Case T‑124/14

Republic of Finland

v

European Commission

(EAFRD — Expenditure excluded from the financing — Rural development — One-off financial correction — Eligibility of expenditure incurred for the purchase of second-hand machinery and equipment — Derogation for micro, small and medium-sized enterprises — Article 55(1) of Regulation (EC) No 1974/2006)

Summary — Judgment of the General Court (Fourth Chamber), 11 December 2015

1.      European Union law — Interpretation — Methods — Literal, systematic, historic and teleological interpretation

(Commission Regulation No 1974/2006, Art. 55(1))

2.      European Union law — Interpretation — Texts in several languages — Uniform interpretation — Consideration of different language versions

(Commission Regulation No 1974/2006, Art. 55(1))

3.      Agriculture — Common agricultural policy — EAFRD financing — Support for rural development — Eligibility of expenditure for the purchase of second-hand material and equipment — Derogatory scheme for micro-, small and medium-sized enterprises — No obligation to interpret strictly

(Commission Regulation No 1974/2006, Art. 55(1))

4.      Agriculture — Common agricultural policy — EAFRD financing — Support for rural development — Eligibility of expenditure for the purchase of second-hand material and equipment — Derogatory scheme for micro-, small and medium-sized enterprises — Limitation to duly substantiated cases — Member States’ discretion

(Commission Regulation No 1974/2006, Art. 55(1))

5.      Agriculture — Common agricultural policy — EAFRD financing — Support for rural development — Eligibility of expenditure for the purchase of second-hand material and equipment — Derogatory scheme for micro-, small and medium-sized enterprises — Implementation — Member States’ discretion — Limits

(Council Regulation No 1698/2005; Commission Regulation No 1974/2006, Art. 55(1))

1.      See the text of the decision.

(see para. 24)

2.      See the text of the decision.

(see para. 25)

3.      The first subparagraph of Article 55(1) of Regulation No 1974/2006 laying down detailed rules for the application of Regulation No 1698/2005 on support for rural development by the EAFRD, constitutes the principal or general rule, and that the second subparagraph provides for a different solution for micro, small and medium-sized enterprises, which makes it possible to classify it, in any event, as a derogating rule. In that respect, it is not clear from the said second subparagraph whether the legislature’s intention was either to lay down such an exception in the strict sense, or only to authorise the Member State to create a derogating and specific scheme for micro, small and medium-sized enterprises, since the terms ‘by way of derogation’ and ‘and only’, read as a whole, may be interpreted both ways. Therefore, the coexistence of the two limiting elements in the same sentence does not provide a sufficiently clear and precise indication as to whether the second subparagraph constitutes an exception in the strict sense or merely a derogating rule providing for the possibility of establishing a different and specific scheme for micro, small and medium-sized enterprises.

It is apparent that the case law, based on the principle of Roman law singularia non sunt extendenda, according to which EU rules providing for exceptions must be interpreted strictly in order to preserve the effectiveness of the general rule from which they are derogating, does not necessarily apply since such a strict interpretation is not required if the second subparagraph of Article 55(1) of Regulation No 1974/2006 is to be classified as a derogating rule providing for the possibility of establishing a different and specific scheme for micro, small and medium-sized enterprises.

(see para. 28-30)

4.      According to the unambiguous wording of the second subparagraph of Article 55(1) of Regulation No 1974/2006 laying down detailed rules for the application of Regulation No 1698/2005 on support for rural development by the EAFRD, the Member States have a discretion in the introduction and implementation of a different and specific scheme for micro, small and medium-sized enterprises, in that, to that end, they may establish the conditions under which the purchase of second-hand equipment may be regarded as eligible expenditure. In those circumstances, having regard to the structure of the said second subparagraph, the criterion of ‘duly substantiated cases’ is immediately linked to the authorisation and discretionary power of the Member State to introduce and implement a different and specific scheme for micro, small and medium-sized enterprises.

Thus, the criterion of ‘duly substantiated cases’ is limited to describing the way in which the Member State is deemed to exercise its discretionary power under the second subparagraph and, above all, to give reasons for exercising it. In other words, each time that the Member State considers it appropriate to use its authorisation and that discretionary power, it is required either, in a possible decision to adopt rules of general scope, or in a possible decision relating to an individual case of purchase of second-hand equipment, to state the relevant reasons in support of its decision in order to satisfy that criterion, and to enable the Commission to carry out a control in that regard. It must be stated that that understanding is the same in the light of all the language versions of the second subparagraph and that it is enough to ensure that the Commission is able to carry out an adequate control a posteriori of the exercise by the Member State of its discretionary power under the second subparagraph, in accordance with the objectives of the relevant EU rules.

Moreover, if the EU legislature had intended to introduce a rule that the Member State was required to lay down rules of general scope specifying, beforehand, all the situations in which financing of the purchase of second-hand machinery or equipment could be regarded as eligible, it should have indicated that clearly. According to the principle of legal certainty, litigants, including the Member States, cannot suffer as a result of difficulties of interpretation owing to imprecise legislation which provides for financial consequences which are unfavourable to them.

(see paras 33-36)

5.      Article 55(1) of Regulation 1974/2006 of Regulation No 1974/2006 laying down detailed rules for the application of Regulation No 1698/2005 on support for rural development by the EAFRD, is to be interpreted as meaning that the second subparagraph authorises Member States, by conferring on them a discretionary power for the purpose, to introduce and implement a specific derogating scheme for micro, small and medium-sized enterprises by specifying the conditions under which the purchase of second-hand equipment may be regarded as eligible expenditure, without it being necessary for the Member State to define, precisely and beforehand, in legislation of general scope, the cases in which the investment corresponds to a ‘duly substantiated case’. The fact remains that that criterion requires the Member State, in the exercise of its discretionary power, either in a decision to lay down rules of general scope or in a decision relating to an individual case, to provide the reasons which show that that decision has been taken in accordance with the criteria and objectives of the relevant national legislation and of EU legislation.

In that regard, the authorisation of the Member States to provide and implement a different and specific scheme for micro, small and medium-sized enterprises in respect of the purchase of second-hand machinery is in full accord with the objectives of Regulations Nos 1698/2005 and 1974/2006 and does not therefore require a restrictive interpretation of the rules of that scheme in the light of those objectives. The fact remains that the criterion of ‘duly substantiated cases’ in the second subparagraph of Article 55(1) of Regulation No 1974/2006 must be interpreted in accordance with those objectives in order to prevent the Member State using its discretionary power under the second subparagraph by reference to considerations unrelated to those objectives and to enable the Commission to carry out an effective control in that regard.

(see paras 41, 54)