C-253/97

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ITALY V COMMISSION

G. ITL 2 165 691 000 in respect of the that management and monitoring were reimbursement of private storage costs inadequate. for wine surpluses on the ground that incorrect information on surplus quan- tities was provided;

II — Forms of order sought H. ITL 3 382 118 277 in respect of the reimbursement of costs for the perma- nent abandonment of wine-growing areas on the ground that checks were 3. By its action the Italian Government inadequate; seeks the complete annulment of the adjust- ments applied in respect of certain points and a reduction thereof in respect of others. Essentially it justifies its action on the grounds that the amounts concerned are I. ITL 5 771 993 000 in respect of disproportionate in relation to the risk for accounting adjustments for stocks of the EAGGF, difficulties arise in interpreting unboned beef in the statement of the provisions of Community law, adequate annual expenditure on the ground that checks are in place, specific and fixed-rate no account was taken of quantitative adjustments are applied concurrently, no losses 4during storage; responsibility exists in respect of certain deficiencies, the Commission makes incor- rect calculations, the irregularities found are merely procedural, and improvements have since been made to the monitoring L. ITL 243 553 000 in respect of the system. early subtraction of forecast quantita- tive losses of boned beef on the ground that such losses were systematically subtracted without further inspection; 4. The Italian Government claims that the Court should

9. Consequently, the competent national 6. The Commission essentially justifies the customs authorities are required to take adjustments applied on the ground that the all necessary measures to ensure that goods checks were inadequate and Community and products subject to the system of law was infringed. prepayment are placed under supervision and control until they leave the customs territory of the Community. 6Accordingly, exporters of products must keep documen- 7. The parties' other submissions on the tary records of the relevant imports and relevant separate items will, where neces- exports, movements, checks and storage. sary, be considered in the analysis, below. The customs authorities must, at all times, be able precisely to identify and locate the goods or products during the period of prepayment.

III — Analysis

Submissions of the parties A. Prepayment of refund for beef

Preliminary remarks 10. The Italian Government does not deny that there were inadequacies and deficien-

8. The system of prepayment of export 6 — See in particular Articles 3 and 26 of Commission Regula- refunds essentially means that payments tion (EEC) No 3665/87 of 27 November 1987 laying down may be made even before products or common detailed rules for the application of the system of export refunds on agricultural products (OJ 1987 L 351, goods have undergone customs checks. p. 1).

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cies in the inspection procedures but takes quantities changed. It was noted in parti- the view that they justify only adjustments cular that considerable differences in terms amounting to a total of 2%, rather than the of inspection procedures existed between 5% applied by the Commission. individual customs districts. In the case of certain stores only customs inspectors had access, whereas in the case of others there was open access. The inadequate inspection procedures were also attributable to the unclear division of competence between the 11. It contends that as a whole the adjust- customs authorities and the National Insti- ments are excessive in respect of the tute for Food Inspections (INCA). No irregularities found. The EAGGF was not checks were carried out at undertakings exposed to any significant risk as a result of between customs clearance and processing the small number of checks. Furthermore, or storage, nor after goods or products left the fact that the beef in question was the stores. Furthermore, the INCA carried cooked prior to customs checks merely out checks only in respect of food hygiene constitutes a procedural error. At any rate it and not in respect of compliance with the poses no risk of damage to the EAGGF. rules governing prepayment. As far as the Moreover, the relevant provisions of Com- cooking of beef prior to processing is munity law are unclear, a fact for which concerned, that is not permitted since Italy cannot be held responsible. In addi- afterwards it is impossible to draw conclu- tion, the respective (inspection) procedures sions as to the basic product. With regard have since been altered accordingly. There- to the question of labelling, the Commis- fore, overall it is evident that a 5% sion observes that in one case an under- adjustment is disproportionate. taking ordered and attached the inspection labels itself and they did not correspond to those of the monitoring authority. More- over, the Commission carried out checks on undertakings which turn over a total of 57.31% of the goods in respect of which prepayment had been requested. 12. The Commission reserves its main criticism for the inadequate checks carried out by the Italian customs authorities when the meat entered the territory and during the storage period. The Commission pointed out those deficiencies during its investigations in the years 1988/89 to 1992/93. No improvements were seen until Opinion May 1995 and during the final checks of relevance to this case at the end of 1993/ beginning of 1994 the previous deficiencies were found again. For example, it was not always possible to ascertain whether the quantities subject to the system of prepay- ment were in fact present and complied with the regulations. Consequently, it was 13. According to the case-law of the Court impossible to exclude the possibility that of Justice, it is for national administrations the goods had been exchanged or the to monitor strict compliance with Commu-

15. The Member State, for its part, cannot rebut the Commission's findings by mere assertions which are not substantiated by evidence of a reliable and operational 17. Therefore, Articles 2 and 3 of Regula­ tion No 729/70 permit the Commission to charge to the EAGGF only sums paid in 7 — Regulation (EEC) N o 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy accordance with the rules laid down in the (OJ, English Special Edition 1970 (I), p. 218). various sectors of agricultural production, 8 — Case C-242/96 Italy ν Commission [1998] ECR I-5863, paragraph 114, Case C-2/93 Exportslachterijen van Oor- leaving the Member States to bear the degem [1994] ECR I-2283, paragraphs 16 to 18, and Case burden of any other sum paid, and in C-8/88 Germany ν Commission [1990] ECR I-2321, para­ graph 2 3 . particular any amounts which the national 9 — Italy ν Commission (cited in footnote 8), paragraph 58. 10 — Italy ν Commission (cited in footnote 8), paragraph 58 and the references contained therein. 11 — Italy ν Commission (cited in footnote 8), paragraph 58 12 — Italy ν Commission (cited in footnote 8), paragraph 59. and the references contained therein. 13 — Italy ν Commission (cited in footnote 8), paragraph 59.

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ITALY V COMMISSION

authorities wrongly believed themselves tion in flat-rate calculations of three possi- authorised to pay in the context of the ble percentages: common organisation of the markets. 14

— 2% where the deficiency is limited to parts of the control system of lesser 18. Although it is therefore for the Com- importance, or to the operation of mission to prove an infringement of the controls which are not essential to the Community rules, the Member State con- assurance of the regularity of the cerned must demonstrate that the Commis- expenditure, such that it can reason- sion committed an error (if that is the case) ably be concluded that the risk of loss as to the financial consequences to be to the EAGGF was minor; attributed to it. 15

22. Consequently, in the present case it was for Italy to prove that the conditions had been satisfied for the expenditure to be charged to the EAGGF or that only a minor 24. The improvements relied upon by the adjustment was justified. Italian Government were unable to take effect until May 1995 even though the legal framework for them had been laid down as early as 1993. Consequently, those improvements cannot be taken into account in the clearance of accounts for the financial year 1993. 23. In that connection it should be noted firstly that the supervisory system undoubt- edly exhibited considerable deficiencies. As the Commission stated — and Italy did not dispute — the unclear division of compe- tence between the competent Italian autho- 25. In view of the foregoing considerations, rities produced a situation whereby no the first plea in law must be rejected. checks were made on compliance with the rules governing prepayment during the storage and processing of the beef. The checks carried out at the undertakings by the INCA related only to aspects of food hygiene. It is also necessary to concur with the Commission's allegation that the cook- ing of beef prior to customs checks was contrary to the provisions laid down by B. Removal of land from production on Community law. Afterwards it is effectively multiannual basis impossible to ascertain the nature of the basic product. Similar considerations apply to the labelling of the beef. In that respect too there were considerable deficiencies in the inspection procedure which are high- Preliminary remarks lighted in particular by the fact that under- takings were able to use their own labels which did not correspond to those nor- mally used by the monitoring authorities. Moreover, what counts is not the number of random inspections carried out by the 26. The aid scheme to encourage the set- Commission but the frequency and effec- aside of arable land was introduced by

Article 1(a) of Regulation No 797/85. 16 Commission that such fallowing had been Under that provision, the scheme covers practised for some considerable time. To all arable land, irrespective of the crops reduce the funds was unlawful, if only grown, provided that the land has in fact because the rules were ambiguous. Further- been cultivated for a reference period to be more, the fallowing was practised in rota- determined. The measure therefore consists tion and therefore affected only part of the in withdrawing from cultivation agricul- area of farms and not necessarily that in tural land previously used as arable land. respect of which the premium was granted. The decisive factor determining entitlement to aid is that the arable land was effectively cropped during the reference period and therefore other types of land were not eligible for that scheme. The reference period for Italy was the financial year 1987/88. 28. The Commission refers to its submis- sions in Case C-242/96, 18 which dealt with the same question but in respect of the financial year 1992. It has been shown that the competent authorities had no knowl- edge of the relevant rules whereby land to be set aside had to have been cultivated Submissions of the parties during the reference period. Moreover, during farm inspections the Sicilian farmers directly concerned had contradicted the Italian authorities' claim that traditional fallowing was no longer farming practice. On the contrary, it was. 27. By its second plea in law Italy seeks the annulment, and only in the alternative a reduction, of the adjustments applied. The reason it gives is the alleged ambiguity of the term 'fallow'. The EAGGF understands the term 'fallow' as meaning 'traditional fallow', but the Italian producers and Opinion officials of the agricultural offices also understand it as meaning 'dressed fallowing combined with green manuring'. 1 7Such fallowing is practised primarily by Sicilian farmers and the Commission was wrong to adjust the funds in respect thereof. The 29. It is evident from the summary report competent authorities had assured the that the EAGGF checks found that, during the reference period in Sicily, a large number of areas withdrawn from produc- 16 — Council Regulation (EEC) N o 797/85 of 12 March 1985 tion in pursuance of the multiannual set- on improving the efficiency of agricultural structures (OJ 1985 L 9 3 , p. 1), as amended by Council Regulation aside scheme was in fact land subject to (EEC) N o 1094/88 of 25 April 1988 (OJ 1988 L 106, p. 28). traditional fallow practices. The inspec- 17 — That practice, which is associated with autumn/spring early crops, consists in keeping the land under cultivation for limited periods and then as usual preparing the ground by ploughing in the crops produced. 18 — Italy v Commission, cited in footnote 8.

30. As the Court of Justice observed in its 32. The question at issue here is whether judgment in Case C-242/96, 19 it should the adjustments in respect of the charging first of all be noted that the Italian Govern­ of sugar storage costs from 15 October ment does not deny having failed to check 1992 to 31 December 1992 are lawful. whether the land allegedly set aside had in fact previously been cultivated or, at least, whether it had been cultivated in the context of bastard fallow. In this case the Italian Government has also been unable to adduce any evidence that traditional fal­ lowing practice has been changed by 'green 33. The common organisation of the mar­ fallowing'. In that respect note should also kets in the sugar sector is covered by 2 be taken of the data collected through the Regulation No 1785/81. 1Article 8 of that network for the collection of farming regulation provides for a compensation accountancy data at Community level 2 0 system for storage costs in respect of which show that traditional fallow was still certain types of sugar products manufac­ the practice in 1986 and 1987. Moreover, it tured from beet or cane of Community is also evident from the statements of the origin. Those costs are to be reimbursed to the organisation storing the product at a farmers directly concerned, which contra­ single, flat rate throughout the Community. dict those of the Italian authorities, that The system is to be financed by means of a traditional fallow, which is not eligible, levy imposed on sugar producers in respect continued to be practised in Sicily. of the quantities produced by each of them, also at a single rate throughout the Com­ munity. 19 — Italy ν Commission (cited in footnote 8). 20 — Regulation No 79/65/EEC of the Council of 15 June 1965 setting up a network for the collection of accountancy data on the incomes and business operation of agricultural holdings in the European Economic Community (OJ, 21 — Council Regulation (EEC) No 1785/81 of 30 June 1981 English Special Edition 1965-66, p. 70). (OJ 1981 L 177, p. 4).

34. The relevant rules are laid down in neutrality'. Where, for any sugar marketing Regulation No 1358/77. 22Article 2 of that year, the total of levies collected is not regulation specifies who is to be reimbursed equal to the total of the reimbursement and Article 3 provides that reimbursement made, the difference is carried forward to a is to be made by the Member State in subsequent sugar marketing year. whose territory the sugar is stored. Those concerned are sugar manufacturers to whom a basic quota has been allocated, refineries, intervention agencies, and also manufacturers of powdered, lump or candy sugar or approved specialised traders. Reimbursement is made to them provided that they are the owners of the sugar or of the syrups held in store. Moreover, since reimbursement cannot be granted unless 37. The amount of the levy is calculated as some measure of control is possible, Arti- follows: the total estimated reimbursement cle 3 provides for the prior approval of the for the sugar marketing year in question is stores by the State in which they are increased or decreased as the case may be located. by the difference which might exist. The result is divided by the estimated quantity of sugar which will be marketed during that marketing year and produced within the maximum quotas. 35. The calculation must based on monthly returns of quantities in store, established by calculating the arithmetic mean of the quantities held in store at the beginning and at the end of the month in question. The amount of the reimbursement is then fixed, financing, insurance and specific storage costs being taken into considera- tion. 38. On account of the complexity of the system, it was also necessary to provide for supervisory measures and procedures for it to work properly, in particular by restrict- ing the approval of stores depending on 36. The levy to be collected from each facilities for accounting and supervision, sugar manufacturer in respect of the quan- since sugar of different origins may be tities produced is to be so fixed that, for stored by the same person. Finally, Arti- any sugar marketing year, the estimated cle 19 of Regulation No 1998/78 23 total of the levies is equal to the estimated requires Member States to take all mea- total of the reimbursement. The principle sures necessary for the application of the underlying the system is termed 'financial regulation. In particular, they must estab- lish all the necessary control measures.

Submissions of the parties 41. The Commission takes the view that an administrative control system such as existed in Italy is not sufficient to safeguard the requirements of the system for reimbur­ sing storage costs. In particular such a control system does not comply with Arti­ cle 19 of Regulation No 1998/78 if it is 40. In this connection the Italian Govern­ established that no checks were carried out ment seeks the annulment of the adjust­ on specialised traders or other approved ments and a reduction only in the alter­ independent stores. According to the Com­ native. Here too it refers to its observations mission, periodic checks were necessary at in Case C-242/96. 24 It argues that the 10% the stores to check the information in the adjustment applied by the Commission is registers against the actual stocks, but no not justified in the first place because the such checks were carried out. In particular 1993 financial year constituted a transi­ no physical checks were carried out, and tional period as the Azienda di Stato per gli during production, for example, only auto­ Interventi nel Mercato Agricolo (AIMA — matic counters were used. However, rigor­ the State intervention agency in the agri­ ous checks were essential in that context in cultural sector) took over the administra­ particular in order to prevent any tamper­ tion of the system from the Cassa Con­ ing involving different types of sugar. guaglio Zucchero and the supervisory func­ Moreover, it follows from the principle of tion which until then had been the respon­ financial neutrality that the entire system sibility of the Uffici Tecnici Imposta di must be viewed at Community level and Fabbricazione. Secondly, an administrative not at the level of producers or Member system had been introduced in respect of States. Consequently, the objection raised specialised traders which worked effec­ by Italy that the producers had paid more tively and provided for severe penalties in in than they had received is unfounded. It the event of infringements. Those traders would be almost impossible for the Com­ are required to keep a register which is mission to carry out all the checks itself. checked by the local administration. Too many factors have to be taken into Finally, it should be borne in mind that account when carrying out the checks such from 1 July 1992 to 30 June 1993 the as, for example, the exact time at which the contribution system relating to storage undertaking commenced its activities, post­ resulted in more levies being paid in than and antedated invoices and graduated aid being paid out. With such requirements amounts. The Member State in whose territory the undertaking carries out its activities is responsible for the checks. As 24 — Italy ν Commission, cited in footnote 8. regards specialist traders, it should be noted

Opinion 44. The Italian Government's claim that a connection exists between the levy paid by sugar producers and the reimbursement of storage costs must likewise be rejected. 42. It should be observed first of all that, by failing to carry out on-the-spot checks on specialised traders during the period scrutinised by the Commission, Italy has failed to fulfil its supervisory obligations under Community rules. That is demon- strated in particular by the fact that, 45. The compensation system is based on although those traders had to keep a the principle of financial neutrality in that register, the accuracy of the information the levies collected must be equivalent to contained therein was not checked on the the reimbursement paid. That is evident spot at the relevant stores. both from Article 6(2) of Regulation No 1358/77 and the case-law of the Court of Justice. 27However, that balance must be achieved at Community level and not at the level of the Member State or the under- 43. If the supervisory requirement stem- taking concerned. 28 ming from Article 19 of Regulation No 1998/78 is interpreted in the light of the Member States' duty to cooperate in good faith with the Commission, estab- lished by Article 5 of the EC Treaty (now Article 10 EC), it is evident that Member States must set up comprehensive adminis- 46. It should also be observed that the trative checks and on-the-spot inspections, traders who pay the levy are not necessarily thus guaranteeing the conformity of finan- the same as those who receive reimburse- cial operations with Community law. 25 ment. Specialised traders who are not liable However, if, as in the present case, no for the levy, for example, receive reimbur- comprehensive system exists or if the sement. Even for manufacturers, the two system introduced gives rise to doubts as amounts do not automatically coincide if to compliance with the conditions imposed they are fixed according to the manufactur- for eligibility for the reimbursement of the expenditure concerned, the Commission is 26 — Italy v Commission (cited in footnote 8), paragraph 116. 27 — Case 121/83 Zuckerfabrik Franken v Hauptzollamt Würz- burg [1984] ECR 2039, paragraph 26. 25 — Italy v Commission (cited in footnote 8), paragraph 116. 28 — Italy v Commission (cited in footnote 8), paragraph 118.

52. There are no grounds for complaining about the Commission's action since Italy 49. The 10% correction adopted by the was unable to prove in particular that the Commission does not, therefore, appear to Commission had clearly exceeded its be unjustified. The third plea in law must powers. In particular, as the Commission consequently be rejected. also observed, the adjustments do not constitute a penalty for failure to carry out supervisory measures but are intended 29 — Italy ν Commission (cited in footnote 8), paragraph 120. merely to mitigate the risk for the EAGGF.

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ITALY V COMMISSION

53. Moreover, note should be taken of the 56. Under Article 8, the aid must be paid observations in point C (paragraphs 42 to 'when the supervisory body designated by 49) in respect of the lawfulness of the the Member State in which packaging takes adjustments applied. place has checked that the conditions for granting the aid have been satisfied. The aid may, however, be advanced as soon as the aid application is submitted, provided that sufficient security has been provided.' 54. Consequently, the fourth plea in law raised by the Italian Government must also be rejected.

57. Under Article 1 of Regulation No 3089/78, aid for olive oil consumption may be granted only to approved olive oil packaging plants. Article 2 of that regula- E. Aid for consumption of olive oil tion lays down the conditions under which such approval may be granted. Under Article 3, approval must be withdrawn if the conditions for approval laid down are no longer met. Articles 7 and 8 of that Preliminary remarks regulation relate to the system of super- vision to be instituted to ensure that the product for which aid has been applied qualifies for such aid.

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OPINION OF MR ALBER — CASE C-253/97

approval, and thus qualification, for aid, 61. It contends that the flat-rate adjustment must be withdrawn, where quantities are is likewise unjustified. The complaints stated which exceed the quantities for related to a total of only 55 undertakings which entitlement to aid has been recog- (less than 10% of the overall number). Full nised by at least 20%. 33 repayment had been effected in respect of 33 undertakings and partial arrears remained in respect of only 22. Moreover, since irregularities had come to light in respect of a total of only 4% of those receiving aid, a flat-rate adjustment was no longer necessary where they were covered 59. In this context the Commission initially by a specific correction. In the alternative, applied a specific correction of ITL 10 610 it is alleged that the calculation of the 2% 940 125 and subsequently applied an adjustment is incorrect since not all monies additional flat-rate adjustment of 2%. paid or recovered had been taken into consideration.

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ITALY V COMMISSION

by the inadequacies in the procedure tion. The Italian Government's submission applied by the Italian authorities. must consequently be rejected.

35 — Case 347/85 United Kingdom v Commission [1988] 34 — The Instituto Repressione Frodi. ECR 1749, paragraph 15.

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OPINION OF MR ALBER — CASE C-253/97

where it does not reject all the expenditure 71. As regards the Italian Government's affected by the infringement, endeavour to submission that the Commission was establish the financial impact of the unlaw­ wrong to take all amounts paid as the basis ful action by means of calculations. Those for its specific correction and thus to calculations must be based on an assess­ include transactions from previous years, ment of what the situation in the relevant that allegation must be rejected. market would have been if the infringement had not occurred.

73. As regards the allegation that the Commission did not comply with the '20% rule' when it calculated the adjust­ ments which it applied, it should be noted 69. Therefore, it follows that if the risk for the EAGGF cannot be covered by means of that that submission, made in the hearing, specific corrections alone, scope must be must be rejected as belated and thus left for additional, flat-rate adjustments. inadmissible. The Italian Government Exposing the EAGGF to further damage or made that allegation for the first time at risks, which could not clearly be deter­ the hearing even though the facts under­ mined, would run counter to the EAGGF lying it were known at the time of the system of financing. Furthermore, it would written procedure. However, as the Court be contrary to the case-law of the Court of of Justice has consistently held, 3 7such a Justice. submission must be rejected as belated where the defendant is deprived of an opportunity to counter the submission as a result of such action.

36 — Italy ν Commission (cited in footnote 8), paragraph 122. 70. Therefore, in principle there can be no 37 — Case C-54/95 Germany ν Commission [1999] ECR I-35, objection to specific and flat-rate correc­ p aragraph 28, Case C-323/96 Commission ν Belgium [1998] ECR I-5063, paragraph 38, and Case C-55/91 tions being applied simultaneously. Italy ν Commission [1993] ECR, 1-4813, paragraph 40.

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ITALY V COMMISSION

74. Thus, the Italian Government was F. Compulsory distillation unable to show that there had been a calculation error in respect of the specific corrections.

75. The conclusion is the same as regards the flat-rate adjustments. The Commission was right to take as a basis the overall amounts communicated to it and did take account of the monies recovered by the 78. Compulsory distillation was intro- relevant date. Furthermore, in view of the duced because it was regarded as the most inadequacies in the administrative proce- effective measure to absorb surpluses of dure and the inspections, which, moreover, table wine on the market. 38 To that end the Italian Government does not deny, a Article 39(1) of Regulation No 822/87 flat-rate adjustment of 2% of the expendi- provides that where, in respect of a given ture appears to be justified. In any event, wine year, the market in table wine and since it took ten years to resolve the conflict wine suitable for yielding table wine is in a of competence between the Italian autho- state of serious imbalance, compulsory rities and it was consequently impossible to distillation of table wine must be decided carry out effective checks in the meantime, on. It is for the Commission to fix the it must be concluded that deficiencies quantities that are to be delivered for occurred which, overall, posed a risk of compulsory distillation to eliminate pro- losses to the Fund. duction surpluses and thus restore a normal market situation, in particular as regards the levels of foreseeable availabilities at the end of a wine year and prices. The total quantity to be distilled must be shared between the various wine-growing regions 76. Furthermore, it should be noted that of the Community, grouped together by the total of the corrections applied by the Member State. The quantity determined for Commission in this respect — a specific distillation must be shared between table- correction and an additional 2% flat-rate wine producers in each wine-growing correction — amounted to less than a region. In addition, the Member States single, flat-rate adjustment of 5% which must notify the Commission of the quan- probably could have been justified in view tities of table wine produced in each wine- of the deficiencies in the inspection proce- growing region. These notifications serve as dure. a basis for setting the total quantity for distillation in the Community. However, the time-limit for such notification must not fall after 15 February of the relevant

80. These procedures enable annual har- vests and storage stocks to be determined. The quantities to be distilled compulsorily are then fixed on the basis of this informa- tion on existing and anticipated quantities 83. Although the Italian Government does of table wine. The percentage of the wine to not deny falling short of the requirements be distilled is based on a graduated scale by a total of 1 285 000 hectolitres, it which is drawn up in terms of yield per nevertheless seeks the annulment of the hectare. adjustments which were applied. The necessary procedure for laying down the scale provides for cooperation between the Member States and the Commission. In that respect forecasts for the forthcoming 81. By Regulation No 129/93 40 of 26 Jan- relevant period are produced on the basis of uary 1993 the Commission fixed the quan- previous production figures. Where a mis- tities to be distilled compulsorily by each take is made in the forecast, the Member State alone cannot be automatically held responsible. Since only forecasts are 39 — Commission Regulation (EEC) No 3929/87 of 17 Decem- involved and the actual development of ber 1987 on harvest, production and stock declarations relating to wine-sector products (OJ 1987 L 369, p. 59). events is subject to a large number of 40 — Commission Regulation (EEC) No 129/93 of 26 January 1993 opening compulsory distillation as provided for in fluctuations and imponderables, the possi- Article 39 of Council Regulation (EEC) No 822/87 and bility that the Member State is liable must derogating for the 1992/93 wine year from certain detailed rules for the application thereof (OJ 1993 L 18, p. 10). be excluded.

85. The Commission points to the absence of any checks prior to the year 1993/94 and 88. As regards the question of the estimates further alleges that Italy failed to submit, of the relevant harvest yields, it must be within the prescribed period, the required concluded that the producers and Member documents relating to checks carried out States alone are responsible. They alone and penalties imposed, and to the quantity possess the necessary figures and are able, of sparkling wine and grape juice recorded. where applicable, to check them in order to It is evident that too little was distilled, too make them available to the Commission. It much wine was placed in storage and is true that in that respect the system of therefore it had been necessary to conclude compulsory distillation provides for coop- a large number of additional storage con- eration between the Member States and the tracts. Consequently, the adjustments as a Commission. However, it does so only in so whole were applied correctly. far as the percentages for the quantities to be distilled are finally fixed. In that respect the Commission is largely dependant on cooperation from the Member States. Where errors are made in the estimates, Opinion they fall solely within the sphere of compe- tence of the Member States. However, if damage may be caused to the EAGGF as a result of those errors, the Commission is

86. It should be noted in the first place that Italy does not deny the inadequate inspec- 41 — Italy v Commission (cited in footnote 8), paragraph 122.

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OPINION OF MR ALBER — CASE C-253/97

92. At issue here is a correction similar to that dealt with in point F above (para- graph 78 et seq.), but relating to the 1991/92 financial year. 90. As regards the Italian Government's allegation that the Commission fixed the distillation quantities before 15 February 1993 — that is to say before time-limit for the Member States' notifications to the 93. The Commission applied a financial Commission — by means of Regulation correction of ITL 2 165 691 000 in respect No 129/93 of 26 January 1993, it should of the failure to distil 319 000 hectolitres of be noted that that regulation merely fixes table wine. The submissions of the parties the quantities for each Member State. in this point are similar to those set out in However, the information which the Mem- point F above. ber States had to communicate to the Commission before 15 February 1993 related to the sharing of those quantities between the individual wine-growing regions. Therefore, the Commission did not have to wait until February 1993 to 94. In this respect too it should be noted fix national quotas but was able to do so in that, in accordance with the considerations advance. The cooperation between the set out in paragraphs 86 to 91, the Com- Member States and the Commission mission was entitled to apply a financial regarding the fixing of individual quantities correction on the basis of the deficiencies in for producers could not be put into effect the administrative control system which until Member States' obligations in respect were found. The Italian Government was of compulsory distillation had been pub- unable to show that the Commission had

98. As is evident from the Commission's submissions, the financial corrections which it applied are lawful. Firstly, it 96. The Italian Government alleges that correctly took as a basis a rate of 3.09% although the Commission reduced the in respect of the 1991/92 financial year, amount of the adjustment which it had whereas another rate, that is to say 1.01%, originally proposed, the specific adjustment was applicable in respect of the 1992/93 that was ultimately applied is incorrect. financial year. In addition, there are no Firstly, a rate of 1.01% and not 3.09% grounds for complaining that the Commis- should have been applied for the province sion did not allow expenditure relating to of Agrigento. The correction of 9.55% of the abandonment of wine-growing areas the expenditure of the province of Agri- for grape varieties which, under Commu- gento is also incorrect. Aid was granted nity law, are ineligible for aid. only in respect of grapes which were in fact cultivated originally, as was evident from the checks carried out by the competent authorities. The differences between the authorities' inspection reports and the books kept by the wine growers are attri- 99. Therefore, since the Italian Govern- butable to inaccuracies in the wine ment incorrectly paid aid in respect of the growers' books. abandonment of wine-growing areas, the Commission was authorised to charge that damage to the EAGGF to the Member State. Moreover, the Italian Government was unable to show that the Commission 97. The Commission argues that the checks had made any calculation error in deter- were inadequate, especially since the wine mining the specific correction.

101. In this respect the Italian Government claims that the figures concerning non- 103. It should again be noted that, accord- declared losses 42 which the Commission ing to the settled-case law of the Court of took as a basis for the financial corrections Justice, the Member States are required to relate not only to the 1993 financial year set up comprehensive administrative checks but date back to 1991 and 1992. That is and on-the-spot inspections, thus guaran- evident from the fact that the goods and teeing the conformity of financial support products concerned are stored for a longer operations with Community law. period than just one financial year. How- ever, if that fact is taken into account it is clear that the losses during storage were within the permitted tolerances and the adjustments applied are therefore unlawful. The irregularities found were merely pro- cedural and incapable of prejudicing the 104. In that respect the Member States and EAGGF. the competent authorities of the Member States are responsible for ensuring that the information to be presented to the Com- mission at the end of each financial year is duly submitted. 102. The Commission observes that the checks carried out revealed that the storage costs had been stated without any account being taken of losses during storage. The AIMA checks revealed losses totalling 1 204 707 tonnes, which meant that the 105. In that respect the Commission was right to reject the Italian Government's argument that the settlement of accounts in 42 — Ordinary quantitative losses resulting from storage or respect of the 1993 financial year could be normal processing. delayed until 1995, when the stores were

110. Under Regulation No 147/91, 43 the information on the actual weight makes it

43 — Commission Regulation (EEC) No 147/91 of 22 January 107. The correction adopted by the Com- 1991 defining and fixing the tolerances for quantity losses of agricultural products in public intervention storage mission is consequently not unjustified. (OJ 1991 L 17, p. 9).

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OPINION OF MR ALBER — CASE C-253/97

possible to trace the goods to the shops. M. Late payment of boned beef taken into intervention storage

117. Since in this respect there are defi- 113. Therefore, the Italian Government ciencies which relate to the whole of the was unable to show that the financial control system essential to assuring the corrections applied by the Commission regularity of the expenditure, the Commis- were unlawful or even that they had been sion was entitled to apply a flat-rate calculated incorrectly. adjustment of 10%. Furthermore, the Ita- lian Government was unable to show that the Commission had committed a calcula- tion error.

44 — Commission Regulation (EEC) No 859/89 of 29 March 114. Consequently, this plea in law must 1989 laying down detailed rules for the application of intervention measures in the beef and veal sector (OJ 1989 also be rejected. L 91, p. 5).

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118. Thus, this plea in law must also be tions existed. However, it claims that rejected. comprehensive administrative reforms have been carried out since those inspections with the result that there is now an effective supervisory system in place which ensures that the requirements of Community law are properly satisfied. N. Inadequate management and monitor- ing of premiums for sheep and goats

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the financial correction applied by the Costs Commission is also justified in terms of the rate thereof.

124. It is clear from the foregoing that 125. Under the first sentence of Arti- none of the pleas in law raised by the cle 69(2) of the Rules of Procedure, the Italian Government are well founded and unsuccessful party is to be ordered to pay consequently that the action must be dis- the costs if they have been applied for in the missed. successful party's pleadings.

IV — Conclusion

126. It is proposed therefore that the Court should: