WRITTEN QUESTION E-2047/00

by Heinz Kindermann (PSE) to the Commission

(21 June 2000)

Subject: Clearing of accounts of the EAGGF

Regulation 1287/95/EC(1) has extended the scope of Article 5 of Regulation 729/70/EEC(2) in a number of major respects. For the first time it lays down rules enabling the Commission to refuse Member States' financing requests under the EAGGF Guarantee Section. The fourth paragraph of Article 5(2)(c) says:

The Commission shall evaluate the amounts to be excluded having regard in particular to the degree of non-compliance found. The Commission shall take into account the nature and gravity of the infringement and the financial loss suffered by the Community.

This clause in Regulation 729/70/EEC has been adopted verbatim in Article 7(4) of Regulation 1258/99/EC, the currently valid regulation. The second sentence in particular is a frequent cause of confusion since it clearly makes evidence of financial loss grounds fore not making payments to Member States, while leaving open the question of how to prove financial loss to the Community.

However, with the extension of the procedure for the clearing of accounts for the new support period to include a number of areas of structural support in rural areas (outside the Objective 1 areas), there is an increasing need for clarification of the practical implementation of this text by the responsible bodies of the Commission.

1. How do the Commission services actually establish whether there has been financial loss suffered by the Community as referred to above?

2. To what extent has the rule on charging a Member State in respect of a financial loss first described in a regulation in 1995 led to a change in the way the Commission services assess audit results?

(1) OJ L 125, 8.6.1995, p. 1.

(2) OJ L 94, 28.4.1970, p. 13.

Answer given by Mr Fischler on behalf of the Commission

(28 July 2000)

1. The Court of Justice applies certain general rules concerning the burden of proof in matters concerning the financing of the common agricultural policy. The Court has consistently held that it is for the Commission to prove an infringement of the rules on the common organisation of the agricultural markets (see, for example, cases 347/85, 262/87 and C-335/87). If the Commission establishes such an infringement, the Member State concerned must then, if appropriate, demonstrate that the Commission committed an error as to the financial consequences to be drawn from it. In such circumstances, the Commission enjoys a margin of discretion in evaluating the amount of expenditure to be charged to the European agriculture guidance and guarantee fund (EAGGF) (see, for example, case C-281/89).

In the fourth subparagraph of Article 7(4) of Council Regulation (EC) No 1258/1999 of 17 May 1999, on the financing of the common agricultural policy(1), the criteria are to be found by which the Commission is to carry out this evaluation. The Commission regards the term and the financial loss suffered by the Community as well as the other criteria presented in this subparagraph as a quantitative limitation of its financial corrections. The financial loss suffered by the Community within the meaning of Article 7(4) fourth subparagraph does not require the Commission to establish in a precise manner such a loss. The fact that expenditure has been effected which was not in conformity with Community rules, creates (a risk of) a financial loss.

For the cases where the Commission is verifying the organisation and functioning of the Member States' control system (systems audit approach), it is hardly feasible or even possible to put exact figures on shortcomings in these systems and, consequently, to establish with sufficient precision the financial loss.

The control deficiency creates a risk for the fund and a probable loss for the fund. The criteria of the fourth subparagraph of Article 7(4) of Regulation (EC) No 1258/1999, allow a rate of correction that clearly relates to the probable loss.

2. The amendments to Article 5 of Council Regulation (EEC) No 729/70 of 21 April 1970, on the financing of the common agricultural policy, incorporated some of the principles governing the clearance of accounts procedure considered as basic by the Court of Justice. The first subparagraph of Article 5(2)(c) of Regulation (EEC) No 729/70 as well as the fourth subparagraph were considered to be a codification of the case law of the Court. Materially nothing has changed except for the fact that the evaluation of the Commission of the financial correction is now enshrined in a Council regulation instead of only being based on the judgments of the Court.

Before the amendment of Regulation (EEC) No 729/70 the Commission made use of working document VI/216/93 which provided for differentiated rate of corrections. Working document VI/5330/97, adopted by the Commission after the changes to Regulation (EEC) No 729/70 and after the introduction of the criterion and the financial loss suffered by the Community, is not significantly different from its predecessor. This mirrors the fact that there has been no change in the evaluation by the Commission of the results of its on-the-spot controls.

(1) OJ L 160, 26.6.1999.