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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Spain v Commission (Agriculture) [2003] EUECJ C-329/00 (19 June 2003)
URL: http://www.bailii.org/eu/cases/EUECJ/2003/C32900.html
Cite as: [2003] EUECJ C-329/00, [2003] EUECJ C-329/
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JUDGMENT OF THE COURT (Fifth Chamber)

19 June 2003 (1)

(EAGGF - Clearance of accounts - Expenditure for 1996 and 1997 - Compensatory aid for banana producers)

In Case C-329/00,

Kingdom of Spain, represented by R. Silva de Lapuerta, acting as Agent, with an address for service in Luxembourg,

applicant,

v

Commission of the European Communities, represented by S. Pardo and M. Niejahr, acting as Agents, assisted by J. Guerra Fernández, abogado, with an address for service in Luxembourg,

defendant,

APPLICATION for the annulment of Commission Decision 2000/449/EC of 5 July 2000 excluding from Community financing certain expenditure incurred by the Member States under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) (OJ 2000 L 180, p. 49), in so far as it provides for a financial adjustment in respect of expenditure declared by the Kingdom of Spain by way of compensatory aid for banana producers for the 1995 and 1996 marketing years,

THE COURT (Fifth Chamber),

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

Advocate General: J. Mischo,


Registrar: R. Grass,

having regard to the report of the Judge-Rapporteur,

after hearing the Opinion of the Advocate General at the sitting on 3 October 2002,

gives the following

Judgment

  1. By application lodged at the Court Registry on 8 September 2000, the Kingdom of Spain applied under the first paragraph of Article 230 EC for the annulment of Commission Decision 2000/449/EC of 5 July 2000 excluding from Community financing certain expenditure incurred by the Member States under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) (OJ 2000 L 180, p. 49, the contested decision), in so far as it provides for a financial adjustment in respect of expenditure declared by the Kingdom of Spain by way of compensatory aid for banana producers for the 1995 and 1996 marketing years.

    Legal background

  2. Article 5(2)(b) and (c) of Council Regulation (EEC) No 729/70 of 21 April 1970 on the financing of the common agricultural policy (OJ, English Special Edition 1970(I), p. 218), as amended by Council Regulation (EC) No 1287/95 of 22 May 1995 (OJ 1995 L 125, p. 1, Regulation No 729/70) provides:

    The Commission, after consulting the Fund Committee:

    ...

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

    ...

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

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

    ...

    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 24 months preceding the Commission's written communication of the results of those checks to the Member State concerned. ...

  3. The Commission's guidelines on financial adjustment were laid down in document No VI/5330/97 of 23 December 1997 on Guidelines for the calculation of financial consequences during the preparation of the decision for clearing the accounts of the Guarantee Section of the EAGGF (document No VI/5330/97). Where information provided by an inquiry is inadequate for assessing the losses sustained by the Community a flat-rate adjustment may be envisaged. The adjustment rates applicable are 2%, 5% or 10% depending on the extent of the risk of loss. A decision may be taken in exceptional cases to impose higher adjustments, which may go as far as total exclusion of the expenditure from Community financing.

  4. The granting of aid in the banana sector is governed in particular by Council Regulation (EEC) No 404/93 of 13 February 1993 on the common organisation of the market in bananas (OJ 1993 L 47, p. 1), and by Commission Regulation (EEC) No 1858/93 of 9 July 1993 laying down detailed rules for applying Council Regulation (EEC) No 404/93 as regards the aid scheme to compensate for loss of income from marketing in the banana sector (OJ 1993 L 170, p. 5), as amended by Commission Regulation (EC) No 796/95 of 7 April 1995 (OJ 1995 L 80, p. 17, Regulation No 1858/93).

  5. Regulation No 404/93 provided for aid to be granted to Community banana producers to compensate for any loss of income following the introduction of the common organisation of the market in bananas.

  6. Article 12(1) and (3) to (7) of Regulation No 404/93 provides:

    1. Compensation for any loss of income shall be granted to Community producers who are members of a recognised producers' organisation which is marketing in the Community bananas complying with the common standards laid down. ...

    ...

    3. Compensation shall be calculated on the basis of the difference between:

    - the flat-rate reference income for bananas produced and marketed within the Community, and

    - the average production income obtained on the Community market during the year in question for bananas produced and marketed within the Community.

    4. The flat-rate reference income shall be:

    - the average price of bananas produced in the Community and marketed during a reference period prior to 1 January 1993 to be determined in accordance with the procedure laid down in Article 27,

    - less the average cost of transport and delivery fob.

    ...

    5. The average production income for Community bananas shall be calculated each year from:

    - the average price of bananas produced in the Community and marketed during the year in question,

    - less the average cost of transport and delivery fob.

    6. Before 1 March of each year, the Commission shall determine compensatory aid for the previous year in accordance with the procedure laid down in Article 27.

    ...

    7. Advances may be paid, against a security, on the basis of compensatory aid granted in the previous year.

  7. Article 4(1), (3) and (5) of Regulation No 1858/93 provides:

    1. Applications for advances may be submitted in accordance with the timetable laid down in Article 7(2).

    ...

    3. Payment of the advance shall be subject to the lodging of a security together with the application. The amount of this security shall be fixed at 50% of the advance.

    ...

    5. The security shall be released as soon as the definitive aid is paid by the competent authorities.

  8. Article 7(2)(b) of Regulation No 1858/93 provides that an application for payment of the balance of the aid must be made at the latest by 31 January of the year following that in respect of which the aid is applied for. The balance comprises the aid for bananas marketed during November to December of the year in respect of which the aid is applied for and, where applicable, the adjustment to the amounts paid for bananas marketed during the months of January to October of that year on the basis of the definitive amount of aid.

  9. Article 10 of Regulation No 1858/93 provides:

    The competent national authorities, after verifying aid applications and the supporting documents, shall pay the amount of the advance or the definitive aid, as the case may be, within the two months following that in which the application was lodged.

  10. Quality standards for bananas were laid down in pursuance of Article 4 of Regulation No 404/93. They are set out in Commission Regulation (EC) No 2257/94 of 16 September 1994 laying down quality standards for bananas (OJ 1994 L 245, p. 6).

    Facts and pre-litigation procedure

  11. During an inspection visit in January 1997 Commission officials found that during 1995 and 1996 significant quantities of bananas taken into account in calculating compensatory aid had been sold on the local Canary Islands market at extremely low prices, under ESP 10 per kg and in some cases as low as ESP 1 per kg. According to the officials conducting the inspection it was possible that the bananas concerned had not actually been marketed, or had not met the minimum quality standards required in order to benefit from aid, that is to say, the quality standards laid down in Regulation No 2257/94, and the Spanish authorities should therefore, in the light of the prices declared, have carried out additional quality checks.

  12. As regards the bananas marketed in 1995, during that year producers had received payments by way of an advance on the compensatory aid. The definitive amount of the aid was established and the balance paid the next year, in 1996.

  13. By letter of 8 July 1997 the Commission conveyed to the Kingdom of Spain the findings made by its officials during their inspection and the doubts they had expressed as to whether the sales made at extremely low prices during 1995 and 1996 were in accordance with the requirements of the Community regulations.

  14. A further visit was made by Commission officials in November 1997.

  15. At a bilateral meeting held on 31 March 1998 the Commission gave its agreement to the authorities of the Autonomous Community of the Canaries for them to arrange for an audit within those undertakings which were considered to have bought bananas at a low price during the 1996 marketing year. The inspections took place in May 1998 at a certain number of the undertakings which had bought bananas from producers during the months of July and August 1996. The audit report sent to the Commission on 2 July 1998 did not reveal any consignment which had been sold by those intermediaries to retailers at under ESP 10/kg.

  16. The Commission officials considered that that report confirmed their own views.

  17. By letter of 15 June 1999 the Commission proposed a financial adjustment based on the difference between the compensatory aid paid to Spanish producers and the compensatory aid which would have been paid to them if the quantities of bananas sold at extremely low prices and the relevant prices had been excluded, in whole or in part, from the calculation of the average Community aid.

  18. By letter of 4 August 1999 the Spanish authorities applied for the conciliation procedure to be initiated.

  19. The Conciliation Body delivered its final report on 4 February 2000. It states in that report that it is extremely difficult to settle the dispute between the parties since their positions are based on assumptions rather than confirmed facts. It mentions that the evidence in its possession gives no reason to exclude the fact that the quality of the bananas in question was below the common standards, but it is unlikely that all the quantities concerned were of poor quality. It adds that it is also possible that frauds were committed in connection with the qualities actually sold, but no specific evidence was submitted to it to that effect.

  20. According to the Conciliation Body, the reasoning of the Spanish authorities was therefore also plausible. In particular, it is possible that the (small) quantities of bananas complying with the common standards were disposed of at prices below the cost price, since selling them would have enabled the producers to receive compensatory aid which they would otherwise have lost. Such a practice is not prohibited.

  21. The Conciliation Body concludes that it was unable to achieve a compromise between the views of the two parties. It nonetheless requests the Commission to check the basis for its proposed financial adjustment in the light of its observations.

  22. On 15 May 2000 the Commission adopted its summary report. It concluded that the Spanish authorities had not managed to show that the contested sales at extremely low prices in 1995 and 1996 had actually been made or that they met the required common quality standards. The Commission stated that it was proposing a financial adjustment of 100% of the compensatory aid relating to the quantities of bananas marketed at below ESP 5/kg and of 25% of the compensatory aid relating to the quantities of bananas marketed at between ESP 5 and 10/kg. That adjustment meant recalculating the amount of compensation by subtracting the said goods in order to determine the average ex-warehouse processing price and prevent the sales allegedly made from having an impact on the final amount of compensatory aid. The total amount of the adjustment was ESP 428 882 534.

  23. On 5 July 2000 the Commission adopted the contested decision, which imposes the financial adjustment contained in the summary report.

    First plea: incorrect application of the adjustment to payments made in 1995

    Arguments of the parties

  24. The Spanish Government contends that it was incorrect for the contested decision to apply also to amounts paid in compensatory aid between 1 January and 15 October 1995, since that expenditure had already been cleared by Commission Decision 1999/187/EC of 3 February 1999 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1995 of the Guarantee Section of the EAGGF (OJ 1999 L 61, p. 37). The contested decision therefore infringed the principle of respect for legitimate expectations and the principle of legal certainty.

  25. The Spanish Government rejects the Commission's assertion that the amounts paid in 1995 should be regarded as advances which could not be cleared by Decision 1999/187. The premise on which the Commission based its case, namely that the compensatory aid could not be regarded as being definitely awarded until the balance of the aid had been paid and that no amount paid before the balance of the aid had been paid could be cleared, is false.

  26. According to the Spanish Government, unlike the system applying with regard to rural development aid, which is a special scheme, as is made clear in particular by Article 7(4), fifth subparagraph, (b) of Council Regulation (EC) No 1258/1999 of 17 May 1999 on the financing of the common agricultural policy (OJ 1999 L 160, p. 103), the various payments made up to the final payment of the compensatory aid in the banana sector are not advances and can be cleared.

  27. The Spanish Government also rejects the arguments by which the Commission, on the basis of the 12th and final recitals in the preamble to Decision 1999/187, claims that it can alter certain aspects of the clearance decision.

  28. With regard to the 12th recital in the preamble to Decision 1999/187, the Spanish Government considers that it refers to Article 5(2)(c) of Regulation No 729/70, under which the Commission may exclude from Community financing expenditure effected within a certain period where it finds that that expenditure has not been effected in compliance with Community rules. According to the Spanish Government, however, since that provision is based on an amendment to Regulation No 729/70 by Regulation No 1287/95, which did not enter into force until financial year 1996, it could not apply to payments made during financial year 1995.

  29. At any event, even if Regulation No 1287/95 did apply in the present case, only expenditure effected after 8 July 1995 could be taken into account, that is to say expenditure incurred less than 24 months before the letter of 8 July 1997, which was the date on which the Commission first communicated the results of its inspections in writing to the Kingdom of Spain. The Spanish Government contends that by that date the greater part of the expenditure for financial year 1995 had already been effected. The financial adjustment procedure is therefore time-barred since it relates to most of the expenditure effected in 1995.

  30. As regards the final recital in the preamble to Decision 1999/187, which states that this decision is without prejudice to any financial consequences drawn by the Commission, during a subsequent accounts clearance procedure, from current investigations under way at the date of the decision, namely 3 February 1999, the Spanish Government states that no one is denying that at that date the investigations relating to financial years 1996 and 1997 were not yet completed. However, those investigations did not concern expenditure for financial year 1995, which had been cleared and agreed.

  31. The Commission maintains first of all that since the aid had been definitively paid in 1996, Decision 1999/187, relating to financial year 1995, did not clear the advances paid in 1995.

  32. The Commission submits that in order to be able to consider that there is entitlement to the aid under Regulation No 1858/93 it must have at its disposal all the data relating to the annual period under consideration, corresponding to a marketing season and running from 1 January to 31 December of the year concerned. It is only once it is in possession of that data, at the end of the year, that the Commission can ascertain whether the circumstances justifying payment of the aid exist, in the sense that production income was less than the reference income, and fixes the amount of the aid. Only then can the balance be paid and the securities released. Amounts paid before the amount of aid is fixed are merely provisional advances open to subsequent revision and cannot therefore be cleared.

  33. Second, the Commission rejects the Spanish Government's argument based on an interpretation of Article 7(4), fifth subparagraph, (b) of Regulation No 1258/1999, on the one hand, because that regulation does not apply to expenditure made after 1 January 2000 and so it is not possible to obtain an interpretation from it which could be extrapolated to the present case and, on the other hand, because the provision relied on by the Spanish Government concerns a different sector, namely that of rural development aid.

  34. Third, the Commission rejects the Spanish Government's assertion that under Article 5(2)(c) of Regulation No 729/70 the financial adjustment cannot in any case be applied to expenditure prior to 8 July 1995, which forms most of the expenditure covered by compensatory aid incurred in 1995. The Commission points out that although the advances were made in 1995 the aid itself was not paid until 1996. Recovery of that aid is therefore not time-barred.

  35. Fourth and finally, the Commission, contrary to the Spanish Government, contends that as its inquiry into the contested compensatory aid had clearly not been concluded on 3 February 1999 when Decision 1999/187 was adopted, if only because the Commission had not yet notified the Spanish authorities of the final result, that decision did not prevent it, under the final recital, from calling that aid into question, including the amounts paid in 1995.

    Findings of the Court

  36. The provisions of Article 5(2)(c) of Regulation No 729/70, also referred to in the 12th recital in the preamble to Decision 1999/187, permit the Commission to exclude from Community financing expenditure not in compliance with Community rules that has been effected during the 24 months before the Commission communicated the results of its inspections in writing to the Member State concerned.

  37. It should be pointed out that those provisions, by which the legislature introduced an adjustment procedure subject to a period of 24 months, were inserted in Regulation No 729/70 by Regulation No 1287/95.

  38. The Court has ruled that the adjustment procedure must be taken to apply to financial years after 16 October 1992 which were not the subject of a clearance decision prior to the entry into force of Regulation No 1287/95 (see Case C-373/99 Greece v Commission [2001] ECR I-9619, paragraph 80). In the present case, since the financial year in question is 1995 and since the decision relating to the clearance of accounts for that financial year, namely Decision 1999/187, was adopted on 3 February 1999, which was after the entry into force of Regulation No 1287/95, it follows that, contrary to the Spanish Government's line of argument, the adjustment procedure was intended to apply to that financial year.

  39. The Spanish Government contends, however, that although the adjustment procedure was intended to apply to financial year 1995 as a result of the period of 24 months it provides for, the adjustment cannot in the present case apply to all the amounts paid during that financial year.

  40. It is appropriate therefore to verify whether, in adopting the contested decision, the Commission complied with the period of 24 months provided for in Article 5(2)(c) of Regulation No 729/70.

  41. In that regard, the parties agree on the fact that the Commission's written communication is dated 8 July 1997 so that it is that date which should be taken into consideration for calculating the period of 24 months referred to in Article 5(2)(c) of Regulation No 729/70. The Commission could therefore, if appropriate, apply the adjustment procedure to the expenditure effected by the Kingdom of Spain from 8 July 1995.

  42. It should also be pointed out that the Spanish Government does not deny that the definitive amount of the compensatory aid for bananas marketed in 1995 was established - and the balance paid - in 1996.

  43. That date must be regarded as decisive as regards application of Article 5(2)(c) of Regulation No 729/70. Indeed, even if they can appear in the decision clearing the accounts, the amounts paid during the preceding year only constitute, as the Commission rightly contends, advances subject to the lodging of a security, and they are therefore not relevant as regards determining the date on which the aid is expended, for the purposes of applying the period of 24 months.

  44. The fact remains that the aid was expended in 1996, that is to say, within the period of 24 months prior to the Commission's written communication dated 8 July 1997.

  45. It follows that in adopting the contested decision the Commission did not infringe the period of 24 months referred to in Article 5(2)(c) of Regulation No 729/70 in respect of the adjustment of the aid imposed in 1996 with reference to the 1995 marketing year.

  46. In the light of the foregoing, it must be concluded that by adjusting the aid expended in 1996 on bananas marketed in 1995 the contested decision did not infringe the principles of legal certainty and respect for legitimate expectations to the detriment of the Kingdom of Spain.

  47. The Spanish Government's first plea alleging incorrect application of the contested decision to payments made during financial year 1995 must therefore be rejected as unfounded.

    Second plea: use of incorrect data and incorrect interpretation

    Arguments of the parties

  48. The Spanish Government contends, first of all, that the Commission wrongly used marketing data for financial years 1996 and 1997 and applied them to the 1995 and 1996 marketing seasons, which correspond to the calendar years and do not coincide with the financial years concerned.

  49. The Commission replies that it used the data which the Spanish authorities sent it and contends that it suggested to them on a number of occasions that they should provide more specific data, stating that it was prepared to redo the calculations.

  50. Secondly, the Spanish Government rejects the conclusions drawn by the Commission, which, on the basis of the finding of an extremely low selling price, maintains that the checks by the national authorities were limited to purely administrative checks and that there is a genuine risk that the invoices issued relate either to bananas which were not actually marketed or to bananas which were of a quality below the common standards.

  51. First, the Spanish Government states that the low prices relate only to very small quantities. Thus, with regard to financial year 1995, the bananas sold at a price below ESP 5/kg, and those sold at a price of between ESP 5 and 10/kg represent 0.48% and 0.4%, respectively, of the total volume of bananas in respect of which compensatory aid was applied for during that financial year. With regard to financial year 1996, they represent 0.9% and 0.5%, respectively, of the total volume of bananas in respect of which compensatory aid was applied for during that financial year.

  52. Secondly, compliance with common quality standards is ensured by carrying out the checks provided for under Commission Regulation (EC) No 2898/95 of 15 December 1995 concerning verification of compliance with quality standards for bananas (OJ 1995 L 304, p. 17). Other checks were carried out following short-term problems and complaints or on the basis of evidence of irregularity. In addition, there is an automatic alarm system, involving specific checks where reports drawn up by officials of the autonomous authority indicate that prices have fallen below a certain threshold.

  53. In addition to those checks, the Intervención General de la Administración del Estado (State General Inspectorate) and the Servicio de Inspección Financiera de la Comunidad Autónoma de Canarias (Financial Inspectorate of the Autonomous Community of the Canaries) carried out ex post checks with the recipients of compensatory aid. Those checks made it possible to establish whether the transactions involved in marketing bananas at low prices had actually taken place and whether the bananas sold complied with the common quality standards.

  54. Thirdly, the Spanish Government refers to the observation by the Conciliation Body that it is unlikely that bananas of a quality below the common standards would be put on sale in a situation where there is excess supply. The Government explains that in such circumstances purchasers prefer to buy bananas which are slightly more expensive but are of a quality that meets the standards.

  55. Fourthly, the low level of prices on the island market might be due to a number of short-term reasons, such as excess supply on the mainland market, the appearance on the market of other substitute fruit at lower prices, or certain climatic factors. The major price variations over the year are confirmed by the weekly lists of prices charged by wholesalers on the Canary market, lists which were submitted to the Conciliation Body and attached to the observations submitted to the Court.

  56. Fifthly, the Spanish Government states that, according to the Conciliation Body, it is perfectly possible that small quantities of bananas complying with the common quality standards were marketed at prices below the cost price since their sale enabled producers to receive compensatory aid which they could not have received otherwise.

  57. Sixthly and lastly, the Spanish Government contends that the criteria required under document No VI/5330/97 in order to impose a flat-rate adjustment are by no means met in the present case.

  58. The Commission submits that the need for a financial adjustment stems from the conclusions reached by its officials after carrying out a random check on a sample of over 100 payment files. Some of the prices found which were under ESP 5 or between ESP 5 and 10/kg could, according to the Commission, be called token prices. The Commission points out that, in comparison, the average annual marketing price for bananas was ESP 16/kg in 1995 and ESP 22.7/kg in 1996; on a weekly basis the lowest average was ESP 10/kg in 1995 and ESP 18/kg in 1996, although during the 14th week of 1996 a fall in prices to ESP 9.47/kg was observed.

  59. The explanations provided by the Canaries authorities revealed that the checks on sales transactions did not go beyond a purely administrative and superficial check. Furthermore, the information checked revealed that the inspection facilities available to the regional agricultural authorities had not been used very often. As for the so-called automatic alarm, it did not enter into force until 1997, and the marketing seasons that were the subject of the clearance related to the years 1995 and 1996 and had ended by then.

  60. The Commission mentions that, in the light of that information, it considered that the token prices related to fictitious sales or to sales of products which did not comply with the common quality standards, whilst accepting that reasonable doubt might exist regarding the quantities marketed at between ESP 5 and 10/kg.

  61. The Commission states that at a bilateral meeting it agreed to the Canaries authorities arranging an audit in order to compare purchases of bananas by intermediaries with subsequent sales of such bananas by those intermediaries. The report prepared at the end of that audit relating to the months of July and August 1996, a period during which prices tend to fall, revealed that prices of second grade bananas, in other words, those of inferior quality, remained within a range of ESP 10 to 50. Consequently, the report did not, in the Commission's view, show that any sales had actually been made at under ESP 10. Details supplied subsequently in respect of that report by the Kingdom of Spain did not provide evidence that the sales had actually been made, either.

  62. The Commission considers that the explanation for such low prices on the market lies neither in excess supply, nor in the presence on the market of substitute products, nor in climate factors.

  63. The Commission recognises that some producers might wish to sell their products at any price in order to receive compensatory aid. It adds, however, that the sales should at any rate be genuine and concern bananas of monitored quality. At the prices which were recorded the Commission does not consider it possible that those two conditions were met.

  64. The Commission contends that its arguments are by no means rebutted by the price lists submitted by the Spanish Government. They show the significant fluctuations in the price of bananas from the Canary Islands but do not explain the exceptionally low selling prices that Commission officials found. Moreover, those lists give the wholesale prices, whereas the adjustment imposed is calculated on the basis of the prices at which producers sold the bananas to the wholesalers. They cannot therefore constitute appropriate evidence.

  65. The Commission submits that the references made by the Spanish Government to certain criteria laid down in document No VI/5330/97 are irrelevant because they only relate to flat-rate adjustments. The Commission did not impose flat-rate adjustments in this case because it was able to assess the loss actually sustained.

    Findings of the Court

  66. As regards the alleged use of incorrect data, it should be noted that the Commission requested the Spanish authorities to provide it with information for the years 1995 and 1996. Having obtained information concerning financial years 1995 and 1996, which run from October each year to September the next year, and not concerning the marketing years, which correspond to the calendar years, it requested those authorities on several occasions to correct the information provided. They did not, however, send any corrections.

  67. It must therefore be considered that the Commission did not commit any error in requesting information concerning the years 1995 and 1996 and in then using only the data which the Spanish authorities supplied to it and which the latter did not correct even after they had been invited to do so by the Commission.

  68. As regards the Commission's alleged error in interpreting the results of its inspections, it should be noted that, in order to prove an infringement of the rules on the common organisation of the agricultural markets, the Commission is not required to demonstrate exhaustively that the checks carried out by the national authorities are inadequate, or that the data submitted by them are incorrect, but to adduce evidence of serious and reasonable doubt on its part regarding the checks or data. The reason for this mitigation of the burden of proof on the Commission is that it is the Member State which is best placed to collect and verify the data required for the clearance of EAGGF accounts and, consequently, it is for that State to adduce the most detailed and comprehensive evidence that its inspections or figures are accurate and, if appropriate, that the Commission's statements are incorrect (see in particular Case C-247/98 Greece v Commission [2001] ECR I-1, paragraphs 7 to 9).

  69. In the present case there are grounds for considering that, in the light of the abnormally low prices which the Commission found on the Canary market, it could entertain serious doubts as to the effectiveness of the inspections in place and whether the sales alleged to have taken place were genuine or whether the quality of the bananas complied with the common quality standards.

  70. It was therefore for the Spanish Government to adduce the most detailed and comprehensive evidence that the sales alleged to have taken place were genuine and that the products sold complied with the common quality standards. It was necessary for it to show in particular that the relevant inspection system would have detected any anomalies.

  71. In that regard, the Spanish Government has supplied information regarding the existing inspection system and also to show that the sales were genuine and complied with the common quality standards.

  72. It is necessary to check whether that information provides adequate evidence.

  73. As regards the checks, it is clear, first, from the Spanish Government's observations that the so-called automatic alarm system did not come into force until 1997. That system is therefore irrelevant as regards consideration of whether the checks relating to 1995 and 1996 were adequate. Second, although there was an overall system of checks it is not clear from those observations whether general provision was made for specific checks should abnormally low prices be found on the market, nor whether such checks were made in the present case. Consequently, the Commission was entitled to consider that the checks carried out were inadequate.

  74. As regards the information provided on the contested sales, the Spanish Government contends that the weekly price lists for 1995 and 1996 show that the banana market experienced significant price variations. The fact remains, however, that although those lists do indeed reveal significant price variations they do not demonstrate that the contested sales were actually made. Moreover, the variations were in the prices charged by the wholesalers, not by the producers. Aid is granted to producers on the basis of their selling prices and not on the basis of the prices invoiced by the wholesalers. Those lists do not therefore by any means constitute conclusive evidence.

  75. The Spanish Government also relies on the results of the internal audit for the months of July and August 1996. To the extent that that audit showed prices that were all higher than ESP 10, it served to confirm the Commission's initial doubts. Moreover, the Spanish Government was not able to show specifically that the sales covered in the audit were made at prices below ESP 10.

  76. The comments of the Conciliation Body to which the Spanish Government refers do not constitute evidence either, only possible explanations for the abnormally low prices found on the market.

  77. Thus it is apparent that the Spanish Government did not submit tangible evidence either that the sales at abnormally low prices were genuine or that the bananas sold in that way complied with the common quality standards. In those circumstances, it must be considered that the Commission did not commit any error in maintaining its initial conclusions that it was improbable that the contested sales took place in accordance with the Community rules and that it was necessary to impose a financial adjustment.

  78. As regards the amount of the adjustment imposed and, in particular, the Spanish Government's complaint that the Commission did not comply with the criteria applicable to flat-rate adjustments, suffice it to say that, as the Commission rightly states, the adjustment imposed in the present case is not a flat-rate adjustment but corresponds to an assessment of the loss sustained by the EAGGF. The criteria relating to flat-rate adjustments contained in document No VI/5330/97 did not therefore apply.

  79. The second plea, alleging the use of incorrect data and an error of interpretation, must therefore be rejected as unfounded.

    Third plea: inadequate grounds

    Arguments of the parties

  80. The Spanish Government submits that the contested decision contains an inadequate statement of the grounds on which it is based. The Commission did not explain either during the procedure leading to the adoption of the contested decision or in the decision itself the grounds on which the percentages of bananas excluded from Community financing are, on the one hand, 100% as regards bananas marketed at a price below ESP 5/kg and, on the other hand, 25% as regards bananas marketed at a price of between ESP 5 and 10/kg. The contested decision is entirely lacking in grounds on that point, which prevents the Spanish Government from ascertaining the justification for the measure.

  81. The Commission challenges the plea put forward by the Spanish Government. It points out that case-law does not require detailed grounds since the Member State is closely involved in the decision-making process. It mentions that in the present case the Spanish Government knew from 15 June 1999, and even earlier, that the ground for the adjustment was the exceptionally low level of the selling price.

  82. The Commission also makes clear that at no point in the proceedings did the Spanish authorities challenge the method for determining the adjustment percentages and had always understood the grounds for it.

    Findings of the Court

  83. According to settled case-law, in the particular context of the preparation of decisions on the clearance of accounts, the grounds for a decision must be considered adequate if the Member State to which the decision is addressed was closely involved in the decision-making process and was aware of the reasons why the Commission considered that it was not required to charge the sum in dispute to the EAGGF (see Case C-147/99 Italy v Commission [2001] ECR I-8999, paragraph 57).

  84. In that regard, it is clear from the procedure followed by the Commission as described in paragraphs 10 to 22 of this judgment that the Spanish authorities were closely involved in the decision-making process and were aware of the Commission's doubts and the reasons why it proposed to apply a financial adjustment. It must therefore be considered that the Commission did not fail to comply with the obligation to provide a statement of grounds laid down in Article 253 EC and the Spanish Government's third plea must be rejected as unfounded.

  85. In the light of all the above considerations, the application must be dismissed in its entirety.

    Costs

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

    On those grounds,

    THE COURT (Fifth Chamber)

    hereby:

    1. Dismisses the application in its entirety;

    2. Orders the Kingdom of Spain to pay the costs.

    Edward
    La Pergola
    Jann

    von BahrRosas

    Delivered in open court in Luxembourg on 19 June 2003.

    R. Grass M. Wathelet

    Registrar President of the Fifth Chamber

    1: Language of the case: Spanish.

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