Judgments nº T-145/15 of The General Court, February 16, 2017

• Resolution Date: February 16, 2017
• Issuing Organization: The General Court
• Decision Number: T-145/15

(EAGGF and EAFRD - Area-related measures - Expenditure excluded from financing - Flat-rate financial corrections - Article 52 of Regulation (EU) No 1306/2013 - Obligation to state reasons - Proportionality)

In Case T-145/15,

Romania, represented initially by R.-H Radu, V. Angelescu, R. Mangu, D. Bulancea, N. Horumbă, E. Mierlea and T. Crainic, and subsequently by R. Radu, V. Angelescu, R. Mangu, N. Horumbă, E. Mierlea and T. Crainic, acting as Agents,

applicant,

v

European Commission, represented by A. Biolan and G. von Rintelen, acting as Agents,

defendant,

ACTION on the basis of Article 263 TFEU seeking the annulment in part of Commission Implementing Decision (EU) 2015/103 of 16 January 2015 excluding from European Union financing certain expenditure incurred by the Member States under the European Agricultural Guarantee Fund (EAGF) and under the European Agricultural Fund for Rural Development (EAFRD) (OJ 2015 L 16, p. 33),

THE GENERAL COURT (Seventh Chamber),

composed of M. van der Woude (Rapporteur), President, M. Kancheva and I. Ulloa Rubio, Judges,

Registrar: I. Drăgan, Administrator,

having regard to the written part of the procedure and further to the hearing on 14 July 2016,

gives the following

Judgment

Facts and background to the dispute

1 Article 14 of Council Regulation (EC) No 73/2009 of 19 January 2009 establishing common rules for direct support schemes for farmers under the common agricultural policy and establishing certain support schemes for farmers, amending Regulations (EC) No 1290/2005, (EC) No 247/2006, (EC) No 378/2007 and repealing Regulation (EC) No 1782/2003 (OJ 2009 L 30, p. 16) requires Member States to set up and operate an integrated administration and control system (‘the IACS’). The IACS is the principal administration and control tool for ‘area’ aid schemes. By virtue of Article 15 of Regulation No 73/2009, the IACS comprises, inter alia, a computerised database of farms and applications for aid and an identification system for agricultural parcels based on a computerised geographical information system (‘the ISAP-GIS’), in accordance with Article 17 of that regulation.

2 In the context of shared management, the comprehensive system for the management and control of agricultural expenditure, provided for in EU legislation with a view to obtaining reasonable guarantees as to the effective management of the risk of error in the legality and regularity of aid, included, in essence, four levels:

- the first level comprises a compulsory administrative structure at the level of Member States, based on the establishment of accredited paying agencies and an authority responsible for their accreditation;

- the second level comprises detailed systems for controls and dissuasive sanctions to be implemented by the paying agencies;

- the third level comprises ex-post controls by independent audit bodies designated by the Member States, in accordance with Article 7 of Council Regulation (EC) No 1290/2005 of 21 June 2005 on the financing of the common agricultural policy (OJ 2005 L 209, p. 1) and Article 5 of Commission Regulation (EC) No 885/2006 of 21 June 2006 laying down detailed rules for the application of Regulation No 1290/2005 as regards the accreditation of paying agencies and other bodies and the clearance of the accounts of the EAGF and of the EAFRD (OJ 2006 L 171, p. 90), applicable rationae temporis at the time of the controls to be carried out by the Romanian conciliation body in respect of claim years 2009 and 2010;

- the fourth level comprises the clearance of accounts through the Commission, including both annual financial clearance and multi-annual conformity clearance.

3 By Commission Implementing Decision (EU) 2015/103 of 16 January 2015 excluding from European Union financing certain expenditure incurred by the Member States under the European Agricultural Guarantee Fund (EAGF) and under the European Agricultural Fund for Rural Development (EAFRD) (OJ 2015 L 16, p. 33; ‘the contested decision’), the Commission excluded certain expenditure incurred by Romania, declared in respect of financial years 2009 and 2010, as expenditure excluded from EU financing.

4 By that decision, a total sum of EUR 128 368 775, made up of an amount of EUR 92 471 526 under budget heading 6701 and EUR 35 897 249 under budget heading 6711, was thus excluded from EU financing, by the application of flat-rate correction rates of 10% in respect of the expenditure in claim year 2009 and of 5% in respect of the expenditure in claim year 2010, because of ‘weaknesses in the administrative cross-checks and the on-site inspections’.

5 The contested decision thus closes a conformity clearance procedure, on the basis of Article 52 of Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008 (OJ 2013 L 347, p. 549), applicable rationae temporis at the time of adoption of that decision on 16 January 2015.

6 In the context of the shared management of the European Agricultural Guarantee Fund (EAGF) and in the European Agricultural Fund for Rural Development (EAFRD), area aid, excluded from EU financing by the contested decision, had been paid to farmers by the Agenția de Plăţi şi Intervenţie pentru Agricultură (Paying and Intervention Agency for Agriculture (‘APIA’), Romania), namely the Romanian paying body responsible for the management and supervision of aid schemes. All the instances of deficent supervision relate to the determination of the admissible areas, with the exception of one instance, deficiency J (see paragraph 20 below) concerning advance payments and the calculation of penalties.

7 The contested decision is based on deficiencies in the supervision by the APIA of the conditions for admissibility of the aid, noted by the Commission in two inquiries into area aid carried out in Romania between 2 and 6 November 2009, as regards the 2009 claim year (inquiry AA/2009/20), and between 27 September and 1 October 2010, as regards the 2010 claim year (inquiry AA/2010/16), on the basis of Article 37 of Regulation No 1290/2005. The purpose of those inquiries was to determine whether the management and supervision of the area aid schemes complied with the EU legislation for that claim year, ‘the more specific objective of the audit being to supervise the implementation of the corrective measures concerning the weaknesses of the IACS (in accordance with the action plan)’. According to the information provided by Romania and not disputed by the Commission, that three-year action plan, dealing mainly with the bringing up to date of the Romanian ISAP-GIS with orto-photo images from 2008, 2009 and 2010, was implemented, in agreement with the Commission, from June 2009 and was closed at the end of 2011.

8 By letters of 7 April 2010 and 18 March 2011, the Commission sent Romania its findings following the abovementioned inquiries and requests for additional information, in accordance with Article 11(1) of Regulation No 885/2006. The Romanian authorities replied by letters of 7 June 2010 and 19 May 2011.

9 The Commission convened a bilateral meeting, which was held on 1 June 2012. The minutes of that meeting were sent to the Romanian authorities by letter of 17 January 2013. In point 3 of those minutes, entitled ‘Conclusion and financial impact’, the Commission states that it ‘maintains its position that the system implemented in Romania shows some major weaknesses, mainly as regards the ISAP-GIS and the carrying-out of on-site inspections and administrative inspections’. It specifies that, ‘in accordance with document VI/5330/97 [entitled “Guidelines concerning the calculations of the financial consequences at the time of preparation of the clearance decision for the EAGGF-Guarantee accounts”], those weaknesses correspond to the weak points in the main inspections (namely the administrative cross-checks and the on-site inspections) and secondary inspections (namely the payments and calculation of the penalties) and created a risk of large-scale loss for the fund as regards the expenditure incurred under the first and second pillars [of the Common Agricultural Policy]’. It adds that, ‘nonetheless, with regard to the financial impact of those findings, the Romanian authorities are reminded that they are entitled to provide clear evidence showing that the risk to the fund is lower than the flat-rate correction usually applied, in accordance with the abovementioned working document’.

10 The Romanian authorities replied by letter of 18 March 2013.

11 By letter of 21 August 2013, the Commission sent Romania, in accordance with the third paragraph of Article 11(2) of Regulation No 885/2006, its proposal to exclude the sums of EUR 90 174 906 in respect of the 2009 claim year and of EUR 50 362 738 in respect of the 2010 claim year from EU financing. The reasons for that exclusion and the measures to which the Commission thus proposed to apply a correction of 10% in respect of the 2009 claim year and of 5% in respect of the 2010 claim year were set out in Annexes 1 and 2 to that letter.

12 By letter of 4 October 2013, Romania referred that proposal for financial corrections to the Conciliation Body, in accordance with Article 16 of Regulation No 885/2006. The report of the Conciliation Body, drawn up on 21 March 2014, was sent to the Romanian authorities on 26 March 2014.

13 In its report, the Conciliation Body concluded, on the basis of the following considerations, that it was possible to reach a partial agreement between the parties:

‘6.1. The Body notes that the parties agree to revise the basis of the correction as regards the possible transfer of some sums from the 2009 financial year to the 2010 financial year and as regards the large...