Judgment of the Court (Sixth Chamber) of 25 May 1993. - Frutticoltori Associati Cuneesi SARL v Associazione tra Produttori Ortofrutticoli Piemontesi and Azienda di Stato per gli Interventi sul Mercato Agricolo. - Reference for a preliminary ruling: Pretura circondariale di Cuneo - Italy. - EAGGF - Decisions on the clearance of accounts - Validity - Recovery of an overpaid amount. - Case C-197/91.



European Court reports 1993 Page I-02639



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

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1. Agriculture ° Common agricultural policy ° Financing by the EAGGF ° Principles ° Aid paid in breach of Community rules ° Failure by a Member State to fulfil its obligation to carry out checks ° Flat-rate reduction ° Permissibility

(Council Regulation No 729/70, Arts 2 and 3)

2. Agriculture ° Common agricultural policy ° Financing by the EAGGF ° Principles ° Aid paid in breach of Community rules ° Obligation to recover ° Recovery from a producers' organization not charged with negligence ° Not permissible

(Council Regulation No 729/70, Art. 8(1))

Summary

1. Articles 2 and 3 of Regulation No 729/70 on the financing of the common agricultural policy enable the Commission to charge to the EAGGF only sums paid in accordance with the Community rules. Consequently, where those rules authorize the payment of aid only on condition that certain checking procedures are observed, the payment of aid in breach of that condition is not in conformity with Community law. Article 8(1) of the regulation requires the Member States to check as to whether any irregularity or negligence has been committed in that respect.

When a Member State fails to comply with that obligation to carry out checks, the Commission may make a flat-rate reduction in the sums to be charged to the EAGGF as expenditure incurred by that Member State.

2. Although Member States are obliged under Article 8(1) of Regulation No 729/70 to take, in accordance with the provisions of national law, the measures required to recover overpaid aid, that function is exercised subject to the limits established by Community law. Since its rules are designed to ensure that all producers' organizations fulfilling the conditions laid down in that regard by the common organization of markets should benefit from aid, Community law precludes the recovery by a Member State of sums of overpaid aid from all producers' organizations where no negligence has been found on the part of one of those organizations.

Parties

In Case C-197/91,

REFERENCE to the Court under Article 177 of the EEC Treaty by the Pretura Circondariale (District Court) di Cuneo for a preliminary ruling in the proceedings pending before that court between

Frutticoltori Associati Cuneesi, soc. coop. a.r.l. (FAC)

and

Associazione tra Produttori Ortofrutticoli Piemontesi (Asprofrut),

Azienda di Stato per gli Interventi sul Mercato Agricolo (AIMA),

on the validity of Commission Decisions 89/627/EEC of 15 November 1989 (OJ 1989 L 359, p. 23) and 90/213/EEC of 19 April 1990 (OJ 1990 L 113, p. 32) on the clearance of the accounts presented by the Member States in respect of the expenditure for 1987 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund, and also on the interpretation of certain general rules of Community Law,

THE COURT (Sixth Chamber),

composed of: C.N. Kakouris, President of the Chamber, G.F. Mancini, F.A. Schockweiler, M. Diez de Velasco and P.J.G. Kapteyn, Judges,

Advocate General: F.G. Jacobs,

Registrar: H.A. Ruehl, Principal Administrator,

after considering the written observations submitted on behalf of:

° Frutticoltori Associati Cuneesi, by E. Cappelli and P. De Caterini, of the Rome Bar,

° the Greek Government, by V. Kontalaimos, Deputy Legal Adviser to the Juridical Council of State, acting as Agent,

° the Commission of the European Communities by E. de March, Legal Adviser, acting as Agent

having regard to the Report for the Hearing,

after hearing the oral observations of Frutticoltori Associati Cuneesi, of the Greek Government and of the Commission at the hearing on 12 November 1992,

after hearing the Opinion of the Advocate General at the sitting on 16 December 1992,

gives the following

Judgment

Grounds

1 By order of 5 July 1991, received at the Court on the following 29 July, the Pretore di Cuneo referred to the Court for a preliminary ruling under Article 177 of the Treaty a number of questions on the validity of Commission Decision 89/627/EEC of 15 November 1989 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1987 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (OJ L 359, p. 23), as amended by Decision 90/213/EEC of 19 April 1990 (OJ L 113, p. 32), and also on the interpretation of certain general principles of Community law.

2 Article 1 of Regulation (EEC) No 729/70 of the Council of 21 April 1970 (OJ, English Special Edition 1970 (I), p. 218) on the financing of the Common Agricultural Policy provides that the task of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (hereinafter "EAGGF") is to finance refunds on exports to non-member countries and intervention intended to stabilize the agricultural markets. Under Article 3, such intervention is to be undertaken according to Community rules within the framework of the common organization of agricultural markets. Article 4 requires the Member States to designate the authorities and bodies empowered to disburse such expenditure.

3 Member States are required to adopt the measures necessary to prevent and deal with irregularities and to inform the Commission thereof. They must recover sums lost as a result of irregularities or negligence. Under Article 8(2) sums which cannot be recovered are to be borne by the Community, unless the negligence or irregularity is attributable to administrative authorities or other bodies of the Member States.

4 The Community rules for the common organization of the market in fruit and vegetables are set out in Regulation (EEC) No 1035/72 of the Council of 18 May 1972 (OJ, English Special Edition 1972 (II), p. 437).

5 It is in the context of the abovementioned regulations that these proceedings were brought before the national court. Having noted that the number and the scale of the checks carried out on the operations of the fruit and vegetable producers' organizations by the Italian authorities did not make it possible to form a sufficiently reliable view of the situation, the Commission, by Decision 89/627, cited above, refused to finance 5% of the expenditure declared by Italy. In the absence of any proof to the contrary by the Italian authorities, the Commission confirmed that financial correction by Decision 90/213/EEC, cited above.

6 On the basis of that decision, the Italian intervention agency, namely the AIMA, required all the producers' organizations concerned to refund 5% of the total sum of the financial compensation paid in 1987. One of those organizations, the Associazione tra Produttori Ortofrutticoli Piemontesi (hereinafter "Asprofrut") informed its members that it had directly debited from the current account governing relations between each of the members and itself a sum equal to 5% of the compensation paid in 1987 for the withdrawal of products from the market.

7 One of those members, Frutticoltori Associati Cuneesi (hereinafter "FAC"), considered that the recovery effected by Asprofrut was unjustified inasmuch as there was no irregularity in its functioning as a producers' organization or in its operations. FAC accordingly summoned Asprofrut to appear before the Pretura Circondariale di Cuneo, which decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

"(a) Are Commission Decisions 89/627/EEC of 15 November 1989 (OJ 1989 L 359, p. 23) and 90/213/EEC of 19 April 1990 (OJ 1990 L 113, p. 32) valid in the light of provisions of Community Law relating to the budget and financial relations between the Community and the individual Member States, to the extent to which those decisions charged to the Italian State the amount of LIT 20 920 524 089 corresponding to financial compensation granted by producers' organizations in the fruit and vegetables sector?;

(b) Is the Italian authorities' claim to charge to all fruit and vegetable producers' organizations without distinction the flat-rate amount of financial compensation for market withdrawals charged to the Italian State on the clearance of accounts in respect of the expenditure for 1987 of the EAGGF, Guarantee Section, consistent with the general principles of the Community legal order on the lawfulness of administrative action, on safeguarding the rights to a fair hearing, and on supervising Community incentives in the agricultural sector; and what is the liability of fruit and vegetable producers and their respective organizations?"

8 Reference is made to the Report for the Hearing for a fuller account of the facts in the main proceedings, the procedure and the written observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

The first question

9 The Greek Government challenges the admissibility of the first question concerning the validity of the decisions on the clearance of accounts. It observes that those decisions are reached by a special procedure and become final if they are not the subject of proceedings under Article 173 of the Treaty. The Government further argues that the issue of the validity of those decisions should not be raised after the expiry of the time-limit laid down by Article 173, because of the practical difficulties that would ensue if the accounts were declared unlawful after becoming final.

10 Under Article 177(b) of the Treaty the Court has jurisdiction to give preliminary rulings on the validity of acts of the institutions of the Community at the request of a national court before which such a question has been raised. The sole purpose of this jurisdiction of the Court is to protect individuals against the application of an unlawful act in proceedings brought before the national court, but without calling into question the act itself, made unassailable by the expiry of the time-limit laid down in Article 173.

11 The Commission, for its part, disputes the relevance of the first question. It observes that the requirement of recovery arises under Article 8 of Regulation No 729/70 and exists independently of the findings of irregularities or negligence which it would have made in a decision on the clearance of accounts. It states that a distinction should be drawn between decisions on the clearance of accounts, which only refer to relations between the Commission and the Member States, and decisions of recovery, which refer to relations between Member States and traders. Decisions on clearance have no legal effect in relation to third parties in proceedings for the recovery of overpaid sums. The Commission therefore considers that it is not appropriate to give a ruling on the validity of the decisions in question.

12 It must be noted that within the framework of the cooperation between the Community court and the national court under Article 177 of the Treaty, only the national court may decide whether it is appropriate to refer a question on the validity of a Commission decision for the purposes of finding a solution in the case before it.

13 In those circumstances the first question must be answered.

14 FAC challenges the validity of the decisions of the Commission. It states that they are incorrectly based on strict liability imposed on producers' organizations for unspecified conduct by unidentified persons. The Greek Government adds that the official accounting rules, which require meticulous book-keeping and the justification of every entry in the accounts, must be applied within the framework of the FEOGA, which constitutes a section of the Community budget. The flat-rate reduction determined unilaterally by the Commission is therefore a financial penalty unauthorized by Regulation No 729/70.

15 Those arguments cannot be upheld.

16 According to settled case-law (see the judgments in Case 327/85 Netherlands v Commission [1988] ECR 1065, paragraph 24, and Case C-197/90 Italy v Commission [1992] ECR I-1, paragraph 38), Articles 2 and 3 of Regulation No 729/70 enable the Commission to charge to the EAGGF only sums paid in accordance with the Community rules. Consequently, where those Community rules authorize payment of aid only on condition that certain checking procedures are observed, the payment of aid in breach of that condition is not in conformity with Community law. Article 8(1) of the regulation requires the Member States to check that no irregularity or negligence has been committed in that respect.

17 Having found that the Republic of Italy had not fulfilled its Community obligations in that it failed to carry out the checks required, the Commission, by the contested decisions, reduced by 5% the financial compensation declared by Italy. According to the case-law (judgment in Italy v Commission, cited above, paragraph 39) a flat-rate reduction is justified in cases where the national authorities have failed to carry out adequate checks.

18 In those circumstances, the validity of the decisions is wrongly challenged on the grounds that the Commission based itself on the strict liability of traders or that it applied a financial penalty not prescribed by Regulation No 729/70.

19 It follows that the answer to the first question put by the national court must be that consideration of that question has disclosed no factor of such a kind as to affect the validity of Commission Decisions 89/627 and 90/213.

The second question

20 The second question seeks essentially to ascertain whether Community law precludes a Member State from recovering amounts of aid incorrectly paid from all producers' organizations where no negligence has been found on the part of one of those organizations.

21 FAC states that in recovering such amounts the competent authorities are required to act in accordance with the general principles common to the Community and national legal orders, such as the lawfulness of administrative action and the protection of the right to a fair hearing.

22 The Commission considers that Community law precludes the systematic and indiscriminate recovery of aid at a fixed percentage as against beneficiary organizations as a whole where the individual liability of each organization has not been established. It adds that the financial adjustment carried out in the main proceedings originated in the inadequacy of the checks carried out by the Italian authorities and that the latter are consequently not entitled to recover the aid paid.

23 It must first be stressed that pursuant to Article 8 of Regulation No 729/70 Member States are required, in accordance with the provisions of national law in force, to take the measures necessary to recover overpaid aid. The Court has, however, pointed out that Member States exercise this function subject to the limits established by Community law (see the judgment in Joined Cases 89 and 91/86 Etoile Commerciale and CNTA v Commission [1987] ECR 3005, paragraph 12).

24 Furthermore, the aim of the Community rules on the common organization of markets consists in granting aid to all producers' organizations which fulfil the relevant conditions. It is common ground in the main proceedings that a financial correction was applied by the competent national authorities without their having established that the producers' organizations concerned had failed to comply with the conditions laid down by Community law.

25 It follows that the answer to the second question must be that it is contrary to Community law for a Member State to recover sums of overpaid aid from all producers' organizations where no negligence has been found on the part of one of those organizations.

Decision on costs

Costs

26 The costs incurred by the Greek Government and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,

THE COURT (Sixth Chamber),

in answer to the questions referred to it by the Pretore di Cuneo, by judgment of 5 July 1991, hereby rules:

1. Consideration of the first question raised has disclosed no factor of such a kind as to affect the validity of Commission Decisions 89/627/EEC of 15 November 1989, and 90/213/EEC of 19 April 1990, on the clearance of the accounts presented by the Member States in respect of the expenditure for 1987 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund.

2. It is contrary to Community law for a Member State to recover the sums of overpaid aid from all producers' organizations where no negligence has been found on the part of one of those organizations.