Report for the Hearing delivered in Case 348/85
I — Facts
1. Article 1 (2) (b) of 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) provides that the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (hereinafter referred to as the ‘Fund’) is to finance (a) refunds to third countries, and (b) intervention intended to stabilize the agricultural markets. Article 2 provides that refunds on exports to third countries, granted in accordance with the Community rules within the framework of the common organization of agricultural markets, are to be financed out of the Fund. Article 3 provides for the financing of intervention intended to stabilize the agricultural markets, undertaken according to Community rules within the framework of the common organization of agricultural markets. Article 5 (2) (b) provides that the Commission should, before the end of the following year, on the basis of the annual accounts, make up the accounts of the authorities and bodies responsible for the payment of the expenses referred to in Articles 2 and 3. Article 1 of Regulation No 1723/72 of the Commission of 26 July 1972 on the clearance of the accounts of the Fund (Official Journal, English Special Edition (Second Series), HI, p. 109) provides that the Member States must forward to the Commission the annual summaries of accounts, reports and a summary of expenditure not later than 31 March of the year following that in which the expenditure they deal with was incurred.
2. The main elements of a common fisheries policy were set out in 1970 by Regulation No 2141/70 of the Council of 20 October 1970 laying down a common structural policy for the fishing industry (Official Journal, English Special Edition 1970 (III), p. 703) and Regulation No 2142/70 of the Council of 20 October 1970 on the common organization of the market in fishery products (Official Journal, English Special Edition 1970 (III), p. 707). Articles 100 to 102 of the Act of Accession of 1972 confirmed and partly amended them in relation to access to fish stocks. In particular, Article 102 provided that from the sixth year after accession at the latest, the Council, acting on a proposal from the Commission, was to determine conditions for fishing with a view to ensuring protection of the fishing grounds and conservation of the biological resources of the sea.
3. Regulations Nos 2141/70 and 2142/70 were replaced by Council Regulation No 100/76 of 19 January 1976 on the common organization of the market in fishery products (Official Journal, L 20, p. 1) and Council Regulation No 101/76 of 19 January 1976 laying down a common structural policy for the fishing industry (Official Journal, L 20, p. 19). The last recital in the preamble to Regulation No 100/76 stated that the expenditure incurred by the Member States as a result of the obligations arising out of the application of the regulation was to fall on the Community in accordance with the provisions of Articles 2 and 3 of Regulation No 729/70. Regulation No 100/76 contained no provision similar to Article 26 (2) of Council Regulation No 3796/81 of 29 December 1981 on the common organization of the market in fishery products (Official Journal, L 379, p. 1), which was applicable from 1982. Article 26 (2) provides that intervention measures are to be financed in respect of products from a stock or group of stocks only up to the limit of any quantities allocated to the Member State in question from the total volume of allowable catches for the stock or group of stocks in question. Article 1 of Regulation No 101/76 provided that common rules should be laid down for fishing in maritime waters and specific measures should be adopted for appropriate action and the coordination of structural policies of Member States to promote harmonious and balanced development of the fishing industry and to encourage rational use of the biological resources of the sea and of inland waters. Article 4 provided that where there was a risk of over-fishing of certain stocks in maritime waters of the Member States, the Council, acting in accordance with the procedure provided for in Article 43 (2) of the Treaty on a proposal from the Commission, could adopt the necessaryconservation measures. In particular, those measures could include restrictions relating -to the catching of certain species, to areas, to fishing seasons, to methods of fishing and to fishing gear.
4. On 6 April 1976 the Council adopted Regulation No 811/76 temporarily authorizing certain systems of catch quotas in the fisheries sector (Official Journal, L 94, p. 1), in which it authorized Member States to limit catches of their fishing fleets in accordance with international undertakings contracted or to be contracted. The first recital in the preamble to the regulation stated that ‘the fishery resources of the sea would be considerably endangered if catches were not controlled;... the rational development of the production of fishery products might be disturbed if no limit were placed on the size of landings’.
5. On 6 October 1976 the Commission sent the Council a proposal for a regulation establishing a Community system of conservation and management of fishery resources, on which the Council was not able to reach agreement, however, until 1983.
6. On 3 November 1976 the Council adopted what is known as the ‘Hague Resolution’. In Annex VI thereto it was stated that, pending the implementation of the Community measures then in preparation relating to the conservation of resources, the Member States would not take any unilateral measures in respect of the conservation of resources. It provided, however, that if no agreement was reached for 1977 within the international fisheries commissions and if subsequently no autonomous Community measures could be adopted immediately, the Member States could then adopt, as an interim measure and in a form which avoided discrimination, appropriate measures to ensure the protection of resources situated in the fishing zones off their coasts. Before adopting such measures, the Member State concerned would seek the approval of the Commission, which had to be consulted at all stages of the procedures.
7. On 18 February 1977 the Council adopted Regulation No 350/77 laying down certain interim measures for the conservation and management of fishery resources (Official Journal, L 48, p. 28), applicable until 31 December 1977 at the latest.
8. At its meeting on 31 January 1978 the Council approved the Commission communication according to which, in the absence of a common system, national measures could only be taken in so far as they were strictly necessary for the conservation and management of fishery resources and were nondiscriminatory and in conformity with the Treaty, and if the approval of the Commission had been sought beforehand (Official Journal, C 154, p. 5).
9. On 19 December 1978 the Council adopted interim measures applicable until the end of March 1979.
10. On 1 January 1979 the transitional period provided for in Article 102 of the 1972 Act of Accession expired. On that date power to take measures intended to conserve maritime resources was to be vested fully and definitively in the Community. Because it was not able to reach agreement on the Commission's proposals, the Council adopted fresh interim measures in 1979 and in March 1980.
11. On 30 May 1980 the Council adopted a declaration concerning the common fisheries policy (Official Journal, C 158, p. 2) in which it undertook to adopt a common overall fisheries policy by 1 January 1981 at the latest. In compliance with the Treaties and in conformity with the Resolution of 3 November 1976 (the Hague Agreement) the policy was to be based inter alia. on rational and nondiscriminatory Community measures for the management of resources, the conservation and reconstitution of stocks and fair distribution of catches. Council Decision 80/601 of 16 June 1980 (Official Journal, L 160, p. 48) refers to that declaration and adopts fresh interim measures applicable until 31 July 1980. Council Decision 80/993 of 28 October 1980, based on the Treaties, concerned fishery activities in waters under the sovereignty or jurisdiction of Member States and was adopted on a temporary basis pending the adoption of permanent Community measures (Official Journal, L 298, p. 38); it provided for the following interim measures, applicable until 20 December 1980: At its meeting on 15 to 17 December 1980 the Council adopted a declaration in the minutes to the effect that the Member States would conduct their fishing activities in such a way that the catches made by their ships during the interim period would take into account the total allowable catches (TACs) submitted for 1981 by the Commission to the Council in its proposals of 18 November and 16 December 1980.
‘(1) Member States shall conduct their fishing activities in such a way as to take into account the total allowable catches (TACs) and the part of the TACs made available to third countries under agreements or arrangements made with them, as given in Regulation (EEC) No 754/80, and in the Commission's amended proposals of 12 September and 24 October 1980, and shall inform the Commission in accordance with Regulation (EEC) No 753/80. The catches taken in the interim period will be offset against the allocations eventually decided upon by the Council for 1980.
2) As regards the technical measures for the conservation and surveillance of fishery resources in geographical areas not covered by Council Regulation (EEC) No 2527/80, Member States shall apply the same measures as they applied on 3 November 1976, and other measures taken in accordance with the procedures and criteria of Annex VI to the Council Resolution of 3 November 1976.’
12. In the conservation of resources the Community had also to take into account its international obligations.
13. In 1981 the Commission repeatedly amended its TAC proposals and ultimately submitted to the Council on 24 July 1981: a proposal for a regulation concerning, for certain fish stocks occurring in the Community fishing zone, the fixing of the total allowable catches for 1981 and the shares available to the Community (Official Journal, C 224, p. 2); an amendment to the proposal for a Council regulation fixing the conditions governing fishing operations when taking the total allowable catches for 1981 (Official Journal, C 224, p. 10), the proposal submitted to the Council on 6 March 1981 (Official Journal, C 224, p. 7); and a proposal for a regulation concerning the distribution among the Member States of the total catch possibilities available to the Community in 1981 of stocks or groups of stocks occurring in the Community fishing zone (Official Journal, C 224, p. 11). In a declaration submitted to the Council on 27 July 1981 (Official Journal, C 224, p. 1) the Commission set out the position resulting from the absence of agreement on its proposals to fix the TACs and quotas for 1981. The Commission recalled that it had certain rights and duties under Article 155 of the Treaty, as had been confirmed by the Court inter alia in its judgment of 5 May 1981 in Case 804/79 Commission v United Kingdom [1981] ECR 1045. In view of the overriding public interest and as a precautionary measure, pending a final decision by the Council, the Commission therefore called upon all Member States in pursuance of their rights and duties to conduct their fishing activities in such a way as to ensure compliance with the Commission's proposals. The Commission also declared that it was determined to use all the means in its power to ensure the respect by Member States of those proposals, which it considered in the circumstances to be legally binding upon the Member States. It is apparent from the minutes of the Council meeting on 27 July 1981 (PV/Cons. 37th Fishing 197, 8682/81, pp. 8 and 9) that the Commission's declaration was challenged by the Council's legal department and various Member States, including the Kingdom of Denmark, and that finally the Council agreed to discuss the TACs and quotas proposed for 1981 at its next meeting. In a letter to the Member States dated 28 July 1981 the Commission drew attention to its declaration and added that it believed it was obliged not merely to approve or disapprove in the light of its proposals national measures as and when they might be submitted, but also to require all Member States to take steps to comply with those proposals. The Commission stated that its position was dictated by the necessity of controlling fishing activity in the interim period; pending the next meeting of the Council the Commission intended to give its approval to catches which amounted to not more than three-quarters of the amount of the quotas proposed by the Commission. The Commission called upon all Member States to indicate not later than 24 August 1981 the measures which they proposed to take in order to ensure that the general rule was respected in the interim period.
14. From 1 January 1982 until 31 March 1982 fishing activities in Community waters were once again governed by an interim Council decision, Decision 81/1052 of 29 December 1981 (Official Journal, L 379, p. 52) requiring the Member States to take into account the TACs proposed by the Commission on 24 July 1981. Subsequently the Council adopted other interim measures for 1982.
15. On 25 January 1983 the Council adopted Regulation No 170/83 of 25 January 1983 establishing a Community system for the conservation and management of fishery resources (Official Journal, L 24, p. 1). Article 3 provides for the fixing of the TACs and Article 4 for the distribution of the available share of the TACs between Member States. In application of that regulation the Council subsequently fixed the necessary TACs and quotas. However, it did not fix them for 1981.
16. In a telex message of 29 May 1984 in relation to the clearing of the Fund's accounts for 1980-81, the Commission informed the Kingdom of Denmark that some of the expenditure declared in the fisheries sector could not be borne by the Fund since it had not been incurred in accordance with Community law. The catches not covered by the quotas set by the Commission were not eligible for Community financing unless it was shown that the quantities at issue had not caused expense to the Community. The message set out the method for calculating the expenditure declared ineligible and the financial consequences. In an exchange of views on 13 June 1984 the representatives of the Commission requested the Danish authorities not to deal in their answer to the aforementioned telex message solely with legal aspects but also with the figures.
17. In a letter of 14 June 1984 the Kingdom of Denmark rejected the Commission's view of the law but did not comment on the figures. In a telex message of 28 August 1984 the Commission once again requested the Danish authorities to forward their observations on the catches. In a letter of 20 December 1984 the Kingdom of Denmark explained its view of the law further and insisted that the whole expenditure incurred in the fisheries sector in 1981 should be approved. It did not comment on the catches. In a telex message of 30 May 1985 the Commission reminded the Danish authorities of its request, but to no avail.
18. By Decision 85/451 of 28 August 1985 on the clearance of the accounts presented by the Kingdom of Denmark in respect of the Fund, expenditure for 1981 (Official Journal, L 267, p. 10), the Commission refused to recognize as chargeable to the Fund: an amount of DKR 5411429 representing financial compensation for the withdrawal of certain species of fish; an amount of DKR 2153527.71 in respect of export refunds for mackerel to nonmember countries. On 6 September 1985 the decision was notified to the Permanent Representation of Denmark.
II — Written procedure and conclusions of the parties
1. The application of the Kingdom of Denmark was lodged at the Court Registry on 16 November 1985.
2. 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.
3. The Kingdom of Denmark, the applicant, claims that the Court should: Declare void Commission Decision 85/451/EEC of 28 August 1985 on the clearance of the accounts presented by the Kingdom of Denmark in respect of the European Agricultural Guidance and Guarantee Fund, Guarantee Section, Expenditure for 1981, in so far as it implies that the following expenditure incurred by Denmark cannot be financed by the Fund: DKR 5411429 in respect of the financial compensation relating to the withdrawal of certain species of fish; DKR 2153527.71 in respect of refunds on the export of mackerel to nonmember countries; Order the Commission to pay the costs.
4. The Commission, the defendant, contends that the Court should: Dismiss the application as unfounded; Order the applicant to pay the costs.
III — Submissions and arguments of the parties
The Kingdom of Denmark's application, which is based on Article 173 of the EEC Treaty, alleges an infringement of the Treaty and the rules of law relating to its application.
The Kingdom of Denmark, which for the main part alleges an infringement of Regulation No 729/70, puts forward its submissions and arguments under four heads :
A proposal by the Commission constitutes neither applicable Community law nor a set of Community rules within the meaning of Regulation No 729/70,
There is no connection between rules relating to quotas and the correct use of the common organization of the agricultural markets within the meaning of Regulation No 729/70;
The infringement of Article 5 of Regulation No 729/70 prevents the Commission from putting forward in 1985 a new view of the law in relation to the clearance of the accounts for 1981;
The deduction is incorrect in so far as the Commission has not taken into account the quantities withdrawn or exported before the quotas referred to were exhausted.
A — The status in Community law of the Commission's proposal for quotas
1. The Kingdom of Denmark considers that in its case-law the Court has clearly rejected the Commission's view that a proposal by the Commission should be part of the Community rules and thereby give rise to rights and obligations for the Member States. There is no authority for the proposition that special circumstances may transform a proposal by the Commission into a binding legal measure. The judgment of the Court of 10 July 1984 in Case 63/83 Regina v Kent Kirk [1984] ECR 2689, on the contrary, is authority for the proposition that there is no principle which allows the Commission to act in special circumstances in the place of the Council. Contrary to what the Commission contends, the Court has not adopted a position on the question whether the Commission may have powers of its own. The Court's silence may be understood only as meaning that it is in any event not possible to envisage situations in which the Commission may have such a power on the basis of unwritten Community law. The Danish Government claims that the judgment of the Court of 16 December 1981 in Case 269/80 Regina v Thymen [1981] ECR 3079, in particular paragraph II, clearly shows that a proposal by the Commission gives the Member States no right on which they may rely before the Court and the judgment of 14 February 1984 in Case 24/83 Gewiese and Mehlićh v Mackenzie [1984] ECR 817, in particular paragraphs 18 and 19, clearly shows that a proposal by the Commission imposes no obligation on the Member States which may be relied upon before the Court. It may certainly be inferred from the last two judgments that in the Court's view a mere proposal by the Commission has no binding effect upon Member States. Accordingly, the Commission's proposal cannot be cited as a legal basis for refusing to finance expenditure chargeable to the Fund. The applicant considers that its arguments cannot be described as general or abstract. The Commission cannot be unaware that its declaration of 27 July 1981 gave rise to objections from the Council which discussed it and to a critical memorandum from the Council's legal department and that in a resolution of 17 September 1981 on the fisheries policy (Official Journal, C 260, p. 82) the European Parliament, in referring to the declaration, queried the Commission's competence and declared that it viewed with concern the institutional repercussions of the Commission's action. Under Article 43 of the Treaty competence to adopt TACs and quotas devolved upon the Council. The Commission's opinion that its proposal is legally binding on the Member States would fundamentally upset the distribution of powers between the institutions of the Community to the detriment of the equilibrium established by the Treaty. The applicant does not share the Commission's view that it follows from the judgments of 10 July 1980 in Case 32/79 Commission v United Kingdom [1980] ECR 2403 and of 5 May 1981 in the aforementioned Case 804/79 that a proposal by the Commission may be legally binding on Member States. Although it may be inferred from the latter judgment that, where conservation measures are necessary but the Council takes no action, the Member States must introduce national conservation measures and in doing so have regard to the objections, reservations or conditions which the Commission may make, the case-law of the Court however does not mean that the Commission may à priori impose its objections, reservations or conditions by making proposals to fix TACs or quotas which then have to be regarded as current law. That would be contrary to the principles of balance between the institutions on which the EEC Treaty is founded. In 1981 the Kingdom of Denmark adopted national conservation measures in the Community interest which were always notified to the Commission without any objections on its part.
2. In response the Commission states that it wishes first to explain that the position it adopted in 1981 in relation to TACs and quotas is legally correct. In requesting the Member States in 1981 to apply its proposals on TACs and quotas it expressly referred to the case-law of the Court. In paragraph 25 of its judgment of 10 July 1980 in Case 32/79 (cited above) the Court defined the obligations of the Member States as follows: ‘Both Article 102 of the Act of Accession and Council Regulation (EEC) No 101/76, in particular Article 4 thereof, in the same way as Annex VI to the Hague Resolution and the Council Regulation of 31 January 1978, are based on the twofold assumption that measures must be adopted so as to meet established conservation needs and that if those measures cannot be introduced in good time on a Community basis the Member States not only have the right but are also under a duty to act in the interests of the Community.’ In its judgment of 5 May 1981 in Case 804/79 the Court stated that failure of the Council to act could not in any case restore to the Member States the power and freedom to act unilaterally in this field (paragraph 20) and that conservation measures must be defined by means of all the available elements of law, even though fragmentary, and by having regard to the structural principles on which the Community is founded. Those principles require the Community to retain in all circumstances its capacity to meet its responsibilities, subject to the observance of the essential balances intended by the Treaty (paragraph 23). In paragraph 25 of its judgment the Court referred to the Commission's proposals with regard to the interim measures adopted by the Council, and several times mentioned the Commission's role when the Member States adopted conservation measures (paragraphs 27, 28 and 30 to 32); in paragraph 31 it referred to the obligation on all Member States in the circumstances to undertake detailed consultations with the Commission and to seek its approval in good faith, and their duty not to adopt national conservation measures in spite of objections, reservations or conditions which might be formulated by the Commission. In view of those judgments the Commission considers itself justified in having asked the Member States in the special circumstances of 1981 to respect its proposals. It is clear both from Article 102 of the Act of Accession and from the different measures adopted by the Council in the field of the conservation of maritime resources that such conservation constitutes one of the fundamental objectives of the Community fisheries policy. As the Council itself has on several occasions admitted, the biological resources of the sea would be greatly threatened by uncontrolled catches. Whilst competence in this area belongs to the Community, therefore, it is for the Member States to implement Community conservation measures. This obligation continues to exist even when the Council fails to act, as the Court stated in its judgment in Case 804/79. The Council's failure to act cannot in any case restore to the Member States the power and freedom to act unilaterally in this field. It is clear that such measures cannot have any effectiveness unless they are applied throughout the sea areas concerned. It follows, therefore, not only that the Member States cannot adopt conservation measures at will but also that they must adopt the provisions necessary to ensure that their fishing activities do not cause irremediable harm to the fish stocks of sea areas, whether these be Community fishing waters or not. The Commission states that conservation measures must be implemented in accordance with the rules adopted by the Council on the basis of Article 43 of the EEC Treaty. When it was unable to adopt the necessary rules, the Council adopted, as was logical, interim decisions in order to safeguard the situation. In the absence of any such decisions in 1981 the Commission, just as logically, requested the Member States to respect the TACs and quotas recommended in its own proposals. The Court has emphasized, in particular in paragraphs 27 to 31 of its judgment of 5 May 1981 in Case 804/79, the need for the Member States, in the absence of appropriate action by the Council, to take their conservation measures in collaboration with the Commission. They must not only consult the Commission and seek its agreement, but also take account of the objections, reservations or conditions which the Commission might formulate. The Commission contends that it would have been guilty of poor administration if it had waited for the Member States to inform it of their intentions before making known to each of them its objections or reservations. To wait would moreover have been futile in the case of inaction on the part of a Member State. Only a general assessment was possible, and that general assessment was contained in the proposals. Any national measure which was inconsistent with it was considered in advance as calling for objections and reservations. The Commission states that that was the effect of its declaration to the Council on 27 July 1981 in which it stated that it considered its proposals to be ‘legally binding’. Taken literally and out of context, that expression might obviously be open to objection. However, the declaration simply expresses the logical conclusion of the reasoning set out above. The Court emphasized the importance of the Commission's proposals and pointed out in paragraph 25 of its judgment of 5 May 1981 in Case 804/79 the reference to the proposals which appears in the interim decisions of the Council. The Commission points out that the decision and declaration adopted by the Council at the end of 1980 required Member States to comply with the proposals which the Commission had submitted to the Council for 1981. Accordingly, in the absence of an interim decision by the Council, the Commission considers that it was justified in referring to its proposals, which it had in the mean time amended in view of scientific opinions obtained from international organizations of which either the Community or the Member States were members and from its own Scientific and Technical Committee for Fisheries. The Commission's proposals concerning conservation measures also took account of the Community's obligations to nonmember countries and international fishing organizations. The Commission then comments on the arguments put forward by the applicant in support of its first submission. The Commission considers that the arguments are too general and abstract even if others agree with them. In taking the Commission's declaration of 27 July 1981 out of its context the applicant attributes to the Commission an opinion which it never expressed and similarly in taking the Court's statements in the judgments cited out of their context it attributes to them a general scope which has no foundation in the judgments. All the Commission ever contended was that in the circumstances which characterized the fisheries sector in 1981 its proposals for TACs and quotas for 1981 were legally binding on the Member States pending a final decision by the Council. The Commission considers that the applicant is putting the question badly and is thereby drawn into an irrelevant discussion of the legal nature of the Commission's proposals considered generally and in the abstract. The rights and obligations of the Commission in the particular context are what constitute the central issue. The Commission contends that the applicant misconstrues the ratio decidendi of the judgment of the Court of 10 July 1984 in Case 63/83 which in fact supports the Commission's case. In considering whether the conditions which had to be satisfied for the measure at issue to be sanctioned by the Commission's approval were in fact satisfied, the Court confirmed the rights of the Commission in relation to conservation. With regard to paragraph 11 of the judgment of the Court of 16 December 1981 in Case 269/80 the Commission considers that the applicant is taking the quotation out of its context. The conclusion affirmed in the judgment in question at paragraph 14 is that after the expiry of the period referred to in Article 102 of the Act of Accession a Member State does not have power to adopt and bring into force, without appropriate prior consultation with the Commission and notwithstanding objections, reservations or conditions formulated by the Commission, a fishery conservation measure. The Commission considers that that view supports its case. With regard to the judgment of the Court of 14 January 1984 in Case 24/83 it is necessary also to read paragraphs 18 and 19 in the context of paragraphs 17 and 20. The Commission states that what the last two judgments settled is not the general or abstract question whether proposals of the Commission give Member States rights or impose obligations on them which may be relied upon before the Court, but the question whether a Member State, in the particular circumstances of each case, was entitled to adopt conservation measures without prior consultation with the Commission. A common feature of both judgments is that they deal with the right of Member States to adopt conservation measures, whereas the question to be decided in the present case is the duty to adopt such measures. The Commission observes that the two judgments uphold the Community's competence in general and that of the Commission in particular in the fisheries sector from 1 January 1979. The two judgments thus support the Commission's view. The Commission denies that it has never reacted to the Danish conservation measure and refers in that respect to its observations published in the Official Journal of 5 June 1982, C 142, p. 2, and in that of 1 December 1982, C 315, p. 2. It is apparent from a perusal of those observations that the Commission constantly referred to its proposals for TACs and quotas which thus constituted the conditions to which it subjected approval of the Danish conservation measures and that it referred, where necessary, expressly to its declaration of 27 July 1981.
B — The rektionship between quotas and the rules of the common organization of the market under Regulation No 729/70
1. The Danish Government claims that even if it is possible to prove that in 1981 a Member State made catches of fish in breach of the Community law applicable in 1981, the legal basis of which the Commission must substantiate, such a finding does not allow the Commission to refuse Community funding for expenditure incurred by Denmark on the basis of and in compliance with the organization of the market applicable in 1981 and the relevant implementing regulations. There is no connection between the question of the extent to which a particular fishing operation in 1981 was consistent with the Community law in force and the question to what extent the expenditure in issue was incurred in accordance with the Community rules under the common organization of the agricultural markets. The applicant points out that the legal structures in relation to fishing, which were not fully worked out in 1981, are very different from the legal structures in relation to agriculture. The Danish Government claims that the expenditure incurred must be financed by the Fund when it is shown that such expenditure was incurred in accordance with the regulations of the organization of the market. The rules aimed at regulating fishing activities can be regarded as relevant in that context only if there were a special legal basis. In that respect it is pertinent to refer to Article 26 (2) of Regulation No 3796/81 which applied from 1982. The references therein show a relationship between the Community rules on quotas and the rules of the organization of the market in relation to financial compensation but not between the rules relating to quotas and the rules of the organization of the market in relation to the payment of export refunds. In the same way there is no relationship between intervention measures as part of the organization of the market and other rules relating to fishing, such as, for example, technical measures for conservation. The Danish Government states that the need for a relationship between legislation relating to quotas and financial compensation is a new feature by comparison with Regulation No 100/76. If, as the Commission obviously thinks, Article 26 (2) of Regulation No 3796/81 were superfluous, it is difficult to understand why the Commission proposed it. If the Commission is contending that Article 26 was adopted only to define the applicable Community law, it would appear incomprehensible that the Commission did not at the same time submit a proposal ensuring a connection between observance of quotas and payment of refunds, just as it would have been reasonable to propose that payment of intervention measures should depend on observance of other rules relating to fishing. The Danish Government adds that Article 7 of Council Regulation No 110/76 of 19 January 1976 laying down general rules for granting export refunds on fishery products and criteria for fixing the amount of such refunds (Official Journal, L 20, p. 48) provides that export refunds must be paid upon proof that the products have been exported from the Community and they are of Community origin. The person concerned is thus legally entitled to require payment by the national authorities who have no choice but to pay the amount of the refunds. The Member States cannot make payment depend upon proof that the quantides in respect of which refunds are claimed were caught in accordance with Community law. The Commission's view would lead to an absurd situation in which on the one hand Member States are bound to pay refunds without being able to require the aforesaid proof and on the other the Commission would refuse to finance the whole or part of the refunds paid. In addition, and in practice, the national authorities have no possibility of carrying out any real check since the fish may be imported or exported through any port of the Community or be frozen and then exported or exported only the following year.
2. In answer the Commission states that, even in the absence of a rule laying down for 1981 a connection between observance of the quotas and Community financing, Regulation No 729/70 must be interpreted as meaning that the Commission had not only a right but also an obligation to exclude from Community financing expenditure in the fisheries sector which had been incurred in relation to fish caught in breach of a Community rule aimed at preserving the biological resources of the sea. Pursuant to Articles 2 and 3 of Regulation No 729/70 export refunds and intervention intended to stabilize the agricultural markets are financed only if they are granted or undertaken in accordance with the Community rules in relation to the common organization of agricultural markets. Those provisions in themselves justify the contested decision In the Commission's view, the phrase ‘according to Community rules’ is far from being of a neutral nature with the result that it would be sufficient to show that any expenditure has been incurred ‘within the framework’ of the common agricultural policy or to attain one of its objectives. On the contrary the phrase has always been interpreted as meaning that any expenditure must be fully consistent with the Community law in force in order to be financed out of the Fund. It is established case-law that Articles 2 and 3 of Regulation No 729/70 allow the Commission to recognize as chargeable to the Fund only sums paid in accordance with the rules laid down in the various sectors of agricultural products, leaving the Member State to bear the burden of any other sum paid, and in particular, any amounts which the national authorities wrongly believe themselves authorized to pay in the context of the common organization of the market. The Commission states that the corrections decided upon relate solely to expenditure which, according to information supplied to the Commission, was incurred as a result of exceeding the quotas. It was open to every Member State to show that the expenditure incurred related to lawfully made catches or to catches in respect of which a check could lawfully have been required and the Commission would have accepted the corresponding expenditure if such proof had been furnished. The Commission contends that nowhere in Regulation No 729/70 is it stated that only the breach of a technical rule concerning the substantive and formal conditions for the grant of a particular subsidy can lead to the expenditure being disallowed. Both Articles 2 and 3, which use the plural (‘Community rules’), and the case-law of the Court, which refers to ‘the rules laid down in the various sectors of agricultural production’, may be cited as authority against that point of view. It follows that neither the wording of the regulations nor the judgments of the Court lead to the conclusion that the Commission must confine its consideration of compliance to technical rules such as time-limits, forms and other formalities. The Commission also refers expressly to the judgments of the Court of 7 February 1979 in Joined Cases 15 and 16/76 France v Commission [1979] ECR 321 and 17 February 1985 in Case 56/83 Italy v Commission [1985] ECR 703 in which the Court did not hesitate to take into account infringements which did not directly relate to the transactions in the strict sense of the term. The Commission goes on to state that the position taken by the applicant constitutes a direct challenge to the principle of equal treatment for fishermen (second subparagraph of Article 40 (3) of the EEC Treaty). The Court, basing itself on the objectives of Regulation No 729/70, stated in its judgments of 7 February 1979 in Case 11/76 Netherlands v Commission [1979] ECR 245 and Case 18/76 Germany v Commission [1979] ECR 343 that 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 out of the Fund but must, in all cases, be borne by the Member State concerned. The Commission considers that the fish caught in disregard of the proposed quotas ought not, in the normal course of events, to have appeared on the market; the fact that it did so is due to the unilateral action of the applicant in breach of the common -policy. According to the case-law cited the expenditure incurred by the applicant for the fish must be regarded as ‘amounts which the national authorities wrongly believed themselves authorized to pay in the context of the common organization of the market’. The Commission contends that a common organization of the market may include, as stated in Article 40 (3) of the EEC Treaty, all measures which the Council considers necessary to attain the objectives set out in Article 39. Nowhere is it said that such measures must be included in a single measure. The legal authority for the TACs and quotas is a measure based on Article 43 of the Treaty. Although the TACs and quotas are intended vo achieve several objectives of the common agricultural policy, their main aim is to ensure that fishing should be able to continue in the long term. The Commission considers that disregard of the proposed quotas must be regarded as a breach of a rule which is an integral part of the common organization of the agricultural markets within the meaning of Article 2 and 3 of Regulation No 729/70. With regard to Article 26 (2) of Regulation No 3796/81, the Commission contends that its refusal of finance is based solely on Articles 2 and 3 of Regulation No 729/70 and that Regulation No 3796/81 neither enlarged nor restricted the scope of Regulation No 729/70. The Commission considers that the aim of Article 26 (2) is confined to clarification and that its provisions are primarily concerned with relations between the Member States and their fishermen. Moreover, since Regulation No 3796/81 did not enter into force until 1 January 1982, it is irrelevant in the present case. The Commission submits three objections to the applicant's specific arguments in relation to export refunds: The arrival on the market of fish caught in excess of quotas was the result of a clear infringement by certain Member States; There is a general principle of law according to which no one is bound to accept goods produced in breach of the legal provisions in force. The Commission does not deny that administrative problems may arise if the grant of refunds is made subject to proof of observance of the quotas in every case. In order not to cause the Member States unduly severe problems in the matters of evidence and checks the Commission took account in calculating the refunds of the national consumption, intra-Community imports and exports and any stock from previous years, as is apparent in the summary of the calculation method in the telex message to the Danish Government of 29 May 1984; The case relates to the financing by the Community of expenditure incurred by a Member State; the sole decisive factor is therefore whether such expenditure complies with Community law.
C — Infringement of Article í of Regulation No 729170
The Danish Government states that according to Article 5 of Regulation No 729/70 the Commission must make up the accounts before the end of the following year. In the present case the year following 1981 expired on 31 December 1982. Although the Danish Government forwarded the necessary documents, the Commission did not make up the accounts for 1981 until its decision of 28 August 1985, that is after a serious delay for which Denmark was in no way responsible.
The Danish Government considers that the aim of Article 5 must have been to impose on the Commission an obligation to act, backed by a legal sanction. The sanction does not consist of invalidity but in preventing the Commission from advancing a new view of the law.
The Danish Government must acccept the delay, in clarifying technical or similar problems but it cannot accept that fundamental questions of law should be raised with retroactive effect in relation to the clearance of the accounts long after the decisions taken by the national administration. In the present case the Commission did not put forward its point of view that there was a connection between any excess fishing and financing of expenditure until its telex message of 29 May 1984. The applicant claims that by reason of the delay the Commission is not entitled to raise that issue in respect of the clearance of the accounts for 1981.
2. The Commission regrets that because of the considerable increase in the cases it has had to deal with it was not able to clear the accounts for 1981 before 31 December 1982 in accordance with Article 5 of Regulation No 729/70. It however denies that such delay can have the result of preventing it from taking into account the fact that legally binding quotas were exceeded by the applicant. In support of its view the Commission cites the judgment of 13 November 1964 in Joined Cases 90 and 91/63 Commission v Belgium and Luxembourg [1964] ECR 625 in which the Court held that under Community law there was no reciprocity between the obligations of an institution and of the Member States. It follows from that general principle of law upheld by the Court that the fact that the Commission was not able to observe the aforementioned Article 5 in no way prevents it, in clearing the accounts presented by the applicant, from taking into account the fact that the applicant has not complied with its obligations under Community law. The Commission observes that its view of the law was in no way a novel one for the applicant and was put forward as soon as possible. Its declaration of 27 July 1981, which was enclosed with its letter to the applicant dated 28 July 1981, contained an announcement that the Commission was determined to use all means in its power to ensure observance by the Member States of its proposals which it considered in the particular situation as legally binding on them. Since it has been the Commission's established practice, endorsed by the Court, to take account of any breaches of Community law on clearing the accounts of the Fund the applicant could have been in no doubt about the meaning of the said declaration.
D — Correctness of the disallowances
1. The Danish Government claims that in the Commission's own view the quantities withdrawn or exported at a time when the quotas had not been exhausted ought to be financed by the Community. The Commission applied that principle in clearing the accounts for 1982 as is shown by its letter of 5 August 1985 annexed to the application. The Danish Government also annexes to its application a summary of the fishing showing the amounts withdrawn or exported before the quotas were exhausted and contained in the Commission's proposal for 1981. It follows that in relation to financial compensation DKR 3214012.05 were used to finance quantities withdrawn at a time when the proposed quotas had not yet been exhausted and that with regard to refunds DKR 1454631.19 were used to finance refunds at a time when the proposed quotas had not yet been exhausted. That is the reason for which the Danish Government claims in the alternative that the Commission decision should be declared void in so far as it does not take account of such expenditure. The Kingdom of Denmark states that it forwarded all the necessary information to the Commission which at no time made any comments on the position of principle adopted by the applicant and set out by it on 14 June and 20 December 1984.
2. While reserving its position on the correctness of the information and the figures submitted the Commission contends that it cannot accept a reduction in the disallowances in the present case. The Commission states that according to Article 1 (2) of Regulation No 1723/72 of the Commission the documents relating to expenditure must reach the Commission not later than 31 March of the year following that in which the expenditure they deal with was incurred, that is to say in the present case, 31 March 1982. Although that period had expired more than two years ago the Commission asked the applicant on three occasions and lastly in 1984 to forward information and to submit its observations on the quantities in question. The Commission considers that it has shown itself particularly patient and now that the accounts are cleared the applicant must suffer the consequences of its own neglect. The correctness of that point of view is expressly confirmed in paragraphs 7 and 8 of the judgment of the Court of 7 February 1979 in the Joined Cases 15 and 16/76, cited above, in which, in relation to subsequent rectification, the Court held that in the context of an application for annulment under Article 173 of the Treaty the legality of the contested measure must be assessed on the basis of the elements of fact and of law existing at the time when the measure was adopted. Sound management would be impossible, if even after a decision on the clearance of accounts, it were open to Member States to raise matters which they could have raised during the procedure prior to clearance. The Commission contends finally that the documents in its possession, the annual accounts and monthly statements relating to expenditure, did not enable it to make distinctions according to whether the expenditure related to quantities withdrawn from the market or exported before or after the national quotas were exhausted.
F. Schockweiler
Judge-Rapporteur
1 Language of the Case: Danish.