OPINION OF ADVOCATE GENERAL

delivered on 29 June 1995 (*1)

1.By application lodged at the Court Registry on 7 February 1994, Ireland brought an action under the first paragraph of Article 173 of the EC Treaty for a declaration that Commission Decision 93/659/EC of 25 November 1993 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1990 of the European Agricultural Guidance and Guarantee Fund (EAGGF), Guarantee Section, (1) was void. Ireland brought that action because in that Decision the Commission disallowed an amount of IR £6343429 paid by way of export refunds for beef.

Before examining the grounds relied on by Ireland in seeking the annulment of Decision 93/659, it is necessary to set out the relevant legislation and the facts.

Relevant legislation

2.For reasons of clarity and administrative efficiency, Regulation (EEC) No 3665/87 (2) consolidated the existing rules on export refunds and laid down a common legal framework for export refunds in numerous markets subject to common organization, including the market in beef and veal.

Such refunds are paid where the goods are directly exported or subject to a customs procedure for processing or storage before leaving the customs territory of the Community. In both cases, the refund may be paid before or after export. Advance payment of refunds is governed by Articles 24 to 34 of Regulation No 3665/87, which implements Regulation (EEC) No 565/80. (3) Advances on refunds may be paid, according to Articles 4 and 5 of Regulation No 565/80, as soon as the basic products are placed under customs control ensuring that the processed products will be exported within a set time-limit or when the exporter puts the goods under the customs-warehousing or free-zone procedure with a view to their being exported within a set time-limit.

3.The common organization of the markets in beef and veal makes provision for private storage aid for beef and veal. Article 2(4) of Regulation (EEC) No 1091/80, (4) as amended by Regulation (EEC) No 2629/80, (5) provides that the same products may not at the same time be eligible for private storage aid and advance payment of an export refund. Article 6(1) of Regulation (EEC) No 2675/88, (6) however, derogated from that prohibition for 1989, providing that beef and veal stored under the private storage procedure could also be placed under the customs-warehousing or free-zone procedure with advance payment as laid down in Article 5 of Regulation No 565/80. An equivalent derogation applied in 1990 by virtue of Regulation (EEC) No 2965/89. (7)

4.The administrative procedure applicable to advance payment of export refunds is set out in Articles 24 to 33 of Regulation No 3665/87. The procedure starts with the exporter's lodging with the customs authorities of a Member State of the so-called ‘payment declaration’, which must include all the particulars necessary for determining the refund. The amount payable before export is to be paid by the Member State in which the payment declaration is accepted.

5.The products are to remain under customs control from the date of acceptance of the payment declaration, which serves to determine the rate of the refund and any adjustments to be made to it. From that date, the exporter has a maximum of six months to remove the goods from the customs territory of the Community. For beef and veal, however, Regulation No 2675/88 increased that period to nine months for 1989 and Regulation No 2965/89 set it at seven months for 1990.

6.Final receipt of the refund is conditional on presentation of clear evidence that the goods have been exported. If such evidence is not provided the exporter must return the advance on the refund and if the time-limits for the warehousing or free-zone procedure or the 60 days for exporting the goods have been exceeded the amount of the refund is to be reduced by 15% together with a reduction proportionate to the accrued delay.

7.Finally, Article 2 of Regulation (EEC) No 729/70 (8) provides that the Guarantee Section of the EAGGF is to finance refunds on exports to third countries granted in accordance with the Community rules within the framework of the common organization of agricultural markets. Conversely, it follows that the financing of refunds on exports granted in breach of the Community rules will not be borne by the Guarantee Section of the EAGGF.

Facts

9.In the course of the EAGGF's financial years 1989 and 1990, Ireland paid advances on export refunds for beef under the customs-warehousing or free-zone procedure pursuant to the relevant provisions of Regulation No 565/80, as implemented by Regulation No 3665/87. At the same time private storage aid was paid for the beef concerned under Regulation No 2675/88, applicable in 1989, and Regulation No 2965/89, applicable in 1990.

10.Following the clearance of the EAGGF accounts in 1989, the Commission of the European Communities came to the view that the documentation used by Ireland to authorize removal of the beef from the customs-warehousing procedure with advance payment of export refunds did not satisfy the conditions laid down by Regulation No 3665/87. Since a more detailed investigation was necessary to determine the economic consequences of that noncompliance, the clearance of that expenditure was postponed. (9)

11.In the Summary Report for 1990, (10) the Commission decided that in 1989 and 1990 Ireland had used a procedure contrary to Regulation No 3665/87. First, the maximum storage period (nine months in 1989 and seven months in 1990) had been exceeded in the case of a significant quantity of beef. Secondly, there were cases in which the meat had left the customs territory of the Community after expiry of the 60-day period following the export declaration. Finally, the documentation used by Ireland to authorize removal of the beef from the warehousing procedure did not constitute an export declaration or ad hoc equivalent document for the purposes of Article 30 of Regulation No 3665/87.

12.Finally, the Commission considered that the Irish authorities had not required from the exporters the documents necessary for proper verification of compliance with the requirements for the grant of export refunds, so that irregularities might have occurred. Since Ireland agreed to resolve the problem and the risk of fraud for the EAGGF was limited, the Commission decided to disallow only 2% of the total expenditure affected by that irregularity in 1989 and 1990, which came to a total of IR £6343429 (3823133 in 1989 and 2520296 in 1990).

13.According to the documents produced by the parties, during the EAGGF financial years 1989 and 1990 Ireland used an autonomous administrative procedure different from that applied in most of the other Member States for the payment of advances on export refunds for beef and veal. The stored meat was placed under customs control on acceptance of the payment declaration, using Form AP, which constituted the application for advance payment of the refund. An additional document, Form C&E 977, called ‘Register of CAP Goods Placed under Control Prior to the Date of Export’, was lodged with the Irish customs authorities with the payment declaration.

14.The storage came to an end and the goods were placed under customs export control by virtue of Form C&E 978, called ‘Notice of Loading of CAP Products for Expon’, comprising two forms of which one was used as written notice of withdrawal from storage and the other was lodged at the actual moment of export of the goods. Ireland admitted, however, that that document was not systematically used for beef exports in 1989 and 1990 and, moreover, confirmed that the AIBP warehouse Forms C&E 978 for that period had been inadvertently destroyed in the AIBP Central Control Office in Dundalk with no copy remaining.

15.Subsequently, the Irish customs authorities required an additional form called ‘Declaration and Control Form for Goods Placed under Customs Control Prior to Exportation’, which contained exhaustive information on the exported goods in accordance with the Community rules.

14.On the basis of the applicable rules and the events which have occurred, Ireland puts forward four grounds for seeking the annulment of Decision 93/659. I will consider each ground individually.

First ground

15.Ireland considers that it has complied with the conditions laid down in Article 30 of Regulation No 3665/87 and that consequently Decision 93/659 should be annulled in so far as it entails the disallowance of export refunds paid in advance in accordance with the Community rules as expenditure chargeable to the EAGGF.

In Ireland's opinion, Article 3 of Regulation No 3665/87 simply determines the content of the export declaration required by Article 30, but does not prescribe the documents by which that declaration is to be made. Member States may thus use the export forms set out in the Community rules or require the use of national documents. The document used by most of the Member States was the standard Community form for export declarations (COM EX), introduced by Regulation (EEC) No 1900/85, (11) which contains all the information necessary for calculating export refunds. Article 6(1) of Regulation No 1900/85 permits different export declaration forms to be used in various cases.

In Ireland, however, export declarations were made by the combined use of Forms C&E 977 and C&E 978, which together contained all the information necessary for the grant of export refunds for beef. Form C&E 977 was used to notify intention to export the goods, to request that they be placed under the customs-warehousing or free-zone procedure and to apply for an advance on the refund. Subsequently, Form C&E 978 was lodged in order to request that the goods be removed from the warehousing procedure and placed under customs export control.

The Court of Justice has considered the export declaration introduced by Regulation No 3665/87, indicating that it must be made in writing so that it may be checked that the information given by the exporter corresponds to the goods presented for export and that moreover the declaration may be lodged before the goods are presented but never after they have left the customs territory of the Community. (12)

In this case, the combined effect of Article 3(5) and Article 30 of Regulation No 3665/87 is to authorize Member States to choose between using the export declaration or an equivalent document or documents containing all the information necessary for calculating the amount of the export refunds and in particular:

(a)a description of the products in accordance with the nomenclature used for refunds;

(b)the net mass of the products or, where applicable, the unit of measurement to be taken into account in calculating the refund; and,

(c)in so far as it is necessary for calculating the refund, particulars of the composition of the products or the relevant reference.’

For the EAGGF financial years 1989 and 1990, Ireland opted to use documents which differed from the export declaration provided for in the Community rules, namely Forms C&E 977 and C&E 978. The former contains all the particulars necessary for calculating the export refunds while the latter, linked to the former, indicates only the date when the beef was withdrawn from the customs-warehousing or free-zone procedure. Ireland is not failing to comply with Article 30 of Regulation No 3665/87 by using those two documents, although the procedure is complicated and it would have been more logical to use the D&C Form as an export declaration.

The Commission, however, discovered various irregularities in the use of those documents, which Ireland has not disproved. First, Form C&E 978 was not used systematically in all beef exports and, secondly, those forms were wrongfully destroyed by the customs authorities in the case of the AIBP warehouses.

Next it must be determined whether Forms C&E 977 and C&E 978 were lodged within the periods stipulated in Articles 30 and 32 of Regulation No 3665/87. As the Commission states in its rejoinder, the lodging of the export declaration is crucial because it fixes the end of the storage period in the customs-warehousing or free-zone procedure, the maximum period of which was nine months in 1989 and seven months in 1990, and it marks the start of the 60-day period in which the beef or veal must leave the customs territory of the Community.

From that perspective, the combined information contained in Forms C&E 977 and C&E 978 does not enable the precise date when the export declaration was lodged and accepted to be identified and it is therefore impossible to know the exact moment when the beef was withdrawn from the warehousing or free-zone procedure and placed under customs control for export within a maximum period of 60 days. Form C&E 978 shows only the date when the meat was withdrawn from storage and contains no formal acceptance by the Irish customs authorities of the placing of the goods under customs export control.

The Commission moreover noted in its Summary Report for 1990 that the checks carried out showed that for some consignments of beef the maximum periods for storage and export laid down in Articles 30 and 32 of Regulation No 3665/87 had been exceeded.

There are many decisions of the Court of Justice on the principles governing the procedure for clearing the EAGGF accounts, (13) which establish that Articles 2 and 3 of Regulation No 729/70 ‘enable the Commission to charge to the EAGGF only sums paid in accordance with the rules laid down in the different agricultural sectors. In cases where Community rules authorize payment of aid only on condition that certain formalities relating to proof or supervision are observed, aid paid in disregard of that condition is not in accordance with Community law and the expenditure incurred therein may not therefore be charged to the EAGGF’. (14)

That strict interpretation of the conditions in which expenditure is to be borne by the EAGGF also reflects the purpose of Regulation No 729/70. The management of the common agricultural policy in conditions of equality between traders in the Member States requires that the authorities of a Member State should not, by the expedient of a wide interpretation of a given provision, favour traders in that State to the detriment of those in other States where a stricter interpretation is applied. (15)

Given that the documentation provided by the parties shows that there were irregularities infringing Regulation No 3665/87 in the administrative procedure applied by Ireland for the advance payment of export refunds for beef, Decision 93/659, in which 2% of the refunds paid in advance by Ireland in the EAGGF financial years 1989 and 1990 are disallowed, is valid. The first ground on which Ireland seeks annulment should therefore be rejected.

Second ground

23.Secondly, Ireland puts forward as a ground for annulment that even if to some extent it did not comply with Article 30 of Regulation No 3665/87, the reasons relied on by the Commission for disallowing the refunds paid in advance relate to subsidiary and nonessential administrative formalities, so that there has been no infringement of Community rules.

In accordance with the case-law of the Court of Justice, (16) the distinction between essential and subsidiary administrative formalities, whatever its scope in Community law, is not applicable in this case. Lodging of the export declaration in the conditions and within the time-limits prescribed by Regulation No 3665/87 is an administrative formality which is indispensable for the prevention of any fraudulent practice and to ensure that the mechanism for the advance payment of export refunds for beef and veal is correctly applied. The Member States' customs authorities are bound to check that there has been strict compliance with those formalities, laid down in the Community legislation, to ensure that expenditure incurred in accordance therewith is charged to the EAGGF.

I therefore consider that the second ground for annulment pleaded by Ireland should be rejected.

Third ground

26.Assuming that there had been a breach of essential administrative formalities, Ireland puts forward as a ground for annulment that the amount of the refunds paid by Ireland and not charged to the EAGGF in Decision 93/659 is disproportionate and excessive.

In Decision 93/659 the Commission simply excluded from EAGGF financing 2% of the total export refunds for beef paid by Ireland, when it could have disallowed all the refunds on the basis that it was impossible to quantify the exact economic impact of the failure to comply with Regulation No 3665/87. That possibility has been accepted by the Court of Justice in a number of judgments recognizing that certain operations may be excluded from financing on a generalized basis, solely on the ground that they have been shown to be unlawful.

In some cases the Court of Justice has upheld the Commission's refusal to charge certain expenditure to the EAGGF — because simple formal requirements as to proof had not been observed — without determining whether there had in fact been unjustified expenditure. (17) In other cases the Court has ruled that the a posteriori production of the formal proof required or the use of methods of proof which differ from those prescribed cannot invalidate the Commission's disallowance of the expenditure. (18)

28.In this case, the Commission has quantified the financial impact of Ireland's noncompliance as 2% of the total export refunds for beef advanced by Ireland in 1989 and 1990. In my view, that estimate is quite reasonable, given that the Commission took into account the fact that, in accordance with its indications, Ireland has started to use the standard Community export declaration form.

Furthermore, the Court of Justice (19) has clearly laid down that, where there is disagreement as to the Commission's estimate of the financial impact of an infringement of Community agricultural rules, the burden of proof rests on the Member States. In this case Ireland has not shown that the financial impact of such infringement is less than the figure of 2% attributed to it.

29.I accordingly consider that the amount of the refunds disallowed is neither disproportionate nor excessive. This ground for annulment can accordingly not be accepted.

Fourth ground

30.Ireland adduces as its final ground for annulment that the Commission's interpretation of Regulation No 3665/87 is contrary to the principles of the protection of legitimate expectations and of legal certainty.

On that issue, the Court of Justice has held that the Commission's disallowance of expenditure resulting from practices incompatible with Community rules does not constitute a penal sanction. In disallowing such amounts, the Commission is acting in accordance with the rules governing the financing of the common agricultural policy under which only payments made in accordance with the Community rules and within the framework of the common organization of agricultural markets may be charged to the EAGGF. It follows that such a decision by the Commission is not contrary to the principles of the protection of legitimate expectations or of legal certainty. (20)

A Member State may only legitimately expect that expenditure will be charged to the EAGGF if it has been incurred as a result of an erroneous interpretation of Community law attributable to a Community institution, (21) but not if the incorrect application of the Community rules is attributable to the national authorities.

32.Since Ireland did not comply with the Community rules on advances on export refunds, it could not legitimately expect that the expenditure would be charged to the EAGGF, and the Commission's disallowance of the expenditure does not infringe the principle of legal certainty. I accordingly consider that the fourth ground for annulment adduced by Ireland should be rejected.

Conclusion

In the light of the foregoing, I propose that the Court should:

(1)dismiss the application;

(2)order Ireland to pay the costs.

*1 Original language: Spanish.

(1) OJ 1993 L 301, p. 13.

(2) Commission Regulation (EEC) No 3665/87 of 27 November 1987 laying down common detailed rules for the application of the system of export refunds on agricultural products (OJ 1987 L 351, p. 1).

(3) Council Regulation (EEC) No 565/80 of 4 March 1980 on the advance payment of export refunds in respect of agricultural products (OJ, English Special Edition 1980 (I), p. 218).

(4) Commission Regulation (EEC) No 1091/80 of 2 May 1980 laying down detailed rules for granting private storage aid for beef and veal (OJ 1980 L 114, p. 18).

(5) Commission Regulation (EEC) No 2629/89 of 29 September 1989 providing for the grant of private storage aid fixed at a standard rate in advance in respect of carcases, half-carcases, hindquarters and forequarters from adult male bovine animals (OJ 1989 L 281, p. 103).

(6) Commission Regulation (EEC) No 2675/88 of 29 August 1988 providing for the grant of private storage aid fixed at a standard rate in advance in respect of carcases, half-carcases, hindquarters and forequarters of adult male bovine animals (OJ 1988 L 239, p. 20).

(7) 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).

(8) See the seventh recital in the preamble to Commission Decision 92/491/EEC of 23 September 1992 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1989 of the European Agricultural Guidance and Guarantee Fund (EAGGF), Guarantee Section (OJ 1992 L 298, p. 23).

(9) Summary Report — Conclusions from the preliminary work for the clearance of the EAGGF Guarantee section accounts for the year 1990, Commission of the European Communities, p. 107.

(10) Council Regulation (EEC) No 1900/85 of 8 July 1985 introducing Community export and import declaration forms (OJ 1985 L 179, p. 4), supplementing the provisions of Council Directive 81/177/EEC of 24 February 1981 on the harmonization of procedures for the export of Community goods (OJ 1981 L 83, p. 40), Council Regulation (EEC) No 678/85 of 18 February 1985 simplifying formalities in trade in goods within the Community (OJ 1985 L 79, p. 1) and Council Regulation (EEC) No 679/85 of 18 February 1985 introducing a specimen declaration form to be used in trade in goods within the Community (OJ 1985 L 79, p. 7).

(11) Case C-54/91 Germany v Commission [1993] ECR I-3399, paragraph 22.

(12) See inter alia Case 11/76 Netherlands v Commission [1979] ECR 245, Joined Cases 15/76 and 16/76 France v Commission [1979] ECR 321.

Case 327/85 Netherlands v Commission [1988] ECR 1065 and Case C-197/90 Italy v Commission [1992] ECR I-1.

(Case C-197/90 Italy v Commission, cited in note 13, paragraph 38.)

(Case 11/76 Netherlands v Commission, cited in note 13, paragraph 9.)

(See in particular Joined Cases 15/76 and 16/76 France v Commission, cited in note 13, paragraphs 13, 14 and 15.)

(Cases 61/82 and 62/82 Italy v Commission [1983] ECR 655 and 687 and Cases 55/83 and 56/83 Italy v Commission [1985] ECR 683 and 703.)

(Joined Cases 15/76 and 16/76 France v Commission, cited in note 13, and Case 18/76 Germany v Commission [1979] ECR 343.)

(Case 347/85 United Kingdom v Commission [1988] ECR 1749, paragraph 15.)

(See in particular Case 347/85 United Kingdom v Commission cited in note 19, paragraphs 57 and 58.)

(Case 820/79 Belgium v Commission [1980] ECR 3537 and Case 1251/79 Italy v Commission [1981] ECR 205.)