1 By order of 18 January 2000, received at the Court Registry on 28 February 2000, the Bundesverwaltungsgericht (Federal Administrative Court) referred to the Court for a preliminary ruling under Article 234 EC a question on the interpretation of the first and second sentences of the first subparagraph of Article 10(2) of Commission Regulation (EEC) No 3887/92 of 23 December 1992 laying down detailed rules for applying the integrated administration and control system for certain Community aid schemes (OJ 1992 L 391, p. 36).
2 That question was raised in the course of proceedings, firstly, between the Land Baden-Württemberg and Mr Schilling, a farmer, and, secondly, between the Bezirksregierung Lüneburg and Mr Nehring, another farmer, regarding penalties imposed upon them by the national authorities under the first and second sentences of the first subparagraph of Article 10(2) of Regulation No 3887/92. The Community legislation The aid scheme applicable to bovine animals Regulation (EEC) No 805/68
3 Articles 4a to 4i 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), in the version resulting from Council Regulation (EEC) No 2066/92 of 30 June 1992 (OJ 1992 L 215, p. 49), provides for the grant of various premiums, including the special premium for male bovine animals instituted by Article 4b of Regulation No 2066/92. The detailed rules for the application of the aid schemes Regulation (EEC) No 3508/92
4 Council Regulation (EEC) No 3508/92 of 27 November 1992 (OJ 1992 L 355, p. 1) establishes an integrated administration and control system (hereinafter the integrated system) for certain Community aid schemes established under the common agricultural policy.
5 According to the first indent of Article 1(1)(b) of Regulation No 3508/92, the integrated system applies, in the livestock sector, to the premium arrangements for beef and veal producers established by Articles 4a to 4h of Regulation No 805/68, as amended by Regulation No 2066/92.
6 Article 6(8) of Regulation No 3508/92 lays down that in order to be eligible for one of the Community schemes or arrangements referred to in Article 1(1)(b) each farmer is to submit one or more livestock aid applications, at the latest by the dates set by the schemes concerned. Regulation No 3887/92
7 Regulation No 3887/92 lays down the detailed rules for applying the integrated system provided for by Regulation No 3508/92.
8 Article 5(1) of Regulation No 3887/92 states that, without prejudice to the requirements pertaining to application for aid under individual schemes, the livestock aid application is to contain all necessary information, in particular the identity of the farmer; the number of animals of each species in respect of which any aid is applied for; where applicable, an undertaking by the applicant to keep these animals on his holding during the retention period and information on the location or locations where the animals will be held; and a statement by the farmer that he is aware of the requirements pertaining to the aids in question.
9 Article 6 of Regulation No 3887/92 provides: 1. Administrative and on-the-spot checks shall be made in such a way as to ensure effective verification of compliance with the terms under which aids and premiums are granted. ... 3. On-the-spot checks shall cover at least a significant percentage of applications. The significant percentage shall represent at least: - 10% of "livestock" aid applications or participation declarations, ... 4. Applications subjected to on-the-spot checking shall be selected by the competent authority on the basis of a risk analysis and an element of representativeness of the aid applications submitted. ... ...
10 Article 10(2) of Regulation No 3887/92 states as follows: If the number of animals declared in an aid application exceeds that found during checks the aid shall be calculated on the number of animals found. However, except in cases of force majeure and after paragraph 5 has been applied, the unit amount of the aid shall be reduced: (a) in cases where an application concerns a maximum of 20 animals: - by the percentage corresponding to the difference found if this is not more than two animals, - by twice the percentage corresponding to the difference found if this is more than two but not more than four animals. If the difference is greater than four animals, no aid shall be granted; (b) in other cases: - by the percentage corresponding to the difference found if this is not more than 5%, - by 20% if the difference found is more than 5% but not more than 10%, - by 40% if the difference found is more than 10% but not more than 20%. If the difference found is more than 20% no aid shall be granted. The percentages mentioned under (a) are calculated on the basis of the number declared, and those mentioned under (b) on the basis of the number found. However, where it is found that a false declaration was made intentionally or as a result of serious negligence: - the farmer in question shall be excluded from the aid scheme concerned for the calendar year in question, and - in the case of a false declaration made intentionally, from the same aid scheme for the following calendar year. If a farmer has been unable to comply with his retention undertaking as a result of force majeure he shall retain his right to a premium in respect of the number of animals actually eligible at the time when the case of force majeure occurred. In no case may premiums be granted on a greater number of animals than that shown in the aid application. For the purposes of this paragraph animals eligible for different premiums shall be treated separately. The main proceedings and the question referred for a preliminary ruling
11 Two sets of proceedings are at the origin of this request for a preliminary ruling. The first dispute is between the Land Baden-Württemberg and Mr Schilling regarding his application of 14 May 1993 for a special premium for male bovine animals in respect of 23 animals which had already been slaughtered in January 1993 and four bulls exported to Italy on 14 April 1993. The competent authority rejected the application with regard to the latter animals on the ground that the application had not been lodged three days before their export. It also reduced the total premium granted in respect of the other animals by 40%, relying on Article 10(2) of Regulation No 3887/92.
12 Mr Schilling brought an action before the Verwaltungsgericht (Administrative Court) which held that the premium for the exported animals had rightly been refused but that this did not justify an additional reduction in the premium for the other animals.
13 As the judgment of the Verwaltungsgericht was confirmed on appeal by the Verwaltungsgerichtshof Baden-Württemberg (Higher Administrative Court, Baden-Württemberg), the Land Baden-Württemberg appealed on a point of law to the Bundesverwaltungsgericht.
14 The second dispute is the result of the rejection by the Bezirksregierung Lüneburg of Mr Nehring's application for a special premium for male bovine animals in respect of four animals on the dual ground that three of the animals had been slaughtered without awaiting the two-week period after the lodging of the declaration of participation required by the national rules relating to cattle and goats and that the fourth animal was not of the minimum slaughter weight.
15 Mr Nehring contested the decision of the Bezirksregierung Lüneburg in an action before the Verwaltungsgericht Stade (Germany). In its judgment of 14 December 1995 the Verwaltungsgericht did not accept the ground for refusing a premium except in regard to the fourth bull, for which Mr Nehring had not proven that the minimum slaughter weight had been achieved. It also held that the decision could not lead to a reduction under Article 10(2) of Regulation No 3887/92 of the premium applied for in respect of the three other animals.
16 The Bezirksregierung Lüneburg appealed to the Niedersächsisches Oberverwaltungsgericht (Higer Administrative Court, Lower Saxony) (Germany) and then, after its appeal had been dismissed by judgment of 11 February 1999, it appealed on a point of law to the Bundesverwaltungsgericht.
17 The Bundesverwaltungsgericht took the view that the proceedings before it required an interpretation of the first and second sentences of the first subparagraph of Article 10(2) of Regulation No 3887/92. It decided to stay proceedings and to refer the following question to the Court of Justice for a preliminary ruling: Must there be a reduction in the unit amount of aid under the second sentence of Article 10(2) even where the discrepancy presupposed in the first sentence between the number of animals declared and the number found during checks is not attributable to incorrect information given by the applicant but to the fact that the authority does not accept that the conditions for the grant of premiums are satisfied in regard to certain animals? The question referred for a preliminary ruling
18 By its question the Bundesverwaltungsgericht is asking essentially whether the first and second sentences of the first subparagraph of Article 10(2) of Regulation No 3887/92 must be interpreted as meaning that the unit amount of the aid must be reduced even where the discrepancy between the number of animals declared and the number found during the check is not attributable to incorrect information given by the applicant but to the fact that the conditions for the grant of the premium are not satisfied in regard to certain animals.
19 Mr Nehring submits that the first and second sentences of the first subparagraph of Article 10(2) of Regulation No 3887/92 provide for a penalty only where it is found, in the course of the check carried out, that information given by the farmer is erroneous. They thus provide for penalties where, on the occasion of a check, it is found that the number of animals indicated in the aid application exceeds the number of animals actually found. That is the only interpretation of that provision which is compatible with the principle of proportionality.
20 The Land Baden-Württemberg contends that pursuant to the second sentence of the first subparagraph of Article 10(2) of Regulation No 3887/92 the amount of the aid must be reduced even if the difference between the number of animals declared and the number of animals found upon a check is not attributable to a false declaration by the applicant but to the fact that the competent authority considers that some animals are not eligible under the aid scheme. The applicants' interpretation of the first and second sentences of the first subparagraph of Article 10(2) of the regulation runs counter to the object and purpose of that regulation, which is to enable the effective implementation of the reform of the common agricultural policy and to prevent and penalise irregularities and fraud.
21 The Land Baden-Württemberg adds that, this being a case of a large-scale procedure in which only spot checks can be made, an applicant is required to exercise great care when submitting his applications. Any irregularity ought to be attributable to him, the competent authority only having to take into account the fact that according to his statements the number of animals declared is greater than the number declared eligible by the authority.
22 The Commission submits that the question should be answered in the affirmative. Administrative decisions relating to the grant of Community aid are collective decisions and so the list of animals set out in the aid applications cannot be treated as mere data which the applicant places before the competent authorities, who then are closely to inspect and correct the various aspects of each application. The system established by Regulation No 3887/92 is based on the cooperation and joint responsibility of the applicant, who, by submitting his application, indicates that it satisfies the conditions required for the grant of the premium. The interpretation of the first and second sentences of the first subparagraph of Article 10(2) proposed by the applicants in the main proceedings might have the effect of inducing applicants for aid to make declarations which were true on their face but false in the light of the conditions of eligibility under the aid scheme.
23 It should be observed, first of all, that at the relevant time the first sentence of the first subparagraph of Article 10(2) of Regulation No 3887/92 provided that where it is established that the number of animals declared in an aid application exceeds the number of animals found during the check, the aid is to be calculated on the basis of the number of animals found. The unit amount of the aid was therefore to be reduced by a percentage which varied according to the amount by which the number of animals stated in the application differed from the number of animals found.
24 Since the wording of the first sentence of the first subparagraph of Article 10(2) of Regulation No 3887/92 presents difficulties of interpretation regarding the question whether [animals] found during checks refers to animals counted during a check or to animals which the competent authorities found, during that check, to be eligible under the Community aid scheme, it is necessary to examine that provision in the light of the purpose of the regulation and, since it is open to several interpretations, preference should be given to the interpretation which ensures that the provision retains its effectiveness (see, in particular, Case C-434/97 Commission v France [2000] ECR I-1129, paragraph 21, and Case C-403/99 Italy v Commission [2001] ECR I-6883, paragraph 28).
25 According to the first, seventh and ninth recitals in the preamble to Regulation No 3887/92, the objectives of the regulation are to enable the reform of the common agricultural policy to be implemented efficiently, to monitor compliance with the provisions on Community aid effectively, and to adopt provisions to prevent and penalise irregularities and fraud effectively.
26 In view of the special features of the various aid schemes, the Community institutions provided for graduated penalties according to the gravity of the irregularity committed. With regard to the penalties relating to livestock aid applications, Article 10(2) of Regulation No 3887/92 provides for penalties ranging from reduction of the unit amount of the aid to total exclusion from the aid scheme for the calendar year concerned and the following calendar year.
27 Article 10(2) of Regulation No 3887/92 is therefore designed to penalise, effectively and as a deterrent, not merely fraudulent declarations or those amounting to serious negligence, but also any irregularity committed by a farmer in his aid application.
28 Mr Nehring claims that the amount of aid to which he is entitled may be reduced under the second sentence of the first subparagraph of Article 10(2) of Regulation No 3887/92 only if the number of animals which he declared in his application differs from the number of animals found, that is to say counted, by the competent authorities upon their inspection.
29 Such an interpretation would be contrary both to the wording of the provisions of Regulation No 3887/92 concerning the submission of aid applications by farmers and to the aims of the Community regulations on the integrated system, namely Regulation No 3508/92 and Regulation No 3887/92.
30 According to Article 5(1) of Regulation No 3887/92, amongst the information to be contained in a livestock aid application submitted by a farmer is a statement by him that he is aware of the requirements pertaining to the aid in question.
31 Moreover, Article 6(1) of Regulation No 3887/92 provides that the two types of checks to which it refers, namely administrative and on-the-spot checks, are to be made in such a way as to ensure effective verification of compliance with the terms under which aids and premiums are granted.
32 It follows that [the number of animals] found during checks within the meaning of the first sentence of the first subparagraph of Article 10(2) of Regulation No 3887/92 must be understood to be the number of animals found by the competent authorities to be eligible under the aid scheme, in the sense that they satisfy the necessary conditions for the grant of the aids and premiums.
33 When submitting an application for livestock aid, a farmer is required to declare the animals which satisfy the various conditions laid down by the Community rules on the grant of such aid.
34 The integrated system established by Regulation No 3508/92 and Regulation No 3887/92 is designed to make administrative and control mechanisms more effective. An effective procedure presupposes that the information to be provided by an applicant for aid is complete and accurate from the outset in order that he may make a proper application for the grant of compensatory payments and avoid the imposition of penalties (see, to that effect, Case C-369/98 Fisher [2000] ECR I-6751, paragraphs 27 and 28).
35 It must also be stated that the interpretation which the applicants for the aid in question seek to give to the first and second sentences of the first subparagraph of Article 10(2) of Regulation No 3887/92 would directly contradict the objectives of that regulation and the system of penalties established by the Community institutions in the framework of the integrated system.
36 As the Commission has rightly pointed out, such an interpretation might induce an applicant for aid to make statements that were true with regard to the number of animals declared but false in the light of the eligibility conditions under the aid scheme, since only the aid in respect of the animals which were not in fact eligible would not be paid to him. Such an interpretation would make effective management of the Community aid schemes impossible.
37 Moreover, it is apparent from the provisions of Regulation No 3508/92 and Regulation No 3887/92 that the national authorities are not required, or even able, to carry out checks to verify the truthfulness of all statements made in aid applications submitted to them. With regard, in particular, to the on-the-spot checks provided for in Article 6(3) of Regulation No 3887/92, those checks are to relate to a significant percentage of applications, but that percentage may be only 10% of livestock aid applications submitted by farmers. It is therefore necessarily the case that under the integrated system it is for the farmers, who state pursuant to Article 5(1) of that regulation that they are aware of the requirements pertaining to the aids in question, to submit aid applications for animals which satisfy those requirements. The second sentence of the first subparagraph of Article 10(2) of that regulation is designed to penalise applicants who do not fulfil that obligation, even if they do so without negligence or fraudulent intent.
38 Mr Nehring's argument that such an interpretation of the first and second sentences of the first subparagraph of Article 10(2) of Regulation No 3887/92 is not in accordance with the principle of proportionality cannot be upheld.
39 First, the Community institutions have a wide measure of discretion in agricultural matters and, second, Regulation No 3887/92 provides for penalties graduated according to the seriousness and magnitude of the irregularity committed (see, to that effect, Case C-354/95 National Farmers' Union and Others [1997] ECR I-4559, paragraph 53 and 54).
40 In those circumstances, it cannot be considered unjustified or disproportionate to impose a dissuasive and effective penalty such as that laid down in the above provision on a farmer who has committed an error, even in good faith and without fraudulent intent (see National Farmers' Union and Others, paragraphs 53 and 54).
41 It should also be observed that even if Regulation No 3887/92 may present difficulties of interpretation, a careful reading of it makes it possible to apprehend the meaning and consequences of applying its provisions, which are aimed at professionals in the relevant area.
42 In the light of all the foregoing, the answer to the question must therefore be that on a proper construction of the first and second sentences of the first subparagraph of Article 10(2) of Regulation No 3887/92 the unit amount of the aid must be reduced even where the discrepancy between the number of animals declared and the number of animals found during checks is not attributable to incorrect information given by the applicant but to the fact that the necessary conditions for the grant of the premiums are not satisfied in regard to certain animals.