Opinion of the Advocate-General
A - Introduction
1 This case essentially concerns the validity of financial aid granted by way of advances for which security is required to be lodged in the form of guarantees. The guarantees can only be released once entitlement to the aid is recognised. If the aid is advanced unlawfully, the national authorities must recover the corresponding amount or lose the right to claim the expenditure from the EAGGF.
2 The Italian Republic has now brought an action for the annulment in part of Commission Decision 96/701/EC of 20 November 1996 (hereinafter `the Decision') amending Decision 96/311/EC (1) on the clearance of the accounts presented by the member States in respect of the expenditure for 1992 of the Guarantee Section of the EAGGF and in respect of certain expenditure for 1993. (2) The Italian Republic challenges that decision in so far as it disallows certain expenditure in respect of aid for the consumption of olive oil.
3 The Commission justifies the financial adjustment which it finally applied in the sum of ITL 11 934 331 913 essentially on the ground that the procedural and monitoring provisions relating to the granting of aid had not been observed.
B - Facts
4 Following an exchange of highly detailed correspondence between the EAGGF and the Italian authorities concerning the documentation and evidence relating to the legality of the aid advanced for the consumption of olive oil for the financial year 1992, the Commission at first envisaged applying an adjustment of ITL 17 149 929 372. In September 1994, the Italian authorities produced additional information. By its decision of 13 January 1995, the Commission informed the Member States that only such documents as had been produced before 28 February 1995 would be taken into consideration in clearing the accounts for the 1992 financial year.
5 By letter of 15 June 1995, the EAGGF, on the basis of the additional information it had meanwhile received, advised the Italian authorities of the financial adjustment to be made in the amount of ITL 11 934 331 913, corresponding to the aid for the consumption of olive oil which had been paid unlawfully and had not been recovered.
6 By letter of 6 July 1995, the Commission officially notified the Italian authorities that the sum at issue could not be taken into account for the 1992 financial year. However, by letter of 17 January 1996, the Commission stated that the sums claimed back and recovered could be taken into account for the 1995 financial year provided, inter alia, that the EAGGF received the corresponding documents by 29 February 1996.
7 After extending the time-limit in this case too, the Commission finally applied a definitive adjustment for the 1992 financial year of approximately ITL 743 million, taking into account also four of the cases at issue here.
8 On 20 November 1996, the Commission adopted the contested decision on the clearance of accounts in respect of the 1992, and in part the 1993, financial years on the basis of the documents which it had received prior to 28 February 1995, confirming thereby the financial adjustment announced in the sum of ITL 11 934 331 913.
9 It appears from the Summary Report (3) that the Commission decision which is challenged here was based on the fact that in 82 instances - no longer covered and secured by guarantee - aid had been paid unlawfully and that the sums advanced had not yet been recovered from the recipients by the national authorities.
10 The Italian Government contests the legality of the reductions, arguing essentially that the conclusions in the Summary Report are incorrect. In the exposition of its argument, the Italian Government subdivides the undertakings concerned into five groups.
11 Group A comprises seven undertakings. In their case, according to the Italian Government, the aid has already been claimed back and recovered. These are the undertakings Valdolio, P.I.O., Certo C., OL. F.lli de Sensi, Perilli, Vizzari and OL. Albenese.
12 Group B includes the Luccisano undertaking. In its case the aid to be recovered is said to have been set off against other claims.
13 Group C concerns the Valle Piacentino undertaking which, according to the Italian Government, has meanwhile lodged security, in the form of a voluntary mortgage on real property owned by it and a bank guarantee, to cover the aid paid. At the time when the guarantee was released, there were still no grounds for suspecting any unlawful conduct on the part of that undertaking.
14 With regard to the undertakings in Group D, the Italian Government maintains that recovery of the sums paid has not yet been achieved in full and that in the meantime the aid is still secured by guarantees.
15 Lastly, the fifth category concerns the special case of the Caruso Rosa undertaking. The authority responsible for monitoring compliance with the conditions for the granting of aid for the consumption of olive oil (Agecontrol) had found irregularities in the case of that company, without, however, succeeding in ascertaining the amount of the aid wrongly paid. Nor has it been possible, in the absence of reliable information, to forfeit the guarantees. However, as soon as the current additional investigations are completed, the amount of aid unlawfully paid will be claimed back.
16 The Italian Government claims that the Court should:
- annul the decision of the Commission of 20 November 1996 No C(96)3274 final in so far as it refuses to charge to the EAGGF ITL 11 934 331 913 in the clearance of accounts submitted by the Italian Republic in respect of expenditure in the 1992 financial year; and
- order the defendant to pay the costs.
17 The Commission contends that the Court should:
- dismiss the action, and
- order the applicant to pay the costs.
18 The Commission contends that the Italian Government has not shown that it made mistakes in assessing the facts. The Commission maintains that it correctly assessed all the information that it had received before 25 February 1995 and that, therefore, its decision to disallow the expenditure in respect of aid for the consumption of olive oil was a proper one. That alone is sufficient ground for dismissing the action brought by the Italian Republic as unfounded.
19 As regards, now, the individual undertakings mentioned by the Italian Government, the Commission's submissions are as follows:
With the exception of the expenditure concerning the undertakings P.I.O., Certo C. and Perilli, the expenditure in respect of the Group A undertakings had been taken into account in the context of the clearance of the accounts for the 1995 financial year. The information provided on those three undertakings was, however, contradictory and did not justify the conclusion that the aid advanced had indeed been recovered.
20 Similarly, the documents concerning the Luccisano undertaking do not justify the conclusion that the amount declared had actually been paid back to the EAGGF.
21 With regard to the Valle Picentino undertaking, the security initially lodged was not forfeited and the amount declared was neither claimed back nor credited to the account of the EAGGF.
22 With regard to the undertakings comprising Group D, the Italian Government itself concedes that the amounts paid have not yet been recovered and that the Italian authorities are not in a position to prove that the guarantees exist. That very fact shows, however, that the contested reductions were rightly made.
23 Finally, as regards the Caruso Rosa undertaking, the guarantees should not have been released and the Italian authorities should instead have demanded that the period of validity of the guarantees be extended.
C - The applicable legislation
24 The basic rules governing the olive oil sector are set out in Regulation No 136/66/EEC. (4) Article 11(1), inserted by Regulation (EEC) No 2210/88, (5) provides the following in respect of aid for the consumption of olive oil:
`Where the production target price minus the production aid is higher than the representative market price for olive oil, consumption aid shall be granted for olive oil produced and placed on the market in the Community. Such aid shall be equal to the difference between those two amounts.'
25 Regulation (EEC) No 3089/78 (6) lays down the general rules in respect of aid for the consumption of olive oil. Article 7 of that regulation requires the Member States to institute `... a system of supervision to ensure that the product for which aid has been applied qualifies for such aid'.
26 Pursuant to Article 8, the aid is to be paid `... when the supervisory body designated by the Member State in which packaging takes place has checked that the conditions for granting the aid have been satisfied.
The aid may, however, be advanced as soon as the aid application is submitted, provided that sufficient security has been provided.'
27 The implementing provisions in respect of the grant of consumption aid for olive oil are, in so far as they relate to the 1992 financial year in point here, laid down in Regulation (EEC) No 2677/85, (7) as last amended by Regulation (EEC) No 571/91. (8)
28 Article 9(3) of that regulation requires the Member State to pay `the aid within 150 days of the submissions of the aid application. However, this period may be extended if the monitoring process requires additional investigations, provided that the duration of validity of the security referred to in Article 11(1) is extended by the same amount of time.'
29 With regard to the security, Article 11 provides:
`1. the amount of the aid shall be advanced to the party concerned as soon as he submits an application for aid together with a certificate showing that a security equal to the amount of the aid has been lodged.
2. The security shall be lodged by an establishment meeting the criteria laid down by the Member State to which application for aid is made. The security shall be valid for at least six months.
3. The security shall be released as soon as the competent authority of the Member State has recognised entitlement to the aid in respect of the quantities shown in the application.
If entitlement to the aid is not recognised in respect of all or part of the quantities shown in the application, the security shall be forfeit in proportion to the quantities in respect of which the conditions giving entitlement to the aid were not complied with.
The body responsible for checking entitlement to aid shall notify the paying agency each month of its findings as regards the recognition of entitlement to aid of each approved undertaking.
...'
30 Article 12(1) defines more precisely the system of supervision referred to under Article 7 of Regulation No 3089/78 with a view to ensuring the effectiveness and the proper conduct of the checks in question.
31 Furthermore, Article 12 provides inter alia:
`1. ...
2. If any doubt arises as to the accuracy of the information given in the application for aid, the Member State shall suspend payment of aid in respect of the quantity of olive oil which is the subject of the inspection and take any steps necessary to ensure recovery of aid which may turn out to have been wrongly granted and the payment of any fines.
...
3. Advances and aid wrongly paid shall be reimbursed together with interest ...
The amount paid to the Member State shall be deducted from claims made on the EAGGF by the paying agencies or authorities of the Member States.'
32 Finally, Article 29 of Regulation (EEC) No 2220/85 (9) contains the following provision:
`Once the competent authority is aware of circumstances giving rise to forfeiture of the security, in whole or in part, it shall without delay demand that the party required to meet the obligation to pay the sum forfeited, allowing up to 30 days ... for payment.'
Where payment has not been made at the end of this period, the guarantor, amongst others, can also be required to pay without delay.
33 To summarise, it may thus be said that the aid is paid only when the competent supervisory body has checked that the conditions for granting the aid have been satisfied. However, the aid can be paid in advance subject to the lodging of a security which may only be released after recognition of entitlement to the aid. Where there is no entitlement to the aid, the security lodged is immediately forfeit. Therefore, in the event that the competent authority does not recognise entitlement to the aid, the undertaking concerned must pay back the aid advanced.
34 In accordance with Article 5 of Regulation (EEC) No 729/70, (10) the Commission makes up the accounts on the basis of the annual accounts transmitted by the Member States accompanied by the documents required for making up the balance sheets.
35 Article 1(3) of Regulation (EEC) No 1723/72, (11) inserted by Regulation (EEC) No 422/86, (12) provides that the Commission may fix a deadline for Member States to communicate additional information. In the case of failure to submit the information concerned within the period fixed, `the Commission shall take its decision on the basis of those elements of information in its possession at the deadline, except in cases where the late submission of information is justified by exceptional circumstances'.
D - Opinion
36 With regard to four of the seven undertakings comprising Group A, namely Valdolio, Vizzari, OL. Albanese and OL. F. lli de Sensi, the Italian Government admitted at the hearing, after the Commission had pointed to the fact in its written pleadings, that, with regard to the amounts claimed in this context, the action had become devoid of purpose because those same amounts had been taken into consideration for the 1995 financial year. (13) Consequently, only the cases of the remaining undertakings cited by the Italian Government need now be considered.
37 The Italian Government's argument, summarised, is that the applicable rules were observed so far as the documents submitted were concerned and thus the Commission was required to allow the expenditure.
38 The Commission relies first on the time-limit of 28 February 1995 it had set for submitting the documents and rejects the additional information produced after that deadline as out of time. Moreover, the Commission points to certain unclear and contradictory elements in the information submitted and claims, furthermore, that the applicable provisions concerning the grant of aid were not complied with.
39 As a preliminary point, it should be borne in mind that in disputes where a Member State is seeking the annulment of a Commission decision on the clearance of the accounts of the EAGGF, the burden of proof resting on the applicant is, according to settled case-law, particularly onerous. (14)
40 Moreover, the Commission is not required to demonstrate exhaustively that the data submitted by the Member States are incorrect but merely to make out a plausible case that there are justified doubts regarding the figures submitted by the national authorities. (15) The reason for this rule concerning the burden of proof is that ultimately it is the State which is best placed to collect and verify the data required for the clearance of EAGGF accounts. Consequently, it is for the State to prove in full the correctness of its figures and, as the case may be, to demonstrate that the Commission's calculations are incorrect. (16)
41 With regard to the remaining undertakings in Group A, namely P.I.O., Certo C. and Perilli, the Commission claims that the documents produced justify the inference that they had in part been transmitted after the deadline which the Commission had fixed at 28 February 1995. Moreover, the documents submitted contain differing figures concerning the sums to be claimed back; those amounts were claimed back in part but not yet recovered; furthermore, the same amounts appeared under various headings with the result that it was not clear to which heading they are now to be ascribed or even whether they come under several headings and are thus accounted for twice. All things considered, however, it cannot be inferred from the documents what specific sums are concerned and to what extent they were repaid.
42 It must first be stated that in this case it is common ground that the deadline mentioned in Article 1(3) of Regulation No 1723/72 was set by the Commission at 28 February 1995. Since the Italian Government has not claimed the existence of exceptional circumstances, the additional information produced after that date must be regarded as out of time. (17) That alone is sufficient ground for dismissing the plea on this point of the contested decision. Moreover, the Italian Government has not submitted any concrete or decisive evidence such as to call in question the accuracy of the Commission's findings or the inferences it drew from them. A mere assertion to the contrary effect cannot, in view of the abovementioned rules concerning the burden of proof, suffice for that purpose.
43 Since the Italian Government did no more than say it was unable to discern any contradictions or obscurities in the documents produced, it was unable to show with sufficient certainty that the Commission's decision was erroneous.
44 With regard to the Luccisano undertaking in Group B, it should first be reiterated that the Commission was only required to take into account the documents produced before 28 February 1995. However, it was only with its letter of 18 September 1995 that the competent Italian authority informed the Commission of the fact that, in August 1994, the Luccisano undertaking had requested that the aid to be repaid be offset against outstanding claims. However, that set-off was effected only by a decree of 15 December 1995.
45 On that point the Commission itself states that it had taken into account the documents concerning the 1995 financial year that had been produced before that deadline in so far as they had been submitted before 15 October 1995 (final date for submitting documents concerning the 1995 financial year). It follows that the Italian Government did not produce the documents within the period prescribed by the Commission and, furthermore, that it did not plead exceptional circumstances such as would justify the delay which occurred.
46 Accordingly, the complaint on this point as regards the disallowance of expenditure for the 1992 financial year must also be rejected.
47 With regard to the Valle Picentino undertaking in Group C, the Commission bases itself, in disallowing the expenditure, on a report of the Italian supervisory authority. That report states that, although there is no objective evidence to that effect, it is reasonable to assume that there may have been at least to some extent fictitious purchases of olive oil. The report thus refers to possibly fraudulent conduct on the part of the undertaking, which, in principle, precludes recognition of any entitlement to aid. At the hearing the Italian Government moreover conceded that there could well be irregularities in relation to the amount of aid concerning this undertaking. However, according to that Government, that is merely an unsubstantiated suspicion.
48 The implementing provisions adopted by the Community legislature concerning consumption aid for olive oil were introduced, as it is stated in the preambles to the regulations in question, also with a view to preventing fraud.
49 Article 11(3) of Regulation No 2667/85 must consequently also be read in this context. That article provides that security is only to be released once the competent authority of the Member State has recognised the existence of a right to the aid. However, it follows from Article 11 that where there are justified doubts no such right can be recognised. The Commission thus rightly points out that in view of the serious doubt regarding the regularity of the conduct of the undertaking concerned, the security originally lodged should not have been released, particularly since the supervisory authority itself mentions that there may have been fraud by way of fictitious purchases.
50 Nor can the lodging of new securities at a later stage alter that conclusion in any way. Since the relevant provisions make the payment of aid by way of advance subject to the requirement that a security has been lodged, precisely in order to frustrate plans to commit fraud, that requirement cannot be circumvented by first releasing the securities originally provided and, in the course of time, lodging new securities if need be.
51 In the present case, the supervisory authority issued its investigation report on 26 January 1993 but the new securities mentioned by the Italian Government were only lodged in September 1993, that is to say, nine months later. The effective application of the rules governing aid presupposes, however, that the sums paid in advance are covered by a security until such time as entitlement to the aid is itself recognised. It is therefore in breach of the provisions in force that, notwithstanding the existence of serious doubts, the securities were released and were not replaced until nine months later, in the context of pending criminal proceedings. Such a procedure is not in keeping with the spirit and purpose of the rules for monitoring consumption aid for olive oil - which aim inter alia to forestall any fraud. The Italian Government's initial assertion that the conduct of the Valle Picentino undertaking was unobjectionable related to the year 1990 and is therefore of no relevance for the purposes of this case.
52 It follows that the argument of theCommission must be upheld and the plea put forward by the Italian Government must be rejected on this point.
53 The Italian Government's argument concerning the undertakings in Group D must likewise be rejected. The Italian Government merely claims that the procedures for recovery of the amounts are not yet completed and that the existence of the securities can be proved. However, no such proof has been adduced.
54 As those securities have therefore not been shown to exist, the Italian Government is merely making a counter-assertion which is not sufficient to show that the Commission's decision is unlawful. In the absence of any further particulars in this respect, the plea in law concerning this point must be rejected.
55 The last plea put forward by the Italian Government concerns the Caruso Rosa undertaking. Here the Italian Government maintains that whilst the supervisory authority complained of the existence of irregularities, it was not possible to quantify precisely the amount of aid which was wrongly paid. Further investigations were carried out subsequently but the outcome was no different. In response to the Commission's criticism that the Italian authorities should have asked for the securities to be extended for a further period, the Italian Government merely states that such a step would have been pointless.
56 Here again, the conditions for entitlement to the aid were not satisfied in view of the doubts that existed, so that by virtue of the applicable provisions the security should not have been released. In the context of the abovementioned rules concerning the burden of proof it should also be noted here that the Italian Government neither makes any substantiated claim nor proves that the securities were properly released and that the Commission's conduct was unlawful. Under the applicable provisions, where a right to the grant of aid cannot be recognised, the security provided for advance payment of aid cannot be released.
57 To summarise, it may be concluded that the Italian Government has been unable to prove that the calculations of the Commission were incorrect. The action must therefore be dismissed.
Costs
58 Under the first subparagraph of Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs.
E - Conclusion
59 In the light of the foregoing, I propose that the Court should:
(1) dismiss the application;
(2) order the Italian Republic to pay the costs.
(1) - Commission Decision of 10 April 1996 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1992 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) and in respect of certain expenditure for 1993 (OJ 1996 L 117, p. 19). The Italian Republic has also brought an action against the Commission for the annulment in part of that decision. See in this respect the Opinion delivered on 24 March 1998 by Advocate General Alber in Case C-242/96 Italy v Commission [1998] ECR I-5863.
(2) - OJ 1996 L 323, p. 26.
(3) - Summary Report on the findings of the clearance of the accounts of the Guarantee Section of the EAGGF in respect of the 1992 and in part the 1993 financial years (Commission document VI/6355/95 Final of 27 March 1996).
(4) - Council Regulation of 22 September 1966 on the establishment of a common organisation of the market in oils and fats (OJ, English Special Edition, 1965-66, p. 221).
(5) - Council Regulation of 19 July 1988 amending Regulation No 136/66/EEC on the establishment of a common organisation of the market in oils and fats (OJ 1988 L 197, p. 1).
(6) - Council Regulation of 19 December 1978 laying down general rules in respect of aid for the consumption of olive oil (OJ 1978 L 369, p. 12).
(7) - Commission Regulation of 24 September 1998 laying down implementing rules in respect of the system of consumption aid for olive oil (OJ 1998 L 254, p. 5).
(8) - Commission Regulation of 8 March 1991 amending Commission Regulation (EEC) No 2677/85 of 24 September 1985 laying down implementing rules in respect of the system of consumption aid for olive oil (OJ 1991 L 63, p. 19).
(9) - Regulation of the Commission of 22 July 1985 laying down common detailed rules for the application of the system of securities for agricultural products (OJ 1985 L 205, p. 5).
(10) - Regulation of the Council of 21 April 1970 on the financing of the common agricultural policy (OJ, English Special Edition 1970 (I), p. 218).
(11) - Commission Regulation of 26 July 1972 on making up accounts for the European Agricultural Guidance and Guarantee Fund, Guarantee Section (JO L 186, p. 1).
(12) - Commission Regulation of 25 February 1986 amending Regulation (EEC) No 1723/72 on making up accounts for the European Agricultural Guidance and Guarantee Fund, Guarantee Section (OJ 1986 L 48, p. 31).
(13) - The Italian Government, however, has not withdrawn or settled its action in this respect.
(14) - See Case 11/76 Netherlands v Commission [1979] ECR 245, at paragraph 9; and Case C-48/91 Netherlands v Commission [1993] ECR I-5611, at paragraph 16.
(15) - See the judgment in Case C-48/91 (cited in footnote 14), at paragraph 17.
(16) - It should be observed here that the Commission does not have any more extensive supervisory powers with respect to the administration of EC resources by national authorities, so that from this point of view, too, the sharing of the burden of proof appears justified. The European Parliament pointed this out in its resolution of 13 April 1989 on preventing and combating fraud against the European Community budget in a post-1992 Europe (OJ 1989 C 120, p. 279).
(17) - In this regard, see also Case C-54/91 Germany v Commission [1993] ECR I-3399, at paragraph 14.
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