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 period 1995/1996 to 2001/2002 (pursuant to Article 3 of Council Decision 2003/530/EC)
Date: 2018-05-23
Institutions: Directorate-General for Agriculture and Rural Development, European Commission
Subjects: Italy, State aid, agricultural quota, control of State aid, dairy production, milk, production aid, reimbursement of aid

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 23.5.2018 COM(2018) 313 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 period 1995/1996 to 2001/2002  
 
 
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 
period 1995/1996 to 2001/2002 

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

report  has  been  drawn  up  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:  ‘the  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 period 1995/1996 to 2001/2002.  

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  period  1995/1996  to 
2001/2002 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 made 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  period  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  marketing  years  1995/96  to 
2001/02. 

Under that provision, the Italian authorities presented their twelfth report to the Commission 
by  letter  from  the  AGEA  (Agenzia  per  le  Erogazioni  in  Agricoltura,  Italian  Agricultural 
Payments Agency) dated 7 November 2017 concerning payment of the 2016 instalment. Since 
the  first  two  instalments  (2004  and  2005)  were  covered  by  a  single  report  (document 
COM(2007) 34 final of 30 January 2007), this report concerns the thirteenth instalment. 

The  report  provides  the  Commission’s  assessment  of  the  progress  reported  by  the  Italian 
authorities for 2016 in recovering the additional levy both for the seven years covered by the 
Council Decision and for those not covered by it. 

2 

 
 
 
 
 
 
Payment of the levy under the 2003 deferred payment scheme 

The Council Decision authorising Italy to itself make payment to the European Union budget 
of  the  additional  levy  due  from  its milk  producers  concerned  25 123 producers in  2005,  the 
year of the first report to the Council. This figure fell to 21 123 for 2016. 

Of all the producers reported on who were subject to the levy for the seven  marketing years 
covered  by  the  Council  Decision,  15 431  initially  opted  to  pay  under  the  2003  deferred 
payment scheme.  In  2004, before the first yearly instalment was paid, the 15 431 producers 
that  had  opted  to  pay  under  the  deferred  payment  scheme  owed  EUR 345 million  in  total, 
which represented about one quarter of the total outstanding amount due from the producers 
that  had  refused  to  opt  into  the  schemes  for  deferred  payment.  It  seems  that  the  producers 
opting to pay under the deferred payment scheme were mostly those with the lowest levels of 
excess  production.  On  the  other  hand,  producers  with  higher  levels  of  excess  production 
(some  8 000 producers  owing  around  EUR 1 billion  in  levies  for  the  seven  years)  preferred 
not to participate in the deferred payment scheme. Nevertheless, it should be pointed out that, 
every  year,  the  Italian  authorities  receive  new  applications  to  be  included  in  the  scheme.  In 
2016,  39 new  applications  were  submitted,  corresponding to  EUR 4.2 million  in  total.  As at 
31  December  2016  the  total  amount  covered  by  the  2003  deferred  payment  scheme  is 
EUR 372 361 million. 

The  thirteenth  yearly  instalment,  totalling  EUR 25 574 104.06,  was  to  be  paid  by 
10 395 producers before 31 December 2016. The checks carried out by the Italian authorities 
show  that  10 186 producers  duly  paid  amounts  totalling  EUR 24 968 791.58  in  2016,  which 
means  that  97.9 %  of  the  producers  paid  97.63 %  of  the  amounts  due  under  the  thirteenth 
instalment within the time limit. As regards the twelve 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 %,  98.2,  95.9 %  and  95.7 %  of  the  due  amounts,  respectively.  The  total  levy  collected 
under  the  thirteen  instalments  therefore  amounts  to  EUR 358 326  million  euro  (just  above 
96 % 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  deferred  payment  scheme  to  meet  their  obligations,  the  Commission 
considers that the follow-up given to cases where the payment has not been made within the 
time limit is a prime indicator of the level of commitment on the part of the Italian authorities 
to ensure full compliance with the conditions of the scheme and ultimately collection in full of 
the levy due.  

As regards the thirteenth instalment, no information is yet available regarding payment by the 
remaining 209 producers for a sum of EUR 563 317.82. (This information will be included in 
the next review.)  

With  regard  to  the  twelfth  instalment,  the  previous  report  stated  that  payment  had  not  been 
made by 31 December 2015 by 258 producers, corresponding to EUR 1 089 857. 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  interest,  outside  the  deferred  payment  scheme.  Of  the  258  producers  first 
thought not to have paid, it later emerged that 124 of them had in fact paid. By contrast, the 
134 producers  who  had  not  actually  paid  the  twelfth  instalment  lost  their  entitlement  to 
deferred payment and enforced recovery procedures were initiated against them.  

Based  on  the  information  provided  by  the  Italian  authorities  for  2016,  the  conditions  for 
applying the deferred payment scheme approved by Council Decision 2003/530/EC appear to 
have been met, and the scheme appears to have been managed in a satisfactory manner given 

3 

 
 
the  progress  made  in  recovering  the  amount  owed  by  the  producers  participating  in  the 
scheme for the period 1995/1996 to 2001/2002.  

Holdings for which the possibility of deferred payment has been revoked 

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

Thirteen years on from the start of the 2003 deferred payment scheme, a total of 991 holdings 
have  had  their  right  to  make  deferred  payments  revoked  for  a  total  debt,  to  be  paid  by 
instalments, of EUR 33 954 483.57. 

However,  of  this  amount,  EUR  15 608 713.05  was  paid  before  the  right  was  revoked  and 
EUR 5 042 636.22  was  recovered  after 
includes 
EUR 2 678 653.30 paid by 256 holdings that thereby managed to clear their debt.  The total 
outstanding debt is therefore EUR 13 314 672.82, relating to 735 holdings. 

the  revocation; 

latter  amount 

this 

These  figures  show  that  the  diligence  shown  by  the  Italian  administration  in  collecting  the 
levy from producers who have been excluded from the deferred payment scheme after failing 
to pay an instalment is far from satisfactory. Moreover, the milk producers had to renounce 
any  legal  action  before  the  Italian  courts  in  order  to  be  included  in  the  deferred  payment 
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 impact on State aid 

Pursuant to Article 2(12)(k) of Italian Decree-Law No 225 of 29 December 2010, which was 
converted,  with  amendments,  into  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 deferred payment scheme approved by Council Decision 2003/530/EC. 

In 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 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 Regulation 
(EC) No 659/1999 and also incompatible with the internal market.  

In  Decision C(2013) 4046 final,  the  Commission  ordered  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  referred  the  judgment  of  the  General  Court  to  the 
Court  of  Justice  of  the  European  Union  (Case C-467/15 P).    In  its  judgment  in  this  case 

4 

 
 
 
delivered  on  25  October  2017,  the  Court  of  Justice  confirmed  the  validity  of  Commission 
Decision C(2013) 4046 final, which the General Court had partially annulled in its judgment 
of 24 June 2015 (Case T-527/13). The Italian authorities have therefore been invited to adopt 
and implement the national measures required to enforce Decision C(2013) 4046 final, until 
the aid disbursed under the scheme has been recovered in full. 

Additional levy due for 2002/2003 

For  the  periods  1995-2002,  Italy  itself  made  payment  to  the  European  Union  budget  of  the 
additional levy due from the producers pursuant to Council Decision 2003/530/EC. 

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

However, the marketing year 2002/2003 is not covered either by the Council Decision or by 
the new scheme set up in 2004. The Italian milk producers responsible for the overrun of the 
national quota allocated to Italy owed EUR 227.76 million to the EU budget for 2002/2003. 

Of that amount, the milk producers concerned still owe EUR 118.4 million to the EU budget 
due to the additional levy.   

Levy  charged  for  the  period  1995/1996  to  2008/2009  and  not  covered  by  the  2003 
deferred payment scheme or the 2009 reimbursement scheme   

As has been pointed out in previous reports, only a small part of the levy to be recovered, i.e. 
EUR 407 million,  or  17  %  of  the  recoverable  amount,  is  actually  covered  by  the 
2003 deferred  payment  scheme  and  by  the  reimbursement  in  instalments  scheme  set  up  by 
Italy  in  2009  (with  an  interest  rate  equal  to  a  EU  reference  rate  increased  by  several 
percentage points).  As at 31 December 2016, a total of EUR 368 million has been recovered 
under  the  2003  deferred  payment  scheme  and  the  2009  reimbursement  scheme.  This  means 
that  only  a  small  fraction  of  the  total  amount  to  be  reimbursed,  i.e.  39  million  euro,  still 
pertains to the two schemes. 

In  truth,  of the EUR 2 303 billion corresponding to  the total  amount  of  the levy charged, as 
notified by Italy, for the period 1995/1996 to 2008/2009, by far the largest part falls outside 
the two schemes.  

While  the  information  provided  in  the  report  from  the  Italian  authorities  on  the  thirteenth 
instalment shows that the current situation as regards recovery of the levy under the deferred 
payment  scheme  set  up  in  2003  is  satisfactory  overall,  the  same  cannot  be  said  of  the 
collection  of  recoverable  amounts  not  subject  to  the  deferred  payment  or  reimbursement 
scheme (EUR 1 268 billion), in particular with respect to the recovery of amounts subject to 
enforcement (EUR 803 million). 

In its successive assessment reports to the Council since 2010, the Commission has repeatedly 
expressed its dissatisfaction with the lack of significant progress in recovering the repayable 
additional milk levy not covered by the deferred payment or reimbursement scheme.  

According  to  the  information  provided  by  the  Italian  authorities  in  their  report  on  the 
thirteenth instalment, there are no major new developments in the actual collection of the levy 
not  covered  by  the  instalment-based  schemes.  The  Italian  authorities  point  out  that 
EUR 798 million will be recovered through legal action (enforced recovery proceedings) still 
pending, but this has not produced any tangible results to date. 

5 

 
 
 
 
In view of the large amount of the levy that has not been  paid and the length of time it has 
gone unrecovered, it must be concluded that the Italian authorities have not been able, either 
now or in the past, to ensure the efficiency and effectiveness of EU law.  

That  is  why  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).  

In  its  judgment  of  24  January  2018  the  Court  of  Justice  of  the  European  Union  upheld  the 
action  brought  by  the  Commission,    stating  that  the  Italian  Republic  has  failed  to  fulfil  the 
obligations  imposed  on  it  by  failing  to  ensure  that  the  additional  levy  payable  in  respect  of 
quantities produced in Italy in excess of the national quota, from the first year in which the 
additional levy was in fact applied in Italy (1995/1996) until the last year in which there was 
surplus production in Italy (2008/2009), 

–  was  in  fact  allocated  to  the  individual  producers  which  had  contributed  to  each  of  the 
production overruns and 

– was paid at the appropriate time, upon their being given notification of the amount payable, 
by the purchasers or the producers in the case of direct sales, or 

–  where  the  levy  was  not  paid  within  the  period  prescribed,  was  registered  and,  where 
possible, recovered by way of enforcement from those purchasers or producers. 

Conclusion 

The  Commission  considers  that  the  deferred  payment  scheme  approved  by  the  Council  in 
2003  has  been  managed  in  a  satisfactory  manner  insofar  as  the  conditions  for  applying  the 
scheme  have  been  met,  as  demonstrated  by  the  progress  made  by  the  Italian  authorities  in 
recovering the amounts due from the producers who opted to pay under that scheme for the 
period 1995/1996 to 2001/2002.  

As for the amounts not subject to either the deferred payment or the reimbursement scheme, it 
needs to be underlined that, by its judgment of 24 January 2018, the Court of Justice of the 
European  Union  has  confirmed  the  failings  of  the  Italian  Republic  pointed  out  by  the 
Commission.  The  Italian  authorities  must  now  take  the  necessary  measures  to  comply  with 
the  judgment  of  the  Court  of  Justice,  as  required  by  Article  260  TFEU,  in  particular  by 
promptly  putting  into  place  effective  arrangements  for  recovering  the  outstanding  amounts 
capable of producing real and measurable results in terms of reducing the amount due. 

6