C-414/98

2. The term 'extensification' has not so far gained acceptance in the majority of Mem- 3. Extensification is defined in Arti- ber States' languages. 3It appeared for the cle 1 a ( 2 ) of R e g u l a t i o n ( E E C ) first time in Community legislation in No 797/85, 5 (hereinafter 'Regulation Section III of the Annex to Council Deci- No 797/85') as amended by Regulation (EEC) No 1760/87. 6This term has since come into widespread use in Community * Original language: Spanish. legislation on agriculture. 7 1 — Commission Regulation (EEC) No 4115/88 of 21 Decem- ber 1988 laying down detailed rules for applying the aid scheme to promote the extensification of production (OJ 1988 L 361, p. 13). 4 — Council Decision 87/218/EEC of 19 March 1987 amending 2 — Commission Regulation (EEC) No 838/93 of 6 April 1993 Decision 83/641/EEC adopting joint research programmes amending Regulation No 4115/88 (OJ 1993 L 88, p. 16). and programmes for coordinating agricultural research 3 — 'Extensification' is not included either in the Shorter Oxford (OJ 1987 L 85, p. 46). English Dictionary or in Merriam-Webster's Collegiate 5 — Council Regulation (EEC) No 797/85 of 12 March 1985 on Dictionary. Nor does it appear in either Le Petit Robert improving the efficiency of agricultural structures (OJ 1985 or the Larousse de la langue française. I see that the Spanish L 93, p. 1). equivalent of the term — 'extensifícación' — is not included in the 21st edition of the Diccionario de la Lengua Española 6 — Council Regulation (EEC) No 1760/87 of 15 June 1987 (1994) or in the Diccionario de uso del español (edited by amending Regulations (EEC) No 797/85, (EEC) María Moliner, revised edition, 1992), or in the Diccionario No 270/79, (EEC) No 1360/78 and (EEC) No 355/77 as ideológico de la lengua española (edited by Julio Casares, regards agricultural structures, the adjustment of agriculture 2nd edition, 18th impression, 1992). The Italian term to the new market situation and the preservation of the 'estensivizzazione' does not appear in the Novissimo countryside (OJ 1987 L 167, p. 1). Dizionario della Lingua Italiana, nor is the Portuguese 7 — It appears in no fewer than 28 Council and Commission term 'extensificaçao' to be found in the Dicionário da regulations and in 10 decisions, as well as in various Lingua Portuguesa (edited by J. Almeida Costa and opinions of the Economic and Social Committee and the A. Sampaio e Melo). Court of Auditors.

6. The plaintiff in the main proceedings, Landerzeugergemeinschaft (Agricultural Producer Group) eG Groß Godems brought an action challenging the decision of the defendant, the Amt für Land- wirtschaft (Office for Agriculture) Parchim 4. With a view to assisting the adjustment (the administrative authority responsible and reorientation of agriculture in the for implementing common agricultural Community, Regulation No 1760/87 policy measures), withdrawing the aid for required Member States to introduce an the extensification of agricultural produc- aid scheme designed to encourage the tion and demanding repayment of the sums conversion and extensification of produc- paid in previous years. tion. 8 — Council Regulation (EEC) No 1094/88 of 25 April 1988 amending Regulations (EEC) No 797/85 and (EEC) No 1760/87 as regards the set-aside of arable land and the extensification and conversion of production (OJ 1988 L 106, p. 28). 9 — Case C-190/91 Lante [1993] ECR I-67. 10 —Case C-384/95 Landboden-Agrardienste [1997] ECR I-7387. I see that in the Opinion delivered to the Court in this case. Advocate General Jacobs has already emphasised the misleading nature of the word 'extensifi- cation'. In footnote 3 to that Opinion he states that: 'This somewhat misleading term, which does not appear in the Shorter Oxford Dictionary, is to be found in Community legislation as denoting a reduction in agricultural produc- 5. The Court is not unfamiliar with the tion... According to The Times of 23 January 1989, "Extensification is Euro-jargon for farming less inten- term extensification, as it has already sively, balancing lower output by savings in expenditure on feed, fertilisers and pesticides". Source: Oxford English adjudicated twice on Community rules Dictionary Word and Language Service (OWLS), Oxford relating to this process. On the first occa- University Press.'

11. By decision of 2 December 1994, the 8. This amount had been calculated on the defendant annulled the decision to grant- basis of an area of 352.95 hectares culti- aid and demanded that the DEM 543 680 vated with surplus products and an area of already disbursed in that connection be 495.49 hectares cultivated with non-sur- repaid. The reason given for that decision plus products. By decision dated 2 October 1992, the amount of aid was reduced to DEM 290 330 following an adjustment of 11 — The plaintiff in the main proceedings has clarified certain aspects of the facts as set out by the national court in the the area. Aid for the 1991/92 marketing order for reference. It claims that the product spread on its year was paid to the plaintiff. For the land was some left-over nitrogenous fertiliser, which had heen manufactured before the demise of the former 1992/93 marketing year it was reduced to German Democratic Republic and deposited in its storage facilities but that it had no use for it as it had been DEM 253 350 because the new legal situa- practising extensive farming for years. In 1994 Mr Neick. who was a member of the Group's management board, had tion precluded the simultaneous subsidising told stime employees that this batch of fertiliser should be of set-aside land and areas farmed under an got rid of by the end of the year. He apparently meant that it should be disposed of along with the rubbish or be extensification programme. This amount offered to a neighbouring farm which was still farming using traditional methods. Mis instructions seem to have was also paid. been misinterpreted and the employees allegedly spread the fertiliser on land where the crops had already been harvested. According to the plaintiff, the parties agree that the amount of fertiliser spread was not sufficient to produce any increase in yields. The amount involved was only annuiti 2 tonnes, which averages out at 35 kg/ha, that is 9 kg of nitrogenous fertiliser per hectare of arable land, while at the time an average of 94 kg of nitrogenous fertiliser was used per hectare of arable land. The plaintiff contends that the small area over which the fertiliser was spread shows that its employees did not intend to fertilise the land in accordance with normal agricultural practice, 9. For the 1993/94 marketing year the as the quantity used did not even amount to 10% of th-- concentration required for a routine dressing. amount of the extensification aid was

3. What are the criteria for determining whether there is a serious infringement 13. Because it had doubts concerning the within the meaning of Article 16(3) of interpretation to be given to Article 16(1) Regulation (EEC) No 4115/88, as and (3) of Regulation No 4115/88, the amended by Regulation (EEC) national court decided to stay proceedings No 838/93?'

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III — The relevant Community provisions financial penalties as a minimum measure in the event of failure to comply with undertakings made.

14. Regulation No 4115/88 laying down detailed rules for applying the aid scheme to promote the extensification of produc- 16. The national court asks the Court of tion was adopted by the Commission to Justice to interpret Article 16, as amended give effect to Regulation No 797/85. Under by Regulation No 838/93. The text is as Article 4(1) of the Regulation Member follows: States may provide for two methods of reducing output namely the 'quantitative' method laid down in Article 6 and based on the quantities actually reduced, and the 'production methods' method and laid down in Article 8, and based on the 'Article 16 adoption of less intensive sectoral farming techniques.

beneficiary can prove that the discrepancy V — The questions is not intentional or the result of negligence on his/her part.

A — The first question

3. Member States shall impose financial penalties as a minimum sanction in the event of failure to comply with undertak- 18. I believe that in asking this question, ings made, other than undertakings refer- the national court is seeking to ascertain red to in paragraphs 1 and 2, except in whether, where the difference between the cases of force majeure or failure to comply number of units for which the aid was with undertakings as a result of other sought and the number of units measured is factors beyond the control of the benefi- greater than two hectares but no more than ciary. In the case of serious infringements of 10% of the cultivated area, the penalty to these undertakings and particularly in the be applied is that provided for in the first case of attempted fraud by the beneficiary sentence of Article 16(1) or that provided or his/her successors, no aid shall be due for for in the first sentence of Article 16(2). the period covered by the undertaking to carry out extensification, without prejudice to any additional penalty which may be appropriate.'

I would remind you that the first penalty consists of reducing the future aid by calculating it on the basis of the number of units measured minus the margin of excess, and that the second penalty consists of paying no aid for the period covered by the undertaking to carry out extensifica- IV — The procedure before the Court tion, without prejudice to any additional penalty which may be appropriate.

20. It is important to stress that the old text of Article 16 of Regulation No 4115/88 differed considerably from the text which the national court has asked to have interpreted in this case. Previously, the Regulation left it entirely to the Member States to determine the penalties and did 21. The beneficiary's obligation to reduce not provide for any gradation according to his output if he is applying the 'quantita- the seriousness of the infringements. tive' method is unquestionably among the quantifiable undertakings on extensifica- tion. I nevertheless consider that para- graphs 1 and 2 of Article 16 may also apply where the beneficiary has failed to comply with undertakings he has given on the basis of the 'production methods' The new Article 16, on the other hand, method if those undertakings are defined consists of two quite separate parts pursu- in terms of quantity. ing different objectives. Paragraphs 1 and 2 lay down the conditions under which the aid may be reduced or withdrawn, depend- ing on the seriousness of the infringement, where the inspections carried out in accor- dance with Article 15 reveal a discrepancy between the number of units for which the aid was requested and the number of units In this connection I believe that, in its order measured. These two paragraphs are there- for reference, the national court was cor- fore applicable only where the undertak- rect in supposing that, in a case such as this, ings on extensification that have been where the beneficiary of the aid has failed broken are quantifiable. to comply with a quantifiable undertaking given on the basis of the 'production methods' method, the penally to be applied is one of the two provided for in Arti- cle 16(1) and (2) of R e g u l a t i o n No 4115/88. I also feel that it would not All other cases of non-compliance must be be correct to consider that paragraph 1 penalised in accordance with Article 16(3), alone applies where the difference between which leaves it to the Member States to the number of units for which aid was determine the penalties. I take this para- requested and the number of units mea-

On the contrary, if the margin of excess The national court wants to know specifi- exceeds the limits laid down in para- cally whether, if the beneficiary fails to graph 1, paragraph 2 provides that the prove that the discrepancy is neither inten- aid will be withdrawn for the whole of tional nor the result of negligence on his/ the period covered by the undertaking to her part, the aid already paid must be carry out extensification, so that in the reduced with effect from the date on which event of a more serious infringement, the the undertaking to carry out extensification penalty is considerably higher than in the was given or only from the date on which it previous case. was broken.

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26. I share the Commission's view. The second sentence of Article 16(1) applies generally to aid paid in advance and does 28. The reply to the second question refer- not contain any time-limit such as that red by the national court should therefore suggested by the national court in the be that the second sentence of Article 16(1) question it has referred for a preliminary must be interpreted to mean that the ruling. reduction of aid paid in advance is applic- able from the commencement of the period for which the undertaking was given, unless the beneficiary can prove that the discre- pancy is neither intentional nor the result of 27. It must also be borne in mind that the negligence on his/her part. check which Member States are required to carry out, in accordance with Article 15 of Regulation No 4115/88, to ensure that beneficiaries fulfil their undertakings on extensification, consists of an inspection, each year, of a representative sample of holdings, which may not be less than 5%. This is a small proportion and, for that reason, the penalties provided for in Arti- cle 16 would lose a large part of their C — The third question deterrent effect if they could only be imposed according to the number of hec- tares in respect of which failure to comply with the undertaking on extensification had been established. This argument is sup- ported by the fact that in practice it is often 29. By this question, the national court impossible to establish, retrospectively, that asks what the criteria arc for determining there has been a failure to comply with the whether there is a 'serious infringement' undertaking. within the meaning of Article 16(3) of

If that paragraph 3 refers only to serious infringements as distinct from those refer- 3 3 . T h e p u r p o s e of R e g u l a t i o n red to in paragraphs 1 and 2, there is, in my No 2988/95 is to ensure the protection of view, no need to reply to this question, the European Communities' financial inter- since I have shown in the analysis of the ests by means of general rules relating to first two questions that the case put by the homogeneous checks and to administrative national court is covered by Article 16(1) in measures and penalties concerning irregu- the interpretation that I have proposed. I larities with regard to Community law. shall nevertheless examine it, in case the Court should consider that it requires an answer. 12 — OJ 1995 L 312, p. 1.

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37. Should the Court deem it necessary to reply to the third question referred to it for 35. As this penalty is very severe and a preliminary ruling, I believe that the corresponds to that provided for in the criteria for determining whether there is a first sentence of Article 16(2), the Commis- 'serious infringement' within the meaning sion proposes that the Regulation be inter- of Article 16(3) of Regulation No 4115/88 preted to mean that, in order to determine are, first, whether it occurred in the context whether a serious infringement within the of cases of failure to comply with under- meaning of this provision has been com- takings given, as distinct from the cases mitted, the failure to comply with the referred to in Article 16(1) and (2) and, undertaking must be comparable to the second, whether it was accompanied by infringements referred to in paragraph 2 serious negligence or fraudulent intent.

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OPINION OF MR RUIZ-JARABO — CASE C-414/98

VI — Conclusion

38. Having regard to the foregoing considerations, I propose that the Court should reply as follows to the questions submitted to it for a preliminary ruling by the Verwaltungsgericht Schwerin:

(1) Article 16 of Commission Regulation (EEC) No 4115/88 of 21 December 1988 laying down detailed rules for applying the aid scheme to promote the extensification of production, as amended by Commission Regulation (EEC) No 838/93 of 6 April 1993, must be interpreted to mean that the penalty provided for in the first sentence of paragraph 1 of that article is applicable where the discrepancy between the number of units for which aid was requested and the number of units measured exceeds two hectares but is less than 10% of the arable area.