Judgment;Summary — ECLI:EU:C:2020:129
Date: 2020-02-27
Language of the case: Lithuanian
Court formation: Ninth Chamber
Subject matter: Agriculture and Fisheries;European Agricultural Guidance and Guarantee Fund (EAGGF)
Procedure: Action for annulment;Appeal - unfounded
Origin: Lithuania

summary report, the Commission set out the reasons for the flat-rate correction made following the verifications it had carried out in the conformity clearance procedure. In particular, it stated that the Lithuanian authorities had not demonstrated that the definition of ‘commercial farming activity’ established in the ex post control was in line with the definition of semi-subsistence holdings and that, therefore, an ex post control by the Lithuanian authorities was inappropriate to demonstrate that the financial risk was lower than the flat-rate correction imposed. 18 The Republic of Lithuania did not contest Implementing Decision 2013/123 laying down that flat-rate financial correction. 19 On 27 June 2014, the Commission services sent an official communication to the Republic of Lithuania pursuant to the third subparagraph of Article 11(2) and Article 16(1) of Regulation No 885/2006 concerning the funds paid out under the ‘early retirement in the course of commercial farming activity’ measure during the period 16 October 2010 to 15 October 2013. 20 The Commission indicated that that was an additional official communication concerning the audit that led to Implementing Decision 2013/123, stating that a further financial correction for that period should be imposed on the Republic of Lithuania for the same reasons as those referred to in the summary report of that audit. 21 In that regard, the Commission referred to several documents drawn up in the adoption of Implementing Decision 2013/123, including its final position of 9 October 2012. It also added, as an annex, the summary report on that decision, according to which the Lithuanian authorities had not demonstrated that the definition of ‘commercial farming activity’, established in the ex post control, was in line with the definition of semi-subsistence farms and, therefore, that an ex post control by those authorities was inappropriate to demonstrate that the financial risk was lower than the proposed flat-rate correction. The Commission services thus concluded that, because of those shortcomings, a further flat-rate correction of 5% should be applied. 22 On 17 July 2014, the Lithuanian Ministry of Agriculture expressed in writing its disagreement with the correction proposed by the Commission services and requested that the dispute be referred to the conciliation body. In that letter, the Lithuanian Ministry of Agriculture made clear that the proposed further correction was disproportionate because the damage likely to be caused to the European Union, relating to the period 16 October 2010 to 15 October 2013, amounted to only EUR 16 788.34. It also noted the content of the ex post control of applications carried out by the Lithuanian authorities and the criteria on the basis of which that control is carried out. In addition, it argued that the obligation to apply quantitative criteria, such as the size of the agricultural holding concerned or the amount of income received, was unlawful. In that regard, it described the specific situation in Lithuania and the possible negative consequences of equating the concept of carrying on a ‘commercial farming activity’ with that of ‘semi-subsistence holdings’. 23 On 17 December 2014, the conciliation body indicated that conciliation was not possible as it was an ongoing financial correction, the initial financial correction having been laid down by Implementing Decision 2013/123, which had not been challenged. 24 On 10 March 2015, the Commission informed the Lithuanian authorities that, because there had been no substantive change in the reasons which had led to the imposition of the initial financial correction, and in view of the fact that the Lithuanian authorities had not adopted any corrective measure, it was justified to apply the same flat-rate financial correction of 5% for the expenditure incurred under the ‘early retirement’ measure. 25 On 22 June 2015, the Commission adopted the contested decision. In that decision, the Commission imposed on the Republic of Lithuania, pursuant to Article 52 of Regulation No 1306/2013, a financial correction of 5%, in the total sum of EUR 1 938 300.08, for the funds paid under the ‘early retirement’ measure during the period 16 October 2010 to 15 October 2013, on the ground that the Republic of Lithuania had not carried out an appropriate control of the obligation imposed on farmers to carry on a commercial farming activity before being eligible for aid for early retirement. The procedure before the General Court and the judgment under appeal 26 By application lodged at the Registry of the General Court on 2 September 2015, the Republic of Lithuania brought an action seeking annulment of the contested decision, relying on a single plea in law alleging infringement of Article 52(2) of Regulation No 1306/2013, read in conjunction with the principle of proportionality. That plea in law consisted of two parts, alleging, first, that the flat-rate correction imposed by the contested decision did not take account of the nature of the infringement and the financial damage to the European Union and, second, that that flat-rate financial correction was disproportionate. 27 By the judgment under appeal, the General Court dismissed that plea in law and therefore dismissed the action. Forms of order sought by the parties 28 The Republic of Lithuania claims that the Court should: – set aside the judgment under appeal and annul the contested decision, and – order the Commission to pay the costs incurred both in the proceedings before the General Court and in the appeal. 29 The Commission contends that the appeal should be dismissed and requests the Court to order the Republic of Lithuania to pay the costs. The appeal 30 In support of its appeal, the Republic of Lithuania raises two grounds of appeal. In its first ground of appeal, that Member State submits that the General Court misinterpreted and misapplied Article 33m(1) of Regulation No 1257/1999 in holding that the possession of a milk quota did not constitute clear evidence of a Lithuanian farmer’s participation in a commercial farming activity. In its second ground of appeal, the Republic of Lithuania submits that the General Court distorted the evidence by deciding, in paragraphs 74 to 79 of the judgment under appeal, that the Lithuanian Government had not shown that having a milk quota meant that the farmer concerned was carrying on a commercial farming activity. The first ground of appeal Arguments of the parties 31 The first ground of appeal is divided into two parts. 32 By the first part of its first ground of appeal, the Republic of Lithuania alleges, in essence, that the General Court misinterpreted and misapplied, in paragraphs 72, 82 and 83 of the judgment under appeal, Article 33m(1) of Regulation No 1257/1999. More specifically, it alleges that the General Court failed to interpret that provision as meaning that the allocation of a milk quota to a Lithuanian farmer is a significant criterion for the purposes of that farmer’s eligibility for the early retirement scheme. 33 According to the Republic of Lithuania, that interpretation follows from the actual wording of Article 33m(1) of Regulation No 1257/1999, in so far as that provision provides that Lithuanian farmers who have been granted a milk quota are eligible for the early retirement scheme, that the milk quotas of the transferor farmer are to be returned to the national reserve and that the amount of support is to be calculated on the basis of the volume of the milk quota. 34 Furthermore, the Republic of Lithuania argues that the derogation provided for in Article 33m(1) of Regulation No 1257/1999 is the result of expressly taking into account the situation of the milk sector in Lithuania. In its opinion, the use of the concept of ‘milk quota’ in that provision is therefore not insignificant. 35 By the second part of its first ground of appeal, the Republic of Lithuania complains, in essence, that the General Court misapplied its own case-law in holding, in paragraphs 72, 78 and 84 of the judgment under appeal, that the mere possession of a milk quota or the mere registration of an animal intended for slaughter in the database concerned was not sufficient to establish that a farmer was carrying on a commercial farming activity. More specifically, the Republic of Lithuania refers to the judgment of 25 February 2015, Poland v Commission (T‑257/13, not published, EU:T:2015:111), according to which production criteria are required only in order to determine whether the farmer was receiving a real income and are not intended to impose a minimum threshold of economic dynamism on the agricultural holding, below which that holding is not regarded as a commercial farming activity. 36 The Republic of Lithuania therefore submits that the General Court erred in law in ruling that having a single cow enabling the sale of two or three litres of milk per day or a holding consisting of a single cow which was subsequently put to slaughter was negligible and therefore not capable of generating real income. In so doing, the General Court established a minimum threshold below which an agricultural holding cannot be regarded as a commercial farming activity. 37 The Commission submits that the first ground of appeal should be dismissed in its entirety. Findings of the Court 38 As regards the first part of the first ground of appeal, according to the Court’s settled case-law, in interpreting a provision of EU law, it is necessary to consider not only its wording but also its context and the objectives pursued by the rules of which it is part. 39 As stated in Article 10 of Regulation No 1257/1999, the purpose of that regulation is, in particular, to support early retirement in the farming sector in order, inter alia, to provide an income for elderly farmers who decide to stop farming and to improve the economic viability of agricultural holdings by promoting the replacement of such elderly farmers. 40 In order to be eligible for the early retirement aid scheme, the farmer must meet three conditions, listed in Article 11(1) of that regulation, namely stop all commercial farming activity definitively, be at least 55 years of age, without having reached normal retirement age at the time of transfer of his or her farming activity, and have practised farming for the 10 years preceding that transfer. 41 Article 33m(1) of Regulation No 1257/1999 provides for a derogation applicable to the Republic of Lithuania concerning that early retirement aid scheme. Thus, according to that provision, ‘by way of derogation from the second indent of Article 11(1) [of that regulation], farmers in Lithuania who have been allocated a milk quota shall be eligible for the early retirement scheme on condition that they are less than 70 years old at the time of the transfer’. 42 The wording of the first subparagraph of Article 33m(1) of Regulation No 1257/1999 therefore leaves no doubt that the derogation provided for therein relates only to the age of the Lithuanian farmers concerned. First, it clearly indicates that that provision provides for a derogation ‘from the second indent’ of Article 11(1) of that regulation, namely that relating to the age requirement. Second, the expression ‘on condition’ which, in particular, is in the French, Spanish, Italian, Portuguese and English versions of the first subparagraph of Article 33m(1) of that regulation is immediately followed by a reference to the age of those farmers. 43 Consequently, contrary to what the Republic of Lithuania submits, in essence, the first subparagraph of Article 33m(1) of Regulation No 1257/1999 does not derogate from the condition stated in Article 11(1) of that regulation, relating to the carrying on of a commercial farming activity, on the ground that it would make the possession of a milk quota a determining criterion for carrying on that activity. The reference to the possession of such a quota is, in reality, intended only to identify Lithuanian farmers who may benefit from the derogation based on the age laid down in that provision. 44 Thus, that derogation cannot exempt Lithuanian farmers wishing to benefit from early retirement aid from proving that they meet the other conditions listed in Article 11(1) of Regulation No 1257/1999 and, in particular, that they were carrying on a commercial farming activity. 45 That consideration cannot be called into question by the fact that the derogation provided for in Article 33m(1) of that regulation is, as the Republic of Lithuania states, the result of expressly taking into account the situation of the milk sector in Lithuania. As noted in paragraph 43 of this judgment, the reference to the possession of a milk quota is intended only to identify Lithuanian farmers who may benefit from the derogation from the age condition for the purposes of the early retirement aid scheme. Only Lithuanian farmers who have been allocated a milk quota can benefit from that age-related derogation. 46 Consequently, by finding, first, in paragraph 72 of the judgment under appeal, that the mere fact of having been allocated a milk quota does not lead to the finding that a farmer is carrying on a commercial farming activity and, second, in paragraph 83 of that judgment, that Article 33m(1) of Regulation No 1257/1999 provides for a derogation only as regards the age which Lithuanian farmers must have reached in order to benefit from the early retirement aid scheme and that that derogation does not exempt those farmers from the obligation to comply with the other conditions in order to benefit from that scheme, the General Court did not err in law. 47 The first part of the first ground of appeal must therefore be rejected as unfounded. 48 As regards the second part of the first ground of appeal, by which the Republic of Lithuania submits that the General Court, contrary to its own case-law and that of the Court of Justice, established a minimum threshold below which a farmer is presumed not to carry on a commercial farming activity, it must be noted that that part is based on an incorrect and incomplete reading of the judgment under appeal. 49 Contrary to what the appellant submits, the General Court correctly analysed the situation in the light of the provisions of Regulation No 1257/1999 and the relevant case-law. 50 Thus, it is apparent from paragraphs 52 to 56 of the judgment under appeal that, in the first place, the General Court merely noted that, in a conformity clearance procedure which may lead to a flat-rate correction, the Commission has wide discretion and that, in order to justify its refusal to charge certain expenditure to the European Union budget, it must submit evidence of its serious and reasonable doubts as to the expenditure incurred by the Member State concerned. It is then up to that Member State to prove that the conditions for benefiting from the financing refused by the Commission have been met. 51 In the second place, the General Court noted, in paragraphs 65 to 67 of that judgment, that, in order to be eligible for the early retirement scheme, the farmer concerned must have carried on a commercial farming activity. In that regard, it stated, in paragraph 68 of that judgment, that carrying on an activity which is limited to meeting one’s own needs and those of one’s family cannot be equated with the carrying on of an income-generating activity which can be classified as a ‘commercial agricultural holding’. It also stated, in paragraph 69 of that judgment, that the criteria relating to production are required only to determine whether the farmer concerned was receiving real income and are not intended to impose a minimum threshold for the agricultural holding’s economic dynamism below which its farmer would not have been eligible for early retirement aid, even though he or she was carrying on his or her activity for commercial purposes. 52 In the present case, as the General Court noted in paragraphs 70 and 72 of the judgment under appeal, the Commission’s doubt was as to whether the mere fact that a Lithuanian farmer was registered in the database of farmers who had been allocated milk quotas was a relevant criterion for concluding that such a farmer was carrying on a commercial farming activity, when it was sufficient for him or her to have one cow and sell two or three litres of milk per day to be registered in that database and thus be eligible for early retirement aid. 53 It was therefore for the Republic of Lithuania to demonstrate that the Commission’s findings were incorrect and that even those small holdings which were registered in the milk quota database were generating real and not insignificant income, thus meeting the criterion of carrying on a commercial farming activity within the meaning of the third indent of Article 11(1) of Regulation No 1257/1999, without it being necessary to take into account, in that regard, the extent of the economic dynamism of the agricultural holding concerned. 54 After assessing, in paragraphs 73 to 77 of that judgment, all of the evidence submitted by the Republic of Lithuania, the General Court concluded, in paragraph 78 of that judgment, that the Republic of Lithuania had not succeeded in removing the Commission’s serious and reasonable doubt as to any grant of early retirement aid to Lithuanian farmers who, even though they were registered in the milk quota database, had only one cow and therefore could not be regarded as receiving income from a commercial farming activity. 55 It follows from the foregoing considerations that, contrary to the appellant’s contention, the General Court in no way imposed a minimum threshold below which it would be presumed that there was no commercial farming activity, namely, in the present case, the production of milk from a single cow. 56 The General Court was therefore fully entitled to conclude, in paragraph 89 of the judgment under appeal, that the Commission could have had doubts as to the relevance of the registration of Lithuanian farmers in databases relating to the agricultural sector, such as the database of farmers who have been allocated milk quotas, as a criterion for determining whether the farmer concerned had carried on a commercial farming activity before being eligible for early retirement aid. 57 In those circumstances, the second part of the first ground of appeal must be rejected as unfounded. 58 In the light of the foregoing, the first ground of appeal must be dismissed as unfounded. The second ground of appeal Arguments of the parties 59 By its second ground of appeal, the Republic of Lithuania submits, in essence, that the General Court, in paragraphs 74 to 79 of the judgment under appeal, distorted the evidence by finding that that Member State had not shown that holding a milk quota proved the existence of a commercial farming activity. 60 The second ground of appeal is divided into two parts. 61 By the first part of its second ground of appeal, the Republic of Lithuania submits, in essence, that the General Court, in paragraph 74 of the judgment under appeal, should have inferred from the evidence which that Member State provided that the early retirement measure was linked to the milk quota scheme, making the registration of a Lithuanian farmer in the database of those quotas a significant criterion for the purposes of granting early retirement aid. In that regard, the Republic of Lithuania states that, before the General Court, it relied on an audit carried out by the Commission in April 2005 concerning the national application of aid measures in the milk products sector and on Special Report No 4/2008 of the Court of Auditors of the European Union concerning the implementation of milk quotas in the Member States which acceded to the European Union on 1 May 2004. 62 According to the Republic of Lithuania, those documents were an indication of market participation and therefore demonstrated that a Lithuanian farmer who was allocated a milk quota was carrying on a commercial farming activity. In that regard, it does not matter that no checks were carried out on the milk quota database during the audit carried out from 20 to 24 April 2009 as part of the early retirement measure, as the Commission has been aware of the milk quota system since 2004. 63 The Republic of Lithuania also considers that the General Court was wrong to find, in paragraph 74 of the judgment under appeal, that the milk quota scheme was not linked to rural development measures, such as the early retirement measure. It is clear from Article 33m(1) of Regulation No 1257/1999 that the amount of aid for early retirement is calculated taking account of the size of the milk quota allocated to the holding, thus confirming the decisive nature of the criterion relating to the milk quota in order to obtain such aid. 64 By the second part of its second ground of appeal, the Republic of Lithuania alleges that the General Court failed to take into account, in paragraphs 75 to 79 of the judgment under appeal, the evidence submitted before it to show that the allocation of milk quotas to Lithuanian farmers demonstrated that they were selling milk and rearing an appropriate number of animals. 65 In that regard, it argues, first, that that evidence was in paragraph 38(1) of its application at first instance and in paragraphs 21 and 33 of its reply at first instance. 66 Next, the Republic of Lithuania submits that the General Court failed to take account of its answers to the questions put by the General Court in the measures of organisation of procedure, even though those answers referred to nine criteria demonstrating that the farmers concerned had received income from their production and that they had therefore carried on a commercial farming activity. 67 The Republic of Lithuania also argues that, contrary to what the General Court states in paragraphs 76 to 78 of the judgment under appeal, it clearly answered the question as to whether the mere presence of the farmer in the milk quota database meant that he or she was deemed to be carrying on a commercial farming activity. In that respect, it submits that it expressly stated in its response before the General Court that ‘[it] has consistently taken the position throughout the entire process of cooperation with the Commission that the existence of an entry in the databases is a sufficient basis for confirming that a commercial farming activity is actually carried on. …’. 68 Finally, it considers that, contrary to what the General Court states in paragraph 79 of the judgment under appeal, other arguments supported its position on the relevance of the inclusion of a farmer in the milk quota database for the purposes of determining the existence, in relation to that farmer, of a commercial farming activity. Thus, the General Court should also have taken account of the additional arguments which the Republic of Lithuania provided, in particular, in its replies to the questions put by that court, which showed that 43% of Lithuanian producers had not obtained a milk quota, which proved that the Lithuanian authorities had verified that the farmer concerned actually participated in the market and that that farmer received income. 69 The Commission disputes the validity of that argument. Findings of the Court 70 It should be noted that, according to the Court’s settled case-law, it follows from the second subparagraph of Article 256(1) TFEU and from the first paragraph of Article 58 of the Statute of the Court of Justice of the European Union that the Court of Justice has no jurisdiction to establish the facts or, in principle, to examine the evidence which the General Court accepted in support of those facts. Provided that that evidence has been properly obtained and the general principles of law and the rules of procedure in relation to the burden of proof and the taking of evidence have been observed, it is for the General Court alone to assess the value which should be attached to the evidence produced before it. That appraisal therefore does not, save where that evidence has been distorted, constitute a point of law which is subject, as such, to review by the Court of Justice. 71 There is such distortion where, without recourse to new evidence, the assessment of the existing evidence is clearly incorrect. However, such distortion must be obvious from the documents on the Court’s file, without there being any need to carry out a new assessment of the facts and the evidence. Moreover, where an appellant alleges distortion of the evidence by the General Court, he or she must indicate precisely the evidence alleged to have been distorted by that Court and show the errors of appraisal which, in his or her view, led to that distortion (judgment of 19 September 2019, Poland v Commission, C‑358/18 P, not published, EU:C:2019:763, paragraph 45 and the case-law cited). 72 By its ground of appeal, entitled ‘Distortion of the factual circumstances’, summarised as follows: ‘the General Court … distorted the facts when it concluded, in paragraphs 74 to 79 of the judgment under appeal, that the Lithuanian Government had not shown that holding a milk quota meant that the applicant was carrying on a commercial farming activity, which did not substantially reflect the documents in the case which were communicated to the General Court’, the appellant submits that the General Court distorted the evidence in two respects. 73 As regards, in the first place, the allegation of distortion of the evidence, in paragraph 74 of the judgment under appeal, as regards the General Court’s finding that the Commission was able to take the view that the milk quota scheme was not linked to rural development measures, such as the early retirement measure, it can only be rejected. 74 It is apparent from that paragraph of the judgment under appeal, which must be read in conjunction with paragraph 73 of that judgment, that the General Court merely found that, although the two documents relied on by the Republic of Lithuania did indeed relate to the milk quota scheme, they did not, however, demonstrate that the operation of the milk quota database had been the subject of the audit carried out from 20 to 24 April 2009 as part of the early retirement measure and that, as a result, the Commission had been aware of the link between the milk quota scheme and the early retirement aid measure. It was therefore in the exercise of its exclusive jurisdiction to assess the evidence that the General Court inferred, in paragraph 74 of that judgment, that the Commission could take the view that the milk quota scheme was not linked to rural development measures, such as the early retirement measure. 75 In so doing, the General Court did not distort the facts and evidence in any way. 76 In the second place, as regards the Republic of Lithuania’s allegation that the General Court distorted the evidence, in paragraphs 75 to 79 of the judgment under appeal, by failing to take account of the evidence purporting to establish that, in order to qualify for a milk quota, Lithuanian farmers had to prove that they were selling milk, it must also be rejected. 77 It should be noted that the second part of the second ground of appeal in fact alleges that the General Court did not take into consideration the evidence submitted by the appellant before it. However, it is sufficient to note that, as is apparent from paragraph 54 of the present judgment, the General Court took account, in paragraphs 75 to 81 of its judgment, of all the evidence submitted by the appellant. That allegation must therefore be rejected. 78 In the light of all of the foregoing considerations, the second ground of appeal must be dismissed as unfounded. 79 Since the two grounds of appeal put forward by the Republic of Lithuania in support of its appeal must be declared unfounded, the appeal must be dismissed in its entirety. Costs 80 Under Article 138(1) of the Rules of Procedure of the Court of Justice, applicable to appeal proceedings by virtue of Article 184(1) of those rules, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Republic of Lithuania has been unsuccessful, the latter must be ordered to pay the costs. On those grounds, the Court (Ninth Chamber) hereby: 1. Dismisses the appeal; 2. Orders the Republic of Lithuania to pay the costs. [Signatures] * Language of the case: Lithuanian.