Court of Justice 20-05-1999 ECLI:EU:C:1999:257

Regulation No 136/66/EEC

Council Regulation No 136/66/EEC of 22 September 1966,^(*) as amended by Council Regulation (EEC) No 1562/78 of 29 June 1978,^(*) and by Council Regulation (EEC) No 2210/88 of 19 July 1988,^(*) introduced a common organisation of the market in oils and fats.

The purpose of the common organisation of the market in olive oil is both ‘to maintain the level of consumption of that product in the Community, having regard to the competition from other vegetable oils, and to ensure that producers receive a fair income for the quantity of olive oil actually produced’.^(*)

Article 11(1) of Regulation No 136/66, as amended, provides:

‘Where the production target price less the production aid exceeds the representative market price for olive oil, a consumption aid shall be granted for olive oil produced and marketed in the Community. The aid shall be equal to the difference between these two amounts.’

Regulation (EEC) No 3089/78

Council Regulation (EEC) No 3089/78 of 19 December 1978 lays down the general rules in respect of aid for the consumption of olive oil.^(*)

Article 1 of Regulation No 3089/78 provides that consumption aid for olive oil is to be granted only to approved olive oil packaging plants.

Article 2(1) of that regulation reads:

‘The approval referred to in Article 1 shall be given by the Member State concerned only to undertakings which:

1. have a minimum packaging capacity to be determined;

2. carry out packaging activities for a minimum period to be determined;

3. keep stock records according to rules to be determined; and

4. agree to undergo any checks laid down for the purposes of the application of the aid system.’

Article 3(1) of Regulation No 3089/78 states: ‘The approval referred to in Article 2 shall be withdrawn if, except in the case of force majeure, one of the conditions for approval laid down in Article 2(1) is no longer met’. In addition, Article 3(2) provides: ‘The Member State concerned shall decide to withdraw approval temporarily from any packaging plant which has applied for aid for a quantity of olive oil in excess of the quantity for which entitlement to aid has been agreed’.

Article 5 provides: ‘Entitlement to consumption aid shall be acquired the moment the olive oil leaves the packaging plant in a package meeting the requirements of Article 4(1)(b)’.^(*)

Article 6(1) reads: ‘The aid shall be granted, on application by the party concerned, in the Member State in which the oil was packaged in accordance with Article 4(1)(b)’.

According to the first paragraph of Article 7, ‘The Member States shall institute a system of supervision to ensure that the product for which aid has been applied qualifies for such aid’.

The second paragraph of Article 7 provides: ‘In particular, checks must be made to ascertain whether the amount of olive oil for which aid has been applied corresponds to:

1. the amount of olive oil of Community origin which entered the packaging plant;

2. the amount of olive oil of Community origin which left the plant after being packaged in accordance with Article 4(1)(b) and which was placed on the market in the Community’.

Article 8 of Regulation No 3089/78 reads:

‘The aid shall be paid when the supervisory body designated by the Member State in which packaging takes place has checked that the conditions for granting the aid have been satisfied.

The aid may, however, be advanced as soon as the aid application is submitted, provided that sufficient security has been provided’.

Regulation (EEC) No 2677/85

Commission Regulation (EEC) No 2677/85 of 24 September 1985 lays down implementing rules in respect of the system of consumption aid for olive oil.^(*)

That regulation was amended in particular by Commission Regulation (EEC) No 571/91 of 8 March 1991^(*) and Commission Regulation (EEC) No 1008/92 of 23 April 1992^(*) in order to increase the effectiveness of the checks.

Article 1 of Regulation (EEC) No 2677/85, as amended (hereinafter, Regulation No 2677/85) provides: ‘For the purposes of obtaining the approval referred to in Article 2 of Regulation (EEC) No 3089/78, a packaging plant must have a packaging capacity of at least six tonnes of oil per eight-hour working day’.

The first sentence of the sixth paragraph of Article 2 of that regulation provides: ‘For the purpose of granting approval, the competent authorities of the Member State shall carry out an on-thespot inspection of the plant and packaging capacity of the undertaking seeking approval’.

The first paragraph of Article 3 of that regulation makes it clear that each packaging plant must, from the date on which it is approved, keep records, referred to in that provision as daily ‘stock records’, giving a certain amount of compulsory information relating in particular to stocks of olive oil, the quality and quantity of olive oil entering the plant, packaged olive oil and olive oil leaving the plant, the number of containers entering the plant and the number of containers used, the number of the purchase invoice for each consignment of olive oil and the number of containers entering the plant, to the sales invoices for each consignment of olive oil, and to movements of oils inside the area and between this area and the storage place.

The first and second subparagraphs of Article 5(1) provide that Member States must check by sampling that the oil put up in immediate containers accords with one of the definitions referred to in Regulation No 3089/78. To this end, the inspection authority must, at least once per marketing year, take samples at each approved plant of at least one type of packaged oil in the area of the plant where packaging took place or in any storage place within the meaning of the relevant rules.

The first subparagraph of Article 5(2) reads:

‘Where the competent authority in each Member State finds that the oil in question does not meet one of the definitions referred to in paragraph 1 as a result of blending or other chemical processes intended to render oil not eligible for consumption aid so eligible, the competent authority shall forthwith withdraw the plant's approval for a period of one to five years depending on the gravity of the infringement, without prejudice to any other penalties. In addition, the plant concerned shall be required to pay the Member State a sum equal to twice the consumption aid applied for in the course of one of the months following that in which the samples were taken. The sum collected by the Member State shall be deducted from the expenditure of the European Agricultural Guidance and Guarantee Fund by the authorities or paying agencies of the Member States.’

The second subparagraph of Article 5(2) reads: ‘Where irregularities other than those referred to in the first subparagraph are observed, the competent authority shall be notified thereof in each case’.

According to Article 6 of that regulation, to qualify for aid, olive oil must be put up in an immediate container of a net content of five litres or less, fitted with a non-reusable sealing device and bearing an identification number.

Article 12 of that regulation describes the checks which Member States may or must carry out at approved plants. Article 12(1) provides as follows:

‘For the purposes of the checks referred to in Article 7 of Regulation (EEC) No 3089/78, the Member States shall inspect the stock records of all approved undertakings. They shall also carry out random checks on the financial supporting documents relating to the transactions carried out by these undertakings. Each undertaking shall be inspected for this purpose at least once in each marketing year. Inspections shall cover a substantial percentage of the applications by each undertaking. ...

...

In the course of the inspections referred to in the first subparagraph Member States shall check that:

• the total quantities of oil stored in bulk and packaged and the empty packagings physically present at the undertaking and the storage place referred to [in this regulation] correspond with

• the data contained in the stock records.

If any doubt arises as to the-accuracy of the information given in the application for aid, Member States shall also check the accounts of approved undertakings.

The Member State may also subject approved undertakings to unannounced checks of the same type as those referred to above.

If the approved undertaking plant packages both olive and seed oil, the checks referred to in this Article may be extended to stock records and accounts in respect of the packaging of oils other than olive oil.

As a horizontal check and particularly where there is doubt about the accuracy of the figures in the aid applications, the Member State shall undertake regular checks among persons supplying raw materials and packaging and operators to whom the packaged oil has been supplied.

...’

Article 12(6) reads: ‘Where it is found by the competent authority that an application for aid relates to a quantity greater than that for which the entitlement to aid was recognised, the Member State shall immediately withdraw approval for a period of from one to five years, depending on the seriousness of the infringement, without prejudice to any other penalties’.

Lorenzo Sandúa

The EAGGF's findings regarding the Agency's supervision of this plant, as set out in the table annexed to the inspection report of 31 May 1994,^(*) noted the following irregularities in particular: the Agency's inspectors expressed their suspicions that there might have been some falsification of delivery notes but no consequences were drawn from that finding; the plant's stock records did not show the 25-litre containers appearing on the last five invoices; the plant did not submit its VAT records or its accounts since the documents concerned were in the hands of an outside accountant.

Examination of the documents drawn up at the time of the Agency's inspection confirms each of those points. They are expressly mentioned in the report compiled on 17 March 1992 and in the report of 26 November 1992. Photocopies of the allegedly falsified delivery notes attached to the file show that the notes in question had indeed been altered. No evidence was produced to explain how that anomaly might have occurred.

According to the Spanish Government, the aid was paid in accordance with the rules.

It submits that when the Agency suspected falsification of the delivery notes it suggested to Senpa that the deadline for submitting its report should be extended, and that during that period it made inquiries before coming to the conclusion that, although it had not identified any application that failed to comply with requirements, it was appropriate that future inspections of the records and of the accounts and business papers should be supplemented, as it had been, by horizontal checks with traders and recipients.

In this connection, it is sufficient to state that no evidence has been produced by the Spanish Government showing that further investigation was carried out or describing the content of the alleged investigation.

The various items of evidence found by the EAGGF investigators thus point to serious failures to comply with the Community rules on the common organisation of the market in oils and fats, as with the requirements in respect of supervision by Member States laid down in the rules on the financing of the common agricultural policy.

There is therefore no need to challenge the financial correction imposed in respect of those irregularities.

Hurtado Tenorio

The EAGGF's findings regarding the Agency's supervision of this plant, as set out in the table annexed to the inspection report of 31 May 1994^(*) and in the letter which the Commission sent to the Spanish authorities on 13 June 1995,^(*) noted the following irregularities in particular: the stocks did not tally with the business books and the results of the tests carried out at the plant revealed that the oil contained 0.5 p.p.m. of trichloroethylene although the maximum permitted level is 0.1 p.p.m. According to the Commission, that trichloroethylene content should have led the competent authorities to analyse the entire stock and to take the necessary action. It considers that the aid was paid without proper investigation.

Examination of the documents drawn up at the time of the Agency's inspection confirms each of those points. The report of 16 November 1992 shows that, under the heading ‘stock records’ in the section for movements of olive oil in bulk, and the section for incoming and outgoing containers, none of the information required was entered against the appropriate item. The report also shows that physical stocks did not correspond with the records, and some of the information in the records did not tally with the business papers.^(*)

Furthermore, the Agency's summary report dated 12 April 1993 contains evidence that the EAGGF's allegations against Hurtado Tenorio concerning the composition of the olive oil were true.^(*)

The Spanish Government states that the discrepancies between the stocks were due to the fact that the quality of the oils changes naturally and that oil which is initially described as ‘extra virgin’ may subsequently become ‘virgin’. This change may be reflected in corrections to the records, but has no effect on the amount of aid. This, according to the applicant, explains why the physical stocks did not tally with the recorded stocks.

It must be pointed out that the Kingdom of Spain has not produced any evidence in support of this allegation to show that the deficiencies noted within the plant concerned could be explained in the way it claims.

The applicant refers to a discrepancy of 5 litres between the data given in the subsidiary record and those in the business papers, a discrepancy which it classes as insignificant. This evidence only partly conveys the true situation, since other discrepancies can be found in the section of the report relating to the checks on whether the stocks correspond: there are unsubstantiated discrepancies between the recorded stocks and the physical stocks of bulk oil and between the recorded stocks and the physical stocks of oil put up in containers.^(*) In addition, there is also a difference, albeit a small one, between the recorded stocks and the physical stocks of containers, contrary to the relevant rules.

The Spanish Government adds that it is wrong to refer to the possible presence of trichloroethylene in the oil as an impurity when this might be due to pollution, which would not come under Regulation No 2677/85. The situation at issue was on the contrary an infringement of Article 4 of Regulation No 3089/78, which gives a definition of olive oil, and so there was no justification for withdrawal of authorisation.

It should be mentioned that the sampling referred to in Article 5(1) of Regulation No 2677/85 is intended precisely to test whether the oil complies with one of the definitions contained in Regulation No 3089/78 and might, if appropriate, result in withdrawal of approval as provided for in Article 5(2). In this particular case, the oil was not regarded as complying. The position maintained by the applicant that the question of the definition of olive oil should be treated separately from that of withdrawal of approval is thus unfounded.

It follows that the irregularities established and the fact that they had no effect on the approval granted to the plant concerned justify the financial correction applied by the Commission.

Olivar de Segura

The EAGGF's findings regarding the Agency's supervision of this plant, as set out in the table annexed to the inspection report of 31 May 1994,^(*) noted the following irregularities in particular: there were no details of the inspections of the accounts, with only one handwritten reference to the relevant books; nor was there any detail given of the checks on the consignments of olive oil coming into the plant; again, there was only one handwritten reference to the relevant books; lastly, the inspector's final report was incorrect since, although he stated that everything was in order, there was a note to Senpa stating that 4 580 kg had been deducted due. to errors which occurred during copying into the account books. In the letter it sent to the Spanish authorities on 13 June 1995 the Commission states that the application for aid related to an amount of oil greater than that which the plant could legitimately claim.^(*)

Examination of the documents drawn up at the time of the Agency's inspection confirms each of those points. The section of the report of 8 September 1992 relating to the inspection of the business papers and the entries of olive oil^(*) contains a handwritten note that the relevant records had been approved. The form contained in the report intended for a summary of the irregularities detected during the inspection bears only the inspector's signature, thus indicating the absence of any anomalies, although the Agency's correspondence of 28 January 1993 concerning the application for consumption aid by the plant concerned reveals that the application for aid relates to an amount 4 580 kg greater than the amount guaranteed. The discrepancy in the amount given in that document is attributed simply to an error in copying the dates into the account books, without any further explanation or justification.

The Spanish Government states that the EAGGF's statements do not correspond to the facts since the inspectors checked the records and there is evidence of their checks. It adds that the inspector proposed a reduction in the aid applied for proportionate to the excess amount and that the Agency endorsed that view in opposing payment of the aid in respect of that amount. It considers that the penalty of withdrawing approval is not justified and that examination of the accounts shows that it was just an error.

This line of argument cannot be accepted.

As regards the reporting of the investigation carried out, it must be stated that a mere reference to the plant's records renders the reports useless and reduces the effectiveness of any checks, since such a way of operating makes it more difficult for checks to be made by any authority, be it national or Community, apart from the one that conducted the inspection.

As regards the quantity to which the application for aid relates, besides the fact that the inspection report does not mention this point, it should be noted that the competent authorities found there was an error but gave no explanation of it and hence made no attempt to check whether or not Article 12(6) of Regulation No 2677/85 ought to have been applied in that case.

The Commission has therefore claimed, quite rightly, that since the application contained an irregularity approval should have been withdrawn, and that in the circumstances the aid was obtained unlawfully. There are therefore no grounds for challenging the financial correction imposed in this connection.

Agroalimentaria Minerva

The EAGGF's findings regarding the Agency's inspection of this undertaking, as set out in the table annexed to the inspection report of 31 May 1994^(*) and in the letter sent by the Commission to the Spanish authorities on 13 June 1995,^(*) noted the following irregularities in particular: the checks carried out by the Agency disclosed unexplained discrepancies between the physical stocks and the recorded stocks and showed that an application for aid had been made in respect of an amount greater than that for which entitlement was recognised, for a reason which could not simply be an accounting error. The Commission considers that, in those circumstances, the aid was obtained unlawfully.

Examination of the documents drawn up at the time of the Agency's inspection, in particular the report of 21 July 1992, confirms the existence of discrepancies between the recorded stock of containers and the corresponding physical stock. Among those discrepancies it is revealed that 1 320 containers out of 8 211 of the same type counted at the plant did not appear in the records.^(*) The Agency inspector remarked that there was the possibility of an error.

The Spanish Government claims that the scale of the discrepancy between the figures shows there was no irregularity and that in its view they corresponded sufficiently closely. It adds that a discrepancy of 1 320 units out of a total of 130 000 containers stored in the plant at the time should be viewed against the almost total correspondence ascertained in other cases, which makes it probable that an error occurred.

It should be pointed out that the four sets of figures relating to containers, which the Spanish inspectors compared, reveal discrepancies amounting to several hundreds of units at least, which, even when compared with the figures for the four categories of stocks at issue of between 10 500 and 95 600 units, cannot be regarded as negligible amounts. In particular, the figure of 1 320 units set against a total of 8 211 in its corresponding category constitutes a substantial discrepancy which it is difficult to put down to a mere error.

As for the claim that the application for aid was unlawful, the Spanish Government states that the Agency's report did not accept an amount of 3 069 kg of olive oil in the application submitted by the plant for the month of December 1991, and that that amount was deducted following an accounting error made by the plant. It maintains that that fact meant that the penalty contained in Article 12(6) of Regulation No 2677/85 could not be imposed since the plant had not made a false statement, deliberately or through serious negligence, in order to obtain aid to which it was not entitled.

The claim that there was a simple clerical accounting error is in my view insufficient, in the absence of any evidence to support such an assumption, to justify the failure to apply Article 12(6) of Regulation No 2677/85.

The financial correction imposed by the Commission should therefore be accepted.

Sagarra Bascompte

The EAGGF's findings regarding the Agency's inspection of this undertaking, as set out in the table annexed to the inspection report of 31 May 1994^(*) and in the letter sent by the Commission to the Spanish authorities on 13 June 1995,^(*) noted the following irregularities in particular: the Agency's inspectors were unable to check the recorded stocks; they noted discrepancies between the recorded stocks and the physical stocks of containers; no business papers were submitted to them on their first visit. Following a further examination at the Agency's offices, the Agency concluded that the stocks did tally and that the documents and records were in order, without giving any convincing explanations, in the Commission's view, as to how the irregularities originally noted had vanished. The Commission considers that the aid was paid without proper investigation.

Examination of the documents drawn up at the time of the Agency's inspection confirms each of those points. The Agency's inspector mentioned in the report of 19 January 1993 that he had not been able to check whether the physical goods corresponded with the goods shown in the records since the accounts ledgers were not available.^(*) Discrepancies were noted between the recorded stocks and the physical stocks of containers.^(*) Furthermore, there is no evidence to explain how the Agency managed to make the figures tally once the records had been examined.

The Spanish Government states that the stock records were up to date and that the inspection procedure had taken place normally. It asserts that the procedure started with checks on the records, during which the inspector examined the records submitted to him by the undertaking, followed by a site visit, after which the results of the two parts of the inspection were assessed at the Agency's offices.

The applicant maintains therefore that the records were checked before the inspection. It does not supply any evidence of this however. No written document has actually been included in the file establishing the existence of such a preliminary investigation, describing the procedure adopted or setting out the findings reached by the investigators.

The Spanish Government adds that no significant discrepancy was detected in the checks on the stocks of containers.

It fails, however, to provide any explanation of the figures noted by the inspectors, which indicate a difference of 8 000 units in one case and 1 320 units in the other.^(*)

All of this evidence is sufficient to justify the financial correction imposed by the Commission.

Amador Rodríguez

The EAGGF's findings regarding the Agency's inspection of this undertaking, as set out in the table annexed to the inspection report of 31 May 1994,^(*) noted the following irregularities in particular: the Agency's inspectors certified that the plant's packaging facilities had not undergone any alteration, on the basis of the statements made by its representative, without carrying out any investigation themselves; there were no 25-litre containers; the 1- and 5-litre containers were not inspected; there is no information in the report regarding consignments of olive oil leaving the plant. The letter sent by the Commission to the Spanish authorities on 13 June 1995 states that the aid was paid without proper investigation.^(*)

Examination of the documents drawn up at the time of the Agency's inspection confirms each of those points.

The inspection report of 10 December 1992 contains the words ‘no change since last inspection according to the undertaking’ in the section relating to the description of the packaging facilities and storage areas.^(*)

That document also notes a discrepancy in that there were 21 physical units of 25-litre containers less than the 384 units shown in the records. The report of 26 January 1993 does not mention any containers.^(*)

The inspectors clearly mentioned in the report of 10 December 1992 that it was not possible to count the 1-litre and 5-litre containers.^(*)

The only entry in that document for findings regarding olive oil leaving the plant is a reference to an annex and to the subsidiary records.^(*) No general or detailed information on olive oil leaving the plant appears in that section.

The Spanish Government disputes the complaints made against it.

As regards the accusations relating to the lack of any changes in the plant's packaging facilities, it maintains that on an initial visit to an undertaking details of the facilities are always described in the report on the basis of mere observation. During subsequent visits the inspector examines the existing facilities again and checks whether there have been any changes since the last time. If so, he indicates this in his report. If not, he ascertains from a representative of the plant that no alteration likely to pass unnoticed on a visual examination has taken place.

The explanation given by the Kingdom of Spain would be acceptable if the systematic examination of the facilities which should take place during each inspection were described in the report. The inspector's remarks however make no mention of this point, and reading them thus gives the impression that no check, not even a purely visual one, was made and that the evidence that there had been no alterations either to the premises or to the facilities lay solely in the statement made by the plant which was being inspected.

The applicant goes on to explain that the 21 missing containers were not intended for marketing the olive oil, which is the reason why they were not taken into account. It does not, however, produce any evidence in support of its assertions.

As regards the fact that 1- and 5-litre containers were not inspected, the Kingdom of Spain alleges that they were checked by a reckoning process, which indicated there was no significant discrepancy.

These explanations by no means relieve the plant from its responsibility, since it is established that those containers could not be counted according to the usual method. Nor do they justify the working methods of the inspectors, who merely noted that it was impossible to carry out their checks without giving any reasons or describing the alternative inspection method which was ultimately used.

Lastly, the Spanish Government maintains that there is information available on the olive oil leaving the plant. The applicant does not however produce the documents containing this information.

All the above considerations therefore justify the financial correction imposed by the Commission.

Fernandez y Ruiz de Aguilar

The EAGGF's findings relating to the Agency's inspection of this plant, as set out in the table annexed to the inspection report of 31 May 1994,^(*) noted the following irregularities in particular: there were no records of stocks of olive oil put up in containers or of stocks of containers; the inspectors concluded that there was ‘nothing to report’, although no inspection could be carried out to establish that there were no discrepancies. The letter sent by the Commission to the Spanish authorities on 13 June 1995 states that the aid was paid without proper investigation.^(*)

Contrary to what the Commission claims, it appears from the inspection report of 13 July 1992 that stock records relating to stocks of olive oil put up in containers and stocks of containers did exist and were inspected.^(*)

However, the section of the report relating to checks on whether the recorded stocks corresponded to the physical stocks does not give any entry relating to stocks of olive oil put up in containers or to stocks of containers, which leaves doubt as to whether a check was made to see if they did correspond.^(*)

The Spanish Government maintains that although the inspector did not show in his report at the time of the inspection that the physical stocks corresponded to the recorded stocks, he mentioned it subsequently in the report which he drew up at the Agency's offices. It states that the fact that the inspector mentioned in his report, on completion of the inspection procedure, that there was ‘nothing to report’ shows that everything was in order and not that the necessary checks had not been made.

Suffice it to state, however, that the Kingdom of Spain does not provide any evidence in support of the assertion that the check on whether the stocks corresponded was eventually carried out.

This finding is sufficient to justify the complaint made by the Commission to the Spanish Government that there was no proper investigation of the packaging plant in question.

Uteco Jaén

The EAGGF's findings regarding the Agency's inspection of this plant, as set out in the table annexed to the inspection report of 31 May 1994^(*) and in the letter sent by the Commission to the Spanish authorities on 13 June 1995,^(*) noted the following irregularities in particular: the inspectors approved the equipment, filling plant and storage area without carrying out any checks and purely on the basis of the statement made by the undertaking; it was not possible to check whether stocks of olive oil put up in containers corresponded to the stocks of containers; the aid was thus paid without proper investigation.

Examination of the documents drawn up at the time of the Agency's inspection confirms each of those points. The Agency's inspectors made an entry in the section of the report of 23 July 1992 intended for details of the packaging plant and the storage depot, to the effect that the equipment and premises concerned had not undergone any change since the last inspection, merely on the basis of a statement by the representative of the plant.^(*)

That report does not mention any record of stocks of oil put up in containers or stocks of containers, which made it difficult to check whether the recorded stocks corresponded to the physical stocks.

As regards the complaint that the entry in the report that there had been no change was made on the basis of a statement by the representative of the plant, the Kingdom of Spain refers to the arguments put forward above in respect of Amador Rodríguez.^(*) As regards the lack of data relating to stocks, it states that the recorded stocks were checked at the Agency's offices.

It should be pointed out that no evidence was produced in support of this latter assertion. As for the first complaint, I merely refer to my reasoning with regard to Amador Rodríguez, which applies also in this case.^(*)

The financial correction imposed by the Commission must therefore be approved.

Aragonesa de Aceite de Oliva

The EAGGF's findings regarding the Agency's inspection of this undertaking, as set out in the table annexed to the inspection report of 31 May 1994^(*) and in the letter sent by the Commission to the Spanish authorities on 13 June 1995,^(*) noted the following irregularities in particular: the accounts and stock records were not up to date; there were no details regarding olive oil entering and leaving the plant; no documents relating to the plant's approval were available at the time of the inspection; it was not possible to check whether the recorded stocks corresponded to the physical stocks; the aid was therefore paid without proper investigation.

Examination of the documents drawn up at the time of the Agency's inspection confirms each of those points.

The report of 9 March 1993 notes that the stock accounting was incomplete.^(*) The plant's representative was not able to produce confirmation of the competent authority's approval.^(*) The records were not available, with the result that the inspectors were not able to check whether the recorded stocks corresponded to the physical stocks.^(*) Neither the report nor any other document on the file provides data on olive oil entering and leaving the plant.^(*)

The Spanish Government maintains that discrepancies were detected in the records because Aragonesa de Aceite de Oliva is a newly-approved plant, but that the records do none the less make it possible to follow stock movements. It adds that the report mentions checks on the bulk olive oil which had entered and left the plant, that is to say, the movements listed in the records examined by the Agency. The applicant points out also that the report states that 100% of the supporting documents relating to olive oil entering and leaving the plant were examined. Lastly, it explains that submission of the documents relating to the plant's approval is a purely formal requirement, which does not affect the inspection procedure since the Agency has a copy of the approval issued by the competent authority.

These arguments are unacceptable. Although some of the irregularities noted may be tolerated from time to time by the administration from a purely instructional viewpoint in order to ensure that the plants concerned comply with the legal requirements more closely in the future, I do not consider it acceptable to disregard the legal consequences of such irregularities where, as in the present case, they are so numerous and relate to all of the plant's activities.

One must state therefore that although the plant was granted approval only recently this cannot justify the fact that no precise details are given of the number, nature and dates of movements of olive oil between the plant and outside businesses, which constitutes one of the bases on which aid is assessed. The fact that a complete inspection was made of the business papers, which is confirmed by the Spanish Government on the basis of the figures given in the report, does not adequately compensate for the lack of information on whether the recorded stocks correspond to the physical stocks, where there is no evidence to show that they do.

I therefore consider that the Commission is entitled to make the disputed financial correction.

Martinez Henarejos

The EAGGF's findings regarding the Agency's inspection of this plant, as set out in the table annexed to the inspection report of 31 May 1994^(*) and in the letter sent by the Commission to the Spanish authorities on 13 June 1995,^(*) note that the records in respect of olive oil stored in bulk, of olive oil put up in containers and of containers were not up to date at the time of the Agency's inspection and it was not possible to make an on-thespot check as to whether the recorded stocks corresponded to the physical stocks. Both sets of data, when finally obtained from the plant, showed discrepancies which, although only of relative significance, were particularly numerous. Aid was thus paid without proper investigation.

Examination of the documents from the Agency's inspection confirms each of those points. The report of 6 October 1992 reveals that the records for each of the abovementioned categories of product were not available on the day of the inspection.^(*) Discrepancies between the recorded stocks and physical stocks of these products, noted subsequently, appear in all cases with regard to olive oil stored in bulk and to containers, and in almost half the cases with regard to oil put up in containers.^(*)

The Spanish Government maintains that the fact that the data did not correspond, as was discovered following the inspection carried out at the Agency's offices, should not be regarded as significant. According to the applicant, those discrepancies are due to the fact that the plant puts its oil up in 16 different types of container.

The arguments put forward by the Kingdom of Spain cannot justify the neartotal divergence between the records and the physical stocks at Martínez Henarejos. Were those arguments to be accepted, it would be tantamount to saying there was no point in an undertaking keeping accurate records of its stocks, as required under the rules. The Spanish Government also fails to explain why it regards the number of different types of container as an obstacle to keeping proper records, since the units reckoned for accounting purposes and as physical units should in principle be the same.

It is apparent from this information that the financial correction decided on by the Commission is justified.

Hispanoliva

The EAGGF's findings regarding the Agency's inspection of this plant, as set out in the table annexed to the inspection report of 31 May 1994^(*) and in the letter sent by the Commission to the Spanish authorities on 13 June 1995,^(*) noted the following irregularities in particular: the packaging facilities, the storage area and the structure of the plant were not inspected at first hand; the containers were not inspected either; there was no check made as to whether the physical stocks of containers corresponded to the recorded stocks of containers; there were no details concerning checks on olive oil entering and leaving the plant. Aid was thus paid without proper investigation.

Examination of the documents drawn up at the time of the Agency's inspection confirms each of those points. The Agency's inspectors recorded in the section of the report of 5 August 1992 intended for the description of the features of the packaging facility, the storage depot and the structure of the plant that the undertaking had stated that no changes had taken place since the previous inspection.^(*) The section of the report relating to checks on containers contains a comment by the inspector that, due to the large number and variety of sizes of the containers, no inspection had been made of them.^(*) The table in the report relating to checks on whether the recorded stocks corresponded to the physical stocks of containers was not completed by the inspectors.^(*) Lastly, the sections of the report relating to olive oil entering and leaving the plant had not been completed.^(*)

The Spanish Government refers to the abovementioned method^(*) used by the inspectors to investigate the plant's plant and premises. I do not think that method ensures proper supervision for the reasons already given.^(*)

The applicant states that the inspectors decided not to carry out a precise count of the containers present since the data contained in the stock records corresponded to the amounts of oil put up in containers which were physically present in the plant at the time of the inspection.

This line of argument fails to take into account the fact that Article 12(1) of Regulation No 2677/85 stipulates that Member States must check that the total quantities of oil stored in bulk in containers and the empty containers physically present in the plant correspond to the figures given in the stock records. It cannot for that reason be accepted.

The financial correction imposed by the Commission in this instance cannot therefore be challenged.

Hijos de Joaquín Seguí

The EAGGF's findings regarding the Agency's inspection of this plant, as set out in the table annexed to the inspection report of 31 May 1994^(*) and in the letter sent by the Commission to the Spanish authorities on 13 June 1995,^(*) noted the following irregularities in particular: invoice numbers were not entered in the stock records; errors were discovered in the recording of amounts of olive oil; the labels on the containers did not include any identification number; the recorded stocks did not correspond to the physical stocks. Aid was thus paid without proper investigation.

Examination of the documents from the Agency's inspection confirms each of those points. The Agency inspector's comments recorded in the report of 6 May 1992 indicate that invoice numbers were omitted from the stock records.^(*) According to the inspector, the description of some quantities of oil did not correspond to their actual quality.^(*) The Agency's inspector stated clearly that the labels on the containers of virgin olive oil did not include any identification number.^(*) Lastly, comparison of the recorded stocks and the physical stocks pointed to the existence of discrepancies in all cases.^(*)

The Spanish Government submits that the discrepancies found are not significant since they affect only a total of 142 litres. It adds that the inspectors carried out individual checks, that is to say, they examined the invoices and receipts relating to the commercial transactions and also the entries in the tax records of the business papers submitted.

The figure put forward by the applicant does not take into account all the discrepancies discovered at the time of the inspection, since discrepancies amounting to several hundred units were revealed between the recorded and physical estimates of quantities of olive oil stored in bulk, on the one hand, and those of the stocks of containers, on the other.^(*) Furthermore, the Spanish Government does not specify what conclusions it draws from the fact that the inspectors carried out individual checks, nor does it indicate the extent to which this is likely to reduce its liability in granting aid paid without any proper investigation.

The financial correction imposed by the Commission cannot for those reasons be challenged.

Emiliano Vivas

The EAGGF's findings regarding the Agency's inspection of this plant, as set out in the table annexed to the inspection report of 31 May 1994,^(*) noted the following irregularities in particular: stock was missing, it was not possible to check containers, and there were significant omissions in the accounts. Aid was thus paid without proper investigation.

Examination of the documents drawn up at the time of the Agency's inspection confirms each of those points. Neither the report of 21 December 1992 nor that of 15 July 1993 contains any figures relating to quantities of olive oil stored either in bulk or in containers.^(*) It appears from the first of those reports that it was not possible to check the containers on that occasion since the containers were not properly arranged.^(*) Some invoices relating to olive oil leaving the plant were missing and were replaced by delivery notes, which were the only documents to be checked.^(*)

The Spanish Government claims that the absence of stocks of olive oil was attributable to the plant's low level of operation and cannot be regarded as an anomaly. As regards the containers, it states that the inspector estimated their number by a process of reckoning, which confirmed that the physical stocks corresponded to the recorded stocks. Lastly, the applicant states that there was an invoice for each of the consignments of oil checked leaving the plant, apart from one where there was a delivery note, as the invoice had not yet been issued due to the amount of time required between actual delivery and invoicing.

It should be stated that, although the absence of stocks cannot be regarded as an anomaly, the absence of proper supervision is unacceptable, and in this particular case was due to inadequate inspection of stocks of containers.^(*) Furthermore, the Spanish Government has failed to demonstrate that the check made of the delivery note was due to circumstances relating to the time required for issuing the invoice.

There is accordingly no reason to challenge the financial correction imposed by the Commission.

The foregoing information demonstrates, to my mind, that the plants in question committed a large number of infringements of the rules relating to the common organisation of the market in oils and fats. Those infringements were not adequately investigated in accordance with the measures laid down in Regulation No 729/70. In accordance with Article 8(2) of that regulation, the Community should not have to bear the financial consequences of irregularities or negligence attributable to administrative authorities or other bodies of the Member States.

The requirement that fraudulent intent be demonstrated

Both Article 3(2) of Regulation No 3089/78 and Article 12(6) of Regulation No 2677/85 state that a Member State must order temporary withdrawal of the approval granted to a packaging plant which has made an application for aid relating to a quantity of olive oil greater than that for which the entitlement to aid was recognised.

The wording of those provisions does not contain any ambiguity regarding the obligation on Member States to withdraw approval where an application relates to a quantity greater than the quantity allowed.

Thus Article 3(2) of Regulation No 3089/78 provides that the Member State concerned ‘shall decide to withdraw approval temporarily’, and Article 12(6) of Regulation No 2677/85 provides that ‘the Member State shall immediately withdraw approval’, without making that decision subject to any condition apart from that of establishing that the quantity of olive oil exceeds the quantity allowed.

The Community rules do not therefore require any evidence to be supplied in advance of fraudulent intent on the part of the trader making the application.

Article 5(2) of Regulation No 2677/85, which the Spanish Government quotes in support of its line of reasoning, does not apply to an application for aid relating to a surplus amount. It actually provides for the case of temporary withdrawal of approval due to a change in the nature of the olive oil as a result of blending or other chemical processes. However, there is no question of that type of irregularity in the proceedings involving the two plants referred to above.

As regards the interpretation of Article 12(6) of Regulation No 2677/85 concerning the demonstration of fraudulent intent or serious negligence which the Commission gave at the meeting of the Management Committee for Oils and Fats on 26 February 1993, it must be pointed out that that position is not contradicted by Decision 96/701.

It is apparent from the Commission's statement that it interprets the provision in question as meaning that clerical errors are excluded from the scope of the provision, and that any other irregularity must be deliberate or the result of serious negligence, as the case may be. Now, as I have said, the Spanish authorities stated that the surplus quantities included in the applications were the result of unintentional errors on the part of the packaging plants, but have not managed to demonstrate the existence of such errors or, a fortiori, to establish that they were purely clerical errors.

The requirement that there should be a minimum amount exceeding the quantity on which the application for aid is based

The principle that a minimum amount is required before approval can be withdrawn does not follow from the version of Article 12(6) of Regulation No 2677/85, as amended by Regulation (EEC) No 643/93,^(*) relied upon by the applicant. That version in fact entered into force after the end of the 1992 accounting period.^(*)

Of course, for reasons relating both to the need to impose penalties only where strictly necessary and to compliance with the principle of proportionality, it may be accepted that, even if it enters into force after the facts in the case, a new rule which makes loss of approval subject to a further condition should apply also as regards those facts.

However, the present action was brought in order to challenge the financial correction imposed on a Member State by reason of the manner in which it carried out its responsibilities with regard to the financing of the common agricultural policy. The case therefore concerns whether it carried out proper investigations of certain businesses and not the measures which should have been taken against the plants concerned, particularly in the light of laws adopted after the facts.

Considered in this light, it is necessary to assess, according to the rules applying at the time the Agency's investigations took place and not in the light of subsequent law, whether the Kingdom of Spain exercised proper supervision and whether proper action was taken subsequently by the Spanish administration in respect of the irregularities that were found. Thus, in order to assess whether the Kingdom of Spain complied with the rules enforceable in respect of those irregularities and, if appropriate, to establish that they did not give rise to the measures prescribed at that time under the relevant law, it is necessary to view the situation as it was at the date of the inspections.

However, although Article 12(6) of Regulation No 2677/85 allows a Member State to adapt the measure to suit the facts of which the plant in question is accused by stipulating that approval is to be withdrawn for between one and five years depending on the seriousness of the infringement, the Spanish authorities simply reduced the amount of aid in proportion to the excess amount. There is reason to believe that such a measure is likely to reduce the deterrent effect of the measure prescribed by the Community legislature in Article 12.

It is clear from all those considerations that the Commission may legitimately base the financial corrections imposed on the Kingdom of Spain on the fact that no temporary withdrawal of approval was ordered in respect of Olivar de Segura and Agroalimentaria Minerva although those plants had made applications for aid in respect of a quantity greater than that to which they were entitled. The fact that that excess was under 20% and that no fraudulent intent on the part of the plants concerned was formally proved is irrelevant in this regard.