Opinion of the Advocate-General
1 The questions referred for a preliminary ruling by the Højesteret relate to the interpretation of the principles of Community law regarding the recovery of Community aid paid but not due and in particular the scope of the judgment delivered by the Court in the case of Deutsche Milchkontor and Others. (1) More particularly, the Court is requested to state whether, in circumstances similar to those which appertain in the main proceedings, the obligation to recover aid may be made inoperative with regard to someone who received the benefit in good faith or who relied on the aid having been correctly paid.
2 The facts of the case which have given rise to the questions submitted for examination by the Court are, briefly stated, as follows.
The defendants in the main proceedings are Danish undertakings operating in the beef trade. During the period from 1985 to 1989 they acquired considerable quantities of `ground beef' from Slagtergården Bindslev A/S (hereinafter `Slagtergården') in order to export it to Arab countries. At the time of export the defendants requested and obtained from the competent Danish authorities, in pursuance of the relevant Community provisions, (2) the payment of a `differentiated' export refund. Refunds, it should be remembered, are Community export aids and are defined as `differentiated' precisely because their amount, which is calculated differently depending on their destination, is adjusted to the price charged on the target market. The principal objective of the rules is to facilitate the sale of Community products on the markets of third countries by offering compensation to the exporter equalling any difference between the Community market price and the normally lower price charged elsewhere.
In this particular case, the amount of the refund was determined by reference to the percentage of beef included in the composition of the product, on the basis of the declarations made by the defendants themselves at the time of their application. Laboratory checks carried out in the Middle East in 1989 revealed, however, that the `ground beef' in respect of which the person concerned had received an export refund in actual fact contained pork. Following this discovery, the customs authorities in Denmark carried out detailed checks at the premises of the producer, Slagtergården. Those checks revealed that the composition of the product differed from that indicated by the defendants in the application for export refunds. The percentage of beef was only 28%, although the exporting undertakings had received refunds on the basis of a declared percentage of 60%. The amount of the aid refunded was therefore considerably higher than the amount actually due. As can be seen from the order for reference, this point is not disputed.
Criminal proceedings were brought against the producer, who was sentenced to a term of imprisonment. At the same time, the Danish authorities required the exporter undertakings to repay the refunds unduly granted. However, the court hearing the case at first instance upheld the applications from the exporter undertakings, holding in substance that they had acted in good faith, since the undue payments had in fact been made as a result of the inappropriate nature of the checks organised by the authorities, who should in consequence bear the risk.
The court making the reference, which was called upon to rule on the appeal lodged by the Danish Ministry of Agriculture, referred the following questions to the Court for a preliminary ruling:
`1. A. Do the Community law principles which result from the case-law of the Court of Justice concerning demands for reimbursement of sums unduly paid as aid, according to which the interests of the Community should be fully taken into account, preclude national law from taking into consideration, as criteria for excluding demands for reimbursement of aid unduly paid:
- the good faith of the aid recipients and thus the protection of legitimate expectations;
- the fact that 5 to 10 years have elapsed since the payment of the aid, and hence that it would be particularly onerous for the aid recipients to have to reimburse the aid now;
- the reason for the undue payment of the aid being exceptional circumstances in the form of serious fraud and punishable offences on the part of a third party; and
- the fact that - as the exporter undertakings were aware - the monitoring authority exercised day-to-day supervision at the place of manufacture, without discovering the fraud and/or taking action;
- the fact that, over the whole period in which payments were made, the authority making the payment was aware that the value of the monitoring system depended on the accuracy of the information supplied by the undertaking being monitored, but despite that fact omitted to ask to see recipes or the producer's accounts relating to the purchase of raw materials;
where the underlying principle is that the same criteria apply in connection with demands for reimbursement of purely national aid?
B. Would the answer be the same if account were taken in national law of the fact that there were no other circumstances which should have given the exporter undertakings grounds for doubting that the product qualified for refunds?
2. Do the Community law principles that follow from the case-law of the Court of Justice concerning reimbursement of aid unduly paid, according to which the interests of the Community are to be fully taken into account, preclude an exporter undertaking being considered to be in good faith, and thus not under an obligation to reimburse an amount of aid, if it is taken into consideration that the exporter undertakings did not reserve the right by agreement with the producer to carry out their own checks at the place of manufacture in order to ensure that the products were manufactured in accordance with the declaration signed by the exporter, when account is taken of the fact that:
- the producer had export approval from the authority that made the payments;
- the exporter undertakings were trading undertakings and the goods did not pass through them;
- the exporter undertakings knew that the monitoring authority exercised day-to-day supervision at the place of manufacture; and
- the price of finished products of equivalent type and description was the same from producers in Denmark and those abroad?
3. May a third party, including an aid recipient, rely on possible negligence on the part of the monitoring authority with the result that demands for reimbursement of refunds already paid would be excluded on the basis of an overall assessment of the case?'
The first question
3 The purpose of the first question is in substance to ascertain whether, in the context of legal proceedings to recover Community aid paid but not due, a court may take into account, in order to exclude the obligation to demand repayment, certain special circumstances which apply in the case concerned and which Danish law takes into consideration in the context of rules governing similar demands for reimbursement of purely national origin.
Let us first consider whether any significance can be ascribed to the good faith of the person concerned, the defendant in the proceedings for recovery. In that regard, the defendants in the main proceedings, the Commission, the German Government and the French Government, whilst proposing differing solutions on the merits of the case, are unanimous in considering that the specific criterion of the obligation to repay is not governed by Community rules. In their view, the recovery of sums paid but not due only came to be governed by uniform rules with the adoption of Commission Regulation (EC) No 2945/94 of 2 December 1994, (3) which is not however applicable to the facts of the case. In accordance with the Deutsche Milchkontor case-law, therefore, the action pending before the national court should be governed exclusively by the relevant provisions of national law, given that, as the Court stated in that judgment, `the rules and procedures laid down by national law must not have the effect of making it virtually impossible to implement Community regulations and national legislation must be applied in a manner which is not discriminatory compared to procedures for deciding similar but purely national disputes'. (4)
However, I cannot endorse that view. Good faith here must be regarded as the subjective state of the recipient, that is to say, lack of awareness of the undue nature of the benefit received. That said, in this particular case, it is a matter of ascertaining whether the obligation to demand repayment is defined in objective terms by the legal system, namely whether the obligation stems exclusively from the objective circumstance that the sum received was not due or whether it is dependent upon an additional condition, of a so-to-speak subjective nature, linked to the recipient's awareness of the undue nature of the aid received. In other words, it is a matter of ascertaining whether the rules concerning the subjective aspect of the obligation to make restitution derive from the Community's own legal system or whether it is necessary to have recourse to the relevant provisions of national law. I, for my part, feel that I must draw from the body of Community rules preceding Regulation No 2945/94 the conclusion that the recovery of export refunds has always been independent of any subjective condition. (5) It is true that the Community rules on the reimbursement of refunds paid but not due did not expressly provide for the case of an exporter who has received undue sums in good faith. However, that omission does not constitute a lacuna in the system now under consideration. On the contrary, it reflects the specific choice of the Community legislature not to attach any importance to the subjective element in an action for recovery. This conclusion, moreover, ties in with the rationale behind the export refund. As the Court has pointed out in other cases, (6) that system derives from a desire to promote the sale of Community products on world markets. To that end, an exporter is paid an amount designed to compensate for any difference there may be between the Community price and the price charged on other markets: the amount paid by the authority granting the refund is adjusted exclusively by reference to the amount of that difference, and the exporter's right to the refund can only be asserted in relation to it. The purpose of the system we are looking at here is as follows: refunds unduly received must be repaid and, where they have been granted in advance, the recipient is required to lodge a deposit in order to guarantee repayment. (7) Such reimbursement is due in any case, irrespective of any finding concerning the subjective state of the recipient. Repayment does not constitute a penalty for any unlawful behaviour, but simply involves reimbursement of an amount which lacks any objective justification. It strikes me as significant, moreover, that even when the goods do not arrive, due to force majeure, at the destination declared in the application but are exported to a place for which a lower refund was provided, the exporter concerned is none the less required to reimburse the difference between the amount received and that which he could legitimately claim. The Court recently clarified this point in the judgment in the case of Anglo Irish Beef Processors International and Others, stating that the recipient is not entitled, even in a case of force majeure, to keep the entire sum paid in advance. (8)
In conclusion, the Community legislature has defined the reimbursement of refunds paid but not due as an objective obligation which merely involves restitution, irrespective of any criterion of fault or responsibility of the part of the person who is bound by that obligation. As the Court said in the Plange judgment, (9) `the grant of the refund constitutes an advantage for the trader which is justified if certain conditions concerning the characteristics of the product exported and the method of exportation are fulfilled. When checks reveal that that has not been the case, the refund is not due to the exporter and it must be repaid if it has already been received ... It is not ... necessary in order to claim repayment that the trader should have been guilty of fraud or of mistakes attributable to fault on his part'.
The recovery of refunds paid but not due is necessary, therefore, irrespective of the good or bad faith of the person concerned: national legal systems cannot in any way alter the strictly objective scope of an action for recovery under Community law.
4 In any case, even if those considerations were left aside, I do not believe that an exporter from whom reimbursement of export refunds is claimed would, in circumstances similar to those described in the order for reference, be able to plead his good faith to avoid the obligation to repay the refunds. In this connection, it is sufficient to consider that the mistake which the exporter concerned claims to have made without any negligence on his part relates to the composition of the products in respect of which the refund was paid. As regards the grant of aid, it is the exporter who must state in his declaration `(a) a description of the products in accordance with the nomenclature used for refunds; (b) the net mass of the products or, where applicable, the unit of measurement to be taken into account in calculating the refund; and, (c) in so far as is necessary for calculating the refund, particulars of the composition of the products or the relevant reference'. (10)
The legal system thus imposes on the exporter an obligation to make a declaration and, more particularly, an obligation to submit correct declarations; all the more so since the checks to establish whether the conditions justifying the grant of aid and the amount thereof have been fulfilled are carried out precisely on the basis of the declarations submitted by the person concerned. Hence any mistake regarding the composition of the goods - which has led the authority to agree to a refund higher than that actually due - must be regarded as an inexcusable mistake since it relates to matters of fact which under the system it is for the exporter to check. It is of little relevance, consequently, that the person concerned was unaware of the true composition of the goods: what matters is that he ought to have known.
The defendant undertakings in the main proceedings contend, however, that the recipients of the aid were in this case commercial undertakings. The fraud, they maintain, was committed by the producer and it would be excessive to claim that an exporter, who had no opportunity of checking the quality of the goods, should carry out detailed laboratory tests in order to establish the truth of the declarations submitted to the authorities. Yet this argument is not convincing. The benefit of the refund is given to the exporter and is granted on the basis of his declarations. I do not therefore see who else should guarantee the truth of the statements submitted to the authorities. It does not strike me as unreasonable or excessive that the risk involved in the possible inaccuracy of the statements should be borne by the person making the declaration who is, moreover, the recipient of the aid.
5 Furthermore, no significance can be attached to the fact that the failure of the goods to conform to the declaration submitted by the exporter was due to fraudulent behaviour by a third party, the producer, in which the exporter himself had no hand at all. As the Court stated in this connection on another occasion, (11) `the exporter's good faith and the fact that he did not take part in the fraud cannot be taken into account'. The explanation for this approach in the case-law, confirmed on many occasions, lies in the fact that the right to obtain the refund is linked to strictly objective criteria: `the good faith of the exporter' - as Advocate General Gulmann observed in his Opinion in the Boterlux case (12) - `is immaterial in that regard. It is the exporter who is responsible for the conditions being met and, in principle therefore, it is the exporter who must bear the risk of non-compliance with those conditions'; that explains why the Court has always considered that any fraudulent behaviour on the part of a third party `represents an ordinary commercial risk' in the context of `contractual relations entered into on the occasion of an exporter applying for a refund'. (13) As the Court held in its judgment in the Theodorakis case, (14) it is for the person concerned, `who is fully at liberty to select such trading partners as his interests in that respect may dictate, to take the appropriate precautions either by including the requisite clauses in the contract in question or by effecting appropriate insurance'. In the case of fraudulent behaviour on the part of a trading partner, an exporter cannot therefore claim that he should be allowed to keep the refund to which he was not entitled; the most he can do is to claim before the national court the contractual or non-contractual protection which he is afforded under his own legal system against the other contracting party, but he may not keep aid which has been paid but was not due.
6 Still in the context of the first question referred for a preliminary ruling, the national court also asks the Court of Justice whether the reimbursement of aid paid but not due can be excluded under the principle, laid down by national law, that recovery would harm the legitimate expectations of the recipient of the aid. The answer, in the light of the information contained in the order for reference, must be in the negative. To begin with, it should be pointed out that protection of legitimate expectations, according to established case-law, is one of the general principles of Community law. (15) In the case of actions for recovery based on Community law, therefore, it is the principle laid down by that law which applies and not the corresponding principle laid down by the various national legal systems. That solution makes it possible to avoid differences of treatment under the law, in all cases which should in principle be subject to the same rules.
That said, I should like to observe that the Court has recently held that the rules applying in the matter of export refunds `cannot give rise to any legitimate expectations other than entitlement to a refund subject to the conditions laid down'. (16) Any trader of average awareness must realise that the system of export aids only confers entitlement to a refund provided, and only provided, that the objective conditions for granting it have been met. It is equally clear that the exporter is required to repay any portion of the aid to which he was not entitled.
It is difficult to see what expectation the person concerned could have entertained in this particular case. In that connection, the finding that expectations are only worthy of protection provided they are legitimate seems to me to be decisive, that is to say, a recipient must, without any negligence on his part, have relied on the lawfulness of the aid, even if it was only apparent. In other words, Community law provides protection for expectations only in the absence of negligence. The Court has on several occasions reiterated the principle with regard to State aid that expectations as to the lawfulness of aid are justified only if the aid has been granted in accordance with the procedure laid down in Article 93 of the Treaty, inasmuch as `a diligent businessman should normally be able to determine whether that procedure has been followed'. (17) I consider that in this respect the case-law expresses a principle of general application regarding legitimate expectations and therefore provides a decisive key to resolving this particular case. The rationale underlying these cases is that the recipient is required, in keeping with the general duty of care, to ensure that the procedure under which he has been given the aid is lawful. No legitimate expectation can therefore have been aroused where the aid is illegal as a result of an infringement of procedural rules, which constitutes an easily verifiable defect, ignorance of which is not a defence.
In this particular case, the exporters have no expectations worthy of protection for the simple reason that the illegality of the aid relates to circumstances which the persons concerned were not aware of but of which they should none the less have been aware. This seems to me to be a point which is beyond dispute. It is apparent from the order for reference that the exporters received undue refunds because they had declared that they were exporting goods with a beef content higher than that which was actually present in the product. It is quite possible that they were not aware of the real composition of the product; the fact remains, however, that they could and should have been aware of it. It is therefore impossible for the exporters to rely on the absence of negligence in pleading lack of awareness of matters which they were under a duty to declare; that duty, needless to say, must clearly be construed as an obligation to provide correct declarations, with the result that the risk of any errors falls on those actually making the declarations.
The fact that the authority carried out checks at the place of production without, however, finding any irregularities is equally unlikely to give rise to legitimate expectations. Whilst acknowledging that the authority failed in its obligation to carry out the necessary checks with due care, it is sufficient to point out that the Court has repeatedly stated that `a practice of a Member State which does not conform to Community rules may never give rise to a legitimate expectation on the part of a trader who has benefited from the situation thus created'. (18) The supervisory duty incumbent on Member States - as the Court stated in the Corman judgment (19) - `is owed to the Community and ... only the Community authorities may act upon any breach of such duty. The supervision exercised in this connection has neither the aim nor the effect of discharging the successful tenderer in any way whatever from his responsibilities arising from the tender'. The point of that judgment is that the exercise of supervision by Member States does not relieve the exporter of the obligation to check that his declarations are correct: the purpose of the supervision is not to provide the traders concerned with any certainty that the products meet the conditions laid down for granting an export refund. In other words, it does not provide a `guarantee' for exporters. It is therefore impossible for the latter to entertain legitimate expectations on the basis of the conduct of the supervisory authorities.
7 The national court also asks the Court of Justice whether the recovery of refunds paid but not due may be avoided on the ground that the considerable amount of time which elapsed between the grant of the aid and the demand for its repayment would make repayment itself particularly onerous for the recipient. The answer in my view should be in the negative. The national court may, of course, apply to the action for recovery the rules on limitation provided for by its own legal system in the case of similar demands for repayment based on national law. Apart from such rules, however, the amount of time elapsing between the granting and the refunding of the aid is totally irrelevant. Moreover, any reimbursement constitutes a diminution of property and is an onerous step for the person concerned. I do not believe that the national court should have a discretion to distinguish between cases in which recovery is seen as a `normal' charge and those, on the other hand, in which it entails excessive loss.
The second question
8 The above considerations make it possible, in my view, to answer the second question as well. In formulating the question, the national court starts from the premiss that a recipient in good faith is not obliged to repay sums unduly received and asks the Court for details regarding the concept of good faith. In particular, it asks whether or not, in circumstances such as those of this case, the recipient can be regarded as acting in good faith and hence be exempted from the obligation to reimburse refunds paid but not due. For the reasons set out above, however, the exporter is in any case required to refund that part of the aid to which he was not entitled; whether or not he acted in good faith is, I repeat, totally irrelevant in that regard. In any case, again in the context of the examination of the first question, I have also explained the grounds on which, in this case, the elements constituting good faith are not present. Good faith presupposes an excusable error, which is lacking here, since the error relates to a matter of fact, namely the composition of the product, of which any person concerned should have been aware had he shown normal care.
The third question
9 The third question raised by the national court relates to the consequences arising from the failure of the authorities to carry out checks on the export transactions in question with due care. I have already answered this point, however: the exporter cannot rely on any negligence on the part of the supervisory authority in order to evade his obligation to repay refunds unduly received. If such negligence has caused him economic damage, he can at most seek compensation from the authorities for the damage sustained, provided of course that the conditions laid down under national law are met in order to be able effectively to bring a claim for compensation.
Conclusion
10 In the light of the foregoing, I propose that the Court should reply to the questions referred by the Højesteret as follows:
Community law, in particular Commission Regulation (EEC) No 3665/87 of 27 November 1987 laying down common detailed rules for the application of the system of export refunds on agricultural products, has defined the reimbursement of export refunds paid but not due as an obligation to make restitution. They must be reimbursed on the basis of the objective finding that they were not due, regardless of the exporter's good faith, of any fraudulent behaviour on the part of a third party, or of the considerable amount of time which elapsed between payment and the demand for repayment, without prejudice in the latter case to the possibility of the national court applying the provisions laid down by national law regarding the limitation period for similar property claims.
An exporter who has obtained undue export refunds on the basis of incorrect declarations concerning the composition of the product which were made to the authorities by the exporter himself cannot be deemed to have acted in good faith.
Any negligence on the part of the administration in the performance of its supervisory duties does not give rise to any legitimate expectations as to the lawfulness of the export refunds granted to the person concerned. A diligent businessman must be in a position to ensure that the goods exported comply with the details declared by the exporter in his application for the grant of export refunds.
(1) - Joined Cases 205/82 to 215/82 [1983] ECR 2633.
(2) - These were Article 18 of Council Regulation (EEC) No 805/68 of 27 June 1968 on the common organisation of the market in beef and veal (OJ, English Special Edition 1968 (I), p. 187); Article 6 of Council Regulation (EEC) No 885/68 of 28 June 1968 laying down general rules for granting export refunds on beef and veal and criteria for fixing the amount of such refunds (OJ, English Special Edition 1968 (I), p. 237), and Commission Regulation (EEC) No 1315/84 of 11 May 1984 fixing the export refunds on beef and veal (OJ 1984 L 125, p. 38).
(3) - Regulation amending Regulation (EEC) No 3665/87 laying down common detailed rules for the application of the system of export refunds on agricultural products, as regards the recovery of amounts unduly paid and sanctions (OJ 1994 L 310, p. 57).
(4) - See Deutsche Milchkontor and Others, cited above, paragraph 19.
(5) - Like the Commission, I consider it necessary to assess this particular case in the light of Commission Regulation (EEC) No 3665/87 of 27 November 1987 laying down common detailed rules for the application of the system of export refunds on agricultural products (OJ 1987 L 351, p. 1) which `consolidates' Commission Regulation (EEC) No 2730/79 of 29 November 1979 laying down common detailed rules for the application of the system of export refunds on agricultural products (OJ 1979 L 317, p. 1).
(6) - See the judgment in Case 89/83 Dimex [1984] ECR 2815, paragraphs 8 and 9.
(7) - In the event of payment in advance, the deposit is intended to provide security to the authority granting the refund for repayment of the amount paid if it were to be established subsequently that `the conditions for granting the refund [were] not fulfilled' (22nd recital in the preamble to Regulation No 3665/87) or if `there was a right to a smaller refund': see Article 6 of Council Regulation (EEC) No 565/80 of 4 March 1980 on the advance payment of export refunds in respect of agricultural products (OJ 1980 L 62, p. 5), as amended by Council Regulation (EEC) No 2026/83 of 18 July 1983 (OJ 1983 L 199, p. 12).
(8) - Case C-299/94 [1996] ECR I-1925, paragraph 25.
(9) - Case 288/85 [1987] ECR 611, paragraph 11 (emphasis added).
(10) - See Article 3(5) of Regulation No 3665/87 (emphasis added).
(11) - See the judgment in Case C-347/93 Boterlux [1994] ECR I-3933, paragraph 36.
(12) - Case C-347/93 Boterlux, cited above, at p. I-3941, see in particular note 14 in which the Advocate General pointed to the case-law of the Court in the Irish Grain Board case (Case 254/85 [1986] ECR 3309). In that case, which concerned monetary compensatory amounts, the Court considered the good faith of the exporter to be irrelevant.
(13) - Boterlux, cited above, paragraph 35.
(14) - Case 109/86 [1987] ECR 4319, paragraph 8.
(15) - See, among many others, Joined Cases C-31/91 to C-44/91 Lageder and Others [1993] ECR I-1761, paragraph 33, with case-law references.
(16) - See Anglo Irish Beef Processors International and Others, cited above, paragraph 33.
(17) - See, most recently, Case C-24/95 Alcan Deutschland [1997] ECR I-1591, paragraph 25, which also contains case-law references.
(18) - See Lageder and Others, cited above, paragraph 34.
(19) - Case 124/83 [1985] ECR 3777, paragraph 21.
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