JUDGMENT OF THE GENERAL COURT (Third Chamber)

26 September 2018 (*)

(EAGF — Area-linked aid — Procedure for the suspension of monthly payments to a Member State — Article 41(2)(b) of Regulation (EU) No 1306/2013 — Key components of the national control system — Deficiencies found — Action plan including clear progress indicators established in consultation with the Commission — Proportionality)

In Case T‑682/16

French Republic, represented by F. Alabrune, D. Colas, D. Segoin, A.-L. Desjonquères and S. Horrenberger, acting as Agents,

applicant,

supported by

Portuguese Republic, represented by L. Inez Fernandes, M. Figueiredo, P. Estêvão and J. Saraiva de Almeida, acting as Agents,

intervener,

v

European Commission, represented by A. Lewis and D. Triantafyllou, acting as Agents,

defendant,

APPLICATION on the basis of Article 263 TFEU seeking the annulment of Commission Implementing Decision C(2016) 4287 final of 12 July 2016 suspending monthly payments to the French Republic under the European Agricultural Guarantee Fund (EAGF),

THE GENERAL COURT (Third Chamber),

composed of S. Frimodt Nielsen (Rapporteur), President, V. Kreuschitz and N. Półtorak, Judges,

Registrar: E. Coulon,

gives the following

Judgment

 Legal framework and background to the dispute

 Provisions at issue

1        Article 41, entitled ‘Reduction and suspension of monthly and interim payments’, of Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008 (OJ 2013 L 347, p. 549, corrigendum OJ 2016 L 130, p. 6), provides:

‘2.      The Commission may adopt implementing acts, reducing or suspending the monthly or interim payments to a Member State if one or more of the key components of the national control system in question do not exist or are not effective due to the gravity or persistence of the deficiencies found, or if there are similar serious deficiencies in the system for the recovery of irregular payments and if one of the following conditions is met:

…

(b)      the Commission concludes that the Member State concerned is not in a position to implement in the immediate future the necessary remedial measures in accordance with an action plan with clear progress indicators, to be established in consultation with the Commission.

The reduction or suspension shall be applied to the relevant expenditure effected by the paying agency where the deficiencies exist for a period to be determined in the implementing acts referred to in this paragraph, which shall not exceed twelve months …

The implementing acts provided for in this paragraph shall be adopted in accordance with the advisory procedure referred to in Article 116(2).

Before adopting the implementing acts referred to in this paragraph, the Commission shall inform the Member State concerned of its intention and shall ask it to react within a period which shall not be less than 30 days.

The implementing acts determining the monthly payments referred to in Article 18(3) or the interim payments referred to in Article 36 shall take account of the implementing acts adopted under this paragraph.’

2        Article 41(3) of Regulation No 1306/2013 provides:

‘Reductions and suspensions under this Article shall be applied in accordance with the principle of proportionality and shall be without prejudice to the application of Articles 51 [clearance of accounts] and 52 [conformity clearance].’

 Establishment and approval of the action plan

3        By letter of 14 May 2013, the European Commission informed the French authorities that several audits carried out by its services had revealed recurring problems with area aid granted under the common agricultural policy (CAP). Those problems concerned, in particular, the Integrated Administration and Control System (‘IACS’), the Land Parcel Identification System (‘LPIS’), also referred to as the ‘Graphic Parcel Register’ (‘GPR’), administrative cross-checks and on-the-spot checks. In consequence, the Commission asked the French authorities to submit an ‘action plan setting out the measures necessary to remedy the shortcomings found’.

4        By letter of 13 November 2013, following several exchanges with the Commission, the French authorities submitted their action plan. By letter of 28 November 2013, the Commission stated that the action plan could ‘be regarded as final’ (‘the action plan’) while pointing out that, ‘in the field of area aid … the proposed measures could be further supplemented [and] detailed during its implementation’.

5        The first of the action plan’s four parts concerned area aid. It covered, first, various measures to update the LPIS, secondly, measures relating to on-the-spot checks and, thirdly, measures relating to the calculation of payments and penalties. As regards the update of the LPIS, the envisaged measures were essentially designed to interpret the photographic elements contained in a database known as BD TOPO (‘the BD TOPO database’), in which various landscape elements such as woodland, watercourses and buildings were digitised. Such systematic interpretation was to serve to recalculate the eligible areas on which payments were based. The three other parts of the action plan, which are not at issue in this case, concerned the cross-compliance of aid, payment entitlements and animal premiums.

 Monitoring, request for revision and new terms of the action plan

6        The action plan included a monitoring mechanism under which numerous exchanges took place between the French authorities and the Commission. Accordingly, the action plan provided that the French authorities would submit progress reports on its implementation. In 2014, such reports were provided on 4 February, 4 April, 2 July and 14 October.

7        By letter of 22 December 2014, the Commission concluded, following an audit carried out in November 2014 to assess the progress of the action plan, that the BD TOPO database was too old and flawed to enable the LPIS to be updated, with the result that the action plan’s success could not be confirmed. However, the Commission pointed out that it had noted that the French authorities were developing an alternative approach which was, in part, to resolve the problems identified. The Commission was thus of the opinion that, in order to forestall any suspension or reduction of payments under Article 41(2)(b) of Regulation No 1306/2013, ‘a revised action plan [had to] be drawn up’ and that ‘those deficiencies [had to] be remedied before implementation of the 2015 marketing year (April 2015)’.

8        By letter of 23 December 2014, the French authorities forwarded to the Commission ‘the anticipated information relating to the implementation of the action plan … in 2014 and its continuation in 2015’. That information was supplemented by the fifth progress report, sent by the French authorities to the Commission on 30 January 2015.

9        By letter of 17 February 2015, the Commission stated, inter alia, that several aspects relating to the implementation of the action plan, envisaged by the French authorities in their letter forwarding the fifth progress report of 30 January 2015, required clarification. By letter of 25 February 2015, the Commission sent the French authorities various items of information relating to the outcome of an inquiry concerning claim years 2013 and 2014 showing that the ‘control system in place in France was flawed because of deficiencies in the LPIS …, problems with the definition of eligible areas, the lack of effective on-the-spot checks, and the method for calculating aid and penalties in the absence of retroactive recovery’. A Commission mission subsequently took place in France between 11 and 13 March 2015 and the French authorities updated the action plan. By a further note of 30 March 2015, the French authorities sent additional information to the Commission.

 Implementation of the procedure for the suspension of payments

10      By letter of 13 April 2015, the Commission sent the French authorities a letter under the fourth subparagraph of Article 41(2) of Regulation No 1306/2013 (‘the letter of 13 April 2015’).

11      In the first part of the letter, the Commission recalled the different aspects of the action plan and its revision.

12      In the first place, the Commission stated that the action plan sought specifically to update the LPIS so that, for each reference parcel, the maximum eligible area would be determined in accordance with regulatory provisions, in the light of, in particular, more recent orthophotographs, the outcome of on-the-spot checks and ineligible elements in existing databases.

13      In the second place, the Commission explained why, following the audit of November 2014, it had taken the view that the planned milestones had not been reached and that there were failings in the quality of the work as well as issues relating to the areas paid under the single payment and, accordingly, had required the French authorities to prepare a ‘revised action plan’ in its letter of 22 December 2014.

14      In the third place, the Commission stated that the ‘revised action plan submitted by France[, by letter of 23] December 2014’ included information relating to the interpretation of images in accordance with rules ensuring the eligibility of areas and their compliance with legislation; information relating to the application of a pro-rata system within the meaning of Article 10 of Commission Delegated Regulation (EU) No 640/2014 of 11 March 2014 supplementing Regulation No 1306/2013 with regard to the IACS and conditions for refusal or withdrawal of payments and administrative penalties applicable to direct payments, rural development support and cross-compliance (OJ 2014 L 181, p. 48) (‘the pro-rata system’); information relating to the eligibility of certain permanent grassland within the meaning of Article 4(1)(h) of Regulation (EU) No 1307/2013 of the European Parliament and of the Council of 17 December 2013 establishing rules for direct payments to farmers under support schemes within the framework of the CAP and repealing Council Regulation (EC) No 637/2008 and Council Regulation (EC) No 73/2009 (OJ 2013 L 347, p. 608), under established local practices (‘the eligibility of certain permanent grassland under established local practices’); and information relating to the ‘declaration of agricultural parcels in graphic form since 2015’. The Commission, however, pointed out that by letter of 20 January 2015, the French authorities had described, as regards the implementation of the revised action plan, the difficulties encountered in the management of 2015 aid applications, which were discussed during a mission in France in March 2015.

15      In the second part of the letter, the Commission provided an overview of the state of play of the action plan covering, in particular, the way in which the French authorities were applying the pro-rata system and the risks which, in its opinion, remained in the definition of the eligibility of certain areas under established local practices. To conclude in that respect, the Commission considered that there had been ‘a failure to comply with the action plan … because not all of the areas recorded in the GPR include[d] a maximum eligible area determined in accordance with EU provisions’.

16      In the third part of the letter, the Commission also referred to the arrangements for managing 2015 aid applications which had been submitted, moreover, by the French authorities.

17      In the light of the foregoing, the Commission stated that ‘the combined effect of the shortcomings in the inherent quality [at that time] of the management and control system and the derogations from the rules on the submission of aid applications which France intend[ed] to apply to 2015 applications’ did ‘not provide the reasonable assurance required for proper administration of the aid and thus for the legality and regularity of the expenditure’ and ‘heighten[ed] the [Commission’s] concerns as to whether correct payments could be made within the periods prescribed by the French authorities’. Therefore, the Commission envisaged a suspension or reduction of payments in the order of 5% if the French authorities failed to address, before 16 October 2015, the concerns identified regarding the state of play of the action plan and the arrangements for managing 2015 aid applications.

18      The French authorities replied to the letter of 13 April 2015 by means of a further update of the action plan dated 24 April 2015, entitled ‘Action plan … — Projected timeline for the 2015 CAP marketing year’, and by a letter of 7 May 2015 concerning ‘monitoring of the action plan …’, which summarised their position.

19      Several exchanges subsequently took place between the Commission and the French authorities: a bilateral meeting was held on 10 June 2015; an interim progress report was sent to the Commission on 13 July 2015; the sixth progress plan was forwarded on 9 October 2015; and the Commission’s services visited France on 1 December 2015.

20      By letter of 22 December 2015, the Commission submitted additional observations under the payment suspension procedure. It recalled that progress reports had not been sent to it within the prescribed periods and that it had commented on the application of the pro-rata system, the determination of the eligibility of certain permanent grassland under established local practices, and on-the-spot checks.

21      The French authorities replied to those additional observations by letter of 13 January 2016. First and foremost, they summarised all of the information sent to the Commission. Next, they provided details on the implementation of the components of the action plan, recalling that, in accordance with the action plan as approved in November 2013, those measures had to be finalised in 2016. The Commission could not therefore rely, in 2015, on the failure to implement the action plan in order to take a measure suspending payments. The French authorities also drew attention to the new methods of photo-interpretation put in place in 2015. Lastly, they addressed the Commission’s various comments on the application of the pro-rata system, the eligibility of certain permanent grassland under established local practices, and the criticism levelled at the conduct of on-the-spot checks. In conclusion, the French authorities stated that they had met or were going to meet in full the commitments set out in the action plan approved in November 2013.

22      Following those exchanges, progress reports were sent to the Commission on 28 January, 26 February and 4 and 29 April 2016. Moreover, a further mission of the Commission was scheduled to take place in France from 11 to 15 April 2016.

23      By letter of 20 May 2016, the Commission sent an additional letter under the fourth subparagraph of Article 41(2) of Regulation No 1306/2013 (‘the additional letter of 20 May 2016’). In that letter, the Commission mentioned the need to check the quality of on-the-spot checks and the correct allocation of payment entitlements. The Commission also referred to ‘deficiencies linked to the quality of rapid visits’ and ‘a problem of consistency with the definition of “permanent grassland” under established local practices’ and ‘problems related to the establishment of a [pro-rata system]’. On that basis, the Commission informed the French authorities that it envisaged a suspension or reduction of payments in the order of 3%.

24      The French authorities replied to the additional letter of 20 May 2016 by letter of 16 June 2016. They stated that, in their opinion, they had implemented the action plan in accordance with their commitments and that the observations made concerning the new arrangements for managing grassland implemented within the framework of the CAP reform arose from unfounded assessments.

25      On 12 July 2016, the Commission adopted the implementing decision suspending monthly payments to the French Republic under the European Agricultural Guarantee Fund (EAGF) (‘the contested decision’). In that decision, the Commission decided that monthly payments to the French Republic pursuant to Article 18 of Regulation No 1306/2013 were to be suspended in the amount obtained by applying a suspension percentage of 3% to the monthly payments relating to area-linked aid in respect of 2015 and that the suspensions were to be applied to monthly payments to be made to the French Republic pursuant to Article 18(2) of Regulation No 1306/2013 for monthly expenditure effected by the paying agency, Agence de Services et de Paiement, from July 2016 to June 2017 inclusive. That decision was notified to the French authorities on 13 July 2016.

 Procedure and forms of order sought

26      By application lodged at the Registry of the Court on 23 September 2016, the French Republic brought the present action.

27      On 22 December 2016, the Commission submitted its defence. The reply and rejoinder were lodged within the prescribed periods.

28      By document lodged at the Court Registry on 7 December 2016, the Portuguese Republic sought leave to intervene in the present proceedings in support of the form of order sought by the French Republic. By decision of 12 January 2017, the President of the Third Chamber of the Court granted leave to intervene. The Portuguese Republic lodged its statement in intervention and the main parties submitted their observations on that statement within the prescribed periods.

29      By measure of organisation of procedure of 26 January 2018, adopted under Article 89(3) of the Rules of Procedure of the General Court, the parties were invited to reply to a number of questions. They complied with that request within the prescribed period.

30      Acting on a report from the Judge-Rapporteur, the Court (Third Chamber) decided, in the absence of a request for a hearing to be arranged as provided in Article 106(1) of its Rules of Procedure, to rule on the action without an oral part of the procedure. The General Court considered that it was sufficiently informed by the documents to give a ruling without taking further steps in the proceedings.

31      The French Republic claims that the Court should:

–        annul the contested decision;

–        order the Commission to pay the costs.

32      The Portuguese Republic, intervening in support of the French Republic, claims that the Court should annul the contested decision.

33      The Commission contends that the Court should:

–        dismiss the action;

–        order the French Republic to pay the costs.

 Law

34      In support of its action, the French Republic puts forward two pleas in law. The first and principal plea alleges breach of Article 41(2)(b) of Regulation No 1306/2013 in that, first, the French authorities fully implemented the action plan, which includes clear progress indicators established in consultation with the Commission, and, secondly, the contested decision is based on factors which were not envisaged in the action plan. The second plea, raised in the alternative, alleges breach of the principle of proportionality.

 First plea in law alleging breach of Article 41(2)(b) of Regulation No 1306/2013

35      As a preliminary point, the French Republic states that the conformity clearance procedure provided for in Article 52 of Regulation No 1306/2013 (‘the conformity clearance procedure’) ensures that agricultural expenditure has been effected in accordance with EU law. That procedure provides Member States with the necessary guarantees for them to make known their views and is regulated by Commission guidelines that describe, among other things, how the financial consequences of conformity clearance are calculated. By contrast, the payment suspension procedure provided for in Article 41 of Regulation No 1306/2013 (‘the suspension procedure’) has almost never been used and is not regulated by Commission guidelines.

36      According to the French Republic, the suspension procedure does not cover the situation where there is a disagreement, as in this case, relating to the application of a pro-rata system and the determination of the eligibility of certain areas under established local practices. The acceptance that such a disagreement may be raised under two separate procedures risks undermining the procedural safeguards enjoyed by the Member State concerned in the conformity clearance procedure, forcing that State to alter its practices in the suspension procedure, even though the infringement has not yet actually been proven, or even depriving the conformity clearance procedure of its effectiveness. By invoking such a disagreement in the suspension procedure, the Commission precluded the proper conduct of exchanges under the conformity clearance procedure.

37      Similarly, according to the Portuguese Republic, Article 41 of Regulation No 1306/2013 does not permit the adoption of a decision suspending monthly payments based on factors which were not proposed by the Member State concerned in its action plan. Such a decision is tantamount in its consequences to a financial correction without, however, observance of the safeguards afforded by the conformity clearance procedure. By unilaterally amending or reviewing the strict terms of a Member State’s commitments, the Commission used a procedure offering significantly less safeguards. Since new factors emerged at a later date, the Commission was required to initiate a conformity clearance procedure.

38      As its main argument, the French Republic submits that the contested decision infringes Article 41(2)(b) of Regulation No 1306/2013 because the Commission was not entitled to conclude that the Member State concerned was ‘not in a position to implement the measures set out in an action plan including clear progress indicators, to be established in consultation with the Commission’. That condition is not satisfied since the action plan was implemented in full and the contested decision is based on factors which were not envisaged in the action plan.

39      In the first place, the French Republic recalls that it undertook to implement the action plan approved in November 2013. Since the methods initially intended to be used to update the LPIS were unsatisfactory, the French Republic also recalls that it proposed, by letter of 23 December 2014, alternative methods which were approved by the Commission.

40      In the second place, the French Republic submits that the action plan, approved in November 2013 and amended in December 2014, was implemented in full.

41      As regards the update of the LPIS, the French Republic asserts that the original plan was to update the photographs and use existing databases, including the BD TOPO database, to simplify the interpretation work, and that the aim of the revised methods proposed in December 2014 was to overcome difficulties that arose when it became clear that the BD TOPO database was not sufficiently reliable. That update was performed within the maximum period prescribed. The problem posed by the age of the photographs was resolved at the end of 2014, as stated in the letter from the French authorities of 23 December 2014, and the interpretation of the photographs was completed in 2016, as mentioned in the fourteenth progress report of 1 September 2016.

42      As regards on-the-spot checks, the French Republic states that it was alleged to have included elements and areas which were not eligible. To overcome that problem, the action plan provided for the establishment of an escalation procedure at central government level for the relevant prefectural orders before such orders were signed. That measure was implemented within the prescribed period, that is, for the 2014 marketing year.

43      As regards the calculation of payments and penalties, the French Republic contends that it was alleged to have performed incorrect calculations, to have failed to plan for the monitoring of retroactive recoveries and to have not recovered undue payments. To overcome that problem, provision had been made, for the 2013 and 2014 marketing years, to strengthen the instructions given to the competent departments and to improve supervision and, from the 2015 marketing year onwards, to review the algorithm for calculating penalties in respect of decoupled aid, that later date enabling inclusion of the amendments to the algorithm rendered necessary by the CAP reform. Those measures were adopted within the prescribed period. In particular, although it was not possible to confirm that the algorithm review had been properly carried out until August 2016 with the actual settlement of payments for the 2015 marketing year, the point there was simply to measure the effects of the new algorithm as early as possible. The commitment set out in the action plan, which was to review the algorithm in 2015, was met within the prescribed period.

44      The French Republic maintains that even though the implementation of the measures envisaged in the action plan, such as the update of the LPIS or the algorithm review, led to delays in the implementation of payments in respect of the 2015 marketing year, that issue falls outside the scope of the action plan in the strict sense, which was not concerned with the timeline for the implementation of that, or any other, marketing year.

45      In the third place, the French Republic contends that the Commission cannot rely on factors extraneous to the action plan in order to adopt a decision suspending payments. Only a failure to take the measures set out in the action plan as approved in November 2013 and revised in December 2014 would allow for such a decision to be taken.

46      In that regard, first of all, the French Republic concedes that during exchanges with the Commission on the implementation of the action plan, discussions concerned the application of the pro-rata system and the determination of the eligibility of certain permanent grassland under established local practices. The French Republic states that recourse to the new possibilities afforded by EU law from the 2015 marketing year onwards could involve, in addition to the photo-interpretation work envisaged in the action plan, a number of field visits in a fairly limited number of areas, in order to update the LPIS. However, the application of the pro-rata system and the determination of the eligibility of certain permanent grassland under established local practices were never, as such, included by the French authorities in the progress indicators of the action plan and it is not for the Commission to modify the plan unilaterally in order to include them. No progress indicator mentions those issues in any of the progress reports sent to the Commission or in the updates of the action plan, such as those of 12 March and 24 April 2015.

47      Next, the French Republic states that in the contested decision, the Commission found that there was still a considerable delay in the processing of aid applications, particularly those relating to permanent grassland. The Commission inferred from this that the objectives of the action plan could not be achieved in the immediate future. However, according to the French Republic, the action plan to which it had committed itself was implemented within the prescribed periods. The delays in the implementation of payments in respect of the 2015 marketing year fall outside the scope of the action plan, which was not concerned with the timeline for the implementation of that, or any other, marketing year. Although the Commission considered that there was no prospect of the action plan being implemented in the near future and that it was therefore entitled to adopt the contested decision, this is because it included in the action plan the application of the pro-rata system and the determination of the eligibility of certain permanent grassland under established local practices, two issues on which the action plan did not include any progress indicators.

48      First, in its letter of 17 February 2015, the Commission mentions a ‘close link between proper implementation of the action plan and the proposed CAP reform, particularly on matters relating to the eligibility of areas and certain landscape elements’. It cannot be inferred from such a link that the action plan was automatically extended to cover those aspects. The action plan and the CAP reform are separate. In that letter, the Commission also unilaterally includes in what it refers to as the ‘revised action plan’ measures on the consistency of the pro-rata system and the determination of the eligibility of certain types of areas. And yet, the Commission did not have the power to make such a unilateral amendment to the action plan.

49      Secondly, in its letter of 13 April 2015, the Commission continues to include, as a key component of the revised action plan, information relating to the application of the pro-rata system and to the inclusion of permanent grassland under established local practices which does not, however, appear in the action plan as approved in November 2013 or in the revised action plan of December 2014. It is on the basis of the ‘combined effect’ of those alleged shortcomings that the Commission decided that the implementation of the action plan did ‘not provide the reasonable assurance required for proper administration of the aid’.

50      Thirdly, in the Commission’s letter of 22 December 2015, the dispute concerning the application of the pro-rata system and the inclusion as eligible areas of certain permanent grassland under established local practices is a decisive aspect of the Commission’s reasoning.

51      Fourthly, although the Commission relies in the contested decision on the allegedly considerable delay in the processing of aid applications, it does so after a lengthy explanation of the dispute concerning the application of the pro-rata system and the inclusion as eligible areas of certain permanent grassland under established local practices. In the contested decision, the Commission also refers to the ‘revised’ action plan of March 2015, even though the most recent revision is dated December 2014. It is thus the continuance of the dispute which forms the basis for the Commission’s conclusion that the French authorities were not in a position to implement the action plan.

52      To conclude, the French Republic argues that the legal dispute concerning the application of the pro-rata system and the determination of the eligibility of certain types of areas differs completely from the dispute concerning the deficiencies in the control system which led to the action plan. The action plan is essentially a technical piece of work designed to upgrade the geographic elements on the basis of which the LPIS was developed. Furthermore, the CAP reform made it possible to determine whether a given proportion of the area at issue would be eligible for agricultural aid or to render eligible certain areas suitable for livestock farming activities even though they were not predominantly grazing areas, provided that established local practices indicated that those areas were suitable for livestock farming.

53      Moreover, the French Republic recalls that it is clear from the provision at issue that the contested decision can be based only on proof that the French authorities were not in a position to implement the measures contained in the action plan. The Commission should act on the basis of shortcomings in the implementation of the measures set out in the action plan and not on a ‘set of weakness and shortcomings’ advanced in general terms. Furthermore, nothing put forward by the Commission demonstrates that there was any shortcoming in the implementation of the measures contained in the action plan. Thus, as regards the update of the LPIS, which was to be operational in 2016 according to the action plan, or on-the-spot checks and payment calculations, the Commission does not claim that those measures were not implemented; it simply asserts that the delays observed amount to a breach of the commitments made in the action plan.

54      Lastly, the French Republic submits that while it is true that its decision to apply the pro-rata system entailed reviewing the payment system, particularly the LPIS, this does not mean that the pro-rata system is inseparable from implementation of the action plan or that the action plan could be considered to be liable to change. Modernisation of the tool enabling the eligible areas to be determined in order to update the databases considered to be too old should be distinguished from the review of that tool so as to incorporate a new parameter resulting from legislation. Those two measures are separable. It is not the action plan that is of a dynamic and changing nature, but rather the tool for determining the eligible areas.

55      The Portuguese Republic contends that the contested decision is based on a ‘revised action plan’, as the Commission calls it, the terms of which were laid down by the Commission unilaterally following the introduction of the pro-rata system implemented by the French authorities in accordance with Article 10 of Delegated Regulation No 640/2014. The implementation of the provisions of EU law relating to the application of a pro-rata system or the determination of the eligibility of certain permanent grassland under established local practices is unrelated to the shortcomings in the control systems which gave rise to the action plan. The contested decision infringes Article 41(2)(b) of Regulation No 1306/2013 because the need for possible changes to the LPIS as a result of the introduction of the pro-rata system was mentioned after the action plan was drawn up and was not subject to the conformity clearance procedure so as to conclude that the key components of the national control system did not exist or were not effective due to the gravity or persistence of the deficiencies found. The contested decision also infringes the provision at issue because it is not specifically based on the commitments contained in the action plan which the Member State concerned undertook to implement, but on factors unrelated to those commitments, such as the introduction of the pro-rata system.

56      Furthermore, the Portuguese Republic relies on the principle of the protection of legitimate expectations. Referring in that regard to paragraphs 71, 161 and 167 of the judgment of 22 June 2006, Belgium and Forum 187 v Commission (C‑182/03 and C‑217/03, EU:C:2006:416), the Portuguese Republic argues that where the Commission alters its approach on the basis only of a more rigorous application of legal rules or, as in this case, extra legem, without giving the time necessary to address that change of approach, that principle is infringed. The Portuguese Republic also recalls that EU legislation must be certain and its application foreseeable by those subject to it. The principle of legal certainty requires that every measure of the institutions having legal effects must be clear and precise and must be brought to the notice of the person concerned in such a way that he can ascertain exactly the time at which the measure comes into being and starts to have legal effects. With reference to paragraph 124 of the judgment of 22 January 1997, Opel Austria v Council (T‑115/94, EU:T:1997:3), the Portuguese Republic submits that the requirement of legal certainty must be observed strictly in the case of a measure liable to have financial consequences, as in this case, in order that those concerned may know precisely the extent of the obligations which it imposes on them.

57      The Commission challenges those arguments, referring to the background to the dispute. In essence, it contends that even if the French Republic pleads that measures were taken to implement the action plan, there were delays and shortcomings in such implementation justifying the adoption of the contested decision.

58      In the present case, it must be noted that in the contested decision, the Commission suspended monthly payments to the French Republic under the EAGF pursuant to Article 41(2)(b) of Regulation No 1306/2013.

59      In recital 1 of the contested decision, the Commission recalled that that provision entitled it to suspend monthly payments to a Member State if ‘one or more of the key components of the national control system in question [did] not exist or [were] ineffective due to the gravity or persistence of the deficiencies found’ and if it ‘conclude[d] from that that the Member State concerned [was] not in a position to implement the necessary remedial measures in the immediate future, in accordance with an action plan with clear progress indicators, to be drawn up in consultation with the Commission’.

60      It should be observed that the suspension procedure does not have the same objective as the conformity clearance procedure. The suspension procedure enables the Commission to suspend temporarily monthly payments to a Member State under the EAGF or the European Agricultural Fund for Rural Development (EAFRD) where, for example, there are serious shortcomings in national control systems or in systems for the recovery of irregular payments. On the other hand, the conformity clearance procedure allows the Commission to determine the amounts to be excluded definitively from EU financing where expenditure under the EAGF and EAFRD has not been effected in conformity with EU law. Contrary to the submissions of the French Republic and the Portuguese Republic, it cannot be inferred from the existence of a clearance procedure for determining the amounts to be excluded from EU financing that the Commission was thus not entitled, beforehand or concomitantly, to use the suspension procedure for monthly payments corresponding to such amounts. Article 41(3) of Regulation No 1306/2013 expressly provides that suspensions under that article are without prejudice to the application of Articles 51 and 52 of that regulation relating to financial clearance and conformity clearance, respectively.

61      It must also be pointed out that like the conformity clearance procedure, the procedure for suspending monthly payments confers procedural rights on the State concerned so that it can submit observations before the adoption of a decision to suspend payments. In the instant case, the French Republic was informed twice, by means of the letter of 13 April 2015 and the additional letter of 20 May 2016, of the Commission’s intention to adopt a decision suspending monthly payments for the reasons set out in those letters. The French Republic was also able to submit observations in that regard on 24 April 2015 and 16 June 2016.

62      Similarly, with regard to the French Republic’s arguments concerning the risk of interfering with the procedural rights afforded to the Member State concerned under the conformity clearance procedure or the fact that the reasons given by the Commission for the purpose of the suspension procedure prevented the proper conduct of exchanges under the conformity clearance procedure, it must be held that those assertions — which are, moreover, unsubstantiated — concern a separate procedure that is not the subject matter of this case. The same also applies to the question of payment of the monthly amounts suspended by the contested decision, raised by the General Court in the measure of organisation of procedure of 26 January 2018, which, as the Commission points out, is the subject matter of the conformity clearance procedure.

63      Accordingly, in the first place, it follows from the foregoing that the contested decision is not intended to exclude amounts definitively from EU financing and thus circumvent the conformity clearance procedure, as the French Republic and the Portuguese Republic essentially claim; it is only intended to suspend monthly payments in accordance with the procedure prescribed for that purpose.

64      In order to adopt a decision suspending monthly payments, the Commission must therefore check that the conditions set out in Article 41(2)(b) of Regulation No 1306/2013 are satisfied.

65      In this case, the first condition to be met before monthly payments can be suspended is that ‘one or more of the key components of the national control system in question do not exist or are not effective due to the gravity or persistence of the deficiencies found’.

66      In recital 2 of the contested decision, the Commission stated that ‘several audits by the Commission revealed problems relating, inter alia, to the [IACS], [LPIS], administrative cross-checks and on-the-spot checks’ and that ‘an action plan [had been] drawn up by the French authorities in November 2013 in order to remedy the weaknesses of the administration and control system for area aid financed by the [EAGF][, which] included, among other things, the updating and the improvement of the quality of the information in the LPIS in France’.

67      Thus, by letter of 14 May 2013 (see paragraph 3 above), the Commission had noted that there were recurring problems concerning, inter alia, area aid. The three main weaknesses identified in that respect were as follows:

–        first, as regards the LPIS, the maximum ineligible area was not up to date because of the age of the photographs used and a misinterpretation of regulatory provisions concerning landscape elements (groves suitable for grazing, ponds, crags);

–        secondly, regarding on-the-spot checks, ineligible landscape elements and zones were considered to be eligible areas (groves suitable for grazing, ponds, crags, gardens, parks, parking areas, forest areas such as exclusively woody rangeland);

–        thirdly, concerning the calculation of payments and penalties, it was found that payments had been miscalculated, that retroactive recoveries had not been monitored and, in some cases, that undue payments had not been recovered.

68      Therefore, in the second place, it must be noted that the French Republic does not deny in this case that, with respect to several key components, its control system did not exist due to the gravity or persistence of the deficiencies found in the years prior to the adoption of the action plan, particularly as regards ‘the updating and the improvement of the quality of the information in the LPIS in France.’ Those deficiencies led to elements which were not eligible for area aid nevertheless being taken into consideration even though they should have been excluded, both initially, based on the LPIS, and subsequently, after on-the-spot checks or the calculation of payments and penalties. In concrete terms, this means that areas declared by the aid beneficiaries included elements which should have been excluded at the aid application stage, since the photo-interpretation of that area identifies those elements, or when such elements were subsequently identified as ineligible.

69      The second condition to be met under Article 41(2)(b) of Regulation No 1306/2013 before monthly payments can be suspended is that the Commission is able to conclude that ‘the Member State concerned [was] not in a position to implement in the immediate future the necessary remedial measures in accordance with an action plan with clear progress indicators, to be established in consultation with the Commission’.

70      In this instance, in order to remedy the situation described by the Commission, the French Republic drew up the action plan, which was sent to the Commission by letter of 13 November 2013. The action plan laid down the following measures and steps.

71      First, as regards the LPIS, the French authorities planned to resolve the issue of the age of the photographs by ensuring that their age limit was observed and by refreshing the photographs taken sooner. In that connection, the French authorities stated that 100% of the photos were less than 5 years old in 2013. A monitoring indicator had to be established in December 2013 with the aim of being operational in 2016.

72      As regards the misinterpretation of the regulatory provisions concerning landscape elements, the French authorities stated that they had already strengthened instructions to reflect the results of the checks carried out during the 2012 marketing year. They were also planning to incorporate automatically the results of on-the-spot checks carried out from the 2013 marketing year onwards, with the aim of allowing farmers to make their 2014 declarations with a GPR that was fully updated with those results.

73      The French authorities also needed to assess the possibility of the automatic photo-interpretation of new orthophotographs which was to be progressively used in the 2012 to 2015 marketing years and by 2016 at the latest. They suggested using the BD TOPO database to achieve various outcomes:

–        the incorporation of the BD TOPO database into the management system was to make it possible to develop a cross-check on artificial elements for the 2012 marketing year (threshold of 5 ares) and 2013 marketing year (lowering the threshold to 2 ares), as those artificial elements were to be included in the category of ineligible areas of the GPR;

–        the incorporation of the BD TOPO database for all artificial land elements without any area limit could, for its part, be postponed until 2015, in view of the small area overlap of less than 2 ares (less than 800 hectares in total), and a decision in that regard was to be taken in November or December 2013;

–        the incorporation into the IACS of the ‘forest’ category of the BD TOPO database, in order to develop a cross-check, was planned to take place in October or November 2013 for work starting during the 2014 marketing year which could be continued, depending on the number of overlaps, in 2015 or, at the latest, in 2016;

–        the incorporation into the IACS of the ‘water area’ category and crags contained in the BD TOPO database, in order to develop a cross-check, was planned to take place in December 2013 or January 2014, and the operating year for those categories was to be set based on the results of the technical analysis and the number of overlaps.

74      Moreover, the French authorities undertook to improve the quality of the orthophotographs, which was to be done for the 2013 marketing year or in April 2014 for the beginning of the declaration period; to evaluate the quality of the GPR, including the new graphic categories, in a first annual report prepared in the first half of 2014 on the 2013 marketing year; and to draw up in 2014 an information and support plan for farmers concerning the quality of declarations.

75      Secondly, as regards on-the-spot checks, the French authorities mentioned the establishment of an escalation and validation procedure for prefectural orders before signature and referred for the remainder to the cross-check with the BD TOPO database to be phased in for artificial and permanent elements.

76      Thirdly, concerning the calculation of payments and penalties, the French authorities stated that the algorithm for calculating penalties in respect of decoupled aid in the event of deviation would be reviewed during the implementation of the CAP reform in 2015, work being undertaken in the course of the 2015 marketing year with a view to being applied in autumn 2015, and that other measures would be taken to resolve the other difficulties during the 2013 and 2014 marketing years.

77      By letter of 28 November 2013 (see paragraph 4 above), the Commission told the French authorities that the action plan could ‘be regarded as final’ while pointing out that, ‘in the field of area aid, the proposed measures could be further supplemented [and] detailed during its implementation’.

78      Therefore, it must be pointed out that the action plan could thus be supplemented or detailed during its implementation. Against that background, the Commission stated in recital 3 of the contested decision:

‘The [progress] reports submitted by the French authorities and an audit carried out by the Commission in November 2014 showed considerable delays in the implementation of key points of the action plan, potentially with effects extending to the administration of 2015. Consequently, the initial action plan was revised in March 2015.’

79      Thus, by letter of 22 December 2014 (see paragraph 7 above), the Commission informed the French authorities of its findings on the progress of the action plan. It stated:

–        ‘the progress of the action plan … does not fully reflect the true position. For example, as the French authorities explained, the average age of the “built area” category must be increased by 2 years for each départment (the category has been included since 2012), meaning that in 2014 the orthophoto[graph]s used to update the GPR are more than [five] years old’;

–        ‘the estimate for the entire territory of the number of irregularities generated by cross-checking the GPR with the “built area” and “vegetation” categories with a threshold of 0 has not yet been provided (according to the action plan, this work should have been completed in 2013 for the “built area” category and in 2014 for the “vegetation” category)’;

–        ‘in the BD TOPO [database], deficiencies and omissions (in the definition of elements in the “vegetation” and “built area” categories) were found, preventing alerts from being triggered to address potential overlaps, particularly as regards built areas of more than 2 ares and vegetation of over 50 ares (according to the thresholds set by the French authorities)’;

–        ‘the financial impact of the confirmed overlaps, with the threshold described, has not yet been calculated by the French authorities. According to the explanations provided, in relation to the thresholds at issue, payments are stopped in the event of overlap’;

–        ‘“built areas” and “vegetation” of less than 2 and 50 ares, respectively, must be dealt with and the financial impact must be calculated. This is in addition to deferring the inclusion of the categories of “water” and “linear elements” until 2015, in contrast to what was initially planned (summer 2014 for linear elements and the end of 2014 for water expanses)’;

–        ‘field visits showed that areas accepted as being eligible for direct support under the first pillar did not comply with EU regulatory provisions. That is particularly the case for permanent pastures and for moors and rangeland … By extension, the prefectural orders and/or their implementation is not in line with EU legislation’.

80      In that letter, the Commission also stated that due to the abovementioned findings, the actual progress of the action plan and its success could not be confirmed. However, the Commission pointed out that its services had noted that the French authorities were developing an alternative approach which was, in part, to resolve the problems identified. The Commission was thus of the opinion that ‘a revised action plan [had to] be drawn up’.

81      It therefore invited the French authorities to submit such a plan, which was to contain the following elements, at least: ‘exact timing (month and year); direct incorporation in the ISIS [management tool] of information received from the IGN, redesign of islets; correct photo-interpretation of agricultural land in accordance with the regulatory provisions applicable as from 2015, [bearing in mind that,] in view of the results of the field visits obtained following the mission, the implementation of a pro rata for each parcel in pastures/moors and rangeland is to be considered by the French authorities’.

82      To conclude, the Commission stated that ‘those deficiencies [had to] be remedied before implementation of the 2015 marketing year (April 2015), particularly as regards the systemic problems of regulatory interpretation’. The Commission made clear that ‘non-compliance [would] be considered in the light of Article 41[(2)(b) of Regulation No ]1306/2013, which provides that failure to implement an action plan may lead to the reduction/suspension of payments’. Accordingly, the Commission pointed out that the ‘next progress report to be submitted … at the end of January 2015 [had to] include the necessary amendments’.

83      By letter of 23 December 2014 (see paragraph 8 above), the French authorities forwarded to the Commission ‘the anticipated information relating to the implementation of the [action plan] in 2014 and its continuation in 2015’.

84      As a preliminary point, the French authorities recalled that the action plan covered the 2014 and 2015 marketing years, which meant that it would end with the payments made in respect of the 2015 marketing year.

85      As regards the update of the GPR, the French authorities stated that work was ongoing to ensure, by photo-interpretation and cross-checking with area databases of the Institut national de l’information géographique et forestière (National Institute of Geographical and Forestry Information, ‘IGN’), that all areas not eligible for aid would be excluded from the area base entitled to receive payments. Details were provided on the manner in which that work was to be carried out. Its aim was to identify the areas eligible for CAP support as well as ‘Ecological Focus Areas (EFAs)’ in the context of future greening payments. The French authorities observed that the timetable was ‘extremely tight’, as the work was to be performed within time limits compatible with the 2015 marketing year. They noted that the work was of ‘huge dimensions given the number of CAP applications to be examined[, that is,] 80% of the CAP applications submitted in 2014, or more than 300 000 out of 372 000’. The French authorities provided the following timetable setting out the provisional objectives for delivery of the graphic categories: January 2015 — islet boundaries; March 2015 — non-agricultural areas on islets; and June 2015 — non-agricultural areas adjacent to islets. The French authorities also stated that ‘one of the difficulties in performing this task in 2 years [was] linked to the fact that, as a result of the decisions on the CAP reform, the rules governing whether areas are eligible for direct payments [would] have to change’.

86      For those reasons, the French authorities also informed the Commission that they had decided to conduct a comprehensive overhaul of the GPR in 2015. They explained that, while incorporating the results of the action plan, the mechanism put in place in 2015 would no longer use the BD TOPO database’s categories, but rather the specific graphic categories drawn up by the IGN for the purposes of the CAP. The French authorities thus concluded: ‘In other words, the [action] plan [to be implemented in] 2015 will not simply replicate the [action] plan [that was implemented in] 2014 (by lowering the thresholds), but will be a new comprehensive exercise of photo-interpretation resulting in the development of those graphic categories’.

87      The information contained in the letter of 23 December 2014 was supplemented by the fifth progress report, sent by the French authorities to the Commission on 30 January 2015 (see paragraph 8 above). In that report, the French authorities sought to reply to the Commission’s letter of 22 December 2014 and submit additional information.

88      As regards the implementation of the action plan in 2014, the French authorities recalled that they undertook to complete the GPR section of that plan ‘in two (or three) years: the 2014 and 2015 (and possibly 2016) marketing years’. Thus, in 2014, they had decided to prioritise what potentially posed the greatest financial risk to the EAGF: the ‘built area’ category exceeding 2 ares and the ‘vegetation’ category exceeding 50 ares. The elements not dealt with in 2014 would be included in the action plan to be implemented in 2015.

89      Concerning the implementation ‘of a revised action plan in 2015’, the French authorities stated that they took note ‘of the approval in principle of the Commission’s services’ and referred to ‘the information already provided on the matter ([on] 23 December [2014]’. With respect to the interpretation of the regulatory provisions governing landscape elements and the eligibility of certain areas, the French authorities also informed the Commission of their ‘decision, under Article 10 of Delegated Regulation No 640/2014, to apply a pro-rata system to determine the eligible area of permanent grassland’ and their planned approach for that purpose, which included, inter alia, a national pro-rata scale comprising five categories.

90      Lastly, the French authorities recalled their proposal to organise a technical meeting in Paris (France) with representatives of the Commission’s services in order to present ‘the new terms of the action plan … to be implemented in 2015’.

91      By letter of 17 February 2015 (see paragraph 9 above), the Commission requested clarification on several aspects relating to the implementation of the action plan envisaged by the French authorities in their letter forwarding the fifth progress report of 30 January 2015. Thus, the Commission enquired about the financial impact and the date on which encoding would be completed as regards the ‘built area’ category of less than 2 ares, the ‘vegetation’ category of less than 50 ares, and the ‘water’ and ‘linear’ elements.

92      In that letter of 17 February 2015, the Commission also stated that it was of the view, in the light of the data obtained from the audit conducted in November 2014, that the technique of photo-interpretation was not in line with the rules so far as concerns landscape elements and the eligibility of certain areas. Furthermore, the Commission asserted that the national pro-rata scale comprising five categories and the question of the eligibility of areas such as groves and ponds had to be clarified, that field visits in case of doubt had to be conducted, and that a ‘revised action plan’ had to be swiftly submitted setting out the objectives and milestones.

93      By letter of 25 February 2015 (see paragraph 9 above), the Commission sent the French authorities various items of information relating to the outcome of an inquiry carried out in France concerning 2013 and 2014 showing that the LPIS was affected by shortcomings linked to the age of the orthophotographs and flawed photo-interpretation. The Commission also noted that there were problems with the definition of eligible areas as regards landscape elements, topographical particularities and ‘moors and rangeland’, that on-the-spot checks were not effective, and that there were problems with the calculation of payments and penalties and with retroactive recovery.

94      By letter of 12 March 2015 (see paragraph 9 above), the French authorities sent the Commission the action plan containing ‘various updates’. That document, entitled ‘Action plan … — Projected timeline for the 2015 CAP marketing year’, comprised three sections headed ‘LIPS/GPR — Reduction in the age of orthophotographs’, ‘LIPS/GPR — Evaluation of the quality of the GPR’, and ‘Changes in the management of the GPR and relationship with on-the-spot checks’. By a further note of 30 March 2015 (see paragraph 9 above), the French authorities sent additional information to the Commission.

95      It can be seen from examining the amendments to the action plan that the deadlines for the different measures planned ranged from 15 January 2015 (for delivery of the new orthophotographs to establish the 2015 GPR) to the end of 2015 (for payments).

96      Therefore, in the third place, it is apparent from the foregoing that the measures initially envisaged in the action plan approved in November 2013 were subsequently revised during the plan’s implementation to take account, among other things, of the difficulties experienced by the French authorities in relation to the use of the BD TOPO database. In particular, since they were not in a position to implement the measures necessary to remedy the deficiencies found as regards the updating and the improvement of the LPIS during the 2013 or 2014 marketing years, the French authorities had undertaken to do so during the 2015 marketing year.

97      Against that background, the French Republic’s argument that what matters is that its commitment under the action plan was to finalise the plan in 2016 cannot be accepted. As is clear from the above, several indicators mentioned in the action plan provided for a phased implementation over time taking account of the objectives to be attained at the end of each marketing year. Implementation was therefore gradual and was not only conditional on achievement of the objectives in 2016.

98      In particular, regarding the amendments made to the action plan as a result of the revisions related to the difficulties experienced by the French authorities in using the BD TOPO database and to the opportunities afforded by the entry into force of the provisions on the application of the pro-rata system and the inclusion as eligible areas of certain permanent grassland under established local practices, it should be noted that the focus had been on the implementation of those measures during the 2015 marketing year.

99      In order to demonstrate that the implementation of the action plan had been inadequate, the Commission made the following statements in recitals 3 to 7 of the contested decision:

‘(3) …      A Commission audit carried out in March 2015 confirmed that significant deficiencies persisted as regards the implementation of the action plan.

(4)      Consequently, pursuant to the fourth subparagraph of Article 41(2) of Regulation … No 1306/2013, the Commission informed France by letter of 13 April 2015 of its intention to reduce or suspend the monthly payments if no additional information was received or if the additional information was not satisfactory. France replied by letter of 7 May 2015, indicating that corrective steps had been taken successfully with the aim of finalising the action plan in 2015.

(5)      The deficiencies referred to in the letter of 13 April 2015 concerned, inter alia, the manner in which France had established the pro-rata system to assess the maximum eligible area under permanent grassland in accordance with Article 10 of … Delegated Regulation … No 640/2014 …, which was not in compliance with the recommendations contained in the Commission’s guidelines and which presented significant risks in terms of management and control; determining the eligibility of certain types of areas, in particular those with a high density of trees and/or low-grade grazing resources, e.g. chestnut groves, bracken or parcels with a pro-rata lower than 50%; the manner in which France would be able to handle anomalies related, for example, to determining a pro-rata for the eligibility of permanent grassland and to establishing Ecological Focus Areas (EFA) as part of the greening process. In general, it was found that the action plan was still not being implemented on the grounds that the areas recorded in the LPIS did not all include a total maximum eligible area established in accordance with regulatory requirements. The French authorities were asked to address all the points set out in the letter before 16 October 2015.

(6)      All of the above factors, in particular the delays and shortcomings in updating and improving the LPIS in France, have in fact had significant negative consequences for the management of aid applications in respect of 2015, in particular as regards providing the beneficiary with the required information on the maximum eligible area and non-agricultural areas, including the EFAs.

(7)      A follow-up report sent by France on 9 October 2015 and a new audit carried out by the Commission during the week of 30 November 2015 concluded that there were still important delays as regards the administrative processing of the applications for aid, the notification to operators of the data from their statements, the calculation of eligible areas and of the EFAs, the handling of irregularities resulting from the administrative and on-the-spot checks, rapid field visits to assess the eligibility of permanent grassland and on-the-spot checks. These delays were subsequently confirmed by an audit carried out by the Commission from 11 to 15 April 2016. Therefore, the on-the-spot checks would not be finalised until July 2016 at the earliest, which affects their effectiveness and consequently also their useful effect, in particular in case of doubt as to the eligibility of areas or compliance with the requirements for the diversification of crops in the context of greening. This confirms that it will not be possible to achieve the objectives of the action plan in the immediate future, which, in turn, does not offer the reasonable assurance required for proper administration of the aid and for the legality and regularity of the payments in respect of the year 2015. Furthermore, these delays also affect the establishment of the definitive value of payment entitlements, which should have been set by 1 April 2016 at the latest, in accordance with Article 18 of … Delegated Regulation … No 639/2014 …, as well as the execution of the payments themselves. Payments should therefore be suspended.’

100    It can be concluded from examining the different documents cited in the contested decision, which are mentioned in paragraphs 69 to 98 above, that the implementation of the action plan referred to therein was inadequate. Those documents show that, as the Commission points out, the delays and shortcomings in updating and improving the LPIS had significant negative consequences for the management of aid applications in respect of 2015, in particular as regards providing the beneficiary with the required information on the maximum eligible area and non-agricultural areas.

101    Thus, contrary to the commitments initially entered into in the action plan approved in November 2013, which were again renewed when amendments were made to the action plan, the French authorities were not in a position to implement those commitments in a satisfactory manner during the 2015 marketing year due to the difficulties they experienced in using the BD TOPO database and the opportunities afforded by the entry into force of the provisions laid down in the CAP reform.

102    For the reasons stated in the various documents mentioned in the contested decision and to which reference is made in paragraphs 69 to 98 above, the Commission was entitled to take the view that the deficiencies found indeed resulted in delays and difficulties in the proper conduct of the 2015 marketing year notwithstanding the undertakings given by the French authorities.

103    Thus, it is apparent from the Commission’s findings in its letter of 13 April 2015 that several questions remained regarding the implementation of the action plan, particularly as to the ‘arrangements for managing aid applications in 2015’. The Commission pointed out in that context that ‘genuine uncertainty remain[ed] as to the area covered by the aid application and in respect of which the farmer [gave] undertakings’ on account of the quality and quantity of information received by the beneficiary from the authorities in order to submit the aid application. The Commission also stated that it was therefore unclear ‘to what extent the paying agency [would be] able to handle the numerous irregularities which [would] arise following the administrative processing of the applications’ and that ‘the distribution and allocation of payment entitlements [was] liable to be affected, with potential consequences for subsequent marketing years’.

104    Similarly, in its letter of 22 December 2015 (see paragraph 20 above), the Commission noted that the French authorities had undertaken to implement the measures set out in the revised action plan before the end of 2015. The Commission submitted in that regard that by stating during the mission in France on 1 December 2015 that those measures could not be completed until April or May 2016, the French authorities delayed the implementation of the action plan for the second time. According to the Commission, such delays resulted in the persistence of the deficiencies in the update of the LPIS and the existence of a significant number of outstanding irregularities.

105    Finally, in the additional letter of 20 May 2016 sent following an audit mission conducted in France in April 2016, the Commission observed that there were ‘fresh delays’, including with respect to ‘the definitive establishment of the value and number of payment entitlements, …, the carrying out of rapid visits and on-the-spot checks, as a result of which payments for the 2015 marketing year [were] not envisaged until after June 2016’. The Commission even feared that ‘the delays [might] also affect the proper implementation of on-the-spot checks and payments for the 2016 marketing year’.

106    None of the arguments put forward by the French Republic is capable of calling that conclusion into question. Besides the fact that the French Republic claims that it ultimately met its commitments (which cannot, however, prevent the Commission, for the purposes of the contested decision, from making a finding regarding the delays that occurred in the light of the envisaged deadlines and the consequences of those delays), the French Republic essentially confines itself to arguing that the basis of the contested decision is a legal dispute between it and the Commission concerning the application of the pro-rata system and the determination of the eligibility of certain permanent grassland under established local practices.

107    While it is true that, as the French Republic observes, the application of the pro-rata system and the determination of the eligibility of certain permanent grassland under established local practices are not among the progress indicators set out in the action plan (both original and revised versions), the Commission’s submissions on those two questions were mentioned only in passing in the contested decision, as part of a list of the various deficiencies found (see recital 5 of the contested decision).

108    As is apparent from the contested decision, particularly recitals 6 and 7 and the documents mentioned in that decision, the Commission was in a position to find that, in 2015, the action plan had not been implemented due to delays and shortcomings in updating and improving the LPIS and that this failure had had significant negative consequences for the management of aid applications in respect of that year. The Commission was therefore legitimately able to conclude that the French Republic was not in a position to implement in the immediate future the necessary remedial measures.

109    As regards the arguments put forward by the Portuguese Republic in support of the pleas in law alleging breach of the principle of the protection of legitimate expectations and breach of the principle of legal certainty, it must be stated that those pleas were not raised by the French Republic in its application, which is based principally on breach of Article 41(2)(b) of Regulation No 1306/2013 and, in the alternative, breach of the principle of proportionality. It is therefore not necessary to respond to those pleas, which are inadmissible, as an intervener may not raise a plea that was not raised by the applicant (see, to that effect, judgment of 25 June 1998, British Airways and Others v Commission, T‑371/94 and T‑394/94, EU:T:1998:140, paragraph 75).

110    It follows from the foregoing that the French Republic, supported by the Portuguese Republic, is not justified in arguing that the contested decision infringes Article 41(2)(b) of Regulation No 1306/2013.

111    The first plea in law must therefore be dismissed.

 Second plea in law alleging breach of the principle of proportionality

112    In the alternative, the French Republic seeks the annulment of the contested decision for breach of the principle of proportionality. It recalls, first of all, that in the contested decision the Commission decided to apply a suspension percentage of ‘3% to the total monthly payments relating to decoupled area-linked aid in respect of 2015, corresponding to expenditure effected monthly by the French Republic from July 2016 to July 2017 inclusive’. The French Republic also observes that in order to justify the rate of 3%, the Commission found that a correction of 5% was the applicable correction within the framework of the conformity clearance procedure in the case of shortcomings in key controls and that account also had to be taken of a number of remedial measures taken by the French Republic.

113    In that context, the French Republic states that it does not dispute the means by which the Commission established the suspension rate applicable to the monthly payments, but rather the ‘base suspension amount’, ‘namely all monthly payments relating to area-linked aid in respect of 2015’. It claims that the contested decision is essentially based on the continuance of the dispute between the Commission and the French authorities in relation to the application of the rules on pro rata and the inclusion of certain areas as permanent grassland under established local practices. However, it argues that all of the areas included in the GPR account for around 27 million hectares and the permanent grassland which could be covered by the pro-rata system or be declared eligible under established local practices represents only a small proportion of the total areas eligible for agricultural aid. Furthermore, the French Republic contends that all areas of permanent grassland account for 8.6 million hectares and are diverse in nature. In essence, those areas as a whole consist of grass-covered land which is thus clearly eligible without there being any need to apply the pro-rata system or to ascertain whether there is an established local practice of pasture despite the low-grade grazing resources. The areas covered by the pro-rata system or by a declaration of eligibility under established local practices therefore account for approximately 520 000 hectares in 2015, or close to 2% of all areas covered by the GPR, bearing in mind that, in 2015, 500 283 hectares were declared to be woody pasture and 20 852 hectares were declared to be oak and chestnut groves maintained by pigs or small ruminants. Consequently, the contested decision should apply a 3% rate only to a base amount corresponding to 2% of the total monthly payments relating to expenditure effected monthly by the French Republic from July 2016 to June 2017 inclusive.

114    Furthermore, in response to the argument that the Commission was entitled to rely not only on a shortcoming in the implementation of the action plan, but also on a shortcoming in the payment system as a whole, the French Republic contends that that argument lacks any basis in fact. Similarly, in reply to the Commission’s claim that the French authorities should have raised the question of the breach of the principle of proportionality in their response to the additional letter of 20 May 2016, the French Republic states that there is no rule laying down such an obligation.

115    The Portuguese Republic also asserts that the contested decision infringes the principle of proportionality because it is directed at all monthly payments and not only those concerning areas under the pro-rata system. The purpose of a decision suspending monthly payments is to avoid risk with respect to future payments and, therefore, should correspond approximately to the expenditure found to be unlawful. Otherwise, payments not linked to the irregularities might also be suspended, which would undermine the funding of CAP expenditure. In the contested decision, the Commission simply applied a flat-rate suspension of payments of 3% without assessing the expenditure considered to be unlawful. The Portuguese Republic refers to the special report entitled ‘Audit of the clearance of accounts procedure’ prepared by the European Court of Auditors to argue that flat-rate corrections should however be based by analogy on a precise estimation of the substantive financial damage caused.

116    As a preliminary point, the Commission observes that the contested decision is not based solely on the fact that the pro-rata system was not taken into account. The reasons given in that decision are broader. The deficiencies identified affect all areas, not only areas of permanent grassland. The affected payments are therefore not only those concerning the determination of eligible areas under the pro-rata system, ‘but all areas, that is to say 8.6 million hectares of permanent grassland’. Furthermore, the risk cited does not affect all areas in the same manner, which is why, in particular, a rate of 3% rather than 5% was decided on. The Commission also contends that the French Republic could and should have raised the question of the breach of the principle of proportionality in the administrative procedure. And yet, following the additional letter of 20 May 2016, which clearly set out the base amount for the suspension of payments and the applicable rate, namely 3%, the French Republic did not bring that question up in its reply of 16 June 2016.

117    In addition, the Commission recalls that the difficulty it faced was the identification of eligible areas. The LPIS’s shortcomings were such that it was not possible to define the eligible areas, which posed a substantial financial risk for the EAGF. Similarly, in view of the deficiencies found, the Commission was not able to calculate the areas concerned and the French Republic did not forward it information in that regard in its reply of 16 June 2016. Furthermore, the base suspension amount and the suspension rate used were calculated with reference to the methodology set out in Communication C(2015) 3675 final from the Commission laying down guidelines on the calculation of the financial corrections in the framework of the conformity and financial clearance of accounts procedures. The Commission argues that, in the same way as in a conformity clearance procedure, the French authorities could have submitted objective evidence to demonstrate that the maximum loss to the EAGGF was limited to a sum lower than the amount resulting from the application of a flat-rate lower than that proposed, but did not do so.

118    It must be recalled that, according to settled case-law, the principle of proportionality, as one of the general principles of EU law, requires that measures adopted by the EU institutions do not exceed the limits of what is appropriate and necessary in order to attain the objectives pursued by the legislation in question. Consequently, when there is a choice between several appropriate measures, recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued (see judgment of 6 November 2014, Greece v Commission, T‑632/11, not published, EU:T:2014:934, paragraph 59 and the case-law cited).

119    It follows from the second subparagraph of Article 41(2) of Regulation No 1306/2013 that an implementing act adopted by the Commission to suspend monthly payments to a Member State is to be applied ‘to the relevant expenditure effected by the paying agency where the deficiencies exist for a period to be determined …, which shall not exceed twelve months’. Article 41(3) of Regulation No 1306/2013 also explicitly states that such an implementing act is to be applied ‘in accordance with the principle of proportionality’.

120    In that regard, contrary to what is claimed by the Commission, the possibility for a Member State to plead a breach of the principle of proportionality before the EU Courts does not require the Member State to submit that complaint beforehand to the Commission during the administrative procedure preceding the adoption of an implementing act suspending monthly payments. EU law contains no rule to the effect that, if a Member State does not raise issues of law in the course of the administrative procedure before the Commission, its right to raise those issues will lapse (see, by analogy, Opinion of Advocate-General Mengozzi in Archer Daniels Midland v Commission, C‑511/06 P, EU:C:2008:604, point 123). As is apparent from Article 41(3) of Regulation No 1306/2013, it is for the Commission to comply with the principle of proportionality and it is for the EU Courts to review such compliance if requested to do so, as in the present case. The Commission is required to adopt a final decision in conformity with law, regardless of whether the person to whom that decision is addressed has actually exercised his rights of defence in the administrative procedure or the extent to which he has done so (see, to that effect, Opinion of Advocate-General Mengozzi in Archer Daniels Midland v Commission, C‑511/06 P, EU:C:2008:604, point 123).

121    The fact that the French Republic did not raise the question of the breach of the principle of proportionality in the administrative procedure, as it could have done, cannot therefore deprive it of the right to challenge the contested decision in that regard once the Commission has adopted a position on the matter, as it is required to do under the above provisions.

122    In this case, the Commission decided in the contested decision that ‘monthly payments to France made pursuant to Article 18 of Regulation (EU) No 1306/2013 [were to] be suspended for an amount obtained by applying a suspension percentage of 3% to the monthly payments relating to area-related aid set out in the Annex to this Decision for the year 2015’ (first paragraph of Article 1 of the contested decision). The Commission also decided that ‘the suspensions [were to] be applied to the monthly payments to be made to France pursuant to Article 18(2) of Regulation (EU) No 1306/2013 for expenditure effected monthly by the paying agency Agence de Services et de Paiement, from July 2016 to June 2017 inclusive’ (recital 8 and second paragraph of Article 1 of the contested decision).

123    As regards the compliance of the measure with the principle of proportionality, the Commission stated, in recital 9 of the contested decision:

‘In accordance with the principle of proportionality, having regard to the gravity and persistence of the deficiencies found and in line with the findings established during the audits, the Commission considers that it is appropriate to set the level of suspension at 3% of the total expenditure concerned. Although the deficiencies are deficiencies in key controls and ancillary controls for which a flat-rate correction of 5% is provided for in the [guidelines on the calculation of financial corrections in the framework of clearance procedures], a suspension rate of 3% is justified. Even though the implementation of the action plan has been delayed and is inadequate, since the beginning of 2015 France has taken additional measures to remedy this situation, which will affect positively the cross-checks carried out at the time of payment, in particular by supplying new orthophotographs for compiling the graphic parcel register. It is considered that the financial risk is also reduced by the fact that the French authorities have decided to make payments only once all the checks (administrative and on-the-spot) have been carried out.’

124    In that context, the French Republic does not dispute the means by which the Commission set the suspension rate at 3% of the expenditure concerned. The French Republic disputes only the fact that the ‘base suspension amount’ decided by the Commission covers ‘all monthly payments relating to area-linked aid in respect of 2015’, whereas the contested decision is essentially based on the application of the rules on pro rata and the inclusion of certain areas as permanent grassland under established local practices and not on all of the areas included in the GPR.

125    In particular, first, the French Republic states that the areas included in the GPR in mainland France account for a total of 27.272 million hectares. According to the French Republic, these are areas that were eligible for agricultural aid in 2015.

126    Secondly, the French Republic submits that permanent grassland, accounting for 8.6 million hectares, thus represents only a small proportion of the total areas eligible for agricultural aid. The French Republic states that, in essence, this is grass-covered land which is clearly eligible for agricultural aid without there being any need to apply the pro-rata system or to ascertain whether there is an established local practice of pasture despite the low-grade grazing resources.

127    Thirdly, the French Republic also contends that, of the areas eligible for agricultural aid in 2015, the areas actually covered by the pro-rata system or by a declaration of eligibility under established local practices account for 520 000 hectares at most, or close to 2% of all areas covered by the GPR. According to the French Republic, this comprises 500 283 hectares, which were declared to be woody pasture in 2015, and 20 852 hectares declared to be oak and chestnut groves maintained by pigs or small ruminants

128    However, contrary to the submissions made by the French Republic, which claims that the only deficiencies found and, in consequence, the expenditure concerned, relate to the areas actually covered by the pro-rata system or by a declaration of eligibility under established local practices, it is readily apparent from the contested decision that the deficiencies found by the Commission are more extensive.

129    Thus, according to recitals 5 and 6 of the contested decision, the deficiencies mentioned by the Commission concerned, ‘inter alia’, ‘the manner in which France had established the pro-rata system to assess the maximum eligible area under permanent grassland’. Furthermore, the Commission pointed out that, in general, the action plan was still not being implemented because the areas recorded in the LPIS did not all include a total maximum eligible area established in accordance with regulatory requirements. According to the Commission, those factors, in particular the delays and shortcomings in updating and improving the LPIS, have in fact had significant negative consequences for the management of aid applications in respect of 2015, in particular as regards providing the beneficiary with the required information on the maximum eligible area and non-agricultural areas, including the Ecological Focus Areas. In the same vein, as indicated in recital 7 of the contested decision, the effect of those shortcomings, in so far as the objectives of the action plan could not be achieved in the immediate future, was that it was not possible to offer ‘the reasonable assurance required for proper administration of the aid and for the legality and regularity of the payments in respect of the year 2015’. Furthermore, as the Commission made clear, those delays ‘also affect[ed] the establishment of the definitive value of payment entitlements, which should have been set by 1 April 2016 at the latest, …, as well as the execution of the payments themselves’. For the reasons set out in paragraphs 100 to 105 above, throughout the administrative procedure the Commission criticised the deficiencies in updating the LPIS and their implications for the management and control of area aid financed by the EAGF without receiving any satisfactory response from the French authorities.

130    The French Republic’s argument that the Commission was not able in this case to rely on a deficiency in the payment system as a whole cannot therefore be accepted.

131    Consequently, the Commission was indeed entitled to find that all payments relating to area-linked aid in respect of 2015 could be included in the base amount for the purpose of applying the suspension percentage of 3%, a figure that the French Republic does not dispute.

132    Since only the Portuguese Republic questions the methodology used by the Commission to arrive at a suspension rate of 3%, namely the application by analogy of its guidelines on the calculation of financial corrections in the framework of clearance procedures, it must be held that the application by analogy of those guidelines does not, per se, demonstrate that the amount suspended in this case is disproportionate. Moreover, in the absence of any other relevant information in the documents before the Court concerning declared areas which actually posed a problem in the light of the deficiencies found, it must be held that the Commission’s use of a flat-rate is not in itself, from a methodological standpoint, disproportionate.

133    It follows from the foregoing that the French Republic, supported by the Portuguese Republic, is not justified in arguing that the contested decision infringes the principle of proportionality.

134    The second plea in law must accordingly be rejected and, therefore, the action must be dismissed in its entirety.

 Costs

135    Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the French Republic has been unsuccessful, it must be ordered to pay the costs, in accordance with the forms of order sought by the Commission.

136    Under Article 138(1) of the Rules of Procedure, Member States which intervene in the proceedings are to bear their own costs. It follows that the Portuguese Republic must bear its own costs.

On those grounds,

THE GENERAL COURT (Third Chamber),

hereby:

1.      Dismisses the action;

2.      Orders the French Republic to bear its own costs and to pay those incurred by the European Commission;

3.      Orders the Portuguese Republic to bear its own costs.

Frimodt Nielsen Kreuschitz Półtorak

Delivered in open court in Luxembourg on 26 September 2018.

[Signatures]

Table of contents

*      Language of the case: French.