Case T‑365/13

(publication by extracts)

Republic of Lithuania

v

European Commission

(EAGGF — Guarantee Section — EAGF and EAFRD — Expenditure excluded from financing — Rural development measures — ‘Natural handicaps’ and agri-environment — Appropriateness of controls — Flat-rate financial corrections — Proportionality)

Summary — Judgment of the General Court (Seventh Chamber), 26 February 2015

Agriculture — Common agricultural policy — EAGGF and EAFRD financing — Clearance of accounts — Disallowance of expenses arising from irregularities in applying EU rules — Flat-rate correction of 5% for insufficient checks by a Member State that environmental measures connected with the criterion relating to the use of fertilisers complied with — Demonstration, by that Member State, that no significant risk for the EU budget thereby created — Breach of principle of proportionality — Annulment of the financial correction

(Council Regulation No 1290/2005, Art. 31(2); Commission Decision 2013/214)

According to Article 31(2) of Regulation No 1290/2005 on the financing of the common agricultural policy, the Commission is to assess the amounts to be excluded from Community financing, by taking account, first, of the nature and gravity of the infringement and, secondly, of the financial damage caused to the European Union.

Therefore, Implementing Decision 2013/214 imposing a financial correction of 5% in relation to agro-environmental measures connected with the criterion relating to the use of fertilisers, based on the Commission’s finding that the visual controls carried out were insufficient, where the Member State concerned has shown to the requisite legal standard that, in practice, the lack of cross-checks in conformity with EU legislation has created only a minor financial risk for the EU budget, must be annulled. That risk does not warrant the application of a financial correction of 5% with respect to the measures concerned, which is provided for solely when the risk of loss to the EU budget is significant. Therefore, the imposition of a financial correction of 5% in such circumstances is contrary to Article 31(2) of Regulation No 1290/2005 and to the principle of proportionality.

(see paras 110, 118, 119, 121)