Opinion of Mr Advocate General Alber delivered on 6 May 1999. - Italian Republic v Commission of the European Communities. - EAGGF - Clearance of accounts - 1993. - Case C-253/97.



European Court reports 1999 Page I-07529



Opinion of the Advocate-General

I - Introduction

1 This case concerns the lawfulness of various reductions in EAGGF (1) financing debited against Italy. It relates both to specific and flat-rate adjustments of between 2% and 10% in respect of a total of 12 separate items.

2 In Decision 97/333/EC (2) (hereinafter: `the contested decision') the Commission declared, inter alia, that the following amounts could not be charged to the EAGGF:

A. ITL 17 361 126 678 in respect of prepayment of the refund for beef on the grounds that checks were inadequate, incorrect labels were used and pre-cooked meat was processed;

B. ITL 2 686 311 350 on the ground that removing land from production was unlawful;

C. ITL 76 987 797 in respect of costs of public storage on the ground that checks were inadequate;

D. ITL 911 895 729 in respect of costs of public storage of sugar on the ground that checks were inadequate;

E. ITL 22 731 751 579 (3) in respect of aid to consumption of olive oil on the ground that the administrative procedure in connection with the withdrawal of approval as an olive oil packaging plant was inadequate;

F. ITL 8 155 895 000 in respect of costs relating to compulsory distillation on the ground that incorrect information on the quantities to be distilled was provided;

G. ITL 2 165 691 000 in respect of the reimbursement of private storage costs for wine surpluses on the ground that incorrect information on surplus quantities was provided;

H. ITL 3 382 118 277 in respect of the reimbursement of costs for the permanent abandonment of wine-growing areas on the ground that checks were inadequate;

I. ITL 5 771 993 000 in respect of accounting adjustments for stocks of unboned beef in the statement of annual expenditure on the ground that no account was taken of quantitative losses (4) during storage;

L. ITL 243 553 000 in respect of the early subtraction of forecast quantitative losses of boned beef on the ground that such losses were systematically subtracted without further inspection;

M. ITL 778 000 000 on account of late payment for intervention purchases of boned beef;

N. ITL 27 804 654 011 in respect of the sheep and goat premium on the ground that management and monitoring were inadequate.

II - Forms of order sought

3 By its action the Italian Government seeks the complete annulment of the adjustments applied in respect of certain points and a reduction thereof in respect of others. Essentially it justifies its action on the grounds that the amounts concerned are disproportionate in relation to the risk for the EAGGF, difficulties arise in interpreting the provisions of Community law, adequate checks are in place, specific and fixed-rate adjustments are applied concurrently, no responsibility exists in respect of certain deficiencies, the Commission makes incorrect calculations, the irregularities found are merely procedural, and improvements have since been made to the monitoring system.

4 The Italian Government claims that the Court should

annul Commission Decision of 23 April 1997 C(97) 1180 final in so far as it excluded the abovementioned amounts (5) from the clearance of the accounts presented by the Italian Republic in respect of the expenditure for 1993 of the EAGGF.

5 The Commission contends that the Court should

1. dismiss the application and

2. order the plaintiff to pay the costs.

6 The Commission essentially justifies the adjustments applied on the ground that the checks were inadequate and Community law was infringed.

7 The parties' other submissions on the relevant separate items will, where necessary, be considered in the analysis, below.

III - Analysis

A. Prepayment of refund for beef

Preliminary remarks

8 The system of prepayment of export refunds essentially means that payments may be made even before products or goods have undergone customs checks. However, in that respect it is necessary to ensure that those products or goods are exported within certain time-limits. Risks for the system of prepayment can arise in particular in respect of storage (exchange of products or goods), the information provided on quantities, non-compliance with existing provisions and, finally, in respect of export itself.

9 Consequently, the competent national customs authorities are required to take all necessary measures to ensure that goods and products subject to the system of prepayment are placed under supervision and control until they leave the customs territory of the Community. (6) Accordingly, exporters of products must keep documentary records of the relevant imports and exports, movements, checks and storage. The customs authorities must, at all times, be able precisely to identify and locate the goods or products during the period of prepayment.

Submissions of the parties

10 The Italian Government does not deny that there were inadequacies and deficiencies in the inspection procedures but takes the view that they justify only adjustments amounting to a total of 2%, rather than the 5% applied by the Commission.

11 It contends that as a whole the adjustments are excessive in respect of the irregularities found. The EAGGF was not exposed to any significant risk as a result of the small number of checks. Furthermore, the fact that the beef in question was cooked prior to customs checks merely constitutes a procedural error. At any rate it poses no risk of damage to the EAGGF. Moreover, the relevant provisions of Community law are unclear, a fact for which Italy cannot be held responsible. In addition, the respective (inspection) procedures have since been altered accordingly. Therefore, overall it is evident that a 5% adjustment is disproportionate.

12 The Commission reserves its main criticism for the inadequate checks carried out by the Italian customs authorities when the meat entered the territory and during the storage period. The Commission pointed out those deficiencies during its investigations in the years 1988/89 to 1992/93. No improvements were seen until May 1995 and during the final checks of relevance to this case at the end of 1993/beginning of 1994 the previous deficiencies were found again. For example, it was not always possible to ascertain whether the quantities subject to the system of prepayment were in fact present and complied with the regulations. Consequently, it was impossible to exclude the possibility that the goods had been exchanged or the quantities changed. It was noted in particular that considerable differences in terms of inspection procedures existed between individual customs districts. In the case of certain stores only customs inspectors had access, whereas in the case of others there was open access. The inadequate inspection procedures were also attributable to the unclear division of competence between the customs authorities and the National Institute for Food Inspections (INCA). No checks were carried out at undertakings between customs clearance and processing or storage, nor after goods or products left the stores. Furthermore, the INCA carried out checks only in respect of food hygiene and not in respect of compliance with the rules governing prepayment. As far as the cooking of beef prior to processing is concerned, that is not permitted since afterwards it is impossible to draw conclusions as to the basic product. With regard to the question of labelling, the Commission observes that in one case an undertaking ordered and attached the inspection labels itself and they did not correspond to those of the monitoring authority. Moreover, the Commission carried out checks on undertakings which turn over a total of 57.31% of the goods in respect of which prepayment had been requested.

Opinion

13 According to the case-law of the Court of Justice, it is for national administrations to monitor strict compliance with Community provisions. As the Court of Justice has already held on several occasions, it is apparent in particular from Article 8(1) of Regulation No 729/70 (7) that Member States are under a general obligation to take the measures necessary to satisfy themselves that the transactions financed by the EAGGF are actually carried out and are executed correctly, even if the specific Community act does not expressly provide for the adoption of particular supervisory measures. (8)

14 The Court of Justice has further held that only intervention undertaken in accordance with the Community rules within the framework of the common organisation of agricultural markets is to be financed by the EAGGF. (9) In that context, it is for the Commission to prove an infringement of the rules on the common organisation of the agricultural markets. (10) Accordingly, the Commission is obliged to give reasons for its decision finding an absence of, or defects in, inspection procedures operated by the Member State in question. (11)

15 The Member State, for its part, cannot rebut the Commission's findings by mere assertions which are not substantiated by evidence of a reliable and operational supervisory system. If it is not able to show that they are inaccurate, the Commission's findings can give rise to serious doubts as to the existence of an adequate and effective series of supervisory measures and inspection procedures. (12)

16 In the present case the Italian Government does not, in principle, deny that there were inadequacies and deficiencies in the inspection procedures. Therefore, it must be concluded that Italy had failed to set up a system of administrative checks and inspection procedures which were capable of ensuring that the financial measures were compatible with Community provisions. Where no such comprehensive system of checks exists or if the system established is defective to the point of giving rise to doubts as to compliance with the conditions imposed for the reimbursement of the expenditure concerned, the Commission is entitled to disallow certain expenditure incurred by the Member State concerned. (13)

17 Therefore, Articles 2 and 3 of Regulation No 729/70 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, leaving the Member States to bear the burden of any other sum paid, and in particular any amounts which the national authorities wrongly believed themselves authorised to pay in the context of the common organisation of the markets. (14)

18 Although it is therefore for the Commission to prove an infringement of the Community rules, the Member State concerned must demonstrate that the Commission committed an error (if that is the case) as to the financial consequences to be attributed to it. (15)

19 Furthermore, as the Court of Justice has consistently held, the Commission, instead of seeking to establish the financial impact of the failure of the Italian monitoring authorities to fulfil their obligations, could have rejected the entire expenditure tainted by the infringement.

20 In the present case the Commission regarded a flat-rate adjustment totalling 5% as appropriate. In that respect it referred to the tables contained in the so-called Belle Group Report. With reference to Articles 2, 3 and 8 of Regulation No 729/70 that report proposes a reduction in flat-rate calculations of three possible percentages:

- 2% where the deficiency is limited to parts of the control system of lesser importance, or to the operation of controls which are not essential to the assurance of the regularity of the expenditure, such that it can reasonably be concluded that the risk of loss to the EAGGF was minor;

- 5% where the deficiency relates to important elements of the control system or to the operation of controls which play an important part in the assurance of the regularity of the expenditure, such that it can reasonably be concluded that the risk of loss to the EAGGF was significant;

- 10% where the deficiency relates to the whole of or fundamental elements of the control system or to the operation of controls essential to assuring the regularity of the expenditure, such that it can reasonably be concluded that there was a high risk of widespread loss.

21 Thus, the decisive criteria are the effectiveness of the supervisory system, the seriousness of the deficiencies and the assessment of the anticipated damage to the EAGGF.

22 Consequently, in the present case it was for Italy to prove that the conditions had been satisfied for the expenditure to be charged to the EAGGF or that only a minor adjustment was justified.

23 In that connection it should be noted firstly that the supervisory system undoubtedly exhibited considerable deficiencies. As the Commission stated - and Italy did not dispute - the unclear division of competence between the competent Italian authorities produced a situation whereby no checks were made on compliance with the rules governing prepayment during the storage and processing of the beef. The checks carried out at the undertakings by the INCA related only to aspects of food hygiene. It is also necessary to concur with the Commission's allegation that the cooking of beef prior to customs checks was contrary to the provisions laid down by Community law. Afterwards it is effectively impossible to ascertain the nature of the basic product. Similar considerations apply to the labelling of the beef. In that respect too there were considerable deficiencies in the inspection procedure which are highlighted in particular by the fact that undertakings were able to use their own labels which did not correspond to those normally used by the monitoring authorities. Moreover, what counts is not the number of random inspections carried out by the Commission but the frequency and effectiveness of the inspections for which the Italian Republic was responsible. As the deficiencies, which are numerous, concern the system as a whole, a 5% reduction appears justified pursuant to the Belle Group Report guidelines.

24 The improvements relied upon by the Italian Government were unable to take effect until May 1995 even though the legal framework for them had been laid down as early as 1993. Consequently, those improvements cannot be taken into account in the clearance of accounts for the financial year 1993.

25 In view of the foregoing considerations, the first plea in law must be rejected.

B. Removal of land from production on multiannual basis

Preliminary remarks

26 The aid scheme to encourage the set-aside of arable land was introduced by Article 1(a) of Regulation No 797/85. (16) Under that provision, the scheme covers all arable land, irrespective of the crops grown, provided that the land has in fact been cultivated for a reference period to be determined. The measure therefore consists in withdrawing from cultivation agricultural land previously used as arable land. The decisive factor determining entitlement to aid is that the arable land was effectively cropped during the reference period and therefore other types of land were not eligible for that scheme. The reference period for Italy was the financial year 1987/88.

Submissions of the parties

27 By its second plea in law Italy seeks the annulment, and only in the alternative a reduction, of the adjustments applied. The reason it gives is the alleged ambiguity of the term `fallow'. The EAGGF understands the term `fallow' as meaning `traditional fallow', but the Italian producers and officials of the agricultural offices also understand it as meaning `dressed fallowing combined with green manuring'. (17) Such fallowing is practised primarily by Sicilian farmers and the Commission was wrong to adjust the funds in respect thereof. The competent authorities had assured the Commission that such fallowing had been practised for some considerable time. To reduce the funds was unlawful, if only because the rules were ambiguous. Furthermore, the fallowing was practised in rotation and therefore affected only part of the area of farms and not necessarily that in respect of which the premium was granted.

28 The Commission refers to its submissions in Case C-242/96, (18) which dealt with the same question but in respect of the financial year 1992. It has been shown that the competent authorities had no knowledge of the relevant rules whereby land to be set aside had to have been cultivated during the reference period. Moreover, during farm inspections the Sicilian farmers directly concerned had contradicted the Italian authorities' claim that traditional fallowing was no longer farming practice. On the contrary, it was.

Opinion

29 It is evident from the summary report that the EAGGF checks found that, during the reference period in Sicily, a large number of areas withdrawn from production in pursuance of the multiannual set-aside scheme was in fact land subject to traditional fallow practices. The inspections also showed that the Italian authorities had failed to check that aspect of the eligibility of the land. The aim of the scheme, to reduce production, was therefore only partly met. The Commission applied a financial correction of 5% - instead of 10% as it had initially proposed - of the expenditure declared for Sicily on the basis of the summary report of the Conciliation Body.

30 As the Court of Justice observed in its judgment in Case C-242/96, (19) it should first of all be noted that the Italian Government does not deny having failed to check whether the land allegedly set aside had in fact previously been cultivated or, at least, whether it had been cultivated in the context of bastard fallow. In this case the Italian Government has also been unable to adduce any evidence that traditional fallowing practice has been changed by `green fallowing'. In that respect note should also be taken of the data collected through the network for the collection of farming accountancy data at Community level (20) which show that traditional fallow was still the practice in 1986 and 1987. Moreover, it is also evident from the statements of the farmers directly concerned, which contradict those of the Italian authorities, that traditional fallow, which is not eligible, continued to be practised in Sicily.

31 The second plea in law must consequently be rejected.

C. Reimbursement of storage costs

Preliminary remarks

32 The question at issue here is whether the adjustments in respect of the charging of sugar storage costs from 15 October 1992 to 31 December 1992 are lawful.

33 The common organisation of the markets in the sugar sector is covered by Regulation No 1785/81. (21) Article 8 of that regulation provides for a compensation system for storage costs in respect of certain types of sugar products manufactured from beet or cane of Community origin. Those costs are to be reimbursed to the organisation storing the product at a single, flat rate throughout the Community. The system is to be financed by means of a levy imposed on sugar producers in respect of the quantities produced by each of them, also at a single rate throughout the Community.

34 The relevant rules are laid down in Regulation No 1358/77. (22) Article 2 of that regulation specifies who is to be reimbursed and Article 3 provides that reimbursement is to be made by the Member State in whose territory the sugar is stored. Those concerned are sugar manufacturers to whom a basic quota has been allocated, refineries, intervention agencies, and also manufacturers of powdered, lump or candy sugar or approved specialised traders. Reimbursement is made to them provided that they are the owners of the sugar or of the syrups held in store. Moreover, since reimbursement cannot be granted unless some measure of control is possible, Article 3 provides for the prior approval of the stores by the State in which they are located.

35 The calculation must based on monthly returns of quantities in store, established by calculating the arithmetic mean of the quantities held in store at the beginning and at the end of the month in question. The amount of the reimbursement is then fixed, financing, insurance and specific storage costs being taken into consideration.

36 The levy to be collected from each sugar manufacturer in respect of the quantities produced is to be so fixed that, for any sugar marketing year, the estimated total of the levies is equal to the estimated total of the reimbursement. The principle underlying the system is termed `financial neutrality'. Where, for any sugar marketing year, the total of levies collected is not equal to the total of the reimbursement made, the difference is carried forward to a subsequent sugar marketing year.

37 The amount of the levy is calculated as follows: the total estimated reimbursement for the sugar marketing year in question is increased or decreased as the case may be by the difference which might exist. The result is divided by the estimated quantity of sugar which will be marketed during that marketing year and produced within the maximum quotas.

38 On account of the complexity of the system, it was also necessary to provide for supervisory measures and procedures for it to work properly, in particular by restricting the approval of stores depending on facilities for accounting and supervision, since sugar of different origins may be stored by the same person. Finally, Article 19 of Regulation No 1998/78 (23) requires Member States to take all measures necessary for the application of the regulation. In particular, they must establish all the necessary control measures.

39 The Commission applied a flat-rate financial correction of 10% in respect of the 1993 financial year.

Submissions of the parties

40 In this connection the Italian Government seeks the annulment of the adjustments and a reduction only in the alternative. Here too it refers to its observations in Case C-242/96. (24) It argues that the 10% adjustment applied by the Commission is not justified in the first place because the 1993 financial year constituted a transitional period as the Azienda di Stato per gli Interventi nel Mercato Agricolo (AIMA - the State intervention agency in the agricultural sector) took over the administration of the system from the Cassa Conguaglio Zucchero and the supervisory function which until then had been the responsibility of the Uffici Tecnici Imposta di Fabbricazione. Secondly, an administrative system had been introduced in respect of specialised traders which worked effectively and provided for severe penalties in the event of infringements. Those traders are required to keep a register which is checked by the local administration. Finally, it should be borne in mind that from 1 July 1992 to 30 June 1993 the contribution system relating to storage resulted in more levies being paid in than aid being paid out. With such requirements in place no traders would declare excessively high stocks.

41 The Commission takes the view that an administrative control system such as existed in Italy is not sufficient to safeguard the requirements of the system for reimbursing storage costs. In particular such a control system does not comply with Article 19 of Regulation No 1998/78 if it is established that no checks were carried out on specialised traders or other approved independent stores. According to the Commission, periodic checks were necessary at the stores to check the information in the registers against the actual stocks, but no such checks were carried out. In particular no physical checks were carried out, and during production, for example, only automatic counters were used. However, rigorous checks were essential in that context in particular in order to prevent any tampering involving different types of sugar. Moreover, it follows from the principle of financial neutrality that the entire system must be viewed at Community level and not at the level of producers or Member States. Consequently, the objection raised by Italy that the producers had paid more in than they had received is unfounded. It would be almost impossible for the Commission to carry out all the checks itself. Too many factors have to be taken into account when carrying out the checks such as, for example, the exact time at which the undertaking commenced its activities, post- and antedated invoices and graduated amounts. The Member State in whose territory the undertaking carries out its activities is responsible for the checks. As regards specialist traders, it should be noted that they, unlike the sugar producers, pay no levies. Therefore, they could well have an interest in declaring large quantities which are not necessarily correct.

Opinion

42 It should be observed first of all that, by failing to carry out on-the-spot checks on specialised traders during the period scrutinised by the Commission, Italy has failed to fulfil its supervisory obligations under Community rules. That is demonstrated in particular by the fact that, although those traders had to keep a register, the accuracy of the information contained therein was not checked on the spot at the relevant stores.

43 If the supervisory requirement stemming from Article 19 of Regulation No 1998/78 is interpreted in the light of the Member States' duty to cooperate in good faith with the Commission, established by Article 5 of the EC Treaty (now Article 10 EC), it is evident that Member States must set up comprehensive administrative checks and on-the-spot inspections, thus guaranteeing the conformity of financial operations with Community law. (25) However, if, as in the present case, no comprehensive system exists or if the system introduced gives rise to doubts as to compliance with the conditions imposed for eligibility for the reimbursement of the expenditure concerned, the Commission is entitled to disallow certain expenditure incurred by the Member State in question. (26)

44 The Italian Government's claim that a connection exists between the levy paid by sugar producers and the reimbursement of storage costs must likewise be rejected.

45 The compensation system is based on the principle of financial neutrality in that the levies collected must be equivalent to the reimbursement paid. That is evident both from Article 6(2) of Regulation No 1358/77 and the case-law of the Court of Justice. (27) However, that balance must be achieved at Community level and not at the level of the Member State or the undertaking concerned. (28)

46 It should also be observed that the traders who pay the levy are not necessarily the same as those who receive reimbursement. Specialised traders who are not liable for the levy, for example, receive reimbursement. Even for manufacturers, the two amounts do not automatically coincide if they are fixed according to the manufacturing quota allocated to them and to the duration of storage respectively.

47 For those reasons Member States must introduce adequate inspection procedures in order to check whether the storage costs eligible for reimbursement have actually been incurred. The absence of such procedures, or deficiencies therein, could allow certain traders to obtain reimbursement for fictitious costs, which would obviously lead to distortion of competition. That would be to the detriment in particular of traders in other Member States where the control system does conform to the requirements of the Community rules. (29)

48 Since the deficiencies found relate to fundamental elements of the control system and to the operation of controls which are essential to ensure the regularity of the expenditure, it was completely within the Commission's discretion to conclude that there was a high risk of widespread losses to the EAGGF.

49 The 10% correction adopted by the Commission does not, therefore, appear to be unjustified. The third plea in law must consequently be rejected.

D. Reimbursement of sugar storage costs

50 This point concerns the same problems as those in point C (paragraphs 32 to 49), but relates to the period from 1 January to 30 June 1993.

51 In that respect the Commission applied adjustments at a flat rate of 2%. The arguments put forward by the parties are essentially the same as those in point C. The Commission claims that in that period too the AIMA failed to carry out any checks. Those checks did not commence until July 1993 but should have applied retrospectively as of January 1993. At the hearing the Commission stated that the reason for the different levels of adjustment in respect of the periods before and after 1 January 1993 was that there were signs of improvement in the supervisory system and it was keen to make concessions to the Member State within the scope of its discretion.

52 There are no grounds for complaining about the Commission's action since Italy was unable to prove in particular that the Commission had clearly exceeded its powers. In particular, as the Commission also observed, the adjustments do not constitute a penalty for failure to carry out supervisory measures but are intended merely to mitigate the risk for the EAGGF.

53 Moreover, note should be taken of the observations in point C (paragraphs 42 to 49) in respect of the lawfulness of the adjustments applied.

54 Consequently, the fourth plea in law raised by the Italian Government must also be rejected.

E. Aid for consumption of olive oil

Preliminary remarks

55 Under Article 11(1) of Regulation No 136/66/EEC, (30) aid must be granted for olive oil consumption where the production target price minus the production aid is greater than the representative market price for olive oil. Such aid must be equal to the difference between those two amounts. Under Article 7 of Regulation No 3089/78, (31) the Member States must `institute a system of supervision to ensure that the product for which aid has been applied qualifies for such aid.'

56 Under Article 8, the aid must be paid `when the supervisory body designated by the Member State in which packaging takes place has checked that the conditions for granting the aid have been satisfied. The aid may, however, be advanced as soon as the aid application is submitted, provided that sufficient security has been provided.'

57 Under Article 1 of Regulation No 3089/78, aid for olive oil consumption may be granted only to approved olive oil packaging plants. Article 2 of that regulation lays down the conditions under which such approval may be granted. Under Article 3, approval must be withdrawn if the conditions for approval laid down are no longer met. Articles 7 and 8 of that regulation relate to the system of supervision to be instituted to ensure that the product for which aid has been applied qualifies for such aid.

58 The conditions governing prepayment are laid down in Regulation No 2677/85. (32) Under Article 9(3), the checks must be carried out in the presence of the competent authority and the finding notified to the body responsible for payment, in which case that body must also carry out checks to ensure that the qualification criteria for the aid are satisfied. Under Article 12 of that regulation, approval, and thus qualification, for aid, must be withdrawn, where quantities are stated which exceed the quantities for which entitlement to aid has been recognised by at least 20%. (33)

59 In this context the Commission initially applied a specific correction of ITL 10 610 940 125 and subsequently applied an additional flat-rate adjustment of 2%.

Submissions of the parties

60 The Italian Government claims first of all that the Commission could not apply a flat-rate correction in addition to a specific adjustment. It is obvious that after a specific correction there is no justification for also deducting flat-rate amounts. As regards the specific adjustment, the Italian Government claims that the Commission made a calculation error in that respect. It erroneously took as the basis for the corrections all the amounts paid and did not deduct those which had already been recovered. In addition, amounts were also included which had been paid before the complaints were made. Consequently, a comparative calculation produces a figure of only ITL 7 147 758 628 (not ITL 10 610 940 125).

61 It contends that the flat-rate adjustment is likewise unjustified. The complaints related to a total of only 55 undertakings (less than 10% of the overall number). Full repayment had been effected in respect of 33 undertakings and partial arrears remained in respect of only 22. Moreover, since irregularities had come to light in respect of a total of only 4% of those receiving aid, a flat-rate adjustment was no longer necessary where they were covered by a specific correction. In the alternative, it is alleged that the calculation of the 2% adjustment is incorrect since not all monies paid or recovered had been taken into consideration.

62 At the hearing the Italian Government also alleged that the Commission had included in its financial correction amounts which related to quantities which had not exceeded the 20% margin, in respect of which approval did not, therefore, have to be withdrawn. That related specifically to two individual cases described in greater detail and therefore the Commission's calculations are incorrect in that respect.

63 The reason which the Commission gives for its action is essentially that during the investigations inadequacies had been found in the inspection procedures and procedural errors in the withdrawal of approval. In principle it is possible to apply a flat-rate correction in addition to a specific correction; there is no provision in the relevant law which prohibits such action. The risk for the EAGGF could be calculated accurately only in respect of certain undertakings. The flat-rate adjustments relate to the additional risks posed by the inadequacies in the procedure applied by the Italian authorities.

64 In that respect the Commission further contends that for ten years there have been difficulties relating to interpretation and the division of competence between the Italian authorities. To the Ministry of Industry the withdrawal of approval constituted a penalty linked to the previous imposition of administrative fines which had been imposed by the Anti-Fraud Office. (34) Consequently, the withdrawal of approval had simply been a formal act imposing a fine. Since 1990 the Ministry of Industry has been asked to withdraw approval in a total of 688 cases, but has done so in respect of only 24 undertakings. By contrast the Ministry of Agriculture regarded the AIMA as the authority responsible for inspections and the withdrawal of approval. It was able to act irrespective of previously imposed administrative fines and thus decide independently on whether to withdraw approval. It was not until May 1995 that an interministerial committee considered this problem. As it failed to reached a conclusion, it was not until May 1996 that the Council of State recognised the Ministry of Industry as the competent authority. During all those years the EAGGF incurred actual losses which are to be covered by the flat-rate correction in particular. In accordance with the normal procedure, which is also supported by case-law, the flat-rate financial corrections always relate to the total expenditure stated by the relevant Member State in respect of the clearance of accounts. The amounts recovered by the relevant date are also taken into consideration. The Italian Government's submission must consequently be rejected.

65 As regards the alleged incorrect calculation resulting from the failure to take account of the 20% margin, the Commission takes the view that the Italian Government's submission at the hearing was belated since that argument was put forward there for the first time and therefore the Commission had no opportunity to counter that submission. In its pleading the Commission claimed that it had been guided by the relevant provisions when it made its calculations and had already applied the `20% rule' in respect of the 1993 financial year (16 October 1992 to 15 October 1993).

Opinion

66 In essence the Italian Government does not deny that there were inadequacies and deficiencies in the inspection procedures and the withdrawal of approval. It refers, however, to the inaccuracy of calculations which the Commission used to determine the financial corrections.

67 As regards the parallel and thus simultaneous application of a specific and flat-rate correction, it should be noted that, according to the settled case-law of the Court of Justice, (35) the Commission must, where it does not reject all the expenditure affected by the infringement, endeavour to establish the financial impact of the unlawful action by means of calculations. Those calculations must be based on an assessment of what the situation in the relevant market would have been if the infringement had not occurred.

68 In accordance with the relevant rules, the Commission may charge to the EAGGF only sums which have been paid lawfully. The Member States must bear the burden of any other sum paid, and in particular those paid wrongly. Therefore, as the Court of Justice has consistently held, the Commission, instead of seeking to establish the financial impact of the failure of the monitoring authorities to fulfil their obligations, can reject the entire expenditure tainted by the infringement.

69 Therefore, it follows that if the risk for the EAGGF cannot be covered by means of specific corrections alone, scope must be left for additional, flat-rate adjustments. Exposing the EAGGF to further damage or risks, which could not clearly be determined, would run counter to the EAGGF system of financing. Furthermore, it would be contrary to the case-law of the Court of Justice.

70 Therefore, in principle there can be no objection to specific and flat-rate corrections being applied simultaneously.

71 As regards the Italian Government's submission that the Commission was wrong to take all amounts paid as the basis for its specific correction and thus to include transactions from previous years, that allegation must be rejected.

72 As the Court of Justice has consistently held, (36) the Commission must take into consideration all amounts paid, including where applicable any monies recovered by the relevant date in respect of the reference year. That is exactly what the Commission did in the present case, using the expenditure communicated to it as the basis for the correction. However, in respect of the 1993 financial year it was neither required nor able to take into account amounts which had not been recovered on time.

73 As regards the allegation that the Commission did not comply with the `20% rule' when it calculated the adjustments which it applied, it should be noted that that submission, made in the hearing, must be rejected as belated and thus inadmissible. The Italian Government made that allegation for the first time at the hearing even though the facts underlying it were known at the time of the written procedure. However, as the Court of Justice has consistently held, (37) such a submission must be rejected as belated where the defendant is deprived of an opportunity to counter the submission as a result of such action.

74 Thus, the Italian Government was unable to show that there had been a calculation error in respect of the specific corrections.

75 The conclusion is the same as regards the flat-rate adjustments. The Commission was right to take as a basis the overall amounts communicated to it and did take account of the monies recovered by the relevant date. Furthermore, in view of the inadequacies in the administrative procedure and the inspections, which, moreover, the Italian Government does not deny, a flat-rate adjustment of 2% of the expenditure appears to be justified. In any event, since it took ten years to resolve the conflict of competence between the Italian authorities and it was consequently impossible to carry out effective checks in the meantime, it must be concluded that deficiencies occurred which, overall, posed a risk of losses to the Fund.

76 Furthermore, it should be noted that the total of the corrections applied by the Commission in this respect - a specific correction and an additional 2% flat-rate correction - amounted to less than a single, flat-rate adjustment of 5% which probably could have been justified in view of the deficiencies in the inspection procedure.

77 This plea in law raised by the Italian Government must consequently be rejected.

F. Compulsory distillation

Preliminary remarks

78 Compulsory distillation was introduced because it was regarded as the most effective measure to absorb surpluses of table wine on the market. (38) To that end Article 39(1) of Regulation No 822/87 provides that where, in respect of a given wine year, the market in table wine and wine suitable for yielding table wine is in a state of serious imbalance, compulsory distillation of table wine must be decided on. It is for the Commission to fix the quantities that are to be delivered for compulsory distillation to eliminate production surpluses and thus restore a normal market situation, in particular as regards the levels of foreseeable availabilities at the end of a wine year and prices. The total quantity to be distilled must be shared between the various wine-growing regions of the Community, grouped together by Member State. The quantity determined for distillation must be shared between table-wine producers in each wine-growing region. In addition, the Member States must notify the Commission of the quantities of table wine produced in each wine-growing region. These notifications serve as a basis for setting the total quantity for distillation in the Community. However, the time-limit for such notification must not fall after 15 February of the relevant wine year. Under Regulation No 3929/87, (39) wine producers are required to submit a harvest declaration each year to the competent authorities designated by the Member States. Under Article 6(2) of that regulation, Member States must estimate the yield per hectare in respect of the table wine production obtained on their territory and communicate this estimate to the Commission before 20 January according to graduated classes of yield.

79 Under Article 31 of Regulation No 822/87, a forward estimate must be drawn up before 10 December of each year for the purpose of determining the Community's resources and estimating its needs.

80 These procedures enable annual harvests and storage stocks to be determined. The quantities to be distilled compulsorily are then fixed on the basis of this information on existing and anticipated quantities of table wine. The percentage of the wine to be distilled is based on a graduated scale which is drawn up in terms of yield per hectare.

81 By Regulation No 129/93 (40) of 26 January 1993 the Commission fixed the quantities to be distilled compulsorily by each Member State, the figure for Italy being 12 760 000 hectolitres. The Member States were then required to share those quantities between the individual wine-growing regions and notify to the Commission the figures calculated by 15 February 1993.

82 In the case of Italy the Commission found a shortfall in the quantity of wine to be distilled totalling 1 285 000 hectolitres. Therefore, it applied a specific correction of ITL 8 155 895 000.

Submissions of the parties

83 Although the Italian Government does not deny falling short of the requirements by a total of 1 285 000 hectolitres, it nevertheless seeks the annulment of the adjustments which were applied. The necessary procedure for laying down the scale provides for cooperation between the Member States and the Commission. In that respect forecasts for the forthcoming relevant period are produced on the basis of previous production figures. Where a mistake is made in the forecast, the Member State alone cannot be automatically held responsible. Since only forecasts are involved and the actual development of events is subject to a large number of fluctuations and imponderables, the possibility that the Member State is liable must be excluded.

84 In the alternative, the calculation of the adjustments is contested. That calculation was made on the basis of the storage costs in respect of the undistilled wine. However, there is not necessarily a link between the producers' decision to store and to distil wine. Furthermore, only two months (1 July to distillation) and not the entire storage period (the average contract length in this respect is nine months) can be taken into account since the storage costs can be charged to the EAGGF until 1 July in any case. In addition, the charges on the EAGGF were considerably lower than in the previous year and the Commission had to take account of that fact as well. Furthermore, checks are now being carried out on a regular basis and therefore the adjustments as a whole appear to be unjustified.

85 The Commission points to the absence of any checks prior to the year 1993/94 and further alleges that Italy failed to submit, within the prescribed period, the required documents relating to checks carried out and penalties imposed, and to the quantity of sparkling wine and grape juice recorded. It is evident that too little was distilled, too much wine was placed in storage and therefore it had been necessary to conclude a large number of additional storage contracts. Consequently, the adjustments as a whole were applied correctly.

Opinion

86 It should be noted in the first place that Italy does not deny the inadequate inspections and incorrect forecasts. However, since they constitute essential aspects of compulsory distillation a financial adjustment charged to Italy does not, in principle, appear to be unjustified.

87 The inadequacies of the supervisory system clearly fall within the responsibility of the relevant Member State and therefore the Commission is entitled, according to the settled case-law of the Court of Justice, (41) to charge wrongly paid amounts to the Member States.

88 As regards the question of the estimates of the relevant harvest yields, it must be concluded that the producers and Member States alone are responsible. They alone possess the necessary figures and are able, where applicable, to check them in order to make them available to the Commission. It is true that in that respect the system of compulsory distillation provides for cooperation between the Member States and the Commission. However, it does so only in so far as the percentages for the quantities to be distilled are finally fixed. In that respect the Commission is largely dependant on cooperation from the Member States. Where errors are made in the estimates, they fall solely within the sphere of competence of the Member States. However, if damage may be caused to the EAGGF as a result of those errors, the Commission is entitled either to reject the expenditure as a whole or to apply financial corrections.

89 In the present case the Commission adopted a specific correction about which no complaint can be made overall. The Commission was able to calculate the possible risk for the EAGGF only on the basis of the wine which was still in storage. Although there may not automatically be any link between the quantities in storage and the undistilled quantities of table wine, no other basis for calculation is apparent and, furthermore, the Italian Government was unable to adduce any evidence of a calculation error in that regard.

90 As regards the Italian Government's allegation that the Commission fixed the distillation quantities before 15 February 1993 - that is to say before time-limit for the Member States' notifications to the Commission - by means of Regulation No 129/93 of 26 January 1993, it should be noted that that regulation merely fixes the quantities for each Member State. However, the information which the Member States had to communicate to the Commission before 15 February 1993 related to the sharing of those quantities between the individual wine-growing regions. Therefore, the Commission did not have to wait until February 1993 to fix national quotas but was able to do so in advance. The cooperation between the Member States and the Commission regarding the fixing of individual quantities for producers could not be put into effect until Member States' obligations in respect of compulsory distillation had been published. In that respect too the Commission acted lawfully.

91 Consequently, the financial corrections applied by the Commission were lawful and this plea in law raised by the Italian Government must also be rejected.

G. Wine surplus in private storage

92 At issue here is a correction similar to that dealt with in point F above (paragraph 78 et seq.), but relating to the 1991/92 financial year.

93 The Commission applied a financial correction of ITL 2 165 691 000 in respect of the failure to distil 319 000 hectolitres of table wine. The submissions of the parties in this point are similar to those set out in point F above.

94 In this respect too it should be noted that, in accordance with the considerations set out in paragraphs 86 to 91, the Commission was entitled to apply a financial correction on the basis of the deficiencies in the administrative control system which were found. The Italian Government was unable to show that the Commission had committed any errors in calculating the amount to be adjusted.

95 Consequently, that plea in law must also be rejected.

H. Permanent abandonment of wine-growing areas

Submissions of the parties

96 The Italian Government alleges that although the Commission reduced the amount of the adjustment which it had originally proposed, the specific adjustment that was ultimately applied is incorrect. Firstly, a rate of 1.01% and not 3.09% should have been applied for the province of Agrigento. The correction of 9.55% of the expenditure of the province of Agrigento is also incorrect. Aid was granted only in respect of grapes which were in fact cultivated originally, as was evident from the checks carried out by the competent authorities. The differences between the authorities' inspection reports and the books kept by the wine growers are attributable to inaccuracies in the wine growers' books.

97 The Commission argues that the checks were inadequate, especially since the wine growers' books are very inaccurate, as was evident in particular in respect of the information on cultivated areas and grape varieties. However, the rate of 1.01% referred to does not relate to the 1991/92 period at issue here, but to 1992/93. As regards the second point, Italy paid aid in respect of table-wine grapes which, under Community law, are not eligible.

Opinion

98 As is evident from the Commission's submissions, the financial corrections which it applied are lawful. Firstly, it correctly took as a basis a rate of 3.09% in respect of the 1991/92 financial year, whereas another rate, that is to say 1.01%, was applicable in respect of the 1992/93 financial year. In addition, there are no grounds for complaining that the Commission did not allow expenditure relating to the abandonment of wine-growing areas for grape varieties which, under Community law, are ineligible for aid.

99 Therefore, since the Italian Government incorrectly paid aid in respect of the abandonment of wine-growing areas, the Commission was authorised to charge that damage to the EAGGF to the Member State. Moreover, the Italian Government was unable to show that the Commission had made any calculation error in determining the specific correction.

100 For that reason this plea in law must also be rejected.

I. Accounting adjustments for stocks of unboned beef in the statement of annual expenditure

Submissions of the parties

101 In this respect the Italian Government claims that the figures concerning non-declared losses (42) which the Commission took as a basis for the financial corrections relate not only to the 1993 financial year but date back to 1991 and 1992. That is evident from the fact that the goods and products concerned are stored for a longer period than just one financial year. However, if that fact is taken into account it is clear that the losses during storage were within the permitted tolerances and the adjustments applied are therefore unlawful. The irregularities found were merely procedural and incapable of prejudicing the EAGGF.

102 The Commission observes that the checks carried out revealed that the storage costs had been stated without any account being taken of losses during storage. The AIMA checks revealed losses totalling 1 204 707 tonnes, which meant that the tolerance was exceeded by 829 717 tonnes. Consequently, the adjustments had to be applied directly since costs in respect of unlawful payments cannot be charged to the EAGGF and losses in storage must be offset when they occur. The Commission also points out that the same deficiencies were found when the EAGGF carried out an inspection in June 1996.

Opinion

103 It should again be noted that, according to the settled-case law of the Court of Justice, the Member States are required to set up comprehensive administrative checks and on-the-spot inspections, thus guaranteeing the conformity of financial support operations with Community law.

104 In that respect the Member States and the competent authorities of the Member States are responsible for ensuring that the information to be presented to the Commission at the end of each financial year is duly submitted.

105 In that respect the Commission was right to reject the Italian Government's argument that the settlement of accounts in respect of the 1993 financial year could be delayed until 1995, when the stores were empty, in order to establish the losses that had occurred there. An effective and timely supervisory system, as was necessary to implement Community law, would have helped prevent the deficiencies which occurred. Therefore, the fact that, on account of the deficiencies in its own checks, losses during storage which may have occurred in previous years have been taken into account also in respect of the 1993 financial year must be attributed to the Member State. However, the Italian Government was unable to show that such losses did in fact stem from previous years. Mere assertions are not sufficient since, according to the principles relating to the burden of proof, the Member State must, as the Court has consistently held, show that the Commission has incorrectly calculated the adjustments which were applied. The Italian Government was unable to do that.

106 Moreover, the present case does not, as the Italian Government seeks to show, involve merely procedural deficiencies in the supervisory system, since in that respect the Commission was able to demonstrate that at times no checks were carried out at all. However, since such inspections form a fundamental part of the aid scheme in the common organisation of the market, the Commission was right to apply the financial corrections.

107 The correction adopted by the Commission is consequently not unjustified.

L. Early subtraction of forecast quantitative losses of boned beef

Submissions of the parties

108 In this respect Italy complains that the Commission did not accept the automatic subtraction of forecast quantitative losses of 0.1 kg per package, although, if a weight per package of 25 to 30 kg were assumed, the automatic subtraction was well below the permitted tolerance of 0.6%.

109 The Commission points to the need for exact figures in respect of losses. At the time of sale the actual weight cannot be checked and it is necessary to rely on the information on the label. However, if that no longer tallies with the actual content, effective checks are no longer possible. Furthermore, the Commission points out that the method complained about was abolished in Italy after 1993.

Opinion

110 Under Regulation No 147/91, (43) the information on the actual weight makes it possible to trace the goods to the shops.

111 It is necessary to concur with the Commission's view that an automatic subtraction of 0.1 kg per package is contrary to the rules. If the spirit and purpose of stating the loss consists in defining the actual quantity more accurately, that can be achieved only by taking an exact measurement. Even if the automatic subtraction of losses practised by the Italian authorities is within the 0.6% tolerance, it may be that considerable fluctuations occur in individual consignments. However, those fluctuations would not be documented and could eventually prejudice the EAGGF.

112 However, since the Member State is responsible for carrying out proper checks to ensure the lawfulness of financial support measures, the Commission was right to apply the adjustments.

113 Therefore, the Italian Government was unable to show that the financial corrections applied by the Commission were unlawful or even that they had been calculated incorrectly.

114 Consequently, this plea in law must also be rejected.

M. Late payment of boned beef taken into intervention storage

115 In this respect the Commission adopted a financial adjustment of ITL 778 000 000 after the intervention agency failed to purchase the goods within 65 days of their delivery. The Italian Government considers that there were only minor delays which were necessary as the competent intervention agency (AIMA) required a so-called `anti-Mafia' certificate for the purchases.

116 Here it should be noted that under Article 15 of Regulation No 859/89, (44) purchases must be made within 45 to 65 days of the day on which the goods were delivered. However, the costs can be charged to the EAGGF only where all the procedural provisions are complied with. In the present case, however, those time-limits were exceeded, as they were in 1991 and 1992, a fact which the Italian Government does not deny.

117 Since in this respect there are deficiencies which relate to the whole of the control system essential to assuring the regularity of the expenditure, the Commission was entitled to apply a flat-rate adjustment of 10%. Furthermore, the Italian Government was unable to show that the Commission had committed a calculation error.

118 Thus, this plea in law must also be rejected.

N. Inadequate management and monitoring of premiums for sheep and goats

119 This concerns a problem similar to that of the 1992 financial year which was resolved in Case C-242/96 by judgment of 1 October 1998. (45)

120 Article 5 of Regulation No 3013/89 (46) provides for the granting of a premium to sheepmeat and goatmeat producers to the extent necessary to offset an income loss in the Community during a marketing year. Serious deficiencies in the control procedures had already been found in the course of inspections to verify the applications for premiums in respect of the 1992 financial year. In particular, the EAGGF had found that the application files were inadequately checked, certain inspection files were unreliable and there was no cross-checking of data contained in the applications with the findings arising from on-the-spot inspections.

121 Overall the Italian Government does not deny that inadequacies in the inspections existed. However, it claims that comprehensive administrative reforms have been carried out since those inspections with the result that there is now an effective supervisory system in place which ensures that the requirements of Community law are properly satisfied.

122 The Commission justifies the 10% flat-rate adjustment, as it did in respect of the 1992 financial year, on the ground that the inspections are still inadequate. Even if, as the Italian Government claims, reforms have been carried out, the same deficiencies were found in respect of the 1993 financial year as had been found the year before. Consequently, the desired improvements had not yet taken effect.

123 Since the Italian Government does not deny the inadequacies of the supervisory system per se, but claims significant improvements, the question arises whether the 10% adjustment applied by the Commission is justified. In view of the seriousness and scale of the irregularities which continue to be found, and of the extent to which supervision was largely ineffective, the EAGGF was exposed to a serious financial risk. In that respect the mere assertion by the Italian Government that reforms have been ordered, the competent agencies have been alerted to the irregularities and an effort is being made to achieve a high level of monitoring overall is insufficient. Since the same deficiencies as were found in 1992 continued to be found at least in respect of the 1993 financial year, the financial correction applied by the Commission is also justified in terms of the rate thereof.

124 It is clear from the foregoing that none of the pleas in law raised by the Italian Government are well founded and consequently that the action must be dismissed.

Costs

125 Under the first sentence of Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings.

IV - Conclusion

126 It is proposed therefore that the Court should:

(1) dismiss the action;

(2) order the Italian Republic to pay the costs.

(1) - The European Agricultural Guidance and Guarantee Fund.

(2) - Commission Decision of 23 April 1997 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1993 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (OJ 1997 L 139, p. 30).

(3) - In this respect the Commission applied specific and flat-rate adjustments which together resulted in the abovementioned amount.

(4) - As in the following point L, this means ordinary quantitative losses as a result of storage or normal processing.

(5) - That is to say the separate entries listed under (A) to (N) in paragraph 2.

(6) - See in particular Articles 3 and 26 of Commission Regulation (EEC) No 3665/87 of 27 November 1987 laying down common detailed rules for the application of the system of export refunds on agricultural products (OJ 1987 L 351, p. 1).

(7) - Regulation (EEC) No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (OJ, English Special Edition 1970 (I), p. 218).

(8) - Case C-242/96 Italy v Commission [1998] ECR I-5863, paragraph 114, Case C-2/93 Exportslachterijen van Oordegem [1994] ECR I-2283, paragraphs 16 to 18, and Case C-8/88 Germany v Commission [1990] ECR I-2321, paragraph 23.

(9) - Italy v Commission (cited in footnote 8), paragraph 58.

(10) - Italy v Commission (cited in footnote 8), paragraph 58 and the references contained therein.

(11) - Italy v Commission (cited in footnote 8), paragraph 58 and the references contained therein.

(12) - Italy v Commission (cited in footnote 8), paragraph 59.

(13) - Italy v Commission (cited in footnote 8), paragraph 59.

(14) - Case C-48/91 Netherlands v Commission [1993] ECR I-5611, paragraph 14, and Italy v Commission (cited in footnote 8), paragraph 122.

(15) - Case 49/83 Luxembourg v Commission [1984] ECR 2931, paragraph 30.

(16) - Council Regulation (EEC) No 797/85 of 12 March 1985 on improving the efficiency of agricultural structures (OJ 1985 L 93, p. 1), as amended by Council Regulation (EEC) No 1094/88 of 25 April 1988 (OJ 1988 L 106, p. 28).

(17) - That practice, which is associated with autumn/spring early crops, consists in keeping the land under cultivation for limited periods and then as usual preparing the ground by ploughing in the crops produced.

(18) - Italy v Commission, cited in footnote 8.

(19) - Italy v Commission (cited in footnote 8).

(20) - Regulation No 79/65/EEC of the Council of 15 June 1965 setting up a network for the collection of accountancy data on the incomes and business operation of agricultural holdings in the European Economic Community (OJ, English Special Edition 1965-66, p. 70).

(21) - Council Regulation (EEC) No 1785/81 of 30 June 1981 (OJ 1981 L 177, p. 4).

(22) - Council Regulation (EEC) No 1358/77 of 20 June 1977 laying down general rules for offsetting storage costs for sugar and repealing Regulation (EEC) No 750/68 (OJ 1977 L 156, p. 4).

(23) - Commission Regulation (EEC) No 1998/78 of 18 August 1978 laying down detailed rules for the offsetting of storage costs for sugar (OJ 1978 L 231, p. 5).

(24) - Italy v Commission, cited in footnote 8.

(25) - Italy v Commission (cited in footnote 8), paragraph 116.

(26) - Italy v Commission (cited in footnote 8), paragraph 116.

(27) - Case 121/83 Zuckerfabrik Franken v Hauptzollamt Würzburg [1984] ECR 2039, paragraph 26.

(28) - Italy v Commission (cited in footnote 8), paragraph 118.

(29) - Italy v Commission (cited in footnote 8), paragraph 120.

(30) - Article 11(1) of Regulation No 136/66/EEC of the Council of 22 September 1966 on the establishment of a common organisation of the market in oils and fats (OJ, English Special Edition 1965-66, p. 221), incorporated by Council Regulation (EEC) No 2210/88 of 19 July 1988 (OJ 1988 L 197, p. 1).

(31) - Council Regulation (EEC) No 3089/78 of 19 December 1978 laying down general rules in respect of aid for the consumption of olive oil (OJ 1978 L 369, p. 12).

(32) - Commission Regulation (EEC) No 2677/85 of 24 September 1985 laying down implementing rules in respect of the system of consumption aid for olive oil (OJ 1985 L 254, p. 5), as last amended by Commission Regulation (EEC) No 571/91 of 8 March 1991 (OJ 1991 L 63, p. 19).

(33) - This is the `20% rule' laid down in Article 12(6) of Regulation No 2677/85, incorporated by Regulation No 643/93.

(34) - The Instituto Repressione Frodi.

(35) - Case 347/85 United Kingdom v Commission [1988] ECR 1749, paragraph 15.

(36) - Italy v Commission (cited in footnote 8), paragraph 122.

(37) - Case C-54/95 Germany v Commission [1999] ECR I-35, paragraph 28, Case C-323/96 Commission v Belgium [1998] ECR I-5063, paragraph 38, and Case C-55/91 Italy v Commission [1993] ECR, I-4813, paragraph 40.

(38) - See the 44th recital in the preamble to Council Regulation (EEC) No 822/87 of 16 March 1987 on the common organisation of the market in wine (OJ 1987 L 84, p. 1).

(39) - Commission Regulation (EEC) No 3929/87 of 17 December 1987 on harvest, production and stock declarations relating to wine-sector products (OJ 1987 L 369, p. 59).

(40) - Commission Regulation (EEC) No 129/93 of 26 January 1993 opening compulsory distillation as provided for in Article 39 of Council Regulation (EEC) No 822/87 and derogating for the 1992/93 wine year from certain detailed rules for the application thereof (OJ 1993 L 18, p. 10).

(41) - Italy v Commission (cited in footnote 8), paragraph 122.

(42) - Ordinary quantitative losses resulting from storage or normal processing.

(43) - Commission Regulation (EEC) No 147/91 of 22 January 1991 defining and fixing the tolerances for quantity losses of agricultural products in public intervention storage (OJ 1991 L 17, p. 9).

(44) - Commission Regulation (EEC) No 859/89 of 29 March 1989 laying down detailed rules for the application of intervention measures in the beef and veal sector (OJ 1989 L 91, p. 5).

(45) - Italy's action was also rejected on this point as unfounded: see Italy v Commission, cited in footnote 8.

(46) - Council Regulation (EEC) No 3013/89 of 25 September 1989 on the common organisation of the market in sheepmeat and goatmeat (OJ 1989 L 289, p. 1).