JUDGMENT OF THE COURT (First Chamber)

15 October 2014 ( *1 )

‛Appeals — EAGGF — Setting-aside of land — Remote-sensing controls — Green cover of parcels set aside — Financial corrections’

In Case C‑417/12 P,

APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 13 September 2012,

Kingdom of Denmark , represented by V. Pasternak Jørgensen, acting as Agent, assisted by J. Pinborg and P. Biering, advokaterne,

applicant,

supported by:

French Republic , represented by D. Colas and C. Candat, acting as Agents,

Kingdom of the Netherlands , represented by M. de Ree and M. Bulterman, acting as Agents,

Republic of Finland , represented by J. Leppo, acting as Agent,

Kingdom of Sweden , represented by U. Persson, acting as Agent,

interveners in the appeal,

the other party to the proceedings being:

European Commission , represented by F. Jimeno Fernández, acting as Agent, assisted by T. Ryhl, advokat

defendant at first instance,

THE COURT (First Chamber),

composed of A. Tizzano, President of the Chamber, S. Rodin, A. Borg Barthet, E. Levits (Rapporteur), and M. Berger, Judges,

Advocate General: N. Jääskinen,

Registrar: C. Strömholm, Administrator,

having regard to the written procedure and further to the hearing on 12 December 2013,

after hearing the Opinion of the Advocate General at the sitting on 30 April 2014,

gives the following

Judgment

1By its appeal, the Kingdom of Denmark seeks to have set aside the judgment of the General Court of the European Union in Denmark v Commission (T‑212/09, EU:T:2012:335 ) (‘the judgment under appeal’), by which it dismissed its action for partial annulment of Commission Decision 2009/253/EC 19 March 2009 excluding from Community financing certain expenditure incurred by the Member States under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) and under the European Agricultural Guarantee Fund (EAGF) ( OJ 2009 L 75, p. 15 ) (‘the contested decision’) in so far as it excludes certain expenditure incurred by the Kingdom of Denmark in respect of the setting-aside of land.

Legal context

Regulation (EC) No 1258/1999

2Council Regulation (EC) No 1258/1999 of 17 May 1999 on the financing of the common agricultural policy ( OJ 1999 L 160, p. 103 ), applicable at the date of the facts in the main proceedings, provided as follows in the first subparagraph of Article 7(4):

‘The Commission shall decide on the expenditure to be excluded from the Community financing referred to in Articles 2 and 3 where it finds that expenditure has not been effected in compliance with Community rules.’

Regulation (EC) No 2316/1999

3Commission Regulation (EC) No 2316/1999 of 22 October 1999 laying down detailed rules for the application of Council Regulation (EC) No 1251/1999 establishing a support system for producers of certain arable crops ( OJ 1999 L 280, p. 43 ), applicable at the date of the facts in the main proceedings, provided as follows in Article 19:

‘1. Areas set aside in accordance with this Chapter must cover a single area at least 0.3 ha in size and at least 20 m wide.

The Member States may accept:

(a)

smaller areas involving whole parcels with permanent boundaries such as walls, hedges or watercourses;

...

4. The Member States shall apply suitable measures compatible with the specific situation of areas set aside in order to ensure they are maintained and the environment is protected. Such measures may also involve green cover; in that case, the measures must ensure that the green cover cannot be used for seed production and that it cannot under any circumstances be used for agricultural purposes before 31 August or, before 15 January thereafter, to produce crops for marketing.

...’

Regulation (EC) No 2419/2001

4Article 15 of Commission Regulation (EC) No 2419/2001 of 11 December 2001 laying down detailed rules for applying the integrated administration and control system for certain Community aid schemes established by Council Regulation (EEC) No 3508/92 ( OJ 2001 L 327, p. 11 ) provided:

‘Administrative and on-the-spot checks shall be made in such a way as to ensure effective verification of compliance with the terms under which aids are granted.’

5Article 22(1) of that regulation, concerning the determination of agricultural parcel areas, provided:

‘Agricultural parcel areas shall be determined by any appropriate means defined by the competent authority which ensure measurement of a precision at least equivalent to that required for official measurements under the national rules. The competent authority shall set a tolerance margin taking account of the measuring method used, the accuracy of the official documents available, local factors such as slope and shape of parcel and the provisions of paragraph 2.’

6Article 23 of that regulation laid down the detailed rules for remote-sensing control.

Regulation (EC) No 1290/2005

7Article 31(1) to (3) of Council Regulation (EC) No 1290/2005 of 21 June 2005 on the financing of the common agricultural policy ( OJ 2005 L 209, p. 1 ), under the title ‘Conformity clearance’, provides:

‘1. If the Commission finds that expenditure as indicated in Article 3(1) and Article 4 has been incurred in a way that has infringed Community rules, it shall decide what amounts are to be excluded from Community financing in accordance with the procedure referred to in Article 41(3).

2. The Commission shall assess the amounts to be excluded on the basis of the gravity of the non-conformity recorded. It shall take due account of the nature and gravity of the infringement and of the financial damage caused to the Community.

3. Before any decision to refuse financing is taken, the findings from the Commission’s inspection and the Member State’s replies shall be notified in writing, following which the two parties shall attempt to reach agreement on the action to be taken.

If agreement is not reached, the Member State may request opening of a procedure aimed at reconciling each party’s position within four months. A report of the outcome of the procedure shall be given to the Commission, which shall examine it before deciding on any refusal of financing.’

The Guidelines

8Commission Document No VI/5330/97 of 23 December 1997, entitled ‘Guidelines regarding the calculation of the financial consequences on preparation of the decision for clearance of the EAGGF Guarantee accounts’ (‘the Guidelines’) describes the method for applying flat-rate financial corrections. It states inter alia as follows:

‘Flat-rate corrections should be considered when the Commission finds a failure adequately to effect any control which is explicitly required by a regulation or implicitly required in order to respect an explicit rule (restriction of aid to a product of a certain quality, for example).

When controls are effected, but imperfectly, the seriousness of the deficiency must be evaluated. Almost every control procedure is perfectible, and one responsibility of the Commission auditors is to recommend improvements to these procedures, and to recommend additional controls which, while not foreseen by the legislator, give additional assurance as to the regularity of expenditure in the particular circumstances of the Member State concerned. The fact that the way in which a control procedure operates is perfectible is, however, not in itself sufficient grounds for a financial correction. There must be a serious failing in the application of express Community rules and such a failing must expose the [European Agricultural Guidance and Guarantee Fund (EAGGF)] to a genuine risk of loss or irregularity.’

9The Guidelines lay down the conditions which must be met for the application of a flat-rate financial correction equal to 2%, 5%, 10% or 25% of declared expenditure.

Facts giving rise to the dispute and the contested decision

10After conducting an on-site investigation in October and December 2004 concerning the conditions of application by the Danish authorities, during the marketing years 2002 to 2004, of the integrated administration and control system of arable crops, the European Commission informed the Kingdom of Denmark that the Danish authorities had not complied with Council Regulation (EC) No 1251/1999 of 17 May 1999 establishing a support system for producers of certain arable crops ( OJ 1999 L 160, p. 1 ) and Council Regulation (EEC) No 3508/92 of 27 November 1992 establishing an integrated administration and control system for certain Community aid schemes ( OJ 1992 L 355, p. 1 ).

11Following the communication of its conclusions to the Kingdom of Denmark by letter of 27 June 2006 in accordance with Article 8(1) of Commission Regulation (EC) No 1663/95 of 7 July 1995 laying down detailed rules for the application of Council Regulation (EEC) No 729/70 regarding the procedure for the clearance of the accounts of the EAGGF Guarantee Section ( OJ 1995 L 158, p. 6 ), as amended by Commission Regulation (EC) No 2245/1999 of 22 October 1999 ( OJ 1999 L 273, p. 5 ), and following an exchange of correspondence, the Commission stated by letter of 21 February 2008 addressed to that Member State that financial corrections of 5% and 10% would be applied to certain expenditure effected during the marketing years 2002 to 2004. Those corrections amounted to 750 million Danish crowns (DKK).

12The Kingdom of Denmark considered that correction to be unjustified and brought the matter before the Conciliation Body.

13In its report of 9 September 2008, the Conciliation Body concluded that the two opposing parties’ points of view were not reconcilable and invited the Commission to reconsider the proposal to apply the 5% and 10% to all relevant expenditure.

14As stated by the Commission in its summary report from the Directorate-General (DG) for Agriculture and Rural Development of 6 January 2009 relating to the inspections carried out by the Commission as part of the procedure for the clearance of the accounts of the EAGGF Guarantee Section pursuant to Article 7(4) of Regulation No 1258/1999 and Article 31 of Regulation No 1290/2005 (‘the summary report’), by the contested decision it applied flat-rate financial corrections amounting to 2%, 5% or 10% of the expenditure effected by the Kingdom of Denmark in various cases in respect of identified weaknesses in remote-sensing control of the parcels and control of compliance with regulatory requirements relating to the areas set aside.

15First of all, the Commission applied a flat-rate correction of 2% to the aid paid during the marketing years 2003 and 2004 in respect of the financial loss caused to the EAGGF, on the ground that the Kingdom of Denmark had not taken corrective measures in the course of the remote-sensing control when the parcels had been measured using HR (high resolution) images.

16Next, the Commission, having found a number of irregularities concerning the areas set aside which were capable of justifying the exclusion of certain expenditure under the EAGGF from financing, concluded that the key controls of those areas had not been carried out or had been carried out so badly as not to be effective at all. Therefore, it applied a flat-rate correction to the aid paid out in the marketing years 2002 to 2004 fixed, depending on the situations in question, at 5% or 10% in order to compensate for the financial loss caused to the EAGGF.

The judgment under appeal

17In the first place, regarding the rules on remote-sensing controls, the General Court stated in paragraphs 48 to 50 of the judgment under appeal that the Kingdom of Denmark ought to have employed an alternative method to ensure that the parcels concerned were measured accurately using HR images, a fortiori because the Danish authorities had been informed in December 2002 that the Commission advised against using that method.

18Moreover, in paragraph 52 of the judgment under appeal, the General Court recognised that under Article 22(1) of Regulation No 2419/2001 the Commission was free to use any appropriate method for measuring the area of the parcels controlled.

19In the second place, in relation to the rules on controls of the areas set aside, in paragraphs 69 to 85 of the judgment under appeal the General Court interpreted Article 19(4) of Regulation No 2316/1999 in a manner contrary to the Commission’s position, holding that the retention of green cover on a parcel set aside is an appropriate measure for the maintenance of that parcel and the protection of the environment. The General Court considered, however, in paragraph 106 of the judgment under appeal, that when the Commission bases itself on a number of separate, autonomous pieces of information in order to substantiate a serious and reasonable doubt, only one of those need be confirmed in order to support a conclusion that the implementation of the controls has been inadequate. It accordingly examined the other evidence adduced by the Commission.

20After recalling the Member States’ obligation to maintain parcels set aside, the General Court held, in paragraphs 93 and 94 of the judgment under appeal, that under that provision green cover must be retained on those parcels in order to preserve the agronomic conditions of those parcels.

21Moreover, as to the concept of ‘permanent boundaries’ within the meaning of point (a) of the second subparagraph of Article 19(1) of Regulation No 2316/1999, the General Court held, in paragraph 101 of the judgment under appeal that the parcels referred to in that provision are eligible for payments by area only if they are physically demarcated. It accordingly rejected the Kingdom of Denmark’s interpretation that cadastral boundaries met the provision’s requirements.

22Regarding the alleged unlawfulness of the conditions in which the Commission found certain irregularities affecting parcels set aside, the General Court considered in paragraph 122 of the judgment under appeal that the Kingdom of Denmark could not give an aid applicant the benefit of the doubt when the on-site checks carried out after the end of the set-aside period showed the presence of haystacks or construction waste on the parcels under consideration.

23In paragraph 123 of the judgment under appeal the General Court held that the Commission had been correct in finding that there was serious and reasonable doubts as to the adequacy of the controls carried out by the Kingdom of Denmark in respect of the parcels in which certain irregularities had been found but that Member State had not put forward any arguments to dispel those doubts.

24In the third place, the General Court rejected all of the Kingdom of Denmark’s arguments regarding the issue of infringement of essential requirements.

25In the fourth place, regarding the rules on financial corrections, the General Court held in paragraph 168 of the judgment under appeal that the Commission was correct in concluding that the risk of loss for the EAGGF was significant and justified a flat-rate correction of 5% or 10%.

26In consequence, the General Court dismissed the action for annulment brought by the Kingdom of Denmark.

Forms of order sought

27By its appeal, the Kingdom of Denmark asks the Court to set aside the judgment under appeal and to uphold its claim at first instance or, in the alternative, refer the case back to the General Court.

28The European Commission contends that the appeal should be dismissed and the Kingdom of Denmark ordered to pay the costs.

Appeal

29The Kingdom of Denmark puts forward four grounds in support of its appeal: (i) misinterpretation of Article 15 of Regulation No 2419/2201; (ii) misinterpretation of Article 19(4) of Regulation No 2316/1999; (iii) errors of law in applying the rules on burden of proof; and (iv) errors of law in applying the provisions on flat-rate corrections.

30The Commission considers that the grounds put forward in support of the appeal must be rejected as inadmissible or, in any event, unfounded.

31It is therefore appropriate to begin by considering the general objection of inadmissibility raised by the Commission.

Consideration of the general objection of inadmissibility

32Whilst addressing each of the grounds of appeal put forward by the Kingdom of Denmark, the Commission submits, by way of principal argument, that the appeal is inadmissible in its entirety on the ground that it seeks a fresh examination of the facts of the case and, in essence, merely reiterates the arguments put forward at first instance.

33In that regard, it should be recalled at the outset that, under Article 256(1) TFEU and the first paragraph of Article 58 of the Statute of the Court of Justice of the European Union, an appeal lies on points of law only.

34Moreover, it is settled case-law that, where the appellant challenges the interpretation or application of EU law by the General Court, the points of law examined at first instance may be discussed again in the course of an appeal. Indeed, if an appellant could not thus base his appeal on pleas in law and arguments already relied on before the General Court, an appeal would be deprived of part of its purpose (judgment in France v Commission , C‑601/11 P, EU:C:2013:465 , paragraph 71).

35As regards the present appeal, it is sufficient to note that, as is apparent in particular from paragraph 29 of the present judgment, and contrary to what the Commission argues, the Kingdom of Denmark does not seek to challenge, in a general way, the General Court’s factual assessments by reiterating the pleas and arguments put forward before that court. The appellant raises questions of law which may be the subject-matter of an appeal.

36At a result, the general objection of inadmissibility raised by the Commission must be dismissed.

37That being said, to the extent that the Commission puts forward more detailed objections of inadmissibility in relation to a number of specific parts of the appeal, those objections fall to be addressed in the context of the grounds of appeal concerned.

Consideration of the first plea

Arguments of the parties

38The Kingdom of Denmark’s first ground of appeal alleges error on the part of the General Court in the interpretation of Article 15 of Regulation No 2419/2001, read in conjunction with Article 23 thereof, since measures obtained using a global positioning system (GPS) device could not be used to assess measurements taken using remote sensing, as those two methods lead to different results.

39The General Court also failed to give a faithful rendition of the facts and to adopt a position on detailed documents proving that the Danish authorities carried out corrective additional controls.

40The French Republic submits that it was for the General Court to verify that measurements obtained using remote sensing offer a degree of accuracy at least equivalent to that required for the official measurements provided for under national legislation. In any event, the national measurements must be assessed with a certain margin of tolerance.

41The Commission contends that, in paragraph 120 of the judgment under appeal, the General Court found weaknesses in the Danish control system and that the ground of appeal put forward in this regard merely challenges that finding of fact.

Findings of the Court

42As rightly observed by the General Court in paragraphs 37 to 41 of the judgment under appeal, under Articles 15 and 22(1) of Regulation No 2419/2001, it is for the Member States to adopt the measures they deem capable of guaranteeing the effectiveness of the controls and, therefore, the accuracy of the measurements taken using remote sensing.

43It follows from those provisions that whilst the Member States are free to choose the means for measuring the area of agricultural parcels, those means must nevertheless satisfy a requirement of accuracy.

44In that context, the General Court cannot be criticised for having held, in its examination of the Danish authorities’ measurements of parcels eligible for the setting-aside scheme, that the Commission could rely on a different method than that used by the Danish authorities.

45Firstly, in its check of the Member State’s compliance with the requirement of accuracy, the Commission cannot be required to use solely the method used by the Member State, especially if it considers that a different method offers greater guarantees of accuracy.

46Secondly, to require the Commission in that context to use the same measurement method as that used by the authorities of the Member State concerned is liable to lead to a weakening of the two-tier control system put in place by Regulation No 2419/2001.

47Consequently, it is only if the Commission is free to choose the method for controlling the measurements taken by the national authorities that it deems most appropriate that it is liable to conduct an effective examination of the reliability of national control systems.

48As to the other grounds of appeal, it must be remembered that the General Court’s assessment of the facts by is not per se a question of law which may be reviewed by the Court of Justice on appeal, except in cases where the evidence has been distorted.

49In challenging the General Court’s assessments of fact as set out in paragraphs 50 and 120 of the judgment under appeal, the Kingdom of Denmark is asking the Court to conduct a fresh examination of the facts, without highlighting any information which establishes that there has been such a distortion.

50Consequently, the first ground of appeal must be rejected as in part inadmissible and in part unfounded.

Consideration of the second ground of appeal

Arguments of the parties

51In support of the second ground of appeal, alleging error by the General Court in interpreting Article 19(4) of Regulation No 2316/1999, the Kingdom of Denmark states that there is no obligation to cut green cover on a parcel set aside, that the maintenance obligation laid down in that provision does not concern green cover and that the General Court failed to explain what it understood to be ‘preservation of the agronomic conditions’ of the areas set aside.

52The Kingdom of Denmark adds that the minimal nature of the irregularities referred to by the Commission in the contested decision cannot serve as a basis for the financial corrections applied.

53Moreover, the General Court did not rule on other irregularities found by the Commission which served as a basis for the contested decision. The insufficient statement of reasons has prevented the applicant from making a correct appraisal of the lawfulness of the contested decision.

54Nor did the General Court rule on the pleas and evidence adduced by the Kingdom of Denmark which showed that the Danish control system was reliable.

56The Republic of Finland submits that the General Court’s interpretation of Article 19(4) of Regulation No 2316/1999 cannot be inferred from its wording.

57The Commission observes that the General Court found irregularities ? the existence of which was not challenged by the Kingdom of Denmark ? as regards the conditions of eligibility under the aid scheme for certain parcels. As the weaknesses in the Danish control system arise from an incorrect interpretation of the EU rules by the Kingdom of Denmark, the General Court did not err in law.

58As to the scope of the irregularities, the Commission submits that the on-the-spot controls showed that those irregularities were not minor or insignificant.

Findings of the Court

59By its first complaint, the Kingdom of Denmark criticises the General Court for having interpreted the first sentence of Article 19(4) of Regulation No 2316/1999 as laying down an implicit obligation to cut green cover.

60That criticism is based on a misreading of the judgment under appeal, however.

61First of all, the General Court observed in paragraph 88 of the judgment under appeal that although the Member States may opt to retain green cover on the areas set aside, the wording of Article 19(4) of Regulation No 2316/1999 requires them to apply appropriate measures to ensure maintenance of those areas and, where they opt for green cover, to maintain them.

62Next, it added correctly in paragraph 93 of its judgment that appropriate maintenance of green cover retained on the areas set aside was aimed at preserving their agronomic conditions.

63In that regard the General Court observed in paragraph 92 of its judgment that the Kingdom of Denmark itself had contended that the decisive criterion was whether the areas set aside were still farm land during the fallow period.

64Lastly the General Court held in paragraph 94 of the judgment under appeal that the retention of green cover on the areas set aside was not an exception in relation to the appropriate measures applied by the Member States under Article 19(4) of Regulation No 2316/1999.

65Thus, contrary to the Kingdom of Denmark’s assertion, the General Court, recalling the need to maintain areas set aside, as stated in the first sentence of Article 19(4) of Regulation No 2316/1999, did not refer to an implicit obligation to cut green cover.

66However, the presence of green cover as an appropriate measure for ensuring the maintenance of an area set aside does not relieve the Member State concerned of its obligation to make sure that the cover itself is maintained. The attainment of the objective of maintaining the area set aside would be undermined if the green cover itself was not maintained.

67By its second complaint, the Kingdom of Denmark criticises the General Court for not having annulled the contested decision and for having held that, despite the Commission’s error of law in failing to categorise the retention of the green cover as an appropriate measure, the irregularities other than that retention found by the Commission were sufficient to justify the financial corrections provided for in that decision.

68The irregularities noted by the General Court are not of such importance as to justify the corrections applied.

69On the one hand, it should be borne in mind that, according to the Court’s settled case-law, the Commission must produce evidence of its serious and reasonable doubt regarding the effectiveness of the controls carried out by the national authorities to justify a financial correction (see, to that effect, judgment in Greece v Commission , C‑300/02, EU:C:2005:103 , paragraph 34).

70Therefore, since the Commission did adduce such evidence in respect of the Kingdom of Denmark other than that which was not accepted by the General Court, the General Court did not err in law in upholding the contested decision, as that evidence is not contested.

71In paragraph 112 of the judgment under appeal the General Court observed that the Kingdom of Denmark had not contested the Commission’s findings of fact characterising the irregularities making up that other evidence and had merely contested the period during which those irregularities were found.

72On the other hand, it should be noted that, in criticising the General Court for having attached too much importance to the irregularities which were held to substantiate the Commission’s reasonable and serious doubts, the Kingdom of Denmark is asking the Court to conduct a fresh examination of the facts assessed previously by the General Court. As observed in paragraph 48 above, such a request is inadmissible at the appeal stage.

75Accordingly, the second ground of appeal must be rejected as in part inadmissible and in part unfounded.

Consideration of the third ground of appeal

Arguments of the parties

77The French Republic, the Kingdom of the Netherlands and the Kingdom of Sweden submit in that regard that it was for the Kingdom of Denmark not to prove that no irregularities had occurred on any of the parcels set aside, but rather to make out proof that the Commission’s findings were not representative of the quality of the national controls.

78The Commission observes that, by virtue of the Court’s case-law, it has a mitigated burden of proof. Thus, inter alia, it does not have to demonstrate a serious deficiency in the compliance with EU rules.

Findings of the Court

79It should be noted, as a preliminary point, that in the area of clearance of EAGGF accounts, the Member States play a key role in that they must make it possible to guarantee that the EAGGF finances only action taken in accordance with EU law provisions governing the common organisation of the agricultural markets.

84The General Court noted in paragraph 107 of the judgment under appeal that, as evidenced by its summary report, the Commission had found a number of irregularities in the conditions in which the controls of the parcels set aside had been carried out such as to substantiate its serious and reasonable doubt concerning the national control system.

85In finding, in order to reject the Kingdom of Denmark’s arguments, that the Kingdom of Denmark had merely adduced evidence about specific findings made by the Commission during the inspection which formed the basis of its summary report, using the selected sample of parcels without producing evidence about all of the parcels set aside, the General Court did not err in law.

86Given the key role played by the Member States in the clearance of EAGGF accounts and the practical impossibility for the Commission to control all of the parcels set aside in each Member State, the control system put in place as part of that clearance allows the Commission to base its assessment on evidence of the serious and reasonable doubt it has about the reliability of controls done by national authorities using on-site sampling inspections.

87Moreover, in the present case the fact that certain irregularities, such as the presence of haystacks and construction waste on areas set aside, were found after the end of the set-aside period does not cast doubt on the probative value of those irregularities, as the possibility could not be ruled out that those irregularities may have been present during the period when those areas were set aside. In any event, contesting the time when certain irregularities were documented does not suffice as proof of the reliability of the Danish control system.

88The General Court was therefore correct and did not distort the evidence adduced when it held that those irregularities gave the Commission grounds for reasonable and serious doubt as to the reliability of the system for controlling parcels set aside as put in place by the Danish authorities.

89The Kingdom of Denmark accordingly had the task of adducing evidence aimed at dispelling that doubt and which showed that there were in fact no irregularities or that the irregularities found were merely isolated cases which did not cast doubt on the reliability of that system as a whole.

90However, first of all, the General Court held in paragraphs 119 and 120 of the judgment under appeal that the Kingdom of Denmark had not implemented corrective actions where only HR images were used, such as enhanced on-site controls before the end of the set-aside period. In that vein the General Court noted in paragraph 164 of the judgment under appeal that the Kingdom of Denmark itself recognised the lack of precision of the remote-sensing control it had carried out.

91Secondly, the General Court held in paragraphs 121 and 122 of the judgment under appeal that the method used by the Danish authorities consisting in giving the aid applicant the benefit of the doubt by considering that the irregularities found at the time of the on-site controls carried out by them after the end of the set-aside period did not relate to that period, did not comply with the rules governing controls and ensuring system reliability.

92In those circumstances, the General Court did not err in law in holding that the Commission could invoke its reasonable and serious doubts as to the reliability of the Danish control system in the light of the evidence adduced by it and the Kingdom of Denmark’s shortcomings in managing to substantiate its controls and figures by producing sufficiently detailed and complete evidence.

93Consequently, the third ground of appeal must be rejected as unfounded.

Consideration of the fourth ground of appeal

Arguments of the parties

94In the fourth ground of appeal relating to the conditions of application of the flat-rate financial corrections, the Kingdom of Denmark submits, firstly, that EU law does not provide explicitly for an obligation to cut parcels set aside. Secondly, the anomalies specified in the contested decision are quite minimal in nature and do not expose the EAGGF to an actual risk of loss.

95The Kingdom of Denmark adds, in respect of the amount of the flat-rate financial corrections, that the General Court gave an inaccurate description of its argument and stated, incorrectly, the corrections fixed in the contested decision on the basis of irregularities, which were minimal.

96The French Republic and the Kingdom of Sweden submit that the General Court ought to have held that the flat-rate correction applied to the irregularities in the maintenance obligation for the parcels set aside was not justified. The General Court should have also ruled on the other irregularities referred to in the contested decision. In any event, in the Republic of Finland’s submission, the financial corrections applied are not proportionate to the irregularities found.

97The Commission contends that the General Court was correct in holding that the Kingdom of Denmark had failed in its obligation to protect the European Union’s financial interests and that the flat-rate financial corrections were justified.

Findings of the Court

98First of all, the General Court was correct in holding that the Commission could legitimately have serious and reasonable doubts as to the reliability of the Danish control system, given the irregularities it had found and the Kingdom of Denmark’s inability to dispel those doubts.

99As alluded to in paragraph 79 of this judgment, it is for the Member States to guarantee that the EAGGF finances only action taken in accordance with EU law provisions governing the common organisation of the agricultural markets. In that vein, the Member States are in charge of the on-site key controls.

100In the present case, the irregularities referred to in paragraph 87 of this judgment led the Commission to consider that the conditions relating to the setting-aside of parcels were still not complied with and that the controls carried out by the Danish authorities were deficient.

101Secondly, as evidenced by paragraph 82 of this judgment, it is not for the Commission to carry out a control of all of the parcels set aside.

102The Commission may accordingly base itself on information gathered following on-site sampling inspections.

103However, the Kingdom of Denmark cannot infer from the information obtained by that method the scale of the loss suffered by the EAGGF so as to call into question the flat-rate corrections fixed by the contested decision.

104To begin with, the irregularities found by the Commission, though minimal, could give rise to serious and reasonable doubts on its part as to the reliability of the entire Danish control system and, under the Guidelines, provide justification for the flat-rate corrections fixed in the contested decision.

106Therefore, since the Kingdom of Denmark has failed to make out proof that the irregularities found by the Commission concerned only isolated cases which did not call into question the reliability of the Danish control system as a whole, it cannot argue that the flat-rate corrections applied are disproportionate in relation to the irregularities found.

107Consequently, the fourth plea in law must be rejected as unfounded.

108It follows from all the above considerations that the appeal must be rejected in its entirety as in part inadmissible and in part unfounded.

Costs

109Under Article 138(1) of the Rules of Procedure of the Court of Justice, which applies to appeal proceedings by virtue of Article 184(1) thereof, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Kingdom of Denmark has been unsuccessful, the latter must be ordered to pay the costs. In accordance with Article 140(1) of those Rules, under which Member States and institutions which have intervened in the proceedings are to bear their own costs, the French Republic, the Kingdom of the Netherlands, the Republic of Finland and the Kingdom of Sweden shall bear their own costs.

On those grounds, the Court (First Chamber) hereby:

1.Dismisses the appeal;

2.Orders the Kingdom of Denmark to pay the costs;

3.Orders the French Republic, the Kingdom of the Netherlands, the Republic of Finland and the Kingdom of Sweden to bear their own costs.

[Signatures]

( *1 ) Language of the case: Danish.