Opinion of Mr Advocate General Capotorti

Mr President,

Members of the Court,

1. This action seeks to have declared void a Commission decision, namely Decision 79/895 of 12 October 1979 adopted in regard to the Federal Republic of Germany and concerning the clearance of accounts in respect of expenditure for 1973 financed by the Guarantee Section of the European Agricultural Guidance and Guarantee Fund. The Commission has refused to credit the German Government with a proportion of the declared expenditure (a little more than DM 9 million), claiming that that proportion may not be financed by the Fund since it was not incurred in respect of intervention intended to stabilize agricultural markets in accordance with Community rules within the framework of the common organization of agricultural markets (final recital in the preamble to the said decision). The German Government, however, regards as unwarranted and unlawful the disputing of the figure declared under Head 6210 (aid for skimmed-milk powder intended for animal feed), from which stems the disallowance of expenditure of roughly DM 8335000. In that lies the source of the action, which divides into three submissions: infringement of rules of secondary Community law, infringement of the principle of the protection of legitimate expectation and inadequacy of the statement of the reasons upon which the decision was based.

2. The rules concerning aid for skimmed milk produced in the Community and used for animal feed date back to Article 10 of Regulation No 804/68 of the Council of 27 June 1968 on the common organization of the market in milk and milk products. Whilst that article provided for the grant of such aid, it deferred the determination of the conditions to be attached to it to a subsequent act by the Council. Consequently, there was promulgated Regulation No 986/68 of 15 July 1968, Article 2 of which details the categories of skimmed milk for which the aid may be granted. Subsequently, the Commission laid down detailed rules for the grant of the aid in Regulation No 1106/68 of 27 July 1968 and Regulation No 990/72 of 15 May 1972.

3. It has transpired in the present case that the Federal Republic of Germany, intending to comply with the obligation imposed by the aforementioned Article 10 (and, previously, by the corresponding Article 8 of Regulation No 1106/68), issued directives through the agency of the Bundesamt für Ernährung und Forstwirtschaft [Federal Bureau for _ Food and Forestry] but did not introduce the system whereby undertakings must give written notification of denaturing operations under Article 3 (2) of Regulation No 990/72. It considered that it sufficed for the objective of that article to be attained by other means and it therefore set up a system of supervision based principally on periodical retrospective checks on the accounting records kept by the undertakings carrying out denaturing. In its view, such checks permit the veracity of the applications for aid submitted by each undertaking to be established with accuracy. Moreover, some samples are taken and some physical checks on the denaturing operations are carried out on the occasion of the accounting checks. Besides, the fact that each inspector is entrusted with the task of continually monitoring the activities of a limited number of undertakings allows information to be sought and obtained as to the dates on which those operations take place and to carry out spot checks on such occasions, in addition to the periodical checks. In those circumstances, to require preliminary notification of each operation was regarded as superfluous, at least until 1977 (when the system of notification was introduced).

4. In my opinion the argument advanced by the German Government cannot be accepted. The supervisory measures which Member States are obliged to take under Article 10 of Regulation No 990/72 are those which are necessary to ensure observance of the provisions of that regulation, that is to say, observance of all its provisions, including Article 3 (2). The fact that the last-mentioned provision is addressed to undertakings does not mean that Member States are not bound to require its observance and, moreover, to regulate the work done by their competent authorities in such a manner that it is coordinated with the notification system. The power to request additional information which is conferred on the competent agency by the last sentence of Article 3 logically implies that that agency has received and evaluated the prescribed, usual information. I would add that, where a provision is addressed directly to undertakings, it cannot be accepted that any Member State may exempt those undertakings from an obligation arising under a Community regulation. That would be equivalent to disregarding the rule that regulations are of general application and directly binding, as well as the principle of uniformity of treatment of citizens throughout the Community. Of course, the German Government considers itself authorized by Article 10 not to take account of Article 3 (2), but Article 10 is clearly not a rule which empowers Member States to derogate from other provisions of the regulation. On the contrary, as I have just stated, Article 10 is directed towards ensuring full effect for the entire regulation.

5. I now turn to consider the second submission in the application. The German Government invokes the principle of the protection of legitimate expectation, stating that the Commission, in addition to never having put forward any objections to the German system of supervision prior to 1977, expressly approved that system. In that regard, the applicant refers to an exchange of views on supervision procedures in relation to aid for milk producers which took place in Brussels and, in particular, to the reply given by the Commission to the observations contained in the report by the Audit Board on the accounts for the 1975 financial year. In that reply the Commission stated that it considered the Community rules to have been complied with when a Member State combines verification of the accounting records with unannounced spot checks on denaturing, supplemented by the taking of samples, and all these checks are performed, on the ground.

6. In its final submission the applicant challenges the decision of 12 October 1979 on the ground that the statement of the reasons upon which it is based is inadequate. It should be said that in the final recital in its preamble that decision refers to Articles 2 and 3 of Regulation No 729/70 and stresses the link between the financing of intervention in the agricultural sphere and observance of Community rules. It then states that inspections carried out show that a part of the expenditure declared amounting to DM 9192762 does not satisfy the requirements of the Community rules on refunds or intervention and therefore cannot be financed. Finally, it states that the Member State has been fully informed of this deduction and has been able to give its views thereon.

7. In conclusion, therfore, I propose the dismissal of the action brought by the Federal Republic of Germany against the Commission by application lodged with the Court Registry on 19 December 1979. The costs must be borne by the unsuccessful party.

1 Translated from the Italian.