Judgment — ECLI:EU:T:2008:530
Date: 2008-11-26
Language of the case: English
Court formation: Second Chamber
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Agriculture and Fisheries;European Agricultural Guidance and Guarantee Fund (EAGGF)
Concepts: Procedure for clearance of accounts;Structural funds;Sale of butter and skimmer-milk powder at reduced prices
Procedure: Action for annulment - unfounded
Origin: United Kingdom

summary report AGRI-61599-2006 of 5 April 2006 on the results of checks on the clearance of EAGGF Guarantee Section accounts pursuant to Article 5(2)(c) of Regulation (EEC) No 729/70 and Article 7(4) of Regulation (EC) No 1258/1999 as regards, inter alia, milk products (‘the summary report’). In point 3.1.5 of that summary report, headed ‘Final position of the Commission’, it is stated as follows: ‘The Commission’s services do not find that the UK authorities have presented additional arguments or new information that would require a change of the position taken. In the assessment of the Commission’s services collusion between independent business organisations operating under the measure is certainly possible and cannot be excluded. The Commission’s services find that a real risk to the Fund has been present due to the absence of physical quantity checks, that would justify the 5% correction proposed. The Commission Services maintain the position as communicated to the UK authorities by the letter AGR 12603 of [23 May 2005] and will propose to the Commission to exclude from Community financing an amount of GBP 1 406 975.46 of the expenditure declared.’ 17 Point 3.1.3(a) of that report, which concerns the correction proposed by the Commission before the referral to the Conciliation Body and headed ‘Insufficient quantity controls on manufacture quantities’, states as follows: ‘The physical quantity controls fall under the definition of key controls as given by [the Guidelines]. … A financial correction may therefore be considered on grounds of deficient control procedures. The financial risk is significant since the quantities are only partly checked by other control measures (sampling and documentary controls). A financial correction of 5% of the expenditure for concentrated butter, traced concentrated butter, traced butter and traced cream is justified.’ Procedure and forms of order sought by the parties 18 By application lodged at the Court Registry on 6 October 2006, the United Kingdom of Great Britain and Northern Ireland brought the present action. 19 The United Kingdom of Great Britain and Northern Ireland claims that the Court should: – annul Article 1 of the contested decision in so far as it excludes from Community financing certain United Kingdom expenditure for the years 2001 to 2004 in the sum of GBP 1 351 441.25 in respect of butterfats in food processing on the grounds of insufficient quantity controls on manufactured quantities; – order the Commission to pay the costs. 20 The Commission contends that the Court should: – dismiss the action as unfounded; – order the United Kingdom of Great Britain and Northern Ireland to pay the costs. Substance 21 It must be pointed out first of all that, pursuant to settled case-law, the EAGGF finances only interventions undertaken in accordance with the Community rules within the framework of the common organisation of the agricultural markets and it is for the Commission to prove an infringement of the rules on the common organisation of the agricultural markets, not to show exhaustively that the checks carried out by the national authorities were inadequate or that the figures they have transmitted are irregular, but to produce evidence of its serious and reasonable doubt regarding such checks or figures. The reason for this mitigation of the burden of proof on the Commission is that it is the Member State which is best placed to collect and verify the data required for the clearance of EAGGF accounts; consequently, it is for that State to adduce the most detailed and comprehensive evidence that its checks have been carried out and its figures are accurate and, if appropriate, that the Commission’s assertions are incorrect (see Case C‑344/01 Germany v Commission [2004] ECR I‑2081, paragragh 58, and the case-law cited; Case C‑300/02 Greece v Commission [2005] ECR I‑1341, paragraphs 32 to 36, and the case-law cited; and Case C‑285/03 Greece v Commission [2005], not published in the ECR, paragraph 43). 22 The Member State concerned, for its part, cannot rebut the Commission’s findings by mere assertions which are not substantiated by evidence of a reliable and operational supervisory system. If it is not able to show that they are inaccurate, the Commission’s findings can give rise to serious doubts as to the existence of an adequate and effective series of supervisory measures and inspection procedures (see Case C‑285/03 Greece v Commission, paragraph 21 above, paragraph 35, and the case-law cited). 23 That definition in case-law of the burden of proof is not affected by the condition laid down in the Guidelines, as referred to in paragraph 8 above, that a flat-rate financial correction assumes the existence of ‘serious deficiency in the compliance with explicit Community rules’. Firstly, that condition must be read in the light of that set out in the preceding paragraph of the Guidelines that flat-rate corrections should be considered when the Commission finds a failure adequately to effect any control which is explicitly required by a regulation ‘or implicitly required in order to respect an explicit rule’. Secondly, to require the Commission not only to show proof of its serious and reasonable doubt but also to show the existence of the serious deficiency in the compliance with explicit Community rules would be contrary to the established case-law of the Court relating to burden of proof, case-law which has been maintained after the adoption of the Guidelines (see Case T‑221/04 Belgium v Commission [2006], not published in the ECR, paragraph 33, and the case-law cited). 24 It is in the light of those considerations that the arguments put forward by the United Kingdom of Great Britain and Northern Ireland against the grounds on which the Commission based the contested decision must be examined. 25 In support of its action, the United Kingdom of Great Britain and Northern Ireland raises two pleas alleging breach of the first subparagraph of Article 7(4) of Regulation No 1258/1999 and breach of the fourth subparagraph of Article 7(4) thereof respectively. The first plea, alleging breach of the first subparagraph of Article 7(4) of Regulation No 1258/1999 Arguments of the parties 26 The United Kingdom of Great Britain and Northern Ireland submits that the contested decision is unlawful in the light of the provisions of the first subparagraph of Article 7(4) of Regulation No 1258/1999 as there was no basis for concluding that the relevant expenditure was not effected in compliance with the Community rules contained in Article 23(2) of Regulation No 2571/97. 27 The essential element which gives rise to the dispute is an allegation by the Commission that the United Kingdom of Great Britain and Northern Ireland has failed to carry out key controls in that, in accordance with its interpretation of Article 23(2) of Regulation No 2571/97, it was under an obligation physically to check the quantities in one batch of concentrated butter after the manufacturing process was complete. The United Kingdom of Great Britain and Northern Ireland disputes that interpretation. 28 Firstly, as a preliminary point, the United Kingdom of Great Britain and Northern Ireland describes the overall system of concentrated butter production as a system which is divisible into two successive stages, that is to say, manufacture and storage, then packaging and weighing for transport. 29 With regard to the first stage, that is to say, the manufacture and storage of the concentrated butter, it is divided into three steps. Firstly, cream, which is the raw material, is stored in enclosed tanks, pre-heated and concentrated to 99.8% butterfat or more and is then used in the production of butter and concentrated butter. During manufacture, and after it has been concentrated, inspectors draw off a sample of concentrated butter for analysis via a sampling valve. 30 The concentrated butter is then channelled into vats where tracers may be added to enable it to be ascertained subsequently whether aid has already been granted in respect of that butter. 31 Finally, after manufacture, the concentrated butter, whether traced or untraced, is then transferred into larger storage tanks. The United Kingdom of Great Britain and Northern Ireland is of the view that, at that point, the manufacturing process is complete. 32 With regard to the second step, that is to say, the packaging and weighing of concentrated butter for transport, the United Kingdom of Great Britain and Northern Ireland states that concentrated butter is transported either in packages of 12.5, 20 or 25kg or by bulk tanker. Tankers are weighed empty and then full, on a computerised weighbridge, to establish the net weight of concentrated butter they contain. 33 Secondly, the United Kingdom of Great Britain and Northern Ireland describes the different types of checks carried out during the manufacturing process. With regard to quantity checks, inspectors verify the quantities manufactured against each tender award which includes checking all relevant records with regard to quantity both at the manufacturers’ and the purchasers’ premises. During the manufacturing process, inspectors observe the manufacturer’s staff taking a record of the quantities of butter produced. The quantity of concentrated butter produced is measured by the factory staff and entered on a check-sheet initialled by an inspector. That measurement of the volume produced, on the basis of the level in the tracer mixing tanks, is cross-checked against the factory production sheets which are supplied to processing operatives. On a random, non-systematic basis, inspectors sometimes climb the ladders fitted to certain tracer mixing tanks in order, in particular, to see for themselves the product in the tanks. The United Kingdom of Great Britain and Northern Ireland adds that, in the case of bulk deliveries, the inspectors verify the weighbridge tickets generated by the computerised weighbridge and the invoices. It states that, in principle, inspectors would not normally observe the filling of boxes or tankers but, prior to May 2004, would commonly be present on-site whilst filling and loading operations were taking place. 34 Firstly and principally, the United Kingdom of Great Britain and Northern Ireland submits that, with regard to the point at which the checks referred to in Article 23(2) of Regulation No 2571/97 are to be carried out, the expression ‘during the manufacture’, which introduces the provisions of that article, refers only to the period during which the concentrated butter is manufactured and not at all to the period after its manufacture. The Conciliation Body supports the United Kingdom of Great Britain and Northern Ireland’s interpretation on this point. The Commission’s interpretation, that the quantity checks on the product produced should be carried out after manufacture, amounts to an imposition of at least two checks per tender instead of only one, as provided for in that article. Two other types of check, relating to the composition and manufacturing conditions of the concentrated butter, are of necessity carried out in the factory during manufacture. Accordingly, in the light of the practical conditions of the manufacturing process, which implies a significant time-lag between the sampling process and the process of packaging/loading into tankers, the Commission’s approach amounts to a requirement for the more or less full-time presence of an inspector at the manufacturing plant. 35 Secondly, the United Kingdom of Great Britain and Northern Ireland submits that Article 23(2) of Regulation No 2571/97 requires only that the checks be carried out on the spot, without specifying their nature. That requirement means that an inspector must visit the premises of the manufacturer at least once per tender in order to carry out the required checks. However, this does not mean that the inspector carries out a physical check, that is to say, de visu. Since butter is, for sanitary reasons, manufactured in a sealed production system, it can be neither inspected nor counted. Accordingly, there is no requirement to count the storage tanks or to count the boxes, or to observe the comings and goings of the tankers, or for someone to climb the ladders along the tracer mixing vats to calculate the volume they contain. The United Kingdom of Great Britain and Northern Ireland verifies the check on the quantity of product obtained which, because of the specific nature of the system of production at issue, relies principally on documentary checks, against the check on the composition which requires samples to be taken and is therefore a physical check. Consequently, such verification of the quantity which combines physical observation of the manufacturing process and documentary checks, as operated by the United Kingdom during the period at issue, complies with the requirements of Article 23(2) of Regulation No 2571/97 and even goes beyond those requirements, since the total quantities of concentrated butter delivered in relation to each tender are verified. 36 Contrary to the Commission’s submissions seeking to show the alleged insufficiency of the quantity checks at issue, its premise that the United Kingdom of Great Britain and Northern Ireland merely carried out documentary checks is incorrect and contradicted by the Commission’s finding that the quantity checks were at the very least incomplete. The United Kingdom of Great Britain and Northern Ireland submits that, in accordance with the provisions of Appendix 4 to the Rural Payment Agency’s Control Instructions to Inspectors on RPA Butter for Manufacture under Regulation No 2571/97, inspectors must provide a report of their checks and that report must be based solely on findings made at the time of the on-the-spot check or checks relating to that report. Furthermore, the United Kingdom of Great Britain and Northern Ireland disputes the Commission’s assertion that checks for sampling purposes must by their nature relate to quality of the products. 37 The word ‘physical’, as it appears only in the English version of the second subparagraph of Article 23(2) of Regulation No 2571/97, in the expression ‘physical samples’, adds nothing to the meaning of the word ‘sample’ which has a connotation of removing something from a larger whole. In any event, it adds nothing to the interpretation of the assessment of the quantities produced and the Commission cannot, therefore, deduce from that expression that the quantity checks of the product obtained ought to be physical checks without running the risk of infringing the principle of legal certainty. 38 Finally, the United Kingdom of Great Britain and Northern Ireland adds that the Commission wrongly describes the checks referred to in the second subparagraph of Article 23(2) of Regulation No 2571/97 as physical checks as opposed to the checks referred to in the third subparagraph of Article 23(2) thereof, which are documentary checks. Certain of the checks carried out pursuant to the third subparagraph are only partly documentary in nature. Furthermore, the distinction between the second and third subparagraphs of Article 23(2) is that the second subparagraph refers to more regular checks whilst the third subparagraph refers to more detailed but less frequent checks. 39 Thirdly, the United Kingdom of Great Britain and Northern Ireland is of the opinion that the Commission’s interpretation of Article 23(2) of Regulation No 2571/97 is incorrect in that it is based on the concept of batches and means that verification of the quantity of concentrated butter produced in one batch does not allow the quantity of product obtained to be checked in respect of the whole tender. Article 23(2) of Regulation No 2571/97 does not include a reference to the concept of ‘batch’, that is to say, a subdivision of a tender, but to that of ‘tender award’, such that the appropriate checks are to be carried out at least once per tender and not on a single batch in a tender. Accordingly, the Commission’s interpretation would lead to checks which were incomplete in the light of that article. The checks as carried out in the United Kingdom, however, enable the total quantities of product obtained to be checked for each tender. 40 Fourthly, the Commission’s interpretation would necessitate a compulsory control measure which is not provided for in Article 23(2) of Regulation No 2571/97 and would infringe the principle of legal certainty. The Commission cannot choose, at the time of the clearance of EAGGF accounts, an interpretation which departs from and is not dictated by the normal meaning of the words used. In addition, the contested decision is analogous to a rule which imposes a charge on the taxpayer. The requirement for legal certainty must be observed all the more strictly in the case of rules liable to entail financial consequences, in order that those concerned may know precisely the extent of the obligations which they impose on them. Finally, the correction applied may be regarded as being of the same type as a penalty which, even if not criminal in nature, cannot be imposed unless it rests on a clear and unambiguous legal basis. 41 Fifthly, the United Kingdom of Great Britain and Northern Ireland takes the view that the Commission cannot rely on the changes made by the United Kingdom to its practice of checks on the quantity of product obtained, with effect from May 2004, in order to comply with the Commission’s requirements, that is to say, that inspectors physically observe the loading of the tankers, to assert that the United Kingdom has accepted that the Commission’s interpretation with regard to the checks to be instituted to comply with the requirements of Article 23(2) of Regulation No 2571/97 is correct. Such an argument would be contrary to the principles applicable in a State governed by law and would infringe the principle of legal certainty. Moreover, the United Kingdom of Great Britain and Northern Ireland submits that those changes, implemented with effect from May 2004, were effected only in order to ensure that the Commission did not continue to disallow the expenditure at issue. 42 Sixthly, the United Kingdom of Great Britain and Northern Ireland submits that, irrespective of the fact that the Commission does not state whether the checks should be effected when the storage tanks in the plant are filled or when the tankers are loaded, the changes which the United Kingdom has made with regard to the methods of checking the quantity of product obtained do not add anything to the existing controls. The fact that an inspector stands next to the tankers as they are filled or counts the boxes stored on the palettes does not meet the criteria of the quantity check laid down in Regulation No 2571/97. As regards counting boxes, the United Kingdom of Great Britain and Northern Ireland points out that they are not opened to verify the contents. It concludes therefrom that, in accordance with the control methods which it has implemented, the check on quantity of product obtained for each tender depends above all on a comparison of the manufacturing programme with production sheets and records of quantities produced and then on weighbridge certificates and records of boxes. 43 The Commission contests the arguments advanced by the United Kingdom of Great Britain and Northern Ireland. Findings of the Court 44 It is clear from point 3.1.3 of the summary report that the correction imposed in the contested decision is based on the finding of the Commission’s services that the quantities of product obtained were only partly checked by the United Kingdom authorities and that consequently Article 23(2) of Regulation No 2571/97 was infringed. The United Kingdom of Great Britain and Northern Ireland disputes the justification for that conclusion, which is based, in its view, on an incorrect interpretation of those provisions by the Commission’s services. In support of its first plea, it puts forward six arguments which it is appropriate to examine individually, starting with the second. – The second argument, relating to the nature of the check of the quantity of product obtained and whether that check is sufficient 45 In the first place, it must be noted that it is apparent from the provisions of the first subparagraph of Article 23(2) of Regulation No 2571/97 that, during the manufacture of concentrated butter, the competent agency is to carry out on-the-spot checks at least once per tender. Pursuant to the second subparagraph of that article, those checks are to entail physical sampling and relate in particular to the conditions of manufacture and the quantity and composition of the product obtained. Finally, the third subparagraph of that article provides that those checks are to be supplemented from time to time, firstly, by detailed scrutiny, by sampling of records and, where appropriate, by sampling accounts and, secondly, by verifying compliance with the terms and conditions governing approval of the establishment concerned. 46 In the present case, the parties are in dispute as to whether or not the on-the-spot checks of the quantity of product obtained are physical in nature, meaning, as the Commission submits, that inspectors must check the quantities of product obtained in person and systematically. 47 In that regard, firstly, it is appropriate to note that the parties agree that the on-the-spot checks referred to in the first subparagraph of Article 23(2) of Regulation No 2571/97 are described in the second subparagraph of that article. Accordingly, those on-the-spot checks relate particularly to the conditions of manufacture, the quantity and composition of the product obtained. 48 Secondly, clearly, the first subparagraph of Article 23(2) of Regulation No 2571/97 is totally unambiguous with regard to the conditions on which the competent body is to check the quantity of product obtained. It is explicit in the terms of the last sentence of that subparagraph that the legislature provided for a single exception to the principle that on-the-spot checks are to be carried out by the competent body. That exception relates only to checks of the quality of the product obtained. It follows that the check of the quantity of product obtained must be carried out on site, at least once per tender, by the national competent body. 49 In the second place, it is necessary to assess the nature of the on-the-site check of the quantity of product obtained which the competent body was required to carry out pursuant to the provisions of Article 23(2) of Regulation No 2571/97. In that regard, the Commission submits that that check must be carried out physically. However, the United Kingdom of Great Britain and Northern Ireland takes the view that the competent body could carry out a check merely combining physical observation of the manufacturing process, supplemented from time to time by a de visu check, and documentary checks. 50 First of all, the Court considers that Article 23(2) of Regulation No 2571/97 institutes a complete system of control measures intended to allow the competent bodies to detect irregularities. In that regard, that article provides for, firstly, the implementation of systematic on-the-spot checks of tenders and, secondly, in addition, periodic detailed scrutiny including inspection of commercial documents and/or accounting records. 51 In accordance with the case-law relating to the common organisation of the agricultural markets, inspection visits and the supplementary scrutiny of commercial documents and of the specific accounts form part of a single inspection system the two parts of which are intended to complement one another. Pursuant to the same case-law, the contemporaneous existence of the two types of inspection is essential in order to enable possible irregularities to be detected since neither inspection visits nor scrutiny of documents can by themselves afford a sufficient guarantee that the Community provisions are being complied with (Case 327/85 Netherlands v Commission [1988] ECR 1065, paragraph 18, and Case 238/86 Netherlands v Commission [1988] ECR 1191, paragraph 20). 52 Moreover, it is clear, essentially, from the same case-law that the rules such as those which follow from Regulation No 2571/97 should be applied uniformly in all the Member States and should, as far as is possible, have the same effect throughout the territory of the Community. A check different from that provided for by the Regulation cannot therefore take the place of the supervisory system laid down in those rules (see, by analogy, Case 327/85 Netherlands v Commission, paragraph 19, and Case 238/86 Netherlands v Commission, paragraph 21). 53 The Court considers that, although the parties disagree on the subject, it does not appear to be necessary, for the purposes of the present examination, to rule on whether the checks referred to in the third subparagraph of Article 23(2) of Regulation No 2571/97 are exclusively or partially documentary checks. It should be noted that, at the very least, those checks relate to commercial and accounting documents. In the light of the case-law cited in paragraph 51 above, clearly, in order to ensure compliance with the Community provisions applicable in the context of the common organisation of the agricultural markets, it is necessary to distinguish between the on-the-spot checks and the checks on commercial and accounting documents, these two control measures being complementary. Accordingly, the nature of the on-the-spot check of the quantity of product obtained, as referred to in the first and second subparagraphs of Article 23(2) of Regulation No 2571/97, must be distinguished from that of the documentary checks referred to in the third subparagraph of that article. 54 Although the second subparagraph of Article 23(2) of Regulation No 2571/97 states that the checks referred to in the first subparagraph include the taking of samples, it cannot be deduced therefrom that the three types of on-the-spot checks to which it refers (conditions of manufacture, quantity and composition) are based solely on such sampling. With regard to the check of the quantity of product obtained, it appears impossible for it to be carried out by sampling. Such an on-the-spot check requires of necessity the use of a quantitative measure, which cannot include mere sampling. 55 In the light of the preceding observations, it is appropriate to hold that only a physical check on the quantity of product obtained, carried out directly by the competent body, makes it possible to meet the objective of detecting possible irregularities which, in accordance with the case-law cited in paragraph 51 above, is pursued by the implementation of the two control measures referred to in Article 23(2) of Regulation No 2571/97. As is clear from the first subparagraph of Article 23(2) of Regulation No 2571/97, such on-the-spot physical checks of the quantity of product obtained must be carried out systematically at least once per tender. 56 In the present case, it must be observed that, as the United Kingdom of Great Britain and Northern Ireland itself accepts in its written submissions, checks on the quantity of product obtained were carried out, at the material time, by combining, on the one hand, during the manufacturing process, observation by inspectors of the manufacturer’s staff drawing up reports on the quantities of concentrated butter produced and, on the other, the carrying out of documentary checks. It must be added that the United Kingdom of Great Britain and Northern Ireland states that the inspectors checked in person, from time to time and on a random basis, the quantity of product contained in the tracer mixing vats (see paragraph 33 above). Finally, in any event, the United Kingdom of Great Britain and Northern Ireland takes the view that, since the butter is manufactured in a closed system, it could be neither inspected nor counted so that checks of the quantity of product obtained could not require that the storage tanks be counted, or that the boxes be counted, or that the comings and goings of the tankers be observed, or that someone climb the ladders along the tracer mixing vats to calculate the volume they contained (see paragraph 35 above). 57 The argument put forward by the United Kingdom of Great Britain and Northern Ireland that, for sanitary reasons, the competent authorities were prevented from carrying out the on-the-spot checks required under Article 23(2) of Regulation No 2571/97 cannot succeed. If that were the case, the United Kingdom ought to have submitted the problems encountered for assessment by the Commission, with a view to resolving them (see, to that effect, Case C‑50/94 Greece v Commission [1996] ECR I‑3331, paragraph 39, and Case C‑318/02 Netherlands v Commission [2005], not published in the ECR, paragraph 44). 58 It follows from the foregoing considerations that the United Kingdom of Great Britain and Northern Ireland does not dispute that the check of the quantity of product obtained was not carried out physically, in person and systematically. Accordingly, the on-the-spot check of the quantity of product obtained, as carried out, at the time material to this case, by the competent body in the United Kingdom, did not comply with the requirements of Article 23(2) of Regulation No 2571/97. 59 That conclusion cannot be called into question by the fact that, as the United Kingdom of Great Britain and Northern Ireland submits, the checks of the quantity of product obtained which it had implemented exceeded the required checks, since its checks enabled verification of the total quantities of concentrated butter delivered under each tender award. According to settled case-law, where a regulation lays down specific measures of supervision, the Member States must apply them and it is unnecessary to examine the merits of their view that another system of supervision is more effective (see Case C-130/99 Spain v Commission [2002] ECR I-3005, paragraph 87, and the case-law cited, and Case C‑332/01 Greece v Commission [2004] ECR I‑7699, paragraph 62). 60 It follows from all the preceding observations that the United Kingdom of Great Britain and Northern Ireland wrongly complains of the Commission’s having considered that the check of the quantity of product obtained was physical in nature and that in the present case the checks carried out by the competent bodies were insufficient. Consequently, the second argument must be rejected as unfounded. – The first argument, concerning the point at which the check on quantity is to be carried out 61 With regard to the first argument, alleging that the expression ‘during manufacture’ which introduces the first subparagraph of Article 23(2) of Regulation No 2571/97 refers solely to the period during which the concentrated butter is manufactured and not at all, as the Commission contends, to the period immediately following its manufacture, it is appropriate to note as follows. 62 First of all, the Court considers that the interpretation of that expression cannot be considered decisive for its ruling on whether the action in the present case is well founded. As it has already been observed in paragraph 56 above, it is common ground that, even during the manufacturing process, the inspectors in the United Kingdom who were competent to carry out the checks did not in person and systematically carry out physical checks of the quantity of product obtained. 63 Next, even were that interpretation to prove necessary in the present case, the Court considers that the expression ‘during manufacture’ should be interpreted in the light of the provisions of the second subparagraph of Article 23(2) of Regulation No 2571/97. In that regard, it is clear from that subparagraph that the on-the-spot checks concern in particular the quantity of product obtained. The Court considers that the use of the term ‘obtained’ clearly shows that the quantity must be measured once the manufacturing process is complete. 64 Incidentally, on that point, it must be held that, at the hearing in response to a question posed by the Court to both parties with regard to the point at which they take the view that the product is obtained within the meaning of the second subparagraph of Article 23(2) of Regulation No 2571/97, the United Kingdom of Great Britain and Northern Ireland accepted that that was the case either when the product left the production line and was directly put into boxes, or when the product reached the storage tank, from which it was then transferred into tankers. 65 Finally, the fact that the Conciliation Body asked the Commission to re-examine the scope of the provisions of Article 23(2) of Regulation No 2571/97 with regard to the on-the-spot checks of the quantity of product obtained cannot be relied on in support of the arguments of the United Kingdom of Great Britain and Northern Ireland. According to case-law, the Commission is not bound by the conclusions of the Conciliation Body when adopting its decision (Case C‑44/97 Germany v Commission [1999] ECR I‑7177, paragraph 18). 66 It follows from the foregoing that, contrary to the allegations of the United Kingdom of Great Britain and Northern Ireland, a restrictive interpretation of the expression ‘during manufacture’ cannot be accepted as meaning that the on-the-spot checks referred to in the first and second subparagraph of Article 23(2) of Regulation No 2571/97 should be carried out only during the manufacturing process. Accordingly, the United Kingdom is wrong to complain of the Commission’s having taken the view that the on-the-spot check of the quantity of product obtained could be carried out immediately after the end of the manufacturing process. The first argument must therefore be rejected as unfounded. – The third argument, alleging that the quantity check imposed by the Commission does not enable the tenders to be checked completely 67 The United Kingdom of Great Britain and Northern Ireland submits that the check of the quantity of product obtained, as laid down by the Commission, applies to only one batch per tender and not to the tender in its entirety. 68 In that regard, the Court recalls that pursuant to the first subparagraph of Article 23(2) of Regulation No 2571/97 the competent body carries out on-the-spot checks so that each tender undergoes at least one check. Furthermore, it must be noted that those provisions do not state whether the on-the-spot checks must be carried out on the entire tender or on only part thereof. Accordingly, the Court considers that the check of the quantity of product obtained in the batch which forms part of the tender is sufficient to satisfy the requirement laid down in the first subparagraph of Article 23(2) of Regulation No 2571/97. Consequently, the United Kingdom of Great Britain and Northern Ireland wrongly claims that the Commission interpreted the provisions of Article 23(2) of Regulation No 2571/97 as meaning that the check of the quantity of product obtained should apply to one batch per offer. 69 It follows from the foregoing that the third argument put forward by the United Kingdom of Great Britain and Northern Ireland in support of its first plea must be rejected as unfounded. – The fourth argument, alleging infringement of the principle of legal certainty 70 The United Kingdom of Great Britain and Northern Ireland submits that, by making compulsory a control measure not laid down in Article 23(2) of Regulation No 2571/97, the Commission has infringed the principle of legal certainty. It adds that the financial correction applied amounts to a penalty which, even if not criminal in nature, can be imposed only if it has a clear and unambiguous legal basis. 71 It is apparent from case-law that the principle of legal certainty, which requires that legal rules be clear and precise and aims to ensure that situations and legal relationships governed by Community law remain foreseeable, cannot be regarded as infringed in the present case, since the applicable legislation provides for the possibility for the Commission – in the event that irregularities are proved – to withdraw the financial aid and request reimbursement of the sums unduly paid by the EAGGF (see Joined Cases T‑141/99, T‑142/99, T‑150/99 and T‑151/99 Vela and Tecnagrind v Commission [2002] ECR II‑4547, paragraph 391, and the case-law cited). 72 In the present case, first of all, it is appropriate to point out that, contrary to the submissions of the United Kingdom of Great Britain and Northern Ireland, the view cannot be taken that the requirement for on-the-spot checks, as defined by the Commission, was not laid down in Article 23(2) of Regulation No 2571/97. As is apparent from the considerations set out in paragraphs 55 and 66 above, and in the light of the objective pursued by the implementation of the two control measures referred to in Article 23(2) of Regulation No 2571/97 (see paragraph 51 above), the Commission was correct to take the view that the on-the-spot check of the quantity of product obtained was of necessity physical in nature and was to be carried out in person and systematically, once the manufacturing process was complete. 73 Next, the United Kingdom of Great Britain and Northern Ireland is incorrect in claiming that the financial correction at issue amounts to a penalty. It is apparent from case-law that, in the context of a procedure for the clearing of EAGGF accounts, such a financial correction is designed to avoid the EAGGF being burdened with amounts that have not served to finance an objective pursued by the Community legislation in question and therefore does not constitute a penalty (Case C‑247/98 Greece v Commission [2001] ECR I‑1, paragraph 14, and Case C‑332/01 Greece v Commission, paragraph 59 above, paragraph 63). 74 It follows from the foregoing that the fourth argument, alleging infringement of the principle of legal certainty, must be rejected as unfounded. – The fifth argument, alleging that the Commission bases its decision on the change in the checking practice of the United Kingdom of Great Britain and Northern Ireland 75 Although the Commission claims unreservedly that the change in practice implemented with effect from the month of May 2004 by the United Kingdom of Great Britain and Northern Ireland with regard to the checks of the quantity of product obtained does not form part of its argument before the Court, it is appropriate to ascertain whether the contested decision is based, as the United Kingdom of Great Britain and Northern Ireland submits, on such an allegation. 76 In that regard, it must be recognised that, in the second subparagraph of point 3.1.3(a) of the summary report, the Commission found that the fact that the United Kingdom authorities amended their instructions, in order to include a physical on-the-spot check, confirmed the position taken by its services that that check was required under the provisions of Article 23(2) of Regulation No 2571/97. Nevertheless, it cannot be deduced therefrom that the contested decision is based on that finding. It is apparent from the terms of the second subparagraph of point 3.1.1(a), the first and fifth subparagraphs of point 3.1.3(a) and the second paragraph of point 3.1.5 of the summary report that the financial correction applied by the Commission in the contested decision is based on the fact that its services took the view that, in the light of the provisions of Article 23(2) of Regulation No 2571/97, the United Kingdom of Great Britain and Northern Ireland had carried out the check of the quantity of product obtained only in part. 77 It follows from the foregoing that the fifth argument must be rejected as unfounded. – The sixth argument, alleging that the check of the quantity imposed by the Commission does not add anything to the existing checks 78 The United Kingdom of Great Britain and Northern Ireland takes the view that the changes imposed by the Commission to the carrying out of the checks of the quantity of product obtained did not add anything to the existing checks. Such an argument cannot succeed. As has been pointed out in paragraph 59 above, where a regulation lays down specific measures of supervision, the Member States must apply them and it is unnecessary to examine the merits of their view that another system of supervision is more effective. 79 Furthermore, it should be borne in mind that it is apparent from the case-law cited in paragraph 52 above, firstly, that rules such as those which follow from Regulation No 2571/97 should be applied uniformly in all the Member States and should, as far as is possible, have the same effect throughout the territory of the Community and, secondly, that a check different from that provided for by the Regulation cannot therefore take the place of the supervisory system laid down in those rules. 80 In the present case, as the Court found in paragraph 58 above, the United Kingdom of Great Britain and Northern Ireland does not dispute that the check of the quantity of product obtained was not carried out physically, in person and systematically. That check has not therefore been carried out in accordance with the provisions of Article 23(2) of Regulation No 2571/97. Accordingly, since the checks imposed by the Commission were intended to make good the failings noted in the checks of the quantity of product obtained, the United Kingdom of Great Britain and Northern Ireland cannot submit, in support of its action, that the checks imposed by the Commission do not add anything to the existing checks. 81 Consequently, the sixth argument must be rejected as unfounded. 82 It follows from all the foregoing observations that the United Kingdom of Great Britain and Northern Ireland was incorrect to claim that the Commission infringed the provisions of Article 23(2) of Regulation No 2571/97. 83 It follows that the first plea must be rejected as unfounded. The second plea, alleging breach of the provisions of the fourth subparagraph of Article 7(4) of Regulation No 1258/1999 Arguments of the parties 84 Firstly, the United Kingdom of Great Britain and Northern Ireland submits that the choice of flat-rate corrections depends on the amplitude of the risk of loss to the EAGGF and the rate of correction must be clearly related to the probable loss. Accordingly, the failure found by the Commission must constitute a serious deficiency in the compliance with explicit Community rules and the deficiency must open the EAGGF to a real risk of loss. 85 Secondly, the United Kingdom of Great Britain and Northern Ireland submits, firstly, that the additional checks proposed by the Commission do not add anything of substance to the complete checks of quantities, as implemented in the United Kingdom until May 2004 and, secondly, that they have not made it possible to establish the existence of irregularities in the form of an application for a grant of aid for concentrated butter for quantities greater than the quantities actually produced. Furthermore, since the Commission has accepted that the United Kingdom of Great Britain and Northern Ireland did carry out at least incomplete quantity checks, it cannot subsequently allege an absence of physical checks of the quantity of product obtained. 86 Thirdly, the United Kingdom of Great Britain and Northern Ireland submits that, in the light of the case-law, although the Commission has a margin of discretion with regard to economic matters, that does not mean that the Community Courts must refrain from reviewing the Commission’s interpretation of information of an economic nature. Accordingly, not only must the Community Courts establish whether the evidence relied on is factually accurate, and reliable and consistent but also whether that evidence contains all the information which must be taken into account in order to assess the situation (Case C‑12/03 P Commission v Tetra Laval [2005] ECR I‑987, paragraph 39). 87 The United Kingdom of Great Britain and Northern Ireland therefore takes the view that the Commission has merely showed that its system of quantity checks was perfectible, but not that there was a real risk of loss or irregularity justifying the imposition of sanctions on the United Kingdom. In any event, the probability of the 5% loss relied on was insufficiently substantiated by the Commission. 88 The Commission contests the arguments raised by the United Kingdom of Great Britain and Northern Ireland. Findings of the Court 89 As a preliminary point, it is appropriate to note that, in point 3.1.5 of the summary report, the amount of the financial correction proposed by the Commission is GBP 1 406 975.46 . That amount is different from the amount referred to in the present action, that is to say, GBP 1 351 441.25. That discrepancy can be explained by the fact that, as is clear from point 3.1.3 of the summary report, following the checks carried out by the Commission’s services, two irregularities were found with regard to the financial years 2001 to 2004. The first, which is the subject matter of the present action, concerns the ‘insufficient quantity controls on manufactured quantities’ and gave rise to the flat-rate correction of GBP 1 351 441.25. The second concerns ‘overtracing – aid paid for part of tracers added’ and gave rise to a spot correction of GBP 55 534.20. Those two amounts are set out clearly in the table annexed to the contested decision and their sum is GBP 1 406 975.45. The Court notes that there is a difference of one penny between that sum and the total amount set out in point 3.1.5 of the summary report. Nevertheless, the view must be taken, leaving aside the negligible nature of that difference, that the difference appears to be the result of a mistake made when point 3.1.5 of the summary report was drafted. 90 Principally, according to settled case-law, it is for the Member State to demonstrate, if appropriate, that the Commission made an error as to the financial consequences to be attached to that infringement of the rules of the common organisation of the agricultural markets (see Case C‑153/01 Spain v Commission [2004] ECR I‑9009, paragraph 67, and the case-law cited; see also, to that effect, Case 49/83 Luxembourg v Commission [1984] ECR 2931, paragraph 30). 91 Moreover, also in accordance with settled case-law, where instead of disallowing all the expenditure affected by the infringement the Commission has endeavoured to establish rules under which irregularities are treated differently, depending on the extent of the shortcomings in the checks and the degree of risk to the EAGGF, it is for the Member State to show that those criteria are arbitrary and unfair (see Case C‑50/94 Greece v Commission, paragraph 57 above, paragraph 28, and Case C‑28/94 Netherlands v Commission, paragraph 56, and the case-law cited). 92 In that regard, as referred to in paragraph 21 above, it is for the Member State to adduce the most detailed and comprehensive evidence that its checks have been carried out and its figures are accurate and, if appropriate, that the Commission’s assertions are incorrect. 93 In its Guidelines, the Commission has established two types of assessment of the financial loss to the EAGGF based either on an extrapolation of the results of the checks carried out on a representative sample or, where the actual level of the irregular expenditure cannot be determined, on flat-rate corrections. The rate of correction applied, which varies between 2 and 25%, depends on the amplitude of the failings found in the implementation of the checks. In particular, the Guidelines advocate a correction of 5% where all the key controls are carried out but where their number, frequency or rigour does not comply with the requirements of the regulations. 94 In the first place, with regard, firstly, to the proof of the serious and reasonable doubts which the Commission had as to the checks made by the United Kingdom authorities of the quantity of product obtained, it must be held to be based on the finding that those checks were insufficient. As concluded in paragraph 58 above, the Government of the United Kingdom does not dispute that it did not carry out, physically, in person and systematically, on-the-spot checks of the quantity of product obtained. Incidentally, it asserts that such checks were impracticable in the present case, having regard to the conditions of manufacture of the product at issue. 95 In those circumstances, the Government of the United Kingdom fails to overturn the Commission’s findings with regard to the insufficiency of the checks of the quantity of product obtained. Since the on-the-spot checks were not carried out in accordance with the provisions of Article 23(2) of Regulation No 2571/97, the Commission was not required to submit other evidence of the insufficiency of those checks. It was therefore correct in taking the view that the expenditure at issue was not incurred in accordance with the Community provisions applicable in the context of the common organisation of the agricultural markets. 96 Secondly, as is apparent from the case-law referred to in paragraph 51 above, the contemporaneous existence of inspection visits and the supplementary scrutiny of commercial documents and of the specific accounts is essential in order to enable possible irregularities to be detected. Similarly, according to case-law, the quality of the physical checks constitutes the decisive element of the control system which must be put in place to ensure that EAGGF expenditure is not irregular (Case C‑318/02 Netherlands v Commission, paragraph 57 above, paragraph 42). Finally, quality control constitutes a key control within the meaning of the Guidelines. 97 It follows from the foregoing considerations, firstly, that in its summary report the Commission has proved the serious and reasonable doubts which it had with regard to the checks of the quantity of product obtained, as carried out by the United Kingdom authorities, and, secondly, that it was reasonable for it to conclude that the risk of loss to the EAGGF was significant and, accordingly, without infringing the provisions of the fourth subparagraph of Article 7(4) of Regulation No 1258/1999 or the Guidelines, to impose a flat-rate correction in accordance with those Guidelines. 98 In the second place, with regard to the flat-rate correction of 5% applied by the Commission, firstly, the United Kingdom of Great Britain and Northern Ireland submits that the Commission was wrong to find that there were no checks of the quantity of product obtained carried out, since those checks were at the very least incomplete. Such an assertion cannot succeed. It is true that, in point 3.1.5 of the summary report, the Commission’s services did state that those checks were not carried out. However, it is explicit both in point 1.1.4 of the letter of formal notice of 23 May 2005 and in the final paragraph of point 3.1.3 of the summary report or in the table annexed to the contested decision that the 5% flat-rate correction was considered, then applied, on the ground that the checks of the quantity of product obtained implemented by the United Kingdom of Great Britain and Northern Ireland were insufficient. 99 Nor, secondly, can the argument that the additional checks did not add anything to the existing checks succeed. As has been recalled in paragraph 59 above, where a regulation lays down specific measures of supervision, the Member States must apply them and it is unnecessary to examine the merits of their view that another system of supervision is more effective. Furthermore, the finding that those additional checks did not enable the existence of irregularities to be noted is not sufficient to allow the view to be taken that the United Kingdom of Great Britain and Northern Ireland has adduced the most detailed and comprehensive evidence that its checks have been carried out and its figures are accurate and, if appropriate, that the Commission’s assertions are incorrect. 100 Thirdly, the Court considers that the reference made by the United Kingdom of Great Britain and Northern Ireland to the judgment in Commission v Tetra Laval, paragraph 86 above (paragraph 39), is irrelevant. That judgment relates to the specific case of the review carried out by the Community Courts with regard to mergers. As has been recalled in paragraph 21 above, within the framework of the common organisation of the agricultural markets, the burden of proof on the Commission is reduced, so that it is for the Member State to adduce the most detailed and comprehensive evidence that its checks have been carried out and its figures are accurate and, if appropriate, that the Commission’s assertions are incorrect. 101 The conclusion must be reached that the United Kingdom of Great Britain and Northern Ireland has not succeeded in showing that the Commission’s assessments are incorrect or that the irregularities found have no effect on the Community budget, or that the amount excluded from Community financing on the basis of the application of the flat-rate correction of 5%, that is to say, GBP 1 351 441.25, exceeded the risk of loss to the EAGGF. 102 Accordingly, since the Guidelines provide that a flat-rate correction of 5% is to be applied where, as in the present case, all the key controls are carried out but their number, frequency or rigour does not comply with the requirements of the regulations, the Commission was entitled, after having found in the present case that the checks of the quantity of product obtained were insufficient, to withhold that flat-rate correction. 103 It follows that the second plea must also be rejected as unfounded. 104 Since none of the pleas raised by the United Kingdom of Great Britain and Northern Ireland has succeeded, the action must be dismissed. Costs 105 Under Article 87(2) of the Rules of Procedure of the Court of First Instance, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the applicant has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the Commission. On those grounds, THE COURT OF FIRST INSTANCE (Second Chamber) hereby: 1. Dismisses the action; 2. Orders the United Kingdom of Great Britain and Northern Ireland to pay the costs. Pelikánová Jürimäe Soldevila Fragoso Delivered in open court in Luxembourg on 26 November 2008. [Signatures] * Language of the case: English.