4.

In my opinion the argument advanced by the German Government cannot be accepted. The supervisory measures which Member States are obliged to take under Article 10 of Regulation No 990/72 are those which are necessary to ensure observance of the provisions of that regulation, that is to say, observance of all its provisions, including Article 3 (2). The fact that the last-mentioned provision is addressed to undertakings does not mean that Member States are not bound to require its observance and, moreover, to regulate the work done by their competent authorities in such a manner that it is coordinated with the notification system. The power to request additional information which is conferred on the competent agency by the last sentence of Article 3 logically implies that that agency has received and evaluated the prescribed, usual information. I would add that, where a provision is addressed directly to undertakings, it cannot be accepted that any Member State may exempt those undertakings from an obligation arising under a Community regulation. That would be equivalent to disregarding the rule that regulations are of general application and directly binding, as well as the principle of uniformity of treatment of citizens throughout the Community. Of course, the German Government considers itself authorized by Article 10 not to take account of Article 3 (2), but Article 10 is clearly not a rule which empowers Member States to derogate from other provisions of the regulation. On the contrary, as I have just stated, Article 10 is directed towards ensuring full effect for the entire regulation. The German Government's efforts to demonstrate the superiority, in practical terms, of the system of accounting checks adopted in its territory cannot affect the answer to the issue before the Court, which is one of pure law. In any event, the results of those efforts are, in my opinion, not convincing. The question which the Court has to consider is a purely legal one, inasmuch as the issue is whether the German Government did or did not comply with Regulation No 990/72. In fact, on that depends the question whether the expenditure which the German Government declared in respect of aid for skimmed-milk powder intended for animal feed was properly incurred and whether, consequently, the German Government is entitled to reimbursement when the accounts of the European Agricultural Guidance and Guarantee Fund are cleared. Even supposing, therefore, that the German system of supervision were superior to that defined by the Community legislature, its lack of conformity with the Community rules would suffice to justify the conclusion that the declared expenditure was irregular. In that regard, I would make the observation that the Commission does not need to show that the denaturing of the milk did not occur or or has not been proved in order to preclude the charging to the European Agricultural Guidance and Guarantee Fund of the sums paid to undertakings by way of aid. It is enough to find that the German administrative authorities did not ensure observance of the detailed rules prescribed by Regulation No 990/72, thereby breaching one of the conditions for the regularity of denaturing. The case-law of the Court is clearly aligned in that direction. In particular, certain statements contained in the judgment of 7 February 1979 in Case 11/76 Netherlands v Commission [1979] ECR 245 are relevant. According to that judgment, the provisions relating to the financing of the common agricultural policy (Articles 2 and 3 of Regulation No 729/70 of 21 April 1970 were involved) “permit the Commission to charge to the EAGGF only sums paid in accordance with the rules laid down in the various sectors of agricultural production while leaving the Member States to bear the burden of any other sum paid ...” (paragraph 8 of the decision). The Court added inter alia:“In fact the management of the common agricultural policy in conditions of equality between traders in the Member States requires that the national authorities of a Member State should not, by the expedient of a wide interpretation of a given provision, favour traders in that State to the detriment of those in other States where a stricter interpretation is applied” (paragraph 9 of the decision). The point of view adopted by the Court in that case was repeated, in identical terms, in the judgment in Case 18/76 Germany v Commission [1979] ECR 345, which was also delivered on 7 February 1979, at paragraphs 7 and 8 of the decision. Finally, in the judgment of the same date in Joined Cases 15 and 16/76 France v Commission [1979] ECR 321 it was stressed that the objective of any decision of the Commission concerning the discharge of accounts presented by the Member States in respect of expenditure financed by the EAGGF “is to assess whether it may be accepted that the expenditure was incurred by the national authorities in accordance with Community provisions” (paragraph 9 of the decision). From that the Court deduced that where, under those provisions, the payment of aid is made subject to compliance with certain formalities relating to proof, aid paid in disregard of that condition may not be charged to the EAGGF since it is not in accordance with Community law (paragraph 10 of the decision). I have also stated that I do not find convincing the German Government's argument that the system of supervision adopted in the Federal Republic is more effective than that provided for by Regulation No 990/72. In fact, that regulation requires inter alia that the milk should not contain certain substances (for example, starch) and that the denaturing should be carried out using specified additives (Article 1 (3) and Article 2). It seems to me that “physical” supervision of the denaturing operations permits observance of that condition to be checked with greater certainty than do ex post facto accounting checks. The fact that the inspector is in a position to be present during those operations is always of considerable importance, whereas the applicant itself has conceded the possibility that its inspectors might not be aware of particular denaturing operations. Above all, however, I agree with the argument that, in addition to ensuring the useful result of keeping the supervising agency informed of the dates upon which every denaturing operation is to take place, compulsory notification has the advantage of deterring undertakings from carrying out irregular operations, inasmuch as they have reason to expect the attendance of the inspector on the date indicated. Next, I do not consider that the German Government may derive any argument in favour of its point of view from the fact that under Council Directive 77/435 of 27 June 1977 — on scrutiny of transactions forming part of the system of financing by the Guarantee Section of the EAGGF — Member States are bound, as from 1 July 1979, to bring into force a system for scrutinizing the commercial documents of undertakings receiving payments. In fact, that system complements, but does not replace, the procedures for “physical” supervision laid down by earlier provisions. The same consideration applies as regards Commission Regulation No 1725/79 of 26 July 1979, which took the place of Regulation No 990/72. It is true that the new regulation requires the keeping of accounts in a manner which facilitates supervision of the grant of aid for skimmed-milk powder, but it also confirmed in its entirety the system of preliminary written notification (Article 3 (3)). The latest rules have the merit of demonstrating with absolute clarity that “on the spot” supervision of a physical character (certified by an analysis report, a specimen of which constitutes Annex I to the regulation) is one thing and that scrutiny of commercial documents and accounts (see Article 10 (2)) is another. In my opinion, that corresponds to the correct interpretation of the concept of “supervision on the premises” which has already appeared in Regulation No 990/72. It is impossible therefore to hold that the accounting checks in force in Germany at the period under consideration were equivalent to the supervision prescribed by Regulation No 990/72. Article 10 of that regulation, in which the German Government erroneously perceived a rule authorizing it to depart from the system laid down by Article 3, undoubtedly allowed Member States who so wished to add accounting supervision to physical supervision, provided that the system of notification was observed. Had it availed itself of that opportunity, the German Government would have anticipated the approach adopted by the Commission in the aforementioned Regulation No 1725/79. But no Member State had power to adopt scrutiny of accounts as its principal method of supervision and not implement the system of notification which was, and still is, an essential element in the “physical” supervision of denaturing.