Judgment of the Court of First Instance (Seventh Chamber) of 1 July 2009 – Spain v Commission

(Case T-259/05)

EAGGF – Guarantee Section – Expenditure excluded from Community financing – Fibre flax – Hemp – Bananas – OLAF report – Report of the Court of Auditors – Bilateral meeting under Article 8(1) of Regulation (EC) No 1663/95 – Breach of essential procedural requirements – Abusive practice – Existence of financial harm to the EAGGF

1. Procedure – Time-limit for producing evidence – Article 48(1) of the Rules of Procedure of the Court of First Instance – Scope (Rules of Procedure of the Court of First Instance, Arts 44(1)(e), 48(1) and 66(2)) (see paras 62-64)

2. Procedure – Introduction of new pleas during the proceedings – Conditions – New plea – Definition (Rules of Procedure of the Court of First Instance, Art. 48(2)) (see para. 68)

3. Procedure – Producing evidence – Time-limit – Late submission of evidence – Conditions (Rules of Procedure of the Court of First Instance, Art. 48(1)) (see paras 70-72)

4. Agriculture – EAGGF – Clearance of accounts – Definitive refusal to accept responsibility for certain expenses – Need for a prior inter partes procedure (Commission Regulation No 1663/95, Art. 8) (see paras 81-89, 191-198)

5. Agriculture – Common organisation of the markets – Flax and hemp – Aid for the production of fibre flax – Finding of abusive practices despite formal compliance with the conditions for grant – Conditions (Council Regulation No 729/70, Art. 8; Commission Regulations Nos 1164/89, third recital, and 1469/94, second recital) (see paras 94-99)

6. Agriculture – Common organisation of the markets – Flax and hemp – Aid for the production of fibre flax – Elements constituting an abusive practice (Council Regulation No 1308/70) (see paras 102-109)

7. Agriculture – EAGGF – Clearance of accounts – Disallowance of expenditure arising from irregularities in the application of the Community rules – Challenge by the Member State concerned – Burden of proof (see paras 112,154)

8. Agriculture – Common agricultural policy – EAGGF financing – Principles – Refusal to assume responsibility for irregular expenses – Finding of failures in the control system implemented by a Member State (see paras 114-115)

9. Agriculture – EAGGF – Clearance of accounts – Disallowance of expenditure arising from irregularities in the application of the Community rules – Financial correction not made by the Commission for a given year despite the finding of irregularities – No effect on the right to make a correction for a subsequent year(Council Regulation No 729/70) (see para. 116)

10. Agriculture – EAGGF – Clearance of accounts – Power of the Commission to monitor the regularity of expenses – Finding by the Commission of irregularities going beyond irregularities proven before a national criminal court – Lawfulness (see para. 174)

11. Agriculture – Common agricultural policy – EAGGF financing – Principles – Obligations of the Member States – Adoption of necessary measures of surveillance and control – Finding of failures in the control system implemented by a Member State(see paras 208-211)

Re:

ANNULMENT in part of Commission Decision 2005/354/EC of 29 April 2005 excluding from Community financing certain expenditure incurred by the Member States under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF), Guarantee Section (OJ 2005 L 112, p. 14).

Operative part:

The Court:

1. Annuls Commission Decision 2005/354/EC of 29 April 2005 excluding from Community financing certain expenditure incurred by the Member States under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF), in so far as it excludes from Community financing the expenditure by the Kingdom of Spain made under aid granted for the production of hemp in the years 1996/1997 to 1999/2000;

2. Dismisses the remainder of the action;

3. Orders each party to bear its own costs.