1 By its appeal, the Hellenic Republic asks the Court to set aside the judgment of the General Court of the European Union of 30 March 2017, Greece v Commission (T‑112/15, ‘the judgment under appeal’, EU:T:2017:239), by which the General Court dismissed its action challenging Commission Implementing Decision 2014/950/EU of 19 December 2014 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 2014 L 369, p. 71; ‘the decision at issue’).
2 Recitals 3, 4, 21 and 24 of Council Regulation (EC) No 1782/2003 of 29 September 2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers and amending Regulations (EEC) No 2019/93, (EC) No 1452/2001, (EC) No 1453/2001, (EC) No 1454/2001, (EC) 1868/94, (EC) No 1251/1999, (EC) No 1254/1999, (EC) No 1673/2000, (EEC) No 2358/71 and (EC) No 2529/2001 (OJ 2003 L 270, p. 1), stated: ‘(3) In order to avoid the abandonment of agricultural land and ensure that it is maintained in good agricultural and environmental condition, standards should be established which may or may not have a basis in provisions of the Member States. It is therefore appropriate to establish a Community framework within which Member States may adopt standards taking account of the specific characteristics of the areas concerned, including soil and climatic conditions and existing farming systems (land use, crop rotation, farming practices) and farm structures. (4) Since permanent pasture has a positive environmental effect, it is appropriate to adopt measures to encourage the maintenance of existing permanent pasture to avoid a massive conversion into arable land. … (21) The support schemes under the common agricultural policy provide for direct income support in particular with a view to ensuring a fair standard of living for the agricultural community. This objective is closely related to the maintenance of rural areas. In order to avoid misallocations of Community funds, no support payments should be made to farmers who have artificially created the conditions required to obtain such payments. … (24) Enhancing the competitiveness of Community agriculture and promoting food quality and environment standards necessarily entail a drop in institutional prices for agricultural products and an increase in the costs of production for agricultural holdings in the Community. To achieve those aims and promote more market-oriented and sustainable agriculture, it is necessary to complete the shift from production support to producer support by introducing a system of decoupled income support for each farm. While decoupling will leave the actual amounts paid to farmers unchanged, it will significantly increase the effectiveness of the income aid. It is, therefore, appropriate to make the single farm payment conditional upon cross-compliance with environmental, food safety, animal health and welfare [standards], as well as the maintenance of the farm in good agricultural and environmental condition.’
3 Regulation No 1782/2003 contained Title III, headed ‘Single payment scheme’, which included Chapter 3, relating to ‘payment entitlements’. Section 1 of that chapter, concerning ‘payment entitlements based on areas’, contained Article 44 of the regulation, relating to ‘use of payment entitlements’, paragraph 2 of which provided: ‘“Eligible hectare” shall mean any agricultural area of the holding taken up by arable land and permanent pasture except areas under permanent crops, forests or used for non-agricultural activities.’
4 In Title III, Chapter 4, which was headed ‘Land use under the single payment scheme’, included, in Section 1 thereof, Article 51 of the regulation, relating to ‘agricultural use of the land’. Article 51 provided: ‘Farmers may use the parcels declared according to Article 44(3) for any agricultural activity except for permanent crops and except for the production of the products referred to in Article 1(2) of Council Regulation (EC) No 2200/96 of 28 October 1996 on the common organisation of the market in fruit and vegetables [(OJ 1996 L 297, p. 1), as amended by Commission Regulation (EC) No 47/2003 of 10 January 2003 (OJ 2003 L 7, p. 64)], [and] in Article 1(2) of Council Regulation (EC) No 2201/96 of 28 October 1996 on the common organisation of the markets in processed fruit and vegetable products [(OJ 1996 L 297, p. 29), as amended by Commission Regulation (EC) No 453/2002 of 10 January 2003 (OJ 2002 L 72, p. 9)] …’
5 In Title IV of Regulation No 1782/2003, headed ‘Other aid schemes’, Chapter 12, relating to ‘beef and veal payments’, contained Article 132 of the regulation, headed ‘Extensification payment’. Article 132(3) stated: ‘For the purposes of the application of paragraph 2: (a) by way of derogation from Article 131(2)(a), the stocking density of the holdings shall be determined by taking into account the male bovine animals, cows, and heifers present thereon during the calendar year concerned, as well as the sheep and/or goats for which premium applications have been submitted for the same calendar year. The number of animals shall be converted to [livestock units (LU)] by reference to the conversion table referred to in Article 131(2)(a); (b) without prejudice to the third indent of Article 131(2)(b), areas used for the production of arable crops as defined in Annex IX shall not be taken as “forage area”; (c) the forage area to be taken into account for the calculation of the stocking density shall consist of at least 50% of pasture land. “Pasture land” shall be defined by Member States. The definition shall include at least the criterion that pasture land shall be grassland which, following the local farming practices is recognised as being destined for grazing bovine animals and/or sheep. However, this shall not exclude the mixed use of pasture land during the same year (pasture, hay, grass silage).’
6 The first paragraph of Article 2 of Commission Regulation (EC) No 796/2004 of 21 April 2004 laying down detailed rules for the implementation of cross-compliance, modulation and the integrated administration and control system provided for in Regulation No 1782/2003 (OJ 2004 L 141, p. 18), as amended by Commission Regulation (EC) No 972/2007 of 20 August 2007 (OJ 2007 L 216, p. 3) (‘Regulation No 796/2004’), was worded as follows: ‘For the purposes of this Regulation, the following definitions shall apply: … (1a) “Agricultural parcel”: shall mean a continuous area of land on which a single crop group is cultivated by a single farmer; however, where a separate declaration of the use of an area within a crop group is required in the context of this Regulation, that specific use shall further limit the agricultural parcel; … (2) “Permanent pasture”: shall mean land used to grow grasses or other herbaceous forage naturally (self-seeded) or through cultivation (sown) and that has not been included in the crop rotation of the holding for five years or longer, excluding land under set-aside schemes …; (2a) “Grasses or other herbaceous forage”: shall mean all herbaceous plants traditionally found in natural pastures or normally included in mixtures of seeds for pastures or meadows in the Member State (whether or not used for grazing animals). Member States may include crops listed in Annex IX to Regulation (EC) No 1782/2003; …’
7 In that regard, recital 1 of Commission Regulation (EC) No 239/2005 of 11 February 2005 (OJ 2005 L 42, p. 3), which amended Regulation No 796/2004 as originally adopted, stated: ‘Article 2 of [Regulation No 796/2004 as originally adopted] contains several definitions that need to be clarified. In particular, the definition of “permanent pasture” in point 2 of that Article needs to be clarified and it is also necessary to introduce a definition for the term “grasses or other herbaceous forage”. However, in that context it has to be considered that the Member States need to have a certain flexibility to be able to take account of local agronomic conditions.’
8 Article 8 of Regulation No 796/2004, headed ‘General principles in respect of agricultural parcels’, provided in paragraph 1: ‘A parcel that contains trees shall be considered an agricultural parcel for the purposes of the area-related aid schemes provided that agricultural activities referred to in Article 51 of Regulation [No 1782/2003] or, where applicable, the production envisaged can be carried out in a similar way as on parcels without trees in the same area.’
9 Title III of Regulation No 796/2004, relating to ‘controls’, included Article 30, headed ‘Determination of areas’. Article 30(2) stated: ‘The total area of an agricultural parcel may be taken into account provided that it is fully utilised in accordance with the customary standards of the Member State or region concerned. In other cases the area actually utilised shall be taken into account. In respect of the regions where certain features, in particular hedges, ditches and walls, are traditionally part of good agriculture cropping or utilisation practices, the Member States may decide that the corresponding area is to be considered part of the fully utilised area on condition that it does not exceed a total width to be determined by the Member States. That width must correspond to a traditional width in the region in question and shall not exceed 2 metres. …’
10 Title IV, headed ‘Clearance of accounts and Commission monitoring’, of Council Regulation (EC) No 1290/2005 of 21 June 2005 on the financing of the common agricultural policy (OJ 2005 L 209, p. 1) contained Article 31 of the regulation, headed ‘Conformity clearance’. Article 31(3) was worded as follows: ‘Before any decision to refuse financing is taken, the findings from the Commission’s inspection and the Member State’s replies shall be notified in writing, following which the two parties shall attempt to reach agreement on the action to be taken. If agreement is not reached, the Member State may request opening of a procedure aimed at reconciling each party’s position within four months. A report of the outcome of the procedure shall be given to the Commission, which shall examine it before deciding on any refusal of financing.’
11 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) contained Article 11, headed ‘Conformity clearance’. Article 11(1) to (3) provided: ‘1. When, as a result of any inquiry, the Commission considers that expenditure was not effected in compliance with Community rules, it shall communicate its findings to the Member State concerned and indicate the corrective measures needed to ensure future compliance with those rules. The communication shall make reference to this Article. The Member State shall reply within two months of receipt of the communication and the Commission may modify its position in consequence. In justified cases, the Commission may agree to extend the period for reply. After expiry of the period for reply, the Commission shall convene a bilateral meeting and both parties shall endeavour to come to an agreement as to the measures to be taken as well as to the evaluation of the gravity of the infringement and of the financial damage caused to the Community budget. 2. Within two months from the date of the reception of the minutes of the bilateral meeting referred to in the third subparagraph of paragraph 1, the Member State shall communicate any information requested during that meeting or any other information which it considers useful for the ongoing examination. In justified cases, the Commission may, upon reasoned request of the Member State, authorise an extension of the period referred to in the first subparagraph. The request shall be addressed to the Commission before the expiry of that period. After the expiry of the period referred to in the first subparagraph, the Commission shall formally communicate its conclusions to the Member State on the basis of the information received in the framework of the conformity clearance procedure. The communication shall evaluate the expenditure which the Commission envisages to exclude from Community financing under Article 31 of Regulation [No 1290/2005] and shall make reference to Article 16(1) of this Regulation. 3. The Member State shall inform the Commission of the corrective measures it has undertaken to ensure compliance with Community rules and the effective date of their implementation. 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. When evaluating the expenditure to be excluded from Community financing, the Commission may take into account any information communicated by the Member State after the expiry of the period referred to in paragraph 2 if this is necessary for a better estimate of the financial damage caused to the Community budget, provided that the late transmission of the information is justified by exceptional circumstances.’
12 Article 16 of Regulation No 885/2006, headed ‘Conciliation procedure’, provided in paragraph 1: ‘A Member State may refer a matter to the Conciliation Body within thirty working days of receipt of the Commission’s formal communication referred to in the third subparagraph of Article 11(2) by sending a reasoned request for conciliation to the secretariat of the Conciliation Body. The procedure to be followed and the address of the secretariat shall be notified to the Member States through the Committee on the Agricultural Funds.’
13 Article 4(1)(h) of Regulation (EU) No 1307/2013 of the European Parliament and of the Council of 17 December 2013 establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy and repealing Council Regulation (EC) No 637/2008 and Council Regulation (EC) No 73/2009 (OJ 2013 L 347, p. 608) sets out the following definition: ‘“permanent grassland and permanent pasture” (together referred to as “permanent grassland”) means land used to grow grasses or other herbaceous forage naturally (self-seeded) or through cultivation (sown) and that has not been included in the crop rotation of the holding for five years or more; it may include other species such as shrubs and/or trees which can be grazed provided that the grasses and other herbaceous forage remain predominant as well as, where Member States so decide, land which can be grazed and which forms part of established local practices where grasses and other herbaceous forage are traditionally not predominant in grazing areas’.
14 The background to the dispute was set out by the General Court in paragraphs 1 to 11 of the judgment under appeal and may, for the purposes of the present proceedings, be summarised as follows.
15 In September 2008 and February 2009, the European Commission carried out two inquiries concerning the expenditure incurred by the Hellenic Republic in respect of area-related aid and rural development measures, respectively, under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) and the European Agricultural Fund for Rural Development (EAFRD) for claim year 2008.
16 Thus, by letter of 21 November 2008, the Commission stated that the on-the-spot checks carried out during the inquiries in question had shown that certain areas accepted as eligible for aid did not comply with the eligibility criteria laid down in Article 44(2) of Regulation No 1782/2003 and in Article 2 of Regulation No 796/2004. The Commission referred in support of that finding to a set of examples which are noted in paragraph 40 of the judgment under appeal.
17 After the Commission had sent its observations and the Hellenic Republic had sent its replies, a bilateral meeting was held on 8 April 2010. On 2 June 2010 the Commission sent its conclusions to the Hellenic Republic, to which the latter replied on 2 August 2010.
18 On 31 May 2013 the Commission informed the Hellenic Republic that it was maintaining its position regarding the net amount of the proposed corrections and the grounds that justified them.
19 The Hellenic Republic referred the matter to the Conciliation Body on 11 July 2013. The Conciliation Body delivered its opinion on 31 January 2014, after which the Commission adopted its final position on 26 March 2014. By its final position, the Commission found (i) weaknesses in the operation of the Land Parcel Identification System and the Geographic Information System (‘the LPIS-GIS’) affecting the cross-checks and the administrative checks, (ii) weaknesses in the on-the-spot checks and (iii) incorrect calculation of payments and penalties. Moreover, the Commission drew attention to the recurrent nature of those findings. The final net amount of the correction imposed on the Hellenic Republic thus amounted to EUR 86 007 771.11.
20 Consequently, on 19 December 2014 the Commission adopted the decision at issue, by which it excludes from EU financing certain expenditure incurred by the Hellenic Republic under the EAGGF Guarantee Section, the EAGF and the EAFRD.
21 By that decision, the Commission applied flat-rate corrections for claim year 2008, first, in the field of area-related aid in a total amount of EUR 61 012 096.85, from which it deducted the sum of EUR 2 135 439.32. That correction takes account in particular of a flat-rate correction of 10%, that is to say, EUR 32 542 837.74, in respect of farmers who had declared only pasture. Second, the Commission imposed corrections for claim year 2008 in the field of rural development in an amount of EUR 5 007 86.36 imputed to the 2009 financial year and of EUR 5 496 524.54 imputed to the 2010 financial year, that is to say, in a total amount of EUR 10 504 391.90, from which it deducted a total amount of EUR 2 588 231.20 corresponding to EUR 2 318 055.75 for the 2009 financial year and EUR 270 175.45 for the 2010 financial year. It follows that the financial impacts arising from the decision at issue that were to be borne by the Hellenic Republic by virtue of the flat-rate corrections in the fields of area-related aid and rural development were EUR 58 876 657.53 and EUR 7 916 160.70 respectively.
22 In the summary report attached to the decision at issue, referred to in paragraph 41 of the judgment under appeal, the Commission justified the imposition of the flat-rate corrections on the following grounds: - as regards the LPIS-GIS: the Commission’s staff were of the opinion that it did not comply with the requirements stemming from Article 20 of Regulation No 1782/2003. In particular: - errors had been established regarding the boundaries of the reference parcels and their maximum eligible area, that information being substantially incorrect. This was in particular so for the areas that were used for pasture, which, as audits had shown, could not always be considered eligible for aid on the basis of Article 2, first paragraph, points 2 and 2a, of Regulation No 796/2004. Consequently, the farmers were not correctly informed about the eligibility of the parcels that they intended to declare. Moreover, the cross-checks to avoid improper multiple granting of the same aid in respect of the same parcel were not conclusive, unless on-the-spot checks that would detect the incorrect location of the parcels and their eligibility had taken place; - from 2009, new LPIS-GIS information was used for declarations and cross-checks. However, the results of the cross-checks could not be used to evaluate the risk to the Fund in respect of 2008. During that year, farmers were declaring their parcels on the basis of the former LPIS-GIS. If the system had operated correctly during 2008, some of those parcels would have been refused as ineligible, a significant proportion thereof being constituted by the permanent pasture which the Greek authorities considered eligible and which the Commission had already, in previous correspondence, stated to be ineligible, because of its non-compliance with the relevant legal provisions; - the on-the-spot checks did not satisfy, for claim year 2008, the requirements of Articles 23 and 30 of Regulation No 796/2004. In particular: - as regards pasture: the absence of measurement of pasture was deemed a particular point of concern. In several cases, eligible areas were covered with ligneous plants and other parcels were partly covered with herbaceous forage, so that they did not meet the criteria of ‘permanent pasture’, within the meaning of Article 2, first paragraph, point 2, of Regulation No 796/2004. The land declared was often located in remote areas that lacked visible boundaries and were not easily accessible. It was found that the inspectors had not measured areas, as required by Article 30 of Regulation No 796/2004. Whilst the Hellenic Republic had on several occasions stated that the contested areas had always been used as pasture without the Commission contesting their eligibility, those areas had also been ineligible in the light of the rules applicable before 2006 and the Directorate-General (DG) for Agriculture had also criticised their eligibility (inquiry AP/2001/06); - as regards on-the-spot checks by remote sensing, the procedure applied did not comply with the relevant requirements. Consequently, aid was paid in respect of parcels that were ineligible under Article 44(2) of Regulation No 1782/2003 and Article 2 of Regulation No 796/2004; - as regards standard on-the-spot checks, re-measurements showed some differences, without however demonstrating a systematic failure in the operation of this type of check, with the exception of pasture. In 2008, in view of the introduction of a new LPIS-GIS, the Hellenic Republic did not input into the LPIS-GIS the coordinates of the parcels subject to standard on-the-spot-checks. Hence there was no graphical overlay making it possible to detect multiple claims. - the shortcomings established constituted a continued failure in the functioning of key controls and ancillary controls and generated a risk for the Fund in respect of area-related aid. Moreover, those findings were of a recurrent nature; - the shortcomings established had an effect on the additional ‘coupled’ area-related aid.
23 In the light of the findings relating to the weaknesses in the LPIS-GIS and in the on-the-spot checks, the Commission applied corrections broken down in accordance with the following categorisation: - for farmers declaring only pasture, a flat-rate correction of 10% was imposed on account of a problematic situation in the LPIS and the result of the on-the-spot checks, indicating disclosing a high level of error and, therefore, of significant irregularities. Although, according to the Commission, a correction of 25% was justified, the application of a flat-rate correction of 10% appeared to be more appropriate taking into account the ‘buffer effect’; - for farmers who declared no pasture, a flat-rate correction of 2% was imposed taking account of the ‘buffer effect’, of the improvement in the standard on-the-spot checks and of the fact that, in that category of farmers, the level of irregularities identified was lower and that standard on-the-spot checks accounted for a significant proportion of the checks; - for additional area-related aid, a flat-rate correction of 5% was imposed given that that aid was negatively affected by the belated launch of on-the-spot checks and there is no ‘buffer effect’; - for all area-based rural development measures, a flat-rate correction of 5% was imposed.
24 By application lodged at the Registry of the General Court on 2 March 2015, the Hellenic Republic brought an action for annulment of the decision at issue, relying, in essence, upon three pleas in law.
25 The first plea, relating to the flat-rate financial correction of 10%, in the amount EUR 32 542 837.74, which was applied to farmers who had declared only pasture, alleged misinterpretation and misapplication of Article 2, first paragraph, point 2, of Regulation No 796/2004, a failure to state adequate reasons and infringement of the principle of proportionality and of the limits on the Commission’s discretion. The second plea, relating to the flat-rate financial correction of 5% in respect of additional coupled aid, alleged an error of fact, a failure to state adequate reasons and an infringement of the principle of proportionality. The third plea, relating to the financial correction of 5% applied in respect of aid under the second pillar (which is dedicated to rural development) of the common agricultural policy (CAP), alleged a failure to state reasons, an error of fact and an infringement of the principle of proportionality.
26 By the judgment under appeal, the General Court dismissed the first two pleas and upheld the action as regards the third plea. Therefore, in point 1 of the operative part of the judgment under appeal, it annulled the decision at issue ‘as regards the amounts of correction of EUR 5 007 867.36, of deduction of EUR 2 318 055.75 and of financial impact of EUR 2 689 811.61, in relation to expenditure incurred by the Hellenic Republic in the sector of Rural Development EAFRD Axis 2 (2007-2013, area-related measures), for the 2009 financial year, in respect of the weaknesses in the [LPIS] and the on-the-spot checks (second pillar, claim year 2008)’ and, in point 2 of the operative part, it dismissed the action as to the remainder.
27 By its appeal, the Hellenic Republic claims that the Court should: - set aside the judgment under appeal; - annul the decision at issue; and - order the Commission to pay the costs.
28 The Commission contends that the Court should: - dismiss the appeal as partly inadmissible and partly unfounded; and - order the Hellenic Republic to pay the costs.
29 The Kingdom of Spain, which has intervened in support of the Hellenic Republic, contends that the Court should: - set aside the judgment under appeal; and - order the Commission to pay the costs.
30 The Hellenic Republic puts forward six grounds of appeal. The first three grounds of appeal concern the General Court’s assessment relating to the financial correction of 10% applied to area-related aid for farmers who had declared only pasture. The fourth and fifth grounds concern the General Court’s assessment relating to the financial correction of 5% applied to additional area-related aid. The sixth ground concerns the General Court’s assessment as to the financial correction of 5% applied to aid under the CAP’s second pillar, which is dedicated to rural development.
31 The first ground of appeal is in three parts.
32 By the first part of its first ground of appeal, the Hellenic Republic complains, in essence, that in paragraphs 24 to 67 of the judgment under appeal the General Court misinterpreted and misapplied Article 2, first paragraph, point 2, of Regulation No 796/2004, which sets out the definition of ‘permanent pasture’. More specifically, it criticises the General Court for having, in paragraphs 34 to 36 of the judgment under appeal, interpreted that concept too narrowly, by adopting a criterion relating exclusively to the type of vegetation covering the area in question. By contrast, the Hellenic Republic, supported by the Kingdom of Spain, puts forward a broad interpretation of that concept, which is stated to reflect the intention of the EU legislature and covers ‘Mediterranean’ pasture, that is to say, areas covered with ligneous or woody vegetation that are suitable for pasture and on which grasses and other herbaceous forage are traditionally not predominant.
33 According to the Hellenic Republic, that interpretation is permitted by the wording of Article 2, first paragraph, point 2, of Regulation No 796/2004 and that regulation’s context and objectives. It thus states that that broad interpretation of the concept of ‘permanent pasture’ results both from Article 4(1)(h) of Regulation No 1307/2013 and from the guide intended to provide Member States with guidance on how best to comply with the legal provisions in force relating to the CAP, published by the Joint Research Centre (JRC) of the Commission on 2 April 2008, and from the action plan drawn up in October 2012 by the Greek authorities and the Commission (‘the 2012 Action Plan’).
34 In support of this line of argument, the Kingdom of Spain submits, in essence, that the General Court failed to take account of the entire context of Regulation No 1782/2003 and all the objectives pursued by it, which include the retention of certain payments linked to production. More specifically, Article 132 of Regulation No 1782/2003, relating to the extensification payment, referred to pasture land without specifying that it had to be covered exclusively by herbaceous vegetation.
35 The Commission counters by stating that the General Court was correct in its interpretation and application of the concept of ‘permanent pasture’ in Article 2, first paragraph, point 2, of Regulation No 796/2004. It is clear from that definition that the criterion relating to the nature of the vegetation covering the agricultural area concerned is decisive. Furthermore, the guidance referred to in paragraph 33 of the present judgment, the 2012 Action Plan and Regulation No 1307/2013, which is applicable from 1 January 2015 and contains an extended definition of the concept of ‘permanent pasture’, are not relevant for the purpose of interpreting the law applicable at the material time and assessing the financial correction decided upon by the Commission.
36 By the second part of the first ground of appeal, the Hellenic Republic criticises the General Court, in essence, for having held in paragraph 66 of the judgment under appeal that, irrespective of the interpretation of the concept of ‘permanent pasture’ that is adopted, the areas at issue remained ineligible, in the light of the shortcomings established in the application of the rules relating to pasture and in the operation of the system of LPIS-GIS checks.
37 The Hellenic Republic submits that, in accordance with the ‘buffer effect’, the General Court could not infer from the sporadic shortcomings found in the operation of the LPIS-GIS in respect of a few parcels identified in paragraph 40 of the judgment under appeal that, in any event, all the areas that were declared as pasture so far as concerns 2008 and were covered by the financial correction would have been ineligible, whether the narrow definition of Article 2 of Regulation No 796/2004 is adopted or the more favourable definitions, stemming from the 2012 Action Plan or from Article 4(1)(h) of Regulation No 1307/2013.
38 The Commission contends that this line of argument should be rejected.
39 In the third part of its first ground of appeal, the Hellenic Republic complains that the reasons stated by the General Court are inadequate since, in paragraphs 20 to 22 of the judgment under appeal, it placed its assessment in the wake of the case-law relating to allocation of the burden of proof in the context of the conformity clearance procedure. That case-law is not relevant with regard to the interpretation of the concept of ‘permanent pasture’ within the meaning of Article 2, first paragraph, point 2, of Regulation No 796/2004.
40 The Commission contends that this line of argument should be rejected.
41 First of all, it should be noted that, without formally raising a plea of inadmissibility, the Commission has doubts as to whether the appeal is admissible since, in its submission, the Hellenic Republic has simply repeated the arguments put forward by it at first instance.
42 That argument of the Commission must, however, be rejected.
43 It is, admittedly, settled case-law that an appeal must indicate precisely the contested elements of the judgment which the appellant seeks to have set aside, and also the legal arguments specifically advanced in support of the appeal (judgment of 4 July 2000, Bergaderm and Goupil v Commission, C‑352/98 P, EU:C:2000:361, paragraph 34).
44 However, in the present case, the Hellenic Republic does not merely repeat or reproduce verbatim the pleas in law and arguments which it submitted to the General Court, but disputes before the Court of Justice the interpretation or application of EU law by the General Court in the judgment under appeal.
45 Accordingly, the grounds of appeal relied on by the Hellenic Republic must be assessed as to the merits.
46 As regards the first part of the first ground of appeal, in accordance with the Court’s settled case-law it is necessary, in interpreting a provision of EU law, to take into account not only its wording but also its context and the objectives of the rules of which it forms part.
47 According to the wording of Article 2, first paragraph, point 2, of Regulation No 796/2004, ‘permanent pasture’ is ‘land used to grow grasses or other herbaceous forage naturally (self-seeded) or through cultivation (sown) and that has not been included in the crop rotation of the holding for five years or longer’.
48 It follows that, whilst that article expressly refers to the presence of ‘grasses or other herbaceous forage’, so that an area on which only herbaceous plants are present certainly constitutes ‘permanent pasture’, the presence of other types of vegetation, such as ligneous vegetation or shrubs, is not, however, ruled out. Accordingly, as the Advocate General has observed in point 56 of her Opinion, the wording of Article 2, first paragraph, point 2, of Regulation No 796/2004 remains ambiguous as to whether classification as ‘permanent pasture’ is subject to the criterion relating to the type of vegetation covering the area concerned and, therefore, is limited to areas upon which only grasses or other herbaceous plants are present.
49 As regards the context of Article 2, first paragraph, point 2, of Regulation No 796/2004, first of all it is apparent from recital 1 of Regulation No 239/2005 that, regard being had to the need to clarify the concept of ‘permanent pasture’, the intention of the EU legislature was to allow the Member States a certain flexibility in order to take account of diverse various local agronomic conditions.
50 Next, it is apparent from the very wording of Article 8(1) of Regulation No 796/2004, which refers to Article 51 of Regulation No 1782/2003, that actual agricultural use of an agricultural area is a more relevant criterion than that of the type of vegetation covering the area concerned. As provided in Article 8(1) of Regulation No 796/2004, a parcel containing trees on which the production envisaged can be carried out in a similar way as on a parcel without trees in the same area is to be considered to be an ‘agricultural parcel’.
51 Furthermore, the criterion relating to the type of vegetation covering the area concerned is also qualified in Article 30(2) of Regulation No 796/2004, in the context of checking the acreage of an agricultural parcel. Under that provision, the Member States may decide that the total area of an agricultural parcel can encompass the area occupied by hedges, provided that that feature is traditionally part of good agriculture utilisation practices.
52 Finally, since the definition of ‘permanent pasture’ is contained in Regulation No 796/2004, which is intended to implement Regulation No 1782/2003, that concept is, under settled case-law of the Court, to be interpreted in conformity with the basic act (judgment of 26 July 2017, Czech Republic v Commission, C‑696/15 P, EU:C:2017:595, paragraph 33).
53 Regulation No 1782/2003 does not make classification as ‘permanent pasture’ conditional upon the presence of vegetation of a given type, as Article 44(2) of that regulation excludes from the status of ‘eligible hectare’ only ‘permanent crops’, ‘forests’ and areas ‘used for non-agricultural activities’.
54 Accordingly, it follows from the foregoing that, as the Advocate General has stated in point 63 of her Opinion, the decisive criterion in respect of the definition of ‘permanent pasture’ is not the type of vegetation covering the agricultural area, but the actual use of that area for an agricultural activity that is typical for ‘permanent pasture’. Consequently, the presence of ligneous plants or of shrubs cannot, in itself, prevent classification of an area as ‘permanent pasture’, as long as their presence does not compromise the actual use of that area for an agricultural activity (see, to that effect, judgment of 9 June 2016, Planes Bresco, C‑333/15 and C‑334/15, EU:C:2016:426, paragraph 35).
55 Such an interpretation is, moreover, borne out by the objectives pursued by Regulation No 1782/2003, namely stabilisation of agricultural income and environmental protection.
56 First, as regards the objective of stabilising agricultural income, it is apparent from recitals 21 and 24 of Regulation No 1782/2003 that the single payment scheme is conditional on maintenance of the farm in good agricultural and environmental condition and is intended to ensure a fair standard of living for farmers. Thus, the single payment scheme is intended to apply to all farmers, without access to such payment being capable of being determined by the type of vegetation present on the areas concerned.
57 Second, recitals 3 and 4 of Regulation No 1782/2003 point out the positive environmental effect of permanent pasture and state that Regulation No 1782/2003 pursues a dual objective, that is to say, to prevent, first, the abandonment of agricultural land and, second, the conversion of existing permanent pasture into arable land. It follows, as the Advocate General has stated in point 68 of her Opinion, that the pursuit of those objectives is not consistent with a restrictive interpretation of the concept of ‘permanent pasture’ as relating exclusively to the type of vegetation covering the agricultural area.
58 It follows from all the foregoing considerations that, for the purpose of determining whether the area concerned must be classified as ‘permanent pasture’, within the meaning of Article 2, first paragraph, point 2, of Regulation No 796/2004, the decisive criterion to be taken into account is not the type of vegetation covering that area, but its actual use for an agricultural activity typical of ‘permanent pasture’.
59 Accordingly, in holding in paragraphs 35 and 36 of the judgment under appeal that the relevant criterion was the type of vegetation present on the area in question and in then conducting its examination in the light of that criterion, the General Court erred in law in the interpretation and application of the concept of ‘permanent pasture’ as resulting from Article 2, first paragraph, point 2, of Regulation No 796/2004. It follows that the finding of the General Court, in paragraph 65 of the judgment under appeal, that the Hellenic Republic had failed to demonstrate that the Commission’s assessments were incorrect, is erroneous.
60 That said, the flat-rate correction of 10% applied in respect of farmers who had declared only pasture is justified, in the summary report, in the light of a set of shortcomings that are set out in paragraphs 16, 21 and 22 of the present judgment, which reproduce, in essence, paragraphs 40 and 41 of the judgment under appeal. The Commission thus justified that correction rate in the light of, first, weaknesses in the LPIS-GIS affecting the probative value of the administrative procedures and of the cross-checks and, second, weaknesses in the on-the-spot checks.
61 In that regard, when assessing the first plea in the action brought before it, the General Court held, in paragraphs 23 to 106 of the judgment under appeal, that the rate of 10% which was applied in respect of farmers who had declared only pasture remained, however, justified in the light of the other shortcomings established.
62 In particular, the General Court found in paragraphs 66, 88 and 95 of the judgment under appeal that the inadequacies of the LPIS-GIS justified, irrespective of the dispute relating to the definition of ‘permanent pasture’, the setting of a flat-rate correction of 10% in respect of farmers who had declared only pasture. That being so, the error of law committed by the General Court, as set out in paragraph 59 of the present judgment, has no effect on the operative part of the judgment under appeal, since the assessments in paragraphs 66, 88 and 95 of that judgment are sufficient to justify its operative part.
63 Accordingly, the error of law identified in paragraph 59 of the present judgment is not capable of resulting in the judgment under appeal being set aside.
64 As regards the second part of the first ground of appeal, it is sufficient to state that, in paragraph 66 of the judgment under appeal, the General Court merely held that, even assuming that the definition of ‘permanent pasture’, as applied, was not consistent with the wording of Article 2, first paragraph, point 2, of Regulation No 796/2004, ‘in the light of the shortcomings established in the application of the rules relating to pasture areas and in the [operation of the] system of LPIS-GIS checks, referred to in paragraphs 40 and 41 [of the judgment under appeal]’, the areas at issue would in any event have been ineligible.
65 In paragraph 40 of the judgment under appeal, the General Court listed a set of examples of parcels that were chosen by the Commission for the purpose of justifying the flat-rate correction, parcels which, assuming that they can be located, did not comply with the eligibility criteria laid down in Article 44(2) of Regulation No 1782/2003 since they were not used for agricultural activities.
66 Consequently, the second part of the first ground of appeal must be rejected and dismissed as unfounded.
67 As regards the third part of the first ground of appeal, it should be pointed out that, in paragraphs 20 to 22 of the judgment under appeal, the General Court merely recalled - prior to its specific assessment of each of the pleas put forward by the Hellenic Republic and without drawing any legal conclusions from them at that stage - the general principles that arise from the settled case-law relating to the allocation of the burden of proof in the context of proceedings concerning European Funds between the Commission and the Member State in question.
68 It follows that the third part of the first ground of appeal must be rejected and dismissed as inadmissible.
69 Accordingly, even if the first part of the first ground of appeal were well founded, the first ground of appeal would not be capable of resulting in the judgment under appeal being set aside.
70 In the light of the foregoing, the first ground of appeal must be rejected as partly ineffective, partly inadmissible and partly unfounded.
71 By its second ground of appeal, the Hellenic Republic pleads, in essence, that in paragraphs 68 to 76 of the judgment under appeal the General Court failed to fulfil its obligation to state reasons, in that it did not respond to all the arguments set out by the Hellenic Republic relating to the concept of ‘permanent pasture’ and in particular as to the concept of ‘Mediterranean pasture’.
72 The Commission contends that this ground of appeal should be dismissed.
73 It is clear from settled case-law that the requirement that the General Court give reasons for its decisions cannot be interpreted as meaning that it is obliged to respond in detail to every single argument advanced by a party, particularly if the argument is not sufficiently clear and precise and is not adequately supported by evidence (judgment of 11 January 2007, Technische Glaswerke Ilmenau v Commission, C‑404/04 P, not published, EU:C:2007:6, paragraph 90).
74 It must be stated, first, that the General Court devoted paragraphs 24 to 65 of the judgment under appeal to a detailed examination of the Hellenic Republic’s arguments relating to the interpretation of the concept of ‘permanent pasture’ and, in particular, to the importance of the type of vegetation covering agricultural areas.
75 Second, in paragraphs 15 and 16 of the application initiating proceedings lodged with the General Court, the Hellenic Republic merely invoked the ‘particular characteristics of all Mediterranean-type pasture’, which ‘are of great environmental value’. As that invocation does not satisfy the requirement for clarity and precision, the General Court cannot be criticised for not having responded specifically to it.
76 It follows that the General Court did not fail to fulfil its obligation to state reasons. Consequently, the second ground of appeal must be dismissed as unfounded.
77 The third ground of appeal is in two parts.
78 By the first part of this ground of appeal, the Hellenic Republic submits, in essence, that the General Court failed in several respects to fulfil its obligation to state reasons in paragraphs 88 to 103 of the judgment under appeal. According to the Hellenic Republic, the General Court unlawfully supplemented the reasoning of the decision at issue by taking the view that the irregularities in the administration and control system were sufficient in themselves to justify the correction rate of 10%, when it is apparent from the summary report that that correction rate is justified only with regard to the ineligibility of the areas declared as ‘permanent pasture’. Furthermore, the General Court did not duly state reasons for its decision either with regard to the increase in the correction rate to 10% compared with the correction rate of 5% adopted for the previous year or in the light of the improvements recorded in the on-the-spot checks. Finally, the Hellenic Republic criticises the General Court for not having taken sufficient account of the ‘buffer effect’.
79 By the second part of this ground of appeal, the Hellenic Republic contends that the General Court infringed the principle of proportionality by confirming, in paragraphs 88 to 103 of the judgment under appeal, the correction rate of 10% in respect of aid for farmers who declared only pasture. In the Hellenic Republic’s submission, a correction rate of 5% would be justified in particular when taking account of the ‘buffer effect’.
80 The Commission submits that this ground of appeal should be dismissed in its entirety as unfounded.
81 As regards the first part of the third ground of appeal, it is to be observed first of all that, contrary to the Hellenic Republic’s contentions, the flat-rate correction of 10% adopted by the Commission is based not solely on the ineligibility of the areas concerned, but on the set of inadequacies of the control system that was found by the Commission in the summary report and noted by the General Court in paragraphs 10 and 89 to 94 of the judgment under appeal.
82 Thus, the General Court did not err in holding, in paragraph 95 of the judgment under appeal, that it is the deficiencies in the checking system, together with all the other deficiencies established, that constitute a seriously inadequate implementation of the checking system implying a high level of errors.
83 It follows that the Hellenic Republic’s contention that it is apparent from the summary report that the flat-rate correction of 10% is justified only with regard to the ineligibility of the areas declared as ‘permanent pasture’ must be rejected.
84 Next, as regards the contention relating to the failure to take account of the improvement recorded regarding the on-the-spot checks and of the financial correction rate of 5% adopted for claim year 2007, it must be stated that, contrary to the Hellenic Republic’s assertions, the General Court assessed the importance of those matters in paragraphs 98 to 101 of the judgment under appeal.
85 The General Court pointed out, in paragraph 99 of the judgment under appeal, that, whilst the summary report found a quantitative improvement in on-the-spot checks in 2008, the fact remained that that report also stated that on-the-spot checks did not improve qualitatively. On the basis of that finding and of the finding that the Hellenic Republic failed to back up its claim regarding the qualitative improvement of on-the-spot checks, the General Court, in paragraph 100 of the judgment under appeal, could properly reject that claim without failing to comply with its obligation to state reasons.
86 Accordingly, such a contention results from a misreading of the judgment under appeal and thus lacks a factual basis.
87 Finally, as regards the contention relating to the failure of the General Court to take account of the ‘buffer effect’, it must be stated that, in paragraphs 95, 102 and 103 of the judgment under appeal, the General Court did indeed take that effect into consideration.
88 More specifically, following its examination, in paragraphs 85 to 94 of the judgment under appeal, relating to whether implementation of the checking system was seriously inadequate, the General Court held, in paragraph 95 of the judgment under appeal, that the body of deficiencies in the checking system, taken as a whole, constituted such seriously inadequate implementation, accordingly justifying a flat-rate correction of 25%. Nonetheless, it then stated in paragraph 95 that the Commission had taken account of the lower risk of losses run by the Fund stemming from the ‘buffer effect’, pursuant to which only a part of the areas declared is taken into account to activate payment entitlements, in order to apply, without committing any error, a flat-rate correction of 10%.
89 Accordingly, such a contention results from a misreading of the judgment under appeal and thus lacks a factual basis.
90 It follows that the first part of the third ground of appeal must be rejected as unfounded.
91 The second part of the third ground of appeal alleges that the General Court infringed the principle of proportionality in that the flat-rate correction should have been not 10% but 5% having regard to the deficiencies of the checking system.
92 It must be stated that, following a detailed analysis in paragraphs 85 to 94 of the judgment under appeal, the General Court held that the deficiencies in the checking system, together with all the other deficiencies established, constituted a seriously inadequate implementation of the checking system involving a high level of errors that demonstrated generalised irregularities, which probably led to extremely high losses for the Fund.
93 The General Court noted in paragraph 82 of the judgment under appeal, without being criticised in this regard by the Hellenic Republic in the present appeal, that it is apparent from document No VI/5330/97 of the Commission of 23 December 1997, which sets out the guidelines concerning financial corrections, that a seriously inadequate implementation of the checking system of that kind is liable to justify application of a correction of 25% of the expenditure, since there is a risk of particularly high losses for the Fund.
94 Accordingly, in holding, in paragraph 96 of the judgment under appeal, that the Commission could, without committing any error, apply a flat-rate correction of 10%, the General Court did not infringe the principle of proportionality.
95 It follows from the foregoing that the second part of the third ground of appeal must be rejected as unfounded.
96 In the light of the foregoing considerations, the third ground of appeal must be dismissed as unfounded.
97 The fourth ground of appeal relates, in essence, to an error of law which the General Court, in paragraphs 110 to 120 of the judgment under appeal, allegedly committed in interpreting and applying Article 31 of Regulation No 1290/2005, read in conjunction with Article 11 of Regulation No 885/2006, and to an inadequate statement of reasons. More specifically, the Hellenic Republic submits that the procedural guarantees enjoyed by it were infringed by the Commission’s failure to invite it to discuss at the bilateral meeting the Commission’s findings relating to the delays in carrying out the on-the-spot checks concerning additional area-related aid.
98 The Commission states in response that this ground of appeal should be dismissed as unfounded.
99 It should be noted at the outset that, in the context of the conformity clearance procedure, it is apparent from Article 31(3) of Regulation No 1290/2005 that, before any decision to refuse financing is taken, the findings from the Commission’s inspection and the Member State’s replies are to be notified in writing, following which the two parties are to attempt to reach agreement on the action to be taken.
100 Furthermore, Article 11 of Regulation No 885/2006 specifies that procedure, laying down its detailed arrangements. Thus, it is apparent from the first subparagraph of Article 11(1) of that regulation that when, as a result of any inquiry, the Commission considers that expenditure was not effected in compliance with EU law, it is to communicate its findings to the Member State concerned and indicate the corrective measures needed. The second subparagraph of Article 11(1) then provides that the Member State is to reply within two months of receipt of the Commission’s communication and the Commission may modify its position in consequence. The third subparagraph of Article 11(1) states finally that, after expiry of the period for reply, the Commission is to convene a bilateral meeting and both parties are to endeavour to come to an agreement as to the measures to be taken as well as to the evaluation of the gravity of the infringement and of the financial damage caused to the EU budget.
101 It is thus clear, first, from the second subparagraph of Article 11(1) of Regulation No 885/2006 that the Commission may modify its position in the light of the details provided by the Member State concerned in reply and, second, from the third subparagraph of Article 11(1) of the regulation that, when convening the bilateral meeting, the Commission is not required to specify all the aspects of the findings that will be discussed at the meeting.
102 On the contrary, as the Advocate General has observed in point 112 of her Opinion, the purpose of holding the bilateral meeting is not so much to inform that Member State of the extent of the Commission’s findings as to make it possible, on the basis of the exchange of information that has taken place beforehand, to reach the agreement required by Article 31(3) of Regulation No 1290/2005 as to the corrective measures to be taken.
103 It follows that the Hellenic Republic’s contention relating to an alleged infringement of the procedural guarantees enjoyed by it, and which is based on Article 11 of Regulation No 885/2006 inasmuch as the Commission did not invite it to discuss, at the bilateral meeting, the delays in carrying out the on-the-spot checks concerning additional area-related aid, must be rejected.
104 Finally, as for the Hellenic Republic’s contention that the reasons stated in the judgment under appeal are inadequate and contradictory, it need only be pointed out that, after setting out, in paragraphs 113 to 116 of the judgment under appeal, the importance of the first written communication as provided for in Article 11 of Regulation No 885/2006, the General Court held, following a clear and detailed analysis in paragraphs 118 to 120 of the judgment, that the communication of the results of the inquiry identified sufficiently the belated nature of the on-the-spot checks concerning additional area-related aid.
105 In the light of the foregoing, the fourth ground of appeal must be dismissed.
106 In its fifth ground of appeal, the Hellenic Republic complains, in essence, that in paragraphs 126 to 128 and 132 to 133 of the judgment under appeal the General Court supplemented the reasons stated for the decision at issue, in order to justify the correction rate of 5% set in respect of additional area-related aid. More specifically, it submits that the General Court supplemented the reasons stated for the decision at issue in order to justify the difference between the correction rate applied in respect of additional area-related aid, set at 5%, and the correction rate applied in respect of non-pasture area-related aid, set at 2%.
107 In the Commission’s submission, this ground of appeal must be dismissed as inadmissible, pursuant to Article 168(1)(d) of the Rules of Procedure of the Court of Justice, since its wording is too brief and vague. In the alternative, the Commission contends that reasons are properly stated in the judgment under appeal. This ground of appeal must therefore be dismissed.
108 As regards the Commission’s plea of inadmissibility based on the vagueness and brevity of the fifth ground of appeal, which are said to have made it impossible for the Commission to respond to it, it should be recalled that, in accordance with the Court’s settled case-law, it follows from the second subparagraph of Article 256(1) TFEU, the first paragraph of Article 58 of the Statute of the Court of Justice of the European Union and Article 168(1)(d) of the Rules of Procedure of the Court of Justice that an appeal must indicate precisely the contested elements of the judgment which the appellant seeks to have set aside and also the legal arguments specifically advanced in support of the appeal. In this regard, Article 169(2) of the Rules of Procedure of the Court of Justice specifies that the pleas in law and legal arguments relied on must identify precisely those points in the grounds of the decision of the General Court which are contested (see, to that effect, judgment of 4 September 2014, Spain v Commission, C‑197/13 P, EU:C:2014:2157, paragraphs 42 and 43 and the case-law cited).
109 In the present case, the Hellenic Republic identified, in paragraph 79 of its appeal, the specific points of the judgment under appeal that are contested in its fifth ground of appeal, and set out a line of argument that is sufficiently specific to enable the Court to examine this ground of appeal. Accordingly, the Hellenic Republic’s fifth ground of appeal is admissible.
110 However, as to the substance, in paragraphs 126 to 128 and 132 and 133 of the judgment under appeal, the General Court, contrary to the Hellenic Republic’s assertions, did not supplement the reasons stated for the decision at issue, in order to justify the difference between the flat-rate correction of 5% set in respect of additional area-related aid and that of 2% set in respect of non-pasture area-related aid.
111 First, it is clear from the considerations set out by the General Court in paragraphs 123 to 131 of the judgment under appeal that the Commission justified the rate of 5% in its summary report in the light of the irregularities of the checking system relating to key controls. Second, it is apparent from paragraph 136 of the judgment under appeal that the rate of 2% set for non-pasture area-related aid is justified on the basis of the ‘buffer effect’. As the Advocate General has observed in points 79 and 118 of her Opinion, that ‘buffer effect’ is not relevant to additional area-related aid, since that aid is coupled to production, without payment entitlements being used. Finally, in so far as the Hellenic Republic contests paragraph 133 of the judgment under appeal, it must be stated that, in that paragraph, the General Court merely carries out an assessment of a factual nature in not accepting that the alleged improvements to the LPIS-GIS were applied in claim year 2008.
112 Consequently, the fifth ground of appeal is based on a misreading of the judgment under appeal and must therefore be dismissed as unfounded.
113 By its sixth ground of appeal, the Hellenic Republic pleads a complete failure of the General Court to state reasons as regards rejection of the second complaint relied upon in the third plea in support of its action for annulment, relating to the correction imposed in the field of rural development, a complaint according to which the decision at issue had to be annulled inasmuch as corrections imposed by an earlier decision of the Commission were not subtracted from the amount of the corrections applied and imputed in the context of the decision at issue. More specifically, the General Court, without stating reasons in that regard, limited the Hellenic Republic’s head of claim to the amount of EUR 5 007 867.36 corresponding to the correction imputed to the 2009 financial year, although the Hellenic Republic contested the total amount of the correction imposed by the decision at issue, that is to say, an amount of EUR 10 504 391.90, corresponding to the total of the corrections imputed to the 2009 financial year (EUR 5 007 867.36) and the 2010 financial year (EUR 5 496 524.54).
114 The Commission states in response that this ground of appeal is inadmissible. First, the Hellenic Republic merely challenges the net final amount of the correction imposed by the decision at issue and the amount by which the final correction was reduced, which is, inherently, a factual challenge that falls outside review by the Court on appeal. Second, the Hellenic Republic’s complaint relating to the gross amount of EUR 10 504 391.90 was not put in issue at any point of the proceedings before the General Court, so that this complaint amounts to a broadening of the subject matter of the dispute on appeal and constitutes a new plea which must, on that basis, be dismissed as inadmissible.
115 In paragraphs 9 and 41 to 43 of its application at first instance, the Hellenic Republic sought the annulment of the decision at issue in so far as it imposes the application of flat-rate corrections in the field of area-related aid of 5% of the total amount of the expenditure incurred in the field of rural development, in a sum of EUR 10 504 391.90, corresponding to the total of the corrections imputed to the 2009 financial year (EUR 5 007 867.36) and the 2010 financial year (EUR 5 496 524.54). More specifically, the Hellenic Republic argued before the General Court that insufficient account was taken of the earlier correction applied under Commission Implementing Decision 2013/214/EU of 2 May 2013 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 2013 L 123, p. 11) in respect of rural development aid, concerning claim year 2008, for the 2009 and 2010 financial years.
116 In this instance, the General Court, in paragraphs 155 to 168 of the judgment under appeal, dismissed the Hellenic Republic’s action while limiting its examination, without stating any further reasons, solely to the correction for claim year 2008 in respect of the 2009 financial year.
117 Accordingly, in failing to respond to a central part of the Hellenic Republic’s line of argument, the General Court infringed its obligation to state reasons under Article 36 of the Statute of the Court of Justice of the European Union, applicable to the General Court by virtue of the first paragraph of Article 53 of the Statute, and under Article 117 of the Rules of Procedure of the General Court.
118 Consequently, the Hellenic Republic’s sixth ground of appeal must be upheld in so far as the General Court dismissed the action brought before it while limiting its examination of the second complaint in support of the third plea in that action solely to the correction for claim year 2008 that was imputed to the 2009 financial year.
119 It follows that, as the sixth ground of appeal must be declared well founded, point 2 of the operative part of the judgment under appeal should be annulled, in that the General Court dismissed the Hellenic Republic’s action while limiting its examination to the correction for claim year 2008 that was imputed to the 2009 financial year as regards the financial correction of 5% applied to aid under the CAP’s second pillar, which is dedicated to rural development, and not examining the correction for claim year 2008 that was imputed to the 2010 financial year in the sum of EUR 5 496 524.54 as regards the financial correction of 5% applied to aid under the CAP’s second pillar, dedicated to rural development.
120 In accordance with the first paragraph of Article 61 of the Statute of the Court of Justice of the European Union, the Court may, after setting aside a decision of the General Court, refer the case back to the General Court for judgment or, where the state of the proceedings so permits, itself give final judgment in the matter.
121 As regards the second complaint in support of the third plea in the action brought before the General Court, it is apparent from paragraphs 155 to 168 of the judgment under appeal that the General Court restricted the extent of the Hellenic Republic’s claim concerning the existence of a double correction to the 2009 financial year alone although, in its application initiating proceedings, the Hellenic Republic had referred to both the 2009 financial year and the 2010 financial year.
122 It must be held, first, that, as regards the correction relating to claim year 2008 in respect of the 2010 financial year, the decision at issue does not specify to the required legal standard to what extent the correction imposed under Decision 2013/214 was in fact reflected in the amount of the correction decided upon in the decision at issue for the purpose of avoiding a double correction.
123 Second, that failure to state reasons does not enable it to be determined satisfactorily whether - and, if so, that what extent - the Commission took account of the correction resulting from Decision 2013/214 when calculating the correction relating to claim year 2008 in respect of the 2010 financial year.
124 It follows that the second complaint in support of the third plea in the action brought before the General Court must be upheld and, consequently, that the decision at issue must be annulled for failure to state reasons in so far as it concerns the taking into account of Decision 2013/214 when calculating the amount of the correction of EUR 5 496 524.54, of the deduction of EUR 270 175.45 and of the financial impact of EUR 5 226 349.09, which related to expenditure incurred by the Hellenic Republic in the sector of Rural Development EAFRD Axis 2 (2007-2013, area-related measures) and were imposed in respect of the 2010 financial year, on account of weaknesses in the LPIS and the on-the-spot checks (second pillar, claim year 2008).
125 Under Article 184(2) of the Rules of Procedure of the Court of Justice, where the appeal is well founded and the Court itself gives final judgment in the case, the Court is to make a decision as to the costs.
126 Under Article 138(3) of the Rules of Procedure, applicable to appeal proceedings by virtue of Article 184(1) thereof, where each party succeeds on some and fails on other heads, the parties are to bear their own costs.
127 Since the Hellenic Republic and the Commission have both succeeded on some and failed on other heads, they must be ordered to bear their own costs at first instance and on appeal.
128 Under Article 140(1) of the Rules of Procedure of the Court of Justice, applicable to appeal proceedings by virtue of Article 184(1) thereof, the Member States and institutions which have intervened in the proceedings are to bear their own costs.
129 The Kingdom of Spain, as an intervener in the appeal, must be ordered to bear its own costs.