Judgment of the General Court (Eighth Chamber) of 5 July 2012. Hellenic Republic v European Commission. EAGGF

JUDGMENT OF THE GENERAL COURT (Eighth Chamber)

5 July 2012 ( *1 )

‛EAGGF — Guarantee Section — Expenditure excluded from financing — Fruit and vegetables — Rural development — Non-compliance with payment deadlines — Compliance with a judgment of the Court of Justice — Res judicata — Period of 24 months — Principle of proportionality’

In Case T-86/08,

Hellenic Republic, represented initially by V. Kontolaimos, S. Charitaki and M. Tassopoulou, and subsequently by M. Tassopoulou, I. Chalkias and K. Tsagkaropoulos, acting as Agents,

applicant,

v

European Commission, represented by H. Tserepa-Lacombe, acting as Agent, assisted by P. Katsimani, lawyer,

defendant,

APPLICATION for annulment of Decision 2008/68/EC of 20 December 2007 excluding from Community financing certain expenditure incurred by the Member States under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) (OJ 2008 L 18, p. 12), in so far as it concerns certain expenditure incurred by the Hellenic Republic,

THE GENERAL COURT (Eighth Chamber),

composed of L. Truchot, President, M.E. Martins Ribeiro and H. Kanninen (Rapporteur), Judges,

Registrar: S. Spyropoulos, Administrator,

having regard to the written procedure and further to the hearing on 22 June 2011,

gives the following

Judgment

Background to the dispute

1

By Decision 2008/68/EC of 20 December 2007 excluding from Community financing certain expenditure incurred by the Member States under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) (OJ 2008 L 18, p. 12; ‘the contested decision’), the Commission of the European Communities excluded from Community financing certain expenditure incurred inter alia by the Hellenic Republic in the sectors of fruit and vegetables and rural development accompanying measures, and with regard to financial auditing.

2

The present action concerns the following financial corrections:

—

a flat-rate correction of 2% of the amount of aid for citrus processing in respect of financial years 1998 and 1999, totalling EUR 345 259.93, due to ‘Shortcomings in checks — payments effected by cheques impeding the quality of controls performed’;

—

a flat-rate correction of 5% concerning rural development accompanying measures in respect of financial years 2003 and 2004, totalling EUR 1 331 047, due to ‘cross-checks not completely satisfactory’;

—

a one-off correction concerning late payments in respect of financial year 2004, amounting to EUR 5 279 881.28.

1. The financial correction applied to expenditure in the ‘Fruit and vegetables — Citrus processing’ sector in respect of financial years 1998 and 1999

3

From 23 to 26 February 1999 and from 22 to 24 March 1999, Commission officials carried out an inspection in Greece, investigating expenditure incurred by the Hellenic Republic in the ‘Fruit and vegetables — Citrus processing’ sector in respect of financial years 1998 and 1999.

4

By letter of 16 August 1999, the Commission communicated the results of its checks to the Hellenic Republic. The Hellenic Republic replied to that letter on 1 October 1999.

5

On 27 January 2000 the Commission invited the Hellenic Republic to attend a bilateral discussion, which took place on 12 April 2000. The minutes of that discussion were communicated to the Hellenic Republic in a letter from the Commission of 16 June 2000. The Hellenic Republic submitted its comments by letter of 21 July 2000.

6

On 6 December 2001 the Hellenic Republic referred the matter to the Conciliation Body, which issued its opinion on 25 April 2002.

7

By letter of 24 June 2002, the Commission communicated its final position to the Hellenic Republic.

8

On 5 November 2002 the Commission adopted Decision 2002/881/EC excluding from Community financing certain expenditure incurred by the Member States under the Guarantee Section of the EAGGF (OJ 2002 L 306, p. 26).

9

By application lodged at the Registry of the Court on 3 January 2003, the Hellenic Republic brought an action for annulment of Decision 2002/881, in so far as it related to financial corrections amounting, first, to EUR 2 438 896.91 in respect of financial years 1997 to 2001 concerning the fruit and vegetable sector, secondly, to EUR 11 352 868 in respect of financial years 1999 to 2001 concerning animal premiums for bovine animals and, thirdly, to EUR 22 969 271 in respect of financial years 1998 and 1999 concerning animal premiums for sheep and goats.

10

By its judgment in Case C-5/03 Greece v Commission [2005] ECR I-5925, the Court of Justice annulled Decision 2002/881 in so far as it excluded from Community financing the sum of EUR 2 438 896.91, corresponding to a flat-rate correction of 2% of the expenditure incurred in the fruit and vegetables sector.

11

On 10 April 2006 the Commission invited the Hellenic Republic to attend another bilateral discussion, which took place on 11 May 2006. The minutes of that discussion were communicated to the Hellenic Republic in a letter from the Commission of 2 June 2006. The Hellenic Republic submitted its comments on 13 July 2006.

12

By letter of 2 February 2007, the Commission made a proposal to the Hellenic Republic that it would impose on it a financial correction based solely on the ground that it was impossible to carry out an ancillary check.

13

After the Conciliation Body issued its opinion on 17 July 2007, the Commission, by letter of 14 August 2007, communicated to the Hellenic Republic its final decision, which is also set out in point 4.3.5 of the Commission’s summary report of 3 September 2007 relating to the results of checks during the clearance of accounts under the Guarantee Section of the EAGGF, pursuant to Article 5(2)(c) of Regulation (EEC) No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (OJ English Special Edition 1970(I), p. 218) and Article 7(4) of Council Regulation (EC) No 1258/1999 of 17 May 1999 on the financing of the common agricultural policy (OJ 1999 L 160, p. 103) (‘the summary report’).

2. The financial correction applied to expenditure in the sector of rural development accompanying measures in respect of financial years 2003 and 2004

14

From 28 February to 4 March 2005, Commission officials carried out inspections in Greece investigating rural development accompanying measures with regard to the ‘agri-environment’ and ‘afforestation of agricultural land’.

15

By letter of 4 July 2005, the Commission communicated the results of its checks to the Hellenic Republic. The Hellenic Republic replied to that letter by letter of 5 September 2005.

16

By letter of 19 January 2006, the Commission invited the Hellenic Republic to attend a bilateral discussion, which took place on 21 February 2006. The minutes of that bilateral meeting were communicated to the Hellenic Republic on 28 March 2006. The Hellenic Republic submitted its comments by letter of 28 April 2006.

17

By letter of 3 October 2006, the Commission formally communicated to the Hellenic Republic the estimated amount of the proposed correction, namely EUR 1 331 047 in respect of financial years 2003 and 2004.

18

On 13 November 2006 the Hellenic Republic referred the matter to the Conciliation Body. The latter issued its opinion on 19 March 2007.

19

By letter of 31 July 2007, the Commission communicated to the Hellenic Republic its final position, which is set out in point 16.3.5 of the summary report.

3. The financial correction applied with regard to the financial audit in respect of financial year 2004

20

By letter of 25 May 2005, the Commission established that the Hellenic Republic had not complied with the regulatory time-limits for payments during the period between 16 October 2003 and 31 July 2004 and during the months of August, September and October 2004. The Hellenic Republic replied to that letter by letter of 4 July 2005.

21

On 2 December 2005 the Commission invited the Hellenic Republic to attend a bilateral meeting, which was held on 12 January 2006 and the minutes of which were communicated to the Hellenic Republic by the Commission by letter of 15 March 2006. The Hellenic Republic replied to that letter by letter of 2 May 2006.

22

On 17 January 2007 the Hellenic Republic referred the matter to the Conciliation Body, which issued its opinion on 21 May 2007.

23

By letter of 20 August 2007, the Commission communicated to the Hellenic Republic its final position, which is set out in point 17.1.5 of the summary report.

Procedure and forms of order sought

24

By application lodged at the Registry of the General Court on 19 February 2008, the Hellenic Republic brought the present action.

25

On hearing the report of the Judge-Rapporteur, the General Court (Eighth Chamber) decided to open the oral procedure and, by way of measures of organisation of procedure pursuant to Article 64 of its Rules of Procedure, put questions in writing to the parties and requested the production of documents. The parties complied with those requests.

26

At the hearing on 22 June 2011, the parties presented oral argument and answered the questions put to them by the Court.

27

The Hellenic Republic claims that the Court should:

—

annul or amend the contested decision in so far as it imposes financial corrections on the Hellenic Republic;

—

order the Commission to pay the costs.

28

The Commission contends that the Court should:

—

dismiss the application;

—

order the Hellenic Republic to pay the costs.

Law

1. The financial correction applied to expenditure in the ‘Fruit and vegetables — Citrus processing’ sector

29

The Hellenic Republic puts forward two pleas in respect of the financial correction applied to expenditure in the ‘Fruit and vegetables — Citrus processing’ sector. The first alleges infringement of Article 233 EC, of the principle of res judicata, of Community regulations and of the guidelines for clearance of accounts. The second alleges incorrect assessment of the facts, an inadequate statement of reasons, infringement of the principle of proportionality and exceeding the bounds of discretion.

The first plea: infringement of Article 233 EC, of the principle of res judicata, of Community regulations and of the guidelines for clearance of accounts

30

The applicant raises in essence three complaints in the first plea. First, the Court of Justice gave a final ruling in the dispute in Case C-5/03, Greece v Commission, paragraph 10 above, so the Commission was not entitled to impose a new financial correction. Secondly, the Commission wrongly decided that the period of 24 months laid down in Article 5 of Regulation No 729/70 began to run from the letter of 16 August 1999, which did not contain an evaluation of any expenditure, in breach of the first subparagraph of Article 8(1) of Commission Regulation (EC) No 1663/95 of 7 July 1995 laying down detailed rules for the application of Regulation No 729/70 regarding the procedure for the clearance of the accounts of the EAGGF Guarantee Section (OJ 1995 L 158, p. 6). Thirdly, the Commission was not entitled to apply a 2% flat-rate correction in the event of defective conduct of an ancillary check.

First complaint: the Commission was not entitled to impose a new financial correction following the judgment in Case C-5/03 Greece v Commission, paragraph 10 above

31

The Hellenic Republic notes that in Case C-5/03 Greece v Commission, paragraph 10 above, the Court of Justice annulled Decision 2002/881, on the ground that two of the four breaches established by the Commission were unfounded, namely the inadequacy of the check on the delivery of certain citrus fruits and the failure to keep documents relating to the quantities of goods delivered (weigh tickets). Hence, the Court of Justice gave a final ruling in the dispute between the Hellenic Republic and the Commission. According to the Hellenic Republic, if the Court of Justice had held that the two other breaches established by the Commission, namely the payment of aid by cheque and the failure to pay aid to certain producers within the set time-limits, were sufficient reasons for the Commission’s decision to impose corrections it would not have annulled Decision 2002/881. As a consequence, according to the Hellenic Republic, following the judgment in Case C-5/03 Greece v Commission, paragraph 10 above, the Commission was not entitled to reopen the procedure for the clearance of accounts for the purposes of applying a new financial correction.

32

According to settled case-law, where the Community Court annuls an act of an institution, Article 233 EC requires the latter to take the measures necessary for compliance with the judgment. In that regard, both the Court of Justice and the General Court have held that, in order to comply with the judgment and to implement it fully, the institution was required to have regard not only to the operative part of the judgment but also to the grounds which led to the judgment and constituted its essential basis, in so far as they were necessary to determine the exact meaning of what was stated in the operative part. It is those grounds which, on the one hand, identify the precise provision held to be illegal and, on the other hand, indicate the specific reasons which underlie the finding of illegality contained in the operative part and which the institution concerned must take into account when replacing the annulled measure (see, to that effect, Joined Cases 97/86, 99/86, 193/86 and 215/86Asteris and Others v Commission [1988] ECR 2181, paragraph 27; order of 24 April 2007 in Case T-132/06 Gorostiaga Atxalandabaso v Parliament, not published in the ECR, paragraph 28; and Case T-301/01 Alitalia v Commission [2008] ECR II-1753, paragraphs 97 and 98).

33

It should also be noted that the Court has on various occasions recalled the importance, in both the legal order of the European Union and the national legal systems, of the principle of res judicata (Case C-224/01 Köbler [2003] ECR I-10239, paragraph 38; Case C-234/04 Kapferer [2006] ECR I-2585, paragraph 20; and Case C-352/09 P ThyssenKrupp Nirosta v Commission [2011] ECR I-2359, paragraph 123) and also the fact that res judicata attaches only to matters of fact and law actually or necessarily settled by the judicial decision in question (see ThyssenKrupp Nirosta v Commission, paragraph 123 and the case-law cited).

34

In the present case, by Decision 2002/881, the Commission had applied a 2% flat-rate correction to the expenditure incurred by the Hellenic Republic in the fruit and vegetables sector on the basis of four breaches, namely, the payment of aid by cheque, the failure to pay aid to certain producers within the set time-limits, the inadequacy of the checks on the delivery of certain citrus fruits and the failure to keep weigh tickets.

35

In paragraphs 34 to 43 of Case C-5/03 Greece v Commission, paragraph 10 above, the Court held that of the four breaches established by the Commission in that decision, two of them were substantiated, namely the payment of aid by cheque and the failure to pay aid to certain producers within the set time-limits. In paragraph 36 of that judgment, the Court states inter alia that ‘the expenditure at issue was not incurred in accordance with the Community rules’ and that ‘therefore the Commission was right to exclude that expenditure from Community financing’.

36

Since two of the four breaches alleged by the Commission were unsubstantiated (Case C-5/03 Greece v Commission, paragraph 10 above, paragraphs 44 to 53) and therefore, as the Court held, the 2% flat-rate correction was based ‘on insufficient justification’, Decision 2002/881 was annulled in so far as it excluded from Community financing 2% of the expenditure incurred in the fruit and vegetables sector (Case C-5/03 Greece v Commission, paragraph 10 above, paragraphs 54 and 55).

37

Contrary to what the Hellenic Republic contends and as is clear from paragraph 35 above, the Court did not decide in Case C-5/03 Greece v Commission, paragraph 10 above, that the two breaches which were held to be substantiated could not give rise to application of a financial correction.

38

It must therefore be held in that regard that, since the Commission based Decision 2002/881 on a finding of four breaches, two of which the Court held to be unsubstantiated in Case C-5/03 Greece v Commission, paragraph 10 above, it was not for the Court to substitute its own assessment for that of the Commission and to decide what conclusions the latter should draw, as regards the two breaches established which it held to be substantiated, with regard to the financial correction to be applied (see, to that effect, Case T-196/01 Aristoteleio Panepistimio Thessalonikis v Commission [2003] ECR II-3987, paragraphs 224 and 225).

39

That finding cannot be undermined by the judgment of the General Court of 11 June 2009 in Case T-33/07 Greece v Commission (not published in the ECR), upheld by the judgment of the Court of Justice of 7 April 2011 in Case C-321/09 P Greece v Commission, which the Hellenic Republic relied upon at the hearing. In Case T-33/07 Greece v Commission, the General Court held that, of the four breaches established by the Commission, only one was unsubstantiated and that did not constitute an ‘essential factor’ merely a ‘minor factor’, whereas the other breaches constituted ‘major deficiencies’, concluding that there was no ground for annulling the Commission’s decision (Case T-33/07 Greece v Commission, paragraphs 211 and 212). In the present case, however, neither the summary report nor the Commission’s final position describe the breach established as regards payment by cheque as a minor matter.

40

It should be added, moreover, that, contrary to what the Hellenic Republic maintains without however substantiating its assertion, European Union law does not preclude resumption of the procedure for the clearance of accounts where the decision reached by the Commission at the end of that procedure has been annulled. The fifth subparagraph of Article 5(2)(c) of Regulation No 729/70, as amended by Council Regulation (EC) No 1287/95 of 22 May 1995 (OJ 1995 L 125, p. 1), which reads ‘[a] refusal to finance may not involve expenditure effected prior to twenty-four months preceding the Commission’s written communication of the results of [the Commission’s] checks’ cannot prevent resumption of the procedure for the clearance of accounts, since, after the annulment of Decision 2002/881, the new financial correction applied by the Commission also concerns expenditure incurred during the 24 months which precede communication to the Hellenic Republic of the results of the checks.

41

As for the Hellenic Republic’s argument that the period of 24 months laid down in Article 5(2)(c) of Regulation No 729/70 cannot start to run from the letter of 16 August 1999, in view of the annulment by the Court of the entire procedure for the clearance of accounts, it must be held that, contrary to what the Hellenic Republic contends, in Case C-5/03 Greece v Commission, paragraph 10 above, the Court did not give a ruling on the procedure for the clearance of accounts at the end of which Decision 2002/881 was adopted.

42

Since the procedure for replacing a measure annulled by the European Union judicature may be resumed at the very point at which the illegality occurred (Case C-458/98 P Industrie des poudres sphériques v Council [2000] ECR I-8147, paragraph 82; order in Gorostiaga Atxalandabaso v Parliament, paragraph 32 above, paragraph 30; and Alitalia v Commission, paragraph 32 above, paragraph 99), annulment of that measure does not affect all the measures predating the procedure. Although in the present case the Commission resumed the procedure at the stage of the invitation to attend a further bilateral meeting, which was held on 11 May 2006, that was, as the Commission itself states, in order for the Hellenic Republic to submit its comments following the annulment of Decision 2002/881 in Case C-5/03 Greece v Commission, paragraph 10 above.

43

It is therefore clear from the foregoing that in taking, in the contested decision, the payment of aid by cheque as the ground for the financial correction applied to expenditure in the fruit and vegetable sector in respect of financial years 1998 and 1999 the Commission did not infringe either Article 233 EC or the principle of res judicata.

44

The first complaint must therefore be rejected.

The second complaint: the period of 24 months laid down in Article 5 of Regulation No 729/70 cannot start to run from the letter of 16 August 1999 since the letter does not contain an evaluation of any expenditure, in breach of the first subparagraph of Article 8(1) of Regulation No 1663/95

45

According to the Hellenic Republic, the Commission cannot take the date of 16 August 1999 as the starting point for the period of 24 months laid down in Article 5(2)(c) of Regulation No 729/70, as amended by Regulation No 1287/95, since the letter of 16 August 1999 does not contain an ‘evaluation of any expenditure’ in breach of the first subparagraph of Article 8(1) of Regulation No 1663/95.

46

The Commission contended, in its written replies to the General Court’s questions and at the hearing, that the Hellenic Republic was barred from putting forward this complaint in the present action since the issue of the content of the letter of 16 August 1999 had been finally settled by the Court of Justice in Case C-5/03 Greece v Commission, paragraph 10 above.

47

It is common ground between the parties that the Hellenic Republic did not raise the present complaint in Case C-5/03 Greece v Commission, paragraph 10 above. The Commission cannot therefore contend that the issue of the content of the letter of 16 August 1999 was finally settled by the Court of Justice in Case C-5/03 Greece v Commission, paragraph 10 above.

48

At the hearing, the Hellenic Republic contended that in Case C-5/03 Greece v Commission, paragraph 10 above, it had raised all the pleas that it considered to be relevant. In that regard, it maintained in essence that the issue of whether the communication setting out the results of the checks should contain an evaluation of any expenditure did not arise at the time when its action was brought before the Court. It stated that it was entitled to raise the present complaint only after the judgment in Case C-300/02 Greece v Commission [2005] ECR I-1341, in which the Court held for the first time that, under Article 8 of Regulation No 1663/95, communication by the Commission of the result of its checks must contain an evaluation of any expenditure.

49

The arguments of the Hellenic Republic in that regard cannot succeed. The interpretation the Court of Justice gives to a rule of European Union law must clarify and define, where necessary, the meaning and scope of that rule as it must or ought to have been understood and applied from the time of its coming into force. It follows that the rule as thus interpreted may, and must, be applied even to legal relationships arising and established before the judgment of the Court (see, to that effect and by analogy, with regard to the temporal effects of interpretations given by the Court in the exercise of the jurisdiction conferred on it by Article 234 EC, Case 61/79 Denkavit italiana [1980] ECR 1205, paragraph 16, and Joined Cases C-367/93 to C-377/93 Roders and Others [1995] ECR I-2229, paragraph 42). The Hellenic Republic cannot therefore rely on the fact that Case C-300/02 Greece v Commission, paragraph 48 above, was delivered before the action was brought in Case C-5/03 Greece v Commission, paragraph 10 above, in order to justify the fact that it was not entitled to raise the present complaint in that action.

50

Therefore, by not raising the present complaint in Case C-5/03 Greece v Commission, paragraph 10 above, although it had the opportunity to do so, the Hellenic Republic deprived itself of any option to raise it subsequently once the time-limit for bringing proceedings against Decision 2002/881 had expired.

51

As already stated in paragraphs 41 and 42 above, the Court of Justice did not give a ruling on the procedure for the clearance of accounts at the end of which Decision 2002/881 was adopted and so after the annulment of that decision the Commission was able to resume the procedure for the clearance of accounts by inviting the Hellenic Republic to a further bilateral discussion, without affecting previous steps in the procedure. The letter of 16 August 1999 by which the Commission communicated the results of its checks was therefore not affected by the annulment of Decision 2002/881.

52

It follows that the contested decision was adopted at the end of a procedure which, in part, was the same as that at the end of which Decision 2002/881 had been adopted.

53

Therefore, to allow the Hellenic Republic in the context of the present action to raise a complaint concerning a step in the procedure that was not affected by the annulment of Decision 2002/881, although there was nothing to prevent it from raising it before the Court of Justice in Case C-5/03 Greece v Commission, paragraph 10 above, would amount to allowing it to infringe the time-limit for bringing proceedings against Decision 2002/881.

54

The Court has consistently held that the strict application of the European Union’s rules on procedural time-limits serves the requirements of legal certainty and the need to avoid any discrimination or arbitrary treatment in the administration of justice (see, to that effect, order of the Court of 16 November 2010 in Case C-73/10 P Internationale Fruchtimport Gesellschaft Weichert v Commission [2010] ECR I-11535, paragraph 49).

55

The second complaint must therefore be rejected as being inadmissible.

The third complaint: a 2% flat-rate correction cannot be applied in the event of defective conduct of an ancillary check

56

The Hellenic Republic contends that a financial correction cannot be applied where a Member State has carried out an ancillary check in a defective manner. Only the complete failure to carry out such a check would justify the application of a 2% flat-rate correction.

57

Assuming the check on the method of paying aid does constitute an ancillary check, it must be held that on its own the fact that some, but not all, payments were made by cheque is not sufficient to establish that the Hellenic Republic merely carried out a check on the method of payment of aid in a defective manner. In that regard, the Commission contends that the Hellenic Republic ‘never checked’ whether the method of paying aid was correct, a contention which the Hellenic Republic does not refute in a reasoned way, merely maintaining that the checks carried out were simply defective and that therefore the Commission’s assertion is ‘manifestly wrong’.

58

In those circumstances, the third complaint must be rejected and, as a consequence, the first plea must also be rejected.

The second plea: incorrect assessment of the facts, inadequate statement of reasons, infringement of the principle of proportionality and exceeding the bounds of discretion

59

The present plea contains two parts. The first part alleges incorrect assessment of the facts and an inadequate statement of reasons. The second part alleges infringement of the principle of proportionality and exceeding the bounds of discretion.

The first part: incorrect assessment of the facts and an inadequate statement of reasons

60

As regards the reasons given for the contested decision, challenged by the applicant in the present part, it should be noted that, according to well-established case-law, in the particular context of the drafting of decisions relating to the clearance of EAGGF accounts, the reasons given for a decision are to be considered sufficient when the relevant Member State was closely involved in the process under which that decision was drawn up and knew the reasons why the Commission considered that the disputed amount should not be charged to the EAGGF (see Case C-130/99 Spain v Commission [2002] ECR I-3005, paragraph 126; Case C-335/03 Portugal v Commission [2005] ECR I-2955, paragraph 84 and the case-law cited; and judgment of 10 July 2009 in Case T-373/05 Italy v Commission, not published in the ECR, paragraph 51).

61

On the assumption that the applicant is complaining that the Commission did not state the reasons for the correction applied, it must first be held that point 4.3 of the summary report, to which the contested decision expressly refers, sets out the various stages in the administrative procedure which took place within the Commission services, with which the Hellenic Republic was closely involved. Secondly, the contested decision gives clearly as a reason for the correction ‘payments effected by cheques impeding the quality of controls performed’, and refers to the summary report, point 4.3.5 of which, setting out the Commission’s final position, clearly states that ‘[t]his financial correction is justified by the shortcoming of the checking system whereby the Greek authorities authorised payments by cheque’.

62

In those circumstances, the applicant cannot contend that the statement of reasons given for the contested decision is ‘vague and inadequate’.

63

As regards the allegedly incorrect assessment of the facts, the Hellenic Republic contends that the contested decision is unlawful in so far as it is based on the finding that the practice of payment by cheque ‘was not unusual’ although, first, only certain members of producers’ organisations had been paid by cheque, secondly, the relevant national rules had been in compliance with the Community rules and, thirdly, the aid payment had been made to all members of producers’ organisations in respect of the 1997/1998 marketing year.

64

It should be noted that, in the present case, the Commission justified the application of a financial correction in respect of the 1997/1998 marketing year in the ‘Fruit and vegetables — Citrus processing’ sector by reasons coming under the heading ‘Shortcomings in checks — payments effected by cheques impeding the quality of controls performed’.

65

As the Commission rightly states, in Case C-5/03 Greece v Commission, paragraph 10 above, the Court has already held that, since certain producers were paid by cheque, the expenditure at issue was not incurred in accordance with the Community rules and the Commission was therefore correct in excluding that expenditure from Community financing by Decision 2002/881.

66

The Hellenic Republic does not moreover deny that aid was paid by cheque to certain members of producers’ organisations, but it claims that the relevant national rules were in accordance with the Community rules and that, despite payment by cheque in certain cases, all the members of producers’ organisations had received the aid.

67

First, the assertion that the national rules were in accordance with the Community rules does not affect the finding that payments were made by cheque. Secondly, it must be observed that in point 4.3.1.1 of the summary report the Commission states that the first interministerial circular, which requires that payments should be made by transfer, was issued after the 1997/1998 marketing year and that the Commission concluded from this that during that year it was not unusual for aid to be paid by methods other than bank or postal transfers, although in the application and the reply the Hellenic Republic does not demonstrate that the Commission’s statement was incorrect.

68

As for the Hellenic Republic’s argument that, although aid had been paid by cheque, the objective of Article 15(2) of Commission Regulation (EC) No 1169/97 of 26 June 1997 laying down detailed rules for the application of Council Regulation (EC) No 2202/96 introducing a Community aid scheme for producers of certain citrus fruits (OJ 1997 L 169, p. 15), namely that producers should receive aid within the relevant time-limits, had been achieved, it must be declared to have no bearing on the issue, since payments must be made in accordance with the Community rules in order to be financed by the EAGGF (see, to that effect, judgment of 9 April 2008 in Case T-364/04 Greece v Commission, not published in the ECR, paragraph 69).

69

Thus, the Hellenic Republic cannot claim that the Commission erred in its assessment of the facts in the present case.

70

It follows that the first part must be rejected.

The second part: infringement of the principle of proportionality and exceeding the bounds of discretion

71

According to the Hellenic Republic, the Commission applied a manifestly excessive correction in view of the losses supposedly incurred by the EAGGF as a result of the payment of aid by cheque to certain members of producers’ organisations.

72

It must be observed that, so far as the amount of the financial correction is concerned, the Commission may even refuse to charge to the EAGGF the whole of the expenditure in question if it finds that there are no adequate control procedures (Case C-263/98 Belgium v Commission [2001] ECR I-6063, paragraph 125, and Case T-33/07 Greece v Commission, paragraph 39 above, paragraph 140). However the Commission must respect the principle of proportionality, which requires that measures adopted by the institutions must not exceed what is appropriate and necessary to attain the objective pursued (Case 15/83 Denkavit Nederland [1984] ECR 2171, paragraph 25). If in its function of clearing the accounts the Commission, instead of refusing the entire expenditure, endeavours to draw up rules to differentiate according to the degree of risk posed to the EAGGF by different levels of defective supervision, the Member State must show that those criteria are arbitrary and unfair (Case C-50/94 Greece v Commission [1996] ECR I-3331, paragraph 28, and Case T-33/07 Greece v Commission, paragraph 39 above, paragraph 140).

73

As regards the type of correction applied in the present case, it should be noted that, in the light of Commission document No VI/5330/97 of 23 December 1997, entitled ‘Guidelines for the calculation of financial consequences when preparing the decision regarding the clearance of the accounts of the EAGGF Guarantee’ (‘Document No VI/5330/97’), a flat-rate correction may be applied by the Commission where it is not possible to determine precisely the losses suffered by the European Community (see, to that effect, Case C-346/00 United Kingdom v Commission [2003] ECR I-9293, paragraph 53, and judgment of 30 April 2009 in Case T-281/06 Spain v Commission, not published in the ECR, paragraph 66).

74

In particular, Document No VI/5330/97 states that when a Member State has adequately performed the key controls, but completely failed to operate one or more of the ancillary controls, then a correction of 2% is justified in view of the lower risk of loss to the Fund, and in view of the lesser seriousness of the infringement. However, when a Member State has performed all key controls, but not in the number, frequency or depth required by the legislation, a correction of 5% is justified as it can reasonably be concluded both that they do not provide the expected degree of assurance that claims are regular and that the risk to the Fund is significant.

75

In the present case, it is apparent from the examination of the first part of the second plea (see paragraphs 63 to 69 above) that the Commission was right to find that as a result of the payment of certain aid by cheque the expenditure at issue had not been incurred in accordance with the Community rules.

76

In Case C-5/03 Greece v Commission, paragraph 10 above, the Court held that it was necessary to uphold the Commission’s findings that there was a risk the EAGGF would incur a financial loss (see paragraphs 41 and 42).

77

It must therefore be held that, without infringing Document No VI/5330/97, the Commission was reasonably entitled to impose a flat-rate correction of 2%, which was the lowest of the applicable rates (see, to that effect, United Kingdom v Commission, paragraph 73 above, paragraph 56, and Case C-418/06 P Belgium v Commission [2008] ECR I-3047, paragraph 137).

78

Moreover, even though, as the Commission contended at the hearing, the check on the method for payment of aid constituted a key control, it should be borne in mind that, according to Document No VI/5330/97, the Commission was authorised to apply a correction of 5% where there were deficiencies in key controls. None the less, the Commission contended that it had reduced the rate of the financial correction to 2% in view of the lower risk of loss to the EAGGF.

79

In those circumstances, the Hellenic Republic cannot criticise the Commission for having imposed a disproportionate financial correction on it.

80

It follows from the foregoing that the second plea must be rejected as unfounded.

2. The correction applied to expenditure incurred in the sector of rural development accompanying measures in respect of financial years 2003 and 2004

81

The Hellenic Republic relies on three pleas relating to the financial correction applied to expenditure incurred in the sector of rural development accompanying measures in respect of financial years 2003 and 2004. The first alleges infringement of essential procedural requirements or, in the alternative, the Commission’s lack of competence ratione temporis. The second plea alleges an inadequate statement of reasons. The third plea alleges a breach of law, errors of fact, inadequate statement of reasons, infringement of the principle of proportionality and exceeding the bounds of discretion.

The first plea: infringement of essential procedural requirements or, in the alternative, the Commission’s lack of competence ratione temporis

82

The present plea contains two parts. The first alleges infringement of essential procedural requirements. The second, which is an alternative plea, alleges the Commission’s lack of competence ratione temporis.

The first part: infringement of essential procedural requirements

83

The Hellenic Republic raises two complaints in the context of the first part of the plea. First, it contends that, during the bilateral discussion which was required to be initiated between representatives of the Commission and representatives of the Member State concerned under Article 7(4) of Regulation No 1258/1999 and Article 8 of Regulation No 1663/95, the Commission ought to have provided a provisional evaluation of the financial corrections being proposed. Secondly, it criticises the Commission for its failure during that bilateral discussion to set out its position regarding an evaluation of the seriousness of the infringements and of the resulting financial loss for the Community.

– The first complaint: no discussion concerning the evaluation of the corrections envisaged

84

The second subparagraph of Article 7(4) of Regulation No 1258/1999 provides that the results of the Commission’s checks and the replies of the Member State concerned are to be notified in writing, after which the two parties are to endeavour to reach agreement on the action to be taken.

85

Article 8(1) of Regulation No 1663/95, as amended by Regulation No 2245/1999, lays down the details of that procedure. After an enquiry, the Commission must notify the Member State concerned of the results of its checks and indicate the corrective measures to be taken. The Member State must reply within two months. After the expiry of the time-limit for reply, the Commission must invite the parties to attend a bilateral discussion and the latter must endeavour to reach agreement on the measures to be taken and on an evaluation of the gravity of the infringement and the financial loss to the Community. The Commission must then formally communicate its conclusions to the Member State, giving an evaluation of any expenditure to be excluded.

86

Before its amendment by Regulation No 2245/1999, the first subparagraph of Article 8(1) of Regulation No 1663/95 provided that the communication of the result of the checks to the Member State was to indicate the corrective measures to be taken to ensure future compliance with the rules in question and an evaluation of any expenditure. Now, according to the version of Regulation No 1663/95 amended by Regulation No 2245/1999, the Commission’s first letter must contain the results of its checks but not an evaluation of any expenditure which it may propose to exclude (judgment of 14 February 2008 in Case T-266/04 Spain v Commission, not published in the ECR, paragraph 199, and judgment of 26 November 2008 in Case T-263/06 Greece v Commission, not published in the ECR, paragraph 65). Moreover, as the Commission rightly stated, during the discussion with the Member State the Commission is not required to indicate an amount to be excluded or to make any proposal concerning it (Case T-263/06 Greece v Commission, paragraph 67). According to recital 3 in the preamble to Regulation No 2245/1999, it is neither right nor fair for the Commission to give an evaluation of the expenditure it intends to exclude as a result of its findings before the Member State has had the opportunity to reply. The conduct of the procedure enables the Commission inter alia to obtain explanations from the Member State regarding the irregularities established and to take those explanations into account when laying down the amount of any expenditure which it may propose to exclude (judgment of 11 October 2007 in Case C-332/06 P Greece v Commission, paragraph 47).

87

The evaluation of any expenditure which the Commission may propose to exclude must now appear in the letter sent following the bilateral discussion, in accordance with the third subparagraph of Article 8(1) of Regulation No 1663/95, as amended (see, to that effect, judgment of 20 June 2006 in Case T-251/04 Greece v Commission, not published in the ECR, paragraph 181, and Case T-33/07 Greece v Commission, paragraph 39 above, paragraph 81).

88

In the present case, the Hellenic Republic challenges the fact that, during the bilateral discussion, the Commission did not provide a provisional evaluation of any financial corrections. As stated in paragraph 86 above, the Commission was not required to indicate to the Hellenic Republic the amount to be excluded, either before or during the bilateral discussion. That amount was formally communicated to the Hellenic Republic by letter of 3 October 2006, in accordance with the third subparagraph of Article 8(1) of Regulation No 1663/95, as amended.

89

That conclusion cannot be undermined by the Hellenic Republic’s argument, contained in the reply, that the absence of a bilateral discussion of the evaluation of the corrections envisaged had the effect of causing the Member State concerned to believe that the Commission services no longer considered that it had committed infringements. In the present case, it is clear beyond doubt from the invitation to the bilateral discussion, as the Commission rightly points out, that the Commission services ‘envisage proposing the exclusion of certain expenditure from Community financing’, although no discussion was scheduled regarding the actual amount of the corrections, so the Hellenic Republic cannot contend that it has been misled.

90

The first complaint must therefore be rejected.

– The second complaint: absence of discussion concerning the nature and gravity of the infringement and the financial loss

91

The fourth subparagraph of Article 7(4) of Regulation No 1258/1999 provides that the bilateral discussion must concern the nature and gravity of the infringement and the financial loss suffered by the Community.

92

The first sentence of the third subparagraph of Article 8(1) of Regulation No 1663/95, as amended by Regulation No 2245/1999, provides that ‘the Commission shall invite the Member State to a bilateral discussion and the parties shall endeavour to reach agreement on the measures to be taken and on an evaluation of the gravity of the infringement and the financial loss to the Community.

93

In the present case, it is apparent from the invitation of 19 January 2006 to the bilateral discussion that the items on the agenda of the bilateral discussion are set out in the annex to that invitation. Point 1.1 of that annex states that the agricultural parcels for which aid had been sought were not identified individually, as required by the Community rules. Point 2.2 of the annex refers to the absence of cross-checks with the integrated administration and control system (‘IACS’) database. Point 3.2 of the annex concerns the inadequacy of on-the-spot checks of all the commitments and obligations of the beneficiaries. Point 3.3 of the annex concerns the insufficiently detailed content of the control reports. Point 4 of the annex concerns good agricultural practices, and inter alia control of such practices.

94

It is apparent moreover from the minutes of the bilateral meeting sent to the Hellenic Republic on 28 March 2006 that that meeting ‘focused on the issues listed in the annex to the invitation to a bilateral meeting’. It is also stated that ‘during the meeting the following points were discussed, in the order in which they appear in the letter of invitation to the bilateral meeting’, namely, inter alia, individual identification of agricultural parcels and cross-checks with IACS (point 1.1), the content of the control reports (point 3.3) and control of good agricultural practices (point 4.3).

95

The Hellenic Republic cannot therefore contend that the bilateral discussion did not cover the nature and gravity of the deficiencies established by the Commission.

96

As for the alleged absence of discussion at the bilateral meeting of the financial loss suffered by the Community, it must be stated, contrary to what the Hellenic Republic contends, that the minutes of the bilateral meeting refer to the invitation to the bilateral discussion, which mentions Document No VI/5330/97 concerning deficiencies in key controls. The guidelines contained in that document concern, inter alia, the risk of losses for the EAGGF where deficiencies in key controls have been established (see, to that effect, Case T-263/06 Greece v Commission, paragraph 86 above, paragraphs 76 and 77).

97

The second complaint must therefore be rejected and, hence, the first part of the present plea.

The second part: the Commission’s lack of competence ratione temporis

98

The Hellenic Republic contends that if the plea alleging infringement of essential procedural requirements is not accepted by the General Court the contested decision must still be annulled on the ground that the Commission lacks competence ratione temporis. According to the Hellenic Republic, the Commission’s first communication containing an evaluation of the amount of the financial correction is the Commission’s letter of 3 October 2006. Consequently, under the 24-month rule laid down in Article 7(4) of Regulation No 1258/1999, expenditure incurred before 3 October 2004 falls outside the Commission’s competence ratione temporis.

99

Sub-subparagraph (a) of the fifth subparagraph of Article 7(4) of Regulation No 1258/1999 provides that a refusal to finance may not involve expenditure effected ‘prior to 24 months preceding the Commission’s written communication of the results of [the] checks to the Member State concerned’.

100

According to case-law, the communication from which the period of 24 months starts to run, and which limits a refusal to finance to expenditure incurred during that period, is the written communication to the Member State concerned merely of the results of the checks carried out by the Commission (see, to that effect, Case C-332/06 P Greece v Commission, paragraph 86 above, paragraph 48, and judgment of 31 March 2011 in Case T-214/07 Greece v Commission, not published in the ECR, paragraph 39).

101

Hence, as the Commission rightly contends and contrary to what the Hellenic Republic asserts, the period of 24 months does not start to run from the Commission’s letter of 3 October 2006, which contains the evaluation of the expenditure, but from the Commission’s letter of 4 July 2005 by which the Hellenic Republic was notified of the results of the checks carried out by the Commission. It should be noted however that that letter expressly states that the exclusion of expenditure from Community financing ‘concerns only expenditure incurred at most during the 24 months preceding the transmission of the present communication in the Greek language’.

102

It is clear from the above considerations that the second part must be rejected and, hence, the present plea must also be rejected.

The second plea: an inadequate statement of reasons

103

The Hellenic Republic claims, in essence, that the statement of reasons for the contested decision is unclear in that it mentions a single infringement relating to a deficiency in a key control in the following terms ‘cross-checks not totally satisfactory’, although it is clear from the Commission’s letter of 3 October 2006 and the summary report that five deficiencies in key controls with regard to the ‘agri-environment’ measure, and two deficiencies in key controls with regard to the ‘afforestation of agricultural land’ measure, were initially relied on against it by the Commission.

104

As already stated in paragraph 60 above, in the particular context of the drafting of decisions relating to the clearance of EAGGF accounts, the reasons given for a decision are to be considered sufficient when the relevant Member State was closely involved in the process under which that decision was drawn up and knew the reasons why the Commission considered that the disputed amount should not be charged to the EAGGF.

105

In the present case, it is appropriate to point out, first, that the summary report, to which the contested decision expressly refers, clearly sets out the various stages in the administrative procedure which took place within the Commission services, with which the Hellenic Republic was closely involved. It must be observed in that regard, as the Commission notes, that recital 4 in the preamble to the contested decision makes clear reference to conclusions drawn from ‘the verifications carried out, the outcome of the bilateral discussions and the conciliation procedures’.

106

It should also be pointed out that the Hellenic Republic was informed during that procedure of the various complaints made against it. This is borne out by the Commission’s letter of 4 July 2005 notifying the Hellenic Republic of the results of the checks performed, the Commission’s letter of 3 October 2006, the letter of invitation to the bilateral discussion and the minutes of that discussion.

107

With regard, in particular, to the Commission’s letter of 3 October 2006, cited by the Hellenic Republic itself, it must be held that that letter sets out, inter alia, five deficiencies in key controls with regard to the ‘agri-environment’ measure, and two deficiencies in key controls with regard to the ‘afforestation of agricultural land’ measure. The deficiencies described in that letter are those determined by the Commission at the end of its inspection, from the notification of its checks, from the analysis of the responses from the Hellenic Republic made after the notification of the checks carried out by the Commission and from the bilateral discussion. That is clear from point 1 of the annex to that letter. Contrary to what the Hellenic Republic contends, the five deficiencies in key controls with regard to the ‘agri-environment’ measure and the two deficiencies in key controls with regard to the ‘afforestation of agricultural land’ measure are not merely the deficiencies established by the Commission at the initial stage of the administrative procedure.

108

Although, as the Hellenic Republic states, point 16.3.5 of the summary report, which sets out the Commission’s final position, does not expressly repeat the list of the five deficiencies found in key controls with regard to the ‘agri-environment’ measure and two deficiencies in key controls with regard to the ‘afforestation of agricultural land’ measure. The summary report merely states, in general terms, that ‘the Commission services consider that the on-the-spot checks, although carried out on 100% of beneficiaries of the afforestation programme, do not make up for the absence of electronic cross-checks with the IACS system, the incorrect identification of agricultural parcels and other shortcomings in the IACS system which were demonstrated by the Commission services in respect of the period covered by the audit’.

109

It must be held, however, as the Commission rightly points out, that it is clear from the concluding sentence of the Commission’s final position contained in point 16.3.5 of the summary report that ‘the Commission services maintain the position which they communicated to the Greek authorities in [the Commission’s letter] of 3 October 2006’, which expressly mentions the five deficiencies found in key controls with regard to the ‘agri-environment’ measure, and two deficiencies in key controls with regard to the ‘afforestation of agricultural land’ measure, as stated in paragraph 107 above.

110

Hence, contrary to what the Hellenic Republic contends, the contested decision shows clearly the reasons which led the Commission to apply the 5% correction to expenditure incurred by the Hellenic Republic in the sector of rural development accompanying measures in respect of financial years 2003 and 2004.

111

The plea alleging that the statement of reasons for the contested decision is inadequate must therefore be dismissed as unfounded.

The third plea: breach of the law, errors of fact, inadequate statement of reasons, infringement of the principle of proportionality and exceeding the bounds of discretion

112

There are two parts to this plea. The first alleges errors of law and of fact and an inadequate statement of reasons. The second alleges infringement of the principle of proportionality and exceeding the bounds of discretion.

The first part: errors of law and of fact and an inadequate statement of reasons

113

It must be observed at the outset that only intervention undertaken in accordance with the Community rules in the framework of the common organisation of agricultural markets is to be financed by the EAGGF (see, to that effect, Case C-300/02 Greece v Commission, paragraph 48 above, paragraph 32).

114

In that regard, it is clear from the rules relating to the EAGGF that the Member States are required to organise a series of administrative and on-the-spot checks to ensure that the substantive and formal conditions for granting aid are correctly observed. Where such a series of checks is not organised or where it is put in place by a Member State in such a deficient manner as to leave doubts as to whether those conditions are met, the Commission is justified in not recognising certain expenditure incurred by the Member State concerned (judgment of 14 April 2005 in Case C-468/02 Spain v Commission, paragraph 36, and judgment of 30 September 2009 in Case T-183/06 Portugal v Commission, not published in the ECR, paragraph 31).

115

According to settled case-law, in order to prove a breach of the rules concerning the common organisation of the agricultural markets, the Commission is not required to demonstrate exhaustively that the checks carried out by the national administrations are inadequate or that the figures presented by them are irregular, but only to provide evidence of the serious and reasonable doubt it entertains about such checks and figures. The reason for this mitigation of the burden of proof on the Commission is that it is the Member State which is best placed to collect and verify the data required for the clearance of EAGGF accounts and, consequently, it is for that State to adduce the most detailed and comprehensive evidence that its inspections or figures are accurate and, if appropriate, that the Commission’s statements are incorrect (Case C-247/98 Greece v Commission [2001] ECR I-1, paragraphs 7 and 9, and Case T-214/07 Greece v Commission, paragraph 100 above, paragraph 51).

116

It is in the light of those considerations that it is necessary to examine whether, as the applicant claims, the Commission erred in establishing, first, that identification of the agricultural parcels benefiting from aid was incomplete, in breach of Article 58 of Commission Regulation (EC) No 445/2002 of 26 February 2002 laying down detailed rules for the application of Council Regulation (EC) No 1257/1999 on support for rural development from the EAGGF (OJ 2002 L 74, p. 1), secondly, that cross-checks were not made with the IACS database, in breach of Article 60 of Regulation No 445/2002, thirdly, that the on-the-spot checks were not exhaustive, in breach of Article 61 of Regulation No 445/2002, fourthly, that the control reports were not detailed, in breach of Article 20 of Commission Regulation (EC) No 2419/2001 of 11 December 2001 laying down detailed rules for applying the IACS system for certain Community aid schemes established by Council Regulation (EEC) No 3508/92 (OJ 2001 L 327, p. 11), and, fifthly, that the checks did not cover all the commitments and obligations of the beneficiaries, in breach of Article 61 of Regulation No 445/2002.

– Identification of agricultural parcels

117

The Hellenic Republic claims in essence that during the procedure for the clearance of accounts it demonstrated that since 2003 agricultural parcels had been identified specifically, in accordance with Article 58 of Regulation No 445/2002, and that aid had been paid without any risk to the EAGGF.

118

Article 58(2) of Regulation No 445/2002 provides that where a rural development support measure relates to areas, parcels are to be identified individually. Article 58(4) provides that plots of land are to be identified in accordance with Article 4 of Council Regulation (EEC) No 3508/92 of 27 November 1992 establishing an integrated administration and control system for certain Community aid schemes (OJ 1992 L 355, p. 1).

119

Article 1(1) of Regulation No 3508/92, as amended by Council Regulation (EC) No 1593/2000 of 17 July 2000 (OJ 2000 L 182, p. 4), provides that each Member State is to set up an IACS.

120

Article 2 du Regulation No 3508/92, as amended by Regulation No 1593/2000, provides that the IACS must comprise, inter alia, an identification system for agricultural parcels.

121

Article 4 of Regulation No 3508/92, as amended by Regulation No 1593/2000, provides that the identification system for agricultural parcels is to be established on the basis of maps or land registry documents or other cartographic references. Use should be made of computerised geographical information system techniques including preferably aerial or spatial orthoimagery, with a homogenous standard guaranteeing accuracy at least equivalent to cartography at a scale of 1:10 000. All agricultural parcels must therefore be identified according to that system (Case T-214/07 Greece v Commission, paragraph 100 above, paragraph 54).

122

Moreover, as the Commission rightly states, the importance of the introduction of IACS should not be forgotten. The identification of agricultural parcels is a key factor in the correct application of a system linked to surface area. The lack of a reliable agricultural parcel identification system in itself implies a greater risk of loss for the Community budget (see, to that effect, judgment of 17 March 2005 in Case C-285/03 Greece v Commission, paragraph 62; Case T-243/05 Greece v Commission [2007] ECR II-3475, paragraph 61; and Case T-214/07 Greece v Commission, paragraph 100 above, paragraph 57).

123

As already stated in paragraph 109 above, the Commission, in its final position contained in point 16.3.5 of the summary report, refers to its letter of 3 October 2006.

124

In its letter of 3 October 2006, the Commission states that ‘the parcels which had benefited from aid were not identified in all cases, which meant that areas could not be determined precisely and effective cross-checks could not be carried out, in breach of Article 58 of Regulation No 445/2002’. It also refers to point 1.1 of its letter of 4 July 2005, in which it had stated that parcels had not been ‘identified specifically’, as required by Regulation No 445/2002. It adds that ‘identification was based mainly on measuring agricultural parcels and the area in question in stremmas (1 stremma = 1/10 hectares) [and that], before 2004, there was no requirement to submit systematically the IACS declaration and/or … extracts from the agricultural parcel identification system [, which made it] impossible, in the majority of cases, to carry out individual identification and hence to conduct cross-checks, which were not computerised until [the end of] 2003’.

125

According to the case-law cited in paragraph 115 above, it is necessary to ascertain whether the Hellenic Republic has demonstrated that the Commission’s statements are incorrect.

126

The Hellenic Republic contends that it provided evidence, during exchanges of correspondence with the Commission and at the bilateral discussion, that parcels had been identified specifically since 2003, in accordance with Article 58 of Regulation No 445/2002. It cites in that regard its letter of 5 September 2005 (point 1.1). In addition, it points to the existence of several ministerial orders concerning the method for identifying agricultural parcels and the obligation to give specific parcel codes in IACS applications.

127

First, it must be stated that the Hellenic Republic claims to have provided evidence of the identification of parcels without, however, stating what that evidence was. It is apparent from the minutes of the bilateral meeting that at that meeting the Hellenic Republic provided several documents demonstrating that parcels had been identified. However, in its pleadings, the applicant does not state to what extent those documents demonstrate that agricultural parcels had been identified since 2003 in accordance with Regulation No 445/2002.

128

Secondly, in order to substantiate its assertion that agricultural parcels have been identified specifically since 2003, the Hellenic Republic relies on its letter of 5 September 2005, in which it is demonstrated in point 1.1, that Greek producers have been carrying out such identification since 2003. It should be stated, however, that the content of that letter does not alter the Commission’s finding. It is not apparent from that letter that the identification of parcels, as required by Regulation No 445/2002, had actually taken place in Greece since 2003. The Hellenic Republic merely lists all the measures which required producers in Greece to provide specific identification of parcels in IACS applications, whilst stating that in 2003 ‘a small number of farmers failed, through lack of awareness, to submit an application’.

129

Moreover, it must be held that citation by the Hellenic Republic of the measures making specific identification of parcels a requirement is insufficient to demonstrate that it actually carried out such identification.

130

Lastly, in the application the Hellenic Republic accepts that some producers did not complete declarations online in respect of 2003, as required by Regulation No 3508/92, but submitted them hand-written. Article 6 of that regulation provides that each farmer must submit, for each year, an aid application indicating agricultural parcels, the identification procedure for which is laid down in Article 4 of that regulation. In those circumstances, the Hellenic Republic cannot contend that agricultural parcels have been identified since 2003 in accordance with that regulation.

131

The arguments put forward by the Hellenic Republic with regard to agricultural parcels must therefore be rejected.

– Cross-checks

132

The Hellenic Republic contends in essence that cross-checks were made with the IACS electronic database, in accordance with Article 60 of Regulation No 445/2002.

133

According to Article 16 of Regulation No 2419/2001, the administrative checks referred to in Article 8(1) of Regulation No 3508/92 comprise inter alia cross-checks relating to agricultural parcels and animals declared, in order to avoid the same aid being unduly granted more than once in respect of the same calendar or marketing year and to prevent any undue cumulation of aid granted under Community aid schemes comprising area declarations and cross-checks using the electronic database in order to check the eligibility of aid applications (see, to that effect, Case T-214/07 Greece v Commission, paragraph 100 above, paragraph 63).

134

Article 60 of Regulation No 445/2002 provides:

‘Administrative checks shall be exhaustive and shall include cross-checks wherever appropriate, inter alia with data from [IACS]. They shall relate to parcels … covered by a support measure in order to avoid all unjustified payments of aid. …’

135

In point 16.3.5 of the summary report, the Commission states that the Hellenic Republic did not carry out electronic cross-checks with the IACS database. It also refers to its position set out in its letter of 3 October 2006, from which it is apparent that IACS was not fully operational in Greece during the period covered by the Commission’s investigation.

136

As stated in paragraph 115 above, it is necessary to determine whether the Hellenic Republic demonstrates that the Commission’s statements are incorrect.

137

The Hellenic Republic states that IACS was fully operational during the period concerned. It also relies on several documents which it provided during the bilateral discussion, which show that it carried out electronic cross-checks. In addition, it cites the letter from OPEKEPE (the Greek payment and control agency for guidance and guarantee aid) of 9 March 2007, which explains how the electronic cross-checks were carried out.

138

It is appropriate to point out first of all, as stated in paragraphs 126 to 131 above, that during the period in question the identification system for agricultural parcels did not fully comply with Article 4 of Regulation No 3508/92, as amended by Regulation No 1593/2000. It should also be pointed out that it is clear from Article 2 of Regulation No 3508/92, as amended by Regulation No 1593/2000, that the identification system for agricultural parcels is an element of IACS. In view of the shortcomings established in the identification of agricultural parcels, the Hellenic Republic cannot contend that IACS was fully operational in 2003.

139

In the absence of such effective and fully operational systems, which are required by European Union law and which constitute fundamental elements of the controls laid down, cross-checks within the meaning of Article 60 of Regulation No 445/2002 cannot be properly carried out (see, to that effect, Case T-263/06 Greece v Commission, paragraph 86 above, paragraph 108, and Case T-214/07 Greece v Commission, paragraph 100 above, paragraph 65).

140

lt should be added, as rightly contended by the Commission, that despite its attempts to show that, contrary to the Commission’s findings, it did carry out electronic cross-checks, the Hellenic Republic itself accepts in its pleadings that some producers did not submit online declarations in respect of 2003, only hand-written declarations, which it also confirmed at the hearing following a question from the General Court.

141

It should be pointed out in that regard that the Hellenic Republic does not establish that the evidence it submitted during the bilateral discussion or the letter from OPEKEPE of 9 March 2007 is capable of disproving that some producers failed to submit online declarations in accordance with Regulation No 3508/92.

142

The Hellenic Republic asserts that failure to submit online declarations in accordance with Regulation No 3508/92 in respect of 2003 does not mean that electronic cross-checks did not take place and adds that the hand-written declarations detected by the Commission services in respect of 2003 were entered into the system, and that it is on the basis of those declarations that the electronic cross-checks were carried out.

143

However, first, the Hellenic Republic does not substantiate its assertions. It does not prove, inter alia, as regards the producers in question that electronic checks were carried out in 2003. Secondly, even if cross-checks did take place on the basis of the hand-written declarations detected by the Commission services in respect of 2003, that fact does not affect the Commission’s assessment based on the failure to establish the identification system for agricultural parcels as provided for by the Community rules.

144

Moreover, in view of the above considerations and the case-law cited in paragraph 60 above, the Commission’s assertion that its officials did not find any evidence during the inspection to show that cross-checks had taken place does not constitute a ‘defective’ statement of reasons as argued by the applicant.

145

Consequently, the arguments put forward by the Hellenic Republic with regard to cross-checks must be rejected.

– On-the-spot checks

146

The Hellenic Republic puts forward two main complaints. First, it claims that it has shown that the on-the-spot checks with regard to the measurement of agricultural parcels were adequate and reliable and that they satisfied the criteria of Article 61 of Regulation No 445/2002. Secondly, it contends that it carried out on-the-spot checks of good agricultural practices.

147

Article 61 of Regulation No 445/2002 provides that ‘on-the-spot checks are to be made in accordance with Title III of Regulation No 2419/2001’. According to Article 15 of that regulation, administrative and on-the-spot checks are to be made in such a way as to ensure effective verification of compliance with the terms under which aids are granted.

148

As regards specifically the checking of good agricultural practices, it is clear from the third paragraph of Article 61 of Regulation No 445/2002 that the relevant check is to cover all the commitments and obligations of a beneficiary which can be checked at the time of the visit. Article 22(2) of Regulation No 2419/2001 provides that good agricultural practices also constitute a factor to be taken into account when determining an area (see, to that effect, Case T-263/06 Greece v Commission, paragraph 86 above, paragraph 119).

149

It is apparent from the Commission’s letter of 3 October 2006, which is referred to in point 16.3.5 of the summary report setting out the Commission’s final position, that the on-the-spot checks were not exhaustive, within the meaning of Article 61 of Regulation No 445/2002, on the grounds, first, that they did not include measurements of the agricultural parcels in accordance with Regulation No 3508/92 and, secondly, there was no evidence that the on-the-spot checks had been carried out so far as the application of good agricultural practices was concerned.

150

In order to challenge the Commission’s assessment as regards the on-the-spot checks of the measurement of agricultural parcels, the Hellenic Republic merely states that those parcels were ‘checked and measured by the national inspectors’, a statement which the Commission officials could not have verified since they did not measure those parcels themselves. Those totally unsubstantiated statements cannot rebut the Commission’s findings.

151

It should be noted in that regard that it is clear from the Commission’s letter of 4 July 2005, referred to in the Commission’s letter of 3 October 2006, that, ‘[i]n so far as the measurement of agricultural parcels is concerned, there is insufficient evidence to establish to what extent a parcel has actually been measured again or whether there has merely been a visual inspection of the parcel’. That finding is not disputed by the Hellenic Republic.

152

Nor can the Hellenic Republic’s argument that the control reports provided during the bilateral discussion refer to on-the-spot checks of the measurement of parcels and of good agricultural practices be accepted. Those control reports concern only Nomos Magnisias, which is not moreover disputed by the Hellenic Republic. Even if those reports do establish that checks were carried out on the application of good agricultural practices, it must be held, as the Commission rightly states, that they are not enough by themselves to demonstrate that the Commission finding, which concerns territory whose area exceeds that one nomos, is incorrect. It is for the Member State to prove in concrete terms that the systems of checks in the regions not checked were not tainted with the same defects as those which the Commission found in the regions that were checked (see, to that effect, Case C-344/01 Germany v Commission [2004] ECR I-2081, paragraphs 64 and 65).

153

Lastly, as regards the Hellenic Republic’s argument that a ministerial order adopted in 2000 lays down the obligation to comply with good agricultural practices, that argument is insufficient to demonstrate that the Hellenic Republic actually carried out an on-the-spot check of good agricultural practices (see, to that effect, Case T-263/06 Greece v Commission, paragraph 86 above, paragraph 120).

154

The Hellenic Republic’s arguments concerning on-the-spot checks must therefore be rejected.

– The control reports

155

The Hellenic Republic contends in essence that the failure to indicate, in the control reports concerning Nomos Larissa, the differences between the areas or animals which were declared and those which were measured or counted, and the absence of specific comments on the part of the inspectors do not constitute an infringement of European Union law and do not justify the imposition of a financial correction.

156

According to Article 20(1)(c) of Regulation No 2419/2001, to which the first sentence of Article 61(1) of Regulation No 445/2002 refers, every on-the-spot check is to be the subject of a control report which makes it possible to review the details of the checks carried out including ‘the agricultural parcels checked, the agricultural parcels measured, the results of the measurements per measured agricultural parcel and the measuring methods used’.

157

According to the Commission’s letter of 3 October 2006, to which point 16.3.5 of the summary report setting out the Commission’s final position refers, the control reports ‘were not detailed’, as required by Article 20 of Regulation No 2419/2001, which provides that, as stated above, the results must be given of the measurements of agricultural parcels.

158

The Commission’s letter of 3 October 2006 also refers to point 3.3 of the Commission’s letter of 4 July 2005, which reads as follows:

‘… the reports that were examined were insufficiently substantiated and did not establish clearly the type of check that had actually taken place during the on-the-spot inspection. The reports did not point to any discrepancies between the area declared and the area determined or the number of animals counted during the check. That raised doubts regarding the accuracy and credibility of the declarations contained in the reports.

As regards the measurement of agricultural parcels, there is insufficient evidence to establish to what extent the parcel was actually measured again or whether there was merely a visual inspection of the parcel. As was noted in particular in the files that were checked, the section which was required to be completed in the control reports and which referred to evidence concerning the measurement method used or the number of parcels measured was not completed systematically. Moreover, the control reports did not contain, more generally, any of the specific observations made by the inspectors during the checks …’

159

The Hellenic Republic does not provide any evidence to rebut the Commission’s findings.

160

The Hellenic Republic’s argument that the control reports provided during the bilateral discussion state that parcels were measured cannot be accepted. As already stated in paragraph 152 above and as the Commission rightly contends, those control reports, which concerned only Nomos Magnisias, do not affect the Commission’s more general finding.

161

It should be pointed out moreover that, contrary to what the Hellenic Republic contends, it does not appear from the file that the Commission services accepted that the content of the control reports for Nomos Larissa was an isolated case. Point 3.3 of the minutes of the bilateral discussion states merely that the Commission services ‘maintain their position regarding the inadequacy of the control reports which were examined during the Larissa inspection’.

162

Lastly, it must be held that the ministerial orders and directives relied on by the Hellenic Republic are not in themselves sufficient to demonstrate that the control reports were indeed drawn up in accordance with Article 20 of Regulation No 2419/2001 (see, to that effect, Case T-263/06 Greece v Commission, paragraph 86 above, paragraph 120).

163

It follows that the Hellenic Republic’s arguments with regard to the control reports must be rejected.

– Checks covering all the commitments and obligations of beneficiaries

164

The Hellenic Republic contends that the fact of not carrying out in every case an on-the spot check covering all the commitments and obligations of beneficiaries does not breach European Union law. It goes on to state that the financial correction imposed by the Commission is based on the only case of a beneficiary whose commitments and obligations were not all checked.

165

The third paragraph of Article 61 of Regulation No 445/2002 provides that ‘checks are to cover all the commitments and obligations of a beneficiary which can be checked at the time of the visit’.

166

The Commission’s letter of 3 October 2006, to which point 16.3.5 of the summary report setting out the Commission’s final position refers, states that, ‘as regards all the commitments made by the beneficiaries (in respect of agri-environment development measures) which could be checked during the inspection, as provided by Article 61 of Regulation No 445/2002, the checks were inadequate’.

167

The Commission’s letter of 3 October 2006 also refers to point 3.2 of the Commission’s letter of 4 July 2005, which reads as follows:

‘As stated in Article 69(3) of Regulation (EC) No 817/2004, the on-the-spot check must cover all a beneficiary’s commitments and obligations in respect of rural development measures which can be checked at the time of the visit. On that point, Member States may provide that, where a beneficiary has been selected in the context of a rural development measure, it will be checked in respect of that measure and of all other measures for the checking of which a similar expert report is required.

When the file was being checked, a case was identified where the beneficiary, which had benefited from two different agri-environment sub-measures, had been selected for an on-the-spot check in respect of one of those measures, but not in respect of the other during the on-the-spot inspection.

When they were questioned in that connection, the Greek authorities admitted that the on-the-spot checks had only covered the commitments in respect of the sub-measure for which the beneficiary had been selected, and had not covered other possible operations of the same rural development measure in respect of which the farmer had benefited.’

168

In order to dispute the Commission’s assessment contained in point 3.2 of the Commission’s letter of 4 July 2005, the Hellenic Republic merely contends that the financial correction applied is based on a single case where not all the beneficiary’s commitments and obligations had been checked. In doing so it does not rebut the Commission’s findings with regard to that beneficiary.

169

It is settled case-law that if the Member State is not able to show that they are inaccurate, the Commission’s findings can give rise to serious doubts as to the existence of an adequate and effective series of supervisory measures and inspection procedures (Case C-253/97 Italy v Commission [1999] ECR I-7529, paragraph 7, and Case C-300/02 Greece v Commission, paragraph 48 above, paragraph 35). Consequently, once an error has been found during random checks, the Commission cannot, in the light of the above case-law, rule out the possibility that that irregularity is more general.

170

With regard to the Hellenic Republic’s argument that the Commission does not state that it was possible, in the case of the beneficiary of the aid concerned, to carry out a check of all its commitments and obligations at the same time, it should be noted that, according to the case-law cited in paragraph 115 above, it is for the Member State concerned to adduce such evidence. The Hellenic Republic, however, does not establish that such a check was impossible. It merely asserts, without adducing any supporting evidence, that on 15 April 2003, the date on which the on-the-spot check into compliance with obligations with regard to the ‘organic farming’ measure concerning ‘wheat’ was carried out, it was impossible for it to check that all the obligations and commitments associated with the measure concerning ‘nitrate pollution’ in respect of ‘cotton’ had been complied with, since it was the cotton planting period at that time. Moreover, that argument of the Hellenic Republic is different from the one put forward at the hearing, when it claimed that, in order to carry out such checks, it was necessary to enlist a team of experts specialising in the areas of cotton, water pollution and agri-environment programmes.

171

Accordingly, it is necessary to reject the Hellenic Republic’s arguments concerning checks of all the commitments and obligations of the beneficiaries and, consequently, the first part of the present plea.

The second part: infringement of the principle of proportionality and exceeding the bounds of discretion

172

The Hellenic Republic contends that the contested decision should be annulled in so far as it infringes the principle of proportionality. Failing which, the calculation of the correction should take into account only the case of Nomos Larissa, the ‘agri-environment’ measure and expenditure incurred after 3 October 2004.

173

It is clear from the settled case-law referred to in paragraph 72 above that if the Commission, instead of refusing the entire expenditure, endeavours to draw up rules to differentiate according to the degree of risk posed to the EAGGF by different levels of defective supervision, the Member State must show that those criteria are arbitrary and unfair.

174

According to Document No VI/5330/97, ‘[w]hen one or more key controls are not applied or applied so poorly or so infrequently that they are completely ineffective in determining the eligibility of the claim or preventing irregularity then a correction of 10% is justified as it can reasonably be concluded that there was a high risk of wide-spread loss to the Fund’ and also ‘[w]hen all key controls are applied, but not in the number, frequency, or the depth required by the regulation, then a correction of 5% is justified’.

175

The Commission justified the financial corrections of 5% in respect of financial years 2003 and 2004 in the sector of rural development accompanying measures by the deficiencies established in the conduct of the key controls listed in paragraph 116 above.

176

It is apparent from examination of the first part of the third plea concerning the financial correction applied to expenditure incurred in the sector of rural development accompanying measures in respect of financial years 2003 and 2004 (see paragraphs 117 to 171 above), that the Hellenic Republic was not in a position to prove that the Commission’s findings were incorrect. Hence, in view of the considerations contained in paragraphs 173 to 175 above, the Commission’s decision to apply a correction of 5% cannot be considered to infringe the principle of proportionality. It should moreover be noted in that regard that the European Union judicature has already found that the application of a correction rate of 5% was proportionate on the ground that there was no reliable agricultural parcel identification system (see, to that effect, Case C-300/02 Greece v Commission, paragraph 48 above, paragraph 100; Case C-285/03 Greece v Commission, paragraph 122 above, paragraph 64, and Case T-243/05 Greece v Commission, paragraph 122 above, paragraph 78).

177

It must also be held that the Hellenic Republic adduces no evidence to show that the Commission could not find that there was a significant risk to the EAGGF. It merely contends that, if the financial correction is not held to be disproportionate, the calculation of the correction should take into account only the case of Nomos Larissa, the ‘agri-environment’ measure and expenditure incurred after 3 October 2004.

178

As is apparent from paragraphs 160 and 161 above, the deficiencies in the checks carried out in Nomos Larissa do not exclude such deficiencies occurring in other nomoi. Moreover, it is apparent from the Commission’s letter of 3 October 2006, to which point 16.3.5 of the summary report refers, that the deficiencies associated with the identification of agricultural parcels and cross-checks with IACS concern not only the ‘agri-environment’ measure but also the ‘afforestation of agricultural land’ measure. It is apparent from paragraphs 117 to 145 above that the Commission did not commit any errors of fact in finding those deficiencies. Lastly, as was stated in paragraphs 99 to 101 above, the period of 24 months is not calculated as running from the Commission’s letter of 3 October 2006, which contains the evaluation of expenditure, but from the Commission’s letter of 4 July 2005 by which the Hellenic Republic was notified of the results of the checks carried out. The Hellenic Republic cannot therefore contend that the financial correction of 5% should apply only with regard to the deficiencies found in respect Nomos Larissa, the ‘agri-environment’ measure and expenditure incurred after 3 October 2004.

179

The second part must therefore be rejected and, consequently, the present plea must also be rejected.

3. The financial correction applied with regard to the financial audit in respect of financial year 2004

180

The Hellenic Republic relies on a single plea alleging a breach of the law and of the guidelines contained in Document No VI/5330/97, errors of fact, failure to state reasons, infringement of the principle of proportionality and exceeding the bounds of discretion.

181

In the context of this plea, the Hellenic Republic contends in essence that the delays in payment were justified and were intended exclusively to protect the financial interests of the Community. It concludes from this that the correction applied is manifestly excessive in relation to the loss allegedly sustained by the EAGGF.

182

Article 4(2) of Commission Regulation (EC) No 296/96 of 16 February 1996 on data to be forwarded by the Member States and the monthly booking of expenditure financed under the Guarantee Section of the EAGGF (OJ 1996 L 39, p. 5), as amended by Commission Regulation (EC) No 1577/2001 of 1 August 2011 (OJ 2001 L 209, p. 12), provides:

‘Advances against booking shall be reduced for expenditure effected after the deadlines laid down as follows:

(a)

where expenditure effected after the deadlines is equal to 4% or less of the expenditure effected before the deadlines, no reduction shall be made, irrespective of the number of months’ delay;

(b)

above the threshold of 4%, all further expenditure effected with a delay of up to:

—

one month shall be reduced by 10%,

—

two months shall be reduced by 25%,

—

three months shall be reduced by 45%,

—

four months shall be reduced by 70%,

—

five months or more shall be reduced by 100%.

However, the Commission will apply a different time scale and/or lower reductions or none at all, if exceptional management conditions are encountered for certain measures, or if well-founded justifications are introduced by the Member States.

The reductions referred to in this Article shall be made in accordance with the rules laid down in Article 14 du Regulation (EC) No 2040/2000.’

183

According to case-law, the second subparagraph of Article 4(2) of Regulation No 296/96 is a provision introducing a derogation and must, accordingly, be interpreted narrowly (Case T-243/05 Greece v Commission, paragraph 122 above, paragraph 115).

184

Furthermore, the financing costs chargeable to the EAGGF must be calculated on the assumption that the time-limits laid down by the applicable agricultural rules have been observed. Accordingly, when national authorities pay aid after expiry of the time-limit, they are charging irregular and thus non-eligible expenditure to the EAGGF, as confirmed by the fourth recital in the preamble to Regulation No 296/96 (see, to that effect, judgment of 28 October 1999 in Italy v Commission, paragraph 169 above, paragraph 126). Consequently, the Member State must organise its system of checks taking into account the time-limit set for payment of aid (see, to that effect, Case T-243/05 Greece v Commission, paragraph 122 above, paragraph 116).

185

According to point 17.1.5 of the summary report, which sets out the Commission’s final position, financial corrections amounting to EUR 5 279 881.28 were applied on grounds of delays in payment.

186

It is incumbent on the Hellenic Republic to show that the conditions laid down in the second subparagraph of Article 4(2) of Regulation No 296/96 are met, that is to say, prove that exceptional management conditions are encountered for certain measures or provide well-founded justifications. The Hellenic Republic must demonstrate inter alia that the delays did not exceed reasonable limits (see, to that effect, Case C-331/00 Greece v Commission [2003] ECR I-9085, paragraph 117, and Case T-33/07 Greece v Commission, paragraph 39 above, paragraph 372).

187

It should be noted first that the Hellenic Republic does not deny the existence of delays in payment. It does, however, criticise the financial correction applied on the ground that the reason for the delays in payment was the need to correct certain errors made in the producers’ applications, by carrying out further checks, where necessary.

188

As the Commission states, it must first be held that the Hellenic Republic does not rely on any ‘exceptional management condition’ giving rise to the delays in payment.

189

Article 4(2) of Regulation No 296/96 refers, in addition to exceptional management conditions, to ‘well-founded justifications introduced by the Member States’.

190

However, without it being necessary to examine whether the need to correct errors made by producers in their applications constitutes a ‘well-founded justification’ for the delays in payment, within the meaning of Article 4(2) of Regulation No 296/96, it must be held that the Hellenic Republic provides no evidence that errors relating to the contact details of producers were in fact made in their applications. In that regard, it should be noted that, in the minutes of the bilateral discussion held on 12 January 2006, the Commission requested the Greek authorities to ‘provide evidence confirming the accuracy of the grounds’ for delay. Although, in its letter of 2 May 2006, the Hellenic Republic substantiates its assertions, it should be noted that it does not however provide evidence confirming the accuracy of the grounds alleged for the delays in payment.

191

In any event, even if the errors made in the producers’ applications were genuine, the Hellenic Republic does not demonstrate the need to carry out further checks, the duration of which justified the delays in payment (see, to that effect, Case T-33/07 Greece v Commission, paragraph 39 above, paragraph 375). In that regard, it should be observed that the 4% threshold laid down in Article 4(2) of Regulation No 296/96 is intended precisely to give Member States the opportunity to carry out additional checks without the number of months’ delay affecting payments which do not exceed that threshold (Case T-243/05 Greece v Commission, paragraph 122 above, paragraph 116).

192

Moreover, the Hellenic Republic’s complaint that the contested decision fails to state reasons, in so far as the Commission did not explain why the grounds given in order to justify the delays in payment had not been taken into account, must be rejected.

193

It must be held that, following the Commission’s request to the Greek authorities to provide evidence confirming the accuracy of the grounds given in order to justify the delays in payment, OPEKEPE set out, in a letter of 2 May 2006, the grounds for the delays in payment and stated in the form of a table the errors made in the producers’ applications in respect of 2002 and 2003, without however providing evidence of those errors in the form of tangible facts. In the Commission’s letter of 20 August 2007, the Commission states that the arguments of the Greek authorities cannot be accepted, since ‘no exceptional management condition arose and no valid reason was given by the [Hellenic Republic]’ and the administrative difficulties were allowed for by the 4% margin provided for in Article 4(2) of Regulation No 296/96.

194

Therefore, according to the case-law cited in paragraph 60 above, the Hellenic Republic cannot, relying on an infringement of the obligation to state reasons, consider that it was not sufficiently informed of the reasons why the Commission did not take into account the evidence provided, in its letter of 2 May 2006, in support of the grounds relied on for the delays in payment. It should also be noted that the applicant has been able to assert its rights, since it does in fact challenge in its application the expression ‘administrative difficulties’ used by the Commission in order to describe the grounds for the delays in payment.

195

As for the Hellenic Republic’s complaint that the correction applied is manifestly excessive in relation to the loss allegedly sustained by the EAGGF, it should be noted that it is common ground that there was a delay in making payments.

196

According to case-law, although it is for the Commission to prove that Community rules have been infringed, once it has established such an infringement it is for the Member State to demonstrate, if appropriate, that the Commission made an error as to the financial consequences to be attached to that infringement (Case C-153/01 Spain v Commission [2004] ECR I-9009, paragraph 67).

197

In the present case, the Hellenic Republic merely justified the delays in payment without however challenging the financial consequences established by the Commission, as regards in particular the provisions of Article 4(2) of Regulation No 296/96 set out in paragraph 182 above. It cannot therefore contend that the financial correction is disproportionate.

198

It must be stated, lastly, that in its pleadings and at the hearing, the Hellenic Republic claimed that the Commission should refund it the sum of EUR 20 006.27, corresponding to the difference between the deductions already made in the context of advances, assessed at EUR 5 299 887.55, and the total amount of the correction applied by the Commission, equal to EUR 5 279 881.28. It should be observed that the contested decision takes account of that difference, which appears in the table annexed to the contested decision in the column headed ‘Financial impact’.

199

Accordingly, the present plea must be rejected and the application must be dismissed in its entirety.

Costs

200

Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Hellenic Republic has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the Commission.

 

On those grounds,

THE GENERAL COURT (Eighth Chamber)

hereby:

 

1.

Dismisses the action;

 

2.

Orders the Hellenic Republic to pay the costs.

 

Truchot

Martins Ribeiro

Kanninen

Delivered in open court in Luxembourg on 5 July 2012.

[Signatures]

( *1 ) Language of the case: Greek.

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