ORDER OF THE GENERAL COURT (Eighth Chamber)
6 March 2012 (*)
(Action for annulment – EAGGF, EAGF and EAFRD – Expenditure incurred by the United Kingdom of Great Britain and Northern Ireland – Expenditure excluded from European Union financing – Devolved administration – No direct concern – Inadmissibility)
In Case T‑453/10,
Northern Ireland Department of Agriculture and Rural Development (United Kingdom), represented by K. Brown, Solicitor, and D. Wyatt QC,
applicant,
v
European Commission, represented by P. Van den Wyngaert, P. Rossi and G. von Rintelen, acting as Agents,
defendant,
ACTION for annulment in part of Commission Decision 2010/399/EU of 15 July 2010 excluding from European Union financing certain expenditure incurred by the Member States under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF), under the European Agricultural Guarantee Fund (EAGF) and under the European Agricultural Fund for Rural Development (EAFRD) (OJ 2010 L 184, p. 6),
THE GENERAL COURT (Eighth Chamber),
composed of L. Truchot, President, M.E. Martins Ribeiro (Rapporteur) and H. Kanninen, Judges,
Registrar: E. Coulon,
makes the following
Order
Legal context
1 Council Regulation (EC) No 1290/2005 of 21 June 2005 on the financing of the common agricultural policy (OJ 2005 L 209, p. 1) is the basic regulation with regard to the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD), which were established under the regulation.
2 Article 3(1) of Regulation No 1290/2005 provides as follows:
‘The EAGF shall finance in a context of shared management between the Member States and the [European Union] the following expenditure, which shall be effected in accordance with [European Union] law:
(a) refunds for the exportation of agricultural products to third countries;
(b) intervention measures to regulate agricultural markets;
(c) direct payments to farmers under the common agricultural policy;
(d) the [European Union’s] financial contribution to information and promotion measures for agricultural products on the internal market of the [European Union] and in third countries, undertaken by Member States on the basis of programmes other than those referred to in Article 4 and selected by the Commission.’
3 Article 4 of Regulation No 1290/2005 provides that the EAFRD is to finance, in a context of shared management between the Member States and the European Union, the European Union’s financial contribution to rural development programmes implemented in accordance with the European Union legislation on support for rural development by the EAFRD.
4 Article 6(1) of Regulation No 1290/2005 defines paying agencies as the departments or bodies of the Member States which, in respect of payments made by them and as regards communicating and keeping information, provide sufficient guarantees to ensure, in essence, that the eligibility of requests is checked before payment is authorised, accurate and exhaustive accounts are kept of the payments made, the checks provided for are made, the requisite documents are presented within the time-limits and that those documents are accessible and kept in a manner which ensures their completeness, validity and legibility. Article 6(2) of that regulation provides that Member States are to accredit as paying agencies departments or bodies which fulfil the conditions laid down in paragraph 1 and, under Article 6(3), where more than one paying agency is accredited, they are to communicate to the European Commission the particulars of the department or body to which it assigns the tasks set out in that paragraph.
5 Article 9 of Regulation No 1290/2005 provides as follows:
‘1. Member States shall:
(a) within the framework of the common agricultural policy, adopt all legislative, regulatory and administrative provisions and take any other measures necessary to ensure effective protection of the financial interests of the [European Union], and particularly in order to:
(i) check the genuineness and compliance of operations financed by the EAGF and the EAFRD;
(ii) prevent and pursue irregularities;
(iii) recover sums lost as a result of irregularities or negligence;
(b) set up an efficient management and control system comprising the certification of accounts and a declaration of assurance based on the signature of the person in charge of the accredited paying agency.
2. The Commission shall ensure that Member States check the legality and compliance of the expenditure referred to in Articles 3(1) and 4, and that they observe the principles of sound financial management; it shall carry out the following measures and checks in this connection:
(a) it shall check that management and control systems exist and function properly in the Member States;
(b) it shall reduce or suspend intermediate payments in full or in part and apply the requisite financial corrections, particularly where the management and control systems fail;
(c) it shall check that prefinancing is reimbursed and shall, if necessary, automatically decommit budget commitments.
3. Member States shall inform the Commission of the provisions adopted and measures taken under paragraph 1 and, with regard to rural development programmes, the measures taken for management and control in compliance with [European Union] legislation concerning support for rural development by the EAFRD in order to protect the financial interests of the [European Union].’
6 Article 14 of Regulation No 1290/2005 is worded as follows:
‘1. The appropriations necessary to finance the expenditure referred to in Article 3(1) shall be made available to Member States by the Commission in the form of monthly reimbursements, hereinafter referred to as “monthly payments”, on the basis of the expenditure effected by the accredited paying agencies during a reference period.
2. Until transfer of the monthly payments by the Commission, the resources required to undertake expenditure shall be mobilised by the Member States according to the needs of their accredited paying agencies.’
7 Article 15(1) to (3) of Regulation No 1290/2005 provides as follows:
‘1. Monthly payments shall be made by the Commission, without prejudice to the decisions referred to in Articles 30 and 31, for expenditure effected by Member States’ accredited paying agencies during the reference month.
2. The Commission shall decide, in accordance with the procedure referred to in Article 41(3), the monthly payments which it makes, on the basis of a declaration of expenditure from the Member States and the information supplied in accordance with Article 8(1), taking into account reductions or suspensions applied under Article 17.
3. Monthly payments shall be made to each Member State at the latest on the third working day of the second month following that in which the expenditure is effected.’
8 Paragraphs 1 to 3 of Article 31 of Regulation No 1290/2005, entitled ‘Conformity clearance’, provide as follows:
‘1. If the Commission finds that expenditure as indicated in Article 3(1) and Article 4 has been incurred in a way that has infringed [European Union] rules, it shall decide what amounts are to be excluded from [European Union] financing in accordance with the procedure referred to in Article 41(3).
2. The Commission shall assess the amounts to be excluded on the basis of the gravity of the non-conformity recorded. It shall take due account of the nature and gravity of the infringement and of the financial damage caused to the [European Union].
3. Before any decision to refuse financing is taken, the findings from the Commission’s inspection and the Member State’s replies shall be notified in writing, following which the two parties shall attempt to reach agreement on the action to be taken.
If agreement is not reached, the Member State may request opening of a procedure aimed at reconciling each party’s position within four months. A report of the outcome of the procedure shall be given to the Commission, which shall examine it before deciding on any refusal of financing.’
9 With regard to expenditure incurred before 16 October 2006, the date of entry into force of Articles 30 and 31 of Regulation No 1290/2005, Article 7(4) of Council Regulation (EC) No 1258/1999 of 17 May 1999 on the financing of the common agricultural policy (OJ 1999 L 160, p. 103), which was repealed by Regulation No 1290/2005, laid down rules similar to those set out in Article 31 of Regulation No 1290/2005.
10 Article 5(1) of Commission Regulation (EC) No 883/2006 of 21 June 2006 laying down detailed rules for the application of Regulation No 1290/2005 as regards the keeping of accounts by the paying agencies, declarations of expenditure and revenue and the conditions for reimbursing expenditure under the EAGF and the EAFRD (OJ 2006 L 171, p. 1) provides as follows:
‘1. Without prejudice to the special provisions on declarations of expenditure and revenue relating to public storage referred to in Article 6, expenditure and assigned revenue declared by the paying agencies in respect of a given month shall correspond to payments and receipts actually effected during that month.
…
However:
…
(c) corrections decided by the Commission under the clearance of accounts and the conformity clearance shall be deducted from or added to the monthly payments referred to, as appropriate, in Article 10(2) or Article 11(4) of Commission Regulation (EC) No 885/2006 directly by the Commission. However, the Member States shall include the amounts corresponding to these corrections in the declaration drawn up for the month for which the corrections are made.’
11 Article 11 of Commission Regulation (EC) No 885/2006 of 21 June 2006 laying down detailed rules for the application of Regulation No 1290/2005 as regards the accreditation of paying agencies and other bodies and the clearance of the accounts of the EAGF and of the EAFRD (OJ 2006 L 171, p. 90) is worded as follows:
‘1. When, as a result of any inquiry, the Commission considers that expenditure was not effected in compliance with [European Union] rules, it shall communicate its findings to the Member State concerned and indicate the corrective measures needed to ensure future compliance with those rules.
The communication shall refer to this Article. The Member State shall reply within two months of receipt of the communication and the Commission may modify its position in consequence. In justified cases, the Commission may agree to extend the period for reply.
After expiry of the period for reply, the Commission shall convene a bilateral meeting and both parties shall endeavour to come to an agreement as to the measures to be taken as well as to the evaluation of the gravity of the infringement and of the financial damage caused to the [European Union] budget.
2. Within two months from the date of the reception of the minutes of the bilateral meeting referred to in the third subparagraph of paragraph 1, the Member State shall communicate any information requested during that meeting or any other information which it considers useful for the ongoing examination.
In justified cases, the Commission may, upon reasoned request of the Member State, authorise an extension of the period referred to in the first subparagraph. The request shall be addressed to the Commission before the expiry of that period.
After the expiry of the period referred to in the first subparagraph, the Commission shall formally communicate its conclusions to the Member State on the basis of the information received in the framework of the conformity clearance procedure. The communication shall evaluate the expenditure which the Commission envisages to exclude from [European Union] financing under Article 31 of Regulation (EC) No 1290/2005 and shall make reference to Article 16(1) of this Regulation.
3. The Member State shall inform the Commission of the corrective measures it has undertaken to ensure compliance with [European Union] rules and the effective date of their implementation.
The Commission, after having examined any report drawn up by the Conciliation Body in accordance with Chapter 3 of this Regulation, shall adopt, if necessary, one or more decisions under Article 31 of Regulation (EC) No 1290/2005 in order to exclude from [European Union] financing expenditure affected by the non-compliance with [European Union] rules until the Member State has effectively implemented the corrective measures.
When evaluating the expenditure to be excluded from [European Union] financing, the Commission may take into account any information communicated by the Member State after the expiry of the period referred to in paragraph 2 if this is necessary for a better estimate of the financial damage caused to the [European Union] budget, provided that the late transmission of the information is justified by exceptional circumstances.
4. As regards the EAGF, the deductions from the [European Union] financing shall be made by the Commission from the monthly payments relating to the expenditure effected in the second month following the decision pursuant to Article 31 of Regulation (EC) No 1290/2005.
As regards the EAFRD, the deductions from the [European Union] financing shall be made by the Commission from the following intermediate payment or the final payment.
However, at the Member State’s request and where warranted by the materiality of the deductions, and after consultation of the Committee on the Agricultural Funds, the Commission may set a different date for the deductions.
5. This Article shall apply, mutatis mutandis, to assigned revenues within the meaning of Article 34 of Regulation (EC) No 1290/2005.’
12 With regard to expenditure effected by the European Agricultural Guidance and Guarantee Fund (EAGGF) prior to the implementation of Regulation No 1290/2005, Article 8 of Commission Regulation (EC) No 1663/95 of 7 July 1995 laying down detailed rules for the application of Regulation (EEC) No 729/70 regarding the procedure for the clearance of the accounts of the EAGGF Guarantee Section (OJ 1995 L 158, p. 6) contained provisions similar to those in Article 11 of Regulation No 885/2006 as regards the procedure for the clearance of the accounts of the EAGGF Guarantee Section.
Background to the dispute and the contested decision
13 An audit conducted by the Commission in 2006 identified deficiencies in the administration and supervision on the part of the applicant, the Northern Ireland Department of Agriculture and Rural Development, of the single payment scheme in Northern Ireland.
14 The Commission, on the basis of scrutiny of the procedures applied by the applicant and on-the-spot checks carried out by the Commission of a number of field parcels, identified deficiencies relating to: (i) the land parcel identification system (LPIS) and the geographical information system (GPS); (ii) on-the-spot checks by the applicant’s inspectors; and (iii) the application of sanctions and retroactive recoveries.
15 By Decision 2010/399/EU of 15 July 2010, adopted following a conformity clearance procedure applied in accordance with Article 7(4) of Regulation No 1258/1999 and, as regards expenditure effected after 16 October 2006, Article 31 of Regulation No 1290/2005, the Commission excluded from European Union financing expenditure incurred by certain Member States under the Guarantee Section of the EAGGF, under the EAGF and the EAFRD (OJ 2010 L 184, p. 6) (‘the contested decision’), on the ground that the expenditure did not comply with European Union rules.
16 It is apparent from recitals 1 to 6 in the preamble to the contested decision that the Commission carried out the verifications necessary under the common agricultural policy and communicated the results to the Member States concerned, which were afforded the opportunity to request the launch of a conciliation procedure. That procedure was used in certain cases and the reports issued on the outcome were examined by the Commission. In particular, according to recital 4 in the preamble to the contested decision, it is apparent from the verifications carried out, the outcome of the bilateral discussions and the conciliation procedures that part of the expenditure declared by the Member States did not fulfil the requirements necessary for entitlement to funding under the EAGGF Guarantee Section, the EAGF or the EAFRD. The assessment of the amounts to be excluded on grounds of non-compliance was notified by the Commission to the Member States in a summary report on the subject.
17 Article 1 of the contested decision reads as follows:
‘The expenditure itemised in the Annex hereto that has been incurred by the Member States’ accredited paying agencies and declared under the EAGGF Guarantee Section, under the EAGF or under the EAFRD shall be excluded from European Union financing because it does not comply with European Union rules.’
18 Article 2 of the contested decision provides as follows:
‘This Decision is addressed to the Kingdom of Denmark, the Federal Republic of Germany, the Kingdom of Spain, the Grand Duchy of Luxembourg, the Republic of Hungary, the Republic of Austria, the Republic of Slovenia, the Slovak Republic, the Republic of Finland, and the United Kingdom of Great Britain and Northern Ireland.’
19 The applicant challenges the contested decision only in so far as concerns the 5% flat-rate financial correction applied to certain expenditure incurred by Northern Ireland relating to area payments granted during the 2007 financial year, totalling EUR 18 600 258.71, on account of shortcomings in the LPIS-GPS and in the on-the-spot checks.
Procedure and forms of order sought by the parties
20 By application lodged at the Registry of the General Court on 24 September 2010, the applicant brought the present action.
21 By separate document lodged at the Court Registry on 17 January 2011, the Commission raised a plea of inadmissibility pursuant to Article 114(1) of the Rules of Procedure of the General Court. The applicant lodged its observations on that plea on 11 March 2011.
22 The applicant claims in its application that the Court should:
– annul the contested decision;
– order the Commission to pay the costs.
23 The Commission claims, in its plea of inadmissibility, that the Court should:
– dismiss the action as inadmissible;
– order the applicant to pay the costs.
24 The applicant claims, in its observations on the plea of inadmissibility, that the Court should:
– dismiss the plea of inadmissibility or, in the alternative, reserve its decision for the final judgment, in accordance with Article 114(4) of the Rules of Procedure;
– order that the costs be reserved.
Law
25 Pursuant to Article 114(1) and (3) of the Rules of Procedure, where a party applies to the General Court for a decision on admissibility not going to the substance of the case, the remainder of the proceedings on the plea of admissibility is to be oral, unless the Court decides otherwise.
26 In the present case, the Court has sufficient information from the file and there is no need to hear the parties’ oral submissions.
27 As a preliminary point, the applicant submits in its application that it is a competent body with responsibility for the common agricultural policy and is an accredited paying agency to that end. It states that the Northern Ireland Assembly exercises regional legislative power in Northern Ireland and is therefore responsible for adopting laws on transferred matters in Northern Ireland and scrutinising the work of Ministers and Departments. It points out that the common agricultural policy, including responsibility for the single payment scheme in Northern Ireland, is a transferred matter.
28 The applicant also observes that the Court held, at paragraph 12 of Case C‑428/07 Horvath [2009] ECR I‑6355 that, according to both the legislation adopted in 1998 by the United Kingdom Parliament and a Devolution Memorandum of Understanding, which, in the form of a statement of political intent, complements the legislation, it is for the devolved administrations, within their respective powers, to implement European Union law obligations and those authorities cannot act or legislate in a way that would be incompatible with European Union law. Moreover, it points out that the Court added that the legislation on that transfer of powers conferred on United Kingdom Ministers reserve powers to intervene where necessary in order to ensure compliance with those obligations.
29 The applicant states, first, that the financing of devolved administrations is carried out principally by block grants from central government and, second, that European Union payments to fund United Kingdom agricultural expenditure are made to the United Kingdom central government, financial corrections being deducted from such payments. It points out that, prior to 2006, one of the central government departments funded agricultural expenditure within the territory of the devolved administrations and made financial provision to cover exclusions from European Union financing or disallowances, within the territory of a devolved administration.
30 The applicant adds that the United Kingdom Treasury decided in 2005 that European Union receipts were to be passed on to devolved administrations and that disallowances incurred by the devolved administrations were to be met by the relevant administration. European Union disallowances as well as receipts were thus to be passed on to the devolved administrations. Moreover, under transitional provisions, a fixed credit was made available with the Department for Environment, Food and Rural Affairs (Defra) which could be used by a devolved administration to set against European Union disallowances, which would otherwise be passed on to the devolved administration. Accordingly, the credit for Northern Ireland was GBP 11.2 million, which, according to Defra, could be used to set against disallowances in any claim year. In the event, the entire amount was called upon to defray approximately 73% of the cost of the 2006 disallowance for Northern Ireland. Thus, the applicant’s liability for the remaining 27% (namely EUR 5.02 million out of a total disallowance of EUR 18 600 258.71) has been recognised in its accounts.
31 According to the applicant, it would be consistent with the European Union’s respect for the national identity of the United Kingdom, including its regional self-government (Article 4(2) TEU) for the Court to find that its application is admissible. Such a finding would also accord with common sense, since the applicant, which bears the burden of disallowances under the constitutional system within which it operates, would be able to challenge such disallowances. The ability to bring such a challenge should not, therefore, be the prerogative of a central government with no obvious financial interest and no obvious incentive to do so.
32 First, it should be noted that there is no ground for concluding that the effect of the transfer of powers in agricultural matters from the central authorities of a Member State to the devolved administrations is, in the present case, that the action brought by the applicant, in its capacity as competent devolved administration, may be treated in the same way as an action brought by a Member State, thus rendering it admissible.
33 It is apparent from the case-file that, in the present case, the Northern Ireland Department of Agriculture and Rural Development is one of the paying agencies accredited by the United Kingdom under Article 6 of Regulation No 1290/2005 and that one of its tasks is to implement the common agricultural policy of the Northern Ireland Government.
34 As stated in Article 6(1) of Regulation No 1290/2005, paying agencies are the departments or bodies which, in respect of payments made by them and as regards communicating and keeping information, provide sufficient guarantees to ensure, in essence, that the eligibility of requests is checked before payment is authorised, accurate and exhaustive accounts are kept of the payments made, the checks provided for are made, the requisite documents are presented within the time-limits and that those documents are accessible and kept in a manner which ensures their completeness, validity and legibility. Moreover, Article 8(2) of that regulation provides that ‘[t]he accredited paying agencies shall keep supporting documents relating to payments made and documents relating to the performance of the administrative and physical checks required by [European Union] legislation, and shall make the documents and information available to the Commission’.
35 On the other hand, as regards the role played by the Member States in the shared management of certain European Union agricultural expenditure, under Article 9(1) of Regulation No 1290/2005 they are responsible, inter alia, for adopting measures necessary to ensure effective protection of the financial interests of the European Union. From that point of view, it is the Member States, not the paying agencies, which are required, under Article 31 of that regulation, to justify the regularity of the expenditure incurred and to request the opening of a conciliation procedure with the Commission.
36 Moreover, it should be noted that the Court has already held that an action by a local or regional entity cannot be treated in the same way as an action by a Member State, the term Member State within the meaning of Article 263 TFEU referring only to government authorities of the Member States. That term cannot include the governments of regions or other local authorities within Member States without undermining the institutional balance provided for by the Treaty (see Case C‑417/04 P Regione Siciliana v Commission [2006] ECR I‑3881, paragraph 21 and the case-law cited), irrespective of the powers they may have (order in Case C‑180/97 Regione Toscana v Commission [1997] ECR I‑5245, paragraph 6).
37 The Court added that, according to settled case-law, although it is for all the authorities of the Member States, whether it be the central authorities of the State or the authorities of a federated State, or other territorial authorities, to ensure observance of the rules of European Union law within the sphere of their competence, it is not for the European Union institutions to determine the division of competences by the institutional rules proper to each Member State or the obligations which may be imposed on the central authorities of the State and the other territorial authorities respectively (see order in Regione Toscana v Commission, paragraph 36 above, paragraph 7 and the case-law cited).
38 It follows from the considerations set out at paragraphs 36 and 37 above that it cannot be accepted that the action based on the applicant’s argument claiming that the European Union has an obligation of respect for the national identity of the United Kingdom, including its regional self-government, is admissible, since such an obligation does not in any way impinge on the Treaty provisions on judicial remedies. It follows that no incompatibility with Article 4(2) TEU can be established.
39 Second, it should, however, be noted that the fourth paragraph of Article 263 TFEU provides that a local or regional entity may, to the extent that it has legal personality under national law, institute proceedings against an act addressed to that entity or which is of direct and individual concern to it, and against a regulatory act which is of direct concern to it and does not entail implementing measures.
40 In those circumstances, since the contested decision was notified by the Commission to, inter alia, the United Kingdom, it is necessary to ascertain whether the applicant has standing to bring an action for annulment of that decision and, in particular, whether the decision is of direct and individual concern to the applicant.
41 To demonstrate that the contested decision is of direct concern to it, first, the applicant submits that it fully exhausted the credit which was available to it to cover disallowance in any claim year. Second, the requirement that the applicant finance the remaining EUR 5.2 million created a financial shortfall, which necessitated recognition of that liability in its accounts. The applicant also points out that, as is apparent from a letter of 15 February 2011 addressed to it by Defra, any disallowance which is applied in relation to the administration of the common agricultural policy in Northern Ireland must be funded by the applicant.
42 As regards the requirement that an applicant must be directly concerned, it is established case-law that, in order to satisfy the requirement that the decision forming the subject-matter of the proceedings must be of direct concern to a natural or legal person, as laid down in the fourth paragraph of Article 263 TFEU, two cumulative criteria must be met, namely, first, the contested European Union measure must directly affect the legal situation of the individual and, second, it must leave no discretion to its addressees, who are entrusted with the task of implementing it, such implementation being purely automatic and resulting from European Union rules without the application of other intermediate rules (see Joined Cases C‑445/07 P and C‑455/07 P Commission v Ente per le Ville Vesuviane and Ente per le Ville Vesuviane v Commission [2009] ECR I‑7993, paragraph 45 and the case-law cited).
43 Referring to Case 11/82 Piraiki-Patraiki and Others v Commission [1985] ECR 207 and Case C‑386/96 P Dreyfus v Commission [1998] ECR I‑2309, the Court of Justice stated that the same applies, by way of exception, where the possibility that addressees will not give effect to the measure concerned is purely theoretical and their intention to act in conformity with it is not in doubt (Commission v Ente per le Ville Vesuviane and Ente per le Ville Vesuviane v Commission, paragraph 42 above, paragraphs 46 and 58).
44 With regard to the first criterion, the General Court considered, in an action brought by the beneficiary of European Union aid similar to that referred to in the contested decision for annulment of a Commission decision refusing to recognise that aid as eligible expenditure under the EAGGF, that such a decision relates only to financial relations between the Commission and the Member State concerned (order in Case T‑244/00 Coillte Teoranta v Commission [2001] ECR II‑1275, paragraph 41).
45 The Court finds that the same applies in the present case.
46 It should be noted that the contested decision is specifically based, having regard to the date on which the expenditure was committed, on Article 7(4) of Regulation No 1258/1999 and Article 31 of Regulation No 1290/2005, entitled ‘Conformity clearance’, and it is solely in the context of the relations between the Commission and the Member States that operations are conducted to check that the Member States comply with the relevant legislation. It is apparent from those provisions in particular that the results of the checks are notified to the Member Sates alone and that the conciliation procedure is provided to enable mediation between the respective positions of the Commission and the Member States.
47 It is indeed correct that Article 1 of the contested decision states that ‘[t]he expenditure itemised in the Annex hereto that has been incurred by the Member States’ accredited paying agencies and declared under the EAGGF Guarantee Section, under the EAGF or under the EAFRD shall be excluded from European Union financing because it does not comply with European Union rules’.
48 However, the only consequence of the Commission’s reference in the contested decision to the paying agencies is that that expenditure is to be excluded from European Union financing. On the other hand, the Commission does not attach to that reference any binding legal consequences vis‑à‑vis the applicant (see, to that effect, the order in Coillte Teoranta v Commission, paragraph 44 above, paragraph 46).
49 Moreover, the fact that, as a result of the contested decision, the amounts claimed automatically constitute a liability for the national budget of the Member State concerned cannot have any direct impact on the applicant because the European Union legislation applicable does not give rise to any obligation as regards the applicant’s legal situation.
50 As the Commission correctly stated and the applicant accepted in its pleadings, under the first subparagraph of Article 11(4) of Regulation No 885/2006, the financial correction is applied, as regards the EAGF, by deducting the amount in question from the amount claimed in a Member States’ application for reimbursement of any other expenditure effected by it in the second month following the conformity clearance decision. Moreover, with regard to EAFRD, the second subparagraph of Article 11(4) of that regulation provides that deductions from European Union financing are to be made by the Commission from the following intermediate payment or the final payment. Thus, all applications for reimbursement of expenditure incurred by a Member State are considered as a whole, without any account being taken of the paying agency which incurred the expenditure. It is only the State’s budget that is affected by the Commission’s decision not to allow certain expenditure.
51 It follows that the decision to refuse financing directly affects the national budget of the Member State concerned.
52 It is indeed true that that decision has consequences for the applicant’s budget, since, as a result of the contested decision, its budget is reduced by the amount of expenditure it incurred which the Commission refused to finance. However, those consequences are not the result of European Union legislation or the contested decision but of the decision of the United Kingdom alone.
53 It follows from the foregoing that, in the light of the case-law cited at paragraph 42 above, the first criterion, according to which the contested European Union measure must directly affect the legal situation of the individual, is not satisfied in the present case.
54 As regards the second criterion, it should be noted, as Advocate General Kokott observed at point 54 of her Opinion in Commission v Ente per le Ville Vesuviane and Ente per le Ville Vesuviane v Commission, paragraph 42 above, as follows:
‘There is no direct concern where the autonomous will of the addressee interposes itself between the [European Union] decision and its effects on the applicant. Where the decision of the addressee is not legally required either by [European Union] law or the specific Commission decision, but is based on an autonomous decision of the Member State, there is no direct connection between the Commission decision and the applicant.’
55 It does not follow either from the contested decision or from European Union law in general that the United Kingdom Government was obliged to place the financial burden on the budget of the Northern Ireland Department of Agriculture and Rural Development for the expenditure referred to in the contested decision which the Commission refused to finance.
56 Unlike the practice generally adopted by the Commission with regard to State aid declared incompatible with the common market whereby the Commission decisions contain provisions calling upon the Member States to recover the sums wrongly paid from the beneficiaries, the contested decision did not place the Member State concerned under any obligation to recover the sums in question from the ultimate beneficiary (see, to that effect, the order in Coillte Teoranta v Commission, paragraph 44 above, paragraph 45, and Commission v Ente per le Ville Vesuviane and Ente per le Ville Vesuviane v Commission, paragraph 42 above, paragraph 61). The outcome cannot be any different where a decision does not place the Member State concerned under an obligation to set those sums against the applicant’s budget.
57 Under European Union law, the United Kingdom was specifically not required to place the financial burden on the budget of the Northern Ireland Department of Agriculture and Rural Development for the expenditure which the Commission refused to finance due to inadequate checks, since the contested decision simply deducted the sum in question by way of set off against the sums due to the United Kingdom, the manner in which that sum is allocated at national level being a matter for the national authorities alone, without any intervention or claim on the part of the Commission.
58 The considerations set out above are not invalidated by the applicant’s argument that it is automatically responsible for bearing the costs of reimbursement under the constitutional rules adopted in 1998 by which the Untied Kingdom enacted legislation providing for the devolution of powers in certain matters to Scotland, Wales and Northern Ireland, in particular in the matter of the common agricultural policy in general, as observed by the Court of Justice in Horvath, paragraph 28 above (paragraphs 12 to 15).
59 It should be noted in that regard that the Court of Justice has already held that a distinction such as that in the present case, drawn from domestic law, cannot have any effect on whether the appellant is directly concerned (see, to that effect, Case C‑15/06 P Regione Siciliana v Commission [2007] ECR I‑2591, paragraph 35).
60 Lastly, the case-law laid down in Piraiki-Patraiki and Others v Commission and Dreyfus v Commission, paragraph 43 above, which is cited by the applicant and in which the Court of Justice, in rejecting the plea of inadmissibility raised by the Commission in those cases, based its reasoning on the fact that the option available to the addressee of a Commission decision not to implement it was purely theoretical, since there was no doubt as to whether it would be implemented, was developed by way of exception, as the Court itself stated at paragraph 58 of Commission v Ente per le Ville Vesuviane and Ente per le Ville Vesuviane v Commission, paragraph 42 above.
61 The case giving rise to the judgment in Piraiki-Patraiki and Others v Commission, paragraph 43 above, entailed a situation in which the Commission, following a request addressed to it by a Member State, adopted a decision authorising that State to limit imports of products from Greece. That Member State therefore adopted, in accordance with the Commission’s decision, a decision to that effect. The Court of Justice held that the companies which, before the Commission decision, had signed contracts for the delivery of the products in question could bring proceedings before the European Union courts against the Commission decision authorising the limitation on the importation of those goods. Since that decision was adopted in response to a request by the Member State concerned, it was, according to the Court, a purely theoretical possibility that that Member State might not make use of the authorisation which it had obtained from the Commission.
62 In the case which gave rise to the judgment in Dreyfus v Commission, paragraph 43 above, the Commission had informed a company forming part of the Russian Federation (‘the State-owned company’) that it could negotiate wheat purchases and the State-owned company proceeded to do so, concluding contracts with the company Dreyfus. The Commission essentially approved those contracts. On account of delays in setting up documentary credit, the delivery period had to be deferred. As wheat prices had risen considerably in the meantime, the State-owned company and Dreyfus agreed on a higher price. However, the Commission, which was to finance the transaction, refused to provide Community financing for those deliveries on the ground that the conditions which had previously been agreed between it and the State-owned company had not been complied with, notwithstanding the fact that the wheat deliveries had taken place. The Court of Justice considered that the refusal to provide Community financing made it unlikely that the State-owned company would comply with its contractual obligations to its private-law partner, precisely because it no longer enjoyed the benefit of that financing, and held that the action brought against the decision to refuse financing adopted by the Commission was admissible.
63 As observed by Advocate General Kokott at point 63 of her Opinion in Commission v Ente per le Ville Vesuviane and Ente per le Ville Vesuviane v Commission, paragraph 54 above, in both cases which gave rise to that judgment, the assessment of the actual facts led the Court to regard as appropriate narrowly defined exceptions to the principle that a third party is not directly concerned by a Commission decision where the addressee of the decision retains a discretion.
64 However, that case-law is not applicable to the present case, since the contested decision is not a response to a request from the Member State concerned to that effect and does not have a very specific factual context, such as that, in particular, in the case which gave rise to the judgment in Dreyfus v Commission, paragraph 43 above.
65 It must therefore be concluded that the applicant does not satisfy one of the conditions for admissibility laid down in Article 263 TFEU, namely the condition that it be directly affected, so that it is unnecessary to consider whether it is individually concerned by the contested decision or whether that decision is a regulatory act within the meaning of the fourth paragraph of Article 263 TFEU.
66 It follows from the foregoing considerations that the present action must be dismissed as inadmissible.
Costs
67 Under Article 87(2) 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 applicant has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the Commission.
On those grounds,
THE GENERAL COURT (Eighth Chamber)
hereby orders:
1. The action is dismissed as inadmissible.
2. The Northern Ireland Department of Agriculture and Rural Development shall pay the costs.
Luxembourg, 6 March 2012.