly conferred to the Court.

22 In the face of the large number of questions raised and having regard to the complexity and the importance of the case the United Kingdom government states that it has difficulty in identifying the legal problems arising in the context of the proceedings pending before the resident magistrate.

23 For this reason the government has asked the Court, in order to permit it to work out its position for the oral hearing, to indicate before hand the questions which it regards as relevant.

24 At this stage, only an examination of articles 34 and 37 of the treaty, relating respectively to quantitative restrictions on export and the system of state monopolies, appears to the government to be necessary for the solution of the problems raised before the national Court.

25 As regards the division of jurisdiction between national Courts and the Court of justice under article 177 of the treaty the national Court, which is alone in having a direct knowledge of the facts of the case and of the arguments put forward by the parties, and which will have to give judgment in the case, is in the best position to appreciate, with full knowledge of the matter before it, the relevance of the questions of law raised by the dispute before it and the necessity for a preliminary ruling so as to enable it to give judgment.

26 However, in the event of questions ' having been improperly formulated or going beyond the scope of the powers conferred on the Court of justice by article 177, the Court is free to extract from all the factors provided by the national Court and in particular from the statement of grounds contained in the reference, the elements of community law requiring an interpretation-or, as the case may be, an assessment of validity-having regard to the subject-matter of the dispute.

27 In this respect it may be noted that the resident magistrate has brought out clearly in his judgment of 19 September 1977 the doubts which he felt as to the classification of the scheme in question, having regard to the provisions of community law, and he has shown that the solution of this preliminary question must depend upon the choice to be made between the various provisions which have been relied upon by the parties.

28 The questions contained in the letter of 10 March 1978 were clearly inspired by the board's contention before the Court of appeal, Belfast, that the resident magistrate has not properly exercised his discretion with regard to the legal questions raised and the necessity of referring them to the Court of justice.

29 In any event a comparison with the judgment of 19 September 1977 shows that the purpose of the supplementary questions is merely to explain and render more precise the questions previously submitted.

30 It is thus appropriate to read the two series of questions together so as to extract the problems of interpretation raised in the context of the prosecution before the resident magistrate.

31 As regards the difficulty mantioned by the united kingdom government of identifying within the broad complex of questions raised by the resident magistrate those which are to be considered as decisive, it has not seemed possible to the Court to give a prior indication at the request of one of the parties to these proceedings without incurring the risk of seeming to commit itself to a definite position in advance of a final judgment and, what is more, without compromising the other parties ' opportunities to put their case.

The classification of the pigs marketing scheme under the provisions, of the treaty and secondary legislation

32 As a preliminary the resident magistrate wishes to obtain all necessary factors which may enable him to interpret community law and to classify the pigs marketing scheme under the provisions of the treaty and secondary legislation with a view to identifying those provisions which will enable him to deliver a judgment as regards the compatibility of the scheme with community law.

33 Three possibilities are envisaged in this respect, first that the pigs marketing scheme and its administering body, the board, are to be considered as a ''state monopoly of a commercial character '' within the meaning of article 37 of the treaty-so that its activities would be exempted, at least until 31 December 1977, by virtue of article 44 of the act of accession from the application of the provisions of the treaty with regard to quantitative restrictions-or secondly as an '' undertaking '' with the consequence that the provisions of the treaty with regard to competition are applicable subject, however, to any special privileges which might arise from article 90, or, finally, that it is a ''national market organization'', which would raise the problem of the compatibility of such an organization with the common organization of the market existing in the sector in question.

34 An answer to this question of classification must be deduced from the general structure of the EEC treaty and from the function in that structure of the provisions relating to agriculture.

35 On this point it must be stated first that the pigs marketing scheme concerns a sector of economic activity, namely the production and marketing of a specific category of pigs, coming under a common organization of the market governed at the time of the accession of the united kingdom by regulation No 121-67 of 13 June 1967 (official journal, English special edition 1967, p.46) and at the material time by regulation No 2759-75 of 29 October 1975, which is still in force at present.

36 It is common ground that this common organization of the market was applicable on the whole of the territory of the united kingdom, by virtue of the general provisions of the act of accession and of the specific rule contained in article 60 (1) of the act, as from 1 February 1973.

37 It follows from article 38 (2) of the EEC treaty that the provisions of the treaty relating to the common agricultural policy have precedence, in case of any discrepancy, over the other rules relating to the establishment of the common market.

38 The specific provisions creating a common organization of the market therefore have precedence in the sector in question over the system laid down in article 37 in favour of state monopolies of a commercial character.

39 Consequently the special time-limit laid down by article 44 of the act of accession cannot be relied on so as to cover national rules and the action of a national body such as the board, relating to a sector for which a common organization of the market exists.

40 It is therefore irrelevant whether the pigs marketing scheme and the board have the character of a ''state monopoly'' within the meaning of article 37, as the application of that provision was in any case excluded as from 1 february 1973 by the effect of the extension to the united kingdom of the common organization of the market in Pigmeat.

41 In its observations submitted to the Court the board maintained that it considers itself, having regard both to the nature of its activities and to the powers conferred upon it by Northern Ireland legislation, as being an undertaking which has ''special or exclusive rights '' within the meaning of article 90 of the treaty.

42 It claims that the provisions, read in conjunction with article 37 relating to state monopolies, has the effect of exempting its activities from the application of the general rules relating to the common organization of the market in Pigmeat.

43 In this respect it must be pointed out, in addition to what has been stated above on the subject of article 37, that article 90 (1) provides expressly that the member states, as regards the undertakings in question, ''shall neither enact nor maintain in force any measure contrary to the rules contained in this treaty ''.

44 The classification of the board as an undertaking having special or exclusive rights within the meaning of article 90 would not therefore have the effect of exempting its activities from the provisions of community law or in particular from those relating to the free movement of goods and the common organization of the agricultural market.

45 Finally the question has been raised whether the activities of the board may be recognized as a special scheme inasmuch as the pigs marketing scheme constitutes a ''national market organization''.

46 In the proceedings before the resident magistrate, this concept seems to have been drawn particularly from article 2 of regulation No 26 applying certain rules of competition to production of and trade in agricultural products.

47 As the Court had occasion to emphasize in its judgment of 10 December 1974 in case 48-74, charmasson ((1974) ecr 1383), national market organizations were only accepted provisionally and the intention is to replace them, in accordance with article 43 (3), by the institution of common organizations of the market.

48 Except for the products in respect of which there is a reservation under article 60 (2) of the act of accession, this replacement took effect for the united kingdom by virtue of the same act on 1 february 1973, as has been indicated above.

49 As regards the reference to national market organizations in regulation No 26, it should be pointed out that the provisions of that regulation, which is dated 4 april 1962, take account of the conditions prevailing during the transitional period and that in the fifth recital in the preamble to that regulation the position as regards the subsequent development of a common agricultural policy is fully safeguarded.

50 Accordingly the question whether the pigs marketing scheme (Northern Ireland) might be classified as a '' national market organization '' is equally irrelevant.

The position of the pigs marketing scheme vis-a-vis the common organization of the market in Pigmeat

51 It follows from the foregoing that the decisive questions for the solution of the case before the resident magistrate concern the compatibility with the provisions relating to the free movement of goods and the common organization of the market in Pigmeat of a market system laid down by the legislation of a member state and managed by a body which has power, thanks to the compulsory powers vested in it, to control the sector of the market in question by measures such as subjecting the marketing of the goods to a requirement that the producer shall be registered with the body in question, the prohibition of any sale otherwise than to that body or through its agency, on the conditions determined by it, and the prohibition of any unauthorized transport of the goods in question.

52 With a view to answering these questions it is necessary to clarify first the relationship existing on the one hand between the regulations mentioned by the resident magistrate, namely regulations nos 121-67 and 2759-75 and, on the other hand, the provisions of the treaty relating to the abolition of quantitative restrictions and more particularly articles 30 and 34 of the treaty.

53 Regulation No 121-67, which was applicable at the time of the accession of the United Kingdom, contains in article 19 express provisions relating to the abolition of customs duties and quantitative restrictions.

54 The fact that these provisions were not re-adopted in regulation No 2759-75, the purpose of which was to consolidate the whole of the existing provisions on this subject, is due, as has been explained by the Commission, to the fact that it is current practice not to insert in the consolidated text of agricultural regulations any provisions which merely re-enact the provisions of the treaty itself.

55 It follows that, having regard to the structure of regulation No 2759-75, which is now in force, the provisions of the treaty relating to the abolition of tariff and commercial barriers to intra-community trade and in particular articles 30 and 34 on the abolition of quantitative restrictions and of all measures having equivalent effect on imports and exports are to be regarded as an integral part of the common organization of the market.

56 As the Court has stated in its judgment of 18 may 1977 in case 111-75 officier van Justitie v van den hazel ((1977) ecr at p.909) once the community has, pursuant to article 40 of the treaty, legislated for the establishment of the common organization of the market in a given sector, member states are under an obligation to refrain from taking any measure which might undermine or create exceptions to it.

57 With a view to applying that statement in the case of the pigs marketing scheme it should be borne in mind that the common organization of the market in Pigmeat, like the other common organizations, is based on the concept of an open market to which every producer has free access and the functioning of which is regulated solely by the instruments provided for by that organization.

58 Hence any provisions or national practices which might alter the pattern of imports or exports or influence the formation of market prices by preventing producers from buying and selling freely within the state in which they are established, or in any other member state, in conditions laid down by community rules and from taking advantage directly of intervention measures or any other measures for regulating the market laid down by the common organization are incompatible with the principles of such organization of the market.

59 Any action of this type, which is brought to bear upon the market by a body set up by a member state and which does not come within the arrangements made by community rules cannot be justified by the pursuit of special objectives of economic policy, national or regional; the common organization of the market, as emerges from the third recital in the preamble to regulation No 2759-75, is intended precisely to attain such objectives on the community scale in conditions acceptable for the whole of the community and taking account of the needs of all its regions.

60 Any intervention by a member state or by its regional or subordinate authorities in the market machinery apart from such intervention as may be specifically laid down by the community regulation runs the risk of obstructing the functioning of the common organization of the market and of creating unjustified advantages for certain groups of producers or consumers to the prejudice of the economy of other member states or of other economic groups within the community.

61 In this respect it is impossible to accept the board's argument to the effect that its price policy is dependent upon market trends and accordingly does not perturb the formation of prices according to the regulation.

62 Indeed this situation by no means excludes the fact that the national provisions in dispute have the effect of placing producers in a position of complete dependence on the board and forbidding them access to the market in the conditions laid down by the treaty and the common organization set up by virtue of the treaty.

63 In this respect account be taken of article 2 of regulation No 2759-75 which lays down a series of measures intended to encourage action by trade and joint trade organizations to facilitate the adjustment of supply to market requirements by reason in particular of a better organization of production, processing or marketing of the products in question.

64 However, that provision makes possible the institution of such measures only within the framework of a community procedure intended to guarantee that the general interests of the community are safeguarded and that the objectives laid down by article 39 of the treaty are observed.

65 The questions referred to the Court by the resident magistrate should therefore be answered to the effect that a marketing system on a national or regional scale set up by the legislation of a member state and administered by a body which, by means of compulsory powers vested in it, is empowered to control the sector of the market in question or a part of it by measures such as subjecting the marketing of the goods to a requirement that the producer shall be registered with the body in question, the prohibition of any sale otherwise than to that body or through its agency on the conditions determined by it, and the prohibition of all transport of the goods in question otherwise than subject to the authorization of the body in question are to be considered as incompatible with the requirements of articles 30 and 34 of the EEC treaty and of regulation No 2759-75 on the common organization of the market in Pigmeat.

66 It should further be stated in reply to the questions raised by the resident magistrate that all the provisions quoted are directly applicable and that as such they confer on individuals rights which the Courts of member states must protect.

67 This result flows on the one hand from the very nature of articles 30 and 34 of the treaty and on the other hand from article 189 in the terms of which regulations are '' directly applicable in all member states ''.

68 As will be clear from the foregoing, the effects described above applied, according to the terms of the act of accession and in particular of articles 2, 42 and 60 (1) thereof, to the whole of the territory of the united kingdom as from 1 february 1973.

69 In this respect the fact that one of the features of the pigs marketing scheme-namely the movement of pigs regulations-was introduced in 1972 subsequently to the date of the signature of the treaty of accession does not alter this situation since the precedence of community law over the provisions of national law applies without regard to the respective dates of the provisions in question.

70 The resident magistrate raises a further special question, with regard to the restrictions resulting as regards transport of pigs from the application of the movement of pigs regulations, as to whether such restrictions might possibly be justified by reason of the control facilities which they offer with regard to large-scale smuggling which apparently takes place on the frontier between northern Ireland and the Republic of Ireland by reason of the disparity in the rates for the '' green pound '' and the payment of the monetary compensatory amounts resulting therefrom.

71 The board, for its part, also emphasizes the connexion existing between this aspect of the pigs marketing scheme and the suppression of smuggling.

72 It is not possible to accept that a prohibition on transport which is incompatible both with freedom of trade between member states and with the common organization of the market in Pigmeat is justified by reason of the fact that such a restriction might incidentally facilitate frontier controls and the campaign against certain fraudulent operations.

73 Such abuses, if not abolished by the removal of their monetary cause, can only be dealt with by means compatible with the normal functioning of the common market.

74 Considerations affecting the repression of fraud cannot therefore be relied upon to justify the scheme which is the subject of the proceedings before the resident magistrate.

75 In view of the foregoing it does not appear necessary to reply to the questions by the resident magistrate regarding the interpretation of articles 85 and 86 of the treaty and the relationship of those provisions with article 37.

Costs

76 The costs incurred by the United Kingdom government and the Commission of the European Communities which have submitted observations to the Court are not recoverable.

77 As these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the prosecution pending before the national Court, costs are a matter for that Court.

On those grounds,

The Court,

In answer to the questions referred to it by the resident magistrate, Armagh, by judgment of 19 September 1977 and by letter of 10 March 1978, hereby rules:

1. A marketing system on a national or regional scale set up by the legislation of a member state and administered by a body which, by means of compulsory powers vested in it, is empowered to control the sector of the market in question or a part of it by measures such as subjecting the marketing of the goods to a requirement that the producer shall be registered with the body in question, the prohibition of any sale otherwise than to that body or through its agency on the conditions determined by it, and the prohibition of all transport of the goods in question otherwise than subject to the authorization of the body in question are to be considered as incompatible with the requirements of articles 30 and 34 of the EEC treaty and of regulation No 2759-75 on the common organization of the market in Pigmeat.

2. The provisions of articles 30 and 34 of the EEC treaty and of regulation No 2759-75 are directly applicable and confer on individuals rights which the Courts of member states must protect.