62012CC0003_EN
Opinion of the Advocate-General
Opinion of the Advocate-General
I – Introduction
1. This case concerns the interpretation of Articles 2(4) and 6 of Council Regulation (EEC) No 4045/89 of 21 December 1989 on scrutiny by Member States of transactions forming part of the system of financing by the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (‘EAGGF Guarantee Section’) and repealing Directive 77/435/EEC. (2)
2. The aim of Regulation No 4045/89 is to guide and assist Member States in the performance of their duties in connection with the supervision of transactions financed by the EAGGF Guarantee Section, that it so say, to check that those transactions have been executed correctly, to prevent and deal with irregularities, and to recover sums lost as a result of irregularities or negligence. Above all, the provisions of that regulation are designed to regulate and strengthen the scrutiny that the competent national authorities must carry out on the basis of the commercial documents of undertakings in receipt of such financial assistance. (3)
3. By the request for a preliminary ruling submitted by the Conseil d’État (Council of State) (France), the Court is called upon, for the first time, to define the parameters of the term ‘scrutiny period’ as used in Article 2(4) of Regulation No 4045/89 – a period which ‘shall run from 1 July [of one year] to 30 June of the following year’ – during which the scrutiny procedure is to be carried out. (4)
4. That request has arisen out of a dispute concerning an inspection initiated in May 2000, during one ‘scrutiny period’, but which – because of the operator under scrutiny – could not be carried out on site until January 2001, that is to say, several months later and during the subsequent ‘scrutiny period’. (5)
5. The Court is asked, first, to specify which steps or procedures must of necessity be completed during the scrutiny period provided for in Regulation No 4045/89 (6) and whether the conduct and/or negligence of the operator under scrutiny might have an influence in that regard.
6. Secondly, the Court is asked about the possible impact of the actions of the operator under scrutiny on the outcome of the inspection. This involves determining whether, where the party concerned has made it impossible for an inspection to be carried out, the competent authorities can require the repayment of aid which thus appears to have been wrongly received and, if so, whether such a measure amounts to a penalty under Article 6(2) of Regulation No 4045/89.
7. Indeed, the economic stakes at play in protecting the financial interests of the European Communities in this field are quite considerable, as is evident from numerical statistics relating to the material time. (7)
II – Legislative background
A – Regulation No 729/70
8. The seventh recital in the preamble to Regulation (EEC) No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (8) states that ‘measures must be taken to prevent and deal with any irregularities and to recover the amounts lost as a result of such irregularities or negligence; … the financial responsibility for such irregularities or negligence must be determined’.
9. Article 8(1) of that regulation provides:
‘Member States in accordance with national provisions laid down by law, regulation or administrative action shall take the measures necessary to:
– satisfy themselves that transactions financed by the [EAGGF] are actually carried out and executed correctly,
– prevent and deal with irregularities,
– recover sums lost as a result of irregularities or negligence.
The Member States shall inform the Commission of the measures taken for those purposes and in particular of the state of the administrative and judicial procedures.’
B – Regulation No 4045/89
10. The first recital to Regulation No 4045/89 re-states the three types of duty entrusted to Member States under Article 8 of Regulation No 729/70.
11. The second recital states that ‘scrutiny of the commercial documents of undertakings receiv[ing] or making payments can be a very effective means of surveillance of transactions forming part of the system of financing by the Guarantee Section of the EAGGF; … this scrutiny supplements other inspections already carried out by the Member States; … furthermore, national provisions relating to scrutiny which are more extensive than those provided for in the Regulation are not affected by this Regulation’.
12. Article 1(1) of Regulation No 4045/89 states that the regulation ‘relates to scrutiny of the commercial documents of those entities receiving or making payments relating directly or indirectly to the system of financing by the Guarantee Section of the EAGGF, hereinafter called “undertakings”, in order to ascertain whether transactions forming part of the system of financing by the Guarantee Section of the EAGGF have actually been carried out and have been executed correctly’.
13. Article 1(2) of Regulation No 4045/89, as amended, (9) provides that, for the purposes of that regulation ‘“commercial documents” shall mean all books, registers, vouchers and supporting documents, accounts, production and quality records, and correspondence relating to the undertaking’s business activity, as well as commercial data, in whatever form they may take, including electronically stored data, in so far as these documents or data relate directly or indirectly to the transactions referred to in paragraph 1’.
14. Under Article 2(1), (2) and (4) of Regulation No 4045/89:
‘1. Member States shall carry out systematic scrutiny of the commercial documents of undertakings taking account of the nature of the transactions to be scrutinised. Member States shall ensure that the selection of undertakings for scrutiny gives the best possible assurance of the effectiveness of the measures for preventing and detecting irregularities under the system of financing by the Guarantee Section of the EAGGF. Inter alia the selection shall take account of the financial importance of the undertakings in that system and other risk factors.
2. …
In relation to each current scrutiny period, … Member States shall … select the undertakings to be scrutinised on the basis of risk analysis in the export refunds sector, and for all other measures where it is practicable to do so. The Member States shall submit to the Commission their proposals for the use of risk analysis … [(10) ]
…
4. The scrutiny period shall run from 1 July to 30 June of the following year.
Scrutiny shall cover a period of at least 12 months ending during the previous scrutiny period; it may be extended for periods, to be determined by the Member State, preceding or following the 12-month period. [(11) ]’.
15. Article 4 of Regulation No 4045/89 provides that ‘[u]ndertakings shall keep the commercial documents referred to in Articles 1(2) and 3 for at least three years, starting from the end of the year in which they were drawn up’ and that ‘[t]he Member States may prescribe a longer period for the retention of these documents’.
16. Under Article 6 of that regulation:
‘1. Member States shall ensure that officials responsible for the scrutiny shall be entitled to seize commercial documents, or have them seized. This right shall be exercised with due regard for relevant national provisions and shall not affect the application of rules governing proceedings in criminal matters concerning the seizure of documents.
2. Member States shall adopt appropriate measures to penalise natural or legal persons who fail to fulfil their obligations under this Regulation.’
C – Regulation No 2988/95
17. Article 1(2) of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests (12) states that ‘]rregularity’ for the purposes of that regulation is to mean ‘any infringement of a provision of Community law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by them … [inter alia] by an unjustified item of expenditure’.
18. Under Article 3 of that regulation, the bringing of proceedings is to be time-barred after four years have elapsed from the time when the irregularity was committed. However, that provision goes on to state that the sectoral rules may make provision for a shorter period which may not be less than three years and that Member States retain the possibility of applying a longer period.
19. In Title II of Regulation No 2988/95 (‘Administrative measures and penalties’), Article 4 provides:
‘1. As a general rule, any irregularity shall involve withdrawal of the wrongly obtained advantage:
– by an obligation to … repay the amounts … wrongly received
…
2. Application of the measures referred to in paragraph 1 shall be limited to the withdrawal of the advantage obtained plus, where so provided for, interest which may be determined on a flat-rate basis.
3. Acts which are established to have as their purpose the obtaining of an advantage contrary to the objectives of the Community law applicable in the case by artificially creating the conditions required for obtaining that advantage shall result, as the case shall be, either in failure to obtain the advantage or in its withdrawal.
4. The measures provided for in this Article shall not be regarded as penalties.’
20. Article 5(1)(b), which is also in Title II of Regulation No 2988/95, provides that intentional irregularities or those caused by negligence may lead to the administrative penalties listed therein, including ‘payment of an amount greater than the amounts wrongly received or evaded, plus interest where appropriate; this additional sum shall be determined in accordance with a percentage to be set in the specific rules, and may not exceed the level strictly necessary to constitute a deterrent’.
III – The dispute in the main proceedings, the questions referred for a preliminary ruling and the procedure before the Court
21. Syndicat OP 84 – an agricultural umbrella organisation for 48 fruit and vegetable producers with its seat in France – implemented an operational programme covering the period from 1 July 1997 to 31 December 1998. On that basis, it received financial assistance from the EAGGF Guarantee Section.
22. By letter of 30 May 2000, Syndicat OP 84 was informed by the competent national authorities that an on-site inspection was to take place pursuant to Regulation No 4045/89. However, the inspection could not begin until 22 January 2001 and was completed on 24 January 2001. According to the referring court, Syndicat OP 84 was responsible for that delay.
23. The inspection disclosed that some of the actions for which Syndicat OP 84 claimed to be entitled to Community assistance were not eligible for such assistance on account of their wholly individual nature, a point late r conceded by that organisation. Moreover, it was shown that the financial contributions to the operational fund made by members of Syndicat OP 84 had immediately been refunded and that such arrangements for financing the fund were not in compliance with Article 15 of Council Regulation (EC) No 2200/96 of 28 October 1996 on the common organisation of the market in fruit and vegetables. (13)
24. On that basis, the Office national interprofessionnel des fruits et légumes et de l’horticulture (ONIFLHOR) asked Syndicat OP 84 by letter of 30 October 2001 to repay, in their entirety, the amounts received in respect of 1997 and 1998. On 14 January 2003, ONIFLHOR issued an enforcement order in respect of the amounts to be recovered.
25. By judgment of 7 November 2006, the Tribunal administratif de Marseille (Administrative Court, Marseilles) annulled the enforcement order issued against Syndicat OP 84.
26. However, by judgment of 8 December 2008, the Cour administrative d’appel de Marseille (Administrative Court of Appeal, Marseilles) set aside the earlier judgment and dismissed the claims made at first instance by Syndicat OP 84.
27. In support of its appeal on a point of law before the Conseil d’État (Council of State), Syndicat OP 84 argued, inter alia, that the Cour administrative d’appel had erred in law by ruling that, without infringing Article 2 of Regulation No 4045/89, the authorities could have initiated an inspection during the scrutiny period from 1 July 1999 to 30 June 2000 and carried on with that inspection during the scrutiny period from 1 July 2000 to 30 June 2001, on the ground that Syndicat OP 84’s conduct had made it impossible to carry out an effective inspection during the first period.
28. On the view that the response to that ground of appeal raised an issue, relating to the interpretation of Regulation No 4045/89, which was crucial to the outcome of the proceedings but which posed a serious difficulty, the Conseil d’État decided by judgment of 2 January 2012 to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1) Must the scrutiny period from 1 July of one year to 30 June of the following year, referred to in Article 2(4) of … Regulation No 4045/89 …, be understood as the period during which the authorities responsible for the scrutiny must inform the producer organisation of the planned inspection, and commence and complete the scrutiny operations in their entirety on-site and on paper and notify the results of that scrutiny, or must it be understood as the period during which only some of those procedural steps have to be carried out?
(2) Where the conduct or the shortcomings of the producer organisation make it impossible actually to carry out an inspection commenced during a scrutiny period, may the authorities – despite the absence of any express provision to that effect in [Regulation No 4045/89] – carry out the scrutiny operations during the subsequent scrutiny period, without causing the procedure to be marred by an irregularity which the organisation under scrutiny may rely on against the decision giving due effects to the results of the scrutiny?
(3) In the event of a negative reply to the previous question, may the authorities, where the conduct or the shortcomings of the producer organisation make actual scrutiny impossible, require repayment of the financial assistance received? Does such a measure constitute one of the penalties which may be applied pursuant to Article 6 of [Regulation No 4045/89]?’
29. Written observations have been submitted to the Court by the Établissement national des produits de l’agriculture et de la mer (FranceAgriMer) (14) by the French and Polish Governments and by the Commission. No hearing was held.
IV – Analysis
A – Introductory remarks
30. According to settled case-law, (15) now enshrined in Article 4(2)(d) TFEU, the common agricultural policy (CAP) is an area of competence shared between the European Union and the Member States. (16) Member States have accordingly retained residual powers enabling them to supplement the measures taken by the European Union (‘EU’) legislature in this field.
31. The sphere of competence of the Member States is thus still significant, particularly as regards the supervision of financial resources granted by the European Union for implementation of the CAP. Since considerable financial contributions are made out of the European Union’s budget to the national authorities, which then distribute those funds to farmers and other operators in the sector, Member States are required to take all measures necessary to ensure that those sums are used in accordance with the objectives established under EU law. (17) That supervisory role is exercised in accordance with national rules, provided that the provisions of EU law in this field are complied with. In other words, national law lays down the detailed rules regarding such supervision, the powers of the competent authorities and the applicable penalties, unless the EU legislature has adopted special provisions in that respect.
32. In order to ensure that the CAP is properly implemented and, above all, in order to combat the kinds of fraudulent offence that may arise in that context, the EU legislature has adopted acts establishing measures to put in place uniform frameworks for scrutiny. In line with Directive 77/435/EEC, (18) which it replaced, Regulation No 4045/89 established a system to ensure regular scrutiny of the commercial documents of undertakings receiving or making payments which have a high financial importance in the context of the EAGGF Guarantee Section or which present other risk factors. (19) To that end, Regulation No 4045/89 defines the operators to be scrutinised, the scrutiny periods and the periods under scrutiny, as well as the rules governing scrutiny. In addition, Regulation No 4045/89 lays down, by way of a minimum, a number of obligations incumbent on operators. (20)
33. Notwithstanding the existence of that common system, Member States are free to apply more stringent scrutiny measures, so long as they observe the general principles of EU law. The minimal nature of the relevant provisions of EU law in this field is expressly referred to in the second recital to Regulation No 4045/89, which specifies that the scrutiny mechanism established by that regulation ‘supplements other inspections already carried out by the Member States’ (21) and that ‘national provisions relating to scrutiny which are more extensive than those provided for in [Regulation No 4045/89] are not affected by [it]’. That approach, which could already be discerned in Regulation No 729/70, (22) was confirmed in the preamble to Regulation No 485/2008 (23), which replaced Regulation No 4045/89.
34. I should point out that the main aim of Regulation No 4045/89 is to set out the obligations of Member States towards the European Union rather than the rights, vis-à-vis those Member States, accruing to undertakings in receipt of assistance. Furthermore, the issues raised by the questions referred for a preliminary ruling seem to me to be based on a false premiss, in that they are predicated on the idea that the aim of the provisions at issue is to limit, in relation to the applicable national law, the powers of the competent authorities with respect to the undertakings that may be inspected under Regulation No 4045/89. Specifically, I do not think that the provisions of Regulation No 4045/89 which the Court has been asked to interpret produce any effect entailing a limitation or time-bar on national inspection powers.
35. As was pointed out by FranceAgriMer and the French Government, the legal certainty of undertakings that may have to undergo scrutiny is guaranteed by the time-bar, which comes into operation after a minimum (24) of four years under Article 3 of Regulation No 2988/95. (25) By contrast, I am of the view that the rules governing the length of time for which commercial documents must be retained (laid down in Article 4 of Regulation No 4045/89) do not form part of that protective approach, as their aim is clearly to lay down an obligation to be incumbent upon the undertakings concerned by virtue of EU law, subject to the existence of more stringent obligations under national law, rather than to establish a period beyond which that obligation would expire.
B – Questions 1 and 2
36. Since the issues raised by the first two questions are similar, it is appropriate to reply to them together.
37. By its first question, the referring court asks whether ‘scrutiny period’, as defined in Article 2(4) of Regulation No 4045/89, is to be understood as the period during which all the various scrutiny operations must be carried out – that is to say, the provision of information to the funding recipient regarding the planned inspection, the commencement of the inspection, the completion of all the operations to be carried out both on site and on paper, and the communication of the findings of the inspection to the interested party – or the period during which only some of those procedural steps have to be carried out. In other words, the Court is called upon to determine which operations absolutely must be completed by the officials responsible for scrutiny during the period from 1 July of the year the inspection begins to 30 June of the following year.
38. It is true that the wording of the first subparagraph of Article 2(4) of Regulation No 4045/89 – under which ‘[t]he scrutiny period shall run from 1 July to 30 June of the following year’ – might, at first sight, be seen to militate against an extensive interpretation of the term ‘scrutiny period’, as it does not expressly open up the possibility of carrying out scrutiny operations after that period has ended, as opposed to the possibility of extending the periods of activity that may come under scrutiny pursuant to the second subparagraph of that provision. (26)
39. However, like FranceAgriMer, the French and Polish Governments, and the Commission, I am of the view that the provision in question must be interpreted not only in the light of its wording, but also in relation to the system of which it forms part and in the light of the general objectives of that system.
40. As regards the latter point, I note that Regulation No 4045/89 is one of a series of measures intended to ensure the supervision of transactions linked to the expenditure of the EAGGF Guarantee Section, with a view to protecting the financial interests of the Communities. (27) It is also clear from the preamble to Regulation No 4045/89 that the regulation seeks to strengthen the effectiveness of inspections for which the Member States are responsible in order to prevent and eliminate irregularities that may exist in this field. That objective should be prioritised as far as possible in the interpretation of the regulation.
41. I also note that Article 1 of Regulation No 4045/89 specifies the scrutiny obligations incumbent upon the Member States, whilst paragraphs 1 and 2 of Article 2 set the parameters of that scrutiny, by specifying the factors relevant to the selection of the undertakings to which such scrutiny will apply (28) and by referring to the interaction that must exist between the Member States and the Commission in that regard.
42. The wording of Article 2 of Regulation No 4045/89 demonstrates that its objective is to establish the boundaries of a uniform system of scrutiny operating under the supervision of the Commission, which receives information every year on national scrutiny programmes and their outcomes. (29) According to the second recital of Regulation No 4045/89, that system does not seek to prevent Member States from applying their own measures, which may go beyond the provisions set out in the regulation, as regards the selection of undertakings to be scrutinised or the definition of scrutiny measures. Accordingly, Regulation No 4045/89 does not create a right for undertakings to be scrutinised only in accordance with the rules set forth in that regulation and only during a predetermined period. In actual fact, the recognition of such a right in favour of an undertaking in receipt of financial assistance paid for by the European Union would be incompatible with Article 325 TFEU on combating fraud.
43. More specifically, the purpose of the definition of ‘scrutiny period’ given in Article 2 of Regulation No 4045/89 is, in my view, simply to establish the period of time during which a sample of the undertakings meeting the criteria laid down in that provision must be inspected. That definition is not intended to restrict the options open to the national authorities as regards the exercise of their competence under national law before or after that period. Rather, it establishes the appropriate temporal parameters for ensuring that the inspections are properly carried out and that this is done within the framework of a uniform programme of scrutiny operations.
44. In consequence, the interpretation of ‘scrutiny period’ cannot have an impact on national administrative proceedings, which – like the main proceedings – come about as a result of an action brought by an undertaking in order to contest the decision of a national authority, as the provision in question concerns Member States and not undertakings. The position would be different, on the other hand, if the national legislature had reproduced the provisions of Regulation No 4045/89 in national law as a legislative framework conferring individual rights on undertakings. (30)
45. To similar effect, the Commission states that Article 2(4) of Regulation No 4045/89 seeks not to confer rights and powers on operators but to find an accommodation between the activities of the Member States and the supervisory and coordinating role that the Commission has to play in the context of that regulation. (31) An analysis of the travaux préparatoires (32) confirms that there is a relationship between the ‘scrutiny period’ thus defined and the precise times at which the Commission must take steps to ensure that Member States have complied as far as possible with the programme of planned inspections (which they must communicate to the Commission in advance) and the annual application report (which they must communicate afterwards). The timetable established in Articles 9 and 10 of Regulation No 4045/89 (33) for the exchange of communications reveals why the ‘scrutiny period’ was defined in Article 2(4) by reference to certain dates, namely 1 July of one year and 30 June of the following year.
46. I share the Commission’s view that the provision in question is intended to ensure that the scrutiny ‘campaigns’ which the Member States must carry out are regular and systematic, rather than to impose an obligation to obtain results before the end of the scrutiny period. However, it goes with out saying that Member States are under a duty to cooperate in good faith, in accordance with the principle enshrined in Article 4(3) TEU. This means that Member States must act as efficiently as possible to ensure that the inspections for which they are responsible under Regulation No 4045/89 can be carried out in accordance with the provisional programmes drawn up and before the deadlines set. It seems to me that, if no scrutiny measures were to be implemented in respect of the undertaking concerned during the scrutiny period timetabled, that situation could constitute a breach by the Member State in question of its duty to take all appropriate measures to ensure fulfilment of its obligations under EU law.
47. If it is established that, as in the case before the referring court, the national authorities were unable, despite exercising diligence, to complete their investigations in good time – that is to say, by 30 June 2000 in the case under consideration, given that the scrutiny was notified on 30 May 2000 – the Member State may, in my opinion, simply postpone sending the information on the scrutiny in question (in the context of the annual report provided for in Article 9(1) of Regulation No 4045/89) until 1 January of the year following that initially envisaged, in other words, until 1 January 2002 instead of 1 January 2001. (34)
48. On a purely practical level, FranceAgriMer and the governments which submitted observations, among other things, the substantive difficulties that the national authorities responsible for scrutiny might have in carrying out – within a period strictly limited to one year – all the steps and procedures specified in Question 1, and to do so in relation to all of the undertakings targeted by such scrutiny in a given scrutiny period. (35)
49. By Question 2, the referring court essentially asks whether Article 2(4) of Regulation No 4045/89 must be interpreted as meaning that scrutiny operations commenced, in factual terms, during one scrutiny period may be continued during the subsequent scrutiny period, without causing the procedure to be vitiated by a defect which the operator under scrutiny could rely on as against the decision setting out the inferences to be drawn from the findings of that inspection, specifically where the conduct or shortcomings of that operator have made it impossible for the inspection actually to be carried out during the first scrutiny period.
50. The second question differs from the first in that the referring court contemplates, more specifically, cases – such as that before it – in which, owing to the conduct of the funding recipient under scrutiny, it was not possible to complete the inspection in full before the expiry of the scrutiny period during which the inspection was initiated.
51. In circumstances involving an external impediment, such as those at issue in the main proceedings, it should, in my view, be possible for the scrutiny procedure to be carried out even after 30 June of the year following that in which it was initiated or, in other words, during the subsequent scrutiny period, given that Article 2(4) of Regulation No 4045/89 does not establish a mandatory deadline to be observed but rather a timetable that Member States should keep to as far as possible.
52.
On any other interpretation, the scrutiny procedure provided for under Regulation No 4045/89 would lose its effectiveness, when its main aim is to enable the recovery of sums paid following an irregularity or because of negligence, in accordance with its first recital.
53. I should add that, regardless of the position taken by the Court on the previous point, it is unacceptable that an operator under scrutiny should be able to escape potential proceedings as a result simply of a refusal to cooperate, which obstructs the investigations of the officers responsible for the scrutiny. (36) In keeping with the adage nemo auditur propriam turpitudinem allegans, which the Court has already applied, (37) an operator cannot rely on what it alleges to be an irregularity in the scrutiny procedure – an irregularity which, moreover, does not exist to my mind – by arguing that some operations were carried out after the expiry of the initial scrutiny period, when the delay in performing the operations is rightly attributable to that operator. Shortcomings or the creation of obstacles for delaying purposes must not in any circumstances be facilitated, let alone encouraged.
54. Accordingly, I am of the view that the term ‘scrutiny period’ in Article 2(4) of Regulation No 4045/89 is not to be interpreted as denoting the period within which the entire scrutiny procedure must be carried out. Operations commenced during one scrutiny period, as defined by Article 2(4), may therefore continue during the subsequent scrutiny period if, despite exercising diligence, the competent authorities were unable to complete them in good time. In any event, even if the Court declines to follow the approach that I have suggested, it is unacceptable for a funding recipient under scrutiny to be able rely on what it alleges to be a procedural irregularity in circumstances where it was the conduct or the shortcomings of that recipient itself which made it impossible to complete those operations during the first scrutiny period.
C – Question 3
55. The referring court asks for a reply to the third question only if Question 2 falls to be answered in the negative, that is to say, in case it is not considered possible for the authorities responsible for scrutiny to carry on with their operations during the subsequent control period where they have been unable, owing to the conduct or shortcomings of the funding recipient, to carry out those operations effectively during the initial scrutiny period.
56. In essence, the referring court seeks to establish whether, in that situation, the authorities can require the operator under scrutiny, who is found to be at fault, to refund the financial assistance received. Furthermore, it asks whether such a measure constitutes a ‘penalty’ for the purposes of Article 6(2) of Regulation No 4045/89.
57. In view of the affirmative answer that should, in my view, be given to Question 2, I agree with FranceAgriMer and the French Government that there is no need to reply to that two-part query, as it is irrelevant.
58. However, in order to accommodate the possibility that the Court may reply to Question 2 in the negative, I wish to make the following observations by way of an alternative.
59. As regards the first aspect of Question 3, I consider that the competent authorities should be able to require repayment of financial assistance received where, as in the case before the referring court, effective scrutiny was impossible owing to the conduct of the funding recipient, regardless of whether that conduct takes the form of actions, fraud or tactics designed to create delay, or even evasion, shortcomings or negligence. (38)
60. As the French Government pointed out, the Court has ruled – in the context of the interpretation of other Community law measures, concerning agriculture – that, where it is not possible to carry out an effective check, it must be considered that the check cannot be made owing to the fault of the applicant and, except in cases of force majeure, the application must therefore be rejected. (39)
61. I share the view of FranceAgriMer and the French Government that it is for the recipients of financial assistance granted under the EAGGF Guarantee Section to provide the authorities responsible for inspecting them with all necessary information in order to establish that the grant of such assistance was well founded and that the transactions financed by that assistance were correctly executed. (40) In the absence of such evidence, either through omission on the part of the recipients or, a fortiori, by design on their part, (41) the authorities can legitimately conclude that the assistance in question was wrongly received and, in consequence, order its recovery.
62. I should point out that, in accordance with general legal principles, financial assistance should be recovered even if the operator under scrutiny has not acted in bad faith, as financial assistance is deemed to be wrongly paid where the interested party is unable to demonstrate that it met the conditions for the grant of that assistance.
63. That approach is prompted by the need to promote the proper working and effectiveness of the scrutiny measures provided for under Regulation No 4045/89, with a view to preserving the very feasibility of the system relating to transactions financed by the EAGGF Guarantee Section.
64. As regards the second aspect of Question 3, it seems to me that the recovery of financial assistance in those circumstances does not fall within the scope of Article 6(2) of Regulation No 4045/89, in terms of which the Member States must adopt appropriate measures to penalise natural or legal persons who fail to fulfil their obligations under that regulation.
65. To that effect, the Polish Government rightly points out that EU law draws a distinction between measures requiring the repayment of a wrongly obtained advantage and penalties that may be imposed as a result of irregularities committed intentionally or through lack of diligence.
66. In particular, Regulation No 2988/95, which is part of the same legislative family as Regulation No 4045/89 and lays down general principles that should be borne in mind in this case, (42) clearly draws a distinction, in Title II, between ‘measures’ and ‘administrative penalties’ which may result from acts detrimental to the Communities’ financial interests. Under Articles 4(1) and (2) of that regulation, all ‘irregularities’ (43) are to trigger, as a general rule, withdrawal of the wrongly obtained advantage, inter alia by means of an obligation to repay the amounts wrongly received, together with any interest provided for. Article 4(4) expressly provides that ‘[t]he measures provided for in this Article shall not be regarded as penalties’. In contrast, Article 5 of Regulation No 2988/95 lists the ‘administrative penalties’ that may be imposed because of intentional irregularities or negligence, such as payment of an administrative fine or payment of an additional sum to be determined in proportion to the amounts wrongly received, plus interest where appropriate. (44)
67. As pointed out by FranceAgriMer and the French and Polish Governments, the Court has consistently held that an obligation to give back advantages wrongly obtained under Community rules does not amount to a penalty. An obligation of that nature is simply the necessary consequence of a finding by the competent authorities that the conditions for obtaining the advantage under EU law were not actually satisfied. (45)
68. The same approach should be followed as regards the distinction to be drawn between, on the one hand, the obligation to repay financial assistance improperly received and, on the other hand, the penalties provided for under Article 6(2) of Regulation No 4045/89. The irregularity, even if only apparent, of a transaction financed by funding received in such circumstances marks that financial assistance out as not owing, thereby justifying its return by the recipient under scrutiny, without such repayment bearing the hallmarks of a pecuniary administrative penalty. I should point out that this is true even if the repayment order is issued merely because the interested party failed to communicate the documents requested by the competent authorities so that they could check that the conditions for the grant of the aid in question were satisfied.
69. The main aim of the correction imposed in that situation is, in my view, to repair the financial damage caused to the EAGGF Guarantee Section and, accordingly, to the European Union’s general budget, (46) as well as to restore fair competition between the operator which procured an advantage to which it was not entitled and the operators which did not unjustifiably benefit from that system. (47) From that point of view, it is for the competent national authorities, acting on behalf of the European Union, to recover Community financial assistance that has been granted in circumstances considered to be improper, without those authorities having any power to assess the appropriateness or otherwise of requiring repayment. (48)
70. The prohibition on unjust enrichment, to which the Court has repeatedly referred in its case-law (49) and which it has upheld as a general principle of EU law, (50) adds further weight to this line of argument. It cannot be denied that a person who has received a financial advantage without providing proof of the legal basis for that advantage must repay the sums received, up to the amount lost, in this instance, by the European Union. (51)
71. In the interests of completeness, I should point out that a penalty, as provided for under Article 6 of Regulation No 4045/89, could also be imposed in addition to the requirement to correct the irregularity. (52) However, in accordance with the general principles of EU law, which include the principles that penalties must be lawful and they must be proportionate, (53) such a penalty could be imposed on the operator under scrutiny only if specific provisions were enacted to that effect in EU or national law (54) and if the penalty in question were commensurate with the breach of obligations under Regulation No 4045/89.
72. On the contrary, the obligation to repay aid received in improper circumstances must be construed as the direct and immediate result of the fact that the aid was not owing, and a finding to that effect constitutes in itself a sufficient legal basis.
73. I therefore consider that, in the alternative, if Question 2 is answered in the negative, Question 3 should be answered as follows: (i) where the conduct or shortcomings of the operator under scrutiny have made it impossible to carry out an effective scrutiny, the competent national authorities may require repayment of the financial assistance received, given that, in such circumstances, the authorities have been unable to check that the conditions for the grant of the aid were satisfied; and (ii) such a request for repayment does not constitute a ‘penalty’ as provided for under Article 6(2) of Regulation No 4045/89.
V – Conclusion
74. On the basis of the above considerations, I propose that the Court answer the questions referred by the Conseil d’État as follows:
Article 2(4) of Council Regulation (EEC) No 4045/89 of 21 December 1989 on scrutiny by Member States of transactions forming part of the system of financing by the Guarantee Section of the European Agricultural Guidance and Guarantee Fund and repealing Directive 77/435/EEC cannot be interpreted as meaning that all the scrutiny operations must be carried out during the ‘scrutiny period’, defined in that provision as ‘run[ning] from 1 July to 30 June of the following year’, and must instead be construed as meaning that operations commenced during one scrutiny period may be continued during the subsequent scrutiny period. In any event, the operator under scrutiny cannot rely on any procedural irregularity as against the decision setting out the inferences to be drawn from the findings of the inspection carried out, where completion of the inspection during the first scrutiny period has been made impossible by the conduct or shortcomings of the operator itself.
It is unnecessary to answer Question 3.
In the alternative, if the previous question is answered in the negative, Question 3 should be answered as follows: if the competent authorities were unable to carry out an effective scrutiny on account of the conduct or shortcomings of a recipient of financial assistance paid in connection with transactions financed by the Guarantee Section of the European Agricultural Guidance and Guarantee Fund, those authorities may require repayment of that funding, which could not be shown to be financial assistance to which the recipient was entitled, without such action being treated as the imposition of a penalty as provided for under Article 6(2) of Regulation No 4045/89.
(1) .
(2)  –	OJ 1989 L 388, p. 18. The regulation, which had been amended on several occasions, was codified and repealed on 22 June 2008 by Council Regulation No 485/2008 of 26 May 2008 on scrutiny by Member States of transactions forming part of the system of financing by the European Agricultural Guarantee Fund (OJ 2008 L 143, p. 1; specifically, recital 1 and Annex I).
(3)  –	See, in particular, the first, third and fifth recitals to Regulation No 4045/89.
(4)  –	This issue differs from, but is related to, that the issue under consideration in Joined Cases C-671/11 to C-676/11 Viniflhor, pending before the Court. In those cases, the same referring court asked how a Member State could implement the option made available under Article 2(4) of Regulation No 4045/89 to extend the period under scrutiny – namely, the period during which the scrutiny is to be carried out – ‘for periods … preceding or following the 12-month period’ as defined by that Member State. The question was asked with particular regard to the meaning of ‘scrutiny period’, referred to in the present case.
(5)  –	In this case, the first period ran from 1 July 1999 to 30 June 2000 and the next from 1 July 2000 to 30 June 2001.
(6)  –	More specifically, it appears from the questions referred for a preliminary ruling that the national court is unsure as to whether, during that period, the competent authorities would have to have informed the operator in question of the planned inspection, initiated the scrutiny, carried out all necessary operations on site, used the supporting documents obtained and notified the outcome of their inspection.
(7)  –	In its annual report on protection of the Communities’ financial interests and the fight against fraud (COM(2001) 255 final, pp. 8 and 88), the European Commission pointed out that, in 2000, fraud and irregularities established by the Member States in relation to EAGGF Guarantee Section expenditure amounted to EUR 474.5 million, or 1.17% of the EAGGF’s budget.
(8)  –	OJ, English Special Edition 1970 (I), p. 218.
(9)  –	As amended in accordance with Council Regulation (EC) No 3094/94 of 12 December 1994 amending Regulation No 4045/89 (OJ 1994 L 328, p. 1).
(10)  – Ibidem. According to the second recital to Regulation No 3094/94, ‘the rules for the selection of undertakings to be scrutinised laid down in Article 2 of [Regulation No 4045/89] should be modified [inter alia] in order to give Member States greater flexibility in the selection of undertakings’.
(11)  – Idem.
(12)  –	OJ 1995 L 312, p. 1.
(13)  –	OJ 1996 L 297, p. 1.
(14)  –	FranceAgriMer is successor in law to the Office national interprofessionnel des fruits, des légumes, des vins et de l’horticulture (VINIFLHOR), itself successor in law to ONIFLHOR.
(15)  –	See, inter alia, the judgments cited in footnote 11 of my Opinion delivered on 6 February 2013 in Case C-373/11 Panellinios Syndesmos Viomichanion Metapoiisis Kapnou .
(16)  –	Under Article 2(2) TFEU, ‘[w]hen the Treaties confer on the Union a competence shared with the Member States in a specific area, the Union and the Member States may legislate and adopt legally binding acts in that area’.
(17)  –	Likewise, the eighth recital to Regulation No 729/70 states that verification by Commission officials should only take place ‘in addition to supervision carried out by Member States on their own initiative, which remains essential’.
(18)  –	Council Directive 77/435/EEC of 27 June 1977 on scrutiny by Member States of transactions forming part of the system of financing by the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (OJ 1977 L 172, p. 17). The third recital to Regulation No 4045/89 states that the regulation is intended to encourage the Member States to reinforce the scrutiny of commercial documents which they have hitherto carried out in accordance with Directive 77/435.
(19)  –	See Article 2(1) of Regulation No 4045/89 and the sixth recital.
(20)  –	Thus, the second paragraph of Article 4 of that regulation allows Member States to impose additional requirements.
(21)  –	Article 2(5) of Regulation No 4045/89 states that ‘[t]he scrutiny carried out pursuant to this Regulation shall not prejudice the inspections undertaken pursuant to Article 6 of [Council] Regulation (EEC) No 283/72 [of 7 February 1972 concerning irregularities and the recovery of sums wrongly paid in connection with the financing of the common agricultural policy and the organization of an information system in this field (OJ, English Special Edition, 1972 (I), p. 90)], or those undertaken pursuant to Article 9 of Regulation (EEC) No 729/70’.
(22)  –	Article 9(2) of Regulation No 729/70 states that the inspections provided for in that regulation are to take place ‘[w]ithout prejudice to the supervision effected by Member States in accordance with national provisions laid down by law, regulation or administrative action’.
(23)  –	Recital 3 essentially reproduces the wording of the second recital to Regulation No 4045/89, save for one change in the terminology used: the EAGGF Guarantee Section is replaced with the European Agricultural Guarantee Fund (EAGF) with effect from 1 January 2007.
(24)  –	See Case C-278/02 Handlbauer
[2004] ECR I-6171, paragraph 40, concerning the function of time-bars and other rules of that kind in ensuring legal certainty, and Case C-131/10 Corman
[2010] ECR I-14199, paragraph 54, concerning the minimal nature of the time-bar established by that provision.
(25)  –	According to Article 3, that period must be for at least three years, although Member States may provide for a longer period.
(26)  –	The second subparagraph 2 of Article 2(4), as amended by Regulation No 3094/94, defines the periods of activity of an operator which may be subject to inspection as follows: ‘[s]crutiny shall cover a period of at least 12 months ending during the previous scrutiny period; it may be extended for periods, to be determined by the Member State, preceding or following the 12-month period’. What is being referred to here is a different type of period, described as the ‘period under scrutiny’ by the referring court in the pending Viniflhor
cases mentioned above.
(27)  –	In particular, that regulation must be viewed in the context of Regulation No 2988/95, which – as the Court pointed out in Case C-489/10 Bonda
[2012] ECR, paragraph 33 – ‘lays down a common set of legal rules for all fields covered by Community policies’ and specifies the consequences flowing from ‘irregularities’, as defined in Article 1(2) of Regulation No 2988/95.
(28)  –	Regulation No 4045/89 does not require all the undertakings selected to be inspected during the ‘scrutiny period’ mentioned in Article 2(4). It merely establishes the quantitative and qualitative criteria governing the scrutiny obligation incumbent on each Member State.
(29)  –	The second subparagraph of Article 8(1) of Regulation No 729/70 lays down a similar information obligation.
(30)  –	As in, for example, Articles R 622-49 and R 622-50 of the French Rural Code.
(31)  –	See the tenth recital to that regulation.
(32)  –	In the initial proposal (COM(89) 290 final), the wording of Article 2(4) was the same as in the final version of Regulation No 4045/89, but the amended proposal (COM(89) 623 final) gave the following wording: ‘The scrutiny period shall run from 1 July to 30 June of the following year. A Member State may begin to effect controls before the 1st July as soon as the Commission has notified its agreement to the provisional programme
mentioned in Article 10 of this Regulation’ (emphasis added).
(33)  –	Paragraphs 1, 2 and 3 of Article 10 provide that each year, before 15 April, Member States are to draw up provisional programmes for scrutinies to be carried out during the subsequent scrutiny period and to send those programmes to the Commission, which must examine them within six weeks. Article 9(1) states that ‘ [b]efore 1 January following the scrutiny period
Member States shall send the Commission a detailed report on the application of this Regulation’ (emphasis added).
(34)  –	The Commission correctly observes that point 4(g) of Annex II to Regulation (EC) No 1863/90 of 29 June 1990 laying down detailed rules for the application of Regulation No 4045/89 (OJ 1990 L 170, p. 23), as amended by Regulation (EC) No 2992/95 of 19 December 1995 (OJ 1995 L 312, p. 11), expressly provides for the possibility of completing scrutinies that have taken place during a period preceding that covered by an annual report sent by a Member State, as that provision refers to ‘the results of those scrutinies carried out pursuant to the scrutiny period prior to that covered by the present report, for which the results were not available at the time of submission of the report for that scrutiny period’.
(35)  –	As the Polish Government underlined, the circumstances specific to an inspection may mean that the operations carried out during an initial scrutiny period have to continue beyond the end of that period, particularly where irregularities have been identified which require further investigation or where there is a delay in receiving the results of cross-checks carried out at national or even cross-border level.
(36)  –	In the main proceedings, the information provided by FranceAgriMer suggests that Syndicat OP 84 delayed the on-site scrutiny procedure by making several requests for pre-arranged appointments to be re-scheduled and by failing to provide documents required by those officers.
(37)  –	Accordingly, in his Opinion in Case 151/80 Hoe v Commission
[1981] ECR 3161, Advocate General Reischl pointed out that an applicant ‘may not on any account later successfully challenge the procedure for filling the post in which he had been concerned by invoking irregularities for which he himself was responsible’ (see also paragraphs 18 and 19 of the judgment). In Joined Cases 316/82 and 40/83 Kohler v Court of Auditors [1984] ECR 641, paragraph 13, the Court also observed that ‘to accept the arguments of the Court of Auditors would be tantamount to allowing it to take advantage of an infringement which it has itself committed’.
(38)  –	In that connection, I recall that the first recital to Regulation No 4045/89, which re-produces Article 8(1) of Regulation No 729/70 and the seventh recital thereto, requires Member States to take the measures necessary to recover sums lost, not only as a result of ‘irregularities’, but also ‘negligence’.
(39)  –	Case C-131/00 Nilsson
[2001] ECR I-10165, paragraph 32. In that case, the check could not be carried out because of the operator’s complete failure to keep the register of animals.
(40)  – Similarly, see the seventh recital of the decision of the referring court.
(41)  –	I should point out that it appears from the eighth and ninth recitals of the decision of the referring court that, in the case before it, the order for repayment of the aid was based not only on the obstructive behaviour of Syndicat OP 84, which failed to supply the supporting documents requested by the inspection authorities, but also on the funding recipient’s ineligibility for financial assistance and on an irregularity identified in the arrangements for financing the operational fund.
(42)  –	In Case C-150/10 Beneo Orafti
[2011] ECR I-6843, paragraph 69 and the case-law cited, the Court stated that ‘in the area of checks and penalties for irregularities committed under European Union law, the European Union legislature has, by adopting Regulation No 2988/95, laid down a series of general principles and has required that, as a general rule, all sectoral regulations comply with those principles’.
(43)  –	The definition of that term set forth in Article 1(2) of Regulation No 2988/95 was specified in Article 2(1) of Commission Regulation (EC) No 1848/2006 of 14 December 2006 concerning irregularities and the recovery of sums wrongly paid in connection with the financing of the common agricultural policy and the organisation of an information system in this field and repealing Council Regulation (EEC) No 595/91 (OJ 2006 L 355, p. 56).
(44)  –	Article 5(1)(b) of Regulation No 2988/95 states that the amount to be paid, as a penalty, over and above the return of the amounts wrongly received, must be determined in accordance with a percentage to be set in the specific rules and may not exceed the level strictly necessary to constitute a deterrent.
(45)  –	See, inter alia, paragraph 269 of the judgment in Case C-349/97 Spain v Commission
[2003] ECR I-3851, which states that ‘[t]he corrections imposed in the present case cannot therefore be regarded as penalties but are rather the necessary consequence of the illegality of the payments made by the Kingdom of Spain’; and paragraph 28 of the judgment in Case C-158/08 Pometon
[2009] ECR I-4695, which states that ‘the obligation to give back an advantage improperly received by means of an irregular practice … is not a penalty, but simply the consequence of a finding that the conditions required to obtain the advantage derived from the Community rules were created artificially, thereby rendering the advantage received a payment that was not due and thus justifying the obligation to repay it’. See also Beneo Orafti, paragraph 70.
(46)  –	In accordance with Article 1 of Regulation No 2988/95.
(47)  –	See, by analogy, Case T-459/93 Siemens v Commission
[1995] ECR II-1675, paragraphs 96 and 97, in which the Court of First Instance indicated that the repayment of illegal State aid is intended to restore the situation as it was prior to the payment of such aid, which presupposes the elimination of all financial advantages resulting from it, since they distort competition.
(48)  –	To that effect, see, by analogy, Joined Cases 146/81, 192/81 and 193/81 BayWa and Others
[1982] ECR 1503, paragraph 30, in terms of which ‘[t]he opposite interpretation [of Article 8(1) of Regulation No 729/70] would lead to an erosion both of the principle of equal treatment between undertakings from different Member States and of the application of Community law which must, so far as possible, remain uniform throughout the Community’.
(49)  –	See, inter alia, Joined Cases 4/59 to 13/59 Mannesmann and Others v High Authority of the European Coal and Steel Community
[1960] ECR 113 and Case 26/67 Danvin v Commission
[1968] ECR 315, especially p. 322).
(50)  –	In Case C-259/87 Greece v Commission
[1990] ECR I-2845, the Court held, in the case of amounts paid to the EAGGF, that unjustly enriching the Community would be contrary to the general principles of Community law.
(51)  –	See, by analogy, regarding a person who has suffered a loss which increases the wealth of another person without there being any legal basis for that enrichment, Case C-47/07 P Masdar (UK) v Commission
[2008] ECR I-9761, paragraph 44, and Case C-470/08 Van Dijk
[2010] ECR I-603, paragraph 41.
(52)  –	See also Pometon, paragraph 29: ‘[s]imilarly, an importer who improperly brings himself within the inward processing procedure and benefits from it by artificially creating the conditions required for its application is obliged to pay the duties on the products concerned, without prejudice, where appropriate, to administrative, civil or criminal sanctions provided for by national law ’ (emphasis added).
(53)  –	This dual requirement is reiterated in Article 5(1)(b) of Regulation No 2988/95, the wording of which is set out above.
(54)  –	As regards the administrative penalties provided for in Regulation No 2988/95, see Case C-367/09 SGS Belgium and Others
[2010] ECR I-10761, paragraph 43, and the Opinion of Advocate General Kokott in that case (particularly point 35 et seq.).