CELEX: 62006CJ0418
Language: en
Date: 2008-04-24 00:00:00
Title: Judgment of the Court (Second Chamber) of 24 April 2008.#Kingdom of Belgium v Commission of the European Communities.#Appeal - EAGGF - Arable crop sector - Clearance of EAGGF accounts - Reliable and operational inspection system - Expenditure excluded from Community financing - Flat-rate correction - Retrospective application of the rules relating to checks - Implicit obligations - Principle of proportionality - Legal certainty - Unlimited jurisdiction.#Case C-418/06 P.

Case C-418/06 P
      Kingdom of Belgium
      v
      Commission of the European Communities
      (Appeal – EAGGF – Arable crop sector – Clearance of EAGGF accounts – Reliable and operational inspection system – Expenditure excluded from Community financing – Flat-rate correction – Retrospective application of the rules relating to checks – Implicit obligations – Principle of proportionality – Legal certainty – Unlimited jurisdiction)
      Summary of the Judgment
      1.        Agriculture – Common agricultural policy – EAGGF financing
      (Council Regulations No 729/70 and No 3508/92; Commission Regulations No 3887/92 and No 2419/2001)
      2.        Agriculture – EAGGF – Clearance of accounts
      3.        Agriculture – Common agricultural policy – EAGGF financing
      (Council Regulations No 729/70 and No 1258/99)
      4.        Agriculture – EAGGF – Clearance of accounts
      (Council Regulation No 729/70)
      5.        Agriculture – EAGGF – Clearance of accounts
      (Art. 229 EC)
      1.        Even if the Community rules on the granting of aid and premiums do not expressly require Member States to introduce supervisory
         measures and inspection procedures, such as that mentioned by the Commission during the clearance of EAGGF accounts, to reduce
         the area to be taken into account in the calculation of aid where the area declared is greater than the area entered in the
         computerised geographical information system (GIS) nevertheless that obligation may follow, in some cases implicitly, from
         the fact that under the rules in question it is for the Member States to organise an effective system of inspection and supervision.
         
      
      On the one hand, administrative checks and on-the-spot checks were designed by the Community legislature as two means of verification
         which, although separate, complement each other. On the other hand, such administrative checks preceding on-the-spot checks
         must be carried out in such a way as to enable the national authorities to draw all the possible conclusions, be they matters
         of certainty or of doubt, regarding compliance with the conditions for granting aid and premiums. Neither the areas declared
         nor those extracted from the GIS can be confirmed as accurate without on-the-spot checks or any other additional checks. Therefore,
         the contradiction between those two sources of information is likely to constitute an anomaly indicating a risk of loss for
         the EAGGF which requires the Member State concerned to adopt checking measures, whether on-the-spot checks or any other additional
         checks.
      
      (see paras 68, 70, 72-73, 75)
      2.        When preparing decisions regarding the clearance of EAGGF accounts, each case must in principle be assessed individually to
         determine whether, as regards operations financed by the EAGGF, the Member State in question, acted in accordance with the
         requirements of Community law and, if it failed to do so, to what extent. A Member State may plead breach of the principle
         of equal treatment only if the cases it cites are at least comparable as regards all the elements which characterise them,
         including, in particular, the period during which the expenditure was incurred, the sectors concerned and the nature of the
         irregularities complained of. Prohibited discrimination can arise where comparable situations are treated differently, unless
         such treatment is objectively justified. The situation of a Member State which has, as a result of a system set up voluntarily,
         relevant information which other Member States do not have is not comparable with the situation of the latter.
      
      (see paras 91-94)
      3.        In the matter of the clearance of EAGGF accounts, the fact that a procedure is open to improvement does not in itself justify
         a financial correction. There must be a serious failing in the application of express Community rules and such a failing must
         expose the EAGGF to a genuine risk of loss or irregularity. A flat-rate correction may be applied even where deficiencies
         are found in the application of implicit rules, provided compliance with those implicit rules is required in order to comply
         with an explicit rule.
      
      (see paras 124, 126)
      4.        In connection with the procedure for the clearance of EAGGF accounts, although it is for the Commission to prove that Community
         rules have been infringed, once it has established such an infringement it is for the Member State to demonstrate, if appropriate,
         that the Commission made an error as to the financial consequences to be attached to that infringement. In that regard, where,
         instead of disallowing all the expenditure affected by the infringement, the Commission has endeavoured to establish rules
         for treating irregularities differently depending on the extent of the shortcomings in the checks and the degree of risk to
         the EAGGF, it is for the Member State to show that those criteria are arbitrary and unfair.
      
      (see paras 135, 138)
      5.        There was no provision in respect of the EAGGF conferring unlimited jurisdiction on the Community courts under Article 229
         EC. Recognising that those courts have unlimited jurisdiction in respect of the amounts of financial corrections imposed by
         the Commission in connection with the procedure for the clearance of EAGGF accounts is not supported by the contention that
         those corrections are in the nature of a penalty. Such corrections are designed to avoid the EAGGF being burdened with amounts
         that have not served to finance an objective pursued by the Community legislation in question and therefore do not constitute
         a penalty.
      
JUDGMENT OF THE COURT (Second Chamber)
      24 April 2008 (*)
      
      (Appeal – EAGGF – Arable crop sector – Clearance of EAGGF accounts – Reliable and operational inspection system – Expenditure excluded from Community financing – Flat-rate correction – Retrospective application of the rules relating to checks – Implicit obligations – Principle of proportionality – Legal certainty – Unlimited jurisdiction)
      In Case C‑418/06 P,
      APPEAL under Article 56 of the Statute of the Court of Justice, lodged on 9 October 2006,
      Kingdom of Belgium, represented initially by A. Hubert, and subsequently by L. Van den Broeck, acting as Agents, and by H. Gilliams, P. de Bandt
         and L. Goossens, avocats,
      
      appellant,
      the other party to the proceedings being:
      Commission of the European Communities, represented by M. Nolin and L. Visaggio, acting as Agents, with an address for service in Luxembourg,
      
      defendant at first instance,
      THE COURT (Second Chamber),
      composed of C.W.A. Timmermans, President of Chamber, L. Bay Larsen, K. Schiemann, J. Makarczyk and C. Toader (Rapporteur),
         Judges,
      
      Advocate General: P. Mengozzi,
      Registrar: M.-A. Gaudissart, Head of Unit,
      having regard to the written procedure and further to the hearing on 21 June 2007,
      after hearing the Opinion of the Advocate General at the sitting on 10 January 2008,
      gives the following
      Judgment
      1        In its appeal, the Kingdom of Belgium is asking the Court in particular:
      
      –        to set aside the judgment delivered by the Court of First Instance of the European Communities on 25 July 2006 in Case T‑221/04
         Kingdom of Belgium v Commission, ‘the judgment under appeal’), in which the Court dismissed its application for partial annulment of Commission Decision
         2004/136/EC of 4 February 2004 excluding from Community financing certain expenditure incurred by the Member States under
         the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) (OJ 2004 L 40, p. 31, ‘the contested
         decision’) and, in the alternative, for reduction in the case of that Member State of the financial correction imposed by
         the Commission of the European Communities in the contested decision to EUR 1 079 814;
      
      –        to grant the forms of order it sought at first instance and hence annul the contested decision;
      –        in the alternative, to set aside the judgment under appeal and, under the unlimited jurisdiction enjoyed by the Court of Justice
         in such matters, reduce to EUR 1 491 085 the financial correction imposed by the Commission.
      
       I – Legal context
       A – Financing of expenditure by the EAGGF
      2        Regulation (EEC) No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (OJ, English
         Special Edition 1970 (I), p. 218), as amended by Council Regulation (EC) No 1287/95 of 22 May 1995 (OJ 1995 L 125, p. 1) (‘Regulation
         No 729/70’), established the general rules applicable to the financing of the common agricultural policy. Council Regulation
         (EC) No 1258/1999 of 17 May 1999 on the financing of the common agricultural policy (OJ 1999 L 160, p. 103) replaced Regulation
         No 729/70 and applies to expenditure incurred after 1 January 2000. 
      
      3        The Guarantee Section of the EAGGF finances, under Articles 1(2)(b) and 3(1) of Regulation No 729/70 and within the framework
         of the common organisation of agricultural markets, intervention intended to stabilise those agricultural markets, undertaken
         in accordance with Community rules. 
      
      4        Under Article 5(2)(c) of Regulation No 729/70, the Commission is to decide on the expenditure to be excluded from the Community
         financing where it finds that expenditure has not been effected in compliance with Community rules. 
      
      5        Article 7(4) of Regulation No 1258/1999 is drafted in the same terms as Article 5(2)(c) of Regulation No 729/70.
      
      6        Article 8(1) of Regulation No 729/70 provides:
      
      ‘The Member States shall, in accordance with national provisions laid down by law, regulation or administrative action, take
         the measures necessary to:
      
      –        satisfy themselves that transactions financed by the Fund are actually carried out and executed correctly;
      –        prevent and deal with irregularities;
      –        recover sums lost as a result of irregularities or negligence.
      …’
      7        Article 8(1) of Regulation No 1258/1999 is drafted in the same terms as Article 8(1) of Regulation No 729/70.
      
       B – The Commission Guidelines
      8        On 23 December 1997 the Commission adopted ‘Guidelines for the calculation of financial consequences when preparing the decision
         regarding the clearance of the accounts of EAGGF Guarantee (Commission document No VI/5330/97, ‘the Guidelines’). These provide
         that a flat-rate correction of 2%, 5%, 10% or 25%, or even more, depending on the extent of the shortcomings identified in
         the conduct of the checks, may be applied in respect of expenditure declared by a Member State where the information available
         to the Commission does not permit assessment of the losses suffered by the European Community as the result of those shortcomings.
         
      
       C – The rules applying with regard to checks in the arable crop sector 
      9        Articles 1 and 2 of Council Regulation (EEC) No 3508/92 of 27 November 1992 establishing an integrated administration and
         control system for certain Community aid schemes (OJ 1992 L 355, p. 1) provide that each Member State is to set up such an
         integrated system, which will comprise in particular a computerised database, an identification system for agricultural parcels
         and an integrated inspection system.
      
      10      Article 4 of Regulation No 3508/92 states, in the original version, that the identification system for parcels is to be established
         on the basis of land registry maps and documents, other cartographic references or of aerial photographs or satellite pictures.
         As amended by Council Regulation (EC) No 1593/2000 of 17 July 2000 (OJ 2000 L 182, p. 4) that article provides that use is
         to be made of computerised geographical information system (‘GIS’) techniques, including preferably aerial or spatial orthoimagery.
         
      
      11      Article 8 of Regulation No 3508/92 provides:
      
      ‘1.      Member States shall carry out administrative checks on aid applications.
      2.      Administrative checks shall be supplemented by on-the-spot checks covering a sample of agricultural holdings. For all these
         checks, Member States shall draw up a sampling plan.
      
      …
      4.      National authorities may, under conditions to be laid down, use remote sensing to determine the area of agricultural parcels,
         identify crops and verify their status.
      
      …’
      12      Article 6 of Commission Regulation (EEC) No 3887/92 of 23 December 1992 laying down detailed rules for applying the integrated
         administration and control system for certain Community aid schemes (OJ 1992 L 391, p. 36), as amended by Commission Regulation
         (EC) No 1678/98 of 29 July 1998 (OJ 1998 L 212, p. 23, ‘Regulation No 3887/92’), provides:
      
      ‘1.      Administrative and on-the-spot checks shall be made in such a way as to ensure effective verification of compliance with the
         terms under which aids and premiums are granted.
      
      2.      The administrative checks referred to in Article 8(1) of Regulation (EEC) No 3508/92 shall include in particular:
      (a)      cross-checks on parcels and animals declared in order to ensure that aid is not granted twice in respect of the same calendar
         year without justification;
      
      …
      3.      On-the-spot checks shall cover at least a significant percentage of applications. The significant percentage shall represent
         at least:
      
      …
      –        5% of “area” aid applications. … 
      Should on-the-spot checks reveal significant irregularities in a region or part of a region the competent authority shall
         make additional checks during the current year in that area and shall increase the percentage of applications to be checked
         in the following year.
      
      4.      Applications subjected to on-the-spot checking shall be selected by the competent authority on the basis of a risk analysis
         and an element of representativeness of the aid applications submitted. The risk analysis shall take account of:
      
      –        the amount of aid involved,
      –        the number of parcels and the area or number of animals for which aid is requested,
      –        changes from the previous year,
      –        the findings of checks made in past years,
      –        other factors to be defined by the Member States, 
      –        infringements of Regulation (EC) No 820/97.
      …
      7.      Agricultural parcel areas shall be determined by any appropriate means defined by the competent authority which ensure measurement
         of a precision at least equivalent to that required for official measurements under the national rules. The competent authority
         shall set a tolerance margin taking account of the measuring method used, the accuracy of the official documents available,
         local factors (such as slope, shape of parcel) and the provisions of the following subparagraph.
      
      …
      8.      The eligibility of agricultural parcels shall be verified by any appropriate means. To this end additional proof shall be
         requested where necessary.
      
      …’
      13      Article 9 of Regulation No 3887/92 provides:
      
      ‘1. If the area actually determined is found to be greater than that declared in the “area” aid application, the area declared
         shall be used for calculation of the aid.
      
      2. If the area actually determined is found to be less than that declared in an “area” aid application, the area actually
         determined on inspection shall be used for calculation of the aid. …
      
      …’
      14      Article 31(2) of Commission Regulation (EC) No 2419/2001 of 11 December 2001 laying down detailed rules for applying the integrated
         administration and control system for certain Community aid schemes established by Council Regulation (EEC) No 3508/92 (OJ
         2001 L 327, p. 11) provides:
      
      ‘2.      … if the area declared in an area aid application exceeds the area determined for that crop group as a result of administrative
         or on-the-spot checks the aid shall be calculated on the basis of the area determined for that crop group.’
      
       II – Facts of the case as given in the judgment under appeal
      15      The Belgian authorities adopted with effect from 1996 an identification system for agricultural parcels based on aerial photographic
         images extracted from a GIS, as provided in Article 4 of Regulation No 3508/92. The parcels were identified on the aerial
         photographic images by means of hand-written markings made by the farmers themselves, then the authorities entered the graphic
         data into the GIS. 
      
      16      Pursuant to Article 9(2) of Regulation No 729/70 and Article 9(2) of Regulation No 1258/1999, the Commission services responsible
         for clearing the EAGGF accounts carried out inspections in Belgium between 15 and 17 May 2001 in the arable crop sector for
         purposes of clearing the accounts for financial years 1999, 2000 and 2001. Those services found that there were anomalies
         in the checks carried out by the Belgian authorities.
      
      17      Following an exchange of correspondence, the bilateral meeting between the Member State concerned and the Commission provided
         for in the second subparagraph of Article 8(1) of Commission Regulation (EC) No 1663/95 of 7 July 1995 laying down detailed
         rules for the application of Regulation No 729/70 regarding the procedure for the clearance of the accounts of the EAGGF Guarantee
         Section (OJ 1995 L 158, p. 6), and an attempt at conciliation under Commission Decision 94/442/EC of 1 July 1994 setting up
         a conciliation procedure in the context of the clearance of the accounts of the European Agricultural Guidance and Guarantee
         Fund (EAGGF) Guarantee Section (OJ 1994 L 182, p. 45), the Commission adopted a summary report on 30 September 2003 (‘the
         summary report’).
      
      18      It is clear from this report that the Commission considered, first, that the Kingdom of Belgium had failed to comply with
         either Article 8 of Regulation No 3508/92 or Articles 6 and 9 of Regulation No 3887/92 by delaying entering the parcels into
         the GIS, thereby preventing consideration of some files in the risk analysis. Secondly, the Commission identified an infringement
         of the abovementioned provisions since there had been no reduction in the area of the parcels declared in the aid applications
         (‘the area declared’) and/or no on-the-spot checks had been carried out where the administrative checks carried out had shown
         that the area declared was greater than the areas of the same parcels as entered in the GIS (‘the GIS area’).
      
      19      In that connection, point B.7.1.1. of that report reads:
      
      ‘The Commission services investigated anomalies detected by Belgium’s administrative checking system for harvest years 1999
         to 2001. It was established that … Belgium’s Geographical Information System (GIS) was a useful tool in determining potential
         anomalies or irregularities. However, where differences were signalled between the data held in the GIS and farmers’ area
         declarations, appropriate action was not always taken. Follow-up checks were performed on-the-spot in only a limited number
         of cases where the difference was in excess of 5% at crop group level. Some aid applications with apparent differences in
         excess of 5% were not subject to further enquiry but simply paid on the basis of the area declared. If the difference was
         less than 5%, the applications were not deemed in any way irregular and were paid without further enquiry on the basis of
         the area declared.
      
      Furthermore, for all such cases not subject to on-the-spot checks, the area declared by the farmer was accepted by the system
         to be indicated in the following year’s pre-printed application sent to the farmer.
      
      …
      The Belgian authorities explained that, in their opinion, only surfaces actually measured on-the-spot may be used to (re-)calculate
         aid. 
      
      The Commission services do not agree that discrepancies revealed by administrative checks using the GIS may not be used to
         legally justify a reduction in aid, and thus consider that the follow-up of anomalies detected after administrative controls
         was not performed with the necessary rigour. The failure [of the Belgian authorities] to reduce aid and/or apply sanctions
         has clearly caused a loss to the Fund.’
      
      20      Paragraph B.7.1.3. of the summary report reads as follows:
      
      ‘It is concluded that Belgium did not adequately or properly perform certain ancillary controls to the required regulatory
         standard. In not reducing area declarations and/or not conducting on-the-spot checks where the administrative control indicated
         anomalous declarations, Belgium has caused the Fund to be over-charged.’
      
      21      On 4 February 2004 the Commission adopted the contested decision, providing that, with regard to arable crops, expenditure
         of the paying agency or agencies accredited by the Kingdom of Belgium declared under the Guarantee Section of the EAGGF in
         respect of financial years 2000-2002 were to be subject to a 2% flat-rate reduction, corresponding to EUR 9 322 809, as a
         result of deficiencies in the ancillary checks.
      
       III – Procedure before the Court of First Instance and judgment under appeal
      22      By application lodged at the Registry of the Court of Justice on 13 April 2004, the Kingdom of Belgium brought an action for
         annulment of the contested decision. By order of 8 June 2004 the Court of Justice referred the case to the Court of First
         Instance, which registered it as Case T-221/04.
      
      23      In support of its action, the Kingdom of Belgium relied on three pleas, alleging, first, that there had been no infringement
         of Article 8 of Regulation No 3508/92 or of Articles 6 and 9 of Regulation No 3887/92, secondly, that the Commission had failed
         to comply with the conditions laid down in the Guidelines concerning serious deficiency in the compliance with Community rules
         and real risk of loss for the EAGGF and, thirdly, infringement of the principle of proportionality in the determination of
         the amount of the financial correction.
      
      24      It asked the Court of First Instance partially to annul the contested decision inasmuch as it provided, in respect of the
         Kingdom of Belgium, for a flat-rate correction of 2% or, in the alternative, under its unlimited jurisdiction, to reduce the
         amount of expenditure excluded from financing to EUR 1 079 814 and to order the Commission to pay the costs.
      
      25      The Commission contended that the Court of First Instance should dismiss the application and order the Kingdom of Belgium
         to pay the costs.
      
      26      In the judgment under appeal, the Court of First Instance held first of all that the head of claim seeking a reduction of
         the financial correction was inadmissible, stating that there was no provision in respect of the EAGGF conferring unlimited
         jurisdiction on the Community Courts under Article 229 EC.
      
      27      Next, ruling on the substance, the Court of First Instance recalled EAGGF case-law as follows:
      
      ‘29      It must be pointed out first of all that the EAGGF finances only intervention undertaken in accordance with the Community
         rules within the framework of the common organisation of agricultural markets (see Case C‑300/02 Greece v Commission [2005] ECR I‑1341, paragraph 32, and case-law cited therein).
      
      30      It should also be noted that it is for the Commission to prove an infringement of the rules on the common organisation of
         the agricultural markets (see Greece v Commission, paragraph 29 above, paragraph 33, and case-law cited therein). However, the Commission is required not to show exhaustively
         that the checks carried out by the national authorities were inadequate or that the figures they have transmitted are irregular,
         but to produce evidence of its serious and reasonable doubt regarding such checks or figures (see Greece v Commission, paragraph 29 above, paragraph 34 and case-law cited therein). 
      
      31      The Member State concerned, for its part, cannot rebut the Commission’s findings by mere assertions which are not substantiated
         by evidence of a reliable and operational inspection system. If it is not able to show that they are inaccurate, the Commission’s
         findings can give rise to serious doubts as to the existence of an adequate and effective series of supervisory measures and
         inspection procedures (see Greece v Commission, paragraph 29 above, paragraph 35 and case-law cited therein). 
      
      32      The reason for this mitigation of the burden of proof on the Commission is that it is the Member State which is best placed
         to collect and verify the data required for the clearance of EAGGF accounts; consequently, it is for that State to adduce
         the most detailed and comprehensive evidence that its inspections or figures are accurate and, if appropriate, that the Commission’s
         statements are incorrect (see Greece v Commission, paragraph 29 above, paragraph 36, and case-law cited therein). 
      
      33      That definition of the burden of proof given in case-law is not affected by the condition laid down in the Guidelines that
         a flat-rate financial correction requires there to be “a serious deficiency in the compliance with explicit Community rules”.
         On one hand, that condition should be read in the light of the condition laid down in the preceding paragraph of the Guidelines
         that flat-rate corrections should be considered when the Commission finds a failure adequately to effect any control which
         is explicitly required by a regulation, “or implicitly required in order to respect an explicit rule”. On the other hand,
         to require the Commission not only to adduce evidence of serious and reasonable doubt on its part but also to demonstrate
         the existence of a serious deficiency in the compliance with explicit Community rules would be contrary to the consistent
         case-law of the Court concerning the burden of proof, case-law that was maintained after the Guidelines had been adopted (see,
         regarding concurrent application of that case-law and the Guidelines, Case C-157/00 Greece v Commission [2003] ECR I‑153, paragraphs 28, 29, 35 and 36, and Case C-318/02 Netherlands v Commission, not published in the ECR, paragraphs 34 and 35).’
      
      28      The Court stated in paragraph 34 of the judgment under appeal that it was in the light of those considerations that the Belgian
         Government’s arguments against the grounds on which the Commission had based the contested decision should be examined.
      
      29      Carrying out a joint examination of the first plea and the first part of the second plea, the Court of First Instance found,
         in paragraphs 47 to 50 of the judgment under appeal, under the heading ‘Seriousness of the anomalies detected by the Commission’,
         that the discrepancies between the area declared and the GIS area, discovered at the administrative checking stage, constituted
         anomalies indicating potential irregularities in aid applications involving a risk of loss for the EAGGF.
      
      30      The Court of First Instance stated in paragraph 49 of that judgment that the legislation in force at the relevant time did
         not require Member States to use a GIS. However, it held that, by adopting a GIS at an early stage before it was made compulsory
         or obsolete as a result of widespread satellite monitoring the Belgian authorities had adopted a monitoring instrument capable
         of supplying relevant information which went further than the express obligations laid down in Article 6(2) of Regulation
         No 3887/92. In the view of the Court, the Commission could not ignore this element establishing the existence of serious and
         reasonable doubt, which clearly indicated a risk of loss for the EAGGF, simply because the system which detected it was not
         compulsory or was not intended for that purpose. 
      
      31      The Court of First Instance then accepted, at paragraph 52 of the judgment under appeal, that the legislation in force at
         the relevant time did not expressly require Member States to use the inspection procedures prescribed by the Commission in
         its summary report. However, according to the Court’s reasoning, based on Case C-8/88 Germany v Commission [1990] ECR I‑2321, paragraph 16, and Case C‑468/02 Spain v Commission, paragraph 35, those obligations to take action in response to anomalies detected by a GIS stemmed, in some cases implicitly,
         from the rules in force, whereby it is for the Member States to organise an effective system of checks and supervision.
      
      32      The Court of First Instance stated in paragraphs 53 and 54 of the judgment under appeal that it followed from those rules
         that Member States are required to organise a series of administrative and on-the-spot checks to ensure that the substantive
         and formal conditions for granting aid are correctly observed. Moreover the Court pointed out that it was also clear from
         case-law that the administrative checks preceding on-the-spot checks must be carried out in such a way as to enable the national
         authorities to draw all possible conclusions, be they matters of certainty or of doubt, regarding compliance with the conditions
         for granting aid (see in particular Case C‑41/94 Germany v Commission [1996] ECR I‑4733, paragraph 17, and Case C‑468/02 Spain v Commission, paragraph 40).
      
      33      The Court then found in paragraph 55 of the judgment under appeal that, faced with the risk of loss for the EAGGF clearly
         identified during the administrative check, inaction on the part of the Belgian authorities would clearly amount to a failure
         to adopt the controls implicitly required in order to comply with one of the explicit rules in force at the relevant time.
      
      34      The Court concluded in paragraph 57 of the judgment under appeal that the Belgian authorities were therefore required to take
         action in response to the anomalies detected by the GIS.
      
      35      With regard to the measures adopted by the Kingdom of Belgium, the Court found in paragraph 62 of the judgment under appeal
         that, in those circumstances and in view of the facts established during the checks carried out in May 2001, the Commission
         was entitled to entertain serious doubts as to whether the areas declared were correct and whether the checks carried out
         were effective.
      
      36      In paragraphs 65 to 70 of the judgment under appeal, the Court accepted the Commission’s argument that owing to the late input
         of the data into the GIS some files had escaped on-the-spot checking. The Court held in particular:
      
      ‘69      As the Belgian Government has failed to adduce relevant evidence to overturn the Commission’s findings regarding the absence
         of on-the-spot checks because of late input of data, the conclusion must be drawn that a number of files escaped such checking
         (see to that effect Case C‑307/03 Italy v Commission, not published in the ECR, paragraphs 33 to 35).
      
      70      That finding is not called into question by the fact that no provision relating to the EAGGF required graphic data to be entered
         before 31 August of each year. The absence of express obligations is not capable of dispelling doubts arising from the absence
         of on-the-spot checks. In any event, since that delay leads to an absence of checks, it infringes the general obligation to
         be in a position to carry out such checks. Also, the fact that on-the-spot checks were conducted after 31 August and gave
         rise to corrections does not mean that all the necessary checks were carried out and does not show that such on‑the-spot checks
         were the result of an effective risk analysis carried out after 31 August.’
      
      37      Hence, the Court concluded, in paragraphs 71 and 72 of that judgment, that the applicant Member State had not adduced sufficient
         evidence to allay the Commission’s serious and reasonable doubts regarding the reliability of the checks, those doubts arising
         from the failure to take sufficient account of the anomalies detected by the GIS and the absence of checks. It therefore considered
         that the Commission was entitled to apply a financial correction. In those circumstances, the first plea and the first part
         of the second plea were rejected.
      
      38      As regards the second part of the second plea, alleging an absence of real risk of loss for the EAGGF, and the third plea,
         alleging that the flat-rate correction is disproportionate to the loss actually suffered by the EAGGF, which the Court of
         First Instance decided to deal with jointly, the latter did not accept the method of calculation put forward by the Kingdom
         of Belgium to demonstrate the allegedly disproportionate nature of the financial corrections applied. It stated in particular,
         in paragraphs 88 and 90 of the judgment under appeal, that the extrapolations submitted by the Belgian Government, designed
         to show the maximum loss sustained by the EAGGF, failed to take into account the recovery of undue payments, and that it was
         impossible to know whether or not they included the files that were entered into the system late.
      
      39      Since that Member State was unable to show the maximum loss sustained by the EAGGF, the Court concluded in paragraphs 92 and
         93 of the judgment under appeal that the Commission was entitled to impose a flat-rate correction and that, as that correction
         had been set at 2%, the lowest rate provided for in the Guidelines, and the Guidelines had not been challenged by the Kingdom
         of Belgium, that correction could not by definition have infringed the principle of proportionality.
      
      40      The Court therefore rejected the second part of the second plea and the third plea.
      
      41      In those circumstances, the application was dismissed and the Kingdom of Belgium was order to pay the costs.
      
       IV – Forms of order sought
      42      In this appeal, the Kingdom of Belgium is asking the Court of Justice:
      
      –        to set aside the judgment under appeal and annul the contested decision;
      –        in the alternative, to set aside the judgment under appeal and, under its unlimited jurisdiction, to reduce the financial
         correction to EUR 1 491 085;
      
      –        in the further alternative, to set aside the judgment under appeal and refer the case back to the Court of First Instance;
      –        to order the Commission to pay the costs incurred before the Court of First Instance and the Court of Justice.
      43      The Commission contends that the Court should dismiss the appeal and order the Kingdom of Belgium to pay the costs.
      
       V – The grounds of the appeal
      44      In support of its appeal, the Kingdom of Belgium puts forward in essence five grounds on which the judgment under appeal should
         be set aside, alleging respectively:
      
      –        distortion of the facts;
      –        infringement of Article 8 of Regulation No 3508/92 and Articles 6 and 9 of Regulation No 3887/92;
      –        infringement of the obligation to provide adequate reasons;
      –        infringement of the principle of proportionality; and
      –        an error of law concerning the absence of unlimited jurisdiction on the part of the Community Courts concerning the amounts
         of financial corrections imposed by the Commission in respect of the EAGGF.
      
       A – First ground of appeal: distortion of the facts
       1. Arguments of the parties
      45      The Kingdom of Belgium submits that the Court of First Instance distorted the facts in finding in particular, in paragraph
         47 of the judgment under appeal, that ‘where the GIS shows, during the administrative checks, that the area declared in an
         aid application is greater than the GIS area, that discrepancy constitutes an anomaly indicating a potential irregularity
         in that application’, since, ‘if the GIS area corresponds more closely to the actual area than the area declared in the aid
         application, the payment of area aid on the basis of the area claimed leads to undue payment to the applicant and hence a
         loss for the EAGGF.’ 
      
      46      Such an assertion demonstrates a misunderstanding as to how the GIS set up by the Kingdom of Belgium functions. According
         to the appellant, it constitutes a distortion of the facts in so far as the Court of First Instance considers the GIS to be
         a measuring instrument providing data that is closer to the actual area data than the data declared by the farmers and that
         that system consequently made it possible to detect anomalies and identify clearly risks of losses for the EAGGF. According
         to that Member State, the GIS served only to identify agricultural parcels and to detect overlapping parcels and duplicate
         declarations and did not enable the actual areas of the parcels to be determined, in particular because some of the photographic
         images used were old.
      
      47      The Commission for its part contends that the meaning the Court intended to convey in paragraph 47 of the judgment under appeal
         was not that the GIS was a measuring instrument but that the difference between the areas declared and the GIS areas raised
         serious doubts as to the accuracy of the areas declared by the farmers. Furthermore, the objective assigned to the GIS by
         the Kingdom of Belgium is inadequate as regards the requirements laid down by Article 6(2)(a) of Regulation No 3887/92, which
         provides that the administrative checks on aid applications must include in particular cross-checks. Use of the phrase ‘in
         particular’ necessarily implies that the administrative checks include measures other than cross-checks.
      
       2. Findings of the Court
      48      In paragraph 47 of the judgment under appeal the Court of First Instance proceeded on the basis that, where the area declared
         in the aid application was greater than the GIS area, that constituted an anomaly indicating a potential irregularity in that
         application. In such a case and assuming the GIS area corresponded more closely to the actual area than the area declared
         in the aid application, the Court of First Instance merely intended to make the point that in those circumstances the payment
         of area aid on the basis of the area declared could lead to an undue payment to the applicant and, hence, a loss to the EAGGF.
      
      49      However, the Court of First Instance did not state that the GIS constituted a reliable measuring instrument, as the Kingdom
         of Belgium appears to allege. Responding to that Member State’s assertions regarding the lack of precision of GIS data, on
         the contrary it stated in paragraph 48 of the judgment under appeal that the lack of precision of such data did not mean they
         were unimportant, but rather implied that the risk of loss for the EAGGF could not be discounted. The Court thus acknowledged
         that the GIS data lacked precision. Nevertheless, making the point that such lack of precision meant it was not possible to
         know whether or not such loss had actually been incurred, it concluded that the anomalies thus revealed indicated a risk of
         loss for the EAGGF.
      
      50      In fact, in paragraph 49 of the judgment under appeal in particular, the Court of First Instance inclined to regard the GIS
         not as a measuring instrument but as an instrument for checking, whereby areas declared could be determined. It did not therefore
         intend to attribute greater reliability to GIS area data than to data contained in aid applications.
      
      51      As regards the capacity of the GIS to detect anomalies, both the areas declared and the GIS areas were ultimately derived
         from the declarations made by farmers, the areas declared being those indicated by the latter on the aid application forms,
         the GIS areas being those resulting from the hand-written markings made by the latter on aerial photographic images.
      
      52      In the absence of on-the-spot checks or any other additional checks, neither the areas declared nor those extracted from the
         GIS could be confirmed as accurate. Therefore, a contradiction between those two sources of information was likely to constitute
         an anomaly (see, to that effect, Case C‑377/99 Germany v Commission [2002] ECR I‑7421, paragraph 48, and Case C‑183/03 Germany v Commission [2006] ECR I‑2, paragraphs 61 and 62).
      
      53      The Court of First Instance was therefore right, in paragraph 47 of the judgment under appeal, to find that, where the GIS
         revealed during an administrative check that the area declared was greater than the GIS area, that discrepancy constituted
         an anomaly indicating a potential irregularity in the application.
      
      54      Consequently, the first ground of appeal must be rejected.
      
       B – Second ground of appeal: infringement of Article 8 of Regulation No 3508/92 and Articles 6 and 9 of Regulation No 3887/92
      55      This ground of appeal can be divided essentially into four parts, which must be considered separately.
      
       1. First part: infringement of Article 6(7) of Regulation No 3887/92
      
       (a) Arguments of the parties
      56      The Kingdom of Belgium considers that the Court of First Instance infringed Article 6(7) of Regulation No 3887/92 in considering
         that, by equipping itself with a GIS, that Member State had an appropriate instrument for measuring the area of agricultural
         parcels, when, on the one hand, the choice of measuring instruments is a matter solely for the Member States and, on the other
         hand, that Member State had opted for official measurement by a land surveyor or by photo-interpretation of satellite images.
      
      57      The Court of First Instance should not therefore have stated, in paragraph 49 of the judgment under appeal, that, with their
         GIS, the Belgian authorities had equipped themselves with a checking instrument capable of providing relevant information
         going beyond the express obligations laid down in Article 6(2) of that regulation.
      
      58      The Commission notes that the Belgian authorities had opted, of their own volition, to use aerial photographic images in order
         to carry out the administrative checks required under Regulation No 3508/92. They therefore had to draw all the necessary
         conclusions in the event of discrepancies between an area declared and the GIS area, but they did not do so. Moreover, the
         reference to Article 6(7) of Regulation No 3887/92 is irrelevant because that provision, concerning measuring techniques,
         applies to determining the area of agricultural parcels in the context of on-the-spot checks.
      
       (b) Findings of the Court
      59      It should be pointed out that, as was stated in paragraph 49 of this judgment, the Court of First Instance did not describe
         the GIS as a measuring instrument. The fact that it considered, in paragraph 49 of the judgment under appeal, that the GIS
         was a checking instrument capable of supplying relevant information going beyond the express obligations laid down in Article
         6(2) of Regulation No 3887/92 does not affect that finding.
      
      60      Consequently, the complaint cannot be made that the Court of First Instance rather than the Kingdom of Belgium defined the
         measuring instrument intended to be used under Article 6(7) of that regulation for the purposes of determining the area of
         agricultural parcels.
      
      61      Consequently, the first part of the second ground of appeal cannot be accepted.
      
       2. The second part: implicit obligations
      
       (a) Arguments of the parties
      62      The Kingdom of Belgium complains that the Court of First Instance imposed retrospectively on the Member States the checking
         procedures decided upon by the Commission in its summary report, which was the basis for the contested decision, although
         the legislation in force at the relevant time did not require them to be used. The Member States were thus required, where
         the area declared was greater than the GIS area, either to carry out an on-the-spot check or to reduce the area for which
         aid was to be granted.
      
      63      According to the Kingdom of Belgium, such requirements are in breach of Article 6(3) of Regulation No 3887/92, under which
         an on-the-spot check had to be carried out only on a significant percentage representing at least 5% of aid applications.
         
      
      64      Moreover, the legislation in force made no provision in the context of administrative checks for the area for which aid was
         to be granted to be reduced solely on the basis of GIS data. Such reduction was provided for, under Article 9(2) of Regulation
         No 3887/92, only where the area declared was greater than the area actually determined. Such determination was legally possible,
         according to the law applying ratione temporis, only in the case of an on-the-spot check within the meaning of Case C‑417/00 Agrargenossenschaft Pretzsch [2002] ECR I‑11053, paragraph 48. An obligation to reduce aid at the administrative checking stage was indeed introduced
         by Article 31 of Regulation No 2419/2001, but only applied with effect from crop year 2002. 
      
      65      Moreover, it was not necessary to lay down such implicit obligations since the applicant Member State had taken account of
         the abovementioned anomalies in the context of the risk analysis.
      
      66      Lastly, those implicit obligations infringed, on the one hand, the principle of legal certainty, since they imposed a penalty
         on farmers at the administrative checking stage, although provision was made for such a penalty by the legislation in force
         ratione temporis only in the event of irregularities being found in the context of an on-the-spot check. On the other hand, they infringed
         the principle of non-discrimination in that they penalised only a Member State which had put in place a specific and effective
         system based on aerial photographic images, which went beyond the obligations incumbent on it at the administrative checking
         stage.
      
      67      The Commission notes first of all that administrative checks should cover all aid applications. In order to make those administrative
         checks effective the Kingdom of Belgium, when faced with discrepancies between the area declared and the GIS area, should
         therefore have taken action in response. The Court of First Instance was therefore right in holding that the inactivity of
         the Belgian authorities amounted to a failure to adopt the checking measures implicitly needed in order to comply with one
         of the express rules in force at the relevant time. This was not the creation of implicit obligations but a statement of the
         obligations inherent in compliance with existing express rules.
      
      68      As regards the implicit obligation to reduce the area to be taken into account in the calculation of aid where the area declared
         is greater than the GIS area, the Commission contends that the case-law of the Court of Justice lays down that obligation
         in respect of any type of check and that in any event the Belgian authorities could have carried out an on-the-spot check
         for the purposes of such reduction. Moreover, Article 31(2) of Regulation No 2419/2001, which provides for such reduction
         at the administrative checking stage, is only clarification of Article 9(2) of Regulation No 3887/92, which applied ratione temporis.
      69      According to the Commission, the assertion concerning legal certainty is lacking in substance since, as the Court of First
         Instance noted in paragraph 56 of the judgment under appeal, it was open to the Belgian authorities to carry out an on-the-spot
         check. Moreover, the principle of non-discrimination relied on by the Kingdom of Belgium does not apply in situations where
         Member States, under Community legislation, have a choice between several technical options. Since it had opted for a particular
         method of identification, albeit one that was more precise than those adopted by other Member States, the Kingdom of Belgium
         was required to use the data produced by that method when carrying out checks under Article 6(1) of Regulation No 3887/92.
      
       (b) Findings of the Court
      70      First of all, as the Court of First Instance noted in paragraph 52 of the judgment under appeal, even if the Community rules
         on the granting of aid and premiums do not expressly require Member States to introduce supervisory measures and inspection
         procedures, such as those mentioned by the Commission during the clearance of the EAGGF accounts, nevertheless that obligation
         may follow, in some cases implicitly, from the fact that under the rules in question it is for the Member States to organise
         an effective system of inspection and supervision (see to that effect Case C‑8/88 Germany v Commission, paragraph 16, and Case C‑468/02 Spain v Commission, paragraph 35).
      
      71      The question therefore arises whether the obligations to which the Court of First Instance referred in the judgment under
         appeal follow implicitly from the obligation on Member States to organise an effective system of checks and supervision and,
         as the case may be, whether such obligations disregard certain provisions of Community law.
      
      i)     The scope and existence of the implicit obligations in dispute
      72      It must be stated in that connection, on the one hand, that administrative checks and on-the-spot checks were designed by
         the Community legislature as two means of verification which, although separate, complement each other (see Case C-41/94 Germany v Commission, paragraph 43, and Case C‑468/02 Spain v Commission, paragraph 39). On the other hand, such administrative checks preceding on-the-spot checks must be carried out in such a
         way as to enable the national authorities to draw all the possible conclusions, be they matters of certainty or of doubt,
         regarding compliance with the conditions for granting aid and premiums (see Case C-41/94 Germany v Commission, paragraph 17 and Case C‑468/02 Spain v Commission, paragraph 40).
      
      73      As was stated in paragraph 52 of this judgment, neither the areas declared nor those extracted from the GIS could be confirmed
         as accurate without on-the-spot checks or any other additional checks. Therefore, the contradiction between those two sources
         of information was likely to constitute an anomaly indicating a risk of loss for the EAGGF.
      
      74      In the presence of such anomalies, the national authorities had therefore to draw all the possible conclusions, be they matters
         of certainty or of doubt, regarding compliance with the conditions for granting aid.
      
      75      It follows that such anomalies required the Member State concerned to adopt checking measures, whether on-the-spot checks
         or any other additional checks, and that in that regard merely taking those anomalies into account in the risk analysis was
         insufficient to dispel doubts concerning the accuracy of the areas declared.
      
      76      Consequently, the Kingdom of Belgium’s arguments challenging the existence in this case of implicit obligations to carry out
         on-the-spot checks or other administrative checks should be rejected as unfounded.
      
      77      Likewise, in paragraph 71 of the judgment under appeal, the Court of First Instance was right to find that the anomalies detected
         by the GIS had not sufficiently been taken into account, although those anomalies had been taken into account in the risk
         analysis.
      
      78      As regards the obligation referred to in paragraph 51 of the judgment under appeal to make a reduction, although the Court
         of First Instance certainly considered, in the following paragraph of that judgment, that that obligation followed, in some
         cases implicitly, from the obligation on Member States to organise an effective system of checks and supervision, it nevertheless
         did not set out expressly the scope of the obligation. Therefore, the deficiencies in the ancillary checks due to the absence
         of on-the-spot checks and/or reductions in the areas declared, which were the subject of debate before the Court of First
         Instance, can only be understood in the light of the summary report in which those complaints were originally formulated and
         developed.
      
      79      As was stated in paragraphs 19 and 20 of this judgment, the Commission essentially alleged in point B.7.1.1 of that report
         that the Member State concerned had not investigated the anomalies detected as a result of the administrative checks with
         the necessary rigour and, in point B.7.1.3, that it had not reduced the areas declared and/or carried out on-the-spot checks
         where the administrative checks revealed anomalies. The Commission did suggest that discrepancies between the areas declared
         and the GIS areas established at the administrative checking stage could legally justify a reduction in the amount of aid,
         but it did not set out the specific procedures which could enable such a reduction to be made.
      
      80      The Commission did not therefore require the Kingdom of Belgium to reduce the areas for which aid was to be granted solely
         on the basis of the GIS data as that Member State alleges.
      
      81      Moreover, that Member State cannot complain that, in paragraphs 51 and 52 of the judgment under appeal, the Court of First
         Instance required it to reduce the areas declared solely on the basis of GIS areas data. No such requirement appears anywhere
         in the judgment under appeal.
      
      82      Therefore, the complaints concerning a supposed obligation to reduce the areas declared on the basis of the GIS areas must
         be rejected as unfounded.
      
      ii)  The incompatibility of the implicit obligations with some requirements under Community law
      83      First of all, even assuming that, under Article 9(2) of Regulation No 3887/92, which applies ratione temporis, any reduction in aid could be made only on the basis of lawfully determined areas, in the present case, following an on-the-spot
         check, it was clearly open to the appellant Member State to carry out such a check in order to reduce the area for which aid
         was to be granted.
      
      84      It cannot therefore be alleged that the Court of First Instance disregarded Article 9(2) of Regulation No 3887/92 and the
         judgment in Agrargenossenschaft Pretzsch when it took the view that the Belgian authorities were required to take appropriate action in response to the anomalies
         detected by their GIS at the administrative checking stage.
      
      85      In any event, it must be pointed out that the aims of Regulation No 3887/92 are, as set out in the seventh and ninth recitals
         in its preamble, to monitor effectively compliance with the provisions on Community aid and to adopt provisions which prevent
         and penalise irregularities and fraud effectively (see, to that effect, Agrargenossenschaft Pretzsch, paragraph 33).
      
      86      Thus, where there are anomalies regarding the accuracy of the areas declared, an obligation to carry out on-the-spot checks
         and/or reductions in the areas declared following determination of the areas in question, far from being contrary to the relevant
         legislation, is likely in reality to serve the objectives of the rules referred to in the preceding paragraph.
      
      87      Clearly also the implicit obligations mentioned by the Court of First Instance by no means disregard Article 6(3) of Regulation
         No 3887/92, under which an on-the-spot check had to be carried out only on a significant percentage, representing at least
         5% of aid applications.
      
      88      Firstly, that provision provides for checking by the Member State of a minimum of 5% of aid applications, which does not exclude
         checks being carried out on a larger percentage, and secondly, as the Court of First Instance found in paragraph 56 of the
         judgment under appeal, the files in which anomalies appeared represented only 2.1% to 4% of the aid application files.
      
      89      As regards the alleged infringement of the principle of legal certainty, it should be noted that, when an administrative check
         was carried out, if there was an anomaly indicating a potential over-estimate of the area declared, the amount of aid could
         be adjusted on the basis of the area actually determined during an on-the-spot check.
      
      90      The Kingdom of Belgium cannot therefore rely on the principle of legal certainty, for the benefit of farmers, as precluding
         reduction of the area for which aid would be granted at the administrative checking stage.
      
      91      As regards alleged infringement of the principle of equal treatment, it must be observed, first of all, that each case must
         in principle be assessed individually to determine whether, as regards operations financed by the EAGGF, the Member State
         in question, acted in accordance with the requirements of Community law and, if it failed to do so, to what extent (Case C‑242/97
         Belgium v Commission [2000] ECR I‑3421, paragraph 129, and Case C‑263/98 Belgium v Commission [2001] ECR I‑6063, paragraph 132).
      
      92      This does not mean that a Member State is not entitled to plead breach of the principle of equal treatment. However, it may
         do so only if the cases it cites are at least comparable as regards all the elements which characterise them, including, in
         particular, the period during which the expenditure was incurred, the sectors concerned and the nature of the irregularities
         complained of (see Case C-242/97 Belgium v Commission, paragraph 130, and Case C‑263/98 Belgium v Commission, paragraph 133).
      
      93      Next it should be borne in mind that the Court has consistently held that prohibited discrimination can arise where comparable
         situations are treated differently, unless such treatment is objectively justified (see, to that effect, Case C‑309/89 Codorniu v Council [1994] ECR I‑1853, paragraph 26, and Case C‑375/99 Spain v Commission [2001] ECR I‑5983, paragraph 28).
      
      94      Since the Kingdom of Belgium had, as a result of a system set up voluntarily, relevant information which other Member States
         did not have because they were not using that system, which was not compulsory at the relevant time, the situations of the
         Kingdom of Belgium and the other Member States were not comparable (see, to that effect, Case C-263/98 Belgium v Commission, paragraphs 135 and 136, and Case C‑375/99 Spain v Commission, paragraph 29).
      
      95      It follows that, as the situations were not comparable, the principle of equal treatment was not infringed.
      
      96      Therefore, the Court of First Instance did not commit an error of law in finding, in paragraph 49 of the judgment under appeal,
         that the Commission could not disregard the anomalies in question merely on the ground that the system which had detected
         them was not compulsory or was not intended for that purpose.
      
      97      Consequently, the second part of the second ground of appeal cannot be accepted.
      
       3. Third part, concerning the applicability of a margin of tolerance at the administrative checking stage
      
       (a) Arguments of the parties
      98      In this part the Kingdom of Belgium alleges that the Court of First Instance infringed the provisions of Article 8 of Regulation
         No 3508/92 and Articles 6 and 9 of Regulation No 3887/92 in that it wrongly found that the Belgian inspection system was not
         effective owing to the failure to investigate data provided by the GIS. The Court of First Instance justified its rejection
         of the Belgian Government’s arguments on a single ground, which was incorrect in law, namely that no margin of tolerance could
         be applied at the administrative checking stage.
      
      99      The Commission contends that the margin of tolerance relied on by the Belgian authorities relates only to physical checks
         and the uncertainty linked to that type of check. This does not justify a margin of tolerance in administrative checks, since
         the area of the reference parcels must be established prior to any application and to any form of checking, including administrative
         checks.
      
      100    The Commission acknowledges that a margin of tolerance is acceptable during the initial creation of reference parcels under
         Article 4 of Regulation No 3508/92, but such a margin cannot, once the system has been introduced, be used repeatedly and
         continually as is the practice of the Belgian authorities.
      
       (b) Findings of the Court
      101    It should be noted that, although the Court of First Instance held in paragraph 60 of the judgment under appeal that a margin
         of tolerance could not be allowed at the administrative checking stage, in paragraph 61 of the judgment under appeal it found
         that the checks carried out by the Belgian authorities could not preclude aid being paid without additional checks on some
         files where the anomaly was more than 5% and on all files where the anomaly was less than 5%.
      
      102    Therefore, irrespective of the question of the applicability of a 5% margin of tolerance at the administrative checking stage,
         the Court of First Instance did in any event find that there were deficiencies in the checks carried out on files where there
         was a difference of more than 5% between the area declared and the area provided by GIS.
      
      103    Consequently, the third part of the second ground of appeal has no validity.
      
       4. The fourth part concerning the late input of data into the GIS
      
       (a) Arguments of the parties
      104    In this part the Kingdom of Belgium seeks to show that the Court of First Instance disregarded Article 8 of Regulation No
         3508/92 and Articles 6 and 9 of Regulation No 3887/92 in that it wrongly considered that the inspection system introduced
         by the Belgian authorities was not effective owing to the late input of graphic data into the GIS. 
      
      105    That Member State also alleges that the Court of First Instance did not comply with the obligation to provide adequate reasons
         in the reasoning set out in paragraphs 65 to 70 of the judgment under appeal. The Court failed in particular to justify how
         the input of graphic data and the conduct of a risk analysis after 31 August could be considered late, as there was no reference
         to such a date in the legislation. Also, it did not examine the Belgian Government’s argument that on-the-spot checks carried
         out after 31 August would have been just as effective as those carried out before that date, since in the case of some crops
         the harvested land has not yet been ploughed up in September and October, whilst in the case of some other types of crop harvesting
         does not take place until the end of October or even the beginning of November.
      
      106    In the Commission’s view, the complaint at issue before the Court of First Instance related not to the delay in carrying out
         the on-the-spot checks, as the Kingdom of Belgium appears to understand it, but to the late input of the graphic data into
         the GIS. This late input of data into the GIS meant that it was not possible to carry out the administrative checks on time,
         thereby preventing or delaying the conduct of subsequent on-the-spot checks. The Belgian authorities have moreover acknowledged
         that the late input of the graphic data into the GIS had an impact on the selection of aid applications in connection with
         the risk analysis.
      
       (b) Findings of the Court
      107    First of all it should be noted, as the Commission pointed out, that in paragraphs 65 to 70 of the judgment under appeal the
         Court of First Instance did not consider the effectiveness of the on-the-spot checks carried out after 31 August but the late
         input of the area data into the GIS, which subsequently meant that the administrative checks could not be carried out on time,
         thus preventing on-the-spot checks from taking place.
      
      108    So far as the lack of adequate reasons is concerned, the arguments submitted by the Belgian Government in that regard are
         unfounded. In paragraph 70 of the judgment under appeal the Court of First Instance set out the reasons why it considered
         that late input of data was likely to cast doubt on the reliability of subsequent checks. It also held that this finding was
         not called into question by the fact that there was no EAGGF rule that graphic data must be entered before 31 August each
         year.
      
      109    As regards the validity of the findings of the Court of First Instance in this respect, the Court of Justice has already had
         occasion to state that, in accordance with the objective and the scheme of Regulation No 3887/92, it is appropriate to interpret
         the second subparagraph of Article 6(3) of that regulation as meaning that both the initial and the additional checks must
         be carried out whilst there is still evidence of arable crops or of set-aside on the areas which have been the subject of
         payments and, at any event, during the current year (see Case C‑153/01 Spain v Commission [2004] ECR I‑9009, paragraph 152).
      
      110    The Court of Justice went on to state that for the sake of efficiency it is appropriate to carry out checks on the areas down
         to arable crops before the harvest and on the areas subject to set-aside before that requirement ends, which is 31 August
         of the current year. At any event, the later the checks the more likely it is that the Commission may reasonably conclude
         that those checks do not offer the expected level of assurance that the applications are in order and the risk of losses for
         the EAGGF is significant (Case C‑153/01 Spain v Commission, paragraph 153).
      
      111    It is therefore clear from case-law that the relevant time factor for assessing whether a Member State has been late in carrying
         out checks on arable crops is the time of the harvest. In that regard, as the Kingdom of Belgium itself recognised, in particular
         in paragraph 104 of its appeal, some crops are harvested before 31 August.
      
      112    The input of area data into the GIS was a necessary preliminary to selection, on the basis of the risk analysis in particular,
         of the aid application files that required an on-the-spot check.
      
      113    The Commission was therefore entitled to use that date in order to calculate, as stated in paragraph 65 of the judgment under
         appeal, the percentage of data entered into the GIS by that date and, consequently, assess the reliability of the inspection
         system put in place by that Member State.
      
      114    The Court of First Instance was therefore right to consider that entering data into the GIS after 31 August might be regarded
         as somewhat late. It was also right to consider that, in those circumstances, the Commission as was found in paragraph 67
         of the judgment under appeal, had grounds for claiming that late input had meant that the administrative checks could not
         be carried out on time, thus preventing on-the-spot checks from taking place, and that, as was found in paragraph 69 of that
         judgment, a number of files had therefore escaped such checks.
      
      115    Consequently, the fourth part of the second ground of appeal cannot be accepted.
      
      116    As the first three parts of the second ground of appeal have also failed, this ground of appeal must be rejected.
      
       C – Third ground of appeal: infringements of the obligation to provide adequate reasons
       1. Arguments of the parties
      117    The Kingdom of Belgium claims that the reasoning set out in paragraphs 29 to 71 of the judgment under appeal is manifestly
         inadequate and/or contradictory.
      
      118    First, in paragraph 33 of the judgment under appeal, the Court of First Instance endorsed without examination the Commission’s
         assertion that the condition laid down in the Guidelines that a flat-rate financial correction requires there to be a serious
         deficiency in the compliance with explicit Community rules should be read in the light of the condition, laid down in the
         preceding paragraph of the Guidelines, that flat-rate corrections should be considered when the Commission finds a failure
         adequately to effect any control which is explicitly required by a regulation or implicitly required in order to respect an
         explicit rule. Such an assertion contradicts the actual wording of those Guidelines, under which the condition of a serious
         deficiency in the compliance with explicit Community rules is linked to the nature of the inspection procedure and whether
         it is open to improvement.
      
      119    Secondly, the Court of First Instance did not address the Belgian Government’s argument that the obligations stipulated by
         the Commission in the summary report, namely, in the case of anomalies, the obligation to conduct an on-the-spot check or
         reduce the area for which aid would be granted, were contrary to the relevant legislation and the case-law of the Court of
         Justice resulting from Agrargenossenschaft Pretzsch.
      
      120    Thirdly, the Court of First Instance held, in paragraph 52 of the judgment under appeal, that the Commission was right to
         impose the checking procedures laid down in the summary report. In the preceding paragraph of the judgment under appeal the
         Court stated, without justification, that the Commission had stipulated that those authorities should either conduct an on-the-spot
         check or reduce the area for which aid would be granted, or conduct other administrative checks, although the report did not
         make any reference to those other administrative checks.
      
      121    Fourthly, the Court of First Instance’s assertions, contained in paragraphs 60 and 70 of the judgment under appeal respectively,
         are contradictory. According to the Kingdom of Belgium, either the risk analysis is ineffective as a whole owing to application
         of a margin of tolerance, or it is effective but only as regards aid applications in respect of which data was entered before
         31 August.
      
      122    According to the Commission, the Court of First Instance complied with the obligation to provide adequate reasons, in particular
         by noting in paragraphs 52 and 57 of the judgment under appeal that it is for the Member States to organise an effective system
         of inspection and supervision and that the Belgian authorities were required to take action in response to the anomalies detected
         by the GIS.
      
      123    Moreover, the Commission considers that paragraphs 60 and 70 of the judgment under appeal do not contain any contradictions
         since the Court of First Instance was examining two separate types of irregularity in those two paragraphs.
      
       2. Findings of the Court 
      124    Concerning first of all the alleged contradiction in and/or inadequacy of the statement of reasons given in paragraph 33 of
         the judgment under appeal, it should be noted that the fact that a procedure is open to improvement does not in itself justify
         a financial correction. There must be a serious failing in the application of express Community rules and such a failing must
         expose the EAGGF to a genuine risk of loss or irregularity (see Case C‑318/02 Netherlands v Commission, paragraph 34, and Case C‑5/03 Greece v Commission [2005] ECR I‑5925, paragraph 51).
      
      125    According to the Kingdom of Belgium, the Court of First Instance did not explain why the abovementioned rule, included by
         the Commission in its Guidelines, should be read in the light of the rule laid down in the Guidelines that flat-rate corrections
         should be considered when the Commission finds a failure adequately to effect any control which is explicitly required by
         a regulation, or implicitly required in order to respect an explicit rule. 
      
      126    In that regard, it should be pointed out that the Court of First Instance justified a joint reading of the provisions of the
         Guidelines on the basis in particular of the rules concerning the burden of proof in disputes connected with the clearance
         of EAGGF accounts. Such justification was adequate. Despite the scope prima facie of the rule set out in paragraph 124 of the present judgment, a flat-rate correction may be applied even where deficiencies
         are found in the application of implicit rules, provided compliance with those implicit rules is required in order to comply
         with an explicit rule (see, as regards a flat-rate correction in conjunction with infringement of implicit obligations, Case
         C-157/00 Greece v Commission, paragraphs 28 and 37).
      
      127    Next, as regards the alleged incompatibility of the implicit obligations in question with Community case-law, it is clear
         that, in the light of what was stated in paragraph 84 of this judgment, there was no need for the Court of First Instance
         to examine the alleged contradiction.
      
      128    So far as paragraph 51 of the judgment under appeal is concerned, it should be noted that that paragraph consisted of a summary
         of the claims made by the Kingdom of Belgium, which argued that the Commission had required it, where there were anomalies,
         either to conduct on-the-spot checks or reduce the area for which aid would be granted, or conduct other administrative checks.
      
      129    As regards ‘other administrative checks’, it should be pointed out that, in point B.7.1.1 of the summary report, the Commission
         had already criticised that Member State for the absence of additional checks, that is to say, in this case, the absence of
         other checks, including administrative checks, in connection with aid applications where the area differences exceeded 5%.
         It follows from this that the Court of First Instance did not go further than the complaints contained in the contested decision
         and did not therefore have to provide any specific reasoning in that regard.
      
      130    Lastly, as regards paragraphs 60 and 70 of the judgment under appeal, it must be concluded that the two separate findings
         made by the Court of First Instance are not at all contradictory.
      
      131    In view of the foregoing, the third ground of appeal must be rejected as being unfounded.
      
       D – Fourth ground of appeal: infringement of the principle of proportionality
       1. Arguments of the parties
      132    In this ground of appeal, the Kingdom of Belgium alleges that the Court of First Instance wrongly applied the principle of
         proportionality in considering that the Commission was justified in imposing on it a financial correction of EUR 9 322 809.
         According to the extrapolation method submitted to the Court by that Member State, the loss actually sustained by the EAGGF
         as a result of the alleged irregularities was EUR 1 079 814 or at most EUR 1 491 085.
      
      133    The Belgian Government also contends that its evaluation of the loss actually sustained by the EAGGF was wrongly rejected
         by the Court of First Instance solely on the ground that it failed to take into account the recovery of undue payments and
         files in respect of which data had been entered late. However, even without those two factors, that Member State argues that
         its extrapolations were enough to show that the flat-rate financial correction applied by the Commission was in any event
         disproportionate.
      
      134    The Commission maintains that the Belgian authorities should have taken into account the recovery of undue payments in their
         initial extrapolation, something they failed to do. In reality, they are trying to put forward a fresh extrapolation by arguing
         at the appeal stage a maximum potential loss for the EAGGF now amounting to EUR 3 500 000.
      
       2. Findings of the Court
      135    The Court has consistently held that, although it is for the Commission to prove that Community rules have been infringed,
         once it has established such an infringement it is for the Member State to demonstrate, if appropriate, that the Commission
         made an error as to the financial consequences to be attached to that infringement (Case C‑5/03 Greece v Commission, paragraph 38, and case-law cited therein).
      
      136    As regards the type of correction applied, it should be noted, in the light of the Guidelines, that a flat-rate correction
         may be considered by the Commission where it is not possible to determine precisely the losses suffered by the Community (see
         Case C‑346/00 United Kingdom v Commission [2003] ECR I‑9293, paragraph 53).
      
      137    In the present case, that was precisely so and the correction rate of 2% applied by the Commission in the contested decision
         is the lowest of the applicable rates (see, to that effect, United Kingdom v Commission, paragraph 56). 
      
      138    In that regard, where, instead of disallowing all the expenditure affected by the infringement, the Commission has endeavoured
         to establish rules for treating irregularities differently depending on the extent of the shortcomings in the checks and the
         degree of risk to the EAGGF, it is for the Member State to show that those criteria are arbitrary and unfair (see, to that
         effect, Case C‑242/96 Italy v Commission [1998] ECR I‑5863, paragraph 75; and see also Case C‑28/94 Netherlands v Commission [1999] ECR I‑1973, paragraph 56; and Case C‑130/99 Spain v Commission [2002] ECR I‑3005, paragraph 44).
      
      139    As regards the 2% flat‑rate correction applied in the contested decision, the Kingdom of Belgium submitted an extrapolation
         which sought to show that the maximum loss sustained by the EAGGF was less than the amount resulting from the flat‑rate correction
         applied by the Commission.
      
      140    It should be pointed out that, in the event of deficiencies in the checks, assessment of the loss to which the EAGGF may have
         been exposed as a result must take into account in particular recovery of area aid payments unduly paid to farmers.
      
      141    The Court of First Instance was therefore right to find that the Kingdom of Belgium had not shown that the maximum loss incurred
         by the EAGGF could not be greater than EUR 1 491 085. In that regard, contrary to what that Member State maintains, if recovery
         of undue payments is not taken into account, the extrapolation submitted could not have probative value for purposes of demonstrating
         that the financial correction in question was disproportionate.
      
      142    Moreover, by submitting in particular, at the appeal stage, a second extrapolation of the maximum loss to which the EAGGF
         was exposed as a result of the deficiencies of its authorities in the matter of checks, the Kingdom of Belgium thereby confirms
         the relative probative value of its initial extrapolations rejected by the Court of First Instance.
      
      143    It follows in that connection that it cannot be alleged that the Court of First Instance infringed the principle of proportionality.
      
      144    In paragraph 122 of its appeal, the Kingdom of Belgium indeed refers to paragraph 93 of the judgment under appeal, in which
         the Court of First Instance considered that since the flat-rate correction was set at 2%, the lowest level provided for by
         the Guidelines, and those Guidelines were not disputed, that correction could not, by definition, have infringed the principle
         of proportionality. However, that Member State did not attempt to submit specific arguments in that regard to challenge that
         finding of the Court of First Instance.
      
      145    According to settled case-law, it follows from Article 225 EC, the first paragraph of Article 58 of the Statute of the Court
         of Justice and Article 112(1)(c) of the Court’s Rules of Procedure that an appeal must indicate precisely the contested elements
         of the judgment which the appellant seeks to have set aside and also the legal arguments specifically advanced in support
         of the appeal (see Case C‑131/03 P Reynolds Tobacco and Others v Commission [2006] ECR I‑7795, paragraph 49, and Case C‑227/04 P Lindorfer v Council [2007] ECR I‑6767, paragraph 45).
      
      146    In view of the foregoing, the fourth ground of appeal must be rejected.
      
       E – Fifth ground of appeal: error of law concerning the absence of unlimited jurisdiction in respect of the amounts of financial
            corrections 
       1. Arguments of the parties
      147    The Kingdom of Belgium considers that the Court of First Instance committed an error of law in rejecting as inadmissible its
         claim that the Court should, under its unlimited jurisdiction, reduce the amount of the financial correction imposed by the
         Commission.
      
      148    That Member State maintains in that regard that Article 229 EC, which provides that regulations adopted jointly by the European
         Parliament and the Council, and by the Council, may give the Court of Justice unlimited jurisdiction with regard to the penalties
         provided for in such regulations does not apply. The financial penalties in question are laid down not in a regulation but
         in Commission guidelines.
      
      149    However, relying on Case C-449/99 P EIB v Hautem [2001] ECR I‑6733, the Belgian Government considers that the Community Courts could be recognised as automatically having
         jurisdiction.
      
      150    The Commission recalls the principle that the EAGGF can finance only expenditure incurred in accordance with Community rules.
         It is therefore required to refuse to finance any irregular expenditure and, if it is impossible to determine the exact amount
         of expenditure affected by an irregularity, it may go so far as to refuse to finance all the expenditure.
      
      151    In this latter case, and for the sake of ensuring proportionality, the system of flat-rate corrections enables situations
         in which there is an irregularity to be differentiated through the application of financial corrections calculated according
         to the risk of loss to which the non-compliance by the Member State with the Community rules has exposed the budget. This
         therefore precludes it being regarded as a system of penalties for irregular payments.
      
      152    As regards EIB v Hautem, the Commission is of the view that the Court of Justice accepted that it had unlimited jurisdiction in that case only because
         of the particular nature of the dispute in question, the court having jurisdiction over the contract generally having unlimited
         jurisdiction. As the clearance of EAGGF accounts does not involve penalties, cases relating to it do not have any particular
         features justifying such acceptance.
      
       2. Findings of the Court
      153    In respect of the EAGGF, as the Court of First Instance rightly held, there is no provision conferring unlimited jurisdiction
         on the Community Courts as provided for under Article 229 EC.
      
      154    As regards the argument alleging that financial corrections imposed by the Commission under the Guidelines it has adopted
         in this matter are coercive, it should be pointed out that such a financial correction is designed to avoid the EAGGF being
         burdened with amounts that have not served to finance an objective pursued by the Community legislation in question and therefore
         does not constitute a penalty (see Case C‑247/98 Greece v Commission [2001] ECR I‑1, paragraphs 13 and 14, and Case C‑332/01 Greece v Commission [2004] ECR I‑7699, paragraph 63).
      
      155    In those circumstances, the Belgian Government’s argument that the Community Courts should be recognised as having unlimited
         jurisdiction in respect of the amounts of financial corrections imposed by the Commission in connection with the procedure
         for the clearance of EAGGF accounts is not supported by the contention that those corrections are in the nature of a penalty.
      
      156    Hence, the fifth ground of appeal must be rejected as being unfounded.
      
      157    In view of all the foregoing, the appeal must be dismissed.
      
       Costs
      158    Under the first subparagraph of Article 69(3) of the Rules of Procedure, applicable in appeal proceedings under Article 118
         of those Rules, the Court may order that the costs should be shared or that the parties are to bear their own costs. In the
         present case, each party must be ordered to bear its own costs.
      
      On those grounds, the Court (Second Chamber) hereby
      1.      Dismisses the appeal;
      2.      Orders the Kingdom of Belgium and the Commission of the European Communities to bear their own costs.
      [Signatures]
      * Language of the case: French.