C-271/01

COPPI

OPINION OF ADVOCATE GENERAL ALBER delivered on 21 November 2002 1

I — Introduction I will consider whether and to what extent the provisions referred to by the national court were actually still in force at the material time.

1. This reference for a preliminary ruling by the Consiglio di Stato (Council of State) concerns the question as to whether in 1997 the Italian authorities had power to reclaim aid granted in 1993 under a pro- gramme that was co-financed out of the Guidance Section of the European Agricul- I I — Facts and question referred tural Guidance and Guarantee Fund (EAGGF) and out of national funds. Depending on which legal basis applied, it could also have been the Commission that had power to reclaim the aid, either alone or acting in conjunction with the Italian authorities. 3. On 24 June 1991, the Italian Govern- ment submitted to the Commission the multiregional operational programme entitled 'Miglioramento delle produzioni tipiche del Mezzogiorno e sviluppo delle colture alternative'' (Improvement of typi- cal products of Southern Italy and deve- lopment of alternative cultivation) and applied for co-financing from the Guaran- 2. There are doubts, however, as to tee Section of the EAGGF. By Decision whether all the provisions that could poten- No C(91)2745 of 29 November 1991, tially apply were still applicable ratione amended by Decision No C(93) 3476 of temporis at the time the aid was reclaimed. 29 November 1993 (hereinafter referred to Accordingly, before outlining the legislative as Decision C(91) 2745), the Commission context, I will first set out the facts in order approved this programme and authorised to establish the chronology of events. Then financial assistance of ECU 86 240 000, equal to 50% of the total volume, to be provided from the Guarantee Section of the 1 — Original language: German. EAGGF. The Commission based these

4. By Ministerial Decrees No 1905 of 9 November 1992 and No 485 of 7 October 1993, the Ministry of Agricul- ture and Forestry ('the Ministry') granted the Consorzio Produttori Pompelmo Ita- liano, a cooperative society with limited liability (Italian Consortium of Grapefruit Producers — 'COPPI'), aid ultimately tot- alling approximately ITL 45 billion for the 6. COPPI had transferred part of the aid to years 1991 to 1993. The decrees, which Società Concentrati Bevibili Sicilia ari cited the Commission Decision and the (CBS) to carry out certain works, as pro- Regulations referred to therein, specified vided for in a sub-programme. The latter, yearly tranches and the respective financial however, had sold a branch of its business, contributions of the Community and of including the plant and machinery financed Italy. through the programme, to Impianti Bre- vetti Sri (MESSE), without the prior auth- orisation of the Commission.

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8. The Ministry appealed this decision to I I I— Whether the Community provisions the Consiglio di Stato on the ground that referred to by the national court were Article 23 of Regulation No 4253/88 con- applicable at the material time ferred power on the Ministry to reclaim aid. The Consiglio di Stato has now referred the following question to the Court for a preliminary ruling: 9. Before considering the various Regu- lations individually, I will first give a brief outline of the evolution of the legislation that is potentially relevant to the present case.

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from the various structural funds and for kets in agricultural products. According to greater coordination of measures with Article 19(2) of Regulation No 355/77, the Member States. At the same time the Commission has responsibility for suspend- Council adopted a series of implementing ing, reducing or discontinuing aid from the regulations on the basis of Article 130e of fund in the event of irregularities in the the EC Treaty (now, after amendment, implementation of projects. The Commis- Article 162 EC). Of these, those of par- sion is to recover any sums the payment of ticular relevance here are the aforemen- which was not justified. The Member tioned Regulation No 4253/88 8 on the States have only a supporting role, for- coordination of the activities of the dif- warding to the Commission all supporting ferent funds and Council Regulation (EEC) documents which are of relevance in prov- No 4256/88 of 19 December 1988, laying ing that the financial or other conditions down provisions for implementing Regu- laid down for each project have been lation (EEC) No 2052/88 as regards the fulfilled. European Agricultural Guidance and Guar- antee Fund Guidance Section 9('Regulation No 2052/88'). In 1993, the regulations adopted in 1988 were further revised. 10

13. It is open to question, however, whether Regulation No 355/77 was actually still in effect at the time the aid was reclaimed or, alternatively, whether A — Regulation No 355/77 certain of its provisions continued to apply by virtue of transitional rules.

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15. A r t i c l e 10(2) of R e g u l a t i o n 18. Consequently, Regulation No 355/77 No 4256/88 1 1(original version) provides has no application to the present case. that Regulation No 355/77 is repealed with effect from the date of entry into force of the Council Decision referred to in para- graph 1 of that article. The Council adopted that decision in the form of Regulation (EEC) No 866/90, 12 which entered into force on 1 January 1990.

17. Moreover, Article 10 of Regulation No 4256/88 (original version) was com- p l e t e l y r e v i s e d by R e g u l a t i o n No 2085/93. 13 As a result of the revision, the transitional regime governing Regu- lation No 355/77 was completely abolished with effect as of 3 August 1993. 1 4It was 20. It was however on this provision that not until four years later that the aid the Ministry based the order for recovery in (including the Community's financial con- Decree No 8649 of 16 December 1997. It tribution) was reclaimed in part under the may be that the sale constitutes a breach of Ministerial Decree of 16 December 1997. other provisions too, for example (ancil- lary) provisions of Ministerial Decree No 485 or provisions of the relevant regu- 11 — Cited in footnote 9. lations. Yet the specific case of grant-aided 12 — Council Regulation (EEC) No 866/90 of 29 March 1990 articles being sold by the beneficiary with- on improving the processing and marketing conditions for agricultural products, OJ 1990 L 91, p. 1. out the consent of the Commission or of the 13 — Cited in footnote 10. national authority concerned is no longer 14 — Case C-500/99 P Conserve Italia v Commission [2002] ECR I-867, paragraph 82. expressly mentioned in the relevant provi-

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21. Since the entry into force of Regu- lations No 4256/88 and No 4253/88 on 23. Recovery of aid can therefore be based 1 January 1989, as the Commission rightly only on Regulation No 4253/88, as observes, these two instruments have amended by Regulation No 2082/93. It formed the legal basis for all measures was on the basis of Regulation No 4253/88 funded under the EAGGF, Guidance Sec- also that the aid was granted to COPPI, as tion. Regulation No 729/70 has since that recited in Ministerial Decrees No 1905 and date had no application to this area, by No 485. Under Article 54 of Council virtue of Article 11 of Regulation Regulation (EC) No 1260/1999 of 21 June No 4256/88. Accordingly, Article 8 of 1999 laying down general provisions on the Regulation No 729/70, which requires Structural Funds, 15 Regulation No 4253/88 Member States to deal with irregularities was repealed with effect only as of and to recover sums lost as a result, is also incapable of providing the basis for recovery of the assistance. 15 — OJ 1999 L 161, p. 1.

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1 January 2000 and was therefore still in intermediary and/or the promoter pro- force when Decree No 8649 of vide proof that they were not respon- 16 December 1997 was adopted. sible for the irregularity or negligence, the Member States shall be liable in the alternative for reimbursement of any sums unduly paid....

IV — The applicable provisions Member States shall inform the Commis- sion of the measures taken for those pur- poses and, in particular, shall notify the 24. Article 23 of Regulation No 4253/88, Commission of the description of the as amended by Regulation No 2082/93, is management and control systems estab- headed 'Financial control'. Paragraph 1 of lished to ensure the efficient implemen- that article provides as follows: tation of operations. They shall regularly inform the Commission of the progress of administrative and judicial proceedings.

...' 28. Those articles provided for a clear division of responsibilities between the Commission and the Member State. Under Article 24(2), the decision to suspend, reduce or cancel aid was solely a matter for the Commission. The national auth- orities, on the other hand, in accordance with Article 23 of Regulation No 4253/88, were responsible for carrying out planned V — Observations of the parties changes in relation to the implementation of the activities funded by the Commission and for the recovery of overpayments.

26. Observations were made to the Court by COPPI, the Italian Government, and the Commission. In what follows, their obser- vations are reported only in so far as they relate to the applicable provisions.

29. This was confirmed by a reading of Regulation No 2052/88 and of Decision No C(91) 2745, by which the aid was granted. A — COPPI

27. In the view of COPPI, the issue raised in the reference for a preliminary ruling is 30. The basic regulation, Regulation essentially whether the Italian authorities No 2052/88, was based on Article 130d were entitled, without any involvement on of the EC Treaty (now, after amendment, the part of the Commission, to reclaim aid Article 161 EC). The regulations laying that had been authorised on the basis of a down special rules for the different funds I - 1038

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(Regulations No 4254/88, No 4255/88 and after conferring with the other. Regulation No 4256/88) and for their coordination No 4253/88, being an implementing regu- (Regulation No 4253/88), by contrast, lation, could not contain provisions calling were based on Article 130e of the EC into question this basic principle set out in Treaty (now, after amendment, Article 162 Regulation No 2052/88. EC). Being implementing regulations, they could not lay down rules which were inconsistent with the basic regulation.

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graphs 21 and 22 of Annex 2 thereto, a discretion to the Member State in relation which are in the following terms: to the implementation of Community oper- ations, which Article 18 of Regulation No 2052/88 reserves to the Commission.

'The Member States and the recipients shall ensure that the Community funding is used for the purposes contemplated. If an oper- ation or a measure no longer warrants more than part of the funds that have been approved for it, the Commission shall immediately reclaim the sum owing in 37. Of all possible alternatives, the inter- accordance with the provisions of para- pretation to be preferred is the one that graph 23, if the Member State is in agree- secures the regulation's validity and is most ment... consonant with the legal context. Therefore Article 23 of Regulation No 4253/88 could not be interpreted in such a way that it authorised Member States to reduce, sus- pend or cancel aid or to recover same.

Under these procedures, the Commission may reduce or suspend assistance in respect of the operation or measure concerned if the examination reveals an irregularity or, in particular, a significant change affecting the nature or conditions for the implemen- tation of the operation or measure for which the Commission's approval has not been sought.' 16 B — The Italian Government

36. If Article 23 of Regulation No 4253/88 did in fact permit Member States to recover Community funding on their own respon- sibility, then the Commission Decision would be invalid, since — unlike the 38. The Italian Government, on the other Regulation — it assigned this task to the hand, takes the view that the recovery of Commission. On this interpretation, the aid had its legal basis in Article 23 of Article 23 of Regulation No 4253/88 Regulation No 4253/88, as amended by would in turn be inconsistent with Regu- Regulation No 2082/93. That article con- lation No 2052/88, since it would delegate ferred power on the Member State to recover aid where irregularities had occurred. The recovery of the aid also 16 — The wording of Paragraph 22 is virtually identical to that constituted an instance of the application of Article 24(2) of Regulation No 4253/88. of Article 280 EC.

41. The system of Community structural activities provided for under Regulations No 2052/88 and No 4253/88, which was introduced as part of the 1988 reform, was based instead on partnership between VI — Legal analysis Commission and Member State. Under this arrangement, the Commission approves the national framework programme submitted to it by the Member State. Thereafter, the Member State implements this programme on its own financial responsibility, through 44. Having established that, in the instant the intermediary of implementing bodies case, only Regulation No 4253/88 can form designated by it for the individual meas- ures. There is no direct relationship between the Commission and the recipients 17 — The Commission refers in this connection to the decision that was at issue before the Court in the Conserve Italia of the aid. case (cited in footnote 14).

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the basis for the reduction and recovery of 47. Narrowly construed, the German term aid, it now has to be considered whether 'ahnden' [take action] might be understood Article 23 of that regulation confers the as denoting only the imposition of penalties relevant power on the Member State. In for criminal offences committed with intent interpreting the article, besides its wording, or through negligence. However, other particular weight must be given to sche- language versions do not offer any support matic and teological considerations. for this restrictive interpretation. 18 In any case, the word 'ahnden' does not exclude other ways of dealing with irregularities, such as administrative measures and pen- alties. 19 It includes, in particular, the power to reduce and recover aid.

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support their views, but they arrive at Member State submits an operational pro- opposite conclusions. gramme to the Commission. The Commis- sion approves the programme and fixes the (proportionate) contribution that the Com- munity will make to the implementation of the programme. The Member State on that basis grants the overall subsidies (consisting of the Community's contribution plus that 50. For COPPI, the juxtaposition of of the Member State) to implementing Articles 23 and 24 of Regulation bodies, such as COPPI, which in turn pass No 4253/88 appears to point to a sort of the funds on to the entities that carry out tiered competence as between Commission the actual projects. and Member State. Under Article 24, on this view, the Commission alone has power to make a decision reducing or cancelling a subsidy vis-à-vis the recipient. The role of the national authorities, on the other hand, is to carry out regular adjustments in the course of the implementation of projects and to effect the 'material' recovery of aid.

53. Accordingly, Commission Decision No C(91) 2745 approving the operational programme was addressed to the Member State and not to the beneficiaries. 20 In the instant case, there was no direct legal 51. In the Commission's view, by contrast, relationship between the beneficiaries and Articles 23 and 24 of Regulation the Commission. The argument of COPPI No 4253/88 apply to different relation- to the effect that the Commission had ships. Article 24 deals with the Commis- granted it aid by virtue of the Decision is sion's power to reduce or cancel the therefore not correct. Community's financial contribution to the national programme in the event of irregu- larities or changes to the programme. Article 23, on the other hand, concerns the private relationship between the national authorities and the beneficiary (emphasis added).

55. The idea of a splitting into two levels, the level of the operational programme and the level of the implementation of that 57. Under Article 23(1), second subpara- programme, also finds expression in the graph, second sentence, the Member State sixth recital to Regulation No 2082/93, is required to inform the Commission amending Regulation No 4253/88. That regularly of the progress of administrative recital is in the following terms: and judicial proceedings. This reporting requirement is doubly significant. First, it shows that it is incumbent on the Member States to bring such proceedings, in con- nection with the implementation of the operational programme, proceedings which can have no object other than the recovery 'Whereas, in application of the principle of of unjustified subsidies. Secondly, the subsidiarity, and without prejudice to the reporting requirement is an expression of Commission's powers, particularly its the Member State's responsibility vis-à-vis responsibility for the management of the the Commission for the proper implemen- Community's financial resources, imple- tation of the programme. mentation of the forms of assistance con- tained in the Community support frame- works should be primarily the responsibil- ity of the Member States at the appropriate territorial level according to the specific needs of each Member State'.

58. As a further consequence of this responsibility of the Member State, Article 24 of Regulation No 4253/88 empowers the Commission to reduce, sus- 56. If a subsidy has been granted in this pend or cancel the Community contribu- way, the Member State is primarily respon- tion and recover it from the Member State sible at the implementation level for super- in the event of non-compliance with the vising the proper use of the funds by the approved operational programme. beneficiaries. For that reason, Article 23 of Granted, Article 24(3), first sentence, Regulation No 4253/88 also expressly laconically provides only that any sum specifies the measures to be taken by the received unduly and to be recovered is to

59. The proposition that Article 24 pri- marily concerns the Member State-Com- mission relationship is also borne out by the fact that it provides specifically for the 62. The Commission had thus established a submission of comments by the Member grantor/grantee relationship with the bene- State but not by those who received aid ficiary and was entitled to cancel the aid from the Member State under an oper- under the terms of that relationship and to ational programme. recover the relevant sums from the bene- ficiary. Since the Community contribution and the national matching funds had been granted by separate decisions, the cancel- lation of the Community contribution did not affect the national decision to grant aid, revocation of which was solely a matter for the national authorities. 60. If the Commission had power, in the instant case, to reduce the aid to COPPI and to recover overpayments directly, that would amount to it being given the right to set aside in part a decision to grant aid of a national authority (Ministerial Decree No 485). There is no provision in the EC Treaty for a Community body to intrude on national sovereignty in this way. 63. I must also reject the argument of COPPI that authority to recover the aid lay with the Commission by virtue of paragraphs 21 and 22 of Annex 2 to Decision No C(91) 2745. That passage of the ancillary provisions reproduces vir- tually word-for-word Article 24 of Regu-

61. These findings are not contradicted by the fact that in certain circumstances the 21 — Cited in footnote 14. A similar situation fell to be considered by the Court in Case T-199/99 Sgaravatiti Commission can, by way of exception, Mediterranea v Commission [20021 ECR II-3731. recover aid directly from beneficiaries, 22 — See the findings of fact set out under points 25 and 26 of paragraph 20 of the Court's judgment in Conserve Italia under Article 24 of R e g u l a t i o n (cited in footnote 14).

66. Nor do the partnership principles set out in Article 4 of Regulation No 2052/88 entail any obligation on the Member State 64. Finally, COPPI refers to Articles 4 and to seek the Commission's approval before 18 of Regulation No 2052/88 (as amended taking action against irregularities and by Regulation No 2081/93). Article 4(1) of recovering 'any amounts lost', as COPPI Regulation No 2052/88 lays down general appears to assume. principles governing cooperation between Commission and Member States. It requires both sides to work together in partnership at all stages of the aid process. According to the fifth sentence of Article 4(1), however, the partnership 'will 67. All that the implementing provisions be conducted in full compliance with the laid down in Regulation No 4253/88 respective institutional, legal and financial require of the Member State is that it powers of each of the partners'. regularly inform the Commission of the progress of administrative and judicial proceedings (Article 23(1), second subpara- graph, second sentence). There is no provi- sion in the Regulation requiring the Member State to involve the Commission in any way before adopting measures pur- suant to Article 23(1) of Regulation No 4253/88.

65. It follows that legally binding rules as to who has power to adopt individual measures cannot be derived from Article 4(1). The powers and duties vested in the Commission and the Member States 68. Such a requirement would be of little are instead to be found in the implementing practical use in a case such as the present. provisions adopted by the Council pur- This is because the Commission, as it suant to Articles 3(4) and (5) of Regulation explained at the hearing, has no knowledge No 2052/88, in this case Articles 23 and 24 of the individual projects in the subpro- of Regulation No 4253/88. In view of the grammes being carried out by third parties express proviso as to legal, institutional and subcontracted to COPPI.

72. The conclusion to be drawn is therefore that Article 23(1) of Regulation No 4253/88 confers power on Member States to reduce aid in the event of irregu- 70. An interpretation of Regulation larities and to recover amounts unduly No 4253/88 in the light of its purposes received by beneficiaries as a result. That also confirms the view that Article 23 is the position at any event if the aid was confers power on the Member State to granted to the beneficiary as a composite reduce and recover aid. Scarce budget subsidy, including the Community con- resources must be used only in accordance tribution, by a decision of a national with the conditions of aid. If there is a authority. Accordingly, a Member State breach of those conditions, it accords with adopting measures under Article 23(1) of the aims of the Regulation for action to be Regulation No 4253/88 is acting in exercise taken against the irregularities as swiftly of its own powers. A delegation of the and as effectively as possible, so as to relevant powers by the Commission to minimise the loss to the Community the Member State — as suggested by budget. COPPI — is therefore not required.

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VII — Conclusion

73. In the light of the foregoing considerations, I propose that the question referred be answered as follows:

'In accordance with Article 23(1) of Council Regulation (EEC) No 4253/88 of 19 December 1988, laying down provisions for implementing Regulation (EEC) No 2052/88 as regards coordination of the activities of the different Structural Funds between themselves and with the operations of the European Investment Bank and the other existing financial instruments, as amended by Council Regulation (EEC) No 2082/93 of 20 July 1993, a Member State had power, in 1997, to take action against irregularities in the implementation of an operational programme and to recover from the beneficiary any amounts lost as a result of such irregularities, including the Community contribution, which the authorities of that Member State had granted to the beneficiary as a composite subsidy under the operational programme.'