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It follows from Article 5 of Regulation No 1782/2003 and from the case-law of the Court of Justice that Member States, when taking into account the specific characteristics of the areas concerned, have a measure of discretion in establishing the requirements relating to good agricultural and environmental condition.

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The problems referred to in the annex to Regulation No 1782/2003 can be resolved by examining each problem and imposing the most appropriate (effective) standards from amongst those established in that regulation on the basis of the national context.

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Taking into account the principle of proportionality, that is to say, if the introduction of a requirement affects small agricultural holdings only and thereby creates administrative burdens and costs significantly greater than the benefits, Member States may introduce essential requirements, provided that these are such as to enable the objectives laid down in Regulation No 1782/2003 to be achieved.

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The Commission did not adopt a consistent approach with regard to the mandatory and essential nature of the requirements listed in Annex III to Regulation No 1782/2003; in addition, there was a breach of the principle of the protection of legitimate expectations because of the Commission’s failure to act until the autumn of 2009.

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It failed to apply the principle of proportionality, in that it did not indicate what was the risk occasioned to the funds and did not take into account the calculations submitted by the Republic of Latvia, on the basis of which the risk occasioned was smaller.

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It infringed the Guidelines, under which the criterion of the flat-rate correction is only to be used when it is not possible, on the basis of the information available, to calculate the losses, despite the fact that the Republic of Latvia sent the Commission precise information which made it possible to calculate the risk occasioned to the funds.