C-332/00

2. The action relates to Community aid for the sale of butter at reduced prices and the granting of aid for butter and concentrated butter intended for the manufacture of Article 1 of Regulation No 570/88 pastry products, ice-cream and other food products. The question is essentially whether the Kingdom of Belgium was 3. As part of measures to promote the use entitled to grant aid for a form of tech- of butter, the Commission, on 16 February nologically adapted butter known as TAIB 1988, enacted Regulation No 570/88 on the sale of butter at reduced prices and the granting of aid for butter and concentrated 1 — Original language: German. butter for use in the manufacture of pastry 2 — Commission Decision 2000/448/EC of 5 July 2000 amend- ing Decision 1999/187/HC on the clearance of the accounts products, ice-cream and other foodstuffs presented by the Member States in respect of expenditure ('Regulation No 570/88'). or 1995 or the Guarantee Section of the Huronean Agricultural Guidance and Guarantee Fund (EAGGF) (notified under document number Q 2 0 0 0 ) IS 13) and Decision 2000/449/F.C of 5 July 2000 excluding from Community financing certain expenditure incurred by the 3 — Commission Regulation No 570/88 of 16 February 1988 on Member States under the Guarantee Section of the Euro- the sale of butter at reduced prices and the granting of aid pean Agricultural Guidance and Guarantee Fund (notified for butter and concentrated butter for use in the manu- under document number C(2000) 1847 (OJ 2000 L 180, facture of pastrv products, ice-cream and other foodstuffs p. 46 and p. 49 respectively). (OJ 1988 L 55, p. 31).

I - 3612

BELGIUM v COMMISSION

Article l(2)(a) of Regulation No 570/88 on the market in butter and cream, 8as was again amended: amended by Regulation (EEC) No 2714/72 of the Council 9and by Council Regulation (EEC) No 1897/87 10 ('Regulation No 985/68'), was in part worded as follows:

'... butter produced directly and exclusively from pasteurised cream and which, in the manufacturing Member State, satisfies the conditions laid down in Article 6(2) of Regulation (EEC) No 804/68 and the requirements of the national quality class '1. Intervention agencies shall buy in only listed in Annex II to Regulation (EC) such butter as: No 454/95 and the packaging of which is marked accordingly...'.

(a) is produced by an approved undertak- 6. Although this amendment, which pro- ing; vides that the grant of aid is expressly dependent on the butter having been directly and exclusively produced from pasteurised cream, came into force only on 1 March 1995, that is, after the period of the aid in dispute, it ought to be cited with regard to the submissions of the (b) meets the definition and classification parties. contained in paragraph 3(a) and (b);...

2. Until the date of implementation of the Article 1 of Regulation No 985/68 provisions adopted pursuant to Article 27 of Regulation (EEC) No 804/68 an under- taking shall only be approved if it manu- factures butter meeting the requirements 7. At the date on which Regulation laid down in paragraph 3(a) and (b). No 570/88 entered into force — and unchanged at the time when the aid in 8 — Regulation (EHC) No 985/68 oí 15 July 1968 (OJ, English dispute was granted in the passages rel- Special Edition 1968 (I), p. 256). evant to this case — Article 1 of Regu- 9 — Regulation (EEC) No 2714/72 of 19 December 1972 (OJ, lation (EEC) No 985/68 of the Council English Special Edition 1972 (28-30 December), p. 15). 10 — Regulation (EF.CI No 1897/87 of 2 Julv 1987 (OJ 1987 laying down general rules for intervention I. 182, p. 35).

— a maximum water content, by weight, of 16%, B — Aid for intermediate products of butter 12

— be manufactured from sour cream,

8. Article 9 of Regulation No 570/88 pro- vided for the possibility of granting aid even if 'the concentrated butter or the or butter, to which tracers have or have not been added, is incorporated at an inter- mediate stage in products other than the final products and in an establishment other than that of final processing'. In this (bb)— a minimum butterfat content, case, the grant of aid was made contingent by weight, of 82%, on specific conditions, in particular the approval of the establishment of intermedi-

11 — There follow the classifications of butter from the other Member States. In what follows this is referred to as the — a maximum water content, by 'list of national classifications'. weight, of 16%, 12 — See the remarks in points 55 to 58.

I - 3614

BELGIUM v COMMISSION

14 — OJ, English Special Edition 1970 II), p. 218. 13 — Regulation (FEC) No 1813/93 of 7 July 1993 (OJ 1993 15 — Regulation (EC) No 1287/95 of 22 May 1995 (OJ 1995 L 166, p. 16]. I. 125, p. 1).

I-3615

OPINION OF MRS STIX-HACKL — CASE C-332/00

12. Articles 2 and 3 of Regulation gravity of the infringement and the No 729/70 set out the general financing financial loss suffered by the Commu- framework for the EAGGF. Under those nity....' provisions, the EAGGF finances refunds on exports to non-member countries, 'granted in accordance with the Community rules within the framework of the common organisation of agricultural markets' (Article 2) and finances interventions intended to stabilise the agricultural mar- 14. Reference should also be made to kets, 'undertaken according to Community Article 8 of the regulation, under which rules within the framework of the common the Member States have a duty to satisfy organisation of agricultural markets' themselves that transactions financed by (Article 3). the EAGGF are actually carried out and are executed correctly, to prevent and deal with irregularities and to recover sums lost as a result of irregularities or negligence.

13. Article 5(2) reads (in part) as follows:

15. Article 8(2) of the regulation provides that the Community will not bear the financial consequences of irregularities or 'The Commission, after consulting the negligence attributable to administrative Fund Committee:... authorities or other bodies of the Member States.

This makes it possible to obtain a standard- ised butter containing 82% fat, 16% water and 2% fat-free dried milk extract and is particularly suitable for producing pastry 22. TAIB had hitherto received aid as an products. 'intermediate product' within the meaning of Article 9 or — after the amendment by Regulation No 1813/93 — Article 9a of Regulation No 570/88, but following this, the Kingdom of Belgium granted Commu- nity aid under Article 1 of that regulation. 19. Since 1989, aid under Article 9 of Regulation No 570/88 has been granted for TAIB.

23. It was possible to grant the aid under Article 1 without adding a tracer to TAIB 20. When TAIB was imported into France and without marking the packaging with in 1991, there was correspondence between the words 'intermediate product', as has the Commission on the one hand and the been required for the grant of aid under French and Belgian authorities on the Article 9a since Article 9a was introduced. other. In this correspondence, the Commis- There was no change in the amount of the sion took the view that TAIB was to be aid.

I-3617

OPINION OF MRS STIX-HACKL — CASE C-332/00

24. On 28 February 1995, the Commission sion before the Court of First Instance; 16 in enacted Regulation No 455/95, which the procedure for clearing EAGGF introduced into Article 1 of Regulation accounts, the Commission relied in part No 570/88 the requirement that the butter on the judgment in that case. was produced 'directly and exclusively' from pasteurised cream.

27. Regulation No 455/95 was also the subject of an application by Corman SA 16 — Judgment of 30 January 1997 in Case T-117/95 Commit v Commission [1997] ECR II-95. The application was initiating proceedings against the Commis- dismissed as inadmissible for lack of individual concern.

I-3618

BELGIUM v COMMISSION

The conciliation body therefore queried in of Belgium in connection with aid its report whether it was appropriate to relating to the sale of butter at reduced undertake a correction in the amount of prices and the granting of aid for 100% of the aid granted. concentrated butter intended for the manufacture of pastry products, ice- cream and other food products, and partially annul Commission Decision 2000/449/EC of 5 July 2000 excluding from Community financing certain The conciliation procedure failed to bring expenditure incurred by the Member the parties' standpoints closer together. States under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) for the financial years 1996 and 1997, in so far as it excludes from Community financ- 30. On 5 July 2000, the Commission ing expenditure in the amount of EUR adopted the decisions that are now being 1 602 256.45 and EUR 31 883.22 also challenged by the application lodged at the incurred by the Kingdom of Belgium in Registry of the Court of Justice on connection with aid relating to the sale 11 September 2000. of butter at reduced prices and the granting of aid for concentrated butter intended for the manufacture of pastry products, ice-cream and other food products; 31. The Kingdom of Belgium claims that the Court should:

IV — Pleas in law

1. First and third parts of the first plea in 33. The Belgian Government bases its law application on four pleas in law by which it alleges breach of Regulation No 570/88 and of several principles of Community law by the contested decisions.

(a) Submissions of the parties

34. The first plea asserts that there was no legal basis. This plea consists of three parts. 36. In the opinion of the Belgian Govern- In the first part the Belgian Government ment, it was permissible to grant Commu- denies that it breached Article 1 of Regu- nity aid under Article 1 of Regulation lation No 570/88, as amended by Regu- No 570/88, in the version in force at the lation No 1157/91. In the second part it relevant time, for TAIB from the date on asserts that no irregularities or negligence which the Belgian authorities classified it as are attributable to the Belgian authorities. 'beurre de laiterie: qualité extra'. The third part relates to the residual jurisdiction which permitted the Kingdom of Belgium to classify TAIB as 'beurre marque de contrôle'.

37. Article 1(2) of the regulation, which deals with the conditions for the grant of aid, refers only to Article l(3)(b) of Regu- lation No 985/68, that is, to that classifi- cation, and therefore the appropriate clas- 35. The other three pleas allege infringe- sification is the only condition subject to ment of the principle of proportionality, of which aid may be granted for butter under the principle of genuine cooperation, and of Article 1 of Regulation No 570/88; the principle of protection of legitimate Article 1(3) of Regulation No 985/68 con- expectations. tains no general definition of the butter that

43. The latter situation applies in the present case in so far as Article 1(2)(a) of Regulation No 570/88 refers as a condition 40. The Belgian Government also, in the for the granting of aid for butter to the third part of this plea of law, invokes the classifications set out in Article 1(3)(b) of principle of subsidiarity and its residual Regulation No 985/68 that are to be jurisdiction to classify the butter. undertaken by the Member States of manu- facture. In the case of Belgian butter, this must be classified under the Belgian provi- sions as 'beurre marque de contrôle' in order to be covered by the aid provision in Article 1 of Regulation No 570/88. 41. Without in principle denying the exist- ence of this residual jurisdiction, the Com- mission is of the opinion that the Kingdom 17 — See in particular Case 48/85 Commission v Gcrnnm\ of Belgium was not entitled to exercise this [1986] UCR 2549, paragraph 12, and Case 154/77 Procureur du Rot v Decímnmn [1978] ECR 1573, para- jurisdiction in order to disregard or circum- graph 16.

I - 3621

OPINION OF MRS STIX-HACKL — CASE C-332/00

50. In order to increase disposal, provision was first of all made for the sale at reduced 47. That article, in addition to the funda- prices of intervention butter bought in on mental principles of the intervention sys- the basis of Regulation No 985/68 for the tem, contains provisions in its third para- manufacture of particular products; this graph on the disposal of the butter bought was done in R e g u l a t i o n (EEC) in by the intervention agency ('intervention No 262/79. 20

20 — Commission Regulation (EEC) No 262/79 of 12 February 18 — See Case 51/74 Van der Hulst [1975] ECR 79, paragraphs 1979 on the sale of butter at reduced prices for use in the 25 to 29. manufacture of pastry products, ice-cream and other 19 — OJ, English Special Edition 1968 (I), p. 176. foodstuffs (OJ 1979 L 41, p. 1).

I - 3622

BELGIUM v COMMISSION

53. The connections set out between Regu- lation No 570/88 and Regulation 55. This assessment is not altered by the No 985/68 make it clear that the measures fact that TAIB, as an 'intermediate prod- provided for in Regulation No 570/88 to uct', can be granted aid on the basis of promote the disposal of butter form a Article 9a. The fact that such intermediate mechanism complementary to the inter- products are eligible for aid represents, in vention system for butter laid down in reality, a subsequent addition which is probably in contradiction to the original system of Regulation No 570/88. 2 1 — C o m m i s s i o n Regulation (EEC) No 1932/81 of 13 July 1981 on the granting of aid for butter and concentrated butter for use in the manufacture of pastry products, ice-cream and other foodstuffs (OJ 1981 L 191, p. 6). This regulation sets out in more detail the aid arrangements with regard to manufacturers of pastry products and ice-cream provided for in Council Regulation (EEC) No 1723/81 of 24 June 1981 establishing general rules relating to measures designed to maintain the level of use of butter by certain categories of consumer and industry (OJ 1981 L 172, p. 14). 56. The original version of the wording and 22 — See in this connection the second recital in the preamble to preamble of Regulation No 570/88 show Regulation No 1723/81. 23 — See the first and second recitals in the preamble to that that aid was allowed to be granted for regulation. butter, concentrated butter or — after

I - 3623

OPINION OF MRS STIX-HACKL — CASE C-332/00

60. Finally, it must also be pointed out that 58. The fact that 'intermediate products' as the list of national classifications in defined in Article 9 were introduced in Article l(3)(b) of Regulation No 985/68 addition to the products in Article 1 as contains only such classifications of butter products eligible for aid is the result of as correspond to the characteristics set out three amending regulations which were in heading (a) of that provision. This is enacted by the Commission as a result of illustrated, for example, by the fact that misunderstandings with regard to the term this list of national classifications was 'intermediate p r o d u c t ' . 2 4 Therefore supplemented by butter manufactured in Article 9a(a) was introduced, which now the United Kingdom and in Ireland — provides that products from concentrated after their accession to the European Com- butter with particular characteristics are to munities —· in such a way as 'to make this be regarded as intermediate products for butter satisfy the conditions corresponding the purposes of Article 9. It was further made clear that 'aid may be requested for the products referred to in Article 9a(a), 25 — Second recital in the preamble to Regulation (EEC) No 2443/93. 26 — The second paragraph now begins as follows: 'Notwith- standing Article 9a(a), only the following may qualify for 24 — Commission Regulation (EEC) No 1813/93 (cited above in aid:...' footnote 13), Commission Regulation (EEC) No 2443/93 27 — At the hearing, the Commission submitted with regard to (cited above in footnote 6) and Commission Regulation Article 9a that its inclusion was the result of a compromise (EEC) No 3049/93 of 4 November 1993. In the preambles between the interest of the Kingdom of Belgium in granting to all three regulations, reference is made to the uncer- aid for TAIB and the principle that as a rule only 'classic' tainty with regard to 'intermediate products'. butter can be the subject of Community butter promotion.

(a) Submissions of the parties 62. Returning to the question of the scope of the residual jurisdiction in the present case and the case-law mentioned at the beginning, it must therefore be concluded 65. The Belgian Government submits that a Member State may exercise its essentially that its authorities did not jurisdiction to undertake the classification commit any irregularities or negligence mentioned in Article 1(3)(b) of Regulation within the meaning of Articles 2 and 3 of No 985/68 only if it takes into account the Regulation No 729/70 on the financing of appropriate standards. the common agricultural policy, on the basis of which the Commission made the corrections. If it was mistaken in its inter- pretation of Regulation No 570/88, this is to be attributed to the uncertainty of the 63. Any other interpretation would allow legal situation, which continued on the Member States to extend the scope of relevant issue until Regulation No 455/95 application of the intervention or aid came into force and for which the Com- system to further products in addition to mission is responsible as a breach of the those which are intended to be covered principle of legal certainty. under the terms of this system, which would be contrary to the principle of uniform application of Community law and to the principle of equality between the citizens of the Community in the implementation of the common agricul- 66. In the opinion of the Commission this tural policy. 29 submission is irrelevant, as the contested decisions were adopted primarily on the basis of Article 3(3) and Article 5(2)(c) of 28 — Regulation (EEC) No 2714/72 of the Council (cited above Regulation No 729/70, and more specifi- in footnote 9) amending Regulation No 985/68 (cued cally as a result of the finding that the above in footnote 8), final recital in the preamble. 29 — With regard to this principle, see Case 11/76 Netherlands v expenditure was not in conformity with Commission [1979] ECR 245, paragraph 9. Community law; any irregularities or neg-

(b) Assessment 69. In the latter case, the Commission makes a financial correction under Article 5(2), the amount of which it deter- mines according to the nature and gravity 67. Article 5(2) of Regulation No 729/70 is of the breach and the damage to the EU the procedural basis of the Commission's budget caused, and which is calculated decision on the exclusion of Member either on the basis of errors in individual States' expenditure from Community cases or on the basis of the risk of financial financing. The framework for this Com- loss. munity financing for the EAGGF is created by Articles 2 and 3 of that regulation. In the present case, Article 3 is relevant; under Article 3, the EAGGF finances interven- tions in order to regulate the agricultural markets. These interventions are 'made under Community law as part of the common organisation of the agricultural 70. If, however, as in the present case, a markets'. Article 8 of the regulation relates Member State has incurred intervention to the correct implementation of the meas- expenses as a result of an incorrect inter- ures: firstly, it imposes an obligation on the pretation or application of a provision of Member States to ensure that the measures Community law, it follows from the case- are implemented correctly, and secondly, it law of the Court of Justice that 'such a contains provisions on the consequences if situation cannot fall under Article 8 but there should be irregularities or negligence must, on the contrary, be examined in the in such implementation. light of the general provisions of Articles 2 and 3 of the same regulation... . Those provisions permit the Commission to charge to the EAGGF only sums paid in accordance with the rules laid down in the 68. In the light of these provisions, when various sectors of agricultural production, deciding to make exclusions from common while leaving the Member States to bear the financing under Article 5(2), it is in prin- burden of any other sum paid, and in ciple necessary to draw a distinction particular any amounts which the national between the situation in which Member authorities wrongly believed themselves States have incurred intervention expendi- authorised to pay in the context of the ture for which there is no legal basis under common organisation of the markets'. 30 Community law and the situation in which a material legal basis existed in Community law for the financing, but in which, when 30 — Case 347/85 United Kingdom v Commission [1988] ECR 1749, paragraph 52, and Case 11/76 (cited above in the measures were implemented, irregular- footnote 29), paragraph 8.

I - 3627

OPINION OF MRS STIX-HACKL — CASE C-332/00

ate measures are available to choose from, 80. In applying these provisions, therefore, the least onerous should be chosen. 31 the Commission had no discretion, if aid was granted on an objectively incorrect legal basis, to choose a different legal consequence from that of excluding the total amount of aid in question from financing by the Community.

77. First, the Belgian Government is cor- rect in so far as it submits that the principle of proportionality also applies to Commis- sion measures in connection with the 81. In particular, under the applicable common agricultural policy. 32 interpretation of the requirements for the expenditure to be taken over by the EAGGF, according to the case-law of the Court of Justice, 33 it probably cannot be assumed that the Commission has a power to review expenditure that a Member State wrongly based on a particular legal foun- dation in order to determine whether there 78. There cannot, however, be any is another legal basis which would be infringement of the principle of propor- correct and then to take over the expendi- tionality if a Community institution carries ture to that extent. 34 out a legal measure on the basis of provi- sions which give it no discretionary scope to take any other measure or to choose any other legai consequence.

87. As laid down in Commission Decision 94/442/EC of 1 July 1994 setting up a 1. Submissions of the parties conciliation procedure in the context of the clearance of the accounts of the European Agricultural Guidance and Guarantee Fund 84. In the opinion of the Belgian Govern- (EAGGF) Guarantee Section, 35 under ment, under the principle of genuine coop- Article 1(1)(b) the conciliation body tries eration the Commission had a duty in the in the conciliation procedure to reconcile conciliation procedure, in the course of the divergent positions of the Commission which the Commission never stated the true and the Member State concerned. In doing grounds for the contested decisions, to this, under Article 2(4) of the same make greater efforts towards the Belgian decision, it bases itself 'on the evidence in side and to discuss thoroughly with it the the dossier' and 'on a fair hearing of the interpretation of the regulation and the Commission staff and national authorities application of the principle of propor- concerned'. tionality.

85. The Commission counters this argu- 88. Point 5 of the conciliation report shows ment on the basis of the facts of the case, that both parties involved in the concili- which were established in the conciliation ation procedure, that is, including the report and were not disputed, and the Commission, used the opportunity to set course of the proceedings, which, in the out their points of view before the con- opinion of the Commission, directly ciliation committee, and these are summa- contradict these accusations. rised in points 3 and 4 of the report.

1. Submissions of the parties 92. With regard to the general course of the dispute on the interpretation of the regu- lation in question, the file further shows that the Commission and the Belgian auth- 95. In the opinion of the Belgian Govern- orities also exchanged a great deal of ment, its interpretation of Article 1 of information outside the conciliation pro- Regulation No 570/88 was justified in the cedure. light of the principle of protection of legitimate expectations. In contrast, and in breach of this principle, the Commission, in taking its decision as to correction, relied above all on a passage from a judgment of 93. Thus, both in 1991 — on the occasion the Court of First Instance of 30 January of the export of TAIB to France — and in 1997 36 a n d thus o n a decision which was the course of 1995 — in connection with taken only three months after the events in the amendment of Regulation No 570/88 by Regulation No 455/95 — there was correspondence between Commission offi- 36 — Corman judgment, cited above in footnote 16.

I - 3630

BELGIUM v COMMISSION

2. Assessment

97. Reliance may be placed on the principle of protection of legitimate expectations in regard to Community law only to the 99. In those circumstances, the Kingdom of extent to which the Community itself first Belgium had no legitimate expectation than creates a situation which is capable of the Commission would take over aid as creating a legitimate expectation. 37 chargeable to the EAGGF where such aid was paid by the Kingdom of Belgium for TAIB under the new classification on the basis of Article 1. In the procedure for clearing EAGGF accounts which preceded the contested decisions, the Commission 98. In the present case, however, the Com- clearly also referred to the Corman judg- mission from the outset, that is, for the first ment, 38 but this does not alter the situation time in its letter of 10 June 1991, expressed with regard to the protection of a legitimate to the Belgian authorities doubts as to the interest, since the Commission, as has just eligibility of TAIB for aid, in any event with been explained, constantly expressed reser-

37 — Sec for example Case C-177/90 Kiilm [19921 HCU I-35. paragraph 14. 38 — See point 3 of the conciliation report.

I-3631

OPINION OF MRS STIX-HACKL — CASE C-332/00

vations as to the eligibility of TAIB for aid 100. The allegation that the Commission under Article 1 of the regulation in ques- infringed legitimate expectations is there- tion. fore also mistaken.