JUDGMENT OF THE GENERAL COURT (Tenth Chamber)
31 January 2024 (*)
(EAGF and EAFRD – Expenditure excluded from financing – Conformity clearance procedure – Action for annulment – Agreement on the withdrawal of the United Kingdom from the European Union and from Euratom – Representation by a lawyer authorised to practise before a court of a Member State or of another State which is a party to the EEA Agreement – Locus standi – Admissibility – Active farmer – Concept of ‘group of natural or legal persons’)
In Case T‑56/22,
United Kingdom of Great Britain and Northern Ireland, represented by S. Fuller, acting as Agent, and by T. Buley, KC,
applicant,
supported by
Czech Republic, represented by M. Smolek, J. Vláčil, O. Serdula and J. Očková, acting as Agents,
intervener,
v
European Commission, represented by H. Krämer, J. Aquilina and A. Becker, acting as Agents,
defendant,
THE GENERAL COURT (Tenth Chamber),
composed of O. Porchia, President, M. Jaeger (Rapporteur) and P. Nihoul, Judges,
Registrar: A. Marghelis, Administrator,
having regard to the written part of the procedure,
further to the hearing on 13 September 2023,
gives the following
Judgment
1 By its action under Article 263 TFEU, the United Kingdom of Great Britain and Northern Ireland seeks the partial annulment of Commission Implementing Decision (EU) 2021/2020 of 17 November 2021 excluding from European Union financing certain expenditure incurred by the Member States under the European Agricultural Guarantee Fund (EAGF) and under the European Agricultural Fund for Rural Development (EAFRD) (OJ 2021 L 413, p. 10; ‘the contested decision’), in so far as it concerns expenditure that the United Kingdom incurred in 2017 in the amount of EUR 2 686 358.72.
Background to the dispute
2 The European Commission opened inquiry NAC/2018/002/GB RLF against the United Kingdom to determine whether the aid granted by the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD) to farmers had been checked in accordance with EU legislation in respect of the years 2015 to 2019 (‘the inquiry’), on the basis of Article 52 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, and corrigendum OJ 2016, L 130, p. 13) and of Article 34 of Commission Implementing Regulation (EU) No 908/2014 of 6 August 2014 laying down rules for the application of Regulation (EU) No 1306/2013 with regard to paying agencies and other bodies, financial management, clearance of accounts, rules on checks, securities and transparency (OJ 2014 L 255, p. 59).
3 From 5 to 9 March 2018, as part of the inquiry, the Commission carried out an on-the-spot check in the United Kingdom.
4 By letter of 14 June 2018, the Commission notified the UK authorities of the results of its checks, in accordance with Article 34(2) of Implementing Regulation No 908/2014. In that letter, the Commission noted that the control system implemented by the United Kingdom to verify the granting of aid under the common agricultural policy by the EAGF and the EAFRD was not in accordance with EU legislation. In addition, it asked the United Kingdom authorities to provide a detailed description of the corrective measures put in place.
5 On 14 March 2019, a bilateral meeting took place between the Commission and the United Kingdom.
6 On 26 April 2019, the Commission sent the United Kingdom the minutes of the bilateral meeting and requested further information from it concerning, inter alia, the application by the UK authorities of Article 9(2) 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 common agricultural policy and repealing Council Regulation (EC) No 637/2008 and Council Regulation (EC) No 73/2009 (OJ 2013 L 347, p. 608).
7 On 30 January 2020, the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (OJ 2020 L 29, p. 7; ‘the Withdrawal Agreement’) was ratified by the European Union.
8 In accordance with the Withdrawal Agreement, on 31 January 2020, the United Kingdom left the European Union and entered a transition period ending on 31 December 2020 (‘the transition period’).
9 By letter of 22 December 2020, the Commission communicated the final conclusions of the inquiry to the United Kingdom under Article 34(4) of Regulation No 908/2014.
10 By letter of 18 May 2021, the Commission sent a summary report to the United Kingdom. In that report, it claimed, inter alia, that the United Kingdom had infringed Article 9(2) of Regulation No 1307/2013 in 2017 by failing to take into account related companies when checking the active farmer status of the aid applicant under the EAGF and the EAFRD (‘the infringement concerning active farmer status’) and therefore proposed to apply a financial correction in the amount of EUR 2 686 358.72.
11 On 17 November 2021, the Commission adopted the contested decision. In particular, with regard to the United Kingdom and its expenditure under the EAGF and the EAFRD, the Commission noted the infringement concerning active farmer status for 2017 and decided to impose a financial correction of EUR 2 686 358.72 on the United Kingdom.
Forms of order sought
12 The United Kingdom, supported by the Czech Republic, claims that the Court should:
– annul the contested decision in so far as it relates to the financial correction of EUR 2 686 358.72 applied to the expenditure incurred by the United Kingdom under the EAGF and the EAFRD in 2017, in relation to the infringement concerning active farmer status;
– order the Commission to pay the costs.
13 The Commission contends that the Court should:
– dismiss the action;
– order the United Kingdom to pay the costs.
Law
Admissibility
14 Without formally raising an objection of inadmissibility, the Commission challenges the admissibility of the action. It submits that the action was brought by the United Kingdom after the end of the transition period, when it could no longer be regarded as being a Member State. Therefore, according to the Commission, in accordance with the third and fourth paragraphs of Article 19 of the Statute of the Court of Justice of the European Union, which, pursuant to the first paragraph of Article 53 of that Statute, also applies to the procedures before the General Court, the United Kingdom should have been represented by a lawyer authorised to practise before a court of a Member State or of another State which is a party to the Agreement on the European Economic Area (EEA). The Commission asserts that, in the present case, the United Kingdom is represented by an agent of its government, assisted by a lawyer authorised to practise before the courts of the United Kingdom only.
15 In this respect, in the first place, the Commission submits that the contested decision was adopted on the basis of Article 52 of Regulation No 1306/2013 and Articles 131 and 138 of the Withdrawal Agreement.
16 According to the Commission, it follows that the conformity clearance procedure that gave rise to the contested decision differs, in terms of its purpose and its implementation, from the administrative procedures initiated before the end of the transition period concerning compliance by the United Kingdom with EU law, provided for in Article 92(1)(a), in Title X of Part Three, entitled ‘Separation Provisions’, of the Withdrawal Agreement, governing judicial and administrative procedures (‘administrative procedures concerning EU law’).
17 First, as regards its purpose, the Commission asserts that the conformity clearance procedure that gave rise to the contested decision is designed to ensure proper use by the Member States of EU funds and the fair division, between the European Union and the Member States, of financial burdens relating to agricultural policy, whereas the purpose of the administrative procedures concerning EU law is to ensure that the United Kingdom complies with EU law.
18 Second, as regards its implementation, the Commission maintains that the conformity clearance procedure that gave rise to the contested decision does not need to be officially registered with the competent institution, whereas administrative procedures concerning EU law are considered to have been initiated at the time when they were formally registered with the competent institution.
19 According to the Commission, since the conformity clearance procedure that gave rise to the contested decision does not come within the scope of administrative procedures concerning EU law, it infers that, in the present case, the United Kingdom cannot rely on Article 91(2) of the Withdrawal Agreement. That provision, which provides for the United Kingdom’s right to be represented or assisted before the Court of Justice of the European Union by a lawyer authorised to practise in the United Kingdom, applies only in cases relating to administrative procedures concerning EU law.
20 In addition to the question of the admissibility of the action regarding lack of representation by a lawyer authorised to practise before a court of a Member State or of another State which is a party to the Agreement on the EEA, the Commission challenges the legal basis of the United Kingdom’s standing to bring proceedings. More specifically, although the Commission acknowledges that the United Kingdom has standing to bring proceedings in the present case, it is of the view that that standing is not based on Article 90(2)(c) of the Withdrawal Agreement. It argues that that provision applies only where the United Kingdom intervenes or participates in preliminary ruling proceedings relating to administrative procedures concerning EU law, which is not the case here.
21 It follows, for the Commission, that the only provision that can grant the United Kingdom standing to bring proceedings in the present case is the fourth paragraph of Article 263 TFEU, which gives the addressees of an act the possibility of challenging its legality by means of an action brought before the Court of Justice of the European Union.
22 The United Kingdom, supported by the Czech Republic, disputes the Commission’s arguments.
Representation of the United Kingdom
23 In the light of the Commission’s arguments, it is necessary to ascertain whether the conformity clearance procedure that gave rise to the contested decision falls within the scope of the administrative procedures concerning EU law covered by the Withdrawal Agreement.
24 As a preliminary point, it should be noted that, according to Article 2 of the Withdrawal Agreement, ‘Union law’ means, inter alia, the EU Treaty, the FEU Treaty and the Treaty establishing the EAEC, as amended or supplemented, as well as the Accession Treaties, the Charter of Fundamental Rights of the European Union, the general principles of EU law and the acts adopted by the institutions, bodies, offices or agencies of the European Union.
25 In addition, it should be noted that, under Article 4 of the Withdrawal Agreement, the provisions of that agreement and the provisions of EU law made applicable by that agreement are to produce, in respect of and in the United Kingdom, the same legal effects as those which they produce within the European Union and its Member States.
26 Article 92 of the Withdrawal Agreement, relating to administrative procedures, provides as follows:
‘1. The institutions, bodies, offices and agencies of the Union shall continue to be competent for administrative procedures which were initiated before the end of the transition period concerning:
(a) compliance with Union law by the United Kingdom, or by natural or legal persons residing or established in the United Kingdom; or
(b) compliance with Union law relating to competition in the United Kingdom.
2. Without prejudice to paragraph 3, for the purposes of this Chapter an administrative procedure shall be considered as having been initiated at the moment at which it has been formally registered with the Union institution, body, office or agency …’
27 Article 91(2) and (3) of the Withdrawal Agreement provides as follows:
‘2. Without prejudice to Article 88, lawyers authorised to practice before the courts or tribunals of the United Kingdom may represent or assist a party before the Court of Justice of the European Union in the cases referred to in Article 87 and Article 95(3) …
3. When representing or assisting a party before the Court of Justice of the European Union in the cases referred to in paragraphs 1 and 2, lawyers authorised to practise before the courts or tribunals of the United Kingdom shall in every respect be treated as lawyers authorised to practise before courts or tribunals of Member States representing or assisting a party before the Court of Justice of the European Union.’
28 Article 95 of the Withdrawal Agreement provides as follows:
‘1. Decisions adopted by institutions, bodies, offices and agencies of the Union before the end of the transition period, or adopted in the procedures referred to in Articles 92 and 93 after the end of the transition period, and addressed to the United Kingdom or to natural and legal persons residing or established in the United Kingdom, shall be binding on and in the United Kingdom.
…
3. The legality of a decision referred to in paragraph 1 of this Article shall be reviewed exclusively by the Court of Justice of the European Union in accordance with Article 263 TFEU …’
29 It follows from those provisions that the conformity clearance procedure that gave rise to the contested decision has the same characteristics as administrative procedures concerning EU law.
30 Indeed, under Article 92(1)(a) of the Withdrawal Agreement, its purpose is to ensure compliance with EU law by the United Kingdom.
31 In that regard, it should be noted that, as is apparent from Article 52(1) of Regulation No 1306/2013, the objective of the conformity clearance procedure is to verify whether the expenditure incurred by a Member State under the common agricultural policy has been incurred in conformity with EU law. That provision reads as follows:
‘Where it finds that expenditure falling within the scope of Article 4(1) and Article 5 has not been effected in conformity with Union law and, in respect of the EAFRD, has not been effected in conformity with the applicable Union and national law referred to in Article 85 of Regulation (EU) No 1303/2013, the Commission shall adopt implementing acts determining the amounts to be excluded from Union financing …’
32 Thus, in the present case, in so far as the Commission considered that certain expenditure incurred by the United Kingdom had been incurred in breach of EU law, it decided, in the contested decision, to exclude it from the EU budget.
33 It follows that, contrary to the Commission’s contention (see paragraph 17 above), the purpose of the conformity clearance procedure is not only to ensure proper use by the Member States of EU funds and the fair division, between the European Union and the Member States, of financial burdens relating to the common agricultural policy, but also to confirm more generally that the Member States comply with EU law under the common agricultural policy and to empower the Commission to adopt, in the context of the conformity clearance procedure, the measures necessary to assess expenditure and, where appropriate, exclude that expenditure from EU financing.
34 Consequently, it must be held that the conformity clearance procedure that gave rise to the contested decision pursues the same objective, relating to compliance by the United Kingdom with EU law, as the administrative procedures concerning EU law provided for in Article 92 of the Withdrawal Agreement.
35 In the second place, it should be noted that, in accordance with Article 92(1) of the Withdrawal Agreement, in order to be capable of being classified as an administrative procedure concerning EU law, an administrative procedure must have been initiated before the end of the transition period. In that regard, Article 92(2) of the Withdrawal Agreement provides that an administrative procedure is considered to have been initiated where it has been formally registered with the competent institution and Article 92(3) of that agreement specifies, for various procedures, when that time is deemed to have taken place.
36 It is true that Article 92(2) and (3) of the Withdrawal Agreement does not define the concept of ‘registration’ of an administrative procedure. However, as was confirmed by the parties at the hearing, the purpose of that provision is to establish a definite date from which it may be inferred that the administrative procedure at issue was indeed initiated by the competent authority before the end of the transition period by means of the implementation of a formal measure, whether that is, as the case may be, registration, the allocation of a file number, a notification, the expiry of a period or a communication.
37 According to settled case-law, the date on which the conformity clearance procedure was formally initiated is the date on which the Commission sent its findings to the Member State concerned, in accordance with Article 34(2) of Implementing Regulation No 908/2014. In that document, the Commission identifies, with sufficient precision, all the irregularities which it alleges against the Member State, specifies the corrective measures which it considers necessary and indicates the provisional level of financial correction that it considers appropriate (see, to that effect, judgment of 8 March 2023, Bulgaria v Commission, T‑235/21, under appeal, EU:T:2023:105, paragraphs 36 to 38).
38 In the present case, it is common ground that the conformity clearance procedure was initiated on 14 June 2018 by the sending of the letter referred to in paragraph 4 above. It is therefore an established date, prior to the end of the transition period, namely 31 December 2020.
39 Thus, it must be held that, in the present case, the conformity clearance procedure that gave rise to the contested decision falls within the scope of administrative procedures concerning EU law.
40 Contrary to the Commission’s assertion, the provisions on which the contested decision is based, namely Article 52 of Regulation No 1306/2013 and Articles 131 and 138 of the Withdrawal Agreement, cannot call that finding into question.
41 First, the reference to Article 52 of Regulation No 1306/2013, the wording of which is set out in paragraph 31 above, makes it possible to classify the procedure that gave rise to the contested decision as a conformity clearance procedure and thus to subject it to all the provisions of EU law governing that type of procedure. That reference is, however, irrelevant when determining whether the procedure that gave rise to the contested decision falls within the scope of administrative procedures concerning EU law under the Withdrawal Agreement.
42 Second, the wording of the first paragraph of Article 131 of the Withdrawal Agreement is as follows:
‘During the transition period, the institutions, bodies, offices and agencies of the Union shall have the powers conferred upon them by Union law in relation to the United Kingdom and to natural and legal persons residing or established in the United Kingdom. In particular, the Court of Justice of the European Union shall have jurisdiction as provided for in the Treaties.’
43 It follows from that provision that the reference to Article 131 of the Withdrawal Agreement is irrelevant, in so far as that provision establishes the powers of the Commission and of the Court of Justice of the European Union during the transition period and does not concern the period subsequent to that period, which is at issue in the present case. The contested decision was adopted by the Commission on 17 November 2021, that is to say, after the end of the transition period on 31 December 2020.
44 Third, the wording of the first paragraph of Article 138 of the Withdrawal Agreement is as follows:
‘In respect of the implementation of the Union programmes and activities committed under the [multiannual financial framework] 2014-2020 or previous financial perspectives, applicable Union law, including the rules on financial corrections and on clearance of accounts, shall continue to apply to the United Kingdom after 31 December 2020 until the closure of those Union programmes and activities.’
45 It follows that the rules on conformity clearance procedures under the multiannual financial framework 2014-2020 continue to apply to the United Kingdom until the ongoing procedures are concluded. There is nothing to suggest that Article 138(1) of the Withdrawal Agreement applies to the exclusion of the rules governing administrative procedures concerning EU law.
46 Fourth, it should be noted that Articles 92 and 95 of the Withdrawal Agreement appear in Title X of Part Three, entitled ‘Separation Provisions’, which governs judicial and administrative proceedings, whereas Article 138 is included in Part Five of the agreement relating to financial provisions. Accordingly, those provisions have a scope that could be interpreted as complementary:
– Article 92 and Article 95(1) and (3) of the Withdrawal Agreement set out in general terms the rules to be followed after the end of the transition period for the management of administrative procedures concerning EU law;
– Article 138 of the Withdrawal Agreement concerns only the implementation, until their closure, of the EU programmes and activities committed under the multiannual financial framework 2014-2020.
47 Consequently, in so far as, first, Article 92 and Article 95(1) and (3) of the Withdrawal Agreement and, second, Article 138 of that agreement may be regarded as being complementary in nature, the fact that the contested decision is based on Article 138 does not preclude, more generally, it from also falling within the scope of Article 92 and Article 95(1) and (3) of that agreement.
48 In the light of the foregoing, it must be held that the present action cannot be declared inadmissible on the ground that the United Kingdom is represented by lawyers who are not authorised to practise before the courts of a Member State.
The United Kingdom’s standing to bring proceedings
49 Although the Commission does not dispute that the United Kingdom has standing in the present case, it submits that the United Kingdom cannot rely on point (c) of the second paragraph of Article 90 of the Withdrawal Agreement in order to establish such standing. That provision applies only in the context of preliminary ruling proceedings brought before the Court in relation to administrative procedures concerning EU law. Consequently, according to the Commission, the United Kingdom’s standing to bring proceedings derives solely from the fourth paragraph of Article 263 TFEU.
50 The United Kingdom, supported by the Czech Republic, disputes the Commission’s arguments.
51 As a preliminary point, it should be borne in mind that, according to settled case-law, the conditions of admissibility of actions, which include the condition that the applicant must have standing to bring an action, raise an absolute bar to proceedings which the General Court may and must raise of its own motion where appropriate, in accordance with Article 129 of its rules of procedure (see, to that effect, judgment of 23 April 2009, Sahlstedt and Others v Commission, C‑362/06 P, EU:C:2009:243, paragraph 22 and the case-law cited).
52 Furthermore, the choice of the legal basis of the United Kingdom’s standing to bring proceedings is not without consequence, since point (c) of the second paragraph of Article 90 of the Withdrawal Agreement confers that status on the United Kingdom, in cases relating to procedures concerning EU law, under the same conditions as a Member State, whereas the fourth paragraph of Article 263 TFEU confers that status on that Member State as a third State.
53 The wording of the first paragraph of Article 90 of the Withdrawal Agreement is as follows:
‘The United Kingdom may also intervene or participate in the procedure before the Court of Justice of the European Union in the same way as a Member State:
…
(c) in relation to the cases referred to in Article 95(3).’
54 It should be recalled that, in accordance with Article 95(3) of the Withdrawal Agreement, read in conjunction with Article 95(1) of that agreement, the Court of Justice of the European Union has exclusive jurisdiction to rule on the legality of decisions adopted by the EU institutions after the end of the transition period in the context of administrative procedures concerning EU law addressed to the United Kingdom and binding on it.
55 It follows that, contrary to what the Commission maintains, point (c) of the second paragraph of Article 90 of the Withdrawal Agreement, read in conjunction with Article 95(3) of that agreement, gives the United Kingdom the right to intervene or to participate in the proceedings before the Court of Justice of the European Union in the same way as a Member State in all cases concerning the legality of the decisions concerning the United Kingdom referred to in paragraph 53 above, without any distinction being made as to the type of the case at issue.
56 In those circumstances, in so far as the conformity clearance procedure that gave rise to the contested decision, in the present case, comes within the scope of administrative procedures concerning EU law, it must be held that the United Kingdom has standing to bring proceedings on the basis of point (c) of the second paragraph of Article 90 of the Withdrawal Agreement.
Substance
57 The United Kingdom, supported by the Czech Republic, contests, by a single plea in law, the infringement concerning active farmer status.
58 In this respect, it submits that the expression ‘groups of natural or legal persons’ in Article 9(2) of Regulation No 1307/2013 refers only to groups of natural or legal persons, to the exclusion of related companies. According to the United Kingdom, that means that it is only in relation to a group as a whole that it is necessary to confirm the existence of the conditions referred to in that provision enabling the aid applicant to obtain active farmer status.
59 The Commission disputes that single plea in law.
60 At the outset, it must be pointed out that the first subparagraph of Article 9(2) of Regulation No 1307/2013 establishes a simple presumption that applicants, be they natural persons, legal persons or groups of natural or legal persons, who operate airports, railway services, waterworks, real estate services or permanent sport and recreational grounds (‘the list of exclusions’) are not, unless there is evidence to the contrary, authorised to receive aid under the common agricultural policy because they are not regarded as active farmers (‘the simple presumption’). However, under the third subparagraph of Article 9(2) of Regulation No 1307/2013, those same persons or groups may rebut the simple presumption if they provide verifiable evidence, in the form that is required by Member States, which demonstrates that any of the following three conditions have been met:
(a) that the annual amount of direct payments is at least 5% of the total receipts that they obtained from non-agricultural activities in the most recent fiscal year for which such evidence is available;
(b) that their agricultural activities are not insignificant;
(c) that their principal business or company objects consist of exercising an agricultural activity.
61 It should also be noted that the concept of ‘groups of natural or legal persons’ within the meaning of Article 9(2) of Regulation No 1307/2013 is not defined either by Regulation No 1307/2013 or by Commission Delegated Regulation (EU) No 639/2014 of 11 March 2014, supplementing Regulation No 1307/2013 and amending Annex X to that Regulation (OJ 2014 L 181, p. 1), which lays down the criteria for the implementation of Article 9 of Regulation No 1307/2013.
62 As regards related companies, it should be noted that no reference to, still less any definition of, that concept is to be found in Regulation No 1307/2013, Delegated Regulation No 639/2014 or Commission Guidance Document DSCG/2014/29 of 15 April 2014, which lays down criteria for the interpretation of Article 9 of Regulation No 1307/2013.
63 In a presentation to the Member States delivered on 27 October 2015 for the purpose of assessing active farmer status, the Commission stated that Article 9(2) of Regulation No 1307/2013 was to be interpreted as meaning that the activities on the list of exclusions could be carried out by natural or legal persons, by groups thereof, directly or through a related company.
64 In addition, in a letter sent to the German Ministry of Food and Agriculture on 29 January 2016, subsequently made available to the other Member States, and in a letter sent to the United Kingdom Department for Environment, Food and Rural Affairs on 14 July 2017, the Commission stated that, for the purposes of the application of Article 9(2) of Regulation No 1307/2013, ‘related company’ meant any entity directly or indirectly related to the aid applicant through a relationship of control taking the form of whole or majority ownership.
65 It is in that context that it is necessary to examine the three complaints raised by the United Kingdom in its single plea in law and the argument put forward by the Czech Republic relating to infringement of the principle of legal certainty.
The first complaint of the single plea in law, relating to the wording of Article 9(2) of Regulation No 1307/2013
66 In its first complaint, the United Kingdom raises, in essence, three arguments.
– The first argument, to the effect that it is not apparent from the wording of Article 9(2) of Regulation No 1307/2013 that companies related to the aid applicant must be taken into account when a Member State checks the eligibility conditions for active farmer status
67 By its first argument, the United Kingdom, supported by the Czech Republic, submits that it is not apparent from the wording of Article 9(2) of Regulation No 1307/2013 that companies related to the aid applicant must be taken into account when a Member State checks the eligibility conditions for active farmer status. There is no reference to related companies in that provision. According to the United Kingdom, Article 9(2) of Regulation No 1307/2013 merely provides that no direct payments are to be granted to natural persons, legal persons or groups of natural or legal persons who themselves undertake any activity on the list of exclusions.
68 The Commission disputes the merits of that argument.
69 First, it may be observed that the term ‘related companies’ does not appear in the text of Article 9(2) of Regulation No 1307/2013, which refers to ‘natural or legal persons and groups of natural or legal persons’.
70 Second, it should be noted that, by its very nature, a ‘group’ designates a group of entities related to each other within the same organisation. Thus, the term ‘group’ must be interpreted as being similar to the term ‘grouping’ and as referring to any association of natural or legal persons related to each other within a more or less structured single organisation. It follows that a group of natural or legal persons includes related companies.
71 In those circumstances, it must be held that it follows from the wording of Article 9(2) of Regulation No 1307/2013 that the aid applicant, which may be a group of natural or legal persons, may carry out the activities on the list of exclusions directly or through a related company forming part of the same group applying for aid. Similarly, if the aid applicant is not a group but a natural or legal person forming part of a group, it may carry out the activities on the list of exclusions either directly or through a related company forming part of the same group.
72 Accordingly, the first argument must be dismissed.
– The second argument, to the effect that the taking into account of related companies when determining the status of active farmer of the aid applicant renders irrelevant the reference to the conditions laid down in the third subparagraph of Article 9(2) of Regulation No 1307/2013 allowing an applicant to rebut the simple presumption
73 By its second argument, the United Kingdom submits that the conditions laid down in the third subparagraph of Article 9(2) of Regulation No 1307/2013 are intended to enable a farmer carrying out one of the activities on the exclusion list to rebut the simple presumption and to demonstrate that his or her agricultural activity is not marginal. According to the United Kingdom, the reference to those conditions would be irrelevant if farmers whose main activity is farming were to be excluded from active farmer status simply because they form part of a group one of whose members carries out an activity on the list of exclusions.
74 The Commission disputes that argument.
75 In that regard, it must be borne in mind that the third subparagraph of Article 9(2) of Regulation No 1307/2013, the content of which is set out in paragraph 60 above, gives natural persons, legal persons and groups of natural or legal persons who carry out one of the activities on the list of exclusions the possibility of rebutting the simple presumption by demonstrating that they fulfil one of the conditions laid down in that provision allowing them to obtain the status of active farmer.
76 It follows that, contrary to what the United Kingdom maintains, the fact that the aid applicant carries out one of the activities on the exclusion list, not directly but through a related company which is part of the same group, does not render irrelevant the reference to the conditions laid down in the third subparagraph of Article 9(2) of Regulation No 1307/2013. In that situation, the applicant may obtain active farmer status by demonstrating that, at the level of the group of which he or she is a member, he or she fulfils one of the conditions enabling him or her to rebut the simple presumption.
77 The present argument must therefore be rejected.
– The third argument, to the effect that the taking into account of related companies when determining the status of active farmer of the aid applicant renders meaningless the reference to groups of legal persons provided for in Article 9(2) of Regulation No 1307/2013
78 By its third argument, the United Kingdom submits that the Commission’s interpretation that the activities on the list of exclusions may be carried out by the aid applicant directly or through related companies renders meaningless the reference to groups of natural persons in Article 9(2) of Regulation No 1307/2013, in so far as, by definition, a natural person cannot be associated with another natural person.
79 The Commission disputes that argument.
80 First, it should be noted that the wording of Article 9(2) of Regulation No 1307/2013 does not permit the inference that groups which submit an application for aid or which are related to another natural or legal person submitting such an application must consist exclusively of natural persons. That provision refers without distinction to groups of natural or legal persons. This means that a group may be composed of both natural and legal persons.
81 Second, it should also be noted that Article 9(2) of Regulation No 1307/2013 does not define what is meant by ‘natural persons’, ‘legal persons’ or ‘groups of natural or legal persons’ which may have the status of active farmer. Thus, the assessment of the legal status of the aid applicant must be carried out in accordance with national law. However, different forms of legal entities are recognised under the national laws of the Member States. Thus, it cannot be argued that in all Member States, a natural person absolutely cannot be part of a larger group composed of several related companies.
82 Third, it must be observed that, by referring broadly to natural persons, legal persons and groups of natural or legal persons, Article 9(2) of Regulation No 1307/2013 seeks to avoid any discrimination between applicants based on their legal status. Thus, irrespective of their legal status, applicants are excluded, unless there is evidence to the contrary, from active farmer status if they carry out an activity on the list of exclusions.
83 The third argument must therefore be rejected, as must, therefore, the first complaint of the single plea in law in its entirety.
The second complaint of the single plea in law, relating to the context of Article 9(2) of Regulation No 1307/2013
84 In its second complaint, the United Kingdom raises two arguments.
– The first argument, to the effect that the expression ‘groups of natural or legal persons’ in Article 9(1) of Regulation No 1307/2013 cannot be interpreted as referring to companies related to the aid applicant
85 By its first argument, the United Kingdom argues that the expression ‘group of natural or legal persons’ in Article 9(2) of Regulation No 1307/2013 is also to be found in Article 9(1) of that regulation.
86 The United Kingdom considers that it is not possible to interpret the expression ‘groups of natural or legal persons’ in Article 9(1) of Regulation No 1307/2013 as referring to companies linked to the aid applicant, since that would amount to preventing a farmer from receiving aid merely because a related company owns grazing land on which it does not carry out the minimum activity defined by the Member States.
87 It follows, according to the United Kingdom, that the expression ‘groups of natural or legal persons’ must be interpreted consistently in Article 9 of Regulation No 1307/2013 as referring to the groups themselves, not to related companies.
88 The Commission disputes that argument.
89 Article 9(1) of Regulation No 1307/2013 reads as follows:
‘No direct payments shall be granted to natural or legal persons, or to groups of natural or legal persons, whose agricultural areas are mainly areas naturally kept in a state suitable for grazing or cultivation and who do not carry out on those areas the minimum activity defined by Member States in accordance with point (b) of Article 4(2).’
90 It follows that, contrary to what the United Kingdom maintains, nothing in the text of Article 9(1) of Regulation No 1307/2013 precludes the expression ‘groups of natural or legal persons’ from being interpreted as referring not only to the groups themselves, but also to any of their related companies.
91 Consequently, the reference to the expression ‘groups of natural or legal persons’ in Article 9(1) of Regulation No 1307/2013 does not give any indication as to the interpretation to be given to the same expression in Article 9(2) of that regulation.
92 Accordingly, the first argument must be rejected.
– The second argument, to the effect that the concept of ‘active farmer’ must be interpreted in the light of that of ‘farmer’ within the meaning of Article 4(1)(a) of Regulation No 1307/2013
93 By its second argument, the United Kingdom, supported by the Czech Republic, submits that the concept of ‘active farmer’, within the meaning of Article 9(2) of Regulation No 1307/2013, must be interpreted in the light of that of ‘farmer’ within the meaning of Article 4(1)(a) of that regulation. Both the concept of active farmer and farmer refer to the aid applicants themselves, not related companies.
94 The Commission disputes that argument.
95 It should be noted that Article 4(1)(a) of Regulation No 1307/2013 defines a farmer as a natural or legal person, or a group of natural or legal persons, regardless of the legal status granted to such group and its members by national law, whose holding is situated within the territorial scope of the Treaties, as defined in Article 52 TEU in conjunction with Articles 349 and 355 TFEU, and who exercises an agricultural activity.
96 The existence of a link between the concept of ‘active farmer’, within the meaning of Article 9(2) of Regulation No 1307/2013, and that of ‘farmer’, within the meaning of Article 4(1)(a) of that regulation, is confirmed by the case-law, which states that, in order to be granted the status of active farmer, a person must first satisfy the requirements referred to in Article 4(1)(a) of Regulation No 1307/2013 concerning the concept of farmer (see, to that effect, judgment of 7 April 2022, Avio Lucos, C‑176/20, EU:C:2022:274, paragraph 54).
97 The existence of a link between the concept of ‘farmer’ and that of ‘active farmer’ cannot call into question the finding, set out in paragraph 70 above, that it must be held that, under Article 9(2) of Regulation No 1307/2013, the aid applicant may carry out the activities on the list of exclusions both directly and through a related company that is part of the same group.
98 Contrary to what the United Kingdom maintains, it is not apparent from the wording of Article 4(1)(a) of Regulation No 1307/2013 that, in order to be classified as a farmer, a natural person, a legal person or a group of natural or legal persons must directly carry out the activities on the list of exclusions.
99 The second argument must therefore be rejected and, accordingly, the second complaint of the single plea in law must be rejected in its entirety.
The third complaint of the single plea, relating to the purpose of Article 9(2) of Regulation No 1307/2013
100 By its third complaint, the United Kingdom, supported by the Czech Republic, submits that the purpose of Article 9(2) of Regulation No 1307/2013 is to limit direct payments under the common agricultural policy to farmers who themselves exercise a non-marginal agricultural activity. Therefore, it is not necessary to consider related companies in order to achieve the objective of that provision. Moreover, according to the United Kingdom, the inclusion of related companies within the scope of Article 9(2) of Regulation No 1307/2013 would create practical difficulties for the competent authorities of the Member States, which would be required to exercise thorough supervision not only of the applicant but also of the group of which he or she is a member in order to detect potential related companies.
101 The Commission disputes that complaint.
102 It should be noted that the objective of the rules on the concept of ‘active farmer’ is set out in recital 10 of Regulation No 1307/2013, which states as follows:
‘Experience acquired in the application of the various support schemes for farmers has shown that support was in a number of cases granted to natural or legal persons whose business purpose was not, or was only marginally targeted at an agricultural activity. To ensure that support is better targeted, Member States should refrain from granting direct payments to certain natural and legal persons unless such persons can demonstrate that their agricultural activity is not marginal.’
103 It follows that, contrary to what the United Kingdom maintains, recital 10 of Regulation No 1307/2013 does not require that the activities on the list of exclusions be carried out directly by the aid applicant, be it a natural person, a legal person or a group of natural or legal persons.
104 In view of its purpose, which, in essence, is to avoid the risk of fraudulent use of the EU budget and to limit payments under the common agricultural policy only to those farmers who genuinely carry out a non-marginal agricultural activity, Article 9(2) of Regulation No 1307/2013 must be interpreted as applying irrespective of whether the applicant, be it a natural or legal person, or the group concerned carries out one of the activities on the list of exclusions directly or through related companies.
105 If the related companies were not taken into account, an applicant could distribute its activities across a number of related legal entities in order to circumvent the limits placed by that provision on the recognition of its active farmer status. The check carried out by the competent authorities of the Member States would then be limited to agricultural activities exercised directly by the applicant, excluding those carried out through related companies.
106 In that regard, at the hearing, the Czech Republic maintained that the risk that the aid applicant will deliberately split its activities into different legal entities to circumvent the application of Article 9(2) of Regulation No 1307/2013 is countered by the wording of Article 60 of Regulation No 1306/2013.
107 In the first place, it should be noted that Article 60 of Regulation No 1306/2013 does not suffice to avoid the risk of EU budget fraud arising from an applicant’s splitting of his or her activities into several related companies in order to avoid checks carried out in respect of active farmer status. That provision reads as follows:
‘Without prejudice to specific provisions, no advantage provided for under sectoral agricultural legislation shall be granted in favour of a natural or legal person in respect of whom it is established that the conditions required for obtaining such advantages were created artificially, contrary to the objectives of that legislation.’
108 In the second place, Article 60 of Regulation No 1306/2013 does not refer to groups of natural or legal persons, but only to natural or legal persons who apply for aid under the common agricultural policy. Thus, that provision does not expressly cover the situation in which a group of natural or legal persons or a natural or legal person forming part of that group divides its activities into several related companies in order to avoid the checks carried out in the context of the recognition of active farmer status.
109 In the third place, according to settled case-law, proof of the artificial creation of the conditions required to obtain an advantage, within the meaning of Article 60 of Regulation No 1306/2013, requires, first, a combination of objective circumstances from which it is apparent that, despite formal observance of the conditions laid down by the relevant rules, the purpose of those rules has not been achieved and, second, a subjective element consisting of the intention to obtain an advantage from the EU rules by artificially creating the conditions laid down for obtaining it (see, to that effect, judgment of 21 July 2005, Eichsfelder Schlachtbetrieb, C‑515/03, EU:C:2005:491, paragraph 39 and the case-law cited).
110 In those circumstances, in view of the scope of Article 60 of Regulation No 1306/2013 and the constraints in terms of proof established by the case-law referred to in paragraph 109 above, it is possible that an abusive practice consisting of circumventing the application of the rules relating to active farmer status does not fall within the scope of Article 60 of Regulation No 1306/2013, but nevertheless constitutes an infringement of Article 9(2) of Regulation No 1307/2013.
111 Thus, it cannot be argued that the wording of Article 60 of Regulation No 1306/2013 alone is sufficient to avoid the risk that the aid applicant may split his activities into several legal entities in order to avoid checking of his or her status as an active farmer under Article 9(2) of Regulation No 1307/2013.
112 That finding cannot be called into question by the United Kingdom’s argument that the inclusion of related companies within the scope of Article 9(2) of Regulation No 1307/2013 would create practical difficulties for the competent authorities of the Member States, which would be required to carry out an in-depth review not only of the aid applicant but also of the group of which that applicant forms part.
113 In that regard, it should be recalled that, according to settled case-law, a Member State may not rely on practical difficulties to justify its failure to implement appropriate supervisory measures (see judgment of 20 March 1990, Commission v France, C‑62/89, EU:C:1990:123, paragraph 23 and the case-law cited; judgment of 1 February 2001, Commission v France, C‑333/99, EU:C:2001:73, paragraph 44).
114 The third complaint of the single plea in law must therefore be rejected.
The argument relating to infringement of the principle of legal certainty
115 In its statement in intervention, the Czech Republic submits that, in accordance with the principle of legal certainty, the Commission may impose a financial correction on a Member State only if the infringement of which it complains is clearly and specifically apparent from the applicable legal framework. In the present case, the inclusion of related companies within the scope of Article 9(2) of Regulation No 1307/2013 is not clearly and specifically apparent from the applicable legal framework. The United Kingdom endorsed that argument at the hearing.
116 The Commission disputes that argument.
117 According to settled case-law, where an obligation imposed on Member States may have financial consequences for them, that obligation must be sufficiently clear and precise, in order to enable them to understand its scope and comply with it. The principle of legal certainty – which forms part of the general principles of EU law – requires that rules of law be clear, precise and predictable in their effect, so that interested parties can ascertain their position in situations and legal relationships governed by EU law (see, to that effect, judgments of 6 September 2018, Czech Republic v Commission, C‑4/17 P, EU:C:2018:678, paragraph 58; of 17 November 2022, Avicarvil Farms, C‑443/21, EU:C:2022:899, paragraph 46; and of 19 December 2019, Czech Republic v Commission, T‑509/18, EU:T:2019:876, paragraph 40).
118 Without it being necessary to rule on the admissibility of such an argument, it is sufficient to state that, in the present case, it is sufficiently clear and precise, within the meaning of that case-law, that a group of natural or legal persons or a natural or legal person forming part of a group may carry out the activities on the list of exclusions both directly and through a related company which is part of the same group. As stated in paragraph 70 above, a group of natural or legal persons includes, in essence, related companies.
119 Thus, the argument relating to infringement of the principle of legal certainty cannot succeed.
120 In the light of all the foregoing, the action must be dismissed in its entirety.
Costs
121 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.
122 As the United Kingdom 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 (Tenth Chamber)
hereby:
1. Dismisses the action;
2. Orders the United Kingdom of Great Britain and Northern Ireland to pay the costs.
Delivered in open court in Luxembourg on 31 January 2024.
V. Di Bucci | | S. Papasavvas |