C-342/85

ITALY v COMMISSION

O P I N I O N O F MR ADVOCATE GENERAL DA CRUZ VILAÇA delivered on 17 September 1987 *

Mr President, February 1980, 3amended for the last time Members of the Court, by Regulation No 3314/80 of 19 December 1980. 4

I I — The Italian Republic has asked the Court to declare partly void Commission 4. It is the final amount of the aid payable, Decisions 85/459/EEC and 85/460/EEC of and therefore eligible for financing by the 28 August 1985 1on the clearance of the EAGGF, which is the subject of these accounts of expenditure to be financed by applications, at this stage. the European Agricultural Guidance and Guarantee Fund (EAGGF), Guarantee Section, presented by the Italian Republic 5. In order to settle the dispute it is for 1980 and 1981 respectively inasmuch as necessary to consider the relationship they refuse to charge to the EAGGF certain between the various provisions governing sums paid by way of aid for skimmed-milk aid for skimmed milk. powder in intervention, aid for the consumption of olive oil, financial compen- sation for withdrawal from the market of fishery products and monetary 6. Regulation No 804/68 of the Council of compensatory amounts. 27 June 1968 5established a common organ- ization of the market in milk and milk products; Article 10 provided that aid was to be granted for skimmed milk and skimmed-milk powder used for animal feed- II — A — Aid for skimmed-milk powder ingstuffs.

made in the trader's country or in another turing was greater than that paid by the Member State) are to be found in consignor Member State (Article 8 (2)). Commission Regulation N o 1725/79 of 26 July 1979 7 which replaced Regulation N o 990/72 of 15 May 1972. 8Article 9 (1) of Regulation N o 1725/79 provided that 'the amount of aid shall be that applicable on the 11. The Commission maintains that that day on which the skimmed milk or special rule was introduced in order to deal skimmed-milk powder is denatured or on particularly with the situation in Italy, which the day on which it is processed into was at that time the only country with compound feedingstuffs'. inadequate stocks of skimmed-milk powder, obliging traders to have recourse to importation and thus subjecting them, under the general rules, to the difficulties inherent in the administrative delays in paying aid in Italy. 9. According to the general rule laid down in Article 3 (1) of Regulation N o 986/68, aid is to be paid in principle by the Member State in whose territory the skimmed milk 12. The result of the two sets of rules taken was denatured or processed and subject to together is that, in general, the amount of proof of completion of that process (Art. the aid is to be calculated at the time of 3 (2)). processing or denaturing — and not the time of purchase or any other earlier event — in the following cases :

lation No 1146/80 of 7 May 1980, 10 which down detailed rules for the application of defined in relation to the transaction at issue earlier transfers to the Italian intervention here the conditions in which the Italian agency). agency was to sell the milk made available to it. 18. For those reasons, since there had been an increase in the amount of aid between 14. Article 3a of Regulation N o 516/80 the time of sale and that of processing the refers generally to the provisions of milk, the Italian intervention agency decided Commission Regulation No 2213/76 of 10 to pay traders thè relevant difference in September 1976 1 1 ( a s last amended by accordance with the procedure laid down in Regulation N o 90/80 of 17 January 1980 12) Article 8 (2) of Regulation No 1624/76. which lays down the general rules applicable to the sale of skimmed-milk powder from public storage, in particular as regards prices. 19. The Commission did not accept that interpretation, and refused to charge the difference to the EAGGF on the ground 15. In addition to that, Article 3a lays down that the amount of aid payable was simply a number of special conditions, including that applicable on the day on which the (paragraph 3) one to the effect that 'at the contract of sale was concluded. time of payment of the purchase price, that price shall be reduced by the amount of the aid referred to in Article 10 of Regulation 20. The Commission maintains that in the (EEC) No 804/68'. absence of an express exemption, that is the natural consequence of the application of the principle tempus regit actum. 16. The purpose and the extent of that reduction is what lies, ultimately, at the root of the dispute between the applicant and the defendant as regards this part of the 21. The Commission also maintains that application. since the detailed rules for granting and paying the aid vary according to the way in which the purchase was made (purchase on 17. The Italian Government maintains that the open market, purchase on the open the reduction pursuant to Article 10 of market with denaturing or processing in the Regulation N o 804/68 must incorporate the territory of another Member State and provisions governing its application, in purchase from intervention agencies), the particular that contained in Article 9 (1) of reduction afforded by Article 10 cannot Regulation N o 1725/79 — a rule which is include all the rules adopted in order to in any case already expressly referred to in implement it. It cannot, in particular, Article 3a (1) (in the same way as Regu- embrace the special case which is sub j udice lation No 990/72, the predecessor to Regu- of purchases by traders from the inter- lation N o 1725/79, was expressly referred vention agency in their own country of to in Article 5 of Commission Regulation skimmed-milk powder coming from inter- N o 2972/76 of 7 December 1976 13 laying vention stocks in another Member State.

23. In the first place, I consider—as does identical rules to govern transfers of milk the Italian Government — that since Article between intervention agencies, cannot be 10 of Regulation N o 804/68 fixes directly valid. neither the amount nor the detailed rules and conditions for granting the aid to which it refers, the aid can only be determined in accordance with the rules for implementing 28. In the case of the exceptional rules for it provided for in Article 10 (2) and (3) early payment by the consignor Member which are, moreover, referred to in State provided for in Article 2 of that regu- paragraph 10 (1). lation, it was necessary (even if that was not the sole purpose of the provision) to state which intervention agency was to pay the difference in the amount of the aid and on 24. As we have seen, however, the general what conditions, given that the processing rule for determining the amount of the aid took place in another Member State. Article is the one which requires the amounts 8 (2) describes those rules in terms which applicable on the date of processing or indicate, moreover, that the legislature denaturing to be taken into account. regarded payment of the difference as being based on other, earlier, provisions, in particular Regulation No 990/72, to which it expressly refers. 25. Now there is not a trace of any legal provision applicable to sales, by an inter- vention agency, of milk transferred to it 29. The application of the general rule from another intervention agency, which tempus regit actum should not affect the indicates clearly that in such cases that interpretation which has just emerged: we general rule does not apply. Regulation N o are not concerned here with the application 516/80 contains no such provision, nor do of any rule which came into existence after any of the others which govern such the act of purchase, but with the determi- transfers. nation and interpretation of a group of rules which were already in existence and in force at that time and which require a date subsequent to the purchase to be taken into 26. The rules of good interpretation would account for fixing the amount of the aid. therefore seem to require in such a case the application in principle of the common rules governing the determination of the amount of the aid, and not the application of an 30. Nor do I consider that it can be chal- exception for which, as regards the case in lenged (see the Summary Report) on the hand, no clear support is to be found in any basis of Article 1 (2) (b) of Regulation N o of the legal texts. 1725/79: 'The skimmed milk and skimmed-milk powder . . . may qualify for aid only i f . . . they have not qualified and are not likely to qualify for aid or a 27. By contrast, the Commission's argument reduction in prices by virtue of other (referred to in the Summary Report on the Community provisions'. One cannot rely on clearance of the EAGGF accounts) that provision when what is to be concerning the absence of a provision corre- determined is only the final amount of the sponding to that which appears in Article 8 same aid, in accordance with the provisions of Regulation N o 1624/76, providing for of that regulation.

32. The fact is that in the case of sale by tender the sale is made at a very reduced 36. Secondly, again according to the price so that it is not necessary, in order to Commission, traders benefit in that case make the product competitive and ensure its from immediate payment of the aid whereas disposal on the market, to grant the aid under Regulation N o 1725/79 they must provided for in Article 10 of Regulation N o first pay the full price and await the time of 804/68 (fifth recital in the preamble and processing in order to be able, not in fact to Article 19 (b) of Regulation N o 368/77); as receive, but to apply for the aid. regards the conditions governing sale at a fixed price, Regulation No 443/77 states that the price must be fixed in such a way as to give priority to sale by tender (second recital in the preamble) and stipulates that 37. Finally, (and this argument is relied on the sales to which it refers must be governed solely in the Summary Repon) the by, inter alia, Article 19 of Regulation N o Commission referred to the fact that only 368/77 which provides that aid is not under the system introduced by Regulation payable. N o 1624/76 is there a fixed period within which processing must be carried out (six months after completion of the customs formalities), whereas in the case of transfers between intervention agencies traders are 33. Were there not, however, — as the free to choose the best moment for Commission alleges — sufficiently strong processing in order to receive the highest reasons to justify abandoning the level of aid. application of the general rule in this case?

43. In addition, I do not support the argument that Italy had benefited suffi- ciently from the special rules designed to 39. I am not swayed by the consideration compensate for the structural deficiencies that if the purchases had been made from traditionally to be found there: the rules in the Italian intervention agency otherwise question also serve the interests of other than in connection with transfers from other Member States, enabling them to dispose of intervention agencies or if they were made surpluses, as is stated in the first and second on the open market in Italy, the amount of recitals in the preamble to Regulation N o aid applicable would be that applicable on 1763/78, and that is sufficient to separate the day of processing, even if transport costs the question of transport costs (which is had not been incurred. It may be said, as governed by Community rules) from that of the Commission pointed out, that that the amount of the aid. difference in treatment is a corollary of the traders' option to choose between various ways of purchasing, each having its own advantages and disadvantages. 44. On the other hand, the fact that Italian traders benefit from receiving the larger part of the aid before they undertake processing is also evident in the provisions of Regu- 40. That argument can in fact serve to lation N o 1624/76, in which it is also support the opposite conclusion that the provided that payment must be made of the system challenged is not the same as the difference between the amount paid and others and may entail advantages not that applicable at the time of processing. conferred by others or avoid disadvantages which others do not.

49. The Italian Government asserted that it B — Aid for olive oil consumption had carried out numerous checks but that the irregularities were only discovered after those checks. Asked by the Commission to 47. In this connection, the applications for explain how the irregularities came to be annulment concern decisions not to charge discovered after the checks, the Italian to the EAGGF amounts corresponding to Government merely stated that they might aid paid to undertakings which, in their own have been discovered as a result of other country, have been charged in criminal or checks, but no positive proof has been administrative proceedings with wrongfully adduced in these proceedings to show that receiving payment of aid. The Commission's the requisite controls were carried out in decisions were based not only on the fact due time. It appears that the only checks that the irregularities had not been made were fiscal ones, carried out long after communicated to it (as required by Council the transactions were completed. Regulation N o 283/72 of 7 February 1972 16) but also on the fact that the national checks were not carried out until after the expiry of the period (150 days) of validity of the 50. In addition, the Italian Government security which — according to the claims that there is no justification for combined provisions of Article 8 of Council refusing finance before the criminal and Regulation No 3089/78 of 19 December administrative proceedings have been 1978 17 and Articles 10 and 11 of concluded, since only then can it be Commission Regulation N o 557/79 of 23 determined whether or not there were March 1979 18 (Articles 9 and 11 of Regu- irregularities. That argument is irrelevant lation N o 3172/80 of 5 December 1980, as for the purposes of financing by the from December 1980 19) — served as a EAGGF in view of Article 8 (2) of Regu- guarantee for the advance payment of the lation N o 729/70, which provides that 'in aid applied for, thus making it impossible to the absence of total recovery, the financial recuperate by means of that security the consequences of irregularities or negligence sums wrongfully paid, even if the irregu- shall be borne by the Community with the larities were discovered in the course of exception of the consequences of irregularities those checks. or negligence attributable to administrative authorities or other bodies of the Member States' (the emphasis is mine).

53. The Commission also pointed out that it only excluded from financing cases where there was a total absence of checks, other 56. An examination of the letter of 28 May than negative ones, pointing out that many 1985 (which was sent to the Commission of the checks not carried out within the after the expiry of the period within which appropriate time became impossible to make documents relating to the 1981 financial subsequently for various reasons (cessation year should have been submitted) reveals of business, missing accounts, etc.). As that it does not contain, in a satisfactory regards the other checks, the Commission form, the necessary information regarding accepted those carried out even after the the items to be cleared, being restricted in 150-day period prescribed for them and fact to a list of undertakings involved in after the securities had lapsed (the Italian criminal and administrative proceedings. Government having extended their period of Moreover, the table it supplied bears not the validity often up to as much as 10 months), slightest resemblance to the information provided that they did not reveal any irreg- requested by the Commission in its letter of ularity. 5 March 1984 (Annex 1 to the defence), contrary to what was stated in the letter sent by the Italian authorities on 28 November 1984. It was therefore entirely understandable that the decision concerning the clearance of the accounts took no 54. In the alternative, the Italian account of the figures contained in that Government claims that the exclusion from letter, particularly in view of the fact that financing by the EAGGF of the relevant aid the Commission called attention once again, should be restricted to the aid connected in a letter dated 5 March 1984, to the fact with the alleged irregularities, that is that the periods prescribed for effecting the to say: LIT 597 899 016 for 1980 checks were binding, and not merely indi- and LIT 1 268 602 210 for 1981. The cative.

58. On those grounds, I am of the opinion that the applications must be dismissed in so far as they concern aid for olive oil 61. That argument cannot be accepted, consumption, so that there are no grounds however. for declaring the decision definitively void in that respect or for re-examining it in the light of any factors which were not suf- ficiently taken into account. 62. Article 8 (2) of Regulation No 729/70 provides that the financial consequences of irregularities or negligence attributable to administrative authorities or other bodies of the Member States must be borne by them. C — Financial compensation connected with In addition to that, there is a specific market withdrawal of fishery products provision applicable to the subject-matter in question here, Article 8 of Regulation N o 2062/80 of 31 July 1980, 21 which provides as follows: 'The Member States shall 59. The third part of the applications exercise continuous supervision of the concerns the entire expenditure declared to operation of recognized producers' organiz- the EAGGF by two producers' organiz- ations and associations, with particular ations: Domar of Porto Garibaldi and San regard to the application of Article 4 of Marco of Chioggia. Regulation (EEC) N o 105/76 and Article 5 of this regulation'.

65. The absence of checks is, therefore, the according to the case-law of this Court, 22 sole and direct cause of the aid paid and not its expenditure could not be financed by the recovered by the Italian State and it is EAGGF. I need not devote much time to irrelevant to the issue here (the financial that argument, which in my view was not consequences of the irregularities) whether adequately enlarged on in the course of the the Italian administration was partly proceedings; I will say, however, that the responsible (as it probably was). irregularities attributed to Domar's management are of a kind which it is difficult to reconcile with the obligations imposed by Community law as a condition for recognition of producers' organizations 66. Similarly, there is no justification for in accordance with Council Regulation N o provisionally accepting the expenditure 105/76 of 19 January 1976 2 3and Regu- pending the conclusion of the relevant legal lation N o 2062/80 of 31 July 1980. proceedings, as the Italian Government sought to maintain in the alternative. The purpose of those proceedings is to determine the criminal liability of the accused for the alleged unlawful conduct; they therefore entail specific requirements 70. In the case of San Marco, a subsidiary and are based on premises very different of Domar, an inspection carried out by staff from those connected with establishing the of the EAGGF in July 1984 (Annex VI to existence of an irregularity in connection the defence) revealed that it did not operate with the procedure for clearing the EAGGF as a genuine producers' organization, being accounts. restricted, at most, to making market with- drawals. Consequently, the Commission refused to finance the expenditure declared by San Marco. 67. As regards the latter procedure, the Commission has information communicated to it by the Italian administrative authorities which includes a reference to the fact that those alleged to be responsible were being 71. In my view its decision cannot be chal- held in preventive detention. lenged. It is abundantly clear from the report made by the officials who inspected San Marco that it was more or less a phantom organization having virtually none 68. In addition, the Commission alleges that of the functions attributed to producers' its officials found it impossible to obtain organizations under the common agri- from Domar, in the course of an inspection, cultural policy by Article 5 of Regulation further information, which could not be No 100/76 of 19 January 1976, 24 disclosed while the matter was sub judice. subsequently replaced by Regulation N o 3796/81 of 29 December 1981, 2 5and by Article 5 of Regulation N o 2062/80. In particular, members of the Commission's

77. In Case 343/85 (concerning 1981) the Italian Government also seeks to have the 72. That is sufficient, given the terms of decision it challenged amended 'at this stage Article 3 (1) of Regulation N o 729/70, to in the proceedings', or at least suspended exclude EAGGF financing for any expen- pending judgment in Cases 244 and 245/85, diture incurred by that organization (see the in so far as it charges to Italy the monetary judgments cited above, paragraph 21). compensatory amounts in intra-Community trade not covered by the EAGGF in connection with certain import and export 73. In addition, Article 8 of Regulation N o transactions involving durum wheat and 2062/80 provides, as I have said, that the wheatmeal. Italian State has a duty to effect permanent checks on the functioning of producers' organizations, something which in this case it is abundantly clear it never did, 78. Those cases concern applications particularly as the checks were required to brought by the two Italian undertakings be carried out by the same committee whose who engaged in those transactions chal- members were incarcerated on discovery of lenging a Commission decision of 22 March the irregularities found to exist in 1985 rejecting a request by the Italian auth- connection with Domar. orities for a reduction in the monetary compensatory amounts concerned in this case pursuant to Article 13 (1) of Council 74. The Italian Government refers to a Regulation N o 1430/79 of 2 July 1979. 26 report produced by the Ministry of the Mercantile Marine (Annex 9 to the application) confirming the existence of irregularities, but asserting that they could 79. I concur with the Commission's view be dealt with quickly; but that is not a that this part of the application is without sufficient ground for re-examining the purpose, since the last paragraph in the question. preamble to the decision regarding the clearance of accounts challenged in this action (Annex 2 to the application) already contains a general reservation to the effect 75. San Marco could only be converted into that the decision will not prejudice the a genuine producers' organization ex nunc, consequences which may be attached to which would not be sufficient to wipe out judgments of the Court of Justice in the irregularities committed in the past or to cases which are pending on the subject- compensate for the absence of checks matter in question. already established. There can therefore be no question of financing being provided by the EAGGF for the expenditure declared by San Marco for the period in question, 1981. 80. In any event, the Court delivered its judgment in Cases 244 and 245/85 on 12 March 1987. 76. I conclude that the application must be dismissed in that regard. 26 — Official Journal, L 175, 12. 7. 1979, p. 1.

86. IV — On those grounds I am of the opinion that in Cases 342 and 343/85 the Court should declare void Commission Decision 85/459/EEC of 28 August 1985 in so far as it refuses to charge to the EAGGF the sum of LIT 655 570, and Commission Decision 85/460/EEC of the same date in so far as it refuses to charge to the EAGGF LIT 677 198 690, which sums represent expenditure incurred by way of aid for skimmed-milk powder to be used as animal feed.

87. The remainder of both applications should be declared unfounded.

88. Since each of the parties has partly failed in its submissions they must bear their own costs in accordance with Article 69 (3) of the Rules of Procedure.