62000J0170

1. Agriculture - EAGGF - Clearance of accounts - Communication to the Member States of the results of the inspections of the control services - Applicable provisions - Conditions as to form - Probative function of writing - Acceptability of any procedure involving written documentation

(Council Regulation No 729/70, Art. 5(2)(c); Commission Regulation No 1663/95, Art. 8(1), first subpara.)

2. Agriculture - EAGGF - Clearance of accounts - Communication to the Member States of the results of the inspections of the control services - Conditions as to content - Indication of period for reply without express reference to Article 8 of Regulation No 1663/95 - No breach of an essential formal requirement - Conditions

(Council Regulation No 729/70, Art. 5(2)(c); Commission Regulation No 1663/95, Art. 8(1), first subpara.)

1. It is clear from the wording of Article 5(2)(c) of Regulation No 729/70 and Article 8 of Regulation No 1663/95 that those provisions both refer to the communication of the results of the inspections of the EAGGF control services in the Member States. Even if the fifth subparagraph of Article 5(2)(c) of Regulation No 729/70 uses the terms results of checks and the first subparagraph of Article 8(1) of Regulation No 1663/95 the terms findings as a result of an enquiry, it is none the less clear that they mean the same stage of the procedure for clearance of accounts of the EAGGF Guarantee Section, that is to say, the on-the-spot inspections in Member States by the Commission's services.

As regards the formal requirements relating to the communication of the results of inspections in the Member States, Article 8(1) of Regulation No 1663/95 makes a distinction between the communication of findings, referred to in the first subparagraph, and the formal communication of conclusions, referred to in the second subparagraph, which happens at a later stage. It follows that the first communication does not have to meet such strict formal conditions as the second. The requirement that the communication be in writing, at that stage in the procedure, has merely a probative function in relations between the Commission and the Member State concerned. That probative function is fulfilled by any procedure involving written documentation. Findings can therefore be communicated by a written message sent by telex or fax.

( see paras 27-29 )

2. In the procedure for the clearance of EAGGF accounts, the document by which the Commission communicates to the Member State the results of on-the-spot checks made and the corrective measures to be taken is the basis for the calculation of the period of 24 months mentioned in the fifth subparagraph of Article 5(2)(c) of Regulation No 729/70. Express reference to that period is not required by the applicable legislation. That document also indicates the period, of two months, in which a reply is to be made, as provided for in Article 8 of Regulation No 1663/95. As regards the question of an express reference to that provision, the Commission is bound, in its relations with the Member States, to respect the conditions it has imposed on itself by implementing regulations. However, the Member States cannot, in their relations with the Commission, adopt purely formalist positions when it is clear from the circumstances that their rights were fully protected. That is the case where a Member State was fully informed about the Commission's reservations and the corrections which would probably be made to the premiums in question, so that the document fulfilled the warning function conferred on a written communication by Article 5(2)(c) of Regulation No 729/70 and the first subparagraph of Article 8(1) of Regulation No 1663/95. The mere omission, in the document communicating the results of inspections, of a reference to Regulation No 1663/95 does not appear to be a breach of an essential formal requirement.

( see paras 32-34 )

In Case C-170/00,

Republic of Finland, represented by T. Pynnä and E. Bygglin, acting as Agents, with an address for service in Luxembourg,

applicant,

v

Commission of the European Communities, represented by M. Niejahr and I. Koskinen, acting as Agents, with an address for service in Luxembourg,

defendant,

APPLICATION for partial annulment of Commission Decision 2000/216/EC of 1 March 2000 excluding from Community financing certain expenditure incurred by the Member States under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) (OJ 2000 L 67, p. 37), in so far as it excludes from Community financing the sum of FIM 7 270 885.76 incurred in the applicant Member State on advance payment of special premiums for bulls, for the 1996 and 1997 marketing years,

THE COURT (Fifth Chamber),

composed of: P. Jann (Rapporteur), President of the Chamber, S. von Bahr, D.A.O. Edward, A. La Pergola and M. Wathelet, Judges,

Advocate General: L.A. Geelhoed,

Registrar: H.A. Rühl, Principal Administrator,

having regard to the Report for the Hearing,

after hearing oral argument from the parties at the hearing on 4 July 2001,

after hearing the Opinion of the Advocate General at the sitting on 20 September 2001,

gives the following

Judgment

1 By application lodged at the Court Registry on 9 May 2000, the Republic of Finland brought an action under the first paragraph of Article 230 EC for partial annulment of Commission Decision 2000/216/EC of 1 March 2000 excluding from Community financing certain expenditure incurred by the Member States under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) (OJ 2000 L 67, p. 37, hereinafter the contested decision), in so far as it excludes from Community financing expenditure amounting to FIM 7 270 885.76 incurred in the applicant Member State on advance payment of special premiums for bulls for the 1996 and 1997 marketing years.

2 That sum corresponds to the expenditure on those special premiums incurred in Finland between 20 May 1995 and 21 December 1996.

Legal background

3 Article 5 of Regulation (EEC) No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (OJ, English Special Edition 1970 (I), p. 218), as amended by Council Regulation (EC) No 1287/95 of 22 May 1995 (OJ 1995 L 125, p. 1, hereinafter Regulation No 729/70), provides:

1. Member States shall at regular intervals transmit to the Commission the following information concerning the accredited paying agencies and coordinating bodies referred to in Article 4 and relating to transactions financed by the Guarantee Section of the EAGGF:

...

2. The Commission, after consulting the Fund Committee:

...

(b) shall, before 30 April of the year following the financial year concerned, on the basis of the information referred to in point (b) of paragraph 1, clear the accounts of the paying agencies.

The accounts clearance decision shall cover the integrality, exactitude and veracity of the accounts submitted.

The decision shall not prejudice the adoption of a subsequent decision pursuant to point (c);

(c) shall decide on the expenditure to be excluded from the Community financing referred to in Articles 2 and 3 where it finds that expenditure has not been effected in compliance with Community rules.

Before a decision to refuse financing is taken, the results of the Commission's checks and the replies of the Member State concerned shall be notified in writing, after which the two parties shall endeavour to reach agreement on the action to be taken.

If no agreement is reached, the Member State may ask for a procedure to be initiated with a view to mediating between the respective positions within a period of four months, the results of which shall be set out in a report sent to and examined by the Commission, before a decision to refuse financing is taken.

The Commission shall evaluate the amounts to be excluded having regard in particular to the degree of non-compliance found. The Commission shall take into account the nature and gravity of the infringement and the financial loss suffered by the Community.

A refusal to finance may not involve expenditure effected prior to twenty-four months preceding the Commission's written communication of the results of those checks to the Member State concerned. However, this provision shall not apply to the financial consequences:

- of irregularities as referred to in Article 8(2);

- concerning national aids, or infringements, for which the procedures referred to in Articles 93 and 169 of the Treaty have been initiated.

3. Detailed rules for the application of this Article shall be adopted in accordance with the procedure laid down in Article 13. Those rules shall cover in particular the attestation of the accounts referred to in paragraph 1 and the procedures relating to the decisions referred to in paragraph 2.

4 Article 8(1) and (2) of Commission Regulation (EC) No 1663/95 of 7 July 1995 laying down detailed rules for the application of Council Regulation (EEC) No 729/70 regarding the procedure for the clearance of the accounts of the EAGGF Guarantee Section (OJ 1995 L 158, p. 6) provides:

1. When, as a result of any enquiry, the Commission considers that expenditure was not effected according to Community rules, it shall communicate to the Member State concerned its findings, the corrective measures to be taken to ensure future compliance, and an evaluation of any expenditure which it may propose to exclude pursuant to Article 5(2)(c) of Regulation (EEC) No 729/70. The communication shall make reference to this Regulation. The Member State shall reply within two months, and the Commission may modify its position in consequence. In justified cases the Commission may agree to extend this period for reply.

After expiry of the period allowed for reply, the Commission shall initiate a bilateral discussion, and both parties shall endeavour to come to an agreement as to the measures to be taken. The Commission shall then formally communicate its conclusions to the Member State, referring to Commission Decision 94/442/EC.

2. The decisions referred to in Article 5(2)(c) of Regulation (EEC) No 729/70 shall be taken after an examination of any report drawn up by the conciliation body according to the provisions laid down in [Decision] 94/442/EC.

The clearance procedure at issue

5 In April 1997, the EAGGF control services carried out checks, in Finland, concerning the application of the system of premiums for cows, bulls and ewes and the implementation of Council Regulation (EC) No 1357/96 of 8 July 1996 providing for additional payments to be made in 1996 with the premiums referred to in Regulation (EEC) No 805/68 on the common organisation of the market in beef and veal and amending that Regulation (OJ 1996 L 175, p. 9).

6 On 20 May 1997, the Commission sent to the Finnish permanent representation to the European Union in Brussels (hereinafter the permanent representation) and to the Finnish Ministry of Agriculture and Forestry in Helsinki (hereinafter the Ministry) a document in Finnish (hereinafter the document of 20 May 1997) in which it drew the attention of the Finnish Government to deficiencies in the Finnish monitoring system which it had detected in the course of its on-the-spot checks. It stated that it reserved the right to decide subsequently whether the expenditure on special premiums for bulls for the 1995 and 1996 marketing years should be excluded from Community financing and that it would be grateful for a reply within two months of receipt of the document.

7 Although the document of 20 May 1997 is in the form of a telex, the Finnish Government alleges that it was transmitted by fax, which is confirmed by the information given in its header. Apparently it was preceded by a telex identical in content but drafted in English and dated 7 May 1997, to which the document of 20 May 1997 makes reference.

8 The Finnish Government replied to the document of 20 May 1997 by a letter of 21 July 1997 in which it stated that it had taken account of the proposals and observations made by the Commission.

9 In a letter in Finnish of 17 September 1998 addressed to the permanent representation which it received on 18 September 1998, and a copy of which was sent to the Ministry and received by it on 24 September 1998 (hereinafter the letter of 17 September 1998), the Commission, referring to Article 8 of Regulation No 1663/95 and to Article 5(2)(c) of Regulation No 729/70, informed the Finnish Government that it intended to propose that a part of the expenditure declared for the 1996 and 1997 financial years should be excluded from Community financing. According to the Commission, the reason for the correction was that monitoring had not been carried out in accordance with the rules, as was clear from the results of the Commission's checks set out in an annex to the letter of 17 September 1998. The Finnish Government was reminded that it had two months from the notification of the letter in which to reply.

10 The annex, which was supposed to contain the detailed findings from on-the-spot checks carried out by the EAGGF services and from the requests for further information, was not attached to the letter of 17 September 1998. At the request of the Finnish Government, the Commission, on 11 December 1998, forwarded that annex, in Finnish, to the Ministry, together with a covering letter, also in Finnish, which reproduced the last paragraph of the letter of 17 September 1998 (hereinafter the letter of 11 December 1998). That letter arrived at the Ministry on 22 September 1998; a copy sent to the permanent representation reached it on 14 December.

11 According to the Commission, a version of the letter of 17 September 1998 and its annex in English had been sent to the permanent representation on 10 July 1998 and a copy sent to the Ministry.

12 After an exchange of correspondence, the Finnish Government informed the Commission, by letter of 5 August 1999, that it intended to rely on the time-limit laid down by Article 5(2)(c) of Regulation No 729/70 and that it considered that the Commission had no grounds to exclude expenditure incurred more than 24 months before 22 December 1998, the date when it received the annex to the letter of 17 September 1998.

13 The expenditure which the Commission was thus time-barred from excluding amounted, according to the calculations of the Finnish Government - which were not disputed by the Commission - to FIM 7 270 885.76.

14 However, by the contested decision, the Commission also excluded the contested expenditure incurred between 20 May 1995 and 21 December 1996.

The sole plea

15 By its sole plea the Finnish Government submits that the contested decision was adopted in breach of Article 5(2)(c) of Regulation No 729/70 and Article 8(1) of Regulation No 1663/95. It is clear from those provisions that the period of 24 months mentioned in the former regulation means the 24 months before a written communication from the Commission to the Member State concerned containing the results of the checks and the findings made by the Commission, and referring expressly to Regulation No 1663/95.

16 The Finnish Government submits that those conditions were not met by the document of 20 May 1997, which in its view does not constitute a written communication within the meaning of Article 5(2)(c) of Regulation No 729/70 and Article 8(1) of Regulation No 1663/95. First of all, it is not a letter and neither a telex nor a fax meets the requirement that it be in written form. Secondly, nothing in the wording of the document of 20 May 1997 suggested that it would cause a limitation period to start to run. Thirdly, it made no reference to Regulation No 1663/95, as required by Article 8(1) of that regulation.

17 Only the letter of 17 September 1998 met the requirements in theory. Since the Commission did not attach the annex containing the results of the checks, the date of 22 December 1998, which is the date on which that annex was received by the Ministry, rather than 20 May 1997, must be taken as the basis for the calculation of the 24-month period in question.

18 The Commission contends that the period of 24 months mentioned in the fifth subparagraph of Article 5(2)(c) of Regulation No 729/70 ended on 20 May 1997, since the document of that date met all the requirements.

19 It argues that the purpose of the 24-month rule is to prevent Member States from being required to accept financial corrections several years after the financial year concerned, without having been forewarned of such a possibility. This is done simply by means of a notice setting out clearly in writing the main conclusions of the Commission and leaving open the possibility for financial corrections to be made. The most important thing, from the point of view of respect for the legitimate expectations of the Member State concerned, is not therefore that the written notice should be in any particular form but that it should fulfil its purpose of alerting the Member State to the possibility of corrections to be made in the future.

20 That purpose was fulfilled in the present case by the document of 20 May 1997. As a fax, that document has the required written form, contains all the information necessary and prescribes a period of two months for a reply. An express statement that the limitation period of 24 months is thereby interrupted is not necessary. Furthermore, a reference to Article 8(1) of Regulation No 1663/95 is not required. There is no connection between that provision and Article 5(2)(c) of Regulation No 729/70, as is clear from the second citation of the preamble to Regulation No 1663/95, according to which the legal basis of that regulation is Article 5(3) and not Article 5(2) of Regulation No 729/70.

21 In the alternative, the Commission contends that the period of 24 months ended on 18 September 1998, the date on which the letter of 17 September 1998 was received, since, even if that letter had not been accompanied by the annex containing the results of the checks of the EAGGF control services, it had been sent, in English, on 10 July 1998 and contained the results of nine on-the-spot checks made in the presence of the Finnish authorities. In that regard, the letter of 11 December 1998 should be considered, the Commission argues, to constitute acquiescence in an extension of the period allowed for a reply.

22 Moreover, as regards the date of receipt of the letter of 11 December 1998 and the accompanying annex, account must be taken of the notification sent to the permanent representation, received on 14 December 1998, and not the date of its arrival at the Ministry.

23 In response to the arguments in the alternative of the Commission, the Finnish Government submits, first, that the letter in English of 10 July 1998 does not in any event meet the formal requirements. According to Article 3 of Council Regulation No 1 of 15 April 1958 determining the languages to be used by the European Economic Community (OJ, English Special Edition 1952-1958, p. 59), as amended by the Act concerning the conditions of accession of the Kingdom of Norway, the Republic of Austria, the Republic of Finland and the Kingdom of Sweden and the adjustments to the Treaties on which the European Union is founded (OJ 1994 C 241, p. 21, and OJ 1995 L 1, p. 1), [d]ocuments which an institution of the Community sends to a Member State or to a person subject to the jurisdiction of a Member State shall be drafted in the language of such State.

24 Second, on 14 December 1998 the permanent representation received only a copy of the letter of 11 December 1998. According to it, the original letter was expressly addressed to the Ministry, so that it was the date on which it was received by the Ministry, that is to say 22 December 1998, which should be taken into account.

Findings of the Court

25 The fifth subparagraph of Article 5(2)(c) of Regulation No 729/70 provides: A refusal to finance may not involve expenditure effected prior to twenty-four months preceding the Commission's written communication of the results of those checks to the Member State concerned.

26 Regulation No 1663/95, which is the implementing regulation for Regulation No 729/70, provides, in the first subparagraph of Article 8(1), what that written communication must contain. According to that article, that communication must indicate the corrective measures to be taken to ensure future compliance with the rules concerned, must give an evaluation of any expenditure which it may propose to exclude and must make reference to Regulation No 1663/95.

27 The Commission's argument that there is no link between Article 5(2)(c) of Regulation No 729/70 and Article 8 of Regulation No 1663/95 cannot be upheld. It is clear from the wording of those provisions that both refer to the communication of the results of the inspections of the EAGGF control services in the Member States. Even if the fifth subparagraph of Article 5(2)(c) of Regulation No 729/70 uses the terms results of checks and the first subparagraph of Article 8(1) of Regulation No 1663/95 the terms findings as a result of an enquiry, it is none the less clear that they mean the same stage of the procedure for clearance of accounts of the EAGGF Guarantee Section, that is to say, the on-the-spot inspections in Member States by the Commission's services.

28 Consequently, it must be ascertained whether the document of 20 May 1997 meets the requirements of Article 5(2)(c) of Regulation No 729/70, read in conjunction with the first subparagraph of Article 8(1) of Regulation No 1663/95.

29 First, as regards the formal requirements, it must be observed that Article 8(1) of Regulation No 1663/95 makes a distinction between the communication of findings, referred to in the first subparagraph, which is what is in question here, and the formal communication of conclusions, referred to in the second subparagraph, which happens at a later stage. It follows that the first communication does not have to meet such strict formal conditions as the second. As the Advocate General has argued, in points 62 to 71 of his Opinion, the requirement that the communication be in writing, at that stage in the procedure, has merely a probative function in relations between the Commission and the Member State concerned. That probative function is fulfilled by any procedure involving written documentation. Findings can therefore be communicated by a written message sent by telex or fax.

30 In the present case, the document of 20 May 1997 thus meets the formal requirements set out in the first subparagraph of Article 8(1) of Regulation No 1663/95.

31 Second, it must be considered whether the document of 20 May 1997 fulfils the other requirements laid down. In that connection, it is stated in the introduction to the document that it is being sent to the national authorities in order to make known as soon as possible the most important causes for concern established in the course of the check. It goes on to describe the system for monitoring meat premiums in the Member State concerned and then to explain the deficiencies in the treatment of requests for premiums, accounting considerations, problems in monitoring accounts encountered by the EAGGF services, an analysis of the risks, a description of the number of on-the-spot checks carried out, as well as detailed findings and deficiencies uncovered during those checks. Finally, it indicates that the Commission reserves the right to bring an action at a later date as regards special premiums for bulls for the 1995 and 1996 marketing years in order to obtain the reimbursement of the expenditure in relation to rejected applications. The document closes with a request that the national authorities forward their reply concerning the points set out within two months of receipt of the document.

32 Accordingly, the document of 20 May 1997 meets the requirements for a communication of the results of on-the-spot checks and the corrective measures to be taken, on the basis of which the period of 24 months mentioned in the fifth subparagraph of Article 5(2)(c) of Regulation No 729/70 can be calculated. Express reference to that period is not required by the applicable legislation. Moreover, the document of 20 May 1997 also indicates the period, of two months, in which a reply is to be made, as provided for in Article 8 of Regulation No 1663/95.

33 However, the document of 20 May 1997 contains no express reference to Article 8 of Regulation No 1663/95. It must therefore be determined whether that omission is sufficient by itself for that document to be considered not to be a written communication.

34 It must be held that the Commission is bound, in its relations with the Member States, to respect the conditions it has imposed on itself by implementing regulations. However, the Member States cannot, in their relations with the Commission, adopt purely formalist positions, when it is clear from the circumstances that their rights were fully protected. In the present case, as was pointed out at paragraph 31 of this judgment, the document of 20 May 1997 informed the Finnish Government fully about the Commission's reservations and the corrections which would probably be made to the premiums in question, so that it fulfilled the warning function conferred on a written communication by Article 5(2)(c) of Regulation No 729/70 and the first subparagraph of Article 8(1) of Regulation No 1663/95. In those circumstances, the mere omission, in that document, of a reference to Regulation No 1663/95 does not appear to be a breach of an essential formal requirement.

35 It follows that the contentions of the Finnish Government cannot be upheld and that the Commission is entitled to consider that the expenditure which it could no longer disallow was that incurred before 20 May 1995, that is to say more that 24 months before notification of the document in question. Accordingly, there is no need to consider the arguments put forward in the alternative by the Commission regarding the documents exchanged after that date.

36 In the light of the foregoing considerations, the application of the Republic of Finland must be dismissed.

Costs

37 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission has applied for costs and the Republic of Finland has been unsuccessful, the latter must be ordered to pay the costs.

On those grounds,

THE COURT (Fifth Chamber)

hereby:

1. Dismisses the action;

2. Orders the Republic of Finland to pay the costs.