Hellenic Republic v Commission of the European Communities.
Date: 2001-01-11
7 As the Court has held, only intervention undertaken in accordance with the Community rules within the framework of the common organisation of agricultural markets is to be financed by the EAGGF (see Case C-253/97 Italy v Commission [1999] ECR I-7529, paragraph 6). In that context, it is for the Commission to prove an infringement of the rules on the common organisation of the agricultural markets (see Case C-281/89 Italy v Commission [1991] ECR I-347, paragraph 19; Case C-55/91 Italy v Commission [1993] ECR I-4813, paragraph 13; and Case C-253/97, cited above, paragraph 6). Accordingly, the Commission is obliged to give reasons for its decision finding an absence of, or defects in, inspection procedures operated by the Member State in question (Case C-8/88 Germany v Commission [1990] ECR I-2321, paragraph 23).
8 However, the Commission is not required to demonstrate exhaustively that the inspections carried out by the national authorities are insufficient, or that the data submitted by them are irregular, but to adduce evidence of serious and reasonable doubt on its part regarding those inspections or data (Case C-54/95 Germany v Commission [1999] ECR I-35, paragraph 35; Case C-28/94 Netherlands v Commission [1999] ECR I-1973, paragraph 40).
9 The reason for this mitigation of the burden of proof on the Commission is that it is the Member State which is best placed to collect and verify the data required for the clearance of EAGGF accounts and, consequently, it is for that State to adduce the most detailed and comprehensive evidence that its inspections or figures are accurate and, if appropriate, that the Commission's statements are incorrect (Case
C-54/95 Germany v Commission, paragraph 35; Case C-28/94 Netherlands v Commission, paragraph 41).
The expenses by way of compensatory aid in the arable crops sector and by way of premiums for beef and veal
13 It should be noted in that respect that, although the procedure laid down by Article 169 of the EC Treaty (now Article 226 EC) and the procedure for clearing EAGGF accounts are both adversarial in character, ensuring compliance with the rights of the defence and can give rise to proceedings before the Court of Justice, the two procedures are nevertheless independent of each other because they pursue different aims and are governed by different rules. In the procedure for failure to fulfil obligations, for the purpose of obtaining a declaration that the conduct of a Member State infringes Community law and of terminating that conduct, the Commission remains at liberty, if the Member State concerned has in the meantime put an end to the alleged failure, to discontinue the procedure, whereas that is not the case with the procedure for clearing EAGGF accounts. The latter procedure serves to determine not only that the expenditure was actually and properly incurred but also that the financial burdens of the Common Agricultural Policy is correctly apportioned between the Member States and the Community, the Commission having in this respect no discretion to derogate from the rules regulating the allocation of those burdens (Joined Cases 15/76 and 16/76 France v Commission [1979] ECR 321, paragraphs 27 and 28).
14 It follows that the Commission is under an obligation to carry out a financial correction if the expenditure in respect of which financing has been requested has not been carried out in accordance with Community rules. Such a financial correction is designed to avoid the EAGGF being burdened with amounts that have not served to finance an objective pursued by the Community legislation in question and therefore, contrary to what the Greek Government maintains, does not constitute a penalty.
18 In that respect, it should be noted, first, that the national legislation applicable in the 1994 financial year authorised the making of the retentions referred to. The documents produced to the Court by the Greek Government show that Article 2 of Law No 1409/83 was not repealed until 1 December 1997 by Law No 2538/97.
19 It should also be noted that the Greek Government acknowledged at the hearing that the retentions referred to were also made on payment of aid to producers who were not members of the ACAs. Since those producers were not parties to the agreements made between the ACAs and their members, the retentions made in respect of them cannot have arisen from those agreements.
27 It should next be observed that, in Joined Cases C-36/97 and C-37/97 Kellinghusen and Ketelsen [1998] ECR I-6337, paragraph 21, the Court held that those provisions prohibit the authorities in the Member States from making a deduction from the payments made or from demanding the payment of administrative fees charged for processing applications and having the effect of reducing the amount of the aid.
28 In that judgment, the Court further held that, unlike the provisions of Regulations Nos 1765/92 and 805/68 which require the payment of aid in its entirety, Commission Regulation (EEC) No 1725/79 of 26 July 1979 on the rules for granting aid to skimmed milk processed into compound feedingstuffs and skimmed-milk powder intended for feed for calves (OJ 1979 L 199, p. 1), which was at issue in Denkavit Futtermittel, made no provision in relation to fees for inspections to be carried out by the Member States (Kellinghusen and Ketelsen, paragraph 23). The same finding must apply as regards the provisions contained in the regulations which formed the subject-matter of the questions referred for a preliminary ruling which were answered in the Bussone judgment, paragraphs 14, 15 and 21. It follows that the Denkavit Futtermittel and Bussone judgments cannot be cited as authority in this case.
29 As for the argument that the fact that the Community legislation adopted in 1992 in the sector of the Common Agricultural Policy does not contain any provision similar to Article 15(3) of Regulation No 1765/92 and Article 30a of Regulation No 805/68 proves that the Community legislature did not intend to prohibit the retention of administrative costs from aid to be paid to producers, it is sufficient to note that those two articles cannot be interpreted in the light of regulations not containing a provision requiring the full payment of aid to beneficiaries (Kellinghusen and Ketelsen, paragraph 27).
32 In that respect, the minutes of the general meetings of the ACAs, annexed to the application, show that the rate of retention used by those ACAs was never lower than 2%. In those circumstances, the Greek Government having failed to prove its allegation, that argument must also be rejected.
36 The summary report shows that, on several inspections carried out by the EAGGF in Greece, deficiencies were found in the system for controlling and administering financial compensation granted to organisations of fruit and vegetable producers.
37 In particular, as regards peaches and nectarines, inspections carried out in Macedonia in August 1994 and August 1995 revealed that recognition had been granted to organisations which did not have the necessary technical facilities to market the production of their members, that none of the organisations inspected had intervention funds, and that the coefficient used for determining the withdrawal price for those fruits was incorrect.
38 According to the summary report, a further inspection was carried out the following year in the nomoi (districts) of Pella and Imathia at the premises of a number of producers' organisations to which recognition had initially been refused. That inspection revealed that the re-examination procedure by the Greek authorities could generally be considered acceptable in relation to Imathia but that, in Pella, a considerable number of organisations should not have been recognised owing to inadequacies in their technical facilities.
39 As regards citrus fruit, the summary report concludes that the Greek system of administering and monitoring the procedures for recognition of the producers' organisations shows several shortcomings. An inspection of a large organisation in the nomos of Arta, of which the Court of Auditors of the European Communities had been critical, had also revealed a number of irregularities and there was no evidence that an inquiry in respect of the withdrawal of oranges in the nomos of Arta, requested by the Commission, had been satisfactorily undertaken.
44 Under Article 13(2) of Regulation No 1035/72, Member States may grant recognition to the organisations concerned only on condition that there is sufficient evidence as regards the duration and effectiveness of their activities, in particular the tasks for the purpose of which they were constituted, and that, from the date of recognition they keep specific accounts in respect of the activities for which recognition was sought. It follows that a Member State must refuse recognition to, or withdraw recognition from, any organisation of producers which, for example, does not have adequate technical facilities for presenting and marketing the products concerned.
46 It should be added, finally, that the lifting by the Commission of its reservations concerning the expenditure by the Hellenic Republic during the 1992 and 1993 financial years does not in any way signify that the maintenance of the correction for the 1994 financial year is unjustified. On the contrary, as the previous paragraph shows, the results of the Commission's inquiries into the producers' organisations, which have not otherwise been challenged by the Hellenic Republic, constitute sufficient justification in that respect.
52 As regards, second, the question whether the inspections carried out by the Commission were sufficiently representative, it must be observed that, as the Commission has argued without being contradicted by the Greek Government, those inspections concerned, in relation to the peaches and nectarines sector, all the producers' organisations having their seat in the nomoi of Pella and Imathia, which account for 95% of production of peaches and nectarines on Greek territory and for 93.5% of the compensatory payments made in that respect. In the citrus fruits sector, the inspections concerned the nomoi of Argolida, Arta and Lefkada, the production of which gave rise to 74% of the compensatory payments made in that sector on Greek territory for the financial year 1994. Having regard to those figures, the representative nature of the inspections made by the Commission and the extent of the irregularities cannot reasonably be cast in doubt.
53 That finding also applies to the inspections carried out in the nomos of Pella. The mere fact that, on a second inspection, the Commission inspected only organisations the recognition of which had already been challenged by the Greek authorities is in no way capable of invalidating the Commission's finding at the conclusion of that inspection, namely that 48% of the producers' organisations established in that nomos did not have technical facilities for the marketing of fruits.
54 Moreover, the adoption of directions addressed to officials responsible for the controls prior to the recognition of the producers' organisations and the creation of computerised files on the members of the producers' organisations do not guarantee that the organisations recognised will in fact fulfil, at the time when recognition is granted to them or subsequently, all the criteria required for that recognition. Those arguments cannot therefore be accepted.
55 It should also be noted, first, that the Commission did not limit itself to finding that a certain number of organisations did not have their own technical facilities but stated that a large number of producers' organisations did not have either their own or rented facilities and that, moreover, it did not observe that the compulsory intervention funds had insufficient receipts but pointed out that those funds were often non-existent.
56 In the light of those considerations, it is apparent that the deficiencies found by the Commission concerned the execution of the essential controls designed to ensure the lawfulness of the expenditure in the area concerned, so that the Commission might reasonably conclude that in this case there was a risk of widespread losses for the EAGGF. Therefore, the correction of 10% made by the Commission does not appear unjustified.
57 As regards the financial correction applied for the nomos of Pella, it should be noted, first, that, according to settled case-law, the Commission may refuse to allow all the expenses under a budgetary heading to be charged to the EAGGF where it finds that sufficient control mechanisms do not exist (Case C-45/97 Spain v Commission [2000] ECR I-5333, paragraph 24), and, moreover, that, in the Belle Report, the Commission expressly reserved for itself the possibility of applying a correction rate higher than 10% in exceptional circumstances. Having regard to the extent and the seriousness of the deficiencies in the essential controls found in the nomos of Pella, the correction of 20% made by the Commission does not appear to be unjustified.
63 According to the Greek Government, that financial correction is unjustified, since the system of monitoring and cross-checking which it has set up in order to compensate for the lack of a vineyard register on its territory is perfectly effective and reliable.
68 In the alternative, the Greek Government maintains that the financial correction of 8.64% is arbitrary and unjustified, since the areas in respect of which premiums for permanent abandonment were granted exceeded the vineyard areas actually grubbed up by only 3.38%.
69 It must be observed, first, that the system of inspection described by the Greek Government in this case does not differ in any way from the system of inspection which it referred to in Case C-46/97 Greece v Commission [2000] ECR I-5719. In paragraph 38 of the judgment in that case, the Court held that that system of controls lacked the objectivity required by Community legislation. As the Greek Government has not adduced any new evidence in that respect, its argument on that point must be rejected.
70 Next, it should be borne in mind that, under the Court's case-law, a Member State whose controls carried out in the context of the application of the rules for the functioning of the guarantee section of the EAGGF have been considered by the Commission to be non-existent or insufficient cannot rebut the Commission's findings without supporting its own allegations by evidence of a reliable and operational supervisory system (Case C-253/97 Italy v Commission, cited above, paragraph 7).
81 Moreover, according to the case-law of the Court, Article 8(1) of Regulation No 729/70 imposes on Member States the general obligation to take the measures necessary to satisfy themselves that the transactions financed by the EAGGF are actually carried out and are executed correctly, to prevent and deal with irregularities and to recover sums lost as a result of irregularities or negligence, even if the specific Community act does not expressly provide for the adoption of particular supervisory measures (Case C-235/97 France v Commission [1998] ECR I-7555, paragraph 45). It also follows from that provision, considered in the light of the duty of faithful cooperation with the Commission laid down by Article 5 of the EC Treaty (now Article 10 EC), with particular regard to the correct utilisation of Community resources, that Member States are required to set up comprehensive administrative checks and on-the-spot inspections thus guaranteeing the proper observance of the substantive and formal conditions for the grant of the premiums in question (Case C-8/88 Germany v Commission, cited above, paragraph 20).
83 Next, it should be emphasised that where, in the case of infringement of the rules on the common organisation of agricultural markets, the Commission applies such a financial correction, it is not required to prove the existence of loss suffered by the EAGGF, but to establish the probability that harm was caused to the Community budget (Case C-232/96 France v Commission [1998] ECR I-5699, paragraph 56).
85 As regards the assessment of the potential risk to the EAGGF resulting from failure to distil the required quantity of wine, it should be borne in mind that, according to the case-law of the Court, the Commission is authorised to calculate that risk on the basis of the wine remaining in storage (Case C-253/97 Italy v Commission, cited above, paragraph 96). Moreover, the Greek Government has not adduced any evidence capable of calling into question the accuracy of the Commission's calculations.
86 Finally, as is clear from the case-law, the Commission cannot be accused of overestimating the quantities to be submitted for compulsory distillation where the harvest estimates on which the Commission relies when making its calculations fall within the sole competence of the producers and the Member State (Case C-253/97 Italy v Commission, cited above, paragraph 95).