Legal Nature of European Union Agricultural Penalties

• Date: 01 December 2012
• Year: 2012
• Author: Justyna Lacny,Monika Szwarc
• Pages: 32

Excluding a farmer from receiving a single area payment in a given year and reducing the payment he could claim within the following years, imposed as a penalties for the breach of the EU agricultural provisions, do not constitute criminal sanctions. They are specific administrative instruments applied against the farmer who had decided to participate in an agricultural aid scheme. In such a case, the ne bis in idem principle does not apply. Thus, exclusion and reduction of agricultural payments do not preclude sentencing the farmer in criminal proceeding for the same breach of the EU agricultural provisions. This conclusion follows from the judgment of the European Court of Justice (ECJ) delivered on 5 June 2012 in case C-489/10 criminal proceedings against Ł. Bonda.

I. Background of the Bonda Case

In May 2005, Łukasz Bonda, a Polish farmer, submitted an application to the local agricultural paying agency¹ for a single area payment for 2005. In his application for payment, he overstated the area used for agriculture by giving a figure of 212.78 hectares instead of 113.49 hectares. The paying agency discovered the false information and reduced the single area payment available to him for 2005 up to the amount of the difference between the real area and the area declared. It also excluded him from payments for the three years following the year 2005. Exclusion and reduction were imposed on the basis of Art. 138 (1) paragraph 2 and 3² of Regulation 1973/2004.³ Then, the Prosecutor initiated a criminal proceeding against Ł. Bonda and, on 14 July 2009, the District Court convicted him of subsidy fraud, defined in Art. 297(1) of the Polish Criminal Code.⁴ The District Court stated that Ł. Bonda made a false declaration to obtain an unjustifiably high amount of a single area payment and sentenced him to eight months of imprisonment, suspended for the three years, and a fine of 1600 Polish zloty (approx. € 400). The farmer appealed to the Regional Court, which set the contested judgement aside. The Regional Court stated that the criminal proceeding was inadmissible because administrative penalties, consisting of exclusion and reduction, had already been imposed on Ł. Bonda for the same act. In consequence, due to the ne bis in idem principle, as envisaged in Art. 17(1)(11) of the Criminal Procedure Code (CPC),⁵ it discontinued the criminal proceeding. The Principal Public Prosecutor filed an appeal against this verdict to the Supreme Court, arguing that the Regional Court infringed Art. 17(1)(11) CPC. The Supreme Court considered that in order for such a statement to be made, it must determine whether the proceedings launched by the agricultural paying agency may be regarded as criminal proceedings within the meaning of Art. 17 (1)(11) CPC. It declared that, while a literal interpretation of this provision requires the question to be answered in the negative, it must be interpreted in the light of Art. 4(1) of Protocol No. 7 to the European Convention of Human Rights (ECHR) establishing the ne bis in idem principle. Considering that the legal nature of the exclusion and reduction imposed on the basis of Art. 138 (1) paragraph 2 and 3 of Regulation No. 1973/2004 must be assessed, the Supreme Court referred a preliminary question to the ECJ, asking whether these provisions constitute criminal penalties.

As the preliminary question of the Polish court considered only the legal nature of the penalties envisaged in Art. 138 (1) of Regulation 1973/2004, the ECJ limited its considerations to this issue. The ECJ ruling, however, raises a fundamental question of application of the ne bis in idem principle in the national case. Therefore, commentary on the Bonda case requires a twofold approach: it must focus on the legal nature of penalties imposed for the breach of the EU agricultural provisions as well as on application of the ne bis in idem principle.

II. Penalties Imposed for Breaches of the Union’s Agricultural Legislation 1. Case-law of the European Court of Justice on penalties imposed for breaches of the Union’s agricultural legislation

The ECJ had many occasions to express its view on the legal nature of penalties imposed for breaches of the EU agricultural provisions. Already in the 90s, in the case C‑240/90 Germany v Commission, it stated that temporary exclusion of an operator from an aid scheme due to the irregularities committed by him does not constitute a criminal sanction.⁶ Then, in case C‑210/00 Käserei Champignon Hofmeister, the ECJ analysed whether a penalty established in agricultural regulation could be regarded as being of a criminal nature. The case concerned provisions establishing a fine as a penalty for false declarations in an application for an export refund. The question arose as to whether such a fine had to be assessed in the light of the nulla poena sine culpa principle. The ECJ answered this question in the negative, explaining that the penalty at issue was an integral part of the export refund scheme and not of a criminal nature.⁷

Analysing the legal nature of the penalties, the ECJ underlines that exclusion, as a type of a penalty foreseen in the EU agricultural legislation, may be imposed only on a farmer who has chosen to take advantage of an agricultural aid scheme.⁸ In such a case, proceedings launched against farmers under EU legislation are not of a criminal nature. The ECJ also examines the objectives of the penalties. It states that exclusion is intended to combat numerous irregularities, which are committed within the framework of EU agricultural aid. Because these irregularities weigh heavily on the EU budget financing implementation of the Common Agricultural Policy (CAP), exclusions are of such a nature as to jeopardise the actions undertaken by the EU’s institutions in the agricultural field, stabilise markets, support the standard of living of farmers, and ensure that supplies reach consumers at reasonable prices.⁹ Moreover, under EU agricultural aid, schemes granting the aid are subject to the condition that the beneficiary offers all guarantees of probity and trustworthiness. The penalty imposed in the event of non-compliance with these requirements therefore intends to ensure the sound financial management of EU public funding.¹⁰

In the above-mentioned jurisprudence, the ECJ applied two conditions that are decisive for claiming that agricultural penalties, in casu exclusions and reductions, are not of a criminal nature; thus, they are administrative ones. Firstly, they may be imposed only on farmers who, on the basis of their own decisions, participate in the agricultural aid schemes. Secondly, the ECJ aligned the administrative nature of penalties with their objectives. They are intended to ensure that goals of the CAP are accomplished and that the EU funds allotted for its implementation are spent properly, so that the financial interests of the EU are duly protected, as required by Art. 325 of the Treaty on the Functioning of the European Union (TFEU). From this perspective, the ECJ declares that penalties imposed for breaches of the EU agricultural provisions constitute “a specific administrative instrument forming an integral part of the scheme of aid.”

The same rationale was applied in the Bonda case. The ECJ reiterated that only farmers who have applied for a single area payment under Regulation No 1973/2004 and provided false information in the application for aid can be subject to the exclusions and reductions foreseen in this Regulation. The ECJ also found that exclusions and reductions constitute a specific administrative instrument forming an integral part of an aid scheme intended to ensure the sound financial management of EU public funds. The ECJ also reiterated Regulation No. 2988/95 on the protection of the EU’s financial interests,¹¹ which, as a horizontal (general) legal act, applies to all EU policies, including CAP. This Regulation foresees that the total or partial removal of an advantage granted by EU rules, even if the operator has wrongly benefited from only a part of that advantage, as well as the exclusion from or withdrawal of an advantage for a period subsequent to that of the irregularity, constitutes administrative penalties (Art. 5(1)(c) and (d) of Regulation No. 2988/95). This Regulation also foresees that the administrative penalties laid down in pursuance of the CAP objectives form an integral part of the aid schemes; they have a purpose of their own and may be applied independently of any criminal penalties, if and in so far as they are not equivalent to such penalties (Art. 6(1) to (5) of Regulation No. 2988/95).

2. Legal Notion of “Criminal Proceedings” in the Case-Law of the European Court of Human Rights (ECtHR)

After excluding the criminal nature of exclusions and reductions foreseen in Art. 138 (1) paragraph 2 and 3 of Regulation No. 1973/2004 in the context of its own case-law, the ECJ analysed...