Case C-310/04
Kingdom of Spain
v
Council of the European Union
(Actions for annulment – Agriculture – Chapter 10a of Title IV of Regulation (EC) No 1782/2003, inserted by Article 1(20) of Regulation (EC) No 864/2004 – Amendment of the support scheme for cotton – Condition that the area is maintained at least until the boll opening – Compliance with Protocol 4 on cotton annexed to the Act of Accession of the Hellenic Republic to the European Communities – Concept of production aid – Obligation to state reasons – Misuse of powers – General principles of proportionality and protection of legitimate expectations)
Summary of the Judgment
1.Court of Justice – Organisation – Assignment of cases to the Grand Chamber
(Statute of the Court of Justice, Art. 16, third para.; Rules of Procedure of the Court of Justice, Art. 44(4))
2.Agriculture – Common agricultural policy – Cotton – Production aid
(Act of Accession of the Hellenic Republic, Protocol 4; Council Regulations Nos 1782/2003 and 864/2004, Art. 1)
3.Acts of the institutions – Statement of reasons – Obligation – Scope
(Art. 253 EC; Council Regulation No 864/2004)
4.Actions for annulment – Grounds – Misuse of powers
5.Community law – Principles – Protection of legitimate expectations – Limits
(Council Regulation No 864/2004)
6.Agriculture – Common agricultural policy – Cotton – Production aid
(Act of Accession of the Hellenic Republic, Protocol 4, para. 2; Council Regulation No 864/2004)
7.Actions for annulment – Judgment annulling a measure – Effects
(Art. 231 EC; Council Regulations No 1782/2003, Title IV, Chapter 10a, and Art. 156(2)(g), and No 864/2004)
1.While the third paragraph of Article 16 of the Statute of the Court of Justice requires the Court to sit as a Grand Chamber if a request to that effect is made by inter alia an institution of the Communities which is a party to the proceedings, a referral of a case back to the Court in order that it may be reassigned to a formation composed of a greater number of judges in accordance with Article 44(4) of the Rules of Procedure constitutes a measure which the formation to which the case has been assigned decides on freely and of its own motion. However, to allow a request under the third paragraph of Article 16 of the Statute to be made at a very advanced stage of the proceedings, such as a request made after the close of the oral procedure and thus at the stage of the deliberations, is liable to cause considerable delay to the progress of the proceedings, and therefore to have effects clearly contrary to the requirement of the proper administration of justice which means that the Court must be able in any case brought before it to ensure that a decision is taken following a procedure that is efficient and completed within a proper time.
(see paras 22-23)
2.The concept of aid to cotton production, as it appears in paragraph 3 of Protocol 4 annexed to the Act of Accession of the Hellenic Republic, does not preclude the condition of eligibility for the specific aid provided for by Regulation No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers, inserted by Article 1(20) of Regulation No 864/2004 and consisting in the requirement that the area is maintained at least up to the boll opening.
In the absence of a definition of production in Protocol 4, nothing in the text or the context of that act indicates that, in the framework of the protocol, the concept of production has a different meaning from that usually accepted, which refers to a process consisting of several stages. In that respect, the mention in the preamble to Protocol 4 of the importance of cotton as a raw material does not imply that the protocol refers only to harvested cotton, but, taken in the context of the preamble of which it forms part, must be understood as merely pointing out that in view of that importance the support scheme for cotton must not have negative effects on trade with third countries. Moreover, the explanation provided by Article 1 of Regulation No 4006/87 amending Protocol No 4 on cotton that the protocol concerns cotton, not carded or combed, falling within heading No 520100 of the combined nomenclature in no way excludes cotton as it is at the time of boll opening. At that stage, just indeed as at the later stage of harvesting, the cotton by definition is not carded or combed.
(see paras 41-45, 49)
3.The statement of reasons required by Article 253 EC must be appropriate to the nature of the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the Community Court to exercise its power of review. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons for a measure meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question. In the case of a measure intended to have general application, the statement of reasons may be limited to indicating, first, the general situation which led to its adoption and, second, the general objectives which it is intended to achieve. Moreover, if a measure of general application clearly discloses the essential objective pursued by the institution, it would be excessive to require a specific statement of reasons for the various technical choices made.
Those conditions are satisfied by Regulation No 864/2004 amending Regulation No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers. The preamble to that regulation gives a transparent and clear summary of the general situation which led the Community legislature to adopt that act and the general objectives pursued. Recitals 5 and 6 together disclose the essence of the objective pursued in so far as the regulation introduces the new cotton support scheme. The Community legislature was not therefore required additionally to give specific reasons for the various technical choices made, such as the choice to make the grant of the specific aid for cotton conditional on the maintenance of cultivation of the cotton up to the boll opening stage.
(see paras 57-60, 64-65)
4.An act is vitiated by misuse of powers only if it appears, on the basis of objective, relevant and consistent evidence, to have been taken with the exclusive or main purpose of achieving an end other than that stated or evading a procedure specifically prescribed by the Treaty for dealing with the circumstances of the case.
(see para. 69)
5.Where a prudent and circumspect economic operator could have foreseen that the adoption of a Community measure is likely to affect his interests, he cannot rely on the principle of the protection of legitimate expectations if the measure is adopted. Furthermore, while that principle is one of the fundamental principles of the Community, economic operators are not justified in having a legitimate expectation that an existing situation which is capable of being altered by the Community institutions in the exercise of their discretionary power will be maintained, particularly in an area such as that of the common organisation of the markets, the objective of which involves constant adjustment to reflect changes in economic circumstances.
A prudent and circumspect operator could have foreseen the adoption of Regulation No 864/2004 amending Regulation No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers and that regulation’s reform of the cotton support scheme. That reform was part of a more extensive reform that had been discussed at political level since 1992 and was moreover specifically envisaged in a Commission communication adopted in 2003, which contained a proposal for amendment to Regulation No 1782/2003 and was the subject of a notice published in the Official Journal. Furthermore, the support scheme in the cotton sector had already been the subject of several substantial reforms in the past.
(see paras 81, 83-84)
6.In view of the wide discretion enjoyed by the Community legislature where the common agricultural policy is concerned, the lawfulness of a measure adopted in that sphere can be affected only if the measure is manifestly inappropriate in terms of the objective which the competent institution is seeking to pursue. That discretion, which implies limited judicial review of its exercise, applies not only to the nature and scope of the measures to be taken but also, to some extent, to the finding of the basic facts. However, even though such judicial review is of limited scope, it requires that the Community institutions must be able to show before the Court that in adopting the act they actually exercised their discretion, which presupposes the taking into consideration of all the relevant factors and circumstances of the situation the act was intended to regulate.
The labour costs of a fixed nature, such as the costs of the farmers’ workforces and their families, were not included and were thus not taken into consideration in the comparative study drawn up by the Commission of the foreseeable profitability of cotton growing under the support scheme for cotton introduced by Regulation No 864/2004 amending Regulation No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers, which was used as the basis of the determination of the amount of the specific aid for cotton. However, the relevance of the labour costs in question for the purposes of calculating the production costs of cotton and the foreseeable profitability of that crop appears in itself to be scarcely deniable.
Moreover, the potential effects of the reform of the cotton support scheme on the economic situation of the ginning undertakings were not examined. Cotton production is not economically possible without the presence in the vicinity of the production regions of such undertakings operating under economically sustainable conditions, since cotton has little commercial value before being processed and it cannot be transported over long distances. The production of cotton and its processing by the ginning undertakings thus appear to be inextricably linked. The potential effects of the reform of the cotton support scheme on the economic viability of the ginning undertakings therefore constitute a basic factor to be taken into account in order to assess the profitability of cotton growing.
In this respect, the Council, the author of Regulation No 864/2004, has not shown before the Court that in adopting the new cotton support scheme established by that regulation it actually exercised its discretion, involving the taking into consideration of all the relevant factors and circumstances of the case. It follows that the information submitted by the Community institutions does not enable the Court to ascertain whether the Community legislature was able, without exceeding the bounds of the broad discretion it enjoys in the matter, to reach the conclusion that fixing the amount of the specific aid for cotton at 35% of the total existing aid under the previous support scheme would suffice to guarantee the objective set out in recital 5 in the preamble to Regulation No 864/2004, namely to ensure the profitability and hence the continuation of that crop, an objective reflecting that laid down in paragraph 2 of Protocol 4 annexed to the Act of Accession of the Hellenic Republic. Consequently, the principle of proportionality was infringed.
(see paras 98, 117, 121-122, 124, 126, 128, 131-135)
7.Under Article 156(2)(g) of Regulation No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers, inserted by Article 1(28) of Regulation No 864/2004, the new cotton support scheme provided for by Chapter 10a of Title IV of Regulation No 1782/2003 is to apply as from 1 January 2006 for the cotton sown as from that date. Farmers in the Member States concerned may consequently already have taken steps to adapt to that scheme so as to be able to benefit from the support it provides for, or at least will have to take such steps shortly. Moreover, the competent authorities of those Member States may already have taken the necessary measures for implementing the scheme, or will soon have to take such measures. In the light of those factors, and in particular in order to avoid any legal uncertainty as to the scheme applicable to aid in the cotton sector following the annulment of Chapter 10a of Title IV of Regulation No 1782/2003, the effects of the annulment must be suspended until the adoption, within a reasonable time, of a new regulation.
(see paras 139-141)