Action brought on 27 June 2011 - Italy v Commission

(Case T-358/11)

Language of the case: Italian

Parties

Applicant: Italian Republic (represented by: P. Marchini, avvocato dello Stato)

Defendant: European Commission

Form of order sought

The applicant claims that the Court should:

annul the following measures: (i) as not being in conformity with the rules of the European Union: European Commission Implementing Decision C(2011) 2517 of 15 April 2011 ... excluding from European Union financing the expenditure incurred by Italy under the EAGGF Guarantee Section in relation to the Public Storage - Sugar measure for the financial year 2006 (10% flat-rate adjustment, amounting to EUR 171.418,00, the reason being '35% increase in storage costs'), the financial year 2007 (10% flat-rate adjustment, amounting to EUR 182.006,00, the reason being '35% increase in storage costs'), the financial year 2008 (10% flat-rate adjustment, amounting to EUR 111.062,00, the reason being '35% increase in storage costs'), the financial year 2009 (10% flat-rate adjustment, amounting to EUR 34.547,00, the reason being '35% increase in storage costs'), the financial year 2006 (5% flat-rate year adjustment, amounting to EUR 781.044,00, the reason being 'late inventory controls') indicated in the Annex to that decision, which relates to Article 1 thereof; (ii) as measures constituting a sine qua non for Decision C(2011) 2517: the letter of the European Commission Directorate-General for Agriculture and Rural Development (Directorate J: Audit of Agricultural Expenditure), No ARES (2011) 2287 of 3 January 2011, and point 2 of the Annex thereto, setting out the definitive reasons in support of the final position following the report of the Dispute Settlement Body in Case 10/IT/435; (iii) as measures constituting a sine qua non for Decision C(2011) 2517: the letter of the European Commission Directorate-General for Agriculture and Rural Development (Directorate J: Audit of Agricultural Expenditure), No ARES (2010) 57525 of 3 February 2010 and the Annex thereto setting out the reasons for the exclusion from Community financing;

(as an incidental claim) uphold the preliminary plea of illegality in respect of Regulation (EC) No 915/2006.

Pleas in law and main arguments

In support of the action, the applicant relies on seven pleas in law.

First plea in law, alleging breach of essential procedural requirements (Article 2[96] T[F]EU, formerly Article 253 TEC): specifically, failure to carry out a preliminary investigation in relation to the financial adjustment of the costs itemised as '35% increase in storage costs for the financial years 2006, 2007, 2008, 2009'

According to the Italian Government, the Commission did not adequately investigate the evidence produced by the AGEA [Agricultural Payments Agency], which shows that the market survey had been carried out and that there was awareness of the causes underlying the increase in the prices charged for the rental of silos, which stemmed from the difficult situation prevailing since 2005 in the market for the rental of storage space for the sugar stocks.

Second plea in law, alleging breach of essential procedural requirements (Article 2[96] T[F]EU, formerly Article 253 TEC): specifically, failure to state reasons in relation to the financial adjustment of the costs itemised as '35% increase in storage costs for the financial years 2006, 2007, 2008, 2009'

According to the Italian Government, the Commission did not explain the failure to treat the statements made by the AGEA officials or the tariff of one of the major warehousing operators as appropriate documentary evidence for showing that there had been a general request on the part of the sugar companies for a price increase of up to 50%.

Third plea in law, alleging infringement and misinterpretation of Article 8 of Regulation (EC) No 884/2006, and Annex I thereto, and of Article 4 of Regulation (EC) No 2148/1996, as amended by the Annex to Commission Regulation (EC) No 915/2006, and breach of the principle of legal certainty, the principle that legislation must not be retroactive and the principle of the protection of legitimate expectations, in relation to the 5% flate-rate financial adjustment for the 2006 financial year, owing to 'late inventory controls'.

The Italian Government submits that the Commission acted in breach of the transitional rules provided for in Point 5 of Section AII of Annex I to Regulation No 884/2006. Given that the AGEA had already carried out those activities as part of the inspections required under the Italian legislation, and had furnished proof of this to Commission staff, by handing over all the loading and discharge registers and the related records to the Commission delegation in the course of the May 2007 inspection visit, the transitional rules should have applied and, accordingly, no penalty should have been imposed on the Italian State, which - owing to genuine organisational difficulties regarding coordination with Agecontrol - could be regarded as entitled to submit only the summary documents in February 2007. The Italian Government alleges breach of the principle of legal certainty, the principle that legislation must not be retroactive, the principle of the protection of legitimate expectations and the principle of proportionality, on the ground that it is inconsistent with those principles to apply an inventory obligation immediately in respect of operations which had long been completed by the time that those regulations entered into force on 23 and 24 June 2006 (in particular, the Annex to Regulation No 915/2006) and shortly before the accounts were closed in respect of the EAGGF year on 30 September 2006.

Fourth plea in law, alleging breach of essential procedural requirements (Article 2[96] T[F]EU, formerly Article 253 TEC): specifically, failure to state reasons in relation to the 5% flat-rate financial adjustment for the 2006 financial year, owing to 'late inventory controls'

According to the Italian Government, the Commission did not state adequate reasons for declining to implement the proposal put forward by the Dispute Settlement Body in so far as, under that proposal, the new rule laid down in Regulation (EC) No 915/2006 fixing the inventory deadline was to be applied to sugar movements only with effect from the entry into force of that regulation and not retroactively to the entire financial year 2006, with the effect that the financial adjustment imposed would have been commensurately reduced (by approximately 8 months).

Fifth plea in law, alleging that Regulation (EC) No 915/2006 is unlawful

The Italian Government alleges that Regulation (EC) No 915/2006 is unlawful in so far as it imposes the obligation to inventory the remaining stocks for the 2004/2005 marketing year (30 September 2005), the initial stocks for the 2005/2006 marketing year (1 October 2005) and the remaining stocks for the 2005/2006 marketing year (30 September 2006), in the course of the 2006 financial year, approximately only three months before the new inventory deadline. According to the Italian Government, it is contrary to the general principles of Community law to make actions compulsory, by means of a regulation, in respect of events which are past and complete and, as a consequence, to penalise their omission by means of the financial adjustment procedure.

Sixth plea in law, alleging breach of essential procedural requirements: specifically, failure to state reasons and failure to produce sufficient evidence (Article 2[96] T[F]EU, formerly Article 253 TEC)

According to the Italian Government, the Commission distorts the facts in so far as it applies a financial adjustment on the mistaken premise, proposed by DG AGRI, to the effect that there was no AGEA monitoring of 'sugar in' and 'sugar out', and that 'approximately 127 000 tons of sugar were moved (without the weight being officially checked'. The Italian Government also submits that insufficient evidence has been produced to substantiate the allegation 'of not undertaking the annual inventory inspection ... when the warehousing operations were carried out' or the allegation that 'approximately 127 000 tons of sugar were moved (without being officially checked or weighed) between 30 September 2006 (the date by which the inventory should have been made) and February 2007'. Given the documentary evidence offered by the AGEA, that is to say, the accounting records - handed over to Commission staff - showing the figures relating to the movement and stocking of the sugar, for each single consignment placed in storage, the Commission services cannot maintain the contrary without proving it.

Seventh plea in law, alleging breach of essential procedural requirements: specifically, failure to state reasons and failure to produce sufficient evidence (Article 2[96] T[F]EU, formerly Article 253 TEC), in relation to the alleged risk that the Fund would sustain damage

According to the Italian Government, the decision is flawed by failure to state adequate reasons for not appraising the useful effect of the inspections and controls which the AGEA nevertheless undertakes of 'sugar in' to storage and 'sugar out' of storage, and of their monthly stocks.

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