JUDGMENT OF 10. 12. 1980 — CASE HO/78 COMMISSION v ITALY

In Case 140/78

THE COURT, composed of: J. Mertens de Wilmars, President, P. Pescatore and T. Koopmans, Presidents of Chambers, Lord Mackenzie Stuart, A. O'Keeffe, G. Bosco and O. Due, Judges, Advocate General: G. Reischl Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts amd Issues

I — Facts and written procedure

II — Conclusions of the parties

III — Submissions and arguments of the parties

IV — Oral procedure

Decision

Costs

I —. Facts and written procedure

1. Article 4 of Regulation No 130/66/EEC of the Council of 26 July 1966 on the financing of the common agricultural policy (Official Journal, English Special Edition 1965-1966, p. 216) provides in particular that

2. The dates fixed for the submission of the reports were not met. The officers of the Commission and the Commission on the one hand and the Italian authorities on the other exchanged numerous memoranda on this matter.

3. By a letter of 24 January 1977 the Permanent Representation of Italy to the European Communities replied to the reasoned opinion and requested an appropriate extension of the time-limit for the submission of the outstanding reports. On 23 December 1977 a letter from the officers of the Commission fixed 31 January 1978 as the latest date by which the reports had to be sent. By a letter of 31 January 1978 the Italian Government asked the Commission for a new extension of at least 15 months. On 14 June 1978 the Commission lodged this application.

II —. Conclusions of the parties

1. In its application the Commission claims that the Court should :

2. The Government of the Italian Republic claims that the Court should:

III —. Submissions and arguments of the parties

1. In its application the Commission states that the reports sent by the Italian Government as at 31 December 1976, a date close to the date on which the period fixed by the reasoned opinion expired, appeared as follows, the state of those reports on 31 December 1973 being given for the purpose of comparison:

2. In its defence the Italian Government, having summarized the aid in question provided by the Fund points out that the Italian administration has repeatedly stated that it could, within the time-limits provided, furnish reports, not only on intervention programmes actually put into effect, but above all on the financing decided on by formal commitments envisaging the use of all of the funds allocated. Yet later on the Italian administration explained to the competent bodies of the Commission the legal reasons and administrative technicalities which made it impossible to complete the programmes and pay out the aid allotted by the Fund within a period which was proving totally insufficient. It was necessary, the Italian administration said, to bring those funds, which are incidentally, allocated in separate successive tranches, either within the scope of laws in the course of being adopted (Green Plan No 2) or to deal with them by special laws authorizing expenditure on the completion of the intervention programmes. The Italian Government also stresses that it had to go through laborious administrative procedures before financing the projects and it maintains that the delay was technically necessary to implement programmes often of considerable size.

3. In its reply the Commission makes the preliminary point that only the proper, precise performance of the obligations imposed by the Community regulations, within the time-limits fixed by them, and no later than the time-limit set in the reasoned opinion, may afford a valid defence. On the date laid down by the reasoned opinion the Italian Government had not complied with the Commission's request. The failure to comply is shown in two ways: first, the time-limits fixed in accordance with the information given by the Italian Government were clearly not kept, and secondly, the regulations in question were infringed not only in the letter. It is evident from the recitals to, and provisions of, those regulations that the funds allocated to Italy were for a specific purpose, that is to say, for the improvement of agricultural structures in Italy so that those funds should actually have been disbursed and the works completed; therefore it is not sufficient simply to commit the funds by including them in the budget.

4. In its rejoinder the Italian Government maintains the standpoint which it adopted in its defence namely that Italy has complied in substance with the obligations imposed upon it by the Community regulations in question. The defendant argues that before 31 December 1973 the Italian administration had wholly decided on the use of all the sums made available to it by the European Economic Community. It insists that it is not possible to agree with the view maintained by the Commission that only works which are completely finished should be regarded as having been reported; that argument overlooks economic reality. The Italian Government also denies that it is necessary to take into consideration the situation existing on the expiry of the period fixed in the reasoned opinion; it refers to the reports on expenditure incurred up to 31 December 1977 which it sent to the Commission by letter of 31 January 1978. That statement of expenditure discloses the following:

IV —. Oral procedure

1. By application lodged at the Court Registry on 14 June 1978 the Commission of the European Communities brought an action before the Court under Article 169 of the EEC Treaty which action, as it now stands after amendment during the procedure, seeks a declaration that by not submitting reports and supporting documents within the time-limits prescribed by the regulation referred to below has failed to fulfil its obligations under Article 4 (3) of Regulation No 130/66/EEC of the Council of 26 July 1977 on the financing of the common agricultural policy (Official Journal, English Special Edition 1965-1966, p. 216), as amended by Regulation No 966/71/EEC of the Council of 10 May 1971 (Official Journal, English Special Edition 1971 (I), p. 255) and under the third subparagraph of Article 12 (4) of Regulation No 159/66/EEC of the Council of 25 October 1966 laying down further provisions for the common organization of the market in fruit and vegetables (Journal Officiel No 192, p. 3286).

2. Under the regulations referred to above the Italian Republic received payment from the resources of the Guidance Section of the European Agricultural Guidance and Guarantee Fund (hereinafter referred to as the EAGGF) in the form of a fixed amount of financial aid including 45000000 units of account for the purpose of making structural improvements in the production and marketing of olives, olive oil, fruit and vegetables, 15000000 units of account for the purpose of making structural improvements in the production and marketing of raw tobacco, and an additional 87299539 units of account for the purpose of making structural improvements in the production and marketing of fruit and vegetables. The regulations provided that before the end of the transitional period the Italian Republic was to submit reports to the Commission together with supporting documents on the expenditure on the measures envisaged. The time-limits for the submission of the reports were extended by subsequent regulations.

3. After the reports had not been submitted within those time-limits to the satisfaction of the Commission the Italian authorities and the Commission exchanged numerous memoranda on the matter. On 11 February 1976 the Commission sent to the Italian Government a letter commencing the procedure contemplated by the first paragraph of Article 169 of the Treaty. In the belief that the observations submitted by the government in question on 17 March 1976 were not satisfactory, the Commission on 16 November 1976 sent to the Italian Government a reasoned opinion pursuant to that provision. That opinion invited Italy to take the steps to comply with it within a period of two months. Following a final exchange of letters, in which the Italian Government requested fresh extensions of the time-limits, on 14 June 1978 the Commission brought this action.

4. At the request of the Italian Government the hearing was postponed several times with the Commission's agreement. During the procedure the Italian Government submitted new reports updated to 31 August 1980. It is evident from those documents that the sums granted by the EAGGF amounting to 45000000 units of account for the purpose of making structural improvements in the production and marketing of olives, olive oil, fruit and vegetables and 15000000 units of account for the purpose of making structural improvements in the production and marketing of raw tobacco have actually been paid by the Italian authorities to the persons who have completed the installations for the improvement of those structures. The Commission has consequently declared its abandonment of its application so far as those two sums of aid are concerned, on the understanding that the defendant should be ordered to pay the costs pursuant to Article 69 (4) of the Rules of Procedure. In regard to the third sum of aid of 87299539 units of account granted within the framework of the common organization of the market in fruit and vegetables, because only 44722700000 lire (81.97%) of that amount has been accounted for, the Commission has requested that the proceedings be continued.

5. In the case of the latter sum of aid the third subparagraph of Article 12 (4) of Regulation No 159/66/EEC cited above refers to the conditions laid down by Article 4 of Regulation No 130/66/EEC also cited above. Paragraph (3) of that last-mentioned article provides that:

6. According to the information provided by the parties the situation concerning the reports is as follows. The 87299539 units of account were roughly equivalent to 54562000000 Italian lire. On 31 December 1973, the date on which the extended time-limit set by the regulations was reached, the Italian Government had undertaken financial commitments to the recipients for 39309000000 lire but had paid only 2757700000 lire thereof. On 31 December 1976, a date near to the expiry date laid down in the Commission's reasoned opinion, the government had undertaken financial commitments exceeding the aid from the EAGGF, but had paid only 22752900000 lire. On 31 August 1980, the date of the most recent reports, the Italian Government had paid 44722700000 lire which represents 81.97% of the amount in lire originally paid to the Italian Republic by the EAGGF.

7. In its defence the Italian Government first contends that the Italian administration had decided within the time-limits laid down by the regulations, that is to say, before 31 December 1973, on the use of the entire amount of the funds allocated by the Community, and that, in any event, financial commitments exceeding the amount of the aid in question had been entered into before the period allowed in the reasoned opinion expired. In the view of the Italian Government the programmes cannot be required to have been completed and the funds to have been actually paid before those dates. Besides, the government had made considerable financial efforts to get the installations in question finished by adding to the Italian budget additional sums to a degree which largely exceeded the increase in costs resulting from inflation. Since the objectives of the Community regulations were thereby achieved it is not in accordance either with the spirit or with the letter of the provisions relied on by the Commission to refer to purely formal considerations.

8. That argument cannot be accepted. The obligations which Community rules impose on Member States must be complied with in full and it is apparent both from the wording of Article 4 (3) of Regulation No 130/66/EEC and from the recitals to Regulation No 966/71/EEC that the reports required by those provisions must be on the sums paid to recipients after the works have been completed and not on the expenditure committed to future works or works in progress.

9. The Italian Government further invokes numerous legal, technical and administrative difficulties which allegedly made the completion of the programmes and the payment of the aid allocated by the EAGGF objectively impossible in the periods laid down by the regulations. First of all those funds had to be brought within the scope of laws in the course of being adopted (notably Green Plan No 2). Then it was necessary to take into account the creation of regions in Italy on which Decree No 11 of the President of the Republic of 15 January 1972 conferred powers in many spheres of activity in agriculture, including powers to intervene in the sphere of reformative and marketing structures for agricultural products. Finally, the government insists that the delays were technically necessary to put into effect programmes of considerable size.

10. Even if the system of fixed amounts of financial aid from the EAGGF, now abolished, may have caused administrative difficulties for the Member States receiving it and even if the circumstances to which the Italian Government adverts may explain at least in part the delays which arose those circumstances do not expunge the failure to fulfil its obligations with which it is charged. According to well-established case-law a Member State may not plead provisions, practices or circumstances existing in its internal legal systems in order to justify the failure to comply with obligations and time-limits resulting from Community rules.

11. Lastly the Italian Government refers to the numerous contacts which took place between the Italian administration and the competent officers of the Commission and to the agreements reached on those occasions. It contends that the Commission accepted by implication the method of accounting used by the Italian administration.

12. Even if the Commission showed a good deal of understanding for the difficulties described above the fact remains that it never waived the submission pursuant to the regulations cited above of full reports on the sums actually paid representing the aid granted by the EAGGF. What is more, the Commission was not empowered to alter the obligations under those regulations.

13. It is therefore appropriate to declare that as regards the aid fixed at 87299539 units of account granted by the EAGGF in the fruit and vegetable sector, the Italian Republic, by its delay in the submission of its reports on the expenditure incurred and by submitting them for the period up to 31 August 1980, only in respect of 44722700000 lire or 81.97% of the aid granted, has not satisfied the requirements of the third subparagraph of Article 12 (4) of Regulation No 159/66/EEC and of Article 4 (3) of Regulation No 130/66/EEC as amended by Regulation No 966/71/EEC and that for that reason it has failed to fulfil its obligations under the EEC Treaty.

14. Under Article 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs.

15. Under Article 69 (4) of the Rules of Procedure a party who discontinues or withdraws from proceedings shall be ordered to pay the costs, unless the discontinuance or withdrawal is justified by the conduct of the opposite party.

16. In those circumstances the Italian Republic should be ordered to pay the costs of the whole action.

On those grounds, THE COURT hereby:

1 Declares that as regards the aid fixed at 87299539 units of account granted by the EAGGF in the fruit and vegetables sector, the Italian Republic, by its delay in the submission of its reports on the expenditure incurred and by submitting them for the period up to 31 August 1980, only in respect of 44722700000 lire or 81.97% of the aid granted, has not satisfied the requirements of the third subparagraph of Article 12 (4) of Regulation No 159/66/EEC of the Council of 25 October 1966 laying down further provisions for the common organization of the market in fruit and vegetables and of Article 4 (3) of Regulation No 130/66/EEC of the Council of 26 July 1966 on the financing of the common agricultural policy, as amended by Regulation No 966/71/EEC of the Council of 10 May 1971; for that reason it has failed to fulfil its obligations under the EEC Treaty;

2 Orders the Italian Republic to pay the costs.

1 The amounts expressed in uniu of account have been convened into lire at the official exchange rate notified to the IMF (1 u.a. = Lit 625) while the payments made by the national authorities are calculated in lire with no allowance being made for the devaluation of the Iulian currency which has occured in the meantime.