Italian Republic v Commission of the European Communities. (Agriculture) [1990] EUECJ C-34/89 (11 October 1990)

Judgment 1 By application lodged at the Court Registry on 9 February 1989, the Italian Republic, pursuant to the first paragraph of Article 173 of the EEC Treaty, sought the partial annulment of Commission Decision 88/630/EEC of 29 November 1988 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1986 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund, ( Official Journal 1988 L 353, p . 30 ), in so far as it did not recognize as chargeable to the European Agricultural Guidance and Guarantee Fund ( hereinafter referred to as "the Fund "), an amount of LIT 10 410 055 894, paid by the Italian authorities to a number of olive oil producers by way of advances on production aid between 1978 and 1984 . 2 The application initially sought the annulment of the said decision in so far as it also did not recognize as chargeable to the Fund an amount of LIT 54 186 548 420 relating to compensation to producer organizations in the fruit and vegetable sector . By letter of 21 December 1989, the Italian Government declared that it was withdrawing the part of the application relating to the said compensation . 3 Regulation No 136/66/EEC of the Council of 22 September 1966 on the establishment of a common organization of the market in oils and fats ( Official Journal, English Special Edition, 1965-66, p . 221 ), as amended by Council Regulation ( EEC ) No 1562/78, of 29 June 1978 ( Official Journal 1978 L 185, p . 1 ) established a system of aid for the production and consumption of olive oil in the Community . Article 5 of Regulation No 136/66 provides that aid for production must be fixed annually before 1 August for the marketing year beginning the following year . Article 12 of Council Regulation ( EEC ) No 2753/78 of 23 November 1978 laying down general rules in respect of production aid for olive oil for the 1978/79 marketing year ( Official Journal 1978 L 331, p . 10 ) authorizes Member States to advance up to 70% of the aid requested to producer organizations . Analogous provisions exist in the regulations applying to the marketing years 1979/80, 1980/81, 1981/82, 1982/83 and 1983/84 . 4 The Italian intervention body, AIMA, made advance payments, in accordance with those provisions, of aid for production of olive oil for the marketing years 1978/79 to 1983/84 . It transpired that, for those marketing years, the advances exceeded the aid actually due, because of a reduction in the quantities of oil qualifying for the aid . Article 8 of Regulation ( EEC ) No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy ( Official Journal, English Special Edition 1970 ( I ), p . 218 ) imposed an obligation on Member States to take steps to recover the difference between sums advanced and the aid actually due . Article 8(1 ) and ( 2 ) is worded as follows : "1 . The Member States in accordance with national provisions laid down by law, regulation or administrative action shall take the measures necessary to : ( i ) satisfy themselves that transactions financed by the Fund are actually carried out and are executed correctly, ( ii ) prevent and deal with irregularities, ( iii ) recover sums lost as a result of irregularities or negligence . The Member States shall inform the Commission of the measures taken for those purposes and in particular of the state of the administrative and judicial procedures . 2 . In the absence of total recovery, the financial consequences of irregularities or negligence shall be borne by the Community, with the exception of the consequences of irregularities or negligence attributable to administrative authorities or other bodies of the Member States . The sums recovered shall be paid to the paying authorities or bodies and deducted by them from the expenditure financed by the Fund ." 5 During an inspection of AIMA in 1985, the Commission' s officials found that accounting procedures relating to amounts of aid wrongly paid and the recovery thereof had not been satisfactory . The Commission informed the Italian authorities of this by telex of 29 July 1986 requesting them to provide information in that connection as a matter of urgency . The Italian authorities responded, on 28 June 1988, by informing the Commission that letters concerning the recovery of excess advances had been or were about to be sent to the recipients of the aid . Meanwhile, the Commission had drawn up its Summary Report of 15 June 1988, for the financial year 1986, proposing that the sums to be recovered should not be chargeable to the Fund, on the grounds that the delays in the recovery procedures were unacceptable . The attitude of the Commission was finally specifically embodied in the contested decision of 29 November 1988 . 6 Reference is made to the Report for the Hearing for a fuller account of the background and the facts of the case, the course of the procedure and the pleas in law and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court . 7 The Italian Government maintains that no rule of Community law requires the national authorities to implement procedures for recovering sums wrongly paid within a shorter period than the ordinary limitation period established by the national provisions in force, which is in the present case 10 years . It states that the said period had not expired when the letters for recovery of the amounts were sent at the end of June 1988 . 8 The Commission, on the other hand, contends that delays of four to 10 years in starting proceedings to recover sums wrongly paid in respect of the marketing years 1978/79 to 1983/84 constitute negligence within the meaning of Article 8(2 ) of Regulation No 729/70, the financial consequences of which are attributable to the Member State . 9 In that connection, it should be noted that paragraphs 1 and 2 of Article 8 of Regulation No 729/70 distinguish between two types of relationship . The first is between the intervention bodies and economic operators and is governed, according to the first sentence of Article 8(1 ), by national law, within the limits imposed by compliance with Community law ( see, in particular, the judgment in Joined Cases 205 to 215/82 Deutsche Milchkontor v Germany [1983] ECR 2633 ). 10 The second, which is in question in the present case, is that between Member States and the Commission . It is concerned not with the granting of aid or the recovery of excessive advance payments as such, but with whether the Member State concerned or the Community has to bear the relevant financial burden . The reply to that question has direct consequences for the Community budget and cannot be determined by national law, which differs from one Member State to another, but must be supplied by Community law . It would be contrary to the uniform nature of the common agricultural policy and the Community budget if the Member States were able to alter the financial consequences of that policy by means of their national rules, including those prescribing time-limits . 11 It follows that responsibility for negligence within the meaning of Article 8(2 ) of Regulation No 729/70, in the context of relations between Member States and the Commission must be determined by Community law which imposes a number of requirements on Member States and the Commission with respect to rules capable of having financial consequences . 12 In the first place, Member States must respect the obligation of general diligence in Article 5 of the EEC Treaty as specifically embodied in the abovementioned Article 8(1 ) and ( 2 ) with regard to the financing of the common agricultural policy . The obligation implies that the Member States must take steps to rectify irregularities promptly . With the passage of time, recovery of sums wrongly paid is likely to become complicated or impossible for reasons such as the fact that undertakings may have ceased trading or accounting documents may have been lost . The Court has already had occasion to make observations to that effect in a different context ( see the judgment in Case 343/85 Italy v Commission [1987] ECR 4711 ). 13 Such circumstances arise in particular when a Member State waits, as in the present case, four to 10 years before starting proceedings to recover amounts wrongly paid . It therefore appears that the Italian authorities have not acted with the necessary diligence . 14 A certain and predictable financial relationship between the Commission and the Member States constitutes, according to consistent case-law ( see, most recently, the judgment in Case C-10/88 Italy v Commission [1990] ECR I-1229 ), a second requirement . If the Commission intends to attach financial consequences to inaction or omissions on the part of national authorities in implementing their Community obligations, such as those imposed by Article 8 of Regulation No 729/70, certainty and predictability in financial relations require that the Commission indicate clearly to those authorities what it is complaining of and not attach financial consequences to their failure until a reasonable period of time has elapsed . 15 The Commission cannot be accused, in the present case, of disregarding those principles of good administration . It is evident from the documents in the case that the Commission' s officials had already reported delays in the recovery procedures at the time of their inspections of AIMA in 1985 and, even before the Summary Report was drawn up, the Commission warned the Italian authorities by a memorandum of 15 April 1988 of its intention not to recognize as chargeable to the Fund the contested amount of LIT 10 410 055 894 . 16 It should be observed, lastly, that the Italian authorities could not reasonably have been unaware that their inaction was liable to have financial repercussions . 17 It follows from the foregoing that the pleas in law made by the Italian Republic are without foundation and, accordingly, the application must be rejected . Costs 18 Under Article 69(2 ) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been asked for in the successful party' s pleading . Since the Italian Republic has failed in its main pleas in law, it must be ordered to pay the costs, with the exception of those corresponding to the head of claim withdrawn in the course of the proceedings and in respect of which the parties each agreed to bear their own costs . On those grounds, THE COURT hereby : ( 1 ) Dismisses the application; ( 2 ) Orders the Italian Republic to pay the costs, with the exception of those corresponding to the claim withdrawn in the course of the proceedings . © European Communities, 2001 All rights reserved BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII