C-54/95

JUDGMENT OF 21. 1. 1999 — CASE C-54/95

J U D G M E N T O F T H E C O U R T (Sixth Chamber) 21 January 1999 *

Table of Contents

I —The 10% increase on the correction made by the Commission to the expenditure on export refunds for the use of starch-and sugar-based products I-80

II — T h e correction relating to irregularities concerning the export of livestock to Poland I-84

Inclusion in the clearance of accounts for the 1991 financial year of sums relating to the 1992 financial year I - 88

IV — The correction relating to irregularities concerning the export of beef and veal to Lebanon I - 117

V — The correction relating to the export of beef and veal to Zimbabwe I - 125

* Language of the case: German.

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GERMANY v COMMISSION

In Case C-54/95,

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T H E C O U R T (Sixth Chamber),

composed of: P. J. G. Kapteyn, President of the Chamber, G. Hirsch, H . Ragne- malm, R. Schintgen and K. M. Ioannou (Rapporteur), Judges,

Advocate General: A. La Pergola, Registrar: H . von Holstein, Deputy Registrar,

having regard to the Report for the Hearing,

GERMANY v COMMISSION

2 More specifically, in the summary report concerning the clearance of the E A G G F Guarantee Section accounts for 1991, annexed to the application, the Commission found that the following sums had to be borne by the Federal Republic of Ger- many:

I — D E M 1 031 451.17 by way of a 10% increase on the amount of the correc- tion made by the Commission to the expenditure on export refunds for the use of starch-and sugar-based products;

II — Correction of D E M 54 275 090.69 relating to irregularities concerning the export of livestock to Poland;

III — Correction of D E M 56 692 508.70 relating to irregularities concerning the export of livestock to the Near and Middle East (Imex affair);

IV — Correction of D E M 997 814 relating to irregularities concerning the export of beef and veal to Lebanon (Südfleisch affair);

4 In the summary report, the Commission states that during the clearance of accounts procedures for the 1988 to 1990 financial years, financial corrections were made to the expenditure declared by the German authorities for export refunds for the use of starch-and sugar-based products. The corrections were made because the German authorities had allowed certain firms to submit applications for refund certificates after, instead of before, processing commenced, as the Community regulations require, to the advantage of the beneficiaries concerned.

5 The Federal Republic of Germany brought an action before the Court of Justice challenging the corrections made for 1988. By judgment of 22 June 1993 in Case C-54/91 Germany v Commission [1993] E C R I-3399, the Court dismissed its appli- cation.

6 By telex of 6 October 1993, the Commission asked the German authorities to modify their procedures so as to conform with Community rules and to inform the E A G G F services of the changes as well as the date of their entry into force, by

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31 January 1994 at the latest, the deadline for transmission to the Commission by the Member States of additional information relating to the 1991 clearance of accounts.

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10 In this case, it is common ground that during the 1991 financial year, the controls carried out by the Federal Republic of Germany for the grant of the export refunds concerned were not in conformity with the Community rules and that the German authorities failed to inform the Commission, within the period fixed by the latter for the transmission of additional information relating to the 1991 accounts, of any measure taken to make the controls consistent with the relevant Community rules.

1 1 Consequently, as soon as the deadline that had been set expired, the Commission was entitled to make a financial correction, which could in fact have amounted to 100%, in respect of the expenditure on those refunds.

12 It cannot be objected in this regard that, because of the dispute that had been referred to the Court of Justice, during the 1988 to 1990 financial years the Com- mission had confined itself, in similar circumstances, to making a 5% correction in respect of expenditure on such refunds. In point of fact, according to the case-law of the Court of Justice, where the Commission has tolerated irregularities on grounds of fairness, the Member State concerned does not acquire any right to demand that the same position be taken with regard to irregularities with respect to the following financial year by virtue of the principle of legal certainty or the principle of protection of legitimate expectations (Case C-55/91 Italy v Commis- sion, cited above, paragraph 67).

1 3 In those circumstances, the fact that the Commission increased the rate of the cor- rection by 10% because information on the measures taken by the German authori- ties had not been transmitted within the period fixed, constitutes neither a sanction nor a penalty, as the German Government claims, but a measure in the process of determining the overall rate of correction to be borne by that Member State.

17 In those circumstances, the argument based on the Commission guidelines has to be considered irrelevant.

18 Moreover, the fact that the measures adopted in 1993 do not affect the scale of the losses incurred during 1991 cannot transform into an obligation the Commission's

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right to reduce the amount of the correction, particularly since the State in ques- tion failed to communicate within the period fixed the corrective measures it had adopted. In addition, to accept the opposite approach could encourage Member States that had belatedly adopted corrective measures not to communicate them to the Commission.

19 Consequently, the plea put forward against this head of the contested decision must be rejected.

GERMANY v COMMISSION

The main finding in this connection is that the classification of the cattle under the heading of "pure-bred breeding animals" carried absolutely no guarantee that the animals could be assumed to be breeding animals (intended for breeding purposes):

— no indication of parentage, genetic merit, performance

— no veterinary analysis for breeding purposes (or veterinary checks for slaughter purposes)

— commercial and other information which should have given cause for serious doubt (age of animals, very low selling price, purchasers unknown etc).

Furthermore, information readily obtained from Poland confirmed that the animals had been slaughtered immediately on arrival in that country. ...

(iii) Taking account of the foregoing, the financial corrections are as follows:

— Germany: 1991 financial year: D E M 56 542 011.69

1992 financial year:

expenditure concerned: D E M 15 694 754.87

expenditure allowed, taking account of the amendment of the national law on 18 October 1991: D E M 12 974 820.87 DEM 2 719 934.00

TOTAL D E M 59 261 945.69

24 In its abovementioned letter of 24 June 1992, the Commission further pointed out that its assertion that the animals exported were not intended to be used for breeding purposes was also confirmed by the fact that they were infected with bovine enzootic leucosis.

25 The pleas and arguments of the parties turn on three issues concerning: the inclu- sion in the clearance of accounts for the 1991 financial year of sums relating to the 1992 financial year; the scope of and compliance with the obligations incumbent

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on the national authorities in granting the export refunds in question; and, finally, the refusal to charge to the E A G G F expenditure incurred up to the level of the rate set for export refunds for cattle for slaughter.

Inclusion in the clearance of accounts for the 1991 financial year of sums rekting to the 1992 financial year

30 The German Government could therefore have put forward that plea in its applica- tion but failed to do so.

31 In those circumstances, the plea must be rejected as inadmissible.

Scope of and compliance with the obligations incumbent on the national authorities in granting the export refunds in question

32 The German Government claims, first, that the Commission's assertion that the bulk of the animals exported were immediately slaughtered in Poland, proving that they were in reality animals for slaughter, is not supported by serious and reason- able doubt, as the case-law of the Court of Justice requires. Similarly, the Com- mission, it is alleged, failed to provide proof of its claim that the animals were infected with bovine enzootic leucosis. More particularly, the Commission failed to submit any documentation to show that the strict health checks applicable to the import of pure-bred breeding cattle into Poland, which include the submission of a certificate issued by an approved veterinary surgeon, were not carried out in the case of the imports in question.

33 The Commission refutes those allegations and cites, among other things: (a) the spectacular increase, in 1991, of German exports to Poland of pure-bred breeding cattle; (b) the inability of the Polish market to absorb such large numbers of breeding cattle because of the difficulties Polish agriculture was experiencing at the time, a factor confirmed by the statements made by M r Maleszewski, Poland's Director of Veterinary Services, to the effect that, with a very few exceptions, Poland was importing slaughter animals only during that period; and (c) a letter of 12 November 1991 from the Federal Ministry of Food, Agriculture and Forests

35 It should be borne in mind here that where the Commission refuses to charge cer- tain expenditure to the E A G G F on the ground that it was incurred as a result of breaches of Community rules for which a Member State can be held responsible, the Commission is required not to demonstrate exhaustively that there are irregu- larities in the data submitted by the Member States but to adduce evidence of serious and reasonable doubt on its part regarding the figures submitted by the national authorities. The reason for this mitigation of the burden of proof on the Commission is that it is the State which is best placed to collect and verify the data required for the clearance of E A G G F accounts; consequently, it is for the State to adduce the most detailed and comprehensive evidence that its figures are accurate and, if appropriate, that the Commission's calculations are incorrect (Case C-48/91 Netherhnds v Commission [1993] E C R I-5611, paragraphs 16 and 17).

36 It should then be observed that the spectacular increase in German exports to Poland of breeding cattle, the volume of which increased from 166 head in 1990 to 57 366 head in 1991, only to fall sharply after the German legislation had been tightened up to 9 300 in 1992 (7 500 of which were exported before April 1992), is a factor capable, failing any convincing explanation, of justifying serious and rea- sonable doubt as to the quality of the cattle exported. The German Government's claim that the increase was a result of the break-up of numerous agricultural coop-

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many, was there any risk of their being re-introduced into the Community, despite the fact that, in 1991, import duties for such animals into the Community were set at E C U 0.

41 It should be noted that, contrary to what is claimed by the German Government, the requirement that it is contesting flows from a number of Community provi- sions.

42 Firstly, the sole factor distinguishing an animal classified as 'a pure-bred breeding animal of the bovine species', in accordance with the classification for refund pur- poses, for which the rate of export refund was E C U 98/100 kg at the material time, from other animals of the bovine species for which the refund provided for was E C U 55.5/100 kg, is that it is used specifically for breeding purposes. It follows that this specific use is the only factor justifying the grant of the highest level of refund. The existence of this factor has therefore of necessity to be verified in order for the appropriate refund to be granted.

43 Furthermore, Article 5(1) of Regulation N o 3665/87 provides:

...'

44 As regards the situation described in Article 5(1 )(a), it is true that, because of the way in which the provision is worded, the term 'destination' could, on first sight, be construed in an exclusively geographical sense, with the result that the provi- sion would apply only in the event of fraud concerning the territorial destination of the product.

45 An interpretation of that nature would, however, run counter to the objective of Article 5(1) of Regulation N o 3665/87 which, according to the fourth recital, is specifically to prevent abuses in relation to refunds. The refunds are designed to cover the difference between the higher Community price for the product in ques- tion and the lower price on the market of the third country to which it is exported. In the case of a product whose price, and therefore rate of refund, depends on the qualitative nature of its use, abuses could also occur where its actual use, that is to say its true destination in functional terms, is not the same as the specific product use for which the refund is requested. It follows that the term 'destination' in Article 5(1)(a) of Regulation N o 3665/87 must be construed in not only a geo- graphical but also a functional sense.

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46 As regards the situation addressed by Article 5(1 )(b) of Regulation N o 3665/87, it should be emphasised that this concerns the risk that the exported product may be re-intrpduced into the Community but does not further require that this risk should have in fact materialised.

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50 The German Government maintains, however, that it was for the Commission to intervene and take the appropriate measures to resolve the problem of the exports of pure-bred breeding cattle. More particularly, the Commission failed to request the Federal Republic to apply Article 5(1) of Regulation N o 3665/87, as provided for by the second subparagraph of Article 5(2), according to which: 'Where there are serious doubts as to the real destination of products, the Commission may request Member States to apply the provisions of paragraph 1'.

51 It should be pointed out here that, according to Article 8(1) of Regulation N o 729/70, it is for the Member States to take, in accordance with national provisions laid down by law, regulation or administrative action, the measures necessary to satisfy themselves that transactions financed by the E A G G F are actually carried out and are executed correctly. According to the eighth recital of Regulation N o 729/70, 'in addition to supervision carried out by Member States on their own initiative, which remains essential, provision should be made for verification by officials of the Commission and for it to have the right to enlist the help of Member States'. It follows that the Member States' obligations to ensure that transactions financed by the E A G G F are carried out correctly exist independently of the measures taken by the Commission.

52 That division of responsibilities is also conveyed by the wording of the second subparagraph of Article 5(2) of Regulation N o 3665/87 which, moreover, does not lay down an obligation but merely opens up a possibility for the Commission. The fact that this possibility is not used cannot therefore justify a Member State's failure to fulfil its own obligations under Article 5(1) of Regulation N o 3665/87.

56 In those circumstances, the Federal Republic of Germany cannot be criticised for having recognised national breeding and reproduction certificates as proof that the animal fell into the category of a pure-bred breeding animal. In any event, given that, under Article 1 of Directive 77/504, an animal is considered to be 'a pure- bred breeding animal of the bovine species' provided it is eligible for entry in a herd-book but does not have actually to be entered therein, it is sufficient for breeding and reproduction certificates to be drawn up or submitted a posteriori for the animal to be recognised as an animal of breeding quality.

57 The Commission counters that argument by stating that the obligation to require the submission of breeding and reproduction certificates indicating the pedigree, the performance and an assessment of the genetic value of the animals flows from Article 1 of Regulation N o 1544/79, in conjunction with Articles 1 and 6 of Direc- tive 77/504. Regulation N o 2342/92, adopted in August 1992, merely clarified the legal position that already existed on the basis of Regulation N o 1544/79 and Direc-

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tive 77/504, in order to dispel, within the Member States, any doubts there might be as to the scope and substance of the controls to be carried out on exports of pure-bred breeding cattle.

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61 Article 6(1) of the same directive further provides that the following are to be deter- mined by the Community authorities:

'— performance monitoring methods and methods for assessing cattle's genetic value,

— the criteria governing entry in herd-books,

— the particulars to be shown on the pedigree certificate.'

65 It is clear from the foregoing that the Community law in force at the material time provided the German authorities with sufficient information as to the manner in which they were to verify that the animals exported to Poland were genuinely intended to be used for breeding purposes, even though the Community institu- tions had not, at the time, adopted an act setting out formally and specifically the evidentiary requirements to be met when those checks on pure-bred breeding cattle destined for export to third countries were made.

66 Indeed, according to the case-law of the Court of Justice, Article 8(1) of Regula- tion N o 729/70, which expressly lays down the obligations incumbent on Member States pursuant to Article 5 of the E C Treaty, imposes on the latter the general obligation to take the measures necessary to satisfy themselves that the transac- tions financed by the E A G G F are actually carried out and are executed correctly, even if the specific Community act does not expressly provide for the adoption of particular supervisory measures (Case C-2/93 Exportslachterijen van Oordegem BVBA v Belgische Dienst voor Bedrijfsleven en Landbouw and Generale Bank NV [1994] E C R I-2283, paragraphs 17 and 18).

67 Therefore the German Government's plea alleging that there were no Community rules making supervision of the quality of exported animals subject to the submis- sion of the evidence cited by the Commission must be rejected.

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68 In the light of the above considerations, the German Government's objection that, by failing to take any measure to tackle the problem of exports of breeding cattle to Poland, the Commission failed to fulfil its supplementary role under Regulation N o 729/70, in breach of its duty of genuine cooperation with the Member States resulting from Article 5 of the Treaty, has also to be rejected.

71 Article 78(3) of Regulation N o 2913/92 provides:

'Where revision of the declaration or post-clearance examination indicates that the provisions governing the customs procedure concerned have been applied on the basis of incorrect or incomplete information, the customs authorities shall, in accor- dance with any provisions laid down, take the measures necessary to regularise the situation, taking account of the new information available to them.'

72 The German Government replies that Article 78 of Regulation N o 2913/92 does not require that a new customs declaration be drawn up. The provision merely points out that the customs authorities must take the necessary measures where it is clear from post-clearance examination of the customs declaration that the provi- sions governing the customs procedure have been applied on the basis of incorrect or incomplete information.

73 The Commission counters this by noting that the reference to Article 78(3) of Regulation N o 2913/92 simply indicates how the customs declaration may be amended post-clearance. In the instant case, there is no doubt that proof of the export of the animals to Poland (transport documents and Polish customs docu- ments) was not provided. That was why it was not possible to take into account levels of refund that would have been payable for the export of animals for slaughter.

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GERMANY v COMMISSION

79 In those circumstances, the Commission was right to refuse to charge to the E A G G F expenditure incurred up to the level of the rate set for animals for slaughter.

so Accordingly, that plea must also be rejected.

III — The correction relating to irregularities committed in connection with the export of livestock to the Near and Middle East (Imex affair — point 6.2.2 of the summary report)

81 It is apparent from the documents in the case that the correction in issue, totalling D E M 56 692 508.70, is made up of three amounts relating to three separate sets of facts, all of which are bound up with the many-faceted dossier on Imex whose fraudulent conduct covers a period extending from 1981 to 1987.

82 In detail, the Commission refused to charge to the Community budget: (a) a sum of D E M 22 Oil 281.10 by way of correction for irregularities committed after 1 January 1986; (b) a sum of D E M 25 024 493 by way of correction for export refunds disbursed during the period 1981 to 1987 as a result of quantitative manipu- lations by auxiliary customs officers; and (c) a sum of D E M 9 656 734.74 by way of correction linked to the alleged late transmission of certain information by the German Government, in the context of the procedure for the clearance of accounts.

However, the Member State could and should have started checking up much ear- lier:

— In June 1985 a truck driver had already made a statement to the German cus- toms authorities concerning quantitative manipulations.

— In October of the same year, France informed Germany of the excess weight of exported German cattle.

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— In November 1985 and March 1986 (reminder), the E A G G F informed Ger- many of its doubts regarding the exceptional weights noted in the figures and insisted on the need to investigate (especially exports announced and foresee- able at that time).

84 The German Government claims that the Commission's finding that the German authorities responsible for conducting investigations did not undertake 'genuine' inquiries in time, thereby abusing their discretion, is unfounded and does not con- tain a sufficient statement of reasons. The German authorities responsible for the inquiries did not fail to observe any obligation that could give rise to a financial charge.

85 More particularly, the statement made by the driver from the Hefter haulage com- pany, which transported cattle for Imex at the time, resulted in inquiries which failed to substantiate initial suspicion and were closed on 20 December 1985.

86 The communication from the French authorities of 21 October 1985 did not con- tain any information concerning Imex, but provided certain data relating to a par- ticular case of which the investigating authorities were already aware.

87 The Commission's letter of 20 November 1985 contained a general warning con- cerning Imex for the first time. O n 17 February 1986, the Munich customs inves- tigation unit reported that no new findings could be derived from the statistical data on quantitative averages annexed to that letter by the Commission, as the animals were counted by headage and not by weight on-the-hoof; there was, however, some evidence of inaccurate weights that merited further investigation.

88 O n 19 June 1986, the Cologne customs investigation unit gave central responsibility for the inquiries conducted by the various services to the Hamburg customs inves- tigation unit which tried, unsuccessfully, to establish proof of falsification of quanti- ties by the suppliers (breeder and producer associations) from whom Imex sourced its product. Furthermore, the independent weight checks made on live cattle exported to Saudi Arabia via Cologne/Bonn airport were not challenged. Finally, checks to confirm weight in Hamburg after the animals' weight had been quanti-

92 In the instant case, in addition to the explanations given in the summary report, referred to in paragraph 83 of this judgment, it is common ground that the German

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Government was closely involved in the process by which the contested decision came about and was therefore aware of the reason why the Commission considered that it could not charge to the E A G G F the sum in dispute. Indeed, it is clear from the text itself of the summary report that it was not drawn up until after the Com- mission had sent the two letters of 10 February and 14 October 1993 in which it informed the German Government of the reasons that had led it to refuse to charge to the E A G G F the expenditure in issue.

93 Consequently, this plea must be rejected.

94 As regards the plea alleging that the Commission's findings concerning the controls and inquiries carried out by the German authorities are unfounded, it should be pointed out that, according to Article 8(1) of Regulation N o 729/70, the Member States are to take, in accordance with national provisions laid down by law, regula- tion or administrative action, the measures necessary to satisfy themselves that transactions financed by the Fund are actually carried out and are executed cor- rectly, and to prevent and deal with irregularities. Pursuant to Article 8(2), the financial consequences of irregularities or negligence are to be borne by the Com- mission, with the exception of the consequences of irregularities or negligence attributable to administrative authorities or other bodies of the Member States.

99 Next, the Commission submitted, and this was not disputed by the German Gov- ernment, that several of the controls effected failed because of poor organisation. For instance, the controls on the Imex suppliers proved ineffective because, given that animals are traded by headage and not by weight — weight being the criterion used for the grant of export refunds — the weight of animals at the suppliers was merely estimated and not accurately determined; consequently, it was impossible to make a comparison with the weight of the same animals at the point of export. Similarly, the controls on animals transported by air were bound to fail from the outset, as quantitative manipulations were unlikely using that form of transport in which the animals had compulsorily to be weighed before being loaded on to the aircraft.

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100 Moreover, with the exception of the latter control and another attempt to carry out controls on the animals, which again failed for technical reasons, the file does not indicate either that the German authorities carried out controls on the animals on a large scale or that they set in place a reliable system for weighing the animals in order to detect the quantitative manipulations, despite the fact that there were only two exporters suspected of engaging in fraudulent practices, namely Imex and Süd- fleisch.

101 In those circumstances, that plea too must be rejected.

The correction of DEM 25 024 493 relating to the refunds disbursed during the period 1981 to 1987 on the basis of quantitative manipulations by auxiliary customs officers

104 The Commission, however, considers that it was not only customs auxiliary officer H . who took part in the quantitative manipulations. Two hundred and eighty-four instances of quantitative manipulation giving rise to damage totalling D E M 25 024 493 were in fact cited by the Munich customs investigation unit in its final report on the inquiry into Imex. The Commission adds that, in the context of the clearance procedure, it need merely be established whether the credits have been disbursed by the Member States in accordance with the Community rules. A national court's finding would not be conclusive in that respect.

105 It should be noted that, as the Commission is right to emphasise, the aim of the procedure for the clearance of accounts is to establish whether the credits made available to the Member States have been disbursed in accordance with the Com- munity rules in force in the context of the common organisation of the markets. As pointed out at paragraph 35 of this judgment, where the Commission refuses to charge certain expenditure to the E A G G F on the ground that it was incurred as a result of breaches of Community rules for which a Member State can be held responsible, the Commission is required not to demonstrate exhaustively that there are irregularities in the data submitted by the Member States but to adduce evidence of serious and reasonable doubt on its part regarding the figures submitted by the national authorities (Case C-48/91 Netherfønds v Commission, cited above, para- graphs 16 and 17).

106 It follows that, when clearing the accounts of the Member States, the Commission is not precluded from making findings that extend beyond the irregularities that have been proven before a national criminal court, if it has serious and reasonable doubt concerning the regularity of the transactions financed by the EAGGF. More- over, procedure before such a court is governed by different rules of evidence.

1 1 0By decision of 21 January 1994, taken on the basis of Commission Regulation (EEC) N o 1723/72 of 26 July 1972 on making up accounts for the European Agri- cultural Guidance and Guarantee Fund, Guarantee Section (OJ, English Special Edition, Second Series III, p. 109), as amended by Commission Regulation (EEC) N o 422/86 of 25 February 1986 (OJ 1986 L 48, p . 31), the Commission set 31

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January 1994 as the deadline by which the Member States were to transmit all the additional information required for the clearance of accounts for the 1991 financial year.

1 1 1According to the summary report (point 6.2.2.6): 'A long time after the deadline of 31 January 1994 ... the German authorities presented a list of payments enabling the Commission to propose a financial correction for the amounts paid after 1 January 1986 and relating to losses due to Zollhilfspersonen, this being D E M 47 035 774. Given the failure to respect the deadline ... the reduction of the initial correction justified by the information received late will be limited to 90%.'

112 The German Government claims that the list of payments in question was com- municated to the Commission on the basis of Article 5(2) of Council Regulation (EEC) N o 595/91 of 4 March 1991 concerning irregularities and the recovery of sums wrongly paid in connection with the financing of the common agricultural policy and the organisation of an information system in this field and repealing Regulation (EEC) N o 283/72 (OJ 1991 L 67, p . 11). Article 5(2) of the regulation provides:

1 1 4The Commission, while taking the view that the notification provided for in Article 5 of Regulation N o 595/91 is a vital component of the clearance procedure, argues that its decision setting the deadline of 31 January 1994 was based not on Regulation N o 595/91 but on Regulation N o 1723/72. In fixing that date, the Com- mission was seeking to obtain from the German Government the exact details of the expenditure incurred before 1 January 1986 to enable it to deal with the Imex dossier as part of the clearance of accounts for 1991. A distinction has therefore to be made between the transmission of those figures and the notification provided for in Article 5 of Regulation N o 595/91. Consequently, the sum in issue was not a penalty for late communication within the meaning of Article 5 of Regulation N o 595/91, but a correction based on general Commission practice whereby, in the case of late transmission of information that justifies a reduction in the amount charged, that reduction is limited to 90%.

us The plea put forward by the German Government first raises the question whether, where procedures for the recovery of sums wrongly granted are under way at national level, it is for the Member States or the Commission to determine that those procedures are no longer going to result in total recovery.

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1 1 6In that connection, it is clear from Article 5(2) of Regulation N o 595/91 that the Member State is to inform the Commission, by means of a special notification, of the amount that has not been recovered, where the State considers that the sum wrongly paid cannot be totally recovered, or cannot be expected to be totally recov- ered, and the Commission has then to take a decision on who should bear the financial consequences. It is also apparent from that same provision that the special notification is not subject to any deadline.

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120 The German Government did not dispute those findings.

121 In those circumstances, the Commission was right to inform the Federal Republic of Germany, by letter of 14 October 1993, that it intended to close the Imex dos- sier during the clearance of accounts for the 1991 financial year and to ask that Member State to communicate to it, by 31 January 1994, the figures concerning the payments made to Imex before 1 January 1986.

122 The question arises whether, in view of the fact that the information requested was not forwarded within the period fixed, the Commission was entitled to impose upon Germany a correction in respect of the relevant expenditure.

123 In that regard, Article 1(3) of Regulation N o 1723/72, as amended by Regulation N o 422/86, provides: 'In the case of failure to submit the aforementioned informa- tion within the period fixed, the Commission shall take its decision on the basis of those elements of information in its possession at the deadline, except in cases where the late submission of information is justified by exceptional circumstances.'

127 It is apparent from the documents in the case that, in March 1991, Südfleisch obtained customs clearance in Germany for a consignment of 628 750.20 kg of beef and veal destined for export to the United Arab Emirates. At the material time, the export refund for the United Arab Emirates was D E M 423.7524 per 100 kg net weight, whereas, for exports to Lebanon, the refund amounted to D E M 294.2725 per 100 kg net weight.

1 2 8In July 1991, Südfleisch submitted to the German authorities a document, which later proved to be a forgery, confirming that the goods had entered the United Arab Emirates.

129 In March 1992, that is to say within the 12-month period stipulated by the Com- munity rules, Südfleisch obtained evidence that part of the initial consignment (364.185 tonnes) had been unloaded in March 1991 in Beirut (Lebanon). Südfleisch received the refund appropriate to that export, and that payment was not subject to any correction by the Commission.

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130 As regards the rest of the consignment (282.565 tonnes), Südfleisch submitted on 1 July 1992, after the German authorities had granted the company an extension of the deadline, evidence of its arrival in Lebanon. Südfleisch received the appropriate export refund, amounting to D E M 997 814. It is the latter payment which has been the subject of the correction made by the Commission.

133 In the light of the wording of Article 47(4) of Regulation N o 3665/87, the argu- ments put forward by the parties turn on whether the condition it lays down was met in this case, namely whether Südfleisch acted with diligence to obtain proof that the goods had reached their destination and whether, in granting an extension of the 12-month deadline, the German authorities properly exercised their power of assessment.

134 The applicant claims that the German authorities did not fail to observe Article 47(4) of Regulation N o 3665/87. It argues that the Hamburg-Jonas Principal Cus- toms Office granted the extension because it considered, on the basis of the infor- mation in its possession and in the absence of proof to the contrary, that Südfleisch had acted with diligence to obtain and transmit the requisite documents.

135 Indeed, as early as May 1991, Südfleisch had commissioned an insurance agent to conduct inquiries into the actual location of the vessel transporting the goods. Then, in June 1991, Südfleisch sent three of its employees to Saudi Arabia to establish that the goods had in fact been unloaded in that country. Though the unloading did not take place while the three employees were in Saudi Arabia, as the date coincided with an Islamic festival, they did inspect the vessel carrying the goods and estab- lished that the holds were virtually full of Südfleisch containers with their seals intact. As regards the submission, in July 1991, of the forged document confirming the arrival of the goods in the United Arab Emirates, it could not be ruled out that Südfleisch had been misled by its associate, the Al Fatha Goldstore company.

139 The Commission's response is that an exporter who, deliberately or at any rate as a result of serious negligence, has already submitted a forged customs clearance document does not fulfil the requirements of Article 47(4) of Regulation N o 3665/87.

1 4 0 It points out in this regard that, although it had doubts concerning the destination of the meat as early as May 1991, Südfleisch submitted a forged customs entry certificate on 1 July 1991 and applied in writing for the payment of the refunds applicable to exports to the United Arab Emirates. The 'controls' effected by three employees sent out to Saudi Arabia in June 1991, on which the German Govern- ment primarily relies, hardly deserve to be so described; the fact that the employees did not wait for the cargo to be unloaded was not acceptable to the Commission, as they should have known that proper execution of the transaction included cus- toms clearance of the goods for release on to the Saudi Arabian market.

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1 4 1 Consequently, in the initial stages, and despite being aware that it was not entitled to them, Südfleisch made every effort to benefit from the higher export refunds disbursed for exports of beef and veal to the United Arab Emirates. Only when its application could not be allowed, because it was discovered that the customs entry certificate had been forged and it was at risk of having to repay the refunds in full, did Südfleisch first request, by letter of 24 September 1991, an extension of the deadline in order to produce the necessary documents.

143 Furthermore, on 28 May 1991, the Commission had informed the Federal Republic of Germany of a mission to Beirut to obtain from the Lebanese customs author- ities documents enabling the German authorities to prove that 'the declarations of arrival of the beef and veal exported from Germany and destined for the United Arab Emirates but diverted to Lebanon had been falsified.' Those inquiries, which were conducted on the spot from 8 to 15 June 1991, and in which a representative of the Munich customs investigation unit took part, revealed that export refunds amounting to approximately D E M 10 million had been wrongly disbursed for some 2 500 tonnes of meat. It is true that the outcome of the mission was not officially forwarded to the German services until 25 September 1991, but they were informed of it directly, as soon as the mission ended, by their representative who had taken part in the on-the-spot investigations.

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144 In addition, the extension was granted on 24 September 1991, that is to say on the very day Südfleisch applied for it and one day before the official outcome of the verification mission in Lebanon was forwarded, even though the statutory 12-month deadline did not expire until March 1992.

145 In the light of those circumstances, the grant of the extension to Südfleisch con- stitutes improper use of the margin of discretion which the national authorities are allowed under Article 47(4) of Regulation N o 3665/87. The Commission is not thereby seeking to impose its own decisions in place of those of the national authorities, but to show that, in this case, by granting an extension, the competent national authority clearly exceeded the limits of its discretion.

149 Consequently, where there are doubts concerning the exporter's conduct, the requirement relating to diligence cannot be considered to be fulfilled. That does not necessarily mean that the exporter has committed acts in respect of which he has been held criminally liable on the basis of national law. An operator may not be diligent, within the meaning of Article 47(4) of Regulation N o 3665/87, but that does not mean that he has committed a criminal act.

150 Furthermore, even if it is established that the exporter acted with diligence, given that Article 47(4) of Regulation N o 3665/87 merely affords the national authorities the possibility of granting an extension but does not require them to do so, they must, when taking their decision, take into consideration not only the diligence of the exporter but all the factors that make it possible to determine whether the grant of an extension is justified.

151 In the instant case, it is apparent from the file that on 24 September 1991, the date on which the decision granting an extension was adopted, the competent authority was in possession of the following information.

152 As regards the conduct of the exporter, it knew that on 1 July 1991 Südfleisch had submitted a forged certificate and had done so despite having doubts, as early as May 1991, about the destination of the meat exported. The controls carried out in June 1991 by the three Südfleisch employees dispatched to Saudi Arabia were not apt to dispel those doubts nor, therefore, to persuade the competent authority that Südfleisch had done everything in its power, because the three employees did not remain in Saudi Arabia until the goods had been unloaded and given customs clear- ance.

157 Accordingly, that plea must be rejected.

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V — The correction relating to the export of beef and veal to Zimbabwe (Barfuß affair — point 6.2.4 of the summary report for the 1991 financial year and point 6.2.2 of the summary report for the 1990 financial year)

158 The summary report for the 1991 financial year details the financial correction made by the Commission to the expenditure relating to the export of beef and veal declared to have been exported to South Africa but actually intended for Zim- babwe. The summary report also states that the case was reviewed in the summary report for the 1990 financial year and that the correction was held over until the clearance of accounts for 1991 because the Federal Republic of Germany was seeking to obtain reimbursement of the sums wrongly paid.

159 In the summary report for the 1990 financial year, the Commission noted that quantities of beef and veal, for which the refund had been accorded on the basis of proof of arrival in South Africa, had simply been stored in South Africa and re-exported to Zimbabwe for processing. The processed products were then imported into the Community free of customs duties on the basis of the E E C - A C P agreement.

162 The applicant claims that the German authorities did not infringe any obligation that could give rise to a financial charge, such as, for example, the obligation that stems from the combined provisions of Article 5 of the Treaty and Article 8 of Regulation N o 729/70.

163 It states in this connection that, by letter of 5 July 1990, the Hamburg customs investigation unit informed the competent authority, that is to say the Hamburg- Jonas Principal Customs Office, of the findings concerning German certificates of fitness for consumption discovered in Zimbabwe and relating to quantities of meat exported by Barfuß to South Africa.

164 By decision of 1 July 1991, the competent authority asked Barfuß to repay the export refunds disbursed amounting to D E M 518 181.97.

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165 O n 25 July 1991, Barfuß appealed against that decision and at the same time requested that its enforcement be suspended. By decision of 20 August 1991, the competent authority acceded to the request to suspend enforcement because, in the absence of proof, there were serious doubts concerning the legality of the decision on recovery.

170 A further substantial delay arose because the competent authority suspended the appeal proceedings until the Court of Justice had delivered its judgment on the reference for a preliminary ruling from the Finanzgericht (Finance Court) Hamburg in Case C-27/92 Möllmann-Fleisch [1993] E C R I-1701. That request for a prelim- inary ruling concerned in particular whether proof of importation into a non- member country may be regarded as not having been provided if there is reason to doubt that the goods specified in the customs entry certificate have actually reached the market of the country of destination. However, it was pointless awaiting the Court's judgment in that case, because consistent case-law already existed in the field (Case 125/75 Milch-, Fett- und Eier-Kontor v Hauptzottamt Hamburg-Jonas [1976] E C R 771 and Case 89/83 Dimex v Hauptzottamt Hamburg-Jonas [1984] ECR 2815).

171 As regards the closure, without good reason, of the recovery procedure, by deci- sion of 7 June 1994, the Commission points out that, contrary to the German Gov- ernment's contentions, the certificates of fitness for human consumption discovered in Zimbabwe were capable of giving rise to justifiable doubt as to whether the goods had been regularly imported into the country of destination, and therefore undermine the probative force of the customs clearance certificates submitted by Barfuß (Case C-27/92 Möllmann-Fleisch, cited above, paragraph 15).

172 The real reason for closing the recovery procedure was, as is apparent from a letter of 29 April 1994 sent by the Federal Ministry to the Commission, that the originals of the certificates of fitness for consumption handed over to the Hauptzollamt (Principal Customs Office) 'could not be found at the Principal Customs Office and, consequently, there was no evidence.'

176 As regards the closure of the recovery procedure, the Commission's view remains unchanged and it makes the point that, in accordance with German procedural law, photocopies of certificates that are not certified copies of the original have no evi- dential value.

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177 It should be recalled here that, according to the case-law of the Court of Justice, the Member States must, in the first place, respect the obligation of general diligence in Article 5 of the Treaty, as specifically embodied in Article 8(1) and (2) of Regula- tion N o 729/70 with regard to the financing of the common agricultural policy. That obligation implies that the Member States must take steps to rectify irregulari- ties promptly. With the passage of time, recovery of sums wrongly paid is likely to become complicated or impossible for reasons such as the fact that undertakings may have ceased trading or accounting documents may have been lost (Case C-34/89 Italy v Commission [1990] E C R I-3603, paragraph 12).

178 Furthermore, national authorities cannot justify a failure to fulfil their obligations to rectify irregularities quickly by relying on the length of administrative or judicial proceedings commenced by an economic agent (Case C-28/89 Germany v Com- mission [1991] E C R I-581, paragraph 32).

179 It should also be pointed out that while, pursuant to Article 8(1) of Regulation N o 729/70, recovery procedures undertaken at national level are carried out in accor- dance with the rules of national law, including those allocating the burden of proof (see, to that effect, Joined Cases 205/82 to 215/82 Deutsche Mikhkontor and Others [1983] E C R 2633, paragraph 36), it is also settled case-law that recourse to rules of national law is possible only in so far as it is necessary for the implementation of provisions of Community law and in so far as the application of those rules of national law does not jeopardise the scope and effectiveness of that Community law (Cases 146/81, 192/81 and 193/81 BayWa and Others v Bundesanstalt für Land- wirtschaftliche Marktordnung [1982] ECR 1503, paragraph 29).

182 It should be pointed out here that, according to the case-law of the Court of Justice, proof of completion of customs formalities in the country of destination amounts only to rebuttable evidence that the objective of the variable export refunds has in fact been attained (see, to that effect, the abovementioned judgments Dimex, para- graph 11, and Möllmann-Fleisch, paragraph 13). More particularly, the probative force which normally attaches to the customs entry certificate may be disregarded where there is reason to doubt the actual access of the goods to the market of the territory of destination in order to be marketed there (Möllmann-Fleisch, cited above, paragraph 15). In circumstances of that kind, the actual access of the goods to the market of the country of destination may be proved by producing other documents provided for under the Community rules (see, to that effect, Möllmann- Fleisch, cited above, paragraph 14), such as the documents confirming that the goods were unloaded in the country of destination.

183 In the instant case, the certificates of fitness for consumption discovered in Zim- babwe were capable of justifying doubt as to whether the consignments of meat to which they referred, and which had been exported by Barfuß, had actually reached the market of their declared country of destination, namely South Africa. It was then for the company in question to prove, relying on documents other than the customs entry certificates, that the goods exported had in fact been released on to the market in their declared country of destination. In the absence of such proof, the exporting company had to repay the refunds already disbursed.

Costs

188 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission has applied for costs to be awarded against the Federal Republic of Germany and the latter has been unsuccessful, the Federal Republic of Germany must be ordered to pay the costs.

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O n those grounds,

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

R. Grass P. J. G. Kapteyn

Registrar President of the Sixth Chamber

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