Judicial review — Milk quota — Whether Dairy Produce Quotas (Amendment) (No 2) Regulations 1990 valid — Whether regulations flawed by reason of illegality in not giving effect to European Commission’s approval in regard to new entrants to milk production
quota system came into effect in the United Kingdom on April 1 1984 in
consequence of EEC Regulations 856/84 and 857/84 — In the UK a producer was
entitled to a ‘primary quota’ in proportion to the quantity of milk delivered
by him during 1983 — The applicant, Mr Lomax, received both a primary quota and
a development quota — In EEC Regulation 3880/89 the European Commission
increased the amount of quota available to mitigate hardship in specified circumstances
and sought from member states national measures for implementation of the
scheme —- The Minister of Agriculture forwarded to the EEC measures for the
benefit of four categories of persons including a category for new entrants —
Following discussions between the minister and the EEC, the commission gave
approval to modified proposals of the ministry — Following that approval the
ministry decided to allocate 22.5m litres of quota originally earmarked for a
new entrants scheme to family-type farms, one of the original four categories
put before the EEC for approval — The Dairy Produce Quotas (Amendment) (No 2)
Regulations 1990 contain nothing in regard to new entrants and the 22.5m litres
have otherwise been allocated — The applicant contended that the regulations
were flawed by reason of illegality in that they did not give effect to the
commission’s approval in regard to new entrants
full — The approval was of measures for implementation which relate to
categories selected by the member state — No perceptible purpose would be
served by insisting on implementation in full — The allocation or reallocation
as between categories is a matter for a member state
No cases are
referred to in this report.
This was an
application by Derek Lomax, the tenant of Hollyoven Beck Farm, Great Eccleston,
Preston, Lancashire, seeking to impugn the validity of the Dairy Produce Quotas
(Amendment) (No 2) Regulations 1990 made by the respondent, the Minister of
Agriculture, Fisheries and Food.
Richard Gordon
(instructed by Cartmell Shepherd, of Carlisle) appeared for the applicant;
Stephen Richards (instructed by the Solicitor to the Ministry of Agriculture,
Fisheries and Food) represented the respondent.
Giving
judgment, MANN LJ said: Roch J is unable to be present today but has authorised
me to say that he agrees with the judgment which I am about to deliver and with
the proposal which I make at the end of it.
There is
before the court an application for judicial review for which leave to move was
given by Otton J on July 24 1990. The applicant is Derek Lomax, who is a dairy
farmer and the tenant of Hollyoven Beck Farm, Great Eccleston, Preston,
Lancashire. Mr Lomax sells milk wholesale to the Milk Marketing Board and his
operation commenced under an agricultural and horticultural development scheme
which covered a four-year period from May 12 1983. The respondent is the
Minister of Agriculture, Fisheries and Food (hereafter ‘the minister’). Mr
Lomax impugns the validity of the Dairy Produce Quotas (Amendment)(No 2)
Regulations 1990 (SI 1990 No 664 and hereafter ‘the regulations’). The
regulations were made jointly by the minister and the Secretary of State for
Scotland on March 19 1990 in the exercise of powers conferred by section 2(2)
of the European Communities Act 1972. They were laid before Parliament on March
20 and came into force the next day.
The
regulations are about the grant of additional dairy produce quota to certain
producers for wholesale. The quota system came into effect in the United
Kingdom on April 1 1984. This was in consequence of the adoption by the council
of ministers of Council Regulations (EEC) Nos 856/84 and 857/84, which
established that system. Under it each member state was allocated a total
reference quantity of milk, which was to be apportioned among its producers. A
producer who produces more than his own annual reference quantity has to pay a
levy in respect of the excess. The quantities or
2, 3 and 4 of Regulation (EEC) No 857/84. The application in national law was,
and is, effected by a number of statutory instruments with the generic title of
Dairy Produce Quotas Regulations. The national measures have to comply with the
requirements of community law and, subject to the present dispute, we were not
informed that they do not. In general terms a UK producer was entitled to quota
in proportion to the quantity of milk delivered by him during 1983. This was
called ‘primary quota’. Producers with expansion plans could receive what was
called ‘development quota’ (in European terms, a ‘special reference quantity’)
in response to what are called a development claim or an exceptional hardship
claim. The UK’s total annual reference quantity was insufficient to satisfy all
the claimants as well as the established producers and accordingly primary
quota allocations had to be set at a percentage of the base-year production in
order to allow for the claims. Notwithstanding this adjustment, established
development and hardship claims themselves had to be subject to a percentage
reduction. I should add that the UK was enabled under article 3 of Regulation
(EEC) No 857/84 to grant a special reference quantity to ‘young farmers setting
up after 31st December 1980’, but this power was not and has not been
exercised. At one stage I thought there might have been some complaint that it
should have been, but no such complaint was, or, in my view, could have been,
pursued in these proceedings.
Mr Lomax
received both a primary quota, which was not large, for he had little base-year
production, and a development quota in response to a claim based on his AHDS.
His primary quota was set at the percentage of his computed base-year
production, which was applied to all producers, and his development quota was
awarded after percentage deductions from the claim, which were applied to all
claimants. I find it unnecessary to discuss the figures but Mr Lomax thinks
that he has been disadvantaged by a system which does not enable him to have a
quota properly reflecting the value of his investment. He has displayed a
lively interest in the alterations to the system which I shall describe and
indeed claims some responsibility for persuading the European Commission to
make those changes.
The European
Commission perceived that certain producers may have sustained hardship under
the system of Regulation (EEC) No 857/84, and in order to mitigate that
hardship they proposed that each member state should have its total reference
quantity increased by 1% and that there might be general rules determining how
allocations of that amount to individuals should be made by the member states.
The proposals were considered by the Council of Ministers, who on December 11
1989 adopted Council Regulation (EEC) No 3880/89. That regulation was inserted
into the 1984 regulations as article 3b in these terms:
1. For the
purposes of determining the reference quantities referred to in Article 2, the
Member State may grant additional or special reference quantities within a
limit of 1% of the guaranteed total quantity fixed in the second subparagraph
of Article 5c(3) of Regulation (EEC) No 804/68:
— to producers as referred to in Articles 3
and 4(1)(b),
— to producers determined in particular on the
basis of one or more of the following criteria:
— producers who are new entrants,
— producers whose individual reference
quantities are less than or equal to 60,000 kilograms,
— the siting of milk production in one of the
zones as defined in Article 3(3)(4) and (5) of Directive 75/268/EEC, as last
amended by Regulation (EEC) No 797/85,
— or to all the producers of the Member State
if, on its territory, the implementation of Articles 3 and 4 has been carried
out on quantities coming from the national reserve.
Member States
shall forward to the Commission, for prior approval, their draft national
measures for the implementation of the first subparagraph. The Commission shall
decide on these measures taking into account the criteria mentioned in the
first subparagraph. These criteria may be adapted and/or supplemented, if
justified by the diversity in national situations.
The UK was
under no obligation to exercise the power conferred by article 3b, but the
minister decided that it should be exercised. On February 12 1990 he wrote to
Mr Ray MacSharry, who is the European Commissioner responsible for agriculture,
seeking the commission’s approval ‘for the method I propose to adopt for
distributing . . . the additional 1% of milk quota’. The method was for the
benefit of four categories of person. The first was that of producers who had
been given development awards in accordance with article 3 of Regulation (EEC)
No 857/84 together with some producers in Northern Ireland who had received
awards on the grounds of exceptional hardship (paras 2 to 4 of the letter). The
second was that of the smaller producers who occupy a family-type holding and
the promotion of this category required an adaptation of one of the criteria in
article 3b which defines small producers in terms which have no relevance to
the UK (para 5). The third category was that of producers in remote parts of
less favoured areas (para 6). The fourth category has become important and was
described in para 7 as ‘the category of new entrants’. After describing the
difficulties confronted by ‘those wishing to enter dairying’ the minister
wrote:
I am
convinced that now is the time to take action on this, albeit on a modest
scale, and I propose to use 22.5 million litres of quota to make 150,000 litres
available to each of 150 new entrants. These would be people who are not
already milk producers. If you take the view that they would not be covered by
the wording of Article 3b of Regulation 857/84, which refers to ‘producers who
are new entrants’, then I would suggest my proposal should be regarded as an
adaptation to the criteria mentioned fully justified by the nature of our
situation in the UK as provided for in the regulation. Alternatively, my
approach could be regarded as a supplementary category or criterion as also
provided for in the regulation.
I doubt
whether the proposal could properly be described as an ‘adaptation to the
criteria’ because the criteria are criteria in regard to ‘producers’, which
those wishing to enter dairying by hypothesis are not. However, the minister
went on in para 8 to explain his particular wish that the quotas for would-be
dairymen should be issued on loan, free of charge and for a period of perhaps
six years. The minister undertook that detailed national measures in draft
concerning the distribution of the 1% would be sent so soon as they were
available.
The minister’s
proposals were then discussed between his own and the commissioner’s officials.
They resulted in a ministry letter dated February 23 1990 and telefaxed to
Brussels on that day. After dealing with points in regard to developers and the
smaller producers, the author wrote:
6. I come now
to the question of new entrants (paragraphs 7 and 8 of Mr Gummer’s letter). My
authorities have not yet decided how they wish to proceed in this matter. I
cannot rule out the possibility that Mr Gummer may wish to make a further
approach to Mr MacSharry. Whether or not he does so — and regardless of the
outcome — it will take a little time for us to work out the details of a new
entrants scheme. This part of our proposals will not therefore be covered by
the draft national measures which we shall be submitting. We envisage seeking a
further Commission Decision in respect of our proposals on new entrants at a
later date, and I understand that this is acceptable to the Commission.
7. There
remains to be settled the treatment for the quota year 1989/90 of the 22.5
million litres of quota which we intend should eventually be issued to new
entrants. I should be grateful for your urgent advice as to whether it is
permissible for us to issue this to the generality of producers — ie
across-the-board — this year and then withdraw it from them next year for issue
to new entrants.
Para 6 was
written for an informed audience and may have nuances which escape other
readers. That said, it does seem clear that the draft measures which the
minister had promised would not contain proposals concerning ‘new entrants’ and
that another commission decision would be sought in respect of them. If my
doubt as to adaptation is well founded, then the appropriate course would
perhaps have been to be the seeking of amending regulations from the Council of
Ministers. However that may be, paras 7 and 8 of the minister’s letter of February
12 were, as Mr Stephen Richards, who appeared for the minister, put it,
‘effectively withdrawn’. Para 7 of the letter of February 23 deals with the
consequence of the withdrawal and suggests a course which in its terms is quite
unsustainable, for article 3b does not permit an issue of any of the 1% ‘across
the board’.
There were
further discussions between officials and they resulted in a ministry letter
dated February 28 and telefaxed to Brussels on the same day. The letter dealt
with the definition of the category of smaller producers and then continued:
4. Turning to
paragraph 6 of my letter I confirm that we still wish to allocate quota to new
entrants and I understand that the Commission Decision will make appropriate
provision. The precise modalities in respect of new entrants remain to be
settled. Indeed, as I said in my previous letter, Mr Gummer may wish to make a
further approach to Mr MacSharry on the question of loaning quota but this does
not affect the definition of categories of eligible producer under the terms of
Article 3b of Regulation 857/84, on which we have now reached agreement.
5. On the
question posed in paragraph 7 of my previous letter I understand that this is
not a course which the Commission could agree for any Member State.
That the
proposal in para 7 of the previous letter had been given its quietus is
unsurprising, but para 4 of this letter has an enigmatic quality for the reader
who was not party to the discussions. In the light of the previous letters,
what is the appropriate provision which is to be made? I think the answer is that the ministry by
now wished to have producers who are ‘new entrants’ as an unadapted category in
respect of which ‘modalities . . . remain to be settled’ but for which 22.5m
litres would be available.
The
commission’s decision on the UK proposals was given on March 12 1990. The
decision had a recital, which included the following:
Whereas the
draft measures notified by the United Kingdom on 12 February 1990, as amended
by telefax no 18 of 23 February 1990 and telefax no 38 of 28 February 1990
should be approved.
The decision
itself was in two parts. The first dealt with the first three categories in the
notification of March 12 and provided for the second of those in terms of an
adaptation of an article 3b category. The second part was effectively in these
terms:
The draft
national provisions for implementation in the United Kingdom of Article 3b of
Regulation (EEC) No 857/84, which provide . . . for the assignment of a special
reference quantity to producers newly installed are hereby approved.
We were told
that ‘producers newly installed’ has the same meaning as ‘producers who are new
entrants’. There is thus no purported adaptation of an article 3b category and
the commission must have understood the amending telefax of February 28 as
having the meaning which suggested itself to me.
I think that
on an analysis of the documents there is no doubt as to what was ultimately
proposed and approved. I have taken the matter at length, first, because Mr
Lomax ought to know what occurred and, second, because during the hearing I was
perplexed by Mr Richards’ varying submissions as to what was from time to time
proposed and then ultimately approved. His submissions on the second day of the
hearing were uncharacteristically inconsistent with those on the first. Thus,
on the first day he had submitted that the approval in regard to new entrants
was ‘unnecessary’, while on the second day he submitted that the approval was
of a category determined on an adapted criteria such as was proposed on March
12. Neither submission is tenable. Together with those submissions which he
variously advanced in regard to para 7 of the letter of February 23, they may
betray an unfortunate confusion in the minds of those instructing Mr Richards
as to what they or their predecessors were about in February and March 1990.
After the
commission’s approval had been obtained, the minister had to consider what to
do in regard to the approved category of new entrants and for which the 22.5m
litres remained earmarked. What he decided was explained in a written reply to
a parliamentary question on March 20, which was the day on which the
regulations were laid before Parliament. The minister said:
The proposals
which we originally put to the Commission contained provision for the loan of
quota to new entrants. The Commission’s view, however, is that no satisfactory
basis exists in Community law for the issue of quota to new entrants on
temporary and conditional terms. We have considered whether quota should
instead be granted outright to new entrants but have decided against this
course. In reaching this conclusion we took into account the strong opposition
of the National Farmers Union to the gift of quota to new entrants. We have
therefore decided to allocate the 22.5 million litres of quota originally
earmarked for a new entrants scheme to family-type farms, who will now receive
an increase of 4% of their existing wholesale quota, and to holders of
development awards, which will be made up to approximately 80% of the original
figure after abatement to take account of subsequent across-the-board quota
cutbacks.
The
regulations contain nothing in regard to new entrants and the 22.5m litres has
in fact been allocated additionally to the approved categories of development
award holders and occupiers of family-type holdings. We were told that the
commission, who presumably know of what has been done, have raised no objection
to the regulations or to the grants of additional quota in fact made.
Mr Richard
Gordon, who appeared for Mr Lomax, made it his primary submission that the
regulations were flawed by reason of illegality in that they did not give
effect to the commission’s approval in regard to new entrants. It is Mr Lomax’s
case that he is a ‘new entrant’ within the true meaning of that term as
employed in the approval and was therefore a potential beneficiary of it. There
is a dispute as to whether he is a ‘new entrant’, but it is a dispute which
need not be resolved in these proceedings.
The inserted
article 3b of Regulation (EEC) No 857/84 gives a power to a member state to
grant quota to specified categories of producer. Mr Gordon accepted that there
is no obligation to exercise the power either at all or in regard to all or any
of the categories. However, a proposal to exercise must be submitted to the
commission for their prior approval, and it may be that a failure to obtain
that approval renders unlawful any implementation of the national measure. I
express no opinion on that point, which is a different one from that which we
have to decide, which is whether the member state must implement the
approved proposal in full. I entertain no doubt that they do not. First, there
is no express obligation that they should. Second, the argument to the contrary
presupposes that the approval is of an indivisible package. It is not. It is an
approval of measures for implementation which relate to categories selected by
the member state and those categories are not interdependent. Third, no
perceptible purpose would be served by insisting on implementation in full
because the commission’s concern is that additional reference quantities within
the 1% limit are granted only to approved categories of producer. I do not see
that they have any concern that the quantities should be granted to all
approved categories of producer. I conclude that an approval does not create an
obligation towards a particular category of producer which hitherto was absent.
I, accordingly, reject Mr Gordon’s argument that the regulations were flawed by
reason of illegality.
There was an
argument as to whether the reallocation of the 22.5m litres required the
commission’s approval. If it did, none was given. I am of the opinion that no
approval was required. This would necessarily follow from the freedom of a
member state not to grant to an approved category of producer. If the
commission had to approve a reallocation, then by withholding it they would in
effect either destroy the freedom or diminish the 1%. The allocation or
reallocation of the 1% as between categories is, in my judgment, a matter for
the member state and it is of course to be observed that the approval of March
12 is silent upon quantities. I should add that, if I were wrong in my view,
then, as Mr Richards pointed out, the absence of approval would not affect the
validity of the regulations, for they do not deal with the amount available for
each category but provide formulae for the distribution by grant of whatever
quantity is allocated by the minister for each category of producer. Any
assault would thus have to be on what he actually did for the greater benefit
of two of the approved categories. Such an assault is quite outside the present
application.
I would
dismiss this application for judicial review. As I have indicated, Roch J has
expressed his agreement. The application is accordingly dismissed.
No order for
costs. Legal aid taxation of applicant’s costs.
