JUDGMENT OF THE COURT (Fifth Chamber)
19 September 2002 (1)
(EAGGF - Clearance of accounts - 1995 financial year - Arable crops)
In Case C-377/99,
Federal Republic of Germany, represented initially by W.-D. Plessing and C.D. Quassowski and subsequently by W.-D. Plessing and B. Muttelsee-Schön, acting as Agents,
applicant,
v
Commission of the European Communities, represented by M. Niejahr and G. Braun, acting as Agents, with an address for service in Luxembourg,
defendant,
APPLICATION for partial annulment of Commission Decision 1999/596/EC of 28 July 1999 amending Decision 1999/187/EC on the clearance of the accounts presented by the Member States in respect of the expenditure for 1995 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) (OJ 1999 L 226, p. 26), in so far as it imposes on the Federal Republic of Germany a flat-rate correction of 5% to the expenditure declared in respect of financial support in the arable crops sector in Mecklenburg-Vorpommern, equal to the sum of DEM 30 394 115.33, instead of 2%, equal to the sum of DEM 12 157 646.13,
THE COURT (Fifth Chamber),
composed of: P. Jann, President of the Chamber, S. von Bahr (Rapporteur), D.A.O. Edward, A. La Pergola and C.W.A. Timmermans, Judges,
Advocate General: C. Stix-Hackl,
Registrar: M.-F. Contet, Administrator,
having regard to the Report for the Hearing,
after hearing oral argument from the parties at the hearing on 10 January 2002,
after hearing the Opinion of the Advocate General at the sitting on 25 April 2002,
gives the following
Legal background
Community rules
Rules on the financing of the common agricultural policy
Integrated administration and control system
Flat-rate corrections
'In determining whether a financial correction should result and, if so, at what rate, the general consideration shall be the assessment of the degree of risk of losses to Community funds having occurred as a consequence of the control deficiency. The specific elements to be taken into account should include the following:
1. whether the deficiency relates to the effectiveness of the control system generally, to the effectiveness of a particular element of the system, or to the operation of a control or controls under the system;
2. the importance of the deficiency within the totality of the administrative, physical and other controls foreseen;
3. the vulnerability to fraud of the measures, having regard particularly to the economic incentive.'
'(a) 2% of expenditure - where the deficiency is limited to parts of the control system of lesser importance, or to the operation of controls which are not essential to the assurance of the regularity of the expenditure, such that it can reasonably be concluded that the risk of loss to the EAGGF was minor.
(b) 5% of expenditure - 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 reasonably be concluded that the risk of loss to the EAGGF was significant.
(c) 10% of expenditure - where the deficiency relates to the whole of or fundamental elements of the control system or to the operation of controls essential to assuring the regularity of the expenditure, such that it canreasonably be concluded that there was a high risk of widespread loss to the EAGGF.'
Conciliation procedure
National rules
Facts and pre-litigation procedure
'May I also draw your attention to the following point, which could be important in the context of the conciliation proceedings. In the course of a joint inspection visit by DG VI and the financial controllers in August 1998 it came to light that, in respect of very many aid applications, the area actually farmed differed from the registered area of the parcels, or the area actually farmed had not been fully reported as anagricultural parcel. If the data on the areas of land actually farmed comes not from the land register but from information supplied by the farmer, it is all the more necessary to measure the agricultural parcels in the course of on-site checks. In that case, the German authorities' contention that about 90% of the blocks were under a single crop or completely set aside would lose its force. The matter is currently being investigated and if you have any comments I would be grateful if you would let me have them as soon as possible.'
'(a) While it is true that no flagrant case of abuse has been detected, it is clear that there were a number of weaknesses in the control system in 1994.
(b) There can be no doubt, after scrutinising the file and hearing the parties concerned, that in 1994 Mecklenburg-Vorpommern [made] serious efforts to implement a valid control system and so prevent losses to the EAGGF; in the case of a new Land not yet fully accustomed to the Community's administrative system, such efforts deserve special mention.
(c) The Conciliation Body accordingly takes the view that applying a flat-rate correction of 5%, as had been originally planned by the Commission, was unjustified.'
The first plea
Arguments of the parties
Findings of the Court
The second plea
Arguments of the parties
- the risk assessment does not apply to 10% or to 15% of the blocks, but to 29% of the total number of agricultural parcels;
- almost all the blocks are made up of more than one registered parcel;
- more than half the registered parcels extend over at least two blocks which frequently belong to one and the same producer. In those cases, it is possible that areas declared for agricultural parcels were exaggerated and granted a higher level of aid;
- there is a risk in respect of around 50% of the agricultural parcels in Mecklenburg-Vorpommern.
Findings of the Court
Failure to comply with the conciliation procedure
Failure to observe the right to be heard
The third plea
Arguments of the parties
Inaccuracy of the risk assessment owing to erroneous findings and assessments of the facts
The use of the same factors to justify different correction rates
- the lack of detailed cross-checking;
- the fact that the Schwerin Amt had carried out fewer on-site verifications than it had claimed;
- the existence of doubts as to whether the Schwerin Amt had actually carried out the risk assessment which it claimed to have carried out.
Findings of the Court
Inaccuracy of the risk assessment owing to erroneous findings and assessments of the facts
The use of the same factors to justify different correction rates
Costs
On those grounds,
THE COURT (Fifth Chamber)
hereby:
1. Dismisses the action;
2. Orders the Federal Republic of Germany to pay the costs.
Jann
La PergolaTimmermans
|
Delivered in open court in Luxembourg on 19 September 2002.
R. Grass P. Jann
Registrar President of the Fifth Chamber
1: Language of the case: German.