61979J0819

1 . AGRICULTURE - COMMON AGRICULTURAL POLICY - FINANCING BY EAGGF - DECISION ON CLEARANCE OF ACCOUNTS - SUBJECT-MATTER - AID PAID CONTRARY TO COMMUNITY RULES - NON-COMPLIANCE WITH FORMALITIES AS TO PROOF AND SUPERVISION - CHARGING TO EAGGF - NOT POSSIBLE

( REGULATION NO 729/70 OF THE COUNCIL , ART . 5 ( 2 ) ( B ))

2 . AGRICULTURE - COMMON ORGANIZATION OF THE MARKETS - MILK AND MILK PRODUCTS - AID FOR SKIMMED-MILK POWDER INTENDED FOR ANIMAL FEED - DENATURING - DETAILED RULES ON SUPERVISION - MANDATORY NATURE

( REGULATION NO 990/72 OF THE COMMISSION , ART . 3 ( 2 ))

3 . MEASURES ADOPTED BY THE INSTITUTIONS - REGULATIONS - UNIFORM APPLICATION - OBLIGATIONS OF MEMBER STATES

4 . MEASURES ADOPTED BY THE INSTITUTIONS - OBLIGATION TO STATE REASONS - EXTENT - DECISION ON CLEARANCE OF ACCOUNTS IN RESPECT OF EXPENDITURE FINANCED BY THE EAGGF

( EEC TREATY , ART . 190 )

1 . THE FUNCTION OF A COMMISSION DECISION RELATING TO THE CLEARANCE OF ACCOUNTS IN RESPECT OF EXPENDITURE FINANCED BY THE EAGGF IS TO ESTABLISH WHETHER THE EXPENDITURE WAS INCURRED BY THE NATIONAL AUTHORITIES IN ACCORDANCE WITH COMMUNITY PROVISIONS . IN CASES WHERE COMMUNITY RULES AUTHORIZE PAYMENT OF AID ONLY ON CONDITION THAT CERTAIN FORMALITIES RELATING TO PROOF OR SUPERVISION ARE OBSERVED , AID PAID IN DISREGARD OF THAT CONDITION IS NOT IN ACCORDANCE WITH COMMUNITY LAW AND THE EXPENDITURE INCURRED THEREIN MAY NOT , IN PRINCIPLE , BE CHARGED TO THE EAGGF .

2 . IN ORDER TO ENSURE EFFECTIVE SUPERVISION OF THE PROPER CONDUCT OF DENATURING OPERATIONS AND TO PREVENT THE SAME PRODUCT FROM BENEFITING MORE THAN ONCE FROM THE AID , REGULATION NO 990/72 ON DETAILED RULES FOR GRANTING AID FOR SKIMMED-MILK POWDER FOR USE AS FEED PROVIDES FOR ON-THE-SPOT CHECKS ON DENATURING UNDERTAKINGS . ARTICLE 3 ( 2 ) OF THE REGULATION REQUIRES UNDERTAKINGS CARRYING OUT DENATURING TO GIVE CERTAIN INFORMATION TO THE COMPETENT NATIONAL AGENCY BEFORE PROCEEDING WITH THE DENATURING . MEMBER STATES MUST COMPLY WITH THE SYSTEM OF SUPERVISION THUS LAID DOWN .

3 . THE PROVISIONS OF COMMUNITY REGULATIONS MUST BE UNIFORMLY APPLIED IN ALL THE MEMBER STATES AND HAVE , SO FAR AS POSSIBLE , THE SAME EFFECT THROUGHOUT THE TERRITORY OF THE COMMUNITY . THE POSITION IS NO DIFFERENT WHERE A REGULATION LAYS DOWN SPECIFIC MEASURES OF SUPERVISION BUT LEAVES TO MEMBER STATES THE TASK OF ENSURING THEIR OBSERVANCE BY APPROPRIATE ADMINISTRATIVE MEASURES .

4 . THE EXTENT OF THE DUTY TO STATE REASONS , LAID DOWN BY ARTICLE 190 OF THE TREATY , DEPENDS ON THE NATURE OF THE ACT IN QUESTION AND ON THE CONTEXT IN WHICH IT IS ADOPTED .

A DECISION RELATING TO THE CLEARANCE OF ACCOUNTS IN RESPECT OF EXPENDITURE FINANCED BY THE EAGGF AND REFUSING TO CHARGE TO IT A PROPORTION OF THE EXPENDITURE DECLARED DOES NOT REQUIRE A DETAILED STATEMENT OF REASONS WHERE THE GOVERNMENT CONCERNED WAS CLOSELY INVOLVED IN THE PROCESS BY WHICH THE CONTESTED DECISION WAS MADE AND WAS THEREFORE AWARE OF THE REASON FOR WHICH THE COMMISSION CONSIDERED THAT THE DISPUTED AMOUNT MIGHT NOT BE CHARGED TO THE EAGGF .

IN CASE 819/79

FEDERAL REPUBLIC OF GERMANY , REPRESENTED BY MARTIN SEIDEL , MINISTERIAL COUNSELLOR AT THE FEDERAL MINISTRY FOR ECONOMIC AFFAIRS , BONN , AND JOCHIM SEDEMUND OF THE COLOGNE BAR , WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE CHANCELLERY OF THE EMBASSY OF THE FEDERAL REPUBLIC OF GERMANY , 3 BOULEVARD ROYAL ,

APPLICANT ,

V

COMMISSION OF THE EUROPEAN COMMUNITIES , REPRESENTED BY GIANLUIGI CAMPOGRANDE AND JORN SACK , MEMBERS OF ITS LEGAL DEPARTMENT , ACTING AS AGENTS , WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE OFFICE OF ITS LEGAL ADVISER , MARIO CERVINO , JEAN MONNET BUILDING , KIRCHBERG ,

DEFENDANT ,

APPLICATION FOR A DECLARATION THAT COMMISSION DECISION 79/895 OF 12 OCTOBER 1979 CONCERNING THE CLEARANCE OF THE ACCOUNTS PRESENTED BY THE FEDERAL REPUBLIC OF GERMANY IN RESPECT OF THE EUROPEAN AGRICULTURAL GUIDANCE AND GUARANTEE FUND , GUARANTEE SECTION , EXPENDITURE FOR 1973 , ( OFFICIAL JOURNAL 1979 , L 278 , P . 13 ) IS VOID IN SO FAR AS THE COMMISSION DID NOT RECOGNIZE AS CHARGEABLE TO THE FUND THE SUM OF DM 8 335 232.61 RELATING TO THE PAYMENT OF AID FOR THE DENATURING OF SKIMMED-MILK POWDER ,

1 BY APPLICATION LODGED AT THE COURT REGISTRY ON 19 DECEMBER 1979 THE FEDERAL REPUBLIC OF GERMANY SOUGHT A DECLARATION , PURSUANT TO ARTICLE 173 OF THE EEC TREATY , THAT COMMISSION DECISION 79/895 OF 12 OCTOBER 1979 CONCERNING THE CLEARANCE OF THE ACCOUNTS PRESENTED BY THE FEDERAL REPUBLIC OF GERMANY IN RESPECT OF THE EUROPEAN AGRICULTURAL GUIDANCE AND GUARANTEE FUND , GUARANTEE SECTION , EXPENDITURE FOR 1973 ( OFFICIAL JOURNAL 1979 L 278 , P . 13 ) IS VOID IN SO FAR AS THE COMMISSION DID NOT RECOGNIZE AS CHARGEABLE TO THE EAGGF THE SUM OF DM 8 335 232.61 RELATING TO THE PAYMENT OF AID FOR THE DENATURING OF SKIMMED-MILK POWDER .

2 UNDER ARTICLE 3 ( 2 ) OF REGULATION NO 986/68 OF THE COUNCIL OF 15 JULY 1968 LAYING DOWN GENERAL RULES FOR GRANTING AID FOR SKIMMED MILK AND SKIMMED-MILK POWDER FOR USE AS FEED ( OFFICIAL JOURNAL , ENGLISH SPECIAL EDITION 1968 ( I ), P . 260 ), AID FOR SKIMMED-MILK POWDER IS TO BE PAID ONLY WHEN PROOF HAS BEEN GIVEN THAT THE SKIMMED-MILK POWDER HAS BEEN DENATURED OR USED IN THE MANUFACTURE OF COMPOUND FEEDINGSTUFFS . FOR THE PURPOSE OF APPLYING THAT PROVISION , ARTICLE 3 OF REGULATION NO 990/72 OF THE COMMISSION OF 15 MAY 1972 ON DETAILED RULES FOR GRANTING AID FOR SKIMMED MILK PROCESSED INTO COMPOUND FEEDINGSTUFFS AND FOR SKIMMED-MILK POWDER FOR USE AS FEED ( OFFICIAL JOURNAL , ENGLISH SPECIAL EDITION 1972 ( II ), P . 428 ) PROVIDES , IN REGARD TO DENATURED SKIMMED-MILK POWDER , THAT DENATURING SHALL BE SUPERVISED ON THE PREMISES ; THAT EACH MEMBER STATE SHALL APPOINT AN AGENCY TO CARRY OUT THAT SUPERVISION AND , MOREOVER , THAT THE CONCERN UNDERTAKING DENATURING SHALL , IN GOOD TIME BEFOREHAND COMMUNICATE IN WRITING TO THAT AGENCY ITS BUSINESS NAME AND ADDRESS , THE QUANTITY OF SKIMMED-MILK POWDER TO BE DENATURED , THE PLACE WHERE DENATURING WILL TAKE PLACE AND THE EXPECTED DURATION OF THE DENATURING PROCESS . ARTICLE 10 OF THAT REGULATION REQUIRES MEMBER STATES TO TAKE ALL MEASURES NECESSARY TO ENSURE THAT THE PROVISIONS LAID DOWN IN THE REGULATION ARE COMPLIED WITH .

3 ACCORDING TO THE FIRST SUBMISSION , THE DECISION UNDER CHALLENGE INFRINGED ARTICLES 3 AND 10 OF THE AFOREMENTIONED REGULATION NO 990/72 BY REFUSING TO RECOGNIZE THE SUPERVISION OF DENATURING CARRIED OUT BY THE GERMAN AUTHORITIES AS BEING IN ACCORDANCE WITH THOSE PROVISIONS .

4 IT APPEARS FROM THE PAPERS IN THE CASE THAT , DURING THE PERIOD UNDER CONSIDERATION , THE SYSTEM OF SUPERVISION OF DENATURING SET UP BY THE GERMAN AUTHORITIES WAS NOT BASED PRINCIPALLY ON PHYSICAL , ON-THE-SPOT CHECKS BUT , RATHER , ON SCRUTINY OF THE BUSINESS RECORDS OF THE UNDERTAKINGS CARRYING OUT DENATURING . THOSE UNDERTAKINGS , WHICH WERE REGISTERED WITH THE COMPETENT GERMAN AGENCY AS DENATURING UNDERTAKINGS , WERE BOUND TO MAINTAIN ACCOUNTING RECORDS IN ACCORDANCE WITH CRITERIA LAID DOWN BY THE COMPETENT AGENCY , TO STORE IN AN ORDERLY FASHION THE PRODUCTS CAPABLE OF BENEFITING FROM THE AID AND THE AGENTS USED IN THE DENATURING AND TO ALLOW THE COMPETENT INSPECTORS ACCESS TO THEIR PREMISES IN ORDER TO CHECK THE ACCOUNTING RECORDS , THE STOCKS AND THE DENATURING OPERATIONS . THE UNDERTAKINGS WERE ALSO BOUND TO ALLOW THE TAKING OF SAMPLES .

5 ACCORDING TO THE COMMISSION , WHATEVER MAY BE THE MERITS OF SUCH A SYSTEM OF SUPERVISION , IT DOES NOT OBLIGE THE UNDERTAKINGS CONCERNED TO PROVIDE THE INFORMATION REQUIRED BY ARTICLE 3 ( 2 ) OF REGULATION NO 990/72 RELATING TO THE DURATION AND PLACE OF DENATURING AND THE QUANTITIES OF SKIMMED-MILK POWDER SUBJECTED TO THE DENATURING PROCESS . ACCORDING TO THE COMMISSION , THAT INFORMATION IS NECESSARY IN ORDER TO FACILITATE THE ON-THE-SPOT SUPERVISION OF THAT PROCESS WHICH IS PROVIDED FOR BY ARTICLE 3 ( 1 ) OF THE REGULATION .

6 THE GERMAN GOVERNMENT ARGUES THAT THE COMBINATION OF SCRUTINY OF THE ACCOUNTING RECORDS AND OF THE ADMINISTRATION OF THE UNDERTAKINGS IN QUESTION , ON-THE-SPOT CHECKS OF RAW MATERIALS AND THE TAKING OF SAMPLES CONSTITUTES A PARTICULARLY EFFECTIVE SYSTEM OF SUPERVISION . THAT IS ESPECIALLY SO WHERE , AS IN THE PRESENT INSTANCE , EACH INSPECTOR SUPERVISES A LIMITED NUMBER OF UNDERTAKINGS , IS IN PERMANENT CONTACT WITH THEM AND IS FAMILIAR WITH THEIR PRACTICES . SINCE THE INSPECTOR HAS AVAILABLE , ON THE BASIS OF VOUCHERS , ALL NECESSARY INFORMATION RELATING TO THE QUANTITIES AND NATURE OF THE AVAILABLE RAW MATERIALS AND THE QUANTITIES AND THE NATURE OF THE PRODUCTS LEAVING THE PREMISES , IT IS MAINTAINED THAT HE HAS EVERY OPPORTUNITY TO RETRACE THE ENTIRE PROCESSING CYCLE FROM THE ARRIVAL OF THE RAW MATERIALS TO THE DEPARTURE OF THE FINISHED PRODUCTS .

7 THE GERMAN GOVERNMENT CONCEDES THAT , UNDER THIS SYSTEM AND AT THE TIME IN QUESTION , THE UNDERTAKINGS CONCERNED DID NOT GIVE WRITTEN NOTICE IN ADVANCE OF DENATURING OPERATIONS TO THE COMPETENT AGENCY . HOWEVER , IN RELIANCE ON ARTICLE 10 OF REGULATION NO 990/72 IT SUBMITS THAT THE COMMUNITY RULES LEFT TO THE MEMBER STATES THE TASK OF ARRANGING SUPERVISION MEASURES . IN RELATION TO THAT PROVISION , ARTICLE 3 ( 2 ) OF THE REGULATION HAS , IT IS SUBMITTED , ONLY AN AUXILIARY FUNCTION AND REQUIRES UNDERTAKINGS TO GIVE CERTAIN INFORMATION ONLY IN SO FAR AS THAT INFORMATION IS INDISPENSABLE TO THE CARRYING OUT OF EFFECTIVE SUPERVISION .

8 IT SHOULD BE RECALLED AT THE OUTSET THAT THE FUNCTION OF A COMMISSION DECISION RELATING TO THE CLEARANCE OF ACCOUNTS IN RESPECT OF EXPENDITURE FINANCED BY THE EAGGF IS TO ESTABLISH WHETHER THE EXPENDITURE WAS INCURRED BY THE NATIONAL AUTHORITIES IN ACCORDANCE WITH COMMUNITY PROVISIONS . IN CASES WHERE COMMUNITY RULES AUTHORIZE PAYMENT OF AID ONLY ON CONDITION THAT CERTAIN FORMALITIES RELATING TO PROOF OR SUPERVISION ARE OBSERVED , AID PAID IN DISREGARD OF THAT CONDITION IS NOT IN ACCORDANCE WITH COMMUNITY LAW AND THE EXPENDITURE INCURRED THEREIN MAY NOT , IN PRINCIPLE , BE CHARGED TO THE EAGGF .

9 IN ORDER TO ENSURE EFFECTIVE SUPERVISION OF THE PROPER CONDUCT OF DENATURING OPERATIONS AND TO PREVENT THE SAME PRODUCT FROM BENEFITING MORE THAN ONCE FROM THE AID , REGULATION NO 990/72 PROVIDES FOR ON-THE-SPOT CHECKS ON DENATURING UNDERTAKINGS . IN ORDER TO ENABLE DENATURING TO BE SUPERVISED ON THE PREMISES , ARTICLE 3 ( 2 ) OF THE REGULATION REQUIRES UNDERTAKINGS CARRYING OUT DENATURING TO GIVE CERTAIN INFORMATION TO THE COMPETENT NATIONAL AGENCY BEFORE PROCEEDINGS WITH THE DENATURING . WHEN ARTICLE 10 OF THE REGULATION PROVIDES THAT MEMBER STATES SHALL TAKE ALL MEASURES ' ' NECESSARY TO ENSURE THAT THE PROVISIONS LAID DOWN IN THIS REGULATION ARE COMPLIED WITH ' ' , IT REFERS TO COMPLIANCE WITH ALL THE PROVISIONS OF THE REGULATION , INCLUDING ARTICLE 3 .

10 IN THESE CIRCUMSTANCES IT IS NOT NECESSARY TO CONSIDER THE SOUNDNESS OF THE GERMAN GOVERNMENT ' S ARGUMENT THAT THE SUPERVISION SYSTEM SET UP IN THE FEDERAL REPUBLIC IS MORE EFFECTIVE THAN THAT PROVIDED FOR IN ARTICLE 3 OF REGULATION NO 990/72 . IN FACT , THE PROVISIONS OF COMMUNITY REGULATIONS MUST BE UNIFORMLY APPLIED IN ALL THE MEMBER STATES AND HAVE , SO FAR AS POSSIBLE , THE SAME EFFECT THROUGHOUT THE TERRITORY OF THE COMMUNITY . THE POSITION IS NO DIFFERENT WHERE A REGULATION LAYS DOWN SPECIFIC MEASURES OF SUPERVISION BUT LEAVES TO MEMBER STATES THE TASK OF ENSURING THEIR OBSERVANCE BY APPROPRIATE ADMINISTRATIVE MEASURES .

11 IT FOLLOWS FROM THE FOREGOING THAT THE FIRST SUBMISSION MUST BE REJECTED .

12 ACCORDING TO THE SECOND SUBMISSION , THE COMMISSION APPROVED THE SYSTEM OF SUPERVISION PRACTISED IN THE FEDERAL REPUBLIC OF GERMANY AND THE COMMISSION IS ACCORDINGLY BOUND TO RECOGNIZE THE AID PAID BY THE GERMAN GOVERNMENT AS CHARGEABLE TO THE EAGGF .

13 IN SUPPORT OF THIS SUBMISSION THE GERMAN GOVERNMENT REFERS TO A MEETING TO EXCHANGE INFORMATION HELD IN MAY 1974 IN THE COURSE OF WHICH THE COMMISSION ' S REPRESENTATIVES ARE SAID TO HAVE ACKNOWLEDGED THAT THE GERMAN SYSTEM OF SUPERVISION OFFERED GREAT ADVANTAGES AND WAS COMPATIBLE WITH COMMUNITY LAW . THE APPLICANT ALSO REFERS TO THE COMMISSION ' S REPLY TO THE REPORT OF THE AUDIT BOARD RELATING TO THE ACCOUNTS FOR THE 1975 FINANCIAL YEAR , IN WHICH REPLY THE COMMISSION , IT IS MAINTAINED , INDICATED THAT IN ITS OPINION THE APPLICABLE PROVISIONS OF THE REGULATIONS HAD BEEN OBSERVED BY THE GERMAN AUTHORITIES .

14 THIS SUBMISSION MUST BE REJECTED . WHATEVER MAY HAVE BEEN THE SCOPE OF THOSE STATEMENTS , THE FAILURE TO COMPLY WITH PROVISIONS OF COMMUNITY LAW IN 1973 CANNOT BE ATTRIBUTED TO THE COMMISSION ' S CONDUCT SUBSEQUENT TO THAT YEAR .

15 FINALLY , ACCORDING TO THE THIRD SUBMISSION , THE DECISION UNDER CHALLENGE DOES NOT SATISFY THE OBLIGATION IMPOSED BY ARTICLE 190 OF THE TREATY TO STATE THE REASONS UPON WHICH IT IS BASED .

16 THE IMPUGNED DECISION CONFINES ITSELF ESSENTIALLY TO STATING , IN THE PREAMBLE THERETO , THAT ONLY INTERVENTION UNDERTAKEN ACCORDING TO COMMUNITY RULES WITHIN THE FRAMEWORK OF THE COMMON ORGANIZATION OF AGRICULTURAL MARKETS MAY BE FINANCED ; THAT INSPECTIONS CARRIED OUT SHOW THAT A PART OF THE EXPENDITURE DECLARED DOES NOT SATISFY THAT REQUIREMENT AND THAT THE MEMBER STATE CONCERNED ' ' HAS BEEN FULLY INFORMED OF THIS DEDUCTION AND HAS BEEN ABLE TO GIVE ITS VIEWS THEREON ' ' .

17 THE COMMISSION SUBMITS THAT A DETAILED STATEMENT OF REASONS IS NOT NECESSARY SINCE THE GERMAN GOVERNMENT WAS PERFECTLY AWARE OF THE REASONS WHICH LED THE COMMISSION TO REFUSE THE PROPORTION OF EXPENDITURE CORRESPONDING TO AID FOR DENATURING WITHIN THE MEANING OF REGULATION NO 990/72 . IT REFERS IN THIS REGARD TO AN EXCHANGE OF LETTERS BETWEEN THE FEDERAL GOVERNMENT AND THE COMMISSION IN 1977 AND TO THE CONSIDERATION GIVEN TO THE ISSUE ON SEVERAL OCCASIONS BY THE FUND COMMITTEE , ON WHICH THE FEDERAL REPUBLIC IS REPRESENTED .

18 THE GERMAN GOVERNMENT HAS NOT DISPUTED THESE FACTUAL POINTS BUT IT CONSIDERS THAT A PRIOR EXCHANGE OF VIEWS MAY NOT STAND IN PLACE OF THE REQUIREMENT TO STATE THE REASONS UPON WHICH A DECISION IS BASED .

19 AS THE COURT HAS ALREADY RECOGNIZED IN ITS JUDGMENT OF 11 JANUARY 1973 IN CASE 13/72 NETHERLANDS V COMMISSION ( 1973 ) ECR 27 , THE EXTENT OF THE DUTY TO STATE REASONS , LAID DOWN BY ARTICLE 190 OF THE TREATY , DEPENDS ON THE NATURE OF THE ACT IN QUESTION AND ON THE CONTEXT IN WHICH IT IS ADOPTED .

20 IN THE PRESENT CASE , IT IS NOT DISPUTED THAT THE GERMAN GOVERNMENT WAS CLOSELY INVOLVED IN THE PROCESS BY WHICH THE CONTESTED DECISION WAS MADE AND WAS THEREFORE AWARE OF THE REASON FOR WHICH THE COMMISSION CONSIDERED THAT THE DISPUTED AMOUNT MIGHT NOT BE CHARGED TO THE EAGGF .

21 IN THESE CIRCUMSTANCES , AND IN THE PARTICULAR CONTEXT OF THE MAKING OF DECISIONS RELATING TO THE CLEARANCE OF ACCOUNTS , THE CONTESTED DECISION MUST BE HELD TO CONTAIN A SUFFICIENT STATEMENT OF THE REASONS UPON WHICH IT WAS BASED .

22 IT FOLLOWS THAT THE APPLICATION MUST BE DISMISSED .

23 UNDER ARTICLE 69 ( 2 ) OF THE RULES OF PROCEDURE THE UNSUCCESSFUL PARTY MUST BE ORDERED TO PAY THE COSTS . THE APPLICANT HAS FAILED IN ITS ACTION AND MUST THEREFORE BE ORDERED TO PAY THE COSTS .

ON THOSE GROUNDS ,

THE COURT

HEREBY :

1 . DISMISSES THE APPLICATION ;

2 . ORDERS THE APPLICANT TO PAY THE COSTS .