C-373/99

OPINION OF MR TIZZANO — CASE C-373/99

OPINION OF ADVOCATE GENERAL TIZZANO delivered on 12 July 2001 *

Table of contents

I — Introduction I - 9623 II — Legal framework I - 9624 A — General rules I-9624 B — Rules governing the fruit and vegetable sector I - 9629 C — Rules governing the arable sector I - 9631

III — Legal analysis I - 9635 A — Introduction I - 9635 B — Financial corrections in the fruit and vegetable sector I - 9635 1. Irregularities in the system of recognition and the functioning of producers' organisations I - 9636 (a) Failure to take account of progress achieved as a result of new administrative measures concerning recognition of producers' organisa- tions I- 9637 (b) Alleged infringement of the fourth indent of Article 5(2)(c) of Regula- tion No 729/70 I-9639 (c) Irregularities in the functioning of producers' organisations I - 9640 (d) Absence of technical facilities and intervention funds available to producers' organisations I - 9641 2. Free distribution of products withdrawn from the market I - 9641 (a) Free distribution to large families: arguments of the parties and assessment I - 9642 (b)Free distribution to school pupils: arguments of the parties and assessment I - 9643 C — Financial corrections in the arable sector I - 9644 1. Deficiencies in the administration and control system I-9644 (a) Observations by the EAGGF I-9644

1 — Original language: Italian.

2. In both decisions the Commission applied financial corrections to the clear- ance of accounts presented by the Member States in respect of the expenditure for

2 — Commission Decision of 3 February 1999 (notified under number C(1999) 209) (OJ 1999 L 61, p. 37; hereinafter: 3. I would, however, point out that, by Decision 99/187'). order of 8 March 2001, the Court declared

I - 9623

OPINION OF MR TIZZANO — CASE C-373/99

the application by the Greek Government sponding to the sums withheld by the manifestly inadmissible in so far as con- agricultural cooperative associations ('the cerns financial corrections in respect of ACAs') when the aid was paid to recipients. olive oil, cotton and beef and veal, and held that Decision 99/187 provided for the final clearance of accounts relating to those sectors and that the contested decision contained nothing new in this respect. It only remains, therefore, to consider the pleas regarding the financial corrections in the fruit and vegetable and arable sectors. I I — Legal framework

A — General rules

'Intervention intended to stabilise the agri- 'The Commission, after consulting the cultural markets, undertaken according to Fund Committee: Community rules within the framework of the common organisation of agricultural markets, shall be financed under Arti- cle 1(2)(b).'

9. It should be pointed out in that regard that, as regards interventions declared by the Member States, of which account must (c) shall decide on the expenditure to be be taken for the purpose of their clearance excluded from the Community finan- within the framework of the EAGGF cing referred to in Articles 2 and 3 financial year, the last indent of Article 7(1) where it finds that expenditure has not of Regulation No 296/96 3 provides that: been effected in compliance with Com- munity rules.

'For a year "n", account shall be taken of expenditure declared by the Member States in accordance with the present paragraph Before a decision to refuse financing is from 16 October of year "n - 1" to taken, the results of the Commission's 15 October of year "n".' checks and the replies of the Member State concerned shall be notified in writing, after which the two parties shall endeavour to reach agreement on the action to be taken.

10. Pursuant to Article 5(2)(c) of Regula- tion No 729/70 as amended by Council

3 — Commission Regulation (EC) No 296/96 of 16 February If no agreement is reached, the Mem- 1996 on data to be forwarded by the Member States and the monthly booking of expenditure financed under the Guar- ber State may ask for a procedure to be antee Section of the Agricultural Guidance and Guarantee initiated with a view to mediating Fund (EAGGF) and repealing Regulation (EEC) No 2776/88, as amended by Commission Regulation (EC between the respective positions within No 1391/97 of 18 July 1997 (OJ 1997 L 190, p. 20). a period of four months, the results of

12. As regards, in particular, the above- — concerning national aids, or infrin- mentioned Article 5(2)(c) of Regulation gements, for which the procedures No 729/70 as amended, it must be noted referred to in Articles 93 and 169 that provisions subsequent to that regula- of the Treaty have been initiated.' tion are of direct importance in this case.

I - 9626

GREECE v COMMISSION

13. That is true especially of Article 2(1) of two months, and the Commission may Regulation No 1287/95 which states that modify its position in consequence. In the regulation applies from the financial justified cases the Commission may agree year beginning on 16 October 1995, while to extend this period for reply. Article 2(2) provides that refusal to grant financing as referred to in Article 5(2)(c) of Regulation No 729/70 may not relate to expenditure claimed in respect of a finan- cial year prior to 16 October 1992 but without prejudice to decisions regarding the clearance of the financial years preced- After expiry of the period allowed for reply, ing the entry into force of the regulation. the Commission shall initiate a bilateral discussion, and both parties shall endea- vour to come to an agreement as to the measures to be taken. The Commission shall then formally communicate its con- clusions to the Member State, referring to Commission Decision 94/442/EC.

14. Articles 8(1) and (2) of Commission Regulation (EC) No 1663/95 of 7 July 1995 laying down detailed rules for the application of Council Regulation (EEC) 2. The decisions referred to in Arti- No 729/70 regarding the procedure for the cle 5 ( 2 ) ( c ) of R e g u l a t i o n (EEC) clearance of the accounts of the EAGGF No 729/70 shall be taken after an exam- Guarantee Section (OJ 1995 L 158, p. 6) ination of any report drawn up by the are also relevant in that respect, providing: Conciliation Body according to the provi- sions laid down in Decision 94/442/EC.'

'A. 2% of expenditure — where the defi- ciency is limited to parts of the control system of lesser importance, or to the operation of controls which are not essen- tial to the assurance of the regularity of the expenditure, such that it can reasonably be concluded that the risk of loss to the 17. As regards financial consequences in EAGGF was minor; the context of the clearance of accounts of the EAGGF guarantee section resulting from deficiencies in the controls carried out by the Member States, a Commission inter-service group drew up a document setting out the guidelines to be followed in B. 5% of expenditure — where the defi- such cases. That document (document ciency relates to important elements of the No VI/216/93 of 1 June 1993; 'the Belle control system or to the operation of Report') was approved by the Commission controls which play an important part in and subsequently communicated to the the assurance of the regularity of the Member States through the EAGGF man- expenditure, such that it can reasonably agement committee, where the report was be concluded that the risk of loss to the favourably received. The guidelines in the EAGGF was significant; Belle Report draw on established practice by the Commission. The Court has held that the application of flat-rate financial corrections was admissible and takes account of such corrections in carrying out its own assessments. 4 C. 10% of expenditure — where the defi- ciency relates to the whole of or funda- mental elements of the control system or to the operation of controls essential to assur- ing the regularity of the expenditure, such that it can reasonably be concluded that there was a high risk of widespread loss to the EAGGF.'

21. The fruit and vegetable sector is gov- 24. Article 15 of Regulation No 1035/72 erned by Council Regulation (EEC) provides, in particular, that to benefit from No 1035/72 of 18 May 1972 on the com- market withdrawal measures — which mon organisation of the market in fruit and give rise to payment of compensation to vegetables (OJ, English Special Edition producers by the organisations of which Series 1972 (II), p. 437). they are members, such compensation being subsequently refunded by the autho- rities of the Member States from funds chargeable to the EAGGF — the products not offered for sale must conform to the quality standards although they need not 22. Article 13 of the Regulation, as amen- comply with marketing rules. According to ded by Council Regulation (EEC) indents 2 to 4 of Article 15(1), as consoli- N o 3284/83 of 14 November 1983 dated by Council Regulation (EEC) (OJ 1983 L 325, p. 1) provides for the No 1154/78 of 30 May 1978 (OJ 1978 creation, on the initiative of producers of L 144, p. 5): fruit and vegetables, of producers' organi- sations for the purpose of promoting the concentration of supply and the régularisa- tion of prices at the producer stage in respect of one or more of the products referred to by Regulation No 1035/72 and of making suitable technical facilities avail- able to producer members for presenting and marketing the relevant products.

I - 9629

OPINION OF MR TIZZANO — CASE C-373/99

— free distribution to charitable orga- nisations and foundations and to persons whose right to public 25. It should be recalled that the provisions of Article 15(1) of Regulation No 1035/72 5 — As amended by Council Regulation (EEC) No 2454/72 of are intended to limit the quantity of 21 November 1972 (English Special Edition 1972 (II) p. 60), Council Regulation (EEC) No 1315/80 of 28 May 1980 products withdrawn and thus, in the final (OJ 1980 L 134, p. 20) and Council Regulation (EEC) analysis, to limit EAGGF interventions. No 3284/83 of 14 November 1983 (OJ 1983 L 325, p. 1).

I - 9630

GREECE v COMMISSION

assistance is recognised by their 3. It shall be the responsibility of Member national laws, in particular because States to organise the free distribution they lack the necessary means of provided for in Article 21(1)(a), first, sixth subsistence. and seventh indents... .'

C — Rules governing the arable sector

28. With regard to the arable sector, a new system for administration and control of Community aid by the Member States, the 'integrated administration and control sys- tem' ('IACS'), was established under Coun- cil Regulation (EEC) No 3508/92 of 27 November 1992 (OJ 1992 L 355, p. 1) for certain Community aid schemes includ- ing the EAGGF for the purpose of improv- ing effectiveness and usefulness of those schemes (see third recital). Article 1(1)(a) of Regulation No 3508/92 provides that:

29. Under Article 2 of the Regulation, the integrated system must, in each Member State, comprise in particular a computer- 3. Each Member State shall designate an ised data base, an alphanumeric identifica- authority responsible for coordinating the tion system for identification of agricultural checks provided for in this Regulation. parcels and aid applications by producers and an integrated control system.

4. National authorities may, under condi- tions to be laid down, use remote sensing to determine the area of agricultural parcels, identify crops and verify their status. 30. Pursuant to Article 7 of Regulation No 3508/92:

5 .....'

'The integrated control system shall cover all aid applications submitted, in particular as regards administrative checks, on-the- spot checks and, if appropriate, verification 32. So far as concerns checking of applica- by aerial or satellite remote sensing.' tions for aid, Article 6(1) to (4) of Com- mission Regulation (EEC) No 3887/92 of 23 December 1992 laying down detailed rules for applying the integrated adminis- tration and control system for certain Community aid schemes (OJ 1992 L 391, p. 36) provides that: 31. According to Article 8 of Regulation No 3508/92:

' 1 . Administrative and on-the-spot checks shall be made in such a way as to ensure effective verification of compliance with ' 1 . Member States shall carry out adminis- the terms under which aids and premiums trative checks on aid applications. are granted.

I - 9632

4. Applications subjected to on-the-spot checking shall be selected by the competent 'Every inspection visit must be the subject authority on the basis of a risk analysis and of a report setting out, in particular, the an element of representativeness of the aid reasons for the visit, the persons present,

I - 9633

OPINION OF MR TIZZANO — CASE C-373/99

the number of parcels visited, those mea- of identification and registration of sured, the measuring methods used, the bovine animals and the integrated number of animals of each species found control system referred to in Article 7; and, where applicable, their identity num- bers.

(b) from 1 January 1996 at the latest as It will be open to the farmer or his regards the other elements referred to representative to sign the report. He may in Article 2.' either merely attest his presence at the inspection or also add his observations.'

36. The 13th recital in the preamble to Regulation No 3887/92 states that the 34. In accordance with Article 19, Regula- integrated system is applicable in its tion No 3887/92 is applicable from 1 Feb- entirety only from 1 January 1996 and ruary 1993. that, 'without prejudice to the obligations arising from Article 8(1) of Regulation (EEC) No 729/70, it is therefore indispen- sable to oblige the Member States to avoid any lack of administration or control meanwhile by adopting the necessary mea- sures at national level.' 35. So far as concerns the entry into force of the integrated system, Article 13(1) of Regulation No 3508/92 provides that:

3 8 . A r t i c l e 1 7 ( 1 ) of Regulation ruled that the action by Greece was inad- No 3887/92 provides that: missible in part, the purpose of these proceedings is confined to the financial corrections concerning the fruit and vege- table and arable sectors. I should add that many of those corrections concern irregu- 'In cases where by virtue of Article 13 of larities similar to those identified by the Regulation (EEC) No 3508/92 certain fea- Commission in the context of the clearance tures of the integrated system are not yet in of accounts for 1994 which were subject to application each Member State shall take financial corrections similar to those deci- whatever administrative and control mea- ded for 1995; the action brought, on that sures are necessary to ensure compliance occasion also, by the Greek Government with the terms on which the aids concerned under Article 230 EC was dismissed by the are granted.' Court in its judgment in Case C-247/98 Greece v Commission [2001] ECR I-1.

39. Under Article 15(3) of Council Regula- tion (EEC) No 1765/92 of 30 June 1992 establishing a support system for producers of certain arable crops (OJ 1992 L 181 p. 12):

B — Financial corrections in the fruit and 'The payments referred to in this Regula- vegetable sector tion are to be paid over to the beneficiaries in their entirety.'

I I I— Legal analysis 41. Taking first the fruit and vegetable sector, the submissions raised in that respect by the Greek Government may be subdivided into two groups, one for each type of correction: on the one hand, A — Introduction submissions relating to irregularities in the system of recognition and the functioning of producers' organisations; and on the other hand, those relating to the free 40. As I mentioned above, following the distribution of products withdrawn from order of the Court of 8 March 2001 which the market.

— the functioning of those organisations, some of which had not established rules on the marketing of products of their members, or had been set up for the sole purpose of collecting fruit and vegetable products to be withdrawn, 44. The Greek Government requested the without making any attempt to adapt partial annulment of Decision 1999/596 so supply to the requirements of the far as concerns various aspects of the market; irregularities identified by Commission inspectors, on the basis of a number of grounds which I shall now examine analy- tically.

— technical means and adequate interven- 7 — See Commission letter No VI/25315 of 24 June 1998 the Conciliation Body's final report on fruit and vegetables tion funds available to those organisa- No 98/GR/110 of 4 January 1999 and the supplement to the 1995 Summary Report. tions.

I - 9636

GREECE v COMMISSION

47. For my part, I would first of all point out that the Greek Government does not contest the findings of the checks carried 46. For its part, the Commission argues in particular that the reasons which led it to make the financial corrections for 1994 still 9 — The Commission points out that, in spite of improvements, persisted during the following financial numerous inspections carried out by the Commission from August 1994 to August 1995 for peaches and nectarines, and from October 1994 to January 1996 for citrus fruits revealed continuing and considerable deficiencies in the system of recognition of producers' organisations. 8 — Financial year beginning 16 October 1994 and ending 10 — This would be the case, for example, for peaches and 15 October 1995 (see last indent of Article 7(1) of Regula- nectarines which are harvested between June and Septem- tion No 296/96). ber.

I - 9637

OPINION OF MR TIZZANO — CASE C-373/99

I - 9638

GREECE v COMMISSION

provisions in payments effected by a Mem- law. On the basis of those parameters and ber State, the Commission is required to of the findings of the checks carried out by correct the accounts presented by that the Commission, a financial correction of Member State.' 12 In the present case, the 10% applied to all expenditure declared by results of the inspections carried out by the it for fruit and vegetables is, in the view of Commission, which are not disputed by the that government, arbitrary and excessive Greek Government, constituted sufficient because it assumes that there is a risk of justification for the financial corrections for generalised losses for the EAGGF whereas 1995, as confirmed, moreover, by the in reality the figure is based on the results judgment in Case C-247/98 Greece v of on-the-spot checks of a sample of regions Commission in which the Court considered which are not representative of the general similar corrections applied in the 1994 picture. 13 That sample, the applicant sub- financial year for the same irregularities mits, besides being excessively restricted to be entirely justified (paragraph 46). (one district out of a total of 52 for oranges and two for peaches and nectarines) inclu- ded in particular producers' organisations for which the Greek authorities had already noted problems and where it could there- fore be expected that there would be a 51. On that basis it appears to me that the greater number of irregularities; if, instead, Greek Government has not shown that the the checks had been carried out in any corrections decided by the Commission other part of the country, it would have result from an incorrect assessment of the been seen that Community rules were fully facts and that, therefore, the arguments observed. under consideration must be rejected.

(c) Irregularities in the functioning of pro- ducers' organisations

54. I would merely point out that the data provided by the Commission (and, again, 56. Turning to the submissions concerning not contested by the Greek Government) the irregular functioning of producers' are identical to those on which a similar organisations, the Greek Government financial correction of 10% for 1994 was claims that the financial correction in based. In Case C-247/98 Greece v Com- question is based on an incorrect assess- mission, cited above, the Court's reply to ment of the facts and on misuse of powers. the Greek Government which, relying on In actual fact, the national authorities had the same arguments as submitted in these forwarded all the instructions needed to proceedings, had challenged that correc- enable checks to be carried out correctly tion, was that, having regard to the figures and effectively, particularly as regards the provided by the Commission, the represen- functioning of producers' organisations tative nature of the inspections could not and procedures for withdrawal from the reasonably be doubted. In view of the market and for free distribution. To that similarity of the situations, I see no reason end, a computer file listing members of to come to any different conclusion. producers' organisations has been created in order better to monitor their production and commercial activities. The Greek Gov- ernment also states that those measures were applied from 1994 and strengthened in 1995 as confirmed by the improvements at all levels as revealed in inspections carried out by the Commission in the 55. By the same token, I also take the view summer of 1995. that the challenge by the Greek Govern- ment regarding the objectivity and the restrictive nature of the sample of agricul- tural holdings subjected to inspections is unfounded. Extending the geographical area of the inspection would, in my view, have been of minor significance given that 57. In my view, however, the Commission in the agricultural holdings of the remain- is very much in the right when it replies that

(d) Absence of technical facilities and inter- 59. I shall now turn to the arguments vention funds available to producers' orga- advanced by Greece regarding the second nisations category of financial corrections in the fruit and vegetables sector, based on irregulari- ties in the free distribution of products withdrawn from the market. It must be observed that there have been no unequi- 58. Finally, as I stated earlier, the Greek vocal indications either in the case-files nor Government also rejects the allegation at the hearing as to whether those financial concerning the lack of technical facilities corrections were made within the context and intervention funds for producers' orga- of the clearance of accounts for 1995 or for nisations which the Commission consid- the following year. If the second hypothesis ered to be in breach of the provisions of were true, the arguments put forward by Regulation No 1035/72. It may be Greece would at the outset be redundant, observed, however, that the statement of given that this action is concerned with the reasons adduced in this respect by the annulment of a decision affecting the 1995 Commission for 1995 is identical to that financial year only; as, however, the first invoked for the previous year (the 1995 hypothesis has not been ruled out, I should report in fact refers back to that of 1994) examine the arguments by the applicant on and the applicant raises objections on this this point. matter which are very similar to those raised, and dismissed, in Case C-247/98 cited above. 14 As no new fact has been adduced in these proceedings, there is no reason, therefore, to diverge from the views 60. Amongst the irregularities mentioned 14 — See paragraphs JO and 55 of Case C-247/98 Greece v in the 1995 summary report, some concern Commission. the free distribution of fruit and vegetable

61. On the matter of free distribution to (a) Free distribution to large families: argu- large families, the Commission points out ments of the parties and assessment that the Greek authorities were too gener- ous in their application of the first indent of the abovementioned Article 21(1)(a), first indent. Although that provision is intended to restrict the group of recipients of aid under consideration to persons 'whose 63. In reply to the Commission's remarks, right to public assistance is recognised by the Greek Government cites two circulars their national laws, in particular because from the Ministry of Agriculture of 18 Jan- they lack the necessary means of subsis- uary and 11 December 1996 respectively tence', free distribution was authorised which, according to that government, in under the legislation in force at the time codifying an already existing practice, to all 'large families', those with at least allowed the quantities distributed freely to four children (three in the case of single- be reduced to a minimum, limiting them in parent families), irrespective of their level particular to persons with a certificate of income. proving their entitlement to public assis- tance.

64. The Commission once again maintains, 62. As regards school pupils, they enjoyed however, that the corrective measures free distribution which did not comply with adopted in 1996 by the Greek authorities the sixth indent of Article 21(1)(a) of Regulation No 1035/72 which, to avoid market imbalances, stipulates that in those 15 — On the question of free distribution to pupils in schools the cases the quantities of fruit and vegetables provision states, 'Member States ensuring that the quan- tities thus distributed are supplementary to the quantities should not substitute, but should be sup- normally bought by school canteens' (emphasis added).

67. The Commission defends the contested decision citing, first, the precise wording of the sixth indent of Article 21(1)(a) of Regulation No 1035/72 and stating, sec- ondly, that during the inspections con- ducted in November 1996, the Greek authorities were unable to provide a clear (b) Free distribution to school pupils: argu- indication of the measures adopted to ments of the parties and assessment ensure compliance with the provision.

16 — Council Regulation (EC) No 2200/96 of 28 October 1996 on the common organisation of the market in fruit and vegetables (OJ 1996 L 297, p. 1). Regulation No 2200/96 now allows the free distribution of fruit to school children 66. On this matter, the Greek Government 'other than as part of the meals served in school canteens, and to pupils in schools which do not have canteens advances three kinds of argument to con- providing meals' (see Article 30(1)(b)).

I - 9643

OPINION OF MR TIZZANO — CASE C-373/99

(a) administrative supervision:

(i) internal supervisory system. Indeed, it was found that the C — Financial corrections in the arable agency responsible for payment, sector DIDAGEP, exercises minimal supervision over the regional head offices of the Ministry of Agricul- ture, which in their turn exercise insufficient supervision over the agronomic engineers responsible 69. The applicant government goes on to for administrative checks and on- raise different arguments relating, first, to the-spot checks who work at the financial corrections concerning deficien- local offices: in particular, the cies in the administration and control system for agricultural expenditure in 17 — Further details may be found in two letters addressed by Greece and, second, to the retention of the Commission to the Greek authorities dated 24 July administration costs for managing Com- 1995 (No VI/28405) and 14 August 1998 (No VI/31634) and the final report by the Conciliation Body on the arable munity aid. sector No 98/GR/121 of 25 February 1999.

I - 9644

GREECE v COMMISSION

I - 9645

OPINION OF MR TIZZANO — CASE C-373/99

(iii) quality of reports on checks carried a period of transition; at that time Greece out. The documents, which were faced particular problems given that it had not even drafted on a number of no land register; none the less, the on-the- occasions, often did not contain spot checks showed improvements, increas- the data, the purpose of the checks ing from 5% to 9.3%, not far short of the and precise information on the threshold of 10% set, as stated above, by results of measurements of agricul- the Commission's services; the negative tural parcels and the number of aspect of the deficiencies observed was, parcels measured. however, mitigated by the fact that there exists in Greece a kind of 'public' control effected by displaying copies of aid appli- cations at the offices of the local authority; checks by the Commission had not revealed major anomalies. 71. The 1995 summary report states that some of those deficiencies (in particular those concerning supervision of ACAs by regional offices, selection of agricultural holdings to be checked and reports on the checks carried out) concern elements of the system of controls which are the responsi- 73. In view of the abovementioned factors bility of the Member States and which, which, furthermore, were not contested by besides being indispensable for effective the Greek authorities and the fact that it management of the aid, are immediately was not possible to quantify precisely the applicable. Therefore, although the final loss incurred, the 1995 summary report deadline for the IACS to become applicable proposed the application of a flat-rate was postponed until 1 January 1997, 18 financial correction of 2%, the minimum those deficiencies were considered unac- such rate listed in the Belle Report (see ceptable. The 1995 summary report went above, paragraph 17). In its final report of on to emphasise that those deficiencies 25 February 1999 the Conciliation Body were not limited to the regions where the accepted that proposal. Commission's services had carried out investigations, but applied to the entire national system.

76. Secondly, the applicant mentions a number of factors in order to prove the existence of a reliable supervisory system in Greece. In particular, it points out the following: in the financial year in question the selection of the sample of agricultural holdings where on-the-spot checks were 78. The Commission replies first and fore- carried out was made by regional offices of most that the arguments put by the appli- the Ministry of Agriculture on the basis of cant government to the Court are merely a detailed instructions from the central repetition of those already examined by the administration defining the risk criteria in Conciliation Body and not considered by accordance with Regulation No 3887/92; that body sufficient to justify opposing the although the system was characterised by proposal of a financial correction of 2%. deficiencies (due to the complexity of the The Commission continues, moreover, by integrated system, however), a system of stating that the deficiencies in the super- comparative checks had, nevertheless, been visory system in Greece were so great and organised; cooperation between the ACAs so numerous as to justify by themselves and the Ministry of Agriculture had allowed the latter to maintain an adequate 19 — Equal to 5% (see first indent of Article 6(3) of Regulation level of supervision. No 3887/92).

I-9647

OPINION OF MR TIZZANO — CASE C-373/99

(i) Introduction 81. It should also be noted that it is the task of the Commission to prove the existence of an infringement of the rules on the 79. Firstly, certain essential aspects of the common organisation of agricultural mar- matter under consideration should be kets 22 and that, when the Commission noted. In particular, it is well known that refuses to charge certain expenditure to the the EAGGF finances only those interven- EAGGF because of such an infringement, it tions made in accordance with Community must justify the decision alleging that provisions within the framework of the inspection procedures operated by the common organisation of agricultural mar- kets 20 and that the purpose of the proce- dure to clear accounts is to guarantee that 21 — See Case C-2/93 Exportslachterijen van Oordegem [1994] ECR I-2283, paragraphs 17 and 18, and Case C-235/97 [1998] France v Commission [1998] ECR I-7555, para- graph 45. 22 — See Case C-281/89 Italy v Commission [1991] ECR I-347, 20 — To that effect, see, among others, Case C-253/97 Italy v paragraph 19; Italy v Commission [1993] cited above, Commission ¡1999] ECR I-7529, paragraph 6, and the paragraph 13, and Italy v Commission ]1999] cited above, case-law cited. paragraph 6.

I - 9648

GREECE v COMMISSION

82. That having been said, I shall now consider the arguments of the Greek Gov- ernment set out above. 84. It also remains to consider, however, whether the financial correction of 2% in respect of the 'minor nature' of the irregu- 23 — See, for example, Case C-8/88 Germany vCommission larities found at a time when the integrated [1990] ECR I-2321, paragraph 23. system was still being developed is not an 24 — See Case C-54/95 Germany v Commission [1999] ECR I-35, paragraph 35, and Case C-28/94 Netherlands excessive amount. In order to rule out that v Commission [1999] ECR I-1973, paragraph 40. conclusion, it is sufficient to observe that 25 — See, to this effect, Case C-54/95 Germany v Commission, cited above, paragraph 35; Case C-28/94 Netherlands v the requirement on Member States to Commission, cited above, paragraph 41, and Case C-278/98 Netherlands v Commission [2001] ECR implement and manage an effective super- I-1501, paragraph 93. visory system to prevent and to take action 26 — See Italy v Commission [1999] cited above, paragraph 7, which includes other references, and Case C-247/98 against irregularities does not arise under Greece v Commission, cited above, paragraph 70. Regulation No 3508/92. The regulation

I - 9649

OPINION OF MR TIZZANO— CASE C-373/99

I - 9650

GREECE v COMMISSION

(iv) Mitigating factors previous year. It is apparent from the report that in Greece the ACAs are required to take part in the management and payment of compensatory arable aid given that they are responsible for the computerised pro- 87. As regards the mitigating claims made, cessing of applications and for making out which the Greek Government complains the payments for all recipients, whether or the Commission failed to take into account not they are members of the ACAs. Pur- or did not do so sufficiently, I would merely suant to a national agreement, the ACAs observe that, as shown above (see para- retain around 2% of the aid by way of graph 72), these were expressly mentioned expenses, contrary to Article 1(4) of Reg- in the 1995 summary report and gave rise ulation No 729/70 and Article 15(3) of to the decision that the financial correc- Regulation No 1765/92, which provide tions should be at the minimum flat-rate of that the aid should be paid in full to the 2%, normally applied, as we read in the recipients. The annex to the 1995 summary Belle Report, 'where the deficiency is report makes clear that the Conciliation limited to parts of the control system of Body found that it had already had the lesser importance, or to the operation of opportunity to consider the same issue in controls which are not essential to the previous proceedings and that the present assurance of the regularity of the expendi- case contained no new factors. ture' (emphasis added).

88. In conclusion, it is my opinion that the submissions by the applicant concerning the financial correction based on the defi- ciencies in the Greek system of administra- tion and control should be rejected.

therefore, there is no reason to diverge graph 14 above). Under Article 10, Regu- from the Court's arguments in that case, 28 lation No 1663/95 applies only from the and I therefore propose that the arguments 1996 financial year and therefore cannot advanced by the Greek Government on that affect the 1995 financial year which is the point should be rejected. subject of the contested decision. In any case, with regard to the 1995 financial year, the Commission points out that it sent a letter to the Greek authorities setting out the results of checks conducted by its own services in January 1996 and the conclu- sions thereof (letter of 8 July 1996 No VI/ 27548). The letter stated that any financial D — Lack of competence ratione temporis consequences deriving from the findings of of the Commission the checks made would be assessed follow- ing the reply of the Greek authorities; it follows that the expenditure under consid- eration in the contested decision was the subject of a communication to the Greek 91. The last plea in law advanced by the authorities before expiry of the 24-month Greek Government is based on the fifth period referred to in the fifth indent of indent of Article 5(2)(c) of Regulation Article 5(2)(c) of Regulation No 729/70. No 729/70 as amended which, as has been seen (see paragraph 10 above), stated inter alia: 'A refusal to finance may not involve expenditure effected prior to twenty-four months preceding the Commission's writ- ten communication of the results of those checks to the Member State concerned.' The Greek Government argues that the contested decision infringes that article - since the Commission imposed financial 93. In order to determine whether the corrections for expenditure made more objection of the Greek Government is well than 24 months prior to the written founded, it must be ascertained whether a communication of the results of the checks. refusal to finance within the context of the clearance of accounts for 1995 is subject to the obligations under Article 5(2)(c). It will be recalled, in that regard, that the current wording of that provision was inserted by Regulation No 1287/95 which, by virtue of Article 2(1), is applicable from the start of 92. The Commission, albeit in its reply, the 1996 financial year. Article 2(2) in turn contends however that the communications provides that any refusal to grant financing in question are governed by Article 8(1) of as referred to in Article 5(2)(c) may not Regulation No 1663/95 laying down relate to expenditure claimed against a detailed rules for the application of Arti- financial year preceding 16 October 1992, cle 5 of Regulation No 729/70 (see para- 'but without prejudice to decisions regard- ing the clearance of the financial years preceding the entry into force of [Regula- 28 — See paragraphs 18, 19 and 32, respectively, of the judg- ment. tion No 1287/95].' In interpreting that

95. As I have said, I have deduced this line of reasoning only indirectly from the writ- ten pleading of the Commission; in my view, however, whether or not it reflects the Commission's arguments, it is consistent with the intricate development of the 94. Moreover, as I stated above, the Com- legislation mentioned above, and in parti- mission argued that the procedures relating cular it is easily reconcilable with the to the 'written communications' in issue are Court's judgment cited above. governed by Article 8 of Regulation No 1663/95 and apply, with certainty, only from the 1996 financial year. The Commis- sion, however, says nothing directly as regards the application, in the present case, of Article 5(2)(c) of Regulation No 729/70 but merely states that it met its obligations under that provision within the time-limit; nor, naturally, does the Commission give its 96. If that is the case, as I believe it is, it is view as to the judgment of the Court cited necessary to ascertain whether the Com- on that point, given that the ruling was mission respected the requirement in this made only subsequently. From the brief case to communicate to Greece in the form observations it makes on the issue, how- prescribed at the material time the results ever, it appears to me that the Commission of checks carried out in respect of the does not contest the scope, including the clearance of accounts for 1995. As I temporal scope, of the obligations with mentioned just above, the Commission invokes to this effect its letter of 8 July 1996 in which it lists the results of the 29 — Case C-278/98 Netherlands v Commission [20011 cited checks carried out in January 1996. On above, paragraph 82. closer examination, however, that letter 30 — For a similar case regarding a decision on the clearance of accounts for 1994 dated 6 May 1998, see to that effect only partly discharges the obligation to Netherlands v Commission, cited above, paragraph 83. provide information referred to in the fifth

indent of Article 5(2)(c) of Regulation authorities on the results of checks carried No 729/70 in that it relates only to the out by the Commission's services in April fruit and vegetable sector and not to the 1995 for the purpose of verifying whether arable sector; it also records the results of the Greek system of management and checks which relate only in part to irregu- control of Community aid was lawful. larities relevant to the clearance of accounts for 1995, and it mentions irregularities which are not entirely co-extensive with those that gave rise to the application of financial corrections to the fruit and vege- table sector contained in the decision contested in the present case (for example, no mention is made of irregularities in the 98. Regarding the fruit and vegetable sec- free distribution to school pupils). tor, the Greek Government appended to its application a copy of a Commission letter dated 3 December 1995 (No VI/74155) containing a series of specific observations concerning both citrus fruits and peaches and nectarines. Those observations, which are, to a large extent, the same as those which provided grounds for the corrections at issue in these proceedings, also include a report on the results of checks carried out by the Commission's services during August 1995. That letter of 3 December 1995, moreover, mentions a previous letter of 21 August 1995 (No 31631) in which the issue of irregularities in the fruit and vegetable sector in general and peaches and 97. Moreover, careful analysis of the case- nectarines in particular was dealt with. file which, unfortunately, does not enable Finally, Commission Communication swift, reliable verification shows that, No VI/25315 of 24 June 1998, appended regarding the point at issue, there was to its pleading, mentions previous commu- further correspondence between the Greek nications by the Commission dated 3 July authorities and the Commission's services. I (No VI/26774) and 6 August 1997 (No VI/ refer, by way of example, to a letter dated 31822) following a series of checks in 8 March 1996 which is mentioned in the Greece. final report of the Conciliation Body on the arable sector (paragraph 8), in which the Commission's services set out the grounds for their proposal for a reduction equal to the amount retained by the ACAs when aid was paid to recipients. Concerning the arable sector again, the Commission appen- ded to its written pleading a copy of a letter 99. This information is clearly indirect and dated 24 July 1995, No VI/28405, in fragmentary to which I cannot but refer on which 'detailed observations' by the account of the incomplete documentation EAGGF were transmitted to the Greek available. In the final analysis, in any event,

(2) The Hellenic Republic is ordered to pay the costs.

I - 9655