Judgment — ECLI:EU:C:1999:510
Date: 1999-10-21
Language of the case: German
Court formation: Sixth Chamber
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Agriculture and Fisheries;Beef and veal;European Agricultural Guidance and Guarantee Fund (EAGGF)
Concepts: Statement of reasons;Procedure for clearance of accounts;Conditions subject to which expenditure is borne by the EAGGF
Procedure: Action for annulment - unfounded
Origin: Germany

summary report 
on the results of inspections concerning the 
clearance of the EAGGF Guarantee Section 
Accounts for 1993,2 the Commission listed 
a series of complaints concerning controls 
on entry into storage of the meat, during 
storage and on removal from storage. 
6. According to the Commission, those 
deficiencies in the control system constitute 
infringements of Article 8(1) of Council 
Regulation (EEC) No 729/70 of 21 April 
1970 on the financing of the common 
agricultural policy,3 as well as Articles 3 
and 4 of Commission Regulation (EEC) 
No 618/90 of 14 March 1990 laying down 
rules for drawing up the annual inventory 
of agricultural products in public storage. 4 
7. The Commission makes the point that its 
findings and the 2% flat-rate correction 
relate to the inadequacy of the controls as a 
whole, that is to say the deficiencies at all 
three stages (controls on takeover, during 
1 — OJ 1996 L 323, p. 26. 
2 — See Doc. VI/6335/95-EN of 27 March 1996 and Doc. VI/ 
5112/96 of 14 June 1996. 
3 — OJ, English Special Edition 1970 (I), p. 218. 
4 — OJ 1990 L 67, p. 21. 
I - 7180 
GERMANY V COMMISSION 
storage and on removal from storage) and 
not the inadequacies specific to each of the 
three stages. The Commission considers 
that it is the shortcomings in the German 
system of control generally that pose a risk 
for Community resources. Furthermore, 
the Commission has confined itself to a 
2% correction because the Federal Repub­
lic of Germany has made an effort to 
remedy the deficiencies identified and spot 
checks have actually made it possible to 
uncover abuses. 
I — The background to the dispute 
8. During the period 1994 to 1995, views 
were exchanged and discussions held on a 
number of occasions, including on 20 Jan­
uary 1995 at BALM's Frankfurt office, 
between the competent German authorities 
and the Commission, but these proved 
fruitless. Subsequently, on 15 December 
1995, the German Government requested 
that the conciliation procedure be initiated 
in accordance with Commission Decision 
94/442/EC of 1 July 1994 setting up a 
conciliation procedure in the context of the 
clearance of accounts of the European 
Agricultural Guidance and Guarantee Fund 
(EAGGF) Guarantee Section.5 The Conci­
liation Body first submitted a list of ques­
tions and then took evidence from the 
Commission's officers and the German 
authorities. 
9. On 1 March 1996 and in the light of the 
differing positions of the Commission and 
the German authorities, the Conciliation 
Body arrived at provisional conclusions 
and proposed to both sides that they enter 
into a detailed dialogue with a view to 
reaching agreement on the facts. 
10. By letter of 19 March 1996 addressed 
to the Conciliation Body, the German 
authorities stated their readiness in princi­
ple for fresh discussions with the Commis­
sion, but pointed out that discussions 
aimed at conciliation would be worthwhile 
only if the Commission was prepared to 
seek a constructive compromise. 
11. By letter of 21 March 1996, the Com­
mission's officers made known that they 
were maintaining their position and that, 
even though the Commission had no objec­
tion to such discussions, there was no real 
point in a further meeting. 
12. In the circumstances, the Conciliation 
Body did not consider it worthwhile arran­
ging such discussions. In its final report of 
29 March 1996, it did not take a vote to 
decide in favour of one or other of the 
parties to the conciliation procedure and 
maintained its provisional conclusions. 
13. It was against that background that the 
Federal Republic of Germany brought its 
action. 5 — OJ 1994 L 182, p. 45. 
I - 7181 
OPINION OF MR MISCHO — CASE C-44/97 
II — Preliminary remarks 
14. The Federal Republic of Germany 
denies that the German control system fails 
to meet the requirements of Community 
law and challenges the accuracy of the 
findings of the Commission inspections. It 
considers that the flat-rate reduction is not 
therefore justified. 
15. The Federal Republic of Germany also 
maintains that the Commission failed to 
take account of the arguments and evidence 
adduced both orally and in writing during 
the period that preceded the action. 
16. According to the Commission, though 
it did not find the evidence furnished by the 
German Government convincing, it is not 
true to say that the Commission failed to 
consider it. 
17. I take the view that even if, as the 
Commission maintains, it must be borne in 
mind that the flat-rate correction at issue 
relates to the inadequacies of the control 
system as a whole and not the inadequacies 
specific to the different stages in the 
intervention machinery, it is none the less 
incumbent on the Commission to establish 
the existence of each of the alleged inade­
quacies. Consequently, the main issue 
involved in this action, namely whether 
there are in fact deficiencies in the German 
control system, can be resolved only after 
detailed analysis of the evidence provided 
by the German Government in relation to 
the findings on which the Commission 
based its decision. 
18. In that context, I consider it useful to 
cite immediately a number of points of 
case-law concerning the burden of proof. 
The Court of Justice has pointed out inter 
alia in a judgment of 1 October 1998 6 
that: 
'only intervention undertaken in accor­
dance with the Community rules within 
the framework of the common organisation 
of the agricultural markets is to be financed 
by the EAGGF (see Case C-48/91 Nether­
lands ν Commission [1993] ECR I-5611, 
paragraph 14). In that respect, it is for the 
Commission to prove an infringement of 
the rules on the common organisation of 
the agricultural markets (see Case 347/85 
United Kingdom ν Commission [1988] 
ECR 1749, paragraph 16; Case C-281/89 
Italy ν Commission [1991] ECR 1-347, 
paragraph 13; Case C-55/91 Italy ν Com­
mission [1993] ECR I-4813, paragraph 13; 
and Case C-48/91, cited above, paragraph 
18). Accordingly, the Commission is 
obliged to give reasons for its decision 
finding an absence of, or defects in, inspec­
tion procedures operated by the Member 
State in question (Case C-8/88 Germany ν 
6 — Case C-242/96 Italy ν Commission [1998] ECR I-5683, 
paragraphs 58 and 59. 
I - 7182 
GERMANY V COMMISSION 
Commission [1990] ECR I-2321, para­
graph 23). 
The Member State, for its part, cannot 
rebut the Commission's findings by mere 
assertions which are not substantiated by 
evidence of the existence of a reliable and 
operational supervisory system. If the 
Member State 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, to that effect, Case 
C-8/88 Germany v Commission, cited 
above, paragraph 28).' 
19. In support of its challenge, the Federal 
Republic of Germany also cites the failure 
of the Commission to charge to it any sum 
during previous financial years for which 
the German controls were carried out using 
the same system, even though the Commis­
sion had undertaken, or arranged for, 
detailed inspections. 
20. The Commission explains that it 
refrained from charging sums to the Federal 
Republic of Germany for the financial 
years 1987 and 1988, even though the 
inspections carried out at the time had 
revealed shortcomings about which it had 
made recommendations to the German 
authorities. Examinations of the system 
carried out in 1991 and 1992 had, however, 
ascertained that those fundamental defects 
had not been remedied and further short­
comings had emerged. The Commission 
adds that the fact that it had apparently 
mentioned only certain imperfections in no 
way prevented it noting other deficiencies 
identified during subsequent inspections of 
the control system and taking them into 
account in imposing charges. 
21. In regard to that argument, I share the 
Commission's view that the fact that it does 
not draw financial inferences from a find­
ing of deficiencies pertaining to one finan­
cial year cannot deprive it of the right to 
draw such inferences in relation to subse­
quent financial years, particularly where 
those deficiencies have persisted. Deficien­
cies identified subsequently may also be 
taken into account in determining the level 
of the flat-rate correction, without there 
being any need for prior recommendations 
or warnings to have been issued in relation 
to those deficiencies. 
22. Finally, the German Government 
claims that its position is borne out by the 
conclusions of the Conciliation Body. 
23. The Commission challenges the Ger­
man Government's interpretation of those 
conclusions and submits, more generally, 
that, pursuant to Article 1(2)(a) of Decision 
94/442/EC, it is not bound by the conclu­
sions of the Conciliation Body when adopt­
ing its final decision. The German Govern­
ment does not take issue with that. 
I - 7183 
OPINION OF MR MISCHO — CASE C-44/97 
24. Alongside a lengthy description of the 
points on which the parties disagree, the 
conclusions of the Conciliation Body 
include the following passages: 
'[T]he German control system operated 
during the period in issue, and in particular 
the use of BALM representatives, could 
probably have been improved, as suggested 
by certain comments made by the EAGGF 
during the 1987 and 1988 verification 
procedures, and as shown by the measures 
taken in the meantime for that purpose by 
the German authorities (see their letter 
No 714/1248/1992 of 6.10.1992). Those 
measures do not, however, allow of the 
conclusion that the measures applied pre­
viously were insufficient to avoid financial 
risk for the EAGGF. 
As regards the question whether in fact the 
German control system meets the standard 
of effectiveness required to avoid such 
risks, the Conciliation Body has not yet 
been able to make a final assessment.' 
Indeed, in that connection, 'the assessment 
of the facts pertaining to the inspection 
situation differs too greatly, according to 
whether it is the Commission officials or 
the German authorities that make the 
assessment.' 
25. Admittedly, this provisional view of the 
Conciliation Body indicates that it in 
principle approves the control system 
applied by the Federal Republic of Ger­
many. However, the Conciliation Body 
does acknowledge that a final evaluation 
can be made only on the basis of a closer 
analysis of the actual operation of the 
system. It is therefore for the Court to 
undertake that analysis. 
26. The Conciliation Body subsequently 
raises the question of whether the German 
control system was sufficiently reliable to 
avoid risks should the slaughterhouse and 
the coldstore form part of the same group 
of companies. In that connection, the 
Conciliation Body states the following: 
'[T]he Commission departments maintain 
that they had no evidence to substantiate 
the German authorities' assertion that the 
controls were carried out by BALM offi­
cials where the slaughterhouse and cold-
store belonged to the same group of 
companies. The German authorities have 
transmitted to the Conciliation Body docu­
ments substantiating that assertion, on the 
basis of specific and limited examples. The 
Conciliation Body fails to understand why 
that vital evidence was not able to be 
entered into in greater detail and clarified 
once and for all during the earlier stages in 
the procedure. It can only invite the parties 
to clarify the issue as a matter of urgency.' 
27. That extract from the conclusions 
shows that the Conciliation Body consid­
ered that the German authorities had 
demonstrated the accuracy of their asser­
tion in certain specific cases, but leaves 
I - 7184 
GERMANY V COMMISSION 
open the question whether a general con­
clusion can be drawn from those cases. 
28. A third extract from the conclusions of 
the Conciliation Body includes a provi­
sional assessment. After considering whe­
ther the incidents of fraud uncovered by the 
German authorities would have been avoi­
ded had BALM used its own inspectors 
exclusively, the Conciliation Body states 
that it is 'inclined to the view that there are 
insufficient grounds for that assumption, 
given the criminal nature of the irregula­
rities.' I shall return to that aspect of the 
problem below. 
III — Controls on takeover (entry into 
storage) 
A — Pleas in law and arguments of the 
parties 
29. The arguments the applicant puts for­
ward to challenge the Commission's sum­
mary report in this regard turn on five 
points. 
1. The use of coldstore employees as 
BALM representatives 
30. The summary report indicates that, in 
accordance with Article 14 of Commission 
Regulation (EEC) No 859/89 of 29 March 
1989 laying down detailed rules for the 
application of intervention measures in the 
beef and veal sector,7 product takeover 
(that is to say transfer of ownership and the 
determining point for payment) occurs on 
the day the products enter the intervention 
centre. The Commission therefore criticised 
the frequent use of employees of the 
coldstores as BALM representatives for 
the purpose of weighing and certifying 
takeover of the goods. Furthermore, 
according to the Commission, even though 
BALM's instructions to its regional offices 
are specific as to the content of the 
verifications the inspectors have to make, 
they are silent as to the timing and fre­
quency of controls to be conducted. The 
controls described could not reasonably be 
made by means of inspection after the event 
because the quarters of meat have already 
been weighed, frozen, packaged, placed on 
pallets and put into storage. The EAGGF 
therefore cast serious doubt on the relia­
bility of a control system based on certifi­
cates issued by warehouse employees. 
31. The summary report further indicates 
that, on this point, BALM initially empha­
sised the conflict of interest between 
slaughterhouses selling into intervention 
and coldstores designated to store the 
7 — OJ 1989 L 91, p. 5. 
I -7185 
OPINION OF MR MISCHO — CASE C-44/97 
goods. However, the report makes clear 
that the EAGGF control showed that this 
could not be relied upon because slaughter­
houses and coldstores sometimes belonged 
to the same group of companies. Therefore, 
while specifically acknowledging the posi­
tive elements in the German system, the 
EAGGF concluded that its main criticisms 
held good in relation to the absence of 
independent and comprehensive official 
controls by BALM at the point of takeover. 
32. In order to justify the use of warehouse 
employees as representatives, the Federal 
Republic of Germany stresses that there are 
two phases of control at the point of 
takeover: the first stage takes place in the 
slaughterhouse and the second in the cold-
store. 
33. In the initial phase, in the slaughter­
house, the German Government stresses 
that the controls are carried out by BALM 
officials only and not by other persons 
delegated by BALM; during this phase, the 
BALM officials undertake comprehensive 
verification of the intervention require­
ments. 
34. In the second phase, in the coldstore, 
the applicant maintains that the controls 
are carried out, as far as possible, by a 
BALM official. It does, however, acknowl­
edge that BALM has also used representa­
tives employed by the coldstore. In such 
cases, BALM would, however, always 
select experienced employees to act as its 
representatives and give them specific train­
ing. Tables and planks, placed in the 
coldstores, enable them to verify whether 
the quarters delivered may be taken over. If 
the representative is in any doubt, the 
BALM regional office immediately sends 
in an inspector who decides whether or not 
the quarters at issue may be taken into 
intervention. Furthermore, persons used as 
representatives are regularly monitored, 
supervised and trained by the BALM super­
visor. 
35. The Federal Republic of Germany 
points out that the controls carried out in 
the coldstore by the individuals appointed 
as BALM representatives took the same 
form and were on the same scale as those 
duly carried out by the BALM inspectors. 
Furthermore, the inspections carried out by 
the BALM representatives were subse­
quently verified by means of ex post 
inspections based on checks on documen­
tation and physical inspections of the goods 
taken over, carried out by BALM inspec­
tors, officials from the BALM regional 
offices and BALM supervisors. That pro­
cedure provided adequate security and 
effective protection against tampering. 
According to the German Government, 
the control system constitutes a whole and 
has to be viewed in its entirety. Assessing 
the second phase of controls in isolation 
would inevitably lead to the conclusion 
that deficiencies existed, if no account were 
taken of the inspections carried out at the 
slaughterhouse. The German Government 
further points out that in making its 
criticism, the Commission failed to take 
account of the two-tier system and con­
siders that the Commission decision does 
not, consequently, provide an adequate 
statement of the reasons on that point. 
I -7186 
GERMANY V COMMISSION 
36. The Commission's response is that it is 
not calling into question the controls at the 
slaughterhouse, which are neither the sub­
ject of the sums charged nor, consequently, 
of this dispute. Those controls cannot, 
however, compensate for the shortcomings 
in the German system identified as the stage 
of entry into storage. In the Commission 
view, no conclusions on compliance with 
the control requirements on entry into 
storage can be drawn from the regularity 
of the controls operated at the slaughter­
house. Nor can it be inferred from the 
regularity of the controls at the slaughter­
house that the controls at the coldstore 
should be less stringent. Those controls 
have their own crucial importance for the 
Community payments system. BALM itself 
recognised that importance by issuing spe­
cial instructions concerning implementa­
tion of the controls. 
37. In regard to the checks on documenta­
tion and the physical inspections carried 
out after the event, the Commission con­
siders that while they are, admittedly, 
useful and necessary in relation to the 
BALM system of representatives, these ex 
post controls are of only limited scope. In 
point of fact, these are basically checks on 
written documentation which fail to take 
account of factors as important as, for 
instance, whether the quarters of meat 
delivered were properly cut up and dressed, 
whether the temperature required at deliv­
ery (plus or minus 7°C) was maintained 
and whether the quarters were properly 
weighed. 
38. The Commission places particular 
stress on the risks bound up with the use 
of representatives, namely the impossibility 
of correcting at a later stage irregularities in 
the controls at the point of takeover and 
the conflicts of interest where the slaughter­
house and coldstore are in the same own­
ership. 
39. In regard to the first of those risks, the 
Commission maintains that the controls 
required on entry into storage can only be 
carried out at the time the batches of beef 
are delivered to the coldstore. If, at that 
stage, the controls are not carried out or are 
not carried out properly, they cannot 
subsequently be corrected on the basis of 
checks on documentation or physical 
checks, even if carried out by BALM 
officials, because the batches of meat at 
issue have already been weighed, frozen 
and packaged, placed on palettes and put 
into storage. That highlights the special 
responsibility incumbent on the persons 
responsible for operating controls on entry 
into storage. 
40. In regard to the risks bound up with 
conflicts of interest where the slaughter­
house selling the meat and the coldstore 
responsible for storing it form part of the 
same group of companies, the Commission 
is of the view that the German system does 
not pay proper attention to that conflict of 
interest. According to the Commission, it is 
quite obvious and perfectly normal that a 
conflict of interest should arise in the 
person of the BALM representative because 
that representative is both an employee of 
the coldstore and is responsible for verify­
ing the regularity of the operations carried 
out by the coldstore when the meat enters 
into storage. If, despite that conflict of 
interest, the use of BALM representatives is 
unavoidable, the German authorities 
I - 7187 
OPINION OF MR MISCHO — CASE C-44/97 
ought, according to the Commission, to 
have taken effective steps to ensure that the 
conflict of interest does not undermine the 
quality of the controls that have to be 
carried out at the time of entry into storage. 
41. In that connection, the Federal Repub­
lic of Germany stresses that whenever, in 
the context of the intervention purchase of 
beef, the vendor was a linked undertaking 
(slaughterhouse/coldstore), BALM took 
special care to ensure that, as far as 
possible, the beef purchased from that 
undertaking was not put into storage in a 
coldstore linked to the vendor (slaughter­
house). In those rare instances in which, for 
logistical and/or organisational reasons, it 
had been necessary to depart from that 
principle, the controls on takeover at the 
coldstore had been carried out by a BALM 
inspector exclusively. In that connection, 
the Federal Republic of Germany cites six 
examples of linked undertakings and atta­
ches, by way of an annex, the file on 
controls in relation to the undertakings 
Annuss (slaughterhouse) and Annuss (cold-
store). It goes on to say that BALM had 
stipulated that this was the procedure to be 
followed (controls to be carried out by 
BALM officials exclusively) in the case of 
linked undertakings and had transmitted 
oral instructions to that effect to the 
regional offices. 
42. The Commission casts doubt on the 
credibility of those claims by pointing out 
that, initially, the German authorities main­
tained that companies selling their products 
into intervention were prohibited by law 
from storing their own products. An 
inspection subsequently revealed that this 
claim did not reflect the true state of affairs 
and that linked undertakings were actually 
entering into such transactions with one 
another. According to the Commission, the 
German authorities than declared that, in 
the circumstances, the controls had to be 
tightened. Finally, in the Commission view, 
the Federal Republic of Germany is now 
claiming, in its application, that, in the case 
of linked undertakings, controls have 
always been carried out by BALM officials. 
Those are the reasons why the Commission 
considers those arguments unconvincing. 
Moreover, they are not mirrored in BALM's 
instructions to its regional offices. The 
instructions make no reference whatsoever 
to the special problem of linked undertak­
ings. The Commission considers that pro­
duction of the file on the controls carried 
out in relation to Annuss/Annuss alone 
cannot prove that the inspections were 
carried out systematically and entirely by 
BALM officials. 
2. Specific irregularities identified in the 
course of certain controls 
43. The Commission summary report indi­
cates that doubts about the reliability of the 
German control system were augmented by 
the knowledge that in one irregular case 
revealed during the EAGGF audit, employ­
ee(s) of the receiving coldstore had 
removed certain cuts from the quarters 
between takeover and blast-freezing. In 
another significant case, classification 
I -7188 
GERMANY V COMMISSION 
stamps on beef had been fraudulently 
changed from 'O' to 'R' to allow 6.7 tonnes 
of otherwise ineligible goods to enter store. 
In yet another case, a false BALM stamp 
was used to allow fraudulent entry of 92 
tonnes of beef to store. That case was not 
detected until after the goods were removed 
from store. 
44. The Federal Republic of Germany 
contends that those three instances in 
which the rules were breached cannot cast 
doubt on the security and regularity of the 
control system. Although indicative of the 
scale of criminal intent, they were detected 
in full as a result of the controls carried out 
by BALM and other German authorities 
and those responsible were held to account, 
with the result that the Community suf­
fered no financial harm. 
45. The Commission responds that the fact 
that those three instances of harm were 
detected by BALM or other German autho­
rities cannot be considered evidence of the 
reliability of the German control system 
either. It again points out that the 2% flat-
rate correction is not based on those cases, 
but that, in its view, they clearly illustrate 
the shortcomings in the control system at 
the stages of takeover, stock management 
and the removal from storage of beef 
within the intervention system. 
46. In that regard, the Commission main­
tains that the first case is a good illustration 
of the shortcomings in the German system. 
Had the controls been carried out regularly 
and in accordance with Community law at 
the time the goods were taken over, there 
would have been no possibility of pieces of 
meat being spirited away between delivery 
and freezing because those controls exten­
ded over the whole of that period, with the 
quarters of meat being subject to control 
from the time they were delivered until they 
were frozen. The fact that this fraudulent 
activity was subsequently detected does not 
alter the fact that the control on takeover 
was incomplete and inadequate. 
47. In its defence, the Commission main­
tains that it has been established that the 
number of half-carcases taken over into 
storage frequently fails to tally with the 
number of half-carcases earlier classified at 
the slaughterhouse. 
48. On that point, the Federal Republic of 
Germany responds that — as the German 
departments explained to the Commission 
in detail at the control stage — the reason 
for the discrepancies in the number of half-
carcases quality-tested in the slaughter­
house is that, during transportation to the 
coldstore, faults (transport stains, for 
instance) appeared in the half-carcases 
destined for intervention, and these pro­
ducts were consequently rejected on inspec­
tion for entry into storage at the coldstore 
because the intervention requirements had 
not been met. Those discrepancies have 
I - 7189 
OPINION OF MR MISCHO — CASE C-44/97 
nothing to do with deficiencies in the 
control system. Moreover, they are not 
relevant given that only meat taken into 
storage at the coldstore is covered by 
intervention. 
49. In its rejoinder, the Commission takes 
the view that the explanations provided by 
the Federal Republic of Germany in this 
respect are perfectly plausible. However, 
according to the Commission, it is surpris­
ing that those anomalies were not men­
tioned in the reports on quality assessment 
and takeover of the beef, in the instances 
mentioned in the summary report in parti­
cular. Those cases also demonstrate that the 
existence of such irregularities did not 
necessarily result — as the German Gov­
ernment seeks to imply — in rejection of 
the goods in question. 
50. As regards the general risks of tamper­
ing, resulting in good quality meat being 
replaced with meat of inferior quality, the 
Federal Republic of Germany claims that 
no complaints were received from purcha­
sers in relation to the meat exported (95%). 
In its opinion, had such tampering occur­
red, the third party purchasers would have 
complained about it. In regard to the 
portion of stock destined for food aid 
(5%), there was no possibility of swapping 
the meat because it would be difficult to sell 
goods that had been cut up and packaged. 
51. The Commission's response here is that 
there was a real possibility of tampering 
which became a virtual certainty in the case 
of linked undertakings, because of the 
possibility of introducing a false report 
into the system, without fear of subsequent 
discovery. 
52. According to the explanations furn­
ished by the Federal Republic of Germany, 
it is not possible to introduce a false 
takeover report into the payments system 
unless there is collusion between all the 
individuals and authorities involved in the 
takeover of the intervention beef and 
administrative control (slaughterhouse, 
BALM inspector/person appointed repre­
sentative by BALM, sworn weigher, cold-
store, BALM regional and central offices), 
because the requisite controls are always 
carried out. However, the Federal Republic 
of Germany points out that no system 
could provide adequate protection against 
extensive and large scale fraudulent activity 
of that kind, involving all of the individuals 
and authorities. 
53. The Commission retorts that in its 
reply to a Commission letter of 13 April 
1994 stressing the risk that false reports 
might be introduced, the German Govern­
ment stated on 6 July 1994 that 'in order to 
guarantee that the takeover reports of the 
BALM central office, its regional offices 
and the coldstore tally ... an internal con­
trol and adjustment procedure will be 
introduced parallel to the current control 
procedure — as suggested by the EAGGF.' 
According to the Commission, in making 
that declaration, the German Government 
I - 7190 
GERMANY V COMMISSION 
acknowledged that the procedure operated 
hitherto did not fully protect the payments 
system against the introduction of false 
reports. 
3. Statistical data 
54. In its summary report, the Commission 
noted that 'comparison of the statistics 
showed some stark contrasts in regional 
control activity. For example BALM Ham­
burg, with about 40% of national deliveries 
to store over 1991 and 1992, could 
demonstrate an official BALM presence 
during takeover for more than half of the 
deliveries in its region (38% in 1991 and 
72% in 1992). The least important BALM 
regions of Berlin and Weimar showed a 
control rate of 80%. Against these statistics 
the regions of Mülheim and Mannheim 
which accounted for about 25% of 
national deliveries had controlled at a rate 
of only 20%. The second most important 
BALM region of Munich (about 28% of 
national total) had not conducted any 
controls at all in 1991.' 
55. In its application, the Federal Republic 
of Germany claims that it had been demon­
strated, for the 1992 financial year, that 
more than half (some 52%) of the 14 000 
controls carried out in a coldstore were 
made by a BALM inspector and that, when 
carrying out his inspection, the BALM 
inspector filled out, in addition to the 
takeover report (part B), a form called the 
'Bericht über die Prüfung im Empfangsbe­
trieb' (report on control in the receiving 
undertaking) which he transmitted to 
BALM. The other controls (some 48%) 
were carried out, according to the Federal 
Republic of Germany, by BALM represen­
tatives, with the result that there was 100% 
control of takeover. 
56. In the Commission's view, the statistics 
show that there were real shortcomings, 
even though the bulk of the controls were 
carried out by BALM officials themselves 
(52% overall for the 1992 financial year). 
The Commission does not dispute that in 
52% of cases the controls were carried out 
by BALM officials, but draws attention to 
the regional discrepancies identified in the 
summary report which it considers to be 
significant in terms of the control activity 
of the BALM regional offices. In the case of 
Munich, the differences identified reveal 
the scale of the deficiencies in the German 
control system. 
57. As regards the assertion concerning the 
BALM Munich regional office inspectors, 
in 1991, the Federal Republic of Germany 
states that it is false and maintains that it 
immediately set the record straight when 
the assertion — based on a misunderstand­
ing — was first made during the concilia­
tion procedure. According to the Federal 
Republic of Germany, the takeover reports 
prove that the Munich regional office had 
BALM inspectors carry out 16% of the 
controls on takeover made in the cold-
stores. 
I - 7191 
OPINION OF MR MISCHO — CASE C-44/97 
58. In that connection, the Commission 
accepts that the assertion contained in the 
defence implies that the BALM officials 
failed to carry out any inspections in 
Munich. However, according to the Com­
mission, that is not the main issue. The 
Commission explains that it actually esta­
blished, on the basis of regional control 
data, requested and transmitted by the 
German authorities, that Munich alone 
was not adhering to the normal control 
system and substantiated the verifications 
by BALM officials by transmitting the 
'control report in the receiving establish­
ment.' Given that no plausible explanation 
was provided to justify the particular case 
of the BALM Munich regional office in 
Munich, the Commission had to infer that 
the implementation of the controls by 
BALM officials, referred to in relation to 
the Munich office, was not properly sub­
stantiated. According to the Commission, it 
has also to be pointed out in passing that, 
based on the statistics supplied by the 
German services, not 16% — as 
claimed — but only 11% of the inspections 
were carried out by the Munich regional 
office (which is responsible for 412 of the 3 
747 takeover reports in total drawn up by 
BALM officials). 
4. Documentation concerning verification 
of takeover 
59. In the summary report, the Commis­
sion states that a close examination of a 
selection of control reports showed that 
they do not necessarily signify comprehen­
sive control (i.e. from start to finish and 
incorporating all elements provided for in 
the national instructions) of a particular 
consignment. On the other hand, about 
10% of the reports viewed by the EAGGF 
indicate some negative observation (eg bad 
cutting, too high a temperature etc) result­
ing in rejection (at the coldstore) of all or 
part of the consignment. That underlines 
the importance of official independent 
controls at the point of takeover, particu­
larly where slaughterhouse and coldstore 
are effectively one and the same. 
60. In its defence, the Commission explains 
that it is clear from consideration of the 
reports that they fail to meet the require­
ments of Community law. That, it claims, is 
quite apparent from an examination of the 
control reports transmitted — albeit belat­
edly — to the Commission. The reports fall 
into three distinct categories: 
First category: reports on the controls on 
takeover made by the BALM officials 
themselves at the time the batches of beef 
are delivered: the reports frequently men­
tion isolated deficiencies; that is fully in 
accord with current practice and what is to 
be expected, and suggests that the controls 
were exhaustive and punctilious. 
I - 7192 
GERMANY V COMMISSION 
Second category: reports on the ex post 
controls on takeover carried out by BALM 
officials. These reports confirm that the 
batches of beef in question were examined 
only after they had been frozen, and state 
specifically that, at that stage, it is no 
longer possible to undertake comprehen­
sive controls of takeover. 
Third category: reports on the takeover of 
the intervention goods made by BALM 
officials; these reports form part B of the 
'Report on the qualitative assessment and 
takeover of the beef' which is used, after 
the slaughterhouse findings have been 
recorded in part A, to confirm the takeover 
of the beef for storage. It should be noted 
that the BALM representatives do not enter 
any negative comments in part B of the 
report. That does not reflect what happens 
in practice and is, moreover, belied by the 
outcome of verification by the BALM 
officials. These are clear contradictions 
that confirm the Commission's finding of 
what it considers to be real shortcomings in 
the system. 
61. The Federal Republic of Germany 
explains that this is an incorrect assessment 
of the documents. According to the Federal 
Republic of Germany, there are two docu­
ments: the 'Report on the qualitative 
assessment and takeover of the beef', which 
the Commission describes as the control 
report, and the form entitled 'Report on 
control in the receiving undertaking'. In the 
German system, it is only the control report 
which is authentic. The other is a BALM 
internal document. 
62. Consequently, according to the Federal 
Republic of Germany, the Commission's 
claims are inaccurate in so far as they refer 
solely to the 'Report on control in the 
receiving undertaking'. Furthermore, the 
Federal Republic of Germany considers it 
necessary to reject the Commission's claim 
that the takeover reports (part B) drawn up 
by the BALM representatives, and contain­
ing no negative comments, do not reflect 
what the Commission has found to be the 
case in practice. On the contrary, the 
Commission has produced only a very 
limited number of 'Reports on control in 
the receiving undertaking' containing the 
findings of the BALM inspectors on the 
discrepancies that exist as compared with 
the normal control procedures. Those 
reports cannot therefore serve as proof of 
an alleged general lack of control conse­
quent on the use of representatives. 
63. In that connection, the Commission 
points out that, in its defence, it selected 
just a few examples to substantiate its 
arguments. The German Government alle­
gation that it was possible to talk in terms 
of only a 'very small number of reports' is 
therefore irrelevant. The Commission 
claims that, all in all, it found references 
to deficiencies in about 15% of the control 
reports analysed after the bilateral meeting 
I - 7193 
OPINION OF MR MISCHO — CASE C-44/97 
of 20 January 1996, one of which noted 
'no BALM stamp'. 
64. The Commission further points out 
that it is the German authorities themselves 
who put forward the 'Reports on control in 
the receiving undertaking' to demonstrate 
that the German control system was work­
ing properly, after the Commission had 
ascertained that the takeover reports were 
frequently not drawn up by the German 
authorities, in accordance with their own 
instructions, and were sometimes not even 
signed. It is therefore logical that the 
Commission departments also should take 
into consideration the 'Reports on control 
in the receiving undertaking'. 
65. The German Government further 
points out that the form 'Report on the 
qualitative assessment and takeover of the 
beef', used during the 1992 financial year 
for the takeover controls, did not include 
an appropriate section in which either the 
BALM inspectors or their representatives 
could record any unusual features that 
came to light during verification of take­
over or minor deficiencies noted in relation 
to the beef to be taken over. Only the half-
carcases duly taken over at the coldstore 
were entered in part Β of the takeover 
report. Subsequently, and at the suggestion 
of the EAGGF, BALM recast the report to 
include a section for unusual features. 
66. According to the Commission, that is a 
further illustration of the shortcomings of 
the German system at the time. It considers 
the absence of an appropriate section in the 
report to be a serious omission. And that 
omission is all the more serious if — as 
claimed by the German Government — the 
takeover report is in fact the main control 
document covering the stage of entry into 
storage. A section of that kind would have 
encouraged the person responsible for car­
rying out the controls to look carefully for 
any deficiencies in the meat delivered and, 
where appropriate, positively to confirm, 
by entering his signature, that the goods 
were of sound quality. 
67. As regards the beef, in relation to 
which a number of 'Reports on control in 
the receiving undertaking' reveal that it was 
inspected in the freezer tunnel, the Federal 
Republic of Germany claims that the meat 
was still fresh and not — as the Commis­
sion claims — frozen. The controls on 
takeover were able to be duly carried out 
because the process of freezing did not 
begin until the whole of the batch delivered 
had been put into the freezer tunnel. 
68. According to the Commission, it is 
clear from two of the reports at issue in 
particular that the meat was not inspected 
until the day after its delivery or, indeed, 
the day after that. It is for the German 
Government to explain whether and how it 
is possible that, after a period of more than 
24 hours, the fresh meat was still fresh and 
had not become frozen. Leaving that aside, 
the ex post controls do not, in any event, 
I - 7194 
GERMANY V COMMISSION 
make it possible to check on whether the 
temperature of 7°C prescribed for delivery 
was maintained. Though the reports con­
firm that temperature, that confirmation is 
not based on controls by the BALM 
officials. 
5. Is Regulation (EEC) No 2456/93 applic­
able? 
69. The Federal Republic of Germany 
further maintains in its application that 
the Commission is basing its objection to 
the system of entry into storage operated in 
Germany — not specifically, it has to be 
said, but in substance — on Article 17 of 
C o m m i s s i o n R e g u l a t i o n (EEC) 
No 2456/93 of 1 September 1993 laying 
down detailed rules for the application of 
Council Regulation (EEC) No 805/68 as 
regards the general and special intervention 
measures for beef. 8 In the German view, it 
is clear from the recitals of the regulation 
that the Commission itself accepted that 
the range of measures available to it in the 
sector was not sufficient to deal with the 
exceptional situation in 1992 (when inter­
vention stocks of beef were at their highest 
since the establishment of the Community). 
However, the Federal Republic of Germany 
contends that this regulation did not enter 
into force until September 1993 and was 
not applicable to the 1992 financial year 
because Regulation No 859/89, then in 
force, did not contain an analogous provi­
sion. The Federal Republic of Germany 
objects that, using Article 8 of Regulation 
No 729/70 as a pretext, the Commission 
has applied retroactively to the 1992 finan­
cial year the more stringent requirements of 
Regulation No 2456/93. 
70. According to the Commission, that 
objection is unfounded because the criti­
cisms directed towards the German control 
system in respect of the 1992 financial year 
are based neither in fact nor in law on the 
rules put in place by Regulation 
No 2456/93. The Commission maintains 
that its criticisms are actually based on the 
fact that the Federal Republic of Germany 
failed to take the measures necessary to 
ensure that the transactions financed by the 
EAGGF were actually carried out and were 
executed correctly, in accordance with 
Article 8(1) of Regulation No 729/70. 
B — Analysis 
71. Are there deficiencies in the German 
control system at the point at which the 
intervention beef is taken into storage 
which might result in a minor risk of losses 
for the EAGGF? 
72. Notwithstanding the arguments put 
forward by the applicant, I consider that 
question has to be answered in the affir­
mative. 8 — OJ 1993 L 225, p. 4. 
I - 7195 
OPINION OF MR MISCHO — CASE C-44/97 
73. It is clearly undeniable that, when 
controls are carried out at the slaughter­
house, the BALM officials make compre­
hensive checks on whether the intervention 
requirements have been met. Those checks 
cannot, however, compensate for possible 
deficiencies in the controls at the time the 
meat is taken over at the coldstore. It has to 
be noted that the regularity of the controls 
at the slaughterhouse is not relevant to an 
assessment of the regularity of the controls 
at the time of takeover at the coldstore. In 
accordance with Article 14 of the above-
mentioned Regulation No 859/89, the cri­
tical point, particularly in relation to the 
transfer of ownership of the intervention 
goods and payment, is the point of take­
over. The Commission is therefore right to 
state that the controls at the coldstore have 
their own crucial importance for the Com­
munity payments system. 
74. As regards those controls, it is signifi­
cant that, as the German Government has 
itself acknowledged, were they assessed in 
isolation, the inevitable conclusion would 
be that deficiencies existed. 9 
75. In that connection, the Commission's 
findings based on the control reports reveal 
that the representatives were not suffi­
ciently searching in the controls they car­
ried out. It is in fact apparent that where it 
was the BALM inspectors who carried out 
the controls, the reports frequently mention 
isolated deficiencies, whereas the reports by 
the BALM representatives contain no nega­
tive comments. That inconsistency is borne 
out by later controls, carried out by the 
BALM officials, 15% of which refer to 
shortcomings involving the controls carried 
out by the representatives. 
76. Germany's argument, according to 
which the ex post control reports drawn 
up by the BALM officials are simply a 
BALM internal document, and only the 
control report made at the point of take­
over is authentic, cannot be accepted. In 
fact, as the Commission points out, the 
German authorities themselves put forward 
those documents to show that their control 
system was working properly. Conse­
quently, if the documents provide argu­
ments that strengthen the Commission's 
case, the Commission is entitled to rely on 
them. 
77. Furthermore, I share the Commission's 
view that the requisite controls can be 
carried out only at the moment when the 
batches of beef are delivered to the cold-
store, since the controls carried out subse­
quently by BALM officials cannot make 
good possible shortcomings in the controls 
made at the time of takeover. If the BALM 
inspector is not present at the time of 
takeover, he will in fact inspect the meat 
either when it is in the freezer tunnel 
(Schockraum) or when it has already 
entered storage. 9 — See point 35 above. 
I - 7196 
GERMANY V COMMISSION 
78. If the meat is inspected in the freezer 
tunnel, it is hard to imagine that, after 24 
hours has elapsed, the meat is not frozen to 
such a degree that it is no longer possible to 
verify its quality with sufficient accuracy, to 
say nothing of its temperature on arrival. 
79. If the inspection is made after the meat 
has entered into storage, detailed checks on 
its state on entry to the coldstore are still 
more impossible because the meat has been 
completely frozen, packaged and placed on 
a pallet in the coldstore. 
80. These subsequent documentary and 
physical checks are therefore of limited 
use in establishing the regularity of the 
transactions. 
81. Furthermore, if it is thus established 
that the main controls are those carried out 
when the meat is taken over, the fact that 
the report used for takeover controls in 
1992 did not contain an appropriate sec­
tion in which to record any unusual 
features that emerged on verification of 
takeover or minor deficiencies noticed in 
the meat to be taken over, constitutes a 
further defect in the German system at the 
time. That would be all the more the case if 
that document were in fact the only 
authentic document, as the German Gov­
ernment claims. Moreover, the latter recog­
nised that defect and remedied it by intro­
ducing an appropriate section for subse­
quent financial years. 
82. More difficult is the question of the 
conclusions to be drawn from the fraud 
detected. As I mentioned at the outset, the 
Conciliation Body is 'inclined to the view' 
that because of the criminal nature of the 
irregularities, they could not have been 
avoided even if BALM had used only its 
own inspectors. That may be so. On the 
other hand, it seems to me, that the 
fraudulent substitution of category 'R' 
stamps for category Ό ' stamps and the 
use of a forged BALM stamp to allow 92 
tonnes of meat into intervention would be 
much more difficult if the BALM officials 
were in attendance when the goods were 
delivered to the coldstore. As the German 
Government points out, these cases of 
fraud cannot, of course, call into question 
the security and regularity of the German 
control system as a whole. But they do 
reveal the vulnerability of the system 
resulting from the use of representatives. 
83. That vulnerability becomes all the 
more apparent if one takes into considera­
tion the relatively limited number of con­
trols carried out by some BALM regional 
offices at the time of takeover. Even though 
the total percentage of controls carried out 
directly by BALM officials was 52%, there 
is reason to fear that the low level of official 
and independent controls carried out by the 
Mülheim, Mannheim and, above all, 
Munich offices, made it easier for the 
unscrupulous to engage in fraud. 
84. However, as regards the risks of fraud 
in the case of linked undertakings, I am 
I - 7197 
OPINION OF MR MISCHO — CASE C-44/97 
surprised at the Commission's assertion 
that only in its application did the German 
Government maintain that controls are 
always carried out by BALM officials in 
such cases. In point of fact, the summary 
report itself makes clear reference to the 
oral instructions given to the regional 
offices, according to which takeover has 
exclusively to be checked by a BALM 
official in cases in which the slaughterhouse 
and coldstore belong to the same group of 
companies. 
85. However, the fact that these were 
purely oral instructions — which the Fed­
eral Republic of Germany does not dis­
pute — is a ground for criticism. Where a 
coldstore and slaughterhouse are linked, it 
is crucially important for the regularity of 
takeover operations that these controls be 
carried out. In issuing its oral instructions, 
BALM recognised the importance of this 
but failed to give them the force of written 
instructions. It can therefore be considered 
that, because BALM's instructions were 
oral, they were not as effective as they 
could have been and that fact may there­
fore also be taken into account in assessing 
the defects of the German control system. 
86. As regards the possibility of introdu­
cing a false report into the system if the two 
undertakings are linked, it has to be said 
that the possibility exists. The risk that that 
kind of fraudulent manœuvre will not be 
detected is, admittedly, a minor one, but it 
nonetheless exists. The German authorities 
themselves acknowledged that to be the 
case by announcing that they were going to 
introduce a procedure designed to guaran­
tee that the copies of the takeover reports in 
the possession of the BALM central office, 
its regional offices and the coldstore tallied 
in every detail. 
87. Finally, as regards the German Govern­
ment's argument criticising the Commis­
sion for retroactively applying Article 17 of 
the a b o v e m e n t i o n e d R e g u l a t i o n 
No 2456/93, I can only endorse the Com­
mission view. That criticism is justified 
neither in fact nor in law. It is true that 
Article 17 sets out for the first time, in 
detail, the procedure for takeover. But even 
if the Community legislation did not yet 
contain provisions as specific as this in this 
area, the fact remains that Article 8 of the 
abovementioned Regulation No 729/70 
itself required the Member States to take 
the necessary measures to: 
— satisfy themselves that transactions 
financed by the Fund are actually 
carried out and are executed correctly; 
and 
— prevent and deal with irregularities. 
88. That provision, which constitutes, 
within the field of agriculture, an expres-
I - 7198 
GERMANY V COMMISSION 
sion of the obligations imposed on the 
Member States by Article 5 of the EC 
Treaty, sets out the principles according to 
which the Community and the Member 
States are to organise implementation of 
the Community decisions on agricultural 
intervention financed by the EAGGF, as 
well as the fight against fraud and irregula­
rities in relation to those operations. It 
imposes on the Member States the general 
obligation to take the measures necessary 
to satisfy themselves that the transactions 
financed by the EAGGF are actually carried 
out and are executed correctly even if the 
specific Community act does not expressly 
provide for the adoption of particular 
supervisory measures. 10 
89. It is in the light of that obligation, 
therefore, that the German authorities were 
supposed to ensure the effectiveness of the 
controls at the time the beef was taken over. 
90. The above analysis has shown to be 
unconvincing the arguments the German 
Government has used to try to prove that 
the shortcomings on which the Commis­
sion based in particular the flat-rate correc­
tion at issue did not exist. 
91. Finally, as regards the complaint that 
the statement of the reasons was inade­
quate, it has only to be borne in mind that 
decisions on the clearance of accounts do 
not require detailed reasons, if they are 
taken on the basis of summary reports as 
well as correspondence between the Mem­
ber State and the Commission, which 
implies that the government concerned 
has been closely involved in the process 
by which the decision came about and is 
therefore aware of the reason for which the 
Commission considered that it must not 
charge the sums in dispute to the 
EAGGF. 11 
IV — Controls during storage 
A — Pleas in law and arguments of the 
parties 
92. The applicant's arguments on this issue 
turn on four points. 
1. Entry in the inventory 
93. Article 3 of the abovementioned Reg­
ulation No 618/90 reads as follows: 
'The accounting inventory shall be verified 
by the storekeeper during the last two 
months of the financial year. 
10 — See Case C-209/96 United Kingdom v Commission [1998] 
ECR 1-5655, paragraph 43. 
11 — See, among others, Case 347/85 United Kingdom v 
Commission [19881 ECR 1749, paragraph 60. 
I - 7199 
OPINION OF MR MISCHO — CASE C-44/97 
This verification shall entail verification of 
the physical presence of the goods in 
accordance with a form, a model for which 
is given in Annex II. 
The verification shall be carried out in the 
presence of an official of the intervention 
agency. 
If, however, the official of the intervention 
agency is not present, he shall carry out the 
verification on his next visit, taking 
account of stock movements occurring in 
the interval.' 
94. The form, a model of which is given in 
Annex II of the regulation, contains four 
columns with the following headings: 
'weight entered', 'weight checked', 'weight 
verified' and 'observations'. The following 
appear at the bottom of the form: 'weight 
checked: establishment of physical pre­
sence of goods (Article 3)' and 'weight 
verified: batches selected and weighed 
(Article 4).' 
95. In its summary report, the Commission 
noted that, in the inventories, there were 
never any differences between the book 
weight and the checked weight. In the 
coldstores visited it was confirmed that 
stocks had not been verified, as required by 
Article 3, but had simply been transposed 
from the stock accounts of the coldstore. 
96. The Federal Republic of Germany 
contends that Article 3 of the abovemen-
tioned Regulation No 618/90 does not 
require that the weight be verified as part 
of the annual inventory control because, 
pursuant to Article 4 of that same regula­
tion, physical verification takes place sub­
sequently. Consequently, according to the 
Federal Republic of Germany, contrary to 
what the Commission alleges, no difference 
in weight is able to be established in the 
annual inventory declarations at the time 
the physical presence of the goods is 
verified. 
97. The Commission maintains that the 
disappearance of any pallet or piece inevi­
tably results in a weight loss which must be 
entered in the inventory report. The fact 
that no such entry exists confirms what 
employees of the coldstore, whom the 
Commission met with during on-the-spot 
verification, told the Commission official 
directly, namely that the storekeeper did 
not verify the physical presence of the 
goods but directly transposed the data on 
quantity and weight entered in the cold-
store stock account. That, according to the 
Commission, is the real flaw in the inven­
tory system because the annual inventories 
drawn up by the coldstores never indicated 
any discrepancy between the quantities and 
weights recorded in the accounts and the 
quantities and weights checked. 
98. The Federal Republic of Germany 
contends that it is for the Commission to 
prove those allegations and puts forward, 
I - 7200 
GERMANY V COMMISSION 
by way of proof, the evidence of some of 
the BALM regional office inspectors. The 
Federal Republic of Germany then explains 
that, every year, the storekeeper is given 
written instructions to comply with the 
requirements relating to the drawing-up of 
the annual inventory. By signing the 
declaration on the annual inventory for 
the intervention goods, the storekeeper 
certifies and establishes that the control 
has been properly carried out. The regula­
tion does not provide for additional proof 
or documentation confirming that Article 3 
was complied with when the accounting 
inventory was checked. 
99. In that connection, the Commission 
replies that the mere obligation to verify the 
physical presence of the goods in itself 
results in the need for documents that 
verifiably establish that the controls have 
been carried out. That is why the proof 
required by the Commission is not 'addi­
tional' proof but simply proof that verifi­
cation has taken place. 
100. According to the Federal Republic of 
Germany, at the point at which the physi­
cal presence of the goods is ascertained, 
there is no need physically to check the 
weight, by weighing the goods as part of 
the inspection provided for in Article 3; all 
that has to be done — in accordance with 
the definition of the phrase 'weight 
checked' — is to record the weight which 
was verified on the spot as part of the 
process of establishing the physical pre­
sence of the goods pursuant to Article 3. 
Given that there is no further control of 
weight, by means of a subsequent weight 
check, the weight that appears in the 
columns on the form relating to the weight 
entered and the weight checked are always 
going to tally if on-the-spot stock verifica­
tion has not identified any mistake in the 
inventory. 
101. On that point, the Commission main­
tains that, contrary to the arguments it is 
now advancing, the Federal Republic of 
Germany has not ruled out the possibility 
that a practice of transcribing exists in the 
coldstores and, in response to a comment 
from the Commission stressing that risk, 
the Federal Republic of Germany stated 
that it intended 'checking the storekeepers' 
compliance with the provisions more clo­
sely in the future.' Moreover, the Commis­
sion points out that, since the figures were 
simply transcribed, it is perfectly natural 
that no quantitative inaccuracy could be 
identified but, in its view, this cannot be 
used as a basis for concluding, as the 
German Government would have it, that 
the controls were regular. 
2. Control of the inventories 
102. Article 4 of Regulation No 618/90 
provides: 
'[0]n the basis of the accounting inven­
tories, the official of the intervention 
agency shall check on the spot: 
— the procedure used by the storekeeper 
to draw up the inventories, 
I - 7201 
OPINION OF MR MISCHO — CASE C-44/97 
— the accounting data of the warehouse 
(entries, removals, balance of stocks) 
and the outcome of the storekeeper's 
annual inventory. 
The official shall compare the abovemen-
tioned data with the quantitative data in his 
own accounts and with the monthly 
accounting inventories. 
Where there is agreement between the 
accounts, he shall make a physical inspec­
tion of at least 5% of the quantities stored 
in accordance with the methods set out in 
Annex III for each product. 
Where accounts differ or where the physi­
cal inspection reveals a discrepancy not 
clearly justified, an additional percentage 
of the quantities in intervention storage 
must be checked in accordance with the 
same method. 
This check must be continued by adding an 
additional 5% each time to the quantities 
involved until the differences or discrepan­
cies are explained. 
The intervention agency must be repre­
sented by an auditor or controller approved 
by a Member State. 
The inspection shall be carried out by a 
person independent of the storekeeper.' 
103. Annex III, section VI, of the same 
regulation lays down the following meth­
ods for the physical inspection of beef with 
a view to drawing up an inventory: 
' 1 . Selection of batches representing 5% of 
the total quantity in public intervention 
storage. The batches to be checked may 
be selected prior to the inspection of 
the warehouse on the basis of the 
accounting data of the intervention 
agency, but the storekeeper may not 
be informed. 
2. On-the-spot verification of the pre­
sence of the batches selected and of 
the composition of the batches. Verifi­
cation shall comprise: 
— for bone-in meat: 
— identification of the batches 
and verification of the number 
of pieces, 
— verification, for each type and/ 
or quality, of the weight of 
20% of the pieces, 
I - 7202 
GERMANY V COMMISSION 
— visual check of the condition of 
the packaging; 
— for boned or boneless meat: 
— identification of the batches 
and verification of the number 
of boxes, 
— weighing of 10% of the pallets 
or containers, 
— verification, for each cut, of 
10% of the boxes from each 
pallet or container, 
— visual check of the contents of 
the boxes and the condition of 
the packaging in each box. 
The pallets/containers shall be chosen 
following the different cuts stored. 
3. Description in the inventory report of 
the batches inspected physically and of 
defects noted.' 
104. In its summary report the Commis­
sion notes that it was not able to establish 
that a physical inspection of at least 5% of 
the meat in store had taken place, in 
accordance with Article 4 and Annex III 
to the regulation. The report describes the 
difficulties the EAGGF encountered in 
undertaking the controls of the inventories : 
the storage facilities were tightly packed, 
there were problems in ascertaining the 
actual quantities visually inspected and in 
determining the number of pieces on each 
pallet, there were no controls designed to 
guarantee that the selected pallets were 
those weighed, and so on. 
105. In its application, the Federal Repub­
lic of Germany disputes the Commission's 
assertion that the controls provided for in 
Article 4 and Annex III were not duly 
carried out. It maintains that a certain 
number of batches, corresponding to at 
least 5% of the total quantity stored, were 
selected and that the composition of those 
batches was verified on the spot. It adds 
that, in the course of the additional verifi­
cation covering 20% of the quantity (5%) 
already checked, weight was checked by 
the BALM official who selected on the spot 
the 20% of pieces to be inspected (selecting 
the pallets). The signatures of the BALM 
official and the storekeeper on the annual 
inventory report — which is accompanied 
by the relevant stock report that lists 
separately the batches stored that have 
been inspected and physically weighed — 
certify and establish the outcome of the 
physical inspection of the meat stored. 
According to the German Government, 
further requirements cannot be justified 
under Community law. 
I - 7203 
OPINION OF MR MISCHO — CASE C-44/97 
106. The Commission does not dispute 
that the weight of the 20% of the 5% 
sample already inspected was determined 
in accordance with Community law, but 
points out that this percentage accounts for 
only 1% of the total quantities stored. 
According to the Commission, that element 
of the controls was not criticised, which is 
why the observations on that point con­
tained in the German Government applica­
tion are irrelevant. According to the Com­
mission, it is in relation to the physical 
inspection of at least 5% of the meat stored 
that there are serious deficiencies in the 
inventory control system. In that connec­
tion, the Commission maintains that the 
claims by the Federal Republic of Germany 
do not square with the actual circumstances 
encountered by the Commission officials 
when carrying out their own inspections. In 
point of fact, according to the Commission, 
the data on weight simply makes it possible 
to establish from which batch or category 
of goods the 1 % of total stock was selected 
for weight control. The Commission points 
out, that in checking on the inventory 
controls carried out by the BALM officials, 
its own inspectors ascertained that it was 
impossible accurately to assess which quan­
tities had been subject to visual checks. 
According to the Commission, the inven­
tory reports did not make it possible to 
verify which and how many pallets had 
been weighed; the number of pieces per 
pallet was not counted; no checks were 
carried out to establish whether the pallets 
selected for weight controls were the pallets 
actually weighed; the pallets weighed by 
the BALM officials were impossible to 
identify; and no piece was unwrapped to 
compare the frozen meat or stamps with 
the data on classification and category. 
Moreover, according to the Commission, 
the 'discrepancies' column in the inventory 
reports had frequently been left blank or 
not been filled in properly. In the Commis­
sion view, it is not possible to determine 
from the inventory reports the exact quan­
tity that has been subject to physical 
inspection. 
107. When the Commission asked BALM 
for documentary evidence it was unable to 
produce its inspectors' working plans 
showing the precise number of pallets and 
pieces inspected with corresponding 
weights. The Commission maintains that 
when, in relation to the use of Community 
resources, Community law lays down spe­
cific controls, such as the physical inspec­
tion of 5% of the beef stored, the compe­
tent national authorities must ensure that it 
is possible to verify whether, in the context 
of the procedure for the clearance of 
accounts, and on the basis of adequate 
documentation, that Community require­
ment has been met. Since that has not 
happened in this case, the burden of proof 
falls to the German Government and, 
according to the Commission, it is not 
sufficient here to rely on declarations by 
BALM officials or inspectors. 
108. The Federal Republic of Germany 
claims that the actual quantity that has 
been physically inspected in accordance 
with Article 4 of Regulation No 618/90 
appears in every annual inventory report, in 
the fourth column of the annex entitled 
'Stock report', with an exact record of 
weight. 
I - 7204 
GERMANY V COMMISSION 
109. As regards the checks to be made on 
which pallets had been weighed and how 
and what pieces they contained, the Federal 
Republic of Germany points out that, on 
the basis of the stock reports which are an 
integral part of the annual inventory report, 
it is possible indisputably to establish which 
batches of stock have been physically 
inspected in accordance with the combined 
provisions of Article 4 and Annex III, sec­
tion VI, of Regulation No 618/90. The 
batches inspected and weights recorded are 
entered in the stock reports. According to 
the Federal Republic of Germany, the 
pallets inspected may be identified on the 
spot by the labels attached to them, at any 
time before the goods are removed from 
storage because, as part of the inventory 
procedure, the competent BALM inspectors 
attach a BALM stamp and/or seal to the 
labels on the inspected and weighed pallets 
and because, once they have been weighed, 
the pallets are not returned to their original 
location but are stored separately. 
110. According to the Commission, the 
German Government is describing a proce­
dure which in theory makes it possible to 
identify the pallets inspected but whose 
actual implementation is in no way guar­
anteed. According to the Commission, its 
officials noted, for instance, in the course of 
their inspections, that the BALM inspectors 
often give the pallets selected a special 
number (from 1 to 20 and so on). In the 
Commission view, that approach made any 
further inspection impossible. In the Com­
mission view, the use of pallet cards is 
certainly in principle a useful means of 
identifying the pallets, but in order for it to 
be possible to carry out controls using those 
cards, the beef would have actually to be 
still on the pallet. The Commission points 
out that if this is not the case, it is because 
clear instructions have not been provided. 
3. Lack of specific national instructions 
concerning the physical controls on 5% of 
the meat stored 
111. In its summary report, the Commis­
sion states that 
'national instructions regarding the execu­
tion of the 5% physical controls are not 
explicit but simply refer to the annex of the 
governing Community regulation.' 
112. The German Government considers 
that the Commission is mistaken here 
because BALM drew up administrative 
instructions on the control of the annual 
inventory of agricultural products in public 
storage for the purpose of implementing 
Regulation No 618/90. In the field at issue 
here, it is sufficient that the administrative 
instructions refer to the provisions of 
Annex III, section VI of the abovemen-
tioned Regulation No 618/90, because that 
annex describes all the stages of control 
needed for the physical inspections to be 
properly executed at the time of the annual 
inventory and is perfectly comprehensible 
to the BALM officials, as it stands. 
I - 7205 
OPINION OF MR MISCHO — CASE C-44/97 
113. In the Commission view that is suffi­
cient neither to guarantee that the physical 
inspection required under Community law 
is executed correctly nor to prove that it 
has been executed correctly, if necessary. 
4. Specific irregularities identified in the 
course of certain controls 
114. In its defence, the Commission notes 
that the inspections carried out in two 
coldstores provide a good example of the 
anomalies and deficiencies identified in 
practice. In the first coldstore, serious 
deficiencies were established in regard to 
three pallets: whereas the pallet card listed 
12 quarters of meat with a gross weight of 
1 129 kg, the inspection found only 11 
quarters weighing 1 021 kg in total on the 
pallet. An unattached label, most probably 
belonging to the missing 12th quarter, was 
lying on top of the 11 quarters. According 
to the card of another pallet, it contained 
11 quarters with a total weight of 1 104 kg, 
subsequently amended to 1 094 kg. An 
unnumbered pallet contained three quar­
ters with no indication of weight. Further­
more, in the second coldstore, one of the 
visible pallets held a quarter from which a 
large metal hook, that had probably been 
forgotten and included in the gross weight 
recorded at the point of entry into storage, 
was protruding. 
115. The German Government explains 
those incidents as follows: in the first 
coldstore, the 12th quarter was not missing 
but had been moved to another pallet 
because putting 12 quarters on one pallet 
was considered an overload. Because of an 
oversight, the pallet card was not amended. 
In regard to the second pallet mentioned by 
the Commission, the change to the weight 
merely corrected a mistake made when the 
original card was issued. As regards the 
three quarters for which no weight was 
indicated, these were goods that had not 
been able to be loaded on that day. Even if 
there had been a failure to mark the pallet, 
the place in which it was stored clearly 
linked it to the delivery from which it came. 
As regards the metal hook, the German 
Government notes that this was the first 
such incident despite the hundreds of 
thousands of quarters processed. In that 
particular case, the hook was removed and 
its weight deducted. 
116. The Commission also points out that, 
pursuant to Article 26(1) of the abovemen-
tioned Regulation No 859/89, the meat is 
to be placed and kept in store in easily 
identifiable lots. In the coldstores visited, 
that requirement had been met in part only 
through the use of pallet cards; it was in 
fact noted that the premises were tightly 
packed, visual inspection was difficult 
because of the lack of access aisles and 
there were apparently no storage plans to 
show where goods were kept. Conse­
quently, only the pallets at the front of the 
warehouse could be properly, that is to say 
rapidly and easily, inspected. 
I - 7206 
GERMANY V COMMISSION 
117. As regards the tightly packed nature 
of the coldstores, the Federal Republic of 
Germany considers that, although the 
warehouses were to some extent tightly 
packed during the 1992 financial year — 
because of the very high level of pur­
chases — the stocks were properly 
inspected. In those warehouses that were 
very tightly packed, pallets were removed, 
according to the Federal Republic of Ger­
many, to allow pallets from the rear of the 
warehouse to be inspected. According to 
the Federal Republic of Germany, the 
Commission's complaint on this point fails 
to take any account of the exceptional 
circumstances of 1992. 
118. Finally, as regards the impossibility of 
identifying the pallets, the Federal Republic 
of Germany claims that the Commission is 
basing this on an isolated incident in which 
the BALM inspector responsible failed to 
monitor the removal from store of some of 
the pallets he had selected in the ware­
house. However, according to the Federal 
Republic of Germany, no general conclu­
sion can be drawn from this exceptional 
case and nor can it be seen as proof of an 
alleged lack of control characterising all the 
inspections carried out during the 1992 
financial year, pursuant to Article 4 of the 
regulation. 
119. The Commission maintains that two 
factors contradict that argument: 
— The irregularities identified in the first 
case were so obvious that the EAGGF 
was able to uncover them simply on the 
basis of random sampling. More ser­
ious still, on the day on which the 
EAGGF made its inspection based on 
sampling, BALM employees had earlier 
carried out an inventory control during 
which those obvious irregularities were 
not picked up. 
— In addition, the German Government 
was also unable to produce in its reply 
working papers drawn up by the 
BALM officials which, had the inven­
tory controls been properly carried out, 
would have informed the Commission 
of the precise number of pallets 
checked and the number of quarters 
of beef stored on them. The Commis­
sion points out that it has always said 
that, notwithstanding deficiencies iden­
tified in specific cases, it would con­
sider such working papers adequate 
proof that inventory controls that were 
regular overall had been carried out. 
However, the Commission has yet to be 
provided with any such working paper. 
B — Analysis 
120. As regards, firstly, the point at issue 
concerning entry in the inventory, I agree 
with the German Government that Arti­
cle 3 of the abovementioned Regulation 
No 618/90 does not require that the meat 
I - 7207 
OPINION OF MR MISCHO — CASE C-44/97 
be weighed. The Commission has also 
acknowledged that. The dispute therefore 
simply concerns whether, as the Commis­
sion maintains, when the annual inventory 
was drawn up, the storekeepers did no 
more than transcribe stock counts or whe­
ther, as required by the abovementioned 
Article 3, they actually verified the physical 
presence of the goods. 
121. The Commission is, of course, right to 
point out that the loss of a pallet or piece 
will inevitably result in a difference 
between what is recorded in the inventory 
report and the stock counts. In this case, 
however, it is common ground that, for the 
1992 financial year, no quantity was iden­
tified as missing when the inventory was 
drawn up. Therefore, the fact the Commis­
sion finds surprising, namely that the 
annual inventories showed no disagreement 
between the quantities and weights recor­
ded in the accounts and the quantities and 
weights checked, seems to me perfectly 
plausible. 
122. It remains to be ascertained whether, 
as required under Community law, the 
warehouse employees verified the physical 
presence of the goods. In that connection, 
the Commission bases its argument that 
this verification was not systematically 
carried out on employee statements. To 
rebut that, the German Government puts 
forward the evidence of BALM officials. 
However, the officials were in a position to 
provide that proof only in those cases in 
which they were actually present when the 
inventory was drawn up. In the other 
instances, it is not possible to challenge the 
evidence cited by the Commission accord­
ing to which there were cases in which the 
storekeepers merely transcribed the figures 
in the stock accounts. Moreover, in a letter 
of 6 July 1994 addressed to the Commis­
sion's Director General for Agriculture, the 
Federal Minister of Finance acknowledged 
the following: 
'... it has to be said that the BALM 
inspectors are not present in every case 
when the inventory is being drawn up. In 
accordance with Article 3(3) of the above-
mentioned regulation, the presence of 
representatives of the intervention agency 
is not, moreover, required. That is why it is 
not possible to comment on whether the 
storekeeper verifies the actual presence (of 
the goods) or simply copies (transcribes) 
the quantity entered in the stock accounts. 
The storekeepers are, however, given an 
annual reminder of the provisions on the 
drawing-up of inventories under Regula­
tion (EEC) No 618/90. In future, BALM 
will monitor storekeepers' compliance with 
the provisions more closely.' 12 
123. As regards, secondly, the inspection of 
the inventories by the BALM representa­
tives themselves, the Commission's main 
criticism of the German authorities is that 
the annual inventory reports do not provide 
proof of compliance with Article 4 of 
12 — Passage translated into French by the Advocate General. 
I - 7208 
GERMANY V COMMISSION 
Regulation No 618/90 as regards the obli­
gation physically to inspect 5% of the 
quantities stored. Those documents ought 
to show that the physical inspection proce­
dure laid down in Annex III of the regula­
tion has been followed step by step and in 
every detail. 13 
124. However, the annual inventory 
reports, including the stock reports that 
accompany them, do not provide that 
information. As the Commission rightly 
maintains, the weights recorded in the 
fourth column of these reports merely 
indicate from which batch or category of 
goods the 1% of total stock was selected 
for weight control. 
125. Like the Commission, I take the view 
that where, in relation to the use of 
Community resources, Community law 
requires specific controls, as in this case 
the physical inspection of 5% of the beef in 
storage, the competent national authorities 
have to ensure that it is possible to verify 
compliance with that requirement in the 
context of the procedure for the clearance 
of accounts, on the basis of adequate 
documentation or references. It is therefore 
the lack of such documentation or refer­
ences that constitutes the deficiency. In its 
letter of 6 October 1995, the Federal 
Ministry for Food, Agriculture and For­
ests 14 stated, moreover, that in future 'the 
controls to be carried out during storage 
will, as you suggest, be fully documented.' 
The ministry thus acknowledged that a gap 
existed here. 
126. As regards, thirdly, the Commission's 
complaint concerning the absence of 
national instructions regarding the proce­
dure to be followed by inspectors when 
carrying out the physical inspection, that 
procedure, I note, emerges clearly from 
Annex III to the regulation. Since that 
annex was attached to the administrative 
instructions, I consider that the inspectors 
were quite definitely in a position to 
understand what was required of them. It 
has, however, to be noted that the German 
authorities ought to have included in their 
instructions an obligation to draw up 
detailed reports on the physical inspection 
of 5% of the meat stored. 
V — Controls on removal from storage 
A — fleas in law and arguments of the 
parties 
127. Commission Regulation (EEC) 
No 147/91 of 22 January 1991 defining 
and fixing the tolerances for quantity losses 
of agricultural products in public interven­
tion storage,15 provides that the tolerance 
limit for quantity losses resulting from 
13 — See point 103 above. 
14 — Annex 7 to the application. 15 — OJ 1991 L 17, p. 9. 
I - 7209 
OPINION OF MR MISCHO — CASE C-44/97 
normal storage operations carried out in 
accordance with the accepted rules is fixed 
as a percentage of the actual weight, with­
out packing, of the quantities entering 
storage (Article 1(1) and (2)). According 
to Article 2 of the regulation, that percen­
tage is set at 0.6% for beef. 
128. In the case of non-identified losses of 
beef, in excess of the tolerance limit of 
0.6% fixed by Regulation No 147/91, the 
Member States have to credit to the 
EAGGF a sum substantially higher than 
the sales value of the quantities lost.16 
129. Furthermore, unboned beef coming 
from public storage is to be sold, pursuant 
to Commission Regulat ion (EEC) 
No 2173/79 of 4 October 1979 on detailed 
rules of application for the disposal of beef 
bought in by intervention offices and 
repealing Regulation (EEC) No 216/69, 17 
according to the gross weight actually 
ascertained. 
130. According to Article 18(2) of that 
regulation, 'delivery shall be taken of the 
goods in accordance with the intervention 
agency rules on release from storage ...' 
131. The Federal Republic of Germany 
gives clear expression to the above provi­
sion of Regulation No 2173/79 in para­
graph 13.5.1 of Bekanntmachung Nr. 
55/87/31 über die Allgemeinen Bedingun­
gen für den Verkauf von Rindfleisch aus 
Interventionen of 8 September 1987 
(Notice No 55/87/31 on the general condi­
tions of sale for beef from intervention) 
which provides that, in the case of frozen 
beef, the delivery weight of any category of 
goods is to be established, on delivery, by a 
qualified weigher using accurately calibra­
ted scales. 
132. According to the second paragraph of 
section 13.5.1 of Notice No 55/87/31: 
'weighing records shall be used to indicate 
gross weight. The total weight entered in 
the weighing record shall be rounded up or 
down to the nearest kilogram in the case of 
quarters of meat and to the nearest one 
hundred grams for cuts. The weigher shall 
sign and stamp the records.' 
133. According to the summary report: 
'Any losses of quarters are considered to 
be over and above the tolerance and lead to 
automatic credits to (the) EAGGF. It is 
clear therefore that Member States have an 
obligation to ensure that beef removed 
from intervention stock is correctly 
16 — See Council Regulation (EEC) No 3492/90 of 27 Novem­
ber 1990 laying down the factors to be taken into 
consideration in the annual accounts for the financing of 
intervention measures in the form of public storage by the 
European Agricultural Guidance and Guarantee Fund, 
Guarantee Section (OJ 1990 L 337, p. 3) and Commission 
Regulation (EEC) No 3597/90 of 12 December 1990 on 
the accounting rules for intervention measures involving 
the buying-in, storage and sale of agricultural products by 
intervention agencies (OJ 1990 L 350, p. 43). 
17 — OJ 1979 L 251, p. 12. 
I - 7210 
GERMANY V COMMISSION 
counted, weighed and reported for 
accounting and payment purposes.' 
134. The Commission also notes the fol­
lowing in the summary report: 
— The EAGGF found no evidence of 
BALM presence at the time of removal 
operations because neither the daily 
stock movement reports (Tagesmeldun-
gen) nor the weighing records bear the 
signature of BALM inspectors. BALM 
has stated that it sometimes uses so-
called BALM representatives to control 
removals because for staffing reasons 
BALM inspectors cannot be present at 
every removal. 
— The EAGGF established from its file 
control that the coldstore and purcha­
ser often belong to the same company. 
In one case noted from its file audit, the 
EAGGF initially concluded that there 
had been no weighing of a particular 
batch of beef removed from a particu­
lar coldstore. From documents viewed 
it appeared that precisely (i.e. to the kg) 
the same quantity had been removed as 
had entered the previous year. 
While insisting that there was a 100% 
weighing of all beef leaving interven­
tion, the German authorities have 
agreed that there was some misbooking 
of two different beef categories incor­
rectly accounted for together and so 
there was no weight loss in this case. 
Other cases noted by the EAGGF 
where there was not a kilogram of 
difference between entry and removal 
have been similarly explained. 
In the absence of weighing procedures 
duly controlled by BALM, the EAGGF 
is not convinced of the arguments and 
evidence put forward. It is clear that a 
highly significant proportion of inter­
vention beef was removed from store 
without the presence of BALM.' 
135. According to the German Govern­
ment, the requirements of Community law 
concerning the removal of the beef were 
respected. Employees of the coldstore, who 
had been selected, trained and appointed by 
BALM, were also used, alongside BALM 
inspectors, to carry out the controls on 
removal of the beef. Even in those cases in 
which representatives were used, proper 
removal of the beef was guaranteed. More­
over, the purchasers would ensure that the 
meat auctioned and paid for was properly 
delivered in terms of both the quality and 
quantity of the beef because BALM's con­
ditions of sale do not allow complaints to 
be made later. In those cases in which 
removal took place in the coldstores 
belonging to the same group as the pur­
chaser, verification was made by BALM 
inspectors only. 
I - 7211 
OPINION OF MR MISCHO — CASE C-44/97 
136. According to the Commission, it is 
true that there is no legal requirement that 
controls on removal from store should be 
carried out by employees of the interven­
tion offices only. There is, however, a 
general legal obligation requiring that the 
Member States ensure the accuracy of the 
quantities of meat removed from interven­
tion stocks, given that the sums to be 
charged to the EAGGF are based on those 
quantities. In the Commission view, if the 
controls at issue are not carried out by 
BALM officials, the control system gener­
ally may be the subject of manipulation and 
abuse. 
137. Even if — as the German Government 
maintains — the storage contracts entered 
into with the coldstores lay down control 
requirements, that such a requirement 
exists does not, in the Commission's view, 
mean that it is always complied with to the 
extent necessary. Furthermore, the German 
Government has still to prove that the 
conditions contained in the storage con­
tract met Community control requirements 
in full. Moreover, as regards the subsequent 
controls carried out by BALM, the Com­
mission considers that these merely involve 
inspection of documents and are insuffi­
cient to replace the on-the-spot controls 
required. As regards the particular problem 
of the linked undertakings, the Commission 
would refer back to the pleas and argu­
ments it made in relation to the controls on 
entry into storage. 
138. As regards the risk of manipulation, 
the Federal Republic of Germany maintains 
that such a risk is not conceivable because 
there is no Community market for frozen 
quarters of young calves, with the result 
that, were they placed on the market, 
questions would be raised as to the meat's 
origin. Furthermore, it would not make 
economic sense to replace that kind of meat 
with beef. In point of fact, the price of 
frozen quarters of young calves is in no way 
higher than that of quarters of fresh beef; 
the process of freezing causes a deprecia­
tion in the value of veal which is always 
greater than the price differential between 
the cost of frozen veal and that of beef. In 
addition, it is easy to distinguish beef from 
veal. Any purchaser of intervention meat 
would be able to tell the difference. More­
over, the purchasers of BALM stocks have 
made no such complaint. 
139. As regards the exhaustive description 
of the controls on removal from store that 
the German Government provides in its 
rejoinder, the Commission maintains that 
this is largely confined to general observa­
tions on the 'normal' progress of the 
control procedure but fails to address the 
specific deficiencies on which the Commis­
sion bases its findings. 
140. The Commission draws attention to 
the findings of the summary report, accord­
ing to which, in several instances, the 
EAGGF established that there was not a 
kilogram's difference between the weight 
recorded on removal from store and the 
weight of the goods that had entered into 
store the previous year, which is unusual in 
I - 7212 
GERMANY V COMMISSION 
the case of goods stored frozen, where 
weight loss frequently occurs. According to 
the Commission, it has therefore to be 
presumed that the weight losses or 
increases were not properly declared 
because of an absence of controls. 
141. According to the Federal Republic of 
Germany, once BALM had looked into the 
cases cited by the Commission, in which 
exceptionally, in its view, no difference in 
weight appeared between entry into and 
removal from storage, there were only two 
instances in which it was established that 
weight on removal from storage was the 
same as weight on entry into storage. Those 
particular cases were explained to the 
Commission. According to the Federal 
Republic of Germany, the explanation 
was that this anomaly was the result not 
of manipulation when the weight was 
recorded or a failure to weigh the goods 
but of the fact that two different categories 
of beef and veal were accounted for toge­
ther by mistake, so that there was in fact no 
weight loss. According to the Federal 
Government, it is perfectly possible that, 
in specific cases, weight on entry into 
storage is exactly the same as weight on 
removal from storage. 
142. According to the Commission, this 
attempt at an explanation is unconvincing 
and has not, moreover, been substantiated. 
The Commission therefore continues to 
consider the cases that have arisen to be 
clear evidence of shortcomings in controls 
on removal from storage in Germany, 
though these specific cases are not in 
themselves the basis for the 2% flat-rate 
correction of expenditure. 
B — Analysis 
143. As regards the controls on removal 
from store, the factors set out below seem 
to me decisive in reaching a determination. 
144. I would first draw attention to the 
undisputed fact that neither the Commu­
nity legislation applicable in 1992 nor the 
legislation that replaced it require that 
employees of the national intervention 
agency be present when goods are removed 
from store. There can therefore be no 
question of automatically concluding from 
the total or partial absence of such employ­
ees a deficiency in the control system 
capable of justifying a refusal to charge 
2% of expenditure to the EAGGF. 
145. However, one can only endorse the 
Commission's view that BALM employees 
must always be present in cases where the 
coldstore and purchaser of the meat belong 
to the same group of companies. Further­
more, that principle has not been chal­
lenged by the Federal Republic of Germany. 
The latter has merely objected that, in such 
situations, a BALM official was always in 
attendance. For its part the Conciliation 
Body concluded that the documents trans­
mitted to it by the German authorities 
confirmed that claim 'on the basis of 
specific and limited examples.' 
I - 7213 
OPINION OF MR MISCHO — CASE C-44/97 
146. In the light of the categorical asser­
tions of the Federal Republic of Germany 
and the fact the Commission departments 
did not exhaustively verify all cases of this 
nature, it can reasonably be supposed that 
BALM officials were present when meat 
was delivered to undertakings linked to the 
company that owned the coldstore. 
147. However, as I noted above in regard 
to the takeover of the meat by the cold-
stores, the German position is undermined 
by the fact that the written instructions 
given to the inspectors do not make their 
presence a formal requirement. In that 
sense, the control system is to an extent 
deficient. 
148. In regard to all the other cases, that is 
to say those in which removal from store 
takes place under the supervision of BALM 
representatives (in the absence therefore of 
BALM officials), the Commission has iden­
tified cases in which the weight of the 
goods delivered was exactly the same as 
that of the goods taken over. An example of 
this appears in a report by EAGGF inspec­
tors, transmitted by the Commission to the 
German authorities by letter of 13 April 
1994 (No VI/014852, annex 3 of the 
application), page 10 of which states that 
273 pieces of meat were weighed on entry 
at 26 591 kg and weighed exactly the same 
on removal. It is, however, clear from the 
legislation that, when they are entering 
storage, the pieces of meat have to be 
weighed before being packaged, whereas 
on removal from storage their gross weight 
has to be recorded, that is to say including 
the packaging. Now it is hardly likely that 
packaging will make up exactly for the loss 
of weight that commonly occurs in stored 
meat. The Commission is therefore right to 
assume that the meat removed from storage 
was not always weighed. 
149. Furthermore, the Community rules 
provide that in the case of non-identified 
losses of beef, in excess of the tolerance 
limit of 0.6%, the Member States have to 
credit to the EAGGF a sum substantially 
higher than the sales value of the quantities 
lost. The Member States are therefore 
required to carry out rigorous controls to 
establish whether or not that limit has been 
exceeded. Those controls may be carried 
out by individuals other than the officials 
of the intervention body but they must be 
carried out with all necessary rigour. 
150. The ex post documentary controls 
carried out by BALM in those cases in 
which it used representatives to carry out 
the control on removal from storage cannot 
compensate for the irregularities which 
may have occurred on removal from sto­
rage. 
151. In that regard, the mere assertion that 
the purchasers made no complaint cannot 
be considered conclusive, if only because 
BALM's conditions of sale preclude the 
lodging of complaints after the event. 
I - 7214 
GERMANY V COMMISSION 
152. I therefore find that the German 
Government has provided only very partial 
proof that the deficiencies cited by the 
Commission in regard to the controls to be 
carried out when intervention beef is 
removed from storage do not exist. 
VI — Final considerations 
153. Contrary to what the German Gov­
ernment claims in its application, the 
summary report on which the Commission 
decision at issue was based does not 
describe the deficiencies identified as sig­
nificant (beträchtlich). 
154. Furthermore, the Commission 
stressed, during the procedure before the 
Court, that its decision was not based on 
the deficiencies identified at each of the 
three stages in the procedure viewed in 
isolation, but on an assessment of the 
procedure operated by the Federal Republic 
of Germany as a whole. 
155. In my view, the arguments presented 
by the Federal Republic of Germany fail to 
demonstrate that this procedure does not 
contain defects which, viewed as a whole, 
may result in 'the risk of minor losses to the 
EAGGF.' It is also clear from several 
documents in the file that the applicant 
undertook to remedy those shortcomings, 
proving that they did indeed exist. 
156. In the light of the assessment of the 
controls carried out at each of the three 
stages, I therefore conclude that the appli­
cant has not succeeded in demonstrating 
the inaccuracy of the Commission's find­
ings. 
157. I have, in addition, to note that, in its 
arguments, the German Government sim­
ply challenged the existence of the deficien­
cies on which the flat-rate reduction is 
based. It did not, however, put forward any 
plea designed to challenge the applicability 
of that reduction to the deficiencies identi­
fied. 
158. In the context of an action for annul­
ment, the Court of Justice merely considers 
the pleas of the applicant and is not, 
therefore, required to consider in this case 
whether the deficiencies identified justify 
application of the flat-rate reduction. 
159. Consequently, I have to conclude that 
the application should be dismissed. 
160. I wish, however, to add that, had the 
applicant raised the issue of whether the 
irregularities in question were of the kind 
I - 7215 
OPINION OF MR MISCHO — CASE C-44/97 
that should trigger a flat-rate correction of 
2%, in accordance with the scale of correc­
tion adopted by the Commission, my 
conclusion would have been the same. A 
correction of that nature applies 'where the 
deficiency is limited to parts of the control 
system of lesser importance, or to the 
operation of controls which are not essen­
tial to the assurance of the regularity of the 
expenditure, such that it can reasonably be 
concluded that the risk of loss to the 
EAGGF was minor.' Now it can hardly be 
disputed that the deficiencies found to exist 
on conclusion of this analysis are likely to 
result in a minor risk of loss to the EAGGF. 
161. Furthermore, the question whether 
the application, in such cases, of a correc­
tion amounting to 2% of the expenditure is 
incompatible with the principle of propor­
tionality was not raised in the instant case. 
VII — Conclusions 
162. In the light of the foregoing I propose that the Court: 
— dismiss the application; and 
— order the Federal Republic of Germany to pay the costs. 
I - 7216