Case T‑139/15
Hungary
v
European Commission
Judgment of the General Court (Fourth Chamber), 12 March 2019
(EAGGF — Guarantee Section — EAGF — Sugar — Temporary scheme for the restructuring of the sugar industry in the European Community — Regulation (EC) No 320/2006 — Regulation (EC) No 968/2006 — Expenditure excluded from financing — Expenditure incurred by Hungary — Conditions for granting aid for full dismantling and aid for partial dismantling — Concept of ‘production facilities’ — Assessment of the use of silos on the date of submission of the application for aid — Concept of ‘full dismantling’ — Annex 2 to Document VI/5330/97 — Problems in interpreting EU legislation — Sincere cooperation)
1. Agriculture — Common organisation of the markets — Sugar — Temporary scheme for restructuring the sugar industry — Restructuring aid — Conditions for granting — Dismantling of production facilities — Full or partial dismantling — Definition — Choice which must be made on the date of the application for aid — Obligation to identify, on that date, all the production facilities to be dismantled
(Council Regulation No 320/2006, Arts 3 and 4; Commission Regulation No 968/2006, Arts 4 and 9)
(see paragraphs 56-70, 73, 74, 77-80, 83-86, 101, 102, 106, 107, 110, 111)
2. Agriculture — Financing by the EAGF — Clearance of accounts — Disallowance of expenses arising from irregularities in applying EU rules — Financial correction corresponding to the difference between the amount of aid for full dismantling and the amount of aid for partial dismantling — Borderline cases — Application of a lower correction rate or no correction rate — Conditions under which applicable — No automatic application where the conditions are met
(Council Regulation No 1290/2005, Art. 31)
(see paragraphs 124, 126-134)
3. Acts of the institutions — Rules of administrative conduct of general scope — Measure designed to produce external effects — Scope
(see paragraph 125)
4. Member States — Obligations — Duty of sincere cooperation with the EU institutions — Reciprocity
(Art. 4(3) TEU)
(see paragraphs 138-140)
Résumé
In the judgment in Hungary v Commission (T‑139/15), delivered on 12 March 2019, the General Court dismissed the action for annulment brought by Hungary, under Article 263 TFEU, against Commission Implementing Decision (EU) 2015/103 (1) imposing on Hungary a financial correction equal to 25% of the total amount of restructuring aid for full dismantling of sugar production sites, which had been granted to Hungarian sugar producers in the framework of the temporary scheme for the restructuring of the sugar industry.
In the first place, the Court was required to determine when the assessment of whether the silos constituted production facilities that were required to be dismantled had to be carried out in order for restructuring aid for full dismantling to be granted or whether the silos fell within one of the exceptions laid down by the Court in its judgment of 14 November 2013 in SFIR and Others (C‑187/12 to C‑189/12, EU:C:2013:737).
The Court took the view that the classification of the silos had to be determined on the date of the application for aid and not at the end of the restructuring operations. In order to achieve the objective of reducing unprofitable sugar production capacity in the European Union, pursued by the relevant legislation, the EU legislature had established two different restructuring schemes depending on the type of dismantling carried out, namely full dismantling or partial dismantling, which gave rise to different amounts of restructuring aid. In the event of full dismantling, all facilities other than those that were necessary for the production of sugar, isoglucose or inulin syrup or that were directly related to their production, such as packaging facilities, could exceptionally be retained. On the other hand, in the event of partial dismantling, facilities that were necessary for the production of sugar, isoglucose or inulin syrup or that were directly related to their production could be retained, provided, inter alia, that they were no longer used for the production of products covered by the CMO for sugar.
First, if the classification of silos had been assessed at the end of the restructuring process, it would have been possible, in the case of full and partial dismantling alike, to retain silos which, on the date the aid application was made, constituted production facilities. Therefore, retaining part of the production facilities would no longer have been characteristic of partial dismantling, but would also have been possible in the event of full dismantling, even though, due to the high costs associated with that type of dismantling, operators received 25% more restructuring aid than that granted in the case of partial dismantling. Secondly, silos that, by definition, were production facilities on the date the aid application was made would not have been mentioned in the restructuring plan as production facilities that were required to be dismantled, in breach of Article 4(3)(c) of Regulation No 320/2006. (2) Thirdly, the commitment to dismantle the production facilities in their entirety, which had to be attached to the application for restructuring aid for full dismantling, would have been invalidated because it would not have covered all production facilities existing on the date on which that commitment was made.
In the second place, the Court examined whether, in view of the objective difficulties in interpreting the relevant legislation as regards the retention of silos in the case of full dismantling, the Commission should have reduced the amount of the financial correction or should not have made any financial correction at all, in accordance with the guidelines set out in Document VI/5330/97 (3) and, more specifically, in the second paragraph under the heading ‘Borderline cases’ in Annex 2 to that document (‘the borderline case’).
The Court took the view that the borderline case is a weighting factor which does not automatically give rise to an entitlement that it be applied. The application of the borderline case is subject to the condition, first, that the deficiency identified by the Commission during the procedure for the clearance of accounts must be the result of difficulties in interpreting EU legislation, and, secondly, that the national authorities must have taken the necessary steps to remedy the deficiency as soon as it was brought to light by the Commission.