C-18/76

GERMANY v COMMISSION

In Case 18/76

Government of the Federal Republic of Germany, represented by Konrad Redeker, Advocate, acting as Agent, with an address for service in Luxem- bourg at the Embassy of the Federal Republic of Germany, 20-22 Rue de l'Arsenal,

applicant,

v

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

gives the following

JUDGMENT OF 7. 2. 1979 — CASE 18/76

JUDGMENT

Facts

The facts of the case, the procedure, the unlawful and should therefore be conclusions and the submissions and annulled in so far as the Commission

arguments of the parties may be refused to finance expenditure summarized as follows: amounting to DM 26 094 195.99 for the 1971 financial

year. — Annul the decisions of the

Commission of the European The reason given for those decisions was Communities of 2 December 1975, that the expenditure had not been auth- No 75/33036 and No 75/33038 orized or incurred by the applicant in regarding the discharge of the accordance with the Community provisions in the context of the common organization of the agricultural markets. In its application the applicant argues that the Commission's decisions are

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accounts of the European Agri- Article 3 cultural Guidance and Guarantee 1. Intervention intended to stabilize Fund, Guarantee Section, for the the agricultural markets, undertaken 1971 and 1972 financial years in so according to Community rules within the far as expenditure incurred by the framework of the common organization Federal Republic of Germany: of agricultural markets, shall be financed (a) amounting to DM 26 094 195.99 under Article 1 (2) (b). for the 1971 financial year; and (b) amounting to DM 13 325 660.12 for the 1972 financial year, Article 4

has not been recognized as 1. Member States shall designate the chargeable to the European Agri- authorities and bodies which they shall cultural Guidance and Guarantee empower to effect, from the date of Fund, Guarantee Section; application of this Regulation, the — Order the Comission to pay the expenditure referred to in Articles 2 and costs. 3. They shall communicate to the Commission, as soon as possible after the B — The Commission contends that the entry into force of this Regulation, the following particulars concerning those Court should: authorities and bodies: — Dismiss the application — their name and, where appropriate, — Order the applicant to bear the costs. their statutes;

(b) intervention intended to stabilize the agricultural markets.

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Article 5 state of the administrative and judical 1. Member States shall at regular procedures. intervals transmit to the Commission the 2. In the absence of total recovery, the following documents concerning the financial consequences of irregularities authorities and bodies referred to in or negligence shall be borne by the Article 4 and relating to transactions Community, with the exception of the financed by the Guarantee Section: consequences of irregularities or (a) statements of cash holdings and negligence attributable to administrative estimates of financial needs; authorities or other bodies of the

(b) annual accounts, accompanied by the Member States.

(b) shall, before the end of the following year, on the basis of the documents Article 8 (German text) referred to in paragraph 1 (b), make up the accounts of the authorities 2. Erfolgt keine vollständige Wiederein- and bodies. ziehung, so trägt die Gemeinschaft die 3. Detailed rules for the application of finanziellen Folgen der Unregel- this Article shall be adopted in mäßigkeiten oder Versäumnisse; dies gilt accordance with the procedure laid nicht für Unregelmäßigkeiten oder Ver- down in Article 13. säumnisse, die den Verwaltungen oder Einrichtungen der Mitgliedstaaten anzu- lasten sind. Article 8 (English text) 1. The Member States in accordance with national provisions laid down by Article 8 (Dutch text) law, regulation or administrative action shall take the measures necessary to: 2. Indien algehele terugvordering — satisfy themselves that transactions uitblijft, draagt de Gemeenschap de financed by the Fund are actually financiële gevolgen van de onregel- carried out and are executed matigheden of nalatigheden, behalve die correctly; welke voortvloeien uit onregel- — prevent and deal with irregularities; matigheden of nalatigheden die aan de overheidsdiensten of organen van de Lid- — recover sums lost as a result of irregu- Staten te wijten zijn. larities or negligence. The Member State shall inform the Commission of the measures taken for

those purposes and in particular of the

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Article 13 the Council on 16 July 1969 (Journal 1. Where the procedure laid down in Officiel C 123 of 19 September 1969, this Article is to be followed, the matter p.27), the provision corresponding to shall be referred to the Committee by the Article 8 (2) of Regulation No 729/70 Chairman, either on his own initiative or (namely Article 8 (3) of the proposal) was worded as follows: at the request of the representative of a Member State. "Article 8

The Council, acting by a qualified majority, may adopt a different decision 3. Die finanziellen Folgen von within one month." Unregelmäßigkeiten oder betrügerischen Handlungen werden von der Unlike the system established pro- Gemeinschaft getragen sofern nicht visionally by Regulation No 17/64/EEC Fahrlässigkeit vorliegt, die den Verwal- of the Council of 5 February 1964 on the tungen der Mitgliedstaaten oder den von conditions for granting aid from the diesen beauftragten Stellen anzulasten ist. European Agricultural Guidance and Guarantee Fund (Official Journal, English Special Edition 1963-1964, p. Article 8 (Dutch text) 103), Regulation No 729/70 lays down the principle of direct financing by the Community of the measures in question. 3. De Gemeenschap draagt de The former regulation provided that the financiële gevolgen van de onregelmatige measures in question should be financed, verrichtingen of fraudes, behalve in geval in the first instance, by the Member van nalatigheid van de overheidsdiensten van de Lid-Staten of van hun organen. States which were subsequently »,

reimbursed by the EAGGF (Article 9). The Commission decided, after consul- The antepenultimate recital of the tation with the Fund Committee, the aid preamble to the proposal for a regulation to be granted from the EAGGF (Article was worded as follows: 10). “...

In the Commission's proposal for a regu- lation on the financing of the common agricultural policy which it submitted to

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Adequate measures must be taken to connexion with the financing of the prevent, repress and make good any irre- common agricultural policy and the gularity or fraud; however, it is not organization of an information system in possible to exclude the possibility that this field (Official Journal, English irregular or fraudulent transactions may Special Edition 1972 (I), p. 90) which be discovered subsequent to the contains, inter alia, the following intervention by the paying bodies or that provisions : all the sums paid may not be recovered; it is therefore appropriate to settle the "Article 2

(b) the determination of the amount of the financial resources still available Article 4 in each Member State at the end of Each Member State shall communicate the year in question, representing without delay to the other Member the difference between total States concerned and to the Commission Community financial resources available at the beginning of the year or advanced during the year and the amount referred to under (a)."

1 (c) The general rules referred to in Article 8 (3) of Regulation No 729/70 are contained in Regulation (EEC) No 283/72 of the Council of 7 February 1972 concerning irregularities and the recovery of sums wrongly paid in

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any irregularities which are liable to have of the quarterly communications effects outside its territory very quickly provided for in Article 5. 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 State concerned following the procedure 1. During the month following the end referred to in paragraph 2, the Member of each quarter, Member States shall State shall institute as rapidly as possible inform the Commission of all judicial or an administrative or judicial procedure to administrative procedures instituted with establish formally that there has been an a view to recovering sums wrongly paid irregularity or negligence. It shall keep and shall supply the Commission with the Commission informed of the any information which is relevant in this progress of the procedure in accordance respect. with Articles 3, 4 and 5.-"

State or those States shall hold an of a Member State, it shall quantify the loss and inform the Member State administrative inquiry in which servants of the Commission may take part. The Member State shall communicate to

the Commission the report and the inquiry findings. If the Commission does not take part in the inquiry, it shall be kept informed of its progress by means

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concerned, inviting it to submit its the Member State concerned and then comments within one month. initiate an exchange of views within the EAGGF Committee.

3. After examining the observations submitted to it by the Member State (c) In the light of knowledge acquired within the said time-limit, the in this way the Commission shall repon Commission shall, by decision, lay down to the Council on the manner which it the amount due to the Communities deems most appropriate to clear up the from the Member State owing to the unresolved cases referred to under

irregular practice or negligence paragraph (b), which report shall be established, unless evidence is produced accompanied, where appropriate, by that the sums wrongly paid have been proposals for solutions to be adopted by recovered in the meantime. The amount the Council in order to resolve

made the following statement 1. The observations of the applicant (Document R/151/72 of 4 February concerning the principles relating to the 1972): financing of intervention measures relate, primarily, to case No 10 and. "As regards Article 1 secondarily, to the other cases referred to under IV below. (a) Where a Member State is of the opinion that it must finally bear the financial consequences of irregularities 1 (a) In its opinion, the Commission did not take account of Article 8 (2) of or negligence attributable to its administrative authorities or other bodies Regulation No 729/70 (hereinafter referred to as "Article 8 (2)"): in the it shall inform the Commission indicating the amount which it is to bear. context of that provision and independently of the question whether, (b) Where a Member State is of the in particular cases, expenditure was incurred in accordance with Community opinion that the irregularities or negligence are not attributable to its provisions the Commission should have examined whether the financial administrative authorities or other bodies

within the meaning of Article 8 (2) of consequences should be borne by the Regulation No 729/70 and that the Community. Commission must bear the financial 1 (b) In the applicant's view that consequences thereof it shall submit provision provides that the Community to the Commission an explanatory memorandum. must bear the consequences of irregu- larities or negligence where recovery of If the Commission ... takes the view

that the financial consequences of those irregularities or negligence should not be borne by the Community it shall contact

the sums paid is no longer possible or as to commit the Commission. In that must be ruled out for other reasons, case mistaken interpretations, made in unless the irregularities or negligence are good faith, should not be excluded. The attributable to the administrative auth- effect of the Commission's view is that it orities or other bodies of the Member must decide alone, in the course of the State concerned. In that case the procedure for discharging the accounts, Member State should bear the burden of whether Community law has been the expenditure incurred. That principle infringed. When consulting the Fund is applicable independently of whether Committee several governments the irregularities or negligence are due to emphasized, in particular, that it is unac- infringements of the law committed by ceptable that the Commission should third parties (individuals) or to the wish to determine finally the expenditure wrongful conduct of the administration. to be borne by the Member States The Commission expressed the same without the States being able to co- opinion in a working paper dated operate effectively (they are merely 2 December 1974 (Document VI/157/- consulted). Furthermore, stress was

view. There nevertheless exists a link negligence on the part of persons outside the administration. between the two procedures in so far as in the terms of Article 5 (2) (b) of Regu- The Commission's interpretation takes lation No 729/70 discharge of the into account neither the wording nor the accounts is not possible while the objectives of Article 8 (2). In view of the procedure for attributing liability has still fact that the Member States apply to be applied. By taking its decision Community rules not only in their own without either carrying out an exami- interest but also in that of the nation, which is here obligatory, as to Community, it would seem to be justified the attribution of liability or registering a to apportion between the Community reservation to that effect, the and the Member States the risks arising Commission acted wrongfully.

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1 (d) The fact that the Commission Member State concerned. Such failed to examine the attribution of apportionment of the financial risks liability in accordance with Article 8 (2) appears to be indispensable, particularly cannot be justified by the fact that a in order to avoid problems with the procedure for attributing liability was not expenditure incurred in financing the yet applicable. Even though the common agricultural policy and to implementing provisions referred to in maintain the best possible relations Article 8 (3) of Regulation No 729/70 between the Community and the have not been adopted it is in fact Member States.

basis of which the financial consequences 2. Before stating its point of view on of irregularities or negligence on the part the matters of principle, the Commission of a Member State may be attributed to observes that it has already defined that it. If, in accordance with that provision, point of view in a succinct form in the a distinction were drawn between irregu- working paper of 16 October 1975 larities and negligence attributable to the (Document VI/192/75) on which its Member State and irregularities or decisions of 2 December 1975 are based negligence which are not so attributable (see point 1 (b)). it could be accepted that that attribution requires the existence of some wrongful conduct in the sector falling within the responsibility of an administration. That would mean that all conduct which is

merely objectively wrongful cannot lead to the attribution of liability to the

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2 (a) The discharge of the accounts decisions taken in the context of that

justifies the introduction of those submitted to the Council on 16 July provisions which, for the rest, merely 1969. Regulation No 283/72 also has the repeat the content of Article 1 (2). character of a regulation directed at individuals. This is evident in particular The powers conferred on the from the recitals in the preamble to the Commission in this respect are fully in regulation, which refer to intensifying conformity with the procedure laid down "the campaign against irregularities" and in Article 108 (3) and Article 110 of the "fraudulent practices", and from Article Financial Regulation of 25 April 1973 3 and Article 6 (3) of the regulation. The (Official Journal L 116 of 1 May 1973, idea of undertaking a procedure against p. 1)· an administration acting in a manner Moreover, the discharge of accounts is, which was legally wrong or negligent is as regards its effects for the Member rather paradoxical. On the other hand a States, not fundamentally different from procedure of that kind could very well the decision which the Commission had be undertaken against officials of the civil service of a Member State. to take concerning aid from the Fund after consulting the Fund Committee It is true that at the time of the

under the previous financial discussions on the proposal for Regu- arrangements of Article 10 of Regulation lation No 283/72 within the Committee No 17/64. of Permanent Representatives the German delegation issued a statement to Finally in this context the Commission the effect that "any wrongful act on the points out that the procedure for the part of the administration of a Member discharge of accounts gives the Member State" should be considered "an irregu- States a very wide right to voice their larity within the meaning of this regu- opinions. In the Commission's lation". The Commission notes, 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

practices often concern the territories of attributed to negligence on the part of several Member States, thus making it the administration and must therefore be

impossible to determine the location of attributed to it — which is meaningless. the factors constituting the irregularity. The Commission takes the view that that These considerations come to the fore in meaningless situation can be avoided the antepenultimate recital in the only if, in interpreting the provision in preamble to the draft Regulation No question, reference is made to the 729/70 referred to above. In that draft original wording of the proposal of the the wording of Article 8 (2) was Commission and if the concept of moreover more specific in this regard "nalatigheid" or "negligence" at the (Article 8 (3) of the draft). beginning of Article 8 (2) is disregarded The Commission further argues that the as an addition devoid of meaning. On German text of Article 8 (2) of Regu- that interpretation the meaning which lation No 729/70 has become the Commission gives to the text must ambiguous, in particular by virtue of the necessarily be accepted, taking account introduction of the word "Versäumnis", of the logic of the wording and without which is rendered in the French text and

in the other languages by "negligence", which corresponds rather to the term "Fahrlässigkeit". Examining the German text in isolation one might be tempted, from a purely linguistic point of view, to consider that a case of "Versäumnis" has

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distorting the text: the financial provision could be interpreted in the consequences of fraudulent transactions same sense as the proposal. That would, or other irregularities committed by third in essence, produce the same result as parties must be borne by the Community the interpretation stating, for example, in so far as they are not attributable to that a condition for the attribution of negligent conduct of the part of the liability is "conduct which is open to Member States. criticism" for which an administration is

Article 8 (2) of Regulation No 729/70 lays down neither the circumstances in which liability must be attributed nor the time at which that must be done, in contrast to the text proposed by the Commission which states that there must be negligence on the part of the Member States. However, even in the absence of that express specification, the current

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was unable to reach agreement on the financial burden of "irregularities", to procedure for which the Commission submit the matter to the Council and to made provision in Article 14 of its find, once Community law is applied, a proposal for Regulation No 283/72 the solution which is in their national

general rules are applicable pursuant to interest. Finally, in contrast to the Regulation No 729/70, that is to say the Commission, the Council is not in a provisions laid down for the discharge of position from an administrative point of accounts. view to deal with numerous individual cases. The existence of a joint statement by the Council and the Commission made at The Commission associates itself without

the time of the adoption of Regulation reservation with the statement proposed No 283/72 does not affect that position. by the French delegation for the minutes By failing to take account of the pro- drawn up at the time of the adoption of cedural rules laid down in those minutes Regulation No 283/72 by the Council, the Commission has at the most merely which does not seek to make the Council

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In particular, it is not possible to The Commission is not convinced by reconcile such a view with the fact that the applicant's argument that the the Member States apply the Community Commission's refusal to recognize provisions in question upon their own certain expenditure could lead to responsibility and not "at the request of" budgetary consequences for the Member the Community or as a "subordinate States. In the opinion of the institution" of a higher Community Commission, the Member States must

organization of the market and in the Nevertheless, some exceptions do exist to performance of tasks assigned to the the principle put forward by the Community; the fundamental rules are Commission, for example in cases of irre- decisive; formal requirements on the gularities on the part of third parties — other hand are of merely secondary Article 8 (2) of Regulation No 729/70 importance. — where the Commission has itself

occasioned the incorrect application or where it may be held responsible for the incorrect application for another reason: see in this respect the situation resulting from the judgment of the Court of Justice delivered on 12 November 1974 in Case 34/74 (Roquette France [1974] ECR 1217).

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parties. The fact that "negligence" in a precise and concrete way how cannot be a mere confusing interpolation liability is to be attributed. However, or an unsuccessful attempt at improving Article 8 draws a distinction between the wording is evident, in the applicant's conduct which is attributable and view, from the following facts: at the conduct which is not. According to the time of the discussions preceding the applicant the origin of that distinction proposal for Regulation No 729/70, can only be as follows: a Member State which originally referred only to must not be liable for the financial "irregular" or "fraudulent transactions" consequences of wrongful conduct by its ("agissements frauduleux", "betrüge- officials unless the wrongful conduct is rischen Handlungen"), agreement was also reprehensible ("vorwerfbar").

All procedure for attributing liability; at the these points are in conformity with the time all those participating in the session opinion of the Commission. were unanimous in considering that irre- The question of the point at which gularities on the part of individuals may objectively wrongful conduct or an error frequently be coupled with negligent may be said to be reprehensible may conduct on the part of the national remain open in view of the fact that in administrations; this idea was, for the the cases in question there was neither first time, at the origin of the use of the conduct of a reprehensible or concept of "negligence" in the text of 15 indefensible nature which was contrary January 1970 (Document R/61/70). The to obligations nor an error on the part of fact that the regulation finally adopted the officials who executed the measure. differs in this respect from the original However, it follows from the proposal of the Commission shows that Commission's opinion that reprehensible the proposal, in the version submitted by the Commission, was not accepted by the Member States.

binding nature can therefore be derived from the version which was not adopted. Consequently, the Commission cannot contend that "negligence" merely constitutes an omission in breach of

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conduct cannot be said to exist prima R/151/72) assigned a specific role to the facie even in cases of simple negligence Council, with the agreement of the ("Fahrlässigkeit"). On the contrary, its Commission. The mere facts of its officials took their decisions after much composition and its other functions mean thought and with the necessary care. that the participation of the Council may The Commission's opinion that "Ver- lead more easily to a reconciliation of interests in relations between the säumnis" means an omission in breach of Commission and the Member States than obligations and that the omission is clear evidence of negligence is not relevant, is possible in the case of a unilateral for two reasons: first, the Commission determination by the Commission. overlooks the fact that "Versäumnis" Even if it was only a "gentleman's may consist not only of an omission but agreement" the Commission thereby also of a wrongful act; secondly, a created a legitimate expectation which distinction should be drawn between has to be respected, as all measures of conduct which contrary to given administrative authorities are subject to obligations and the ensuing compliance with the principle of good consequences regarding liability faith. By the very aim which it embodies ("Zurechnung"). Conduct contrary to the verbal statement is conceived as a

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4. In its rejoinder the Commission very least have been expressed in a clear observes, with regard to the interpre- form in the final version.

The .explanations submitted by the of civil law with regard to wrongful applicant on the origins of Article 8 (2) conduct by individuals. Thus in the field of Regulation No 729/70 establish, of Community liability under Article 215 of the Treaty the Court of Justice according to the Commission, only that rejected as irrelevant the objection from the very beginning the applicant advanced by the Commission to the advocated a different 'interpretation but effect that supervisory organizations that that interpretation was not adopted by the other delegations. The Commission does not believe that

the processes leading up to the adoption of that provision enable the conclusion to be drawn that, by modifying the text of the provision, the Council wished to introduce therein an entirely different concept regarding the apportioning of financial charges; if that was indeed the intention of the Council it should at the

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cannot, under a general legal principle, effect of leading to the adoption of a be rendered liable, except in the case of decision relating to individual cases. The gross malfeasance; the Court on the Commission does not see from what the contrary merely referred to the principle applicant deduces the legally binding that the Commission, like the nature of that rule: it is clear from the governments of the Member States, has, decided cases of the Court of Justice that in applying Community law, a general even Council resolutions do not have

absurd to claim that the obligation to must show in this field must primarily be request further details in itself leads to regulated by the Council in the context unacceptable legal uncertainty in trade of a compromise between the interests at or a type of barrier to the application of stake. The present instance specifically Community law: on the contrary, such concerns not the search for a political requests for further details have in- compromise but the regulation of creasingly appeared to be the best means individual cases with the aid of legal of eliminating continuing legal uncer- criteria. In the opinion of' the Commission the course to be followed tainty and of contributing to the effective and uniform application of Community should be the implementation in the law; if nevertheless the national context of the EAGGF of all conciliatory administration is obliged to take decisions which do not allow it the time

to make such a request for further details other possibilities for avoiding a conflict exist; however, if, in exceptional circum- stances, no such possibility exists the conclusion may perhaps be reached at this stage that the Member State in question is not guilty of conduct which is open to criticism. The Commission emphasizes that the procedure provided for in the statement made at the time of the adoption of Regulation No 283/72 cannot have the

JUDGMENT OF 7. 1. 1979 — CASE 18/76

procedures in order to settle amicably accordingly. By Decision 78/710/EEC any differences of opinion. The of 28 July 1978 — that is, after the end procedure within the Council would of the procedure — amending Decisions entail the risk that the Member States 76/141/EEC and 76/147/EEC con-

A — Transport costs occasioned by the 1. Article 2 of Regulation No 986/68 termination of contracts (case No 2) of the Council of 15 July 1968 laying down general rules for granting aid for This problem, which relates to an skimmed milk and skimmed-milk powder amount of DM 63 841.15 for the 1971 for use as feed (Official Journal, English financial year and of DM 243 992.66 for Special Edition 1968 (I), p. 260) provides the 1972 financial year, has already that aid may be granted for "skimmed- formed the subject-matter of Case 47/75 milk powder which has been denatured Federal Republic of Germany according to methods to be determined" Commission. In its judgment of 4 May and for "skimmed-milk powder and 1976 ([1976] 1 ECR 569), the Court of skimmed milk produced and processed in Justice interpreted the relevant provisions the dairy and used in the manufacture of in the sense advocated by the applicant, compound feedingstuffs". that is to say to the effect that the storage costs in issue were not 2. Article 3 of that regulation provides necessarily covered by the flat rate that "The aid shall be paid by the amount laid down to cover the costs of intervention agency of the Member State storage. within whose territory is situated ... the farm or other concern which denatured In its reply the applicant states that the present action seeks, in accordance with the skimmed-milk powder or used it in that decision, to obtain rectification of the manufacture of compound the discharge of the accounts for 1971 feedingstuffs". and 1972 and consequently to credit the applicant with the corresponding amounts. In its rejoinder the Commission states that it will take the necessary steps to amend the contested decisions

territory of another Member State. on the goods. The customs office of destination sub- 3. Where use was made of the authori- sequently marks on the original control zation thus laid down the system for the copy that the control has been effected; granting of aid had to comply with the the document is returned to the customs rules laid down by Article 7 of Regu- office of departure which then has the lation No 1106/68 of the Commission of proof required by the provisions of 27 July 1968 on detailed rules for Article 7 (2) of Regulation No 1106/68 granting aid for skimmed-milk powder which alone justifies payment of the aid for use as feed (Journal Officiel L 184 of by the exporting Member State. The 29 July 1968, p. 26) as amended by security is released only for those Article 1 of Regulation No 332/70 of the quantities of skimmed-milk powder in Commission of 23 February 1970 respect of which proof of denaturing or (Official Journal, English Special Edition processing in accordance with the 1970 (I), p. 117). That article provides provisions in question is submitted by the that: processor. it

1. Aid shall be given by the forwarding 4. In answer to a question from the Member State only when the Federal Ministry of Food the skimmed-milk powder has been Commission, by telex message of 12 placed by the importing Member October 1971, replied that: State under customs control or "In cases where the time of the placing equivalent administrative control of the goods under control can no longer involving the lodging of a deposit be established clearly and where the equal in amount to the aid granted competent Italian authorities have finally under Community provisions in the refused to pay the aid, payment of that forwarding Member State. 2. Proof of control by the importing Member State shall be the control

double payment is excluded ..." excludes the possibility that any of the said consignments of skimmed-milk In the course of the preparation of the powder might have been regarded by this decisions relating to the discharge of the agency as being eligible for aid pursuant accounts the Commission extended that to the Community rules which entered notice to all cases in which the goods into force on 1 July 1971. had been placed under control after 30 This legal situation will remain June 1971. unchanged in the future even in respect of future applications for aid which may 5. In 1971 the competent authority in be addressed to this agency in respect of the Federal Republic of Germany paid consignments notified by the Bundesamt. aid amounting in all to DM 885 701.70 for skimmed-milk powder intended for It was in fact provided in the last denaturing in Italy although the control paragraph of the said Circular No 141 copy mentioned, as the date of placing that as regards consignments of skimmed- under control, a date subsequent to 30 milk powder still accompanied by the June 1971 or it was not possible to transit receipt for control copy T1/T2 No 5 after 30 June 1971, the previous establish clearly that the placing under control had been carried out by 30 June provisions, which specifically make 1971 at the latest (case No 4). provision for the aid to be granted by the exporting Member State, should Before paying the aid the competent continue to be applied." German authority asked the Italian State In an addendum to Document VI/- agency for intervention on the agri- 145/75 the Commission stated as the cultural market (AIMA) to carry out a check. By a letter of 14 March 1972 the ground for its refusal to recognize that AIMA replied that: the said amount was chargeable to the EAGGF that proof that there was no "After a close examination of the double payment must relate to specific situation and although it has not been and individual cases and cannot consist possible to examine all the cases referred merely of the affirmation that double to us by the Bundesamt it can payment was not possible under the nevertheless be confirmed that it was provisions in force. legally impossible that the consignments in question, which are eligible for 6. The applicant also paid the aid laid Community aid in the Federal Republic down for 140 tonnes of skimmed-milk of Germany, were also able to obtain powder without the originals of the that aid in Italy, by virtue of the in- T1/T2 control copies having been structions given in Circular No 141 of 8 supplied. That aid amounted to DM July 1971, a copy of which is attached, 62 267.00 (case No 5). relating to the application of the second The Commission refused to recognize subparagraph of Article 3 (1) of Regu- that that amount was chargeable to the lation No 986/68, which was issued by the Directorate General for Customs of EAGGF on the ground that production the Ministry for Finance and by the Ministry for Agriculture and Forestry, Directorate General for the Economic

clearly evident in the text of the 3. The applicant replies that in the addendum to Document VI/145/75: addendum to Document VI/145/75 Commission bases its refusal on the "... one must seriously doubt the practical possibility of establishing the presumption of double payment; verifi- necessary facts correctly so long after the cation of such a presumption is operation in question." impossible and is of no importance from a legal point of view. It is moreover for 2. The Commission observes that taking the Commission to prove that double account of the wording of its telex payment was made. message of 12 October 1971 the question It is evident from all the circumstances of whether it did not require the submission the case that when the Commission of proof for each individual case is, at replied in its telex message: "in the very least, open to doubt. That text cases..." it was to be interpreted as refers in fact to certain "cases". The meaning that it was in agreement with all letter from the AIMA of 14 March 1972 the information submitted by the shows that the Italian agency was not in Member State concerned in so far as the a position to check the cases submitted to it and consequently it merely gave a general answer unrelated to the individual cases in question and setting out the legal situation then applicable. The applicant is wrong to allege that the Commission has adopted a contradictory course of conduct: in cases where the date of control was doubtful the

Commission asked for proof in each individual case; in cases where it

latter had not displayed negligence. It is AIMA referred to a certain procedure in that sense that the initial effort of the that means only that if the rules in force applicant to produce proof in each were correctly applied it was impossible individual case must be regarded, as for the aid to be paid. showing that the applicant did all in its (b) Inadequacy of the proof on the basis power not to lay itself open to criticism. of which payment of the aid for It is for the Commission to express skimmed-milk powder was auth- another point of view more clearly, for orized (case No 5) example by using an expression such as "in each individual case". 1. The applicant explains that the control copies in question were lost in The letter from the AIMA refers to a transit between the Italian authorities certain procedure which was in fact and the German customs offices. implemented by the Italian customs and None the less, the aids were paid and the which excludes double payment. It is security released only after the therefore not merely an argument accompanying documents, customs relating to legal assessment. The clearance declarations and declarations applicant was bound and entitled to by representatives of the firms seeking presume that that letter was correct. Had the aid had been submitted. Those the Commission followed the procedure documents constitute the requisite proof laid down in the statement made by the Council and the Commission at the time that the skimmed-milk powder was despatched to Italy and was there subject of the adoption of Regulation No 283/72 then if the Commission was in a to control in good time. Furthermore, the risk of double payment is excluded, position to prove that a double payment as witness the letter from the AIMA of had been made it would have been 14 March 1972. In those circumstances possible to charge the expenditure only the applicant took the view that it was to Italy. not legally possible to refuse to pay the aid sought to the consignors. 4. In its rejoinder the Commission emphasizes that the applicant, by its 2. The Commission emphasizes that the argument that the Commission should control copy is the only acceptable proof produce proof of double payment and under Article 7 (1) of Regulation No that it was possible to charge the 1106/68. A certain regard for formalities expenditure only to Italy, is effectively is inherent in the very nature of the saying that in spite of the fact that the control procedure appertaining to the goods were placed under control after payment of aids. If, in a particular case, 30 June 1971 the applicant remained a national administration held that proof competent to pay the aid and that, consequently, any payments made by the Italian authorities were contrary to the provisions in force. In so saying the applicant takes no account of the amendment to the powers in question which has taken place in the meantime. The proof required by the Commission could have been contained in a general letter if such a letter had confirmed that

the applicability of Article 8 (2) of Regu- The applicant states finally that refusal to lation No 729/70 is accepted it must be make the payments in the present case held in the present instances that the would have been penalized by its applicant applied the law incorrectly: the national courts. That shows that its applicant paid the aid although it was national administrative authorities are clearly established that the only proof not guilty of any irregularity or accepted by Community law was lacking. negligence, as there is no infringement of a rule of law. 3. The applicant replies that the objective assigned to the payment of the 4. The Commission emphasizes in its aid by the regulations in question must rejoinder that failure to comply with be taken as the starting point: as the rules regarding essential procedural processing of skimmed-milk powder was requirements entails consequences of a carried out in the present instances in legal nature. The provision relating to accordance with the provisions of Regu- the transfer of powers which is at the lation No 1106/68 the mere absence of heart of case No 4 does not constitute the control copy cannot be decisive. such a rule. On the other hand, taking The applicant states, in the alternative, account of the clear and concise wording that if the procedure laid down in the of Article 7 of Regulation No 1106/68 statement made by the Council and the and of the objective of those Commission at the time of the adoption arrangements, the binding nature of the of Regulation No 283/72 had been followed it would have become evident

uniform application of Community law. Member States "may grant aids to The Commission recalls that, taking permit the purchase or butter at reduced account of the provisions of Community prices by persons in receipt of social assistance". The measure was to be law and the case-law of the Court of Justice, it is unlikely that the applicant applicable until 31 December 1971. would have been unsuccessful in cases In application of that authorization the brought against it before the national Commission adopted Decision 70/228 courts. EEC of 24 March 1970 relating to the disposal of butter to certain categories of In the Commission's view the proofs consumers in receipt of social assistance accepted by the applicant enable it to be (Journal Officiel L 77 of 7 April 1970, shown that the goods in question arrived p. 15). That decision authorized the in Italy but not that they were placed under control there. Member States to pay to butter suppliers aid not exceeding. 1.45 units of account In the Commission's view the arguments per kg on the purchase of a quantity of presented by the applicant in the alter- butter not exceeding 0.5 kg per month native regarding the question of the attri- (Article 1, Article 2 and the second bution of liability are of little relevance: paragraph of Article 3). The butter could all the facts relied on fall outside the only be supplied to consumers in scope of Article 8 (2) of Regulation No exchange for an individualized voucher 729/70; similarly, they do not constitute (first paragraph of Article 3). The any of the exceptional cases in which the Member States were to take all necessary Community may be held responsible for measures to ensure that the aid was the incorrect application of Community granted exclusively for deliveries for law by a Member State. which it was provided (Article 4). The Commission maintains that to allow That decision was repealed with effect the establishment of certain proofs by a from 1 May 1971 by Decision 71/166 of single document is a widespread practice the Commission of 30 March 1971 in Community trade; the movement certi- (Journal Officiel L 88 of 20 April 1971, ficate DD 4 at issue in Case 12/70 p. 14). At the 212th meeting of the (Craeynest) is a good example. Further- Management Committee for Milk and more, the Commission cannot permit a Milk products on 17 March 1971 the Member State to refrain from applying a Community provision which it regards as inadequate; otherwise the indispensable uniformity of application of Community law would be disrupted.

the aid paid in the Federal Republic of December 1971. Furthermore, Decision Germany after 30 April 1971 as being 71/166 not only revoked the authori- chargeable to the EAGGF. The zation to issue vouchers but also

expenditure in question amounted to abrogated Decision 70/228, that is to DM 17 930 880.40 in 1971 and DM say, the authorization for the Member 12 051 258.00 in 1972. States to grant those aids. It was therefore no longer possible to issue 2. Submissions and arguments of the vouchers valid after 1 May 1971. parties The measure in question was introduced 1. The applicant states that even under in order to use up existing stocks of the procedure applied by it the butter. It should, therefore, have administrative costs amounted to around followed developments on the market DM 6 million annually. To have issued and have been abrogated when it was no the vouchers for shorter periods would longer justified from an economic point have doubled the cost. of view. That was also the reason why The Community rules in question make the validity of Decision 70/228 was not provision for neither the right nor the originally limited in time. A measure of obligation for the Member States to abrogation confined to the distribution of vouchers would have been of no effect make the vouchers subject to conditions or limits; nor does it contain any clause taking account, at the very least, of the relating to adaptation. Until March procedure followed by the applicant for 1971, therefore, the applicant was able to distributing the vouchers. and had to take the view that the Holders of vouchers have no legal measures would be maintained at least guarantees: primarily because the matter until 31 December 1971. Consequently, involves relations between individuals it issued the vouchers for the period laid and the Member State in question which down in the regulations. That procedure was adopted for the administrative and economic reasons referred to above.

December 1968 (COM(68)991 final) The Commission states finally that even authorizing the Federal Republic of if the applicant's view as to the Germany to sell butter from public applicability of Article 8 (2) of Regu- stocks at a reduced price in the form of lation No 729/70 is adopted it must be concentrated butter. held that the applicant applied Community law wrongly in view of the The a posteriori invalidation or the withdrawal of the vouchers was fact that to an objective observer that application appears to be clearly contrary impossible as, under German law, the to the letter and the spirit of the persons holding the vouchers had Community provisions. The applicant's acquired certain legal rights. conduct must at the very least be 4. The Commission states, in its regarded as extremely negligent, particu- rejoinder, that it did not cause the larly having regard to the circumstances in which Decision 71/166 was adopted. applicant to apply Community law incorrectly. Under both national law and Community law it is neither necessary 3. The applicant replies that even if it is nor even customary to include in every accepted that the Commission's interpret- ation is well-founded the conditions for legislative measure a provision recalling the obvious fact that the measure in attribution are not fulfilled. The question may subsequently be abrogated Commission is in fact guilty of or amended; a time-limit need be fixed negligence: Decision 70/228 makes no only in certain exceptional cases, for reservation as to the possibility of example where it is known in advance making subsequent amendments and that rules are necessary only for a fixes no time-limit; Article 4 of the specific period; the decision of the decision provides solely that the butter Commission of 17 December 1968 shall be granted only to persons in nevertheless had to make provision for receipt of social assistance and does not the possibility of amendments as refer to any other obligation or to the otherwise sales contracts which had possibility of withdrawal or the fixing of already been concluded could no longer time-limits. It is even doubtful whether have been made subject to the new rules. the applicant had the power to impose such a restriction. Article 1 of the said

up a framework within which the sense of "delivery". Consequently it sold Commission had the possibility but not butter ar reduced prices under the sales contracts which had been concluded the obligation to act. It could equally have confined itself to making partial use before 22 September 1970 and it repaid of the authorization. It is therefore the securities lodged where the butter incorrect to regard the partial exercise of was exported within 30 days of its an authorization as an infringement of removal from storage. The Commission took the view that the term "sale" relates its substance. The same applies to the authorization granted to the Member to the conclusion of the agreement between the intervention agency and the States by the Commission. person concerned and that the applicant was therefore not able to grant a D — Sale of butter from intervention reduction for all intervention butter stocks at reduced prices (case No 9) exported after 21 October 1970 and it therefore refused to recognize the sum 1. Facts of DM 7 274 690.12 as being chargeable to the EAGGF for that financial year. In order to take action to dispose of intervention stocks of butter during the 2. Submissions and arguments of the 1968/69 milk year the Commission parties adopted Regulation No 1308/68 of 28 1. The applicant argues that in order to August 1968 on the sale of butter from take account of Article 3 of Regulation public stocks for exportation (Journal No 1308/68 it is necessary, when calcu- Officiel L 214 of 29 August 1968, p. 10). lating the period, to take into That regulation laid down the obligation consideration the date when the butter in for the intervention agency to sell, fact leaves the warehouse of the subject to specified conditions, to all intervention agency for export. The risk interested persons, butter which had that the purchaser may use the butter been stored for at least four months otherwise than is laid down by the regu- (Article 1). The butter was to be sold at lation is in fact avoided so long as the a price which was 5.5 units of account butter is stored with the intervention per 100 kg less than the intervention agency. The disposal of large quantities price (Article 2). The butter was to be is economically and materially possible exported within 30 days after "sale" by only if the contracts can be spread over the intervention agency (Article 3). relatively long periods and if the refund is fixed in advance. Although the regulation was repealed by Article 5 of Regulation No 1893/70 of 2. The Commission argues that in the Commission of 18 September 1970 common parlance the concept of sale on the sale of butter from public stocks refers to an agreement for the transfer of (Journal Officiel L 208 of 19 September the property in goods in return for 1970, p. 13) it remained applicable to butter which had been sold in payment. Regulation No 1308/68 does

the interpretation advocated by the The applicant had no valid reason for applicant is also approved by other applying the regulation in the way that it Member States. Furthermore, because of did. The Commission explained the point the imprecise wording of Regulation No of view set out above at the 195th 1308/68 the Commission is at the origin meeting of the Management Committee of any misinterpretations. It would have for Milk and Milk Products on 13 been a simple matter for the Commission August 1970; the Commission notified to indicate clearly, as it did in Article 4. that point of view to the applicant by that the date of the sales contract was to letter of 14 December 1970; the latter be regarded as decisive in Article 3 as stated its point of view in a telex message well. of 9 February 1971 and it was then The Commission cannot avoid its informed that although the Commission still took a different view it had decided obligation to ensure that there is no not to open proceedings under Article linguistic ambiguity in the legal measures 169 of the Treaty as the infringement promulgated by it by relying on the fact that the national authorities are free to had ceased. ask it for further information. That

(1) of Regulation No 1308/68 is used in exactly the same sense as that of E — Repurchase of butter sold at reduced "conclusion of the contract of sale". prices and intended for processing Comparison with other provisions, in into concentrated butter (case No particular with Article 3 of that regu- 10) lation, does not support an argument a contrario. The four months laid down in 1. Facts Article 1 of Regulation No 1308/68 In the context of the special measures represent, in the Commission's view, the referred to in Article 6 (3) of Regulation minimum period for which butter must No 804/68 of 27 June 1968 on the have been stored when the contract of common organization of the market in sale is concluded. Operations of this type milk and milk products (Official Journal, are in fact intended to dispose first of English Special Edition 1968 (I), p. 176) butter which has been in store for the the Commission, in several decisions, longest period as the quality of the butter authorized' inter alia the Federal deteriorates the longer it is stored. If the Republic of Germany to sell butter from applicant's view were correct the intervention stocks at reduced prices provision would have stated that butter after it had been processed into sold had to have been stored for at least concentrated butter. Under the four months at the time of delivery. As provisions of Article 6 (1) of the regards Article 5 of the said regulation Commission decision of 17 December the Commission states that the 1968 authorizing the Federal Republic to determining factor is not the volume of sell butter from public stocks in the form storage space available at a given of concentrated butter at a reduced price moment; rather, it is necessary to be able (COM(68)991), as amended by the to assess the general outcome of the decision of 29 July 1970 (COM(70)865), measure applied. On the one hand such the applicant was to ensure that, within disposal constitutes a substantial burden its territory, the concentrated butter was on the Community budget and is consumed directly without being further justified only if it is economically processed. indispensable; on the other the termin- In view of the fact that, despite the safe- ation of the measure cannot affect guards against abuses laid down, it was contracts already concluded. In order to impossible to guarantee that the be able to choose the time when the concentrated butter would be used for operation undertaken should be the prescribed purposes, the Commission terminated the Commission must have adopted the decision of 19 August 1971 information regarding the quantities (COM(71)986) authorizing the applicant which have formed the subject-matter of to reach an agreement with the pur- contracts of sale and not just regarding quantities which have been delivered. If the applicant's view were correct the Member States would have been able to determine the duration and thus the

chasers to terminate the sales contracts The Commission takes the view that the which had been concluded and to make product should be repurchased at the provision for a refund. The purchasers price for which the intervention agency were then to place the product at the sold it. The costs which it recognized as disposal of the intervention agency and being chargeable to the EAGGF are the to obtain reimbursement of the purchase processing costs referred to in Article 4 price and a fixed sum by way of (1) (h) of Regulation No 2306/70, as those costs were determined on the basis compensation to cover the costs of storage which they had incurred. of the fixed amount laid down by the decision of 30 November, and the As regards the system for financing the storage costs referred to in the decision intervention reference should be made in of 19 August 1971. the present case to the provisions of It therefore refused to recognize that an Article 4 (1) (f) of Regulation No amount of DM 1 212 135.12 was 2306/70 of the Council of 10 November chargeable to the EAGGF. 1970 on the financing of intervention expenditure in respect of the domestic 2. Submissions and arguments of the market in milk and milk products parties

butter intended for processing into are to be determined by decision of the concentrated butter by the purchasers Commission as a fixed amount for each and the costs arising from the type of processing. The costs of repurchase. Neither Regulation No processing butter into concentrated 804/68 nor Regulation No 2306/70 butter were fixed, for the period 29 July refers to the need to reduce the burden to 31 December 1972, by Commission of finance borne by the Commission. In decision of 30 November 1973 the applicant's view the Commission was (COM(73)1988). aware that it was possible to prevent misuse of the product sold only by The applicant repurchased the butter and repurchasing it and that that repurchase the concentrated butter at a market price could only be effected at the market which was higher than that for which it price obtaining at the time. had sold the product.

GERMANY COMMISSION

August 1971 was applied correctly but agency would have had to continue to whether the operation should be store the butter itself. There would

whatever the particular circumstances of the individual case.

The Commission states with regard to the storage costs referred to in its decision of 19 August "1971 that if the sale had not taken place the intervention

JUDGMENT OF 7. 2. 1979 — CASE 18/76

It is the Community which determines the law In the opinion of the applicant the result within the context of the powers would be the same even if the conferred on it; the Member States apply Commission's criteria relating, to the that law to individual cases. The point of apportionment of the financial risk view advocated by the applicant between the Community and the overturns that system. Member States was applied. The The applicant was not caused to act as it Commission recognizes that exceptions exist to the view that it is for the did by the Community. The fact that the present case does not correspond to any Member States to bear the financial of the exceptions from the principle of risks, since the Community may be financing by the Member States relied on declared liable for the incorrect by the Commission is evident from its application of provisions. In the observations on case No 5. The fact that applicant's contention that is the case in the Commission authorized the applicant this instance. The Commission auth- to cancel the operation which had been orized the repurchase in order to avoid commenced does not affect the situation. effects detrimental to the Community; The applicant went beyond that authori- those considerations dictated to the zation, which was primarily granted in applicant its course of conduct; as the the interests of the applicant which, if objective of the measure for the the operation had not been cancelled, repurchase of the butter could not be would have had to bear far greater achieved at a lower price and as, further- financial consequences. more, the repurchase was necessary for the reasons set out above it was F — Costs of crushing and reconditioning necessary therefore to increase the sugar (case No 12) repurchase price accordingly.

justified.

on the common organization of the 2. Submissions and arguments of the market in sugar (Official Journal, parties English Special Edition 1967, p. 304) the 1. The applicant observes that the Commission adopted Regulation No procedure followed by it was approved 822/70 of 4 May concerning a standing by the Commission's representatives. Use invitation to tender for the sale of white was not made of the possibilities set out sugar intended for animal feeding-stuffs in Article 9 of Regulation No 822/70 to held by the German intervention agency forestall actions on a warranty or actions (Journal Officiel L 98 of 5 May 1970, p. for damages brought by purchasers as, 7). Under Article 6 (1) of that regulation because of their supply obligations, the the standing invitation to tender related successful tenderers had insisted on the to quantities of "free-running" white supply of the quantity awarded in full sugar. The first paragraph of Article 9 and no other sugar corresponding to the provides that in the event of its being quality awarded was available. In view of shown that a quantity of sugar which the assurance given at the time of the was the subject of an award under the invitation to tender that the sugar would invitation to tender does not correspond be "free-running", the product of the to the condition as to quality of the sale, in the applicant's view, is not the notice of invitation to tender, the suc- tender price but that price after cessful tenderer may apply for an deduction of necessary expenditure. The adjustment of the quantity awarded or fact that part of the sugar solidified the supply of an equivalent quantity during storage cannot be held against the which does conform taken from other applicant. The hardening was the lots available for tender but not yet necessary consequence of prolonged awarded. The second paragraph of storage. When the conditions of the Article 9 provides that after removal of invitation to tender were discussed the goods the successful tenderer within the Management Committee for concerned may not, on grounds of the Sugar the competent German de- difference in quality referred to above, partments drew the attention of the assert contractual or non-contractual Commission to that fact and asked that rights. the sugar should be put out to tender "in As one consignment of sugar stored in its existing state". Germany had solidified it was crushed and reconditioned before it left the 2. The Commission does not regard the warehouse in order to satisfy the processing of the solidified sugar into conditions laid down by Regulation No "free-running" sugar as wrongful: the 822/70. The German intervention question is merely whether the agency therefore entered on the credit side of the account which it had to draw

expenditure arising out of those quality to be guaranteed. That is clear operations must be borne by the from the recitals in the preamble to that EAGGF. Consequently the alternative regulation and the Commission was arguments put forward by the applicant aware of the fact. Nevertheless, by relating to Article 8 (2) of Regulation guaranteeing that quality the No 729/70 are of no relevance in this Commission necessarily exposed the instance. applicant to actions for damages and actions on a warranty by purchasers of The German intervention agency acted the sugar. If the applicant had in fact as though Article 4 (1) of Regulation No relied on the provision in the second 2334/69 made provision for an additional item to be debited under a paragraph of Article 9 of the regulation it would effectively have excluded the subparagraph (h). However, like the warranty, which is not permissible under analagous provisions applying to other German law. In the applicant's view the sectors, the list of the various factors measures laid down in the first referred to in Article 4 of the said regu- lation is exhaustive. paragraph of Article 9 were inapplicable; no purchaser would be satisfied with a The fact that the invitation to tender small quantity of poor quality sugar provided for the sale of "free-running" when a larger quantity of a better quality white sugar, contrary to the wish of the had been guaranteed. Supply of sub- German delegation to the Management stitute sugar was impossible from the Committee cannot, in the Commission's beginning as none of the sugar which view, lead to the conclusions drawn by was put out to tender was of the the applicant: first, sugar stored for a guaranteed quality. The costs of crushing long period does not necessarily lose that were therefore due to the fact that the quality which ensures that it is free- Commission failed to draw up rules running if it is stored in suitable appropriate to the quality of the sugar. conditions; furthermore, Regulation No In those circumstances financing by the 822/70 provided, in cases where sugar Community as provided for by the first was of defective quality, for a solution subparagraph of Article 8 (2) of Regu- which was in conformity with the lation No 729/70 is the only possibility. financing rules applicable. In view of the fact that the Commission

primarily in order to limit as much as quality. It was precisely for that reason possible the financial losses caused to the that the first paragraph of Article 9 was Community by possible actions for inserted in the regulation. The applicant damages that the applicant incurred the is wrong in holding that that article is expenditure in question. It should not applicable. The second paragraph of therefore be paid by the Commission as Article 9 of that regulation is of little a sort of reimbursement of costs ("Auf- relevance as in the present instance the wendungsersatz"). hardening of the sugar had already been noted before its removal from store. It is The applicant states finally that the Commission's contention that sugar does not true, according to the Commission, not solidify refers to sugar stored in silos. that all the sugar put out to tender was The applicant recalls in this respect that not "free-running"; only 9 900 tonnes of in 1970, because of the Community sugar out of the total amount put out to tender of 36 370 tonnes had hardened. provisions then applicable, sugar in triple- layered paper sacks was also to be The Commission submits finally that the covered by intervention measures. The partial hardening of the sugar was due to consequence of that method of storage inadequacies in the storage. The sugar was that sugar solidified if it was stored was in paper sacks having five layers, the for too long a period. second of which was coated with bitumen; furthermore, officials of the 4. As regards its observations Commission found that the German concerning the principles of the store was arranged in such a way that it applicant's arguments the Commission is not surprising that the sugar solidified refers to the comments made by it in even though it was stored in paper sacks connexion with case No 10. It then having five layers. emphasizes that even if it is accepted that it acted wrongly in adopting Regulation No 822/70 that cannot justify the V — Oral procedure financing by the Community of the expenditure incurred by the applicant. In The German Government, represented any event, the Commission was by no by its Agent, K. Redeker, and the means at the origin of the applicant's Commission represented by its Legal action and the expenditure in question is Advisers, P. Gilsdor and G. Zur Hausen, attributable exclusively to unsuitable acting as Agents, presented oral storage on the part of the applicant. The argument at the hearing on 24 October Commission accepts that at the time of 1978. the adoption of Regulation No 822/70 it was well-known that there was a The Advocate General delivered his

3 In contesting the legality of the decisions adopted by the Commission, the applicant Government cites, apart from the provisions of those specific regu- lations, certain general rules set out in Regulation No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (Official Journal, English Special Edition 1970 (I), p. 218), in particular the first subparagraph of Article 8 (2) which is worded as follows :

"In the absence of total recovery, the financial consequences of irregularities or negligence shall be borne by the Community, with the exception of the consequence of irregularities or negligence attributable to administrative auth- orities or other bodies of the Member States."

The Government argues that that provision must be interpreted as meaning that the financial consequences of an incorrect application of a Community provision by a national authority must be borne by the Community in all cases where the error committed is not the fault of the administrative auth- orities or other bodies of the Member State concerned but is the result of an

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

GERMANY COMMISSION

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.

JUDGMENT OF 7. 2. 1979 — CASE 18/76

In cases where, viewed objectively, Community law has been incorrectly applied on the basis of an interpretation adopted in good faith by the national authorities it is not possible as a general rule, either under Community law or under most of the national legal systems, to recover sums paid in error from the recipients and it is not possible to undertake administrative or judicial procedures against those responsible.

7 Consequently such a situation cannot fall under Article 8 but must, on the contrary, be examined in the light of the general provisions of Articles 2 and 3 of the same regulation, according to which refunds granted and intervention undertaken "in accordance with the Community rules" within the framework of the common organization of agricultural markets are to be financed by the EAGGF.

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- cultual 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.

8 That strict interpretation of the conditions under which expenditure is to be borne by the EAGGF is necessary, moreover, in view of the objective 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 interpre- tation of a given provision, favour traders in that State 'to the detriment of those in other States where a stricter interpretation is applied.

It appears from that statement that if the Commission takes the view, contrary to that of the Member State concerned, that the financial consequences of irregularities or negligence should not be borne by the Community it must contact that Member State and then initiative an exchange of views within the Fund Committee referred to in Article 11 of Regulation No 729/70.

It further appears from the statement that the Commission is to make a report to the Council in the light of knowledge acquired in that way and, where necessary, is to propose solutions to be adopted by the Council in order to resolve differences of that kind.

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 purpose 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.

JUDGMENT OF 7. 2. 1979 — CASE 18/76

16 Under that regulation, as amended by subsequent Council regulations, and under Commission regulations on detailed rules for the grant of that aid:

— 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 ;

GERMANY COMMISSION

— 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.

JUDGMENT OF 7. 2. 1979 — CASE 18/76

formal proof provided by the control copy of the transit document correctly completed and stamped.

As the objective of the regulatory provisions in question is to exclude the possibility of double payment and the possibility of the goods being returned to ordinary commercial channels, the formalities relating to proof must be strictly adhered to for that purpose, and in particular to forestall any fraudulent practice intended to evade the supervisory measures.

To accept, as the German authorities did in this instance, proofs which do not relate case by case to specific consignments but which merely consist of general statements as to the scope of instructions given to the administrative authorities in the importing State is therefore, in any event, incompatible with the requirements of the Community provisions in this field.

The Commission's refusal to charge the expenditure in question to the EAGGF is therefore justified.

21 Another disputed item relates to aid paid by the German authorities in respect of quantities of skimmed-milk powder exported to Italy in cases where the dates when the goods were placed under control in that country are not in dispute but where proof that the goods were placed under control was not adduced by production of the control copy of the Community transit document duly completed and stamped by the Italian authorities.

23 The Commission refused to charge to the EAGGF the sums of DM 17 930 880.40 for the 1971 financial year and DM 12 051 258.00 for the 1972 financial year which were paid by the authorities in the Federal Republic of Germany by way of aid for the purchase of butter by persons in receipt of social assistance.

24 Article 1 of Regulation No 414/70 of the Council of 3 March 1970 laying down general rules relating to measures intended to increase the use of butter by certain categories of consumers (Journal Officiel L 52 of 6 March 1970, p. 2) authorized the Commission to decide that Member States may grant aid to permit the purchase of butter at reduced prices by, inter alia, persons in receipt of social assistance.

Pursuant to that provision the Commission adopted Decision 70/228 of 24 March 1970 (Journal Officiel L 77 of 7 April 1970, p. 15) authorizing the Member States to grant aid to enable persons in receipt of social assistance to purchase, in exchange for individualized vouchers, 0.5 kg of butter per month at a reduced price.

The period of validity of Regulation No 414/70, which was initially confined to 1970, was extended until 31 December 1971 by Regulation No 2550/70 of the Council of 15 December 1970 (Journal Officiel L 275 of 19 December 1970, p. 1).

Commission Decision 70/228, the period of validity of which was not restricted by any express provision, remained applicable until it was repealed, with effect from 1 May 1971, by Commission Decision 71/166 of 30 March 1971 (Journal officiel L 88 of 20 April 1971, p. 14).

JUDGMENT OF 7. 2. 1979 — CASE 18/76

While certain provisions seek to prevent abuses and to guarantee that the aid will be granted only for deliveries for which it was provided, no provision is made for the possibility of terminating the aid before the expiry of the period during which Regulation No 414/70 was applicable.

28 Since Decision 70/228 requires the Member States to use a system of individual vouchers for distributing the aid, since the applicant Government adopted such a system, in the first instance until the end of 1970, and since the Commission decision remained in force without any amendment for an indeterminate period after the enabling regulation was extended to the end of 1971, it cannot be said that the applicant Government, by maintaining the

GERMANY COMMISSION

system initially adopted without making provision for the possibility of terminating the operation in the course of the year and taking into account also the special nature of the measure in question, exceeded what it was lawfully entitled to do to implement the Commission's decision within its national territory.

The contested decisions should therefore be annulled in so far as the

Commission refused to charge to the EAGGF the disputed amounts paid by the applicant Government by way of aid for the purchase of butter by persons in receipt of social assistance.

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.

JUDGMENT OF 7. 2. 1979 — CASE 18/76

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.

32 However, in the context of the regulation in question there is no reason why the term "sale" used in Article 3 should be given a meaning different to that which it has in ordinary legal language and which corresponds, moreover, to that assigned to it in other provisions of the regulation.

The period of 30 days laid down in Article 3 must therefore be calculated from the date of the conclusion of the contract of sale and not from the date when the butter left the store.

that the product would exclusively be used within the national territory for direct consumption without preliminary processing.

35 As the German Government informed the Commission that it was no longer in a position to guarantee complete compliance with that condition in respect of certain quantities of butter sold in 1970 which had not reached the stage of retail sale it was authorized by a Commission decision of 19 August 1971 to reach agreement with the purchasers regarding cancellation of the sales contracts.

In exchange for the return of the butter the intervention agency was to repay to the purchaser the purchase price, together with a fixed amount to cover the storage costs which had been incurred.

The German intervention agency, however, repurchased the butter at a price higher than the initial price and, in addition, reimbursed certain expenditure for which no provision was made in the decision of the Commission, namely loss of interest suffered by the purchasers.

36 The applicant Government claims that the Commission must charge to the EAGGF all expenditure incurred together with the actual costs of the processing of the butter sold, irrespective of the limits of the fixed amounts which, in respect of the storage costs and the processing costs incurred by the intervention agency as a result of the measures taken under Article 6 (3) of Regulation No 804/68, were laid down by Article 4 (1) (f) and (h) of Regulation No 2306/70 of the Council of 10 November 1970 on the financing of intervention expenditure in respect of the domestic market in milk and milk products (Official Journal, English Special Edition 1966-1972, p. 44).

Costs of crushing and reconditioning sugar

38 Certain of the amounts which the Commission refused to charge to the EAGGF constitute expenditure incurred by the applicant Government in respect of the crushing and reconditioning of sugar sold pursuant to Regu- lation No 822/70 of the Commission of 4 May 1970 concerning a standing invitation to tender for the sale of white sugar intended for animal feeding- stuffs held by the German intervention agency (Journal Officiel L 98 of 5 May 1970, p. 7).

39 The crushing of certain quantities of sugar which had hardened in store was undertaken by the German authorities in order to satisfy the condition contained in Article 6 of the regulation that the sugar put out to tender should be free-running.

The costs of that operation were deducted by the applicant Government from the total receipts from the sales which, under Article 4 (2) (a) of Regu- lation No 2334/69 of the Council of 25 November 1969 on the financing of intervention expenditure in respect of the domestic market in sugar (Official Journal, English Special Edition 1966-1972, p. 27), are to be credited to the account drawn up by the intervention agency in order to calculate the net losses chargeable to the EAGGF under Article 2 of the regulation.

40 Article 4 (1) lists the items to be debited to that account and Article 4 (2) lists those which are to be credited to it.

The item defined in Article 4 (2) as "the total amount of the receipts from sales effected ...” must be understood as being the gross amount without deduction of the sales costs.

43 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.

Under Article 69 (3), where each party succeeds on some and fails on other heads, or where the circumstances are exceptional, the Court may order that the parties bear their own costs in whole or in part.

44 The Commission failed on one head while the applicant Government failed on the other heads.

The applicant Government should therefore pay its own costs and three quarters of those of the Commission.

JUDGMENT OF 7. 2. 1979 — CASE 18/76

On those grounds,

Kutscher Mertens de Wilmars Mackenzie Stuart

Pescatore Sørensen O'Keeffe Bosco

Delivered in open court in Luxembourg on 7 Febraury 1979.

A. Van Houtte H. Kutscher

Registrar President

GERMANY / COMMISSION

(b) Regulation No 1723/72 350

(c) Regulation No 283/72 350

B — Submissions and arguments of the parties 352

1. The applicant — application 352

2. The Commission — defence 354

3. The applicant — reply 359

(a) Aid for skimmed-milk powder used for animal feedingstuffs: presumption or double payment (case No 4) 367

(b) Inadequacy of the proof on the basis of which the payment of aid for skimmed-milk powder was authorized (case No 5) 368

C — Aid for the purchase of butter by persons in receipt of social assistance (case No 8) 370

1. Facts 370

2. Submissions and arguments of the parties 371

D — Sale of butter from intervention stocks at reduced prices (case No 9) 373

1. Facts 378

2. Submissions and arguments of the parties 379

V — Oral Procedure 381

Decision 382