Judgment — ECLI:EU:C:1998:27
Date: 1998-01-29
Language of the case: Greek
Court formation: Sixth Chamber
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Agriculture and Fisheries;European Agricultural Guidance and Guarantee Fund (EAGGF);Milk products;Oils and fats;Cotton;Tobacco
Concepts: Procedure for clearance of accounts
Procedure: Action for annulment - unfounded;Action for annulment - successful
Origin: Greece

summary report 2explains that the
decision is based on the fact that some of the
expenditure declared by the Hellenic Repub­
lic failed to meet the requirements laid down
by Community legislation and could not
therefore be charged to the Fund. The
complaints against the applicant relate to a
number of shortcomings in the system set up
by the Greek authorities to monitor compat­
ibility with the criteria laid down by the
Community rules on financial intervention
within the ambit of agricultural policy and
are summarised below, indicating the sums
involved: 3
A) Aid for olive oil production (paragraph
4.7.2.1).
— Shortcomings in the checking of expendi­
ture.
Correction — DR 2 465 573 475.
B) Aid for cotton production (paragraph
4.7.5.1).
Inadequacy of the checks on the measure.
Correction — DR 16 735 309 160.
* Original language: Italian.
1 — OJ 1994 L 352, p. 82.
2 — Summary report concerning the clearance of the EAGGF
Guarantee Section accounts for 1991, Commission Docu­
ment of 21 December 1994, Doc. VI/320/94, fin.
3 — Originally the application also concerned that part of the
decision which disallowed expenditure incurred in the milk
sector. In its reply, the Hellenic Republic confirmed that it
had informed the Court of its decision to withdraw part of
its claim; subsequently, it announced officially at the hearing
that it was withdrawing the remainder of that part of the
application.
I-209
OPINION OF MR LA PERGOLA — CASE C-61/95
C) Tobacco
C.1) Irregularities in premium payment
(4.9.2.1).
Correction — DR 3 531 558 038.
C.2) Securities for premiums for leaf
tobacco (paragraph 4.9.2.2).
Correction — DR 2 705 095.
C.3) Reduction of premiums and interven­
tion prices -where the maximum guaranteed
quantities are exceeded (paragraph 4.9.2.3).
Correction — DR 4 922 442 527.
C.4) Calculation of the final correspondence
(paragraph 4.9.2.4).
Correction — DR 1 993 586 687.
3. The Hellenic Republic considers the
decision to be invalid for reasons concerning
both the establishment of the facts and the
Commission's assessment. The Court of Jus­
tice is therefore being asked to annul that
part of the decision relating to the sectors
challenged in this action and the correspond­
ing amounts and, in addition, to order the
Commission to pay the costs of the proceed­
ings.
The Commission, meanwhile,, contends that
the Court should dismiss the application and
order the Hellenic Republic to pay the costs.
4. Now that I have described the items of
expenditure in dispute and the claims of the
parties, some general points relevant to con­
sideration of the case have to be made. I shall
begin by setting out the main elements of the
general legislative framework and go on to
explain the criteria that have been laid down
for quantifying the expenditure that has been
disallowed. Finally, I shall consider the prin­
ciples laid down by the Court of Justice in
relation to the burden of proof in this area. 4
General legislative framework
5. Article 3(1) of Regulation (EEC) No 729/
70 5provides that the Fund is to finance
4 — In order to make it easier to understand the reasoning
behind the individual grounds of challenge, I have, however,
decided to structure my Opinion according to the sectors of
activity in issue. I have therefore set out, at the head of each
section: the legislative provisions specific to each of the rel­
evant agricultural sectors; the arguments put by the parties
— or rather, by the applicant, given that, pursuing what
appears, regrettably, to be increasingly becoming its estab­
lished practice in this area, the Commission has failed to deal
in its observations with many of the points at issue — and,
finally, their assessment in law. See, on that point, what
Advocate General Fennelly had to say in his Opinion in
Case C-50/94 Greece v Commission [1996] ECR I-3334,
paragraph 12.
5 — Regulation of the Council of 21 April 1970 on the financing
of the common agricultural policy (OJ, English Special Edi­
tion 1970(1), p. 218).
I-210
GREECE v COMMISSION
intervention undertaken, according to Com­
munity rules, within the framework of the
common organisation of the agricultural
markets. Before the end of the year follow­
ing the year in question and after consulting
the Fund Committee, the Commission is to
clear the annual accounts presented by the
national bodies authorised to make payments
in respect of such activities (Article 5). 6 That
decision is based on information that the
Commission obtains either directly or
through the Member States. Consequently, a
time-limit is set annually for the Member
States to provide the additional information
required for the final decision. For the year
in question, the deadline was set at 31 Janu­
ary 1994. 7
6. The financial consequences of any irregu­
larities are borne by the Community, with
the exception of the consequences of irregu­
larities or negligence attributable to adminis­
trative authorities or other bodies of the
Member States, while the sums recovered are
to be paid over to the paying authorities or
bodies and deducted by them from the
expenditure financed by the Fund. 8
7. Those legislative requirements are set out
in detail in Regulation (EEC) No 595/91, 9
which defines the obligations and powers of
the Member States and governs relations
between them bearing in mind that 'in order
to prevent irregularities, cooperation
between the Member States and the Com­
mission should be reinforced'. 10In that con­
text (Article 6(1)), where the Commission
considers that irregularities have taken place,
it is to inform the Member State concerned
thereof and the latter is to hold, at the earli­
est opportunity, an inquiry in which officials
of the Commission may take part.
The criteria for quantifying the expenditure
to be disallowed
8. The act whereby, on completion of the
clearance procedure, the Commission
decides to disallow expenditure improperly
incurred, ought not to be discretionary in
terms of the actual amount disallowed.
However, it often happens that the infor­
mation that has been collected — directly or
indirectly — does not make it possible to
arrive at an exact figure, and so that amount
is determined by reference to the gravity of
6 — Supervision is crucial in a system organised on two levels: at
national level, where monies from the Fund are actually dis­
tributed, and at Community level, where decisions on the
allocation of resources are made. The regulation takes this
fully into account: see, in particular, the seventh and eighth
recitals in the preamble.
7 — Commission Decision of 21 January 1994 setting a time-limit
for the communication of additional data in connection with
the clearance of EAGGF, Guarantee Section, accounts, for
the 1991 financial year, Doc. VI/4480/93.
8 — Article 9(1) provides that: 'Member States shall make avail­
able to the Commission all information required for the
proper working of the Fund and shall take all suitable mea­
sures to facilitate the supervision which the Commission
may consider it necessary to undertake within the frame­
work of the management of Community financing, including
inspections on the spot. Member States shall communicate to
the Commission provisions laid down by law, regulation or
administrative action which they have adopted for the appli­
cation of legal acts of the Community relating to the com­
mon agricultural policy in so far as those acts nave financial
consequences for the Fund.'
9 — Council Regulation of 4 March 1991 concerning irregulari­
ties and the recovery of sums wrongly paid in connection
with the financing of the common agricultural policy and
the organisation of an information system in this field and
repealing Regulation (EEC) No 283/72 (OJ 1991 L 67,
p. 11).
10 — See the tenth recital in the preamble. Under Article 2,
Member States are to communicate to the Commission: the
provisions laid down for the application of the measures
provided for in Article 8(1) of Regulation (EEC) No
729/70; a list of the irregularities discovered when exercis­
ing supervision (Articles 3 and 4); and a list of the provi­
sions adopted in response to the irregularities discovered.
I-211
OPINION OF MR LA PERGOLA — CASE C-61/95
the failure to respect the rules and the dam­
age allegedly caused to the Community bud­
get: consequently, it is a decision that
involves a degree of discretion.
9. The exercise of that decision-making
power has therefore been the subject of a
Commission measure that was considered in
detail by Advocate General Fennelly in his
Opinion in Case C-50/94. 11
It was pointed out that, once failure to com­
ply with the Community rules has been
ascertained, the decision concerning the rate
of correction to be applied to the accounts
that have to be cleared must flow directly
from an estimation of the risk. The Commis­
sion described various pre-existing methods
of risk assessment, including the method
applicable to situations in which there is
insufficient information available to justify
extrapolation, 12 and proposed three rates of
proportionate reduction in reimbursement,
namely 2%, 5% and 10%, linked to the dif­
ferent degrees of failure to carry out the req­
uisite supervision. The 10% rate was to
apply where the failure concerned the whole,
or the essential elements, of the system of
supervision, or the application of essential
checks designed to ensure that expenditure
was lawful, so that a serious risk of overall
losses for the EAGGF could reasonably be
assumed to exist. 13
The principles applicable to the burden of
proof
10. In cases where a Member State is seeking
the annulment of a Commission decision on
the clearance of EAGGF accounts, the crite­
rion that has been developed by the case-law
of the Court of Justice in relation to the bur­
den of proof is particularly exacting in
respect of the applicant. 14
As stated in the judgment in Netherlands v
Commission, the Commission is not required
to provide exhaustive proof of the inaccu­
racy of the information supplied by the
Member States but to provide proof in sup­
port of the serious and reasonable doubts it
has expressed in relation to the figures sup­
plied by the national authorities. 15 The
11 — Case C-50/94 (cited in footnote 4 above), paragraph 4. The
Advocate General pointed out on that occasion that, by
decision of 31 July 1992 [COM(92) PV 1116], an internal
inter-service group was set up within the Commission,
charged with developing a methodological approach in
respect of Member States that had incorrectly applied Com­
munity rules. The guidelines thus established were subse­
quently approved by the Commission and the representa-
aves of the Member States on the EAGGF Committee.
12 — Clearly, in cases of that nature where the information is
unreliable, a rate of reimbursement calculated on the basis
of extrapolation by reference to the number of checks actu­
ally carried out would, (almost) inevitably, lead to an inac­
curate assessment of probable losses to the Fund.
13 — Furthermore —and this, as we shall see, is an important
point in this case — in exceptional circumstances, a rate of
correction in excess of 10% may be considered appropriate.
14 — The requirement that a uniform test and uniform criteria
should be applied derives from the objective of Regulation
No 729/70. If the aim is to guarantee conditions of equality
among traders from the different Member States, this can be
achieved only if the competent authorities interpret the rel­
evant provisions by reference to the same criteria. See Case
11/76 Netherlands v Commission [1979] ECR 245, para­
graph 9.
15 — Case C-48/91 Netherlands v Commission [1993] ECR
I-5611, paragraph 17.
I-212
GREECE v COMMISSION
Court went on to state that this was a solu­
tion dictated by the fact that it is the State
which has the best opportunities of collect­
ing and verifying the information needed for
the clearance of EAGGF accounts, and it is
therefore for the State to furnish exhaustive
proof of the accuracy of its own information
as well as, if necessary, of the inaccuracy of
the Commission's calculation.
11. That approach is clear enough: in rela­
tion to the clearance of accounts, the Com­
mission is entitled to draw reasonable infer­
ences from the information it possesses,
whether it has been provided by the Member
States or obtained as a result of its own
investigations. The Court will not annul a
Commission decision withholding reim­
bursement of declared expenditure simply on
the basis of the contrary assertion of a Mem­
ber State, or even on the strength of serious
doubts raised by the evidence adduced by a
Member State. In short, as pointed out by
Advocate General Fennelly in his abovemen-
tioned Opinion: 'The aggrieved Member
State must, pursuant to the principle actori
incumbit probatio, 16 prove with at least a
reasonable degree of certainty that the Com­
mission has erred.' 17
12. That principle has been expressly set out
in cases — similar, as we can see, to the
instant case — in which the Commission had
to deal not so much with specific and
clearly-defined failures to comply with the
rules as with the general lack of an effective
system of supervision and control. In those
circumstances, as the Court has ruled, the
Commission is right to draw, from certain
specific cases, inferences for the whole of the
sector in question. 18
Having made those three general points, I
now turn to the substance of the applicant's
complaints.
Aid for olive oil production
The relevant provisions
13. The basic rules governing the olive oil
sector are contained in Regulation No
136/66/EEC, 19 which provides for a system
of administrative intervention in the sector
designed to achieve a constant balance
between supply and demand and thus pre­
vent irregularities in production.
16 — That principle had already been mentioned by Advocate
General Mischo in his Opinion in Case C-281/89 Italy v
Commission [1991] ECR I-354, point 18.
17 — See the abovementioned Opinion, point 16; see also the
Opinion of Advocate General Gand in Case 8/65 Acciaierie
e Ferriere Pugliesi v High Authority [1966] ECR 1.
18 — Case C-8/88 Germany v Commission [1990] ECR I-2321,
paragraphs 41 and 42. See also the Opinion of Advocate
General Van Gerven in that case (point 30). For a thorough
analysis of the rules in the agricultural sector, paying par­
ticular attention to those aspects of supervision linked to
the organization of the market and the impact on the bur­
den or proof, see the Opinion of Advocate General Van
Gerven m Case C-55/91 Italy v Commission [1993] ECR
I-4813, p. I-4834.
19 — Regulation No 136/66/EEC of the Council of 22 Septem­
ber 1966 on the establishment of a common organisation of
the market in oils and fats (OJ, English Special Edition
1966, p. 221).
I-213
OPINION OF MR LA PERGOLA — CASE C-61/95
14. Regulation No 2261/84 lays down gen­
eral rules on the granting of aid for the pro­
duction of olive oil and to olive oil producer
organisations. 20
The priority attaching to the issue of super­
vision is not only apparent from the pre­
amble 21 but is also made clear in the indi­
vidual provisions of the regulation. Within
the structure established by the regulation,
the legality of transactions is verified at vari­
ous stages.
In the case of producers belonging to an
organisation or association, it is that body
(which submits the aid applications to the
State in question on behalf of its members)
that is required to make on-the-spot
checks 22 and establish that the file submitted
is consistent with the provisions laid down
by regulation. 23
According to Article 10, the associations of
producer organisations governed by Article
20c(2) of Regulation No 136/66 24 are to
coordinate the activities of the organisations
of which they are composed, ensure that
those activities accord with the provisions of
the regulation and directly verify the manner
in which the checks have been carried out. 25
In the case of independent producers, who
are not therefore members of a producer
organisation, those checks must be carried
out by the Member State concerned. 26
Article 14(1) requires the Member States
generally to apply 'a system of checks to
ensure that the product in respect of which
aid is granted is eligible for such aid' and
Article 14(2) lays down what may be consid­
ered the cornerstone of the system by pro­
viding that: 'Producer Member States shall
20 — Council Regulation (EEC) No 2261/84 of 17 July 1984 lay­
ing down general rules on the granting of aid for the pro­
duction of olive oil and of aid to olive oil producer organi­
sations (OJ 1984 L 208, p. 3).
21 — The thirteenth recital in the preamble, for example, reads:
'in order to guarantee that the aid is granted only in respect
of oil which qualifies therefor, provision should be made
for an appropriate system of administrative checks'; accord­
ing to the fifteenth recital: 'detailed and effective checking
and verification [is] difficult; it is necessary [to resolve those
difficulties] by setting up in each Member State a comput­
erised file containing all the information needed to facilitate
checking and the prompt detection of irregularities'. But see
also the fourth, sixth, seventh, eighth and fourteenth recit­
als.
22 — Articles 6(1), 8(1) and 10 of Regulation No 2261/84, as
amended by Council Regulation (EEC) No 3500/90 of 27
November 1990 (OJ 1990 L 338, p. 3).
23 — Article 6(1) of Regulation No 2261/84, as further defined
by Article 4(2) of Commission Regulation (EEC) No
3061/84 of 31 October 1984 laying down detailed rules for
the application of the system of production aid for olive oil
(OJ 1984 L 288, p. 52).
24 — As amended by Council Regulation (EEC) No 1413/82 of
18 May 1982 amending the abovementioned Regulation No
136/66 (OJ 1982 L 162, p. 6).
25 — Article 10 of Regulation No 2261/84, as amended by Regu­
lation No 3500/90.
26 — Article 14(4) of Regulation No 2261/84, as further defined
by Article 10(2) of Commission Regulation (EEC) No
3061/84, as amended by Article 1(5) of Commission Regu­
lation (EEC) No 98/89 of 17 January 1989 (OJ 1989 L 14,
p. 14).
I-214
GREECE v COMMISSION
verify the activities of each producer organi­
sation and association and, in particular, that
the checking operations have been carried
out by these bodies.' 27
15. The rules governing the exercise of
supervision provide for a twofold mecha­
nism: the Member States are to establish and
regularly update a register of olive cultivation
to provide the information needed to ascer­
tain potential production and guarantee,
more generally, the improved operation of
the aid system; 28 they are then required to
draw up and keep up-to-date permanent
computerised files of olive and olive-oil pro­
duction data to be used by the Member
States to guide the checking operations to be
carried out. 29
The matters at issue
16. The disallowance of expenditure in the
olive oil sector is based on a number of criti­
cisms which the Commission has directed at
the applicant: failure to set up the register of
olive oil cultivation; failure fully to comput­
erise the files of production data; failure by
the national monitoring agency to carry out
on-the-spot checks; and inadequacy of the
checks carried out by the producer organisa­
tions.
The summary report goes on to describe fur­
ther shortcomings: the Agricultural Bank of
Greece is said to retain the aid allocated to
olive growers who die during the marketing
year; 2% of the total aid is withheld to
finance the insurance system to protect farm­
ers against risks.
As a result of the structural inadequacy of
the system of supervision, the Commission
disallowed 10% of the total expenditure
incurred.
27 — The percentage checks which the Members States have to
carry out in regard to producers who arc not members of a
producer organisation amount to 1% in the zones where
the basic data contained in the register of olive cultivation
are available, and 4% in the other zones. The checks carried
out by the producer organisations referred to in the second
indent of Article 6(1) are to cover 5% of the crop declara­
tions submitted by each organisation. See Articles 10(2) and
4(2) of the abovementioned Regulation No 3061/84.
28 — Article 1 of Council Regulation (EEC) No 154/75 of 21
January 1975 on the establishment of a register of olive cul­
tivation in the Member States producing olive oil (OJ 1975
L 19, p. 1). Commission Regulation (EEC) No 2276/79 of
16 October 1979 laid down detailed rules for the
drawing-up of a register of olive cultivation in the Member
States producing olive oil (OJ 1979 L 262, p. 11). The regu­
lation was subsequently amended on a number of occa­
sions. See Commission Regulation (EEC) No 1279/89 of 10
May 1989 (OJ 1989 L 127, p. 24).
As far as the time-limits for implementing the register of
olive cultivation are concerned, specific rules for Greece
were laid down in Council Regulation (EEC) No 3453/80
of 22 December 1980 (OJ 1980 L 360, p. 15). These pro­
vided that the time-limits of two and six years respectively,
laid down for the implementation of the register of olive
cultivation as from the date of entry into force of the
abovementioned Regulation No 154/75, were to run from 1
November 1982 (Article 1). That set the time-limit for
implementing the register of olive cultivation in Greece at
31 October 1988.
One further point: on closer scrutiny it would be more
appropriate to consider it a land-use survey rather than a
register. Aerial photographs of the olive-producing area,
considered the most reliable method of obtaining the infor­
mation, are used to draw up land-use maps showing the
olives used for oil production. That information is then
compared with the production declared by the olive pro­
ducers.
29 — See Articles 16(1) and 14(5) of the abovementioned Regu­
lation No 2261/84. The deadline for setting up the comput­
erised files was set at 31 October 1990 (see Article 11(1) of
Commission Regulation No 3061/84, as amended by
Article 1(7) of Commission Regulation No 98/89, also cited
above).
I-215
OPINION OF MR LA PERGOLA — CASE C-61/95
The position of the Hellenic Republic
17. The Hellenic Republic disputes each of
the points contained in the summary report.
18. As regards the failure to set up the reg­
ister, the applicant reiterates the arguments
put forward in Case C-50/94, claiming that it
was objectively impossible for it to do so.
That omission was, it maintains, the result of
a failure on the part of the Commission; con­
sequently, responsibility cannot be imputed
to the applicant. 30
19. However, as regards the alleged failure
to set up computerised files, the applicant
claims that this complaint is based on a fac­
tual error. Such files have been in existence
since 1985. Furthermore, according to the
applicant, where checks prove to be inad­
equate, additional verification is carried out
by the Ministry of Agriculture, the producer
organisations and the national agency
responsible for monitoring aid for olive oil
production.
20. According to the applicant, the alle­
gation that the checks carried out by the
competent agency were inadequate is also
inaccurate. That agency carries out checks on
the basis of an annual work schedule that is
periodically adjusted in the light of the
reported risks of abuse or fraud. 31 The Hel­
lenic Republic refers to a number of details
concerning the checks carried out during the
1991/92 marketing year.
21. As regards the alleged inadequacy of the
checks carried out by the producer organisa­
tions and the consequent granting of unjusti­
fied premiums, Greece contends that the
Commission has failed to take into account
the fact that those organisations possess
comprehensive data on the number of trees
used for olive-oil production and that such
data is checked by local organisations. 32
30 — The Hellenic Republic claims that on 28 December 1988, in
compliance with the provisions of Commission Regulation
(EEC) No 586/88 of 3 March 1988 (OJ 1988 L 57, p. 18), it
transmitted to the Commission a programme of trials for
the establishment of a register of olive cultivation. Subse­
quently, on 30 October 1989, the Ministry of Agriculture
asked the Commission for information relating to the
approval of the programme. On 21 June 1991, the Commis­
sion proposed to the Ministry of Agriculture that a 'pilot'
scheme be carried out before undertaking the main project.
A tendering procedure was thus set in motion; during that
procedure, the Commission allegedly replied to a query
from the Greek Government of 16 July 1992 concerning
the state of progress that tendering procedures for the
scheme took time. The Commission was therefore apprised
of the problem at the outset.
31 — The programme is drawn up on the basis of Article 3 of
Commission Regulation (EEC) No 27/85 of 4 January 1985
laying down detailed rules for the application of Regulation
(EEC) No 2262/84 laying down special measures in respect
of olive oil (OJ 1985 L 4, p. 5).
32 — The applicant also discusses two further aspects of the
Greek system to which the summary report indirectly
refers. It acknowledges the existence of the practice
whereby the Agricultural Bank of Greece withholds the aid
payable to olive growers who die during a marketing year,
but claims that this is a legitimate practice. The aid is a
financial advantage payable to those beneficially entitled to
the estate of the farm owner. Since the process of establish­
ing succession is not a rapid one, the Bank is obliged to
withhold all of the aid in order to be ready to disburse it to
the lawful heirs. Furthermore, the applicant claims that the
2% deduction allocated to the Agricultural Insurance
Office is legal and compatible with Community rules since
it meets the need to fund that body which is responsible for
awarding compensation to producers affected by natural
disasters. In any event, that deduction is made only once
the purpose for which the aid was disbursed has been
achieved.
I-216
GREECE v COMMISSION
The Commission's position
22. The Commission notes that the Court
has already considered the olive oil sector in
its judgment in Case C-50/94. Furthermore,
the applicant disputes neither the absence of
a register of olive cultivation nor the fact that
the computer files have not been properly set
up; nor does it deny that the conventional.
checks are inadequate. The Commission fur­
ther points out that its own services have
reviewed the entire procedure for managing
and monitoring aid for olive oil production.
According to the Commission, that review
brought to light a series of shortcomings to
which it drew the attention of the Greek
authorities: viewed objectively, the number
of staff responsible for monitoring the activ­
ity of the olive producers and producer
organisations was inadequate, and the com­
petent national bodies had failed to draw up
reports on the checks carried out.
Substance
Register of olive cultivation and computer­
ised data files
23. The Court has already given a ruling on
the operation of the olive oil sector in
Greece during 1990 in its judgment in
Greece v Commission. 33 That is a factor
which has to be taken into consideration in
reaching a decision in this dispute. As stated
in the summary report, the current short­
comings cannot be disassociated from those
already established: 'the system audit under­
taken last year and continued this year
shows that no significant change has taken
place in the organisation of checks on the
aid: the shortcomings publicised before still
persist' (paragraph 4.7.2.1; emphasis added).
24. That state of affairs is confirmed in rela­
tion to the obligation to set up both the reg­
ister of olive cultivation and the computer­
ised files.
25. Firstly, the argument that it was objec­
tively impossible to set up the register of
olive cultivation was specifically rejected by
the Court in its abovementioned judg­
ment. 34
In that case, the Court also ruled in relation
to the computerised files that 'no justifica­
tion could be given for the delay in establish­
ing the files' (paragraph 41). That conclusion
33 — Case C-50/94, cited in footnote 4 above.
34 — Paragraph 40 reads as follows: 'With respect to the register
of olive cultivation, it was not until its letter of 28 Decem­
ber 1988, that is, after the expiry of the period laid down by
Regulation No 3453/80, that the Greek Government sub­
mitted to the Commission a programme of trials for estab­
lishing the register. The representative of the Greek Gov­
ernment confirmed at the hearing that the difficulties in
establishing the register were not notified to the Commis­
sion until after the expiry of the prescribed period. The fact
that after that date the Commission assisted the Greek
Government in its efforts to fulfil its obligations cannot, in
those circumstances, prove that it was absolutely impossible
to establish the register by the required date, since the
Greek Government has not put forward any argument
relating to the period before 31 October 1988.'
I-217
OPINION OF MR LA PERGOLA — CASE C-61/95
can and should apply to the present dispute.
The applicant has simply claimed that the oil
mills, producer organisations and crop decla­
rations have been recorded on computer file
and that the applications have 'to a large
extent' been computerised but has not, as
required by the abovementioned judgment
of the Court, provided proof that effectively
refutes the results of the checks carried out
by the Commission or justifies the objective
delay in meeting the statutory time-limit. 35
26. That assessment is not altered by the
applicant's claims concerning the additional
checks carried out by the Ministry of Agri­
culture, the producer organisations and the
competent agency. No evidence has been fur­
nished in support of those claims. For the
same reasons as those set out above, they
cannot therefore invalidate the Commis­
sion's assessment which is based on an
objective review of the supervision exercised.
27. In the light of those facts, I have no
choice, in this case, but to endorse the find­
ing of the Court in its abovementioned judg­
ment: 'In those circumstances, the Greek
Government has not shown that the delay in
establishing the register of olive cultivation
and the computerised files was due to abso­
lute impossibility' (paragraph 42).
Failure of the competent agency, government
officials and producer organisations to exer­
cise proper supervision
28. As I have said, the Hellenic Republic
rejects the conclusions reached in the sum­
mary report on the basis of certain data con­
cerning the checks carried out by the agency
during the 1991/92 marketing year. 36
According to the Greek Government, con­
trary to the impression given in the summary
report, the number of checks carried out on
the activities of the producer organisations
35 — I would point out here that the summary report (paragraph
4.7.2.1) states that the process of computerising data was
interrupted for several months because of a shortage of
trained staff and that the Greek authorities are not able to
set the deadline for the completion of the project and for
user access to the files.
36 — The requirement that the Member States are to establish a
control agency was provided for in Council Regulation
(EEC) No 2262/84 of 17 July 1984 laying down special
measures in respect of olive oil (OJ 1984 L 208, p. 11). The
rules, laid down in order to provide the national authorities
with administrative structures able to ensure the timely and
effective exercise of the controls required in the olive oil
sector (second and third recitals in the preamble), accorded
the agencies a variety of responsibilities in the sector. These
include responsibility for establishing that the activities of
the producer organisations and their associations are com­
patible with the Community rules, and responsibility for
carrying out the checks referred to in Articles 14 and 15 of
the abovementioned Regulation No 2261/84. Under Article
1(4), moreover, the Member State concerned is required to
draw up, acting on a proposal from the agency, a work
schedule designed to ensure that the production-aid scheme
is correctly applied. The schedule, together with the provi­
sional budget, is transmitted to the Commission which may
request the Member State to make changes to the docu­
ments. In addition to setting the time-limit for the estab­
lishment of the agency at 31 March 1985, the implementing
provisions, contained in the abovementioned Commission
Regulation No 27/85, set out in detail the agency's work
schedule.
Verification by the Ministry of Agriculture in fact consists
in checking the declarations made by the producers in order
to determine the accuracy of their applications for aid.
I-218
GREECE v COMMISSION
and each association, the oil mills and indi­
vidual producers affiliated to an organisation
was significantly higher than the percentages
prescribed by the Community rules.
29. The national control agency draws up an
annual work schedule which is submitted to
the Commission for approval. The checks
carried out by the Fund revealed that the
supervision actually exercised fell substan­
tially short of the level indicated by the Hel­
lenic Republic in its work schedule. In dis­
missing that conclusion, the applicant has
provided no evidence of the checks actually
carried out and has simply relied on undocu­
mented data to support its claim. In my
opinion, an argument that relies on data of
that nature is not capable of overturning the
results of the EAGGF inspections and can­
not be upheld.
30. A further point. The data put forward
by the applicant in relation to the number of
checks carried out by the agency are wholly
irrelevant to the actual issue raised by the
summary report, namely the quality of
checks in Greece. The inspections carried out
reveal that though monitoring by the staff of
the Ministry of Agriculture does exist, it is
only very superficial. In practice, there are
just one or two individuals responsible for
vetting thousands of individual files (sum­
mary report, paragraph 4.7.2.1), which
would not seem consistent with the kind of
effective monitoring required under the
Community legislation. 37 Nor do I consider
that the fact, cited by the applicant, that the
producer organisations hold comprehensive
data on the number of trees, has any bearing
on the assessment made. That claim cannot
rebut what is stated in the summary report
in regard either to the exclusively 'documen­
tary' nature of the checks carried out by the
organisations, or to the checks carried out by
the Commission for purposes of comparison
using a homogenous zone or, finally, to the
failure to establish, at the time when the
application for a premium is accepted, that
the trees declared by the producer organisa­
tions actually exist. The Commission's
doubts concerning the scope and effective­
ness of supervision exercised in this way are
thus well founded.
31. Furthermore, there is serious circum­
stantial evidence which suggests that the
Commission decision is correct. The register
of olive cultivation and the computerised
files are inadequate. Under the Community
rules, the checks are to be carried out using
that register and those files. The data they
contain are used to direct supervision to
those olive growers who record, from one
marketing year to the next, either differences
in production levels that cannot be easily
37 — The reference to effectiveness is a leitmotif in the vast array
of rules on supervision. See, among others, the abovemen-
tioned Regulation No 2262/84 (second recital in the pre­
amble).
I-219
OPINION OF MR LA PERGOLA — CASE C-61/95
explained or unusual production levels. 38 If
that Virtuous circle' between the various
control mechanisms has not been established,
that is, in part at least, a direct result of the
fact that the system comprising a register and
computerised files is neither complete nor
effective. 39
32. That said, it is my view that the Com­
mission's assessment for 1991 must also be
upheld. Advocate General Fennelly has
described the attitude of the Greek authori­
ties to supervision in this sector as 'lethargic':
it is in any event inadequate. 40 Nor do the
objections raised by the Hellenic Republic
disprove the existence of the shortcomings
identified by the Commission in the system
of supervision adopted at national level.
There is consequently no reason to consider
that the Commission was unjustified in dis­
allowing 10% of the expenditure incurred by
the Greek authorities. 41
Aid for cotton production
The relevant provisions
33. The general rules governing the system
of aid for cotton production are laid down
38 — See, to that effect, the points made in the letter of 7 July
1995 sent to the Greek authorities by Director-General
Legras and concerning the procedure for 1992: 'the files
should be used to identify: producers declaring an unusual
harvest; communes in which total production is in excess of
normal yield; oil mills -which have apparently processed a
quantity that is unusual in terms of either the capacity of
their plant and machinery or previous marketing years; and
the yield for every production zone'. See, for an example of
the use of the data in the files, Article 3(2) of the abovemen-
tioned Regulation No 27/85 which provides that: 'The
work schedule shall include ... (a) a plan for the use of the
data in the computerised files'. See also Article 4(2) of the
abovementioned Regulation No 3061/84 which lays down
an order of priority for the on-the-spot checks referred to
in the second indent of Article 6(1) of Regulation No
2261/84, stating that they must, as a first priority, cover
those crop declarations where the number of olive trees per
hectare is higher than the average for the production zone
in question. Finally, for a number of points concerning the
interdependence of the different inspection methods pro­
vided for in another sector of agricultural policy, I would
refer to my own Opinion of 7 December 1995 in Case
C-41/94 Commission v Germany (points 20 and 21).
39 — A further point. Under Article 1 of the abovementioned
Regulation No 2276/79, the register of olive cultivation is
to be set up on the responsibility of the intervention agen­
cies. On closer scrutiny, therefore, the failure to comply
with the obligation to keep a register in itself implies that
the action taken by the Greek agency is inadequate.
40 — See the Opinion in Case C-50/94, cited at footnote 4 above,
point 49.
41 — I do not consider it necessary to look in detail at the issues
raised in relation to the activity of the Agricultural Bank of
Greece and the 2% levy in favour of the insurance fund.
These arguments are not essential to the Commission's
decision which is in fact more directly based on the inad­
equacy of the checks carried out in the sector. I would
make two brief points here. It does not seem to me that the
2% levy on the amount of the subsidy falls within the con­
cept of 'intervention intended to stabilise the agricultural
markets', which constitutes, under Article 1(2)(b) of Regu­
lation No 729/70, the clear practical justification for the
grant of aid by the EAGGF Guarantee Section. I therefore
consider that the practice adopted by the Greek authorities
should be deemed incompatible with the Community rules.
That is also the case because, in my view, the possibility of
withholding part of the aid should always take effect within
a Community framework. See, by way of example, Article
1 of Council Regulation (EEC) No 2159/92 of 23 July 1992
on the financing of expenditure for the establishment and
updating of the register of olive cultivation (OJ 1992 L 217,
p. 8) which permits a deduction in order to finance the
establishment of the register. See also the abovementioned
Regulation No 2261/84, as amended by Council Regulation
(EEC) No 892/88 of 29 March 1988 (OJ 1988 L 89, p. 1)
which permits the withholding of a percentage of the aid to
cover the costs of the checks carried out by the producer
organisations and associations (Article 11(1)) in accordance
with Regulation No 136/66 (Articles 20c and 20d). How­
ever, I do not consider incompatible with the Community
rules the practice whereby the Agricultural Bank of Greece
withholds the amount of the aid granted to farmers who
have died for as long as is necessary to establish succession.
In fact, it seems to me that the effect is to simplify the dis­
bursement procedure. I do, however, consider that if that
practice is to be entirely lawful within the ambit of agricul­
tural policy, it should be backed by the requirement that it
should be adequately documented and that the Commission
should be kept informed in accordance with the abovemen­
tioned Regulation No 595/91 (see, by analogy, Articles 3, 4
and 5 of that regulation).
I-220
GREECE v COMMISSION
by Regulation No 2169/81. 42 The preamble
to that regulation is concerned with supervi­
sion. 43 Article 12 of the regulation refers, for
the purposes relevant here, to the rules con­
tained in Regulation No 729/70. 44
The matters at issue
34. During the 1991/92 marketing year, the
Hellenic Republic declared that it had
recorded a cotton harvest significantly higher
than originally estimated. On 10 July 1992,
the Commission consequently asked the
Greek authorities to hold an inquiry in
accordance with Article 6 of Regulation No
595/91, and at the same time reserved the
right to carry out the inspections provided
for in Article 9 of Regulation No 729/70.
35. That inquiry — the first stage of which
was conducted by the Commission, the com­
petent Greek authority and a firm of audi­
tors — revealed a series of irregularities later
described in the summary report: Didagep —
the authority responsible for disbursing the
Community aid — had failed to carry out
checks on the aid applications submitted by
the Hellenic Cotton Board, responsible for
the administrative management and supervi­
sion of the aid; numerous delivery certifi­
cates had been falsified; the authorities had
failed to apply the necessary supervisory
measures where there was a discrepancy
between the quantities of cotton delivered
for ginning and the surface area cultivated
which might have suggested improbable pro­
ductivity levels; practically no checks had
been made on the declarations submitted by
the parties concerned as to the surface area
sown; and the methods used to calculate the
aid were imprecise.
The summary report also disclosed that the
Greek authorities had not conducted the
inquiry with which they had been entrusted
in accordance with the rules laid down: the
documentation submitted by the Greek
authorities following the first part of the
inquiry did not provide an adequate
response to either the requests for infor­
mation made by the EAGGF as early as
February 1993, or to the requirements of
Regulation No 595/91. According to the
Commission, the conduct of the Greek
authorities did not comply in all respects
with the duties of supervision imposed upon
the Member States by Article 8 of Regu­
lation No 729/70. 45
42 — Council Regulation (EEC) No 2169/81 of 27 July 1981 lay­
ing down the general rules for the system of aid for cotton
(OJ 1981 L 211, p. 2).
43 — The preamble states that 'the producer Member States
should be required to set up the control arrangements nec­
essary to ensure that the aid system operates correctly'
(eleventh recital); and that 'in order to facilitate implemen­
tation of the production aid system and its sound manage­
ment, a procedure should be provided for establishing close
cooperation between the Member States and the Commis­
sion within a Management Committee' (second recital).
44 — The twelfth recital in particular stipulates that 'in order that
the Community expenditure relating to the measure in
question may be subjected to appropriate financial and
monetary rules and procedures, Council Regulation (EEC)
No 729/70 of 21 April 1970 on the financing of the com­
mon agricultural policy ... should be applied in this sector
by analogy in view of the specifically agricultural nature of
cotton'.
45 — That provision, it should be borne in mind, requires the
Member States to adopt the measures necessary to satisfy
themselves that transactions financed by the Fund are actu­
ally carried out and are executed correctly; to prevent and
deal with irregularities; and to recover sums lost as a result
of irregularities.
I-221
OPINION OF MR LA PERGOLA — CASE C-61/95
Since the shortcomings identified were
exceptionally serious, the Commission
decided, on completion of an intensive pro­
cedure, to disallow 25% of the expenditure.
The position of the Hellenic Republic
36. The application for annulment is based
on a number of different grounds: infringe­
ment of the rights of the defence, the Com­
mission's lack of competence and improper
exercise of its discretion. In the alternative,
the applicant alleges infringement of a funda­
mental provision of Community law, refer­
ence to a condition that does not exist in law
and incorrect statement of reasons.
37. As regards the alleged infringement of
the rights of the defence, the Hellenic Repub­
lic claims that there was no mention of the
cotton sector during the bilateral meeting
between Greek Government and Commis­
sion representatives on clearance of the
accounts, which took place on 6 October
1993. The Greek authorities therefore
believed that activity in the cotton sector did
not raise any problems. Furthermore, they
remained in contact with the Commission to
keep it informed of the measures adopted to
curb irregularities and abuses committed in
relation to aid for cotton. The representatives
of the Greek authorities did not discover
that the Fund proposed to disallow 10% of
the expenditure until the meeting of the
EAGGF Committee in September 1994.
That percentage was increased to 50% by the
Director-General for Agriculture. The Com­
mission subsequently reduced it to 25%.
According to the applicant, the decisions
adopted and relevant procedures were arbi­
trary and infringed the rights of the defence.
38. Turning to the alleged lack of compe­
tence, the Greek Government claims that the
Commission does not have the authority,
under either Article 155 of the Treaty or
Regulation No 729/70, to adopt the decision
approved on 1 June 1993 laying down the
criteria for determining the percentages of
expenditure not to be recognised as charge­
able to the Community.
39. The Hellenic Republic also reproaches
the Commission for stating incorrect rea­
sons: Didagep ought to be regarded as a divi­
sion, as it were, of the paying agency;
according to the applicant, there is no ban on
distributing the product through intermedi­
aries; nor is it true that the checks were not
carried out, as claimed in the summary
report. In addition to the usual checks, very
detailed individual checks were carried out
with the participation of Community offi­
cials, and the reports on the checks were for­
warded to the EAGGF by ministerial notes
of 6 July and 14 September 1994. The Greek
authorities had also informed the Commis-
I-222
GREECE v COMMISSION
sion of the irregularities established during
the first quarter of 1993, in accordance with
Article 3 of Regulation No 595/91. 46
40. That brings us to the plea alleging
infringement of a fundamental provision of
Community law and reference to a condition
that does not exist in Uw. Here the applicant
submits that the ninth recital in the preamble
to the decision constitutes a provision
unknown in international law. That recital
states that '... the special circumstances of
these cases justify re-examination by the
Commission of the disallowance during the
present clearance in the light of the findings
and verifications currently under way; ... this
decision is nevertheless immediately appli­
cable'.
The Commission's position
41. The Commission first points out that the
flat-rate correction of 25% may be reduced
to 10% if it is established that the checks car­
ried out by the authorities in the sector have
been tightened.
42. The Commission's reconstruction of the
facts differs from that of the Hellenic Repub­
lic. It submits that, before the decision in
issue was drawn up, it drew the attention of
the Greek authorities on several occasions to
the inadequacy of supervision in the cotton
sector and, therefore, to the ensuing financial
consequences. It also stated its intention of
imposing a flat-rate correction of 25%. Fur­
thermore, both the outcome of the four
Commission inspections of 1992 — the
reports of which were forwarded to the
Greek authorities on 28 January 1993 — and
the inquiry set in motion, pursuant to Article
6 of Regulation No 595/91 and Article 9 of
Regulation No 729/70, show that the defen­
dant was aware of the problems that had
arisen in the sector. On the basis of the first
part of the inquiry, held between 26 October
and 4 December 1992, Greece had in fact
acknowledged its obligation to inform the
Commission of any irregularities detected.
However, despite repeated requests by the
EAGGF to set it in motion, the second part
of the inquiry — as the Greek authorities
have themselves acknowledged — has yet to
begin.
Substance
The plea alleging infringement of the rights
of the defence
43. In view of the abovementioned facts and,
in particular, the inquiries set in motion and
conducted in the sector during 1992 and
1993, I consider to be unfounded the appli­
cant's claim that the rights of the defence
were infringed because the existence of prob-
46 — That provision, it should be remembered, requires that dur­
ing the two months following the end of each quarter,
Member States are to communicate to the Commission a
list of irregularities which have been the subject of the pri­
mary administrative or judicial findings of fact. It goes on
to stipulate in great detail: (a) the information that such
communications should contain; (b) the obligations to sup­
ply missing information; and (c) the procedures for com­
munication if the information is confidential.
I-223
OPINION OF MR LA PERGOLA — CASE C-61/95
lems in the sector was not brought to its
attention until the EAGGF meeting of Sep­
tember 1994. It seems to me that the inspec­
tions carried out — either by the Commis­
sion itself or, at its request, by the national
authorities — are a sufficient indication that
the procedures for managing the system of
Community aid for cotton production in
Greece had, for some time, been the source
of considerable concern at Community level.
A number of factors lend weight to that con­
clusion.
In the first place, the special inquiry into the
sector was instigated specifically because of a
production surplus which had fuelled suspi­
cions of fraud. 47 Secondly, the inquiry itself
was seriously flawed. Not only did the appli­
cant fail to provide comprehensive replies to
repeated requests for information from the
EAGGF or to respond to requests for a
copy of the investigation plan, but it also
failed to provide, in accordance with Article
6(2) of Regulation No 595/91, a precise
evaluation of the financial impact of the
irregularities established; 48 finally, it did not
hold the second part of the inquiry as spe­
cifically requested by the Commission — a
fact acknowledged by the Ministry of Agri­
culture itself in a letter of 14 June 1994. 49
In the light of those circumstances, the appli­
cant is calling for a bilateral committee to be
set up. That request does not seem to me to
be justified. To acquiesce in it would mean
further complicating the procedure, and that
is not justified because the procedure laid
down already makes provision for lengthy
periods of dialogue. As I have already
explained, the exchange of letters between
the Commission and the Hellenic Republic
— and we have only to bear in mind the
request to proceed with the inquiry and
repeated requests to transmit its conclusions
— highlighted well before September 1994
the problems in the sector and also the finan­
cial consequences that would be drawn
therefrom in regard to clearance of the
accounts. Despite that, the applicant failed to
make use of the procedural means that
would have enabled it to respond to the
Commission's criticisms and demonstrate
the effectiveness of the system of supervision
adopted in Greece.
The applicant's argument fails to take into
consideration the procedures governing
clearance of the accounts and I cannot
endorse it.
47 — I would point out that under Article 6(1) of Regulation No
595/91, the Commission has to consider 'that irregularities
have taken place in one or more Member States' before it
can call for an inquiry.
48 — Article 6(2) provides that: The Member State shall, as soon
as possible, communicate to the Commission the inquiry
findings. Where an inquiry shows that there has been an
irregularity, the Member State shall inform the Commission
thereof in accordance with Articles 3, 4 and 5 ..." I would
point out that those provisions lay down specific require­
ments as to communication which must be both 'suffi­
ciently detailed to enable the Commission to decide who
shall bear the financial consequences, in accordance with
Article 8(2) of Regulation (EEC) No 729/70' (Article 5(2)),
immediately executed (Article 4) or, if appropriate, carried
out during the two months following the end of each quar­
ter (Article 3).
49 — In addition, on 18 August 1994, the competent Member of
the Commission, Mr Steichen, sent a letter to the Greek
Minister for Agriculture deploring the Greek authorities'
failure to cooperate fully with the Commission in the sector
in question. Following that letter, or so it would seem, a
joint Greece-Commission working party was set up and
met for the first time in Athens on 21 November 1994.
I - 224
GREECE v COMMISSION
The plea alleging the Commission's lack of
competence
44. Does the Commission have the authority
to adopt a measure setting out the criteria
that will guide it in its decision to disallow
expenditure incurred in financing agricul­
tural policy? That, basically, is the issue
raised by the applicant.
45. In my view, the decision in question may
be classified in the 'category' of communica­
tions: this, as we know, is a 'broad' category
encompassing acts of differing form and
content. There are three kinds of communi­
cation: interpretative communications, infor­
mation communications and communica­
tions of decisions. 50 It is the latter that I
shall be looking at in greater detail here. As
recently explained by Advocate General
Tesauro, 'decisional' communications con­
cern 'sectors in which the Commission has a
discretion'. 51 In those sectors the Commis­
sion is able to adopt acts by which it informs
those subject to its administration of the cri­
teria by which it is guided in the exercise of
its discretion. 52 This applies to agricultural
policy as well.
46. The act at issue in this case sets out the
criteria which the Commission applies when
deciding not to allow expenditure. There
seems to me to be no doubt that the Com­
mission had the authority to adopt it. In a
different case, Advocate General Fennelly
has already aptly made the point that: 'There
is no objection in principle to the Commis­
sion seeking, with greater or lesser exacti­
tude, to quantify [the actual or likely loss to
the Fund caused by a breach of Community
rules].' 53
47. I would myself add that the reasons that
justify the Commission's competence are
firmly established in the case-law of the
Court of Justice. In the final analysis, this is
a situation in which, given the difficulty of
quantifying precisely the amount of expendi­
ture to be disallowed, the Commission is
endeavouring to draw up rules that differen­
tiate according to the degree of risk posed to
the EAGGF by different levels of defective50 — I am aware that a communication may be considered
'unusual' in various respects, particularly when compared
with the communications generally taken into consideration
by academic lawyers when reviewing this category of act. It
seems to me, however, that we can identify a number of
basic elements: an administration with a decision-making
power that includes a margin of discretion; an act directed
at the person to whom it is addressed; an indication of the
criteria that should guide the exercise of that discretion. In
this case, the fact that the document is Opaque' is not, in
my view, significant. Since this is an area in which only the
Member States and the Commission are involved, it seems
to me that the approval of the decision by the representa­
tives of the Member States in the EAGGF Committee gives
that body the kind of publicity warranted by its function.
51 — See the Opinion of Advocate General Tesauro in Case
C-57/95 France v Commission [1997] ECR 1-1627, foot­
note 17.
52 — Sec, on that point, although it postdates the facts of the
case, Council Regulation (EEC) No 1287/95 of 22 May
1995, amending Regulation No 729/70 on the financing of
the common agricultural policy, which amends the text of
Article 5 of the latter regulation, providing in the fourth
indent of Article 5(2)(c) that: 'The Commission shall evalu­
ate the amounts (of expenditure disallowed) to be excluded
having regard in particular to the degree of non-compliance
found. The Commission shall take into account the nature
and gravity of the infringement and the financial loss suf­
fered by the Community' (OJ 1995 L 125, p. 1).
53 — Opinion cited above, point 41.
I - 225
OPINION OF MR LA PERGOLA — CASE C-61/95
supervision. 54 In short, this constitutes a
guarantee for the Member States. Had the
Commission not drawn up the criteria laid
down here and transmitted them to the
Member States in a decisional communi­
cation, it would have to disallow the expen­
diture in its entirety. 55 The measure in ques­
tion limits and in any event governs the
exercise by the Commission of its discretion,
on the basis of rules that are communicated
to interested parties and therefore have the
effect of creating a framework of legal cer­
tainty. Finally, as far as the present case is
concerned, we have to bear in mind the sig­
nificant factor that, within the EAGGF
Committee, the communication was well
received by all of the Member States, includ­
ing Greece.
48. Nor does the second argument put for­
ward by the applicant seem to me to be any
more convincing. In an attempt to clarify its
own reasoning in the reply, it criticised the
criteria adopted in the communication for
being too general. In fact it is the criticism
made by the applicant that is too general and
insufficiently substantiated. It merely
assumes that the criteria contained in the
document are insufficiently precise but fails
to demonstrate that they are either arbitrary
or inequitable. In my view, they are neither.
The Commission has adopted criteria that
establish, as far as possible, a correlation
between the percentage of expenditure disal­
lowed and the degree of risk posed to Com­
munity funds because of the shortcomings of
the Member States. 56 The objection raised
by Greece must therefore be deemed to be
unfounded.
The plea alleging that there are limits on the
Commission's discretion
49. According to the applicant, the decision
should be annulled because the manner of its
adoption was, basically, arbitrary. This is
apparent from the procedure by which the
amount of expenditure disallowed was deter­
mined: an initial EAGGF proposal equiva­
lent to 10% of the expenditure was actually
increased to 50% by the Director-General
for Agriculture and then, finally, set by the
Commission at 25%. 57
50. In my view, the argument of the Hellenic
Republic cannot be endorsed. The measure
54 — See, on that point, the judgment in Case C-50/94 (cited in
footnote 4 above) which confirms that the Commission is
acting lawfully when 'instead of refusing the entire expen­
diture, [it] endeavours to draw up rules to differentiate
accordine to the degree of risk posed to the EAGGF by
different levels of defective supervision' (paragraph 28).
55 — Case 347/85 United Kingdom v Commission [1988] ECR
1749, paragraph 60.
56 — See, to that effect, the conclusion reached by Advocate
General Fennelly when considering that same act in Case
C-50/94.
57 — We should bear in mind here a number of procedural
aspects: under Article 5(2)(b) of Regulation No 729/70, the
Commission clears the accounts after consulting the Fund
Committee. The procedure to which that provision
expressly refers provides that the Commission representa­
tive is to submit a draft of the measures to be adopted and
that the Committee reaches its own opinion on them. That
act is not, however, binding; the Commission may adopt
measures that are not in accordance with the opinion of the
Committee (Article 13 of the regulation).
I-226
GREECE v COMMISSION
at issue can and must be exclusively the
Commission decision disallowing 25% of
the expenditure incurred. The decision by
the Director-General for Agriculture to
increase to 50% the proportion of expendi­
ture to be disallowed that was proposed by
his services is not of itself material. It is part
of the Commission's internal decision­
making process with regard to clearance of
the accounts; it is not a final decision, and it
cannot bind the administration or be taken
into account in connection with the chal­
lenge against the main decision.
The plea alleging that the reasons stated are
incorrect
51. The applicant's complaints alleging that
the grounds for the decision were incorrect
are likewise unfounded.
52. The objections raised by the Hellenic
Republic do not have the effect of refuting
the conclusions reached by the Commission
and recorded in the summary report. The
Hellenic Republic provides no evidence of
the failure of Didagep to perform checks on
the applications for aid submitted by the
Hellenic Cotton Board. It simply refers to
the legal nature of Didagep, its responsibili­
ties and its organisation.
Nor, in my opinion, is the other argument
well founded, according to which the Greek
authorities had already communicated, ' in
accordance with Regulation No 595/91, the
information concerning the irregularities
identified by the Commission. The summary
report does not criticise the failure to com­
municate the information but the fact that it
was neither satisfactory nor adequate (para­
graph 4.7.5.1). As I have pointed out, the
rules contained in Regulation No 595/91
provide that the Member State concerned is
to supply clear and detailed information on
the basis of which the decision whether or
not to clear the accounts can be taken. That
is a mandatory requirement, and the Greek
authorities do not appear to have complied
with it in this case: the information which
they supplied was unclear and inconsistent,
and that was why the Commission decided
not to allow the expenditure. Checks were
provided for at national level, but they cer­
tainly did not meet the standards set by the
Commission.
The plea alleging infringement of a funda­
mental provision or reference to a condition
that does not exist in law
53. If the Commission declares a decision
disallowing expenditure to be immediately
applicable, can it reserve the right to review
that decision in the light of the results of
inspections under way?
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OPINION OF MR LA PERGOLA — CASE C-61/95
The applicant seeks a declaration to the effect
that a reservation of that kind, which the
Commission has entered in this case,
describing it as a 'negative reservation' in
response to the Court's questions, is unlaw­
ful. 58
54. The decision on the annual clearance of
accounts forms part of a procedure between
the Member States and the Commission that
allows ample time for dialogue at both the
verification and the decision-making stage.
As is clear from Regulation No 1287/95, 59
that feature of the decision informs the pro­
cedure for clearance of the accounts in a
number of ways. 60
55. The substance of the decision is by its
very nature 'not immutable'. It does not pre­
judge other measures which the Commission
may adopt, depending on the outcome of the
investigations under way, when it undertakes
clearance of the accounts for subsequent
years. The procedure requires the Member
States concerned to supply information and
carry out checks and accords the Commis­
sion the discretion to assess and monitor
their action. 61 The Commission takes a
decision on the basis of the information in its
possession but may reserve the right to
review that decision should further infor­
mation come to light; a decision containing a
reservation of that nature is fully justified by
the special requirements of the procedure. A
negative reservation acts as an incentive to
the administrative machinery of the State
which is being monitored, in this case
Greece, 62 and is, furthermore, standard prac­
tice, as is borne out by the annual summary
reports which the Commission produces in
this field.
56. On the basis of the foregoing, I consider
that the applicant has failed to demonstrate
that the findings on which the Commission
based its decision to disallow expenditure are
inaccurate or that the procedures applied are
unlawful. I therefore propose that the Court
reject the pleas concerning the cotton sector.
58 — It should be pointed out here that, by his letter of 17 April
1996, the Commission's Director-General for Agriculture,
Mr G. Legras, informed the Greek Government that his
services had submitted to the Commission a proposal that
the rate of correction for the expenditure under consider­
ation here should be reduced to 10% for 1991 and 1992.
Were the proposal to be accepted, the result would be a
positive financial correction of DR 10 041 185 496.
59 — See the new Article 5(2)(c) of Regulation No 729/70, as
amended by the abovementioned regulation. I would point
out that it provides for a genuine dialogue between the
Member State and the Commission on the decision to disal­
low expenditure.
60 — A number of examples of this: the annual time-limit pro­
vided for in Article 5 of Regulation No 729/70 has been
interpreted as a merely formaftime-limit. The Court of Jus­
tice has, for example, authorised a clearance of accounts
which, being designed to guarantee that the expenditure
was charged by the national authorities in compliance with
the Community rules, actually took place after expiry of
the time-limit (Case 349/85 Denmark v Commission [1988]
ECR 169, paragraph 19). Similarly, the requirement to state
reasons has been specifically defined in relation to the dif­
ferent types of procedure. The Court has thus ruled that
there does not have to be a detailed statement of reasons if
the Member State has been involved in the verification pro­
cedure (Case 347/85 United Kingdom v Commission, cited
in footnote 55 above).
61 — Furthermore, that characteristic of the decision was
expressly recognised in the abovementioned Regulation No
1287/95, which made a distinction that has the effect of
clarifying the position in many respects: '... it is accordingly
necessary to separate the procedure into two types of
decision, one concerning the clearance of the accounts of
the Guarantee Section of the Fund, the other determining
the consequences, including financial corrections, to be
drawn from the results of the checks on conformity'
(fourth recital in the preamble).
62 — That objective is clear from the content of the abovemen­
tioned letter from the Commission's Director-General for
Agriculture of 17 April 1996. It refers to improvements in
supervision in the sector concerned and increased coopera­
tion among the national authorities, including them among
the conditions that made possible a change of view to the
advantage of Greece.
I-228
GREECE v COMMISSION
The tobacco sector
The relevant provisions
57. The rules governing the tobacco sector
are set out in Regulation (EEC) No
727/70. 63
The regulation provides for two kinds of
measure: a system of norm and intervention
prices, involving the obligation to buy in on
the part of the national authorities, and the
granting of a premium to users who pur­
chase leaf tobacco directly from Community
producers.
58. Under the regulation (Article 2), each
year the Council is to fix, for the whole of
the Community, norm prices and interven
tion prices for the crop of the following cal­
endar year, along with a purchase premium
(Article 3(1)). 64 The premium is specifically
designed to enable purchasers to pay the
norm price and, consequently, to facilitate
the disposal of tobacco produced in the
Community. If, despite the grant of the pre­
mium, the tobacco is not purchased directly
from the producers, the agencies designated
by each of the Member States take over from
the producers and purchase at the interven­
tion price — subject to further conditions —
the Community-grown leaf tobacco offered
to them (Article 5).
The regulation then provides that derived
intervention prices may be fixed for baled
leaf tobacco, that is to say leaf tobacco that
has undergone first processing and market
preparation (Article 6). The intervention
agencies are required to purchase the tobacco
thus processed at the price determined by
reference to the Community rules.
Commission Regulation (EEC) No 1726/70
lays down the procedure for granting the
premium for leaf tobacco; it establishes a
system of supervision that is designed to
determine the quantities of tobacco subject
to checks and meet certain requirements to
ensure that it is uniformly applied in the
Member States. 65
63 — Council Regulation of 21 April 1970 on the common
organisation of the market in raw tobacco (OJ, English Spe­
cial Edition 1970(1), p. 206) as amended by Council Regu­
lation (EEC) No 1329/90 of 14 May 1990 (OJ 1990 L 132,
p. 25). In his Opinion of 19 May 1994 in Joined Cases
C-133/93, C-300/93 and C-362/93 Crispoltoni and Others v
Fattoria Autonoma Tabacchi and D onatab [1994] ECR
I-4867, Advocate General Jacobs considers in detail the leg­
islation in force in the sector, as amended over time. In
addition to the general aim of supporting producer
incomes, the legislation also seeks to encourage improve­
ments in quality and crop adjustments, in particular conver­
sion to varieties which are in greater demand or are more
competitive (sixth recital in the preamble).
64 — The norm price is fixed at a level that takes account of the
need to encourage the kind of specialisation that is suited to
the economic structures and natural conditions of Commu­
nity production and requires that undertakings be ratio­
nally managed and economically viable, in terms of both
quality of production and an adequate return for producers.
The intervention price is equivalent to 90% of the norm
price.
65 — Regulation of 25 August 1970 (OJ, English Special Edition
1970(11), p. 587).
I-229
OPINION OF MR LA PERGOLA — CASE C-61/95
59. In 1988, a system of supervision was also
set up for the purpose of controlling the vol­
ume of Community production. 66 Accord­
ing to the rules (Article 4(5) of Regulation
No 727/70), the Council is to fix a maximum
guaranteed quantity and, before 31 July of
the year following the year in question, the
Commission is required to establish whether
or not production has exceeded that thresh­
old. If it has, provision is made for a propor­
tional reduction in intervention prices and
premiums amounting to 1% for each per­
centage point by which the permitted quan­
tity is exceeded. 67
Regulation (EEC) No 2824/88 lays down
certain detailed rules for the application of
the system of maximum guaranteed quanti­
ties in the tobacco sector. 68 Article 3 pro­
vides that until actual production has been
determined by the Commission, not more
than 95% of the amounts fixed for the inter­
vention prices and premiums for the 1988
harvest may be paid, and not more than 85%
of the corresponding amounts for the 1989
and 1990 harvests. Article 3(2) provides that
any balance is to be paid 'after actual pro­
duction is determined'.
Commission Regulations (EEC) Nos 2046/
90, 69 2267/91, 70 2178/92 71 and 2065/93 72
determine the quantities actually produced
and the prices and premiums payable for the
1989, 1990, 1991 and 1992 harvests respec­
tively. Article 2 of each of those annual regu­
lations provides that it is to enter into force
on the third day following its publication.
The matters at issue
60. The criticisms raised in the summary
report relate to four different issues: the
establishment of irregularities in the payment
of premiums; irregularities in the lodging of
securities in relation to premiums for leaf
tobacco; the failure immediately to reduce
premiums and intervention prices where the
maximum guaranteed quantities were
66 — Council Regulation (EEC) No 1114/88 of 25 April 1988
amending Regulation (EEC) No 727/70 on the common
organisation of the market in raw tobacco (OJ 1988 L 110,
p. 35). The question of the validity of the regulation was
considered in Crispoltoni, cited in footnote 63 above. The
legislation has been further amended: Council Regulation
(EEC) No 1251/89 of 3 May 1989 (OJ 1989 L 129, p. 16)
provided that the Council was to lay down every year a
maximum guaranteed quantity for the following year's har­
vest and Council Regulation (EEC) No 1329/90 of 14 May
1990 (OJ 1990 L 132, p. 25) set the overall maximum guar­
anteed quantity at 385 000 tonnes for each of the 1988 to
1993 harvests.
67 — It is further provided (Article 13) that where the quantities
taken over by the intervention agencies exceed a stated per­
centage of production and in any case a stated quantity, the
Council may, after examining the report submitted by the
Commission, adopt those measures, to be applied to the
crop of the following calendar year, by which a better bal­
ance may be established between production and demand
and stocks may be reduced. The measures provided for that
purpose include lowering the intervention price level
(Article 13(5)). Similarly, if Community production for
which it has been decided to grant a premium exceeds a
stated percentage of the average production during the
three previous crop years, the Council may, again on the
basis of a report from the Commission, reduce the norm
prices involving a corresponding reduction in the premiums
(Article 13(6)).
68 — Commission Regulation of 13 September 1988 (OJ 1988
L 254, p. 9).
69 — Regulation of 18 July 1990 (OJ 1990 L 187, p. 23).
70 — Regulation of 29 July 1991 (OJ 1991 L 208, p. 26).
71 — Regulation of 30 July 1992 (OJ 1992 L 217, p. 75).
72 — Regulation of 27 July 1993 (OJ 1993 L 187, p. 26).
I-230
GREECE v COMMISSION
exceeded; and the use of incorrect methods
to calculate the final correspondence. 73
Irregular payment of premiums. The position
of the parties
61. The applicant claims that the decision
should be annulled because the rights of the
defence have been infringed. According to
the applicant, on 21 November 1994, the
Commission decided — by addendum No 2
to the summary report — to disallow expen­
diture on the premiums for tobacco because
of the outcome of the inspection into
tobacco exported by Greek producers to
Albania and Bulgaria, carried out in accord­
ance with Article 9 of Regulation No 729/70.
The final report of that inspection, dated 28
September 1994, was not transmitted to the
Greek authorities until 22 December 1994
and, therefore, not until the day after the
decision was adopted. The applicant was not
therefore given an opportunity to put its
case.
62. The defendant objects that the decision,
published some three months after the report
of the 'fraud inspection mission' had been
drawn up, is not based on data unfamiliar to
the applicant at the time of its adoption. Fur­
thermore, the decision forms part of a pro­
cedure that includes lengthy negotiations, in
the course of which, despite being apprised
of the Commission's concerns about the
tobacco market, the applicant failed to take
the measures which the Commission had
requested to no avail.
Substance
63. On 4 December 1992, the Commission
informed the Greek authorities that, on the
basis of information in its possession, it sus­
pected possible fraud in the sector. Subse­
quently, by letter of 20 April 1993, it asked
the Greek authorities to hold an inquiry in
accordance with Article 6 of Regulation No
595/91.
An inquiry was held at national level and
found that, essentially, the expenditure had
been properly incurred. The Commission
did not take part in the inquiry and was not
informed of its findings. Consequently, by
letter of 14 January 1994, the EAGGF
informed the Greek authorities that it
wished to take part in their inquiries. A
meeting therefore took place on 20 January
1994. After listening to what the representa­
tives of the Hellenic Republic had to say, the
73 — On that last point, the summary report revealed an error in
the conversion rate applied by the applicant to determine
the premiums. The calculations made by the Greek authori­
ties arc alleged to have inaccurately converted leaf tobacco
into baled tobacco, with the result that premiums were
granted for fictitious quantities. In the light of that mistake,
the Commission's officials asked the Greek authorities to
reconstruct the tables of calculations for verifying the final
adjustment; that information was not, however, forthcom­
ing.
I-231
OPINION OF MR LA PERGOLA — CASE C-61/95
Commission listed a number of complaints:
it had not been involved in the inquiry,
which it deemed inadequate; there had been
no coordination between the various depart­
ments responsible during the inquiry; and
the inquiry itself had lacked a proper pro­
gramme.
At the Commission's request, Community
officials then took part in missions of inspec­
tion to Greece, in which, according to the
defendant, the Greek authorities took no
active part.
64. It is therefore quite clear that the report
in issue, dated 28 September 1994, is simply
the last chapter in a turbulent affair.
As the Commission has pointed out and as is
more generally apparent from the legislative
background and case-law, supervision in the
field of agricultural policy is the result of a
dialogue between the Commission and the
Member State concerned. Let us bear in
mind the critical point in that dialogue in
this particular case. The Greek authorities
could not have been unaware of the suspi­
cion concerning the existence of irregularities
in the tobacco sector 74 but they did nothing
to allay that suspicion despite repeated
requests from the Commission. It seems to
me that, in so doing, the Greek authorities
were acting in a manner incompatible with
both the specific guidelines laid down in
Article 8 of Regulation No 729/70 and the
requirement inherent in that provision that
there should be cooperation between the
national authorities and the Commission.
65. Furthermore, it is worth emphasising
that the inspection mission's report did not
establish the existence of further deficiencies
in the tobacco sector but simply confirmed
the conclusions reached by the EAGGF in
respect of 1990. The Greek system had
already been found to be generally inad­
equate. 75 In other words, the Hellenic
Republic knew that the sector was being
monitored; it was aware of the Commis­
sion's suspicions concerning possible fraud
and its concerns about the effective and com­
prehensive nature of the inquiry carried out
at national level and it knew that the request
to provide a work schedule had met with no
response.
66. One last point. The applicant maintains
that the mission's report reached its Perma­
nent Representation on 22 December 1994;
the Commission, however, contends that the
report was available to Greece as soon as it
was published, on 28 September 1994. I do
74 — As I have already pointed out, the prerequisite for a joint
inquiry within the meaning of Article 6 of Regulation No
595/91 is that the Commission 'considers that irregularities
have taken place'.
75 — The Commission had made the following complaints at the
time (and entered a negative reservation): the tobacco had
not been subject to first processing and market preparation;
the checks had not been carried out; refunds had been paid
on tobacco that had been exported but was not baled; see
the Summary Report concerning the clearance of the
EAGGF Guarantee Section accounts for 1990, Brussels, 1
January 1993, Doc. VT/119/93 fin. (paragraph 4.9.2.1.1).
I-232
GREECE v COMMISSION
not know which is correct. However, certain
factors induce me to accept the Commis­
sion's argument. As I have already said, the
procedure provides not only for provisional
summary reports but also for the opinion of
the EAGGF Committee. It therefore seems
odd to me that during that stage — in which
representatives of the Greek authorities were
also involved, if only as members of the
Committee — no reference should have been
made to the mission's report which was
already available and on the basis of which it
was decided to confirm the assessment for
the preceding years.
Taken together, those facts constitute suffi­
cient proof that the Commission suspected
the existence of serious irregularities in the
Greek tobacco sector; all of that was well
known to the Hellenic Republic which could
not have failed to realise that deficiencies in
the system of supervision would result in the
expenditure being disallowed. Faced with
those clear warnings, Greece ought to have
taken action to state its own case and rebut
the findings of the EAGGF which were,
moreover, subject to a negative reservation.
It did not do so.
On those grounds, the plea alleging infringe­
ment of the rights of the defence cannot be
upheld
Clear error and improper exercise of discre­
tion
67. The second ground for annulment cited
by the applicant concerns the Commission's
erroneous assessment of the facts and
improper exercise of its discretion in relation
to the outcome of the inspection.
68. According to the applicant, the inspec­
tion mission's report contains a number of
errors. The findings of the inquiry in relation
to the producers' cooperative SEKE are
unfounded. Checks carried out by the tax
authorities have established that SEKE's
activity is legal and that it operates lawfully
under Greek law.
Even if we leave out of account the actual
inquiry carried out under Greek law, there
are a number of reasons for considering that
the Commission acted correctly.
SEKE was mentioned as one of the compa­
nies to be inspected during the mission.
When the representatives of the Commission
arrived, they were unable to locate the
accounts needed for the audit, which had
been destroyed — legally, according to
Greece — once the checks carried out by the
tax authorities had resulted in approval. I do
not wish to enter into the question of
whether or not the destruction of the docu­
ments is permitted under national law. The
I-233
OPINION OF MR LA PERGOLA — CASE C-61/95
fact is that for the purposes of these proceed­
ings, their destruction is incompatible with
the requirements of supervision underlying
the Community rules and the spirit of coop­
eration that should govern the process of
verification by the national authorities and
the Commission. Even if they could lawfully
be destroyed under tax law, the accounts
ought to have been preserved in order to
make it possible to ascertain whether the
subsidies had been properly granted — par­
ticularly since SEKE had already been iden­
tified as one of the companies to be
inspected; and the national authorities ought
to have kept a particularly close eye on both
the company and its files. In other words, it
is of little relevance that Greek law permitted
the destruction of the documents in ques­
tion. 76 The provisions of Regulation No
595/91 and, more generally, the whole of the
legislation in this field impose on the
national authorities a duty of active coopera­
tion with the Fund; by permitting the docu­
ments to be destroyed, Greece has clearly
failed to fulfil that duty.
69. Secondly, the applicant objects to the
checks carried out to ascertain actual capac­
ity to prepare baled tobacco. On that point,
the comments made in the mission's report
regarding heavy bale production capacity
seem to me to be justified. The Commis­
sion's services carried out on-the-spot checks
on the possibility of converting the tobacco
into 59 kg bales and established: (a) that this
was a difficult operation; (b) that the work­
force was clearly unfamiliar with it; (c) that
— and this was confirmed by experts — the
machines used could not cope with that
workload as they were set up to produce
bales weighing between 20 kg and 30 kg.
Calculations based on those production fig­
ures may not reflect the true state of affairs,
and the Commission's suspicions concerning
the alleged irregularities do not appear to me
to be unjustified.
70. As regards the claims made by the appli­
cant concerning the quality of AGREX
tobacco, SEKE's production capacities, the
sales of unprocessed tobacco to Italy, the
inexplicable differences in price between the
tobacco supplied to Didagep and that sup­
plied to Bulgaria, and the methods of pay­
ment and market preparation applied to the
latter, I do not consider that it has provided
the proof needed to overturn the findings of
the inspection mission's report.
71. The Hellenic Republic has failed to
establish whether the tobacco purchased by
AGREX was already processed, as it main­
tains, or unprocessed, as the Commission
claims; it has not established that the infor­
mation supplied by SEKE's director-general
concerning labour costs in the Soluveko pro­
cessing facility, which led the Commission to
consider the company's accounts to be76 — Observations of the applicant, p. 27.
I - 234
GREECE v COMMISSION
improbable, was incorrect; nor has it estab­
lished that the Commission's reconstruction
of the commercial relationships between
SEKE and the Italian companies STP and
Boselli Caito was inaccurate and that those
two companies purchased unprocessed
tobacco from SEKE; again, as regards the
differences in price between the various con­
signments, although explanations were given,
they were not backed by documentary evi­
dence. Nor has the applicant been able to
justify the differences ascertained in the
weight of the baled tobacco intended for
domestic consumption and that bound for
export. Finally, the Hellenic Republic has
not even demonstrated the inaccuracy of the
allegations in the report concerning both the
muddled and unreliable nature of the docu­
ments confirming payments and the failure
of SEKE to cooperate during the inquiry.
72. The same applies to the data furnished
by the applicant concerning the Michailidis
and Gleoudis Kavex companies. Once again,
the Commission's findings are cogent and
clearly expressed: the competent authorities
failed to carry out checks; the registers had
been falsified; the sales invoices were incon­
sistent; no data was provided to make it pos­
sible to verify product processing rates; and
the accounts had not been properly kept.
73. The applicant counters these points with
arguments that are irrelevant and, in any
event, unconvincing. It claims that the regis­
ters were properly kept and tallied with the
stock books, whereas the Commission notes
that the registers had been drawn up 'to
order' and that the remaining documentation
was muddled or had been tampered with.
Furthermore, in regard to the complaint con­
cerning false customs declarations, the appli­
cant simply cites legislation in abstracto but
provides no tangible evidence of whether
and how it was applied in this case, and does
not specifically rule out the existence of dis­
parities, attributable to fraud, between the
value of the goods declared and the value of
the goods actually exported.
In other respects, the applicant's defence
even sounds like a tacit admission that the
system of supervision was inefficient. The
reference to the books and records of the
Gleoudis Kavex company are one example of
this: the applicant states that certain docu­
ments were seized by the authorities on 11
November 1992 but have yet to be inspected.
74. The inspection mission's report brought
clearly to light the national authorities'
general lack of interest in the problem of
supervision. The inspectors called on the
companies ' to be able to say that they had
been in' but knew nothing about what actu­
ally went on inside those companies.
According to the mission's report (paragraph
7.2.1.3), this was in fact acknowledged by the
Greek authorities.
I-235
OPINION OF MR LA PERGOLA — CASE C-61/95
The Fund's decision clearly takes into
account the general pattern of ineffective and
inadequate checks of which the individual
instances criticised by the Commission form
part.
This seems to me to be the critical factor jus­
tifying the conclusion that the action taken
by the Greek authorities was inadequate.
Given the widespread lack of diligence com­
plained of by the Commission, it is under­
standable that the latter should have applied
criteria based on circumstantial evidence in
deciding to disallow expenditure specifically
in the light of Communication No 216/93: it
seems to me, therefore, that the conclusions
reached by the Commission can be endorsed.
75. Furthermore, the applicant goes through
the pretence of rebutting the comments of
the EAGGF in detail, on the basis of very
specific data, but without providing any evi­
dence. This leads me to make two points.
Firstly, these objections, the detailed expla­
nations of how the Greek legislation oper­
ates and the 'willingness' to accept supervi­
sion that appears to be conveyed by the
statement of defence ought to have perme­
ated the whole of the procedure. That, as we
know, was not the case. The Commission
repeatedly asked for investigation plans,
information, checks and cooperation, with­
out obtaining any response. Moreover, dur­
ing the inspections, that had long been in
preparation and took place, as I have said,
against a background of overt concern about
the proper functioning of the sector, the
Commission's services found that the —
basically passive — attitude of the Greek
officials was certainly not consonant with the
principles of sound management that should
inform the activity of the national authorities
in their relations with the Commission.
Hence, and this is my second point, I do not
see how that perception of supervision at
national level can overturn the results of the
objective checks carried out by the Commis­
sion. The Commission's decisions are based
on inspections, the information received
from the national authorities, an overall
assessment of their organisation and activi­
ties and, indeed, the practices they actually
apply.
Bearing in mind the lack of cooperation
from the Greek authorities, the review thus
carried out led to the conclusions set out in
the inspection mission's report and recorded
in the summary report, which the applicant
has not successfully rebutted.
The plea alleging unjust enrichment on the
part of the Commission
76. The applicant seeks the annulment of the
decision, alleging unjust enrichment on the
part of the Commission in three respects.
I-236
GREECE v COMMISSION
77. In the first place, by letter of 12 Decem­
ber 1994, the Greek authorities claim to have
informed the EAGGF that they had with­
held the sum in issue, by way of set-off, at
the expense of the processors, and to have, at
the same time, informed the Court of Audi­
tors of this. Despite that, according to the
applicant, the equivalent amount was disal­
lowed, which resulted in the Commission's
unjust enrichment; on the one hand, sums
were credited to the Commission as a result
of the set-off, but on the other, the Commis­
sion disallowed an equivalent amount of the
expenditure incurred. Basically, the Commis­
sion has doubled its receipts on one and the
same transaction.
The Commission refrains from commenting
on that point.
78. Secondly, the applicant asks, in regard
also to the reductions in premiums and inter­
vention prices where the maximum guaran­
teed quantity has been exceeded, that the
decision should be annulled on the ground
that the principle of unjust enrichment has
been infringed. It claims that the Fund was
informed, through the abovementioned let­
ter, of the fact that all the sums relating to
the overrun of the maximum guaranteed
quantities for the 1989 and 1990 harvests had
been recovered by the Greek authorities,
either directly or by set-off. Consequently,
the Commission's refusal to allow the expen­
diture was unjustified.
79. The applicant complains that the prin­
ciple of unjust enrichment has been infringed
because of an error in the conversion rate
used to calculate the final adjustment. In
September 1994, the Greek authorities
assured the Fund that they had calculated the
final adjustment in accordance with the
guidelines laid down by the EAGGF itself,
which, as is clear from the abovementioned
letter of 12 December 1994, was indeed the
case. That calculation produced a correction
(DR 80 379 053) substantially lower than the
figure given by the Commission in its
decision because the EAGGF had already
been credited with the remainder.
Substance
80. In my view, these three arguments have
to be appraised together. As we have seen, all
three refer to the letter of 12 December 1994
which, it is alleged, provided the Commis­
sion with all the information it had requested
or at least the information deemed necessary
for proper clearance of the accounts.
81. As I said in my general introduction, the
procedure for clearance of the accounts pro­
vides for a time-limit with which the Mem­
ber States must comply when submitting the
information required for the adoption of the
decision. For the 1991 marketing year, that
time-limit was set at 31 January 1994. It
seems to me that, in accordance with the
I-237
OPINION OF MR LA PERGOLA — CASE C-61/95
case-law of the Court of Justice, the infor­
mation provided by the Hellenic Republic
cannot therefore be taken into consideration
for clearance of the accounts for the current
year. In the proceedings before the Court,
the applicant did not adduce the existence of
exceptional circumstances justifying the
delay recorded. 77 The information submit­
ted should in fact be assessed during the sub­
sequent clearance of accounts and, if appro­
priate, result in a correction in the accounts
for 1992.
82. That of itself is sufficient reason to con­
clude that all three arguments, based on the
information provided in December 1994,
should be rejected. I propose, however, to
consider each of the applicant's submissions
in greater detail below.
The securities
83. To deal with the question of securities,
we must take a step back in time. The 1988
summary report (paragraph 4.9.2.8)
explained the reasons underlying the
decision to disallow the expenditure at issue
here. Article 7(2) of Regulation No 1726/70
provided that as soon as the tobacco came
under supervision, the total amount of the
premium could be advanced on condition
that a deposit equal to 20% of the amount
was lodged or that an amount equal to 80%
of the total could be advanced. 78 However,
the file referred to in Article 3(1) of Regu­
lation No 727/70 was not to be closed until
proof had been provided that the tobacco
covered by the premium had been incorpo­
rated into manufactured products or
exported to third countries.
84. In the course of the inquiry relating to
that year, the Commission established that
the Greek authorities were holding in abey­
ance a number of securities relating to har­
vests for the period 1981 to 1989 and had not
produced the documents that proved the
premium had been lawfully granted, by cer­
tifying that the tobacco had been 'incorpo­
rated' into the products concerned. The
Commission therefore asked the Greek
authorities to provide those missing docu­
ments in respect of the advances paid
between 1981 and 1985, reserving the right
to take a decision on the financial conse­
quences once it had considered them. As
stated in the 1989 summary report (para­
graph 5.10), the Commission received the
documents in question on 27 June 1991. The
deficiencies they revealed were such as to
cause the Commission to take a decision —
that was not challenged — to disallow
expenditure in the amount of DR
370 057 029. It was further stipulated that a
final use should be found for the tobacco
77 — Case C-54/91 Germany v Commission [1993] ECR I-3399,
paragraphs 13 and 15; Case C-41/94 Germany v Commis­
sion [1996] ECR I-4733, paragraph 23.
78 — The reason for that provision was the need to alleviate the
economic effects of the time required for first processing
and market preparation (see the ninth recital in the pre­
amble). Because of the particular situation prevailing on the
Greek market, the Commission introduced a derogation for
Greece. While, generally speaking, a purchaser may ask for
advance payment of the amount of the premium only if he
meets the conditions of having concluded a cultivation con­
tract or signed a crop declaration, those requirements do
not have to be met in Greece. Sec Commission Regulation
(EEC) No 1186/83 of 18 May 1983 (OJ 1983 L 129, p. 23)
and Commission Regulation (EEC) No 1791/86 of 10 June
1986 (OJ 1986 L 156, p. 16).
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GREECE v COMMISSION
from the 1981 and 1986 harvests, which had
remained in storage after processing, as soon
as possible, and in any event by 31 Decem­
ber 1992 at the latest — the date on which all
the files on the lodging of securities were to
be closed. The correction in issue, concern­
ing the above documentation, therefore
marks the conclusion of an inquiry into the
securities for the period from 1981 to 1985
which, as I have said, resulted in a substan­
tially greater amount of expenditure being
disallowed for 1989.
85. The Commission has established that,
with reference to paragraph 5.10 of the 1989
summary report, a given quantity of tobacco
had not been exported by the 31 December
1992 deadline. Consequently, the premiums
granted could not be deemed lawful. The
Hellenic Republic did not respond to that
finding until its abovementioned letter of 12
December 1994 in which it asked the Com­
mission to reduce overall by DR 372 762 124
the expenditure disallowed for both 1989
and 1991, citing the set-off that had been
effected.
86. I do not consider that the content of the
letter of 12 December 1994 can constitute a
lawful ground for annulling the decision, not
just because the letter came too late but also
because of its substance. The letter does not
comment on the merits of the Commission's
complaints; it merely refers to a set-off but
does not provide evidence of this, supplying
only general information on the point. It
seems quite clear to me that this defence is
not sufficiënt, even in terms of its substance,
to refute the conclusions reached by the
Commission on the basis of checks carried
out over a period of three years which fea­
tured a constant exchange of information
with the applicant and revealed deficiencies
in the management of the system of securi­
ties and advances provided for in Regulation
No 1726/70.
Overrun of the maximum guaranteed quan­
tities
87. The question of the overrun of the maxi­
mum guaranteed quantities also requires a
look at the earlier summary reports.
88. The Greek authorities take the view that
it is possible to recover premiums granted in
excess of the amounts provided for after the
correction procedure, at the point at which
the individual files are closed.
According to the Commission, however, the
refund must be immediate. It contends that
the rules governing the system, which
entered into force as of the 1989 harvest,
clearly require the immediate recovery of
premiums unduly paid. The Greek authori­
ties failed to meet that requirement since
they did not begin the procedure for recov­
ery until two or three years after the above-
mentioned rules had entered into force. The
I-239
OPINION OF MR LA PERGOLA — CASE C-61/95
Commission took up that point in response
to the question put by the Court in its letter
of 22 October 1996. In particular, citing the
aim of the regulation, it reiterated the inter­
pretation according to which 'if the maxi­
mum guaranteed quantities are exceeded, the
penalty on producers should be imposed
immediately'. 79 The Commission also stated
that 'the delay in recovery, after two or three
years, does not make it possible to pursue
the objective of the regulation, particularly
since the Greek authorities collected the fine
on the basis of the set-off effected between
the two harvests, without taking account of
the benefit obtained as a result of the devalu­
ation of the drachma against the ecu'.
89. In my opinion, the system established by
the regulation is more consistent with the
interpretation put forward by the Commis­
sion than with that advanced by the appli­
cant. It is more in keeping with the provi­
sions of the regulation to consider that the
national authorities' duty of recovery is trig­
gered as soon as it is established that the per­
mitted quantity has been exceeded.
90. That follows, firstly, from the provisions
of Regulation No 2824/88 under which the
intervention prices and premium are paid at
the rate of 95% of the relevant amount for
the 1988 harvest and 85% for the 1989 and
1990 harvests. That limitation shows that the
Community legislature sought from the out­
set to avoid the need for refunds and instead
deemed it preferable to anticipate at once the
probable results of the verification for the
years in question. Furthermore, Article 3(2)
of that regulation provides, in regard to the
1989 and 1990 harvests, that any balance in
respect of the percentage of the premium
granted is to be paid 'after actual production
is determined'. That provision is inspired, as
I see it, by the need to stabilise the situation
of farmers immediately. 80 In other words,
the Community, and the very system of
securities as a whole attests to this, has a spe­
cific interest in ensuring not only that the
premium is granted in the amount actually
due to the person concerned but also that it
is granted rapidly.
Moreover, the refund has to be immediate
because of the other principles underlying
the legislation as well. Immediate action is a
response to the problem of fraud. If sums
unduly paid are left in the hands of recipi­
ents, the risk of irregularities is actually
greater. Furthermore, if the Member States
are allowed to keep funds long after the
amount actually payable has been deter-
79 — See the Commission's letter of 4 November 1996 [JUR
(96)09545] in response to the letter from the Court of Jus­
tice of 22 October 1996 containing questions of interpreta­
tion.
80 — See also the third recital in the preamble which states: 'how­
ever, the norm and intervention prices may be adjusted by
the application of the provisions on the maximum guaran­
teed quantities; in that case, the purchasing price must be
adjusted'. Consequently, it does not seem possible to iden­
tify in the legislation a clear link, even relating to the times­
cale, between the Commission decision and regularisation
of the premiums (but also of the securities that arc released
or forfeited depending on the outcome of the verification
carried out by the Commission).
I-240
GREECE v COMMISSION
mined, the effect may be to distort the con­
ditions of competition among economic
operators.
Aside from that, the provision under consid­
eration has to be construed in the light of the
criterion of sound management, in the sense
that it should help to simplify the adminis­
trative process. 81
In conclusion, where Article 3(2) of Regu­
lation No 2824/88 provides that 'any balance
shall be paid ... after actual production is
determined', this has to be construed as
meaning that any balance must be paid as
soon as the Commission has taken its annual
decision.
The approach I am suggesting is, in my view,
warranted by the intention clearly evinced
by the Community legislature to ensure that
effective action is taken forthwith in keeping
with 'economic legitimacy', that is to say in
keeping with the effectiveness of the legisla­
tion rather than the objective pursued when
it comes to the recovery of premiums paid
for surplus quantities. I therefore endorse the
Commission's findings.
Calculation of the final correspondence
91. I also concur with the Commission's
argument in regard to the calculation of the
final adjustment. According to the Commis­
sion, the amount that appears in its decision
was correctly determined. To make matters
quite clear, it should be noted that the Com­
mission informed Greece of the system it
ought to have adopted with reference to the
final adjustment. Although the Commission
repeatedly raised the problem of bringing the
tables of expenditure into line with Commu­
nity standards in a number of letters, the
Greek authorities simply failed to take the
necessary measures. They persisted in using
their own method and did not calculate the
final adjustment in accordance with the cri­
teria required by the Commission. In point
of fact, it was not until its letters of 12
December 1994 that Greece declared it had
complied with those criteria — too late
therefore for this to be taken into account
for the 1991 financial year.
Hence not only was the applicant out of
time in stating its position but, given the
repeated requests of the Commission, it
demonstrated an unwillingness to cooperate
which, here again, is incompatible with the
principles underlying the legislation: the
decision on clearance of the accounts for
1991 is therefore justified in terms of the
above considerations as well.
81 — Sec, to that effect, the clear guidance contained in the
abovementioned Regulation No 1287/95 (fourth and fifth
recitals in the preamble).
I - 241
OPINION OF MR LA PERGOLA — CASE C-61/95
Conclusion
On the basis of the foregoing, I propose that the Court of Justice reject the applica­
tion by the Hellenic Republic for the annulment of the decision at issue. I therefore
conclude that Commission Decision 94/871/EC of 21 December 1994 on the clear­
ance of the accounts presented by the Member States in respect of the expenditure
for 1991 of the European Agricultural Guidance and Guarantee Fund (EAGGF)
Guarantee Section should be upheld in so far as it applies to the Hellenic Republic
and that costs should be awarded against the applicant.
I-242