Italy cannot replace the EU rules’ requirement for proportional allocation with a criterion that favors producers in mountainous or economically disadvantaged regions.
Read attorney Hans Sønderby Christensen’s article published on Monday, October 21, 2019, on Jyllands-Posten’s website here.
The case mentioned in this article concerned Azienda Agricola Barausse Antonio e Gabriele – Società semplice, a milk-producing company based in Italy (hereinafter referred to as the company). In the period from April 1, 2000, to March 31, 2001, the company had exceeded its individual milk quotas. The excess triggers an obligation to pay a levy. As other Italian companies had not fully utilized their quotas, the company wished to receive a share thereof to reduce the additional levy.
By decision of July 26, 2001, Agenzia per le Erogazioni in Agricoltura, an Italian agency for the allocation of aid to the agricultural sector (hereinafter AGEA), announced which milk producers had been selected to receive a redistribution of the unutilized individual milk quotas. The company was not one of the producers favored by these redistributions. The selection of the companies that could obtain additional quota had been made according to criteria established by the Italian authorities, not according to EU rules.
The company, therefore, brought the decision before the Tribunale amministrativo regionale del Lazio – sede di Roma (Administrative Court for Lazio, Rome, Italy). The company argued that the rules in the Italian legislation that had been applied in connection with the redistribution were in conflict with the EU legal provisions in the EU regulation in question. The provisions in the EU regulation stipulated that if member states chose to redistribute unutilized individual milk quotas, a strict criterion of equality and proportionality should be applied. According to the national Italian rules, the criteria included taking special account of producers in mountainous areas or areas with special economic needs.
After the Administrative Court had rejected the case, the company initiated an appeal before the Consiglio di Stato (Italy’s Supreme Court in administrative law cases). However, this court was in doubt as to whether the EU regulation should be interpreted in such a way that the redistribution should take place on an equal and proportionate basis, or whether the member states are authorized to identify categories of beneficiary milk producers based on a prioritization. On this basis, it decided to refer this question to the EU Court of Justice for a preliminary ruling.
The EU Court of Justice began by referring to its own established case law regarding the interpretation of EU legal provisions. According to this case law, the interpretation must take into account not only the wording of the EU legal provision in question but also the context in which the provision is included, as well as the objectives pursued by the scheme of which it forms a part.
As regards the wording of the relevant EU legal provision in the EU regulation, which regulates the possibility for member states to redistribute unutilized individual milk quotas, the EU Court of Justice referred to the various language versions of the provision. According to the EU Court of Justice, it was clear from all language versions that the redistribution of the unutilized individual milk quotas must take place »in proportion to each producer’s reference quantity«. The logic is that since the individual producer’s contribution to the payment of the additional levy due is determined in relation to that producer’s excess, the favorable quotas must also be distributed in this way, so that the size of a party’s unutilized quotas corresponds to the party’s share in the payment of additional levy. Thus, the EU rule establishes a criterion for the redistribution, namely that it must be proportional.
Furthermore, the EU Court of Justice noted that since the provision neither mentions other criteria nor refers to the member states’ competence to establish their own criteria, this criterion of proportional distribution must be considered the only one that can form the basis for the redistribution.
This reading of the provision is also supported, according to the EU Court of Justice, by the context in which the provision is included. The possibility of carrying out redistribution under other criteria within the framework of the application of this provision cannot be inferred from other provisions in the EU regulation in question.
In addition, this reading of the provision is further supported, according to the EU Court of Justice, by the very objective of the scheme pursued by the EU regulation. In addition to the fact that the additional levy aims to oblige milk producers to comply with the reference quantities allocated to them, it also pursues an economic purpose, as it must provide the necessary funds for the EU to market the production created by the milk producers.
The EU Court of Justice then noted that although the member states are granted an opportunity under the EU regulation to redistribute unutilized individual milk quotas, the member states cannot freely decide how this redistribution is carried out. This is because the EU legislator has already set the framework for the exercise of this opportunity with the EU regulation in question by setting the conditions for it. This precludes the member states’ discretion to determine the criteria for the redistribution themselves because EU rules take precedence.
In this connection, the EU Court of Justice noted that the member states, in exercising their discretion, are also obliged to observe the general principles of EU law. This includes the principle of proportionality, the principle of legal certainty, and the principle of the protection of legitimate expectations. This means that there is a requirement for proportionality and that EU citizens and EU companies must be able to predict their legal position.
Against this background, the EU Court of Justice concluded summarily on the question raised that the EU regulation in question must be interpreted in such a way that the redistribution of the unutilized individual milk quotas must take place between the producers who have exceeded their reference quantities in proportion to the reference quantities that each producer has at their disposal. In other words, it must be proportional.
The judgment shows that the member states’ discretion is limited in cases where EU law, including EU regulations, lays down specific criteria for the application of EU legal provisions. Furthermore, the member states’ national authorities are, in accordance with the principle of the primacy of EU law, obliged to apply EU legal provisions in preference to provisions in national legislation. For EU legal provisions in EU regulations, they do not have to be implemented in national law but have direct effect. This means that EU citizens and EU companies can invoke such EU legal provisions directly before the national courts.
