OPINION OF ADVOCATE GENERAL

JACOBS

delivered on 3 June 1992 ( *1 )

Mr President,

Members of the Court,

1. 

This case raises a fundamental question of considerable practical importance, namely the extent of the Commission's powers to require the imposition of sanctions on persons who have committed irregularities while applying for financial assistance available under Community law.

The contested provisions

2.

In an application brought under Article 173 of the EEC Treaty, the Federal Republic of Germany challenges the validity of three provisions contained in regulations adopted by the Commission in the sphere of the common agricultural policy. Germany requests the annulment of:

(1)

Article 6(6) of Commission Regulation No 3007/84 of 26 October 1984 laying down detailed rules for the application of the premium for producers of sheepmeat (OJ 1984 L 283, p. 28), as amended by Commission Regulation No 1260/90 of 11 May 1990 (OJ 1990 L 124, p. 15);

(2)

Article 13(3)(b) of Commission Regulation No 3813/89 of 19 December 1989 laying down detailed rules for the application of the system of transitional aids to agricultural income (OJ 1989 L 371, p. 17), as amended by Commission Regulation No 1279/90 of 15 May 1990 (OJ 1990 L 126, p. 20); and

(3)

Article 13(3)(c) of the same regulation.

3.

The Commission adopted the contested measures under provisions whereby the Council delegated certain powers to the Commission. The first measure concerns financial assistance to the sheepmeat sector. Article 5 of Council Regulation No 3013/89 of 25 September 1989 on the common organization of the market in sheepmeat and goatmeat (OJ 1989 L 289, p. 1) provides for a premium to be granted under certain circumstances to producers of sheepmeat in the Community, and Article 5(9) provides that:

‘The Commission, acting in accordance with the procedure laid down in Article 30:

...

shall adopt implementing rules for this Article covering, in particular, the submission of premium applications and payment of the premium.’

In purported pursuance of that provision, Commission Regulation No 1260/90 replaced Article 6 of Commission Regulation No 3007/84 by the new version of Article 6 which is challenged in these proceedings. The other contested measures concern agricultural income aid. Council Regulation No 768/89 of 21 March 1989 establishing a system of transitional aids to agricultural income (OJ 1989 L 84, p. 8) provides for aid to be given to farmers meeting certain criteria, and Article 12 provides that:

‘Detailed rules for the application of this Regulation... shall be adopted in accordance with the procedure laid down in Article 13.’

In purported pursuance of that provision, Commission Regulation No 1279/90 replaced Article 13(3) of Commission Regulation No 3813/89 by the new version of Article 13(3) which is challenged in the present proceedings. In each case, the procedure for the adoption of the implementing rules is the so-called Management Committee procedure, according to which the proposed measures are submitted in draft to a committee comprising representatives of the Member States. If the measures proposed are not in accordance with the opinion of the committee, they are communicated to the Council, which may within one month take a different decision acting by qualified majority.

4.

The first of the three contested provisions, Article 6(6) of Commission Regulation No 3007/84, as amended, imposes sanctions on producers who have made a false declaration in the course of applying for a premium under Article 5 of Council Regulation No 3013/89, which provides for a premium to be granted to offset income loss by sheepmeat producers. In order to calculate the amount of the premium it is necessary to ascertain the number of eligible animals in the producer's flock; Article 6(1) of Regulation No 3007/84 accordingly provides that:

‘If the actual number of eligible animals recorded during a check... is less than that in respect of which an application for a premium has been submitted, no premium shall be paid....’

By Article 6(5):

‘Premiums improperly paid shall be recovered, together with interest to be fixed by the Member State in respect of the period between payment of the premium and its recovery.’

Article 6(6) provides that:

‘Where paragraph 1 is applied, if the competent authority establishes that a false declaration made deliberately or as a result of serious negligence is involved, the producer in question shall also be excluded from entitlement under the premium arrangements for the marketing year following that in respect of which the false declaration is established.’

5.

The other contested provisions are contained in Commission Regulation No 3813/89, as amended, which lays down detailed rules for the application of the system of transitional aids to agricultural income (‘AIA’) established by Council Regulation No 768/89. Article 13(3) of Regulation No 3813/89 provides that:

‘Whenever AIA is found to have been granted on the basis of inaccurate data provided by the farmer who certified it, the following measures shall be taken by the Member State concerned:

(a)

The amount of the aid unduly paid shall be recovered from the farmer, plus the interest thereon from the date when the aid was paid until the date when it is recovered. The rate of interest to be applied shall be that in force for similar recovery operations under national law.

(b)

In addition where the competent authority determines that the amount was wrongfully paid as a result of serious irregularities on the part of the farmer, the Member State shall either:

in all such cases charge the farmer an amount equal to 30% of the aid wrongfully paid, or

as a general rule charge the farmer an amount equal to 30% of the aid wrongfully paid but have the possibility [, ] to apply on the basis of the gravity of the particular case [, ] of charging an amount not less than 20% nor greater than 40% of the aid wrongfully paid.

(c)

Furthermore a farmer who is responsible for inaccurate data giving rise to a charge as provided for in paragraph (b) shall be excluded from eligibility for all payments under any PAIA [i. e. programme of agricultural income aid] for a period of 12 months from the date that the charge was determined. In instances where the aid has been capitalized the Member State concerned shall take the steps necessary to ensure equivalent treatment to that applying had payments not been capitalized.

....’.

Points (b) and (c) of Article 13(3) are the second and third provisions challenged in the present proceedings.

6.

It can be seen that the sanctions which are to be imposed under the contested provisions fall into two categories. Under Article 6(6) of Regulation No 3007/84 and Article 13(3)(c) of Regulation No 3813/89, the sanction is an exclusion, lasting for a period of one year, from future benefits under the relevant scheme. Under Article 13(3)(b) of Regulation No 3813/89, on the other hand, the penalty consists in the payment of an amount which is additional to the refund of the benefit already paid with interest. In what follows, I shall refer to those two categories of sanction as ‘exclusion’ and ‘surcharge’ respectively.

7.

The German Government contends that neither the Council nor the Commission has the power to require Member States to impose the sanction of exclusion, and that the Council is not able to delegate to the Commission a power to require the imposition of either kind of sanction. It submits furthermore that, even if it were possible in principle to delegate such a power to the Commission, no such delegation, whether express or implied, is in fact contained in Article 5(9) of Regulation No 3013/89 or in Article 12 of Regulation No 768/89.

Sanctions under the EEC Treaty

8.

Before turning to the arguments advanced by the German Government in support of its contentions, it may be helpful to consider in general terms the position of penalties and sanctions under the EEC Treaty. In what follows, I shall use the terms ‘penalty’ and ‘sanction’ interchangeably, but reserve the expression ‘penal sanction’ for sanctions having a criminal law nature.

9.

The Treaty contains relatively few provisions expressly relating to the imposition of sanctions. In the first place, a distinction must be drawn between sanctions imposed directly by the Community, and sanctions which Member States may be required to impose by virtue of Community legislation.

10.

As regards the former kind of sanction, Article 87(2) of the Treaty provides that the regulations or directives which the Council is required to adopt under Article 87(1) shall be designed in particular:

‘(a)

to ensure compliance with the prohibitions laid down in Article 85(1) and in Article 86 by making provision for fines and periodic penalty payments;

...

(d)

to define the respective functions of the Commission and of the Court of Justice in applying the provisions laid down in this paragraph;

.... .’.

Accordingly, Council Regulation No 17 of 6 February 1962 (OJ, English Special Edition 1959-62, p. 87) gives the Commission powers to impose fines and periodic penalty payments on undertakings: see Article 15, as regards fines, and Article 16, as regards penalty payments. It is to be noted that those sanctions are imposed by Commission decision, and not by the authorities of the Member States, although they are enforceable, if necessary, in the courts of the Member States: see Article 192 of the Treaty. Fines may be imposed for the supply of false, misleading or incomplete information (Article 15(1)) and for the breach of substantive competition rules or decisions (Article 15(2)), provided in each case that the undertaking concerned has acted intentionally or negligently. However, by Article 15(4):

‘Decisions taken pursuant to paragraphs (1) and (2) shall not be of a criminal law nature.’

Thus, the exercise by the Community of its powers under Article 87(2)(a) of the Treaty should not be taken to be the exercise of any powers in the domain of criminal law. By the same token, however, Article 15(4) also suggests that the imposition of pecuniary sanctions such as fines or penalty payments can be within the Community's powers, even where matters in the domain of the criminal law remain exclusively within the competence of the Member States.

11.

Accordingly, although the Community has the power to impose penalties for breach of competition rules, such penalties need not be regarded as penal sanctions, and the distinction between penal and non-penal sanctions has moreover been expressly recognized by the Council. That distinction merits closer analysis, for it is central to the issues raised in this case. There is of course no doubt that the imposition of fines, amounting in some cases to several million ECUs, is intended to have a powerful dissuasive effect on undertakings which might otherwise be tempted to act without regard to Community competition rules. Criminal penalties, also, seek to dissuade; but it does not follow that every dissuasive sanction is penal. Typically, the purpose of a criminal sanction exceeds that of simple deterrence, and will normally involve such matters as the stigma of social disapproval or the attribution of moral blame. Thus, the amount of the penalty, in a criminal case, will often reflect the extent of society's disapproval of the conduct in question, rather than any more pragmatic consideration. In contrast, in the case of a non-penal sanction, even one imposed in the event of negligence or fraud, the judgment of fault may indeed be a necessary presupposition, but it is not usually the ultimate purpose of the penalty. In the case, for example, of civil damages for negligence or deceit, the object of the penalty is to compensate the victim, and in some cases to deter the wrongdoer, but not to attach the stigma of criminality, even though blame may have to be apportioned before the penalty can be imposed.

12.

Certainly, then, Community law in its present state does not confer on the Commission (or on the Court of First Instance or the Court of Justice) the function of a criminal tribunal. It should be noted however that that would not in itself preclude the Community from exercising, for example, powers to harmonize the criminal laws of the Member States, if that were necessary to attain one of the objectives of the Community. It remains the case, in any event, that financial penalties may be imposed, in certain circumstances, in order to persuade undertakings to take due care to conform to Community rules, and that such penalties need not be equated with penal sanctions.

13.

By Article 172 of the Treaty:

‘Regulations made by the Council pursuant to the provisions of this Treaty may give the Court of Justice unlimited jurisdiction in regard to the penalties provided for in such regulations.’

That provision appears to presuppose that the Council has a power to provide for sanctions in the regulations it adopts, quite apart from its powers under Article 87(2)(a) of the Treaty. For, as we have seen, Article 87(2)(d) already permits the Court to be given any necessary jurisdiction in the case of sanctions imposed pursuant to regulations made under Article 87(2)(a); if those were the only sanctions which the Council could impose, Article 172 would be otiose. Article 172 has indeed been used, on at least one other occasion. Article 79(3) of the Treaty provides that, in laying down rules implementing the abolition, pursuant to Article 79(1), of certain forms of discrimination in the sphere of transport:

‘The Council may in particular lay down the provisions needed to enable the institutions of the Community to secure compliance with the rule laid down in paragraph 1 and to ensure that users benefit from it to the fall.’

Article 79(3) may be interpreted as including a power to provide for sanctions. Accordingly, Article 18 of Council Regulation No 11 of 27 June. 1960 (OJ, English Special Edition 1959-62, p. 60) permits the Commission to impose penalties on carriers responsible for discrimination within the meaning of Article 79(1) of the Treaty, and Article 17 permits penalties to be imposed on undertakings which fail to supply correct information. Article 25(2) of the regulation provides that:

‘Pursuant to Article 172 of the Treaty, the Court of Justice shall have unlimited jurisdiction in regard to any penalty imposed under Articles 17 and 18. ...’

It is also to be noted that Article 19 of Regulation No 11, like Article 15(4) of Regulation No 17, provides that decisions under Articles 17 and 18 ‘shall not be of a criminal law nature’.

14.

As the Commission points out in its rejoinder, it is clear that Article 172 applies only to penalties imposed by Community institutions, and not to sanctions imposed by national authorities. The Treaty does not in fact appear to make any express provision for the latter kind of sanction. Where a sanction is imposed by a national authority pursuant to Community legislation, it is of course the national courts which will have jurisdiction in the event of any challenge to the decision to impose the penalty. The sanctions at issue in the present proceedings are to be imposed by national authorities, pursuant to provisions in Commission regulations, and not imposed directly by the Commission. Since Article 172 of the Treaty is not concerned with such a case, it is not relevant, for the purpose of deciding whether the Commission is able to adopt such provisions, that Article 172 refers only to regulations made by the Council, and not to regulations made by the Commission.

15.

Although the Treaty does not make any express provision in regard to sanctions imposed by national authorities, the Court has interpreted Article 5 of the Treaty as requiring Member States to impose sanctions, in certain circumstances, for breaches of Community regulations. In Case 50/76 Amsterdam Bulb v Produktschat voor Siergewassen [1977] ECR 137, which concerned the question whether the Netherlands was permitted to take certain measures relating to the fixing of export prices for flower bulbs which were not contained in the regulations establishing a common organization of the market in such produce, the Court observed, at paragraph 33 of the judgment:

‘... in the absence of any provision in the Community rules providing for specific sanctions to be imposed on individuals for a failure to observe those rules, the Member States are competent to adopt such sanctions as appear to them to be appropriate’.

In Case 68/88 Commission v Greece [1989] ECR 2965, the Court however went further, stating, at paragraphs 23 to 25 of the judgment, that:

‘It should be observed that where Community legislation does not specifically provide any penalty for an infringement or refers for that purpose to national laws, regulations and administrative provisions, Article 5 of the Treaty requires the Member States to take all measures necessary to guarantee the application and effectiveness of Community law.

For that purpose, whilst the choice of penalties remains within their discretion, they must ensure in particular that infringements of Community law are penalized under conditions, both procedural and substantive, which are analogous to those applicable to infringements of national law of a similar nature and importance and which, in any event, make the penalty effective, proportionate and dissuasive.

Moreover, the national authorities must proceed, with respect to infringements of Community law, with the same diligence as that which they bring to bear in implementing corresponding national laws.’

Thus, even where Community legislation does not provide sanctions for its infringement — and it is to be noted that, in both the judgments cited above, the Court leaves open the possibility that Community legislation might so provide — the freedom of action of Member States is none the less constrained by their duty, under Article 5 of the Treaty, to cooperate in the achievement of the Community's objectives. Where the purpose of Community rules would not be fully attained without the imposition of sanctions, Member States must ensure that adequate penalties are available.

16.

Given those limitations on the Member States' freedom of action, it would be natural to suppose that the Community is competent to specify, in any legislation it adopts, those sanctions for its infringement or abuse which are to be regarded as sufficiently effective, proportionate and dissuasive. In particular, in the case of the common organization of the agricultural markets, it is natural to suppose that the Community has the power, under Articles 40(3) and 43(2) of the Treaty, to specify the sanctions it considers necessary for the effective and uniform application of the rules laid down in that area. The German Government does not in fact dispute that the Community is competent to make provision for sanctions in the legislation it adopts. In the view of the German Government, however, that competence has been exceeded in the case of the present provisions. I shall now therefore turn to the German Government's arguments in favour of that contention.

17.

As we have seen, the German Government challenges the validity of the contested provisions on three distinct grounds. The first ground concerns the extent of the Community's powers to impose sanctions. The second ground concerns the Council's ability to delegate such powers to the Commission; and the third concerns the question whether, in the present instance, the appropriate powers have in fact been delegated. I shall consider each of those grounds in turn.

Extent of the power to impose sanctions

18.

According to the German Government, the Community has the power to impose the sanction of surcharge, but not the sanction of exclusion. It points out that, where the Treaty expressly mentions sanctions, it refers, in Article 87(2)(a), only to ‘fines and periodic penalty payments’. The German Government argues that the Une between ‘penal’ and ‘administrative’ sanctions is drawn differently in different Member States, and that, accordingly, only the sanctions expressly mentioned in the Treaty can safely be regarded as falling within the competence of the Community. For it would otherwise be difficult to decide in each case whether a sanction was a penal sanction, falling outside the Community's competence, or alternatively a non-penal sanction falling within its powers. In its view, moreover, a restrictive interpretation of the notion of Community sanction is also required because sanctions particularly affect the fundamental rights of individuals.

19.

The German Government also submits that a power to impose sanctions cannot be deduced from Article 40(3) of the Treaty and its implementing provisions. It is however difficult to reconcile that submission with the German Government's view that the Community does have the power, in the present case, to impose the sanction of surcharge (as opposed to the sanction of exclusion). If the Community does have such a power, it can only be because the imposition of such a sanction in these circumstances is necessary for the working out and implementation of the common agricultural policy, pursuant to Articles 40(3) and 43(2) of the Treaty.

20.

The German Government maintains, in any event, that the Community cannot validly impose the sanction of exclusion. An exclusion from future participation in a scheme of financial assistance cannot be assimilated to a sanction such as a surcharge, fine or penalty payment, which are penalties having determinate financial consequences for the producer concerned. In the view of the German Government, exclusion carries with it a judgment of moral opprobrium; for, in being excluded from future benefits under a scheme of financial assistance, the producer is being condemned as morally unfit to participate in the scheme, rather than merely being made to pay a financial penalty. Exclusion, unlike surcharge, is accordingly a sanction having a penal character, as well as being a sanction which is not expressly envisaged by the Treaty.

21.

The Commission, for its part, considers that the sanction of exclusion falls squarely within the category of measures which the Community is entitled to adopt pursuant to Articles 40(3) and 43(2) of the Treaty. The Commission points out that Article 40(3) provides that the common organization of the agricultural markets ‘may include all measures required to attain the objectives set out in Article 39’. The Commission suggests that exclusion from future participation in a grant or premium scheme is an administrative rather than a penal measure, and is better regarded as a condition on the grant of the aid which is freely accepted by the producer, rather than as a punishment for the breach of an obligation unilaterally imposed by the Community. Moreover exclusion is, according to the Commission, an essential instrument in the control and safeguard of the funds which finance the schemes in question, and the power to require imposition of appropriate sanctions is necessary to ensure the uniform application of Community law.

22.

In my view, the German Government has given no convincing reason for denying the Community competence to impose the sanction of exclusion. As we have seen, the arguments of the German Government are essentially fourfold, invoking (1) the language of the Treaty (2) the difficulty of distinguishing penal from non-penal sanctions (3) the need for a restrictive interpretation of the Community's powers, and (4) the distinction between the sanctions of surcharge and exclusion. I shall consider each of those arguments in turn. As I have already mentioned, a further argument of the German Government relating to the interpretation of Article 40(3) of the Treaty can only be sustained if the sanction of exclusion can be distinguished from the sanction of surcharge, a question which I consider under point (4).

(1) The hnguage of the Treaty

23.

It cannot in my view be deduced, from the fact that fines and periodic penalty payments are the only penalties mentioned by name in the Treaty, that those are the only sanctions which the Community can require to be imposed. For, in the first place, it is to be noted that Article 172 refers in quite general terms to ‘penalties’ (in the French text of the Treaty ‘sanctions’, in the German ‘Zwangsmaßnahmen’), and, in the context of transport, Article 79(3) refers, in even more general terms, to ‘the provisions needed to ... secure compliance’, which as we have seen may be interpreted to include sanctions. Moreover, the sanctions at issue in the present case are not imposed directly by the Community, but are rather measures which the Member States are required to take pursuant to Community legislation. Thus, even if a distinction between surcharge and exclusion could be sustained on the ground that surcharge could be regarded as a species of fine, and hence as a kind of sanction specifically mentioned in the Treaty — a proposition which is in itself doubtful — it does not seem to me that that would have any consequences for the sanctions the Member States can be required to impose. For the Treaty does not in any case deal expressly with sanctions imposed by the Member States.

(2) Penal and non-penal sanctions

24.

Contrary to the view of the German Government, it does not seem to me that it could be of decisive significance that the distinction between penal and non-penal sanctions may be drawn differently in different Member States. Even if it is granted that the competence of the Community, as regards implementation of the common agricultural policy under Article 43(2), is limited to the imposition of sanctions having a non-penal character, it is none the less clear that it is for Community law to determine the limits of the Community's competence. The distinction, for that purpose, between penal and non-penal sanctions would accordingly be a matter for Community and not for national law.

(3) The need for a restrictive interpretation

25.

Given the serious consequences which sanctions may have for the individuals concerned, it is no doubt true that the Community should require the imposition of sanctions only where it is strictly necessary to do so in order to attain the objectives of the Community, which in this case are those of the common agricultural policy. It is however difficult to see how that principle, which is in substance an application of the principle of proportionality, could preclude the Community from having the competence to impose a particular kind of sanction.

26.

It would in my view be surprising if exclusion from future participation in a Community scheme of financial assistance were a sanction falling outside the competence of the Community. It must surely lie within the Community's powers to require, under certain clearly defined circumstances and for a limited period of time, a producer's exclusion from a Community scheme, just as it is within its powers to require certain conditions to be satisfied before the financial assistance is granted. As we have seen, the fact that the circumstances in question may include, as in the present case, the fraud or negligence of the producer, is not sufficient to invest the sanction with a penal character, given that fraud, and even more so negligence, is as much a concept of the civil as of the criminal law. For although fraud may of course be morally odious, it does not follow that every sanction for fraud must have moral or penal intent: the purpose of the sanction may simply be dissuasive.

27.

The German Government does not, in any event, dispute that the imposition of a surcharge falls within the powers of the Community, even where that penalty is imposed for serious irregularities such as negligence or fraud. I now therefore turn to the question whether any distinction can be drawn, for the present purposes, between the two kinds of sanction.

(4) The distinction between exclusion and surcharge

28.

As the Commission observes, it is difficult to see how exclusion could fall outside the Community's competence, but surcharge remain within its powers. In particular, the loss of the right to participate in a scheme of financial assistance would not appear to have any greater a penal character than the obligation to pay a financial penalty. While it may be true that the pecuniary loss to the producer may be more difficult to quantify in the case of an exclusion than in the case of a surcharge, that does not, it seems to me, have any bearing on the supposedly criminal nature of the sanction.

29.

In my view, the differences between the sanctions of exclusion and surcharge are, for the present purposes, of less significance than what unites them. Both forms of penalty are characterized by the fact that the sanction inflicted on the producer goes beyond a requirement to refund, possibly with interest, any benefits unduly received. Thus, there is no doubt that both Article 6(6) of Regulation No 3007/84 and Article 13(3)(b) and (c) of Regulation No 3813/89 impose penalties which are additional to the recovery of unduly paid funds and interest provided for in Articles 6(5) and 13(3)(a) respectively. The precise manner in which the fraudulent or negligent producer is penalized, on the other hand, is in my view of lesser importance. As I have already mentioned, any sanctions imposed must of course meet the criterion of proportionality; that is to say they must be an appropriate means of achieving their aim, without going beyond what is necessary for that purpose. In the present case, therefore, the sanctions must be dissuasive of negligence and fraud, without exceeding what is necessary for that purpose, taking into account, in particular, the availability of other, means of control such as audit and inspection. As long as those criteria are respected, however, it seems to me that the choice between the sanctions of surcharge and exclusion is well within the margin of appraisal enjoyed by the Community in the sphere of the common agricultural policy.

30.

It is true that the terms ‘sanction’ and ‘penalty’ are sometimes used for provisions which, in reality, require nothing more than the restitution of a benefit unduly received. Thus, the Court has repeatedly described as a ‘penalty’ the forfeiture of a security lodged against the advance payment of an export refund: see Case 137/85 Maizena v BALM [1987] ECR 4587, at paragraph 12 of the judgment, Case C-155/89 Philipp Brothers [1990] ECR I-3265, at paragraph 40, and, most recently, Case C-199/90 Italtrade v AIMA [1991] ECR I-5545, at paragraph 10. It is clear however that, in such a case, the producer's loss is in substance the loss of his right to retain the original benefit, which was paid in advance of his fulfilment of the conditions attached to the refund. If the producer subsequently fails to fulfil the conditions, the call upon his security is merely the means by which he is made to restore a benefit which has been unduly received: see Philipp Brothers, at paragraph 37 of the judgment, and see the Opinion of Advocate General Darmon in the Italtrade case, delivered on 26 September 1991, at paragraphs 18 and 19 of the Opinion.

31.

It is clear, however, that the restitution of unduly acquired benefits is not the only sanction which is available for the purpose of ensuring that conditions imposed by Community legislation are fulfilled. In Case 11/70 Internationale Handelsgesellschaft v Einfuhr-und Vorratsstelle [1970] ECR 1125, the security at issue did not consist in the giving of a guarantee of repayment of funds paid in advance, but rather in the lodging of a deposit against fulfilment of an obligation to export, in order to ensure that those receiving an export licence would make use of the licences issued to them. The Court held that the forfeiture of the deposit, on breach of that condition, was a necessary and appropriate means of ensuring fulfilment of the obligation: see paragraphs 8 to 12 of the judgment. Although the Court emphasized, at paragraph 18 of the judgment, that the forfeiture was not to be regarded as a penal sanction, it is clear that the requirement to forfeit a deposit in such circumstances amounts to a penalty which goes beyond the restitution of any benefits unduly received: see also Case 122/78 Buitoni v FORMA [1979] ECR 677, and Case 181/84 Man (Sugar) v I BAP [1985] ECR 2889, where the Community's general competence to impose such sanctions was not contested. As I have already mentioned, however, the German Government does not in any event dispute that the Community is competent, in the present case, to make provision for the sanction of surcharge, which indubitably goes beyond the restitution of benefits received.

32.

I conclude therefore that, in laying down rules for the administration of schemes under which financial assistance is available to agricultural producers satisfying certain conditions, the Community has the power, in principle, to require Member States to impose the sanction of exclusion on producers who have committed serious irregularities such as fraud or negligence. In my view, therefore, the German Government's first ground of invalidity must be rejected.

33.

The other two grounds of invalidity advanced by the German Government concern the competence of the Commission, rather than that of the Community as a whole. The German Government submits that, even where the Council has the power to impose sanctions, it is not permitted to delegate that power to the Commission. The German Government contends furthermore that, even if such a power of delegation could be said to exist, it has not been exercised in the case of the present provisions. I shall now turn to consider those two submissions.

Extent of the Council's power to delegate

34.

According to Article 145 of the Treaty:

‘To ensure that the objectives set out in this Treaty are attained, the Council shall, in accordance with the provisions of this Treaty:

...

confer on the Commission, in the acts which the Council adopts, powers for the implementation of the rules which the Council lays down. The Council may impose certain requirements in respect of the exercise of those powers. The Council may also reserve the right, in specific cases, to exercise direcdy implementing powers itself. The procedures referred to above must be consonant with principles and rules to be laid down in advance by the Council, acting unanimously on a proposal from the Commission and after obtaining the Opinion of the European Parliament.’

Pursuant to that provision, the Council adopted Decision 87/373/EEC of 13 July 1987 laying down the procedures for the exercise of implementing powers conferred on the Commission (OJ 1987 L 197, p. 33), the so-called Comitology Decision. By Article 1 of the decision:

‘Other than in the specific cases where it reserves the right to exercise directly implementing powers itself, the Council shall, in the acts which it adopts, confer on the Commission powers for the implementation of the rules which it lays down. The Council shall specify the essential elements of these powers.

The Council may impose requirements in respect of the exercise of these powers, which must be in conformity with the procedures set out in Articles 2 and 3.’

Among the procedures set out is Procedure II, which corresponds to the Management Committee procedure used to adopt the provisions at issue in the present proceedings.

35.

Finally, to the Council's power to confer on the Commission any necessary implementing powers, there corresponds the Commission's duty to exercise those powers, laid down by Article 155 of the Treaty:

‘In order to ensure the proper functioning and development of the common market, the Commission shall:

...

exercise the powers conferred on it by the Council for the implementation of the rules laid down by the latter.’

36.

The provisions of the Treaty and the Comitology Decision which have just been cited do not suggest that the Council's ability to delegate implementing powers to the Commission should be narrowly construed; if anything, they suggest the opposite. For there appears to be a presumption that any necessary implementation of the rules laid down by the Council will be delegated to the Commission, except in the specific cases where the Council decides it is more appropriate to exercise the implementing powers itself. That presumption would appear to have particular force in the sphere of the common agricultural policy: see Case 22/88 Vreugdenhil v Minister van Landbouw en Visserij [1989] ECR 2049, at paragraph 16 of the judgment, and Case C-357/88 Hopermann [1990] ECR I-1669, at paragraph 7. It will be observed that the Council can, in any case, retain a degree of control over the adoption of the Commission's implementing measures by selecting one of the procedures set out in the Comitology Decision, as indeed it did in the case of the present provisions.

37.

In support of its contention that the Council is unable to confer on the Commission any power to impose sanctions, the German Government relies upon essentially three arguments. First, it observes that where the Treaty expressly refers to the imposition of sanctions, it mentions the Council and not the Commission: thus, as we have seen, Article 87(2)(a) of the Treaty invites the Council, and not the Commission, to make provision for fines and penalty payments in the measures it adopts under Article 87(1), and Article 172 similarly refers to ‘regulations made by the Council’. Secondly, the German Government suggests that it better accords with the principle of institutional balance between the organs of the Community, that the power to provide for sanctions be reserved to the Council, and that the Commission's powers of implementation be narrowly construed. In that respect, the German Government relies upon an analogy between the relation of the Council and the Commission, on the one hand, and the relation of the legislative and executive powers of the State, on the other, claiming that only the organ which corresponds to the legislature, namely the Council, should have the power to impose sanctions. Finally, the German Government suggests that the imposition of sanctions is in any case not properly regarded as forming part of the implementation of the rules laid down by the Council, but rather as a measure completing or supplementing such rules.

38.

The Commission, on the other hand, contends that the decision to provide for sanctions falls squarely within the implementation of rules laid down by the Council. The Commission points out that the nature of any sanctions which may be necessary will depend, among other things, upon what other measures of control are possible. The more closely the operation of a scheme of financial assistance can be monitored, for instance, the less it may be necessary to impose sanctions to deter breaches or abuse. Only the Commission, in the course of its implementation of the scheme, is in a position to make a judgment concerning the kind and level of sanctions which it is necessary to impose. The Commission also suggests that the existing case-law of the Court already shows that the Commission has the power to provide for sanctions.

39.

As I have already suggested, the terms of Articles 87(2)(a) and 172 of the Treaty, and indeed of Article 79(3), which similarly refers only to a power of the Council and not of the Commission, are not directly relevant to the provisions presently at issue; for those provisions provide for sanctions to be imposed by national authorities pursuant to Commission regulations, rather than imposed directly by the Commission. The terms of Article 172, in particular, are not relevant in the present instance, because the Court will not in any case have jurisdiction over the sanctions in issue. Thus, it does not seem to me that the Community's power to harmonize the penalties provided by national law could be affected by provisions of the Treaty relating to sanctions imposed directly by the Community.

40.

In my view, the German Government's second argument is equally to be rejected. Even if the constitutional analogy drawn by the German Government were to be accepted, it should be noted that powers to impose non-penal sanctions can normally be delegated by the legislature to the executive. In any event, as we have seen, the Treaty expressly assigns to the Commission the rôle of implementing the rules laid down by the Council. If providing for sanctions can be regarded as a part of such implementation, the exercise of such a power must be regarded as being fully in accordance with the respective rôles of the two institutions. The only question which needs to be considered, therefore, is whether providing for appropriate sanctions is indeed an intrinsic part of the Commission's task of implementing rules laid down by the Council, or whether, as the German Government suggests, it is better seen as a mode of completing or supplementing such rules.

41.

It seems to me that the answer to that question is clear from the case-law of the Court. In Case 25/70 Einfuhr-und Vorratsstelle v Koster [1970] ECR 1161, the Court considered the validity of measures adopted by the Commission in implementation of Regulation No 19 of the Council of 4 April 1962 on the progressive establishment of a common organization of the market in cereals Qournal Officiel 1962, p. 933). That regulation, together with the implementing provisions, established a system of deposits similar to that considered in the Internationale Handelsgesellschaft case, cited above in paragraph 31. Thus, Article 16(1) of Regulation No 19 made the importation or exportation of certain products conditional upon the presentation of an import or export licence, and Article 16(2) made the issue of an import licence conditional upon the lodging of a deposit. Finally, Article 16(3) provided that ‘the detailed rules for the application of this article’ were to be adopted by the Commission according to the Management Committee procedure. Pursuant to that provision, the Commission adopted rules making the issue of an export, and not only of an import, licence conditional upon the lodging of a deposit, and providing for the forfeiture of that deposit in the event of a breach of the obligation to export.

42.

In the Raster case, the Court held that the rules adopted by the Commission came within the scope of the implementing power delegated by Article 16(3) of the Council regulation (see paragraphs 17 and 18 of the judgment, which are cited below at paragraph 43). As Advocate General Dutheillet de Lamothe observed in his Opinion, at p. 1145:

‘... the Council is always free to retain or to confer on the Commission the adoption of measures to implement basic regulations.

The only problem is whether the institution of a system of deposits really constitutes a measure of “implementation” of a regulation which lays down the obligation to obtain an import or export licence.

I think so, for once the Council imposed the requirement of an import or export licence, the conditions for the issue of such licences were... nothing more than means of implementing that obligation so long as these means... do not impose on importers and exporters burdens which are excessive as regards the aims for which the import licence was instituted.’

Thus, it did not matter that Article 16(2) of the Council regulation only went as far as making the issue of an import licence conditional upon the lodging of a deposit. As the Court observed, that provision could itself be regarded as a partial implementation of the rule, laid down in Article 16(1), that made both exportation and importation conditional upon the presentation of a licence. The measures adopted by the Commission, which extended the requirement to lodge a deposit to the case of export licences, were to be seen as further steps in the implementation of the rule laid down in Article 16(1), and hence as coming within the general powers of implementation enjoyed by the Commission under Article 16(3).

43.

In its reply, the German Government suggests that Koster does not assist the Commission, and that the Court, in that case, only recognized the Commission's powers to extend the system of deposits to exports because the Council regulation had already established it for imports. It is true that Article 16(2) of the Council regulation already established the system of deposits in part. It seems to me however that the important point, for the present purposes, is that the Court characterized both the provisions of the Council and the provisions of the Commission as measures of implementation of the rule laid down by Article 16(1). Thus, as the Court stated in paragraphs 17 and 18 of its judgment:

‘Paragraph (2) [of Article 16], which is placed between... two provisions of general scope, constitutes a special measure of application intended to implement a part of the provisions envisaged in paragraph (1)

Article 16 must therefore be interpreted as having included, in the reference to the measures of application mentioned in paragraph (3) all provisions intended to supplement the partial measures laid down in paragraph (2), according to the pattern of that same provision.’

Of course, if the implementing measures of the Commission had interfered with, rather than complementing, the partial implementing measures already taken by the Council, the Commission would not have validly exercised its powers of implementation. That would be the case however, not because establishing a system of deposits goes beyond the implementation of a system of export licences, but rather because implementing measures adopted by the Commission must always be consistent with the provisions they implement, and with any other rules laid down by the Council.

44.

Accordingly, in Case 22/88 Vreugdenhil v Minister van Landbouw en Visserij, cited above at paragraph 36, and to which the German Government also refers, the Court held that the Commission had gone too far in its implementation of Council Regulation No 754/76 of 25 March 1976 on the customs treatment applicable to goods returned to the customs territory of the Community (OJ 1976 L 89, p. 1). In order to combat fraud, the Commission had provided that goods from intervention were to be excluded from the arrangements for returned goods. The Court however held that the Commission's measures were inconsistent with Article 2(1) of the Council regulation, the scope of which the Commission had no power to alter: see paragraph 20 of the judgment. The Commission was moreover equally unable to rely upon its powers of implementation derived from the basic regulations on the common organization of agricultural markets, because in this case the measures taken were inconsistent with rules laid down by the Council in a different domain, which the Commission had been given no power to amend: see paragraphs 21 to 25 of the judgment. Thus, contrary to the view of the German Government, Vreugdenhil does not show that measures designed to combat fraud do not come within the scope of the Commission's powers to implement rules laid down by the Council, but only that those powers must not be exercised in a manner which is inconsistent with other rules which the Council has laid down. Indeed, the Court has clearly stated that the imposition of sanctions to ensure compliance with a Community regulation does not in itself extend the scope of that regulation: see Case C-326/88 Hansen [1990] ECR I-2911, at paragraph 11 of the judgment.

45.

The Court's case-law therefore shows, in my opinion, that the delegation of implementing powers to the Commission may include powers to provide for sanctions against breaches of Community obligations, and indeed that the Commission is, in principle, entitled to exercise its powers of implementation by providing for such sanctions. As is shown by the example of the forfeiture of a deposit for breach of an obligation to export, the sanctions imposed may go beyond the restitution of benefits unduly received. In that respect, there are no grounds for distinguishing the case of the forfeiture of a deposit given before the obligation falls due, and the imposition of a penalty after the obligation has been breached. A system of deposits can be regarded merely as a means of ensuring that the authorities are able easily to collect any penalties which may become payable, and as equivalent in other respects to a system of fines imposed a posteriori: see Koster, cited above in paragraph 41, at paragraphs 26 and 27 of the judgment. Such a system will not of course usually be appropriate where the penalty only becomes payable on proof of negligence or fraud. As we have seen, however, even where the breaches which are sanctioned do involve serious irregularities, the sanction need not be regarded as a criminal penalty.

46.

Accordingly, there is in my view no doubt that the Council may delegate to the Commission the power to make provision for the non-penal sanctions which may be necessary for the proper implementation of a Council regulation. The question which remains to be considered, therefore, is whether such a delegation has effectively taken place in the case of the provisions presently at issue.

Delegation of the power to impose sanctions

47.

It will be recalled that in the present case, implementing powers were delegated to the Commission in the most general terms. Thus, Article 5(9) of Council Regulation No 3013/89 provides that the Commission ‘shall adopt implementing rules for this Article covering, in particular, the submission of premium applications and payment of the premium’, and Article 12 of Council Regulation No 768/89 provides that ‘Detailed rules for the application of this Regulation... shall be adopted in accordance with the procedure laid down’: see paragraph 3, above. According to the German Government, however, such terms are not apt to confer any power to impose sanctions, since the Commission's powers of implementation must, as regards sanctions at least, be restrictively construed. In the view of the German Government, furthermore, the requirement in Article 1 of the Comitology Decision, cited above in paragraph 34, that the Council ‘shall specify the essential elements’ of the powers it delegates to the Commission, implies that a power to impose sanctions must be expressly delegated, rather than implied as part of a general implementing power. Since the imposition of sanctions is a matter which affects the fundamental rights of individuals, it is also necessary, in the German Government's view, for the Council to specify the nature, and maximum level, of any sanctions which can be imposed.

48.

The Commission, on the other hand, argues that its implementing powers are to be construed broadly. Although the Council has the power, pursuant to Article 1 of the Comitology Decision, to limit the extent of the powers it delegates to the Commission, it has not done so in the present case. In the Commission's view, therefore, the contested provisions fall within the scope of the powers which the Council has delegated to the Commission.

49.

As we have already seen, the existing case-law of the Court, and in particular Koster, indicates that a general power to adopt detailed rules for the implementation of a Council regulation is apt to include the imposition of such sanctions as may be necessary to ensure the effectiveness of the rules laid down: see paragraphs 41 to 45 above. The German Government has not suggested that the sanctions at issue in the present proceedings are unnecessary or inexpedient for the purpose of ensuring the effective functioning of the schemes of financial assistance in question; nor has it contended that the imposition of such sanctions is inconsistent with any other rules laid down by the Council. It seems to me therefore that, on existing principles, the contested provisions fall within the broad powers of implementation which have been conferred on the Commission by Council Regulations No 768/89 and No 3013/89.

50.

That conclusion is not affected, in my view, by an examination of Article 1 of the Comitology Decision. As appears from its second recital, the aim of the decision is to limit the types of procedural requirements which the Council may impose on the exercise of the implementing powers it delegates to the Commission. There is however no suggestion, in the recitals to the decision, that the Council's competence to delegate implementing powers is intended to be subject to any further limitation. Article 1 of the decision is not therefore to be construed as limiting the Council's ability to delegate general powers of implementation to the Commission. The Council's ability to confer such powers is of particular importance in the sphere of the common agricultural policy, where the Commission must of necessity enjoy broad powers of implementation.

51.

It will be observed that the Council is not, in any case, prevented from safeguarding its own powers, either by reserving the right to exercise implementing powers itself, or by means of the selection of an appropriate committee procedure. The Council may furthermore impose any appropriate limitations on the Commission's powers by specifying the essential elements of the powers delegated. It seems to me therefore that the range of options available to the Council provides a sufficient means of safeguarding the balance between the two institutions.

52.

Nor, finally, does it seem to me that there is any substance in the German Government's argument based on fundamental rights. It cannot be an objection against the existence of a power, that the abusive exercise of the power might lead to the infringement of fundamental rights. The Commission's exercise of its powers in particular cases is in any event subject to judicial protection of the rights of individuals according to general principles of Community law, as indeed is the implementation of Community provisions by the national authorities.

Conclusion

53.

I am accordingly of the opinion that the Court should:

(1)

dismiss the application;

(2)

order the Federal Republic of Germany to pay the costs.


( *1 ) Original language: English.