Judgment — ECLI:EU:C:1999:191
Date: 1999-04-22
Language of the case: Dutch
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
Concepts: Procedure for clearance of accounts;General
Procedure: Action for annulment - unfounded
Origin: Netherlands

summary 
report. 8 According to that report, the Neth­
erlands authorities had never introduced a 
system of controls whereby the cream used in 
the manufacture of butter sold into interven­
tion. Analysis of the documents available 
showed that the butter brought between 1982 
and 1987 had been made either by the N I Z O 
or by the equally unauthorised half-and-half 
process. 
9. Although the Kingdom of the Netherlands 
had been aware of the fact that there were 
shortcomings in its system of controls since 
1977, it was not until early 1987 according to 
the Commission that they investigated the 
process used. The fact that in 1987 the AID 
rejected butter which had actually been 
accepted for intervention by the C O Z shows 
that the C O Z checked the process. 
10. It is also stated in the summary report 
that the Netherlands authorities had been 
aware since 1982 that there had been attempts 
to sell butter made from sweet cream into 
intervention. In reviewing the authorisations 
5 — Voedselvoorzienings in- en verkoopbureau. 
6 — Centraal Orgaan Zuivelcontrole. 
7 — Algemene Inspectiedienst van het Ministerie van Landbouw, 
Natuurbeheer en Visserij. 8 — Doc. VI/119/93-FR final. 
I-1977 
OPINION OF MR ALBER — CASE C-28/94 
of the undertakings in 1987, the AID found 
that the dairies had been selling unauthorised 
butter into intervention since 1982 at least. 
The Netherlands authorities should have 
informed the appropriate departments of the 
Commission accordingly. 
11. In view of the seriousness of the short­
comings, the decision was taken to reduce by 
10% all expenditure declared for 1987 in 
respect of butter bought into intervention 
since 28 February 1985. As a result, the Com­
mission disallowed expenditure in the sum of 
N L G 82 656 019. 
12. The Kingdom of the Netherlands main­
tains, to the contrary, that, in particular by 
introducing additional controls, it had done 
everything that can be required of a Member 
State in that regard. Since those controls had 
prevented irregularities, it was not under any 
obligation to inform the Commission. 
13. Accordingly in 1994, the Kingdom of the 
Netherlands brought an action before the 
Court of Justice, claiming that the Court 
should: 
— annul Commission Decision N o 
93/659/EEC of 25 November 1993 on the 
clearance of the accounts presented by the 
Member States in respect of the expendi­
ture for 1990 of the European Agricul­
tural Guidance and Guarantee Fund 
(EAGGF), Guarantee Section (OJ 1993 
L 301, p. 13), in so far as it refuses clear­
ance to a sum of N L G 82 656 019, repre­
senting expenditure in respect of butter 
bought into intervention; 
— order the Commission to pay the costs. 
14. The Commission contends that the Court 
should: 
— dismiss the action as unfounded, 
— order the applicant to pay the costs. 
B — Pleas in law and arguments 
15. The Kingdom of the Netherlands puts 
forward several pleas in law. First, it claims 
that the Commission misapplied Article 8(2) 
of Regulation (EEC) N o 729/70 on the 
I - 1978 
NETHERLANDS ν COMMISSION 
financing of the common agricultural policy. 9 
Under that provision the Community is not 
to bear the financial consequences of irregu­
larities or negligence attributable to adminis­
trative authorities of the Member States. 
16. However, the applicant submits that it 
cannot be held responsible for any irregulari­
ties or negligence. It did everything — in 
other words it carried out all the checks which 
can reasonably be expected of a Member 
State. Accordingly, the applicant considers 
that it has fulfilled all the requirements under 
Article 8(1) of Regulation N o 729/70, which 
provides: 
'The Member States in accordance with 
national provisions laid down by law, regula­
tion or administrative action shall take the 
measures necessary to: 
— satisfy themselves that transactions 
financed by the Fund are actually carried 
out and are executed correctly; 
— prevent and deal with irregularities; 
...' 
17. The Kingdom of the Netherlands main­
tains that it complied with all requirements 
prescribed by the Community rules for the 
checks to be carried out. However, there are 
gaps in those rules making it impossible effec­
tively to prevent the sale into intervention of 
N I Z O butter. Thus, for example, Article 2(1) 
of Regulation N o 685/69 requires samples to 
be taken only from the final product. How­
ever, the process by which the butter was 
made can no longer be determined from the 
final product, the butter itself. 
18. The Commission points out in that respect 
that the checks prescribed by the Community 
were laid down at a time when the N I Z O 
process was still unknown. In its submission, 
however, the checks prescribed, which also 
apply to the process of the manufacture of 
the butter, make it perfectly possible for the 
Member States to ascertain which production 
process was used for the manufacture. Thus 
the plant used in the traditional manufac­
turing process differs from that used in the 
N I Z O process. The N I Z O plant needs an 
opening through which the permeate can be 
added at a later stage, as well as a special 
sweet-cream reservoir. There is no need for 
such a reservoir in the traditional manufac­
turing process since the cream employed is 
quite different on account of its properties. 
Therefore, the process by which the butter 
was made can be established by an on-the-
spot inspection at the dairy. 
19. The applicant disputes that claim, arguing 
that such equipment can be readily converted 
from one production process to the other. 
Consequently, inspections cannot establish if 
9 — Regulation (EEC) No 729/70 of the Council of 21 April 1970 
on the financing of the common agricultural policy (OJ, 
English Special Edition 1970 (I), p. 218). 
I-1979 
OPINION OF MR ALBER — CASE C-28/94 
processes other than that in application at the 
time of inspection were used previously. 
20. The Commission disputes this. It refers 
here to the minutes relating to the inspection 
carried out by the AID which have been pro­
duced by the applicant. The minutes show 
that in meetings with the dairy managers, the 
latter had maintained that N I Z O production 
plant could no longer be used for the tradi­
tional manufacturing process. 
21. The Commission claims that the second 
means of checking is to analyse the cream and 
butterfat on the spot. The Commission is 
referring here to the fact that the N I Z O pro­
cess uses sweet cream as a primary product, 
obtaining sweet butterfat in the course of 
production, whereas the traditional process 
uses sour cream from the very outset, with 
the result that the buttermilk produced is also 
sour. The Commission maintains that that can 
be checked simply by tasting the cream or by 
analysing the buttermilk at the dairy. 
22. The applicant considers that that is also 
simply a spot-check method which can only 
be effective if the checking is carried out 
regularly. The Commission does not deny 
this. 
23. Lastly, the Commission maintains that 
the third possibility is to examine the books 
of the dairies. The Commission mentions a 
number of points which could shed light on 
the production process applied. For example, 
the sweet buttermilk produced by the N I Z O 
process is far more readily marketable than 
sour buttermilk. The Kingdom of the Neth­
erlands disagrees, pointing out that even sour 
buttermilk can be used as a primary product 
— for example in making cheese — and is, 
therefore, marketable. 
24. The Commission bases its position in this 
matter on a report submitted to it by the 
applicant itself. In that report it is said that it 
was above all the difficulties in marketing sour 
buttermilk that prompted the development of 
a new process which did not yield that product. 
25. As a further point the Commission men­
tions examination of the production plans and 
costs. The NIZO process makes it possible 
for production to continue without interrup­
tion with the result that there are savings in 
costs. That can be established by examining 
the books. Finally, the production process can 
also be deduced from the quantity of N I Z O 
permeate used. The applicant disputes this. It 
argues that, firstly, the savings in costs are not 
great. Secondly, the production process cannot 
be determined with accuracy from the per­
meate quantities since the same permeate is 
also used in making products intended for 
intervention. 
I -1980 
NETHERLANDS ν COMMISSION 
26. As regards the comprehensiveness of the 
checks and controls prescribed by Commu­
nity law, the applicant maintains that the 
Member States cannot be held responsible for 
the shortcomings in the Community system 
of controls. It is for the Commission to bring 
its rules into line with current technology. 
The Commission was particularly negligent 
in this respect because the applicant had drawn 
its attention on a number of occasions to the 
fact that there could be difficulties as a result 
of the introduction of the N I Z O process. 
Since it could no longer be determined from 
the final product whether that product had 
been made from sweet or sour cream, the 
applicant had repeatedly requested that the 
rules be brought into line with the new 
circumstances. 
27. The applicant also argues that, by intro­
ducing additional measures extending its 
system of controls, it had complied with its 
obligations under Article 8(1) of Regulation 
N o 729/70. It had thus done everything that 
could reasonably be expected of it. 
C — Analysis 
28. It now falls to be considered whether it 
is possible to ensure with reasonable certainty 
— if necessary, through a combination of the 
checking methods mentioned by the Com­
mission — that butter made from sweet cream 
is not sold into intervention. 
29. The pleadings of the parties show that 
they are at least agreed that there are some 
easily detectable differences in the equipment 
used in the two processes and that these can 
be modified, albeit at some cost. It follows 
that frequent and unannounced inspections 
might very well shed light on the production 
method used by the undertaking. 
30. With regard to the examination of the 
books, it is quite possible, having regard to 
the report, which states that the N I Z O pro­
cess was developed because of the difficulties 
in marketing sour buttermilk, that the butter­
milk sales figures — and perhaps also the 
names of the buyers — could serve to indi­
cate whether the buttermilk in question was 
sweet or sour. 
31. Whilst it is debatable whether permeate 
quantities shed sufficient light on the produc­
tion process, I must agree with the Commis­
sion that a combination of the controls it has 
proposed constitutes a reliable means of veri­
fying the production methods employed. It is 
therefore not possible to agree with the appli­
cant's assertion that even on the basis of the 
Commission's proposals it is impossible to 
determine by which process the intervention 
I-1981 
OPINION OF MR ALBER — CASE C-28/94 
butter was produced, particularly since the 
applicant itself maintains it had done every­
thing necessary to prevent the sale of N I Z O 
butter into intervention. It follows that even 
the applicant must consider that there must 
be some means of checking. 
32. N o r can I support the applicant in its 
attempt to transfer the responsibility for those 
checks to the Commission. It is settled 
case-law that the national administrative 
authorities are responsible for ensuring that 
the Community rules are strictly observed.1 0 
The scope of that responsibility in the con­
text of EAGGF financing was determined by 
the Court in its judgment in Exportslachter-
ijen van Oordegem. In that judgment, the 
Court stated with regard to Article 8(1) of 
Regulation N o 729/70: 
'That provision, which expressly lays down 
in that specific area the obligations imposed 
on Member States by Article 5 of the Treaty 
defines, the Court has said, the principles 
according to which the Community and the 
Member States must ensure the implementa­
tion of Community decisions on agricultural 
intervention financed by the Fund and 
combat fraud and irregularities in relation 
to those operations (BayWa, cited above, 
paragraph 13). 
That article thus imposes on the Member 
States the general obligation to take the mea­
sures necessary to satisfy themselves that the 
transactions financed by the Fund are actu­
ally carried out and are executed correctly, 
even if the specific Community act does not 
expressly provide for the adoption of par­
ticular supervisory measures (Case C-8/88 
Germany ν Commission [1990] ECR 1-2321, 
paragraphs 16 and 17).' 11 
33. It follows that the Member States have a 
general obligation to exercise adequate super­
vision even if the relevant rules do not 
expressly provide for this in a given situation. 
34. Particularly in cases like this, where the 
introduction of a new production process 
creates a new situation so far as controls are 
concerned, it is for the Member States to adapt 
their systems of control to that situation. As 
the Commission correctly points out, that is 
particularly true in this case, since it was the 
Member State itself which created that situa­
tion by authorising the N I Z O process. 
35. It must now be determined whether the 
additional checks carried out by the applicant 
were indeed sufficiënt. Before examining this 
10 — Case C-48/91 Netherlands ν Commisńon [1993] ECR I-5611, 
at paragraph 11; Case C-366/88 France ν Commission [1990] 
ECR 1-3571, at paragraph 20; Case C-8/88 Germany ν 
Commission [1990] ECR I-2321, at paragraph 17; and Joined 
Cases 146/81, 192/81 and 193/81 BayWa [1982] ECR 1503, 
at paragraph 26. 
11 — Case C-2/93 van Oordegem ν BDBL [1994] ECR I-2283, at 
paragraphs 17 and 18. 
I-1982 
NETHERLANDS ν COMMISSION 
point in detail, it is first necessary to explain 
in general terms how the Court has allocated 
the burden of proof in a case such as this. 
The Commission maintains that it is for the 
Member States to carry out the necessary 
checks. For that reason, the Commission 
cannot, it submits, substitute itself for the 
national inspectors and evaluate the checks 
carried out by the Member State in question. 
The Commission has merely to ascertain that 
those measures are adequate for the purpose 
of preventing irregularities. If it were to prove 
that that these were justified doubts, it could 
then take appropriate action at the financial 
level. It would then be for the Member State 
to show that the conditions for the expendi­
ture to be allowed by the Commission were 
fulfilled. The Commission makes reference 
here to the judgment in Case C-48/91. 1 2 
36. The applicant also cites that judgment 
but arrived at a different conclusion. The 
applicant submits that the Commission has 
not adduced the necessary proof since not the 
slightest evidence of justified doubt has been 
put forward. According to the case-law of the 
Court of Justice, it is for the Commission to 
show, in the event of dispute, that there has 
been a breach of the Community rules. In 
this case, however, the Commission has not 
even shown that there was a justified doubt 
but has merely asserted categorically that the 
supervisory measures taken by the Nether­
lands were inadequate. 
37. The parties are correct in referring here 
to Case C-48/91. In that judgment, the Court 
stated that: 1 3 'The Commission is required 
not to demonstrate exhaustively that there are 
irregularities in the data submitted by the 
Member States but to adduce evidence of 
serious and reasonable doubt on its part 
regarding the figures submitted by the national 
authorities. The reason for this mitigation of 
the burden of proof on the Commission is 
that ... it is the State which is best placed to 
collect and verify the data required for the 
clearance of EAGGF accounts; consequently, 
it is for the State to adduce the most detailed 
and comprehensive evidence that its figures 
are accurate and, if appropriate, that the Com­
mission's calculations are incorrect'. 1 4 
38. As can be inferred from the parties' sub­
missions, it is not in dispute that the Com­
mission has at first only to make out a plau­
sible case that there are justified doubts. 
Whether or not the Commission has done so 
in this case is, however, in dispute. It must 
now be examined, in this respect, whether the 
additional supervisory measures which the 
applicant claims to have introduced were suf­
ficient to dispel such doubts (or indeed to 
prevent them from arising at all). 
12 — Cited in footnote 10. 
13 — See the judgment in Case C-48/91 (cited in footnote 10), at 
paragraph 17. 
14 — Accordingly, in its resolution of 13 April 1989 on preventing 
and combating fraud against the European Community 
budget in a post-1992 Europe, the European Parliament 
states that 'the Council has sail hitherto failed to invest the 
Commission with adequate monitoring powers to enable it 
to keep track of how Community revenue and expenditure 
are managed in the Member States ...' (OJ 1989 C 120, 
p. 279, point 7). 
I -1983 
OPINION OF MR ALBER — CASE C-28/94 
39. The applicant points out first of all that 
it defined the terms 'cream' and 'sour' — 
which are not defined under the Community 
rules — and that in November 1986 it had 
banned the N I Z O permeate. In response the 
Commission rightly states that those were no 
more than basic rules which the applicant 
should have issued when it approved the 
N I Z O process. 
40. However, those conditions, too, call for 
verification of compliance and the mere fact 
that they exist cannot, therefore, be adduced 
as evidence of effective supervision. 
41. Secondly, the applicant refers to the 
inspections carried out by the AID. When 
the AID checked the authorisations of the 
undertakings, it also checked, according to 
the applicant, whether there was a production 
plant to make butter from sour cream. 
According to the Commission, that does not 
amount to an effective check either, since no 
checks of the kind were carried out between 
1982 and 1987. The Commission refers here 
to Minister Brake's replies to written ques­
tions of the Netherlands parliament following 
the Dankert report. Asked whether the AID 
had carried out any checks between 1982 and 
1987, the Minister replied in the negative. The 
authorisations were only checked at the VIB's 
request. The VIB only made such requests in 
the case of new authorisations or when the 
VIB's requirements were modified, as was the 
case in 1982 and 1986. 
42. The applicant disputes this. In addition to 
checking the authorisations of the dairies, the 
AID also supervised the COZ. The applicant 
submits, moreover, that it is not permissible 
for the Commission to rely here on third-
party statements in adducing the evidence 
required of it. Furthermore, the Commis­
sion's questions were taken out of context 
and its own conclusions were attached to 
them. 
43. The Commission points out in response 
that the documents in question are official 
government documents which the authorities 
had forwarded to the Commission and which 
were also placed on the file. Moreover, those 
documents are not intended to serve as evi­
dence but as grounds for justification of the 
Commission's doubts regarding the effective­
ness of the system of controls in the Nether­
lands. There can be no objection to this. Nor 
can it be said that the Commission took the 
questions mentioned by it out of context. The 
Commission submitted the questions and 
answers not just individually, but as a whole. 
Nor can it be said that there was, objectively 
speaking, a context, since the preceding and 
subsequent questions were not concerned with 
the checks carried out by the AID. Further­
more, it cannot be said that the Commission 
drew unjustified conclusions. When the com­
petent Minister states that the AID carried 
out checks only in 1982 and 1986 and the 
applicant itself points out that the AID would 
carry out its checks in the context of the 
examination of the authorisations of the under­
takings, it is perfectly possible to entertain 
justified doubts regarding the regularity of 
the AID checks. 
I -1984 
NETHERLANDS ν COMMISSION 
44. Lastly, the following point should be men­
tioned. The applicant's statement, already 
mentioned, that the production process cannot 
be inferred from the checks of the industrial 
plant carried out by the AID since the plant 
could be swiftly converted, might suggest that 
those checks were not performed at regular 
and short intervals. Consequently, there are 
in fact good reasons for doubting whether the 
checks undertaken by the AID in the period 
from 1982 to 1987 were carried out on a 
regular basis. 
45. Furthermore, if it is borne in mind that 
on the occasion of its inspection in 1987, the 
AID rejected a not insignificant quantity of 
butter on the ground that it was made from 
sweet cream and, at the same time, that it was 
not certain whether such checks were carried 
out at all in the preceding years, justified 
doubts again arise regarding the effectiveness 
of the Netherlands system of controls in the 
period before 1987. 
46. The Government of the Netherlands men­
tions, as further supplementary controls, those 
carried out by the C O Z in the course of the 
manufacturing process. During those inspec­
tions, the cream and the buttermilk obtained 
were tasted and, in the event of doubt, the 
cream was analysed for its acid content. The 
Commission too was aware of the fact that 
the C O Z proceeded in this way. It was thus 
ensured that only butter made by the author­
ised process was packaged and labelled Τ or 
'Int ' as prescribed by the VIB. Only butter 
packaged in that way could have been sold to 
the intervention agencies. 
47. In response to this, the Commission points 
out that those checks too were not carried 
out regularly. O n this point it should be said 
that the applicant itself concedes that such 
checks in the course of the manufacturing 
process have no point since the results are 
selective. This gives at least some reason for 
doubting whether those checks were carried 
out on a regular basis and not merely 
sporadically. 
48. The Commission claims, moreover, that 
the Netherlands did not adapt the instruc­
tions issued to the C O Z in the matter of the 
checks to be carried out after an attempted 
fraud in 1982. (At that time too there was an 
attempt to sell N I Z O butter into interven­
tion.) That fact is clear also from the replies 
of Minister Brak. When he was asked to 
submit the written instructions for the C O Z 
control procedures, the Minister replied that 
no such instructions existed. According to 
him, the questions in point had already been 
settled in the 1970s. Nor, again according to 
the Commission, had the C O Z ever system­
atically checked the accounts. This emerged 
above all in 1987 when the AID rejected 
N I Z O butter which the C O Z had approved. 
49. The applicant, on the other hand, submits 
on this point that the very fact that the N I Z O 
butter had been identified and rejected shows 
that the system of controls in the Nether­
lands was effective. There was therefore no 
reason to adapt the C O Z instructions in any 
way. 
I - 1985 
OPINION OF MR ALBER — CASE C-28/94 
50. As has already been mentioned, the Com­
mission considers, however, that the AID was 
not continuously active and that it was not 
until 1987 that it carried out the checks anew. 
As a result, in the period before 1987, the 
COZ was the only active inspection authority. 
If it were now to transpire that the butter 
approved by the COZ had actually been made 
by the NIZO process, the effectiveness of the 
system of controls would be placed in serious 
doubt. 
51. The applicant claims, however, that the 
AID exercised constant supervision over the 
COZ. Moreover, in the specific instance in 
1987, the AID acted at the request of the 
COZ. 
52. The fact that the C O Z 15 expressly 
requested the AID, which, moreover, was the 
body which was supposed to supervise it, to 
check the production process suggests that, 
to say the least, the AID did not carry out its 
checks on a regular basis. 
53. Thus, as regards the effectiveness of the 
system of controls, justified doubts, at the 
very least, arose, above all concerning the 
years before 1987, in view of the uncertainty 
whether the AID did in fact carry out checks 
before that year. 
54. The reference made by the Commission 
to the audit reports communicated by the 
applicant further strengthens those doubts. 
Those reports were drawn up during the 
AID's audits in 1987. They show that the 
managers and the staff of the dairies were not 
informed of the fact that butter made by the 
NIZO process did not qualify for interven­
tion. The Commission maintains it made 
similar findings during its own inspection in 
1989. Accordingly, it is impossible to be sure 
that undertakings producing only, or also, by 
the N I Z O process did not sell that butter to 
the intervention agencies. 
55. For its part, the applicant maintains that 
with each invitation to tender the VIB also 
published the conditions for admission to 
intervention. Accordingly, the ban on N I Z O 
butter must have been known. The fact that 
the dairy owners were nevertheless insuffi­
ciently informed is not a ground for doubting 
the quality of the checks carried out. 
56. It is not possible to concur with the 
applicant on this. If an undertaking which on 
its own admission produced for intervention 
and did so by means of the N I Z O process 
had offered butter for intervention and if that 
offer had been rejected on the basis of effec­
tive checks, then, at the latest since that time, 
that undertaking would have been informed 
of the fact that N I Z O butter does not qualify 
for intervention. The fact that the undertak­
ings did not know that the sale of N I Z O 
butter into intervention was prohibited is 
15 — The VIB also requested the AID carry out such a check in 
order to determine whether the dairies were applying in 
advance the expected amendments to the production rules. 
I - 1986 
NETHERLANDS ν COMMISSION 
therefore a ground for justified doubts as to 
the effectiveness of the system of controls. It 
makes no difference that the applicant claims 
that N I Z O butter sold so well on the free 
market that there was no need to produce it 
for intervention. The minutes of the discus­
sions with the dairy owners in the course of 
the audits show that the dairies also produced 
N I Z O butter for intervention. 
57. The applicant contends, moreover, that 
the audit reports are not admissible as evi­
dence. The fact remains, however, that those 
reports — which the applicant itself commu­
nicated to the Commission — can perfectly 
well be used to see if they give rise to justi­
fied doubts regarding the effectiveness of the 
system. 
58. Lastly, the Commission has maintained 
that even the C O Z had expressed doubts 
regarding the effectiveness of its system of 
controls. The applicant, for its part, denies 
that. The Commission refers, here again, to 
Minister Braks's reply. When he was asked 
why an administrative control by means of 
spot checks on the books was regarded as 
impracticable, the Minister replied that a check 
within the meaning of the relevant rules could 
be carried out only if accompanied by a com­
prehensive administrative audit of the 
accounts. By this he means a systematic veri­
fication of the production in its entirety, 
including, therefore, purchases, sales and 
storage. That gives rise, to say no more, to 
the question why such an audit was never 
carried out. In any event, the impression cre­
ated is that such an audit was not carried out 
in the Netherlands. Another reply shows that 
proposals for making changes in the checks, 
put forward by the COZ, were implemented 
only very belatedly. 
59. It may thus be seen from the pleadings as 
a whole as well as from the foregoing con­
siderations that there are at the very least jus­
tified doubts regarding the effectiveness of 
the system of controls in the Netherlands; by 
putting forward submissions to that effect, 
the Commission has discharged its burden of 
proving the irregularities alleged against the 
applicant. 
60. The applicant also contests the Commis­
sion's calculation of the reductions. The first 
issue here is the expenditure serving as the 
basis of calculation. The applicant proceeds 
on the assumption that the financial correc­
tion should apply to the 1987 financial year. 
In the present case only the quantities bought 
in by the intervention agencies between 1 
December 1986 and 1 July 1987 and the 
checks made during that period could be rel­
evant. The first date corresponds to the begin­
ning of the 1987 financial year. The date of 
1 July 1987 applies since it was from that date 
that butter made from sweet cream was 
I-1987 
OPINION OF MR ALBER — CASE C-28/94 
eligible for intervention and thus the controls 
at issue here were no longer necessary. Cal­
culated on the basis of the butter bought in 
during that period, the reduction would not 
exceed the sum of N L G 11 million. 
61. The Commission argues for its part that 
the expenditure presented by the applicant 
for 1987 was considered on the occasion of 
this clearance of accounts. That expenditure 
also concerned butter which had been admitted 
to intervention in the preceding years. Since 
that was done without proper checks, the 
Commission could not allow the expenditure 
concerning that butter for 1987. As the 
accounts in respect of the expenditure declared 
for 1985 and 1986 had already been cleared, a 
correction for those years was inappropriate. 
However, the issue in the context of the clear­
ance of accounts for 1987 was not just the 
expenditure in respect of the butter bought 
into intervention in 1987 but rather the expen­
diture declared for 1987. That expenditure 
could also concern the purchases carried out 
in previous years. 
62. The applicant contests this, arguing that 
a clearance of accounts means both that the 
expenditure is recognised as properly incurred 
and that it is established that it is in compli­
ance with the Community rules. A clearance 
of accounts may, it is true, concern butter 
bought into intervention in the preceding 
years. However, if the accounts for the prior 
years are definitively cleared, the expenditure 
concerned must be regarded as lawful. It fol­
lows that butter which had been (lawfully) 
bought in earlier years cannot in later years 
give rise to expenditure regarded as lawful. 
63. According to the Commission that argu­
ment is incorrect. Moreover, it would mean 
that it is impossible for the Commission to 
take appropriate action, on the financial level, 
on irregularities which are only detected some 
years later. The clearance of accounts for a 
financial year simply means that in clearing 
accounts for subsequent financial years the 
Commission can no longer make a decision 
on the expenditure relating to that year. In 
other words, the clearance of accounts is final. 
It does not mean, however, that the Commis­
sion has accepted activities which were car­
ried out in the year in question but the expen­
diture on which is declared only — as in this 
case — in later years. Nor can it prevent the 
Commission from taking appropriate action, 
on the financial level, on irregularities which 
are detected only a few years later, provided 
that the correction is applied in respect of a 
financial year the accounts of which have not 
yet been cleared. 
64. Article 8 of Regulation (EEC) N o 1723/72 
of the Commission of 26 July 1972 on making 
up accounts for the European Agricultural 
Guidance and Guarantee Fund, Guarantee 
I -1988 
NETHERLANDS ν COMMISSION 
Section 1 6 provides that the decision to make 
up the accounts is to cover: 'the determina­
tion of the amount of expenditure incurred in 
each Member State during the year in ques­
tion, recognised as chargeable to the EAGGF, 
Guarantee Section'. 1 7 That simply means that 
the decision on the clearance of accounts 
determines which expenditure can be taken 
over by the EAGGF. Moreover, since Article 
3 of Regulation N o 729/70 provides that only 
intervention undertaken in accordance with 
the Community rules is to be financed, it 
could also be inferred from the above-cited 
provision that that decision also recognises 
the expenditure as having been incurred in 
compliance with the Community rules. 
65. According to the case-law of the Court, 
however, the essential purpose of the decision 
on the clearance of accounts is 'to ensure that 
expenditure incurred by the national author­
ities is in accordance with the Community 
rules'. 18 The Court also stated that until the 
accounts are duly cleared, Article 2 of Regu­
lation N o 729/70 requires the Commission to 
refuse to charge to the E A G G F those expen­
ditures not incurred in accordance with the 
Community rules. That requirement does not 
disappear merely because the accounts are 
cleared after the expiry of the period pre­
scribed in Article 5 of Regulation N o 729/70. 
66. It follows that the main concern of the 
decision on the clearance of accounts is to 
prevent the Commission from incurring unjus­
tified expenditure. Notwithstanding the pre­
scribed time-limits, that must be possible until 
the clearance of accounts becomes final. It 
would be inconsistent with that aim if, for 
the reason that irregularities had gone unde­
tected, expenditure which not yet established 
for that year could be declared later and 
expenditure which was already established 
could engender subsequent costs, for example 
storage costs, in the following years without 
its being possible for the Commission — 
despite the fact that the accounts for the fol­
lowing years had not yet been cleared — to 
take appropriate action of a financial nature 
on irregularities detected in the meantime in 
respect of the expenditure declared for the 
following years. In this regard, the Commis­
sion must be allowed to extend the correc­
tions made on the ground of insufficient con­
trols also to the expenditure which was 
incurred in respect of the butter bought into 
intervention and stored after 28 February 
1985 and which was declared by the applicant 
for 1987. 
67. The applicant also contests the amount of 
the reductions applied. The Commission, it 
maintains, applied the 10% reduction arbi­
trarily. That reduction is unjustified because 
the Commission has not put forward any 
specific case or facts concerning infringements 
committed by the applicant. 
16 — OJ L 186, p. 1. 
17 — This regulation was repealed with effect from 16 October 
1995 by Commission Regulation (EC) N o 1663/95 of 7 July 
1995 laying down detailed rules for the application of Council 
Regulation (EEC) N o 729/70 regarding the procedure for 
the clearance of the accounts of the EAGGF Guarantee Sec­
tion. However, pursuant to Article 9 of Regulation N o 
1663/95, it remains applicable to the clearance of the accounts 
of the Guarantee Fund up to those of its financial year 1995. 
Article 7(1) of Regulation N o 1663/95 provides that the 
accounts clearance decision 'shall determine the amount of 
expenditure effected in each Member State during the finan­
cial year in question which shall be recognised as being 
chargeable to the EAGGF, without prejudice to decisions 
taken subsequently in accordance with paragraph 2(c) of 
that Article' (which moreover provides for even more exten­
sive corrections in certain cases). 
18 — Case 349/85 Denmark v Commission [1988] ECR 169, at 
paragraph 19. 
I -1989 
OPINION OF MR ALBER — CASE C-28/94 
68. In response, the Commission rightly 
points out that, according to the case-law of 
the Court, it could also have refused to charge 
all the expenditure in question. Thus, the 
Court has held that, where it proves impos­
sible to establish the extent to which a national 
measure which is incompatible with Commu­
nity law has caused an increase in the expen­
diture entered under a budgetary item of the 
EAGGF, the Commission 'has no choice' but 
to disallow all the expenditure in question, 
not just a percentage thereof. 19 Since it is not 
possible, in the absence of adequate checks, 
to establish accurately the extent of the damage 
caused, it follows that the expenditure could 
be disallowed in its entirety. The Commission 
itself makes reference here to a judgment in 
which the Court stated: 'Since it follows ... 
that the inspections carried out... do not con­
stitute thorough scrutiny ..., the Commission 
could have disallowed charging to the EAGGF 
of the whole of the sums in question'. 2 0 
69. Furthermore, the Commission maintains 
that in this case a 10% reduction must be 
regarded as very modest. On the basis of the 
AID inspection in 1987, over 25 000 tonnes 
of butter were rejected by the intervention 
agencies on the ground that they had not been 
manufactured in accordance with the pre­
scribed requirements. That corresponds to 
40% of all the butter offered for intervention 
in 1987. For that reason, a 10% reduction 
cannot be regarded as too high. 
70. The applicant replies that the Commis­
sion is basing its contention here on a quan­
tity of butter which — thanks to the appli­
cant's checks — was, specifically, not sold 
into intervention. However, as shown above, 
these are good reasons for doubting whether 
regular and effective checks were carried out 
in the preceding years. It may, therefore, be 
assumed that for want of effective supervision 
in the preceding years the intervention agen­
cies also brought in butter which should not 
have qualified for intervention. It must be 
noted in this regard that none of the butter 
offered for intervention in the preceding years 
was rejected. However, it cannot be ruled out 
that no N I Z O butter was offered for inter­
vention in the preceding years before and that, 
all of a sudden, in 1987, 40% of all the butter 
offered was produced by the N I Z O process. 
71. The guidelines adopted by the Commis­
sion for flat-rate corrections, on a proposal 
from an inter-directorate group (the Belle 
Group Report), provide for three possible 
rates of reduction: 2%, 5% and 10%. A 10% 
reduction is to be applied where the deficien­
cies concern the system of controls as a whole, 
or any key elements thereof, or where they 
concern the implementation of controls which 
19 — Case C-50/94 Greece ν Commission [1996] ECR I-3331, at 
paragraph 26; Joined Cases 15/76 and 16/76 France ν Com­
mission [1979] ECR 321, at paragraph 32 et seq., and Case 
347/85 United Kingdom ν Commission [1988] ECR 1749, at 
paragraph 13. 
20 — Case C-197/90 Italy ν Commission [1992] ECR I-1, at 
paragraph 39. 
I - 1990 
NETHERLANDS ν COMMISSION 
are indispensable for the ensuring that the 
expenditure is properly incurred, so that it 
may reasonably be assumed that there is a 
high risk of significant losses. 
72. In view of the deficiencies in the system 
of controls and considering the fact that the 
butter offered unlawfully for intervention rep­
resented up to 40% of all the butter offered 
for intervention, a 10% reduction cannot be 
regarded as being unfair. 
73. The applicant's objections against the cal­
culation of the reduction must therefore be 
held to be unfounded. 
74. In the context of its first plea in law, the 
applicant also claims that another regulation 
was infringed. In its summary report, the 
Commission had alleged that the applicant 
had infringed Articles 3 and 5 of Regulation 
N o 283/72 2 1 . Article 3 requires Member States 
to communicate to the Commission a list of 
the irregularities which have been the subject 
of primary administrative or judicial findings 
of fact. Article 5 concerns the recovery of 
sums wrongly paid. The applicant argues that 
it did not infringe those provisions since an 
irregularity within the meaning of Article 3 
would only have existed if N I Z O butter had 
actually been bought into intervention. Only 
actual infringements of the Community rules 
must be communicated to the Commission. 
That is clear from the wording of the regula­
tion. 
75. The Commission, on the contrary, sub­
mits that the term 'irregularity' must be inter­
preted broadly. It refers here to a working 
document of its own drafting according to 
which it is to be assumed that there is an 
irregularity when a Community rule is disre­
garded with the aim of wrongfully obtaining 
sums to the detriment of the EAGGF, whether 
or not the EAGGF actually suffers a financial 
loss as a result. The words 'primary admin­
istrative or judicial findings of fact' must also 
be interpreted broadly. They mean the first 
report of findings drawn up and signed by a 
competent national authority and concerning 
a case where it may properly be assumed that 
the rules have been infringed. That report is 
not subject to any particular formal require­
ments. 
76. The Commission also maintains that, in 
this case, the possibility of fraud in earlier 
years cannot be ruled out. Moreover, it is not 
just the financial effects of conduct which are 
important under the system established by 
Regulation N o 283/72, but also their serious­
ness. This case concerns 40% of all the butter 
offered in one year. The Netherlands author­
ities should have been able to conclude from 
21 — Regulation (EEC) No 283/72 of the Council of 7 February 
1972 concerning irregularities and the recovery of sums 
wrongly paid in connection with the financing of the common 
agricultural poliev and the organisation of an information 
system in this field (OJ L 036, p.1). 
I-1991 
OPINION OF MR ALBER — CASE C-28/94 
this that some of the butter which had already 
been bought into intervention did not comply 
with the requirements either. Nor can the 
possibility of fraud be ruled out in connec­
tion with the butter which was not admitted 
to intervention because of the inspection 
checks. That butter could have been offered 
in another Member State. In this case, the risk 
of fraud was particularly great since it is not 
possible to distinguish NIZO butter from 
butter made from sour cream. 
77. If one looks to the wording of Article 3, 
one will find in paragraph (2) that the infor­
mation to be communicated must indicate 
which provision has been infringed. That 
could be understood as meaning that only 
infringements of Community rules must be 
notified. Article 4, however, requires each 
Member State to communicate without delay 
to the other Member States and to the Com­
mission any irregularities which are liable to 
have effects outside its territory. That applies 
also to irregularities which disclose the exist­
ence of a new fraudulent practice. This sug­
gests that the primary concern is to prevent 
new cases of fraud as far as possible. In this 
connection, it is important — as the Com­
mission has submitted — for the Commis­
sion also to be informed of any instances of 
attempted fraud. Accordingly, Article 7(3) 
provides that the Commission is to organise 
meetings at Community level to examine the 
information obtained 'in particular with regard 
to the lessons to be learned from it in con­
nection with irregularities'. Lastly, the third 
recital also requires irregularities to be com­
municated to the Commission with a view to 
'learning the nature of fraudulent practices'. 
78. In this context the words 'primary admin­
istrative or judicial findings of fact' must also 
be interpreted broadly. As the Commission 
rightly submits, it may be assumed that the 
AID recorded any irregularities which were 
detected and that these were thus the subject 
of a primary administrative or judicial finding 
of fact. 
79. Consequently, it is clear from the very 
wording of the regulation that both terms are 
to be construed broadly and, consequently, 
the applicant can be charged with infringing 
the regulation. That is all the more true in 
that it must have realised that there had indeed 
been cases of fraud in preceding years. The 
fact that the working document to which the 
Commission refers was drawn up only in 
1989 is irrelevant. 
80. The arguments put forward by the appli­
cant in connection with its second plea in law 
— infringement of general principles of law, 
such as the principle of care and legal cer­
tainty — largely concern the issues already 
examined in relation to its first plea in law. 
Thus, the applicant claims that the Commis­
sion infringed the principle of care inter alia 
by failing to take account the applicant's 
efforts to introduce an effective system of 
I - 1992 
NETHERLANDS ν COMMISSION 
controls. In the first part of this Opinion, I 
have already explained that there were justi­
fied doubts regarding the effectiveness of that 
system of controls. 
81. Moreover, the applicant, at this point, 
again contests the rate of 10% set in calcu­
lating the refund, claiming that the Commis­
sion had disregarded its own very guidelines 
to that effect. However, the applicant founds 
this claim on the assertion that there were no 
deficiencies in its system of controls. That 
assertion too has been examined in the con­
text of the first plea in law, with the conclu­
sion that there were justified doubts regarding 
the effectiveness of the system of controls as 
a whole. The Commission was therefore en­
titled, in accordance with its own guidelines, 
to apply a 10% reduction. It must here again 
be pointed out that the Commission could — 
as I have already stated — have decided to 
disallow the expenditure in its entirety. 
82. The applicant also makes the point that, 
following an inspection carried out by the 
Commission in 1987 in the context of the 
clearance of accounts for 1986, the Commis­
sion had found no fault whatsoever with the 
system of controls in the Netherlands. The 
applicant claims that it was therefore entitled 
to assume that the Commission also consid­
ered its system of controls to be effective and 
adequate. Consequently, it is not possible that 
the Commission could have come to the oppo­
site conclusion following an investigation con­
ducted two years later. That would be con­
trary to the principle of legal certainty. 
83. In this case the subject-matter of the 
inspection carried out by the Commission in 
1987 is in dispute. The Commission claims in 
this regard that the inspection in point con­
cerned a matter entirely different from that 
which was the subject of the 1989 inspection. 
In 1987 a general inspection was carried out. 
The checking of the butter bought into inter­
vention was only part of a wider-ranging 
examination. In 1989, on the other hand, the 
inspection was undertaken with the sole aim 
of verifying whether the suspicions expressed 
by a Member of the European Parliament 
concerning checking deficiencies in the con­
text of the buying-in of butter were con­
firmed. Moreover, the purpose of the 1987 
inspection, which was only concerned with 
intervention in general, was to check whether 
the rules in force at the time were being 
observed. As from 1987, however, butter made 
from sweet cream was admitted to interven­
tion with the result that it was no longer nec­
essary to supervise checking procedures in 
that regard. Here again, the applicant denies 
the fact that the 1987 inspection concerned 
the new rules. 
84. It can be taken as accepted that the 1989 
inspection was specifically directed to estab­
lishing whether or not the applicant had car­
ried out effective checks to ensure that only 
butter made from sour cream was sold into 
intervention. In that respect, it is hard to see 
why the Commission, having found deficien­
cies in the course of a specific inspection, 
should not take appropriate action of a merely 
financial nature because those deficiencies had 
not yet been detected in an earlier inspection. 
I -1993 
OPINION OF MR ALBER — CASE C-28/94 
That would mean that an inspection con­
cluded with a 'no complaints' finding would 
preclude all financial consequences for the 
future even if irregularities were subsequently 
discovered. As I have already stated, the pur­
pose of the clearance of accounts is to ensure 
that expenditure complies with the Commu­
nity rules. It must therefore be possible, until 
such time as the accounts are duly cleared, to 
take appropriate action of a financial nature 
on irregularities which occurred earlier. 
85. In this respect, it must again be observed 
that it is the Member States which are first 
and foremost responsible for the organisation 
of controls. The Member States must struc­
ture the controls in such a way as to prevent 
irregularities. In the present case, the appli­
cant has itself pointed out that there can be 
problems in control procedures. Moreover, it 
pointed out repeatedly that even the possi­
bilities suggested by the Commission in the 
matter of controls did not enable effective 
supervision to be exercised. The applicant 
cannot plead the fact that the Commission 
did not detect any irregularities in an earlier 
inspection in order to avoid its responsibility 
for organising effective control procedures. 
86. By its last plea in law the applicant claims 
that the Commission infringed Article 190 of 
the EC Treaty because it did not give adequate 
reasons for its decision. On the one hand, the 
applicant here again puts forward consider­
ations which in fact relate to the first plea in 
law. On the other hand, as regards the ques­
tion whether the reasons given by the Com­
mission were adequate, reference should be 
made to the case-law of the Court to the effect 
that decisions concerning the clearance of 
accounts do not require detailed reasons if 
the country concerned was closely involved 
in the process by which the decision came 
about and was therefore aware of the reasons 
for which the Commission considered that it 
must not charge the sums in dispute to the 
EAGGF. 2 2 Since the applicant itself has 
referred to extensive correspondence 
exchanged between the Netherlands and the 
Commission in the years from 1989 to 1993, 
it must be considered as having been suffi­
ciently involved in the preliminary procedure. 
87. Accordingly, it should be held the appli­
cant has failed to make out its case against the 
decision of the Commission. 
Costs 
88. Under the first sentence of Article 69(2) 
of the Rules of Procedure, the unsuccessful 
party is to be ordered to pay the costs. 
22 — See Case 347/85 (cited in footnote 19), at paragraph 60. 
I - 1994 
NETHERLANDS ν COMMISSION 
D — Conclusion 
89. I therefore propose that the Court should: 
(1) dismiss the application; 
(2) order the Kingdom of the Netherlands to pay the costs. 
I-1995