Portugal v Commission (Agriculture) [2004] EUECJ C-249/02 (11 November 2004)

Judgment By its application, the Portuguese Republic seeks the annulment of the letter of the Director-General of the Directorate-General for Agriculture of the Commission of the European Communities of 18 April 2002 (-�the contested decision-�), concerning a reduction in advances paid in the 2002 financial year in accordance with Article 39(3) of Commission Regulation (EC) No 1750/1999 of 23 July 1999 laying down detailed rules for the application of Council Regulation (EC) No 1257/1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) (OJ 1999 L 214, p. 31), as most recently amended by Commission Regulation (EC) No 1763/2001 of 6 September 2001 (OJ 2001 L 239, p. 10) (-�Regulation No 1750/1999-�). Legal framework Council Regulation (EC) No 1257/1999 of 17 May 1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) and amending and repealing certain regulations (OJ 1999 L 160, p. 80) requires the Member States to draw up rural development plans covering a period of seven years from 1 January 2000. Those plans are to be submitted to the Commission, which is to approve rural development financial programming documents on the basis of them. Article 46 of Regulation No 1257/1999 states: -�1. Community support for rural development from the EAGGF Guarantee Section shall be subject to financial planning and accounting on an annual basis. -� 2. The Commission shall make initial allocations to Member States, broken down on an annual basis and using objective criteria -� 3. Initial allocations shall be adjusted on the basis of actual expenditure and revised expenditure forecasts submitted by the Member States taking into account programme objectives, and be subject to the funds available -�-� Article 47(3) of the same regulation provides: -�Payments of financial assistance from the EAGGF Guarantee Section may take the form of advances for programme implementation and of payments in respect of expenditure incurred.-� According to the second paragraph of Article 56 of Regulation No 1257/1999: -�[That regulation] shall apply in relation to Community support as from 1 January 2000-�. Article 7(1) to (3) 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) states: -�1. The Commission, after consulting the [EAGGF] Committee shall adopt the decisions set out in paragraphs 2, 3 and 4. 2. The Commission shall decide on monthly advances on the provision for expenditure effected by the accredited paying agencies. -� 3. The Commission shall, before 30 April of the year following the financial year concerned, -� clear the accounts of the paying agencies. -�-� Article 12 of the same regulation provides that the EAGGF Committee is to consist of representatives of the Member States and of the Commission and that a representative of the Commission is to be its chairman. 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 Agricultural Guidance and Guarantee Fund (EAGGF) and repealing Regulation (EEC) No 2776/88 (OJ 1996 L 39, p. 5) lays down the conditions under which the Member States may benefit from the financing by the EAGGF Guarantee Section of expenditure incurred by them. Article 4(1) of Regulation No 296/96 provides that -�on the basis of data sent [by the Member States], the Commission shall adopt decisions and make the monthly advances against booking of expenditure -�-� The second subparagraph of Article 7(1) of the same regulation states: -�For a year -�n-�, account shall be taken of expenditure effected by the Member States from 16 October of year -�n-1-� to 15 October of year -�n-�.-� Article 37(1) of Regulation No 1750/1999 provides: -�No later than 30 September each year, the Member States shall forward to the Commission, for each rural development programming document -�: (a) a statement of expenditure incurred in the current financial year and of expenditure remaining to be disbursed by the end of that year and covered by Community support -�, and (b) revised forecasts of such expenditure for subsequent financial years until the end of the programming period in question, keeping within the allocation for each Member State. -�-� The first paragraph of Article 38 of Regulation No 1750/1999 states: -�For the month during which the decision approving a rural development programming document -� is adopted, the paying agencies may enter into the accounts as expenditure an advance not exceeding 12.5% of the average annual EAGGF contribution provided for in the programming document -�-� Article 39(3) and (4) of Regulation No 1750/1999 provides that: -�3. Where expenditure actually incurred by a Member State in a given financial year is less than 75% of the amounts referred to in paragraph 1, the expenditure to be recognised for the following financial year shall be reduced by a third of the difference between this threshold -� and the actual expenditure incurred during the financial year in question. This reduction shall not be taken into account when establishing actual expenditure in the financial year following that in which the reduction was made. 4. Paragraph 3 shall not apply in relation to the first declaration of expenditure under the rural development programming document -�-� Article 50 of Regulation No 1750/1999 provides that it is to apply in relation to Community support as from 1 January 2000. With effect from its entry into force on 22 March 2002, Commission Regulation (EC) No 445/2002 of 26 February 2002 laying down detailed rules for the application of Regulation No 1257/1999 (OJ 2002 L 74, p. 1) replaced Regulation No 1750/1999, which it repealed. Article 47(1) of Regulation No 445/2002 restates the provisions of Article 37(1) of Regulation No 1750/1999. Article 48(1) of Regulation No 445/2002 repeats the provisions of the first paragraph of Article 38 of Regulation No 1750/1999. The provisions of Article 39(3) of Regulation No 1750/1999 are likewise replicated at Article 49(1) and (4) of Regulation No 445/2002. Lastly, Article 49(5) of Regulation No 445/2002 repeats the provisions of Article 39(4) of Regulation No 1750/1999, but states in addition that the first statement of expenditure covered is that relating to -�the 2000 financial year-�. Facts By decisions of 22 November 2000, and 1 March and 30 April 2001, the Commission approved, for the programming period 2000 to 2006, the rural development plans for the Portuguese mainland, the autonomous region of the Azores and the autonomous region of Madeira, respectively. Those decisions include an annex setting out a general indicative financial table which records the national public expenditure allocated to the implementation of the measures covered by the rural development plan concerned and the contribution of the EAGGF Guarantee Section. Article 2(2) of each of those decisions provides that the 2000 budgetary year is to cover payments made by the paying organisations from 16 October 1999. Under Article 3(1) of the decisions, expenditure is eligible from the date on which the rural development plans concerned were submitted to the Commission, that is to say 6 January, and 4 and 22 February 2000, respectively. By communication of 30 September 2000, the Portuguese Republic submitted to the Commission its expenditure forecasts for the subsequent financial years of the programming period and for each rural development programming document, in accordance with Article 37(1)(b) of Regulation No 1750/1999. That communication stated that the amount of the forecast expenditure in respect of the 2001 financial year, that is to say from 16 October 2000 to 15 October 2001, was EUR 281 430 000. However, in the light of the data forwarded each month by the Portuguese authorities, the Commission found that, in the 2001 financial year, the expenditure actually incurred by the Portuguese Republic had amounted only to EUR 197 323 332.52, corresponding to 70.11% of the forecast expenditure for that financial year. As the actual expenditure was, for the Portuguese Republic as for other Member States, less than the threshold of 75% of the forecast expenditure referred to in Article 39(3) of Regulation No 1750/1999, the application of the reductions provided for under that provision was discussed at the meetings of the EAGGF Committee held on 22 January and 19 February 2002. Point 6 of the minute of the latter meeting states that -�the [six] Member States [concerned by the reductions] will be advised by letter of the date on which the penalties will be deducted from their monthly advance -�-� By the contested decision, the Director-General of the Directorate-'General for Agriculture of the Commission informed the Instituto Nacional de Garantia Agrícola (-�the INGA-�), the organisation which is responsible in Portugal for the coordination of expenditure financed by the Guarantee Section of the EAGGF, that: -�During the 2001 EAGGF financial year, the total expenditure attributed to Portugal under heading 1b (Rural development) amounted to EUR 197 323 332.52. The forecast expenditure for 2001 which was intimated to the Commission on 30 September 2000 under Article 37 of Regulation (EC) No 1750/1999 amounted to EUR 281 430 000. As the total of the expenditure fails to meet the threshold of 75% of the forecast submitted, Article 39(3) of Regulation (EC) No 1750/1999 is applicable. Document AGRI/46059/2001 - Rev. 2, which was discussed by the EAGGF Committee on 19 February 2002 and which sets out the detail of the calculations, is attached as an annex to this letter. Pursuant to the abovementioned article, a reduction of EUR 4 583 055.83 will therefore be applied to the advances for 2002. I should add that this reduction of EUR 4 583 055.83 to the advances will be attributed to Chapter B01-41 (Clearance of accounts and reductions/corrections to advances) -�-� At the meeting held on 19 April 2002, the EAGGF Committee was consulted on the advances to be paid to the Member States in May 2002 for the booking of expenditure incurred by them in March 2002. The application of the reductions provided for in Article 39(3) of Regulation No 1750/1999 (now Article 49(4) of Regulation No 445/2002) was discussed again. Point 7.5.3 of the minute of that meeting, headed -�Reduction provided for by Article 39(3) of Regulation No 1750/1999-�), states: -�At the request of the Danish delegation, the Chairman wishes to state that the Legal Service of the Commission has confirmed that the reduction in question is indeed of the nature of a standard financial correction, which will take the form of a deduction from the advances against booking of expenditure to be paid to the Member States concerned, either in June or in August 2002 -�-� At the meetings held on 22 May and 19 June 2002, the EAGGF Committee was consulted as to the advances to be paid to the Member States in June and July 2002 respectively for the booking of expenditure incurred in April and May 2002. The minutes of those meetings record that the amount of the advances -�takes into account the corrections - positive and negative - made to the expenditure declared by several Member States-�. By decisions of 27 May and 24 June 2002, signed by the Commissioner for Agriculture, the Commission set the amount of the advances to be paid to the Member States for April and May 2002. Lastly, by Decision 2002/461/EC of 12 June 2002 on the clearance of the accounts of Member States-� expenditure financed by the European Agricultural Guidance and Guarantee Fund (EAGGF), Guarantee Section, for the 2001 financial year (OJ 2002 L 160, p. 28), taken under Article 7(3) of Regulation No 1258/1999, the Commission provided that clearance. Forms of order sought The application was registered at the Court Registry on 1 July 2002. The Portuguese Republic claims that the Court should: - annul the contested decision, and - order the Commission to pay the costs. The Commission claims that the Court should: - dismiss the action, and - order the applicant to pay the costs. The two parties have submitted a reply and a rejoinder respectively, in which the same forms of order are sought. The action Admissibility The Commission submits that the action is directed towards an act which has no binding legal effect and is therefore inadmissible. It states that the reduction in the monthly advances paid to the Portuguese Republic was preceded by close cooperation between the Commission and the applicant - as with all the Member States - within the EAGGF Committee, which discussed the matter at its meetings of 22 January and 19 February 2002. At the latter meeting, the Commission-�s representative informed the representatives of the Member States affected by the reductions that they would be advised by letter of the date on which those reductions would be made. Further discussions also took place on the same matter at the meetings of 19 April and 22 May 2002 of the EAGGF Committee. The contested decision is simply the letter which it had been stated at the meeting of 19 February 2002 would be sent. That letter is merely a communication between the services of the Commission and those of the Portuguese Republic. It is purely informative and thus has no binding legal effect. The Commission states that the only decisions having binding legal effect which are capable of affecting the interests of the Portuguese Republic are the decisions of 27 May and 24 June 2002, regarding the advances for April and May 2002, in which the Commissioner for Agriculture legitimately adopted, under delegation from the Commission, the disputed measure for the reduction of the advances. In that regard, in order to ascertain whether measures are acts within the meaning of Article 230 EC, it is necessary to look to their substance, as the form in which they are cast is, in principle, immaterial in this respect. Only a measure the legal effects of which are binding on, and are capable of affecting the interests of, the applicant by bringing about a distinct change in his legal position is an act or decision which may be the subject of an action for annulment under Article 230 EC (see, to that effect, Case 60/81 IBM v Commission [1981] ECR 2639 , paragraph 9, and Case C-308/95 Netherlands v Commission [1999] ECR I-6513, paragraph 26). In the present case, point 6 of the minute of the 583rd meeting of the EAGGF Committee of 19 February 2002, headed -�Information regarding the penalties to be imposed on certain Member States for failure to comply with the expenditure forecasts in relation to rural development for the 2001 EAGGF financial year [application of Article 39(3) of Regulation No 1750/1999]-�, shows that, at that meeting, the Commission-�s representative took the views of the representatives of the six Member States concerned on the Commission-�s intention to apply the corrective financial measures provided for in Article 39 to those Member States. Point 6 of the same minute states, at the end of the first paragraph, that -�those Member States will be notified by letter of the date on which the penalties will be deducted from their monthly advance-�. That point ends with a reference to a declaration by the Luxembourg delegation, stating that it -�regrets-� that the Commission -�did not choose to extend the transitional period referred to in Article 39 of Regulation (EC) No 1750/1999 -� particularly as the adoption by the European Commission of the Luxembourg RDP occurred very late in 2000 -�-�. It is apparent from point 6 of that minute that the financial corrections would be applied to the monthly advances paid to certain Member States and that those States would subsequently be advised of them by letter. Next, the terms of the contested decision, which is the same letter which it was stated at the EAGGF Committee meeting of 19 February 2002 would be sent, show that that decision was intended to have legal effect. It is headed: -�Application of Article 39(3) of Regulation (EC) No 1750/1999 - Correction to be applied to advances-�. The next paragraph of that act, which is plainly of the nature of a decision, states that -�because the total of expenditure does not meet the 75% threshold of the forecast submitted, Article 39(3) of Regulation (EC) No 1750/1999 is applicable. Document AGRI/46059/2001 - Rev. 2, which was discussed at the meeting of the EAGGF Committee on 19 February 2002 and which shows the detail of the calculations, is annexed-�. Lastly, as the applicant rightly submits, the contested decision is the only act which states that the expenditure to be booked for the 2002 financial year of the Portuguese Republic is to be reduced by EUR 4 583 055.83, is the only act by which the applicant was duly informed of the finding that the actual expenditure did not amount to 75% of the forecast expenditure, and also the only act specifying the budget chapter against which that sum was to be applied. By contrast to the contested decision, the decisions of 27 May and 24 June 2002 regarding the advances to be paid to the Member States for April and May 2002 are addressed to all the Member States, refer only to the overall amount of monthly advances to be paid to them and do not contain any reference to the amount of the financial corrections to be made with respect to the parties to whom they are addressed. Furthermore, the Commission has not specified the financial corrections which those two decisions would have applied to the Portuguese Republic. The contested decision accordingly constitutes the only measure which clearly determines the content and scope of the disputed financial correction. The applicant is therefore right to submit that the decisions of 27 May and 24 June 2002 are no more than measures which give effect to the contested decision. This is also apparent from the terms of that act, which had stated that those decisions would be taken. It follows from all of the above that the contested decision is indeed the act by which the contested financial correction was taken and by which the Portuguese authorities received notification of that correction. That act therefore has binding legal effect, with the result that the applicant-�s request for annulment is admissible. The preliminary objection of inadmissibility raised by the Commission must accordingly be rejected. Substance By the first part of its first plea, which alleges that the author of the act exceeded its powers, the applicant submits that, according to the general principles of administrative law, the delegation and sub-delegation of powers may not be inferred but must be expressly invoked where the author of the act is not acting within the scope of its own powers. In this case, the Director-General who signed the contested decision did not himself have the power to adopt that decision and did not rely upon any act of delegation or sub-delegation taken on the basis of Article 13 or Article 14 of the Commission-�s Rules of Procedure. The Commission-�s only argument against the first part of the plea states, at point 38 of the defence and at point 88 of the rejoinder, that the disputed financial correction was not taken by the contested decision, but by the decisions of 27 May and 24 June 2002, adopted by the Commissioner for Agriculture acting under a delegation of powers by the Commission. The Commission thus does not deny that the Director-General who signed the contested decision did not hold any delegation of powers authorising him to adopt the disputed financial corrective measure. Accordingly, the contested decision which, as mentioned above, constitutes the act by which the financial correction was adopted and notified to the Portuguese authorities, is vitiated by lack of powers and must, on that ground and without there being any need to consider the six remaining pleas in the application, be annulled. Costs Under Article 69(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 Portuguese Republic applied for the Commission to be ordered to pay the costs and the Commission has been unsuccessful, it must be ordered to pay the costs. On those grounds, the Court (Second Chamber) hereby: 1. Annuls the decision contained in the letter of the Director-'General of the Directorate-'General for Agriculture of the Commission of the European Communities of 18 April 2002 concerning a reduction in advances extended in the 2002 financial year in accordance with Article 39(3) of Commission Regulation (EC) No 1750/1999 of 23 July 1999 laying down detailed rules for the application of Council Regulation (EC) No 1257/1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF), as most recently amended by Commission Regulation (EC) No 1763/2001 of 6 September 2001; 2. Orders the Commission of the European Communities to pay the costs. Signatures. - Language of the case: Portuguese. BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII