Case T‑501/22
(publication by extracts)
Republic of Austria
v
European Commission
Judgment of the General Court (Tenth Chamber) of 7 February 2024
(EAGF and EAFRD – Expenditure excluded from financing – Expenditure incurred by Austria – Reduction coefficient – Article 24(6) of Regulation (EU) No 1307/2013 – Article 30(7)(b) of Regulation No 1307/2013 – Article 52(4)(a) of Regulation (EU) No 1306/2013 – Obligation to state reasons)
1. Acts of the institutions – Statement of reasons – Obligation – Scope – Account-clearing decision for expenses financed by EAGF and EAFRD – Financial corrections – Addressee State having been closely associated with the process of drawing up the decision – Infringement of the obligation to state reasons – None
(Art. 296 TFEU)
(see paragraphs 43-45)
2. Agriculture – EAGF and EAFRD financing – Clearance of accounts – Disallowance of expenses arising from irregularities in applying EU rules – Challenge by the Member State concerned – Burden of proof – Shared by the Commission and the Member State
(European Parliament and Council Regulation No 1306/2013)
(see paragraph 58)
3. Agriculture – Common agricultural policy – Direct support schemes – Common rules – Basic payment scheme – Application of a reduction coefficient solely to alpine pastures and not to neighbouring parcels that have not been so classified – Neighbouring parcels regarded as belonging to separate areas – Whether permissible – Conditions
(European Parliament and Council Regulation No 1307/2013, Art. 24(6))
(see paragraphs 83, 84, 87)
4. Agriculture – Common agricultural policy – Direct support schemes – Common rules – Additional allocation of payment entitlements from the national reserve – Compensation for specific disadvantages suffered by the farmers – Disadvantage resulting from an error committed by a Member State in the application of EU law – Unlawful
(European Parliament and Council Regulation No 1307/2013, recital 24 and Arts 24(6) and 30(6) and (7)(b); Commission Delegated Regulation No 639/2014, Art. 31(2))
(see paragraphs 99-105, 108, 111-114)
5. Agriculture – EAGF and EAFRD financing – Clearance of accounts – Limitation of refusal of financing – Twenty-four month period – Point from which time starts to run – Communication by the Commission of the results of verifications – Conditions
(European Parliament and Council Regulation No 1306/2013, Art. 52(4)(a); Commission Regulation No 908/2014, Art. 34(2))
(see paragraphs 139, 140)
Résumé
Ruling on an action for annulment brought by the Republic of Austria, the General Court annuls in part Decision 2022/908 (1) of the European Commission, in so far as it excludes from EU financing expenditure incurred by that Member State under the European Agricultural Guarantee Fund (EAGF) prior to 27 November 2016. In that context, it rules, for the first time, on the interpretation of Article 24(6) of Regulation No 1307/2013 (2) and on the concept of ‘specific disadvantages’ within the meaning of Article 30(7)(b) of that regulation.
In the context of the basic payment scheme, the Republic of Austria decided to apply a reduction coefficient to parcels classified, under Austrian law, as ‘pastures’ and as ‘alpine pastures’. In 2016, the Commission opened an investigation against the Republic of Austria so as to verify whether, for the years 2015 and 2016, the management and control of area-related schemes as regards aid paid to farmers under the EAGF had been carried out in accordance with EU law. Taking the view, at the end of that investigation, that the Austrian authorities had incorrectly applied Article 24(6) of Regulation No 1307/2013 as regards ‘pastures’, the Commission imposed a financial correction (3) on the Republic of Austria. Consequently, the Republic of Austria, by way of a corrective measure, allocated to the farmers concerned additional payment entitlements for each eligible hectare of ‘pastures’, doing so from the national reserve which it is for the Member States to establish pursuant to that regulation, (4) with effect from 2017.
In 2018, the Commission opened a new investigation against the Republic of Austria. It is apparent from its summary report, first, that the Austrian authorities had, as regards ‘alpine pastures’, applied Article 24(6) of Regulation No 1307/2013 incorrectly, which, according to the Commission, had led to unjustified differences in treatment in so far as, within the same area, the reduction coefficient had not been applied to all parcels subject to the same climate conditions. Second, that report finds that the Republic of Austria unlawfully used the national reserve to finance the corrective measure relating to ‘pastures’. Consequently, by the contested decision, the Commission excluded from EU financing, in respect of the two instances of alleged non-compliance on the part of the Republic of Austria, expenditure declared under the EAGF by that Member State in the amount of EUR 68 146 449.98.
Findings of the Court
In the first place, the Court rejects the plea in law alleging infringement of Article 52(1) of Regulation No 1306/2013 (5) resulting from a financial correction based on a misinterpretation of Article 24(6) of Regulation No 1307/2013.
In that regard, the fact that the reduction coefficient was applied to ‘alpine pastures’ and not to neighbouring parcels does not necessarily show an incorrect application of Article 24(6) of Regulation No 1307/2013. That provision does not contain any details as to the extent of the areas in respect of which it is necessary to assess whether the criterion of difficult climate conditions is satisfied. Nevertheless, the Austrian authorities’ approach, consisting in applying the reduction coefficient only to parcels classified as ‘alpine pastures’, without it being shown in the present case that the competent authorities had carried out that classification specifically and systematically on the basis of the fact that those parcels are subject to particular climatic conditions specific to them, does not make it possible to ensure that that coefficient was applied to all parcels located in areas with difficult climate conditions or to ensure that that coefficient was applied only to parcels which actually meet that criterion.
In the second place, the Court holds that the Commission was entitled to consider that the allocation of additional payment entitlements to farmers working ‘pastures’, in order to remedy the incorrect application of the reduction coefficient, could not be financed from the national reserve on the basis of Article 30(7)(b) of Regulation No 1307/2013.
To arrive at that conclusion, the General Court interprets Article 30(7)(b) of Regulation No 1307/2013, to which the Republic of Austria refers as the legal basis for its use of the national reserve, taking into account its wording, the context in which it occurs and the objectives of the rules of which that provision forms part.
As regards the wording of that provision, the Court finds that the adjective ‘specific’ supports an interpretation according to which the disadvantages in question concern certain categories of farmers, who are distinguished from others by virtue of characteristics that are inherent in their situation. The fact that farmers suffer the consequences of an error committed by a Member State in the application of EU law does not appear sufficient to support the conclusion that those farmers fall within a particular category and that the disadvantage which they suffer as a result of that error should, for that reason, be regarded as being specific to them. That interpretation is borne out by the context in which the provision at issue occurs, in particular by Article 31(2) of Regulation No 639/2014. (6)
As regards the objectives of the legislation at issue, the implementation of the reserve is intended to enable Member States to provide support to farmers in specific situations, as a matter of priority young farmers and those commencing their agricultural activity.
In the present case, the disadvantage suffered by the farmers working ‘pastures’ was not inherent in their situation or linked to a characteristic specific to them, but resulted from the fact that the Austrian authorities, by incorrectly applying Article 24(6) of Regulation No 1307/2013, had deprived them of payment entitlements which should have been allocated to them from the outset.
Accordingly, the fact, relied on by the Republic of Austria, that the incorrect application of EU law affected only the holders of ‘pastures’ – which is, moreover, disputable given the impact of that error on the value of the payment entitlements of all Austrian farmers – cannot lead to the conclusion that the holders of ‘pastures’ were in a situation constituting a specific disadvantage allowing the Republic of Austria to allocate additional payment entitlements to them from the national reserve on the basis of Article 30(7)(b) of Regulation No 1307/2013.
Lastly, the Court upholds the third plea in law, alleging infringement of Article 52(4)(a) of Regulation No 1306/2013.
In that regard, the communication referred to in the first subparagraph of Article 34(2) of Implementing Regulation No 908/2014 (7) constitutes the reference point for calculation of the period of 24 months laid down in Article 52(4)(a) of Regulation No 1306/2013, in so far as it identifies with sufficient precision the purpose of the investigation carried out by the Commission and the deficiencies found by it during the investigation. The limitation of the period during which the Commission may exclude certain expenditure from EU financing is intended to protect Member States against the absence of legal certainty which would exist if the Commission were able to call into question expenditure incurred several years before the adoption of a conformity clearance decision.
Given that it identified, for the first time, with sufficient precision the non-compliance found by the Commission as regards the incorrect application of the reduction coefficient to ‘alpine pastures’, the communication of 27 November 2018 constituted, in the present case, the reference point for calculation of the period of 24 months laid down in Article 52(4)(a) of Regulation No 1306/2013. Consequently, the Commission could not exclude from EU financing expenditure incurred before 27 November 2016.
In the light of the foregoing, the Court concludes that the contested decision must be annulled in so far as, as regards the first financial correction at issue, it excluded from EU financing expenditure incurred prior to 27 November 2016.