C-209/96

O P I N I O N O F MR ALBER — CASE C-209/96

OPINION OF ADVOCATE GENERAL ALBER delivered on 24 March 1998 *

A — Introduction perform his contract with the intervention agency as to 85 or 9 5 % , he loses in whole or in part the security deposited in respect of the total amount. 4

1. The present case concerns a flat-rate reduc- tion in EAGGF 1financing contested by the applicant. The Commission justified that reduction by pointing to the fact that, in the 2. If, however, the tenderer splits his original context of intervention purchasing, the tender into several smaller ones which are national authorities had accepted unlawful made in the name of nominees, the risk of multiple tenders (group tenders or intercon- losing the security payment is reduced. If he nected tenders). 2 These may be of a specula- is unable to deliver the full quantity tendered tive nature. If, for example, very large quanti- for, in the case of several smaller tenders he ties of beef are offered for sale into is at least in a position to honour certain of intervention, it becomes necessary to reduce them in such a way that he does not lose the these quantities by application of a coeffi- security payment. It is true that in respect of cient. 3 Since the tenderers endeavour to con- the remaining tenders which he is then no tinue to sell the whole of their meat into longer in a position to honour the security intervention inflated tenders are lodged for payment will also be retained. However, that speculative purposes. If a tenderer speculates security is not calculated on the total amount that a specific reduction coefficient will be of all the tenders instigated by him but only laid down, he offers a correspondingly higher on the smaller amount in each case. The quantity for sale into intervention. If it then amount of the security lost is thus smaller turns out that the coefficient laid down is not and is often exceeded by the profit achieved. as high as the tenderer assumed, the tenderer must deliver into intervention more meat than he actually has available. If he is unable to

6. By this application the United Kingdom seeks the annulment of the Commission deci- 5. Speculative tenders which, as demonstrated, sion disallowing, in respect of the United are favoured by the lodging of multiple ten- Kingdom's expenditure for 1992 incurred in ders make it difficult, according to the Com- the buying-in of beef, the sum of U K L mission, to operate intervention successfully. 3 356 000 (hereinafter 'the Decision'). 9 The Since more meat is offered than is actually on disallowance of that expenditure is contained the market, buying-in prices and quantities in Annex I of the Decision. The amount dis- determined on the basis of tenders received allowed corresponds to a flat-rate correction can no longer be established in accordance of 2 % of 1992 expenditure. with the actual market situation. Speculative tenders thus prevent the Commission from obtaining a precise overview of the market situation. For that reason it may, the Com- mission maintains, almost certainly be pre- sumed that, as a result of the speculative ten- ders and the multiple tenders favouring them, more meat is bought in by the intervention agencies at higher prices. In that connection, 7. In its Summary Report 10 the Commission justifies that reduction on the ground that the United Kingdom did not check whether mul- tiple tenders had been submitted. 5 — Fourth recital in the preamble to and Article 5 of Regulation (EEC) N o 805/68 of the Council of 27 June 1968 on the common organisation of the markets for beef and veal (OJ, English Special Edition 1968(1), p. 187). 6 — Cited in footnote 3. 9 — Commission Decision 96/311/EC of 10 April 1996 on the 7 — Third recital and Article 7 et seq. of Regulation N o 859/89. clearance of the accounts presented by the Member States in 8 — Second recital in the preamble to Council Regulation (EEC) respect of the expenditure for 1992 of the Guarantee Section N o 571/89 of 2 March 1989 amending Regulation (EEC) N o of the European Agricultural Guidance and Guarantee Fund 805/68 on the common organisation of the markets in beef and in respect of certain expenditure for 1993 (OJ 1996 and veal, repealing Regulation (EEC) N o 1302/73 and renewing L 117, p. 19). Regulation (EEC) N o 4132/88 (OJ 1989 L 61, p. 43). 10 — Document VI/6355/95.

9. The approach of the competent United 13. The distinction between the concepts of Kingdom authority (Intervention Board) was 'tenderer' and 'interested party' is, in the therefore not compatible with the Commu- Commission's view, of significance in this nity rules and discriminated against partici- connection. According to the Commission, it pants who had observed the rules. follows from the difference in wording that interested parties are not to be equated with tenderers. 'Interested parties' are not only those persons who lodged tenders in the course of their economic activities. That con- cept embraces a much wider circle of persons. It is not therefore only the individual ten- 10. In the applicant's view, however, all the derer, that is to say the person who actually rules concerning intervention were observed. lodges the tender, who is prohibited from It accepted no tenders which were not lawful; lodging more than one tender. The prohibi- it therefore contravened no requirement to tion covers all persons tendering in respect of carry out checks. the same quantity of meat.

14. O n the other hand, the applicant is of the opinion that the concepts of 'tenderer' and 11. The provision which underlies this dis- 'interested party' are interchangeable. The pute is contained in Article 9 of Regulation N o 859/89, paragraph 1 of which provides: 'Tenderers may take part in the invitation to 11 — Emphasis added. tender only if they undertake in writing to 12 — Emphasis added.

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'tenderer', on the other hand, is the person Where there are serious indications to the who in fact submits the tender. Accordingly, contrary or that tenders are not in line with the prohibition in the second sentence of economic facts, tenders shall be deemed admis- Article 9(2) merely precludes the person finally sible only where the tenderer presents suit- appearing as a tenderer from submitting more able evidence of compliance with the second than one tender. subparagraph.

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17. The Commission points out in that con- The Commission contended that the Court nection that, in contrast to the national author- should ities, it did not at first have this information available to it. Since the tenders -were for- warded to it anonymously, it became aware of the irregularities only after checks carried out by it. — dismiss the application, and

— order the applicant to pay the costs.

18. In its decision the Commission confirmed the 2 % reduction proposed in the Summary Report, whereupon the applicant in June 1996 C — Opinion brought these proceedings before the Court in which it sought

Meaning and purpose of the second sentence of Article 9(2)

21. According to the Court's case-law, it is 24. Accordingly, it must be examined whether for the Commission, it is submitted, in the the terms in which the second sentence of context of the clearance of the accounts of the Article 9(2) of Regulation N o 859/89 are EAGGF, to show that a Member State has couched satisfies these requirements and contravened Community rules. The Commis- whether they allow of a construction of the sion, as has been demonstrated, was not able kind placed on them by the Commission. In to adduce such proof. Moreover, the appli- that connection it would appear appropriate cant points out that rules which may have to examine first the manner in which the financial consequences for the Member States Commission seeks to interpret the second must be clearly and precisely formulated. sentence of Article 9(2). The pleadings mainly speak of multiple tenders. Those cannot be tenders submitted by one and the same ten- derer under one name, for such tenders are

16 — Case C-48/91 Netherlands v Commission [1993] I-5611, paragraphs 13 and 14, with further references. 22. The applicant refers to the case-law of the 17 — Netherlands v Commission (cited in footnote 16, paragraph Court. Thus, 'as the Court has already 18, with further references); Case C-281/89 Italy v Com- mission [1991] ECR I-347, paragraph 19, with further refer- observed, only refunds granted and interven- ences; Case 347/85 United Kingdom v Commission [1988] ECR 1749, paragraph 16; and Case C-55/91 Italy v Com- tion undertaken in accordance with the Com- mission [1993] ECR I-4813, paragraph 13, with further refer- ences. munity rules within the framework of the 18 — Case 349/85 Denmark v Commission [1988] ECR 169, para- common organisation of agricultural markets graph 16.

25. The Commission points out that, according to the Court's case-law, a provision is not merely to be construed literally but also in accordance with its meaning and pur- pose. 19 Accordingly, the Commission con- tends that the provision at issue in these pro- ceedings would be deprived of its purpose if 28. In the Commission's view, this follows it were possible to submit several tenders via from the wording. In this connection it should nominees, thus circumventing the prohibitive be said that a difference in wording as between provision. paragraphs 1 and 2 of Article 9 could cer- tainly point to a difference in meaning. It could be inferred therefrom that it is not suf- ficient to check whether the person who in actual fact submits the tender only submits a single one, that is to say whether in each case an independent (legal) person participates in 26. The intervention scheme is jeopardised, the procedure. Thus the term 'interested party' as has been demonstrated, by the practice in could be understood as including a person regard to intervention buying-in in the United interested in selling his meat into interven- Kingdom. By the buying-in of excessive quan- tion. As has been seen, that person must not tities greater costs arise, it is submitted, than necessarily be the same person as the ten- are necessary in order to support the market. derer, that is to say the person who actually submits the tender. If, for example, the meat is offered via nominees, in that case there is 19 — Case C-283/91 Contarini [1992] ECR I-6359, paragraph 14 only one interested party but several ten- and Joined Cases C-296/93 and C-307/93 France and Ire- land v Commission [1996] ECR I-795, paragraph 21. derers. But if one looks at the way in which

30. However, it is more instructive to have regard to the provisions which pre- ceded those at issue in the present pro- 32. In the applicant's view that regulation ceedings. Thus, in 1990 it was made possible only governs the number of tenders which to submit several tenders at different the tenderer may submit. However, it is clear prices. Under Regulation N o 1282/90 22 that after repeal of the provision in Regula- tion N o 1282/90 the tenderer may no longer submit several tenders in respect of the same 20 — Commission Regulation (EEC) N o 2271/90 of 1 August quantity of meat. The meaning and purpose 1990 amending Regulation (EEC) N o 859/89 laying down of the provision here at issue in the second detailed rules for the application of intcrvention measures in the beef and veal sector (OJ 1990 L 204, p. 45). sentence of Article 9(2) is thus that several 21 — This distinction is also reflected in the English version which tenders may not be submitted in respect of a speaks of 'interested parties' and 'tenderer'. 22 — Commission Regulation (EEC) N o 1282/90 of 15 May 1990 specific quantity of meat. That provision amending Regulation (EEC) N o 859/89 and laying down would become meaningless if it could readily detailed rules for the application of intervention measures for beef (OJ 1990 L 126, p. 31). be circumvented by recourse to nominees.

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34. Moreover, the Court has held that even in cases where Community law is applied objectively but incorrectly as a result of an interpretation in good faith by national author- ities, costs incurred in that connection must, under Articles 2 and 3 of Regulation N o 729/70 23 be borne by the Member States. 24 This narrow interpretation of the criteria for 36. Accordingly, it is right to uphold the allowing expenditure under the E A G G F is Commission's submission that the second sen- dictated by the objective pursued by Regula- tence of Article 9(2) also prohibits tenders tion N o 729/70. Since implementation of a which, whilst coming from different legal common agricultural policy must ensure equal persons, are made in respect of the same beef, treatment as between citizens of the Member with the result that the tenders may be assumed States, national authorities of a Member State to have been submitted by nominees. are not permitted, by means of a broad inter- pretation of a given provision, to favour citi- zens of that State as against those of other Member States in which a stricter interpreta- tion is applied. 25

23 — Regulátion (EEC) N o 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (OJ, English Special Edition 1970 (I), p. 218). 24 — Article 3(1) of Regulation N o 729/70 provides: 'Intervention intended to stabilise the agricultural markets, 37. In that 'way, contrary to the applicant's undertaken according to Community rules within the frame- work of the common organisation of the markets, shall be submission, a basis is provided for such ten- financed under Article l(2)(b).' ders to be rejected, namely the second sen- 25 — Case 11/76 Netherlands v Commission [1979] ECR 245, paragraphs 8 and 9. tence of Article 9(2) aforesaid.

39. It is clear that in the United Kingdom tenders are examined only to see whether they originate from different legal persons. N o further examination was undertaken. In what 42. Thus, since in the context of the clearance follows it will be a matter of examining of E A G G F accounts the Commission is whether on that basis the applicant may be dependent upon information provided by the said to have failed to observe a provision of Member States, it is not possible for it here to Community law. give a specific example of an infringement under the tendering procedures. The Com- mission is able — and required — merely to show that the applicant failed to examine all the criteria necessary for the purposes of compliance with the relevant provision. That 40. For the applicant submits that the Com- the Commission did. mission has mentioned not one single example in which tenders were actually submitted by nominees.

43. In connection with the question whether 41. However, the Commission is unable to there is thus shown to be an infringement by adduce such proof because in this connection the applicant, a matter also to be considered the applicant carried out no checks. The only is whether the applicant was required to carry check made was whether the tenders were out any additional examination. In that con- from independent (legal) persons. Thus, the nection reference should be made to Regula- Commission has no information before it as to the further details of specific circumstances. Admittedly, the Commission may also carry 26 — Netherlands v Commission (cited in footnote 16, paragraph out its own checks. However, under the 11).

— prevent and deal with irregularities; 28 — Netherlands v Commission (cited at footnote 16, paragraph 11, Case C-366/88 France v Commission [1990] ECR I-3571, paragraph 20, Case C-8/88 Germany v Commission [1990] ECR I-2321, paragraph 17 and Joined Cases 146/81, 192/81 27 — Seventh recital. and 193/81 BayWa [1982] ECR 1503, paragraph 26.

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UNITED KINGDOM v COMMISSION

That article thus imposes on the Member it might be queried whether the applicant was States the general obligation to take the mea- required to take any further steps. sures necessary to satisfy themselves that the transactions financed by the Fund are actu- ally carried out and are executed correctly, even if the specific Community act does not expressly provide for the adoption of par- ticular supervisory measures (Case C-8/88 Germany v Commission [1990] ECR I-2321, paragraphs 16 and 17).' 29 49. In order to prevent speculative tenders whereby, in anticipation of a specific reduc- tion coefficient, tenders are made in respect of a greater quantity of meat than is available, 30 a security payment was introduced under Article 10(1), in order to ensure that 'tenders 46. It follows therefrom that an obligation are bona fide and that the conditions laid on the part of Member States to carry out down are complied with'. 31 That means that checks may subsist even if such a requirement in that connection the Member States are is not expressly provided for in the relevant merely obliged to ensure that the appropriate provision. amount of security is deposited. They do not have to check whether the individual tenderer has offered more beef than is in his posses- sion.

51. Thus, it is clear that the applicant ought this duty arose out of the rationale under- to have carried out further checks in order to lying intervention long before the provision establish whether the tenders submitted were was enacted in Regulation N o 2456/93. The in fact from the same tenderer. That is par- important factor in that connection is that the ticularly the case in light of the clear indica- Member State should check whether in fact tions already alluded to of interconnections tenders are being made in respect of different between individual tenderers. Even if it could quantities of beef. The manner in which it not with certainty be concluded from those carries out those checks is for it to decide. interconnections that there was an infringe- This does not need to be expressly regulated ment of the second sentence of Article 9(2), by the Commission. Accordingly, the Com- the indications were however of such a nature mission cannot be said, contrary to the appli- as to necessitate more specific checks, and cant's submission, to be seeking to apply that was the sole decisive factor. Regulation N o 2456/93 retroactively to the facts of the present case.

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of the clearance of E A G G F accounts. Thus, 57. There may be a case of that kind here the Court has stated that only refunds granted since, precisely because the necessary checks in accordance with Community provisions were not made, the Commission is unable to and interventions carried out in the context establish to what extent the applicant's con- of the common organisation of agricultural duct has occasioned loss to the EAGGF. markets are to be financed by the EAGGF. 34 Hypothetically, it may only be speculated It is, the Court went on, for the Member what costs would not have been incurred if State to show that the conditions for obtaining the applicant had carried out the proper the financing refused by the Commission are checks. fulfilled, where the Commission refuses to charge certain expenditure to the E A G G F on the ground that such expenditure was incurred as a result of breaches of Community rules attributable to that Member State. 35

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if the applicant had carried out adequate dependent on tenders for sale into interven- checks. But, also in that connection, the Com- tion forwarded by the Member States but has mission did not merely submit that the other possibilities available to it for obtaining E A G G F suffered no loss. Rather it showed information on the prevailing market situa- that the applicant had infringed Community tion. law and the manner in which it had done so. It explained, furthermore, how that may have favoured speculative bids by tenderers. It explained, finally, that that may have led to an erroneous appraisal of the market and thus to excessive buying-in of beef, in some cases, at increased prices. Thus, in any event, it adduced 62. In that connection it should be said that, credible evidence that it was possible for loss under Regulation N o 571/89, purchase prices to have been incurred by the EAGGF. and quantities are determined on the basis of tenders received. 39 It is apparent therefrom that the numbers of tenders have at least a concomitant role to play in the appraisal of the market and the determination of prices and quantities which are bought in. Thus, it cannot be precluded that excessive bids could have given rise to an erroneous assessment.

60. A more extensive evidentiary obligation cannot be imposed on the Commission since the abovementioned grounds for easing the burden of proof also subsist in this case. N o r can it be ruled out beyond doubt that the 63. Since the Commission has thus at least applicant's conduct jeopardised the func- adduced credible evidence that the applicant's tioning of the common organisation of the conduct may have occasioned loss to the market. 38 EAGGF, it is for the applicant to show that this was not the case.

67. Moreover, the applicant submits that during the relevant period only small amounts 65. Also in connection with the observance of security payments were forfeited. Accord- of formalities, the Court has held: 'In view of ingly, there can have been no extensive specu- the essential nature of the formalities which lation in regard to tenders. The Commission's were not complied with and of the fact that view is that this shows, precisely, h o w suc- it was not possible to check that the time- cessful the practice of so-called multiple ten- limit within which the products were to be ders is in reducing the risk to the individual exported was observed, and in view, there- tenderer. fore, of the possibility of losses, or even fraud, to the detriment of the Community budget, the amount disallowed by the Commission, which was limited to 2 % of the expenditure involved, cannot be regarded as excessive and disproportionate.' 41 Thus, even the mere like- lihood of losses may be used as a criterion for the purposes of the assessment. Such likeli- hood subsists in the present case in light of 68. As the Commission rightly argues, the the abovementioned factors and the absence practice of so-called multiple tenders enables of checks. the tenderer to speculate with several tenders whereby, in the event of an unsuccessful speculation, the loss is reduced because the security is smaller for the smaller quantity.

66. The sole matter to be determined is there- fore whether the applicant can successfully plead that no loss was incurred by the EAGGF. 69. Accordingly, the practice of so-called mul- tiple tenders need not necessarily lead to a reduction in cases in which the security is 40 — Case 327/85 Netherlands v Commission [1988] ECR 1065, paragraph 25. 41 — Case C-49/94 Ireland v Commission [1995] ECR I-2683, paragraph 22. 42 — Cf. paragraph 54 et seq.

71. Finally, the applicant claims that the par- ticipants in tendering procedures under the Possibility of a flat-rate calculation of the so-called safety net procedure are scarcely financial loss different from the participants in normal ten- dering procedures. 43 However, since under the safety net procedure all bids were accepted, there was in that case no need for speculative tenders. Yet, if the participants under these intervention measures are the same as those participating in the normal intervention pro- 74. The applicant also challenges the flat-rate cedures, as the applicant asserts, it might calculation of the financial loss undertaken by the Commission. Since there is no connection between that calculation and the loss, that is 43 — Safety-net measures are adopted if the market price falls par- said to be a penalty for which there must be ticularly sharply. Under those measures all bids at or under an express legal basis. N o such basis is, how- 80% of the intervention price are accepted (Article 6(5) of Regulation No 805/68 as amended by Regulation No 571/89). ever, apparent.

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Commission's guidelines (Belle Group Report) — 5 % , where the deficiency relates to impor- tant elements of the control system or to the operation of controls which play an important part in the assurance of the regularity of the expenditure, such that it can reasonably be concluded that the risk of loss to the E A G G F was significant;

76. In that connection it should again be recalled that, under the Court's case-law, financing of expenditure can be disallowed — 10%, where the deficiency relates to the even as to 100%, if the precise financial con- whole of or fundamental elements of the control system or to the operation of

44 — Sec paragraph 54 et seq., in particular paragraph 63. 45 — United Kingdom v Commission (cited in footnote 17, para- graphs 14 and 15). 46 — Sec footnote 36.

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controls essential to assuring the regu- nominees. Accordingly, the 2 % flat-rate cor- larity of the expenditure, such that it can rection chosen by the Commission appears to reasonably be concluded that there was a be proportionate and reasonable. high risk of widespread loss to the E A G G E

81. Finally, the applicant additionally submits that the Commission's decision must be set aside because it contravenes Article 190 of the EC Treaty. The Commission, it is submitted, failed adequately to demonstrate that the mul- tiple tenders produced the effects alleged by it. As already demonstrated above, the Com- mission, in any event, discharged the burden 79. It is this provision which the applicant of proof imposed on it in the present case. invokes. Even if one could proceed on the basis that the deficiencies in the control system were attributable to the fact that the second sentence of Article 9(2) of Regulation N o 859/89 was difficult to interpret, it must be pointed out that the criterion of (only) minor deficiencies mentioned in those guidelines is not satisfied in this case. This is not a case of 82. Moreover, reference should be made to minor deficiencies in the control system. the Court's case-law under which decisions Rather it is a case where no checks were car- concerning the clearance of accounts do not ried out to ascertain whether multiple tenders require detailed reasons if the government were made in respect of the same quantity of concerned was closely involved in the process meat or indeed whether they were made by by which the decision came about and is

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therefore aware of the reason for which the Costs Commission considers that it must not charge the sums in dispute to the EAGGF. 47

84. Under the first subparagraph of Article 69(2) of the Rules of Procedure of the Court 83. Accordingly, the objections made against the unsuccessful party is to be ordered to pay the Commission's decision cannot avail the the costs if they have been asked for in the applicant. successful party's pleadings.