OPINION OF ADVOCATE GENERAL
PITRUZZELLA
delivered on 26 October 2023 (1)
Case C‑437/22
R.M.,
E.M.
other party:
Eesti Vabariik (Republic of Estonia, represented by the Põllumajanduse Registrite ja Informatsiooni Amet)
(Request for a preliminary ruling from the Riigikohus (Supreme Court, Estonia))
(Reference for a preliminary ruling – Agriculture – Common agricultural policy – Contributions from the European Union – Administrative measures and penalties – Fraud committed by representatives of a limited liability company – Recovery of sums unduly paid)
1. A Member State’s court proceedings establish conclusively that representatives of a capital company submitted false information with a view to obtaining agricultural financing subsequently obtained; during the national proceedings, the company was wound up and rights and obligations transferred to another company without adequate resources; may the Member State demand repayment of sums unduly paid directly from the natural persons who were the legal representatives and shareholders of the company receiving the financing (and also of the transferee company) and who engaged in the fraudulent conduct conclusively established?
I. Legal framework
A. European Union law
Regulation EC, Euratom) No 2988/95 (2)
2. The fourth and fifth recitals of Regulation (EC, Euratom) No 2988/95 state:
‘… the effectiveness of the combating of fraud against the Communities’ financial interests calls for a common set of legal rules to be enacted for all areas covered by Community policies.
… irregular conduct, and the administrative measures and penalties relating thereto, are provided for in sectoral rules in accordance with this Regulation’.
3. Article 1 of the regulation provides:
‘1. For the purposes of protecting the European Communities’ financial interests, general rules are hereby adopted relating to homogenous checks and to administrative measures and penalties concerning irregularities with regard to Community law.
2. “Irregularity” shall mean any infringement of a provision of Community law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by them, either by reducing or losing revenue accruing from own resources collected directly on behalf of the Communities, or by an unjustified item of expenditure.’
4. Article 2 of the regulation provides:
‘1. Administrative checks, measures and penalties shall be introduced in so far as they are necessary to ensure the proper application of Community law. They shall be effective, proportionate and dissuasive so that they provide adequate protection for the Communities’ financial interests.
…
3. Community law shall determine the nature and scope of the administrative measures and penalties necessary for the correct application of the rules in question, having regard to the nature and seriousness of the irregularity, the advantage granted or received and the degree of responsibility.
4. Subject to the Community law applicable, the procedures for the application of Community checks, measures and penalties shall be governed by the laws of the Member States.’
5. Article 4 of the regulation is worded as follows:
‘1. As a general rule, any irregularity shall involve withdrawal of the wrongly obtained advantage:
– by an obligation to pay or repay the amounts due or wrongly received,
…
4. The measures provided for in this Article shall not be regarded as penalties.’
6. Pursuant to Article 5(1) of Regulation No 2988/95:
‘Intentional irregularities or those caused by negligence may lead to the following administrative penalties:
…’
7. Article 7 of the regulation provides:
‘Community administrative measures and penalties may be applied to the economic operators referred to in Article 1, namely the natural or legal persons and the other entities on which national law confers legal capacity who have committed the irregularity. They may also apply to persons who have taken part in the irregularity and to those who are under a duty to take responsibility for the irregularity or to ensure that it is not committed.’
Regulation (EU) No 1306/2013 (3)
8. Recital 39 of Regulation (EU) No 1306/2013 states:
‘In order to protect the financial interests of the Union’s budget, measures should be taken by Member States to satisfy themselves that transactions financed by the Funds are actually carried out and are executed correctly. Member States should also prevent, detect and deal effectively with any irregularities or non-compliance with obligations committed by beneficiaries. To this end, Council Regulation (EC, Euratom) No 2988/95 … should apply. In cases of infringement of the sectoral agricultural legislation, where detailed rules on administrative penalties have not been laid down by Union legal acts, Member States should impose national penalties which should be effective, dissuasive and proportionate.’
9. Article 54 of Regulation No 1306/2013, entitled ‘Common Provisions’, provides:
‘1. For any undue payment following the occurrence of irregularity or negligence, Member States shall request recovery from the beneficiary within 18 months after the approval and, where applicable, reception, by the paying agency or body responsible for the recovery, of a control report or similar document, stating that an irregularity has taken place. The corresponding amounts shall be recorded at the time of the recovery request in the debtors’ ledger of the paying agency.
…
3. On duly justified grounds, Member States may decide not to pursue recovery. A decision to this effect may be taken only in the following cases:
…
(b) where recovery proves impossible owing to the insolvency, recorded and recognised under national law, of the debtor or the persons legally responsible for the irregularity.
…’
10. The first paragraph of Article 56 of the regulation, entitled ‘Provisions specific to the [European Agricultural Fund for Rural Development (EAFRD)]’, provides:
‘Where irregularities or negligence are detected in rural development operations or programmes, Member States shall make financial adjustments by totally or partially cancelling the Union financing concerned. Member States shall take into consideration the nature and gravity of the irregularities detected and the level of the financial loss to the EAFRD.’
11. Article 58 of the regulation, entitled ‘Protection of the financial interests of the Union’, provides as follows:
‘1. Member States shall, within the framework of the CAP, adopt all legislative, regulatory and administrative provisions and take any other measures necessary to ensure effective protection of the financial interests of the Union, in particular to:
…
(e) recover undue payments plus interest, and bring legal proceedings to that effect as necessary.
…’
Delegated Regulation (EU) 640/2014 (4)
12. Article 35, entitled ‘Non-compliance with the eligibility criteria other than the size of area or number of animals, commitments or other obligations’, provides in paragraph 6:
‘Where it is established that the beneficiary provided false evidence for the purpose of receiving the support or failed to provide the necessary information due to negligence, the support shall be refused or withdrawn in full. Furthermore, the beneficiary shall be excluded from the same measure or type of operation for the calendar year of finding and for the following calendar year.’
B. Estonian law
13. Under Article 381(2) of the kriminaalmenetluse seadustik (Code of Criminal Procedure), a public authority may, in criminal proceedings, bring an action for recognition of a public-law claim if the fact giving rise to that claim is largely based on the same material elements that constitute the offence that is the subject of the proceedings.
14. Under Article 111 of the Euroopa Liidu ühise põllumajanduspoliitika rakendamise seadus (Law transposing the common agricultural policy of the European Union), entitled ‘Recovery of subsidies’:
‘(1) If, after the payment of the subsidy, it appears that the subsidy, as a result of irregularities or negligence, has been unduly paid and, in particular, if it has not been used for the intended purpose, all or part of the subsidy must, for the reasons and within the time limits provided for in Regulations (EU) Nos 1303/2013 and 1306/2013 of the European Parliament and of the Council and other relevant EU regulations, be recovered from the beneficiary of the subsidy and in particular from the beneficiary of a subsidy chosen following a selection procedure.
…’
II. Background to the dispute
15. By judgment of the Viru Maakohus (Court of First Instance, Viru, Estonia) of 15 March 2021, R.M. was convicted on three counts of subsidy fraud. In particular, he, as the representative of X OÜ (‘X’), intentionally made false statements to the Põllumajanduse Registrite ja Informatsiooni Amet (Agricultural Registers and Information Board; ‘PRIA’). As a result, in the years 2013 to 2017, PRIA unduly paid X agricultural aid in the total amount of EUR 143 737.38, which was to be financed by the European Union. In two of the three counts of subsidy fraud, in addition to R.M., E.M. was convicted as an accomplice.
16. At the same time, the Viru Maakohus (Court of First Instance, Viru) upheld the ‘civil action within criminal proceedings’ brought by the injured party, the Republic of Estonia (represented by PRIA), and ordered the accused persons to repay to the State the amounts of aid unduly paid to X as a result of the fraud as follows: R.M. to pay the amount of EUR 87 340.00 and R.M. and E.M. to pay jointly and severally the amount of EUR 56 397.38.
17. The Viru Maakohus (Court of First Instance, Viru) stated that where, following the payment of aid, it transpires that the subsidy has been unduly paid as a result of irregularities or negligence, the subsidy is, pursuant to Article 111(1) of the Law transposing the common agricultural policy of the European Union, to be recovered from the beneficiaries, in whole or in part, in accordance with the conditions and time limits laid down in the relevant EU regulations.
18. The injured party is therefore entitled to request repayment of the aid unduly paid to X also from R.M. and E.M.
19. R.M. and E.M.’s defence lawyers lodged an appeal against the judgment of the Viru Maakohus (Court of First Instance, Viru), contesting both the criminal conviction of the accused persons and the upholding of the ‘civil action within criminal proceedings’.
20. By judgment of the Tartu Ringkonnakohus (Court of Appeal, Tartu, Estonia) of 15 September 2021, the judgment of the Viru Maakohus (Court of First Instance, Viru) was upheld. The Court of Appeal followed the view of the Court of First Instance that X had obtained the funding by fraud, failed to meet its own contribution obligation and submitted falsified documents.
21. The Court of Appeal also concurred with the view of the Viru Maakohus (Court of First Instance, Viru) that, under Article 7 of Regulation No 2988/95, the injured party is entitled to recover the aid unduly paid to X from R.M. and E.M.
22. The defence lawyers acting for R.M. and E.M. brought an appeal on a point of law against the judgment of the Court of Appeal, contesting both the criminal conviction of the accused persons and the upholding of the ‘civil action within criminal proceedings’.
23. In the present criminal case, the Criminal Chamber of the Riigikohus (Supreme Court, Estonia) delivered, on 20 May 2022, a partial judgment upholding the judgments of the Tartu Ringkonnakohus (Court of Appeal, Tartu) and the Viru Maakohus (Court of First Instance, Viru), inter alia, in so far as R.M. and E.M. had been found guilty and sentenced on several counts of the abovementioned subsidy fraud.
24. The accused persons’ guilty verdicts and sentences thus became final. At the same time, the Riigikohus (Supreme Court) decided to proceed with the appeal on a point of law and to give a subsequent ruling by a separate judgment in so far as the courts had ordered R.M. to pay to the State EUR 87 340.00 and R.M. and E.M. jointly and severally to pay to the State EUR 56 397.38 by way of a settlement for the aid unduly paid to X.
25. In those circumstances, the referring court stayed the proceedings and referred the following questions to the Court of Justice for a preliminary ruling:
‘(1) In circumstances such as those in the main proceedings, does a basis with a direct legal effect flow from Article 7 of Regulation [No 2988/95], read in conjunction with Article 56(1) and Article 54(1) of Regulation [No 1306/2013] and with Article 35(6) of Delegated Regulation [No 640/2014], for the recovery of fraudulently obtained aid financed by the [EAFRD] from the representatives of a beneficiary legal person who intentionally made false declarations with a view to fraudulently obtaining the aid?
(2) In circumstances such as those of the main proceedings, in which aid to be financed by the EAFRD was, as a result of fraud, set and paid to a limited liability company (Estonian company), can the representatives of the beneficiary company who carried out the fraud and who, at the time when the aid was fraudulently obtained, were simultaneously the beneficial owners of that company, also be regarded as beneficiaries within the meaning of Article 54(1) of Regulation [No 1306/2013] and Article 35(6) of Delegated Regulation [No 640/2014]?’
III. Legal analysis
26. As requested by the Court, I shall focus my legal analysis on the first question referred for a preliminary ruling by the referring court.
27. I note that it might not be necessary to answer the second question referred for a preliminary ruling, since if the answer to the first question is in the affirmative in the terms which I propose, the second question is encompassed by the first question.
28. In essence, the referring court seeks to ascertain whether Article 54 and the first paragraph of Article 56 of Regulation No 1306/2013 and the first sentence of Article 35(6) of Regulation No 640/2014, read in conjunction with Article 7 of Regulation No 2988/95, must be interpreted as meaning that reimbursement of financing wrongly received by the EAFRD as a result of an irregularity may be claimed not only from the beneficiary of that aid but also from persons who, although they cannot technically be regarded as beneficiaries, participated in the implementation of the irregularity which led to the undue payment of the financing.
A. General remarks
29. The common agricultural policy is implemented in shared management between the Member States and the European Union, and EU funds are paid to the final beneficiaries through the Member States. The Member State must effectively protect the financial interests of the European Union by ensuring that only interventions complying with the provisions of EU law are financed by EU funds. Article 58(1) of Regulation No 1306/2013 requires Member States to take all measures necessary to ensure effective protection of the financial interests of the European Union and recover undue payments. The Member States are best placed to recover sums unduly paid as a result of irregularities or negligence and to determine the most appropriate steps to be taken in that respect. Thus, in particular, it is for the national authorities to choose the remedies which they deem most appropriate to recover the sums in question. Those articles are the expression, as regards the financing of the common agricultural policy, of the general obligation of diligence laid down in Article 4(3) TEU, which requires Member States to carry out recovery and take measures to rectify irregularities in a timely manner. (5) Compliance with the relevant procedures and deadlines with regard to recovery under national law constitutes a minimum obligation, which is necessary but is not sufficient to show a Member State’s diligence for the purposes of Article 58(1) of Regulation No 1306/2013. (6)
30. It follows from that general legislative context that the recovery of sums unduly paid is a specific obligation of the Member States, designed to ensure effective protection of the financial interests of the European Union.
31. As the Danish government has pointed out in its statement in intervention, (7) this is a matter of great importance in relation to the ability of Member States to carry out effective checks on the compliance of agricultural financing with EU legislation: the problem that has given rise to the questions referred for a preliminary ruling in the present case – namely that the entity that received the aid, and is thus legally the ‘beneficiary of the aid’ (Company X), either no longer exists in law or does not have sufficient resources to make the repayment – frequently arises where the national authorities have to request repayment of unduly paid agricultural aid. The effective implementation of the obligation to require recovery of aid unduly paid presupposes that the Member States are in a position to initiate such proceedings not only against the direct beneficiaries but also against representatives of the undertakings [concerned] – in so far as they participated in the irregularities – or of their beneficial owners. In essence, the aim is to ensure the effectiveness of provisions of EU law: a system which permitted such situations because it relied on a formalistic interpretation would risk rendering seriously ineffective the possibility of recovering sums unduly paid and would encourage unlawful conduct.
32. The national court has referred the question to the Court of Justice for a preliminary ruling and has also referred to the possible direct effect of the provisions of EU law which, taken together, could provide a legal basis for the recovery of the unduly paid financing from the natural persons who perpetrated the fraud.
33. I share the Commission’s view that the question is not whether Article 7 of Regulation No 2988/95 has direct effect, but whether, in conjunction with the sectoral provisions, it is sufficient in itself to require reimbursement of the financing from the natural persons representing the beneficiary company who were responsible for the conduct which caused the irregularities. That question arises because the EU legislature has adopted sectoral rules providing for reimbursement, but has not adopted the conditions for their application to that category of persons, and the law of the Member State in which the irregularity occurred does not expressly provide for the application of an administrative measure to that category of persons.
34. The legal issues to be resolved in order to give a useful answer to the preliminary question are therefore, in my view, as follows: (a) the relationship between Regulation No 2988/95 and the sectoral regulations (in particular, whether the general rules laid down in Regulation No 2988/95 as regards administrative measures and the entities from which wrongly paid financing may be recovered are also valid in specific areas in which those rules are not reproduced and in the absence of national legislation implementing those rules); (b) the different principles applicable (and the different legal regime) to administrative penalties and measures (and therefore the non-applicability of the principles identified by the Court in some precedents relating to penalties); and (c) the determination of the appropriate legal regime for the perpetrators of the offences.
B. Question referred for a preliminary ruling
35. Regulation No 2988/95 contains several general provisions laying down rules for the effective protection of the financial interests of the European Union.
36. It governs any situation involving an irregularity, namely the infringement of a provision of EU law resulting from an act or omission by an economic operator which has, or would have, the effect of prejudicing the budget. (8)
37. The objective of Regulation No 2988/95 is to protect the financial interests of the European Union in all areas and to establish a common set of legal rules for all areas covered by EU policies. (9)
38. The fifth recital provides that sectoral rules on administrative measures and penalties must be consistent with Regulation No 2988/95. Similarly, recital 39 of Regulation 1306/2013 provides that, since Member States should prevent, detect and deal effectively with any irregularities or non-compliance with obligations committed by beneficiaries, Regulation No 2988/95 should apply.
39. The case-law of the Court of Justice (Grand Chamber) also confirms that, in the area of checks and penalties for irregularities committed under EU law, the EU legislature has, by adopting Regulation No 2988/95, laid down a series of general principles and has required that, as a general rule, all sectoral regulations comply with those principles. (10)
40. Regulation No 2988/95 is therefore a general regulation which, although it does not preclude the establishment of specific or sectoral rules in the European Union’s various fields of activity, requires that those rules be interpreted in accordance with the general framework that it defines.
41. In so far as is relevant here, the general principles with which the sectoral provisions must comply go beyond Article 1, mentioned above, Article 4 and Article 7.
42. The first indent of Article 4(1) of Regulation No 2988/95 provides that ‘as a general rule, any irregularity ‘shall involve withdrawal of the wrongly obtained advantage … by an obligation to repay the amounts … wrongly received’.
43. From a lexical point of view, it is clear that the term ‘involve’, even when accompanied by the phrase ‘as a general rule’, leaves no room for judgement or discretion: the meaning can only be that in the event of an irregularity Member States must take steps to recover the amounts, in application of the abovementioned duty of care, except where this is not possible. An example of a derogation may be found in the sectoral legislation, more specifically in Article 54(3)(b) of Regulation No 1306/2013 (11) (which I will also explore below in relation to the structural distinction between penalties and other administrative measures).
44. Article 7 provides that administrative measures and penalties may be applied not only to the economic operators referred to in Article 1, namely the natural or legal persons and the other entities on which national law confers legal capacity who have committed the irregularity, but also to persons who have taken part in the irregularity and to those who are under a duty to take responsibility for the irregularity or to ensure that it is not committed.
45. Article 7, therefore, determines the scope of access to recovery from subjects, that is to say, the range of persons from whom, depending on the circumstances, repayment of the sum unduly paid may be demanded. Its function is to confirm the perspective of the regulation’s provisions in terms of substance, in line with its objectives. That perspective, at least as regards recovery measures, must seek to allow the Member States to effectively carry out their duty of diligence, by enabling the recovery of sums from the persons who actually caused the irregularity, without lending itself to possible and, to tell the truth, all too easy forms of evasion.
46. Next, Article 7 is systematically linked and is instrumental to Article 4(1), which, as a general principle of EU law, provides that any irregularity is to involve withdrawal of the wrongly obtained advantage by an obligation to repay the amounts wrongly received.
47. Articles 54 and 56 of Regulation No 1306/2013 and Article 35 of Delegated Regulation 640/2014 do not reproduce those provisions, either as regards the recovery obligation or the persons to whom the request for reimbursement is to be addressed. Those provisions refer only to ‘beneficiaries’, identified as the natural or legal persons who have received funding.
48. Hence the referring court’s doubts: while it is convinced that the recovery may only be directed towards the persons who, through their subsequent conduct (opening the company, obtaining financing by means of false documents, closing the company, opening another manifestly insolvent company) were the real protagonists who caused the undue funding from the European Union, it doubts whether, in the absence of specific provisions in the sectoral regulations or national legislation, the provisions of Articles 4 and 7 of Regulation No 2988/95 are sufficient to constitute an appropriate legal basis for recovery.
49. The doubts arise, in particular, from the fact that in the judgment in SGS Belgium (12) the Court held that Regulation No 2988/95 is not in itself sufficient as a legal basis for imposing penalties under Article 5 of that regulation. The Court recalled that some of the provisions of a regulation may necessitate, for their implementation, the adoption of implementing measures by the Member States or by the EU legislature itself (paragraph 33) and that this also applies to the administrative penalties imposed on the various categories of operators identified in Regulation No 2988/95 (paragraph 34). In order for a penalty to be applied, it is therefore necessary for EU sectoral legislation or, in the absence of such legislation, national legislation to provide for the application of an administrative penalty to that category of persons (paragraphs 43 to 62). This is in line with the principle of legality. (13)
50. The referring court’s doubts may, however, be dispelled if it can be demonstrated that there is structural difference between administrative measures and penalties and through a textual, systematic and teleological interpretation of the relevant provisions of EU law.
51. A textual interpretation would, in itself, be sufficient to demonstrate the clear difference between penalties and other administrative measures, such as the recovery of sums unduly paid: Article 4 of Regulation No 2988/95, relating to administrative measures, states that any irregularity ‘shall involve’, as a general rule, withdrawal of the wrongly obtained advantage; Article 5 of that regulation, relating to penalties, states that intentional irregularities or those caused by negligence ‘may lead to’ the following administrative penalties. There is a clear difference in the legislative choices made: the recovery of sums, unless there are express derogations otherwise, implies the automatic withdrawal of the wrongly obtained advantage without any need for further implementation or specifications. (14) The imposition of sanctions is possible (‘may lead to’) because it depends on ascertaining the subjective element (intention or negligence), and that requires implementing parameters for its assessment, just as the choice between the various measures provided for in Article 5 itself requires implementing parameters, and thus leaves room for discretion in implementation.
52. None of this applies to the administrative measure of withdrawal (and the associated demand for repayment of the financing), which does not require any specification or implementation, and leaves no room for discretion: the establishment of the irregularity gives rise to the obligation to recover the sums from the persons who were actively involved in the irregularity and are clearly and unequivocally defined by Article 7 of Regulation No 2988/95. (15) In the first instance, the request for repayment must, of course, be addressed to the natural or legal person directly responsible for the irregularity (the beneficiary in the technical sense); where that is not possible by reason of the specific circumstances, as in the cases at hand, it must be addressed to the persons who have taken part in the irregularity or who are under a duty to take responsibility for it or to ensure that it is not committed.
53. Article 4(4) of Regulation No 2988/95 is very clear: ‘the measures provided for in this Article shall not be regarded as penalties’.
54. A systematic interpretation confirms this approach: as the Danish Government has pointed out, the provisions of Article 54(3)(b) of the abovementioned Regulation No 1306/2013 would also be meaningless if they were not interpreted as meaning that persons other than the direct beneficiary may be liable for the irregularity and may therefore be subject to a repayment obligation.
55. Article 2(2) of Regulation No 2988/95, which provides that ‘no administrative penalty may be imposed unless a Community act prior to the irregularity has made provision for it’ confirms what follows from the principles, namely that, for the imposition of penalties (criminal or even administrative penalties of a punitive nature), the principle of legality must be strictly respected. (16) The fact that the above provision does not refer to administrative measures confirms that only the principles of legal certainty and legitimate expectations may apply to such measures. As regards the legal certainty, I consider that it is fully respected in the interpretation offered, since Article 7 of Regulation No 2988/95 unequivocally clarifies the consequences of a finding of irregularity of financing from the EU budget: the obligation on the part of the State to recover the sums from the persons who actually contributed to the irregularity. As for legitimate expectations, this principle can certainly not be invoked in the event of a total absence of good faith where, in fact, the conduct displayed is intended to give a false representation of reality and to attempt to avoid its consequences.
56. As the Commission has concurringly observed in that regard, (17) the Court has held that, even in the absence in sectoral or national legislation of a provision providing for the application of a penalty, the national authority is required to apply an administrative measure, within the meaning of the first indent of Article 4(1) of Regulation No 2988/95, which requires repayment of all of the aid unduly paid, in so far as it is established, which it is for the national court to determine, that that aid was wrongly granted. (18)
57. As regards the objectives, I can only repeat my observations above in my general remarks: the overriding purpose of Regulation No 2988/95 is to effectively protect the financial interests of the European Union. That could not be achieved if a formalistic interpretation of EU law made it excessively difficult for the Member States to recover sums unduly paid where the persons who committed the irregularities were found to have acted wrongfully.
58. It is therefore clear that the principles laid down by the Court in the judgment in SGS Belgium cannot be extended to a case where it is necessary to proceed solely with the recovery of sums unduly paid. The fact that the persons are not direct beneficiaries has no bearing on the conclusion, since a reading of all the provisions cited by the referring court, taken as a whole, constitutes an appropriate legal basis for recovering sums unduly paid.
59. One final remark on a procedural point, raised by the applicants in the main proceedings, namely, the need for the national government to seek reimbursement of sums unduly paid previously to the newly formed company, even if it is insolvent. In the light of the foregoing, it seems to me that this is a purely formal question: if the national court has established that the company newly formed by the applicants is in fact unable to pay the large debt, I do not think it would be helpful to make a request for repayment that could not be followed by appropriate recovery measures. Second, the referring court will have to ascertain any procedures or rules in national law governing the relationship between shareholders, directors and companies. On the basis of the foregoing, I would reiterate that, under EU law, the persons who have participated in the implementation of the irregularity are liable in their own right for the repayment of sums unlawfully paid by way of agricultural financing, once it has been established that it is impossible to recover them from the beneficiary of the financing, in the technical sense.
60. Another assessment to be made by the national court is whether national law permits those natural persons to be classified as persons who ‘have taken part in the irregularity’, persons who ‘are under a duty to take responsibility for the irregularity’ or persons who ‘are under a duty to ensure that it is not committed’.
61. If Article 7 of Regulation No 2988/95, read in conjunction with the sectoral provisions, were not interpreted in that way, this could result in the actual perpetrator of the fraud being released from liability and would seriously jeopardise the protection of the financial interests of the European Union. As the Commission has pointed out, another reason is that it is individuals and not legal entities who engage in fraud. (19)
IV. Conclusion
62. On the basis of all of the foregoing considerations, I propose that the Court answer the questions referred for a preliminary ruling as follows:
Articles 4 and 7 of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests, in conjunction with Articles 54 and 56 of Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008, and Article 35(6) of Commission Delegated Regulation (EU) No 640/2014 of 11 March 2014 supplementing Regulation (EU) No 1306/2013 of the European Parliament and of the Council with regard to the integrated administration and control system and conditions for refusal or withdrawal of payments and administrative penalties applicable to direct payments, rural development support and cross compliance
must be interpreted as meaning that the combined provisions of those provisions constitute a legal basis for requiring repayment of funds obtained by means of fraudulent actions and granted by the European Agricultural Fund for Rural Development (EAFRD), by representatives of the beneficiary legal person who deliberately provided false information in order to obtain that financing.
It is for the national court to ascertain that the recipient company or its successor in rights and obligations is not in a position to repay the financing unduly granted and that, under national law, the person from whom repayment is sought is regarded as a ‘person who has taken part in the irregularity’, a ‘person responsible for the irregularity’ or a ‘person with a duty to ensure that the irregularity is not committed’.