1 BY APPLICATION LODGED AT THE COURT REGISTRY ON 14 JUNE 1978 THE COMMISSION OF THE EUROPEAN COMMUNITIES BROUGHT AN ACTION BEFORE THE COURT UNDER ARTICLE 169 OF THE EEC TREATY WHICH ACTION , AS IT NOW STANDS AFTER AMENDMENT DURING THE PROCEDURE , SEEKS A DECLARATION THAT BY NOT SUBMITTING REPORTS AND SUPPORTING DOCUMENTS WITHIN THE TIME-LIMITS PRESCRIBED BY THE REGULATION REFERRED TO BELOW HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER ARTICLE 4 ( 3 ) OF REGULATION NO 130/66/EEC OF THE COUNCIL OF 26 JULY 1977 ON THE FINANCING OF THE COMMON AGRICULTURAL POLICY ( OFFICIAL JOURNAL , ENGLISH SPECIAL EDITION 1965-1966 , P . 216 ), AS AMENDED BY REGULATION NO 966/71/EEC OF THE COUNCIL OF 10 MAY 1971 ( OFFICIAL JOURNAL , ENGLISH SPECIAL EDITION 1971 ( I ), P . 255 ) AND UNDER THE THIRD SUBPARAGRAPH OF ARTICLE 12 ( 4 ) OF REGULATION NO 159/66/EEC OF THE COUNCIL OF 25 OCTOBER 1966 LAYING DOWN FURTHER PROVISIONS FOR THE COMMON ORGANIZATION OF THE MARKET IN FRUIT AND VEGETABLES ( JOURNAL OFFICIEL NO 192 , P . 3286 ).
2 UNDER THE REGULATIONS REFERRED TO ABOVE THE ITALIAN REPUBLIC RECEIVED PAYMENT FROM THE RESOURCES OF THE GUIDANCE SECTION OF THE EUROPEAN AGRICULTURAL GUIDANCE AND GUARANTEE FUND ( HEREINAFTER REFERRED TO AS ' ' THE EAGGF ' ' ) IN THE FORM OF A FIXED AMOUNT OF FINANCIAL AID INCLUDING 45 000 000 UNITS OF ACCOUNT FOR THE PURPOSE OF MAKING STRUCTURAL IMPROVEMENTS IN THE PRODUCTION AND MARKETING OF OLIVES , OLIVE OIL , FRUIT AND VEGETABLES , 15 000 000 UNITS OF ACCOUNT FOR THE PURPOSE OF MAKING STRUCTURAL IMPROVEMENTS IN THE PRODUCTION AND MARKETING OF RAW TOBACCO , AND AN ADDITIONAL 87 299 539 UNITS OF ACCOUNT FOR THE PURPOSE OF MAKING STRUCTURAL IMPROVEMENTS IN THE PRODUCTION AND MARKETING OF FRUIT AND VEGETABLES . THE REGULATIONS PROVIDED THAT BEFORE THE END OF THE TRANSITIONAL PERIOD THE ITALIAN REPUBLIC WAS TO SUBMIT REPORTS TO THE COMMISSION TOGETHER WITH SUPPORTING DOCUMENTS ON THE EXPENDITURE ON THE MEASURES ENVISAGED . THE TIME-LIMITS FOR THE SUBMISSION OF THE REPORTS WERE EXTENDED BY SUBSEQUENT REGULATIONS .
3 AFTER THE REPORTS HAD NOT BEEN SUBMITTED WITHIN THOSE TIME-LIMITS TO THE SATISFACTION OF THE COMMISSION THE ITALIAN AUTHORITIES AND THE COMMISSION EXCHANGED NUMEROUS MEMORANDA ON THE MATTER . ON 11 FEBRUARY 1976 THE COMMISSION SENT TO THE ITALIAN GOVERNMENT A LETTER COMMENCING THE PROCEDURE CONTEMPLATED BY THE FIRST PARAGRAPH OF ARTICLE 169 OF THE TREATY . IN THE BELIEF THAT THE OBSERVATIONS SUBMITTED BY THE GOVERNMENT IN QUESTION ON 17 MARCH 1976 WERE NOT SATISFACTORY , THE COMMISSION ON 16 NOVEMBER 1976 SENT TO THE ITALIAN GOVERNMENT A REASONED OPINION PURSUANT TO THAT PROVISION . THAT OPINION INVITED ITALY TO TAKE THE STEPS TO COMPLY WITH IT WITHIN A PERIOD OF TWO MONTHS . FOLLOWING A FINAL EXCHANGE OF LETTERS , IN WHICH THE ITALIAN GOVERNMENT REQUESTED FRESH EXTENSIONS OF THE TIME-LIMITS , ON 14 JUNE 1978 THE COMMISSION BROUGHT THIS ACTION .
4 AT THE REQUEST OF THE ITALIAN GOVERNMENT THE HEARING WAS POSTPONED SEVERAL TIMES WITH THE COMMISSION ' S AGREEMENT . DURING THE PROCEDURE THE ITALIAN GOVERNMENT SUBMITTED NEW REPORTS UPDATED TO 31 AUGUST 1980 . IT IS EVIDENT FROM THOSE DOCUMENTS THAT THE SUMS GRANTED BY THE EAGGF AMOUNTING TO 45 000 000 UNITS OF ACCOUNT FOR THE PURPOSE OF MAKING STRUCTURAL IMPROVEMENTS IN THE PRODUCTION AND MARKETING OF OLIVES , OLIVE OIL , FRUIT AND VEGETABLES AND 15 000 000 UNITS OF ACCOUNT FOR THE PURPOSE OF MAKING STRUCTURAL IMPROVEMENTS IN THE PRODUCTION AND MARKETING OF RAW TOBACCO HAVE ACTUALLY BEEN PAID BY THE ITALIAN AUTHORITIES TO THE PERSONS WHO HAVE COMPLETED THE INSTALLATIONS FOR THE IMPROVEMENT OF THOSE STRUCTURES . THE COMMISSION HAS CONSEQUENTLY DECLARED ITS ABANDONMENT OF ITS APPLICATION SO FAR AS THOSE TWO SUMS OF AID ARE CONCERNED , ON THE UNDERSTANDING THAT THE DEFENDANT SHOULD BE ORDERED TO PAY THE COSTS PURSUANT TO ARTICLE 69 ( 4 ) OF THE RULES OF PROCEDURE . IN REGARD TO THE THIRD SUM OF AID OF 87 299 539 UNITS OF ACCOUNT GRANTED WITHIN THE FRAMEWORK OF THE COMMON ORGANIZATION OF THE MARKET IN FRUIT AND VEGETABLES , BECAUSE ONLY 44 722 700 000 LIRE ( 81.97% ) OF THAT AMOUNT HAS BEEN ACCOUNTED FOR , THE COMMISSION HAS REQUESTED THAT THE PROCEEDINGS BE CONTINUED .
5 IN THE CASE OF THE LATTER SUM OF AID THE THIRD SUBPARAGRAPH OF ARTICLE 12 ( 4 ) OF REGULATION NO 159/66/EEC CITED ABOVE REFERS TO THE CONDITIONS LAID DOWN BY ARTICLE 4 OF REGULATION NO 130/66/EEC ALSO CITED ABOVE . PARAGRAPH ( 3 ) OF THAT LAST-MENTIONED ARTICLE PROVIDES THAT : ' ' THE ITALIAN REPUBLIC SHALL , BEFORE THE END OF THE TRANSITIONAL PERIOD , SUBMIT TO THE COMMISSION ONE OR MORE REPORTS , ACCOMPANIED BY SUPPORTING DOCUMENTS , ON THE EXPENDITURE INCURRED IN RESPECT OF MEASURES REFERRED TO . . . ' ' THAT TIME-LIMIT WAS EXTENDED TO 31 DECEMBER 1973 BY REGULATION NO 966/71/EEC CITED ABOVE , THE THIRD RECITAL TO WHICH IS WORDED AS FOLLOWS : ' ' WHEREAS THE ITALIAN GOVERNMENT HAS APPLIED TO THE COMMISSION FOR AN EXTENSION TO 31 DECEMBER 1973 OF THE TIME-LIMIT WHICH EXPIRED ON 31 DECEMBER 1969 AND WHICH WAS NOT MET ON ACCOUNT OF THE TIME NEEDED TO CARRY OUT ADMINISTRATIVE FORMALITIES AND COMPLETE THE RELEVANT WORKS . ' '
6 ACCORDING TO THE INFORMATION PROVIDED BY THE PARTIES THE SITUATION CONCERNING THE REPORTS IS AS FOLLOWS . THE 87 299 539 UNITS OF ACCOUNT WERE ROUGHLY EQUIVALENT TO 54 562 000 000 ITALIAN LIRE . ON 31 DECEMBER 1973 , THE DATE ON WHICH THE EXTENDED TIME-LIMIT SET BY THE REGULATIONS WAS REACHED , THE ITALIAN GOVERNMENT HAD UNDERTAKEN FINANCIAL COMMITMENTS TO THE RECIPIENTS FOR 39 309 000 000 LIRE BUT HAD PAID ONLY 2 757 700 000 LIRE THEREOF . ON 31 DECEMBER 1976 , A DATE NEAR TO THE EXPIRY DATE LAID DOWN IN THE COMMISSION ' S REASONED OPINION , THE GOVERNMENT HAD UNDERTAKEN FINANCIAL COMMITMENTS EXCEEDING THE AID FROM THE EAGGF , BUT HAD PAID ONLY 22 752 900 000 LIRE . ON 31 AUGUST 1980 , THE DATE OF THE MOST RECENT REPORTS , THE ITALIAN GOVERNMENT HAD PAID 44 722 700 000 LIRE WHICH REPRESENTS 81.97% OF THE AMOUNT IN LIRE ORIGINALLY PAID TO THE ITALIAN REPUBLIC BY THE EAGGF .
7 IN ITS DEFENCE THE ITALIAN GOVERNMENT FIRST CONTENDS THAT THE ITALIAN ADMINISTRATION HAD DECIDED WITHIN THE TIME-LIMITS LAID DOWN BY THE REGULATIONS , THAT IS TO SAY , BEFORE 31 DECEMBER 1973 , ON THE USE OF THE ENTIRE AMOUNT OF THE FUNDS ALLOCATED BY THE COMMUNITY , AND THAT , IN ANY EVENT , FINANCIAL COMMITMENTS EXCEEDING THE AMOUNT OF THE AID IN QUESTION HAD BEEN ENTERED INTO BEFORE THE PERIOD ALLOWED IN THE REASONED OPINION EXPIRED . IN THE VIEW OF THE ITALIAN GOVERNMENT THE PROGRAMMES CANNOT BE REQUIRED TO HAVE BEEN COMPLETED AND THE FUNDS TO HAVE BEEN ACTUALLY PAID BEFORE THOSE DATES . BESIDES , THE GOVERNMENT HAD MADE CONSIDERABLE FINANCIAL EFFORTS TO GET THE INSTALLATIONS IN QUESTION FINISHED BY ADDING TO THE ITALIAN BUDGET ADDITIONAL SUMS TO A DEGREE WHICH LARGELY EXCEEDED THE INCREASE IN COSTS RESULTING FROM INFLATION . SINCE THE OBJECTIVES OF THE COMMUNITY REGULATIONS WERE THEREBY ACHIEVED IT IS NOT IN ACCORDANCE EITHER WITH THE SPIRIT OR WITH THE LETTER OF THE PROVISIONS RELIED ON BY THE COMMISSION TO REFER TO PURELY FORMAL CONSIDERATIONS .
8 THAT ARGUMENT CANNOT BE ACCEPTED . THE OBLIGATIONS WHICH COMMUNITY RULES IMPOSE ON MEMBER STATES MUST BE COMPLIED WITH IN FULL AND IT IS APPARENT BOTH FROM THE WORDING OF ARTICLE 4 ( 3 ) OF REGULATION NO 130/66/EEC AND FROM THE RECITALS TO REGULATION NO 966/71/EEC THAT THE REPORTS REQUIRED BY THOSE PROVISIONS MUST BE ON THE SUMS PAID TO RECIPIENTS AFTER THE WORKS HAVE BEEN COMPLETED AND NOT ON THE EXPENDITURE COMMITTED TO FUTURE WORKS OR WORKS IN PROGRESS .
9 THE ITALIAN GOVERNMENT FURTHER INVOKES NUMEROUS LEGAL , TECHNICAL AND ADMINISTRATIVE DIFFICULTIES WHICH ALLEGEDLY MADE THE COMPLETION OF THE PROGRAMMES AND THE PAYMENT OF THE AID ALLOCATED BY THE EAGGF OBJECTIVELY IMPOSSIBLE IN THE PERIODS LAID DOWN BY THE REGULATIONS . FIRST OF ALL THOSE FUNDS HAD TO BE BROUGHT WITHIN THE SCOPE OF LAWS IN THE COURSE OF BEING ADOPTED ( NOTABLY GREEN PLAN NO 2 ). THEN IT WAS NECESSARY TO TAKE INTO ACCOUNT THE CREATION OF REGIONS IN ITALY ON WHICH DECREE NO 11 OF THE PRESIDENT OF THE REPUBLIC OF 15 JANUARY 1972 CONFERRED POWERS IN MANY SPHERES OF ACTIVITY IN AGRICULTURE , INCLUDING POWERS TO INTERVENE IN THE SPHERE OF REFORMATIVE AND MARKETING STRUCTURES FOR AGRICULTURAL PRODUCTS . FINALLY , THE GOVERNMENT INSISTS THAT THE DELAYS WERE TECHNICALLY NECESSARY TO PUT INTO EFFECT PROGRAMMES OF CONSIDERABLE SIZE .
10 EVEN IF THE SYSTEM OF FIXED AMOUNTS OF FINANCIAL AID FROM THE EAGGF , NOW ABOLISHED , MAY HAVE CAUSED ADMINISTRATIVE DIFFICULTIES FOR THE MEMBER STATES RECEIVING IT AND EVEN IF THE CIRCUMSTANCES TO WHICH THE ITALIAN GOVERNMENT ADVERTS MAY EXPLAIN AT LEAST IN PART THE DELAYS WHICH AROSE THOSE CIRCUMSTANCES DO NOT EXPUNGE THE FAILURE TO FULFIL ITS OBLIGATIONS WITH WHICH IT IS CHARGED . ACCORDING TO WELL-ESTABLISHED CASE-LAW A MEMBER STATE MAY NOT PLEAD PROVISIONS , PRACTICES OR CIRCUMSTANCES EXISTING IN ITS INTERNAL LEGAL SYSTEMS IN ORDER TO JUSTIFY THE FAILURE TO COMPLY WITH OBLIGATIONS AND TIME-LIMITS RESULTING FROM COMMUNITY RULES .
11 LASTLY THE ITALIAN GOVERNMENT REFERS TO THE NUMEROUS CONTACTS WHICH TOOK PLACE BETWEEN THE ITALIAN ADMINISTRATION AND THE COMPETENT OFFICERS OF THE COMMISSION AND TO THE AGREEMENTS REACHED ON THOSE OCCASIONS . IT CONTENDS THAT THE COMMISSION ACCEPTED BY IMPLICATION THE METHOD OF ACCOUNTING USED BY THE ITALIAN ADMINISTRATION .
12 EVEN IF THE COMMISSION SHOWED A GOOD DEAL OF UNDERSTANDING FOR THE DIFFICULTIES DESCRIBED ABOVE THE FACT REMAINS THAT IT NEVER WAIVED THE SUBMISSION PURSUANT TO THE REGULATIONS CITED ABOVE OF FULL REPORTS ON THE SUMS ACTUALLY PAID REPRESENTING THE AID GRANTED BY THE EAGGF . WHAT IS MORE , THE COMMISSION WAS NOT EMPOWERED TO ALTER THE OBLIGATIONS UNDER THOSE REGULATIONS .
13 IT IS THEREFORE APPROPRIATE TO DECLARE THAT AS REGARDS THE AID FIXED AT 87 299 539 UNITS OF ACCOUNT GRANTED BY THE EAGGF IN THE FRUIT AND VEGETABLE SECTOR , THE ITALIAN REPUBLIC , BY ITS DELAY IN THE SUBMISSION OF ITS REPORTS ON THE EXPENDITURE INCURRED AND BY SUBMITTING THEM FOR THE PERIOD UP TO 31 AUGUST 1980 , ONLY IN RESPECT OF 44 722 700 000 LIRE OR 81.97% OF THE AID GRANTED , HAS NOT SATISFIED THE REQUIREMENTS OF THE THIRD SUBPARAGRAPH OF ARTICLE 12 ( 4 ) OF REGULATION NO 159/66/EEC AND OF ARTICLE 4 ( 3 ) OF REGULATION NO 130/66/EEC AS AMENDED BY REGULATION NO 966/71/EEC AND THAT FOR THAT REASON IT HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER THE EEC TREATY .