62001CJ0344_EN
Parties
Grounds
Decision on costs
Operative part
Parties
In Case C-344/01,
Federal Republic of Germany,
represented by W.-D. Plessing and M. Lumma, acting as Agents,
applicant,
v
Commission of the European Communities,
represented by M. Niejahr, acting as Agent, with an address for service in Luxembourg,
defendant,
APPLICATION for the annulment of Commission Decision 2001/557/EC of 11 July 2001excluding from Community financing certain expenditure incurred by the Member States under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) (OJ 2001 L 200, p. 28), in so far as it makes financial corrections in respect of suckler cow premiums granted in 1995 and 1996, which correspond to the 1996 and 1997 financial years,
THE COURT (Fifth Chamber),
composed of: C.W.A. Timmermans (Rapporteur), acting for the President of the Fifth Chamber, A. Rosas and A. La Pergola, Judges,
Advocate
General: P. Léger,
Registrar: M. Múgica Arzamendi, Principal Administrator,
having regard to the Report for the Hearing,
after hearing oral argument from the parties at the hearing on 5 June 2003,
after hearing the Opinion of the Advocate General at the sitting of
25 September 2003,
gives the following
Judgment
Grounds
1. By application received at the Court on 12 September 2001, the Federal Republic of Germany brought an action under Article 230 EC for the annulment of Commission Decision 2001/557/EC of 11 July 2001 excluding from Community financing certain expenditure incurred by the Member States under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) (OJ 2001 L 200, p. 28; ‘the contested decision’), in so far as it makes financial corrections in respect of suckler cow premiums granted in 1995 and 1996, which correspond to the 1996 and 1997 financial years.
Relevant provisions
2. Article 4d of Regulation (EEC) No 805/68 of the Council of 27 June 1968 on the common organisation of the market in beef and veal (OJ, English Special Edition 1968 (I), p. 187), as amended by Council Regulation (EEC) No 2066/92 of 30 June 1992 (OJ 1992 L 215, p. 49; hereinafter ‘Regulation No 805/68’), provides:
‘1. A producer keeping suckler cows on his holding may qualify, on application, for a premium for maintaining suckler cows (suckler cow premium).
…
5. The premium shall be granted to any producer not supplying milk or milk products from his holding for 12 months from the day of deposit of the application, provided that he keeps for not less than six months successively in that period a number of suckler cows at least equal to the number in respect of which the premium is applied for.
The supply of milk or milk products directly from the holding to the consumer shall not, however, prevent grant of the premium.
6. The premium shall also be granted to any producer supplying milk or milk products whose individual reference quantity as referred to in Article 5c of Regulation (EEC) No 804/68 … does not exceed 60 000 kilograms.
In such cases, the premium shall be granted for a number of suckler cows not exceeding 10 per holding which are kept for not less than six months successively from the day of deposit of the application.
…’
3. Under Article 4a of Regulation No 805/68, ‘suckler cow’ is to mean:
‘(i) a cow belonging to a meat breed or born of a cross with a meat breed, and belonging to a herd intended for rearing calves for meat production;
and
(ii) 	an in-calf heifer, meeting the same criteria, which replaces a suckler cow.’
4. Commission 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 and repealing Regulations (EEC) No 1244/82 and (EEC) No 714/89 (OJ 1992 L 391, p. 20), lays down detailed rules for the application of the grant of, among other things, the suckler cow premium.
5. 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; ‘the integrated system’) and 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 (OJ 1992 L 391, p. 36) set out the rules applicable to the processing of applications for suckler cow premiums and to the checks on the lawfulness of the grant of those premiums.
6. Under Article 2 of Regulation No 3508/92, the integrated system is to comprise, among other things, a computerised database, an alphanumeric identification system for the identification and registration of animals and an integrated control system. Pursuant to Article 13(1) of the regulation, the alphanumeric system of identification and registration of animals and the integrated control system were to apply from 1 February 1993, and the computerised database from 1 January 1996.
7. Articles 6 to 15 of Regulation No 3887/92 set out detailed rules for checks in respect of the integrated system. Article 6(1) and (2) are worded as follows:
‘1. Administrative and on-the-spot checks shall be made in such a way as to ensure effective verification of compliance with the terms under which aids and premiums are granted.
2. The administrative checks referred to in Article 8(1) of Regulation (EEC) No 3508/92 shall include cross-checks on parcels and animals declared in order to ensure that aid is not granted twice in respect of the same calendar year without justification.’
8. Regulation (EEC) No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (OJ, English Special Edition 1970 (I), p. 218), as amended by Council Regulation (EC) No 1287/95 of 22 May 1995 (OJ 1995 L 125. p. 1; hereinafter ‘Regulation No 729/70’), lays down general rules on the financing of the common agricultural policy.
9. Article 3(1) of Regulation No 729/70 provides that the Guarantee Section of the EAGGF is to finance intervention intended to stabilise the agricultural markets which is undertaken according to Community rules within the framework of the common organisation of agricultural markets.
10. Under Article 5(2)(c) of Regulation No 729/70 the Commission is to decide, in the course of ‘compliance’ decisions, on the expenditure to be excluded from Community financing referred to in Articles 2 and 3 of the regulation, where it finds that expenditure has not been incurred in compliance with Community rules.
11. Article 8(1) of Regulation No 729/70 imposes on the Member States a general requirement to take the measures necessary to satisfy themselves that transactions financed by the EAGGF are actually carried out and are executed correctly, to prevent and deal with irregularities and to recover sums lost as a result of irregularities or negligence.
12. Article 9 of Regulation No 729/70 provides that Member States are to make available to the Commission all information required for the proper working of the EAGGF and to take all suitable measures to facilitate the checks which the Commission may consider it necessary to undertake.
13. In 1997 the Commission laid down ‘Guidelines for the calculation of financial consequences during the preparation of the decision for clearing the accounts of the Guarantee Section of the EAGGF’ (Document No VI/5330/97; ‘the Guidelines’). For the purpose of calculating expenditure which is not eligible, where checks in the Member States are inadequate, the Guidelines provide for flat-rate corrections of 2%, 5%, 10% or 25% of the expenditure declared. They specify that a decision may be taken in exceptional cases to impose higher rates of correction, which may go as far as total exclusion of the expenditure from Community financing.
14. In respect of the basis of calculation, the Guidelines provide:
‘The rate of correction should be applied to that part of the expenditure which presents a risk. When the deficiency results from a failure by the Member State to adopt an appropriate control system, then the correction should be applied to the entire expenditure for which that control system was required. When there is reason to suppose that the deficiency is limited to that of a department or region’s application of the control system adopted by the Member State, the correction should be limited to the expenditure controlled by that department or region …’.
Procedure before the Commission
15. The Commission carried out various checks relating to the implementation of, among other things, suckler cow premiums in North Rhineland-Westphalia, from 22 to 26 September 1997, Schleswig-Holstein, from 19 to 23 January 1998, and Bavaria, from 8 to 12 June 1998 (‘the three Länder checked’).
16. In letters dated 25 November 1997 and 2 February 1999, the Commission communicated its findings and recommendations in respect of those checks. In the second letter, it stated that, unless there was evidence to the contrary, the findings in the three Länder checked would be considered to be representative of the whole of Germany. It invited the competent German authorities to a bilateral discussion in Brussels, which took place on 1 June 1999. By letter of 31 August 1999, the Commission informed the German Government that it was going to make a correction extending to all the Länder in respect of, among other things, suckler cow premiums. In its reply of 3 November 1999, the German Government contested the extension to other Länder of the breaches found by the Commission in the three Länder checked.
17. In an official communication of 9 October 2000 the Commission made a financial correction in the suckler cow premium sector in respect of the 1996 and 1997 financial years amounting to 5% for Schleswig-Holstein and 2% for the other Länder. However, it stated in that communication that, as regards Mecklenburg-Western Pomerania, it had received important additional information describing a system of checks specific to animals which were potentially ineligible. It stated that its position in relation to that Land could be reviewed if relevant instructions for checks and a description of the risk analysis were supplied.
18. To support extrapolation to the other Länder of the findings made in the three Länder checked, the Commission relied essentially on the following matters: (i) the data banks in the various Länder were incompatible until 1997, so that the checks intended to avoid multiple applications for premiums for the same cows could only be incomplete; (ii) in many cases, the registers of livestock were incorrect, and did not therefore constitute a reliable basis for the on-the-spot administrative checks; (iii) the system of checks did not lay down adequate age-limits for the purpose of assessing eligibility for a suckler cow premium or for the purpose of organising on-the-spot checks.
19. The Commission justified extending the financial correction to other Länder not checked by claiming that ‘in view of the similar nature of the principal infringements found in the different Länder visited and the significant similarity which exists between the administrative structures and procedures, it seemed appropriate to depart from the principle that, in 1995 and 1996, comparable deficiencies must have existed in all the Länder not visited’. The Commission stated that it had asked for evidence that its findings did not apply to the other Länder. However, the competent German authorities had not sent it any such documents, since they considered that it was not possible to provide them to the extent requested.
20. By letter of 21 November 2000, the German Government applied to the secretariat of the conciliation body of the Commission seeking the opening of a conciliation procedure. In its final report of 16 March 2001, the conciliation body took the view that it was not its task to resolve the question of the constitutional legality of the application of financial corrections to the Länder in which no check had been carried out beforehand. In respect of the burden of proof and the nature and assessment of the documents to be submitted, it could not see a way of reconciling the differing positions. On a more general level, in view of possible disputes as to the form and content of proof which may be requested from the Member States, the conciliation body stated however that it was in favour of the development of clear and precise rules by the Commission.
21. By letter of 8 May 2001, the Commission submitted its definitive conclusions following the final report of the conciliation body. The German Government maintained and clarified its position, by letter of 20 June 2001.
22. In its summary report of 19 June 2001 (Doc No AGRI/17537/01), the Commission maintained its point of view regarding extrapolation of the financial corrections to Länder in which it had not carried out checks on the spot. However, regarding Mecklenburg-Western Pomerania, it stated that it had received the information requested. On 19 June 2001, the Member States were heard at the EAGGF committee meeting on the Commission’s draft decision.
23. In the contested decision the Commission set the final financial correction, against which the Federal Republic of Germany has brought the present action.
Forms of order sought
24. The German Government claims that the Court should:
– annul the contested decision in so far as it excludes from Community financing the sum of DEM 3 870 600.88 and charges it to the Federal Republic of Germany;
– order the defendant to pay the costs.
25. The Commission claims that the Court should dismiss the application and order the applicant to pay the costs.
The pleas for annulment of the contested decision
26. The German Government puts forward three pleas in support of its action.
27. First, the application of the correction to ‘all the Länder’ is based on an infringement of an essential procedural requirement within the meaning of the second paragraph of Article 230 EC. The contested decision was founded on erroneous conclusions drawn from an inadequate investigation by the Commission.
28. Secondly, the contested decision infringes the principles of proper administration in so far as the Commission departed, without reasons or prior notice, from its previous administrative practice of charging ‘specific to each Land’. The Commission thus took administrative action which did not meet the requirements of foreseeability and transparency.
29. Thirdly, the contested decision breaches the duty of cooperation in good faith on the part of the Community institutions towards th e Member States, which follows from Article 10 EC.
The first plea
Arguments of the parties
30. The German Government claims that the investigation, intended to identify the decisive facts on which the contested decision is based, is inadequate. This inadequacy constitutes infringement of an essential procedural requirement within the meaning of the second paragraph of Article 230 EC. Extrapolation of the findings made in the three Länder checked to the other Länder where no checks were carried out is unjustified.
31. The federal constitutional structure of Germany precludes such extrapolation. The implementation of measures relating to premiums granted under the integrated system, including suckler cow premiums, falls within the exclusive competence of the Länder. That means, among other things, internal implementation by each Land under its own responsibility. Implementation of Community law by the Länder is therefore a priori heterogeneous because of different administrative organisation as well as implementing provisions specific to each Land.
32. There is therefore no ‘overall homogeneous nature’ which justifies a financial correction for the whole of Germany. Financial corrections should only be applied, in principle, on the basis of misconduct found on the part of paying agencies which have been checked. It is only when it has concrete evidence that the Commission may broaden the scope of financial corrections to the paying agencies of Länder which have not been checked on the spot.
33. In any event, the German Government believes that extrapolation was not justified in the present case.
34. In this connection, it maintains that findings had never been extrapolated before. At the time of other checks carried out under the EAGGF, the Commission had only applied financial corrections to the Land in which it had made the checks, and thus had not extended those corrections to the whole of Germany.
35. The German Government states that administrative implementation of and checks on the suckler cow premium scheme are structured differently, so that an infringement found in one of the Länder should not necessarily be presumed to exist in the other Länder. Extrapolating in a general manner results of checks carried out in different Länder to situations in other Länder is not therefore necessarily appropriate. Moreover, the Commission’s findings themselves preclude such an extrapolation. In particular, the lacunae found in the three Länder checked in relation to the age-limit laid down for the purpose of assessing eligibility for the premium were completely different.
36. As an example of the diverse situations in the different Länder, the German Government further argues that, in Thuringia, far more than 10% of holdings had been checked on the spot in previous years in order to avoid unjustified payments. The large number of holdings checked on the spot guaranteed certainty in the application procedure.
37. In Hesse, a suckler cow’s capacity to confer entitlement to a premium was checked both by means of plausibility checks on the basis of documents supplied and by on-the-spot checks.
38. In Saarland, computerisation has made it possible to guarantee full monitoring of premium animals as well as of those which do not confer entitlement to a premium. The competent body of this Land draws up lists of animals containing the eartag number and the date of birth of all cattle (database of the integrated system set up in accordance with Article 2(a) of Regulation No 3508/92) and those lists are checked independently of the tagging system, with a view to avoiding duplicate applications.
39. In Saxony, a suckler cow’s capacity to confer entitlement to a premium is always verified by means of checks, irrespective of the age of the animals for which an application for a premium is made. 24 out of 1 887 applications were rejected in 1995, 59 out of 1 935 applications were rejected in 1996 and 51 out of 2 054 applications were rejected in 1997.
40. In Baden-Württemberg, the competent authorities carried out a greater number than average of on-the-spot checks of applications for suckler cow premiums. Thus, 19.63% of applications were checked on the spot in 1995, giving rise to 254 rejections, and 18.46% of applications in 1996, giving rise to 144 rejections.
41. The claim made by the Commission that alleged inadequate central cross-checking of applications for premiums is an infringement not limited to a Land is unfounded. In October 1995 a new identification system for cattle was introduced. Effective and homogenous, it involves a central registration of numbers issued, thereby allowing a cross-check at federal level of eartags requested.
42. The German Government also claims that the Commission is in breach of its duty to adduce evidence of an infringement of the provisions of Community law in the field of suckler cow premiums in the Länder not checked. Without concrete evidence, it has reversed the burden of proof to the detriment of the Federal Republic of Germany. Its investigation into the facts decisive for imputing infringements to all the Länder was incomplete and did not provide any tangible ground for believing that the infringements found also existed in other Länder. Only an on-the-spot check could have given a proper overview in accordance with the principles of administration system checks and checks on a Land or paying agency.
43. The Commission maintains that the duty to prove the relevant facts on which a decision is based is not an essential procedural requirement within the meaning of the second paragraph of Article 230 EC. The first plea should therefore be dismissed.
44. In the alternative, the Commission acknowledges in respect of the argument regarding the constitutional structure of the Federal Republic of Germany that it is necessary to take that structure into account when determining whether the inadequacies of checks found in a Land constitute a problem specific to that Land or a problem on a federal scale.
45. However it is possible, in principle, to take expenditure of certain Länder in which the Commission has not carried out checks previously into account in calculating a financial correction. The autonomy of the Member States in the national allocation of powers for implementing Community law should not in fact make it unreasonably difficult or impossible to fulfil the Commission’s obligations in the clearance of accounts procedure. Moreover, an absolute prohibition on extending the results of checks collected in one or several federal states would lead to discrimination between the different Member States, since Member States with a federal constitution would be subject to lower financial corrections than Member States with a more centralised structure.
46. As for the argument of the German Government that extrapolation was not justified by the facts, the Commission asserts that it does not dispute that in certain Länder, like Thuringia and Baden-Württemberg, the number of on-the-spot checks made in the period referred to was considerably greater than the minimum laid down by Community law. However that fact is of no relevance, because the criticism of the Commission at the origin of the contested correction did not concern the number of checks carried out, but the choice of producers to be checked and the timing and content of the checks.
47. As regards the statements of the German Government on the Länder cited as examples, the Commission points out that in Thuringia the information supplied related in the main to the period prior to 1995 and is therefore of no relevance to the assessment of the situation in 1995 and 1996, which correspond in this case to the 1996 and 1997 financial years. Only some of the information submitted is relevant to 1995 and 1996. However, that information does not make it possible to determine whether the age of the declared animals was taken into consideration when determining which producers were to be checked.
48. In the case of Hesse, the German Government’s assertion is much too general to dispel the doubts of the Commission. Moreover, it cannot be checked, given the absence of evidence.
49. In the case of Saarland, the submissions of the German Government relate exclusively to the carrying out of administrative checks. They are therefore not relevant to the issue of the quality of the on-the-spot checks, decisive in this case.
50. In the case of Saxony, the Commission maintains that, irrespective of the fact that the ratio between the number of rejections and the total number of applications does not make it possible to draw any conclusions as to the quality of the on-the-spot checks carried out in that Land, the examples of reimbursement provided by the German Government, far from dispelling the Commission’s doubts, serve rather to strengthen them. With one exception, all the reimbursement decisions were issued a year after the grant of the premiums. That shows that the on-the-spot checks carried out in Saxony took place late and, therefore, that whether or not the declared animals were suckler cows at the time of the application could not be established effectively.
51. The Commission adds that the German Government has not provided any information on the seven other Länder not checked.
52. Regarding the cattle identification system with central registration of numbers issued, the Commission points out that it was only from 1998, as the German Government itself confirms, that almost all animals were registered in the system. During 1995 and 1996 it was only possible to carry out a limited cross-check of data at federal level.
53. Moreover, the inadequacies found by the Commission in the central cross-checking of data did not constitute the decisive ground for the financial correction in question. According to the Commission, that correction was based essentially on lacunae in the organisation of checks concerning the identification of animals as suckler cows.
54. The Commission denies having reversed the burden of proof to the detriment of the Federal Republic of Germany. It believes that the inadequacy of the checks as to whether animals were suckler cows made in the three Länder checked is indisputable. Furthermore, the similarity in the lacunae found gave rise to serious and justified doubts as to the effectiveness of the German authorities’ checks for the whole of Germany. Against that background, it is for the German Government to provide detailed and comprehensive proof of the effectiveness of the systems of checks applied in the Länder not checked. Having been requested to do so time and again in vain, the German Government finally complied in part by sending documents relating to Mecklenburg-Western Pomerania. In respect of the 12 other Länder not checked, the Commission did not receive any information capable of removing its doubts as to the effectiveness of the systems of checks.
55. The Commission also notes that it is not required to carry out on-the-spot checks before reaching a decision to exclude certain expenditure from Community financing on the basis of Article 5(2)(c) of Regulation No 729/70, since that provision requires only that the Commission carries out checks. A financial correction can therefore be based exclusively on an examination of the files submitted by the Member State.
Findings of the Court
56. In its first plea, the Federal Republic of Germany claims, essentially, that the Commission is in breach of its duty to carry out an adequate enquiry before taking a decision, in particular by failing to apply the rules of evidence on the clearance of EAGGF accounts.
57. In this respect, it should be recalled that Article 8(1) of Regulation No 729/70 imposes on the Member States the obligation to take the measures necessary to satisfy themselves that the transactions financed by the EAGGF are actually carried out and are executed correctly, to prevent and deal with irregularities and to recover sums lost as a result of irregularities or negligence, even if the specific Community act does not expressly provide for the adoption of particular supervisory measures (Case C-373/99 Greece
v Commission [2001] ECR I-9619, paragraph 9).
58. The Court has consistently held that the Commission, in order to prove an infringement of the rules on the common organisation of the agricultural markets, is required not to demonstrate exhaustively that the checks carried out by the national authorities are inadequate, or that the data submitted by them are incorrect, but to adduce evidence of serious and reasonable doubt on its part regarding the checks or data.
The reason for this mitigation of the burden of proof on the Commission is that it is the Member State which is best placed to collect and verify the data required for the clearance of EAGGF accounts and, consequently, it is for that State to adduce the most detailed and comprehensive evidence that its checks or data are accurate and, if appropriate, that the Commission’s statements are incorrect (see in particular Case C-278/98
Netherlands
v Commission
[2001] ECR I-1501, paragraphs 39 to 41, and Case C-329/00 Spain
v Commission
[2003] ECR I-6103, paragraph 68).
59. Those rules on apportionment of the burden of proof between the Commission and the Member States apply irrespective of the internal structure of a Member State.
Responsibility for an infringement of the rules on the common organisation of the agricultural markets lies with the Member States themselves, as is clear from Article 8(1) of Regulation No 729/70, which requires the latter in general to take the measures necessary to satisfy themselves that transactions financed by the EAGGF are actually carried out and are executed correctly, to prevent and deal with irregularities and to recover sums lost as a result of irregularities or negligence.
60. Therefore, just as it is not for the Commission to rule on the allocation of powers by the institutional rules proper to each Member State, or on the obligations which may be imposed on the Federal Republic of Germany and Länder authorities respectively (see Case C-8/88 Germany
v Commission
[1990] ECR I-2321, paragraph 13), that allocation cannot constitute a sufficient reason to restructure the Member States’ obligations towards the Community in connection with the apportionment of the burden of proof of an infringement of the rules on the common organisation of the agricultural markets (also see, on this point, Case C-52/91 Commission v Netherlands
[1993] ECR I-3069, paragraph 36, Case C-140/00 Commission
v United Kingdom
[2002] ECR I-10379, paragraph 60, and Case C-89/03 Commission
v Luxembourg
[2003] ECR I-0000, paragraph 5).
61. Extrapolation of the data of certain Länder to others is not therefore prohibited in principle. It must, however, always be justified by the evidence.
62. It should be noted that the German Government does not contest the findings of the Commission in the three Länder checked.
63. It is common ground that the Commission relied on the following matters to impute its findings to the other Länder. First, the data banks in the various Länder were incompatible until 1997, so that the checks intended to avoid multiple applications for premiums for the same cows could only be incomplete. Next, in many cases, the registers of livestock were incorrect and did not therefore constitute a reliable basis for the on-the-spot administrative checks. Finally, the system of checks did not lay down adequate age-limits for the purpose of assessing eligibility for a suckler cow premium or for the purpose of organising on-the-spot checks.
64. It cannot be disputed that these matters constitute evidence, within the meaning of the case-law cited in paragraph 58 of this judgment, for the serious and reasonable doubt which the Commission could have regarding the checks or data of the Länder not checked.
65. It was therefore for the German Government, in accordance with that case-law, to submit the most detailed and comprehensive evidence that its checks were actually carried out or its data is correct, in order to show that the Commission’s doubts were not founded. Simply referring to the fact that the situation is different in each Land does not suffice. It was for the German Government to prove in concrete terms that the systems of checks in the Länder not checked were not tainted with the same defects as those which the Commission found in the three Länder checked.
66. The German Government does not deny that it received a request from the Commission to provide such evidence or that it submitted information on the systems of checks set up in Saxony, Thuringia, Mecklenburg-Western Pomerania, Hesse and Saarland. In the case of Meckenburg-Western Pomerania, it appears that the information submitted to the Commission led the latter not to apply a final financial correction to the expenditure incurred in that Land during the 1996 and 1997 financial years for suckler cow premiums.
67. Regarding the other four Länder, the German Government does not specify in what respect the reply given by the Commission in this case that the information it had received regarding those Länder was too general or irrelevant is incorrect.
68. The first plea of the German Government, alleging failure to apply the rules of evidence, must therefore be dismissed as unfounded.
The second plea
Arguments of the parties
69. In its second plea, the German Government claims that the Commission infringed the principles of proper administration, which also constitutes an infringement of an essential procedural requirement within the meaning of the second paragraph of Article 230 EC.
70. It takes the view that the application to ‘all the Länder’ of the lacunae found in three of them breaks new ground. The Commission thereby departed from an administrative practice followed over many years. Moreover it did not give reasons for that change in its administrative practice, although, for reasons of proper administration, foreseeability and transparency it should have notified the Member States of that change of policy and set out at the very least its main po ints.
71. The Commission replies that in 1990 it adopted a financial correction chargeable to the Italian Republic in which it ‘extended’ the financial consequences of irregularities found in certain regions of Italy at the time of payment of premiums, imputing the information gathered to regions not checked. It argues in addition that the contested decision also contains a financial correction relating to the Kingdom of Spain in which it ‘generalises’ the results of checks which it carried out in certain automonous regions of Spain, and which was calculated on the basis of expenditure incurred in the sector in question for the whole of Spain. The Spanish authorities did not contest that correction.
72. The Commission also refers to the guidelines laid down in 1997, which expressly state that a correction should be restricted to expenditure incurred in a given region only where there are reasons to believe that the deficiency is limited to the failure to apply the system of checks adopted by the Member State in that region.
Findings of the Court
73. Even if a change in the Commission’s practice which has not been notified to the Member States could constitute an infringement of the principle of proper administration, as the German Government alleges, there is no evidence to show that such a change actually took place in this case.
74. On the contrary, it is clear from Case C-55/91 Italy
v Commission
[1993] ECR I-4813, paragraph 18, that the Commission already extended the results of checks in one region to another region at the beginning of the 1990s.
75. In addition, the guidelines laid down by the Commission in 1997 state that a correction should be restricted to expenditure incurred in a given region only where there are reasons to believe that the deficiency is limited to the failure to apply the system of checks adopted by the Member State in that region. That confirms that, according to those guidelines, extrapolation of financial corrections from one region to another within a Member State is possible, and indeed is the rule.
76. The second plea put forward by the German Government must therefore be dismissed.
The third plea
Arguments of the parties
77. The German Government alleges that the Commission has infringed Article 10 EC. Under that article, the Commission is required to act in good faith with regard to the Member States and to respect their legitimate interests. That duty to act in good faith includes the obligation to have regard to the constitutional structures, in particular the federal structures, of the Member States. That interpretation of Article 10 EC is borne out by Article 6(3) EU, which provides that the European Union is to respect the national identity of its Member States. Therefore, respect for the division of the Federal Republic of Germany into autonomous Länder requires the Commission to refrain from taking decisions on financial corrections in respect of different Länder unless the EAGGF has itself found an infringement of Community law in those Länder harmful to the budget of the Community.
78. The Commission takes the view that that plea is unfounded. The Community institutions' obligation to take into consideration the federal structure of a Member State under the duty of cooperation in good faith does not apply without restriction. In respect of the procedure for the clearance of accounts, the restrictions which the German Government should accept are given concrete expression in the general principles developed in this area by the Court, in particular regarding the burden of proof. As long as the Commission observes those principles in making its financial corrections, it will not infringe the duty of cooperation in good faith. An infringement of Article 10 EC could therefore only be pleaded in this case if the Commission had not observed the principles of the clearance of accounts procedure so far as concerns the contested financial correction.
Findings of the Court
79. It should be noted that the duty to cooperate in good faith which follows from Article 10 EC governs relations between the Member States and the institutions. It entails an obligation on the Member States to take all the measures necessary to guarantee the application and effectiveness of Community law and imposes on Member States and the Community institutions mutual duties to cooperate in good faith (Case C-339/00 Ireland v Commission [2003] ECR I-0000, paragraph 71, and the case-law cited therein).
80. That principle applies, in particular, to the rules on the apportionment of the burden of proof referred to in paragraph 58 of this judgment and which, through the active participation required on the part of both the Commission and the Member States, induces cooperation in good faith between those bodies in determining whether or not the rules on the common organisation of the agricultural markets have been infringed.
81. It follows that the correct application of the rules on the apportionment of the burden of proof entails, in principle, compliance with Article 10 EC. To that effect, the third plea of the German Government coincides with its first plea, which has been dismissed. The arguments on which that third plea is based essentially concern the application of the rules on the apportionment of the burden of proof.
82. The third plea must therefore also be dismissed.
Decision on costs
Costs
83. Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Federal Republic of Germany has been unsuccessful, the Federal Republic of Germany must be ordered to pay the costs
Operative part
On those grounds,
THE COURT (Fifth Chamber)
hereby:
1. Dismisses the application;
2. Orders the Federal Republic of Germany to pay the costs.