Judgment;Summary — ECLI:EU:C:2019:991
Date: 2019-11-20
Language of the case: Portuguese
Court formation: Ninth Chamber
Subject matter: Agriculture and Fisheries;European Agricultural Guidance and Guarantee Fund (EAGGF)
Procedure: Action for annulment;Appeal - unfounded
Origin: Portugal

summary report of 20 May 2016, the Commission summarised the reasons for the financial corrections applied following the checks it had carried out in the conformity clearance procedure. 17 By the decision at issue, the Commission excluded from EU financing an amount of EUR 8 984 891.60 relating to expenditure claimed by the Portuguese Republic in connection with cross-compliance, in the financial years 2010, 2011 and 2012. The procedure before the General Court and the judgment under appeal 18 By application lodged at the Registry of the General Court on 22 August 2016, the Portuguese Republic brought an action for annulment of the decision at issue. 19 In support of its action, the Portuguese Republic raised six pleas in law, alleging: – first, failure to state reasons and infringement of Article 11 of Commission Regulation (EC) No 885/2006 of 21 June 2006 laying down detailed rules for the application of Regulation No 1290/2005 as regards the accreditation of paying agencies and other bodies and the clearance of the accounts of the EAGF and of the EAFRD (OJ 2006 L 171, p. 90); – secondly, infringement of Article 24 of Regulation No 73/2009 and of the second subparagraph of Article 54(1)(c), and Article 71 of Regulation No 1122/2009; – thirdly, infringement of Articles 26 and 53 of Regulation No 1122/2009; – fourthly, failure to state reasons; – fifthly, infringement of the ne bis in idem principle; and – sixthly, infringement of the principle of proportionality and of Article 31 of Regulation No 1290/2005. 20 The General Court rejected as unfounded the second to seventh parts of the first plea in law and the fifth and sixth pleas in law. 21 Moreover, the General Court rejected as ineffective the first and eighth parts of the first plea in law and the second to fourth pleas in law. 22 The General Court therefore dismissed the action. Forms of order sought by the parties before the Court 23 The Portuguese Republic claims that the Court should: – set aside the judgment under appeal; – annul the decision at issue; and – order the Commission to pay all the costs. 24 The Commission contends that the Court should: – dismiss the appeal; and – order the Portuguese Republic to pay the costs of the proceedings. The appeal 25 The Portuguese Republic relies on two grounds of appeal. The first ground of appeal alleges that, when assessing the second plea at first instance, the General Court erred in law, vitiated the judgment under appeal by giving contradictory grounds and infringed the principles of legal certainty and of the protection of legitimate expectations. The second ground of appeal alleges that, when assessing the sixth plea at first instance, the General Court erred in law, vitiated that judgment by giving contradictory grounds and infringed the principle of proportionality. 26 The second ground of appeal should be examined before assessing the first. The second ground of appeal Arguments of the parties 27 There are two parts to the Portuguese Republic’s argument in support of its second ground of appeal. 28 In the first place, that Member State claims that the General Court’s rejection, in paragraphs 50 and 51 of the judgment under appeal, of the sixth plea raised before it was vitiated by errors of law and contradictory grounds. 29 In that regard, the Portuguese Republic notes that, as is apparent from point 2 of document AGRI-2005-64043, the cross-compliance rules are not eligibility rules but a basis for imposing sanctions. Moreover, Article 50 of Regulation No 1122/2009 lays down the minimum mandatory control rate for cross-compliance. According to that Member State, it follows that the risk to the Fund should be assessed on the basis of the risk of financial harm resulting from the non-application of reductions or exclusions, and that the basis for the calculation of the financial correction applied should not be the total number of aid beneficiaries subject to cross-compliance, but only the number of beneficiaries corresponding to the control rate, as sanctions are applicable only to them. 30 Although the General Court clearly acknowledged the distinction between cross-compliance rules and eligibility rules in paragraph 41 of the judgment under appeal, it then conflated those rules in paragraphs 46 and 47 of that judgment, upholding the Commission’s application of a flat-rate correction to all the aid beneficiaries subject to cross-compliance. The General Court therefore vitiated its judgment by giving contradictory grounds. In addition, it misapplied the rules on eligibility, bearing in mind that the present case concerns cross-compliance, failing to take account of the specific characteristics of the latter. 31 In so doing, the General Court also infringed the principle of the protection of legitimate expectations and the rules laid down in the first and sixth paragraphs of point 2 of Document AGRI-2005-64043, in Article 50 of Regulation No 1122/2009 and in Commission Working Document DS/2010/29 REV. Whereas, in the light of the first of those documents and Article 50 of Regulation No 1122/2009, the flat-rate correction may be applied only to 1% of the aid beneficiaries subject to cross-compliance, the General Court extrapolated it to all of those beneficiaries. Furthermore, according to the second of those documents, which the Commission disregarded when adopting the decision at issue, even under an imperfect control system, the maximum rate is 20% of all farmers. 32 In the second place, the Portuguese Republic submits that the General Court infringed the principle of proportionality and erred in law by concluding, in paragraph 43 of the judgment under appeal, that the risk to the Fund cannot be limited to the control sample. The objective of corrections is not to penalise the Member State concerned, but to compensate as far as possible for the potential financial loss. Accordingly, as is apparent from the arguments put forward in the first part of the second ground of appeal, the actual financial loss to the European Union was overestimated and the sanction was set at five times what it should have been. 33 In that context, the Portuguese Republic further submits that the General Court erred in law by referring to Document VI/5330/97 in paragraph 46 of the judgment under appeal and relying on the criteria set out therein. Indeed, that document was drafted when the cross-compliance rules had not yet been adopted. 34 The Commission contends that those arguments are unfounded. Findings of the Court 35 At the outset, it should be borne in mind that, under Article 170(1) of the Rules of Procedure of the Court of Justice, the subject matter of the proceedings before the General Court may not be changed in the appeal. Indeed, the jurisdiction of the Court of Justice, in an appeal, is limited to assessing the findings in law on the pleas argued at first instance. Consequently, a party cannot put forward for the first time before the Court of Justice a plea in law which it has not raised before the General Court since that would allow that party to bring before the Court of Justice, whose jurisdiction in appeal proceedings is limited, a wider case than that heard by the General Court (order of 12 July 2018, Acquafarm v Commission, C‑40/18 P, not published, EU:C:2018:566, paragraph 58 and the case-law cited). 36 In the present case, it should be noted that the argument alleging infringement of Working Document DS/2010/29 is based on the claim that the Commission failed to comply with the requirements set out in that working document, contrary to the principle of the protection of legitimate expectations. However, the Portuguese Republic did not allege such non-compliance in its action at first instance. It follows that that argument is manifestly inadmissible. 37 First, it should be pointed out that, by the two parts of its second ground of appeal, which should be examined together, the Portuguese Republic disputes the General Court’s rejection of its sixth plea at first instance on the ground that it is vitiated by errors of law, contradictory grounds and infringement of the principle of proportionality. In essence, that Member State claims that, contrary to what was held by the General Court, the basis for the calculation of the flat-rate correction applied is not the total number of aid beneficiaries subject to cross-compliance, but the number of beneficiaries subject to checks, as sanctions may be imposed only on the latter group of beneficiaries. 38 In that regard, it is noteworthy that the General Court’s rejection of the sixth plea at first instance, in paragraph 51 of the judgment under appeal, was based on the reasoning set out in paragraphs 41 to 50 of that judgment. 39 In this respect, in paragraph 41 of the judgment under appeal, the General Court noted that the parties agreed that, as far as concerns cross-compliance, as a rule, the risk to the Fund is not to be assessed on the basis of the risk of ineligible expenditure, but on the basis of the risk of financial loss resulting from the non-application of sanctions. Moreover, the General Court observed that, as a rule, if it is found during checks that a farmer has failed to comply with cross-compliance requirements, individual sanctions will apply, in the light of the provisions of Regulations No 73/2009 and No 1122/2009. 40 In the first place, in paragraphs 42 to 46 of the judgment under appeal, the General Court examined, and then rejected in paragraph 47 of that judgment, the Portuguese Republic’s argument that only agricultural holdings that have been subject to checks may be subject to a reduction or an exclusion. Accordingly, in paragraphs 42 and 43 of that judgment, the General Court stated that, even if the risk to the Fund is generally created by the fact that sanctions will not be imposed for failure to comply with cross-compliance requirements, and that risk is generally limited to the control sample defined in, inter alia, Articles 50 and 51 of Regulation No 1122/2009, that argument is valid only if the cross-compliance control system put in place by the Member State is effective. If, on the other hand, the control system is deficient, a Member State cannot guarantee that the rules laid down in Regulations No 73/2009 and No 1122/2009 will be monitored and enforced, and it will therefore be impossible to ensure that that risk is limited to the control sample. 41 In that regard, in paragraph 44 of the judgment under appeal, the General Court observed, by way of example, that a deficient system makes it impossible to find a significant degree of non-compliance and, consequently, to apply Article 50(3) of Regulation No 1122/2009, which provides that, where a significant degree of non-compliance is found, the number of on-the-spot checks to be carried out in the following control period must be increased. 42 In paragraph 45 of that judgment, the General Court pointed out that it is precisely in order to take into account such a possibility that the Commission stated in Document AGRI-2005-64043 that the risk to the Fund could extend beyond the farmers who have been subject to checks. In paragraph 46 of that judgment, the General Court quoted a large part of point 2 of that document. 43 In the second place, in paragraphs 48 to 50 of the judgment under appeal, the General Court rejected the Portuguese Republic’s argument that, having regard to the rate set out in Article 71(4) of Regulation No 1122/2009, the application of the contested financial correction was contrary to the principle of proportionality and to Article 31(2) of Regulation No 1290/2005. In that regard, the General Court held that the first of those provisions has no bearing on a correction that the Commission applies to a Member State for weaknesses in its cross-compliance control system, since that provision concerns the reductions which the Member State must apply to a farmer where non-compliance with cross-compliance rules results from the negligence of that farmer. 44 In the light of the foregoing, it must be held, in the first place, that, contrary to what is claimed by the Portuguese Republic, the General Court did not in any way conflate the eligibility rules and the cross-compliance rules. On the contrary, it clearly distinguished between them in paragraph 41 of the judgment under appeal. 45 In so far as the Portuguese Republic claims that the General Court contradicted that distinction in paragraphs 46, 47, 50 and 51 of that judgment, it should be noted that, in paragraphs 42 to 46 of that judgment, the General Court explained the reasons for its conclusion that, where the control system is deficient, the risk to the Fund extends beyond the farmers who have been subject to checks. In so doing, the General Court took into account the specific characteristics of the cross-compliance rules and did not contradict itself. 46 As regards the findings in paragraphs 42 to 46 of the judgment under appeal, although the Portuguese Republic argues, briefly, that ‘even where control systems are deficient, … the sanctions applied cannot be extrapolated beyond the percentage of farmers checked’, the fact remains that that Member State has failed to explain how the General Court’s reasoning – that a deficient control system makes it impossible for the Member State to guarantee that the rules laid down in Regulations No 73/2009 and No 1122/2009 will be monitored and enforced – is erroneous. 47 As regards the alleged infringement by the General Court of Article 50 of Regulation No 1122/2009, it is true that paragraph 1 of that article requires on-the-spot checks only in respect of 1% of all farmers who have submitted aid applications. However, it should be noted that, first, that provision does not govern the calculation of the correction rate that the Commission imposes on Member States, particularly those whose control systems are deficient. Secondly, paragraph 3 of that article, cited by the General Court in paragraph 44 of the judgment under appeal, provides that, if on-the-spot checks reveal a significant degree of non-compliance, the number of on-the-spot checks to be carried out in the following control period must be increased, which, moreover, the Portuguese Republic does not dispute. Therefore, it cannot be argued that Article 50 of Regulation No 1122/2009 imposes only the obligation for the national control authorities to check 1% of all aid beneficiaries. 48 In those circumstances, the Portuguese Republic’s argument that the General Court infringed Article 50 of Regulation No 1122/2009 in paragraphs 47, 50 and 51 of the judgment under appeal must be rejected as unfounded. 49 As regards the argument that, in those paragraphs of the judgment under appeal, the General Court disregarded point 2 of Commission Document AGRI-2005-64043, it must be noted that, even though point 2 of that document states that cross-compliance rules are distinct from eligibility rules, it also provides that ‘the total aid paid to farmers to be controlled by that competent control authority, and to whom the specific requirement in which weaknesses have been established applies is subject to correction’. 50 The concept of ‘farmers to be controlled’ cannot be construed as including only farmers who have actually been checked by the national authorities, first, because there is no wording to that effect in point 2 of that document and, secondly, on account of Article 50(3) of Regulation No 1122/2009, in the light of which that concept must be interpreted. Indeed, that provision states that the number of farmers to be checked must be increased. As the General Court correctly observed in paragraph 44 of the judgment under appeal, if controls are inadequate, no significant degree of non-compliance will be found and the control sample will never be increased. 51 In those circumstances, the argument that the General Court disregarded point 2 of Commission Document AGRI-2005-64043 in paragraphs 47, 50 and 51 of the judgment under appeal must be rejected as unfounded. 52 Moreover, in that context, it should be pointed out that, contrary to what is claimed by the Portuguese Republic, there is no basis for the contention that, in paragraph 46 of the judgment under appeal, the General Court disregarded point 2 of Commission Document AGRI-2005-64043 and infringed Article 50 of Regulation No 1122/2009, as the General Court merely quoted an extract from point 2 of that document. 53 In the second place, as regards the alleged infringement of the principle of proportionality, in paragraph 43 of the judgment under appeal, the Portuguese Republic’s argument is based on the premiss that the correction rate is not applicable to more than 1% of aid beneficiaries. 54 As is apparent from the foregoing analysis, the Portuguese Republic has not succeeded in calling into question the General Court’s finding that the application of that rate is not limited to 1% of aid beneficiaries. The allegation of infringement of the principle of proportionality must therefore be rejected. 55 Consequently, the second ground of appeal must be rejected as in part manifestly inadmissible and in part unfounded. The first ground of appeal Arguments of the parties 56 By its first ground of appeal, the Portuguese Republic submits that, in paragraph 139 of the judgment under appeal, when assessing the second plea at first instance, the General Court infringed the principle of the protection of legitimate expectations and committed a manifest error of law. 57 In that regard, it claims that that plea was not of the same importance as the other pleas, and that it concerned the ‘system for the application of reductions and exclusions’ and the resulting infringement of Article 24 of Regulation No 73/2009, and the second subparagraph of Article 54(1)(c) and Article 71(1) of Regulation No 1122/2009. Where non-compliance with cross-compliance rules is the result of the farmer’s conduct, according to Article 23 of Regulation No 73/2009, the total amount to be granted to that farmer must be reduced or excluded. 58 Under the cross-compliance rules, the Commission wrongly claimed in the decision at issue that, in the years 2010, 2011 and 2012, the Portuguese authorities had provided for a ‘margin of tolerance’ in respect of certain control elements, and that the system implemented in Portugal had not facilitated the effective application of the assessment criteria, as defined in Article 47 of Regulation No 1122/2009, where instances of non-compliance were identified. Article 71(1) of that regulation does not provide that the majority of sanctions applied must be 3% of the total amount. That provision gives Member States a degree of discretion to reduce or increase that rate so that the sanction is proportionate to the irregularity. Thus, the Portuguese Republic argues, the General Court infringed Article 24 of Regulation No 73/2009, and the second subparagraph of Article 54(1)(c) and Article 71(1) of Regulation No 1122/2009, and clearly contradicted, on account of the error of law committed, the findings in paragraphs 43 and 44 of the judgment under appeal. 59 In rejecting as ineffective the second plea at first instance, the General Court presupposed that the Portuguese cross-compliance control system was an effective control system. The General Court therefore erred in law and contradicted itself in the judgment under appeal. 60 Lastly, the Portuguese Republic concludes that the General Court has infringed the principle of legal certainty. 61 The Commission contends that these arguments are unfounded. Findings of the Court 62 By its first ground of appeal, the Portuguese Republic criticises, in essence, paragraphs 138 and 139 of the judgment under appeal, in so far as the General Court wrongly rejected as ineffective the second plea at first instance. 63 In that regard, it is clear from paragraphs 134, 135 and 137 of the judgment under appeal that, in the decision at issue, the Commission identified a number of weaknesses in the control system implemented by the Portuguese Republic, only some of which were challenged before the General Court. In paragraph 138 of the judgment under appeal, the General Court observed that, as regards six of those weaknesses, ‘the operative part of the decision [at issue] is based on six grounds, the validity of which has not been properly challenged in the first, fifth and sixth pleas, and which are not addressed in the second, third and fourth pleas’, and listed those six grounds. In paragraph 139 of that judgment, it added that ‘each of those six grounds is sufficient in itself to form the basis of the Commission’s reasoning and to justify the application of a 5% flat-rate correction’ and concluded, inter alia, that the second plea, relating to errors allegedly committed by the Commission concerning the shortcomings in the application of reductions and exclusions, was ineffective. According to the General Court, ‘indeed, even if [it] were to be considered [well founded], [that plea] could not lead to the partial annulment of the decision [at issue] unless the Portuguese Republic demonstrated that all the grounds relied on to justify the flat-rate correction of 5% were vitiated by illegality.’ 64 It is thus clear from paragraphs 138 and 139 of the judgment under appeal that the General Court found, in essence, that the second plea at first instance was ineffective in so far as, even if the ground relating to the shortcomings in the application of reductions and exclusions had been unfounded, the operative part of the decision at issue could, in any event, be properly based on any of the other six grounds, which the Portuguese Republic had either not challenged or had been unable to call into question in its action before the General Court. 65 In the first place, by the present ground of appeal, the Portuguese Republic in no way calls into question the General Court’s finding that each of the six grounds referred to in paragraph 138 of the judgment under appeal is sufficient in itself to justify the application of a flat-rate correction of 5%, and neither does it claim that the second plea at first instance sought to challenge the grounds of the decision at issue. 66 Moreover, that finding was confirmed by the Portuguese Republic itself, since in its appeal, it stated that the second plea at first instance ‘concerned the “system for the application of reductions and exclusions”’. 67 In those circumstances, it must be concluded that the General Court did err in law or infringe the principle of the protection of legitimate expectations in rejecting the second plea raised before it as ineffective. Even if it were proven that that last plea ‘is not of the same importance as the other [pleas raised before the General Court]’, an assertion which is, moreover, entirely unsupported, this could not affect that conclusion. 68 In the second place, the allegation that the General Court infringed the principle of legal certainty by accepting the Commission’s argument that the system for the application of reductions and exclusions in force in Portugal had not facilitated the effective implementation of the assessment criteria defined in Article 47 of Regulation No 1122/2009, and the allegation that the General Court therefore contradicted the content of paragraphs 43 and 44 of the judgment under appeal are based on an incorrect premiss and an incorrect reading of that judgment. 69 By rejecting as ineffective the second plea raised before it, without assessing whether the Commission’s claims as regards the shortcomings in the application of reductions and exclusions were well founded, the General Court did not in any way uphold those claims. 70 The claims alleging contradictory grounds and infringement of the principle of legal certainty must therefore be rejected as unfounded. 71 Consequently, the first ground of appeal must be rejected in its entirety as unfounded. 72 It follows from all the foregoing considerations that the appeal must be dismissed in its entirety. Costs 73 Under Article 184(2) of the Rules of Procedure of the Court of Justice, where the appeal is unfounded, the Court is to make a decision as to the costs. 74 Article 138(1) of those rules, applicable to appeal proceedings pursuant to Article 184(1) thereof, provides that the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. 75 Since the Portuguese Republic has been unsuccessful in its submissions and the Commission has applied for costs, the Portuguese Republic must be ordered to pay the costs relating to the present appeal. On those grounds, the Court (Ninth Chamber) hereby: 1. Dismisses the appeal; 2. Orders the Portuguese Republic to pay the costs. [Signatures] * Language of the case: Portuguese.