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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Agrargenossenschaft Pretzsch (Agriculture) [2002] EUECJ C-417/00 (28 November 2002)
URL: http://www.bailii.org/eu/cases/EUECJ/2002/C41700.html
Cite as: [2002] EUECJ C-417/00, [2002] EUECJ C-417/
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JUDGMENT OF THE COURT (Sixth Chamber)

28 November 2002 (1)

(Common agricultural policy - Regulation (EEC) No 3887/92 - Integrated administration and control system for certain Community aid schemes - Implementing rules - Aid linked to set-aside of land - Declaration of area of set-aside - Failure to give notice, after submission of the aid application, of a decrease of the area of set-aside - Penalties)

In Case C-417/00,

REFERENCE to the Court under Article 234 EC by the Oberverwaltungsgericht des Landes Sachsen-Anhalt (Germany) for a preliminary ruling in the proceedings pending before that court between

Agrargenossenschaft Pretzsch eG

and

Amt für Landwirtschaft und Flurneuordnung Anhalt,

on the interpretation of Article 9(2) of Commission Regulation (EEC) No 3887/92 of 23 December 1992 laying down detailed rules for applying the integrated administration and control system for certain Community aid schemes (OJ 1992 L 391, p. 36), as amended by Commission Regulations (EC) Nos 229/95 of 3 February 1995 (OJ 1995 L 27, p. 3) and 1648/95 of 6 July 1995 (OJ 1995 L 156, p. 27),

THE COURT (Sixth Chamber),

composed of: R. Schintgen, President of the Second Chamber, acting for the President of the Sixth Chamber, C. Gulmann, V. Skouris, F. Macken (Rapporteur) and N. Colneric, Judges,

Advocate General: P. Léger,


Registrar: R. Grass,

after considering the written observations submitted on behalf of:

- Agrargenossenschaft Pretzsch eG, by C. Columbus, Rechtsanwältin,

- the Amt für Landwirtschaft und Flurneuordnung Anhalt, by W. Nahrstedt, acting as Agent,

- the French Government, by G. de Bergues and L. Bernheim, acting as Agents,

- the Commission of the European Communities, by M. Niejahr, acting as Agent,

having regard to the report of the Judge-Rapporteur,

after hearing the Opinion of the Advocate General at the sitting on 11 July 2002,

gives the following

Judgment

  1. By order of 7 September 2000, received at the Court on 13 November 2000, the Oberverwaltungsgericht des Landes Sachsen-Anhalt (Higher Administrative Court of the Land Sachsen-Anhalt, Germany) referred to the Court for a preliminary ruling under Article 234 EC, two questions on the interpretation of Article 9(2) of Commission Regulation (EEC) No 3887/92 of 23 December 1992 laying down detailed rules for applying the integrated administration and control system for certainCommunity aid schemes (OJ 1992 L 391, p. 36), as amended by Commission Regulations (EC) Nos 229/95 of 3 February 1995 (OJ 1995 L 27, p. 3) and 1648/95 of 6 July 1995 (OJ 1995 L 156, p. 27), (hereinafter 'Regulation No 3887/92').

  2. Those questions were raised in the course of an action between Agrargenossenschaft Pretzsch eG, a German agricultural cooperative, and the Amt für Landwirtschaft und Flurneuordnung (Office for Agriculture and Rearrangement of Land) Anhalt, the competent authority in Germany for managing the integrated administration and control system for certain Community aid schemes (hereinafter 'the IACS'), regarding a financial penalty imposed on the said cooperative under the second indent of the third subparagraph of Article 9(2) of Regulation No 3887/92.

    Relevant legislation

    Regulation (EEC) No 1765/92

  3. Article 2(1) of Council Regulation (EEC) No 1765/92 of 30 June 1992 establishing a support system for producers of certain arable crops (OJ 1992 L 181, p. 12), provides that Community producers of arable crops may apply for a compensatory payment under the conditions set out in Articles 2 to 13 of that regulation.

  4. The second subparagraph of Article 2(2) of Regulation No 1765/92 provides that the compensatory payment is to be granted for the area which is down to arable crops or subject to set-aside, in accordance with Article 7 of that regulation.

  5. Under Article 7(4) of Regulation No 1765/92, the land set aside may be used for the provision of materials for the manufacture within the Community of products not primarily intended for human or animal consumption, provided that effective control systems are applied.

    Regulation (EC) No 762/94

  6. Commission Regulation (EC) No 762/94 of 6 April 1994 (OJ 1994 L 90, p. 8) lays down detailed rules for the application of Regulation No 1765/92 with regard to the set-aside scheme.

  7. Under the first subparagraph of Article 2 of Regulation No 762/94, 'set-aside' means the leaving fallow of an area which has been cultivated in the previous year with a view to a harvest.

  8. Article 3(2) of Regulation No 762/94 provides that the areas set aside may not be used for agricultural production of any sort other than that referred to in Article 7(4) of Regulation No 1765/92, nor put to any lucrative use incompatible with the growing of an arable crop.

  9. In the words of Article 3(4) of Regulation No 762/94:

    'To be considered under the scheme provided for in Regulation (EEC) No 1765/92, the areas set aside must:

    - have been farmed by the applicant during the previous two years, save in special cases, duly justified according to objective criteria laid down by the Member State concerned, such as circumstances relating to the type of tenure, installation, or expansion of the holding by succession,

    - remain set aside for a period commencing on 15 January at the latest and ending on 31 August at the earliest. However, Member States shall set the conditions under which producers may be authorized to sow seed, from 15 July, for harvesting in the following year and the conditions to be met in order for grazing to be authorised from 15 July in Member States where transhumance is traditionally practised. ...'

    Regulation (EEC) No 3508/92

  10. Under Article 1(1)(a) of Council Regulation (EEC) No 3508/92 of 27 November 1992 establishing an integrated administration and control system for certain Community aid schemes (OJ 1992 L 355, p. 1), the IACS applies, in the crop sector, to the support system for producers of certain arable crops established by Regulation No 1765/92.

  11. Article 6(1) of Regulation No 3508/92 provides:

    'In order to be eligible under one or more Community schemes governed by this Regulation, each farmer shall submit, for each year, an area aid application indicating:

    - the agricultural parcels, including areas under forage crops, and agricultural parcels covered by a set-aside measure for arable land and those laid fallow,

    - where applicable, any other necessary information provided for either by the Regulations relating to the Community schemes, or by the Member State concerned.'

  12. Under Article 6(4) of Regulation No 3508/92, certain amendments may be made to the 'area' aid application provided that they are received by the competent authorities no later than the dates referred to in Articles 10, 11 and 12 of Regulation No 1765/92.

  13. Under Article 6(5) of Regulation No 3508/92 the 'area' aid application, amended if necessary in accordance with paragraph 4 of that article, is deemed to be the aid application provided for in the scheme referred to in Article 1(1)(a) of that regulation.

    Regulation No 3887/92

  14. Article 4 of Regulation No 3887/92 is worded as follows:

    '1. Without prejudice to the requirements set out in regulations on individual aid schemes, area aid application shall contain all necessary information, in particular:

    - the identity of the farmer,

    - particulars permitting identification of all the agricultural parcels on the holding, with their area, location, use and, where relevant, whether the parcels are irrigated, and the aid scheme concerned,

    - a statement by the producer that he is aware of the requirements pertaining to the aids in question.

    By use is meant the type of crop or ground cover or the absence of a crop.

    ...

    2. (a) After the time limit for its submission the area aid application may be amended on condition that the competent authority receives the amendments not later than the dates specified in Articles 10, 11 and 12 of Council Regulation (EEC) No 1765/92.

    Where agricultural parcels are concerned, amendments may be made to the area aid application only in particular cases that are properly documented, in particular death, marriage, purchase or sale, on conclusion of a tenancy contract. Member States shall determine the conditions applying thereto. However, a set-aside or forage area parcel may not be added to parcels already declared except in cases which are duly justified under the provisions concerned and on condition that the parcel has already been accounted for as set-aside or forage area in the aid application of another farmer, the latter application being corrected accordingly.

    Changes of use or aid scheme shall be permitted in all cases. However, a parcel may not be added to parcels declared as set aside.

    ...'

  15. Article 9(2) of Regulation No 3887/92 provides:

    'If the area actually determined is found to be less than that declared in an area aid application, the area actually determined on inspection shall be used for calculation of the aid. However, except in cases of force majeure, the area actually determined oninspection shall be reduced by twice the difference found if this is more than 3% or two hectares but not more than 20% of the determined area.

    If the difference is more than 20% of the determined area no area-linked aid shall be granted.

    However, in the case of a false declaration made intentionally or as a result of serious negligence:

    - the farmer in question shall be excluded from the aid scheme concerned for the calendar year in question, and

    - in the case of a false declaration intentionally made, from any aid scheme referred to in Article 1(1) of Regulation (EEC) No 3508/92 for the following calendar year, in respect of an area equal to that for which his aid application was rejected.

    These reductions shall not be applied if the farmer can show that his determination of the area was accurately based on information recognised by the competent authority.

    Where a farmer has not met all the obligations incumbent on him in regard to parcels fallowed for non-food production purposes these shall, on the occasion of inspection for the purposes of application of this Article, be considered not to have been found.

    For the purposes of this Article, determined area means the area for which all of the conditions laid down in the rules have been met.'

    The dispute in the main proceedings and the questions referred for a preliminary ruling

  16. On 3 May 1996, Agrargenossenschaft Pretzsch eG applied to the Amt für Landwirtschaft und Flurneuordnung Anhalt for a compensatory payment pursuant to Regulation No 1765/92, in respect of the setting-aside of a parcel of 191.71 hectares.

  17. In its application form, it stated that it undertook to inform the competent authority immediately of all facts which conflicted with the grant or continuation of the aid, any departure from the application data and any change in use entitlement for the duration of the obligations undertaken by it, as well as any non-compliance with the conditions under which the aid was granted, even if non-compliance resulted from force majeure.

  18. On 11 December 1996, it was informed by the defendant in the main action that, pursuant to the second indent of the third subparagraph of Article 9(2) of Regulation No 3887/92, it was excluded from the payment of subsidy in respect of the whole of the set-aside land for the application year and the following year, on the ground that, according to the on-the-spot findings, the applicant had used 14.90 hectares of the saidarea as pasture without informing the defendant thereof. The defendant in the main action considered that Agrargenossenschaft Pretzsch eG knew that the area declared as set-aside could not be used as pasture, during a certain period, after the said declaration and that it had deliberately omitted to inform it of the changed use.

  19. It is apparent from the order for reference that, during the proceedings, the applicant in the main action demonstrated that, since the months of March and April 1995, it had been planned to build two cowsheds as well as a liquid manure container. With regard to the cowshed, in which the cows which were subsequently driven onto the set-aside land had stood, the building works were commenced at the end of May 1996. The animals were then kept in the neighbouring farmyard. However, since the construction of a liquid manure container on the boundary of the farmyard was brought forward by four weeks, it was necessary to drive the cows temporarily onto the set-aside area, which was close to the farm. According to the building plans, it was indeed envisaged that the farmyard would be used temporarily, but not that the set-aside area would be used as cow-pasture.

  20. In its action before the Verwaltungsgericht (Administrative Court) Dessau (Germany), the applicant in the main action submitted that the putting of cows to pasture on the set-aside area does not constitute agricultural production such as to cast fresh doubt on the grant of aid. The penalty laid down in the second indent of the third subparagraph of Article 9(2) of Regulation No 3887/92 relates only to intentionally false declarations made concerning the size of the set-aside area at the time of the aid application. Conversely, that provision does not apply to the dispute in the main proceedings, which concerns a reduction of the area set aside and, therefore, the failure to inform the competent authority of such a change occurring after submission of that application.

  21. By judgment of 14 July 1999, the applicant's action in the main proceedings was dismissed on the ground that, according to the Verwaltungsgericht Dessau, the applicant had made false declarations about the area set aside. It was clearly in accordance with the wording of the second indent of the third subparagraph of Article 9(2) of Regulation No 3887/92, as well as with the spirit and purpose of that provision, to regard information stated in the application for aid as false, not only when it did not correspond with the actual circumstances at the time of the application, but also if, subsequently, that information became incorrect, for instance because the applicant for aid, in spite of a change in the circumstances as stated in the aid application, did not correct it. Persisting with an aid application in spite of a subsequent change in circumstances capable of affecting the grant of aid, in itself, constitutes a false declaration within the meaning of that provision.

  22. According to the Verwaltungsgericht Dessau, the element of intent necessary to impose the penalty was also present. In fact, at the end of June 1996 at the latest, the applicant in the main proceedings realised that the set-aside area was being used in circumstances which jeopardised its right to the aid, so that it promptly took steps todrive the cows from the area in question. Yet, although it knew of its reporting duty, at no time did it notify the competent authority of the reduction in the set-aside area.

  23. The applicant in the main action, which was given leave to appeal against that judgment to the Oberverwaltungsgericht des Landes Sachsen-Anhalt, submits that it is entitled to the whole aid for set-aside for the land in question. The defendant in the main action is seeking confirmation of the judgment at first instance.

  24. Taking the view that the resolution of the proceedings before it required the interpretation of Article 9(2) of Regulation No 3887/92, the Oberverwaltungsgericht des Landes Sachsen-Anhalt decided to stay proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

    '(1) On a proper interpretation of the third subparagraph of Article 9(2) of Regulation [No 3887/92], does false declaration refer to a culpable positive act in the context of an application for aid, so that failure to report to the granting authority changes which are relevant to the application but do not occur until afterwards is not penalised?

    (2) Do the so-called simple cases of difference in the second sentence of the first subparagraph of Article 9(2) of Regulation [No 3887/92] presuppose the making of a false declaration in the application itself, or is it simply a question of comparing the information given in the application with the result of the on-the-spot inspection?'

    The questions referred for a preliminary ruling

  25. By its two questions, which it is appropriate to consider together, the referring court is asking, in essence, whether Article 9(2) of Regulation No 3887/92 is to be interpreted as meaning that the penalties prescribed by that provision are limited to cases in which the farmer has made erroneous or false declarations at the time when the aid application was submitted, but that they do not apply where the farmer has failed to notify the competent authority of changes affecting the conditions governing grant of the aid.

    Observations submitted to the Court

  26. The applicant in the main proceedings submits that an interpretation of Article 9(2) of Regulation No 3887/92 based on the wording and scheme of the rule laid down in that provision entails restriction of the scope of the penalty to erroneous declarations at the time of the application's submission to the competent authority.

  27. In relation, in particular, to the penalties prescribed by the third subparagraph of Article 9(2) of Regulation No 3887/92, the applicant in the main proceedings maintains that the establishment of a declaration as false presupposes, at the very least, 'conductsuch as to mislead another as to the reality of the situation, by means of action upon the other's conception of it'. Such conduct cannot be established simply from an omission to notify the competent authority of a change in those circumstances. There is no evidence to suggest that the applicant intended to seek to obtain, in a fraudulent manner, payments for set-aside to which it was not entitled.

  28. The applicant in the main proceedings submits therefore that to equate its position with that of an applicant for aid who, at the time of application, makes false declarations to obtain aid such as that for set-aside, is not consistent with the purpose of the third subparagraph of Article 9(2) of Regulation No 3887/92.

  29. The defendant in the main proceedings, the French Government and the Commission all contend that the first and second subparagraphs of Article 9(2) of Regulation No 3887/92 apply even where the farmer has made statements which were correct at the time of the application's submission and where the circumstances changed only subsequently.

  30. The French Government and the Commission point out that the strict liability on the applicant for aid is in accordance with the purpose of the overall system of penalties, which is intended to avoid or to punish irregularities and frauds.

  31. As regards the third subparagraph of Article 9(2) of Regulation No 3887/92, the defendant in the main proceedings, the French Government and the Commission consider that the penalties which it lays down are also applicable where the intentional fault of the applicant for aid or his serious negligence are subsequent to the submission of the application. In order to combat fraud and other serious irregularities effectively, that provision must cover all cases in which the farmer is guilty of intentional fault or serious negligence, irrespective of the time at which they were committed.

  32. The French Government contends that, if the recipient of aid failed to give notice of a change in area, there would necessarily follow from such omission a difference between the area stated in his application and that which would be actually established by a check, which is the situation covered by Article 9 of Regulation No 3887/92.

    Findings of the Court

  33. It must be noted that the objectives of Regulation No 3887/92 and, in particular, of Article 9 thereof are, according to the first, seventh and ninth recitals in the preamble to that regulation, to enable the reform of the common agricultural policy to be implemented efficiently, to monitor compliance with the provisions on Community aid effectively, and to adopt provisions to prevent and penalise irregularities and fraud effectively.

  34. Pursuant to Article 9(2) of Regulation No 3887/92 'area' aid is granted in full where the area declared in the aid application is the same as that determined by a check bythe competent authorities and if all the relevant regulatory conditions have been observed.

  35. In order to attain the objectives mentioned in paragraph 33 of this judgment and taking into account the details of the various Community aid schemes, that provision prescribes, in a case where the area declared in an 'area' aid application is greater than that determined by a check and, therefore, in a case where the conditions provided by the IACS have not been observed, sanctions graded according to the gravity of the irregularity committed.

  36. In the first place, in relation to a slight overestimate of the area declared, made in good faith without serious negligence, the first sentence of the first subparagraph of Article 9(2) of Regulation No 3887/92 provides simply for the correction of the amount of the aid, which is to be calculated on the basis of the area actually determined by the check.

  37. Secondly, under the second sentence of the first subparagraph of Article 9(2) of that regulation, where the excess of the area declared over that determined by a check is more than 3% or 2 hectares but not more that 20% of the area determined, the area actually determined is reduced by twice the excess.

  38. Thirdly, under the second subparagraph of Article 9(2) of that regulation, no area-linked aid is granted if the farmer has, in his declaration, overstated by more than 20% the area in respect of which aid has been applied for.

  39. Finally, it is clear from the third subparagraph of Article 9(2) of Regulation No 3887/92 that farmers who have made a false declaration intentionally or as a result of serious negligence are in any event excluded from the aid scheme concerned for the calendar year in question and even, in the case of a deliberately false declaration, for the following calendar year. Those penalties operate whatever the extent of the difference between the areas declared and those determined on inspection (Case C-354/95 National Farmers' Union and Others [1997] ECR I-4559, paragraph 62).

  40. It is clear from those provisions of Regulation No 3887/92 that the finding of a difference between the area declared and the area actually determined in the course of checks carried out by the competent authorities entails, by itself, the application of a penalty.

  41. As the Commission rightly pointed out, for the imposition of penalties under the first two subparagraphs of Article 9(2) of Regulation No 3887/92, knowledge of the reasons for the discrepancy between the declarations in the aid application and the result of the check carried out by the competent authorities is not necessary.

  42. Even though the sanctions prescribed by the first and second subparagraphs of Article 9(2) of Regulation No 3887/92 are graded according to the gravity of the irregularity committed, it is none the less the case that those provisions must be applied evenwhere the farmer made correct declarations at the time of submission of the application and the situation changed only thereafter.

  43. That interpretation of the abovementioned provisions of Regulation No 3887/92 is in accordance with the obligations imposed on the applicant for aid under that regulation.

  44. First, it is clear from the third indent of the first subparagraph of Article 4(1) of Regulation No 3887/92 that, among the information which the 'area' aid application must contain, is a statement by the producer that he is aware of the requirements pertaining to the aids in question.

  45. The grant of aid under the IACS involves procedures relating to a large number of applications. The effective protection of the financial interests of the Community in such a context entails that the recipients of aid take an active part in the correct implementation of those procedures and take responsibility for the correctness of the amounts granted to them under the IACS (see, to that effect, Case C-63/00 Schilling and Nehring [2002] ECR I-4483, paragraphs 34 and 37).

  46. Secondly, after the time-limit laid down for its submission, an 'area' aid application may be amended only in certain properly substantiated circumstances, exhaustively set out in Article 4(2)(a) of Regulation No 3887/92, such as, for example, death or marriage, or the sale or purchase of the agricultural holding concerned.

  47. That provision and Article 6(4) and (5) of Regulation No 3508/92 show, however, that during a certain period, an 'area' aid application may be amended and subsequently taken into account as the requisite IACS application.

  48. In light of the foregoing, it is appropriate to point out that the first and second subparagraphs of Article 9(2) of Regulation No 3887/92 seek to establish a comparison between the statements made in the aid application and the result of the on-the-spot checks, without the need for enquiry as to whether the discrepancy in areas which may be ascertained existed or not at the date of submission of that application.

  49. As to the third subparagraph of Article 9(2) of Regulation No 3887/92, although it can be interpreted as covering only false declarations made deliberately or as a result of serious negligence at the time of submission of the aid application, it is clear both from the purpose of that provision and from the scheme of that article considered as a whole, that such a restrictive interpretation cannot be upheld.

  50. In order to attain the objective sought by Article 9(2), namely to prevent and penalise irregularities and fraud effectively, it is necessary for the third subparagraph of that provision to apply not only in the event of false statements made deliberately or as a result of serious negligence at the time of submission of the aid application, but also where the information given in that application no longer accords with the actualsituation established after the submission thereof owing to a change in the initial situation.

  51. In that regard, as the French Government has correctly observed, if the applicant for aid fails to notify the competent authorities of the changes occurring on the parcel in respect of which he has sought that aid, there will necessarily arise from that omission a discrepancy between the area declared in that application and that actually ascertained on a check, which is the precise situation covered by Article 9(2) of Regulation No 3887/92. Therefore, the fact of persisting with an aid application in the terms in which it was submitted notwithstanding a subsequent change of circumstances such as to affect the grant of aid, in itself, constitutes an irregularity within the meaning of that provision.

  52. Moreover, as the Court held at paragraph 37 of the judgment in Schilling and Nehring, cited above, it is apparent from the provisions of Regulations Nos 3508/92 and 3887/92 that the national authorities are not required, or above all able, to carry out checks to verify the accuracy of all the statements made in aid applications submitted to them. In the context of the IACS it is for the farmers to submit aid applications for areas which satisfy the requirements for the grant of the aid concerned and to notify the competent authorities of any change in circumstances occurring after submission of the application.

  53. The interpretation of the third subparagraph of Article 9(2) of Regulation No 3887/92, advocated by the applicant in the main action, according to which no penalty may be imposed unless an error was made at the time the application was submitted, with the result that changes in circumstances affecting the grant or continuation of the aid applied for are of no consequence, cannot therefore be upheld.

  54. Such a construction would mean that an applicant for aid might be tempted to submit an application satisfying all the regulatory conditions required by the IACS and not to correct the information given in that application if it became erroneous after submission thereof, given that no penalty could be imposed on the applicant.

  55. As regards the question which of the penalties prescribed by Article 9(2) of Regulation No 3887/92 applies to the circumstances of the main proceedings, it must be observed that it is for the national court to evaluate the degree of seriousness of the irregularity committed, and, in particular, whether the failure of the applicant for aid to notify the competent authority of changes affecting the grant of the aid was deliberate or seriously negligent within the meaning of the third subparagraph of that provision.

  56. Having regard to all those considerations, the answer to the questions referred must be that Article 9(2) of Regulation No 3887/92 must be interpreted as meaning that the penalties prescribed by that provision are not limited to cases in which the farmer has made erroneous or false declarations at the time when the aid application was submitted but that they also apply where the farmer has failed to notify the competent authority of changes affecting the conditions governing grant of the aid.

    Costs

    57. 57. The costs incurred by the French Government and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

    On those grounds,

    THE COURT (Sixth Chamber),

    in answer to the questions referred to it by the Oberverwaltungsgericht des Landes Sachsen-Anhalt by order of 7 September 2000, hereby rules:

    Article 9(2) of Commission Regulation (EEC) No 3887/92 of 23 December 1992 laying down detailed rules for applying the integrated administration and control system for certain Community aid schemes, as amended by Commission Regulations (EC) Nos 229/95 of 3 February 1995 and 1648/95 of 6 July 1995, must be interpreted as meaning that the penalties prescribed by that provision are not limited to cases in which the farmer has made erroneous or false declarations at the time when the aid application was submitted but that they also apply where the farmer has failed to notify the competent authority of changes affecting the conditions governing grant of the aid.

    Schintgen
    Gulmann
    Skouris

    MackenColneric

    Delivered in open court in Luxembourg on 28 November 2002.

    R. Grass J.-P. Puissochet

    Registrar President of the Sixth Chamber

    1: Language of the case: German.

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