Ireland v Commission of the European Communities.
Date: 1998-10-01
21 According to settled case-law, the extent of the obligation to state reasons depends on the nature of the measure in question and on the context in which it was adopted (see Case 327/85 Netherlands v Commission [1988] ECR 1065, paragraph 13, and Case C-54/91 Germany v Commission [1993] ECR I-3399, paragraph 10).
22 In this regard, it is sufficient to point out that decisions concerning the clearance of accounts do not require detailed reasons if they are taken on the basis either of summary reports or of any correspondence between the Member State and the Commission, which implies that the government concerned was closely involved in the process by which the decision came about and is therefore aware of the reason for which the Commission considers that it must not charge the sums in dispute to the EAGGF (Case 347/85 United Kingdom v Commission [1988] ECR 1749, paragraph 60).
27 In that connection it must be borne in mind first of all that, as the Court has consistently held, Articles 2 and 3 of Regulation No 729/70 permit the Commission to charge to the EAGGF only sums paid in accordance with the rules laid down in the various sectors of agricultural production, leaving the Member States to bear the burden of any other sum paid, and in particular any amounts which the national authorities wrongly believed themselves authorised to pay in the context of the common organisation of the markets (Case 11/76 Netherlands v Commission [1979] ECR 245, paragraph 8; Case 18/76 Germany v Commission [1979] ECR 343, paragraph 7; and Case C-48/91 Netherlands v Commission [1993] ECR I-5611, paragraph 14).
28 Although it is therefore for the Commission to prove an infringement of the Community rules, the Member State concerned must demonstrate that the Commission committed an error as to the financial consequences to be attributed to it (see, to this effect, Case 49/83 Luxembourg v Commission [1984] ECR 2931, paragraph 30).
29 The Commission is not compelled to prove that there have been losses but may simply adduce highly significant evidence to that effect.  The reason for this mitigation of the burden of proof on the Commission lies in the division of powers between the Community and the Member States concerning the common agricultural policy (see, to that effect, Case C-48/91 Netherlands v Commission, cited above, paragraph 17).
30 The management of EAGGF finances is principally in the hands of the national administrative authorities responsible for ensuring that the Community rules are strictly observed.  That system, based on trust between national and Community authorities, does not involve any systematic supervision by the Commission, which moreover would in practice be quite unable to carry it out.  Only the Member State is in a position to know and determine precisely the information necessary for drawing up EAGGF accounts since the Commission is not close enough to obtain the information it needs from the economic operators (Case C-48/91 Netherlands v Commission, cited above, paragraph 11).
31 The limits to the extent of the evidence which the Commission must provide are confirmed by the guidelines laid down in the Belle Group Report according to which, for those difficult cases where the extent of the losses cannot be ascertained, `the losses to the Community funds must ... be determined by an evaluation of the risk to which they are exposed by the control deficiency'.
36 First of all, it must be noted here that, as the Court has consistently held (Case 347/85, cited above, paragraph 13) where it proves impossible to establish with certainty the extent to which a national measure that is incompatible with Community law has caused an increase in the expenditure entered under a budgetary item of the EAGGF, the Commission has no choice but to disallow all the expenditure in question.
37 It must further be observed that, where the Commission, instead of rejecting all the expenditure affected by the infringement, has endeavoured to establish the financial impact of the unlawful action by means of calculations based on an assessment of what the situation on the relevant market would have been if the infringement had not occurred, the burden of proving that those calculations are not correct rests on the Member State (Case 347/85, cited above, paragraph 15).
46 It need only be observed here that, where it proves impossible to establish with certainty the extent to which a national measure that is incompatible with Community law has caused an increase in the expenditure entered under a budgetary item of the EAGGF, it is open to the Commission to disallow all the expenditure in question (see Case 347/85, cited above, paragraph 13).
81 The first point to be borne in mind here is the need to ensure legal certainty, which means that rules must enable those concerned to know precisely the extent of the obligations which they impose on them (see, to that effect, Case 348/85 Denmark v Commission [1987] ECR 5225, paragraph 19).  The Commission thus cannot choose, at the time of the clearance of EAGGF accounts, an interpretation which departs from and is not dictated by the normal meaning of the words used (see, to that effect, Case 349/85 Denmark v Commission [1988] ECR 169, paragraphs 15 and 16).
87 The management of EAGGF finances is principally in the hands of the national administrative authorities responsible for ensuring that the Community rules are strictly observed.  That system, based on trust between national and community authorities, does not involve any systematic supervision by the Commission, which moreover would in practice be quite unable to carry it out.  Only the intervention agencies are in a position to provide the information necessary for setting a maximum buying-in price and, where necessary, a reduction coefficient, since the Commission is not close enough to obtain the information it needs from the economic operators (see, to this effect, Case C-48/91 Netherlands v Commission, cited above, paragraph 11).
88 By failing to carry out such inquiries, Ireland failed to fulfil its obligations under Article 8(1) of Regulation No 729/70 (see Case C-2/93 Exportslachterijen van Oordegem v Belgische Dienst voor Bedrijfsleven en Landbouw [1994] ECR I-2283, paragraphs 16 to 18).
89 That provision, which constitutes a specific expression in the agricultural area of the obligations imposed on Member States by Article 5 of the EC Treaty, defines the principles according to which the Community and the Member States must ensure the implementation of Community decisions on agricultural intervention financed by the EAGGF and combat fraud and irregularities in relation to those operations (see Joined Cases 146/81, 192/81 and 193/81 BayWa and Others v Bundesanstalt für Landwirtschaftliche Marktordnung [1982] ECR 1503, paragraph 13).  It imposes on the 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, even if the specific Community act does not expressly provide for the adoption of particular supervisory measures (see Case C-8/88 Germany v Commission [1990] ECR I-2321, paragraphs 16 and 17).
90 Moreover, the EAGGF found that there had been an infringement of more than Article 9(2) of Regulation No 859/89.  It also pointed out that the practices referred to at paragraph 85 of the present judgment breached the prohibition on the transfer of rights and obligations arising from the tender procedure (Article 12(2) of Regulation No 859/89) and the tenderers' obligation to lodge a security (Article 9(4)(c)) and to receive payment personally (Article 15) (pp. 103 and 104 of the Summary Report).
100 The Court has consistently held that Articles 2 and 3 of Regulation No 729/70 permit the Commission to charge to the EAGGF only sums paid in accordance with the rules laid down in the various sectors of agricultural production, leaving the Member States to bear the burden of any other sum paid, and in particular any amounts which the national authorities wrongly believed themselves authorised to pay in the context of the common organisation of the markets (Case 11/76 Netherlands v Commission, cited above, paragraph 8; Case 18/76 Germany v Commission, cited above, paragraph 7; and Case C-48/91 Netherlands v Commission, cited above, paragraph 14).
101 Although it is therefore for the Commission to prove an infringement of the Community rules, the Member State concerned must demonstrate that the Commission committed an error as to the financial consequences to be attributed to it (see, to this effect, Case 49/83 Luxembourg v Commission, cited above, paragraph 30).
103 In addition, it indicated how it was possible for the unlawful conduct of the Irish tenderers to have led to an erroneous assessment of the market by the Community authorities likely to result in the purchase of excessive quantities of beef and veal, possibly at higher prices.  In so doing, it established the probability that harm was caused to the Community budget.  The Commission cannot be required to do more than that, since it cannot carry out the systematic checks and since analysis of the current state of a given market depends on information gathered by the Member States (see Case C-48/91 Netherlands v Commission, cited above, paragraph 17).
106 Moreover, it is apparent from the correspondence produced by the Commission that the Irish authorities acknowledged on two occasions, in the course of negotiations with it, that use of the device of connected companies in order to reduce the risk of security loss was widespread (see point 90 of the Advocate General's Opinion).
108 As for the setting of two corrections in 1991, it must be noted that, having identified separate risks arising from different deficiencies in the control system, the Commission was entitled to assess them separately. Moreover, as the Court has consistently held, the Commission, instead of seeking to establish the financial impact of the failure of the Irish monitoring authorities to fulfil their obligations, could have rejected the entire expenditure tainted by the infringement (see Case 347/85, cited above, paragraph 13).
109 Finally, having regard to the essential nature of the formalities which were not complied with and of the probability of losses, or even fraud, to the detriment of the Community budget, the amount disallowed by the Commission, which was limited to 2% of the expenditure involved, cannot be regarded as excessive and disproportionate (Case C-49/94 Ireland v Commission [1995] ECR I-2683, paragraph 22).