61999CC0132_EN
Opinion of the Advocate-General
Opinion of the Advocate-General
1. Pursuant to Article 173 of the EC Treaty (now, after amendment, Article 230 EC), an action has been brought by the Netherlands against Commission Decision 1999/187/EC of 3 February 1999 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1995 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund.
The aim of this action is to have the decision annulled on account of its requiring the Netherlands to make a correction, for the reasons set out in the summary report, of NLG 117 277, representing 50% of the expenditure of NLG 234 553 declared to the EAGGF in connection with hemp production aid for the 1995 financial year.
I - The Community legislation
2. Regulation No 729/70, on the financing of the common agricultural policy lays down the expenditure of the Member States for which the Guarantee Section of the EAGGF assumes responsibility and the conditions under which financing may be granted. Under Article 3, measures to stabilise agricultural markets which are undertaken according to Community rules are financed. Article 8 requires the Member States to take the necessary steps to satisfy themselves that transactions financed by the Fund 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.
3. Regulation No 1723/72, on making up accounts for the European Agricultural Guidance and Guarantee Fund, Guarantee Section, requires the Member States to send the Commission each year the accounts relating to expenditure financed with a view to their approval.
4. On 4 June 1993 the Commission adopted a communication to the EAGGF, entitled Calculation of financial consequences when preparing the decision regarding the clearance of the accounts of EAGGF Guarantee, establishing the guidelines to be followed when drafting the summary report concerning the 1990 financial year and subsequent ones. Appendix I deals with the financial consequences of inquiries undertaken the clearance of accounts programme and Appendix II with the financial consequences within the clearance of accounts of EAGGF Guarantee of deficiencies in controls carried out by the Member States - flat rate corrections. This Appendix states that, as a rule, where the Commission adopts a decision in respect of a financial correction, it must assess the degree of risk of losses to Community funds occurring as a consequence of the control deficiency, bearing in mind their nature, quality and frequency. Three rates of flat rate correction are provided for: 2%, 5% and 10% of expenditure, depending on whether the deficiency relates to factors of greater or lesser importance in the control system or the implementation of checks to determine that the expenditure is of a regular nature.
5. The common organisation of the market in hemp is governed by Regulation No 1308/70 and applies to hemp, a plant of the Cannabaceae family (Cannabis sativa), raw or worked but not spun, and tow and waste of true hemp including pulled or garnetted rags or ropes. The general rules on the granting of aid for hemp produced in the Community are set out in Regulation No 619/71. According to Article 3, aid is to be granted only to the grower and only for hemp grown from certified seed of varieties contained in a list to be drawn up in accordance with the procedure laid down in Article 12 of Regulation (EEC) No 1308/70. Under Article 6, the amount of the aid is calculated in relation to the area sown and harvested. Article 4 provides that Member States are to ensure by administrative supervision that the product for which aid has been requested qualifies for that aid and for the purposes of that supervision, they are to require areas sown and harvested to be declared. According to Article 5, Member States are to verify the accuracy of the declarations of areas sown and harvested and applications for aid submitted by the producers by means of spot checks.
6. Detailed rules concerning aid for hemp are set out in Regulation No 1164/89. Article 3 provides that aid is to be granted only in respect of areas of hemp which have been sown with the varieties of seed listed in Annex B. In accordance with Article 5, the grower must each year submit a declaration, no later than 15 July, of the areas sown and, at least, his personal particulars, the botanical species used and the cadastral registration number. Under Article 6, sampling checks on site must relate to at least 5% of the declarations of areas sown. Articles 5, 7 and 8 set out the consequences of the differences recorded between the area indicated in the declaration and the area referred to in the application for aid.
7. Article 4 of Regulation No 1164/89 sets out the conditions under which the areas can qualify for aid. It was initially worded as follows:
Aid shall be granted only in respect of areas:
(a) which have been completely sown and harvested and on which normal cultivation work has been carried out; and
(b) for which a declaration of areas sown has been made in accordance with Article 5.
8. Regulation No 1469/94 supplemented Article 4(a) by the addition of the following text:
To be considered as having been harvested, areas must have undergone an operation:
- carried out after seed formation,
- aimed at terminating the growing cycle of the plant, and
- carried out with the aim of valorizing the stalk, with or without seed.
The valorization referred to in the third indent shall be considered as having been desired if the plant has been pulled up or if it has been cut by a cutter bar operating, in the case of flax and hemp, at a maximum height of 10 cm and 20 cm respectively from the ground.
....
The Dutch text of this article, amended in this way, seems to differ from the other language versions: as the first sentence and the third indent of the Dutch text relate to flax, the Netherlands authorities have been able to interpret this article as meaning that it does not apply to hemp. I will examine the practical consequences of this difference during my reasoning.
II - The facts in the present dispute
9. From 11 to 15 September 1995, the EAGGF services conducted an inspection in the Netherlands. The Netherlands authorities had been notified beforehand of the purpose of the visit, which related to compliance with Regulations Nos 1308/70, 619/71 and 1164/89. The exercise was intended to verify whether the expenditure declared in respect of the 1993, 1994 and 1995 production years by the Hoofdproduktschap voor Akkerbouwprodukten in the hemp and flax fibre sector were correct.
10. The findings of the services were set out in a report, sent to the Netherlands authorities on 31 July 1996; according to it, the hemp-growing area in the Netherlands was not, theoretically, eligible for aid, since that plant had been harvested there prior to seed formation. The authors of the report also pointed out that the Netherlands had failed to fulfil its obligation to check imports of seed from non-member countries.
11. Since the Netherlands disputed the content of this report, a bilateral consultation meeting took place on 30 January 1997, followed by an exchange of correspondence between the parties in April, May and August 1997. Finally, in October, the Commission confirmed that hemp had been harvested before seed formation in 1994, contrary to Article 4 of Regulation No 1164/89, the hemp areas cultivated could not therefore qualify for any aid and that a 50% flat rate correction needed to be applied to the expenditure declared by the Netherlands in respect of budget item 1402 relating to hemp.
12. In December 1997, the Netherlands submitted a reasoned request for conciliation, in accordance with Article 2(1) of Decision 94/442.
In its report, the Conciliation Body expressed doubts about the Commission's approach and the scope of some of its arguments. It acknowledged that the Commission could refuse to pay the aid when the eligibility conditions were not entirely met, although it did think that the basis on which the areas in question were determined did not seem to be entirely reliable. In the absence of sufficiently significant controls on the actual state of the plants at harvest time, the information provided by the sole Community producer of seed did not seem sufficient to allow the actual state of each parcel to be determined with certainty, primarily because climatic conditions can vary from one year, or from one region, to another and because differences might arise from one parcel to another under identical conditions. The Conciliation Body confirmed that it had not been able to establish whether there was a definition of the concept of formed seed which was acknowledged by all the experts. For these various reasons, it therefore felt that the corrections which the Commission could propose would be based on a more solid foundation if they were based mainly on the deficiencies recorded, in the different checks, in relation to rates adapted to the degree of seriousness of those deficiencies.
13. In January 1999, the Commission adopted the summary report relating to the results of the checks for the clearance of EAGGF accounts, Guarantee Section, in respect of the 1995 financial year. In point 4.7.4.1.2., dealing with hemp production aids in the Netherlands, the Commission acknowledged that it had noted, on site and on the premises of the undertaking responsible for processing production, that harvesting had been carried out before full seed formation and that the Netherlands authorities were not exercising adequate control in this connection.
14. To take account of the Conciliation Body's remarks in its report, the Commission re-examined the scope of the concept of seed formation and the method of quantifying areas ineligible for aid.
As regards the first point, instead of requiring that harvesting should take place after the formation of all the seed, the Commission considered that it was sufficient that half the seed should be formed and that the amendment introduced by Regulation No 466/96 with effect from the 1996/97 production year set out in specific detail the rules previously in force.
As regards the second point, the Commission felt that the date on which 50% of the seed was formed varied according to the years and the varieties sown was an established fact. However, having regard to the absence of any check on compliance with this condition during the 1994 production year and to the technical information available, as well as the results of the inspections conducted on site in other Member States, the Commission became convinced that 50% of the seed was not formed before 1 September, regarded as the cut-off date for estimating the areas of hemp able to qualify for partial aid in the case of the varieties of hemp used in the Netherlands in 1994 and bearing in mind the climatic conditions in that country. To determine accurately the areas of hemp harvested before the regulatory stage, the Commission asked the Netherlands authorities in August 1998 to advise it of the harvesting dates. According to the information provided in respect of the 1994/95 production year, all the Netherlands hemp areas, namely 138.50 hectares, were harvested before 1 September 1994. The Commission therefore decided that a 50% correction ought to be applied to the total amount of the expenditure declared, namely NLG 234 553, so that the amount pertaining to budget item 1402 in the clearance of accounts was reduced to NLG 117 277.
III - Procedure before the Court
15. The Netherlands submitted its application on 17 April 1999 and the Commission lodged a defence on 8 July. The reply and rejoinder were lodged at the Registry on 22 October 1999 and 28 January 2000 respectively.
16. By order of the President of the Court of 26 January 2000, the Kingdom of Spain was granted leave to intervene in support of the form of order sought by the Netherlands. The President also allowed the request for the confidential treatment of certain documents produced by the Netherlands.
17. Since none of the parties has submitted a request within the period prescribed indicating the reasons for which it would have wished to be heard, the Court decided, in accordance with Article 44a of the Rules of Procedure, to give judgment without calling on the parties to attend a hearing.
IV - The pleas in law of the action for annulment
18. The action brought by the Netherlands is based on four pleas in law. By the first plea, it alleges the Commission incorrectly interpreted Regulation No 1308/70, since it believes this makes no distinction between the production of seed and the production of fibre and that the Netherlands fulfilled the obligation to check imports of hemp seed from non-member countries under Article 8. The second plea alleges infringement of Regulation No 1164/89, in that no account was taken of the fact that the Dutch text of Article 4 differs from the other language versions of that provision and in that the concept of seed formation was incorrectly interpreted. The third and fourth pleas allege breach of the requirement to state reasons and infringement of the principle of equality respectively.
A. First part of the first plea: misinterpretation of Regulation No 1308/70 in that it makes no distinction between fibre production and seed production
19. The Netherlands asserts that Regulation No 1308/70 does not require Member States to harvest fibre and seed from the same plant. The Commission therefore interprets it erroneously when it points out, in the summary report, that the parcels harvested before seed formation can only qualify for aid at the rate of 50% because aid for hemp growing has two components, namely, the production of fibre and the production of seed. No such obligation could appear in that regulation since it is virtually impossible in practice to harvest both fibre and seed profitably. The Kingdom of Spain maintains that Regulation No 1308/70 does not require harvesting fibre and seed to be harvested from the same plant, nor does it make any provision for a breakdown of the production aid between seed and fibre in percentage terms.
20. The Commission contends that the applicant is confusing the conditions for the granting of aid and the modulation of the financial penalty applicable when the conditions have not all been met.
21. In my opinion, the Commission is right. Under Article 4(a), third indent, of Regulation No 1164/89, in the version resulting from Regulation No 1469/94, the aid is granted only in respect of areas of hemp sown which have been harvested with the aim of valorising the stalk, with or without seed, so that it is paid in its entirety when all these conditions are met, even when the seed has not been harvested.
Since the Commission found that none of the areas devoted to hemp growing met all the conditions required for qualifying for the EAGGF aid, it could have excluded all the expenditure from financing. In this connection, the Court has held that Articles 2 and 3 of Regulation No 729/70 allow the Commission to accept responsibility being assumed by the EAGGF only for the amounts paid in accordance with the rules established in the different sectors of agricultural products. Where Community legislation authorises the payment of an aid only on condition that certain formal requirements pertaining to evidence or control are observed, aid paid without complying with this condition is not in accordance with Community law and the expenditure pertaining thereto cannot therefore be chargeable to the EAGGF.
To attenuate the severity of this rule, the Commission elected to reduce the assumption of responsibility to 50% since, although harvesting was carried out before the regulatory stage, there had been hemp fibre production. It used the fact that the amount of the aid is made up of two components pertaining respectively to fibre production on the one hand and to seed production on the other as a criterion. However, it did not in any way contend in its pleadings that the legislation requires fibre and seed to be harvested from the same plant since, as everybody knows, such an activity could not be economically profitable.
22. The Netherlands submits that the risk of hemp subsidised under Regulation No 1164/89 being diverted to the production of drugs is very limited since, according to Article 3, the aid is granted only for areas sown with the varieties listed in Annex B; it further states that the application for aid is accompanied by a copy of the official label in respect of the seed used, that the tetrahydrocannabinol content must be recorded and samples taken according to the method described in Annex C and that, according to Article 4(a), harvesting must have been carried out after seed formation.
The Netherlands also contends that the Commission has not adapted the reduction of the aid to the seriousness of the breach of Regulation No 1164/89, since the condition that harvesting must take place after seed formation is not one of the most important ones. The tetrahydrocannabinol content reduces by barely 10% after flowering, in other words a reduction of 0.27% for a maximum content of 0.3%, the divergence between the maximum content and the minimum content being extremely low. It is therefore disproportionate to apply a 50% reduction where a condition of minor importance has not been complied with, given the fact that the interest protected, namely public health, is safeguarded by the other conditions, compliance with which has not been disputed by the Commission.
23. I cannot support the applicant's contention for several reasons.
Firstly, the risk of hemp being diverted to the production of drugs cannot be as negligible as it claims since the Community legislature reduced the maximum narcotic substance content of the approved varieties from 0.3% to 0.2% with effect from the 2001/2002 marketing year to avert the potential danger it posed for public health. The legislation applicable to the granting of aid must therefore be interpreted strictly and without losing sight of the fact that both the condition relating to seed formation before harvesting and the control on imports of hemp seed which the Member States must carry out are based on the need to protect public health.
Secondly, I can see nothing in Article 4(a) of Regulation No 1164/89 which would justify grading the importance of the conditions it lays down for an area to be able to be regarded as harvested.
As regards the assertion that the date of harvesting only slightly affects the tetrahydrocannabinol content, the Court has held that the Commission cannot recognise expenditure disbursed in a manner not in accordance with Community law as the responsibility of the EAGGF, so that the de minimis rule, whereby a practice should not be regarded as contrary to the common market unless it is of a sensitive nature and applies in other sectors of Community law, cannot be taken into consideration in the clearance of EAGGF accounts.
24. Furthermore, since what is involved is the absence of proportion between the breach committed and the correction applied, it should be pointed out that as all the area of hemp sown was harvested before the formation of the seed, the Commission could have excluded all the sums in budget heading 1402 from EAGGF financing. The Netherlands Government can therefore hardly complain that the Commission limited itself to applying a flat-rate reduction of 50%.
25. For the reasons I have just set out, I do not consider that the Commission misinterpreted Regulation No 1308/70 when it adopted the contested decision. The first part of the first plea is not therefore well founded and must be rejected.
B. Second part of the first plea: misinterpretation of Regulation No 1308/70 in that the obligation as to the control of imports of hemp seed from other Member States arising from Article 8 has been complied with
26. The Netherlands maintains that, before granting the aid, it always checks that the hemp harvested belongs to one of the varieties referred to in Annex B to Regulation No 1308/70 by means of the seed labels which must be attached to the application for aid and the random checks on parcels of land. Moreover, the importation into the Netherlands of hemp seed falling within tariff headings 1207 99 10 and 1207 99 91, which serve almost exclusively as bird feed, can only be carried out after authorisation and is, moreover, subject to monitoring by the administrative authorities. The Commission cannot therefore rightly assert, in the summary report, that the checks carried out in the Netherlands on imports of seed from non-member countries are inadequate. The Netherlands does, nevertheless, consider that whatever it claims, the Commission has taken account of it in imposing a 50% reduction in the aid.
27. The Commission denies having attached any negative consequences to the deficiencies of the monitoring of hemp seed imports from non-member countries when it decided to apply the 50% correction rate to the expenditure declared. It maintains that this was one of the findings made in the course of its investigation in the Netherlands and one concerning which it wished to draw the attention of the Netherlands authorities on account of the importance of effective monitoring for the protection of public health.
28. I subscribe to the Commission's line of argument on this point also. The carrying out of specific checks on imports of seed is not a condition for granting the aid and an inadequate check could not accordingly give rise to any financial penalty in the context of the clearance of accounts.
The Netherlands Government does not accept that the checks on seed imports are inadequate and argues that there was legislation in the Netherlands regulating the importation of seed into its territory, both for sowing and for other purposes. The fact that legislation exists does not mean that it has been correctly applied, especially if the authorities were faced with organisational problems at the time when the inspection was carried out. The applicant has not provided any information either as regards the nature or the frequency of the checks carried out. Nor has it shown that the Commission took account of the deficiencies in the monitoring of imports when evaluating the correction it applied to budget heading 1402.
29. I therefore consider that the second part of the first plea is not well founded either and that the first plea must be rejected in its entirety.
C. First part of the second plea: infringement of Regulation No 1164/89, in that no account was taken of the divergence between the Dutch version of Article 4 and the other language versions of this provision
30. The Netherlands maintains that, in its summary report, the Commission used an erroneous version of Regulation No 1164/89. The contested correction relates to expenditure in the 1995 financial year, which began on 16 October 1994 and ended on 15 October 1995.
Pursuant to Article 3 of Regulation No 1308/70, the marketing year began on 1 August 1994 and ended on 31 July 1995. The 1994 harvest was marketed during that marketing year, so that the hemp taken into account for the 1995 financial year is that which was harvested in 1994, the date on which the version then in force of Article 4(a) of Regulation No 1164/89 resulted from Regulation No 1469/94, the Dutch version of which differed from the other language versions. This difference was due to the fact that the scope of this provision, which sets out the condition relating to seed formation before harvest, was limited in the Dutch version to flax, so that it could be legitimately interpreted as meaning that the obligation to harvest the product after seed formation did not apply to hemp.
Regulation No 1469/94 was published on 27 June 1994 and entered into force on 4 July 1994, that is to say, shortly before the harvest of that year, and this difference in formulation was only noted after the harvest. The applicant considers that, to determine the financial consequences, the Commission should have weighted its judgment in the light of the problems of interpretation resulting from the erroneous translation of this provision of Community law and taken account of the fact that the error was not discovered in good time.
31. The Commission maintains that this divergence between the Dutch version and the other versions is a manifest error on which the applicant cannot rely.
32. I share the Commission's opinion on this point for the following reasons:
33. Firstly, it is true that the Dutch version of this provision does seem to limit its scope to flax. Thus, whereas the first sentence of the text which Regulation No 1469/94 added to Article 4(a), provides that to be considered as having been harvested, areas must have undergone an operation ... in the other language versions, the Dutch version states that: for flax, on a specified area, to be regarded as harvested, the area must have undergone an operation .... Similarly, whereas the third indent uses the term carried out with the aim of valorising the stalk ..., the Dutch version adds carried out with a view to valorising the stalk of flax ....
The fact nevertheless remains that the next sentence is worded as follows in all the Community languages: The valorization referred to in the third indent shall be considered as having been desired if the plant has been pulled up or if it has been cut by a cutter bar operating, in the case of flax and hemp, at a maximum height of 10 cm and 20 cm respectively from the ground. Since Article 4, as amended by Regulation No 1469/94, distinguishes between the method of harvesting flax and that of hemp, it should be concluded that it applies to both one and the other. Moreover, since this sentence immediately follows the introductory sentence and the three indents, which set out three cumulative conditions, a reasonably attentive reader could note this inconsistency and wonder whether, from a logical point of view, these conditions related solely to flax. In order to dispel the doubts to which this formulation gave rise, the Netherlands authorities should have compared it with other language versions and would thus have been able to ascertain that they did not expressly mention flax. In this connection, the Court considers that the need for a uniform application and, accordingly, interpretation rules out a text being regarded in isolation in one of its versions but requires that it be interpreted in accordance both with the actual intention of its author and with the aim pursued by the author in the light, in particular, of the versions drawn up in all the languages.
34. Secondly, the Netherlands authorities were associated with the drafting of Regulation No 1469/94 since, according to the Commission, they were consulted in the context of the Management Committee for Flax and Hemp, so that they should have immediately noted that the draft related to the two plants. Moreover, they had the time to acquaint themselves with its content, since the Dutch version of the draft was sent to them well before the harvest; they attended the Management Committee meeting which approved the draft on 8 June 1994 and voted in favour of it. I am therefore, like the Commission, of the opinion that the Netherlands Government's argument that it only noted the divergence after harvesting is not convincing. The Court has held that the fact that the Member States were closely associated with the process of preparing the disputed decision and therefore know the reasons for which it was adopted is of decisive importance in assessing whether the statement of reasons meets the requirements of Article 253 EC when it is the subject of an action brought by a Member State. Similarly, the fact that the Netherlands authorities were consulted in the context of the Management Committee for Flax and Hemp, that they had the draft regulation at their disposal and that they attended the meeting during which it was adopted leads me to think that they were capable of realising the divergence between the Dutch version of the text published and that which they had studied at the draft stage.
Thirdly, if the reading of the Dutch version of Regulation No 1469/94 raised doubts in the minds of the authorities responsible for applying it, the applicant should have put this point to the Commission, as the principle of cooperation in good faith set out in Article 10 EC requires. Since the Netherlands authorities omitted to do this, I consider that the error they may have committed ought to be imputed to them, even though the text was translated by the Commission. As the Court has stated, the Commission is required to take responsibility for the contested expenditure in the course of the clearance of the accounts of the Member States in the context of the EAGGF only if the erroneous application of Community law can be attributed to one of the institutions of the Union. If the Netherlands authorities entertained any doubts, they could easily have dispelled them by consulting the Commission or by simply comparing the Dutch version with one of the other language versions published. The Netherlands authorities cannot, therefore, plead the divergence in formulation to justify non-compliance with one of the conditions laid down by Article 4(a) of Regulation No 1164/89, in the version resulting from Regulation No 1469/94, at the time of the 1994 hemp harvest.
35. The above reasoning shows that the first part of the second plea is not well founded and must therefore be rejected.
D. Second part of the second plea: infringement of Regulation No 1164/89 in that the concept of seed formation has been incorrectly interpreted
36. The Netherlands maintains that, at the time of the 1994 hemp harvest, Article 4(a) required only that the harvest should be carried out after seed formation, which is what the Netherlands growers did. Seed begins forming at flowering time and, when the hemp plant blossom is already practically formed, it also appears in the lower part of the plant. At the end of flowering, a large proportion of the seed is fully formed in terms of size and volume but only reaches the stage of full maturity one or two weeks afterwards. Given the fact that seed forms during flowering and that the 1994 harvest only took place after this, the Netherlands considers that the conditions laid down in Article 4(a) of Regulation No 1164/89 were complied with. It also points out that in the Netherlands hemp growing is solely intended for the production of fibre and not seed and that the quality of hemp diminishes after flowering. Harvesting is therefore carried out during flowering or immediately afterwards.
The Netherlands ensures that the date of maturity of the seed of authorised hemp varieties varies little under the climatic conditions of that country. The earliest seed reaches maturity on 7 September, whereas that of the latest variety reaches it on 20 September, with only two weeks separating these two dates. Among the four varieties sown, two of them must, according to the Netherlands, be described as early (Felina 34 and Fibrimon 56). It adds that in 1994 the main flowering of the varieties Felina 34, Fibrimon 56, Futura 77 and Fedrina 74 took place between 21 July and 6 August, in other words substantially earlier than the Commission asserts; the latter's data lie between 12 and 22 August. 50% of the seed reaches maturity between three and four weeks after flowering, so it reaches this stage between 18 and 29 August. The Commission cannot therefore reasonably claim that 50% of the seed reached maturity on 1 September at the earliest. According to the Netherlands Government, main flowering took place between 22 July and 1 August, 50% of the seed reached maturity between 19 and 29 August and harvesting was carried out between 1 and 26 August, in other words immediately or shortly after flowering. The seed has then reached the wax-ripe maturity stage and is completely formed. Seed dried at the stage of wax-ripe maturity produces seed with a germination capacity.
The Netherlands Government further maintains that the concepts of seed formation and seed which have reached maturity are not unequivocal botanical terms and are open to a number of interpretations. According to that proposed by the Commission, harvesting can only be carried out when at least 50% of the seed has reached maturity, which means that only the southern Member States could qualify for the system of aid established by Regulation No 1164/89, since climatic conditions do not allow seed to be reliably grown except in those States.
37. Taking as its basis a technical article attached by the Netherlands to the reply and data supplied by France's National Hemp Growers' Federation, which were attached to the rejoinder, the Commission asserts that the flowering of the plant takes place in three stages: it begins with flowering properly speaking, continues with full flowering, which takes place 7 to 10 days afterwards, and finishes 7 to 10 days later with the end of flowering; the seed then begins to take the form described as the milky state. Fruiting of the seed takes place in two stages: firstly, the 50% seed formation stage, during which 50% of the seed forms and reaches the wax-ripe state and which begins 7 to 10 days after the end of flowering and, secondly, the full maturity stage, when all the seed reaches the wax-ripe stage, approximately 25 days after the first stage. The Commission asserts that, on the basis of the technical information then in its possession, it prudently set 1 September as the date of 50% seed formation for the Netherlands crop, so that, bearing in mind the date on which flowering occurs on average in the case of the different varieties, the end of flowering or the milky state of the seed were reached no earlier than 22 August 1994, when the bulk of the hemp had already been harvested.
38. The concept of seed formation is certainly not, it seems, defined in botany. Had it been, one of the parties at least would have made this known. The Conciliation Body, consulted by the Netherlands, stated in its report that it had not been able to establish for certain whether a definition of the concept of formed seed existed which was recognised by all the experts. Nor did the Community legislation applicable in the case provide, in this instance, any more detailed specification and it was necessary to await the adoption of Regulation No 466/96, the statement of reasons for which explains that the phrase after seed formation is liable to give rise to a different interpretation in the producing Member States and that it must be assigned a specific meaning in order to ensure the aid system is applied uniformly. There was therefore added, in Article 4(a) of Regulation No 1164/89, after the third indent, a paragraph worded as follows: Seed formation as referred to in the first indent shall be considered to be terminated if the number of hemp seed or flax seed capsules found to have reached their final shape and volume is greater than the number of other hemp seed or flax seed capsules.
39. Given the fact that no definition of the concept of seed formation existed then in Community law, the meaning and scope of this term need to be determined by taking into consideration the general context in which it is used and in accordance with its usual meaning in everyday language.
40. As regards the context, I share the Commission's opinion that if the requirement of a harvest subsequent to seed formation was inserted in Regulation No 1164/89, this was because Regulation No 1557/93 had repealed the special measures for hemp seed instituted by Regulation No 3698/88. As from June 1993, hemp aids related both to the production of fibre and that of seed, so that Regulation No 1164/89 incorporated the requirement to which Article 5 of Regulation No 3164/89 subjected the granting of the aid, namely that hemp could not be pulled up or cut except after complete seed formation.
I also consider, like the Commission, that with the tetrahydrocannabinol content of the plant reaching its peak during flowering, the protection of public health requires harvesting to be carried out at a time as far removed as possible from that period, in other words after seed formation, in order to limit the tetrahydrocannabinol content as far as possible. The Netherlands Government admits that in 1994 hemp was harvested when the seed was still in the milky state, in other words between the end of flowering and the initial fruiting stage.
41. As regards the usual meaning of the phrase operation carried out after seed formation, this must mean that one needs to wait for the seed to be able to be described as such, in other words, once it is separate from the plant, it has the necessary germinating properties to be able to be earmarked for sowing. This does not seem to be the case with seed which is still in the milky state.
Apart from being based on common sense, this interpretation guarantees that harvesting is carried out under the same conditions in all Member States and allows a simultaneous listing of those which grow hemp for fibre and those growing it to produce hemp seed.
42. I consider that in 1994, the condition was that harvesting should be carried out after seed formation. This concept must be understood as meaning that the seed must be able to be used as from its separation from the plant and, accordingly, that it must have achieved the wax-ripe state. Moreover, having regard to the provisions of the regulations in force at that time, formation must be understood to apply to the formation of nearly all the seed.
With the exception of the assertions I have reproduced earlier, the Netherlands has not provided any evidence of the checks it should have carried out to ensure that the seed was formed before harvesting. It admits, moreover, that in 1994 the harvesting of all hemp took place towards the end of August. The Commission has, however, established that three of the varieties used during this production year were late and that 50% of the seed could not be formed, in other words have achieved the wax-ripe state, before 1 September. Accordingly, in my opinion, by interpreting as it did the concept of seed formation and by deciding that only half the expenditure declared by the Netherlands in 1994 by way of budget item 1402 could be made the responsibility of the EAGGF, the Commission did not infringe Regulation No 1164/89.
43. The second part of the second plea is accordingly not well founded either and must be rejected.
E. Third plea: breach of the requirement to state reasons
44. According to the applicant, the statement of reasons for the disputed decision does not enable the reasoning which led the Commission to apply to it a 50% correction as regards budget item 1402 to be understood. To understand it, reference needs to be made to the 1995 summary report in which Regulation No 1308/70 and the guidelines are relied on. However, the latter provide only for flat-rate correction rates of 2%, 5% and 10% and the Commission has not explained why it has not chosen one of these rates. Moreover, the fact of applying a 50% correction because the harvest was carried out before seed formation is not supported by Regulations Nos 1308/70, 619/71 or 1164/89 either.
The applicant is firmly of the opinion that, although it participated in the procedure at the end of which the Commission adopted the contested decision, the latter did not clearly set out the reasons for which it imposed a 50% correction on the applicant. All it did was state that Regulation No 1164/89, when applied to hemp production, requires that the obligation to harvest after seed formation should be complied with.
It adds that, although the Netherlands did not comply with the obligations arising from Regulation No 1308/70, this non-compliance was very limited and that its consequences for the financial obligations of the Community in the framework of the system of aid for hemp production are negligible.
45. The Kingdom of Spain considers that the principle of the right to be heard was only formally complied with since the Commission ignored the explanations it was given. It also considers that the principle of sound administration was not complied with, since the Commission did not take into account or assess the explanations given by the Netherlands authorities.
46. Contrary to what the Netherlands Government asserts, it is not evident, in my opinion, from the summary report that the Commission based itself on the guidelines in applying the 50% correction of the expenditure under budget heading 1402. Nor did it mention Regulation No 1308/70 for this purpose but in connection with the inadequacy of the checks on imports of hemp from non-member countries, an inadequacy to which it did not attach any financial consequence.
47. On the other hand, the Commission rightly refers to Regulation No 1164/89, Article 4 of which sets out the conditions under which harvesting must be carried out for the aid to be granted. One of these conditions, namely that the harvest should be subsequent to seed formation, was not complied with in 1994 in the Netherlands.
48. It is settled case-law that the extent of the obligation to state reasons depends on the nature of the act in question and on the context in which it was adopted. As regards the decisions on the clearance of accounts, these do not require a detailed statement of reasons since they are taken on the basis of the summary report(s) and also all correspondence between the Member State and the Commission, which means that the government concerned has been closely associated with the process of drafting the decision and therefore knew the reason for which the Commission considered it did not have to make the contested amounts the responsibility of the EAGGF.
49. I do not share the opinion expressed by the Kingdom of Spain as regards the breach of the principle of the right to be heard and the principle of sound administration. The Commission points out, and the data in the dossier enabled it to be established, that the Netherlands was duly informed throughout the procedure of the reasons which led the Commission to adopt the contested decision, within the framework of a sincere dialogue between the two parties.
The Commission only formed a definitive opinion after hearing the applicant, taking note of the Conciliation Body's opinion and discussion within the EAGGF Committee.
50. Having regard to the foregoing considerations, I am of the opinion that the Netherlands Government was well informed of the reasons for which the Commission applied a 50% correction to the expenditure arising from budget heading 1402 and that the contested decision is therefore solidly grounded.
51. It follows that this plea, too, is not well founded and must be rejected.
F. Fourth plea: breach of the principle of equality
52. The Netherlands submits that by diverging from its guidelines without giving reasons, even though those guidelines have no binding force, the Commission infringed the principle of equality.
53. As I have already pointed out during the examination of the previous plea, the guidelines were not applicable to the facts which gave rise to the present dispute, since these constituted a failure to comply with one of the conditions for granting aid which were imposed by Article 4 of Regulation No 1164/89. Furthermore, the Commission did not apply the guidelines in imposing the 50% correction to the budget heading relating to hemp.
54. It is settled case-law that discrimination can only consist of the application of different rules to comparable situations or of the application of the same rule to different situations.
55. Since the facts which gave rise to the present dispute are not governed by the guidelines but by Article 4 of Regulation No 1164/89, the Netherlands is not justified in claiming that the Commission infringed the principle of equality in relation to the States which were in a situation to which these guidelines were, by contrast, applicable.
56. This plea, too, is not well founded and must therefore be rejected.
V - Costs
57. Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Given the fact that I propose that the Court should dismiss the action and that the Commission has applied for costs, that application should be granted. I propose that the Kingdom of Spain, which has intervened in support of the form of order sought by the Kingdom of Netherlands, should bear its own costs.
VI - Conclusion
58. In the light of the foregoing considerations, I propose that the Court should
(1) dismiss the action brought by the Netherlands against Commission Decision 1999/187/EC of 3 February 1999 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1995 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund.
(2) order the applicant to pay the costs.
(3) order the Kingdom of Spain to bear its own costs.