Proposal for a Council Regulation amending Regulation (EC) No 1290/2005 on the financing of the common agricultural policy
Date: 2007-03-20
Institutions: European Commission
Subjects: EU financing arrangements, common agricultural policy, financial regulation

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 20.3.2007 
COM(2007) 122 final 

2007/0045 (CNS) 

Proposal for a 

COUNCIL REGULATION 

amending Regulation (EC) No 1290/2005 
on the financing of the common agricultural policy 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

•  Grounds for and objectives of the proposal 

The  requirement  on  the  publication  of  information  on  beneficiaries  of  Community 
funds, as inserted into the Financial Regulation by Council Regulation (EC, Euratom) 
No 1995/2006 of 13 December 2006, provides that the necessary details shall be laid 
down in the relevant sector-specific rules. In order to implement this obligation, it is 
necessary to modify Council Regulation (EC) No 1290/2005 on the financing of the 
common  agricultural  policy.  Furthermore,  a  number  of  outstanding  problems 
regarding the effective application of the Regulation are addressed.  

The following issues are therefore included in this proposal: 

1. 

Publication of information on beneficiaries of EAGF and EAFRD funding 

The principles included contain the following: 

– 

– 

– 

– 

– 

as  regards  EAGF  expenditure,  a  split  between  direct  payments  and  other 
funding, 

as regards EAFRD expenditure, one single amount of total public funding,  

ex-post annual publication per budget year, 

publication  to  cover  EAFRD  expenditure  effected  as  of  1  January  2007  and 
EAGF expenditure effected as of 16 October 2007, 

publication by Member States at national level. 

The  details  should  be  laid  down  in  implementing  rules  to  be  adopted  by  the 
Commission.  

Annex  VI  to  Commission  Regulation  (EC)  No 1974/2006  of  15  December  2006 
laying  down  detailed  rules  for  the  application  of  Council  Regulation  (EC) 
No 1698/2005  on  support  for  rural  development  by  the  European  Agricultural  Fund 
for  Rural  Development  (EAFRD)1  requires  Member  States'  managing  authorities 
starting from 2008 to publish at least annually, electronically or otherwise the list of 
beneficiaries receiving support from the rural development programmes, the names of 
the  operations  and  the  amount  of  public  contributions  allocated  to  these  operations. 
However,  the  starting  date  for  the  publication  of  these  data  is  now  superseded  by 
Regulation  (EC,  Euratom)  No 1605/2002,  as  amended  by  Regulation  (EC) 
No 1995/2006,  which  requires  ex-post  publication  of  beneficiaries  of  this  Fund  as 
from 1 January 2007. 

2. 

Reduction  and  suspension  of  monthly  and  intermediate  payments  to  Member 
States 

The present mechanism under Articles 17 and 27 is not well tailored to deal with the 
situation where key components of a national control system do not exist or are not 

1 

OJ L 368, 23.12.2006, p. 15. 

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effective  over  a  long  period  of  time  and  where  no  remedy  is  available  in  the 
immediate future. It is therefore proposed to introduce a new mechanism under which 
the  Commission  would  be  empowered,  but  not  obliged,  to  reduce  or  suspend 
payments. This mechanism could be triggered only if all below mentioned conditions 
are met: 

– 

– 

– 

the Commission has already imposed two financial corrections in respect of the 
same measure and for the same reason; 

one  or  more  of  the  key  components  of  the  control  system  in  question  do  not 
exist  or  are  not  effective  due  to  the  gravity  or  persistence  of  the  deficiencies 
found; 

the  projection  of  the  Commission  is  such  that  the  Member  State  has  failed  to 
implement  Commission's  recommendation  to  remedy  the  situation  and  cannot 
or will not remedy the deficiencies in question in the immediate future. 

The  suspension  or  reduction  would  follow  a  "warning  letter"  sent  to  the  Member 
State. The decision would be valid for a period to be determined by the Commission 
covering payments after the decision, without the need to repeat the procedure each 
month. 

3.  Modification  of  Article  31(5)  of  the  Regulation  (exceptions  to  the  so-called 

24-month rule) 

Regulation  (EEC)  No 4045/89  requires  Member  States  to  carry  out  ex-post  controls 
on certain CAP expenditure. A literal interpretation of the 24-month-rule laid down in 
Article 31(4)  of  the  Regulation  prevents  the  Commission  from  imposing  financial 
corrections  on  the  Member  States  in  case  they  do  not  comply  with  their  control 
obligations  under  the  above-mentioned  Regulation  due  to  the  lack  of  time  left  after 
controls made by the Member State. It is therefore proposed to amend Article 31(5) 
of  the  Regulation  in  order  to  allow  for  a  reasonable  period  of  time  for  the 
Commission  to  audit  whether  Member  States  have  complied  with  their  control 
obligations  under  Regulation  (EEC)  No 4045/89  and,  if  necessary,  impose  financial 
corrections.  

4. 

Commissions implementing powers under Article 42 

It  is  proposed  to  adapt  this  Article  in  order  to  enable  the  Commission  adopting 
detailed rules for all provisions laid down in the Regulation. Additionally, with a new 
Article on transparency in the Regulation it is advisable to refer directly in the Article 
on  implementing  powers  to  the  transparency  provision  in  order  to  authorise  the 
Commission to adopt detailed rules of application. 

5. 

Technical adaptations 

Finally,  it  is  suggested  to  resolve  a  number  of  smaller  technical  problems  that  have 
been identified concerning mainly the coherence between the financial management 
of  the  EAFRD  and  the  financial  management  of  the  Structural  Funds  and  the 
financing of intervention measures if no sum per unit is determined.  

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•  General context 

Reduction  of  monthly  and  intermediate  payments  is  already  possible  under  current 
legislation.  However,  for  the  specific  situation  addressed  by  the  proposal,  there  is 
reason  for  improvement.  As  far  as  transparency  is  concerned,  new  legislative 
developments require an adaptation of the Regulation. 

•  Existing provisions in the area of the proposal 

Articles 17, 27, 42 of the Council Regulation (EC) No 1290/2005  
Article 105(3) of Regulation (EC) No 1083/2006 
Articles 30(3) and 53b of Council Regulation (EC) No 1605/2002 

•  Consistency with the other policies and objectives of the Union 

Not applicable. 

2. 

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

Not  relevant  as  the  proposal  concerns  basically  the  relation  between  the  Member 
States and the Commission. 

•  Collection and use of expertise 

There was no need for external expertise. 

•  Impact assessment 

For  amending  an  existing  Council  Regulation,  it  is  required  to  adopt  a  Council 
Regulation. 

Other options, as described, cannot serve this purpose as they do not have the same 
legal effect. 

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

•  Summary of the proposed action 

– 

– 

– 

– 

Introduction of legal provision on transparency, 

new mechanism for reducing monthly and intermediate payment of CAP money 
to Member States in a specific situation, 

enhanced applicability of financial corrections for post-payment checks, 

technical adaptations. 

•  Legal basis 

The  third  subparagraph  of  Article  37(2)  of  the  Treaty  establishing  the  European 
Community. 

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•  Subsidiarity principle 

The  proposal  falls  under  the  exclusive  competence  of  the  Community.  The 
subsidiarity principle therefore does not apply. 

•  Proportionality principle 

The proposal complies with the proportionality principle for the following reason(s). 

The  amendment  in  respect  of  reductions  allows  for  a  procedure  which  conforms 
largely  to  existing  procedures.  As  far  as  transparency  is  concerned,  the  proposal  is 
kept  at  a  rather  simple  level  and  follows  agreement  by  the  Member  States  on  this 
topic. For the rest, the amendments would allow for a better execution of Regulation 
(EC) No 1290/2005. 

The administrative burden for regional and local authorities, economic operators and 
citizens is non-existent. Administrative burden for Member States and Community is 
minimal and financial burden is not higher than in the past. Transparency obliges an 
extra effort from the Member States and the Community. 

•  Choice of instruments 

Proposed instruments: regulation. 

Other means would not be adequate for the following reason(s). 

A Council Regulation is needed as the amendments concern a Council Regulation. 

4. 

BUDGETARY IMPLICATION 

The proposal has no implication for the Community budget. 

5. 

ADDITIONAL INFORMATION 

•  Repeal of existing legislation 

No. 

However, it should be noted that in its proposal for a Council Regulation laying down 
rules  for  voluntary  modulation  of  direct  payments  provided  for  in  Regulation  (EC) 
No 1782/2003  establishing  common  rules  for  direct  support  schemes  under  the 
common agricultural policy and establishing certain support schemes for farmers, and 
amending  Regulation  (EC)  No 1290/20052,  the  Commission  has  proposed  an 
amendment  of  Article  42  of  Regulation  (EC)  No 1290/2005  which  is  similar  to  the 
one set out in Article 1(8) of the present proposal and, thus, is superseded by this new 
proposal. 

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COM(2006) 241 final. 

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2007/0045 (CNS) 

Proposal for a 

COUNCIL REGULATION 

amending Regulation (EC) No 1290/2005 
on the financing of the common agricultural policy 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular the third 
subparagraph of Article 37(2) thereof, 

Having regard to the proposal from the Commission, 

Having regard to the opinion of the European Parliament3, 

After consulting the European Data Protection Supervisor, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

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In  the  case  of  intervention  measures  in  respect  of  which  a  sum  per  unit  is  not 
determined  within  the  framework  of  a  common  organisation  of  the  markets, 
implementing  rules  should  be  laid  down,  with  regard  in  particular  to  the  method  for 
determining the amounts to be financed, the financing of expenditure resulting from the 
tying-up of the funds necessary for buying-in products and the financing of expenditure 
resulting from storage and, where appropriate, processing operations. 

In  view  of  the  nature  of  the  measures  and  programmes  covered  by  Council 
Decision 90/424/EEC on expenditure in the veterinary field4, provision should be made 
that  in  duly  justified  exceptional  cases  the  EAGF  may  finance  administrative  and 
personnel costs incurred in the execution of such measures and programmes.  

Article 17 of Council Regulation (EC) No 1290/20055 provides for the procedure to be 
followed  by  the  Commission  to  decide  to  reduce  or  suspend  monthly  payments. 
Article 27  of  that  Regulation  provides  for  the  procedure  to  be  followed  to  decide  to 
suspend or reduce intermediate payments. 

Pursuant to Article 31 of Regulation (EC) No 1290/2005, the Commission decides on 
amounts  that  are  to  be  excluded  from  Community  financing  if  it  finds  that  this 
expenditure  has  been  incurred  in  a  way  that  has  infringed  Community  rules.  In  the 
context  of  the  procedure  leading  to  the  exclusion  from  Community  financing,  the 

OJ C …, …, p. …. 
OJ L 224, 18.8.1990, p. 19. Decision as last amended by Decision 2006/965/EC (OJ L 397, 30.12.2006, 
p. 22) 
OJ  L  209,  11.8.2005,  p. 1.  Regulation  as  amended  by  Regulation  (EC)  No 320/2006  (OJ L 58, 
28.2.2006, p. 42). 

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(5) 

(6) 

(7) 

(8) 

(9) 

Commission, in order to remedy the situation, makes recommendations to the Member 
State concerned on the way to apply Community legislation. If the Member State fails 
to implement these recommendations, further decisions excluding expenditure will be 
taken by the Commission. In addition to this it can be established in certain cases that 
such recommendations will not or cannot be implemented in the immediate future. 

Under such circumstances the possibility to suspend or reduce monthly or intermediate 
payments  as  it  is  currently  provided  for  in  Articles 17  and  27  of  Regulation  (EC) 
No 1290/2005 does not protect sufficiently the financial interest of the Community. In 
this  respect,  it  is  considered  useful  to  provide  for  a  new  procedure  permitting  the 
Commission to suspend or reduce payments in specific situations in a more effective 
way. 

An  ex-ante  suspension  or  reduction  of  payments  in  the  agricultural  field  could  have 
serious  financial  implications  for  the  Member  State  concerned.  In  addition,  in 
comparison  with  the  procedure  for  the  conformity  clearance  decision,  the  Member 
State has only limited possibilities to defend its position vis-à-vis the Commission. For 
these reasons the new procedure of suspension or reduction of payments should only be 
used  in  case  one  or  more  of  the  key  components  of  the  national  control  system  in 
question  do  not  exist  or  are  not  effective  due  to  the  gravity  or  persistence  of  the 
deficiencies found. 

Provision should be made to clarify under which conditions an intermediate declaration 
of expenditure under the European Agricultural Fund for Rural Development (EAFRD) 
is inadmissible. 

Council Regulation (EEC) No 4045/89 of 21 December 1989 on scrutiny by Member 
States of transactions forming part of the system of financing by the Guarantee Section 
the  European  Agricultural  Guidance  and  Guarantee  Fund  and  repealing 
of 
Directive 77/435/EEC6 requires Member States to carry out ex-post controls on certain 
common  agricultural  policy  expenditure  of  financial  year  "n"  in  the  period  from 
1 July n+1  to  30 June n+2.  The  report  to  the  Commission  on  the  control  activities  in 
that period is only due by the end of the year n+2. 

The limitation in time for the conformity clearance decisions laid down in Article 31(4) 
of Regulation (EC) No 1290/2005, makes it effectively impossible for the Commission 
to decide on an exclusion from Community financing in case a Member States does not 
comply  with  its  control  obligations  under  Regulation  (EEC)  No 4045/89.  In  order  to 
deal with this problem, the limitation in time should not apply for infringements of the 
Member States' control obligations under Regulation (EEC) No 4045/89, provided that 
the Commission acts upon the Member States' report within a period of 12 months after 
receipt of that report. 

(10)  Since there is no need for Member States to inform the Commission on the way they 
have decided or plan to reuse the cancelled funds and to amend the financing plan for 
the rural development programme concerned, the second subparagraph of Article 33(4) 
of Regulation (EC) No 1290/2005 should be deleted. 

(11) 

In  order  to  align  the  transitional  rules  for  the  European  Agricultural  Guidance  and 
Guarantee Fund (EAGGF) Guidance Section to the new provisions applicable for the 

6 

OJ L 388, 30.12.1989, p. 18. Regulation as last amended by Regulation (EC) No 2154/2002 (OJ L 328, 
5.12.2002, p. 4.) 

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(12) 

(13) 

next  programming  period  of  the  Structural  Funds,  Article 40(1)  of  Regulation  (EC) 
No 1290/2005  should  be  amended  in  line  with  Article 105(3)  of  Council  Regulation 
(EC) No 1083/2006 of 11 July 2006 laying down general provisions on the European 
Regional  Development  Fund,  the  European  Social  Fund  and  the  Cohesion  Fund  and 
repealing Regulation (EC) No 1260/19997. 

It  is  necessary  to  clarify  the  legal  basis  for  the  adoption  of  detailed  rules  for  the 
application of Regulation (EC) No 1290/2005. In particular, the Commission should be 
able to adopt detailed rules of application in respect of the publication of information 
on beneficiaries of the common agricultural policy, in respect of intervention measures 
where no fixed sum per item has been laid down in a common market organisation and 
in  respect  of  appropriations  which  have  been  carried  over  to  finance  the  expenditure 
referred to in Article 3(1)(c) of that Regulation. 

In  the  context  of  the  revision  of  Council  Regulation  (EC)  No 1605/2002  on  the 
Financial Regulation applicable to the general budget of the European Communities8, 
Articles 30(3) and 53b(2)(d) on the annual ex-post publication of beneficiaries of funds 
deriving from the budget were inserted into that Regulation in order to implement the 
European Transparency Initiative. Sector-specific Regulations are to provide the means 
for  such  a  publication.  Both  the  European  Agricultural  Guarantee  Fund  (EAGF)  and 
the  EAFRD  form  part  of  the  budget  of  the  European  Communities  and  finance 
expenditure  in  a  context  of  shared  management  between  the  Member  States  and  the 
Community. Rules should therefore be laid down for the publication of information on 
the beneficiaries of these Funds. To that end, Member States should ensure annual ex-
post  publication  of  the  beneficiaries  and  the  amounts  received  per  beneficiary  under 
each of these Funds. 

(14)  Making this information accessible to the public enhances transparency regarding the 
use  Community  funds  in  the  common  agricultural  policy  and  improves  the  sound 
financial management of these funds, in particular by reinforcing public control of the 
money used. Given the overriding weight of the objectives pursued it is justified with 
regard  to  the  principle  of  proportionality  and  the  requirement  of  the  protection  of 
personal  data  to  provide  for  the  general  publication  of  the  relevant  information  as  it 
does not go beyond what is necessary in a democratic society and for the prevention of 
irregularities. 

(15)  Regulation (EC) No 1290/2005 should therefore be amended accordingly, 

HAS ADOPTED THIS REGULATION: 

Article 1 

Regulation (EC) No 1290/2005 is amended as follows: 

(1) 

In Article 3, the following paragraph is added: 

"3.  Where, within the framework of a common organisation of the markets, a sum 
per unit is not determined in respect of an intervention measure, the EAGF shall 

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8 

OJ L 210, 31.7.2006, p. 25. 
OJ  L  248,  16.9.2002,  p. 1.  Regulation  amended  by  Regulation  (EC)  No  1995/2006  (OJ L 390, 
30.12.2006, p. 1). 

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finance  the  measure  concerned  on  the  basis  of  standard  amounts  uniform 
throughout  the  Community,  in  particular  for  funds  originating  in  the  Member 
States used for buying-in products, for material operations arising from storage 
and, where appropriate, for processing of intervention products. 

The  respective  charges  and  costs  shall  be  calculated  in  accordance  with  the 
procedure referred to in Article 41(3)." 

(2) 

In Article 13, the following paragraph is added: 

"In  duly  justified  exceptional  cases,  the  first  paragraph  shall  not  apply  to  measures 
and programmes covered by Council Decision 90/424/EEC." 

(3) 

The following Article 17a is inserted: 

"Article 17a 
Reduction and suspension of monthly payments in specific cases 

1.  Without  prejudice  to  Article  17,  the  Commission  may  decide,  in  accordance 
with paragraphs 2 and 3 of this Article, to reduce or suspend monthly payments 
referred to in Article 14 for a period to be determined in the decision. 

2. 

The  monthly  payments  may  be  reduced  or  suspended  if  the  following 
conditions are met: 

(a) 

(b) 

(c) 

the Commission has already decided, by means of at least two decisions 
pursuant to Article 31, to exclude from Community financing expenditure 
from the Member State concerned for the same measure and for the same 
reasons;  

the reason for the exclusion referred to in point (a) is that one or more of 
the key components of the national control system in question do not exist 
or  are  not  effective  due  to  the  gravity  or  persistence  of  the  deficiencies 
found; 

the  Commission  concludes  that  the  Member  State  concerned  has  not 
implemented its recommendations to remedy the situation and is not in a 
position to do so in the immediate future. 

3. 

Before  taking  the  decision  referred  to  in  paragraph 1,  the  Commission  shall 
inform  the  Member  State  concerned  of  its  intention  and  shall  ask  it  to  react 
within a period determined by the Commission according to the severity of the 
problem and which generally may not be less than 30 days. 

The percentage by which the monthly payments may be reduced or suspended 
shall  be  equal  to  the  percentage  decided  by  the  Commission  in  its  latest 
decision as referred to in paragraph 2(a)." 

(4) 

In Article 26, paragraph 4 is replaced by the following: 

"4. 

If one of the requirements laid down in paragraph 3 is not met, the Commission 
shall forthwith inform the accredited paying agency and the coordinating body, 
where one has been appointed. If one of the requirements laid down in point (a) 

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or (c)  of  paragraph 3  is  not  respected,  the  declaration  of  expenditure  shall  be 
inadmissible." 

(5) 

The following Article 27a is inserted: 

"Article 27a 
Suspension and reduction of intermediate payments in specific cases 

Article  17a  shall  apply  mutatis  mutandis  to  the  suspension  and  reduction  of 
intermediate payments referred to in Article 26." 

(6) 

In Article 31(5), the following point (c) is added: 

"(c) 

infringements by Member States of their obligations under Council Regulation 
(EEC) No 4045/89*, provided that the Commission notifies the Member State 
in  writing  of  its  inspection  findings  within  12 months  following  receipt  of  the 
Member  State's  report  on  the  results  of  its  controls  of  the  expenditure 
concerned. 

* 

OJ L 388, 30.12.1989, p. 18." 

(7) 

(8) 

In Article 33(4), the second subparagraph is deleted. 

In Article 40, paragraph 1 is replaced by the following: 

"1.  By  way  of  derogation  from  Articles  31(2),  32(4)  and  37(1)  of  Council 
Regulation  (EC)  No 1260/1999*,  partial  sums  committed  for  assistance  co-
financed  by  the  EAGGF  Guidance  Section  approved  by  the  Commission 
between  1 January  2000  and  31 December  2006,  for  which  the  certified 
statement of expenditure actually paid, the final report on implementation and 
the  statement  referred  to  in  Article 38(1)(f)  of  that  Regulation  have  not  been 
sent  to  the  Commission  within  15 months  after  the  final  date  of  eligibility  of 
expenditure laid down in the decision granting a contribution from the Funds, 
shall be automatically de-committed by the Commission not later than 6 months 
after that deadline, giving rise to the repayment of amounts unduly paid. 

* 

OJ L 161, 26.6.1999, p. 1." 

(9) 

Article 42 is amended as follows: 

(a) 

in the introductory part, the second sentence is replaced by the following: 

"Those rules shall include in particular:" 

(b)  point 1 is replaced by the following: 

"1. 

the  conditions  applicable  to  the  accreditation  of  paying  agencies  as  well 
as  the  specific  accreditation  of  coordinating  bodies,  their  respective 
functions, the information required and the arrangements for it to be made 
available or transmitted to the Commission;" 

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(c) 

the following points 8a, 8b and 8c are inserted: 

"8a.  detailed rules on the financing and accounting of intervention measures in 
the form of public storage as well as on other expenditure financed by the 
EAGF and the EAFRD; 

8b. 

8c. 

the  detailed  rules  as  to  the  obligation  of  the  Member  States  to  publish 
information  on  beneficiaries  laid  down  in  Article  44a,  including  aspects 
related  to  the  protection  of  individuals  with  regard  to  the  processing  of 
their personal data; 

the conditions and detailed rules applicable to appropriations which have 
been  carried  over 
in 
Article 3(1)(c)." 

the  expenditure 

referred 

finance 

to 

to 

(10) 

The following Article 44a is inserted: 

"Article 44a 
Publication of the beneficiaries 

Pursuant to Article 53b(2)(d) of Regulation (EC) No 1605/2002, Member States shall 
ensure annual ex-post publication of the beneficiaries of the EAGF and the EAFRD 
and the amounts received per beneficiary under each of these Funds. 

The publication shall contain at least: 

(a) 

for the EAGF, the amount subdivided in direct payments within the meaning of 
Article 2(d) of Regulation (EC) No 1782/2003 and other expenditure; 

(b) 

for the EAFRD, the total amount of public funding per beneficiary." 

Article 2 

This Regulation shall enter into force on the seventh day following that of its publication in 
the Official Journal of the European Union. 

Article 1(10) shall apply to EAGF expenditure incurred from 16 October 2007 and to EAFRD 
expenditure from 1 January 2007. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, … 

For the Council, 
The President 

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