C-197/90

ITALY » COMMISSION

OPINION OF MR ADVOCATE GENERAL DARMON delivered on 3 October 1991 *

Mr President, the consumption of olive oil. They will Members of the Court, accordingly be considered in turn.

I — Aid for die processing of skimmed-milk 1. In this action, the Iulian Republic powder requests the Court to annul in part Commission Decision 90/213/EEC of 19 April 1990,' by which the Commission amended, with regard to three Member States including Italy, Commission Decision 4. The expenditure disallowed by the 89/627/EEC 2 on the clearance of the Commission totals LIT 5 862 632 980, accounts for 1987. corresponding to 10% of the aid for milk processing paid by the Italian authorities during the financial year in question.

I-13

O P I N I O N OF MR D A R M O N — CASE C-197/90

governments of Member States are closely 8. Further scrutiny was carried out in involved in the process by which the October 1989. Three Community officials clearance decision came about. 4 were present during part of the inspection, and on 19 October 1989 the EAGGF sent the Italian authorities further instructions on the procedure for that inspection. Those instructions called for a comparison between the particular book records, 6 the stock 6. Before considering the specific facts by records and the undertaking's general virtue of which, according to the applicant accounts, between the figures in the annual government, the Commission wrongly report approved by the external auditor and considered the scrutiny to be inadequate, it the particular book records, between stocks is appropriate to note the reasons for which of raw materials, current output and stocks Decision 89/627/EEC cannot have related of finished products. They also called for a to the aid for milk-processing. As the detailed description of all the checks carried Commission states in its defence without out, information on the extent and result of being contradicted by the Italian the scrutiny, 'statistics relating to the totals Government, a visit by EAGGF inspectors of securities released and the total amount from 2 to 6 May 1988 to the undertakings of aid paid for 1987 by each firm inspected', Wessanen, Frabes and Plodari in the information on the composition of the Province of Brescia revealed that the checks inspection teams and the duration of those carried out by the Ispettorato Provinciale checks. The abovementioned instructions per l'Agricoltura did not extend to the also noted that Wessanen did not possess undertakings' commercial documents, that certain required documents, namely the the inspection reports, which were drawn up results of the laboratory analyses requested in standard form, did not indicate that the by the firm, manufacturing records and the records had been compared with the inventory for 1987. 7 financial accounts, and that certain quarterly checks were no more than the conclusion of work carried out during the previous quarter. 5

probative value of the documents produced 13. It is true that, in the documents sent by in that regard. the Iulian authorities to the Commission, there is no information as to the number of transactions selected nor as to the results of their scrutiny. During the oral procedure, the EAGGF confirmed, furthermore, that the Commission had received only photo- copies of certain transactions. 10. The Italian Republic brings its criticisms to bear on the findings made by the EAGGF officials in their Further Summary Report of 12 March 1990. 8 Paragraph 3 of that report sutes that the reports forwarded by the Italian authorities do not mention the 14. It must also be suted that the Iulian comparison, for all the transactions, of the Government has not produced evidence undertakings' particular book records with over and above that which it had sent to the their accounts. It also specifies five specific Commission before the adoption of the facts constituting deficiencies in the checks contested decision. The Court has already carried out. I will consider first the held that, if complaint as to the lack of an overall comparison, then the five points concerning the alleged deficiencies.

'without contradicting those findings by producing evidence, the applicant government merely contends that adminis- trative checks were in fact carried out, as well as on-the-spot inspections...'," 11. So far as concerns the lack of an overall comparison, the applicant State asserts that the inspectors compared all the accounts and, in particular, the entries in the registers of AIMA, the Italian intervention agency, with those kept by the undertakings by that does not make it possible virtue of Italian law. However, only the most important transactions were recorded. 9

16. During the oral procedure, there was a 19. Point (a) concerns the failure to discussion between the parties as to whether examine the results of the analyses carried the instructions of 19 October 1989, sent by out by the three undertakings' laboratories telex, clearly called for all the documents and of the manufacturing records, as well subject to scrutiny to be submitted. The as, for Plodari only, the lack of records of telex in question states: 'Please retain the raw materials and finished products. various documents, inspection notes and reports which wíl be used as a basis for the final report. The report and the various inspection documents must be submitted by 20. The applicant Sute claims, as to the 30 November 1989 at the latest'. first criticism, that the analyses made by private laboratories, at the request of the undertakings themselves, are not mandatory and have no official status. In this case, analyses were in fact carried out at the 17. Even if those instructions are somewhat request of the three undertakings in ambiguously worded as to the requirement question but, according to the Italian to communicate all the inspection Government, the results were examined by documents, it suffices to note that Italy has the Italian inspection authorities. not offered, in these proceedings, to communicate additional documents either to the Commission or to the Court. Following the case which I have just cited, I accordingly remain of the view expressed 21. The Commission replies that the above. analyses carried out by the public labora- tories should have been compared with the unofficial analyses carried out at the request of the undertakings.

without its being established, however, that my view, be considered as commercial the Italian authorities carried out any documents within the meaning of Article comparison between the results of those two 10(2)(d) of Regulation No 1725/79. The types of analysis. The analytical reports for effectiveness of that provision would Plodari and Frabes do not mention the otherwise be seriously undermined. existence of analyses carried out by private laboratories, while the Italian authorities' Summary Report seems to indicate that those two undertakings did carry out such analyses. 1S Accordingly, no evidence that a comparison was actually made between the 26. The concept of 'commercial documents' which also appears in Article 1 of Council results of those different analyses has been Directive 77/435/EEC of 27 June 1977 on furnished by the applicant Sute. scrutiny by Member States of transactions forming part of the system of financing by the Guarantee Section of the European Agricultural Guidance and Guarantee Fund ' 6 includes, according to the wording 23. The second criticism concerns the of Article 1(2), 'all the books, registen, failure to examine the manufacturing vouchers and supporting documents, records. Italy maintains that neither accounts and correspondence relating to the Community legislation nor national legis- undertaking's business activity, in so far as lation requires that manufacturing records these documents may be useful to the be retained. It is not disputed that the scrutiny . . . '. manufacturing records of the three under- takings for 1987 no longer existed.

29. The Italian Summary Repon states, (a) the origin of the raw materials used; moreover, that those manufacturing records are confidential since they include the formulas showing how the raw materials are used. ' 7 Besides the fact that consulting those records facilitates supervision which, according to Article 10(2)(a) of Regulation No 1725/79, must have particular regard to the composition of the mixtures utilized and the compound feedingstuffs manufactured, (c) the quantities and composition of the their confidential nature is not affected products manufactured . . . '. inasmuch as Article 8(1) of the abovemen- tioned directive provides that 'information collected in the course of scrutiny as provided f o r . . . shall be protected by 33. Under Community law, Plodari was professional secrecy". accordingly required to draw up records of raw materials and finished products.

30. Hence the deficiency regarding the Italian authorities' checks has, in that 34. Point (b) of the Commission's Further respect, been established. Summary Report concerns the lack of evidence that an inventory of raw materials or finished products was carried out. Italy points out that a comparison was made between the accounting data provided by 31. The third criticism concerns the lack, AIMA's registers and the undertakings' for Plodari, of any records of raw materials 'traditional' accounts. It admits, however, and finished products. The Italian that a direct comparison between the Government points out that, because of its records of raw materials and the data low production, Plodari was not required by relating to stocks provided by AIMA's Italian law to keep such records. registers could not be carried out for 1987 but only for the period subject to the scrutiny.18

36. It is true that the three analytical not be capable of resulting in the annulment reports sent to the Commission in of the contested decision. The deficiencies November 1989 contain no specific infor- as to the thoroughness of the scrutiny have, mation on the actual carrying out of an as I said, been established and are sufficient inventory of raw materials or finished to justify the Commission's refusal of products. ' 9 Moreover, the Court has EAAGF assistance for certain sums. already held that the absence of scrutiny as required by Community legislation cannot be regularized after the event by scrutiny of a different kind. x Accordingly, the defi- 39. Accordingly, the applicant state has not ciencies in question seem to be established. adduced evidence that the deficiencies alleged by the Commission in support of its decision were unfairly relied upon as against the applicant. 37. Point (c) of the Commission's Further Summary Report refers to two sales made by Wessanen in respect of which the security was forfeited. During the oral 40. There remains to be examined, procedure, the Commission acknowledged however, the argument of the Italian that, in the light of the information in the Government that the Commission was not Italian Government's reply, that criticism entitled to set at a flat rate of 10% of the was no longer justified. It considers, aid granted the amounts which would not however, that the evidence adduced by Italy be borne by the EAGGF. is out of time.

I-19

OPINION OF MR DARMON — CASE C-197/90

in the scrutiny or in the piecing together of 46. Let me point out at once, so as not to evidence, endeavour: have to come back to this point, that the action also concerns certain reservations allegedly expressed by the Commission, not in the contested decision but in a letter of 'to establish the financial impact of the 10 May 1990, v with regard to the sum unlawful action by means of calculations of LIT 28 688 711294. The Commission based on an assessment of what the lodged an objection that the application was situation on the relevant market would have inadmissible on that point. 28 In its reply, been if the infringement had not the Italian Government abandons that head occurred'. 2i of claim. Accordingly, Italy's submission concerns only the refusal to charge to the EAGGF the abovementioned sum of LIT 4 352 012 388. The Court added that:

'In such a case, the burden of proving that 47. Formally, that submission concerns both those calculations are not correct rests on infringement of the applicable Community the State seeking to have the disallowance law and failure to state reasons. My obser- annulled'. 2i vations concerning aid for the processing of skimmed-milk powder are equally valid here.

43. It must be stated that no such evidence has been adduced by Italy in these proceedings. 48. The discussion between the parties is essentially legal. It is not disputed that the abovementioned sum corresponds to aid 44. Accordingly, none of the submissions which the Italian authorities noted was put forward as regards the aid for the undue because of irregularities. Legal processing of skimmed-milk powder appear proceedings are in progress before the to me to be of such a kind as to vitiate the Italian courts. The Italian Government legality of the contested decision. considers, for its part, that the Commission should have awaited the final outcome of those proceedings before taking the decision to refuse EAGGF assistance for those sums. II— Aid for die consumption of ouve oil The Commission takes the opposite view on that point.

53. Article 11 of Commission Regulation 51. That provision is unambiguous. We are (EEC) No 2677/85 of 24 September 1985 dealing, let me point out, with a system of laying down implementing rules in respect advance aid. Accordingly, where irregu- of the system of consumption aid for olive larities have been established by the admin- oil30 provides that the security is only to istrative authority, it is not clear for what be released once the competent national reasons the parties concerned should have authority has recognized entitlement to the the right, on the ground that the matter is aid. before a court, to retain advances on the aid in question and therefore to object to the securities being forfeited by the competent 54. The application accordingly seems national authorities. Neither the Community unfounded on that point as well.

55. I therefore propose that the Court dismiss the application in this case and order the applicant State to pay the costs in their entirety.

» — OJ 19*5 L 205, p. 5. 30 — OJ 1985 L 254, p. 5.

I-21