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New statutory regulation of agricultural support schemes is not unconstitutional

Press Release No. 109/2008 of 23 December 2008

Order of 14 October 2008
1 BvF 4/05

In June 2003, the agriculture ministers of the European Union decided to adopt a fundamental reform of the Common Agricultural Policy. The reform is inter alia designed to reduce surplus agricultural production, which had been increased in the past by subsidies that had been tied to production quantities. In their production, farmers are now supposed to orientate more strongly towards the market than in the past. According to the new support scheme, income support is supposed to be orientated more strongly towards the use and maintenance of land. Pursuant to Council Regulation No. 1782/2003 (hereinafter: the Regulation) of September 2003, which goes back to the resolutions made at the agriculture ministers’ conference, the new income support for farms is paid in the shape of what is known as a single farm payment. The volume of single farm payments in the Member States is limited by the national ceilings set out in the Regulation. For the implementation of the single payment scheme in the Member States, the Regulation provides, on the one hand, a standard scheme for the allocation of the aid which ties the amount of the future single farm payment to the support paid in a reference period (which covers the years 2000 to 2002). As an alternative, the Regulation provides the Member States with the possibility of opting for what is known as “regional implementation” while at the same time detaching the grant of the single farm payments more strongly from the support paid in the reference period. If a Member State decided to opt for regional implementation, it had to define the regions and to subdivide the national ceiling between the regions, both according to objective criteria. The Single Payment Implementation Act (Betriebsprämiendurchführungsgesetz, hereinafter: the Act), which entered into force in Germany in August 2004, serves to implement the Regulation. The basis of the Act is not the standard scheme of implementation but a regional scheme. In a first step, the federal territory is divided into many regions; with the exception of the city states, the division follows the borders of the Länder (states). In a second step, the national payment volume is allocated to the regions according to a specific formula. On the one hand, the allocation formula contains a historical element by partly taking former support as a starting point (65 per cent); on the other hand, it takes the extent of the eligible area in the respective region into account (35 per cent). In a third step, the Act lays down a nationwide mode for the allocation of the respective payment volume within the different regions, which differentiates between the starting phase (until 2008), the transitional period from 2009 to 2013 („adaptation path“) and the subsequent period of time. With the end of the transitional period, the scheme of a combination of support components whose point of reference is the individual farm and support components which are area-related is replaced by a single farm payment that is uniform within the regions, and which is purely area-related. However, as regards the allocation of the national payment volume between the regions, the support component that takes the past as its point of reference is taken into account even after the transitional period. The application of this calculation method results in different amounts of support for farmers in different regions even after the end of the transitional period. According to current official estimates, a farmer from the Saarland will, for instance, receive a uniform regional amount of EUR 258 per hectare per year, whereas a farmer from North Rhine-Westphalia will receive EUR 359 per hectare. In proceedings for the review of a statute, the government of the Saarland has applied for a declaration of unconstitutionality of the Act.

The First Senate of the Federal Constitutional Court has reached the result that the Act does not violate Article 3 of the Basic Law (GrundgesetzGG). The legislature, when modifying agricultural market support, did not violate constitutional law by basically following the borders of the Länder for the division, demanded by Community law, of the federal territory into regions. To avoid structural imbalances, the legislature can take support elements into account that take the past as their point of reference even if this results in different area-related support amounts (payments per hectare) in different regions of Germany.

The decision is essentially based on the following considerations:

The unequal treatment under the law which can be ascertained in the case at hand between the groups of farmers resident in the different regions due to different payment amounts, and which will continue to exist even after the transitional period, is justified under constitutional law. In a federal law, a differentiation according to regions is not in principle ruled out. For special combinations of circumstances, a differentiation according to regional characteristics can be made if sufficient factual reasons for justifying the shape of a region and above all for the different treatment of this particular region can be found and if the legislature has given it a uniform regulatory concept as a basis.

The regulations of the Act are also based on sufficiently pertinent reasons which are justifiable according to their nature and their weight. This applies to the statutory transitional period from the combined scheme to the area scheme as well as to the final area scheme, which is a purely regional one. The objectives of decoupling production as far as possible from the grant of support on the one hand and of protecting vested rights on the other hand, which are prescribed by the Regulation, have guided the national legislature when lending concrete shape to the Regulation and implementing it. These objectives are constitutionally legitimate because the legislature had to take a conflict of objectives into account which is already contained in Community law; this conflict of objectives consists in decoupling the single farm payment from production, thereby departing from the previous support scheme, whilst on the other hand avoiding excessive imbalances which would be the result of an abrupt system change, and which would be to the detriment of the farmers and of the common good.

Finally, it cannot be established that the regulation is unfit for the particular purpose because it would, in its concrete shape, result in an unacceptable impairment of those farmers who due to the region in which they live, would profit less from the protection of vested rights than farmers in other regions, and who receive lower single payments even though the other framework conditions are comparable. The regional division performed by the legislature is justified for reasons of administrative practicability. It is also appropriate that the city states Berlin, Bremen and Hamburg are incorporated into adjacent territorial states because the city states show structural particularities due to their small size and low number of farms.

As concerns its concrete organisation, the mode of the allocation of the national payment volume to the regions keeps within the legislature’s latitude of drafting because it cannot be established that the legislature has taken incorrect or incomplete facts as a starting point for its approach of achieving an adequate balance between the ideas of area-related support on the one hand and of the protection of farmers’ and regional vested rights on the other hand. The resulting regional reallocation effects have been ascertained on the basis of different models. The subdivision of the national ceiling (65 per cent according to historical figures and only 35 per cent according to area-related figures) does not transgress the legislature’s framework of assessment which it may make use of when engaging in benefit-granting state activities.

Apart from this, neither is the date chosen for the start of the transitional period (2009) until the establishment of uniform area payments within the regions unacceptably late, nor has the duration of the transitional period (until 2013) been scheduled in such a way that it is unacceptably long under constitutional-law standards. The “perpetuation effect”, which will set in from 2013, requires, however, a special assessment under constitutional law as regards the fact that the support from the previous reference period is taken into account in the allocation of the national payment volume to the regions. The aspects of the farms’ adapting to the new support scheme and of avoiding imbalances also among the regions will lose more and more importance in the course of time, and from a certain point in time in the future they will possibly lose such importance altogether. As this point in time is, however, clearly situated at a considerable distance in the future and the legal situation is amenable to correction by the legislature, it cannot be established at present that these effects, which will show in the future, are incompatible with the Basic Law even from today’s perspective. The competent state bodies are, however, required to observe this effect in order to counteract, if necessary, for instance a perpetuation of the influence of past-related reference figures without any time restriction which would no longer be justifiable.

The provisions of the Act are also not contradictory or contrary to the system either per se or in a superior context; nor do they violate the requirement of transparency. The legislature was not prevented from pursuing various regulatory objectives even if this may lead to a reduced effect as regards the individual objectives. The legislature was also not required to specify the individual aims of the regulation in the wording of the Act. Moreover, the provisions of the Act which are under review do not violate the federative requirement of equal treatment, because this requirement is not applicable if the addressees of a federal statute are not the Länder but the statute merely has different results on the financial strength of the citizens in the Länder and thus can at best indirectly influence the financial situation of the Länder.