Report for the Hearing in Case C-55/91

I — Relevant legislation

1. The basic provision on the financing of the common agricultural policy is Regulation (EEC) No 729/70 of 21 April 1970 (OJ, English Special Edition 1970(1), p. 218). Article 1 of that regulation gives the European Agricultural Guidance and Guarantee Fund (hereinafter the EAGGF) the task of financing refunds on exports to third countries and intervention intended to stabilize the agricultural markets. Under Article 3 of the regulation, such intervention must be

2. Article 6 of Regulation (EEC) No 283/72 of the Council of 7 February 1972 concerning irregularities and the recovery of sums wrongly paid in connection with the financing of the common agricultural policy and the organization of an information system in this field (OJ, English Special Edition 1972(1), p. 90) provides as follows:

3. 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 (OJ, English Special Edition, Second Series, III. European Agricultural Guidance and Guarantee Fund, p. 109) sets out the procedure whereby the authorities and bodies empowered to pay the expenditure financed by the EAGGF are to be forwarded to the Commission.

4. As far as milk and milk products are concerned, Council Regulation (EEC) No 856/84 of 31 March 1984 amending Regulation (EEC) No 804/68 on the common organization of the market in milk and milk products (OJ 1984 L 90, p. 10) provided for an additional levy imposed on producers or purchasers of cows' milk with the aim of controlling the increase in milk production, whilst enabling the necessary changes and structural adjustments to take place, having regard to the diversity of national and regional situations.

5. Council Regulation (EEC) No 1837/80 of 27 June 1980 on the common organization of the market in sheepmeat and goatmeat (OJ 1980 L 183, p. 1) provided for a premium for Italian farmers per head of lamb or kid not slaughtered before the age of two months to the extent necessary in order to offset their potential loss of income as a result of the introduction of the common organization of the market. Expenditure relating to such premiums is regarded as forming part of intervention intended to regularize the agricultural markets.

6. Article 5 of Regulation (EEC) No 1467/70 of the Council of 20 July 1970 fixing certain general rules governing intervention on the market in raw tobacco (OJ, English Special Edition 1970(II), p. 497) provides that

7. Article 35 of Regulation No 136/66/EEC of the Council of 22 September 1966 on the establishment of a common organization of the market in oils and fats (OJ, English Special Edition 1965-1966, p. 221) provides as follows:

8. According to Article 27(1) of Regulation No 136/66,

9. Article 10 of Regulation (EEC) No 2727/75 of the Council of 29 October 1975 on the common organization of the market in cereals (OJ 1975 L 281, p. 1) provides for an aid for durum wheat provided that the intervention price valid for the marketing centre of the area with the largest surplus is lower than the guaranteed minimum price.

II — Facts and procedure

1. By letter reference SG (90) D/29931 dated 30 November 1990, which was received at the Italian Permanent Representation to the European Communities on 3 December 1990, the Commission of the European Communities notified to the Italian Government, pursuant to Article 191 of the EEC Treaty, Decision C (90) 2337 final of 30 November 1990 on the clearance of the accounts presented by the Member States in respect of the expenditure for 1988 of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund.

2. By that decision, after stating among other things (in the fifth recital in the preamble) that

3. The Italian Republic brought an action against that decision; its application was received at the Court Registry on 7 February 1991.

4. The applicant, the Italian Republic, claims that the Court should:

III — Pleas and arguments of the parties

(a) Expenditure in respect of the co-responsibility levy in milk and cheese sector

1. The applicant contests the calculation set out in the third subparagraph of section 4.3.10.3.(a) of the summary report, according to which the Commission added to the 8702741600 kg given in ISTAT's monthly statistics as communicated to EUROSTAT an additional 103000000 kg to cover cheese deliveries to dairies not included in the ISTAT figures. It was precisely on the basis of those data that the Commission worked out that the national reference quantity had been exceeded by 183701600 kg and calculated the levy on the basis of that quantity.

2. The Commission, as defendant, argues that the calculation method in question had already been used by it and accepted by Italy on the occasion of the clearance of the accounts for the preceding financial year, when it was found that the quantity of cheese delivered to dairies was not included in the ISTAT data and therefore had to be added.

(b) Expenditure in respect of the premium for producers of sheepmeat and goatmeat

1. The applicant challenges the refusal to charge to the EAGGF the sum of LIT 2827359845 on account of late payment and LIT 67392655139 on account of controls which are regarded as being inadequate.

2. The Commission considers in the first place that this plea relates to the definitive refusal to charge to the EAGGF the sum of LIT 53438771788 corresponding to the expenditure declared by Italy in respect of premiums for producers of sheepmeat and goatmeat in the seven regions in which the checks were carried out. In contrast, the provisional refusal to charge to the EAGGF LIT 130000000000 corresponding to the expenditure declared by Italy in respect of the regions in which checks were not carried out is not covered by these proceedings, since a review procedure is pending.

(c) Expenditure in respect of tobacco offered for intervention

1. The applicant contests the manner in which the Commission carried out quantitative inspections in the stores for intervention tobacco and took what it maintains to be representative samples of each lot, resulting in two financial corrections to Italy's disadvantage of LIT 711001824 and 1554528324 respectively.

2. The Commission starts by stating that, during the inspection carried out between 7 and 15 February 1988, the Commission delegation was — with the agreement of AIMA (the Italian intervention agency) — accompanied on all visits to storage sites by AIMA representatives who were experts on tobacco, and that, during those visits, the AIAM representatives made no objection in the various minutes about the procedure, the method or the results of the checks carried out.

(d) Expenditure in respect of olive oil taken into intervention

1. The applicant points out first that, as far as this plea is concerned, there are two separate points at issue:

2. As far as the oil from the 1987/1988 marketing year is concerned, the Commission argues that the financial correction in question had been challenged by the applicant on a precautionary basis pending the judgment of the Court in Joined Cases C-161/90 and C-162/90 Petruzzi and Longo. Since the Commission's views set out in the defence remained the same, the question seemed to be otiose having regard to the judgment of 10 October 1991, which confirmed the legality of the analyses carried out.

(e) Expenditure in respect of aid for the processing of soya beans

1. The applicant regards it as absolutely unacceptable that the Commission should have used as its yardstick an inquiry made at the material time into 400 farms, which allegedly revealed the inadequacy of control measures in ... critical areas of the sector of aid for the production of soya beans, and that it had therefore considered it necessary to make a flat-rate 5% deduction from the amount of expenditure incurred by Italy for the 1988 financial year of LIT 760 billion, resulting in its refusal to charge to the EAGGF the sum of LIT 38034266760.

2. The Commission states in the first place that, in view of the magnitude of domestic production in Italy, the EAGGF decided to carry out an inquiry pursuant to Article 9 of Regulation No 729/70 in order to check that the Community aid disbursed pursuant to the special measures for soya beans had been paid in respect of a product which had actually been harvested and processed in the Community.

(f) Expenditure in respect of aid granted for durum wheat

1. The Italian Republic starts by pointing out that, in a letter from the Commission dated 12 June 1987, the Italian authorities were asked, pursuant to Article 6 of Regulation No 283/72, to initiate an administrative inquiry with a view to checking the accuracy and correctness of data relating to areas intended for the cultivation of durum wheat in receipt of Community aid. Although the findings were notified to the Commission by memorandum of 8 January 1988, it was not until more than a year later that the Commission had proposed making a financial correction based on an extrapolation of the irregularities found.

2. The Commission argues in the first place that the applicant's arguments to the effect that payments already made at the time when the findings of an inquiry are notified should not be covered by corrections are completely irrelevant.

1 Language of the case: Italian.