JUDGMENT OF 7. 2. 1979 — CASE 11/76 NETHERLANDS v COMMISSION
In Case 11/76,
THE COURT composed of: H. Kutscher, President, J. Mertens de Wilmars and Lord Mackenzie Stuart (Presidents of Chambers), P. Pescatore, M. Sørensen, A. O'Keeffe and G. Bosco, Judges, Advocate General: F. Capotorti Registrar: A. Van Houtte
gives the following
JUDGMENT
Facts
The facts of the case, the procedure, the conclusions and the submissions and arguments of the parties may be summarized as follows:
I — Facts and procedure
A — The origin of the butter case
In order to take action to dispose of intervention stocks of butter during the 1968/69 milk year the Commission adopted Regulation No 1308/68 of 28 August 1968 on the sale of butter from public stocks for exportation (Journal Officiel No L 214 of 29 August 1968, p. 10). That regulation laid down the obligation for the intervention agency to sell, subject to specified conditions, to all interested persons, butter which had been stored for at least four months (Article 1). The butter was to be sold at a price which was 5.5 units of account per 100 kg less than the intervention price (Article 2). The butter was to be exported within 30 days after ‘sale’ by the intervention agency (Article 3).
Although the regulation was repealed by Article 5 of Regulation No 1893/70 of the Commission of 18 September 1970 on the sale of butter from public stocks (Journal Officiel No L 208 of 19 September 1970, p. 13) it remained applicable to butter which had been sold in accordance with the repealed regulation (Article 5). Regulation No 1893/70 entered into force on the third day after the day on which it was published, that is to say 22 September 1970(Article 6).
During the 1971 financial year the applicant applied Regulation No 1308/68 interpreting the word ‘sale’ contained in Article 3 thereof in the sense of ‘delivery’. Consequently it sold butter at reduced prices under sales contracts which had been concluded before 22 September 1970 and it repaid the securities lodged where the butter was exponed within 30 days from its removal from storage. The Commission took the view that the term ‘sale’ relates to the conclusion of the agreement between the intervention agency and the person concerned and that the applicant was therefore not able to grant a reduction for all intervention butter exported after 21 October 1970 and it therefore refused to recognize the sum of Hfl 590072.67 as being chargeable to the EAGGF for that financial year. In the present proceedings the applicant is contesting that refusal of the Commission.
B — The origin of the albumin case
Article 17 (1) of Regulation (EEC) No 804/68 of the Council of 27 June 1968 on the common organization of the market in milk and milk products (Official Journal, English Special Edition 1968 (I), p. 176) makes provision for the possibility of granting export refunds for lactalbumin.
Article 2 of Regulation (EEC) No 204/69 of the Council of 28 January 1969 laying down general rules for granting export refunds on certain agricultural products exported in the form of goods not covered by Annex II to the Treaty, and the criteria for fixing the amount of such refunds (Official Journal, English Special Edition 1969 (I), p. 35) provides that the export refund shall be equal to the sum of the amounts obtained by multiplying the quantity of each of the basic products listed in Annex A to the regulation by the rate of refund on the basic product. As regards the quantity of the basic products to be taken into account Article 3 provides, in respect of the goods listed in Annex C, standard fixed quantities. For both lactalbumin and ovalbumin that annex refers to the same fixed quantity of eggs in shell.
Pursuant to Ankle 17 (4) of Regulation No 804/68 the Council is to fix the refunds at regular intervals in accordance with the Management Committee procedure. For the export of eggs and yolks of eggs in the form of ovalbumin the rates of refund were fixed on several occasion but the same was not done for lactalbumin.
During the 1971 and 1972 financial years the applicant granted export refunds for lactalbumin. Consequently the Commission refused to recognize as chargeable to the EAGGF for those financial years the sums of Hfl 968643.33 and Hfl 12148.73 respectively. The applicant has brought the present proceedings against that refusal of the Commission.
C — Provisions to be considered
1. Principles governing the financing of intervention measures 1. (a) 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 (L), p. 218) contains inter alia the following provisions: ‘Article 1 1. The European Agricultural Guidance and Guarantee Fund (hereinafter called the “Fund”) shall form pan of the budget of the Communities. It shall comprise two sections: the Guarantee Section; the Guidance Section. 2. The Guarantee Section shall finance: (a) refunds on exports to third countries; (b) intervention intended to stabilize the agricultural markets. … Article 3 1. Intervention intended to stabilize the agricultural markets, undertaken according to Community rules within the framework of the common organization of agricultural markets, shall be financed under Article 1 (2) (b). … Article 4 1. Member States shall designate the authorities and bodies which they shall empower to effect, from the date of application of this Regulation, the expenditure referred to in Articles 2 and 3. They shall communicate to the Commission, as soon as possible after the entry into force of this Regulation, the following particulars concerning those authorities and bodies: their name and, where appropriate, their statutes; the administrative and accounting conditions in accordance with which payments are made relating to the implementation of Community rules within the framework of the common organization of agricultural markets. They shall inform the Commission forthwith of any change in those particulars. 2. The Commission shall make available to Member States the necessary credits so that the designated authorities and bodies may, in accordance with Community rules and national legislation, make the payments referred to in paragraph 1. The Member States shall ensure that those credits are used without delay and solely for the purpose laid down. … Article 5 1. Member States shall at regular intervals transmit to the Commission the following documents concerning the authorities and bodies referred to in Article 4 and relating to transactions financed by the Guarantee Section: (a) statements of cash holdings and estimates of financial needs; (b) annual accounts, accompanied by the documents required for making up the balance sheets. 2. The Commission, after consulting the Fund Committee referred to in Article 11, (a) shall decide: at the beginning of the year, on the basis of the documents referred to in paragraph 1 (a), on an advance payment for the authorities and bodies not exceeding one-third of the credits entered in the budget; during the year, on additional payments intended to cover expenditure to be borne by an authority or body; (b) shall, before the end of the following year, on the basis of the documents referred to in paragraph 1 (b), make up the accounts of the authorities and bodies. 3. Detailed rules for the application of this Article shall be adopted in accordance with the procedure laid down in Article 13. … Article 8 (English text) 1. The Member States in accordance with national provisions laid down by law, regulation or administrative action shall 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. The Member States shall inform the Commission of the measures taken for those purposes and in particular of the state of the administrative and judicial procedures. 2. In the absence of total recovery, the financial consequences of irregularities or negligence shall be borne by the Community, with the exception of the consequences of irregularities or negligence attributable to administrative authorities or other bodies of the Member States. The sums recovered shall be paid to the paying authorities or bodies and deducted by them from the expenditure financed by the Fund. 3. The Council, acting by a qualified majority on a proposal from the Commission, shall lay down general rules for the application of this Article. Article 8 (French text) … 2. A défaut de récupération totale, les conséquences financières des irrégularités ou des négligences sont supportées par la Communauté, sauf celles résultant d'irrégularités ou de négligences imputables aux administrations ou organismes des Etats membres. … Article 8 (German text) … 2. Erfolgt keine vollständige Wiedereinziehung, so trägt die Gemeinschaft die finanziellen Folgen der Unregelmäßigkeiten oder Versäumnisse; dies gilt nicht für Unregelmäßigkeiten oder Versäumnisse, die den Verwaltungen oder Einrichtungen der Mitgliedstaaten anzulasten sind. … Article 8 (Dutch text) … 2. Indien algehele terugvordering uitblijft, draagt de Gemeenschap de financiële gevolgen van de onregelmatigheden of nalatigheden, behalve die welke voortvloeien uit onregelmatigheden of nalatigheden die aan de overheidsdiensten of organen van de Lid-Staten te wijten zijn. … Article 13 1. Where the procedure laid down in this Article is to be followed, the matter shall be referred to the Committee by the Chairman, either on his own initiative or at the request of the representative of a Member State. 2. The representative of the Commission shall submit a draft of the measures to be adopted. The Committee shall deliver its Opinion on those measures within a time-limit set by the Chairman according to the urgency of the matters. An opinion shall be adopted by a majority of twelve votes. 3. The Commission shall adopt measures which shall be immediately applicable. However, if such measures are not in accordance with the Opinion delivered by the Committee, they shall at once be communicated by the Commission to the Council. In that case, the Commission may defer for not more than one month from the date of such communication, application of the measures which it has adopted. The Council, acting by a qualified majority, may adopt a different decision within one month.’ Unlike the system established provisionally by Regulation No 17/64/EEC of the Council of 5 February 1964 on the conditions for granting aid from the European Agricultural Guidance and Guarantee Fund (Official Journal, English Special Edition 1963 — 1964, p. 103), Regulation No 729/70 therefore lays down the principle of direct financing by the Community of the measures in question. The former regulation provided that the measures in question should be financed, in the first instance, by the Member States which were subsequently reimbursed by the EAGGF (Article 9). The Commission decided, after consultation with the Fund Committee, the aid to be granted from the EAGGF (Article 10). In the Commission's proposal for a regulation on the financing of the common agricultural policy which it submitted to the Council on 16 July 1969 (Journal Officiel No C 123 of 19 September 1969, p. 27), the provision corresponding to Article 8 (2) of Regulation No 729/70 (namely Article 8 (3) of the proposal) was worded as follows: ‘Article 8 … 3. The financial consequences of irregular or fraudulent transactions shall be borne by the Community, with the exception of negligence attributable to the administrative authorities or other bodies of the Member States. … Article 8 (French text) … 3. Les conséquences financières des opérations irrégulières ou frauduleuses sont supportées par la Communauté, sauf négligences imputables aux administrations des Etats membres ou à leurs organismes. … Article 8 (German text) … 3. Die finanziellen Folgen von Unregelmäßigkeiten oder betrügerischen Handlungen werden von der Gemeinschaft getragen sofern nicht Fahrlässigkeit vorliegt, die den Verwaltungen der Mitgliedstaaten oder den von diesen beauftragten Stellen anzulasten ist. … Article 8 (Dutch text) … 3. De Gemeenschap draagt de financiële gevolgen van de onregelmatige verrichtingen of fraudes, behalve in geval van nalatigheid van de overheidsdiensten van de Lid-Staten of van hun organen. …» The antepenultimate recital of the preamble to the proposal for a regulation was worded as follows : ‘… Adequate measures must be taken to prevent, repress and make good any irregularity or fraud; however, it is not possible to exclude the possibility that irregular or fraudulent transactions may be discovered subsequent to the intervention by the paying bodies or that all the sums paid may not be recoverd; it is therefore appropriate to settle the problem of the determination of financial liability for such losses; the principle most in conformity with the principle of Community financing of the common agricultural policy and which best takes account of the difficulty of localizing in a single Member State the origin of each such transaction consists in charging such losses in the last instance to the Community with the exception of negligence attributable to the administrative authorities of other bodies of the Member States. ’ 1. (b) Article 8 of Regulation 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) is worded as follows: ‘The decision to make up the accounts mentioned in Article 5 (2) (b) of Regulation (EEC) No 729/70 shall cover: (a) the determination of the amount of expenditure incurred in each Member State during the year in question, recognized as chargeable to the EAGGF, Guarantee Section; (b) the determination of the amount of the financial resources still available in each Member State at the end of the year in question, representing the difference between total Community financial resources available at the beginning of the year or advanced during the year and the amount referred to under (a).’ 1. (c) The general rules referred to in Article 8 (3) of Regulation No 729/70 are contained in Regulation (EEC) No 283/72 of the Council of 7 February 1972 concerning irregularities and the recovery of sums wrongly paid in connexion with the financing of the common agricultural policy and the organization of an information system in this field (Official Journal, English Special Edition 1972 (I), p. 90) which contains, inier alia, the following provisions : ‘Article 2 1. Member States shall communicate to the Commission within three months of the entry into force of this Regulation: the provisions laid down by law, regulation or administrative action for the application of the measures provided for in Article 8 (1) of Regulation (EEC) No 729/70, and the list of authorities and bodies responsible for the application of those measures and the main provisions relating to the role and functioning of those authorities and bodies and the procedures which they are responsible for applying. … Article 3 During the month following the end of each quarter, Member States shall communicate to the Commission a list of irregularities which have been the subject of the primary administrative or judicial findings of fact. … Article 4 Each Member State shall communicate without delay to the other Member States concerned and to the Commission any irregularities which are liable to have effects outside its territory very quickly or which show that a new fraudulent practice has been adopted. Article 5 1. During the month following the end of each quarter, Member States shall inform the Commission of all judicial or administrative procedures instituted with a view to recovering sums wrongly paid and shall supply the Commission with any information which is relevant in this respect. 2. At the same intervals the Commission shall be informed of the progress of the procedure referred to in the preceding paragraph and of the amounts which have been or are expected to be recovered and, where appropriate, of the reasons for abandoning legal proceedings. 3. Furthermore, as far as possible before a decision is given, the Commission shall be informed in detail of the reasons for partial or complete failure to recover sums due. 4. Where a judicial or administrative decision is given at the end of proceedings, Member States shall communicate that decision or the main points thereof to the Commission. Article 6 1. Where the Commission considers that irregularities or negligence have taken place in one or more Member States, it shall inform the Member State or States concerned thereof, and that State or those States shall hold an administrative inquiry in which servants of the Commission may take part. The Member State shall communicate to the Commission the report and the inquiry findings. If the Commission does not take part in the inquiry, it shall be kept informed of its progress by means of the quarterly communications provided for in Article 5. … 3. Where the inquiry shows that there has been an irregularity or negligence, or where this is accepted by the Member State concerned following the procedure referred to in paragraph 2, the Member State shall institute as rapidly as possible an administrative or judicial procedure to establish formally that there has been an irregularity or negligence. It shall keep the Commission informed of the progress of the procedure in accordance with Articles 3, 4 and 5.’ Article 14 of the Commission's proposal for a Council regulation concerning irregularities and the recovery of sums wrongly paid in connexion with the financing of the common agricultural policy and the organization of an information system, which it submitted to the Council on 16 October 1970 (Journal Officiel No C 130 of 27 October 1970, p. 7), was worded as follows: ‘Article 14 1. Before the financial consequences arising from irregularities or negligence are finally charged to the Community the Commission shall ascertain whether responsibility for the irregularities or negligence should be borne by the administrative authorities or other bodies of the Member States. 2. If, following that investigation, the Commission takes the view that the Community has suffered a financial loss as the result of irregularities or negligence attributable to the administrative authorities or other bodies of a Member State, it shall quantify the loss and inform the Member State concerned, inviting it to submit its comments within one month. 3. After examining the observations submitted to it by the Member State within the said time-limit, the Commission shall, by decision, lay down the amount due to the Communities from the Member State owing to the irregular practice or negligence established, unless evidence is produced that the sums wrongly paid have been recovered in the meantime. The amount fixed by that decision shall be determined taking account of the observations of the Member State concerned. 4. The Member State concerned shall pay the amount due to the Communities within one month from the day of notification of the decision.’ At the time of adopting Regulation No 283/72 the Council and Commission made the following statement (Document R/151/72 of 4 February 1972): ‘As regards Article 1 (a) Where a Member State is of the opinion that it must finally bear the financial consequences of irregularities or negligence attributable to its administrative authorities or other bodies it shall inform the Commission indicating the amount which it is to bear. (b) Where a Member State is of the opinion that the irregularities or negligence are not attributable to its administrative authorities or other bodies within the meaning of Article 8 (2) of Regulation No 729/70 and that the Commission must bear the financial consequences thereof it shall submit to the Commission an explanatory memorandum. If the Commission … takes the view that the financial consequences of those irregularities or negligence should not be borne by the Community it shall contact the Member State concerned and then initiate an exchange of views within the EAGGF Committee. (c) In the light of knowledge acquired in this way the Commission shall report to the Council on the manner which it deems most appropriate to clear up the unresolved cases referred to under paragraph (b), which report shall be accompanied, where appropriate, by proposals for solutions to be adopted by the Council in order to resolve differences of that kind. As regards Article 3 Irregularities within the meaning of this regulation shall include any infringement, whether or not intentional, of a provision of a legal nature.’
2. Financing of intervention measures for butter Pursuant to Article 6 (1) of Regulation No 804/68 the intervention agencies are to buy in butter at the intervention price in accordance with the conditions laid down by the Council in Regulation (EEC) No 985/68 of 15 July 1968 laying down general rules for intervention on the market in butter and cream (Official Journal, English Special Edition 1968 (I), p. 256). Those two regulations also lay down the general conditions for the sale of butter bought in by the intervention agencies. Decisions relating to sales are to be made in each case by the Commission. The chargeable amount of the expenditure resulting from intervention is to be calculated by determining the net losses in each calendar year by means of an account drawn up by the intervention agency (Articles 3 and 4 of Regulation (EEC) No 2306/70 of the Council of 10 November 1970 on the financing of intervention expenditure in respect of the domestic market in milk and milk products — Official Journal, English Special Edition 1966-1972, p. 44). Under Article 4 (1) (b) of that regulation that account is to be debited with the value of the butter bought in by the intervention agency (at the intervention price) and, pursuant to Article 4 (2) (a), the account is to be credited with the total amount of receipts from disposals. Any difference between the two items is transferred to the amount of the net losses of the intervention agency which must then be financed by the Community. Regulation No 2306/70 contains the following further provisions: The procedure laid down in Article 26 of Regulation No 17/64/EEC corresponds to that laid down in Article 13 of Regulation No 729/70. Article 31 of Regulation No 804/68 provides that:
From the amount of expenditure which is chargeable within the meaning of Article 3 there shall be deducted losses incurred as a result of irregularity or negligence attributable to the Member States; this shall be established in accordance with the procedure provided for in the second sentence of Article 18 (1).
1. Each of the fixed amounts adopted under this article shall be uniform for the Community. Each amount shall be determined in accordance with the procedure laid down in Article 26 of Regulation No 17/64/EEC, account being taken of the outcome of the examination made under Article 31 of Regulation (EEC) No 804/68.
…’
‘The Committee [Management Committee for Milk and Milk Products] may consider any other question referred to it by its Chairman either on his own initiative or at the request of the representative of a Member State.’
D — Procedure
The written procedure was suspended as from September 1976 to enable the parties to enter into negotiations for a settlement. As those negotiations were unsuccessful the written procedure was reopened in August 1977.
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.
II — Conclusions of the parties
The applicant claims in its reply that the Court should:
Annul Commission Decisions 76/145/EEC and 76/151/EEC of 2 December 1975 in so far as the Commission did not discharge the accounts relating to sums of Hfl 590072.67 in respect of the release of securities lodged to guarantee the export, within a fixed period, of intervention butter sold at a reduced price in 1971, of Hfl 968643.33 in respect of the grant of export refunds in respect of lactalbumin in 1971 and of Hfl 12148.73 in respect of the grant of like refunds in 1972, since those accounts are eligible for discharge,
for the following reasons:
In the case of the butter:
Principally, because the implementing body applied Regulation No 1308/68 correctly;
In the alternative, because if that regulation was applied incorrectly such application constitutes an irregularity or negligence within the meaning of Article 15 of Regulation No 2306/70 which cannot entail a reduction in the chargeable amount within the meaning of Article 3 of the aforesaid regulation as applied by the Commission unless the implementing body is held liable in accordance with the procedure laid down by that article, which has not been done,
with the result that the accounts relating to the items in question should have been discharged unless, as regards the alternative conclusion, the decision as to the attribution of liability is now taken in the prescribed manner;
In the further alternative — in the event of the Court's holding that it is necessary to decide the question of liability — because that irregularity or negligence is not attributable to the administrative authorities or other bodies of the applicant within the meaning of Article 15 of Regulation No 2306/70, so that the reduction made was not therefore justified;
In the case of the albumin:
Principally because, although Regulation No 204/69 was applied incorrectly, that application constitutes an irregularity or negligence within the meaning of Article 8 of Regulation No 729/70, the financial consequences of which are to be borne by the Community under paragraph (2) of that article, unless such irregularity or negligence is attributable to the administrative authorities or other bodies of the Member State concerned, although the general rules necessary for the application of that provision within the meaning of paragraph (3) of that article have not yet been laid down and although the Commission furthermore gave an undertaking to the applicant that it would reach agreement with the Council before taking a decision on the matter or, if such a decision could be taken, even in the absence of the rules mentioned above, under Article 8 (2), because in adopting the decisions in dispute the defendant failed to rule on that point,
with the result that the account relating to the item in question should have been discharged, subject to the reservation that the decision as to the attribution of liability shall be taken when the conditions to be laid down for that purpose are fulfilled;
In the alternative — in the event of the Court's holding that it is necessary to decide the question of liability — because the measure in question is not attributable to the authorities or other bodies of the applicant, with the result that, pursuant to the provisions of Regulation No 729/70 or the system of that regulation and taking account of certain general legal principles and of the financing arrangements applicable within the Community, the Community should bear the financial consequences of that incorrect application.
Order the Commission to pay the costs.
The Commission contends that the Court should:
Dismiss the application;
Order the applicant to pay the costs.
III — Submissions and arguments of the parties
A — The principles governing the financing of intervention measures
1. The applicant's observations in this respect relate to the albumin case and, as a subsidiary matter, to the butter case. The main observations of the applicant relating to the butter case are summarized under B. 1. 1. (a) The applicant argues primarily that Article 8 of Regulation No 729/70 and, where appropriate, Article 15 of Regulation No 2306/70 relate to all the expenditure resulting from irregularities or negligence on the part of either officials or administrative authorities or both together. The view that Article 8 (2) of Regulation No 729/70 is applicable only to irregularities or negligence on the part of an individual is contrary to the wording of the provision, to the system of the regulation of which it forms part and to the origins of Regulation No 283/70 which was adopted in implementation of Article 8. The wording of Article 8 (2) in fact refers only to wrongful conduct on the part of the national administrative authorities which is attributable to them and it certainly in no way refers to particular conduct on the part of an individual. In view of the fact that negligence on the part of an individual is always coupled with negligence on the part of the national administrative authority in the case of expenditure incurred in error, the important point in this instance is the negligence of the national administrative authority. There could moreover be negligence on the part of an administrative authority in respect of which the question of its liability could be raised without any such prior negligent conduct on the part of an individual: that is an additional reason for regarding the negligence of the administrative authority as an independent factual consideration. It is, moreover, irrational to hold the Member States liable without more ado for all mistakes in interpretation but not mistakes made by the administrative authority in the course of examining irregularities which were not attributable to it and which were committed by individuals. Article 14 (2) of the proposal for Regulation No 283/72, referred to above, and the note from the Legal Department which the Commission submitted at the time of the discussion on the proposal in question before the Council (Document R/1024/71 of 25 May 1971) show that the view adopted by the Commission favoured the applicant's opinion. The applicant concludes that the item relating to butter should have been discharged even if the possibility exists that there was a case of negligence. Such negligence should have formed the subject-matter of an investigation in accordance with the procedure laid down by Article 15 of Regulation No 2306/70; where appropriate, a deduction could have been made only where it was found to be attributable to the Member State pursuant to that procedure. The Commission should however have the option of re-opening the procedure under Article 5 of Regulation No 729/70 and Article 15 of Regulation No 2306/70, unless the Court rules in favour of the applicant's conclusions set out under 1 (b). The applicant concludes, with regard to the items relating to albumin, that they too should have been discharged even if a case of negligence existed here, as this is a case such as those referred to in Article 8 (2) of Regulation No 729/70. Under that provision an examination should have been carried out as to whether or not any negligence in the present instance was attributable to the administrative authorities or other bodies of the applicant State. The applicant observes that the procedural rules for the application óf Article 8 have never been drawn up. It takes the view that the consultations envisaged in the statement made by the Council and the Commission at the time of the adoption of Regulation No 283/72 should still be held whether or not they result in a proposal to the Council. However that may be there is no reason for not discharging the accounts in question whilst awaiting the application of Article 8 (2). 1. (b) The applicant argues, secondly, that in practice it is inevitable that mistakes should be made at a national level in implementing the Community rules. It does not see what interest may be served by refusing to discharge the accounts of national authorities in cases where it was impossible to make good the financial consequences of mistakes made unless the national body responsible could be criticized in respect of management or policy. The applicant's opinion corresponds to the practice in the Member States. An application of Article 5 of Regulation No 729/70 which, effectively excludes the discharge of all expenditure, the implementation of which does not seem to correspond in every respect to the Community rules, even if such a conclusion appears only once the expenditure has been incurred, contradicts the content of Article 5 and constitutes an unfair burden on the Member States. It is moreover in conformity with general legal principles and with the general rules of good administration that where an authority is responsible for the implementation of measures enacted by another authority the risks inherent in that implementation should be borne by the authority which enacted the measures in question. These are the principles applicable where governmental authorities employ the the services of subordinate authorities. The former are released from the financial consequences of errors in the implementation of measures in the context of such a decentralized system only if those errors are attributable to the implementing body. Article 4 of Regulation No 729/70 ist to be understood in this sense and Article 8 of the same regulation is expressly based on that principle. The applicant takes the view that the cases which form the subject-matter of these proceedings are in any event eligible for discharge as the implementing body acted in good faith. Consequently, the applicant does not agree with the view which the Commission appeared to express in a letter adressed to the Member States on 30 May 1975 following the judgment of the Court of Justice delivered on 12 November 1974 in Case 34/74 Roquette v France ([1974] 2 ECR 1217) to the effect that there can be no question of charging to the Community expenditure incurred as a result of a misinterpretation of Community law by national authorities except in cases where the interpretation received the prior approval of the Commission.
2. Before stating its point of view on the matters of principle, the Commission observes that it has already defined that point of view in a succinct form in the working paper of 16 October 1975 on the procedure, practice and consequences of the clearance of accounts (Document VI/192/75) on which its decisions of 2 December 1975 are based. 2. (a) The discharge of the accounts consists of a binding decision determining the expenditure of the Member States in the course of a given financial year which is finally to be borne by the Community. Discharge is therefore not a mere internal accounting operation which requires no formal measure by way of decision, as is expressed by Article 8 (a) of Regulation No 1723/72. Such recognition of expenditure is necessary as Community financing is restricted to measures taken in accordance with Community provisions. Regulation No 729/70 defines that point at Article 2 (1) and Article 3 (1). It is that specific definition which, in the Commission's view, justifies the introduction of those provisions which, for the rest, merely repeat the content of Article 1 (2). The powers conferred on the Commission in this respect are fully in conformity with the procedure laid down in Article 108 (3) and Article 110 of the Financial Regulation of 25 April 1973 (Official Journal No L 116 of 1 May 1973, p. 1). Moreover, the discharge of accounts is, as regards its effects for the Member States, not fundamentally different from the decision which the Commission had to take concerning aid from the Fund after consulting the Fund Committee under the previous financial arrangements of Article 10 of Regulation No 17/64. Finally in this context the Commission points out that the procedure for the discharge of accounts gives the Member States a very wide right to voice their opinions. In the Commission's conception the procedure includes a bilateral and a multilateral phase, the latter consisting of consultation with the Fund Committee on draft discharge decisions. The Commission refers in this respect to the aforementioned working paper (Document VI/192/75 of 16 October 1975). Legal protection against decisions taken in the context of that procedure is afforded by Article 173 of the Treaty. 2. (b) Article 8 (2) of Regulation No 729/70 relates only to ‘irregularities or negligence’ attributable to (third party) individuals. That is evident from the position of that provision in the system of the regulation, read in conjunction with Regulation No 283/72, and from its origins and the objective which it pursues. The Commission refers in this respect to the first paragraph of the article in question and to Article 8 and the antepenultimate recital in the preamble to the draft regulation No 729/70, which the Commission submitted to the Council on 16 July 1969. Regulation No 283/72 also has the character of a regulation directed at individuals. This is evident in particular from the recitals in the preamble to the regulation, which refer to intensifying ‘the campaign against irregularities’ and ‘fraudulent practices’, and from Article 3 and Article 6 (3) of the regulation. The idea of undertaking a procedure against an administration acting in a manner which was legally wrong or negligent is rather paradoxical. On the other hand a procedure of that kind could very well be undertaken against officials of the civil service of a Member State. If there were a financial loss due exclusively to the wrongful conduct of a Member State it is only logical that the Member State should also bear the financial risk of its acts. However, a financial loss due to the conduct of a third party would constitute a breach in the sphere of responsibility of the Member State and it would be appropriate to release the State from the financial risk assumed by it. In addition there is also the fact that irregular practices often concern the territories of several Member States, thus making it impossible to determine the location of the factors constituting the irregularity. These considerations come to the fore in the antepenultimate recital in the preamble to the draft Regulation No 729/70 referred to above. In that draft the wording of Article 8 (2) was moreover more specific in this regard (Article 8 (3) of the draft). The Commission further argues that the German text of Article 8 (2) of Regulation No 729/70 has become ambiguous, in particular by virtue of the introduction of the word ‘Versäumnis’, which is rendered in the French text and in the other languages by ‘negligence’, which corresponds rather to the term ‘Fahrlässigkeit’. Examining the German text in isolation one might be tempted, from a purely linguistic point of view, to consider that a case of ‘Versäumnis’ has occurred when a Member State is guilty of an omission in breach of the obligations incumbent upon it. That interpretation however would render incomprehensible the distinction drawn by the provision between attributable and non-attributable negligence. Examination of the Dutch text, which is in conformity with the French text, reveals first that the concept of ‘nalatigheid’ could also apply to the conduct of individuals. If, in this context, ‘negligence’ was intended to signify negligent (‘fahrlässig’) action on the part of the administration then in the Commission's view one comes up against the same logical requirements as in the German text but to a still greater degree: it is necessary, in fact, to examine whether the negligent (‘fahrlässig’) conduct of the administration must be attributed to negligence on the part of the administration and must therefore be attributed to it — which is meaningless. The Commission takes the view that that meaningless situation can be avoided only if, in interpreting the provision in question, reference is made to the original wording of the proposal of the Commission and if the concept of ‘nalatigheid’ or ‘negligence’ at the beginning of Article 8 (2) is disregarded as an addition devoid of meaning. On that interpretation the meaning which the Commission gives to the text must necessarily be accepted, taking account of the logic of the wording and without distorting the text: the financial consequences of fraudulent transactions or other irregularities committed by third parties must be borne by the Community in so far as they are not attributable to negligent conduct on the part of the Member State. As the word ‘negligence’ was inserted without explanation into a working paper of the Council of 14 January 1970 (Document R/61/70) and as there is no written evidence that the amendment was discussed, it is impossible to regard it as a substantive amendment to the Commission's proposal. It would, moreover, be surprising to find an attempt to amend the principle laid down by Regulation No 17/64 concerning the power of the Commission to decide on aid from the Fund towards expenditure by the Member States without its being expressed clearly or confirmed in the preparatory documents. 2. (c) The Commission states that its subsequent submissions concerning the attribution of liability and the procedure for attribution assume particular importance if the fundamental conception of the applicant relating to the interpretation of Article 8 (2) is held to be correct. Article 8 (2) of Regulation No 729/70 lays down neither the circumstances in which liability must be attributed nor the time at which that must be done, in contrast to the text proposed by the Commission which states that there must be negligence on the part of the Member State. However, even in the absence of that express specification,-the current provision could be interpreted in the same sense as the proposal. That would, in essence, produce the same result as the interpretation stating, for example, that a condition for the attribution of liability is ‘conduct which is open to criticism’ for which an administration is to be held responsible. As the general rules referred to in Article 8 (3) have not yet been adopted the definition of the concept of ‘conduct which is open to criticism’ must be sought in the application of the law by way of interpretation. In defining that concept, on no account may subjective elements appertaining to the official executing the act be taken into consideration. If a competent and objective observer has a priori reasonable doubts as to the correctness of a given legal interpretation, the national administration should be invited to attempt to dispel those doubts, for example by consulting the Commission. If it does not do so it lays itself open to the charge that it may have misinterpreted a provision and it would also have to bear the financial consequences thereof. This view is necessary for the actual application of Community law in order to avoid the national adminstration's being as it were awarded a premium for having applied Community law without due consideration. In the Commission's view there does not exist a procedure for attributing liability in the legal sense. As the Council was unable to reach agreement on the procedure for which the Commission made provision in Article 14 of its proposal for Regulation No 283/72 the general rules are applicable pursuant to Regulation No 729/70, that is to say the provisions laid down for the discharge of accounts. The existence of a joint statement by the Council and the Commission made at the time of the adoption of Regulation No 283/72 does not affect that position. By failing to take account of the procedural rules laid down in those minutes the Commission has at the most merely infringed a sort of ‘gentleman's agreement’ and should bear the political responsibility therefor. That statement does not imply that the Commission's powers are affected by the procedure laid down therein. In any event it does not constitute the basis for a power of decision on the part of the Council, even to lay down outline provisions. The repon which the Commission was to submit to the Council under paragraph (c) of the statement was intended only to provoke discussion at the highest level, as the Commission was certainly expected to take account in its decision of the views of the Council. The fact that the report should, ‘where appropriate’, be accompanied by proposals relating to solutions to be adopted by the Council can only constitute a reference to the ever-present possibility of resolving a problem arising in a particular case in general terms and for the future, by means of a legal measure adopted under the normal legislative procedure. The possibility for the Council to intervene in such individual cases is, moreover, capable of having a detrimental effect on the institutional balance of the Treaty. Furthermore, the Council has a tendency to impose a ‘political’ solution on cases submitted to it. The prospect of such a political compromise might encourage the Member States to oppose, in the first instance, the attribution to them of the financial burden of ‘irregularities’, to submit the matter to the Council and to find, once Community law is applied, a solution which is in their national interest. Finally, in contrast to the Commission, the Council is not in a position from an administrative point of view to deal with numerous individual cases. The Commission associates itself without reservation with the statement proposed by the French delegation for the minutes drawn up at the time of the adoption of Regulation No 283/72 by the Council, which does not seek to make the Council a conciliatory body but to implement conciliation procedures within the EAGGF Committee, that is to say within an agency of the Commission. 2. (d) Article 15 of Regulation No 2306/70 should be read in conjunction with Article 3 of that regulation. Apart from the net losses mentioned in Article 3 losses may arise from damage suffered during storage or in some other way. Article 15 relates solely to the problem of losses during storage. This is clearly evident from the origins of Article 15 which, moreover, figures as a ‘horizontal clause’ in the financial regulations relating to the various sectors such as, for example, Regulation No 786/69 Article 7 (Official Journal, English Special Edition 1966-1972, p. 11). All those regulations are still based on Regulation No 17/64. Chronologically, therefore, Article 15 was conceived prior to Regulation No 729/70, that is to say in the context of the aforementioned regulation, dating from 1969, and it was incorporated as it stood into Regulation No 2306/70 without any study being made of the logical connexion with Regulation No 729/70. The origins of that provision are evident from the Council documents S/121/69 and S/176/2/69 of 7 February and 21 March 1969 respectively, which corroborate the Commission's opinion. If the Management Committee procedure was to be applied in general to the problem of attributing liability, as is laid down by Article 15, it would not have been necessary to lay down special rules on attributing liability under Article 8 of Regulation No 729/70. 2. (e) The Commission does not believe that the considerations of principle relating to the apportionment of the financial risk between the Community and the Member States put forward by the applicant can have the effect of creating a fundamental derogation from its conclusions. In its opinion all thoughts on this matter must be based on the principle that the Community finances only measures which are adopted in accordance with Community provisions. It appears difficult to reconcile the applicant's view with the wording of Articles 2 and 3 of Regulation No 729/70, unless one gives a quite general significance to the words ‘refunds … granted in accordance with the Community rules … shall be financed …’ which, from the point of view of linguistic usage, is ruled out by the fact that Article 8 (2) contains an exception to that view and therefore suggests a conclusion a contrario. In particular, it is not possible to reconcile such a view with the fact that the Member States apply the Community provisions in question upon their own responsibility and not ‘at the request of’ the Community or as a ‘subordinate institution’ of a higher Community authority. The administrative authorities of the Member States are not bound by instructions of the Community executive and furthermore the Commission does not possess a supervisory power within the usual meaning of administrative law. The Commission is merely able to call attention to infringements recorded by it, by means of opinions which are not binding, in the context of its bilateral contacts or in existing committees. The counterpart of the application of Community law by Member States upon their own responsibility is precisely the obligation to bear the financial risk of an incorrect application of that law. This conclusion cannot be affected by the fact that the application and interpretation of Community law sometimes raise practical difficulties: such difficulties can often be resolved when the measure is being prepared by consultation with the Commission or in the context of numerous committees, and so on; the remaining instances should be extremely rare; where necessary, payments could either be delayed or made subject to reservation. Nevertheless, some exceptions do exist to the principle put forward by the Commission, for example in cases of irregularities on the part of third parties — Article 8 (2) of Regulation No 729/70 — where the Commission has itself occasioned the incorrect application or where it may be held responsible for the incorrect application for another reason: see in this respect the situation resulting from the judgment of the Court of Justice delivered on 12 November 1974 in Case 34/74 (Roquette v France [1974] 2 ECR 1217).
3. (a) The applicant states in its reply with regard to the discharge of accounts and the consequences thereof that it is first necessary to determine whether each item of expenditure was actually incurred in favour of the individual concerned and whether the latter really undertook the factual steps which justify that expenditure; it is subsequently necessary to examine whether the expenditure was in accordance with Community law and, where appropriate, the matter may be brought before the Court of Justice; if it appears that the expenditure was not in accordance with Community law the question arises of the purport of Article 8 of Regulation No 729/70. That article is based on the idea that items relating to expenditure which, whilst not in accordance with Community rules, was nevertheless incurred, are to be discharged within the meaning of Article 5 (2) of the regulation. Such a situation is not necessarily in contradiction with Articles 2 or 3 of the regulation. Those articles in fact relate to the actual financing of the measure to be taken in accordance with the rules and not its application in concreto. The problem of implementation is touched on only by Article 4, which gives the national authorities responsibility for making payments in accordance with Community rules. In the applicant's opinion the question is whether expenditure wrongly incurred should be reimbursed by the competent authority of the Member State because the financing arrangements, in contrast to those of Regulation No 17/64, make provision for internal payments made by external authorities. Budgetary acceptance has already taken place at the time of the closure of the financial year in the course of which any unauthorized payment has been made. Budgetary apportionment between the Community and the Member States of expenditure arising from measures which are not in accordance with Community law requires: a procedure guaranteeing that decisions are taken after due reflection, based on close cooperation between the Commission and the Member States, in which respect the applicant has in mind the Fund Committee procedure as defined in Article 26 of Regulation No 17/64 (which corresponds to that laid down by Article 13 of Regulation No 729/70); and also rules laid down and formulated in some way which give concrete expression to recognized principles relating to budgetary apportionment of expenditure between the Community and the Member States. If, following that procedure, sums are charged to a Member State, that decision will annul the effect of the decision to discharge the item in question.
3. (b) The applicant is still of the opinion that Article 8 of Regulation No 729/70 also contains provisions relating to the procedure and conduct of national bodies. There is nothing to indicate the contrary in the position of the provision, the recitals in the preamble, its origins or its purpose. The purpose of the first subparagraph of Article 8 (1) would not be affected and, taking account of the second subparagraph of that provision, would be meaningless if it did not also serve to counter wrongful acts or omissions on the part of the authorities and bodies responsible for making the payments in the performance of their duties. Finally, the system of the third subparagraph requires that irregularities or negligence must be understood as including all the factors giving rise to the wrongful payment which may be localized within or outside those authorities or bodies. Nor is Regulation No 283/72 confined to the conduct of individuals. The provisions to be communicated to the Commission under Article 2 of the regulation cover the whole of the field of the measures to be taken in application of Article 8 (1) and the main provisions relating to the role and functioning of the authorities and other bodies and the procedures which the latter are responsible for applying; Article 5 relates in a very general manner to all procedures instituted with a view to recovering sums wrongly paid as a result of irregularities or negligence; Article 6 also has a wide scope. The applicant further states that the Commission's affirmation that the scope of Article 15 of Regulation No 2306/70 and of the corresponding articles in other regulations is confined to losses suffered in storage is unfounded. If it had been intended to regulate only that aspect it would have been necessary to add an additional item to the list of those to be credited pursuant to Article 4 (2) of Regulation No 2306/70. The fact that a separate article was introduced shows that on the contrary rules with a wider scope were intended. In any event, the wording of Article 15 leaves no doubt as to its scope. The opinion of the applicant as set out above is corroborated by Working Paper R/1024/71 of 25 May 1971 relating to the financial consequences of irregular transactions drawn up by the Commission at the time of the discussion on the proposal for Regulation No 283/72. The document states at page 3 that: ‘The question of financial responsibility is a different problem (from that of the finding of irregularities by Member States)… If no ad hoc provision were laid down the question would finally be resolved by the Commission after consulting the Fund Committee at the time of the annual decision on the discharge of the accounts referred to in Article 5 (2) (b) of Regulation No 729/70 … In the text at present under discussion these questions are, on the contrary, to form the subject-matter of appropriate contacts between the State and the Commission and — in case of dispute — ad hoc decisions which are to be taken by the Commission after an «opinion» has been given by the Committee in accordance with the procedure under Article 13 of the regulation (thus after the matter has been referred to the Council in the case of an unfavourable opinion)… Already in the financing arrangements prior to 1 January 1971 the regulations provided that the Member States and not the Community are to bear the financial burden of negligence attributable to the former and that decisions on the matter are to be taken by the Commission in accordance with a Management Committee-type procedure …’. The applicant takes the view that the Commission should take account of the text of Working Paper R/1024/71 in applying Regulation No 283/72. It refers moreover to the examples listed at page 6 of that paper of negligence on the part of an official acting in the performance of his duties and in the context of the normal application of Community law: arbitrary conduct by an official in infringement of the instructions given to him by the State or failure by him to take the necessary steps to forestall fraud, in which case it is necessary, in the view of the applicant, to examine also whether or not such conduct constitutes negligence attributable to the Member State concerned. In these circumstances it is not possible to argue that the concept of negligence does not also cover the incorrect application of a regulation as a result, for example, of a misunderstanding of the relationship existing between the various provisions in question or of an incorrect evaluation of the wording of a provision having regard to its purpose. With regard to the Commission's reference to the penultimate recital in the preamble to the proposal for Regulation No 729/70 the applicant observes that that recital was wisely not included in the final text as it gave a one-sided picture of the problem. As it stands, the recital merely states that ‘the financial responsibility for such irregularities or negligence must be determined’. In the applicant's view the difference between the Dutch text and the German and French texts of Article 8 (2) of the proposal for Regulation No 729/70 of the Commission is due to the fact that the word ‘attributable’ was mistakenly not translated in the Dutch text and that therefore that text does not correctly express the Commission's initial proposal. The applicant states that there are very few differences between the German and French texts of Article 8 (2). The essential fact is that the concepts of irregularity and negligence together cover all the causes which may give rise to wrongful payments; the word ‘negligence’ covers actions or failures to act on the part of the administration in breach of the obligations incumbent on the Member State; if account is taken of the obligation imposed on the Member States in Article 8 (1) then logically negligence should be examined for the purpose of ascertaining whether it may be attributed to the Member State. In the case of negligence in breach of a duty a distinction drawn between attributable negligence and non-attributable negligence is not as incomprehensible as the Commission states in its defence. The fact that there has sometimes been a certain carelessness in this respect is of little importance; the significant fact is that it is the intention of the regulation that such negligence should be assessed and that the question whether it may or may not be attributed to the authorities or other bodies of the Member State should be resolved. The applicant believes that the reason for the interpolation of the concept of negligence in the course of the discussions was that the application of the word ‘irregularity’ to actions of the authorities of the Member States was held to be less adequate. The French wording of Article 8 (3) contained in the proposal for Regulation No 729/70 would not, in this respect, have led to a result different from the present situation. In that text the crucial point is whether the negligence is attributable. On the other hand, it is significant that the expression ‘irregular transactions’ was replaced by ‘irregularities’. It might be argued that the word ‘transactions’ refers both to acts on the part of individuals and acts on the part of bodies or officials. The applicant contends that it is clear that implementing provisions were required by Article 8 (1) and (2). Regulation No 283/72 should be supplemented in this respect on the basis of proposals to be made by the Commission in accordance with the duties set out in Article 8 (3) and the statement made at the time of the adoption of Regulation No 283/72 (Document R/151/72). The Commission's view that, as regards questions of interpretation, the Member State must be deemed to act at its own risk and on its own responsibility unless it has consulted the Commission in advance is not reconcilable with the different duties of the Commission and of the Member State in the context of the implementation of the Community rules on the organization of the markets or with the fact that difficulties of interpretation are not always known in advance and that, generally, they cannot be resolved by the authorities of administrative bodies, including the departments of the Commission.
3. (c) The applicant then replies to the Commission's arguments relating to the procedure. As regards the albumin case the applicant's argument is that, at present, the Commission does not have the power to adopt a supplementary decision laying down the financial obligations of the Netherlands State towards the Community, either in view of the absence of rules such as those contained in Article 14 of the proposal for Regulation No 283/72 or because of the undertaking entered into by the Commission at point (c) of the statement issued at the time of the adoption of that regulation. The applicant refers in this respect to the Report on the implementation of Regulation (EEC) No 283/72 of the Council of 7 February 1972 concerning irregularities and the recovery of sums wrongly paid in connexion with the financing of the common agricultural policy and the organization of an information system in this field (Document R/2608/75 of 22 October 1975) and in particular to point 44 of that report, in terms of which, in the absence of general rules defining the scope of the first paragraph of Article 8 (2) of Regulation No 729/70 and the procedure to be followed in its implementation, that provision seems difficult to apply in cases where differences in interpretation exist between the Member State concerned and the Commission. It does not follow from the statement issued at the time of the adoption of Regulation No 283/72 that the Council must give its opinion on individual cases. It is the applicant's wish that the report promised in that statement be submitted to the Council and that it be accompanied by proposals for rules within the meaning of Article 8 (3) of Regulation No 729/70 to be adopted by the Council, in application of which solutions could be found for cases where it has not been possible to reach agreement on the attribution of liability. The applicant objects to decisions on the attribution of liability being taken by the Commission after merely hearing the Fund Committee. It believes that it is necessary to follow the procedure referred to in Article 26 of Regulation No 17/64. It is also necessary that the implementing rules which are to be adopted should define the content of the concept of the attribution of liability. It is not desirable to use for this purpose very precise wording, but at least a certain number of general criteria should be established which could be partly of a substantive nature and consist partly of rules for collaboration between the Member States and the Commission.
3. (d) The applicant states that Article 15 of Regulation No 2306/70 and the corresponding provisions in other regulations were inserted in order to avoid the declaration of excessive amounts to the EAGGF where losses within the meaning of Article 3 of Regulation No 2306/70 or the corresponding provisions in other regulations were rendered worse by negligent management of intervention stocks. Article 8 of Regulation No 729/70, on the other hand, governs the refunding of amounts wrongly paid by means of funds placed by the Commission at the disposal of the national paying authorities. Thus Article 8 and Article 15 could never be applied simultaneously. Documents S/121/69 and S/176/2/69 referred to by the Commission do not show the reason why the departments of the Commission sought to generalize that question. For that reason alone the origins are of scant importance. The fifth recital of the preamble to Regulation No 2306/70, moreover, supports the applicant's opinion. In calculating the net loss which may be declared to the Community only the items listed exhaustively may be taken into consideration pursuant to the regulations. Such a general provisions is thus necessary. As Article 4 (2) (a) of Regulation No 2306/70 provides that in calculating net losses the account may be credited only with the actual amount of receipts from disposals, the applicant takes the view that, in the butter case, the shortfall in the receipts of the Netherlands intervention agency could be corrected only by applying Article 15. Clearly, Article 8 of Regulation No 729 could also have been framed with sufficient latitude to cover losses suffered in the case of so-called second category intervention within the meaning of Article 15 of Regulation No 2306/70 as well, but that solution was not adopted.
3. (e) The applicant begins its arguments relating to the apportionment of the financial risk between the Community and the Member States by analysing the possible causes of wrongful payments. In its view that analysis shows that, from the point of view of financing, the phenomenon of wrongful payments can only be treated as a whole and that in certain respects it is inevitable that losses should be recorded following wrongful payments. According to the applicant it ensues from the system of the present financing arrangements and the general institutional and budgetary framework that the Member States cannot be held to be under an obligation to refund wrongful payments unless they themselves or their agencies have failed to fulfil their obligations. Articles 2, 3, 4 and 5 of Regulation No 729/70 contain no rule automatically placing the Member States under an obligation to compensate the Commission for sums wrongly paid which cannot be recovered. On the other hand, provision is made for such an obligation to pay compensation where the authorities or other bodies of the Member States are at fault in connexion with the wrongful payments. In view of the fact that financing is, since the introduction of ‘direct financing’, the responsibility of the Commission, the latter must bear the ensuing risks. For their part the Member States are only liable for the financial consequences of irregularities or negligence attributable to the authorities or other bodies of the State. That system of liability is not only justified from a legal point of view but also complies with the political and institutional situation in the agricultural sector: the agricultural policy is a Community policy and the various Member States merely collaborate in its implementation; for that reason, in implementing the agricultural policy as such funds are no longer available to the Member States; the charging to a Member State of a financial burden in connexion with that implementation thus requires a special reason. As regards the Commission's observation that it does not have the power to give instructions to the paying authorities, the applicant states that that situation is justified by the fact that only the national legislature can confer on those authorities the necessary powers to ensure a proper application of Community provisions and only action in their own name makes it possible to remain within the context of the national organization of administrative law. The present legal procedures thus benefit the Community itself. This situation also has to do with the fact that what is at issue here is not merely a question of the application of Community provisions but also of the application of rules of national law. The principal justification for autonomous action by the implementing authorities lies in the fact that they must be in a position to act sufficiently promptly and always to react adequately to situationswhich, in the commercial context, are often unforeseeable. Finally, the Commission mistakenly presents matters as though difficulties met in practice can always be resolved by consulting the Commission's departments. Some cases can certainly be resolved in that way but in other cases doubts as to the exact meaning of a provision are not dispelled by the information obtained. With regard to the substantive criteria relating to the apportionment of the financial risk the applicant states that where an implementing body makes incorrect use of available information which is in itself correct, the rule is that the payments should be charged to that body. However, where exact and decisive information was wrongly not available the paramount factor is to what extent the Member States performed their duty to check whether information supplied by individuals with regard to transactions undertaken by them was correct. The applicant notes with regard to the incorrect application of regulations by the competent authority that payments wrongly made because of negligent acquaintance with the rules on the part of the officials responsible for their implementation or because of incomplete or belated notification to them of the rules by the central authorities seem in principle inexcusable, save in cases of force majeure or similar circumstances. A possible case of mistaken interpretation could be held to exist only where, taking account of all the relevant circumstances, the interpretation applied by the authority was indefensible from the point of view of an objective and competent observer and where the national court which was faced with the question whether reference should be made to the Court of Justice under the last paragraph of Article 177 of the Treaty had not done so. With regard to the criteria of a procedural nature relating to the apportionment of the financial risk the applicant observes that they might relate in particular to cases where problems of interpretation exist. It is of great value to ask the opinion of the Commission's departments; it does, however, create a number of complications: first, the possibility of interpreting rules in two ways may, in certain cases, only become apparent later; next, the question arises as to whether application of a rule should be suspended until the opinion is received; a third question is whether the Community should assume responsibility for all the consequences of an opinion which subsequently proved to be erroneous; finally, it is necessary that the formal conditions, for such an opinion should be clearly laid down, for example, whether it should be given in writing, possibly within a time-limit to be fixed, and whether reasons must be given. The applicant believes that it has shown in its conclusions that the questions raised by the complex matter of wrongful payments require the establishment of rules enabling an answer to be given. The institutional balance would be upset if the rules were formulated and laid down by the Commission. It was for that reason, inter alia, that the applicant asks the Court to declare that before continuing the examination of the case or cases in question the Commission should submit proposals on this matter to the Council pursuant to Article 8 (3) of Regulation No 729/70.
4. In its rejoinder the Commission emphasizes with regard to the discharge of accounts and the consequences thereof that Articles 2 (1) and 3 (1) of Regulation No 729/70 are not, as the applicant claims, confined to marking the beginning of total financing by the Community of all refunds and intervention. That already applied at the single market stage under Article 2 (2) of Regulation No 25 of 20 April 1962 on the financing of the common agricultural policy (Official Journal, English Special Edition 1959 — 1962, p. 126). In contrast to the applicant the Commission attributes the same significance to the word ‘volgens’ used in Articles 2 (1) and 3 (1) of Regulation No 729/70 as to the word ‘overeenkomstig’ used in Article 4 (2) of that regulation [the English text has ‘in accordance with’ for both]. It adds that where the transaction giving rise to payment by the competent department of the Member State is not in accordance with Community rules the same is true of the payment. The Commission observes with regard to the scope of Article 8 (2) of Regulation No 729/70 that the applicant is misinterpreting the text of that provision in considering that the first indent of Article 8 (1) is meaningful and justified having regard to the second indent only if it also covers acts of the administration. Under the first indent the Member States are obliged to take the ‘measures’ necessary to ‘satisfy themselves that transactions financed by the Fund are actually carried out and are executed correctly’. That part of the provision relates to the establishment by the Member States of a control procedure in order to verify that the conditions laid down for the financing of transactions are satisfied by the recipient. Contrary to the applicant's view, Article 2 of Regulation No 283/72 is not therefore applicable, on a wholly general level, to the agencies responsible for implementing the transactions to be financed and the procedures which it applies but only to the authorities and bodies responsible for checking, preventing and dealing with irregularities and the recovery of sums lost and to the procedure applied by those bodies. In practice the provision is also interpreted in that way by the Member States. The Commission confirms that the applicant notified the lactalbumin case to it, pursuant to Article 5 of Regulation No 283/72, as an irregularity. It states in this connexion that the classification of a case by a Member State in a certain category cannot automatically be treated as the correct legal classification of the case. The applicant's observations with regard to Working Paper R/1024/71 can in no way invalidate the Commission's view: all the discussions and the observations relating to the conduct of officials of the Member States always dealt with infringements of Community law by third parties, that is to say irregularities; the text of page 6 of the paper is clear in this respect as it refers to the ‘failure by an official to take the necessary steps to forestall fraud …’; this is therefore an irregularity on the part of a third party to the adverse financial consequences of which the official contributed by not taking all necessary steps to avoid it; the passages on page 3 of document R/1024/71, referred to above, should also be viewed in the context of irregularities by third parties. Furthermore the Commission did not refer to the text of Article 8 (3) of the proposal for Regulation No 729/70 in order to prove that negligence and the attribution of liability had the same meaning, as the applicant claims. It only intended to show by means of that text the idea on which that provision is based is that the Community should in principle bear the financial consequences of irregular or fraudulent transactions and that an exception should be made to that principle only where in addition to irregular or fraudulent conduct on the part of a third party a Member State was guilty of a wrongful act. The reason why only the term ‘irregularity’ appears in the first part of the paragraph in the final version in place of ‘irregular or fraudulent transactions’ consists not, as the applicant claims, in the intention to designate acts of Member States by the concept of ‘irregularities’ but in the desire to dispense with the concept of- ‘fraudulent transactions’. That concept is in fact superfluous as all frauds constitute irregularities. The Commission maintains that Article 15 of Regulation No 2306/70 was conceived in order to take account of possible depreciation of intervention products as a result of poor storage. It explains that that regulation is still based on Regulation No 17/64. That is why the regulation also makes provision for the financing of the net losses of intervention agencies determined on the basis of accounts of receipts and expenditure. At the request of the Member States account was taken, in determining the items to be contained in those accounts, of possible depreciation of intervention products following poor storage. On the credit side in Article 4 (2) (e) of that regulation an item was inserted corresponding to the amounts by the intervention agency from the storer as compensation for losses of that kind. The rule in Article 15 was drawn up with the same idea in mind because it was necessary to make provision for cases where poor storage and the consequent depreciation of the product are the responsibility of the intervention agency itself. The provisions relating to the item to be credited therefore refer to Article 15 in order to exclude an overlapping of the two provisions.
B — The individual cases
1. The butter case
1)
a) The applicant takes the view that the vague term ‘sale’ contained in Article 3 of Regulation No 1308/68 must be understood in the sense of ‘delivery’ so that the period of 30 days begins to run from the time of delivery. The difference between the parties' views is evident on the following points: The applicant puts forward the following arguments in support of its views: There exist intervention regulations in other sectors which draw a distinction, in general terms, between the date of the conclusion of the contract of sale and the date of acceptance of delivery, the two dates being separated by a fixed period of time. As the rules in question made no such provision there therefore exists a lacuna which must be filled. Furthermore, it is evident from Regulation No 1893/70 which replaced the previous rules on this subject that the Commission had not regulated the question of the conclusion of forward contracts: a provision excluding forward sales was inserted as Article 2 (3) of that regulation.
In the Commission's view forward sales, that is to say supplies, are excluded; the applicant takes the opposite view;
In the Commission's view the sale of the butter is equivalent to its removal from the store so that within 30 days from the repeal of Regulation No 1308/68 all butter sold under that regulation should have been exported; according to the applicant, that regulation continued to apply so long as a certain number of contracts for forward delivery, relating to a subsequent date, remained to be executed.
1)
a)
2) The applicant further argues, relying on its observations set out under A 1 (b) that the Commission had no reason to refuse to approve the accounts relating to the butter case as the implementing body was not aware that Community provisions had been infringed.
1)
b) The Commission argues that in common parlance the concept of sale refers to an agreement for the transfer of the property in goods in return for payment. Regulation No 1308/68 does not define the term in detail Nevertheless, in various articles and various recitals in the preamble indications may be found to support an interpretation in accordance with general usage. The Commission refers in this respect to Articles 1, 2, 4 (1) and 5 of the regulation in question. It is also clear from Regulation No 1893/70 that that view is the correct one. The Commission argues that it is not possible to rely on Article 2 (3) of Regulation No 1893/70 in order to maintain that there is a lacuna in Regulation No 1308/68: in view of the fact that Regulation No 1893/70 made no provision for an obligation to export which had to be satisfied within a given period it was necessary to lay down directly the period within which the purchaser had to accept delivery of the goods. Where Article 2 (3) of Regulation No 1893/70 referred to ‘the day of conclusion of the contract of sale’ the word ‘sale’ could, in the Commission's view, have no meaning other than that which it had in Regulation No 1308/68. In fact the party entering into a contract with the intervention agency was referred to as the ‘purchaser’ and had to accept delivery of the butter ‘purchased’. Consequently, Regulation No 1893/70 used the same terminology as Regulation No 1308/68 with the same meaning. The Commission does not think that the intervention agency had a valid reason for applying the regulation as it did. In fact the applicant had no reason to substitute in practice for the wording used in Regulation No 1308/68 the words of Article 3 of Regulation No 2059/69 of 20 October 1969 on the sale of skimmed-milk powder from public stocks intended for export (Journal Officiel No L 263 of 21 October 1969, p. 17), pursuant to which the milk powder ‘sold’ must be exported ‘within 30 days after delivery by the intervention agency’. The applicant was moreover aware from a very early stage that the Commission interpreted the term ‘sale’ referred to in Article 3 of Regulation No 1308/68 in the sense advocated in the present case even after the adoption of Regulation No 2059/69. The Commission's representative explained that point of view at the 195th meeting of the Management Committee for Milk and Milk Products on 13 August 1970.
1)
c) The applicant replies that the dispute turns on the question whether the term ‘sale’ excluded the conclusion of contracts relating to forward deliveries. Once such contracts had been concluded it was not possible, after the cancellation of the scheme for selling butter at reduced prices, to obtain supplementary payments from the contracting parties or to declare that securities which had been lodged were forfeit. The applicant denies that the wording of Regulation No 1308/68 is clear. It makes reference to the fact in two Member States the concept of sale has been interpreted in a wider sense, including the possibility of concluding provisional agreements or preliminary contracts. Moreover, the Euroterm dictionary gives in place of ‘vendu’: ‘commercialisé ou (re)distribué [marketed or (re)distributed] and in place of “verkauft”: “vertrieben, verteilt, abgesetzt” [marketed, distributed, disposed of]. The Commission fails to recognize that its analysis of Regulation No 1308/68 does not exclude, under the terms of that regulation, the possibility of a forward sale. That form of transaction is in accordance with the intervention agencies’ established practice. The aim of Article 5 of Regulation No 1308/68, which obliged the Member States to notify to the Commission regularly quantities ‘sold’, was to enable the Commission to know the quantities sold each month and not what quantities were or were not sold in forward dealing. It was for that reason that the Netherlands always stated each month the quantities entering storage and the quantities leaving store. The Commission never remarked on the point. The applicant is unable to understand how the Commission purports to show that its opinion is correct by relying on the provisions of Regulation No 1893/70. In fact the structure of that regulation is quite different from that of Regulation No 1308/68 as it lays down an obligation to accept delivery within a certain period from the conclusion of the sales contract. In the present proceedings the only important question is, moreover, whether the intervention agency could reasonably be deemed to have known that the term ‘sale’ should be interpreted in a sense which was specified two years later. That is surely an exaggerated requirement. The Commission had, moreover, in the applicant's view, given it grounds for interpreting and applying the regulation incorrectly. All the market organizations which were set up after 1967 made provision for intervention arrangements involving in particular very specific rules relating to sale by tender; there were no grounds for arguing that the agency could not interpret in the same way a regulation which, like Regulation No 1308/68, was not complete in this respect. The applicant denies that it was aware ‘from a very early stage’ of any view held by the Commission on this matter. The applicant concludes that it applied Article 3 of Regulation No 1308/68 correctly and that its implementing authority was not in this instance guilty of a mistake for which it may be held liable.
1)
d) The Commission observes in its rejoinder that the expressions referred to in the Euroterm dictionary in place of ‘vendu’ or ‘verkauft’ are merely generic terms which include the legal act of sale and which cannot be assimilated to removal from store or acceptance of delivery. The terms ‘sale’ contained in Article 5 of Regulation No 1308/68 should also be interpreted in the sense of the conclusion of the contract of sale. That interpretation enables the exact consequences of the regulation to be assessed in their entirety and is even necessary if the repeal of that regulation is not to affect contracts already concluded. Information confined to quantities already stored would give only an incomplete idea of those consequences. The Commission maintains that it did not cause the applicant to apply the relevant provisions incorrectly.
2. The lactalbumin case
2)
a) The applicant recognized that it applied a mistaken interpretation in this case. In reliance on its observations set out under A (1) (b), it argues that there are nevertheless no grounds for refusing to discharge the accounts in question by virtue of the fact that at the time the rules were so complicated that it is not possible to criticize the implementing body for its mistake. The confusion was fostered by the fact that since May 1971 monetary compensatory amounts could also be paid for lactalbumin. Application of a provision in accordance with requirements which are not expressly set out in that provision can moreover not be required of the persons concerned. That situation formed the subject-matter of discussions within the Management Committee for Pouhrymeat and Eggs. In the course of those discussions it merely became apparent that the grant of refunds was less desirable from the economic point of view and that finding led to a proposal from the Commission to modify Regulation No 204/69. The Commission had not previously challenged the interpretation adopted and it was therefore not possible to conclude that the Commission would not assume any financial responsibility in this respect. The judgment of the Court of Justice delivered on 13 December 1973 in Case 150/73 (Hollandse Melksuikerfabriek v Hoofdproduktschap voor Akkerbouwprodukten [1973] 2 ECR, p. 1633, which established that during the period in question there existed no right to export refunds for lactalbumin, contained, however, no ruling on the question whether the implementing body could reasonably have taken the view that it could interpret the provision in question as it did.
2)
b) The Commission is of the opinion that it did not give the applicant cause to apply Regulation No 204/69 incorrectly. In this respect it disputes the applicant's view that payment must always be made to an individual who applies for it so long as it is not established that no legal obligation to make the payment exists. Application of such a principle would be dangerous and would lead to unacceptable consequences: if payment was made without reservation it would generally be impossible, under national law, for reasons of protection of legitimate expectations, to seek reimbursement of the amount paid even if it was established beyond doubt that no right to such a payment in fact existed. The problem of the grant of export refunds for lactalbumin was in fact discussed at the meeting of the Management Committee for Pouhrymeat and Eggs of 21 September 1971. At that meeting the Commission's departments stated that no refund was to be paid for lactalbumin.
2)
c) The applicant argues in its reply that in this instance it has not made a mistake for which it can be held liable. Objectively there are excellent reasons for treating the two products as being similar, since they can be substituted one for the other. The opinion expressed by the Commission in the course of the meeting of the Management Committee of 21 September 1971 to the effect that no refund was to be granted for lactalbumin was the personal opinion of the Commission's representative who admitted that, taking account of the wording of the provision and the system of Regulation No 204/69, a different interpretation was defensible. It was for that reason that the official report of that meeting (Document 3771/VI/71 of 27 September 1971) states on this matter under point 7: That note was never received. That is all the more regrettable as the report does not indicate the substantive purport of the information supplied. In those circumstances the applicant decided to grant the applications for refunds. That decision was made taking account in particular of the fact that the Netherlands authorities took the view that the reasonable period for payment had been exceeded and that the absence of a decision stating the reasons on which it was based might form the subject of legal proceedings. The solution of making payment subject to a reservation, suggested by the Commission, gives rise to difficulties if, as was the case here, the person claiming the refund satisfies all the relevant substantive conditions. In such a case the adminstration can only grant the application for payment or reject it. The applicant informed the Commission, pursuant to Articles 3 and 5 of Regulation No 283/72, of the procedure adopted by it to recover the sums when it became apparent that payment had been made in error. The Commission did not challenge the validity of that information which shows that it accepted the applicant's notification. The applicant wonders whether the revocation of that acceptance by the Commission almost three years later is in accordance with the principles of proper management. In the autumn of 1972 the Commission sent to the Council its proposal for replacing Regulation No 204/69 by a new regulation. In the explanatory memorandum the following reason was given for the need for such replacement: ‘… the body of rules applicable in this area has become difficult to understand …’. Viewed in that light the conclusion that under Regulation No 204/69 the grant of an export refund for lactalbumin was justified appears to be plausible. The applicant's statement also shows that opinions which have financial consequences must be given by the Commission in writing and must set out the reasons on which they are based.
‘The Committee
Takes note of the additional information supplied by the representative of the relevant department of the Commission;
Is informed that the delegations of the Member States will receive for their information a note on the application of Regulation No 204/69 to refunds for albumin.’
2)
d) In its rejoinder the Commission repeats that it did not cause the incorrect application. It emphasizes that at management committee meetings the chairman is not the only person to speak in the name of the departments of the Commission but that, at his request, other officials of the Commission may set out the departments' point of view. Such statements thus clearly convey the view of the relevant departments of the Commission. The document considered at that meeting by the Commission was conceived, from the beginning, as a general document on Regulation No 204/69 and not as a special written statement of its position on the question raised by the Netherlands delegation. The minutes are indeed not clear on this point. The absence of a written statement of opinion can nevertheless not alter the fact that from the time when the relevant meeting of the Management Committee was held all the Member States were informed of the solution which the Commission regarded as appropriate to the problems raised. If doubts remained the applicant should have requested a written statement of the Commission's point of view and it could certainly not continue to pay refunds without any reservation, even if it awaited written confirmation of the Commission's point of view following the meeting on 21 September 1971. The argument that the time-limits relating to the payment of refunds are generally short and that the risk exists of judicial proceedings being brought by applicants against the national administration therefore carries little weight. The reasons given by the Commission's departments to show that it was impossible to grant the refund should therefore have been sufficient as a statement of reasons for a negative reply or at least a reply subject to a reservation.
IV — Oral procedure
This Netherlands Government, represented by its Agent, A. Bos, and the Commission, represented by its Legal Advisers, P. Gilsdorf, G. Zur Hausen and R. Baeyens, acting as Agents, presented oral argument at the hearing on 24 October 1978.
The Advocate General delivered his opinion at the hearing on 5 December 1978.
Decision
1. By an application lodged on 2 February the Government of the Netherlands sought the partial annulment under the first and third paragraphs of Article 173 of the EEC Treaty of Commission Decisions 76/145 and 76/151 of 2 December 1975 concerning the discharge of the accounts in respect of the European Agricultural Guidance and Guarantee Fund, Guarantee Section, expenditure for 1971 and 1972 (Official Journal No L 27 of 2 February 1976, p. 11 and p. 23).
2. The applicant Government complains that the Commission failed to charge to the EAGGF the amount of Hfl 590072.67 in respect of the release of securities lodged to guarantee the export, within a fixed period, of intervention butter sold at a reduced price in 1971 and two amounts of Hfl 968643.33 and Hfl 12148.73 in respect of the grant of export refunds for lactalbumin in 1971 and 1972 respectively.
3. In contesting the legality of the decisions adopted by the Commission, the applicant Government cites, apart from the provisions of the specific regulations applicable to the products in question, certain general rules set out in Regulation 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), in particular the first subparagraph of Article 8 (2) which is worded as follows:
‘In the absence of total recovery, the financial consequences of irregularities or negligence shall be borne by the Community, with the exception of the consequences of irregularities or negligence attributable to administrative authorities or other bodies of the Member States.’
4. The Government argues that that provision must be interpreted as meaning that the financial consequences of an incorrect application of a Community provision by a national authority must be borne by the Community in all cases where the error committed is not the fault of the administrative authorities or other bodies of the Member State concerned but is the result of an interpretation which, albeit objectively incorrect, was adopted in good faith. In fact, in the opinion of the applicant Government, by providing that the financial consequences of irregularities or negligence, with the exception of irregularities or negligence attributable to the Member States, shall be borne by the Community, Article 8 (2) signifies that a Member State is obliged to bear the financial consequences only in cases where the incorrect application of a Community provision is the result of wrongful action on the part of a national department or body.
5. The Commission, on the other hand, denies that Article 8 (2) is relevant to the solution of the problems in question, arguing that that provision relates to irregularities and negligence attributable to individuals as persons in receipt of EAGGF expenditure and that it relates to negligence or irregularities which are attributable to the Member States only in the exceptional case of irregularities or negligence on the part of officials in the public service acting in breach of their professional duty. The Commission nevertheless recognizes that according to general legal principles it is for the Community to bear the financial consequences of an incorrect application of Community law where that application is attributable to an institution of the Community.
6. The text of Article 8 in the different language versions, considered in the light of the origins of the provision and the preparatory documents, on which the parties have based their arguments in the course of the proceedings, contains too many contradictory and ambiguous elements to provide an answer to the questions at issue. In order to interpret that provision, therefore, it is necessary to consider its context and the objective of the rules in question.
7. In this respect it should be noted, first, that Article 8 defines the principles in accordance with which the Community and the Member States are to organize measures to combat fraud and other irregularities in connexion with the operations financed by the EAGGF. It makes provision both for measures for the recovery of sums wrongly paid and for administrative and judicial procedures against the persons responsible.
8. In cases where, viewed objectively, Community law has been incorrectly applied on the basis of an interpretation adopted in good faith by the national authorities it is not possible as a general rule, either under Community law or under most of the national legal systems, to recover sums paid in error from the recipients and it is not possible to undertake administrative or judicial procedures against those responsible. Consequently such a situation cannot fall under Article 8 but must, on the contrary, be examined in the light of the general provisions of Articles 2 and 3 of the same regulation, according to which refunds granted and intervention undertaken ‘in accordance with the Community rules’ within the framework of the common organization of agricultural markets are to be financed by the EAGGF. Those provisions permit the Commission to charge to the EAGGF only sums paid in accordance with the rules laid down in the various sectors of agricultural production while leaving the Member States to bear the burden of any other sum paid, and in particular any amounts which the national authorities wrongly believed themselves authorized to pay in the context of the common organization of the markets.
9. That strict interpretation of the conditions under which expenditure is. to be borne by the EAGGF is necessary, moreover, in view of the objectives of Regulation No 729/70. In fact the management of the common agricultural policy in conditions of equality between traders in the Member States requires that the national authorities of a Member State should not, by the expedient of a wide interpretation of a given provision, favour traders in that State to the detriment of those in other States where a stricter interpretation is applied. If such distortion of competition between Member States arises despite the means available to ensure the uniform application of Community law throughout the Community it cannot be financed by the EAGGF but must, in any event, be borne by the Member State concerned. It must therefore be concluded that the provisions of Article 8 of Regulation No 729/70 are not applicable to the operations in question.
10. The applicant Government further argues that the expenditure cannot be charged either to the Community or to a Member State on the occasion of the discharge of the accounts of the national authorities and bodies under Article 5 (2) (b) of Regulation No 729/70 but must be attributed by means of a separate procedure. In this respect the Government refers to a joint statement made by the Council and Commission and recorded in the minutes of the Council meeting held on 8 December 1971. It appears from that statement that if the Commission takes the view, contrary to that of the Member State concerned, that the financial consequences of irregularities or negligence should not be borne by the Community it must contact that Member State and then initiate an exchange of views within the Fund Committee referred to in Article 11 of Regulation No 729/70. It further appears from the statement that the Commission is to make a report to the Council in the light of knowledge acquired in that way and, where necessary, is to propose solutions to be adopted by the Council in order to resolve differences of that kind.
11. It should be noted that that statement was issued with regard to a regulation (Regulation No 283/72 of 7 February 1972, Official Journal, English Special Edition 1972 (I), p. 90) which was adopted under Article 8 of Regulation No 729/70 and that its scope is consequently limited to the financial consequences of irregularities and negligence referred to by that article, which is not relevant here.
12. It is moreover established that up to the present no specific procedure for attributing liability has been laid down by Community law for the purpose of settling differences between the Community and the Member States. The discharge of the accounts by the Commission thus necessarily entails the attribution of expenditure either to the Commission or to the Member State concerned.
13. It is clear from Article 5 (2) of Regulation No 729/70 that the Commission's decision is to be adopted only after the consultation with the Fund Committee referred to in Article 11, but that the special procedure defined in Article 13 is not applicable. It is established that the Fund Committee was consulted in the present instance after the applicant Government had been informed of the items which the Commission considered itself unable to charge to the EAGGF and after it had had the opportunity of making its position on the matter clear.
14. It is evident from the foregoing that the argument based on the alleged failure to comply with the prescribed procedure cannot be upheld.
15. It is therefore necessary to examine with regard to each of the items at issue whether the expenditure which the Commission refused to charge to the EAGGF was incurred in accordance with the Community provisions applicable in the sector in question.
Sale at reduced prices of butter from public stocks for export
16. Certain of the amounts which the Commission refused to charge to the EAGGF constitute expenditure incurred by the applicant Government in respect of the sale of butter from public stocks at reduced prices under Regulation No 1308/68 of the Commission of 28 August 1968 (Journal Officiel No L 214 of 29 August 1968, p. 10). Under Article 3 of that regulation butter covered by that operation was to be exported within 30 days ‘after sale’ by the intervention agency, and compliance with that condition was guaranteed by the lodging of a security under Article 4. Regulation No 1308/68 was repealed by Article 5 of Regulation No 1893/70 of the Commission of 18 September 1970 on the sale of butter from public stocks (Journal Officiel No L 208 of 19 September 1970, p. 13) but it remained applicable to butter sold under the regulation which had been repealed.
17. The applicant Government contends that the reduced price is applicable and the condition laid down in Article 3 is satisfied in cases where the contract of sale was concluded pursuant to the regulation which was repealed and where the butter was exported within 30 days of its removal from storage, even if that took place after 22 September 1970, the date on which Regulation No 1893/70 entered into force. The Commission, on the other hand, takes the view that the period of 30 days referred to in Article 3 must be calculated from the date of the conclusion of the contract of sale and not from that of the removal of the butter from storage.
18. In support of the interpretation advocated by the applicant Government it is argued in particular, on the one hand, that only that interpretation enables forward sales and sales effected over relatively long periods to benefit from the reduced prices and, on the other, that it does not open the way to abuses, since unauthorized use of the butter is excluded while the butter is still in the intervention agency's store.
19. However, in the context of the regulation in question there is no reason why the term ‘sale’ used in Article 3 should be given a meaning different to that which it has in ordinary legal language and which corresponds, moreover, to that assigned to it in other provisions of the regulation.
20. The period of 30 days laid down in Article 3 must therefore be calculated from the date of the conclusion of the contract of sale and not from the date when the butter left the store.
21. As the expenditure considered in this connexion was not therefore incurred in accordance with Community law the Commission's refusal to charge it to the EAGGF is justified.
Export refunds for lactalbumin
22. The disputed items relating to export refunds for lactalbumin concern refunds paid by the competent Netherlands agency on the basis of provisions of Community regulations providing for the grant of export refunds for ovalbumin, on the one hand, and the application of an identical method of calculation for ovalbumin and lactalbumin, on the other.
23. As the Court ruled in its judgment of 13 December 1973 in Case 150/73 ([1973] 2 ECR 1633), the provisions in question were not to be interpreted as implying that export refunds for ovalbumin, a product in the egg sector, were to apply to lactalbumin, a product in the milk and milk products sector, in the absence of a special provision adopted in the context of the common organization of the market in the latter sector.
24. The applicant Government recognizes that the interpretation adopted by the Netherlands authorities was objectively incorrect but it nevertheless claims that it is not guilty of an error in this respect for which it may be held liable.
25. It is evident from the interpretation of Regulation No 729/70 adopted above that the Commission would be obliged to bear the expenditure in question only if the incorrect application of Community law could be attributed to a Community institution.
26. Even if it is accepted that the provisions relating to the refunds in question might give rise to doubts as to their exact scope, none of the evidence produced by the parties in the course of the proceedings, including in particular the discussions of the relevant management committee, enables it to be said that the incorrect interpretation of the provisions may be attributed to the Commission's conduct.
27. The Commission's refusal to charge the amounts considered in this connexion to the EAGGF is therefore justified.
28. The application must, therefore, be dismissed in its entirety.
Costs
29. Article 69 (2) of the Rules of Procedure provides that the unsuccessful party shall be ordered to pay the costs if they have been asked for the successful party's pleading.
30. The applicant Government has failed in its submissions. It should therefore be ordered to pay the costs.
On those grounds, THE COURT hereby:
1 Dismisses the application;
2 Orders the applicant Government to pay the costs.