Italian Republic v Commission of the European Communities.
Date: 1998-10-01
29 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).
40 Article 6(4) of Regulation No 859/89 provides that bone-in meat is to be wrapped in polyethylene or polypropylene suitable for wrapping foodstuffs and in cotton (stockinettes) or a synthetic material sufficiently resistant, in such a way that the meat is entirely covered by the said wrappings.
58 As the Court has already observed, 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-48/91 Netherlands v Commission [1993] ECR I-5611, paragraph 14). 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 347/85 United Kingdom v Commission [1988] ECR 1749, paragraph 16; Case C-281/89 Italy v Commission [1991] ECR I-347, paragraph 13; Case C-55/91 Italy v Commission [1993] ECR I-4813, paragraph 13; and Case C-48/91, cited above, paragraph 18).  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).
59 The Member State, for its part, cannot rebut the Commission's findings by mere assertions which are not substantiated by evidence of a reliable and operational supervisory system.  If it is not able to show that they are inaccurate, the Commission's findings can give rise to serious doubts as to the existence of an adequate and effective series of supervisory measures and inspection procedures (see, to that effect, Case C-8/88 Germany v Commission, cited above, paragraph 28).
65 It must be observed first of all 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 United Kingdom v Commission, cited above, paragraph 15).
75 It must be observed first of all 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 United Kingdom v Commission, cited above, paragraph 15).
114 It cannot be contended that such an obligation is not expressly laid down in the relevant regulations.  The Court has consistently held that it is apparent from Article 8(1) of Regulation No 729/70 that Member States are under a 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, cited above, paragraphs 16 and 17, and Case C-2/93 Exportslachterijen van Oordegem v Belgische Dienst voor Bedrijfsleven en Landbouw [1994] ECR I-2283, paragraphs 16 to 18).
116 Those provisions must be viewed in the light of the duty to cooperate in good faith with the Commission, established by Article 5 of the EC Treaty, which, with particular regard to the utilisation of Community resources, requires Member States to set up comprehensive administrative checks and on-the-spot inspections, thus guaranteeing the conformity of financial operations with Community law.  Consequently, if, as in the present case, no comprehensive system exists or if the system introduced gives rise to doubts as to compliance with the conditions imposed for eligibility for the reimbursement of the expenditure concerned, the Commission is entitled to disallow certain expenditure incurred by the Member State in question (see Case C-8/88 Germany v Commission, cited above, paragraphs 16 to 21).
118 Although the compensation system is indeed based on the principle of financial neutrality in that the levies collected must be equivalent to the reimbursement paid, as is evident from Article 6(2) of Regulation No 1358/77 and the case-law of the Court of Justice (see Case 121/83 Zuckerfabrik Franken v Hauptzollamt Würzburg [1984] ECR 2039, paragraph 26), that balance must be achieved at Community level and not at the level of the Member State or the undertaking concerned as the Advocate General has indicated at points 138 and 140 of his Opinion.
119 Traders who pay the levy are not, moreover, necessarily the same as those who receive the reimbursement.  The latter include specialised traders who are not liable for the levy.  Moreover, even so far as concerns manufacturers, the two amounts, fixed according to the manufacturing quota allocated to them and to the duration of storage respectively, do not automatically coincide.
120 That is why the Member States must introduce adequate inspection procedures in order to check whether the storage costs eligible for reimbursement have actually been incurred.  The absence of such procedures, or deficiencies therein, could allow certain traders to obtain reimbursement for fictitious costs, which would obviously lead to distortions of competition, to the detriment in particular of traders in other Member States where the control system does conform to the requirements of the Community rules.
122 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, cited above, paragraph 14).
123 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).
124 Moreover, as the Court has consistently held, the Commission, instead of seeking to establish the financial impact of the failure of the Italian monitoring authorities to fulfil their obligations, could have rejected the entire expenditure tainted by the infringement (see Case 347/85 United Kingdom v Commission, cited above, paragraph 13).