C-11/76

JUDGMENT OF 7. 2. 1979 — CASE 11/76

refunds granted and intervention 3. In the context of the discharge of the undertaken "in accordance with the accounts submitted by the Member Community rules" within the States in connexion with expenditure framework of the common organi- financed by the EAGGF, it is for the zation of agricultural markets are to Commission to bear the financial be financed by the EAGGF; those consequences of expenditure provisions permit the Commission to undertaken on the basis of an charge to the EAGGF only sums paid incorrect application of Community in accordance with the rules laid law only where that application is down in the various sectors of agri- attributable to an institution of the cultural production while leaving the Member States to bear the burden of Community. any other sum paid, and in particular 4. Since, up to the present, no specific any amounts which the national auth- procedure for attributing expenditure orities wrongly believed themselves incurred in connexion with the authorized to pay in the context of common agricultural policy has been the common organization of the laid down by Community law for the markets. purpose of settling differences 2. The management of the common agri- between the Community and the cultural policy in conditions of Member States, the discharge of the equality between traders in the accounts by the Commission pursuant Member States requires that national authorities of a Member State should to Article 5 (2) (b) of Regulation No 729/70 necessarily entails the attri- not, by the expedient of a wide in- terpretation or a given provision, bution of expenditure either to the favour traders in that State to the Commission or to the Member State

Commission of the European Communities, represented by its Legal Advisers, R. Baeyens and G. zur Hausen, acting as Agents, with an address for service in Luxembourg at the office of its Legal Adviser, Mario Cervino, Jean Monnet Building, Kirchberg,

defendant,

APPLICATION for the annulment of Commission Decisions 76/145/EEC

and 76/151/EEC of 2 December 1975 concerning the discharge of the accounts presented by the Kingdom of the Netherlands in respect of the European Agricultural Guidance and Guarantee Fund (EAGGF), Guarantee Section, expenditure for 1971 and 1972 (Official Journal No L 27 of 2 February 1976, pp. 11 and 23), in so far as the Commission failed to recognize as chargeable to the EAGGF sums of Hfl 590 072.67 for the release of securities lodged to guarantee the export, within a fixed time-limit, of intervention butter sold at a reduced price in 1971, of Hfl 968 643.33 for the grant of export refunds in respect of lactalbumin in 1971 and of Hfl 12 148.73 for the grant of like refunds in 1972,

THE COURT

composed of: H. Kutscher, President, J. Mertens de Wilmars and Lord Mackenzie Stuart (Presidents of Chambers), P. Pescatore, M. Sørensen, A. O'Keeffe and G. Bosco, Judges,

(Article 1 ). The butter was to be sold at a B — The origin of the albumin case price which was 5.5 units of account per Article 17 (1) of Regulation (EEC) No 100 kg less than the intervention price 804/68 of the Council of 27 June 1968 (Article 2). The butter was to be exported on the common organization of the within 30 days after "sale" by the market in milk and milk products intervention agency (Article 3). (Official Journal, English Special Edition Although the regulation was repealed by 1968 (I), p. 176) makes provision for the Article 5 of Regulation No 1893/70 of the possibility of granting export refunds for Commission of 18 September 1970 on lactalbumin.

the sale of butter from public stocks Article 2 of Regulation (EEC) No 204/69 (Journal Officiel No L 208 of 19 of the Council of 28 January 1969 laying September 1970, p. 13) it remained down general rules for granting export applicable to butter which had been sold refunds on certain agricultural products in accordance with the repealed regu- exported in the form of goods not lation (Article 5). Regulation No 1893/70 covered by Annex II to the Treaty, and entered into force on the third day after the criteria for fixing the amount of such the day on which it was published, that is to say 22 September 1970 (Article 6). During the 1971 financial year the applicant applied Regulation No 1308/68 interpreting the word "sale" contained in Article 3 thereof in the

NETHERLANDS COMMISSION

refunds (Official Journal, English Special It shall comprise two sections: Edition 1969 (I), p. 35) provides that the the Guarantee Section; export refund shall be equal to the sum the Guidance Section. of the amounts obtained by multiplying the quantity of each of the basic 2. The Guarantee Section shall finance: products listed in Annex A to the regu- lation by the rate of refund on the basic (a) refunds on exports to third product. As regards the quantity of the countries;

— their name and, where appropriate, C — Provisions to be considered their statutes;

1. Principles governing the financing of — the administrative and accounting intervention measures conditions in accordance with which

payments are made relating to the 1. (a) Regulation (EEC) No 729/70 of implementation of Community rules within the framework of the common the Council of 21 April 1970 on the financing of the common agricultural organization of agricultural markets. policy (Official Journal, English Special They shall inform the Commission Edition 1970 (L), p. 218) contains inter forthwith of any change in those parti- alia the following provisions: culars.

"Article 1

1. The European Agricultural Guidance and Guarantee Fund (hereinafter called the 'Fund') shall form pan of the budget of the Communities.

JUDGMENT OF 7. 2. 1979 — CASE 11/76

(a) shall decide: Member States.

— at the beginning of the year, on The sums recovered shall be paid to the the basis of the documents paying authorities or bodies and referred to in paragraph 1 (a), on deducted by them from the expenditure an advance payment for the auth- financed by the Fund. orities and bodies not exceeding one-third of the credits entered 3. The Council, acting by a qualified in the budget; majority on a proposal from the — during the year, on additional Commission, shall lay down general payments intended to cover rules for the application of this Article. expenditure to be borne by an authority or body; Article 8 (French text)

(b) shall, before the end of the following year, on the basis of the documents 2. A défaut de récupération totale, les referred to in paragraph 1 (b), make conséquences financières des irrégularités up the accounts of the authorities and bodies. ou des négligences sont supportées par la Communauté, sauf celles résultant d'ir- régularités ou de négligences imputables 3. Detailed rules for the application of aux administrations ou organismes des this Article shall be adopted in Etats membres. accordance with the procedure laid down in Article 13.

NETHERLANDS COMMISSION

2. The representative of the Commission shall submit a draft of the 3. The financial consequences of measures to be adopted. The Committee irregular or fraudulent transactions shall shall deliver its Opinion on those be borne by the Community, with the measures within a time-limit set by the exception of negligence attributable to Chairman according to the urgency of the administrative authorities or other the matters. An opinion shall be adopted bodies of the Member States. by a majority of twelve votes.

3. The Commission shall adopt Article 8 (French text) measures which shall be immediately applicable. However, if such measures 3. Les conséquences financières des are not in accordance with the Opinion opérations irrégulières ou frauduleuses delivered by the Committee, they shall at sont supportées par la Communauté, sauf once be communicated by the négligences imputables aux admi- Commission to the Council. In that case, nistrations des Etats membres ou à leurs the Commission may defer for not more organismes. than one month from the date of such communication, application of the measures which it has adopted.

JUDGMENT OF 7. 2. 1979 — CASE 11/76

van de Lid-Staten of van hun organen. beginning of the year or advanced » during the year and the amount referred to under (a)." The antepenultimate recital of the preamble to the proposal for a regulation 1. (c) The general rules referred to in was worded as follows : Article 8 (3) of Regulation No 729/70 ". . . are contained in Regulation (EEC) No 283/72 of the Council of 7 February Adequate measures must be taken to 1972 concerning irregularities and the prevent, repress and make good any irre- gularity or fraud; however, it is not recovery of sums wrongly paid in connexion with the financing of the possible to exclude the possibility that common agricultural policy and the irregular or fraudulent transactions may organization of an information system in be discovered subsequent to the this field (Official Journal, English intervention by the paying bodies or that Special Edition 1972 (I), p. 90) which all the sums paid may not be recoverd; it contains, inier alia, the following is therefore appropriate to settle the provisions : problem of the determination of financial liability for such losses; the principle "Article 2 most in conformity with the principle of 1. Member States shall communicate to Community financing of the common the Commission within three months of agricultural policy and which best takes the entry into force of this Regulation: account of the difficulty of localizing in a single Member State the origin of each — the provisions laid down by law, regu- lation or administrative action for the such transaction consists in charging such losses in the last instance to the application of the measures provided Community with the exception of for in Article 8 (1) of Regulation negligence attributable to the (EEC) No 729/70, and administrative authorities of other bodies — the list of authorities and bodies of the Member States. responsible for the application of those measures and the main

that irregularities or negligence have During the month following the end of taken place in one or more Member each quarter, Member States shall communicate to the Commission a list of States, it shall inform the Member State or States concerned thereof, and that irregularities which have been the subject State or those States shall hold an of the primary administrative or judicial administrative inquiry in which servants findings of fact. of the Commission may take part. The Member State shall communicate to

Article 4 the Commission the report and the inquiry findings. If the Commission does Each Member State shall communicate not take part in the inquiry, it shall be without delay to the other Member kept informed of its progress by means States concerned and to the Commission of the quarterly communications any irregularities which are liable to have provided for in Article 5. effects outside its territory very quickly or which show that a new fraudulent

practice has been adopted. 3. Where the inquiry shows that there has been an irregularity or negligence, or Article 5 where this is accepted by the Member 1. During the month following the end State concerned following the procedure of each quarter, Member States shall referred to in paragraph 2, the Member inform the Commission of all judicial or State shall institute as rapidly as possible administrative procedures instituted with an administrative or judicial procedure to a view to recovering sums wrongly paid establish formally that there has been an and shall supply the Commission with irregularity or negligence. It shall keep any information which is relevant in this the Commission informed of the

2. If, following that investigation, the consequences thereof it shall submit to Commission takes the view that the the Commission an explanatory memorandum. Community has suffered a financial loss as the result of irregularities or If the Commission ... takes the view negligence attributable to the admin- that the financial consequences of those istrative authorities or other bodies of a irregularities or negligence should not be Member State, it shall quantify the loss borne by the Community it shall contact and inform the Member State concerned, the Member State concerned and then inviting it to submit its comments within initiate an exchange of views within the one month. EAGGF Committee.

NETHERLANDS COMMISSION

Those two regulations also lay down the ination made under Article 31 of Regu- general conditions for the sale of butter lation (EEC) No 804/68. bought in by the intervention agencies. ..."

Decisions relating to sales are to be made in each case by the Commission. The procedure laid down in Article 26 of The chargeable amount of the Regulation No 17/64/EEC corresponds expenditure resulting from intervention is to that laid down in Article 13 of Regu- to be calculated by determining the net lation No 729/70. losses in each calendar year by means of an account drawn up by the intervention Article 31 of Regulation No 804/68 agency (Articles 3 and 4 of Regulation provides that: (EEC) No 2306/70 of the Council of 10 "The Committee [Management Com- November 1970 on the financing of mittee for Milk and Milk Products] may intervention expenditure in respect of the consider any other question referred to it domestic market in milk and milk by its Chairman either on his own products — Official Journal, English initiative or at the request of the rep- Special Edition 1966-1972, p. 44). Under resentative of a Member State." Article 4 (1) (b) of that regulation that account is to be debited with the value of D — Procedure the butter bought in by the intervention agency (at the intervention price) and, The written procedure was suspended as pursuant to Article 4 (2) (a), the account from September 1976 to enable the is to be credited with the total amount of parties to enter into negotiations for a receipts from disposals. Any difference settlement. As those negotiations were between the two items is transferred to unsuccessful the written procedure was the amount of the net losses of the reopened in August 1977. intervention agency which must then be Upon hearing the report of the Judge- financed by the Community. Rapporteur and the views of the Regulation No 2306/70 contains the Advocate General the Court decided to following further provisions: open the oral procedure without any preparatory inquiry. "Article 15

discharge, Member State concerned, although the general rules necessary for the for the following reasons: application of that provision within In the case of the butter: the meaning of paragraph (3) of that — Principally, because the implementing article have not yet been laid down body applied Regulation No 1308/68 and although the Commission fur- correctly; thermore gave an undertaking to the applicant that it would reach — In the alternative, because if that agreement with the Council before regulation was applied incorrectly taking a decision on the matter or, if such application constitutes an irregu- such a decision could be taken, even larity or negligence within the in the absence of the rules mentioned meaning of Article 15 of Regulation above, under Article 8 (2), because in No 2306/70 which cannot entail a adopting the decisions in dispute the reduction in the chargeable amount defendant failed to rule on that within the meaning of Article 3 of the point, aforesaid regulation as applied by the Commission unless the implementing with the result that the account relating body is held liable in accordance with to the item in question should have been the procedure laid down by that discharged, subject to the reservation that the decision as to the attribution of article, which has not been done, liability shall be taken when the with the result that the accounts relating conditions to be laid down for that to the items in question should have been purpose are fulfilled; discharged unless, as regards the alterna- — In the alternative — in the event of tive conclusion, the decision as to the the Court's holding that it is attribution of liability is now taken in the necessary to decide the question of prescribed manner; liability — because the measure in — In the further alternative — in the question is not attributable to the event of the Court's holding that it is authorities or other bodies of the necessary to decide the question of applicant, with the result that, liability — because that irregularity pursuant to the provisions of Regu- or negligence is not attributable to lation No 729/70 or the system of the administrative authorities or other that regulation and taking account of bodies of the applicant within the certain general legal principles and of meaning of Article 15 of Regulation the financing arrangements applicable No 2306/70, so that the reduction within the Community, the made was not therefore justified; Community should bear the financial consequences of that incorrect In the case of the albumin: application. — Principally because, although Regu- — Order the Commission to pay the lation No 204/69 was applied costs.

The Commission contends that the Court be raised without any such prior should: negligent conduct on the part of an individual: that is an additional reason — Dismiss the application; for regarding the negligence of the — Order the applicant to pay the costs. administrative authority as an independent factual consideration. It is, moreover, irrational to hold the Member III — Submissions and argu- States liable without more ado for all ments of the parties mistakes in interpretation but not mistakes made by the administrative A — The principles governing the authority in the course of examining ir- financing of intervention measures regularities which were not attributable to it and which were committed by

both together. The view that Article 8 (2) that there was a case of negligence. Such of Regulation No 729/70 is applicable negligence should have formed the only to irregularities or negligence on subject-matter of an investigation in the part of an individual is contrary to accordance with the procedure laid the wording of the provision, to the down by Article 15 of Regulation No system of the regulation of which it 2306/70; where appropriate, a deduction forms part and to the origins of Regu- could have been made only where it was lation No 283/70 which was adopted in found to be attributable to the Member implementation of Article 8.

There could moreover be negligence on the part of an administrative authority in respect of which the question of its liability could

be served by refusing to discharge the 30 May 1975 following the judgment of accounts of national authorities in cases the Court of Justice delivered on 12 where it was impossible to make good November 1974 in Case 34/74 Roquette the financial consequences of mistakes v France ([1974] 2 ECR 1217) to the made unless the national body effect that there can be no question of responsible could be criticized in respect charging to the Community expenditure of management or policy. The incurred as a result of a misinterpretation applicant's opinion corresponds to the of Community law by national auth- practice in the Member States. orities except in cases where the interpret- ation received the prior approval of the An application of Article 5 of Regulation Commission. No 729/70 which, effectively excludes the discharge of all expenditure, the 2. Before stating its point of view on implementation of which does not seem the matters of principle, the Commission to correspond in every respect to the observes that it has already defined that Community rules, even if such a point of view in a succinct form in the conclusion appears only once the working paper of 16 October 1975 on expenditure has been incurred, the procedure, practice and conse- contradicts the content of Article 5 and quences of the clearance of accounts constitutes an unfair burden on the Member States.

It is moreover in conformity with general legal principles and with the general rules of good administration that where an authority is responsible for the

NETHERLANDS COMMISSION

(Document VI/192/75) on which its respect to the aforementioned working decisions of 2 December 1975 are based. paper (Document VI/192/75 of 16 October 1975). Legal protection against 2. (a) The discharge of the accounts decisions taken in the context of that

under the previous financial arrange- exclusively to the wrongful conduct of a ments of Article 10 of Regulation No Member State it is only logical that the 17/64. Member State should also bear the financial risk of its acts. However, a Finally in this context the Commission financial loss due to the conduct of a points out that the procedure for the discharge of accounts gives the Member States a very wide right to voice their opinions. In the Commission's conception the procedure includes a bilateral and a multilateral phase, the latter consisting of consultation with the Fund Committee on draft discharge decisions. The Commission refers in this

JUDGMENT OF 7. 2. 1979 — CASE 11/76

third party would constitute a breach in the administration and must therefore be

which is rendered in the French text and As the word "negligence" was inserted in the other languages by "negligence", without explanation into a working which corresponds rather to the term paper of the Council of 14 January 1970 "Fahrlässigkeit". Examining the German (Document R/61/70) and as there is no text in isolation one might be tempted, written evidence that the amendment was from a purely linguistic point of view, to discussed, it is impossible to regard it as consider that a case of "Versäumnis" has a substantive amendment to the occurred when a Member State is guilty Commission's proposal. It would, of an omission in breach of the moreover, be surprising to find an obligations incumbent upon it. That attempt to amend the principle laid down interpretation however would render by Regulation No 17/64 concerning the incomprehensible the distinction drawn power of the Commission to decide on by the provision between attributable and aid from the Fund towards expenditure non-attributable negligence. by the Member States without its being Examination of the Dutch text, which is expressed clearly or confirmed in the in conformity with the French text, preparatory documents. reveals first that the concept of "nalatigheid" could also apply to the 2. (c) The Commission states that its conduct of individuals. If, in this context, subsequent submissions concerning the "negligence" was intended to signify attribution of liability and the procedure negligent ("fahrlässig") action on the part of the administration then in the Commission's view one comes up against the same logical requirements as in the German text but to a still greater degree: it is necessary, in fact, to examine whether the negligent ("fahrlässig") conduct of the administration must be

be negligence on the part of the Member the time of the adoption of Regulation State. However, even in the absence of No 283/72 does not affect that position. that express specification,-the current By failing to take account of the pro- cedural rules laid down in those minutes provision could be interpreted in the same sense as the proposal. That would, the Commission has at the most merely in essence, produce the same result as infringed a sort of "gentleman's the interpretation stating, for example, agreement" and should bear the political that a condition for the attribution of responsibility therefor. That statement liability is "conduct which is open to does not imply that the Commission's criticism" for which an administration is powers are affected by the procedure to be held responsible. laid down therein. In any event it does not constitute the basis for a power of As the general rules referred to in Article decision on the part of the Council, even 8 (3) have not yet been adopted the to lay down outline provisions. The definition of the concept of "conduct repon which the Commission was to which is open to criticism" must be submit to the Council under paragraph sought in the application of the law by (c) of the statement was intended only to way of interpretation. In defining that provoke discussion at the highest level, concept, on no account may subjective as the Commission was certainly elements appertaining to the official expected to take account in its decision executing the act be taken into of the views of the Council. The fact that consideration. If a competent and the report should, "where appropriate", objective observer has a priori reasonable be accompanied by proposals relating to doubts as to the correctness of a given solutions to be adopted by the Council legal interpretation, the national adminis- can only constitute a reference to the tration should be invited to attempt to ever-present possibility of resolving a dispel those doubts, for example by problem arising in a particular case in consulting the Commission. If it does not general terms and for the future, by do so it lays itself open to the charge means of a legal measure adopted under that it may have misinterpreted a the normal legislative procedure. provision and it would also have to bear the financial consequences thereof. This view is necessary for the actual application of Community law in order to avoid the national adminstration's

it. The prospect of such a political S/121/69 and S/176/2/69 of 7 February compromise might encourage the and 21 March 1969 respectively, which Member States to oppose, in the first corroborate the Commission's opinion. If instance, the attribution to them of the the Management Committee procedure financial burden of "irregularities", to was to be applied in general to the submit the matter to the Council and to problem of attributing liability, as is laid find, once Community law is applied, a down by Article 15, it would not have solution which is in their national been necessary to lay down special rules interest. Finally, in contrast to the on attributing liability under Article 8 of Commission, the Council is not in a Regulation No 729/70. position from an administrative point of view to deal with numerous individual 2. (e) The Commission does not believe cases. that the considerations of principle The Commission associates itself without relating to the apportionment of the financial risk between the Community reservation with the statement proposed and the Member States put forward b\ by the French delegation for the minutes the applicant can have the effect of drawn up at the time of the adoption of creating a fundamental derogation from Regulation No 283/72 by the Council, which does not seek to make the Council its conclusions. In its opinion all thoughts on this matter must be based on a conciliatory body but to implement the principle that the Community conciliation procedures within the finances only measures which are EAGGF Committee, that is to say within adopted in accordance with Community an agency of the Commission. provisions.

the Community or as a "subordinate and whether the latter really undertook institution" of a higher Community the factual steps which justify that authority. The administrative authorities expenditure; it is subsequently necessary of the Member States are not bound by to examine whether the expenditure was instructions of the Community executive in accordance with Community law and, and furthermore the Commission does where appropriate, the matter may be not possess a supervisory power within brought before the Court of Justice; if it the usual meaning of administrative law. appears that the expenditure was not in The Commission is merely able to call accordance with Community law the attention to infringements recorded by it, question arises of the purport of Article 8 by means of opinions which are not of Regulation No 729/70. binding, in the context of its bilateral That article is based on the idea that contacts or in existing committees. The items relating to expenditure which, counterpart of the application of whilst not in accordance with Community law by Member States upon Community rules, was nevertheless their own responsibility is precisely the incurred, are to be discharged within the obligation to bear the financial risk of an meaning of Article 5 (2) of the regu- incorrect application of that law. lation. Such a situation is not necessarily This conclusion cannot be affected by in contradiction with Articles 2 or 3 of

the fact that the application and interpre- the regulation. Those articles in fact tation of Community law sometimes relate to the actual financing of the measure to be taken in accordance with raise practical difficulties: such dif- ficulties can often be resolved when the the rules and not its application in measure is being prepared by consul- concreto. The problem of implementation tation with the Commission or in the is touched on only by Article 4, which context of numerous committees, and so gives the national authorities on; the remaining instances should be responsibility for making payments in extremely rare; where necessary, accordance with Community rules.

and the Member States, in which procedures which the latter are respect the applicant has in mind the responsible for applying; Article 5 relates Fund Committee procedure as in a very general manner to all pro- defined in Article 26 of Regulation cedures instituted with a view to

No 17/64 (which corresponds to that recovering sums wrongly paid as a result laid down by Article 13 of Regu- of irregularities or negligence; Article 6 lation No 729/70); and also also has a wide scope. — rules laid down and formulated in The applicant further states that the some way which give concrete Commission's affirmation that the scope expression to recognized principles of Article 15 of Regulation No 2306/70 relating to budgetary apportionment and of the corresponding articles in of expenditure between the Com- other regulations is confined to losses munity and the Member States. suffered in storage is unfounded. If it had been intended to regulate only that If, following that procedure, sums are aspect it would have been necessary to charged to a Member State, that decision add an additional item to the list of those will annul the effect of the decision to to be credited pursuant to Article 4 (2) discharge the item in question. of Regulation No 2306/70. The fact that a separate article was introduced shows 3. (b) The applicant is still of the that on the contrary rules with a wider opinion that Article 8 of Regulation No scope were intended. In any event, the 729/70 also contains provisions relating wording of Article 15 leaves no doubt as to the procedure and conduct of national to its scope. bodies. There is nothing to indicate the The opinion of the applicant as set out contrary in the position of the provision, above is corroborated by Working Paper the recitals in the preamble, its origins or R/1024/71 of 25 May 1971 relating to its purpose. the financial consequences of irregular The purpose of the first subparagraph of transactions drawn up by the Article 8 (1) would not be affected and, Commission at the time of the discussion taking account of the second subpara- on the proposal for Regulation No graph of that provision, would be 283/72. The document states at page 3 meaningless if it did not also serve to that:

laid down the question would finally be relationship existing between the various resolved by the Commission after provisions in question or of an incorrect consulting the Fund Committee at the evaluation of the wording of a provision time of the annual decision on the having regard to its purpose. discharge of the accounts referred to in With regard to the Commission's Article 5 (2) (b) of Regulation No reference to the penultimate recital in the 729/70 ... In the text at present under preamble to the proposal for Regulation discussion these questions are, on the No 729/70 the applicant observes that contrary, to form the subject-matter of that recital was wisely not included in appropriate contacts between the State the final text as it gave a one-sided and the Commission and — in case of picture of the problem. As it stands, the dispute — ad hoc decisions which are to recital merely states that "the financial be taken by the Commission after an responsibility for such irregularities or 'opinion' has been given by the negligence must be determined". Committee in accordance with the In the applicant's view the difference procedure under Article 13 of the regu- between the Dutch text and the German lation (thus after the matter has been referred to the Council in the case of an and French texts of Article 8 (2) of the proposal for Regulation No 729/70 of unfavourable opinion). ... Already in the the Commission is due to the fact that financing arrangements prior to 1 the word "attributable" was mistakenly January 1971 the regulations not translated in the Dutch text and that provided that the Member States and not therefore that text does not correctly the Community are to bear the financial express the Commission's initial burden of negligence attributable to the proposal. former and that decisions on the matter

In these circumstances it is not possible to argue that the concept of negligence does not also cover the incorrect

application of a regulation as a result, for example, of a misunderstanding of the

JUDGMENT OF 7. 2. 1979 — CASE 11/76

fact that there has sometimes been a or with the fact that difficulties of in-

risk and on its own responsibility unless it has consulted the Commission in advance is not reconcilable with the different duties of the Commission and of the Member State in the context of

the implementation of the Community rules on the organization of the markets

NETHERLANDS COMMISSION

It does not follow from the statement Documents S/121/69 and S/176/2/69

Regulation No 729/70 to be adopted by loss which may be declared to the the Council, in application of which Community only the items listed solutions could be found for cases where exhaustively may be taken into consideration pursuant to the regu- it has not been possible to reach agreement on the attribution of liability. lations. Such a general provisions is thus necessary. As Article 4 (2) (a) of Regu- The applicant objects to decisions on the lation No 2306/70 provides that in calcu- attribution of liability being taken by the lating net losses the account may be Commission after merely hearing the credited only with the actual amount of Fund Committee. It believes that it is receipts from disposals, the applicant necessary to follow the procedure takes the view that, in the butter case, referred to in Article 26 of Regulation the shortfall in the receipts of the No 17/64.

stocks. Article 8 of Regulation No 729/70, on the other hand, governs the refunding of amounts wrongly paid by means of funds placed by the Commission at the disposal of the national paying authorities. Thus Article 8 and Article 15 could never be applied simultaneously.

to fulfil their obligations. here is not merely a question of the application of Community provisions but Articles 2, 3, 4 and 5 of Regulation No also of the application of rules of 729/70 contain no rule automatically national law. placing the Member States under an obligation to compensate the The principal justification for auton- Commission for sums wrongly paid omous action by the implementing auth- which cannot be recovered. On the other orities lies in the fact that they must be in hand, provision is made for such an a position to act sufficiently promptly obligation to pay compensation where and always to react adequately to the authorities or other bodies of the situationswhich, in the commercial Member States are at fault in connexion context, are often unforeseeable. with the wrongful payments. Finally, the Commission mistakenly In view of the fact that financing is, since presents matters as though difficulties the introduction of "direct financing", met in practice can always be resolved the responsibility of the Commission, the by consulting the Commission's de- latter must bear the ensuing risks. For partments. Some cases can certainly be their part the Member States are only resolved in that way but in other cases liable for the financial consequences of doubts as to the exact meaning of a irregularities or negligence attributable to provision are not dispelled by the infor- mation obtained. the authorities or other bodies of the State. With regard to the substantive criteria relating to the apportionment of the That system of liability is not only financial risk the applicant states that justified from a legal point of view but where an implementing body makes also complies with the political and incorrect use of available information institutional situation in the agricultural which is in itself correct, the rule is that sector: the agricultural policy is a the payments should be charged to that Community policy and the various body. Member States merely collaborate in its implementation; for that reason, in However, where exact and decisive infor- implementing the agricultural policy as mation was wrongly not available the such funds are no longer available to the Member States; the charging to a Member State of a financial burden in

paramount factor is to what extent the whether it should be given in writing, Member States performed their duty to possibly within a time-limit to be fixed, check whether information supplied by and whether reasons must be given. individuals with regard to transactions The applicant believes that it has shown undertaken by them was correct. in its conclusions that the questions The applicant notes with regard to the raised by the complex matter of incorrect application of regulations by wrongful payments require the the competent authority that payments establishment of rules enabling an answer wrongly made because of negligent to be given. The institutional balance acquaintance with the rules on the part would be upset if the rules were of the officials responsible for their formulated and laid down by the Commission. implementation or because of incomplete or belated notification to them of the It was for that reason, inter alia, that the rules by the central authorities seem in applicant asks the Court to declare that principle inexcusable, save in cases of before continuing the examination of the force majeure or similar circumstances. case or cases in question the Commission A possible case of mistaken interpre- should submit proposals on this matter to tation could be held to exist only where, the Council pursuant to Article 8 (3) of taking account of all the relevant circum- Regulation No 729/70. stances, the interpretation applied by the authority was indefensible from the point 4. In its rejoinder the Commission of view of an objective and competent emphasizes with regard to the discharge observer and where the national court of accounts and the consequences thereof that Articles 2 (1) and 3 (1) of which was faced with the question whether reference should be made to the Regulation No 729/70 are not, as the applicant claims, confined to marking the Court of Justice under the last paragraph of Article 177 of the Treaty had not beginning of total financing by the done so. Community of all refunds and intervention. That already applied at the With regard to the criteria of a pro- single market stage under Article 2 (2) of cedural nature relating to the Regulation No 25 of 20 April 1962 on apportionment of the financial risk the the financing of the common agricultural applicant observes that they might relate policy (Official Journal, English Special in particular to cases where problems of Edition 1959—1962, p. 126). interpretation exist. It is of great value to ask the opinion of the Commission's departments; it does, however, create a number of complications: first, the possibility of interpreting rules in two ways may, in certain cases, only become apparent later; next, the question arises as to whether application of a rule should be suspended until the opinion is received; a third question is whether the Community should assume responsibility for all the consequences of an opinion which sub- sequently proved to be erroneous; finally, it is necessary that the formal conditions, for such an opinion should be clearly laid down, for example,

in Articles 2 (1) and 3 (1) of Regulation The applicant's observations with regard No 729/70 as to the word to Working Paper R/1024/71 can in no "overeenkomstig" used in Article 4 (2) way invalidate the Commission's view: of that regulation [the English text has all the discussions and the observations "in accordance with" for both]. It adds relating to the conduct of officials of the that where the transaction giving rise to Member States always dealt with payment by the competent department of infringements of Community law by the Member State is not in accordance third parties, that is to say irregularities; with Community rules the same is true of the text of page 6 of the paper is clear in the payment. this respect as it refers to the "failure by The Commission observes with regard to an official to take the necessary steps to the scope of Article 8 (2) of Regulation forestall fraud ..."; this is therefore an No 729/70 that the applicant is misinter- irregularity on the part of a third party preting the text of that provision in to the adverse financial consequences of considering that the first indent of which the official contributed by not Article 8 (1) is meaningful and justified taking all necessary steps to avoid it; the having regard to the second indent only passages on page 3 of document if it also covers acts of the R/1024/71, referred to above, should administration. Under the first indent the also be viewed in the context of irregu- Member States are obliged to take the larities by third parties. "measures" necessary to "satisfy Furthermore the Commission did not themselves that transactions financed by refer to the text of Article 8 (3) of the the Fund are actually carried out and are proposal for Regulation No 729/70 in executed correctly". That part of the order to prove that negligence and the provision relates to the establishment by attribution of liability had the same the Member States of a control meaning, as the applicant claims. It only procedure in order to verify that the intended to show by means of that text conditions laid down for the financing of the idea on which that provision is based transactions are satisfied by the recipient. is that the Community should in Contrary to the applicant's view, Article principle bear the financial consequences 2 of Regulation No 283/72 is not of irregular or fraudulent transactions therefore applicable, on a wholly general and that an exception should be made to level, to the agencies responsible for implementing the transactions to be financed and the procedures which it applies but only to the authorities and bodies responsible for checking, preventing and dealing with irregularities and the recovery of sums lost and to the procedure applied by those bodies. In practice the provision is also interpreted in that way by the Member States. The Commission confirms that the

possible depreciation of intervention regulation should have been products as a result of poor storage. It exported; according to the applicant, explains that that regulation is still based that regulation continued to apply so on Regulation No 17/64. That is why long as a certain number of contracts the regulation also makes provision for for forward delivery, relating to a the financing of the net losses of subsequent date, remained to be executed. intervention agencies determined on the basis of accounts of receipts and The applicant puts forward the following expenditure. At the request of the arguments in support of its views: Member States account was taken, in determining the items to be contained in There exist intervention regulations in other sectors which draw a distinction, in those accounts, of possible depreciation general terms, between the date of the of intervention products following poor conclusion of the contract of sale and storage. the date of acceptance of delivery, the On the credit side in Article 4 (2) (e) of two dates being separated by a fixed that regulation an item was inserted period of time. As the rules in question corresponding to the amounts by the made no such provision there therefore exists a lacuna which must be filled. intervention agency from the storer as compensation for losses of that kind. The rule in Article 15 was drawn up with the same idea in mind because it was

necessary to make provision for cases where poor storage and the consequent depreciation of the product are the responsibility of the intervention agency itself. The provisions relating to the item to be credited therefore refer to Article

Furthermore, it is evident from Regu- with the intervention agency was lation No 1893/70 which replaced the referred to as the "purchaser" and had previous rules on this subject that the to accept delivery of the butter Commission had not regulated the "purchased". Consequently, Regulation question of the conclusion of forward No 1893/70 used the same terminology contracts: a provision excluding forward as Regulation No 1308/68 with the same sales was inserted as Article 2 (3) of that meaning. regulation. The Commission does not think that the intervention agency had a valid reason 1. (a) (2) The applicant further argues, for applying the regulation as it did. relying on its observations set out under A 1 (b) that the Commission had no In fact the applicant had no reason to substitute in practice for the wording reason to refuse to approve the accounts used in Regulation No 1308/68 the relating to the butter case as the words of Article 3 of Regulation No implementing body was not aware that 2059/69 of 20 October 1969 on the sale Community provisions had been of skimmed-milk powder from public infringed. stocks intended for export (Journal Officiel No L 263 of 21 October 1969, 1. (b) The Commission argues that in p. 17), pursuant to which the milk common parlance the concept of sale powder "sold" must be exported "within refers to an agreement for the transfer of 30 days after delivery by the intervention the property in goods in return for agency". payment. Regulation No 1308/68 does not define the term in detail The applicant was moreover aware from Nevertheless, in various articles and a very early stage that the Commission various recitals in the preamble interpreted the term "sale" referred to in indications may be found to support an Article 3 of Regulation No 1308/68 in interpretation in accordance with general the sense advocated in the present case usage. The Commission refers in this even after the adoption of Regulation respect to Articles 1, 2, 4 (1) and 5 of the No 2059/69. The Commission's repres- regulation in question. It is also clear entative explained that point of view at from Regulation No 1893/70 that that the 195th meeting of the Management view is the correct one. Committee for Milk and Milk Products

The applicant denies that the wording of The Commission had, moreover, in the Regulation No 1308/68 is clear. It applicant's view, given it grounds for makes reference to the fact in two interpreting and applying the regulation Member States the concept of sale has incorrectly. All the market organizations been interpreted in a wider sense, which were set up after 1967 made including the possibility of concluding provision for intervention arrangements provisional agreements or preliminary involving in particular very specific rules contracts. relating to sale by tender; there were no Moreover, the Euroterm dictionary gives grounds for arguing that the agency in place of "vendu": "commercialisé ou could not interpret in the same way a (re)distribué [marketed or (re)dis- regulation which, like Regulation No tributed] and in place of "verkauft": 1308/68, was not complete in this "vertrieben, verteilt, abgesetzt" respect.

that its opinion is correct by relying on interpretation enables the exact the provisions of Regulation No consequences of the regulation to be 1893/70. In fact the structure of that assessed in their entirety and is even regulation is quite different from that of necessary if the repeal of that regulation Regulation No 1308/68 as it lays down is not to affect contracts already

JUDGMENT OF 7. 2. 1979 — CASE 11/76

concluded. Information confined to that it could interpret the provision in quantities already stored would give only question as it did. an incomplete idea of those conse- quences. The Commission maintains that 2. (b) The Commission is of the opinion it did not cause the applicant to apply that it did not give the applicant cause to the relevant provisions incorrectly. apply Regulation No 204/69 incorrectly. In this respect it disputes the applicant's 2. The lactalbumin case view that payment must always be made 2. (a) The applicant recognized that it to an individual who applies for it so applied a mistaken interpretation in this long as it is not established that no legal case. In reliance on its observations set obligation to make the payment exists. out under A (1) (b), it argues that there Application of such a principle would be are nevertheless no grounds for refusing dangerous and would lead to unac- to discharge the accounts in question by ceptable consequences: if payment was made without reservation it would virtue of the fact that at the time the

NETHERLANDS COMMISSION

2. (c) The applicant argues in its reply as was the case here, the person claiming that in this instance it has not made a the refund satisfies all the relevant sub- mistake for which it can be held liable. stantive conditions. In such a case the

adminstration can only grant the Objectively there are excellent reasons application for payment or reject it. for treating the two products as being similar, since they can be substituted one The applicant informed the Commission, for the other. pursuant to Articles 3 and 5 of Regu- lation No 283/72, of the procedure The opinion expressed by the adopted by it to recover the sums when Commission in the course of the meeting it became apparent that payment had of the Management Committee of 21 been made in error. The Commission did September 1971 to the effect that no not challenge the validity of that infor- refund was to be granted for lactalbumin mation which shows that it accepted the was the personal opinion of the applicant's notification. The applicant Commission's representative who wonders whether the revocation of that admitted that, taking account of the acceptance by the Commission almost wording of the provision and the system three years later is in accordance with of Regulation No 204/69, a different the principles of proper management. interpretation was defensible. It was for In the autumn of 1972 the Commission that reason that the official report of that meeting (Document 3771/VI/71 of 27 sent to the Council its proposal for September 1971) states on this matter replacing Regulation No 204/69 by a under point 7: new regulation. In the explanatory memorandum the following reason was "The Committee given for the need for such replacement: Takes note of the additional information "... the body of rules applicable in this supplied by the representative of the area has become difficult to understand

meeting by the Commission was weight. The reasons given by the conceived, from the beginning, as a Commission's departments to show that general document on Regulation No it was impossible to grant the refund 204/69 and not as a special written should therefore have been sufficient as a

statement of its position on the question statement of reasons for a negative reply raised by the Netherlands delegation. or at least a reply subject to a reser- The minutes are indeed not clear on this vation.

point. The absence of a written statement of opinion can nevertheless not alter the fact that from the time when the relevant IV — Oral procedure meeting of the Management Committee was held all the Member States were This Netherlands Government, informed of the solution which the represented by its Agent, A. Bos, and the Commission regarded as appropriate to Commission, represented by its Legal the problems raised. Advisers, P. Gilsdorf, G. Zur Hausen and R. Baeyens, acting as Agents, If doubts remained the applicant should presented oral argument at the hearing have requested a written statement of the on 24 October 1978. Commission's point of view and it could certainly not continue to pay refunds The Advocate General delivered his

without any reservation, even if it opinion at the hearing on 5 December awaited written confirmation of the 1978.

Decision

1 By an application lodged on 2 February the Government of the Netherlands sought the partial annulment under the first and third paragraphs of Article 173 of the EEC Treaty of Commission Decisions 76/145 and 76/151 of 2 December 1975 concerning the discharge of the accounts in respect of the European Agricultural Guidance and Guarantee Fund, Guarantee Section, expenditure for 1971 and 1972 (Official Journal No L 27 of 2 February 1976, p. 11 and p. 23).

interpretation which, albeit objectively incorrect, was adopted in good faith.

In fact, in the opinion of the applicant Government, by providing that the financial consequences of irregularities or negligence, with the exception of irregularities or negligence attributable to the Member States, shall be borne by the Community, Article 8 (2) signifies that a Member State is obliged to bear the financial consequences only in cases where the incorrect application of a Community provision is the result of wrongful action on the part of a national department or body.

5 The Commission, on the other hand, denies that Article 8 (2) is relevant to the solution of the problems in question, arguing that that provision relates to irregularities and negligence attributable to individuals as persons in receipt of EAGGF expenditure and that it relates to negligence or irregu- larities which are attributable to the Member States only in the exceptional case of irregularities or negligence on the part of officials in the public service acting in breach of their professional duty.

JUDGMENT OF 7. 2. 1979 — CASE 11/76

The Commission nevertheless recognizes that according to general legal principles it is for the Community to bear the financial consequences of an incorrect application of Community law where that application is attributable to an institution of the Community.

6 The text of Article 8 in the different language versions, considered in the light of the origins of the provision and the preparatory documents, on which the parties have based their arguments in the course of the proceedings, contains too many contradictory and ambiguous elements to provide an answer to the questions at issue.

Those provisions permit the Commission to charge to the EAGGF only sums paid in accordance with the rules laid down in the various sectors of agri- cultural production while leaving the Member States to bear the burden of any other sum paid, and in particular any amounts which the national auth- orities wrongly believed themselves authorized to pay in the context of the common organization of the markets.

9 That strict interpretation of the conditions under which expenditure is. to be borne by the EAGGF is necessary, moreover, in view of the objectives of Regulation No 729/70.

In fact the management of the common agricultural policy in conditions of equality between traders in the Member States requires that the national auth- orities of a Member State should not, by the expedient of a wide inter- pretation of a given provision, favour traders in that State to the detriment of those in other States where a stricter interpretation is applied.

If such distortion of competition between Member States arises despite the means available to ensure the uniform application of Community law throughout the Community it cannot be financed by the EAGGF but must, in any event, be borne by the Member State concerned.

It must therefore be concluded that the provisions of Article 8 of Regulation No 729/70 are not applicable to the operations in question.

10 The applicant Government further argues that the expenditure cannot be charged either to the Community or to a Member State on the occasion of the discharge of the accounts of the national authorities and bodies under Article 5 (2) (b) of Regulation No 729/70 but must be attributed by means of a separate procedure.

11 It should be noted that that statement was issued with regard to a regulation (Regulation No 283/72 of 7 February 1972, Official Journal, English Special Edition 1972 (I), p. 90) which was adopted under Article 8 of Regulation No 729/70 and that its scope is consequently limited to the financial consequences of irregularities and negligence referred to by that article, which is not relevant here.

12 It is moreover established that up to the present no specific procedure for attributing liability has been laid down by Community law for the urpose of settling differences between the Community and the Member States.

The discharge of the accounts by the Commission thus necessarily entails the attribution of expenditure either to the Commission or to the Member State concerned.

13 It is clear from Article 5 (2) of Regulation No 729/70 that the Commission's decision is to be adopted only after the consultation with the Fund Committee referred to in Article 11, but that the special procedure defined in Article 13 is not applicable.

It is established that the Fund Committee was consulted in the present instance after the applicant Government had been informed of the items which the Commission considered itself unable to charge to the EAGGF and after it had had the opportunity of making its position on the matter clear.

14 It is evident from the foregoing that the argument based on the alleged failure to comply with the prescribed procedure cannot be upheld.

Regulation No 1308/68 was repealed by Article 5 of Regulation No 1893/70 of the Commission of 18 September 1970 on the sale of butter from public stocks (Journal Officiel No L 208 of 19 September 1970, p. 13) but it remained applicable to butter sold under the regulation which had been repealed.

17 The applicant Government contends that the reduced price is applicable and the condition laid down in Article 3 is satisfied in cases where the contract of

sale was concluded pursuant to the regulation which was repealed and where the butter was exported within 30 days of its removal from storage, even if that took place after 22 September 1970, the date on which Regulation No 1893/70 entered into force.

The Commission, on the other hand, takes the view that the period of 30 days referred to in Article 3 must be calculated from the date of the conclusion of the contract of sale and not from that of the removal of the

butter from storage.

18 In support of the interpretation advocated by the applicant Government it is argued in particular, on the one hand, that only that interpretation enables forward sales and sales effected over relatively long periods to benefit from the reduced prices and, on the other, that it does not open the way to abuses, since unauthorized use of the butter is excluded while the butter is still in the intervention agency's store.

23 As the Court ruled in its judgment of 13 December 1973 in Case 150/73 ([1973] 2 ECR 1633), the provisions in question were not to be interpreted as implying that export refunds for ovalbumin, a product in the egg sector, were to apply to lactalbumin, a product in the milk and milk products sector, in the absence of a special provision adopted in the context of the common organization of the market in the latter sector.

24 The applicant Government recognizes that the interpretation adopted by the Netherlands authorities was objectively incorrect but it nevertheless claims that it is not guilty of an error in this respect for which it may be held liable.

25 It is evident from the interpretation of Regulation No 729/70 adopted above that the Commission would be obliged to bear the expenditure in question

NETHERLANDS COMMISSION

only if the incorrect application of Community law could be attributed to a Community institution.

26 Even if it is accepted that the provisions relating to the refunds in question might give rise to doubts as to their exact scope, none of the evidence produced by the parties in the course of the proceedings, including in particular the discussions of the relevant management committee, enables it to be said that the incorrect interpretation of the provisions may be attributed to the Commission's conduct.

JUDGMENT OF 7. 2. 1979 — CASE 11/76

On those grounds,

THE COURT

hereby:

1. Dismisses the application;

2. Orders the applicant Government to pay the costs.

CONTENTS

I — Facts and procedure 248

A — The origin of the butter case 248

— The origin of the albumin case 248

C — Provisions to be considered

1. Principles governing the financing of intervention measures 249

III — Submissions and arguments of the parties 257

A — The principles governing the financing of intervention measures 257

I. The applicant, application 257

2. The Commission, defence 258

3. The applicant, reply 263

4. The Commission, rejoinder 269

2. The lactalbumin case

(a) The applicant 274

(b) The Commission 274

(c) The applicant 275

(d) The Commission 275

IV — Oral procedure 276