Cases T-274/08 and T-275/08

Italian Republic

v

European Commission

(EAGF – Clearance of the accounts of the paying agencies of Member States concerning expenditure financed by the EAGF – Sums recoverable from the Italian Republic where there is non-recovery within the time-limits specified – Meaning of financial consequences – Receipt of interest – Article 32(5) of Regulation (EC) No 1290/2005)

Summary of the Judgment

Agriculture – Common agricultural policy – EAGF financing – Accounts clearance procedure

(Council Regulation No 1290/2005, Art. 32(5))

Article 32(5) of Regulation No 1290/2005 on the financing of the common agricultural policy relates to specific situations in which a Member State has not recovered sums payable as a result of irregularity or negligence, either within four years of the primary administrative or judicial finding, or within eight years where recovery action is taken in the national courts. In such situations, it is stated that 50% of the financial consequences of non-recovery shall be borne by the Member State concerned and 50% by the Community budget.

In interpreting a provision of Community law, it is necessary to consider not only its wording but also the context in which it occurs and the objects of the rules of which it is part. First, the words ‘financial consequences’ have a wide scope in so far as they are capable of including all the effects of a financial nature linked to non-recovery of sums irregularly paid. The interest which should have been paid under Article 32(1) of that regulation is necessarily one of those effects.

Secondly, that literal interpretation is borne out by Article 34(1)(a) of Regulation No 1290/2005 under which sums which, under Articles 31, 32 and 33 of that regulation, must be paid to the Community budget, including interest thereon, shall be regarded as assigned revenue within the meaning of Article 18 of Regulation No 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities. That interpretation is also consistent with the general scheme of the accounts clearance procedure. Article 32(5) of Regulation No 1290/2005 must be read in the light of Article 32(1) of that regulation, which constitutes the general framework as regards reimbursement to the Community of amounts payable as a result of irregularity or negligence in the use of funds. In so far as Article 32(5) does not amend the principle of the inclusion of interest, but merely divides the financial responsibility between the Member State and the Community budget where there is non-recovery of the amounts payable within reasonable periods, it assuredly follows from that that the ‘financial consequences’ referred to in Article 32(5) of that regulation include, inter alia, the principal sums and the interest thereon.

Thirdly, it is apparent from the preamble to Regulation No 1290/2005, and in particular from recitals 25 and 26 in that preamble, that the system of shared financial responsibility established by Article 32(5) of that regulation is designed to protect the financial interests of the Community budget by a partial charging to the Member State concerned of sums payable as a result of irregularities and not recovered within reasonable deadlines. The obligation to recover the interest outstanding for the period from the time when the irregularity was discovered to the time when the sums in question were actually recovered is compensatory in nature in so far as the interest relates to the temporary damage suffered by the Community budget as a result of the fact that it has not been in receipt of a credit entered in its favour.

Fourthly, the principle that interest is ancillary to the principal amount and follows the same accounting regime is of general application in the context of the rules relating to the Community budget as is evidenced by Article 86(1) of Regulation No 2342/2002 laying down detailed rules for the implementation of Regulation No 1605/2002, implementing Article 71(4) of Regulation No 1605/2002, which states that without prejudice to any specific provisions deriving from the application of sectoral rules, any amount receivable not repaid shall bear interest.

(see paras 36-37, 39-41, 44-45)