Special Report No 8/2011 ‘Recovery of undue payments made under the common agricultural policy’
Date: 2011-09-30
Institutions: European Court of Auditors
Subjects: common agricultural policy, payment

EUROPEAN
COURT OF AUDITORS

4
3
8
0
-
1
3
8
1
N
S
S

I

1
1
0
2

8
o
N

t
r
o
p
e
R

l

a
i
c
e
p
S

RECOVERY OF UNDUE PAYMENTS 
MADE UNDER THE COMMON 
AGRICULTURAL POLICY 

EN

 
 
 
 
 
Special Report No 8 

 2011

RECOVERY OF UNDUE 
PAYMENTS MADE UNDER  
THE COMMON 
AGRICULTURAL POLICY 

(pursuant to Article 287(4), second subparagraph, TFEU)

EUROPEAN COURT OF AUDITORS

EUROPEAN COURT OF AUDITORS
12, rue Alcide De Gasperi
1615 Luxembourg
LUXEMBOURG

Tel. +352 4398-1
Fax +352 4398-46410
E-mail: euraud@eca.europa.eu
Internet: http://www.eca.europa.eu

Special Report No 8 

 2011

A great deal of additional information on the European Union is available on the Internet. 

It can be accessed through the Europa server (http://europa.eu).

Cataloguing data can be found at the end of this publication.

Luxembourg: Publications Office of the European Union, 2011

ISBN 978-92-9237-223-1

doi:10.2865/52004

© European Union, 2011

Reproduction is authorised provided the source is acknowledged.

Printed in Luxembourg

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

CONTENTS

3

PARAGRAPH

GLOSSARY

I–VI	

EXECUTIVE	SUMMARY

1–14	

9–12	

INTRODUCTION

A	NEW	FRAMEWORK	2006

13–14	

	HOW	ARE	DEBTS	AND	RECOVERIES	REPORTED?

15–16	

AUDIT	SCOPE	AND	APPROACH

17–78	

OBSERVATIONS

17–35	

DO	MEMBER	STATES	RECORD	AND	PROCESS	DEBTS	CORRECTLY?

19–20 

INACCURACIES IN THE DEBTORS’ ACCOUNTS

21–26 

INCONSISTENCIES IN THE DATE THE DEBTS ARE RECORDED

27–31 

INCONSISTENCIES AS A RESULT OF DIFFERING INTERPRETATIONS OF SPECIFIC TYPES OF DEBT

32–35 

INCONSISTENT APPLICATION OF INTEREST LEADING TO FINANCIAL LOSS

36–43	

ARE	MEMBER	STATES	SUCCESSFUL	IN	RECOVERING	IDENTIFIED	UNDUE	PAYMENTS?

37–38 

 RELATIVELY LOW RATES OF RECOVERY BUT SIGNS OF IMPROVEMENT

39–40 

TIMELY INITIATION OF RECOVERY PROCEDURES IMPROVES THE CHANCE OF RECOVERY, BUT SIGNIFICANT  
DELAYS IDENTIFIED

41 

WEAKNESSES IN RECOVERY ACTIONS BY NATIONAL AUTHORITIES

42–43 

LIMITED ENFORCEMENT PROCEDURES AVAILABLE TO MEMBER STATE AUTHORITIES

44–53	

DO	MEMBER	STATES	WRITE	OFF	DEBTS	AS	IRRECOVERABLE	APPROPRIATELY?

47–50 

LACK OF CLARITY IN THE CRITERIA TO BE APPLIED TO JUSTIFY WRITING OFF DEBT

51 

 WRITING OFF DUE TO UNECONOMIC RECOVERY COSTS: SMALLER AMOUNTS INVOLVED BUT STILL A NEED 
FOR CLARIFICATION

52–53 

CANCELLED CASES

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

	
 
4

54–78	

DOES	THE	COMMISSION	SUPERVISE	AND	MONITOR	RECOVERIES	EFFECTIVELY?

55–62 

WHAT DOES THE COMMISSION REPORT?

63–64 

GUIDANCE IS PROVIDED BY THE COMMISSION BUT IS SOMETIMES LATE AND INCOMPLETE

65–67 

 FINANCIAL CLEARANCE: THE COMMISSION ACCEPTS THE DEBTORS ACCOUNTS AND CHARGES MEMBER 
STATES UNDER THE 50/50 RULE

68–69 

AMOUNTS CAN ‘ESCAPE’ THE 50/50 CLEARANCE PROCEDURE

70–72 

SPECIFIC AUDITS ON DEBTS BY THE COMMISSION UNDER CONFORMITY CLEARANCE

73–75 

THE ‘BURDEN OF THE PAST’, INCLUDING OLD TASK FORCE RECOVERY CASES, NEEDS TO BE LAID TO REST

76–78 

INFORMATION ON IRREGULARITY IS SENT TO OLAF TOO LATE

79–84	

CONCLUSIONS	AND	RECOMMENDATIONS

ANNEX	I	 —	 NEW	DEBTS	RAISED	—	INCLUDING	‘PRE-DEBTORS’	FOR	2006–09

ANNEX	II	 —	 APPLICATION	OF	INTEREST	IN	THE	PAYING	AGENCIES	AUDITED

ANNEX	III	 —	 DIFFERENCES	BETWEEN	DEBTS	RECORDED	IN	MEMBER	STATES’	

DEBTORS’ ACCOUNTS	AND	THE	GROSS	RECEIVABLES	AS	SHOWN	IN	
THE ANNUAL ACCOUNTS

ANNEX	IV	 —	 LONGSTANDING	UNRESOLVED	ISSUES	OF	INCONSISTENT	TREATMENT	OF	

IRREGULARITY	AND	RECOVERY

REPLY	OF	THE	COMMISSION		

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

	
	
	
	
GLOSSARY

55

AAR: Annual activity report: report by a director-general of the Commission giving an account of the 
achievements of the key policy objectives and core activities of the directorate-general.

AGRI: European Commission Directorate General for Agriculture and Rural Development

Annex	III	and	Annex	IIIA: The overview of amounts to be recovered from final beneficiaries provided by 
the paying agency to the Commission as part of its annual accounts.

CB: Certification body: public or private legal entity designated by the Member State with a view to 
certifying the truthfulness, completeness and accuracy of the accounts of the accredited paying agency.

Clearance	of	accounts: The procedure by which the Commission accepts the accounts of the Member 
States and thereby the expenditure made by the paying agencies to farmers and beneficiaries. Firstly the 
accounts of paying agencies are checked for accuracy by certification bodies in the Member States and 
are then subject to an annual financial clearance decision by the Commission. Secondly the Commission 
itself then carries out the conformity clearance procedure based on audits which permit it to identify 
and exclude (in later years) payments not complying with the rules.

EAFRD: European Agricultural Fund for Rural Development

EAGF: European Agricultural Guarantee Fund

EAGGF: European Agricultural Guidance and Guarantee Fund

CJEU	(ECJ): Court of Justice of the European Union

GBP: Pound sterling (£)

Irregularities: ‘Irregularity’ shall mean any infringement of a provision of Community law resulting from 
an act or omission by an economic operator, which has, or would have, the effect of prejudicing the 
general budget of the Communities or budgets managed by them, either by reducing or losing revenue 
accruing from own resources collected directly on behalf of the Communities, or by an unjustified item 
of expenditure. See Article 1(2) of Regulation (EC, Euratom) No 2988/95.

IT: Information technology

MS: Member State

OLAF: European Anti-Fraud Office

PA: Paying agency: the organisation responsible within a Member State for the proper assessment, cal-
culation, inspection and payment of agricultural subsidies. Part of the work of the paying agency may 
be done by delegated bodies.

PACA: Premier Acte de Constat Administratif ou Judiciaire. A French acronym commonly used to denote 
the date that the beneficiary is notified for the first time in writing by an authority in the Member State 
that an amount of agricultural subsidy should not have been paid. This is the date at which the debt 
should be recorded in the accounts (Annex III/IIIA tables) but not — in the case of pre-debtors — in the 
debtors’ ledger of the paying agency. See also Article 35 of Regulation (EC) No 1290/2005.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

6

Pre -debtor: The ‘pre-debtors’  fulfil  the  criteria  of  the  Commission  to  be  included  in  the  accounts 
(Annex III/IIIA tables) and are the result of a pre-notification where the debtor has been informed by the 
PA of a potential debt which may end up in a recovery notification. The time elapsing between informing 
of a potential debt and the recovery notification can take several months or even years. See also ‘PACA’.

Recoveries	vs	financial	corrections: Recovery of unduly paid amounts from the beneficiary through a 
recovery notification issued by the PA. Financial corrections to Member States can be imposed by the 
Commission under (1) the financial clearance (reliability of the annual accounts) and/or under (2) the 
conformity clearance (legality and regularity of the underlying transactions) of the annual accounts of 
the PA. Amounts under financial corrections are financed by national budgets.

Recovery	rate: The Court has calculated various recovery rates in the report by comparing the amounts 
recovered to the debt outstanding recorded and expressing this as a percentage.

TFR: The task force recovery was set up in 2002 to examine old cases of debt relating to irregularity as 
many hundreds of old cases had not been followed up. Its purpose was to decide whether the debt could 
be written off to the cost of the budget or whether, where Member States had been negligent, the debt 
should be charged to the Member State concerned.

50/50	rule: As part of the review of European legislation relating to debt and recovery in 2006, the 
so-called 50/50 rule was introduced which allows the Commission to automatically take back from the 
Member States 50 % of debts that remain unrecovered in the debtors' accounts after four years, or after 
eight years where there is a legal case pending for the debt.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

I.
The Europ ean U nio n s p ends  aro u nd  5 5  bil -
l i o n   e u ro   p e r   ye a r   o n   a gr i c u l t u re   a n d   r u ra l 
d e v e l o p m e n t ,   s o m e   o f   w h i c h   i s   w r o n g l y 
p a i d   d u e   t o   i r r e g u l a r   o r   i n c o r r e c t   c l a i m s 
or er rors. This repor t examines the proced-
u r e s   f o r   r e c o v e r y   o f   u n d u e   p a y m e n t s .   I n 
par ticular it focuses on recoveries by M em -
b e r   S t a t e   a u t h o r i t i e s   a n d   t h e   m o n i t o r i n g 
role of th e Com mis sio n.

II. 	
T h e   C o u r t   p r e v i o u s l y   e x a m i n e d   t h e 
a r ra n g e m e nt s   fo r   t h e   re cove r y   o f   i r re g u l a r 
p ay m e nt s   i n   i t s   S p e c i a l   R e p o r t   N o   3 / 2 0 0 4 . 
I t   fo u n d   t h a t   t h e re   we re   s i gn i f i c a n t   we a k -
n e s s e s   i n   t h e   a r r a n g e m e n t s   f o r   r e p o r t -
i n g ,   r e c o v e r y   a n d   w r i t i n g   o f f   i r r e g u l a r 
p a y m e n t s .   S u b s e q u e n t l y   t h e   C o m m i s s i o n 
i m p l e m e n t e d   i m p o r t a n t   c h a n g e s   i n   t h e 
way   i n   w h i c h   d e b t s   a re   re co rd e d,   re p o r te d 
a n d   ce r t i f i e d   i n   t h e   M e m b e r   St ate s.   I t   a l s o 
t r a n s f e r r e d   t h e   r e s p o n s i b i l i t y   f o r   f i n a n -
c i a l   fo l l o w - u p   t o   D G   AG R I   f r o m   O L A F.  T h e 
i m p a c t   o f   t h e s e   c h a n g e s   i s   a l s o   e x a m i n e d 
i n   t h i s   r e p o r t .   T h e   C o u r t   e x a m i n e d   b o t h 
t h e   r e p o r t i n g   o f   r e c o v e r i e s   b y   M e m b e r 
S t a t e s   t o   t h e   C o m m i s s i o n   a n d   t h e   p r e s -
e n t a t i o n   o f   f i g u r e s   o n   r e c o v e r i e s   i n   t h e 
annual acco u nt s o f the E U.

77

EXECUTIVE 
SUMMARY

III.	
T h e   C o u r t   f o u n d   t h a t   t h e   a r r a n g e m e n t s 
introduced  in   2 0 06  have  improve d  m at te r s 
b y   p r o v i d i n g   m o r e   a c c u r a t e   i n f o r m a t i o n 
a n d   g r e a t e r   d e t a i l   o n   d e b t s   a n d   r e c o v e r -
i e s   a t   t h e   l e v e l   o f   t h e   M e m b e r   S t a t e s   a n d 
b y   g i v i n g   m o re   i n fo r m a t i o n   i n   t h e   a n n u a l 
a c c o u n t s .   T h e   r e c o v e r y   r a t e s   h a v e   a l s o 
i m p r o v e d   i n   r e s p e c t   o f   d e b t s   r a i s e d   f r o m 
2 0 0 6   o n w a r d s ,   h o w e v e r,   c e r t a i n   w e a k -
n esses  persist :

 Ū N e w   p r o c e d u r e s ,   w h i c h   r e s u l t   i n   t h e 
a u t o  m a t i c   re i m b u r s e m e n t   t o   t h e   Co m -
m i s s i o n   o f   5 0  %   o f   t h e   a m o u n t   o f   o l d 
d e b t s ,   e n h a n c e   t h e   p r o t e c t i o n   o f   t h e 
EU’s financial interests by ‘recover y ’ via 
t h e   t ra n s fe r   o f   f u n d s   f ro m   t h e   M e m b e r 
S t a t e   b u d g e t   t o   t h e   E u r o p e a n   U n i o n 
b u d g e t .   T h e   s y s t e m   h a s   c e r t a i n   s h o r t -
c o m i n g s   s u c h   a s   r u n n i n g   t h e   r i s k   o f 
e n c o u r a g i n g   t h e   w r i t e - o f f   o f   d e b t   b y 
M e m b e r   S t a t e s   a s   e a r l y   a s   p o s s i b l e   o r 
r e p o r t i n g   d e b t   a s   l a t e   a s   p o s s i b l e   a n d 
a l l o w i n g   c e r t a i n   a m o u n t s   t o   ‘e s c a p e ’ 
from t he procedure.

 Ū Differences in treatment between Mem -
b e r   St ate s   m e a n s   t h at   d e b t s   a re   re co g-
n i s e d   a t   d i f f e r e n t   t i m e s ,   r e p o r t e d   f i g -
u r e s   a r e   n o t   c o m p a r a b l e ,   i n t e r e s t   i s 
applied  incon sistently  an d  t he  poi nt   in 
t i m e   d e b t s   c a n   b e   w r i t t e n   o f f   c a n   v a r y 
s i g n i f i c a n t l y,   l e a d i n g   t o   a   n e g a t i v e   f i -
n ancial impac t on  t he EU  budg et.

 Ū Th e   l i k e l i h o o d   o f   re cove r y   o f   a n   u n d u e 
p a y m e n t   i s   a f f e c t e d   b y   d e l a y s   i n   t h e 
M e m b e r   S t a t e s ’  i n i t i a t i o n   o f   r e c o v e r y 
p r o c e d u r e s ,   s h o r t c o m i n g s   i n   t h e i r   r e -
c o v e r y   a c t i o n s ,   a n d   t h e i r   l i m i t e d   e n -
forcement possibilities.

 Ū Whe re  delays  in t he in itial record i ng  of 
debt occur, the transmission of informa-
t i o n   r e l a t i n g   t o   i r r e g u l a r i t i e s   t o   O L A F 
c an als o be delayed.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

8

EXECUTIVE
SUMMARY

V.
D ur ing the per iod 2006–08, covered by the 
Co u r t ’s   a u d i t,   a ro u n d   9 0  %   o f   t h e   a m o u nt s 
r e p o r t e d   i n   t h e   E U   a n n u a l   a c c o u n t s   a s 
‘ r e c o v e r i e s   o f   u n d u e   p a y m e n t s ’  w e r e 
t h o s e   m a d e   b y   t h e   C o m m i s s i o n   t h r o u g h 
d e d u c t i o n s   f r o m   t h e   M e m b e r   S t a t e s   a n d 
n o t   a c t u a l   r e c o v e r i e s   o f   t h e   u n d u l y   p a i d 
a i d   f r o m   b e n e f i c i a r i e s .   T h i s   u n d o u b t e d l y 
p r o t e c t s   t h e   f i n a n c i a l   i n t e r e s t s   o f   t h e   E U 
b u t   w i t h o u t   t h e   f u l l   d e t e r r e n t   e f f e c t   o f   a 
r e c o v e r y   m a d e   f r o m   a n   u n d u l y   p a i d   b e n -
eficiar y.

VI.
Th e   Co m m i s s i o n   s h o u l d   t h e re fo re   e x p l o re 
m e t h o d s   t h a t   p e r m i t   i t   to   re d u ce   t h e   p ro -
p o r t i o n   o f   i t s   ‘ r e c o v e r i e s ’  f r o m   M e m b e r 
S t a t e s’  b u d g e t s,   a n d   i n c re a s e   t h e   p ro p o r -
t i o n   o f   u n d u e   p a y m e n t s   r e c o v e r e d   f r o m 
th e ben eficiar ies who receive d t h em .

IV.
Th e   Co u r t   t h e re fo re   re co m m e n d s   t h a t   t h e 
C o m m i s s i o n   s h o u l d   f u r t h e r   i m p r o v e   t h e 
w a y   i n   w h i c h   d e b t s   i n   t h e   M e m b e r   S t a t e s 
a r e   m a n a g e d   a n d   r e p o r t e d   u p o n   a n d 
e n s u r e   a   c o n s i s t e n t   t r e a t m e n t   o f   t h o s e 
across all M emb er St ates  by :

 Ū requesting Member States to record the 
irregularities and other debts once they 
are leg al ly du e,  n ot ab ly  at  the t i me  th e 
r e c o v e r y   n o t i f i c a t i o n   h a s   b e e n   d r a w n 
up;

 Ū cla r ifyin g cer t ain key rep or t ing  and  a c -
counting concepts which have been in -
consistently applied thus far by issuing 
guide l ine s,  in  a t im ely manner ;

 Ū i n t r o d u c i n g   a   u n i f o r m   t i m e   l i m i t   b e -
t w e e n   t h e   d i s c o v e r y   o f   a   p o t e n t i a l   i r -
regularity and the notification of the re -
cover y order to the debtor which would 
e n h a n ce   h a r m o n i s at i o n   b e t we e n   M e m-
b e r   S t a t e s   a n d   e n s u r e   a   m o r e   t i m e l y 
t r a n s m i s s i o n   o f   i n fo r m a t i o n   o n   i r re g u -
lar ities  to  OLAF;

 Ū introdu cing  exp l icit ru les  in rel at ion  to 

th e a pp lic at ion  of  interes t ;

 Ū p r o v i d i n g   f u r t h e r   c l a r i f i c a t i o n   o f   t h e 
c i r c u m s t a n c e s   u n d e r   w h i c h   d e b t s   c a n 
be declared as irrecoverable, in par ticu-
lar in relation to the rules for writing off 
debt in  inso l venc y cases ;

 Ū r e v i e w i n g   t h e   a p p l i c a t i o n   o f   t h e   n e w, 
a u t o m a t i c   5 0  %   r e c o v e r y   p r o c e d u r e 
rules to ensure its effec tive application;

 Ū f i n a l i s i n g   t h e   f o l l o w - u p   o f   o l d   ‘ Ta s k 
Force   R ecover y ’  cas es,   which  were  sup -
posed to have been finalised some three 
years ag o.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

1.	

2.	

3.	

INTRODUCTION

9

 The EU  sp ends  aroun d 55 b il lion  euro pe r  ye ar  on  agr icult ure 
and rural development. Table 1 shows a breakdown of spend-
ing between the guarantee fund (EAGF) and rural development 
for t he 2006 to  2009 p er io d.

1  Article 9(1)(a) of Council 
Regulation (EC) No 1290/2005 of 

21 June 2005 on the financing of 

the common agricultural policy 

(OJ L 209, 11.8.2005, p. 1).

M a n a g e m e n t   o f   m o s t   o f   t h i s   e x p e n d i t u r e   i s   s h a r e d   b e t we e n 
t h e   M e m b e r   S t a t e s   a n d   t h e   Co m m i s s i o n .  T h e   a i d   i s   p a i d   o u t 
t o   f a r m e r s   a n d   b e n e f i c i a r i e s   b y   t h e   p a y i n g   a g e n c i e s   ( d e s i g -
nated national authorities), which are then reimbursed by the 
Co mm issio n. S o me o f thes e pay me nts  are mad e i r re g ula r ly  or 
with er rors and, if detec ted, have to be recovered. This repor t 
exam ines t he  a r rangements for  suc h  re cover ie s.

In order to safeguard the EU financial interests, Member States 
are re qu ire d to ‘adop t al l  l egislat ive,  re g ul ator y  an d ad mi ni s -
t r a t i ve   p rov i s i o n s   a n d   to   t a k e   a ny   o t h e r   m e a s u re s   n e c e s s a r y 
to:

(a )   c h e c k   t h e   g e n u i n e n e s s   a n d   c o m p l i a n c e   o f   o p e r a t i o n s   f i -

nance d by t he EAGF  and th e EAFR D ;

(b)  p reve nt  and pu rs ue ir reg ular itie s ;

(c)  recover sums lost as a result of irregularities or negligence 1.’

TA B L E 	 1

AG R I C U LT U R E 	 S P E N D I N G 	20 06 – 0 9	 ( M I L L I O N 	 E U R O ) 1

EAGF

Rural Development

Total

20062

42 116

11 543

53 659

2007

42 446

11 154

53 620

2008

43 011

10 671

53 682

2009

46 120

8 992

55 112 

1  The amounts are the payments made for Chapters 05 02 and 05 03 (EAGF) and Chapters 05 04 and 05 05 (Rural Development) as included in Volume II, 
Annex A (ii), pp. 356–379 for 2006 and in Volume II, Annex B: Expenditure (i), pp. 306–315 of the Annual Accounts of the European Communities for 
2007 as well as Tables 5.1 and 3.1 of the Annual Report 2008 and 2009 respectively. 

2  Prior to 2007 there was only a single fund, the EAGGF.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

 
10

4. 	

5.  

6. 	

Member States are required to under take checks (generally on 
a sample basis) on the regularity of individual payments. Some 
chec ks  tak e  pl ace  b efo re  th e  paym ent  is   m ade,   i n   wh ich   c a se 
the  de tec ted ir regu l ar ities c an be de duc ted  di re c tly  from  t he 
payment to be made. For checks carried out af ter payment has 
tak en  pl ace,  M emb er  States  are  re quired   to  re cord   a  d ebt   for 
any undue payments detec ted and then request repayment of 
the  over p aid amou nt from t he be ne f ici ar y. 

M a ny   b e n e f i c i a r i e s   r e p a y   a s   r e q u e s t e d ,   b u t   i f   t h e y   l o d g e   a n 
a p p e a l   a n d   i f   t h e   d e b t   i s   s u b s e q u e n t l y   u p h e l d   by   t h e   PA ,   a n 
e n f o r c e m e n t   a c t i o n   f o r   i t s   r e c o v e r y   i s   i n i t i a t e d ,   s o m e t i m e s 
involving legal ac tion. Under cer tain conditions (in the case of 
insolvenc y, or the cost of recover y exceeding the amount due), 
the paying agenc y can decide to halt recover y and declare the 
amount as ir recoverable to the EU and the debt is wr itten off.

Ta b l e   2   s e t s   o u t   t h e   t o t a l   a m o u n t   f o r   w h i c h   r e c o v e r y   i s   o n-
g o i n g   a n d   a m o u n t s   r e c o v e r e d   a s   r e c o r d e d   i n   t h e   M e m b e r 
St ate s deb to rs’ accou nt s for  the  per iod  2 0 0 6 – 0 9  as  fol lows :   

TA B L E 	 2

A M O U N T S 	 R E CO R D E D 	 I N 	T H E 	 M E M B E R 	 S TAT E S’	 D E B TO R S’	 ACCO U N T S	
( M I L L I O N   E U R O )

EAGF year ending 15 October

Amount for which recovery is ongoing as 
at 15 October

Amounts recovered during the EAGF year

Percentage recovered4

2006

1 2671

1043

8,2 %

2007

1 4372

152

10,6 %

2008

1 246

113

9,1 %

2009

1 115

111

10 %

1   In its AAR 2009, the Commission corrected its originally reported figure of 1 449 million euro for 2006 because of corrections for Italy: AGEA.
2   The Court’s analysis showed that an amount of 209 million euro was overstated for FY 2007 because of the inclusion of invoiced amounts for temporary 

sugar restructuring. If this overstatement was taken into account then the percentage recovered would rise to 12,8 %.

3   Based on totals provided by certification bodies for ‘Table 1 and 2 data’.
4    This percentage is calculated on the basis of the year-end figures. If the average debt figure is used the percentages would be 6,8 %, 11,2 %, 8,4 % and 

9,4 % for the years 2006–09 respectively.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

2  Council Regulation (EC) 
No 1290/2005, Commission 

Regulation (EC) No 883/2006 

(OJ L 171, 23.6.2006, p. 1) and 

Commission Regulation (EC) 

No 885/2006, complemented 

by Commission guidelines, 

and Commission Regulation 

(EC) No 1848/2006 (OJ L 355, 

15.12.2006, p. 56).  

11

7.	

8.  

9.  

10.  

A s   c a n   b e   s e e n ,   t h e   l e v e l   o f   a m o u n t   f o r   w h i c h   r e c o v e r y   i s 
o n  g o i n g   i n   t h e   M e m b e r   S t a t e s’  a c c o u n t s   h a s   r e m a i n e d   r e l a -
t i ve l y   s t a b l e   w i t h   re cove r i e s   a n d   w r i te - o f fs   ( s e e   Ta b l e   4 )   b e -
i n g   l a rg e l y   co m p e n s a te d   by   n e w   d e b t s   r a i s e d,   A n n e x   I   gi ve s 
a   b re a k d o w n   o f   t h e   n e w   d e b t s   r a i s e d   b e t we e n   2 0 0 6 – 0 9 .   Fo r 
c a s e s   f r o m   2 0 0 6   o n w a r d s   h o w e v e r   t h e   r e c o v e r y   r a t e s   h a v e 
im p roved (se e Table   3).

The ar rangements for financing the common agr icultural pol-
i c y   ( C A P )   a l s o   p r o v i d e   f o r   t h e   C o m m i s s i o n   t o   c l e a r   t h e   a c -
counts relating to agriculture and rural development: the Com-
m i s s i o n   a cce p t s   t h e   a m o u nt s   p a i d   o u t   by   t h e   M e m b e r   St ate s 
a n d   m a y   r e d u c e   p a y m e n t s   t o   M e m b e r   S t a t e s   w h e n   i t   f i n d s 
that they have misapplied the regulations gover ning the C AP. 
Although the Commission has often repor ted these reduc tions 
as ‘recoveries’, most of the transac tions involved take the form 
of correc tions which do not recover undue payments from the 
beneficiaries, rather they shift par t of the cost of the CAP onto 
national taxpayers. In the context of the clearance of accounts, 
a small par t of the Commission’s clearance decisions relate to 
the  recove r y o f sp ec ific de b ts.   

A 	 N E W 	 F R A M E W O R K 	200 6

The Cour t last repor ted on the recover y of irregular payments 
i n   2 0 0 4   ( S p e c i a l   R e p o r t   N o   3 / 2 0 0 4 ) .   A t   t h a t   t i m e   t h e   C o u r t 
h i g h l i g h t e d   a   l o w   r a t e   o f   r e c o v e r y   o f   r e p o r t e d   d e b t ,   i n c o n -
s i s t e n c i e s   i n   t h e   d a t a   r e p o r t e d ,   a   l a r g e   v o l u m e   o f   o l d   d e b t s 
n e i t h e r   re cove re d   n o r   w r i t te n   o f f   a n d   a   l a c k   o f   c l a r i t y   i n   t h e 
divisio n o f resp o nsib l ities  b et wee n  DG AGR I an d OL AF.

I n 2006, the Council introduced a new regulator y framewor k 2. 
The most significant change was the introduc tion of the ‘50/50 
r u l e’  w h i c h   s h a r e s   t h e   f i n a n c i a l   c o n s e q u e n c e   o f   n o n - r e c o v-
e re d   d e b t   e q u a l l y   b e t we e n   t h e   E U   b u d g e t   a n d   re l a te d   M e m -
be r St ate. Th e ru l e help s  p rotec t  th e fi na nci al i nte re st s of  th e 
U n i o n .   M e m b e r   S t a t e s   a r e   c h a r g e d   f o r   5 0  %   o f   a m o u n t s   n o t 
re cove re d   fo u r   ye a r s   a f te r   t h e   d ate   t h e   d e b t   wa s   re co gn i s e d, 
or  eig ht  ye ars  if  the  recover y   proce ss   is   bei ng   pur sue d  in   t he 
c o u r t s .   T h e   d a t e   o n   w h i c h   t h e   d e b t   i s   r e c o g n i s e d   i s   t h e r e -
fo r e   i m p o r t a n t   fo r   t h e   a p p l i c a t i o n   o f   t h e   r u l e.   H o w e v e r,   i f   a 
 final judicial decision confirms that the debt was not due, the 
a m o u nt   c h a rg e d   u n d e r   t h e   5 0 / 5 0   r u l e   h a s   to   b e   p a i d   b a c k   to 
the  M e mb er St ate by the Co mmi s si on.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

12

11.  

12.  

The 50/50 rule is intended to provide an incentive for Member 
States to ensure a more timely recover y of debts. I t represents 
a n   i m p r o v e m e n t   o v e r   t h e   p r e v i o u s   s i t u a t i o n   w h e r e b y   u n r e -
cove red   d e b t   wa s   al l owe d   to  rem a i n   i n   th e   a cco u nt s   fo r   ve r y 
long periods, sometimes decades, until ad hoc decisions were 
f i n a l l y   t a k e n   t o   w r i t e   t h e m   o f f.   T h e r e   a r e   t w o   m a i n   r i s k s   t o 
the   ef fec t ive   ap p l ication  of  the  r ule :  (i )  pos tpon em ent  of  th e 
date that debts are first recognised, thereby delaying the date 
t h at   M e m b e r   S t ate s   c a n   b e   c h a rg e d   i n   c a s e   o f   n o n - re cove r y ; 
an d  (ii)   w r it ing   de bt s  o ff  as  ir recoverabl e  be fore   all   recover y 
p o s s i b i l i t i e s   h a ve   b e e n   e x h a u s t e d,   i n   o rd e r   t o   a vo i d   t h e   a p -
plicat io n o f t he r ul e to a sp ec ific d ebt. 

3  Cf. Commission Regulation 
(EC) No 885/2006 of 21 June 

2006 laying down detailed rules 

for the application of Council 

Regulation (EC) No 1290/2005 

as regards the accreditation 

of paying agencies and other 

bodies and the clearance of the 

accounts of the EAGF and of 

the EAFRD (OJ L 171, 23.6.2006, 

p. 90).

Fur th er chang es were int roduce d by th e  n e w f rame wor k  wi th 
resp ec t to  t he co mmu nic ation by  M em ber  St ates  to t he  Com -
m i s s i o n   o f   i r r e g u l a r i t i e s   a n d   t h e   p r o g r e s s   m a d e   i n   r e c o v e r-
i n g   t h e m.   Pr io r  to   2 00 6,   s u c h   i nfor m at i o n   was   s ent   to  t h e   E U 
a n t i - f r a u d   o f f i c e,   O L A F.   D e t a i l e d   i n fo r m a t i o n   i s   n o w   s e n t   t o 
the responsible Commission Ser vice, DG Agriculture and Rural 
D e ve l o p m e n t ,   s o   t h a t   d e b t s   c a n   b e   m o re   c l o s e l y   m o n i t o re d. 
Also, the threshold for communicating individual irregularities 
to  OLAF  was raised fro m 4 0 00  to  1 0  0 0 0  e uro.

H O W 	 A R E 	 D E B T S 	 A N D 	 R E CO V E R I E S 	 R E P O R T E D ?

13.  

I nfo r mat ion  on   t he  s ituat ion   with   reg ard   to  de bts   an d  re cov-
e r i e s   i n   t h e   M e m b e r   S t a t e s   i s   r e p o r t e d   y e a r l y   b y   t h e   p a y i n g 
age ncies  to  t he Co mmissio n in  se parate t able s (An nex III  an d 
Annex IIIA data) attached to their annual accounts 3. This infor-
m a t i o n   i s   a l s o   u s e d   a s   a   s o u rce   o f   i n fo r m a t i o n   o n   re cove r i e s 
provide d in t he  Annual  Ac tivit y  R e por t  (AAR ) of th e Direc tor- 
G eneral  o f Agr ic ult ure and  Rural D e vel opme nt.

14.   B a s e d   o n   t h e   i n fo r m a t i o n   f ro m   M e m b e r   S t a t e s,   t h e   Co m m i s -
sion publishes data on the level of debt and recover y of undue 
payments in notes to the financial statements of the European 
U n i o n .  Th e   a m o u n t s   re p o r te d   i n   t h e   E U   a cco u n t s   a re   s i g n i f i -
cantly less than the aggregate of the amounts recorded in the 
M e m b e r   S t a t e s’  re c o rd s   t o   t a k e   d u e   a c c o u n t   o f   t h e   Co m m i s -
s i o n’s   e s t i m a t e s   o f   a m o u n t s   c o n s i d e r e d   a s   r e c o v e r a b l e   ( s e e 
paragraphs 59 to 61). The Commission also repor ts annually to 
the European Parliament and the Council on the protec tion of 
the EU financial interests and the fight against fraud, including 
recover ies  o f un du e agr ic ul tural pay m ents.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

AUDIT SCOPE AND APPROACH

13

15.  

T h e   C o u r t   a s s e s s e d   t h e   e f f e c t i v e n e s s   o f   t h e   s y s t e m s   e s t a b -
l i s h e d   a n d   o p e r a t e d   b y   M e m b e r   S t a t e s   t o   re c o ve r   i d e n t i f i e d 
debts, together with the Commission's super vision of the proc-
ess. Th e aud it  addres s ed the followi n g  ques ti on s:

(i)  

 D o  M e mbe r St ates  p roce ss an d re co rd  de bts  cor rec t ly ?

(ii ) 

 A r e   M e m b e r   S t a t e s   s u c c e s s f u l   i n   r e c o v e r i n g   i d e n t i f i e d 
u ndue  paym ent s?

(ii i)  D o   M e m b e r   S t a t e s   w r i t e   o f f   d e b t s   a s   i r r e c o v e r a b l e 

 ap p rop r iatel y?

(iv ) 

 D o e s   t h e   Co m m i s s i o n   s u p e r v i s e   a n d   m o n i to r   re c ove r i e s 
ef fec tivel y?

16.  

The audit covered EAGF recoveries for the 2006, 2007 and 2008 
financ ial   years,   al l   of  w hich   were   subje c t   to  th e   n e w  rule s   in-
tro du ce d in 20 06 .

 The  aud it  invol ved :   

 Ū analysis of a sample of 14 paying agencies in eight Member 
St ates,  focu sing  on thos e wit h t h e  h i gh es t  re cord ed  d e bt;

 Ū t e s t i n g   o f   a   s a m p l e   o f   6 7 0   t r a n s a c t i o n s   ( 4 9 4   i n d i v i d u a l 

de bt s,  176 o the r trans ac tion s) ;

 Ū examination of the Commission's guidance, audits and ap -

p l icatio n o f financial co r rec t ion s.

More detailed information on the work done is provided at the 
b e gi n n i n g   o f   e a c h   s e c t i o n   i n   t h e   o b s e r vat i o n s.  Th e   a u d i t   d i d 
n o t   a s s e s s   t h e   e f fe c t i ve n e s s   o f   M e m b e r   S t ate s   i n   i d e n t i f y i n g 
ir re gu l ar ities fo r  recover y.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

	
 
4  Example: At RPA (UK), for 
seven cases out of the sample of 

66, underlying documentation 

could not be presented: amount 

involved 4,3 million GBP.

OBSERVATIONS

14

D O 	 M E M B E R 	 S TAT E S 	 R E CO R D 	 A N D 	 P R O C E S S	
D E B T S 	 CO R R E C T LY ?

17. 	 Af ter identifying irregularities and errors, Member States have 
a   n u m b e r   o f   o b l i g at i o n s   to   fo l l ow   i n   re s p e c t   o f   t h e   re s u l t i n g 
deb t. The se  inc l ud e:

 Ū a c c u r a t e   r e c o r d i n g   o f   t h e   a m o u n t   a n d   d a t e   o f   t h e   d e b t 
a n d   i t s   re p o r t i n g   to   t h e   Co m m i s s i o n ,   i nte r   a l i a   to   p rov i d e 
an a pp ro pr iate b as is  for t he appli c ati on  o f  t h e  50 /5 0  r ule ;

 Ū c o r re c t   c l a s s i f i c a t i o n   o f   t h e   d e b t ,   w h i c h   c a n   a l s o   h ave   a n 

imp ac t  o n the  50 /50 rul e;  and

 Ū t he c al cul at io n, c hargin g and  re cord in g  of  i nte res t.

18. 	

19. 	

 Th e   Co u r t   ex a m i n e d   t h e   i m p l e m e nt at i o n   o f   s u c h   o b l i g at i o n s 
i n   t h e   p ay i n g   a g e n c i e s   s e l e c te d   by   a n   e v a l u a t i o n   o f   t h e   s y s-
tems   in  p lace  as  wel l   as   through   th e  tes ti ng   of  th e   s am ple   of 
t ra n s a c t i o n s.   I t   a n a l ys e d   t h e   d e b to r s’  a cco u nt s,   a n d   c h e c k e d 
t h e   a c c u r a c y   o f   t h e   t a b l e s   p ro v i d e d   t o   t h e   Co m m i s s i o n .  T h e 
C o u r t   a l s o   a s s e s s e d   t h e   e x t e n t   t o   w h i c h   t h e   r u l e s   a l l o w   f o r 
d i f fe r i n g   i nte r p re t at i o n s   w h i c h   co u l d   l e a d   to   d i f fe re nt   t re at -
ment b et we en M emb er States ( in cludi n g pote nt ia l impa c t on 
the  amo unts  recovered) .

I N ACC U R AC I E S 	 I N 	T H E 	 D E B TO R S’	 ACCO U N T S

 A m o u n t s   t o   b e   re c ove re d   m ay   b e   c l a s s i f i e d   a s   i r re g u l a r i t i e s, 
errors in administrative procedures or other amounts recover-
able. The rules applicable to each categor y are somewhat dif-
fere nt, as  expl aine d in p aragraphs  29  an d 3 0 . For  a sam ple o f 
transac tions, the Cour t checked the accurac y of the tables re -
por ting debts to the Commission. The main inaccuracies found 
by   t h e   Co u r t   re l ate d   to   c a s e s   t h at   we re   i n co r re c t l y   c l a s s i f i e d 
or where no or inadequate suppor ting documentation existed 
on  f il e  for  t he  reco rded  amo unt s 4. Th e  total  amount   of   er rors 
i nvo l ve d   i n   t h e   Co u r t ’s   s a m p l e   wa s   8 , 3   m i l l i o n   e u ro   a n d   co n-
cerned 89 cases out of the total of 670 transac tions examined. 
W h e r e   i r r e g u l a r i t i e s   a r e   c o n c e r n e d ,   t h e s e   i n a c c u r a c i e s   m a y 
have a financial impac t since they can affec t the normal appli-
cat io n of  t he  50/ 50  clearance m ech an i sm  a nd  direc t ly  i mpac t 
o n   t h e   a m o u nt s   co r re c te d   by   t h e   Co m m i s s i o n   a n d   re cove re d 
fro m M emb er St ates.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

15

20. 	

T h e   d e b t o r s   a c c o u n t s   i n   t h e   i n d i v i d u a l   p a y i n g   a g e n c i e s   a r e 
als o ch eck ed by  indep en dent audi tor s  ( th e  ce r t if ic at ion  bod-
ies,  C Bs) wh ich rep or t  to the  Comm ission  on  t he  re liabi li t y  of 
t h e   a c c o u n t s   p r e s e n t e d .   H o w e v e r,   t h e   c e r t i f i e d   f i g u r e s   c a n 
als o  be   significantl y  ch anged  in   late r   ye ar s   by  t he   CBs   th e m-
s e l ve s.   Fo r   I t a l y,   fo r   i n s t a n ce,   t h e   to t a l   o f   o u t s t a n d i n g   d e b t s 
at  t he e nd o f 2 006,  w hic h was  ce r ti f ie d by th e  I ta lian  C B, was 
a d j u s t e d   d o w nw a r d s   b y   1 8 2   m i l l i o n   e u r o 5  i n   2 0 0 9 ,   o r   i n   t h e 
case   of  D e nmar k ,   recovered  amounts   alre ady   ce r t if ie d  by   t he 
Danis h CB fo r 2 00 8 had als o be cor rec te d upward s by 4 , 7  mil-
lio n  eu ro  and  t ho se  for  20 09   d ownwa rds   by   1 4 , 1   mi llion   e uro 
in subsequent years. Such large adjustments call into question 
t h e   re l i a b i l i t y   o f   t h e   c e r t i f i e d   f i g u r e s.   A s   c a n   b e   s e e n   i n   t h e 
example presented in Box 1 the CBs also encountered difficul -
t i e s   i n   ce r t i f y i n g   t h e   a cc u ra c y   o f   t h e   f i g u re s   re co rd e d   i n   t h e 
M e mb er St ate s.

5 

In its AAR 2009, the 

Commission corrected its 

originally reported figure of 

1 449 million euro for 2006 

because of corrections for Italy: 

AGEA.

B O X 	 1

M I S S I N G 	 O R 	 U N R E A D A B L E 	 D ATA 	 AT 	T H E 	 R U R A L 	 PAYM E N T S 	 AG E N C Y 	 ( R PA )	
( U K )

At the RPA, the Court was unable, for 2006 and 2007 6, to reconcile the figures reported to the Com-
mission with the amounts recorded in the agency’s debtor accounts as the RPA debtor’s data has 
become corrupted. For 2006, differences amounting to 8,8 million pounds sterling were noted 7, 
81 % of them due to corrections. Problems had also been found by the certification body’s audit, 
and their recompilation of the debtor’s accounts provided only some, but not full, assurance and 
the certification body concluded that the accuracy of debts recorded was poor for 2007.

6  Table 5 of Annex III to Commission Regulation (EC) No 885/2006.

7  The 8,8 million pounds sterling refers to differences found by the Court’s reconciliation work and not to errors found in the 
Court’s sample as described in paragraph 19.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

16

21.  

22.  

I N CO N S I S T E N C I E S 	 I N 	T H E 	 D AT E 	T H E 	 D E B T S 	 A R E	
R E CO R D E D	 	

The date on which irregularities must be recorded in the debt -
ors accounts of the Member States (Annex III) is a key element 
for  t he   ap p l icat ion  of   th e  reg ulation  as  it  dete r m ines  th e  in i -
tiatio n o f t he time l im it s  o f four  year s  an d ei ght  ye ar s for  ap -
plying the 50/50 rule. The regulation defines this date as, ‘ the 
f i r s t   w r i t te n   a s s e s s m e nt   o f   a   co m p e te nt   a u t h o r i t y,   e i t h e r   a d-
ministrative or judicial, concluding on the basis of ac tual fac ts 
that an irregularit y has been committed, without prejudice to 
the possibilit y that this conclusion may subsequently have to 
b e   a d j u s te d   o r   w i t h d raw n   a s   a   re s u l t   o f   d e ve l o p m e nt s   i n   t h e 
co u r s e   o f   t h e   a d m i n i s t rat i ve   o r   j u d i c i a l   p ro ce d u re.’ 8  Th e   d ate 
of initial recording of debts is thus governed by the concept of 
the primar y administrative or judicial finding more commonly 
k nown by its French acronym PAC A ( Prem ier Ac te de Con stata-
tio n Adm i ni s trat ive).

8  Article 35 of Council 
Regulation (EC) No 1290/2005.

9  Section 5.3.5 of Guideline 
No 2.

10  Guideline No 1: paragraph 2.7: 
column (g) of Annex III.

11  Recovery notifications can be 
regarded as a receivable whereas 

‘potential debtors’ are not.  

The  Eu rop ean   Commis sion  has   f ur t he r   d eve loped   t hi s  d ef in i -
tion in its guidelines 9 which from 2008 onwards 10, also provide 
t h a t   a l l   i r r e g u l a r i t y   c a s e s   s h o u l d   b e   i n c l u d e d   i n   t h e   a n n u a l 
accounts of the paying agencies even if the debt has not been 
officially notified in the form of a recover y notification 11, in or-
der to record these cases as ‘potential debtors’ or ‘pre - debtors’. 
D e s p i t e   t h e   i n t e n d e d   h a r m o n i s a t i o n ,   t h e   d a t e   o f   t h e   PA C A 
contin ue s  to  be   inter p reted   differe ntly   i n  t he   M e mbe r   St ate s 
and the Commission’s instructions to individual Member States 
have not always been consistent. I n prac tice it varies bet ween 
t h e   d a t e   o f   a   c h e c k   b y   t h e   c o n t ro l   b o d y,   a t   t h e   e a r l i e s t ,   a n d 
the date of issue of the recover y notification, at the latest. The 
Co u r t   fo u n d   t h at   t h e re   c a n   b e   a   d i f fe re n ce   o f   u p   to   s i x   ye a r s 
bet ween these t wo dates. Although the regulations do not fix 
a   t i m e   l i m i t   fo r   t h e   n o t i f i c a t i o n   o f   a   d e b t   fo l l ow i n g   a   c h e c k , 
t h e   E C J   D e c i s i o n   i n   C a s e   C - 5 4 / 9 5   r e q u i r e s   t h a t   t h e   r e c o v e r y 
procedure should be initiated within one year after all relevant 
fac t s w it h regard to t he ir regular i t y  are  k n own .

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

17

12  FEGA: Fondo Español de 
Garantía Agraria. 

AVFGA: Agencia Valenciana de 

Fomento y Garantia Agraria.

13  General confirmation by the 
German PA (HZA Hamburg-

Jonas): ‘in some cases’; German 

PA (Hannover): two out of 

12 cases; Belgian PA (BIRB): one 

out of 11 cases; Hungarian PA: 

(ARDA) one out of 12 cases; 

United Kingdom PA (RPA): four 

out of seven cases.   

23.   M e mb er St ates  t hat  u se th e lates t poss i ble ti me  an d  con si de r 
the date of the written recover y notification to constitute the 
PAC A   g ain  addit ion al   time  b efore   a mount s  are   subje c t  to  t he 
50/50 clearance mechanism and do not always register the po -
tential  de bt  as a ‘p re - d eb to r ’ as s ti pul ate d i n th e  Commi ss ion 
g u i d e l i n e s .  T h i s   m e a n s   t h a t   a n   i r r e g u l a r i t y   d e t e c t e d   c a n   b e 
accou nted fo r and b e the s u bjec t  of  a  cor re c ti on by  the  Com-
mission in different years depending upon the polic y adopted 
by t he M e mbe r St ate co ncer n ed.

24.  

Th e   S p a n i s h   a u t h o r i t i e s   g e n e ra l l y   co n s i d e r   t h e   PAC A   d ate   to 
be the first assessment (acuerdo de inicio) sent to the benefici-
ar y b efo re the recover y notific at ion . Howeve r,  t wo PAs  ( FE G A 
and AVFGA) 12 audited have taken into account the date of the 
recover y notification from 2008 onwards which, under the giv-
e n   c i rc u m s t a n ce s,   i s   n o t   i n   l i n e   w i t h   c u r re n t   l e g i s l a t i o n .  Th e 
Frenc h PAs  comp l ied w ith  the reg ul ati on and  g ui de li ne s unti l 
2008 but for 2009 they changed their repor ting system to use 
a   l a te r   o p e r a t i ve   d a te,   t h e   d a te   o f   t h e   re c ove r y   n o t i f i c a t i o n , 
to   ove rco m e   d i s a d va nt a g e s   o f   a n   e a r l y   re co rd i n g   o f   d e b t s   a s 
‘p re - d e b to r s’.   At   t h e   e n d   o f   2 0 0 9 ,   t h e   Co m m i s s i o n   re q u e s te d 
the  Frenc h au th or it ies to  c hang e  th e  sys tem  back  ag ai n.   

25.   A   l i m i t e d   n u m b e r   o f   c a s e s   we re   fo u n d   i n   G e r m a ny,   B e l g i u m , 
H u n g a r y   a n d   t h e   U n i t e d   K i n g d o m 1 3  w h e r e   p r e v i o u s   w r i t t e n 
assessments had been sent to potential debtors which should 
h a v e   c o n s t i t u t e d   t h e   r e c o r d i n g   d a t e   o f   t h e   d e b t   i n   t h e   a c -
cou nt s b u t no  s uc h reco rding was  m ade. 

26.  

T h e   p r o b l e m   o f   d i f f e r e n t   i n t e r p r e t a t i o n s   o f   t h e   d a t e   o f   t h e 
PAC A  was rais ed in the Cou r t ’s 2 0 0 4  repor t an d wa s acce pted 
by the Commission as requiring attention. However, guidelines 
i s s u e d   b y   t h e   C o m m i s s i o n   h a v e   n o t   y e t   p r o m o t e d   a   h a r m o -
nised approach to this problem, the significance of which has 
in creas ed w ith the int roduc tion  of  th e  5 0 /5 0  r ule.   

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

18

27.  

28.  

29.  

I N CO N S I S T E N C I E S 	 A S 	 A 	 R E S U LT 	 O F 	 D I F F E R I N G	
I N T E R P R E TAT I O N S 	 O F 	 S P E C I F I C 	T Y P E S 	 O F 	 D E B T	

 Th e   Co u r t   a l s o   fo u n d   i n co n s i s te nt   i nte r p re t at i o n s   by   t h e   PAs 
o f   t h e   c o n c e p t s   o f   i r r e g u l a r i t y,   e r r o r s   d u e   t o   a d m i n i s t r a t i v e 
procedures, and other t ypes of recoveries. I t is impor tant that 
M e m b e r   S t a t e s   i n t e r p r e t   t h e s e   c o n c e p t s   i n   t h e   s a m e   w a y   t o 
ensu re  co nsis tent   an d  com p arable   re por ti n g ;  th e   d if feren ce s 
i n   i n t e r p re t a t i o n   c a n   a l s o   h a ve   a   f i n a n c i a l   i m p a c t   o n   t h e   E U 
budg et.

14  Tables 1, 2 and 5 of Annex III 
to Commission Regulation (EC) 

No 885/2006.

 In 2006 and 2007, all debt cases (whether they are classified as 
i r re g u l a r i t i e s,   a d m i n i s t rat i ve   e r ro r s   o r  ‘o t h e r ’ )   we re   re p o r te d 
to   t h e   Co m m i s s i o n 1 4  i n   M e m b e r   S t ate s   d e b to r s   a cco u n t s   a n d 
made  su bjec t  to th e 50/5 0 c learance  mech an i sm .

Fro m   2 0 0 8   u n d u e   a m o u nt s   p a i d   a s   a   re s u l t   o f   a d m i n i s t rat i ve 
errors are no longer included in the Member States debtor ac -
cou nt s  (Annex  I II  t able s)  s ince  th ey   mus t  be  repai d   to  t h e  E U 
budg et  at  t he end  o f each  year  i n th e  contex t  of th e  f in an c i al 
cle arance o f accou nts. 

B O X 	 2

F R A N C E 	 PAY I N G 	 AG E N C Y 	 O N I E P 15:	‘OT H E R ’ D E B T

In 2008, the PA reported a case for the first time — in the part of the accounts not subject to 
the 50/50 clearance rule — with the justification that the irregularity was covered by bank 
guarantees. The case dated from 1997, with a potential financial impact of 8,5 million euro. If 
the case had been classified as an irregularity instead of ‘other’ debt it would have been cleared 
in 2006 when the 50/50 rule was introduced and 4,3 million euro returned to the EU budget, 
without prejudice to any subsequent encashment of the guarantees.  

15  ONIEP: Office National Interprofessionnel de l'Elevage et de ses Productions.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

19

30.  

Fur th er m ore, M emb er States have applie d th e  con ce pt of  a d -
ministrative error in an inconsistent manner. The Cour t identi-
fied 15 cases with a value of 7 million euro 16 communicated as 
ir re gu l ar it ies  t hat,   it   co ns idered,   s h oul d  h ave  be en   c las si fi ed 
as administrative errors, and thus credited immediately to the 
EU  b ud g et. 

31.   PA s   h a v e   d i f f e r e n t   i n t e r p r e t a t i o n s   o f   w h a t   c o n s t i t u t e s   a n 
 ir regular it y 17. For example, cases identified but which are not 
detected as a result of a scrutiny or cases that are covered by a 
guarantee are not considered as irregularities and not record-
e d   a s   s u c h   i n   c e r t a i n   M e m b e r   S t a t e s   ( G e r m a ny   a n d   Fr a n c e ) . 
Th e y   a re   re co rd e d   a s  ‘o t h e r ’  d e b t s   a n d   t h e re fo re   n o t   co n s i d -
ered  for  t he  ap p l ic ation o f the 5 0 /5 0  cl earan ce  me ch ani sm . I f 
eventually such debts are declared as irrecoverable the risk of 
non - enc ashment o f th e gu arantee  i s bor ne  by  t he  E U budg et.  

B ox 2 p rovid es an examp l e of ir re gular it y c as es  wron gly  c las -
s i f i e d   a s   o t h e r   r e c o v e r i e s ,   a n d   s h o w s   t h e   i m p a c t   o n   t h e   E U 
budg et.

16  Case described in Box 6 is an 
example. 

17  For a legal definition see 
Article 1(2) of Council Regulation 

(EC, Euratom) 2988/95 of 

18 December 1995 on the 

protection of the European 

Communities’ financial interests 

(OJ L 312, 23.12.1995, p. 1) as 

shown in the glossary. 

18  Article 32(1) of Council 
Regulation (EC) No 1290/2005 

provides that ‘sums recovered 

following the occurrence of 

irregularity or negligence and 

the interest on these shall be 

made over to the paying agency 

and booked by it as revenue 

assigned to the EAGF in the 

month in which the money is 

actually received.’

I N CO N S I S T E N T 	 A P P L I C AT I O N 	 O F 	 I N T E R E S T 	 L E A D I N G 	TO	
F I N A N C I A L 	 LO S S	

32.   Given the sometimes long delays bet ween an undue payment 
being made and its eventual detec tion and subsequent recov-
er y, interest on outstanding debt should be charged 18, to pro -
tec t the financial interests of the EU. With an average of some 
1   2 0 0   m i l l i o n   e u ro   o f   d e b t   o u t s t a n d i n g   t h e   i nte re s t   a cc r u i n g 
t o   t h e   E U   b u d g e t   o n   a n   a n n u a l   b a s i s   i s   s u b s t a n t i a l   —   b a s e d 
o n   a   co n s e r vat i ve   rate   o f   3 %   p e r   a n n u m ,   t h e   a n n u a l   a m o u nt 
is estimated at 36 million euro. Where interest is fully charged 
to  the  EU bu dg et, no l o ss o ccur s.

33.  

Th e  Co ur t  fo u nd  t hat   the  ap plic at ion   o f  inte re st   on   de bt   was 
s t i l l   n o t   f u l l y   h a r m o n i s e d.   Fo r   t h e   va s t   m a j o r i t y   o f   m e a s u re s, 
the interest rate must be calculated in accordance with nation-
al  law,  b ut   no  sp ecific   rate  is   est abli sh e d,   alt houg h   it  can n ot 
be   l owe r  t han  t he  interes t   rate  a pplic a ble  for   t he   recove r y  of 
amounts under national provisions. Annex II shows a summar y 
of the different methods used by the PAs audited by the Cour t 
as  re gards  the ap p l ic ation o f inte re st.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

 
20

34.   Most of the PAs audited apply an automatic calculation mecha -
nism, based on the interest rate calculated in accordance with 
n at i o n a l   l aw,   a l t h o u g h   t h e re   we re   w i d e   va r i at i o n s   a p p l i e d   i n 
prac t ice. 

35.  

T h e   E u r o p e a n   C o u r t   o f   J u s t i c e   s u p p o r t e d   t h e   C o m m i s s i o n’s 
v i e w   t h a t   i n t e r e s t   i s   t o   b e   i n c l u d e d   i n   A n n e x   I I I   e v e n   i f   t h e 
pr inc ipal  amo unt has no t b een  re cove red  or  h as  n ot be e n es -
tab l ished   in  l eg al   p roceedin gs 19.  Howeve r,  in  th e  cur rent  sys-
tem interest payable is not always communicated to the debtor 
by sending an updated recover y notification as at 15 O c tober 
ever y ye ar, i.e. t he year en d for  E U a gr i c ul tural pay m ents.

19  Judgment of the General 
Court of 22 April 2010: Italy 

v Commission (T-274/08 and 

T-275/08) where the Commission 

imposed corrections of 

214 million euro relating to the 

50/50 clearance mechanism, 

including interest.

B O X 	 3

T R E AT M E N T 	 O F 	 ACC R U E D 	 I N T E R E S T 	 I N 	 S PA I N

At the Commission’s request, AVFGA (PA Valencia) incorporated accrued interest in Annex III as 
at 15 October 2008, consequently updating the amount due for 575 cases. The accrued inter-
est calculated by AVFGA on the basis of a compound interest formula until 15 October 2008 
amounted to 11,6 million euro. The Court identified errors in the calculation, totalling 1,4 million 
euro of understatement. The calculation made by the PA was only for the purposes of reporting 
to the Commission as the debtors were not invoiced.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

21

A R E 	 M E M B E R 	 S TAT E S 	 S U CC E S S F U L 	 I N	
R E CO V E R I N G 	 I D E N T I F I E D 	 U N D U E 	 PAYM E N T S ?

36.   Wh en an ir reg u l ar it y is d etec ted,  i t i s  im por tant t h at M em be r 
State authorities use all means to recover the amount from the 
be nefic iar y.  The Co ur t asses sed for  t h e year s  2 0 0 6  to 2 0 0 9 : 

 Ū  t he ex tent  to  w hic h deb t s  are  recovere d;

 Ū h o w   q u i c k l y   M e m b e r   S t a t e s   i n i t i a t e   r e c o v e r y   p r o c e d u r e s 

af ter an  ir reg ul ar it y is  d etec ted;

 Ū h o w   f a r   n o n - re c ove r i e s   c a n   b e   c o n s i d e re d   a s  ‘n e g l i g e n c e’ 
by the national authorities, thereby mak ing them liable for 
t he w ho le amo u nt due;  and

 Ū t he m et ho ds avail ab le to  M embe r  St ate s to en force recov-

er y, an d how  t hey  are us ed  in prac t ice.

R E L AT I V E LY 	 LO W 	 R AT E S 	 O F 	 R E CO V E R Y 	 B U T 	 S I G N S 	 O F	
I M P R O V E M E N T	

37.   As shown in Table 2 the annual rate of recover y of amount for 
which recover y is ongoing is rather low, at around 10 % of the 
to t a l   re co rd e d   d e b t .   I n   o rd e r   to   t r y   a n d   a s s e s s   t h e   i m p a c t   o f 
t h e   c h a n g e s   t o   t h e   s y s t e m ,   t h e   C o u r t   h a s   c a l c u l a t e d   a   y e a r -
by -ye a r   re cove r y   ra te   fo r   t h e   n e w   d e b t s   e s t a b l i s h e d   i n   ye a r s 
20 06– 09.  For  cas es  fro m  20 06   onward s  h oweve r   th e   re cover y 
rates  have imp roved  (Table   3) .

38.  

 Ta b l e   3   s h ow s   t h a t   t h e   l a rg e s t   p ro p o r t i o n   o f   t h e   re c ove r y   i s 
a c h i e v e d   d u r i n g   t h e   y e a r   i n   w h i c h   a   d e b t   i s   e s t a b l i s h e d .   I n 
subsequent years, the recover y rate drops significantly. A more 
d e t a i l e d   a n a l y s i s   s h o w s   t h a t   t h e   re c o ve r y   r a t e s   fo r   a d m i n i s -
t rat i ve   c a s e s   a re   n o t i ce a b l y   h i g h e r   t h a n   c a s e s   u n d e r   j u d i c i a l 
pro ceed in gs (an overal l  recover y  rate of  5 4  % in  the  fir st case 
aga inst  8,3 % in  th e seco nd case over t he pe r i od  2 0 0 6– 0 9 ) . 

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

22

T I M E LY 	 I N I T I AT I O N 	 O F 	 R E CO V E R Y 	 P R O C E D U R E S	
I M P R O V E S 	T H E 	 C H A N C E 	 O F 	 R E CO V E R Y,	 B U T 	 S I G N I F I C A N T	
D E L AYS 	 I D E N T I F I E D	

39.  

The effec tiveness of a recover y procedure is largely dependent 
on the rapidit y of the steps adopted in the ear ly stages. Af ter 
the detec tion of a potential irregularit y by the control bodies, 
it is impor tant that a final decision should be taken as quick ly 
a s   p o s s i b l e   a s   to   w h e t h e r   a   d e b t   e x i s t s   a n d   a   re cove r y   o rd e r 
sho ul d  b e issu ed.

40.   However, the Cour t identified the number of PAs, par ticular ly 
Fran ce,  I t al y  a nd  Greece,   w h ere  d ebt s  were   recorde d  un j ust i -
f i a b l y   l a t e   a f t e r   t h e   d e te c t i o n   o f   t h e   i r re g u l a r i t y.   O u t   o f   4 9 4 
c a s e s   e x a m i n e d   i n   t h e   a b o v e m e n t i o n e d   c o u n t r i e s ,   3 9   w e r e 
affe c ted by unjus t ifiab l e del ays.

TA B L E 	 3

R E CO V E R Y 	 O F 	 D E B T S 	 R E CO R D E D 	 A F T E R 	T H E 	 I N T R O D U C T I O N	
O F  T H E  50/ 50   R U L E

FY

2006

2007

2008

2009

Debt established 
concerning year 
(million euro)

Recovered
1st year

Recovered
2nd year

Recovered
3rd year

Recovered
4th year

Total 
recovered

155

257

135

135

17,7  %

12,7  %

16,8  %

24,1  %

33,3  %

33,7  %

35,5  %

2,7  %

6,0  %

3,6  %

50,6  %

49,5  %

50,6  %

35,5  %

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

23

W E A K N E S S E S 	 I N 	 R E CO V E R Y 	 AC T I O N S 	 BY 	 N AT I O N A L	
AU T H O R I T I E S	

41.  

Th e   Co m m i s s i o n   i s   re s p o n s i b l e   fo r   s u p e r v i s i n g   t h e   d i l i g e n ce 
of  t he natio nal  au thor ities  in pur s ui n g th e re cover y  of de bts. 
When these authorities are found negligent in this regard, the 
M e m b e r   S t a t e   m u s t   r e i m b u r s e   t h e   a m o u n t   o f   t h e   d e b t   fo r e -
gone to the EU budget. The Cour t identified several such cases 
where the Commission should deter mine whether negligence 
occ ur red.  The mo st rel evant case s i de ntif i ed  we re : 

20  Five cases with financial 
impact of 2,2 million euro.

21  Four cases with financial 
impact of 1,6 million euro.

22  One case with financial 
impact of 0,2 million euro.

 Ū cases where the judicial author ities cancelled the recover y 
procedure because the administrative authorities had failed 
t o   c o m p l y   w i t h   o n e   o r   m o r e   l e g a l l y   b i n d i n g   p r o c e d u r e s , 
n o t a b l y   f a i l u r e   t o   e n g a g e   i n   t h e   a d v e r s a r i a l   p r o c e e d i n g s 
t h a t ,   d e p e n d i n g   o n   t h e   n a t i o n a l   l e g i s l a t i o n ,   t h e   PA s   a r e 
req uired to  under take w ith  t he be ne f ic i ar y 20;

 Ū c a s e s   w h e r e   t h e   j u d i c i a l   a u t h o r i t i e s   c a n c e l l e d   r e c o v e r y 
p ro ce e d i n g s   b e c a u s e   t h e y   co n s i d e re d   t h at   t h e   c a s e s   we re 
t i m e - b a r re d   i . e.   a d m i n i s t r a t i ve   p ro c e d u re s   h a d   t a k e n   t o o 
l on g,  and  th at   this   was   attr ibut able   to  exce ss i ve   de lays   of 
t he ad ministrat ive aut ho r ities  in  t he ir   re cove r y  ac ti on s 21;

 Ū cases where the administrative authorities failed to register 
their debt against the beneficiar y in a collec tive insolvenc y 
i n   g o o d   t i m e ,   e f fe c t i v e l y   e xc l u d i n g   t h e   a m o u n t   t o   b e   r e -
covered 22;

B O X 	 4

U N J U S T I F I E D 	 D E L AYS 	 I N 	 G R E E C E 	 A N D 	 I TA LY

In Greece, the audit found seven cases where there were delays of between four and six years for 
the assessment of investigation reports. In the same country, for 18 cases, the final ministerial 
decision to validate the recovery took between two and seven years following the first recovery 
notification sent to the beneficiary. The value of these cases amounts to 10,3 million euro. In 
Italy, the audit found seven cases involving a total amount of 2,5 million euro where the delay 
between the investigation report and the recording of the debt extended to two to four years. 

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

24

 Ū ca ses   w here  t he  administrat ive  aut hor i ti es   h ad  wh at  we re 
d e e m e d   t o   b e   s u f f i c i e n t   g r o u n d s   t o   p r e s e n t   a n   a p p e a l   o r 
to take the case to a subsequent level but failed to do so 23; 
and

 Ū c a s e s   w h e r e   t h e r e   w e r e   e xc e s s i v e   d e l a y s   i n   t h e   r e c o v e r y 
ac tions once the procedure had already been initiated, par-
ticularly concerning the initiation of enforcement recover y 
ac t io ns 24.

L I M I T E D 	 E N F O R C E M E N T 	 P R O C E D U R E S 	 AVA I L A B L E 	TO	
M E M B E R 	 S TAT E 	 AU T H O R I T I E S	 	

42.  

Enforcement procedures fall exclusively under national legis -
latio n.  An excep tio n to  t his gene ral pr i nci ple  cam e into force 
f ro m   f i n a n c i a l   ye a r   2 0 0 8 2 5,   w h e re b y   M e m b e r   S t a t e s   we re   re -
q u i r e d ,   w i t h o u t   p r e j u d i c e   t o   a n y   o t h e r   e n f o r c e m e n t   a c t i o n 
p r o v i d e d   fo r   i n   n a t i o n a l   l a w,   t o  ‘o f f s e t   a ny   s t i l l   o u t s t a n d i n g 
d e b t   o f   a   b e n e f i c i a r y   w h i c h   h a s   b e e n   e s t a b l i s h e d   i n   a c c o rd -
ance with national law against any future payment to be made 
by the PA responsible for the recover y of the debt to the same 
be nefic iar y.’

23  Six cases with financial impact 
of 5,3 million euro.

24  492 cases with financial 
impact of 7,3 million euro, 

mainly in Spain, as shown in 

Box 5.

25  Commission Regulation (EC) 
No 1034/2008 of 21 October 

2008 amending Regulation 

(EC) No 885/2006 laying down 

detailed rules for the application 

of Council Regulation (EC) 

No 1290/2005 as regards the 

accreditation of paying agencies 

and other bodies and the 

clearance of the accounts of the 

EAGF and the EAFRD (OJ L 279, 

22.10.2008, p. 13) introducing 

Article 5(b) in Commission 

Regulation (EC) No 885/2006.

B O X 	 5

E X A M P L E 	 O F 	 L AC K 	 O F 	 D I L I G E N C E 	 BY 	T H E 	 N AT I O N A L 	 AU T H O R I T I E S :	 S PA I N	
( A N D A LU C Í A )

In Spain (Andalucía), between 2006 and 2008, 252 cases were detected by the Court where the 
prescription period26 of four years had already elapsed between the discovery of the irregularity 
and the time when the PA became aware of the facts and could start the recovery process. The 
PA decided to write off the amount of 5,8 million euro against the EU budget. Any negligence 
subsequently determined by the Commission would be attributable to the Spanish authorities.

26  Following the prescription period the case is ‘time barred’ and cannot be pursued further.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

25

43.  

 However, the Cour t ’s audit found that the effec tiveness of the 
enforce ment p roced ure is l imite d  by  th e  followi n g: 

27  Paying agencies audited in 
Germany, Spain, Greece and 

Hungary.

 Ū S i n c e   2 0 0 8 ,   t h e   PA s   a u d i t e d   h a v e   a p p l i e d   r e c o v e r i e s 
t hro ug h o ffs ett ing w here th is is allowed  by  nat io nal l egi s -
lation, however, offsets cannot be applied until the debt is 
l eg al l y reco gnis ed.

 Ū B e y o n d   o f f s e t t i n g   o r   t h e   c a l l i n g   i n   o f   g u a r a n t e e s   ( w h e r e 
a p p l i c a b l e ) ,   n o n e   o f   t h e   PAs   a u d i te d   h a s   a ny   o t h e r   d i re c t 
en fo rceme nt  po s sib il ities.

 Ū Only some of the PAs audited 27 have the possibility, through 
legal means or convention, to enforce the recover y of Com-
munit y debts through other bodies e.g. the regional or na -
t i o n a l   t a x / c u s t o m s   a u t h o r i t i e s .  T h i s   p o s s i b i l i t y   i n c r e a s e s 
t he c hance of  recover y. 

 Ū I n  al l   M emb er  St ates  au dited,  except   B el gi um  an d  G ree ce, 
the recover y orders notified by the PAs are direc tly enforce -
ab l e t hro ug h a ju dic ial  auth or it y.

 Ū The execution of a recover y notification should only be sus-
p e n d e d   i f   t h e   a m o u nt   d i s p u te d   i s   s u f f i c i e nt l y   s e c u re d   ( by 
a   b a n k   g u a r a n te e,   c a s h   d e p o s i t   e tc. )   u n l e s s   d u l y   j u s t i f i e d 
reasons for such a waiver are presented by the debtor. This 
p r i n c i p l e   w a s,   h o we ve r,   n o t   a p p l i e d   i n   a l l   M e m b e r   S t a t e s 
au dited.

D O 	 M E M B E R 	 S TAT E S 	W R I T E 	 O F F 	 D E B T S 	 A S	
I R R E CO V E R A B L E 	 A P P R O P R I AT E LY ?

44.   When debts are deemed to be irrecoverable (if the benefic iar y 
i s   i n s o l v e n t   o r   i f   t h e   c o s t   o f   t h e   r e c o v e r y   a c t i o n   i s   l i k e l y   t o 
exceed the amount recovered), the regulation allows M ember 
States  to  wr ite  t hem o ff. I n such case s  t he  d ebt s are  re move d 
f r o m   t h e   d e b t o r   a c c o u n t s   s u b m i t t e d   t o   t h e   C o m m i s s i o n .   I f 
this write - off takes place before the four- and eight-year time 
l i m i t s,   t h e n   t h e   5 0 / 5 0   r u l e   d o e s   n o t   a p p l y   a n d   t h e   a m o u nt   i s 
e f fe c t i ve l y   c h a rg e d   i n   f u l l   to   t h e   E U   b u d g e t.  Th i s   c re ate s   t h e 
r i s k   t h a t   d e b t s   a r e   w r i t t e n   o f f   p r e m a t u r e l y   —   t h a t   i s   b e fo r e 
all possible recover y steps have been exhausted — in order to 
avoid the application of the 50/50 rule and the related charge 
on  M emb er  St ates.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

26

45.  

The Cour t examined a sample of 138 cases written off between 
2 0 0 6   a n d   2 0 0 8   w i t h   a   t o t a l   v a l u e   o f   1 7 6 , 5   m i l l i o n   e u r o,   t o 
a s s e s s   w h e t h e r   t h e   w r i t e - o f f   w a s   a p p ro p r i a t e   i n   t h e   c i rc u m-
sta nces.  I t  also :    

 Ū a n a l ys e d   t h e   a m o u nt s   w r i t te n   o f f   b e t we e n   2 0 0 6   a n d   2 0 0 9 

and  est ab lish ed the co st  to t he E U  bud g e t;

 Ū examined the wor k ing definition of insolvenc y, and its im-

p ac t  o n wr ite - o ffs; and

 Ū eval uated t he o ther s it uat ions  whe n  de bt s a re wr it ten  of f.

46.  

The  Co ur t ’s  ana lys is   o f  th e  figure s  for   d ebt   wr i tte n  of f   sh ows 
that most of the amounts declared as irrecoverable by the PAs 
we re   f i n a n c e d   b y   t h e   E U   b u d g e t   ( s e e   Ta b l e   4 ) .  Th e   s i t u a t i o n 
in 2006 is considered to be exceptional as accumulated debts 
for t he p ast,  b ac k to t he 19 80 s,  we re  wr i tte n  off  i n  th at ye ar.  

TA B L E 	 4

A M O U N T S 	W R I T T E N 	 O F F 	2006 – 0 9	 ( M I L L I O N 	 E U R O )

Cases ‘written off’

Borne by the EU budget in total

Percentage of debts written off  
borne by the EU budget

2006

225,8

207,2

91,8  %

2007

166,01

154,4

93  %

2008

2009

32,4

25,3

64,4

42,0

Total

488,6

428,9

78,1 %

65,1 %

87,8  %

1   Out of the 166 million euro total, 117,1 million euro relates to a single debt declared irrecoverable in Italy.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

27

L AC K 	 O F 	 C L A R I T Y 	 I N 	T H E 	 C R I T E R I A 	TO 	 B E 	 A P P L I E D 	TO	
J U S T I F Y 	W R I T I N G 	 O F F 	 D E B T	 	

47.   C o n c e r n i n g   t h e   c o n c e p t   o f   i n s o l v e n c y,   w h i c h   i s   t h e   r e a s o n 
gi ve n   fo r   ove r   9 0 %   o f   d e b t   w r i t te n   o f f,   t h e   re g u l ato r y   p rov i-
s i o n 2 8  i s   n o t   s u f f i c i e n t l y   e x p l i c i t .   I n   p r i n c i p l e ,   PA s   w r i t e   o f f 
am o unts  u nde r th e fol l ow ing  co nd it ion s. 

28  Article 32.6 of Council 
Regulation (EC)1290/2005.

Fo r ca ses su b je c t  to l eg al  p roce edi n g s:

 Ū I n s o l v e n c y   p r o c e e d i n g s   d e c l a r e d   b y   n a t i o n a l   c o u r t s   a n d 
handled by liquidators: The Cour t found that, depending on 
the PA, the case could be written off at the opening, during 
or at the end of the insolvenc y proceedings thereby causing 
considerable variations in the application of the eight-year 
period granted before amounts are cleared under the 50/50 
rule. The amounts finally recovered through the liquidation 
procedure are generally relatively low (between 0,14  % and 
6 %  of  th e deb t) .

For no n-ju dicial ( i. e.  s tandard ) c ases :

 Ū I m p o s s i b i l i t y   t o   t r a c e   t h e   d e b t o r,   d e a t h   o f   t h e   d e b t o r   o r 
f r u i t l e s s   s e i z u re   ( nu l l a   b o n a )   a re   t h e   re a s o n s   g e n e ra l l y   i n -
vo k e d   to   j u s t i f y   w r i te - o f fs :  Th e re   i s   n o   co m m o n   a p p ro a c h 
defined for the application of these criteria, leading to dif -
fe r i n g   p r a c t i c e s   b e i n g   u s e d   b y   t h e   PA s   a u d i t e d   a n d   w i d e 
variations in the application of the four-year period granted 
b efore  amo unt s  are cl eared un d e r  t h e  50 /5 0  r ule. 

48.  

 I t  was   al so   no ted   that   cer t ain  PAs   wr ite   off   th eir   debts  in  the 
A n n e x   I I I   t a b l e s   a l t h o u g h   t h e y   re m a i n   i n   t h e   d e b to r ’s   l e d g e r 
u n d e r   n a t i o n a l   l e g i s l a t i o n   b e c a u s e   o f   f u r t h e r   r e c o v e r y   p o s-
s i b i l i t i e s   u s i n g   n at i o n a l   l e gi s l at i o n   ( PAs   i n   G e r m a ny ) .   Fo r   co -
financed measures, this prac tice leads to a different treatment 
of debtors, whereby recover y procedures for the national par t 
of the debt are still continuing when the Communit y par t has 
be en w r itten o ff. 

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

 
 
28

49.   G i v e n   t h a t   t h e   m a j o r i t y   o f   w r i t e - o f f   i s   d u e   t o   i n s o l v e n c y   o f 
t h e   d e b t o r,   i t   i s   i m p o r t a n t   t o   c l a r i f i y   t h e   c r i t e r i a   a p p l i e d 
i n   t h e   M e m b e r   S t a t e s   t o   e n s u r e   t h a t   t h e   m a x i m u m   a m o u n t 
is   recovered  to  t he  EU   b u dget  an d  to  e ns ure   e qual  t re atme nt 
of  simi lar c ases b et ween M ember   St ates.

29  ‘RPA debt recovery — High- 
level guidance/procedures’ 

(Version 2.4 from 24.11.2008), 

paragraph 8.1.3.

50.   Box 6 shows an example of an unjustified write - off and poten-
tial  neg l ig ence on  t he p ar t  of th e  ad min i st rati ve  aut hor it ie s. 

W R I T I N G 	 O F F 	 D U E 	TO 	 U N E CO N O M I C 	 R E CO V E R Y 	 CO S T S :	
S M A L L E R 	 A M O U N T S 	 I N V O LV E D 	 B U T 	 S T I L L 	 A 	 N E E D 	 F O R	
C L A R I F I C AT I O N	 	

51.   Pa y i n g   a g e n c i e s   m a d e   l i m i t e d   u s e   o f   t h e   p r a c t i c e   w h e r e b y 
d e b t s   w e r e   w r i t t e n   o f f   b e c a u s e   t h e   r e c o v e r y   c o s t s   w e r e   a d -
j u d g e d   t o   b e   h i g h e r   t h a n   t h e   a m o u n t   t o   b e   r e c o v e r e d .   T h e 
Cour t found that this was used mostly in cases for amounts of 
l e s s   t h a n   1 0 0   e u ro,   a l t h o u g h ,   i n   t h e   U K   ( R PA) ,   i t   i s   g e n e r a l l y 
considered only to be cost- effec tive to pursue by legal ac tion 
d e b t s   e xc e e d i n g   2   0 0 0   p o u n d s   s t e r l i n g 2 9.   I n   G e r m a ny   ( PA   — 
Ham b urg - J o nas) the  thres ho ld set  is 1 0 0 0 e uro.  Th e  Comm is-
sio n  h as  no t  p rovided  any  fur t he r   gui dan ce   on  t hi s   i ss ue   an d 
differences between Member States remain. Between 2006 and 
2 0 0 9 ,   s o m e   8 8 0   0 0 0   e u ro   w a s   w r i t t e n   o f f   b y   t h e   PA s   fo r   t h i s 
reaso n. 

B O X 	 6

U N J U S T I F I E D 	W R I T E - O F F 	 O F 	 D E B T 	TO 	T H E 	 C H A R G E 	 O F 	 E U 	 B U D G E T 	 BY 	T H E	
G E R M A N 	 PA 	 N I E D E R S AC H S E N

In this case, recovery notifications were issued for an amount of 4,9 million euro on 6 August 
2003. Insolvency proceedings were opened on 1 August 2003. The amount was declared as 
irrecoverable by the PA on 15 October 2006, prior to the application of the 50/50 clearance 
mechanism, with the result that the entire amount was written off against the EU budget. How-
ever, at the time the case was declared as being irrecoverable, legal proceedings concerning 
the encashment of a guarantee covering the amount of the debt were still pending, meaning 
that recovery possibilities were not exhausted. The unjustified write-off borne by the EU budget 
was therefore 4,9 million.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

29

30  Commission reply No 632128 
of 15 September 2010 to the 

Court’s observation letter PF-

3814 of 2 June 2010.

52.  

53.  

C A N C E L L E D 	 C A S E S

 Member States may cancel debts as a result of decisions adopt -
ed by an administrative or a judicial authorit y, normally when 
a   r e p o r t e d   i r r e g u l a r i t y   i s   s u b s e q u e n t l y   n o t   c o n f i r m e d   b y   a 
cour t. This has the effec t of writing off the debt and removing 
i t   f ro m   t h e   d e b t o r s’  a c c o u n t s.   I n   c a s e s   w h e re   t h e   5 0 / 5 0   r u l e 
has already been applied, then the amount already charged to 
t h e   M e m b e r   St ate   h a s   to   b e   re i m b u r s e d   f ro m   t h e   E U   b u d g e t. 
Th e re fo re,   i t   i s   i m p o r t a n t   t o   fo l l ow   u p   s u c h   c a s e s   a n d   t o   e x-
amine whether the cancellation of the debt as repor ted by the 
M e mb er  St ate  is   fu l l y  j us tified  an d  th at   th e  appropr iate   l eve l 
o f   p o s s i b l e   a p p e a l   h a s   b e e n   f u l l y   e x p l o r e d   b y   t h e   M e m b e r 
State. 

T h e   C o m m i s s i o n   r e p o r t e d   t h a t   i t   fo l l o w e d   u p   2 3   s u c h   c a s e s 
a b o v e   1   m i l l i o n   e u r o   e a c h   f o r   t h e   f i n a n c i a l   y e a r s   2 0 0 6   a n d 
2007 30. However, the Commission does not, for non-legal cases, 
a s s e s s   t h e   b a s i s   fo r   t h e   c a n c e l l a t i o n   o f   t h e   c a s e   a n d,   fo r   j u -
dicial   c ases,  do es   n ot   eval uate  t he   pos si bili ti e s  for   appe al  to 
hi gh er judicia l ins t ances and wh e th er  such  pos si bili ti es  we re 
pursued. Whilst the cer tification bodies in the M ember States 
e x a m i n e   s u c h   c a s e s,   t h e   s c o p e   o f   t h e i r   a n a l y s i s   i s   l i m i t e d   t o 
ve r i f y i n g   t h a t   a   b a s i s   e x i s t s   fo r   t h e   a u t h o r i t i e s   to   c a n ce l   t h e 
c a s e s   ( e. g.   t h e   ex i s te n ce   o f   a   d e c i s i o n )   a n d   n o t   w h e t h e r   t h at 
d e c i s i o n   c o u l d   a n d   s h o u l d   h a v e   b e e n   a p p e a l e d   t o   a   h i g h e r 
l e ve l.  Th e   re l e va n t   Co m m i s s i o n   g u i d e l i n e s   i s s u e d   to   t h e   ce r -
tification bodies do not provide sufficient detail in respec t of 
the   wo r k  to   b e  do ne.  I n   to tal,   bet wee n   2 0 0 6   an d  2 0 0 9 ,  d ebt s 
with a value of 455 million euro were cancelled by the Member 
States, 261 million euro of which related to a relatively limited 
num be r o f l arge c as es ( 46 ) over  1  million  euro. 

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

30

D O E S 	T H E 	 CO M M I S S I O N 	 S U P E R V I S E 	 A N D	
M O N I TO R 	 R E CO V E R I E S 	 E F F E C T I V E LY ?	 		

54.  

Th e   Co m m i s s i o n   h a s   t h e   re s p o n s i b i l i t y   to   s u p e r v i s e   M e m b e r 
State  manag e ment  and  adminis trat ion   of   agr ic ultural  s pen d -
in g, in clu ding  ac tion taken on re cove r i es.  I t i s  req ui red  to: 

 Ū p u b l i s h   c o m p l e t e   a n d   a c c u r a t e   i n fo r m a t i o n   o n   d e b t s   a n d 
recover ie s  in  t he  annual   accounts,  bas ed   on   t he   d ata   s ub -
mit ted  by t he national  aut hor iti es ;

 Ū iss ue   cl ear  and  unam big uous   g uid an ce   on   t he   appli cat ion 

o f t he l egisl at io n; 

 Ū a p p l y   e f f e c t i v e   c l e a r a n c e   m e c h a n i s m s   —   i n c l u d i n g   t h e 
50/50 rule — to identify non- compliance with regulations, 
and  imp o se co r rec tio ns  on  M embe r  State s  accordin g ly ;

 Ū f i n a l i s e   t h e   w o r k   o f   t h e   t a s k   f o r c e   o n   r e c o v e r i e s   f o r   p r e -

200 6 deb t s; and

 Ū make appropriate use of the information provided by Mem-

b er St ates o n individu al  debts.

The Cour t assessed the operation of these various mechanisms, 
a n d   c h e c k e d   w h e t h e r   t h e y   w e r e   b e i n g   a p p l i e d   a s   i n t e n d e d , 
an d were e ffe c tive in p rotec ting  th e  fi na nci al i nte res ts  of t he 
Unio n.

W H AT 	 D O E S 	T H E 	 CO M M I S S I O N 	 R E P O R T ?

55.  

The Commission publishes information on the recover y of un -
due payments in notes to the annual accounts of the European 
Union. The Commission also repor ts annually to the European 
Par liament and the Council on the protec tion of the EU finan -
cial   intere sts  and  the  fight  again st   f raud,   i n cludi ng   a  se c t ion 
on  recove r ies fo r agr icu l tu re.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

 
31

56.  

 I n f o r m a t i o n   o n   t h e   s i t u a t i o n   o n   r e c o v e r i e s   i n   t h e   M e m b e r 
S t a t e s   i s   r e p o r t e d   y e a r l y   b y   t h e   PA s   i n   s e p a r a t e   t a b l e s   ( A n -
n e x   I I I   a n d   A n n e x   I I I A   d a t a )   i n   t h e i r   a n n u a l   a c c o u n t s 3 1.   T h i s 
i n f o r m a t i o n   i s   a l s o   u s e d   a s   a   s o u r c e   o f   i n f o r m a t i o n   o n   r e -
cove r i e s   p rov i d e d   i n   t h e   An n u a l   Ac t i v i t y   R e p o r t   (A A R )   o f   t h e 
Direc to r- G e neral  o f D G AG RI .

31  Cf. Commission Regulation 
(EC) No 885/2006.

57.   Ta b l e   5   s h o w s   t h e   f i g u re s   p r e s e n t e d   i n   t h e   a n n u a l   a c c o u n t s 
of  the  Euro p ean U nio n give th e followin g  pic t ure wit h reg ard 
to  EAGF  deb t. 

58.  

The amounts presented in the annual accounts are significant-
l y   l owe r   t h a n   t h o s e   re c o rd e d   i n   t h e   M e m b e r   S t a t e s’  d e b t o r s’ 
accou nts as th ey are adj us ted downwards  in  accord ance wi th 
recognised accounting policies and the principle of prudence. 
The  adju sted  fig ures   ref l ec t   th e   f ac t   t h at  M e mbe r   St ate s  may 
reta in  20 %  o f  any  re cove r y,   am ounts  alread y   su bje c t  to   5 0 % 
clearance and to take account of what the Commission consid-
e r s   w i l l   n o t   b e   re cove re d.   I n   m a k i n g   t h i s   a n n u a l   a d j u s t m e nt, 
t h e   Co m m i s s i o n   a p p l i e s   a n   a l g o r i t h m   w h i c h ,   i nte r   a l i a ,   t a k e s 
into  acco unt  th e age of th e outsta nd in g  de bts.  A table  s how-
ing the var ious adjustments made to the figures is incuded at  
A nn ex   III.

59.   Table 6 shows the analysis of the figures published in respec t 
of the ‘recover y ’ of undue payments in the annual accounts of 
the  Euro pe an Un ion.

TA B L E 	 5

O U T S TA N D I N G 	 D E B T 	 A S 	 S H O W N 	 I N 	T H E 	 A N N UA L 	 ACCO U N T S 	 ( M I L L I O N 	 E U R O )

Year

EAGF gross receivables outstanding  
as at 31 December

Write-down

Net amount

2006

1 009

(477)

532

2007

902

(483)

419

2008

684

(392)

292

2009

627

(350)

277

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

32

60.  

61.  

 T h e re   a re   s i g n i f i c a n t   d i f fe re n c e s   b e t we e n   t h e   a b o ve   f i g u re s 
f o r   d e b t s   ( s e e   Ta b l e   5 )   a n d   r e c o v e r i e s   ( s e e   Ta b l e   6 )   a s   p r e -
sented in the accounts and the aggregate of those sums in the 
M e mb er St ates’ records  (s ee Tab le 2 ) . This is par t ly  explained 
by   t h e   d i f fe re n t   d a te s   o n   w h i c h   e a c h   o f   t h e   f i g u re s   i s   e s t a b -
lished. While a large propor tion of these differences could be 
explained by the Commission ser vices, impor tant unexplained 
differences remained due to the absence of a regular reconcili -
a t i o n   p ro c e d u re.   I n   a d d i t i o n ,   t h e   t re a t m e n t   o f   c e r t a i n   d e b t s 
a r i s i n g   a s   a   r e s u l t   o f   t h e   r e s t r u c t u r i n g   o f   t h e   s u g a r   m a r k e t 
r e s u l t e d   i n   a n   o v e r s t a t e m e n t   o f   t h e   2 0 0 7   a c c o u n t s   b y   s o m e 
10 4 mil l io n e uro  (s ee A n nex III) .

Th e   v a s t   m a j o r i t y   ( s o m e   8 7  %   ove r   t h e   fo u r   ye a r s )   o f   t h e  ‘re -
cover ies’ o f undu e paym ent s repor ted  i n th e  an n ual accounts 
a re   t h e   re s u l t   o f   co r re c t i o n s   by   t h e   Co m m i s s i o n   t h ro u g h   t h e 
c l e a ra n ce   o f   a cco u nt s   p ro ce d u re s.  Th e s e   a re   i n   t h e   m a i n   n o t 
linked to individual debts or ir regular payments found. These 
cor rec t io ns   are  b or n e  by   the  t ax payer s   in   th e  M embe r   St ates 
c o n c e r n e d   a n d   a r e   n o t   a n   a c t u a l   r e p a y m e n t   o f   f u n d s   f r o m 
a   b e n e f i c i a r y   u n d u l y   p a i d.   I t   w a s   t h e re fo re   i n a p p ro p r i a t e   t o 
des cr ibe  them  a s ‘recover ies’ in  th e  account s up unti l 2 0 0 8 .     

TA B L E 	 6

‘ R E CO V E R Y ’	 O F 	 U N D U E 	 PAYM E N T S 	 I N 	T H E 	 A N N UA L 	 ACCO U N T S 	 ( M I L L I O N 	 E U R O )

Financial year

Amounts recovered from beneficiaries 
and reimbursed by the Member States

Corrections applied by the Commis-
sion and recovered from the national 
authorities

Total

2006

108 
(11 %)

839
(89 %)

947

2007

115  
(13 %)

739
(87 %)

854

2008

129  
(10 %)

1 148
(90 %)

1 277

2009

132  
(21 %)

4931
(79 %)

625

1   The marked decrease in corrections in the 2009 accounts is explained by the Commission as being due to 368 million euro of clearance being ‘non-

implemented’ at the end of 2008 (see Note 6.2.2 to the Annual Accounts of the EU 2009).

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

32  Example: PA Niedersachsen: 
508 000 euro for amounts 

cleared twice by the Commission 

and not reimbursed within 

20 months after the PA’s request 

(situation as at January 2011).

33

62.  

63.  

64.  

Fo r   e x a m p l e ,   i n   t h e   n o t e s   t o   t h e   a n n u a l   a c c o u n t s   o f   t h e   E U 
f o r   2 0 0 8   ( N o t e   2 . 1 0   o n   r e c e i v a b l e s   a n d   N o t e   6   o n   r e c o v e r y  
o f   u n d u e   p a y m e n t s )   t h e   t o t a l   d e b t   a s   r e g a r d s   E A G F   w a s 
 s t a t e d   a t   6 8 4   m i l l i o n   e u r o   a n d   s o m e   1   2 7 7   m i l l i o n   e u r o 
wa s shown as h aving  b een recove re d i n t hat ye ar.  Anal ysi s of 
t h e   1   2 7 7   m i l l i o n   e u ro   s h o w s   t h a t   1 2 9   m i l l i o n   we re   re c o ve r -
ies from beneficiaries: the remaining por tion of  ‘recoveries’ — 
1   1 4 8   m i l l i o n   e u ro —   c o m p r i s e d   c o r r e c t i o n s   i m p o s e d   o n   t h e 
Member States through the clearance of accounts procedures. 
Howe ver,  exam inatio n  of   the  M em ber   State s’  accounts   s hows 
t h a t   t h e   a m o u n t   o w e d   t o   t h e   v a r i o u s   p a y i n g   a g e n c i e s   w a s 
1   2 4 6   m i l l i o n   e u r o   a n d   t h e   a m o u n t   a c t u a l l y   r e c o v e r e d   f r o m 
b e n e f i c i a r i e s   wa s   1 1 3   m i l l i o n   e u ro.   Fo r   2 0 0 9 ,   w h i l e   t h e   Co m -
miss ion  dist ingu ishes   more  clea r ly   bet we en   fi n an c ial  cor re c -
tions and ac tual recoveries, it is still not possible to determine 
f r o m   t h e   n o t e s   t o   t h e   a c c o u n t s   t h e   p r e c i s e   a m o u n t   a c t u a l l y 
recovere d from f in al  b enefic iar ies.   

G U I D A N C E 	 I S 	 P R O V I D E D 	 BY 	T H E 	 CO M M I S S I O N 	 B U T 	 I S	
S O M E T I M E S 	 L AT E 	 A N D 	 I N CO M P L E T E

T h e   Co m m i s s i o n   h a s   c l a r i f i e d   t h e   a p p l i c a t i o n   o f   t h e   l e g i s l a-
tio n  in  it s  gu idel ines   to  M embe r   St ate s   is sued   in   th e   co ntex t 
o f   t h e   c l e a r a n c e   o f   a c c o u n t s .   H o w e v e r,   t h e   a n n u a l   u p d a t e s 
a p p l i c  a b l e   t o   t h e   f i n a n c i a l   y e a r s   2 0 0 6 ,   2 0 0 7 ,   2 0 0 8   a n d   2 0 0 9 
d i d   n o t   a l l ow   fo r   PAs   to   f u l l y   a d a p t   t h e i r   s ys te m s,   w h i c h   c re -
ated problems for Member States in ensuring those guidelines 
we re fu l ly co mp l ied w it h.

The Cour t has identified cases in Member States where the re -
sponsible authorities were unclear on how to deal with cer tain 
sp ecif ic c irc umstan ces fol l owing  th e  applicati on of  th e 5 0 /5 0 
rule. These circumstances can lead to Member States not being 
re i m b u r s e d 3 2  o r   t h e   b u d g e t   b e i n g   c re d i te d   w i t h   m o re   t h a n   i t 
sho ul d  have bee n.   

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

34

65.  

66.  

F I N A N C I A L 	 C L E A R A N C E :	T H E 	 CO M M I S S I O N 	 ACC E P T S 	T H E	
D E B TO R S 	 ACCO U N T S 	 A N D 	 C H A R G E S 	 M E M B E R 	 S TAT E S	
U N D E R 	T H E 	50/ 50	 R U L E

Th ro u g h   t h e   a n n u a l   f i n a n c i a l   c l e a ra n ce   o f   a cco u n t s   d e c i s i o n 
t h e   Co m m i s s i o n   h a s   to   d e te r m i n e   t h e   ex p e n d i t u re   i t   a cce p t s 
( s u b j e c t   to   f u r t h e r   a u d i t )   i n   e a c h   M e m b e r   S t ate   o n   t h e   b a s i s 
of  the  acco unts t ran smitted  by  th e  PAs.

33  Article 32(5) of Council 
Regulation (EC) No 1290/2005.

The reliabilit y of the PA’s annual accounts, including the debt -
o r s ’  a c c o u n t s ,   i s   v e r i f i e d   b y   t h e   i n d e p e n d e n t   c e r t i f i c a t i o n 
b o d i e s ,   w h i c h   r e p o r t   t o   t h e   C o m m i s s i o n   a n d   i s s u e   a n   a u d i t 
cer tificate. This system has been the subjec t of continuous up -
dating and improvement by the Commission and the debtor ’s 
accounts are now more complete and more rigorously checked 
than  th ey were at t he time of th e  Cour t ’s  prev ious  re por t.

67.   As   f rom   t he  finan cial   year   20 06 ,  t he   f in an c ia l  cle arance  de ci-
sion has included the amount to be charged to Member States’ 
bu dg e t s  a s  a   resu l t  o f  the  app lic ati on   of   th e  5 0 /5 0   c lea ra nce 
m e c h a n i s m 3 3   .   M e m b e r   S t a t e s   h a v e   b e e n   c h a r g e d   w i t h   t h e 
am o unts   shown  in   Table   7 .  The  table  shows   th e  pre domin ant 
im p ac t  so  far of  the s ys tem was in  el imi n ati n g old  de bt s  f rom 
the  record s. I ts  imp ac t was  greates t at th e  s ta r t  of  t h e proce -
dure, where large numbers of old debts were subjec ted to the 
50 /5 0 rul e and M emb er States ch arg ed  as  a res ul t.   

TA B L E 	 7

A M O U N T S 	 C H A R G E D 	TO 	 M E M B E R 	 S TAT E S 	 U N D E R 	T H E 	5 0/5 0 	 R U L E 	 ( M I L L I O N	
E U R O )

Charged to Member States under the 
50/50 mechanism by Commission 
decisions

For 2006

For 2007

For 2008

For 2009

231,9

137,6

31,4

22,8

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

35

68.  

69.  

A M O U N T S 	 C A N 	‘ E S C A P E ’	T H E 	 5 0/5 0 	 C L E A R A N C E	
P R O C E D U R E

T h e   o r i g i n a l   a m o u n t   o f   t h e   d e b t   m a y   s u b s e q u e n t l y   h a v e   t o 
b e   a d j u s t e d   u p w a r d s   o n c e   t h e r e   i s   a   f i n a l   d e c i s i o n   f r o m   a n 
administrative or judicial authorit y. These adjustments should 
a l s o   b e   s u b j e c t e d   t o   t h e   5 0 / 5 0   c l e a r a n c e   m e c h a n i s m .   H o w -
ever, if the amounts originally recorded as a debt have already 
been subjected to the mechanism, the adjustment may ‘escape’ 
o r   avo i d   c l e a ra n ce,   p a r t i c u l a r l y   w h e n   t h e y   a re   a cco u nte d   fo r 
u n d e r   t h e   s a m e   c a s e   i d e n t i f i c a t i o n   n u m b e r   a n d   t h e   s a m e   f i -
n a n c i a l   ye a r   o f   p r i m a r y   f i n d i n g   o f   t h e   i r re g u l a r i t y.  Th e   s a m e 
app l ies  to  any interes t calc u late d on  t h e d ebt.   

The  Co ur t   ide nt ified  a  to tal   of  3 7 ,9   mi lli on   euro  as  ‘e sca pin g’ 
or  avo iding   c l earance  in  t he  year s   2 0 0 6–0 9  in   th is  way.  I f   th e 
5 0 / 5 0   r u l e   h a d   b e e n   a p p l i e d   o n   t h i s   a m o u n t ,   i t   w o u l d   y i e l d 
an o the r 18,9 mil l io n euro  fo r the  EU  budg e t.  Th e  Cour t ’s  ana-
lysis showed that the amounts ‘escaping’ clearance in this way 
out weigh the potential adjustments in the opposite sense, i.e. 
where the amount of the debt recorded in the M ember State’s 
a c c o u n t s   i s   r e d u c e d   a f t e r   t h e   a p p l i c a t i o n   o f   t h e   5 0 / 5 0   r u l e . 
The lack of clar it y in the Commission’s guidelines is par tly re -
s p o n s i b l e   fo r   t h e s e   c a s e s   e s c a p i n g   t h e   c l e a ra n ce   m e c h a n i s m 
an d,  al t hou gh  t he Com mis sion is  aware  of  t he  ci rc ums tan ce s, 
it has not reac ted in a timely manner to remedy this situation. 
These findings were confirmed during the Cour t ’s on-the -spot 
audit s.   

TA B L E 	 8

S H O W I N G 	T H E 	 I M PAC T 	 O F 	T H E 	 A P P L I C AT I O N 	 O F 	T H E 	5 0/5 0 	 M E C H A N I S M 	 I N	
R E G A R D 	TO 	T H E 	 M E M B E R 	 S TAT E S

Member State

BE

DE

EL

ES

FR

IT

NL

PT

UK

Other 
MSs

Total

Amounts
(in thousand euro)

8 046

31 975

15 954

44 611

43 944

245 963

7 158

9 644

10 618

5 874

423 787

 %

1,9

7,5

3,8

10,5

10,4

58,0

1,7

2,3

2,5

1,4

100,0

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

36

70.  

71.  

S P E C I F I C 	 AU D I T S 	 O N 	 D E B T S 	 BY 	T H E 	 CO M M I S S I O N 	 U N D E R	
CO N F O R M I T Y 	 C L E A R A N C E

Th e   c u r re nt   l e g a l   f ra m e wo r k 3 4  p rov i d e s   t h e   Co m m i s s i o n   w i t h 
t h e   p o s s i b i l i t y   t o   i n i t i a t e   t h e   r e c o v e r y   f r o m   M e m b e r   S t a t e s 
through its own audit work during the conformity clearance of 
accou nts pro cedu re fo r s p e cific  reas on s relate d to d ebt  man -
age ment. 

34  Article 32(4) and (8) of Council 
Regulation (EC) No 1290/2005.

35  Formal notification pursuant 
to Article 11(2) of Commission 

Regulation (EC) No 885/2006.

The Co ur t examined  th e wor k done  by  t h e Comm is si on  und er 
conformity clearance procedures, but only where the decisions 
s p e c i f i c a l l y   d e a l t   w i t h   d e b t   m a n a g e m e n t   i n   t h e   p e r i o d   2 0 0 6 
to  20 09. These   p ro cedu res   have  n ot   yet   be en   f ul ly   con c lud ed 
and, consequently, no recoveries from Member States through 
cor rec t io ns  h ave b een p ro p os ed.

72.   Wit h  reg ard  to  the  Co mmission’s   audit s,  th e y   were  mai n ly   fo -
c u s e d   o n   s ys te m s   ex a m i n at i o n ,   b u t   a l s o   cove re d   a   s a m p l e   o f 
2 0 7   c a s e s .   Fo r   a   c e r t a i n   n u m b e r   o f   t h e m ,   t h e   i n i t i a l   a s s e s s -
m e nt   o f   t h e   Co m m i s s i o n   s e r v i ce s,   co m m u n i c ate d   to   M e m b e r 
States 35, was that cer tain amounts not recovered could be sub-
jec t  to  p ote nt ial co r rec tio ns  and be re cove re d d ire c tly  by  t h e 
Co m m i s s i o n   f r o m   t h e   M e m b e r   S t a t e.  T h e   f i n a n c i a l   i m p a c t   i s 
estimated at 27,2 million euro and covers eight Member States 
(B elgium, D enmar k , G er many, Greece, Spain, France, I taly and 
the  UK ). 

TA B L E 	 9

S H O W I N G 	T H E 	 M E M B E R 	 S TAT E S 	 A F F E C T E D 	 BY 	 A M O U N T S 	 E S C A P I N G	
C L E A R A N C E

Member State

Total
(in thousand euro)

 %

DE

535

1,4

EL

ES

FR

IT

Other MSs

Total

1 129

17 127

8 070

10 637

3,0

45,2

21,3

28,1

381

1,0

37 879

100,0

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

37

36  Commission Decision 
2006/678/EC of 3 October 

2006 (OJ L 278, 10.10.2006, 

p. 24): Approximately 98 % of 

the amounts charged to the 

Member States concerned Italy, 

311 million euro for 157 cases of 

irregularities. On 11 December 

2006, Italy brought an action 

against the Commission (Case 

T-394/06); the case is pending 

before the ECJ.

37  On 14.4.2009, Greece 
brought an action against the 

Commission concerning 13 cases 

of irregularity of 13,3 million 

euro, pleading, inter alia, that 

Council Regulation 1290/2005 

was not applicable for old cases 

(Case T-158/09); the case is 

pending before the ECJ.

73.  

74.  

T H E 	‘ B U R D E N 	 O F 	T H E 	 PA S T ’,	 I N C LU D I N G 	 O L D 	TA S K 	 F O R C E	
R E CO V E R Y 	 C A S E S ,	 N E E D S 	TO 	 B E 	 L A I D 	TO 	 R E S T	

The Cour t ’s previous repor t, published in 2004, found ser ious 
weak nesses in the treatment of debt and recover y. Thousands 
of old cases had been neglected due to weak nesses in previous 
procedures. These were to be decided upon by the Commission 
with the financial burden falling either to EU budget or to the 
M e mb er St ate  concer ned. 

I n 2002, t he Co mmis sion had set  up an  OL AF–AGRI Task Force 
R ecover y ( TFR) with a view to clear ing ir regular it y cases noti-
fied under the old regulator y framework . Because of the large 
number of pending cases, the Commission decided to concen-
trate  it s wo r k  o n c ases ab ove 50 0  0 0 0  e uro.    

 Ū A t   t h a t   t i m e   4 3 1   c a s e s   w e r e   a b o v e   t h a t   t h r e s h o l d   a n d 
3   2 2 7   c a s e s   b e l ow   i t .   B y   3   O c to b e r   2 0 0 6 3 6,   j u s t   b e fo re   t h e 
new regulation came into force, 349 cases above the thresh-
o ld  had b een cl eared. 

 Ū Al l c ase s ou ts t andin g as at 1 5  O c to ber  2 0 0 6 , i nc lu ding  t he 
82  (431–3 49 ) T F R   c as es  t hat  h ad  n ot  be e n  t reated   an d  t he 
3   2 2 7   l o w e r - v a l u e   c a s e s ,   w e r e   r e p o r t e d   a s   h a v i n g   b e e n 
cl ea re d un der t he new  5 0/50  r ule  for   20 06 . 

 Ū A   f u r t h e r   c o n f o r m i t y   c l e a r a n c e   d e c i s i o n   o f   1 3   Fe b r u a r y 
2 0 0 9   c o v e r e d   a n   a d d i t i o n a l   2 2   T F R   c a s e s   ( o u t   o f   t h e   r e -
m a i n i n g   8 2 ) 3 7,   t w o   o f   w h i c h   w e r e   r e c o v e r e d   t w i c e   ( u n d e r 
t he 50 /50 ru le and by  con fo r m it y  c le aran ce de c i s ion ) . 

 Ū H oweve r, seven  T FR  c ases, (G er ma ny 1 , G reece 3 ,  France  1, 
I t a l y   1   a n d   Po r t u g a l   1 )   wo r t h   1 6 , 3   m i l l i o n   e u ro   we re   k e p t 
o u t s i d e   t h e   A n n ex   I I I   t a b l e   a n d   n o t   c l e a re d   5 0 / 5 0   a n d   a re 
t he  su bjec t   o f  co ntinu ing  c leara n ce   proced ure s  in   v ie w  of 
a f inal  Commiss ion  d ecis ion . 

 Ū The Commission requested fur ther infor mation from M em -
ber States in 2009 concerning 49 outstanding old TFR cases 
a s   t h e s e   c a s e s   co u l d   n o t   b e   i d e nt i f i e d   by   t h e   Co m m i s s i o n 
in th e Ann ex III  t ab l es.  Th ese  proce du res  are  s ti ll on go ing. 

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

38

75.  

I n   a d d i t i o n   t o   t h e   4 9   o l d   t a s k   f o r c e   c a s e s   t h a t   r e m a i n   u n -
d e c i d e d,   t h e   Co u r t ’s   a u d i t   a l s o   fo u n d   t h at   t h e   a p p l i c at i o n   o f 
the   50/5 0  rul e  to  cas es   initially  fores e en   to  be   tre ated  by   th e 
task force but still open at 16 Oc tober 2006 led to inconsistent 
t re a t m e n t   o f   d e b t o r s   re l a t i ve   t o   t h o s e   c a s e s   a l r e a d y   c l o s e d. 
D e t ails  o f the se c as es are given  in  A nn ex  IV.

76.  

77.  

I N F O R M AT I O N 	 O N 	 I R R E G U L A R I T Y 	 I S 	 S E N T 	TO 	 O L A F	
TO O   L AT E	

Fo l l o w i n g   t h e   Co u r t ’s   p re v i o u s   a u d i t   a n d   s u b s e q u e n t   t o   t h e 
adoption of the new regulator y framework DG AGRI became re -
sponsible for financial follow up and communications relating 
to   d e b t   a n d   i r re g u l a r i t y   we re   ro u te d   to   O L A F   t h ro u g h   i t.  Th e 
change in procedures was intended to place responsibilit y for 
follow-up with DG AGRI, the ser vice that in effec t paid out the 
monies to be recovered, whilst at the same time retaining the 
f l ow   o f   i n fo r m a t i o n   o n   i r re g u l a r i t y   to   O L A F.  Th e   i n fo r m a t i o n 
made   avail ab le   to  OLA F   is   inten de d  for   st rate gic  intel lig e nce 
purposes, namely risk analysis, fraud proofing and prevention, 
an d no t  fo r finan c ial fo l low-up as  such .

The Cour t found that the infor mation made available to OLAF 
is ex tensively used for repor ting purposes, notably in the con -
tex t of the OLAF annual ac tivity repor t, the Commission repor t 
t o   t h e   E u r o p e a n   Pa r l i a m e n t   a n d   t o   t h e   C o u n c i l   o n   t h e   p r o -
te c t i o n   o f   t h e   Co m m u n i t i e s’  f i n a n c i a l   i n te re s t s   a n d   t h e   f i g h t 
a g a i n s t   f r a u d   a n d   o t h e r   p u b l i c a t i o n s   t h a t   a re   d i s t r i b u t e d   t o 
the M ember States. However, at operational level both within 
O L A F   a n d   at   t h e   Co m m i s s i o n ,   o n l y   l i m i te d   u s e   a p p e a r s   to   b e 
m a d e   o f   t h e   d at a b a s e   fo r   a n a l ys i s   a n d   s t rate gi c   i nte l l i g e n ce. 
T h i s   i s ,   i n   p a r t ,   d u e   t o   t h e   l o n g   d e l a y s   w h i c h   c a n   o c c u r   i n 
prac tice bet ween the detec tion of a potential irregularit y and 
i t s   n o t i f i c at i o n   to   t h e   Co m m i s s i o n   u n d e r   t h e   n e w   re g u l ato r y 
fram ewo r k .

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

39

78.  

 C u r r e n t l y   O L A F,   i n   r e c o g n i t i o n   o f   t h e   a b o v e   l i m i t a t i o n s ,   i s 
study ing  the  po ss ib ilit y  of   p roposi ng   a   mod if icati on  of   Com -
mission Regulation (EC ) No 1848/2006 in order to achieve t wo 
different o bj ec t ives:   

 Ū to considerably reduce the long delays cur rently occur r ing 
between the detection of an irregularity and its notification 
to  OLA F,  f rom t he M emb e r State s  via  D G  AGR I;

 Ū to   f u r t h e r   i m p rove   t h e   co nte nt   o f   t h e   co m m u n i c at i o n s,   i n 
p ar tic ul ar regard in g cer tain  key  i n for m ati on  n eces s ar y  fo r 
t h e   p u r p o s e s   o f   r i s k   a n a l y s i s,   f r a u d   p ro o f i n g   a n d   p re ve n -
t ion .

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

CONCLUSIONS AND  
RECOMMENDATIONS

40

79.  

80.  

T h e   C o u r t ’s   a u d i t   o f   t h e   s y s t e m s   e s t a b l i s h e d   a n d   o p e r a t e d 
by   M e m b e r   S t ate s   to   re cove r   i d e nt i f i e d   d e b t s,   to g e t h e r   w i t h 
t h e   Co m m i s s i o n' s   s u p e r v i s i o n   o f   t h e   p ro ce s s,   co n c l u d e s   t h at 
ove ra l l   t h e y   h ave   i m p rove d   s i n ce   2 0 0 4 .  Th e   s ys te m s   a re   n ow 
mo re   ef fe c tive  in  p ro tec t in g  th e  E U’s  f in an c ial   i nte re st s,   par -
ticular ly through the ar rangements introduced for repayment 
b y   M e m b e r   S t a t e s   t o   t h e   E U   o f   a   p r o p o r t i o n   o f   u n r e c o v e r e d 
d e b t s   ( t h e   5 0 / 5 0   r u l e ) .   H owe ve r,   t h e   s ys te m   n e e d s   to   b e   f u r-
t h e r   i m p r o v e d   b y   c l a r i f y i n g   t h e   r u l e s ,   t h e r e b y   r e d u c i n g   t h e 
s co p e   fo r   i nte r p re t at i o n   a n d   d i ve rgi n g   p r a c t i ce s   a d o p te d   by 
the  M e mb er St ates.

For the most par t, M ember States process and record debts in 
a cco rd a n ce   w i t h   t h e   r u l e s   a n d   re q u i re m e nt s.   H owe ve r,   t h e re 
are  so me t ime s  s ignf icant  d if fere n ces   i n   i nte r pre tat ion :   de bts 
a r e   r e c o g n i s e d   a t   d i f f e r e n t   t i m e s ;   r e p o r t e d   f i g u r e s   a r e   n o t 
c o m p a r a b l e ;   i n t e r e s t   i s   a p p l i e d   i n c o n s i s t e n t l y   a n d   t h e   d a t e 
and the circumstances whereby debts are written off var y con-
side rab ly. I n g eneral,  the margin  of  inter pret at ion  grante d to 
the M ember States allow them to take decisions which have a 
ne g at ive financial  imp ac t o n th e E U  bud g et.

81.   M e m b e r   S t a t e s   a r e   n o w   r e c o v e r i n g   a   g r e a t e r   p r o p o r t i o n   o f 
ne w  deb t s, al th o ugh the Cour t n ote s  th at  th e  amount s  bei ng 
r e c o r d e d   a s   n e w   d e b t s   h a v e   r e d u c e d .   T h e   C o u r t   f o u n d   t h e 
l i k e l i h o o d   o f   re c o ve r y   o f   a n   u n d u e   p ay m e n t   t o   b e   a d ve r s e l y 
a f f e c t e d   b y   t h e   f r e q u e n t   l o n g   d e l a y s   i n   t h e   M e m b e r   S t a t e s’ 
in itiatio n of recover y p rocedures,  s h or tcomi n gs  in  t he  ac ti on 
they take, and the limited enforcement possibilities available 
to  the m.

82.   Whil e  M emb er  St ates   gen erally   w r i te   of f   d ebt s  in   accord an ce 
with the rules, a lack of clarit y in these rules means that there 
a r e   c o n s i d e r a b l e   d i f f e r e n c e s   i n   t h e   c i r c u m s t a n c e s   i n   w h i c h 
this happens. I n par ticular, the point in the insolvenc y proce -
dure where write - off occurs can differ between Member States. 
Such issues have par ticular significance as wr itten- off debt is 
n o t   s u b j e c t   to   re p ay m e nt   to   t h e   E U   b u d g e t   w i t h i n   t h e   5 0 / 5 0 
rul e.   

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

41

R E C O M M E N D AT I O N 	 1

T h e   Co m m issi o n   s h o u l d   f u r t h e r   i m p r ove   t h e   w ay   i n   w h i c h 
d e b t s   i n   t h e   M e m b e r   S t a t e s   a r e   m a n a g e d   a n d   r e p o r t e d 
u p o n   a n d   e n s u r e   a   c o n s i s t e n t   t r e a t m e n t   o f   t h o s e   d e b t s , 
a cross  all M e m b e r St ate s .  I n p ar ti cular,  i t  sh o ul d:

Ū  re quest Memb er States to rep or t irre gularities and other 
re coveries o nce th ey b e com e le gally du e, not ab ly at th e 
tim e  th e  re cove r y  n oti f i c ati o n  has  b e e n  dr aw n  u p;

—  issue guidelines in a timely manner to address current in -
consis tencies in key rep or ting and accounting concept s;

—  i n t r o d u c e   a   u n i f o r m   t i m e   l i m i t   b e t w e e n   t h e   d i s c o v e r y 
o f   a   p o t e n t i a l   i r r e g u l a r i t y   a n d   t h e   n o t i f i c a t i o n   o f   t h e 
re cove r y  o rd e r  to   th e  d e b to r,  e n han cin g  h ar m o nis ati o n 
b e t w e e n   M e m b e r   S t a t e s   a n d   e n s u r i n g   a   m o r e   t i m e l y 
t r ansm issi o n o f inf o r m ati o n o n  ir re gu lar i ti e s  to  O L AF;

—  issu e cl ear an d unamb igu o us r ul es in re lati o n to th e ap -

p li c ati o n o f inte re s t  o n o u t s t an din g  d e b t ;

—  clar i f y th e circums t an ce s  u n d e r  w hi ch d e b t s  c an  b e d e -
clare d as ir re coverab le, in p ar ticular in re lation to ins o l -
ve n c y  c as e s .

83.  

I n   re l a t i o n   t o   t h e   Co m m i s s i o n’s   s u p e r v i s i o n   a n d   m o n i t o r i n g, 
t h e   Co u r t   fo u n d   t h at   t h e   i n fo r m at i o n   p rov i d e d   i n   t h e   a n n u a l 
accou nts has  imp roved, al th oug h t h e d is ti nc ti on be t we en  re -
coveries from individual beneficiaries — currently only 13 % of 
the  to t al  —  and am ou nt s repaid  by  M e mber  St ate auth or iti e s 
( f i n a n c e d   b y   n a t i o n a l   t a x p a y e r s )   i s   s t i l l   i n s u f f i c i e n t l y   c l e a r. 
T h e   C o m m i s s i o n   d o e s   n o t   s y s t e m a t i c a l l y   r e c o n c i l e   t h e   v a r i -
ous sources of infor mation, notably the aggregate data in the 
M e m b e r   S t ate s’  re co rd s,   w i t h   t h e   f i g u re s   i n   t h e   E U   a cco u n t s, 
whic h redu ces t ran sp arenc y  and  di mi ni s he s th e pos s ibili t y  of 
i d e nt i f y i n g   e r ro r s   i n   t h e   d at a .  Th e   Co m m i s s i o n   n ow   p rov i d e s 
more guidance to Member States, but it is sometimes late and 
incomplete. The task force set up in 2002 to resolve the treat -
ment  o f  p revio us   u nrecovered  de bt s   h as   compl eted   its   wor k , 
however the follow-up of cer tain cases remains to be finalised.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

42

84.  

The int rod uc t ion  of the 50/ 50  r ule, a  ke y  el em ent of  th e 2 0 0 6 
f r a m e w o r k ,   w a s   i n t e n d e d   t o   i n c e n t i v i s e   M e m b e r   S t a t e s   t o 
speed up the recover y procedures for repor ted debt. I t repre -
sents an improvement on the previous situation whereby unre -
covered debt was allowed to remain in the accounts for many 
y e a r s.   H o w e v e r,   t h e   r u l e   a l s o   i n t r o d u c e s   a   r i s k   t h a t   M e m b e r 
S t a t e s  ‘m a n a g e’  t h e   re p o r t i n g   a n d   w r i t e - o f f   p ro c e s s   t o   t h e i r 
ad vant age,  not ab ly  to   avoid   or  pos tpon e   it s  appl ic at ion   (a nd 
r e s u l t a n t   c h a r g e   t o   t h e   n a t i o n a l   b u d g e t ) .   T h e   C o u r t ’s   w o r k 
showed  this r isk to b e real  in ter m s  of :   

 Ū i n   t h e   c a s e   o f   i n s o l ve n c y,   w r i t i n g   o f f   o f   t h e   d e b t   b e fo re   i t 

was  fu ll y  ju st if ied to d o so;

 Ū delaying the date of recognition of the debt, thereby post -

p o ning  the ap p l icat ion  of  t he r ule.

R E C O M M E N D AT I O N 	 2

T h e  Co mm issi o n sh o u l d th e re f o re:

Ū  r e v i e w   s p e c i f i c   a s p e c t s   o f   t h e   a p p l i c a t i o n   o f   t h e   50/50 
rule, for e xamp le amount s that p otentially esc ap e clear-
an ce,  to  e nsu re  i t s e f f e c ti ve ap p li c ati o n;

—  ensure that th e wo rk of th e cer tif ic ation b o dies , in th eir 
te s tin g  o f d e b to r s'  a cco unt s in  th e M e m b e r  St ate s , cov -
e r s th e r isk s hi gh li ghte d;

—  co nsi d e r   h ow   to   re cove r   a   g re ate r   p r o p o r ti o n   o f   u n du e 

p ay m e nt s f ro m b e n e f i ciar i e s;

—  f i n a l i s e   t h e   f o l l o w - u p   o f   t h e   o l d   Ta s k   F o r c e   R e c o v e r y 

c as e s  as  s o o n as p ossib l e.

T h i s   r e p o r t   w a s   a d o p t e d   b y   C h a m b e r   I ,   h e a d e d   b y   M r   O l a v i 
ALA-NISSILÄ, Member of the Cour t of Auditors, in Luxembourg 
at  its  me eting  o f 8 Ju ne 201 1.

Fo r  th e  Co u r t  o f  Audi to rs

Víto r  M anue l  da  S I LVA   C A L D E I R A
Presi de nt

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

 
43

A N N E X 	 I

N E W 	 D E B T S 	 R A I S E D 	 — 	 I N C LU D I N G 	‘ P R E - D E B TO R S’	
F O R 	2006 – 0 9

An average of 199 million euro per year of new debt — including ‘pre-
debtors" mainly recorded in France and Italy — has been reported by 
Member States for the last four years.

N E W 	 D E B T S 	 R A I S E D 	 2 00 6 – 0 9 	 ( I N 	% )	 	
TOTA L 	 A M O U N T: 	79 5	 M I L L I O N 	 E U R	

BE
6 %

DE
7 %

ES
20 %

Other MSs
24 %

UK
9 %

IT
15 %

FR
19 %

Member State

BE

DE

ES

FR

IT

UK

Other 
MSs

Total

Amount  
(million euro)

52,5

55,1

157,3

150,5

121,8

69,5

188,4

795,1

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

 
44

A N N E X 	 I I

A P P L I C AT I O N 	 O F 	 I N T E R E S T 	 I N 	T H E 	 PAY I N G 	 AG E N C I E S 	 AU D I T E D

Code

Authority name

Interest between 
the date of the 
undue payment 
and the date of the 
recovery order

Interest between 
the date of the 
recovery order and 
the date of  
repayment

National rules 
applicable to all 
measures

Accrued interest 
at the end of the 
financial year

BE01

BE03

BIRB

Not applied

Rare

OP Wallonie

Systematic

Occasional

DE02

HZA Hamburg-Jonas

 Systematic

Not applicable

DE12

Niedersachsen

 Not applicable

 Systematic

Andalucía

Systematic

ES01

ES17

ES18

FR14

FR16

GB09

GR01

HU01

IT01

IT02

Rare

 Rare

Rare 

Rare 

Rare

 Systematic

 Systematic

Not applied 

Not applied

AVFGA

FEGA

ONIEP

ONIGC

RPA

Systematic

Not applied

OPEKEPE

Occasional

Systematic

ARDA

AGEA

SAISA

Occasional

Occasional

Occasional

Systematic

Occasional

Systematic

Yes

Yes

Yes

Yes

Yes

Yes

Yes

 No

No

Yes

Yes

Yes

Yes

Yes

No

No

No1

No

Yes

Yes

Yes

No

No

No

No

No

Yes

Yes

1   Interest calculations are carried out systematically on a three years basis and communicated to the debtors to avoid the amounts becoming 

time barred.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

45

A N N E X 	 I I I

D I F F E R E N C E S 	 B E T W E E N 	 D E B T S 	 R E CO R D E D 	 I N 	 M E M B E R 	 S TAT E S	
D E B TO R S 	 ACCO U N T S 	 A N D 	T H E 	 G R O S S 	 R E C E I VA B L E S 	 A S 	 S H O W N	
I N 	T H E 	 A N N UA L 	 ACCO U N T S

Year

2006

2007

2008

2009

(million euro)

Amounts recorded in Member State debtor accounts 
as at 15 October (Table 2)

1 267

1 437

1 246

1 115

Add: Adjustment for Italy (see endnote 1 of Table 2)

182,0

Add: Amount of debts outstanding reported by paying agencies 
in Annex IIIA

39,9

59,3

Add: Adjustments for year-end Oct – Dec 

18,1

31,5

2,6

-2,0

Less: Pre-debtors

(152,9)

(163,4)

Subtotal nominal amounts estimated outstanding debts  
as per 31 December

1 467,1

1 468,5

1 135,6

1 008,9

Less: Amounts subject to 50/50 clearance

(274,4)

(330,1)

(288,9)

(233,8)

Less: 20 % retention allowed to Member States

(203,0)

(227,6)

(163,1)

(148,0)

Subtotal calculated gross amounts for the balance sheet

989,8

910,8

683,6

627,1

Remaining differences: unexplained1

19,0

-9,0

Gross receivables as per annual accounts (Table 5) 
as at 31 December

1 009

9022

684

627

1   The outstanding differences referred to in paragraph 60 are shown in this line of the table.
2   The figure shown includes the overstated amount in relation to sugar detailed in paragraph 60.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

46

A N N E X 	 I V

LO N G S TA N D I N G 	 U N R E S O LV E D 	 I S S U E S 	 O F	
I N CO N S I S T E N T 	T R E AT M E N T 	 O F 	 I R R E G U L A R I T Y	
A N D 	 R E CO V E R Y

Concerning the threshold of 500 000 euro that was fixed in the context of 
the task force recovery, the following example demonstrates the inconsist-
ent treatment of the old cases:

 Ū OLAF Case No DE/92/001: irregularity of 739 092 DM (< 500 000 euro)

 Ū OLAF Case No DE/92/002: irregularity of 4 247 763 DM (> 500 000 euro).

Although both cases stem from the same irregularity, Case No DE/92/001 
was cleared 50/50 for 2006, including interest, and subsequently declared 
irrecoverable by the Hamburg-Jonas PA. The second case, No DE/92/002, 
is still pending at the Commission and was not cleared in so far as it was 
excluded — without a Commission decision — by the PA from its Annex 
III figures. Whatever the final Commission decision may be, the first case 
has resulted in 50 % being charged to the EU budget whereas the second 
case will be either 100 % to the charge of the national or 100 % to the 
charge of the EU budget.

Fur thermore,  these  two  cases,  provisionally  removed  from  the  1991 
clearance decision, came under a budget line that was 100 % excluded 
from Community financing, confirmed by a Court of Justice judgment 
on 21 January 1999. The ECJ’s judgment could be seen as prevailing and 
should not be circumvented by the reporting provisions of Council Regula-
tion (EC) No 595/91. Hence, the full amounts for the two cases should have 
already been excluded from Community financing in 1999. The financial 
impact to the EU budget is calculated as at 2,35 million euro.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

47

A N N E X 	 I V

EXPORT REFUND CASE IN ITALY

In 1996, the Commission disallowed from Community financing an amount 
of 118,1 million euro because of negligence on the part of the Italian au-
thorities related to one beneficiary (Commission Decision No 96/311/EC). 
In 2006, debts of the same beneficiary of 2,9 million euro were cleared 
50/50 as not been declared as irrecoverable by the Italian PA (SAISA). This 
amount is subject to a Commission investigation. In 2007, the Italian PA, 
contrary to its 2006 approach, has, with the acceptance of the Commis-
sion, written off an amount of 117 million euro because of insolvency 
proceedings for the beneficiary. The Commission’s handling of the case, 
i.e. to accept a write-off of 117 million euro in 2007 and to investigate 
further into a smaller amount of 2,9 million euro without considering the 
negligence element decided upon in 1996, appears to be questionable. 

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

48

REPLY OF THE  
COMMISSION

EXECUTIVE	SUMMARY

I II .
T h e   C o m m i s s i o n   c o n s i d e r s   t h a t   t h e   n e w 
clearance mechanism for ir regular it y cases 
i n t r o d u c e d   i n   2 0 0 6   h a s   l e d   t o   a   s i g n i f i -
c a n t   i m p r o v e m e n t   o f   t h e   s i t u a t i o n ,   b o t h 
a s   r e g a r d s   t h e   r a t e   o f   r e c o v e r y   f r o m   f i n a l 
b e n e f i c i a r i e s   a n d   t h e   p r o t e c t i o n   o f   t h e 
f i n a n c i a l   i n t e r e s t   o f   t h e   E U   a g a i n s t   d e f i -
c i e n t   r e c o v e r y   p r o c e d u r e s   b y   M e m b e r 
States.   

I II .	 first 	 ind ent
T h e   C o m m i s s i o n   c o n s i d e r s   t h a t   t h e   r i s k 
re fe r re d   to   by   t h e   Co u r t   i n   i t s   o b s e r vat i o n 
i s   a l r e a d y   a d d r e s s e d   t h r o u g h   t h e   w o r k   o f 
t h e   c e r t i f i c a t i o n   b o d i e s   a n d   i t s   o w n   c o n -
for mit y  audits.

W h e r e   s u c h   s h o r t c o m i n g s   m a t e r i a l i s e , 
t h e   r e s u l t i n g   f i n a n c i a l   r i s k   i s   a d d r e s s e d 
t h r o u g h   f i n a n c i a l   c o r r e c t i o n s   u n d e r 
 A r t i c l e   3 2 ( 4 )   a n d   ( 8 )   o f   R e g u l a t i o n   ( E C ) 
N o 1 2 90 /200 5 .

I II .	 seco nd 	 ind ent
T h e   f a c t   t h a t   t h e   a p p l i c a t i o n   o f   t h e   n e w 
r e g u l a t o r y   c o n c e p t s   d o   n o t   r e s u l t   i n   a 
u n i f o r m   p r a c t i c e   t h r o u g h o u t   a l l   M e m b e r 
S t a t e s   i s   t h e   i n e v i t a b l e   c o n s e q u e n c e   o f 
t h e   f a c t   t h a t   t h e   r u l e s   fo r   t h e   re c o ve r y   o f 
ir regular payments have not been har mon-
i s e d   a t   E U   l e v e l ,   b u t   e s s e n t i a l l y   c o n t i n u e 
to be  a matter  of  n ational law.

T h e   C o m m i s s i o n   c h e c k s   t h e   c o r r e c t 
i m p l e m e n t a t i o n   o f   r e c o v e r y   p r o c e d u r e s 
b y   M e m b e r   S t a t e s   i n   t h e   c o n t e x t   o f   i t s 
confor m it y  aud its.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

III.	th ird	inde nt
Th e   n e w   c l e a ra n ce   m e c h a n i s m   i nt ro d u ce d 
by   R e g u l at i o n   ( E C )   N o   1 2 9 0 / 2 0 0 5   p rov i d e s 
a   s t r o n g   i n c e n t i v e   f o r   M e m b e r   S t a t e s   t o 
c o m p l e t e   r e c o v e r y   o f   u n d u e   p a y m e n t s 
f r o m   t h e   b e n e f i c i a r i e s   a s   q u i c k l y   a s   p o s -
s i b l e .   A s   a   r e s u l t ,   b y   t h e   e n d   o f   f i n a n c i a l 
y e a r   2 0 1 0 ,   m o r e   t h a n   4 0  %   o f   t h e   n e w 
E AG F   d e b t s   f ro m   2 0 0 7   a n d   t h e re a f te r   h ave 
a l re a d y   b e e n   re cove re d,   w h i c h   i s   a   s i gn i f i -
cant  improvement co mp ared  to  t h e  pas t.

III.	four th	inde nt
A n y   d e l a y   i n   t h e   t r a n s m i s s i o n   o f   s u c h 
i n f o r m a t i o n   t o   O L A F   d o e s   n o t   h a v e   a n y 
implications for the operation of the clear-
a n c e   m e c h a n i s m   f o r   i r r e g u l a r i t i e s   u n d e r 
R e g u l a t i o n   ( E C )   N o   1 2 9 0 / 2 0 0 5   ( w h i c h   i s 
based on t he An nex I I I tab l e).

IV.	fi rst	inde nt	
T h e   C o m m i s s i o n   w i l l   c o n s i d e r   p o s s i b l e 
m o d i f i c a t i o n s   t o   t h e   c u r r e n t   r u l e s   o n   t h e 
r e c o r d i n g   a n d   r e p o r t i n g   o f   i r r e g u l a r i t i e s 
a n d   o t h e r   d e b t s   i n   t h e   co ntex t   o f   i t s   l e gi s -
lat ive  pro po sal s fo r th e C AP towa rd s  20 20 .

IV.	second 	inde nt	
Th e   Co m m i s s i o n   h a s   a l re a d y   i s s u e d   g t i d e -
l i n e s   to   c l a r i f y   t h e   re p o r t i n g   a n d   a cco u nt-
i n g   c o n c e p t s .   W i t h   t h e   e x c e p t i o n   o f   t h e 
f i r s t   y e a r   ( 2 0 0 6 ) ,   g u i d e l i n e s   w e r e   a l w a y s 
i s s u e d   i n   J u l y   a n d ,   t h u s,   m o r e   t h a n   h a l f   a 
ye a r   b e fo re   t h e   re p o r t i n g   d e a d l i n e   t o   t h e 
C o m m i s s i o n .   A s   t h e   g u i d e l i n e s   n e e d   t o 
t a k e   a c c o u n t   o f   t h e   e x p e r i e n c e   f r o m   t h e 
p re v i o u s   f i n a n c i a l   c l e a ra n ce   e xe rc i s e,   i t   i s 
n o t   p o s s i b l e   t o   a d v a n c e   t h i s   d a t e   f u r t h e r. 
M oreover, since the last regulator y change 
i n   O c t o b e r   2 0 0 7 ,   t h e   g u i d e l i n e s   h a v e 
essentiall y re mained stab l e.

4949

REPLY OF THE  
COMMISSION

I V.	t hird 	ind ent	
T h e s e   t i m e   l i m i t s   a r e   a l r e a d y   s e t   i n   r e l -
e v a n t   c a s e   l a w   a n d   i n   R e g u l a t i o n   ( E C )   N o 
1 2 9 0 / 2 0 0 5 .   I t   fo l l o w s   f ro m   t h e   j u d g m e n t s 
i n   C a s e   C - 3 4 / 8 9   ( p o i n t s   1 2 – 1 3 )   a n d   C a s e 
C - 5 4 / 9 5   t h a t   t h e   M e m b e r   S t a t e   c a n n o t   b e 
i n a c t i ve   i n   a   gi ve n   c a s e   fo r   m o re   t h a n   o n e 
y e a r   a n d   t h a t   w i t h i n   a   f o u r - y e a r   p e r i o d 
f ro m   t h e   m o m e nt   o f   t h e   f i r s t   i n d i c at i o n   o f 
an ir regular it y the investigation must  nor-
m a l l y   b e   c o n c l u d e d   a n d   a   d e c i s i o n   o n   t h e 
i n i t i a t i o n   o f   re cove r y   p ro ce d u re   b e   t a k e n . 
T h e   C o m m i s s i o n   w i l l   c o n s i d e r   c l a r i f y i n g 
M e m b e r   St ate s’  o b l i g at i o n s   i n   t h i s   re s p e c t 
i n   t h e   c o n t e x t   o f   i t s   l e g i s l a t i v e   p r o p o s a l s 
for t he C AP  towards 20 2 0.

I V.	fo ur t h	ind ent	
T h e   Co m m i s s i o n   c o n s i d e r s   t h a t   G u i d e l i n e 
N o   1   p r o v i d e s   s u f f i c i e n t l y   c l e a r   g u i d a n c e 
o n   t h e   c a l c u l a t i o n   a n d   re p o r t i n g   o f   i n t e r-
e s t s   i n   t h e   co n te x t   o f   t h e   a n n u a l   f i n a n c i a l 
c l e a r a n c e   e xe rc i s e.   Fu r t h e r m o re   t h e   l e g a l 
o b l i g a t i o n   t o   re p o r t   i n t e re s t   a s   a c c e s s o r y 
of pr incipal amounts was confir med by the 
European Cour t of Justice in its judgement 
i n   j o i n e d   c a s e s   T- 2 7 4 / 0 8   a n d   T- 2 7 5 / 0 8 . 
Th e   Co m m i s s i o n   a gre e s,   h owe ve r,   t h at   t h e 
r e p o r t i n g   o f   s o m e   M e m b e r   S t a t e s   i s   d e f i -
c i e nt   i n   t h i s   re s p e c t   a n d   i s   p u r s u i n g   t h e s e 
d e f i c i e n c i e s   i n   t h e   co ntex t   o f   i t s   co n fo r m -
i t y   c l e a ra n ce   p ro ce d u re s.  Th e   Co m m i s s i o n 
i s   c u r r e n t l y   c o n s i d e r i n g   h a r m o n i s i n g   t h e 
substantive rules on the recover y of undue 
p a y m e n t s ,   i n c l u d i n g   t h o s e   o n   i n t e r e s t s , 
thereby overcoming the differences result -
in g from th e applic ation of nat ion al  r ule s.

I V.	fif t h	 ind ent
A r t i c l e   3 2 ( 6 ) ( b )   o f   R e g u l a t i o n   ( E C )   N o 
1 2 9 0 / 2 0 0 5   e x p l i c i t l y   p r o v i d e s   t h a t   t h e 
d e c i s i o n   t o   w r i t e   o f f   a   d e b t   a s   i r r e c o v e r -
a b l e   d u e   t o   t h e   i n s o l v e n c y   o f   t h e   d e b t o r 
s h a l l   b e   b a s e d   o n   a n   a c t   r e c o r d e d   a n d 
r e c o g n i s e d   u n d e r   t h e   n a t i o n a l   l a w   o f   t h e 
M e m b e r   St ate   co n ce r n e d.  Th e   Co m m i s s i o n 
ver ifies whether any such decision is prop -
er ly justified in the contex t of its confor m-
i t y   a u d i t s   a n d   i s   p r o v i d i n g   f e e d b a c k   a n d 
r e c o m m e n d a t i o n s   t o   t h e   M e m b e r   S t a t e s 
concerned on their administrative prac tice.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

IV.	si x th	inde nt
T h e   5 0 / 5 0   r u l e   i s   a p p l i e d   o n   t h e   o u t -
s t a n d i n g   a m o u n t s   a s   t h e y   a r e   r e p o r t e d 
i n   t h e   A n n e x   I I I   t a b l e   o f   R e g u l a t i o n   ( E C )
N o   8 8 5 / 2 0 0 6   fo r   t h e   ye a r   i n   q u e s t i o n .  Th e 
f i n a n c i a l   r e s u l t   i s   n o t   a d a p t e d   r e t r o a c -
tively to take account of either negative or 
p o s i t i v e   c o r r e c t i o n s   r e p o r t e d   b y   M e m b e r 
States in subsequent years. This is the log-
i c a l   c o n s e q u e n c e   o f   t h e   a u t o m a t i c   n a t u re 
o f   t h i s   n e w   c l e a r a n c e   m e c h a n i s m   a n d   fo l -
l ows   f ro m   t h e   ex p l i c i t   c h o i ce   m a d e   by   t h e 
E U   l e gi s l ato r   to   l i m i t   a ny   e x   p o s t   re c t i f i c a -
t i o n s   t o   c a s e s   w h e r e   t h e   a b s e n c e   o f   a n y 
i r re g u l a r i t y   i s   re c o rd e d   b y   a n   a d m i n i s t r a -
t i v e   o r   j u d i c i a l   a c t   o f   a   d e f i n i t i v e   n a t u r e 
(Ar ticle 32(5), four th paragraph, of R egula-
tion ( EC ) No  1290/2005).

IV.	seventh	inde nt
S o m e   o f   t h e   c a s e s   i n i t i a l l y   a u d i t e d   by   t h e 
Task Force had to be lef t open because the 
r e c o v e r y   p r o c e d u r e s   w e r e   s t i l l   o n g o i n g 
and there was no negligence on the par t of 
t h e   M e m b e r   S t a te   co n ce r n e d.  Th e s e   c a s e s 
w e r e   s u b s e q u e n t l y   s u b j e c t   t o   t h e   n e w 
clearance  mec hanis m of  the 50/ 5 0 -r ule. 

V.
A c c o r d i n g   t o   a c c o u n t i n g   r u l e s ,   t h e   C o m -
m i s s i o n   h a s   t o   s h o w   t h e   p o s i t i o n   o f   i t s 
d e b t s   a n d   a c c o u n t   fo r   i t s   o w n   re c o ve r i e s, 
i n c l u d i n g   b o t h   re c o ve r i e s   f ro m   f i n a l   b e n -
e f i c i a r i e s   a n d   f i n a n c i a l   c o r r e c t i o n s   f r o m 
M e m b e r   S t a t e s .   T h e   C o m m i s s i o n   c o n -
s i d e r s   i t   i n a p p r o p r i a t e   t o   c o m p a r e   t h e 
r e c o v e r i e s   f r o m   f i n a l   b e n e f i c i a r i e s   t o   t h e 
t o t a l   a m o u n t s   r e c o v e r e d   b y   t h e   C o m m i s -
s i o n ,   w h i c h   i n c l u d e   f i n a n c i a l   c o r r e c t i o n s 
imposed  on M e mb er States.

50

REPLY OF THE  
COMMISSION

V I.
A c c o r d i n g   t o   t h e   p r i n c i p l e   o f   s h a r e d 
m a n a g e m e n t ,   t h e   r e c o v e r y   o f   i r r e g u l a r 
payments from the beneficiar ies is the sole 
re s p o n s i b i l i t y   o f   M e m b e r   St ate s.   H owe ve r, 
t h e   f i n a n c i a l   c o r r e c t i o n s   i m p o s e d   o n 
M e m b e r   S t a t e s   u n d e r   t h e   c l e a r a n c e   o f 
accounts system, including the application 
of the 50/50 rule, are a strong incentive for 
t h e m   t o   i m p r o v e   t h e i r   m a n a g e m e n t   a n d 
c o n t r o l   s y s t e m s   i n c l u d i n g   t h o s e   r e l a t i n g 
t o   re c o ve r y   o f   f u n d s   u n d u l y   p a i d   b e c a u s e 
o f   i r r e g u l a r i t i e s   a n d   f r a u d ,   a n d ,   t h e r e b y, 
c o n t r i b u t e   t o   t h e   l e g a l i t y   a n d   r e g u l a r i t y 
o f   t h e   t r a n s a c t i o n s   a t   f i n a l   b e n e f i c i a r y 
l e v e l   a n d   t o   a   f a s t e r   r e c o ve r y   o f   i r re g u l a r 
pay ments.

INTRODUCTION

6 –7.
T h e   p e r c e n t a g e   o f   r e c o v e r y   g i v e n   i n 
Ta b l e   2   d o e s   n o t   t a k e   a c c o u n t   o f   re c o ve r -
i e s   m a d e   b y   M e m b e r   S t a t e s   b e f o r e   2 0 0 6 . 
T h e   C o m m i s s i o n   h a s   c a l c u l a t e d   t h e   o v e r -
a l l   r e c o v e r y   r a t e s   f r o m   f i n a l   b e n e f i c i a r -
i e s   w h i c h ,   w i t h   a b o v e   4 0  % ,   s h o w   a   c o n -
s i d e r a b l y   m o r e   p o s i t i v e   r e s u l t   t h a n   t h e 
o n e   p r e s e n t e d   b y   t h e   C o u r t .   T h i s   i s   d u e 
t o   t h e   i n t r o d u c t i o n   o f   t h e   n e w   c l e a r -
a n c e   m e c h a n i s m   t h r o u g h   R e g u l a t i o n   ( E C ) 
N o   1 2 9 0 / 2 0 0 5 ,   w h i c h   p r o v i d e s   a   s t r o n g 
i n c e n t i v e   f o r   M e m b e r   S t a t e s   t o   c o m p l e t e 
recover y of undue payments from the ben -
eficiar ie s as quic k ly  as pos sible.

8 .
P u r s u a n t   t o   A r t i c l e   9 ( 1 ) ( a )   o f   R e g u l a t i o n 
( E C )   N o   1 2 9 0 / 2 0 0 5   a n d   i n   a cco rd a n ce   w i t h 
the pr inciple of shared management, M em-
b e r   S t a t e s   a r e   s o l e l y   r e s p o n s i b l e   f o r   t h e 
r e c o v e r y   o f   d e b t   a m o u n t s   f r o m   t h e   f i n a l 
beneficiar ies. I n case of recover y the M em-
b e r   S t a t e   c r e d i t s   t h e   s u m s   r e c o v e r e d   t o 
t h e   E U   b u d g e t   ( A r t i c l e   3 2 ( 1 )   o f   t h e   s a m e 
regulation). Under shared management the 
Commission is entitled to receive assigned 
reven ue from th e M em ber  St ates.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

5151

REPLY OF THE  
COMMISSION

2 0.
I n   t h e   c a s e   o f   D e n m a r k ,   t h e   C B   r e v e a l e d 
m a t e r i a l   e r r o r s   i n   t h e   c o u r s e   o f   i t s   s u b -
s t a n t i ve   te s t i n g   o f   A n n e xe s   I I I   a n d   I I I A   fo r 
f i n a n c i a l   ye a r   2 0 0 8 ,   d u e   to   i nte r n a l   i n co n -
s i s te n c i e s   i n   t h e   t a b l e s.   S u b s e q u e nt l y,   t h e 
Co m m i s s i o n   s e r v i ce s   l a u n c h e d   co n fo r m i t y 
e n q u i r i e s   a n d   c a r r i e d   o u t   a u d i t   m i s s i o n s 
t o   b o t h   t h e   p a y i n g   a g e n c y   a n d   t h e   C B . 
R e m e d i a l   a c t i o n s   w e r e   t a k e n   b y   t h e   D a n -
ish   author ities  an d  n ew  cor rec te d  An nexe s 
I I I   t a b l e s   w e r e   s u b m i t t e d   f o r   f i n a n c i a l 
ye a r   2 0 0 8 ,   w h i c h   we re   ce r t i f i e d   by   t h e   C B. 
R egarding financial year 2009, the mater ial 
e r r o r   i d e n t i f i e d   b y   t h e   C B   i n   t h e   s u b s t a n -
t i ve   te s t i n g   o f   A n n e xe s   I I I   a n d   I I I A   re l a te d 
o n c e   a g a i n   m a i n l y   t o   re p o r t i n g / re c o rd i n g 
i s s u e s   b e t we e n   t h e   va r i o u s   co l u m n s   o f   t h e 
t a b l e s .   H e r e   t o o,   o n   t h e   b a s i s   o f   t h e   C B ' s 
wor k , the Commission launched a confor m-
i t y   e n q u i r y.   T h e   s i t u a t i o n   h a s   a l s o   b e e n 
c o r r e c t e d   b y   t h e   D a n i s h   a u t h o r i t i e s   a n d 
n e w   t a b l e s   s u b m i t t e d   i n   S e p t e m b e r   2 0 1 0 , 
a f te r   h av i n g   b e e n   re v i e we d   by   t h e   C B.   I t   i s 
also to be noted that the cor rec tions in the 
A n n e x   I I I   t a b l e s   d i d   n o t   p u t   i n t o   q u e s t i o n 
t h e   f a i r   s t a t e m e n t   o f   r e c o v e r i e s   d e c l a r e d 
a s   a s s i gn e d   re ve n u e   i n   t h e   m o nt h l y   d e c l a -
r a t i o n   o f   e x p e n d i t u r e   ( T 1 0 4 ) ,   a n d   h a d   n o 
i m p a c t   o n   t h e   y e a r - e n d   o u t s t a n d i n g   b a l -
an ce of th e debts.

11.
T h e   C o m m i s s i o n   c o n s i d e r s   t h a t   t h e   r i s k s 
r e f e r r e d   t o   b y   t h e   C o u r t   a r e   a l r e a d y 
a d d r e s s e d   t h r o u g h   t h e   w o r k   o f   t h e   c e r -
t i f i c a t i o n   b o d i e s   a n d   i t s   o w n   c o n f o r m i t y 
audits.

W h e r e   t h e   r i s k s   r e f e r r e d   t o   b y   t h e   C o u r t 
m a t e r i a l i s e ,   t h e   r e s u l t i n g   f i n a n c i a l   r i s k   i s 
a d d r e s s e d   t h r o u g h   f i n a n c i a l   c o r r e c t i o n s 
u n d e r   A r t i c l e   3 2 ( 4 )   a n d   ( 8 )   o f   R e g u l a t i o n 
(EC ) No 1 29 0/ 2005.

14.
S e e   t h e   C o m m i s s i o n ' s   r e p l y   t o   p o i n t s 
61–62.

OBSERVATIONS

19.
T h e   a m o u n t s   t o   b e   e x c l u d e d   f r o m   E U 
f i n a n c i n g   d u e   t o   a d m i n i s t r a t i v e   e r r o r s   a s 
w e l l   a s   t h e   i n f o r m a t i o n   t o   b e   p r o v i d e d 
b y   M e m b e r   S t a t e s   i n   t h e   A n n e x   I I I   t a b l e s 
a re   ve r i f i e d   a n d   c e r t i f i e d   b y   i n d e p e n d e n t 
a u d i t   b o d i e s ,   t h e   s o - c a l l e d   c e r t i f i c a t i o n 
b o d i e s   (C B ) .   D e f i c i e n c i e s   a n d   i n a cc u ra c i e s 
d e t e c t e d   b y   t h e s e   c e r t i f i c a t i o n   b o d i e s   i n 
t h i s   c o n t e x t   a r e   fo l l o w e d   u p   b y   t h e   C o m-
mission through confor mit y clearance pro -
cedures.

M o r e o v e r ,   t h e   C o m m i s s i o n   v e r i f i e s 
t h e   M e m b e r   S t a t e s '   c l a s s i f i c a t i o n   a n d 
re p o r t i n g   o f   i r re g u l a r i t i e s,   a d m i n i s t r a t i ve 
e r ro r s   a n d   o t h e r   a m o u nt s   to   b e   re cove re d 
i n   t h e   c o n t e x t   o f   i t s   c o n f o r m i t y   a u d i t s 
a n d ,   j u s t   l i k e   t h e   C o u r t ,   h a s   d e t e c t e d 
c a s e s   o f   n o n - c o m p l i a n c e   w h i c h   a r e   n o w 
pursued with a view to proposing financial 
cor rec tions fo r the amo unt s invo l ve d.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

52

REPLY OF THE  
COMMISSION

T h e   r e g u l a t i o n   d o e s   n o t   f i x   i n d e e d   a 
t i m e   l i m i t   f o r   t h e   n o t i f i c a t i o n   o f   a   d e b t 
f o l l o w i n g   a   c h e c k .   T h e   t i m e   l i m i t   c a n 
h o w e v e r   b e   d e d u c t e d   f r o m   r e l e v a n t   c a s e 
l a w .   I t   f o l l o w s   f r o m   t h e   j u d g m e n t s   i n 
C a s e   C - 3 4 / 8 9   ( p o i n t s   1 2   –   1 3 )   a n d   C a s e 
C - 5 4 / 9 5   t h a t   t h e   M e m b e r   S t a t e   c a n n o t   b e 
i n a c t i ve   i n   a   gi ve n   c a s e   fo r   m o re   t h a n   o n e 
y e a r   a n d   t h a t   w i t h i n   a   f o u r - y e a r   p e r i o d 
f r o m   t h e   m o m e n t   o f   t h e   f i r s t   i n d i c a t i o n 
o f   a n   i r r e g u l a r i t y   t h e   i n v e s t i g a t i o n   m u s t 
n o r m a l l y   b e   c o n c l u d e d   a n d   a   d e c i s i o n 
o n   t h e   i n i t i a t i o n   o f   a   r e c o v e r y   p r o c e d u r e 
b e   t a k e n .   T h e   C o m m i s s i o n   w i l l   c o n s i d e r 
c l a r i f y i n g   M e m b e r   S t a t e s ’  o b l i g a t i o n s   i n 
this respec t in the contex t of its legislative 
propos als  for  t he C AP  towards  20 20 .

2 3.
T h e   C o m m i s s i o n   h a s   p r o v i d e d   a   u n i f o r m 
s e t   o f   c r i t e r i a   f o r   t h e   a p p l i c a t i o n   o f   t h e 
co n ce p t   o f   p r i m a r y   a d m i n i s t rat i ve   o f   j u d i-
c i a l   f i n d i n g   i n   i t s   G u i d e l i n e   N o   2   a n d   ve r i-
fies M ember States' compliance with these 
c r i t e r i a   i n   t h e   c o n t e x t   o f   i t s   c o n f o r m i t y 
a u d i t s .   T h e   f a c t   t h a t   t h e   a p p l i c a t i o n   o f 
t h i s   c o n c e p t   d o e s   n o t   r e s u l t   i n   a   u n i fo r m 
p r a c t i c e   t h r o u g h o u t   a l l   M e m b e r   S t a t e s 
i s   t h e   i n e v i t a b l e   c o n s e q u e n c e   o f   t h e   f a c t 
t h a t   t h e   r u l e s   f o r   t h e   r e c o v e r y   o f   i r r e g u -
l a r   p a y m e n t s   h a v e   n o t   b e e n   h a r m o n i s e d 
at   E U   l e ve l,   b u t   co nt i n u e   to   b e   a   m at te r   o f 
n ation al  law.

The notion of pre - debt does not exist in all 
th e M em ber States.

I n   t h e   c a s e   o f   I t a l y,   t h e   a n n u a l   a c c o u n t s 
r e l a t e d   t o   f i n a n c i a l   y e a r s   2 0 0 4 ,   2 0 0 5   a n d 
2 0 0 6   fo r   AG E A   co u l d   n o t   b e   c l e a re d   i n   t h e 
o r i g i n a l   c l e a r a n c e   d e c i s i o n s ,   a s   t h e   C B 
c o n c l u d e d   t h a t   t h e   r e p o r t i n g   o f   d e b t s   b y 
t h e   p ay i n g   a g e n c y   w a s   u n re l i a b l e.   Co n s e -
q u e nt l y,   t h e   p ay i n g   a g e n c y   wa s   re q u e s te d 
t o   t a k e   c o r r e c t i v e   m e a s u r e s   i n   o r d e r   t o 
e n s u r e   a   c o r r e c t   r e p o r t i n g   o f   d e b t s   a n d 
t h e   C B   w a s   r e q u e s t e d   t o   c a r r y   o u t   a d d i -
t i o n a l   te s t i n g,   i n   o rd e r   to   co n f i r m   t h e   co r -
rec tive m easu res imp l emented by  t h e pay-
i n g   a g e n c y.   O n - t h e - s p o t   m i s s i o n s   w e r e 
a l s o   c a r r i e d   o u t   i n   t h e   c o u r s e   o f   2 0 0 7   b y 
the Commission ser vices. As a result of this 
a d d i t i o n a l   wo r k   c a r r i e d   o u t   by   t h e   p ay i n g 
a g e n c y,   t h e   C B   a n d   t h e   Co m m i s s i o n   s e r v -
i c e s   i t   w a s   p o s s i b l e   f i n a l l y   t o   e s t a b l i s h   a 
c o r r e c t ,   o u t s t a n d i n g   b a l a n c e   o f   d e b t s   fo r 
f i n a n c i a l   ye a r   2 0 0 6   ( 4 8 7   m i l l i o n   e u ro,   t h u s 
178 million euro lower than the figures ini-
t i a l l y   c o m m u n i c a t e d ) .   S u b s e q u e n t l y,   t h e 
a c c o u n t s   w e r e   c l e a r e d ,   w i t h   p r o p o s a l s   o f 
financial cor rec tion to cover the remaining 
confor mit y is sues.

22.
T h e   C o m m i s s i o n ' s   i n t e r p r e t a t i o n   o f   t h e 
c o n c e p t   o f   t h e   p r i m a r y   a d m i n i s t r a t i v e 
o r   j u d i c i a l   f i n d i n g   i s   c l e a r l y   s e t   o u t   i n 
Guideline No 2 and no substantive changes 
h a v e   b e e n   m a d e   t o   t h i s   i n t e r p r e t a t i o n 
s i n c e   i t   w a s   f i r s t   i n t r o d u c e d   i n   2 0 0 6 .   I t 
i m p l i e s,   i n   p a r t i c u l a r,   t h a t   b o t h   p re - d e b t s 
a n d   d e b t s   h a v e   t o   b e   i n c l u d e d   i n   t h e 
Annex II I tab l e.

I t   f o l l o w s   f r o m   A r t i c l e   3 5   o f   R e g u l a t i o n 
( E C )   N o   1 2 9 0 / 2 0 0 5   t h a t   t h e   d a t e   o f   t h e 
p r i m a r y   a d m i n i s t r a t i ve   o r   j u d i c i a l   f i n d i n g 
c o r r e s p o n d s   t o   t h e   d a t e   w h e n   t h e   t h r e e 
c o n d i t i o n s   s e t   o u t   i n   G u i d e l i n e   N o   2   a r e 
m e t   f o r   t h e   f i r s t   t i m e .   C a s e s   w h e r e   M e m -
b e r   S t a t e s   e s t a b l i s h   t h e   p r i m a r y   a d m i n i s -
t r a t i v e   o r   j u d i c i a l   f i n d i n g   a t   a   l a t e r   d a t e 
a re   p u r s u e d   t h ro u g h   co n fo r m i t y   c l e a ra n ce 
p ro ce d u re s.   H owe ve r,   d u e   to   t h e   f a c t   t h a t 
the national procedures for the recover y of 
i r r e g u l a r   p a y m e n t s   d i f f e r   b e t w e e n   M e m -
b e r   S t a t e s ,   t h e   t y p e   o f   d o c u m e n t   w h i c h 
s a t i s f i e s   t h e   t h re e   c o n d i t i o n s   fo r   t h e   f i r s t 
time may also be different in each M ember 
State.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

5353

REPLY OF THE  
COMMISSION

2 9.
T h e   a m o u n t s   t o   b e   e x c l u d e d   f r o m   E U 
f i n a n c i n g   d u e   t o   a d m i n i s t r a t i v e   e r r o r s   a s 
w e l l   a s   t h e   i n f o r m a t i o n   t o   b e   p r o v i d e d 
b y   M e m b e r   S t a t e s   i n   t h e   A n n e x   I I I   t a b l e s 
a re   ve r i f i e d   a n d   c e r t i f i e d   b y   t h e   c e r t i f i c a -
t i o n   b o d i e s.   D e f i c i e n c i e s   a n d   i n a cc u ra c i e s 
detec ted by the cer tification bodies in this 
contex t are followed up by the Commission 
th roug h con for mit y cle aran ce  proced ure s.

M o r e o v e r,   t h e   C o m m i s s i o n   v e r i f i e s   t h e 
M e m b e r   S t a t e s '   c l a s s i f i c a t i o n   a n d   r e p o r t -
i n g   o f   i r re g u l a r i t i e s,   a d m i n i s t r a t i ve   e r ro r s 
a n d   o t h e r   a m o u n t s   to   b e   re cove re d   i n   t h e 
c o n t e x t   o f   i t s   c o n f o r m i t y   a u d i t s   a n d ,   j u s t 
l i k e   t h e   Co u r t ,   h a s   d e t e c t e d   c a s e s   o f   n o n -
co m p l i a n ce   w h i c h   a re   n ow   p u r s u e d   w i t h   a 
view to proposing financial cor rec tions for 
th e amounts involved.

3 0.
T h e   C o m m i s s i o n   h a s   i d e n t i f i e d   s i m i l a r 
p ro b l e m s   a n d   h a s   i m p rove d   i t s   g u i d e l i n e s 
a s   o f   2 0 0 8   w i t h   a   v i e w   t o   c l a r i f y i n g   t h e 
co n ce p t   o f   a d m i n i s t rat i ve   e r ro r.   M o re  ove r, 
c a s e s   w h e r e   t h e   d e l i m i t a t i o n   b e t w e e n 
i r r e g u l a r i t i e s   a n d   a d m i n i s t r a t i v e   e r r o r s   i s 
n o t   r e s p e c t e d   b y   M e m b e r   S t a t e s   i n   t h e i r 
a d m i n i s t r a t i v e   p r a c t i c e s   a r e   f o l l o w e d   u p 
th roug h con for mit y cle aran ce  proced ure s.

3 1.
The Commission agrees with the Cour t that 
c a s e s   m a y   b e   a n   i r r e g u l a r i t y,   a n d   a s   s u c h 
would  be  subj ec t  to  t he  50 /50  r ule,   e ve n   if 
t h e y   a re   c o ve re d   b y   a   g u a r a n t e e,   a n d   i t   i s 
p u r s u i n g   t h i s   i s s u e   w i t h   t h e   M e m b e r   St ate 
c o n c e r n e d   ( G e r m a n y,   Fr a n c e )   i n   t h e   c o n -
t e x t   o f   a   c o n f o r m i t y   c l e a r a n c e   p r o c e d u r e 
in itiated in 2 00 9 and  2 01 1.

24.
As regards the situation in Spain, the Com-
mis sion  s hares  th e  Co u r t' s   ass ess m ent  and 
i s   p u r s u i n g   t h e   i s s u e   i n   t h e   c o n t e x t   o f   i t s 
o n g o i n g   co n fo r m i t y   c l e a ra n ce   p ro ce d u re s. 
I t has requested the Spanish author ities to 
b r i n g   t h e i r   a d m i n i s t r a t i ve   p r a c t i c e   i n   l i n e 
w i t h   G u i d e l i n e   N o   2   b y   c o n s i d e r i n g   t h e 
‘ a c u e rd o   d e   i n i c i o ’  a s   t h e   p r i m a r y   a d m i n i s -
t r a t i ve   o r   j u d i c i a l   f i n d i n g.   S p a i n   re p o r t e d 
i t s   i r re g u l a r i t y   c a s e s   i n   t h e   An n ex   I I I   t a b l e 
f o r   f i n a n c i a l   y e a r   2 0 1 0   a c c o r d i n g   t o   t h i s 
requirement.

A s   r e g a r d s   t h e   s i t u a t i o n   i n   F r a n c e ,   t w o 
p a y i n g   a g e n c i e s   i n i t i a l l y   t r i e d   t o   c h a n g e 
t h e i r   a d m i n i s t r a t i ve   p r a c t i c e   fo r   f i n a n c i a l 
y e a r   2 0 0 9 ,   b u t   a t   t h e   i n s i s t e n c e   o f   t h e 
C o m m i s s i o n   e v e n t u a l l y   r e v e r t e d   b a c k   t o 
t h e i r   p re v i o u s   p ra c t i ce   a n d,   t h u s,   e n s u re d 
compliance with Guideline No 2 before the 
end of t he financial  cl earance exe rc ise.

25.
Ca s e s   w h e re   t h e   p r i m a r y   a d m i n i s t rat i ve   o r 
j u d i c i a l   f i n d i n g   i s   n o t   e s t a b l i s h e d   i n   co m-
pliance with the rules are pursued through 
confor mit y cl earance p ro cedure s.

26.
S ee t he Co mmissio n's rep l y to p o i nt 2 2.

27.
T h e   C o m m i s s i o n   h a s   p r o v i d e d   g u i d a n c e 
o n   t h e   i nte r p re t at i o n   o f   i r re g u l a r i t i e s   a n d 
a d m i n i s t rat i ve   e r ro r s   i n   i t s   G u i d e l i n e   N o   1 
a n d   i s   v e r i f y i n g   w h e t h e r   M e m b e r   S t a t e s 
comply with this inter pretation in the con -
tex t  of its confor mit y aud its.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

54

REPLY OF THE  
COMMISSION

B ox 	2
Th e   n at u re   o f   c a s e s   re p o r te d   i n   t h e   An n ex 
I I I A   t a b l e   i s   u n d e r   d i s c u s s i o n   w i t h   t h e 
F r e n c h   a u t h o r i t i e s   i n   t h e   c o n t e x t   o f   t h e 
on going co nfo r m it y  clearance p ro cedu re s.

33.
T h e   Co m m i s s i o n   c o n s i d e r s   t h a t   G u i d e l i n e 
N o   1   p r o v i d e s   s u f f i c i e n t l y   c l e a r   g u i d a n c e 
o n   t h e   c a l c u l a t i o n   a n d   re p o r t i n g   o f   i n t e r-
e s t s   i n   t h e   co nte x t   o f   t h e   a n n u a l   f i n a n c i a l 
c l e a r a n c e   e xe rc i s e.   Fu r t h e r m o re   t h e   l e g a l 
o b l i g a t i o n   t o   re p o r t   i n t e re s t   a s   a c c e s s o r y 
of pr incipal amounts was confir med by the 
European Cour t of Justice in its judgement 
in joined c ases  T- 27 4/ 08  and T-2 7 5 / 0 8 . 

T h e   C o m m i s s i o n   c u r r e n t l y   c o n s i d e r s   h a r -
m o n i s i n g   t h e   s u b s t a n t i v e   r u l e s   o n   t h e 
r e c o v e r y   o f   u n d u e   p a y m e n t s ,   i n c l u d i n g 
those on interests, thereby overcoming the 
d i f fe re n ce s   re s u l t i n g   f ro m   t h e   a p p l i c at i o n 
of national  ru le s.

34.
Th e   p ro p e r   a p p l i c at i o n   o f   i nte re s t s   by   t h e 
p ay i n g   a g e n c i e s   i s   s y s t e m a t i c a l l y   ve r i f i e d 
b y   t h e   C o m m i s s i o n   i n   t h e   c o n t e x t   o f   i t s 
c o n f o r m i t y   a u d i t s   o n   r e c o v e r i e s   ( a s   w e l l 
a s   i t s   a cc re d i t a t i o n   a u d i t s ) .  Th e re   a re   c u r -
r e n t l y   c o n f o r m i t y   p r o c e d u r e s   o n g o i n g   i n 
th is  respec t  ag ainst  9 M em ber St ate s.

35.
Th e   Co m m i s s i o n' s   re q u i re m e nt   o n   i nte re s t 
i s   l i m i t e d   t o   t h e   i n t e r e s t   b e i n g   r e p o r t e d 
a n d   u p d a t e d   e v e r y   y e a r   i n   t h e   A n n e x   I I I 
t a b l e   i n   e a c h   c a s e ,   i n c l u d i n g   t h e   p r e -
d e b t s .   M e m b e r   S t a t e s   a r e   r e s p o n s i b l e 
w h e t h e r   t o   c o m m u n i c a t e   t h e   i n t e r e s t 
a m o u n t s   t o   t h e   ( p o t e n t i a l )   d e b t o r   i m m e -
d i a t e l y   a f t e r   t h e   u p d a t e   a s   a t   1 5   O c t o b e r 
e a c h   y e a r   o r   o n l y   a t   a   l a t e r   s t a g e .   I n   t h e 
c a s e   o f   p r e - d e b t s   i n v o i c i n g   o f   i n t e r e s t 
wo u l d   b e   e ve n   i m p o s s i b l e   a s   t h e   re cove r y 
o rd e r   fo r   t h e   i r re g u l a r   a m o u nt   i t s e l f   i s   n o t 
i n v o i c e d   u n t i l   t h e   p r e - d e b t   i s   c o n v e r t e d 
into a  confir me d deb t.

3 7.
Th e   p e rce nt a g e   o f   re cove r y   gi ve n   i n  Ta b l e 
2   d o e s   n o t   t a k e   a c c o u n t   o f   t h e   r e c o v e r -
i e s   m a d e   b y   M e m b e r   S t a t e s   b e f o r e   2 0 0 6 . 
T h e   C o m m i s s i o n   h a s   c a l c u l a t e d   t h e   o v e r -
a l l   r e c o v e r y   r a t e s   f r o m   f i n a l   b e n e f i c i a r -
i e s   w h i c h ,   w i t h   a b o v e   4 0  %   s h o w   a   c o n -
s i d e r a b l y   m o r e   p o s i t i v e   r e s u l t   t h a n   t h e 
o n e   p r e s e n t e d   b y   t h e   C o u r t .   T h i s   i s   d u e 
t o   t h e   i n t r o d u c t i o n   o f   t h e   n e w   c l e a r a n c e 
m e c h a n i s m   t h r o u g h   R e g u l a t i o n   ( E C )   N o 
1 29 0/2 00 5,  whic h  prov ide s  a  st ron g  i nce n-
t i ve   fo r   M e m b e r   St ate s   to   co m p l e te   re cov -
e r y   o f   u n d u e   p ay m e n t s   f ro m   t h e   b e n e f i c i -
ar ie s as quick ly  as possible. 

4 0.
S ee the Commission's reply to B ox 4 below.

B ox	 4
Th e   Co m m i s s i o n   s ys te m at i c a l l y   c h e c k s   t h e 
t i m e l y   i n i t i a t i o n   o f   r e c o v e r y   p r o c e d u r e s 
d u r i n g   i t s   a u d i t s   a n d   u n j u s t i f i e d   d e l a y s 
are followed up in the contex t of confor m-
i t y   c l e a r a n c e   p r o c e d u r e s ,   i n c l u d i n g   f o r 
t h e   t wo   M e m b e r   S t a t e s   re fe r re d   t o   b y   t h e 
Cour t.

4 1.
U n d e r   t h e   n e w   c l e a r a n c e   m e c h a n i s m ,   a l l 
c a s e s   a r e   s u b j e c t   t o   t h e   5 0 / 5 0   r u l e .   T h e 
s y s t e m   t h e r e f o r e   n o   l o n g e r   r e q u i r e s   a n 
e x h a u s t i v e   r e v i e w   o f   a l l   i n d i v i d u a l   c a s e s . 
I n   a c c o r d a n c e   w i t h   i t s   C o m m u n i c a t i o n 
o f   2 7   N o v e m b e r   2 0 0 7 ,   t h e   C o m m i s s i o n 
s y s t e m a t i c a l l y   r e v i e w s   c a s e s   w h e r e   t h e 
a m o u n t   o u t s t a n d i n g ,   w r i t t e n   o f f   o r 
c o r r e c t e d   t o   z e r o   e xc e e d s   1   m i l l i o n   e u r o. 
M o r e o v e r ,   c a s e s   b e l o w   1   m i l l i o n   e u r o 
a r e   i n c l u d e d   i n   t h e   s a m p l e   w h i c h   t h e 
C o m m i s s i o n   c h e c k s   i n   t h e   c o n t e x t   o f 
i t s   o n - t h e - s p o t   a u d i t s .   I n   t h e   c a s e   o f 
n e g l i g e n c e   b y   M e m b e r   S t a t e s   i n   t h e 
r e c o v e r y   p r o c e d u r e ,   t h e   C o m m i s s i o n   i s 
a p p l y i n g   a   f i n a n c i a l   c o r r e c t i o n   u n d e r 
A r t i c l e   3 2 ( 4 )   a n d   ( 8 )   o f   R e g u l a t i o n   ( E C ) 
N o   1 2 9 0 / 2 0 0 5   i n   t h e   c o n t e x t   o f   i t s 
confor m it y  proce dures.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

5555

REPLY OF THE  
COMMISSION

4 3.	fif t h	 ind ent
As   re cove r y   i s   g ove r n e d   by   n a t i o n a l   r u l e s, 
a ny   s u c h   p rov i s i o n s   wo u l d   h ave   to   b e   p ro -
vided  by n ational law.

4 4.
T h e   C o m m i s s i o n   c o n s i d e r s   t h a t   t h e   r i s k 
t h a t   d e b t s   a r e   w r i t t e n   o f f   p r e m a t u r e l y   i s 
a d e q u ate l y   a d d re s s e d   t h ro u g h   t h e   wo r k   o f 
t h e   c e r t i f i c a t i o n   b o d i e s   a n d   i t s   o w n   c o n -
for mit y  audits.

I n   a c c o r d a n c e   w i t h   i t s   c o m m u n i c a t i o n 
o f   2 7   N o v e m b e r   2 0 0 7 ,   t h e   C o m m i s s i o n 
s y s t e m a t i c a l l y   r e v i e w s   c a s e s   w h e r e   t h e 
a m o u n t   o u t s t a n d i n g ,   w r i t t e n   o f f   o r   c o r -
r e c t e d   t o   z e r o   e x c e e d s   1   m i l l i o n   e u r o . 
M o r e o v e r,   c a s e s   b e l o w   1   m i l l i o n   e u r o   a r e 
i n c l u d e d   i n   t h e   s a m p l e   w h i c h   t h e   Co m m i s -
s i o n   c h e c k s   i n   t h e   c o n t e x t   o f   i t s   o n - t h e -
spot audits. I f the grounds for the wr ite - off 
a r e   n o t   w e l l - f o u n d e d ,   a   f i n a n c i a l   c o r r e c -
t i o n   c a n   b e   i m p o s e d   o n   t h e   M e m b e r   S t ate 
co n ce r n e d   u n d e r   A r t i c l e   3 2 ( 8 ) ( b )   o f   R e g u -
lation  (E C ) N o 1 2 90/2 00 5.

4 6.
Th e   2 0 0 6   f i g u re   i s   i n f l u e n ce d   by   t h e   re t ro -
ac tive application of the 50/50 mechanism; 
t h e   2 0 0 7   f i g u r e   i s   s t r o n g l y   i n f l u e n c e d   b y 
one  cas e amountin g to 11 7 ,1  m illi on  e uro. 

I n   t h e   i n s o l ve n c y   c a s e s,   t h e   d e b to r   i s   u s u -
a l l y   b a n k r u p t   a l r e a d y   w h e n   t h e   r e c o v e r y 
p ro ce d u re   s t a r t s,   o r   i t   i s   t h e   re cove r y   p ro -
c e d u r e   i t s e l f   w h i c h   r e s u l t s   i n   t h e   i n s o l -
v e n c y   o f   t h e   d e b t o r.   I n   t h e s e   c a s e s ,   t h e 
d e c l a r a t i o n   o f   i r r e c o v e r a b i l i t y   i s   m a d e 
w i t h i n   f o u r   t o   e i g h t   y e a r s   a f t e r   t h e   PA C A 
an d th e loss is  bor ne by  th e E U bud ge t.

41.	four t h	ind ent
T h e   C o m m i s s i o n   d o e s   n o t   e v a l u a t e   t h e 
possibilities for appeals against judgments 
f r o m   l o w e r   c o u r t s ,   s i n c e   i n   a   U n i o n   o f 
l a w   w h i c h   i s   b a s e d   o n   t h e   p r i n c i p l e   o f 
s e p a r a t i o n   o f   p o w e r s ,   a   j u d g m e n t   o f 
a   n a t i o n a l   c o u r t   i s   r e s p e c t e d   b y   t h e 
C o m m i s s i o n ,   e x c e p t   i n   e x c e p t i o n a l   c a s e s 
where there are indications of obvious and 
g r ave   v i o l a t i o n s   o f   E U   l aw,   a s   re f l e c t e d   i n 
the jur isprudence of the European Cour t of 
Justice.

41.	fi f th	ind ent
I n   t h e   c a s e   o f   n e g l i g e n c e   b y   M e m b e r 
States in the recover y procedure, the Com-
m i s s i o n   i s   a p p l y i n g   a   f i n a n c i a l   c o r r e c t i o n 
u n d e r   A r t i c l e   3 2 ( 4 )   a n d   ( 8 )   o f   R e g u l a t i o n 
( E C )   N o   1 2 9 0 / 2 0 0 5   i n   t h e   c o n t e x t   o f   i t s 
confor mit y pro cedu res.

43.	fi rst	ind ent
Acco rd i n g   to   Ar t i c l e   5 b   o f   R e g u l at i o n   ( E C ) 
N o   8 8 5 / 2 0 0 6 ,   t h e   o f f - s e t t i n g   i s   m a d e   co m-
p u l s o r y   f o r   t h e   M e m b e r   S t a t e s   t o   a p p l y 
only once the debt has been established in 
confor mit y with  nat ional l aw. 

43.	second	a nd	third	inde nt
T h e   C o m m i s s i o n   a l s o   n o t e d   d u r i n g   i t s 
a u d i t s   t h a t   t h e   e n fo rce m e n t   a c t i v i t i e s   a re 
u n d e r t a k e n   i n   t h e   m a j o r i t y   o f   t h e   M e m b e r 
S t a t e s   b y   e n f o r c e m e n t   b o d i e s   w h i c h   a r e 
ex te r n a l   to   t h e   p ay i n g   a g e n c i e s.   H owe ve r, 
a s   r e c o v e r y   i s   g o v e r n e d   b y   n a t i o n a l   r u l e s 
a ny   o t h e r   e n fo rce m e nt   p owe r   fo r   t h e   p ay -
i n g   a g e n c i e s   w o u l d   h a v e   t o   b e   p r o v i d e d 
for in  nation al law.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

56

REPLY OF THE  
COMMISSION

4 8.
A m o u n t s   c a n   b e   d e c l a r e d   i r r e c o v e r a b l e 
i n   t h e   A n n e x   I I I   t a b l e   i f   t h e   c o n d i t i o n s 
u n d e r   A r t i c l e   3 2 ( 6 )   o f   R e g u l a t i o n   ( E C ) 
N o   1 2 9 0 / 2 0 0 5   a r e   f u l f i l l e d .   H o w e v e r,   i f 
n a t i o n a l   l a w   d o e s   n o t   p ro v i d e   fo r   w r i t i n g 
o f f   d e b t s   i n   t h e   d e b t o r s '   l e d g e r   ( l i k e   i n 
G e r m a ny )   t h e   c a s e s   c o n t i n u e   t o   b e   r e g i s -
te re d   i n   t h e   d e b to r s '   l e d g e r.  Th e   Co m m i s -
s i o n   i s   i n f o r m e d   a b o u t   t h e s e   a m o u n t s   b y 
t h e   r e c o n c i l i a t i o n   m a d e   b y   t h e   c e r t i f i c a -
t i o n   b o d i e s   b e t we e n   i n   t h e   An n ex   I I I   t a b l e 
a n d   t h e   d e b to r s '   l e d g e r   d u r i n g   t h e   a n n u a l 
clearance exerc ise.

4 9.
S ee  th e Com miss ion's  reply  to point  4 7 .

B ox	 6
T h e   c a s e   i s   s u b j e c t   t o   a   c o n fo r m i t y   c l e a r-
an ce procedure  (IR /20 0 9/0 10/DE ) .

5 1.
A r t i c l e   5 a   o f   R e g u l a t i o n   ( E C )   N o   8 8 5 / 2 0 0 6 
f i x e s   a   u n i f o r m   d e   m i n i m i s   t h r e s h o l d   o f 
E U R   1 0 0   f o r   t h e   a p p l i c a t i o n   o f   A r t i c l e    
3 2 ( 6 ) a   o f   R e g u l a t i o n   ( E C )   N o   1 2 9 0 / 2 0 0 5 . 
H o w e v e r,   i t   f o l l o w s   f r o m   t h e   f i r s t   r e c i t a l 
o f   R e g u l a t i o n   ( E C )   N o   1 0 3 4 / 2 0 0 8   t h a t   t h e 
i n t r o d u c t i o n   o f   t h i s   t h r e s h o l d   d o e s   n o t 
p re ve n t   M e m b e r   S t a te s   f ro m   a p p l y i n g   t h e 
s a i d   A r t i c l e   3 2 ( 6 ) ( a )   t o   c a s e s   e x c e e d i n g 
1 0 0   e u r o,   i f   p r o p e r l y   j u s t i f i e d .   T h e   C o m -
m i s s i o n   d i s c u s s e d   t h e   h i g h e r   t h r e s h o l d s 
a p p l i e d   b y   R PA   w i t h   t h i s   p a y i n g   a g e n c y 
an d agreed to  it s applic at ion.

5 2.
I n   a c c o r d a n c e   w i t h   i t s   C o m m u n i c a t i o n 
o f   2 7   N o v e m b e r   2 0 0 7 ,   t h e   C o m m i s s i o n 
s y s t e m a t i c a l l y   r e v i e w s   c a s e s   w h e r e   t h e 
a m o u n t   o u t s t a n d i n g ,   w r i t t e n   o f f   o r   c o r -
r e c t e d   t o   z e r o   e x c e e d s   1   m i l l i o n   e u r o . 
M o r e o v e r,   c a s e s   b e l o w   1   m i l l i o n   e u r o   a r e 
in cluded in  th e sample wh ic h th e Com mi s-
s i o n   c h e c k s   i n   t h e   c o n t e x t   o f   i t s   o n - t h e -
s p o t   a u d i t s .   T h e   r e v i e w   o f   t h e s e   c a s e s   s o 
f a r   s h ows   t h a t   t h e   c a n ce l l a t i o n   i n   m o s t   o f 
th ese c ases  is  proper ly  justified.

D u r i n g   t h e   a n n u a l   c e r t i f i c a t i o n   e x e r c i s e , 
t h e   c e r t i f i c a t i o n   b o d i e s   a r e   t e s t i n g   o n   a 
s a m p l e   b a s i s   i f   t h e s e   d e c i s i o n s   a r e   p r o p -
er ly founded.

Ca s e s   w r i t t e n   o f f   w i t h   a n   a m o u n t   e xc e e d -
i n g   1   m i l l i o n   e u r o   a r e   s y s t e m a t i c a l l y 
a u d i t e d   b y   t h e   C o m m i s s i o n .   M o r e o v e r, 
c a s e s   b e l ow   1   m i l l i o n   e u ro   a re   i n c l u d e d   i n 
t h e   s a m p l e   w h i c h   t h e   Co m m i s s i o n   c h e c k s 
in t he  contex t  of its  on -th e -s po t  a u dit s.

47.	fi rst	ind ent
U n d e r   A r t i c l e   3 2 ( 6 ) ( b )   o f   R e g u l a t i o n   ( E C ) 
N o   1 2 9 0 / 2 0 0 5 ,   t h e   i n s o l v e n c y   o f   t h e 
d e b t o r   s h a l l   b e   e s t a b l i s h e d   i n   a c c o r d -
a n c e   w i t h   t h e   n a t i o n a l   i n s o l v e n c y   l a w   o f 
t h e   M e m b e r   S t a t e   c o n c e r n e d .   S i n c e   t h e 
i n s o l v e n c y   l a w s   d i f f e r   b e t w e e n   M e m b e r 
S t a t e s ,   b o t h   t h e   t i m i n g   o f   t h e   d e c i s i o n 
n o t   t o   p u r s u e   r e c o v e r y   d u e   t o   t h e   i n s o l -
ve n c y   o f   t h e   d e b to r   a n d   t h e   t y p e   o f   d o c u-
m e nt s   s u p p o r t i n g   t h at   d e c i s i o n   i n d e e d   d o 
v a r y   a c r o s s   t h e   M e m b e r   S t a t e s ,   a n d   i t   i s 
n o t   p o s s i b l e   to   p rov i d e   u n i fo r m   g u i d a n ce 
o n   t h e   a p p l i c a t i o n   o f   t h i s   p ro v i s i o n   a t   E U 
l e v e l .   H o w e v e r,   t h e   C o m m i s s i o n   i s   v e r i f y -
i n g   t h e   M e m b e r   S t a t e s '   a d m i n i s t r a t i v e 
p r a c t i c e   u n d e r   t h i s   p r o v i s i o n   i n   t h e   c o n -
tex t   o f   i t s   co n fo r m i t y   a u d i t s   a n d   p ro p o s e s 
f i n a n c i a l   c o r r e c t i o n s   w h e r e   t h e   d e c i s i o n 
n o t   to   p u r s u e   re cove r y   c a n n o t   b e   j u s t i f i e d 
b y   a p p ro p r i a t e   s u p p o r t i n g   d o c u m e n t s.   I n 
t h i s   c o n t e x t ,   p ro v i s i o n a l   o r   i n fo r m a l   f i n d-
i n g s   o f   i n s o l v e n c y   c a n n o t   b e   a c c e p t e d   a s 
justificat io n.

G u i d e l i n e   N o   5   r e q u i r e s   t h e   c e r t i f i c a t i o n 
b o d i e s   t o   c h e c k   a n d   c o n c l u d e   w h e t h e r 
proper justifications are provided for those 
c a s e s   w h e r e   t h e   p a y i n g   a g e n c i e s   d e c i d e 
n o t   to   p u r s u e   re cove r y.   A n   a n a l ys i s   o f   t h e 
cer tification repor ts received shows that in 
the far major it y of cases the required audit 
work was done and the cer tification bodies 
conclu ded  p os it ivel y.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

5757

REPLY OF THE  
COMMISSION

6 0.
T h e   o u t s t a n d i n g   u n e x p l a i n e d   d i f f e r e n c e s 
i n   A n n e x   I I I   p re s e nte d   by   t h e   Co u r t   re p re -
s e n t   1 , 9  %   o f   gro s s   re ce i v a b l e   i n   2 0 0 6   a n d 
1  % in  20 07 . 

T h e r e   a r e   n o   u n e x p l a i n e d   d i f f e r e n c e s   i n 
2 00 8 an d 20 0 9.

6 1 – 6 2 .   Acco rd i n g   to   a cco u n t i n g   r u l e s,   t h e 
Commission has to show the position of its 
d e b t s   a n d   a c c o u n t   fo r   i t s   o w n   r e c o v e r i e s. 
I n   t h a t   p e r s p e c t i v e ,   t h e   a c c o u n t i n g   p o s i -
t i o n   i n c l u d e s   b o t h   r e c o v e r i e s   f r o m   f i n a l 
b e n e f i c i a r i e s   a n d   f i n a n c i a l   c o r r e c t i o n s 
from M ember States through the clearance 
of account s system .

Ye t ,   a s   r e c o g n i s e d   b y   t h e   C o u r t   i n   p a r a -
g r a p h   6 3 ,   t h e   C o m m i s s i o n   i s   d i s c l o s i n g 
separately,  as   f rom  20 0 9,  th e  fin anc i al   co r-
rec tions through the clearance of accounts 
system from other recover ies. M oreover, as 
r e q u e s t e d   b y   t h e   C o u r t ,   t h e   C o m m i s s i o n 
w i l l,   i n   t h e   f u t u re,   s h ow   t h e   c u r re nt   f i n a n-
c i a l   c l e a r a n c e   p r o c e e d s   u n d e r   t h e   5 0 / 5 0 
r u l e   i n   t h e   f i n a n c i a l   c o r r e c t i o n   s e c t i o n 
( a l t h o u g h   t h e   i m p a c t   i s   n o t   m a t e r i a l ,   i n 
2009 it amounted to 5 % of the total recov-
er ie s of 62 5 million  euro) .   

The Commission considers it inappropr iate 
t o   c o m p a re   t h e   re c ove r i e s   f ro m   f i n a l   b e n-
e f i c i a r i e s   t o   t h e   t o t a l   a m o u n t s   r e c o v e r e d 
by the Commission, which include financial 
cor rec t ions impos ed on M ember   State s. 

53.
I n   t h e   c o n t e x t   o f   i t s   re v i e w s   o f   i n d i v i d u a l 
ir regular it y cases the Commission assesses 
whether the negative cor rec tions are prop -
e r l y   j u s t i f i e d   by   s u p p o r t i n g   d o c u m e nt s.   I n 
contrast, it nor mally does not evaluate the 
possibilities for appeals against judgments 
f ro m   l owe r   co u r t s,   s i n ce   i n   a   U n i o n   o f   l aw 
w h i c h   i s   b a s e d   o n   t h e   p r i n c i p l e   o f   s e p a ra -
t i o n   o f   p o w e r s ,   a   j u d g m e n t   o f   a   n a t i o n a l 
c o u r t   i s   r e s p e c t e d   b y   t h e   C o m m i s s i o n , 
e x c e p t   i n   e x c e p t i o n a l   c a s e s   w h e r e   t h e r e 
are indications of obvious and grave viola -
t i o n s   o f   E U   l a w,   a s   r e f l e c t e d   i n   t h e   j u r i s -
prudence of the European Cour t of Justice.

Fi n a l l y,   i t   s h o u l d   b e   n o te d   t h at   t h e   ce r t i f i-
cation bodies car r y out substantive testing 
o n   t h e   c o l u m n   ' c o r r e c t e d   a m o u n t '   o f   t h e 
An n ex   I I I   t a b l e,   w h i c h   p rov i d e s   re a s o n a b l e 
a s s u r a n ce   t h a t   t h e   a m o u n t s   co r re c te d   a re 
proper ly jus tif ied.

I n   t h e   A n n e x   I I I   t a b l e s   o f   f i n a n c i a l   y e a r s 
2 0 0 6   a n d   2 0 0 7 ,   t h e   Co m m i s s i o n   i d e nt i f i e d 
4 4   c a s e s   w i t h   a   n e g a t i v e   c o r r e c t i o n 
e x c e e d i n g   1   m i l l i o n   e u r o ,   a l l   t o g e t h e r 
a m o u nt i n g   to   2 5 6 , 9   m i l l i o n   e u ro.   Al l   t h e s e 
cases  have be en o r are b eing fo l l owed  up.

Fo r   t h e   a m o u n t s   e xce e d i n g   1   m i l l i o n   e u ro 
i n   t h e   A n n e x   I I I   t a b l e s   o f   2 0 0 8   a n d   2 0 0 9 
( 1 5   c a s e s ) ,   d e s k   a u d i t s   w i l l   b e   l a u n c h e d   i n 
th e cours e o f 20 11.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

63.
With th e except ion of  the first  ye ar  (2 0 06 ), 
G u i d e l i n e   N o   1   w a s   a l w a y s   i s s u e d   i n   J u l y 
a n d ,   t h u s ,   m o r e   t h a n   h a l f   a   y e a r   b e f o r e 
the repor ting deadline to the Commission. 
As   t h e   g u i d e l i n e   n e e d s   to   t a k e   a cco u n t   o f 
t h e   e x p e r i e n c e   f r o m   t h e   p r e v i o u s   f i n a n -
c i a l   c l e a r a n c e   e x e r c i s e ,   i t   i s   n o t   p o s s i b l e 
t o   a d v a n c e   t h i s   d a t e   f u r t h e r.   M o r e o v e r, 
s i n c e   t h e   l a s t   r e g u l a t o r y   c h a n g e   i n   O c t o -
b e r   2 0 0 7 ,   t h e   g u i d e l i n e   h a s   e s s e n t i a l l y 
rema ined  s tab l e.

64.
Th e   c a s e s   re fe r re d   to   by   t h e   Co u r t   we re   o f 
a n   e x c e p t i o n a l   n a t u r e   a n d   c o u l d   o n l y   b e 
dea lt wit h on an in dividual  b as is.

A s   fo r   t h e   e x a m p l e   g i ve n   i n   t h e   fo o t n o t e, 
G e r m a ny   wa s   re i m b u r s e d   w i t h   t h e   a m o u nt 
of 508  165,76 eu ro.

67.
Following the application of the 50/50 rule 
t h e   d e b t   a m o u n t s   r e m a i n   i n   t h e   A n n e x 
I I I   t a b l e .   P u r s u a n t   t o   t h e   t h i r d   s u b p a r a -
g r a p h   o f   A r t i c l e   3 2 ( 5 )   o f   R e g u l a t i o n   ( E C ) 
No 1290/2005 the M ember State concerned 
m u s t   p u r s u e   r e c o v e r y   p r o c e d u r e s   fo l l o w -
i n g   t h e   a p p l i c a t i o n   o f   t h e   5 0 / 5 0   r u l e   a n d 
c r e d i t   5 0  %   o f   t h e   s u m s   r e c o v e r e d   t o   t h e 
EAG F.

58

REPLY OF THE 
COMMISSION

6 8.
Th e   5 0 / 5 0   r u l e   i s   a p p l i e d   o n   t h e   o u t s t a n d-
i n g   a m o u n t s   a s   t h e y   a r e   r e p o r t e d   i n   t h e 
A n n e x   I I I   t a b l e   f o r   t h e   y e a r   i n   q u e s t i o n . 
The financial result is not adapted retroac -
tively to take account of either negative or 
p o s i t i v e   c o r r e c t i o n s   r e p o r t e d   b y   M e m b e r 
States in subsequent years. This is the logi -
c a l   c o n s e q u e n c e   o f   t h e   a u t o m a t i c   n a t u r e 
o f   t h i s   n e w   c l e a r a n c e   m e c h a n i s m   a n d   fo l -
lows from the deliberate decision of the EU 
legislator to limit any ex p ost rec tifications 
t o   c a s e s   w h e r e   t h e   a b s e n c e   o f   a n y   i r r e g -
u l a r i t y   i s   r e c o r d e d   b y   a n   a d m i n i s t r a t i v e 
o r   l e g a l   i n s t r u m e n t   o f   a   d e f i n i t i v e   n a t u r e 
(A r t i c l e   3 2 ( 5 ) ,   fo u r t h   p a r a g r a p h ,   o f   R e g u -
l a t i o n   ( E C )   N o   1 2 9 0 / 2 0 0 5 ) .   I t   s h o u l d   b e 
noted, however, that 50 % of any  cor rec ted 
a m o u n t s   w h i c h   a r e   r e c o v e r e d   p o s t   c l e a r -
ance have to be credited to the EU budget.

6 9.
M o s t   o f   t h e   d e b t   a m o u n t s   a r e   e x p e c t e d 
t o   b e   s u b j e c t   t o   p o s i t i v e   c o r r e c t i o n   a f t e r 
t h e   a p p l i c a t i o n   o f   t h e   5 0 / 5 0   r u l e   a s   i n te r -
est   has  to  be  c alculated  at  th e  en d  o f   e ac h 
f i n a n c i a l   ye a r   a n d   i t   h a s   t o   b e   u p d a t e d   i n 
the Annex III table. O ther cor rec tions (pos-
itive  or  n egat ive )  are  the  results  of   f ur t he r 
a s s e s s m e n t   o f   t h e   c o n t r o l   f i n d i n g s   w h i c h 
m a y   h a p p e n   a f t e r   t h e   a p p l i c a t i o n   o f   t h e 
5 0/5 0 r ule.

I f correc tions made by M ember States af ter 
t h e   a p p l i c a t i o n   o f   t h e   5 0 / 5 0   r u l e   w e r e 
t o   b e   s u b j e c t   t o   a n y   s u b s e q u e n t   c l e a r -
a n c e ,   b o t h   p o s i t i v e   a n d   n e g a t i v e   c o r r e c -
t i o n s   wo u l d   h ave   to   b e   t a k e n   i nto   a cco u nt 
a n d   t h e   C o m m i s s i o n   e s t i m a t e s   t h a t   t h e r e 
would be n o advantag e for  th e E U bud ge t.

As   re g a rd s   t h e   c l a r i t y   o f   t h e   Co m m i s s i o n' s 
g u i d e l i n e s ,   t h e   c o r r e s p o n d i n g   p r o v i s i o n s 
a r e   e x p l i c i t l y   a n d   c l e a r l y   s e t   i n   A r t i c l e 
3 2( 5)  of R eg ulation (E C ) N o 1 2 90 /2 00 5.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

5959

REPLY OF THE  
COMMISSION

7 5.
A s   d e s c r i b e d   a b o v e   t h e   5 0 / 5 0   r u l e   w a s 
a p p l i c a b l e   t o   a l l   n o n - c l e a r e d   i r r e g u l a r i t y 
c a s e s   f o r   w h i c h   f u l l   r e c o v e r y   h a d   n o t   y e t 
taken place by 16 O c tober 2006. Therefore, 
i t   w a s   a l s o   a p p l i e d   t o   t h e   c a s e s   a u d i t e d 
b y   t h e   T F R ,   b u t   n o t   c l e a r e d   t h r o u g h 
a   c o n f o r m i t y   d e c i s i o n   a d o p t e d   b e f o r e 
1 6 O c tobe r 20 0 6. 

Concer nin g th e cas es rais ed in An n ex IV:

 Ū  t h e   c a s e   D E / 9 2 / 0 0 2   i s   s u b j e c t   t o 
a   c o n f o r m i t y   c l e a r a n c e   p r o c e d u r e 
( IR /2 0 09 /0 10 /D E) .

 Ū  t h e   t w o   I t a l i a n   c a s e s   w e r e   s u b j e c t   t o 
th e  5 0/5 0  rule   by   Commission   D e c is i on 
2 0 0 7 / 3 2 7 / E C   a n d   w e r e   s u b s e q u e n t l y 
 audited by  t he Commiss ion.

72.
D u r i n g   t h e   y e a r s   2 0 0 8 – 1 0 ,   t h e   C o m m i s -
s i o n   h a s   b e e n   a u d i t i n g   t h e   c o r r e c t   a p p l i -
c a t i o n   o f   t h e   n e w   c l e a r a n c e   m e c h a n i s m 
t h ro u g h   1 5   o n - t h e - s p o t   co n t ro l s   cove r i n g 
1 6   p a y i n g   a g e n c i e s   i n   1 2   M e m b e r   S t a t e s 
a n d   a ro u n d   9 0  %   o f   a l l   o u t s t a n d i n g   d e b t s 
( i n c l u d i n g   a l l   E U - 1 5   M e m b e r   S t a t e s   w i t h 
a   l ow   re cove r y   rate   fo r   t h e   c a s e s   d e te c te d 
since 2007). I n g eneral  t he M em b e r  States ' 
a u t h o r i t i e s   h a v e   a d e q u a t e   p r o c e d u r e s   i n 
p l a c e   t o   p r o t e c t   t h e   f i n a n c i a l   i n t e r e s t   o f 
t h e   E u r o p e a n   U n i o n .   D e f i c i e n c i e s   f o u n d 
d u r i n g   t h e s e   a u d i t s   a re   b e i n g   fo l l o we d   i n 
the contex t of confor mit y clearance proce -
dures. The diligence of the M ember States' 
a u t h o r i t i e s   i n   t h e   r e c o v e r y   o f   t h e   m o s t 
s i g n i f i c a n t   i n d i v i d u a l   i r re g u l a r i t y   c a s e s   i s 
a s s e s s e d   i n   t h e   c o n t e x t   o f   a   f u r t h e r   n i n e -
c o n f o r m i t y   c l e a r a n c e   p r o c e d u r e s .   T h e 
Co m m i s s i o n   co n s i d e r s   t h i s   a u d i t   cove ra g e 
c o m p r e h e n s i v e   a n d   s u f f i c i e n t   a s   r e g a r d s 
th e fin anc ial  r is k co ncer ned.

74.	th ird 	ind ent
I n   o n e   o f   t h e   c a s e s,   t h e   e xc e s s i ve   a m o u n t 
recovered has meanwhile been reimbursed 
t o   t h e   M e m b e r   S t a t e   c o n c e r n e d .   Fo r   t h e 
o t h e r   c a s e ,   t h e   C o m m i s s i o n   h a s   n e v e r 
received a reque s t for  reimb urs e m ent. 

74.	fi f th	ind ent
T h e s e   p r o c e d u r e s   a i m   t o   e n s u r e   t h a t 
t h e   c a s e s   w e r e   p r o p e r l y   r e p o r t e d   i n   t h e 
A n n e x   I I I   t a b l e s   a n d ,   t h u s ,   s u b j e c t   t o 
th e 50/50 ru le.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

60

REPLY OF THE 
COMMISSION

CONCLUSIONS	AND		
RECOMMENDATIONS

79.
T h e   C o m m i s s i o n   w e l c o m e s   t h e   C o u r t ' s 
c o n c l u s i o n   t h a t   t h e   s y s t e m s   e s t a b l i s h e d 
and operated by M emb er States  to  re cove r 
i d e n t i f i e d   d e b t s   a n d   t h e   C o m m i s s i o n ' s 
super visio n o f t he p roces s have  i m prove d.

T h e   C o m m i s s i o n   c o n s i d e r s   t h a t   i t s   i n t e r -
p r e t a t i o n   o f   t h e   c u r r e n t   r u l e s   h a s   b e e n 
c l a r i f i e d   i n   t h e   g u i d e l i n e s .   H o w e v e r , 
d i ve rgi n g   p ra c t i ce s   p e r s i s t   d u e   to   t h e   f a c t 
that recover y is gover ned by national rules 
a n d   t h e   Co m m i s s i o n   w i l l   c o n s i d e r   h o w   t o 
address  t his iss ue in th e contex t  o f  i ts  le g -
islative proposal for the C AP towards 2020.

8 2.
U n d e r   A r t i c l e   3 2 ( 6 ) ( b )   o f   R e g u l a t i o n   ( E C ) 
N o   1 2 9 0 / 2 0 0 5 ,   t h e   i n s o l v e n c y   o f   t h e 
d e b to r   s h a l l   b e   e s t a b l i s h e d   i n   a cco rd a n ce 
w i t h   t h e   n a t i o n a l   i n s o l v e n c y   l a w   o f   t h e 
M e m b e r   S t a te   co n ce r n e d.   S i n ce   t h e   i n s o l -
ve n c y   l aws   d i f fe r   b e t we e n   M e m b e r   St ate s, 
i t   i s   n o t   p o s s i b l e   to   p rov i d e   u n i fo r m   g u i d -
ance on the application of this provision at 
EU level. However, the Commission ver ifies 
t h e   M e m b e r   S t a t e s '   a d m i n i s t r a t i v e   p r a c -
t i ce   i n   t h e   co ntex t   o f   i t s   co n fo r m i t y   c l e a r-
a n c e   p r o c e d u r e s   w i t h   a   v i e w   t o   e n s u r i n g 
t h at   d e b t s   a re   n o t   w r i t te n   o f f   p re m at u re l y 
unde r t his provision.

80.
T h e   C o m m i s s i o n   c h e c k s   t h e   d e b t   m a n -
a g e m e n t   s y s t e m   o f   t h e   M e m b e r   S t a t e s   i n 
t h e   co ntex t   o f   i t s   co n fo r m i t y   a u d i t s.   H ow -
ever, the definitions and requirements laid 
d o w n   i n   E U   l a w   h a ve   t o   b e   a p p l i e d   t o   t h e 
n a t i o n a l   re cove r y   p ro ce d u re,   w h i c h   i n e v i -
t a b l y   l e a d s   t o   d i f fe r e n c e s   i n   t h e   c o n c r e t e 
applicatio n acros s  the M emb er St ates.

81.
W h e r e   s h o r t c o m i n g s   i n   t h e   M e m b e r 
S t a t e s '   r e c o v e r y   p r o c e d u r e s   m a t e r i a l i s e , 
t h e   r e s u l t i n g   f i n a n c i a l   r i s k   i s   a d d r e s s e d 
t h r o u g h   f i n a n c i a l   c o r r e c t i o n s   u n d e r 
 A r t i c l e   3 2 ( 4 )   a n d   ( 8 )   o f   R e g u l a t i o n   ( E C ) 
No 1290 /2005.

As   re cove r y   i s   g ove r n e d   by   n at i o n a l   r u l e s, 
a n y   e n f o r c e m e n t   p o w e r   f o r   t h e   p a y i n g 
a g e n c i e s   wo u l d   h ave   to   b e   p rov i d e d   fo r   i n 
nat iona l l aw.

Recommendatio n	1 	first 	 ind ent
T h e   C o m m i s s i o n   c o n s i d e r s   t h a t   t h e   w a y 
i n   w h i c h   d e b t s   a re   m a n a g e d   a n d   re p o r te d 
u p o n   b y   t h e   M e m b e r   S t a t e s   h a s   a l r e a d y 
improved  signific ant ly,  n ot  leas t  due   to   i ts 
confor m it y  aud its in  t his area.

Recommendatio n	1 	seco nd 	 ind ent
T h e   C o m m i s s i o n   w i l l   c o n s i d e r   p o s s i b l e 
m o d i f i c a t i o n s   t o   r e i n f o r c e   t h e   c u r r e n t 
r u l e s   o n   t h e   r e c o r d i n g   a n d   r e p o r t i n g   o f 
i r r e g u l a r i t i e s   a n d   o t h e r   d e b t s   i n   t h e   c o n -
tex t of its legislative proposals for the C AP 
towards 2 02 0.

Recommendatio n	1 	t hird 	ind ent
Wit h t he exception of t he first  ye ar  (2 0 0 6 ), 
t h e   g u i d e l i n e s   w e r e   a l w a y s   i s s u e d   i n   J u l y 
a t   t h e   l a t e s t   a n d ,   t h u s ,   m o r e   t h a n   h a l f   a 
ye a r   b e fo re   t h e   re p o r t i n g   d e a d l i n e   t o   t h e 
C o m m i s s i o n .   A s   t h e   g u i d e l i n e s   n e e d   t o 
t a k e   a c c o u n t   o f   t h e   e x p e r i e n c e   f r o m   t h e 
p re v i o u s   f i n a n c i a l   c l e a ra n ce   e xe rc i s e,   i t   i s 
n o t   p o s s i b l e   t o   a d v a n c e   t h i s   d a t e   f u r t h e r. 
M oreover, since the last regulator y change 
i n   O c to b e r   2 0 0 7 ,   t h e   g u i d e l i n e   h a s   e s s e n -
tially  remaine d stable.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

6161

REPLY OF THE  
COMMISSION

8 3.
The Commission considers it inappropr iate 
t o   c o m p a re   t h e   re c ove r i e s   f ro m   f i n a l   b e n-
e f i c i a r i e s   t o   t h e   t o t a l   a m o u n t s   r e c o v e r e d 
by the Commission, which include financial 
cor rec t ions impos ed on M ember   State s.

Wi t h   t h e   exce p t i o n   o f   t h e   f i r s t   ye a r   ( 2 0 0 6 ) , 
G u i d e l i n e   N o   1   w a s   a l w a y s   i s s u e d   i n   J u l y 
a n d ,   t h u s ,   m o r e   t h a n   h a l f   a   y e a r   b e f o r e 
t h e   re p o r t i n g   d e a d l i n e   to   t h e   Co m m i s s i o n . 
A s   t h e   g u i d e l i n e   n e e d s   t o   t a k e   a c c o u n t   o f 
t h e   e x p e r i e n c e   f r o m   t h e   p r e v i o u s   f i n a n -
c i a l   c l e a r a n c e   e x e r c i s e ,   i t   i s   n o t   p o s s i b l e 
t o   a d v a n c e   t h i s   d a t e   f u r t h e r.   M o r e o v e r, 
s i n c e   t h e   l a s t   r e g u l a t o r y   c h a n g e   i n   O c t o -
b e r   2 0 0 7 ,   t h e   g u i d e l i n e   h a s   e s s e n t i a l l y 
remain ed st able.

T h e   T F R   c o m p l e t e d   i t s   w o r k   b y   i s s u i n g 
t h e   C o m m i s s i o n   d e c i s i o n   o f   1 3   Fe b r u a r y 
2 0 0 9 .   I n   t h o s e   c a s e s   w h e r e   t h e   M e m b e r 
S t a t e s   a c t e d   w i t h   t h e   n e c e s s a r y   d i l i g e n c e 
a n d   r e c o v e r y   w a s   s t i l l   o n g o i n g ,   t h e   Ta s k 
F o r c e   c o u l d   n o t   w r i t e   o f f   t h e   o u t s t a n d -
i n g   a m o u n t   a t   t h e   e x p e n s e   o f   e i t h e r   t h e 
M e m b e r   S t a t e   o r   t h e   E U   b u d g e t .   T h e r e -
f o r e ,   t h e s e   c a s e s   f e l l   u n d e r   t h e   n e w 
c l e a r a n c e   m e c h a n i s m   o f   R e g u l a t i o n   ( E C ) 
N o 1 2 90 /200 5 .

Recomme ndat ion	1	four th	ind ent
These time limits are already set in respec -
t i v e   c a s e   l a w   a n d   i n   R e g u l a t i o n   ( E C ) 
N o   1 2 9 0 / 2 0 0 5 .   I t   f o l l o w s   f r o m   t h e   j u d g -
m e n t s   i n   Ca s e   C - 3 4 / 8 9   ( p o i n t s   1 2 – 1 3 )   a n d 
C a s e   C - 5 4 / 9 5   t h a t   t h e   M e m b e r   S t a t e   c a n -
n o t   b e   i n a c t i v e   i n   a   g i v e n   c a s e   f o r   m o r e 
t h a n   o n e   ye a r   a n d   t h a t   w i t h i n   a   fo u r - ye a r 
p e r i o d   f ro m   t h e   m o m e n t   o f   t h e   f i r s t   i n d i -
c a t i o n   o f   a n   i r re g u l a r i t y   t h e   i nve s t i g a t i o n 
m u s t   n o r m a l l y   b e   c o n c l u d e d   a n d   a   d e c i -
s i o n   o n   t h e   i n i t i at i o n   o f   a   re cove r y   p ro ce -
d u r e   b e   t a k e n .   T h e   C o m m i s s i o n   w i l l   c o n -
sider clar ifying M ember States’ obligations 
in this respec t in the contex t of its legisla-
tive propo sal s fo r the C A P towa rds   20 2 0 .

Recomme ndat ion	1	f if th	ind ent
T h e   Co m m i s s i o n   c o n s i d e r s   t h a t   G u i d e l i n e 
N o   1   p r o v i d e s   s u f f i c i e n t l y   c l e a r   g u i d a n c e 
o n   t h e   c a l c u l a t i o n   a n d   re p o r t i n g   o f   i n t e r-
e s t s   i n   t h e   co nte x t   o f   t h e   a n n u a l   f i n a n c i a l 
c l e a r a n c e   e xe rc i s e.   Fu r t h e r m o re   t h e   l e g a l 
o b l i g a t i o n   t o   re p o r t   i n t e re s t   a s   a c c e s s o r y 
of pr incipal amounts was confir med by the 
European Cour t of Justice in its judgement 
i n   j o i n e d   c a s e s   T- 2 7 4 / 0 8   a n d   T- 2 7 5 / 0 8 . 
Th e   Co m m i s s i o n   a gre e s,   h owe ve r,   t h at   t h e 
r e p o r t i n g   o f   s o m e   M e m b e r   S t a t e s   i s   d e f i -
c i e nt   i n   t h i s   re s p e c t   a n d   i s   p u r s u i n g   t h e s e 
d e f i c i e n c i e s   i n   t h e   co ntex t   o f   i t s   co n fo r m-
it y clea rance  p ro cedures.

T h e   C o m m i s s i o n   i s   c u r r e n t l y   c o n s i d e r i n g 
h a r m o n i s i n g   t h e   s u b s t a n t i v e   r u l e s   o n   t h e 
r e c o v e r y   o f   u n d u e   p a y m e n t s ,   i n c l u d i n g 
those on interests, thereby overcoming the 
d i f fe re n ce s   re s u l t i n g   f ro m   t h e   a p p l i c at i o n 
of national  ru le s.

Recomme ndat ion	1	s ix th 	inde nt
A r t i c l e   3 2 ( 6 ) ( b )   o f   R e g u l a t i o n   ( E C ) 
N o   1 2 9 0 / 2 0 0 5   e x p l i c i t l y   p rov i d e s   t h a t   t h e 
d e c i s i o n   t o   w r i t e   o f f   a   d e b t   a s   i r r e c o v e r -
a b l e   d u e   t o   t h e   i n s o l v e n c y   o f   t h e   d e b t o r 
s h a l l   b e   b a s e d   o n   a n   a c t   r e c o r d e d   a n d 
r e c o g n i s e d   u n d e r   t h e   n a t i o n a l   l a w   o f   t h e 
M e m b e r   St ate   co n ce r n e d.  Th e   Co m m i s s i o n 
ver ifies whether any such decision is prop -
er ly justified in the contex t of its confor m -
it y au dit s.

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

62

REPLY OF THE 
COMMISSION

Recommendatio n	2 	seco nd 	 ind ent
T h e   C o m m i s s i o n   c o n s i d e r s   t h a t   t h e   r i s k s 
r e f e r r e d   t o   b y   t h e   C o u r t   a r e   a l r e a d y 
a d d re s s e d   t h ro u g h   t h e   wo r k   o f   t h e   ce r t i f i -
cation  bodies.

Recommendatio n	2 	t hird 	ind ent
Acco rd i n g   to   t h e   p r i n c i p l e   o f   s h a re d   m a n -
a g e m e n t ,   t h e   r e c o v e r y   o f   i r r e g u l a r   p a y -
m e n t s   f r o m   t h e   b e n e f i c i a r i e s   i s   t h e   s o l e 
re s p o n s i b i l i t y   o f   M e m b e r   St ate s.   H owe ve r, 
the financial cor rec tions imposed on M em-
b e r   S t a te s   a re   a   s t ro n g   i n ce n t i ve   fo r   t h e m 
to   i m p rove   t h e i r   m a n a g e m e nt   a n d   co nt ro l 
s y s t e m s   a n d ,   t h e r e b y,   c o n t r i b u t e   t o   t h e 
l e g a l i t y   a n d   re g u l a r i t y   o f   t h e   t ra n s a c t i o n s 
at  final be nefic iar y level.

M o r e o v e r,   t h e   n e w   c l e a r a n c e   m e c h a n i s m 
c o m b i n e d   w i t h   t h e   r u l e   o f   c o m p u l s o r y 
c o m p e n s a t i o n   re fe r re d   t o   a b o ve   p ro v i d e s 
a   s t r o n g   i n c e n t i v e   f o r   M e m b e r   S t a t e s   t o 
c o m p l e t e   r e c o v e r y   o f   u n d u e   p a y m e n t s 
f r o m   t h e   b e n e f i c i a r i e s   a s   q u i c k l y   a s   p o s -
s i b l e .   A s   a   r e s u l t ,   b y   t h e   e n d   o f   f i n a n c i a l 
y e a r   2 0 1 0 ,   m o r e   t h a n   4 0  %   o f   t h e   n e w 
E AG F   d e b t s   f ro m   2 0 0 7   a n d   t h e re a f t e r   h a d 
a l re a d y   b e e n   re cove re d,   w h i c h   i s   a   s i gn i f i -
cant improvement  compared  to  th e  pas t.

Recommendatio n	2 	fo ur t h	ind ent
T h e   T F R   c o m p l e t e d   i t s   w o r k   b y   i s s u i n g 
t h e   C o m m i s s i o n   d e c i s i o n   o f   1 3   Fe b r u a r y 
2 0 0 9 .   I n   t h o s e   c a s e s   w h e r e   t h e   M e m b e r 
S t a t e s   a c t e d   w i t h   t h e   n e c e s s a r y   d i l i g e n c e 
a n d   r e c o v e r y   w a s   s t i l l   o n g o i n g ,   t h e   T F R 
co u l d   n o t   w r i te   o f f   t h e   o u t s t a n d i n g   at   t h e 
e x p e n s e   o f   e i t h e r   t h e   M e m b e r   S t a t e   o r 
t h e   E U   b u d g e t .  Th e re fo re,   t h e s e   c a s e s   fe l l 
u n d e r   t h e   n e w   c l e a r a n c e   m e c h a n i s m   o f 
R eg ulation ( EC ) N o 1 29 0/20 0 5.

84.
T h e   C o m m i s s i o n   c o n s i d e r s   t h a t   t h e   r i s k s 
r e f e r r e d   t o   b y   t h e   C o u r t   a r e   a d e q u a t e l y 
a d d r e s s e d   t h r o u g h   t h e   w o r k   o f   t h e   c e r -
t i f i c a t i o n   b o d i e s   a n d   i t s   o w n   c o n f o r m i t y 
audits.

85.	fi rst	ind ent
U n d e r   A r t i c l e   3 2 ( 6 ) ( b )   o f   R e g u l a t i o n   ( E C ) 
N o   1 2 9 0 / 2 0 0 5 ,   t h e   i n s o l v e n c y   o f   t h e 
d e b to r   s h a l l   b e   e s t a b l i s h e d   i n   a cco rd a n ce 
w i t h   t h e   n a t i o n a l   i n s o l v e n c y   l a w   o f   t h e 
M e m b e r   S t a te   co n ce r n e d.   S i n ce   t h e   i n s o l -
ve n c y   l aws   d i f fe r   b e t we e n   M e m b e r   St ate s, 
i t   i s   n o t   p o s s i b l e   to   p rov i d e   u n i fo r m   g u i d -
ance on the application of this provision at 
EU level. However, the Commission ver ifies 
t h e   M e m b e r   S t a t e s '   a d m i n i s t r a t i v e   p r a c -
t i ce   i n   t h e   co ntex t   o f   i t s   co n fo r m i t y   c l e a r-
a n c e   p r o c e d u r e s   w i t h   a   v i e w   t o   e n s u r i n g 
t h at   d e b t s   a re   n o t   w r i t te n   o f f   p re m at u re l y 
under  this provis ion .

85.	second	inde nt
I t   f o l l o w s   f r o m   A r t i c l e   3 5   o f   R e g u l a t i o n 
( E C )   N o   1 2 9 0 / 2 0 0 5   t h a t   t h e   d a t e   o f   t h e 
p r i m a r y   a d m i n i s t r a t i ve   o r   j u d i c i a l   f i n d i n g 
c o r r e s p o n d s   t o   t h e   d a t e   w h e n   t h e   t h r e e 
c o n d i t i o n s   s e t   o u t   i n   G u i d e l i n e   N o   2   a r e 
met for the first time. Cases where M ember 
States establish the pr imar y administrative 
o r   j u d i c i a l   f i n d i n g   a t   a   l a t e r   d a t e   a re   p u r -
s u e d   t h ro u g h   co n fo r m i t y   c l e a ra n ce   p ro ce -
dures.

Recomme ndat ion	2	f irst 	inde nt
Th e   5 0 / 5 0   r u l e   i s   a p p l i e d   o n   t h e   o u t s t a n d-
i n g   a m o u n t s   a s   t h e y   a r e   r e p o r t e d   i n   t h e 
A n n e x   I I I   t a b l e   f o r   t h e   y e a r   i n   q u e s t i o n . 
T h e   f i n a n c i a l   r e s u l t   i s   n o t   a d a p t e d   r e t r o -
a c t i v e l y   t o   t a k e   a c c o u n t   o f   e i t h e r   n e g a -
t i v e   o r   p o s i t i v e   c o r r e c t i o n s   r e p o r t e d   b y 
M ember States in subsequent years. This is 
t h e   l o g i c a l   c o n s e q u e n c e   o f   t h e   a u t o m a t i c 
n a t u r e   o f   t h i s   n e w   c l e a r a n c e   m e c h a n i s m 
a n d   f o l l o w s   f r o m   t h e   d e l i b e r a t e   d e c i s i o n 
of the EU legislator to limit any ex post rec -
t i f i c a t i o n s   t o   c a s e s   w h e r e   t h e   a b s e n c e   o f 
a ny   i r r e g u l a r i t y   i s   r e c o r d e d   b y   a n   a d m i n -
istrative or legal instrument of a definitive 
n at u re   (Ar t i c l e   3 2 ( 5 ) ,   fo u r t h   p a ra gra p h ,   o f 
R egulat io n (EC ) No 1 29 0/ 20 05).

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

 
 
63

European Court of Auditors

Special	Report	No	8/2011

Recovery	of	undue	payments	made	under	the	common	agricultural	policy

Luxembourg: Publications Office of the European Union

2011 — 62 pp. — 21 × 29,7 cm

ISBN 978-92-9237-223-1

doi:10.2865/52004

Special Report No 8/2011 – Recovery of undue payments made under the common agricultural policy

How	to	obtain	EU	publications

Free	publications:

• 

• 

via EU Bookshop (http://bookshop.europa.eu);

at the European Union's representations or delegations. You can obtain their contact details 
on the Internet (http://ec.europa.eu) or by sending a fax to +352 2929-42758.

Priced	publications:

• 

via EU Bookshop (http://bookshop.europa.eu).

Priced	subscriptions	(e.g.	annual	series	of	the	Official Journal of the European Union	and	reports	
of	cases	before	the	Court	of	Justice	of	the	European	Union):

• 

via one of the sales agents of the Publications Office of the European Union 
(http://publications.europa.eu/others/agents/index_en.htm).

 
 
t

Q
J
-
A
B
-
1
1
-
0
0
6
-
E
N

-
C

THIS  SPECIAL  REPORT  COVERS  THE  SYSTEMS  ESTABLISHED  IN  MEMBER 

STATES  FOR THE  RECOVERY  OF  UNDUE  PAYMENTS  UNDER THE  COMMON 

AGRICULTURE  POLICY  AND  THE  COMMISSION’S  SUPERVISION  OF  THE 

PROCESS.  

THE  REPORT  EXAMINES,  IN  PARTICULAR,  THE  FUNCTIONING  OF  THE 

‘50/50  MECHANISM’,  WHEREBY  50   %  OF  UNRECOVERED  DEBTS  SHOULD 

BE AUTOMATICALLY CHARGED TO MEMBER STATES.

IT  HIGHLIGHTS  THE  RISKS,  SUCH  AS  PREMATURE  WRITE-OFFS  AND  LONG 

DELAYS, ARISING FROM THE RECOVERY PROCEDURES AND THE RELATIVELY 

LOW RATE OF RECOVERY FROM FINAL BENEFICIARIES.

EUROPEAN COURT OF AUDITORS