Judgment — ECLI:EU:C:2001:443
Date: 2001-09-13
Language of the case: Spanish
Court formation: Fifth Chamber
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Agriculture and Fisheries;European Agricultural Guidance and Guarantee Fund (EAGGF);Oils and fats;Sheepmeat and goatmeat
Concepts: Procedure for clearance of accounts
Procedure: Action for annulment - unfounded
Origin: Spain

Summary Reports Nos VI/7421/97 and VI/6462/98, which set out the results of the clearance of the accounts of the EAGGF Guarantee Section for 1994 and 1995. The Summary Report for 1995 is supplemented by a report of 7 June 1995. 12. The amount of the additional correction corresponds to 10% of the expenditure incurred in respect of consumption aid for olive oil in 1994 and 1995, and to the following corrections in respect of ewe/goat premiums: 5% of the expenditure incurred in four Spanish provinces (Valencia, Salamanca, Orense and Castellón) and 2% of the expenditure incurred in a fifth province (Lugo), both in relation to the 1993 marketing year. 13. By an application lodged at the Court Registry on 7 October 1999, the Kingdom of Spain brought an action under the first paragraph of Article 230 EC for the partial annulment of the contested decision in so far as it concerns the flat-rate corrections applied to consumption aid for olive oil and ewe/goat premiums. Pleas in law and arguments of the parties 14. The Spanish Government bases its action on a number of grounds of a general nature. It claims that the decision was based on erroneous and subjective considerations and is also in breach of a number of principles of law, namely, the principle of the right to be heard, lack of evidence of the wrongful conduct imputed to Spain, the principle of sound administration and, in the alternative, the principle of proportionality. 15. The application focuses mainly on the reduction made in respect of consumption aid for olive oil. That reduction is the subject of five pleas in law covering the following matters: (1) The obligation on the Commission to take into account the Conciliation Body's report. (2) The representativeness of the verifications carried out by the Commission. (3) The procedure for the administration and payment of consumption aid. (4) The control procedures. (5) The imposition of penalties by a Member State. According to the Spanish Government, those five pleas in law render unlawful, having regard to the principle of proportionality, a high correction rate of 10% as applied by the contested decision to all the expenditure declared by Spain. I would observe at the outset here that it is clear from the Commission's defence that the failures imputed to the Kingdom of Spain in respect of the matters raised in the third, fourth and fifth pleas in law, considered as a whole, constituted a valid reason for the Commission to apply a 10% correction. A sixth plea in law, factual in nature, concerns the reduction made in respect of ewe/goat premiums. First plea in law 16. The Spanish Government argues that the Conciliation Body is not merely a consultative body. On the contrary, it is clear from Article 1(1)(b) of Decision 94/442/EC that the Body is to try to reconcile the divergent positions of the Commission and the Member State concerned. Article 5(2)(c) of Regulation No 729/90 is similar in tenor. The purpose of the procedure before the Body is to mediate between the parties. The Commission must examine the Conciliation Body's report before reaching a decision and must take account of its reasoning. 17. The Spanish Government then points to the Conciliation Body's findings in the present case, and in particular to points 10 to 14 of its report, which indicate inter alia: - that the financial risk entailed by the procedure applied in Spain has not been demonstrated; - that there has been an improvement in the control procedures applied in Spain; - and, more generally, that the Commission's complaints are not clearly formulated. 18. The Commission is of the opinion that the Conciliation Body's task is to facilitate conciliation. If the Member State does not agree with the decision subsequently taken by the Commission, it is entitled to bring the matter before the Court. Moreover, the Commission takes a different view of the Body's report in the present case. Second plea in law 19. The Spanish Government claims that the verifications which the Commission carried out at the premises of Spanish undertakings were not representative. The Commission carried out verifications at 22 plants. Those 22 were not chosen at random but were the plants with regard to which the Spanish authorities themselves had already found irregularities. The Spanish Government refers to a communication from the Commission, according to which flat-rate reductions should not be applied on account of deficiencies which have already been detected by the authorities of the Member State. 20. The Commission denies that it based its conclusions only on the abovementioned 22 cases. On the contrary, its assessment was based on an overall analysis of the Spanish system for the administration and payment of consumption aid for olive oil. Moreover, it carried out additional verifications at the premises of six large Spanish undertakings which between them had received almost 50% of the aid. 21. In its reply, the Spanish Government claims that it had not been informed of the additional verifications and that its right to a fair hearing had thus been infringed. According to the judgment in Oliveira v Commission, (12) that procedural defect renders the reduction void. In its rejoinder, the Commission acknowledges that the Spanish authorities were only informed after the verifications had been carried out, although, it claims, the purpose of the verifications was merely to check whether the earlier findings may have been incorrect. Third plea in law 22. This plea in law relates to an alleged deficiency in the procedure applied in Spain for the administration and payment of consumption aid. The Spanish Government points in this connection to an inconsistency between Articles 9 and 12 of Regulation No 2677/85. Article 9 requires the Member State to pay the aid within 150 days of the submission of an aid application following on-the-spot checks. Under Article 12 of the regulation, a Member State must inspect each undertaking at least once a year as part of a random check. In view of that inconsistency, the Spanish supervisory body applies the following method: after the first application for aid during a marketing year for olive oil, it draws up a report only after making an on-the-spot check at the premises of the undertaking concerned. For subsequent applications, it draws up its report on the basis of data supplied monthly by the undertakings. That method does not present any risk for the EAGGF. 23. The Commission points out that Article 12 in its present form was adopted by Regulation No 571/91 of 8 March 1991 and Article 9 by Regulation No 643/93 of 19 March 1993. (13) The Commission attaches importance to the fact that the wording of Article 9 is of more recent date. While acknowledging the apparent ambiguity, the Commission interprets those provisions as follows. Article 12 lays down as a minimum requirement that an undertaking must be inspected at least once every 12 months. On top of that, Article 9 requires an on-the-spot inspection to be carried out for each application for aid. The Commission points out that an on-the-spot check for each application was the central element of Regulation No 643/93, which is aimed at reducing fraud. Spain was aware of that by virtue of its presence on the management committee which approved Regulation No 643/93. 24. The Commission also points out that the Conciliation Body has stated that it largely shares the opinion of the Commission. (14) Moreover, according to the Court's settled case-law, the Commission is not required to establish the existence of harm to the EAGGF or to specify the nature of such harm in order to be able to apply a financial correction. It is not required to do more than establish the probability of such harm. (15) Fourth plea in law 25. The Spanish Government points out that the control procedures in Spain had been improved, as the Commission also acknowledged. The Commission should therefore never have increased the level of the flat-rate correction to 10%, which was higher than that applied in previous years. The question of re-offending did not arise here. 26. The Commission justifies the application of the 10% rate in three ways. First, the percentage was based, not on deficiencies in the checks alone, but on deficiencies in the Spanish system as a whole, which, in addition to the checks, consisted of administration and penalties. Second, in a sector such as this, which was very susceptible to fraud, a rapid and significant improvement in procedures could legitimately be expected. The Commission was entitled to impose a penalty if improvement was slow and incomplete. Third, the less stringent correction percentage applied previously stemmed from the fact that the Commission's earlier verifications, unlike the present ones, did not relate to an assessment of the system as a whole. Fifth plea in law 27. In this plea in law, which relates to the imposition of penalties, the Spanish Government refers to Article 2(4) of Regulation No 2988/95, which states that the procedures for the imposition of penalties are to be governed by the laws of the Member States. The procedure for the imposition of penalties is subject to procedural guarantees for the benefit of persons subject to law. However, that does not mean that no penalties are imposed. With regard to the severity of the penalties themselves, the Spanish Government claims that they are consistent with the nature and seriousness of the irregularities, the criteria laid down in Article 2(3) of Regulation No 2988/95. There was no intentional act or serious negligence on the part of the undertakings concerned. 28. In its defence, the Commission points out that Article 2 of that regulation also provides that penalties are to be effective, proportionate and dissuasive so that they provide adequate protection for the Communities' financial interests (Article 2(1)) and that Article 2(4) applies [s]ubject to the Community law applicable. The Commission refers in this connection to the judgment in Deutsche Milchkontor, (16) in which the Court held that the procedures laid down by national law must not have the effect of making it impossible in practice to implement Community rules. Moreover, the Commission infers from Article 1(2) of Regulation No 2988/95 that the irregularity is determined by the result, and not by intention or serious negligence. Even where there is no intention or serious negligence, penalties must be imposed. Sixth plea in law, concerning the ewe/goat premiums 29. The Kingdom of Spain is of the opinion that the amounts taken into account in calculating the correction in respect of 1994 do not correspond to the expenditure for that year. On the contrary, they include expenditure for 1993, which the Commission had already cleared. The reservation to which the clearance decision was made subject related purely to cases where a Member State had referred the matter to the Conciliation Body, which the Spanish authorities had not done in this case. The Commission had at no time informed the Kingdom of Spain that it would also be taking the expenditure for 1993 into account, and therefore the Spanish Government always assumed that the Commission had made a calculation error. 30. The Commission points out that the Community system of ewe/goat premiums is extremely complex, since the beneficiaries of the premiums receive amounts for one marketing year from different financial years. The payments for the 1993 marketing year span the 1993, 1994 and 1995 financial years. The Commission's inspection therefore related to the 1993, 1994 and 1995 financial years. The Commission then draws attention to the fact that the clearance of the expenditure for 1993 was not yet definitive. It cites the penultimate recital in the preamble to Decision 97/333/EC, (17) by which the accounts presented by the Member States in respect of the expenditure for 1993 were cleared. Whereas this Decision is without prejudice to any financial consequences drawn by the Commission, during a subsequent accounts clearance procedure, from investigations under way at the time of this Decision, from irregularities referred to in Article 8 of Regulation (EEC) No 729/70 or from judgments of the Court of Justice of the European Communities in cases now pending and relating to matters covered by this Decision. Moreover, it is clear from the Summary Report of 15 March 1997 (18) that a further investigation was envisaged in the present case. Finally, the Commission states that it indicated on several occasions during the bilateral consultations with the Spanish authorities that the verifications also concerned the 1993 financial year. The Commission's policy and the Court's case-law on that policy 31. The Commission's policy with regard to the application of financial corrections and the Court's case-law on that policy are discussed in detail in my Opinion in Spain v Commission. (19) In view of its relevance to this case, I reproduce below my observations in that case. (20) There is one point which merits special attention, namely, the role of the Conciliation Body. In issue in Spain v Commission (21) were the consequences of the Spanish Government's decision not to refer to the Body. In this case, however, a different aspect is under discussion, namely, the legal force of the Body's findings. I shall consider that issue at the end of this part of my Opinion. The Commission's policy 32. When applying financial corrections, the Commission pursues a policy which was first adopted in a working document of 1 June 1993, known as the Belle Report. (22) That document has already been referred to on a number of occasions before the Court. In his Opinion in Greece v Commission, (23) Advocate General Fennelly examines the background to and nature of that document. In 1992 the Commission established an internal inter-service group which was charged with developing a method for imposing penalties on Member States which incorrectly apply Community law. The rules drafted by the inter-service group were approved by the Commission and by the representatives of the Member States in the EAGGF Committee. They do not purport to constitute a binding measure. The choice of the level of reduction to be applied should flow from an assessment of the risks affecting Community expenditure which arise from defects in the supervision exercised by the Member States. The inter-service group adopted three levels of flat-rate reduction in reimbursement: 2%, 5% and 10%. The Belle Report has since been replaced by Commission working document No VI/5330/97 of 23 December 1997, which gives new guidelines for calculating the financial repercussions. That new document does not make any significant changes to the Belle Report criteria, but adds a new category: a reduction level of 25% in serious cases. The Commission decision at issue here is based on the guidelines laid down in that working document. 33. The Commission's Belle Report and the abovementioned working document thus contain guidelines to be followed when corrections have to be applied vis-à-vis a Member State. For difficult cases they envisage a flat-rate method: (24) As the systems audit approach has become more widely applied, the EAGGF has had recourse increasingly to an assessment of the risk which a systems deficiency presents. By the very nature of ex-post auditing, it can rarely be established at the time of audit whether a claim was valid when paid ... The loss to the Community funds must therefore be determined by an evaluation of the risk to which they were exposed by the control deficiency, which may concern as much the nature, or quality, of the controls operated as the quantity of controls effected. ... The report proposes three categories of flat-rate correction: A. 2% of expenditure - where the deficiency is limited to parts of the control system of lesser importance, or to the operation of controls which are not essential 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. B. 5% of expenditure - where the deficiency relates to important elements of the control system or to the operation of controls which play an important part in the assurance of the regularity of the expenditure, such that it can reasonably be concluded that the risk of loss to the EAGGF was significant. C. 10% of expenditure - where the deficiency relates to the whole of or fundamental elements of the control system or to the operation of controls essential to assuring the regularity of the expenditure, such that it can reasonably be concluded that there was a high risk of widespread loss to the EAGGF. 34. The guidelines laid down by the abovementioned report further provide that, where there is doubt as to the correction to be applied, the following points may be taken into account as mitigating factors: - whether the national authorities took effective steps to remedy the deficiencies as soon as they were brought to light; - whether the deficiencies arose from difficulties in the interpretation of Community texts. 35. The Belle Report reflects what was already a long-standing Commission practice of applying flat-rate corrections to the reimbursement of expenditure effected by Member States for the purpose of implementing the common agricultural policy. In the Commission's opinion, the criteria laid down in the Belle Report form a common basis of agreement in that, if it proves impossible to determine the amount of the adjustments precisely, a middle way is chosen by withholding a flat-rate amount, thus making it possible both to respect Community law and the sound management of Community resources and to comply with the understandable wish of the Member States to avoid excessive and disproportionate adjustments. (25) The Court's case-law on that policy 36. That practice of applying flat-rate corrections and its representation in the Belle Report and the later working document have been examined on many occasions by the Court, most recently in the judgment in Greece v Commission. (26) As may be inferred from that judgment, but certainly also from the judgment in Italy v Commission, (27) the Court does not call in question the correctness of the criteria established by the Belle Report. Indeed, those criteria also form the basis of assessment used by the Court. 37. The Court's approach is then as follows. As is clear from, inter alia, the judgment in United Kingdom v Commission, (28) the Commission must establish that a Member State has infringed the rules of the common agricultural policy by, for example, as in this case, failing to supervise expenditure adequately. Once the Commission has established that, it must act. However, it has a wide discretion in the choice of penalties to be applied. It is for the Member State concerned to prove that the facts established by the Commission are incorrect and that the latter has attached incorrect consequences to them by, for example, applying an excessively high flat-rate correction. The judgment in the abovementioned Greece v Commission (29) case states: 26 The Court observes that, according to its case-law ... , where it proves impossible to establish with certainty the extent to which a national measure which is incompatible with Community law has caused an increase in the expenditure entered under a budgetary item of the EAGGF, the Commission has no choice but to disallow all the expenditure in question. 27 When the Commission refuses to charge certain expenditure to the EAGGF, on the ground that it was incurred as a result of breaches of Community rules imputable to a Member State, it is for that State to show that the conditions for obtaining the financing refused by the Commission are fulfilled ... 28 If, then, in its function of clearing the accounts the Commission, instead of refusing the entire expenditure, endeavours to draw up rules to differentiate according to the degree of risk posed to the EAGGF by different levels of defective supervision, the Member State must show that those criteria are arbitrary and unfair. ... 38. I would add to that by referring to the judgment in Netherlands v Commission, (30) which clarified the division of the burden of proof between the Commission and the Member State concerned. In paragraph 17, the Court states: The Commission is required not to demonstrate exhaustively that there are irregularities ... but to adduce evidence of serious and reasonable doubt ... The reason for this mitigation of the burden of proof on the Commission is that ... it is the State which is best placed to collect and verify the data required for the clearance of EAGGF accounts; consequently, it is for the State to adduce the most detailed and comprehensive evidence that its figures are accurate and, if appropriate, that the Commission's calculations are incorrect. The Court has repeated that wording in various subsequent judgments. (31) 39. As I have already stated, it can be inferred from the Court's settled case-law that the Commission has a wide discretion in the application of penalties where a Member State has failed to monitor effectively its expenditure under the common agricultural policy. The Commission may refuse to refund the expenditure concerned in its entirety, or it may apply a percentage reduction, as has occurred in the present case. It is self-evident that the reduction percentages mentioned in the Belle Report, namely 2%, 5% and 10%, constitute a considerably more lenient penalty than a complete refusal to refund expenditure. 40. With regard to the burden of proof, the following may be concluded. As is clear from, inter alia, the judgment in Greece v Commission, (32) the burden of proof rests in a number of respects with the Member State which challenges the correctness of the penalty imposed on it: (a) the right to have the expenditure effected by it reimbursed by the EAGGF; (b) the accuracy of the data on which the Commission bases its decision; (c) the correctness of the criteria applied by the Commission when imposing the reduction. If the criteria set out in the Belle Report (33) are applied, the correctness of those criteria must be presumed. However, in my opinion, since those criteria are not in fact binding rules, the Member State is certainly entitled to try to establish that the Belle Report criteria have arbitrary or unreasonable effects in its particular case; (d) the method of applying those criteria. As a supplement to my Opinion in Case C-375/99 Spain v Commission: the Conciliation Body 41. As the Court has already held on a number of occasions, inter alia in Germany v Commission, (34) decisions of the Conciliation Body do not have binding force: Finally, pursuant to Article 1(2)(a) of Decision 94/442/EC, the Commission, as it has rightly maintained, and without being contradicted on this point by the German Government, is not bound by the conclusions of the Conciliation Body when adopting its decision. Consequently, as the Court acknowledged in that case, the reasoning of the Conciliation Body does not need to be regarded as conclusive for the purposes of the Commission's assessment. Nevertheless, it must of course be examined whether general conclusions are to be drawn from the reasoning of the Conciliation Body. My reading of that judgment is that the more specific and directive the Conciliation Body's findings are, the more the Commission is obliged to take account of them. Assessment of the dispute The central feature of the system 42. The financing by the EAGGF of the implementation of the common agricultural policy by the Member States has already given rise to a large body of Court decisions. A dispute such as that in the present case can therefore be dealt with largely on the basis of the Court's existing - and often settled - case-law. 43. In my opinion, the central feature of the system - and of the Court's case-law - is the fact that it is the Member States which in this case implement a Community-financed system. It is therefore the duty of the Member States to account in detail for the expenditure which they effect in that connection. It is also they who possess the data which forms the basis of the actual expenditure. The Commission can do no more than exercise (random) supervision, for which purpose it is largely dependent on the data provided by the Member States. Such a system, which is vulnerable, calls for wide discretionary power for the Commission to impose penalties when it finds irregularities. Because the Commission cannot have all the data in its possession, flat-rate reductions are indispensable. On the other hand, arbitrariness in the application of the system by the Commission's departments must of course be avoided. The Commission must act with due care, both when establishing and characterising facts which may give occasion for the application of corrections and when imposing those corrections themselves. 44. Where appropriate, following an inspection carried out by it, the Commission must prove that an irregularity has taken place and must also indicate the nature of that irregularity. It may then propose a penalty. In so doing, it must provide reasonable evidence - although it is not required to prove - that the proposed penalty matches the nature, seriousness and extent of the irregularity found. It is then for the Member State to prove, on the basis of data available to the Member State but not to the Commission, that the Commission has not established the facts correctly or else has wrongly characterised those facts, and that the proposed penalty does not fit the nature, seriousness and extent of the irregularity found. In view of the rather vague nature of the criteria applied by the Commission in this context, I attach great importance to the conciliation procedure for which the system provides. The conciliation procedure gives the parties the opportunity to engage in a proper exchange of arguments and information. The dispute itself 45. Another prominent feature of the present dispute is that, in one important respect, the Spanish Government does not deny that it infringed the rules of the common agricultural policy - by failing adequately to supervise the spending on consumption aid for olive oil. That failure alone entitled the Commission to adopt a measure involving the application of a financial correction to the expenditure effected by the Spanish Government. The only point at issue is therefore the size of the reduction applied by the Commission. 46. Since it is established that the Spanish Government failed to fulfil its obligations with regard to the control of expenditure under the common agricultural policy, it follows from the above observations that the Commission has a wide discretion in applying the penalty and that the onus is on the Member State concerned to refute the Commission's findings and conclusions. With regard to the burden of proof, I refer to point 40 above. I also find it significant that the Spanish Government does not state in what specific respects it considers that the reduction percentage applied is contrary to the criteria laid down in the Belle Report. 47. The foregoing does not apply to the reduction in respect of ewe/goat premiums (sixth plea in law). In that connection, the Kingdom of Spain disputes the Commission's right to take the expenditure for 1993 into account when calculating the reduction. 48. Finally, I shall forgo separate discussion of the breaches of various principles of law alleged by the Spanish Government and to which I have made reference in point 14 of this Opinion. In so far as the Spanish Government has put forward grounds in support of those allegations, those grounds are directly connected with the pleas in law which are examined in turn below. First plea in law 49. Both the Spanish Government and the Commission have examined the nature of the proceedings before the Conciliation Body. The Spanish Government emphasises the fact that the Body is not merely a consultative body; regard must be had to the Body's reasoning. The Commission emphasises its facilitating function. In my opinion, the views of the two parties on the nature of the procedure before the Body are not mutually exclusive. On the contrary, each follows from the other. In particular, I infer from Decision 94/442 that the setting up of the Conciliation Body is intended to offer the parties a platform for consultation if their positions diverge. Certainly, in this field, where the determination of the relevant facts and the financial consequences to be attached to them is made on the basis of estimates and rather imprecise criteria, (35) such a platform is an appropriate way of ensuring that not all disputes are brought directly before the Court. In addition, Article 1(1)(c) of the decision confers on the Body an advisory function which should not be treated without commitment, particularly in view of the Body's composition. Under Article 3 of the decision, the Body is to be composed of five independent and highly qualified members who are nationals of different Member States. 50. In my opinion, in view of the nature of the procedure described above, it must first be ascertained what conclusions can be drawn from the Conciliation Body's findings in this case. It is of course a basic assumption in this regard that those findings have no binding force, but equally that they cannot simply be disregarded. 51. The Conciliation Body's report of 30 March 1999 gives a balanced picture. In short, the Body sees no reason to cast doubt on the validity of the Commission's main complaints. On the other hand, it considers the level of the 10% reduction questionable. Certainly, since the control system in Spain has been improved compared with previous years, it is important that precise reasons should be given for any increase in the reduction percentage. 52. The balanced - and, I repeat, non-binding - conclusions of the Conciliation Body give the Commission latitude to apply a reduction percentage. At the very most, there may be room for doubt as regards the level of the percentage. That doubt is bound up with the assessment of the improvement in the control system in Spain, which is the subject-matter of the fourth plea in law. In my opinion, the question is, in essence, not so much whether the Commission took account of the Conciliation Body's opinion, but whether, despite the improvement in the control system, it was entitled to decide on an increase in the reduction percentage. That question is examined under the fourth plea in law. 53. My conclusion is that the first plea in law is unfounded. Second plea in law 54. With regard to the representativeness of the Commission's verifications, I would draw attention, first, to the need for a random approach. As the Court has held, inter alia in its judgment in Netherlands v Commission, (36) the system, based on trust, does not involve any systematic supervision by the Commission, which moreover would in practice be impossible for it to carry out. 55. The question which therefore arises first is whether the Commission was reasonably entitled to reach its conclusion on the basis of the random check carried out by it. I agree with the Spanish Government when it claims that the original selection of 22 plants does not at first sight appear to form a suitable basis for drawing general conclusions, since those plants were exclusively those where the Spanish authorities themselves had already found irregularities. However, I gather from the Conciliation Body's report that at nine of those plants the irregularities had not been so serious as to lead to the imposition of penalties by the Spanish authorities. Even more importantly, I note that, as the Commission claims without being contradicted, the Commission carried out additional verifications at the premises of six large Spanish undertakings. I therefore see no reason to suppose that the Commission's verifications were insufficiently representative. 56. Then there is the question of the importance to be attached to the fact that the Commission did not give the Spanish Government proper notice of the additional verifications. I do not see on what ground that omission could lead to the annulment of the Commission's decision. In my opinion, the Spanish Government was not in any way harmed by it. The Commission's claim that this was merely a matter of confirming earlier findings appears to me to be credible. 57. The judgment in Oliveira v Commission, (37) cited by the Spanish Government, is not relevant in this case, in my view. That judgment annulled a Commission decision on account of failure to comply with an essential procedural requirement. Unlike in the present case, the failure to comply with that procedural requirement placed the Member State concerned at a serious procedural disadvantage. It was in fact no longer able to bring an action against the decision in question within the period allowed by the EC Treaty. 58. I conclude that the second plea in law is also unfounded. Third plea in law 59. The third plea in law concerns the interpretation of Articles 9(3) and 12(1) of Regulation No 2677/85, which at first sight appear contradictory, with regard to the question whether the granting of aid must always be preceded by an on-the-spot check. 60. In my view, the interpretation which the Commission places on the relationship between Article 9(3) and Article 12 of that regulation is plausible. The requirements laid down in both articles with regard to on-the-spot checks apply cumulatively. 61. I note in this regard that the wording of Article 9(3) is not entirely unambiguous. Nevertheless, the Spanish Government could easily have satisfied itself as to the content and meaning of Article 9(3) in so far as it was not already informed thereof through its presence on the management committee which adopted that provision. Moreover, if it was in doubt as to the correct interpretation, it could have ascertained it from the Commission. In any event, in my view, a Member State may not unilaterally interpret an implementing provision such as this one, in the adoption of which it has been involved, in a manner which differs from the most obvious interpretation. 62. The third plea in law is also unfounded. Fourth plea in law 63. The fourth plea in law concerns an increase in the reduction percentage as compared with the percentage applied in previous years. 64. First, I would draw attention to the judgment in Germany v Commission, (38) referred to in point 41 of this Opinion, in which the Court states that the fact that the Commission did not take the appropriate action, on the financial level, on a finding of deficiencies pertaining to one financial year cannot deprive it of the right to do so in relation to subsequent financial years, particularly where those deficiencies have persisted. Moreover, deficiencies ascertained subsequently may also be taken into account in determining the level of the flat-rate correction. (39) In my opinion, that also applies in this case. The fact that the Commission attaches a specific penalty to a specific deficiency in respect of one financial year does not deprive it of the right to impose a higher penalty in respect of a subsequent year, even if the deficiency is by then less serious. 65. I am certainly of the opinion that the Commission should properly state its reasons for such action. In point 26 of this Opinion, I described the Commission's statement of reasons in the present case. I consider that statement of reasons sufficient and attach particular importance to the Commission's argument that, in a sector such as this, which is susceptible to fraud, a slight improvement will not suffice, but that a rapid and significant improvement of the system can legitimately be expected. 66. The fourth plea in law is likewise unfounded. Fifth plea in law 67. This plea in law, which relates to the imposition of penalties for established irregularities, calls for the following observations. The system in question is one in which the Member States effect expenditure which is charged to the budget of the European Communities, in this case the EAGGF Guarantee Section. The imposition of penalties for established irregularities must in those circumstances provide effective protection for the financial interests of the European Communities. For that reason inter alia, some general rules were laid down in Regulation No 2988/95. Article 2(1) of that regulation provides that penalties must be effective, proportionate and dissuasive. The Commission rightly states, (40) moreover, that the national procedures for the imposition of penalties must not have the effect of making it impossible in practice to implement Community rules in the proper manner. 68. Effective protection of the financial interests of the European Communities in this case constitutes an essential function of the system for the imposition of penalties. In those circumstances, a Member State cannot limit the imposition of penalties for infringements of the rules of a system which is susceptible to fraud entirely or almost entirely to cases involving deliberate intent or serious negligence. However, that does not alter the fact that the procedures for the imposition of penalties are governed by national law. 69. Since in essence the Spanish Government relies only on national procedural guarantees for persons subject to law, on that ground alone this plea in law cannot succeed. I therefore conclude that the fifth plea in law also is unfounded. Sixth plea in law 70. In essence, the sixth plea in law disputes the Commission's right to take the expenditure for 1993 into account in calculating the flat-rate correction in respect of ewe/goat premiums. 71. In itself, I can understand the Spanish Government's surprise that certain amounts for which clearance had already been granted should still be taken into account in calculating a reduction. I can also understand that the penultimate recital in the preamble to Decision 97/333 and the reservation in the Summary Report (with regard to both, see point 29 of this Opinion) did not immediately prompt the Spanish Government to consider that Decision 97/333 was not definitive. Nor can it be inferred from the recitals in the preamble to Commission Decision 97/608/EC of 30 July 1997 amending Decision 97/333/EC (41) that the Commission intended in this case to come back to the clearance of the expenditure for 1993. If the Commission intends to do that, it can obviously be expected, in general, to express a clearer reservation. 72. Nevertheless, I am of the opinion that the Commission did not exceed its powers by taking account of the expenditure for 1993. It is not apparent, either from Decision 97/333 or from other documents, that the decision is of such a definitive nature as to preclude the Commission from coming back to it. I consider the following points, taken together as a whole, to be fundamental. The penultimate recital in the preamble to Decision 97/333 states that the decision is without prejudice to any financial consequences drawn by the Commission, during a subsequent accounts clearance procedure, from investigations under way at the time of this Decision. The Summary Report of 15 March 1997 mentions the fact that the checks carried out in Spain will be reviewed. An even earlier EAGGF document, of 6 January 1997, states that the checks in Spain before 1995 had been inadequate or even non-existent. The Spanish authorities must also have been aware of all this in view of their many contacts with the Commission's departments. The Commission claims that this was the case and the Spanish Government does not dispute it. Finally, it is also apparent from, in particular, a document of 22 October 1996 produced by the Commission that the Spanish Government could have been aware of the Commission's practice of taking into account payments made over several financial years for the purpose of clearing the accounts in respect of ewe/goat premiums. 73. The sixth plea in law also is therefore unfounded. Conclusion 74. In the light of the above facts and circumstances, I propose that the Court dismiss the action and, pursuant to Article 69(2) of the Rules of Procedure, order the Kingdom of Spain to pay the costs. 1: - Original language: Dutch. 2: - OJ 1999 L 226, p. 26. This decision amended the earlier Decision 99/187/EC of 3 February 1999 (OJ 1999 L 61, p. 37). 3: - C-375/99. 4: - OJ, English Special Edition, 1970 (I), p. 218; now replaced by Council Regulation (EC) No 1258/99 of 17 May 1999 on the financing of the common agricultural policy (OJ 1999 L 160, p. 103). 5: - OJ 1995 L 125, p. 1; now Article 7(4) of Regulation No 1258/99. 6: - Now Article 8(1) of Regulation No 1258/99. 7: - OJ 1995 L 158, p. 6. 8: - OJ 1994 L 182, p. 45. 9: - OJ 1985 L 254, p. 5. 10: - The texts reproduced are those which apply to the checks forming the subject-matter of the present proceedings. Article 9(3) and Article 11(3) were introduced in this form by Regulation (EEC) No 643/93 of 19 March 1993 (OJ 1993 L 69, p. 19) and Article 12(1) by Regulation (EEC) No 571/91 of 8 March 1991 (OJ 1991 L 63, p. 19). 11: - OJ 1995 L 312, p. 1. 12: - Case C-304/89 [1991] ECR I-2283. 13: - See footnote 10. 14: - The reference is to point 10 of the Body's report. 15: - The Commission refers to the judgment in Case C-238/96 Ireland v Commission [1998] ECR I-5801, paragraph 103. 16: - Joined Cases 205/82 to 215/82 [1983] ECR 2633. 17: - Commission Decision of 23 April 1997 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1993 on the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) (OJ 1997 L 139, p. 30). 18: - Page 228 of that report; the Commission refers to it in its defence. 19: - Cited in footnote 3. 20: - In addition, the Commission refers to a number of judgments which are not cited in this context in my Opinion in Case C-375/99 Spain v Commission. They are inter alia those in Case 129/84 Italy v Commission [1986] ECR 309, Case C-50/94 Greece v Commission [1996] ECR I-3331 and Ireland v Commission (cited in footnote 15). Those judgments shed no new light on this case, although the last-mentioned judgment is certainly relevant in connection with the role of the Conciliation Body. 21: - Cited in footnote 3. 22: - Document No VI/216/93. 23: - Case C-50/94 [1996], cited in footnote 20. 24: - The quotation which follows is from the Belle Report. 25: - See Greece v Commission, cited in footnote 20, paragraph 24. 26: - Case C-243/97 [2000] ECR I-5813. 27: - Case C-242/96 [1998] ECR I-5863. 28: - Case 347/85 [1988] ECR 1749, paragraph 16. This judgment examines the question of the burden of proof at length. See also the judgment in Italy v Commission, cited in footnote 27, paragraph 58. 29: - Cited in footnote 20, paragraph 26 et seq. 30: - Case C-48/91 [1993] ECR I-5611. 31: - See, among others, Case C-242/97 Belgium v Commission [2000] ECR I-3421, paragraph 104. 32: - Case C-50/94 [1996], cited in footnote 20. 33: - Or the document of 23 December 1997. 34: - Case C-44/97 [1999] ECR I-7177, paragraph 18. 35: - See also my Opinion in Case C-375/99 Spain v Commission, in particular point 34, and point 44 of this Opinion. 36: - Cited in footnote 30. 37: - Cited in footnote 12. 38: - Cited in footnote 34. 39: - Paragraph 14 of the judgment. 40: - It also refers to the judgment in Deutsche Milchkontor, cited in footnote 16. 41: - OJ 1997 L 245, p. 20.