Judgment of the Court of 21 February 1991. - Federal Republic of Germany v Commission of the European Communities. - EAGGF - Clearance of accounts - Financial year 1986. - Case C-28/89.



European Court reports 1991 Page I-00581



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

++++

1. Measures adopted by the Institutions - Regulations - Regulations prescribing specific measures of supervision - No discretionary power for the Member States - Non-implementation - Justification - Difficulties of application - Not acceptable

2. Agriculture - Common organization of the markets - Functioning of intervention mechanisms - Obligation of the national intervention agencies to accept the products offered - Irrevocability of offers - Justification - Exclusion of speculation

3. Agriculture - Common agricultural policy - Financing by the EAGGF - Principles - Obligation of diligence incumbent on the Member States in the recovery of amounts irregularly paid - Failure to fulfil it - Justification based on the duration of the procedures commenced by economic agents in order to avoid repayment - Not acceptable

(EEC Treaty, Art. 5; Council Regulation No 729/70, Art. 8)

4. Agriculture - Common organization of the markets - System for the provision of securities - Forfeiture of the security - Provisions of national law preventing the security from being declared forfeit - Primacy of the Community rule

Summary

1. Where a regulation lays down specific measures of supervision, the Member States must apply them. They cannot escape that obligation on the ground that a different system of supervision would be more, or just as, efficient. Difficulties in the implementation of the Community rules may not justify a Member State in unilaterally absolving itself from observing its obligations.

2. The rules governing the functioning of the intervention mechanisms entailed in the common organization of the agricultural markets have a specific character compared with normal contractual relations. For this reason, national intervention agencies are obliged to purchase products offered for intervention and fulfilling the conditions laid down for products to qualify for intervention and must therefore accept offers of sale from producers. That impossibility of refusing an offer is matched by the irrevocability of the offer whenever its withdrawal would run counter to the intervention mechanism, particularly in so far as it would be used for speculative purposes, extraneous to the aims pursued by the common organization of the markets.

3. The system established by Article 8 of Regulation No 729/70, which, as regards the financing of the common agricultural policy, constitutes an expression of the general obligation of diligence laid down by Article 5 of the Treaty, requires the Member States to act quickly in order to recover sums paid in breach of the Community rules. National authorities cannot justify a failure to fulfil that obligation by relying on the length of the administrative or judicial proceedings commenced by an economic agent seeking to avoid the repayment demanded.

4. Since the Community provisions relating to a system for the provision of securities under a common organization of the agricultural markets provide for the security furnished by the economic agent to be forfeited if he does not observe his obligations, a provision of national law which, by hindering the forfeiture of the security, prevents the application of Community law and makes possible speculation which Community law is meant to eliminate cannot be applied.

Parties

In Case C-28/89,

Federal Republic of Germany, represented by Martin Seidel, Ministerialrat (Ministerial Adviser) at the Federal Ministry for Economic Affairs, acting as Agent, assisted by Michael Loschelder, Rechtsanwalt, Cologne, with an address for service in Luxembourg at the Embassy of the Federal Republic of Germany, 20-22 avenue Émile Reuter,

applicant,

v

Commission of the European Communities, represented by Dierk Booss, a member of its Legal Department, acting as Agent, with an address for service in Luxembourg at the office of Guido Berardis, also a member of its Legal Department, Wagner Centre, Kirchberg,

defendant,

APPLICATION for the annulment of Commission Decision 88/630/EEC of 29 November 1988 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1986 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) (Official Journal 1988, L 353, p. 30) to the extent that the Commission disallowed certain expenditure incurred by the Federal Republic of Germany,

THE COURT

composed of: O. Due, President, T. F. O' Higgins, J. C. Moitinho de Almeida and M. Díez de Velasco (Presidents of Chambers), C. N. Kakouris, F. A. Schockweiler, F. Grévisse, M. Zuleeg and P. J. G. Kapteyn, Judges,

Advocate General: F. G. Jacobs

Registrar: J. A. Pompe, Deputy Registrar,

having regard to the Report for the Hearing,

having heard oral argument submitted by the parties at the hearing on 9 October 1990,

after hearing the Opinion of the Advocate General delivered at the sitting on 20 November 1990,

gives the following

Judgment

Grounds

1 By an application lodged at the Registry of the Court of Justice on 2 February 1989, the Federal Republic of Germany brought an action under the first paragraph of Article 173 of the EEC Treaty for the partial annulment of Commission Decision 88/630/EEC of 29 November 1988 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1986 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) (Official Journal, 1988 L 353, p. 30).

2 The annulment of that decision is sought to the extent that it disallows the following sums:

DM 61 377 605.77 in respect of controls on the homogeneous denaturing of skimmed milk;

DM 1 947 053 in respect of controls on butter quality during the trial storage period;

DM 1 789 856.23 in respect of delayed takeover of intervention butter;

DM 190 429.76 in respect of the advance payment of export refunds.

3 Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the course of the procedure and the submissions and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

Controls on the homogeneous denaturing of skimmed-milk powder

4 Article 6 of Commission Regulation (EEC) No 368/77 of 23 February 1977 on the sale by tender of skimmed-milk powder for use in feed for pigs and poultry (Official Journal 1977, L 52, p. 19) requires a tenderer to denature skimmed-milk powder either in accordance with a formula set out in the Annex to the regulation or by incorporating it directly in a feedingstuff. Article 16(2) of that regulation provides that the competent authority of the Member State concerned is to be responsible for checking that denaturing or direct incorporation has been properly carried out. Section 1 of the Annex to the regulation sets out the various denaturing formulae; paragraph D of Section 3 of the Annex requires the denaturing product to be distributed in a uniform manner so that two individual samples of a certain weight give, upon chemical determination, substantially the same results.

5 In the contested decision the Commission did not charge to the EAGGF expenditure incurred by the Federal Republic of Germany during 1986 on controls on the homogeneous denaturing of skimmed-milk powder on the ground that the applicant had not carried out a chemical analysis as required by the Community rules.

6 The applicant submits first of all that Regulation No 368/77 does not prescribe a chemical analysis and that in any event it is for the tenderer and not the Member State to ensure that the denaturing products are distributed uniformly.

7 In its judgment of 19 October 1989 in Joined Cases 258/87, 337/87 and 338/87 (Italy v Commission [1989] ECR 3359), the Court held that it was clear from Article 6 together with Article 16(2) of Regulation No 368/77 that the technical prescriptions mentioned in Section 3 D of the Annex to which Article 6 referred formed an integral part of the system for the supervision of denaturing and that those prescriptions themselves indicated the systematic nature of the chemical analysis.

8 The applicant also submits that, in view of the denaturing agent and the formula used, chemical analysis is an inadequate means of control and that the denaturing substances, ferrous sulphate and copper sulphate, whose homogeneous distribution can be controlled only by chemical analysis, are not authorized by Council Directive 70/524/EEC concerning additives in feedingstuffs (Official Journal, English Special Edition 1970 (III), p. 840). Finally, it points out that Regulation No 368/77 is silent as to the timing and frequency of analysis and that chemical analysis of samples of skimmed-milk powder denatured in 1986, carried out after 21 September 1987, showed that the denaturing substances had been uniformly distributed.

9 As regards the first argument, it must be pointed out that the Court has consistently held (see the judgment in Case 819/79 Germany v Commission [1981] ECR 21) that, where a regulation lays down specific measures of supervision, the Member States must apply them and it is unnecessary to examine the merits of their view that another system of supervision is more effective.

10 As regards the second argument, it must be stated that, whilst Directive 70/524 does in fact prohibit the incorporation in feedingstuffs of certain products such as ferrous sulphate or copper sulphate in monohydrate form, it does not prohibit the use of those substances in different forms referred to in certain of the denaturing formulae set out in the Annex to Regulation No 368/77.

11 As regards the last argument that the regulation is silent as to the timing or frequency of chemical analysis, the Court has stated in its judgment in Joined Cases 258/87, 337/87 and 338/87, Italy v Commission, cited above, that chemical analysis must be systematic in nature. Therefore a chemical analysis of samples of skimmed-milk powder denatured in 1986, carried out only after September 1987, is not in accordance with the system established by Regulation No 368/77.

12 Consequently, the action for the annulment of the contested decision, in so far as it relates to controls on the homogeneous denaturing of skimmed-milk powder, must be dismissed.

Controls on butter quality during the trial storage period

13 Article 6(1) of Regulation (EEC) No 685/69 of the Commission of 14 April 1969 on detailed rules of application for intervention on the market in butter and cream (Official Journal, English Special Edition 1969 (I), p. 194), as amended by Commission Regulation (EEC) No 1836/86 of 12 June 1986 (Official Journal 1986, L 158, p. 57), requires butter delivered into intervention to undergo a trial storage period of two months starting from the date of entry of the butter into the cold storage depot. Under Article 6(2), as amended by Commission Regulation (EEC) No 1829/80 of 11 July 1980 (Official Journal 1980, L 178, p. 22), the seller by his offer undertakes, in the event of any abnormal deterioration in the quality of the butter, to take back the goods in question, to reimburse any price paid and to pay the storage costs.

14 The applicant objects in general to the Commission' s refusal to charge to the EAGGF expenditure relating to tests of the keeping quality of butter carried out before the expiry of the trial period. It also argues that the Commission has failed to give any reasons for disallowing 0.25% of the total expenditure incurred.

15 In its judgment in Case C-22/89 (Netherlands v Commission [1990] ECR I-4799), the Court held that the purpose of Article 6(1), in conjunction with Article 6(2) of Regulation No 685/69, was to ensure that the butter had good keeping qualities before being finally taken over by the intervention agency and to make the seller bear the consequences of any abnormal deterioration in the quality of the butter that occurred during the trial period. The Court concluded that, having regard to that aim of Article 6, the testing of the keeping qualities of stored butter could not be carried out before the end of the two-month trial period.

16 In the aforesaid judgment, the Court also held that the trader' s legitimate interest in knowing as soon as possible where he stood as regards the outcome of the transaction could not justify an interpretation of Regulation No 685/69 which would release him from the obligation to assume until the end of the storage test period the detrimental consequences arising from any abnormal deterioration in the quality of the stored butter. It also held that the Summary Report relating to the clearance of EAGGF accounts for 1986 expressly stated the considerations which led the Commission to disallow 0.25% of the expenditure concerned.

17 As regards the applicant' s argument that the analysis methods used allow any abnormal deterioration in the quality of the butter during the storage test period to be ascertained as from the fourteenth day after the butter' s entry into the cold storage depot, it must be noted, as has already been pointed out in paragraph 9 of this judgment, that, where a regulation lays down specific measures of supervision, the Member States must apply them so that it is not necessary to examine the merits of their view that a different system of supervision would be more, or just as, effective.

18 As regards the practical difficulties associated with carrying out tests after the expiry of the test period, it is sufficient to recall the case-law of the Court (see, most recently, the judgment of 27 November 1990 in Case C-39/88 Commission v Ireland [1990] ECR I-4271), according to which difficulties in the implementation of a Community measure may not justify a Member State in unilaterally absolving itself from observing its obligations.

19 From those considerations it is clear that the action for annulment must be dismissed in so far as it relates to controls on the quality of butter during the trial storage period.

Delayed takeover of intervention butter

20 The detailed rules of application for intervention on the market in butter and cream are laid down in Regulation No 685/69, cited above. In order to prevent price speculation, the Commission laid down periods of delayed takeover; until the expiry of those periods, the seller has to bear the costs of intervention. During 1986, those periods were as follows:

before 28 February 1986: no provision for delayed takeover;

28 February to 11 May 1986: delayed takeover period of 60 days;

12 May to 12 June 1986: no provision for delayed takeover;

13 June to 11 September 1986: delayed takeover period of 60 days;

12 September to 31 December 1986: delayed takeover period of 120 days.

21 The Commission objects to the applicant having allowed tenderers to withdraw their offers made during the period 12 May to 12 June 1986 and to submit new offers after 12 June relating to butter previously offered as well as to butter not yet made. It therefore refused to charge to the EAGGF expenditure relating to quantities of butter to which those offers were related.

22 The applicant argues that neither German law nor the Community rules prohibit the withdrawal of offers, as was confirmed by the position adopted by the Commission in a letter addressed to the German authorities in 1982 in which it expressly allowed offers relating to butter not yet produced. The applicant also argues that the Commission must bear the consequences of lacunae in the Community rules.

23 As regards the legal effect of an offer, it must be pointed out that the Community rules on market intervention derogate from ordinary law in so far as the national intervention agency is obliged to accept an offer of sale from an economic agent if the conditions for intervention are fulfilled. The fact that the addressee of the offer may not turn it down justifies the prohibition imposed on the tenderer preventing him from withdrawing his offer where this would run counter to the aims of the intervention system. That is so in this case, since the possibility of withdrawing an offer and submitting a new one relating to quantities already offered as well as to quantities not yet produced would encourage speculation and lead to results not in accord with the aim pursued by the Community rules.

24 The authorization which the Commission gave to the German authorities in 1982 to accept offers relating to butter not yet produced was issued in specific circumstances in which there was no risk of an increase in the expenditure chargeable to the EAGGF or of a circumvention of the Community rules. That authorization cannot therefore be relied upon to challenge the position which was adopted by the Commission following the introduction of the system of delayed takeover and which was necessary in order to achieve the aims of that system.

25 As regards the obligation allegedly incumbent on the Commission to bear the financial consequences of any lacunae in the Community rules, it must be pointed out that the Court has shown in paragraph 23 of this judgment that the prohibition against withdrawing offers is inherent in the aims of the Community rules and that the argument based on lacunae in those rules is not therefore well founded.

26 The action for annulment must accordingly be dismissed in so far as it relates to delayed takeover periods for butter storage.

Advance payment of export refunds

27 The system of advance payment of export refunds for agricultural products is laid down in Council Regulation (EEC) No 565/80 of 4 March 1980 (Official Journal 1980, L 62, p. 5). Under Article 5(1), the refund is to be paid as soon as the products or goods have been brought under the customs warehousing or free-zone procedure with a view to their being exported within a set time-limit. Under Article 6, the payment is subject to the provision of a security which is to remain forfeit if there proves to be no right to the export refund or only a right to a smaller refund.

28 The detailed rules for the advance payment of export refunds are laid down in Commission Regulation (EEC) No 798/80 of 31 March 1980 (Official Journal 1980, L 87, p. 42). Article 2(1) of that regulation provides that payment is to be subject to the lodging with the customs authorities of a payment declaration whilst Article 3 provides that at the time of acceptance of that declaration the products are to be placed under customs controls. The arrangements relating to the provision of a security are laid down in Article 7, which requires a security to be furnished equal to the amount to be paid in advance of export plus any applicable monetary compensatory amount and an additional percentage. Article 10 lays down the conditions for the release of securities.

29 The Commission objects to the fact that in 1986 the applicant did not recover an export refund paid in advance and did not declare forfeit the security furnished when a portion of the goods declared for export had not been produced or had not been presented at the place indicated in the payment declaration.

30 The applicant points out that, under Council Regulation (EEC) No 729/70 of 21 April 1970 on the financing of the common agricultural policy (Official Journal, English Special Edition 1970 (I), p. 218), sums lost through irregularities or negligence are to be recovered in accordance with the laws, regulations and administrative provisions of the Member States. Since the export payment was not recovered until 1988, it should not have been taken into account in the clearance of accounts for 1986. On the question of the security, the applicant submits that under German law a payment declaration relating to non-existent goods is void, so that the security may not be declared forfeit. It also argues that the decision to charge the amount of the security to the Federal Republic is not reasoned.

31 As regards the question of the recovery of the amount to be paid in advance of export, reference should be made to the system laid down in Article 8 of Regulation No 729/70, cited above, which is considered an expression, as regards the financing of the common agricultural policy, of the general obligation of diligence laid down in Article 5 of the EEC Treaty (see the judgment in Case C-34/89 Italy v Commission [1990] ECR I-3603). Article 8(1) imposes on Member States an obligation to recover sums lost as a result of irregularities or negligence whilst Article 8(2) provides that, in the absence of total recovery, the financial consequences of irregularities or negligence attributable to administrative authorities or other bodies of the Member States are to be borne by them.

32 National authorities cannot justify a failure to fulfil their obligation to rectify irregularities quickly by relying on the length of administrative or judicial proceedings commenced by an economic agent.

33 As regards the argument that under German customs law it was not possible to declare the security forfeit, reference must be made to Article 10(1)(b) of Regulation No 798/80 which expressly provides that the release in full of the security is to be subject to the production of proof that the products concerned provide entitlement to a refund. In a field governed by Community law, a provision of national law which frustrates the application of Community law and makes possible speculation which Community law is meant to eliminate cannot be applied.

34 As regards the complaint that the decision is not reasoned, it is sufficient to point out that the eighth recital of the preamble to the contested decision expressly states that the expenditure disallowed for Germany comprises an amount in respect of a security for a certain quantity of wheat starch which should have been credited to the EAGGF. As is clear from the same preamble and the Summary Report, the briefness of that reasoning is explained by the fact that the refusal to bear the cost of the security was provisional, pending the furnishing of the required evidence by the Member State in question before a certain date. The exchange of correspondence between the Federal Republic of Germany and the Commission after the adoption of the contested decision also shows that the applicant knew the reasons for the Commission' s decision.

35 The action for annulment must accordingly be dismissed in so far as it relates to the advance payment of export refunds.

36 It follows from all the considerations set out above that the action for annulment brought by the Federal Republic of Germany must be dismissed in its entirety.

Decision on costs

Costs

37 Under Article 69(2) of the Rules of Procedure, the unsuccessful party must be ordered to pay the costs. Since the Federal Republic of Germany has failed in its submissions, it must be ordered to pay the costs.

Operative part

On those grounds,

THE COURT

hereby:

(1) Dismisses the application;

(2) Orders the Federal Republic of Germany to pay the costs.