Case T‑292/18

Portuguese Republic

v

European Commission

Judgment of the General Court (Fifth Chamber), 30 January 2020

(EAGF and EAFRD — Expenditure excluded from financing — Expenditure incurred by Portugal — Articles 32 and 33 of Regulation (EC) No 1290/2005 — Article 54 of Regulation (EU) No 1306/2013 — Definition of ‘national court’)

1. Agriculture — Common agricultural policy — EAGF and EAFRD financing — Clearance of accounts — Amounts recoverable from the Member State — Non-recovery by the Member State of the amounts due following irregularities or omissions within the time limits laid down — Different time limits according to whether or not recovery action is taken in the national courts — Definition of ‘national court’ — Recovery by administrative authority by means of tax execution procedure — Authority which carries out administrative functions only and does not satisfy the independence requirement — Not included

   (Art. 267 TFEU; European Parliament and Council Regulation No 1306/2013, Art. 54(2); Council Regulation No 1290/2005, Arts 32(5) and 33(8))

   (see paragraphs 33-37, 47-49, 55, 56)

2. Agriculture — Common agricultural policy — Financing by the EAGF and the EAFRD — Clearance of accounts — Principles — Member States’ duty of diligence

   (Art. 4(3) TEU; European Parliament and Council Regulation No 1306/2013, Art. 58(1); Council Regulation No 1290/2005, Art. 9(1)(a))

   (see paragraphs 59-67)

Résumé

In the judgment in Portugal v Commission (T‑292/18), delivered on 30 January 2020, the Court dismissed an action for partial annulment brought by the Portuguese Republic against Commission Implementing Decision (EU) 2018/304, ( 1 ) in so far as it excluded from European Union financing certain expenditure incurred by that Member State under the European Agricultural Guarantee Fund (EAGF) and under the European Agricultural Fund for Rural Development (EAFRD), in the amount of EUR 1052101.05.

Article 32(5) of Regulation No 1290/2005 ( 2 ) provides that, if recovery of sums unduly paid following the occurrence of irregularity or negligence has not taken place within four years of the primary administrative or judicial finding, or within eight years where recovery action is taken in the national courts, 50% of the financial consequences of non-recovery are to be borne by the Member State concerned and 50% by the Union budget (the rule of shared financial responsibility for non-recovery, known as ‘the 50/50 rule’). ( 3 )

The basis of the contested decision is the Commission’s finding, in the context of its mandate to investigate national procedures for recovery of undue payments brought following irregularities, that the Portuguese authorities miscategorised certain expenditure which had been incurred under the EAGF or EAFRD and was to be recovered. The Commission took the view that the debts owed to the Portuguese paying agency, whose recovery gave rise to an execution procedure by the Portuguese tax authorities, were miscategorised as debts in relation to which ‘recovery action [was] taken in the national courts’ within the meaning of Article 32(5). In its view, therefore, the 50/50 rule should be applied to those debts in the event of non-recovery within four years, not in the event of non-recovery within eight years only, as contended by the Portuguese authorities.

Challenging that interpretation, the Portuguese Republic applied for annulment of the contested decision, arguing that the forced recovery of sums owed in the context of administrative relationships is implemented in Portugal by means of the tax execution procedure, which ought to be regarded as judicial in nature. According to the Portuguese Republic, the 50/50 rule should therefore only apply if recovery has not taken place within eight years.

In support of its action for annulment of the contested decision, the Portuguese Republic raised a single plea of infringement of Articles 32 and 33 of Regulation No 1290/2005, and Article 54 of Regulation No 1306/2013, in so far as the Commission was wrong to take the view that the debts owed to the Portuguese paying agency in relation to which an execution procedure was brought by the tax authorities did not constitute debts in relation to which recovery action was taken in the national courts, within the meaning of those articles.

In dismissing the action, the Court first of all stated that the concept of ‘national court’, which is critical for determining the scope of the 50/50 rule, cannot be left to individual Member States to assess, but requires autonomous and uniform interpretation throughout the Union which is to be arrived at taking account of the context of the provisions of which it is forms part, and of the aim pursued by Regulation No 1290/2005 and No 1306/2013.

In interpreting the concept of ‘national court’ in the aforementioned articles, the General Court referred to the criteria set out by the Court of Justice for assessing whether a body making a reference for a preliminary ruling is a ‘court or tribunal’ for the purposes of Article 267 TFEU.

Having examined the attributes of the competent department of the Portuguese tax authorities in light of those criteria, the Court found that such a department cannot be classed as a ‘national court’. It does not carry out judicial functions, merely functions of an administrative nature, nor is it charged with resolving disputes or monitoring the legality of the debt certificate issued by the Portuguese paying agency. Nor, further, does such a department satisfy the requirement of independence.

The Court thus concluded that, contrary to the submissions of the Portuguese Government, a tax execution procedure before the competent department of the tax authorities cannot be classified as a recovery action before the ‘national courts’ for the purposes of the aforementioned articles of Regulations No 1290/2005 and No 1306/2013, at least in the absence of any intervention by the administrative and tax courts.

The Portuguese Republic should therefore have concluded the tax execution procedure before the competent department of the tax authorities within the mandatory four-year time limit set out in the aforementioned provisions. The Court accordingly found that the Commission could validly exclude certain expenditure from Union financing on the ground that it had been the subject of a tax execution procedure before the competent department of the tax authorities for more than four years.

( 1 ) Commission Implementing Decision (EU) 2018/304 of 27 February 2018 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 2018 L 59, p. 3).

( 2 ) Council Regulation (EC) No 1290/2005 of 21 June 2005 on the financing of the common agricultural policy (OJ 2005 L 209, p. 1).

( 3 ) Article 32 of Regulation No 1290/2005 sets out the provisions specific to the EAGF. Article 33(8) of the same regulation contains a provision that is in substance equivalent with regard to the EAFRD. Those provisions were in substance repeated in Article 54 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 (OJ 2013 L 347, p. 549, and corrigendum OJ 2016 L 130, p. 6), which repealed and replaced Regulation No 1290/2005.