C-247/98

OPINION OF MR ALBER — CASE C-247/98

O P I N I O N OF ADVOCATE GENERAL ALBER delivered on 6 July 2000 1

I — Introduction larly in relation to the compulsory distilla- tion of wine, relying on an insufficient legal basis for imposing the correction.

1. With the present action, the Hellenic Republic is seeking the annulment of Com- mission Decision 98/358/EC of 6 May 1998 on the clearance of the accounts I I — Forms of order sought presented by the Member States in respect of the expenditure for 1994 of the Guar- antee Section of the European Agricultural G u i d a n c e and G u a r a n t e e Fund ('EAGGF'), 2 in so far as that decision 3. The Hellenic Republic has therefore excluded from Community funding, in brought an action against the Commission, respect of the applicant, an amount of claiming that the Court should: GRD 8 093 595 532 for expenditure relat- ing to the arable crops, beef and veal, fruit and vegetable, and wine sectors. The Com- mission claims that there have been serious deficiencies in the management and control (1) hold the action admissible; system in Greece which were discovered during investigations in 1994 and 1995.

(2) annul, or otherwise modify, Commis- sion Decision C(98) 1124 final of 6 May 1998 on the clearance of the 2. The Hellenic Republic considers that the accounts presented by the Member contested Commission decision must be States in respect of the expenditure annulled or, in the alternative, modified, for 1994 of the Guarantee Section of since it is based on a misapprehension of the European Agricultural Guidance the facts and on an incorrect, or otherwise and Guarantee Fund. insufficient, statement of reasons. In adopt- ing that decision, the Commission exceeded the limits of its discretion, while, particu-

8. Under Article 5(1)(a) and (b), those 6. Financing is effected through the 'Eur- authorities must transmit to the Commis- opean Agricultural Guidance and Guaran- sion estimates and annual accounts, accom- tee Fund', which (under Article 1(1)) com- panied by the necessary documents. prises two sections, the Guarantee Section and the Guidance Section. The Guarantee Section finances (under Article 1(2))

3 — OJ 1970 L 94, p. 13. 9. Under Article 5(2)(b), after consulting 4 — OJ 1995 L 125, p. 1. the European Agricultural Guidance and

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Guarantee Fund Committee, the Commis- 11. Furthermore, the Member States are sion must, '... before the end of the required under Article 9 to cooperate in following year, on the basis of the docu- inspections and to provide information. ments referred to in paragraph 1(b), make up the accounts of the authorities and bodies'.

10. In order to ensure that payments are made correctly, the Member States are 12. If a Member State infringes the Com- required to take further measures. To that munity rules or fails to comply with its end, Article 8 provides as follows: obligations, the Commission is required to refuse to bear the expenditure, since, under Article 8(2), the financial consequences of 'irregularities or negligence attributable to administrative authorities or other bodies of the Member States' are not to be borne 'The Member States in accordance with by the Community. national provisions laid down by law, regulation or administrative action shall take the measures necessary to:

'(a) 2% of expenditure — where the defi- ciency is limited to parts of the control system of lesser importance, or to the '— whether the national authorities took operation of controls which are not essen- effective steps to remedy the deficien- tial to the assurance of the regularity of the cies as soon as they were brought to expenditure, such that it can reasonably be light; concluded that the risk of loss to the EAGGF was minor.

— whether the deficiencies arose from difficulties in the interpretation of (b) 5% of expenditure — where the defi- Community texts'. ciency relates to important 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 EAGGF was significant. 16. Therefore, under the guidelines set out in that report, in assessing the rate at which flat-rate corrections are to be applied, where it is not possible to determine specific amounts which have been paid out at the expense of the EAGGF, the risk of loss to the EAGGF is firstly to be (c) 10% of expenditure — where the defi- calculated on the basis of the deficiencies ciency relates to the whole of or funda- found. In that regard, the effectiveness of mental elements of the control system or to the control system as a whole, individual the operation of controls essential to assur- elements of that system or the implementa- ing the regularity of the expenditure, such tion of those controls must be taken into that it can reasonably be concluded that consideration. Account must also be taken there was a high risk of widespread loss to of the seriousness of the deficiencies and the EAGGF.' the measures to combat fraud.

20. The Court has held that Article 8(1) of Regulation No 729/70 — see point 11 B — Particular provisions above — which expressly lays down in that specific area the obligations imposed on the Member States by Article 5 of the EC Treaty, defines the principles according 18. In order ensure greater clarity and to which the Community and the Member easier comprehension, the particular provi- States are to ensure the implementation of sions will not be set out in succession at this Community decisions on agricultural inter- point, but will be included with each of the vention financed by the EAGGF and com- individual sectors in question. Reference is bat fraud and irregularities in relation to those operations. It imposes on the Mem- ber States the obligation to take the mea- 5 — Regulation (EEC) No 1723/72 of the Commission of sures necessary to satisfy themselves that 26 July 1972 on making up accounts for the European Agricultural Guidance and Guarantee Fund, Guarantee the transactions financed by the EAGGF Section (01 1972 L 186, p. 1), as amended by Commission are actually carried out and are executed Regulation (EEC) No 295/88 of 1 February 1998 (OJ 1988 correctly, even if the specific Community L 30, p. 7).

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24. In refusing to bear expenditure within the framework of the grant of funds 22. Consequently, it is for the State to show through the EAGGF, the Commission is that the Commission's calculations and not required in principle to prove that findings are incorrect and to adduce the actual loss has occurred. If such specific most detailed and comprehensive evidence cases cannot be proven, proof of a (theore- tical) risk of loss to the EAGGF is suffi- cient. 6 — See Case C-2/93 Exportslachterijen van Oordegem [1994] ECR I-2283, paragraphs 17 and 18, and Case C-235/97 France v Commission [1998] ECR I-7555, paragraph 45. 7 — Case C-28/94 Netherlands v Commission [1999] 9 —Case C-54/95 Germany v Commission [1999] ECR I-35, ECR I-1973, paragraph 40, with further references. paragraph 35. 8 — Case C-242/96 Italy v Commission [1998] ECR I-5863, 10 — Case C-242/96 Italy v Commission, cited in footnote 8, paragraph 58, and Case C-8/88 Germany v Commission and Case C-8/88 Germany v Commission, cited in [1990] ECR I-2321, paragraph 23. footnote 8.

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IV — Opinion payment under the conditions set out in Title I of that regulation.

27. "With regard to the amount of the A — Corrections in the arable crops and compensatory payments, Article 15(3) beef and veal sectors states:

25. In these sectors the Commission has not recognised expenditure amounting to 'The payments referred to in this Regula- GRD 1 877 531 872 (which corresponds tion are to be paid over to the beneficiaries to 2% of the declared expenditure). 11The in their entirety'. 13 Commission essentially justified its correc- tions on the ground that the producers' organisations in the Hellenic Republic had made an average deduction of 2% from the compensatory payments and premiums to be paid to the producers (members of the 2 8 . U n d e r R e g u l a t i o n (EEC) N o organisations and non-members) in order 2066/92 14 the conditions for the grant of to cover their own costs. premiums for beef producers were rede- fined and Article 30a was inserted into Regulation (EEC) No 805/68 of the Coun- cil of 27 June 1968 on the common orga- nisation of the market in beef and veal. 15 That article is worded as follows:

2. Summary Report for verifying the payments made by the Associations. The actual situation in the Hellenic Republic appeared to be that, after receiving the applications for aid, the regional directorates passed them on to 29. In its Summary Report concerning the the Associations which were then respon- corrections in the arable crops and beef and sible for processing the data, examining the veal sectors, the Commission stated the applications for aid, compiling a compu- following: terised list and, lastly, paying the aid to the beneficiaries. The regional directorate is to be regarded as a supervisory authority, but appears to have failed to perform that function and to have approved payment lists without having conducted any real verification. No effective control was exer- cised for the 1993 and 1994 financial years, since the regional directorates did not have (a) Arable crops sector the necessary technical equipment and thus did not have access to the Associations' databases.

34. As part of the conciliation procedure requested by the Hellenic Republic, it argued that the existing statutory basis be changed and that a judgment by the Court of Justice in Jensen, 17 which was of importance to the present case, should be 36. The competent Greek authorities had awaited. In the light of the first argument, claimed that the retention in each case the Commission then refrained from bring- could vary between the individual coopera- ing an action for failure to fulfil obliga- tives. However, no evidence was produced tions. The Commission could not concur in support of that claim. with the second argument, since it took the view that the judgment in Jensen could not be applied to the present case. The Jensen case concerns the lawfulness of a set-off in connection with the grant of aid, whereas the present case relates to the indirect financing of administrative expenditure at national level, where important functions in connection with the grant of aid have been transferred to the Associations. (b) Corrections in the beef and veal sector

37. As in the arable crops sector, the 35. In the conciliation procedure the Hel- Commission found that in the beef and lenic Republic submitted new arguments. veal sector each of the producers' organisa- According to those arguments, the con- tions had retained at least 2% of the aid in tested retention had been arranged not on order to reimburse the administrative costs the basis of Greek Law No 1409/83, but on incurred. However, that is contrary to the basis of a voluntary agreement. Even Article 30(a) of Regulation No 805/68 18 after examining that submission, which under which the amounts to be paid must had, in the view of the Commission, been be paid in full to the beneficiaries. The lodged out of time, the assessment Commission therefore applied a correction

41. Thirdly, the argument is submitted, in the alternative, that the applicable provi- sions of Community law do not preclude the Greek action. In accordance with the 39. The Greek Government argues, first of case-law of the Court of Justice, 19 a all, that the contested retention took place deduction from the aid payable is permitted on a voluntary basis and was not applied to where that is consistent with the costs all producers. Since 1993 it had no longer actually incurred and the normal costs been founded on Law No 1409/83, but which might be passed on in other cases stemmed from an agreement concluded in national law and where the amount of between producers' organisations and their that deduction is not such as to deter the members. The retention was not therefore effected on a statutory basis and was not connected to the covering of costs linked to 19— The Greek Government relies in this respect on the the operation of aid management, but was judgments in Case 31/78 Bussane [1978] ECR 2429 and in Case 233/81 Denkavit Futtermittel v Germany [1982] the consideration for general services pro- ECR 2933.

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beneficiaries from participation in the sup­ deductions made by the Associations vary port programme or to impair the function­ between 0.5% and 2% of the aid to be ing of the common organisation of the paid. The Commission should therefore market. only have applied a correction rate of 1.25%.

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not applicable, the Hellenic Republic, rules corresponding to Article 15(3) of which conferred a public function on the Regulation No 1765/92 and Article 30a Associations, should have prevented them of Regulation No 805/68. However, it is from retaining a certain percentage of the apparent from those two provisions that aid. Lastly, the argument that the deduction the Member States are prohibited from was voluntary was not put forward until deducting administrative costs from the two years after the objections had been Community aid to be paid. made by the Commission and thus after the expiry of the period within which that submission would have had to be consid- ered.

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pensate for the loss of income caused by the 53. The case-law of the Court of Justice reduction of the institutional prices within cited by the Greek Government 22 is not the framework of the new support system relevant to the present case. Regulation for producers of certain arable crops intro- (EEC) Nol725/79, 23 which had to be duced as a result of the reform of the interpreted in those cases, does not contain common agricultural policy. Under the any rules on the costs of the checks to be third recital of Regulation No 2066/92 conducted by the Member States. The the purpose of the premiums in question wording of that regulation did not prohibit is to grant substantial compensation for the the Member States from conducting checks consequences for producers of the reduc- without remuneration or from requiring tion of the intervention price in the beef the undertakings concerned to reimburse and veal sector. the costs of those checks.

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B — Fruit and vegetable sectors organisation of fruit and vegetable pro- ducers:

56. The Commission applied a correction amounting to GRD 5 138 253 067 24 in this sector, justifying that correction on the ground that there were deficiencies in the Greek management and control system and (a) which is formed on the producers' own in the operation of the producers' organi- initiative for the purposes, in particu- sations. lar:

— of promoting the concentration of supply and the stabilisation of 1. Particular provisions prices at the producer stage in respect of one or more of the products referred to in Article 1, and 57. The fundamental provisions governing the common organisation of the market in fruit and vegetables are contained in Reg- ulation (EEC) No 1035/72 of the Council of 18 May 1972. 25 — of making suitable technical facil- ities available to producer mem- bers for presenting and marketing the relevant products; 58. As regards the producers' organisa- tions, Article 13, as amended by Regula- tion (EEC) No 3284/83, 26 provides as follows:

(b) which requires the producer members:

— to provide the information — shall take a decision on the granting of requested by the organisation on recognition within three months from harvests and supplies; the filing of the request,

— shall notify the Commission, within a time-limit of two months, of any deci- sion to grant, refuse or withdraw (c) which has been recognised by the recognition, Member State concerned pursuant to paragraph 2.

— shall draw up each year a report on the application of this Article ...'

2. Member States shall at the request of the organisations concerned grant them the recognition referred to in paragraph 1(c) if: 59. With regard to the withdrawal of products listed in Annex II of that regula- tion, 27 Article 15(1), as amended by Reg- ulation (EEC) No 1154/78, 28 provides that producers' organisations or associations of

27 — These are products covered by the price and intervention system. — there is sufficient evidence as regards 28 — Council Regulation (EEC) No 1154/78 of 30 May 1978 amending Regulation (EEC) No 1035/72 on the common the duration and effectiveness of their organisation of the market in fruit and vegetables and activities, in particular the tasks re- Regulation (EEC) No 2601/69 laying down special mea- sures to encourage the processing of certain varieties of ferred to in paragraph 1, oranges (OJ 1978 L 144, p. 5).

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2. Summary Report

60. In its Summary Report, the Commis- sion states that in the course of several inspections it found significant deficiencies in the management and control system in 63. The Commission also discovered a the Hellenic Republic in the fruit and number of deficiencies in the area of citrus vegetable sectors. fruits. Alarming weaknesses were evident in the management and control system concerning the recognition and control procedures of the producers' organisations. In addition, the inspection of a large producers' organisation in Arta uncovered 61. The inspections carried out for peaches a number of deficiencies. The Commission and nectarines in Macedonia in August asked the Greek authorities to conduct an 1994 and August 1995 revealed that pro- investigation of the withdrawal of oranges

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in the nomos of Arta; however, no such 10% correction, with the exception of the investigation was satisfactorily conducted. nomos of Pella. There had been more The Commission therefore proposed a serious deficiencies in that nomos than in correction of 10% both for citrus fruits the other districts. and for peaches and nectarines, whilst notification was given of a correction of 20% for the nomos of Pella.

3. Submissions of the applicant

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found had not justified the correction made nectarines, similar instructions were issued and that correction was arbitrary. A 10% relating to the recognition of certain pro- reduction should be applied only where it ducers' organisations and the checks to be can be concluded that there is an increased conducted. Furthermore, a computerised risk of loss to the EAGGF. In its correc- form was devised for members of the tions, the Commission must take into producers' organisations in order to be consideration the nature and severity of able to verify their productivity and eco- the infringements and the financial loss nomic efficiency. As far as the supposed incurred by the Community. With regard to lack of technical equipment and interven- oranges, the Commission inspected only tion funds is concerned, the Hellenic one nomos out of a total of 52 in Greece. Republic argues that Regulation As far as peaches and nectarines were No 1035/72 does not prescribe that the concerned, the Commission inspected only producers' organisations must have their 2 (of the 52) nomoi and restricted itself to own technical equipment, with the result those producers' organisations whose con- that it is also possible to hire such equip- duct had already been criticised by the ment. That regulation does not lay down a Greek authorities. The 20% correction ceiling for the intervention funds either, and applied for the nomos of Pella should also the possibility that the financial means of be regarded as unjustified, since in that the producers' organisations might be nomos the Commission inspected only inadequate is not in itself a reason to refuse eight producers' organisations to whose recognition. recognition the Greek authorities had already objected.

The deficiencies to which the Commission tigations conducted by it. Those investiga- objects regarding registration on the mem- tions had uncovered a series of irregula- bership list had no consequences. rities. Thus, in the course of an investiga- tion in August 1994 in the area of peaches and nectarines, Commission officials found that some producers' organisations had not provided their members with the necessary technical facilities for marketing the prod- ucts, that others did not have an interven- 70. With regard to the supposed deficien- tion fund, that the withdrawal coefficient cies in the withdrawal of oranges in the had been incorrectly applied and that the nomos of Arta, further payments were obligation to define the size of fruit had not suspended immediately, further informa- been complied with. On the basis of those tion was requested from the competent findings, a correction of 50% was proposed local authorities and a special investigation for the 1992 to 1994 marketing years. group was appointed which nevertheless While the Greek authorities had taken concluded that no irregularities had oc- measures to improve the management and curred in that case. control system, new investigations had revealed that there were still significant deficiencies, in particular regarding packa- ging and mandatory definition of fruit size. In the area of citrus fruit, the same irregularities occurred as for peaches. Those irregularities concerned the recogni- tion of producers' organisations, the con- 4. Submissions of the defendant trols on the operation of those organisa- tions and the existence of intervention funds. Even though the Commission did not apply a correction for the 1992 and 1993 marketing years, the existence of the 71. The Commission firstly points out that abovementioned deficiencies justified the the clearance of accounts for 1994 covers proposed reduction of 10% for the 1994 the period from 16 October 1993 to marketing year. 15 October 1994. Since the marketing year for peaches and nectarines extends from 1 May to 31 October and for oranges from 1 October to 15 July, compensatory pay- ments for the withdrawal of peaches and nectarines applied for in August 1994 could not be taken into consideration until the clearance of accounts for 1995.

the declared expenditure relating to citrus 76. With regard to the argument put for- fruit and peaches and nectarines was justi- ward by the Greek authorities regarding the fied on account of the deficiencies found operation of the producers' organisations, and the resulting risk of loss to the EAGGF. the Commission claims that it has not been The losses to the EAGGF were in any case substantiated what instructions were higher than the correction made by the drawn up for the producers' associations Commission. with a view to improving quality control. In addition, the measures taken did not relate to the deficiencies established during an inspection in April 1994, according to which producers' organisations did not have any membership lists and admission was possible even after the expiry of the admission obligation under Article 5 of Regulation (EEC) No 2602/90. 29 As a result of those deficiencies, the competent authorities should have withdrawn recog- 74. In reply to the accusation that the nition from the producers' organisations. inspections were supposedly not represen- The improvements referred to by the Hel- tative, the Commission contends that the lenic Republic were not decided until June inspections conducted by it concerning 1995 and thus could not have had any peaches and nectarines in the nomoi of effect during the 1994 marketing year. The Pella and Imathia had covered 95% of investigations conducted in the nomos of Greek production of those products and Pella had revealed that 48% of the produ- 93.5% of the total amount of funding paid cers' associations had neither their own nor to the Hellenic Republic. The inspections hired equipment for presenting and market- for citrus fruit — where the nomoi of ing their products. Agulide, Arta and Leucade were inspected — were also representative, since 74% of all funds for the 1994 financial year were paid over to that area. The inspections in the nomos of Pella had revealed that 48% of the producers' orga- nisations did not have the necessary tech- nical facilities for marketing fruit.

80. Nor has the Greek Government proven that the recognised producers' organisa- tions have the intervention funds necessary 78. It should firstly be stated that under under Article 15(1) of Regulation Article 13(2) of Regulation No 1035/72, as No 1035/72, as amended by Regulation amended by Regulation No 3284/83 — No 1154/78, 31 for financing the measures see point 58 above — Member States must in connection with the withdrawal of grant the producers' organisations recogni- certain products. tion only if there is sufficient evidence as regards the duration and effectiveness of their activities. The duties of a producers' organisation under Article 13(1) of that regulation include making suitable techni- cal facilities available to producer members for presenting and marketing the relevant 81. Even though the Commission did not products. make any financial corrections for the 1992 and 1993 marketing years, that does not mean that it would not have been entitled to make corrections for the 1994 financial year on the basis of the same deficiencies in the management and control system. The Court has already ruled in this regard. In Italy v Commission 32 it held as follows: 79. In the present case the Greek Govern- ment could not prove that the findings made by the Commission regarding the lack of technical equipment held by produ- cers' organisations and producers were inadequate. However, since the Court of Justice has held 30 that it is for the Member '... Where the Commission did not carry State to show that the Commission's find- out the correction due in respect of a ings are incorrect and to adduce the most detailed and comprehensive evidence that 31 — See point 59 above. 32 — Case 55/91 Italy v Commission [1993] ECR I-4813, 30 — See point 22 above. paragraph 67.

84. In this sector the Commission declined 82. With regard to the representativeness to recognise expenditure amounting to of the inspections conducted by the Com- GRD 629 212 616. 33 That correction is mission, those inspections for the nomoi of based, firstly, on deficiencies in the manage- Pella and Imathia covered 95% of Greek ment and control system in connection with production of peaches and nectarines and the permanent abandonment of wine-grow- 93.5% of the total compensatory payments ing areas and, secondly, on failure to made. The inspections for citrus fruit achieve the quantities of wines fixed for covered a total of 74% of the compensa- compulsory distillation. tory payments made in that sector for the 1994 financial year. Finally, for the nomos of Pella, the Commission found that 48% of the producers' organisations inspected did not have the necessary technical equip- ment. 1. Particular provisions

86. Under Article 2(3) the yield per hectare of the grubbed-up areas is to be calculated 'Whereas before the premium is paid... the on the basis of the average yield declared production capacity of the areas to be for the recipient's holding and the produc- grubbed up should be assessed, and tive capacity of the wine-growing area to be whereas it should be verified that grubbing grubbed up assessed by the competent up of the said areas has actually taken authority. place; whereas these findings must be certified in order to enable the applicant to prove that grubbing up has been carried out...'.

87. Under Article 4(2) the grant of the premium is subject to a written declaration in which the applicant undertakes to grub up the vines on the areas in respect of 89. Under Article 4(2), on receiving the which the premium has been applied for or application for the grant of the premium, to have them grubbed up before 15 May of the competent authority must verify the the year following that in which the information contained in the application, application is submitted. determine in particular the production capacity of the wine-growing area to be grubbed up on the basis of its age, its state of upkeep and the proportion of missing vines, calculate the yield per hectare of the areas concerned, and notify the applicant of 88. Regulation (EEC) No 2729/88 35 laid the level of premium granted, after allow- down detailed rules for the application of ing him to submit his own observations.

35 — Commission Regulation (EEC) No 2729/88 of 31 August 1988 laying down detailed rules for the application of Regulation (EEC) No 1442/88 on the granting, for the 1988/89 to 1995/96 wine years, of permanent abandon- ment premiums of wine-growing areas (OJ 1998 L 241, 90. Under Article 6(1) the competent p. 108). authority must, at the applicant's request I-26

36 —Council Regulation (EEC) No 2392/86 of 24 July 1986 establishing a Community vineyard register (OJ 1986 L 208, p. 1). 37 — With regard to the spirit and purpose of such a vineyard register, the second recital states that 'such a register is needed if vital information is to be obtained on production potential and trends, in order to ensure the proper functioning of the common organisation of the market in wine, and in particular of the Community arrangements on Member States shall ensure that the com- intervention and planting, and monitoring measures'. petent authorities have a sufficient number 38 —Council Regulation (EC) No 1549/95 of 29 June 1995 of suitably qualified and experienced staff amending Regulation No 2392/86 establishing a Commu- nity vineyard register (OJ 1995 L 148, p. 37). 39 — Inserted by Regulation No 1549/95 and amended by Council Regulation (EC) No 1596/96 of 30 July 1996 amending Regulation No 2392/86 establishing a Commu- 40 —Council Regulation No 2048/89 of 19 June 1989 nity vineyard register (OJ 1995 L 206, p. 38). (OJ 1989 L 202, p. 32).

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to carry out efficiently the wine controls 2. Summary Report referred to in the Annex in particular.'

(b) Compulsory distillation (a) Permanent abandonment of wine-grow- ing areas

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ducted only after the prescribed period had 3. Submissions of the applicant expired. The Commission therefore con- siders a correction of 8.64% of expenditure to be justified.

(a) Permanent abandonment of wine-grow- ing areas

(b) Compulsory distillation 98. In the view of the Hellenic Republic, the correction made amounting to 8.64% is not justified, since the control and inspec- tion system is operational and reliable. The on-the-spot checks, which covered 100% 96. The reason for a correction in this of the submitted documents, were entrusted sector can be seen from the clearance of to specialised agricultural experts and were accounts for 1991, in which it emerged that conducted both before and after set-aside. several Member States (including the Hel- lenic Republic) had failed to comply with their obligations regarding compulsory dis- tillation and had systematically underesti- mated the stocks at the end of the market- ing year. As a result, compulsory distilla- tion had been carried out on too small a 99. The checks conducted before set-aside scale, the operation of the common orga- concerned the surface area, productivity nisation of the market in wine had been and yields of the individual plots. The impaired and the costs of private storage results of the checks and the data contained had increased. in the applications were published. The Greek system provides for verification of the data and the results of the checks by two different bodies. After the land is set aside, there is another on-the-spot check, including a new survey of the surface area, from which the data obtained are com- pared with the earlier data. 97. As regards compulsory distillation, the Commission initially assumed a shortfall of 153 000 hectolitres. In the conciliation procedure initiated by the Greek authori- ties, the Commission corrected that amount on the basis of documents produced by the Greek authorities and now assumes a 100. As far as the identification and sur- deficit of 135 569 hectolitres. veying of surface areas is concerned, the

101. With regard to the alleged discrepan- cies between production declarations and yields, it is claimed that the average yield of a plot was calculated with great precision with due regard to the age of the vines, fructification, the strength of the vines and (b) Compulsory distillation irrigation possibilities. Lastly, in order to assess the compensatory payments, the yield of a plot was compared with yields from the preceding years. In addition, the Greek Government refers to the fact that 105. In the view of the Greek Government, harvest declarations were not used to there is no legal basis for the application of

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106. Firstly, the Commission refers to the fact that the deficiencies in the control system concerning permanent set-aside have been known since the clearance of accounts for 1992 and 1993. The state- ments made by the Hellenic Republic are not such as to dispel the Commission's doubts regarding the existence of an opera- 108. The Commission therefore initially tional system for recognition and determi- proceeded from the assumption of a cor-

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rection of 17% for the 1993/94 financial 5. Assessment year. As a result of the information subse- quently communicated by the Greek autho- rities, the Commission eventually applied a correction of 8.64%.

(a) Permanent abandonment of wine-grow- ing areas

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between the areas declared as set-aside land tillation. The Court has held 42 that Mem- and the areas which were actually set aside. ber States are required to take the measures It was found in particular that, in this case necessary to satisfy themselves that the also, the necessary technical equipment was transactions financed by the EAGGF are not available. actually carried out and are executed correctly, even if the specific Community act does not expressly provide for the adoption of particular supervisory mea- sures.

114. The submissions of the Greek Gov- ernment are not capable of proving that the Commission's findings are incorrect, since the Government has not adduced detailed 117. However, since it is undisputed that or comprehensive evidence that its own the quantity for compulsory distillation laid information and figures are accurate. The down by the Commission under Article 39 Greek Government could not indicate any of Regulation No 822/87 was not complied specific circumstances by reference to with, it must be assumed that the Hellenic which the existence of a reliable and Republic has infringed Article 8(1) of Reg- operational supervisory system could be ulation No 729/70 in conjunction with proven. Similarly, with regard to the level Article 5 of the EC Treaty (now Article 10 of the correction applied by the Commis- EC). sion, the Greek Government could not prove that the calculation was incorrect.

118. The Commission was able to calculate possible risks to the EAGGF only on the basis of the wine remaining in storage. 115. The submissions of the Greek Gov- Although there is no automatic correlation ernment which are based on those argu- between the quantities of wine stored and ments must therefore be rejected. the quantities not distilled, it would be difficult to make the calculation on any other basis. 43 Moreover, the Greek Gov- ernment was unable to supply evidence of actual errors in the calculations.

1 2 1 . In the light of the foregoing, I propose that the Court should:

(1) dismiss the action;

(2) order the Hellenic Republic to pay the costs.

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