Court of Justice of the European Communities (including Court of First Instance Decisions)

Provisional text

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 12 March 2020 (1)

Case C‑742/18 P

Czech Republic

v

European Commission

(Checks by means of remote sensing for the EAGF and EAFRD)

(Appeal – EAGF and EAFRD – Expenditure excluded from financing by the European Union – Expenditure incurred by the Czech Republic – Regulation (EC) No 1122/2009 – Area aid – On-the-spot checks – On-the-spot checks by means of remote sensing – Adequacy and effectiveness of checks – Shared burden of proof – Regulation (EC) No 555/2008 – Investments in the wine sector – Implementation control – Sampling)

I.      Introduction

1.        Given the broad scope and complexity of numerous EU support measures in the agricultural sector, the Member States are required to perform careful controls to ensure that those measures comply with the terms under which the aid was granted and are duly implemented. The Commission may therefore reduce or exclude from EU financing altogether expenditure incurred by a Member State to support its agricultural sector even if the ineligibility for aid of a particular measure or a particular project has not yet been established. On the contrary, it suffices for the purpose of correction that the Member State failed to perform adequate and effective controls to ensure that all measures implemented by it comply with the terms under which the aid was granted. (2)

2.        This appeal by the Czech Republic is directed against the judgment delivered by the Court on 13 September 2018 (‘the judgment under appeal’) (3) upholding the exclusion of certain expenditure from financing by the European Agricultural Guarantee Fund (‘EAGF’) and the European Agricultural Fund for Rural Development (EAFRD). The parties are in a specific dispute over certain area aid payments and investments funded in the wine sector. The only reason given by the Commission in its implementing decision of 20 June 2016 (‘contested implementing decision’) (4) for excluding the expenditure incurred was the insufficient level of checks by the Czech Republic.

3.        This appeal focuses, first, on how the effectiveness of checks on eligible areas should be assessed and, second, on how the Member States should verify the implementation of investments in the wine sector.

II.    Legal framework

4.        The legal framework in this case comprises Regulation (EC) No 73/2009 (5) and the implementing Regulation (EC) No 1122/2009 adopted pursuant thereto. (6) Furthermore, implementing Regulation (EC) No 555/2009 (7) is important for the wine sector in particular; it refers to implementing Regulation (EU) No 65/2011, (8) which applies to the EAFRD in general.

A.      Regulation No 73/2009

5.        Regulation No 73/2009 regulated direct support under the common agricultural policy at the relevant time for the purpose of these proceedings. Direct payments may be based on certain eligible agricultural plots.

6.        Article 20 of Regulation No 73/2009 (9) requires the Member States to verify the eligibility of plots as follows:

‘(1)      Member States shall carry out administrative controls on the aid applications to verify the eligibility conditions for the aid.

(2)      Administrative controls shall be supplemented by a system of on-the-spot checks to verify eligibility for the aid. For this purpose, Member States shall draw up a sampling plan of agricultural holdings.

Member States may use remote sensing … as a means of carrying out on-the-spot checks on agricultural parcels.

(3)      …’

B.      Regulation No 1122/2009

7.        Regulation No 1122/2009 contains provisions implementing Regulation No 73/2009 with regard to the integrated administration and control system for support schemes for farmers. Article 26(1) of Regulation No 1122/2009 (10) laid down general principles for controls:

‘Administrative controls and on-the-spot checks provided for in this Regulation shall be made in such a way as to ensure effective verification of compliance with the terms under which aids are granted and of the requirements and standards relevant for cross-compliance.’

8.        Article 30 of that regulation (11) prescribed the following control rates for on-the-spot checks:

‘(1)      The total number of on-the-spot checks carried out each year shall cover at least 5% of all farmers applying respectively for the single payment scheme, the single area payment scheme or area-related payments under specific support. The Member States shall assure that on-the-spot checks cover at least 3% of the farmers applying for aid under each of other area-related aid schemes provided for under Titles III, IV and V of Regulation (EC) No 73/2009.

(2)      …

(3)      Should on-the-spot checks reveal significant irregularities in the context of a given aid scheme or in a region or part of a region, the competent authority shall appropriately increase the number of on-the-spot checks during the current year and shall appropriately increase the percentage of farmers to be checked on-the-spot in the following year.

(4)      Where it is provided that particular elements of an on-the-spot check may be carried out on the basis of a sample, that sample shall guarantee a reliable and representative level of control. Member States shall establish the criteria for the selection of the sample. If the checks on that sample reveal irregularities, the extent and scope of the sample shall be extended appropriately.’

9.        Article 31(1) and (2) of Regulation No 1122/2009 (12) regulated the selection of the control sample:

‘(1)      Control samples for on-the-spot checks under this Regulation shall be selected by the competent authority on the basis of a risk analysis and representativeness of the aid applications submitted.

To provide the element of representativeness, the Member States shall select randomly between 20% and 25% of the minimum number of farmers to be subject to on-the-spot checks as provided for in Article 30(1) and (2).

…

(2)      The effectiveness of the risk analysis shall be assessed and updated on an annual basis:

(a)      by establishing the relevance of each risk factor;

(b)      by comparing the results of the risk based and randomly selected sample referred to in the second subparagraph of paragraph 1;

(c)      by taking into account the specific situation in the Member State.’

10.      Article 33 of Regulation No 1122/2009 (13) provided for the elements of the on-the-spot checks:

‘On-the-spot checks shall cover all the agricultural parcels for which aid is requested under aid schemes listed in Annex I to Regulation (EC) No 73/2009, except those related to applications for seed aid in accordance with Article 87 of that Regulation. Nevertheless, the actual determination of the areas as part of an on-the-spot check may be limited to a sample of at least 50% of the agricultural parcels for which an application has been submitted under the aid schemes established in Titles III, IV and V of Regulation (EC) No 73/2009 provided that the sample guarantees a reliable and representative level of control both in respect of area checked and aid claimed. When this sample check reveals anomalies the sample of agricultural parcels actually inspected shall be increased.

Member States may make use of remote sensing in accordance with Article 35 …, where possible.’

11.      Article 35 of that regulation (14) described on-the-spot checks by means of remote sensing in greater detail:

‘(1)      Where a Member State makes use of the possibility, provided for in the second paragraph of Article 33, to carry out on-the-spot checks by remote sensing, it shall:

(a)      perform photo interpretation of satellite images or aerial photographs of all agricultural parcels per application to be checked with a view to recognising the ground cover and measuring the area;

(b)      carry out physical inspections in the field of all agricultural parcels for which photo interpretation does not make it possible to verify the accuracy of the declaration to the satisfaction of the competent authority.

(2)      The additional checks referred to in Article 30(3) shall be carried out by means of traditional on-the-spot checks if it is no longer possible to carry them out by means of remote sensing within the current year.’

C.      Regulation No 555/2008

12.      Regulation No 555/2008 contains provisions implementing Council Regulation (EC) No 479/2008, (15) especially controls in the wine sector. Article 19(1), first subparagraph, of Regulation No 555/2008 regulates the financial management of support for measures:

‘Support shall be paid once it is ascertained that either a single operation or all the operations covered by the support application, according to the choice made by the Member State for the management of the measure, have been implemented and controlled on the spot.’

13.      Article 76 of Regulation No 555/2008 establishes the principles of control in the wine sector:

‘Without prejudice to specific provisions of this Regulation or other Community legislation, Member States shall introduce checks and measures in so far as they are necessary to ensure the proper application of Regulation (EC) No 479/2008 and this Regulation. They shall be effective, proportionate and dissuasive so that they provide adequate protection for the Communities’ financial interests.

In particular, Member States shall ensure that:

…

(e)      controls are carried out either systematically or by sampling. In the case of sampling, Member States shall ensure that by their number, nature and frequency controls are representative of the whole of their territory and correspond, where applicable, to the volume of wine-sector products marketed or held with a view to their marketing;

…’

14.      Article 77(3) and (5) of that regulation set out further general principles of control:

‘(3)      Except for the cases where systematic on-the-spot checks are foreseen by Regulation (EC) No 479/2008 or by this Regulation, the competent authorities shall perform on-the-spot checks by sampling an appropriate percentage of beneficiaries/producers on the basis of a risk analysis in accordance with Article 79 of this Regulation.

…

(5)      Concerning measures foreseen by Article 15 of Regulation (EC) No 479/2008, Articles 26, 27 and 28 of Regulation (EC) No 1975/2006 (21) shall apply mutatis mutandis.’

15.      Article 15(1) of Regulation No 479/2008 (16) refers to measures in the form of ‘tangible or intangible investments in processing facilities, winery infrastructure and marketing of wine’.

D.      Regulation No 65/2011

16.      Article 77(5) of Regulation No 555/2008 (17) refers with regard to measures controlled in accordance with Article 15 of Regulation No 479/2008 to Articles 26 to 28 of Regulation (EC) No 1975/2006. (18)

17.      Regulation No 1975/2006 was repealed by Regulation No 65/2011 on 1 January 2011. (19) Article 34(2) of Regulation No 65/2011 states that references to Regulation No 1975/2006 shall be construed as references to Regulation No 65/2011 and shall be read in accordance with the correlation table in Annex II to that regulation. Article 4(5) and Articles 24 to 26 of Regulation No 65/2011 correspond to Articles 26 to 28 of Regulation No 1975/2006.

18.      Article 25(1), first sentence, of Regulation No 65/2011 (20) also sets out a rule governing on-the-spot checks:

‘Member States shall organise on-the-spot checks on approved operations using an appropriate sampling basis.’

III. Background to the dispute and proceedings before the General Court

19.      On 20 June 2016, the Commission adopted the contested implementing decision, by which it excluded certain expenditure reported by the Member States under the EAGF or the EAFRD from EU financing. That decision was addressed to the Czech Republic and other Member States. The Commission excluded the following expenditure incurred by that Member State:

–        EUR 462 517.83 in decoupled direct aids for certain agricultural plots in the 2013 to 2015 financial years;

–        EUR 636 516.20 in connection with investments in the wine sector in the 2011 to 2014 financial years;

–        EUR 29 485 612.55 in connection with cross-compliance checks in the 2011 to 2014 financial years. (21)

20.      By its action of 31 August 2016, the Czech Republic claimed that the General Court should annul the contested implementing decision in so far as it excluded expenditure incurred by the Czech Republic in an amount of EUR 30 206 401.58 from EU financing. (22)

21.      The General Court admitted the action in part and annulled the contested implementing decision in so far as it excluded expenditure of EUR 6 356 909.30 incurred by the Czech Republic under the EAGF in connection with cross-compliance controls for the 2011 financial year.

22.      The General Court dismissed the action as to the remainder.

IV.    Proceedings before the Court of Justice

23.      The Czech Republic brought this appeal against the judgment under appeal by procedural act dated 27 November 2018. It claims that the Court should:

–        set aside the judgment under appeal in so far as the General Court dismissed the action brought at first instance;

–        annul the contested implementing decision in so far as it excluded expenditure amounting to EUR 462 517.83 in connection with the single area payment;

–        annul the contested implementing decision in so far as it excluded expenditure of EUR 636 516.20 in connection with investments in the wine sector; and

–        order the Commission to pay the costs.

24.      The Commission contends that the Court should:

–        dismiss the appeal; and

–        order the Czech Republic to pay the costs.

25.      The parties to the proceedings submitted written observations and presented oral argument on the appeal at the hearing on 29 January 2020.

V.      Analysis

26.      The Czech Republic advances four grounds of appeal. The first two grounds of appeal concern the exclusion of area-related payments from EU financing and the third and fourth grounds of appeal concern the exclusion of expenditure for investments in the wine sector.

A.      Exclusion of single area payments (first and second grounds of appeal)

27.      The background to the exclusion of the area-related expenditure incurred is recalled briefly in order to aid an understanding of the first two grounds of appeal. The Commission based the exclusion on its finding of an insufficient level of checks by the Czech Republic to ensure that the agricultural plots supported comply with the terms under which the aid was granted.

28.      Area-related aid is intended to support a particular agricultural use of a plot and is based on the size of the parcel. The Member States therefore check the use of the parcels against the notification by the aid beneficiary, on the one hand, and the actual size of the parcels, on the other. Any discrepancies compared to the aid applications are marked as irregularities.

29.      Regulation No 1122/2009 refers in this context to two types of on-the-spot checks in addition to administrative controls: ‘traditional’ on-the-spot checks (23) involving physical field inspections and on-the-spot checks by means of remote sensing. (24) Article 26(1) of Regulation No 1122/2009 requires these checks to be effective, that is they must ensure reliable verification of compliance with the terms under which the aid was granted.

30.      According to the case-law of the Court, if the Commission is of the opinion that a Member State is not performing adequate and effective checks of certain support measures, it is not required to show exhaustively that the checks carried out by the Member State were inadequate or that the figures transmitted are irregular. It must simply produce evidence of reasonable doubt regarding such checks or figures. (25) The Commission must present specific findings in support of its doubts. These may take the form of contradictory figures submitted by a Member State. (26)

31.      The Member State can rebut the Commission’s findings by proving that they are inaccurate and that it does in fact have a reliable and functioning control system. (27) Otherwise, the serious doubt as to whether the Member State’s control and monitoring system is adequate and effective is considered to have been proven. (28)

1.      First ground of appeal

32.      By its first ground of appeal, the Czech Republic claims, first, that the General Court erred in law in concluding that the Commission had shown reasonable doubt as to the effectiveness of the checks of the supported plots and, second, that it likewise erred in law in examining whether the Czech Republic had rebutted those doubts and ultimately wrongly found that it had not.

(a)    Substance of first ground of appeal

33.      The first ground of appeal revolves around the question as to the type of findings that can substantiate reasonable doubt as to the effectiveness of checks within the meaning of the case-law cited above. (29)

34.      Specifically, it is necessary to establish if the General Court erred in law by assuming at paragraph 22 of the judgment under appeal that doubt as to the effectiveness of remote sensing can be shown merely by the fact that that control method detected a smaller irregularity rate than traditional on-the-spot checks. (30) The irregularity rate describes the ratio between the number of irregularities detected and the total number of parcels checked.

35.      In the opinion of the General Court, both types of on-the-spot check carried out on the basis of representative samples for the area of the Member State concerned should give fundamentally similar results. (31)

36.      In other words, the General Court is therefore of the opinion that it follows simply from the fact that both traditional field inspections and remote sensing each check individual parcels (or samples) from the Czech Republic that both control methods should detect the same rate of irregularities.

37.      The probability of irregularities is calculated in a risk analysis before the samples are selected for checking. That risk analysis applies various risk factors to establish the probability that the actual use or size of a parcel differs from that stated in the aid application. The type of terrain was one particular risk factor named in the hearing.

38.      In light of that, the finding by the General Court is unconvincing; it could only be correct if the samples selected for checking by means of remote sensing and the samples checked by field inspection had on average the same average probability of irregularity.

39.      However, according to the submissions of the Czech Republic at first instance and in these appeal proceedings, they did not. According to that Member State, the probability of irregularity in the samples that can usefully be checked by means of remote sensing is systematically lower than that of the samples checked by traditional on-the-spot checks.

40.      The Czech Republic argues, first, that it has to select the samples (parcels) for checks by means of remote sensing before applications are made for the year concerned. Therefore, the risk analysis must be performed based on data from the previous year. For field inspections, on the other hand, the applicants for which the highest probability of irregularities was calculated based on data from current applications are targeted for selection.

41.      Second, it argues that remote sensing by default covers very large areas and thus numerous parcels at once. It follows from this that remote sensing cannot focus on ‘high-risk’ parcels alone and always automatically includes adjacent parcels which may have a lower probability of irregularities. That automatically gives a lower irregularity rate.

42.      Third, it argues that remote sensing is only used to check areas in which at least 25% of the land is put to agricultural use, whereas areas in which individual plots are put to agricultural use and which are checked by field inspections often have a very high probability of irregularities.

43.      Ultimately, therefore, the Czech Republic contends, first, that the populations, that is the mass of parcels from which samples can be selected for the purpose of each control method, differ between the two methods due to inherent differences and, second, that those populations do not on average have the same probability of irregularities and that, consequently, the finding of different irregularity rates alone cannot substantiate any doubt as to the effectiveness of checks by means of remote sensing.

44.      However, the Commission is of the opinion that Article 31(2)(b) of Regulation No 1122/2009 illustrates that the results of checks on different samples should indeed be comparable.

45.      That provision states that the effectiveness of the risk analysis preceding the selection of samples for a control method must be assessed by comparing the results of the risk based and randomly selected sample. However, the Commission has overlooked the fact that this means that the population from which one sample is selected randomly and one sample is selected risk based is one and the same. However, it is precisely this that the Czech Republic denies with regard to field inspections, on the one hand, and checks by means of remote sensing, on the other.

46.      The General Court did not address those particular arguments. In particular, it did not dismiss the argument of the Czech Republic as wrong and find that the same samples are selected for checks by means of remote sensing and field inspections or, at the very least, that the average probability of irregularity is the same in both cases.

47.      In any event, the General Court was unable to find, based simply on the fact that the on-the-spot checks and the checks by means of remote sensing are both performed on representative samples for the plots of the Member State concerned, that these checks should give fundamentally similar irregularity rates.

48.      Moreover, remote sensing cannot be considered less effective because the samples selected for that control method have on average a lower probability of irregularity.

49.      That is because, first, the effectiveness of a control system must be assessed overall. Parcels which, by reason of their geographical location for example, cannot be usefully checked by means of remote sensing, are not by any means left unchecked. On the contrary, they are subjected to field inspection. Second, it does not follow from the obligation to check compliance with the terms under which aids are granted, as imposed under Article 26(1) of Regulation No 1122/2009, that the Member States must apply a particular method to a particular parcel if a different method would appear to be more appropriate for certain parcels. Suitability must be assessed with due consideration for practical and economic aspects. (32)

50.      To summarise, it follows from the above considerations that the General Court wrongly held at paragraph 22 of the judgment under appeal that, in finding different irregularity rates between controls by means of remote sensing and traditional on-the-spot checks, the Commission had shown doubts as to the effectiveness of checks by means of remote sensing, as that finding is not capable of casting doubt on the effectiveness of that control method.

51.      Thus, there is no need to address further the question of whether the Czech Republic rebutted those doubts.

52.      In the light of the foregoing, the first ground of appeal is well founded.

(b)    Consequences of the fact that the first ground of appeal is well founded

53.      According to the first sentence of the first paragraph of Article 61 of the Statute of the Court of Justice, the Court of Justice shall quash the decision of the General Court if the appeal is well founded. In this case, the fact that the first ground of appeal is well founded of itself justifies quashing of the judgment under appeal in so far as the General Court dismissed the action in respect of the exclusion of single area payments totalling EUR 69 054.23. That is because expenditure was reduced by that amount on the grounds of the presumed inadequacy of the checks by means of remote sensing. (33)

54.      The Commission argued a further objection at first instance with regard to the effectiveness of the checks performed by the Czech Republic by means of remote sensing. It doubted their effectiveness based on the fact that the irregularity rate established in 2012 from risk-based checks by means of remote sensing was lower than the rate established from random checks by means of remote sensing. (34)

55.      It follows from Article 31(2)(b) of Regulation No 1122/2009 that the risk analysis must be updated based on any such comparison of the results. From that it follows in turn that any such result might indeed be a finding capable of giving rise to doubt as to the effectiveness of the risk analysis and, consequently, of the effectiveness of the actual checks carried out by the Czech Republic by means of remote sensing. (35) However, the General Court did not base its finding that the Commission had shown doubt as to the effectiveness of the checks by means of remote sensing on that fact.

56.      Although the Court of Justice can in principle replace the grounds given by the General Court if the outcome proves to be correct on other grounds, (36) the General Court omitted in this case to make the necessary findings in fact with regard to the Commission’s second objection. In particular, it did not find that such a discrepancy existed in 2012 and that it was caused by factors other than those shown by the Commission. Thus, the grounds cannot be replaced.

2.      Second ground of appeal

57.      By its second ground of appeal, the Czech Republic claims infringement of Articles 33, 57 and 58 of Regulation No 1122/2009; that the General Court erred in law in assuming that the sample of the agricultural parcels inspected should automatically be extended if a plot is found to be between 0.1 and 2 hectares or 3% smaller than stated in the aid application; that, moreover, the General Court erred in law in assuming that the Member State is unable to take account in its decision of the circumstances of the individual case, whereas, in the event of discrepancies of up to 2 hectares or 3%, the Czech Republic decides in practice case by case if the sample should be increased. (37)

58.      First, it has to be noted that, according to Article 33, first paragraph, second sentence, of Regulation No 1122/2009, on-the-spot checks must cover at least 50% of the agricultural parcels reported by the farm being checked. The third sentence states that when this sample check reveals ‘anomalies’, ‘the sample of agricultural parcels actually inspected shall be increased’. However, it does not state if a single ‘anomaly’, that is every over-declaration of an area, of itself obliges the Member State to increase the sample.

59.      In any event, however, it is not possible, contrary to the contention of the Czech Republic, to conclude from the fact that Article 33 of Regulation No 1122/2009 uses the term ‘anomalies’ in the plural that a Member State need only increase the sample inspected if serious irregularities occur. The Czech Republic believes that the term ‘anomaly’ would have been used in the singular if individual and thus ultimately negligible findings also had to be included.

60.      Although there is much to support a de minimis threshold, which the General Court ultimately pitched at 0.1 hectares, (38) over-declarations of 2 hectares or 3% and more cannot be classed as negligible.

61.      Moreover, the wording of Article 33 of Regulation No 1122/2009 leaves no room for an interpretation whereby the Member States, having appraised the overall circumstances of the individual case, could decide whether or not to increase the sample inspected. That is because the increase in the sample is a mandatory duty (‘shall be increased’ (39)), not a discretionary decision.

62.      The case-law cited in this regard by the Czech Republic, to the effect that every decision requires an overall assessment that takes all the relevant factors in each individual case into consideration, only refers to discretionary decisions. (40)

63.      In conclusion, the second ground of appeal must therefore be dismissed.

B.      Exclusion of investments in the wine sector (third and fourth grounds of appeal)

64.      The background to the third and fourth grounds of appeal is a national support programme for certain investments in the wine sector. The Commission objects in this regard in the implementing decision, first, that the Czech Republic disbursed money before the support programme had even entered into force and, second, that the Czech Republic failed to control properly the implementation of the investments concerned.

1.      Third ground of appeal

65.      By its third ground of appeal, the Czech Republic claims that the General Court distorted the substance of the dispute by assuming that the contested correction only concerned investments disbursed prior to the implementation of the national support programme. (41) The Czech Republic has already argued in that regard at first instance that the Commission also excluded investments from financing that were disbursed after the implementation of the national support programme, but prior to verification of the individual aid applications.

66.      The General Court rejected that line of argument at paragraph 49 of the judgment under appeal on the ground that it is irrelevant. The Czech Republic sees that as an error in law.

67.      However, there is no evidence that the General Court distorted the substance of the dispute. That is because the Commission submitted at first instance that it had based the correction concerned solely on payments made prior to the implementation of the national support programme.

68.      The Czech Republic only submits in support of its opinion that the correction in fact also concerns expenditure incurred after the implementation of the support programme but prior to verification of the individual applications that it provided the Commission with the documentation for that expenditure also.

69.      However, that does not beg the conclusion that the Commission also made a correction in that regard. The Czech Republic has not cited passages of the contested implementing decision that refer to that expenditure.

70.      Although in this context the General Court mentions at paragraph 43 of the judgment under appeal that the correction is based in particular on the fact that the payments were made before verification of the individual aid applications, it only concerns payments which were in any event also made prior to the implementation of the national support programme. (42)

71.      Thus, the General Court dismissed that line of argument by the Czech Republic without erring in law or distorting the substance of the dispute.

72.      It follows that the third ground of appeal is also unfounded.

2.      Fourth ground of appeal

73.      Finally, by its fourth ground of appeal, the Czech Republic claims infringement of Article 77(5) of Regulation No 555/2008, which allows the Member States to carry out on-the-spot checks of approved investments by sampling. It argues that the General Court wrongly assumed, however, that the Czech Republic is obliged in accordance with Article 19(1), first subparagraph, of Regulation No 555/2008 to carry out systematic on-the-spot checks of investments in the wine sector.

74.      This appeal essentially addresses the question of which of those two provisions applies in this case to controls of the investments and the extent to which (systematic or by sampling) the provision prescribes controls by the Member States.

75.      Article 77(3) of Regulation No 555/2008 states that the Member States shall carry out on-the-spot checks of aid beneficiaries by sampling ‘except for the cases where systematic on-the-spot checks are foreseen by [this] Regulation’. The General Court viewed Article 19 of Regulation No 555/2008 in that sense as lex specialis governing Article 77, from which it deduced an obligation to perform systematic on-the-spot checks. (43)

76.      Article 19(1), first subparagraph, of Regulation No 555/2008 states that the support for a particular investment shall be paid ‘once it is ascertained that either a single operation or all the operations covered by the support application, according to the choice made by the Member State for the management of the measure, have been implemented and controlled on the spot’.

77.      First, it has to be noted in this context that, contrary to the view taken by the General Court, the wording of Article 19(1), first subparagraph, of Regulation No 555/2008 does not provide for mandatory systematic controls. (44) The first subparagraph of Article 19(1) simply says that the measures implemented must be controlled on the spot by the Member States. That does not preclude on-the-spot checks by sampling.

78.      Second, the general scheme of Regulation No 555/2008 shows that systematic checks are expressly ordered where the Member States are subject to such an obligation. For example, Article 76(2)(e) of Regulation No 555/2008 regulating controls in the wine sector leaves the Member States the option of carrying out controls systematically or by sampling. Article 77(3) of Regulation No 555/2008 provides for systematic on-the-spot checks by way of exception, whereas Article 77(2) orders systematic administrative checks. The fact that Regulation No 555/2008 expressly orders systematic checks is illustrated moreover by the third sentence of Article 78(1), which allows a particular exception where ‘systematic on the spot checks are foreseen’. The special provision in Article 12 of Regulation No 555/2008 on green harvesting is also one example of expressly ordered systematic on-the-spot checks. (45)

79.      Third, the Member States are required in principle to carry out on-the-spot checks by sampling for all direct payments subject to the control system for the common agricultural policy. (46) In light of the scope of aids and their piecemeal allocation, this would be practically impossible to manage differently. Systematic on-the-spot checks are the exception from this perspective also.

80.      Even if one wanted to deduce from Article 19(1), first subparagraph, of Regulation No 555/2008 that the Member States are obliged to carry out systematic controls of investments, the scheme of Article 19 and Article 77 suggests, however, that Article 77 should be seen as the lex specialis, not Article 19.

81.      That is because, first, a general provision usually precedes a specific provision and, second, Article 19 comes under Section 6 (Investments) in Chapter II (Eligible measures) of Title II (Support programmes), whereas Article 77 comes under Chapter I (Principles of control) in Title V (Controls in the Wine Sector). This suggests that Article 19 is a general provision on investments, whereas their verification (and verification of other types of aid) is specified in Title V on controls in the wine sector. The fact that the title on controls in the wine sector includes controls of investments is illustrated by Article 77(5) of the regulation, which applies to measures foreseen by Article 15 of Regulation No 479/2008. However, all these measures are investments. (47)

82.      Contrary to the view taken by the General Court, (48) this is not refuted by the fact that Article 77 is headed ‘General principles’. That is because, although that provision sets out general principles for controls in the wine sector, that title includes many more provisions specifying how controls are to be carried out. (49) In that regard, Article 77 of Regulation No 555/2008 should be understood as the general rule within the framework of the special control rules for the wine sector.

83.      Were Article 19 of Regulation No 555/2008 lex specialis governing the control of investments and were the Member States therefore obliged to carry out on-the-spot checks of investments systematically, there would remain no further scope for Article 77(5). That is because, according to that provision, certain rules of Regulation No 65/2011 (50) apply mutatis mutandis to investments, especially Article 25 of that regulation, the first sentence of the first paragraph of which provides for on-the-spot checks using an appropriate sampling basis. That reference is incompatible with an obligation to carry out systematic on-the-spot checks pursuant to the first paragraph of Article 19 of Regulation No 555/2008.

84.      Nor, contrary to the view taken by the General Court, (51) does this change because there remains scope for Article 25 of Regulation No 65/2011 outside the reference in Regulation No 555/2008. As the Czech Republic rightly notes, the fact that Article 77(5) of Regulation No 555/2008 would no longer have any scope based on the interpretation given by the General Court does not change that.

85.      It follows from this that Article 19 is not some form of lex specialis governing Article 77(5) of Regulation No 555/2008.

86.      Consequently, the General Court erred in law in holding that Article 19 of Regulation No 555/2008 is lex specialis governing Article 77 and in deducing from that that the Czech Republic was obliged to carry out systematic on-the-spot checks of the investments made.

87.      In conclusion, the fourth ground of appeal is therefore well founded.

88.      The fact that the fourth ground of appeal is well founded means that the judgment under appeal must be quashed in so far as the General Court dismissed the action in respect of the exclusion of investments totalling EUR 636 516.20. That is because, based on that error in law, the General Court did not question the finding by the Commission in the implementing decision that the level of on-the-spot controls of investments in the wine sector carried out by the Czech Republic by sampling was insufficient.

VI.    Referral of the case back to the General Court

89.      According to the second sentence of the first paragraph of Article 61 of the Statute of the Court of Justice, it may, where a decision of the General Court has been quashed, give final judgment in the matter itself, where the state of proceedings so permits, or refer the case back to the General Court for judgment.

90.      The state of proceedings does not permit final judgment.

91.      That the judgment under appeal has to be quashed because the first ground of appeal is well founded (52) follows from the fact that additional findings in fact are needed in order to deliver final judgment in the matter. (53)

92.      As for the fact that the judgment under appeal has to be quashed because the fourth ground of appeal is well founded, (54) it has to be noted that the Commission based the exclusion of expenditure of EUR 636 516.20 in connection with investments in the wine sector both on an insufficient level of on-the-spot checks and on the disbursement of monies prior to the implementation of the national support programme. (55) It is for the General Court to decide if the exclusion of expenditure of EUR 636 516.20 is warranted based on the second of those two considerations alone.

93.      Therefore, the case has to be referred back to the General Court.

VII. Costs

94.      As the case has to be referred back to the General Court for judgment, costs are reserved.

VIII. Conclusion

95.      In view of all the foregoing considerations, I propose that the Court of Justice should:

(1)      Quash the judgment of the General Court of the European Union of 13 September 2018, Czech Republic v Commission (T‑627/16, not published, EU:T:2016:538), in so far as the General Court rejected the action of the Czech Republic concerning the exclusion of single area payments of EUR 69 054.23 and the exclusion of investments of EUR 636 516.20;

(2)      Dismiss the appeal as to the remainder;

(3)      Refer the case back to the General Court for it to give judgment on the claims of the Czech Republic concerning the exclusion of single area payments of EUR 69 054.23 and the exclusion of investments of EUR 636 516.20;

4.      Reserve the costs.

1      Original language: German.

2      That is because it is an infringement of EU law that may justify a correction to the financing: see judgment of 24 February 2005, Greece v Commission (C‑300/02, EU:C:2005:103, paragraphs 32 and 33).

3      Judgment of 13 September 2018, Czech Republic v Commission (T‑627/16, not published, EU:T:2018:538).

4      Commission Implementing Decision (EU) 2016/1059 of 20 June 2016 excluding from European Union financing certain expenditure incurred by the Member States under the European Agricultural Guarantee Fund (EAGF) and under the European Agricultural Fund for Rural Development (EAFRD) (OJ 2016 L 173, p. 59).

5      Council Regulation of 19 January 2009 establishing common rules for direct support schemes for farmers under the common agricultural policy and establishing certain support schemes for farmers, amending Regulations (EC) No 1290/2005, (EC) No 247/2006, (EC) No 378/2007 and repealing Regulation (EC) No 1782/2003 (OJ 2009 L 30, p. 16) (‘Regulation No 73/2009’). Subsequent amendments do not concern Article 20, which is the relevant article in this case. Regulation No 73/2009 was repealed by Regulation (EU) No 1307/2013 of the European Parliament and of the Council of 17 December 2013 (OJ 2013 L 347, p. 608).

6      Commission Regulation of 30 November 2009 as regards cross-compliance, modulation and the integrated administration and control system, under the direct support schemes for farmers provided for that Regulation, as well as for the implementation of Council Regulation (EC) No 1234/2007 as regards cross-compliance under the support scheme provided for the wine sector (OJ 2009 L 316, p. 65) (‘Regulation No 1122/2009’). Subsequent amendments to Regulation No 1122/2009 did not concern the provisions which are relevant in this case. Regulation No 1122/2009 was amended by Commission Delegated Regulation (EU) No 640/2014 of 11 March 2014 (OJ 2014 L 181, p. 48) (‘Regulation No 640/2014’).

7      Commission Regulation of 27 June 2008 laying down detailed rules for implementing Council Regulation (EC) No 479/2008 on the common organisation of the market in wine as regards support programmes, trade with third countries, production potential and on controls in the wine sector (OJ 2008 L 170, p. 1), as amended by Commission Regulation (EC) No 42/2009 of 3 August 2009 (OJ 2009 L 202, p. 5) (‘Regulation No 555/2008’).

8      Commission Regulation of 27 January 2011 laying down detailed rules for the implementation of Council Regulation (EC) No 1698/2005, as regards the implementation of control procedures as well as cross-compliance in respect of rural development support measures (OJ 2011 L 25, p. 8) (‘Regulation No 65/2011’). Subsequent amendments do not concern the articles which are relevant in this case. Regulation No 65/2011 was likewise repealed by Regulation No 640/2014.

9      Article 74 of Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008 (OJ 2013 L 347, p. 549) now corresponds to this article.

10      Cf. now Article 24(1) of Commission Implementing Regulation (EU) No 809/2014 of 17 July 2014 laying down rules for the application of Regulation (EU) No 1306/2013 of the European Parliament and of the Council with regard to the integrated administration and control system, rural development measures and cross compliance (OJ 2014 L 227, p. 69), as amended by Commission Implementing Regulation (EU) 2019/1804 of 28 October 2019 (OJ 2019 L 276, p. 12) (‘Regulation No 809/2014’).

11      Cf. now Article 50 of Regulation No 809/2014.

12      Cf. now Article 69 of Regulation No 809/2014.

13      Cf. now Article 70 of Regulation No 809/2014.

14      Cf. now Article 40 of Regulation No 809/2014.

15      Council Regulation of 29 April 2008 on the common organisation of the market in wine, amending Regulations (EC) No 1493/1999, (EC) No 1782/2003, (EC) No 1290/2005, (EC) No 3/2008 and repealing Regulations (EEC) No 2392/86 and (EC) No 1493/1999 (OJ 2008 L 148, p. 61) (‘Regulation No 479/2008’). Regulation No 479/2008 was repealed by Council Regulation (EC) No 491/2009 of 25 May 2009 (OJ 2009 L 154, p. 1) (‘Regulation No 491/2009’).

16      Article 103u of Regulation No 491/2009 now corresponds to Article 15 of Regulation No 479/2008.

17      Point 14 of this Opinion.

18      Commission Regulation of 7 December 2006 laying down detailed rules for the implementation of Council Regulation (EC) No 1698/2005, as regards the implementation of control procedures as well as cross-compliance in respect of rural development support measures (OJ 2006 L 368, p. 74), as amended by Commission Regulation (EC) No 484/2009 of 9 June 2009 (OJ 2009 L 145, p. 25) (‘Regulation No 1975/2006’).

19      Article 34(1), first subparagraph, of Regulation No 65/2011.

20      Cf. now Article 50 of Regulation No 809/2014.

21      Paragraphs 2 and 3 of the judgment under appeal.

22      Paragraphs 5 and 7 of the judgment under appeal.

23      Cf. Article 35(2) and recital 48 of Regulation No 1122/2009.

24      Article 33, second paragraph, of Regulation No 1122/2009.

25      Judgments of 24 February 2005, Greece v Commission (C‑300/02, EU:C:2005:103, paragraphs 33 and 34), and of 19 September 2019, Poland v Commission (C‑358/18 P, not published, EU:C:2019:763, paragraph 42).

26      See judgment of 24 February 2005, Greece v Commission (C‑300/02, EU:C:2005:103, paragraph 39).

27      Judgments of 24 February 2005, Greece v Commission (C‑300/02, EU:C:2005:103, paragraph 35), and of 19 September 2019, Poland v Commission (C‑358/18 P, not published, EU:C:2019:763, paragraph 42).

28      Judgment of 19 September 2019, Poland v Commission (C‑358/18 P, not published, EU:C:2019:763, paragraph 42).

29      See point 30 of this Opinion.

30      Thus, according to the findings of the General Court at paragraph 18 of the judgment under appeal, remote sensing revealed an irregularity rate of 0.29% in 2012, whereas traditional on-the-spot checks revealed a rate of 0.87%. In 2013, remote sensing gave an irregularity rate of 0.28%, compared to 1.13% from traditional on-the-spot checks.

31      Paragraph 22 of the judgment under appeal.

32      See, to that effect, judgment of 10 April 2014, Maatschap T. van Oosterom en A. van Oosterom-Boelhouwer (C‑485/12, EU:C:2014:250, paragraph 62).

33      Paragraph 11 of the judgment under appeal.

34      See paragraph 19 of the judgment under appeal.

35      The General Court itself assumes this elsewhere: see judgments of 16 June 2015, Portugal v Commission (T‑3/11, not published, EU:T:2015:388, paragraph 75), and of 20 July 2017, Spain v Commission (T‑143/15, not published, EU:T:2017:534, paragraph 38).

36      Judgment of 9 September 2008, FIAMM and Others v Council and Commission (C‑120/06 P and C‑121/06 P, EU:C:2008:476, paragraph 187).

37      See, in that regard, findings of the General Court at paragraphs 27, 29 and 39 of the judgment under appeal, which the Czech Republic has not contested.

38      See paragraphs 35, 36 and 38 of the judgment under appeal.

39      In French: ‘est élargi’; in German: ‘wird … ausgeweitet’; in Polish: ‘zwiększa się próbę’; in Spanish: ‘se aumentará la muestra’; in Dutch: ‘wordt de steekproef … uitgebreid’.

40      The Czech Republic refers in particular to judgment of 17 April 2018, B and Vomero (C‑316/16 and C‑424/16, EU:C:2018:256, paragraph 70), concerning the expulsion of an EU citizen.

41      Paragraph 50 of the judgment under appeal.

42      Paragraph 48 of the judgment under appeal.

43      Paragraph 56 of the judgment under appeal.

44      ‘On-the-spot check prior to every support payment for an investment’, paragraph 56 of the judgment under appeal.

45      See, with regard to Article 12, recital 19 of Regulation No 555/2008.

46      See Article 20(2), first subparagraph, second sentence, of Regulation No 73/2009, now Article 74(2) of Regulation No 1306/2013.

47      See point 15 of this Opinion.

48      Paragraph 56 of the judgment under appeal.

49      Namely, for example, on assistance between control bodies (Chapter II), on the analytical databank (Chapter III) and on collection of samples for control purposes (Chapter IV).

50      See point 18 of this Opinion.

51      Paragraphs 60 and 61 of the judgment under appeal.

52      See point 53 of this Opinion.

53      See points 46 and 56 of this Opinion.

54      See point 88 of this Opinion.

55      See paragraph 43 et seq. of the judgment under appeal and point 64 of this Opinion.

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