C-146/81

JUDGMENT OF 6. 5. 1982 — JOINED CASES 146, 192 AND 193/81

regarded as wrongly paid if the rules procedural and formal rules pre- for the use of that method have not scribed by the national law of the been complied with. Member State concerned. However, In the case of denaturing by methods recourse to rules of national law is other than the colouring method possible only in so far as it is which may be prescribed by national necessary for the implementation of law, the rules governing those provisions of Community law and in methods must be complied with in full so far as the application of those rules if the denaturing operation is to of national law does not jeopardize confer entitlement to the premium. the scope and effectiveness of that Community law. 2. Community law in its present state 4. Anicie 8 (1) of Regulation N o 729/70 does not restrict to a specific method concerning the recover)' by the the supervision, by the competent Member States of sums lost as a result authorities of the Member States, of irregularities, expressly requires the of the regularity of denaturing national authorities responsible for operations conferring entitlement to operating Community machinen' for payment of the premium. Supervision agricultural intervention to recover may inter alia take the form of an sums unduly or irregularly paid; and audit of the accounting records. It is such authorities, acting on behalf of for the competent national authorities the Community, may not, on such to determine, subject to review by the occasions, exercise a discretion as national courts, what probative value to the expediency of demanding it is appropriate to attribute to the repayment of Community funds results of the various types of unduly or irregularly granted. The supervision to which denaturing opposite interpretation would lead to operations are subject. an erosion both of the principle of 3. Where the implementation of a equal treatment between undertakings Community regulation is a matter from different Member States and of for the national authorities subject the application of Community law to review by the national courts, which must, so far as possible, remain implementation must comply with the uniform throughout the Community.

on the interpretation of: Articles 4 (2) and 2(1) of Regulation (EEC) No 172/67 of the Council of 27 June 1967 (Official Journal, English Special Edition 1967, p. 139), Articles 4 (3) and 5 of Regulation (EEC) No 1403/69 of the Commission of 18 July 1969 (Official Journal, English Special Edition 1969, p. 345) and Article 8 of Regulation (EEC) No 729/70 of the Council of 21 April 1970 (Official Journal, English Special Edition 1970 (I), p. 218),

T H E C O U R T (Second Chamber)

composed of: O. Due, President of Chamber, A. Chloros and F. Grévisse, Judges,

Advocate General: F. Capotorti Registrar: H. A. Rühi, Principal Administrator

gives the following

JUDGMENT OF 6. 5. 1982 — JOINED CASES 146. 192 AND 193/81

The facts of the case, the course of The findings of the court making the the procedure and the obsen'ations reference indicate that the denaturing submitted pursuant to Article 20 of the operations were conducted wholly or Protocol on the Statute of the Court of partially in the presence of the Justice of the EEC may be summarized defendant's inspectors. The inspection as follows: reports do not show whether the inspectors also checked the incorporation of the denaturing product. The reports do not contain any objections. I — Facts and p r o c e d u r e The plaintiffs in the main action observed at the hearing that those In the course of 1969, 1970 an 1971, the findings were, in their opinion, incom- plaintiff undertakings, BayWa, Raiff- plete. In the plaintiffs' own words, the eisenbank Unterspiesheim and Raiff- inspection reports "refer to the precise eisenbank Biitthard denatured cereals quantity and characteristics of the (or had them denatured by another common wheat, the precise quantity and company, Rhenus) in respect of which type of denaturing product used and the the Bundesanstalt für landwirtschaftliche method of denaturing employed ...." and Marktordnung [hereinafter referred to as it is only " . . . in certain reports drawn "the Federal Office"] after carrying out up by the Einfuhr und Vorratsstelle inspections during the course of the [Importation and Storage Agency]" that denaturing, paid denaturing premiums . . . "the weight of denaturing product is pursuant to Regulation N o 172/67 of not specifically indicated". They add, the Council on general rules governing moreover, that " . . . in the case of the the denaturing of wheat and rye of inspections carried out after 1 August bread-making quality and to Regulation 1970, the precise quantities of denaturing No 1403/69 of the Commission laying product actually held in stock by the down detailed rules for the application plaintiffs were checked before and after of the provisions concerning denaturing each denaturing operation and were of common wheat and rye of bread- expressly attested . . . " . making quality. The Raiffeisen Haupt- genossenschaft was granted denaturing In the plaintiffs' view, proof of their premiums on 14 Mav and 27 Julv 1970. contentions lies in the inspection reports 21 September 1973 and 8 Februar)· 1974. annexed either to the obsenations submitted to the Court or to the statements submitted in the main action The denaturing was effected either by before the Verwaltungsgericht Frankfurt the use of the colouring agent "Patented am Main. Blue V" or by the addition of fish oil or cod-liver oil. The latter process was used in particular for the operations carried In 1975 and 1976, that is to say several out by or on behalf of Raiffeisen Haupt- years after the denaturing operations had genossenschaft. taken place, the Federal Office carried

In the first place, the Verwaltungsgericht The accuracy of the audits carried out by (First Chamber) considers that the right the Federal Office was challenged by the to a denaturing premium does not arise undertakings on the ground that in view merely as a result of the fact that the of the time which had elapsed between cereals have been rendered unsuitable for the contested denaturing operations and human consumption but is subject to the audits (on average five years) the compliance with the standard method set records which had been kept showed out in the annex to Regulation N o only the general accounts of the under- 1403/69 of the Commission. However, takings and could not clearly reveal the the conflicting decision of the Hessischer quantities of denaturing agents used for Verwaltungsgerichtshof [Higher Admin- each operation. Furthermore, some of istrative Court, Hessen] of 18 February the undertakings contended that since 1980 (Az. VIII — OE 20/79) has cast they had not carried out the denaturing doubt on the soundness of that in- operations themselves they had been terpretation. unable to keep accounting records; such records could have been kept only by the denaturing undertakings acting on their Secondly, the court making the reference behalf. considers that a decision granting dena- turing premiums may be revoked at any time if the results of the inspections However, although the inspections carried out during denaturing are sub- carried out during the denaturing sequently proved inaccurate in the light operations established that the cereals of a subsequent audit. That interpret- had actually been rendered unsuitable ation is based on the need to guard for human consumption, the Federal against fraudulent operations and the Office demanded, solely in the light of provision of imprecise or incomplete data the audits, the repayment of the de- by undertakings with a view to securing naturing premiums which it had granted. decisions to grant premiums from the intervention agencies. However, the Verwaltungsgericht questions whether The demand for repayment was the that analysis is compatible with the text subject of an extra-judicial objection by of Regulation No 1403/69, in particular the plaintiff undertakings. with Article 4 thereof, which lays down that "the granting of a denaturing premium shall be subject to supervision The objection was however rejected, and . . . of the process of denaturing of BayWa, Raiffeisenbank Unterspiesheim, common wheat".

In particular, the judgment of the Court ment, referred the following questions to of Justice of 14 January 1981 in Case the Court of Justice for a preliminary 819/79 Germany v Commission [1981] ruling: ECR 21 may be interpreted as meaning that Community law precludes repay- ment of the premium where the super- vision of the denaturing has been satis- (a) Has a denaturing premium granted factor)·. on the basis of Article 4 (2) of Regu- lation (EEC) No 172/67 of the Council of 27 June 1967 (Official Journal, English Special Edition Finally, the court making the reference 1967, p. 139) been allocated questions the extent of the discretion unlawfully only when the denaturing left by Community law to national operation has failed to achieve the intervention agencies to decide whether purpose specified in Article 2(1) of to recover denaturing premiums which the regulation or when the standard have been unduly granted. method laid down in Annex I to Regulation (EEC) No 1403/69 of the Commission (Official Journal, English Special Edition 1969 (II), In particular, the question is whether the p. 345) has not been adhered to? Federal Office, pursuant to the Verwal- tungsverfahrensgesetz [German Law of 25 May 1976 on administrative procedure] (Bundesgesetzblatt I, p. (b) Can recovery of the denaturing 1253), should, before revoking the premium be based on the results of decision granting the premiums and an audit of the accounting records demanding their repayment, first have carried out on completion of the determined the extent of the plaintiffs' denaturing process or does it follow expectation that that decision would from Articles 4 (3) and 5 of Regu- remain in force, or whether on the lation N o 1403/69 that the results of contrary the Federal Office was obliged ex post facto audits are to be disre- under Community law to require "in all garded? If ex post facto checks are circumstances" the repayment of the taken into account, how important unduly paid premiums. The effect of the are they in relation to the exercise of latter interpretation would be to exclude supervision provided for in Article German law from the scope of the 4 (3) of Regulation No 1403/69- administrative procedure which, under Article 48 (1) of the Law of 1976, requires the administrative authority to hear the views of the persons concerned (c) Does Article 8 of Regulation (EEC) by the measure whose revocation was No 729/70 of the Council ot' 21 proposed. April 1970 (Official Journal. Enphih Special Edition 1970 (I), p 2 1 M require Member States in even case to recover unlawfully granted de- On those grounds, the Verwaltungs- naturing premiums or does the repu- gericht Frankfun am Main, by orders of tation allow Member States to leave 30 April 1981 drawn up in identical individual cases of recoven to the terms and received at the Court Registry discretion of the competent auth- on 9 and 25 June 1981. stayed the orities, in accordance with national proceedings and, before delivering judg- legal provisions?

In accordance with Anicie 20 of the and to the supervision of such Protocol on the Statute of the Court of operations, reference to which is made in Justice, written observations were the file on the case, may be summarized submitted by the following: BayWa AG; as follows: the agricultural credit cooperatives Raiffeisenbank Unterspiesheim und Umgebung e.G., and Raiffeisenbank I — Provisions relating to the Biitthard e.G., all three represented by acquisition of a right to the Dr. Helmut Fischer, senior legal adviser premium to BayWa AG; the cooperative Raiffeisen Hauptgenossenschaft e.G., /. Community provisions represented in the proceedings by Fritz Modest and Partners, Rechtsanwälte, Hamburg; the Government of the Fed- (a) Premiums for the denaturing of eral Republic of Germany, represented common wheat and rye of bread-making by Dr Martin Seidel, Ministerialrat at quality were introduced bv Regulation the Federal Ministry for the Economy, (EEC) No 172/67 of the Council of 27 assisted by Jochim Sedemund, Rechts- June 1967 in connection with Regulation anwalt, Cologne, acting as Agents; and (EEC) No 120/67 of the Council of 13 the Commission of the European June 1967 (Official Journal, English Communities, represented by Meinhard Special Edition 1967, p. 33) on the Hilf, a member of its Legal Department, common organization of the market in acting as Agent. cereals. The main provisions of Regu- lation (EEC) No 172/67 are worded as follows: By order of 15 July 1981, the Court decided to join the three cases for the purposes of the procedure and the First recital judgment. " . . . methods of denaturing should be On hearing the report of the Judge- effective enough to prevent the Rapporteur and the views of the denatured cereal being placed again on Advocate General, the Court decided to the market for human consumption in its open the oral procedure without any original state or as a processed product; preparatory inquiry. By order of 20 January 1982, the Court . . . it is therefore advisable to lay down decided, pursuant to Article 95 (2) of the technical methods offering minimum Rules of Procedure, to assign the case to safeguards in that respect and to provide the Second Chamber. that in no case could the methods actually employed by Member States result in a lesser degree of denaturing." II — O b s e r v a t i o n s s u b m i t t e d in p u r s u a n c e of A r t i c l e 20 of Article 2 the P r o t o c o l on t h e S t a t u t e of t h e C o u r t of J u s t i c e of "(1) The methods employed for de- the E E C naturing must ensure that denatured wheat and rye can no A — Legislative background described by longer be used for human the observations submitted to the consumption. Court (2) These methods must be at least as The provisions relating to the grant of effective as a standard method to be premiums for the denaturing of cereals determined."

(b) In application of the same regu- 2. National provisions lation, Regulation (EEC) N o 1403/69 of the Commission provides: According to the information supplied to the Court by the Government of the Third recital Federal Republic of Germany which has not been challenged by the panies, the legal position in the Federal Republic of " . . . experience shows that it is advisable Germany is governed by the Durch- to maintain, as a standard method, the führungsgesetz EWG Getreide, Reis, method of denaturing previously used Zucker, Schweinefleisch, Eier und and, in the case of denaturing by Geflügelfleisch sowie Verarbeitungser- colouring, to ensure uniform application zeugnisse aus Obst und Gemüse mit of this method throughout the Zusatz von Zucker (EEC Implementing Community." Law on wheat, rice, sugar, pigmeat, eggs and poultry as well as products processed from fruit and vegetables with the Article 1 addition of sugar) of 30 June 1967 (BGBl. p. 617) as amended by the Law "The standard method of denaturing of 30 July 1968 (BGBl. I, p. 874) common wheat and rye of bread-making bringing into force the common organiz- quality provided for in Article 2 (2) of ation of markets in the cereal sector etc. Regulation (EEC) N o 172/67 shall be as and its implementing provisions adopted described in Annex I. by the Minister for Agriculture which include the regulations of 8 August 1968 (Banz No 148) and 19 November 1971 In the case of denaturing by colouring, (BGBl. I, p. 1831) relating to the grant the standard method only shall be used. of denaturing premiums in respect of common wheat. In the case of denaturing otherwise than by colouring, the means used must be at Those texts and the directives adopted least as reliable as the standard method." annually for their implementation by the director of the Federal intervention In the original version of that regulation, agency contain, inter alia, provisions the standard method consisted of dena- relating to methods of denaturing. turing by colouring. Annex I, referred to in Anicie 1 of Regulation N o 1403/69, In the opinion of the Government of defines the colouring matter (Patented the Federal Republic of Germany the Blue V), the quantities to be used and Community regulations left it to the the directions for use. Member States to adopt rules under national law, in respect of denaturing, Regulation (EEC) No 1092/70 of the subject to the condition laid down by Commission of 10 June 1970 (Official Anicie 2 (2) of Regulation (EEC) N o Journal, English Special Edition 1970 172/67/EEC that the methods selected (II), p. 354) lays down a second standard must be "at least as effective as a

(a) Article 7 of Regulation No 172/67 The Member States shall inform the of the Council is drafted as follows: Commission of the measures taken for those purposes and in particular of the state of the administrative and judicial " T o qualify· for the premium, denaturing procedures." should be effected in agreement with the intervention agency and under its supervision". (d) With the same object in view, though much later so that no reliance may be placed on it for the solution of (b) Pursuant to that provision, Anicie the present dispute, Council Directive 4 (3) of Regulation No 1403/69 provides 77/435/EEC of 27 June 1977 (Official that: Journal L 172, p. 17) on scrutiny by Member States of transactions forming "The granting of a denaturing premium pan of the system of financing by the shall be subject to supervision by the Guarantee Section of the European Agri­ intervention agency of the process of cultural Guidance and Guarantee Fund denaturing of common wheat, or of its entrusts those States with the task of admixture, unaltered, with compound exercising surveillance, in particular, feedingstuffs falling within heading No scrutinizing the accounts of undertakings 23.07 of the Common Customs Tariff. involved in guarantee transactions under [See Customs Cooperation Council, the Fund. To that end. it is designed to Explanatory Notes to the Brussels harmonize the conditions and the scope Nomenclature, Volume I, Section IV, of such surveillance as is borne out bv heading No 23.07, p. 159.] The duration the second and fourth recitals in the of the denaturing process shall noi preamble to the directive as follows:

". .. it is for Member States to determine B — Observations of the pUintiffs in the the frequency and scope of such main action scrutiny, particularly in the light of the nature of the transactions carried out 1 (a) The plaintiff undertakings Bay Wo, under their responsibility and of the Raiffeisenbank Unterspiesheim and Raiff- breakdown of the undertakings receiving eisenbank Biitthard commenced by sub- or making payments according to their mitting observations on the third question financial importance in the system of of the national court which, in their financing bv the Guarantee Section of opinion, must be answered in the the EAGGF." negative.

should have demanded repayment of the istrative measures which give rise to sums alleged to have been unduly rights. granted in accordance with the pro- cedural and substantive rules laid down As regards the risk that different by German administrative law in the treatment may be accorded to under- Verwaltungsverfahrengesetz of 25 May takings in comparable situations as a 1976. result of the application of different national laws relating to the recovery of Accordingly, the Federal Office should sums unduly paid, the plaintiffs in the first have set about withdrawing the main action contend that academic decision granting the contested premiums writers do not support the view that the by observing the procedure laid down by German legal system countenances, to the first sentence of Paragraph 48 (1) of a significant extent, more favourable the aforesaid law. The central feature of treatment than that reserved by other that provision is that the administration national legal systems to other traders.

dation. The Federal Office could have evaded its duty to comply with the provisions of national administrative law only if it had On those grounds, the plaintiffs in the been compelled either by the Community main action conclude that the third legislature or by authorization under question submitted by the national court national law, to withdraw its decisions must be answered in the negative. granting premiums. That is not so in the present case: Regulation No 729/70 (b) As regards the second question contains a reference to national law and submitted by the national court the German implementing provisions concerning the repayment of the relating to the denaturing of agricultural premiums granted on the basis of the products (EEC Implementing Law of 30 results of a subsequent audit of the June 1967, as amended by the Law of 30 accounts, the plaintiffs' contentions are July 1968) and the Regulation on de- as set out below. naturing of 19 November 1971 to which reference has already been made permit It is necessary to draw a distinction no derogations from the general prin- between the checks carried out prior to ciples of administrative law concerning the decision granting the premium and the withdrawal of unlawful admin- those effected subsequently.

In its judgment in Case 3/73 Hessische rise to the same effects. It is impossible Mehlindustrie v Einfuhr- und VorratssteUe to agree that the results of supervision Getreide [1973] ECR 745, the Court held carried out by means of an inspection on that the legislature of the Community the spot during the operation and had left the Member States the power to constituting "primary" proof may be regulate the detailed rules of supervision. called in question by means of an audit

prior to the decision to grant the accounting records several years after the premium. carrying-out of an operation recognized as being lawful at the material time is insufficient to call in question the result In that connection, the judgment of the of supervision effected by independent Court in Case 3/73 is to be interpreted inspectors during the operation itself or as meaning that the Member States are to permit the conclusion to be drawn free to choose the detailed rules of that an irregularity existed ab initio supervision (constant supervision, or spot necessarily casting doubt on the validity checks, supervision during the operation of the initial decision granting the itself or on its completion and so on) but premium. not to alter the condition laid down by

performed. The denaturing premium paid as a result cannot be made the Furthermore, the plaintiffs point out that subject of a claim for repayment based the two checks (during the denaturing on a subsequent audit by an and following the adoption of the administrative authority of the Member decision granting the premium) are not State except after all other methods of qualitatively comparable and cannot give proof have been exhausted and the

content of the inspection repon must withdrawal of the decision granting the take precedence in the event of any premium if the objective of the de- doubt." naturing process has been attained. (c) As regards the first question relating 2 (a) The plaintiff company Raiffeisen to compliance with the standard method Hauptgenossenschaft recalls in the first laid down in Annex I to Regulation No place the legal and factual circumstances 1403/69, the plaintiffs in the main action which led to the initiation of preceedings distinguish between the grant and the before the national coun and explains withdrawal of the denaturing premium. that the reference to the Court of Justice As regards the grant of the premium, the in the joined cases under consideration plaintiffs are of the opinion that the should be seen against the background of standard method is binding in so far as a large number of disputes brought since its use may constitute a pre-condition for 1977 before the Verwaltungsgericht the acquisition of a right to the premium Frankfurt am Main and the Hessischer provided for by the Community legis- Verwaltungsgerichtshof.

The Hessischer Verwal- principles of the protection of acquired tungsgerichtshof for its part has resolved rights and of its expectation that the some of the issues of law raised in the decision granting the premium will be questions referred to the Court. The maintained. If, however, it were to judgment delivered by that Vewaltungs- appear that the error committed during gerichtshof was the subject of an appeal the denaturing process was only a minor on a point of law to the Bundesverwal- one and that the cereals have indeed tungsgericht [Federal Administrative been withdrawn form the market in Court]. foodstuffs fit for human consumption, the administrative authority is not The plaintiffs observations subsequently required to attach the same importance focus on examining the questions raised to non-compliance with the standard by the Verwaltungsgericht Frankfurt am method but should determine, in accord- Main. ance with the national laws governing formal and substantive conditions giving (b) As a preliminary remark, the rise to the right to demand repayment plaintiff points out that the Court has (cf. answer to the third question), laid down, in particular in Joined Cases whether the protection of the public 119 and 126/79 Lippische Haupt- interest necessitates disregarding the genossenschaft v Bahn [1980] ECR 1863 right of private individuals to rely on the and 265/78 Ferwerda v Produktschap continued validity of the decision voor Vee en Vlees [1980] ECR 617, that granting the premiums. disputes on the repayment of sums collected on behalf of the Community For those reasons the plaintiffs conclude are governed by national law by virtue of that failure to comply with the standard Anicie 8 of Regulation No 729/70 of the method need not necessarily result in the Council of 21 April 1970 on the

financing of the common agricultural lation No 1403/69, that is to say de- policy. However, the Court of Justice naturing by colouring, is not used for de- has held that there are two restrictions naturing cereals but, as in the present on the applicability in principle of case, another process is employed, national law to those disputes : first, there involving the addition of fish oil or cod- must be no difference in the application liver oil. the only question is whether, in of Community law according to whether accordance with the aforementioned the disputes have arisen as a result of the provisions of Article 2 of Regulation N o application of Community law or are, on 172/67 the denatured cereals can no the contrary, similar but exclusively longer be used for human consumption national in character; secondly, the effect and whether the process selected offers, of applying national law must not be to for the achievement of that purpose, a render impossible in practice the exercise guarantee that the means employed are of rights conferred by Community law. at least as reliable as the standard method, that is to say denaturing by colouring. Since the answers to the questions submitted by the national court are based on principles of the case-law of the Thus, compliance with the standard Court of Justice, it is necessary to method provided for in Annex I to Regu- distinguish those which are applicable in lation No 1403/69 of the Commission is areas covered by national law from those obviously not a pre-condition for the which are governed by Community law. grant of the premium since that method is concerned only with colouring by the use of Patented Blue V. (c) In examining the first question which deals with the binding nature of the standard method set out in Annex I (d) As regards the second question to Regulation No 1403/69 of the which relates to the validity of audits Commission, the plaintiff in the main carried out ex post facto and, according action points out that rules have been to the plaintiff, to the evidence admitted adopted under Community law in in connection with demands for the respect of the method of denaturing only repayment of premiums, the plaintiff in order to specify, in Article 2 of Regu- submits as follows. lation No 172/67 of the Council, that the methods employed for denaturing must ensure that the cereals are rendered The case-law of the Court establishes unsuitable for human consumption. In that by virtue of Article 8 of Regulation keeping with that approach, referred No 729/70 of the Council, the question to in the third paragraph of Article 1 of the recover>' of Community aids of Regulation No 1403/69 of the unduly granted is in principle governed Commission, the standard method laid by national law subject to the two down in Annex I to that regulation conditions set by the plaintiff in the constitutes only a model which in no remark prefacing its answer to the way excludes any other method which questions. the intervention agencies of the Member States are entitled to authorize. The general principles of evidence in German law compel the court to give If the one standard method originally judgment on the basis of its unfettered laid down by the provisions of Regu- opinion, formed in the course of the

entire proceedings. However, since the divergent systems of proof according to case-law of the Court of Justice requires the Member States in which under- that the application of national takings in comparable situations operate. provisions shall not render impossible in practice the exercise of rights conferred by Community law, the national court is The plaintiff observes in that connection also obliged to observe the rules of that although under Community law the Community law relating to the method Member States may adopt measures of of denaturing. In the present case, it is control other than those prescribed by apparent from the layout of the Community law, the latter nowhere provisions in question as well as from the makes provision for a system of control wording of Article 5 of Regulation No on the basis of ex post facto audits of 1403/69 that the intention of the accounting records. Community legislature is to bring the principal weight of the controls to bear on inspections of operations on the spot. The results of the checks carried out by the Member States on their own initiative cannot therefore have the same The importance of supervision on the importance for a national court as the spot whilst denaturing operations are in results of the controls prescribed by progress has moreover been recognized the Community legislature as being by the Court in Case 819/79 of 14 necessary for the implementation of a January 1981 [1981] ECR 21 concerning measure which it has enacted itself. the conditions for granting premiums in respect of the denaturing of skimmed- milk powder governed by Regulation No For that reason the plaintiff takes the 990/72 of the Commission of 15 May view that the answer to the second 1972 (Official Journal, English Special question submitted by the national court Edition 1972 (II), p. 428). That regu- should be that the significance to be lation provides for a system of controls ascribed to an audit carried out sub- which is "essentially identical" to the sequently to the completion of a dena- system provided for by Regulation No turing operation is a question of evidence 1403/69. The Court's solution is which must be decided in accordance therefore applicable to the present case. with national law. However, since Community law provides solely for an inspection of the denaturing operations Consequently, even if national law which is to be carried out on the confers on the national court a discretion premises by the intervention agency, the in relation to the evidence produced results of that check must take before it, the court must none the less precedence over other controls unilat- acknowledge the dominant role of the erally prescribed by the Member States. system of proof established by Com- munity law, that is to say inspections on the spot. (e) In reply to the third question concerning the discretion conferred by German law on the intervention agency The opposite solution would jeopardize where it proposes to demand repayment the uniform application of Community of Community aids unduly granted, the law by making the grant and retention of plaintiff cites the actual terms in which premiums paid thereunder subject to Article 8 (1) of Regulation No 729/70 of

the Council is couched. It is possible to obligation defined by the Court that no state on the basis of that provision that, distinction must be drawn between in that area, Community law refers back disputes under Community law and to the law of the Member States. similar ones under national law. It is apparent from the decisions of the German administrative courts (in Thus Community law leaves the matter particular, the judgment of the to the national laws of the Member Hessischer Verwaliungsgerichtshof of 9 States and contains no provisions relating March 1981) that disputes resulting from to the conditions for repayment of aids the application of the German regu- unduly granted; similarly, it in no way lations of 1968 and 1971 relating to provides that an aid unduly granted must premiums for the denaturing of cereals necessarily, notwithstanding the appli- are governed by the same administrative cable national provisions safeguarding procedure, provided for bv Article 48 of the principles of legal certainty or the the Law of 25 May 1976. ' protection of legitimate expectation, be

1976. In particular, that provision lays The main objective of the Community down that the Federal Office may rules on the denaturing of wheat is to withdraw a decision granting premiums ensure that the denatured cereals are only after examining all the factual withdrawn from the market in foodstuffs circumstances of the case and exercising fit for human consumption. Once that the discretion which devolves upon it by objective is achieved, the problem of the virtue of the general principles of repayment of the premium is of German administrative law consolidated secondary importance. The plaintiff in by the Law of 1976. the main action points out that the first sentence of Article 8 (2) of Regulation No 729/70 of the Council makes clear The Federal Office may evade that that it was by no means the intention of procedure only if its implementation the Community legislature to recover in were to conflict with one of the two all cases the full amount of aids unduly restrictions arising from the case-law of granted in consequence of irregularities the Court on the application of the or negligence.

BAYYA v BALM

to exist on the other. With that end benefits which have been mistakenly in view, the authority exercising a granted under Community rules and in discretion must respect the fundamental the absence of any specific rule rights embodied in the Constitution and concerning limitation periods, such the principles of equality, proportionality limitation periods as may be drawn from and the protection of legitimate the application of general principles expectation. recognized in the law of the country concerned". The citizen is afforded similar guarantees by the other national legal systems of the In the present case, the German

law. were moreover positive and failed to reveal any irregularities on the part of the recipient of the premiums. Thus, the application of German administrative law is in conformity with The plaintiff in the main action therefore the general principles of the other concludes that the answer to the third

question should be that when the ECR 343 the Court recognized the need national administration withdraws for strict compliance with the formalities measures by which it granted denaturing governing proof, which are clearly and premiums, it is to act in accordance with definitively laid down, when compliance its national law. The Federal intervention therewith constitutes a precondition for agency was required, in the present case, the grant of financial benefits in respect to exercise the discretion which devolves of agriculture. upon it under German administrative law

from both Regulation No 172/67 (first recital and Article 2 (2)) and the provisions of Regulation N o 1403/69 2. On the second question relating to (third recital, Article 1 and Article 4 (3)) the acceptability of ex post facto audits, that the Community legislature intended, the Commission's opinion is as follows: by prescribing that method of denaturing by colouring, to pursue two objectives, the first being to provide a minimum Article 4 (3) of Regulation No 1403/69 guarantee as regards denaturing and the sets out the features of the supervision second to ensure uniformity in the which precedes any decision granting methods and costs of denaturing so that premiums, with a view to providing a the premium, granted in a single lump minimum and uniform guarantee for the sum, covers the reimbursement of Community in the various Member identical costs incurred by the denaturing States. However, the Community legis- undertakings. lature has entrusted the Member States with the practical organization of the detailed rules governing such checks. To recognize the exception to the method laid down would increase the risks of fraud, complicate the admin- The introduction, sought by the istration of control operations and Community legislature, of that minimum involve the possibility that undertakings guarantee does not, however, exclude all might gain a financial advantage by other checks prescribed by the Member using a lesser quantity of colouring agent Sutes under their own legislation. than that specified in the standard Moreover, the Court has confirmed that method and reimbursed in a lump sum approach in its judgment in Case 3/73 by way of the premium. [1973] ECR 745. The Court's judgment

BAYVA v BALM

itself concerned with a situation in which Whether or not ex post facto checks are additional checks are carried out by the to be taken into account does not, as the Member States but with a situation in Verwaltungsgericht appears to believe, which a Member State had undermined depend on aggravating circumstances the uniform application of Community which were not in existence when law by substituting a different national inspections were carried out on the spot check for a check prescribed by during denaturing. Community law.

JUDGMENT OF 6. 5. I9S: — JOINED CASES 146. 19: AND I9.V8I

of Regulation No 729/80, the effect of Finally, the Commission points out that which is to require the Member States to when the Community legislature drafted recover sums lost as a result of irregu- provisions comparable to Regulation No larities. 729/70 such as Council Regulation (EEC) N o 1697/79 of 24 Julv 1979 (Official Journal L 197, 3 August 1979) on the post-clearance recovery of import Although, according to the Commission, duties, it expressly excluded the exercise the Court of Justice recognizes the legal of any discretion in relation to the obstacles, such as the principle of legal levying of post-clearance customs duties. certainty, periods of limitation or absolute time-limits, which exist in national laws, the discretion with regard to withdrawal of premiums conferred on The Commission therefore concludes the German administrative authority is that Article 8 of Regulation No 729/70 not in the nature of such an obstacle. imposes an obligation on the authorities The exercise of that discretion might of the Member States to demand render "impossible in practice" the repayment of denaturing premiums exercise of the right of recovery·. At any unduly granted without their having any rate, it is in that light that the opportunity to exercise any discretion. Commission understands the decisions of the Court in Cases 118/76 Balkan- Import-Export v Hauptzollamt Berlin- Packhof [1977] ECR 1177 and 265/78 Ferwerda v Producktschap voor Vee en D — Observations of the Government of Weef [1980] ECR 617. the Federal Republic of Germany

relating to the grant of denaturing Foremost amongst the provisions of premiums in respect of common wheat. Community law on the grant and repayment of premiums for the dena- Those provisions and the directives turing of cereals are those referred to adopted annually for their implemen- above, contained in Regulation N o tation by the director of the Federal 729/70 of the Council, Article 8 of intervention agency contain, inter alia, which leaves it to the Member Sutes provisions relating to: under national law "to prevent and deal (a) methods of denaturing; with irregularities" and "recover sums lost as a result of irregularities or (b) the controls; negligence". (c) recovery of premiums unduly paid. ' 2, As regards the first question relating In the opinion of the Government of the to compliance with the standard method, Federal Republic of Germany, that set of the German Government considers that provisions rules out the application of the significance and purpose of the the Law of 25 May 1976 on establishment at Community level of a administrative procedures, in particular, standard method necessarily imply that paragraph 48 (1) thereof relating to the compliance therewith is to be regarded procedure for the withdrawal of admin- as a pre-condition for the grant of

matters. Consequently, the procedure of an effective administrative control and provided for by paragraph 48 of the Law to allow undertakings which have not of 1976 cannot be applied in that area, in used the precise quantities of denaturing accordance with Article 1 of the same agent which have been prescribed to law, which lays down in substance that obtain an unjustified financial advantage the general principles consolidated by it which ultimately undermines the prin- are of only secondary importance in ciple of competition on equal terms. relation to the specific provisions of

JUDGMENT OF é. 5. 1982 — JOINED CASES 146, 192 AND 193/81

On the contrary, the Community legislature has in more general terms unequivocally expressed the wish thai the On those grounds, the Federal Govern- Member States should reinforce the ment is of the opinion that the first controls provided for by Community question referred to the Court must be law. In particular. Article 2 (2) of answered in the negative, irrespective of Commission Regulation (EEC) No whether the standard method was 1687/76 of 3C June 1976 laying down directly laid down by Community law common detailed rules for verifying the or provided for by national law in use and/or destination of products pursuance of principles established by the from intervention expressly invites the Community legislature. Member States to carry out checks ex

BAYWA v BALM

Since the stated objective of Community rules on agriculture is that only those operations which may be clearly Moreover, that obligation stems from established as being lawful may qualify the need to achieve uniformity in the for intervention, the interesu of the application of Community law in the Community demand that the checks Member States and to ensure equal should be as thorough as possible so as treatment and competition on equal to reveal whether the undertakings have terms in the case of undertakings in infringed the law. In such a case, under- comparable situations in the various takings may not rely on the fact that the Member Sutes. The Court has moreover outcome of the inspections on the spot confirmed that interpretation in a series was satisfactory in order to claim that of decisions, the salient features of which they are entitled to retain the premium may be summarized as follows: first, an paid on completion of the denaturing aid which from an objective point of operations. view has been wrongly granted may not be charged to the European Agricultural Guidance and Guarantee Fund and must therefore be charged to the national budget of the Member Sute which has On those grounds, the Federal omitted to seek its recovery (Case Government is of the opinion that a 819/79 of 14 January 1981); secondly, check ex post facto may call in question Community law imposes an obligation the results of an inspection on the spot on the Member Sute to demand and that the irregularities thus revealed repayment of any premium the grant of by that check are capable of calling in which appears to have been unjustified question the grounds on which the initial (Joined Cases 119 and 126/79 and Case payment of the premium was based. 18/76 Germany v Commission [1979] ECR 343).

law does not prevent certain provisions cooperative Raiffeisen Hauptgenossen- of national law from regulating the schaft; Jochim Sedemund, Rechtsanwalt, formal and procedural conditions Cologne, for the Government of the governing the demand for repayment or, Federal Republic of Germany; and where appropriate, from being taken into Meinhard Hilf, a member of the Legal account for the purpose of determining Department, for the Commission of the whether the demand for repayment is European Communities. justified. Amongst those provisions of national law, the Government of the Federal Republic of Germany considers On that occasion, BayWa, Raiff- in particular that general principles of eisenbank Unterspiesheim and Raiff- law and fundamental rights, including eisenbank Bütthard proceeded to explain the principles of proportionality, legal the answer which they proposed should certainty and the protection of legitimate be given to the second question raised by expectation, are capable of restricting, in the Verwaltungsgericht Frankfun am certain special cases, the application of Main as follows: the principle that there is a strict obligation to recover sums unduly paid. "The supervision procedure provided for by Article 3 of Regulation (EEC) No In conclusion, the Government of the 1403/69 also contains substantive rules Federal Republic of Germany is of the relating to proof in connection with opinion that the answer to the third lawful grants of denaturing premiums or question referred to the Court by the demands for the repayment of denatur- Verwaltungsgericht Frankfurt am Main ing premiums wrongly granted. In order must be that Article 8 of Regulation N o to ensure the uniform application of 729/70 of the Council does not leave the European law, the Member States are competent authorities of the Member not entitled to strengthen or to detract States any opportunity to exercise a from those rules. The existence of discretion in deciding whether or not documentary proof of the purchase of premiums unduly paid are to be denaturing products at the time of de- recovered. naturing is not a fundamental condition for the grant of the denaturing premium. The inspection report drawn up by the intervention agency establishing that the supervision procedure has been complied I l l — Oral p r o c e d u r e with lawfully and in its entirety mav be invalidated by a subsequent audit of the accounting records under the law of the Member State concerned only if the intervention agency which assumed At the silting on 18 February 1982, oral responsibility for supervision at the argument and answers to the questions outset was compelled, in the light of put by the Court were presented by the facts which emerged as a result of the following: Dr Helmut Fischer, senior audit of the accounts, to refuse to certify legal adviser to the company BayWa for that denaturing had been conducted that company and for the agricultural lawfully and in its entirety." credit cooperatives Raiffeisenbank Umerspiesheim und Umgebung e. G. and Raiffeisenbank Bütthard e. G.; Mr Gündisch of Fritz Modest and Partners, The Advocate General delivered his Rechtsanwälte, Hamburg, for the opinion at the sitting on 18 March 1982.

2 Between 1969 and 1974, the plaintiffs in the main actions, four agricultural cooperatives in the Federal Republic of Germany, carried out, either by themselves or through others, operations involving the denaturing of cereals of bread-making quality as provided for by Regulations Nos 172/67 and 1403/69, in the presence for all or part of the operations of inspectors delegated by the Federal Office. The reports drawn up by those inspectors do not contain any objections. However, after audits of the accounting records were carried out, the Federal Office took the view that the dena- turing operations had not been conducted in accordance with the mandatory provisions which it considered to be applicable. It demanded repayment of the denaturing premiums paid. An objection lodged by the plaintiffs in the main action against those decisions to recover the premiums was rejected and the plaintiffs thereupon instituted proceedings before the Verwaltungsgericht.

J In the course of the proceedings, the Verwaltungsgericht referred to the Court of Justice three questions for a preliminar)' ruling which were drafted as follows: "(a) Has a denaturing premium granted on the basis of Article 4 (2) of Regulation (EEC) N o 172/67 of the Council of 27 June 1967 (Official Journal, English Special Edition 1967, p. 139) been allocated unlawfully

JUDGMENT OF 6. 5. 1982 — JOINED CASES 146. 192 AND 193/81

only when the denaturing operation has failed to achieve the purpose specified in Anicie 2 (1) of the regulation or when the standard method laid down in Annex I to Regulation (EEC) No 1403/69 of the Commission (Official Journal, English Special Edition 1969 (II), p. 345) has not been adhered to?

BAYWA v BALM

6 In its first question, the Verwaltungsgericht seeks a ruling from the Court on whether a premium for the denaturing of cereals has been unlawfully granted if the denatured wheat and rye may still be used for human consumption or if the rules of the standard method determined by Annex I to Regulation N o 1403/69 have not been adhered to.

7 The plaintiffs in the main action contend that although the standard method may not have been strictly adhered to during the denaturing operations carried out on their behalf, the objective laid down by the Community- legislation, that is to say the denaturing of cereals and their withdrawal from the market for human consumption, has been achieved. Accordingly, there was no intent to defraud in their conduct, as is apparent from the positive results of the supervision exercised during the operation. According to the plaintiffs in the main action, strict compliance with the standard method does not constitute a condition for the creation of a right to the premium. The premium must be paid as soon as the cereals can no longer be used for human consumption, irrespective of the means used to achieve that end.

8 The Commission and the Government of the Federal Republic of Germany maintain, however, that the wording of Regulations Nos 172/67 and 1403/69 and the need to apply Community law in a uniform manner show that compliance with the Community standard method or with the methods which may replace it under national law on the conditions laid down by Article 2 (2) of Regulation No 172/67 is mandatory.

i2 Certain information contained in the file on the case leads to the assumption that denaturing by colouring was not the only method used. Accordingly, it is appropriate to determine what effect the use of other methods of dena- turing has on the right to the premium.

i3 Regulation (EEC) N o 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy lays down in Article 8 the principles according to which the Community and the Member States must organize the implementation of Community decisions on agricultural intervention financed by the Fund and combat fraud and irregularities in relation to those operations. With that end in view, Article 8 (1) provided that: "The Member States in accordance with national provisions laid do* n by law, regulation or administrative action shall take the measures necessar- io satisfy themselves that transactions financed by the Fund are actually carried out and are executed correctly, prevent and deal with irregularities [and] recover sums lost as a result of irregularities or negligence".

BATTA v BALM

i4 It is apparent from the combined provisions of Regulation N o 729/70 and Article 2 of Regulation No 172/67 that the Member States are authorized-to establish, under national law, methods of denaturing other than the standard method of denaturing by colouring on condition that, as stipulated by the provisions of Article 2(2) of Regulation No 172/67 and of the third paragraph of Article 1 of Regulation No 1403/69, the means adopted to carry out denaturing by a method other than colouring are at least as reliable as the standard method.

is the plaintiffs in the main action maintain that an audit ex post facto, carried out pursuant to the provisions of national law, cannot have the same force as supervision on the spot by inspectors of the Federal Office, which in their opinion is the form of supervision provided for by Community law. They consider that the probative value of supervision on the spot is greater than that of an abstract check subsequent to the denaturing operations. Further­ more, they rely on the principle of equal treatment between undertakings to justify the precedence of supervision on the spot, which alone is laid down by Community law.

ľ» The Commission and the Government of the Federal Republic of Germany maintain however that Article 8 (1) of Regulation N o 729/70 of the Council permits the Member States to prescribe checks ex post facto in order to supplement the supervision provided for by Article 4 (3) of Regulation N o 1403/69 and that national checks are no less important than the supervision prescribed by Community law.

22 In its present state, Community law contains no specific provisions relating to the exercise of supervision by the competent national authorities. The only requirement which must be laid down in that regard from the point of view of the Community is that the national authorities are to act in this field with the same degree of care as they exercise in implementing their national legislation, so as to prevent any erosion of the effectiveness of Community law.

23 T h o s e findings in connection with the legislation relating to premiums for the d e n a t u r i n g of cereals coincide, moreover, with the m o r e general provisions, cited above, of Article 8 (1) of R e g u l a t i o n N o 7 2 9 / 7 0 of the C o u n c i l , which themselves correspond t o the obligation imposed o n the M e m b e r States by Article 5 of the E E C T r e a t y .

24 Community law, which in its present state does not lay down detailed rules governing supervision of the regularity of operations for the denaturing of cereals, does not define either the relative significance to be attributed to each of the sets of rules determined and used by the national authorities.

25 Accordingly, the answer to the second question raised by the c o u r t making the reference must be that C o m m u n i t y law in its present state does not restrict t o a specific m e t h o d the supervision, by the c o m p e t e n t authorities of the M e m b e r States, of the regularity of denaturing operations conferring entitlement to p a y m e n t of the premium. Supervision m a y inter alia take the form of an audit of the accounting records. It is for the c o m p e t e n t national

2" It is clear from the aforesaid provisions of Article 8 of Regulation No 729/70 that the Member States are entrusted with the task of bringing prosecutions and instituting proceedings where it is necessary for the operation of the Community machinery for agricultural intervention and, in particular, that they are responsible for recovery of premiums from the Fund which have been unduly paid. In those circumstances, where the implementation of a Community regulation is a matter for the national authorities subject to review by the national courts, implementation must comply with the pro-

BAYWA v BALM

cedural and formal rules prescribed by the national law of the Member State concerned. However, as the Court has already emphasized in a number of consistent decisions, recourse to rules of national law is possible only in so far as it is necessary for the implementation of provisions of Community law and in so far as the application of those rules of national law does not jeopardize the scope and effectiveness of that Community law.

3o In particular, it is appropriate to point out that the very wording of Article 8(1) of Regulation No 729/70 concerning the recovery by the Member States of sums lost as a result of irregularities, expressly requires the national authorities responsible for operating Community machinery for agricultural intervention to recover sums unduly or irregularly paid; and such authorities, acting on behalf of the Community, may not, on such occasions, exercise a discretion as to the expediency of demanding repayment of Community funds unduly or irregularly granted. The opposite interpretation would lead to an erosion both of the principle of equal treatment between undertakings from different Member States and of the application of Community law which must, so far as possible, remain uniform throughout the Community.

in answer to the questions submitted to it by the Verwaltungsgericht Frankfun am Main, by orders of 30 April 1981, hereby rules:

1. A denaturing premium granted on the basis of Article 4 (2) of Regu- lation No 172/67 must, if the standard method laid down in Annex I to Regulation No 1403/69 of the Commission is selected, be regarded as wrongly paid if the rules for that method have not been complied with.

2. Community law in its present state does not restrict to a specific method the supervision, by the competent authorities of the Member States, of the regularity of denaturing operations conferring entitlement to payment of the premium. Supervision may inter alia take the form of an audit of the accounting records. It is for the competent national authorities to determine, subject to review by the national courts, what probative value it is appropriate to attribute to the results of the various types of supervision to which denaturing operations are subject.

3. Article 8(1) of Regulation No 729/70 of the Council requires and does not merely empower the Member States to demand repayment of Community denaturing premiums unduly or irregularly granted, and it is not possible to leave the question of repayment in each individual case to the discretion of the competent national authorities.

Due Chloros Grévisse

Delivered in open court in Luxembourg on 6 May 1982.