Opinion of the Advocate-General

Opinion of the Advocate-General

1. This reference for a preliminary ruling from the Bundesfinanzhof (Federal Finance Court), Germany, concerns the interpretation of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests (‘Regulation No 2988/95’). (2)

2. The referring court wishes to ascertain the appropriate limitation period for the recovery of an export refund wrongly granted to the exporter by reason of an error committed by the national authorities.

Legal framework

Regulation No 2988/95

3. Regulation No 2988/95 entered into force on 26 December 1995. (3) It sets out a number of general rules regarding checks, administrative measures and penalties for irregularities in payments to beneficiaries under Community policies. In particular, it establishes a limitation period for actions arising as a consequence of wrongfully paid export refunds.

4. Before Regulation No 2988/95 was adopted there were no common rules providing for periods of limitation applicable to the investigation or detection of irregularities and to recovery measures arising as a consequence of those irregularities.

5. The third and fourth recitals to the regulation are particularly relevant. The third recital indicates that the detailed rules governing the administration and monitoring of Community expenditure are the subject of differing detailed provisions according to the Community policies concerned, but that acts detrimental to the Communities’ financial interests must be countered in all areas. The fourth recital states that a common set of legal rules for all areas covered by Community policies is needed in order effectively to combat fraud committed against the Communities’ financial interests.

6. The regulation then sets out the general rules relating to checks and administrative measures and penalties concerning irregularities with regard to Community law.

7. Article 1(1) provides:

‘For the purposes of protecting the European Communities’ financial interests, general rules are hereby adopted relating to homogenous checks and to administrative measures and penalties concerning irregularities with regard to Community law.’

8. Article 1(2) defines an irregularity as:

‘…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’.

9. The relevant parts of Article 3 provide:

‘1. The limitation period for proceedings shall be four years as from the time when the irregularity referred to in Article 1(1) was committed. However, the sectoral rules may make provision for a shorter period which may not be less than three years.

…

3. Member States shall retain the possibility of applying a period which is longer than that provided for in paragraphs 1 and 2 respectively.’

Regulation No 3665/87 and Regulation No 800/1999

10. Regulation No 800/1999 (4) was the first regulation to lay down specific limitation periods for the recovery of wrongfully paid export refunds. However, Article 54 of that regulation states:

‘[Regulation No 3665/87 (5) ] shall continue to apply:

– to exports covered by export declarations accepted prior to the entry into force of [Regulation No 800/1999]’

11. Article 11(3) of Regulation No 3665/87, which addresses the recovery of export refunds (and under which the recovery claim at issue in the present proceedings before the national court was made) is silent as to limitation periods.

National legal provisions

12. At the material time, there were no specific provisions in German law setting a limitation period for actions to recover wrongfully granted administrative advantages.

13. Rather, it appears that the German administration and the German courts applied the limitation period set out in Paragraph 195 of the German Civil Code (Bürgerliches Gesetzbuch; ‘BGB’) by analogy to administrative actions taken to recover export refund payments that were wrongly made. (6)

14. Paragraph 195 of BGB provided that the standard limitation period for claims made under German civil law was 30 years. This paragraph was amended with effect from 1 January 2002. The standard limitation period contained therein was shortened to three years and has remained so since that date.

Factual background

15. In 1995, LAGRA Import Export GmbH (‘LAGRA’) applied for export refunds in respect of 31 bovine animals, totalling 21 413 kg, which it intended to export to Turkey. The Principal Customs Office (‘the Hauptzollamt’) approved the application for the export refunds in respect of all 31 animals.

16. However, one animal died in Trieste en route to Turkey. LAGRA informed the Hauptzollamt of the death and asked that its application for an export refund be amended accordingly from 31 animals to 30 animals (and hence from 21 413 kg to 20 715 kg). The Hauptzollamt appears to have overlooked this request. On 19 April 1996, it granted the export refund in respect of all 31 animals. (7)

17. On 5 August 1999 the Hauptzollamt issued an amending notice claiming back the amount granted for the animal which had died. (8)

18. In July 2000 LAGRA became the subject of insolvency proceedings. It appears that its assets were assigned to a bank, Bayerischen Hypotheken- und Wechselbank AG. Bayerische Hypotheken- und Vereinsbank AG (‘Bayerische’) is the present successor to all the rights in Bayerischen Hypotheken- und Wechselbank AG.

19. LAGRA had not, when it became insolvent, repaid the export refund for the animal that had died. On 28 August 2000, the Hauptzollamt took a decision enforcing recovery of that sum against the assignee of LAGRA’s assets. On realising that the original assignee had ceased to exist as an independent entity, the Hauptzollamt withdrew that decision. On 12 December 2001, the Hauptzollamt issued a notice of liability to Bayerische. (9)

20. Bayerische contested the notice of liability before the Finanzgericht, which ruled that the Hauptzollamt’s claim for recovery was out of time by reason of the limitation period set out in Article 3(1) of Regulation No 2988/95.

21. The Hauptzollamt appealed to the Bundesfinanzhof, which has referred the following questions to the Court:

‘(1) Must the first sentence of the first subparagraph of Article 3(1) of [Regulation No 2988/95] be applied to a claim for recovery of an export refund wrongly granted to an exporter, even if the latter did not commit an irregularity?

If this question is to be answered in the affirmative:

(2) Must this provision be applied mutatis mutandis to a claim for recovery of such benefits from the party to which the exporter has assigned its claim to the export refund?’

22. Written pleadings were submitted by the Commission alone. No hearing was requested in this case, and none was held.

Preliminary observations

23. In my Opinion in Vosding , I concluded that the limitation period prescribed in the first sentence of the first subparagraph of Article 3(1) of Regulation No 2988/95 also applies to proceedings in respect of an irregularity which was committed or ceased before that regulation entered into force. That limitation period applies both to penalties and to administrative measures such as the recovery of export refunds granted as a result of irregularities.

24. I also concluded that, in reliance upon Article 3(3) of that regulation, a Member State may apply a longer limitation period already provided for in national law before the regulation was adopted. However, I took the view that such a longer period may not be applied if it was found only in a general civil law rule of the Member State concerned, covering limitation in all classes of action not specifically otherwise regulated.

25. I therefore concluded that Paragraph 195 of the BGB, in its application merely by analogy to administrative law claims for the recovery of sums wrongly paid, was not specific enough to fall within the scope of Article 3(3) of Regulation No 2988/95.

26. Within that framework, I turn to consider the questions referred in the present case. Should the Court disagree with any part of the conclusions that I reached in my Opinion in Vosding , it would necessarily conclude that the Bundesfinanzhof’s first question should be answered in the negative. It would therefore not answer the second question referred.

The first question

27. Article 11 of Regulation No 3665/87, which deals with the recovery of export refunds, does not specify any limitation periods. Although Article 54 of Regulation No 800/99 preserves the applicability of Regulation No 3665/87 to such actions, neither measure resolves the question of what the applicable limitation period should be. The limitation period applicable to an action to recover an export refund granted consequent to an export declaration which was accepted before 24 April 1999 (10) must therefore be found either in Article 3(1) of Regulation No 2988/95 or in national law.

28. The referring court’s first question asks whether the limitation period set out in Article 3(1) of Regulation No 2988/95 should be applied to a claim for recovery of an export refund wrongly granted to an exporter even if the latter has not committed an irregularity.

29. In my view this question can only properly be answered in the negative.

30. Article 3(1) applies to ‘irregularities’ as defined in Article 1(2). If, however, there is no irregularity, Article 3(1) cannot apply.

31. An irregularity is defined under Article 1(2) as ‘any infringement of a provision of Community law resulting from an act or omission by an economic operator …’. That definition does not, on its wording, cover an act or omission by the national authority responsible for granting an export refund.

32. The existence of an ‘irregularity’ is central to the way in which the definition of the limitation period is formulated and is reflected in the legislator’s choice of starting point from which the limitation period should run. The first subparagraph of Article 3(1) provides that the limitation period starts at the moment the irregularity is committed. If there is no irregularity, the starting point for the limitation period cannot be established.

33. In the present case, it is common ground that the overpayment of the export refund is attributable solely to the error of the Hauptzollamt. The exporter, LAGRA, conscientiously notified the Haupzollamt that the 31 st animal had died. The Hauptzollamt nevertheless proceeded to grant and pay the export refund in respect of 31 animals rather than 30 animals. In plain terms, that overpayment ‘resulted’ from the Hauptzollamt’s error and nothing else. To seek to argue otherwise distorts the meaning of the text of Article 1(2) (11) and the ordinary analysis of causation.

34. The order for reference proceeds on the basis that, therefore , no irregularity arose that is attributable to the exporter.

35. So far as can be ascertained from the file, it is true that LAGRA took no positive action at any point to adopt the error made by the Hauptzollamt. A more interesting question is whether there is any ‘omission’ attributable to LAGRA that can be said to have caused an irregularity to arise in this case. It might plausibly be argued that, when the payment was made, LAGRA ought to have verified the amount of the payment, realised that it had been paid for 31 animals rather than 30 and raised the matter again with the Hauptzollamt. (12) Does this inaction amount to an ‘omission’? Certainly it ‘has … the effect of prejudicing the general budget of the Communities’. (13)

36. While the Court must proceed on the basis of the order for reference, it seems to me that it would be open to the national court to re-examine the facts of the case and to conclude – on the basis that I have just outlined – that LAGRA committed an irregularity through omission, by its failure to verify that it had indeed been paid the correct amount by way of export refund.

37. I do not think that it is possible to say that the limitation period set out in Article 3(1) can be applied by analogy to a situation in which the causative act or omission is that of the national authorities. Wording to justify such a reading is simply not to be found in the text. It seems to me that it is not open to the Court effectively to rewrite the definition of ‘irregularity’ in Article 1(2) so as to include acts or omissions by the national authorities.

38. I therefore reach the conclusion that the limitation period laid down in Article 3(1) of Regulation No 2988/95 cannot be applied if the exporter did not commit an irregularity.

39. If Article 3(1) of Regulation No 2988/95 is not applicable, the limitation period will be set by the relevant provisions of national law. Before Regulation No 2988/95 entered into force, the German courts applied the limitation period set out in Paragraph 195 of the BGB by analogy – at the material time, a 30 year limitation period. It might therefore appear logical for the national court to apply that same default limitation period to a situation which falls outside the regulation’s sphere of application. Does it follow that an exporter who has not committed an irregularity may properly be exposed to a 30 year limitation period whereas exporters who have committed irregularities can benefit from the 4 year limitation period laid down in Article 3(1) of Regulation No 2988/95? In my view, the Court does not need to reach that conclusion. Nor should it do so.

40. In my Opinion in Vosding , I took the view (in answering the third question referred) that Paragraph 195 of the BGB was not specific enough to fall within the scope of Article 3(3) of Regulation No 2988/95, but that – if it did fall within that provision – the national court would need to examine whether the length of the limitation period it sets complied with general principles of Community law.

41. The present proceedings concern an export refund erroneously paid to the exporter by the national authorities under Community law. (14) That over payment has a negative effect on the general budget of the Communities. The over payment and the proceedings for its recovery therefore clearly fall within the scope of Community law. In consequence, even if the limitation period applicable is to be derived from national law, the national court must satisfy itself that that limitation period respects general principles of Community law.

42. The 30 year limitation period laid down in Paragraph 195 of the BGB and applied by analogy to administrative actions for the recovery of sums wrongly paid is, in my view, manifestly disproportionate in the light of the 4 year limitation period laid down by Article 3(1) of Regulation No 2988/95.

43. National law on limitation will, ex hypothesi , be applied to recovery actions for export refunds wrongly paid in circumstances in which the exporter has not committed an irregularity. In such cases, it seems to me that a limitation period that satisfied the proportionality test would necessarily be one that did not exceed the limitation period laid down by Article 3(1) of Regulation No 2899/95 for cases in which the exporter has committed an irregularity.

The second question

44. As the first question calls for a negative answer, the second question does not arise.

Conclusion

45. I therefore suggest that the first question referred by the Bundesfinanzhof should be answered as follows:

The first sentence of the first subparagraph of Article 3(1) of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities’ financial interests cannot be applied to a claim for recovery of an export refund wrongly granted to an exporter, if the latter did not commit an irregularity. Since the obligation to repay a wrongly granted export refund arises by operation of Community law, a national court applying a limitation period laid down by national law must nevertheless examine whether that limitation period satisfies general principles of Community law, in particular the requirement of proportionality.

(1) .

(2)  – OJ 1995 L 312, p. 1.

(3)  – It is not clear from the order for reference whether the actual export of the animals in respect of which the application for the export refund was made occurred before or after Regulation No 2988/95 entered into force. The erroneous overpayment to the exporter took place after that date. In my Opinion in Joined Cases C-278/07 to C-280/07 Josef Vosding Schlacht-, Kühl- und Zerlegebetrieb, Vion Trading und Ze Fu Fleischhandel (‘ Vosding ’), at points 23 to 41, I explain why, in my view, Article 3(1) of Regulation No 2988/95 is a procedural measure that may be applied retroactively to situations falling within its scope.

(4)  – Commission Regulation (EC) No 800/1999 of 15 April 1999 laying down common detailed rules for the application of the system of export refunds on agricultural products (OJ 1999 L 102, p. 11).

(5)  – 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).

(6)  – See my Opinion in Vosding , cited in footnote 3, at point 14.

(7)  – It appears from the national court file that the Hauptzollamt did so notwithstanding that its decision of 19 April 1996 expressly refers to LAGRA’s letter of 17 January 1996. It is, however, possible to deduce from that document that there was an overpayment because the weight of the animals (described on the form as ‘Warenmenge’) appears as (the original) 21 413 kg, rather than as 20 715 kg.

(8)  – DM 1 137.58 (approximately EUR 582).

(9)  – The order for reference states that the notice of liability was not proven to have been notified to Bayerische until May 2004.

(10)  – See points 10 and 11 above.

(11) – The verbs used in the various language versions of Regulation No 2988/95 range from ‘resulting from’, ‘résultant de’, ‘als Folge’ in the English, French and German versions respectively, through ‘derivante da’ in the Italian version, to the somewhat softer ‘correspondiente a’ and ‘bestaat in’ in the Spanish and Dutch versions respectively. However, all these versions support my view that, for there to be an ‘irregularity’, the infringement of Community law must not arise before the act or omission of the economic operator in question.

(12)  – It seems reasonable to suppose that an exporter would check to make sure that it had not been underpaid. By the same token, it seems fair to suggest that it is under a duty to verify that it has not been overpaid . There may of course be instances in which it is genuinely not possible for an exporter to identify that there has been an overpayment. This does not appear to be such a case.

(13)  – Article 1(2) of Regulation No 2988/95.

(14)  – At the material time, the exporter’s entitlement to an export refund in respect of bovine animals derived from Regulation No 3665/87, which itself referred to Regulation (EEC) No 805/68 of the Council of 27 June 1968 on the common organisation of the market in beef and veal (OJ 1968 L 148, p. 24). The application for an export refund was duly made in accordance with the requirements of the T5 form, which were governed by Articles 471 to 495 of Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the implementation of Council Regulation (EEC) No 2913/92 establishing the Community Customs Code (OJ 1993 L 253, p. 1).