62013CC0105
OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 6 February 2014 (
1
)
Case C‑105/13
P.J. Vonk Noordegraaf
v
Staatssecretaris van Economische Zaken
(Request for a preliminary ruling from the College van Beroep voor het bedrijfsleven (Netherlands))
‛Common agricultural policy — Direct payments — Recalculation of payment entitlements’
I – Introduction
1.
Is it legitimate to correct errors in determining payment entitlements within the agricultural support scheme only in so far as the correction is to the farmer’s disadvantage but to disallow a corresponding correction in his favour? The present case concerns such a situation.
2.
It does seem reasonable, at first sight, to adopt a consistent approach to the correction of errors and, therefore, to correct errors both to the disadvantage and to the benefit of the farmer. On closer consideration, however, the principle of legal certainty, as given expression in respect of the right to agricultural aid, could preclude this.
3.
I shall therefore examine both the legal basis for the correction of an error and the rules to ensure legal certainty in more detail below.
II – Legal framework
A – Regulation No 1782/2003
4.
In the past, several systems for granting aid for agricultural holdings were provided for under European Union law. In part the production of certain goods was subsidised but, in the case of some crops, payments were also made for the area farmed. These various support measures were transferred into a single operating aid scheme by Regulation No 1782/2003. (
2
)
5.
Under Article 37(1) of Regulation No 1782/2003, to this end a so-called reference amount had first to be determined. It corresponded to the average of the payments granted to a farmer under certain support schemes during a certain period before the changes.
6.
This was the basis on which the so-called payment entitlements could be calculated under Article 43 of Regulation No 1782/2003:
‘(1)   Without prejudice to Article 48, a farmer shall receive a payment entitlement per hectare which is calculated by dividing the reference amount by the three-year average number of all hectares which in the reference period gave right to direct payments listed in Annex VI.
The total number of payment entitlements shall be equal to the above mentioned average number of hectares.
…
(2)   …
(3)   For the purpose … “forage area” shall mean the area of the holding that was available throughout the calendar year … for rearing animals including areas in shared use and areas which were subject to mixed cultivation. The forage area shall not include:
—
buildings, woods, ponds, paths;
—
…
(4)   The payment entitlements per hectare shall not be modified save as otherwise provided.’
7.
In addition, the term eligible hectare, which is defined in Article 44(2) of Regulation No 1782/2003, is of interest in the present case:
‘“Eligible hectare” shall mean any agricultural area of the holding taken up by arable land and permanent pasture except areas under permanent crops, forests or used for non agricultural activities.’
B – Regulation No 73/2009
8.
Regulation No 1782/2003 was replaced by Regulation No 73/2009, (
3
) which is the subject of the reference for a preliminary ruling.
9.
Under Article 33(1)(a) of Regulation No 73/2009, support under the single payment scheme is available to farmers if they hold payment entitlements which they have obtained in accordance with Regulation No 1782/2003.
10.
Article 34 of Regulation No 73/2009 stipulates that payment entitlements can be claimed only for the eligible hectares farmed:
‘(1)   Support under the single payment scheme shall be granted to farmers upon activation of a payment entitlement per eligible hectare. Activated payment entitlements shall give a right to the payment of the amounts fixed therein.
(2)   …
Except in the case of force majeure or exceptional circumstances, hectares shall comply with the eligibility condition throughout the calendar year.’
11.
Article 36 of Regulation No 73/2009 concerns the modification of payment entitlements:
‘The payment entitlements per hectare shall not be modified, save as otherwise provided for in this Regulation.
The Commission, in accordance with the procedure referred to in Article 141(2), shall lay down detailed rules for the modification, from 2010, of payment entitlements, in particular in the case of fractions of entitlements.’
12.
Special provisions concerning the definitive nature of certain payment entitlements are laid down in Article 137 of Regulation No 73/2009.
‘(1)   Payment entitlements allocated to farmers before 1 January 2009 shall be deemed legal and regular as from 1 January 2010.
(2)   Paragraph 1 shall not apply to payment entitlements allocated to farmers on the basis of factually incorrect applications except in cases where the error could not reasonably have been detected by the farmer.
(3)   …’
13.
Recital 49 in the preamble to Regulation No 73/2009 states:
‘In the initial allocation of payment entitlements by Member States, some errors led to particularly high payments to farmers. This non-compliance is normally the subject of financial correction until such time as corrective measures are taken. However, taking into account the time that has elapsed since the payment entitlements were first allocated, the necessary correction would lead to disproportionate legal and administrative constraints for Member States. In the interest of legal certainty, the allocation of such payments should therefore be regularised.’
C – Implementation rules
14.
Relevant rules for the implementation of Regulation No 1782/2003 and Regulation No 73/2009 were initially laid down in Regulation No 796/2004 (
4
) and subsequently in Regulation No 1122/2009. (
5
)
15.
Article 73a of Regulation No 796/2004 (now slightly amended by Article 81 of Regulation No 1122/2009) contains provisions on the adjustment of payment entitlements:
‘Recovery of undue entitlements
(1)   Where, after payment entitlements have been allocated to farmers …, it is established that certain payment entitlements have been allocated unduly, the farmer concerned shall give up the unduly allocated entitlements to the national reserve …
…
(2)   Where, after payment entitlements have been allocated to farmers …, it is established that the value of the payment entitlements is too high, that value shall be adjusted accordingly. … The value of the reduction shall be allocated to the national reserve …
…
(2a)   Where, for the purpose of the application of paragraphs 1 and 2 it is established that the number of the entitlements allocated to a farmer … is incorrect, and where the undue allocation has no impact on the total value of the entitlements the farmer received, the Member State shall recalculate the payment entitlements and where appropriate correct the type of the entitlements allocated to the farmer. However, this shall not apply if the errors could reasonably have been detected by the farmers.’
III – Facts and reference for a preliminary ruling
16.
The parties to the main proceedings are in dispute about the support for Mr Vonk Noordegraaf’s holding for the year 2009. The outcome of this dispute is, however, also relevant for subsequent years.
17.
The legal dispute has its basis in the change in the system of agricultural support from the subsidisation of certain forms of agricultural production to the single payment scheme. In order to calculate the single payment, the production subsidy previously applied is allocated to the agricultural area of the holding. During subsequent eligible periods the payment entitlement per eligible hectare thus calculated can be claimed, provided the relevant hectares are available to the holding.
18.
In the past, Mr Vonk Noordegraaf received premiums for suckler cows and bulls that were linked not to the hectares farmed but instead to the number of animals. By decision of 18 July 2006 his average historical premium, the reference value under Article 37(1) of Regulation No 1782/2003, was allocated to the agricultural area then at his disposal. This area was fixed at that time at 10.76 hectares. He therefore received 10.76 payment entitlements. (
6
) The measuring method used to calculate the hectares registered the gross parcel area, including ditches, banks and paths.
19.
However, following criticism from the Commission, in 2009 a new land inventory system was introduced in the Netherlands. This system measures only the net parcel area. Ditches, banks and paths are excluded. The eligible hectares of Mr Vonk Noordegraaf’s holding, which had already been recorded in 2006, were recalculated for 2009 on the basis of this method and fixed at only 8.34 hectares. This reduction in the land area is not based on the fact that Mr Vonk Noordegraaf no longer farms certain areas, but solely on the new registration system. The consequence is that he can claim payment entitlements only to this lesser extent.
20.
The parties now disagree as to whether Mr Vonk Noordegraaf’s single payment must also be correspondingly reduced. He is seeking a recalculation of his payment entitlements in the form of an increase in their value on the basis of the reduced area of the holding. In his view, it was wrong to allocate the reference amount to 10.76 hectares. It ought to have been allocated to 8.34 hectares. This would have prevented any reduction in the total amount of the agricultural subsidy to which he is entitled.
21.
According to the referring court, Netherlands law would permit the payment entitlements to be adjusted accordingly. However, since there are doubts as to whether European Union law precludes an adjustment, the College van Beroep voor het bedrijfsleven (Administrative Court for Trade and Industry) has referred the following question to the Court of Justice for a preliminary ruling:
‘Can it be said to constitute a correct application of Regulation No 73/2009, with particular reference to Articles 34, 36 and 137, if a farmer with payment entitlements acquired on the basis of non-area-related production, allocated to the area in his possession, does not have a significant proportion of those entitlements paid out to him despite the fact that he declared the eligible area of the hectares which remained unchanged in his possession in good faith in accordance with the measuring method used by the Member State at the time of the activation of the payment entitlements under Article 34 of Regulation No 73/2009, but subsequently rejected by the Commission, for the sole reason that the eligible area determined for purposes of the payment turns out to be smaller as the result of a changed measuring method?’
22.
In the proceedings only the Kingdom of the Netherlands and the European Commission submitted pleadings. There was no oral procedure.
IV – Legal assessment
A – Functioning of the single payment system
23.
It will be useful for understanding the request for a preliminary ruling to start by explaining the single payment system using a simplified example. In principle, and subject to other provisions which are not of interest in the present case, a farmer’s single payment results from the allocation of the subsidy under the previous system to the area farmed by the farmer.
24.
To this end, a reference amount is first calculated which corresponds to the average of the subsidy received by the farmer under the old subsidy system during the last three years before the changes (Article 37 of Regulation No 1782/2003). The reference amount is then allocated to the average area farmed during this period. On this basis the farmer receives a certain number of payment entitlements with a certain respective value which corresponds to the number of hectares of the said area (Article 43 of Regulation No 1782/2003).
25.
So, if the farmer’s reference amount is EUR 8 000, because this was the average of his subsidy during the reference period, and if, on average, he farmed 10 hectares, he is entitled to 10 payment entitlements with a value of EUR 800 each. As long as he continues to farm the same area, he can claim these entitlements, that is a total of EUR 8 000, again each year (Article 34 of Regulation No 73/2009).
26.
However, if it later transpires that the hectares used in this example actually include only eight hectares of farmed areas, while the rest relates to paths and ditches, the farmer can in fact claim only eight payment entitlements.
27.
Whether the total value of the payment entitlements due to him is thereby also reduced to eight times EUR 800, i.e. to a total of EUR 6 400, is the subject of the present proceedings. Such a reduction would be avoided if the revised land area were taken into account not only in relation to the payment of the claims but if the calculation of the payment entitlements were also corrected. The farmer would then receive eight payment entitlements worth EUR 1 000 each and could continue to claim the full EUR 8 000 also on the basis of the revised area.
28.
In order to answer the question submitted for a preliminary ruling it must therefore be clarified whether such an adjustment is permissible, that is to say, whether there is a legal basis for it (see B below), and subsequently, whether the rules contained in Article 137 of Regulation No 73/2009 on the definitive nature of payment entitlements allocated preclude an adjustment (see C below).
B – Requirements for an adjustment
29.
Article 73a of Regulation No 796/2004 may provide the legal basis for an adjustment.
30.
It is true that under Article 36(1) of Regulation No 73/2009 the payment entitlements per hectare are not to be modified, save as otherwise provided for in the regulation. However, under Article 36(2) the Commission may lay down detailed rules for the modification of payment entitlements.
31.
As the present case concerns the payments for 2009, under Article 86 of Regulation No 1122/2009 the rules for the implementation of the previous Regulation No 796/2004 are still applicable. These were based in turn on Regulation No 1782/2003, which provided in Article 43(4), similarly to Article 36 of Regulation No 73/2009, that the payment entitlements per hectare were not to be modified save as otherwise provided.
32.
As the Commission argues, paragraphs 1 and 2a of Article 73a of Regulation No 796/2004 could therefore provide the legal basis for a recalculation. Under paragraph 1, a farmer must give up payment entitlements to the national reserve if it is established that certain payment entitlements have been allocated unduly. If such a determination is made, paragraph 2a provides that if the undue allocation has no impact on the total value of the entitlements the farmer received, the Member State shall recalculate the payment entitlements. Paragraph 2a does not apply, however, if the errors could reasonably have been detected by the farmers.
33.
This could give rise not only to the possibility of recalculating the payment entitlements for Mr Vonk Noordegraaf’s holding, but indeed to an obligation to do so, because in the present case a recalculation would not have an impact on the total value of the payment entitlements he receives. This is because this value corresponds to the unchanged reference amount, i.e. his average subsidy before the change to the single payment. It may also be assumed that Mr Vonk Noordegraaf could not have reasonably detected errors in the determination of the land area since the errors were based on the methods used by the Netherlands authorities.
34.
The Netherlands, however, dispute that the original allocation of payment entitlements in 2006 was incorrect.
35.
It therefore falls to be examined whether the number of allocated payment entitlements was incorrect due to the fact that, in determining the applicable hectares, areas such as paths and ditches were included which were left out of account in the determination of the hectares as from 2009. The holding would then have been allocated too high a number of payment entitlements, each with too low a value in terms of amount.
36.
Pursuant to the original version of Article 44(2) of Regulation No 1782/2003, initially only arable land and permanent pasture constituted eligible areas; (
7
) areas used for other crops were added later. (
8
) Other areas, in particular paths and ditches, were not eligible even at that time.
37.
It is true that Article 43 of Regulation No 1782/2003 does not expressly provide that only eligible hectares are to be taken into account in calculating the payment entitlements. However, according to recital 30 in the preamble to the regulation, the payments entitlements are to be linked to the eligible hectares of the holding. Accordingly, the eligible hectares are expressly specified in respect of the alternative mode of allocation provided for in Article 59. Consequently, it can be considered that, when calculating the payment entitlements, in general terms the same areas should be taken into account as for the subsequent payment of the subsidy.
38.
Moreover, Article 43(3) of Regulation No 1782/2003 makes it clear that forage area taken into account does not include, in particular, ponds and paths. It therefore cannot be considered that such areas can be included in other agricultural land.
39.
Areas that were not used as arable land or permanent pasture or for other recognised crops could consequently not be taken into account in calculating the payment entitlements even in 2006. If this nevertheless did in fact happen, as the request for a preliminary ruling states, for the purposes of Article 73a(2a) of Regulation No 796/2004 the number of payment entitlements determined would have been incorrect from the outset.
40.
It must therefore be concluded that the competent Member State is to recalculate a farmer’s payment entitlement in accordance with Article 73a(2a) of Regulation No 796/2004 if, in the original calculation of the payment entitlements, an earlier subsidy in the form of premiums for suckler cows and bulls was allocated to an overstated number of hectares on the basis of the method used in this Member State for determining eligible hectares.
C – Definitive nature of the payment entitlements
41.
In the view of the Netherlands, a recalculation of the payment entitlements is, however, precluded by Article 137(1) of Regulation No 73/2009. According to that provision, payment entitlements allocated to farmers before 1 January 2009 are deemed legal and regular as from 1 January 2010.
42.
The Netherlands interprets this provision as meaning that as from 1 January 2010, any errors in determining the eligible hectares under the original allocation of payment entitlements before 1 January 2009 can no longer be corrected.
43.
On the face of it, the first part of Article 137(2) of Regulation No 73/2009, which states that paragraph 1 is not to apply to payment entitlements allocated on the basis of factually incorrect applications, could conflict with this view because under Article 34 of Regulation No 1782/2003 the application for calculation of the payment entitlements must have contained the erroneous area data known to the Netherlands authorities, that is the gross parcel area including paths and ditches.
44.
None the less, this ought not to be relevant because, under the second part of Article 137(2), paragraph 1 still applies in cases in which the error could not reasonably have been detected by the farmer. This would be the case in so far as the application was based on the official Netherlands method of identifying the land area.
45.
However, the Commission considers that Article 137 of Regulation No 73/2009 does not apply ratione temporis. Although the Netherlands authorities adopted the contested decision only after 1 January 2010, it relates to the operating aid for 2009. I understand the Commission’s argument on this point to mean that the competent authorities should have made the correction under Article 73a(2a) of Regulation No 796/2004 when assessing this application as the error in allocating the payment entitlements within this framework was evident. It ought not to matter in this regard whether a support measure was decided upon before or after 1 January 2010 if it related to a period before this date.
46.
In the final analysis this view cannot be dismissed. It would hardly be reasonable to permit the correction of an unfair disadvantage for the applicant only if the competent authorities deal with an application particularly rapidly, whereas processing delays would preclude any redress.
47.
However, the solution cannot lie in restricting the temporal applicability of Article 137(1) of Regulation No 73/2009 contrary to its wording, because the fundamental problem with the provision would continue to exist: it clearly goes too far, inasmuch as its wording precludes the correction of past errors that disadvantage farmers acting in good faith, for the future, in relation to agricultural support.
48.
That being so, the question to be examined is whether Article 137(1) of Regulation No 73/2009 generally precludes adjustments under Article 73a(2a) of Regulation No 796/2004, irrespective of when a procedure is commenced.
49.
The wording of Article 137(1) of Regulation No 73/2009 gives expression to the principle of legal certainty for the allocation of payment entitlements in comprehensive terms. Recognising 1 January 2010 as the last possible date for applying for a correction would be in conformity with the wording.
50.
However, according to recital 49 in the preamble to Regulation No 73/2009, Article 137(1) is merely aimed at ensuring the legal validity of specific allocations. This provision was consequently introduced in order to enable Member States to waive the reclaiming of certain particularly high payments made in error.
51.
This objective is also reflected in Article 137(2) of Regulation No 73/2009 referred to above. This provision restricts the scope of the legal certainty established in accordance with Article 137(1) by excluding any application to farmers who are responsible for errors in calculating payment entitlements. The aim, therefore, is to protect farmers who, through no fault of their own, have benefited from overpayments but not, conversely, to establish a disadvantage, for the future, for farmers who are not at fault.
52.
Only this interpretation can lead, in the present case, to the improved knowledge of the eligible hectares being taken into consideration in a consistent manner; otherwise, although the new and more precisely determined size of the agricultural area of a holding would be taken into account in future to the farmer’s disadvantage, it would not be taken into account in his favour. This would not be consistent.
53.
In its capacity as implementing legislator, the Commission confirms this interpretation of Article 137 of Regulation No 73/2009 as amended by Article 81 of its Regulation No 1122/2009, which largely corresponds to Article 73a of Regulation No 796/2004, the relevant regulation in the present case. As compared to Regulation No 796/2004, the authority to make adjustments under Article 81(1) and (2) of Regulation No 1122/2009 is supplemented by the indication that it applies without prejudice to Article 137 of Regulation No 73/2009. Farmers who have benefited from overpayments in good faith are therefore to be spared. By contrast, the Commission did not include a corresponding indication in Article 81(3) of Regulation No 1122/2009. This provision allows for the correction of errors that did not result in overpayments and, as there is no corresponding reference to Article 137 of Regulation No 73/2009, is excluded from its scope. The same must apply to Article 73a(2a) of Regulation No 796/2004, which corresponds to Article 81(3) of Regulation No 1122/2009.
54.
Accordingly, Article 137 of Regulation No 73/2009 does not apply to a correction under Article 73a(2a) of Regulation No 796/2004.
V – Conclusion
55.
I therefore propose that the court should rule as follows:
The competent Member State is to recalculate a farmer’s payment entitlements under Article 73a(2a) of Regulation No 796/2004 if, in the original calculation of the payment entitlements, an earlier subsidy in the form of premiums for suckler cows and bulls was allocated to an overstated number of hectares on the basis of the method used in this Member State for determining eligible hectares. Article 137 of Regulation No 73/2009 does not apply to a correction under Article 73a(2a) of Regulation No 796/2004.
(
1
)	Original language: German.
(
2
)	Council Regulation (EC) No 1782/2003 of 29 September 2003 establishing common rules for direct support schemes for farmers under the common agricultural policy and establishing certain support schemes for farmers … (OJ 2003 L 270, p. 1). Despite numerous subsequent amendments, it is essentially the original version that is of interest in the present case.
(
3
)	Council Regulation (EC) No 73/2009 of 19 January 2009 establishing common rules for direct support schemes for farmers under the common agricultural policy and establishing certain support schemes for farmers, amending Regulations (EC) No 1290/2005, (EC) No 247/2006, (EC) No 378/2007 and repealing Regulation (EC) No 1782/2003 (OJ 2009 L 30, p. 16) as amended by Commission Regulation (EU) No 360/2010 of 27 April 2010 amending Annex IV and Annex VIII to Council Regulation (EC) No 73/2009 establishing common rules for direct support schemes for farmers under the common agricultural policy (OJ 2010 L 106, p. 1).
(
4
)	Commission Regulation (EC) No 796/2004 of 21 April 2004 laying down detailed rules for the implementation of cross-compliance, modulation and the integrated administration and control system provided for in Regulation (EC) No 1782/2003 … (OJ 2004 L 141, p. 18) as amended by Commission Regulation (EC) No 380/2009 of 8 May 2009 (OJ 2009 L 116, p. 9).
(
5
)	Commission Regulation (EC) No 1122/2009 of 30 November 2009 laying down detailed rules for the implementation of Council Regulation (EC) No 73/2009 as regards cross-compliance, modulation and the integrated administration and control system, under the direct support schemes for farmers provided for in that regulation, as well as for the implementation of Council Regulation (EC) No 1234/2007 as regards cross-compliance under the support scheme provided for the wine sector (OJ 2009 L 316, p. 65) as amended by Commission Regulation (EU) No 146/2010 of 23 February 2010 (OJ 2010 L 47, p. 1).
(
6
)	The relationship between land area and payment entitlements is illustrated again in point 25 below.
(
7
)	See Case C-61/09 Landkreis Bad Dürkheim [2010] ECR I-9763, in particular paragraphs 37 and 43.
(
8
)	See the version of Commission Regulation (EC) No 1182/2007 of 26 September 2007, OJ 2007 L 273, p. 1.