C-41/94

The grounds of the Commission decision 3. First, the Court is called upon to consider, from both the organizational and functional standpoints, all the activities of the national administration responsible for applying Community law. In particular, as far as the 2. The grounds of the contested Commis­ first criticism is concerned, it is necessary to sion decision relate to various irregularities establish whether the administrative system set up in implementation of the relevant

* Original language: Italian. 1 — OJ 1993 L 301, p. 13. 4 — Commission Regulation (EEC) No 714/89 of 20 March 1989 2 — OJ, English Special Edition 1968 (I), p. 187. laying down detailed rules applying to the special premium 3 — OJ 1989 L 61, p. 43. for beef producers (OJ 1989 L 78, p. 38).

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OPINION OF MR LA PERGOLA — CASE C-41/94

5 — I refer, specifically, to the precedent which I consider closest to the present case: the judgment in Case C-8/88 Germany v Commission [1990] ECR I-2321. On that occasion, Advocate General Van Gervcn observed: 'the novelty of this case is to be found in the fact that the dispute docs not concern so 'public intervention has gradually lost its much the Commission's conclusions from its analysis of individual cases, but rather the consequences drawn by it original function as a safety net and has from an examination of the administrative implementation of become an outlet in its own right'; a part of the common agricultural policy in certain areas of the Member State in question'; Opinion in the abovemen- tioncd case, at p. I-2334, in particular p. I-2335. 6 — I refer to rules both of a general and specific nature. First, at federal level, there are general implementation rules for the payment of premiums to the producers of beef and veal and sheepmeat of 7 October 1987 (BGBL, I, 2266; subsequently amended by the Regulation of 10 April 1989; BGBL, I, 778). and lays down rules to limit public buying, Secondly, there are extremely detailed rules applied in the Länder, in relation to the procedure for payment of the pre­ adapting the existing rules to meet the need mium and the verification phase: see the implementing instructions from the Bavarian Ministry of Agriculture and Forests for implementation of the special premium granted to the beef and veal producers of 12 February 1990 (No T6-7643.2-511); notice issued by the Ministry of Rural Areas, Food, Agriculture and Forests of Baden- 7 — Regulation (EEC) No 805/68 on the common organization Württemberg, of 29 March 1989 (concerning general rules on of the market in beef and veal (OJ, English Special Edition the premium); the circular from the same Ministry of 29 1968 (I), p. 187). March 1989 (concerning payment of the premium); the letter 8 — Council Regulation (EEC) No 467/87 of 10 February 1987 from the same Ministry of 7 June 1989 (concerning checks amending Regulation (EEC) No 805/68 on the common carried out under the rules on premiums); and, finally, the organization of the market in beef and veal and the system of detailed inspection form provided for by the federal authori­ premiums granted in the beef and veal sector (OJ 1987 L 48, ties. p. 1).

13 — In that connection, sec the third and fourth recitals in the 9 — The premiums in force were introduced by Council preamble to the Regulation (and also the fifth and seventh): Regulations (EEC) No 1346/86 of 6 May 1986 (OJ 1986 The third recital states: 'in view of the difficulties of fur­ L 119, p. 39) and No 1347/86 of the same date (OJ 1986 nishing evidence of compliance with the requirements laid L 119, p. 40). down, u should be spedfied that applications be accompa- nied by declarations and undertakings by recipients and that 10 — The original time-limit of 31 December 1988 was extended these be subject to both administrative and on-the-spot by Council Regulation (EEC) No 571/89 of 2 March 1989, checks by Member States regarding a minimum number of cited above, footnote 3. holdings and give rise to total recovery of the sums paid 11 — Regulation (EEC! No 468/87 of 10 February 1987 laying should they turn out to be inexact*. down general rules applying to the special premium for The fourth recital states 'in the light of experience and tak­ beef producers (OJ 1987 L 48, p. 4); amended by Regu­ ing account in an appropriate manner of infractions of lation (EEC) No 572/89 of 2 March 1989 (OJ 1989 L 63, minor importance it is necessary to reinforce the measures p. 1). The measure laid down certain basic elements of the for preventing and sanctioning irregularities and frauds' rules: the amount of the premium; the maximum number of (emphasis added). qualifying animals per holding; the minimum age of the animals. 14 — Regulation (EEC) No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy 12 — Regulation No 714/89 replaced and repealed Commission (OJ, English Special Edition 1970 (I), p . 218). Sec also the Regulation (EEC) No 859/87 of 25 March 1987 laying third, seventh and eight recitals. The first-mentioned pro­ down detailed rules applying to the special premium for vides for the creation of a committee for the European beef producers (OJ 1987 L 82, p. 25). Those rules comprise: Agricultural Guidance and Guarantee Fund; the second (a) provisions on the lodgement of applications and pay­ recital mentioned states 'measures must be taken to prevent ment of the premium; and deal with any irregularities and to recover the amounts (b) provisions on the identification of animals; lost as a result of such irregularities or negligence'; the (c) procedures for checking the number of male animals third-mentioned recital — the most relevant one to this case declared and conditions ... in particular the period during — links the two concepts — cooperation and control which cattle arc to be kept on the holding, in order to guar­ — and states 'Community expenditure must be made sub­ antee adequate control; ject to close supervision' and 'in addition to supervision (d) special provisions to be applied by the Member States carried out by Member States on their own initiative, which which apply the rules under Article 4, when exporting remains essential, provisions should be made for verifica­ qualifying live animals to non-member countries or des­ tion by officials of the Commission and for it to have the patching them to other Member States. right to enlist the help of Member States'.

The Member States shall inform the Com­ Let us consider the legislation indicated mission of the measures taken for those pur­ above. poses and in particular of the state of the administrative and judicial procedures'.

Article 9(1) provides: From the organizational and functional point of view, the Commission takes wide-ranging action to regulate the markets: guidelines, intervention, the extent of financing and the 'Member States ... shall take all suitable mea­ procedures to check proper payment are laid sures to facilitate the supervision which the down at Community level. However, it is Commission may consider it necessary to not incumbent on the Community to deal undertake within the framework of the man­ with detailed matters or specifically check agement of Community financing, including the application of the provisions adopted by inspections on the spot. it in the sector concerned. Those activities

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15 — Sec the judgment in Case 54/81 fromme [1982] ECR 1449: 'by providing that the Member Slates arc. in accordance with national provisions laid down by law, regulation or administrative action, to take tiic measures necessary to recover sums lost as the result of irregularities or negli­ gence. Article 8 of Regulation No 729/70 docs no more than confirm expressly an obligation already incumbent on the Member States by virtue of the principle of cooperation enunciated in Article 5 of the Treaty' (paragraph 5). Sec the Opinion of Advocate General Capotorti in Joined Cases 17 — Sec Case C-48/91, cited in footnote 16 above, paragraph 11. 146/81, 192/81 and 193/81 BayWa [1982] ECR 1545. 18 — Thus — in relation to an objection by the Federal Republic 16 — Sec most recently Case C-476/93 Nuirai SpA v Commission of Germany that the provisions of Commission Regulation [1995] LCR I-4125. Sec the Judgment in Case C-48/91 No 1244/82 of 19 May 1982 (laying down detailed rules Netherlands v Commission [1993] ECR I 5611, para­ implementing the system of premiums for maintaining graph 11: 'management of financing of the EAGGF is sucklcr cows) do not lay down the obligation to adopt par­ mainly a matter for the national administrations responsible ticular rules to govern payment of the premium — the for ensuring strict compliance with the Community provi­ Court stated 'it should be pointed out that the Community sions ... only Member States are m fad in a position to rules, though not going so far as to impose on Member obtain und determine precisely the data necessary for prepa- States the requirement to adopt detailed and rigid rules, ration of lhe EAGGF accounts, whereas the Commission is nevertheless entail the obligation to establish a coherent set not close enough to traders to be able to obtain from them of measures containing specific guidelines for the oßtcials information which it requires' (emphasis added); sec the entrusted with on-the-spot inspections' (emphasis added) judgment in Joined Cases 89/86 and 91/86 Étoile Commer- — judgment in Case C-8/88, cited in footnote 5, in particu­ ciale and CNTA v Commission [1987] ECR 3005. lar paragraphs 36 to 38.

21 — Case C-48/91, cited in footnote 16. Note should also be taken of the analysis of the organizational basis in this area given by Advocate General Van Gerven in his Opinion of 3 19 — The principle of good administration referred to here is March 1993 in Case C-55/91 Italy v Commission [1993] linked, in particular, to the requirement that administrative ECR I-4834; see, in particular, the first part of the Opinion: action be complete, whereby 'when the authority takes a 'Preliminary general remarks'. decision ... it should take into consideration all the factors which may effect its decision'; see the Order of the Court 22 — See Article 8(2) of Regulation No 729/70; 'in the absence of of First Instance in Case T-14/91 Weyrich v Commission total recovery, the financial consequences of irregularities or [1991] ECR II-235; secondly, and more generally, the negligence shall be borne by the Community, with the administration's conduct must be reasonable: see Case exception of the consequences of irregularities or negligence C-10/88 Italy v Commission [1990] ECR I-1229, para­ attributable to administrative authorities or other bodies of graph 13: 'the principle of good administration requires that the Member States'. the period be notified in due time'; see also the judgment in 23 — The Court stated: 'Member States are required to set up Case 14/88 Italy v Commission [1989] ECR 3677; Case comprehensive administrative checks and on-the-spot C-34/89 Italy v Commission [1990] ECR I-3603: the obli­ inspections thus guaranteeing the proper observance of the gation of diligence 'implies that the Member States must substantive and formal conditions for the grant of the pre- take steps to rectify irregularities promptly' (paragraph 12). miums in question' (emphasis added) — Case C-8/88, cited 20 — Case C-30/89 Commission v France [1990] ECR I-691. in footnote 5, paragraph 20.

For the sake of good order, I should first deal with the grounds of the more general pleas (the first and the third). Taking account 'The competent authority appointed by each Member State shall operate administrative checks and on-farm inspections in order to 24 — The Commission must entertain serious and reasonable (or verify that the provisions governing the spe­ rather, justified) doubts concerning possible irregularities in cial premium arc complied with. These the conduct of the national administrative authorities, and it is incumbent upon the Member States to furnish proof to inspections must be carried out at a mini­ the contrary: judgment in Case C-48/91, cited in footnote 16, in particular paragraphs 15 to 18; Case C-8/88, cited in mum number of holdings ... the control mea­ footnote 5. For another perspective, sec Case C-48/83 Luxembourg v Commission [1984] ECR 2931; Cases 55/83 sures shall cover in particular: and 56/83 Italy v Commission [1985J ECR 683 and 703; (only expenditure shown by the Member States actually to have been properly incurred may be reimbursed by the EAGGF). 25 — The Court, in order not to hamper checks and to make the threat of penalties more effective, upheld the legality of extrapolating results obtained from a minimum sample so as to apply to the entire administrative organization of the Member State, or, in cases like this one where powers arc conferred regionally, the competent local administrative authorities; sec Case C-413/92 Germany v Commission (a) the presence on the holding run by the [1994) LCR I-3781, paragraph 11. producer of the number of male cattle

13. The criticism contained in the summary report is directly concerned with administra­ tive control measures. The Commission took the view that the control procedures applied by the competent authorities of the Länder did not conform with the Community requirements. This was because the checks were intended merely to verify that the application forms for the premium were duly filled in and that the maximum number of premium applications corresponded to that 15. In the Commission's view, administra­ laid down by the regulation. tive checks, although different from inspec­ tions, should not as a result be limited to superficial inquiries to establish that action is properly taken, but that was the approach adopted in this case. As regards the compari­ son of results, the defendant contends that there is no supporting evidence. In any 14. In response to those comments, the event, such a comparison is only of limited applicant contends that administrative checks value in assessing the plausibility of applica­ must be taken to mean 'effective verification tions, and, even then, only in connection of the plausibility of the premium applica­ with inspections. As regards the claimed pro­ tions' — as provided for and applied — and fessionalism of the personnel of the agricul-

I - 4742

GERMANY v COMMISSION

26 — Commission Decision C/92/2645 of 6 November 1992 adopted pursuant to Article 1(3) of Commission Regulation (EEC) No 1723/72 of 26 July 1972 (OJ 1992 L 186, p. I.) 27 — Case C-8/88, cited in footnote 5, paragraph 20.

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OPINION OF MR LA PERGOLA — CASE C-41/94

satisfy the requirement of completeness, 17. In examining the second criticism, it is properly covering the field in which they are necessary to decide whether the 'sampling' to operate. Furthermore, as I have already method adopted by the German system for indicated, the parameters for checks are to be selecting the holdings to be inspected is sat­ inferred from the basic principles of the leg­ isfactory. The Commission considers that islation: cooperation between the Commis­ that approach is not capable of implementing sion and Member States, good administra­ the control required by the Community tion, legal certainty. It is necessary to clarify rules, because it is not based on rational cri­ the role of those principles in relation to teria. each specific case in defining the type of checks and the procedures for carrying them out.

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GERMANY v COMMISSION

agricultural subsidies, 8the administrative method of inspection adopted in Germany. authorities of the Länder having expressly No importance can therefore be attached to called upon the local departments to carry the applicant's reference to the 'side-effects' out inspections on the requisite number of deriving from the fact that the national rules 29 holdings. on subsidies and the administrative measures referred to by the latter apply at the same time. According to the Commission, that argument has no bearing on the central problem of the selection of the holdings to be inspected.

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OPINION OF MR LA PERGOLA — CASE C-41/94

inspected should be selected not at random irregular conduct on the part of all possible but on the basis of the outcome of appropri­ recipients of the premium and — I repeat — ate administrative checks: by means of a first no distinction is drawn between them. That, screening of cases in which the probability of in my opinion, constitutes indirect but irregularities appeared to be higher, once important confirmation of the inadequacy of again, of course, for the purposes of ensuring the administrative checks provided for and 30 proper payment of the premium. That carried out in the Lander: the control is would, as the Commission points out in the merely a 'paper' check — as, moreover, is words of its expert, constitute a less indis­ pointed out in the summary report — and criminate and more rational form of inspec­ does not serve to select, on the basis of any tion, conforming to the provisions of the prior assessment of risk factors, the holdings regulation. However, there is no trace of which should then be inspected. The inspec­ such use of the two methods of investigation tion is in fact preceded by a merely formal in the German system, either in the legisla­ verification of the plausibility of the applica­ 31 tive provisions or in practice. Inspection tion for a premium, involving no essential by sampling was chosen to the exclusion of assessment of the way in which those seek­ any other method. It was not considered that ing the premium manage their holdings. it should necessarily be combined with any form of administrative checks, on which inspections based purely on chance might rationally be based.

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GERMANY v COMMISSION

Commission considered that 'the inspection In addition, the late production of that evi­ rate was entirely arbitrary and, consequently, dence cannot be justified under Article 42(1) not particularly representative or efficient'. of the Rules of Procedure of the Court . The And even the statement — the undisputed applicant says nothing regarding the 'reasons statement — by the Commission expert that for the delay' in offering that evidence the local departments were, during the expressly referred to in that provision. inspection itself, questioned on this point , shows that the German administrative authorities were aware of the shortcomings of that method of selection.

Indication of the age of the animals

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OPINION OF MR LA PERGOLA — CASE C-41/94

from holders to the effect that the animals commenced would be a rather unprofitable were at least six months old — a method of option for the holder. identification which the inspection by the EAGGF officials showed to be specifically deficient since the documentation for a very large number of animals did not contain any information whatsoever concerning age. That fact, together with the actual features of the system (and in particular, as emphasized at the hearing, the fact that the system is 'self- 25. The defendant considers that the term managed' by the persons to whom it 'indication of age' must be construed in applies), gave rise to major difficulties in accordance with Community legislation and verifying the age of the animals, both during its purpose, so that it is meaningful through­ administrative checks and in on-the-spot out the control procedure. Under other legal inspections. systems, it has been contended, the control system provides for a card for every animal qualifying for a premium, which documents inter alia its age, with a reasonable degree of certainty. As regards the German system of ear-marking by rotation, that provides a 'guarantee' of the propriety of the premium procedures only to the extent to which the underlying system of identifying the animals and establishing their age is efficient, a sys­ tem which the defendant criticized in its decision.

I - 4748

GERMANY v COMMISSION

of adequate controls. Under the laws of payment of the premium? The Commission other Member States, as I stated earlier, a thinks not. The marking, it states, is carried card is required for every animal qualifying out by the applicants for premiums them­ for a premium, thus documenting its age selves without official supervision and does with a reasonable degree of certainty. That is not provide sufficient guarantees. The not the only possible solution. What is inspections carried out by EAGGF officials important, however, is that the 'indications' in fact reveal that the perforations tend to required by Community law should have, at close up again and the marks can be easily national level, the full significance attaching removed. The high rate of rejections of to them by virtue of the very aims of the applications by the German authorities is regulation. That is not the case here. The attributable, moreover, to the fact that the German system of division into periods does way the animals are marked does not not in itself provide any proof of the matters adequately identify them. at issue here, and in no way resolves the doubt raised by the Commission concerning the efficacy of the practice adopted in the two Länder to determine the age of the ani­ mals.

registration of animals ) the Community 31. Those are the submissions of the parties. laid down similar identification procedures, In my opinion, decisive importance is to be and because the Commission, having attached to the fact — which emerged in the received notice under the regulation of the course of the inspection carried out by the system adopted in Germany, gave it a posi­ EAGGF officials and was confirmed at the 36 tive assessment. hearing by the Commission's expert — that it was difficult to identify the animals because their ears had been marked, perfo­ rated and notched on several occasions. The first point which I think should be empha­ sized is that in the Länder identification operations are carried out by the producers themselves. The administration does not directly supervise them. However, identifica­ 30. The Commission responds with a num­ tion of the animal is an essential part of the ber of arguments. Both the inspection and due process of paying out the premium and 37 the evidence obtained by Community offi­ undertaking the associated checks. That cials from German producers disclose the follows from the logic and the wording of 38 deficiencies of the identification system used: the legislation. To entrust to the producers the Commission expert at the hearing stated — the very beneficiaries of the premium — that the animals displayed 'a multitude' of an activity having such important conse­ perforations which made identification of quences runs counter to the completeness them difficult, or indeed impossible. and rigour of the checks which must be regarded as required of the Member States by virtue of the principle of good adminis­ tration. If the intention was to leave marking to the producers, it could have and should have been carried out under the direct super­ vision of the administration.

the large number of cases in which adminis­ may be the same on holdings where no trative proceedings are pending on that inspection is carried out, which amount to point. However, that reasoning overlooks 90% of the total number. This factual infer­ the fact that the Court is called upon specifi­ ence should be taken into account together cally and solely to assess the technical with the inefficiency or inadequacy of the adequacy of the identification system, system for identifying the animals which was namely its fulfilment of the requirements of observed. 'permanence' and 'clear visibility' of the marking. Failure to adopt a system display­ ing those features entails breach of the Com­ munity requirements. That, and only that, was the matter to be dealt with in connection with this aspect of the action. It is of no importance how domestic law might have reacted to possible irregularities in the func­ tioning of the system adopted. Decisions rejecting applications for premiums and the resultant proceedings before administrative courts do not change the fact that the identi­ fication system was not designed in accord­ ance with the requirements of Community law. In any event, as the Commission points 34. Let us now consider the Commission's out, the abovementioned litigation — which alleged knowledge and implied approval of arose precisely because, in breach of the the German system. The Commission con­ regulation, arrangements had not been made cedes that, at some point, it expressed the for adequate forms of marking and identifi­ view that, in the abstract, the system adopted cation of the animals — indirectly confirms in Germany was compatible with the Com­ the doubts raised by the objective findings of munity provisions. However, it insists that it the EAGGF inspectors. did not thereby intend in any way to rule out the possibility that, when the system was examined in practice, the opposite conclu­ sion might be arrived at. In any event, it is now for the Court to consider both the pro­ visions of the contested rules for identifying the cattle and their practical application. I have already given my view as to the decision to be taken. I would merely add that the applicant's reference to Directive 92/102 is not relevant to this case. That measure was adopted subsequently, has no bearing on the matters of fact at issue and in no way helps clarify the central issue of the 33. A further comment is appropriate. practical application of the system of identi­ On-the-spot inspections are envisaged for a fication. And, as far as the expert's opinion small percentage of the holdings. But the produced in the reply is concerned, I con­ number of irregularities detected on those sider that the Court cannot take cognizance holdings has been high. It is legitimate to of it. I refer to my observations in para­ presume that the frequency of irregularities graph 22 in that respect.

36. The applicant's response comprises mat­ ters of fact and of law: the professionalism of 38. In my opinion, inspections represent the the staff ensured that the inspections were most advanced and effective way of checking effective; the inspection forms expressly the proper conduct of operations relating to required the inspectors to verify that the ani­ the premium. Inspections should therefore mal was on the holding for the prescribed display the rigour necessitated by the func­ minimum period. tion which they perform. Only thus can it be justified, within the organizational structure under review here, that inspections are lim­ ited to a percentage of the holdings receiving the premium. If an investigation of that kind were required for all the holdings, the con­ trol system would be uneconomical and The legal argument, on the other hand, con­ would hamper the proper marketing of the cerns the absence of Community provisions products, thereby definitively undermining requiring the applicant to maintain addi­ the very functioning of the market. In that tional documentation. That requirement, it light, inspections are intended to establish, claims, applies pursuant to Article 7(1), sec­ with the greatest possible degree of certainty, ond subparagraph, of the regulation only that the requirements, whether objective or with respect to those Member States which subjective, laid down for payment of the pre­ adopt systems of identification 'other than in mium are satisfied. The administrative specific connection with the special pre­ inspection, as stated earlier, is not merely a mium'. formality. It is necessary to check whether

39. Examination of the various pleas in the application has shown that, as a whole, the control measures applied in the two Länder are to be regarded as unsatisfactory. In the first place, the objective findings of the 'methods of identification ... other than in inspections indicate a lack of information as specific connection with the special premium to the age of the animals, inadequacy of the ... providing that such methods enable each means of identification used, and superficial animal to be identified .... Where this is the on-the-spot inspections. Secondly, the inter­ case, the number of the animals in question pretation of the provisions of the regulation must be stated on the premium application adopted by the applicant with regard both to and this application must be furnished: the very meaning of control measures and to the requirements concerning identification of the animals runs counter to the principles that can be inferred from those provisions. That fact, together with the indications that — by a document which shall accompany the system is inefficient, such as the large the animal throughout its life ... ; number of administrative proceedings con­ cerning irregularities of marking, provide legitimate basis for the 'serious and reason­ able' doubt expressed by the Commission regarding the propriety of the German administration's conduct. It does not seem to — ... by a register in which the animal is me that Germany has adequately dispelled registered under its number, and which is

I - 4753

OPINION OF MR LA PERGOLA — CASE C-41/94

The criticisms in the summary report con­ cern the failure to take appropriate measures to ensure that animals imported from Bel­ gium and France and those exported to Italy do not benefit from the premium twice. 42. In the first case — and here we look at the positions taken by both parties — the principle of cooperation between the Com­ munity and the Member States is important. The Commission complains that Germany did not adopt suitable measures to identify imported cattle, merely calling on the Com­ 41. The monitoring of imports and exports munity to take action for a proper solution of cattle touches upon a delicate aspect of the to be found to the problem of double pay­ matter in hand. The movement of animals ment of the premium in the Member State of may give rise to the risk of more than one destination or in the State from which the premium being paid. However, the corner­ animal came. The applicant allegedly failed stone of the regulation is the absolute rule to display the diligence required by the com­ that the premium may be granted only once plexity of the case. For its part, Germany for the same animal. Where there are no contends that it was the Commission which

I - 4754

GERMANY v COMMISSION

'broke off' the cooperation with the national Member States and between the institutions authority by failing to follow up, at least in themselves. the year to which the clearance procedure relates, the urgent requests made by it to deal 39 with the case.

39 — Those requests from Germany take the form of letters (in December 1989 and November 1990); discussions within 41 — See the guidance on cooperation given, with regard to State the Beef and Veal Committee (in May 1991); oral commu­ aid, in the judgment in Case 94/87 Commission v Germany nications in November 1989 and during the EAGGF [1989] ECR 175. inspections in Bavaria and Baden-Württemberg. 42 — Uniform rules of this kind were adopted, as we have seen, 40 — See the judgment in Italy v Commission (cited in footnote only in 1992, by means of Directive 92/102, cited in para 19). graph 29 of this Opinion.

I - 4755

OPINION OF MR LA PERGOLA — CASE C-41/94

43 — I think it is appropriate to refer, even though they postdate the facts of this case, to two legislative measures on fraud undermining the financial interests of the Community, which support the solution which I advocate. Article 209a, introduceer by the Maastricht Treaty, provides (in the sec­ ond sentence of the second paragraph) that, in order to coordinate their action aimed at protecting the interests of the Community, the Member States are to Organize, with the help of the Commission, close and regular cooperation between the competent departments of their administra­ 47. That reading of the provision, advocated tions'. To the same effect, and more specifically, the rules by the applicant, is justified not only by its kid down in Council Regulation (EEC) No 595/91 of 4 March 1991 concerning irregularities and the recovery of literal wording but also by the logical sums wrongly paid in connection with the financing of the common agricultural policy (OJ 1991 L 67, p. 11) centre scheme of Article 7. The standard system anti-fraud action specifically on close cooperation between provided for in the first paragraph relies on the Member States and the Commission (on all these points, see the tenth recital in the preamble). And it is on the basis the permanence and clear visibility of the of the guidance given by those legislative measures that I attach particular importance to the Commission's inaction marking. The requirements laid down for the in the present case, preventing materialization of the coop­ eration which the applicant had repeatedly and expressly alternative systems which the Member States requested. may adopt, on the other hand, reduce the

48. But can that obligation also be deemed to apply to animals which have already been 44 — And in fact the legislative history of the provision clearly identified under the standard system? I think confirms that the approach which I advocate is correct. Originally, Commission Regulation (EEC) No 859/87 of 25 the answer is no. The characteristics of that March 1987 laying down detailed rules applying to the spe cial premium for beef producers (OJ 1987 L 82, p. 25) pro additional marking are not in fact specified. vided, in Article 6(2), that 'Animals for which a premium It must be concluded that they are to meet application .

mals? I think it is more appropriate to read cific — and 'different' — marking of animals identified under the standard system, but maintained the specific the provision as meaning that only the other marking requirement for animals covered by the deroga tion. This legislative progression proves two tilings: the first systems of identification which the Member is that the specific and 'different' markings laid down for State may use are to be supplemented by the animals identified under the standard system were expressly eliminated by the legislature. The second is that the origin specific marking which follows payment of of the paragraph of Article 7 of Regulation No 714/89 at issue here relates directly and solely to animals identified the premium and applies in the case of under the alternative rules. Those two facts, it seems to me,

I - 4757

OPINION OF MR LA PERGOLA — CASE C-41/94

animals from Belgium and France and — that the animals will be slaughtered or exports to Italy. exported to third countries before 3 Sep­ tember 1989.

Application of transitional provisions

The animals concerned must have a clearly visible and permanent identification mark'. 49. The transitional provisions are contained in Article 11 (paragraphs 2 and 3) of the regulation, which provides:

50. The non-recognition of the expenses 'Member States ... may open, from 3 April to incurred under those rules is broken down as 4 June 1989, a period for the lodging of tran­ follows: 4 % (equivalent to DM379 140) sitional premium applications for animals relates to documentary findings by EAGGF whose fattening is almost completed. officials showing that, as regards 5.6% of premium applications, the premium had been paid irregularly (that percentage was reduced to 4% following information forwarded by Germany during the objection procedure); 10% (equivalent to DM 957 850) relates to more general inadequacies of the system In this case, the producer must declare in his adopted in the two Länder. The specific application: grounds of objection relate to clearly identi­ fied irregularities encountered in the pay­ ment of the premium. It is stated in the Commission's letter of 29 September 1992 that, in relation to 36 applications in response to which the premium was paid — that the animals concerned are at least 12 punctually, the following was discovered: months old at the date of lodging of the sale or butchering of the animal before the application, end of the prescribed period; lack of docu­ mentary evidence; changes made to certifi­ cates. That specific criticism, with which the applicant appears to be acquainted (see para­ graph 18 of the application), has not been directly challenged. It must therefore be — that he is keeping them on his holding deemed to be accepted. for at least one month,

However, the applicant made no comment on the substance of the criticism, namely the lack, to which the Commission referred, of any coordination by the competent authori­ ties regarding the various colourings used. The Commission expert stated that the 52. The first point. In compliance with the inspections had disclosed that the animals eight recital, for animals covered by the were identified differently from one holding derogating rules, mere colouring of the head to another and, what is more serious, with­ 45 or back of the animals was allowed. Dur­ out the national inspectors being familiar ing the inspection it was found that the great with the types of identification used on the majority of animals lacked identification various holdings. Those circumstances, in the conforming to the requirements of the Com­ Commission's view, show that the inspec­ munity legislation. As the Commission tions were objectively incapable of ensuring expert stated at the hearing, more particu­ effective control. The applicant has not chal­ larly there was a lack of specific guidance lenged that view. from the administrative authorities regarding

45 — The eight recital in the preamble to Regulation No 714/89 states, 'in view of the marketing requirements for male cattle held by producers at the time when this regulation enters into force, a temporary exception to the obligation to keep the animals on the holding for a specified period after lodgment of the application should be granted, on con­ 54. The Commission's observations arc, I dition however that the cattle in question are of the pre­ think, justified by the outcome of the inspec­ scribed age and have been fattened on the holding for at least two months; whereas it is necessary, furthermore, to tions and support the conclusion that the lay down for these animals, which by virtue of their age are difficult to handle, an exception to the marking system' identification system adopted under the (emphasis added). derogating rules was not in conformity with

56. The applicant alleges, in the first place, that the EAGGF's statement that 'almost all slaughter certificates' were completed by dealers is incorrect. It claims that only half of such certificates were at fault, this being due It is apparent from the summary report to the fact that many slaughterers were origi­ that the EAGGF is unable to verify that nally wholesale dealers, and the documenta­ tion still referred to their original business. Secondly, the applicant maintains that it can 46 — See the Opinion of Advocate General Van Gerven in Ger- be inferred from the information contained many v Commission, cited in footnote 5, in particular para­ graph 7: 'a lack of interest manifested at federal level or in the dealer's invoices that the animal for between the Länder ... merges into the other grounds ... in which a premium was claimed was actually particular inadequate supervisory rules adopted by, and in consultation with, the competent Länder in the Federal Republic of Germany and inadequate supervision of the officials responsible for carrying out checks at local level'; see also paragraphs 25 to 28 of the judgment. 47 — I think it is appropriate to draw attention to the particular 48 — The documentation required by the national rules is importance of documentation under the transitional extremely detailed. Among other things, it provides that arrangements. Because of the limited period for which the evidence of slaughtering is to be provided by means of animals are required to be kept on the holding (one month 'health inspections; slaughter certificates (weight of the car­ as from the date of the application) and between that date cass); certificates in respect of the animal to be slaughtered and slaughter or export of the animal (a maximum of five (live weight) with annexed documents proving slaughter': months), the documentation essentially becomes the only see the circular from the Ministry of Rural Areas, Food, means by which the regularity of the payment of the Com­ Agriculture and Forests of Baden-Württemberg of 29 munity premium can be verified. March 1989, Article 5.

59. Specifically because of the claimed sub­ stantive link between the transitional regime and the standard regime, the arguments put forward cannot be dissociated from the more general context in which control measures 57. The Commission docs not share that are applied, as considered and evaluated in view. I too consider that those arguments do relation to the first plea in the application. not serve to challenge the objective and clear The applicant contends that the control mea­ fact that the documentation concerning sures carried out in the two Länder (and in slaughter of the animals for which a pre­ particular inspections) were as a whole apt to mium is claimed was inadequate. As regards avoid cases of double payment. The other, the information which producers must pro­ more specific, submissions in the application vide under the national provisions, it is which are relevant here may be summarized appropriate, in this case too, to distinguish as follows: specifically with respect to the between the rules and the way in which they animals covered by the derogation, the were applied in practice. As I pointed out in inspection form expressly required inspec­ connection with the other submissions, the tors to check whether it was likely that the deficiencies of the system in force in the applicant had already obtained the premium; Länder are in various cases omissions or the administration had itself indicated several other irregularities in the specific application times that double payment of the premium of those rules, which cannot be remedied, was unlawful; the German implementing and have not in fact been remedied, by the regulation required a register to be kept from special knowledge which, according to the the date of the application for the premium applicant, the competent authorities have of until the date of slaughter. the German holdings.

62. The defendant considers, finally, that the considerable decentralization of administra­ tive organization in Bavaria and Baden- Württemberg, inter alia because the authori­ ties in the two Länder failed to issue 61. Those arguments are very similar to guidance or instructions, 'exacerbated' the those put forward regarding the control difficulties encountered in carrying out the measures applied under the standard regime control measures. and I can therefore refer to my earlier con­ clusions regarding that regime, together with those concerning paragraphs (a) and (c) of the present plea: the transitional arrange­ ments lacked the essential requirements for proper implementation at national level of the control measures in the manner provided for by the Community rules. On the basis of the above points concerning inspection activ­ 63. I am not persuaded by that argument. I ity both under the standard regime and the should point out that on another occasion transitional regime, I am of the opinion that the Court of Justice stated that 'it is for all it can be concluded that whichever regime is the authorities of the Member States, considered, the result is unchanged: the whether it be the central authorities of the implementation of controls is unsatisfactory. State or the authorities of a federated state, Quite apart from the requirements of the or other territorial authorities, to ensure forms — which in my opinion are suffi­ observance of the rules of Community law ciently detailed — the results of the inspec­ within the sphere of their competence. How­ tion undertaken by the EAGGF officials ever, it is not for the Commission to rule on raised justified doubts as to whether the the division of competences by the institu­ inspection, as actually conducted, was as tional rules proper to each Member State, or detailed and complete as it must be, as indi­ on the obligations which may be imposed on cated above, under the Community rules. federal and Länder authorities respec­ And all the conclusions reached concerning 49 tively'. Competence concerning basic the various criticisms associated with the organizational arrangements, with specific present plea show that under the transitional reference to the division of functions regime the practices adopted make it difficult to identify the animals for which a premium has already been paid or to establish, as required, that the conditions concerning 49 — Case 8/88 Germany v Commission (cited in footnote 5), slaughtering have been satisfied. The control paragraph 13; see also Joined Cases 51/71 to 54/71 Interna- tional Fruit [1971] ECR 1107, paragraph 4.

— annul Commission Decision 93 / 659 / EEC of 25 November 1993 as to the sum of DM 1 150 165 in respect of the expenditure not recognized in relation to imports of cattle from France and Belgium and exports of cattle to Italy;

— dismiss the applicant's claims for the rest;

— since both parties have been partially unsuccessful, I propose that the costs be shared pursuant to Article 69(3) of the Rules of Procedure .

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