1 By order of 27 August 1996, received at the Court on 11 September 1996, the Verwaltungsgericht (Administrative Court) Frankfurt am Main referred to the Court for a preliminary ruling under Article 177 of the EC Treaty a question on the principles of Community law applicable to measures taken by national authorities for the recovery of an unduly paid Community subsidy.
2 That question was raised in proceedings between, on the one hand, the oil mills Oelmühle Hamburg AG (`Oelmühle') and Jb. Schmidt Söhne GmbH & Co. KG (`Schmidt') and, on the other, the Bundesanstalt für Landwirtschaft und Ernährung (Federal Office of Agriculture and Food, `the BLE') concerning part repayment of subsidies granted for the processing of colza.
3 The subsidy granted for the processing of oil seeds harvested and processed within the Community is provided for by Article 27(1) of Regulation 136/66/EEC of the Council of 27 September 1966 on the establishment of a common organisation of the markets in oils and fats (OJ English Special Edition, 1965-66, p. 221). In accordance with that provision: `Where the target price in force for a species of seed is higher than the world market price for that seed determined in accordance with the provisions of Article 29, a subsidy shall be granted for seed of that species harvested and processed within the Community. Subject to exceptions made pursuant to paragraph 3, this subsidy shall be equal to the difference between these prices'.
4 The principles governing the grant of that subsidy were, at the time of the events giving rise to the dispute in the main proceedings, laid down in Council Regulation (EEC) No 1594/83 of 14 June 1983 on the subsidy for oil seeds (OJ 1983 L 163, p. 44) and Commission Regulation (EEC) No 2681/83 of 21 September 1983 laying down detailed rules for the application of the subsidy system for oil seeds (OJ 1983 L 266, p. 1).
5 In order to ensure that the subsidy is granted only for seeds which qualify for it, Article 4 of Regulation No 1594/83, as amended by Council Regulation (EEC) No 935/86 of 25 March 1986 (OJ 1986 L 87, p. 5), introduced a two-part Community certificate, one part of which was intended to provide proof that the seeds harvested in the Community had been identified at an oil mill or a feed mill (the part designated `ID'), and the other part of which was intended to certify, where such was the case, that the amount of the subsidy had been fixed in advance (the part designated `AP').
6 In accordance with Article 3 of Regulation No 1594/83, as amended by Regulation No 935/86, the procedure for `identification' of seeds is entrusted to the competent agency of the Member State to which the application for the subsidy is made.
7 Entitlement to and payment of the subsidy are governed by Article 10 of that regulation, as amended, which provides: `(1) Entitlement to the subsidy shall be acquired: (a) in the case of colza and rape and sunflower seeds for processing into oil, when they are so processed; (b) in the case of colza and rape seeds incorporated into animal feedingstuffs, when they are so incorporated; (2) The subsidy shall be paid to the holder of the "identification" part of the certificate, referred to in Article 4, in the Member State in which the seeds are placed under control: - in the case of the seeds referred to in 1(a), when proof of processing is furnished, - in the case of the seeds referred to in 1(b), when proof of incorporation is furnished. ...'
8 The subsidy in question is equal to the difference between the target price in force for a species of seed and the world market price. In accordance with Article 33(1) of Regulation No 2681/83, it is fixed by the Commission `whenever the market situation makes it necessary and in such a way as to ensure its being applied at least once a week'.
9 Accordingly, the Commission first fixes the `gross' subsidy in ECU. Next, that amount is converted into the national currencies and increased or reduced by a corrective amount (the `definitive' subsidy) and, finally, subject to the spot and forward exchange rates of the ECU into national currencies, the amount is converted into the currency of the Member State in which the seeds have been processed, if other than the State in which they were harvested. Thus the subsidy varies from one State to another, depending on the Member States' currency situation.
10 In the first case, the documents before the Court show that in 1988 Oelmühle bought several consignments of colza from a French supplier through a brokerage company established in Hamburg.
11 The invoice for the goods delivered by the French supplier, a letter of guarantee, the insurance certificate, the transit control copy document and the expert's reports produced by a Hamburg laboratory showed that the consignments of colza in question were of Irish origin. The BLE therefore issued Oelmühle with identification certificates (`ID certificates') for colza originating in Ireland and, by three decisions of 20 May 1989, granted it a subsidy for processing a total of 1 167 858 kg of colza, based on the rate applicable to colza of Irish origin.
12 Subsequently the Irish customs authorities ascertained that 389 400 kg of colza in fact originated not in Ireland but in Northern Ireland, and thus in the United Kingdom. As a result, the BLE cancelled the ID certificates which it had issued and the three decisions by which it had granted the subsidy, and demanded repayment of the subsidy.
13 When its complaint against that decision was rejected by decision of 17 February 1994, Oelmühle brought an action on 17 March 1994 before the Verwaltungsgericht Frankfurt am Main. It disputes, in the first place, that the colza originated in Northern Ireland. Second, it claims that part of the enrichment it received has been lost, since the fact is that it passed on the pecuniary advantage it had received to its suppliers by paying the target price, which is higher than the normal market price, and that it is highly unlikely that it can enforce a claim against those suppliers.
14 In the second case, Schmidt appears to have acquired a quantity of colza between 1984 and 1986, part of which was supplied to it direct by a previous purchaser.
15 On the basis of information supplied by Schmidt, stating that the colza had been harvested in Germany, the BLE issued ID certificates for colza of German origin and granted the relevant subsidy by seven decisions adopted between November 1984 and January 1987.
16 Following an investigation of the previous purchaser, the customs authorities concluded that part of the subsidised colza had been imported from France. The BLE therefore cancelled the ID certificates issued to Schmidt and the decisions granting the subsidy, and demanded repayment of the subsidy.
17 Following the rejection on 3 June 1991 of its complaint against the BLE's decision, by application of 25 June 1991 Schmidt, too, brought an action before the Verwaltungsgericht Frankfurt am Main. First, it denies that the colza was of French origin. Second, it claims that part of the enrichment it received has been lost, since the fact is that it passed on the pecuniary advantage it had received to its suppliers by paying the target price, and that its rights of action against them are virtually worthless, both because the time-limits have expired and because the suppliers are insolvent.
18 The Verwaltungsgericht Frankfurt am Main joined the two cases. The BLE contended that the two actions should be dismissed, arguing that even where the recipient of a subsidy has already passed on the benefit of that subsidy to its suppliers through the price paid, it cannot plead that all enrichment has been lost when the cause of the subsidy's being withdrawn is the occurrence of a risk that it must bear.
19 The Verwaltungsgericht Frankfurt am Main points out that, under German law, although decisions unlawfully conferring benefits must in principle be revoked, recovery of subsidies unlawfully granted may be waived if the recipients are able to plead loss of enrichment (Paragraph 10(1) of the Gesetz zur Durchführung der gemeinsamen Marktorganisationen (Law implementing the common organisation of the markets), as published on 27 August 1986, which makes reference to Paragraph 48(2) to (4), and to Paragraph 49a(1), first sentence, and Paragraph 49(2) of the Verwaltungsverfahrensgesetz (Law on Non-contentious Administrative Procedure), and Paragraph 818(3) of the Bürgerliches Gesetzbuch (German Civil Code)). Loss of unjust enrichment may not, however, be pleaded where the person required to make repayment was aware of the circumstances rendering the act illegal or was unaware of them as a result of gross negligence (the second sentence of Paragraph 49a(2)of the Verwaltungsverfahrensgesetz).
20 The Verwaltungsgericht tends to the view that, in accordance with those provisions, it should be recognised that in this instance any enrichment has been lost and the BLE's repayment notices should be revoked. Nevertheless, it has some reservations as to the compatibility, in the circumstances, of the plea of lost enrichment with the case-law of the Court of Justice, in particular the judgment in Joined Cases 205/82 to 215/82 Deutsche Milchkontor and Others v Germany [1983] ECR 2633. According to that case-law, the recovery required by Community law must not be rendered practically impossible and the interests of the Community must be taken fully into consideration.
21 Those were the circumstances in which the Verwaltungsgericht Frankfurt am Main stayed proceedings and referred the following question to the Court for a preliminary ruling: `Is it compatible with Community law for German domestic law to preclude the recovery of subsidies unduly paid for the processing of colza where the recipient, who was unaware of the facts giving rise to the illegality of the notice of grant and whose ignorance thereof did not result from gross negligence (Paragraph 48(2), seventh sentence, as it was, now Paragraph 49a(2), second sentence, of the Verwaltungsverfahrensgesetz (Law on Administrative Procedure)), is able to rely, pursuant to Article 48(2), sixth sentence, of that Law (Paragraph 49a(2) of the new version) in conjunction with Paragraph 818(3) of the Bürgerliches Gesetzbuch (Civil Code), on the loss of enrichment, where the enrichment would normally be held to be lost if the recipient had already, at the time when the subsidy was granted, passed on the pecuniary advantage resulting from it by paying the target price provided for under Community legislation and has obtained no right of recourse, or merely a worthless right of recourse, against the supplier of the processed colza?'
22 By that question, the national court is in substance asking whether it is contrary to Community law for domestic legislation to permit unduly paid Community subsidies not to be recovered, on the basis, assuming that the recipient's good faith is established, of criteria such as loss of enrichment, where the recipient had already, at the time when the subsidy was granted, passed on the pecuniary advantage resulting from it by paying the target price provided for under Community legislation and any right of recourse against his suppliers would be worthless.
23 First, it should be recalled that it is for the Member States, by virtue of Article 5 of the EC Treaty, to ensure that Community regulations, particularly those concerning the common agricultural policy, are implemented within their territory. Similarly, it follows from Article 8(1) of Regulation (EEC) No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (OJ, English Special Edition 1970 (1), p. 218), that Member States must take the measures necessary to recover sums lost as a result of irregularities or negligence. The exercise of any discretion to decide whether or not it would be expedient to demand repayment of Community funds unduly or irregularly granted would be inconsistent with that duty (Deutsche Milchkontor, paragraphs 17, 18 and 22).
24 It follows from the case-law of the Court that, in the absence of provisions of Community law, disputes concerning the recovery of amounts unduly paid under Community law must be decided by national courts in application of their own domestic law, subject to the limits imposed by Community law, on the basis that the rules and procedures laid down by domestic law must not have the effect of making it practically impossible or excessively difficult to implement the Community rules and that the national legislation must be applied in a manner which is not discriminatory as compared to procedures for deciding similar national disputes (see, in particular, Deutsche Milchkontor, paragraph 19, and Case C-366/95 Landbrugsministeriet v Steff-Houlberg Export and Others [1998] ECR I-0000 and, as regards national procedural law, Case C-312/93 Peterbroeck [1995] ECR I-4599, paragraph 12, and Joined Cases C-430/93 and C-431/93 Van Schijndel and Van Veen [1995] ECR I-4705, paragraph 17). If domestic law requires the various interests in question, namely, on the one hand, the public interest in the revocation of an unlawful administrative measure and, on the other, the protection of the legitimate expectation of the person to whom it is addressed, to be weighed against one another before the measure is revoked, the interests of the Community must be taken fully into account (Deutsche Milchkontor, paragraph 32).
25 In that judgment the Court ruled, in the light of those factors, that Community law does not prevent the domestic legislation concerned from having regard, in barring the recovery of unduly paid Community subsidies, to criteria such as loss of the unjust enrichment.
26 According to the plaintiffs in the main proceedings, in the circumstances of the case their plea of lost enrichment satisfies the conditions laid down by the Court. The interests of the Community could be only very slightly affected, since the objective of the common agricultural policy measure, that is to say the granting of subsidies to producers of oil seeds harvested and processed within the Community, was in substance achieved when the oil mills passed on the subsidy to the producers or suppliers through the purchase price. Repayment is still less justified in view of the fact that the oil mills divide the subsidies between the various oil-seed producers on behalf of the Community. They should not therefore have to bear risks which in reality are a matter for the Community.
27 The German Government endorses that view, observing that this case concerns the same provision of domestic law as was at issue in the dispute giving rise to the Deutsche Milchkontor judgment. In this case as in that, application of that provision in order to recover the subsidy would have no effect on the scope or effectiveness of Community law.
28 The Commission, however, submits that the question referred to the Court should be answered in the negative. It argues, in particular, that to uphold the argument based on loss of unjust enrichment where the recipient of the subsidy believed that the information as to origin was correct would contravene the conditions for the grant of oil-seed processing subsidies and would thus undermine the effectiveness of the entire scheme of subsidies. Moreover, the Commission argues that, in order to obtain the subsidy, the recipient has to supply certain information, for which he alone is responsible, concerning in particular the place where the seeds were harvested. It concludes that the recipient of the subsidy has to comply with a strict obligation as to guarantee of origin, which means that it is not subsequently open to him to plead that the unjust enrichment has been lost.
29 In that respect, it should be noted, first, that oil mills are in a position to challenge a demand for recovery only if they acted in good faith as regards the conformity of the goods with the declaration submitted by them in order to obtain the subsidy in question. To ascertain whether that is so, it is necessary to consider, first, whether the oil mills may plead good faith even though they themselves drafted the declaration as to the origin of the goods with a view to obtaining the subsidy and, second, whether in order to be in good faith, it was incumbent on them to carry out inspections as to the origin of the goods.
30 In the present case it should be pointed out that there is no provision of Community law governing the recovery of subsidies where they were paid on the basis of documents subsequently shown to be inaccurate. In that regard, it should be noted in particular that Regulations No 136/66, No 1594/83 and No 2681/83 make no reference to recovery. Accordingly, if a trader draws up and submits a declaration with a view to obtaining a subsidy, the mere fact of having drawn up that document cannot deprive him of the right to plead his good faith when the declaration is based exclusively on information which was provided by third parties. It is, however, for the national court to consider whether certain factors should not, in the circumstances, have caused the trader to check the accuracy of this information.
31 Should the national court decide that the oil mills acted in good faith, it would not be contrary to Community law to take into consideration the plea of loss of unjust enrichment. Since that principle also forms part of the Community legal system, it cannot be considered contrary to Community law for domestic legislation to apply that principle in a field such as that of recovery of unduly paid Community subsidies
32 As for the fact that the recipient of a subsidy had already, at the time when it was granted, passed on the pecuniary advantage resulting from it by paying the target price to the producer, it should be noted, as the Advocate General observed at point 44 of his Opinion, that this is a particularity of the Community scheme set up to provide for subsidies in the sphere of oil-seed processing, and the effects of any malfunctioning of that scheme are not to be borne by the processing undertakings.
33 The Commission maintains that in circumstances such as those in point in the main proceedings the rights of recourse available to recipients of subsidies against producers or their suppliers are, as a rule, worthless, which means that recovery of aid would be practically impossible in the sense contemplated in the line of decisions beginning with the judgment in Deutsche Milchkontor.
34 In that regard, it must be stated that one of the requirements to be satisfied in order to plead lost enrichment is that the national court should have established that in the specific circumstances the trader has no possibility of recourse against his suppliers.
35 The information provided by the national court shows that the general rule applying in domestic law is for unduly paid subsidies to be recovered and that the plea of lost enrichment is accepted, purely by way of exception, where compensation by third parties is not possible. In those circumstances, the mere presumption that the financial situation of producers is generally deplorable, as the Commission seems to claim, is not sufficient to establish that recovery is practically impossible in the sense contemplated in the Deutsche Milchkontor case-law.
36 Finally, the Commission refers to the judgment in Case C-24/95 Land Rheinland-Pfalz v Alcan Deutschland [1997] ECR I-1591, concerning unlawfully paid State aid, in which the Court held that resisting recovery on the ground that the gain has ceased to exist would render the recovery required by Community law practically impossible (paragraph 50).
37 In that regard, it is sufficient to state that that finding, which was made in the context of Article 93 of the Treaty, cannot be transposed to recovery of unduly paid Community subsidies. As the Advocate General has shown in points 47 to 51 of his Opinion, the two situations are not comparable; in particular, the competitive advantage given to national undertakings, which is a feature of State aid, does not exist in the context of Community aid under the common agricultural policy.
38 In view of the foregoing, the answer to the question referred to the Court must be that Community law does not in principle preclude national legislation from allowing recovery of unduly paid Community subsidies to be barred, on the basis of criteria such as loss of the enrichment, where: - the recipient of the subsidy had already, at the time when it was granted, passed on the pecuniary advantage resulting from it by paying the producer the target price prescribed by Community law, and - any right or recourse against his suppliers is worthless. That presupposes, however: - that the good faith of the recipient has first been established, and - that the conditions prescribed are the same as those which apply with respect to the recovery of purely national financial benefits.