C-15/76

applicant,

v

Commission of the European Communities, represented by its Legal Advisers, Jean Amphoux and Götz zur Hausen (in Case 15/76) and Bernard Paulin and Giuliano Marenco (in Case 16/76), 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 76/142/EEC

arid 76/148/EEC of 2 December 1975 concerning the discharge of the accounts presented by the French Republic in respect of the European Agri- cultural Guidance and Guarantee Fund (EAGGF), Guarantee Section, expenditure for 1971 and 1972 (Official Journal L 27 of 2 February 1976,

JUDGMENT

Facts

The facts of the case, the procedure, the Article 4 of the regulation provides that conclusions and the submissions and the Commission is to make available to

arguments of the parties may be Member States the necessary credits so summarized as follows: that the designated authorities and bodies may make the payments referred to in Articles 2 and 3.

I — Financing of intervention Article 5 (1) (b) of the regulation measures provides that the Member States are to transmit to the Commission the annual 1. Regulation (EEC) No 729/70 of the accounts concerning the authorities and Council of 21 April 1970 on the bodies referred to in Article 4 relating to financing of the common agricultural transactions financed by the EAGGF, policy (Official Journal, English Special Guarantee Section, accompanied by the Edition 1970 (I), p. 218) provides in documents required for their discharge. Articles 2 and 3 that the EAGGF, Guarantee Section, is to finance refunds on exports to third countries and intervention intended to stabilize the agri- cultural markets, undertaken according to Community rules within the framework of the common organization of agricultural markets.

JUDGMENT OF 7. 2. 1979 — JOINED CASES 15 AND 16/76

facture of compound feedingstuffs within 2. The rules for the grant of the aid in the territory of another Member State. question were introduced by Regulation 4. If use was made of the authorization (EEC) No 986/68 of the Council of 15 July 1968 laying down general rules for thus laid down the system for the grant granting aid for skimmed milk and of the aid had to comply with the rules skimmed-milk powder for use as feed laid down by Article 7 of Regulation No (Official Journal, English Special 1106/68 of the Commission of 27 July Edition, 1968 (I), p. 260), as amended by 1968 on detailed rules for granting aid Regulation (EEC) No 1227/70 of the for skimmed-milk powder for use as feed Council of 29 June 1970 (Journal and skimmed milk processed into Officiel L 141 of 29 June 1970, p. 33) compound feedingstuffs (Journal Officiel and by Regulation (EEC) No 673/71 of L 184 of 29 July 1968, p. 26) as amended the Council of 30 March 1971 (Official by Article 1 of Regulation No 332/70 of Journal, English Special Edition 1971 (I), the Commission of 23 February 1970 p. 185). (Official Journal, English Special Edition 1970 (I), p. 117), and with the rules laid Article 2 of Regulation No 986/68 is worded as follows: down by Regulation No 2315/69 of the Commission of 19 November 1969 on "— Aid may be granted for: the use of Community transit documents for the purpose of applying Community measures for verifying the use and/or — skimmed-milk powder which has been denatured according to methods to be determined;

— skimmed-milk powder and skimmed milk produced and processed in the dairy and used in the manufacture of compound feedingstuffs..."

(2) Proof of control by the importing destination appended to the back of the Member State shall be the control original. copy provided for in Article 1 of In France the aid is paid on presentation Regulation (EEC) No 2315/69. of the copy of the control copy to the Sections 101, 103 and 104 of the Fonds d'orientation et de régularisation control copy shall be completed. des marchés agricoles (Fund for the Section 104 shall be completed by guidance and stabilization of agricultural deleting what does not apply and markets, hereinafter referred to as the inserting in the second indent one of FORMA). the following statements: The deposit is to be returned only for the quantities of skimmed-milk powder in respect of which the processor 'to be placed under control with a furnishes proof that those quantities have view to denaturing or processing been denatured or processed in under Regulation (EEC) No 1106/- accordance with the provisions in 68'. question. ...“

7. By its aforementioned decision of In its telex message the Commission 2 December 1975 the Commission held emphasizes that the expenditure which that it could not charge to the EAGGF was not recognized as chargeable to the the sum of FF 1 240 514 which, in its EAGGF relates to about 4% of the view, had not been granted in copies. accordance with Community rules. As evidence of its spirit of understanding it adds, first, that the payment of the aid 8. In a telex message of 27 October on the basis of copies which did not give 1975 the Commission explains the proof that the goods had been placed reasons for its action. It states inter alia under customs control was in itself that it appeared from the audit on the sufficient reason for rejecting the all spot that FF 31 250 815 had been paid relevant expenditure and, secondly, that on the basis of copies which did not the originals which had been duly provide proof that the goods had been stamped by the customs had been placed under customs control in Italy. accepted even if the signatures were It goes on to observe that the staff of the missing; the signatures on their own, EAGGF asked to check the original without the obligatory stamp, would copies which, in most cases, was have been held to be insufficient.

porting documents in connexion with case-law in the present instance the expenses disbursed on behalf of the formality should be regarded as one of Community, the Commission has substance if failure to comply with it was failed to fulfil its obligations; such as to have enabled expenditure to be incurred in error. If, on the other — Declare that the anomalies affecting hand, the formal defect had no influence the control copies amounted to on the character of that expenditure it defects of form of minor importance; should be regarded as subsidiary and — Annul the decision descharging the therefore as not affecting the regularity accounts for the 1971 financial year of the measure. in so far as it does not take into As regards the nullity of a measure in account the expenditure to which the respect of which essential procedural documents in question relate; requirements have not been followed, the — Order the Commission to pay the French Government states that although costs. failure to comply with an essential pro- cedural requirement has the effect of The Commission contends that the Court depriving the administrative document in should: question of its value as proof of the regu- — Dismiss the application as being larity of the operation to which it without foundation; applies, it nevertheless does not — Order the applicant to pay the costs. necessarily mean that the operation itself was irregular. In this respect the Court should rule that any evidence that an C — Submissions and arguments of the operation such as that in question was parties regular should be held admissible. 1. Admissibility (b) According to the French Govern- The Commission submits that the first ment the anomalies mentioned by the two conclusions of the applicant are Commission in its telex message of 27 inadmissible as the Court cannot make October 1975 concern for the most part findings of law in the context of only formal requirements of purely subs- proceedings for annulment. idiary importance.

priate security was lodged to guarantee Regulation No 1106/68 is applied the destination", followed by the strictly only presentation of the original signature and the name of the officer can authorize payment of the aid. authorized to sign. Contrary to what the Commission states the appending of that (d) As regards the mandatory nature of rectangular stamp was always followed the conditions for the grant of aid the by the signature of the competent officer. Commission argues that Community law Quite simply, in some cases the customs recognizes a distinction between essential authorities believed that they were auth- procedural requirements and subsidiary orized to dispense with appending, in procedural requirements, for example in addition, the round stamp. Article 173 of the Treaty. Everything suggests, however, that strict compliance (2) As regards the second anomaly with the conditions laid down by mentioned by the Commission under Community rules for the payment of aids point 2 of its telex message the French in the present instance must be regarded as essential. Government makes the following obser- vations: (1) The mandatory nature of the The essential requirement is to produce requirements in question appears first evidence that the denaturing in fact took from Article 7 of Regulation No place. The statement made by the 1106/68, as amended by Regulation No exporter in Section 104 on the front of 332/70. The control copy may constitute the control copy serves that end; it is the proof referred to in Article 7 only if not, however, absolutely indispensable it was completed and used correctly. since the Italian customs authorities have stated in the fifth section on the back (2) A certain formalism is inherent in that they have placed the goods under the nature of the control copy document control. It is, moreover, absurd to carry and in the nature of the Community out such control if the product is not to transit procedure in the framework of be denatured; indeed, in the French which it is issued. The very purpose of Government's view the very provision of the Community transit arrangements is the control copy is justified in intra- to facilitate the movement of goods Community trade only if it involves within the Community. The conditions control of the use or destination of the for their proper functioning are mutual goods which, in this instance, could only confidence between the administrative be denaturing. authorities involved and uniform

would be able to reintroduce products (e) The Commission states that the into normal market channels. In extreme defects mentioned in its telex message of cases, it is possible that a continuous 27 October 1975 are not merely sub- circuit might be created. sidiary formal requirements. On the contrary, those defects deprive the copies (4) Reliance on means of proof other of their value as evidence that the milk than production of the control copy is powder in question was placed under ruled out by the very wording of Article control. Consequently, the FORMA is 7 of Regulation No 1106/68. It is not entitled to pay the aid on the basis of moreover inherent in the concept of those copies. documentary proof of public expenditure that the control copy must serve its evidential function at the time when it

forms the basis for the expenditure incurred. In addition, serious doubts may arise as to the practical possibility of making the necessary findings in a proper manner so long after the operations in question took place. There can be no question of the discharge of the accounts being the occasion for reopening the examination of the file on each individual operation. If such were the case a permanent situation of legal uncertainty would be established. Finally,

JUDGMENT OF 7. 2. 1979 — JOINED CASES 15 AND 16/76

(1) In the view of the Commission, in First, of the 18 documents submitted 16 the absence of the original control copies are merely copies. It is therefore not it is impossible to verify whether the milk possible to verify the existence of a note powder concerned was in fact placed by the Italian customs relating to the under control by the Italian authorities. placing under control. Even if one The position is aggravated by the fact accepts in place thereof the note by the that in most cases the copies submitted to French customs authorities which held

nothing against the stamping procedure goods have been dealt with it nor is applied by the Italian customs as a specified how they were used as Section method of annotation but that that 104 has not been correctly completed. procedure cannot replace the official The same applies to the two original control copies bearing the rectangular stamp. The purpose of the stamp is to authenticate the signature of the stamp of the Italian customs authorities. Once again there is no precise indication competent officer and thus to make it of how the goods have been dealt with. impossible or at least very difficult to The form merely states that the goods falsify the documents. It is thus an have been dealt with as indicated on the important element in authenticating front of the document. In both cases those documents. The Commission adds Section 104 on the front of the .to the statements made by it in its telex document merely contains the name of message that sometimes the annotation the consignee of the goods. made by the Italian customs consists merely of a barely legible mark and that (4) As regards the failure of the Italian often the indication of the date on which customs authorities to record on the the goods were placed under control is documents the placing under control the missing. Commission complains that the documents in question not only fail to (3) As regards the absence of a indicate the date of the placing under statement relating to the denaturing or control or contain a mistake as to the processing of the products concerned in section used for such indication, but also Section 104 of the control copies the lack any indication by the Italian Commission .states that in eleven cases customs authorities that the goods were Section 104 is completely blank or placed under control. The documents in contains only the word "Italy". In seven question have merely been initialed and other cases Section 104 contains only the name of an Italian undertaking. Reference to the documents produced by the French Government shows that the

that where the granting of aid to private of account (FF 6.10) per degree and per storage alone is unlikely to be effective hectolitre (Article 3 of Regulation No in restoring price levels the Council is to 766/72). The aid paid to distillers for the adopt measures for distillation. distilled wine was fixed at 0,52 units of account and 0.43 units of account per 2. As regards the 1971/72 marketing degree and per hectolitre respectively for year, despite the fact that aids to private the products of the distillation having an storage were granted from the beginning alcoholic strength of 86° or more or 85° of the marketing year for wines of the or less (Articles 5'. and.' 6 of Regulation RI, RII and A I types the prices for No 766/72). those wines continued to be less than the 3. The French Government took the activating prices. view that the minimum price fixed by The option of concluding storage Regulation No 766/72 was insufficient contracts for a period of nine months to induce wine growers to have their between 27 December 1971 and 15 wine distilled and that the Community February 1972 for the same types of intervention would therefore be largely wine did not restore price levels ineffective. appreciably. Consequently it granted additional aid to Having regard to that situation and to distillers, on condition that they the fact that the abundance of the 1970/-

1971 harvest had created supplies which substantially exceeded normal require- ments at the beginning of the 1971/1972 wine year the Council decided, in Regu- lation No 766/72 of 17 April 1972 laying down general rules governing the distillation of table wines during the period from 24 April 1972 to 27 May

In that letter the Commission stated that to prove possible to make such a the measures adopted by France were distinction the incompatibility with not laid down in the distillation Community law of the national measure arrangements established by Regulation would not prejudice the charging to the No 766/72 and extended by Regulation EAGGF of the expenditure relating to No 1098/72. The distillation rules set the Community measure. The level of out therein were exhaustive and did not prices guaranteed a priori by the French permit the Member States to adopt other authorities, which was higher than that measures in that context. laid down by the Community provisions, determined the conduct of producers By letter of 4 May 1973, however, the who relied on that level in order to Commission informed the French decide whether, and if so in what Government that as the measures in quantities, they would send their wine question related to the past it had for distillation. decided not to pursue the procedure under Article 169 which had been 7. The present proceedings have been initiated. It stated that if similar brought against the Commission's infringements were repeated that decision of 2 December 1975. procedure would be reopened. It added that "the decision taken in the context of

the procedure in respect of a failure to B — Conclusions of the parties fulfil an obligation does not prejudge the The applicant claims that the Court final closure of the accounts to be should: carried out annually by the Commission on behalf of the EAGGF". — Declare that in leaving the expenditure resulting from Regu- lation No 766/72 chargeable to the 5. For the purpose of the discharge of the accounts for 1972 the French French Republic the Commission has Government submitted, for the distilla- failed to fulfil its obligations under Community law; tion season in question, expenditure amounting to FF 72 590 447.69 which is the product of the multiplication of

1. Admissibility (c) As regards the question whether it The Commission argues that the French is possible to distinguish the effect of the Government's first conclusion is national measure from that of the inadmissible as it is not possible in the Community measure Commission the context of an action for annulment to refers to its previous arguments and adds ask the Court to declare that certain that it might possibly have been feasible conduct of an institution constitutes a to distinguish between the effects of the failure on its part to comply with its two measures if, for example, after the obligations. end of the distillation operations and without any possibility of foreknowledge 2. Merits on the part of producers, the French (a) In its application the French Government had adopted measures to Government claims, in reply to the increase the profits obtained from Commission's argument to the effect that distillation by producers who had in the final analysis the national aid undertaken it, on the basis of the alone determined the amount of the quantities which had in fact been distilled. expenditure chargeable to the EAGGF that the Commission ignored the obligation laid down by Regulation No (d) As regards the illegality of the 816/70 as regards the objective to be national aid the Commission argues that attained. the French measures gave rise to intervention which was fundamentally In fact the aid laid down by the different from that envisaged in Regu- Commission was sufficient to ensure that lation No 729/70. In its opinion the a certain amount of wine would be sent objective pursued by the Community in for distillation. Consequently, the French fixing the minimum purchase price for aid could, in the applicant's view, only wine is not only to determine the have an additional effect to that of the financial consequences of the Community premium. intervention but also to achieve an The French Government takes the view economic balance: a balance between that a fair solution would be to producers and consumers, a balance

procedure for the discharge of the concerning the budgetary estimates accounts. relating to Regulation No 766/72. It follows that the Commission would The Commission replied that the budget itself have infringed the provisions for the 1972 financial year contains no relating to the financing of intervention estimate relating to that regulation. It expenditure by the EAGGF, Guarantee added, however, that the letter Section, if it had agreed to charge the transmitting to the Council the proposal expenditure in question to the which subsequently became Regulation Community budget. No 766/72 was accompanied by the following observations:

IV — Procedure

The applications were lodged on 13 February 1976. The written procedure followed the normal course.

Upon hearing the report of the Judge- Rapporteur and the views of the

FRANCE COMMISSION

"In view of the information which may France: 1 500 000 hectolitres be drawn from the results of similar Italy: 1 500 000 hectolitres." operations applied during the past wine growing year it can be estimated that the The Advocate General delivered his following quantities of table wine may be opinion at the hearing on 5 December distilled during the period in question: 1978.

JUDGMENT OF 7. 2. 1979 — JOINED CASES 15 AND 16/76

— The aid was, in principle, to be paid by the intervention agency of the Member State within whose territory was situated the concern which denatured the skimmed-milk powder or used it in the manufacture of compound feedingstuffs;

— As a temporary measure, valid until 30 June 1971, where skimmed-milk powder produced in one Member State was denatured or used in another Member State, the former Member State was authorized to pay the aid;

— The decisive date for the payment of the aid by the exporting State was the day when each consignment of the product was placed under control in the territory of the importing Member State;

— Proof that the goods had been placed under control in the importing Member State could be adduced only by producing the control copy of the Community transit document, certain sections of which had to be completed in a specific manner.

5 The amounts in issue relate to cases in which the Commission held that the

10 In cases where the Community rules authorize payment of an aid only on condition that certain formalities relating to proof are complied with at the time of payment, aid paid in disregard of that condition is not in accordance with Community law and the related expenditure cannot, therefore, in principle be charged to the EAGGF when the accounts for the financial year in question are discharged, without prejudice to any possibility on the part of the Commission to take account, during another financial year, of the sub- sequent production of the requisite proof.

11 It follows that the rectification of the formal requirements relating to proof following payment of the aid by the competent national agency is not such as to invalidate the Commission's refusal to charge the expenditure to the EAGGF.

12 It is further necessary to examine the applicant Government's argument that the anomalies are merely subsidiary and should not therefore be relied on to refuse to allow Community financing of the aid granted.

13 In this respect it should be observed that whatever the importance in Community law of the distinction between essential and subsidiary administrative formalities the distinction is not applicable to the proof required in this case.

14 The Community rules in this field are drawn up in terms which do not give the national authorities the option of accepting any other proof that the goods have been placed under control in the importing country than the formal proof provided by the control copy of the transit document correctly completed and stamped.

19 Article 7 of Regulation (EEC) No 816/70 of the Council of 28 April 1970 laying down additional provisions for the common organization of the market in wine (Official Journal, English Special Edition 1970 (I), p. 234) provides that where the granting of aid to private storage of table wines alone is unlikely to be effective in restoring price levels measures may be adopted for distillation.

20 Taking the view that that condition was fulfilled following the abundant harvest of 1970/1971 the Council decided, in Regulation No 766/72 of 17 April 1972 laying down general rules governing the distillation of table wines during the period from 24 April 1972 to 27 May 1972 (Journal Officiel L 91 of 18 April 1972, p. 1), to open a distillation season and to set up a system of aids for that purpose.

FRANCE COMMISSION

21 The French Government took the view that the minimum price and the amount of the aid fixed under that scheme were insufficient and, as a national measure, made provision for additional aids.

22 The Commission regarded that measure as incompatible with the relevant Community rules and in July 1972 it initiated against France the procedure under Article 169 of the Treaty for failure to fulfil an obligation under the Treaty.

23 However, in May 1973 the Commission informed the French Government that as the measures in question related to the past it had decided not to pursue the procedure under Article 169 which had been initiated, whilst adding that that decision did not prejudge the final closure of the accounts to be carried out annually by the Commission on behalf of the EAGGF.

has no discretionary power to derogate from the rules regulating the allocation of expenses.

29 The sum in question which, in the opinion of the French Government, should be charged to the EAGGF, represents, in respect of all the quantities of wine which have been distilled, that proportion of the aid granted which corresponds to the rates fixed by Community rules whilst the proportion corresponding to the additional national aid should be borne by France.

30 The Commission objects to such a calculation, arguing that the national measure had the effect of distorting the distillation operation by extending it, in France, to far greater quantities of wine than would have been distilled on the basis of the Community measure alone.

31 In applying Community rules the Member States cannot unilaterally adopt additional measures which are such as to compromise the equality of treatment of traders throughout the Community and thus to distort competitive conditions between the Member States.

32 As the French national measure in question is therefore incompatible with Community law it is impossible to ascertain to what extent the total effect of the combined national and Community measures is due to one or other component part.

33 It is, in particular, impossible to establish with certainty what quantities of wine would have been distilled in France if the national measure had not

Costs

37 Article 69 (2) of the Rules of Procedure provides that the unsuccessful party shall be ordered to pay the costs if they have been asked for in the successful party's pleading.

38 The applicant Government has been unsuccessful in its submissions.

39 It should therefore be ordered to pay the costs.

On those grounds,

THE COURT

A. Van Houtte H. Kutscher

Registrar President