C-210/00

OPINION OF MRS STIX-HACKL — CASE C-210/00

OPINION OF ADVOCATE GENERAL STIX-HACKL delivered on 27 November 2001 1

I — Introduction sion Regulation (EEC) No 3665/87 of 27 November 1987 laying down common detailed rules for the application of the system of export refunds on agricultural products 2 as amended by Commission 1. By order of 4 April 2000 the Bundesfi- Regulation (EC) No 2945/94 of 2 De- nanzhof (Federal Finance Court) of the cember 1994 3 (hereinafter 'Regulation Federal Republic of Germany referred to No 3665/87') include the following: the Court for a preliminary ruling two questions concerning a penalty rule relating to export refunds. Essentially, the Bundes- finanzhof wishes to know whether the penalty rule, according to which in the event of an unintentional discrepancy between the refund requested and the ' 1 . Where it has been found that an refund actually applicable the refund exporter, with a view to the granting of granted is the refund actually applicable an export refund, has requested a refund in less half the difference, may not be invalid excess of that applicable, the refund due for in so far as it does not depend upon the the relevant exportation shall be the refund exporter being at fault. Alternatively, applicable to the actual exportation assuming that in these circumstances the reduced by an amount equivalent to: penalty rule does continue to apply, it wishes to know how the concept of 'force majeure' used in that rule is to be inter- preted.

(a) half the difference between the refund requested and the refund applicable to the actual exportation;

'Whereas the Community rules provide for the granting of export refunds on the basis The sanction referred to under (a) shall not of solely objective criteria, in particular apply: concerning the quantity, nature and char- acteristics of the product exported as well as its geographical destination; whereas in the light of experience, measures to combat irregularities and notably fraud prejudicial to the Community budget should be inten- sified; whereas, to that end, provision should be made for the recovery of amounts unduly paid and sanctions to encourage exporters to comply with Com- — in the case of force majeure... munity rules;

Whereas to ensure the correct functioning of the system of export refunds, sanctions should be applied regardless of the sub- Where the reduction referred to under (a) jective element of fault; whereas it is or (b) results in a negative amount, the nevertheless appropriate to waive the appli- exporter shall pay that negative amount... cation of sanctions in certain cases notably in cases of an obvious error recognised by the competent authority and to provide for a higher sanction in cases of intent;

The sanctions shall be without prejudice to Whereas, where an exporter has supplied additional sanctions laid down at national wrong information that wrong information level.' could lead to an undue payment of the

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refund if the error is not discovered, whilst, — by total or partial loss of the security where the error is discovered it is entirely provided in support of the request for proportional to sanction the exporter for an advantage granted or at the time of an amount in proportion to the amount the receipt of an advance. which he would have received unduly if the error would not have been discovered; whereas in the case where the wrong information was supplied intentionally it is equally proportional to provide for a 2. Application of the measures referred to higher sanction.' in paragraph 1 shall be limited to the withdrawal of the advantage obtained plus, where so provided for, interest which may be determined on a flat-rate basis.

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(b) payment of an amount greater than the (g) other penalties of a purely economic amounts wrongly received or evaded, type, equivalent in nature and scope, plus interest where appropriate; this provided for in the sectoral rules additional sum shall be determined in adopted by the Council in the light of accordance with a percentage to be set the specific requirements of the sectors in the specific rules, and may not concerned and in compliance with the exceed the level strictly necessary to implementing powers conferred on the constitute a deterrent; Commission by the Council.

(c) total or partial removal of an advan- 2. Without prejudice to the provisions laid tage granted by Community rules, even down in the sectoral rules existing at the if the operator wrongly benefited from time of entry into force of this Regulation, only a part of that advantage; other irregularities may give rise only to those penalties not equivalent to a criminal penalty that are provided for in paragraph 1, provided that such penalties are essential to ensure correct application of the rules.'

(d) exclusion from, or withdrawal of, the advantage for a period subsequent to that of the irregularity;

III — Facts and procedure

(e) temporary withdrawal of the approval or recognition necessary for partici- pation in a Community aid scheme; 5. In 1996, the plaintiff in the main pro- ceedings, Käserei Champignon Hofmeister GmbH & Co. KG (hereinafter 'the plain- tiff), exported, under cover of an export declaration, cheese spread under CAP Goods List Number 0406 3039 9500 and, at its request, received an export refund of (f) the loss of a security or deposit pro- around DM 30 000 as an advance payment vided for the purpose of complying from the Hauptzollamt Hamburg-Jonas with the conditions laid down by rules (Hamburg-Jonas Principal Customs Office) or the replenishment of the amount of a (hereinafter 'the defendant'). An examin- security wrongly released; ation of a sample taken from one of the

5 — Commission Regulation (EC) No 1222/94 of 30 May 1994 laying down common detailed rules for the application of the system of granting export refunds on certain agricultural products exported in the form of goods not covered by Annex II to the Treaty, and the criteria for fixing the 11. The Bundesfinanzhof found that the amount of such refunds (OJ 1994 L 136, p. 5). requirements of the first subparagraph of

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Article 11(1) of Regulation No 3665/87 13. The Bundesfinanzhof was also of the were satisfied. The defendant had had to view that no case obtained here such as that impose a penalty in so far as the conditions provided for in the third indent of the third under which the penalty laid down in that subparagraph of Article 11(1), i.e. a case of provision did not apply were not fulfilled. obvious error as to the refund requested, recognised by the competent authority.

14. The Bundesfinanzhof then examined whether the Community rule infringed fundamental rights and considered that it did not, since there was no question of a 'punishment' and neither the principle of proportionality nor the principle of non- discrimination had been contravened.

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reduction was not the mark of an infringe- operate commercially in the trade sector ment for which the applicant could be exporting CAP goods subsidised by export blamed personally but was merely intended refunds. If he decided, in his own interest, to counteract such infringement by the to participate in a system of public pay- threat thereof. ments, then he was obliged to submit to the rules laid down, which included the penalty at issue. The fact that the customs auth- orities were, among other things, thus spared the need to furnish definitive proof of negligence by the exporter, which was often difficult, and the administration of export refunds was thereby simplified also supported the case for interpreting 17. The fact that the recitals used the term Article 11(1) as a refund reduction irre- 'sanction' was of no consequence, since the spective of fault. In relation to its intended concept could also be intended in a purpose and in view of the frequent provi- broader, non-technical, sense. sion of false information, which was hard to detect, the penalty was not inappropriate nor did it infringe the principle of propor- tionality.

18. Article 5(1) of Regulation No 2988/95 provided for administrative penalties only where irregularities were caused inten- tionally or by negligence. Under Article 5(2) of the Regulation, however, penalties were to be introduced '[w]ithout prejudice to the provisions laid down in the sectoral rules existing at the time of entry into force of this Regulation', which included the penalty rule at issue.

2. If the first question is to be answered in the affirmative:

A — 'Nulla poena sine culpa'

Can the first indent of the third sub- paragraph of Article 11(1) of Regu- lation No 3665/87 be interpreted as 1. The arguments of the parties meaning that false information pro- vided in good faith by the refund applicant on the basis of inaccurate

8 — Case C-366/95 Steff-Hoidherg Export and Others [1998] ECR I-2661 and Case C-298/96 Odimele und Schmidt 24. The plaintiff begins by arguing that the Söhne [1998] ECR I-4767. sanction for which the abovementioned

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28. It is also true that the rule does not constitute compensation for free credit, as 26. The plaintiff's arguments call for an might be the case where security has been examination of the legal nature of the provided.9 Under the export refund regu- sanction in question (a). If it is not a penal sanction, then it will be necessary to establish whether the fault principle is 9 — See judgment in Case 288/85 Flange Kraftfutterwerke applicable at all (b). [1987] ECR 611, paragraphs 14 ff.

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lations, it is the exporter who prefinances 32. Article 5(1) of Regulation No 2988/95 the export refund until the refund office also establishes a clear connection between makes payment. the — administrative — penalties it lists, especially the 'payment of an amount greater than the amounts wrongly received or evaded' (subparagraph (b)), and their preventive nature. Thus, the sanctions 'may not exceed the level strictly necessary to constitute a deterrent'. 29. However, it still does not follow that the sanction for which Article 11(1) of Regulation No 3665/87 provides is penal in nature.

33. With respect to the notion of a penal sanction, the national court rightly points out that, as Advocate General Jacobs observed in his Opinion in Case C-240/90, 30. First of all, generally speaking, the it cannot be deduced from the deterrent Community is not, in principle, competent function of penal sanctions that every to impose criminal sanctions. Where appro­ sanction with a deterrent purpose consti­ priate, it is for the Member States to impose tutes a penal sanction, since the purpose of such sanctions if obligations under Com­ a penal sanction extends beyond mere munity law are not fulfilled. 10 deterrence and also includes social disap­ proval. 11

36. Thus, inasmuch as the sanction in question is primarily intended to have a deterrent effect and does not give expression to social or ethical disapproval, it cannot be considered to be penal in nature. 39. Contrary to the view expressed by the plaintiff, the level of the penalty in question has no effect on its legal nature. Nor does, the plaintiff's view find any support in the case-law of the European Court of Human Rights, according to which '... The first An administrative sanction? matter to be ascertained is whether or not the text defining the offence in issue belongs, according to the legal system of the respondent State, to criminal law; next, the nature of the offence and, finally, the nature and degree of severity of the penalty that the person concerned risked incurring 37. As Advocate General Saggio has noted, must be examined, having regard to the '... the Court of Justice has never found it necessary to define the precise legal nature of the European Communities' power to 13 — Opinion in Case C-356/97 Molkereigenossenschaft Wie- impose sanctions, thereby avoiding having dergeltingen [2000] ECR 1-5461, paragraph 49. This idea is developed in footnote 33: 'In the few cases in which the to concern itself with the distinction Court of Justice has been requested to express a view on the question of the penal nature of Community sanctions, it has never proposed a positive definition but has confined itself to ruling out the penal nature of the sanction at issue'. 12 — French: 'infliger... une sanction', English: 'to sanction', 14 — See, in particular, the fourth subparagraph of Article 11(1) Spanish: 'sancionar', Italian: 'applicare... una sancione', of Regulation No 3665/87 as amended by Regulation Dutch: 'een sanctie op te leggen'. No 2945/94.

42. Finding a sanction to be non-criminal 40. The Court of Justice is called upon, in nature does not have the effect of leaving amongst other things, to assess the funda­ the person subject to the regulation without mental validity of a penalty rule in its legal protection. According to settled case- overall context. Thus, the legal nature of a law, 'a penalty, even of a non-criminal penalty associated with the common agri­ nature, cannot be imposed unless it rests on cultural policy cannot depend on its level. a clear and unambiguous legal basis. More­ As the Commission aptly points out, what over, the Court has always emphasised that really matters is the purpose of the pen­ fundamental rights are an integral part of alty 1 6 and the overall context within which the general principles of Community law it fits. 17 which it is called upon to enforce. Finally, it is settled law... that the provisions of Community law must comply with the principle of proportionality...'. 20

(b) The fault principle as a general prin- ciple of Community law? 47. Thus, in the legal systems of the Member States the principles of criminal law, to which the fault principle undis- putedly belongs, are variously applied. The narrower the range of purely administrative penalties — and hence the broader the 44. Irrespective of the legal nature of the range of criminal penalties — the clearer penalty rule in question, the plaintiff argues the distinction between criminal and that the applicability of the fault principle administrative sanctions with respect to to administrative penalties is a general their legal treatment. principle of Community law. This is said to follow both from the common legal tradition of the Member States and from the fundamental rights which the Court is called upon to enforce.

48. The scope of the fault principle also appears to vary. In the case of criminal penalties which give expression to minor social disapproval, the behavioural obli- gation may be so conceived that individual 45. Accordingly, the next step must be to reprehendsibility is induced merely by its examine whether the applicability of the not being fulfilled. Moreover, in its written fault principle follows from a possible observations the plaintiff itself acknowl- common legal tradition of the Member edges that where a sanction is based on States, from the incorporation of the rights objective criteria the possibilities of exemp- guaranteed by the ECHR in accordance tion could lead to more or less the same with Article 6(2) EU or directly from results as liability based on fault with Community law. reversal of the burden of proof.

The fault principle as a general principle under Regulation No 2988/95?

51. Accordingly, it cannot be deduced from the abovementioned case-law of the ECHR 21 concerning the treatment of a surcharge as a sanction that the fault principle must be applied to all adminis- 54. According to Article 5(1) of Regulation trative penalties. In so far as the ECHR No 2988/95, irregularities can lead to treated tax surcharges for false information administrative penalties only if they are as a criminal charge within the meaning of intentional or caused by negligence. In this, Article 6(1) of the ECHR, it did so on the too, the plaintiff sees an acknowledgement grounds that the sanction was imposed for of the fault principle in Community law in both preventive and repressive purposes. 22 relation to penalties, whether repressive or preventive in nature.

21 — See footnote 15 above. 22 — ECHR, Bendenoun judgment of 24 February 1994 (cited 23 — ECHR, Salabiaku judgment of 7 October 1988, Series A, in footnote 18). No 141A, paragraph 28.

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55. According to Article 5(2) of Regulation 58. Consequently, the unlimited applicabil- No 2988/95, sectoral penalty rules that ity of the fault principle cannot be deduced existed before the Regulation entered into from Regulation No 2988/95 either. force remain unaffected by the principle laid down in Article 5(1). The plaintiff considers this derogation to have no bear- ing on the applicability of the fault prin- ciple on the grounds that it obviously concerns only the legal consequences, that is to say the content of the penalty to be 59. All this leads to the conclusion that, imposed, not the actual requirements for fundamentally, in so far as it provides for a the imposition of a penalty. penalty with an — at least predomi- nantly — deterrent purpose, Article 11(1) of Regulation No 3665/87 is not subject to the fault principle.

1. Arguments of the parties At the same time, the Court's decisions in customs cases have recognised that the exporter will have fulfilled his obligation to lodge a valid customs declaration even if, in good faith, he has furnished the customs administration with incorrect or incom- plete information, provided that he could not reasonably have known or procured 62. The plaintiff contends that the penalty any other. 24 laid down by Article 11(1) of Regulation No 3665/87 is inappropriate for achieving the intended purpose, is unnecessary and fails the test of reasonableness which must be applied in determining proportionality. Since its arguments relating to the appro- priateness, necessity and reasonableness of the penalty rule in question partially over- lap, they will be reproduced in summary 65. The plaintiff believes that from this it form. can be deduced that the penalty specified in Article 11(1) is neither appropriate nor necessary to achieve the intended purpose, that is to say, the protection of the Com- munity's financial interests. Recovery of the export refund would be sufficient. Moreover, the rule does not take into account the fact that the obligation to 63. The plaintiff begins by pointing out lodge a materially correct declaration is that export refunds are not a benefit not absolute. Alternatively, with respect to reserved for the exporter which the latter necessity the exporter argues that it can be seeks of his own accord. The export refund gathered from Regulation No 2988/85 that returns to the exporter the sum which — the financial interests of the Community by paying the purchase price of the refund would be adequately protected by sanctions goods — he has laid out to finance the based on fault, especially as national sanc- agricultural price support system. To this tions are also available. extent, for the exporter, having to claim an export refund actually represents a finan- cial loss.

68. The Commission, on the other hand, considers that the mere repayment of the export refund in the event of an irregularity would not be a sufficient deterrent. It notes that the level of the penalty is calculated in Appropriateness of the penalty rule terms of the relief wrongly granted to the exporter. Finally, it recalls the broad dis- cretion enjoyed by the Community legis- lature in matters concerning the common agricultural policy. In its opinion, in the case at issue there can be no question of the 71. With respect to the appropriateness of rule being obviously inappropriate or of the the penalty rule in question it should first limits being obviously overstepped. be recalled that the Community legislature is allowed a large measure of discretion in deciding what means to use to attain its objective. On the subject of compliance with the principle of proportionality, the Court has stated that in matters concerning 2. Analysis 25 — See the judgment in Case C-356/97 (cited in footnote 13, paragraph 35), which refers to the judgments in Cases C-118/89 Lingenfelser [1990] ECR I-2637, paragraph 12; 319/90 Pressier [1992] ECR I-203, paragraph 12; and C-354/95 National Farmers' Union and Others [1997] ECR I-4559, paragraph 49. 26 — Cited in footnote 25, paragraph 36 and referring to the judgments in Case C-8/89 Zardi and Others [1990] ECR 69. According to settled case-law, 'in order I-2515, paragraph 10; Pressier, cited in footnote 25, to establish, in particular in the sector of paragraph 12; and Joined Cases C-133/93, C-300/93 and C-362/93 Crispoltoni and Others [1994] ECR I-4863, the common organisation of the agricul- paragraph 41.

72. The protection of the Community's financial interests28 is a legitimate objec- 75. The plaintiff is in any case wrong in tive which the Commission is pursuing by assuming that the mere recovery of refunds applying the penalty rule in question. The unduly granted would be sufficient. imposition of a financial penalty for sub- Admittedly, the plaintiff is correct in point- mitting an incorrect refund application is ing out that export refunds cannot be an appropriate means not only of deterring compared with direct aid, as it is the the applicant from making intentionally farmer — and not the exporter — who false statements but also of encouraging in the last analysis receives the benefit of him to exercise the utmost care. them. However, this does not mean that the recovery of an export refund would have the same deterrent effect as the penalty rule in question. Firstly, the recovery of an unduly granted export refund does not mean that no refund will be paid at all; if this were so, then in the case of an incor- rectly made out refund application recovery would often have a more drastic effect than 73. The plaintiff has not succeeded in the penalty rule itself. Secondly, it should showing a manifest error of judgment on be noted that, as the Commission rightly the part of the Commission in its choice of points out, recovery fails to exert a deter- penalty in relation to the intended purpose rent effect inasmuch as it is limited to of protecting the financial interests of the reducing the amount of the refund to the Community. amount due. Finally, although in the event of recovery the exporter may lose interest because of the pre-financing effect, it may 27 — Judgments in Cases 265/87 Stimuler [1989| ECU 2237, be assumed that this loss will be less than paragraph 22; C-331/88 Fedesa and Others [1990] ECR the potential gain from an inflated refund I-4023. paragraphs 13 and 14; and C-180/96, United Kingdom v Commission [1998] E CR I-2265. paragraph 97. application that passes undetected, so that 28 — See the first recital of Regulation No 2945/94. the mere possibility of losing interest is

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82. The distinction between intent and of an incorrect refund application the other cases in terms of the legal con- imposition of a penalty not based on fault sequences (level of the penalty) seems to leads to the obligation to lodge a correct be objectively justified, in view of the declaration being formulated objectively, correspondingly different sense of justice although the declaration involves various of the exporter in these two cases. From uncertainties beyond the exporter's con- this it follows immediately that an infringe- trol. 31 ment of the principle of non-discrimination can be ruled out.

31 — See paragraph 64 above. 85. In this connection, the plaintiff is 32 — Opinion of Advocate General Léger in Case C-298/96 doubtless right to point out that in the case (cited in footnote 8), paragraph 44.

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as to make certain that Community aid is data in the refund application could not be not paid for products which do not qualify established or could be established only by for it, to decide on the controls necessary means of checks at the undertaking in for that purpose'. which the goods were manufactured would then be inmaterial.

88. It should be borne in mind that a sanction of the kind in question would be V — Second question: interpretation of unreasonable if it had also to be imposed the concept of force majeure where the refund applicant was not respon- sible for the threat to the Community's financial interests. 33 This, however, would certainly not be the case if — as in the present instance — he had voluntarily, within the context of his economic activity, used a third party to manufacture the goods 90. The second question, which presup- at issue. The fact that the inaccuracy of the poses that the penalty rule is valid, mainly turns on whether force majeure may be assumed where the refund applicant could 33 — With respect to such cases it should be noted that any not establish that his data were false or doubt as to the reasonableness of the penalty rule in question could be countered by a broad interpretation of could do so only by means of checks on the the concept of force majeure in the first indent of the third subparagraph of Article 11(1) of Regulation No 3665/87. premises of a third party.

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A — Arguments of the parties refund system, which was entirely governed by Community law, nor why an uniden- tifiable and unverifiable error on the part of the supplier should not correspond to the concept of force majeure.

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exporter could not establish that it was sequences could not have been avoided in false or could do so only by means of spite of the exercise of all due care'. 35 checks at the undertaking where the goods were manufactured. The decisions of the Court of Justice cited by the national court could not lead to any other conclusion since the situations envisaged were not comparable.

B — Analysis 97. In applying this definition, in its settled case-law the Court has also accepted that force majeure does not obtain where non- compliance with a necessary condition can 95. According to the first indent of the be traced back to non-performance by the third subparagraph of Article 11(1) of other party to the contract. In Theodora- Regulation No 3665/87, the sanction in kis, 36 the purchaser failed to take delivery question does not apply in the case of force of the goods sold for export, with the result majeure. As the Court has already estab- that the goods were not exported during lished in Kampffmeyer, 34 the concept of the period of validity of the export licence. force majeure does not have exactly the The Court described this as an Ordinary same scope in different areas of the law and commercial risk' inherent in commercial in its various spheres of application, so that transactions. It was 'for the holder of the its precise meaning must be determined by licence, who is fully at liberty to select such reference to the legal context within which trading partners as his interests in that it is intended to operate. respect may dictate, to take the appropriate precautions either by including the requisite clauses in the contract in question or by effecting appropriate insurance'. 37 Thus, in the view of the Court, the criterion of

unforeseeability had not been met. In Admittedly, in Oelmiihle und Schmidt Boterlux 38 it was likewise held that the Söhne 39 the Court ruled that Community argument based on force majeure must fail law does not in principle preclude a because fraudulent re-importation into the national rule from allowing non-recovery Community was foreseeable. of Community aid unduly paid, particu- larly if, inter alia, the recipient demon- strably acted in good faith. In this con- nection, the Court pointed out that '... if a trader draws up and submits a declaration with a view to obtaining a subsidy, the mere fact of having drawn up that docu- 98. In the present case, it is clear from the ment cannot deprive him of the right to order for reference that the exporter had no plead his good faith when the declaration is knowledge of the true composition of the based exclusively on information which product and could have acquired such was provided by third parties. It is, how- knowledge only by means of checks at the ever, for the national court to consider undertaking at which the goods were whether certain factors should not, in the manufactured which, in the view of the circumstances, have caused the trader to Bundesfinanzhof, he could not, or at least check the accuracy of this information'. 40 could not be expected to, carry out.

102. With respect to the scope of these two judgments, it should first be noted that they concern the national recovery of subsidies unduly paid. Before ruling on the question of good faith, the Court noted that 'there is no Community provision governing the recovery of refunds paid on the basis of documents subsequently shown to be inac- curate'. 43

104. The answer to the second question 103. Concerning the applicability of the referred for a preliminary ruling must Boterlux decision, according to which the therefore be that the first indent of the error 44 of a third party constitutes an third subparagraph of Article 11(1) of ordinary commercial risk for the aid recipi- Regulation No 3665/87 cannot be inter- ent, the Court held that 'when a balance preted as meaning that false information must be struck between the interests of the provided in good faith by the refund Community and those of the trader, the applicant on the basis of inaccurate data national court must take into account the supplied by the manufacturer constitutes in fact that fault on the part of the third party principle a case of force majeure where the applicant could not establish that it was false or could do so only by means of 42 — Loc. cit., paragraph 22. checks at the undertaking where the goods 43 — The regulation in question (Regulation No 2945/94) did were manufactured. not apply ratione temporis. See the judgment cited in footnote 41, paragraph 22. 44 — In Boterlux, it was a question of fraudulent behaviour by a third party. If this constitutes an ordinary commercial risk, then, a fortiori, so does a mere error. 45 — Loc. cit., paragraph 28.

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