CELEX: 62001CC0344
Language: en
Date: 2003-09-25 00:00:00
Title: Opinion of Mr Advocate General Léger delivered on 25 September 2003. # Federal Republic of Germany v Commission of the European Communities. # EAGGF - Expenditure excluded from Community financing - Suckler cow premium - Checks carried out by the Commission in certain Länder - Extrapolation of findings to other Länder - Burden of proof - Duty of cooperation in good faith. # Case C-344/01.

OPINION OF ADVOCATE GENERAL
      LÉGER 
      delivered on 25 September 2003 (1)
      
      Case C-344/01
      Federal Republic of Germany
      v
      Commission of the European Communities
      (EAGGF – Suckler cow premium – Commission checks on the regularity of expenditure incurred by certain local authorities – Extension of result of checks to other local authorities – Burden of proof – Principle of legitimate expectations and duty of cooperation in good faith)1.        Under the second paragraph of Article 230 EC the Federal Republic of Germany (‘Germany’) seeks the partial annulment of Commission
         Decision 2001/557/EC of 11 July 2001 excluding from Community financing certain expenditure incurred by the Member States
         under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF). (2) Germany contests the decision at issue regarding the correction of DEM 3 870 600.88 which corresponds to the amount of expenditure
         incurred in certain Länder, in the course of the 1996 and 1997 financial years, for the payment of suckler cow premiums. 
      
      I –  Relevant provisions 
      A –    General rules on the monitoring of expenditure financed by the EAGGF 
      2.        Regulation (EEC) No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy, (3) as amended by Regulation (EC) No 1287/95 of the Council of 22 May 1995, (4) provides that the EAGGF is to finance, inter alia, intervention intended to stabilise the agricultural markets, undertaken
         according to Community rules within the framework of the common organisation of agricultural markets. (5)
      
      3.        This type of Community financing is based on the following mechanism. The Commission makes available to Member States, by
         means of advances on the provision for expenditure or intervention effected in a reference period, the financial resources
         required to cover the expenditure in question. Until the advances are paid, the resources necessary to meet that expenditure
         are mobilised by the Member States. (6) That expenditure is effected by paying agencies offering certain guarantees and accredited as a result in the Member States.
         (7)
      
      4.        The Member States have to take the measures necessary, first, to satisfy themselves that transactions financed by the EAGGF
         are actually carried out and executed correctly, secondly, to prevent and deal with irregularities and, thirdly, to recover
         sums lost as a result of irregularities or negligence. (8)
      
      5.        Having carried out these checks, the Member States transmit to the Commission the annual accounts of the paying agencies,
         accompanied by the information required for their clearance. (9) On the basis of that information, the Commission clears the accounts in question. (10)
      
      6.        That clearance of accounts decision is without prejudice to the adoption of a subsequent decision to exclude from Community
         financing expenditure which is found, following checks by the Commission, not to have been effected in compliance with Community
         rules. (11)
      
      7.        The Commission evaluates the amounts to be excluded from Community financing, having regard to the degree of non-compliance
         found, in particular in the light of the nature and gravity of the infringement and the financial loss suffered by the Community.
         (12) That evaluation generally results in the application of a flat-rate correction. (13) Such a decision to refuse financing is adopted under a particular procedure involving the Member State in question closely
         in the Commission’s decision-making process. (14)
      
      B –    Special rules on the grant of suckler cow premiums 
      8.        Regulation (EEC) No 805/68 of the Council of 27 June 1968 on the common organisation of the market in beef and veal, (15) as amended by Council Regulation (EEC) No 2066/92 of 30 June 1992, (16) provides that a producer keeping suckler cows on his holding may qualify, on application, for a premium for maintaining suckler
         cows (17) (the ‘suckler cow premium’). The grant of the premium is subject to certain conditions, laid down in that regulation and
         in Commission Regulation (EEC) No 3886/92. (18)
      
      II –  Facts and pre-litigation procedure 
      9.        In the course of 1997 and 1998, the Commission carried out various checks in Germany relating to the procedure for the grant
         of suckler cow premiums. Those checks were carried out on the spot in three Länder, namely North Rhineland-Westphalia (from
         22 to 26 September 1997), Schleswig-Holstein (from 19 to 23 January 1998) and Bavaria (from 8 to 12 June 1998). 
      
      10.      Following these checks, the Commission indicated to the German authorities, by letter of 31 August 1999, that the measures
         laid down to ensure the correct execution of grants of suckler cow premiums in 1996 and 1997 appeared inadequate. 
      
      11.      To support this finding, the Commission referred to the following matters. (19) First, the data banks existing in the various Länder (which register applications for premiums and the information relating
         to them) were inconsistent (up to 1997), so that the checks intended to avoid multiple applications (during the relevant period)
         for premiums for the same cows could only be incomplete. Moreover, in many cases the registers of livestock were incorrect,
         so that they did not constitute a reliable basis for the on-the-spot administrative checks of applications for premiums. Finally,
         and most importantly, the age from which a cow could be considered as suckling, and therefore eligible for the grant of a
         premium, was not high enough or, at least, the checks on this were insufficient, or even non-existent. 
      
      12.      In view of these matters, the Commission informed the German authorities of its intention to make a flat-rate correction to
         the expenditure incurred on this ground in all the Länder, and not just in the three Länder checked. (20) The geographic reach of the flat-rate correction contemplated was justified by the similarities in the inadequacies found
         in the Länder in question and by the absence of coordination by the federal authorities of the checks carried out at the Länder
         level. In these circumstances there were good grounds for thinking that the quality of suckler cows was not effectively monitored
         in all the Länder. (21)
      
      13.      Following a request from the Commission, the German authorities forwarded additional information to the Commission, by letter
         of 3 November 1999, relating to the systems of checks in certain Länder. (22) The outcome was, according to the Commission, that only the Land of Mecklenburg-Western Pomerania established that it had
         an effective system of checks. 
      
      14.      As a result, by an official communication of 9 October 2000, the Commission made a flat-rate correction, amounting to 2%,
         on expenditure effected – in 1996 and 1997 in respect of suckler cow premiums – in all the Länder, with the exception of Mecklenburg-Western
         Pomerania. The financial correction amounts to DEM 6 366 695.50, that is, DEM 2 496 094.62 for the Länder checked and DEM
         3 870 600.88 for the Länder not checked. 
      
      15.      By letter of 21 November 2001, the German authorities requested the opening of a conciliation procedure in order to reach
         an agreement with the Commission regarding the extension of the flat-rate correction in question to the Länder not checked
         (with the exception of the Land of Mecklenburg-Western Pomerania). The respective positions of the parties were no closer
         by the end of this procedure. Therefore, in its reports of 26 March and 19 June 2001, the conciliation body merely stated,
         on the one hand, that it was not its task to resolve the question of the constitutional legality of the extension of the flat-rate
         correction to the Länder not checked and, on the other hand, that the detailed rules on evidence relating to the quality of
         the checks laid down by the Member States was of fundamental importance and called for clarification in future. 
      
      16.      Following this unsuccessful conciliation procedure, the Commission adopted the contested decision. 
      III –  The action 
      17.      Germany contests the decision at issue in that it excludes from Community financing  suckler cow premiums paid in 1996 and
         1997 by the Länder not checked (with the exception of those paid by the Land of Mecklenburg-Western Pomerania). 
      
      18.      In support of its action, the applicant puts forward three pleas alleging, first, infringement of an essential procedural
         requirement when adopting the contested decision by failing to observe the relevant rules of evidence, secondly, infringement
         of the principle of legitimate expectations, and thirdly, disregard of Article 10 EC. 
      
      A –    The first plea: failure to observe the rules of evidence for the clearance of EAGGF accounts 
      19.      Germany alleges that the Commission extended or imputed to Länder other than those checked on the spot by the Commission,
         the (uncontested) breaches which it had found and consequently applied the flat-rate correction at issue to them. 
      
      20.      That extension was contrary to the principles governing proof of an infringement of the rules of Community law on the grant
         of premiums under the EAGGF. Since it did not carry out on-the-spot checks throughout Germany, the Commission had failed to
         note matters which could give rise to serious doubts as to the existence of infringements in the Länder which had not been
         checked. 
      
      21.      It had thereby unjustifiably shifted the burden of proof in relation to the factors capable of forming the basis of the decision
         at issue, so that the decision was tainted by a procedural defect. In so doing, the Commission had also failed to observe
         the extent of its duty to make investigations, which generally entailed the carrying out of on-the-spot checks in each Land,
         and not only the inspection of administrative documents. 
      
      22.      In my view, this argument does not stand up to an examination of the settled case-law of the Court in relation to the apportionment
         of the relevant burden of proof. 
      
      23.      It is important to note that Article 8(1) of Regulation No 729/70 provides that the Member States are to take the measures
         necessary to satisfy themselves that transactions financed by the EAGGF are actually carried out and are executed correctly.
         
      
      24.      The Court has consistently held that, where the Commission refuses to charge certain expenditure to the EAGGF on the ground
         that it was incurred as a result of breaches of Community rules for which a Member State can be held responsible, it is for
         the Commission to prove the infringements in question. (23) In other words, the Commission is obliged to give reasons for its decision finding an absence of, or defects in, inspection
         procedures operated by the Member States in question. (24)
      
      25.      However, initially, the Commission is not required to demonstrate exhaustively that the checks carried out by national authorities are inadequate
         or that there are irregularities in the figures submitted by them throughout the Member State concerned. It is sufficient
         to adduce evidence of serious and reasonable doubt on its part regarding such checks or figures. (25)
      
      26.      It is then, subsequently, for that State to show that the conditions for obtaining the financing refused are fulfilled. (26) In other words, the Member State concerned cannot rebut the Commission’s findings by mere assertions which are not substantiated
         by evidence of a reliable and operational supervisory system. If it is not able to show that the Commission’s findings are
         inaccurate, those findings can give rise to serious doubts as to the existence of an adequate and effective series of supervisory
         measures and inspection procedures. (27)
      
      27.      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, and, consequently, it is for that Member State
         to adduce the most detailed and comprehensive evidence that its checks or figures are accurate and, if appropriate, that the
         Commission’s assertions are incorrect. (28)
      
      28.      I am of the opinion that the case-law is applicable without distinction to all the Member States, in the light of the fundamental
         requirement that Community law be applied uniformly. (29)
      
      29.      It follows that, contrary to the claims of the German Government, the Commission is not required to carry out detailed and
         exhaustive investigations on the effectiveness of the inspection procedures operated in the Member State concerned by means
         of on-the-spot systematic checks in all the Länder. This evidential requirement cannot arise from the condition requiring
         evidence capable of justifying a serious and reasonable doubt on the matter. Such an evidential requirement would, in practical
         terms, be impossible to fulfil. It would tend to undermine the structure of the system introduced by Regulation No 729/70
         concerning the checks of transactions financed by the EAGGF. 
      
      30.      The contested decision may not therefore be called into question solely on the ground that the Commission failed to carry
         out on-the-spot checks in certain Länder on the existence and reliability of the checks made by those Länder. 
      
      31.      Moreover, in any event, the Commission had good grounds for questioning whether those checks were adequate and effective.
         As regards the checks of the German authorities on the age of supposed suckler cows, the Commission took the trouble to carry
         out on-the-spot inspections in several Länder, rather than merely exchanging correspondence. The various on-the-spot inspections,
         the results of which are not contested by the applicant, could only give rise, in view of the similarity in the defects found,
         to serious and reasonable doubt on the part of the Commission as to the effectiveness of the supervision by the German authorities
         in that regard in the other Länder. 
      
      32.      The alleged diversity of operation and methods of supervision between all the Länder could not dispel the concerns of the
         Commission precisely because, notwithstanding this diversity, the inspections carried out on the spot in three different Länder
         invariably led to broadly comparable results. 
      
      33.      Moreover, the absence of communication of additional information regarding many Länder (other than those checked on the spot),
         despite the Commission’s request in that regard, could not but confirm the Commission’s doubts as to the situation in all
         those Länder. (30)
      
      34.      It follows from these arguments that the first plea of failure to observe the rules of evidence must be dismissed. 
      B –    The second plea: infringement of the principle of legitimate expectations 
      35.      In this plea Germany contends, essentially, that the Commission infringed the principle of legitimate expectations in that
         it suddenly changed its previous practice in relation to the application of a flat-rate correction in connection with the
         clearance of EAGGF accounts. (31)
      
      36.      In my view this argument is not well founded. It is apparent from the documents that the blanket charging system in question
         was not unprecedented since the Commission had already made use of it vis-à-vis certain Member States with a federal or quasi-federal
         structure, as was the case with Italy. (32)
      
      37.      Moreover, the Commission was careful to make clear in its Belle II report of 1997, cited above, that a correction should be
         restricted to expenditure administered in a given region or département only where there are reasons to believe that the deficiency is confined to the failure to apply the system of checks adopted
         by the Member State concerned in that region or département. In the absence of tangible evidence to that effect, the correction should be applied to all the expenditure subject to the
         system of checks at issue, that is to the expenditure incurred by all the national authorities in the sector concerned. (33)
      
      38.      Those guidelines, established in 1997, are in line with the case-law of the Court on apportionment of the burden of proof,
         since it is precisely in situations where there is no indication that the deficiency is limited in that way that the Commission
         has serious and reasonable doubts as to the effectiveness of the checks throughout the Member State concerned. 
      
      39.      Accordingly the conduct of the Commission was not capable of giving rise to reasonable expectations on the part of the German
         authorities that the financial corrections in question would necessarily be restricted to the expenditure incurred in Länder
         where on-the-spot checks were carried out. 
      
      40.      In consequence, the second plea must be dismissed. 
      C –    The third plea: infringement of Article 10 EC 
      41.      Germany alleges, in its third plea, that the Commission did not take account of Germany’s federal structure, consisting of
         independent Länder, when it extended the contested financial correction to Länder which had not been subject to checks. That
         process was contrary to the duty of cooperation in good faith on the part of the Community institutions towards the Member
         States, which follows from Article 10 EC. 
      
      42.      I do not believe that this argument can reasonably succeed. 
      43.      To begin with, I cannot accept that the Commission has acted vis-à-vis the German authorities in breach of the duty of cooperation
         in good faith, since, in my view, it has acted in accordance with the case-law of the Court on apportionment of the burden
         of proof and has not breached the legitimate expectations of the authorities concerned. 
      
      44.      Furthermore, the argument put forward by the German Government seems to run counter to a strong trend in case-law of recognising
         the rule of the unity of the State in Community law, well-known in international law. Several significant illustrations of
         this jurisprudential trend can be found. 
      
      45.      The first illustration of the trend can be found in cases concerning the clearance of EAGGF accounts. In Case C-8/88 Germany v Commission [1990] ECR I-2321, cited above, the Court held that ‘it is for all the authorities of the Member States, whether it be the
         central authorities of the State or the authorities of a federated State, or other territorial authorities, to ensure observance
         of the rules of Community law within the sphere of their competence ... (h)owever, it is not for the Commission to rule on
         the division of competences by the institutional rules proper to each Member State, or on the obligations which may be imposed
         on federal and Länder authorities respectively’. (34) The Court concluded that the Commission ‘may only verify whether the supervisory and inspection procedures established according
         to the arrangements within the national legal system are in their entirety sufficiently effective to enable the Community
         requirements to be correctly applied’. (35)
      
      46.      Those observations clarified an issue which is rather different from that with which we are concerned. The Commission had
         based the contested decision on the fact that, on the one hand, the federal authorities had not given the Länder detailed
         instructions on the nature and frequency of the checks, and, on the other, the Länder had not drawn up and applied the appropriate
         supervisory measures. It was not therefore a question of knowing whether the Commission was entitled to impute findings made
         in certain Länder to other Länder, as in the present case. 
      
      47.      However, that case-law does have some relevance in this case. It is based on the principle that a Member State’s compliance
         with the rules of Community law must be assessed in relation to the conduct of that Member State, considered as a whole or
         as single instances, irrespective of the division of competences between the different authorities of which it consists. According
         to this case-law, it is not the task of the Commission to interfere with the division of competences specific to a Member
         State, by checking whether each of the authorities of which it consists, viewed individually, or any one of them, has complied
         with the rules of Community law in the sphere falling within its competence. 
      
      48.      Conversely, it may be recalled that the Court has consistently held that a Member State may not plead situations existing
         in its internal order, including its constitutional order, to justify failure to comply with obligations arising from Community
         law, thereby avoiding all responsibility on that point in connection with an infringement proceeding. (36) By extension, it might be argued that a Member State cannot avoid the application of a particular flat-rate correction in
         connection with the clearance of EAGGF accounts on the ground that the federal structure of that Member State prevented the
         attribution of defects recorded in on-the-spot checks in certain local authorities to other local authorities not subject
         to checks. 
      
      49.      Following this line of thought, I would cite Joined Cases C-46/93 and C‑48/93 Brasserie du Pêcheur and Factortame (37) on the liability of Member States for breaches of Community law. The Court held that, in the Community legal order, a Member
         State whose liability for breach of a Community provision is in issue will be viewed as a single entity, irrespective of whether
         the breach which gave rise to the damage is attributable to the legislature, the judiciary or the executive. (38) It concluded that the fact that, under national rules, the breach complained of is attributable to the legislature cannot
         exclude the liability of the Member State in question. (39)
      
      50.      All these arguments from the case-law reflect the same reasoning, which is that a Member State’s position in relation to compliance
         with the provisions of Community law should be assessed in an overall manner, in accordance with the traditional rule on the
         unity of the State, i.e. irrespective of its division of competences, so that it is unnecessary to make distinctions according
         to whether the Member State in question has a federal or a centralised structure. 
      
      51.      The Court will rely on these arguments from the case-law to dismiss the third plea in relation to infringement of Article
         10 EC. 
      
      IV –  Conclusion 
      52.      In the light of the foregoing considerations, I propose that the Court should:
      (1)      dismiss the application;
      (2)      order the Federal Republic of Germany to pay the costs. 
      1 –	 Original language: French.
      
      2 –	OJ 2001 L 200, p. 28.
      
      3 –	OJ, English Special Edition 1970 (I), p. 218.
      
      4 –	OJ 1995 L 125, p. 1.
      
      5 –	Article 1(2)(b) and Article 3(1) of Regulation No 729/90 as amended.
      
      6 –	Cited above, Article 4(5).
      
      7 –	Article 4(1).
      
      8 –	Article 8(1).
      
      9 –	Article 5(1)(b) of Regulation No 729/70 as amended.
      
      10 –	Cited above, Article 5(2)(b).
      
      11 –	Article 5(2)(c) and Article 9.
      
      12 –	Article 5(2)(c).
      
      13 –	These flat-rate corrections can be 2%, 5%, 10%, 25% or 50% of the declared expenditure. See, in this connection, the guidelines
         set out by the Commission in 1997 for the calculation of financial consequences when preparing the decision regarding the
         clearance of the accounts of the EAGGF/Guarantee (Doc. VI/5330/97 of 23 December 1997; ‘Belle II Report’, pp. 9 to 12).
      
      14 –	Article 5(2) of Regulation No 1287/95.
      
      15 –	OJ, English Special Edition 1968 (I), p. 187.
      
      16 –	OJ 1992 L 215, p. 49.
      
      17 –	Article 4d(1) of Regulation No 2066/92.
      
      18 –	Commission Regulation (EEC) No 3886/92 of 23 December 1992 laying down detailed rules for the application of the premium
         schemes provided for in Council Regulation (EEC) No 805/68 and repealing Regulations (EEC) No 1244/82 and (EEC) No 714/89
         (OJ 1992 L 391, p. 20).
      
      19 –	See letter of 31 August 1999.
      
      20 –	Cited above.
      
      21 –	Cited above.
      
      22 –	The information submitted concerned the following Länder: Saxony, Thuringia, Mecklenburg-Western Pomerania, Hessen and
         Saarland.
      
      23 –	See in particular Case C-281/89 Italy v Commission [1991] ECR I-347, paragraph 19, Case C‑55/91 Italy v Commission [1993] ECR I-4813, paragraph 13, and Case C-253/97 Italy v Commission [1999] ECR I-7529, paragraph 6.
      
      24 –	See in particular Case C-8/88 Germany v Commission [1990] ECR I-2321, paragraph  23, Case C-278/98 Netherlands v Commission [2001] ECR I-1501, paragraph 39, and Case C-349/97 Spain v Commission [2003] ECR I-3851, paragraph 46.
      
      25 –	See in particular Case C-48/91 Netherlands v Commission [1993] ECR I-5611, paragraph 17, Case C-54/95 Germany v Commission [1999] ECR I-35, paragraph  35, Case C-28/94 Netherlands v Commission [1999] ECR I-1973, paragraph 40, Case C-278/98 Netherlands v Commission, cited above, paragraph 40, Case C-263/98 Belgium v Commission [2001] ECR I‑6063, paragraph 36, and Spain v Commission, cited above, paragraph 47.
      
      26 –	See in particular Case 347/85 United Kingdom v Commission [1988] ECR 1749, paragraph 14, Case C-48/91 Netherlands v Commission, cited above, paragraph 16, and Case C-263/98 Belgium v Commission, cited above, paragraph 36.
      
      27 –	See Case C-253/97 Italy v Commission, cited above, paragraph 7, and Case C-349/97 Spain v Commission, cited above, paragraph 48.
      
      28 –	See in particular Case C-48/91 Netherlands v Commission, cited  above, paragraph 17, Case C‑54/95 Germany v Commission, cited above, paragraph 35, Case C-59/97 Italy v Commission [1999] ECR I-1683, paragraph 55, Case C-278/98 Netherlands v Commission, cited above, paragraph 41, Case C-263/98 Belgium v Commission, cited above, paragraph 37, Case C-118/99 France v Commission [2002] ECR I-747, paragraph 37 and Case C-349/97 Spain v Commission, cited above, paragraph 49.
      
      29 –	On this fundamental requirement of the Community legal order, see in particular Joined Cases C-143/88 and C-92/89 Zuckerfabrik SüderdithmarschenandZuckerfabrik Soest [1991] ECR I‑415, paragraph 26.
      
      30 –	See point 13 of this Opinion.
      
      31 –	For examples of the application of the principle of legitimate expectations of the Member States in connection with the
         clearance of EAGGF accounts, see in particular Case C-55/91 Italy v Commission, cited above, paragraph 67 and Case C-373/99 Greece v Commission [2001] ECR I-9619, paragraph 56, and the Opinion of Advocate General Ruiz-Jarabo Colomer in Case C‑49/94 Ireland v Commission [1995] ECR I-2683, points 30 to 32.
      
      32 –	See Case C-55/91 Italy v Commission, cited above, paragraph 18, and the Opinion of Advocate General Van Gerven in that case (point 19). In this case, the Commission
         extended to regions not checked on the spot the results of checks carried out in other regions.
      
      33 –	Page 12, last paragraph, of Belle II Report. The terms of this report, applicable to the drawing up of the contested decision,
         are appreciably different from those used in the report of 1 June 1993 known as Belle I, according to which flat-rate corrections
         only apply to the sector of expenditure affected in the region or administrative area in which the deficiencies have been
         found, unless it can be proven that the same deficiency exists in the other regions or in all the Member State concerned (doc.
         VI/216/93, Appendix 2, p. 3, paragraph 4).
      
      34 –	Paragraph 13.
      
      35 –	Ibid.
      
      36 –	See in particular Case C-33/90 Commission v Italy [1991] ECR I-5987, paragraph 24, Case C‑301/95 Commission v Germany [1998] ECR I-6135, paragraphs 21 to 23, Case C-274/98 Commission v Spain [2000] ECR I-2823, paragraphs 19 and 20 and Case C-212/99 Commission v Italy [2001] ECR I-4923, paragraphs 34 and 35.
      
      37 –	[1996] ECR I-1029.
      
      38 –	Paragraph 34. See also the Opinion in Case C-224/01 Kölber [2003] ECR I-10239, points 44 to 47, and that of Advocate General Geelhoed in Case C-129/00 Commission v Italy [2003] ECR I‑4637, paragraphs 50 to 55.
      
      39 –	Paragraph 35.