CELEX: 61976CC0011
Language: en
Date: 1978-12-05 00:00:00
Title: Joined opinion of Mr Advocate General Capotorti delivered on 5 December 1978. # Government of the Kingdom of the Netherlands v Commission of the European Communities. # EAGGF. # Case 11/76. # French Government v Commission of the European Communities. # EAGGF. # Joined cases 15 and 16/76. # Government of the Federal Republic of Germany v Commission of the European Communities. # EAGGF. # Case 18/76.

OPINION OF MR ADVOCATE GENERAL CAPOTORTI
      DELIVERED ON 5 DECEMBER 1978 (
            1
         )
      
         Mr President,
      
         Members of the Court,
      
               1. 
            
            
               My opinion today concerns four actions brought by the Netherlands Government (Case 11/76), by the French Government (Joined Cases 15 and 16/76) and by the Government of the Federal Republic of Germany (Case 18/76). The applicants seek the annulment of the decisions whereby the Commission, in discharging the accounts of the European Agricultural Guidance and Guarantee Fund (EAGGF), Guarantee Section, for 1970 and 1971, refused to recognize that certain expenditure incurred by the three States in the context of their activities in implementation of the common agricultural policy was chargeable to the said Fund.
               The reason for the Commission's view is essentially that the expenditure in question was irregular in form or completely unjustified in the light of the Community rules. The point of view of the three governments is based in many cases on an interpretation of the relevant provisions which differs from that of the Commission, so as to justify the expenditure incurred and thus the charging to the EAGGF of the resulting financial burden. In other cases, however, the applicants recognize that there is no objective basis in the Community rules for the expenditure which they seek to recover as it was incurred on the basis of a mistaken interpretation of those rules or in order to remedy an alleged inadequacy of those rules with regard to the factual situations. None the less, the applicants argue that the financial burden in question should also be borne by the Community and in support of that view they put forward a series of considerations relating to the criteria for charging to the Community expenditure incurred on its behalf by national bodies in the context of the common agricultural policy. In view of the general nature of those considerations it is appropriate, in my view, to examine them before looking to the substance of the individual items of expenditure which the Commission has rejected.
            
         
               2. 
            
            
               The contested decisions are based on Article 5 (2) (b) of Regulation (EEC) No 729/70 of the Council of 21 April 1970 and on Article 8 (a) of Regulation (EEC) No 1723/72 of the Commission of 26 June 1972. The first concerns the financing of the common agricultural policy while the second relates to the discharge of accounts for the Guarantee Section of the EAGGF.
               Under the first provision ‘The Commission, after consulting the Fund Committee referred to in Article 11, … shall, before the end of the following year, on the basis of the documents referred to in paragraph 1 (b), make up the accounts of the (national) authorities and bodies’.
               The second provision referred to above provides that the decision to discharge the accounts shall include ‘the determination of the amount of expenditure incurred in each Member State during the year in question, recognized as chargeable to the EAGGF, Guarantee Section’.
               It should be pointed out that until the end of 1970 expenditure relating to the common agricultural policy was advanced by the Member States and subsequently reimbursed by the Community. As from January 1971 however, pursuant to Regulation No 729/70, the system was adopted of direct financing by the Community of refunds on exports to third countries and intervention intended to stabilize the agricultural markets. The Commission makes available to the Member States the necessary credits to enable the competent national bodies to make the payments relating to measures of the two aforesaid types. In the course of each year the Commission makes advance payments to the national bodies. Subsequently, the Member States transmit to the Commission the annual accounts relating to the financial operations of the aforesaid kind carried out by the competent authorities and bodies, accompanied by the necessary supporting documents.
               The discharge of the accounts is therefore more than a mere accounting operation. In fact in order to draw up a balance between the advances paid by the Community and the payments made by the States it is necessary that the expenditure should be finally recognized as chargeable to the EAGFF, Guarantee Section. No provision is made for a specific administrative procedure in order to resolve problems which may arise with regard to the charging to the EAGGF of payments made by the national bodies. Therefore the examination to ascertain that the conditions for such expenditure to be charged to the EAGGF are satisfied is carried out in the context of the discharge procedure.
               It is clear that the management of the payments in question by the Member States on behalf of the Community can give rise to irregularities. This eventuality is covered by Article 8 of the said Regulation No 729/70, paragraph (1) of which requires Member States to adopt, inter alia, the measures necessary to prevent and deal with irregularities and to recover sums lost as a result of irregularities or negligence. The Member States are to inform the Commission of the measures taken for those purposes and in particular of the state of the administrative and judicial procedures. Article 8 (2) provides: ‘In the absence of total recovery, the financial consequences of irregularities or negligence shall be borne by the Community, with the exception of the consequences of irregularities or negligence attributable to administrative authorities or other bodies of the Member States.
               …’
            
         
               3. 
            
            
               The interpretation of that provision forms the subject-matter of the first preliminary point of a general nature which is common to the action brought by the Netherlands Government and that lodged by the German Government. This involves establishing whether Article 8 relates essentially to irregularities or negligence on the part of private individuals and covers those of Member States only in so far as it concerns the course of conduct adopted by their administrative authorities or other bodies in relation to the conduct of such private individuals, or whether on the other hand it governs the apportionment of all expenditure resulting from irregularities or negligence, whether committed by individuals or by the national administrations.
               In support of the first-mentioned solution the Commission places emphasis on Articles 2 and 3 of the regulation, which provide that refunds on exports to third countries and intervention intended to stabilize the agricultural markets are to be financed by the Community but which always refer to refunds granted and intervention undertaken ‘in accordance with Community rules within the framework of the common organization of agricultural markets’. In the Commission's view that signifies that the EAGGF cannot properly assume responsibility for State measures which were not taken in conformity with Community rules. The consequence is that, as a rule, no payment may be charged to the EAGGF which has been made by State bodies in circumstances which are objectively irregular, apart from the case of irregularity or negligence on the part of private persons (such as, for example, cases of fraud). Only in that case would the charging of sums to the Community be justified, and even then the State would be rendered liable if bodies entrusted with the management of the common agricultural policy on its behalf had themselves been involved in irregularities or negligence (for example by reason of insufficient preliminary control, through negligence in recovering sums paid in error and similar cases).
               The Government of the Netherlands and the Government of the Federal Republic of Germany take the opposite view. They contend that Article 8 (2) regulates in general terms the question of the charging of payments undertaken in an irregular manner, including cases other than those where the irregularity was brought about by actions of private persons. As we have seen, in the terms of that provision the Member States are liable only for expenditure resulting from ‘irregularities or negligence attributable to administrative authorities or other bodies’ of each State; therefore if the provision is interpreted as including all cases of irregularity involving State bodies the general principle of apportionment of financial responsibility for irregular payments between the Community and the Member States is substantially different from that which the Commission derives from Articles 2 and 3 of the regulation.
               In support of their view the applicants adduce arguments relating to the fundamental characteristics of the intervention system. They argue that as a consequence of the introduction of the system of ‘direct financing’, the Community must, as a rule, bear the risks and perils of the system. Furthermore, there is no doubt that the intervention system falls within the field of agricultural policy, which is an exclusively Community matter. Therefore, if it is true that in applying common intervention measures the Member States are acting on behalf of the Community it would, in the opinion of the applicants, be in accordance with the logic of the system that the States' liability for irregular payments should be confined to cases in which any irregularity or negligence is attributable to them.
               It must be said that this point of view lacks the necessary clarity so long as the concept of ‘irregularities or negligence attributable to the State’ has not been defined.
               In awareness of this the Netherlands Government submits further details in this respect. It takes the view that the irregularity of a payment by reason of defective knowledge of Community provisions on the part of national officials is inexcusable. In its opinion the liability of the State would also be incurred by reason of a mistaken interpretation of Community provisions if, having regard to the actual circumstances, the same interpretation could not reasonably have been adopted by an objective and competent observer. In substance, the idea of the Government of the Netherlands seems to be that the financial consequences of irregularities in the application of the Community agricultural rules are attributable to the Member States only if there exists grave negligence on the part of their national bodies.
               The Commission, for its part, emphasizes that it does not have the power to address itself directly to the national intervention agencies to give them instructions on the manner in which the agricultural rules are to be applied; nor does it have a power of supervision enabling it to prevent the national bodies from applying the rules improperly. The national authorities of the Member States enjoy full autonomy in implementing the Community agricultural provisions; in the Commission's view the counterpart of that autonomy must be an equally wide responsibility on the part of the Member States for irregularities by their authorities in that field.
            
         
               4. 
            
            
               To my mind the whole problem consists in determining whether the general principle of the attribution to the Community of the payments provided for in Regulation No 729/70 should be derived from Articles 2 and 3 of that regulation or from Article 8 (2). In the first eventuality the general principle would be that only regular expenditure could be charged to the Community; that would rule out the possibility, therefore, that the exception laid down in Article 8 (2) could also cover expenditure incurred irregularly by the Member States in the absence of wrongful conduct on the part of private individuals, since to attribute such breadth to the exception would amount to negating the principle itself. In the second eventuality, however, the general principle would be that all expenditure incurred by the Member State in managing refunds on exports and interventions to stabilize the agricultural markets could be charged to the Community, including payments which failed to conform with Community law either as to form or as to substance, with the sole exception of irregularities or negligence which could be defined as being ‘attributable’ to the administrative authorities or other bodies of the Member States. It would still be necessary of course to determine the conditions for that exceptional ‘attribution’ to the Member States.
               In my opinion the context of Regulation No 729/70 clearly shows that the general principle is that which may be derived from Articles 2 and 3 and the exception lies in the possibility of charging to the Community payments vitiated by irregularity or negligence which is not attributable to the national administrative authorities or other bodies. In fact a system of direct Community financing of the common agricultural policy logically implies that the Community should finance such measures subject to the conditions which it has itself fixed by its own rules. Article 2 (1) and Article 3 (1) of the said regulation merely confirm this line of reasoning. If the State bodies charged with managing the measures in question are negligent in their compliance with the Community provisions or if they are guilty of irregularities (and it should be noted that the latter term is wider in scope than the former as it lacks the subjective connotation of wrongful conduct) the Member States are liable; otherwise Community financing would be granted irrespective of compliance with Community rules, which would contrast with the said Articles 2 and 3.
               Other arguments in support of this point of view may be derived from the wording of Article 8. It may be recalled that in the proposal for a regulation submitted by the Commission to the Council the scope of that article was clearly limited to cases of irregularities on the part of third parties. Although the formulation subsequently adopted differs, it does not follow that the Council intended to introduce so fundamental a change in relation to the original proposal as to overturn the basic principle of the attribution of expenditure deriving from the aforesaid Articles 2 and 3.
               Let us now consider the content and the wording of Article 8 (1). It begins by providing that the Member States shall take the measures necessary to satisfy themselves that transactions financed by the Fund are actually carried out and are executed correctly; it requires them to prevent and deal with irregularities, and to recover sums lost as a result of irregularities or negligence; the Commission must be informed of the measures taken and in particular of the state of the administrative and judicial procedures. In my view it is significant that the correctness refers to transactions financed by the Fund, that is to say to the private activities supported by the financing and not to the payments made by the Member States; the same reference must apply to irregularities. It further appears to me that as regards its content that provision clearly considers irregularities or negligence as the conduct of individuals separate from States: the Member States are required to prevent and deal with them and to recover sums lost and thus to act against third parties who are guilty of such irregularities or negligence.
               With regard to the obligation to recover sums lost as a result of irregularities or negligence it may be observed that if, on the basis of a mistaken interpretation of the Community rules or negligent application of those rules, the administration had paid to third parties sums in excess of those permitted, or if it had made payment in conditions which were irregular as to form, the general principle of good faith could scarcely permit the recipient to be required to reimburse sums thus paid. Payment as a result of fraud or irregularities on the part of private recipients is a different matter however.
               I now turn to paragraph (2) of Article 8
               The Netherlands Government and the German Government interpret that provision as though it was worded: ‘In the absence of total recovery, the financial consequences of irregularities or negligence whether on the part of individuals or of the administrative authorities or other bodies of the Member States shall be borne by the Community with the exception of the consequences of irregularities or negligence attributable to administrative authorities or other bodies of the Member States’ What sense would there be, however, in contrasting irregularities or negligence on the part of national administrative authorities with irregularities or negligence attributable to the national administrative authorities? Negligence on the part of the administration can be nothing other than negligence attributable to the administration; the same is true of irregularities. The provision is meaningful only if the irregularities or negligence attributable to the national administrative authorities are contrasted with the irregularities or negligence attributable to other persons, that is to say private individuals, persons involved in transactions financed by the Fund.
               It should also be recalled that the Council, pursuant to Article 8 (3), laid down in Regulation No 283/72 of 7 February 1972 the general rules for the application of that article. That regulation contains certain elements which may serve to assist in interpreting Article 8 (2). I refer first to the -preamble to Regulation No 283/72 from which it is evident that the Council considered fraudulent practices and irregularities together (third recital) and thus had in mind actions on the part of individuals, of differing degrees of gravity and intent.
               Mention should also be made of Article 3, which requires the Member State to communicate to the Commission each quarter a list of irregularities which have been the subject of the primary administrative or judicial findings of fact; it requires the States inter alia to give detailed information concerning the practices adopted in committing the irregularity and the manner in which the irregularity was discovered. That provision also clearly implies that the irregularities were committed by persons outside the administration. Article 4, finally mentions irregularities which ‘show that a new fraudulent practice has been adopted’: here again is that type of irregularity classified as fraud which drew most attention from the Community legislature.
               In the course of the discussions on the proposal for Regulation No 283/72 the problem of the meaning of the term ‘irregularity’ was not entirely disregarded: the German delegation declared that any negligent act on the part of the administration of a Member State should be classified as an irregularity within the meaning of the regulation. However, as was pointed out by the Commission, it is significant that that declaration remained unilateral and was not even included in the Council minutes. Therefore it is not an argument in favour of the applicants' view: the same must be said of the joint statement made by the Council and the Commission on 7 February 1972, in which irregularity within the meaning of that regulation was defined as ‘any infringement, whether or not intentional, of a provision of a legal nature’.
            
         
               5. 
            
            
               In the light of those considerations Article 8 (2) of Regulation No 729/70 of the Council should, in my opinion, be interpreted as meaning that, in the absence of total recovery of amounts which private individuals have obtained improperly, by means of unlawful or negligent conduct, from a national administration, the loss will be borne by the Community, except where the national authorities themselves have tendered themselves liable for the loss by their conduct in making the payment (for example, by negligent control of the veracity of declarations, payment without reserve in cases of doubt, mistaken calculation of the amount) or at a subsequent time (for example, failure to demand reimbursement of the amount paid in error or to act within the appropriate period in order to recover sums paid).
               The said provision therefore refers above all to irregularities or negligence attributable to private individuals while irregularities or negligence on the part of the administration enter into consideration only in so far as they are accessory to actions of individuals. Thus the scope of Article 8 does not cover irrer gularities committed directly by the administration, independently of the conduct of private individuals. They are subject to the general rule, which may be deduced from the said Articles 2 and 3, whereby the Community is responsible solely for payments made correctly by the Member States in application of the Community agricultural rules. Article 8 (2) clearly constitutes an exception to that general rule which, however, is limited by the last phrase which has the effect of restating the fundamental criterion of the possibility of attributing irregular payments to States.
               In my view that interpretation is not illogical, as the Netherlands Government argues. Indeed, in view of the fact that the States act on behalf of the Community it is proper that the Community should bear losses caused by the conduct of individuals where the Member States have done all in their power to satisfy themselves that transactions financed by the Fund are actually carried out and are executed correctly, to prevent and deal with irregularities and to recover sums lost. The case of payments incorrectly made by State bodies without any blame attaching to third parties is a different matter. The extension to that situation of the exception laid down by Article 8 (2) would very probably increase substantially the financial intervention of the Community and would put the Community in the singular position of financing State measures which are not in conformity with Community law, the effects if not the intention of which would also be incompatible with the principle of non-discrimination. As the Court is aware, in accordance with that principle Community rules must accord the same advantages to and impose the same burdens on persons subject to them in all the Member States. That is also necessary in order to avoid the distortion of competitive conditions. If it had to be accepted that the Community should also support expenditure incurred incorrectly by the States in managing the common agricultural policy (with the sole exception of expenditure which was the result of serious negligence) States which were guilty of the greatest number of irregularities in granting Community aid would become the major beneficiaries of the financing by the EAGGF. This contrasts with the elementary principles of distributive justice.
               Furthermore, the ensuing reduction of the financial risks for the Member States of irregularities might serve to make them less watchful and thus to increase the amount of irregular expenditure; that risk is all the more serious in that the Community is not able to intervene directly in relation to the internal administrative authorities to issue them with orders or instructions.
            
         
               6. 
            
            
               In all the cases of irregular payments to which the decisions contested in the present cases refer, the action of the national administration concerned stands on its own without any concomitant irregular conduct attributable to individual recipients.
               The consequences — on the basis of what I have already said — is that all those cases are subject not to the provisions of Article 8 (2) of Regulation No 729/70 of the Council but to the general rule that intervention measures financed by the EAGGF are those which are in accordance with Community rules.
               However, taking account of the principle of the protection of expectations the Commission accepts that not every irregularity committed by national administrations (with the exception of course of cases covered by Article 8 (2)) automatically entails exclusion of the expenditure from the accounts of the EAGGF. In particular, if the erroneous interpretation of the Community provisions applied by the national administration may be attributed to a Community institution, the Community itself should bear the financial burden in question when the expenditure is validated.
               It seems to me that that possibility of a subsequent limitation of the liabilities of the Member State should be recognized as being in conformity with the logic of the system not only on the basis of the principle of the protection of expectations, but also in the light of the general criteria relating to liability. There may also be an error attributable to the Community either in the context of Community actions of an executive nature (for example, an opinion of the Commission on the application of ambiguous provisions which subsequently turns out to be based on a mistaken interpretation of those provisions; or a failure to reply to a request for clarification submitted by a Member State) or within the scope of the Community legislature's own activities (for example, a legislative provision which is drawn up in so equivocal or obscure a way as to mislead even a person who is expert in the matter).
               Those reasonable derogations from the rigours of the general principle of the liability of the Member States for irregularities on the part of their authorities in applying the Community agricultural provisions therefore lead to laying on the EAGGF the burden of irregular expenditure which, according to the interpretation adopted here, is outside the scope of Article 8 (2) of Regulation No 729/70. That does not affect the fact that the general principle derived from Article 2 and Article 3 of that regulation should remain valid.
            
         
               7. 
            
            
               Another preliminary point raised by the applicants in Cases 11/76 and 18/76 (that is, the Netherlands Government and the German Government) relates to the procedure followed by the Commission in ascertaining the alleged irregularities.
               The two Governments argue that a distinction should be drawn between the procedure for discharging the accounts and the procedure for attributing expenditure. Only discharge has the property of being entirely entrusted to the Commission and being concluded by a decision of the Commission; the attribution of expenditure, on the other hand, although there exists no express legislative provision, requires a more complex procedure, involving the participation of the Member States concerned and of the Council.
               The applicants observe that the procedure for discharging the accounts is laid down in Article 5 (2) (b) of Regulation No 729/70; the procedure for the attribution of expenditure on the other hand is, in their view, based on Article 8 (2). Discharge constitutes the final decision debiting to the Community budget expenditure incurred by the Member States; that decision therefore presupposed that questions relating to the attribution of expenditure have been resolved. In the absence of any preliminary procedure for attributing expenditure the decision to discharge that expenditure, which was moreover adopted without reservation, is said to be defective and should therefore be annulled.
               However, the detailed rules for the attribution procedure have never been laid down. In that situation the German Government argues that the Commission should at least have abided by the statement made by it, together with the Council, at the time when Regulation No 283/72 was adopted, which statement attributed to the Council (in the opinion of the German Government) a decisive role in resolving individual disputed cases. The Netherlands Government, on the other hand, rules out the possibility that that statement implies the obligation to leave decisions on specific cases to the Council; it only requires the Commission to submit to the Council proposals for a regulation in the context of Article 8 (3) of Regulation No 729/70 in order to define certain substantive criteria and to determine a suitable procedure in order to resolve questions relating to the attribution of intervention expenditure in the agricultural sector.
               In fact, the joint statement of the Commission and the Council provides that where the Commission considers that the financial consequences of irregularities or negligence referred to in Article 8 (2) of Regulation No 729/70 should not be borne by the Community it should contact the Member State concerned and subsequently initiate an exchange of views within the EAGGF Committee. Apart from that, and in the light of experience, the Commission is to inform the Council of the method which it regards as most appropriate to settle outstanding cases (les cas non réglés), if necessary putting forward proposals for solutions to be adopted by the Council in order to settle any differences of that kind.
               The meaning of that passage is not very clear. First, it is not certain whether, when it refers to ‘outstanding’ cases, it refers to specific questions still pending or to types of dispute in respect of which the relevant Community provisions do not supply sufficient criteria for a solution. The second alternative seems to be supported by the reference to ‘experience’. If that is correct, any solutions proposed should consist of proposals of a legislative nature as the Netherlands Government contends.
               However that may be, the said declaration of intent cannot effect a change in the powers of the institutions which are established expressly or by implication by the legislative provisions in force.
               There can be no doubt that the Commission has been given the exclusive power to undertake the discharge of the accounts of the EAGGF and that no special procedures have been laid down nor has power been given to other bodies to take administrative decisions regarding the attribution of payments made by Member States. Taking that into account, and in view of the very close connexion between the attribution of expenditure and the discharge thereof, it is impossible not to recognize by necessary implication, justified by clear functional requirements, that the Commission also has the power to take the administrative decision as to whether expenditure contained in the accounts to be discharged may be attributed to the EAGGF. It goes without saying that in the absence of appropriate procedural provisions the Commission may legitimately apply the rules laid down for discharge to the attribution of expenditure.
               It is clear from the ‘working paper’ No VI/192/75 of the Commission of 16 October 1975 that in order to determine whether expenditure is chargeable or not that institution provided for the participation of each Member State concerned, primarily on a bilateral basis, by way of frequent contacts between the departments of the Commission and those of the State in order to ensure a maximum of reciprocal information on factual and legal problems.
               After examining each case in the light of the results of such contacts, the Commission holds informal consultations with the EAGGF Committee whose view, therefore, is one of the factors taken into account in adopting the decision on the attribution of expenditure and the discharge of the accounts. Even after that decision the States concerned may seek its amendment through administrative channels, in particular by producing additional evidence relating to the expenditure in respect of which the Commission had reserved the right of further examination.
               Thus in cases of differences of opinion with the Commission the Member States are enabled by this procedure to put forward their arguments either before the Commission or within the Fund Committee before the adoption of the decision on the attribution of expenditure. Of course the procedure could be improved. I do not believe, however, that, as the law stands, the Commission may be said to be under an obligation to refer disputed matters to the Council, as appears to be argued by the German Government on the basis of the ambiguous declaration of intent referred to above; for in the absence of any clear legislative provision the Commission cannot be constrained to renounce the exercise of its powers of decision. Nor, on the other hand, do I hold it desirable that questions which should be resolved on the basis of objective legal criteria in order to guarantee equality of treatment for all Community nationals, should perhaps become the object of a decision of a political nature.
               According to the Netherlands Government the Commission is obliged, even in the absence of any provision to this effect, to follow the procedure laid down by Article 26 of Regulation No 17/64 of the Council (on the conditions for granting aid from the EAGGF), the wording of which is repeated by Article 13 of Regulation No 729/70. Pursuant to that provision, where measures are not in accordance with the opinion of the EAGGF Committee they are to be communicated to the Council which, acting by a qualified majority, may adopt a different decision within one month. However, under the two aforesaid articles that procedure is only to be applied in cases where express reference is made to it. Apart from such cases the Commission has a wide power to consult the Fund Committee informally pursuant to Article 27 of Regulation No 17/64 and Article 14 of Regulation No 729/70. That is just what the Commission did in the two cases in question.
               For those reasons I take the view that the alleged defects in the contested decisions, resulting either from a failure to defer to the Council the decision in the cases in question or from a failure to follow the procedure laid down by Article 26 of Regulation No 17/64 and by Article 13 of Regulation No 729/70, are non-existent.
               Consequently, the application originally submitted by the Netherlands Government to the Court for the suspension of the proceedings until the Commission had submitted to the Council a proposal for a regulation under Article 8 (3) of Regulation No 729/70 should also be dismissed, Furthermore, even if the Commission is considered to be obliged to take such action it is not thereby obliged to reopen the administrative procedure which has already reached its conclusion in the contested decisions. I may add that there is nothing to guarantee that the Council would adopt rules on this matter within a reasonable period. Therefore the suspension for an indeterminate period of the discharge of the accounts of the EAGGF would be contrary to elementary functional requirements and the requirement of legal certainty.
               That completes my examination of the questions of a general nature. I shall now go on to examine individually the applications relating to individual items of expenditure which were rejected by the Commission's decisions.
            
         
         Sale at reduced prices of butter for export (Application of the Netherlands Government and the German Government: case No 9)
      
               8.
            
            
               With regard to the sale at reduced prices of butter for export a dispute has arisen between the Government of the Netherlands and the Government of the Federal Republic of Germany, on the one hand, and the Commission, on the other, with regard to the refusal by the Commission to charge to the EAGGF the financial burden borne by the two States relating to deliveries made beyond a certain fixed date.
               Regulation No 1308/68/EEC of the Commission permitted the intervention agencies to sell butter from public stocks at a reduced price on condition that the goods were exported within 30 days after sale (Article 3). Compliance with that condition was ensured by the lodging of a securitiy which was to be forfeit if the export was carried out after the said period (Article 4). That system was repealed by Regulation No 1893/70 as from 21 September 1970, except as regards butter already sold but not yet exported on that date. Referring to the said Regulation No 1308/68 the Commission held that 21 October 1970 was the final date for the exportation of the butter sold and therefore a fortiori for the delivery of the goods to the purchaser by the intervention agency.
               In fact, however, in the Federal Republic of Germany and in the Netherlands the intervention agencies continued to make deliveries of butter on the basis of Regulation No 1308/68 even after 21 October 1970. In the cases at issue certain consignments of butter formed the subject-matter of sales contracts concluded before 22 September 1971 but delivery by the intervention agencies was delayed. Exportation allegedly took place within 30 days of delivery.
               According to the applicants the period referred to in the said Article 3 begins to run from the date when the goods least the warehouse of the intervention agency and not from the date of the sales contract. As the export transactions were carried out on the basis of contracts intended to be executed over a long period of time the delivery of the goods was to be suited to the timetable for those transactions. Furthermore, there was no risk of the butter being put to other uses by the purchaser so long as the goods were in the intervention agency's warehouse. It was only if Article 3 of Regulation No 1308/68 was interpreted in that way that it would be possible, according to the German Government, to sell off sufficient quantities to absorb the surpluses.
               The Commission points out that the said provision refers to ‘sale’ and that that term is quite different from that of ‘delivery’, both in legal usage and in current usage. The generally accepted meaning of the word sale is an agreement relating to the transfer of property in goods in return for payment of a given sum. The wording of Regulation No 1308/68 contains nothing to suggest a use of that expression in a sense differing from the normal usage. On the contrary, there are factors confirming that in the regulation the term is used in its usual sense.
               I share the Commission's point of view which, it seems to me, is supported by various arguments. Let us consider first Article 1 of the regulation in question, which lays down the condition that the goods must have been stored for at least four months and which provides that that condition must be satisfied at the time of sale. Clearly, protection of the interests of the purchasers implies that that moment should be the time of the conclusion of the contracts — so that before committing themselves the purchasers are certain that the condition is already satisfied — and not the time when the goods are removed from the intervention agency's warehouse.
               Article 2 is to the same effect. It provides that the intervention agencies ‘shall sell at a price equal to the purchase price less 5.5 units of account per 100 kilogrammes’. It its clear that the words ‘shall sell’ refer to the time when the contract is concluded, because it is at that moment that the price is determined and not at the time of delivery.
               We have already seen that pursuant to Article 4 the intervention agency is to sell the butter to interested parties only on condition that they have lodged a security at ‘the time of concluding the contract of sale at the latest’. The security must therefore be lodged either before the conclusion of the contract or at the time of conclusion at the latest. Here also the word ‘sell’ is used in its usual sense.
               It is true that in certain legislative provisions relating to other agricultural sectors (such as Regulation No 2059/69 of the Commission on the sale from public stocks of skimmed-milk powder for expon) a clear distinction is drawn between the conclusion of the contract of sale and the withdrawal of the goods by the purchaser, with the period for effecting exportation running from the date of the latter (Article 3). That does not justifiy the presumption, made by the Netherlands Government, that the legislature intended to lay down the same system even where it prescribed that the period should run from the day of sale.
               Nor is it possible to accept that there is a lacuna in the provisions of Regulation No 1308/68 merely because Regulation No 1893/70 (in Article 3 (3)) lays down a longer period for the removal of the goods running from the conclusion of the contract of sale. From that the Netherlands Government infers that, in the absence of a corresponding provision in Regulation No 1308/68, the latter does not disallow sales with deferred delivery and must therefore necessarily allow the time-limit for exportation to run from a date subsequent to the conclusion of the contract. The Commission correctly observes that Regulation 1893/70, in contrast to Regulation No 1308/68, lays down no obligation to export the goods before a certain final date. That explained the need to determine, as from the date of the contract, the period within which the purchaser had to have withdrawn the goods from the intervention agency.
            
         
               9.
            
            
               From the foregoing examination it follows that in the absence of any clear evidence of the will of the Community legislature to the contrary it cannot be held that the reference to sale in Article 3 of Regulation No 1308/68 has any other meaning than that borne by the term in other provisions of the same regulation, which corresponds to its usual meaning.
               This view is confirmed by consideration of the objective of the Community rules in question. The reductions in price were introduced in order to speed up the disposal of butter which had been stored for a certain time (at least four months). The interpretation adopted by the two applicant Governments, on the other hand, would in practice open the way to the conclusion of sales as reduced prices for fresh butter as well (or at least, butter which had been in store for less than four months): it would be sufficient to stipulate in the contracts that the butter should remain in store until it satisfied the period required by Regulation No 1308/68. Such conduct would have run contrary to the purpose assigned to the system of sales at reduced prices, not only because it would have extended the benefit of that scheme to fresh butter but also in so far as, in order to satisfy the condition laid down by the regulation, it would have made it necessary to allow the butter to age in the warehouse of the intervention agencies and would thus have had the result of artificially delaying the removal of the butter from store instead of speeding it up.
               Furthermore, still on the basis of the interpretation advocated by the two applicant Governments, in practice the Member States would have been able themselves to determine the duration and thus the extent of the Community intervention. Indeed their agencies would have been enabled to conclude sales contracts in such a way as to permit purchasers to cover exports for a period longer than that held necessary for the Community intervention. Meanwhile, the butter would have continued to lie in the stores of the intervention agencies at the Community's expense. The Community would not have been in a position to terminate the operation previously undertaken at the moment it saw fit.
               It should also be observed that the Commission had already clarified its own point of view when the problem was raised by the German delegation during the course of the 195th session of the Management Committee for Milk and Milk Products on 13 August 1970. The Commission then clearly ruled out the possibility of treating the concept of the ‘sale’ of goods in the same way as the physical transfer thereof. That view held by the Commission was confirmed in a letter of 14 December 1970. The Netherlands and German authorities were therefore quite aware of it and should at least have had some doubts as to whether their interpretation was correct.
               Finally, I would observe that the terms of the problem are in no way altered by the fact that the Commission did not initiate a procedure under Article 169 against the Federal Republic of Germany or against the Kingdom of the Netherlands. That was certainly due in fact not to any change in the Commission's view of the interpretation of the rules applicable but only to the fact that in the meantime the conduct in question had come to an end. I shall return to this matter subsequently when I deal with the applications of the French Government.
            
         
         Export refunds for lactalbumin (Application of the Netherlands Government)
      
               10.
            
            
               This dispute arises from the fact that the Netherlands intervention agencies granted export refunds for lactalbumin in 1971 and 1972 and that the Commission held those payments to be unjustified and refused to charge them to the EAGGF. The Government of the Netherlands now recognizes that at the time in question those refunds were not payable; it may be said that it is obliged to recognize that fact following the judgment of the Court of Justice of 13 December 1973 in Case 150/73 (Hollandse Melksuikerfabriek v Hoofdproduktschap voor Akkerbouwprodukten [1973] 2 ECR 1633). The conduct of the Netherlands intervention agencies is therefore said to have been the consequence of a mistaken interpretation of the relevant regulation. According to the applicant Government, however, that mistake must be regarded as excusable, as the interpretation adopted by it is said to have been, at the time of the facts giving rise to the case, quite plausible. Therefore, relying on the said provision of Article 8 (2) of Regulation No 729/70 of the Council, the Netherlands Government maintains its argument that the financial burden should be borne by the Community.
               It will be recalled that the possibility of granting export refunds for various milk products including lactalbumin was laid down by Regulation (EEC) No 804/68 of the Council of 27 June 1968 on the common organization of the markets in milk and milk products. By Regulation (EEC) No 204/69 of 28 January 1969 the Council laid down general rules for granting export refunds and the criteria for fixing the amount of such refunds. The criteria were identical for lactalbumin and ovalbumin. However, as the Court stated in its aforesaid judgment the fact that the criteria are identical does not imply that the provisions of a refund available on exports of ovalbumin extends also to exports of lactalbumin in the absence of special provisions in a regulation of the Commission made under Article 17 of Regulation No 804/68 of the Council.
               In fact Regulation No 204/69 treated the two products in a similar manner solely for the purpose of applying the criteria for calculating the refunds. It was the problem of ‘how’ and not that of ‘whether’ which was resolved, as Advocate General Trabucchi correctly observed in his opinion in that case (at page 1643): ‘But the practical application of these criteria is based on the assumption that the Commission has, in clear and precise terms, declared its intention to grant an export refund on each product, taken separately, to which these criteria are in theory applicable.’
               The Advocate General stated that the significance of the system in question was clear and unequivocal. He thereby excluded the possibility of reasonably upholding a different interpretation of the provisions in question and stated that both the. legal objective of the export refund system and the correlation between the basic regulations on the organization of the markets and the implementing regulations adopted by the Commission had the effect of ruling out the possibility that the decision to grant refunds for one product might by implication entail an analogous decision in respect of a different product.
               In the light of those considerations the applicant's contention that, at the time when the refunds in question were made, it was reasonably possible to adopt an interpretation different from that laid down by the Court of Justice appears to me untenable.
               Moreover, as the case concerns an exception to the general principle of the attribution to the States of irregular payments made by them I believe, as I have already stated in the general part of my opinion, that in order to charge payments of such a kind to the Community it is not sufficient that the erroneous interpretation of the relevant rules should appear to be plausible; it is necessary that it should have been such as to convince persons expert in the matter. In this respect it should be noted that in the course of the meeting of the Management Committee for Poultrymeat and Eggs of 21 September 1971 the representatives of the Commission expressly ruled out the possibility of paying an export refund for lactalbumin. In view of that attitude adopted by the competent officials of the very institution which adopted Regulation No 204/69, the interpretation of which was in question, the applicant could not have banished all doubt as to the correctness of its interpretation of Regulation No 204/69. This is all the more true as the Netherlands delegates themselves had stated that from the point of view of its economic consequences the payment of a refund for lactalbumin would be counterproductive.
               In view of that it seems to me that it would not be justified to require the Community to bear the financial burden of the refund granted for a product other than that for which the refund was laid down by the Community rules.
               There can be no doubt that the Netherlands authorities acted in good faith. But that does not rule out the possibility of negligence on their part in failing to suspend the payments pending a solution to the problem or at least in failing to make the payments subject to reservation in order to avoid giving the recipients an acquired right.
               The applicant Government refers to the necessity of not keeping applications for refunds already introduced suspended for too long a time and it refers to its general practice of making payments within 30 days of the application being lodged. It argues that it would have been difficult for the administration to make payment subject to reservation and that furthermore such a course of action would have prevented the undertaking in question from fixing a selling price taking all factors into account. Furthermore it is argued in this connexion that a trader in the Netherlands could have brought proceedings in respect of payment subject to reservation and most probably would have been successful in the courts.
               In this respect I shall merely observe that proceedings arising out of payment subject to reservation would probably have been the subject of a reference to the Court of Justice for a preliminary ruling and would thus have made it possible to resolve once and for all the point at issue, as subsequently happened with the questions referred for a preliminary ruling in Case 150/73.
               Nor do I find relevant the argument which the applicant Government seeks to derive from the fact that it never received the information regarding the application of Regulation No 204/69 allegedly promised by officials of the Commission at the meeting of the relevant Management Committee of 21 September 1971, as is said to be evident from the communiqué issued at the conclusion of that meeting.
               In this connexion the Commission states that it did not intend to promise a written reply to the specific question raised by the Netherlands delegation but had only given advance notice of general information on Regulation No 204/69, which it subsequently in fact distributed. It is possible that the communiqué of the Management Committee was not clear in this respect. In any event if the applicant was still troubled by any doubts it should have sought written information from the Commission on the specific problem raised by it.
               In conclusion, even if the provisions of Article 8 (2) of Regulation No 729/70 were held to be applicable to the present case the application in question would in my view have to be declared without foundation. In fact, while the Netherlands intervention agency relied in good faith on a mistaken interpretation of Community law, not only was it not led into error by a measure or conduct of the Community but further, after having been warned by the Commission, it did not exercise due diligence nor take the necessary care in applying the Community provisions.
            
         
         Aid for skimmed-milk powder used for animal feeding-stuffs (Application of the German Government: cases Nos 4 and 5) — (Application of the French Government: Case 15/76)
      
               11.
            
            
               With regard to Community aid for skimmed-milk powder for use as animal feed three disputes have arisen in this instance: two between the Commission and the German Government, designated cases Nos 4 and 5 respectively, and one between the Commission and the French Government, which forms the subjectmatter of Case 15/76. I shall first mention the relevant Community provisions.
               Regulation (EEC) No 986/68 of the Council of 15 July 1968 lays down general rules for granting the aid in question. It provides inter alia in the second subparagraph of Article 3(1) that a Member State may pay aid even if the skimmed-milk powder produced on its territory is intended to be denatured (or used in the manufacture of compound feeding-stuffs) in another Member State. This constitutes an exception, restricted to the 1968/1969 and 1969/1970 milk years, to the principle whereby the aid is to be paid by the Member State within whose territory is situated the undertaking which denatured the milk or which used it in the manufacture of feeding-stuffs. For its part Regulation No 1106/68 of the Commission of 27 July 1968 provides in Article 7 (4) that in the case of milk produced in a Member State and intended to be exported to another Member State before being denatured the competent authority in the Exporting Member State may pay the aid when it has received proof that the exported product has been placed under customs or administrative control by the authorities of the importing Member State. Pursuant to the provisions of the second paragraph of that article as amended by Article 1 of Regulation (EEC) No 332/70 of the Commission of 23 February 1970, ‘proof of control by the importing Member States shall be the control copy provided for in [Article 1 of] Regulation (EEC) No 2315/69’.
               Pursuant to the said Article 7 (4) the Commission regarded the decisive moment for the payment of aid by the forwarding Member State as the day on which the goods are placed under control in the territory of the importing Member State. That point of view was expressed by the Commission in a document from the Directorate-General for Agriculture of 4 October 1971, which was sent on 7 October 1971 to the Management Committee for Milk. In that document the Commission also stated that, taking account of the timelimits set out in the second indent of Article 3 (1) of Regulation No 986/68, exporting Member States could pay the aid for skimmed-milk powder produced in their territory and denatured in another Member State only if the milk had been placed under the said customs or administrative control in the importing State before 1 July 1971. For milk which had not been placed under that control before that date the aid should have been paid by the importing State.
            
         
               12.
            
            
               Let us now turn to case No 4. A certain quantity of skimmed-milk powder was exported from the Federal Republic of Germany to Italy to be denatured there and used for animal feed. The documents relating to that transaction give, as the date on which the milk was placed under control in Italy, a date which is either illegible or which is subsequent to 30 June 1971. At least as regards the latter group of cases the above-mentioned provisions should have resulted in the exclusion of any possibility for the exporting State to pay the aid. However, in a telex message of 12 October 1971 in answer to a question from the German Federal Minister for Food the Commission, while reasserting the point of view set out in the said document of 4 October, declared that it was prepared to follow a more flexible line; it stated in fact that ‘in cases where the time of the placing of the goods under control can no longer be established clearly and where the competent Italian authorities have finally refused to pay the aid, payment of that aid by the Federal Government gives rise to no objection as in that case any risk of double payment is excluded’. Following that the aid was paid by the German Government.
               There remained the question of the proof that payment of that aid had not been made in Italy. In this connexion the German Government has submitted a letter of 14 March 1972 sent by the competent Italian body (AIMA) in reply to a request from the German authorities; in that letter the AIMA stated that it had not been able to verify all the cases to which the German authorities had referred but that it was ‘legally impossible’ that the consignments of milk in question for which Community aid had been granted in Germany could have obtained the aid in Italy as well.
               Without contesting the veracity of that assertion the Commission stated that it did not make it possible to ascertain whether or not in fact the aid had been duplicated. According to the Commission, in order to establish that fact it is not sufficient to state that duplication of aid was legally impossible, particularly as the letter from the AIMA does not enable the individual consignments at issue to be identified. For that reason the Commission, in discharging the accounts, refused to charge to the EAGGF the amount of aid corresponding to the said consignments. The applicant for its part argues that it is for the Commission to show that payments were duplicated in the instances contested by it. In the absence of such proof the Commission cannot refuse to charge the corresponding expenditure to the Community.
               I would observe first of all that if the exporting Member State failed to respect the evidential requirements laid down by Community provisions it cannot rely on an unlawful situation of its own making in order to transfer to the Commission the onus of proving the contrary. It is true that the German authorities were not originally responsible for the fact that the documents sent by the Italian authorities were incomplete, but they assumed responsibility therefor at the time when, regarding those documents as sufficient, they paid the aid. In this instance, according to the specific provisions of Regulation No 1106/78, proof should have consisted in certification from the customs authorities that the milk had been placed under control in the importing Member State: in the absence of such certification the German authorities were wrong to pay the aid themselves without even taking the precaution of making it subject to reservation.
               The exceptional option given by the Commission to the State concerned (in the telex message to which I have referred above) of merely establishing that no duplicate payment of the aid had been made by the Italian authorities was a concession in derogation from the provisions in force. The extent of a derogation must be restrictively assessed. Without a doubt therefore the Commission was entitled to require sufficient evidence to exclude any risk of double payment of the aid.
               If account is taken of the fact that for products imported into Italy and placed under control after 30 June 1971 (or on an uncertain date which may even be later) the power to grant the aid was as a rule exercised only by the Italian authorities, the absence of proof that the products had been placed under control before 1 July raises the reasonable doubt that the aid might have been duplicated. For that reason, and without doubting the good faith of the German adminstration or of the Italian administration, the objective existence of the possibility of duplicated payment due to the failure to comply first with Community rules and then with the less stringent conditions laid down as an exception by the Commission fully justifies the defendant's refusal to charge to the EAGGF the payments made by the Federal Government.
               The applicant further objects that the Commission had not previously required individual proof in each case. However, in a letter of 12 October 1971 the Commission referred to the cases in which it was not possible to ascertain the time of the control and in which the competent authorities had finally refused to pay the aid. It was clearly incumbent upon the persons concerned to show that such a case existed.
               Furthermore, as the defendant states, it may be inferred from the letter of the AIMA of 14 March 1972 that at the end of 1971 and the beginning of 1972 the German authorities had sought confirmation in each case from the Italian intervention agency that the imported milk had been placed under control. It may therefore be presumed that already at that time the said authorities had realized the need to obtain precise evidence. They were clearly in a position to understand that a statement of a general nature relating to the legal problem and not to the factual situation, such as that provided by the AIMA, did not satisfy the conditions for charging to the EAGGF the aid granted.
               All the above leads me to conclude that this application must be dismissed. That conclusion would not be altered even if the provisions of Article 8 (2) of Regulation No 729/70 were to be held applicable to the cases in point.
            
         
               13.
            
            
               We have just seen in examining case No 4 above that, as a rule, a Member State which exports skimmed-milk powder may grant the aid only when it has been proved that the goods have been placed under control in the importing Member State (for the purposes of the intended use). In practice, it is necessary that the forwarding State has received from the importing State form T 1/T2 No 5. In fact, however, for six consignments of milk, amounting to 140 tonnes, exported from Germany to Italy between 20 February and 12 June 1971 the Federal Republic of Germany paid the aid without having received those forms. For that reason the Commission refused to charge the corresponding amount to the EAGGF and that gave rise to the dispute referred to as case No 5.
               It is alleged that the missing documents were lost in the post after having been sent by the Italian authorities to the German customs authorities. The applicant states that notwithstanding that fact other documents show that the consignments in question were placed under control in Italy before 1 July 1971, even though the exact date of the control could not be determined. The German authorities paid the aid after the undertakings concerned had submitted to them customs clearance declarations from the Italian authorities and statements from their representatives. The applicant is, therefore, of the opinion that in this case the risk of double payment is excluded, relying on arguments which are identical to those put forward in case No 4 and in particular on the letter from the AIMA of 14 March 1972.
               The Commission observes, however, that reference to that letter is in any event out of place as in the present case it is not just a matter of avoiding double payment but, primarily, of ascertaining that the goods in question are entitled to the aid.
               The applicant argues that as the aim of the Community rules in question is to encourage the processing of skimmed-milk powder so as to allow it to be used for animal feed the decisive factor for the payment of the aid is not the placing of the milk under control but the processing of the milk. In this instance the processing was carried out and therefore the mere fact that one of the control documents is missing is not sufficient to justify refusal of the aid.
               The Commission replies that in the absence of the documents required by the said Community rules to prove that the goods were placed under control it is not only the date of the latter but also the very fact of a placing under control which cannot be regarded as proved. The regard of the Community rules for formal requirements, accepting only a specified means of proof, is justified for reasons of certainty and the simplification of customs control formalities. The Community evidential requirements are based on mutual trust between the Member States which can only subsist on condition that the Community rules continue to be applied everywhere in a uniform manner and without exceptions.
               The Commission also emphasizes the need to ensure that the system of aids, which is intended to promote sales of the skimmed-milk powder surpluses to be used for animal feed, should be applied only where it is ensured that the product cannot be put back into normal commercial channels and used for human consumption.
               In my opinion this fundamental requirement justifies the stringency of the proof. In its judgment of 22 October 1970 in Case 12/70 (Craeynest v Belgium [1970] 2 ECR 905) the Court recognized that it was necessary to have strict regard to formalities, holding that in the absence of the certificate DD4 an imponer can in no case benefit from the system of intra-Community agricultural levies, or, in consequence, from the reduced rates laid down for intra-Community trade. According to that judgment production of that certificate is indispensable even though the Community origin of the product in question could be established by means other than the said certificate.
               It is true that in the present case the prescribed documents were mislaid, but it is impossible to determine who was responsible for that and whether the loss was caused by negligence or by chance. The applicant goes so far as to allege that the difficulties in supplying the requisite evidence are due to the negligence of the Commission. It states that under Regulation No 2315/69 of the Commission the importing Member State is to affix its endorsement to a single document which constitutes the necessary evidence for the granting of the aid. According to the applicant the prescribing of a single copy of the supporting document is contrary to elementary principles of prudence and also to the custom in international trade of providing for several copies of a single document, each equally valid, in order to avoid the risk of the loss of the originals which have to be sent. The system laid down by the Commission is therefore inadequate in that it did not provide for the possibility of the loss of the control document which must be returned to the customs office in the State of origin, thereby entitling the German authorities to remedy that inadequacy by relying on other evidence. In the present case such evidence is said to show with certainty that the processing of the skimmed-milk powder was carried out in accordance with the Community provisions and that any risk of its re-entering the market is ruled out.
               The defendant recalls that the documentation required by Regulation No 1106/68 is of a formal nature and is not open to exceptions and it argues that the documents on which the German authorities relied were not sufficient evidence having regard to the objectives of the Community rules. In the Commission's contention the accompanying documents and the customs declarations show that the goods reached Italy, but not that they were placed under control. The declarations of the representatives of the undertakings which received the aid and who therefore had a direct interest in stating that the aids were properly granted can for their part hardly be regarded as appropriate proof that the goods were placed under control.
               It appears to me that the provisions adopted by the Council and the Commission are quite clear and unequivocal and a mistaken interpretation would therefore be inexcusable; nor, moreover, does the applicant maintain that there was a mistaken interpretation. Nor, in my opinion, does the alleged inadequacy, which in the opinion of the applicant exists in the provisions in question, justify a departure from the rules in force. To permit each Member State to correct unilaterally any inadequacies in the Community rules would clearly be contrary to the requirements of the uniformity of those rules and the very principle of legal certainly.
               The need to avoid intervention by the individual States is all the more evident when the granting of economic benefits payable by the Community to categories of traders is in question. Certainly, the Member States do not lack the means, through the normal channels, to seek amendment of a regulation which is inadequate or which reveals lacunae. Until that has been done no Member State can set itself above the law in force because it regards it as unsatisfactory. This must also apply in particular to formal requirements observance of which serves not only to facilitate the tasks of the administration but also to ensure uniformity of the criteria for granting financial benefits.
               For that reason in my opinion the application of the German Government is without foundation.
            
         
               14.
            
            
               The question raised by one of the applications lodged by the French Government (in Case 15/76) has features which are quite different from those characterizing the two cases discussed above.
               The dispute to which I now turn has its origins in a difference of opinion between the French authorities and the Commission as to the determination of the time with reference to which the rate of aid applicable is to be fixed (this is another case of aids for skimmed-milk powder produced in one Member State and intended to be denatured after expor tation to another Member State). The Community provisions do not stati whether the rate applicable is that it force on the day when the exported mill is placed under control or that on the day when the customs export formalities are completed. The French authorities opted for the second solution, regarding it as more appropriate to the Community interests as the rate of the aids tends to increase with the passage of time. When the staff of the Commission were informed at the time of that practice they objected that it had the disadvantage of giving rise to the risk of double payment for milk exported from France before 30 June 1971 and placed under control in Italy after 1 July of that year. After a systematic check of the copies of the control documents the Commission's staff found that in a certain number of cases the date when the goods were placed under control in Italy had not been entered by the French customs on the aforementioned copies. Subsequently, the Commission carried out a check of the originals of those documents (approximately 6000), of which it was able to find all but eight. That check revealed irregularities in ninety of the documents: apart from the eight cases in which, as I have stated, the original was missing, in 18 other cases the original had not been fully completed by the exporter; in 55 cases the official stamp of the Italian customs was missing; in nine cases the indication of the dates on which the goods were placed under control in Italy was missing. For those reasons the Commission refused to charge to the EAGGF the expenditure involved in the transactions to which the documents referred.
               On a general level the applicant states that even where a rule relating to an essential procedural requirement has been infringed (that is, an infringement which creates the risk of expenditure incurred in error) the absence of proof in accordance with the legal requirements should not be confused with positive proof that the expenditure is irregular. In accordance with this line of thought the Commission cannot, merely because the evidence is not in the prescribed form, automatically charge the financial burden to the State but should at least allow the State to submit appropriate evidence to dispel any doubt as to the regularity of the expenditure in relation to substantive law.
               The defendant observes, first, that the distinction between essential and nonessential procedural requirements was drawn for the purposes of administrative proceedings in order to determine those formal defects which may lead to the annulment of a measure; it is inappropriate to apply it purely and simply to matters of evidence.
               The defendant emphasizes that the documents accompanying goods in trade between the Member States drawn up on the basis of Community models serve to simplify both the formalities involved in the crossing of frontiers and the checks necessary to ensure the correct application of Community provisions. As the submission of those documents has taken the place of other forms of control by the customs authorities it is necessary to respect the relevant Community provisions in the most scrupulous manner and to treat irregular documents with a certain severity.
               With regard more specifically to the present instance it is necessary in essence to determine whether every divergence from the legal specimen document which the Community legislature has laid down as the sole means of proving a fact on which performance of an obligation by the administration depends should lead to that performance being refused or whether, within certain limits, certain differences of a formal nature are permissible without affecting the performance in relation to the person concerned.
               The document's correspondence to the specimen laid down by law clearly serves to guarantee that all the substantive conditions to justify the granting of the aid are fulfilled and to enable the Community authorities to carry out a check. I am therefore of the opinion that the criterion to be adopted is that any discrepancy between the document and the legal specimen which may diminish its evidential value or is such as to hamper the possibility of carrying out a check renders the document itself ineffective.
               It should further be asked whether in a case where a formal irregularity existed at the time when the aid was paid the national intervention agency may regularize the situation a posteriori. The Commission rules out that possibility altogether and observes that the documents on which the payment of public funds is based must be appropriate to fulfil that function from the time when the payment is made. If it could not constitute a valid legal basis for the expenditure, then that expenditure was wrongly incurred and the irregularity cannot subsequently be made good by correcting the formal defect.
               In my view it would be superfluous to examine the justification for this strict viewpoint adopted by the defendant as in this case there was no subsequent correction when the Commission proceeded to validate the expenditure. No correction may be deemed admissible once the Commission has begun examining the accounts for the purpose of validating the expenditure. Otherwise, taking account of the very large number of transactions financed by the EAGGF, the risk would arise of postponing sine die the discharge of the accounts and difficulties and complications would be created for the departments of the Commission necessitating detailed investigation by them far beyond their normal function or mere supervision.
               Next, with regard to the eight cases of missing documents (as a result, it appears, of their premature destruction by a French customs office) the refusal of the Commission is based not on the fact at the time when the aid was granted the requisite formal conditions were not satisfied but on the fact that documentation was not available. Even if it is possible that in such cases the aid was granted on the basis of documents which were quite in order the subsequent destruction of the only means of proof accepted by the Community rules, responsibility for which must be borne by the national administration, makes any review of their regularity impossible.
            
         
               15.
            
            
               The aformentioned factors suffice, in my opinion, to justify dismissing the application, since the existence of the formal irregularities is not contested and they are not of a merely subsidiary nature.
               However, if the Court wished to undertake a more extensive inquiry into the irregularities in the documentation available it would be necessary to examine separately each of the three categories of cases referred to above. That is what I shall now briefly attempt to do.
               
                        (a)
                     
                     
                        We have seen that in the case of 55 documents the stamp of the Italian customs office is missing; we know, however, that the following words are stamped on those documents: ‘The consignment was placed under control on … for the destination indicated overleaf. An appropriate security was lodged to guarantee the destination’. There follows the signature of an official. The applicant contends that the reference to the security is sufficient to show that the transaction is valid; in spite of the absence of the official stamp there is therefore no risk of double payment or irregular payment.
                        According to the Commission the formality in question, which is laid down by Article 7 of Regulation No 1106/68 as amended by Regulation No 332/70, is of a nature which does not allow of exceptions and constitutes an essential prerequisite for payment of the aid. The defendant justifies that formalism by considerations which are analogous to those already set out with regard to case No 4 regarding the Federal Republic of Germany, which I have discussed above.
                        It appears to me that the note referred to above, although affixed by way of a stamp which was presumably applied by the Italian customs office, cannot constitute a substitute for that office's own stamp. The requirement of the stamp is clear from the specimen control document annexed to Regulation (EEC) No 2315/69; its purpose is clearly to authenticate the signature of the competent official, making falsification impossible or at least extremely difficult. Therefore it must be held that it is not merely a subsidiary formality but an essential means of proving the authenticity of the documents. In the absence of such a stamp those documents, even if they bear the stamped note referred to above, cannot serve as adequate evidence that the products have been placed under control.
                     
                  
                        (b)
                     
                     
                        With regard to the failure to state, in Section 104 of 18 documents, the fact that the product was intended for denaturing in Italy the applicant argues that that statement is not indispensable as the Italian customs indicated in another part of the said document that it had placed the goods under control; that is sufficient in itself to guarantee that the milk was intended for denaturing.
                        The Commission objects, however, that in the absence of the entry referred to in Section 104, the statement relating to the placing of the goods under control by the Italian customs becomes devoid of meaning. The stamp states, as I have mentioned, that the consignment ‘was placed under control … for the destination indicated overleaf’. However, that destination is not evident as Section 104 on the back of the document merely indicates the name of the person for whom the goods are intended. Furthermore, 16 of the 18 documents in question are copies to which is affixed a note by the French customs authorities certifying that the goods were dealt with as indicated on the reverse and were used as specified there. But once again on the reverse of the copies there is no indication of a specific destination nor any specific conditions as to use, since Section 104 was left blank.
                        In consequence, on the grounds of the omissions set out above, the documents must be held to have no evidential value.
                     
                  
                        (c)
                     
                     
                        Finally, with regard to the nine documents held to be invalid for lack of evidence that the Italian customs authorities had placed the goods under control, the applicants contend that the requisite statement was made, albeit in a section other than that provided for that purpose; there was therefore a mistake, but not one such as to deprive the entry itself of all evidential value.
                        According to the Commission, however, the statement regarding the placing of the goods under control is completely missing from the aforesaid nine documents, on the reverse of which there is only a signature and the official stamp of the Italian customs authorities apart from the indication of a date and a reference stamp.
                        Examination of the photocopies annexed to the file on the case appears to support the defendant.
                        The application is therefore without foundation in its entirety.
                     
                  
         
         Aid for the purchase of butter by persons in receipt of social assistance (Application of the German Government: case No 8)
      
               16.
            
            
               Regulation No 414/70 of the Council made provision for the possibility that in a subsequent decision of the Commission the Member States would be permitted, until 31 December 1970, to grant aids to facilitate the purchase of butter by certain categories of consumers. In Regulation No 2550/70 the Council limited that possibility solely to persons in receipt of social assistance but extended the time-limit to 31 December 1971. On the basis of the first regulation the Commission, by decision 70/228 of 24 March 1970, authorized the Member States to grant the aid. Under Article 3 of that decision consumers were able to obtain the butter at reduced prices on presentation of an individualized voucher. For reasons of economy the Federal Republic of Germany provided that the distribution of the vouchers should be entrusted to the social security organizations and the district authorities and sent the vouchers to those bodies at the beginning of each of the two years during which the provisions were in force. The vouchers remained valid for the whole of the year in which they were issued. The Commission raised no objection to that system.
               By decision 71/166 of 30 March 1971 the Commission repealed the aforesaid decision on the ground that the support measures which it had authorized no longer appeared to be justified following the change in the situation on the butter market. It should be noted that the applicant Government was hostile to the repeal and chose not to participate in the meeting of the Management Committee for Milk at which that provision was examined. Subsequently, notwithstanding the above-mentioned decision, the Federal Government held that it was entitled to permit until 31 December 1971 the use of vouchers distributed en bloc to recipients in the first months of the year. When it discharged the accounts of the EAGGF the Commission declared that the expenditure relating to such aid, the time-limit for which had been unlawfully extended, could not be charged to the Community. From that has arisen the present dispute.
               A first argument put forward by the applicant is that the period of validity of a complete calendar year mentioned on the vouchers was determined on the basis of the expiry date laid down by Regulation No 2550/70 of the Council (31 December 1970). It should, however, be emphasized that that limit relates only to the exercise of the discretion conferred on the Commission to authorize the Member States to grant the aid. The decision of the Commission whereby the Member States were in fact given that authorization was not made subject to any time-limit. Accordingly, the Commission remained at liberty to revoke its decision at any moment taking account of developments in the situation on the butter market. In that legislative context the provision that the German vouchers were to expire on 31 December, whilst coinciding with the time-limit laid down for the exercise of the discretion conferred on the Commission, could not be based on the certainly that the purchase of butter at reduced prices would be supporting by Community aid until that date.
               Article 1 of the second decision of the Commission, of 30 March 1971, provides that ‘the decision of 24 March 1970 concerning sales of butter is repealed with effect from 1 May 1971’. From that it was therefore clear that as from 1 May 1971 the Member States were no longer authorized to pay aid to suppliers of butter intended for persons in receipt of social assistance. However, the characteristic factor in the situation referred to by the German Government is that many persons had received vouchers before 30 April 1971 and those vouchers indicated that they were valid until 31 December. The applicant observes that from the point of view of its internal legal system persons who had received such vouchers acquired the right to use them until the end of that year. It also refers to the need to take account of the special position of recipients of such vouchers, as being persons deserving of assistance.
               In my opinion one should not ignore the objective of the measures in question, which was in fact to promote sales of butter in order to reduce the surpluses which had accumulated within the common market. That essentially economic aim of Regulation No 414/70 of the Council is unequivocally clear from its preamble. It refers in fact primarily to Article 12 (1) of Regulation No 804/68, which provides that when surpluses of butterfat build up measures other than those laid down in Article 6 of that regulation may be taken in order to facilitate their disposal. The preamble to Regulation No 414/70 goes on to refer to the existence of large stocks of butter within the Community due to the functioning of the intervention arrangements and mentions the impossibility of reducing those stocks by selling butter under normal trade conditions; hence the need for new measures.
               That shows that the disposal of butter at reduced prices — the source of not inconsiderable expenditure for the Community budget — was of an exceptional nature and was therefore to be kept within the limits of what was strictly necessary. Therefore it was logical that it should be terminated even before the ultimate limit laid down by the Council regulation, as soon as developments in the situation on the butter market permitted. As regards the social function of the measure in question, it must be recognized that this was merely a secondary result of the scheme selected to achieve the purpose of reducing surpluses. In my opinion, therefore, it is not justified to derive an argument from that social function in support of a contention that the measure itself should be interpreted loosely.
               In implementing the Commission's decision each Member State was certainly at liberty to adopt the method of selling the butter which appeared most practical and economical within its own system. However, no Member State was entitled to grant to the recipients, at the expense of the Community, rights more extensive than those conferred by the Commission decision when considered in conjunction with the aims of the aid scheme which it implemented. Not only did that decision not guarantee that the support measures would be maintained for the whole of 1971 but it also gave rise to no such expectation.
               Clearly, it was not necessary for the Commission to remind the Member States, which must have been well aware of the function of the aid, that the authorization could be revoked at any time in accordance with developments on the market. Therefore, if the system of disposal adopted by a Member State was such as to confer on the recipients within its internal order rights such as to remain valid for the whole of the current year that was a matter for the State and not the Community. In view of the fact that the vouchers were distributed free of charge there was nothing in that system to prevent the Member State from formulating a general reservation as to the duration of their validity. Failure by the internal authorities to take sufficient precautions could therefore not give rise to an obligation on the Community to bear the burden of a system which no longer corresponded to Community objectives.
               The opposition of the German representatives to the adoption of the decision revoking the scheme, to which I have already alluded, shows that the Federal Republic properly understood the effect of the measure; there is no other explanation of why it should have sought to delay for one month its entry into force. By continuing to permit and finance the sale of butter at reduced prices after the end of the period laid down by the Commission the applicant Government was therefore well aware that it was acting contrary to the decision of the Commission.
               Finally, therefore, there exists no valid reason for charging to the Community the financial burden of the unauthorized maintenance of those support measures.
               In my opinion, therefore, the application must be held to be without foundation.
            
         
         Repurchase of butter sold at reduced prices and intended for processing into concentrated butter (Application of the German Government: case No 10)
      
               17.
            
            
               In view of the butter surplus existing in the Community and of the limited possibilities of exporting it, the Commission, by a decision of 17 December 1968 pursuant to Article 6 (3) of Regulation No 804/68 of the Council, authorized the Federal Republic of Germany to sell at reduced prices butter held in store by the intervention agencies. In order to ensure that the consignments of butter sold at less than the normal price were not diverted from their intended use a system of supervision was of course necessary and the Federal Republic — as appears from a recital in the preamble to that decision — stated that it could guarantee the efficacy of such supervision. However, in the course of 1971 the German authorities informed the Commission that following developments in the situation on the butter market they were no longer in a position to ensure, at every stage of marketing, that the butter would not be diverted from its lawful destination.
               At the same time certain of the quantities of butter sold at reduced prices in 1970 by the German intervention agencies were still held by the initial purchasers, who appeared to be disposed to allow the contracts of sale to be rescinded and thus to return the goods, on condition that the price paid by them, plus a specified amount to compensate them for expenses incurred, was reimbursed to them. That led the Commission to adopt the decision of 19 August 1971 which authorized the Federal Republic of Germany to agree with the aforesaid purchasers to rescind the contracts of sale concluded by the German intervention agency prior to 1 January 1971. That authorization was intended to prevent quantities of butter which were still held by the initial purchasers from subsequently forming the subject of fraudulent practices or other irregularities to the detriment of the functioning of the Community system. The said decision stated that the sums intended to compensate purchasers should not exceed set limits. More particularly, Article 1 (2) (b) of the decision fixed the maximum amount of the compensation on the basis of the quantity of the goods and the length of time for which they had been stored by the purchaser.
               The German agency thus undertook to repurchase the available consignments. However, the German authorities granted, under contract, repayments calculated on the basis of prices in excess of that at which the intervention agency had sold the butter. Furthermore, amounts were also paid corresponding to the interest lost by purchasers by virtue of the storage of the goods.
               Faced with that situation the Commission held that it could charge to the EAGGF only that expenditure which conformed to the criteria laid down by Regulation No 2306/70 of the Council of 10 November 1970 (on the financing of intervention expenditure in respect of the domestic market in milk and milk products).
               Under Article 4 (1) (f) of that regulation the account relating to intervention on the domestic market in butter is to be debited with “the storage costs, apart from the financing costs, calculated on the basis of a fixed amount per metric ton/ period of storage, this fixed amount to be determined in accordance with Article 18 (1)”. Article 4 (1) (h) provides that the processing costs incurred by the intervention agency as a result of particular measures taken to sell butter held in public storage which cannot be marketed on normal terms during a milk year should be charged to the abovementioned account.
               The aforesaid decision of the Commission of 19 August 1971 evaluated the storage costs borne by purchasers of butter at reduced prices on the basis of the costs which would have been incurred by the intervention agencies if they themselves had continued to hold in store the butter sold. The amounts laid down by the said decision in fact correspond more or less exactly, according to the Commission, to the fixed amounts laid down by the said Article 4 (1) (f) of Regulation No 2306/70.
               As regards the costs relating to the processing of the butter into concentrated butter the fixed amount thereof for the period in question was determined for the whole of the Community by the Commission by decision of 30 November 1973, adopted in accordance with the management committee procedure laid down by Regulation No 2306/70 (Article 4 (1) (h)). Only that amount, therefore, could be paid in connexion with the repurchase of the butter, leaving out of consideration the particular circumstances of those transactions; additional amounts arising from the processing of concentrated butter into melted butter by purchasers could not be charged to the EAGGF.
               Therefore the Commission is of the view that its refusal, addressed to the Federal Republic of Germany, to charge to the EAGGF, in respect of the transactions described above, expenditure in excess of the fixed amount for the storage and processing costs determined by the aforementioned provisions of Article 4 (1) (f) and (h) of Regulation No 2306/70 is fully justified by Community law.
               The applicant objects that the expenditure incurred, although greater than that fixed by the decision of 19 August 1971, was incurred in the interests of the Community and was necessary to achieve the objective in question. Nevertheless, that fact is not sufficient for the expenditure to be charged to the Community; it is contradicted by the exhaustive nature of the list of items to be debited contained in Article 4 of Regulation No 2306/70.
               In order to escape application of the general rule the applicant suggests that the situation in which its intervention agency found itself should be treated in the same way as an instance of management without mandate in a case of urgency and necessity. It argues that successful tenderers still in possession of the butter, who had the opportunity to engage in a speculative transaction consisting in the resale on the market of the butter purchased at a low price, could not reasonably be expected to be satisfied with reimbursement of the purchase price and mere indemnification in respect of storage costs. According to the German Government the maximum repurchase price fixed by the Commission in its decision of 19 August 1971 was economically inapplicable; the German Government therefore argues that its unilateral action served to protect the interests of the Community.
               It appears to me that it is for the Community and not for the individual Member States to assess the Community's interest in the implementation of repurchasing transactions authorized and financed by it. On the basis of that discretionary assessment it is always for the Community to determine the terms of such transactions.
               Nor should it be forgotten that the Federal Government had declared, when it was authorized to sell butter at reduced prices, that it could guarantee that the sale would be conducted properly and that it had entered into a precise obligation in that respect. It should therefore have taken all measures necessary to eliminate the risk of the speculative transactions on the part of private individuals which were to be feared, without imposing on the Commission an additional financial burden. In other words, the German authorities, having given that assurance, were deemed to be capable of assuming responsibility for any irregularities resulting from defects in the system of supervision applied by it in accordance with the general rules examined at the beginning of my opinion.
               It is true that notwithstanding that fact the Commission subsequently declared that it was willing to contribute to the costs of repurchase, but only within fixed financial limits. If, therefore, the Federal Government held that it was necessary to incur greater expenditure in order to bring the transaction to a successful conclusion, the basic responsibility which that Government had assumed is of itself sufficient to justify the refusal of the Commission to charge to the Community that additional and unauthorized expenditure.
               Nor, in my view, does Article 8 (2) of Regulation No 729/70 have any effect on the solution to this case (even if the interpretation of that provision advocated by the applicant is accepted) in so far as it concerns expenditure in excess of that authorized.
               As regards the alleged instance of management without mandate in a case of necessity it can certainly not be simply transposed from civil law to the sphere of relations between the Community and a Member State. In any event, that doctrine does not permit the Member States to substitute themselves for the Community, with the result of placing a burden on the Community budget in a sector in which the Community had clearly laid down the limits within which it was willing to bear the financial burden of a transaction which the German State, at its own request, had been authorized to undertake. As the Community is not guilty of a failure to act the doctrine of management without mandate is in any event inapplicable. The action of the German authorities should rather be regarded as action extra legem, arising from the desire to give the repurchasing operation a wider scope than would have been possible within the limits of the terms fixed by the Commission.
               Finally, it should be observed that no urgent reasons have been shown to exist such as to prevent the Federal authorities from demonstrating to the Community that there existed a need for a greater contribution from the Community towards the financing of the operation.
               For that reason it is not possible to uphold the applicant's request in this regard.
            
         
         Costs of crushing solidified sugar (Application of the German Government: case No 12)
      
               18.
            
            
               A consignment of sugar stored by the intervention agencies in Germany which had solidified because of humidity in the store had to be reduced to powder before the goods could be put up for sale. The Commission refused to charge to the EAGGF the expenditure relating to that operation as it was not included in the expenditure provided for by Article 4 (1) of Regulation No 2334/69 of the Council of 25 November 1969 on the financing of intervention expenditure in respect of the domestic market in sugar. Under Article 4 (1) (f) of that regulation the EAGGF is to bear the costs incurred through storage calculated on the basis of a fixed amount, but not other expenditure caused by storage of the goods.
               The applicant observes that the crushing of the sugar before putting it up for sale was necessary in order to comply with Article 6 of Regulation No 822/70'of the Commission whereby ‘the standing invitation to tender shall apply to quantities of free-running white sugar’. If the sugar had not been crushed there would have been a risk of actions for damages which the purchasers could have brought as the sugar did not correspond to the quality prescribed in the said provision.
               Although the costs of crushing the sugar are not contained in the list of expenditure to be charged to the EAGGF under Article 4 of Regulation No 2334/69 of the Council the applicant contends that they should be deducted from the total amount of the receipts which, under Article 4 (2) of that regulation, are to be credited to the EAGGF. In fact that amount corresponds to the receipts from sales effected by the national intervention agencies, which is not the gross price under the tender but that price reduced by the costs which were necessary to market the goods.
               That category includes the cost of crushing the sugar as the goods could not have been sold if that operation had not been carried out.
               As was observed with regard to the previous case (No 10), the list in Article 4, both as regards the items to be debited (Article 4 (1)), and those to be credited to the EAGGF (Article 4 (2)), is certainly of an exhaustive nature.
               The Community provisions entail no diminution of the gross receipts from the sale, nor do they make provision for the charging of the expenditure in question to the intervention agency. For that reason the costs relating to the crushing must be held to be included in the fixed amount of storage costs.
               With particular regard to the specific point at issue it should be recalled that under Article 9 of Regulation No 822/70 of the Commission ‘in the event of its being shown that a quantity of sugar which was the subject of a tender award does not correspond entirely or in part to the quality condition of the notice of invitation to tender, on application to be submitted at the time of removal by the successful tenderer and for the quantity of sugar which does not conform, the German intervention agency shall adjust the relevant quantity awarded. On the other hand, after agreement between the two parties, the quantity of sugar which does not conform may be replaced by an equivalent quantity which conforms, coming from other lots available for tender but not yet awarded, if the latter are situated in the same warehousing district. After removal the successful tenderer cannot, because of the difference of quality referred to above, assert contractual or non-contractual rights’. It is evident from the preamble to the regulation that the said provision was laid down for cases in which ‘the sugar allocated is not free-running’. In that case, the preamble continues: ‘therefore, it is appropriate to make provision for the German intervention agency… to adjust the quantity allocated, or if the successful tenderer so requests, for that agency to replace the quantity concerned’. The problem had therefore been identified and the possible remedies were laid down.
               The applicant objects in the present instance that it had not been possible to use such remedies because the tenderers, on account of their supply commitments, had insisted on withdrawing all the sugar which had been purchased and no other sugar was available which corresponded to the quality put out to tender.
               Clearly the German intervention agencies were at liberty to make provision for the crushing of the sugar in order to satisfy the particular requirements of their tenderers. They cannot, however, seek to charge that expenditure to the EAGGF; I repeat that that is excluded, in my opinion, by the exhaustive nature of the list of items of expenditure chargeable to the Fund under Article 4 of Regulation No 2334/69 of the Council. I further observe that on the basis of the aforementioned rules under Regulation No 822/70, if the sugar allocated did not correspond to the quality laid down (‘was not free-running’) and if the agency concerned was not able to replace the goods with free-running sugar (as was apparently the case in this instance), the purchasers were entitled to obtain, obviously within the limits of quantities available, an additional amount of sugar to compensate for the lower value of the goods received. As no other provision was made by the Community rules relating to the conditions for the invitation to tender the purchasers had no right to claim that the agency concerned should itself undertake to crush the solidified sugar.
               In the light of those considerations it is, in my view, unnecessary to go into the merits of the question, on which the parties differ, of the reason why the sugar solidified and whether liability for any negligence relating to the storage conditions may be imputed to the intervention agency. That question might be relevant if the application of the provisions of Article 8 (2) of Regulation No 729/70 of the Council was concerned which, as we have seen, provides for the charging to the Member States of expenditure incurred in the application of Community provisions on agricultural matters only in the event of irregularities or negligence on the part of the State authorities. That provision, however, cannot concern items of expenditure which are not foreseen by Community provisions, which are not in any event chargeable to the EAGGF under Regulations Nos 729/70 and 2334/69 of the Council.
               It is evident that this application is also unfounded.
            
         
         Aids for the distillation of wine (Application of the French Government: Case 16/76)
      
               19.
            
            
               In order to facilitate the disposal of wine surpluses the Council, by Regulation No 766/72 of 17 April 1972, in application of Article 7 of the basic Regulation No 816/70, made provision for the granting of financial aids to distillers on condition that they acquired the wine from producers at a price not lower than that laid down by the regulation and that they should in fact distil the wine. In order to be eligible for that aid, the distillation had to be carried out between 24 April and 27 May 1972, which latter date was changed to 31 July 1972 by Regulation No 1098/72.
               The French authorities, taking the view that the minimum purchase price for table wines for distillation fixed by the Community rules at FF 6.10 per degree and per hectolitre was not a sufficient inducement to wine growers to sell their products to distillers, decided to pay a supplementary aid to distillers to the extent necessary to induce them to guarantee producers a minimum price of FF 7.10 per degree and per hectolitre. That measure, which was initially to be limited to two million hectolitres, was subsequently extended to 2.8 million hectolitres. The Commission first decided to initiate the procedure for infringement of Treaty obligations under Article 169 of the EEC Treaty (letter of the French Government of 27 July 1972), but it subsequently discontinued that procedure (letter of 4 May 1973) as the measures constituting the infringement were by then at an end. However, in the second letter the Commission stated that that discontinuation of the procedure did not prejudge the final closure of the accounts of the EAGGF. On that latter occasion the French Government applied for reimbursement of the aids granted to distillers to the amount of FF 6.10 per hectolitre as fixed by the Council (taking upon itself naturally the cost of the supplementary aid which it had itself laid down), but the Commission refused to charge that expenditure to the Fund on the ground that the supplementary payments had completely distorted the intervention system laid down by the Community legislature.
               It is appropriate to examine first the argument put forward by the applicant Government that the Commission, once it had discontinued the procedure under Article 169 of the Treaty, could not reopen the matter in another context, on the occasion of the discharge of the accounts.
               It should be noted in this respect that no Community provision makes the initiation of a procedure under Article 169 a necessary precondition for the Commission's refusal to charge to the EAGGF expenditure improperly incurred by a Member State. In a case in which the Commission, before validating expenditure in the context of the EAGGF, initiated such a procedure, discontinuation of that procedure certainly cannot have the effect of legalizing unlawful measures or imposing an obligation on the Community to finance such measures. In discontinuing the procedure under Article 169 the Commission merely refrains from obtaining a formal finding by the Court of Justice of an infringement alleged against a Member State. It certainly does not mean that the Commission will not ensure, in the context of the discharge of the EAGGF accounts, compliance with the Community provisions which govern the charging to the Community of expenditure incurred by the Member States. In applying the provisions governing the expenditure of the EAGGF the Commission is subject to strict obligations. The discontinuation of the procedure under Article 169, on the other hand, is a measure falling within the discretionary powers of the Commission. That measure has no influence on the position of the Member State concerned as regards the accounts, which remains wholly subject to the provisions of Regulation No 729/70 of the Council, in particular Article 3 and Article 5 (2) thereof.
               As regards the substance of the application it should be recalled primarily that the fixing of a minimum purchase price for wine for distillation by the Community is undertaken essentially in furtherance of the objective of maintaining an economic balance, both between producers and consumers (in accordance with the aims indicated in Article 39 of the Treaty) and between producers of the various Member States who must be placed in the same competitive position and also between the market in wine and the market in alcohol. That is evident from Article 7 (2) (a) and (b) of Regulation No 816/70 and from the fifth recital in the preamble to Regulation No 766/72. According to the Commission the French measures did not take account of that complex balance and, in particular, distorted competitive conditions to the benefit of French wine growers. Apart from that, the defendant states that the absorbtion by the distilling industry of an over-large quantity of wine contributed, together with the poor harvest in 1972, to the excessive rise in prices during the 1972/1973 season.
               The sole justification for its conduct put forward by the applicant is that one month after the entry into force of the system of Community aid only 504000 hectolitres of wine had been sent for distillation; in its opinion that shows that the minimum price laid down by the Council was too low to achieve the desired result. In this connexion the applicant has stated that in proposing to the Council the system of aids for distillation in question, the Commission had specified that the target for the operation was the distillation of 3 million hectolitres of wine, half in France and half in Italy. The result obtained, helped by the additional aid from the French Government, was that French wine growers alone sent some 3 million hectolitres of wine for distillation in the period during which the scheme was applicable. In Italy, on the other hand, no more than 500000 hectolitres — that is, a third of the quantity expected by the Community authorities — were distilled during the same period.
               In order to establish whether the application is well-founded it is not necessary to give an opinion as to whether the additional aid granted unilaterally by the French State was economically appropriate. It is necessary rather to determine whether the said unilateral measure had the effect of rendering unlawful the system of aids for distillation applied in France.
               In this respect I believe it is sufficient to refer to the established case-law of the Court to the effect that it is not permissible for the Member States, in applying Community provisions, to adopt unilaterally additional measures which are such as to influence the scope of the Community provisions and to jeopardize in particular the principle of the uniformity of treatment of individuals throughout the territory in which the Community provisions are applicable (see the judgment of 18 February 1970 in Case 40/69 Hauptzollamt Hamburg-Oberelbe v Bollmann [1970] 1 ECR 69; the judgment of 11 February 1971 in Case 39/70 Fleischkontor v Hauptzollami Hamburg-St. Annen [1971] 1 ECR 49 the judgment of 1 February 1972 in Case49/71 Hagen v Einfuhr- und Vorratstelle für Getreide und Futtermittel [1972] 1 ECR 23; the judgment of 1 February 1972 in Case 59/71 Wünsche v Einfiihr- und Vorratstelle für Getreide und Futtermittel [1972] 1 ECR 53; the judgment of 6 June 1972 in Case 91/71 Schlüter v Hauptzollamt Hamburg-Jonas [1972] 1 ECR 307; and the judgment of 30 November 1972 in Case 32/72 Wasaknäcke v Einfuhr- und Vorratstelle für Getreide und Futtermittel [1972] 2 ECR 1181).
               Such unilateral State measures must a fortiori be regarded as unlawful when, apart from jeopardizing the uniformity of treatment of individuals, they substantially alter the scope of the Community intervention arrangements.
               At the hearing the applicant suggested in the alternative and as an equitable solution that the Community should bear the costs of the aid relating at least to the quantity of wine which it had hoped would be distilled in France (that is, one and a half million hectolitres).
               The Commission, however, replied correctly that it is not possible to determine whether, in the absence of the additional national aid, the target set would have been achieved in France. If, as the applicant states, it is true that the level of the Community minimum price was inadequate to achieve the desired effect, it follows that the French measure, by distorting the working of the scheme established by the Council, has rendered impossible even an approximate assessment of the quantity of wine which would have benefited from Community intervention if in France as well the price had remained at the level fixed by the Council.
               In reality the scheme of aids for distillation as applied in France was in the final analysis completely distorted by the unilateral alteration of the Community minimum price by the national authorities. Furthermore, that alteration distorted competitive conditions within the common market between wine producers in the Member States concerned, as well as the planned allocation of economic benefits between wine producers in each State. For that reason, in my opinion, the operation in question should be regarded as unlawful in its entirety. It is not merely a question of ensuring that the the budget of the EAGGF does not bear expenditure greater than that which would probably have been incurred in the absence of the unilateral French measures; it is primarily a question of ensuring that the Community does not ratify a measure which is contrary to the balance of the system and the principles which govern the working of the common market.
            
         
               20.
            
            
               Examination of the individual cases concerning one or other of the three applicant Governments leads, as we have seen, to conclusions which are identical to those derived from an examination of the general problems.
            
         In conclusion, therefore, I propose that the Court should dismiss the four applications in question as unfounded on all heads and that it should order the applicants to pay the costs.
      (
            1
         )	Translated from the Italian.