Conclusions
OPINION OF ADVOCATE GENERAL
ALBER
delivered on 16 April 2002 (1)
Case C-157/00
Hellenic Republic
v
Commission of the European Communities
((EAGGF – Clearance of accounts – Export refunds – Conduct of checks))
I ─ Introduction
1. This action for annulment concerns both how the national authorities were to perform certain checks in relation to the European
Agricultural Guidance and Guarantee Fund and whether those checks were actually carried out in accordance with the relevant
provisions, as well as whether the Commission may reduce refunds of expenditure for the period that runs from the time when
the results of a European Agricultural Guidance and Guarantee Fund investigation have been communicated and until the deficiencies
identified have been remedied. It further concerns compliance with the provisions on the improvement of peach and nectarine
production and payment of the minimum price to producers.
II ─ Legislative framework
2. Given the extensive volume of legislation relevant to this case, I shall not cite individual provisions in detail. The material
provisions will be cited in the points below, either under
submissions of the parties or under
legal analysis. To summarise, the main items of legislation involved are the following:
(1) On financing the agricultural policy
─
Council Regulation (EEC) No 729/70 of 21 April 1970 on the financing of the common agricultural policy,
2
OJ, English Special Edition 1970, p. 218. as amended by Council Regulation (EC) No 1287/95 of 22 May 1995 amending Regulation (EEC) No 729/70 of 21 April 1970 on the
financing of the common agricultural policy (hereinafter: Regulation No 729/70);
3
OJ 1995 L 125, p. 1.
─
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 accounts of the European Agricultural Guidance and Guarantee
Fund Guarantee Section (hereinafter: Regulation No 1663/95).
4
OJ 1995 L 158, p. 6.
(2) On the export refunds
─
Council Regulation (EEC) No 386/90 of 12 February 1990 on the monitoring carried out at the time of export of agricultural
products receiving refunds or other amounts (hereinafter: Regulation No 386/90);
5
OJ 1990 L 42, p. 6.
─
Commission Regulation (EC) No 2221/95 of 20 September 1995 laying down detailed rules for the application of Council Regulation
(EEC) No 386/90 as regards physical checks carried out at the time of export of agricultural products qualifying for refunds
(hereinafter: Regulation No 2221/95).
6
OJ 1995 L 224, p. 13.
(3) On measures to improve peach and nectarine production
─
Council Regulation (EC) No 2505/95 of 24 October 1995 on the improvement of the Community production of peaches and nectarines
(hereinafter: Regulation No 2505/95);
7
OJ 1995 L 258, p. 1.
─
Commission Regulation (EC) No 2684/95 of 21 November 1995 laying down detailed rules for the application of Council Regulation
(EC) No 2505/95 on the improvement of the Community production of peaches and nectarines (hereinafter: Regulation No 2684/95).
8
OJ 1995 L 279, p. 3.
(4) On the processing of peaches
─
Council Regulation (EEC) No 426/86 of 24 February 1986 on the common organisation of the market in products processed from
fruit and vegetables (hereinafter: Regulation No 426/86);
9
OJ 1986 L 49, p. 1.
─
Council Regulation (EC) No 2201/96 of 28 October 1996 on the common organisation of the markets in processed fruit and vegetable
products (hereinafter: Regulation No 2201/96);
10
OJ 1996 L 297, p. 29.
─
Commission Regulation (EEC) No 1558/91 of 7 June 1991 laying down detailed rules for the application of the system of production
aid for products processed from fruit and vegetables (hereinafter: Regulation No 1558/91);
11
OJ 1991 L 144, p. 31.
─
Commission Regulation (EC) No 504/97 of 19 March 1997 laying down detailed rules for the application of Council Regulation
(EC) No 2201/96 on the common organisation of the markets in processed fruit and vegetable products (hereinafter: Regulation
No 504/97).
12
OJ 1997 L 78, p. 14.
III ─ Facts
3. During the period 12 to 16 May 1997, the Commission carried out checks at the customs offices in Thessaloniki, Skydra, Piraeus
and Patras. Those checks established various deficiencies in the implementation of the system for monitoring goods in connection
with the grant of export refunds. Checks were also carried out as part of the process of monitoring implementation of the
system for financing redevelopment measures in the peach and nectarine sectors in three administrative districts in which
peach and nectarine trees were being grubbed up. In addition, the Commission carried out checks on the processing of peaches
in Greece, in April and May 1997, with additional checks on 26 and 27 August 1998.
4. By letter of 18 September 1997 (VI/35924), the Commission informed Greece of the outcome of its inspections. By letter of
24 November 1998, the Commission informed Greece of the outcome of the further checks carried out in August 1998.
5. In the contested Decision 2000/216/EC of 1 March 2000,
(13)
the Commission ─ taking account of the earlier bilateral contacts and the outcome of the conciliation procedure ─ found that
part of the expenditure declared by Greece had not been made in accordance with Community law. It therefore disallowed the
following expenditure from financing by the EAGGF Guarantee Section:
- ─
export refunds: GRD 339 028 666.00 for the financial year 1996-1998 because of inadequate physical controls;
- ─
budget posts 1505-003 ─ fruit and vegetables: GRD 659 967 504.00 for the financial year 1996-1997 because the relevant provisions
were not complied with;
- ─
budget posts 1512-001 ─ fruit and vegetables: GRD 1 966 954 869.00 for the financial year 1996-1997 because of deficiencies
in controls.
6. The infringements of Community law are set out in detail in the Summary Report of 27 October 1999.
(14)
Supplement No I to the Summary Report of 17 January 2000 gives further details regarding the monitoring of goods in relation
to export refunds.
(15)
IV ─ Pleas in law
7. The Hellenic Republic brought an action against the decision on 27 April 2000 and is claiming that the Court should:
(1) declare the action admissible;
(2) annul or, in the alternative, amend Commission Decision C (2000) 488 final 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), which has been published in the
Official Journal of the European Communities as Decision No 2000/216/EC (OJ 2000 L 67, p. 37), so far as concerns the chapters thereof specifically contested, relating
to financial corrections to the detriment of the Hellenic Republic.
8. The Commission contends that the Court should:
(1) dismiss the application.
(2) order the Hellenic Republic to pay the costs.
V ─ Submissions of the parties and legal analysis
A ─
Export refunds
(1) National monitoring
(a) Submissions of the parties
(i) The Hellenic Republic
9. The
Greek Government contends that the disallowance of financing for the export refunds is based on an incorrect interpretation of Regulations
Nos 386/90 and 2221/95 and an incorrect assessment of the facts. All that follows from Articles 2 and 3 of Regulation No
386/90 is that a minimum of 5% of the goods for which export refunds have been claimed must be subject to physical checks.
Articles 5 and 7 of Regulation No 2221/95 do not specify a standard which the checks must meet. Article 5 simply provides
that the export declaration and goods must correspond as regards quantity, nature and characteristics. Under Article 7, it
must be ensured that achievement of the check rate of 5% can be verified at any time and a detailed examination account must
be produced. That legislation therefore provides no basis for the qualitative requirements the Commission lays down.
10. The Greek Government also considers that it has secured a sufficiently high standard of national checks. In accordance with
the abovementioned provisions, it was ensured that the export declaration tallied with the goods. Employees with the rank
of director were employed in every customs office. Furthermore, the checks were soon to be supplemented by the creation of
a special department within the customs administration. In the context of the
Customs 2000 programme, the measures to transpose the rules contained in Regulations Nos 386/90 and 2221/95 were being implemented according
to a special timetable. The Hellenic Republic therefore considers that the presence of the requisite infrastructure should
not constitute grounds for imposing a reduction.
11. As regards the nature of the checks, the Greek Government maintains that its inspectors used the resources available to them,
such as scales, to verify the information recorded on the export documents. In response to the criticism of the lack of a
uniform and detailed examination account, the Greek Government points out that the inspectors were required to note the checks
on the export declaration. By circular No T.998/84/A0019 of 15 February 1999, all customs offices were instructed to prepare
a special examination account. Furthermore, clear and unambiguous instructions were issued to the various offices and, where
necessary, these were supplemented by instructions issued locally. That applied also to the advance notice of loading exporters
had to submit to the customs authorities. Moreover, in its letter VI/35924 of 18 September 1997, the Commission confirmed
that the checks carried out in Greece were satisfactory and that an above average number of checks were carried out.
12. With particular reference to the customs administration in Skydra, the Greek Government submits that this office used the
circular of 18 December 1996 concerning the information exporters were required to provide under paragraph No 31 of the Single
Administrative Document (SAD). The office checked the accuracy of the information provided by the exporter under paragraph
No 31 of the SAD, where necessary by carrying out spot checks and laboratory analyses. Since the time of the EAGGF inspections,
that customs office was also accepting separate declarations from exporters.
13. The Greek Government further contends that the Commission Decision involves a misuse of powers. The Commission has misused
its powers under Article 5(2)(c) of Regulation No 729/70 in that a flat-rate reduction of 5% for the individual unsatisfactory
checks alleged to have been identified is too high.
(ii) The Commission
14. The
Commission , however, contends that the qualitative requirements the national checks have to meet are sufficiently clear from Article
3 of Regulation No 386/90 and Articles 5, 6 and 7 and the Annex to Regulation No 2221/95.
15. The main criticism, on which the 5% reduction is based, is the absence of the essential infrastructure without which the checks
cannot be reliably performed. If, for instance, the appropriate facilities for emptying a container are not available, and
the spot checks are therefore always carried out on the last items loaded, it cannot be guaranteed that the checks are representative
and reliable.
16. The Commission also considers the organisational measures set in place to be inadequate. Appointing directors does not of
itself guarantee the quality of the checks. There were no internal, unannounced inspections. There was similarly a failure
to guarantee that the checks were carried out uniformly across-the-board. The Commission further complains that the operational
instructions the Greek Government cites were not described in greater detail.
17. In addition, in the absence of examination accounts, it is not possible to ascertain whether the checks have fulfilled the
requirements. Not until the directive of 15 February 1999 was issued were the customs offices required to prepare examination
accounts.
18. Furthermore, the proposed changes did not invalidate the finding of deficiencies in the national checks carried out in the
budget years 1996-1998. In relation to the Skydra customs office, the Commission points out that, according to the Greek
authorities' letter No 166593 of 2 April 1999, the 1996 decree was not put into effect until late 1998.
19. As regards the level of the flat-rate reduction imposed, the Commission takes the view that the mediocre quality of the checks,
as established, fully justifies a flat-rate reduction of 5%. The deficiencies identified resulted in an increased risk to
the EAGGF.
(b) Analysis
20. The questions to be discussed in the context of this action can be divided into two categories. The first covers matters
of fact, such as the hierarchical supervision of the checks by a director; the existence of the appropriate infrastructure
and the preparation of inspection reports. The second covers the basic issues: the extent to which Regulations Nos 386/90
and 2221/95 stipulate the nature or quality of the checks to be made. Since the answer to the first question depends on the
answer to the second, it is necessary to begin by determining the requirements the checks must meet, in accordance with Regulations
Nos 386/90 and 2221/95.
(i) Basic requirements
21. I should first point out that it is settled case-law that Article 8(1) of Regulation No 729/70, which embodies the obligations
incumbent on the Member States under Article 10 EC in this particular area, imposes on the Member States the general obligation
to take the measures necessary to satisfy themselves that the transactions financed by the EAGGF are actually carried out
and are executed correctly, even if the specific Community act does not expressly provide for the adoption of a particular
supervisory measure.
(16)
Viewed simply in the light of that case-law, the arguments the Greek Government has advanced do not carry conviction. Even
assuming them to be correct, that is to say even if Regulations Nos 386/90 and 2221/95 did not prescribe the standard of the
checks to be carried out, the Greek Government would be under an obligation, on the basis of Article 8 of Regulation No 729/70,
to take all measures to ensure that Community financing of EAGGF expenditure was carried out properly, by performing effective
physical checks.
22. I shall therefore analyse merely in the alternative below, in the event that the Court does not apply that case-law in these
proceedings, the question of the extent to which Regulations Nos 386/90 and 2221/95 determine which checks are to be carried
out.
23. According to the abovementioned Summary Report of the Directorate General for Agriculture of 27 October 1999, the Commission's
Clearance of Accounts Unit set out its conclusions concerning the checks carried out in all the Member States during 1992
and 1993 in a special report published in OJ 1993 C 218 of 12 August 1993. On 18 January 1994, it sent a letter to all of
them requesting them to introduce the requisite corrective measures by 1 July 1994. In the letter, the Member States were
asked, among other things, to ensure that: Regulations Nos 386/90 and 2030/90 ─ the latter was replaced by Regulation No 2221/95
as of 1 January 1996 ─ were applied uniformly in all customs offices; the central customs authorities played a coordinating,
developmental and supervisory role by evaluating the data from the local offices; and customs offices in which the checks
on goods were carried out had the necessary infrastructure (scales, fork-lift trucks, facilities for thawing out meat and
refrigerators to store unloaded goods etc.).
(17)
According to that report, those rules became an integral part of Regulation No 2221/95, which entered into force on 1 January
1996.
(18)
24. According to Article 1(1) of Regulation No 386/90, the checks are necessary to monitor whether operations conferring entitlement
to the payment of refunds have actually been carried out and have been executed correctly. Article 3(1) provides that checks
on goods must take place frequently in the form of spot checks and without prior warning and must relate to a representative
selection of at least 5% of the export declarations in respect of which export refunds are being applied for. Under Article
3, a visual inspection must be carried out to establish that the goods correspond to the description given in the refunds
nomenclature. Should that not prove possible and the classification or quality of the goods requires very precise information
about their ingredients, verification is to take place by using all the senses or by applying physical measures which may
go so far as submitting the goods for analysis by laboratories specially equipped for the purpose.
25. Article 5(1) of Regulation No 2221/95 defines the concept of physical checks under Article 3 of Regulation No 386/90 as
verification that the export declaration ... and the goods correspond as regards quantity, nature and characteristics. In addition, Article 5(1) refers to the Annex to the regulation and Article 13 of Regulation (EEC) No 3665/87. The Annex
to Regulation No 2221/95 makes a distinction between bulk and packaged goods and non-Annex II goods. The quantity of exports
of bulk goods is to be determined by calibrated automatic weighing and the nature and characteristics by random representative
checks. Where necessary, the data entered in the weighing records is to be checked against the data contained in the loading
documents. In the case of exports of goods which have been automatically bagged, canned or bottled etc., the number of bags,
cans or bottles must be counted in total, and the nature and characteristics of the goods checked on the basis of a representative
selection. If pallets loaded with boxes, cans etc. are being exported, representative pallets are to be selected and the
number of boxes etc. on them checked. A number of representative boxes etc. are to be selected and the number of individual
items checked.
26. In the light of those provisions, the Greek Government's submission that Regulations Nos 386/90 and 2221/95 do not provide
greater detail as to the quality of the checks to be carried out lacks conviction. In particular, the checking procedures
and objectives to be achieved set out in the Annex to Regulation No 2221/95 indicate how the checks are to be carried out.
A distinction is actually made according to the goods to be checked, depending on whether they are bulk or packaged goods
or Annex II goods. The first two categories of goods are relevant to these proceedings.
27. In relation to checks on the quantities exported, the Annex to Regulation No 2221/95 stipulates that quantities are to be
checked by weight and number. That applies not only to the total quantity but, where necessary, also to the pallets and boxes
etc. to be selected. As provided for in paragraph 1(b), in exceptional cases, any other means of checking, which is satisfactory
from the commercial point of view, is to be used.
28. As regards checks on the nature and characteristics of the goods, Article 3(3) of Regulation No 386/90 itself provides for
random checks or, if necessary, checks using all the senses or even laboratory analysis. Article 13 of Regulation No 3665/87,
to which Article 5 of Regulation No 2221/95 refers, further requires that the goods must be of sound and fair marketable quality
and it must, if necessary, be guaranteed that they are safe for human consumption.
29. As the Commission submits, therefore, the checks are to be carried out
inter alia using scales and by checking the weighing records. Random sampling may mean that it is necessary to unload at least part
of the packaged goods or check them before they are loaded, and that presupposes the existence of the necessary infrastructure
─ for example fork-lift trucks, storerooms and means of transport in order to reach the loading site and containers to which
the bulk goods can be transferred.
30. In the light of the above observations, the Greek Government's objection that Regulations Nos 386/90 and 2221/95 do not specify
the standard of the checks to be carried out must be rejected.
(ii) The checks carried out
31. Having thus established that the checks to be carried out must be of a certain standard, it is now necessary to consider whether
the physical checks for monitoring export refunds carried out by the Greek authorities in the period at issue in this case,
between 1996 and 1998, meet the requirements of Regulations Nos 386/90 and 2221/95. At issue here are the alleged shortcomings
identified in the customs offices in Thessaloniki and Skydra in particular.
32. In response to the Commission's criticism of a lack of internal measures to ensure the proper standard of checks, the Greek
Government refers to the appointment of a director who is supposed to monitor the standard of the checks. It has to be noted
here that while this organisational measure may perhaps be a necessary step towards ensuring the quality of checks in the
individual offices, it cannot be deemed to be sufficient in itself. What matters is how these officials perform their duties.
The Greek Government, however, provides no evidence to show that as a result of the appointment of these officials, the standard
of checks carried out by the offices actually changed during the material period.
33. In that connection, it has fundamentally to be pointed out that in the context of the charging of expenditure to the EAGGF,
the Commission benefits from a mitigation of the burden of proof. It is settled case-law that Articles 2 and 3 of Regulation
No 729/70 permit the Commission to charge to the EAGGF only sums paid in accordance with the rules laid down in the various
sectors of agricultural production, leaving the Member States to bear the burden of any other sums paid, in particular any
amount which the national authorities wrongly believed themselves authorised to pay in the context of the common organisation
of the markets.
(19)
Consequently, though it is for the Commission to produce evidence of an infringement of Community law, in order for it to
do so, it is sufficient that the Commission has serious and reasonable doubts in view of the absence or inadequacy of checks
implemented by the Member State concerned. It is for the Member State to demonstrate, if appropriate, that the Commission
has erred in its doubts concerning that Member State's system of checks and the financial consequences consequently drawn.
(20)
This mitigation of the burden of proof on the Commission lies in the division of powers between the Community and the Member
States concerning the common agricultural policy. The management of EAGGF finances is principally in the hands of the national
administrative authorities responsible for ensuring that the Community rules are strictly observed. That system, based on
trust between national and Community authorities, does not involve any systematic supervision by the Commission, which, moreover,
would in practice be quite unable to carry it out. Only the Member State is in a position to know and determine precisely
the information necessary for drawing up EAGGF accounts since the Commission is not close enough to obtain the information
it needs from the economic operators.
(21)
The burden of proof is thus reversed.
34. On the basis of that case-law, it can be established in this case that, in the Summary Report in particular, the Commission
listed in detail the deficiencies it had identified,
(22)
and to that extent presented specific facts which give rise to justifiable doubts as to the proper implementation of the
physical checks required by Regulations Nos 386/90 and 2221/95. The Greek Government has not, however, demonstrated that,
in comparison with the deficiencies the Commission identified, the checks carried out by the individual customs offices actually
improved in the period at issue here between 1996 and 1998, as a result of the appointment of special officials responsible
for monitoring the standard of the checks. In that respect, the Commission's argument is not rebutted. That objection to
the legality of the contested decision has therefore to be rejected.
35. Neither does the objection that the instructions issued to the customs offices regarding the implementation of the Community
rules were clear and unambiguous invalidate the Commission's finding that there were deficiencies. The mere fact that those
instructions existed no more guarantees that the checks to be carried out under Regulations Nos 386/90 and 2221/95 were actually
carried in a way that prevented irregularities than does the appointment of special officials. As the Commission correctly
points out, that requires, for instance, a system of internal checks to monitor observance of the instructions. Only a system
of that kind will guarantee that the requisite checks are carried out properly and uniformly. The Greek Government makes
no mention of a precautionary measure of that kind. In that respect also, therefore, its submission does not justify declaring
the contested decision to be invalid.
36. In relation to the Skydra customs office, the Greek Government points out that that office applied the circular of 18 December
1996 concerning the declaration to be made by the exporter, which forms annex 14 to the application. On that point, the Commission
states, without contradiction, that, according to the Greek Government's letter No 166593 of 2 April 1999, submitted as annex
2 to the rejoinder, that circular was not put into effect until late 1998. That letter confirms the Commission's finding
that its application was not secured in the period material to this case, between 1996 and 1998. The Greek Government has,
consequently, failed to demonstrate that the deficiency the Commission identified in this respect does not exist. That objection
has, therefore, also to be rejected.
37. In relation to the Commission's criticism of a lack of proper infrastructure available to the customs office, the Greek Government
points out that this is being set in place as part of the
Customs 2000 programme. According to the abovementioned Summary Report, the Greek Government intended to put that infrastructure in place
in the context of
Agenda 2000.
(23)
It does not matter which Community support measure is used to set in place the requisite infrastructure. The crucial factor
is that the Greek Government's submission confirms the Commission's doubts as to whether the checks were properly carried
out in view of the lack of infrastructure. For the material period of time, in respect of which the amount of expenditure
to be refunded is being reduced, the customs offices inspected did not have the appropriate infrastructure. That objection
to the contested decision must, therefore, also be rejected.
38. The Greek Government points out that the Commission has acknowledged that a particularly high number of checks were carried
out in Greece. That is confirmed in the Commission's abovementioned Summary Report. But that objection fails to take into
account that the Commission has criticised not the frequency but the standard of the checks. It refers to the fact that only
visual checks were carried out; the goods were not unloaded because there was no suitable infrastructure. Random checks were
carried out only on the easily accessible goods which had been loaded last. The Greek Government has not contradicted that
statement of fact. The Commission's criticism, therefore, is that the lack of infrastructure meant that the checks could
not be carried out to the requisite standard. The lack of infrastructure is not remedied by carrying out checks. They remain
inadequate and inapt to prevent irregularities in relation to export refunds. Consequently, that objection too must be rejected.
39. In relation to the preparation of reports on the physical checks carried out, the Greek Government points out that the inspectors
were not required to note the implementation of checks on the export declaration. Other documents, the inspectors' mission
documents for example, could in fact show that the checks had been carried out. The Commission does not dispute this. It
actually bases the reductions it has applied on the fact that there were no documents, mission documents, for example, which
proved that the checks had actually been carried out.
40. The reference to the circular of 15 February 1999 has also to be rejected. The material period of time in this case is between
1996 and 1998. A circular of 1999 cannot undo the shortcomings identified in the period before 1999; at best, it can prevent
them for the future. That objection too has therefore to be rejected.
41. In conclusion, it has to be established that Regulations Nos 386/90 and 2221/95 stipulate the standard of the checks to be
carried out and that the physical checks carried out in Greece between 1996 and 1998 did not meet those requirements.
(2) The material period of time
(a) Submissions of the parties
(i) The Hellenic Republic
42. The
Greek Government considers that the Commission should not have reduced expenditure for the period after the outcome of the EAGGF checks was
communicated, that is to say after 18 September 1997, as it had no legal basis for doing so. According to Article 5(2)(c)
of Regulation No 729/70, as amended by Regulation No 1287/95, the Commission is to decide on the expenditure to be excluded
from the Community financing. And, according to Article 8 of Regulation No 1663/95, the Commission is to provide an evaluation
of any expenditure which it may propose to exclude. It is clear from the wording of those provisions that reductions cannot
be imposed on other sums that arise after the Commission's findings have been communicated. That option was made available
to the Commission only on the advent of Regulation (EEC) No 2245/99, which amended Regulation No 1663/95. But since Regulation
2245/99 did not enter into force until October 1999, it does not cover this case which relates to expenditure in the period
1996-1998. The reductions the Commission imposed after 18 September 1997 were not communicated in accordance with Regulation
No 1663/95, and the Commission's action therefore also infringes the principle of legal certainty.
(ii) The Commission
43. The
Commission's response to that objection is that Article 5 of Regulation No 729/70 and Article 8 of Regulation No 1663/95 do not prevent
reductions being imposed for the period after the outcome of the checks has been communicated. A distinction has to be made
between the period in respect of which the checks were carried out and the period in respect of which reductions were imposed.
The restriction to a period of 24 months before the communication contained in Article 5(2)(c) of Regulation No 729/70 was
introduced for reasons of legal certainty. Once the Member State has been informed of a deficiency, however, the reduction
of expenditure ceases to be contrary to the principle of legal certainty. The inadequacy of the checks was brought to the
attention of the Greek Government by letter of 18 September 1997; consequently, between that date and until the deficiency
was remedied no expectation worthy of protection stood in the way of a reduction in the expenditure eligible for refund.
(b) Analysis
44. The Greek Government is relying on the wording of Article 5(2)(c) of Regulation No 729/70, as amended by Regulation No 1287/95,
as well as Article 8 of Regulation No 1663/95. It is therefore helpful to reproduce the text of those two provisions here.
45. Article 5(2)(c) of Regulation No 729/70 provides: [The Commission] 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 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. ... 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....
46. In the version applicable to this case, that is to say before Regulation No 1663/95 was adopted, Article 8(1) of Regulation
No 1663/95 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.
......
47. Relying on the wording of Article 5 of Regulation No 729/70 and Article 8 of Regulation No 1663/95 in the version which applies
in this case, that it to say before the entry into force of Regulation No 2245/99, the Greek Government argues that the contested
Commission decision was adopted without a legal basis, in that it imposes a reduction on the expenditure eligible for refund
for irregularities in the period after the communication in accordance with Article 8 of Regulation No 1663/95. The Commission
merely retorts that the provisions relied on do not prevent a reduction of that nature. It does not state on which provisions
its authority to reduce the amounts at issue is based.
48. The Commission's argument cannot suffice to establish the legality of the contested decision. The fact that, according to
its wording, a provision does not prevent an action by the Commission does not mean that it authorises that action.
49. The Greek Government bases its interpretation on the wording, particularly the terms
shall decide in Article 5(2)(c) of Regulation No 729/70 and
shall communicate [an evaluation of any expenditure which it may propose to exclude] in Article 8(1) of Regulation No 1663/95. In that connection, it is necessary to point out that Article 5 specifically addresses
only the question of how far back the disallowance of expenditure may extend, namely 24 months. The wording of that provision
provides no specific answer to the question raised here of how far into the future the reduction can extend after communication,
in accordance with Article 8 of Regulation No 1663/95. The term
shall decide merely implies that the Commission has the authority to determine which expenditure is to be excluded from Community financing.
The provision is silent as far as the temporal scope is concerned. It does not regulate the matter of the period to which
reduction can apply.
50. Similar considerations have to be raised in regard to the wording of Article 8(1) of Regulation No 1663/95, cited above.
If the Commission indicates that certain expenditure may possibly be excluded from financing, that possibility too contains
no indication of temporal scope.
51. It might be possible to consider interpreting Article 8 as meaning that in any event no more expenditure may be excluded than
is stated in the Commission's communication. However, an interpretation of that nature does not accord with the system of
EAGGF financing, as set out in Regulation No 729/70.
52. It is settled case-law that Articles 2 and 3 of Regulation No 729/70 permit the Commission to charge to the EAGGF only sums
paid in accordance with the rules laid down in the various sectors of agricultural production, leaving the Member States to
bear the burden of any other sums paid, in particular any amount which the national authorities wrongly believed themselves
authorised to pay in the context of the common organisation of the markets.
(24)
53. In the light of that basis structure, the question the Greek Government raises does not appear to be the right one. The question
is not whether the Commission had the authority to reduce the expenditure claimed. The real question is whether the Commission
had the authority to charge to the EAGGF the expenditure on export refunds the Greek Government had applied for. It was authorised
to do that only if the expenditure was in compliance with Community rules. Where irregularities, as in this case in the form
of inadequate physical checks are identified, it is incumbent on the Commission, on the basis of Articles 2 and 3 of Regulation
No 729/70, to exclude that expenditure from EAGGF financing in accordance with Article 5(2)(c).
(25)
To that extent, the Commission is not only authorised but is actually under an obligation not to take over expenditure which
has not been incurred in compliance with Community rules.
54. On the basis of the above considerations, the Greek Government's objection of the lack of a legal base must be rejected.
So long as the deficiencies identified persist, the Commission is not entitled, on the basis of Articles 2 and 3 of Regulation
No 729/70, to charge to the EAGGF the financing for the expenditure claimed. It is actually under an obligation to exclude
that expenditure from Community financing, in accordance with Article 5(2)(c) of Regulation No 729/70. The contested decision
is therefore also legitimate in so far as it provides for a reduction in expenditure, as a result of irregularities, beyond
18 September 1997 and until the deficiencies identified have been remedied.
(3) Proportionality of the reduction
55. The Commission has imposed a flat-rate of reduction of 5% of the sums applied for by way of export refunds as a result of
the deficiencies identified. The Greek Government considers this to be disproportionate. In particular, the Commission nowhere
indicated the sums jeopardised as a result of inadequate physical checks. It is not clear what could justify that level of
reduction.
56. On the basis of the abovementioned case-law on the reversal of the burden of proof, the Court has concluded, in settled case-law,
that where a Member State is unable to prove that expenditure has been incurred in compliance with Community rule, the Commission
has no choice but to disallow all the expenditure in question.
(26)
57. As early as its judgment in Case 347/85, the Court held that where the Commission, instead of rejecting all the expenditure
affected by the infringement, which it is legally entitled to do, has endeavoured to establish the financial impact of the
unlawful action by means of calculations based on an assessment of what the situation on the relevant market would have been
if the infringement had not occurred, the burden of proving that those calculations are not correct rests on the State seeking
to have the disallowance annulled.
(27)
That case-law was subsequently confirmed, including as a result of the adoption of the
Guidelines on the calculation of the financial consequences when preparing the decision regarding the clearance of the accounts
of EAGGF Guarantee, working paper VI/216/93 of 3 June 1993 and working paper VI/5330/97 of 23 December 1997 (hereinafter: the Guidelines).
(28)
The Guidelines are based on the findings of a working group which the Commission set up in 1990, chaired by Jacques Belle.
The final report of the working group of October 1992 is known as the
Belle report, which the Commission adopted in its unpublished Decision E/103/93 of 5 March 1993 (SEC[93]306). On the basis of that report,
the abovementioned Guidelines were adopted in June 1993, and they have since been used by the Commission to calculate flat-rate
reductions.
58. It follows from that case-law, firstly, that, in this case, the Commission would have been entitled to refuse to charge to
the EAGGF all the expenditure in relation to export refunds. It is for the Greek Government to prove that the expenditure
is lawful. As stated above, that Government failed to provide the proof required.
59. It has further to be taken into account that the Commission informed the Hellenic Republic, by letter of 24 November 1998,
that the lack of verifiable results of checks carried out made it impossible to ascertain the practical effects of the poor
standard of those checks and, consequently, a flat-rate reduction had to be applied. In the light of the abovementioned case-law,
there can be no legal objection to that conclusion.
60. As regards the level of the reduction, it has first to be pointed out that where the checks are defective, the Court has held
a both a total disallowance of expenditure
(29)
and also a 10% reduction to be lawful.
(30)
The Commission has a power of discretion here, the exercise of which is defined in greater detail in the abovementioned
Guidelines.
61. Under the Guidelines, a 5% reduction of the expenditure claimed is imposed where the deficiency relates to important elements
of the control system or to the operation of controls which play an important part in the assurance of the regularity of the
expenditure, such that it can be concluded that the risk of loss to the EAGGF was significant. The deficiencies the Commission
criticises concern the equipment of the customs offices and thus constitute an important element of the control system. In
addition, the thoroughness of the checks carried out by the Greek customs offices is criticised. That being so, it is clear
that the 5% reduction is consistent with the Guidelines. It can therefore be deemed to be proportionate.
62. To summarise then, the first plea in law must be rejected.
B ─
Budget post 1505
(1) Written undertaking to refrain from new planting
(a) Submissions of the parties
(i) The Hellenic Republic
63. As regards the reduction as a result of the failure to include on the application for a premium a written undertaking by the
owner/tenant to refrain from new planting, the
Greek Government objects that Article 2(1)(a) of Regulation No 2505/95 and Article 3(4)(3) of Regulation No 2684/95 have not been interpreted
correctly. According to those provisions, it is sufficient for the written undertaking to be appended to the application.
It is not, however, necessary for it to appear on the application form.
64. As regards the written undertaking to inform the owner/tenant that they must refrain from new planting, the Greek Government
contends that that requirement is met because a permit is necessary before agricultural land can be sold or let. That ensures
that the owner/tenant is informed that he is under an obligation to refrain from new planting.
(ii) The Commission
65. The
Commission , however, maintains that the measures taken by the Greek authorities fail to meet the requirements of Article 3 of Regulation
No 2684/95. In particular, the application form distributed does not include a declaration in which the vendor/lessor undertakes
to point out, when the land is sold or let, that there must be no new planting. In its inspections, the Commission ascertained
that the regional authorities used the form differently. In two of the three administrative districts (Nomoi) inspected,
namely in Imathias (Veria) and Pella (Giannitsà), no written undertakings were required at all. The authorities in fact considered
the permit requirement in relation to land transactions to be sufficient. But the Commission does not consider this sufficient
to meet the obligation arising out of Article 3 of Regulation No 2684/95, since it does not ensure that the owner/tenant is
aware of all the encumbrances affecting the land.
(b) Analysis
66. The first point to make is that the Greek Government does not dispute the Commission's actual findings. It is common ground
that the undertaking in question to inform the owner/tenant that there must be no new planting was not required by all the
customs offices inspected, as some considered the mandatory permit procedure to be sufficient.
67. Article 2(b) of Regulation No 2505/95 makes the grant of the grubbing-up premium subject, among other things, to the requirement
that the beneficiary should refrain from any new planting. Article 3 of Regulation No 2684/95 fleshes out that provision
by making a distinction between the undertaking not to engage in new planting oneself and the undertaking to inform an owner/tenant
of the land in question that it is affected by an encumbrance of that nature. As the Greek Government correctly points out,
those undertakings have to be
appended to the application. That term does not, necessarily at least, indicate that the undertakings must be recorded on the application
form.
68. However, in accordance with Article 4 of Regulation No 2684/95, the body responsible for taking receipt of the application
for a grubbing-up premium must record the undertaking referred to in Article 3 before deciding whether the application is
admissible. That presupposes the existence of the relevant written undertaking at the time the application is submitted.
The permit procedure may possibly be capable of informing a purchaser of the encumbrance affecting the land, as the Greek
Government maintains. But it does not constitute a written undertaking by the owner/tenant as required by Article 3 of Regulation
No 2684/95, as it does not take place at the time the application is submitted. That objection by the Greek Government must
therefore be rejected.
(2) Recording the date on inspection notes
(a) Submissions of the parties
(i) The Hellenic Republic
69. In response to the criticism that no date was recorded on the inspection notes, the Greek Government objects that Article
4 of Regulation No 2684/95 has not been interpreted correctly and that the actual circumstances have been wrongly assessed.
Article 4 does not require the date to be recorded on the inspection notes. It is sufficient for this to be apparent from
other documents, such as the mission documents.
(ii) The Commission
70. The
Commission , however, considers it essential that the date be recorded on the inspection notes. The date is of particular importance
as a time-limited support programme is being implemented. In response to the objection that the date could be obtained from
other documents, the Commission notes that in the administrative district of Imathias, the relevant documents contained nothing
to indicate the date. More particularly, they contained no mission documents. Nor were the inspectors able to provide the
dates on the basis of other documents. It is therefore clear that the administrative documents contained no evidence that
the checks had been carried out within the requisite time-limits.
(b) Analysis
71. Article 1 of Regulation No 2505/95 provides that during the 1995 marketing year, a one-off premium is to be paid for grubbing
up peach and nectarine trees. Under Article 2(1)(a), that grubbing up has to take place before 30 April 1996. That rule is
reiterated in Article 4(3) of implementing Regulation No 2684/95. Article 3(1) of that regulation further stipulates that
the application for the grubbing-up premium must be submitted by 31 January 1996 at the latest, and, under Article 4(2), a
decision on the application must be taken within two months of its receipt. Pursuant to Article 5(1), the Member States have
to inform the Commission by 31 August 1996 of the areas for which applications for grubbing-up premiums have been submitted
and the areas which have been grubbed up.
72. That relatively tight timetable is the reason why the Commission attaches importance to recording the date on the inspection
notes. The obligation incumbent on the national authorities to certify the period at which the grubbing-up took place actually
guarantees the prevention of abuses. Nor does the Greek Government appear basically to challenge the need to record the date
of the national checks. But it does not consider it necessary to record the date of the check on the inspection notes.
73. But even assuming that the date did not necessarily have to be recorded on the inspection notes and that it is sufficient
for it to be apparent from other documents, the Greek Government's submission does not seem capable of rebutting the Commission's
criticism. The fact is that, in this case, it is impossible to tell when the checks took place from the documents submitted
by the Greek authorities. The Commission asserts, without contradiction, that the Greek officials were not able to provide
the dates on the basis of other documents either. According to the abovementioned rules of evidence, it has therefore to be
established that the Greek Government's submissions are not sufficient to refute the Commission's findings that it was not
possible to ascertain the date on which the checks were carried out. That objection too must therefore be rejected.
(3) Notifying that grubbing-up has been completed
(a) Submissions of the parties
(i) The Hellenic Republic
74. As far as notification that grubbing-up has been completed is concerned, the
Greek Government contends that the Commission has misconstrued Article 5 of Regulation No 2684/95. It does not follow from that provision
that the authorities have to be given written notification. Notification could be provided in any other form, particularly
by word of mouth. All that matters is that the trees have actually been felled and that this is verified by the competent
authority, that being the prerequisite for the grant of the premium.
(ii) The Commission
75. The
Commission , however, points out that it was not clear from the documents examined of the competent authorities that the beneficiaries
had notified the date of grubbing-up. It was also particularly important that that provision should be complied with, as
this was a time-limited programme. It had to be possible to verify the data in the application and check that grubbing-up
had taken place. In the administrative district (Nomos) of Imathias, for instance, no notifications were recorded. In the
administrative district of Pellas, the beneficiaries had notified not the date of grubbing-up but that it had taken place.
That meant it was impossible for the competent authorities to verify the grubbing-up.
(b) Analysis
76. According to Article 5 of Regulation No 2684/95, the applicant is to notify the competent authority of the probable date of
grubbing-up. That rule does not in fact expressly provide for the form notification is to take.
77. As set out above, on the basis of Article 8 of Regulation No 729/70, the Member States are, however, obliged to take the measures
necessary to satisfy themselves that the transactions financed by the EAGGF are actually carried out and are executed correctly
even if the specific Community act does not expressly provide for the adoption of particular supervisory measures.
(31)
That case-law indicates that even if Article 5 does not require written notification of the date of grubbing-up, it must
at least be clear from the competent authority's files that the beneficiary has provided notification. In addition, it must
be also be possible to verify when that notification was made. Regulation No 2684/95 has set a very short period of time
within which the individual measures have to be taken. Specific measures have to take place by a time-limit which the regulation
lays down (the application by 31 January; the decision within two weeks; the grubbing-up by 30 April and the notification
to the Commission by 31 August 1996). In the light of all those circumstances, it is clear that the individual measures,
including notification by the beneficiary under Article 5, must be apparent from the national authorities' documentation.
78. The Greek Government's contention does not cast doubt on the Commission's findings that it was not possible to ascertain from
the documents available whether and when the declarations at issue were made, and that in the administrative district of Pellas
a declaration of that nature was not even required. The sole notification provided was that grubbing-up had taken place.
But notification of that kind does not enable the authorities to verify whether the parcels of land for which a premium is
being claimed were actually planted with peach or nectarine trees previously. It cannot therefore serve as notification within
the meaning of Article 5. That objection on the part of the Greek Government must therefore also be rejected.
(4) Size of the parcels in respect of which a premium was applied for
(a) Submissions of the parties
(i) The Hellenic Republic
79. The
Greek Government claims that neither Articles 1 and 2 of Regulation No 2505/95 nor Article 1 of Regulation No 2684/95 required that there
should be a long-term or indeed indefinite tenancy agreement or that this should have been concluded long before 31 January
1996. By its interpretation, the Commission is introducing new, additional requirements for the grant of the premium.
(ii) The Commission
80. The
Commission , however, points out that a substantial proportion of the agreements concluded in January 1996 ─ that is to say shortly before
the qualifying date for the premium under Regulation No 2684/95, namely 31 January 1996 ─ related to parcels which were smaller
than 0.5 hectares and, therefore, in principle excluded from the premium. Without the agreements in question, no premiums
could therefore have been granted for those parcels. Those cases therefore represented an increased risk to the proper implementation
of the programme and ought, consequently, to have prompted additional inspections. But it was ascertained that, in Imathias
and Edessa, all the agreements concluded in January 1996 had been accepted, even when they were valid for only a relatively
short period of a year or two. In the Commission's view, that should have resulted in more extensive checks.
(b) Analysis
81. The parties dispute whether the transactions in relation to the parcels, which benefited from the premium under Regulation
No 2684/95 because they were the subject of a contractual agreement entered into in January 1996 and were thus combined to
form an overall parcel of at least 0.5 hectares, should have prompted tighter controls. The Commission has not in practice
demonstrated that specific parcels wrongly benefited from a premium. The issue is the failure to carry out checks which might
possibly have uncovered irregularities.
82. The Greek Government is correct to say that the Community rules do not require that the parcels which benefit from a subsidy
must be integrated within long-term tenancy agreements entered into well before 31 January 1996 or contracts for the sale
of land. But that is not what the Commission is claiming. The real issue is whether the fact that certain parcels were the
subject of agreements, which were entered into shortly before the qualifying date, should have given rise to more extensive
checks.
83. The fact that the agreements at issue were concluded so near to the qualifying date and that the parcels in question would
otherwise have been too small to qualify for the premium under Regulation No 2684/95 certainly seems to suggest that more
extensive checks should have been carried out. There is at least a greater possibility of the misuse of premiums in this
instance, as compared with longer-term agreements or agreements concluded long before the qualifying date. Pursuant to the
abovementioned case-law, according to which the Member States must take all the measures necessary to prevent the misuse of
EAGGF financing, even if the specific Community act does not provide for the adoption of particular supervisory measures,
the circumstances described justify carrying out more extensive checks. That plea in law must therefore also be rejected.
84. The interim conclusion must therefore be that the reduction under budget item 1505 is also legitimate.
C ─
Budget item 1512
(1) Delivery notes
(a) Submissions of the parties
(i) The Hellenic Republic
85. As regards the third reduction from the expenditure in respect of which a refund has been claimed, the
Greek Government argues that Article 15 of Regulation No 1558/91 has been misconstrued and the facts incorrectly evaluated. In its view, there
is no requirement to draw up delivery notes. Under Article 15 of Regulation No 1558/91, the drawing-up of delivery notes
is optional, and even Article 14 of Regulation No 504/97 refers only to any receipts that have been issued. Nor is there
any obligation to keeping weighing records.
86. However, the Greek Government points out that the national implementing legislation relating to Regulation No 504/97 makes
the grant of the processing subsidy dependent on proof that the conditions of subsidy have been met on the basis of delivery
notes and weighing records.
(ii) The Commission
87. The
Commission , however, points out that the Greek authorities told the EAGGF inspectors that the whole of Greece's monitoring system relied
on delivery notes. But the delivery notes inspected were incomplete, as they did not contain all the required signatures
(producer ─ carrier ─ processor). It was also striking that, on receipt of the goods, the processor never queried the quantity
declared by the producer. As stated by the chairman of the
Axos Cooperative, that was because the delivery notes were completed not by the producer but by the processor. The Commission
therefore concludes that there was a high risk to the EAGGF.
(b) Analysis
88. The wording of Article 15 of Regulation No 1558/91 and Article 14 of Regulation 504/97 does not in fact require that proof
should be provided in the form of delivery notes. But that objection, which is based on the wording of the provisions, does
not undermine the Commission's findings in the Summary Report, namely that the whole of the Greek monitoring system relied
on the use of delivery notes to verify that the minimum price had been paid to the producers and establish whether the processing
yield accorded with the national rules.
(32)
That fact is actually further underscored by the Greek Government's claim that the submission of delivery notes is one of
the implementing measures that Government requires in the context of the application of Regulation No 504/97. The Commission's
account of how the Greek authorities told the EAGGF inspectors that the delivery notes were an essential element of the national
checks and the statement by the chairman of the
Axos Cooperative cited in the defence confirm the Commission's argument that the delivery notes played a significant role in the
Greek system. Those arguments have not been refuted.
89. In that connection, it should be pointed out that Article 15 of Regulation No 1558/91 and Article 14 of Regulation No 504/97
do not contain definitive rules on the evidence the processors must submit. Article 15(3) of Regulation No 1558/91, as well
as the equivalent provision in Article 14(3) of Regulation No 504/97, stipulate that processors are to undergo any inspections
or checks deemed necessary and to keep such additional records as the national authorities require. The Greek Government has
not rebutted the Commission's finding that the delivery notes formed the basis of the Greek monitoring system. Nor has it
─ and this is the crucial point ─ argued that the irregularities in relation to the delivery notes (absence of signatures,
no differences in the quantities delivered) were inaccurate. Consequently, the Greek Government's objection in relation to
the delivery notes must be rejected.
(2) National checks
(a) Submissions of the parties
(i) The Hellenic Republic
90. As regards the standard of the checks carried out by the national offices, the
Greek Government objects that Article 16 of Regulation No 1558/91 has been misconstrued and the facts incorrectly evaluated. It considers
that a large number of checks were carried out and were executed carefully. The reports on those checks were in the administrative
records. The Greek Government maintains that, in this respect, the Commission's complaint is actually very vague. Regulations
Nos 1558/91 and 504/97 do not require checks on stocks. But those checks were in any event performed. Nor does Article 16
of Regulation No 1558/91 specifically require checks. It should, however, be noted that Greece checked 100% rather than the
15% of the quantities of finished products in question and later, when the rules were amended, it continued to check 100%
rather that the 25% required.
(ii) The Commission
91. The
Commission , however, points out that the administrative records either contain no documentation in relation to the checks carried out
or, where reports exist, the data they contain is not verifiable. In Giannitsà in particular, there were no reports and,
in Edessa, reports were submitted but contained no statement of conclusions.
(b) Analysis
92. The Commission's complaint relates to the impossibility of verifying that the checks the Greek authorities were supposed to
carry out on the basis of Article 16 of Regulation No 1558/91 had in fact taken place. The Greek Government's claim that
it checked 100% rather than the prescribed 15% or 25% of the quantities of finished products in question and that the inspection
reports were submitted to the EAGGF inspectors with the other administrative documents cannot rebut the Commission's findings.
Even if 100% of the quantities of finished goods were checked, but no reports were drawn up on the outcome or the reports
were at least not made available to the Commission services (the complaint directed against the Giannitsà customs office,
for example) or the existing reports were incomplete, as they contained no conclusions (the complaint directed against the
Edessa customs office), it has at least to be established that the prescribed checks were in any event carried out inadequately.
The Greek Government has failed to prove that both those customs offices drew up proper inspection reports. Consequently,
the Commission's complaint that no adequate and verifiable checks were carried out is not disproved. That objection must
therefore be rejected.
(3) Payment of the minimum price
(a) Submissions of the parties
(i) The Hellenic Republic
93. As regards the complaint that there was a failure to pay the minimum price, the
Greek Government argues that Article 9 of Regulation No 504/97 does not regulate the way in which a producer organisation should pay its individual
members. That provision relates solely to the relationship between processors and producer organisations. It is not incompatible
with Regulation Nos 1558/91 and 504/97 for producer organisations to apply reductions to their individual members because
of those members' debts to the organisation. Furthermore, such reductions have no impact on the EAGGF. But even if individual
infringements were identified, it would not justify a reduction of 10% of the expenditure claimed. In that connection, the
Greek Government complains, in the alternative, that the reduction in question is disproportionate and should at least be
decreased to 2%.
(ii) The Commission
94. The
Commission points out that, under Greek national legislation, a reduction of up to 5% of the weight of the raw materials supplied may
be applied, if the consignment is not of the required processing standard. As a result of that possibility, the minimum price
may not be guaranteed. The Commission considers that a consignment has either to be wholly accepted or to be rejected. According
to the Commission, the abovementioned possibility of imposing reductions exists only in Greece. It results in increased income
for processors. Such reductions were recorded in 1996 and 1997, but not in 1998 or 1999. As regards the level of the reduction
imposed, the Commission points out that it has taken account of the opinion of the conciliation body concerning the situation
in Giannitsà. In Giannitsà, it was established that a discrepancy of 2 632 469 kg existed between actual stocks and declared
stocks. The Commission, consequently, first proposed disallowing GRD 71 097 342 of expenditure eligible for refund. It did
not, however, proceed with that correction. That sum therefore no longer forms part of the flat-rate correction of 10% of
the expenditure claimed for the processing of peaches in Greece, based on the failure to comply with the rules on the minimum
price and serious deficiencies in the monitoring system.
(b) Analysis
95. It has first to be noted that the Greek Government's arguments concern the relationship between the producer organisations
and their members. But the Commission's complaint relates to the price the processors paid to the producers. It is thus clear
that no specific arguments of fact have been adduced in response to the Commission's findings.
96. Apart from that, the Greek Government's argument is incompatible with the second subparagraph of Article 9(2) of Regulation
No 504/97. According to that provision, the producer organisation is to pay the amount paid to it by the processor, which
must be at least the minimum price, to its members without reductions. Any reduction in the minimum price between the producer
organisations and their members is therefore incompatible with Community law.
97. Furthermore, the Greek Government has failed to submit arguments to rebut the Commission's findings that processors were able
to impose a reduction of 5% of the weight of a consignment, if the goods supplied were found to be defective. The Commission
is right to argue that a reduction of that nature is not provided for in Regulations Nos 1558/91 and 504/97. According to
Article 10 of Regulation No 1558/91 and Article 10 of Regulation No 504/97, the producer must supply raw materials of sound
and fair merchantable quality and suitable for processing. It follows from Article 14(2)(a) of Regulation No 1558/91 and
─ still more clearly ─ from Article 9(1) of Regulation No 504/97 that the processor has to pay the producer organisation at
least the prescribed minimum price. Consequently, reductions in that price are not admissible.
98. Nor would a reduction of that nature by the processor be compatible with the institution of the minimum price. Under Article
4 of Regulation No 426/86 and Article 3 of Regulation 2201/96, the minimum price is set using an abstract formula at the beginning
of the marketing year on the basis of: the minimum price applying during the previous marketing year, the movement of market
prices and the need to ensure normal market disposal of basic fresh products for the various uses. No account is taken of
the quality of the raw materials actually delivered to the processors in individual cases.
99. Nor are reductions of that nature without impact on the Community budget. The minimum price to be paid for the raw materials
is only one of the criteria to be taken into account under Article 5 of Regulation No 426/86 and Article 4 of Regulation No
2201/96. If the minimum price is in fact not paid, then the subsidy to processors, which is again calculated using an abstract
formula, is not correct.
100. As regards the proportionality of the 10% reduction, it has to be noted that, according to the Guidelines, a reduction of
that nature is justified, where the deficiency relates to the whole of or fundamental elements of the control system or to
the operation of controls essential to ensuring the regularity of the expenditure, such that it can be reasonably concluded
that there was a high risk of widespread loss to the EAGGF.
101. This case concerns deficient delivery notes which, the Commission has established, are the lynchpin of the checks carried
out by the Greek authorities. Similarly, there was no proof of the checks that had supposedly taken place. Finally, the possibility
of making reductions in relation to the minimum price, which is not compatible with Community law, also resulted in a high
risk to the EAGGF. In that respect, the reduction imposed is consistent with the Guidelines and cannot be defined as an abuse
of power.
102. In conclusion, the last plea in law must also be rejected.
VI ─ Costs
103. In the light of the foregoing I propose that the Court should dismiss the application. Pursuant to Article 69 of the Rules
of Procedure, the unsuccessful party shall be ordered to pay the costs if they have been applied for in the successful party's
pleadings. Since the application by the Hellenic Republic has been rejected and the Commission applied for the costs, the
Hellenic Republic must be ordered to pay the costs.
VII ─ Conclusion
104. In the light of the foregoing I propose that the Court should:
(1) dismiss the application.
(2) order the Hellenic Republic to pay the costs.
- 1 –
- Original language: German.
- 2 –
- OJ, English Special Edition 1970, p. 218.
- 3 –
- OJ 1995 L 125, p. 1.
- 4 –
- OJ 1995 L 158, p. 6.
- 5 –
- OJ 1990 L 42, p. 6.
- 6 –
- OJ 1995 L 224, p. 13.
- 7 –
- OJ 1995 L 258, p. 1.
- 8 –
- OJ 1995 L 279, p. 3.
- 9 –
- OJ 1986 L 49, p. 1.
- 10 –
- OJ 1996 L 297, p. 29.
- 11 –
- OJ 1991 L 144, p. 31.
- 12 –
- OJ 1997 L 78, p. 14.
- 13 –
- OJ 2000 L 67, p. 37.
- 14 –
- Commission Directorate General for Agriculture document D(99) Doc. VI/10529/99 of 27 October 1999. The findings relating
to physical checks are on pp. 22 and 23 in paragraph 2.4; on improving production in the peach sector, on pp. 87 to 89 in
paragraph 3.4; and on the processing of peaches, on pp. 89 to 91 in paragraph 3.5.
- 15 –
- Commission Directorate General for Agriculture document D(99) Doc. VI/10529/99 of 17 January 2000, pp. 2 and 3 in paragraph
2.4.
- 16 –
- See Case C-54/95
Germany v
Commission [1999] ECR I-35, paragraph 66; Case C-2/93
Exportslachterijen van Oordegem [1994] ECR I-2283, paragraph 17 et seq; Case C-235/97
France v
Commission [1998] ECR I-7555, paragraph 45.
- 17 –
- Summary Report, p. 13 et seq.
- 18 –
- Summary Report, p. 15.
- 19 –
- Case C-147/99
Italy v
Commission [2001] ECR I-8999, paragraph 54; Case C-28/94
Netherlands v
Commission [1999] ECR I-1973, paragraph 50 et seq.
- 20 –
- Case C-28/1994 (cited in footnote 19 above) paragraph 75; Case C-253/97
Italy v
Commission [1999] ECR I-7529, paragraph 6 et seq.; Case C-46/97
Greece v
Commission [2000] ECR I-5719, paragraph 58.
- 21 –
- Case C-238/96
Ireland v
Commission [1998] ECR I-5801 paragraphs 27 to 31 with further references. See also Case C-118/99
France v
Commission [2002] ECR I-747, paragraph 37 et seq.
- 22 –
- See paragraph 2.4 on p. 22 of the Summary Report.
- 23 –
- See paragraph 2.4 on p. 22 of Document VI/10529/99.
- 24 –
- Case 147/99 (cited in footnote 19 above) paragraph 54; Case C-28/94 (cited in footnote 19 above) paragraph 50 et seq.
- 25 –
- See Case C-28/94 (cited in footnote 19 above) paragraphs 49 to 51.
- 26 –
- Case C-50/94 Greece v Commission [1996] ECR I-3331, paragraph 26.
- 27 –
- Case 347/85
United Kingdom of Great Britain and Northern Ireland v
Commission [1988] ECR 1749, paragraph 15 et seq. See also the Opinion of Advocate General Darmon of 3 October 1991 in Case C-197/90
Italy v
Commission [1992] ECR I-1, I-13, point 42.
- 28 –
- Case C-50/94 (cited in footnote 26 above) paragraph 7 et seq.
- 29 –
- Case C-45/97
Spain v
Commission [2000] ECR I-5333, paragraphs 24 to 26.
- 30 –
- Case C-242/97
Belgium v
Commission [2000] ECR I-3421, paragraphs 124 to 126;
Netherlands v
Commission , cited in footnote 19, paragraphs 54 to 56.
- 31 –
- Case C-54/95 (cited in footnote 16 above) paragraph 66; Case C-2/93 (cited in footnote 16 above) paragraphs 17 and 18.
- 32 –
- See Summary report, p. 89, paragraph 3.5. The German text uses the term
Verarbeitungssatz, while the French text refers to
rendement de la transformation. That in fact corresponds to the German term
Verarbeitungsertrag (processing yield).
