# 62021TJ0033

JUDGMENT OF THE GENERAL COURT (Fourth Chamber)

18 January 2023 (
  *1
  )

*1

(EAGF and EAFRD – Expenditure excluded from financing – Expenditure incurred by Romania – National Rural Development Programme 2007-2013 – Methods for calculating the support rates relating to sub-measure ‘1a’ of measure 215 – Welfare payments for ‘fattening pigs’ and ‘gilts’ – Increase of at least 10% of the available space allocated to each animal – Obligation to state reasons – Legitimate expectations – Legal certainty – Legal classification of the facts – Article 12(6) and (7) of Delegated Regulation (EU) No 907/2014 – Guidelines on the calculation of financial corrections in the framework of the conformity and financial clearance of accounts procedures)

In Case T‐33/21,

Romania, represented by E. Gane and L.-E. Baţagoi, acting as Agents,

Romania

applicant,

v

European Commission, represented by J. Aquilina, A. Biolan and M. Kaduczak, acting as Agents,

European Commission

defendant,

THE GENERAL COURT (Fourth Chamber),

composed, at the time of the deliberations, of S. Gervasoni, President, L. Madise (Rapporteur) and J. Martín y Pérez de Nanclares, Judges,

Registrar: I. Kurme, Administrator,

having regard to the written part of the procedure,

further to the hearing on 14 July 2022,

gives the following

Judgment

Judgment

| 1 | By its action under Article 263 TFEU, Romania seeks annulment of Commission Implementing Decision (EU) 2020/1734 of 18 November 2020 excluding from European Union financing certain expenditure incurred by the Member States under the European Agricultural Guarantee Fund (EAGF) and under the European Agricultural Fund for Rural Development (EAFRD) (OJ 2020 L 390, p. 10), in so far as it excludes certain expenditure which Romania incurred for the financial years 2017 to 2019, in the amount of EUR 18 717 475.08 (‘the contested decision’). |
| --- | --- |

1

By its action under Article 263 TFEU, Romania seeks annulment of Commission Implementing Decision (EU) 2020/1734 of 18 November 2020 excluding from European Union financing certain expenditure incurred by the Member States under the European Agricultural Guarantee Fund (EAGF) and under the European Agricultural Fund for Rural Development (EAFRD) (OJ 2020 L 390, p. 10), in so far as it excludes certain expenditure which Romania incurred for the financial years 2017 to 2019, in the amount of EUR 18 717 475.08 (‘the contested decision’).

Background to the dispute

Background to the dispute

| 2 | By Decision C(2008) 3831 of 16 July 2008, the European Commission approved the Rural Development Programme for Romania for the 2007 to 2013 period (‘the RDP 2007-2013’). |
| --- | --- |

2

By Decision C(2008) 3831 of 16 July 2008, the European Commission approved the Rural Development Programme for Romania for the 2007 to 2013 period (‘the RDP 2007-2013’).

| 3 | On 14 September 2011, the Romanian Ministry of Agriculture and Rural Development submitted a request to the Commission for a revision of the RDP 2007-2013, pursuant to Article 6(1)(a) of Commission Regulation (EC) No 1974/2006 of 15 December 2006 laying down detailed rules for the application of Council Regulation (EC) No 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) (OJ 2006 L 368, p. 15). One of the proposed changes was the introduction of measure 215 – Animal welfare payments (‘measure 215’). Under that measure, compensatory payments had been provided for to cover income foregone and additional costs borne by poultry and pig breeders who, in accordance with the RDP 2007-2013, voluntarily committed to implement certain animal welfare standards. The aid was granted in the context of multi-annual commitments given by the farmers for a minimum period of five years. |
| --- | --- |

3

On 14 September 2011, the Romanian Ministry of Agriculture and Rural Development submitted a request to the Commission for a revision of the RDP 2007-2013, pursuant to Article 6(1)(a) of Commission Regulation (EC) No 1974/2006 of 15 December 2006 laying down detailed rules for the application of Council Regulation (EC) No 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) (OJ 2006 L 368, p. 15). One of the proposed changes was the introduction of measure 215 – Animal welfare payments (‘measure 215’). Under that measure, compensatory payments had been provided for to cover income foregone and additional costs borne by poultry and pig breeders who, in accordance with the RDP 2007-2013, voluntarily committed to implement certain animal welfare standards. The aid was granted in the context of multi-annual commitments given by the farmers for a minimum period of five years.

| 4 | By its letter ARES(2011) 1344895 of 13 December 2011, the Commission informed Romania that it had received and analysed the proposed change in the RDP 2007-2013. It stated that, as matters then stood, the proposed change was not acceptable, and requested clarification. As regards, in particular, measure 215, the Commission referred, in particular, to the methods for calculating the support rates associated with measure 215, and requested corrections. |
| --- | --- |

4

By its letter ARES(2011) 1344895 of 13 December 2011, the Commission informed Romania that it had received and analysed the proposed change in the RDP 2007-2013. It stated that, as matters then stood, the proposed change was not acceptable, and requested clarification. As regards, in particular, measure 215, the Commission referred, in particular, to the methods for calculating the support rates associated with measure 215, and requested corrections.

| 5 | On 22 March 2012, the Romanian authorities uploaded the revised calculation methods to the SFC2007 EU fund management system. |
| --- | --- |

5

On 22 March 2012, the Romanian authorities uploaded the revised calculation methods to the SFC2007 EU fund management system.

| 6 | By its letter ARES(2012) 411175 of 4 April 2012, the Commission gave its consent for the seventh change in the RDP 2007-2013, including measure 215. According to that letter, ‘the Commission’s services [had] analysed the proposed changes’ and had considered that those ‘changes ... compl[ied] with the relevant provisions of [Council] Regulation [(EC)] No 1698/2005 [of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) (OJ 2005 L 277, p. 1)] and Regulation No 1974/2006’ and that, ‘consequently, the proposals [were] accepted’. |
| --- | --- |

6

By its letter ARES(2012) 411175 of 4 April 2012, the Commission gave its consent for the seventh change in the RDP 2007-2013, including measure 215. According to that letter, ‘the Commission’s services [had] analysed the proposed changes’ and had considered that those ‘changes ... compl[ied] with the relevant provisions of [Council] Regulation [(EC)] No 1698/2005 [of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) (OJ 2005 L 277, p. 1)] and Regulation No 1974/2006’ and that, ‘consequently, the proposals [were] accepted’.

| 7 | By Commission Implementing Decision C(2012) 3529 final of 25 May 2012, the RDP 2007-2013 was changed and measure 215 was introduced. |
| --- | --- |

7

By Commission Implementing Decision C(2012) 3529 final of 25 May 2012, the RDP 2007-2013 was changed and measure 215 was introduced.

| 8 | Between 18 and 29 May 2015, the Court of Auditors carried out an audit mission in Romania and found errors relating to the payments made in application of measure 215. According to those preliminary findings, which were notified to the Romanian authorities on 18 September 2015, errors in the methods for calculating compensatory payments on the basis of the various sub-measures of measure 215 had been detected. Those errors gave rise to the grant of overcompensation to farmers and thus to an infringement of Article 40 of Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) (OJ 2005 L 277, p. 1). The sub-measures of measure 215 to which the Court of Auditors’ findings related included sub-measure ‘1a’: ‘fattening pigs’, ‘gilts’ and ‘sows’ – Increase of at least 10% of the available space allocated to each animal (only for ‘fattening pigs’ and ‘gilts’) (‘the sub-measure at issue’). |
| --- | --- |

8

Between 18 and 29 May 2015, the Court of Auditors carried out an audit mission in Romania and found errors relating to the payments made in application of measure 215. According to those preliminary findings, which were notified to the Romanian authorities on 18 September 2015, errors in the methods for calculating compensatory payments on the basis of the various sub-measures of measure 215 had been detected. Those errors gave rise to the grant of overcompensation to farmers and thus to an infringement of Article 40 of Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) (OJ 2005 L 277, p. 1). The sub-measures of measure 215 to which the Court of Auditors’ findings related included sub-measure ‘1a’: ‘fattening pigs’, ‘gilts’ and ‘sows’ – Increase of at least 10% of the available space allocated to each animal (only for ‘fattening pigs’ and ‘gilts’) (‘the sub-measure at issue’).

| 9 | By their letter No 493 of 7 January 2016 and their letter E7324 of 24 March 2016, the Romanian authorities requested the Commission’s help in identifying a solution and pointed out that the RDP 2007-2013 could no longer be changed at the time when the Court of Auditors made its findings, namely on 18 September 2015. |
| --- | --- |

9

By their letter No 493 of 7 January 2016 and their letter E7324 of 24 March 2016, the Romanian authorities requested the Commission’s help in identifying a solution and pointed out that the RDP 2007-2013 could no longer be changed at the time when the Court of Auditors made its findings, namely on 18 September 2015.

| 10 | By its letter of 25 January 2016, the Court of Auditors found, in particular, that the expenditure under the sub-measure at issue was ineligible, on the ground that the method for calculating the support rates was incorrect. |
| --- | --- |

10

By its letter of 25 January 2016, the Court of Auditors found, in particular, that the expenditure under the sub-measure at issue was ineligible, on the ground that the method for calculating the support rates was incorrect.

| 11 | After analysing the Court of Auditors’ findings and the Romanian authorities’ responses, the Commission decided to initiate a first administrative audit, under reference RD 2/2016/031/RO, concerning measure 215 on animal welfare in Romania for the financial years 2014 to 2016 (‘the first audit’). |
| --- | --- |

11

After analysing the Court of Auditors’ findings and the Romanian authorities’ responses, the Commission decided to initiate a first administrative audit, under reference RD 2/2016/031/RO, concerning measure 215 on animal welfare in Romania for the financial years 2014 to 2016 (‘the first audit’).

| 12 | By its letter ARES(2016) 1403661 of 21 March 2016, the Commission considered that the payments relating, inter alia, to the sub-measure at issue contained systemic errors and were not compatible with Article 40(3) of Regulation No 1698/2005. It asked the Romanian authorities to provide further information relating, inter alia, to that sub-measure. On the basis of the information available to the Commission, a key control appeared to be absent and the payments made under that sub-measure seemed to be characterised by wide-spread irregularities capable of rendering the corresponding expenditure ineligible for EU financing. |
| --- | --- |

12

By its letter ARES(2016) 1403661 of 21 March 2016, the Commission considered that the payments relating, inter alia, to the sub-measure at issue contained systemic errors and were not compatible with Article 40(3) of Regulation No 1698/2005. It asked the Romanian authorities to provide further information relating, inter alia, to that sub-measure. On the basis of the information available to the Commission, a key control appeared to be absent and the payments made under that sub-measure seemed to be characterised by wide-spread irregularities capable of rendering the corresponding expenditure ineligible for EU financing.

| 13 | By its letter ARES(2017) 1331659 of 14 March 2017, the Commission requested the Romanian authorities to re-calculate the payment rates and proposed the application of a financial correction for the financial years 2014 to 2016. More specifically, it proposed, in particular, the application of a flat-rate financial correction of 25% of the expenditure resulting from the compensatory payments made by the Romanian paying authority under the sub-measure at issue and of the corrections calculated on an individual basis for the expenditure incurred under the various sub-measures other than the sub-measure at issue. |
| --- | --- |

13

By its letter ARES(2017) 1331659 of 14 March 2017, the Commission requested the Romanian authorities to re-calculate the payment rates and proposed the application of a financial correction for the financial years 2014 to 2016. More specifically, it proposed, in particular, the application of a flat-rate financial correction of 25% of the expenditure resulting from the compensatory payments made by the Romanian paying authority under the sub-measure at issue and of the corrections calculated on an individual basis for the expenditure incurred under the various sub-measures other than the sub-measure at issue.

| 14 | The Romanian authorities initiated a conciliation procedure under reference 17/RO/796 (‘procedure 17/RO/796’), in the amount of EUR 28 087 745.37 relating to the payments made under the sub-measure at issue during the financial years 2014 to 2016. |
| --- | --- |

14

The Romanian authorities initiated a conciliation procedure under reference 17/RO/796 (‘procedure 17/RO/796’), in the amount of EUR 28 087 745.37 relating to the payments made under the sub-measure at issue during the financial years 2014 to 2016.

| 15 | In the report which it submitted in the context of procedure 17/RO/796, set out in its letter ARES(2017) 4685136 of 26 September 2017, the conciliation body concluded that a flat-rate correction of 25% was unjustified, on the ground, in particular, that the circumstances of the case did not permit the conclusion that a key control was absent (see paragraph 12 above) and expressed doubts as to the application of a correction for the period preceding the date of notification of the preliminary findings of the audit mission carried out by the Court of Auditors. |
| --- | --- |

15

In the report which it submitted in the context of procedure 17/RO/796, set out in its letter ARES(2017) 4685136 of 26 September 2017, the conciliation body concluded that a flat-rate correction of 25% was unjustified, on the ground, in particular, that the circumstances of the case did not permit the conclusion that a key control was absent (see paragraph 12 above) and expressed doubts as to the application of a correction for the period preceding the date of notification of the preliminary findings of the audit mission carried out by the Court of Auditors.

| 16 | In its final position, set out in its letter ARES(2018) 1348956 of 12 March 2018, and in its summary report ARES(2018) 2487854 of 16 May 2018, the Commission, inter alia, maintained its finding that the payments made under the sub-measure at issue infringed Article 40(3) of Regulation No 1698/2005. |
| --- | --- |

16

In its final position, set out in its letter ARES(2018) 1348956 of 12 March 2018, and in its summary report ARES(2018) 2487854 of 16 May 2018, the Commission, inter alia, maintained its finding that the payments made under the sub-measure at issue infringed Article 40(3) of Regulation No 1698/2005.

| 17 | On 13 June 2018, the Commission adopted Implementing Decision (EU) 2018/873 excluding from European Union financing certain expenditure incurred by the Member States under the European Agricultural Guarantee Fund (EAGF) and under the European Agricultural Fund for Rural Development (EAFRD) (OJ 2018 L 152, p. 29). By that decision, the Commission, inter alia, applied to Romania a flat-rate financial correction of 25% corresponding to an amount of EUR 13 184 846.61 for the financial years 2015 and 2016, because of the overestimation of the amount of payments made by the Romanian paying authority under the sub-measure at issue, coming within the Integrated Administration and Control System (IACS) in the framework of the European Agricultural Fund for Rural Development (EAFRD). |
| --- | --- |

17

On 13 June 2018, the Commission adopted Implementing Decision (EU) 2018/873 excluding from European Union financing certain expenditure incurred by the Member States under the European Agricultural Guarantee Fund (EAGF) and under the European Agricultural Fund for Rural Development (EAFRD) (OJ 2018 L 152, p. 29). By that decision, the Commission, inter alia, applied to Romania a flat-rate financial correction of 25% corresponding to an amount of EUR 13 184 846.61 for the financial years 2015 and 2016, because of the overestimation of the amount of payments made by the Romanian paying authority under the sub-measure at issue, coming within the Integrated Administration and Control System (IACS) in the framework of the European Agricultural Fund for Rural Development (EAFRD).

| 18 | Romania brought an action for partial annulment of Implementing Decision 2018/873. That action was dismissed as inadmissible, on the ground that it was out of time, by order of 30 April 2019, Romania v Commission (T‐530/18, EU:T:2019:269). Romania’s appeal against that order was dismissed by judgment of 10 September 2020, Romania v Commission (C‐498/19 P, not published, EU:C:2020:686). |
| --- | --- |

18

Romania brought an action for partial annulment of Implementing Decision 2018/873. That action was dismissed as inadmissible, on the ground that it was out of time, by order of 30 April 2019, Romania v Commission (T‐530/18, EU:T:2019:269). Romania’s appeal against that order was dismissed by judgment of 10 September 2020, Romania v Commission (C‐498/19 P, not published, EU:C:2020:686).

| 19 | Following the close of the financial year 2016, the Commission carried out a new audit, under reference RD 2/2018/031/RO, covering the financial years 2017 to 2019 (‘the second audit’). Taking the view that the Romanian authorities had infringed Article 40(3) of Regulation No 1698/2005, the Commission proposed, in particular, that the amount of EUR 18 717 475.08, corresponding to a flat-rate financial correction of 25% of the expenditure incurred under the sub-measure at issue of the RDP 2007-2013, be excluded from EAFRD financing. As regards that sub-measure, which provided for compensatory payments for breeders of ‘fattening pigs’, at the support rate of EUR 41.40 per livestock unit (LU), of ‘gilts’, at the support rate of EUR 165 per LU, and of ‘sows’, at the rate of EUR 23.30 per LU, the Commission found the same errors as in the first audit. More specifically, according to the Commission, the payment rates for the categories ‘fattening pigs’ and ‘gilts’ were overestimated, since savings in feed did not take account of the animals’ actual increase in weight and since the initial entry price of animals not reared had not been deducted. In application of Article 41(1) of Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008 (OJ 2013 L 347 p. 549), the Commission therefore systematically suspended 25% of all the amounts claimed by the Romanian authorities for the sub-measure at issue. |
| --- | --- |

19

Following the close of the financial year 2016, the Commission carried out a new audit, under reference RD 2/2018/031/RO, covering the financial years 2017 to 2019 (‘the second audit’). Taking the view that the Romanian authorities had infringed Article 40(3) of Regulation No 1698/2005, the Commission proposed, in particular, that the amount of EUR 18 717 475.08, corresponding to a flat-rate financial correction of 25% of the expenditure incurred under the sub-measure at issue of the RDP 2007-2013, be excluded from EAFRD financing. As regards that sub-measure, which provided for compensatory payments for breeders of ‘fattening pigs’, at the support rate of EUR 41.40 per livestock unit (LU), of ‘gilts’, at the support rate of EUR 165 per LU, and of ‘sows’, at the rate of EUR 23.30 per LU, the Commission found the same errors as in the first audit. More specifically, according to the Commission, the payment rates for the categories ‘fattening pigs’ and ‘gilts’ were overestimated, since savings in feed did not take account of the animals’ actual increase in weight and since the initial entry price of animals not reared had not been deducted. In application of Article 41(1) of Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008 (OJ 2013 L 347 p. 549), the Commission therefore systematically suspended 25% of all the amounts claimed by the Romanian authorities for the sub-measure at issue.

| 20 | By their letter No 545 of 9 July 2018, the Romanian authorities provided additional information concerning, in particular, the procedures used to make compensatory payments in the context of measure 215 and again informed the Commission that it was objectively impossible to make changes in the RDP 2007-2013. They also informed the Commission that proceedings had been brought before the national courts by beneficiaries who had received compensatory payments below those provided for in the commitments given in application of measure 215 of the RDP 2007-2013. |
| --- | --- |

20

By their letter No 545 of 9 July 2018, the Romanian authorities provided additional information concerning, in particular, the procedures used to make compensatory payments in the context of measure 215 and again informed the Commission that it was objectively impossible to make changes in the RDP 2007-2013. They also informed the Commission that proceedings had been brought before the national courts by beneficiaries who had received compensatory payments below those provided for in the commitments given in application of measure 215 of the RDP 2007-2013.

| 21 | By its letter ARES(2018) 638947 of 12 December 2018, the Commission asked the Romanian authorities for clarification and sent them the minutes of a bilateral meeting held on 20 November 2018. The Romanian authorities replied by their letter No 241040 of 8 January 2019 and by their letter No 133 of 12 February 2019, seeking, inter alia, clarification of the method of revision of the RDP 2007-2013, on the ground that, in their view, in order to change the rates of payment relating to the sub-measure at issue, it was necessary to change that programme and that the deadline for doing so had expired when they were notified of the Court of Auditors’ findings. |
| --- | --- |

21

By its letter ARES(2018) 638947 of 12 December 2018, the Commission asked the Romanian authorities for clarification and sent them the minutes of a bilateral meeting held on 20 November 2018. The Romanian authorities replied by their letter No 241040 of 8 January 2019 and by their letter No 133 of 12 February 2019, seeking, inter alia, clarification of the method of revision of the RDP 2007-2013, on the ground that, in their view, in order to change the rates of payment relating to the sub-measure at issue, it was necessary to change that programme and that the deadline for doing so had expired when they were notified of the Court of Auditors’ findings.

| 22 | By its letter ARES(2019) 1368242 of 28 February 2019, the Commission stated that the RDP 2007-2013 could no longer be the subject of a revision, but that it might agree, in principle, that the changes in the amount of the payments relating to measure 215 would be reflected in a change in the national rural development programme for the period 2014-2020. |
| --- | --- |

22

By its letter ARES(2019) 1368242 of 28 February 2019, the Commission stated that the RDP 2007-2013 could no longer be the subject of a revision, but that it might agree, in principle, that the changes in the amount of the payments relating to measure 215 would be reflected in a change in the national rural development programme for the period 2014-2020.

| 23 | Following discussions and exchanges of information between the Romanian authorities and the Commission, the latter, by its letter ARES(2019) 5096803 of 5 August 2019, informed Romania of its proposal to exclude from EU financing the amount of EUR 18 717 475.08 representing a flat-rate correction of 25% of the expenditure incurred under the sub-measure at issue for the financial years 2017 to 2019. In that letter, the Commission explained that, in accordance with Article 12(7)(c) of Delegated Regulation (EU) No 907/2014 of 11 March 2014 supplementing Regulation No 1306/2013 with regard to paying agencies and other bodies, financial management, clearance of accounts, securities and use of euro (OJ 2014 L 255, p. 18), there was a greater risk of loss for the European Union’s budget, since it could reasonably be assumed that the freedom to submit irregular claims with impunity was likely to entail exceptionally high financial damage for the European Union’s budget. According to the Commission, Romania had committed ‘wide-spread irregularity’, within the meaning of point 3.2.5 of the Guidelines on the calculation of the financial corrections in the framework of the conformity and financial clearance of accounts procedures, as set out in Communication C(2015) 3675 final from the Commission of 8 June 2015 (‘the Guidelines on the calculation of financial corrections’), that justified the application of a correction rate of 25%. |
| --- | --- |

23

Following discussions and exchanges of information between the Romanian authorities and the Commission, the latter, by its letter ARES(2019) 5096803 of 5 August 2019, informed Romania of its proposal to exclude from EU financing the amount of EUR 18 717 475.08 representing a flat-rate correction of 25% of the expenditure incurred under the sub-measure at issue for the financial years 2017 to 2019. In that letter, the Commission explained that, in accordance with Article 12(7)(c) of Delegated Regulation (EU) No 907/2014 of 11 March 2014 supplementing Regulation No 1306/2013 with regard to paying agencies and other bodies, financial management, clearance of accounts, securities and use of euro (OJ 2014 L 255, p. 18), there was a greater risk of loss for the European Union’s budget, since it could reasonably be assumed that the freedom to submit irregular claims with impunity was likely to entail exceptionally high financial damage for the European Union’s budget. According to the Commission, Romania had committed ‘wide-spread irregularity’, within the meaning of point 3.2.5 of the Guidelines on the calculation of the financial corrections in the framework of the conformity and financial clearance of accounts procedures, as set out in Communication C(2015) 3675 final from the Commission of 8 June 2015 (‘the Guidelines on the calculation of financial corrections’), that justified the application of a correction rate of 25%.

| 24 | By letter No 662 of 11 September 2019, the Romanian authorities indicated that the solution proposed by the Commission, referred to in paragraph 22 above, was inapplicable. They therefore again initiated a conciliation procedure, under reference 19/RO/856, concerning the amount of EUR 18717475,08 (‘procedure 19/RO/856’). |
| --- | --- |

24

By letter No 662 of 11 September 2019, the Romanian authorities indicated that the solution proposed by the Commission, referred to in paragraph 22 above, was inapplicable. They therefore again initiated a conciliation procedure, under reference 19/RO/856, concerning the amount of EUR 18717475,08 (‘procedure 19/RO/856’).

| 25 | In its report submitted in the context of procedure 19/RO/856, set out in its letter ARES(2019) 7587324 of 10 December 2019, the conciliation body stated that conciliation was not possible and observed, in particular, that it was not convinced that the matters taken into consideration in the case in question were covered by the concept of ‘irregularity’ within the meaning of the Guidelines on the calculation of financial corrections (see paragraph 23 above). |
| --- | --- |

25

In its report submitted in the context of procedure 19/RO/856, set out in its letter ARES(2019) 7587324 of 10 December 2019, the conciliation body stated that conciliation was not possible and observed, in particular, that it was not convinced that the matters taken into consideration in the case in question were covered by the concept of ‘irregularity’ within the meaning of the Guidelines on the calculation of financial corrections (see paragraph 23 above).

| 26 | By its letter ARES(2020) 2031991 of 14 April 2020, containing its final position, and by its summary report ARES(2020) 5780976 of 22 October 2020, the Commission concluded that the payments made under the sub-measure at issue infringed Article 40(3) of Regulation No 1698/2005. It thus indicated that the amount of EUR 18 717 475.08, corresponding to 25% of the expenditure related to that sub-measure, should be excluded from EU financing. |
| --- | --- |

26

By its letter ARES(2020) 2031991 of 14 April 2020, containing its final position, and by its summary report ARES(2020) 5780976 of 22 October 2020, the Commission concluded that the payments made under the sub-measure at issue infringed Article 40(3) of Regulation No 1698/2005. It thus indicated that the amount of EUR 18 717 475.08, corresponding to 25% of the expenditure related to that sub-measure, should be excluded from EU financing.

| 27 | On 18 November 2020, the Commission adopted the contested decision and, inter alia, applied to Romania a flat-rate financial correction under which 25% of the expenditure incurred by the Romanian approved paying authority and declared within the framework of the EAFRD, in the amount of EUR 18 717 475.08, was excluded owing to the overestimation of the amount of the compensatory payments made under the sub-measure at issue during the financial years 2017 to 2019. |
| --- | --- |

27

On 18 November 2020, the Commission adopted the contested decision and, inter alia, applied to Romania a flat-rate financial correction under which 25% of the expenditure incurred by the Romanian approved paying authority and declared within the framework of the EAFRD, in the amount of EUR 18 717 475.08, was excluded owing to the overestimation of the amount of the compensatory payments made under the sub-measure at issue during the financial years 2017 to 2019.

Forms of order sought

Forms of order sought

| 28 | Romania claims that the Court should:





  – | annul the contested decision in so far as it excludes the expenditure incurred by the Romanian paying authority under the EAFRD, in application of the sub-measure at issue for the financial years 2017 to 2019, in the amount of EUR 18 717 475.08 euros; |
| --- | --- | --- |

28

Romania claims that the Court should:

–

annul the contested decision in so far as it excludes the expenditure incurred by the Romanian paying authority under the EAFRD, in application of the sub-measure at issue for the financial years 2017 to 2019, in the amount of EUR 18 717 475.08 euros;

| – | order the Commission to pay the costs. |
| --- | --- |

–

order the Commission to pay the costs.

| 29 | The Commission contends that the Court should:





  – | dismiss the action; |
| --- | --- | --- |

29

The Commission contends that the Court should:

–

dismiss the action;

| – | order Romania to pay the costs. |
| --- | --- |

–

order Romania to pay the costs.

Law

Law

| 30 | In support of its action, Romania raises, in essence, two pleas in law. The first plea alleges inappropriate use of the Commission’s power to exclude certain expenditure from European Union financing on the basis of Article 52 of Regulation No 1306/2013 and contains six complaints. The second plea alleges breach of the obligation to state reasons. |
| --- | --- |

30

In support of its action, Romania raises, in essence, two pleas in law. The first plea alleges inappropriate use of the Commission’s power to exclude certain expenditure from European Union financing on the basis of Article 52 of Regulation No 1306/2013 and contains six complaints. The second plea alleges breach of the obligation to state reasons.

| 31 | It is appropriate to analyse the second plea first. |
| --- | --- |

31

It is appropriate to analyse the second plea first.

| 32 | In addition, it should be noted that, in the context of the second plea, Romania also claims that the Commission made an error of law. As an identical argument is also raised in the context of the third complaint of the first plea, it should be answered when that plea and the corresponding complaint are examined. |
| --- | --- |

32

In addition, it should be noted that, in the context of the second plea, Romania also claims that the Commission made an error of law. As an identical argument is also raised in the context of the third complaint of the first plea, it should be answered when that plea and the corresponding complaint are examined.

The second plea, alleging breach of the obligation to state reasons

The second plea, alleging breach of the obligation to state reasons

| 33 | Romania claims that the Commission does not explain its reasons for excluding the total sum of EUR 18 717 475.08 from the financing of certain expenditure incurred in the context of the EAFRD for the financial years 2017 to 2019. |
| --- | --- |

33

Romania claims that the Commission does not explain its reasons for excluding the total sum of EUR 18 717 475.08 from the financing of certain expenditure incurred in the context of the EAFRD for the financial years 2017 to 2019.

| 34 | Romania contends that the Commission has not sufficiently explained how a supposedly incorrect calculation method constituted a matter coming within the situations referred to in Article 12(6) and (7) of Delegated Regulation No 907/2014, namely an irregularity, within the meaning of the Guidelines on the calculation of financial corrections. Nor did the Commission rely on the situation involving negligence in countering irregular or fraudulent practices in order to justify the application of a flat-rate correction of 25% of the expenditure or further justify its changing position regarding the legal classification of a supposedly incorrect method of calculation (see paragraphs 12, 15, 23 and 25 above). The change in the terminology used by the Commission to justify the application of a flat-rate correction hinders the efforts that the Romanian authorities made to understand the reasons on which the contested decision is based. |
| --- | --- |

34

Romania contends that the Commission has not sufficiently explained how a supposedly incorrect calculation method constituted a matter coming within the situations referred to in Article 12(6) and (7) of Delegated Regulation No 907/2014, namely an irregularity, within the meaning of the Guidelines on the calculation of financial corrections. Nor did the Commission rely on the situation involving negligence in countering irregular or fraudulent practices in order to justify the application of a flat-rate correction of 25% of the expenditure or further justify its changing position regarding the legal classification of a supposedly incorrect method of calculation (see paragraphs 12, 15, 23 and 25 above). The change in the terminology used by the Commission to justify the application of a flat-rate correction hinders the efforts that the Romanian authorities made to understand the reasons on which the contested decision is based.

| 35 | The Commission disputes Romania’s arguments. |
| --- | --- |

35

The Commission disputes Romania’s arguments.

| 36 | It must be recalled that the obligation to state reasons laid down in Article 296 TFEU is an essential procedural requirement, as distinct from the question of the merits of the grounds relied on, the merits relating to the substantive legality of the contested measure. With that in mind, the statement of reasons must be appropriate to the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure, in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent court to exercise its power of review (see judgment of 16 February 2017, Romania v Commission, T‐145/15, EU:T:2017:86, paragraph 42 and the case-law cited). |
| --- | --- |

36

It must be recalled that the obligation to state reasons laid down in Article 296 TFEU is an essential procedural requirement, as distinct from the question of the merits of the grounds relied on, the merits relating to the substantive legality of the contested measure. With that in mind, the statement of reasons must be appropriate to the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure, in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent court to exercise its power of review (see judgment of 16 February 2017, Romania v Commission, T‐145/15, EU:T:2017:86, paragraph 42 and the case-law cited).

| 37 | In particular, the purpose of the obligation to state the reasons on which an act adversely affecting an individual is based, which is a corollary of the principle of respect for the rights of the defence, is, first, to provide the person concerned with sufficient information to make it possible to ascertain whether the act is well founded or whether it is vitiated by a defect which may permit its legality to be contested before the Courts of the European Union and, second, to enable the latter to review the legality of that act (see judgment of 16 February 2017, Romania v Commission, T‐145/15, EU:T:2017:86, paragraph 43 and the case-law cited). |
| --- | --- |

37

In particular, the purpose of the obligation to state the reasons on which an act adversely affecting an individual is based, which is a corollary of the principle of respect for the rights of the defence, is, first, to provide the person concerned with sufficient information to make it possible to ascertain whether the act is well founded or whether it is vitiated by a defect which may permit its legality to be contested before the Courts of the European Union and, second, to enable the latter to review the legality of that act (see judgment of 16 February 2017, Romania v Commission, T‐145/15, EU:T:2017:86, paragraph 43 and the case-law cited).

| 38 | However, the statement of reasons cannot be required to go into every relevant point of fact and law. Whether the statement of reasons on which a decision is based meets the requirements referred to in paragraphs 36 and 37 above must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (see judgment of 16 February 2017, Romania v Commission, T‐145/15, EU:T:2017:86, paragraph 44 and the case-law cited). |
| --- | --- |

38

However, the statement of reasons cannot be required to go into every relevant point of fact and law. Whether the statement of reasons on which a decision is based meets the requirements referred to in paragraphs 36 and 37 above must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (see judgment of 16 February 2017, Romania v Commission, T‐145/15, EU:T:2017:86, paragraph 44 and the case-law cited).

| 39 | Furthermore, when a decision has been adopted in a context with which the interested party is familiar, it can be reasoned in a summary manner (judgment of 12 May 2011, Région Nord-Pas-de-Calais and Communauté d’agglomération du Douaisis v Commission, T‐267/08 and T‐279/08, EU:T:2011:209, paragraph 44; see also, to that effect, judgment of 30 September 2003, Germany v Commission, C‐301/96, EU:C:2003:509, paragraphs 89 and 92). |
| --- | --- |

39

Furthermore, when a decision has been adopted in a context with which the interested party is familiar, it can be reasoned in a summary manner (judgment of 12 May 2011, Région Nord-Pas-de-Calais and Communauté d’agglomération du Douaisis v Commission, T‐267/08 and T‐279/08, EU:T:2011:209, paragraph 44; see also, to that effect, judgment of 30 September 2003, Germany v Commission, C‐301/96, EU:C:2003:509, paragraphs 89 and 92).

| 40 | It must also be recalled that, in the particular context of the preparation of decisions relating to the clearance of accounts, the statement of reasons for a decision must be regarded as sufficient if the Member State to which the decision was addressed was closely involved in the process by which the decision came about and was aware of the reasons for which the Commission took the view that it must not charge the sum in dispute to the agricultural funds (see, to that effect, judgment of 9 September 2004, Greece v Commission, C‐332/01, EU:C:2004:496, paragraph 67 and the case-law cited). |
| --- | --- |

40

It must also be recalled that, in the particular context of the preparation of decisions relating to the clearance of accounts, the statement of reasons for a decision must be regarded as sufficient if the Member State to which the decision was addressed was closely involved in the process by which the decision came about and was aware of the reasons for which the Commission took the view that it must not charge the sum in dispute to the agricultural funds (see, to that effect, judgment of 9 September 2004, Greece v Commission, C‐332/01, EU:C:2004:496, paragraph 67 and the case-law cited).

| 41 | In the light of the case-law cited in paragraphs 36 to 40 above, it is necessary to examine whether the Commission sufficiently explained the reasons that led it to consider that it was faced by the circumstances, referred to in Article 12(6) and (7) of Delegated Regulation No 907/2014 and in point 3.2.5 of the Guidelines on the calculation of financial corrections, which indicate a high degree of gravity of the deficiencies detected revealing a greater risk of loss for the European Union’s budget and for which those provisions provide for the application of a flat-rate correction of 25%. |
| --- | --- |

41

In the light of the case-law cited in paragraphs 36 to 40 above, it is necessary to examine whether the Commission sufficiently explained the reasons that led it to consider that it was faced by the circumstances, referred to in Article 12(6) and (7) of Delegated Regulation No 907/2014 and in point 3.2.5 of the Guidelines on the calculation of financial corrections, which indicate a high degree of gravity of the deficiencies detected revealing a greater risk of loss for the European Union’s budget and for which those provisions provide for the application of a flat-rate correction of 25%.

| 42 | In that regard, in the first place, it must be observed that Implementing Decision 2018/873 and the administrative dialogue that preceded the adoption of the contested decision are part of the context of which that decision forms part and may therefore, in application of the case-law cited in paragraph 40 above, be taken into account for the purpose of assessing whether that decision is sufficiently reasoned. Furthermore, the Commission itself, in the context of the second audit, referred on a number of occasions to the first audit, pointing out that the essential elements had already been discussed and decided and that it relied on the first audit to supplement its answers to the factors indicated by the Romanian authorities. |
| --- | --- |

42

In that regard, in the first place, it must be observed that Implementing Decision 2018/873 and the administrative dialogue that preceded the adoption of the contested decision are part of the context of which that decision forms part and may therefore, in application of the case-law cited in paragraph 40 above, be taken into account for the purpose of assessing whether that decision is sufficiently reasoned. Furthermore, the Commission itself, in the context of the second audit, referred on a number of occasions to the first audit, pointing out that the essential elements had already been discussed and decided and that it relied on the first audit to supplement its answers to the factors indicated by the Romanian authorities.

| 43 | In the second place, in application of the case-law cited in paragraph 40 above, it is appropriate to take account of the official exchanges between the Commission and the Romanian authorities with a view to the adoption of the contested decision, since they contain a summary of the main points discussed during the procedure and they also form part of the context in which that decision was adopted. Those exchanges consist of the letter relating to the findings of 8 May 2018, to which Romania replied by its letter of 9 July 2018, the bilateral meeting of 20 November 2018, the minutes of which were communicated to Romania by letter of 12 December 2018, to which Romania also replied on 8 January 2019, the conciliation letter of 5 August 2019, the final position set out in the letter of 14 April 2020 and the summary report relating to the contested decision. |
| --- | --- |

43

In the second place, in application of the case-law cited in paragraph 40 above, it is appropriate to take account of the official exchanges between the Commission and the Romanian authorities with a view to the adoption of the contested decision, since they contain a summary of the main points discussed during the procedure and they also form part of the context in which that decision was adopted. Those exchanges consist of the letter relating to the findings of 8 May 2018, to which Romania replied by its letter of 9 July 2018, the bilateral meeting of 20 November 2018, the minutes of which were communicated to Romania by letter of 12 December 2018, to which Romania also replied on 8 January 2019, the conciliation letter of 5 August 2019, the final position set out in the letter of 14 April 2020 and the summary report relating to the contested decision.

| 44 | It is apparent from the documents referred to in paragraphs 42 and 43 above that the Commission informed the Romanian authorities that the payment rates applied under the sub-measure at issue were too high. More precisely, the Commission stated in those documents that the calculation method used by Romania to establish the payment rates did not take account, when calculating the savings in feed, of the actual increase in the animals’ weight, namely the fact that the animals went from 30 kilogrammes (kg) to 103 kg before delivery for slaughter. In addition, the Commission also informed the Romanian authorities that, in application of that method for calculating the rate of compensatory support, the animals not purchased were not deducted from the initial entry price. In the Commission’s submission, it was necessary, when calculating the compensation rate covering the additional costs and the income foregone under the sub-measure at issue, to deduct the price of animals no longer purchased because of the commitments voluntarily given by pig breeders to increase by 10% the space available for each animal. |
| --- | --- |

44

It is apparent from the documents referred to in paragraphs 42 and 43 above that the Commission informed the Romanian authorities that the payment rates applied under the sub-measure at issue were too high. More precisely, the Commission stated in those documents that the calculation method used by Romania to establish the payment rates did not take account, when calculating the savings in feed, of the actual increase in the animals’ weight, namely the fact that the animals went from 30 kilogrammes (kg) to 103 kg before delivery for slaughter. In addition, the Commission also informed the Romanian authorities that, in application of that method for calculating the rate of compensatory support, the animals not purchased were not deducted from the initial entry price. In the Commission’s submission, it was necessary, when calculating the compensation rate covering the additional costs and the income foregone under the sub-measure at issue, to deduct the price of animals no longer purchased because of the commitments voluntarily given by pig breeders to increase by 10% the space available for each animal.

| 45 | The failure to take the actual increase in the animals’ weight into account when calculating savings in feed, and the failure to deduct the initial entry price of the animals, for the purpose of fixing the support rates were regarded by the Commission as contrary to Article 40(3) of Regulation No 1698/2005, which provides that animal welfare payments are to cover additional costs and income foregone resulting from the commitment made. According to the Commission’s reasoning, a certain part of all the compensatory payments made under the sub-measure at issue could not be financed by the budget of the European Union, because of the systematic nature of the use of overestimated rates in calculating those payments. It was therefore in order to protect the agricultural funds that the Commission systematically suspended 25% of all the amounts claimed by the Romanian authorities for the sub-measure at issue, then applied a flat-rate correction of 25% of the expenditure relating to that sub-measure. |
| --- | --- |

45

The failure to take the actual increase in the animals’ weight into account when calculating savings in feed, and the failure to deduct the initial entry price of the animals, for the purpose of fixing the support rates were regarded by the Commission as contrary to Article 40(3) of Regulation No 1698/2005, which provides that animal welfare payments are to cover additional costs and income foregone resulting from the commitment made. According to the Commission’s reasoning, a certain part of all the compensatory payments made under the sub-measure at issue could not be financed by the budget of the European Union, because of the systematic nature of the use of overestimated rates in calculating those payments. It was therefore in order to protect the agricultural funds that the Commission systematically suspended 25% of all the amounts claimed by the Romanian authorities for the sub-measure at issue, then applied a flat-rate correction of 25% of the expenditure relating to that sub-measure.

| 46 | Romania disputes the sufficiency of the explanations provided by the Commission to justify the application of a flat-rate correction of 25% and submits that the change in terminology used to classify the alleged error relating to the method for calculating the support rates provided for in the sub-measure at issue constitutes a barrier to the understanding of that correction. |
| --- | --- |

46

Romania disputes the sufficiency of the explanations provided by the Commission to justify the application of a flat-rate correction of 25% and submits that the change in terminology used to classify the alleged error relating to the method for calculating the support rates provided for in the sub-measure at issue constitutes a barrier to the understanding of that correction.

| 47 | In that respect, it must be recalled that the criteria and the methodology for the application of corrections in the context of Article 52(1) of Regulation No 1306/2013 are set out in Article 12 of Delegated Regulation No 907/2014. It follows from Article 12(6) of that delegated regulation that where the amounts to be excluded from EU financing cannot be determined by the calculation or the extrapolation referred to in Article 12(2) and (3) thereof, the Commission is to apply the appropriate flat-rate corrections, taking into account the nature and gravity of the infringement and its own estimation of the risk of financial damage caused to the European Union. According to Article 12(7) of that delegated regulation, when establishing the level of flat-rate corrections, the Commission is specifically to take into account circumstances demonstrating a higher degree of gravity of the deficiencies revealing a greater risk of loss for the European Union’s budget. Among those circumstances, reference is made in Article 12(7)(c) thereof to the Member State’s application of a control system that is found to be absent or gravely deficient and to evidence of ‘wide-spread irregularity and negligence in countering irregular or fraudulent practices’. |
| --- | --- |

47

In that respect, it must be recalled that the criteria and the methodology for the application of corrections in the context of Article 52(1) of Regulation No 1306/2013 are set out in Article 12 of Delegated Regulation No 907/2014. It follows from Article 12(6) of that delegated regulation that where the amounts to be excluded from EU financing cannot be determined by the calculation or the extrapolation referred to in Article 12(2) and (3) thereof, the Commission is to apply the appropriate flat-rate corrections, taking into account the nature and gravity of the infringement and its own estimation of the risk of financial damage caused to the European Union. According to Article 12(7) of that delegated regulation, when establishing the level of flat-rate corrections, the Commission is specifically to take into account circumstances demonstrating a higher degree of gravity of the deficiencies revealing a greater risk of loss for the European Union’s budget. Among those circumstances, reference is made in Article 12(7)(c) thereof to the Member State’s application of a control system that is found to be absent or gravely deficient and to evidence of ‘wide-spread irregularity and negligence in countering irregular or fraudulent practices’.

| 48 | In the Guidelines on the calculation of financial corrections, the Commission set out the general principles and the level of the flat-rate correction which it might propose under Article 52(1) of Regulation No 1306/2013 and Article 12(6) and (7) of Delegated Regulation No 907/2014. In point 3.2.5 of those guidelines, it is stated that, ‘[if] the Member State’s application of a control system is found to be absent or gravely deficient, and [if] there is evidence of wide-spread irregularity and negligence in countering irregular or fraudulent practices, ... then a correction of 25% is justified as it can reasonably be assumed that the freedom to submit irregular claims with impunity will occasion exceptionally high financial damages to the Union’s budget’. |
| --- | --- |

48

In the Guidelines on the calculation of financial corrections, the Commission set out the general principles and the level of the flat-rate correction which it might propose under Article 52(1) of Regulation No 1306/2013 and Article 12(6) and (7) of Delegated Regulation No 907/2014. In point 3.2.5 of those guidelines, it is stated that, ‘[if] the Member State’s application of a control system is found to be absent or gravely deficient, and [if] there is evidence of wide-spread irregularity and negligence in countering irregular or fraudulent practices, ... then a correction of 25% is justified as it can reasonably be assumed that the freedom to submit irregular claims with impunity will occasion exceptionally high financial damages to the Union’s budget’.

| 49 | In its final position and in its summary report, drawn up in the context of the second audit and of which Romania was aware, the Commission stated that, in its view, the irregularities resulted in this instance from the fact that the Romanian authorities had systematically used an incorrect calculation method to establish the rates of payment for the sub-measure at issue, and not from the implementation of that measure with respect to each beneficiary in return for the commitment given by the latter. In those documents, the Commission stated that, on the basis of the information available, the system for the administration and control of the sub-measure at issue in Romania seemed to be gravely deficient and that there was evidence of wide-spread irregularity giving rise to the systematic overcompensation of farmers. As the Romanian authorities provided no calculation of the risk incurred by the agricultural funds, but indicated the population at risk, the Commission considered that the application of a correction of at least 25% was consistent with Article 12(7)(c) of Delegated Regulation No 907/2004 and with the Guidelines on the calculation of financial corrections and covered the expenditure incurred in respect of the financial years 2017 to 2019 (from 16 October 2016 to 31 December 2018). |
| --- | --- |

49

In its final position and in its summary report, drawn up in the context of the second audit and of which Romania was aware, the Commission stated that, in its view, the irregularities resulted in this instance from the fact that the Romanian authorities had systematically used an incorrect calculation method to establish the rates of payment for the sub-measure at issue, and not from the implementation of that measure with respect to each beneficiary in return for the commitment given by the latter. In those documents, the Commission stated that, on the basis of the information available, the system for the administration and control of the sub-measure at issue in Romania seemed to be gravely deficient and that there was evidence of wide-spread irregularity giving rise to the systematic overcompensation of farmers. As the Romanian authorities provided no calculation of the risk incurred by the agricultural funds, but indicated the population at risk, the Commission considered that the application of a correction of at least 25% was consistent with Article 12(7)(c) of Delegated Regulation No 907/2004 and with the Guidelines on the calculation of financial corrections and covered the expenditure incurred in respect of the financial years 2017 to 2019 (from 16 October 2016 to 31 December 2018).

| 50 | In the documents referred to in paragraph 49 above, the Commission emphasised that the Court of Auditors had calculated an overcompensation of 38.41% and that, conversely, it had proposed a lower correction rate in order to take account of certain arguments put forward by the Romanian authorities that might have entailed a lower risk of overcompensation, but that could not have been quantified by purely mathematical means. The Romanian authorities had asked that ad libitum (at will) feeding technology, the increase in the average weight at slaughter in recent years and the increase in fixed costs for the remaining animals be taken into account. Since the Romanian authorities had not provided a new calculation of the payment rates, the Commission considered that the flat rate of 25% was the best estimate of the risk for the agricultural funds that could be made with proportionate effort. |
| --- | --- |

50

In the documents referred to in paragraph 49 above, the Commission emphasised that the Court of Auditors had calculated an overcompensation of 38.41% and that, conversely, it had proposed a lower correction rate in order to take account of certain arguments put forward by the Romanian authorities that might have entailed a lower risk of overcompensation, but that could not have been quantified by purely mathematical means. The Romanian authorities had asked that ad libitum (at will) feeding technology, the increase in the average weight at slaughter in recent years and the increase in fixed costs for the remaining animals be taken into account. Since the Romanian authorities had not provided a new calculation of the payment rates, the Commission considered that the flat rate of 25% was the best estimate of the risk for the agricultural funds that could be made with proportionate effort.

| 51 | The reference, in the acts preparatory to the contested decision referred to in paragraph 49 above, to the existence of ‘wide-spread irregularity’ and ‘negligence in countering irregular or fraudulent practices’ in order to justify the application of a flat-rate correction of 25% constitutes a sufficient statement of reasons to permit the Romanian authorities to understand the application of the financial correction. It was the conclusion relating to the systematic nature of the overcompensation, affecting all compensatory payments made under the sub-measure at issue, that led the Commission to consider that it was faced with wide-spread irregularity and to consider that, in the absence of a detailed calculation of that overcompensation provided by the Romanian authorities, 25% of the amounts spent under the sub-measure at issue should be excluded from EU financing in application of Article 52 of Regulation No 1306/2013, Article 12 of Delegated Regulation No 907/2014 and the Guidelines on the calculation of financial corrections. |
| --- | --- |

51

The reference, in the acts preparatory to the contested decision referred to in paragraph 49 above, to the existence of ‘wide-spread irregularity’ and ‘negligence in countering irregular or fraudulent practices’ in order to justify the application of a flat-rate correction of 25% constitutes a sufficient statement of reasons to permit the Romanian authorities to understand the application of the financial correction. It was the conclusion relating to the systematic nature of the overcompensation, affecting all compensatory payments made under the sub-measure at issue, that led the Commission to consider that it was faced with wide-spread irregularity and to consider that, in the absence of a detailed calculation of that overcompensation provided by the Romanian authorities, 25% of the amounts spent under the sub-measure at issue should be excluded from EU financing in application of Article 52 of Regulation No 1306/2013, Article 12 of Delegated Regulation No 907/2014 and the Guidelines on the calculation of financial corrections.

| 52 | Furthermore, it should be noted that the Romanian authorities exercised their option to comment on the deficiencies detected. A part of their arguments, moreover, caused the Commission to conclude that it was not faced with an absence of key control but, rather, with wide-spread irregularity (see paragraphs 12, 15, 23 and 25 above). It also follows from those exchanges, referred to in paragraph 43 above, that the questions at issue in the present case were raised and discussed before the conciliation body, which, moreover, supported Romania’s position. Therefore, the assertion that the Commission did not explain the reasons why it had excluded the total sum of EUR 18 717 475.08 from the financing of certain expenditure incurred in the context of the EAFRD for the financial years 2017 to 2019 must be rejected. The Commission identified in detail each of the documents forming the subject matter of those exchanges as forming an integral part of the summary report and indicated sufficiently the reasons why that amount was excluded from EU financing. |
| --- | --- |

52

Furthermore, it should be noted that the Romanian authorities exercised their option to comment on the deficiencies detected. A part of their arguments, moreover, caused the Commission to conclude that it was not faced with an absence of key control but, rather, with wide-spread irregularity (see paragraphs 12, 15, 23 and 25 above). It also follows from those exchanges, referred to in paragraph 43 above, that the questions at issue in the present case were raised and discussed before the conciliation body, which, moreover, supported Romania’s position. Therefore, the assertion that the Commission did not explain the reasons why it had excluded the total sum of EUR 18 717 475.08 from the financing of certain expenditure incurred in the context of the EAFRD for the financial years 2017 to 2019 must be rejected. The Commission identified in detail each of the documents forming the subject matter of those exchanges as forming an integral part of the summary report and indicated sufficiently the reasons why that amount was excluded from EU financing.

| 53 | In addition, in the context of the third complaint in the first plea, Romania disputes the merits of the grounds that justified the application of a flat-rate correction, maintaining that the legal classification of the method for calculating the compensatory payments relating to the sub-measure at issue as ‘wide-spread irregularity’, used by the Commission to justify the application of a flat-rate correction, is incorrect. That circumstance shows that Romania was able to understand the reasoning underlying the Commission’s decision to apply a flat-rate correction of 25%. |
| --- | --- |

53

In addition, in the context of the third complaint in the first plea, Romania disputes the merits of the grounds that justified the application of a flat-rate correction, maintaining that the legal classification of the method for calculating the compensatory payments relating to the sub-measure at issue as ‘wide-spread irregularity’, used by the Commission to justify the application of a flat-rate correction, is incorrect. That circumstance shows that Romania was able to understand the reasoning underlying the Commission’s decision to apply a flat-rate correction of 25%.

| 54 | It must therefore be concluded that the Commission provided sufficient reasons to allow Romania to understand the reasons for the application of a flat-rate financial correction and to dispute the merits thereof and also to enable the Court to exercise its power of review. |
| --- | --- |

54

It must therefore be concluded that the Commission provided sufficient reasons to allow Romania to understand the reasons for the application of a flat-rate financial correction and to dispute the merits thereof and also to enable the Court to exercise its power of review.

| 55 | That conclusion is not called into question by the argument that, in perpetuating the incorrect approach taken at the time of the administrative dialogue held in the context of the adoption of Implementing Decision 2018/873, which consisted in taking the view that the supposedly incorrect calculation method should be classified as the ‘absence of a key control’, the Commission hindered the efforts made by the Romanian authorities to understand the grounds forming the basis of the contested decision. |
| --- | --- |

55

That conclusion is not called into question by the argument that, in perpetuating the incorrect approach taken at the time of the administrative dialogue held in the context of the adoption of Implementing Decision 2018/873, which consisted in taking the view that the supposedly incorrect calculation method should be classified as the ‘absence of a key control’, the Commission hindered the efforts made by the Romanian authorities to understand the grounds forming the basis of the contested decision.

| 56 | In that regard, it must be stated that, although, in the summary report of 22 October 2020, the Commission asserts that the administration and control system of the animal welfare measure was gravely deficient, it no longer refers, as in the summary report of 16 May 2018, to the absence of a ‘key control’ or to a deficiency in a ‘key control’, but only to ‘wide-spread irregularity’, leading to the systematic overcompensation of farmers. In the summary report of 22 October 2020, the Commission stated that, in the present case, the irregularity was the result of the systematic application of payment rates that were too high and from the freedom to submit irregular claims with impunity, leading to exceptionally high financial damage for the European Union’s budget. In addition, when questioned at the hearing, the Commission explained that in its view the Romanian authorities’ negligence in countering irregular practices had become ‘grave’, since they had continued to apply the same method for calculating the payment rates relating to the sub-measure at issue after the Court of Auditors had found that that method gave rise to overcompensation of the beneficiaries of the aid. |
| --- | --- |

56

In that regard, it must be stated that, although, in the summary report of 22 October 2020, the Commission asserts that the administration and control system of the animal welfare measure was gravely deficient, it no longer refers, as in the summary report of 16 May 2018, to the absence of a ‘key control’ or to a deficiency in a ‘key control’, but only to ‘wide-spread irregularity’, leading to the systematic overcompensation of farmers. In the summary report of 22 October 2020, the Commission stated that, in the present case, the irregularity was the result of the systematic application of payment rates that were too high and from the freedom to submit irregular claims with impunity, leading to exceptionally high financial damage for the European Union’s budget. In addition, when questioned at the hearing, the Commission explained that in its view the Romanian authorities’ negligence in countering irregular practices had become ‘grave’, since they had continued to apply the same method for calculating the payment rates relating to the sub-measure at issue after the Court of Auditors had found that that method gave rise to overcompensation of the beneficiaries of the aid.

| 57 | Thus, it is true that, by comparison with Implementing Decision 2018/873, the Commission changed the terminology used to classify the use of a method for the calculation of the payment rates relating to the sub-measure at issue which it considered to be incorrect and that, instead of referring to the ‘absence of key control’, it focused on the existence of ‘wide-spread irregularity and negligence in countering irregular practices’ in order to justify the application of a flat-rate financial correction of 25%. However, Romania cannot maintain that the change in the terminology used by the Commission hindered the efforts made by the Romanian authorities to understand the grounds forming the basis of the contested decision. |
| --- | --- |

57

Thus, it is true that, by comparison with Implementing Decision 2018/873, the Commission changed the terminology used to classify the use of a method for the calculation of the payment rates relating to the sub-measure at issue which it considered to be incorrect and that, instead of referring to the ‘absence of key control’, it focused on the existence of ‘wide-spread irregularity and negligence in countering irregular practices’ in order to justify the application of a flat-rate financial correction of 25%. However, Romania cannot maintain that the change in the terminology used by the Commission hindered the efforts made by the Romanian authorities to understand the grounds forming the basis of the contested decision.

| 58 | As stated in paragraph 53 above, Romania was able to dispute, in the context of the third complaint in the first plea, the merits of the approach taken by the Commission that led it to consider that the application of a supposedly incorrect method for calculating the payment rates relating to the sub-measure at issue must be classified as ‘wide-spread irregularity and negligence in countering irregular or fraudulent practices’ and justified the application of a flat-rate correction in accordance with Article 12(7)(c) of Delegated Regulation No 907/2014, read together with the Guidelines on the calculation of financial corrections. |
| --- | --- |

58

As stated in paragraph 53 above, Romania was able to dispute, in the context of the third complaint in the first plea, the merits of the approach taken by the Commission that led it to consider that the application of a supposedly incorrect method for calculating the payment rates relating to the sub-measure at issue must be classified as ‘wide-spread irregularity and negligence in countering irregular or fraudulent practices’ and justified the application of a flat-rate correction in accordance with Article 12(7)(c) of Delegated Regulation No 907/2014, read together with the Guidelines on the calculation of financial corrections.

| 59 | The question whether the legal classification as ‘wide-spread irregularity’ is correct and justifies the application of a flat-rate correction of 25% in the light of the Guidelines on the calculation of financial corrections does not relate to the insufficiency of the reasoning, but to the merits of the reasoning, and will therefore be addressed when the Court analyses the third complaint in the first plea, which specifically raises the legally incorrect nature of that classification. |
| --- | --- |

59

The question whether the legal classification as ‘wide-spread irregularity’ is correct and justifies the application of a flat-rate correction of 25% in the light of the Guidelines on the calculation of financial corrections does not relate to the insufficiency of the reasoning, but to the merits of the reasoning, and will therefore be addressed when the Court analyses the third complaint in the first plea, which specifically raises the legally incorrect nature of that classification.

| 60 | Nor can the conclusion set out in paragraph 54 above be invalidated by Romania’s argument that the Commission makes incoherent allegations, since in the defence the Commission maintains, first, that the contested decision and the acts preparatory to the second audit refer to the existence of ‘wide-spread irregularity’ and ‘negligence in countering irregular or fraudulent practices’ and, second, that in the context of the second audit and in its final position it no longer referred to irregularity within the meaning of the Guidelines on the calculation of financial corrections. |
| --- | --- |

60

Nor can the conclusion set out in paragraph 54 above be invalidated by Romania’s argument that the Commission makes incoherent allegations, since in the defence the Commission maintains, first, that the contested decision and the acts preparatory to the second audit refer to the existence of ‘wide-spread irregularity’ and ‘negligence in countering irregular or fraudulent practices’ and, second, that in the context of the second audit and in its final position it no longer referred to irregularity within the meaning of the Guidelines on the calculation of financial corrections.

| 61 | That alleged incoherence in the defence does not exclude the possibility of understanding, on the basis of the documents referred to in paragraph 49 above, the reasoning underlying the flat-rate correction. That correction was applied because, according to the Commission, the administrative and control system of the sub-measure at issue in Romania appeared to be gravely deficient, in so far as there was evidence of wide-spread irregularity leading to systematic overcompensation of farmers. Thus, as confirmed at the hearing, in the Commission’s contention the risk for the agricultural funds was high and the information provided by the Romanian authorities did not permit an ad-hoc calculation of that risk. Consequently, the Commission applied a flat-rate correction of 25% on the basis of Article 12(6) and (7) of Delegated Regulation No 907/2014, read together with the Guidelines on the calculation of financial corrections, both of which refer to the concept of ‘irregularity’. |
| --- | --- |

61

That alleged incoherence in the defence does not exclude the possibility of understanding, on the basis of the documents referred to in paragraph 49 above, the reasoning underlying the flat-rate correction. That correction was applied because, according to the Commission, the administrative and control system of the sub-measure at issue in Romania appeared to be gravely deficient, in so far as there was evidence of wide-spread irregularity leading to systematic overcompensation of farmers. Thus, as confirmed at the hearing, in the Commission’s contention the risk for the agricultural funds was high and the information provided by the Romanian authorities did not permit an ad-hoc calculation of that risk. Consequently, the Commission applied a flat-rate correction of 25% on the basis of Article 12(6) and (7) of Delegated Regulation No 907/2014, read together with the Guidelines on the calculation of financial corrections, both of which refer to the concept of ‘irregularity’.

| 62 | In the light of the foregoing, the second plea must be dismissed in so far as it raises the insufficiently reasoned nature of the application, in the contested decision, of a flat-rate correction of 25% of the expenditure incurred by Romania under the sub-measure at issue. |
| --- | --- |

62

In the light of the foregoing, the second plea must be dismissed in so far as it raises the insufficiently reasoned nature of the application, in the contested decision, of a flat-rate correction of 25% of the expenditure incurred by Romania under the sub-measure at issue.

The first plea, alleging that the Commission exercised its power to exclude certain amounts from EU financing on the basis of Article 52 of Regulation No 1306/2013 in an inappropriate manner

The first plea, alleging that the Commission exercised its power to exclude certain amounts from EU financing on the basis of Article 52 of Regulation No 1306/2013 in an inappropriate manner

| 63 | The first plea, alleging that the Commission exercised its powers inappropriately, contrary to Article 52 of Regulation No 1306/2013, contains six complaints. |
| --- | --- |

63

The first plea, alleging that the Commission exercised its powers inappropriately, contrary to Article 52 of Regulation No 1306/2013, contains six complaints.

| 64 | First, Romania claims that the Commission must accept responsibility in the event that the sub-measure at issue, set out in the RDP 2007-2013, which the Commission approved, proves to be contrary to Article 40(3) of Regulation No 1698/2005. Any other approach would be contrary to Articles 76 to 78 of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (OJ 2002 L 248, p. 1). Second, the Commission was wrong to consider that Romania had overcompensated the beneficiaries of the aid, in breach of Article 40(3) of Regulation No 1698/2005. Third, the Commission incorrectly applied Article 12(6) and (7) of Delegated Regulation No 907/2014 and the Guidelines on the calculation of financial corrections. Fourth, the Commission failed to observe the principle of the protection of legitimate expectations. Fifth, the Commission breached the principle of legal certainty. Sixth, the Commission failed to observe the principle of good administration. |
| --- | --- |

64

First, Romania claims that the Commission must accept responsibility in the event that the sub-measure at issue, set out in the RDP 2007-2013, which the Commission approved, proves to be contrary to Article 40(3) of Regulation No 1698/2005. Any other approach would be contrary to Articles 76 to 78 of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (OJ 2002 L 248, p. 1). Second, the Commission was wrong to consider that Romania had overcompensated the beneficiaries of the aid, in breach of Article 40(3) of Regulation No 1698/2005. Third, the Commission incorrectly applied Article 12(6) and (7) of Delegated Regulation No 907/2014 and the Guidelines on the calculation of financial corrections. Fourth, the Commission failed to observe the principle of the protection of legitimate expectations. Fifth, the Commission breached the principle of legal certainty. Sixth, the Commission failed to observe the principle of good administration.

| 65 | First of all, the fourth and fifth complaints of the first plea, which are closely linked and based on the same facts, should be examined together. |
| --- | --- |

65

First of all, the fourth and fifth complaints of the first plea, which are closely linked and based on the same facts, should be examined together.

The fourth and fifth complaints in the first plea, one alleging breach of the principle of the protection of legitimate expectations and the other alleging breach of the principle of legal certainty

The fourth and fifth complaints in the first plea, one alleging breach of the principle of the protection of legitimate expectations and the other alleging breach of the principle of legal certainty

| 66 | Romania claims that the Commission failed to comply with the principle of the protection of legitimate expectations and the principle of legal certainty when it adopted the contested decision. More specifically, the Commission’s letter of 4 April 2012 (see paragraph 6 above) and its approval of the seventh change in the RDP 2007-2013 by Decision C(2012) 3529 final of 25 May 2012 (see paragraph 7 above) caused the Romanian authorities and the beneficiaries concerned to have legitimate expectations that the commitments given in order to finance the sub-measure at issue would be respected. Those expectations were, wrongly, not taken into account when the contested decision was adopted. Furthermore, the diverging opinions and the Commission’s late reaction, in the context of a situation which it had itself created, breached the principle of legal certainty and made it impossible for the Romanian authorities to implement appropriate measures. |
| --- | --- |

66

Romania claims that the Commission failed to comply with the principle of the protection of legitimate expectations and the principle of legal certainty when it adopted the contested decision. More specifically, the Commission’s letter of 4 April 2012 (see paragraph 6 above) and its approval of the seventh change in the RDP 2007-2013 by Decision C(2012) 3529 final of 25 May 2012 (see paragraph 7 above) caused the Romanian authorities and the beneficiaries concerned to have legitimate expectations that the commitments given in order to finance the sub-measure at issue would be respected. Those expectations were, wrongly, not taken into account when the contested decision was adopted. Furthermore, the diverging opinions and the Commission’s late reaction, in the context of a situation which it had itself created, breached the principle of legal certainty and made it impossible for the Romanian authorities to implement appropriate measures.

| 67 | The Commission disputes Romania’s arguments. In its contention, first of all, its approval of the seventh change in the RDP 2007-2013 was given on the basis of inaccurate information. Thus, its letter of 4 April 2012 (see paragraph 6 above) does not contain precise, unconditional and consistent assurances of such a kind as to give rise to a legitimate expectation that the payment rates provided for in the sub-measure at issue would continue to be applied. By failing to include a review clause in its contracts with the beneficiaries concerned, Romania took on responsibility for their expectations. Next, there was no breach of the principle of legal certainty by the Commission, nor was it too late in communicating to the Romanian authorities a possible solution to avoid any overcompensation of the beneficiaries concerned. Last, Romania’s assertion that the RDP 2007-2013 and the payment rates established on the basis of the method that was approved should be strictly observed until they were changed is incorrect. Article 19 of Regulation No 1698/2005, read in conjunction with Article 6(1)(c) and Article 9(3) of Regulation 1974/2006, concerns only the revision of and changes in national rural development programmes and is without prejudice to the rules on the financing, administration and monitoring of the common agricultural policy and to the Commission’s obligations concerning the payments made in breach of those rules. |
| --- | --- |

67

The Commission disputes Romania’s arguments. In its contention, first of all, its approval of the seventh change in the RDP 2007-2013 was given on the basis of inaccurate information. Thus, its letter of 4 April 2012 (see paragraph 6 above) does not contain precise, unconditional and consistent assurances of such a kind as to give rise to a legitimate expectation that the payment rates provided for in the sub-measure at issue would continue to be applied. By failing to include a review clause in its contracts with the beneficiaries concerned, Romania took on responsibility for their expectations. Next, there was no breach of the principle of legal certainty by the Commission, nor was it too late in communicating to the Romanian authorities a possible solution to avoid any overcompensation of the beneficiaries concerned. Last, Romania’s assertion that the RDP 2007-2013 and the payment rates established on the basis of the method that was approved should be strictly observed until they were changed is incorrect. Article 19 of Regulation No 1698/2005, read in conjunction with Article 6(1)(c) and Article 9(3) of Regulation 1974/2006, concerns only the revision of and changes in national rural development programmes and is without prejudice to the rules on the financing, administration and monitoring of the common agricultural policy and to the Commission’s obligations concerning the payments made in breach of those rules.

| 68 | As a preliminary point, it should be borne in mind that the principle of legal certainty – which is one of the general principles of EU law – requires that rules of law be clear, precise and predictable in their effects, so that interested parties can ascertain their position in situations and legal relationships governed by EU law (see judgment of 8 December 2011, France Télécom v Commission, C 81/10 P, EU:C:2011:811, paragraph 100 and the case-law cited). |
| --- | --- |

68

As a preliminary point, it should be borne in mind that the principle of legal certainty – which is one of the general principles of EU law – requires that rules of law be clear, precise and predictable in their effects, so that interested parties can ascertain their position in situations and legal relationships governed by EU law (see judgment of 8 December 2011, France Télécom v Commission, C 81/10 P, EU:C:2011:811, paragraph 100 and the case-law cited).

| 69 | A corollary of the principle of legal certainty is the principle of the protection of legitimate expectations, under which the right to rely on that protection extends to any person whom an institution of the European Union has caused, by giving him or her precise assurances, to entertain justified hopes. Information which is precise, unconditional and consistent, in whatever form it is given, constitutes such assurances. By contrast, a person may not plead breach of that principle unless he or she has been given those assurances (see judgment of 13 September 2017, Pappalardo and Others v Commission, C‐350/16 P, EU:C:2017:672, paragraph 39 and the case-law cited). The principle of the protection of legitimate expectations can also be invoked by a Member State (see judgment of 5 July 2018, Spain v Commission, T‐88/17, EU:T:2018:406, paragraph 107 and the case-law cited). |
| --- | --- |

69

A corollary of the principle of legal certainty is the principle of the protection of legitimate expectations, under which the right to rely on that protection extends to any person whom an institution of the European Union has caused, by giving him or her precise assurances, to entertain justified hopes. Information which is precise, unconditional and consistent, in whatever form it is given, constitutes such assurances. By contrast, a person may not plead breach of that principle unless he or she has been given those assurances (see judgment of 13 September 2017, Pappalardo and Others v Commission, C‐350/16 P, EU:C:2017:672, paragraph 39 and the case-law cited). The principle of the protection of legitimate expectations can also be invoked by a Member State (see judgment of 5 July 2018, Spain v Commission, T‐88/17, EU:T:2018:406, paragraph 107 and the case-law cited).

| 70 | In order to ascertain respect for the principle of the protection of legitimate expectations, it is appropriate, first, to determine whether the conduct of the administrative authorities gave rise to a reasonable expectation in the mind of a prudent and discriminating economic operator. If it did, the legitimate nature of that expectation must then be established (see judgment of 14 September 2006, Elmeka, C‐181/04 to C‐183/04, EU:C:2006:563, paragraph 32 and the case-law cited). |
| --- | --- |

70

In order to ascertain respect for the principle of the protection of legitimate expectations, it is appropriate, first, to determine whether the conduct of the administrative authorities gave rise to a reasonable expectation in the mind of a prudent and discriminating economic operator. If it did, the legitimate nature of that expectation must then be established (see judgment of 14 September 2006, Elmeka, C‐181/04 to C‐183/04, EU:C:2006:563, paragraph 32 and the case-law cited).

| 71 | If a prudent and discriminating economic operator could have foreseen the adoption of an EU measure likely to affect his or her interests, he or she cannot avail himself or herself of that principle if the measure is then adopted (see judgment of 16 October 1996, Efisol v Commission, T‐336/94, EU:T:1996:148, paragraph 31 and the case-law cited). |
| --- | --- |

71

If a prudent and discriminating economic operator could have foreseen the adoption of an EU measure likely to affect his or her interests, he or she cannot avail himself or herself of that principle if the measure is then adopted (see judgment of 16 October 1996, Efisol v Commission, T‐336/94, EU:T:1996:148, paragraph 31 and the case-law cited).

| 72 | It must be established whether, having regard to the circumstances of the present case, the Commission observed the principle of the protection of legitimate expectations and the principle of legal certainty. |
| --- | --- |

72

It must be established whether, having regard to the circumstances of the present case, the Commission observed the principle of the protection of legitimate expectations and the principle of legal certainty.

| 73 | In the present case, it must be recalled that, by its Decision C(2008) 3831 of 16 July 2008, the Commission approved the RDP 2007-2013 proposed by the Romanian authorities (see paragraph 2 above). On 14 September 2011, the Commission received a request for revision of the programme so as to include new ‘measures’ (see paragraph 3 above). Those measures included measure 215, containing several sub-measures (see paragraph 7 above) establishing compensatory payments for the income foregone and the additional costs borne by farmers – poultry and pig breeders – who voluntarily committed to implement certain animal welfare standards. It is common ground that measure 215 – including, therefore, the sub-measure at issue – was the subject of several exchanges between the Romanian authorities and the Commission before the Commission, by Implementing Decision C(2012) 3529 final of 25 May 2012 (see paragraph 7 above), approved the proposed change in the RDP 2007-2013 and the insertion of, inter alia, measure 215 in that programme as compatible with the EU legislation and, in particular, with Regulation No 1698/2005. |
| --- | --- |

73

In the present case, it must be recalled that, by its Decision C(2008) 3831 of 16 July 2008, the Commission approved the RDP 2007-2013 proposed by the Romanian authorities (see paragraph 2 above). On 14 September 2011, the Commission received a request for revision of the programme so as to include new ‘measures’ (see paragraph 3 above). Those measures included measure 215, containing several sub-measures (see paragraph 7 above) establishing compensatory payments for the income foregone and the additional costs borne by farmers – poultry and pig breeders – who voluntarily committed to implement certain animal welfare standards. It is common ground that measure 215 – including, therefore, the sub-measure at issue – was the subject of several exchanges between the Romanian authorities and the Commission before the Commission, by Implementing Decision C(2012) 3529 final of 25 May 2012 (see paragraph 7 above), approved the proposed change in the RDP 2007-2013 and the insertion of, inter alia, measure 215 in that programme as compatible with the EU legislation and, in particular, with Regulation No 1698/2005.

| 74 | However, following audits subsequent to its Implementing Decision C(2012) 3529 final of 25 May 2012 (see paragraph 7 above), the Commission considered, in its conciliation letter of 14 March 2017 (see paragraph 13 above), that measure 215 was not compatible with Article 40(3) of Regulation No 1698/2005, which, as stated in paragraph 45 above, provides that ‘the payments shall be granted annually and shall cover additional costs and payment foregone resulting from the commitment made’ and ‘where necessary, ... may cover also transaction costs’. |
| --- | --- |

74

However, following audits subsequent to its Implementing Decision C(2012) 3529 final of 25 May 2012 (see paragraph 7 above), the Commission considered, in its conciliation letter of 14 March 2017 (see paragraph 13 above), that measure 215 was not compatible with Article 40(3) of Regulation No 1698/2005, which, as stated in paragraph 45 above, provides that ‘the payments shall be granted annually and shall cover additional costs and payment foregone resulting from the commitment made’ and ‘where necessary, ... may cover also transaction costs’.

| 75 | That being noted, in the first place, it is appropriate to examine the Commission’s argument that the approval of the change in the RDP 2007-2013 to include measure 215 did not give rise to a legitimate expectation that the compensatory payment rates relating to the sub-measure at issue would be observed, in so far as it did not have before it all the necessary evidence to establish that that sub-measure was compatible with the EU legislation and, in particular, with Regulation No 1698/2005 (see paragraph 67 above). |
| --- | --- |

75

That being noted, in the first place, it is appropriate to examine the Commission’s argument that the approval of the change in the RDP 2007-2013 to include measure 215 did not give rise to a legitimate expectation that the compensatory payment rates relating to the sub-measure at issue would be observed, in so far as it did not have before it all the necessary evidence to establish that that sub-measure was compatible with the EU legislation and, in particular, with Regulation No 1698/2005 (see paragraph 67 above).

| 76 | In that regard, first, it follows from the letter ARES(2011) 1344895 of 13 December 2011 (see paragraph 4 above) that the Commission informed the Romanian authorities that, as matters then stood, the proposed change in the RDP 2007-2013 was not acceptable, and therefore requested clarification. More specifically, the Commission observed that the financing of the breeders seemed to be based on the premiss that the number of animals was falling and that, at the same time, the expenditure linked with the depreciation of the barns, manual labour and consumption of electricity persisted, which seemed to the Commission to represent double use of the aid. The Commission therefore required clarification. |
| --- | --- |

76

In that regard, first, it follows from the letter ARES(2011) 1344895 of 13 December 2011 (see paragraph 4 above) that the Commission informed the Romanian authorities that, as matters then stood, the proposed change in the RDP 2007-2013 was not acceptable, and therefore requested clarification. More specifically, the Commission observed that the financing of the breeders seemed to be based on the premiss that the number of animals was falling and that, at the same time, the expenditure linked with the depreciation of the barns, manual labour and consumption of electricity persisted, which seemed to the Commission to represent double use of the aid. The Commission therefore required clarification.

| 77 | Second, it is apparent from the letter of 4 April 2012 (see paragraph 6 above) that clarification was provided to the Commission. In that letter, the Commission stated, in particular, that the proposed changes in the RDP 2007-2013 complied with the relevant provisions of Regulation No 1698/2005 and of Regulation No 1974/2006 and were therefore accepted. The Commission thus adopted Implementing Decision C(2012) 3529 final of 25 May 2012 approving the seventh change in the RDP 2007-2013, which included, inter alia, measure 215 and its sub-measures (see paragraph 7 above). |
| --- | --- |

77

Second, it is apparent from the letter of 4 April 2012 (see paragraph 6 above) that clarification was provided to the Commission. In that letter, the Commission stated, in particular, that the proposed changes in the RDP 2007-2013 complied with the relevant provisions of Regulation No 1698/2005 and of Regulation No 1974/2006 and were therefore accepted. The Commission thus adopted Implementing Decision C(2012) 3529 final of 25 May 2012 approving the seventh change in the RDP 2007-2013, which included, inter alia, measure 215 and its sub-measures (see paragraph 7 above).

| 78 | Third, it follows from the report of the conciliation body issued in the context of procedure 17/RO/796 (see paragraph 15 above) that the Romanian authorities showed that body an email dated 17 February 2012 which confirmed that discussions between the Romanian authorities and the Commission, involving requests to change the method for calculating the compensatory payments relating to the sub-measure at issue, had taken place. The conciliation body therefore considered that all the details used in the calculation had been made available to the Commission, namely not only the final result but also the way in which that result had been obtained. |
| --- | --- |

78

Third, it follows from the report of the conciliation body issued in the context of procedure 17/RO/796 (see paragraph 15 above) that the Romanian authorities showed that body an email dated 17 February 2012 which confirmed that discussions between the Romanian authorities and the Commission, involving requests to change the method for calculating the compensatory payments relating to the sub-measure at issue, had taken place. The conciliation body therefore considered that all the details used in the calculation had been made available to the Commission, namely not only the final result but also the way in which that result had been obtained.

| 79 | Fourth, it follows from the letter of 11 September 2019 (see paragraph 24 above), whereby the Romanian authorities requested the initiation of procedure 19/RO/856, that, during the process of negotiation with the Commission with a view to making changes in the RDP 2007-2013 in order to introduce, inter alia, measure 215, the calculation method relating to that measure was the subject of email correspondence of 17 February and 14 March 2012 and also of bilateral meetings on 27 July 2011 and 13 and 14 February 2012. In the letter of 11 September 2019, it is stated that the exchanges of information and the negotiation tables concerning the technical aspects of measure 215 led to changes and to adaptations of the versions of the data sheet relating to that measure and the applicable calculation methods it in order to ensure compatibility with the EU legislation. More precisely, in that letter, the Romanian authorities stated that the savings in feed had been analysed in detail and that it had not been deemed necessary to include the savings resulting from the acquisition of a smaller number of animals. In addition, it was stated that the calculation methods relating to all the sub-measures of measure 215 had been made available to the Commission by means of the SFC2007 EU fund management system, first on 14 September 2011, in their initial version, and second, on 22 March 2012, in their final version approved by the Commission. |
| --- | --- |

79

Fourth, it follows from the letter of 11 September 2019 (see paragraph 24 above), whereby the Romanian authorities requested the initiation of procedure 19/RO/856, that, during the process of negotiation with the Commission with a view to making changes in the RDP 2007-2013 in order to introduce, inter alia, measure 215, the calculation method relating to that measure was the subject of email correspondence of 17 February and 14 March 2012 and also of bilateral meetings on 27 July 2011 and 13 and 14 February 2012. In the letter of 11 September 2019, it is stated that the exchanges of information and the negotiation tables concerning the technical aspects of measure 215 led to changes and to adaptations of the versions of the data sheet relating to that measure and the applicable calculation methods it in order to ensure compatibility with the EU legislation. More precisely, in that letter, the Romanian authorities stated that the savings in feed had been analysed in detail and that it had not been deemed necessary to include the savings resulting from the acquisition of a smaller number of animals. In addition, it was stated that the calculation methods relating to all the sub-measures of measure 215 had been made available to the Commission by means of the SFC2007 EU fund management system, first on 14 September 2011, in their initial version, and second, on 22 March 2012, in their final version approved by the Commission.

| 80 | In answer to a measure of organisation of procedure adopted by the Court, Romania produced two screenshots of the SFC2007 EU fund management system showing that the calculation methods relating to the sub-measure at issue had in fact been made available to the Commission, first on 14 September 2011, in their initial version, and then on 22 March 2012, in their final version approved by the Commission. In addition, in answer to a question put by the Court at the hearing, Romania stated that the fixed costs had been made available to the Commission in the context of the discussions that had taken place at the time of the first audit and that the Commission had taken them into account and considered that they were incorporated in the calculation method proposed by the Romanian authorities. Consequently, those costs were no longer mentioned in the final version of measure 215 approved by the Commission. |
| --- | --- |

80

In answer to a measure of organisation of procedure adopted by the Court, Romania produced two screenshots of the SFC2007 EU fund management system showing that the calculation methods relating to the sub-measure at issue had in fact been made available to the Commission, first on 14 September 2011, in their initial version, and then on 22 March 2012, in their final version approved by the Commission. In addition, in answer to a question put by the Court at the hearing, Romania stated that the fixed costs had been made available to the Commission in the context of the discussions that had taken place at the time of the first audit and that the Commission had taken them into account and considered that they were incorporated in the calculation method proposed by the Romanian authorities. Consequently, those costs were no longer mentioned in the final version of measure 215 approved by the Commission.

| 81 | In the light of the foregoing, it must be held that the discussions between the Romanian authorities and the Commission that preceded the Commission’s approval of the change in the RDP 2007-2013 in May 2012, concerned, in particular, the methods for calculating the compensatory payments relating to the sub-measure at issue and that both the final result and the way in which that result had been calculated were made available to the Commission. Furthermore, first, in its written pleadings, the Commission did not deny that the calculation methods had been made available to it by means of the SFC2007 EU fund management system, provided for in Article 63(1) of Regulation No 1974/2006. Second, in answer to a measure of organisation of procedure adopted by the Court, the Commission acknowledged that the letter ARES(2011) 1344895 of 13 December 2011 (see paragraph 4 above) showed that the details of the calculation method used for the sub-measure at issue had been the subject of discussions between it and Romania. |
| --- | --- |

81

In the light of the foregoing, it must be held that the discussions between the Romanian authorities and the Commission that preceded the Commission’s approval of the change in the RDP 2007-2013 in May 2012, concerned, in particular, the methods for calculating the compensatory payments relating to the sub-measure at issue and that both the final result and the way in which that result had been calculated were made available to the Commission. Furthermore, first, in its written pleadings, the Commission did not deny that the calculation methods had been made available to it by means of the SFC2007 EU fund management system, provided for in Article 63(1) of Regulation No 1974/2006. Second, in answer to a measure of organisation of procedure adopted by the Court, the Commission acknowledged that the letter ARES(2011) 1344895 of 13 December 2011 (see paragraph 4 above) showed that the details of the calculation method used for the sub-measure at issue had been the subject of discussions between it and Romania.

| 82 | On the basis of the evidence made available to the Court, it must be considered that, when it approved the change in the RDP 2007-2013, the Commission had information that enabled it to assess whether the sub-measure at issue and the methods for calculating the support rate specific to that measure were compatible with Article 40(3) of Regulation No 1698/2005. Therefore, the Commission’s argument that it was only after the audit carried out by the Court of Auditors that it became aware that the savings linked with animals not purchased and the savings in feed linked with the real increase in the animals’ weight had not been taken into account in the calculation of the payment rates relating to the sub-measure at issue must be dismissed. |
| --- | --- |

82

On the basis of the evidence made available to the Court, it must be considered that, when it approved the change in the RDP 2007-2013, the Commission had information that enabled it to assess whether the sub-measure at issue and the methods for calculating the support rate specific to that measure were compatible with Article 40(3) of Regulation No 1698/2005. Therefore, the Commission’s argument that it was only after the audit carried out by the Court of Auditors that it became aware that the savings linked with animals not purchased and the savings in feed linked with the real increase in the animals’ weight had not been taken into account in the calculation of the payment rates relating to the sub-measure at issue must be dismissed.

| 83 | Romania is therefore right to argue that the approval of the RDP 2007-2013 represented the Commission’s ‘clear’ consent to the implementation of the sub-measure at issue, in accordance with the requirements in budgetary matters and the principle of close cooperation between the Commission, in its capacity as paying authority, and the Member States of the European Union. |
| --- | --- |

83

Romania is therefore right to argue that the approval of the RDP 2007-2013 represented the Commission’s ‘clear’ consent to the implementation of the sub-measure at issue, in accordance with the requirements in budgetary matters and the principle of close cooperation between the Commission, in its capacity as paying authority, and the Member States of the European Union.

| 84 | In the second place, as is clear from paragraphs 76 to 79 above, there was a discussion between the Romanian authorities and the Commission about the method for calculating the payment rates relating to the sub-measure at issue, before the approval of the change in the RDP 2007-2013 to include that sub-measure in the RDP 2007-2013, and the Commission had the necessary information to assess whether that sub-measure was compatible with Article 40(3) of Regulation 1698/2005. That discussion and the documents referred to in paragraphs 78 and 79 above support the conclusion that the Commission provided ‘precise information’, within the meaning of the case-law cited in paragraph 69 above, when it sent the letter of 4 April 2012 and when it approved the change in the RDP 2007-2013. In addition, the wording of the Commission’s letter of 4 April 2012 and the decision approving the change in the national rural development programme support the conclusion that that information was ‘unconditional’ within the meaning of the case-law cited in paragraph 69 above. Last, it must be held that the information in question was also ‘consistent’ within the meaning of that case-law. According to Article 9(6) of Regulation No 1974/2006, the Commission is to assess changes in the rural development programmes proposed by the Member States by assessing their compliance with Regulation No 1698/2005, their coherence with the relevant national strategy plan and their compliance with Regulation No 1974/2006. |
| --- | --- |

84

In the second place, as is clear from paragraphs 76 to 79 above, there was a discussion between the Romanian authorities and the Commission about the method for calculating the payment rates relating to the sub-measure at issue, before the approval of the change in the RDP 2007-2013 to include that sub-measure in the RDP 2007-2013, and the Commission had the necessary information to assess whether that sub-measure was compatible with Article 40(3) of Regulation 1698/2005. That discussion and the documents referred to in paragraphs 78 and 79 above support the conclusion that the Commission provided ‘precise information’, within the meaning of the case-law cited in paragraph 69 above, when it sent the letter of 4 April 2012 and when it approved the change in the RDP 2007-2013. In addition, the wording of the Commission’s letter of 4 April 2012 and the decision approving the change in the national rural development programme support the conclusion that that information was ‘unconditional’ within the meaning of the case-law cited in paragraph 69 above. Last, it must be held that the information in question was also ‘consistent’ within the meaning of that case-law. According to Article 9(6) of Regulation No 1974/2006, the Commission is to assess changes in the rural development programmes proposed by the Member States by assessing their compliance with Regulation No 1698/2005, their coherence with the relevant national strategy plan and their compliance with Regulation No 1974/2006.

| 85 | Furthermore, since, when approving the change in the RDP 2007-2013, to include measure 215, the Commission assessed the compatibility of the sub-measure at issue with Regulation No 1698/2005, including, therefore, with Article 40(3) of that regulation, it must be acknowledged that the Romanian authorities lawfully considered that, in the present case, the Commission decision approving the change in the RDP 2007-2013 constituted a legal commitment within the meaning of the second subparagraph of Article 23 of Council Regulation (EC) No 1290/2005 of 21 June 2005 on the financing of the common agricultural policy (OJ 2005 L 209, p. 1). According to that provision, ‘the Commission decision adopting each rural development programme submitted by a Member State shall constitute a financing decision within the meaning of Article 75(2) of Regulation ... No 1605/2002 and, once notified to the Member State concerned, a legal commitment within the meaning of that Regulation’. Such a legal commitment, in specific circumstances, like those of the present dispute, may be such as to give rise to a legitimate expectation that an assessment by the Commission that a measure is compatible with the rules in force will be maintained. |
| --- | --- |

85

Furthermore, since, when approving the change in the RDP 2007-2013, to include measure 215, the Commission assessed the compatibility of the sub-measure at issue with Regulation No 1698/2005, including, therefore, with Article 40(3) of that regulation, it must be acknowledged that the Romanian authorities lawfully considered that, in the present case, the Commission decision approving the change in the RDP 2007-2013 constituted a legal commitment within the meaning of the second subparagraph of Article 23 of Council Regulation (EC) No 1290/2005 of 21 June 2005 on the financing of the common agricultural policy (OJ 2005 L 209, p. 1). According to that provision, ‘the Commission decision adopting each rural development programme submitted by a Member State shall constitute a financing decision within the meaning of Article 75(2) of Regulation ... No 1605/2002 and, once notified to the Member State concerned, a legal commitment within the meaning of that Regulation’. Such a legal commitment, in specific circumstances, like those of the present dispute, may be such as to give rise to a legitimate expectation that an assessment by the Commission that a measure is compatible with the rules in force will be maintained.

| 86 | In the light of the foregoing, it must be acknowledged that the Commission caused the Romanian authorities to have a legitimate expectation, within the meaning of the case-law cited in paragraph 70 above, that the compensatory payment rates relating to the sub-measure at issue were compatible with the EU legislation and, consequently, that those payments were covered by EU financing. |
| --- | --- |

86

In the light of the foregoing, it must be acknowledged that the Commission caused the Romanian authorities to have a legitimate expectation, within the meaning of the case-law cited in paragraph 70 above, that the compensatory payment rates relating to the sub-measure at issue were compatible with the EU legislation and, consequently, that those payments were covered by EU financing.

| 87 | In the third place, as regards the Commission’s assertion that, following the communication to the Romanian authorities of the Court of Auditors’ findings, the Romanian authorities’ expectations were no longer ‘legitimate’ within the meaning of the case-law cited in paragraphs 70 and 71 above, the following observations are called for. |
| --- | --- |

87

In the third place, as regards the Commission’s assertion that, following the communication to the Romanian authorities of the Court of Auditors’ findings, the Romanian authorities’ expectations were no longer ‘legitimate’ within the meaning of the case-law cited in paragraphs 70 and 71 above, the following observations are called for.

| 88 | First, as Romania correctly submits, the audit procedure before the Court of Auditors is an intermediate stage in the process preceding the adoption of the contested decision and the evaluation of the compatibility of the expenditure incurred under the RDP 2007-2013. That stage is followed by a number of steps taken by the Commission, such as an audit, bilateral meetings, any conciliation procedures that may take place, the final position taken by the Commission following those procedures, a summary report and a decision on whether the expenditure is to be excluded from financing. Since the Commission provided information of such a kind as to cause Romania to have a legitimate expectation that the compensatory payment rates relating to the sub-measure at issue, fixed by the RDP 2007-2013 and reproduced in the national legislation, were observed, the mere fact that the Commission might have reviewed its position following the Court of Auditors’ findings was not such as to put an end to that expectation. |
| --- | --- |

88

First, as Romania correctly submits, the audit procedure before the Court of Auditors is an intermediate stage in the process preceding the adoption of the contested decision and the evaluation of the compatibility of the expenditure incurred under the RDP 2007-2013. That stage is followed by a number of steps taken by the Commission, such as an audit, bilateral meetings, any conciliation procedures that may take place, the final position taken by the Commission following those procedures, a summary report and a decision on whether the expenditure is to be excluded from financing. Since the Commission provided information of such a kind as to cause Romania to have a legitimate expectation that the compensatory payment rates relating to the sub-measure at issue, fixed by the RDP 2007-2013 and reproduced in the national legislation, were observed, the mere fact that the Commission might have reviewed its position following the Court of Auditors’ findings was not such as to put an end to that expectation.

| 89 | Furthermore, it is apparent on reading the Court of Auditors’ findings and the Commission’s conciliation letter of 14 March 2017 (see paragraph 13 above) that the auditors of the Court of Auditors communicated an error rate of up to 78.87% for certain sub-measures and animal categories and a total error amount of EUR 160 056 272.18, while the Commission proposed to exclude a total amount of EUR 73 619 746.33 from EU financing under the sub-measure at issue and the other sub-measures of measure 215 of the RDP 2007-2013. In addition, in its first audit the Commission did not make an assessment of the impact of the error in the case of the sub-measure at issue, although the impact estimated by the auditors of the Court of Auditors was 38.41%. As is apparent from the report issued by the conciliation body in the context of procedure 19/RO/796, the Commission stated, at the hearing before that body, that it had been unable to verify or understand the Court of Auditors’ calculation of an error rate of more than 38%. |
| --- | --- |

89

Furthermore, it is apparent on reading the Court of Auditors’ findings and the Commission’s conciliation letter of 14 March 2017 (see paragraph 13 above) that the auditors of the Court of Auditors communicated an error rate of up to 78.87% for certain sub-measures and animal categories and a total error amount of EUR 160 056 272.18, while the Commission proposed to exclude a total amount of EUR 73 619 746.33 from EU financing under the sub-measure at issue and the other sub-measures of measure 215 of the RDP 2007-2013. In addition, in its first audit the Commission did not make an assessment of the impact of the error in the case of the sub-measure at issue, although the impact estimated by the auditors of the Court of Auditors was 38.41%. As is apparent from the report issued by the conciliation body in the context of procedure 19/RO/796, the Commission stated, at the hearing before that body, that it had been unable to verify or understand the Court of Auditors’ calculation of an error rate of more than 38%.

| 90 | It follows from the foregoing that the Court of Auditors’ findings were communicated to the Romanian authorities before the Commission adopted the amended position that the payments made under the sub-measure at issue infringed Article 40(3) of Regulation No 1698/2005. Thus, it cannot be maintained that, since receiving the Court of Auditors’ findings, the Romanian authorities ought reasonably to have expected that the Commission, which was the source of the precise, unconditional and consistent information according to which the method for calculating the payment rates relating to the sub-measure at issue met the requirements of Regulation No 1698/2005, might have ‘used a different calculation method’ from that used by the Romanian authorities, which, moreover, would have been different from that proposed by the Court of Auditors. |
| --- | --- |

90

It follows from the foregoing that the Court of Auditors’ findings were communicated to the Romanian authorities before the Commission adopted the amended position that the payments made under the sub-measure at issue infringed Article 40(3) of Regulation No 1698/2005. Thus, it cannot be maintained that, since receiving the Court of Auditors’ findings, the Romanian authorities ought reasonably to have expected that the Commission, which was the source of the precise, unconditional and consistent information according to which the method for calculating the payment rates relating to the sub-measure at issue met the requirements of Regulation No 1698/2005, might have ‘used a different calculation method’ from that used by the Romanian authorities, which, moreover, would have been different from that proposed by the Court of Auditors.

| 91 | Second, Article 9(3) of Regulation No 1974/2006 provides that changes in the RDP 2007-2013 may be made before 31 December 2015, provided that Member States notify such changes by 31 August 2015 at the latest. In the present case, it is common ground that, in accordance with that article, the provisions of the RDP 2007-2013, and thus measure 215 implemented in the legislative framework of the common agricultural policy during that period, could no longer be amended at the time when the Court of Auditors’ findings’ audit were communicated. In its letter of 28 February 2019, moreover, the Commission acknowledges that a change in the RDP 2007-2013 was no longer possible on that date. Therefore, it cannot be argued that the Romanian authorities were able to apply payments that differed from those approved in Commission Decision C(2012) 3529 final of 25 May 2012, although that decision was still in force, or that, at the time when the Court of Auditors made its findings, those authorities could unilaterally change the national rural development programme after 31 December 2015. It must also be observed that the Romanian authorities sent numerous requests to the Commission’s staff after 2016 with a view to identifying a procedure for changing the provisions of the technical file for measure 215 of the RDP 2007-2013 and that, contrary to the Commission’s contention, a useful answer to those questions had not been given to them by 3 March 2016. |
| --- | --- |

91

Second, Article 9(3) of Regulation No 1974/2006 provides that changes in the RDP 2007-2013 may be made before 31 December 2015, provided that Member States notify such changes by 31 August 2015 at the latest. In the present case, it is common ground that, in accordance with that article, the provisions of the RDP 2007-2013, and thus measure 215 implemented in the legislative framework of the common agricultural policy during that period, could no longer be amended at the time when the Court of Auditors’ findings’ audit were communicated. In its letter of 28 February 2019, moreover, the Commission acknowledges that a change in the RDP 2007-2013 was no longer possible on that date. Therefore, it cannot be argued that the Romanian authorities were able to apply payments that differed from those approved in Commission Decision C(2012) 3529 final of 25 May 2012, although that decision was still in force, or that, at the time when the Court of Auditors made its findings, those authorities could unilaterally change the national rural development programme after 31 December 2015. It must also be observed that the Romanian authorities sent numerous requests to the Commission’s staff after 2016 with a view to identifying a procedure for changing the provisions of the technical file for measure 215 of the RDP 2007-2013 and that, contrary to the Commission’s contention, a useful answer to those questions had not been given to them by 3 March 2016.

| 92 | It is not apparent from the Commission’s letter of 3 March 2016, which the Commission produced before the Court in answer to a measure of organisation of procedure, that an answer relating to the way of making the compensatory payments relating to the sub-measure at issue was provided to the Romanian authorities on that date. In the letter of 3 March 2016, the Commission refers to the payments relating to other sub-measures of measure 215 of the RDP 2007-2013. In any event, even on the assumption that, in its letter of 3 March 2016, the Commission implicitly set out the proposal to introduce review clauses in the commitments given by the beneficiaries concerned, it must be observed that the inclusion of such clauses would not be sufficient for the Romanian authorities to stop applying the payment rates relating to the sub-measure at issue fixed by an unaltered national rural development programme. A reduction of the payment rates relating to the sub-measure at issue became applicable for the Romanian authorities following a change in the RDP 2007-2013, carried out in accordance with Articles 18 and 19 of Regulation 1698/2005. |
| --- | --- |

92

It is not apparent from the Commission’s letter of 3 March 2016, which the Commission produced before the Court in answer to a measure of organisation of procedure, that an answer relating to the way of making the compensatory payments relating to the sub-measure at issue was provided to the Romanian authorities on that date. In the letter of 3 March 2016, the Commission refers to the payments relating to other sub-measures of measure 215 of the RDP 2007-2013. In any event, even on the assumption that, in its letter of 3 March 2016, the Commission implicitly set out the proposal to introduce review clauses in the commitments given by the beneficiaries concerned, it must be observed that the inclusion of such clauses would not be sufficient for the Romanian authorities to stop applying the payment rates relating to the sub-measure at issue fixed by an unaltered national rural development programme. A reduction of the payment rates relating to the sub-measure at issue became applicable for the Romanian authorities following a change in the RDP 2007-2013, carried out in accordance with Articles 18 and 19 of Regulation 1698/2005.

| 93 | Article 18 of Regulation No 1698/2005, entitled ‘Preparation and approval’ is worded as follows:
  ‘1.   Rural development programmes shall be established by a Member State following close cooperation with the partners referred to in Article 6.
  2.   Member States shall submit to the Commission a proposal for each rural development programme, containing the information mentioned in Article 16.
  3.   The Commission shall assess the proposed programmes on the basis of their consistency with the Community strategic guidelines, the national strategy plan and this Regulation.
  Where the Commission considers that a rural development programme is not consistent with the Community strategic guidelines, the national strategy plan or this Regulation, it shall request the Member State to revise the proposed programme accordingly.
  4.   Each rural development programme shall be approved in accordance with the procedure referred to in Article 90(2).’ |
| --- | --- |

93

Article 18 of Regulation No 1698/2005, entitled ‘Preparation and approval’ is worded as follows:

‘1.   Rural development programmes shall be established by a Member State following close cooperation with the partners referred to in Article 6.

2.   Member States shall submit to the Commission a proposal for each rural development programme, containing the information mentioned in Article 16.

3.   The Commission shall assess the proposed programmes on the basis of their consistency with the Community strategic guidelines, the national strategy plan and this Regulation.

Where the Commission considers that a rural development programme is not consistent with the Community strategic guidelines, the national strategy plan or this Regulation, it shall request the Member State to revise the proposed programme accordingly.

4.   Each rural development programme shall be approved in accordance with the procedure referred to in Article 90(2).’

| 94 | Article 19 of Regulation No 1698/2005, entitled ‘Review’, provides as follows:
  ‘1.   The rural development programmes shall be re-examined and, if appropriate, adapted for the remainder of the period by the Member State following Monitoring Committee approval. The revisions shall take into account the outcome of evaluations and the Commission’s reports, particularly with a view to strengthening or adapting the way in which the [Union] priorities are taken into account.
  2.   The Commission shall adopt a decision on requests to revise rural development programmes after the submission of such a request by a Member State in accordance with the procedure referred to in Article 90(2). Changes requiring approval by Commission decision shall be defined in accordance with the procedure referred to in Article 90(2).’ |
| --- | --- |

94

Article 19 of Regulation No 1698/2005, entitled ‘Review’, provides as follows:

‘1.   The rural development programmes shall be re-examined and, if appropriate, adapted for the remainder of the period by the Member State following Monitoring Committee approval. The revisions shall take into account the outcome of evaluations and the Commission’s reports, particularly with a view to strengthening or adapting the way in which the [Union] priorities are taken into account.

2.   The Commission shall adopt a decision on requests to revise rural development programmes after the submission of such a request by a Member State in accordance with the procedure referred to in Article 90(2). Changes requiring approval by Commission decision shall be defined in accordance with the procedure referred to in Article 90(2).’

| 95 | In the dialogue with the Commission, the Romanian authorities pointed out, on several occasions, that it was objectively impossible to make changes in the RDP 2007-2013, and requested the Commission’s help in identifying a solution as early as 7 January 2016. Thus, the Commission cannot maintain that the Romanian authorities did not act with all due diligence in order to clarify the situation as quickly as possible and to identify a legally feasible option. |
| --- | --- |

95

In the dialogue with the Commission, the Romanian authorities pointed out, on several occasions, that it was objectively impossible to make changes in the RDP 2007-2013, and requested the Commission’s help in identifying a solution as early as 7 January 2016. Thus, the Commission cannot maintain that the Romanian authorities did not act with all due diligence in order to clarify the situation as quickly as possible and to identify a legally feasible option.

| 96 | Third, the Commission cannot rely on the proposal set out in its letter of 28 February 2019, according to which, after 31 December 2015, all payments relating to measure 215 were made under transitional provisions relating to expenditure of the national rural development programme for the period 2014-2020 and the Commission could, in principle, allow the change in the payment rates relating to that sub-measure to be reflected in the wording of the national rural development programme, by means of a change in that programme. |
| --- | --- |

96

Third, the Commission cannot rely on the proposal set out in its letter of 28 February 2019, according to which, after 31 December 2015, all payments relating to measure 215 were made under transitional provisions relating to expenditure of the national rural development programme for the period 2014-2020 and the Commission could, in principle, allow the change in the payment rates relating to that sub-measure to be reflected in the wording of the national rural development programme, by means of a change in that programme.

| 97 | The EU legislation sets deadlines for any changes in the RDP 2007-2013 and for the submission of payment claims in application of a measure of that programme. At the date of the Commission’s letter, on 28 February 2019, it was no longer possible to change the compensatory payments by means of a change in the national rural development programme for the period 2014-2020 that would have been applied retroactively to payment claims already submitted in application of the sub-measure at issue. The commitments with beneficiaries had been entered into on the basis of the RDP 2007-2013 and the date for submission of payment claims for the last year of commitment of the beneficiaries of measure 215 was 15 February 2019. |
| --- | --- |

97

The EU legislation sets deadlines for any changes in the RDP 2007-2013 and for the submission of payment claims in application of a measure of that programme. At the date of the Commission’s letter, on 28 February 2019, it was no longer possible to change the compensatory payments by means of a change in the national rural development programme for the period 2014-2020 that would have been applied retroactively to payment claims already submitted in application of the sub-measure at issue. The commitments with beneficiaries had been entered into on the basis of the RDP 2007-2013 and the date for submission of payment claims for the last year of commitment of the beneficiaries of measure 215 was 15 February 2019.

| 98 | In that regard, it should be made clear that, as is apparent from the case file, and as stated at the hearing, measure 215 of the RDP 2007-2013 was the subject of a transition, in the context of the national rural development programme for the period 2014-2020, approved by Commission Implementing Decision C(2015) 3508 of 26 May 2015, and was implemented in the context of the transitional provisions without the specific conditions of the commitments under measure 215 being adjusted by a change in the national rural development programme for the period 2014-2020. Thus, for the Romanian authorities, the amount of the payments relating to the sub-measure at issue continued to be the amount fixed in the RDP 2007-2013 until 2019, the last year of the transitional commitments of measure 215, for which the compensatory payments relating to the sub-measure at issue were made until the final date of 30 June 2020, as provided for in Article 75(1) of Regulation No 1306/2013. |
| --- | --- |

98

In that regard, it should be made clear that, as is apparent from the case file, and as stated at the hearing, measure 215 of the RDP 2007-2013 was the subject of a transition, in the context of the national rural development programme for the period 2014-2020, approved by Commission Implementing Decision C(2015) 3508 of 26 May 2015, and was implemented in the context of the transitional provisions without the specific conditions of the commitments under measure 215 being adjusted by a change in the national rural development programme for the period 2014-2020. Thus, for the Romanian authorities, the amount of the payments relating to the sub-measure at issue continued to be the amount fixed in the RDP 2007-2013 until 2019, the last year of the transitional commitments of measure 215, for which the compensatory payments relating to the sub-measure at issue were made until the final date of 30 June 2020, as provided for in Article 75(1) of Regulation No 1306/2013.

| 99 | Furthermore, as stated in the Romanian authorities’ letter of 11 September 2019, the programme documents pertaining to the implementation of the measures of the RDP 2007-2013 (guide for claimants, manuals and procedures for the administration of claims for payment, manuals and procedures for authorisation of payment) were approved by ministerial decree and constitute the national legislation. Those documents, in turn, contain the amounts set out in the file for measure 215. |
| --- | --- |

99

Furthermore, as stated in the Romanian authorities’ letter of 11 September 2019, the programme documents pertaining to the implementation of the measures of the RDP 2007-2013 (guide for claimants, manuals and procedures for the administration of claims for payment, manuals and procedures for authorisation of payment) were approved by ministerial decree and constitute the national legislation. Those documents, in turn, contain the amounts set out in the file for measure 215.

| 100 | Fourth, it should therefore be recognised – as the conciliation body recognises in the report issued in the context of procedure 19/RO/796 – that a change in the RDP 2007-2013 and a decision approving that change were required in order for the Romanian authorities to be able to reduce the compensatory payments made. Those authorities were correct to claim that compliance with the relevant EU rules and, more specifically, with Article 9(3) of Regulation No 1974/2006 (see paragraph 91 above) and with the relevant national legislation, adopted for the purpose of implementing that programme, made it impossible to change, after the date on which they were notified of the Court of Auditors’ findings, the rate of payment and the calculation method relating to the sub-measure at issue approved by the Commission by Decision C(2012) 3529 final of 25 May 2012. |
| --- | --- |

100

Fourth, it should therefore be recognised – as the conciliation body recognises in the report issued in the context of procedure 19/RO/796 – that a change in the RDP 2007-2013 and a decision approving that change were required in order for the Romanian authorities to be able to reduce the compensatory payments made. Those authorities were correct to claim that compliance with the relevant EU rules and, more specifically, with Article 9(3) of Regulation No 1974/2006 (see paragraph 91 above) and with the relevant national legislation, adopted for the purpose of implementing that programme, made it impossible to change, after the date on which they were notified of the Court of Auditors’ findings, the rate of payment and the calculation method relating to the sub-measure at issue approved by the Commission by Decision C(2012) 3529 final of 25 May 2012.

| 101 | Thus, it must be held that, having regard to the circumstances of the present case, namely that the methods for calculating the payment rates relating to the sub-measure at issue and the results of that calculation had been the subject of a specific negotiation with the Commission, which, by letter of 4 April 2012 and by Decision C(2012) 3529 final of 25 May 2012, had expressly approved them as being compatible with Regulation No 1698/2005, the Court of Auditors’ findings are not capable of rendering those methods and their results invalid, with immediate effect, and having the consequence of putting an end to Romania’s legitimate expectations. |
| --- | --- |

101

Thus, it must be held that, having regard to the circumstances of the present case, namely that the methods for calculating the payment rates relating to the sub-measure at issue and the results of that calculation had been the subject of a specific negotiation with the Commission, which, by letter of 4 April 2012 and by Decision C(2012) 3529 final of 25 May 2012, had expressly approved them as being compatible with Regulation No 1698/2005, the Court of Auditors’ findings are not capable of rendering those methods and their results invalid, with immediate effect, and having the consequence of putting an end to Romania’s legitimate expectations.

| 102 | As Romania’s legitimate expectations that the compensatory payment rates relating to the sub-measure at issue, fixed by the RDP 2007-2013, transposed into the national rural development programme for the period 2014-2020 (see paragraph 98 above) and reproduced in the national legislation (see paragraph 99 above), would be respected throughout the entire period of the commitments given by the beneficiaries were extended following the Court of Auditors’ findings, the Commission therefore failed to have regard to those expectations when it decided to apply a flat-rate correction of 25% and to exclude from EU financing the corresponding expenditure relating to that sub-measure. |
| --- | --- |

102

As Romania’s legitimate expectations that the compensatory payment rates relating to the sub-measure at issue, fixed by the RDP 2007-2013, transposed into the national rural development programme for the period 2014-2020 (see paragraph 98 above) and reproduced in the national legislation (see paragraph 99 above), would be respected throughout the entire period of the commitments given by the beneficiaries were extended following the Court of Auditors’ findings, the Commission therefore failed to have regard to those expectations when it decided to apply a flat-rate correction of 25% and to exclude from EU financing the corresponding expenditure relating to that sub-measure.

| 103 | That conclusion is not called into question by the Commission’s argument that the judgment of 14 March 2013, Agrargenossenschaft Neuzelle (C‐545/11, EU:C:2013:169) is applicable in the present case. In paragraph 31 of that judgment, it is stated that Article 30 of Regulation No 1782/2003 provides that the support schemes listed in Annex I to that regulation are to be applied without prejudice to possible review at any moment in the light of market developments and the budgetary situation. In paragraph 32 of that judgment, it is noted that recital 22 of that regulation states that common support schemes have to be adapted to developments, if necessary within short time limits, and that beneficiaries cannot, therefore, rely on support conditions remaining unchanged and should be prepared for a possible review of schemes in the light of market developments. The Court of Justice concludes, in paragraph 33 of that judgment, that a prudent and alert economic operator was in a position to foresee that the direct payments under the revenue support schemes could be reduced following a review, in the light of market developments and the budgetary situation. However, unlike the case examined by the Court of Justice in the judgment of 14 March 2013, Agrargenossenschaft Neuzelle (C‐545/11, EU:C:2013:169), in the present case the EU legislation does not permit a change in the RDP 2007-2013 and the commitments entered into with the beneficiaries at any time, as is clear from Article 9(3) of Regulation No 1974/2006, referred to in paragraph 91 above. |
| --- | --- |

103

That conclusion is not called into question by the Commission’s argument that the judgment of 14 March 2013, Agrargenossenschaft Neuzelle (C‐545/11, EU:C:2013:169) is applicable in the present case. In paragraph 31 of that judgment, it is stated that Article 30 of Regulation No 1782/2003 provides that the support schemes listed in Annex I to that regulation are to be applied without prejudice to possible review at any moment in the light of market developments and the budgetary situation. In paragraph 32 of that judgment, it is noted that recital 22 of that regulation states that common support schemes have to be adapted to developments, if necessary within short time limits, and that beneficiaries cannot, therefore, rely on support conditions remaining unchanged and should be prepared for a possible review of schemes in the light of market developments. The Court of Justice concludes, in paragraph 33 of that judgment, that a prudent and alert economic operator was in a position to foresee that the direct payments under the revenue support schemes could be reduced following a review, in the light of market developments and the budgetary situation. However, unlike the case examined by the Court of Justice in the judgment of 14 March 2013, Agrargenossenschaft Neuzelle (C‐545/11, EU:C:2013:169), in the present case the EU legislation does not permit a change in the RDP 2007-2013 and the commitments entered into with the beneficiaries at any time, as is clear from Article 9(3) of Regulation No 1974/2006, referred to in paragraph 91 above.

| 104 | Nor can the Commission rely on the application in the present case of the judgment of 3 April 2017, Germany v Commission (T‐28/16, EU:T:2017:242, paragraphs 93 to 97), to preclude the persistence in time of Romania’s legitimate expectations. In that judgment, this Court held that the Commission’s approval of the programme for the development of the agricultural and rural economy in Bavaria (Germany) for the period 2007-2013 could not have resulted in the Commission waiving the requirement for comparative selection criteria, which in any event would have resulted in its exceeding its powers. However, the situation in the present case is not comparable with the situation examined in the context of that judgment. In the present case, the Commission, which had all the necessary material before it, decided, in the context of its wide discretion, to approve the change in the RDP 2007-2013 so as to include therein measure 215 (and thus the sub-measure at issue) as compatible with Regulation No 1698/2005, therefore including Article 40(3) of that regulation. In doing so, the Commission approved a method for calculating the compensatory payment rates relating to the sub-measure at issue which did not take the savings resulting from animals no longer purchased and the animals’ actual weight into account for the purpose of calculating the savings in feed. Furthermore, it does not follow from the judgment of 3 April 2017, Germany v Commission (T‐28/16, EU:T:2017:242), that the measures of the development programme concerned had, as in the present case, been the subject of a specific negotiation. |
| --- | --- |

104

Nor can the Commission rely on the application in the present case of the judgment of 3 April 2017, Germany v Commission (T‐28/16, EU:T:2017:242, paragraphs 93 to 97), to preclude the persistence in time of Romania’s legitimate expectations. In that judgment, this Court held that the Commission’s approval of the programme for the development of the agricultural and rural economy in Bavaria (Germany) for the period 2007-2013 could not have resulted in the Commission waiving the requirement for comparative selection criteria, which in any event would have resulted in its exceeding its powers. However, the situation in the present case is not comparable with the situation examined in the context of that judgment. In the present case, the Commission, which had all the necessary material before it, decided, in the context of its wide discretion, to approve the change in the RDP 2007-2013 so as to include therein measure 215 (and thus the sub-measure at issue) as compatible with Regulation No 1698/2005, therefore including Article 40(3) of that regulation. In doing so, the Commission approved a method for calculating the compensatory payment rates relating to the sub-measure at issue which did not take the savings resulting from animals no longer purchased and the animals’ actual weight into account for the purpose of calculating the savings in feed. Furthermore, it does not follow from the judgment of 3 April 2017, Germany v Commission (T‐28/16, EU:T:2017:242), that the measures of the development programme concerned had, as in the present case, been the subject of a specific negotiation.

| 105 | The possibility, put forward by the Commission at the hearing, that the case-law resulting from the judgment of 22 November 2018, Portugal v Commission (T‐31/17, EU:T:2018:830, paragraph 93) might be applied in the present case must also be dismissed. |
| --- | --- |

105

The possibility, put forward by the Commission at the hearing, that the case-law resulting from the judgment of 22 November 2018, Portugal v Commission (T‐31/17, EU:T:2018:830, paragraph 93) might be applied in the present case must also be dismissed.

| 106 | Admittedly, it was held in paragraph 93 of the judgment of 22 November 2018, Portugal v Commission (T‐31/17, EU:T:2018:830), that overall programmes were provisional in nature, with the result that, by approving them, the Commission was not, in principle, taking a definitive view on the compatibility of the measures contained therein with all the applicable rules of EU law and, therefore, on the eligibility of those measures for EU financing. The Court further held that it cannot be inferred from the mere fact that the Commission approves an overall programme either that the measures contained in that programme necessarily comply with all the relevant rules of EU law or that the eligibility of those measures for EU financing could no longer be called into question by the Commission, in particular as part of the conformity clearance procedure provided for in Article 31 of Regulation No 1290/2005, and referred to points 48, 49, 52 and 59 of the Opinion of Advocate General Kokott in Czech Republic v Commission (C‐4/17 P, EU:C:2018:237). |
| --- | --- |

106

Admittedly, it was held in paragraph 93 of the judgment of 22 November 2018, Portugal v Commission (T‐31/17, EU:T:2018:830), that overall programmes were provisional in nature, with the result that, by approving them, the Commission was not, in principle, taking a definitive view on the compatibility of the measures contained therein with all the applicable rules of EU law and, therefore, on the eligibility of those measures for EU financing. The Court further held that it cannot be inferred from the mere fact that the Commission approves an overall programme either that the measures contained in that programme necessarily comply with all the relevant rules of EU law or that the eligibility of those measures for EU financing could no longer be called into question by the Commission, in particular as part of the conformity clearance procedure provided for in Article 31 of Regulation No 1290/2005, and referred to points 48, 49, 52 and 59 of the Opinion of Advocate General Kokott in Czech Republic v Commission (C‐4/17 P, EU:C:2018:237).

| 107 | However, it must be observed that, in paragraph 96 of the judgment of 22 November 2018, Portugal v Commission (T‐31/17, EU:T:2018:830), it is expressly stated that the Commission decision approving the national rural development programme at issue did not specifically rule on the compatibility of the sub-measure of the programme in question with all the applicable European Agricultural Guarantee Fund (EAGF) related provisions. In addition, the operative part of the Commission decision approving the change in that programme made clear that the approval given by that decision ‘[did] not cover the control arrangements and the penalties, which [would have been] examined as part of the EAGF audits’. It was therefore by reference to the terms of the decision approving the change and the legal context in which it was taken that the Court held that the Commission could not be regarded as ‘having given the Portuguese authorities, on the adoption of that decision, precise, unconditional and consistent information as regards the eligibility for EU financing of the expenditure relating to the checks mentioned in point 4.6 of Annex I to the sub-programme for the autonomous region of the Azores’ (Portugal). Therefore, the findings made in that judgment cannot be transposed to the present case. As stated in paragraphs 84, 101 and 102 above, the Commission specifically negotiated the content of the sub-measure at issue. The decision approving the change in RDP 2007-2013 cannot therefore be merely ‘provisional’. |
| --- | --- |

107

However, it must be observed that, in paragraph 96 of the judgment of 22 November 2018, Portugal v Commission (T‐31/17, EU:T:2018:830), it is expressly stated that the Commission decision approving the national rural development programme at issue did not specifically rule on the compatibility of the sub-measure of the programme in question with all the applicable European Agricultural Guarantee Fund (EAGF) related provisions. In addition, the operative part of the Commission decision approving the change in that programme made clear that the approval given by that decision ‘[did] not cover the control arrangements and the penalties, which [would have been] examined as part of the EAGF audits’. It was therefore by reference to the terms of the decision approving the change and the legal context in which it was taken that the Court held that the Commission could not be regarded as ‘having given the Portuguese authorities, on the adoption of that decision, precise, unconditional and consistent information as regards the eligibility for EU financing of the expenditure relating to the checks mentioned in point 4.6 of Annex I to the sub-programme for the autonomous region of the Azores’ (Portugal). Therefore, the findings made in that judgment cannot be transposed to the present case. As stated in paragraphs 84, 101 and 102 above, the Commission specifically negotiated the content of the sub-measure at issue. The decision approving the change in RDP 2007-2013 cannot therefore be merely ‘provisional’.

| 108 | As regards the Commission’s argument that, despite the absence in the contracts with the beneficiaries of any provision for review clauses, Romania would also have found, in its legal framework, a means of reducing payments for the other sub-measures of measure 215 of the RDP 2007-2013 after 2015, in the light of the findings set out in paragraphs 91 to 100 above, it must be observed that that argument does not establish, in the case of the sub-measure at issue, that Romania had also been able to find a means of reducing the compensatory payment rates. Furthermore, Romania informed the Commission, in its letters of 9 July 2018 and 8 January and 12 February 2019, that, because of the reduction of the compensatory payments relating to the other sub-measures, legal proceedings had been initiated by beneficiaries claiming payment of the aid in full in accordance with the RDP 2007-2013 and the national legislation. |
| --- | --- |

108

As regards the Commission’s argument that, despite the absence in the contracts with the beneficiaries of any provision for review clauses, Romania would also have found, in its legal framework, a means of reducing payments for the other sub-measures of measure 215 of the RDP 2007-2013 after 2015, in the light of the findings set out in paragraphs 91 to 100 above, it must be observed that that argument does not establish, in the case of the sub-measure at issue, that Romania had also been able to find a means of reducing the compensatory payment rates. Furthermore, Romania informed the Commission, in its letters of 9 July 2018 and 8 January and 12 February 2019, that, because of the reduction of the compensatory payments relating to the other sub-measures, legal proceedings had been initiated by beneficiaries claiming payment of the aid in full in accordance with the RDP 2007-2013 and the national legislation.

| 109 | In that regard, Romania pertinently claimed, in its letter of 11 September 2019, that the Commission’s proposal to include, after the submission of payment claims for the fifth and final commitment year under measure 215, new factors in the method for calculating the compensatory payments in addition to the factors known at the time when the commitments were entered into represented a risk for the beneficiaries owing to the lack of foreseeability of the factors capable of influencing the economic and financial indicators on which the viability of the farms and, indeed, in certain extreme cases, the pursuit of the economic activity of the farms in difficulty, were dependent. |
| --- | --- |

109

In that regard, Romania pertinently claimed, in its letter of 11 September 2019, that the Commission’s proposal to include, after the submission of payment claims for the fifth and final commitment year under measure 215, new factors in the method for calculating the compensatory payments in addition to the factors known at the time when the commitments were entered into represented a risk for the beneficiaries owing to the lack of foreseeability of the factors capable of influencing the economic and financial indicators on which the viability of the farms and, indeed, in certain extreme cases, the pursuit of the economic activity of the farms in difficulty, were dependent.

| 110 | The commitments entered into by the beneficiaries in the context of measure 215 have contractual force, they are concluded for a minimum period of five years and they prescribe obligations, voluntarily assumed by the beneficiaries, to comply with the basic requirements, the requirements and actions specific to each sub-measure for which they have signed up and also with the cross-compliance rules applicable to the agricultural land belonging to the farm in question and the agricultural activities carried out on that farm. By reason of those commitments and of the expiry of the time limit laid down for proposing a change in the RDP 2007-2013, it was not possible for the Romanian authorities to apply compensatory payments that did not correspond to the level set out in the technical file of measure 215 of the RDP 2007-2013. |
| --- | --- |

110

The commitments entered into by the beneficiaries in the context of measure 215 have contractual force, they are concluded for a minimum period of five years and they prescribe obligations, voluntarily assumed by the beneficiaries, to comply with the basic requirements, the requirements and actions specific to each sub-measure for which they have signed up and also with the cross-compliance rules applicable to the agricultural land belonging to the farm in question and the agricultural activities carried out on that farm. By reason of those commitments and of the expiry of the time limit laid down for proposing a change in the RDP 2007-2013, it was not possible for the Romanian authorities to apply compensatory payments that did not correspond to the level set out in the technical file of measure 215 of the RDP 2007-2013.

| 111 | In any event, the fact that Romania might be in a position to reduce the payments and thus to reduce its losses resulting from the agricultural funds’ refusal to cover the expenditure as regards the sub-measure at issue, contrary to what was agreed in the approved national rural development programme, is not such as to deprive it of the possibility to rely on its legitimate expectation that the compensatory payment rates relating to the sub-measure at issue, fixed by the RDP 2007-2013 and reproduced in the national legislation (see paragraph 99 above), would be respected. Furthermore, the need to initiate, in the context of the sub-measure at issue, procedures to alter the contracts and the need to deal with any ensuing legal proceedings, as was the case in the context of the other sub-measures of measure 215 of the RDP 2007-2013, would be precisely the negative consequences of a breach of the principle of the protection of Romania’s legitimate expectations and also of the principle of legal certainty. |
| --- | --- |

111

In any event, the fact that Romania might be in a position to reduce the payments and thus to reduce its losses resulting from the agricultural funds’ refusal to cover the expenditure as regards the sub-measure at issue, contrary to what was agreed in the approved national rural development programme, is not such as to deprive it of the possibility to rely on its legitimate expectation that the compensatory payment rates relating to the sub-measure at issue, fixed by the RDP 2007-2013 and reproduced in the national legislation (see paragraph 99 above), would be respected. Furthermore, the need to initiate, in the context of the sub-measure at issue, procedures to alter the contracts and the need to deal with any ensuing legal proceedings, as was the case in the context of the other sub-measures of measure 215 of the RDP 2007-2013, would be precisely the negative consequences of a breach of the principle of the protection of Romania’s legitimate expectations and also of the principle of legal certainty.

| 112 | Admittedly, it follows from the case-law that the Commission’s approval of a rural development programme does not confer on that planning document a value higher than that of the EU legislation and that, consequently, both the Commission and Romania continue to be required to comply with the provisions of the EU legislation (see, to that effect, judgment of 25 February 2015, Poland v Commission, T‐257/13, not published, EU:T:2015:111, paragraph 53). However, Romania bases its assertions that the Commission breached the principle of the protection of legitimate expectations not only on the approval of the RDP 2007-2013, but also on the fact that measure 215 and the method for calculating the compensatory payments contained therein were the subject of a specific negotiation and on the fact that, at the time when the Court of Auditors’ findings were communicated to Romania, the EU legislation, namely Article 9(3) of Regulation No 1974/2006, no longer allowed that programme to be changed. The underlying objective of that provision is to ensure the stability of the commitments made in application of the RDP 2007-2013. |
| --- | --- |

112

Admittedly, it follows from the case-law that the Commission’s approval of a rural development programme does not confer on that planning document a value higher than that of the EU legislation and that, consequently, both the Commission and Romania continue to be required to comply with the provisions of the EU legislation (see, to that effect, judgment of 25 February 2015, Poland v Commission, T‐257/13, not published, EU:T:2015:111, paragraph 53). However, Romania bases its assertions that the Commission breached the principle of the protection of legitimate expectations not only on the approval of the RDP 2007-2013, but also on the fact that measure 215 and the method for calculating the compensatory payments contained therein were the subject of a specific negotiation and on the fact that, at the time when the Court of Auditors’ findings were communicated to Romania, the EU legislation, namely Article 9(3) of Regulation No 1974/2006, no longer allowed that programme to be changed. The underlying objective of that provision is to ensure the stability of the commitments made in application of the RDP 2007-2013.

| 113 | In so far as the wording of Article 40(3) of Regulation No 1698/2005, which provides that animal welfare payments are to cover additional costs and income foregone resulting from the commitments made (see paragraph 45 above), does not state how the additional costs borne by breeders are to be calculated, and in so far as the Commission has a wide discretion in deciding whether a method for calculating the rates of compensation gives rise to overcompensation of the beneficiaries of the aid, particular significance should be placed on the Commission’s approval, following a specific negotiation with the Romanian authorities, of the method identified by those authorities. In other words, the Commission’s approval of the change in the RDP 2007-2013 by Decision C(2012) 3529 final of 25 May 2012, and the expiry of the period during which changes might be made, support the conclusion that the Commission caused a legitimate expectation not only that the sub-measure at issue would no longer be changed, but also that the Romanian authorities’ expectations continued to be legitimate within the meaning of the case-law cited in paragraphs 70 and 71 above, after they had been notified of the Court of Auditors’ findings. |
| --- | --- |

113

In so far as the wording of Article 40(3) of Regulation No 1698/2005, which provides that animal welfare payments are to cover additional costs and income foregone resulting from the commitments made (see paragraph 45 above), does not state how the additional costs borne by breeders are to be calculated, and in so far as the Commission has a wide discretion in deciding whether a method for calculating the rates of compensation gives rise to overcompensation of the beneficiaries of the aid, particular significance should be placed on the Commission’s approval, following a specific negotiation with the Romanian authorities, of the method identified by those authorities. In other words, the Commission’s approval of the change in the RDP 2007-2013 by Decision C(2012) 3529 final of 25 May 2012, and the expiry of the period during which changes might be made, support the conclusion that the Commission caused a legitimate expectation not only that the sub-measure at issue would no longer be changed, but also that the Romanian authorities’ expectations continued to be legitimate within the meaning of the case-law cited in paragraphs 70 and 71 above, after they had been notified of the Court of Auditors’ findings.

| 114 | Taking account of the specific circumstances of the present case, it must be recognised that the right to EU financing of the compensatory payments relating to the sub-measure at issue according to the amount fixed in the RDP 2007-2013 and transposed in the national rural development programme for the period 2014-2020, approved by Commission Implementing Decision C(2015) 3508 of 26 May 2015, in return for the commitments given and complied with by the farmers over a period of five years (namely to increase by 10% the space allocated to each animal and to reduce the number of animals accordingly), cannot be affected and altered as a result of subsequent events, such as the Court of Auditors’ findings, since that would constitute a breach of the Romanian authorities’ legitimate expectations. |
| --- | --- |

114

Taking account of the specific circumstances of the present case, it must be recognised that the right to EU financing of the compensatory payments relating to the sub-measure at issue according to the amount fixed in the RDP 2007-2013 and transposed in the national rural development programme for the period 2014-2020, approved by Commission Implementing Decision C(2015) 3508 of 26 May 2015, in return for the commitments given and complied with by the farmers over a period of five years (namely to increase by 10% the space allocated to each animal and to reduce the number of animals accordingly), cannot be affected and altered as a result of subsequent events, such as the Court of Auditors’ findings, since that would constitute a breach of the Romanian authorities’ legitimate expectations.

| 115 | In the light of all of the foregoing, it must be concluded that, when it adopted the contested decision, the Commission failed to comply with the principle of the protection of legitimate expectations and, consequently, the principle of legal certainty, of which the principle of the protection of legitimate expectations constitutes a corollary (see paragraph 69 above). |
| --- | --- |

115

In the light of all of the foregoing, it must be concluded that, when it adopted the contested decision, the Commission failed to comply with the principle of the protection of legitimate expectations and, consequently, the principle of legal certainty, of which the principle of the protection of legitimate expectations constitutes a corollary (see paragraph 69 above).

| 116 | The fourth and fifth complaints in the first plea must therefore be upheld. |
| --- | --- |

116

The fourth and fifth complaints in the first plea must therefore be upheld.

The third complaint in the first plea, alleging infringement of Article 12(6) and (7) of Delegated Regulation No 907/2014 and the Guidelines on the calculation of financial corrections

The third complaint in the first plea, alleging infringement of Article 12(6) and (7) of Delegated Regulation No 907/2014 and the Guidelines on the calculation of financial corrections

| 117 | Romania maintains that the Commission misapplied Article 12(6) and (7) of Delegated Regulation No 907/2014 and the Guidelines on the calculation of financial corrections. It submits that, as the conciliation body had demonstrated in the report which it submitted in the context of procedure 17/RO/796 (see paragraph 15 above), that problem had already been raised with respect to Implementing Decision 2018/873. More specifically, the Commission was wrong to consider that the existence of a supposedly incorrect calculation method could be treated as equivalent to the cases of irregularity governed by Article 12(6) and (7) of Delegated Regulation No 907/2014. The case covered by that provision concerns the conduct of the beneficiaries of the funds. The present case does not concern deficiencies in the verification of the legality and the regularity of the claims that gave rise to a compensatory payment under the sub-measure at issue. Furthermore, in the event of an incorrect calculation method, it is possible to determine, without disproportionate effort, the precise amount of the corrections. Since the finding that a calculation method is incorrect cannot be connected to cases of irregularity within the meaning of the provisions referred to above, that finding cannot lead to the application of a flat-rate correction. |
| --- | --- |

117

Romania maintains that the Commission misapplied Article 12(6) and (7) of Delegated Regulation No 907/2014 and the Guidelines on the calculation of financial corrections. It submits that, as the conciliation body had demonstrated in the report which it submitted in the context of procedure 17/RO/796 (see paragraph 15 above), that problem had already been raised with respect to Implementing Decision 2018/873. More specifically, the Commission was wrong to consider that the existence of a supposedly incorrect calculation method could be treated as equivalent to the cases of irregularity governed by Article 12(6) and (7) of Delegated Regulation No 907/2014. The case covered by that provision concerns the conduct of the beneficiaries of the funds. The present case does not concern deficiencies in the verification of the legality and the regularity of the claims that gave rise to a compensatory payment under the sub-measure at issue. Furthermore, in the event of an incorrect calculation method, it is possible to determine, without disproportionate effort, the precise amount of the corrections. Since the finding that a calculation method is incorrect cannot be connected to cases of irregularity within the meaning of the provisions referred to above, that finding cannot lead to the application of a flat-rate correction.

| 118 | The Commission contends that it was correct to rely on Article 12(6) and (7) of Delegated Regulation No 907/2014, since the information resulting from the second audit did not allow it to determine the amount of the overcompensation more precisely by calculation or by extrapolation, as required by Article 12(2) and (3) of that regulation. The Commission acknowledges that, in the context of the first audit, the irregularities were characterised as both ‘ineligible expenditure’ and ‘absence of key control’ with regard to the corresponding verifications designed to check the conformity of the claim with all the eligibility criteria laid down in the EU legislation and defined in the RDP 2007-2013. However, the decision adopted following the first audit is not the subject matter of the present case and the second audit resulted in the finding of ‘wide-spread irregularity’ and ‘negligence in countering irregular or fraudulent practices’, with no mention of absence of key control within the meaning of the Guidelines on the calculation of financial corrections. In the Commission’s contention, the words ‘flat-rate correction’ were used in both audits and, as regards the terminology used for the purpose of making corrections, the words ‘incorrect payment rates’ and ‘overestimated payment amounts’ refer to the same aspect, namely to the fact that the incorrect payment rates entailed an overestimation of the amounts to be paid. Article 12(6) and (7) of Delegated Regulation No 907/2014 concerns the application of Article 52(1) of Regulation No 1306/2013, which includes any expenditure not in conformity with EU law and the EAFRD, and also the overcompensation concerned in the present case, which is the result of the application of an incorrect calculation method. |
| --- | --- |

118

The Commission contends that it was correct to rely on Article 12(6) and (7) of Delegated Regulation No 907/2014, since the information resulting from the second audit did not allow it to determine the amount of the overcompensation more precisely by calculation or by extrapolation, as required by Article 12(2) and (3) of that regulation. The Commission acknowledges that, in the context of the first audit, the irregularities were characterised as both ‘ineligible expenditure’ and ‘absence of key control’ with regard to the corresponding verifications designed to check the conformity of the claim with all the eligibility criteria laid down in the EU legislation and defined in the RDP 2007-2013. However, the decision adopted following the first audit is not the subject matter of the present case and the second audit resulted in the finding of ‘wide-spread irregularity’ and ‘negligence in countering irregular or fraudulent practices’, with no mention of absence of key control within the meaning of the Guidelines on the calculation of financial corrections. In the Commission’s contention, the words ‘flat-rate correction’ were used in both audits and, as regards the terminology used for the purpose of making corrections, the words ‘incorrect payment rates’ and ‘overestimated payment amounts’ refer to the same aspect, namely to the fact that the incorrect payment rates entailed an overestimation of the amounts to be paid. Article 12(6) and (7) of Delegated Regulation No 907/2014 concerns the application of Article 52(1) of Regulation No 1306/2013, which includes any expenditure not in conformity with EU law and the EAFRD, and also the overcompensation concerned in the present case, which is the result of the application of an incorrect calculation method.

| 119 | In that regard, it should be emphasised that, in accordance with Article 52(1) of Regulation No 1306/2013, where the Commission finds that expenditure has not been effected in conformity with EU law, it is to adopt a decision determining the amounts to be excluded from EU financing. In the words of Article 52(2) thereof, the Commission is to assess the amounts to be excluded on the basis of the gravity of the non-conformity recorded. In doing so, it is to take account of the nature of the infringement and of the financial damage caused to the European Union. In addition, it is to base the exclusion on the identification of amounts unduly spent and, where these cannot be identified with proportionate effort, may apply, inter alia, flat-rate corrections. Flat-rate corrections are to be applied only where, due to the nature of the case or because the Member State has not provided the Commission with the necessary information, it is not possible with proportionate effort to identify more precisely the financial damage caused to the European Union. |
| --- | --- |

119

In that regard, it should be emphasised that, in accordance with Article 52(1) of Regulation No 1306/2013, where the Commission finds that expenditure has not been effected in conformity with EU law, it is to adopt a decision determining the amounts to be excluded from EU financing. In the words of Article 52(2) thereof, the Commission is to assess the amounts to be excluded on the basis of the gravity of the non-conformity recorded. In doing so, it is to take account of the nature of the infringement and of the financial damage caused to the European Union. In addition, it is to base the exclusion on the identification of amounts unduly spent and, where these cannot be identified with proportionate effort, may apply, inter alia, flat-rate corrections. Flat-rate corrections are to be applied only where, due to the nature of the case or because the Member State has not provided the Commission with the necessary information, it is not possible with proportionate effort to identify more precisely the financial damage caused to the European Union.

| 120 | Article 12(2) and (3) of Delegated Regulation No 907/2014 takes into account the situations in which amounts unduly spent may or may not be identified with proportionate effort and with the help of the Member States. |
| --- | --- |

120

Article 12(2) and (3) of Delegated Regulation No 907/2014 takes into account the situations in which amounts unduly spent may or may not be identified with proportionate effort and with the help of the Member States.

| 121 | According to the second subparagraph of Article 12(1) of Delegated Regulation No 907/2014, ‘in order to determine the amounts that may be excluded from Union financing, when finding that expenditure has not been incurred in conformity with Union law, and concerning EAFRD, in conformity with the applicable Union and national law, the Commission shall use its own findings and shall take into account the information made available by the Member States during the conformity clearance procedure carried out in accordance with Article 52 of Regulation ... No 1306/2013’. |
| --- | --- |

121

According to the second subparagraph of Article 12(1) of Delegated Regulation No 907/2014, ‘in order to determine the amounts that may be excluded from Union financing, when finding that expenditure has not been incurred in conformity with Union law, and concerning EAFRD, in conformity with the applicable Union and national law, the Commission shall use its own findings and shall take into account the information made available by the Member States during the conformity clearance procedure carried out in accordance with Article 52 of Regulation ... No 1306/2013’.

| 122 | Article 12(3) of Delegated Regulation No 907/2014 provides as follows:
  ‘Where the amounts unduly spent cannot be identified in accordance with paragraph 2, the Commission may determine the amounts to be excluded by applying extrapolated corrections. To enable the Commission to determine the relevant amounts, Member States may, within the time-periods set by the Commission during the conformity clearance procedure, submit a calculation of the amount to be excluded from Union financing by extrapolating through statistical means the results of checks carried out on a representative sample of those cases. The sample shall be drawn from the population for which the identified non-conformity is reasonably expected to occur.’ |
| --- | --- |

122

Article 12(3) of Delegated Regulation No 907/2014 provides as follows:

‘Where the amounts unduly spent cannot be identified in accordance with paragraph 2, the Commission may determine the amounts to be excluded by applying extrapolated corrections. To enable the Commission to determine the relevant amounts, Member States may, within the time-periods set by the Commission during the conformity clearance procedure, submit a calculation of the amount to be excluded from Union financing by extrapolating through statistical means the results of checks carried out on a representative sample of those cases. The sample shall be drawn from the population for which the identified non-conformity is reasonably expected to occur.’

| 123 | Article 12(6) and (7) of Delegated Regulation No 907/2014 covers cases in which the conditions for determining the amounts to be excluded from EU financing as referred to in Article 12(2) and (3) of that regulation are not met. Thus, the Commission is to apply flat-rate corrections, the level of which is to be established by taking into consideration in particular the nature and gravity of the infringement and its own estimation of the risk of financial damage caused to the European Union. |
| --- | --- |

123

Article 12(6) and (7) of Delegated Regulation No 907/2014 covers cases in which the conditions for determining the amounts to be excluded from EU financing as referred to in Article 12(2) and (3) of that regulation are not met. Thus, the Commission is to apply flat-rate corrections, the level of which is to be established by taking into consideration in particular the nature and gravity of the infringement and its own estimation of the risk of financial damage caused to the European Union.

| 124 | Article 12(6) of Delegated Regulation No 907/2014 is worded as follows:
  ‘Where the conditions for determining the amounts to be excluded from Union financing as referred to in paragraphs 2 and 3 are not met or the nature of the case is such that the amounts to be excluded cannot be determined on the basis of those paragraphs, the Commission shall apply the appropriate flat-rate corrections, taking into account the nature and gravity of the infringement and its own estimation of the risk of financial damage caused to the Union.
  The level of flat-rate correction shall be established by taking into consideration in particular the type of non-conformity identified. To this effect control deficiencies shall be divided between those relating to key and ancillary controls as follows:





  (a) | Key controls shall be the administrative and on-the-spot checks necessary to determine the eligibility of the aid and the relevant application of reductions and penalties; |
| --- | --- | --- |

124

Article 12(6) of Delegated Regulation No 907/2014 is worded as follows:

‘Where the conditions for determining the amounts to be excluded from Union financing as referred to in paragraphs 2 and 3 are not met or the nature of the case is such that the amounts to be excluded cannot be determined on the basis of those paragraphs, the Commission shall apply the appropriate flat-rate corrections, taking into account the nature and gravity of the infringement and its own estimation of the risk of financial damage caused to the Union.

The level of flat-rate correction shall be established by taking into consideration in particular the type of non-conformity identified. To this effect control deficiencies shall be divided between those relating to key and ancillary controls as follows:

(a)

Key controls shall be the administrative and on-the-spot checks necessary to determine the eligibility of the aid and the relevant application of reductions and penalties;

| (b) | Ancillary controls shall be all other administrative operations required to correctly process claims. |
| --- | --- |

(b)

Ancillary controls shall be all other administrative operations required to correctly process claims.

If, in the framework of the same conformity clearance procedure, different non-conformities which would individually lead to distinct flat-rate corrections are established, then only the highest flat-rate correction shall apply.’

| 125 | Article 12(7) of Delegated Regulation No 907/2014 states that, ‘when establishing the level of flat-rate corrections, the Commission shall specifically take into account the following circumstances demonstrating a higher gravity of the deficiencies revealing a greater risk of loss for the Union’s budget’. |
| --- | --- |

125

Article 12(7) of Delegated Regulation No 907/2014 states that, ‘when establishing the level of flat-rate corrections, the Commission shall specifically take into account the following circumstances demonstrating a higher gravity of the deficiencies revealing a greater risk of loss for the Union’s budget’.

| 126 | As regards gravity, Article 12(7)(c) of Delegated Regulation No 907/2014 provides, in particular, that the gravity is higher and, accordingly, that there is a greater risk of loss for the European Union’s budget where ‘the Member State’s application of a control system is found to be absent or gravely deficient, and [where] there is evidence of wide-spread irregularity and negligence in countering irregular or fraudulent practices ...’. |
| --- | --- |

126

As regards gravity, Article 12(7)(c) of Delegated Regulation No 907/2014 provides, in particular, that the gravity is higher and, accordingly, that there is a greater risk of loss for the European Union’s budget where ‘the Member State’s application of a control system is found to be absent or gravely deficient, and [where] there is evidence of wide-spread irregularity and negligence in countering irregular or fraudulent practices ...’.

| 127 | It has been held that a correction adopted by the Commission in accordance with the Guidelines on the calculation of financial corrections was intended to avoid charging to the funds amounts which had not been used to finance an objective pursued by the EU legislation in question and did not constitute a sanction. The case-law has thus recognised that the flat rates set out in those guidelines made it possible to comply with EU law and the proper management of the European Union’s resources and to ensure that the Commission did not exercise its discretion by imposing inappropriate and disproportionate corrections on Member States (see, to that effect, judgment of 6 July 2015, Italy v Commission, T‐44/11, not published, EU:T:2015:469, paragraph 87 and the case-law cited). |
| --- | --- |

127

It has been held that a correction adopted by the Commission in accordance with the Guidelines on the calculation of financial corrections was intended to avoid charging to the funds amounts which had not been used to finance an objective pursued by the EU legislation in question and did not constitute a sanction. The case-law has thus recognised that the flat rates set out in those guidelines made it possible to comply with EU law and the proper management of the European Union’s resources and to ensure that the Commission did not exercise its discretion by imposing inappropriate and disproportionate corrections on Member States (see, to that effect, judgment of 6 July 2015, Italy v Commission, T‐44/11, not published, EU:T:2015:469, paragraph 87 and the case-law cited).

| 128 | The case-law has also made clear that, where it was not possible to determine precisely the losses suffered by the European Union, a flat-rate correction might be envisaged by the Commission on the basis of the guidance set out in the Guidelines on the calculation of financial corrections (see, to that effect, judgment of 6 July 2015, Italy v Commission, T‐44/11, not published, EU:T:2015:469, paragraph 89 and the case-law cited). |
| --- | --- |

128

The case-law has also made clear that, where it was not possible to determine precisely the losses suffered by the European Union, a flat-rate correction might be envisaged by the Commission on the basis of the guidance set out in the Guidelines on the calculation of financial corrections (see, to that effect, judgment of 6 July 2015, Italy v Commission, T‐44/11, not published, EU:T:2015:469, paragraph 89 and the case-law cited).

| 129 | As set out in paragraph 48 above, point 3.2.5 of the Guidelines on the calculation of financial corrections states the following:
  ‘“[if] the Member State’s application of a control system is found to be absent or gravely deficient, and [if] there is evidence of wide-spread irregularity and negligence in countering irregular or fraudulent practices”, then a correction of 25% is justified as it can reasonably be assumed that the freedom to submit irregular claims with impunity will occasion exceptionally high financial damages to the Union’s budget.
  ...’ |
| --- | --- |

129

As set out in paragraph 48 above, point 3.2.5 of the Guidelines on the calculation of financial corrections states the following:

‘“[if] the Member State’s application of a control system is found to be absent or gravely deficient, and [if] there is evidence of wide-spread irregularity and negligence in countering irregular or fraudulent practices”, then a correction of 25% is justified as it can reasonably be assumed that the freedom to submit irregular claims with impunity will occasion exceptionally high financial damages to the Union’s budget.

...’

| 130 | It follows from the case-law that, under point 3.2.5 of the Guidelines on the calculation of financial corrections, in circumstances which indicate a higher gravity of the deficiencies revealing a greater risk of loss for the European Union’s budget, referred to in Article 12(7) of Delegated Regulation No 907/2014, the Commission is required to apply, in principle, a flat-rate correction of 25%. That being said, it may set a correction rate at an even higher level. Thus, a flat-rate correction at a rate of 100% is justified where the deficiencies in the control system are so serious as to constitute a complete failure to comply with the EU rules, such as to make all the payments irregular (judgment of 17 December 2020, France v Commission, C‐404/19 P, EU:C:2020:1041, paragraph 58). |
| --- | --- |

130

It follows from the case-law that, under point 3.2.5 of the Guidelines on the calculation of financial corrections, in circumstances which indicate a higher gravity of the deficiencies revealing a greater risk of loss for the European Union’s budget, referred to in Article 12(7) of Delegated Regulation No 907/2014, the Commission is required to apply, in principle, a flat-rate correction of 25%. That being said, it may set a correction rate at an even higher level. Thus, a flat-rate correction at a rate of 100% is justified where the deficiencies in the control system are so serious as to constitute a complete failure to comply with the EU rules, such as to make all the payments irregular (judgment of 17 December 2020, France v Commission, C‐404/19 P, EU:C:2020:1041, paragraph 58).

| 131 | In the present case, it should be observed that, as is apparent from the summary report and the final position set out in the letter of 14 April 2020, the Commission based the imposition of a flat-rate correction on the existence of a significant risk for the agricultural funds, owing to the application by the Romanian authorities of a system for the management and control of measure 215 relating to animal welfare that was ‘gravely deficient with regard to the payment rates relating to the sub-measure at issue’. According to the Commission, that deficiency, affecting all payments under the sub-measure at issue, was systemic in nature. More specifically, the Commission considered that there were indications of wide-spread irregularity leading to systematic overcompensation for farmers. Since the Romanian authorities had not provided a calculation of the risk incurred by the agricultural funds, but had, however, established the population at risk, the Commission concluded that it was reasonable to assume that the freedom to submit irregular claims with impunity occasioned exceptionally high financial damages to the European Union’s budget. Thus, relying on its Guidelines on the calculation of financial corrections, the Commission decided to apply a flat-rate correction of 25%. |
| --- | --- |

131

In the present case, it should be observed that, as is apparent from the summary report and the final position set out in the letter of 14 April 2020, the Commission based the imposition of a flat-rate correction on the existence of a significant risk for the agricultural funds, owing to the application by the Romanian authorities of a system for the management and control of measure 215 relating to animal welfare that was ‘gravely deficient with regard to the payment rates relating to the sub-measure at issue’. According to the Commission, that deficiency, affecting all payments under the sub-measure at issue, was systemic in nature. More specifically, the Commission considered that there were indications of wide-spread irregularity leading to systematic overcompensation for farmers. Since the Romanian authorities had not provided a calculation of the risk incurred by the agricultural funds, but had, however, established the population at risk, the Commission concluded that it was reasonable to assume that the freedom to submit irregular claims with impunity occasioned exceptionally high financial damages to the European Union’s budget. Thus, relying on its Guidelines on the calculation of financial corrections, the Commission decided to apply a flat-rate correction of 25%.

| 132 | As regards the review of the proportionality of the flat-rate correction applied by the Commission, it must be observed that, among the circumstances which, according to Article 12(7)(c) of Delegated Regulation No 907/2014, demonstrate a higher gravity of the deficiencies revealing a greater risk of loss for the European Union’s budget, is the situation where there is evidence of wide-spread irregularity and negligence in countering irregular or fraudulent practices (see paragraph 126 above). |
| --- | --- |

132

As regards the review of the proportionality of the flat-rate correction applied by the Commission, it must be observed that, among the circumstances which, according to Article 12(7)(c) of Delegated Regulation No 907/2014, demonstrate a higher gravity of the deficiencies revealing a greater risk of loss for the European Union’s budget, is the situation where there is evidence of wide-spread irregularity and negligence in countering irregular or fraudulent practices (see paragraph 126 above).

| 133 | That situation is repeated in point 3.2.5 of the Guidelines on the calculation of financial corrections, according to which, where ‘the Member State’s application of a control system is found to be absent or gravely deficient, and [where] there is evidence of wide-spread irregularity and negligence in countering irregular or fraudulent practices, ... then a correction of 25% is justified as it can reasonably be assumed that the freedom to submit irregular claims with impunity will occasion exceptionally high financial damages to the Union’s budget’ (see paragraphs 48 and 129 above). |
| --- | --- |

133

That situation is repeated in point 3.2.5 of the Guidelines on the calculation of financial corrections, according to which, where ‘the Member State’s application of a control system is found to be absent or gravely deficient, and [where] there is evidence of wide-spread irregularity and negligence in countering irregular or fraudulent practices, ... then a correction of 25% is justified as it can reasonably be assumed that the freedom to submit irregular claims with impunity will occasion exceptionally high financial damages to the Union’s budget’ (see paragraphs 48 and 129 above).

| 134 | The concept of ‘irregularity’ is defined in point 1.2 of the Guidelines on the calculation of financial corrections as corresponding to ‘any infringement of a provision of [Union law or national law] resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the [Union] or budgets managed by [it] either by reducing or losing revenue accruing from its own resources collected directly or on behalf of the [Union], or by an unjustified item of expenditure’. |
| --- | --- |

134

The concept of ‘irregularity’ is defined in point 1.2 of the Guidelines on the calculation of financial corrections as corresponding to ‘any infringement of a provision of [Union law or national law] resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the [Union] or budgets managed by [it] either by reducing or losing revenue accruing from its own resources collected directly or on behalf of the [Union], or by an unjustified item of expenditure’.

| 135 | Where it defines the concept of ‘irregularity’ justifying the application of a correction rate of 25% of expenditure, point 1.2 of the Guidelines on the calculation of financial corrections therefore refers to the ‘acts’ or ‘omissions’ of economic operators. |
| --- | --- |

135

Where it defines the concept of ‘irregularity’ justifying the application of a correction rate of 25% of expenditure, point 1.2 of the Guidelines on the calculation of financial corrections therefore refers to the ‘acts’ or ‘omissions’ of economic operators.

| 136 | In the present case, as the conciliation body confirms in its report submitted in the context of procedure 19/RO/856 (see paragraph 25 above), and as Romania reiterates in its application, economic operators, within the meaning of point 1.2 of the Guidelines on the calculation of financial corrections, are the beneficiaries who have claimed aid on the basis of the payment rates provided for in the RDP 2007-2013 approved by the Commission. |
| --- | --- |

136

In the present case, as the conciliation body confirms in its report submitted in the context of procedure 19/RO/856 (see paragraph 25 above), and as Romania reiterates in its application, economic operators, within the meaning of point 1.2 of the Guidelines on the calculation of financial corrections, are the beneficiaries who have claimed aid on the basis of the payment rates provided for in the RDP 2007-2013 approved by the Commission.

| 137 | The infringement of Article 40(3) of Regulation No 1698/2005 alleged by the Commission does not in any event result from ‘acts’ or ‘omissions’ on the part of the beneficiaries of the aid, but from a method for calculating the support rates applied by the Romanian authorities. |
| --- | --- |

137

The infringement of Article 40(3) of Regulation No 1698/2005 alleged by the Commission does not in any event result from ‘acts’ or ‘omissions’ on the part of the beneficiaries of the aid, but from a method for calculating the support rates applied by the Romanian authorities.

| 138 | Thus, the legal classification of the calculation method relating to the sub-measure at issue and its financial result as ‘wide-spread irregularity and negligence in countering irregular or fraudulent practices’, in the words of the Guidelines on the calculation of financial corrections, is not correct. |
| --- | --- |

138

Thus, the legal classification of the calculation method relating to the sub-measure at issue and its financial result as ‘wide-spread irregularity and negligence in countering irregular or fraudulent practices’, in the words of the Guidelines on the calculation of financial corrections, is not correct.

| 139 | In that regard, it must be recalled that, according to the case-law, where the Commission has adopted guidelines, it is governed by them and the Courts of the European Union must check that it has observed the rules which it adopted (see, to that effect, judgment of 9 September 2009, Holland Malt v Commission, T‐369/06, EU:T:2009:319, paragraph 167 and the case-law cited). |
| --- | --- |

139

In that regard, it must be recalled that, according to the case-law, where the Commission has adopted guidelines, it is governed by them and the Courts of the European Union must check that it has observed the rules which it adopted (see, to that effect, judgment of 9 September 2009, Holland Malt v Commission, T‐369/06, EU:T:2009:319, paragraph 167 and the case-law cited).

| 140 | Furthermore, even if it is accepted that the ‘wide-spread irregularity and negligence’ to which the Commission refers in its summary report and its final position might be referring to the Romanian authorities and not to the beneficiaries, the following observations are called for. |
| --- | --- |

140

Furthermore, even if it is accepted that the ‘wide-spread irregularity and negligence’ to which the Commission refers in its summary report and its final position might be referring to the Romanian authorities and not to the beneficiaries, the following observations are called for.

| 141 | It is true that the Romanian authorities were made aware, from the date on which they were notified of the Court of Auditors’ findings, namely 18 September 2015 (see paragraph 7 above), and also since they received the Commission’s letter of 21 March 2016 (see paragraph 12 above), of the Commission’s opinion as to the irregularity of the payment rates relating to the sub-measure at issue. However, the Commission was wrong to consider that the Romanian authorities had committed wide-spread irregularity or had been gravely negligent in countering the irregular practices by continuing to submit freely claims for aid on the basis of a rate that gave rise to overcompensation. The Romanian authorities’ approach was explained by the fact, first, that they had received assurances that the calculation method submitted to the Commission complied with the relevant provisions of Regulation No 1698/2005 and Regulation No 1974/2006 and, second, that, under Article 9(3) of Regulation No 1974/2006, a change in the RDP 2007-2013 could be made before 31 December 2015 at the latest, provided that the Member State notified such change by 31 August 2015 at the latest. |
| --- | --- |

141

It is true that the Romanian authorities were made aware, from the date on which they were notified of the Court of Auditors’ findings, namely 18 September 2015 (see paragraph 7 above), and also since they received the Commission’s letter of 21 March 2016 (see paragraph 12 above), of the Commission’s opinion as to the irregularity of the payment rates relating to the sub-measure at issue. However, the Commission was wrong to consider that the Romanian authorities had committed wide-spread irregularity or had been gravely negligent in countering the irregular practices by continuing to submit freely claims for aid on the basis of a rate that gave rise to overcompensation. The Romanian authorities’ approach was explained by the fact, first, that they had received assurances that the calculation method submitted to the Commission complied with the relevant provisions of Regulation No 1698/2005 and Regulation No 1974/2006 and, second, that, under Article 9(3) of Regulation No 1974/2006, a change in the RDP 2007-2013 could be made before 31 December 2015 at the latest, provided that the Member State notified such change by 31 August 2015 at the latest.

| 142 | The systematic nature of the failure to adopt measures to reduce the compensatory payments relating to the sub-measure at issue, or indeed to suspend them, cannot therefore be treated in the present case as a ‘wide-spread irregularity’ within the meaning of the Guidelines on the calculation of financial corrections that would justify the application of a flat-rate correction rate of 25%. |
| --- | --- |

142

The systematic nature of the failure to adopt measures to reduce the compensatory payments relating to the sub-measure at issue, or indeed to suspend them, cannot therefore be treated in the present case as a ‘wide-spread irregularity’ within the meaning of the Guidelines on the calculation of financial corrections that would justify the application of a flat-rate correction rate of 25%.

| 143 | As for the alleged freedom for the beneficiaries to submit irregular claims ‘with impunity’ and the application of the supposedly overestimated payment rates, it should be observed that that situation is linked with the multi-annual commitments given in application of the RDP 2007-2013 and the legitimate expectations that the sub-measure at issue would remain applicable. |
| --- | --- |

143

As for the alleged freedom for the beneficiaries to submit irregular claims ‘with impunity’ and the application of the supposedly overestimated payment rates, it should be observed that that situation is linked with the multi-annual commitments given in application of the RDP 2007-2013 and the legitimate expectations that the sub-measure at issue would remain applicable.

| 144 | Lastly, the conduct of both the Romanian authorities and the beneficiaries concerned cannot be treated as ‘wide-spread’ negligence in countering irregular or fraudulent practices. In the present case, on account of the legitimate expectation acquired by the Romanian authorities that the calculation method discussed with the Commission in 2012 complied with the rules in force, no irregular or fraudulent practice can be identified. The claims for payment were submitted in a ‘regular’ fashion, in accordance with the national rural development programme in force, and the payments were made in a ‘regular’ fashion, in application of the rates provided for in the sub-measure at issue, which was previously approved by the Commission and was in force both when the commitments were given by the beneficiaries and when the beneficiaries submitted their payment claims to the paying authority. |
| --- | --- |

144

Lastly, the conduct of both the Romanian authorities and the beneficiaries concerned cannot be treated as ‘wide-spread’ negligence in countering irregular or fraudulent practices. In the present case, on account of the legitimate expectation acquired by the Romanian authorities that the calculation method discussed with the Commission in 2012 complied with the rules in force, no irregular or fraudulent practice can be identified. The claims for payment were submitted in a ‘regular’ fashion, in accordance with the national rural development programme in force, and the payments were made in a ‘regular’ fashion, in application of the rates provided for in the sub-measure at issue, which was previously approved by the Commission and was in force both when the commitments were given by the beneficiaries and when the beneficiaries submitted their payment claims to the paying authority.

| 145 | Since it was the existence and the gravity of the irregularity and the negligence committed by the Romanian authorities, resulting from the systematic nature of the application of overestimated payment rates, that led the Commission to assume that there was a risk of financial damage for the European Union’s budget, in accordance with Article 12(7)(c) of Delegated Regulation No 907/2014, and since both the ‘existence’ of alleged irregularity or negligence and ‘their gravity or systematic nature’ must be precluded in the present case (see paragraphs 142 to 144 above), the application of a correction of 25% is, in turn, unjustified under that article, read together with the Guidelines on the calculation of financial corrections. |
| --- | --- |

145

Since it was the existence and the gravity of the irregularity and the negligence committed by the Romanian authorities, resulting from the systematic nature of the application of overestimated payment rates, that led the Commission to assume that there was a risk of financial damage for the European Union’s budget, in accordance with Article 12(7)(c) of Delegated Regulation No 907/2014, and since both the ‘existence’ of alleged irregularity or negligence and ‘their gravity or systematic nature’ must be precluded in the present case (see paragraphs 142 to 144 above), the application of a correction of 25% is, in turn, unjustified under that article, read together with the Guidelines on the calculation of financial corrections.

| 146 | Therefore, the Commission made an error of legal classification in relying on Article 12(7)(c) of Delegated Regulation No 907/2014, read together with its Guidelines on the calculation of financial corrections, to justify the application of a rate of 25% as a flat-rate correction. |
| --- | --- |

146

Therefore, the Commission made an error of legal classification in relying on Article 12(7)(c) of Delegated Regulation No 907/2014, read together with its Guidelines on the calculation of financial corrections, to justify the application of a rate of 25% as a flat-rate correction.

| 147 | Furthermore, as Romania rightly asserts, in the context of the first audit, the irregularities linked to the calculation method relating to the sub-measure at issue and its financial result had been characterised by the Commission as both ‘ineligible expenditure’ and the ‘absence of key control’ concerning the checks of the conformity of a claim for aid with the eligibility criteria set out in the EU legislation and defined in the RDP 2007-2013. Although, as the Commission correctly asserts, the decision adopted following the first audit does not form the subject matter of the present case, the fact nonetheless remains that the legally incorrect classification of ‘absence of key control’ shows that, since the beginning of its investigation, the Commission has not succeeded in identifying the type of infringement committed by the Romanian authorities and the financial correction applicable in the present case. |
| --- | --- |

147

Furthermore, as Romania rightly asserts, in the context of the first audit, the irregularities linked to the calculation method relating to the sub-measure at issue and its financial result had been characterised by the Commission as both ‘ineligible expenditure’ and the ‘absence of key control’ concerning the checks of the conformity of a claim for aid with the eligibility criteria set out in the EU legislation and defined in the RDP 2007-2013. Although, as the Commission correctly asserts, the decision adopted following the first audit does not form the subject matter of the present case, the fact nonetheless remains that the legally incorrect classification of ‘absence of key control’ shows that, since the beginning of its investigation, the Commission has not succeeded in identifying the type of infringement committed by the Romanian authorities and the financial correction applicable in the present case.

| 148 | The third complaint in the first plea must therefore be upheld and the Commission must be held to have been wrong to consider that the financial correction of 25% was justified under Article 52 of Regulation No 1306/2013, read together with Article 12 of Delegated Regulation No 907/2014 and point 3.2.5 of the Guidelines on the calculation of financial corrections. |
| --- | --- |

148

The third complaint in the first plea must therefore be upheld and the Commission must be held to have been wrong to consider that the financial correction of 25% was justified under Article 52 of Regulation No 1306/2013, read together with Article 12 of Delegated Regulation No 907/2014 and point 3.2.5 of the Guidelines on the calculation of financial corrections.

| 149 | In the light of all of the foregoing – and without there being any need to examine the first complaint in the first plea, alleging that the Commission is liable under Articles 76 to 78 of Regulation No 1605/2002, or the second complaint in the first plea, alleging an error of assessment concerning the method for calculating the rate of compensatory payment, or the sixth complaint in the first plea, alleging breach of the principle of good administration – the first plea and, accordingly, the action in its entirety must be upheld and the contested decision must be annulled in so far as it excludes certain expenditure which Romania incurred under the EAFRD for the financial years 2017 to 2019, in the amount of EUR 18 717 475.08. |
| --- | --- |

149

In the light of all of the foregoing – and without there being any need to examine the first complaint in the first plea, alleging that the Commission is liable under Articles 76 to 78 of Regulation No 1605/2002, or the second complaint in the first plea, alleging an error of assessment concerning the method for calculating the rate of compensatory payment, or the sixth complaint in the first plea, alleging breach of the principle of good administration – the first plea and, accordingly, the action in its entirety must be upheld and the contested decision must be annulled in so far as it excludes certain expenditure which Romania incurred under the EAFRD for the financial years 2017 to 2019, in the amount of EUR 18 717 475.08.

Costs

Costs

| 150 | Under Article 134(1) of the Rules of Procedure of the General Court, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. |
| --- | --- |

150

Under Article 134(1) of the Rules of Procedure of the General Court, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.

| 151 | As the Commission has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by Romania. |
| --- | --- |

151

As the Commission has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by Romania.

| | On those grounds,
  THE GENERAL COURT (Fourth Chamber)
  hereby: |
| --- | --- |

On those grounds,

THE GENERAL COURT (Fourth Chamber)

hereby:

| | 1. | Annuls Commission Implementing Decision (EU) 2020/1734 of 18 November 2020 excluding from European Union financing certain expenditure incurred by the Member States under the European Agricultural Guarantee Fund (EAGF) and under the European Agricultural Fund for Rural Development (EAFRD), in so far as it excludes certain expenditure which Romania incurred under the EAFRD for the financial years 2017 to 2019 in the amount of EUR 18 717 475.08; |
| --- | --- | --- |

1.

1.

Annuls Commission Implementing Decision (EU) 2020/1734 of 18 November 2020 excluding from European Union financing certain expenditure incurred by the Member States under the European Agricultural Guarantee Fund (EAGF) and under the European Agricultural Fund for Rural Development (EAFRD), in so far as it excludes certain expenditure which Romania incurred under the EAFRD for the financial years 2017 to 2019 in the amount of EUR 18 717 475.08;

Annuls Commission Implementing Decision (EU) 2020/1734 of 18 November 2020 excluding from European Union financing certain expenditure incurred by the Member States under the European Agricultural Guarantee Fund (EAGF) and under the European Agricultural Fund for Rural Development (EAFRD), in so far as it excludes certain expenditure which Romania incurred under the EAFRD for the financial years 2017 to 2019 in the amount of EUR 18 717 475.08;

| | 2. | Orders the European Commission to pay the costs. |
| --- | --- | --- |

2.

2.

Orders the European Commission to pay the costs.

Orders the European Commission to pay the costs.

| | Gervasoni


  Madise


  Martín y Pérez de Nanclares


  Delivered in open court in Luxembourg on 18 January 2023.
  [Signatures] |
| --- | --- |

Gervasoni

Madise

Martín y Pérez de Nanclares

Delivered in open court in Luxembourg on 18 January 2023.

[Signatures]

---

(
  *1
  )	Language of the case: Romanian.

*1