C-61/95

GREECE v COMMISSION

OPINION OF ADVOCATE GENERAL LA PERGOLA delivered on 17 April 1997 *

Introduction number of shortcomings in the system set up by the Greek authorities to monitor compat­ ibility with the criteria laid down by the Community rules on financial intervention within the ambit of agricultural policy and are summarised below, indicating the sums 3 involved: 1. The Hellenic Republic (hereinafter the 'applicant') has brought an action under Article 173 of the Treaty seeking the partial annulment of Commission Decision 94/871/EC of 21 December 1994 (hereinafter 'the decision') on the clearance of the accounts presented by the Member States in A) Aid for olive oil production (paragraph respect of the expenditure for 1991 of the 4.7.2.1). European Agricultural Guidance and Guar­ antee Fund (EAGGF) Guarantee Section — Shortcomings in the checking of expendi­ 1 (hereinafter 'the EAGGF' or 'the Fund'). ture. The Hellenic Republic is challenging that part of the decision that disallows expendi­ ture it incurred as a result of financing inter­ Correction — DR 2 465 573 475. vention measures in the olive oil, cotton and tobacco sectors.

B) Aid for cotton production (paragraph 4.7.5.1). 2. The summary report 2explains that the decision is based on the fact that some of the expenditure declared by the Hellenic Repub­ Inadequacy of the checks on the measure. lic failed to meet the requirements laid down by Community legislation and could not therefore be charged to the Fund. The complaints against the applicant relate to a Correction — DR 16 735 309 160.

Correction — DR 4 922 442 527. General legislative framework

C.4) Calculation of the final correspondence (paragraph 4.9.2.4).

Correction — DR 1 993 586 687. 5. Article 3(1) of Regulation (EEC) No 729/ 70 5provides that the Fund is to finance

4 — In order to make it easier to understand the reasoning 3. The Hellenic Republic considers the behind the individual grounds of challenge, I have, however, decided to structure my Opinion according to the sectors of decision to be invalid for reasons concerning activity in issue. I have therefore set out, at the head of each section: the legislative provisions specific to each of the rel- both the establishment of the facts and the evant agricultural sectors; the arguments put by the parties Commission's assessment. The Court of Jus­ — or rather, by the applicant, given that, pursuing what appears, regrettably, to be increasingly becoming its estab- tice is therefore being asked to annul that lished practice in this area, the Commission has failed to deal in its observations with many of the points at issue — and, part of the decision relating to the sectors finally, their assessment in law. See, on that point, what challenged in this action and the correspond­ Advocate General Fennelly had to say in his Opinion in Case C-50/94 Greece v Commission [1996] ECR I-3334, ing amounts and, in addition, to order the paragraph 12.

Commission to pay the costs of the proceed­ 5 — Regulation of the Council of 21 April 1970 on the financing of the common agricultural policy (OJ, English Special Edi- ings. tion 1970(1), p. 218).

6. The financial consequences of any irregu­ larities are borne by the Community, with the exception of the consequences of irregu- larities or negligence attributable to adminis- trative authorities or other bodies of the 8. The act whereby, on completion of the Member States, while the sums recovered are clearance procedure, the Commission to be paid over to the paying authorities or decides to disallow expenditure improperly bodies and deducted by them from the incurred, ought not to be discretionary in expenditure financed by the Fund. 8 terms of the actual amount disallowed. However, it often happens that the infor­ mation that has been collected — directly or 6 — Supervision is crucial in a system organised on two levels: at indirectly — does not make it possible to national level, where monies from the Fund are actually dis- tributed, and at Community level, where decisions on the arrive at an exact figure, and so that amount allocation of resources are made. The regulation takes this fully into account: see, in particular, the seventh and eighth is determined by reference to the gravity of recitals in the preamble. 7 — Commission Decision of 21 January 1994 setting a time-limit for the communication of additional data in connection with the clearance of EAGGF, Guarantee Section, accounts, for the 1991 financial year, Doc. VI/4480/93. 9 — Council Regulation of 4 March 1991 concerning irregulari- 8 — Article 9(1) provides that: 'Member States shall make avail- ties and the recovery of sums wrongly paid in connection able to the Commission all information required for the with the financing of the common agricultural policy and proper working of the Fund and shall take all suitable mea- the organisation of an information system in this field and sures to facilitate the supervision which the Commission repealing Regulation (EEC) No 283/72 (OJ 1991 L 67, may consider it necessary to undertake within the frame- p. 11). work of the management of Community financing, including 10 — See the tenth recital in the preamble. Under Article 2, inspections on the spot. Member States shall communicate to Member States are to communicate to the Commission: the the Commission provisions laid down by law, regulation or provisions laid down for the application of the measures administrative action which they have adopted for the appli- provided for in Article 8(1) of Regulation (EEC) No cation of legal acts of the Community relating to the com- 729/70; a list of the irregularities discovered when exercis- mon agricultural policy in so far as those acts nave financial ing supervision (Articles 3 and 4); and a list of the provi- consequences for the Fund.' sions adopted in response to the irregularities discovered.

10. In cases where a Member State is seeking the annulment of a Commission decision on the clearance of EAGGF accounts, the crite­ It was pointed out that, once failure to com­ rion that has been developed by the case-law ply with the Community rules has been of the Court of Justice in relation to the bur­ ascertained, the decision concerning the rate den of proof is particularly exacting in 14 of correction to be applied to the accounts respect of the applicant. that have to be cleared must flow directly from an estimation of the risk. The Commis­ sion described various pre-existing methods of risk assessment, including the method applicable to situations in which there is insufficient information available to justify 1 As stated in the judgment in Netherlands v extrapolation, 2 and proposed three rates of Commission, the Commission is not required proportionate reduction in reimbursement, to provide exhaustive proof of the inaccu­ namely 2 %, 5 % and 10%, linked to the dif­ racy of the information supplied by the ferent degrees of failure to carry out the req­ Member States but to provide proof in sup­ uisite supervision. The 10% rate was to port of the serious and reasonable doubts it apply where the failure concerned the whole, has expressed in relation to the figures sup­ or the essential elements, of the system of 15 plied by the national authorities. The

Having made those three general points, I now turn to the substance of the applicant's 11. That approach is clear enough: in rela­ complaints. tion to the clearance of accounts, the Com­ mission is entitled to draw reasonable infer­ ences from the information it possesses, whether it has been provided by the Member States or obtained as a result of its own Aid for olive oil production investigations. The Court will not annul a Commission decision withholding reim­ bursement of declared expenditure simply on the basis of the contrary assertion of a Mem­ ber State, or even on the strength of serious doubts raised by the evidence adduced by a The relevant provisions Member State. In short, as pointed out by Advocate General Fennelly in his abovemen- tioned Opinion: 'The aggrieved Member State must, pursuant to the principle actori 16 incumbit probatio, prove with at least a reasonable degree of certainty that the Com­ 13. The basic rules governing the olive oil mission has erred.' 17 sector are contained in Regulation No 19 136/66/EEC, which provides for a system of administrative intervention in the sector designed to achieve a constant balance between supply and demand and thus pre­ vent irregularities in production. 12. That principle has been expressly set out in cases — similar, as we can see, to the instant case — in which the Commission had 18 — Case C-8/88 Germany v Commission [1990] ECR I-2321, to deal not so much with specific and paragraphs 41 and 42. See also the Opinion of Advocate General Van Gerven in that case (point 30). For a thorough analysis of the rules in the agricultural sector, paying par- ticular attention to those aspects of supervision linked to the organization of the market and the impact on the bur- den or proof, see the Opinion of Advocate General Van 16 — That principle had already been mentioned by Advocate Gerven m Case C-55/91 Italy v Commission [1993] ECR General Mischo in his Opinion in Case C-281/89 Italy v I-4813, p. I-4834. Commission [1991] ECR I-354, point 18. 19 — Regulation No 136/66/EEC of the Council of 22 Septem- 17 — See the abovementioned Opinion, point 16; see also the ber 1966 on the establishment of a common organisation of Opinion of Advocate General Gand in Case 8/65 Acciaierie the market in oils and fats (OJ, English Special Edition e Ferriere Pugliesi v High Authority [1966] ECR 1. 1966, p. 221).

Article 14(1) requires the Member States generally to apply 'a system of checks to 20 — Council Regulation (EEC) No 2261/84 of 17 July 1984 lay- ing down general rules on the granting of aid for the pro- ensure that the product in respect of which duction of olive oil and of aid to olive oil producer organi- sations (OJ 1984 L 208, p. 3). aid is granted is eligible for such aid' and 21 — The thirteenth recital in the preamble, for example, reads: Article 14(2) lays down what may be consid­ 'in order to guarantee that the aid is granted only in respect of oil which qualifies therefor, provision should be made ered the cornerstone of the system by pro­ for an appropriate system of administrative checks'; accord- viding that: 'Producer Member States shall ing to the fifteenth recital: 'detailed and effective checking and verification [is] difficult; it is necessary [to resolve those difficulties] by setting up in each Member State a comput- erised file containing all the information needed to facilitate checking and the prompt detection of irregularities'. But see also the fourth, sixth, seventh, eighth and fourteenth recit- 24 — As amended by Council Regulation (EEC) No 1413/82 of als. 18 May 1982 amending the abovementioned Regulation No 22 — Articles 6(1), 8(1) and 10 of Regulation No 2261/84, as 136/66 (OJ 1982 L 162, p. 6). amended by Council Regulation (EEC) No 3500/90 of 27 25 — Article 10 of Regulation No 2261/84, as amended by Regu- November 1990 (OJ 1990 L 338, p. 3). lation No 3500/90. 23 — Article 6(1) of Regulation No 2261/84, as further defined 26 — Article 14(4) of Regulation No 2261/84, as further defined by Article 4(2) of Commission Regulation (EEC) No by Article 10(2) of Commission Regulation (EEC) No 3061/84 of 31 October 1984 laying down detailed rules for 3061/84, as amended by Article 1(5) of Commission Regu- the application of the system of production aid for olive oil lation (EEC) No 98/89 of 17 January 1989 (OJ 1989 L 14, (OJ 1984 L 288, p. 52). p. 14).

27 — The percentage checks which the Members States have to carry out in regard to producers who arc not members of a producer organisation amount to 1% in the zones where The summary report goes on to describe fur­ the basic data contained in the register of olive cultivation are available, and 4% in the other zones. The checks carried ther shortcomings: the Agricultural Bank of out by the producer organisations referred to in the second indent of Article 6(1) are to cover 5% of the crop declara- Greece is said to retain the aid allocated to tions submitted by each organisation. See Articles 10(2) and olive growers who die during the marketing 4(2) of the abovementioned Regulation No 3061/84. 28 — Article 1 of Council Regulation (EEC) No 154/75 of 21 year; 2 % of the total aid is withheld to January 1975 on the establishment of a register of olive cul- finance the insurance system to protect farm­ tivation in the Member States producing olive oil (OJ 1975 L 19, p. 1). Commission Regulation (EEC) No 2276/79 of ers against risks. 16 October 1979 laid down detailed rules for the drawing-up of a register of olive cultivation in the Member States producing olive oil (OJ 1979 L 262, p. 11). The regu- lation was subsequently amended on a number of occa- sions. See Commission Regulation (EEC) No 1279/89 of 10 May 1989 (OJ 1989 L 127, p. 24). As far as the time-limits for implementing the register of olive cultivation are concerned, specific rules for Greece were laid down in Council Regulation (EEC) No 3453/80 As a result of the structural inadequacy of of 22 December 1980 (OJ 1980 L 360, p. 15). These pro- vided that the time-limits of two and six years respectively, the system of supervision, the Commission laid down for the implementation of the register of olive cultivation as from the date of entry into force of the disallowed 10% of the total expenditure abovementioned Regulation No 154/75, were to run from 1 incurred. November 1982 (Article 1). That set the time-limit for implementing the register of olive cultivation in Greece at 31 October 1988. One further point: on closer scrutiny it would be more appropriate to consider it a land-use survey rather than a register. Aerial photographs of the olive-producing area, 29 — See Articles 16(1) and 14(5) of the abovementioned Regu- considered the most reliable method of obtaining the infor- lation No 2261/84. The deadline for setting up the comput- mation, are used to draw up land-use maps showing the erised files was set at 31 October 1990 (see Article 11(1) of olives used for oil production. That information is then Commission Regulation No 3061/84, as amended by compared with the production declared by the olive pro- Article 1(7) of Commission Regulation No 98/89, also cited ducers. above).

21. As regards the alleged inadequacy of the checks carried out by the producer organisa­ tions and the consequent granting of unjusti­ 19. However, as regards the alleged failure fied premiums, Greece contends that the to set up computerised files, the applicant Commission has failed to take into account claims that this complaint is based on a fac­ the fact that those organisations possess tual error. Such files have been in existence comprehensive data on the number of trees since 1985. Furthermore, according to the used for olive-oil production and that such applicant, where checks prove to be inad­ 32 data is checked by local organisations. equate, additional verification is carried out by the Ministry of Agriculture, the producer organisations and the national agency responsible for monitoring aid for olive oil 31 — The programme is drawn up on the basis of Article 3 of Commission Regulation (EEC) No 27/85 of 4 January 1985 production. laying down detailed rules for the application of Regulation (EEC) No 2262/84 laying down special measures in respect of olive oil (OJ 1985 L 4, p. 5). 32 — The applicant also discusses two further aspects of the Greek system to which the summary report indirectly 30 — The Hellenic Republic claims that on 28 December 1988, in refers. It acknowledges the existence of the practice compliance with the provisions of Commission Regulation whereby the Agricultural Bank of Greece withholds the aid (EEC) No 586/88 of 3 March 1988 (OJ 1988 L 57, p. 18), it payable to olive growers who die during a marketing year, transmitted to the Commission a programme of trials for but claims that this is a legitimate practice. The aid is a the establishment of a register of olive cultivation. Subse- financial advantage payable to those beneficially entitled to quently, on 30 October 1989, the Ministry of Agriculture the estate of the farm owner. Since the process of establish- asked the Commission for information relating to the ing succession is not a rapid one, the Bank is obliged to approval of the programme. On 21 June 1991, the Commis- withhold all of the aid in order to be ready to disburse it to sion proposed to the Ministry of Agriculture that a 'pilot' the lawful heirs. Furthermore, the applicant claims that the scheme be carried out before undertaking the main project. 2% deduction allocated to the Agricultural Insurance A tendering procedure was thus set in motion; during that Office is legal and compatible with Community rules since procedure, the Commission allegedly replied to a query it meets the need to fund that body which is responsible for from the Greek Government of 16 July 1992 concerning awarding compensation to producers affected by natural the state of progress that tendering procedures for the disasters. In any event, that deduction is made only once scheme took time. The Commission was therefore apprised the purpose for which the aid was disbursed has been of the problem at the outset. achieved.

Substance

In that case, the Court also ruled in relation Register of olive cultivation and computer­ to the computerised files that 'no justifica­ ised data files tion could be given for the delay in establish­ ing the files' (paragraph 41). That conclusion

23. The Court has already given a ruling on 34 — Paragraph 40 reads as follows: 'With respect to the register of olive cultivation, it was not until its letter of 28 Decem- the operation of the olive oil sector in ber 1988, that is, after the expiry of the period laid down by Greece during 1990 in its judgment in Regulation No 3453/80, that the Greek Government sub- 33 mitted to the Commission a programme of trials for estab- Greece v Commission. That is a factor lishing the register. The representative of the Greek Gov- ernment confirmed at the hearing that the difficulties in which has to be taken into consideration in establishing the register were not notified to the Commis- reaching a decision in this dispute. As stated sion until after the expiry of the prescribed period. The fact that after that date the Commission assisted the Greek Government in its efforts to fulfil its obligations cannot, in those circumstances, prove that it was absolutely impossible to establish the register by the required date, since the Greek Government has not put forward any argument 33 — Case C-50/94, cited in footnote 4 above. relating to the period before 31 October 1988.'

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can and should apply to the present dispute. and the computerised files was due to abso­ The applicant has simply claimed that the oil lute impossibility' (paragraph 42). mills, producer organisations and crop decla­ rations have been recorded on computer file and that the applications have 'to a large extent' been computerised but has not, as required by the abovementioned judgment of the Court, provided proof that effectively refutes the results of the checks carried out by the Commission or justifies the objective Failure of the competent agency, government 35 delay in meeting the statutory time-limit. officials and producer organisations to exer­ cise proper supervision

36 — The requirement that the Member States are to establish a control agency was provided for in Council Regulation (EEC) No 2262/84 of 17 July 1984 laying down special measures in respect of olive oil (OJ 1984 L 208, p. 11). The rules, laid down in order to provide the national authorities with administrative structures able to ensure the timely and effective exercise of the controls required in the olive oil sector (second and third recitals in the preamble), accorded 27. In the light of those facts, I have no the agencies a variety of responsibilities in the sector. These include responsibility for establishing that the activities of choice, in this case, but to endorse the find­ the producer organisations and their associations are com- ing of the Court in its abovementioned judg­ patible with the Community rules, and responsibility for carrying out the checks referred to in Articles 14 and 15 of ment: 'In those circumstances, the Greek the abovementioned Regulation No 2261/84. Under Article 1(4), moreover, the Member State concerned is required to Government has not shown that the delay in draw up, acting on a proposal from the agency, a work establishing the register of olive cultivation schedule designed to ensure that the production-aid scheme is correctly applied. The schedule, together with the provi- sional budget, is transmitted to the Commission which may request the Member State to make changes to the docu- ments. In addition to setting the time-limit for the estab- lishment of the agency at 31 March 1985, the implementing 35 — I would point out here that the summary report (paragraph provisions, contained in the abovementioned Commission 4.7.2.1) states that the process of computerising data was Regulation No 27/85, set out in detail the agency's work interrupted for several months because of a shortage of schedule. trained staff and that the Greek authorities are not able to Verification by the Ministry of Agriculture in fact consists set the deadline for the completion of the project and for in checking the declarations made by the producers in order user access to the files. to determine the accuracy of their applications for aid.

31. Furthermore, there is serious circum­ stantial evidence which suggests that the Commission decision is correct. The register of olive cultivation and the computerised 30. A further point. The data put forward files are inadequate. Under the Community by the applicant in relation to the number of rules, the checks are to be carried out using checks carried out by the agency are wholly that register and those files. The data they irrelevant to the actual issue raised by the contain are used to direct supervision to summary report, namely the quality of those olive growers who record, from one checks in Greece. The inspections carried out marketing year to the next, either differences reveal that though monitoring by the staff of in production levels that cannot be easily the Ministry of Agriculture does exist, it is only very superficial. In practice, there are just one or two individuals responsible for 37 — The reference to effectiveness is a leitmotif in the vast array vetting thousands of individual files (sum­ of rules on supervision. See, among others, the abovemen- tioned Regulation No 2262/84 (second recital in the pre­ mary report, paragraph 4.7.2.1), which amble).

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explained or unusual production levels. If There is consequently no reason to consider that Virtuous circle' between the various that the Commission was unjustified in dis­ control mechanisms has not been established, allowing 10% of the expenditure incurred by 41 that is, in part at least, a direct result of the the Greek authorities. fact that the system comprising a register and computerised files is neither complete nor 39 effective.

32. That said, it is my view that the Com mission's assessment for 1991 must also be upheld. Advocate General Fennelly has described the attitude of the Greek authori 33. The general rules governing the system ties to supervision in this sector as 'lethargic': 40 of aid for cotton production are laid down it is in any event inadequate. Nor do the objections raised by the Hellenic Republic disprove the existence of the shortcomings identified by the Commission in the system 41 — I do not consider it necessary to look in detail at the issues raised in relation to the activity of the Agricultural Bank of of supervision adopted at national level. Greece and the 2% levy in favour of the insurance fund. These arguments are not essential to the Commission's decision which is in fact more directly based on the inad- equacy of the checks carried out in the sector.

I therefore harvest; communes in which total production is in excess of consider that the practice adopted by the Greek authorities normal yield; oil mills -which have apparently processed a should be deemed incompatible with the Community rules. quantity that is unusual in terms of either the capacity of That is also the case because, in my view, the possibility of their plant and machinery or previous marketing years; and withholding part of the aid should always take effect within the yield for every production zone'. See, for an example of a Community framework. See, by way of example, Article the use of the data in the files, Article 3(2) of the abovemen- 1 of Council Regulation (EEC) No 2159/92 of 23 July 1992 tioned Regulation No 27/85 which provides that: 'The on the financing of expenditure for the establishment and work schedule shall include .

How- interdependence of the different inspection methods pro- ever, I do not consider incompatible with the Community vided for in another sector of agricultural policy, I would rules the practice whereby the Agricultural Bank of Greece refer to my own Opinion of 7 December 1995 in Case withholds the amount of the aid granted to farmers who C-41/94 Commission v Germany (points 20 and 21). have died for as long as is necessary to establish succession. 39 — A further point. Under Article 1 of the abovementioned In fact, it seems to me that the effect is to simplify the dis- Regulation No 2276/79, the register of olive cultivation is bursement procedure. I do, however, consider that if that to be set up on the responsibility of the intervention agen- practice is to be entirely lawful within the ambit of agricul-

point 49.

The summary report also disclosed that the Greek authorities had not conducted the inquiry with which they had been entrusted in accordance with the rules laid down: the 35. That inquiry — the first stage of which documentation submitted by the Greek was conducted by the Commission, the com­ authorities following the first part of the petent Greek authority and a firm of audi­ inquiry did not provide an adequate tors — revealed a series of irregularities later response to either the requests for infor­ mation made by the EAGGF as early as February 1993, or to the requirements of Regulation No 595/91. According to the 42 — Council Regulation (EEC) No 2169/81 of 27 July 1981 lay- ing down the general rules for the system of aid for cotton Commission, the conduct of the Greek (OJ 1981 L 211, p. 2). 43 — The preamble states that 'the producer Member States authorities did not comply in all respects should be required to set up the control arrangements nec- with the duties of supervision imposed upon essary to ensure that the aid system operates correctly' (eleventh recital); and that 'in order to facilitate implemen- the Member States by Article 8 of Regu­ tation of the production aid system and its sound manage- 45 ment, a procedure should be provided for establishing close lation No 729/70. cooperation between the Member States and the Commis- sion within a Management Committee' (second recital). 44 — The twelfth recital in particular stipulates that 'in order that the Community expenditure relating to the measure in question may be subjected to appropriate financial and 45 — That provision, it should be borne in mind, requires the monetary rules and procedures, Council Regulation (EEC) Member States to adopt the measures necessary to satisfy No 729/70 of 21 April 1970 on the financing of the com- themselves that transactions financed by the Fund are actu- mon agricultural policy ... should be applied in this sector ally carried out and are executed correctly; to prevent and by analogy in view of the specifically agricultural nature of deal with irregularities; and to recover sums lost as a result cotton'. of irregularities.

39. The Hellenic Republic also reproaches 37. As regards the alleged infringement of the Commission for stating incorrect rea­ the rights of the defence, the Hellenic Repub­ sons: Didagep ought to be regarded as a divi­ lic claims that there was no mention of the sion, as it were, of the paying agency; cotton sector during the bilateral meeting according to the applicant, there is no ban on between Greek Government and Commis­ distributing the product through intermedi­ sion representatives on clearance of the aries; nor is it true that the checks were not accounts, which took place on 6 October carried out, as claimed in the summary 1993. The Greek authorities therefore report. In addition to the usual checks, very believed that activity in the cotton sector did detailed individual checks were carried out not raise any problems. Furthermore, they with the participation of Community offi­ remained in contact with the Commission to cials, and the reports on the checks were for­ keep it informed of the measures adopted to warded to the EAGGF by ministerial notes curb irregularities and abuses committed in of 6 July and 14 September 1994. The Greek relation to aid for cotton. The representatives authorities had also informed the Commis-

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GREECE v COMMISSION

41. The Commission first points out that the Substance flat-rate correction of 25 % may be reduced to 10% if it is established that the checks car­ ried out by the authorities in the sector have been tightened.

The plea alleging infringement of the rights of the defence

42. The Commission's reconstruction of the facts differs from that of the Hellenic Repub­

46 — That provision, it should be remembered, requires that dur- 43. In view of the abovementioned facts and, ing the two months following the end of each quarter, in particular, the inquiries set in motion and Member States are to communicate to the Commission a list of irregularities which have been the subject of the pri- conducted in the sector during 1992 and mary administrative or judicial findings of fact. It goes on to stipulate in great detail: (a) the information that such 1993, I consider to be unfounded the appli­ communications should contain; (b) the obligations to sup- cant's claim that the rights of the defence ply missing information; and (c) the procedures for com- munication if the information is confidential. were infringed because the existence of prob-

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47 — I would point out that under Article 6(1) of Regulation No The applicant's argument fails to take into 595/91, the Commission has to consider 'that irregularities consideration the procedures governing have taken place in one or more Member States' before it can call for an inquiry. clearance of the accounts and I cannot 48 — Article 6(2) provides that: The Member State shall, as soon endorse it. as possible, communicate to the Commission the inquiry findings. Where an inquiry shows that there has been an irregularity, the Member State shall inform the Commission thereof in accordance with Articles 3, 4 and 5 ..." I would point out that those provisions lay down specific require- ments as to communication which must be both 'suffi- 49 — In addition, on 18 August 1994, the competent Member of ciently detailed to enable the Commission to decide who the Commission, Mr Steichen, sent a letter to the Greek shall bear the financial consequences, in accordance with Minister for Agriculture deploring the Greek authorities' Article 8(2) of Regulation (EEC) No 729/70' (Article 5(2)), failure to cooperate fully with the Commission in the sector immediately executed (Article 4) or, if appropriate, carried in question. Following that letter, or so it would seem, a out during the two months following the end of each quar- joint Greece-Commission working party was set up and ter (Article 3). met for the first time in Athens on 21 November 1994.

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GREECE v COMMISSION

The plea alleging the Commission's lack of its discretion. This applies to agricultural competence policy as well.

45. In my view, the decision in question may the Fund caused by a breach of Community be classified in the 'category' of communica 53 rules].' tions: this, as we know, is a 'broad' category encompassing acts of differing form and content. There are three kinds of communi cation: interpretative communications, infor mation communications and communica 50 tions of decisions. It is the latter that I shall be looking at in greater detail here.

It seems to me, however, that we can identify a number of basic elements: an administration with a decision-making power that includes a margin of discretion; an act directed 52 — Sec, on that point, although it postdates the facts of the at the person to whom it is addressed; an indication of the case, Council Regulation (EEC) No 1287/95 of 22 May criteria that should guide the exercise of that discretion. In 1995, amending Regulation No 729/70 on the financing of this case, the fact that the document is Opaque' is not, in the common agricultural policy, which amends the text of my view, significant. Since this is an area in which only the Article 5 of the latter regulation, providing in the fourth Member States and the Commission are involved, it seems indent of Article 5(2)(c) that: 'The Commission shall evalu- to me that the approval of the decision by the representa- ate the amounts (of expenditure disallowed) to be excluded tives of the Member States in the EAGGF Committee gives having regard in particular to the degree of non-compliance that body the kind of publicity warranted by its function. found. The Commission shall take into account the nature and gravity of the infringement and the financial loss suf- 51 — See the Opinion of Advocate General Tesauro in Case fered by the Community' (OJ 1995 L 125, p. 1). C-57/95 France v Commission [1997] ECR 1-1627, foot- note 17. 53 — Opinion cited above, point 41.

49. According to the applicant, the decision should be annulled because the manner of its adoption was, basically, arbitrary. This is apparent from the procedure by which the amount of expenditure disallowed was deter­ mined: an initial EAGGF proposal equiva­ lent to 10% of the expenditure was actually 48. Nor does the second argument put for­ increased to 50% by the Director-General ward by the applicant seem to me to be any for Agriculture and then, finally, set by the 57 more convincing. In an attempt to clarify its Commission at 25 %. own reasoning in the reply, it criticised the criteria adopted in the communication for being too general. In fact it is the criticism made by the applicant that is too general and insufficiently substantiated. It merely assumes that the criteria contained in the document are insufficiently precise but fails 50. In my view, the argument of the Hellenic to demonstrate that they are either arbitrary Republic cannot be endorsed. The measure or inequitable. In my view, they are neither. The Commission has adopted criteria that establish, as far as possible, a correlation 56 — See, to that effect, the conclusion reached by Advocate General Fennelly when considering that same act in Case C-50/94. 57 — We should bear in mind here a number of procedural aspects: under Article 5(2)(b) of Regulation No 729/70, the 54 — See, on that point, the judgment in Case C-50/94 (cited in Commission clears the accounts after consulting the Fund footnote 4 above) which confirms that the Commission is Committee. The procedure to which that provision acting lawfully when 'instead of refusing the entire expen- expressly refers provides that the Commission representa- diture, [it] endeavours to draw up rules to differentiate tive is to submit a draft of the measures to be adopted and accordine to the degree of risk posed to the EAGGF by that the Committee reaches its own opinion on them. That different levels of defective supervision' (paragraph 28). act is not, however, binding; the Commission may adopt 55 — Case 347/85 United Kingdom v Commission [1988] ECR measures that are not in accordance with the opinion of the 1749, paragraph 60. Committee (Article 13 of the regulation).

51. The applicant's complaints alleging that the grounds for the decision were incorrect are likewise unfounded.

The plea alleging infringement of a funda­ mental provision or reference to a condition that does not exist in law

52. The objections raised by the Hellenic Republic do not have the effect of refuting the conclusions reached by the Commission and recorded in the summary report. The Hellenic Republic provides no evidence of the failure of Didagep to perform checks on 53. If the Commission declares a decision the applications for aid submitted by the disallowing expenditure to be immediately Hellenic Cotton Board. It simply refers to applicable, can it reserve the right to review the legal nature of Didagep, its responsibili­ that decision in the light of the results of ties and its organisation. inspections under way?

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55. The substance of the decision is by its very nature 'not immutable'. It does not pre­ judge other measures which the Commission may adopt, depending on the outcome of the 56. On the basis of the foregoing, I consider that the applicant has failed to demonstrate that the findings on which the Commission based its decision to disallow expenditure are 58 — It should be pointed out here that, by his letter of 17 April 1996, the Commission's Director-General for Agriculture, inaccurate or that the procedures applied are Mr G. Legras, informed the Greek Government that his unlawful. I therefore propose that the Court services had submitted to the Commission a proposal that the rate of correction for the expenditure under consider- reject the pleas concerning the cotton sector. ation here should be reduced to 10% for 1991 and 1992. Were the proposal to be accepted, the result would be a positive financial correction of DR 10 041 185 496. 59 — See the new Article 5(2)(c) of Regulation No 729/70, as amended by the abovementioned regulation. I would point out that it provides for a genuine dialogue between the Member State and the Commission on the decision to disal- 61 — Furthermore, that characteristic of the decision was low expenditure. expressly recognised in the abovementioned Regulation No 60 — A number of examples of this: the annual time-limit pro- 1287/95, which made a distinction that has the effect of vided for in Article 5 of Regulation No 729/70 has been clarifying the position in many respects: '... it is accordingly interpreted as a merely formaftime-limit. The Court of Jus- necessary to separate the procedure into two types of tice has, for example, authorised a clearance of accounts decision, one concerning the clearance of the accounts of which, being designed to guarantee that the expenditure the Guarantee Section of the Fund, the other determining was charged by the national authorities in compliance with the consequences, including financial corrections, to be the Community rules, actually took place after expiry of drawn from the results of the checks on conformity' the time-limit (Case 349/85 Denmark v Commission [1988] (fourth recital in the preamble). ECR 169, paragraph 19). Similarly, the requirement to state 62 — That objective is clear from the content of the abovemen- reasons has been specifically defined in relation to the dif- tioned letter from the Commission's Director-General for ferent types of procedure. The Court has thus ruled that Agriculture of 17 April 1996. It refers to improvements in there does not have to be a detailed statement of reasons if supervision in the sector concerned and increased coopera- the Member State has been involved in the verification pro- tion among the national authorities, including them among cedure (Case 347/85 United Kingdom v Commission, cited the conditions that made possible a change of view to the in footnote 55 above). advantage of Greece.

Commission Regulation (EEC) No 1726/70 58. Under the regulation (Article 2), each lays down the procedure for granting the year the Council is to fix, for the whole of premium for leaf tobacco; it establishes a the Community, norm prices and interven system of supervision that is designed to tion prices for the crop of the following cal­ determine the quantities of tobacco subject endar year, along with a purchase premium to checks and meet certain requirements to ensure that it is uniformly applied in the 65 Member States. 63 — Council Regulation of 21 April 1970 on the common organisation of the market in raw tobacco (OJ, English Spe- cial Edition 1970(1), p. 206) as amended by Council Regu- lation (EEC) No 1329/90 of 14 May 1990 (OJ 1990 L 132, p. 25). In his Opinion of 19 May 1994 in Joined Cases 64 — The norm price is fixed at a level that takes account of the C-133/93, C-300/93 and C-362/93 Crispoltoni and Others v need to encourage the kind of specialisation that is suited to Fattoria Autonoma Tabacchi and D onatab [1994] ECR the economic structures and natural conditions of Commu- I-4867, Advocate General Jacobs considers in detail the leg- nity production and requires that undertakings be ratio- islation in force in the sector, as amended over time. In nally managed and economically viable, in terms of both addition to the general aim of supporting producer quality of production and an adequate return for producers. incomes, the legislation also seeks to encourage improve- The intervention price is equivalent to 90% of the norm ments in quality and crop adjustments, in particular conver- price. sion to varieties which are in greater demand or are more 65 — Regulation of 25 August 1970 (OJ, English Special Edition competitive (sixth recital in the preamble). 1970(11), p. 587).

66 — Council Regulation (EEC) No 1114/88 of 25 April 1988 amending Regulation (EEC) No 727/70 on the common organisation of the market in raw tobacco (OJ 1988 L 110, p. 35). The question of the validity of the regulation was considered in Crispoltoni, cited in footnote 63 above. The legislation has been further amended: Council Regulation (EEC) No 1251/89 of 3 May 1989 (OJ 1989 L 129, p. 16) provided that the Council was to lay down every year a maximum guaranteed quantity for the following year's har- vest and Council Regulation (EEC) No 1329/90 of 14 May 1990 (OJ 1990 L 132, p. 25) set the overall maximum guar- 60. The criticisms raised in the summary anteed quantity at 385 000 tonnes for each of the 1988 to report relate to four different issues: the 1993 harvests. establishment of irregularities in the payment 67 — It is further provided (Article 13) that where the quantities taken over by the intervention agencies exceed a stated per- of premiums; irregularities in the lodging of centage of production and in any case a stated quantity, the Council may, after examining the report submitted by the securities in relation to premiums for leaf Commission, adopt those measures, to be applied to the tobacco; the failure immediately to reduce crop of the following calendar year, by which a better bal- ance may be established between production and demand premiums and intervention prices where the and stocks may be reduced. The measures provided for that purpose include lowering the intervention price level maximum guaranteed quantities were (Article 13(5)). Similarly, if Community production for which it has been decided to grant a premium exceeds a stated percentage of the average production during the three previous crop years, the Council may, again on the basis of a report from the Commission, reduce the norm prices involving a corresponding reduction in the premiums 69 — Regulation of 18 July 1990 (OJ 1990 L 187, p. 23). (Article 13(6)). 70 — Regulation of 29 July 1991 (OJ 1991 L 208, p. 26).

61. The applicant claims that the decision should be annulled because the rights of the Substance defence have been infringed. According to the applicant, on 21 November 1994, the Commission decided — by addendum No 2 to the summary report — to disallow expen­ diture on the premiums for tobacco because of the outcome of the inspection into tobacco exported by Greek producers to Albania and Bulgaria, carried out in accord­ 63. On 4 December 1992, the Commission ance with Article 9 of Regulation No 729/70. informed the Greek authorities that, on the The final report of that inspection, dated 28 basis of information in its possession, it sus­ September 1994, was not transmitted to the pected possible fraud in the sector. Subse­ Greek authorities until 22 December 1994 quently, by letter of 20 April 1993, it asked and, therefore, not until the day after the the Greek authorities to hold an inquiry in decision was adopted. The applicant was not accordance with Article 6 of Regulation No therefore given an opportunity to put its 595/91. case.

At the Commission's request, Community 65. Furthermore, it is worth emphasising officials then took part in missions of inspec­ that the inspection mission's report did not tion to Greece, in which, according to the establish the existence of further deficiencies defendant, the Greek authorities took no in the tobacco sector but simply confirmed active part. the conclusions reached by the EAGGF in respect of 1990. The Greek system had already been found to be generally inad­ 75 equate. In other words, the Hellenic Republic knew that the sector was being 64. It is therefore quite clear that the report monitored; it was aware of the Commis­ in issue, dated 28 September 1994, is simply sion's suspicions concerning possible fraud the last chapter in a turbulent affair. and its concerns about the effective and com­ prehensive nature of the inquiry carried out at national level and it knew that the request to provide a work schedule had met with no response.

not know which is correct. However, certain Clear error and improper exercise of discre- factors induce me to accept the Commis­ tion sion's argument. As I have already said, the procedure provides not only for provisional summary reports but also for the opinion of the EAGGF Committee. It therefore seems odd to me that during that stage — in which 67. The second ground for annulment cited representatives of the Greek authorities were by the applicant concerns the Commission's also involved, if only as members of the erroneous assessment of the facts and Committee — no reference should have been improper exercise of its discretion in relation made to the mission's report which was to the outcome of the inspection. already available and on the basis of which it was decided to confirm the assessment for the preceding years.

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improbable, was incorrect; nor has it estab­ stock books, whereas the Commission notes lished that the Commission's reconstruction that the registers had been drawn up 'to of the commercial relationships between order' and that the remaining documentation SEKE and the Italian companies STP and was muddled or had been tampered with. Boselli Caito was inaccurate and that those Furthermore, in regard to the complaint con­ two companies purchased unprocessed cerning false customs declarations, the appli­ tobacco from SEKE; again, as regards the cant simply cites legislation in abstracto but differences in price between the various con­ provides no tangible evidence of whether signments, although explanations were given, and how it was applied in this case, and does they were not backed by documentary evi­ not specifically rule out the existence of dis­ dence. Nor has the applicant been able to parities, attributable to fraud, between the justify the differences ascertained in the value of the goods declared and the value of weight of the baled tobacco intended for the goods actually exported. domestic consumption and that bound for export. Finally, the Hellenic Republic has not even demonstrated the inaccuracy of the allegations in the report concerning both the muddled and unreliable nature of the docu­ ments confirming payments and the failure of SEKE to cooperate during the inquiry.

In other respects, the applicant's defence even sounds like a tacit admission that the system of supervision was inefficient. The reference to the books and records of the Gleoudis Kavex company are one example of this: the applicant states that certain docu­ 72. The same applies to the data furnished ments were seized by the authorities on 11 by the applicant concerning the Michailidis November 1992 but have yet to be inspected. and Gleoudis Kavex companies. Once again, the Commission's findings are cogent and clearly expressed: the competent authorities failed to carry out checks; the registers had been falsified; the sales invoices were incon­ sistent; no data was provided to make it pos­ sible to verify product processing rates; and the accounts had not been properly kept.

Bearing in mind the lack of cooperation from the Greek authorities, the review thus 75. Furthermore, the applicant goes through carried out led to the conclusions set out in the pretence of rebutting the comments of the inspection mission's report and recorded the EAGGF in detail, on the basis of very in the summary report, which the applicant specific data, but without providing any evi­ has not successfully rebutted. dence. This leads me to make two points. Firstly, these objections, the detailed expla­ nations of how the Greek legislation oper­ ates and the 'willingness' to accept supervi­ sion that appears to be conveyed by the The plea alleging unjust enrichment on the statement of defence ought to have perme­ part of the Commission ated the whole of the procedure. That, as we know, was not the case. The Commission repeatedly asked for investigation plans, information, checks and cooperation, with­ out obtaining any response. Moreover, dur­ ing the inspections, that had long been in preparation and took place, as I have said, 76. The applicant seeks the annulment of the against a background of overt concern about decision, alleging unjust enrichment on the the proper functioning of the sector, the part of the Commission in three respects.

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80. In my view, these three arguments have 78. Secondly, the applicant asks, in regard to be appraised together. As we have seen, all also to the reductions in premiums and inter­ three refer to the letter of 12 December 1994 vention prices where the maximum guaran­ which, it is alleged, provided the Commis­ teed quantity has been exceeded, that the sion with all the information it had requested decision should be annulled on the ground or at least the information deemed necessary that the principle of unjust enrichment has for proper clearance of the accounts. been infringed. It claims that the Fund was informed, through the abovementioned let­ ter, of the fact that all the sums relating to the overrun of the maximum guaranteed quantities for the 1989 and 1990 harvests had been recovered by the Greek authorities, either directly or by set-off. Consequently, the Commission's refusal to allow the expen­ 81. As I said in my general introduction, the diture was unjustified. procedure for clearance of the accounts pro­ vides for a time-limit with which the Mem­ ber States must comply when submitting the information required for the adoption of the decision. For the 1991 marketing year, that 79. The applicant complains that the prin­ time-limit was set at 31 January 1994. It ciple of unjust enrichment has been infringed seems to me that, in accordance with the

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case-law of the Court of Justice, the infor­ was lodged or that an amount equal to 80% mation provided by the Hellenic Republic of the total could be advanced. However, cannot therefore be taken into consideration the file referred to in Article 3(1) of Regu­ for clearance of the accounts for the current lation No 727/70 was not to be closed until year. In the proceedings before the Court, proof had been provided that the tobacco the applicant did not adduce the existence of covered by the premium had been incorpo­ exceptional circumstances justifying the rated into manufactured products or 77 delay recorded. The information submit­ exported to third countries. ted should in fact be assessed during the sub­ sequent clearance of accounts and, if appro­ priate, result in a correction in the accounts for 1992.

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from the 1981 and 1986 harvests, which had out over a period of three years which fea­ remained in storage after processing, as soon tured a constant exchange of information as possible, and in any event by 31 Decem­ with the applicant and revealed deficiencies ber 1992 at the latest — the date on which all in the management of the system of securi­ the files on the lodging of securities were to ties and advances provided for in Regulation be closed. The correction in issue, concern­ No 1726/70. ing the above documentation, therefore marks the conclusion of an inquiry into the securities for the period from 1981 to 1985 which, as I have said, resulted in a substan­ tially greater amount of expenditure being disallowed for 1989. Overrun of the maximum guaranteed quan- tities

85. The Commission has established that, with reference to paragraph 5.10 of the 1989 87. The question of the overrun of the maxi­ summary report, a given quantity of tobacco mum guaranteed quantities also requires a had not been exported by the 31 December look at the earlier summary reports. 1992 deadline. Consequently, the premiums granted could not be deemed lawful. The Hellenic Republic did not respond to that finding until its abovementioned letter of 12 December 1994 in which it asked the Com­ mission to reduce overall by DR 372 762 124 the expenditure disallowed for both 1989 88. The Greek authorities take the view that and 1991, citing the set-off that had been it is possible to recover premiums granted in effected. excess of the amounts provided for after the correction procedure, at the point at which the individual files are closed.

Commission took up that point in response the 1988 harvest and 85% for the 1989 and to the question put by the Court in its letter 1990 harvests. That limitation shows that the of 22 October 1996. In particular, citing the Community legislature sought from the out­ aim of the regulation, it reiterated the inter­ set to avoid the need for refunds and instead pretation according to which 'if the maxi­ deemed it preferable to anticipate at once the mum guaranteed quantities are exceeded, the probable results of the verification for the penalty on producers should be imposed years in question. Furthermore, Article 3(2) 79 immediately'. The Commission also stated of that regulation provides, in regard to the that 'the delay in recovery, after two or three 1989 and 1990 harvests, that any balance in years, does not make it possible to pursue respect of the percentage of the premium the objective of the regulation, particularly granted is to be paid 'after actual production since the Greek authorities collected the fine is determined'. That provision is inspired, as on the basis of the set-off effected between I see it, by the need to stabilise the situation 80 the two harvests, without taking account of of farmers immediately. In other words, the benefit obtained as a result of the devalu­ the Community, and the very system of ation of the drachma against the ecu'. securities as a whole attests to this, has a spe­ cific interest in ensuring not only that the premium is granted in the amount actually due to the person concerned but also that it is granted rapidly.

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mined, the effect may be to distort the con­ Calculation of the final correspondence ditions of competition among economic operators.

Aside from that, the provision under consid­ 91. I also concur with the Commission's eration has to be construed in the light of the argument in regard to the calculation of the criterion of sound management, in the sense final adjustment. According to the Commis­ that it should help to simplify the adminis­ sion, the amount that appears in its decision 81 was correctly determined. To make matters trative process. quite clear, it should be noted that the Com­ mission informed Greece of the system it ought to have adopted with reference to the final adjustment. Although the Commission repeatedly raised the problem of bringing the tables of expenditure into line with Commu­ nity standards in a number of letters, the In conclusion, where Article 3(2) of Regu­ Greek authorities simply failed to take the lation No 2824/88 provides that 'any balance necessary measures. They persisted in using shall be paid ... after actual production is their own method and did not calculate the determined', this has to be construed as final adjustment in accordance with the cri­ meaning that any balance must be paid as teria required by the Commission. In point soon as the Commission has taken its annual of fact, it was not until its letters of 12 decision. December 1994 that Greece declared it had complied with those criteria — too late therefore for this to be taken into account for the 1991 financial year.