Case T‑503/12
United Kingdom of Great Britain and Northern Ireland
v
European Commission
(EAGGF — Guarantee Section — EAGF and EAFRD — Expenditure excluded from financing — Single payment scheme — Key controls — Ancillary controls)
Summary — Judgment of the General Court (Second Chamber), 4 September 2015
1.      Agriculture — Common agricultural policy — EAGGF, EAGF and EAFRD financing — Clearance of accounts — Disallowance of expenses arising from irregularities in applying EU rules — Challenge by the Member State concerned — Burden of proof — Shared by the Commission and the Member State
(Council Regulation No 1290/2005, Art. 31(1))
2.      Agriculture — Common agricultural policy — EAGGF, EAGF and EAFRD financing — Clearance of accounts — Disallowance of expenses arising from irregularities in applying EU rules — Flat-rate correction issued by the Commission in accordance with internal guidelines — Application by the Commission of the said internal guidelines in the context of the clearance of the accounts of funds other than the EAGGF  — Lawfulness
(Council Regulation No 1290/2005, Art. 31(1))
3.      Agriculture — Common agricultural policy — EAGGF, EAGF and EAFRD financing — Clearance of accounts — Disallowance of expenses arising from irregularities in applying EU rules — Flat-rate correction issued by the Commission in accordance with internal guidelines — Controls not giving the expected level of regularity of claims — Admissibility of applying a flat-rate correction of 5% in the case of weaknesses found in a key control established by a Member State for checking the area eligible for financial support
(Council Regulations No 1782/2003, Arts 36(1), and 44(1), and No 1290/2005, Art. 31(1))
4.      Judicial proceedings — Introduction of new pleas during the proceedings — Conditions — Amplification of an existing plea — Lawfulness
(Rules of Procedure of the General Court, Arts 44(1)(c), and 48(2))
5.      Agriculture — Common agricultural policy — EAGGF, EAGF and EAFRD financing — Clearance of accounts — Disallowance of expenses arising from irregularities in applying EU rules — Flat-rate correction issued by the Commission in accordance with internal guidelines — Finding of the existence of several weaknesses in the system of checks established by a Member State — Flat-rate corrections not cumulative
(Council Regulation No 1290/2005, Art. 31(1))
1.      See the text of the decision.
(see paras 52-54)
2.      Concerning Commission Document No VI/5330/97, defining the guidelines for the application of financial corrections in the context of the EAGGF, whilst the latter was issued by the Commission in the context of the EAGGF and, as its title indicates, contains guidelines for the calculation of financial consequences when preparing the decision regarding the clearance of the accounts of the EAGGF Guarantee Section, there is nothing to prevent the Commission from applying that document also when exercising the powers which Article 31(1) of Regulation No 1290/2005 on the financing of the common agricultural policy confers on it for the purpose of the clearance of the accounts of the funds financing the common agricultural policy.
(see para. 55)
3.      In the matter of clearance of the accounts of the Funds, where it is not possible to determine precisely the losses suffered by the European Union, a flat-rate correction may be considered by the Commission. In that regard, for the purposes of calculating ineligible expenses, Document No VI/5330/97 provides for a flat-rate correction of 5% where all key controls are applied, but not in the number, frequency or the depth required by the regulation, as it can be reasonably concluded that those controls do not provide sufficient level of assurance of the regularity of claims, and that the risk of losses for the Funds is significant.
Thus, where the weaknesses in a key control affect the check of the area eligible for financial support, such as inadequacies concerning information contained in geographical information systems and the identification of agricultural parcels (LPIS-GIS), the Commission is justified in applying the flat-rate correction to all payments made and potentially affected by the weakness in that key control. It is apparent from Article 36(1) of Regulation No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers that aid under the single payment scheme is to be paid in respect of payment entitlements accompanied by an equal number of eligible hectares. Likewise, in accordance with Article 44(1) of that regulation, any payment entitlement accompanied by an eligible hectare is to give a right to the payment of the amount fixed by the payment entitlement. Therefore, the amount of aid granted under the single payment scheme corresponds to the sum of the unit values of ‘activated’ payment entitlements, that is to say, payment entitlements accompanied by eligible hectares. It follows that an error regarding the determination of the eligible areas in any event affects the amount of aid. Consequently, an irregularity in the LPIS-GIS affecting the checks of the eligibility of the areas declared is capable of affecting, potentially, any payment made.
It is also apparent from Document No VI/5330/97 that the rate of correction should be applied to the part of the expenditure which constituted a risk. When the deficiency results from a failure by the Member State to adopt an appropriate control system, then the correction should, by very reason of its flat-rate nature, be applied to the entire expenditure under the measure concerned. Similarly, in accordance with that same document, when there is reason to suppose that the deficiency is limited to that of a department’s or region’s application of the control system adopted by the Member State, the correction should be limited to the expenditure under that department or region.
In addition, the appropriateness of a flat-rate correction of 5% applied to all expenditure incurred in a region of a Member State is all the more evident in the light of the importance of the regular upkeep of the LPIS-GIS. The identification of agricultural parcels and the check of the eligibility of areas is a key element in the correct application of a system linked to land area. Weaknesses in the LPIS-GIS, such as lack of precision of the information contained therein affecting the carrying out of administrative and on-the-spot checks to monitor the eligibility of the areas declared, of themselves entail a substantial risk of damage to the European Union budget.
(see paras 55-57, 66, 67, 72)
4.      See the text of the decision.
(see para. 95)
5.      In the matter of the clearance of accounts of the funds for financing the common agricultural policy, it is apparent from Annex 2 to Document No VI/5330/97 that, when several deficiencies are found in the same system, the flat rates of correction are not cumulated, the most serious deficiency being taken as an indication of the risks presented by the control system as a whole.
(see para. 104)