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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Gr�ce v Commission (Agriculture) [2004] EUECJ C-332/01 (09 September 2004)
URL: http://www.bailii.org/eu/cases/EUECJ/2004/C33201.html
Cite as: [2004] EUECJ C-332/1, [2004] EUECJ C-332/01

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IMPORTANT LEGAL NOTICE - IMPORTANT LEGAL NOTICE - The source of this judgment is the web site of the Court of Justice of the European Communities. The information in this database has been provided free of charge and is subject to a Court of Justice of the European Communities disclaimer and a copyright notice. This electronic version is not authentic and is subject to amendment.

JUDGMENT OF THE COURT (Second Chamber)
9 September 2004 (1)

(EAGGF - Clearance of accounts - 1996 to 1999 - Decision 2001/557/EC - Cotton, olive oil, dried grapes, sheepmeat and goatmeat)

In Case C-332/01,

ACTION for annulment under Article 230 EC brought on 3 September 2001,

Hellenic Republic, represented by V. Kontolaimos and I. Chalkias, acting as Agents, with an address for service in Luxembourg,

applicant,

v

Commission of the European Communities, represented by M. Condou-Durande, acting as Agent, with an address for service in Luxembourg,

defendant,

THE COURT (Second Chamber),

composed of: C.W.A. Timmermans, President of the Chamber, J.-P. Puissochet, J.N. Cunha Rodrigues (Rapporteur), R. Schintgen and N. Colneric, Judges,

Advocate General: F.G. Jacobs,
Registrar: H. von Holstein, Deputy Registrar

having regard to the written procedure and further to the hearing on 13 November 2003,

after hearing the Opinion of the Advocate General at the sitting on 22 January 2004,

gives the following

Judgment

By its application the Hellenic Republic seeks the annulment of Commission Decision 2001/557/EC of 11 July 2001 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 2001 L 200, p. 28, -�the contested decision-�), in so far as it concerns the applicant.

Legal background

The financing of expenditure under the EAGGF

Regulation (EEC) No 729/70 of the Council 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, under Articles 1(2)(b) and 3(1), that the Guarantee Section of the EAGGF is to finance interventions intended to stabilise agricultural markets undertaken according to Community rules within the framework of the common organisation of agricultural markets.

Article 5(2)(c) of Regulation No 729/70 provides:

Article 9(1) of Regulation No 729/70 provides:

Pursuant to Article 9(2) of Regulation No 729/70, officials appointed by the Commission to carry out inspections on the spot are to have access to the books and all other documents relating to expenditure financed by the EAGGF.

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 the accounts of the EAGGF Guarantee Section (OJ 1995 L 158, p. 6) lays down, inter alia, obligations on the coordinating bodies which are the sole representatives of the Member State concerned before the Commission. Those bodies must hold at the disposal of the Commission a full record of all accounting information required in a form enabling the Commission to carry out the necessary controls.

The annex to Regulation No 1663/95 lays down detailed administrative and accounting rules which must be followed by the paying agencies of the Member States so as to ensure effective control of the eligibility of claims for aid and compliance with the Community rules on the corresponding payments.

Commission Document No VI/5330/97 of 23 December 1997 contains guidelines which the Commission intends to follow when applying financial corrections in the context of the clearance of the EAGGF accounts. According to those guidelines, where the actual level of irregular payments cannot be determined and, consequently, it is impossible to quantify the amount of financial loss suffered by the Community, the Commission is to apply fixed-rate financial corrections generally amounting to 2%, 5%, 10% or 25% of the declared expenditure according to the magnitude of risk of loss.

That document also makes clear that those guidelines distinguish between two categories of controls:

Document No VI/5330/97 provides in this connection that:

The cotton sector

Article 8(1) of Commission Regulation (EEC) No 1201/89 of 3 May 1989 laying down rules implementing the system of aid for cotton (OJ 1989 L 123, p. 23), as amended in particular by Commission Regulation (EC) No 1437/96 of 23 July 1996 (OJ 1996 L 184, p. 29) (-�Regulation No 1201/89-�), provides:

Article 12(1)(a) of Regulation No 1201/89 provides:

The olive oil sector

Article 1(1) of Regulation (EEC) No 154/75 of the Council of 21 January 1975 on the establishment of a register of olive cultivation in the Member States producing olive oil (OJ 1975 L 19, p. 1), as amended by Council Regulation (EEC) No 3453/80 of 22 December 1980 (OJ 1980 L 360, p. 15) (-�Regulation No 154/75-�), requires the Member States concerned to establish a register of olive cultivation to cover all olive-growing holdings within their territory.

Article 1(2) of Regulation No 154/75 provides that the register of olive cultivation is to furnish the following information for each holding:

Under that same provision, the register of olive cultivation in Greece was to be established by 31 October 1988.

Article 16(1) of Council Regulation (EEC) No 2261/84 of 17 July 1984 laying down general rules on the granting of aid for the production of olive oil and of aid to olive oil producer organisations (OJ 1984 L 208, p. 3), requires each producer Member State to draw up and keep up to date permanent computerised files of olive and olive oil production data.

Article 11(1) of Commission Regulation (EEC) No 3061/84 of 31 October 1984 laying down detailed rules for the application of the system of production aid for olive oil (OJ 1984 L 288, p. 52) as amended by Commission Regulation (EEC) No 98/89 of 17 January 1989 (OJ 1989 L 14, p. 14) (-�Regulation No 3061/84-�), provides that the Member States are to enter in the computerised files the data contained in the register of olive cultivation, as soon as such data become available.

In accordance with Article 11(2) of Regulation No 3061/84, the files were to be operational before 31 October 1990.

The dried grape sector

Article 3 of Commission Regulation (EEC) No 2911/90 of 9 October 1990 laying down detailed rules of application for aid for the production of certain varieties of grapes for drying (OJ 1990 L 278, p. 35), as amended by Commission Regulation (EC) No 2475/94 of 13 October 1994 (OJ 1994 L 264, p. 6), and Commission Regulation (EC) No 2614/95 of 9 November 1995 (OJ 1995 L 268, p. 7) (-�Regulation No 2911/90-�), lays down the information and data which must be included in cultivation declarations.

Article 3(1) of Regulation No 2911/90 provides:

Article 3(2) of that regulation states:

Article 6 of Regulation No 2911/90 defines the checks which the Member States must carry out. The first subparagraph of paragraph 2 of that article states:

Commission Regulation (EC) No 1456/97 of 25 July 1997 fixing for the 1997/98 marketing year the amount of the aid for the cultivation of grapes intended for the production of certain varieties of dried grapes (OJ 1997 L 199, p. 4), fixes the minimum yields below which no aid can be paid. Article 1(3) provides that the Member States are to take all measures necessary for checking this minimum yield.

Article 16 of Council Regulation (EC) No 1493/1999 of 17 May 1999 on the common organisation of the market in wine (OJ 1999 L 179, p. 1), lists the information contained in the inventory of production potential. Paragraph 2 of that article states that a Member State may provide that the inventory may be drawn up on a regional basis. However, in this case, all regional inventories are to be drawn up by 31 December 2001.

Article 2(3) of Commission Regulation (EC) No 1621/1999 of 22 July 1999 laying down detailed rules for the application of Council Regulation (EC) No 2201/96 as regards aid for the cultivation of grapes to produce certain varieties of dried grapes (OJ 1999 L 192, p. 21), which replaced Regulation No 2911/90 from the 1999/2000 marketing year, provides:

Article 13(1) of Regulation No 1621/1999 provides:

The sheepmeat and goatmeat sector

Article 5(1) 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), provides:

-�-�

Article 6 of the same regulation provides:

Under Article 10(5) of Regulation No 3887/92:

Article 12 of that regulation states as follows:

The first and second subparagraphs of Article 1(3) of Commission Regulation (EEC) No 2700/93 of 30 September 1993 on detailed rules for the application of the premium in favour of sheepmeat and goatmeat producers (OJ 1993 L 245, p. 99), as amended by Commission Regulation (EC) No 279/94 of 8 February 1994 (OJ 1994 L 37, p. 1) (-�Regulation No 2700/93-�), provides:

Article 4 of Regulation No 2700/93 provides:

Under the second paragraph of Article 9 of Regulation No 2700/93, that regulation applies from the 1994 marketing year.

Facts and procedure

The grounds on which the operations covered by the contested decision are considered to be irregular are set out in the Summary Report AGRI/17537-01-EN-FINAL of the Commission of 19 June 2001 (-�the Summary Report-�).

In the cotton sector, the Commission found, for the 1995/96 marketing year, a failure to carry out on-the-spot checks of the declarations of the areas of cotton sown in the prefectures (administrative regions) of Serres and Drama whereas Article 12(1) of Regulation No 1201/89 requires that such checks should cover a minimum of 5% of the declarations of areas sown. The Commission also found that the checks of the areas sown were carried out late, between December 1996 and March 1997. It therefore applied a fixed rate of correction of 10% in respect of all those errors, in the total sum of GRD 4 163 259 550.

In the olive oil sector, the inspections carried out in Greece revealed various shortcomings in the system of checks, the most important being the lack of a register of olive cultivation and of any computerised files. In 1999 the Greek authorities presented evidence of improvements introduced. After a meeting with those authorities in Brussels on 23 September 1999 the Commission stated that, whilst it appreciated those improvements, they were insufficient to remedy the shortcomings observed. Consequently, the Commission applied a financial correction of 5% of the expenditure declared for the 1997 and 1998 financial years (corresponding to the 1995/96 and 1996/97 marketing years respectively), in the sum of GRD 17 308 535 972.

In the dried grape sector, following its inspection in 1998 in the prefecture of Heraklion, the Commission found three types of infringement: first, in the checks on areas cultivated and the eligibility of grape varieties for Community aid; second, in the checks on the minimum yield and on the eligibility of grape varieties and, lastly, in the adoption and application of the systems of checks. In respect of the first two types of infringement, the Commission imposed a financial correction of 5% of the expenditure declared for the 1997, 1998 and 1999 financial years for the prefecture of Heraklion. A correction of 2% was applied to expenditure relating to the whole of Greece for the same financial years in respect of the third type of infringement. Those corrections were in the total sum of GRD 3 144 838 970.

In the sheepmeat and goatmeat sector, following two audits carried out in 1997 and 1998 the Commission considered that the inspection system applied in Greece to the sheepmeat and goatmeat premium scheme did not comply with the Community legislation and had various shortcomings such as the lack of a livestock movement register, very few on-the-spot checks in certain prefectures, unreliable inspection statistics, poor quality inspection reports, delays in data processing, lack of risk analysis, failure to notify the place of retention, failure to mark animals and merely oral notification of losses. On that basis, in respect of the expenditure declared for 1995, 1996 and 1997, the Commission imposed a correction of 25% of that expenditure for the prefecture of Rethymnon (Crete) because of a total failure to inspect, 10% in respect of certain other prefectures and 5% for the rest of Greece. The total amount of those corrections was in the sum of GRD 11 863 933 000.

By the contested decision, the Commission excluded from Community financing the amounts referred to in paragraphs 35 to 38 of the present judgment on the ground that they failed to comply with Community law.

By the present action, the Hellenic Republic asks the Court to annul or at least amend the contested decision in so far as that decision imposes those financial corrections on that Member State.

The Commission contends that the Court should dismiss the action and order the Hellenic Republic to pay the costs.

The correction in respect of production aid for cotton

Arguments of the parties

The Greek Government claims that the Commission errs in its interpretation of Article 12(1)(a) of Regulation No 1201/89, in that that article requires inspections in respect of 5% of the declarations of areas sown with cotton, not in each prefecture but nationally, as occurred in Greece. Whilst that regulation requires that the inspections must make it possible to check the truthfulness and accuracy of the declarations of areas sown, by means of a representative sample, nothing requires the prefecture to be taken as the administrative unit of reference.

The Commission contends that the representativeness of the inspections must be assessed in relation to each administrative region in which cotton is cultivated since the inspections are intended to ensure the accuracy of the declarations. Those declarations would be treated with caution if no inspections at all were carried out in certain high-yielding regions. The failure to carry out inspections in the two prefectures in question, which the Hellenic Republic does not deny, thus constitutes a high-risk factor for the Community-�s resources.

As for the criticism that it delayed in carrying out the inspections, the Greek Government submits that Regulation No 1201/89 does not set any time-limits for carrying out on-the-spot inspections, failure to comply with which entails financial corrections. Inspections may be carried out not only until November, but also until March or April of the year following the harvest provided that the cotton stalks remain in the ground. Moreover, the delays in the present case were due to force majeure, namely, strikes.

The Commission contends that the inspections should have been carried out before the harvest, that is to say, in October at the latest. It adds that there can be no force majeure where notice of a strike is given.

Findings of the Court

Article 12(1)(a) of Regulation No 1201/89 provides that the appointed agency must carry out -�random inspections relating to not less than 5% of the declarations-�.

In requiring that the inspections should relate to not less than 5% of the declarations, that provision is intended to ensure that the inspections are representative. It does not state that, in Greece, those 5% must be ascertained in respect of each prefecture rather than on the basis of larger administrative regions. On the other hand it does require those inspections to be -�random-�.

It is clear from the evidence in the file before the Court that, during the 1995/96 marketing year, the Greek authorities randomly selected 1 101 of the 10 874 declarations made in the prefecture of Serres and 325 of the 3 222 declarations made in the prefecture of Drama. It is, however, not in dispute that during that marketing year, no on-the-spot inspections were carried out in either of those prefectures.

It follows that, in those prefectures, random inspections were not carried out, as required by Article 12(1)(a) of Regulation No 1201/89.

As for the Greek Government-�s argument that the failure to carry out inspections in those two nomoi during the 1995/96 marketing year was an isolated event, due to a temporary lack of staff, it should be noted that it is for the authorities of the Member States to implement a reliable and operational supervisory system organised in such as way as to prevent such shortcomings arising (see, to that effect, Case C-157/00 Greece v Commission [2003] ECR I-153, paragraph 18).

As for the Commission-�s finding that the inspections of areas sown with cotton during the 1996/97 marketing year were carried out late, it should be noted that it is for the Member State concerned to adduce the most detailed and comprehensive evidence that it has made checks or that its figures are accurate and, if appropriate, that the Commission-�s assertions are incorrect (Greece v Commission, paragraph 17).

It is clear from the information provided to the Court that, notwithstanding the Commission-�s repeated requests, the Greek authorities did not adduce in due time any information or document to show that such inspections had been carried out, whether before or after the harvest in the marketing year in question.

Consequently, the Greek Government-�s argument relating to the belated inspections of areas must be rejected without its being necessary to decide whether it would have been in accordance with Article 12(1)(a) of Regulation No 1201/89 to carry out such inspections in the months following the harvest rather than before it, or whether a strike can constitute force majeure justifying the delay in carrying out those inspections.

In the light of the foregoing, the Greek Government-�s arguments in respect of the financial correction imposed on the production aid for cotton must be rejected in their entirety as unfounded.

The correction in respect of production aid for olive oil

First plea: infringement of the fourth subparagraph of Article 5(2)(c) of Regulation No 729/70

The Greek Government claims that the application of a financial correction of 5% to the expenditure declared for the 1997 and 1998 financial years infringes the fourth subparagraph of Article 5(2)(c) of Regulation No 729/70 because the Commission extrapolated the findings made during the inspections carried out between 20 and 24 May 1996 to those financial years on the sole ground that it had not remedied the failure to put in place a register of olive cultivation and computerised files of olive and olive oil production data, for which the Hellenic Republic had already been reproached in 1996. The correction was all the more unfounded since the lack of a register of olive cultivation may be overcome by using another equally reliable system of checks. Moreover, the Commission committed an abuse of process as an action for failure to fulfil obligations would have been more appropriate because the correction may be regarded as a penalty for delay in setting up that register.

The Commission submits that the failure to establish a register of olive cultivation does not necessarily have to be the subject of an action for failure to fulfil an obligation and that, in the context of EAGGF expenditure, such a financial correction is not a penalty. The correction cannot be less than 5% since the register of olive cultivation and the computerised files constitute the mainstay of the Community system of checks.

It is to be noted that, in accordance with Article 1(2) of Regulation No 154/75, the Greek Republic was required to establish a register of olive cultivation by 31 October 1988 at the latest.

It is not in dispute that the Hellenic Republic has not complied with that time-limit and that, in the 1998 financial year, the register of olive cultivation had still not been established.

In accordance with Regulations Nos 2261/84 and 3061/84, the Hellenic Republic was required to implement the computerised files of olive and olive oil production data before 31 October 1990.

The Hellenic Republic did not comply with that time-limit and, during the 1998 financial year, the computerised files had still not been put in place.

In those circumstances, there is no need in the present case for the Commission to adduce any other evidence of the lack of a register of olive cultivation and computerised files for the 1997 and 1998 financial years, other than that which it had adduced for the 1996 financial year, but it is rather for the Member State concerned to show that, since the 1996 financial year, it in fact implemented the register of olive cultivation and the computerised files (see, to that effect, Greece v Commission, paragraph 18). Since the Hellenic Republic has adduced no such evidence, a financial correction was justified in that regard.

Even if alternative inspections had been organised, it is to be noted that where a regulation lays down specific measures of supervision, the Member States must apply them and it is unnecessary to examine the merits of their view that another system of supervision is more effective (see Case C-130/99 Spain v Commission [2002] ECR I-3005, paragraph 87).

As regards the Greek Government-�s argument that an action for a declaration of failure to fulfil obligations would have been more appropriate in penalising the delay in establishing the register of olive cultivation, it should be noted that an action for failure to fulfil obligations under Article 226 EC and the procedure for the clearance of the EAGGF accounts pursue different aims and are governed by different rules. In the latter procedure, the Commission is under an obligation to carry out a financial correction if the expenditure in respect of which financing has been requested has not been carried out in accordance with Community rules. Such a financial correction is designed to avoid the EAGGF-�s being burdened with amounts that have not served to finance an objective pursued by the Community legislation in question and therefore, contrary to what the Greek Government maintains, does not constitute a penalty (see Case C-247/98 Greece v Commission [2001] ECR I-1, paragraphs 13 and 14).

It follows that the first plea in respect of production aid for olive oil must be rejected as unfounded.

Second plea: lack or inadequacy of the statement of reasons for the contested decision

The Greek Government alleges a failure to state reasons in breach of Article 253 EC, on the ground that the Commission failed to take account of the efforts made to improve the system of checks and the payment of production aid for olive oil. Various controls were implemented, such as requiring olive producers to lodge a declaration of cultivation subject to three checks, stating the number of olive trees and their location, requiring pressers to provide a -�monthly business statement-�, and a check known as a -�company audit-� carried out by means of posting lists of producers of olive oil and their characteristics (identity, claim made and declaration of cultivation) which are checked by the oil producers themselves. The Greek Government considers that no item of expenditure in issue should be excluded; in any event, the shortcomings which remain are merely isolated incidents of an administrative nature and, in accordance with the principle of proportionality, do not justify a correction of more than 2%.

According to the Commission, the improvements made do not justify reducing the amount of the correction for the 1997 and 1998 financial years from 5% to 2%. It submits that as long as the two principal forms of control, namely the register of olive cultivation and the computerised files, are unimplemented, the risk of loss for the Community remains high and the corrections are justified.

On the duty to state reasons, the Court has consistently held that, in the particular context of the preparation of decisions relating to the clearance of accounts, the statement of reasons for a decision must be regarded as sufficient if the Member State to which the decision was addressed was sufficiently involved in the process by which the decision came about and was aware of the reasons for which the Commission took the view that it must not charge the sum in dispute to the EAGGF (Case C-242/97 Belgium v Commission [2000] ECR I-3421, paragraph 95, and Case C-118/99 France v Commission [2002] ECR I-747, paragraph 54).

In the present case, it is clear from the file that the Greek Government was involved in the process of drawing up the contested decision. The failure to establish a register of olive cultivation and the computerised files gave rise to financial corrections during earlier marketing years and, for the years in question, the reasons for which the Commission intended to make a financial correction were set out, in particular at the meeting of 23 September 1999, which took place as part of the conciliation procedure, and in the Summary Report.

In those circumstances, the statement of reasons for the contested decision must be regarded as sufficient.

As for the 5% figure imposed by the Commission in its calculation of the correction in respect of production aid for olive oil, it should be noted that the register of olive cultivation and the computerised files are fundamental components of the Community system of control of aid. As long as those components have not been introduced, it is in principle justified to impose the correction rate of 10% laid down by the Commission-�s guidelines, as set out in its Document No VI/5330/97.

Nevertheless, the Commission admitted that the measures adopted by the Greek authorities since 1996 are improvements, without however providing effective control equivalent to the system of control laid down by the Community rules. It therefore considered it appropriate to reduce the rate of correction from 10% to 5%.

The Commission-�s guidelines do not permit a reduction of the rate of correction to below 5% as long as the register of olive cultivation and the computerised files have not been put in place, given that these are the key components of the Community system of control. The opposing arguments of the Greek Government must therefore be rejected.

Consequently, the second plea concerning production aid for olive oil must be rejected as unfounded.

The correction in respect of production aid for dried grapes

First plea: misinterpretation and misapplication of Article 16(2) of Regulation No 1493/1999 and of Articles 2 and 13(1) of Regulation No 1621/1999 and inadequate statement of reasons based on an erroneous assessment of the facts