Parties

Grounds

Operative part



Parties

In Case C-454/11,

REQUEST for a preliminary ruling under Article 267 TFEU from the Augstākās Tiesas Senāts (Latvia), made by decision of 22 August 2011, received at the Court on 1 September 2011, in the proceedings

Gunārs Pusts

v

Lauku atbalsta dienests,

THE COURT (Third Chamber),

composed of R. Silva de Lapuerta, acting as President of the Third Chamber, K. Lenaerts, G. Arestis (Rapporteur), J. Malenovský and D. Šváby, Judges,

Advocate General: Y. Bot,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

– Mr Pusts, by himself,

– the Latvian Government, by I. Kalniņš and I. Ņesterova, acting as Agents,

– the European Commission, by G. von Rintelen and A. Sauka, acting as Agents,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

Judgment

Grounds

1. This request for a preliminary ruling concerns the interpretation of Council Regulation (EC) No 1257/1999 of 17 May 1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) and amending and repealing certain Regulations (OJ 1999 L 160, p. 80), as amended by Council Regulation (EC) No 1783/2003 of 29 September 2003 (OJ 2003 L 270, p. 70) (‘Regulation No 1257/1999’), of Commission Regulation (EC) No 817/2004 of 29 April 2004 laying down detailed rules for the application of Council Regulation (EC) No 1257/1999 (OJ 2004 L 153, p. 30, and corrigendum OJ 2004 L 231, p. 24), and of Commission Regulation (EC) No 796/2004 of 21 April 2004 laying down detailed rules for the implementation of cross-compliance, modulation and the integrated administration and control system provided for in Council Regulation (EC) No 1782/2003 of 29 September 2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers (OJ 2004 L 141, p. 18).

2. The request has been made in proceedings between Mr Pusts, a farmer, and the Lauku atbalsta dienests (the Latvian rural support service; ‘the LAD’) concerning the repayment of agri-environmental aid granted to Mr Pusts by the Latvian authorities over the course of the five-year commitment period.

Legal context

EU law

3. In Chapter VI (entitled ‘Agri-environment and animal welfare’) of Title II of Regulation No 1257/1999, Article 22 provides:

‘Support for agricultural methods designed to protect the environment, maintain the countryside (agri-environment) or improve animal welfare shall contribute to achieving the Community’s policy objectives regarding agriculture, the environment and the welfare of farm animals.

...’

4. Article 23 of Regulation No 1257/1999 provides:

‘1. Support shall be granted to farmers who give agri-environmental or animal welfare commitments for at least five years. Where necessary, a longer period shall be determined for particular types of commitments in view of their effects on the environment or animal welfare.

2. Agri-environmental and animal welfare commitments shall involve more than the application of usual good farming practice including good animal husbandry practice.

They shall provide for services which are not provided for by other support measures, such as market support or compensatory allowances.’

5. Article 24 of Regulation No 1257/1999 is worded as follows:

‘1. Support in respect of an agri-environmental or animal welfare commitment shall be granted annually and be calculated on the basis of:

(a) income foregone,

(b) additional costs resulting from the commitment given, and

(c) the need to provide an incentive.

Costs related to investments shall not be taken into account when calculating the level of annual support. Costs for non-remunerative investments which are necessary to comply with a commitment may be taken into account in calculating the level of annual support.

2. Maximum amounts per year eligible for Community support are laid down in the Annex. When support is calculated on an area basis, these amounts shall be based on that area of the holding to which agri-environmental commitments apply.’

6. Article 37(4) of Regulation No 1257/1999 provides:

‘Member States may lay down further or more restrictive conditions for granting Community support for rural development provided that such conditions are consistent with the objectives and requirements laid down in this Regulation.’

7. In Section 6 (entitled ‘Applications, checks and penalties’) of Chapter II of Regulation No 817/2004, Article 66 provides as follows:

‘1. Applications for rural development support for areas or animals which are lodged separately from aid applications under Article 6 of [Commission] Regulation (EC) No 2419/2001 [of 11 December 2001 laying down detailed rules for applying the integrated administration and control system for certain Community aid schemes established by Council Regulation (EEC) No 3508/92 (OJ 2001 L 327, p. 11)] shall indicate all the areas and animals on the holding which are relevant for checking the applications under the measure in question, including those for which no support is requested.

2. Where a rural development support measure relates to areas, parcels shall be identified individually. During the period covered by a commitment, parcels receiving support may not be exchanged except in cases specifically provided for in the programming document.

3. Where an application for payment is included with an application for an area payment in the context of the integrated administration and control system, the Member State shall ensure that parcels covered by applications for rural development support are declared separately.

4. Animals and plots of land shall be identified in accordance with Articles 18 and 20 of Regulation (EC) No 1782/2003.

5. Where support is multiannual, payments subsequent to that made in the year an application was submitted shall be made in response to an annual application for payment, except where the Member State has introduced an effective annual verification procedure as referred to in Article [67(1)].’

8. Article 67 of Regulation No 817/2004 provides:

‘1. Initial applications to join a scheme and subsequent applications for payment shall be checked in a manner which ensures effective verification of compliance with the conditions for granting support.

The Member States shall define suitable methods and means for verifying each support measure as well as the persons who shall be subject to checks.

Wherever appropriate, Member States shall make use of the integrated administration and control system introduced by Regulation (EC) No 1782/2003.

2. Verification shall be by administrative and on-the-spot checks.’

9. Article 71(2) of Regulation No 817/2004 states:

‘In the event of undue payment, the beneficiary under a rural development measure shall be under an obligation to repay the amount concerned in accordance with Article 49 of Regulation (EC) No 2419/2001’.

10. Article 73 of Regulation No 817/2004 provides:

‘Member States shall lay down the rules on penalties applicable to infringements of the provisions of this Regulation and shall take all measures necessary to ensure that they are implemented. The penalties provided for must be effective, proportionate and dissuasive.’

11. Regulation No 796/2004 repealed Regulation No 2419/2001. Regulation No 796/2004 provides that it is to apply to aid applications relating to marketing years or premium periods commencing as of 1 January 2005 and that references to Regulation No 2419/2001 are to be construed as references to Regulation No 796/2004.

12. Article 73 of Regulation No 796/2004, which replaced Article 49 of Regulation No 2419/2001, is worded as follows:

‘1. If undue payment is made, the farmer shall repay the amount in question plus interest calculated in accordance with paragraph 3.

...

3. Interest shall be calculated for the period elapsing between the notification of the repayment obligation to the farmer and either repayment or deduction.

The rate of interest applicable shall be calculated in accordance with national law but shall not be lower than the interest rate applicable for the recovery of amounts under national provisions.

...’

Latvian law

13. Council of Ministers Decree No 255 of 17 April 2007 concerning the procedure for granting State and European Union aid for supporting rural development, in the version applicable to the dispute in the main proceedings ( Latvijas Vēstnesis , 2007, No 70), provides that, in order to obtain aid for the development of organic farming, the applicant for that aid must submit to the LAD, before 11 June of the current year, an application duly completed by means of an area payment application form and a map of the agricultural parcels, issued by the LAD, indicating the area of the agricultural parcels farmed. That decree specifies, furthermore, that that applicant undertakes, for the entire five-year commitment period, to submit each year to the LAD an application for support relating to the measures declared and not to reduce the area which is the subject of the commitment and not to change its location. In the event of failure to comply with those requirements, that decree requires the applicant to repay to the LAD the aid paid out.

14. Annex 10 to Council of Ministers Decree No 1002 of 30 November 2004 on the detailed rules for the application of the programming document ‘Latvian rural development plan for the implementation of the rural development programme for the years 2004 to 2006’ ( Latvijas Vēstnesis , 2004, No 193), mentions the documents to be submitted to the LAD in order to obtain aid for the development of organic farming. In particular, that annex indicates that, during the commitment period, the applicant for the aid must submit, for the current year, an application and a map of the agricultural parcels.

15. Annex 11 to Decree No 1002 provides that, in the event of suspension of the commitment, any aid received must be repaid to the LAD.

16. It is also necessary to point out that the application form referred to by Decree No 255 was approved by Council of Ministers Decree No 269 of 17 April 2007 concerning the procedure for granting State and European Union aid for agriculture within the framework of direct aid schemes ( Latvijas Vēstnesis , 2007, No 69). That form allows the applicant to submit an application both for area payments and for other payments, such as agri-environmental aid. The beginning of that form indicates, exhaustively, the aid schemes for which the applicant may qualify and contains an invitation to examine the manual for obtaining area payments for the year concerned. Finally, that form contains, above the space for the signature, the following warning:

‘It is necessary to submit the completed annex … with an application for agri-environmental aid. Otherwise, the environmental aid … will not be paid. I, the undersigned, certify that I have read the requirements and conditions laid down by the regulatory measures as regards the scheme for the single payment of area [aid] … and agri-environmental aid and have taken account of those requirements and conditions, declare that I will comply with them in full and declare that I am aware of all of the conditions governing receipt of the aid and of the fact that the aid will be paid in part or will not be paid if incorrect information has been provided intentionally or through negligence.’

The dispute in the main proceedings and the questions referred for a preliminary ruling

17. On 21 April 2006, Mr Pusts submitted an application to the LAD for area aid for 2006 and an application for agri-environmental aid subject to a five-year commitment for an area of 18.85 hectares of agricultural parcels.

18. On 9 May 2007, Mr Pusts submitted an application for area aid for the year 2007, following which he received, on 11 June of that year, a letter from the LAD indicating that the information given in that application would be carefully checked and that, if errors were found, he would be notified in order to remedy the problems encountered.

19. On 3 July 2007, the LAD granted Mr Pusts agri-environmental aid in the amount of LVL 1 826.7, in respect of 2006, for an area of 18.85 hectares of agricultural parcels which were the subject of a five-year commitment. On 30 July 2007 Mr Pusts received a certificate relating to the compatibility of the activities of his farm during the period of conversion to organic production.

20. By a decision of 25 April 2008, the LAD asked Mr Pusts to repay all of the agri-environmental aid received in respect of 2006 on the ground that the area of 18.85 hectares of agricultural parcels subject to the five-year commitment had been reduced in 2007. That decision was based on the fact that, on examination of the 2007 application for aid, the LAD had found that Mr Pusts, when completing the application for area aid for that year, had not specified that he was also requesting agri-environmental aid for the parcels declared, since he had not completed column 9 of part ‘C’ of that application in which the parcels declared were set out or attached to that application the annex entitled ‘Application for aid for agri-environmental measures’ as required by the relevant national rules. The LAD took the view that that could not be considered to be an error on the part of Mr Pusts. It therefore concluded that he had ceased to be in compliance with the agri-environmental commitments relating to that area of 18.85 hectares which he had made in 2006 and that he was therefore required to repay the aid already received, in accordance with those national rules.

21. By decision of 11 June 2008, the LAD confirmed its earlier decision. Consequently, it withheld LVL 1 228.87 from the subsequent aid payments and required Mr Pusts to repay the balance of LVL 597.90.

22. Mr Pusts brought an action seeking annulment of that decision of 11 June 2008 before the Administratīvā rajona tiesa (District Administrative Court). By that action, he sought the payment of the amount withheld by the LAD and the grant of the agri-environmental aid denied for the year 2007. Mr Pusts admitted that he had subm itted an incomplete aid application but stated that he fulfilled the requirements for the grant of that aid and that he had neither substantially reduced the area covered by the agri-environmental commitments nor changed its location, but that he had made an inadvertent error in the application. Claiming to have, in fact, continued to comply with those commitments, Mr Pusts complained, moreover, that the LAD had neither informed him of the flawed nature of his application nor asked him to provide supplementary information.

23. By judgment of 19 November 2009, the Administratīvā rajona tiesa dismissed that action. It noted that, in accordance with the relevant national rules, Mr Pusts had undertaken, for a period of five years, to submit an annual application for agri-environmental aid relating to the declared measures. Furthermore, that court pointed out that, in order to obtain agri-environmental aid, as for the year 2006, Mr Pusts had to submit for the year 2007 a complete application for aid and a map of the agricultural parcels concerned. Since Mr Pusts had not specified in his application for area aid for the year 2007 that he was also requesting agri-environmental aid for that year, and as he had not provided the corresponding annex, that court held that the LAD had properly concluded that Mr Pusts had terminated his agri-environmental commitments undertaken in 2006 and that he was, therefore, obliged to reimburse the aid that had been paid to him.

24. Moreover, the Administratīvā rajona tiesa stated in its judgment that the incomplete nature of Mr Pusts’ application could not be regarded as resulting from an error, but, rather, had to be regarded as constituting an infringement of the eligibility conditions for the grant of agri-environmental aid laid down by the relevant national rules. That infringement had to result in repayment by Mr Pusts of the aid unduly received, even if he continued to comply with his other commitments. Similarly, that court took the view that the LAD was not obliged to inform Mr Pusts of the flawed nature of his application and, moreover, had no reason to draw Mr Pusts’ attention to that point, since column 9 of part ‘C’ of that form did not mention any parcel of land and the corresponding annex was not included. Finally, that court pointed out that the LAD had based its decision on the information submitted by Mr Pusts, namely his applications for aid for the years 2006 and 2007. Accordingly, having all the necessary information to take that decision, the Administratīvā rajona tiesa held that the LAD was not required to hear Mr Pusts’ point of view, which could not influence the substance of the administrative measures.

25. Mr Pusts appealed against the judgment of the Administratīvā rajona tiesa to the Administratīvā apgabaltiesa (Regional Administrative Court of Appeal). By judgment of 8 November 2010, that latter court dismissed the appeal and confirmed the legal basis of the judgment of the Administratīvā rajona tiesa, adding that Mr Pusts had certified, by his applications for aid, that he was aware of the requirements laid down by the relevant national rules for obtaining the agri-environmental aid in question.

26. Mr Pusts brought an appeal on a point of law against that judgment before the referring court. In his appeal, he claims, inter alia, that that judgment infringed the scope of certain provisions of the relevant European Union law.

27. As it took the view that the outcome of the dispute in the main proceedings depended on the interpretation of Regulations No 1257/1999, No 817/2004 and No 796/2004, the Augstākās Tiesas Senāts (Supreme Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘1. Are the European Union rules governing repayment of aid be interpreted as meaning that payment of aid may be considered undue in cases where, although the beneficiary of the aid continued to fulfil the commitments, he did not comply with the established payment application procedure?

2. Is a rule under which the commitments made by the aid beneficiary are deemed to be suspended, without giving the aid beneficiary the opportunity to be heard and where that suspension is deduced solely from the fact that an application has not been submitted, compatible with European Union law governing repayment of aid?

3. Is a rule under which, where it is no longer possible to carry out an on-the-spot check (because a year has elapsed) and where it is therefore deduced that the commitments made by the aid beneficiary have been suspended, that beneficiary is required to repay the entire amount of the funds already paid during the commitment period, even if those funds have already been allocated and paid for several years, compatible with European Union law governing repayment of aid?’

Consideration of the questions referred

28. By its three questions, which should be examined together, the referring court asks, in essence, whether Regulations No 1257/1999, No 817/2004 and No 796/2004 must be interpreted as precluding national rules according to which the beneficiary of aid granted in return for his agri-environmental commitments covering several years is required to repay all of the aid already paid in respect of previous years on the ground that he did not submit an annual application in accordance with the applicable national provisions, although that beneficiary claims that he continued to fulfil his obligations regarding the use of the areas concerned, that he was not given the opportunity to be heard by the competent authority, but that it is no longer possible to carry out an on-the-spot check of the areas concerned because the year at issue has elapsed.

29. It must be stated at the outset that none of those regulations contains a provision which specifically precludes such a national rule.

30. Articles 22 to 24 of Regulation No 1257/1999 set out the general conditions for the grant of support for farming practices designed, in particular, to maintain the countryside. It follows from those provisions that agri-environmental measures are characterised by the five-year commitment given by the farmers concerned to practise a form of agriculture which respects the environment. In return for the agri-environmental commitments for a minimum of five years, financial support is allocated annually by the States according to the loss of revenue incurred or the resulting additional costs (see Case C-241/07 JK Otsa Talu [2009] ECR I-4323, paragraph 36, and Case C-188/11 Hehenberger [2012] ECR, paragraph 30).

31. In that regard, it must be noted that Article 37(4) of Regulation No 1257/1999 allows Member States to lay down further or more restrictive conditions for granting European Union support for rural development, provided that such conditions are consistent with the objectives and requirements laid down in that regulation.

32. As regards the applications for support for agri-environmental production methods based on Articles 22 to 24 of Regulation No 1257/1999, Article 66(5) of Regulation No 817/2004 provides that, where support is multiannual, payments subsequent to that made in the year in which an application was submitted must be made in response to an annual application for payment, except where the Member State has introduced an effective annual verification procedure as referred to in Article 67(1). It is apparent from that Article 66(5) that, apart from the existence of such a national procedure, no payment is made to farmers if they do not submit an annual application for payment. Submission of that annual application thus constitutes a condition governing eligibility for receiving agri-environmental aid on the basis of Articles 22 to 24.

33. The importance of submitting an annual application for payment of agri-environmental aid is also made clear in Article 67(1) of Regulation No 817/2004, which provides, as regards the system for checking the multiannual support for agri-environmental production methods, that initial applications to join a scheme and subsequent applications for payment must be checked in a manner which ensures effective verification of compliance with the conditions for granting support. Accordingly, the submission of such an annual application makes it possible to verify compliance with the agri-environmental commitments which have been given. In basing itself on that annual application, the organisation which makes the payments is in a position to verify effectively each year whether there continues to be compliance with those commitments covering several years and, where appropriate, to pay that aid.

34. It follows that national rules which require, as one of the conditions governing eligibility for the grant of agri-environmental aid, that the applicant for that aid undertakes, for the entire five-year commitment period, to submit each year to the organisation which makes the payments an application relating to the agri-environmental measures declared, are compatible with the abovementioned provisions of European Union law. Such national rules therefore come within the discretion which Member States have pursuant to Article 37(4) of Regulation No 1257/1999.

35. Furthermore, it is necessary to note that, so far as concerns the agri-environmental aid characterised by a multi-annual commitment, the conditions for the grant of support must be observed throughout the commitment period in respect of which the support was granted (see Hehenberger , paragraph 34). Therefore, if one of the conditions for the grant of such aid, such as the submission of an annual application for payment of support required by the national rules at issue in the main proceedings, is not complied with, even if only once, throughout the duration of the agri-environmental project in respect of which the beneficiary of that same aid has given a commitment, that aid cannot be granted.

36. In that regard, the fact that the beneficiary of the agri-environmental aid continued to fulfil the other conditions for the grant of that aid, and in particular his obligations relating to the use of the areas concerned, cannot prevent the exclusion from the benefit of that aid to which failure to comply with one of those conditions gives rise. The grant of that aid is subject to compliance with all of the eligibility conditions throughout the duration of the agri-environmental project to which that beneficiary has committed, with the result that failure to comply with one of those conditions is sufficient, in itself, to give rise to that exclusion.

37. In the event of exclusion from the benefit of agri-environmental aid by reason of failure to comply with the conditions governing the grant of that aid, it is clear from Article 71(2) of Regulation No 817/2004, which relates back to Article 73 of Regulation No 796/2004, that the beneficiary of that aid is required to repay all the amounts already paid in respect of the aid to which entitlement has been excluded (see Hehenberger , paragraph 36).

38. Moreover, the beneficiary of agri-environmental aid who did not submit an application in accordance with the national rules making the grant of that aid subject to an annual application cannot rely on the right to be given the opportunity to state his views in that regard. No provision of Regulations No 1257/1999, No 817/2004 or No 796/2004 establishes such a right in favour of a farmer who has not submitted a proper application for agri-environmental aid. In any event, even if a farmer who has not submitted such an application may be given the opportunity to state his views in that regard, such a hearing cannot affect the consequences which flow from failure to comply with the conditions governing the grant of agri-environmental aid in respect of which a commitment has been given. That farmer cannot justify his failure to comply with those conditions.

39. Likewise, the fact that it is no longer possible to carry out an on-the-spot check of the areas concerned because the year at issue has elapsed also cannot have a bearing on exclusion from the benefit of agri-environmental aid by reason of failure to comply with the conditions governing the grant of that aid and on the resultant repayment of the amounts of that aid which were unduly paid. Even if that check were possible, failure to comply with one of those conditions is sufficient, in itself, to give rise to such an exclusion and, therefore, that repayment.

40. Having regard to all of the foregoing considerations, the answer to the questions referred is that Regulations No 1257/1999, No 817/2004 and No 796/2004 must be interpreted as not precluding national rules according to which the beneficiary of aid granted in return for his agri-environmental commitments covering several years is required to repay all of the aid already received in respect of previous years on the ground that he did not submit an annual application in accordance with the applicable national provisions, where that beneficiary claims that he continued to fulfil his obligations regarding the use of the areas concerned, he was not given the opportunity to be heard by the competent authority, but it is no longer possible to carry out an on-the-spot check of the areas concerned because the year at issue has elapsed.

Costs

41. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Third Chamber) hereby rules:

Council Regulation (EC) No 1257/1999 of 17 May 1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) and amending and repealing certain regulations, as amended by Council Regulation (EC) No 1783/2003 of 29 September 2003, Commission Regulation (EC) No 817/2004 of 29 April 2004 laying down detailed rules for the application of Council Regulation (EC) No 1257/1999, and Commission Regulation (EC) No 796/2004 of 21 April 2004 laying down detailed rules for the implementation of cross-compliance, modulation and the integrated administration and control system provided for in Council Regulation (EC) No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers must be interpreted as not precluding national rules according to which the beneficiary of aid granted in return for his agri-environmental commitments covering several years is required to repay all of the aid already received in respect of previous years on the ground that he did not submit an annual application in accordance with the applicable national provisions, where that beneficiary claims that he continued to fulfil his obligations regarding the use of the areas concerned, he was not given the opportunity to be heard by the competent authority, but it is no longer possible to carry out an on-the-spot check of the areas concerned because the year at issue has elapsed.