In Case C-55/91,
Italian Republic, represented by Professor Luigi Ferrari Bravo, Head of the Department for Contentious Diplomatic Affairs in the Ministry of Foreign Affairs, acting as Agent, assisted by Oscar Fiumara, Avvocato dello Stato, with an address for service in Luxembourg at the Italian Embassy, 5 Rue Marie-Adelaïde,
applicant,
supported by
French Republic, represented by Edwige Belliard, Deputy Director in the Legal Affairs Directorate of the Ministry of Foreign Affairs, and Claude Chavance, Principal Attaché for Central Administration in that Ministry, acting as Agents, with an address for service in Luxembourg at the French Embassy, 9 Boulevard du Prince Henri,
intervener,
v
Commission of the European Communities, represented by Eugenio de March, Legal Adviser, acting as Agent, with an address for service in Luxembourg at the office of Nicola Annecchino, of its Legal Service, Wagner Centre, Kirchberg,
defendant,
APPLICATION for the partial annulment of Commission Decision C (90) 2337 final of 30 November 1990 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1988 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) in so far as it excludes, in the final determination of total Italian expenditure chargeable to the Fund, certain sums connected with the co-responsibility levy in the milk and cheese sector, premiums for producers of sheepmeat and goatmeat, tobacco presented for intervention, olive oil presented for intervention, aid for the processing of soya beans and aid for the production of durum wheat,
THE COURT,
composed of: C.N. Kakouris, President of the Fourth and Sixth Chambers, acting for the President, M. Zuleeg and J.L. Murray (Presidents of Chambers), G.F. Mancini, F.A. Schockweiler, J.C. Moitinho de Almeida, F. Grévisse, M. Diez de Velasco and P.J.G. Kapteyn, Judges,
Advocate General: W. Van Gerven,
Registrar: H. von Holstein, Deputy Registrar,
having regard to the Report for the Hearing,
after hearing oral argument from the parties at the hearing on 10 November 1992,
after hearing the Opinion of the Advocate General at the sitting on 3 March 1993,
gives the following
Judgment
1 By application lodged at the Court Registry on 7 February 1991, the Italian Government brought an action under the first paragraph of Article 173 of the EEC Treaty for the partial annulment of Commission Decision 90/644/EEC of 30 November 1990 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1988 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) (OJ 1990 L 350, p. 82).
2 The application seeks the annulment of that decision in so far as it declared that the following sums were not chargeable to the EAGGF:
° LIT 83 977 318 963 in respect of the additional co-responsibility levy in the milk and milk products sector,
° LIT 67 392 655 139 in respect of premiums for producers of sheepmeat and goatmeat,
° LIT 711 001 829 + 1 554 528 324 in the sector of intervention tobacco,
° LIT 60 808 737 217 in the olive oil sector,
° LIT 38 034 266 760 in respect of aid for the processing of soya beans and
° LIT 67 501 305 800 in respect of aid for the production of durum wheat.
3 The French Republic, which was given leave to intervene by order of 7 October 1991, did not submit a statement in intervention within the prescribed time-limit.
4 Reference is made to the Report for the Hearing for a fuller account of the facts, the procedure and the pleas and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.
Additional levy in the milk and milk products sector
5 The additional levy in the milk and milk products sector was introduced by Council Regulation (EEC) No 856/84 of 31 March 1984 (OJ 1984 L 90, p. 10) amending Regulation (EEC) No 804/68 of the Council on the common organization of the market in milk and milk products (OJ, English Special Edition 1968(I), p. 176). The system of the additional levy on milk was introduced by adding an Article 5c to Regulation (EEC) No 804/68. That provision was implemented by Council Regulation (EEC) No 857/84 of 31 March 1984 adopting general rules for the application of the levy referred to in Article 5c of Regulation (EEC) No 804/68 in the milk and milk products sector (OJ 1984 L 90, p. 13). That regulation was repealed and replaced by Council Regulation (EEC) No 3950/92 of 28 December 1992, that is to say, after the date of the material facts in this case.
6 The system of the additional levy, as introduced by Article 5c of Regulation No 856/84, is intended to reduce production in the milk sector. Under that system, the Community authorities fix the maximum quantity which may be produced in the Community as a whole and then allocate it amongst producers in the Member States by giving each of them a quota known as "reference quota". If the producer exceeds that quota, he has to pay an additional levy, which constitutes a penalty.
7 The additional levy is calculated by aggregating all the quantities of milk and milk products marketed in each Member State during the reference year.
8 It is common ground that Italy did not implement the additional levy system until 1988. For the period 1987-1988 Italy submitted to the Commission a total balance of 8 702 741 600 kg obtained on the basis of the monthly statistics of ISTAT (the Italian Statistical Institute).
9 On the basis of other data, in particular a table obtained from the Italian Ministry of Agriculture (entitled "Evoluzione della produzione e della commercializzazione dei formaggi di azienda agricola"), the Commission decided that the figure submitted by Italy was incorrect and that it was necessary to add to it a quantity corresponding to the production of cheese (103 000 000 kg). Consequently, the levy had to be calculated on the basis of the total figure.
10 In the instant case, the Italian Government contests that view on the ground that, according to Article 5(2) of Regulation (EEC) No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (OJ, English Special Edition 1970(I), p. 218), the Commission has to clear the accounts of the EAGGF on the basis of the annual accounts presented by the Member States. It further points out that cheese production was taken into account on the basis of a table drawn up informally on the occasion of a visit to Italy by EAGGF officials designed to inform those officials about the implementation of milk quotas in Italy. Since that document was not official, it could not be used by the Commission for the purposes of clearing EAGGF accounts. In addition, the ISTAT data and the informal estimates resulting from the table were disparate values which were not comparable.
11 The Commission contests these arguments. First, the production of cheese had already been taken into account for the purpose of the clearance of the accounts for the preceding financial year (1986 to 1987) and was taken into account again for the subsequent year (1988 to 1989), without this having given rise to any objections from Italy. Moreover, in the letter relating to the period 1988-1989, the Commission had stated that it intended to take the same approach for subsequent years. Secondly, the data contained in the aforementioned table constituted statistics as reliable as those of ISTAT. Thirdly, the Commission did not have any other means of verifying the data provided to it by the Italian Government, given that, in 1987 and 1988, Italy had not made the declarations relating to deliveries of milk and milk products provided for in Articles 15 and 16 of Commission Regulation (EEC) No 1546/88 of 3 June 1988 laying down detailed rules for the application of the additional levy referred to in Article 5c of Regulation (EEC) No 804/68.
12 In that regard, it should be observed in the first place that, according to Article 5(2) of Regulation No 729/70, EAGGF accounts are to be cleared on the basis of the annual accounts, accompanied by the documents necessary in order to clear them, forwarded periodically by the Member States to the Commission. In no case does that provision debar the Commission from satisfying itself by other means, such as inspections carried out on the spot by its officials in accordance with Article 9(2) of Regulation (EEC) No 729/70, that the data provided by the Member States are correct.
13 As regards the burden of proof, it should next be pointed out that, as far as the financing of the common agricultural policy is concerned, it is first for the Commission to prove an infringement of the rules of the common organization of the agricultural markets. Once such an infringement has been established, the Member State concerned must then, if appropriate, demonstrate that the Commission committed an error as to the financial consequences to be attributed to it (see, in particular, Case C-281/89 Italy v Commission [1991] ECR I-347, paragraph 19).
14 However, it should be made clear that that case-law presupposes that a distinction can be drawn between the existence of the irregularity which may have been committed and its financial consequences. However, such a distinction cannot be made in this case, where the alleged infringement relates to the actual calculation of the additional levy which the Italian Republic had to carry out. Since the Member State has available to it all the information relating to the circumstances in which the operation in question took place, the burden of proving that the Community rules were complied with falls on it.
15 In this case, however, as the Advocate General observes at point 12 of his Opinion, the Italian Republic merely claims that cheese deliveries were included in the figures used in order to implement the additional levy system, but has not adduced factual evidence to this effect.
16 Accordingly, it must be held that Italy has not succeeded in showing that the Commission' s arguments are unfounded. Consequently, the plea raised by the Italian Government must be rejected.
Premiums for producers of sheepmeat and goatmeat
17 In order to offset the potential loss of income ensuing from the introduction of the common organization of the market in sheepmeat and goatmeat, Article 5 of Council Regulation (EEC) No 1837/80 of 27 June 1980, which introduced that common organization (OJ 1988 L 183, p. 1), provided for the grant of a premium to producers of lambs and kids which are not slaughtered before the age of two months. In the period 1987-1988 Italy paid premiums under this head amounting to LIT 103 345 056 245. Of this total amount, the Commission refused to charge to the EAGGF (a) LIT 2 827 359 845 on account of late payment and (b) LIT 67 392 655 139 on account of the absence of sufficient controls.
18 As appears from the documents before the Court, the Commission made spot checks in most of the Italian regions concerned. Those checks brought to light numerous irregularities in the payment of the premiums by the Italian administration. Thereupon, the Commission reduced the amount of the premiums chargeable to the EAGGF, not only in the regions in which the checks were carried out, but also, by extrapolation, in other Italian regions.
19 In its application, the Italian Government initially contested the legality and systematic nature of the checks carried out by the Commission and the use of the method of extrapolation; however, since the exclusion of the premiums corresponding to the regions concerned by that method was provisional (subject to proof to the contrary), Italy has withdrawn that complaint.
20 As regards the first complaint, it should be observed that, according to the documents before the Court, the Commission' s inspectors carried out inspections in four regions accounting for 68% of the total declared expenditure and, in addition, scrutinized documents relating to three other regions. Consequently, the checks covered 77% of the Italian production areas which received premiums for the raising of lambs and kids. Moreover, it also emerges from the documents before the Court that the checks were carried out systematically by comparing various documents and by examining the criteria and methods utilized by the Italian authorities.
21 Lastly, it should be added that, as the letter sent on 22 September 1990 by the national intervention agency (hereinafter "AIMA") to the Commission attests, the Italian administration has itself acknowledged that its officials had found shortcomings and encountered difficulties when inspecting the accounts of the farms.
22 It follows from the foregoing considerations that the checks carried out by the Commission in the seven Italian regions to which this complaint relates were systematic and that, consequently, the conclusions which they reached could be generalized to all the regions in which they were carried out. Given that, as indicated in the preceding paragraph, shortcomings were uncovered at most of the farms, including those which had been checked by the Italian administration itself, there is no reason to consider that the irregularities found in those checks were not committed in other farms in the regions concerned.
23 Since the Commission has therefore established the existence of irregularities in the seven regions which were the subject of the checks in question, it is for the Italian State to prove that the Commission committed an error in evaluating the consequences to be attributed to those irregularities.
24 In that regard, it should be observed that, in so far as it has confined itself to stating that the checks carried out by the Commission constituted mere indicia which were objectively uncertain and proved absolutely nothing as regards the payments made by Italy, the Italian Republic has not adduced proof of such an error.
25 Consequently, the second ground of the application must also be rejected.
Intervention tobacco
26 Article 5 of Regulation (EEC) No 1467/70 of the Council of 20 July 1970 fixing certain general rules governing intervention on the market in raw tobacco (OJ, English Special Edition 1970(II), p. 497) provides that only tobacco corresponding to the minimum quality characteristics to be defined on the basis of classification by variety and quality is to be bought in by the intervention agencies. Pursuant to that provision, Annexes II and III to Regulation (EEC) No 1727/70 of the Commission of 25 August 1970 on intervention procedure for raw tobacco (OJ, English Special Edition 1970(II), p. 592) defined the minimum quality characteristics and the relevant classification by variety and quality.
27 In the course of inspections carried out by it at Italian stores of tobacco bought in for intervention, the Commission took samples with a view to effecting qualitative checks. As appears from the summary report drawn up by the Commission, those inspections showed that large quantities of intervention tobacco did not come up to the minimum quality requirements prescribed by Regulation (EEC) No 1727/70. In addition, there were other specific batches which did not fall within the category in which they had been classed. In the light of those findings, the Commission effected a negative financial correction in the case of Italy amounting to LIT 1 544 528 324.
28 The Italian Government considers that that correction is unlawful and asks the Court to annul it. Its claim is based on three arguments. First, the samples on which the correction is based, are alleged to have been taken without complying with the procedure laid down in Article 9 of Regulation (EEC) No 729/70 as interpreted by the Court in Case C-366/88 France v Commission [1990] ECR I-3571. Secondly, it is claimed that the Italian administration consistently contested the procedure and control methods used by the Commission and the conclusions drawn by the Commission from the inspections and the analysis of the samples. In this regard, Italy refers to the non-representative nature of the samples taken, to the poor conditions in which they were kept and to the Commission' s refusal to take account of the deterioration in the quality of the products owing to ageing. Thirdly, it is alleged that, during the on-the-spot inspections carried out in January 1990, the Commission' s officials themselves admitted that the quality and classification of the tobacco were in accordance with Community law. In that connection, the Italian Government refers to minutes of 19 January 1990.
29 The Commission responds by stating in the first place that it always took and analysed the samples in the presence of the AIMA representatives and that, during the relevant visits, those representatives raised no fundamental objection to the procedure, the method or the results of the checks. As for the statements made by the Commission' s officials regarding the correctness of the checks carried out by the Italian administration, these were denied immediately by the Commission in a letter dated 27 February 1990. Lastly, the Commission considers that the judgment in Case C-366/88 France v Commission is not applicable in this case, since it is concerned with relations between the Commission and third parties in receipt of aid from the EAGGF and not with the direct relations between the Commission and the Member States which are at issue in this case.
30 In order to decide this point, it is necessary to consider whether the Commission exceeded its powers in carrying out on-the-spot inspections and, specifically, in taking samples of tobacco.
31 In this connection, it must be pointed out in the first place that, under the system laid down by Regulation No 729/70, the Commission plays merely a role complementary to that of the Member States. According to the eighth recital in the preamble to that regulation, in addition to supervision carried out by Member States on their own initiative, which remains essential, provision should be made for verification by officials of the Commission and for it to have the right to enlist the help of Member States (see Case C-366/88 France v Commission, paragraph 20).
32 The complementary nature of those two types of supervision also emerges from Article 9(2) of Regulation No 729/70, from which it appears that the purpose of on-the-spot inspections performed by the Commission is to establish whether the checks carried out by the Member States were accurate.
33 Moreover, it follows from the supervisory system, taken as a whole, established by Article 9 of that regulation that, if it proves necessary to take and analyse samples, this must in principle be done by the Member State either on its own initiative, pursuant to the responsibilities devolved upon it by Article 8(1) of Regulation No 729/70, or at the request of the Commission, pursuant to the third subparagraph of Article 9(2) of that regulation. However, the Commission may, on the conditions laid down in the fourth subparagraph of Article 9(2), carry out certain other inspections or inquiries, including the taking of samples on the spot. In that event, the checks in question are subject to the prior agreement of the Member States and must take place in the presence of representatives of the national administrative authorities concerned. Article 9 of Regulation No 729/70 does not empower the Commission to define procedures governing its intervention or to take samples in cases where it acts independently of the Member States. In addition, in circumstances such as these, Article 5 of the Treaty requires it to act in agreement with the competent national administrative authorities.
34 In this case, it must be held, on the one hand, that the Commission' s officials invariably took the samples in the presence of representatives of the Italian administrative authorities and, on the other, that the various criticisms relating to lack of care in packaging them and transporting them and to the deterioration of the tobacco stored in the Italian warehouses on account of the fact that it had been stored for too long were considered by the Commission in various letters and at talks held with the Italian authorities on 9 January 1991.
35 As far as the non-representative nature of the samples taken by the Commission is concerned, it must also be observed that the Italian Republic has not proved that the number of samples taken was insufficient to justify the financial correction. Where the Commission adduces factors capable of raising serious doubts as to the accuracy of calculations carried out by a Member State, it is for that State to adduce sufficient evidence to remove those doubts. In this case it must be held that the Italian Republic has not adduced such evidence.
36 As for the statements of the Commission official recorded in the minutes of 19 January 1990 to the effect that the checks had not brought to light any anomaly, which were subsequently denied by the Commission' s departments, it should be recalled that, as appears from Article 5(2) of Regulation No 729/70, before the annual accounts are cleared the Commission may not validly take a view on intervention carried out by the Member States in connection with the activities of the EAGGF.
37 In view of the foregoing considerations, the complaint raised by the Italian Government must be rejected.
Intervention olive oil
38 The Italian Government raises two pleas in this connection. The first refers to the results of an inquiry carried out by the Commission in respect of the 1988 financial year, which allegedly revealed that a large part of the olive oil placed in storage in the course of that year was of quality inferior to that indicated in the declaration relating to the intervention. Since in the judgment in Joined Cases C-161/90 and C-162/90 Petruzzi and Longo [1991] ECR I-4845 the Court held that the subsequent check carried out by the Commission was correct, the Italian Republic has withdrawn this plea.
39 Nevertheless, at the hearing the Italian Republic explained that, following that judgment, it asked the Commission ° without calling its decision in question ° that at the very least the Italian authorities should be able to sell the oil in question on such terms as they might determine. The Commission did not accede to that request and, as a result, there was a fall in the profit received by the Italian authorities. In these proceedings the Italian Republic has asked the Commission to make good that loss of profits.
40 It must be held that that plea was raised for the first time at the hearing. However, under the first subparagraph of Article 42(2) of the Rules of Procedure, no new plea may be introduced in the course of proceedings unless it is based on matters of law or of fact which come to light in the course of the procedure. Since those conditions are not met in this case, the first plea must be rejected.
41 The second plea raised by the Italian Government refers to the corrections made by the Commission to the balance sheet presented by Italy showing the quantities of olive oil bought in for intervention during the successive marketing years between 1983 and 1987. On the basis of data obtained in the course of an inquiry, the so-called "ASSITOL inquiry", the Commission found that the quality of a large part of the oil in question did not tally with the quality declared. Accordingly, it corrected the figures presented by the Italian Republic downwards.
42 According to the Italian Government, the ASSITOL inquiry was carried out by the Italian oils industries and subsequently adopted by the Commission without any verification on its part. It should therefore be rejected and replaced by the data provided by the Italian Republic, which, for their part, are in conformity with the Community rules and represent the outcome of checks duly carried out by approved laboratories. It also claims that those data have been confirmed by inspections carried out by customs departments when the oils in question were exported and by the prices obtained when they were sold. Those prices tally with the quality declared. Lastly, it maintains that, by taking the samples, the Commission exceeded the powers conferred on it by Regulation No 729/70.
43 The Commission' s response to those arguments is that, although a complaint was initially made to it by ASSITOL, it carried out its own inquiry and the samples were analysed by independent laboratories.
44 As far as the question of the Commission' s powers to take and analyse samples are concerned, it is sufficient to refer to paragraph 33 of this judgment.
45 As for the other complaints raised by the Italian Government, it should be pointed out that it is clear from the documents before the Court that, in correcting the accounts presented by the Italian Republic, the Commission based itself on an inquiry which had been carried out by its own departments and which fulfilled the requisite conditions of objectivity and representativeness. It should also be emphasized that the Italian Government has not provided the Court with any evidence of the selling prices or of the inspections carried out by the customs offices. Likewise, neither has it been established that those data were communicated to the Commission.
46 Accordingly, it must be held that Italy has not succeeded in proving the shortcomings of the inquiry conducted by the Commission or the facts relating to the selling prices and the favourable customs inspections on which it relies.
47 Consequently, this head of the application must also be rejected.
Aid for the processing of soya beans
48 Council Regulation (EEC) No 1491/85 of 23 May 1985 laying down special measures in respect of soya beans (OJ 1985 L 151, p. 15) and Council Regulation (EEC) No 2194/85 of 25 July 1985 adopting general rules concerning special measures for soya beans (OJ 1985 L 204, p. 1) both provided for the grant of aid for the production of Community soya. Payment of that aid and supervising the grant thereof fall to the Member States (Article 2 of Regulation No 1491/85 and Article 6 of Regulation No 2194/85).
49 As appears from the summary report, the Commission' s working method consisted initially in carrying out inspections at almost 400 farms, selected at random, and subsequently in scrutinizing the control procedures employed by the various public agencies concerned, together with the operation of a processing undertaking. The findings of that inquiry indicated that the controls carried out by the Italian authorities were insufficient, that they did not enable it to be established whether or not the applications for aid related to soya beans of non-Community origin and that the Italian administration had not effected surprise checks at either harvest or storage centres. Moreover, it emerged that the Italian customs were not aware of the destination of imported soya beans and that AIMA, for its part, did not know the exact number of harvest centres.
50 Those various findings prompted the Commission substantially to reduce the amount of aid to be charged to the EAGGF. Nevertheless, following discussions with representatives of the Italian administration, the Commission decided to effect merely a financial correction of LIT 38 034 266 760 or 5% of the Italian expenditure.
51 The Italian Republic puts forward various arguments against the control methods employed by the Commission. First, it claims that the Commission' s criticisms are based on a general impression and not on specific evidence. Secondly, it maintains that the fact that, following its meeting with Italian officials, the Commission limited the amount of the reduction which it had initially intended to make shows that its arguments are not at all cogent and that in fact it did not uncover any serious irregularity. Thirdly, it claims that since no substantive irregularity was found, Italy is unable to seek reimbursement of aid unduly paid to recipients. Fourthly, given the existence of certain lacunae as regards controls in the applicable Community legislation, Italy was faced with additional difficulties at the time when it carried out its controls.
52 In this regard, it should be pointed out that, contrary to the Italian Government is contention, the system of inquiries and on-the-spot inspections implemented by the Commission, as described at point 37 of the Advocate General' s Opinion, fulfils the requisite minimum conditions of objectivity and representativeness of the actual situation.
53 Next, as the Advocate General rightly observes, the fact that the Commission reduced the financial correction initially proposed to 5% of the expenditure incurred by Italy does not mean that that correction is not justified. On the contrary, the results of the inquiry and inspections carried out by the Commission at Italian undertakings constitute adequate grounds for the correction. Besides, Italy has not put forward any serious factor such as to cast doubt on those results.
54 As for the argument that it is impossible in practice for Italy to recover the aid unduly paid by it, on the ground that the Commission has not proved the existence of serious irregularities in the grant of that aid, it is unacceptable for two reasons.
55 First, the inspections carried out by the Commission disclosed an absence of supervision by the Italian authorities of the aid which it granted. Since that was liable to result in major irregularities, the Commission is entitled in a case such as this to disallow certain expenditure incurred by the Member State in question (see Case C-8/88 Germany v Commission [1990] ECR I-2321, paragraph 21).
56 Secondly, as the Court has already intimated, the obligation for Member States to recover sums unduly paid to traders by way of aid from the EAGGF stems from Article 8 of Regulation No 729/70. That provision is regarded as expressing, as regards the financing of the common agricultural policy, the duty of general diligence imposed by Article 5 of the EEC Treaty. Article 8(1) imposes on Member States an obligation to recover sums lost as a result of irregularities or negligence (see Case C-34/89 Italy v Commission [1990] ECR I-3603 and Case C-28/89 Germany v Commission [1991] ECR I-581, paragraph 31). Furthermore, Article 8(2) provides that, in the absence of total recovery, the financial consequences of irregularities or negligence attributable to administrative authorities or other bodies of the Member States are to be borne by them.
57 Since, in this case, it is not in dispute that the system of controls set up by the Italian administration did not function satisfactorily ° which the Italian authorities have themselves acknowledged ° the Italian Government' s arguments cannot be upheld. In that regard, the fact that there were lacunae as regards controls in the applicable Community legislation is not a relevant argument.
58 It follows from the foregoing that that head of the Italian Republic' s application must also be rejected.
Aid for the production of durum wheat
59 Article 10 of Regulation (EEC) No 2727/75 of the Council of 29 October 1975 on the common organization of the market in cereals (OJ 1975 L 281, p. 1) provides for the grant an aid for the production of durum wheat in the event that the intervention price valid for the marketing centre of the area with the largest surplus is lower than the guaranteed minimum price. That provision was implemented by Council Regulation (EEC) No 3103/76 of 16 December 1976 on aid for durum wheat (OJ 1976 L 351, p. 1).
60 In 1986, the Commission discovered, in the course of clearing the accounts for the 1984 financial year, that the areas actually cultivated and the areas for which aid had been granted in Italy did not tally. Accordingly, by letter dated 12 June 1987, the Commission asked the Italian authorities to initiate an administrative inquiry in order to check the data relating to the areas earmarked for the cultivation of durum wheat which were eligible for Community aid.
61 That request was made pursuant to Article 6 of Regulation (EEC) No 283/72 of the Council of 7 February 1972 concerning irregularities and the recovery of sums wrongly paid in connection with the financing of the common agricultural policy and the organization of an information system in this field (OJ, English Special Edition 1972(I), p. 90). Article 6(1) provides that "[w]here the Commission considers that irregularities or negligence have taken place in one or more Member States, it shall inform the Member State or States concerned thereof, and that State or those States shall hold an administrative inquiry in which servants of the Commission may take part".
62 As appears from the documents before the Court, the inquiry requested was carried out in August and September 1987 by Italian technical experts accompanied by Community officials. Its results were notified to the Commission in a memorandum dated 8 January 1988.
63 In a letter dated 8 March 1989, the Commission rejected the Italian administration' s conclusions and proposed that a financial correction should be made on the basis of extrapolating the irregularities found to all Italian regions in receipt of aid. Following various discussions with the Italian administration, the Commission, in a memorandum dated 19 November 1989, reduced the correction originally proposed to LIT 67 500 305 800. On grounds of fairness, it agreed not to take account of payments made before the inquiry was initiated, that is to say, those relating to 1984 and 1985 (see the Commission' s memorandum of 19 November 1990).
64 Notwithstanding that reduction, Italy has contested the definitive correction decided upon by the Commission on various grounds. First, it argues that the grounds of fairness which prompted the Commission to forego corrections in respect of payments already made before the beginning of the year (that is, those corresponding to 1984 and 1985) also hold good for the payments relating to 1986, since they too were made before the inquiry was opened. Under Article 6 of Commission Regulation (EEC) No 2835/77 of 19 December 1977 laying down detailed rules with respect to aid for durum wheat (OJ 1977 L 327, p. 9), payments of the aid in question must be made before 30 April in the year following that of production. In fact, under the Italian legislation, such payments are made before 5 April each year.
65 The second group of arguments relates to the payments made for the subsequent years. First, even if it had wished to do so, Italy could not, without infringing the Community legislation, have stopped paying the aid before the Commission had notified it of the results of the inquiry. Secondly, there was no basis for extending the results of the inquiry to the other Italian cereal-growing regions or to other financial years. Thirdly, the Italian administration was not informed by the Commission of the aims of the inquiry and, since it thought that it consisted of a mere check of statistics, it carried only a limited number of inspections. Had it been apprised of the Commission' s real intentions, it would have surrounded the inquiry with more safeguards. Fourthly, Italy considers that the period which elapsed between its forwarding the results of the inquiry to the Commission and the Commission' s response was excessive and that hence the Italian administration had been entitled to consider that there was no doubt as to the legality of the payments. Lastly, Italy contests the percentage of irregularities determined by the Commission. The inquiry showed that 8% of payments of premiums ° and not 12%, as the Commission maintains ° were dubious; those results had not been denied by the Commission.
66 In response, the Commission states in the first place that it was in no event obliged to allow the unlawful payments made by the Italian administration. Consequently, there could be no question of relying in these proceedings on acquired rights or the principles of legal certainty and protection of legitimate expectations as regards interested parties. Next, as regards the results of the inquiry, the Commission points out that it needed a year to study them thoroughly. It derived the complaints relating to the shortcomings of the Italian control system from that study. As regards the application of the extrapolation method, the Commission states that it is the best solution for the Member State, since otherwise all the expenditure incurred which was subject to irregular controls would have to be disallowed. Lastly, Italy could not contest the results of the inquiry, since it itself had obtained and checked them.
67 It must be observed in this connection that EAGGF financing of expenditure incurred by national authorities is governed by the rule that only expenditure incurred in conformity with the Community rules is to be charged to the Community budget. Consequently, once it discovers the existence of an infringement of Community provisions in payments effected by a Member State, the Commission is required to correct the accounts presented by that Member State. Where the Commission did not carry out the correction due in respect of a previous year, but tolerated the irregularities on grounds of fairness, the Member State does not acquire any right to demand to the same position to be taken with regard to the irregularities with respect to the following financial year by virtue of the principle of legal certainty or the principle of protection of legitimate expectations.
68 Moreover, as regards the payments made after the inquiry was opened, the complaints made in relation to the objectives of the inquiry requested by the Commission should be rejected. It appears from wording of Article 6 of Regulation (EEC) No 283/72 that such an inquiry must be intended to ascertain any irregularities. Likewise, the criticisms as to the extrapolation method are not relevant, since Italy was aware of the aim of the inquiry. It was therefore for Italy to determine the degree to which the inquiry had to be exhaustive.
69 By the same token, the complaint alleging that the Commission was late in responding cannot be accepted. The Court has consistently held (see, in particular, Case 349/85 Denmark v Commission [1988] ECR 169) that, in the absence of any sanction attaching to the failure by the Commission to comply with the time-limit laid down by Article 5(2)(b) of Regulation (EEC) No 729/70 for taking a decision on the clearance of the accounts as regards expenditure financed by the EAGGF, that time-limit cannot be regarded as mandatory, provided that the interests of the Member State are not impaired. Consequently, the duration of that period, even if it is very long, does not cause the Community to incur liability, unless it is the outcome of negligence on its part. In this case, the Italian Republic has not proved such negligence.
70 Lastly, it should be stated in response to the Italian Government, which claims that the conclusions drawn by its administration from the inquiry must be regarded as valid until such time as the Commission has proved the contrary, that it is sufficient for the Commission to raise serious doubts concerning the accuracy of the data provided by the Member State for the purposes of the clearance of EAGGF accounts in order for the burden of proof to be reversed.
71 Even though, in this case, the Commission did not prove that the conclusions drawn from the inquiry by the Italian administration were inaccurate, it must be held that serious doubts exist in that connection. Accordingly, it was for Italy to show that the Commission' s calculations were erroneous. Since no such proof has been adduced, this head of the application must also be rejected.
Costs
72 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Since the Italian Republic has been unsuccessful, it must be ordered to pay the costs.
On those grounds,
THE COURT
hereby:
1. Dismisses the application;
2. Orders the Italian Republic to pay the costs.
