Proposal for a COUNCIL REGULATION (EC) on measures to be taken in dealing with certain beneficiaries of operations financed by the Guarantee Section of the EAGGF
Date: 1994-04-26
Institutions: European Commission
Subjects: EAGGF Guarantee Section, award of contract, confidentiality, discount sale, exchange of information, export refund

COMMISSION  OF  THE  EUROPEAN  COMVKJNITIES 

C0M(94) 122 final 
Brussels, 26.04.1094 

94/0015  (CNS) 

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Proposal  for  a 

COUNCIL  REGULATION  (EC) 

on measures to be taken  in dealing with certain 
beneficiaries  of operations  financed by 
the Guarantee  Section of the EAGGF 

(presented  by the Commission) 

waffs 

Explanatory  Memorandum 

1.  With  a view  to combatting  fraud  affecting  the Guarantee  Section  of  the 
EAGGF  effectively, a Community  system  has  to be established  which will 
enable  the competent  national  authorities  to  identify,  In particular  In 
connection  with  tendering  procedures,  the  grant  of  export  refunds  and 
sales  at  reduced  prices  of  intervention  products,  those  operators  who 
have  deliberately  or  as  a  result  of  serious  negligence  committed  an 
irregularity  prejudicial  to  Community  funds  or  who  are  suspected  on 
solid  grounds of  having  done  so. On  this basis,  the  competent  national 
authorities  must,  in  the  light  of  the  seriousness  of  the  offence  and 
depending  on  whether  It  has  been  established  or  suspected,  proceed  to 
draw  up  a  series  of  varied  measures  ranging  from  reinforcing  controls 
to  excluding  the operators  concerned  from  taking  part  In  the  relevant 
operations where  it  Is established  that  they  have acted  fraudulently. 

2. 

What  is  involved  is  in  fact  the  implementation  of  one  of  the  specific 
measures contained  In: 

-  the  action  programme  of  the  UCLAF  report  for  1993,  point  8.5  of 
which  provided  that  entitlement  to  Community  aid  Is  to  be  made 
conditional  on certain  criteria  relating  to the beneficiaries, 

-  the  conclusions of  the  ECOFIN  Council  of  7 June  1993 on  that  report 

which  encourage  the Commission  to carry out  the said  programme, 

-  the  conclusions  of  the  European  Council  in  Copenhagen  on  21  and 
22 June  1993  which  stress  the  importance  of  pursuing  the  campaign 
against  fraud  and  Irregularities  prejudicial  to  the  Community 
budget. 

3. 

The  system  proposed  must,  of  course,  have  built  into  It  a  maximum  of 
guarantees  and  precautions  to  ensure  that  Its  practical  application 
does  not  lead  to  unjustifiably  or  disproportionately  harmful  effects 
for  the operators  concerned. 

Article  3  of  the  proposed  Regulation  hence  refers  explicitly  to  the 
basic  rights and general  principles  to be observed. 

By  virtue  of  the  principle  of  subsidiarity  and  In order  to enable  the 
Council  to  confine  itself  to  drawing  up  the  necessary  regulatory 
framework,  It  Is envisaged  that  the detailed  rules of  application  to be 
adopted  by  the Commission  give concrete expression  to the principles  In 
question  In relation  to  the multitude  of  situations  which  may  arise  in 
real Ity. 

4. 

It should  be  noted  that  where, despite  the existence of  the preventive 
measures  laid  down  In  the  proposed  Regulation,  the  competent  national 
authority  does  not  apply  them  in dealing  with  an  operator  reported  as 
presenting  a risk of  non-reliability,  the Commission  must  bear  such  an 
attitude  in mind  in the  course of  the clearance  of  accounts  in respect 
of  the  expenditure  which  could  have  been  avoided  had  this  Regulation 
been effectively applied. 

5. 

This  proposal  does  not  generate  any  expenditure  for  the  Community 
budget. 

_  v* _ 

Proposal  for a 

COUNCIL  REGULATION  (EC) 

on  measures  to  be  taken  in  dealing  with  certain 
beneficiaries  of  o p e r a t i o ns  financed  by 
the  G u a r a n t ee  S e c t i on  of  the  E A G GF 

The Council  of  the European  Union, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  In 

particular  Article 43 thereof, 

Having  regard  to the opinion of  the European  Parliament, 

Having  regard  to the opinion of  the Economic  and Social  Committee, 

Having  regard  to the proposal  from  the  Commission, 

Whereas,  at  its meeting  on  21  and  22 June  1993  in Copenhagen,  the  European 

Council  stressed  the  importance  of  pursuing  the  campaign  against  fraud  and 

irregularities  affecting  the  Community  budget;  whereas  there  should  be  a 

reinforcement  of  those measures  designed  to ensure  that  the Community  funds 

Intended  for  the  Implementation  of  the  CAP  are  not  granted  to  persons  or 

companies  which  do  not  offer  all  the  guarantees  of  reliability  as  to  the 

proper  execution of  the operations  concerned; 

Whereas  Article 8 of  Council  Regulation  (EEC) No 729/70 of  21 April  1970 on 

the  financing  of  the  common  agricultural  policy^1),  as  last  amended  by 

Regulation  (EEC)  No 2048/88(2),  lays  down,  in  particular,  that  Member 

States are under  an obligation  to take  the measures necessary  to ensure  that 

transactions  financed  by  the Fund  are actually  carried  out  and  are  properly 

executed,  and  to prevent  and deal  with  irregularities; 

(1)  0J  No L 94, 28.4.1970, p. 13. 

(2)  0J  No L 185, 15.7.1988, p. 1. 

A'hereas  Council  Regulation  (EEC)  No 595/91  of  4 March  1991  concerning 

irregularities and  the  recovery  of  sums wrongly  paid  In connection  with  the 

financing  of  the  common  agricultural  policy  and  the  organization  of  an 

information  system  in  this  field,  and  repealing  Regulation  (EEC) 

No 283/72(3),  lays  down,  among  other  things,  that  with  a  view  to 

systematically  ascertaining  the  nature  of  fraudulent  practices  and  to 

recovering  sums  wrongly  paid,  cases  of  Irregularity  and  the  Judicial  or 

administrative  procedures  against  persons who  have  committed  irregularities 

are  to be  communicated  at  regular  intervals  to the Commission  by  the Member 

States; 

Whereas  these  provisions  need  to  be  supplemented  by  a  Community  system 

allowing  the  national  authorities  to  identify,  In particular  in  connection 

with  tendering  procedures,  the  grant  of  export  refunds  or  sales  at  reduced 

prices  of  intervention  products,  operators  who  have  deliberately  or  as  a 

result  of  serious  negligence  committed  an  Irregularity  prejudicial  to 

Community  funds  or  who  are  suspected  on  solid  grounds  of  having  done so-, 

whereas,  on  that  basis,  there  must  be  determined,  in  the  light  of  the 

seriousness  of  the offence  and  depending  on whether  it has  been  established 

or  suspected,  a  series  of  varied  measures  ranging  from  reinforced  controls 

to  the  exclusion  of  the  operators  concerned  from  taking  part  In operations 

to be determined  when  their  fraudulent  actions are established; 

Whereas,  while  providing  operators  with  a  maximum  of  guarantees,  it  Is 

necessary  to  lay  down  that  Member  States  take  the  necessary  measures  to 

ensure  that  their  provisions  relating  to  the  confidentiality  of  Judicial 

Investigations  are  adapted,  if  necessary,  so  as  not  to  prevent  this 

Regulation  from being effectively  applied; 

Whereas  the  present  system  must  be  a  supplement  to  the  specific  provisions 

already  existing  or  to  be  adopted  In  the  future  under  the  common 

agricultural  policy  with  a view  to preventing  irregularities,  in particular 

those  provisions  relating  to  controls  and  sanctions  established  by  the 

Commission  as part of  Its powers confirmed by  the Court  of  Justice, 

HAS ADOPTED THIS REGULATION: 

(3)  OJ  No L 67, 14.3.1991, p. 11. 

-  2 -

Article 1 

1. 

A  Community  system  Is hereby  established  designed  to  identify  and  make 

known  to  the  competent  authorities of  the  Member  States,  as  rapidly  as 

possible,  operators  presenting,  on  the  grounds  of  experience  acquired 

with  them  as  to  the  proper  execution  of  their  previous  obligations,  a 

risk  of  non-re IlablI Ity  In  connection  with  operations  financed  by  the 

Guidance  Section  of  the  EAGGF  and  in  particular  with  tendering 

procedures,  export  refunds  and  sales  at  reduced  prices  of  Intervention 

products. 

2. 

For  the  purposes  of  this  Regulation,  "operators  presenting  a  risk  of 

non-reliability" means: 

(a) 

operators,  whether 

natural 

or 

legal 

persons,  who 

have 

deliberately 

or 

through 

serious  negligence 

committed 

an 

Irregularity  in respect  of  relevant  Community  provisions  and  who 

have  unjustly  benefited  from  a  financial  advantage  or  who  have 

attempted  to  benefit  therefrom,  and 

(b) 

those  who  are  the  subject  of  well-founded  suspicions  in  this 

respect. 

Article  2 

The  identification  procedures  and  the  rules  relating  to  notification  shall 

be  Implemented  at  the  initiative  of  the  Member  State  in  which  the  risk  of 

the  operator's  non-reilablIIty  was  Identified  or,  where  appropriate,  at  the 

Commission's  initiative. 

Article  3 

1. 

Member  States  shall  take  the  following  measures  to  deal  with  the 

operators  referred  to  in Article  K 2 ) ( a ): 

(a) 

intensified  checking  of  the operations pursued  by  the  operator 

or 

-  3 -

(b) 

suspension  of  the  payment  of  the  amounts  in  respect  of 

operations  In  progress  to  be  determined  and,  where  appropriate, 

of  the  release  of  the  security  relating  thereto,  until  an 

Irregularity  within  the  meaning  of  Article  1(2)(a)  has  been 

determined, 

or 

(c) 

their  exclusion  for  a  period  and  from  operations  to  be 

determined. 

2. 

In  the  case  of  operators  as  referred  to  in  Article  1(2)(b),  only  the 

measures  set  out  in  the  previous  paragraph  under  (a)  and  (b)  shall 

apply. 

3. 

Where,  within  a  tendering  procedure,  the  Commission  itself  awards  a 

contract,  it  shall,  as  appropriate,  take  one  or  other  of  the  measures 

set  out  in paragraph  1. 

Article 4 

1. 

The  measures  referred  to  In  Article  3  must  comply  with  the  following 

pr inclples: 

(a) 

the  prior  hearing  and  the  right  of  appeal  of  the  operator 

concerned; 

(b) 

proportionality  between  the  Irregularity,  whether  committed  or 

suspected,  and  one  or  other  of  the  measures  referred  to  in 

Article  3(1),  subject  to  the  provisions  to  be  established  in 

accordance with  the procedure  laid  down  In Article  5; 

(c) 

non-discrimination  among operators. 

2. 

The  provisions  of  Article  10(1),  (2)  and  (4)  of  Regulation  (EEC) 

No 595/91  on  the  observance  of  the  principle  of  confidentiality  and 

professional  secrecy  shall  be applicable under  this  Regulation. 

-  4  -

3. 

In  the  case  of  operators  as  referred  to  in  Article  1(2)(b),  Member 

States  shall  take  the  necessary  measures  to  ensure  that  national 

provisions  providing  for  the  confidentiality  of  judicial  investigations 

are  adapted,  if  necessary,  so  as  not  to  prevent  this  Regulation  from 

being  applied  effectively. 

Article  5 

The  detailed  rules  for  the  application  of  this  Regulation  shall  be  adopted 

in accordance with  the  procedure  laid  down  in Article  13 of  Regulation  (EEC) 

No 729/70. They  shall  include  provisions  on  notifications  to  be  made  by  the 

Member  State. 

Article g 

This  Regulation  shall  be  supplementary  to  the  specific  provisions  under  the 

common  agricultural  policy. 

Article  7 

This  Regulation  shall  enter  into  force  on  the  seventh  day  following  its 

publication  in the Official  Journal  of  the  European  Communities. 

This  Regulation  shall  be  binding  in  its entirely  and  directly  applicable  in 

a 11 Member  States. 

Done  at 

For  the  Council 

The  President 

-  5  -

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