1 By order of 22 November 1995, received at the Court on 28 November 1995, the Højesteret (Supreme Court) referred to the Court for a preliminary ruling under Article 177 of the EC Treaty three questions on the interpretation of Community law principles applicable to measures taken by the national authorities for the recovery of export refunds paid but not due.
2 Those questions were raised in proceedings between the Landbrugsministeriet - EF-Direktoratet (hereinafter `the Ministry') and the Danish companies Steff-Houlberg Export I/S, Nowaco A/S and Nowaco Holding A/S, and SMC af 31/12-1989 A/S (hereinafter `the exporter undertakings'), concerning a demand for repayment of export refunds paid but not due.
3 For a number of years, until 1989, the exporter undertakings purchased large amounts of ground beef from the slaughterhouse Slagtergården Bindslev A/S (hereinafter `Slagtergården') and exported it to Arab countries.
4 Pursuant to the Community rules, in particular Article 18 of Regulation (EEC) No 805/68 of the Council of 27 June 1968 on the common organisation of the market in beef and veal (OJ, English Special Edition 1968 (I), p. 187), Article 6 of Regulation (EEC) No 885/68 of the Council of 28 June 1968 laying down general rules for granting export refunds on beef and veal and criteria for fixing the amount of such refunds (OJ, English Special Edition 1968 (I), p. 237), and Commission Regulation (EEC) No 1315/84 of 11 May 1984 fixing the export refunds on beef and veal (OJ 1984 L 125, p. 38), the exporter undertakings received approximately DKR 100 million by way of refunds. According to the relevant legislation, the amount of the refunds depended on the proportion of beef included in the composition of the product, namely 60% in the present case.
5 In 1989 the Ministry was informed that, according to tests carried out in the Middle East, beef products originating in Denmark and bound for Moslem countries contained pork. Accordingly, the Danish customs authorities carried out inspections at Slagtergården's manufacturing premises. The investigations revealed that the composition of the products manufactured by Slagtergården differed considerably from that indicated to the purchasers and to the authorities. Some of the meat qualifying for a refund had been replaced by other ingredients not qualifying for refunds. Thus, the beef content of the product in respect of which the exporter undertakings had applied for and received export refunds was in fact only 28% rather than the required 60%.
6 The Ministry consequently sought to recover the refunds. At the same time, criminal proceedings were brought against the manager of Slagtergården.
7 The exporter undertakings contested the Ministry's claim for repayment and contended that they could not be held liable for the reprehensible conduct of Slagtergården. As trading undertakings they had no contact with the goods and therefore had no opportunity to check them. The checks were always carried out exclusively by the competent authorities. In the present case, serious inadequacies were detected in the monitoring system operated by the Ministry and the customs authorities.
8 It is apparent from the order for reference that the various national authorities involved in the main proceedings did not tighten checks on Slagtergården even though irregularities had been detected in the latter's practices. The fact that certain checks carried out by the State authorities, inter alia in Denmark, were inadequate was, moreover, highlighted in the Court of Auditor's Special Report No 2/90 of 5 April 1990 on the management and control of export refunds (OJ 1990 C 133, p. 1), as a result of which checks appear to have been made more stringent.
9 By judgment of 25 June 1992 the Østre Landsret (Eastern Regional Court), ruling at first instance, upheld the exporter undertakings' contentions and thus held that, under national law, they could not be required to repay the sums received. It acknowledged that the exporter undertakings had acted in good faith, that the irregular payment of the refunds resulted from special circumstances of an exceptional nature and that, on the basis of the evidence adduced in the course of the proceedings concerning the organisation of the authorities' monitoring system and the manner in which it operated in practice, it was most appropriate for the authority which paid the refunds to bear the attendant risks.
10 The Ministry appealed against that decision to the Højesteret which, in view of the principles laid down by the Court in Joined Cases 205/82 to 215/82 Deutsche Milchkontor and Others [1983] ECR 2633 (hereinafter `Deutsche Milchkontor'), expressed some doubts as to the effect, in the case before it, of the requirements of Community law concerning the recovery of Community aid paid but not due.
11 It therefore decided to stay proceedings and to refer the following questions to the Court for a preliminary ruling: `1 (a) Do the Community law principles which result from the case-law of the Court of Justice concerning demands for reimbursement of sums unduly paid as aid, according to which the interests of the Community should be fully taken into account, preclude national law from taking into consideration, as criteria for excluding demands for reimbursement of aid unduly paid: - the good faith of the aid recipients and thus the protection of legitimate expectations; - the fact that 5 to 10 years have elapsed since the payment of the aid, and hence that it would be particularly onerous for the aid recipients to have to reimburse the aid now; - the reason for the undue payment of the aid being exceptional circumstances in the form of serious fraud and punishable offences on the part of a third party; and - the fact that - as the exporter undertakings were aware - the monitoring authority exercised day-to-day supervision at the place of manufacture, without discovering the fraud and/or taking action; - the fact that, over the whole period in which payments were made, the authority making the payment was aware that the value of the monitoring system depended on the accuracy of the information supplied by the undertaking being monitored, but despite that fact omitted to ask to see recipes or the producer's accounts relating to the purchase of raw materials; where the underlying principle is that the same criteria apply in connection with demands for reimbursement of purely national aid? (b) Would the answer be the same if account were taken in national law of the fact that there were no other circumstances which should have given the exporter undertakings grounds for doubting that the product qualified for refunds? 2. Do the Community law principles that follow from the case-law of the Court of Justice concerning reimbursement of aid unduly paid, according to which the interests of the Community are to be fully taken into account, preclude an exporter undertaking being considered to be in good faith, and thus not under an obligation to reimburse an amount of aid, if it is taken into consideration that the exporter undertakings did not reserve the right by agreement with the producer to carry out their own checks at the place of manufacture in order to ensure that the products were manufactured in accordance with the declaration signed by the exporter, when account is taken of the fact that: - the producer had export approval from the authority that made the payments; - the exporter undertakings were trading undertakings and the goods did not pass through them; - the exporter undertakings knew that the monitoring authority exercised day-to-day supervision at the place of manufacture; and - the price of finished products of equivalent type and description was the same from producers in Denmark and those abroad? 3. May a third party, including an aid recipient, rely on possible negligence on the part of the monitoring authority with the result that demands for reimbursement of refunds already paid would be excluded on the basis of an overall assessment of the case?'
12 In its order for reference, the Højesteret seeks clarification of the circumstances in which the fact that account is to be taken of the interests of the Community, which is one of the fundamental principles laid down in Deutsche Milchkontor, prevents national rules, which provide in principle for the repayment of sums paid but not due, from allowing an action for recovery of export refunds to be dismissed in so far as the exporter undertakings submitted in good faith inaccurate declarations concerning the composition of the product. Furthermore, the national court asks whether other factors, in addition to the good faith of the exporter undertakings as a condition for protection of legitimate expectations, can also be taken into account for that purpose. More specifically, the national court raises questions as to the relevance of any fraudulent conduct by a third party and negligence on the part of the national authorities responsible for carrying out the necessary checks and of grounds of equity, in particular the considerable time which has elapsed since the payment of the refunds in question and the effect of recovery on the financial situation of the recipient of the refund.
13 According to the Højesteret, the relevant principles of Danish law do not in practice preclude recovery of aid paid but not due and apply to the recovery of both Community funds and national funds. The requirement of good faith as a condition for protection of legitimate expectations
14 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 (Deutsche Milchkontor, paragraph 17). Likewise, 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 (I), p. 218), that Member States must take the measures necessary to recover sums lost as a result of irregularities or negligence (Deutsche Milchkontor, paragraph 18). 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, paragraph 22).
15 It follows from the case-law of the Court that, in the absence of provisions of Community law, disputes concerning the recovery of amounts paid but not due under Community law must be decided by national courts pursuant to their own national law subject to the limits imposed by Community law inasmuch as the rules and procedures laid down by national law must not have the effect of making it virtually impossible or excessively difficult to implement Community rules and national legislation must be applied in a manner which is not discriminatory compared to procedures for deciding similar national disputes (see, in particular, Deutsche Milchkontor, paragraph 19, 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). Although national 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).
16 In that judgment the Court held, with reference to those factors, that Community law does not prevent national law from having regard, in excluding the recovery of Community aid paid but not due, to the protection of legitimate expectations (Deutsche Milchkontor, paragraph 33).
17 The national court raises the question whether, in circumstances such as those of the case before it, Community law precludes exporter undertakings from pleading their good faith in response to a demand for repayment of refunds. In that respect it is apparent from the order for reference that, in the judgment challenged before the national court, the Østre Landsret had accepted that, in submitting inaccurate declarations on the basis of information provided by Slagtergården, those undertakings had acted in good faith since, as trading undertakings, they were not in any way involved in the manufacturing cycle of the products. They did not carry out checks on the products themselves since, on the one hand, they did not have access to Slagtergården's recipes, the production accounts or the manufacturing premises and, on the other, the checks had been carried out by various State authorities.
18 According to the Ministry, the exporter undertakings could not plead their good faith since they had drafted the declarations in question themselves. Pursuant to Article 3(5) of Commission Regulation (EEC) No 3665/87 of 27 November 1987 laying down common detailed rules for the application of the system of export refunds on agricultural products (OJ 1987 L 351, p. 1), exporters must submit a written declaration including such information concerning the nature and composition of the meat as is necessary for calculating the export refund. Exporters are therefore responsible for the content of their declarations, independently of any errors on the part of the competent national authority or fraudulent acts on the part of third parties, on a basis which approaches strict liability.
19 The Commission shares that analysis and considers that the Court has already established a system of strict liability in situations of that kind. It refers to the judgment in Case 288/85 Plange [1987] ECR 611, from which it follows that when a trader undertakes to export products which must, but do not, satisfy certain conditions, he should automatically repay the export refunds received. Furthermore, Article 11(3) of Regulation (EEC) No 3665/87, as amended by Commission Regulation (EC) No 2945/94 of 2 December 1994 (OJ 1994 L 310, p. 57), expressly provides for the obligation to reimburse aid, such as that at issue in the main proceedings, which was paid but not due.
20 Like the exporter undertakings, the German Government considers, by contrast, that there is no system of strict liability for the recovery of sums paid but not due at Community level, which would exclude the application of national law and thus reverse the principles laid down in Deutsche Milchkontor. In particular, such a system cannot be inferred from Regulation No 2945/94, which does not apply ratione temporis to the facts of the case.
21 In that respect, it should be noted, first, that exporter undertakings are able to contest 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 refund in question. To ascertain whether that is so, it is necessary to consider, first, whether the exporter undertakings may plead good faith even though they themselves drafted the declaration including a description of the goods with a view to obtaining the refunds and, second, whether in order to be in good faith, they should have inspected the goods or monitored the manufacturing process.
22 In the present case, in contrast to Plange, cited above (see, in particular, paragraph 10), there is no Community provision governing the recovery of refunds paid on the basis of documents subsequently shown to be inaccurate. Regulation No 2945/94, upon which the Commission relied in support of its argument, does not apply ratione temporis to the refunds in question. Accordingly, if an exporter draws up and submits a declaration with a view to obtaining export refunds, the mere fact of having prepared 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 the other party to a contract and the accuracy of which he was unable to establish.
23 The next point to consider is whether, under Community law, an exporter who receives an export refund may plead good faith only when he has inspected the composition of the goods as well as the manufacturing process and the raw materials used, with a view to establishing that the goods correspond to the description given in the declaration submitted to the national supervisory authorities.
24 The exporter undertakings have pointed out in that respect that the only practical means for them to detect the fraudulent composition of the meat supplied by the abattoir would have been to supervise production. Such supervision of the other party's performance of its contractual obligations would not, however, have been practical, in view of the technical difficulty involved and the fact that such a procedure, which is very expensive, is not common practice in the sector concerned.
25 If that were the case, such supervision would be onerous and technically difficult to carry out and the obligation would thus be disproportionate to the objective pursued. In those circumstances, therefore, Community law cannot make the exporter's right to plead his good faith as regards the conformity of the goods with the description given by him in the declaration submitted in order to obtain an export refund, conditional on him supervising the manufacturing process or checking the raw materials used by his third party supplier, in order to verify the quality of those goods, unless there are specific reasons to doubt that the content of the declaration is accurate or special circumstances, such as abnormally low prices or the size of the exporter undertakings' profit margin. Fault on the part of a third party
26 According to the national court, the declarations submitted by the exporter undertakings concerning the meat content of the exported goods conferring entitlement to the refunds were shown to be inaccurate, in particular as a result of serious punishable offences committed by a third party, namely the producer, with the object and effect of circumventing the rules laid down by the Ministry. The national court asks whether that fact can be taken into account and, if so, to what extent.
27 The Ministry and the Commission claim that, in accordance with the judgment in Case C-347/93 Boterlux [1994] ECR I-3933, fraudulent behaviour by a third party should be considered to be an ordinary commercial risk for the recipient of the aid and repayment cannot therefore be excluded.
28 The Court considered in Boterlux, paragraph 35, that in the context of an application for export refunds governed by Community law, fraudulent behaviour by a third party does not amount to force majeure but constitutes an ordinary commercial risk. Although, in contrast to the present case, that judgment was not given in the context of repayment governed by national law, it is none the less the case that, when a balance must be struck between the interests of the Community and those of the trader, the national court must take into account the fact that fault on the part of the third party with whom the recipient of the aid has entered into a contract concerns more closely the sphere of the recipient of the aid than that of the Community. Negligence on the part of the national authorities
29 According to the national court, the national authorities responsible for the checks failed to carry out adequate supervision on the basis of the information contained in the recipes or the producer's accounts concerning the purchase of raw materials and to take specific measures against Slagtergården, notwithstanding their suspicions.
30 It appears that, according to Danish law, in circumstances such as those of this case, negligence and/or passivity on the part of the various national authorities responsible for the checks should be taken into account as a factor excluding recovery from the recipient. The national court asks whether Community law precludes such conduct from being taken into account.
31 The Court has already held in Deutsche Milchkontor, paragraph 31, that in the case of a demand for repayment of sums unduly granted, Community law does not preclude grounds for excluding repayment from being taken into account where these are related to the administration's own conduct and it can therefore prevent them from occurring.
32 It follows from the principle of cooperation laid down in Article 5 of the Treaty, but also from provisions such as Article 8 of Regulation No 729/70, that the national authorities must verify by means of appropriate controls that products in respect of which Community aid has been sought comply with the relevant Community rules so as to ensure that Community aids are not paid in respect of products for which they ought not to be granted (Deutsche Milchkontor, paragraph 43). It is for the national court to determine the controls necessary for this purpose, having regard to the circumstances of the case and the technical methods available at the time for the product in question and, therefore, the existence and degree of negligence, if any. If the circumstances referred to by the national court are established, there is no apparent reason why the conduct of the national authorities should not be treated as negligence which may exclude repayment. Likewise, the identification of negligent conduct on the part of the national authorities by a Community body such as the Court of Auditors is a specific indication in that respect. Grounds of equity
33 Finally, the national court asks whether the fact that 5 to 10 years have elapsed since the payment of the aid, and hence that any repayment would be particularly onerous for the recipients, can be taken into account at the time of repayment.
34 In that respect, the Court held in Deutsche Milchkontor, paragraph 33, that Community law does not prevent the national legislature from having regard, in excluding the recovery of aid paid but not due, to such considerations as the passing of a time-limit. That judgment concerned a national rule which provided for the withdrawal of an unlawful administrative measure within one year of the administration becoming aware of certain circumstances which, according to the relevant national law in that case, gave rise to a legitimate expectation on the part of the recipient.
35 In this case, it follows from the explanations given by the national court that, under Danish law, the national authorities have a discretion to refuse or to grant recovery of aid paid but not due, having regard to the period of time which has elapsed since the refunds were paid. Community law does not preclude that ground of equity from being taken into account provided, however, that it satisfies the conditions set out in Deutsche Milchkontor.
36 In view of all the foregoing, the answer must be that Community law does not in principle preclude a national rule from allowing non-recovery of Community aid paid but not due, regard being had to criteria such as negligence on the part of the national authorities and the fact that a considerable period of time has elapsed since the payment of the aid in question, provided that the good faith of the recipient is established, that the same conditions apply as for the recovery of purely national payments and that the interests of the Community are fully taken into account.