Judgment — ECLI:EU:C:1999:527
Date: 1999-10-28
Language of the case: Italian
Court formation: Fifth 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);Oils and fats;Wine
Concepts: Statement of reasons;Procedure for clearance of accounts;Storage
Procedure: Action for annulment - unfounded;Action for annulment - successful
Origin: Italy

summary report 
that the EAGGF checks found that, during 
the reference period in Sicily, a large 
number of areas withdrawn from produc­
tion in pursuance of the multiannual set-
aside scheme was in fact land subject to 
traditional fallow practices. The inspec-
16 — Council Regulation (EEC) No 797/85 of 12 March 1985 
on improving the efficiency of agricultural structures 
(OJ 1985 L 93, p. 1), as amended by Council Regulation 
(EEC) No 1094/88 of 25 April 1988 (OJ 1988 L 106, 
p. 28). 
17 — That practice, which is associated with autumn/spring 
early crops, consists in keeping the land under cultivation 
for limited periods and then as usual preparing the ground 
by ploughing in the crops produced. 18 — Italy v Commission, cited in footnote 8. 
I - 7539 
OPINION OF MR ALBER — CASE C-253/97 
tions also showed that the Italian autho­
rities had failed to check that aspect of the 
eligibility of the land. The aim of the 
scheme, to reduce production, was there­
fore only partly met. The Commission 
applied a financial correction of 5% — 
instead of 10% as it had initially pro­
posed — of the expenditure declared for 
Sicily on the basis of the summary report of 
the Conciliation Body. 
30. As the Court of Justice observed in its 
judgment in Case C-242/96, 19 it should 
first of all be noted that the Italian Govern­
ment does not deny having failed to check 
whether the land allegedly set aside had in 
fact previously been cultivated or, at least, 
whether it had been cultivated in the 
context of bastard fallow. In this case the 
Italian Government has also been unable to 
adduce any evidence that traditional fal­
lowing practice has been changed by 'green 
fallowing'. In that respect note should also 
be taken of the data collected through the 
network for the collection of farming 
accountancy data at Community level20 
which show that traditional fallow was still 
the practice in 1986 and 1987. Moreover, it 
is also evident from the statements of the 
farmers directly concerned, which contra­
dict those of the Italian authorities, that 
traditional fallow, which is not eligible, 
continued to be practised in Sicily. 
31. The second plea in law must conse­
quently be rejected. 
C. Reimbursement of storage costs 
Preliminary remarks 
32. The question at issue here is whether 
the adjustments in respect of the charging 
of sugar storage costs from 15 October 
1992 to 31 December 1992 are lawful. 
33. The common organisation of the mar­
kets in the sugar sector is covered by 
Regulation No 1785/81. 21 Article 8 of that 
regulation provides for a compensation 
system for storage costs in respect of 
certain types of sugar products manufac­
tured from beet or cane of Community 
origin. Those costs are to be reimbursed to 
the organisation storing the product at a 
single, flat rate throughout the Community. 
The system is to be financed by means of a 
levy imposed on sugar producers in respect 
of the quantities produced by each of them, 
also at a single rate throughout the Com­
munity. 
19 — Italy ν Commission (cited in footnote 8). 
20 — Regulation No 79/65/EEC of the Council of 15 June 1965 
setting up a network for the collection of accountancy data 
on the incomes and business operation of agricultural 
holdings in the European Economic Community (OJ, 
English Special Edition 1965-66, p. 70). 
21 — Council Regulation (EEC) No 1785/81 of 30 June 1981 
(OJ 1981 L 177, p. 4). 
I - 7540 
ITALY V COMMISSION 
34. The relevant rules are laid down in 
Regulation No 1358/77. 22 Article 2 of that 
regulation specifies who is to be reimbursed 
and Article 3 provides that reimbursement 
is to be made by the Member State in 
whose territory the sugar is stored. Those 
concerned are sugar manufacturers to 
whom a basic quota has been allocated, 
refineries, intervention agencies, and also 
manufacturers of powdered, lump or candy 
sugar or approved specialised traders. 
Reimbursement is made to them provided 
that they are the owners of the sugar or of 
the syrups held in store. Moreover, since 
reimbursement cannot be granted unless 
some measure of control is possible, Arti­
cle 3 provides for the prior approval of the 
stores by the State in which they are 
located. 
35. The calculation must based on monthly 
returns of quantities in store, established by 
calculating the arithmetic mean of the 
quantities held in store at the beginning 
and at the end of the month in question. 
The amount of the reimbursement is then 
fixed, financing, insurance and specific 
storage costs being taken into considera­
tion. 
36. The levy to be collected from each 
sugar manufacturer in respect of the quan­
tities produced is to be so fixed that, for 
any sugar marketing year, the estimated 
total of the levies is equal to the estimated 
total of the reimbursement. The principle 
underlying the system is termed 'financial 
neutrality'. Where, for any sugar marketing 
year, the total of levies collected is not 
equal to the total of the reimbursement 
made, the difference is carried forward to a 
subsequent sugar marketing year. 
37. The amount of the levy is calculated as 
follows: the total estimated reimbursement 
for the sugar marketing year in question is 
increased or decreased as the case may be 
by the difference which might exist. The 
result is divided by the estimated quantity 
of sugar which will be marketed during 
that marketing year and produced within 
the maximum quotas. 
38. On account of the complexity of the 
system, it was also necessary to provide for 
supervisory measures and procedures for it 
to work properly, in particular by restrict­
ing the approval of stores depending on 
facilities for accounting and supervision, 
since sugar of different origins may be 
stored by the same person. Finally, Arti­
cle 19 of Regulation No 1998/78 23 
requires Member States to take all mea­
sures necessary for the application of the 
regulation. In particular, they must estab­
lish all the necessary control measures. 
22 — Council Regulation (EEC) No 1358/77 of 20 June 1977 
laying down general rules for offsetting storage costs for 
sugar and repealing Regulation (EEC) No 750/68 
(OJ 1977 L 156, p. 4). 
23 — Commission Regulation (EEC) No 1998/78 of 18 August 
1978 laying down detailed rules for the offsetting of 
storage costs for sugar (OJ 1978 L 231, p. 5). 
I - 7541 
OPINION OF MR ALBER — CASE C-253/97 
39. The Commission applied a flat-rate 
financial correction of 10% in respect of 
the 1993 financial year. 
Submissions of the parties 
40. In this connection the Italian Govern­
ment seeks the annulment of the adjust­
ments and a reduction only in the alter­
native. Here too it refers to its observations 
in Case C-242/96. 24 It argues that the 10% 
adjustment applied by the Commission is 
not justified in the first place because the 
1993 financial year constituted a transi­
tional period as the Azienda di Stato per gli 
Interventi nel Mercato Agricolo (AIMA — 
the State intervention agency in the agri­
cultural sector) took over the administra­
tion of the system from the Cassa Con­
guaglio Zucchero and the supervisory func­
tion which until then had been the respon­
sibility of the Uffici Tecnici Imposta di 
Fabbricazione. Secondly, an administrative 
system had been introduced in respect of 
specialised traders which worked effec­
tively and provided for severe penalties in 
the event of infringements. Those traders 
are required to keep a register which is 
checked by the local administration. 
Finally, it should be borne in mind that 
from 1 July 1992 to 30 June 1993 the 
contribution system relating to storage 
resulted in more levies being paid in than 
aid being paid out. With such requirements 
in place no traders would declare exces­
sively high stocks. 
41. The Commission takes the view that an 
administrative control system such as 
existed in Italy is not sufficient to safeguard 
the requirements of the system for reimbur­
sing storage costs. In particular such a 
control system does not comply with Arti­
cle 19 of Regulation No 1998/78 if it is 
established that no checks were carried out 
on specialised traders or other approved 
independent stores. According to the Com­
mission, periodic checks were necessary at 
the stores to check the information in the 
registers against the actual stocks, but no 
such checks were carried out. In particular 
no physical checks were carried out, and 
during production, for example, only auto­
matic counters were used. However, rigor­
ous checks were essential in that context in 
particular in order to prevent any tamper­
ing involving different types of sugar. 
Moreover, it follows from the principle of 
financial neutrality that the entire system 
must be viewed at Community level and 
not at the level of producers or Member 
States. Consequently, the objection raised 
by Italy that the producers had paid more 
in than they had received is unfounded. It 
would be almost impossible for the Com­
mission to carry out all the checks itself. 
Too many factors have to be taken into 
account when carrying out the checks such 
as, for example, the exact time at which the 
undertaking commenced its activities, post­
and antedated invoices and graduated 
amounts. The Member State in whose 
territory the undertaking carries out its 
activities is responsible for the checks. As 
regards specialist traders, it should be noted 24 — Italy ν Commission, cited in footnote 8. 
I - 7542 
ITALY V COMMISSION 
that they, unlike the sugar producers, pay 
no levies. Therefore, they could well have 
an interest in declaring large quantities 
which are not necessarily correct. 
Opinion 
42. It should be observed first of all that, 
by failing to carry out on-the-spot checks 
on specialised traders during the period 
scrutinised by the Commission, Italy has 
failed to fulfil its supervisory obligations 
under Community rules. That is demon­
strated in particular by the fact that, 
although those traders had to keep a 
register, the accuracy of the information 
contained therein was not checked on the 
spot at the relevant stores. 
43. If the supervisory requirement stem­
ming from Article 19 of Regulation 
No 1998/78 is interpreted in the light of 
the Member States' duty to cooperate in 
good faith with the Commission, estab­
lished by Article 5 of the EC Treaty (now 
Article 10 EC), it is evident that Member 
States must set up comprehensive adminis­
trative checks and on-the-spot inspections, 
thus guaranteeing the conformity of finan­
cial operations with Community law. 25 
However, if, as in the present case, no 
comprehensive system exists or if the 
system introduced gives rise to doubts as 
to compliance with the conditions imposed 
for eligibility for the reimbursement of the 
expenditure concerned, the Commission is 
entitled to disallow certain expenditure 
incurred by the Member State in ques­
tion. 26 
44. The Italian Government's claim that a 
connection exists between the levy paid by 
sugar producers and the reimbursement of 
storage costs must likewise be rejected. 
45. The compensation system is based on 
the principle of financial neutrality in that 
the levies collected must be equivalent to 
the reimbursement paid. That is evident 
both from Article 6(2) of Regulation 
No 1358/77 and the case-law of the Court 
of Justice. 27 However, that balance must be 
achieved at Community level and not at the 
level of the Member State or the under­
taking concerned. 28 
46. It should also be observed that the 
traders who pay the levy are not necessarily 
the same as those who receive reimburse­
ment. Specialised traders who are not liable 
for the levy, for example, receive reimbur­
sement. Even for manufacturers, the two 
amounts do not automatically coincide if 
they are fixed according to the manufactur-
25 — Italy v Commission (cited in footnote 8), paragraph 116. 
26 — Italy v Commission (cited in footnote 8), paragraph 116. 
27 — Case 121/83 Zuckerfabrik Franken v Hauptzollamt Würz­
burg [1984] ECR 2039, paragraph 26. 
28 — Italy v Commission (cited in footnote 8), paragraph 118. 
I - 7543 
OPINION OF MR ALBER — CASE C-253/97 
ing quota allocated to them and to the 
duration of storage respectively. 
47. For those reasons Member States must 
introduce adequate inspection procedures 
in order to check whether the storage costs 
eligible for reimbursement have actually 
been incurred. The absence of such proce­
dures, or deficiencies therein, could allow 
certain traders to obtain reimbursement for 
fictitious costs, which would obviously lead 
to distortion of competition. That would be 
to the detriment in particular of traders in 
other Member States where the control 
system does conform to the requirements of 
the Community rules. 29 
48. Since the deficiencies found relate to 
fundamental elements of the control system 
and to the operation of controls which are 
essential to ensure the regularity of the 
expenditure, it was completely within the 
Commission's discretion to conclude that 
there was a high risk of widespread losses 
to the EAGGF. 
49. The 10% correction adopted by the 
Commission does not, therefore, appear to 
be unjustified. The third plea in law must 
consequently be rejected. 
D. Reimbursement of sugar storage costs 
50. This point concerns the same problems 
as those in point C (paragraphs 32 to 49), 
but relates to the period from 1 January to 
30 June 1993. 
51. In that respect the Commission applied 
adjustments at a flat rate of 2%. The 
arguments put forward by the parties are 
essentially the same as those in point C. 
The Commission claims that in that period 
too the AIMA failed to carry out any 
checks. Those checks did not commence 
until July 1993 but should have applied 
retrospectively as of January 1993. At the 
hearing the Commission stated that the 
reason for the different levels of adjustment 
in respect of the periods before and after 
1 January 1993 was that there were signs 
of improvement in the supervisory system 
and it was keen to make concessions to the 
Member State within the scope of its 
discretion. 
52. There are no grounds for complaining 
about the Commission's action since Italy 
was unable to prove in particular that the 
Commission had clearly exceeded its 
powers. In particular, as the Commission 
also observed, the adjustments do not 
constitute a penalty for failure to carry 
out supervisory measures but are intended 
merely to mitigate the risk for the EAGGF. 29 — Italy ν Commission (cited in footnote 8), paragraph 120. 
I - 7544 
ITALY V COMMISSION 
53. Moreover, note should be taken of the 
observations in point C (paragraphs 42 to 
49) in respect of the lawfulness of the 
adjustments applied. 
54. Consequently, the fourth plea in law 
raised by the Italian Government must also 
be rejected. 
E. Aid for consumption of olive oil 
Preliminary remarks 
55. Under Article 11(1) of Regulation 
No 136/66/EEC, 3 0 aid must be granted 
for olive oil consumption where the pro­
duction target price minus the production 
aid is greater than the representative mar­
ket price for olive oil. Such aid must be 
equal to the difference between those two 
amounts. Under Article 7 of Regulation 
No 3089/78, 3 1 the Member States must 
'institute a system of supervision to ensure 
that the product for which aid has been 
applied qualifies for such aid.' 
56. Under Article 8, the aid must be paid 
'when the supervisory body designated by 
the Member State in which packaging takes 
place has checked that the conditions for 
granting the aid have been satisfied. The 
aid may, however, be advanced as soon as 
the aid application is submitted, provided 
that sufficient security has been provided.' 
57. Under Article 1 of Regulation 
No 3089/78, aid for olive oil consumption 
may be granted only to approved olive oil 
packaging plants. Article 2 of that regula­
tion lays down the conditions under which 
such approval may be granted. Under 
Article 3, approval must be withdrawn if 
the conditions for approval laid down are 
no longer met. Articles 7 and 8 of that 
regulation relate to the system of super­
vision to be instituted to ensure that the 
product for which aid has been applied 
qualifies for such aid. 
58. The conditions governing prepayment 
a r e l a i d d o w n in R e g u l a t i o n 
No 2677/85. 3 2 Under Article 9(3), the 
checks must be carried out in the presence 
of the competent authority and the finding 
notified to the body responsible for pay­
ment, in which case that body must also 
carry out checks to ensure that the quali­
fication criteria for the aid are satisfied. 
Under Article 12 of that regulation, 30 —Article 11(1) of Regulation No 136/66/EEC of the Council 
of 22 September 1966 on the establishment of a common 
organisation of the market in oils and fats (OJ, English 
Special Edition 1965-66, p. 221), incorporated by Council 
Regulation (EEC) No 2210/88 of 19 July 1988 (OJ 1988 
L 197, p. 1). 
31 — Council Regulation (EEC) No 3089/78 of 19 December 
1978 laying down general rules in respect of aid for the 
consumption of olive oil (OJ 1978 L 369, p. 12). 
32 — Commission Regulation (EEC) No 2677/85 of 24 Septem­
ber 1985 laying down implementing rules in respect of the 
system of consumption aid for olive oil (OJ 1985 L 254, 
p. 5), as last amended by Commission Regulation (EEC) 
No 571/91 of 8 March 1991 (OJ 1991 L 63, p. 19). 
I - 7545 
OPINION OF MR ALBER — CASE C-253/97 
approval, and thus qualification, for aid, 
must be withdrawn, where quantities are 
stated which exceed the quantities for 
which entitlement to aid has been recog­
nised by at least 20%. 33 
59. In this context the Commission initially 
applied a specific correction of ITL 10 610 
940 125 and subsequently applied an 
additional flat-rate adjustment of 2%. 
Submissions of the parties 
60. The Italian Government claims first of 
all that the Commission could not apply a 
flat-rate correction in addition to a specific 
adjustment. It is obvious that after a 
specific correction there is no justification 
for also deducting flat-rate amounts. As 
regards the specific adjustment, the Italian 
Government claims that the Commission 
made a calculation error in that respect. It 
erroneously took as the basis for the 
corrections all the amounts paid and did 
not deduct those which had already been 
recovered. In addition, amounts were also 
included which had been paid before the 
complaints were made. Consequently, a 
comparative calculation produces a figure 
of only ITL 7 147 758 628 (not 
ITL 10 610 940 125). 
61. It contends that the flat-rate adjustment 
is likewise unjustified. The complaints 
related to a total of only 55 undertakings 
(less than 10% of the overall number). Full 
repayment had been effected in respect of 
33 undertakings and partial arrears 
remained in respect of only 22. Moreover, 
since irregularities had come to light in 
respect of a total of only 4% of those 
receiving aid, a flat-rate adjustment was no 
longer necessary where they were covered 
by a specific correction. In the alternative, 
it is alleged that the calculation of the 2% 
adjustment is incorrect since not all monies 
paid or recovered had been taken into 
consideration. 
62. At the hearing the Italian Government 
also alleged that the Commission had 
included in its financial correction amounts 
which related to quantities which had not 
exceeded the 20% margin, in respect of 
which approval did not, therefore, have to 
be withdrawn. That related specifically to 
two individual cases described in greater 
detail and therefore the Commission's cal­
culations are incorrect in that respect. 
63. The reason which the Commission 
gives for its action is essentially that during 
the investigations inadequacies had been 
found in the inspection procedures and 
procedural errors in the withdrawal of 
approval. In principle it is possible to apply 
a flat-rate correction in addition to a 
specific correction; there is no provision 
in the relevant law which prohibits such 
action. The risk for the EAGGF could be 
calculated accurately only in respect of 
certain undertakings. The flat-rate adjust­
ments relate to the additional risks posed 
33 — This is the '20% rule' laid down in Article 12(6) of 
Regulation No 2677/85, incorporated by Regulation 
No 643/93. 
I - 7546 
ITALY V COMMISSION 
by the inadequacies in the procedure 
applied by the Italian authorities. 
64. In that respect the Commission further 
contends that for ten years there have been 
difficulties relating to interpretation and 
the division of competence between the 
Italian authorities. To the Ministry of 
Industry the withdrawal of approval con­
stituted a penalty linked to the previous 
imposition of administrative fines which 
had been imposed by the Anti-Fraud 
Office. 34 Consequently, the withdrawal of 
approval had simply been a formal act 
imposing a fine. Since 1990 the Ministry of 
Industry has been asked to withdraw 
approval in a total of 688 cases, but has 
done so in respect of only 24 undertakings. 
By contrast the Ministry of Agriculture 
regarded the AIMA as the authority 
responsible for inspections and the with­
drawal of approval. It was able to act 
irrespective of previously imposed admin­
istrative fines and thus decide indepen­
dently on whether to withdraw approval. 
It was not until May 1995 that an inter-
ministerial committee considered this pro­
blem. As it failed to reached a conclusion, it 
was not until May 1996 that the Council of 
State recognised the Ministry of Industry as 
the competent authority. During all those 
years the EAGGF incurred actual losses 
which are to be covered by the flat-rate 
correction in particular. In accordance with 
the normal procedure, which is also sup­
ported by case-law, the flat-rate financial 
corrections always relate to the total 
expenditure stated by the relevant Member 
State in respect of the clearance of 
accounts. The amounts recovered by the 
relevant date are also taken into considera­
tion. The Italian Government's submission 
must consequently be rejected. 
65. As regards the alleged incorrect calcu­
lation resulting from the failure to take 
account of the 20% margin, the Commis­
sion takes the view that the Italian Govern­
ment's submission at the hearing was 
belated since that argument was put for­
ward there for the first time and therefore 
the Commission had no opportunity to 
counter that submission. In its pleading the 
Commission claimed that it had been 
guided by the relevant provisions when it 
made its calculations and had already 
applied the '20% rule' in respect of the 
1993 financial year (16 October 1992 to 
15 October 1993). 
Opinion 
66. In essence the Italian Government does 
not deny that there were inadequacies and 
deficiencies in the inspection procedures 
and the withdrawal of approval. It refers, 
however, to the inaccuracy of calculations 
which the Commission used to determine 
the financial corrections. 
67. As regards the parallel and thus simul­
taneous application of a specific and flat-
rate correction, it should be noted that, 
according to the settled case-law of the 
Court of Justice, 35 the Commission must, 
34 — The Instituto Repressione Frodi. 
35 — Case 347/85 United Kingdom v Commission [1988] 
ECR 1749, paragraph 15. 
I - 7547 
OPINION OF MR ALBER — CASE C-253/97 
where it does not reject all the expenditure 
affected by the infringement, endeavour to 
establish the financial impact of the unlaw­
ful action by means of calculations. Those 
calculations must be based on an assess­
ment of what the situation in the relevant 
market would have been if the infringement 
had not occurred. 
68. In accordance with the relevant rules, 
the Commission may charge to the EAGGF 
only sums which have been paid lawfully. 
The Member States must bear the burden 
of any other sum paid, and in particular 
those paid wrongly. Therefore, as the Court 
of Justice has consistently held, the Com­
mission, instead of seeking to establish the 
financial impact of the failure of the 
monitoring authorities to fulfil their obli­
gations, can reject the entire expenditure 
tainted by the infringement. 
69. Therefore, it follows that if the risk for 
the EAGGF cannot be covered by means of 
specific corrections alone, scope must be 
left for additional, flat-rate adjustments. 
Exposing the EAGGF to further damage or 
risks, which could not clearly be deter­
mined, would run counter to the EAGGF 
system of financing. Furthermore, it would 
be contrary to the case-law of the Court of 
Justice. 
70. Therefore, in principle there can be no 
objection to specific and flat-rate correc­
tions being applied simultaneously. 
71. As regards the Italian Government's 
submission that the Commission was 
wrong to take all amounts paid as the basis 
for its specific correction and thus to 
include transactions from previous years, 
that allegation must be rejected. 
72. As the Court of Justice has consistently 
held, 3 6 the Commission must take into 
consideration all amounts paid, including 
where applicable any monies recovered by 
the relevant date in respect of the reference 
year. That is exactly what the Commission 
did in the present case, using the expendi­
ture communicated to it as the basis for the 
correction. However, in respect of the 1993 
financial year it was neither required nor 
able to take into account amounts which 
had not been recovered on time. 
73. As regards the allegation that the 
Commission did not comply with the 
'20% rule' when it calculated the adjust­
ments which it applied, it should be noted 
that that submission, made in the hearing, 
must be rejected as belated and thus 
inadmissible. The Italian Government 
made that allegation for the first time at 
the hearing even though the facts under­
lying it were known at the time of the 
written procedure. However, as the Court 
of Justice has consistently held, 3 7 such a 
submission must be rejected as belated 
where the defendant is deprived of an 
opportunity to counter the submission as 
a result of such action. 
36 — Italy ν Commission (cited in footnote 8), paragraph 122. 
37 — Case C-54/95 Germany ν Commission [1999] ECR I-35, 
paragraph 28, Case C-323/96 Commission ν Belgium 
[1998] ECR I-5063, paragraph 38, and Case C-55/91 
Italy ν Commission [1993] ECR, 1-4813, paragraph 40. 
I - 7548 
ITALY V COMMISSION 
74. Thus, the Italian Government was 
unable to show that there had been a 
calculation error in respect of the specific 
corrections. 
75. The conclusion is the same as regards 
the flat-rate adjustments. The Commission 
was right to take as a basis the overall 
amounts communicated to it and did take 
account of the monies recovered by the 
relevant date. Furthermore, in view of the 
inadequacies in the administrative proce­
dure and the inspections, which, moreover, 
the Italian Government does not deny, a 
flat-rate adjustment of 2% of the expendi­
ture appears to be justified. In any event, 
since it took ten years to resolve the conflict 
of competence between the Italian autho­
rities and it was consequently impossible to 
carry out effective checks in the meantime, 
it must be concluded that deficiencies 
occurred which, overall, posed a risk of 
losses to the Fund. 
76. Furthermore, it should be noted that 
the total of the corrections applied by the 
Commission in this respect — a specific 
correction and an additional 2% flat-rate 
correction — amounted to less than a 
single, flat-rate adjustment of 5% which 
probably could have been justified in view 
of the deficiencies in the inspection proce­
dure. 
77. This plea in law raised by the Italian 
Government must consequently be rejected. 
F. Compulsory distillation 
Preliminary remarks 
78. Compulsory distillation was intro­
duced because it was regarded as the most 
effective measure to absorb surpluses of 
table wine on the market. 38 To that end 
Article 39(1) of Regulation No 822/87 
provides that where, in respect of a given 
wine year, the market in table wine and 
wine suitable for yielding table wine is in a 
state of serious imbalance, compulsory 
distillation of table wine must be decided 
on. It is for the Commission to fix the 
quantities that are to be delivered for 
compulsory distillation to eliminate pro­
duction surpluses and thus restore a normal 
market situation, in particular as regards 
the levels of foreseeable availabilities at the 
end of a wine year and prices. The total 
quantity to be distilled must be shared 
between the various wine-growing regions 
of the Community, grouped together by 
Member State. The quantity determined for 
distillation must be shared between table-
wine producers in each wine-growing 
region. In addition, the Member States 
must notify the Commission of the quan­
tities of table wine produced in each wine­
growing region. These notifications serve as 
a basis for setting the total quantity for 
distillation in the Community. However, 
the time-limit for such notification must 
not fall after 15 February of the relevant 
38 — See the 44th recital in the preamble to Council Regulation 
(EEC) No 822/87 of 16 March 1987 on the common 
organisation of the market in wine (OJ 1987 L 84, p. 1). 
I - 7549 
OPINION OF MR ALBER — CASE C-253/97 
w i n e y e a r . U n d e r R e g u l a t i o n 
No 3929/87, 3 9 wine producers are 
required to submit a harvest declaration 
each year to the competent authorities 
designated by the Member States. Under 
Article 6(2) of that regulation, Member 
States must estimate the yield per hectare 
in respect of the table wine production 
obtained on their territory and communi­
cate this estimate to the Commission before 
20 January according to graduated classes 
of yield. 
79. Under Article 31 of Regulation 
No 822/87, a forward estimate must be 
drawn up before 10 December of each year 
for the purpose of determining the Com­
munity's resources and estimating its needs. 
80. These procedures enable annual har­
vests and storage stocks to be determined. 
The quantities to be distilled compulsorily 
are then fixed on the basis of this informa­
tion on existing and anticipated quantities 
of table wine. The percentage of the wine to 
be distilled is based on a graduated scale 
which is drawn up in terms of yield per 
hectare. 
81. By Regulation No 129/93 40 of 26 Jan­
uary 1993 the Commission fixed the quan­
tities to be distilled compulsorily by each 
Member State, the figure for Italy being 12 
760 000 hectolitres. The Member States 
were then required to share those quantities 
between the individual wine-growing 
regions and notify to the Commission the 
figures calculated by 15 February 1993. 
82. In the case of Italy the Commission 
found a shortfall in the quantity of wine to 
be distilled totalling 1 285 000 hectolitres. 
Therefore, it applied a specific correction of 
ITL 8 155 895 000. 
Submissions of the parties 
83. Although the Italian Government does 
not deny falling short of the requirements 
by a total of 1 285 000 hectolitres, it 
nevertheless seeks the annulment of the 
adjustments which were applied. The 
necessary procedure for laying down the 
scale provides for cooperation between the 
Member States and the Commission. In 
that respect forecasts for the forthcoming 
relevant period are produced on the basis of 
previous production figures. Where a mis­
take is made in the forecast, the Member 
State alone cannot be automatically held 
responsible. Since only forecasts are 
involved and the actual development of 
events is subject to a large number of 
fluctuations and imponderables, the possi­
bility that the Member State is liable must 
be excluded. 
39 — Commission Regulation (EEC) No 3929/87 of 17 Decem­
ber 1987 on harvest, production and stock declarations 
relating to wine-sector products (OJ 1987 L 369, p. 59). 
40 — Commission Regulation (EEC) No 129/93 of 26 January 
1993 opening compulsory distillation as provided for in 
Article 39 of Council Regulation (EEC) No 822/87 and 
derogating for the 1992/93 wine year from certain detailed 
rules for the application thereof (OJ 1993 L 18, p. 10). 
I - 7550 
ITALY V COMMISSION 
84. In the alternative, the calculation of the 
adjustments is contested. That calculation 
was made on the basis of the storage costs 
in respect of the undistilled wine. However, 
there is not necessarily a link between the 
producers' decision to store and to distil 
wine. Furthermore, only two months 
(1 July to distillation) and not the entire 
storage period (the average contract length 
in this respect is nine months) can be taken 
into account since the storage costs can be 
charged to the EAGGF until 1 July in any 
case. In addition, the charges on the 
EAGGF were considerably lower than in 
the previous year and the Commission had 
to take account of that fact as well. 
Furthermore, checks are now being carried 
out on a regular basis and therefore the 
adjustments as a whole appear to be 
unjustified. 
85. The Commission points to the absence 
of any checks prior to the year 1993/94 and 
further alleges that Italy failed to submit, 
within the prescribed period, the required 
documents relating to checks carried out 
and penalties imposed, and to the quantity 
of sparkling wine and grape juice recorded. 
It is evident that too little was distilled, too 
much wine was placed in storage and 
therefore it had been necessary to conclude 
a large number of additional storage con­
tracts. Consequently, the adjustments as a 
whole were applied correctly. 
Opinion 
86. It should be noted in the first place that 
Italy does not deny the inadequate inspec­
tions and incorrect forecasts. However, 
since they constitute essential aspects of 
compulsory distillation a financial adjust­
ment charged to Italy does not, in principle, 
appear to be unjustified. 
87. The inadequacies of the supervisory 
system clearly fall within the responsibility 
of the relevant Member State and therefore 
the Commission is entitled, according to 
the settled case-law of the Court of Jus­
tice, 41 to charge wrongly paid amounts to 
the Member States. 
88. As regards the question of the estimates 
of the relevant harvest yields, it must be 
concluded that the producers and Member 
States alone are responsible. They alone 
possess the necessary figures and are able, 
where applicable, to check them in order to 
make them available to the Commission. It 
is true that in that respect the system of 
compulsory distillation provides for coop­
eration between the Member States and the 
Commission. However, it does so only in so 
far as the percentages for the quantities to 
be distilled are finally fixed. In that respect 
the Commission is largely dependant on 
cooperation from the Member States. 
Where errors are made in the estimates, 
they fall solely within the sphere of compe­
tence of the Member States. However, if 
damage may be caused to the EAGGF as a 
result of those errors, the Commission is 
41 — Italy v Commission (cited in footnote 8), paragraph 122. 
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OPINION OF MR ALBER — CASE C-253/97 
entitled either to reject the expenditure as a 
whole or to apply financial corrections. 
89. In the present case the Commission 
adopted a specific correction about which 
no complaint can be made overall. The 
Commission was able to calculate the 
possible risk for the EAGGF only on the 
basis of the wine which was still in storage. 
Although there may not automatically be 
any link between the quantities in storage 
and the undistilled quantities of table wine, 
no other basis for calculation is apparent 
and, furthermore, the Italian Government 
was unable to adduce any evidence of a 
calculation error in that regard. 
90. As regards the Italian Government's 
allegation that the Commission fixed the 
distillation quantities before 15 February 
1993 — that is to say before time-limit for 
the Member States' notifications to the 
Commission — by means of Regulation 
No 129/93 of 26 January 1993, it should 
be noted that that regulation merely fixes 
the quantities for each Member State. 
However, the information which the Mem­
ber States had to communicate to the 
Commission before 15 February 1993 
related to the sharing of those quantities 
between the individual wine-growing 
regions. Therefore, the Commission did 
not have to wait until February 1993 to 
fix national quotas but was able to do so in 
advance. The cooperation between the 
Member States and the Commission 
regarding the fixing of individual quantities 
for producers could not be put into effect 
until Member States' obligations in respect 
of compulsory distillation had been pub­
lished. In that respect too the Commission 
acted lawfully. 
91. Consequently, the financial corrections 
applied by the Commission were lawful 
and this plea in law raised by the Italian 
Government must also be rejected. 
G. Wine surplus in private storage 
92. At issue here is a correction similar to 
that dealt with in point F above (para­
graph 78 et seq.), but relating to the 
1991/92 financial year. 
93. The Commission applied a financial 
correction of ITL 2 165 691 000 in respect 
of the failure to distil 319 000 hectolitres of 
table wine. The submissions of the parties 
in this point are similar to those set out in 
point F above. 
94. In this respect too it should be noted 
that, in accordance with the considerations 
set out in paragraphs 86 to 91, the Com­
mission was entitled to apply a financial 
correction on the basis of the deficiencies in 
the administrative control system which 
were found. The Italian Government was 
unable to show that the Commission had 
I - 7552 
ITALY V COMMISSION 
committed any errors in calculating the 
amount to be adjusted. 
95. Consequently, that plea in law must 
also be rejected. 
H. Permanent abandonment of wine-grow­
ing areas 
Submissions of the parties 
96. The Italian Government alleges that 
although the Commission reduced the 
amount of the adjustment which it had 
originally proposed, the specific adjustment 
that was ultimately applied is incorrect. 
Firstly, a rate of 1.01% and not 3.09% 
should have been applied for the province 
of Agrigento. The correction of 9.55% of 
the expenditure of the province of Agri­
gento is also incorrect. Aid was granted 
only in respect of grapes which were in fact 
cultivated originally, as was evident from 
the checks carried out by the competent 
authorities. The differences between the 
authorities' inspection reports and the 
books kept by the wine growers are attri­
butable to inaccuracies in the wine 
growers' books. 
97. The Commission argues that the checks 
were inadequate, especially since the wine 
growers' books are very inaccurate, as was 
evident in particular in respect of the 
information on cultivated areas and grape 
varieties. However, the rate of 1.01% 
referred to does not relate to the 1991/92 
period at issue here, but to 1992/93. As 
regards the second point, Italy paid aid in 
respect of table-wine grapes which, under 
Community law, are not eligible. 
Opinion 
98. As is evident from the Commission's 
submissions, the financial corrections 
which it applied are lawful. Firstly, it 
correctly took as a basis a rate of 3.09% 
in respect of the 1991/92 financial year, 
whereas another rate, that is to say 1.01%, 
was applicable in respect of the 1992/93 
financial year. In addition, there are no 
grounds for complaining that the Commis­
sion did not allow expenditure relating to 
the abandonment of wine-growing areas 
for grape varieties which, under Commu­
nity law, are ineligible for aid. 
99. Therefore, since the Italian Govern­
ment incorrectly paid aid in respect of the 
abandonment of wine-growing areas, the 
Commission was authorised to charge that 
damage to the EAGGF to the Member 
State. Moreover, the Italian Government 
was unable to show that the Commission 
had made any calculation error in deter­
mining the specific correction. 
I - 7553 
OPINION OF MR ALBER — CASE C-253/97 
100. For that reason this plea in law must 
also be rejected. 
I. Accounting adjustments for stocks of 
unboned beef in the statement of annual 
expenditure 
Submissions of the parties 
101. In this respect the Italian Government 
claims that the figures concerning non-
declared losses 42 which the Commission 
took as a basis for the financial corrections 
relate not only to the 1993 financial year 
but date back to 1991 and 1992. That is 
evident from the fact that the goods and 
products concerned are stored for a longer 
period than just one financial year. How­
ever, if that fact is taken into account it is 
clear that the losses during storage were 
within the permitted tolerances and the 
adjustments applied are therefore unlawful. 
The irregularities found were merely pro­
cedural and incapable of prejudicing the 
EAGGF. 
102. The Commission observes that the 
checks carried out revealed that the storage 
costs had been stated without any account 
being taken of losses during storage. The 
AIMA checks revealed losses totalling 
1 204 707 tonnes, which meant that the 
tolerance was exceeded by 829 717 tonnes. 
Consequently, the adjustments had to be 
applied directly since costs in respect of 
unlawful payments cannot be charged to 
the EAGGF and losses in storage must be 
offset when they occur. The Commission 
also points out that the same deficiencies 
were found when the EAGGF carried out 
an inspection in June 1996. 
Opinion 
103. It should again be noted that, accord­
ing to the settled-case law of the Court of 
Justice, the Member States are required to 
set up comprehensive administrative checks 
and on-the-spot inspections, thus guaran­
teeing the conformity of financial support 
operations with Community law. 
104. In that respect the Member States and 
the competent authorities of the Member 
States are responsible for ensuring that the 
information to be presented to the Com­
mission at the end of each financial year is 
duly submitted. 
105. In that respect the Commission was 
right to reject the Italian Government's 
argument that the settlement of accounts in 
respect of the 1993 financial year could be 
delayed until 1995, when the stores were 
42 — Ordinary quantitative losses resulting from storage or 
normal processing. 
I - 7554 
ITALY V COMMISSION 
empty, in order to establish the losses that 
had occurred there. An effective and timely 
supervisory system, as was necessary to 
implement Community law, would have 
helped prevent the deficiencies which 
occurred. Therefore, the fact that, on 
account of the deficiencies in its own 
checks, losses during storage which may 
have occurred in previous years have been 
taken into account also in respect of the 
1993 financial year must be attributed to 
the Member State. However, the Italian 
Government was unable to show that such 
losses did in fact stem from previous years. 
Mere assertions are not sufficient since, 
according to the principles relating to the 
burden of proof, the Member State must, as 
the Court has consistently held, show that 
the Commission has incorrectly calculated 
the adjustments which were applied. The 
Italian Government was unable to do that. 
106. Moreover, the present case does not, 
as the Italian Government seeks to show, 
involve merely procedural deficiencies in 
the supervisory system, since in that respect 
the Commission was able to demonstrate 
that at times no checks were carried out at 
all. However, since such inspections form a 
fundamental part of the aid scheme in the 
common organisation of the market, the 
Commission was right to apply the finan­
cial corrections. 
107. The correction adopted by the Com­
mission is consequently not unjustified. 
L. Early subtraction of forecast quantita­
tive losses of boned beef 
Submissions of the parties 
108. In this respect Italy complains that the 
Commission did not accept the automatic 
subtraction of forecast quantitative losses 
of 0.1 kg per package, although, if a weight 
per package of 25 to 30 kg were assumed, 
the automatic subtraction was well below 
the permitted tolerance of 0.6%. 
109. The Commission points to the need 
for exact figures in respect of losses. At the 
time of sale the actual weight cannot be 
checked and it is necessary to rely on the 
information on the label. However, if that 
no longer tallies with the actual content, 
effective checks are no longer possible. 
Furthermore, the Commission points out 
that the method complained about was 
abolished in Italy after 1993. 
Opinion 
110. Under Regulation No 147/91,43 the 
information on the actual weight makes it 
43 — Commission Regulation (EEC) No 147/91 of 22 January 
1991 defining and fixing the tolerances for quantity losses 
of agricultural products in public intervention storage 
(OJ 1991 L 17, p. 9). 
I - 7555 
OPINION OF MR ALBER — CASE C-253/97 
possible to trace the goods to the shops. 
111. It is necessary to concur with the 
Commission's view that an automatic sub­
traction of 0.1 kg per package is contrary 
to the rules. If the spirit and purpose of 
stating the loss consists in defining the 
actual quantity more accurately, that can be 
achieved only by taking an exact measure­
ment. Even if the automatic subtraction of 
losses practised by the Italian authorities is 
within the 0.6% tolerance, it may be that 
considerable fluctuations occur in indivi­
dual consignments. However, those fluc­
tuations would not be documented and 
could eventually prejudice the EAGGF. 
112. However, since the Member State is 
responsible for carrying out proper checks 
to ensure the lawfulness of financial sup­
port measures, the Commission was right 
to apply the adjustments. 
113. Therefore, the Italian Government 
was unable to show that the financial 
corrections applied by the Commission 
were unlawful or even that they had been 
calculated incorrectly. 
114. Consequently, this plea in law must 
also be rejected. 
M. Late payment of boned beef taken into 
intervention storage 
115. In this respect the Commission 
adopted a financial adjustment of 
ITL 778 000 000 after the intervention 
agency failed to purchase the goods within 
65 days of their delivery. The Italian 
Government considers that there were only 
minor delays which were necessary as the 
competent intervention agency (AIMA) 
required a so-called 'anti-Mafia' certificate 
for the purchases. 
116. Here it should be noted that under 
Article 15 of Regulation No 859/89, 44 
purchases must be made within 45 to 65 
days of the day on which the goods were 
delivered. However, the costs can be 
charged to the EAGGF only where all the 
procedural provisions are complied with. In 
the present case, however, those time-limits 
were exceeded, as they were in 1991 and 
1992, a fact which the Italian Government 
does not deny. 
117. Since in this respect there are defi­
ciencies which relate to the whole of the 
control system essential to assuring the 
regularity of the expenditure, the Commis­
sion was entitled to apply a flat-rate 
adjustment of 10%. Furthermore, the Ita­
lian Government was unable to show that 
the Commission had committed a calcula­
tion error. 
44 — 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 (OJ 1989 
L 91, p. 5). 
I - 7556 
ITALY V COMMISSION 
118. Thus, this plea in law must also be 
rejected. 
N. Inadequate management and monitor­
ing of premiums for sheep and goats 
119. This concerns a problem similar to 
that of the 1992 financial year which was 
resolved in Case C-242/96 by judgment of 
1 October 1998. 45 
1 2 0 . A r t i c l e 5 of R e g u l a t i o n 
No 3013/89 46 provides for the granting 
of a premium to sheepmeat and goatmeat 
producers to the extent necessary to offset 
an income loss in the Community during a 
marketing year. Serious deficiencies in the 
control procedures had already been found 
in the course of inspections to verify the 
applications for premiums in respect of the 
1992 financial year. In particular, the 
EAGGF had found that the application 
files were inadequately checked, certain 
inspection files were unreliable and there 
was no cross-checking of data contained in 
the applications with the findings arising 
from on-the-spot inspections. 
121. Overall the Italian Government does 
not deny that inadequacies in the inspec­
tions existed. However, it claims that 
comprehensive administrative reforms have 
been carried out since those inspections 
with the result that there is now an effective 
supervisory system in place which ensures 
that the requirements of Community law 
are properly satisfied. 
122. The Commission justifies the 10% 
flat-rate adjustment, as it did in respect of 
the 1992 financial year, on the ground that 
the inspections are still inadequate. Even if, 
as the Italian Government claims, reforms 
have been carried out, the same deficiencies 
were found in respect of the 1993 financial 
year as had been found the year before. 
Consequently, the desired improvements 
had not yet taken effect. 
123. Since the Italian Government does not 
deny the inadequacies of the supervisory 
system per se, but claims significant 
improvements, the question arises whether 
the 10% adjustment applied by the Com­
mission is justified. In view of the serious­
ness and scale of the irregularities which 
continue to be found, and of the extent to 
which supervision was largely ineffective, 
the EAGGF was exposed to a serious 
financial risk. In that respect the mere 
assertion by the Italian Government that 
reforms have been ordered, the competent 
agencies have been alerted to the irregula­
rities and an effort is being made to achieve 
a high level of monitoring overall is insuffi­
cient. Since the same deficiencies as were 
found in 1992 continued to be found at 
least in respect of the 1993 financial year, 
45 — Italy's action was also rejected on this point as unfounded: 
see Italy v Commission, cited in footnote 8. 
46 — Council Regulation (EEC) No 3013/89 of 25 September 
1989 on tne common organisation of the market in 
sheepmeat and goatmeat (OJ 1989 L 289, p. 1). 
I - 7557 
OPINION OF MR ALBER — CASE C-253/97 
the financial correction applied by the 
Commission is also justified in terms of 
the rate thereof. 
124. It is clear from the foregoing that 
none of the pleas in law raised by the 
Italian Government are well founded and 
consequently that the action must be dis­
missed. 
Costs 
125. Under the first sentence of Arti­
cle 69(2) of the Rules of Procedure, the 
unsuccessful party is to be ordered to pay 
the costs if they have been applied for in the 
successful party's pleadings. 
IV — Conclusion 
126. It is proposed therefore that the Court should: 
(1) dismiss the action; 
(2) order the Italian Republic to pay the costs. 
I - 7558