# C_2005217EN.01005202.xml

| 3.9.2005 | EN | Official Journal of the European Union | C 217/52 |
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Action brought on 8 July 2005 by Kingdom of Spain against the Commission of the European Communities

(Case T-259/05)

(2005/C 217/109)

Language of the case: Spanish

An action against the Commission of the European Communities was brought before the Court of First Instance of the European Communities on 8 July 2005 by the Kingdom of Spain, having its seat in Madrid, represented by its Agent, Miguel Muñoz Pérez.

The applicant claims that the Court should:

| — | annul Commission Decision 2005/354/EC of 29 April 2005 excluding from Community financing certain expenditure incurred by the Member States under the Guarantee Section of the EAGGF( 1 ) in the part being the object of the action; |
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| — | order the Commission of the European Communities to pay the costs. |
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Pleas in law and main arguments

The present action is brought against Commission Decision 2005/354/EC of 29 April 2005 excluding from Community financing certain expenditure incurred by the Member States under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF). The aspects of that decision which are specifically challenged are as follows:

| — | imposition of a correction of 100 % of the expenditure declared in production aid for textile flax in the financial years 1998/1999 and 1999/2000. The applicant claims that the irregularities which would justify the imposition of that correction do not exist, since:
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the correction of 100 % of the expenditure is of an exceptional nature which the Commission has not justified; —
the OLAF report on which the Commission relies suffers from significant technical defects which make it impossible to extend its findings to the entire flax sector in Spain; —
the Commission has not taken into account the activities of the Spanish authorities in that sphere; and —
the Commission has not sufficiently justified the general scope of the loss sustained by the Community budget as a result of the irregularities present in the system for the administration of aid for textile flax. | — | the correction of 100 % of the expenditure is of an exceptional nature which the Commission has not justified; | — | the OLAF report on which the Commission relies suffers from significant technical defects which make it impossible to extend its findings to the entire flax sector in Spain; | — | the Commission has not taken into account the activities of the Spanish authorities in that sphere; and | — | the Commission has not sufficiently justified the general scope of the loss sustained by the Community budget as a result of the irregularities present in the system for the administration of aid for textile flax. |
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| — | the correction of 100 % of the expenditure is of an exceptional nature which the Commission has not justified; | | | | | | | | |
| — | the OLAF report on which the Commission relies suffers from significant technical defects which make it impossible to extend its findings to the entire flax sector in Spain; | | | | | | | | |
| — | the Commission has not taken into account the activities of the Spanish authorities in that sphere; and | | | | | | | | |
| — | the Commission has not sufficiently justified the general scope of the loss sustained by the Community budget as a result of the irregularities present in the system for the administration of aid for textile flax. | | | | | | | | |

| — | Imposition of a correction of 25 % of the expenditure declared in production aid for textile flax in the financial years 1996/1997 and 1997/1998. In that regard, the applicant claims:
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breach of essential procedural requirements during the procedure which led to the adoption of the financial correction, as that correction was applied without the Member State having had the opportunity to provide the information sought by the Commission before the bilateral meeting was held; and, in the alternative, —
absence of irregularities which would justify the financial correction made, since that correction cannot be based on failure to comply with the objectives underlying the common organisation of the markets in flax and hemp, when the Commission itself recognises that all the procedural conditions for the grant of the aid were fulfilled. | — | breach of essential procedural requirements during the procedure which led to the adoption of the financial correction, as that correction was applied without the Member State having had the opportunity to provide the information sought by the Commission before the bilateral meeting was held; and, in the alternative, | — | absence of irregularities which would justify the financial correction made, since that correction cannot be based on failure to comply with the objectives underlying the common organisation of the markets in flax and hemp, when the Commission itself recognises that all the procedural conditions for the grant of the aid were fulfilled. |
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| — | breach of essential procedural requirements during the procedure which led to the adoption of the financial correction, as that correction was applied without the Member State having had the opportunity to provide the information sought by the Commission before the bilateral meeting was held; and, in the alternative, | | | | |
| — | absence of irregularities which would justify the financial correction made, since that correction cannot be based on failure to comply with the objectives underlying the common organisation of the markets in flax and hemp, when the Commission itself recognises that all the procedural conditions for the grant of the aid were fulfilled. | | | | |

| — | Imposition, as regards production aid for hemp, of one correction of 10 % and another of 25 % of the expenditure corresponding to the financial years 1996/1997 and 1997/1998 respectively. On that point, the applicant claims, by way of breach of an essential procedural requirement, failure to fulfil the obligation to hold a bilateral meeting with the Member State concerned. In the alternative, the applicant also claims:
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that there was no failure to fulfil an obligation which would justify the imposition of the correction applied, since that correction is based on failure to comply with the objectives underlying the common organisation of the markets in flax and hemp, and also an unwarranted comparison between the situation in the flax sector and the situation in the hemp sector; and —
inadequate justification for the increase in the percentage of the correction between the financial years 1997 and 1998 and those of 1999 and 2000. | — | that there was no failure to fulfil an obligation which would justify the imposition of the correction applied, since that correction is based on failure to comply with the objectives underlying the common organisation of the markets in flax and hemp, and also an unwarranted comparison between the situation in the flax sector and the situation in the hemp sector; and | — | inadequate justification for the increase in the percentage of the correction between the financial years 1997 and 1998 and those of 1999 and 2000. |
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| — | that there was no failure to fulfil an obligation which would justify the imposition of the correction applied, since that correction is based on failure to comply with the objectives underlying the common organisation of the markets in flax and hemp, and also an unwarranted comparison between the situation in the flax sector and the situation in the hemp sector; and | | | | |
| — | inadequate justification for the increase in the percentage of the correction between the financial years 1997 and 1998 and those of 1999 and 2000. | | | | |

| — | Imposition, as regards the compensatory aid for bananas, of a correction of 5 % of the expenditure corresponding to the financial year 2000. In relation to this part of the application, the applicant denies the existence of irregularities which would justify the imposition of a correction percentage. |
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( 1 )  OJ L 112 of 3.5.2005, p. 14

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