Judgment of the General Court (Second Chamber) of 22 January 2020 –

Lithuania v Commission

(Case T‑19/18)

(EAGF and EAFRD — Expenditure excluded from financing — Expenditure incurred by Lithuania — One-off and flat-rate financial corrections — Rural development — Cross-compliance control system — Administrative control — On-the-spot check — Quality of the checks — Quality of the applicants — Artificial conditions — Reasonableness of the costs — Expenditure incurred through projects — Risk analysis — Risk factors — Tolerance regarding penalties which is not provided for under EU legislation — Assessment and penalty system which is too lenient — Annual statistical control data)

1. Agriculture — EAGF and EAFRD financing — 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 (European Parliament and Council Regulation No 1306/2013, Art. 52(2)) (see paras 47-51)

2. Agriculture — EAGF and EAFRD financing — Grant of aid and premiums — Obligation on the Member States to organise an effective system of administrative and on-site inspections — Scope — Unreliable controls — Disallowance (European Parliament and Council Regulation No 1306/2013, Art. 52(2); Commission Regulation No 65/2011, Recital 3 and Arts 4(1), (2) and (8), 24(1), (2)(a) and (d) and (3); Commission Recommendation 2003/361, Recital 9) (see paras 67, 69-71, 79, 86, 87, 92-94, 100, 105-107, 139, 145, 149, 200, 201, 203)

3. Agriculture — EAGF and EAFRD financing — 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 — Whether permissible to apply a flat rate of 2% in the event of a failure to carry out one or more secondary checks (European Parliament and Council Regulation No 1306/2013, Art. 52) (see para. 249)

4. Agriculture — EAGF and EAFRD financing — 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 — Evidence of failures in the national system during the audit period (Commission Regulation No 1122/2009, Art. 84) (see para. 288)

Re:

Application under Article 263 TFEU seeking annulment of Commission Implementing Decision (EU) 2017/2014 of 8 November 2017 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 2017, L 292, p. 61), in so far as it provides for the imposition on the Republic of Lithuania of a financial correction of EUR 9745 705.88 regarding expenditure connected with EAFRD and a financial correction of EUR 546 351.91 regarding expenditure connected with EAGF and EAFRD.

Operative part

The Court:

1. Dismisses the action;

2. Orders the Republic of Lithuania to bear its own costs and to pay those incurred by the European Commission;