1 By its appeal, the Republic of Bulgaria seeks to have set aside the judgment of the General Court of the European Union of 8 March 2023, Bulgaria v Commission (T‑235/21, EU:T:2023:105; ‘the judgment under appeal’), by which the General Court dismissed that Member State’s action against Commission Implementing Decision (EU) 2021/261 of 17 February 2021 excluding from European Union financing certain expenditure incurred by the Member States under the European Agricultural Guarantee Fund (EAGF) and under the European Agricultural Fund for Rural Development (EAFRD) (OJ 2021 L 59, p. 10; ‘the decision at issue’), in so far as it excludes from that financing the amount of EUR 7 656 848.97 declared by the Republic of Bulgaria.
2 Article 1(2) of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests (OJ 1995 L 312, p. 1) provides: ‘“Irregularity” shall mean any infringement of a provision of Community law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by them, either by reducing or losing revenue accruing from own resources collected directly on behalf of the Communities, or by an unjustified item of expenditure.’
3 Recitals 36, 37, 39 and 94 of Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008 (OJ 2013 L 347, p. 549, and corrigendum OJ 2016 L 130, p. 6), state: … …
4 Under Article 1 of Regulation No 1306/2013, entitled ‘Scope’: ‘This Regulation lays down the rules on:
5 Article 2(1) of that regulation provides: ‘For the purpose of this Regulation:
6 Regulation No 1306/2013 contains Title IV, entitled ‘Financial management of the funds’, which includes Chapter IV, headed ‘Clearance of accounts’. In Section I of that chapter, entitled ‘General provisions’, Article 47 of that regulation, in turn entitled ‘On-the-spot checks by the Commission’, states: ‘1. Without prejudice to the checks carried out by Member States under national law, regulations and administrative provisions or Article 287 TFEU or to any check organised under Article 322 TFEU or based on Council Regulation (Euratom, EC) No 2185/96 [of 11 November 1996 concerning on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities’ financial interests against fraud and other irregularities (OJ 1996 L 292, p. 2)], the Commission may organise on-the-spot checks in Member States with a view to verifying in particular: Persons authorised by the Commission to carry out on-the-spot checks on its behalf, or Commission agents acting within the scope of the powers conferred on them, shall have access to the books and all other documents, including documents and metadata drawn up or received and recorded on an electronic medium, relating to expenditure financed by the EAGF or the EAFRD. The powers to carry out on-the-spot checks shall not affect the application of national provisions which reserve certain acts for agents specifically designated by national law. Without prejudice to the specific provisions of Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council [of 11 September 2013 concerning investigations conducted by the European Anti-Fraud Office (OLAF) and repealing Regulation (EC) No 1073/1999 of the European Parliament and of the Council and Council Regulation (Euratom) No 1074/1999 (OJ 2013 L 248, p. 1)] and [Regulation No 2185/96], persons authorised by the Commission to act on its behalf shall not take part, inter alia, in home visits or the formal questioning of persons on the basis of law of the Member State concerned. However, they shall have access to information thus obtained. 2. The Commission shall give sufficient prior notice of an on-the-spot check to the Member State concerned or to the Member State within whose territory the check is to take place, taking into account the administrative impact on paying agencies when organising checks. Agents from the Member State concerned may take part in such checks. At the request of the Commission and with the agreement of the Member State, additional checks or inquiries into the operations covered by this Regulation shall be undertaken by the competent bodies of that Member State. Commission agents or persons authorised by the Commission to act on its behalf may take part in such checks. In order to improve checks, the Commission may, with the agreement of the Member States concerned, request the assistance of the authorities of those Member States for certain checks or inquiries.’
7 Under Article 48(3) of Regulation No 1306/2013: ‘Member States shall make available to the Commission information about irregularities and suspected fraud cases detected, as well as information about the steps taken pursuant to Section III of this Chapter to recover undue payments in connection with those irregularities and frauds.’
8 Chapter IV of Title IV of that regulation contains Section II, entitled ‘Clearance’, which includes Article 52 of that regulation; that article concerns conformity clearance and provides, in paragraphs 1 to 4 thereof: ‘1. Where it finds that expenditure falling within the scope of Article 4(1) and Article 5 has not been effected in conformity with Union law and, in respect of the EAFRD, has not been effected in conformity with the applicable Union and national law referred to in Article 85 of Regulation (EU) No 1303/2013 [of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006 (OJ 2013 L 347, p. 320)], the Commission shall adopt implementing acts determining the amounts to be excluded from Union financing. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 116(2). 2. The Commission shall assess the amounts to be excluded on the basis of the gravity of the non-conformity recorded. It shall take due account of the nature of the infringement and of the financial damage caused to the Union. It shall base the exclusion on the identification of amounts unduly spent and, where these cannot be identified with proportionate effort, may apply extrapolated or flat-rate corrections. Flat-rate corrections shall only be applied where, due to the nature of the case or because the Member State has not provided the Commission with the necessary information, it is not possible with proportionate effort to identify more precisely the financial damage caused to the Union. 3. Before the adoption of any decision to refuse financing, 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. At that point in the procedure the Member States shall be given the opportunity to demonstrate that the actual extent of the non-compliance is less than in the Commission’s assessment. If agreement is not reached, the Member State may request the opening of a procedure aimed at reconciling, within a period of four months, each party’s position. A report of the outcome of the procedure shall be submitted to the Commission. The Commission shall take into account the recommendations in the report before deciding on any refusal of financing and shall give reasons if it decides not to follow those recommendations. 4. Financing may not be refused for:
9 Article 53 of Regulation No 1306/2013, entitled ‘Commission powers’, provides, in paragraph 1 thereof: ‘The Commission shall adopt implementing acts laying down rules on: …
10 Chapter IV of Title IV of that regulation contains Section III, entitled ‘Irregularities’, which includes Article 54 of that regulation; that article is entitled ‘Common provisions’ and provides, in paragraphs 1, 2, 4 and 5 thereof: ‘1. For any undue payment following the occurrence of irregularity or negligence, Member States shall request recovery from the beneficiary within 18 months after the approval and, where applicable, reception, by the paying agency or body responsible for the recovery, of a control report or similar document, stating that an irregularity has taken place. The corresponding amounts shall be recorded at the time of the recovery request in the debtors’ ledger of the paying agency. 2. If recovery has not taken place within four years from the date of the recovery request, or within eight years where recovery is taken in the national courts, 50% of the financial consequences of the non-recovery shall be borne by the Member State concerned and 50% by the Union’s budget, without prejudice to the requirement that the Member State concerned must pursue recovery procedures in compliance with Article 58. … 4. Member States shall enter in the annual accounts to be sent to the Commission under point (c)(iv) of Article 102(1) the amounts to be borne by them under paragraph 2 of this Article. The Commission shall check that this has been done and make any adjustments needed in the implementing act referred to in Article 51. 5. The Commission may, provided that the procedure laid down in Article 52(3) has been followed, adopt, implementing acts, excluding from Union financing sums charged to the Union’s budget in the following cases:
11 Regulation No 1306/2013 contains Title V, entitled ‘Control systems and penalties’, which includes Chapter I, headed ‘General rules’; that chapter includes Article 58 of that regulation, itself entitled ‘Protection of the financial interests of the Union’, which provides, in paragraph 1 thereof: ‘Member States shall, within the framework of the CAP, adopt all legislative, regulatory and administrative provisions and take any other measures necessary to ensure effective protection of the financial interests of the Union, in particular to:
12 Recitals 25 and 27 of Commission Implementing Regulation (EU) No 908/2014 of 6 August 2014 laying down rules for the application of Regulation (EU) No 1306/2013 of the European Parliament and of the Council with regard to paying agencies and other bodies, financial management, clearance of accounts, rules on checks, securities and transparency (OJ 2014 L 255, p. 59, and corrigendum OJ 2015 L 114, p. 25), state: …
13 Article 34 of that implementing regulation, entitled ‘Conformity clearance’, provides: ‘1. In order to determine what amounts are to be excluded from Union financing, when finding that expenditure has not been incurred in conformity with Union rules, the Commission shall use its own findings and shall take into account the information made available by Member States, provided that the latter information is provided within the time limits set by the Commission in the framework of the conformity clearance procedure carried out in accordance [with] Article 52 of Regulation (EU) No 1306/2013 and in conformity with this Article. 2. When, as a result of any inquiry, the Commission considers that expenditure was not effected in compliance with Union rules, it shall communicate its findings to the Member State concerned, specifying the corrective measures needed to ensure future compliance with those rules, and indicating the provisional level of financial correction which at that stage of the procedure it considers corresponds to its findings. That communication shall also schedule a bilateral meeting within four months after expiry of the period for reply by the Member State. The communication shall make reference to this Article. The Member State shall reply within two months of receipt of the communication. In its reply the Member State shall have the opportunity, in particular, to: In justified cases, the Commission may, upon reasoned request of the Member State, authorise an extension of the two[-]month period by a maximum of two months. The request shall be addressed to the Commission before the expiry of that period. If the Member State considers that a bilateral meeting is not required, it shall inform the Commission accordingly in its reply to the communication mentioned above. 3. In the bilateral meeting 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 Union budget. The Commission shall within 30 working days of the bilateral meeting draw up the minutes and send them to the Member State. The Member State may send its observations to the Commission within 15 working days after receipt of the minutes. The Commission shall within six months after sending the minutes of the bilateral meeting formally communicate its conclusions to the Member State on the basis of the information received in the framework of the conformity clearance procedure. That communication shall evaluate the expenditure to be excluded from Union financing under Article 52 of [Regulation (EU) No 1306/2013] and Article 12 of [Commission] Delegated Regulation (EU) No 907/2014 [of 11 March 2014 supplementing Regulation (EU) No 1306/2013 of the European Parliament and of the Council with regard to paying agencies and other bodies, financial management, clearance of accounts, securities and use of euro (OJ 2014 L 255, p. 18)]. The communication shall make reference to Article 40(1) of this Regulation. … 5. In order to apply paragraphs 3 and 4 within the respective time periods, the Commission shall have available all information relevant at that particular step of the procedure. Where the Commission deems it lacks information, it may at any time within the time periods set out in paragraphs 3 and 4: In that case, the time periods referred to in paragraphs 3 and 4 shall start again either on the receipt by the Commission of the requested additional information or from the last day of the additional audit mission. 7. The Commission, after having communicated its conclusions to the Member States in accordance with Article 34 paragraph 3 or 4 of this Regulation, shall adopt, where appropriate, one or more decisions under Article 52 of Regulation (EU) No 1306/2013 in order to exclude from Union financing expenditure affected by the non-compliance with Union rules. The Commission may pursue consecutive conformity clearance procedures until the Member State has actually implemented the corrective measures. …’
14 Article 40 of Implementing Regulation No 908/2014, entitled ‘Conciliation procedure’, provides, in paragraph 1 thereof: ‘A Member State may refer a matter to the Conciliation Body within 30 working days of receipt of the Commission’s formal communication referred to in the third subparagraph of Article 34(3) by sending a reasoned request for conciliation to the secretariat of the Conciliation Body. …’
15 The background to the dispute was set out by the General Court in paragraphs 2 to 12 of the judgment under appeal and may, for the purposes of the present proceedings, be summarised as follows.
16 By letter of 4 January 2017, the Commission requested the Republic of Bulgaria to submit its comments on the information provided by the European Anti-Fraud Office (OLAF), in investigation INT/2016/101/BG (‘the communication of findings’); it had emerged from that investigation, in essence, that fraudulent activity had resulted in the undue payment of EU funds. In addition, the Commission informed the Republic of Bulgaria that eligibility for funding from the EAGF of all expenditure in respect of programmes implemented by [confidential] (1) was affected and that, therefore, in accordance with Article 52 of Regulation No 1306/2013, the Commission was considering the possibility of excluding such expenditure from EU financing. The Commission also recommended that the Bulgarian authorities suspend payments in respect of all programmes and transactions in which [confidential] (2) was implicated where they had sufficient grounds to do so.
17 By letter of 2 May 2017, the Commission invited the Bulgarian authorities to attend a bilateral meeting in accordance with the first subparagraph of Article 34(2) of Implementing Regulation No 908/2014, while informing them that it maintained its position that OLAF’s findings indicated that there were serious irregularities regarding the expenditure referred to in the preceding paragraph. The Commission explained that it would provide, also by letter and after the communication of OLAF’s final report, further details on the various steps that would be taken in the clearance procedure that had been initiated. The Commission concluded by pointing out that, pending that report, it maintained its position that all expenditure in respect of the programmes implemented by [confidential] (3) was at risk.
18 By letter of 11 September 2017, the Commission sent the Republic of Bulgaria the minutes of the bilateral meeting held on 12 July 2017 and asked it some additional questions. It also informed the Republic of Bulgaria that it was necessary to wait for OLAF’s final report before pursuing the next steps of the clearance procedure, particularly as regards the quantification of the risk to the fund in question resulting from the deficiencies found. In accordance with Article 34(9) of Implementing Regulation No 908/2014, the Commission decided to extend the six-month period provided for in Article 34(3) of that implementing regulation by an additional three months in order to send its conclusions to the Republic of Bulgaria.
19 By letter of 19 January 2018, the Commission forwarded OLAF’s final report with reference OF/2012/0565/B (‘OLAF’s first report’) to the Republic of Bulgaria. It informed the Bulgarian authorities that it would organise a second bilateral meeting with them to discuss that report.
20 By letter of 7 May 2018, the Commission invited the Republic of Bulgaria to a second bilateral meeting, which was held on 29 May 2018, to discuss OLAF’s first report (‘the second invitation to a bilateral meeting’). The Commission also stated that it maintained its position that all expenditure in respect of the promotion programmes in which [confidential] (4) was implicated were at risk. The Commission therefore recommended that the Bulgarian authorities continue to suspend payments for all programmes in which [confidential] (5) was implicated and that irregular payments should be recovered from the beneficiaries, in accordance with Article 54 of Regulation No 1306/2013.
21 By letter of 29 June 2018, the Commission sent the Republic of Bulgaria the minutes of the second bilateral meeting, in which it recalled that, during that meeting, it had requested further information.
22 By letter of 3 September 2018, the Commission sent the Bulgarian authorities OLAF’s report with reference OF/2016/0390/B5 (‘OLAF’s second report’), concerning the irregularities committed by [confidential] (6) in the context of promotion programmes financed by the EAGF.
23 By letter of 1 March 2019, the Commission, in accordance with Article 34(5)(a) of Implementing Regulation No 908/2014, requested the Bulgarian authorities to provide it with further information on the recovery of the amounts related to the expenditure incurred by the EAGF under the nine promotion programmes identified as posing risks to the fund in question, in addition to the recording of the corresponding amounts in the debtors’ ledger pursuant to Article 54 of Regulation No 1306/2013. It also stated that, under that article, the recovery request in respect of the programmes implemented by [confidential] (7) should be made no later than 18 months from 19 January 2018, while the recovery request in respect of the programme implemented by [confidential] (8) should be made no later than 18 months from 3 September 2018 - that is to say, the dates on which OLAF’s first report and OLAF’s second report (together, ‘OLAF’s final reports’) were sent to the Bulgarian paying agency.
24 By letter of 19 November 2019, the Commission forwarded a communication to the Republic of Bulgaria pursuant to the third subparagraph of Article 34(3) of Implementing Regulation No 908/2014, in which the information provided by the Bulgarian authorities in three letters dated 20 July 2018, 21 September 2018 and 24 April 2019 was analysed. It emerged from that communication, in essence, that, following the bilateral discussion of 29 May 2018 and on the basis of the additional information subsequently provided by the Republic of Bulgaria and OLAF’s final reports, the Commission considered that the financing of nine promotion programmes implemented by [confidential] (9) and [confidential] (10) was not in conformity with the applicable rules. Furthermore, the Commission considered that, since the Republic of Bulgaria had not initiated any procedure for recovery or recording in the debtors’ ledger of the paying agency, its management and control system did not comply with the requirements laid down by EU law and there was therefore a risk to the fund in question. Consequently, the Commission proposed to exclude from EAGF funding the amount of EUR 7 656 848.97.
25 By letter of 18 December 2019, the Republic of Bulgaria, in accordance with Article 40(1) of Implementing Regulation No 908/2014, referred the matter to the conciliation body, which delivered an opinion on 25 February 2020.
26 By letter of 12 August 2020, the Commission forwarded its final opinion to the Republic of Bulgaria, by which it informed the Republic of Bulgaria that it maintained its position as set out in its letter of 19 November 2019, and that it thus proposed to exclude from EAGF funding the amount of EUR 7 656 848.97.
27 On 17 February 2021, the Commission adopted the decision at issue, by which it applied, on the basis of Article 52 of Regulation No 1306/2013, a one-off correction by excluding from EU financing certain expenditure incurred by the Republic of Bulgaria under operational programmes co-financed by the EAGF and the EAFRD. The decision at issue thus excluded from EU financing the amount of EUR 7 656 848.97.
28 By application lodged at the Registry of the General Court on 28 April 2021, the Republic of Bulgaria brought an action for annulment of the decision at issue in so far as that decision imposed on it a financial correction in the amount of EUR 7 656 848.97.
29 In support of its action, the Republic of Bulgaria relied on five pleas in law alleging, in essence: (i) an infringement of its procedural rights during the administrative procedure that had led to the adoption of the decision at issue; (ii) an inadequate statement of reasons; (iii) a misinterpretation of Article 54(1) of Regulation No 1306/2013 as regards the definition of the starting point of the 18-month period from which recovery of any undue payment must be requested from the beneficiary by the Member State concerned; (iv) an error of assessment by the Commission in so far as it considered that the paying agency had failed to act with the requisite care to recover the sums corresponding to the expenditure exposed to a risk and that it had been negligent in failing to initiate an administrative recovery procedure within the time limits prescribed in Article 54(1) of Regulation No 1306/2013; and (v) that the amount of expenditure excluded from EU financing by the decision at issue did not comply with Article 54 of Regulation No 1306/2013 or with the principle of proportionality.
30 By the judgement under appeal, the General Court dismissed the action.
31 The Republic of Bulgaria claims that the Court should: - set aside the judgment under appeal; - give final judgment in the matter or, in the alternative, refer the case back to the General Court; and - order the Commission to pay the costs.
32 The Commission contends that the Court should dismiss the appeal and order the Republic of Bulgaria to pay the costs.
33 In support of its appeal, the Republic of Bulgaria puts forward two grounds of appeal.
34 The first alleges an error of law in the interpretation of Article 52(3) of Regulation No 1306/2013 and Article 34 of Implementing Regulation No 908/2014, read in conjunction with Article 52(1) and Article 54(5) of Regulation No 1306/2013, and a failure to comply with the obligation to state reasons under Article 296 TFEU as well as a failure to observe the principle of good administration and the principle of sincere cooperation.
35 The second ground of appeal alleges that the General Court erred in law in its interpretation of Article 54(5)(a) and (c) of Regulation No 1306/2013, read in conjunction with Article 54(1) thereof.
36 By its first ground of appeal, the Republic of Bulgaria alleges that the General Court erred in law in its interpretation of Article 52(3) of Regulation No 1306/2013 and Article 34 of Implementing Regulation No 908/2014, read in conjunction with Article 52(1) and Article 54(5) of Regulation No 1306/2013, and failed to comply with the obligation to state reasons under Article 296 TFEU as well as failed to observe the principle of good administration and the principle of sincere cooperation, which, in that Member State’s submission, led the General Court to find, incorrectly, that the Republic of Bulgaria’s rights of defence and the procedural guarantees applicable during the conformity clearance procedure, the obligation to state reasons for the corrective measures, the principle of good administration and the principle of sincere cooperation had been observed. That Member State further claims that the reasoning of the judgment under appeal is insufficient and inappropriate, since the General Court did not assess all the facts relevant to the dispute and the observations that that Member State had submitted.
37 In the first place, the Republic of Bulgaria submits that, in finding, in paragraphs 47 to 49 of the judgment under appeal, that, having regard to the fact that the second invitation to a bilateral meeting had been sent and that meeting had been held, the procedural defects relating to the alteration by the Commission of the legal basis for the financial correction relating to expenditure exposed to a risk had been remedied, the General Court confused the procedure giving effect to the audi alteram partem principle laid down in Article 52(3) of Regulation No 1306/2013, read in conjunction with Article 34 of Implementing Regulation No 908/2014, with the separate substantive grounds for imposing a financial correction referred to, respectively, in Article 52(1) and Article 54(5) of Regulation No 1306/2013.
38 In that regard, the Republic of Bulgaria submits that financial corrections imposed under, first, Article 52(1) of Regulation No 1306/2013 and, second, Article 54(5) of that regulation have different legal bases. Consequently, although the adoption of decisions on each of those bases is subject to the same procedure giving effect to the audi alteram partem principle, governed by Article 52(3) of that regulation, read in conjunction with Article 34 of Implementing Regulation No 908/2014, the decision at issue should have been based on the same grounds as those on which the procedure leading to its adoption had been initiated.
39 Thus, according to that Member State, in the present case, the Commission should have interrupted the procedure initiated on the basis of Article 52(1) of Regulation No 1306/2013 and initiated a new procedure on the basis of Article 54(5) of that regulation by communicating to the Republic of Bulgaria, in accordance with Article 34(2) of Implementing Regulation No 908/2014, its findings, made following the checks referred to in Article 54(4) of Regulation No 1306/2013.
40 The Republic of Bulgaria submits that the General Court therefore erred in holding, in paragraph 42 of the judgment under appeal, that the second invitation to a bilateral meeting could alter the communication of the findings to the new legal basis relied on.
41 In the second place, the Republic of Bulgaria asserts that the General Court erred in finding, in paragraphs 61 and 62 of the judgment under appeal, that the obligation to state reasons had been complied with on the ground that that Member State had participated in the procedure giving effect to the audi alteram partem principle provided for in Article 52(3) of Regulation No 1306/2013.
42 In that regard, that Member State submits that Article 54(5) of Regulation No 1306/2013 empowers the Commission to adopt implementing acts excluding sums from EU financing, provided that the procedure laid down in Article 52(3) of that regulation has been followed; Article 52(3) empowers the Commission to adopt such acts even in the absence of a prior on-the-spot check, for the purposes of Article 47 of Regulation No 1306/2013, subject to respect for the rights of the defence and the adversarial principle.
43 The Republic of Bulgaria infers from that that, in the present case, the Commission should have interrupted the check initiated by the transmission of OLAF’s final reports and, after having checked the documents referred to in Article 54(4) of Regulation No 1306/2013, it should have initiated the procedure provided for in Article 54(5) by sending, in accordance with Article 34(2) of Implementing Regulation No 908/2014, a communication informing the Member State of its findings under Article 54(5) of Regulation No 1306/2013, made following the checks referred to in Article 54(4) of that regulation.
44 The Republic of Bulgaria states that the Commission opened an investigation on the basis of Article 52(1) of Regulation No 1306/2013, then ultimately reached the conclusion that, owing to the negligence of the paying agency as regards the request for recovery from the beneficiary and the recording of the amounts concerned in the debtors’ ledger within the time limit laid down in Article 54(1) of that regulation, the ground for exclusion was the one referred to in Article 54(5)(a) and (c) of that regulation, even though the grounds of the decision at issue make no reference to that provision.
45 In the third place, the Republic of Bulgaria submits that the General Court failed to ascertain whether the Commission had complied with the duty of diligence laid down in Article 4(3) TEU.
46 In that regard, the Republic of Bulgaria submits that the Commission acted prematurely in so far as, after receiving OLAF’s final reports, it should have sent them to the Republic of Bulgaria only together with a recommendation to take corrective measures and, next, ascertained whether Article 54(1) of Regulation No 1306/2013 had been complied with before adopting an implementing decision on the basis of Article 54(5)(a) and (c) of that regulation.
47 In the fourth place, the Republic of Bulgaria submits that the General Court failed to assess or comment on the evidence which that Member State had submitted before the hearing and which related to observance of the principles of sincere cooperation and good administration. According to that Member State, that evidence shows that, in other cases in which the paying agency had received a certain number of final reports relating to checks carried out by OLAF, which had also been sent by the Commission to the Bulgarian authorities, the Commission had not initiated the procedure provided for in Article 52 of Regulation No 1306/2013. In that regard, the General Court neither assessed nor commented on the fact that the Commission had apparently changed its approach.
48 According to the Republic of Bulgaria, the decision at issue could have reasonably been adopted only if OLAF’s final reports had shown that the paying agency had failed to comply with the provisions of Article 54(5)(a) and (c) of Regulation No 1306/2013, whereas, in the present case, the facts related to irregularities committed by the beneficiaries of the EU agricultural funds.
49 The Commission disputes the merits of that line of argument.
50 As regards, in the first place, the complaint summarised in paragraphs 37 to 40 above, according to which the Commission could not, by means of the second invitation to a bilateral meeting, alter the communication of the findings, for the purposes of Article 34(2) of Implementing Regulation No 908/2014, since the imposition of a financial correction, either under Article 52(1) of Regulation No 1306/2013 or under Article 54(5) thereof, has different legal bases, it must be borne in mind that, in paragraphs 41, 42 and 46 of the judgment under appeal, the General Court held as follows:
51 Article 54(5)(a) and (c) of Regulation No 1306/2013 states that the Commission may, provided that the procedure laid down in Article 52(3) of that regulation has been followed, adopt implementing acts excluding from EU financing sums charged to the European Union’s budget if the Member State concerned has not respected the 18-month time limit referred to in Article 54(1) of that regulation, or if the Commission considers that a lack of recovery is the outcome of irregularity or negligence attributable to that Member State.
52 Under Article 54(1) of Regulation No 1306/2013, Member States are to request recovery from the beneficiary of undue payments following the occurrence of irregularity or negligence within 18 months after the approval and, where applicable, reception, by the paying agency or body responsible for the recovery, of a control report or similar document, stating that an irregularity has taken place. The corresponding amounts are to be recorded at the time of the recovery request in the debtors’ ledger of the paying agency.
53 As the Advocate General observed, in essence, in point 40 of his Opinion, it is clear from the wording of that provision that the obligation of the Member States, under that provision, to request recovery from the beneficiary of undue payments following the occurrence of irregularity or negligence arises from the date of approval or reception, by the paying agency or body responsible for the recovery, of a ‘control report or similar document, stating that an irregularity has taken place’.
54 Furthermore, since Article 54(5) of Regulation No 1306/2013 makes the adoption, by the Commission, of an implementing decision on the basis of that provision subject to compliance with only the procedure laid down in Article 52(3) of that regulation, it must be stated, as the Advocate General did in point 41 of his Opinion, that the procedure leading to the adoption of an implementing act on the basis of Article 54(5) of that regulation may be implemented independently of the procedure based on Article 52(1) of that regulation.
55 It follows that, in accordance with the objective of protecting the financial interests of the European Union’s budget, referred to in recitals 37 and 39 of Regulation No 1306/2013, the Commission may, where the failure to comply with the obligation to request recovery has been established, adopt an implementing act under Article 54(5) of that regulation, subject to compliance with the procedure laid down in Article 52(3) of that regulation.
56 It is clear from Article 52(3) of Regulation No 1306/2013, which defines the procedure to be followed prior to any decision to refuse financing, that the adoption of such a decision is subject to there being an exchange, between the Commission and the Member State concerned, of written notifications concerning the results of the checks carried out by the Commission with a view to reaching an agreement on the measures to be adopted. If no agreement is reached, the Member State concerned may request the initiation of a conciliation procedure, following which a report containing recommendations is to be submitted to the Commission, which has to take it into account prior to adopting any decision to refuse financing.
57 In accordance with Article 53(1)(b) of Regulation No 1306/2013, the Commission adopted Implementing Regulation No 908/2014, Article 34 of which lays down detailed rules for the conformity clearance procedure provided for in Article 52 of Regulation No 1306/2013.
58 As is clear from Article 34 of Implementing Regulation No 908/2014, read in the light of recital 27 thereof, that procedure gives effect to the audi alteram partem principle, and its various stages, which the General Court set out in paragraph 36 of the judgment under appeal, are subject to compliance with specific time limits in order to ensure that that procedure is concluded within a reasonable period of time.
59 In the first stage, the Commission communicates its findings to the Member State concerned, specifying the corrective measures it considers necessary and indicating the provisional level of financial correction it considers appropriate. In accordance with the case-law referred to by the General Court in paragraph 37 of the judgment under appeal, that communication must identify in a sufficiently precise manner all irregularities which the Member State concerned is alleged to have committed which, ultimately, formed the basis for the financial correction applied. Such a communication alone can ensure that full information is provided concerning the Commission’s reservations (see, by analogy, judgment of 3 May 2012, Spain v Commission, C‑24/11 P, EU:C:2012:266, paragraph 31). In addition, in accordance with the first subparagraph of Article 34(2) of Implementing Regulation No 908/2014, that communication must refer to Article 34 and schedule a bilateral meeting to be held within four months of the expiry of the period for reply available to the Member State concerned.
60 In the present case, the General Court noted, in paragraph 42 of the judgment under appeal, that, in the second invitation to a bilateral meeting which the Commission had sent to the Republic of Bulgaria, it had indicated that certain payments could be considered ineligible for EU financing. The Commission recommended therein, first, that payments deemed to pose a risk to the fund in question should not be renewed and, second, that irregular payments should be recovered from their respective beneficiaries, in accordance with Article 54 of Regulation No 1306/2013. In addition, the General Court stated that that invitation contained, first, a reference to Article 34 of Implementing Regulation No 908/2014, second, precise details of the irregularities that, at that stage, could justify a financial correction and, third, an indication of the corrective measures that should be envisaged.
61 The General Court did not therefore err in law in inferring from that that the second invitation to a bilateral meeting complied with the requirements set out in the first subparagraph of Article 34(2) of Implementing Regulation No 908/2014 and, accordingly, in considering that that second invitation had, in essence, altered the communication of the findings sent to the Republic of Bulgaria on 4 January 2017.
62 Furthermore, in so far as, by that complaint, the Republic of Bulgaria submits that, in the present case, the Commission acted prematurely when it initiated the procedure under Article 54(5)(a) and (c) of Regulation No 1306/2013, on the ground that it should have, as a first step, sent to that Member State OLAF’s final reports accompanied by a mere recommendation to take corrective measures and, next, ascertained whether that Member State had fulfilled its obligations under Article 54(1) of that regulation before, as a second step, communicated to it its findings under Article 34(2) of Implementing Regulation No 908/2014, it should be noted that that interpretation is in no way borne out by the wording of those provisions.
63 Furthermore, that interpretation would be difficult to reconcile with the objective of protecting the financial interests of the European Union’s budget, referred to in paragraph 55 above.
64 Such an interpretation would have the effect of requiring the Commission to wait until the end of the 18-month time limit laid down in Article 54(1) of Regulation No 1306/2013 before being able to initiate the procedure giving effect to the audi alteram partem principle provided for in Article 34 of Implementing Regulation No 908/2014 and, in particular, to communicate to the Member State concerned the corrective measures which should, in its view, be implemented, thereby potentially reducing the likelihood of actual recovery of undue payments following the occurrence of irregularity or negligence.
65 It must be added that the interpretation put forward by the Republic of Bulgaria is not warranted by the requirement to protect the rights of the defence since, as the General Court took care to ascertain in paragraph 49 of the judgment under appeal, the interpretation which it adopted does not deprive the Member State concerned of the possibility of effectively making known its point of view as regards the recovery of expenditure exposed to a risk and as regards the application of Article 54 of Regulation No 1306/2013.
66 It follows from the foregoing considerations that the present complaint is based on a misinterpretation of Article 52(1) and Article 54(5) of Regulation No 1306/2013, with the result that it must be rejected as unfounded.
67 As regards, in the second place, the line of argument set out in paragraphs 41 to 44 above, by which the Republic of Bulgaria submits, in essence, that the General Court erred in law in finding, in paragraphs 61 and 62 of the judgment under appeal, that the Commission had complied with its obligation to state reasons, even though the decision at issue makes no reference to Article 54(5) of Regulation No 1306/2013, which constitutes, according to the Republic of Bulgaria, the true legal basis for that decision, it must be noted that the General Court was entitled to begin by recalling, in paragraph 57 of the judgment under appeal, the settled case-law relating to Article 296 TFEU, according to which the statement of reasons for legal acts must be appropriate to the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the act in question in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent court to exercise its supervisory jurisdiction.
68 The General Court was also entitled, in paragraph 60 of the judgment under appeal, to recall, next, the case-law according to which, in the particular context in which the decisions relating to the clearance of accounts concerning the EU agricultural funds came about, the statement of reasons for a decision refusing to charge part of the declared expenditure to that fund must be regarded as sufficient if the Member State to which the decision was addressed was closely involved in the process by which the decision came about and was aware of the reasons for which the Commission took the view that it must not charge that expenditure to the fund concerned.
69 In the present case, the Republic of Bulgaria has not called into question the findings made by the General Court in paragraph 61 of the judgment under appeal, according to which that Member State was involved in the process by which the decision at issue came about and the question of the recovery of the debts at issue, in accordance with Article 54 of Regulation No 1306/2013, was discussed between the parties on numerous occasions.
70 Accordingly, the Republic of Bulgaria is not justified in criticising the General Court for having inferred from that, in paragraph 62 of the judgment under appeal, that the Republic of Bulgaria could not contend that it had not been informed of the reasons why the Commission had sought to impose on it the financial correction relating to expenditure exposed to a risk, or that it had not been in a position to understand the grounds of the decision at issue on that matter.
71 Having regard to the case-law referred to by the General Court, that Court thus did not err in law in finding that the Commission had not failed to comply with its obligation to state reasons.
72 The second complaint must therefore be rejected as unfounded.
73 In the third place, in so far as the Republic of Bulgaria submits, by the arguments summarised in paragraphs 45 and 46 above, that the General Court failed to examine whether the Commission had complied with the duty of diligence laid down in Article 4(3) TEU, it is sufficient to note, as the Advocate General did in points 82 to 85 of his Opinion, first, that the arguments put forward by the Republic of Bulgaria before the General Court in that regard were not independent in nature but appeared, on the contrary, to be a consequence of the alleged infringement of the procedure that, according to that Member State, should have led to the adoption of the decision at issue and, moreover, that those arguments were particularly cursory and that, contrary to what that Member State claims, it is clear from paragraph 49 of the judgment under appeal that the General Court examined those arguments and provided a response that was just as cursory.
74 The third complaint must therefore be rejected as unfounded.
75 In the fourth place, as regards the complaint summarised in paragraphs 47 and 48 above, according to which the General Court failed to examine certain items of evidence alleged to establish that the Commission did not observe the principles of sincere cooperation and good administration by initiating the procedure provided for in Article 52 of Regulation No 1306/2013, whereas, in other, similar situations occurring later, that procedure was not initiated, it must be borne in mind that, in the context of an appeal, the purpose of review by the Court of Justice is, inter alia, to ascertain whether the General Court addressed, to the requisite legal standard, all the arguments put forward by the appellant, it being noted that the plea alleging that the General Court failed to address arguments relied on at first instance amounts essentially to alleging infringement of the duty to state reasons which derives from 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 that statute, and Article 117 of the Rules of Procedure of the General Court (see, to that effect, judgment of 27 February 2025, OA v Parliament, C‑32/24 P, EU:C:2025:118, paragraph 24 and the case-law cited).
76 That duty to state the reasons on which judgments are based does not require the General Court to provide an account that follows exhaustively and one by one all the reasoning articulated by the parties to the case. The reasoning may therefore be implicit, on condition, however, that it enables the persons concerned to know the grounds on which the judgment under appeal is based and provides the Court of Justice with sufficient material for it to exercise its powers of review on appeal (judgment of 27 February 2025, OA v Parliament, C‑32/24 P, EU:C:2025:118, paragraph 25 and the case-law cited).
77 In the present case, as regards, first, the Commission’s letter received by the Republic of Bulgaria on 12 May 2022, it must be noted that, in paragraph 22 of the judgment under appeal, the General Court held that that item of evidence which had been submitted by that Member State the day before the hearing before the General Court was admissible. The General Court then examined it in paragraph 53 of that judgment, in which it held that that Member State had not explained how that letter was capable of supporting its line of argument, with the result that the claim that the General Court disregarded that item of evidence is unfounded.
78 Second, in so far as, by that complaint, the Republic of Bulgaria claims that the General Court did not comment on its observations concerning recital 29 and Article 2 of Regulation (EU, Euratom) 2020/2223 of the European Parliament and of the Council of 23 December 2020 amending Regulation (EU, Euratom) No 883/2013, as regards cooperation with the European Public Prosecutor’s Office and the effectiveness of the European Anti-Fraud Office investigations (OJ 2020 L 437, p. 49), it is important to recall the settled case-law of the Court of Justice according to which, under Article 256 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, an appeal must indicate precisely the contested elements of the judgment which the appellant seeks to have set aside as well as the legal arguments specifically advanced in support of the appeal (judgment of 22 May 2025, Trasta Komercbanka v ECB, C‑90/23 P, EU:C:2025:369, paragraph 53 and the case-law cited).
79 In the present case, it should be noted that the Republic of Bulgaria’s line of argument concerning recital 29 and Article 2 of Regulation 2020/2223, set out in paragraph 48 of the appeal, is characterised by a complete absence of clarity or link with the grounds of the judgment under appeal and is, consequently, manifestly inadmissible.
80 In the light of the foregoing considerations, the first ground of appeal must be rejected as in part inadmissible and in part unfounded.
81 The second ground of appeal alleges that the General Court erred in law inasmuch as it interpreted Article 54(5)(a) and (c) of Regulation No 1306/2013, read in conjunction with Article 54(1) of that regulation, as meaning that, in the present case, the 18-month time limit laid down in Article 54(1) had started to run from the date of reception, by the paying agency, of OLAF’s final reports.
82 According to the Republic of Bulgaria, the General Court’s reasoning in paragraphs 76 to 78 of the judgment under appeal is contrary to its settled case-law according to which the decision-making process provided for in Article 52 of Regulation No 1306/2013 is adversarial and the various documents exchanged in the context of the administrative procedure are documents preparatory to the adoption of a decision.
83 The Republic of Bulgaria submits, in particular, that the General Court held, in paragraph 76 of the judgment under appeal, that, if the EU legislature had intended to set the starting point of the 18-month time limit laid down for Member States to request recovery of undue payments from their beneficiaries as the time of the formal completion of the clearance procedure, as provided for in Article 52 of Regulation No 1306/2013, it would have expressly referred to the ‘implementing acts’.
84 That Member State claims in that regard that, although, in Article 54(1) of Regulation No 1306/2013, the EU legislature defined in general terms the documents after whose receipt the 18-month time limit begins to run, that is owing to the heterogeneous nature of the checks, findings and reports which may be adopted in the context of the clearance procedure and the procedure relating to irregularities.
85 The Republic of Bulgaria further submits that, contrary to what is stated in paragraph 77 of the judgment under appeal, it does not dispute that the Commission is entitled, in principle, to decide to initiate a conformity clearance procedure and to exclude expenditure on the basis of the information contained in OLAF’s final reports.
86 According to that Member State, in the present case, however, the procedure already initiated under Article 52 of Regulation No 1306/2013 required the Commission to adopt a decision refusing financing at the end of all of the stages provided for in Article 34 of Implementing Regulation No 908/2014.
87 The Republic of Bulgaria submits that the procedure laid down in Article 52(3) of Regulation No 1306/2013, initiated on the basis of Article 52(1) of that regulation, requires the Commission to close that procedure by an implementing decision adopted on the same basis, so that the Member State concerned can know with certainty what measures it must take.
88 The Republic of Bulgaria claims that, by failing to do so, the Commission left it in a state of uncertainty as to the exact nature of the allegations against it.
89 That Member State submits that, in paragraphs 73 to 81 of the judgment under appeal, the General Court misinterpreted the facts of the present case in connection with Articles 52 and 54 of Regulation No 1306/2013, which should be interpreted together, given that Article 54 of that regulation refers to Article 52(3) of that regulation as regards the rights of the defence and to the information in the context of a decision to be adopted under Article 54(5) of that regulation.
90 The Republic of Bulgaria asserts that the General Court misinterpreted the combined provisions of Article 52(1) and (3) of Regulation No 1306/2013 by holding that those provisions allowed the Commission to adopt a decision under Article 54(5) of that regulation, whereas, according to that Member State, in reality, Article 54(5) requires only that the Commission comply with the procedure giving effect to the audi alteram partem principle laid down in Article 52(3) of that regulation in order to exclude expenditure on the basis of Article 54(5), in the event of non-compliance with the time limit laid down in Article 54(1) of that regulation or negligence on the part of the Member State concerned.
91 The Commission disputes the merits of that line of argument.
92 By the second ground of appeal, the Republic of Bulgaria submits that the General Court erred in law in its interpretation of Article 54(5)(a) and (c) of Regulation No 1306/2013, read in conjunction with Article 54(1) of that regulation, inasmuch as, in essence, it considered that, in the present case, the 18-month time limit laid down in Article 54(1) had started to run from the date of reception, by the paying agency, of OLAF’s final reports, whereas, according to that Member State, where a procedure is opened under Article 52 of that regulation, that procedure must lead to the adoption of a decision refusing financing at the end of the various stages provided for in Article 34 of Implementing Regulation No 908/2014, which, in the present case, was not the case when OLAF sent its final reports.
93 According to the Republic of Bulgaria, in so doing, the General Court failed to have regard to the adversarial nature of the decision-making process provided for in Article 52 of Regulation No 1306/2013 and to the fact that the documents communicated in the context of that administrative procedure are documents preparatory to the adoption of a decision refusing financing.
94 In that regard, it should be noted that the second ground of appeal is based on the incorrect premiss that the Commission, since it initiated the conformity clearance procedure on the basis of Article 52(1) of Regulation No 1306/2013, is required to adopt an implementing act under that provision before it may, as the case may be, initiate a procedure on the basis of Article 54(5)(a) and (c) of that regulation.
95 As is apparent from the examination of the first ground of appeal, and, in particular, paragraphs 53 to 55 above, the obligation to request recovery of undue payments following the occurrence of irregularity or negligence arises from, inter alia, the reception, by the paying agency or the body responsible for the recovery, of a ‘control report or similar document, stating that an irregularity has taken place’, and the procedure leading to the adoption of an implementing act on the basis of Article 54(5) of Regulation No 1306/2013 may be implemented independently of the procedure based on Article 52(1) of that regulation.
96 Consequently, the Commission may, where the failure to comply with the obligation to request recovery has been established and without being required first to bring to an end the procedure initiated on the basis of Article 52(1) of Regulation No 1306/2013, adopt an implementing act under Article 54(5) of that regulation, subject to compliance with the procedure laid down in Article 52(3) thereof.
97 In those circumstances, the present ground of appeal cannot succeed.
98 Since none of the grounds of appeal raised in support of the present appeal has been successful, the appeal must be dismissed in its entirety.
99 Under Article 184(2) of the Rules of Procedure of the Court of Justice, where the appeal is unfounded, the Court is to make a decision as to the costs.
100 Under Article 138(1) of the Rules of Procedure, which applies to appeal proceedings by virtue of Article 184(1) thereof, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.
101 Since the Commission has applied for costs against the Republic of Bulgaria and the Republic of Bulgaria has been unsuccessful, that Member State must be ordered to bear its own costs and to pay those incurred by the Commission. 1. Dismisses the appeal; 2. Orders the Republic of Bulgaria to pay, in addition to its own costs, those incurred by the European Commission.