C-132/99

OPINION OF MR RUIZ-JARABO — CASE C-132/99

O P I N I O N O F ADVOCATE GENERAL RUIZ-JARABO C O L O M E R delivered on 13 November 2001 1

1. Pursuant to Article 173 of the EC Treaty I — The Community legislation (now, after amendment, Article 230 EC), an action has been brought by the Nether- lands against Commission Decision 1999/187/EC of 3 February 1999 on the clearance of the accounts presented by the 2. Regulation No 729/70, 4on the financ- Member States in respect of the expendi- ing of the common agricultural policy lays ture for 1995 of the Guarantee Section of down the expenditure of the Member States the European Agricultural Guidance and for which the Guarantee Section of the Guarantee Fund. 2 EAGGF assumes responsibility and the conditions under which financing may be granted. Under Article 3, measures to stabilise agricultural markets which are undertaken according to Community rules are financed. Article 8 requires the Member States to take the necessary steps to satisfy themselves that transactions financed by the Fund are actually carried out and are executed correctly, to prevent and deal with irregularities and to recover sums lost as a result of irregularities or negligence.

The aim of this action is to have the decision annulled on account of its requi- 3. Regulation No 1723/72, 5on making up ring the Netherlands to make a correction, accounts for the European Agricultural for the reasons set out in the summary Guidance and Guarantee Fund, Guarantee report, of NLG 117 277, 3 representing Section, requires the Member States to send 50% of the expenditure of NLG 234 553 the Commission each year the accounts declared to the EAGGF in connection with relating to expenditure financed with a hemp production aid for the 1995 financial view to their approval. year.

4. On 4 June 1993 the Commission tow and waste of true hemp including adopted a communication to the EAGGF, 6 pulled or garnetted rags or ropes. 8The entitled 'Calculation of financial con- general rules on the granting of aid for sequences when preparing the decision hemp produced in the Community are set regarding the clearance of the accounts of out in Regulation No 619/71. 9 According EAGGF Guarantee', establishing the guide- to Article 3, 10 aid is to be granted only to lines to be followed when drafting the the grower and only for hemp grown from summary report concerning the 1990 finan- certified seed of varieties contained in a list cial year and subsequent ones. Appendix I to be drawn up in accordance with the deals with 'the financial consequences of procedure laid down in Article 12 of inquiries undertaken the clearance of Regulation (EEC) No 1308/70. Under accounts programme' and Appendix II with Article 6, the amount of the aid is calcu- the 'financial consequences within the lated in relation to the area sown and clearance of accounts of EAGGF Guaran- harvested. Article 4 provides that Member tee of deficiencies in controls carried out by States are to ensure by administrative the Member States — flat rate correc- supervision that the product for which aid tions'. This Appendix states that, as a rule, has been requested qualifies for that aid where the Commission adopts a decision in and for the purposes of that supervision, respect of a financial correction, it must they are to require areas sown and har- assess the degree of risk of losses to vested to be declared. According to Community funds occurring as a con- Article 5, Member States are to verify the sequence of the control deficiency, bearing accuracy of the declarations of areas sown in mind their nature, quality and frequency. and harvested and applications for aid Three rates of flat rate correction are submitted by the producers by means of provided for: 2%, 5% and 10% of expen- spot checks. diture, depending on whether the defi- ciency relates to factors of greater or lesser importance in the control system or the implementation of checks to determine that the expenditure is of a regular nature.

7. Article 4 of Regulation No 1164/89 sets out the conditions under which the areas — carried out after seed formation, can qualify for aid. It was initially worded as follows:

— aimed at terminating the growing cycle 'Aid shall be granted only in respect of of the plant, and areas:

— carried out with the aim of valorizing (a) which have been completely sown and the stalk, with or without seed. harvested and on which normal culti- vation work has been carried out; and

The valorization referred to in the third indent shall be considered as having been (b) for which a declaration of areas sown desired if the plant has been pulled up or if has been made in accordance with it has been cut by a cutter bar operating, in Article 5.'

13 — Commission Regulation (EC) of 27 June 1994 amending 12 — In the version resulting from Regulation No 3569/92. Regulation (EEC) No 1164/89 (OJ 1994 L 159, p. 12).

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The Dutch text of this article, amended in this way, seems to differ from the other language versions: as the first sentence and the third indent of the Dutch text relate to flax, the Netherlands authorities have been able to interpret this article as meaning that it does not apply to hemp. I will examine the practical consequences of this differ- ence during my reasoning. 11. Since the Netherlands disputed the content of this report, a bilateral consul- tation meeting took place on 30 January 1997, followed by an exchange of cor- respondence between the parties in April, May and August 1997. Finally, in October, I I— The facts in the present dispute the Commission confirmed that hemp had been harvested before seed formation in 1994, contrary to Article 4 of Regulation No 1164/89, the hemp areas cultivated could not therefore qualify for any aid and 9. From 11 to 15 September 1995, the that a 50% flat rate correction needed to be EAGGF services conducted an inspection applied to the expenditure declared by the in the Netherlands. The Netherlands auth- Netherlands in respect of budget item 1402 orities had been notified beforehand of the relating to hemp. purpose of the visit, which related to compliance with Regulations Nos 1308/70, 619/71 and 1164/89. The exercise was intended to verify whether the expenditure declared in respect of the 1993, 1994 and 1995 production years by the Hoofdpro- duktschap voor Akkerbouwprodukten in the hemp and flax fibre sector were cor- rect. 14 12. In December 1997, the Netherlands submitted a reasoned request for concili- 14 — In paragraph 10 of the application, the Netherlands asserts that this visit formed part of a series of control visits conducted in the four Member States which were the main producers of hemp at the time: Spain, France, the United Kingdom and the Netherlands itself. 15 — Reference VI/5078/96 NL.

ation, in accordance with Article 2(1) of 13. In January 1999, the Commission Decision 94/442. 16 adopted the summary report relating to the results of the checks for the clearance of EAGGF accounts, Guarantee Section, in respect of the 1995 financial year. In point 4.7.4.1.2., dealing with hemp production aids in the Netherlands, the Commission acknowledged that it had noted, on site and on the premises of the undertaking responsible for processing production, that harvesting had been car- In its report, the Conciliation Body ried out before full seed formation and that expressed doubts about the Commission's the Netherlands authorities were not exer- approach and the scope of some of its cising adequate control in this connection. arguments. It acknowledged that the Com- mission could refuse to pay the aid when the eligibility conditions were not entirely met, although it did think that the basis on which the areas in question were deter- mined did not seem to be entirely reliable. 14. To take account of the Conciliation In the absence of sufficiently significant Body's remarks in its report, the Commis- controls on the actual state of the plants at sion re-examined the scope of the concept harvest time, the information provided by of 'seed formation' and the method of the sole Community producer of seed did quantifying areas ineligible for aid. not seem sufficient to allow the actual state of each parcel to be determined with certainty, primarily because climatic con- ditions can vary from one year, or from one region, to another and because differences As regards the first point, instead of requi- might arise from one parcel to another ring that harvesting should take place after under identical conditions. The Concili- the formation of all the seed, the Commis- ation Body confirmed that it had not been sion considered that it was sufficient that able to establish whether there was a half the seed should be formed and that the definition of the concept of 'formed' seed amendment introduced by Regulation which was acknowledged by all the No 466/96 17 with effect from the 1996/97 experts. For these various reasons, it there- production year set out in specific detail the fore felt that the corrections which the rules previously in force. Commission could propose would be based on a more solid foundation if they were based mainly on the deficiencies recorded, in the different checks, in relation to rates adapted to the degree of seriousness of those deficiencies. As regards the second point, the Commis- sion felt that the date on which 50% of the

seed was formed varied according to the and rejoinder were lodged at the Registry years and the varieties sown was an estab- on 22 October 1999 and 28 January 2000 lished fact. However, having regard to the respectively. absence of any check on compliance with this condition during the 1994 production year and to the technical information avail- able, as well as the results of the inspections conducted on site in other Member States, the Commission became convinced that 16. By order of the President of the Court 50% of the seed was not formed before of 26 January 2000, the Kingdom of Spain 1 September, regarded as the cut-off date was granted leave to intervene in support of for estimating the areas of hemp able to the form of order sought by the Nether- qualify for partial aid in the case of the lands. The President also allowed the varieties of hemp used in the Netherlands request for the confidential treatment of in 1994 and bearing in mind the climatic certain documents produced by the Nether- conditions in that country. To determine lands. accurately the areas of hemp harvested before the regulatory stage, the Commis- sion asked the Netherlands authorities in August 1998 to advise it of the harvesting dates. According to the information pro- vided in respect of the 1994/95 production 17. Since none of the parties has submitted year, all the Netherlands hemp areas, a request within the period prescribed namely 138.50 hectares, were harvested indicating the reasons for which it would before 1 September 1994. The Commission have wished to be heard, the Court therefore decided that a 50% correction decided, in accordance with Article 44a of ought to be applied to the total amount of the Rules of Procedure, to give judgment the expenditure declared, namely NLG without calling on the parties to attend a 234 553, so that the amount pertaining to hearing. budget item 1402 in the clearance of accounts was reduced to NLG 117 277.

19. The Netherlands asserts that Regu- lation No 1308/70 does not require Member States to harvest fibre and seed from the same plant. The Commission Since the Commission found that none of therefore interprets it erroneously when it the areas devoted to hemp growing met all points out, in the summary report, that the the conditions required for qualifying for parcels harvested before seed formation can the EAGGF aid, it could have excluded all only qualify for aid at the rate of 50% the expenditure from financing. In this because aid for hemp growing has two connection, the Court has held that components, namely, the production of Articles 2 and 3 of Regulation No 729/70 fibre and the production of seed. No such allow the Commission to accept responsi- obligation could appear in that regulation bility being assumed by the EAGGF only since it is virtually impossible in practice to for the amounts paid in accordance with harvest both fibre and seed profitably. The the rules established in the different sectors Kingdom of Spain maintains that Regu- of agricultural products. Where Commu- lation No 1308/70 does not require har- nity legislation authorises the payment of vesting fibre and seed to be harvested from an aid only on condition that certain the same plant, nor does it make any formal requirements pertaining to evidence provision for a breakdown of the produc- or control are observed, aid paid without tion aid between seed and fibre in per- complying with this condition is not in centage terms. accordance with Community law and the

22. The Netherlands submits that the risk of hemp subsidised under Regulation No 1164/89 being diverted to the produc- tion of drugs is very limited since, accord- Firstly, the risk of hemp being diverted to ing to Article 3, the aid is granted only for the production of drugs cannot be as areas sown with the varieties listed in negligible as it claims since the Community Annex B; it further states that the appli- legislature reduced the maximum narcotic cation for aid is accompanied by a copy of substance content of the approved varieties the official label in respect of the seed used, from 0.3% to 0.2% with effect from the that the tetrahydrocannabinol content must 2001/2002 marketing year to avert the be recorded and samples taken according to potential danger it posed for public the method described in Annex C and that, health. 19 The legislation applicable to the according to Article 4(a), harvesting must granting of aid must therefore be inter- have been carried out after seed formation. preted strictly and without losing sight of the fact that both the condition relating to

18 — Case 819/79 Germany v Commission [1981] ECR 21, paragraph 8; Case 327/85 Netherlands v Commission [1988] ECR 1065, paragraphs 24 and 25; Case C-197/90 19 — Council Regulation (EC) No 1420/98 of 26 June 1998 Italy v Commission [1992] ECR I-1, paragraph 38; and amending Regulation (EEC) No 619/71 laying down Case C-28/94 Netherlands v Commission [1999] ECR general rules for granting aid for flax and hemp (OJ 1998 I-1973, paragraph 54. L 190, p. 7).

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26. The Netherlands maintains that, before granting the aid, it always checks that the hemp harvested belongs to one of the 24. Furthermore, since what is involved is varieties referred to in Annex B to Regu- the absence of proportion between the lation No 1308/70 by means of the seed breach committed and the correction labels which must be attached to the applied, it should be pointed out that as application for aid and the random checks all the area of hemp sown was harvested on parcels of land. Moreover, the import- before the formation of the seed, the ation into the Netherlands of hemp seed falling within tariff headings 1207 99 10 20 — Case 334/87 Greece v Commission [1990] ECR I-2849, summary publication, paragraph 42, and Case 335/87 Greece v Commission [1990] ECR I-2875, summary 21 — Case C-197/90 Italy v Commission [1992] ECR I-1, publication, paragraph 28. paragraph 39.

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28. I subscribe to the Commission's line of C. First part of the second plea: infringe- argument on this point also. The carrying ment of Regulation No 1164/89, in that no out of specific checks on imports of seed is account was taken of the divergence not a condition for granting the aid and an between the Dutch version of Article 4 inadequate check could not accordingly and the other language versions of this give rise to any financial penalty in the provision context of the clearance of accounts.

22 — In accordance with the In- en uitvoerbesluit landbouw- goederen 1980, Staatsblad 1980, No 576, read in con- junction with the In- en uitvoerbescbikking 30. The Netherlands maintains that, in its landbouw-goederen 1981, Staatscourant 1192, No 21. summary report, the Commission used an Two regulations governing the importation and expor- tation of agricultural products are involved. e r r o n e o u s v e r s i o n of R e g u l a t i o n

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No 1164/89. The contested correction 31. The Commission maintains that this relates to expenditure in the 1995 financial divergence between the Dutch version and year, which began on 16 October 1994 and the other versions is a manifest error on ended on 15 October 1995. which the applicant cannot rely.

Regulation No 1469/94 was published on 27 June 1994 and entered into force on 4 July 1994, that is to say, shortly before the harvest of that year, and this difference The fact nevertheless remains that the next in formulation was only noted after the sentence is worded as follows in all the harvest. The applicant considers that, to Community languages: 'The valorization determine the financial consequences, the referred to in the third indent shall be Commission should have weighted its judg- considered as having been desired if the ment in the light of the problems of inter- plant has been pulled up or if it has been pretation resulting from the erroneous cut by a cutter bar operating, in the case of translation of this provision of Community flax and hemp, at a maximum height of 10 law and taken account of the fact that the cm and 20 cm respectively from the error was not discovered in good time. ground'. Since Article 4, as amended by

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34. Secondly, the Netherlands authorities were associated with the drafting of Regu- lation No 1469/94 since, according to the Thirdly, if the reading of the Dutch version Commission, they were consulted in the of Regulation No 1469/94 raised doubts in context of the Management Committee for the minds of the authorities responsible for Flax and Hemp, so that they should have applying it, the applicant should have put immediately noted that the draft related to this point to the Commission, as the the two plants. Moreover, they had the principle of cooperation in good faith set time to acquaint themselves with its con- out in Article 10 EC requires. Since the tent, since the Dutch version of the draft Netherlands authorities omitted to do this, was sent to them well before the harvest; I consider that the error they may have they attended the Management Committee committed ought to be imputed to them, meeting which approved the draft on even though the text was translated by the

23 — Case 55/87 Moksel [1988] ECR 3845. See also Case 29/69 24 — Case C-54/91 Germany v Commission [1993] ECR Stauder [1969] ECR 419, paragraph 3; Case 30/77 Bouc- I-3399, paragraphs 10 to 12, and Case C-478/93 Nether- hereau [1977] ECR 1999, paragraph 13; and Case lands v Commission [1995] ECR I-3081, paragraphs 48 to C-449/93 Rockfon [1995] ECR I-4291, paragraph 28. 50.

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35. The above reasoning shows that the first part of the second plea is not well founded and must therefore be rejected.

The Netherlands ensures that the date of maturity of the seed of authorised hemp varieties varies little under the climatic conditions of that country. The earliest seed reaches maturity on 7 September, D. Second part of the second plea: infringe- whereas that of the latest variety reaches ment of Regulation No 1164/89 in that the it on 20 September, with only two weeks concept of 'seed formation' has been incor- separating these two dates. Among the four rectly interpreted varieties sown, two of them must, accord- ing to the Netherlands, be described as early (Felina 34 and Fibrimon 56). It adds that in 1994 the main flowering of the 36. The Netherlands maintains that, at the varieties Felina 34, Fibrimon 56, Futura 77 time of the 1994 hemp harvest, Article 4(a) and Fedrina 74 took place between 21 July and 6 August, in other words substantially 25 — Case 11/76 Netherlands v Commission [1979] ECR 245, earlier than the Commission asserts; the paragraphs 25 and 26. latter's data lie between 12 and 22 August. 26 — This is precisely what I had to do to interpret this 50% of the seed reaches maturity between provision, since the Spanish version contained numerous omissions and typographical errors. three and four weeks after flowering, so it

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38. The concept of 'seed formation' is certainly not, it seems, defined in botany. 37. Taking as its basis a technical article attached by the Netherlands to the reply 27 and data supplied by France's National 28 — To which growers of hemp seeds sown in the Netherlands belong in 1994. 29 — The Commission has applied a very wide margin of tolerance in favour of the applicant since the data at its 27 — G. Fournier and M. Paris, 'Détermination de chimiotypes disposal indicated that the late varieties sown in the à partir des cannabinoïdes chez le chanvre à fibre mono- Netherlands would reach the 50% seed formation stage ïque (Cannabis sativa L.) — Possibilités de sélection', in between 11 and 21 September and the 100% seed Physiologie Végétale, Vol. 18 (2), pp. 349-356, especially formation stage towards the end of September or in early p. 354. October, or even mid-October at the latest.

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31 — Insertion made by Regulation No 1469/94. 32 —Council Regulation (EEC) No 1557/93 of 14 June 1993 amending Regulation (EEC) No 1308/70 (OJ 1993 L 154, 39. Given the fact that no definition of the p. 26). concept of 'seed formation' existed then in 33 — Council Regulation (EEC) of 24 November 1988 laying down special measures for hemp seed (OJ 1988 L 325, Community law, the meaning and scope of p. 2). this term need to be determined by taking 34 — Commission Regulation (EEC) No 3164/89 of 23 October 1989 laying down detailed rules for the application of into consideration the general context in special measures in respect of hemp seed (OJ 1989 L 307, p. 22). which it is used and in accordance with its 35 — In fact, under Article 1(1) of Council Regulation (EC) usual meaning in everyday language. 30 No 1420/98 of 26 June 1998 amending Regulation (EEC) No 619/71 laying down general rules for granting aid for flax and hemp (OJ 1998 L 190, p. 7), the sample taken to determine the tetrahydrocannabinol content consists of the upper third of a representative number of plants 30 — Case 349/85 Denmark v Commission [1988] ECR 169, selected at random at the end of their flowering period and paragraph 9. with stalks and seeds removed.

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was harvested when the seed was still in the that time, formation must be understood to milky state, in other words between the end apply to the formation of nearly all the of flowering and the initial fruiting stage. seed.

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E. Third plea: breach of the requirement to It adds that, although the Netherlands did state reasons not comply with the obligations arising from Regulation No 1308/70, this non- compliance was very limited and that its consequences for the financial obligations of the Community in the framework of the system of aid for hemp production are negligible.

44. According to the applicant, the state- ment of reasons for the disputed decision does not enable the reasoning which led the Commission to apply to it a 50% correc- tion as regards budget item 1402 to be understood. To understand it, reference needs to be made to the 1995 summary report in which Regulation No 1308/70 45. The Kingdom of Spain considers that and the 'guidelines' are relied on. However, the principle of the right to be heard was the latter provide only for flat-rate correc- only formally complied with since the tion rates of 2%, 5% and 10% and the Commission ignored the explanations it Commission has not explained why it has was given. It also considers that the prin- not chosen one of these rates. Moreover, ciple of sound administration was not the fact of applying a 50% correction complied with, since the Commission did because the harvest was carried out before not take into account or assess the expla- seed formation is not supported by Regu- nations given by the Netherlands auth- lations Nos 1308/70, 619/71 or 1164/89 orities. either.

The Commission only formed a definitive opinion after hearing the applicant, taking note of the Conciliation Body's opinion and 48. It is settled case-law that the extent of discussion within the EAGGF Committee. the obligation to state reasons depends on the nature of the act in question and on the context in which it was adopted. 37 As regards the decisions on the clearance of accounts, these do not require a detailed statement of reasons since they are taken on the basis of the summary report(s) and also all correspondence between the Member State and the Commission, which 50. Having regard to the foregoing con- means that the government concerned has siderations, I am of the opinion that the been closely associated with the process of Netherlands Government was well drafting the decision and therefore knew informed of the reasons for which the the reason for which the Commission con- Commission applied a 50% correction to sidered it did not have to make the the expenditure arising from budget head- contested amounts the responsibility of ing 1402 and that the contested decision is the EAGGF. 38 therefore solidly grounded.

37 — Case 327/85 Netherlands v Commission [1988] ECR 1065, paragraph 13, and Case C-54/91 Germany v Commission [1993] ECR I-3399, paragraph 10. 38 — Case 347/85 United Kingdom v Commission [19881 ECR 1749, paragraph 60; Case C-238/96 Ireland v Commission [1998] ECR I-5801, paragraph 22; Case C-44/97 Germany v Commission [1999) ECR I-7177, paragraph 21; Case C-242/97 Belgium v Commission [2000] ECR I-3421, paragraph 95; Case C-245/97 Germany v Commission [2000] ECR I-11261, paragraph 48; and Case C-278/98 51. It follows that this plea, too, is not well Netherlands v Commission [2001] ECR I-1501, paragraph 119. founded and must be rejected.

NETHERLANDS v COMMISSION

VI — Conclusion

58. In the light of the foregoing considerations, I propose that the Court should

(1) dismiss the action brought by the Netherlands against Commission Decision 1999/187/EC of 3 February 1999 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1995 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund.

(2) order the applicant to pay the costs.

(3) order the Kingdom of Spain to bear its own costs.