OPINION OF ADVOCATE GENERAL
WAHL
delivered on 26 February 2015 (1)
Case C‑684/13
Johannes Demmer
v
Fødevareministeriets Klagecenter
(Request for a preliminary ruling from the Vestre Landsret (Denmark))
(Common agricultural policy — Recovery of agricultural aid unduly allocated and unduly paid — Areas eligible for aid — ‘Eligible hectare’ — Agricultural and non-agricultural activities — Airfield safety areas — Cultivation of grass on those areas for the production of feed pellets — Predominant use — Restrictions regarding the use of airfield safety areas — Error that could reasonably have been detected by the farmer — Good faith)
1. Does a farmer who cultivates and harvests grass on airfield safety areas enjoy the right to agricultural aid for that land? A dispute between a farmer and the Danish authorities regarding that very issue has given rise to the questions referred to the Court in the present case.
2. The request for a preliminary ruling from the Vestre Landsret (Western Regional Court) (Denmark) turns on the proper construction of the term ‘eligible hectare’ and, more precisely, on the parameters for determining what may or may not constitute land eligible for agricultural aid under the relevant EU legislation. In that context, the referring court is also unsure about the scope of the repayment obligation in the case of aid unduly granted: what yardsticks are to be employed to determine the circumstances in which a beneficiary can be released from the repayment obligation?
3. In the following, I will set out the reasons why I believe that areas of land such as those at issue before the referring court ought, as a matter of principle, not to be regarded as falling outside the scope of the term ‘eligible hectare’. As will be explained below, the fact that land located at airfields is not excluded a priori is also relevant for the purposes of determining whether a professional farmer could reasonably have detected the error which led to the undue allocation of payment entitlements and the subsequent payment of aid.
I – Legal Framework
A – EU Law
1. Basic Regulations
4. Regulation (EC) No 1782/2003 (2) establishes common rules for direct support schemes under the common agricultural policy. In accordance with Article 1 of that regulation, Regulation No 1782/2003 introduces a new form of income support for farmers.
5. Under Article 2(b) of that regulation, ‘holding’ is defined as ‘all the production units managed by a farmer situated within the territory of the same Member State’ whereas, under Article 2(c), ‘agricultural activity’ is defined as ‘the production, rearing or growing of agricultural products including harvesting, milking, breeding animals and keeping animals for farming purposes, or maintaining the land in good agricultural and environmental condition as established under Article 5’.
6. Article 44(1) of Regulation No 1782/2003 provides that any payment entitlement accompanied by an eligible hectare is to give rise to the payment of the amount fixed by the payment entitlement. Article 44(2) defines ‘eligible hectare’ as any agricultural area of the holding taken up by arable land and permanent pasture apart from areas under permanent crops, forests or used for non-agricultural activities.
7. With effect from 1 January 2009, Regulation No 1782/2003 was replaced by Regulation (EC) No 73/2009 (3) (together, ‘the Basic Regulations’).
8. Recital 2 in the preamble to Regulation No 73/2009 explains that one of the reasons for the repeal of Regulation No 1782/2003 was that it had been subject to numerous substantial amendments. Regulation No 73/2009 was therefore adopted in the interests of clarity. It seeks, inter alia, to simplify the functioning of the single payment scheme.
9. Points (b) and (c) of Article 2 of Regulation No 73/2009 define ‘holding’ and ‘agricultural activity’ respectively in the same terms as Regulation No 1782/2003.
10. Under Article 34(1) of Regulation No 73/2009, support under the single payment scheme is to be granted to farmers upon activation of a payment entitlement per eligible hectare. In accordance with Article 34(2)(a), ‘eligible hectare’ means any agricultural area of the holding ‘that is used for an agricultural activity or, where the area is used as well for non-agricultural activities, predominantly used for agricultural activities’.
11. Article 137 of Regulation No 73/2009 governs the repayment of unduly allocated payment entitlements. Article 137(1) states that payment entitlements allocated to farmers before 1 January 2009 are to be deemed legal and regular as from 1 January 2010. However, in accordance with Article 137(2), that is not the case where payment entitlements have been allocated to farmers on the basis of factually incorrect applications. However, that exception is to apply only in so far as ‘the error could not reasonably have been detected by the farmer’.
2. Implementing Regulations
12. In respect of the relevant period (between 2005 and 2009), Regulations No 1782/2003 and No 73/2009 were implemented, inter alia, by Commission Regulations (EC) No 795/2004 (4) and (EC) No 796/2004 (5) (together, ‘the Implementing Regulations’).
13. Article 2(a) of Regulation No 795/2004 defines ‘agricultural area’ — a precondition for the relevant area to constitute an ‘eligible hectare’ — as any area taken up by arable land, permanent pasture or permanent crops.
14. Regulation No 795/2004 was amended, inter alia, by Commission Regulation (EC) No 370/2009 (6) with effect from 1 January 2009. The following Article 3c was thereby inserted into Regulation No 795/2004:
‘For the purposes of the application of Article 34(2)(a) of [Regulation No 73/2009], where an agricultural area of a holding is used as well for non-agricultural activities that area shall be considered as being used predominantly for agricultural activities, if the agricultural activity can be exercised without being significantly hampered by the intensity, nature, duration and timing of the non-agricultural activity.
Member States shall establish criteria for the implementation of the first subparagraph on their territory.’
15. In accordance with Article 2(1) of Regulation No 796/2004, ‘arable land’ means land which, inter alia, is cultivated for crop production, or maintained in good agricultural and environmental condition. Under Article 2(2) of that regulation, ‘permanent pasture’ means land which is used to grow grasses or other herbaceous forage and that has not been included in the crop rotation of the holding for five years or longer. (7)
16. Article 12 of Regulation No 796/2004 (8) is also relevant here. In accordance with Article 12(1)(f), a farmer applying for aid under the relevant aid schemes is to provide a statement that he is aware of the conditions pertaining to the aid schemes in question. Furthermore, Article 12(4) provides that, when submitting the application form, the farmer is to correct the pre-printed form if any of the information contained in the pre-printed forms is incorrect.
17. Article 73(1) of Regulation No 796/2004 states that, if undue payment is made, the farmer is to repay the amount in question with interest.
18. However, an exception to that rule is laid down in Article 73(4) and (5) of that regulation, under which:
‘4. The repayment obligation referred to in paragraph 1 shall not apply if the payment was made by error of the competent authority or of another authority and if the error could not reasonably have been detected by the farmer.
However, where the error relates to factual elements relevant for the calculation of the payment concerned, the first subparagraph shall only apply if the decision to recover was not communicated within 12 months of the payment.
5. The repayment obligation referred to in [Article 73(1)] shall not apply if the period which elapsed between the date of the payment of the aid and that of the first notification to the beneficiary by the competent authority concerning the undue nature of the payment concerned is more than ten years.
However, the period referred to in the first subparagraph shall be limited to four years if the beneficiary acted in good faith.’
19. Article 73a(1) of Regulation No 796/2004 (9) provides that, if it is established that payment entitlements have been allocated unduly, the farmer is to give up these entitlements and they are to be deemed not to have been allocated ab initio.
B – Danish law
20. Under Danish law, the requirements relating to airfield safety areas are laid down by the Trafikstyrelsen (formerly Statens Luftfartsvæsen, Transport Authority) through the ‘Civil Aviation Rules’ (Bestemmelser for Civil Luftfart, ‘BL’).
21. The cultivation of safety areas is governed by BL 3-16 of 31 January 2005 on measures to reduce the risk of collision between aircraft and birds or mammals at airfields. In accordance with those rules:
‘5.2.2. Parcels of land without hard surfacing, situated within the territory of the airfield up to the runway(s) and out to a distance of up to 150 m from the airfield boundaries:
a. The land shall be laid to grass ...
…
5.2.3. Parcels of land without hard surfacing, situated within the territory of the airfield at a distance of between 150 m and 300 m from the boundaries of the runway(s):
a. The land shall be used for the cultivation of grass ...
b. The land may be used for the cultivation of crops only after consultation with the adviser. The cultivation of all-year seed is not permitted.
5.2.4. Parcels of land without hard-surfacing, situated within the territory of the airfield at a distance of over 300 m from the boundaries of the runway(s), may be used for agriculture only after consultation with the adviser.
…
6.4.1. In connection with the cultivation of the land, the following rules shall apply:
a. The grass must permanently be maintained at a height of at most 20 cm on the runway(s) and taxiway(s) without gravel or hard surfacing …
b. Outside the areas referred to in point (a) but within the areas covered by Paragraph 5.2.2, efforts must permanently be made to keep the grass at a height no lower than 20 cm and no higher than 40 cm …’
II – Facts, procedure and the questions referred
22. On 21 December 1999 and 10 May 2000, Mr Demmer entered into agreements with Aalborg Airport (Aalborg Lufthavn) and Skrydstrup Air Base (Flyvestation Skrydstrup), respectively, for the lease of safety areas situated around the runways, taxiways and stopways of those airfields. The land is used to cultivate grass for the production of feed pellets.
23. Pursuant to those agreements and subject to their terms, Mr Demmer, as lessee, obtained the right to cut and use the grass from the airport land in return for rent. Mr Demmer was to harvest the grass three to four times a year.
24. The agreements contained a number of terms regarding the maintenance of the land in question. Among the provisions laid down were conditions regarding when and how the cutting of the grass should be carried out; conditions relating to the use of fertiliser; and, in agreement with Skrydstrup Air Base, a prohibition on the use of pesticides. (10)
25. Under Paragraph 8 of the agreement concluded with Skrydstrup Air Base, Mr Demmer was to perform his work in a way that would not hamper flight operations and in accordance with instructions and prohibitions which might be issued by the Skrydstrup Air Traffic Control Service or Air Base Managers.
26. Under Paragraph 6 of the lease agreement between Mr Demmer and Aalborg Air Base, Mr Demmer was to inform the lessor when access to the leased land was sought. The same paragraph also granted the Armed Forces unlimited rights to use, or to let others use, the leased land to hold military exercises of any kind.
27. As from 2005, Mr Demmer consented, under both agreements, to use the land in a way that ensured the right to be allocated payment entitlements and to submit the related applications. Following an application from Mr Demmer, the Food Industry Agency (FødevareErhverv, now NaturEhrverv styrelsen; the AgriFish Agency) allocated to him, by decision of 29 May 2006, payment entitlements in respect of the land at issue with effect from aid year 2005.
28. On 1 February 2006, Mr Demmer transferred to the Armed Forces the payment entitlements relating to the airfield land at Aalborg Airport. Thus, during the aid years 2006 to 2009, Mr Demmer merely leased the airfield land at Skrydstrup Air Base and was paid aid only in respect of that land.
29. In 2008, the Food Industry Agency carried out an examination and audit of the production block register. As a result of that audit, some of the production blocks in relation to which Mr Demmer had declared land under the single payment scheme were reduced or removed from the register. The reason was that, according to the Food Industry Agency, safety areas at airfields could not be regarded as agricultural areas eligible for aid. In that connection, Mr Demmer was notified that the applications relating to previous years would also be reconsidered and the payment entitlements recalculated.
30. On 2 May 2011, the Food Industry Agency took a decision to reduce Mr Demmer’s payment entitlements and to recover aid unduly paid for the land at Aalborg Airport in 2005 and for the land at Skrydstrup Air Base from 2005 to 2009.
31. Mr Demmer challenged that decision before the Complaints Centre of the Ministry of Food, Agriculture and Fisheries (Fødevareministeriets Klagecenter). In May 2012, the Complaints Centre upheld the decision of the Food Industry Agency.
32. On 13 November 2012, Mr Demmer contested the decision of the Complaints Centre before the referring court. That court has now requested a preliminary ruling on the following questions:
‘(1) Must the requirement that an agricultural area not be used for “non-agricultural activities” within the meaning of Article 44(2) of Regulation No 1782/2003 and the requirement that an agricultural area be used for “an agricultural activity” or “… predominantly used for agricultural activities” within the meaning of Article 34(2)(a) of Regulation No 73/2009 be interpreted as meaning that it is a condition for aid that the primary purpose of an area’s use be agricultural?
(a) If so, the Court is requested to specify what parameters must be taken into account in deciding what purpose of use is the “primary” use where an area is used for several different purposes at the same time.
(b) If so, the Court is further requested to state whether, where applicable, that means that safety areas surrounding runways, taxiways and stopways at airfields, which are part of the airfield and are subject to special rules and restrictions, such as those at issue, relating to the use of the land, but at the same time are also used to harvest grass for the production of feed pellets, are by their nature and use eligible for aid under the above provisions.
(2) Must the requirement that the agricultural land form part of the farmer’s “holding” within the meaning of Article 44(2) of Regulation No 1782/2003 and Article 34(2)(a) of Regulation No 73/2009 be interpreted as meaning that safety areas surrounding runways, taxiways and stopways at airports, which are part of the airfield and are subject to special rules and restrictions, such as those at issue, relating to the use of the land, but at the same time are also used to harvest grass for the production of feed pellets, are eligible for aid under the above provisions?
(3) If the answer to Question 1(b) and/or Question 2 is in the negative, will there then be, because the parcels of land in addition to being used to cultivate permanent pasture for the production of feed pellets are also safety areas surrounding runways, taxiways and stopways,
(a) an error which could reasonably have been detected by the farmer for the purposes of Article 137 of Regulation No 73/2009 where payment entitlements for the areas are nevertheless allocated?
(b) an error which could reasonably have been detected by the farmer for the purposes of Article 73(4) of [Regulation No 796/2004], where aid for the areas is nevertheless paid?
(c) an undue payment in relation to which the beneficiary cannot be regarded as having acted in good faith for the purposes of Article 73(5) of [Regulation No 796/2004], where aid for the areas is nevertheless paid?
(4) What time is material in assessing whether
(a) there is an error which could reasonably have been detected by the farmer for the purposes of Article 137 of Regulation No 73/2009,
(b) there is an error which could reasonably have been detected by the farmer for the purposes of Article 73(4) of [Regulation No 796/2004],
(c) the beneficiary can be regarded as having acted in good faith for the purposes of Article 73(5) of [Regulation No 796/2004]?
(5) Must the assessment referred to in Question 4(a) to (c) be carried out in respect of each individual aid year or for the payments as a whole?’
33. Written observations in the present proceedings have been submitted by Mr Demmer, by the Danish, Greek and Polish Governments, and by the Commission. The Court decided to proceed without a hearing.
III – Analysis
A – Preliminary issues
34. The referring court has put a number of questions to the Court. None the less, the complex of problems that arises in the main proceedings turns on three closely linked issues: (i) the eligibility for aid of areas of land situated within airfield security zones (Questions 1 and 2); (ii) the parameters for assessing whether a beneficiary ought to be released from the obligation to repay aid unduly allocated and paid (Question 3); and (iii) the appropriate time-frame for that assessment (Questions 4 and 5). Before moving on to consider those issues in more detail, it is important, however, to address three preliminary issues which have a bearing on the subsequent analysis.
35. First, any interpretation of the rules governing the grant of aid under the single payment scheme must take into account the underlying rationale for the grant of agricultural aid. With regard to the single payment scheme, in particular, that scheme was put in place by Regulation No 1782/2003 in the context of the reform of EU agricultural policy. As Article 1 of that regulation makes clear, the overarching objective of Regulation No 1782/2003 was to introduce a new form of income support for farmers. In that sense, the single payment scheme undoubtedly contributes to the attainment of the socio-political objective of EU agricultural policy, which is to secure a reasonable standard of living for those involved in agriculture. (11) That objective has implications for the interpretation of the Basic Regulations.
36. Secondly, as the referring court notes, a degree of disparity exists between Regulation No 1782/2003 and Regulation No 73/2009 with regard to what constitutes an ‘eligible hectare’ for the purposes of those regulations. Indeed, whereas Article 44(2) of Regulation No 1782/2003 states that any agricultural areas of the holding taken up by arable land and permanent pasture, excluding areas used for non-agricultural activities, are to be regarded as ‘eligible hectares’, Regulation No 73/2009 provides a somewhat different definition. In fact, Article 34(2)(a) of Regulation No 73/2009 states that any agricultural area of the holding that is used for an agricultural activity — or, where the area is used also for non-agricultural activities, predominantly used for agricultural activities — is to be regarded as an eligible hectare.
37. The changes made are by no means insignificant. Indeed, on a purely literal reading, it could be argued that, under Regulation No 1782/2003, any non-agricultural use of an agricultural area would automatically exclude that area from eligibility for the single payment scheme. However, as the parties seem to agree, the discrepancy in the terminology employed in those instruments ought not to be attributed particular importance. Indeed, there seems to be nothing in the travaux préparatoires for Regulation No 73/2009 to suggest that the intention of the legislature was to modify the rules concerning eligible hectares, which undoubtedly constitute one of the cornerstones of the single payment scheme.
38. In my view, the legislature intended, rather, to clarify the rules governing the support schemes applicable to farmers. What is more, it is by no means uncommon that a parcel of land is used for both agricultural and non-agricultural activities. It therefore seems logical that the eligibility of that land must be determined on the basis of the activity which is predominant. Regulation No 73/2009, read in the light of Article 3c of Regulation No 795/2004, as amended, goes some way to meeting the need for clarity in this area. Indeed, those provisions clearly indicate that mixed use of a parcel of land does not automatically exclude that land from aid. Rather, the key requirement for eligibility is that the land be used predominantly for agricultural activities. (12) Accordingly, I consider it appropriate to assess the questions raised by the referring court (in particular, Questions 1 and 2) in the light of the wording of Regulation No 73/2009 for the entire period under consideration, that is to say, from 2005 to 2009.
39. Thirdly, I wish to point out that the referring court predicates its approach on the assumption that we are dealing with areas used for both agricultural and non-agricultural activities within the meaning of the Basic Regulations. In that regard, it transpires from the order for reference that Mr Demmer agreed to use the land at Skrydstrup Air Base with due regard for flight operations and in accordance with possible instructions and prohibitions. Under the lease agreement concerning Aalborg Airport, the Armed Forces reserved the unlimited right to use, or to let others use, the land to hold military exercises of any kind. In addition, when seeking access to the land, Mr Demmer was to inform the lessor.
40. However, it is not clear from the case-file whether non-agricultural activities took place on the land in question or whether the lessor did, in actual fact, exercise its contractual rights in relation to that land.
41. That is why it is necessary to enter the following caveat. To my way of thinking, neither the fact that clauses such as those mentioned above exist nor the fact that the parcel of land in question lies within an airfield security zone can be regarded as evidence of a non-agricultural activity. In that context, the relevant fact, to my mind, is that the non-agricultural activities (such as military exercises or flight operations) are actually taking place.
42. As I see it, a contractual term to the effect that the land must be used with due regard for flight operations and in accordance with possible instructions and prohibitions cannot itself be regarded as an ‘activity’. The same applies to provisions defining the purpose of an airfield security zone or laying down certain restrictions on its use. Indeed, it is by no means unusual that the lessor reserves certain rights as regards the land which is leased or delimits the margin of manoeuvre that the farmer has in relation to the leased land (for example, as regards the use of pesticides, the crops to be planted, or indeed, the maintenance of the land in an environmentally sound manner). At the very most, I would describe the rules and restrictions stemming from both the legislation and the contractual clauses as enabling the exercise of a non-agricultural activity.
43. However, it must be borne in mind that, to be eligible for aid, the land at issue must, in any event, form part of the farmer’s holding. As will be explained in point 60 et seq. below, the specific rules and restrictions pertaining to the use of the land in question are of relevance in the context of that assessment (rather than in deciding whether the land is used primarily for agricultural activity as opposed to non-agricultural activity).
44. Be that as it may, it is for the referring court to determine whether or not the land was used for military exercises or any other non-agricultural activity. Despite those reservations and given that that issue has not been extensively discussed either by the referring court or by the parties, I will now examine the questions referred, basing that examination on the assumption that the parcels of land in question are indeed subject to mixed use (both agricultural and non-agricultural activities).
B – An ‘eligible hectare’
1. The primary purpose and predominant use in the case of mixed use of land
45. In the context of Questions 1 and 2, the referring court wishes to know, inter alia, whether, in order for an agricultural area to be eligible for aid, the decisive factor is that the primary purpose of the use of that area is agricultural.
46. Before dealing with that issue, I note as a preliminary point that there seems to be little doubt that the areas at issue in the main proceedings constitute agricultural areas within the meaning of Regulations No 1782/2003 and No 73/2009: indeed, the areas at issue are used to cultivate grass for the production of feed pellets. Therefore, those areas can with relative ease be classified as agricultural, because they are being used as arable land or permanent pasture within the meaning of Article 2(1) and (2) of Regulation No 796/2004. (13) It also seems to be undisputed that Mr Demmer’s activity, which consists in cultivating grass on that land, constitutes an ‘agricultural activity’ within the meaning of the Basic Regulations.
47. As regards more specifically the purpose of the areas at issue, it seems safe to assume that their original purpose (or the reason for their existence) was to ensure airfield and air traffic safety. Initially, those areas might not have been intended for use as agricultural land. However, that circumstance must be clearly distinguished from the purpose for which those areas are currently and in fact used. Although admittedly elusive concepts, it seems difficult to distinguish the primary purpose for which the areas are used — the concept to which the referring court alludes in its questions — from the predominant use of that land within the meaning of Article 34(2) of Regulation No 73/2009. Indeed, as Advocate General Mazák has already noted, what matters (for the purposes of an ‘eligible hectare’) is the actual use of the area, or perhaps what is actually planted in the area, rather than the objectives or (overriding) purposes for which the land is used. (14) That is why I take the view that when a question arises as to the eligibility of a parcel of land, the relevant yardstick for assessing that is the predominant (and actual) use of that land.
48. To determine what constitutes the predominant use of a particular parcel of land, Regulation No 370/2009 (which inserted Article 3c in Regulation No 795/2004) offers helpful guidance as to the criteria to be employed, even though that regulation is not applicable ratione temporis to the whole period between 2005 and 2009. In fact, Article 3c of Regulation No 795/2004 provides that an area that is subject to both agricultural and non-agricultural activities is to be regarded as being used predominantly for agricultural activities in so far as the agricultural activity in question can be exercised without being significantly hampered by the intensity, nature, duration or timing of the non-agricultural activity.
49. The following question therefore arises: what does ‘significantly hampered’ mean in this context? — I will deal with that issue next.
2. The predominant use of an area
50. Certainly, it would be tempting to leave this to the referring court, given its exclusive jurisdiction to assess the facts. Nevertheless, to ensure, as far as possible, that the eligibility rules are uniformly applied throughout the European Union (despite the leeway left to Member States to implement those rules in accordance with the second paragraph of Article 3c of Regulation No 795/2004), I will try to chart some parameters that will be of use in determining what constitutes predominant agricultural use of a particular parcel of land. (15)
51. First, I would note that the concept of ‘predominant use’ is in itself somewhat misleading. Indeed, if due consideration were not given to Article 3c of Regulation No 795/2004, it would be reasonable to assume that, in order to qualify for aid, only purely ancillary or incidental non-agricultural activities may take place on the parcel of land in question. However, Article 3c explicitly lowers the threshold for eligibility: indeed, the fact that predominant use merely requires that the agricultural activity not be significantly hampered suggests, to my mind, that the focus of the assessment ought to be on the particular conditions surrounding the exercise of the agricultural activity and, more specifically, on the actual possibilities of exercising that activity. (16) In that regard, there is no bar on the exercise of two (or more) activities on the same parcel of land, provided that the non-agricultural activities do not significantly hinder the practice of the agricultural activity.
52. Given that it is impossible — and not altogether desirable — to draw up an exhaustive list of situations in which the agricultural activity is to be regarded as predominant, it is of particular significance that the referring court takes all factual circumstances regarding the different uses into account when carrying out its assessment. To the extent that a degree of interference can be observed as regards the exercise of the agricultural activity, the next step is to see whether that interference reaches a level which can be regarded as ‘significant’. To reach that threshold, I believe the farmer would have to meet with actual — and not inconsequential — difficulties or obstacles in carrying out the agricultural activity.
53. To be more specific, let us imagine that a farmer enters into an agreement with a ski resort. Under that agreement, the farmer cultivates grass but also puts cattle out to pasture on the parcels of land at issue, which form part of the skiing area during the winter season. In other words, the same parcels of land are used for different activities. However, as long as the non-agricultural activity does not make it more difficult for the farmer to cultivate the land and harvest the crop during the relevant periods of the year, the non-agricultural activity can hardly be said to constitute a hindrance capable of significantly hampering the farmer’s agricultural activities. Obvious parallels can be drawn with the organisation of military exercises: simply because military exercises are organised (subject to verification by the referring court) on the land in question does not mean that that land is no longer covered by the term ‘eligible hectares’ — as long as those exercises do not significantly interfere with the agricultural activity in question.
54. Admittedly, the use of relevant contractual prerogatives as well as restrictions resulting from the exercise of the non-agricultural activity (here: the organisation of military exercises or the smooth functioning of flight operations) can certainly place constraints on the farmer. However, that does not automatically imply that the agricultural activity is significantly hampered.
55. In my view, the eligibility of a parcel of land should only be said to be affected where the non-agricultural activity also interferes with the agricultural use of the land in terms of its temporal and/or spatial scope. (17) In that sense, what is paramount is that the farmer is able to pursue the agricultural activity of his choice despite the parallel exercise of a non-agricultural activity and, as the case may be, the application of special rules and restrictions concerning the use of the land in question. As I see it, the agricultural activity is not significantly hampered where the farmer can in fact use the land in question for the agricultural activity of his choice. (18)
56. Admittedly, as the Commission and the Danish Government contend, the choice of potential agricultural activities is remarkably limited in the case of airfields. It is also true that the cutting of grass in the vicinity of runways and stopways serves other (non-agricultural) objectives, such as air traffic safety: to comply with air safety regulations the grass has to be cut in any event. However, under the single payment scheme, those circumstances lack importance. Instead, what is important — as is illustrated, in particular, by Article 34(2) of Regulation No 73/2009 and Article 3c of Regulation No 795/2004 — is that the farmer can pursue the agricultural activity of his choice on the land in question.
57. In the case of Mr Demmer, for example, he has chosen to grow grass for the production of feed pellets on the land in question. That constitutes an agricultural activity that can be exercised without great difficulty on that land. (19) I fail to see why Mr Demmer should be penalised for opting for an agricultural activity that can be carried out despite the applicable restrictions and the ‘competing’ non-agricultural activity.
58. Moreover, in order to address the concerns of the Danish Government, a further observation is called for. I do not think that to accept, in circumstances such as those of the case before the referring court, that the agricultural activity is not significantly hampered by the non-agricultural activity would be to stretch the limits of eligibility too far. Indeed, a point that should not be overlooked is that we are dealing with provincial (military) airfields here. To be more precise, it appears counterintuitive to argue that any major transport hub or a green area surrounding busy motorways would fulfil the criterion identified in point 55 above. Because of the intensity (but perhaps also the nature, duration and timing) of the non-agricultural activity in such areas, the farmer would certainly be prevented from pursuing the agricultural activity of his choice during, as the case may be, the growing or pasture season.
59. That clarification made, I conclude that safety areas surrounding runways, taxiways and stopways at airfields that are subject to special rules and restrictions may be ‘eligible’ for aid within the meaning of Article 44(2) of Regulation No 1782/2003 and Article 34(2) of Regulation No 73/2009 provided that the agricultural activity exercised in those areas is not significantly hampered by the non-agricultural activity. However, that is not enough for the area fully to qualify for aid. The parcels of land under consideration must also, in accordance with Article 44(2) of Regulation No 1782/2003 and Article 34(2) of Regulation No 73/2009, form part of the farmer’s holding. I will deal with that issue next.
3. The requirement that the area must form part of the holding
60. The first point to note is that, under Article 44(2) of Regulation No 1782/2003 and Article 34(2) of Regulation No 73/2009, any agricultural area of the holding is eligible for aid. ‘Holding’ is defined in Article 2(b) of Regulation No 1782/2003 (and of Regulation No 73/2009) as ‘all the production units managed by a farmer situated within the territory of the same Member State’.
61. The Court has already provided guidance on the term ‘holding’ in Landkreis Bad Dürkheim. (20) As in the present case, the farmer in that case was not at full liberty to use the areas in question. On the contrary, she was bound by certain instructions from the national authorities to ensure that the nature and landscape conservation objective of that land was attained. In its judgment in Landkreis Bad Dürkheim, the Court stated that the decisive criterion for determining whether a particular area of land forms part of the farmer’s holding is that the farmer is able to use the area in question with a degree of autonomy and possesses decision-making power sufficient for carrying out the agricultural activities in question. However, the Court was careful to explain that the criterion relating to autonomy does not imply that the farmer must enjoy unlimited power over the area in question when using it for agricultural purposes. (21)
62. Admittedly, the Landkreis Bad Dürkheim case concerned the specific context of nature conservation, which the Court acknowledged to be consistent with the general objectives of Regulation No 73/2009. Notwithstanding that fact, I believe the above statement concerning the criterion of autonomy is also relevant in the context of areas of land used for purposes that have no immediate link to the objectives of the single payment scheme. As that statement makes clear, the assessment of whether an area of land forms part of the farmer’s holding is closely linked to the issue of what constitutes the predominant use of that specific area. Indeed, the relevant criteria appear to converge to a certain extent. (22)
63. In the present case, we are dealing with safety areas surrounding runways, taxiways and stopways at airfields. The applicable rules and restrictions stem, on the one hand, from national and international provisions designed to ensure air traffic safety and, on the other, from contractual terms. They concern, inter alia, the maintenance of the land in a specific condition, the crops that may be grown and harvested (in practice, grass) and the acceptable height of the grass. It can hardly be denied, therefore, that a farmer in Mr Demmer’s position does not enjoy complete autonomy regarding the use of the areas in question.
64. However, as long as a farmer is able to use the land for the agricultural activity of his choice without that activity being significantly hampered by the non-agricultural activity carried out on that land (or, where no actual non-agricultural activity is taking place, merely by the applicable rules and restrictions), there is no reason to consider that the areas of land at issue before the referring court would not also form part of the farmer’s holding within the meaning of Regulations No 1782/2003 and No 73/2009. Provided that that criterion is fulfilled, I cannot see why a farmer such as Mr Demmer would not also possess a degree of autonomy and decision-making power sufficient for carrying out the agricultural activities in question, as required by the case-law of the Court.
65. As a final point, I would draw attention to the fact that the single payment scheme is a form of income support that may encourage farming in areas that would not otherwise be used for farming. The case before the referring court is a case in point. However, I am unable to find reasons in the applicable legislative framework, or elsewhere, why the mere fact that an agricultural activity is exercised on land situated within the parameters of an airfield would automatically preclude that area from eligibility for aid. Provided that the criterion identified in point 55 above is met, the location of the land is irrelevant.
66. I therefore take the view that agricultural land which consists of safety areas surrounding runways, taxiways and stopways at airfields is to be regarded as allocated to a ‘holding’ and thus as eligible for aid within the meaning of Article 44(2) of Regulation No 1782/2003 and Article 34(2) of Regulation No 73/2009; provided that, despite the applicable rules and restrictions, the farmer enjoys a degree of autonomy and decision-making power sufficient for carrying out the agricultural activities of his choice on the areas of land in question.
67. If, after assessing all the relevant facts pertaining to the dispute pending before it, the referring court concludes that the areas at issue are not eligible for aid because the rules and restrictions significantly hamper Mr Demmer’s agricultural activity, the question arises whether Mr Demmer ought reasonably to have detected the erroneous allocation of payment entitlements and payment of aid (Question 3). In that regard, the relevant time-frame by reference to which that assessment is to be made must also be determined (Questions 4 and 5). I will deal with all those questions together in the following.
C – Errors that can reasonably be detected by the farmer, and good faith
68. Three issues arise in the present case: (i) whether there was an error that could reasonably have been detected by the farmer as regards the allocation of payment entitlements for the areas of land in question; (ii) whether there was an error that could reasonably have been detected by the farmer at the time when aid was paid for the land in question; and, lastly, (iii) whether a beneficiary such as Mr Demmer can be regarded as having acted in good faith. The referring court is also unsure as to the relevant time by reference to which to carry out that assessment.
69. As a matter of principle, unduly allocated entitlements are to be withdrawn and unduly paid aid is to be recovered. Fundamentally, the aim underlying the recovery of undue payments is undoubtedly to protect the financial interests of the European Union and prevent unjustified enrichment. (23) That idea is clearly expressed by Articles 73(1) and 73a of Regulation No 796/2004. There are, however, exceptions to that rule.
70. Those exceptions are expressed in Article 137(2) of Regulation No 73/2009 (undue allocation of payment entitlements) and Article 73(4) and (5) of Regulation No 796/2004 (undue payment of aid). Undoubtedly, as the Danish Government observes, those provisions are designed to ensure that the principle of the protection of legitimate expectations is respected. (24) The question remains, however, whether or not those exceptions fall to be applied in the circumstances of the present case.
71. Before addressing that question, I would note as a preliminary point that under the approach adopted above, the eligibility of areas of land situated within the parameters of airfields depends on a case-by-case analysis. Indeed, eligibility cannot be excluded at the outset. Eligibility may also vary from one aid year to another. In fact, safety areas surrounding runways, taxiways and stopways at airfields may constitute eligible hectares provided that the farmer can actually pursue the agricultural activity of his choice on the land at issue. Another point that must be kept in mind is that farming constitutes a professional activity. In my view, that fact ought to be attributed particular significance in identifying the degree of care that the farmer is to exercise in applying for aid under the single payment scheme.
72. In relation to that last point, I would draw attention to Article 12 of Regulation No 796/2004, and in particular to Article 12(1)(f) and (4) of that regulation. Under those provisions, it falls on the farmer to check the accuracy of the information on the pre-printed form employed to apply for aid under the single payment scheme. It further transpires from those provisions that the income support system set up by the Basic Regulations is founded on the premiss that farmers are aware of the conditions that govern the grant of aid under the schemes in question. Those provisions embody the idea that farmers, as professionals, can be expected to exercise special care in applying for aid and to be aware of the conditions pertaining to the grant of aid.
73. Moreover, as the Commission points out, the fact that the competent authorities have allocated payment entitlements to specific areas of land or that aid has been paid in relation to those areas does not ‘exonerate’ the farmer from his obligations. Indeed, the provisions that the referring court identifies in its questions, and in particular Article 73 of Regulation No 796/2004, concern situations where an undue payment has already been made. What is more, under Article 73a of that regulation, the farmer is to give up unduly allocated entitlements and they must be deemed not to have been allocated at all. Therefore, simply because payment entitlements have been allocated (or, indeed, payments have been made) does not mean that the unduly received benefit is to be regarded as regular. Rather, a risk — of which farmers ought to be aware — exists that corrections may have to be made even after payment.
74. Thus, a professional farmer such as Mr Demmer ought to know the conditions pertaining to ‘eligible hectares’ within the meaning of Article 44(2) of Regulation No 1782/2004 and Article 34(2) of Regulation No 73/2009. Therefore, it does not appear particularly severe to require such a farmer — particularly given his professional experience (25) — to be aware of the special rules that apply with regard to areas of land subject to mixed use. (26) As regards, more specifically, the issue of good faith and aid that has already been paid, I would simply note that the fact that payment has been made matters little in assessing whether a beneficiary could be considered to have acted in good faith. In the particular context of an aid scheme designed to provide income support for a group of professionals, the assessment of good faith ought — as with the reasonability test above — to rest on objective elements.
75. With regard to the relevant point in time by reference to which to make the assessment, I would note the following.
76. First, Article 137 of Regulation No 73/2009 lays down the rule that payment entitlements allocated unduly before 1 January 2009 are to be regularised as of 1 January 2010. However, that rule applies only in so far as the error which induced the undue payment could not reasonably have been detected by the farmer. In that regard, it transpires from the case-file that the contentious parcels of land were removed from the land register in 2008. At that point, that information — but also the intention of the competent authority to reconsider the applications for previous years and recalculate the payment entitlements — was communicated to Mr Demmer. In view of that fact, I consider that Article 137(2) of Regulation No 73/2009 does not fall to be applied in the circumstances of the case pending before the referring court.
77. More generally, for that provision to apply, the error must be such that the farmer could not reasonably have detected it before 1 January 2010. Where the farmer has been significantly impeded in his agricultural activity by the non-agricultural activity (at any point before 1 January 2010), I cannot see how it could seriously be argued that a farmer, in his professional capacity, could not have detected the error which led to the allocation of payment entitlements.
78. Secondly, Article 73 of Regulation No 796/2004 concerns payments that have already been made. Bearing in mind the information that Mr Demmer had in 2008, the exceptions to recovery provided for in Article 73(4) and (5) may, in the particular circumstances of the present case, fall to be applied only as regards the period prior to that time.
79. When assessing whether a farmer could reasonably have detected an error leading to an undue payment for the purposes of Article 73(4) of Regulation No 796/2004, the relevant moment ought, in my view, to be the time of the payment — as is also clearly indicated by that provision. Indeed, why ought the farmer to be prevented from applying for aid in circumstances where the areas of land may, after all, constitute eligible hectares?
80. In the case of mixed use of land, in particular, it is entirely conceivable that the impact of both the contractual and the legislative restrictions on the use of the land in question may not become evident until the aid year in question. For example, it might not be possible to predict, prior to making an application, whether (and, if so, to what extent) the landowner de facto makes use of his contractual prerogatives (in the present case, military exercises) or whether the farmer may actually use the land in question for the agricultural activity of his choice. To the extent that aid is paid for one aid year at a time, the assessment with regard to Article 73(4) of Regulation No 796/2004 ought, in my view, to be carried out separately in respect of each individual aid year. This is because circumstances may, as explained above, change over time.
81. Thirdly and lastly, in accordance with Article 73(5) of Regulation No 796/2004, the repayment obligation is limited to four years where the beneficiary has acted in good faith. As was mentioned above, I do not believe that a farmer who genuinely intends to use the land in question for a particular agricultural activity should be penalised for applying for aid. This is because the farmer might not be able to determine until afterwards whether the restrictions on the use of the land are of such a nature as to prevent him from using the areas in question for the agricultural activity of his choice.
82. That said, in order to benefit from the exception laid down in Article 73(5), the farmer must — given, in particular, the need to avoid unjustified enrichment — act in good faith (that is, in the genuine belief that the agricultural activity of his choice can actually be exercised on the land) at all relevant times, beginning with the time at which payment entitlements are allocated and ending with the time of payment of the aid. Accordingly, the assessment of good faith for the purposes of Article 73(5) of Regulation No 796/2004 must be carried out in respect of each aid year separately and good faith must continue up to the time of payment.
IV – Conclusion
83. In the light of the foregoing, I propose that the Court answer the questions referred by the Vestre Landsret as follows:
(1) Safety areas surrounding runways, taxiways and stopways at airfields may be eligible for aid within the meaning of Article 44(2) of Council Regulation (EC) No 1782/2003 of 29 September 2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers and Article 34(2) of Council Regulation (EC) No 73/2009 of 19 January 2009 establishing common rules for direct support schemes for farmers under the common agricultural policy and establishing certain support schemes for farmers provided that, despite the applicable rules and restrictions, the farmer is able actually to use the land at issue for the agricultural activity of his choice.
(2) Where a farmer applies for aid for an agricultural activity exercised on safety areas surrounding airfield runways, taxiways and stopways,
(a) there is an error which could reasonably have been detected by the farmer for the purposes of Article 73(4) of Commission Regulation (EC) No 796/2004 of 21 April 2004 laying down detailed rules for the implementation of cross-compliance, modulation and the integrated administration and control system provided for in Council Regulation (EC) No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers (as amended) if — at the time of payment — the farmer was aware that he was unable actually to use the land at issue for the agricultural activity of his choice during the relevant aid year, and
(b) the beneficiary cannot be regarded as having acted in good faith for the purposes of Article 73(5) of Regulation No 796/2004 if — at the time of payment — the farmer was aware that he was unable actually to use the land at issue for the agricultural activity of his choice during the relevant aid year.
(3) The assessment in relation to points 2(a) and 2(b) is to be carried out for each aid year individually.