The story goes like this. And this is a much simplified version. When Greece joined the EC back in 1980, a support scheme for cotton was introduced by Protocol 4 on cotton annexed to the Greek Act of Accession. Then the scheme was extended to Spain and Portugal when those countries joined in 1986. Basically, the support scheme took the form of an aid to cotton production.
Then, the Council adopted Regulation 1782/2003 as part of the reform of the common agricultural policy to "decouple" aid to farmers from actual production. The idea was to provide income support for farmers without inciting them to produce stuff no-one wanted at prices no-one could afford. The Council brought the cotton support scheme into line with that new general philosophy with Regulation 864/2004. But a complete alignment would have disrupted the cotton sector considerably so the Council split the support into two parts: 35% would be paid as support for production per eligible hectare and the remaining 65% would be paid over as income support irrespective of cotton production. The problem lay in how "eligible hectares" of production were defined and calculated. The Council defined "eligible hectares" rather restrictively as areas sown with cotton and maintained at least until the boll opening under normal growing conditions.
Spain brought an action to annul the new support scheme. It contended that the condition that the crop should be maintained until the boll opening was manifestly inappropriate for ensuring economic conditions which can ensure that cotton growing can continue and prevent the crop from being driven out by others.
The Court agreed with Spain. It held that the condition that the crop be maintained until the boll opening was disproportionate. The Court held that he Community legislature has, in agricultural matters, a wide discretion, corresponding to the political responsibilities given to it by Articles 34 EC to 37 EC. Thus judicial review must be limited to verifying that the measure in question is not vitiated by any manifest error or misuse of powers and that the authority concerned has not manifestly exceeded the limits of its discretion (Case C‑189/01 Jippes and Others, paragraph 80). As to review of proportionality, the principle of proportionality requires that acts adopted by Community institutions do not exceed the limits of what is appropriate and necessary in order to attain the legitimate objectives pursued by the legislation in question; where there is a choice between several appropriate measures, recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued (Case C‑189/01 Jippes and Others paragraph 81). As regards judicial review of the implementation of that principle, bearing in mind the wide discretion enjoyed by the Community legislature where the common agricultural policy is concerned, the lawfulness of a measure adopted in that sphere can be affected only if the measure is manifestly inappropriate in terms of the objective which the competent institution is seeking to pursue. In this particular case, the Court held that one of the goals of the scheme was to ensure the maintenance of cotton production and prevent cotton being driven out by other crops. It found after careful review that the level of production aid (the 35% part) was insufficient to meet the objective assigned and that the institutions had not taken into account all the relevant factors in calculating the quantum of aid.
However, the Court suspended the effects of the annulment under Article 231 EC until such time as a new measure is adopted.
But the Court rejected other pleas adduced by Spain. It rejected the plea that the measure contained insufficient reasoning contrary to Article 253 EC. The Court found that in the case of a measure of general application, as here, the statement of reasons may be limited to indicating, first, the general situation which led to its adoption and, second, the general objectives which it is intended to achieve (see, inter alia, Case C‑342/03 Spain v Council, paragraph 55). If the contested measure clearly discloses the essential objective pursued by the institution, it would be excessive to require a specific statement of reasons for the various technical choices made (see, inter alia, Case C‑284/94 Spain v Council paragraph 30).
The Court also rejected a plea of misuse of powers. It held that an act is vitiated by misuse of powers only if it appears, on the basis of objective, relevant and consistent evidence, to have been taken with the exclusive or main purpose of achieving an end other than that stated or evading a procedure specifically prescribed by the Treaty for dealing with the circumstances of the case (see, inter alia, Case C‑342/03 Spain v Council, paragraph 64). But Spain had produced no such evidence.
One final curiosity is worth mentioning. The case was assigned to a chamber comprising 5 judges (the second chamber). After the Council saw the Advocate General's opinion of March 16th, 2006, recommending annulment of the measure, it must have panicked and wrote to the Court to request that the case be transferred to the Grand Chamber under Article 16 of the Statute of the Court. The Court held that it was too late for such a transfer: unjustified delay would be caused and would be contrary to the requirement of the proper administration of justice.