Report for the Hearing in Case C-34/89

I — Facts and procedure

1. Legal background

(a) The financing of the common agricultural policy

Article 1 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) provides that the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (hereinafter referred to as the Fund) is to finance refunds on exports to third countries and intervention intended to stabilize the agricultural markets.

Under Article 3 of the regulation, intervention is undertaken according to Community rules within the framework of the common organization of agricultural markets.

Article 4 provides that the Member States are to designate the authorities and bodies which they empower to effect the expenditure referred to in Article 3. The annual accounts of those authorities and bodies, forwarded by the Member States to the Commission, are cleared by the latter under the terms of Article 5(2)(b). The Member States also have to provide the documents necessary for clearing the accounts.

Article 8(1) requires Member States, in accordance with national provisions laid down by law, regulation or administrative action, to take the measures necessary to:

satisfy themselves that transactions financed by the Fund are actually carried out and are executed correctly; prevent and deal with irregularities; recover sums lost as a result of irregularities or negligence. Furthermore, the Member States must inform the Commission of the measures taken for those purposes and in particular of the state of the administrative and judicial procedures. Article 8(2) provides that in the absence of total recovery, the financial consequences of irregularities or negligence are to be borne by the Community, unless the irregularities or negligence are attributable to the administrative authorities or other bodies of the Member States. The sums recovered are to be paid to the paying authorities or bodies and deducted by them from the expenditure financed by the Fund.

Regulation (EEC) No 1723/72 of the Commission of 26 July 1972 on making up accounts for the European Agricultural Guidance and Guarantee Fund, Guarantee Section (Official Journal, English Special Edition, Second Series (III), p. 109) established the procedures according to which the annual accounts are to be forwarded to the Commission, so that it can take the decision on the clearance of the accounts laid down by Article 5(2)(b) of Regulation No 729/70. Article 8(a) of Regulation No 1723/72 states that the decision must cover the determination of the amount of expenditure incurred in each Member State during the year in question recognized as chargeable to the Guarantee Section of the Fund.

(b) Aid for the production of olive oil

Council Regulation (EEC) No 1562/78 of 29 June 1978 amending Regulation No 136/66/EEC on the establishment of a common organization of the market in oils and fats (Official Journal 1978 L 185, p. 1) established a new system of aid for the production and consumption of olive oil in the Community. Article 5 of Regulation No 136/66 deals with production aid. According to Article 5(1) the aid is to be fixed annually before 1 August for the marketing year beginning the following year. Article 5(4) provides for the Council to adopt general rules for the application of Article 5.

Council Regulation (EEC) No 2753/78 of 23 November 1978 lays down general rules in respect of production aid for olive oil for the 1978/79 marketing year. Under Article 12, the Member States are authorized to make an advance to the producer organizations as soon as they submit their aid application; the advance may not exceed 70% of the aid requested. Similar provisions are set out in the regulations applying to the marketing years 1979/80, 1980/81, 1981/82, 1982/83 and 1983/84 (see, respectively, Regulations (EEC) Nos 2378/79 (Official Journal 1979 L 274, p. 3), 2529/80 (Official Journal 1980 L 259, p. 3), 2990/81 (Official Journal 1981 L 299, p. 17), 2959/82 (Official Journal 1982 L 309, p. 30) and 2893/83 (Official Journal 1983 L 285, p. 13)).

2. Facts

The Italian intervention agency (AIMA) made advances on the aid for production of olive oil for the marketing years from 1978/79 to 1983/84. It transpired that for those marketing years the advances were greater than the aid actually due, following a reduction in the quantities of oil qualifying for aid. The sum overpaid was LIT 10410055894 and involved a very large number of applications (94094), many of which were for small amounts. Because of the large number of applications, the AIMA had difficulties in recovering the sum in question, so that delays arose in commencing the recovery procedures.

When clearing the accounts for 1983 the Commission's officials carried out inspections into AIMA at the end of 1985. The officials concluded that accounting procedures relating to amounts of aid overpaid and the recovery thereof had not been satisfactory. By telex of 29 July 1986, the Commission invited the Italian authorities to furnish it with information on the matter.

The balance to be recovered was also the subject of a memorandum from the Commission of 15 April 1988 on the clearance of the accounts of the Guarantee Section of the Fund for 1986. In that memorandum addressed to the Italian authorities, the Commission's officials observed that the producers concerned had not yet been advised of the sums to be repaid and declared that they reserved the right to propose to the Commission rectification of the clearance. That attitude was reflected in the drafting of a Summary Report of 15 June 1988 under which the sums to be recovered were not chargeable to the Fund.

The Italian Ministry of Agriculture replied by letter of 18 June 1988 to the Commission's Memorandum of 15 April 1988. The letter indicated that recovery procedures had since been started. From 20 to 22 June 1988 the Italian authorities opened a current account for sending 94094 registered letters to the producers. Those letters were in fact sent at the end of the month. The Italian Ministry of Agriculture informed the Commission of their despatch by letters of 28 and 30 June 1988.

Those replies did not, however, lead the Commission to alter its Summary Report of 15 June 1988 as requested by the Italian authorities. Commission Decision 88/630/EEC of 29 November 1988 on the clearance of the accounts presented by the Member States in respect or the expenditure for 1986 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (Official Journal 1988 L 353, p. 30) therefore did not recognize as chargeable to the Fund the sum of LIT 10410055894 corresponding to the amounts to be recovered.

Implementation of the recovery procedures in Italy has resulted, meanwhile, in the repayment of LIT 2000 million. But there remains a large number of disputes as a result of challenges raised by many of the producers.

II — Procedure before the Court

By application lodged at the Court Registry on 9 February 1989, the Italian Government brought the present action against Decision 88/630.

The application originally sought the partial annulment of the decision, in so far as it did not recognize as chargeable to the Fund not only LIT 10410055894 in respect of amounts to be recovered in the olive oil sector, but also LIT 54186548420 by way of 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 second part of its application concerning the said compensation. The procedure otherwise followed the normal course.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry.

The Italian Government claims that the Court should:

The Commission contends that the Court should:

III — Pleas in law and arguments of the parties

The Italian Government considers that the Commission's conduct was contrary to Article 8 of Regulation No 729/70 referred to above. That article refers to the national provisions for the recovery of sums lost as a result of irregularities or negligence. The national provisions in force in Italy allow the Italian authorities to take steps to recover sums wrongly paid out within the usual limitation period of 10 years. According to the Italian Government, that time-limit had certainly not expired when the Summary Report was drawn up and the registered letters were sent.

No rule of Community law obliges the national authorities to begin the recovery procedures within a shorter period than that established by the national provisions in force. The existence of such a rule cannot be inferred from the judgment of the Court in Case 343/85 Italy v Commission [1987] ECR 4711. The Italian Government accepts that, according to that judgment, checks which are not carried out within the prescribed time-limits are likely to become impossible after a certain time for reasons such as the fact that undertakings may have ceased trading or accounting documents may have been lost. However, that finding is not relevant to the present case. The facts of Case 342/85 concerned Community rules laying down a time-limit, whereas in the present case the Community rules refer precisely to the national provisions.

Reference to Article 190 of the Regulation on the Administration of State Assets and on the General Accounting of the State (Regolamento per l'amministrazione del patrimonio e per la contabilità generale dello Stato, Regio Decreto No 827 of 23 May 1924, Supplement to Gazzetta ufficiale No 129 of 3. 6. 1924) is also not relevant in the present context. That provision, which requires State revenue collectors to comply with a time-limit of one month after a debt becomes due, deals with the responsibility of public agents and officials. In the view of the Italian Government, there is accordingly no link between Article 190 of the regulation mentioned above and the present case.

The Italian Government observes, finally, that it has in any case complied with the time-limit of 30 June 1988 set by the Commission for the sending of evidence that the registered letters had been despatched. The Commission has not taken into account the documents sent before the expiry of that time-limit.

The Commission contends that delays of between four and ten years in commencing recovery procedures for sums wrongly paid in the marketing years 1978/79 to 1983/84 constitute negligence in respect of which the financial consequences are to be borne by the State. After such a long time the actual recovery of those sums will be complicated or impossible. The Court has expressed such a view in its judgment of 25 November 1987, referred to above.

The Italian Government cannot justify its negligence by referring to the limitation periods applying in Italy. Article 190 of the abovementioned regulation, Regio Decreto No 827 of 23 May 1924, shows, even if it is not directly applicable to the case in question, that the Italian legal system does have shorter time-limits than the limitation periods.

The Commission contends that the concept of negligence under Article 8 of Regulation (EEC) No 729/70 must be defined independently from breach of a specific legal rule. That concept should be assessed by reference to conduct involving all reasonable and usual care, skill and forethought. A diligent creditor would not wait until the last day of a limitation period to demand payment of a debt.

1 Language of the case: Italian.