Action brought on 15 August 2022 — Hungary v Commission

(Case T-499/22)

(2022/C 368/54)

Language of the case: Hungarian

Parties

Applicant: Hungary (represented by: M. Fehér y G. Koós, acting as Agents)

Defendant: European Commission

Form of order sought

The applicant claims that the Court should:

— annul Commission Implementing Decision (EU) 2022/908 of 8 June 2022 excluding from European Union financing certain expenditure incurred by the Member States under the European Agricultural Guarantee Fund (EAGF) and under the European Agricultural Fund for Rural Development (EAFRD), in so far as it excludes from EU financing, by reason of the deficiencies found, the financial assistance granted to Hungary in respect of decoupled direct aids and voluntary coupled support in respect of the financial years 2017 to 2019 and in respect of measures subject to IACS and risk management relating to EAFRD rural development in respect of the financial years 2017 to 2018.

— order the Commission to pay the costs.

Pleas in law and main arguments

The exclusion is based on four grounds, three of which are the subject of the action for partial annulment of the contested decision brought by the Hungarian Government.

As regards the first legal basis for the exclusion, the Hungarian Government bases its argument on the fact that neither a literal nor a teleological interpretation of Article 9 of Regulation (EU) No 1307/2013 (1) justifies the Commission's interpretation to the effect that the concept of active farmer also includes related undertakings.

The concept of a grouping of natural and legal persons cannot be equated with that of related undertakings, nor does the former in itself include the latter. The Commission’s interpretation in that regard is rejected by many Member States, and it cannot be considered that making the content of bilateral consultation meetings with Member States available through the CircaBC system would create legal certainty on such a significant issue.

The second ground for exclusion relates to the Commission's position that Article 35 of Regulation (EU) No 809/2014, (2) in providing for an increase in the percentage of on-the-spot checks, does not distinguish between such checks according to the source of the level of error (risk-based/random selection). According to the Commission, the approach adopted by the Hungarian authorities, according to which only certain results from randomly selected on-the-spot checks are to be taken into account and are relevant for the purpose of calculating any increase in the rate of checks which may be necessary, is not consistent with the regulatory provisions.

However, the relevant legislative provisions do not expressly provide that it is necessary, in order to determine the percentage increase, to take account also of errors discovered in the sample elements in the framework of a risk analysis. Consequently, the relevant EU provisions do not specify how the sample of beneficiaries to be checked is to be defined. In fact, there is nothing to support the conclusion that the ‘scaling up to an appropriate level’ can only be achieved, instead of using a random sample that more closely matches the population, by making this sample ‘proportional’ to a sample selected on the basis of a risk analysis. The inclusion in the overall error rate of the results of the sample selected on the basis of a risk analysis leads to a biased result.

Finally, the third ground for exclusion is based on the fact that notifications of animal-related events were recorded in the animal register with no record of late notifications. The fact that the administrative cross-checks did not make it possible to identify the late notifications (after the expiry of the maximum time limits laid down by the sectoral rules, which is a necessary condition for voluntary coupled aid) precludes a reduction in the payments of voluntary coupled aid and the imposition of administrative penalties.

However, this does not mean that late notifications are not sanctioned by the Hungarian authorities, as they are sanctioned in the framework of cross-compliance checks. Consequently, such actions do not go unpunished, but the same action is not sanctioned twice.

(1) Regulation (EU) No 1307/2013 of the European Parliament and of the Council of 17 December 2013 establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy and repealing Council Regulation (EC) No 637/2008 and Council Regulation (EC) No 73/2009 (OJ 2013 L 347, p. 608).

(2) Commission Implementing Regulation (EU) No 809/2014 of 17 July 2014 laying down rules for the application of Regulation (EU) No 1306/2013 of the European Parliament and of the Council with regard to the integrated administration and control system, rural development measures and cross compliance (OJ 2014 L 227, p. 69).