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No more CMO subsidies for vegetable and fruit processing

No more CMO subsidies for vegetable and fruit processing

In a judgement dated 30 May 2013, the General Court of the European Union (the Court) declared a provision from Regulation 1580/2007 and two provisions from article 50(3) of Regulation 543/2011 to be void. On the one hand, this means that the value of processing activities may no longer be included in the calculation of the value of the production sold and, on the other, that activities related to vegetable and fruit processing may not be eligible for CMO subsidies.

The court case and the Court’s opinion
The case was brought before the Court by two vegetable and fruit processors. They objected to the fact that based on the provisions of the Implementing Regulations, producer organisations could receive CMO subsidies for processing vegetables and fruit while processors were not eligible for these subsidies.

The Court established that Regulation 1234/2007 (the comprehensive CMO Regulation) did not provide for the possibility of subsidising processing activities carried out by producer organisations. Furthermore, in the Court’s view, honouring the principle of equal treatment meant that no distinction could be made between processors who are members of producer organisations and processors who are not. In the light of this, the Court found that the Commission cannot grant aid that covers the costs of processing activities exclusively to producer organisations via Implementing Regulations. This is all the more the case since this would result in processors who are not members of a producer organisation being disadvantaged with respect to producer organisations to the extent these organisations perform processing activities.

That is why the Commission could not stipulate in Regulation 1580/2007 and article 50(3) of Regulation 543/2011 that producer organisations could be eligible for CMO subsidies for processing activities. Consequently article 52(2a), second paragraph of Regulation 1580/2007, article 50(3) of Regulation 543/2011 and article 60(7) of Regulation 543/2011 were declared void.

Consequences of declaring the provisions void
The Commission asked the Court to stipulate that the implementing acts of the provision declared void would nonetheless remain valid. The Court partially complied with this request.

Article 52(2a), second paragraph of Regulation 1580/2007 and article 50(3) of Regulation 543/2011 both pertain to the calculation of the value of the production sold. This value is important in calculating the maximum CMO subsidy that a producer organisation can receive. The value of the sold production calculated in accordance with article 52(2a), second paragraph of Regulation 1580/2007 and article 50(3) of Regulation 543/2011 will remain effective. This effect is limited in time however and exclusively relates to payments made to the producer organisations between 7 August 2010 (the date that Regulation 687/2010 took effect) and 30 May 2013 (the date of this judgement). There are practical concerns behind regarding the effectiveness of these payments as definitive. The Court wanted to prevent financial transactions involving the Commission, the national payment bodies (in the Netherlands, the Product Board for Horticulture) and the producer organisations from becoming, partially, the subject of disagreement because in that case all the aid paid to the producer organisations on the basis of the contested provisions would have to be recalculated in order to determine what part of that aid corresponds to the processing activities for every product involved. The Court believed that this would result in significant technical difficulties.

In relation to the actions for which CMO subsidy was granted on grounds of article 60(7) of Regulation 543/2011, the Court is of the opinion that the consequences are not definitive however. Article 60(7) of Regulation 543/2011 relates to CMO subsidies for investments and actions related to processing activities. Since, according to the Court, the particular funding is by its very nature fully affected by the unlawfulness ascertained, the CMO subsidies for investments or actions relating to vegetable and fruit processing granted in the past are also up for discussion.

Conclusion
We will have to wait and see whether the Commission will file an appeal against the judgement. If the judgement is upheld, the producer organisations and their members will be whistling in the wind. They thought they would be able to claim CMO aid for processing activities without a hitch. Despite the text of Regulations 1580/2007 and 543/2011, it emerges that no such entitlement exists. Yet another example which shows that CMO subsidies are slowly becoming a kind of Russian roulette. What can be relied on if even the provisions of a European Regulation can so readily be declared void? Whatever the case, it seems as if we have not yet heard the last of this.

The question is also what the Product Board for Horticulture will do at this point. Will the CMO subsidies be recovered already or will a possible appeal be awaited? In any event, producer organisations would be wise to make provisions for CMO subsidies received in the past for processing activities.

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