(Regulation No 729/70 of the Council, as amended by Regulations No 3183/87 and No 2048/88)

1. The obligation on the Commission, in the management of the EAGGF, to commit funds only for expenditure effected in accordance with Community rules exists not only at the time of the annual clearance of the national accounts but also when, during the year, it makes the monthly payments provided for by Regulation No 729/70, as amended by Regulations No 3183/87 and No 2048/88. It follows that the Commission has power, while awaiting the final decision on the clearance of the annual accounts, to reduce the payment of amounts due under monthly advances according to the state of the account of each Member State with the EAGGF when it establishes breaches of Community law by the competent national body either at the level of collection of payments earmarked for the EAGGF or at the level of expenditure for the financing of which the EAGGF is responsible.

2 Articles 1(2), 2 and 3 of Regulation (EEC) No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (Official Journal, English Special Edition 1970 (I), p. 218) provide that the EAGGF Guarantee Section is to finance refunds on exports to third countries and intervention intended to stabilize the agricultural markets. Pursuant to the third subparagraph of Article 4(2), as amended by Council Regulation (EEC) No 3183/87 of 19 October 1987 introducing special rules for the financing of the common agricultural policy (Official Journal 1987 L 304, p. 1), the financial resources earmarked to cover the expenditure referred to in Article 1(2) are to be mobilized by the Member States in accordance with the needs of their disbursing authorities.

3 Article 5(2)(a) of Regulation No 729/70 requires the Commission, after consulting the Fund Committee, to decide at the beginning of the year on an advance payment and, during the year, on additional payments. Pursuant to the final subparagraph of Article 5(2)(a), as added by Regulation No 3183/87 and amended by Council Regulation (EEC) No 2048/88 of 24 June 1988 amending Regulation No 729/70 (Official Journal 1988 L 185, p. 1), the Commission, from January 1988, is to decide solely on monthly advances against booking of expenditure effected from the financial resources referred to in the third subparagraph of Article 4(2) of Regulation No 729/70.

9 In support of its application, the Federal Republic of Germany claims first of all that the Commission is not entitled to reduce the advances applied for by a Member State on the basis of expenditure effected during a reference period. It takes the view that the system established by Regulations No 3183/87, No 2048/88 and No 2776/88 did not change the legal nature of advances into a system of reimbursement and that the Commission, pursuant to Article 4 of Regulation No 2776/88, has power to defer payment of advances only if the notifications are late in reaching it or contain discrepancies which necessitate supplementary verification. The Federal Republic of Germany goes on to claim that to authorize the Commission to reduce advances in the event of a breach of Community law would be tantamount to anticipating the procedure of the clearance of accounts and would ignore the Member States' right to a fair hearing. Finally, the Federal Republic of Germany complains that the Commission did not adequately state the reasons on which the contested decision was based.

10 The Commission replies, essentially, that Regulations No 3183/87 and No 2048/88 changed the system of advances into a system of monthly payments based on expenditure actually effected; Articles 1, 2 and 3 of Regulation No 729/70 reflect a general principle according to which the Commission is entitled to defray only expenditure effected in accordance with Community law. The Commission disputes the pleas in law based on breach of the right to a fair hearing and the lack of sufficient reasoning for the contested decision.

15 That rule is of general application and applies not only at the time of the annual clearance of the accounts of national authorities and bodies but also to the additional payments during the year which, since the change to the system of advances introduced by Regulations No 3183/87 and No 2048/88, have been made on the basis of the booking of expenditure effected during a certain prior period.

(Regulation No 729/70 of the Council, as amended by Regulations No 3183/87 and No 2048/88)

1. The obligation on the Commission, in the management of the EAGGF, to commit funds only for expenditure effected in accordance with Community rules exists not only at the time of the annual clearance of the national accounts but also when, during the year, it makes the monthly payments provided for by Regulation No 729/70, as amended by Regulations No 3183/87 and No 2048/88. It follows that the Commission has power, while awaiting the final decision on the clearance of the annual accounts, to reduce the payment of amounts due under monthly advances according to the state of the account of each Member State with the EAGGF when it establishes breaches of Community law by the competent national body either at the level of collection of payments earmarked for the EAGGF or at the level of expenditure for the financing of which the EAGGF is responsible.

2 Articles 1(2), 2 and 3 of Regulation (EEC) No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (Official Journal, English Special Edition 1970 (I), p. 218) provide that the EAGGF Guarantee Section is to finance refunds on exports to third countries and intervention intended to stabilize the agricultural markets. Pursuant to the third subparagraph of Article 4(2), as amended by Council Regulation (EEC) No 3183/87 of 19 October 1987 introducing special rules for the financing of the common agricultural policy (Official Journal 1987 L 304, p. 1), the financial resources earmarked to cover the expenditure referred to in Article 1(2) are to be mobilized by the Member States in accordance with the needs of their disbursing authorities.

3 Article 5(2)(a) of Regulation No 729/70 requires the Commission, after consulting the Fund Committee, to decide at the beginning of the year on an advance payment and, during the year, on additional payments. Pursuant to the final subparagraph of Article 5(2)(a), as added by Regulation No 3183/87 and amended by Council Regulation (EEC) No 2048/88 of 24 June 1988 amending Regulation (EEC) No 729/70 (Official Journal 1988 L 185, p. 1), the Commission, from January 1988, is to decide solely on monthly advances against booking of expenditure effected from the financial resources referred to in the third subparagraph of Article 4(2) of Regulation No 729/70.

9 In support of its application, the Italian Republic claims first of all that the Commission is not entitled to reduce the advances applied for by a Member State on the basis of expenditure effected during a reference period. It takes the view that the system established by Regulations No 3183/87, No 2048/88 and No 2776/88 did not change the legal nature of advances into a system of reimbursement and that the Commission, pursuant to Article 4 of Regulation No 2776/88, has power to defer payment of advances only if the notifications are late in reaching it or contain discrepancies which necessitate supplementary verification. The Italian Republic goes on to claim that to authorize the Commission to reduce advances in the event of a breach of Community law would be tantamount to anticipating the procedure of the clearance of accounts and would ignore the Member States' right to a fair hearing.

10 The Commission replies, essentially, that Regulations No 3183/87 and No 2048/88 changed the system of advances into a system of monthly payments based on expenditure actually effected; Articles 1, 2 and 3 of Regulation No 729/70 reflect a general principle according to which the Commission is entitled to defray only expenditure effected in accordance with Community law. The Commission disputes the plea in law based on breach of the right to a fair hearing.

15 That rule is of general application and applies not only at the time of the annual clearance of the accounts of national authorities and bodies but also to the additional payments during the year which, since the change to the system of advances introduced by Regulations No 3183/87 and No 2048/88, have been made on the basis of the booking of expenditure effected during a certain prior period.