Case T‑46/09

Hellenic Republic

v

European Commission

(EAGGF — Guarantee Section — Expenditure excluded from financing — Processing of citrus fruits, cotton, bovines, and olive oil — Financial audit — Key controls — Proportionality — Recurrence — Duty to state reasons)

Summary — Judgment of the General Court (Second Chamber), 22 January 2013

1.      Agriculture — EAGGF — Clearance of accounts — Disallowance of expenditure arising from irregularities in the application of the Community rules — Flat-rate correction issued by the Commission in accordance with internal guidelines — Controls not providing expected degree of assurance that claims regular — Whether permissible to apply a flat-rate correction where weaknesses found in key controls established by a Member State in the citrus processing industry

(Commission Regulation No 2111/2003, Arts 24 and 27)

2.      Agriculture — Common agricultural policy — EAGGF financing — Principles — Disallowance of expenditure arising from irregularities in the application of the Community rules — Seriousness of the infringement taken into account — Recurrence of irregularities found — Factor capable of justifying increase in the financial correction imposed — Recurrent nature of deficiencies in the administrative and accounting controls established by a Member State in the citrus processing and olive oil industries

(Council Regulation No 1258/99, Art. 7(4), fourth para., and No 1290/2005, Art. 31(2))

3.      Acts of the institutions — Statement of reasons — Obligation — Scope — Decision relating to the clearance of accounts in respect of expenditure financed by the EAGGF — Financial corrections in the citrus processing, bovines, olive oil and financial audit sectors — No infringement

(Art. 296 TFEU)

4.      Agriculture — EAGGF — Clearance of accounts — Disallowance of expenditure arising from irregularities in the application of the Community rules — Irregularity relating to the financial conditions for implementing Community legislation — Challenge by the Member State concerned — Burden of proof — Allocation between the Commission and the Member State

5.      Acts of the institutions — Regulations — Regulation prescribing specific control measures — No Member State discretion — Non-implementation — Justification — Other control system more efficient — Inadmissibility

6.      Agriculture — EAGGF — Clearance of accounts — Disallowance of expenditure arising from irregularities in the application of the Community rules — Flat-rate correction of 5% for insufficient controls for compliance with environmental measures established by a Member State in the cotton sector — Lawfulness

(Council Regulation No 1051/2001, Art. 17; Commission Regulation No 1398/2002)

7.      Actions for annulment — Contested act — Assessment of legality in the light of the information available at the time of adoption of the measure

(Art. 263 TFEU)

8.      Agriculture — Common agricultural policy — EAGGF financing — Principles — Disallowance of expenditure arising from irregularities in the application of the Community rules — Finding of failures in the control system implemented by a Member State in the cotton, olive oil and financial audit sectors — Financial correction — No breach of principle of proportionality

(Council Regulation No 1051/2001; Commission Regulation No 296/96, Art. 4(2))

9.      Agriculture — EAGGF — Grant of aids and premiums — Obligation of Member States to organise an effective system of administrative controls and on-the-spot checks — Failure to fulfil obligations — Justification on the basis of practical difficulties — Not permissible

10.    Agriculture — Common organisation of the markets — Oils and fats — Olive oil — Production aid — Obligation of Member States to establish an olive cultivation register and computerised files — Replacement of certain data having to appear in that register by an increase in the number of controls — Not permissible

(Council Regulations No 154/75 and No 1638/98; Commission Regulation No 2366/98, Art. 28(2))

11.    Agriculture — Common agricultural policy — EAGGF financing — Principles — Disallowance of expenditure arising from irregularities in the application of the Community rules — Financial correction — Insufficient controls established by a Member State in the financial audit sector — Increase of the correction where failure persists — Lawfulness

(Council Regulation No 1258/99, Art. 7(4))

12.    Agriculture — Common agricultural policy — EAGGF financing — Principles — Disallowance of expenditure arising from irregularities in the application of the Community rules — Ineligibility of expenses paid by the national authorities following the expiry of the time limits prescribed by the relevant agricultural legislation

(Commission Regulation No 296/96, 4th Recital and Art. 4)

1.      In the matter of clearance of EAGGF accounts, where it is not possible to determine precisely the losses suffered by the Community, a flat-rate correction may be considered by the Commission. In that regard, for the purposes of calculating ineligible expenses, Commission document No VI/5330/97 setting out guidelines for applying financial corrections imposes a flat-rate of 5% of expenditure when all key controls are applied, but not in the number, frequency or depth required by the regulations, when it can reasonably be concluded both that they do not provide the expected degree of assurance that claims are regular and that the risk of loss to the EAGGF is significant. That is the situation with weaknesses found in key controls, such as the administrative and accounting controls provided for in Articles 24 and 27 of Regulation No 2111/2003 laying down detailed rules for the application of Regulation No 2202/96, which have not been applied with the depth required by those regulations.

(see paras 44, 47, 49-51)

2.      See the text of the decision.

(see paras 56, 57, 63-66, 315, 316)

3.      See the text of the decision.

(see paras 73-75, 199, 332-335, 359, 373, 374)

4.      See the text of the decision.

(see paras 78-83, 114, 115, 117-121, 146-148, 150-152, 203-208, 213, 222, 233, 242-244, 283, 290, 293, 294, 298, 301, 306, 309, 330)

5.      See the text of the decision.

(see para. 116)

6.      See the text of the decision.

(see paras 125-139)

7.      See the text of the decision.

(see para. 149)

8.      See the text of the decision.

(see paras 156-166, 337-339, 362-365, 376-381)

9.      See the text of the decision.

(see para. 241)

10.    See the text of the decision.

(see paras 286, 289)

11.    See the text of the decision.

(see paras 320-322, 327-329)

12.    See the text of the decision.

(see paras 368-371, 383)