C-157/00

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— C o m m i s s i o n R e g u l a t i o n (EC) (3) On measures to improve peach and No 1663/95 of 7 July 1995 laying nectarine production down detailed rules for the application of C o u n c i l R e g u l a t i o n (EEC) No 729/70 regarding the procedure — Council Regulation (EC) No 2505/95 for the clearance of accounts of the of 24 October 1995 on the improve- European Agricultural Guidance and ment of the Community production of Guarantee Fund Guarantee Section peaches and nectarines (hereinafter: (hereinafter: Regulation No 1663/95). 4 Regulation No 2505/95); 7

— C o m m i s s i o n R e g u l a t i o n (EC) No 2684/95 of 21 November 1995 laying down detailed rules for the application of Council Regulation (EC) (2) On the export refunds No 2505/95 on the improvement of the Community production of peaches and nectarines (hereinafter: Regulation No 2684/95). 8

— Council Regulation (EEC) No 386/90 of 12 February 1990 on the monitoring carried out at the time of export of (4) On the processing of peaches agricultural products receiving refunds or other amounts (hereinafter: Regu- lation No 386/90); 5 — Council Regulation (EEC) No 426/86 of 24 February 1986 on the common organisation of the market in products processed from fruit and vegetables (hereinafter: Regulation No 426/86); 9

— C o m m i s s i o n R e g u l a t i o n (EC) No 2221/95 of 20 September 1995 laying down detailed rules for the — Council Regulation (EC) No 2201/96 application of Council Regulation of 28 October 1996 on the com- (EEC) No 386/90 as regards physical mon organisation of the markets in checks carried out at the time of export processed fruit and vegetable prod- of agricultural products qualifying for ucts (hereinafter: Regulation refunds (hereinafter: Regulation No 2201/96); ]10 No 2221/95). 6

5. In the contested Decision 2000/216/EC of 1 March 2000, 1 3the Commission — I I I— Facts taking account of the earlier bilateral con- tacts and the outcome of the conciliation procedure — found that part of the expen- diture declared by Greece had not been 3. During the period 12 to 16 May 1997, made in accordance with Community law. the Commission carried out checks at the It therefore disallowed the following customs offices in Thessaloniki, Skydra, expenditure from financing by the EAGGF Piraeus and Patras. Those checks estab- Guarantee Section: lished various deficiencies in the implemen- tation of the system for monitoring goods in connection with the grant of export refunds. Checks were also carried out as part of the process of monitoring imple- mentation of the system for financing redevelopment measures in the peach and nectarine sectors in three administrative — export refunds: GRD 339 028 666.00 districts in which peach and nectarine trees for the financial year 1996-1998 were being grubbed up. In addition, the because of inadequate physical con- trols;

11 — OJ 1991 L 144, p. 31. 12 — OJ 1997 L 78, p. 14. 13 — OJ 2000 I. 67, p. 37.

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— budget posts 1505-003 — fruit and IV — Pleas in law vegetables: GRD 659 967 504.00 for the financial year 1996-1997 because the relevant provisions were not com- plied with; 7. The Hellenic Republic brought an action against the decision on 27 April 2000 and is claiming that the Court should:

(1) declare the action admissible;

GREECE v COMMISSION

V — Submissions of the parties and legal that achievement of the check rate of 5% analysis can be verified at any time and a detailed examination account must be produced. That legislation therefore provides no basis for the qualitative requirements the Com- mission lays down.

A — Export refunds

( 1 ) National monitoring 10. The Greek Government also considers that it has secured a sufficiently high standard of national checks. In accordance with the abovementioned provisions, it was ensured that the export declaration tallied (a) Submissions of the parties with the goods. Employees with the rank of director were employed in every customs office. Furthermore, the checks were soon to be supplemented by the creation of a special department within the customs administration. In the context of the 'Cus- (i) The Hellenic Republic toms 2000' programme, the measures to transpose the rules contained in Regu- lations Nos 386/90 and 2221/95 were being implemented according to a special timetable. The Hellenic Republic therefore considers that the presence of the requisite infrastructure should not constitute 9. The Greek Government contends that grounds for imposing a reduction. the disallowance of financing for the export refunds is based on an incorrect interpre- tation of Regulations Nos 386/90 and 2221/95 and an incorrect assessment of the facts. All that follows from Articles 2 and 3 of Regulation No 386/90 is that a minimum of 5% of the goods for which export refunds have been claimed must be subject to physical checks. Articles 5 and 7 of Regulation No 2221/95 do not specify a 11. As regards the nature of the checks, the standard which the checks must meet. Greek Government maintains that its Article 5 simply provides that the export inspectors used the resources available to declaration and goods must correspond as them, such as scales, to verify the infor- regards quantity, nature and character- mation recorded on the export documents. istics. Under Article 7, it must be ensured In response to the criticism of the lack of a

14. The Commission, however, contends 12. With particular reference to the cus- that the qualitative requirements the toms administration in Skydra, the Greek national checks have to meet are suffi- Government submits that this office used ciently clear from Article 3 of Regulation the circular of 18 December 1996 concern- No 386/90 and Articles 5, 6 and 7 and the ing the information exporters were Annex to Regulation No 2221/95. required to provide under paragraph No 31 of the Single Administrative Docu- ment (SAD). The office checked the accu- racy of the information provided by the exporter under paragraph No 31 of the SAD, where necessary by carrying out spot checks and laboratory analyses. Since the time of the EAGGF inspections, that cus- toms office was also accepting separate 15. The main criticism, on which the 5% declarations from exporters. reduction is based, is the absence of the essential infrastructure without which the checks cannot be reliably performed. If, for instance, the appropriate facilities for emp- tying a container are not available, and the spot checks are therefore always carried out on the last items loaded, it cannot be 13. The Greek Government further con- guaranteed that the checks are represen- tends that the Commission Decision tative and reliable.

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16. The Commission also considers the 19. As regards the level of the flat-rate organisational measures set in place to be reduction imposed, the Commission takes inadequate. Appointing directors does not the view that the mediocre quality of the of itself guarantee the quality of the checks. checks, as established, fully justifies a flat- There were no internal, unannounced rate reduction of 5%. The deficiencies inspections. There was similarly a failure identified resulted in an increased risk to to guarantee that the checks were carried the EAGGF. out uniformly across-the-board. The Com- mission further complains that the oper- ational instructions the Greek Government cites were not described in greater detail.

21. I should first point out that it is settled case-law that Article 8(1) of Regulation No 729/70, which embodies the obligations incumbent on the Member States under Article 10 EC in this particular area, imposes on the Member States the general obligation to take the measures necessary to satisfy themselves that the transactions financed by the EAGGF are actually carried out and are executed correctly, even if the specific Community act does not expressly provide for the adoption of a particular supervisory measure. 16 Viewed simply in the light of that case-law, the arguments the Greek Government has advanced do not carry conviction. Even assuming them to be correct, that is to say even if Regulations Nos 386/90 and 2221/95 did not prescribe the standard of the checks to be carried out, 23. According to the abovementioned Sum- the Greek Government would be under an mary Report of the Directorate General for obligation, on the basis of Article 8 of Agriculture of 27 October 1999, the Com- Regulation No 729/70, to take all measures mission's Clearance of Accounts Unit set to ensure that Community financing of out its conclusions concerning the checks EAGGF expenditure was carried out carried out in all the Member States during properly, by performing effective physical 1992 and 1993 in a special report pub- checks. lished in OJ 1993 C 218 of 12 August 1993. On 18 January 1994, it sent a letter to all of them requesting them to introduce the requisite corrective measures by 1 July 1994. In the letter, the Member States were asked, among other things, to ensure that: Regulations Nos 386/90 and 2030/90 — the latter was replaced by Regulation 22. I shall therefore analyse merely in the No 2221/95 as of 1 January 1996 — were alternative below, in the event that the applied uniformly in all customs offices; the Court does not apply that case-law in these central customs authorities played a coor- proceedings, the question of the extent to dinating, developmental and supervisory role by evaluating the data from the local offices; and customs offices in which the 16 — See Case C-S4/95 Germany v Commission [1999] ECR I-35, paragraph 66; Case C-2/93 Exportslachterijen van checks on goods were carried out had the Oordegem [1994] ECR I-2283, paragraph 17 et seq; Case C-235/97 France v Commission [1998] ECR I-7555, necessary infrastructure (scales, fork-lift paragraph 45. trucks, facilities for thawing out meat and

refrigerators to store unloaded goods under Article 3 of Regulation No 386/90 as etc.). 17 According to that report, those 'verification that the export declaration... rules became an integral part of Regulation and the goods correspond as regards quan- No 2221/95, which entered into force on tity, nature and characteristics'. In addi- 1 January 1996. 18 tion, Article 5(1) refers to the Annex to the regulation and Article 13 of Regulation (EEC) No 3665/87. The Annex to Regu- lation No 2221/95 makes a distinction between bulk and packaged goods and non-Annex II goods. The quantity of exports of bulk goods is to be determined by calibrated automatic weighing and the 24. According to Article 1(1) of Regulation nature and characteristics by random rep- No 386/90, the checks are necessary to resentative checks. Where necessary, the monitor whether operations conferring data entered in the weighing records is to entitlement to the payment of refunds have be checked against the data contained in actually been carried out and have been the loading documents. In the case of executed correctly. Article 3(1) provides exports of goods which have been auto- that checks on goods must take place matically bagged, canned or bottled etc., frequently in the form of spot checks and the number of bags, cans or bottles must be without prior warning and must relate to a counted in total, and the nature and char- representative selection of at least 5% of acteristics of the goods checked on the basis the export declarations in respect of which of a representative selection. If pallets export refunds are being applied for. Under loaded with boxes, cans etc. are being Article 3, a visual inspection must be exported, representative pallets are to be carried out to establish that the goods selected and the number of boxes etc. on correspond to the description given in the them checked. A number of representative refunds nomenclature. Should that not boxes etc. are to be selected and the prove possible and the classification or number of individual items checked. quality of the goods requires very precise information about their ingredients, verifi- cation is to take place by using all the senses or by applying physical measures which may go so far as submitting the goods for analysis by laboratories specially equipped for the purpose.

(ii) The checks carried out

28. As regards checks on the nature and characteristics of the goods, Article 3(3) of Regulation No 386/90 itself provides for random checks or, if necessary, checks using all the senses or even laboratory 31. Having thus established that the checks analysis. Article 13 of Regulation to be carried out must be of a certain No 3665/87, to which Article 5 of Regu- standard, it is now necessary to consider lation No 2221/95 refers, further requires whether the physical checks for monitoring

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19 — C a s e C-147/99 Italy v Ctmmmsiwi [2001] ECU I-8999, 33. In that connection, it has funda- paragraph 54; Case C-28/94 Netherlands v Cotiwussmfi [ I 9 9 9 | ECU I-1973, paragraph 50 et seq. mentally to be pointed out that in the 20 — Case C-28/1994 (cited in footnote 19 above) paragraph context of the charging of expenditure to 75; Case C-2S.V97 llaly v Commission [1999| ECU I-7529, paragraph 6 et seq.; Case C-46/97 Greece v the EAGGF, the Commission benefits from Commission (2000| ECU I-5719, paragraph 58.

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37. In relation to the Commission's criti- goods were not unloaded because there was cism of a lack of proper infrastructure no suitable infrastructure. Random checks available to the customs office, the Greek were carried out only on the easily access- Government points out that this is being set ible goods which had been loaded last. The in place as part of the 'Customs 2000' Greek Government has not contradicted programme. According to the abovemen- that statement of fact. The Commission's tioned Summary Report, the Greek Gov- criticism, therefore, is that the lack of ernment intended to put that infrastructure infrastructure meant that the checks could in place in the context of 'Agenda 2000'. 23 not be carried out to the requisite standard. It does not matter which Community sup- The lack of infrastructure is not remedied port measure is used to set in place the by carrying out checks. They remain inad- requisite infrastructure. The crucial factor equate and inapt to prevent irregularities in is that the Greek Government's submission relation to export refunds. Consequently, confirms the Commission's doubts as to that objection too must be rejected. whether the checks were properly carried out in view of the lack of infrastructure. For the material period of time, in respect of which the amount of expenditure to be refunded is being reduced, the customs offices inspected did not have the appropri- ate infrastructure. That objection to the contested decision must, therefore, also be rejected.

40. The reference to the circular of No 1287/95, the Commission is to decide 15 February 1999 has also to be rejected. on the expenditure to be excluded from the The material period of time in this case is Community financing. And, according to between 1996 and 1998. A circular of 1999 Article 8 of Regulation No 1663/95, the cannot undo the shortcomings identified in Commission is to provide an evaluation of the period before 1999; at best, it can any expenditure which it may propose to prevent them for the future. That objection exclude. It is clear from the wording of too has therefore to be rejected. those provisions that reductions cannot be imposed on other sums that arise after the Commission's findings have been com- municated. That option was made avail- able to the Commission only on the advent of Regulation (EEC) No 2245/99, which 41. In conclusion, it has to be established amended Regulation No 1663/95. But since that Regulations Nos 386/90 and 2221/95 Regulation 2245/99 did not enter into force stipulate the standard of the checks to be until October 1999, it does not cover this carried out and that the physical checks case which relates to expenditure in the carried out in Greece between 1996 and period 1996-1998. The reductions the 1998 did not meet those requirements. Commission imposed after 18 September 1997 were not communicated in accord- ance with Regulation No 1663/95, and the Commission's action therefore also infringes the principle of legal certainty. (2) The material period of time

(a) Submissions of the parties

outcome of the checks has been communi- 45. Article 5(2)(c) of Regulation No 729/70 cated. A distinction has to be made provides: between the period in respect of which the checks were carried out and the period in respect of which reductions were imposed. The restriction to a period of 24 months before the communication con- tained in Article 5(2)(c) of Regulation No 729/70 was introduced for reasons of legal certainty. Once the Member State has '[The Commission] shall decide on the been informed of a deficiency, however, the expenditure to be excluded from the Com- reduction of expenditure ceases to be munity financing referred to in Articles 2 contrary to the principle of legal certainty. and 3 where it finds that expenditure has The inadequacy of the checks was brought not been effected in compliance with Com- to the attention of the Greek Government munity rules. Before a decision to refuse by letter of 18 September 1997; con- financing is taken, the results of the Com- sequently, between that date and until the mission checks and the replies of the deficiency was remedied no expectation Member State concerned shall be notified worthy of protection stood in the way of a in writing, after which the two parties shall reduction in the expenditure eligible for endeavour to reach agreement on the action refund. to be taken.... The Commission shall evalu- ate the amounts to be excluded having regard in particular to the degree of non- compliance found. The Commission shall take into account the nature and gravity of the infringement and the financial loss suffered by the Community. A refusal to finance may not involve expenditure effected prior to twenty-four months preceding the Commission's written com- munication of the results of those checks to (b) Analysis the Member State concerned.

49. The Greek Government bases its inter- pretation on the wording, particularly the ...' terms 'shall decide' in Article 5(2)(c) of Regulation No 729/70 and 'shall communi- cate [an evaluation of any expenditure which it may propose to exclude]' in Article 8(1) of Regulation No 1663/95. In that connection, it is necessary to point out that Article 5 specifically addresses only the question of how far back the disallowance 47. Relying on the wording of Article 5 of of expenditure may extend, namely 24 Regulation No 729/70 and Article 8 of months. The wording of that provision Regulation No 1663/95 in the version provides no specific answer to the question which applies in this case, that it to say raised here of how far into the future the before the entry into force of Regulation reduction can extend after communication, No 2245/1999, the Greek Government in accordance with Article 8 of Regulation argues that the contested Commission No 1663/95. The term 'shall decide' merely decision was adopted without a legal basis, implies that the Commission has the auth- in that it imposes a reduction on the ority to determine which expenditure is to expenditure eligible for refund for irregu- be excluded from Community financing. larities in the period after the communi- The provision is silent as far as the cation in accordance with Article 8 of temporal scope is concerned. It does not Regulation No 1663/95. The Commission regulate the matter of the period to which merely retorts that the provisions relied on reduction can apply.

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52. It is settled case-law that Articles 2 and 3 of Regulation No 729/70 permit the Commission to charge to the EAGGF only sums paid in accordance with the rules laid 54. On the basis of the above consider- down in the various sectors of agricultural ations, the Greek Government's objection production, leaving the Member States to of the lack of a legal base must be rejected. bear the burden of any other sums paid, in So long as the deficiencies identified persist, particular any amount which the national the Commission is not entitled, on the basis authorities wrongly believed themselves of Articles 2 and 3 of Regulation authorised to pay in the context of the No 729/70, to charge to the EAGGF the common organisation of the markets. 24 financing for the expenditure claimed. It is actually under an obligation to exclude that expenditure from Community financing, in accordance with Article 5(2)(c) of Regu- lation No 729/70. The contested decision is therefore also legitimate in so far as it- 53. In the light of that basis structure, the provides for a reduction in expenditure, as question the Greek Government raises does a result of irregularities, beyond not appear to be the right one. The ques- 18 September 1997 and until the defi- ciencies identified have been remedied.

24 — Case 147/99 (cited in footnote 19 above) paragraph 54; Case C-28/94 (cited in footnote 19 above) paragraph 50 et 25 — See Case C-28/94 (cited in footnote 19 above) paragraphs seq. 49 to 51.

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58. It follows from that case-law, firstly, that, in this case, the Commission would 57. As early as its judgment in Case have been entitled to refuse to charge to the 347/85, the Court held that where the EAGGF all the expenditure in relation to Commission, instead of rejecting all the export refunds. It is for the Greek Govern- expenditure affected by the infringement, ment to prove that the expenditure is which it is legally entitled to do, has lawful. As stated above, that Government endeavoured to establish the financial failed to provide the proof required. impact of the unlawful action by means of calculations based on an assessment of what the situation on the relevant market 27 — Case 347/85 United Kingdom of Great Britain and Northern Ireland v Commission [1988] ECR 1749, para- graph 15 et seq. See also the Opinion of Advocate General Darmon of 3 October 1991 in Case C-197/90 Italy v Commission [1992] ECR 1-1,1-13, point 42. 26 — Case C-50/94 Greece v Commission [1996] ECR I-3331, 28 — Case C-50/94 (cited in footnote 26 above) paragraph 7 et paragraph 26. seq.

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59. It has further to be taken into account constitute an important element of the that the Commission informed the Hellenic control system. In addition, the thorough- Republic, by letter of 24 November 1998, ness of the checks carried out by the Greek that the lack of verifiable results of checks customs offices is criticised. That being so, carried out made it impossible to ascertain it is clear that the 5% reduction is con- the practical effects of the poor standard of sistent with the Guidelines. It can therefore those checks and, consequently, a flat-rate be deemed to be proportionate. reduction had to be applied. In the light of the abovementioned case-law, there can be no legal objection to that conclusion.

(a) Submissions of the parties 61. Under the Guidelines, a 5% reduction of the expenditure claimed is imposed where the deficiency relates to important elements of the control system or to the operation of controls which play an (i) The Hellenic Republic important part in the assurance of the regularity of the expenditure, such that it- can be concluded that the risk of loss to the EAGGF was significant. The deficiencies the Commission criticises concern the equipment of the customs offices and thus 63. As regards the reduction as a result of the failure to include on the application for a premium a written undertaking by the 29 — Case C-45/97 Spain v Commission [2000] ECR I-5333, owner/tenant to refrain from new planting, paragraphs 24 to 26. the Greek Government objects that 30 — Case C-242/97 Belgium v Commission [2000] ECR I-3421, paragraphs 124 to 126; Netherlands v Commis¬ Article 2(1 )(a) of Regulation No 2505/95 sion, cited in footnote 19, paragraphs 54 to 56. and Article 3(4)(3) of Regulation

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No 2684/95 have not been interpreted permit requirement in relation to land correctly. According to those provisions, it transactions to be sufficient. But the Com- is sufficient for the written undertaking to mission does not consider this sufficient to be appended to the application. It is not, meet the obligation arising out of Article 3 however, necessary for it to appear on the of Regulation No 2684/95, since it does not application form. ensure that the owner/tenant is aware of all the encumbrances affecting the land.

65. The Commission, however, maintains that the measures taken by the Greek authorities fail to meet the requirements of Article 3 of Regulation No 2684/95. In particular, the application form distributed 67. Article 2(b) of Regulation No 2505/95 does not include a declaration in which the makes the grant of the grubbing-up pre- vendor/lessor undertakes to point out, mium subject, among other things, to the when the land is sold or let, that there requirement that the beneficiary should must be no new planting. In its inspections, refrain from any new planting. Article 3 the Commission ascertained that the of Regulation No 2684/95 fleshes out that regional authorities used the form differ- provision by making a distinction between ently. In two of the three administrative the undertaking not to engage in new districts (Nomoi) inspected, namely in planting oneself and the undertaking to Imathias (Veria) and Pella (Giannitsà), no inform an owner/tenant of the land in written undertakings were required at all. question that it is affected by an encum- The authorities in fact considered the brance of that nature. As the Greek Gov-

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(b) Analysis (i) The Hellenic Republic

69. In response to the criticism that no date 71. Article 1 of Regulation No 2505/95 was recorded on the inspection notes, the provides that during the 1995 marketing

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year, a one-off premium is to be paid for 73. But even assuming that the date did not grubbing up peach and nectarine trees. necessarily have to be recorded on the Under Article 2(1)(a), that grubbing up inspection notes and that it is sufficient for has to take place before 30 April 1996. it to be apparent from other documents, the That rule is reiterated in Article 4(3) of Greek Government's submission does not implementing Regulation No 2684/95. seem capable of rebutting the Commis- Article 3(1) of that regulation further sion's criticism. The fact is that, in this case, stipulates that the application for the it is impossible to tell when the checks took grubbing-up premium must be submitted place from the documents submitted by the by 31 January 1996 at the latest, and, Greek authorities. The Commission asserts, under Article 4(2), a decision on the without contradiction, that the Greek offi- application must be taken within two cials were not able to provide the dates on months of its receipt. Pursuant to the basis of other documents either. Article 5(1), the Member States have to According to the abovementioned rules of inform the Commission by 31 August 1996 evidence, it has therefore to be established of the areas for which applications for that the Greek Government's submissions grubbing-up premiums have been sub- are not sufficient to refute the Commis- mitted and the areas which have been sion's findings that it was not possible to grubbed up. ascertain the date on which the checks were carried out. That objection too must there- fore be rejected.

77. As set out above, on the basis of Article 8 of Regulation No 729/70, the Member States are, however, obliged to take the measures necessary to satisfy (ii) The Commission themselves that the transactions financed by the EAGGF are actually carried out and are executed correctly even if the specific Community act does not expressly provide for the adoption of particular supervisory measures. 31 That case-law indicates that- even if Article 5 does not require written notification of the date of grubbing-up, it- must at least be clear from the competent authority's files that the beneficiary has 75. The Commission, however, points out provided notification. In addition, it must that it was not clear from the documents be also be possible to verify when that examined of the competent authorities that notification was made. Regulation the beneficiaries had notified the date of No 2684/95 has set a very short period of grubbing-up. It was also particularly time within which the individual measures important that that provision should be have to be taken. Specific measures have to complied with, as this was a time-limited take place by a time-limit which the programme. It had to be possible to verify regulation lays down (the application by the data in the application and check that 31 January; the decision within two weeks; grubbing-up had taken place. In the admin- the grubbing-up by 30 April and the istrative district (Nomos) of Imathias, for notification to the Commission by instance, no notifications were recorded. In 31 August 1996). In the light of all those the administrative district of Pellas, the circumstances, it is clear that the individual beneficiaries had notified not the date of measures, including notification by the grubbing-up but that it had taken place. That meant it was impossible for the competent authorities to verify the grub- 31 — Case C-.54/95 (cited in footnote 16 above) paragraph 66; Case C-2/93 (cited in footnote 16 above) paragraphs 17 bing-up. and 18.

beneficiary under Article 5, must be appar- No 2505/95 nor Article 1 of Regulation ent from the national authorities' docu- No 2684/95 required that there should be a mentation. long-term or indeed indefinite tenancy agreement or that this should have been concluded long before 31 January 1996. By its interpretation, the Commission is intro- ducing new, additional requirements for 78. The Greek Government's contention the grant of the premium. does not cast doubt on the Commission's findings that it was not possible to ascer- tain from the documents available whether and when the declarations at issue were made, and that in the administrative dis- trict of Pellas a declaration of that nature was not even required. The sole notifi- cation provided was that grubbing-up had taken place. But notification of that kind does not enable the authorities to verify (ii) The Commission whether the parcels of land for which a premium is being claimed were actually planted with peach or nectarine trees pre- viously. It cannot therefore serve as notifi- cation within the meaning of Article 5. That objection on the part of the Greek Government must therefore also be rejected. 80. The Commission, however, points out that a substantial proportion of the agree- ments concluded in January 1996 — that is to say shortly before the qualifying date (4) Size of the parcels in respect of which a for the premium under Regulation premium was applied for No 2684/95, namely 31 January 1996 — related to parcels which were smaller than 0.5 hectares and, therefore, in principle excluded from the premium. Without the agreements in question, no premiums could (a) Submissions of the parties therefore have been granted for those parcels. Those cases therefore represented an increased risk to the proper implemen- tation of the programme and ought, con- sequently, to have prompted additional (i) The Hellenic Republic inspections. But it was ascertained that, in Imathias and Edessa, all the agreements concluded in January 1996 had been accepted, even when they were valid for only a relatively short period of a year or 79. The Greek Government claims that two. In the Commission's view, that should neither Articles 1 and 2 of Regulation have resulted in more extensive checks.

83. The fact that the agreements at issue were concluded so near to the qualifying (i) The Hellenic Republic date and that the parcels in question would otherwise have been too small to qualify for the premium under Regulation No 2684/95 certainly seems to suggest that more extensive checks should have been 85. As regards the third reduction from the carried out. There is at least a greater expenditure in respect of which a refund

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has been claimed, the Greek Government queried the quantity declared by the pro- argues that Article 15 of Regulation ducer. As stated by the chairman of the No 1558/91 has been misconstrued and 'Axos' Cooperative, that was because the the facts incorrectly evaluated. In its view, delivery notes were completed not by the there is no requirement to draw up delivery producer but by the processor. The Com- notes. Under Article 15 of Regulation mission therefore concludes that there was No 1558/91, the drawing-up of delivery a high risk to the EAGGF. notes is optional, and even Article 14 of Regulation No 504/97 refers only to any receipts that have been issued. Nor is there any obligation to keeping weighing records.

(b) Analysis

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how the Greek authorities told the EAGGF (2) National checks inspectors that the delivery notes were an essential element of the national checks and the statement by the chairman of the 'Axos' Cooperative cited in the defence confirm the Commission's argument that the delivery notes played a significant role in the Greek system. Those arguments have not been refuted. (a) Submissions of the parties

(i) The Hellenic Republic

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(ii) The Commission were incomplete, as they contained no conclusions (the complaint directed against the Edessa customs office), it has at least to be established that the prescribed checks were in any event carried out inadequately. The Greek Government has failed to prove that both those customs offices drew up 91. The Commission, however, points out proper inspection reports. Consequently, that the administrative records either con- the Commission's complaint that no tain no documentation in relation to the adequate and verifiable checks were carried checks carried out or, where reports exist, out is not disproved. That objection must the data they contain is not verifiable. In therefore be rejected. Giannitsà in particular, there were no reports and, in Edessa, reports were sub- mitted but contained no statement of con- clusions.

(3) Payment of the minimum price

(b) Analysis

(a) Submissions of the parties

their individual members because of those discrepancy of 2 632 469 kg existed members' debts to the organisation. Fur- between actual stocks and declared stocks. thermore, such reductions have no impact The Commission, consequently, first pro- on the EAGGF. But even if individual posed disallowing GRD 71 097 342 of infringements were identified, it would expenditure eligible for refund. It did not, not justify a reduction of 10% of the however, proceed with that correction. expenditure claimed. In that connection, That sum therefore no longer forms part the Greek Government complains, in the of the flat-rate correction of '10% of the alternative, that the reduction in question is expenditure claimed for the processing of disproportionate and should at least be peaches in Greece, based on the failure to decreased to 2%. comply with the rules on the minimum price and serious deficiencies in the moni- toring system.

(ii) The Commission (b) Analysis

97. Furthermore, the Greek Government has failed to submit arguments to rebut the Commission's findings that processors were able to impose a reduction of 5% of the weight of a consignment, if the goods supplied were found to be defective. The 99. Nor are reductions of that nature Commission is right to argue that a reduc- without impact on the Community budget. tion of that nature is not provided for in The minimum price to be paid for the raw Regulations Nos 1558/91 and 504/97. materials is only one of the criteria to be According to Article 10 of Regulation taken into account under Article 5 of No 1558/91 and Article 10 of Regulation Regulation No 426/86 and Article 4 of No 504/97, the producer must supply raw Regulation No 2201/96. If the minimum materials of sound and fair merchantable price is in fact not paid, then the subsidy to quality and suitable for processing. It processors, which is again calculated using follows from Article 14(2)(a) of Regulation an abstract formula, is not correct. No 1558/91 and — still more clearly — from Article 9(1) of Regulation No 504/97 that the processor has to pay the producer organisation at least the prescribed mini- mum price. Consequently, reductions in that price are not admissible.

100. As regards the proportionality of the 10% reduction, it has to be noted that, according to the Guidelines, a reduction of that nature is justified, where the deficiency relates to the whole of or fundamental elements of the control system or to the operation of controls essential to ensuring 98. Nor would a reduction of that nature the regularity of the expenditure, such that by the processor be compatible with the it can be reasonably concluded that there institution of the minimum price. Under was a high risk of widespread loss to the Article 4 of Regulation No 426/86 and EAGGF.

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

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