Language of document : ECLI:EU:T:1997:101

JUDGMENT OF THE COURT OF FIRST INSTANCE (Fourth Chamber)

9 July 1997(1)

(Agriculture — Common organization of the market in the sheepmeat andgoatmeat sector — Variable slaughter premium for sheep — Conditions forreimbursement of clawback — Principle of legal certainty — Principle ofprotection of legitimate expectations — Principle of proportionality)

In Case T-455/93,

Hedley Lomas (Ireland) Ltd, a company incorporated under Irish law, establishedin Dublin,
Sharpbond Trading Ltd, a company incorporated under English law, establishedin Stratford-upon-Avon (United Kingdom),
J. & S.A. Wood (Livestock Exports) Ltd, a company incorporated under Englishlaw, established in Redditch (United Kingdom),
J. & S.A. Wood, established in Redditch,
Lesley Dorothy Joan Mills, residing in Framlingham (United Kingdom),
Live Sheep Traders Ltd, a company incorporated under English law, established inFramlingham,
Livestock Sales Transport Ltd, a company incorporated under English law,established in Framlingham,
Peter Ziokowski, residing in Folkestone (United Kingdom),
Brigstock Farms Ltd, a company incorporated under English law, established inLondon,
K.A. & S.B.M. Feakins, established in Llancloudy (United Kingdom),
Deaconvale Ltd, a company incorporated under English law, established inGloucester (United Kingdom),
represented by Conor Quigley, of the Bar of England and Wales, instructed byA.M. Burstow, Solicitor, Crawley (United Kingdom), with an address for service inLuxembourg at the Chambers of Jean-Marie Bauler, 42 Grand-Rue,

applicants,

v

Commission of the European Communities, represented by Thomas Van Rijn andChristopher Docksey, of its Legal Service, acting as Agents, and by PhilippaWatson, of the Bar of England and Wales, with an address for service inLuxembourg at the office of Carlos Gómez de la Cruz, of its Legal Service, WagnerCentre, Kirchberg,

defendant,

supported by

United Kingdom of Great Britain and Northern Ireland,represented byJ.E. Collins, of the Treasury Solicitor's Department, acting as Agent, and by GeraldBarling QC, of the Bar of England and Wales, with an address for service inLuxembourg at the British Embassy, 14 Boulevard Roosevelt,

intervener,

APPLICATION for the annulment of Article 2 of Commission Regulation (EEC)No 1922/92 of 13 July 1992 amending Regulation (EEC) No 1633/84 laying downdetailed rules for applying the variable slaughter premium for sheep, repealingRegulation (EEC) No 2661/80 and determining the conditions for thereimbursement of the clawback following the judgment of the Court of Justice inJoined Cases C-38/90 and C-151/90 (OJ 1992 L 195, p. 10),

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (Fourth Chamber),



composed of: K. Lenaerts, President, P. Lindh and J.D. Cooke, Judges,

Registrar: J. Palacio González, Administrator,

having regard to the written procedure and further to the hearing on 21 November1996,

gives the following

Judgment

Legislative context and the background to the claim

  1. The common organization of the market in the sheepmeat and goatmeat sector wasestablished by Council Regulation (EEC) No 1837/80 of 27 June 1980 (OJ 1980L 183, p. 1, hereinafter 'Regulation No 1837/80‘).

  2. Article 9 of this regulation, as substituted by Council Regulation (EEC) No 871/84of 31 March 1984 (OJ 1984 L 90, p. 35), empowered the United Kingdom to granta variable slaughter premium for sheep.

  3. In order to prevent the payment of such a premium from disrupting interstate tradeand from distorting competition between producers in different regions, paragraph3 of this article provided that in the event of payment of premium on any suchproducts, measures had to be taken to ensure that an equivalent amount —commonly referred to as 'the clawback‘ — would be levied on the export of theproducts from the Member State in question.

  4. Commission Regulation (EEC) No 1633/84 of 8 June 1984 (OJ 1984 L 154, p. 27,hereinafter 'Regulation No 1633/84‘) laying down detailed rules for applying thevariable slaughter premium for sheep and repealing Regulation (EEC) No 2661/80, provided detailed rules for the calculation and collection of the clawback.

  5. Article 4(1) and (2) of this regulation provided:

    '1.    For the United Kingdom, the amount to be charged on departure of theproducts referred to in Article 1(a) and (c) of Regulation (EEC)No 1837/80 from region 5, in accordance with Article 9(3) of thatregulation, shall be fixed each week by the Commission. It shall be equal tothe amount of the premium fixed in accordance with Article 3(1), for theweek during which departure of the products in question took place.

    2.    On departure of the products referred to in Article 1(a) and (c) ofRegulation (EEC) No 1837/80 from the territory of region 5, a security shallbe lodged. The security shall be fixed by the United Kingdom at a levelwhich covers the amount due pursuant to paragraph 1; it shall not be lessthan the forecast amount of the premium for the week preceding thatduring which departure takes place. The said security shall be released assoon as the amount referred to in paragraph 1 has been paid.‘

  6. Council Regulation (EEC) No 3013/89 of 25 September 1989 on the commonorganization of the market in sheepmeat and goatmeat (OJ 1989 L 289, p. 1,hereinafter 'Regulation No 3013/89‘), applicable as from 1 January 1990, repealedRegulation No 1837/80 and instituted a new common organization. This regulationprovides for a unified common organization of the market, subject to certaintransitional provisions. In particular, those provisions include authorization to theUnited Kingdom to grant a variable slaughter premium until the end of the 1992marketing year. Article 9(3) of Regulation No 1837/80, as amended, was replacedin substantially identical terms by Article 24(5) of Regulation No 3013/89. In theevent of that premium being granted, the clawback was to be imposed on meatleaving the United Kingdom.

  7. Commission Regulation (EEC) No 3246/91 of 7 November 1991 authorizing theUnited Kingdom to discontinue granting the variable slaughter premium for sheepin Great Britain and derogating from Regulation No 1633/84 (OJ 1991 L 307, p.16), authorized the United Kingdom to discontinue the variable slaughter premiumfrom the beginning of the 1992 marketing year.

  8. In 1990, references were made to the Court of Justice for preliminary rulings onthe validity of Article 4(1) and (2) of Regulation No 1633/84.

  9. In its judgment of 10 March 1992 in Joined Cases C-38/90 and C-151/90 Lomas andOthers [1992] ECR I-1781 (hereinafter the 'Lomas judgment‘), the Court of Justiceruled as follows:

    '1.    Article 4(1) of Commission Regulation (EEC) No 1633/84 of 8 June 1984laying down detailed rules for applying the variable slaughter premium forsheep and repealing Regulation (EEC) No 2661/80 is invalid inasmuch as,by providing for the charging, by way of the clawback, of an amount whichin most cases is not exactly equal to that of the slaughter premium actuallygranted, the Commission exceeded the powers conferred on it by Article9(3) of Council Regulation (EEC) No 1837/80 of 27 June 1980 on thecommon organization of the market in sheepmeat and goatmeat, asamended by Council Regulation (EEC) No 871/84 of 31 March 1984.Accordingly, Article 4(2) of Regulation No 1633/84 is also invalid in so faras it requires a security to be lodged in order to ensure that the amount duepursuant to Article 4(1) is charged;

    2.    The declaration that Article 4(1) and (2) of Regulation No 1633/84 is invalidmay not be relied upon with effect from a date prior to that of thisjudgment, except by traders or those entitled through them who initiatedproceedings or made an equivalent complaint under the applicable nationallaw before that date;

    3.    The United Kingdom is obliged by Community law to require theproduction of documents relating to operations involving the export ofsheep or sheepmeat subject to payment of the clawback and to imposeeffective penalties on traders who make false statements in suchdocuments.‘

  10. In consequence of that judgment, the Commission adopted on 13 July 1992Regulation (EEC) No 1922/92, amending Regulation No 1633/84 and determiningthe conditions for the reimbursement of the clawback following the judgment of theCourt of Justice in Joined Cases C-38/90 and C-151/90 (OJ 1992 L 195, p. 10,hereinafter 'Regulation No 1922/92‘ or the 'Contested Regulation‘).

  11. Article 1(1) of this regulation, replacing Article 4(1) of Regulation No 1633/84, isworded as follows:

    '1.    For the United Kingdom, the amount of the clawback to be charged ondeparture of the products referred to in Article 1(a) and (c) of Regulation(EEC) No 3013/89 from region 1, in accordance with Article 24(5) of thatregulation, shall be equal to the amount of the premiums fixed inaccordance with Article 3(1) and actually granted for the same productssubject to the said clawback.

        At the request of the operator the amount of the clawback shall be fixedequal to the average amount of the premium fixed for the week ofdeparture of the products and the three previous weeks.

        Operators shall indicate within 28 days of notification by the competentUnited Kingdom authorities on which of the abovementioned options theyintend to proceed. The option chosen shall apply to all clawback for whichthe operator is liable.

        In the case of the first option chosen, the operator shall, at the same time,provide satisfactory [proof] to the competent United Kingdom authorities,of the amount of premium actually granted for the products subject to thesaid clawback. The period for providing proof may be extended by thoseauthorities by a further 60 days.

        In the case of the second option chosen, the competent United Kingdomauthorities shall notify the operators of the amount of clawback calculatedin accordance with the second subparagraph.

        In case of failure to indicate the chosen option within 28 days or failure toprovide, in the case of the first option chosen, the said proof within afurther period of 60 days the security shall be forfeited in full.‘

  12. Article 2, the provision contested in the present action (hereinafter the 'ContestedArticle‘), is worded as follows:

    '1.    Operators or those entitled through them who, prior to the judgment of theCourt of Justice of 10 March 1992 in Joined Cases C-38/90 and C-151/90,initiated proceedings or made an equivalent complaint under the applicablenational law in relation to the method of calculation of the amount of theclawback under Article 4(1) of Regulation (EEC) No 1633/84, are entitledto reimbursement, within the time-limits and according to the procedure laiddown in the relevant national law, of the difference between the clawbackthey paid and the amount of the premium, fixed in accordance with Article3(1) of the aforementioned regulation actually granted for the sameproducts.

        Alternatively, at the request of the operator, reimbursement can be madeof the difference between the clawback actually paid and the averageamount of the premiums fixed for the week of departure of the productsand the three previous weeks.

    2.    Before the 30 November 1992, the persons referred to in paragraph 1 shallgive the competent United Kingdom authorities a specification of:

    • the date at which their claim commences,

    • the amount of the clawback paid from this date until 10 March 1992,

    • and, unless they have made a request under the second subparagraphof paragraph 1, the premium actually granted for the same productssubject to the clawback,

        and proof satisfactory to the competent United Kingdom authorities as faras the above elements are concerned.

    3.    The competent United Kingdom authorities shall, before 31 December1992, inform the Commission of the number of claims for reimbursementmade pursuant to paragraph 1 with a specification of the period to whichthe claim refers and the amount of reimbursement claimed.‘

  13. The applicants in the present case are engaged in the export from the UnitedKingdom of sheepmeat and, in particular, of live sheep. On various dates between1980 and 1992 they paid sums of money to the competent authority in the UnitedKingdom responsible for operating the variable slaughter premium scheme, theIntervention Board for Agricultural Produce (hereinafter the 'Intervention Board‘).These payments were made on foot of invoices for amounts of clawback calculatedby the Intervention Board and based on the applicants' customs declarations of thequantities and categories of sheep exported. Invoices still outstanding at 10 March1992 were not paid by the applicants in view of the Lomas judgment. Theapplicants had initiated legal proceedings prior to 10 March 1992, the date ofdelivery of the Lomas judgment, seeking recovery of the sums which they had paidpursuant to Article 4 of Regulation No 1633/84.

  14. In 1994 a number of further questions were referred to the Court of Justice for apreliminary ruling under Article 177 of the EC Treaty on the validity andinterpretation of Article 4(1) of Regulation No 1633/84, as amended by RegulationNo 1922/92.

  15. In its judgment of 8 February 1996 in Case C-212/94 FMC and Others v InterventionBoard for Agricultural Produce and Another [1996] ECR I-389 (hereinafter the'FMC judgment‘) the Court ruled as follows:

    '1.    Consideration of the questions raised has disclosed no factor of such a kindas to affect the validity either of Article 4(1) of Commission Regulation(EEC) No 1633/84 of 8 June 1984 laying down detailed rules for applyingthe variable slaughter premium for sheep and repealing Regulation (EEC)No 2661/80, as amended by Article 1 of Commission Regulation (EEC) No1922/92 of 13 July 1992 amending Regulation No 1633/84, cited above, anddetermining the conditions for the reimbursement of the clawback followingthe judgment of the Court of Justice in Joined Cases C-38/90 and C-151/90,or of Article 2 of Regulation No 1922/92.

    2.    The requirement of proof laid down in Article 4(1) of Regulation No1633/84, cited above, as amended by Article 1 of Regulation No 1922/92,cited above, and in Article 2 of the latter regulation, is to be interpreted asmeaning that traders are required to supply proof to the satisfaction of thecompetent United Kingdom authorities, in accordance with national law andwithin the period prescribed by Regulation No 1922/92, of the amount ofthe premium actually granted for products subject to clawback, providedthat the applicable national rules do not affect the scope or effectiveness ofCommunity law.

    3.    As regards claims for repayment of clawback unduly paid prior to 10 March1992, paragraph 30 of the judgment in Lomas and Others (Joined Cases C-38/90 and C-151/90) is to be interpreted as meaning that traders or thoseentitled through them who prior to that date initiated proceedings or madean equivalent complaint under the applicable national law may rely on theinvalidity of Article 4(1) and (2) of Regulation No 1633/84, cited above, asfrom the date of its entry into force, subject to the application, within thelimits set by Community law, of any national rules limiting the period priorto the submission of a claim in respect of which repayment of a sum undulypaid may be obtained.

    4.    With regard to matters not governed by Article 2 of Regulation No 1922/92,cited above, national courts called upon to give judgment on a claim forreimbursement of clawback unduly charged must apply their national law,provided the detailed rules laid down therein are not less favourable thanthose governing similar domestic actions and are not so framed as to rendervirtually impossible or excessively difficult the exercise of rights conferredby the Community legal system.‘

    Procedure before the Court and forms of order sought

  16. The case commenced as an application lodged at the Registry of the Court ofJustice on 11 September 1992 registered as Case C-356/92 and the writtenprocedure took place before the Court of Justice. Two other applications werelodged at the Registry of the Court of Justice on 11 September 1992, in CaseC-355/92 and in Case C-357/92; and a fourth application was lodged on 24September 1992, in Case C-370/92.

  17. By order of 3 November 1992 the four cases were joined for the purposes of theprocedure and the judgment.

  18. By order of the President of the Court of Justice of 18 March 1993, the UnitedKingdom was granted leave to intervene in support of the form of order sought bythe Commission.

  19. In consequence of the entry into force on 1 August 1993 of Council Decision93/350/Euratom, ECSC, EEC of 8 June 1993 amending Council Decision88/591/ECSC, EEC, Euratom establishing a Court of First Instance of theEuropean Communities (OJ 1993 L 144, p. 21), the joined cases were transferredto the Court of First Instance by order of the Court of Justice of 27 September1993. They were entered in the registry of the Court of First Instance under thecase numbers T-455/93, T-454/93, T-456/93 and T-457/93 respectively.

  20. By letter dated 6 June 1994, the applicants in Cases T-455/93, T-456/93 andT-457/93 applied for the proceedings to be stayed pending delivery of the judgmentof the Court of Justice on the reference for a preliminary ruling in Case C-212/94(the FMC judgment), and, by order of the Court of First Instance of 25 October1994, the proceedings in the four cases were stayed.

  21. Following the delivery of the FMC judgment on 8 February 1996, the Court, byletter of 26 March 1996, requested the observations of the parties on theresumption of the proceedings.

  22. On 24 April 1996 the Commission submitted its observations to the effect that theapplicants had no interest in continuing the proceedings as their arguments hadbeen dealt with in the FMC judgment. In letters dated 3 and 17 May 1996, theapplicants emphasized their distinct position as exporters of live sheep andsubmitted that the FMC judgment was limited to the interests of operatorsexporting meat.

  23. By letters of 4 September 1996, 8 July 1996 and 27 August 1996 the applicants inCases T-454/93, T-456/93 and T-457/93 indicated to the Court that they wished todiscontinue the proceedings and, by order of the President of the Fourth Chamberof 2 October 1996, these cases were removed from the register.

  24. Upon hearing the report of the Judge-Rapporteur, the Court of First Instancedecided to open the oral procedure without any preparatory inquiry. It decidedhowever to put a series of questions to the Commission which were answered on30 August 1996. The parties presented oral argument at a hearing in open courton 21 November 1996.

  25. The applicants claim that the Court should:

    • declare the application admissible;

    • declare Article 2 of Regulation No 1922/92 void;

    • order the defendant to pay the costs incurred by each of the applicants.



  26. The Commission contends that the Court should:

    • dismiss the application in its entirety; and

    • order the applicants to pay the costs.



  27. The United Kingdom contends that the Court should:

    • dismiss the application in its entirety.

    Substance

  28. As the defendant and the intervener do not deny and it is otherwise clear that theapplicants are directly and individually concerned by the Contested Article withinthe meaning of the fourth paragraph of Article 173 of the EC Treaty, theapplication is accordingly admissible.

    On the admissibility of the plea in law concerning the validity of Article 2 ofRegulation (EEC) No 1922/92 in so far as it applies to trade in live sheep

  29. In the letters referred to at paragraph 22 above and particularly in the course ofthe oral hearing, the applicants sought to distinguish the situation of the live tradefrom that of the sheepmeat trade and argued that the FMC judgment wasconcerned only with the latter. They submitted that the FMC judgment, while itupheld the validity of the Contested Article, was concerned only with thesheepmeat trade in that, under the applicable regulations, the products had to beexported within 21 days of receipt of the premium by the operator, who was usuallythe producer. In those cases the calculation of the clawback by reference to theaverage rate of premium over a four-week period was likely to give a resultrelatively close to the amount of premium actually paid. On the other hand, in thecase of the live trade, the sheep must be placed in quarantine for 30 days prior toexport and the date of placing in quarantine is deemed to be the date of export forthe purpose of satisfying the 21-day rule, although clawback is determined at theactual date of export, by which stage the rate of clawback would be radicallydifferent from the rate of premium actually paid. Moreover, the sheep continue tofatten during the quarantine period, with the result that clawback is applied to agreater weight than that by which the premium was calculated. In support of thisplea in law, the applicants commissioned an expert report which they sought to putin evidence at the hearing.

  30. Both the Commission and the United Kingdom objected to the introduction of theexpert report after the close of the written procedure, on the ground that they hadno opportunity of considering it before the hearing. In any event, they argued, thisplea went beyond the scope of the application as originally defined and wasinadmissible by virtue of Article 48(2) of the Rules of Procedure of the Court ofFirst Instance.

    Findings of the Court

  31. Article 38(1) of the Rules of Procedure of the Court of Justice, which applied whenthe case was commenced and which corresponds precisely to Article 44(1) of theRules of Procedure of the Court of First Instance, provides that an application isto state, inter alia, the subject-matter of the proceedings and a summary of thepleas in law on which it is based. Article 42(2) of the former Rules, whichcorresponds to Article 48(2) of the latter, provides that no new plea in law may beintroduced in the course of the proceedings unless it is based on matters of law orfact which come to light in the course of the procedure.

  32. Given that the regulations in question governing the operation of the variableslaughter premium scheme have at all material times applied both to live trade andto trade in sheepmeat, the distinct position of operators in the former trade musthave been apparent to the applicants from the outset and could have been putforward as the basis of a separate plea in the application. The delivery of thejudgment in the FMC judgment does not constitute a new matter of law or of factwhich would permit the applicants to invoke the exception to the rule contained inArticle 48(2) aforesaid. The Court considers therefore that this additional plea inlaw is inadmissible and for that reason it declined to admit in evidence at thehearing the expert report which the applicants sought to submit.

  33. The Court notes in any event that as the proceedings initiated by the applicantsbefore the national court are still pending, its ruling on this additional plea does notdeprive them of an opportunity of raising it in those proceedings. The nationalcourt remains competent to consider whether the circumstances of the applicantsentitle them to distinguish the ruling in the FMC judgment and, if it considers itnecessary, to refer any relevant question of Community law to the Court of Justiceunder Article 177 of the EC Treaty.

  34. The applicants also raise two other pleas in law in support of their claim forannulment; the first alleges breach of the principles of legal certainty and of theprotection of legitimate expectations; the second alleges breach of the principle ofproportionality.

    The first plea in law alleging breach of the principles of legal certainty and of theprotection of legitimate expectations

    Arguments of the parties

  35. The applicants' first plea is divided into two limbs. The first concerns the rules ofEnglish law applicable to the recovery of sums unlawfully paid to a public authority.The second relates to the conditions for reimbursement laid down by the ContestedArticle.

    • The first limb, relating to the English law of recovery



  36. The applicants maintain that the measure at issue breaches the principles of legalcertainty and of the protection of legitimate expectations because, at the time whenthey initiated their proceedings, they were entitled to expect that recovery of thesums due would take place in accordance with the principles of English law. Theyexplain that, by writs issued in the English High Court prior to delivery of theLomas judgment, they commenced proceedings for the recovery of the clawbackpaid by them. Their primary claim in those proceedings is that they are entitled tosue for recovery of the full amount of the sums paid because there was no lawfulpower on the basis of which the national authorities had any grounds fordemanding payment of the clawback. In the alternative, they claim that, even if theIntervention Board had power to demand payment of the clawback, no lawfuldemand for payment was ever made, since the demands issued were all based, asregards the calculation of the amount due, on an invalid provision, namely Article4 of Regulation No 1633/84. In the further alternative, the applicants claim thatthey are entitled to recover the difference between the clawback charged and theamounts which would have been paid had a lawful system of calculation been inoperation.

  37. According to the applicants, the Court of Justice explicitly recognized in the Lomasjudgment that it is for the national court to determine the right of recovery. Theyconcede that the Court of Justice appeared to be of the view that only thedifference between the clawback and the premium should be recoverable. However,they consider that it did not give a definitive ruling on that point, since at no stagedid it determine the rules by which recovery was to take place. On the contrary, theCourt of Justice appears to have left it to the national courts to determine theapplicable rules, since paragraph 30 refers to those who had initiated proceedings'under the applicable national law‘. Consequently, it is for the national court todetermine whether the right of recovery is merely limited to the difference betweenthe clawback and the premium actually granted or, alternatively, whether theapplicants are prima facie entitled to recover the amounts paid in full, subject toa valid defence by the Intervention Board, such as that of unjust enrichment.

  38. In the applicants' view, it is apparent from the principles set forth by the House ofLords in Woolwich Equitable Building Society v Inland Revenue Commissioners[1993] A.C.70 (hereinafter 'the Woolwich EBS case‘) that they are prima facieentitled to recover in full the clawback paid, subject only to such valid defence asthe defendant might raise. The Contested Article, which replaces the national rulesrelating to recovery, prejudices the applicants' legitimate expectation of recoveryand the principle of legal certainty because it makes it more difficult to pursue theclaims for the sums in question. Whilst, under English law, the amounts paid wererecoverable in full as of right, subject to any adequately substantiated defence beingraised, the Contested Article removes the need for the Intervention Board toprovide a defence and requires the applicants to claim only the difference betweenthe amount paid and the amount which should have been paid.

  39. Finally, the applicants consider that the Commission was not obliged, pursuant toArticle 176 of the EC Treaty, to adopt the provision at issue.

    • The second limb, relating to the conditions for reimbursement laid down by theContested Article



  40. The applicants submit that the method of reimbursement provided for in thesecond subparagraph of paragraph 1 of the Contested Article suffers from the sameflaw as that contained in the method of calculation set out in Article 4(1) ofRegulation No 1633/84, held invalid by the Court of Justice in the Lomas judgment.The two methods closely resemble one another, in that the method in issueprovides for reimbursement to be made of the difference between the clawbackactually paid and the average amount of the premiums fixed for the week ofdeparture of the products and the three previous weeks, while Article 4(1) fixed theclawback as equal to the amount of the premium for the week during whichdeparture from the United Kingdom of the products in question took place.

  41. As regards the alternative method provided for in the first subparagraph ofparagraph 1 of the Contested Article, entitling operators to reimbursement of thedifference between the clawback paid and the premium actually granted for thesame products, the applicants consider that it imposes a burden of proof which itis impossible to discharge, for the simple reason that the premiums in questionwere paid to the farmers, not to the exporters, and therefore the latter cannotestablish with any degree of precision the amount of premiums granted.

        The arguments of the Commission and the United Kingdom

  42. In response to the first limb of the plea, the Commission states that there arenumerous reasons for which the applicants clearly could not have had anylegitimate expectation of recovering the full amount of clawback paid. First of all,the Lomas judgment clearly shows that the applicants were not entitled toreimbursement of the full amount of clawback paid but merely to the differencebetween the premium granted and the amount of clawback paid, assuming that thelatter sum is greater than the former. Secondly, at the time when the applicantsinitiated their proceedings before the High Court, it was not even clear that themethod of calculating the clawback was invalid, since the Court of Justice had notyet delivered the Lomas judgment. Similarly, given that the judgment of the Houseof Lords which is relied on by the applicants was not delivered until 20 July 1992,after the adoption of the Contested Article, the Commission finds it difficult tocomprehend how it could have given rise to any legitimate expectation whateveron the part of the applicants. Clearly, prior to delivery of that judgment, there wasno right to recovery under common law in cases such as the present. Furthermore,the applicants must have foreseen that, if the Court of Justice annulled the methodof calculation laid down by Article 4 of Regulation No 1633/84 in its judgment inLomas, the Commission would have no option but to adopt a provision such as theone at issue in order to comply with the obligation imposed on it by Article 176 ofthe EC Treaty. Finally, the applicants' interpretation of the phrase appearing inparagraph 30 of the Lomas judgment referring to proceedings initiated 'under theapplicable national law‘ is quite wrong.

  43. In response to the second limb of this plea, the Commission states that it shouldnot be impossible for an exporter to ascertain the amount of the premium paid forproducts in respect of which clawback has subsequently been paid. However, itconcedes that this could be difficult and that it is for that reason that the ContestedArticle provides for a second method of reimbursement. That second methodconstitutes an equitable solution for those who have suffered as a result of theillegality of the method laid down by Article 4 of Regulation No 1633/84.

  44. The United Kingdom considers that the first plea in law is founded on a falsepremiss, inasmuch as it assumes that the applicants are entitled to recover all sumspaid by way of clawback, while the Lomas judgment clearly shows that their rightto reimbursement is limited solely to any overpayments made. Clearly, even if theContested Article had never been adopted, the applicants would have had toestablish, in accordance with the national rules relating to the burden of proof, theamount of the overpayments allegedly made by them. In the United Kingdom'sview, nothing in the judgment of the House of Lords which is relied on by theapplicants alters that burden of proof. The only consequence arising from theadoption of the Contested Article is that it creates a second method of recoverywhich is intended to mitigate the difficulties which the applicants might encounterin discharging the burden of proof.

    Findings of the Court

    • The first limb: the English law of recovery



  45. Prior to the Lomas judgment, demands for payment of clawback made were notentirely devoid of lawful authority notwithstanding the declaration of invaliditymade in that judgment in respect of Article 4(1) and (2) of Regulation No 1633/84(see paragraph 9 above).

  46. In declaring Article 4(1) and (2) invalid, the Court of Justice pointed out thatalthough the charging of any sum of money upon exportation of products from oneMember State to another constituted in principle an obstacle to their freemovement within the common market, such a charge might nevertheless be justifiedin an organization of the market which has not yet been completely unified whereit was intended to offset inequalities arising from the fact that that organization hadnot yet been fully achieved, in order to enable products covered by the organizationto circulate on equal terms without thereby artificially distorting competitionbetween producers in different regions (paragraph 15 of the Lomas judgment). Itfollowed that the clawback had to be charged in such a way as to ensure that itneutralized the premium on departure from the region concerned of the productswhich had benefited from that premium, without working to the advantage ofproducers in that region, as would be the case if the amount charged by way of theclawback were lower than that of the premium granted, or affecting theircompetitive position, as would be the case if the clawback were higher than thepremium (paragraph 17 of the Lomas judgment).

  47. Thus, the ruling of the Court of Justice was not directed at the principle of chargingclawback as such but at the fact that Article 4(1) failed to ensure that the methodof calculating the clawback achieved the aim of neutralizing the premium uponexport of the products. This was confirmed by the Court of Justice in the FMCjudgment, where it declared that the charging of clawback was valid in principle(paragraph 28). Failure to recover any clawback whatsoever would have resultedin an even more flagrant distortion of competition between producers and wouldhave been incompatible with the principle upon which the charging of the clawbackwas based. A Member State availing of the facility to pay a variable slaughterpremium was accordingly under a duty in Community law to ensure that it wasadministered in a manner which did not conflict with this principle.

  48. It should also be noted that the duty of the national authority in the UnitedKingdom to demand payment of clawback upon export of products which hadbenefited from a premium derived not from Article 4 of Regulation No 1633/84 butfrom Article 9(3) of Regulation No 1837/80, later amended by Regulation No871/84, and subsequently from Article 24(5) of Regulation No 3013/89, whichindicated that an amount equivalent to the premium would be charged when thoseproducts left the territory of the Member State concerned. Despite the Lomasjudgment, a Member State which had availed of the power to pay a variableslaughter premium under Article 9(1) of Regulation No 1837/80, as subsequentlyamended, was under a duty to ensure that an amount equivalent to the premiumpaid was charged in respect of products which left its territory. It follows thatdemands for clawback made by a national authority on the basis of Article 4 ofRegulation No 1633/84 were not wholly devoid of lawful authority notwithstandingthe subsequent declaration of invalidity of paragraphs 1 and 2 of that article.

  49. In addition, premiums paid to operators prior to the date of the Lomas judgmentwere received by them in full knowledge of the conditions laid down for such ascheme under Community law. It must be assumed that the operators were willingto accept the fact that an amount equivalent to the premium received would becharged upon the products in the event of export. Such a repayment obligationformed an integral part of the operation of the variable premium scheme inCommunity law. It follows that there could, in fact, have been no legitimateexpectation on the part of any operator who had received a premium for certainproducts that he had an entitlement to retain the benefit of that premium in theevent of his exporting those products. Indeed, the applicants acknowledge in theirpleadings that the amounts demanded from them by way of clawback prior to thedate of the Lomas judgment were paid by them in the belief that they were in lawobliged to do so. In other words, their expectation at the time when they purchasedthe products from operators who had benefited from payment of the premium wasthat the premium would be clawed back if the products were exported.

  50. In so far as the applicants rely upon principles of English law in support of theirplea, it must be pointed out that the operation of the scheme under English law isitself derived from the measures laid down for the purpose in Community law. Theapplicants could not have expected to avoid paying the clawback in view of thefundamental requirement of the operation of the variable premium scheme thatartificial distortion of competition between producers in different regions beeliminated. It follows that, contrary to the applicants' assertion, the determinationof claims for reimbursement in accordance with national law following the Lomasjudgment could not result in a situation in which operators would be reimbursedthe full amount of clawback charged and not merely the difference between theexcess clawback and the amount of the premium actually paid.

  51. While the interpretation and application of national law is exclusively a matter forthe national courts, a party invoking the principle of legitimate expectation beforethis Court on the basis of a particular entitlement under national law bears theonus of proving with sufficient certainty the existence of that entitlement as amatter of fact. Accordingly, if the right to recover clawback unlawfully chargedprior to 10 March 1992 must be determined by reference to English law, as theapplicants contend, the Court does not consider that it has been established thatEnglish law did in fact give rise as from that date to a legitimate expectation of thekind asserted by the applicants.

  52. It is evident that the decision of the House of Lords in the Woolwich EBS case (seeparagraph 38 above), when delivered on 20 July 1992, represented an importantchange in the existing law in relation to claims for recovery of sums paid to a publicauthority under protest on foot of a demand later found to be ultra vires. This isclear from a reading of the speeches of all of their Lordships including, forexample, Lord Browne-Wilkinson who, speaking as one of the majority in theHouse, said: 'My Lords, in this case your Lordships are all agreed that, as the lawat present stands, tax paid under protest in response to an ultra vires demand is notrecoverable at common law. .... The issue which divides your Lordships is whetherthis House should now reinterpret the principles lying behind the authorities so asto give a right of recovery in such circumstances. On that issue, I agree with mynoble and learned friend Lord Goff that, for the reasons he gives, it is appropriateto do so‘.

  53. Finally, the Court notes that in its consideration of the factors giving rise to a rightof recovery and, in particular, the possibility that the unjust enrichment of aclaimant might be a ground for disallowing recovery of sums unduly charged by andpaid to a public authority, the House of Lords itself took note of the judgment ofthe Court of Justice in Case 199/82 Amministrazione delle Finanze dello Stato v SanGiorgio [1983] ECR 3595. In that judgment the Court of Justice held thatCommunity law did not prevent a national legal system from disallowing repaymentof charges where repayment would entail unjust enrichment of the recipient, evenwhere the charges in question had been exacted by a national authority in breachof Community law. As the applicants have themselves acknowledged in theirpleadings, it remains for the national court hearing their pending claims todetermine whether considerations of unjust enrichment would preclude them fromrecovering the sums claimed in whole or in part.

  54. In the light of the foregoing considerations, the Court concludes that the applicantshave not established the existence of any legitimate expectation on their part, eitheras a matter of fact or in consequence of national law, to full recovery of clawbackpaid prior to the date of the Lomas judgment. Nor have they established anybreach of the principle of legal certainty (which was also taken into account by theCourt of Justice in the FMC judgment; see paragraph 26 quoting Question 1 fromthe national court).

  55. The first limb of this plea in law must therefore be rejected.

    • The second limb, relating to the conditions of reimbursement laid down by theContested Article



  56. It is notable that paragraph 1 of the Contested Article gives precise effect to thedeclaration of invalidity in the Lomas judgment by confirming the entitlement ofoperators to reimbursement of the difference between the clawback they paid andthe amount of the premium actually granted for the same products. This methodof calculation was upheld by the Court of Justice in the FMC judgment (paragraphs34 to 36 and 45).

  57. The alternative method of calculating the amount to be reimbursed is based on theaverage amount of premiums over a period of four weeks. This alternative wasmade available because of the difficulties which at least some operators hadexperienced in providing proof as to the premiums actually paid to the farmersfrom whom they had purchased the products in question. The fact that such amethod has been provided does not, in the Court's judgment, invalidate a rule laiddown in implementation of Article 9(3) of Regulation No 1837/80 and Article 24(5)of Regulation No 3013/89 and which, indeed, has been upheld by the Court ofJustice in the FMC judgment (paragraphs 37 to 45).

  58. The applicants' first plea must, accordingly, be rejected.

    The second plea, alleging breach of the principle of proportionality

    Arguments of the parties

  59. The applicants consider that Article 2 of Regulation No 1922/92 breaches theprinciple of proportionality, in that it imposes, for the purposes of obtaining thereimbursement to which they are entitled, a burden of proof which it is impossibleto discharge. Its effect is also to deny them an effective remedy, to which they areentitled under Community law (see the judgments of the Court of Justice in Case199/82 Amministrazione delle Finanze dello Stato v San Giorgio, and Joined CasesC-6/90 and C-9/90 Francovich and Others v Italy [1991] ECR I-5357), andconstitutes a breach by the Commission of the duty of cooperation incumbent onit by virtue of Article 5 of the EC Treaty.

  60. The Commission and the United Kingdom state in reply that the methods ofreimbursement laid down by the Contested Article are consistent with its objective,which is to ensure the application of the principle of clawback as defined in Article9(3) of Regulation No 1837/80 and to give full effect to the Lomas judgment, andare also necessary for the attainment of that objective.

  61. Moreover, as regards the principle of proportionality, the Commission maintainsthat to order reimbursement of the full amount of clawback paid by the applicantswould be contrary to that principle. Such a measure would have the effect ofdeducting from Community funds, for the benefit of the applicants, substantial sumsto which the latter have no legal entitlement and would give them an unjustifiedadvantage over their competitors.

  62. The United Kingdom observes that the measure at issue is consistent with theLomas judgment and cannot, therefore, constitute a breach of the principle ofproportionality. In its view, it is entirely normal for a person claimingreimbursement of sums unduly paid to be required to establish the existence andextent of the overpayment.

    Findings of the Court

  63. It should be borne in mind that the Contested Article applies to operators or thoseclaiming through them who had already, prior to 10 March 1992, initiatedappropriate proceedings at national level seeking to recover clawback paid priorto that date. By initiating such proceedings, those operators had already undertakento discharge the burden of proof incumbent on any party seeking to recover moneydue in a civil claim, namely that of establishing to the requisite standard of proofunder national law the precise amount of the overpayment which it claimed to havemade. The Contested Article does not alter that position but merely confirms theentitlement of such operators to reimbursement of the difference between theclawback they paid and the amount of the premium actually granted for theproducts in question. It leaves to the relevant rules of national procedure both thetime-limits involved in the bringing of such claims, subject to certain provisions setout in the Contested Article, and the standard of proof required to establish theamount of that difference in any given case (see, in this regard, paragraphs 46 to77 of the FMC judgment).

  64. The difficulties of proof adverted to by the applicants do not derive from theprovisions of the Contested Article as such, but result from the manner in whichthey had conducted their business at the relevant time and especially from the factthat farmers from whom sheep were purchased were not asked to provideappropriate documentation concerning any premiums paid. As the Court of Justiceheld in the FMC judgment, it was not manifestly inappropriate for exporters tobear the burden of proof, and both Article 9(3) of Regulation No 1837/80 andArticle 24(5) of Regulation No 3013/89 had clearly laid down that the amount ofthe clawback was to be equivalent to the amount of the premium. Thus a prudenttrader, knowing that he would be liable to pay the clawback upon export of theproducts, should have taken the necessary steps to obtain the evidence which wouldbe required in due course to establish the equivalence of the amounts in question(paragraph 36).

  65. The applicants' second plea must therefore be rejected.

  66. It follows that the application must be dismissed.

    Costs

  67. Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to beordered to pay the costs if they have been applied for in the successful party'spleadings. Since the applicants have been unsuccessful and the Commission hasapplied for costs, the applicants must be ordered to pay the costs. The UnitedKingdom, which intervened in support of the Commission, must bear its own costs,in accordance with Article 87(4) of those Rules.

    On those grounds,

    THE COURT OF FIRST INSTANCE (Fourth Chamber)

    hereby:

    1. Dismisses the application;

    2. Orders the applicants jointly and severally to pay the costs of theCommission;

    3. Orders the United Kingdom of Great Britain and Northern Ireland to bearits own costs.



LenaertsLindh
Cooke

Delivered in open court in Luxembourg on 9 July 1997.

H. Jung

K. Lenaerts

Registrar

President

1: Language of the case: English.