61995CC0354_EN
Opinion of the Advocate-General
Opinion of the Advocate-General
1 The High Court of Justice of England and Wales, Queen's Bench Division, (hereinafter `the High Court') has asked the Court to interpret and assess the validity of Article 9 of Commission Regulation (EEC) No 3887/92 of 23 December 1992 laying down detailed rules for applying the integrated administration and control system for certain Community aid schemes (1) (hereinafter `Regulation No 3887/92' or
`the contested regulation').
The Court is asked, essentially, whether the penalties laid down for farmers who innocently overstate areas by more than 20% when making declarations in their aid applications are in conformity with Community law.
Community law
2 The presentation of the relevant rules in this part of my Opinion will be deliberately succinct.
I shall return to each of the specific texts in detail when examining the replies to be given to the questions referred to the Court for a preliminary ruling by the High Court.
3 In 1992 the Common Agricultural Policy (hereinafter `the CAP') underwent considerable reforms, which included the creation or modification of a number of aid schemes.
The primary objective pursued by the Community legislature was to control the increasing financial cost of the CAP. Furthermore, it sought to avoid overproduction. (2)
4 In order to achieve the first objective defined above, the Community legislature sought to replace the previous price support schemes, whereby artificially high prices were maintained by intervention mechanisms, with new schemes based on the principles of control of supply and price reduction, accompanied by direct aid to farmers. (3)
5 Radical modification of the principles governing the grant of aid was used to implement the mechanisms designed to avoid overproduction.
Thus, since 1992, aid for arable crops is no longer linked to production volume but to hectares and set-aside of land is a precondition for eligibility for compensatory payments. (4)
Moreover, for the calculation of livestock aid, extensification criteria were laid down. (5)
6 To ensure the proper functioning of the aid schemes in question, the Community legislature established an integrated administration and control system.
In order to obtain aid, farmers must comply with a number of requirements, in particular that of completing declarations concerning the surface area for which aid is claimed. (6) The effectiveness of the integrated administration and control system is dependent on the accuracy of the data supplied by farmers concerning those areas.
The Community legislature accordingly provided for measures intended to prevent and penalize errors and fraud. (7)
7 Two types of Community legislation are in issue: specific legislation concerning the scheme for agricultural premiums for bovine animals and premiums for land, and general legislation relating to the integrated administration and control system for certain Community aid schemes (hereinafter `the integrated system').
I - Specific legislation concerning the aid schemes applicable to bovine animals and land
8 Eligibility for the aid schemes in question is conditional on compliance with certain requirements concerning land use. In particular, in connection with payments linked to arable crops or set-aside (`area aid'), a minimum area of land must be left fallow or used for non-food purposes.
Similarly, in connection with premiums for livestock (`livestock aid'), a minimum forage area per animal is required in order to avoid over-intensive grazing.
A - The aid scheme for bovine animals
Council Regulation (EEC) No 805/68 (8)
9 Regulation No 805/68, as amended by Regulation No 2066/92, provides in Articles 4a to 4l for the grant of various premiums, including the special premium for male bovine animals and the premium for suckler cows.
The amount of the premiums is based on the number of animals in respect of which the farmer is eligible for the premiums. To encourage extensive production, Article 4g of Regulation No 805/68 as amended provides that payment of the special premium and the suckler cow premium is to be limited by the application of a stocking density on the holding.
That stocking density is to be expressed in livestock units (hereinafter `LU') per unit of forage area of the holding used for the animals carried on it.
Commission Regulation (EEC) No 3886/92 (9)
10 This regulation lays down detailed rules for the application of the premium schemes provided for in Regulation No 805/68. Under Article 42(1) of Regulation No 3886/92, for each producer who, in respect of the same calendar year, submits an `area' aid application (10) referred to in Article 6(1) of Regulation No 3508/92
and at least one special premium or suckler cow premium application, the competent authorities are to establish the number of LU corresponding to the number of animals for which a premium may be granted, taking account of the forage area of the holding.
B - The aid scheme for arable crops and set-aside
Council Regulation (EEC) No 1765/92
11 This regulation establishes a support system for producers of certain arable crops.
It was introduced in 1992 and entered into force from marketing year 1993/94, and its aims are to ensure better market balance by approximating the Community prices of certain arable crops to prices on the world markets, to compensate the loss of income caused by the reduction of the institutional prices by a compensatory payment for producers who cultivate such products and to avoid over-production.
The area eligible is to be restricted to the area down to arable crops or publicly funded set-aside in the past. (11)
12 The amount of the compensatory payments is based on the specific structural characteristics that influence yield of each arable crop. (12)
13 Provision is made for two types of scheme:
a `general scheme' open to all producers and a `simplified scheme' open only to small producers. (13)
14 With regard to the general scheme, (14) the Community legislature's intention to make the grant of compensatory payments conditional on the absolute requirement to set aside a certain proportion of land is clearly expressed in the preamble to Regulation No 1765/92:
`in order to benefit from the compensatory payments under the "general scheme", producers must set aside a predetermined percentage of their arable area ...'; (15) `the set-aside requirement should be fixed initially at 15% of the land of the holding for which claims for payments are made ...'. (16)
15 Title 1 of Regulation No 1765/92 deals with the compensatory payment.
Article 2 establishes the general rules governing grant of those premiums; in particular it is provided that the same area cannot give entitlement to compensatory payments for crops and set-aside and to the premiums for bovine animals provided for in Regulation No 805/68.
It is further stated that, in order to benefit from compensatory payments under the general scheme, the requirements laid down in Article 7 of Regulation No 1765/92 must be complied with.
That article concerns exclusively the rules on set-aside.
16 Articles 4 to 6 of Regulation No 1765/92 lay down the methods for calculating the compensatory payments, which differ according to the type of arable crops involved.
17 Set-aside is the cornerstone of the system.
It thus plays two distinct roles: first, it gives entitlement, in the same way as a crop, to a compensatory payment (17) and secondly, its existence is a condition of the farmer's entitlement to aid for arable crops.
II - General legislation concerning the detailed application of the aid schemes
18 In order to simplify the administration of those aid schemes (18) and to avoid fraud, (19) Regulations Nos 3508/92 and 3887/92 established an integrated administration and control system inter alia for the aid schemes at issue in the present case.
19 Simplification of the administration of the said schemes in question, which was the primary objective of the new system, was to be achieved by setting up a single procedure for monitoring all applications for aid linked to the cultivated area. (20)
20 Effective measures to combat fraud, which was the second objective of the Community legislature, were to take the form of a system of graded sanctions. (21)
Council Regulation (EEC) No 3508/92
21 This regulation applies, inter alia, to the support system for producers of certain arable crops established by Regulation No 1765/92 and to the system of premiums for producers of beef and veal established by Regulation No 805/68.
Article 6 provides that in order to be eligible under one or more Community schemes, each farmer is to submit, for each year, an `area' aid application indicating the agricultural parcels, including areas under forage crops, covered by a set-aside measure for arable land and those laid fallow.
22 Article 12 of that regulation provides that the Commission is to adopt detailed rules for its application.
23 That requirement was fulfilled by the contested regulation.
Commission Regulation (EEC) No 3887/92
24 This regulation lays down detailed rules for applying the integrated administration and control system for certain Community aid schemes.
Its primary aim is to enable the reform of the CAP to be implemented efficiently and, in particular, to solve the administrative problems caused by the reform having introduced several area-linked aid schemes. (22)
The Community legislature also indicated that specific provisions should be adopted to achieve that end, specifically provisions to prevent and penalize irregularities and fraud effectively, having regard to the specific features of the various schemes.
25 Article 4 of Regulation No 3887/92 specifies the requirements with which applications for `area' aid are to comply. Article 4(1) thus provides that applications for `area' aid must include: the identity of the farmer; particulars permitting identification of all the agricultural parcels on the holding, with their area, location, use (23) and, where relevant, whether the parcels are irrigated, and the aid scheme concerned; a statement by the producer that he is aware of the requirements pertaining to the aids in question.
Article 4(2) lays down the conditions which must be satisfied before the declarations thus made may be validly amended. Article 4(4) provides that set-aside declarations and crop declarations under the non-food product crop scheme are to be made along with the `area' aid application or comprise part of it.
26 Article 5 lays down the requirements with which any `livestock' aid application must comply.
27 The rules concerning the monitoring of compliance with the terms relating to the grant of aid and premiums are set out in Title IV of Regulation No 3887/92. (24)
28 Article 6(1) of Regulation No 3887/92 states that administrative and on-the-spot checks are to be made in such a way as to ensure effective verification of compliance with the terms under which aids and premiums are granted.
29 Article 9 of the contested regulation (hereinafter the `text' or `contested provision'), the details of which I shall return to later, contains a series of closely-linked provisions establishing the rules applicable for the determination of the eligible area where there is a discrepancy between the area declared in the `area' aid application and the area actually determined following inspection by the competent national authorities.
Commission Regulations Nos 229/95 (25) and 1648/95 (26)
30 Article 9 of Regulation No 3887/92 has been the subject of a number of amendments.
31 The first amendment was made by Regulation No 229/95. Article 9(4) of the contested regulation was replaced by a new Article 9(4)(a) and (b).
32 The purpose of that first reform by the Community legislature was in particular to specify the method for calculating `the maximum area eligible for compensatory payments to arable crop producers in the case of inadequate set-aside ... and [to make provision in that respect for] pro rata adjustment for the different crops.' (27)
33 Regulation No 1648/95 subsequently amended Article 9(2) and (4) of the contested regulation.
34 As the fourth recital in the preamble to Regulation No 1648/95 makes clear, the purpose of the regulation is to amend the sanctions imposed on arable crop producers if they make an innocent mistake in their declarations of set-aside areas:
`... in the interests of simplification of the "area" and "livestock" sanctions the provisions with regard to their application should be amended; ... as the rules concerning set-aside have been modified since the adoption of Commission Regulation (EEC) No 3887/92, as amended by Regulation (EC) No 229/95, in particular with the adoption of provisions allowing the transfer of the set-aside obligation from producer to producer and of voluntary set-aside, it is appropriate to amend the sanctions'. (28)
35 That aim was achieved by the adoption of Article 9(4)(a), the details of which I shall return to later.
36 The new provisions adopted by Regulation No 1648/95 mitigated to some extent the effects of the previous administrative sanctions. (29)
Facts and procedural background to the dispute in the main proceedings
37 The National Farmers' Union (hereinafter `the NFU' or `the applicant in the main proceedings') is the trade association for farmers in England and Wales. After receiving numerous complaints regarding the penalties imposed by the Ministry of Agriculture, Fisheries and Food (hereinafter `the MAFF') on farmers who had made innocent mistakes in their applications for `area' aid, the NFU and 120 individual farmers applied to the High Court of Justice, Queen's Bench Division, for judicial review of MAFF's application of Article 9 of Regulation No 3887/92.
38 According to the national court, pursuant to that article, the MAFF does not grant any aid linked to set-aside or to arable crop areas where the area of set-aside declared is found to be overstated by more than 20% when checked.
The order for reference also makes clear that the dispute in the main proceedings concerns only farmers who committed such mistakes completely bona fide. The farmers penalized have suffered severe financial difficulties as a result of that interpretation.
39 By letter of 22 February 1995, the United Kingdom authorities wrote to the Commission suggesting that the penalty of denying any compensatory payment on linked arable crops was disproportionate to the gravity of the irregularity.
The Commission replied that the penalty provisions in question were not unduly harsh, adding that it had drawn up a modified proposal enabling farmers to receive compensatory payments in respect of their arable crops on a pro rata basis corresponding to the set-aside area found. (30)
40 Taking the view that it could not reach a decision on the application without first obtaining clarification as to the interpretation of the relevant rules of Community law and their validity, the High Court of Justice has submitted the following five questions to the Court of Justice for a preliminary ruling:
The questions referred
`(1) Are Article 9(2) to (4) of Commission Regulation No 3887/92 (prior to the entry into force of Regulation No 1648/95) to be construed as requiring that all area-related payments be refused to farmers whose set-aside land actually determined is found to be less than that declared in an aid application when the difference is more than 20% but when no false intention or serious negligence has been found?
(2) Are Articles 9(2) to (4) of Commission Regulation No 3887/92 (prior to the entry into force of Regulation No 1648/95) to be construed as requiring that all beef premiums be refused to farmers whose forage area actually determined is found to be less than that declared in an area aid application when the difference is more than 20%, but when no false intention or serious negligence has been found?
(3) If the answer to Question (1) and/or (2) is "yes", are Article 9(2) to (4) of Commission Regulation No 3887/92 (prior to the entry into force of Regulation No 1648/95) invalid, wholly or in part, by reason of breach of any principle of Community law, particularly legal certainty, non-discrimination and/or proportionality?
(4) If the answer to Question (1) and/or (2) is "no", how are Articles 9(2) to (4) of Commission Regulation No 3887/92 (prior to the entry into force of Regulation No 1648/95) to be construed?
(5) Regardless of the answers to Questions (1) to (4), is it valid and lawful for Commission Regulation No 3887/92 to impose the sanction of loss of the entire specific area-related payment on a farmer whose area actually determined is found to be less than that declared in the aid application when the difference [is] more than 20% but when no false intention or serious negligence has been found?'
Replies to the questions
I - Question 1
41 The first question concerns the interpretation of Article 9(2) to (4) of Regulation No 3887/92, read in conjunction with the provisions concerning the aid schemes applicable to arable crops and set-aside before the entry into force of Regulation No 1648/95.
42 The national court is, in essence, asking the Court to determine whether that text should be understood as authorizing the refusal of any payment related to `arable crop areas' to farmers whose area of set-aside actually determined is found on inspection by the competent authorities to be less than that declared in the aid application, if the difference is more than 20% but there was no false intention or serious negligence.
43 The national court expressly confines the subject-matter of the reference to the scheme laid down in Regulation No 3887/92, in its initial version, before the amendments introduced by Regulations Nos 229/95 and 1648/95.
However, it should be pointed out that a further regulation, No 2988/95, (31) has entered into force since the order for reference was made.
44 The Court decided to request written observations from the interveners on the subject of the effect of that reform on the replies to be given to the questions submitted. Although all agreed that that reform settles the problem raised by the national court in its first question, opinions differ on the question whether it applies retrospectively to the case before the High Court.
45 That point must be clarified.
An examination of the amended texts might possibly provide the national court with the information needed to resolve the case. Nevertheless, the question must also be answered as it was formulated in the order for reference, inasmuch as the national court has not been questioned as to the bearing of that reform on the resolution of its case and only that court can assess the expediency and relevance of the question which it has submitted to the Court. (32) That is all the more true since we do not know what specific powers the national court enjoys as regards issues of liability or legality.
46 I will deal first with Question 1 as drawn up by the national court, before going on to examine the scope of the amendments introduced by the 1995 regulations.
A - Interpretation of Article 9(2) to (4) of Regulation No 3887/92 before the entry into force of Regulation No 1648/95
47 I must first make a point regarding the wording of the first paragraph of Article 9(4) of Regulation No 3887/92. It is common ground that the initial English version of that text contains an error and that it should be understood in the sense of the terms employed in the other language versions.
That provision should, therefore, be read as providing that `The areas determined in accordance with the provisions of paragraphs 1 to 3 of this article ...' and not `paragraphs 1 and 3'.
That error was, moreover, corrected by Regulation No 229/95 and the English version is now the same as the other language versions.
48 Article 9 is worded as follows:
`1. If the area actually determined is found to be greater than that declared in the "area" aid application, the area declared shall be used for calculation of the aid.
2. If the area actually determined is found to be less than that declared in an
"area" aid application, the area actually determined on inspection shall be used for calculation of the aid.
However, except in cases of force majeure, the area actually determined on inspection shall be reduced:
- by twice the difference found if this is more than 2% or two hectares but not more than 10% of the determined area,
- by 30% if the difference found is more than 10% but not more than 20% of the determined area.
If the difference is more than 20% of the determined area no area-linked aid shall be granted.
However, in the case of a false declaration made intentionally or as a result of serious negligence:
- the farmer in question shall be excluded from the aid scheme concerned for the calendar year in question, and
- in the case of a false declaration intentionally made, from any aid scheme referred to in Article 1(1) of Regulation (EEC) No 3508/92 for the following calendar year, in respect of an area equal to that for which his aid application was rejected.
These reductions shall not be applied if the farmer can show that his determination of the area was accurately based on information recognized by the competent authority.
Where a farmer has not met all the obligations incumbent on him in regard to parcels fallowed for non-food production purposes these shall, on the occasion of inspection for the purposes of application of this article, be considered not to have been found.
For the purposes of this article, "determined area" means the area for which all of the conditions laid down in the rules have been met.
3. Forage areas, set-aside areas and each arable crop area for which a different aid rate is applicable shall be treated exclusively and separately for the purposes of applying paragraphs 1 and 2.
4. The areas determined in accordance with the provisions of paragraphs 1 to 3 of this article for aid calculation purposes shall be used:
- where set-aside provisions are involved, for the calculation of the maximum area eligible for compensatory payments to arable crop producers,
- for calculation of the limit on the premiums referred to in Articles 4g and 4h of Regulation (EEC) No 805/68, as well as for the compensatory allowance.
However, in the cases mentioned in paragraph 2, first subparagraph, first and second indents, the calculation of the maximum area eligible for the payment of compensatory allowances to arable producers shall be made on the basis of the area of set-aside actually determined.
...'
49 In order to understand the problem which is before the national court, I think it would be useful to give a short illustration.
50 A farmer who wishes to obtain aid (or a compensatory payment) for a specific arable crop under the general scheme provided for in Regulation No 1765/92 (33) must, in accordance with Article 4(1) of Regulation No 3887/92, declare the area of the agricultural parcel(s) in respect of which he claims `area' aid, together with the location and use of the parcel(s) in question (that is, the type of crop grown).
Furthermore, under Article 4(4) of Regulation No 3887/92, he must declare the set-aside area which is essential for the determination of the maximum area eligible for the `arable crops' compensatory payments in question.
Errors in respect of the declared areas may relate either to the area of cultivated arable land or the area of set-aside land, or to both.
It must therefore be established what effect an error, committed innocently, in the declaration of the area of set-aside will have and, if there is a difference of more than 20% between the area of set-aside determined on inspection and the declared area of set-aside, the effect on the calculation of `arable crop' area aid.
It should be remembered that the farmer may also claim `compensation' for the set-aside which he has had to implement. (34)
51 The national court asks whether the second subparagraph of Article 9(2) of Regulation No 3887/92, which, as we have seen, provides: `If the difference is more than 20% of the determined area no area-linked aid shall be granted' must be interpreted, in a case such as that described above, as meaning that the farmer loses all entitlement not only to aid for `set-aside', but also to the arable-crop aid he has applied for.
52 The Commission and the United Kingdom Government take the view that the reply should be in the affirmative.
They argue that if a discrepancy of more than 20% is found between the declared area of set-aside and the area determined on inspection, that has the same effect as if no area has been found to exist.
An error in the declaration of set-aside land has consequences not only on the `set-aside' aid scheme, but also on the system for `arable crops' support claimed by the farmer.
They base their interpretation on the aims of Article 9 and on its wording considered in the legislative context.
53 The NFU does not share that view.
It states that such a construction has extremely serious, unjust and disproportionate consequences for farmers who have made an innocent mistake.
It suggests another construction, which would enable the drastic effects (loss of `set-aside' aid and `arable crop' support) of such an error to be limited. A rule should apply to the effect that calculation of the maximum area eligible for compensatory payments for arable farmers should be made on the basis of the area actually determined and on a pro rata basis for each crop concerned. The NFU adds that the area determined must mean that actually verified on inspection, without any account being taken of the penalties provided for in Article 9(2) of Regulation No 3887/92.
54 I consider that the NFU is reading too much into the text.
In contrast, the interpretation for which the Commission and the Government of the United Kingdom argue seems to me correct for three essential reasons.
55 First, the logical arrangement of the provisions set out in the various paragraphs of Article 9(2) to (4) militates in favour of that argument.
Let us analyse that article.
56 Article 9(3) specifies that in the calculation of an eligible area (for the purposes of applying Article 9(1) and (2)) forage areas, set-aside areas and each arable crop area for which a different aid rate is applicable are to be treated exclusively and separately.
57 Thus in the case of my earlier example (35) the farmer must declare the area of set-aside and cropped land separately, specifying in particular the type of crop grown, and verification of the accuracy of the data provided will be undertaken separately.
58 Article 9(2) sets out the rules for establishing the area to be used for calculation of the aid (determination of the eligible area) if it appears that the area declared in the `area' aid application is greater than that determined on inspection.
59 In such cases the principle (36) is that the area actually determined by way of verification or inspection is the area to be used for calculation of the aid.
60 Two series of exceptions, introduced in the text by the adverb `however', are provided in order to take into account the good or bad faith of the declarant. (37)
61 The first series of exceptions gives rise to three penalties (38) and concerns exclusively the case of a declarant who has made an innocent mistake.
In that case, the extent of the error is taken into account.
Thus the eligible area will be determined according to the following method of calculation:
- determination of the actual area on inspection;
- calculation of the difference between that area and the area declared in the aid application (hereinafter `D');
- determination of the penalty on the basis of the legal provisions in the first and second indents to the second sentence of the first paragraph of Article 9(2) of Regulation No 3887/92.
For the error not to be such as to prevent determination of an eligible area, thus precluding entitlement to aid, D must be between 3% and 20%.
If D is over 20%, it will not be possible to calculate the eligible area because the penalty will consist in loss of area-linked aid. (39)
In other words, any D over 20% entails the same consequences as the absence of any area.
62 To return to my previous example, (40) since the farmer has made an error of more than 20% in his `set-aside' area declaration, he will be deemed not to have set aside any land.
As that data is necessary for the calculation of the eligible area for `arable crop' aid, it will not be possible to grant him that aid because the eligible area cannot be determined.
In consequence he loses entitlement to specific arable crop aid and the corresponding set-aside aid, although the error of more than 20% which he made in good faith related to the `set-aside' area alone.
That is a perfect illustration of the twofold function of the set-aside obligation. (41)
63 The second series of exceptions gives rise to two penalties and concerns exclusively cases where the declarant intentionally makes a false declaration or is seriously negligent. (42)
- If the farmer has made a false declaration as a result of serious negligence, the penalty will consist in exclusion from the aid scheme concerned for the year in question, (43) whatever the difference between the area determined on inspection and the area declared;
- on the other hand, if the declaration is intentionally false, a penalty of the same nature as those for false declarations as a result of serious negligence is imposed, together with exclusion from all aid schemes in the integrated system for the following year, in respect of an area equal to that for which his aid application was rejected (that is to say the area he had declared). (44)
64 Article 9(4) defines the method for calculating the aid where there is a difference between the area declared and the area determined on inspection.
65 The first and second indents to the first paragraph of Article 9(4) set out the principle: the areas determined in accordance with the provisions of Article 9(1) to (3) are to be used for calculation of the aid.
The first and second indents to the first paragraph of Article 9(4) of Regulation No 3887/92 must be read in conjunction with Article 9(1) and the first sentence of the first paragraph of Article 9(2), which themselves lay down the principles governing determination of the eligible area where there is a difference between declared and determined areas.
66 The second paragraph of Article 9(4) is stated as an exception to the principle, again introduced by the adverb `however'.
It establishes the rules for calculating the aid solely in cases where the difference resulting from an error made innocently is between 3% and 20%.
Those provisions must be read in conjunction with the first and second indents to the second sentence of the first paragraph of Article 9(2).
The words `area actually determined' of set-aside contained in that provision must mean the area determined on inspection and after the penalties provided for in the first and second indents to the first paragraph of Article 9(2) have been applied; were it otherwise the reference to those provisions dealing with eligible area after application of the penalties would be meaningless.
67 No provision is made for other cases of error (innocent error of more than 20%, serious negligence, intentionally false declaration) since, in those cases, the second and third paragraphs of Article 9(2) apply.
The aid need not be calculated since the eligible area cannot be determined.
68 The second reason militating in favour of the interpretation put forward by the Commission and the United Kingdom Government lies in the purpose of Regulation No 1648/95.
69 The reform undertaken by Regulation No 1648/95 is aimed at amending the sanctions to be imposed on arable crop producers who make an innocent mistake in their declaration of set-aside area:
`in the interests of simplification of the "area" and "livestock" sanctions the provisions with regard to their application should be amended; ... as the rules concerning set-aside have been modified since the adoption of Commission Regulation (EEC) No 3887/92, as amended by Regulation (EC) No 229/95, in particular with the adoption of provisions allowing the transfer of the set-aside obligation from producer to producer and of voluntary set-aside, it is appropriate to amend the sanctions...'. (45)
70 The second paragraph of Article 9(4)(a) of the contested regulation was amended by Regulation No 1648/95 to read:
`The calculation of the maximum eligible area for the compensatory payments to arable crop producers shall be made on the basis of the area of set-aside land actually determined and on a pro rata basis for each crop concerned.'
71 The interpretation of Article 9(2) to (4) of Regulation No 3887/92, in its original version, proposed by the NFU (46) corresponds precisely on every point to the content of the new text.
To follow the NFU in its interpretation would amount to maintaining that the reform introduced by Regulation No 1648/95 was redundant.
72 The amendment to Article 9 suffices to establish that, before the entry into force of Regulation No 1648/95, where the area of set-aside land as declared in the aid application was more than 20% greater than that found on inspection, there was no determination of set-aside land and, in consequence, the farmers in question were not eligible for compensatory payments on a pro rata basis for their arable crops.
73 Lastly, Article 9(2) to (4) of the contested regulation seeks to achieve the objectives laid down by the Community legislature (47) by ensuring compliance with the obligations to set aside a certain area of land, which is a necessary precondition for the grant of `arable area' compensatory payments, (48) for the declaration of parcels of land and the elimination of irregularities and fraud relating to those obligations.(49)
74 In conclusion, for all the foregoing reasons, I would suggest that the Court reply in the affirmative to the first question as formulated by the national court.
B - Interpretation of Article 9(2) to (4) of Regulation No 3887/92 after the entry into force of Regulation No 1648/95
75 The first and second indents to the second sentence of the first paragraph of Article 9(2) and Article 9(4)(a) were amended by the 1995 regulations as follows: (50)
`2. - by twice the difference found if this is more than 3% or two hectares but not more than 20% of the determined area. (51)
...
4. (a) The areas established in accordance with the provisions of paragraphs 1 to 3 for the purpose of calculating the aid shall be used for the calculation of the limit of the premiums referred to in Articles 4g and 4h of Regulation (EEC) No 805/68, as well as for the calculation of the compensatory allowance.
The calculation of the maximum eligible area for the compensatory payments to arable crop producers shall be made on the basis of the area of set-aside land actually determined and on a pro rata basis for each crop concerned.' (52)
76 The new Article 9, as amended by Regulation No 1648/95, mitigates, to some degree, the sanctions applicable to farmers who make an innocent mistake in their aid applications.
77 Thus the sanctions which existed under the former text in a case of innocent mistake as to the area of `set-aside' no longer include application of the penalties provided for in the first and second indents of the last sentence of the first paragraph, and the second paragraph, of Article 9(2) of Regulation No 3887/92, as amended by Regulation No 1648/95, whatever the extent of the mistake.
In those cases, calculation of the maximum eligible area for the determination of the amount of `arable crop' aid is to be carried out on the basis of the area of set-aside land actually determined on inspection and on a pro rata basis for each crop concerned.
Thus the term `area of set-aside land actually determined' must be understood as designating the area determined on inspection, without taking penalties into account, failing which the reform would be purposeless. (53)
78 In accordance with Article 2 of Regulation No 1648/95, those provisions entered into force at a date subsequent to the events giving rise to the case before the national court.
79 However, the entry into force of Regulation No 2988/95 may well provide the national court with useful clarification.
80 The aims of Regulation No 2988/95 are not only to protect the Community's financial interests and to combat fraud affecting those interests, (54) but also to ensure that the measures adopted comply with the general principle of equity and the principle of proportionality. (55)
81 Article 2(2) provides: `No
administrative penalty may be imposed unless a Community act prior to the irregularity has made provision for it.
In the event of a subsequent amendment of the provisions which impose administrative penalties and are contained in Community rules, the less severe provisions shall apply retroactively.' (56)
82 Under Article 1(2) `irregularity' is defined for the purposes of the regulation as: `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, either by reducing or [by] losing revenue accruing from own resources collected directly on behalf of the Communities, or by an unjustified item of expenditure.'
83 The United Kingdom Government argues against immediate application of those more lenient measures to the case before the High Court.
In its view no provision in Regulation No 2988/95 permits retroactive application of that text to situations that arose prior to its adoption.
84 The Commission and the applicant in the main proceedings maintain, in contrast, that Regulation No 2988/95 does allow for immediate application of more lenient administrative penalties.
85 I share the view of the Commission and the NFU, essentially for two reasons.
86 First, the construction they propose corresponds to the aim of the Community legislature.
In the tenth recital in the preamble to the regulation it is stated that `... not only under the general principle of equity and the principle of proportionality but also in the light of the principle of non bis in idem, appropriate provisions must be adopted while respecting the acquis communautaire and the provisions laid down in specific Community rules existing at the time of entry into force of this regulation, to prevent any overlap of Community financial penalties and national criminal penalties imposed on the same persons for the same reasons ...'. (57)
87 That shows that the draughtsmen had in mind situations that had arisen prior to the entry into force of Regulation No 2988/95, and it was their intention in fact to ensure that penalties incompatible with the principles of equity and proportionality were not imposed. The legislation is not intended to alter settled (that is to say, definitive) situations and cannot result in so doing, but rather is intended to apply to past situations the consequences of which have not become definitive, inasmuch as the new provisions are more favourable to economic operators.
88 Secondly, the contested provision appears in Title I of Regulation No 2988/95, headed `General principles'.
It must be understood as seeking to transpose into the specific area of Community provisions, the purpose of which is to protect the financial interests of the Communities, the principle that exists in the great majority of the Member States that more lenient penal or administrative sanctions should have immediate application.
89 In conclusion, in so far as the reform introduced by Regulation No 2988/95 can provide useful material for resolving the case before the national court, (58) it is for that court to take into consideration the new version of the second paragraph of Article 9(4)(a) of Regulation No 3887/92.
II - Question 2
90 This question concerns the interpretation of Articles 9(2) to (4) of Regulation No 3887/92, read in conjunction with the provisions on the aid scheme applicable to livestock prior to the entry into force of Regulation No 1648/95.
The national court is asking the Court, essentially, to state whether that text should be construed as requiring that all payments linked to livestock be refused to farmers whose forage area actually determined on inspection by the competent authorities is found to be less than that declared in the aid application when the difference is more than 20%, but when no false intention or serious negligence has been found.
91 All the interveners agree that the reply to that question should be in the affirmative.
92 In accordance with what was stated above, (59) there is only one area to declare in that case - the forage area. (60)
Article 9(4) of Regulation No 3887/92 provides that the area thus determined is to be used `for calculation of the limit on the premiums referred to in Articles 4g and 4h of Regulation (EEC) No 805/68'.
Articles 4g and 4h of Regulation No 805/68, as amended by Regulation No 2066/92, provide that payment of the special premium and the suckler cow premium is to be limited by the application of a stocking density on the holding.
That stocking density is to be expressed in LU per unit of forage area of the holding used for the animals carried on it.
93 Forage area is thus an essential factor in the scheme, since it constitutes a condition of eligibility for the premiums thus provided.
94 In addition, in contrast to the compensatory payments granted to producers of arable crops, Regulation No 2066/92 does not provide that that forage area automatically gives entitlement to any sort of aid.
Accordingly, an innocent mistake as to more than 20% of forage area will only affect grant of `livestock' premiums linked to that area.
95 Since Regulation No 1648/95 has not altered the situation of those farmers, the same penalties have been applicable since it entered into force.
96 Consequently I would suggest that the Court reply to the second question in the affirmative.
As a result of the replies given to Questions 1 and 2, the fourth question, concerning a possible alternative interpretation of the contested text, becomes redundant.
III - Questions 3 and 5
97 The third question referred to the Court is a refinement of the fifth question.
The national court asks the Court to assess the validity of Article 9(2) to (4) of Regulation No 3887/92, prior to the entry into force of Regulation No 1648/95, with regard, in particular, to the principles of legal certainty, non-discrimination and proportionality.
98 The applicant in the main proceedings maintains that the penalties provided for in Article 9(2) to (4) of Regulation No 3887/92, prior to the entry into force of Regulation No 1648/95, as regards farmers who innocently overstate the area of set-aside land and forage area in their declarations, are contrary to the principles of legal certainty, non-discrimination and proportionality.
A - Alleged infringement of the principle of legal certainty
99 The applicant in the main proceedings considers that the lack of clarity of the second paragraph of Article 9(2), prior to the entry into force of Regulation No 1648/95, is such as to deprive it of its entitlement to the aid in question.
100 The Court has consistently held that the principle of legal certainty constitutes a fundamental principle of Community law, (61) which requires in particular that rules imposing charges on a taxpayer be clear and precise so that he may be able to ascertain unequivocally what his rights and obligations are. (62)
101 In this case, where the penalties involved apply to livestock farmers who innocently overstate by more than 20% their forage area, the meaning of the contested provision and the consequences of its application are clear. (63) However, as regards the penalties applicable to arable farmers who innocently overstate by more than 20% the area of their set-aside land, it is true that the text in question is complicated and must be read very attentively if it is to be understood, owing to two different types of difficulty.
102 First, awkwardness in its drafting and formal presentation make the text
difficult to read.
For instance, I consider it clumsy to have laid down a principle and an exception to it in the same paragraph; (64) conversely, it is regrettable that the different penalties for errors committed innocently were not set out in a single paragraph. (65)
Such drafting certainly hinders rapid comprehension of the contested text, to the point that the NFU could justifiably question whether the principle of legal certainty had been complied with. However, I do not think that those purely formal defects are sufficient to vitiate, for ambiguity, the content of the text.
The NFU does not, moreover, prove that to be the case, inasmuch as the interpretation which it proposes manifestly adds provisions which it does not contain.
103 Moreover, and above all, the dryness of the text is due to the technicality of the subject-matter.
As the Commission rightly points out, Community agricultural law is complicated by reason of its very subject-matter since, on the one hand, it is made up of a collection of legislative provisions which often overlap, and, on the other hand, its implementation necessitates evaluation of delicate economic situations.
Accordingly, to draft a legislative provision concisely, accurately, and at the same time fully, is no easy task.
104 However, this area of law is intended for those involved professionally in the area, who are familiar with the subject-matter and deal with it on a daily basis; what the uninitiated have difficulty in understanding will present fewer difficulties to the specialist.
The second paragraph of Article 9(2) of Regulation No 3887/92 is no exception to that rule and although it is not easily comprehended if read rapidly and in isolation, if it is read painstakingly the sense and consequences of the application of the said provisions can be grasped without ambiguity.
Moreover, at the hearing the Commission indicated that they had been applied without apparent difficulty in most Member States.
105 I must therefore conclude that the claim that the principle of legal certainty has been infringed should not be upheld.
B - Infringement of the principle of equal treatment
106 The applicant in the main proceedings maintains that the second paragraph of Article 9(2) of the contested regulation, in disregard of the principle of equal treatment, allows for the imposition of identical penalties to farmers who have committed errors of differing nature and intensity.
107 It claims that in the case of a farmer growing only one type of arable crop in respect of which he applies for grant of a single type of aid, or in the case of a cattle breeder who only carries on that type of activity, in respect of which he applies only for one particular `livestock' aid, an innocent overstatement of more than 20% of the area of set-aside land or forage area will have the same consequence (66) as that imposed on an arable or livestock farmer who makes a false area declaration as a result of serious negligence. (67)
Those penalties take the form of refusal of `area' or `livestock' aid for the calendar year in question, de facto for the former, de jure for the latter.
108 The NFU points out that the errors are, however, different in nature, since, in the first case, the farmer has not acted wrongfully, in contrast to the second case, and that those mistakes, although different in nature and intensity, nevertheless give rise to the same consequences. It concludes that the general principle of equal treatment in Community law has been infringed.
109 According to the Court's settled case-law, the prohibition of discrimination set out in Article 40(3) of the EC Treaty is merely a specific expression of the general principle of equal treatment in Community law, according to which comparable situations must not be treated differently and different situations must not be treated in the same way unless such treatment is objectively justified. (68)
110 As the United Kingdom Government and the Commission point out, the conditions under which the penalties applicable to the two different groups of farmers described above by the NFU are implemented are not comparable.
111 According to the second paragraph of Article 9(2) of Regulation No 3887/92, aid applied for by a farmer for a specific arable crop will be refused only if he overstates by more than 20% the area of set-aside land or if that overstatement relates to the area of specific arable land. Similarly, a livestock farmer will only be refused specific `livestock' aid if he overstates the area of forage by more than 20%.
112 According to the first indent to the third paragraph of Article 9(2) of the contested regulation, however, aid claimed by an arable or livestock farmer cannot be granted where they have made a false declaration as a result of serious negligence, whatever the percentage difference between the declared area and that determined on inspection.
113 It follows from the foregoing that the situation of the two groups of farmers referred to by the NFU is not comparable and is not treated in the same way.
114 Consequently, the claim that there has been a breach of the principle of non-discrimination must be rejected.
C - Plea of infringement of the principle of proportionality
115 The NFU and the United Kingdom Government maintain that the penalties provided for in the second paragraph of Article 9(2) of Regulation No 3887/92 do not comply with the principle of proportionality.
116 That general principle of Community law requires that acts of the Community institutions do not go beyond what is appropriate and necessary to attain the objectives legitimately pursued by the legislation in question; where there is a choice between several appropriate measures, recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued. (69)
117 It is also clear from the Court's settled case-law that, where the evaluation of a complex economic situation is involved, which is the case in CAP matters, the Community institutions enjoy a wide measure of discretion. (70)
Thus, in reviewing the legality of the exercise of such discretion, the Court must confine itself to examining whether it discloses manifest error or constitutes misuse of power or a clear disregard of the limits of its discretion on the part of that institution. (71)
118 Is the penalty of refusal of all `area' aid where the farmer has innocently overstated in his declaration his area of set-aside land or forage area by more than 20% manifestly inappropriate to the objectives pursued?
119 As regards the objectives pursued by the contested measure, it is apparent from the regulation in question that it is intended to penalize irregularities and fraud effectively and, to that end, the Community legislature has specified that there should be sanctions graded according to the gravity of the irregularity committed, going as far as total exclusion from a scheme for the year in question and the year thereafter. (72)
120 It is thus clear from those objectives that total exclusion from an aid is, on the scale of penalties provided for, the most severe sanction.
Such a penalty should, according to the Community legislature, be reserved for the most serious forms of conduct.
121 Three types of blameworthy conduct on the part of a farmer at the time when he makes his area declaration are involved: innocent error, serious negligence and false declaration made intentionally.
122 It is indisputable that a farmer who makes an innocent mistake, that is to say with no fraudulent intent, is not guilty of dishonest conduct and in that case, to impose on him one of the most severe penalties provided for (73) is incompatible with the objectives pursued and therefore necessarily and manifestly inappropriate.
123 Furthermore, by imposing the same penalties on farmers who have committed irregularities that are different in nature, the text is treating the honest farmer in the same way as a negligent farmer, or a farmer acting in bad faith. In other words, beyond a certain threshold of error, there is a presumption of bad faith vis-à-vis an innocent farmer, contradicting the actual terms of the text. (74)
124 The seriousness of the irregularities said to have been committed in this case by the farmers concerned differs considerably and the Community legislature should have taken that into account. (75)
125 Article 9(2) of the disputed regulation does not therefore faithfully reflect the objectives pursued by the Community legislature.
126 Lastly, it seems to me that other, equally effective but less stringent, measures could have been implemented to achieve those ends.
For example, it could be provided that only a lump-sum aid, fixed at Community level, might be granted, if there were no bad faith or fraud on the part of the farmer, beyond a certain level of discrepancy between the declared area and the area determined on inspection.
127 Consequently I consider that the claim that the principle of proportionality has been infringed should be upheld.
128 I would therefore suggest that the Court declare the second paragraph of Article 9(2) of Regulation No 3887/92 (prior to the entry into force of Regulation No 1648/95) invalid.
Conclusion
129 In the light of the foregoing observations, I propose that the Court give the following replies to the questions referred to it by the national court:
(1) Article 9(2) to (4) of Commission Regulation (EEC) No 3887/92 of 23 December 1992 laying down detailed rules for applying the integrated administration and control system for certain Community aid schemes, prior to the entry into force of Commission Regulation (EC) No 1648/95 of 6 July 1995 amending Regulation No 3887/92, is to be interpreted as prohibiting all area-linked aid for farmers whose set-aside area actually determined is found to be less than that declared in their aid application when the difference is more than 20%, but when no false intention or serious negligence has been found.
(2) Article 9(2) to (4) of Regulation No 3887/92, prior to the entry into force of Regulation No 1648/95, is to be interpreted as prohibiting the payment of any premium for bovine animals to farmers whose forage area actually determined is found to be less than that declared in their `area' aid application when the difference is more than 20%, but when no false intention or serious negligence has been found.
(3) Article 9(2), second paragraph, of Regulation No 3887/92, prior to the entry into force of Regulation No 1648/95, is invalid in so far as it prohibits payment of any area-linked aid and any premium for bovine animals to a farmer who, in his declaration, overstates by more than 20% his area of set-aside land and forage area, when no false intention or serious negligence has been found.
(1) - OJ 1992 L 391, p. 36.
(2) - Second recital in the preamble to Council Regulation (EEC) No 1765/92 of 30 June 1992 establishing a support system for producers of certain arable crops (OJ 1992 L 181, p. 12); first and fourth recitals in the preamble to Council Regulation (EEC) No 2066/92 of 30 June 1992 amending Regulation (EEC) No 805/68 on the common organization of the market in beef and veal and repealing Regulation (EEC) No 468/87 laying down general rules applying to the special premium for beef producers and Regulation (EEC) No 1357/80 introducing a system of premiums for maintaining suckler cows (OJ 1992 L 215, p. 49).
(3) - Second recitals in the preambles to Regulations No 1765/92 and 2066/92.
(4) - Thirteenth recital in the preamble to Regulation No 1765/92.
(5) - Tenth recital in the preamble to Regulation No 2066/92.
(6) - Seventh recital in the preamble to Council Regulation (EEC) No 3508/92 of 27 November 1992 establishing an integrated administration and control system for certain Community aid schemes (OJ 1992 L 355, p. 1); third and fourth recitals in the preamble to the contested regulation.
(7) - First recital in the preamble to Regulation No 3508/92; ninth recital in the preamble to Regulation No 3887/92.
(8) - Regulation (EEC) No 805/68 of 27 June 1968 on the common organization of the market in beef and veal (OJ, English Special Edition 1968 (I), p. 187.)
(9) - Regulation (EEC) No 3886/92 of 23 December 1992 laying down detailed rules for the application of the premium schemes provided for in Council Regulation (EEC) No 805/68 on the common organization of the market in beef and repealing Regulations (EEC) No 1244/82 and (EEC) No 714/89 (OJ 1992 L 391, p. 20).
(10) - That is to say, aid under the scheme linked to declaration of the surface area of agricultural parcels.
(11) - Second recital in the preamble to Regulation No 1765/92.
(12) - Ibid., fifth recital.
(13) - Ibid., 11th and 12th recitals.
(14) - Conversely, under the terms of the 16th recital in the preamble to Regulation No 1765/92, no set-aside requirement is imposed on small producers.
(15) - Thirteenth recital in the preamble to Regulation No 1765/92, my emphasis.
(16) - Ibid., 14th recital, my emphasis.
(17) - Ibid., 15th recital.
(18) - First recital in the preamble to Regulation No 3887/92.
(19) - First recital in the preamble to Regulation No 3508/92.
(20) - Third recital in the preamble to Regulation No 3508/92 and seventh recital in the preamble to the contested regulation.
(21) - Ninth recital in the preamble to the contested regulation.
(22) - Ibid., first recital in the preamble to the regulation.
(23) - That is to say, the type of crop or ground cover or the absence of a crop.
(24) - Articles 6 to 16 of the contested regulation.
(25) - Commission Regulation (EC) No 229/95 of 3 February 1995 amending Regulation (EEC) No 3887/92 laying down detailed rules for applying the integrated administration and control system for certain Community aid schemes and Regulation (EC) No 762/94 (OJ 1995 L 27, p. 3).
(26) - Commission Regulation (EC) No 1648/95 of 6 July 1995 amending Regulation (EEC) No 3887/92 laying down detailed rules for applying the integrated administration and control system for certain Community aid schemes (OJ 1995 L 156, p. 27).
(27) - Third recital in the preamble to Regulation No 229/95, my emphasis.
(28) - My emphasis.
(29) - See points 75 to 89 of this Opinion.
(30) - p. 9 of the order for reference.
(31) - Council Regulation (EC, EURATOM) No 2988/95 of 18 December 1995 on the protection of the European Communities' financial interests (OJ 1995 L 312, p. 1).
(32) - As consistently held by the Court since its judgment in Case 26/62 Van Gend en Loos [1963] ECR 1.
(33) - Articles 2 and 7.
(34) - Ibid., second subparagraph of Article 2(5).
(35) - Paragraph 50 above.
(36) - First sentence of the first subparagraph of Article 9(2).
(37) - Ibid., Article 9(2), first paragraph (second sentence), first and second indents, and second paragraph, first, and Article 9(2), third paragraph, first and second indents, secondly.
(38) - Ibid., Article 9(2), first paragraph (second sentence), first and second indents, and second paragraph.
(39) - Ibid., second paragraph of Article 9(2).
(40) - Point 50 of this Opinion.
(41) - See points 14 to 17 of this Opinion.
(42) - First and second indents to the third paragraph of Article 9(2) of Regulation No 3887/92.
(43) - Ibid., first indent to the third paragraph of Article 9(2).
(44) - Ibid., second indent to the third paragraph of Article 9(2).
(45) - Fourth recital in the preamble to Regulation No 1648/95, my emphasis.
(46) - See point 53 of this Opinion.
(47) - See points 3 to 6 of this Opinion.
(48) - See point 14 of this Opinion.
(49) - See point 24 of this Opinion.
(50) - Regulations Nos 229/95 and 1648/95.
(51) - Amendment resulting from Article 1(5) of Regulation No 1648/95.
(52) - Amendment resulting from Article 1(6) of Regulation No 1648/95.
(53) - Contrary to the construction given to that expression under the former text, see point 66 of this Opinion.
(54) - Third, fourth, fifth and sixth recitals in the preamble.
(55) - Tenth recital in the preamble.
(56) - My emphasis.
(57) - My emphasis.
(58) - See point 45 of this Opinion.
(59) - See points 9, 10 and 15 of this Opinion.
(60) - Article 9(3) of Regulation No 3887/92.
(61) - See, to this effect, Joined Cases 205/82 to 215/82 Deutsche Milchkontor and Others [1983] ECR 2633.
(62) - Case 169/80 Gondrand Frères and Garancini [1981] ECR 1931; Joined Cases 92/87 and 93/87 Commission v France and United Kingdom [1989] ECR 405, paragraph 22; and recently Case C-143/93 Van Es Douane Agenten [1996] ECR I-431, paragraph 27.
(63) - See points 92 to 96 of this Opinion.
(64) - First paragraph of Article 9(2) of the contested regulation.
(65) - The penalties imposed on a farmer who innocently makes a mistake in his area declaration appear in the first and second indents to the second sentence of the first paragraph of Article 9(2) on the one hand and in the second paragraph of Article 9(2) of the contested regulation on the other.
(66) - Under the second paragraph of Article 9(2) of the contested regulation.
(67) - Under the first indent to the third paragraph of Article 9(2) of the contested regulation.
(68) - See one of the recent judgments, delivered on 12 December 1996, Case C-241/95 Accrington Beef [1996] ECR I-6699, paragraph 49.
(69) - See, for instance, Joined Cases C-296/93 and C-307/93 France and Ireland v Commission [1996] ECR I-795, paragraphs 22 and 30.
(70) - See, inter alia, Case 29/77 Roquette Frères [1977] ECR 1835, paragraphs 19 and 20.
(71) - See Joined Cases C-296/93 and C-307/93 France and Ireland v Commission, cited above, paragraph 31.
(72) - Ninth recital in the preamble to the contested regulation.
(73) - Which is the case as regards farmers who find themselves in the situations described in point 107 of this Opinion.
(74) - See points 61 and 63 of this Opinion.
(75) - See, for comparison, a recent judgment of 17 September 1996 in Joined Cases C-246/94, C-247/94, C-248/94 and C-249/94 Cooperativa Agricola Zootechnica S. Antonio and Others [1996] ECR I-4373, paragraph 32.