Judgment — ECLI:EU:C:1998:452
Date: 1998-10-01
Language of the case: Italian
Court formation: Fifth Chamber
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Agriculture and Fisheries;European Agricultural Guidance and Guarantee Fund (EAGGF)
Concepts: Procedure for clearance of accounts;Conditions subject to which expenditure is borne by the EAGGF;Storage;Domestic market
Procedure: Action for annulment - unfounded
Origin: Italy

Summary Report 4 according to 
which, during its inspections carried out in 
1990 and 1991, it found serious deficiencies in 
the control procedures in Italy. It attributes 
those deficiencies to the fact that the compe­
tent intervention agency, the AIMA, had del­
egated its function to a trade association, the 
AIA. Responsibility for boning the purchased 
beef had likewise been handed over to private 
intervention centres. In both cases, there were 
no adequate checks to ascertain whether the 
tasks were carried out in accordance with the 
Commission's rules. 
10. Moreover, the Commission submits that 
in many cases the supervising and supervised 
parties were one and the same, that is to say, 
the organisations which carried out the checks 
may also have supplied meat to the interven­
tion agencies. 
11. In the Commission's view those deficien­
cies in the control system are confirmed by 
the fact that, during its inspections, it found 
serious shortcomings in the conduct of the 
procedure and in respect of the quality of the 
meat put into storage. Thus, the intervention 
agency purchased meat which, because of its 
characteristics, should not have been deemed 
eligible for intervention. Moreover, it was 
found that, in some cases, inspection marks 
had been removed from meat, which indi­
cated that the meat concerned was not of 
3 — Commission Decision 96/311/EC of 10 April 1996 on the 
clearance of the accounts presented by the Member States in 
respect of the expenditure for 1992 of the Guarantee Section 
of the European Agricultural Guidance and Guarantee Fund 
and in respect of certain expenditure for 1993 (OJ 1996 
L 117, p. 19). 4 — Document W6355/95. 
I - 5868 
ITALY v COMMISSION 
Community origin. Furthermore, instances of 
reclassification, with falsification of the orig­
inal classification, were found. Other causes 
of complaint were, inter alia, unsuitable pack­
aging and inadequate freezing of meat. 
12. In order to highlight the deficiencies in 
the Italian system, moreover, the Commis­
sion refers to sales of stored meat, on the one 
hand in the context of food aid for Bulgaria, 
and on the other hand in the context of sales 
to the former Soviet Union and Brazil. The 
abovementioned deficiencies were also found 
to apply in those cases. For this reason, the 
Commission considered a 10% reduction in 
the costs declared for 1990 and 1991 to be 
justified. 
13. Italy denies that the control procedures 
were not carried out in accordance with the 
regulations. If there were any defects in the 
meat at all, they would have been confined to 
isolated cases only. It maintains that a 10% 
reduction is thus too high in any event, and 
particularly in view of the improvements 
which Italy has introduced in the meantime. 
Tendering procedures for beef and veal 
14. In this connection, Italy seeks the annul­
ment of the Commission decision in so far as 
it disallows expenditure of a sum of ITL 7 
104 000 000. The amount disallowed corre­
sponds to a flat-rate correction of 2% of the 
1992 expenditure. 
15. In its Summary Report 5 the Commission 
justifies that reduction on the ground that 
Italy allowed multiple tenders. The approach 
of the competent Italian authority was not 
compatible with the Community rules and 
discriminated against participants who had 
observed the rules. 
16. The multiple tenders complained about 
may be of a speculative nature. If, for example, 
very large quantities of beef are offered for 
sale into intervention, it becomes necessary to 
reduce these quantities by application of a 
coefficient. 6 Since the tenderers endeavour to 
continue to sell the whole of their meat into 
intervention, inflated tenders are lodged for 
5 — See footnote 4. 
6 — The relevant provision is to be found in Article 11(3) of 
Commission Regulation (EEC) No 859/89 of 29 March 1989 
laying down detailed rules for the application of intervention 
measures in the beef and veal sector (OJ 1989 L 91, p. 5). 
I - 5869 
OPINION OF MR ALBER — CASE C-242/96 
speculative purposes. If a tenderer speculates 
that a specific reduction coefficient will be 
laid down, he offers a correspondingly higher 
quantity for sale into intervention. If it then 
turns out that the coefficient laid down is not 
as high as the tenderer assumed, the tenderer 
must deliver into intervention more meat than 
he actually has available. If he is unable to 
perform his contract with the intervention 
agency as to 85% or 95%, he loses in whole 
or in part the security deposited in respect of 
the total amount. 7 
17. If, however, the tenderer splits his original 
tender into several smaller ones which are 
made in the name of nominees, the risk of 
losing the security payment is reduced. If he 
is unable to deliver the full quantity tendered 
for, in the case of several smaller tenders he 
is at least in a position to honour certain of 
them in such a way that he does not lose the 
security payment. It is true that in respect of 
the remaining tenders which he is then no 
longer in a position to honour he will lose his 
security payment. However, that security is 
not calculated on the total amount of all the 
tenders offered by him, but only on the smaller 
amount in each case. The amount of the secu­
rity lost is thus smaller and is often exceeded 
by the profit achieved. 
18. A clear consequence of this, in the Com­
mission's view, is that the lodging of multiple 
tenders favours speculation because the effect 
of the security deposit is lessened. 
19. Speculative tendering for pretended larger 
quantities, according to the Commission, runs 
counter to the purpose of intervention, which 
is, for example by intervention buying-in, to 
stabilise the market and prevent or mitigate a 
substantial fall in prices, 8 where market prices 
fall below a certain level. Regulation N o 
859/89 9 introduced a tendering procedure. 10 
Under that tendering procedure purchase 
prices and quantities are established on the 
basis of tenders received. 11 
20. Speculative tenders which, as demon­
strated, are favoured by the lodging of mul­
tiple tenders make it difficult to operate inter­
vention successfully. Since more meat is 
offfered than is actually on the market, 
buying-in prices and quantities determined 
on the basis of tenders received can no longer 
be established in accordance with the actual 
market situation. Speculative tenders thus pre­
vent the Commission from obtaining a pre­
cise overview of the market situation. For 
that reason it may almost certainly be pre­
sumed that, as a result of the speculative ten­
ders and the multiple tenders favouring them, 
more meat is bought in by the intervention 
agencies at higher prices. In that connection 
7 — Article 13(4) of Regulation N o 859/89. 
8 — Fourth recital in the preamble to and Article 5 of Regulation 
(EEC) N o 805/68 of the Council of 27 June 1968 on the 
common organisation of the market in beef and veal (OJ, 
English Special Edition 1968 (I), p. 187). 
9 — Cited in footnote 6. 
10 — Third recital in the preamble to and Article 7 et seq. of 
Regulation N o 859/89. 
11 — Second recital in the preamble to Council Regulation (EEC) 
N o 571/89 of 2 March 1989 amending Regulation (EEC) 
N o 805/68 on the common organisation of the market in 
beef and veal, repealing Regulauon (EEC) N o 1302/73 and 
«tending Regulation (EEC) N o 4132/88 (OJ 1989 L 61, 
p. 43). 
I - 5870 
ITALY v COMMISSION 
it must also be borne in mind that the lodging 
of several tenders allows speculation as to the 
price. The buying-in of excessive quantities 
causes the EAGGF to incur higher costs than 
is necessary in order to support the market. 
21. In the applicant's view, however, all the 
rules concerning intervention were observed. 
It accepted no more than one tender per ten­
derer and thus contravened no requirement 
to carry out checks. 
22. The provision which underlies this dis­
pute is contained in Article 9 of Regulation 
N o 859/89, paragraph 1 of which provides: 
'Tenderers may take part in the invitation to 
tender only if they undertake in writing to 
comply with all the provisions relating to the 
tender concerned.' 12 
23. Paragraph 2 provides: 'Interested parties 
may participate in the invitation to tender 
issued by intervention agencies of the Member 
States in which this is opened either by lodging 
a written tender against a receipt or by any 
other written means of communication 
accepted by the intervention agency, with 
advice of receipt; they may submit one tender 
only per category in response to each invita­
tion to tender.' 13 
24. The distinction between the concepts of 
'tenderer' and 'interested party' is, in the 
Commission's view, of significance in this 
connection. According to the Commission, it 
follows from the difference in wording that 
interested parties are not to be equated with 
tenderers. 'Interested parties' are not only 
those persons who actually take action and 
lodge tenders. That concept embraces a much 
wider class of persons. It is not therefore only 
the individual tenderer, that is to say the 
person who actually lodges the tender, who is 
prohibited from lodging more than one tender. 
The prohibition covers all persons tendering 
in respect of the same quantity of meat. 
25. On the other hand, the applicant is of the 
opinion that the concepts of 'tenderer' and 
'interested party' are interchangeable. The dif­
ference in -wording is intended only to avoid 
a repetition of the concepts. N o distinction 
can be made between the two. In other Com­
munity provisions as well, the concept of 
'interested party' means nothing more than 
an undertaking which participates in an invi­
tation to tender. Accordingly, the prohibition 
in the last phrase of Article 9(2) merely pre­
cludes the person finally appearing as a ten­
derer from submitting more than one tender. 
26. The requirement for the economic situa­
tion to be taken into account in connection 
with tenders follows, it is submitted, only 
from Article 11(3) of Commission Regulation 
(EEC) N o 2456/93 of 1 September 1993 laying 
down detailed rules for the application of 
Council Regulation (EEC) N o 805/68 as 
12 — Emphasis added. 
13 — Emphasis added. 
I - 5871 
OPINION OF MR ALBER — CASE C-242/96 
regards the general and special intervention 
measures for beef, 14 which was not yet in 
force at the material time. That provision is as 
follows: 
'Interested parties may submit only one tender 
per category in response to each invitation to 
tender. 
The Member States shall ensure that tenderers 
are independent of each other in the terms of 
their management, staffing and operations. 
Where there are serious indications to the 
contrary or that tenders are not in line with 
economic facts, tenders shall be deemed admis­
sible only where the tenderer presents suit­
able evidence of compliance with the second 
subparagraph. 
Where it is established that a tenderer has 
submitted more than one tender, all the ten­
ders from that tenderer shall be deemed inad­
missible.' 
27. In the Commission's opinion, there was 
yet a further reason for considering that the 
tendering procedure in Italy was not compat­
ible with the Community rules. Undertakings 
on the beef and veal market in Italy are 
grouped together into three large producers' 
associations. According to the applicant, the 
latter comply on behalf of their members with 
all necessary formalities vis-à-vis public 
bodies. That is normal practice in Italy. Thus, 
those producers' associations collected their 
members' tenders, which, according to the 
applicant, had been placed in sealed enve­
lopes, and forwarded them to the interven­
tion agency. In the Commission's view, the 
confidentiality of tenders, which is required 
by Article 9(6) of Regulation N o 859/89, is 
thus no longer ensured. Italy, on the other 
hand, is of the opinion that the associations 
merely fulfil the function of a postman in this 
connection. N o infringement of Community 
provisions is therefore apparent. 
28. In addition, such a producers' association 
can lodge a tender in its own name on behalf 
of all those of its members who have not sub­
mitted individual tenders. In that case also, in 
the Commission's view, confidentiality is not 
observed. The interests of competitors are 
pooled and the advantages of an invitation to 
tender cancelled out. In Italy's view, however, 
the practice in question is certainly not an 
infringement of the prohibition of multiple 
tenders, as the Commission claims, but con­
stitutes a single tender lodged by the pro­
ducers' association. It contends that this does 
not jeopardise intervention, but leads to a 14 — OJ 1993 L 225, p. 4. 
I - 5872 
ITALY v COMMISSION 
reduction in the number of tenders, which is 
entirely desirable. 
Premiums for sheepmeat and goatmeat 
29. In this connection, Italy challenges the 
Commission decision in so far as it disallows 
expenditure of a sum of ITL 34 175 522 595. 
That amount corresponds to a reduction of 
10% of 1992 expenditure. 
30. Under Article 5 of Council Regulation 
(EEC) N o 3013/89 of 25 September 1989 on 
the common organisation of the market in 
sheepmeat and goatmeat, 15 a premium is to 
be granted to sheepmeat producers in order 
to offset an income loss. In the Commission's 
view, serious deficiencies in the Italian con­
trol system led, in numerous cases, to pre­
miums being wrongly paid for animals which 
should not actually have been selected for 
that purpose. 
31. Italy does not deny the deficiencies alleged 
by the Commission, but challenges the level 
of the correction made by the Commission. 
The applicant attributes the deficiencies in the 
control system to lack of training and lack of 
familiarity with the law on the part of the 
staff assigned to the checks. 
Public storage of cereals 
32. In this connection, Italy seeks the annul­
ment of the Commission decision in so far as 
it disallows expenditure of a sum of ITL 
10 082 336 246. The Commission justifies that 
reduction on the ground that it found serious 
deficiencies during its inspections. The public 
storage functions had been transferred without 
any control to outside operators. According 
to the Commission's submission, there were 
no controls either in respect of the outside 
operators' activities or in respect of the quality 
of the stored products. As a result, the Fund 
had incurred unnecessary costs. For that 
reason the Commission made a 10% reduc­
tion in the expenditure claimed as technical 
costs and financial charges for 1992 and a 5% 
reduction in the expenditure claimed as other 
costs for 1992. 
33. Italy does not deny the alleged deficien­
cies, but challenges the level of the reduction. 15 — OJ 1989 L 289, p. 1. 
I - 5873 
OPINION OF MR ALBER — CASE C-242/96 
Set-aside of arable land 
34. In this sector, Italy challenges the Com­
mission decision in so far as it disallows 
expenditure of a sum of ITL 2 169 762 753. 
According to the applicant, that amount cor­
responds to 10% of the expenditure allowed 
for Sicily in respect of 1992. 
35. Regulation N o 797/85 on improving the 
efficiency of agricultural structures, 16 as 
amended by Regulation N o 1094/88, 17 intro­
duced an aid scheme to encourage the set-
aside of arable land. 1 8 That aid could be 
granted for all arable land, irrespective of the 
crops grown, provided that the land had in 
fact previously been cultivated for a reference 
period to be determined 19 — in this case the 
1987/88 marketing year. 
36. In the Commission's opinion, certain land 
in Sicily benefited under that aid scheme 
despite the fact that the last-mentioned con­
dition was not satisfied, and it makes no sense 
to pay set-aside premiums in respect of land 
which has been ploughed but on which no 
crops have been grown. The applicant also, it 
is alleged, carried out no checks whatsoever 
in that regard. 
37. Italy submits that the previous practice of 
'technical fallowing' has been superseded. 
With technical fallowing, the land lies fallow 
for a certain time and is only ploughed in 
order to improve its capacity to take in and 
retain water. Farmers have now gone over to 
planting that fallow land with autumn/spring 
crops for early harvesting, such as legumi­
nous forage crops, broad beans, chickpeas, 
potatoes, etc., in order to prevent corrosion 
damage. 
38. In the Commission's opinion, the tradi­
tional fallowing practice (that is to say without 
cultivation) has (also) continued to be 
employed in Sicily. However, since no checks 
whatsoever were carried out in this regard, it 
disallowed expenditure of a sum corre­
sponding — according to it — to 5% of the 
relevant costs. 
39. Italy disputes the justification for the 
reduction since, it claims, the relevant provi­
sion of the regulation is not clearly worded. 
16 — Council Regulation (EEC) N o 797/85 of 12 March 1985 on 
improving the efficiency of agricultural structures (OJ 1985 
L 93, p. 1). 
17 — Council Regulation (EEC) N o 1094/88 of 25 April 1988 
amending Regulations (EEC) N o 797/85 and (EEC) N o 
1760/87 as regards the set-aside of arable land and the exten-
siñeation and conversion of production (OJ 1988 L 106, 
p. 28). 
18 — Article la(1). 
19 — Article la(2) of Regulation N o 1094/88. 
I - 5874 
ITALY v COMMISSION 
Sugar storage costs 
40. In this connection, Italy challenges the 
Commission decision in so far as it disallows 
expenditure of a sum of ITL 391 281 020. 
That amount corresponds to 10% of the 
storage costs paid to specialised traders (and 
independent stores) in 1992. 
41. The Commission justifies that reduction 
on the ground that none of the necessary 
checks was carried out. 
42. Article 8 of Council Regulation (EEC) 
N o 1785/81 of 30 June 1981 on the common 
organisation of the market in the sugar sec­
tor 20 instituted a system of compensation for 
sugar storage costs. That system comprises 
flat-rate reimbursement to be financed by 
means of a levy. Under Regulation N o 
1785/81, that levy is to be imposed on each 
importer of preferential sugar and each refiner 
of preferential sugar. 
43. Under Article 2 of Council Regulation 
(EEC) N o 1358/77 of 20 June 1977 laying 
down general rules for offsetting storage costs 
for sugar and repealing Regulation (EEC) N o 
750/68, 21 reimbursement of storage costs is 
to be made to: 'any sugar manufacturer to 
whom a basic quota has been allocated; any 
sugar refiner; any manufacturer of powdered, 
... candy sugar ...; any specialised sugar trader 
who has been approved by the Member State 
on whose territory he is established; any inter­
vention agency'. 
44. In addition, the third recital in the pre­
amble to that regulation states: 'therefore, the 
principle to be observed when the amounts of 
these levies are being fixed should be that 
total reimbursements made should equal total 
levies charged'. 
45. Finally, the control of that system is regu­
lated in Article 19 of Commission Regulation 
(EEC) No 1998/78 of 18 August 1978 laying 
down detailed rules for the offsetting of storage 
costs for sugar. 22 That provision states: 'Mem­
ber States shall take all measures necessary 
for the application of this Regulation and shall 
in particular establish all the necessary con­
trol measures.' 
20 — OJ 1981 L 177, p. 4. 
21 — OJ 1977 L 156, p. 4. 
22 — OJ 1978 L 231, p. 5. 
I - 5875 
OPINION OF MR ALBER — CASE C-242/96 
46. The Commission submits that the system 
in question is a very complex one requiring 
strict control arrangements, for which provi­
sion has also been made. However, it claims 
that since, by 31 December 1992, no checks 
whatsoever had been carried out at the pre-, 
mises of specialised traders in Italy, the 10% 
reduction is justified. 
47. Italy concedes that, during a transitional 
period, 23 no on-the-spot checks were carried 
out at the premises of specialised traders. 
Only an administrative control procedure 
took place. However, this was very intensive 
and involved heavy penalties for failure to 
submit the requested documents in time. As 
soon as the AIMA was also able to carry out 
on-the-spot checks, these were extended to 
cover the preceding periods as well. In the 
course of those checks no irregularities were 
found. That was also true of the preceding 
periods. 
48. The applicant argues that, in view of the 
fact that the storage costs were financed by 
the levies paid by the producers, rejection of 
the storage costs accounts conflicts with accep­
tance of the levy accounts of the beneficiaries. 
49. With regard to the necessary checks, the 
applicant submits that the Community rules 
contained no provisions specifying the fre­
quency and method applicable to them. On 
the contrary, the Community legislature has 
allowed the authorities of the Member States 
considerable freedom in applying the proce­
dures and measures which it considers neces­
sary in order to ensure sufficient supervision. 
Since, it is argued, there is no evidence of 
economic harm having occurred in this case, 
there is no basis for claiming that the checks 
were not sufficient. 
Forms of order sought 
50. On account of those six reductions, in 
July 1996 the Italian Republic brought an 
action and claimed that the Court should: 
— annul Commission Decision N o 417 of 10 
April 1996 24 in so far as, in clearing the 
accounts submitted by the Italian Republic 
for expenditure for 1992, it declares that 
the total sum of ITL 108 850 076 808 is 
not chargeable to the EAGGF. 
23 — In the period examined by the Commission the AIMA had 
just taken over the functions of the former Cassa Congua­
glio Zucchero. 24 — Published under No 96/311/EC (OJ 1996 L 117, p. 19). 
I - 5876 
ITALY v COMMISSION 
51. The Commission claimed that the Court 
should: 
— dismiss the action; 
— order the applicant to pay the costs. 
C — Opinion 
Public storage of beef and veal 
52. The Commission alleges serious deficien­
cies in Italy's control system, that is to say, 
that Italy failed to fulfil its supervisory obli­
gation. As far as the supervision of boning 
operations is concerned, that obligation results 
from Article 20 of Regulation N o 859/89 
laying down detailed rules for the application 
of intervention measures in the beef and veal 
sector. 25 That article provides not only that 
intervention agencies are to be responsible for 
the supervision of the operations in question, 
but also specifies the forms which that super­
vision is to take. As far as other supervision 
is concerned, reference should be made to 
Regulation (EEC) N o 729/70 of the Council 
of 21 April 1970 on the financing of the 
common agricultural policy. 26 The recitals in 
the preamble to that regulation state, inter 
alia: 'Whereas measures must be taken to 
prevent... irregularities...'. 27 The eighth recital 
states: 'Whereas Community expenditure 
must be made subject to close supervision; 
whereas, in addition to supervision carried 
out by Member States on their own initiative, 
which remains essential, provision should be 
made for verification by officials of the Com­
mission and for it to have the right to enlist 
the help of Member States'. 
53. Article 8 of the regulation, which reflects 
those recitals, provides in paragraph 1 thereof: 
'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; 
25 — Cited in footnote 6. 
26 — OJ, English Special Edition 1970 (I), p. 218. 
27 — Seventh recital in the preamble to Regulation No 729/70. 
I - 5877 
OPINION OF MR ALBER — CASE C-242/96 
— prevent and deal with irregularities; 
— recover sums lost as a result of irregulari­
ties or negligence. 
...' 
54. Under the Court 's case-law the national 
administrative authorities are responsible for 
ensuring that the Community rules are strictly 
observed. 28 The extent of this obligation on 
the Member States in regard to the financing 
of the EAGGF was decided by the Court in 
its judgment in Exportskchterijen van 
Oordegem. In that judgment it was held in 
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 v Commission [1990] ECR I-2321, 
paragraphs 16 and 17).' 29 
55. It follows that an obligation on the part 
of Member States to carry out checks may 
subsist even if such a requirement is not 
expressly provided for in the relevant provi­
sion. 
56. Since Regulation N o 859/89 contains 
extensive provisions on the characteristics 
which meat bought in is to have, how it is to 
be stored and how it is to be packed, the 
Member States must carry out the relevant 
checks in order to ensure that those rules are 
observed. 
28 — Judgments in Case C-48/91 Netherlands v Commission [1993] 
ECR I-5611, it paragraph 11, Case C-366/88 France v Cam-
mission [1990] ECR I-3571, at paragraph 20, Case C-8/88 
Germany v 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. 
29 — Judgment in Case C-2/93 Exportslachteräen van Oordegem 
[1994] ECR I-2283, at paragraphs 17 and 18. 
I - 5878 
ITALY v COMMISSION 
57. If they fail to comply with that obliga­
tion, their expenditure in the context of the 
EAGGF will not be reimbursed. As the Court 
has observed, 'only refunds granted and inter­
vention undertaken in accordance with the 
Community rules within the framework of 
the common organisation of agricultural mar­
kets are to be financed by the EAGGF ...'. 30 
In that regard, it is for the Commission to 
prove that the rules of the common organisa­
tion of the agricultural markets have been 
infringed. 31 
58. It therefore now falls to examine whether 
the Commission has satisfied the burden of 
proof upon it. It claims that the supervisory 
functions and responsibility in the context of 
the intervention procedure were transferred 
by the AIMA to the AIA and private centres 
without appropriate supervision by the AIMA 
having been ensured. 
59. Italy, for its part, gives details of the staff 
assigned to the checks and of the form which 
those checks took. On the one hand it names 
official veterinarians in this connection, but 
also states that checks were carried out by an 
organisation which was directly linked to the 
agency responsible for storage. N o informa­
tion is given about whether checks were also 
carried out by the AIMA and, if so, what 
form they took. The applicant merely states 
that it cannot be assumed that the AIMA del­
egated its function to the AIA. On the con­
trary, it claims, there was a reciprocal contract 
between the two organisations. 
60. Since the AIMA has thus provided no 
information on whether and how it carried 
out its checks, it could be inferred therefrom 
that supervision was completely lacking at 
that level. 
61. In the Commission's opinion, that is con­
firmed by the fact that in some instances the 
deficiencies found on the meat itself were so 
obvious (defective stamps, for example) that 
they should have been found during a proper 
check in any case. 
62. The question is whether that is sufficient 
to prove an infringement on the part of the 
AIMA. In this connection, reference should 
be made to the Court's case-law under which 
the Commission is obliged on each occasion 
to give reasons for its decision finding an 
absence of, or defects in, inspection proce­
dures. 32 In that case the Commission argued, 
inter alia, that the competent authorities were 
30 — Judgment in Netherlands v Commission, cited in footnote 
28, at paragraphs 13 and 14, with further references. 
31 — Judgment in Netherlands v Commission, cited in footnote 
28, at paragraph 18, with further references; judgments in 
Case C-281/89 Italy v Commission [1991] ECR I-347, at 
paragraph 19, with further references; Case 347/85 United 
Kingdom v Commission [1988] ECR 1749, at paragraph 16, 
and Case C-55/91 Italy v Commission [1993] ECR I-4813, 
at paragraph 13, with further references. 
32 — Judgment in Germany v Commission, cited in footnote 28, 
at paragraph 23. 
I - 5879 
OPINION OF MR ALBER — CASE C-242/96 
unable to provide information on the fre­
quency of on-the-spot inspections or on the 
system of communication between the super­
visory authorities and local officials. They 
were also said to have been unable to com­
ment on the failure to draw up written reports. 
From the Commission's point of view, those 
factors constituted sufficient reasons for its 
decision. It was now for the applicant to show 
that the Commission's findings were inaccu­
rate. It was not sufficient in this regard, the 
Court went on, for the applicant to contend 
that administrative checks as well as on-the-
spot inspections were in fact carried out, but 
without producing any evidence for it. Since 
it had thus failed to show that checks had 
been carried out, those findings were capable 
of giving rise to serious doubts as to the 
existence of an adequate and effective series 
of supervisory measures and inspection pro­
cedures. 33 
63. In this connection, the Commission sub­
mits that the AIMA was unable to explain by 
what criteria it assessed whether the AIA car­
ried out properly the tasks transferred to it. 
In other words, the AIMA was unable to 
show by what means it ensured that the 
system was functioning properly. Moreover, 
it is alleged, the AIMA was also unable to 
give any indication of instructions which it 
may have issued. The Italian authorities had 
not even made clear whether any on-the-spot 
checks took place and, if so, how often and 
according to what criteria. Much the same 
applied to measures concerning the storage of 
meat. Finally, the authorities had also been 
unable to produce the results of any checks. 
64. In the Commission's opinion, an effective 
control system is all the more vital in this 
context since, in its view, in many cases the 
checker and the subject of the check are one 
and the same. Such a practice increases the 
risk of fraud. Italy says nothing about this. It 
merely makes observations concerning the 
allocation of functions in a very specific case 
as between AIA inspectors, official veterinar­
ians and staff assigned to checks by the pri­
vate intervention centres. It is not apparent 
from those submissions whether the functions 
were always clearly separate as between the 
individual agencies. 
65. Furthermore, Italy makes observations 
only in response to individual allegations. 
Thus, for example, in response to the allega­
tion that the intervention agencies had, in 
contravention of the rules, bought in meat 
which was already frozen, it states that such 
an infringement could not have been estab­
lished retrospectively by a Commission 
inspection. The Commission contradicts this 
and submits that, in the case of meat pur­
chased when it is already in a frozen state, the 
stamps are very easy to remove, in contrast to 
stamps applied to fresh meat. Italy does not 
deny the allegation that the maximum quan­
tity which is allowed to be packed into car­
tons was not complied with in Italy. It merely 
states the reasons why that rule was not 
observed. The applicant does not respond in 
detail to the allegation that false stamps were 33 — Judgment in Germany v Commission, cited in footnote 28, 
at paragraph 26 et seq. 
I - 5880 
ITALY v COMMISSION 
applied. It merely submits that no loss was 
occasioned if a stamp was applied in the 
wrong place. 
66. As far as the reclassifications are con­
cerned, it at least admits that the AIA was 
obliged, from 1991 onwards, to pass on exten­
sive instructions by circular letter to the com­
petent agencies in order to ensure compliance 
with the rules. It thus does not deny that dif­
ficulties arose in this area. 
67. In other respects, in response to many 
allegations it merely states that checks were 
carried out but that they revealed no infringe­
ments whatsoever. As has already been dem­
onstrated, according to the Court's case-law 
that is not sufficient. As far as the problems 
with the classification of meat are concerned, 
it contends that this is done on the basis of 
subjective criteria which vary from one 
Member State to another. Against that it must 
be said that there are clear Community rules 
as to how meat is to be classified. 34 With 
regard to the allegation that veal or beef of 
the poor-quality conformation class P was 
purchased, the applicant contends that there 
was no reason to sell veal into intervention 
since the price of veal was much higher on 
the open market. With regard to that, it must 
be stated that selling veal into intervention 
may make sense if that meat cannot be sold 
on the open market. Meat of conformation 
class P, the applicant goes on, is very 
uncommon in Italy and was not encountered 
in the course of its own checks. As has already 
been demonstrated, that submission is not 
sufficient. With regard to the allegation of fal­
sified classification, the applicant, in addition 
to asserting that no such falsification was 
established, refers to experts' reports which 
were drawn up at the request of the pro­
ducers and intervention centres. N o particular 
attention was paid to an alteration of confor­
mation class 'P ' into the better-quality class 
'R' since the classes shown had turned out to 
be correct. Whether that submission is suffi­
cient to refute the allegation is questionable. 
But even if it were, there are still enough 
other points which suggest deficiencies in the 
control procedures. 
68. A further point which the applicant raises 
is that the deficiencies established are minimal; 
that is to say that only a minor infringement 
has occurred. Apart from the fact that the 
scale of the infringement is uncertain, such a 
submission can relate only to an individual 
problem and not to all the deficiencies alleged 
by the Commission. 
69. Next, as far as the sales to Bulgaria, the 
former Soviet Union and Brazil are con­
cerned, the applicant contends that there were 
no complaints on the part of the consignees. 
However, that absence of complaints cannot 
constitute a criterion in the present case. In 
the case of Bulgaria, the applicant claims that 
the meat was inspected prior to export. If 
34 — Council Regulation (EEC) No 1208/81 of 28 April 1981 
determining the Community scale for the classification of 
carcases of adult bovine animals (OJ 1981 L 123, p. 3). 
I -5881 
OPINION OF MR ALBER — CASE C-242/96 
deficiencies had been found on that occasion, 
it is argued, the meat could not have been 
released for export. The same applies to the 
sales to the former Soviet Union. Moreover, 
in the case of the sales to Bulgaria, the Com­
mission is said to have stated a completely 
wrong quantity of meat. That claim cannot 
be verified. What is clear, however, is that 
during an inspection which was carried out it 
was concluded that the meat in question did 
not comply with the rules on intervention. 
70. Italy cites a further individual instance. In 
that case, after no objections had been raised 
in the course of an inspection by the EAGGF, 
the AIA established considerable deficiencies. 
However, it cannot be inferred from that 
individual case of an actual inspection that 
the AIA's inspection criteria were in general 
conformity with those of the EAGGF. 
71. Finally, the applicant submits that the 
deficiencies established by the Commission 
related to just a few isolated cases (the defi­
ciencies on the meat itself and the defective 
packing, for example). However, those iso­
lated cases constitute an additional factor in 
support of the allegation that no effective 
system of control existed. 35 Here, too, it may 
surely be assumed that the Commission has 
succeeded in showing that, if the AIMA car­
ried out any checks at all, those checks, like 
those carried out by the AIA, were insuffi­
cient. To that extent, the isolated cases estab­
lished by the Commission may corroborate 
that point. Moreover, the Commission has 
submitted that it inspected all the existing 
intervention centres in 1990 and 15 out of 35 
in 1991. It found the same deficiencies in all 
of them. To that extent, it is not possible in 
this case to speak merely of minor isolated 
instances or selectively-targeted inspections. 
Secondly, it should be pointed out that in this 
case the Commission chose the flat-rate cal­
culation method on the basis of the risk which 
had arisen. Since the AIMA was unable to 
disprove the allegation that it was no longer 
carrying out inspections itself, that alone sup­
ports the conclusion that there was a serious 
risk to the Fund. Any such conclusion does 
not have to be based solely on the deficien­
cies established during the checks. 
72. The Commission has thus been able to 
prove that Italy failed to fulfil its supervisory 
obligations. It rightly assumes that such a 
failure constituted a risk to the Fund. 
73. The remaining burden of proof now rests 
on Italy. As the Court has held, when the 
Commission refuses to charge certain expen­
diture to the EAGGF on the ground that it 
was incurred as a result of breaches of Com­
munity rules imputable to a Member State, it 
is for that State to show that the conditions 
for obtaining the financing refused by the 
35 — See also judgment in Germany v Commission, cited in foot­
note 28, at paragraph 42. 
I - 5882 
ITALY v COMMISSION 
Commission are fulfilled; 36 in other words, 
the applicant must prove that the conduct 
imputed to it did not lead to an increase in 
costs in the context of the EAGGF. However, 
the applicant makes no observations on this 
point. 
74. It merely submits that, if the Commis­
sion had reached the correct decision when 
exercising its discretion, it should have made 
a reduction of only 5%. 
75. It should be pointed out in this connec­
tion that the Court has held that where it 
proves impossible to establish with certainty 
the extent to which a national measure which 
is incompatible with Community law has 
caused an increase in the expenditure entered 
under a budgetary item of the EAGGF, the 
Commission has 'no choice' but to disallow 
all the expenditure in question, and not only 
a percentage thereof. 37 
76. For the purposes of flat-rate correction, 
the Commission has adopted certain guide­
lines upon a proposal by an interservice group 
(Belle Group Report). Those guidelines 
propose a reduction in flat-rate calculations 
to three possible percentages: 
— 2% where the deficiency is limited to parts 
of the control system of lesser importance, 
or to the operation of controls which are 
not essential to the assurance of the regu­
larity of the expenditure, such that it can 
reasonably be concluded that the risk of 
loss to the EAGGF was minor; 
— 5% where the deficiency relates to impor­
tant elements of the control system or to 
the operation of controls which play an 
important part in the assurance of the 
regularity of the expenditure, such that it 
can reasonably be concluded that the risk 
of loss to the EAGGF was significant; 
— 10% where the deficiency relates to the 
whole of or fundamental elements of the 
control system or to the operation of con­
trols essential to assuring the regularity of 
the expenditure, such that it can reason­
ably be concluded that there was a high 
risk of widespread loss. 
77. Otherwise, it is sufficient to refer to the 
Court's case-law concerning cases in which 
the Commission does not disallow the total 
36 — Judgment in Netherlands v Commission, cited in footnote 
28, at paragraph 16, and judgment in United Kingdom v 
Commission, cited in footnote 31, at paragraph 14. 
37 — Judgments in Case C-50/94 Greece v Commission [19961 
ECR I-3331, at paragraph 26, in Joined Cases 15/76 and 
16/76 France v Commission [1979] ECR 321, at paragraph 
32 et seq., and in United Kingdom v Commission, cited in 
footnote 31, at paragraph 13. 
I - 5883 
OPINION OF MR ALBER — CASE C-242/96 
expenditure affected by the infringement but 
endeavours to establish the financial impact 
of the unlawful action by means of calcula­
tions. In such cases, the Court has held, it is 
for the Member State to show that the condi­
tions for obtaining the financing refused by 
the Commission are fulfilled. 38 The applicant 
merely asserts in this regard that, in view of 
the Commission's unrepresentative checks, a 
10% reduction is not justified. That objection 
cannot be upheld since the number of spot 
checks carried out by the Commission is not 
what matters. Decisive importance attaches to 
the checks for which the applicant bears 
responsibility. Since the deficiencies apply to 
the whole of the system — the AIMA was 
unable to show that it monitors the execution 
of the functions transferred by it — a 10% 
reduction is also justified under the Belle 
Group guidelines. 
78. In addition, the applicant refers to its 
improvements in the system, which were also 
acknowledged in the Summary Report. For 
that reason, it argues, a reduction of 10% 
should not have been implemented. The guide­
lines provide that, where the Member State 
undertakes improvements in the system as 
soon as existing déficiences become known, 
this must be taken into account in the correc­
tion to be made. Those criteria should be fol­
lowed when there are doubts as to which of 
the three categories (2, 5 or 10%) should 
be applied. However, the Commission points 
out that the changes in question were intro­
duced only from 1993 onwards. According to 
the Commission, however, the applicant was 
informed of the existing deficiencies as early 
as 1991. 
79. Italy thus did not introduce the improve­
ments immediately after the deficiencies 
became known. In conclusion, it should be 
pointed out that, in principle, Italy is favoured 
by the flat-rate calculation since, if the Com­
mission had projected the results of its checks, 
it would have come to the conclusion that 
irregularities existed in 30% of cases. It could 
therefore even have disallowed the costs in 
their entirety. For that reason it may be 
assumed in this connection that the 10% 
reduction was justified. 
Tendering procedure for beef and veal 
Meaning and purpose of the last phrase of 
Article 9(2) 
80. The applicant claims, firstly, that the Com­
mission has misconstrued the last phrase of 
Article 9(2). That provision, it argues, merely 
requires every natural and legal person 
applying to the authority as a tenderer to 
submit one tender only. It is not apparent 
from that provision that account has to be 
taken of economic facts, namely possible con­
nections between members of a company or 
38 — Judgment in United Kingdom v Commission, cited in foot­
note 31, at paragraphs 14 and 15. 
I - 5884 
ITALY v COMMISSION 
firm and the company or firm itself as well as 
holding companies. Such a requirement would 
have to result expressly from the provision. If 
tenders from independent legal persons are 
rejected on economic grounds, that is a breach 
of the principle of economic freedom. 
81. Under the Court's case-law, it is for the 
Commission to prove that the rules of the 
common organisation of the agricultural mar­
kets have been infringed, which results in a 
refusal to charge expenditure to the EAGGF. 39 
82. Moreover, in regard to the requirements 
which the formulation of provisions must 
satisfy, the Court has held: 'Since a rule whose 
breach inevitably entails financial conse­
quences must be sufficiently clear and precise, 
the Commission was not entitled to rely on 
the terms of subheading ... as a basis for 
imposing, at the time of the clearance of 
EAGGF accounts, an interpretation which 
was not dictated by the normal meaning of 
the words used.' 40 
83. Accordingly, it must be examined whether 
the terms in which the last phrase of Article 
9(2) of Regulation N o 859/89 is couched sat­
isfy those requirements and whether they 
allow of a construction of the kind placed 
upon them by the Commission. In that con­
nection it would appear appropriate to 
examine first the manner in which the Com­
mission seeks to interpret the last phrase of 
Article 9(2). The pleadings mainly speak of 
'multiple' tenders. Those cannot be tenders 
submitted by one and the same tenderer under 
one name, for such tenders are not lawful in 
Italy either. As is also clear from the plead­
ings, the Commission is also not challenging 
every kind of connection between the indi­
vidual tenders. Thus, for example, it states 
that where a person operates two indepen­
dent slaughterhouses, both may submit a 
tender. As the Commission explained at the 
hearing, in its view only tenders relating to 
the same quantity of meat are unlawful under 
the last phrase of Article 9(2). Where an inter­
ested party offers his meat not only himself 
but also through the intermediary of nomi­
nees, that is in breach of Community provi­
sions and must be prohibited by the authori­
ties of the Member States. 
84. The Commission points out that, 
according to the Court's case-law, a provision 
is not merely to be construed literally but 
also in accordance with its meaning and pur­
pose. 41 Accordingly, the Commission con­
tends that the provision at issue in these pro­
ceedings would be deprived of its purpose if 
it were possible to submit several tenders via 
nominees and thus circumvent the prohibi­
tory provision. 
39 — See footnotes 30 and 31. 
40 — Judgment in Case 349/85 Denmark v Commission [1988] 
ECR 169, at paragraph 16. 
41 — Judgments in Case C-283/91 Contarini [1992] ECR 1-6359, 
at paragraph 14, and in Joined Cases C-296/93 and C-307/93 
France and Ireland v Commission [1996] ECR I-795, at 
paragraph 21. 
I - 5885 
OPINION OF MR ALBER — CASE C-242/96 
85. The intervention scheme, the Commis­
sion contends, is jeopardised, as has already 
been demonstrated, by the practice in regard 
to intervention buying-in in Italy. By the 
buying-in of excessive quantities greater costs 
arise, it is submitted, than are necessary in 
order to support the market. Moreover, 
equality of access for all interested parties, 
which is required under Article 6(6) of Regu­
lation N o 805/68 as amended by Regulation 
N o 571/89, is not guaranteed. 
86. The last phrase of Article 9(2) of Regula­
tion No 859/89 must therefore, the Commis­
sion contends, be interpreted according to its 
meaning and purpose in such a way that 
intervention measures cannot be frustrated. If 
tenders relate to the same quantity of meat, 
they are in reality only from a single tenderer. 
Such tenders are therefore unlawful. 
87. In the Commission's opinion, that also 
follows from the wording. In this connection 
it should be said that a difference in wording 
as between paragraphs 1 and 2 of Article 9 
could certainly point to a difference in 
meaning. It could be inferred from this that 
it is not sufficient to check whether the person 
who actually submits the tender only submits 
a single one, that is to say, whether in each 
case an independent (legal) person participates 
in the procedure. Thus the term 'interested 
party' could be understood as meaning a 
person interested in selling his meat into inter­
vention. As has been seen, that person must 
not necessarily be the same person as the ten­
derer, that is to say the person who actually 
submits the tender. If, for example, the meat 
is offered via nominees, in that case there is 
only one interested party but several ten­
derers. But if one looks at the way in which 
those two concepts are used in other regula­
tions dealing with intervention measures for 
beef and veal, it may be seen that the above-
mentioned distinction is not always adhered 
to. Thus, for example, the first recital in the 
preamble to Regulation N o 2271/90 42 states 
'... that tenderers should only be allowed to 
submit a single tender ... for each category in 
response to each invitation to tender'. More­
over, the German version of Article 11(3) of 
Regulation N o 2456/93, which replaced 
Article 9 of Regulation N o 859/89, uses the 
terms 'Interessent' [interested party] and 
'Bieter' [tenderer] in connection with the sub­
mission of tenders. 43 
88. Thus, no further conclusions may be 
drawn from the distinction between 'tender­
ers' and 'interested parties' in Article 9. 
89. However, it is more instructive to have 
regard to the provisions which preceded 
those at issue in the present proceedings. 
Thus, in 1990 it was made possible to 
submit several tenders at different prices. 
Under Regulation N o 1282/90 44 the last 
42 — Commission Regulation (EEC) N o 2271/90 of 1 August 
1990 amending Regulation (EEC) N o 859/89 laying down 
detailed rules for the application of intervention measures in 
the beef and veal sector (OJ 1990 L 204, p. 45). 
43 — This distinction is also reflected in the English version, which 
speaks of 'interested parties' and 'tenderer'. 
44 — Commission Regulation (EEC) N o 1282/90 of 15 May 1990 
amending Regulation (EEC) N o 859/89 laying down detailed 
rules for the application of intervention measures in the beef 
and veal sector (OJ 1990 L 126, p. 31). 
I - 5886 
ITALY v COMMISSION 
phrase of Article 9(2) was amended to read as 
follows: 
'they may submit more than one tender, at 
different prices, for each category in response 
to each invitation to tender.' 
90. That provision was, however, repealed 
shortly afterwards in August 1990. Amending 
Regulation N o 2271/90 stated in the first 
recital in the preamble thereto: 'Experience 
shows that tenderers should only be allowed 
to submit a single tender ... for each category 
in response to each invitation to tender'. 
91. In the applicant's view no conclusions 
may be drawn from that as regards the present 
case. Regulation N o 1282/90 concerned the 
submission of more than one tender by the 
same tenderer. However, this case concerns 
the question whether tenders submitted by 
different legal persons may be rejected. That 
was never the intention at the outset. A dif­
ferent interpretation may therefore not be 
adopted in times of economic difficulty; par­
ticularly since the provision in Regulation N o 
2456/93 leads to a reversal of the burden of 
proof for the tenderer. He is required to pro­
duce proof of his economic independence. 
N o corresponding provision is to be found in 
the last phrase of Article 9(2). However, nor 
is it necessary to rely on a provision corre­
sponding to Regulation N o 2456/93. At the 
same time, however, it is clear that after repeal 
of the provision in Regulation N o 1282/90 
the tenderer may no longer submit several 
tenders in respect of the same quantity of 
meat. The meaning and purpose of the provi­
sion here at issue in the last phrase of Article 
9(2) is thus in any case that several tenders 
may not be submitted in respect of a specific 
quantity of meat. That provision would 
become meaningless if it could readily be cir­
cumvented by recourse to nominees. 
92. The applicant must also have been aware 
of that fact when it received the tenders. On 
the one hand, it is true of any rule that it 
becomes meaningless if it is circumvented, for 
example, as is maintained in this case, by 
virtue of the fact that the same meat is offered 
by several persons. O n the other hand, the 
applicant was aware of the meaning and pur­
pose of intervention. To that extent it must 
also have been aware of the fact that it runs 
counter to the purpose of intervention if mul­
tiple tenders are submitted in respect of the 
meat available on the market. 
93. Moreover, the Court has held that even 
in cases where, viewed objectively, Commu­
nity law is incorrectly applied as a result of 
an interpretation adopted in good faith by the 
national authorities, costs incurred in that 
connection must, under Articles 2 and 3 of 
I - 5887 
OP I NI ON OF MR ALBER — CASE C-242/96 
Regulation N o 729/70, be borne by Member 
States. 45 That strict interpretation of the con­
ditions under which expenditure is to be 
borne by the EAGGF is necessary, moreover, 
in view of the objectives of Regulation N o 
729/70. The management of the common agri­
cultural policy in conditions of equality 
between traders in the Member States requires 
that the national authorities of a Member State 
should not, by the expedient of a wide inter­
pretation of a given provision, favour traders 
in that State to the detriment of those in other 
States where a stricter interpretation is 
applied. 46 
94. The applicant points out that the last 
phrase of Article 9(2) is silent as to who the 
individual tenderers are and the manner in 
which they are to structure their relationships 
one to another. It follows from the meaning 
and purpose of the last phrase of Article 9(2) 
that it is prohibited to offer meat by way of 
nominees. The applicant cannot rest content 
with the assertion that it is under no obliga­
tion under the terms of Article 9 to examine 
possible connections between individual ten­
derers. That merely goes to the question as to 
the manner in which observance of a prohibi­
tory provision such as that contained in the 
last phrase of Article 9(2) can be monitored. 
95. Accordingly, it is necessary to concur 
with the Commission's submission that the 
last phrase of Article 9(2) also prohibits ten­
ders which, whilst coming from different legal 
persons, are made in respect of the same meat, 
with the result that the tenders may be assumed 
to have been submitted by nominees. 
96. Accordingly, contrary to the applicant's 
submission, a basis is also provided for such 
tenders to be rejected, namely the last phrase 
of Article 9(2). 
Monitoring obligation on the part of the 
Member State 
97. In the Commission's view, the disallow­
ance made in the context of the clearance of 
accounts is justified on the ground that the 
applicant did not ensure compliance with that 
provision. 
98. It is clear that in Italy tenders were exam­
ined only to see whether they originate from 
different legal persons. N o further examina­
tion was undertaken. In what follows it will 
be a matter of examining whether on that 
basis the applicant may be said to have failed 
to observe a provision of Community law, 
since the Commission has mentioned no actual 
45 — Article 3(1) of Regulation 729/70 provides: 
'Intervention intended to stabilise the agricultural markets, 
undertaken according to Community rules within the frame­
work of the common organisation of agricultural markets, 
shall be financed under Article 1(2)(b).' 
46 — Judgment in Case 11/76 Netherlands v Commission [1979] 
ECR 245, at paragraphs 8 and 9. 
I - 5888 
ITALY v COMMISSION 
example where tenders were actually sub­
mitted by nominees. 
99. However, the Commission is unable to 
adduce such proof because in this respect the 
applicant carried out no checks at all. The 
only check made was whether the tenders 
were from independent (legal) persons. Thus, 
the Commission has no information before it 
for examining the specific circumstances. 
Admittedly, the Commission may also carry 
out its own checks. However, under the 
Court's case-law the management of EAGGF 
finances is principally in the hands of the 
national administrative authorities respon­
sible for ensuring that the Community rules 
are strictly observed. The Court went on to 
point out: 'That system, based on trust, does 
not involve any systematic supervision by the 
Commission, which moreover would in prac­
tice be impossible for it to carry out ... Only 
the Member State is in a position to know 
and determine precisely the information nec­
essary for drawing up EAGGF accounts since 
the Commission is not close enough to obtain 
the information it needs from the economic 
operators.' 47 
100. Thus, since in the context of the clear­
ance of EAGGF accounts the Commission is 
dependent upon information provided by the 
Member States, it is not possible for it here to 
give a specific example of an infringement 
under the tendering procedures. The Com­
mission is able — and required — merely to 
show that the applicant failed to examine all 
the criteria necessary for the purposes of 
compliance with the relevant provision. That 
the Commission has done. 
101. With regard to the general monitoring 
obligation under Article 8 of Regulation N o 
729/70, reference is made to point 53 et seq. 
above. As is clear from the Court's case-law, 
a Member State may be obliged to carry out 
checks even if such a requirement is not 
expressly laid down in the relevant provision. 
102. Thus, the question arises whether in the 
specific case before the Court the applicant 
was required to carry out further checks; that 
is to say, should or could the Member State 
have done more and, if so, what? 
103. As the Commission has stated, the dis­
advantage for the Fund arises out of the fact 
that the submission of several tenders by an 
interested party by means of nominees encour­
ages the submission of speculative tenders. 
Yet if one has regard to the Commission's 
action against speculative tenders as such, it 
might be queried whether the applicant was 
required to take any further steps. 
47 — Judgment in Netherlands v Commission, cited in footnote 
28, at paragraph 11. 
I - 5889 
OPINION OF MR ALBER — CASE C-242/96 
104. According to the Commission, in order 
to prevent speculative tenders whereby, in 
anticipation of a specific reduction coefficient, 
tenders are made in respect of a greater quan­
tity of meat than is available, a security pay­
ment was introduced. 48 That means that in 
that connection the Member States are merely 
obliged to ensure that the appropriate amount 
of security is deposited. They do not have to 
check whether the individual tenderer has 
offered more meat than is in his possession. 
105. In the present case, however, there was 
a further provision to be considered which 
could not be circumvented. An interested 
party desirous of selling his meat into inter­
vention could not submit more than one 
tender. That followed from the underlying 
rationale of intervention. It is true that that 
idea was only subsequendy given concrete 
shape in Regulation N o 2456/93. 49 However, 
that does not alter the fact that already prior 
thereto there must have been awareness of 
that idea. 
106. Thus, it is clear that the applicant ought 
to have carried out further checks in order to 
establish whether the tenders submitted were 
in fact from the same tenderer. That is par­
ticularly the case in light of the clear indica­
tions of interconnections between individual 
tenderers, which resulted from a comparison 
of names, addresses and bank account num­
bers. Even if it could not with certainty be 
concluded from those indications that there 
was an infringement of the last phrase of 
Article 9(2), the indications were however of 
such a nature as to necessitate more specific 
checks, and that is the decisive factor. 
107. Such a check could have been carried 
out even before the entry into force of the 
1993 regulation. As has been shown, a moni­
toring obligation on the part of the Member 
States may subsist even if it is not expressly 
laid down in the relevant provision but derives 
from the spirit thereof. The important factor 
in that connection is that the Member State 
should check whether in fact tenders are being 
made in respect of different quantities of meat. 
The manner in 'which it carries out those 
checks is for it to decide. This does not need 
to be expressly regulated by the Commission. 
Accordingly, the Commission cannot be said, 
contrary to the applicant's submission, to be 
seeking to apply Regulation N o 2456/93 ret­
roactively to the facts of the present case. 
108. It must therefore be held that the appli­
cant ought to have carried out further checks 
but failed to do so. It thus failed to fulfil its 
monitoring obligations and therefore infringed 
Community law. 
48 — Article 10 of Regulation No 859/89. 
49 — Third recital in the preamble to Regulation No 2456/93. 
I - 5890 
ITALY v COMMISSION 
109. The question now remains as to whether 
that is also the case with regard to the prac­
tice of submission of tenders by producers' 
associations, which exists only in Italy. Since 
Italy has submitted that the tenders are 
received in sealed envelopes by the associa­
tions and merely forwarded, a fact not dis­
puted by the Commission, formally speaking 
they are not multiple tenders; their confiden­
tiality would also be safeguarded, so that it is 
not apparent how there could be an infringe­
ment of the last phrase of Article 9(2) or 
Article 9(6). However, that is not the case 
with the practice of submission of tenders by 
producers' associations on their own behalf. 
Since the tenders are first collected and then 
forwarded as a single tender, that is a breach 
of the confidentiality of tenders. Moreover, 
there is the risk of infringing Article 9(4)(a) 
under which a tender must relate to a quan­
tity of at least 10 tonnes. That provision 
becomes completely ineffective if the tenders 
collected include small ones which are then 
submitted as part of a large collective tender. 
In that connection at least there has been an 
infringement of the Community rules. 
Proof of loss occasioned to the EAGGF — 
burden of proof 
110. It now falls to examine whether a reduc­
tion in the context of the clearance of accounts, 
as applied by the Commission, was justified 
on the facts. Since the Commission has proved 
that there was an infringement of the rules 
governing the common organisation of the 
agricultural markets, it is now for the appli­
cant to show that the Commission made an 
error with regard to the financial conse­
quences to be drawn from that. 
111. In this connection the Commission has 
not merely submitted that the EAGGF suf­
fered a loss. Rather it has shown that the 
applicant infringed Community law and the 
manner in which it did so. The Commission 
has, furthermore, set out how that may have 
favoured speculative bids by tenderers. It has 
explained, finally, how that may have led to 
an erroneous appraisal of the market and thus 
to excessive buying-in of beef, possibly at 
higher prices. Thus, in any event, it has 
adduced credible evidence that it was possible 
for loss to have been incurred by the EAGGF. 
112. Since the applicant itself has raised no 
objections to the Commission's financial cal­
culation, it merely remains to be considered 
whether the 2% reduction envisaged by the 
Commission is also justified in the light of 
the Commission's guidelines. 
113. With regard to the rates of reduction 
and percentages listed in those guidelines, ref­
erence is made to point 76 above. 
I - 5891 
OPINION OF MR ALBER — CASE C-242/96 
114. In this connection it must again be 
pointed out that under the Court's case-law 
financing of expendure can be disallowed even 
as to 100% if the precise financial conse­
quences of a measure contrary to Commu­
nity law cannot be established. 50 
115. The present case did not involve minor 
deficiencies in the control system. Rather, 
there was a complete absence of checks as to 
whether multiple tenders were being sub­
mitted in respect of one and the same quan­
tity of meat, and that via nominees. Under 
those circumstances, the 2% rate of correc­
tion chosen by the Commission appears pro­
portionate and appropriate. 
116. Accordingly, the objections raised by 
the applicant in this connection against the 
Commission decision cannot succeed. 
Control procedures with regard to premiums 
for sheepmeat and goatmeat 
117. Italy does not deny that there were 
serious deficiencies with regard to the control 
procedures. However, since measures have 
been adopted from 1993 onwards which the 
Commission itself has acknowledged as effec­
tive, Italy objects to the level of the reduc­
tion. In its opinion, it should be not more 
than 2%. 
118. The Commission, on the other hand, 
points out that those measures were intro­
duced only from 1993 onwards, whereas the 
decision at issue concerns expenditure for 
1992. The Commission further submits that a 
reduction of 10% is also justified on the basis 
of the Belle Group guidelines. It emphasises 
that virtually no effective monitoring took 
place. For that reason the Commission could 
even have envisaged making a higher reduc­
tion, as in the previous years. It refrained 
from doing so in view of the improvments 
made by Italy. 
119. Under the Belle Group Report, the ques­
tion of improvements undertaken by national 
authorities should be raised only when it is 
not entirely clear in which of the three cat­
egories (2, 5 or 10% reduction) a par­
ticular case should be placed. Italy does not 
deny that before the improvements were intro­
duced there was practically no effective moni­
toring. The infringements were therefore so 
serious that a significant financial risk existed 
for the Fund and a reduction of 10% is justi­
fied. 50 — See footnote 37. 
I - 5892 
ITALY v COMMISSION 
120. Moreover, the Belle Group Report then 
states that improvements must be introduced 
as soon as deficiencies came to light. That 
surely did not happen in this case, since the 
Commission had already made reductions in 
the previous years but the improvements came 
into effect only from 1993 onwards. In any 
case, the financial risk in respect of 1992 could 
no longer be lessened. Accordingly, a reduc­
tion of 10% can be regarded as justified in 
this case. 
121. From the applicant's plea that no more 
premiums were paid than was lawful, it could 
be inferred that the existence of a loss is dis­
puted. It should be stated in this connection 
that under the Court's case-law the burden of 
proof in this regard rests on the applicant. 
However, since it has adduced no further 
arguments, it has therefore failed to refute the 
allegation that a significant financial risk arose 
for the Fund as a consequence of the existing 
deficiencies in the control procedures. Under 
the Commission's guidelines, that is a suffi­
cient ground for making a correction. 
Public storage of cereals 
122. In this connection also, Italy does not 
deny the deficiencies established by the Com­
mission. However, pointing to the improve­
ments introduced from 1994 onwards, it main­
tains that the reductions of 5 and 10% made 
for 1992 (in respect of different budgetary 
items in each case) are no longer justified. 
123. In this connection also, the Commission 
refers to the indisputable seriousness of the 
deficiencies which, under the Belle Group 
Report, justifed the reductions adopted by 
the Commission. It points out that the 
improvements introduced will be assessed in 
the context of subsequent clearances of 
accounts. In Italy's opinion, however, the 
reforms introduced should already result in a 
reduction of the rate of correction. 
124. In view of the seriousness of the infringe­
ments, it is not apparent in this context, as in 
that of premiums for sheepmeat and goat-
meat, that the reduction made by the Com­
mission is not justified, particularly since the 
improvements cited by Italy were, according 
to Italy, introduced only from 1994 onwards. 
Set-aside of arable Und 
125. The Commission alleges that Italy failed 
to check whether the land said to have been 
withdrawn from production was land which 
had actually been previously cultivated or 
I - 5893 
OPINION OF MR ALBER — CASE C-242/96 
land which had been cultivated in the context 
of bastard fallow. 
126. Italy does not dispute that, but claims 
that the modified form of fallow (with culti­
vation) has been practised in Italy since the 
1987/88 marketing year. It submits that the 
relevant provisions are not clear, however, and 
a correction is therefore not justified. 
127. The Commission submits that, in the 
light of the observations of the Conciliation 
Body, it is disallowing, not 10% of the expen­
diture, but only 5%. It is thus taking into 
account the otherwise very rigorous control 
procedures operated by the Italian authorities 
with regard to set-aside. 
128. With regard, next, to the question 
whether, as Italy submits, the relevant provi­
sion of the regulation uses a technical term 
whose meaning is not clear, it should be 
pointed out that Italy is referring to the term 
'fallow'. 51 However, in this case it is rather a 
question of ascertaining under what condi­
tions land intended to be withdrawn from 
production can be considered to have actu­
ally been cultivated previously. 
129. In this connection, reference should be 
made to Commission Regulation (EEC) N o 
1272/88 of 29 April 1988 laying down detailed 
rules for applying the set-aside incentive 
scheme for arable land. 52 Under Article 2(1) 
of that regulation, arable land means the types 
of land listed in section D of Annex I to 
Regulation (EEC) N o 571/88 ," with the 
exception of land mentioned under point 
D/21. An exception also applies to land 
devoted to products without a market organi­
sation. Annex 1(D) mentions as crops, inter 
alia: cereals, dried vegetables, potatoes, sugar 
beet, industrial plants such as tobacco, hops, 
cotton, oilseeds or fibre plants, or forage 
plants. The exception under point 21 is 
worded: 'Fallow land'. Accordingly, land 
planted with potatoes and dried vegetables in 
the context of fallow could also be eligible for 
aid. 
130. On the other hand, under the third sub­
paragraph of Article 1a(3) of Regulation N o 
1094/88, the use of set-aside arable land may 
be authorised for grazing and for growing 
lentils, chickpeas and vetches. Land farmed in 
that way may not, therefore, be regarded as 
actually cultivated. Whilst it is therefore not 
clearly apparent from the provisions in ques-
51 — In the French text 'jachère', in the Italian text 'maggese'. 
52 — OJ 1988 L 121, p. 36. 
53 — Council Regulation (EEC) No 571/88 of 29 February 1988 
on the organisation of Community surveys on the structure 
of agricultural holdings between 1988 and 1997 (OJ 1988 
L 54, p. 1). 
I - 5894 
ITALY v COMMISSION 
tion that the land in Sicily at issue was 
eligible for aid, it can however be held that 
those provisions are not clear in that regard. 
131. On the other hand, however, Italy has 
been unable to refute the Commission's alle­
gation that the traditional method of fal­
lowing is still being applied in Sicily. The mere 
assertion that this method has been com­
pletely superseded is not sufficient in this 
regard, particularly since the Commission's 
allegation is partly based on information pro­
vided in the context of the farm accountancy 
data network. 54 The checks required by the 
Commission would therefore have been nec­
essary. The applicant has been unable to show 
that those checks were actually carried out. 
According to the Commission, the applicant 
was also unable to provide any information 
about its instructions regarding checks to be 
carried out. The proposed reduction is there­
fore justified. 
Sugar storage expenditure 
132. In the applicant's opinion, the checks 
which it carried out were sufficient. In its 
view that is also true of the period in which 
only administrative checks and no on-the-
spot checks were made in the case of specia­
lised traders. 
133. The checks which had to be carried out 
are mentioned, inter alia, in Article 4 of 
Regulation N o 1358/77. Paragraph 1 thereof 
provides that calculation of the reimburse­
ment is to be based on monthly returns of 
quantities in store. It follows that checks on 
quantities stored had to be carried out 
monthly. However, that is not in itself suffi­
cient to establish whether those checks had to 
take place on the spot. 
134. Article 16 of Regulation N o 1998/78 
regulates the case where discrepancies are 
found between the actual stocks and the stocks 
recorded. Such discrepancies can, however, 
only be found if checks are carried out on the 
spot. It is therefore clear from the provisions 
on the offsetting of sugar storage costs that it 
was not sufficient to carry out administrative 
checks only. 
135. Since the applicant indisputably failed to 
carry out any on-the-spot checks at the pre­
mises of specialised traders in the period exam­
ined by the Commission, it therefore failed to 
fulfil its monitoring obligation arising from 
the Community rules. 
54 — Regulation No 79/65/EEC of the Council of 15 June 1965 
setting up a network for the collection of accountancy data 
on the incomes and business operation of agricultural hold­
ings in the European Economic Community (OJ, English 
Special Edition 1965-66, p. 70). 
I - 5895 
OPINION OF MR ALBER — CASE C-242/96 
136. The applicant, on the other hand, claims 
that no such obligation results expressly from 
the provisions in question. That view cannot 
be supported. Moreover, the Court has held 
that monitoring obligations on the part of 
Member States may subsist even if they are 
not expressly provided for in a regulation. 
That follows from the spirit and purpose of 
the system in conjunction with the general 
supervisory obligation contained in Article 8 
of Regulation N o 729/70. 
137. In other respects the applicant merely 
asserts that its checks were sufficient. 
According to the Court's case-law, however, 
that submission will not suffice. 
138. As far as the applicant's reference to the 
links between compensation for storage costs 
and levies paid by producers is concerned, 
the Commission submits that the compensa­
tion system in question is based on the prin­
ciple of financial neutrality. This means that 
the total of levies collected and compensatory 
amounts paid out should equal zero in respect 
of any financial year. The Commission refers 
in this regard to Article 6(2) of Regulation 
N o 1358/77. That paragraph provides that 
any difference is to be carried forward to a 
subsequent sugar marketing year. Following 
that principle, the Commission states that 
compensatory amounts are paid only in respect 
of products in respect of which a levy has 
been paid. Conversely, levies are charged only 
on products in respect of which compensa­
tion for storage costs has been paid. In the 
Commission's opinion, however, that balance 
between amounts exists at Community level 
and not at the level of individual undertak­
ings or Member States. It is the Commis­
sion's task to set the amounts annually for 
the Community as a whole. 
139. Moreover, according to the Commis­
sion, the traders who pay levies are not nec­
essarily the same as those who benefit from 
compensation. That follows clearly from the 
fact that compensation is also paid to specia­
lised traders, whereas they are not required to 
pay any levies. Even in the case of a single 
manufacturer, the two amounts — compensa­
tory payments and levies — would not auto­
matically tally. 
140. That argument must be upheld. It cannot 
be inferred from the link between compensa­
tory payments and levies that compensatory 
payments must be made even when the nec­
essary conditions for such payments are not 
fulfilled. Thus, for example, payment is to be 
made only in respect of certain types of 
sugar. 55 Moreover, certain forms of processing 
may have the consequence that the resulting 
product ceases to be eligible for reimburse­
ment. 56 If those conditions are not observed, 
storage costs cannot be reimbursed. Levies 
already paid are irrelevant in that regard. It is 
55 — Article 3 of Regulation No 1358/77. 
56 — Article 9 of Regulation No 1998/78. 
I - 5896 
ITALY v COMMISSION 
rather the case that compensatory sums paid 
without justification result in a loss to the 
Fund. 
141. Nor can its objection that no loss to the 
Fund has been proved avail the applicant. As 
has already been demonstrated, under the 
Court's case-law, where an infringement by a 
Member State is established, it is for the 
Member State to show that the Commission's 
financial considerations are erroneous. In this 
case the applicant has failed to do that. 
142. It is thus clear that the applicant failed 
to carry out the necessary checks, exposing 
the EAGGF to a serious risk. A 10% reduc­
tion is therefore justified. 
Costs 
143. Under the first subparagraph of Article 
69(2) of the Rules of Procedure of the Court 
the unsuccessful party is to be ordered to pay 
the costs if they have been applied for in the 
successful party's pleadings. 
D — Conclus ion 
144. The C o u r t should therefore: 
(1) dismiss the action; 
(2) o rder the Italian Republ ic t o p a y the costs . 
I - 5897