Keywords
Summary

Keywords

1 Agriculture - Common agricultural policy - EAGGF financing - Principles - Irregular expenditure disallowed - Financial correction applied for a number of financial years - Rate of the correction increased for the following financial year - Breach of the principles of legal certainty and protection of legitimate expectations - No such breach - Where a Member State has amended its control procedures after the financial year for which the accounts are being cleared - Reduction of the amount of the correction - Option available to the Commission

2 Agriculture - EAGGF - Clearance of accounts - Commission's power to monitor the regularity of expenditure - Where reasonable doubt arises - Burden of proof to be discharged by the Member States

3 Agriculture - Common organisation of the markets - Export refunds - Conditions for granting - Importation of the product into the country of destination - Article 5(1) of Regulation No 3665/87 - Conditions of application - Serious doubts as to the product's true destination - Meaning of `destination'

(Commission Regulation No 3665/87, Art. 5(1))

4 Agriculture - Common agricultural policy - EAGGF financing - Member States' obligations - Adoption of measures to ensure the regularity of expenditure - Scope

(EC Treaty, Art. 5; Council Regulation No 729/70, Art. 8(1))

5 Agriculture - Common agricultural policy - EAGGF financing - Export refunds paid in a Member State in cases where the product declared is not the same as the product actually exported - Whether to be taken into account by the EAGGF - Conditions

(Council Regulations No 729/70, Art. 2(1), and No 2913/92, Art. 78(3))

6 Agriculture - EAGGF - Clearance of accounts - Recovery of funds wrongly granted - Member States to assess whether a recovery procedure under way will be successful - Special notification to the Commission of the amounts not recovered - No deadline for such notification - Power of the Commission to set a deadline for the necessary information to be forwarded - Limits

(EC Treaty, Art. 169; Council Regulation No 595/91, Art. 5(2))

7 Agriculture - Common organisation of the markets - Export refunds - Production of documentary evidence - Failure to meet the statutory deadline - Grant of extension - Discretion enjoyed by the national authorities - Limits

(Commission Regulation No 3665/87, Art. 47(4))

8 Agriculture - Common agricultural policy - EAGGF financing - Principles - Member States under an obligation to use due diligence in the recovery of amounts irregularly paid - Failure to fulfil that obligation - Justification relying on the length of proceedings commenced by economic agents in order to avoid reimbursement - Not permissible - Recovery procedures effected in accordance with national law - Limits

(EC Treaty, Art. 5; Council Regulation No 729/70, Art. 8)

9 Agriculture - Common organisation of the markets - Export refunds - Variable refunds - Conditions for granting - Importation of the product into the country of destination - Rules of evidence - Customs clearance certificate - Limited probative force

Summary

1 Under the procedure for clearance of the EAGGF accounts, the Commission is required to audit the accounts submitted by a Member State for a given financial year. That procedure is governed by the principle according to which only expenditure incurred in conformity with the Community rules is to be charged to the Community budget.

Consequently, where the controls carried out by the Member State concerned are not in conformity with Community law, the Commission is entitled to make a financial correction. It is also entitled, in respect of a given financial year, to increase the rate of the correction applied to that Member State in similar circumstances in respect of the previous financial years, where the national authorities have failed to notify it, within the period fixed, of any measure taken to make the controls consistent with the relevant Community rules. Where the Commission has tolerated irregularities on grounds of fairness, the Member State concerned does not acquire any right to demand that the same position be taken with regard to irregularities with respect to the following financial year by virtue of the principle of legal certainty or the principle of protection of legitimate expectations.

Moreover, the fact that, after the financial year for which clearance is being effected, a Member State has adopted such corrective measures cannot transform into an obligation the Commission's right in such circumstances to reduce the amount of the correction in respect of that financial year, particularly where the State in question fails to communicate those measures to the Commission within the period prescribed.

2 Where the Commission refuses to charge certain expenditure to the EAGGF on the ground that it was incurred as a result of breaches of Community rules for which a Member State can be held responsible, the Commission is not required to demonstrate exhaustively that there are irregularities in the data submitted by the Member States, but it must adduce evidence of serious and reasonable doubt on its part regarding the figures submitted by the national authorities. The reason for this mitigation of the burden of proof on the Commission is that the State is best placed to collect and verify the data required for the clearance of EAGGF accounts; consequently, it is for the State to adduce the most detailed and comprehensive evidence that its figures are accurate and, if appropriate, that the Commission's calculations are incorrect.

When clearing the accounts of the Member States, the Commission is not precluded, therefore, from making findings that extend beyond the irregularities that have been proven before a national criminal court, if it has serious and reasonable doubt concerning the regularity of the transactions financed by the EAGGF.

3 The purpose of Article 5(1) of Regulation No 3665/87 - under which payment of export refunds is conditional on the product having been imported into the country of destination where there is serious doubt as to the true destination of the product, or where, by reason of the difference between the amount of the refund on the exported product and the amount of the import duties applicable to an identical product, it is possible that the product may be re-introduced into the Community - is to prevent abuses in relation to refunds. In the case of a product whose price, and therefore rate of refund, depends on the qualitative nature of its use, abuses could occur where its actual use, that is to say its true destination in functional terms, is not the same as the specific product use for which the refund is requested. It follows that the term `destination' in the above provision must be construed in not only a geographical but also a functional sense.

4 Article 8(1) of Regulation No 729/70, which expressly lays down the obligations incumbent on Member States pursuant to Article 5 of the Treaty, imposes on the latter the general obligation to take the measures necessary to satisfy themselves that the transactions financed by the EAGGF are actually carried out and are executed correctly, and to prevent and deal with irregularities, even if the specific Community act does not expressly provide for the adoption of particular supervisory measures.

In the case of supervisory measures adopted, the national authorities must act with the same degree of care as they exercise in implementing the corresponding national legislation, in order to prevent any erosion of the effectiveness of Community law. While the national authorities remain free to select the measures they consider appropriate to safeguard the Community's financial interests, that freedom may not in any way jeopardise the speed, the sound organisation or the comprehensiveness of the requisite controls and inquiries.

5 The disbursement of an export refund by the national authorities cannot be considered to have been made in accordance with the Community rules if, as a result of conduct attributable to the exporter, the product actually exported is not the same as the product declared. Accordingly, in cases where, in an attempt to obtain the higher rate of refund, exporters have knowingly declared that certain animals exported were pure-bred breeding cattle though they were in fact slaughter cattle, the EAGGF would be able to take into account refunds disbursed by the national authorities up to the level of the rate for slaughter cattle only if the customs declarations were rectified post-clearance, on presentation of the documents required under the Community rules for the export of animals for slaughter.

6 Where procedures for the recovery of Community funds wrongly granted are under way at national level, it is for the Member States, pursuant to Article 5(2) of Regulation No 595/91, to inform the Commission, by means of a special notification, of the amount that has not been recovered, where the State considers that the sum wrongly paid cannot be totally recovered, or cannot be expected to be totally recovered, and the Commission has then to take a decision on who should bear the financial consequences.

Although the special notification is not subject to any deadline, the exercise of the power the Member States have to assess whether or not a recovery procedure that is under way is going to be successful cannot have the effect of unduly delaying the clearance of accounts for a given financial year. The interest that attaches to scrutinising Member States' accounts rapidly means that the Commission must be able to set a deadline for the Member State concerned to forward the necessary information, including information concerning recovery procedures under way, without having to activate the procedure under Article 169 of the Treaty. In doing this, the Commission has to respect the principles of sound administration, such as the principle that there must be a certain and predictable financial relationship between the Community and the Member States.

7 Article 47(4) of Regulation No 3665/87 accords the national authorities the possibility of granting the exporter an extension of the deadline for the submission of proof that the goods exported have arrived at their destination, if the exporter has been unable to submit them within the statutory 12-month period, despite having acted with diligence in seeking to obtain and communicate them within that period. It thus accords the national authorities a margin of discretion enabling them to ascertain whether the exporter has exhibited diligence and to decide whether they are going to avail themselves of the possibility accorded to them of granting an extension. In the exercise of that discretion, the national authorities cannot consider the requirement relating to diligence to be fulfilled where there are doubts concerning the exporter's conduct, and they must, when taking their decision, take into consideration not only the diligence of the exporter but all the factors that make it possible to determine whether the grant of an extension is justified.

8 The Member States must respect the obligation of general diligence in Article 5 of the Treaty, as specifically embodied in Article 8(1) and (2) of Regulation No 729/70 with regard to the financing of the common agricultural policy. That obligation implies that the Member States must take steps to rectify irregularities promptly. With the passage of time, recovery of sums wrongly paid is likely to become complicated or impossible for reasons such as the fact that undertakings may have ceased trading or accounting documents may have been lost.

National authorities cannot justify a failure to fulfil their obligations to rectify irregularities quickly by relying on the length of administrative or judicial proceedings commenced by an economic agent. While, pursuant to Article 8(1) of Regulation No 729/70, recovery procedures undertaken at national level are carried out in accordance with the rules of national law - including those allocating the burden of proof - recourse to those rules is possible only in so far as it is necessary for the implementation of provisions of Community law and in so far as the application of those rules of national law does not jeopardise the scope and effectiveness of that Community law.

9 In the context of the system of variable export refunds on agricultural products, proof of completion of customs formalities in the country of destination amounts only to rebuttable evidence that the objective of those refunds has in fact been attained. In particular, the probative force which normally attaches to customs clearance certificates may be disregarded where there is reason to doubt the actual access of the goods to the market of the territory of destination in order to be marketed there. In circumstances of that kind, the actual access of the goods to the market of the country of destination may be proved by producing other documents provided for under the Community rules, such as the documents confirming that the goods were unloaded in the country of destination.