Case C-242/96 
Italian Republic 
v 
Commission of the European Communities 
(EAGGF — Clearance of accounts — 1992 and 1993 — Beef and veal) 
Opinion of Advocate General Alber delivered on 24 March 1998 I - 5867 
Judgment of the Court (Fifth Chamber), 1 October 1998 I - 5898 
Summary of the Judgment 
1. Agriculture — Common organisation of the markets — Beef and veal — Intervention mecha­
nisms — Buying-in by tendering procedures — Relationship between tenderers — Article 9 of 
Regulation No 859/89 — Interpretation — Rule that tenders must be independent — Scope 
(Commission Regulations No 859/89, Arts 9, 12(2) and 15, and No 2456/93, Art. 11) 
2. Agriculture — EAGGF— Clearance of accounts — Refusal to charge to the EAGGF expen­
diture arising from irregularities in the application of the Community rules — Disputed by 
the Member State concerned — Burden of proof— Divided between the Commission and the 
Member State concerned 
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SUMMARY — CASE C-242/96 
3. Agriculture — EAGGF— Clearance of accounts — Refusal to charge to the EAGGF expen­
diture arising from irregularities in the application of the Community rules — Assessment of 
the financial impact — Disputed by the Member State concerned — Burden of proof 
4. Agriculture — Common agricultural policy — EAGGF financing — System of rules for offset­
ting storage costs for sugar — Member States' obligation to organise an effective system of 
administrative checks and on-the-spot inspections — Unreliable inspection procedures — 
Refusal to charge to the Fund 
(EC Treaty, Art. 5; Regulation No 729/70 of the Council, Art. 8(1); Commission Regulation 
No 1998/78, Art. 19) 
5. Agriculture — Common organisation of the markets — Sugar — Offsetting of storage costs 
— Levy imposed on producers — Principle of financial neutrality — Scope 
(Council Regulation No 1358/77, Art. 6(2)) 
6. Agriculture — Common agricultural policy — EAGGF financing — Principles — Conformity 
of expenditure with the Community rules — Burden of proof— Divided between the Com­
mission and the Member State concerned 
(Regulation No 729/70 of the Council, Arts 2 and 3) 
1. In the context of intervention measures in 
the beef and veal sector, and in particular 
of the system of buying-in by tendering 
procedures, Article 9(1) of Regulation No 
859/89 provides that tenderers must under­
take to comply with all the relevant provi­
sions and Article 9(2) that interested par­
ties may submit one tender only per 
category in response to each invitation to 
tender. Since the need to ensure legal cer­
tainty means that rules must enable those 
concerned to know precisely the extent of 
the obligations which they impose on 
them, the wording of Article 9(2) cannot 
provide any support for the interpretation 
that, on account of the difference in 
meaning between the words 'interested 
party' and 'tenderers', the latter may submit 
one tender only in response to an invita­
tion to tender where they are part of a 
single group. Such an interpretation would 
thus be tantamount to applying retroac­tively Article 11 of Regulation No 2456/93, 
which introduces into the Community leg­
islation provisions on the relationship 
between tenderers. 
That being the case, although the rule that 
tenders must be independent, an essential 
requirement for the validity and effective­
ness of any tender procedure, which under­
lies Articles 9(6) (confidentiality of ten­
ders), 12(2) (prohibition on the transfer of 
rights and obligations arising from the 
tender procedure), 9(4)(c) (tenderers' obli­
gation to lodge a security) and 15 (tender­
ers' obligation to receive payment person­
ally) of Regulation No 859/89, does not 
prevent several companies belonging to 
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ITALY v COMMISSION 
one group from taking part at the same 
time in one tender procedure, it does pre­
clude those same companies from agreeing 
on the terms and conditions of the tenders 
which they each submit, if the tender pro­
cedure is not to be distorted. 
2. So far as concerns the financing of the 
common agricultural policy by the 
EAGGF, it is for the Commission, where 
it intends to refuse to charge to the EAGGF 
expenditure declared by a Member State, 
to prove an infringement of the rules on 
the common organisation of the agricul­
tural markets. Accordingly, the Commis­
sion is obliged to give reasons for its deci­
sion finding an absence of, or defects in, 
inspection procedures operated by the 
Member State in question. The latter, 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 supervi­
sory measures and inspection procedures. 
3. Where in the context of its task of clearing 
the EAGGF accounts, if a national mea­
sure that is incompatible with Commu­
nity law has caused an increase in the 
expenditure of the EAGGF, the Commis­
sion, instead of rejecting all the expendi­
ture in question, has endeavoured to estab­
lish the financial impact of the unlawful action by means of calculations based on 
an assessment of what the situation on the 
relevant market would have been if the 
infringement had not occurred, the burden 
of proving that those calculations are not 
correct rests on the Member State. 
4. It is apparent from Article 8(1) of Regula­
tion No 729/70 on the financing of the 
common agricultural policy and from Arti­
cle 19 of Regulation No 1998/78 laying 
down detailed rules for the offsetting of 
storage costs for sugar, viewed in the light 
of the duty to cooperate in good faith with 
the Commission laid down in Article 5 of 
the Treaty, and with particular regard to 
the correct utilisation of Community 
resources, that Member States are required 
to set up comprehensive administrative 
checks and on-the-spot inspections guar­
anteeing the conformity of financial opera­
tions with Community law. Where the 
Commission establishes that in a Member 
State 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 condi­
tions imposed for the reimbursement of 
the expenditure concerned, the Commis­
sion is entitled to disallow certain expen­
diture incurred by that State. 
5. It is evident from Article 6(2) of Regula­
tion No 1358/77 that the system for 
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SUMMARY — CASE C-242/96 
offsetting storage costs in the sugar sector 
is based on the principle of financial neu­
trality in that the levies collected must be 
equivalent to the reimbursement paid. 
However, that balance must be achieved at 
Community level and not at the level of 
the Member State or the undertaking con­
cerned. 
6. 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 organi­
sation of the markets. 
Although it is therefore for the Commis­
sion to prove an infringement of the Com­
munity rules, the Member State concerned 
must demonstrate that the Commission 
committed an error as to the financial 
consequences to be attributed to it. 
I - 5866