Judgment of the General Court (Seventh Chamber) of 8 November 2018 –

Lithuania v Commission

(Case T‑34/16)

(EAGF — Expenditure excluded from financing — Specific support for the bovine and ovine meat sectors — On-site inspections — Physical verification of the animals — Quality of the inspections — Inspection report — Flat-rate correction — Obligation to state reasons — Proportionality — One-off correction)

1. Agriculture — Financing by the EAGF — Clearance of accounts — Disallowance of expenses arising from irregularities in applying EU rules — Assessment of losses suffered by the funds — Irregular expenses not capable of being determined with sufficient precision — Assessment based on flat-rate corrections — Lawfulness (European Parliament and Council Regulation No 1306/2013, Art. 52(2)) (see para. 23)

2. Agriculture — Financing by the EAGF — 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) (see paras 26-29, 63, 109, 112)

3. Acts of the institutions — Statement of reasons — Obligation — Scope — Decision on clearance of accounts in relation to expenses financed by the EAGF — Financial corrections — Addressee State having been closely associated with the process of drawing up the decision — Infringement of the duty to state reasons — None (Art. 296 TFEU) (see para. 30)

4. Agriculture — Financing by the EAGF — Clearance of accounts — Disallowance of expenses arising from irregularities in applying EU rules — Challenge by the Member State concerned — Reliance on the adoption of corrective measures as a result of the Commission’s audit — Index of failures in the national system during the audit period (European Parliament and Council Regulation No 1306/2013, Art. 52) (see para. 50)

5. Agriculture — Financing by the EAGF — Grant of aid and premiums — Obligation on the Member States to organise an effective system of administrative and on-site inspections — Scope — On-site inspections of animals — Subject-matter — Possibility of carrying out checks a posteriori on the basis of documents relating to the detention period of animals — None — Requirement for a physical inspection (Commission Regulation No 1122/2009, Art. 42) (see para. 54)

6. Agriculture — Financing by the EAGF — 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 (European Parliament and Council Regulation No 1306/2013, Art. 52) (see paras 72, 118)

7. Agriculture — Financing by the EAGF — Grant of aid and premiums — Obligation on the Member States to organise an effective system of administrative and on-site inspections — Scope — On-site inspections of animals — Need to verify the correspondence between the number of animals present on site and the number recorded in the register kept by the animal owner — Possibility of not using the register, but of relying on information contained in a computerised database and in breeding records — None (Commission Regulation No 1122/2009, Art. 42) (see paras 91, 92)

8. Actions for annulment — Subject-matter — Decision based on several pillars of reasoning, each sufficient to justify the operative part — Annulment of such a decision — Conditions (Art. 263 TFEU) (see para. 101)

9. EU law — Principles — Proportionality — Scope (Art. 5(4) TEU) (see paras 105, 106)

10. Agriculture — Financing by the EAGF — Clearance of accounts — Procedure — Subject-matter — Financial correction not constituting a penalty (see para. 108)

11. Agriculture — Financing by the EAGF — 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 — Eligibility for the application of a flat rate of 5% for deficiencies found in a single key inspection (European Parliament and Council Regulation No 1306/2013, Art. 52) (see para. 117)

12. Agriculture — Financing by the EAGF — Clearance of accounts — Disallowance of expenses arising from irregularities in applying EU rules — Financial correction — Cumulation of analytical and flat-rate corrections — Lawfulness — Conditions (European Parliament and Council Regulation No 1306/2013, Art. 52(2)) (see paras 168, 169, 173, 174)

Re:

Application based on Article 263 TFEU seeking annulment of Commission Implementing Decision (EU) 2015/2098 of 13 November 2015 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) (OJ 2015 L 303, p. 35).

Operative part

The Court:

1. Dismisses the action;