CELEX: 62011TJ0661
Language: en
Date: 2014-12-02 00:00:00
Title: Judgment of the General Court (Second Chamber) of 2 December 2014. # Italian Republic v European Commission. # Case T-661/11.

Parties
               Grounds
               Operative part
               
            
            Parties
            In Case T‑661/11,
            Italian Republic, represented by G. Palmieri, acting as Agent, assisted by G. Aiello and P. Grasso, avvocati dello Stato,
            applicant,
            v
            European Commission, represented by P. Rossi and D. Nardi, acting as Agents,
            defendant,
            ACTION for the annulment of Commission Implementing Decision 2011/689/EC of 14 October 2011 on excluding from European Union financing certain expenditure incurred by the Member States under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF), under the European Agricultural Guarantee Fund (EAGF) and under the European Agricultural Fund for Rural Development (EAFRD) (OJ 2011 L 270, p. 33) in so far as it imposes on the Italian Republic a flat-rate financial correction of EUR 70 912 382 on account of irregularities in the checking of milk quotas identified in the Italian regions of Abruzzi, Lazio, Marche, Apulia, Sardinia, Calabria, Friuli-Venezia Giulia and Valle d’Aosta during the course of the 2004/2005, 2005/2006 and 2006/2007 milk years.
            THE GENERAL COURT (Second Chamber),
            composed of M.E. Martins Ribeiro, President, S. Gervasoni and L. Madise (Rapporteur), Judges,
            Registrar: J. Palacio González, Principal Administrator,
            having regard to the written procedure and further to the hearing on 1 April 2014,
            gives the following
            
            Grounds
            Judgment 
             General legal context 
            A – Relevant provisions of the financial regulation applicable to the general budget of the European Union 
            1. Article 53 of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (OJ 2002 L 248, p. 1), in force, in accordance with the provisions of the second paragraph of Article 2 of Council Regulation (EC, Euratom) No 1995/2006 of 13 December 2006 amending Regulation No 1605/2002 (OJ 2006 L 390, p. 1), until 1 May 2007, provides: 
            ‘1. The Commission shall implement the budget:
            (a) on a centralised basis;
            (b) by shared or decentralised management; or
            (c) by joint management with international organisations.
            …
            3. Where the Commission implements the budget by shared management, implementation tasks shall be delegated to Member States in accordance with the provisions of Titles I and II of part two. 
            …
            5. In cases of shared or decentralised management, in order to ensure that the funds are used in accordance with the applicable rules, the Commission shall apply clearance-of-accounts procedures or financial correction mechanisms which enable it to assume final responsibility for the implementation of the budget in accordance with Article 274 of the EC Treaty and Article 179 of the Euratom Treaty.
            6. In the methods of budget implementation referred to in paragraphs 3 and 4, the Member States and third countries shall conduct regular checks to ensure that the actions to be financed from the Community budget have been implemented correctly.
            They shall take appropriate measures to prevent irregularities and fraud and if necessary shall bring prosecutions to recover funds wrongly paid. 
            …’
            2. Article 53 of Regulation No 1605/2002, as amended by Regulation No 1995/2006, applicable, in accordance with the provisions of the second paragraph of Article 2 of Regulation No 1995/2006, from 1 May 2007 onwards, provides:
            ‘The Commission shall implement the budget in accordance with the provisions set out in Articles 53a to 53d in any of the following ways:
            (a) on a centralised basis;
            (b) by shared or decentralised management;
            (c) by joint management with international organisations.’
            3. Article 53b of Regulation No 1605/2002, inserted by Regulation No 1995/2006, provides: 
            ‘1. Where the Commission implements the budget by shared management, implementation tasks shall be delegated to Member States. That method shall apply in particular to the actions referred to in Titles I and II of Part Two. 
            2. Without prejudice to complementary provisions included in relevant sector-specific regulations, and in order to ensure in shared management that the funds are used in accordance with the applicable rules and principles, the Member States shall take all the legislative, regulatory and administrative or other measures necessary for protecting the Communities’ financial interests. To this effect they shall in particular: 
            (a) satisfy themselves that actions financed from the budget are actually carried out and ... ensure that they are implemented correctly;
            (b) prevent and deal with irregularities and fraud;
            (c) recover funds wrongly paid or incorrectly used or funds lost as a result of irregularities or errors;
            (d) ensure, by means of relevant sector-specific regulations and in conformity with Article 30(3), adequate annual ex post  publication of beneficiaries of funds deriving from the budget.
            To that effect, the Member States shall conduct checks and shall put in place an effective and efficient internal control system, according to the provisions laid down in Article 28a. They shall bring legal proceedings as necessary and appropriate. 
            3. Member States shall produce an annual summary at the appropriate national level of the available audits and declarations.
            4. In order to ensure that the funds are used in accordance with the applicable rules, the Commission shall apply clearance-of-accounts procedures or financial correction mechanisms which enable it to assume final responsibility for the implementation of the budget.’
            B – General legislation relating to the financing of the common agricultural policy 
            4. Regulation (EEC) No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (OJ, English Special Edition 1970 (I), p. 218) laid down the general rules applicable to the financing of the common agricultural policy (‘the CAP’). That regulation was repealed and replaced by Council Regulation (EC) No 1258/1999 of 17 May 1999 on the financing of the common agricultural policy (OJ 1999 L 160, p. 103), which governs expenditure effected between 1 January 2000 and 15 October 2006 in the context of the financing of the CAP. 
            5. As is stated, in particular, in recital 5 of the preamble to Regulation No 1258/1999, ‘responsibility for checking [EAGGF] Guarantee Section expenditure lies, in the first place, with the Member States ...; ... the Commission, being responsible for implementing the Community budget, must verify the conditions under which payments and checks have been made’. According to recital 11 of the preamble to that regulation, ‘measures must be taken to prevent and deal with any irregularities and to recover the amounts lost as a result of such irregularities or negligence [and] the financial responsibility for such irregularities or negligence must be determined’.
            6. In accordance with the provisions of Article 1(2)(b) and Article 2(2) of Regulation No 1258/1999, which correspond to the provisions of Article 1(2)(b) and Article 3(1) of Regulation No 729/70 respectively, in the context of the common organisation of agricultural markets, the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) is to finance interventions intended to stabilise those markets undertaken in accordance with EU rules. 
            7. Article 6(1)(b) of Regulation No 1258/1999, the provisions of which correspond, in substance, to those of Article 5(1) of Regulation No 729/70, provides:
            ‘Member States shall, at regular intervals, transmit to the Commission the following information concerning the accredited paying agencies and coordinating bodies and relating to the transactions financed by the Guarantee Section of the Fund: 
            …
            (b) annual accounts, accompanied by the information required for clearance and an attestation regarding the integrality, accuracy and veracity of the accounts transmitted.’
            8. Article 7(4) of Regulation No 1258/1999, the provisions of which correspond, in substance, to those of Article 5(2)(c) of Regulation No 729/70, reads as follows:
            ‘The Commission shall decide on the expenditure to be excluded from the Community financing referred to in Articles 2 and 3 where it finds that expenditure has not been effected in compliance with Community rules. 
            Before a decision to refuse financing is taken, the results of the Commission’s checks and the replies of the Member State concerned shall be notified in writing, after which the two parties shall endeavour to reach agreement on the action to be taken. 
            If no agreement is reached, the Member State may ask for a procedure to be initiated with a view to mediating between the respective positions within a period of four months, the results of which shall be set out in a report sent to and examined by the Commission, before a decision to refuse financing is taken.
            The Commission shall evaluate the amounts to be excluded having regard in particular to the degree of non-compliance found. The Commission shall take into account the nature and gravity of the infringement and the financial loss suffered by the Community.
            A refusal to finance may not involve:
            (a) expenditure referred to in Article 2 effected prior to 24 months preceding the Commission’s written communication of the results of those checks to the Member State concerned;
            … ’
            9. Article 8(1) of Regulation No 1258/1999 provides: 
            ‘The Member States shall, in accordance with national provisions laid down by law, regulation or administrative action, take the measures necessary to:
            (a) satisfy themselves that transactions financed by the Fund are actually carried out and executed correctly;
            (b) prevent and deal with irregularities;
            (c) recover sums lost as a result of irregularities or negligence.
            … ’
            10. Council Regulation (EC) No 1290/2005 of 21 June 2005 on the financing of the common agricultural policy (OJ 2005 L 209, p. 1) repealed Regulation No 1258/1999 and is applicable from 1 January 2007 (Article 49 of Regulation No 1290/2005). However, it provides that Regulation No 1258/1999 is to apply until 15 October 2006 to expenditure incurred by the Member States (Article 47 of Regulation No 1290/2005) and that, inter alia, Article 31 of Regulation No 1290/2005, relating to conformity clearance, is to apply from 16 October 2006 in respect of expenditure incurred from that date onwards (Article 49 of Regulation No 1290/2005).
            11. As is stated in recital 2 of the preamble to Regulation No 1290/2005, ‘[t]he Community budget should finance [CAP] expenditure ... through the [EAGF,] [i]n line with Article 53 of ... Regulation ... No 1605/2002 ... either centrally or in the context of shared management with the Member States’.
            12. Under the provisions of Article 2(1)(a) of Regulation No 1290/2005, the European Agricultural Guarantee Fund (EAGF) was set up, in accordance with Article 49 of that regulation, with effect from 1 January 2007.
            13. Article 8(1)(c)(iii) of Regulation No 1290/2005, the provisions of which correspond, in substance, to those of Article 6(1) of Regulation No 1258/1999, provides:
            ‘In addition to the provisions laid down in the sectoral Regulations, Member States shall send to the Commission the following information, declarations and documents: 
            …
            (c) for measures relating to operations financed by the EAGF …:
            …
            (iii)	the annual accounts of the accredited paying agencies with a statement of assurance signed by the person in charge of the accredited paying agency, accompanied by the requisite information for their clearance, and a certification report drawn up by the certification body referred to in Article 7.’
            14. Article 31 of Regulation No 1290/2005, entitled ‘Conformity clearance’ contains, in substance, the same provisions as Article 7(4) of Regulation No 1258/1999.
            15. Commission Regulation (EC) No 1663/95 of 7 July 1995 laying down detailed rules for the application of Regulation No 729/70 regarding the procedure for the clearance of the accounts of the EAGGF Guarantee Section (OJ 1995 L 158, p. 6), as amended, inter alia, by Commission Regulation (EC) No 2245/1999 of 22 October 1999 (OJ 1999 L 273, p. 5), provides, in Article 6 thereof:
            ‘The supporting documents regarding the expenditure financed and the amounts to be recovered by the EAGGF Guarantee Section, shall be kept at the disposal of the Commission for at least three years following that in which the Commission clears the accounts of the financial year concerned and, in the case where the clearance of accounts decision is the subject of proceedings before the Court of Justice of the European Communities, up to one year after the conclusion of those proceedings.’ 
            16. Article 8 of Regulation No 1663/95, as amended by Regulation No 2245/1999, provides: 
            ‘1. If, as a result of an enquiry, the Commission considers that expenditure has not been effected according to Community rules, it shall notify the Member State concerned of the results of its checks and indicate the corrective measures to be taken to ensure future compliance.
            The communication shall refer to this Regulation. The Member State shall reply within two months and the Commission may modify its position in consequence. In justified cases, the Commission may extend the period allowed for reply. 
            After expiry of the period allowed for reply, the Commission shall invite the Member State to a bilateral discussion and the parties shall endeavour to reach agreement on the measures to be taken and on an evaluation of the gravity of the infringement and the financial loss to the Community. Following that discussion and any deadline after the discussion fixed by the Commission, after consultation of the Member States, for the provision of further information or, where the Member State does not accept the invitation to a meeting before the deadline set by the Commission, after that deadline has passed, the Commission shall formally communicate its conclusions to the Member State, referring to Commission Decision 94/442/EC. Without prejudice to the fourth subparagraph of this paragraph, that communication shall include an evaluation of any expenditure the Commission intends to exclude under Article 5(2)(c) of Regulation ... No 729/70. 
            The Member State shall inform the Commission as soon as possible of the corrective measures adopted to ensure compliance with Community rules and the date of their entry into force. The Commission shall, as appropriate, adopt one or more Decisions under Article 5(2)(c) of Regulation ... No 729/70 to exclude expenditure affected by non-compliance with Community rules up to the date of entry into force of the corrective measures. 
            2. The decisions referred to in Article 5(2)(c) of Regulation ... No 729/70 s hall be taken after an examination of any report drawn up by the Conciliation body according to the provisions laid down in Directive 94/442/EC.
            …’
            17. Paragraph 11 of the single annex to Regulation No 1663/95, which is entitled ‘Guidelines for criteria for accreditation as a paying agency’, reads as follows:
            All the above paragraphs apply, mutatis mutandis , to ‘[assigned revenue]’ (levies, forfeited guarantees, reimbursed payments, etc.) that the agency is required to collect on behalf of the Guarantee Section of the EAGGF. In particular, the agency shall set up a system for the recognition of all amounts due to the EAGGF and for the recording in a debtors ledger of all such debts prior to their receipt. ...’
            18. Commission Regulation (EC) No 885/2006 of 21 June 2006 laying down detailed rules for the application of Regulation No 1290/2005 as regards the accreditation of paying agencies and other bodies and the clearance of the accounts of the EAGF and of the EAFRD (OJ 2006 L 171, p. 90) is applicable, in so far as concerns the majority of its provisions, from 16 October 2006, and Article 11(1) to (3) the regulation, provide, in substance, for the same procedure as that provided for in Article 8 of Regulation No 1663/95.
            19. In accordance with the provisions of the second subparagraph of Article 11(3) of Regulation (EC) No 885/2006: 
            ‘The Commission, after having examined any report drawn up by the Conciliation Body in accordance with Chapter 3 of this Regulation, shall adopt, if necessary, one or more decisions under Article 31 of Regulation ... No 1290/2005 in order to exclude from Community financing expenditure affected by the non-compliance with Community rules until the Member State has effectively implemented the corrective measures.’ 
            20. Article 11(5) of Regulation No 885/2006 provides: 
            ‘This Article shall apply, mutatis mutandis , to assigned revenues within the meaning of Article 34 of Regulation ... No 1290/2005.’ 
            C – Legislation relating to the milk and milk products sector 
            21. The milk and milk products sector has been the subject of a common market organisation under the CAP. In 1984, in order to curb the increase in milk production in the market and to restore balance, the EU legislature established, inter alia, an additional levy scheme (‘the additional levy’ or ‘the levy’). Council Regulation (EC) No 1788/2003 of 29 September 2003 establishing a levy in the milk and milk products sector (OJ 2003 L 270, p. 123) has governed, for eleven consecutive periods of twelve month commencing on 1 April 2004, the additional levy to be paid by producers of milk and milk products. Under Article 25 of Regulation No 1788/2003, Council Regulation (EEC) No 3950/92, of 28 December 1992, establishing an additional levy in the milk and milk products sector (OJ 1992 L 405, p. 1), as amended, was repealed as from 1 April 2004.
            22. Article 3(1) of Regulation No 1788/2003 provides: 
            ‘Member States shall be liable to the Community for the levy resulting from overruns of the national reference quantity fixed in Annex I, determined nationally and separately for deliveries and direct sales, and before 1 October following the twelve-month period concerned, shall pay it, within the limit of 99% of the amount due, into the [EAGGF].’ 
            23. Article 4 of Regulation No 1788/2003 provides: 
            ‘The levy shall be entirely allocated, in accordance with the provisions of Articles 10 and 12, among the producers who have contributed to each of the overruns of the national reference quantities referred to in Article 1(2).
            Without prejudice to Article 10(3) and Article 12(1), producers shall be liable vis‑à‑vis the Member State for payment of their contribution to the levy due, calculated in accordance with the provisions of Chapter 3, for the mere fact of having overrun their available reference quantities.’ 
            24. Article 22 of Regulation No 1788/2003 provides: 
            ‘The levy shall be considered as intervention to stabilise agricultural markets and shall be applied to financing expenditure in the milk sector’. 
            25. Commission Regulation (EC) No 595/2004 of 30 March 2004 laying down detailed rules for applying Regulation No 1788/2003 (OJ 2004 L 94, p. 22) is applicable from 1 April 2004. Under Article 28 of that regulation, Commission Regulation (EC) No 1392/2001 of 9 July 2001 laying down detailed rules for applying Regulation No 3950/92 (OJ 2001 L 187, p. 19) was repealed, subject to certain exceptions.
            26. Section 1 of Chapter IV of Regulation No 595/2004 lays down rules on checks carried out by the Member States and establishes obligations on purchasers and producers. In this context, Article 19 of the regulation, entitled ‘Control plan’ provides:
            ‘1. Member States shall draw up a general control plan for each 12-month period on the basis of risk analysis. This control plan shall include at least: 
            …
            (c) on-the-spot checks to be executed regarding the 12-month period;
            …
            2. Controls shall be carried out partly during the 12-month period in question, partly after the 12-month period on the basis of the yearly declarations.
            3. Controls shall be deemed to be completed once an inspection report of the controls is available.
            All inspection reports shall be completed no later than 18 months after the end of the 12-month period concerned. 
            …’
            27. Article 22 of Regulation No 595/2004, entitled ‘Intensity of controls’, provides: 
            ‘1. The controls referred to in Article 21(1) shall cover at least:
            (a) 1% of producers for the 12-month period 2004/05, 2% of producers for the following 12-month periods;
            (b) 40% of the quantity of milk declared before correction for the period concerned;
            (c) a representative sample of transport of milk between selected producers and purchasers.
            The transport controls referred to in point (c) shall be carried out in particular at unloading at the dairies. 
            2. Controls referred to in Article 21(2) shall cover at least 5% of producers.
            3. Each purchaser shall be controlled at least once in five years.’
            28. Article 24 of Regulation No 595/2004 lays down an obligation for purchasers and producers to preserve certain documents for at least three years from the end of the year in which the documents are drawn up. 
            D – Commission Guidelines 
            29. The guidelines for the application of flat-rate corrections were laid down in Commission Document No VI/5330/97 of 23 December 1997, entitled ‘Guidelines for the calculation of financial consequences when preparing the decision regarding the clearance of the accounts of EAGGF Guarantee’ (‘Document No VI/5330/97’). According to the section of Annex II to Document No VI/5330/97, entitled ‘Guidelines for the application of flat-rate corrections’, when the information resulting from the enquiry does not make it possible to evaluate the loss sustained by the Community by extrapolating those losses by statistical means or by reference to other verifiable data, the European Commission may envisage a flat-rate correction. That same section of the annex goes on to state:
            ‘In determining whether a financial correction should result and, if so, at what rate, the general consideration shall be the assessment of the degree of risk of losses to Community funds having occurred as a consequence of the control deficiency. The specific elements to be taken into account should include the following: 
            1. whether the deficiency relates to the effectiveness of the control system generally, to the effectiveness of a particular element of the system, or to the operation of a control or controls under the system;
            2. the importance of the deficiency within the totality of the administrative, physical and other controls foreseen;
            3. the vulnerability to fraud of the measures, having regard particularly to the economic incentive.
            With these principles in mind, controls can be divided into two categories:
            Key controls are those physical and administrative checks required to verify substantive elements, in particular the existence of the subject of the claim, the quantity, and the qualitative conditions including the [observance] of time-limits, harvesting requirements, retention periods, etc. They are performed on the spot and by cross-checks to independent data such as land registers. 
            Ancillary controls are those administrative operations required correctly to process claims, such as verification of the [observance] of time-limits for their submission, identification of duplicate claims for the same subject, risk analysis, application of sanctions and appropriate supervision of the procedures.’ 
            30. Under that same heading, ‘Guidelines for the application of flat-rate corrections’, in Annex II to Document No VI/5330/97, various levels of flat-rate financial correction are set out, as follows: 
            ‘When one or more key controls are not applied or applied so poorly or so infrequently that they are completely ineffective in determining the eligibility of the claim or preventing irregularity, then a correction of 10% is justified, as it can reasonably be concluded that there was a high risk of wide-spread loss to the Fund. 
            When all key controls are applied, but not in the number, frequency or depth required by the regulations, then a correction of 5% is justified, as it can reasonably be concluded [that] they do not provide [a] sufficient level of assurance of the regularity of claims, and that the risk to the Fund was significant. 
            When a Member State has adequately performed the key controls, but completely failed to [carry out] one or more ancillary controls, then a correction of 2% is justified in view of the lower risk of loss to the Fund, and in view of the lesser seriousness of the infringement.
            …’
            31. Finally, in accordance with Document No VI/5330/97, ‘[w]hen there is reason to suppose that the deficiency is limited to that of a department or region’s application of the control system adopted by the Member State, the correction should be limited to the expenditure controlled by that department or region’.
            32. The way in which the Commission proposes to apply the principle, set out in Document No VI/5330/97, according to which a Member State’s failure to perfect controls becomes more serious if the Commission has already notified it of the improvements it considers essential to protect Community funds against fraud and irregularity, is clarified in document AGRI/60637/2006, entitled ‘Commission Notification — How the Commission intends to handle recurrent shortcomings in control systems under the EAGGF Guarantee Section accounts clearance procedure’ (‘Document AGRI/60637/2006’). It is clear from the second subparagraph of paragraph 1 of Document AGRI/60637/2006 that the rules which it sets out are based on the principle, referred to in Article 7(4) of Regulation No 1258/1999, that the Commission is to take account of the nature and gravity of the infringement and of the financial loss to the Community.
            33. Paragraph 2 of Document AGRI/60637/2006 provides:
            ‘Where the absence of or shortcomings in a control system or an aspect of that system have been the subject of one or more financial correction decisions under the EAGGF Guarantee Section accounts clearance procedure,
            and
            the same shortcomings are found to have continued in a period after the one for which the corrections are made,
            the Commission considers ... that there is normally justification for applying an increase to the flat-rate [financial] correction applied at the time of the previous correction, in view of the increased risk of financial loss to the EAGGF.’
            34. In accordance with paragraph 3 of Document AGRI/60637/2006:
            ‘The increase will be calculated on the basis of the risk of financial loss.
            It will not be applied automatically, but with due consideration for the seriousness of the shortcoming and any factors limiting the risk.
            In order to ensure that flat-rate corrections are applied, as provided for in document No VI/5330/97, when the actual level of irregular payments and thus the amount of financial losses suffered by the Community cannot be determined, the following percentages are intended to provide guidance:
            in the event of a previous correction of 2%: a rate of at least 3% over the new period concerned, this rate possibly rising to 5% where it may reasonably be concluded that persistent shortcomings in ancillary controls will reduce the effectiveness of key controls;
            in the event of a previous correction of 5%: a rate of 10% over the new period concerned;
            …’
             Background to the dispute 
            35. Between 18 and 22 September 2006 and 3 and 7 March 2008, the Commission carried out two investigations in Italy, bearing the references LA/2006/08/IT and LA/2008/001/IT respectively and concerning the 2003/2004, 2004/2005, 2005/2006 and 2006/2007 milk years in a number of Italian regions.
            36. It is apparent from the minutes of the bilateral meeting held on 15 January 2009 that the Commission complained that the Italian Republic had failed to carry out checks on purchasers within the time-limits imposed by EU legislation. It pointed out that, in order for the checks to be regarded as having been completed, it was necessary for the inspection reports relating to them to be finalised. 
            37. On 24 March 2010, the Commission sent the Italian Republic a formal communication, in accordance with the third subparagraph of Article 11(2) and Article 16(1) of Regulation No 885/2006, bearing the reference DG AGRI ARES(2010)155172. In that formal communication the Commission maintained its position on the non-conformity of the implementation of the milk quotas scheme in Italy with respect to the 2003/2004, 2004/2005, 2005/2006 and 2006/2007 milk years and proposed a financial correction amounting to EUR 85 625 455. It is apparent from the formal communication that, in its calculation of the financial correction in respect of the irregularities identified, the Commission had followed the following three steps: 
            – as a first step, since it lacked reliable data on the quantities of milk produced in the regions in which the identified irregularities had occurred, the Commission corrected the risk of under-declaration of the quantities produced by applying to the quantities declared flat-rate financial corrections, which it increased, in accordance with Document AGRI/60637/2006, to reflect the recurrence of infringements in some of the regions in question. In this way it determined the scale of corrections to be applied to the quantities declared in order to compensate the lack of reliable data on the quantities of milk actually produced in the regions in question;
            – as a second step, it added the corrections which it had calculated as a first step to the total quantity of milk declared in Italy. The total thus obtained represented the total quantity of milk likely to have actually been produced nationally, and the Commission therefore then checked whether that figure was greater than the national quota allocated to Italy for each of the milk years in question;
            – as a third step, after finding that the national quota allocated for certain milk years had been exceeded, the Commission applied the coefficient for calculating the additional levy, provided for by the legislation in force, to the corrections calculated in the first step for the regions in which the identified irregularities had occurred. 
            38. On 8 September 2010 there was a meeting of the Conciliation Body, which delivered its final report on 11 October 2010 (‘the final report’). In the conclusions of that report, which addressed only the part of the correction relating to the region of Lazio, the Conciliation Body invited the Commission to re-examine its proposed financial correction in light of the observations set out in paragraphs 6.3 and 6.4 of the report. In paragraph 6.3, the Conciliation Body took issue with the Commission for failing to justify its decision to apply a correction of 5%. In paragraph 6.4, it stated that the proposed correction of 10% in respect of the 2004/2005 and 2005/2006 milk years was potentially inconsistent with the guidelines set out in Document AGRI/60637/2006 and that, if that correction was to be maintained, further justification needed to be given. 
            39. By letter of 21 December 2010 bearing the reference ARES No 979992, the Commission informed the Italian Republic of its definitive position following the final report. That position was then superseded by a new position, communicated by letter of 24 May 2011 bearing the reference ARES No 560020 in which the Commission maintained the position which it had set out in its letter of 24 March 2010 but reduced the total amount of the financial correction which it had initially proposed. The reduction arose from the cancellation of the correction relating to the 2003/2004 milk year, since that year fell outside the 24-month time-limit for the application of financial corrections laid down in Article 7 of Regulation No 1258/1999. 
            40. In the summary report from its Directorate-General for Agriculture and Rural Development of 24 June 2011 relating to inspections carried out by the Commission as part of the procedure for the clearance of accounts pursuant to Article 7(4) of Regulation No 1258/1999 and Article 31 of Regulation No 1290/2005 (‘the summary report’) the Commission summarised, in chapter 5.1 of the report, the reasons underlying the financial correction applied to the Italian Republic in the milk products sector.
            41. First of all, the Commission maintained its position with regard to the conclusions which it had drawn following the two investigations referred to in paragraph 35 above, that is to say, that the Italian authorities had been late in carrying out their checks and that this was an irregularity which posed a financial risk for the Guarantee Section of the EAGGF or for the EAGF. Secondly, it stated that, since the additional levy applicable in this case was assigned revenue, the irregularities identified, which related to shortcomings in controls, had led to a loss of revenue for the funds in question. Thus, in order to calculate the amount of the financial correction to be applied, and since it had been unable to determine objectively the scale of the financial loss accruing to the Guarantee Section of the EAGGF or to the EAGF because of the lack of reliable data on the quantities of milk produced, it had applied flat-rate financial corrections on the basis of Document No VI/5330/97. Thirdly, it justified the percentages which it had chosen for the flat-rate financial corrections by reference to the fact that the irregularities identified related to key controls. Fourthly, since the additional levy was assigned revenue, the Commission had, however, determined the level of risk in accordance with a scale that was substantially similar to that described in its letter of 24 March 2010. Fifthly, the Commission pointed out that, in accordance with the guidelines contained in Document No VI/5330/97, the financial correction had to be applied on a regional basis. Moreover, in accordance with the terms of Document AGRI/60637/2006, since a financial correction had already been applied on account of irregularities in identical checks carried out in the regions of Apulia and Abruzzi during the 2002/2003 milk year, it had increased the level of the flat-rate financial correction in the present procedure with respect to those regions on account of the recurrence of the irregularities identified. Sixthly, it set out the reasons for which it had not given effect to the observations made by the Conciliation Body in paragraphs 6.3 and 6.4 of its final report.
            42. On the basis of those reasons the Commission adopted Implementing Decision 2011/689/EC of 14 October 2011 on excluding from European Union financing certain expenditure incurred by the Member States under the Guarantee Section of the EAGGF, the EAGF and the EAFRD (OJ 2011 L 270, p. 33) (‘the contested decision’). In that decision, in so far as concerns the Italian Republic, the Commission applied, in respect of the 2005, 2006 and 2007 financial years, a financial correction amounting to EUR 70 912 382 in total as a consequence of the shortcomings in checks on milk quotas relating to their late performance identified in the regions of the Abruzzi, Lazio, Marche, Apulia, Sardinia, Calabria, Friuli-Venezia Giulia and Valle d’Aosta.
             Procedure and forms of order sought 
            43. By application lodged at the Registry of the General Court on 21 December 2011, the Italian Republic brought the present action. 
            44. Following a change in the composition of the chambers of the General Court, the Judge-Rapporteur was assigned to the Second Chamber, to which this case was consequently allocated. 
            45. The Italian Republic claims that the Court should annul the contested decision in so far as it imposes flat-rate financial corrections relating to the milk quotas scheme for the 2004/2005, 2005/2006 and 2006/2007 milk years amounting to EUR 70 912 382 in total.
            46. The Commission contends that the Court should: 
            – dismiss the action; 
            – order the Italian Republic to pay the costs. 
            47. On hearing the report of the Judge-Rapporteur, the General Court (Second Chamber) decided to open the oral procedure and, by way of measures of organisation of procedure pursuant to Article 64 of the Rules of Procedure of the General Court, put questions to the parties, requiring them to answer some of those questions in writing and others orally at the hearing. The parties complied with those measures of organisation of procedure within the prescribed period. 
            48. The parties presented oral argument and answered the written questions and the oral questions put by the Court at the hearing on 1 April 2014. 
             Law 
            49. In support of the present action, the Italian Republic formally raises four pleas in law, alleging, first, infringement of Article 11 of Regulation No 885/2006 and of the guidelines contained in Document No VI/5330/97, misuse of powers in the application of a financial correction, secondly, infringement of Articles 21 and 22(1)(b) of Regulation No 595/2004, thirdly, infringement of Article 11 of Regulation No 885/2006 and of the guidelines contained in Document No VI/5330/97 and breach of the principle of proportionality and misuse of powers in the application of a flat-rate financial correction and, fourthly, breach of the duty to state reasons, or an insufficient statement of reasons, and infringement of the terms of Document No AGRI/60637/2006.
            A – Admissibility of the allegation, made in the context of the first and third pleas in law, of misuse of powers 
            50. It is appropriate to recall that, under Article 44(1)(c) of the Rules of Procedure, the application initiating the proceedings must contain, inter alia, a summary of the pleas in law relied on. In addition, according to settled case-law, irrespective of any question of terminology, that summary must be sufficiently clear and precise to enable the defendant to prepare its defence and the Court to rule on the application, even without further information. In order for an action to be admissible it is necessary that the basic legal and factual particulars relied on be indicated, at least in summary form, coherently and intelligibly in the application itself, so as to guarantee legal certainty and the sound administration of justice (see Case T‑322/01 Roquette Frères  v Commission [2006] ECR II‑3137, paragraph 208 and the case-law cited). It is also settled case-law that any plea which is not adequately articulated in the application initiating the proceedings must be held inadmissible. Similar requirements apply where a submission is made in support of a plea in law. In the case of an absolute bar to proceeding, such inadmissibility may be raised by the Court of its own motion if need be (see Case T‑209/01 Honeywell  v Commission [2005] ECR II‑5527, paragraphs 54 and 55 and the case-law cited).
            51. In the present case the Court would observe, of its own motion, that the allegation, made in the context of the first and third pleas in law put forward in the application, of misuse of powers is not supported, even in summary form, as is required by Article 44(1)(c) of the Rules of Procedure. 
            52. Moreover, in response to a question put at the hearing, the Italian Republic, while maintaining the allegation made in the context of the first and third pleas of misuse of powers, acknowledged that the application contained no specific line of argument in support of that complaint. It stated that, in substance, the principal objective of the first and third pleas was to obtain a declaration of the Court that the contested decision is vitiated by a contravention of legal rules and that the allegation of misuse of powers was put forward in support of the main objective of each of those two pleas.
            53. In light of the settled case-law referred to in paragraph 50 above, the observation made by the Court in paragraph 51 above and the Italian Republic’s answers to the question put to it at the hearing, reported in paragraph 52 above, the Court must reject as inadmissible the allegation, made in the context of the first and third pleas in law, of misuse of powers. 
            B – Substance 
            54. As stated in paragraph 49 above, the Italian Republic puts forward four pleas in law in support of the present action. In light of the conclusion drawn in paragraph 53 above, the first and third pleas will be examined only to the extent that they each allege the contravention of legal rules or indeed of general principles of EU law. 
            1. The first plea, alleging infringement of Article 11 of Regulation No 885/2006 and of the guidelines contained in Document No VI/5330/97 in the application of a financial correction 
            a) Arguments of the parties
            55. The Italian Republic maintains that, in substance, the checks carried out, albeit belatedly in some cases, were nevertheless reliable and effective, and that the Guarantee Section of the EAGGF and the EAGF were consequently not exposed to any risk. Therefore, by applying a financial correction and, a fortiori , a flat-rate financial correction, the Commission infringed the provisions of Article 11 of Regulation No 885/2006 and the guidelines contained in Document No VI/5330/97. 
            56. More specifically, first of all, notwithstanding the fact that some of the checks carried out by the national authorities were somewhat late, they made it possible to arrive at a definitive and reliable determination of the quantities of milk actually delivered and sold directly. The Italian Republic submits that it is clear from Annex II to Document No VI/5330/97 that a flat-rate financial correction may be applied only where the passage of time has necessarily compromised the a posteriori  reconstruction of the volume of certain transactions. However, that is not so in the present case, since the checks carried out by the national authorities related, as is required by Article 11 of Regulation No 1392/2001, to commercial documents and other documents showing how the collected milk and milk equivalent had been used, which, in accordance with Article 14 of the same regulation, must be kept by purchasers for at least three years from the end of the year in which they are drawn up. 
            57. Secondly, the Italian Republic points out that, in its Special Report No 7/2010, the Court of Auditors of the European Union strongly criticised the Commission’s excessive use of the flat-rate financial correction approach. According to Document No VI/5330/97, that method should, it submits, be used only as a last resort where it is impossible to evaluate the impact of one or more errors detected in one or more specific cases of irregular transactions or on the basis of the examination of a representative sample of transactions.
            58. The Commission contests the arguments put forward by the Italian Republic in support of its first plea.
            b) Findings of the Court
            59. The first plea is expressed as two complaints by which it is argued that, by applying a financial correction and, a fortiori , a flat-rate financial correction, the Commission infringed, first, Article 11 of Regulation No 885/2006 and, secondly, the guidelines contained in Document No VI/5330/97.
            60. At the outset, in light of the case-law referred to in paragraph 50 above, the Court would observe, of its own motion, that the allegation of infringement of Article 11 of Regulation No 885/2006 is not supported, even in summary form, as is required by Article 44(1)(c) of the Rules of Procedure. Indeed, in its application, the Italian Republic failed to set out any argument capable of supporting that complaint. Nor was the complaint supported in its reply. A complaint of that kind must be declared inadmissible. 
            61. In any event, first of all, even if it were to be admitted that the complaint of infringement of Article 11 of Regulation No 885/2006 could be examined together with the allegation of infringement of the guidelines contained in Document No VI/5330/97 and in light of the arguments put forward in support of the first plea, it must be observed that, in accordance with the provisions of the second paragraph of Article 19 of Regulation No 885/2006, Article 11 of that regulation applies only from 16 October 2006 onwards. 
            62. Consequently, it would be necessary, in principle, to examine the first plea only in so far as it relates to the 2006/2007 milk year and not to the 2004/2005 and 2005/2006 milk years, which also gave rise to the application of a financial correction. However, as is clear from the correlation table set out in Annex V to Regulation No 885/2006, the provisions of Article 11 of Regulation No 885/2006 correspond to those of Article 8 of Regulation No 1663/1995. It is also clear from the Commission’s written pleadings that that institution itself acknowledges the correspondence between those provisions. It may, therefore, be concluded that, in the context of its first plea, the Italian Republic is essentially alleging, in relation to the 2004/2005, 2005/2006 and 2006/2007 milk years, infringement of, on the one hand, Article 8 of Regulation No 1663/1995 and Article 11 of Regulation No 885/2006 and, on the other, infringement of the guidelines contained in Document No VI/5330/97.
            63. Secondly, it is clear from the arguments put forward by the Italian Republic in support of its first plea that, in essence, it submits that, notwithstanding the fact that some of the checks carried out by the Italian authorities were late and uncontested, the checks carried out into the quantities of milk declared in particular, they were nevertheless reliable and effective inasmuch as they made it possible to arrive at a definitive determination of the quantities of milk actually delivered and actually sold directly. The first plea must, therefore, be understood as alleging, in substance, that the Commission had been able to evaluate the losses incurred by the European fund in question (‘the Fund’), that is to say, the Guarantee Section of the EAGGF in 2005 and 2006 and the EAGF in 2007 and that, consequently, those funds had not been exposed to any risk such as to justify the application of a financial correction and the Commission had therefore had no grounds to apply a flat-rate financial correction. 
            64. It must be observed, first and foremost, that Article 19(3) of Regulation No 595/2004 provides that, for each 12-month period for which the Member States must implement a general control plan on the basis of risk analysis, checks are deemed to be completed once an inspection report of the controls — which must be completed no later than 18 months after the end of the 12-month period concerned — is available. Those provisions require that checks be completed within a fixed time-frame, without exception. It is thus clear from the very wording of the provisions in question that the time-limit for carrying out the checks is mandatory (see, by analogy, judgment of 9 October 2012 in Case T‑426/08 Italy  v Commission , not published in the ECR, paragraph 74).
            65. In the second place, it is clear from the case-law that the imposition of a precise time-limit for the completion of the checks contributes to achieving the objective of reducing the risk that sums due will not be recovered. Indeed, the time-limit forms part of the rules governing the performance of the checks and contributes to achieving the objective of dissuading both purchasers and producers making direct sales from under-declaring deliveries and direct sales so as not to have to pay an additional levy. Furthermore, such a time-limit reduces the risk that the data needed to carry out the checks will in fact no longer be available, despite the obligation imposed on operators to retain certain documents for a period of three years (Article 24 of Regulation No 595/2004). The time-limit also prevents the indefinite postponement of the checks, which could result in no checks being carried out and create a risk that levies due are not collected. Finally, the time-limit in question is intended to assist in the planning of future controls on the basis of a risk analysis, as provided for in Article 19(1) and (2) of Regulation No 595/2004. The mandatory nature of the time-limit laid down in Article 19(3) of Regulation No 595/2004 is thus also evident from the general structure of that article (see, by analogy, Italy  v Commission , paragraph 64 above, paragraph 75).
            66. In light of the considerations set out in paragraphs 64 and 65 above, it must be held, first, that, since the Italian authorities carried out some of the checks late, a point which, moreover, the Italian Republic does not dispute, the Commission was entitled both to regard the reliability of the data obtained on that occasion as having been impaired, in that the delay resulted in an increased risk of under-declaration of the quantities of milk produced, and to conclude that those irregularities exposed the Fund to a real financial risk.
            67. Secondly, the Commission was entitled, in those circumstances, to apply a financial correction. It is also appropriate to point out in this connection that, since the Commission was no longer able to assess the quantities of milk produced objectively and thus to determine precisely the losses sustained by the Fund, it was entitled, in accordance with the guidelines contained in Document No VI/5330/97, to apply a flat-rate financial correction (Case C‑418/06 P Belgium v Commission [2008] ECR I‑3047, paragraph 136, and Case T‑46/09 Greece  v Commission [2013] ECR, paragraph 49).
            68. Thirdly, as regards the conclusions drawn by the Court of Auditors in its Special Report No 7/2010, according to which the Commission had made excessive use of flat-rate financial corrections, it must be observed that those conclusions, on which the Italian Republic relies in support of its first plea, are formulated in general terms and that, in any event, they in no way support the conclusion (contrary to the Court’s finding in paragraph 67 above) that, in the circumstances of the present case, the Commission’s application of a flat-rate financial correction contravened the applicable legal rules. They must, therefore, be disregarded as having no effect. 
            69. In light of all the foregoing considerations, the first plea must be dismissed as in part inadmissible and in part unfounded.
            2. The second plea, alleging infringement of Articles 21 and 22(1)(b) of Regulation No 595/2004 
            a) Arguments of the parties
            70. In support of its second plea, alleging infringement of Articles 21 and 22(1)(b) of Regulation No 595/2004, the Italian Republic puts forward the following three arguments.
            71. First, the Italian Republic argues that, since the checks carried out by the Italian authorities covered declared quantities of milk close to, or even in excess of, the 40% rate specified in Article 22(1)(b) of Regulation No 595/2004, the control system implemented posed no financial risk for the Fund. 
            72. Secondly, the Italian Republic maintains that the Commission’s decision to apply no correction in the regions in which the proportion of late checks was below 30%, a 2% correction in the regions in which the proportion was between 30% and 50%, and a 5% correction in the regions in which the proportion of late checks was greater than 50% was inconsistent with the guidelines contained in Document No VI/5330/97. According to the Italian Republic, the Commission thereby disregarded the objective quantity of milk produced that had actually been checked, whereas, under Regulation No 595/2004, that is an essential part of the checks on purchasers. The Commission’s approach precluded any objective assessment of the risk to the Fund. 
            73. Thirdly, the Italian Republic submits that, by adopting a criterion based on the percentage of checks carried out late, the Commission accorded the same importance, in each individual region, to checks on purchasers of negligible quantities of milk as it did to checks on purchasers of much larger quantities of milk. The approach adopted by the Commission therefore resulted in the imposition of financial corrections that were disproportionate to the objective significance of the risk to the Fund and which therefore breached the principle of equal treatment.
            74. The Commission contests the arguments put forward by the Italian Republic in support of its second plea.
            b) Findings of the Court
            75. As regards the first argument, it should be recalled that, as was pointed out in the context of the Court’s examination of the first plea, first of all, it is not in dispute that some of the checks carried out by the national authorities were performed late, after the mandatory time-limit laid down by the legislation in force and, secondly, that irregularity, affecting the checks, exposed the Fund to a financial risk and thus gave the Commission grounds for applying a financial correction. Therefore, since the contested decision is based on the finding that the checks carried out by the national authorities were performed late, and in no way on the intensity of the checks, as defined in Article 22 of Regulation No 595/2004, the Court must reject the first argument, since it has no bearing on the consequences that must be drawn from the finding relating to the belated nature of the checks at issue.
            76. As regards the second argument, the irregularity in the checks which the Commission found in the contested decision was that they were not carried out within the time-limit imposed for their performance. As is clear from the case-law referred to in paragraphs 65 and 67 above, one of the direct consequences of an irregularity of that nature is to jeopardise the precise calculation of the quantity of milk actually produced and, thus, the amount of any surplus justifying collection of the additional levy. Furthermore, in light of the guidelines contained in Document No VI/5330/97, given the lack of sufficiently reliable data from which to establish objectively the relevant quantity of milk produced, the Commission was entitled to apply a flat-rate financial correction, the very purpose of which is to reflect the loss likely to have been caused to the Fund by the identified deficiency in the checks in question.
            77. It is clear from the foregoing considerations that the Italian Republic’s complaint that, by applying the flat-rate financial correction method, the Commission disregarded the objective quantity of milk produced that had actually been checked and infringed the guidelines contained in Document No VI/5330/97 is not justified.
            78. As regards the third argument, it is appropriate to state at the outset that, whilst, under the provisions of Article 22 of Regulation No 595/2004, the intensity of the checks to be carried out by the Member States in respect of deliveries and direct sales, as referred to in Article 21 of the regulation, is set at a minimum of 40% of the quantity of milk declared before correction for the period concerned, Article 22(3) nevertheless provides that every purchaser is to be checked at least once every five years. 
            79. Consequently, first of all, the sample of purchasers to be checked by the Member States is determined on the basis of a rotation among purchasers, with no account being taken of the declared quantity of milk that each of them has purchased. Secondly, it is indeed possible that, where one check is carried out on a purchaser that has purchased a small quantity of milk, it will be necessary to select another purchaser that has purchased a significant quantity of milk in order to satisfy the requirement of checking 40% of the declared quantity of milk. However, that method of compensation, for arithmetical purposes, can in no way alter the consequences which the Commission must draw whenever it identifies irregularities in the way in which key controls are implemented by the Member States. In other words, regardless of the declared quantity of milk which a purchaser has purchased, if the Commission finds that the checks made on that purchaser were performed late, it must draw the legal consequences of that irregularity.
            80. Primarily, it must be recalled that, in the area of the clearance of EAGGF accounts, whilst the Commission is entrusted with the task of checking whether the transactions financed by the Guarantee Section are carried out by the Member States in accordance with the applicable rules of EU law, the fact remains that it is the Member States that are best placed to collect and verify the data required for the clearance of EAGGF accounts, and consequently it is for the Member States to put forward the most detailed and comprehensive evidence that the figures are accurate and, if appropriate, that the Commission’s calculations are incorrect (Case C‑48/91 Netherlands  v Commission  [1993] ECR I‑5611, paragraph 17). In the case of the irregularity identified by the Commission, namely that the checks carried out by the Italian Republic were performed late, neither that State nor the Commission was in a position to establish objectively the quantity of milk produced, in particular by the operators in relation to which the checks were defective. Consequently, the third argument, which is that the Commission accorded the same significance to checks made on purchasers of negligible quantities of milk in a given region as it did to checks made on purchasers of much larger quantities, must be rejected.
            81. That being so, in light of the considerations set out in paragraph 76 above, since the Commission was not in a position to establish objectively the quantity of milk produced in the region in question, it was entitled to apply a flat-rate financial correction in order reflect the loss likely to have been caused to the Fund. It cannot, therefore, be criticised for not having taken into account the quantities of milk to which the defective checks related. Moreover and in any event, the absence of reliable data on the quantities of milk produced that were checked makes it difficult to assess whether the applicable flat-rate financial correction was disproportionate, as alleged, to the quantities of milk to which the irregularity identified by the Commission related.
            82. Consequently, the second plea must be dismissed as unfounded. 
            3. The third plea, alleging the absence of any legal basis for the application of a flat-rate financial correction and, consequently, infringement of Article 11 of Regulation No 885/2006 and of the guidelines contained in Document No VI/5330/97 and breach of the principle of proportionality 
            a) Arguments of the parties
            83. In its application, the Italian Republic complains, in substance, that there is no legal basis for the application by the Commission of a flat-rate financial correction in the event of irregularity in the implementation of a scheme relating to assigned revenue and that it therefore acted in arbitrary fashion, infringing both the provisions of Article 11 of Regulation No 885/2003 and the guidelines contained in Document No VI/5330/97 as well as the principle of proportionality. In support of those three complaints which make up its third plea, the Italian Republic relies, in substance, on the following arguments. 
            84. First of all, the Italian Republic maintains that no provision of EU law provides a basis for the application of a flat-rate financial correction in the event of irregularities in checks relating to assigned revenue. Acts of the European Union such as Document No VI/5330/97 justify the application of a correction of that kind only where the absence or lack of key controls relates to expenditure incurred, and not to assigned revenue. Moreover, by contrast with the case of expenditure incurred, no act of EU law defines the detailed procedures for controls relating to assigned revenue or the degree of importance of such controls. 
            85. Secondly, the Italian Republic maintains, in substance, that in so far as concerns the risk of loss accruing to the Fund as a result of failure to recover assigned revenue, the level of milk production cannot be taken as a parameter. It is only once the amount of any overrun has been determined that the Commission may, in order to estimate such loss, apply to the levy theoretically due on account of the overrun the flat-rate financial correction rates laid down in Document No VI/5330/97. In the present case. However, ‘[t]he anomaly arises from the fact that the correction rates were applied to the theoretical amount of the levy calculated by applying the levy to the total quantity of milk produced in the milk years in question’. The Italian Republic adds that the Commission arbitrarily ‘used the financial correction rates to estimate the possible overrun of the quota and the consequent levy, adding it to the overrun of the national production quota and dividing it up for re-allocation to the individual regions subject to controls for the clearance of accounts’. 
            86. In its reply, in response to a purported misunderstanding on the Commission’s part of the scope of its third plea, as set out in the application, the Italian Republic stated that, by that plea, it took issue with the application of the financial correction by reference to the total quantity of milk produced in the regions in which irregularities had been identified, rather than by reference solely to the production of milk in connection with which checks on purchasers and producers were carried out late.
            87. The Commission contests the arguments put forward by the Italian Republic in support of its third plea.
            b) Findings of the Court
            88. As a preliminary point, first of all, in light of the case-law referred to in paragraph 50 above, the Court would observe, of its own motion, that the third complaint, alleging breach of the principle of proportionality, is not supported, even in summary form, as is required by Article 44(1)(c) of the Rules of Procedure. Indeed, in both its application and its reply, as far as the third plea is concerned, the Italian Republic failed to set out any argument capable of supporting that complaint. It must therefore be declared inadmissible.
            89. Secondly, it must be pointed out that it is clear from the provisions of Article 48(2) of the Rules of Procedure that no new plea in law may be introduced in the course of proceedings unless it is based on matters of fact or law which come to light in the course of the proceedings. However, a submission which may be regarded as amplifying a plea put forward previously, whether directly or by implication, in the originating application, and which is closely connected therewith, will be declared admissible (Joined Cases T‑456/05 and T‑457/05 Gütermann and Zwicky  v Commission [2010] ECR II‑1443, paragraphs 198 and 199).
            90. In the present case, as regards the argument set out by the Italian Republic in its reply and referred to in paragraph 86 above, it must be held that, in so far as it seeks to show that the calculation of financial corrections should have been based solely on the production of milk in connection with which checks on purchasers and producers were carried out late, that argument was in no way put forward in the originating application.
            91. In its application, the Italian Republic argued, first, that, in the case of assigned revenue, the level of milk production can in no way be taken into account. Secondly, it complained that the Commission had arbitrarily used ‘the financial correction rates to estimate the possible overrun of the quota and the consequent levy, adding it to the overrun of the national production quota and dividing it up for re-allocation to the individual regions subject to controls for the clearance of accounts’. However, it is in no way apparent from those two arguments that, at that stage of the proceedings, the Italian Republic maintained, even in substance, that the calculation of financial corrections should have been based solely on the production of milk in connection with which checks on purchasers and producers were carried out late. 
            92. Therefore, that argument, which does not constitute an amplification of the plea which it puts forward and is not on based on matters of fact or law which came to light in the course of the proceedings, must be declared inadmissible. 
            93. With regard to the first and second complaints made in support of the third plea, it is appropriate to examine each of the two arguments referred to in paragraphs 84 and 85 above.
             The first argument, alleging that there is no legal basis for the application of a flat-rate financial correction in the event of irregularities in checks relating to assigned revenue 
            94. As regards the first argument, by which it alleged, in substance, that the application of a flat-rate financial correction in the event of irregularities in checks relating to assigned revenue is devoid of any legal basis and thus arbitrary, it must be held that, although the Italian Republic expressly refers only to the provisions of Article 11 of Regulation No 885/2006 (which applies to the 2006/2007 milk year), this first argument must be examined in the light of the legislation applicable to the various milk years in question, which includes, in particular, Regulation No 1663/95, repealed by Regulation No 885/2006. It is important to note in this connection that, as is clear from the correlation table set out in Annex V to Regulation No 885/2006, the provisions of Article 8 of Regulation No 1663/1995 correspond to those of Article 11 of Regulation No 885/2006. 
            – The 2004/2005 and 2005/2006 milk years
            95. With respect to the 2004/2005 and 2005/2006 milk years, Regulation No 1605/2002, in the version applicable up to 1 May 2007, and Regulations Nos 1258/1999, 1663/95, 1788/2003 and 595/2004 apply. It is thus necessary to examine whether they provide a legal basis for the application by the Commission of financial corrections in the event of irregularities in the implementation of a scheme relating to assigned revenue and of a flat-rate financial correction in the event of such irregularities.
            96. As regards, first of all, the Commission’s power to apply financial corrections in the event of irregularities in the implementation of a scheme relating to assigned revenue, it must be recalled, first, that, under the provisions of Article 274 EC, the Commission is to implement the budget, in accordance with the provisions of the regulations made pursuant to Article 279 EC, under its own responsibility and within the limits of the appropriations authorised, in accordance with the principle of sound financial management. Next, it is clear from recital 16 of the preamble to Regulation No 1605/2002, which was adopted on the basis of Article 279 EC, that the various implementation methods should guarantee that the procedures for protecting Community funds are complied with, whatever the entity responsible for all or part of this implementation, and must confirm that final responsibility for budgetary implementation lies with the Commission in accordance with Article 274 EC. Finally, under Article 53(1) of Regulation No 1605/2002, cited in paragraph 1 above, applicable until 1 May 2007, the Commission is to implement the budget using any of three methods, including the method of shared management. Under Article 53(5) of Regulation No 1605/2002, also cited in paragraph 1 above, in the case of shared management, the Commission is to apply clearance-of-accounts procedures or financial correction mechanisms which enable it to assume final responsibility for the implementation of the budget. 
            97. Secondly, in so far as concerns the financing of the CAP, and in particular the EAGGF, which, as is stated in recital 1 of the preamble to Regulation No 1258/1999, forms part of the general budget of the European Communities, it should first of all be noted that, in accordance with Article 1(2)(b) of that regulation, the Guarantee Section of the EAGGF finances intervention intended to stabilise the agricultural markets. Next, according to Article 2(2) of the regulation, the financing of that intervention is conditional on its being undertaken in accordance with Community rules within the framework of the common organisation of agricultural markets. Lastly, under Article 8(1)(c) of the same regulation, the Member States are to take the measures necessary to recover sums lost as a result of irregularities or negligence and, under the second subparagraph of Article 8(2), the sums recovered are to be paid to the accredited paying agencies and deducted by them from the expenditure financed by the Fund.
            98. Thirdly, as regards the procedure for the clearance of the Fund, in accordance with the second subparagraph of Article 1(3) of Regulation No 1663/95, decisions on the accreditation of paying agencies are taken on the basis of an examination covering their administrative and accounting arrangements, including those adopted to protect the European Union’s interests regarding, inter alia, sums to be collected. In accordance with paragraph 11 of the Annex to Regulation No 1258/1999, which is entitled ‘Guidelines for criteria for accreditation as a paying agency’, all paragraphs of that annex ‘apply, mutatis mutandis , to ‘[assigned revenue]’ (levies, forfeited guarantees, reimbursed payments, etc.) that the [paying] agency is required to collect on behalf of the Guarantee Section of the EAGGF. ...’
            99. Fourthly, as regards the additional levy, first of all, according to Article 3 of Regulation No 1788/2003, the Member States are liable to the European Union for the levy resulting from overruns of the national reference quantity and must pay it into the Fund. Next, under Article 11 of that regulation, purchasers are responsible for collecting from producers contributions due from the latter by virtue of the levy and are to pay to the competent body of the Member State the amount of these contributions. Article 22 of the regulation provides that the additional levy is regarded as intervention to stabilise agricultural markets and is to be applied to financing expenditure in the milk sector. Lastly, under Article 17 of Regulation No 595/2004, Member States are to take all necessary measures to ensure that the additional levy is correctly charged and that it falls on the producers who have contributed to the overrun.
            100. An examination of the legislation mentioned in paragraphs 96 to 99 above permits the following three conclusions to be drawn in relation to the 2004/2005 and 2005/2006 milk years.
            101. First of all, intervention under the Guarantee Section of the EAGGF, the purpose of which is to stabilise agricultural markets, must be undertaken in accordance with the Community rules in force within the framework of the common organisation of agricultural markets (Article 2(2) of Regulation No 1258/1999). The milk and milk products sector has been the subject of a common market organisation under the CAP (see paragraph 21 above) and the supplemental levy is regarded as intervention to stabilise agricultural markets and is applied to financing expenditure in the milk sector (Article 22 of Regulation No 1788/2003). Therefore, the correctness of the methods for collecting the supplemental levy is one of the requirements that must be fulfilled in the implementation of assistance from the Guarantee Section of the EAGGF in the milk and milk products sector.
            102. Secondly, it is the responsibility of the Member States, under the supervision of the Commission, to ensure that the additional levy is correctly charged by the competent paying authorities (Article 17 of Regulation No 595/2004) on behalf of the Guarantee Section of the EAGGF (paragraph 11 of the annex to Regulation No 1663/95).
            103. Thirdly, under Article 53 of Regulation No 1605/2002, the Commission must, inter alia, apply financial correction mechanisms which enable it to assume final responsibility for the implementation of the budget, in accordance with the principle that the various methods for implementing the budget must ensure that the procedures for protecting Community funds are complied with. It is on that basis that the Commission has competence, in particular, to decide on the expenditure to be excluded from European Union financing where it finds that expenditure has not been effected in compliance with Community rules (the first paragraph of Article 7(4) of Regulation No 1258/1999). The same holds true in the case of assigned revenue. Indeed, it is clear from the nature of the additional levy that it constitutes revenue applied to financing expenditure in the milk sector (Article 22 of Regulation No 1788/2003). As is clear from the legislation outlined in paragraphs 96 to 99 above, the Member States are responsible for collecting that revenue on behalf of the Guarantee Section of the EAGGF, under the supervision of the Commission, which enables that institution to take final responsibility for the implementation of the budget. Therefore, it must be held that the Commission has power to draw the financial consequences of irregularities which affect the recovery, under the responsibility of the Member States, of the additional levy.
            104. It follows from the three conclusions drawn in paragraphs 101 to 103 above that, in so far as the 2004/2005 and 2005/2006 milk years are concerned, a legal basis existed, under the Treaty provisions mentioned in paragraph 96 above and Article 53(5) of Regulation No 1605/2002, applicable until 1 May 2007, for the Commission to supervise the methods of collection of t he additional levy and to apply financial corrections in the event of irregularities such as those at issue in the present case.
            105. As regards, secondly, the Commission’s power to apply flat-rate financial corrections, it must first of all be recalled that, as is stated in the second paragraph of section 2 of Annex I to Document No VI/5330/97, entitled ‘Financial consequences of inquiries undertaken outside the clearance of accounts programme’, that the objective of auditing the systems is to obtain a reasonable assurance that expenditure is incurred and receipts are recovered in accordance with rules of EU law. Furthermore, as is stated in that same paragraph, it is necessary to ensure that receipts are not materially understated. 
            106. Secondly, the Italian Republic is mistaken in its assertion that, by contrast with the case of expenditure, no European Union act defines the detailed procedures for controls relating to revenue or the degree of importance of such controls. Indeed, in Annex II to Document No VI/5330/97, entitled, ‘Financial consequences within the framework of the clearance of accounts of [the Guarantee Section of the] EAGGF ... of deficiencies in controls carried out by the Member States’, referred to in paragraphs 29 an 30 above, the Commission set out in detail the main factors to be taken into consideration when assessing the degree of risk of losses accruing to EU funds, in order to establish whether a financial correction is called for, and the flat-rate financial corrections which should apply, depending on the degree of severity of the irregularities identified, a distinction being drawn between two categories of controls, namely key controls and ancillary controls. Neither the factors to be taken into consideration when assessing the degree of risk of losses accruing nor the definition given in the annex of the two categories of controls indicates that they apply only to irregularities relating to expenditure incurred, and not to assigned revenue. Indeed, the annex states that key controls are ‘those physical and administrative checks required to verify substantive elements, in particular ... the quantity, and the qualitative conditions including the [observance] of time-limits’ and that ‘[t]hey are performed on the spot, and by cross-checks to independent data’. 
            107. In the present case, suffice it to recall that the irregularities identified by the Commission relate to the completion, by the national authorities, after the time-limit laid down, of the physical and administrative checks required to verify substantive elements, namely the quantities of milk produced, in order to establish whether the additional levy was to be applied. 
            108. Therefore, since the irregularities at issue concerned the completion of on-the-spot checks after the time-limit laid down, they related to key controls, as defined in Document No VI/5330/97. Furthermore, given the category of controls affected, the Commission was entitled, in accordance with the guidelines contained in that document, as referred to in paragraph 30 above, to apply a flat-rate financial correction of 5% or 10%. Consequently, the Commission was right to refer to the guidelines contained in Document No VI/5330/97 in order to establish a flat-rate financial correction in respect of the type of irregularities at issue in the present case, which related to the collection of the additional levy, which is assigned revenue.
            109. In light of the considerations set out above, in so far as concerns the 2004/2005 and 2005/2006 milk years, the Italian Republic is mistaken in its assertion, made under the first complaint, that the Commission was not entitled to apply a flat-rate financial correction in the event of irregularities concerning controls relating to assigned revenue, such as those at issue in the present case, because there was no legal basis for it to do so.
            – The 2006/2007 milk year
            110. With respect to the 2006/2007 milk year, Regulation No 1605/2002, in the version applicable up to 1 May 2007, and subsequently in the amended version applicable from 1 May 2007 onwards, and Regulations Nos 1290/2005, 885/2006, 1788/2003 and 595/2004 apply. It is therefore again necessary to examine whether there was a legal basis for the application by the Commission of financial corrections in the event of irregularities in the implementation of a scheme relating to assigned revenue and of a flat-rate financial correction in the event of such irregularities.
            111. As regards, first of all, the Commission’s power to apply financial corrections in the event of irregularities in the implementation of a scheme relating to assigned revenue, the Court would refer to the reasoning set out in paragraph 96 above, in connection with both the provisions of Article 274 EC and those of Article 53 of Regulation No 1605/2002, in the version applicable until 1 May 2007. As regards the provisions of Article 53 of the latter regulation, in the amended version applicable from 1 May 2007 onwards, cited in paragraph 2 above, they again provide that the Commission is to implement the budget, in accordance with Articles 53a to 53d, using any of three management methods, including shared management. In accordance with the provisions of Article 53b(2) and (4) of Regulation No 1605/2002, as amended, cited in paragraph 3 above, where the Commission implements the budget by shared management, in order to ensure that the funds are used in accordance with the applicable rules, the Member States are to take all necessary measures to protect the European Union’s financial interests and, to that end, must, inter alia, recover funds lost as a result of irregularities or errors. Article 53b(4) goes on to provide that, in order to ensure that the funds are used correctly, the Commission must apply clearance-of-accounts procedures or financial correction mechanisms which enable it to assume final responsibility for the implementation of the budget. 
            112. Secondly, in so far as concerns the financing of the CAP, and the EAGF in particular, first of all, as is clear from recital 2 of the preamble to Regulation No 1290/2005, the EU budget finances CAP expenditure through the EAGF. Furthermore, according to the same recital, the financing of CAP expenditure is carried out either under centralised management or in the context of shared management with the Member States, in line with Article 53 of Regulation No 1605/2002.
            113. Next, recital 29 of the preamble to Regulation No 1290/2005 reads: 
            ‘In order to permit reuse of EAGF ... funds, rules are needed on assignment of the sums recovered by Member States when conformity clearance is carried out or following proceedings in the event of discovery of irregularity or negligence and for additional levies in the milk and milk products sector.’ 
            114. Lastly in this connection, Article 34(1)(b) of Regulation No 1290/2005 provides:
            ‘1. The following shall be regarded as assigned revenue within the meaning of Article 18 of Regulation ... No 1605/2002:
            …
            (b) sums which are collected or recovered under ... Regulation ... No 1788/2003 ...’
            115. Thirdly, as regards the clearance of the accounts of the EAGF, as the Commission points out, pursuant to Article 11(5) of Regulation No 885/2006, Article 11, which lays down the rules applicable to conformity clearance and, in the second subparagraph of Article 11(3), confers power on the Commission to adopt decisions under Article 31 of Regulation No 1290/2005, applies, mutatis mutandis , to assigned revenues within the meaning of Article 34 of the same regulation.
            116. It is also appropriate to point out that point E, entitled ‘Procedures for debts’, of Annex I to Regulation No 885/2006, entitled ‘[Paying agency] accreditation criteria’, states:
            ‘All the criteria provided for in points A) to D) shall apply, mutatis mutandis , to levies ... which the agency is required to collect on behalf of the EAGF ...’
            117. Fourthly, as regards the additional levy, since the provisions of Regulations Nos 1788/2003 and 595/2004 apply to the 2006/2007 milk year, the Court would refer to the reasoning set out in paragraph 99 above. 
            118. In light of the legislation referred to in paragraphs 111 to 117 above and, by analogy, the three conclusions drawn in paragraphs 101 to 103 above, it must be held that, in so far as concerns the 2006/2007 milk year, a legal basis existed, under the Treaty provisions mentioned in paragraph 96 above, Article 53b(2) and (4) of Regulation No 1605/2002, applicable from 1 May 2007 onwards, and Article 34 of Regulation No 1290/2005, for the Commission to supervise and apply a financial correction in the event of irregularities such as those at issue in the present case, which concern controls relating to the collection of the additional levy, which is assigned revenue.
            119. As regards, secondly, the Commission’s power to apply flat-rate financial corrections, as is clear from the reasoning set out in paragraphs 105 to 108 above, that institution was entitled to follow the guidelines contained in Document No VI/5330/97, which applies to the 2006/2007 milk year, in order to establish a flat-rate financial correction in respect of the type of irregularities at issue in the present case, which relate to the collection of the additional levy.
            120. In light of the considerations set out above, in so far as concerns the 2006/2007 milk year, the Italian Republic is mistaken in its assertion, made under the first complaint, that the Commission was not entitled to apply a flat-rate financial correction in the event of irregularities concerning controls relating to assigned revenue, such as those at issue in the present case, because there was no legal basis for it to do so.
            121. Before drawing a final conclusion on the merits of the first argument put forward in support of the third plea, it is appropriate to point out that the conclusions drawn in paragraphs 109 and 120 above are corroborated, by way of analogy, by the case-law of the Court of Justice.
            122. In Netherlands  v Commission , paragraph 80 above, the Court ruled on the application of the provisions of Regulation No 729/70 to a procedure for the clearance of the accounts of the EAGGF concerning revenue to be collected by the Member States, namely the co-responsibility levy in the cereals sector, described in Article 4(4) of Regulation (EEC) No 2727/75 of the Council of 29 October 1975 on the common organisation of the market in cereals (OJ 1975 L 281, p. 1), as amended by Council Regulation (EEC) No 1579/86 of 23 May 1986 (OJ 1986 L 139, p. 29).
            123. First of all, in Netherlands  v Commission , paragraph 80 above, (paragraph 22), the Court recalled that the co-responsibility levy in the cereals sector was to be regarded as one of the intervention measures designed to stabilise agricultural markets and was to be allocated to the financing of costs in the cereals sector. It also pointed out that it followed from the combined provisions of Article 1(2)(b) and Article 3(1) of Regulation No 729/70 that intervention measures intended to stabilise the agricultural markets fell within the scope of that regulation. 
            124. Secondly, in Netherlands  v Commission , paragraph 80 above, (paragraph 23), the Court pointed out that there was nothing either in the preamble to or in the provisions of Regulation No 729/70 to indicate that there should be any difference in the procedure for clearing the accounts depending on whether it related to expenditure to be financed by the EAGGF or revenue to be collected by that fund. Indeed, it held that, on the contrary, the final subparagraph of Article 5(1) of Regulation No 729/70 clearly showed that the regulation applied to all transactions financed by the Guarantee Section of the EAGGF, including intervention measures intended to stabilise the markets, of which the co-responsibility levy formed part. 
            125. In the present case, it must be observed, first of all, that Article 22 of Regulation No 1788/2003, which governs the additional levy to be paid by producers of milk and other milk products, contains similar provisions to those of Article 4(4) of Regulation No 2727/75. Indeed, it provides that the levy is to be considered as intervention to stabilise agricultural markets and is to be used to finance expenditure in the milk sector. 
            126. Next, as is clear from the correlation tables annexed to Regulations Nos 1258/1999 and 1290/2005, the provisions of Article 1(2)(b) and Article 2(2) of Regulation No 1258/1999, on the one hand, and Article 3 of Regulation No 1290/2005, on the other, correspond, in substance at least, to those of Article 1(2)(b) and Article 3(1) of Regulation No 729/70.
            127. Lastly, as is also clear from paragraphs 7 and 13 above, the provisions of Article 6(1)(b) of Regulation No 1258/1999 and of Article 8(1)(c)(iii) of Regulation No 1290/2005 correspond, in substance at least, to those of Article 5(1)(b) of Regulation No 729/70.
            128. Having regard to the considerations set out in paragraphs 125 to 127 above, similar reasoning to that given for the judgment in Netherlands  v Commission , paragraph 80 above, (paragraphs 22 and 23), must be applied in the present case. It must, therefore, be held that the provisions of Regulation No 1258/1999 and of Regulation No 1290/2005 relating to the clearance of the accounts of the EAGGF and the EAGF respectively apply both to expenditure incurred and to assigned revenue. 
            129. In light of all the foregoing considerations and, in particular, the conclusions drawn in paragraphs 109 and 120 above, the first argument must be rejected as unfounded.
             The second argument, alleging that the Commission failed to estimate the amount of any possible overrun before applying to that amount a flat-rate financial correction 
            130. As regards the second argument, by which the Italian Republic complains that, in connection with the risk of loss accruing to the Fund as a result of failure to recover assigned revenue, the Commission failed to first determine the amount of any overrun before applying to the levy theoretically due on account of the overrun the flat-rate financial correction rates laid down in Document No VI/5330/97 in order to reflect such loss, the following observations should be made. 
            131. First of all, the Italian Republic is mistaken in the assertions, which it makes in order to dispute the legality of the contested decision, that ‘[t]he anomaly arises from the fact that the correction rates were applied to the theoretical amount of the levy calculated by applying the levy to the total quantity of milk produced in the milk years in question’ and that ‘the Commission arbitrarily used the financial correction rates to estimate the possible overrun of the quota and the consequent levy, adding it to the overrun of the national production quota and dividing it up for re-allocation to the individual regions subject to controls for the clearance of accounts’.
            132. As is manifestly clear from both the information given in the Commission’s letter of 24 March 2010 concerning the method used to calculate the financial correction, which comprised the three steps described in paragraph 37 above, and from the terms of the summary report, as described in paragraphs 40 and 41 above, contrary to the Italian Republic’s submission, the Commission did not apply the flat-rate financial corrections to the theoretical amount of the levy; nor did it apply them both to determine any possible overrun and to calculate the consequent levy. The flat-rate financial corrections were applied solely in order to calculate, in the absence of reliable data resulting from the identified irregularities in the checks carried out, the theoretical quantity of milk produced in each of the regions affected by the irregularities identified during the course of the milk years in question. 
            133. Secondly, as the Italian Republic points out, according to the guidelines contained in Document No VI/5330/97, ‘flat-rate corrections may be applied to the amount of expenditure which constitutes a risk’. Consequently, the flat-rate corrections laid down in that document apply to the thing which directly created the risk of loss accruing to the Fund. 
            134. In the case of expenditure, since the thing which directly creates the risk of loss accruing to the Fund is the possible overstatement of expenditure, the flat-rate correction provided for in Document No VI/5330/97 is applied to that overstatement.
            135. By contrast, in the case of assigned revenue, at issue in the present case, it is clear from the case-law referred to in paragraph 65 above that the thing which directly creates the risk of loss accruing to the Fund is the possible under-declaration by purchasers or producers of the quantities of milk produced, so as not to have to pay the additional levy. Indeed, in a case such as the present, in the absence of reliable data on the quantities of milk produced, neither the Member State responsible for collecting the additional levy nor the Commission entrusted with implementing the budget can determine objectively the quantity of milk produced. Consequently, since they are unable to check whether the national quota allocated has been exceeded, they are equally unable to determine whether the additional levy should be collected or to calculate it in the event that it should. It follows from the foregoing that it is as a result of a risk of under-declaration of the milk produced that the Fund is exposed to a risk of loss of revenue. 
            136. In the present case, in accordance with the guidelines contained in Document No VI/5330/97, since the Commission was not able to quantify the financial loss accruing to the Fund, it was entitled to apply a flat-rate financial correction. Moreover, as the Court concluded in the context of its examination of the first plea (see paragraph 66 above), the irregularities identified in this case necessarily impaired the reliability and effectiveness of the checks carried out for the very purpose of determining the quantity of milk produced and, consequently, of checking whether the national quota allocated to the Italian Republic had been exceeded. Those irregularities exposed the Fund to a real risk of losses. 
            137. In light of the foregoing considerations, since the Commission was unable to determine objectively the quantity of milk produced and was therefore unable to determine with certainty whether the national quota allocated to the Italian Republic had been exceeded, the application of a flat-rate financial correction was the only way to estimate the loss likely to have been sustained by the Fund. Moreover, the Commission was entitled, in order to assess that risk, to begin by applying the flat-rate financial corrections to the quantities of milk declared in order to compensate the risk of under-declaration of the quantities of milk produced. 
            138. Consequently, the second argument must be rejected as unfounded. 
            139. In conclusion, the third plea must be rejected as unfounded. 
            4. The fourth plea, alleging breach of the duty to state reasons, or an insufficient statement of reasons, and infringement of the terms of Document AGRI/60637/2006 
            a) Arguments of the parties
            140. First of all, relying, in particular, on the conclusions reached by the Conciliation Body in its final report, which concern the region of Lazio, the Italian Republic maintains that the statement of reasons given for the level of corrections applied on account of the recurrence of the irregularities identified is insufficient.
            141. The Italian Republic also considers that the correction applied by the Commission is inconsistent with the terms of Document AGRI/60637/2006. Since no definition of the notions of key controls and ancillary controls has been adopted in the field of milk quotas, the Commission was not entitled to regard the irregularities identified in the present case as relating to key controls.
            142. Finally, since the 2003/2004 milk year did not give rise to a financial correction, the Commission was not entitled to apply the rule relating to recurrence to the financial corrections for the 2004/2005, 2005/2006 and 2006/2007 milk years. Consequently, the flat-rate financial correction applied in respect of the 2004/2005 milk year in the region of Lazio should have been 3%. 
            143. The Commission contests the arguments put forward by the Italian Republic in support of its fourth plea.
            b) Findings of the Court
            144. By its first complaint, referring, inter alia, to the conclusions drawn by the Court of Auditors in Special Report No 7/2010, the Italian Republic argues that the Commission failed to give sufficient reasons in the contested decision for its application of an increase, on the basis of Document AGRI/60637/2006, on account of the recurrence of the irregularities identified in the contested decision.
            145. It must be recalled in this connection that the statement of reasons required by Article 296 TFEU must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent Court of the European Union to exercise its power of review (see Case C‑26/00 Netherlands v Commission [2005] ECR I‑6527, paragraph 113, Case T‑48/04 Qualcomm  v Commission [2009] ECR II‑2029, paragraph 174 and the case-law cited).
            146. Furthermore, according to well-established case-law, in the particular context of the drafting of decisions relating to the clearance of accounts, the reasons given for a decision are to be considered sufficient if the Member State to which the decision is addressed was closely involved in the process by which the decision came about and was aware of the reasons for which the Commission took the view that the sum in dispute should not be charged to the EAGGF (Case C‑263/98 Belgium  v Commission  [2001] ECR I‑6063, paragraph 98, Case C‑332/01 Greece  v Commission  [2004] ECR I‑7699, paragraph 67, and the judgment of 30 September 2009 in Case T‑55/07 Netherlands  v Commission , not published in the ECR, paragraph 125). That case-law must be applied by analogy to decisions imposing financial corrections on account of irregularities in checks relating to assigned income.
            147. In the present case, first of all, the Commission stated in its summary report in a clear and unequivocal fashion the reasons for which it took the view that, since the irregularities identified in the checks carried out during the milk years in question were a recurrence of those which it had identified in Decision 2008/582/EC of 8 July 2008 excluding from Community financing certain expenditure incurred by the Member States under the Guarantee Section of the EAGGF and under the EAGF (OJ 2008 L 186, p. 39) relating to the 2002/2003 milk year in Italy, it was appropriate, on the basis of Document AGRI/60637/2006, to increase the flat-rate financial correction applied in the contested decision in respect of the 2005, 2006 and 2007 financial years. More specifically, the Commission stated in its summary report that, as a result of the investigation conducted in Italy in 2004 and bearing the reference LA/2004/01/IT, it had already identified irregularities — in particular, failures to comply with time-limits — in checks carried out by the national authorities in relation to the 2002/2003 milk year in the regions of Apulia, Trento, Abruzzi and Lazio. Since those irregularities had again been identified in some of those regions in the course of the investigations bearing the references LA/2006/08/IT and LA/2008/001/IT, the Commission had decided to apply the rule relating to recurrence following those investigations also.
            148. Next, it must be observed that, throughout the administrative procedure in the present case, the Commission repeatedly drew the attention of the Italian Republic to the recurrent nature of the irregularities identified, in particular with reference to the conclusions drawn following the investigations bearing the references LA/2004/01/IT and LA/2006/08/IT and, consequently, to the possibility that the flat-rate financial correction applied would be increased in accordance with the terms of Document AGRI/60637/2006. That is clear, inter alia, from the Commission’s letter no 20272 of 20 August 2008 concerning the investigation bearing the reference LA/2008/001/IT, which it sent the Italian Republic in accordance with Article 11(1) of Regulation No 885/2006. It is also clear from the second and third paragraphs of point 1.4 of the minutes of the bilateral meeting of 15 January 2009. Similarly, in its letter of 24 March 2010, the Commission formally communicated to the Italian Republic, in accordance with Article 11(2) of Regulation No 885/2006, the financial consequences which it proposed to draw from the irregularities identified. In the penultimate paragraph of point 1.2 and in point 2.3 of that letter, the Commission mentioned the recurrent nature of the irregularities identified and consequently increased the flat-rate financial correction applied, in accordance with the terms of Document AGRI/60637/2006.
            149. In light of the foregoing considerations, the Italian Republic having been closely involved in the process by which the contested decision was drawn up, it must be held that, in accordance with the case-law cited in paragraph 146 above, it was aware of the reasons for which the Commission applied an increase on the basis of Document AGRI/60637/2006. Consequently, the first complaint, by which it is alleged that no statement of reasons, or an insufficient statement of reasons was given, must be rejected as unfounded.
            150. However, it is clear from the second and third complaints which the Italian Republic makes in support of its fourth plea that it also disputes the validity of the reasons given by the Commission.
            151. As regards its second complaint, the Italian Republic maintains that, since no definition of key controls is given in Document AGRI/60637/2006, the Commission was not entitled to increase the financial correction under the terms of that document.
            152. It must be recalled in this connection that Document VI/5330/97, which, as was noted in paragraph 119 above, applies to irregularities relating both to expenditure incurred and to assigned income, states:
            ‘Key controls are those physical and administrative checks required to verify substantive elements, in particular the existence of the subject of the claim, the quantity, and the qualitative conditions including the [observance] of time limits, harvesting requirements, retention periods, etc. They are performed on the spot, and by cross-checks to independent data such as land registers.’
            153. The express purpose of Document AGRI/60637/2006 is to define the circumstances under which, in the context of the clearance of the accounts of the Guarantee Section of the EAGGF, it is appropriate to increase the flat-rate financial correction applied in accordance with Document VI/5330/97 in the event of recurrent shortcomings in control systems. It must therefore be held that it is light of the definition of the notion of key controls given in Document VI/5330/97 that the terms of Document AGRI/60637/2006 are to be given effect. The second complaint put forward in support of the fourth plea must therefore be rejected as unfounded.
            154. As regards the third complaint, the Italian Republic maintains that, since the 2003/2004 milk year did not give rise to the application of a financial correction, the Commission was not entitled to apply the rule relating to recurrence to the irregularities identified in the subsequent milk years and to increase the financial correction applied in respect of those later milk years as a result. 
            155. It must first of all be noted in this connection that the Italian Republic does not dispute that the irregularities identified by the Commission in Decision 2008/582, relating to the 2002/2003 milk year, on the one hand, and those identified in the contested decisions, relating to the 2004/2005, 2005/2006 and 2006/2007 milk years, on the other, are similar, concern the same sector (namely the milk sector), are attributable to the same Member State, concern the same region (namely Lazio) and were regarded as decisive for the application of the rate of correction which was the subject of the increase. 
            156. However, it does maintain that, since the 2003/2004 milk year did not, as a result of the application of the 24 month rule laid down in Article 7 of Regulation No 1258/1999 and subsequently expressed in Article 31(4) of Regulation No 1290/2005, give rise to the application of a financial correction, the Commission was not entitled to apply the rule relating to recurrence to the financial corrections relating to the 2004/2005, 2005/2006 and 2006/2007 milk years.
            157. That argument cannot succeed. According to the wording of paragraph 2 of Document AGRI/60637/2006, cited in paragraph 33 above, the rule relating to recurrence applies where irregularities found in the course of one milk year recur in ‘a period after the one for which the corrections are made’. It is clear from that wording and the use of the indefinite article rather than the definitive article, in both Italian (which is the language of the case in this instance) and English, before ‘period after the one for which the corrections are made’ that it is to be interpreted as meaning that the recurrence of the irregularities need not necessarily occur in the year immediately following the year in which the first financial correction was applied. Furthermore, to adopt such a narrow interpretation as that proposed by the Italian Republic would oblige the Commission to carry out annual checks in order to be able to increase a financial correction on the basis of Document AGRI/60637/2006.
            158. In conclusion, the fourth plea must be dismissed as unfounded and, consequently, the action must be dismissed in its entirety.
             Costs 
            159. Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the applicant has been unsuccessful, it must be ordered to pay the costs, in accordance with form of order sought by the Commission. 
            
            Operative part
            On those grounds,
            THE GENERAL COURT (Second Chamber)
            hereby:
            1. Dismisses the action; 
            2. Orders the Italian Republic to bear its own costs and to pay the costs incurred by the European Commission.