REPORT FROM THE COMMISSION TO THE COUNCIL assessing the progress reported by Italy to the Commission and the Council on the recovery of the amount due from milk producers by virtue of the additional levy for the periods 1995/96 to 2001/02 (pursuant to Article 3 of Council Decision 2003/530/EC)
Date: 2016-07-29
Institutions: Directorate-General for Agriculture and Rural Development, European Commission
Subjects: Italy, State aid, agricultural levy, agricultural quota, control of State aid, dairy production, milk, production aid, redemption

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 29.7.2016  COM(2016) 488 final   REPORT FROM THE COMMISSION TO THE COUNCIL assessing the progress reported by Italy to the Commission and the Council on the recovery of the amount due from milk producers by virtue of the additional levy for the periods 1995/96 to 2001/02  (pursuant to Article 3 of Council Decision 2003/530/EC)  
 
 
REPORT FROM THE COMMISSION TO THE COUNCIL 

assessing the progress reported by Italy to the Commission and the Council on the 
recovery of the amount due from milk producers by virtue of the additional levy for the 
periods 1995/96 to 2001/02 

(pursuant to Article 3 of Council Decision 2003/530/EC) 

report  has  been  produced  pursuant 

This  assessment 
to  Article 3  of  Council 
Decision 2003/530/EC of 16 July 2003 on the compatibility with the common market of aid 
that  the  Italian  Republic  intends  to  grant  to  its  milk  producers  (hereinafter:  ‘Council 
Decision’), in accordance with which the competent Italian authorities must report annually to 
the Council and the Commission on the progress made by them in recovering the amount due 
from the producers by virtue of the additional levy for the periods 1995/96 to 2001/02.  

Under Article 1 of the Council Decision, the aid the Italian Republic grants to milk producers, 
by itself making payment to the European Union budget of the amount due from them to the 
EU  by  virtue  of  the  additional  levy  on  milk  and  milk  products  for  the  periods  1995/96  to 
2001/02 and by allowing these producers to repay their debt by way of deferred payment over 
a  number  of  years  without  interest,  is  exceptionally  considered  to  be  compatible  with  the 
common market on condition that: 

– 

– 

repayment is in full by yearly instalments of equal size, and 

the repayment period does not exceed 14 years, starting from 1 January 2004. 

Under  Article 2  of  the  Council Decision,  the  granting  of  the  aid  is  conditional  upon  Italy 
declaring  the  total  additional  levy  for  the  periods  concerned  to  the  European  Agricultural 
Guidance and Guarantee Fund (EAGGF) and upon it deducting the outstanding debt in three 
yearly  instalments  of  equal  size  from  the  expenditure  financed  by  the  EAGGF  for 
November 2003, November 2004 and November 2005 respectively. The declaration by  Italy 
of  the  total  additional  levy  for  the  periods  concerned  was  duly  made  by  letter  of 
26 August 2003.  Deductions  of  the  outstanding  debt  were  duly  made  from  expenditure 
financed by the EAGGF for November 2003, 2004 and 2005. 

Article 3 of the Council Decision requires the competent Italian authorities to report annually 
to the Council and the Commission on the progress made by them in recovering the amount 
due from producers by virtue of the additional levy for the periods 1995/96 to 2001/02. 

Under that provision, the Italian authorities presented their tenth report to the Commission by 
letter  from  the  AGEA  (Agenzia  per  le  Erogazioni  in  Agricoltura,  Italian  Agricultural 
Payments Agency) dated 27 November 2015 concerning payment of the 2014 instalment.  

The  report  provides  the  Commission’s  assessment  of  the  progress  reported  by  the  Italian 
authorities for 2014 in  recovering the additional  levy both  for the seven periods covered by 
the Council Decision and for those not covered by it. 

Payment of the levy under the 2003 instalment scheme 

The Council Decision authorising Italy to itself make payment to the European Union budget 
of  the  additional  levy  due  from  its  milk  producers  related  to  25 123 producers  in  2005,  the 
date of the first report to the Council. This figure fell to 21 657 for 2014. 

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Of all the reported producers subject to the levy for the seven periods covered by the Council 
Decision, 15 431 initially opted to pay under the 2003 instalment scheme. In 2004, before the 
first  yearly  instalment  was  paid,  the  15 431  producers  which  had  opted  to  pay  under  the 
instalment scheme owed EUR 345 million in total, which represented about one quarter of the 
total outstanding amount due from the producers which had refused to opt into the instalment 
schemes.  The  producers  responsible  for  the  lowest  levels  of  excess  production  therefore 
mostly opted to pay under the instalment scheme. However, the producers with greater levels 
of excess production (some 8 000 producers to whom around EUR 1 billion in levy due over 
the  seven  periods  is  billed)  instead  preferred  not  to  pay  under  the  instalment  scheme. 
Nevertheless,  it  should  be  pointed  out  that,  every  year,  the  Italian  authorities  receive  new 
applications  to  pay  by  instalments.  In  2014,  154 new  applications  were  submitted, 
corresponding to EUR 14.9 million in total. The total amount covered by the 2003 instalment 
scheme is EUR 373.80 million. 

instalment 

totalling  EUR 25 348 650.96  was 

The  eleventh  yearly 
to  be  paid  by 
10 686 producers before 31 December 2014. The checks carried out by the Italian authorities 
show that 10 418 producers duly paid amounts totalling EUR 24 312 190 during 2014, which 
means  that  97.5 %  of  the  producers  paid  95.9 %  of  the  amounts  due  under  the  eleventh 
instalment within the time limit. As regards the ten previous instalments, timely payment had 
been recorded for 99.6 %, 97.9 %, 99.5 %, 99.7 %, 96.4 %, 96.2 %, 90.5 %, 98.3 %, 96.9 % 
and  98.2 %  of  the  due  amounts  respectively.  The  total  levy  collected  under  the  first  eleven 
instalments  therefore  amounts  to  roughly  EUR 294 051 830  (almost  97.2 %  of  the  total 
amount due under these yearly instalments).  

Whilst  these  levels  are  certainly  indicative  of  a  commitment  on  the  part  of  the  producers 
participating  in  the  instalment  scheme  to  meet  their  obligations,  the  Commission  considers 
that  the  follow-up  given  to  cases  where  the  payment  has  not  been  recorded  within  the  time 
limit is a prime indicator of the level of commitment on the part of the Italian authorities to 
ensure correct observance of the conditions of the scheme and ultimately collection in full of 
the levy due.  

As regards the eleventh  instalment,  no information  is  yet  available for the payments for the 
remaining 268 producers for a sum of EUR 1 035 351.12. 

With  regard  to  the  tenth  instalment  period,  the  previous  report  stated  that  payment  had  not 
been  made  by  31 December 2013  by  199 producers,  corresponding  to  EUR 500 948. 
According  to  the  information  received  from  the  Italian  authorities,  all  these  cases  were 
notified  by  the  central  authorities  to  the  relevant  regional  authorities  in  order  to  enforce 
payment of the entire amount due with an interest rate outside the instalment scheme. Of the 
199  producers  first  thought  not  to  have  paid,  it  later  emerged  that  101  of  them  had  in  fact 
paid.  By contrast,  the 98 producers who had not  actually paid  the tenth instalment  lost their 
entitlement  to  pay  by  instalments  and  enforced  recovery  procedures  were  initiated  against 
them.  

Holdings for which the possibility of payment by instalments has been revoked 

The  failure  to  pay  any  one  yearly  instalment  results  in  exclusion  from  the  scheme  and 
consequently  makes  producers  liable  to  seizure  of  the  entire  amount  still  outstanding  with 
accrued interest. 

Eleven  years  on  from  the  start  of  the  2003  scheme  for  payment  by  instalments,  a  total  of 
718 holdings  have  had  the  right  to  pay  by  instalments  revoked  for  a  total  debt,  broken  into 
instalments, of EUR 24 890 674.25. 

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However,  of  this  amount,  EUR 8 532 777.28  had  been  paid  by  instalments  before  the  right 
was revoked and EUR 3 745 496.41 was recovered after the revocation, enabling the amount 
owed  by  223 holdings  to  be  paid  off  completely.  The  total  outstanding  debt  is  therefore 
EUR 12 588 110.95 and relates to 495 holdings. 

These  figures  show  that  the  diligence  shown  by  the  Italian  administration  in  collecting  the 
levy from the producers who were excluded from the scheme after failing to pay an instalment 
is  far  from  satisfactory.  Moreover, milk  producers had to  renounce their  legal  action before 
the Italian courts in order to be able to pay under the instalment scheme. The lack of recovery 
therefore  seems  to  be  due  not  to  the  potential  length  of  court  proceedings,  but  rather  to  the 
incapacity of the Italian administration to effectively recover those amounts.  

Six-month deferral of payment and its consequences for State aid 

Pursuant to Article 2(12)(k) of Italian Decree-Law No 225 of 29 December 2010, which, after 
amendments,  became  Law No 10  of  26 February 2011,  Italy  authorised  the  deferral,  until 
30 June 2011,  of  the  2010  instalment  due,  in  principle,  by  31 December 2010  under  the 
2003 instalment scheme approved by Council Decision 2003/530/EC. 

In  Commission Decision C(2013) 4046 final  of  17 July 2013,  the  Commission  declared  that 
the deferral of the payment of the milk levy instalment due by 31 December 2010 constituted 
aid incompatible with the internal market. Furthermore, it considered that this aid had entailed 
a breach of the conditions laid down in Council Decision No 2003/530/EC, and had created – 
for those who benefited from it and thus had gone beyond the framework established by the 
Council  –  new  State  aid  that  was  unlawful  within  the  meaning  of  Article 1(f)  of 
Council Regulation (EC) No 659/1999 and incompatible with the internal market as well.  

In  Commission Decision C(2013) 4046 final,  the  Commission  directed  Italy  to  arrange  to 
have the incompatible aid, together with interest, refunded by the beneficiaries of the deferral 
of payment.  

The  Italian  authorities  have  initiated  the  administrative  procedures  necessary  to  recover  the 
aid. However, on 8 November 2013, Italy brought an action against the Commission Decision 
before  the  General  Court  (Case T-527/13).  On  24 June 2015,  the  General  Court  delivered  a 
judgment  partially  annulling  the  Commission  Decision.  It  confirmed  the  Commission's 
approach  as  regards  the  aid  inherent  in  deferring  the  payment  of  the  instalment  due  by 
31 December 2010,  but  rejected  the  Commission's  conclusions  concerning  the  new  aid 
created for those who benefited from the deferral and thus had gone beyond the framework of 
the Council Decision. The Commission has referred the judgment to the Court of Justice. A 
decision by the Court is still pending. 

Additional levy due for the period 2002/2003 

For the periods 1995 to 2002, Italy itself made payment to the European Union budget of the 
additional levy due from the producers, pursuant to Council Decision No 2003/530/EC. 

Since 2004, Member States have paid the additional levy directly to the EU budget, pursuant 
to Council Regulation (EC) No 1788/2003 of 29 September 2003. 

However,  the  period  2002/2003  is  covered  neither  by  the  Council  Decision  nor  by  the  new 
scheme  established  in  2004.  Given  the  overrun  of  the  national  quota  allocated  to  Italy,  the 
Italian  milk  producers  responsible  for  that  overrun  owed  EUR 227.77 million  to  the  EU 
budget for the period 2002/2003. 

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Of this amount,  

- EUR 40.46 million has been cancelled by decision of a court of law; 

-  EUR 9.97 million  is  covered  by  the  2009  reimbursement  system  (of  which  EUR 2 million 
has already been paid); and 

- EUR 59.18 million has been recovered outside the instalment scheme  

EUR 118.15 million in additional levy is therefore still due to the European Union budget for 
the  period  2002/2003  corresponding  to  the  additional  level  from  milk  producers  who  opted 
out of the 2009 instalment scheme.  

Levy  charged  for  the  periods  1995/1996  to  2008/2009  and  not  covered  by  the  2003 
instalment scheme or the 2009 reimbursement system  

Reference has already been made in previous reports to the low uptake of the 2003 instalment 
scheme and the 2009 reimbursement system (with an interest rate equal to a reference rate for 
the European Union increased by several percentage points) in terms of the amount of levy to 
be recovered. 

In fact,  the total  amount  of levy  charged for the  periods 1995/96  to  2008/09,  as  notified by 
Italy,  is  EUR 2.305 billion.  Of  this  amount,  EUR 613.54  million  was  recovered  by  Italy 
the  2003 instalment  scheme, 
between  2003  and  2014:  EUR 294.05 million  under 
EUR 6.65 million under the 2009 reimbursement system and EUR 312.84 million outside the 
instalment schemes. 

Of the remaining amount, that is, EUR 1.691 billion: 

- a small part (EUR 142.28 million) is covered by the instalment schemes established by Italy 
in 2003 and 2009, which some milk producers liable for payment of the levy have opted into; 

- EUR 211.18 million has  been declared irrecoverable following bankruptcy of the producer 
or cancellation of the levy by court; 

- there remains EUR 1.338 billion due from the producers who have refused to opt into the 
instalment  schemes,  most  of  whom  have  contested  the  additional  levy  before  the  Italian 
courts.  Of  the  overall  amounts  still  due  by  virtue  of  the  levy  for  the  periods  1995/96  to 
2008/09 (EUR 1.48 billion), approximately 90 % are not covered by either of the instalment 
schemes. 

The  total  amount  of  levy  collected  outside  the  instalment  schemes  amounts  so  far  to  just 
EUR 312.84 million.  According  to  the  report  submitted  by  the  Italian  authorities,  this 
extremely low rate could be due to the large number of court cases brought by the producers 
who are liable for payment of the levy and who had the recovery process suspended. 

The Commission welcomed the information contained in the Italian authorities’ report on the 
eleventh  instalment  as  regards  the  current  overall  situation  concerning  recovery  of  the  levy 
under the instalment scheme established in 2003. 

However, the figures provided by the Italian administration show that insignificant progress 
has been made in collecting the amounts not covered by the instalment schemes. In particular, 
insignificant progress has been made in recovering the enforceable amounts which were never 
contested or which were contested but confirmed by the relevant court, or for which cases are 
ongoing but suspension orders were not issued.  

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On 31 December 2014,  EUR 262.18 million  of these enforceable amounts  had actually been 
collected,  while  the  enforceable  amount  still  outstanding  was  EUR 871.76 million.  The 
Commission  would  further  point  out  that,  of  the  EUR 1.48 billion  still  due  for  the  periods 
1995/96-2008/09, EUR 466 million is not yet enforceable as it is the subject of a legal dispute 
and a court order has been issued for recovery to be suspended. However, it will have to be 
recovered once judgments have been returned in favour of the administration. 

As  regards  the  periods  covered  by  the  Council  Decision  (1995/96  to  2001/02),  31 %  of  the 
enforceable amounts have been collected to date. As regards the enforceable amounts due for 
the periods 1995/96-2008/09, only 23 % of the amounts have actually been collected. 

Within  the  enforceable  amounts  due  for  the  entire  period,  a  distinction  should  be  made 
between  

-  the  amounts  which  were  not  contested:  of  the  enforceable  EUR 174.18  million, 
EUR 96.05 million has been recovered, which corresponds to a recovery rate of 55 %; 

- the amounts which were the subject of a legal dispute, but for which no order was issued to 
suspend recovery: of the enforceable EUR 191.74 million, only EUR 19.86 million (10.35 %) 
has been recovered; 

-  the  amounts  which  were  confirmed  by  court:  of  the  enforceable  EUR 768.03  million, 
EUR 146.27 million (19 %) has been recovered. 

The  Commission  underlines  the  extremely  poor  progress  made  in  recovering  the  last  two 
categories  of  amounts.  Likewise,  from  the  EUR 174.18 million  which  was  never  contested 
and  therefore  could  be  recovered  immediately,  there  is  still  EUR 78.13 million  to  be 
recovered.  

The  Commission  greatly  regrets  the  slow  progress  made  in  recovering  the  part  of  the  levy 
which was not covered by the 2003 instalment scheme or the 2009 reimbursement system.  

The  Commission  has  been  continuing  to  closely  follow  the  recovery  process  in  Italy, 
particularly the recovery of the levy not covered by the instalment scheme. The Commission 
departments  have  on  several  occasions  brought  their  observations  (including  negative 
remarks)  to  the  attention  of  the  Italian  authorities  and  requested  detailed  information  on 
different aspects concerning the recovery of the milk levy.  

Nevertheless, in spite of numerous repeated requests by the Commission, the majority of the 
amounts due have still not been recovered by the Italian authorities.  

The  Commission  sent  Italy  a  letter  of  formal  notice  concerning  the  matter  in  June 2013, 
followed  by  a  reasoned  opinion  in  July 2014.  As  Italy’s  replies  did  not  indicate  that  any 
significant  progress  had  been  made  with  the  recovery,  the  Commission  decided,  on 
26 February 2015, to bring  action before the Court  of Justice of the European Union under 
Article 258  of  the  TFEU  for  failure  to  fulfil  an  obligation.  On  6 August 2015,  the 
Commission  therefore  brought  action  against  Italy  for  failing  to  fulfil  its  obligation  to  take 
sufficient measures to guarantee the effective and efficient recovery of levies on surplus from 
milk producers who overran their individual quotas during the years in which Italy exceeded 
its national milk quota (case C-433/15).  

Conclusion 

The  Commission  considers  that,  insofar  as  the  conditions  for  the  implementation  of  the 
instalment scheme approved by the Council in 2003 are met, the progress made by the Italian 
authorities  in  recovering  the  amount  due  from  the  producers  who  opted  to  pay  under  the 

6 

 
 
 
instalment scheme for the periods 1995/96 to 2001/02 demonstrates that the scheme has been 
managed in a satisfactory manner.  

As  for  the  amounts  of  levy  not  covered  by  the  instalment  schemes,  the  Commission  has 
already expressed – in its successive assessment reports to the Council since 2010, then in the 
letter  of  formal  notice  sent  to  Italy  on  20 June 2013,  and  in  the  reasoned  opinion  issued  on 
10 July 2014 – its dissatisfaction with the lack of significant progress in recovering the milk 
quota levy.  

According to the information provided by the Italian authorities in their report on the eleventh 
instalment, in this case, no major new developments can be reported in the actual collection of 
the  levy  not  covered  by  the  instalment  schemes.  In  view  of  the  large  amount  of  the  unpaid 
levy and the length of time it has gone unrecovered, it must be concluded that the efficiency 
and effectiveness of EU law is and has been far from ensured by the Italian authorities.  

That  is  why  on  6 August 2015  action  was  brought  by  the  Commission  before  the  Court  of 
Justice of the European Union under Article 258 of the TFEU for failure to fulfil an obligation 
(Case C-433/15). 

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