CELEX: 62005CJ0286
Language: en
Date: 2006-05-04
Title: Judgment of the Court (Fourth Chamber) of 4 May 2006. # Reinhold Haug v Land Baden-Württemberg. # Reference for a preliminary ruling: Verwaltungsgerichtshof Baden-Württemberg - Germany. # Protection of the European Communities' financial interests -Regulation (EC, Euratom) No 2988/95 - Repayment of Community aid - Retroactive application of less severe administrative penalties. # Case C-286/05.

Case C-286/05
      Reinhold Haug
      v
      Land Baden-Württemberg
      (Reference for a preliminary ruling from the 
      Verwaltungsgerichtshof Baden-Württemberg)
      (Protection of the European Communities’ financial interests – Regulation (EC, Euratom) No 2988/95 – Repayment of Community aid – Retroactive application of less severe administrative penalties)
      Summary of the Judgment
      Agriculture – Common agricultural policy – Integrated administration and control system for certain aid schemes 
      (Council Regulation No 2988/95, Art. 2(2); Commission Regulations No 3887/92, Art. 9(2), and No 2419/2001, Art. 31)
      The second sentence of Article 2(2) of Regulation No 2988/95 on the protection of the European Communities’ financial interests,
         which provides that in the event of a subsequent amendment of the provisions which impose administrative penalties, the less
         severe provisions are to apply retroactively, does not apply if, a difference of the declared area which is greater than 20%
         of the determined area within the meaning of Article 9(2) of Regulation No 3887/92 laying down detailed rules for applying
         the integrated administration and control system for certain Community aid schemes having been found, full repayment of the
         Community aid initially granted, together with interest, is sought whereas the economic operator concerned contends that the
         amount of the aid to be repaid might be lower under Article 31(3) of Regulation No 2419/2001 laying down detailed rules for
         applying the integrated administration and control system for certain Community aid schemes established by Regulation No 3508/92.
         
      
      Article 31 of Regulation No 2419/2001 does not provide for any penalty and thus cannot constitute an amendment of the penalty
         under Article 9(2) of Regulation No 3887/92.
      
      (see paras 24-25, operative part)
JUDGMENT OF THE COURT (Fourth Chamber)
      4 May 2006 (*)
      
      (Protection of the European Communities’ financial interests – Regulation (EC, Euratom) No 2988/95 – Repayment of Community aid – Retroactive application of less severe administrative penalties)
      In Case C-286/05,
      REFERENCE for a preliminary ruling under Article 234 EC from the Verwaltungsgerichtshof Baden-Württemberg (Germany), made
         by decision of 30 June 2005, received at the Court on 18 July 2005, in the proceedings
      
      Reinhold Haug
      v
      Land Baden-Württemberg,
      THE COURT (Fourth Chamber),
      composed of K. Schiemann, President of the Chamber, E. Juhász and M. Ilešič (Rapporteur), Judges,
      Advocate General: P. Léger,
      Registrar: R. Grass,
      having regard to the written procedure,
      after considering the observations submitted on behalf of:
      –        Mr Haug, by F. Schulze, Rechtsanwalt,
      –        Land Baden-Württemberg, by N. Philippi, acting as Agent,
      –        the Commission of the European Communities, by F. Erlbacher and L. Visaggio, acting as Agents,
      having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
      gives the following
      Judgment
      1        This reference for a preliminary ruling concerns the interpretation of Article 2(2) of Council Regulation (EC, Euratom) No
         2988/95 of 18 December 1995 on the protection of the European Communities’ financial interests (OJ 1995 L 312, p. 1).
      
      2        The reference was made in proceedings between Mr Haug, farmer, and Land Baden-Württemberg, represented by the Landratsamt
         Tuttlingen (Tuttlingen District Administrator’s Office), concerning the annulment of a decision to grant aid and the obligation
         to repay such aid in full.
      
       Legal context
      3        Article 1(2) of Regulation No 2988/95 provides:
      
      ‘“Irregularity” shall mean any infringement of a provision of Community law resulting from an act or omission by an economic
         operator, which has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by
         them, either by reducing or losing revenue accruing from own resources collected directly on behalf of the Communities, or
         by an unjustified item of expenditure.’
      
      4        The second sentence of Article 2(2) of that regulation provides:
      
      ‘In the event of a subsequent amendment of the provisions which impose administrative penalties and are contained in Community
         rules, the less severe provisions shall apply retroactively.’
      
      5        Article 4 of the regulation states: 
      
      ‘1.      As a general rule, any irregularity shall involve withdrawal of the wrongly obtained advantage:
      –        by an obligation to pay or repay the amounts due or wrongly received,
      …
      2.      Application of the measures referred to in paragraph 1 shall be limited to the withdrawal of the advantage obtained plus,
         where so provided for, interest which may be determined on a flat-rate basis. 
      
      …
      4.      The measures provided for in this article shall not be regarded as penalties.’
      6        According to Article 5(1) of the regulation:
      
      ‘Intentional irregularities or those caused by negligence may lead to the following administrative penalties:
       … 
      (b)      payment of an amount greater than the amounts wrongly received or evaded, plus interest where appropriate; this additional
         sum shall be determined in accordance with a percentage to be set in the specific rules, and may not exceed the level strictly
         necessary to constitute a deterrent;
      
      (c)      total or partial removal of an advantage granted by Community rules, even if the operator wrongly benefited from only a part
         of that advantage; 
      
       …’
      7        Article 9(2) 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) deals with differences between
         the area of land declared in the area-linked aid application (‘“area” aid’) on the one hand, and the area for which all of
         the conditions laid down in the rules have been met (‘determined area’) on the other. This provision is worded as follows:
      
      ‘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. However, except in cases of force majeure, the area actually determined
         on inspection shall be reduced:
      
      –        by twice the difference found if this is more than 2% or two hectares but not more than 10% of the determined area.
      –        by 30% if the difference found is more than 10% but not more than 20% of the determined area.
      If the difference is more than 20% of the determined area no area-linked aid shall be granted.
      … 
      Where a farmer has not met all the obligations incumbent on him in regard to parcels fallowed for non-food production purposes
         these shall, on the occasion of inspection for the purposes of application of this article, be considered not to have been
         found.
      
      For the purposes of this article, “determined area” means the area for which all of the conditions laid down in the rules
         have been met.’
      
      8        Regulation No 3887/92 was repealed by the first sentence of Article 53(1) 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). However, the second sentence of Article
         53(1) of Regulation No 2419/2001 provides that Regulation No 3887/92 ‘shall continue to apply in respect of aid applications
         relating to marketing years or premium periods which start before 1 January 2002’.
      
      9        Under the title ‘Basis of calculation’, Article 31 of Regulation No 2419/2001 states:
      
      ‘…
      2.      Without prejudice to reductions and exclusions in accordance with Articles 32 to 35, 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.
      
      3.      The calculation of the maximum eligible area for the area payments to arable crop producers shall be made on the basis of
         the area of set-aside land determined and on a pro rata basis for each crop concerned. However, payments to arable crop producers
         shall, in relation to the area of set-aside land determined, only be reduced to the level corresponding to the area which
         would be needed to produce 92 tonnes of cereals in accordance with Article 6(7) of Regulation (EC) No 1251/1999 [Council Regulation
         (EC) No 1251/1999 of 17 May 1999 establishing a support system for producers of certain arable crops (OJ 1999 L 160, p. 1)].
      
       …’
      10      Article 32 of that regulation, entitled ‘Reductions and exclusions in cases of overdeclaration’, provides in paragraph 1:
      
      ‘If, in respect of a crop group, the area declared exceeds the area determined in accordance with Article 31(2) the aid shall
         be calculated on the basis of the area determined reduced by twice the difference found if that difference is more than either
         3% or two hectares but no more than 20% of the area determined.
      
      If the difference is more than 20% of the area determined, no area-linked aid shall be granted for the crop group concerned.’
       The main proceedings and the questions referred for a preliminary ruling
      11      On 22 March 2000, Mr Haug applied for area aid for certain agricultural arable crops for an area planted with colza and an
         area planted with cereals. He indicated in his application the parcels lying fallow and on which, consequently, products not
         directly intended for consumption were to be cultivated. By decision of 18 December 2000, the Amt für Landwirtschaft, Landschafts-
         und Bodenkultur Tuttlingen (Agency for Agriculture, Countryside and Soil Cultivation of Tuttlingen; ‘the ALLB’) awarded him
         an area payment in the total sum of DEM 17 772.57 under the Community rules on arable crops. This sum was divided into three
         amounts corresponding to the colza, the cereals and the fallowed parcels respectively. The decision stated that the obligations
         entered into by Mr Haug when the application for the aid was submitted had to be complied with. 
      
      12      By letter of 13 December 2000, the ALLB asked Mr Haug, as part of a general plausibility check, to forward the certificates
         for deliveries of colza for consumption. In his reply of 21 December 2000, Mr Haug informed the ALLB that his son had made
         a mistake, and inadvertently delivered as colza for consumption some of the colza that he should have delivered as raw material
         not for consumption.
      
      13      By decision of 16 February 2001, the ALLB annulled its decision of 18 December 2000 regarding an area payment of DEM 17 772.57
         and asked for that sum to be repaid, together with DEM 354.83 interest. The reason given for the decision was Mr Haug’s failure
         to meet the obligations entered into on the basis of his application for aid. Since the difference between the areas declared
         in his application and the areas determined was more than 20%, no aid could be granted, in accordance with Article 9(2) of
         Regulation No 3887/92.
      
      14      Mr Haug lodged an objection against that decision, in which he argued in particular that the amount to be repaid was, in his
         view, out of proportion to the oversight. He contended that the failure to comply in relation to the area of land lying fallow
         could only lead to a reduction in aid. He relied in this connection on the second sentence of Article 31(3) of Regulation
         No 2419/2001, under which payments to arable crop producers are, in relation to the area of set-aside land determined, only
         to be reduced to the level corresponding to the area which would be needed to produce 92 tonnes of cereals in accordance with
         Article 6(7) of Regulation No 1251/1999. According to Mr Haug, that provision should be applied in the present case pursuant
         to the second sentence of Article 2(2) of Regulation No 2988/95.  
      
      15      By decision of 13 December 2002, the Regierungspräsidium Freiburg (Freiburg Regional Council) dismissed Mr Haug’s objection.
         The action brought by the latter against that decision was also dismissed by judgment of 23 November 2004 of the Verwaltungsgericht
         Freiburg (Freiburg Administrative Court). Mr Haug appealed against that judgment to the Verwaltungsgerichtshof Baden-Württemberg
         (Baden-Württemberg Higher Administrative Court).
      
      16      It is in those circumstances that the Verwaltungsgerichtshof Baden-Württemberg decided to stay the proceedings and to refer
         the following questions to the Court for a preliminary ruling:
      
      ‘(1)      Does the second sentence of Article 2(2) of Regulation [No 2988/95] apply even if in the context of an irregularity within
         the meaning of Article 1(2) of that regulation only the reimbursement of wrongly granted aid is sought (Article 4(1) of [that]
         regulation) and, under a provision of Community law which comes into force later, the amount of wrongly granted aid to be
         reimbursed would be lower than under the provisions of Community law in force at the time when the irregularity was committed?
         
      
      If the answer to the first question is in the affirmative:
      (2)      Does the second sentence of Article 2(2) of Regulation [No 2988/95] also apply with regard to the rules governing payment
         of interest if no administrative penalties within the meaning of Article 5(1) of that regulation are imposed on the farmer
         concerned, who is required only to repay the wrongly granted aid within the meaning of Article 4(1) of that regulation?’
      
       The questions referred
      17      In the procedure established by Article 234 EC providing for cooperation between national courts and the Court of Justice,
         it is for the latter to provide the national court with an answer which will be of use to it and enable it to determine the
         case before it. To that end, the Court may have to reformulate the questions referred to it (see, inter alia, Case C-88/99
         Roquette Frères [2000] ECR I-10465, paragraph 18, and Case C-469/00 Ravil [2003] ECR I-5053, paragraph 27).
      
      18      It is apparent from the grounds of the referring decision that the parties to the main proceedings accept that the rule set
         out in the second sentence of Article 2(2) of Regulation No 2988/95 concerning retroactive application of the less severe
         provisions is expressly limited to administrative penalties and therefore does not apply to measures within the meaning of
         Article 4 of that regulation.
      
      19      As stated in the referring decision and the observations submitted to the Court, the main case turns on whether the obligation
         to reimburse in full, together with interest, an area payment initially granted, where a difference of more than 20% of the
         determined area within the meaning of Article 9(2) of Regulation No 3887/92 has been found, constitutes a measure within the
         meaning of Article 4 of Regulation No 2988/95 or a penalty within the meaning of Article 5 of that regulation. In addition
         to this there is disagreement between the parties to the main proceedings as to whether or not Article 31(3) of Regulation
         No 2419/2001, which Mr Haug contends to be the less severe provision within the meaning of Regulation No 2988/95, is of a
         punitive nature.
      
      20      Thus, in order to provide the national court with an answer which will be of use to it and enable it to determine the main
         case, the questions referred should be reformulated as follows:
      
      Does the second sentence of Article 2(2) of Regulation No 2988/95 apply if, a difference of more than 20% of the determined
         area within the meaning of Article 9(2) of Regulation No 3887/92 having been found, full repayment of the Community aid initially
         awarded, together with interest, is sought whereas the economic operator concerned contends that the amount of the aid to
         be repaid might be lower under Article 31(3) of Regulation No 2419/2001?
      
      21      As the Court has held on a number of occasions, an inaccurate declaration of the eligible area in the application for aid,
         as referred to in Article 9(2) of Regulation No 3887/92, constitutes an irregularity within the meaning of Article 1(2) of
         Regulation No 2988/95 and the withdrawal of the aid under the same provision of Regulation No 3887/92, in the light of the
         difference between the area declared and the area actually determined, constitutes an administrative penalty within the meaning
         of Article 2(2) of Regulation No 2988/95 (Case C-354/95 National Farmers’ Union and Others [1997] ECR I-4559, paragraphs 40 and 41; Case C‑304/00 Strawson and Gagg & Sons [2002] ECR I‑10737, paragraph 46; and Case C‑94/05 Emsland-Stärke [2006] ECR I-0000, paragraph 63; see also, by analogy, Case C‑295/02 Gerken [2004] ECR I-6369, paragraph 50). 
      
      22      In particular, such a withdrawal, which takes effect through full repayment of the Community aid initially granted, together
         with interest, corresponds to ‘total … removal of an advantage granted by Community rules’, as referred to in Article 5(1)(c)
         of Regulation No 2988/95, which this provision expressly qualifies as an administrative penalty where the withdrawal is made
         as a result of an irregularity which is intentional or caused by negligence.
      
      23      As a result, the second sentence of Article 2(2) of Regulation No 2988/95 would tend to apply if, a difference of more than
         20% of the determined area within the meaning of Article 9(2) of Regulation No 3887/92 having been found, full repayment of
         the Community aid initially awarded, together with interest, is sought whereas a provision of Community law introducing a
         subsequent amendment to the penalty under Article 9(2) of Regulation No 3887/92 provides for a lesser amount to be repaid.
      
      24      It should be noted in this connection, however, that, unlike Article 9(2) of Regulation No 3887/92, Article 31 of Regulation
         No 2419/2001 does not provide for any penalty. The title and wording of the latter provision indicate that it does no more
         than define a basis of calculation, without prejudice to reductions and exclusions in accordance with Articles 32 to 35 of
         Regulation No 2419/2001. That provision thus cannot constitute an amendment of the penalty under Article 9(2) of Regulation
         No 3887/92. This finding is further supported by the second paragraph of Article 32(1) of Regulation No 2419/2001, which reproduces
         in essence the rule provided for in the second paragraph of Article 9(2) of Regulation No 3887/92. 
      
      25      Accordingly, the answer to the questions as reformulated by the Court must be that the second sentence of Article 2(2) of
         Regulation No 2988/95 does not apply if, a difference of more than 20% of the determined area within the meaning of Article
         9(2) of Regulation No 3887/92 having been found, full repayment of the Community aid initially granted, together with interest,
         is sought whereas the economic operator concerned contends that the amount of the aid to be repaid might be lower under Article
         31(3) of Regulation No 2419/2001.
      
       Costs
      26      Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court,
         the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs
         of those parties, are not recoverable.
      
      On those grounds, the Court (Fourth Chamber) hereby rules:
      The second sentence of Article 2(2) of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of
            the European Communities’ financial interests does not apply if, a difference of more than 20% of the determined area within
            the meaning of Article 9(2) 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 having been found, full repayment of the
            Community aid initially granted, together with interest, is sought whereas the economic operator concerned contends that the
            amount of the aid to be repaid might be lower under Article 31(3) 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. 
      [Signatures]
      * Language of the case: German.