Judgment — ECLI:EU:C:2018:637
Date: 2018-08-07
Language of the case: Estonian
Court formation: Third Chamber
Subject matter: Agriculture and Fisheries;Agricultural structures
Procedure: Reference for a preliminary ruling
Origin: Estonia

summary, in my view the concept of ‘environment’ as used in the cross-compliance context should not be understood narrowly so as to cover only the immediate biological surroundings in which farming activity takes place. As the Court has already indicated in Horvath, landscape features that do not directly contribute to the processes of the farming industry are nevertheless an integral part of the rural countryside; and their preservation may properly form part of the cross-compliance obligations that farmers are required to respect in return for the direct aid that they receive from the EU budget and hence from the EU taxpayer. (23) 35. Thus, EU law does not preclude a Member State from including the preservation of archaeological monuments, such as a stone funeral cairn, as part of the standards for the good agricultural and environmental condition of land for the purposes of point GAEC 7 in Annex II to Regulation No 1306/2013. 36. That being the case, I am of the view that the administrative penalty was permissible. 37. The referring court has stated that the removal of the cairn was contrary to the relevant national rules. Thus, Mardi talu infringed the cross-compliance rules within the meaning of Article 93 of Regulation No 1306/2013. The conditions which trigger the imposition of an administrative penalty laid down in Article 91(1) and (2) therefore applied. In accordance with Article 39(1) of Delegated Regulation No 640/2014 the appropriate reduction was 3% (the minimum amount provided) of the total amount of aid. 38. I therefore conclude that pursuant to Articles 93 and 94 of Regulation No 1306/2013, a Member State may include requirements relating to the preservation of archaeological structures, such as a stone funeral cairn, in its rules relating to the GAEC standards listed in Annex II to that regulation, in as much as those requirements contribute to the preservation of such structures as landscape features or, as the case may be, to avoiding habitat deterioration. Where a beneficiary of a direct payment fails to comply with the rules on cross-compliance, in particular by not preserving an archaeological monument as required by national rules, it is compatible with the provisions of Title VI of Regulation No 1306/2013 to apply the appropriate administrative penalty in accordance with Article 39 of Delegated Regulation No 640/2014. Question 2 39. Question 2 concerns the interpretation of the area of the‘holding’ of the beneficiary concerned. The referring court seeks to ascertain whether a beneficiary must comply with the requirements of good agricultural and environmental condition on his entire holding or solely on the specific agricultural area for which aid has been requested. 40. That court states that Mardi talu did not use the land on which the cairn stood as agricultural land, and that no aid was requested in relation to that plot. The cairn was on the margin of the parcel for which aid was requested. Those facts are not disputed by the beneficiary, save for the location of the cairn. Mardi talu maintains that the referring court’s description of the facts in that respect is incorrect, as the funeral cairn had been erected on land adjoining the plot for which aid was requested. The stones had been there for decades rendering that land unsuitable for agricultural use. 41. The referring court states that Question 2 arises only in case of a negative answer to its first question. However, it seems to me (as the Estonian Government and the Commission submit) that that question is actually relevant in the case of a positive response. I shall therefore consider the second question with a view to providing a full reply to the issues raised in the order for reference. 42. It is common ground that the cairn was situated on the farm of Mardi talu, the beneficiary for the purposes of the cross-compliance rules. It is also not in dispute that the site of the cairn was not an agricultural production unit for which aid was sought. 43. It seems to me that a beneficiary must necessarily comply with the cross-compliance rules in relation to the entire holding, rather than solely for the specific area used for agricultural production for which aid is requested. I have already hinted that that reflects my reading of Article 72(1)(a) read together with the cross-compliance rules in Title VI of Regulation No 1306/2013. (24) 44. Article 91(2)(b) states that an administrative penalty only applies where non-compliance is the result of an act or omission directly attributable to the beneficiary concerned and where one or both of two conditions are met: (a) the non-compliance is related to the agricultural activity of the beneficiary (which is not the case here); (b) the area of the holding of the beneficiary is concerned. The ‘holding’ is defined in Article 91(3)(a) as meaning all the production units and areas managed by the beneficiary situated within the territory of the same Member State. (25) That wording indicates that the activities of the beneficiary in relation to the entire holding are relevant to the competent authorities’ assessment as to whether the cross-compliance rules are respected in any particular case. 45. That view is underpinned by recital 53 of Regulation No 1306/2013, which states that Regulation No 1782/2003 established the principle that the full payment to beneficiaries of certain financial support under the CAP should be linked to compliance rules relating to, inter alia, land management. Under the resulting ‘cross-compliance’ system Member States are to impose penalties by way of reduction or exclusion of aid. Recital 54 adds that the cross-compliance system incorporates in the CAP basic standards concerning, for example the environment, climate change and good agricultural and environmental condition of land confirming the wide scope of those rules. 46. Those objectives cover broad aims which are not subject to express limitation. That is not surprising. It would be difficult to justify paying public money in direct aid to farmers for certain plots of land which form part of their general holding, whilst tolerating activities that are detrimental to the environment as a whole on other plots on the same holding that are not used for agricultural purposes. 47. The legislative history of Regulation No 1306/2013 sheds further light on the aims of the rules. The sequence of legislative acts is as follows. Regulation No 1782/2003 (which was replaced by Regulation (EC) No 73/2009 (26)) established the principle that the full payment of aid to beneficiaries under the CAP should be linked to a system of cross-compliance. A number of separate instruments were then adopted laying down the legislative framework for the CAP in the period from 2014 to 2020 including Regulation No 1306/2013 and Regulation No 1307/2013, which repealed and replaced Regulation No 73/2009. Regulation No 1306/2013 lays down rules that were previously set out in Regulation No 73/2009 in particular the rules to guarantee compliance with the obligations laid down by direct payment provisions, including checks and the application of administrative measures and administrative penalties in the case of non-compliance, the rules related to cross-compliance such as the statutory management requirements, the good agricultural and environmental condition, the monitoring and evaluation of relevant measures and the rules related to the payment of advances and the recovery of undue payments. (27) 48. In the explanatory memorandum to its proposal for what became Regulation No 1782/2003 setting out its views on a long term perspective for sustainable agriculture, under the heading ‘Reinforcement of environmental, food safety, animal health and welfare and occupational safety standards’, the Commission stated: ‘Compulsory cross-compliance will apply to statutory European standards in the field of environment, food safety, animal health and welfare and occupational safety related to the farm level. As a necessary complement to decoupling in order to avoid land abandonment and subsequent environmental problems, beneficiaries of direct payments will also be obliged to maintain all agricultural land in good agricultural condition. This will be applied as a whole-farm approach, and sanctions will be applicable to any case of non-compliance on a beneficiary’s farm. It will apply to all sectors and apply to used as well as unused agricultural land. Farmers receiving the single farm payment or other direct payments under the CAP who do not comply with these statutory standards will be subject to a system of sanctions. The penalty will take the form of a partial or full reduction of the aid (depending on the severity of the case).’ (28) 49. In a later study on the impact of environmental agreements on the CAP it was noted that ‘cross-compliance is one key element of the 2003 CAP reform. The introduction of compulsory cross-compliance means that from 1 January 2005 farmers in receipt of direct payments will be required to respect a set of statutory management requirements (SMRs), as set out in Annex III to Regulation No 1782/2003, and maintain eligible land in good agricultural and environmental condition (GAEC), in line with the framework established by Annex IV to the same regulation. Cross-compliance requirements refer to the whole farm, and also to land and farm branches without direct payments. Non-compliance will lead to determined reductions of direct payments, with 3% (1% to 5%) in the case of a first breach, and 15% to 100% where non-compliance is intentional, depending on the severity, extent, permanence and repetition of non-compliance. Thus, both existing statutory requirements as well as GAEC standards will be enforced through controls within the direct payment system’. (29) 50. Finally, the explanatory memorandum to the Commission’s proposal for Regulation No 1306/2013 notes: ‘Farmers, who are together with foresters the main land managers, will need to be supported in adopting and maintaining farming systems and practices that are particularly favourable to environmental and climate objectives because market prices do not reflect the provision of such public goods. It will also be essential to best harness the diverse potential of rural areas and thus contribute to inclusive growth and cohesion.’ (30) 51. The legislative history indicates that within the context of the CAP, farmers are considered to have obligations which extend beyond agricultural production. They also have a role as guardians of the environment (‘land managers’) in relation to the land which comprises their holding. Thus, the provenance of the cross-compliance rules supports a reading of Regulation No 1306/2013 which construes ‘holding’ as referring to the beneficiary’s entire holding. 52. That might be said to be sufficient to conclude the matter. Nevertheless, for the sake of completeness I shall also briefly consider whether the detailed legislative scheme similarly supports the view that the word ‘holding’ includes land which is not the subject of the aid application. 53. The body of legislation is very complex. It includes Delegated Regulation No 640/2014 which must of course be interpreted in a coherent manner with Regulation No 1306/2013, the enabling regulation. (31) In addition to the terms ‘holding’ and ‘agricultural area’ the latter regulation uses the expression ‘agricultural parcel’ defined in Article 67(4)(a) of Regulation No 1306/2013. That provision is part of Chapter II ‘Integrated administration and control system’ which is in Title V of Regulation No 1306/2013, headed ‘Control systems and penalties’. Those provisions comprise the elements introduced to monitor effectively the distribution of EU aid paid to farmers. (32) 54. Delegated Regulation No 640/2014 introduces a number of detailed technical measures. Inter alia, it sets out the basis for calculating aid, including rules on how to deal with certain cases in which eligible areas contain landscape features or trees (Article 1(h)). Where Member States award single area payments they must ensure that each agricultural parcel declared by a beneficiary is reliably identified, in a manner which enables it to be located and measured (Article 5(2)) in order to enable the competent authorities to carry out the necessary checks. 55. Article 9(2) of Delegated Regulation No 640/2014 provides that any landscape features that fall within Annex II to Regulation No 1306/2013 which form part of the total area of the agricultural parcel are to be considered as part of the eligible area of that parcel. (33) 56. However, the issue here is not whether the site where the cairn was located was eligible for aid. Rather, it is whether the national rules that require the cairn’s preservation as a condition for CAP aid regarding the adjoining plot on whose margins the cairn was located (34) are compatible with EU law. Thus, whether the cairn was located on an agricultural parcel that was itself eligible for EU aid for the purposes of Article 9(2) of Delegated Regulation No 640/2014 cannot affect the proper interpretation of ‘holding’ for the purposes of Articles 2(d) and 91(3) of Regulation No 1306/2013. 57. That said, at a practical level it might be helpful if the referring court established whether the land where the cairn was situated was identified by Mardi talu as part of an eligible area of an agricultural parcel for the purposes of Delegated Regulation No 640/2014. If that were found to be the case, it would be inconsistent with such a finding to determine that no administrative penalty could be imposed regarding the land where the cairn was located simply because that plot was not used for agricultural production. Mardi talu would otherwise be attempting to have its cake and to eat it. Where a farmer identifies the site of an archaeological structure as an agricultural parcel for the purposes of requesting aid, he cannot simultaneously claim that administrative penalties cannot apply to his activities on that land because it is not used for agricultural production. 58. I add that the contrary interpretation (limiting cross-compliance obligations to the parcels of land within a holding that are actually being farmed) would make it all too easy for the unscrupulous to circumvent those obligations. Thus, in year 1 a farmer might refrain from including a parcel of land containing an inconvenient landscape feature (a millennial tree, say, or the remains of an Iron Age fort) in his claim for direct aid. Unhampered by the financial penalty that would be incurred by deliberately breaching a cross-compliance obligation, the farmer then cuts down the tree, or bulldozes the fort. He clears the debris off his land, thereby increasing his available acreage for production and his potential profit line. Then, in year 2, he includes that parcel of land in his claim for direct aid as land that is being farmed. When the situation is thus stated, it becomes plain why the system put in place by the EU legislator only functions correctly if the cross-complaints obligations pertain to all the parcels of land comprising the beneficiary’s holding, whether or not they are actually being farmed at any particular point. 59. It follows that in my view, for the purposes of Article 72(1)(a) and the cross-compliance rules in Title VI of Regulation No 1306/2013, a beneficiary must comply with the requirements of the good agricultural and environmental condition in relation to his entire holding, not solely as regards the specific agricultural area for which aid has been requested. Conclusion 60. In the light of all the foregoing considerations, I am of the opinion that the Court should answer the question posed by the Tartu Halduskohus (Administrative Court, Tartu, Estonia) as follows: – Pursuant to Articles 93 and 94 of Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy, a Member State may include requirements relating to the preservation of archaeological structures, such as a stone funeral cairn, in its rules relating to the standards for good agricultural and environmental condition of land (GAEC) listed in Annex II to that regulation, in as much as those requirements contribute to the preservation of such structures as landscape features or as the case may be, to avoiding habitat deterioration. – Where a beneficiary of a direct payment fails to comply with the rules on cross-compliance, in particular by not preserving an archaeological monument as required by national rules, it is compatible with the provisions of Title VI of Regulation No 1306/2013 to apply the appropriate administrative penalty in accordance with Article 39 of Commission Delegated Regulation (EU) No 640/2014 of 11 March 2014 supplementing Regulation No 1306/2013 with regard to the integrated administration and control system and conditions for refusal or withdrawal of payments and administrative penalties applicable to direct payments, rural development support and cross compliance. – For the purposes of Article 72(1)(a) and the cross-compliance rules in Title VI of Regulation No 1306/2013, a beneficiary must comply with the requirements of the good agricultural and environmental condition in relation to his entire holding, not solely as regards the specific agricultural area for which aid has been requested. 1 Original language: English. 2 Regulation of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008 (OJ 2013 L 347, p. 549). 3 Regulation of the European Parliament and of the Council of 17 December 2013 establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy and repealing Council Regulation (EC) No 637/2008 and Council Regulation (EC) No 73/2009 (OJ 2013 L 347, p. 608). 4 The common rules under Regulation No 1307/2013 apply to the support schemes listed in Annex I to that regulation known as direct payments. Those include the single area payment scheme (Article 1(a)). That scheme is a transitional, simplified income support scheme for farmers offered at the date of accession to the Member States that joined the European Union in 2004 to facilitate the implementation of direct payments. I shall refer to direct payments made to beneficiaries under the common rules as ‘aid’ for the purposes of this Opinion. 5 Article 4(1)(a) of Regulation No 1307/2013. 6 Article 4(1)(b) of Regulation No 1307/2013. 7 Article 4(1)(e) of Regulation No 1307/2013. 8 Recital 53 states that Regulation No 1306/2013 establishes the principle that the full payment of financial support to a beneficiary should be linked to the cross-compliance rules. Recital 54 confirms that those rules incorporate basic standards including those concerning good agricultural and environmental condition of land. See also Article 1(d) of Regulation No 1306/2013. 9 Article 67(4) of Regulation No 1306/2013 defines ‘agricultural parcel’ as ‘a continuous area of land, declared by one farmer, which does not cover more than one single crop group; however, where a separate declaration of the use of an area within a crop group is required in the context of Regulation (EU) No 1307/2013, that specific use shall if necessary further limit the agricultural parcel. …’ 10 Under Article 92 of Regulation No 1306/2013, a beneficiary is a person in receipt of direct payments. 11 Recital 58 states that the cross-compliance system laid down in Regulation No 1306/2013 is wider in scope than that in previous legislation (see further point 47 below). The system ‘… should therefore include a framework within which Member States are to adopt national standards of good agricultural and environmental condition. The Union framework should also include rules to better address water, soil, carbon stock, biodiversity and landscape issues as well as minimum level of maintenance of the land.’ 12 Of 11 March 2014 supplementing Regulation (EU) No 1306/2013 of the European Parliament and of the Council with regard to the integrated administration and control system and conditions for refusal or withdrawal of payments and administrative penalties applicable to direct payments, rural development support and cross compliance (OJ 2014 L 181, p. 48). 13 Article 1(b) and (h) respectively, of Delegated Regulation No 640/2014. 14 As defined in Article 67(4) of Regulation No 1306/2013; see also recitals 43 to 45 of that regulation. 15 See also recital 11 of Delegated Regulation No 640/2014. 16 In its order for reference the referring court has set out Paragraph 8 of Regulation No 32 of the Minister for Rural Affairs of 17 April 2015, ‘General requirements for obtaining direct payments, single area payment, climate and environment support and support for young farmers’. 17 The referring court sets out in the order for reference Paragraph 3(9) of Regulation No 4 of the Minister for Agriculture of 14 January 2015, ‘Requirements for maintaining land in a good agricultural and environmental state’, which refers to Paragraph 3(2) of the Muinsuskaitseseadus (the Law on heritage conservation). 18 See amongst many, judgments of 10 May 2001, Rundgren, C‑389/99, EU:C:2001:264, paragraph 41, and of 16 July 2009, Horvath, C‑428/07, EU:C:2009:458, paragraph 34. 19 Judgment of 16 July 2009, C‑428/07, EU:C:2009:458. 20 Council Regulation of 29 September 2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers and amending Regulations (EEC) No 2019/93, (EC) No 1452/2001, (EC) No 1453/2001, (EC) No 1454/2001, (EC) No 1868/94, (EC) No 1251/1999, (EC) No 1254/1999, (EC) No 1673/2000, (EEC) No 2358/71 and (EC) No 2529/2001 (OJ 2003 L 270, p. 1). 21 Judgment of 16 July 2009, Horvath, C‑428/07, EU:C:2009:458, paragraphs 26, 27 and 32. 22 Judgment of 16 July 2009, Horvath, C‑428/07, EU:C:2009:458, paragraphs 41 to 43. 23 See, for example, judgment of 9 June 2016, Planes Bresco, C‑333/15 and C‑334/15, EU:C:2016:426, paragraph 47. 24 See point 29 above. 25 Article 2(d) of Regulation No 1306/2013 defines holding by reference to Article 4(1)(b) of Regulation No 1307/2013, save where the cross compliance rules in Title VI of Regulation No 1306/2013 apply. See points 4 to 8 above. 26 Council Regulation of 19 January 2009 establishing common rules for direct support schemes for farmers under the common agricultural policy and establishing certain support schemes for farmers, amending Regulations (EC) No 1290/2005, (EC) No 247/2006, (EC) No 378/2007 and repealing Regulation (EC) No 1782/2003 (OJ 2009 L 30, p. 16). 27 See recitals 53 and 58 of Regulation No 1306/2013. 28 Proposal for a Council Regulation establishing common rules for direct support schemes under the common agricultural policy and support schemes for producers of certain crops of 21 January 2003 COM(2003) 23 final, p. 10 (my emphasis). 29 Gay, S.H., Osterburg, B., Baldock, D., and Zdanowicz, A., ‘Recent evolution of the EU Common Agricultural Policy (CAP): state of play and environmental potential’, March 2005, p. 36 (my emphasis). 30 Proposal of the European Commission of 12 October 2011, COM(2011) 628 final/2, p. 3. 31 I consider the relationship between Council regulations and Commission implementing regulations in greater detail in my Opinion in Teglgaard and Fløjstrupgård, C‑239/17, EU:C:2018:328, points 38 to 46. 32 See recitals 43 to 45 of Regulation No 1306/2013. 33 See recital 11 of Delegated Regulation No 640/2014. 34 See point 18 above.