French Republic v European Commission (T-475/21)

Contents

Judgment of the General Court (Ninth Chamber)21 September 2022^note(EAGF and EAFRD — Expenditure excluded from financing — Expenditure incurred by France — Voluntary coupled support — Conditions of eligibility — Eligible sectors and productions — Article 52(2) of Regulation (EU) No 1307/2013)In Case T‑475/21,French Republic, represented by A.-L. Desjonquères, F. Alabrune, T. Stéhelin, G. Bain and J.-L. Carré, acting as Agents,vEuropean Commission, represented by C. Perrin and A. Sauka, acting as Agents,THE GENERAL COURT (Ninth Chamber),composed of M.J. Costeira, President, M. Kancheva and I. Dimitrakopoulos (Rapporteur), Judges,Registrar: E. Coulon,having regard to the written part of the procedure,having regard to the fact that no request for a hearing was submitted by the parties within three weeks after service of notification of the close of the written part of the procedure, and having decided to rule on the action without an oral part of the procedure, pursuant to Article 106(3) of the Rules of Procedure of the General Court,gives the following

Judgment

1By its action based on Article 263 TFEU, the French Republic seeks annulment of Commission Implementing Decision (EU) 2021/988 of 16 June 2021 excluding from European Union financing certain expenditure incurred by the Member States under the European Agricultural Guarantee Fund (EAGF) and under the European Agricultural Fund for Rural Development (EAFRD) (OJ 2021 L 218, p. 9; ‘the contested decision’) in so far as it excluded from financing by the EAGF an amount of EUR 45869 990.19 corresponding to expenditure incurred under a voluntary coupled support measure for the production of fodder legumes relating to claim year 2017.

Background to the dispute

2On 1 August 2016, the French authorities notified the European Commission, pursuant to Article 54(1) of Regulation (EU) No 1307/2013 of the European Parliament and of the Council of 17 December 2013 establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy and repealing Council Regulation (EC) No 637/2008 and Council Regulation (EC) No 73/2009 (OJ 2013 L 347, p. 608), of a coupled support measure for the protein crops sector, entitled ‘24. Aid for the production of fodder legumes’ (‘Measure 24’). In point 2.2(b) of that notification, it was stated in particular that the eligible areas for that coupled support scheme were those cultivated for fodder legumes either alone, in mixtures with other fodder legumes or in mixtures with other varieties (cereals, other grasses, oilseeds), where the mixture contained at least 50 % fodder legume seeds at planting.

3For claim years 2015 and 2016 (that is to say, financial years 2016 and 2017), the Commission initiated an inquiry, under reference NAC/2016/021/FR, on the basis of which it found that the conditions of eligibility laid down for Measure 24 did not comply with EU law and therefore adopted Commission Implementing Decision (EU) 2018/1841 of 16 November 2018 excluding from European Union financing certain expenditure incurred by the Member States under the EAGF and the EAFRD (OJ 2018 L 298, p. 34), applying a financial correction to the French Republic for the expenditure incurred in respect of that measure.

4A new inquiry was initiated by the Commission for claim year 2017, registered under reference NAC/2018/009/FR.

5By letter of 4 May 2018, the Commission communicated the findings of that inquiry to the French Republic pursuant to Article 34(2) of Commission Implementing Regulation (EU) No 908/2014 of 6 August 2014 laying down rules for the application of Regulation (EU) No 1306/2013 of the European Parliament and of the Council with regard to paying agencies and other bodies, financial management, clearance of accounts, rules on checks, securities and transparency (OJ 2014 L 255, p. 59). In that communication of 4 May 2018, the Commission stated that the conditions of eligibility for Measure 24 had not changed from those which applied to claim years 2015 and 2016, as mixtures of legumes with grasses were still included among the areas eligible for coupled support. The Commission therefore informed the French authorities that it considered the payments made in respect of Measure 24 as from claim year 2017 to be irregular and ineligible for EU financing. In addition, the Commission requested the French authorities to provide an estimate of risk for the EAGF for claim year 2017 and to modify the conditions of eligibility for Measure 24.

6By letter of 6 November 2018, the French authorities, first, challenged the application of a financial correction equal to the amount of aid paid in respect of the areas covered by mixtures of legumes and grasses and, second, asserted, in essence, that no regulatory provisions excluded grasses from coupled support.

7By letter of 17 December 2019, sent on the basis of the third subparagraph of Article 34(3) and Article 40(1) of Regulation No 908/2014, the Commission formally communicated to the French Republic the estimated amount of the proposed correction for claim year 2017, namely EUR 45869 990.19.

8By letter of 3 February 2020, the French authorities requested the opening of a conciliation procedure on the basis of Article 40(1) of Regulation No 908/2014. On 2 August 2020, the conciliation body delivered its report, in which it concluded that conciliation between the parties was not possible.

9By letter of 5 March 2021, the Commission sent the French authorities its final position following the conciliation body’s report, in which it confirmed, in essence, that in so far as grasses were not listed among the sectors and productions eligible for coupled support in Article 52(2) of Regulation No 1307/2013, mixtures of legumes and grasses, even in minority proportions, could not be granted such support.

10By the contested decision, the Commission, inter alia, excluded from EU financing the expenditure incurred by the French Republic in respect of Measure 24 relating to claim year 2017, amounting to EUR 45869 990.19.

Forms of order sought

11The French Republic claims, in essence, that the Court should:– annul the contested decision in so far as it applies a financial correction amounting to EUR 45869 990.19 to the expenditure in respect of Measure 24 relating to claim year 2017;– order the Commission to pay the costs.

12The Commission contends that the Court should:– dismiss the action;– order the French Republic to pay the costs.

Law

13In support of the action, the French Republic raises a single plea in law, alleging an infringement of Article 52(2) of Regulation No 1307/2013. The French Republic asserts that by finding that legumes cultivated in mixtures with grasses were not eligible for a coupled support scheme, the Commission misinterpreted that provision.

14In that regard, the French Republic maintains that on the basis of a literal, contextual and teleological interpretation of Article 52(2) of Regulation No 1307/2013, the concept of ‘sector’ within the meaning of that provision has a broader scope than the concept of ‘production’, which is confirmed, in particular, by the distinction made between agricultural productions and agricultural sectors by Article 52(3) and Article 54(1) and (2) of Regulation No 1307/2013, by recital 49 of that regulation and by Regulation (EU) No 1308/2013 of the European Parliament and of the Council of 17 December 2013 establishing a common organisation of the markets in agricultural products and repealing Council Regulations (EEC) No 922/72, (EEC) No 234/79, (EC) No 1037/2001 and (EC) No 1234/2007 (OJ 2013 L 347, p. 671). Thus, according to the French Republic, pursuant to Article 52(2) of Regulation No 1307/2013, Member States may, in order to prevent existing difficulties from worsening, grant coupled support either to a specific agricultural sector, that is, to several types of productions belonging primarily or secondarily to that sector, or to a specific type of agricultural production alone.

15As regards, more specifically, the protein crops sector, mentioned in Article 52(2) of Regulation No 1307/2013, the French Republic maintains that it does not designate a specific production, but refers to the sector of plants belonging to the legume family which are cultivated for their high protein content.

16In those circumstances, the French Republic asserts that the protein crops sector should be given a broad interpretation such that it includes all common practices established in a Member State for the production of varieties of legumes cultivated for their high protein content.

17In France, legume crops for animal fodder are commonly cultivated in mixtures with other varieties such as grasses. The cultivation of legume crops in mixtures with grasses has not only an agricultural benefit, in that it provides breeders with fodder which is more easily digestible for animals, but also an environmental benefit, as legumes enable atmospheric nitrogen to be fixed in the soil and thus the addition of nitrogen fertilisers to be reduced. Furthermore, the French Republic maintains that the fodder legumes sector has experienced a significant decline since the 1960s. Consequently, the grant of coupled support for legume crops including fodder legume crops in mixtures with other varieties, such as grasses, meets the objective of coupled support, which is to support a sector in difficulties by encouraging a common practice that is beneficial to animal health and to the environment.

18Lastly, the French Republic states in the reply that it is not claiming that legumes and grasses are, respectively, primary productions and secondary productions within the protein crops sector, but that mixtures of legumes and grasses, where legumes are predominant, are a production type in its own right within that sector.

19The Commission disputes the arguments put forward by the French Republic.

20It should be noted as a preliminary point that, in its written pleadings, the French Republic does not dispute that grasses, taken in isolation, do not come under the sectors or productions listed in Article 52(2) of Regulation No 1307/2013 and that, consequently, they are not eligible for coupled support per se. In addition, it is common ground between the parties that legumes are eligible for coupled support in so far as that production belongs to the protein crops sector, which is expressly mentioned in Article 52(2) of Regulation No 1307/2013.

21Nevertheless, the parties disagree as to whether mixtures of agricultural products coming under one of the sectors or productions listed in Article 52(2) of Regulation No 1307/2013, such as legumes, and agricultural products not coming under those sectors or productions, such as grasses, are eligible for coupled support.

22In order to answer that question, it is necessary to carry out a literal, contextual and teleological interpretation of Article 52(2) of Regulation No 1307/2013 (see, to that effect, judgment of 11 December 2015, Finland v Commission, T‑124/14, EU:T:2015:955, paragraph 24).

Literal interpretation

23In a literal interpretation, it must be borne in mind that EU legislation is drafted in various languages and that the different language versions are all equally authentic, which may require a comparison of the different language versions (see, to that effect, judgment of 11 December 2015, Finland v Commission, T‑124/14, EU:T:2015:955, paragraph 25 and the case-law cited).

24Article 52 of Regulation No 1307/2013, entitled ‘General rules’, appears in Chapter 1, entitled ‘Voluntary coupled support’, of Title IV, entitled ‘Coupled support’, of that regulation and provides, in paragraph 1, that Member States may grant coupled support to farmers under the conditions laid down in that chapter.

25Under Article 52(2) of Regulation No 1307/2013, coupled support may be granted to the following sectors and productions: cereals, oilseeds, protein crops, grain legumes, flax, hemp, rice, nuts, starch potato, milk and milk products, seeds, sheepmeat and goatmeat, beef and veal, olive oil, silkworms, dried fodder, hops, sugar beet, cane and chicory, fruit and vegetables and short rotation coppice.

26It should be noted that Article 52(2) of Regulation No 1307/2013 contains a list of sectors and productions eligible for coupled support, the limited and exhaustive character of which is shown by the use of the adjective ‘following’ (‘suivants’ in French and ‘seguenti’ in Italian), followed by a colon, before a list of those sectors and productions.

27Accordingly, since Article 52(2) of Regulation No 1307/2013 contains, first, an exhaustive list of sectors and productions eligible for coupled support and, second, does not mention mixtures of products coming under the sectors or productions expressly listed and products not coming under those sectors or productions, the literal interpretation of that provision seems to support the Commission’s view that such mixtures are essentially ineligible, rather than the view taken by the French Republic.

Contextual interpretation

28It follows from the use of, first, the adjective ‘voluntary’ in the title of Chapter 1 of Title IV of Regulation No 1307/2013 and, second, the verb ‘may’ in Article 52(1) of that regulation (see paragraph 24 above) that the coupled support scheme is not mandatory and that Member States therefore have latitude in granting such support.

29In addition, under Article 52(1) of Regulation No 1307/2013, where Member States decide to introduce such support, they must do so under all the conditions laid down in Chapter 1 of Title IV of that regulation (see paragraph 24 above).

30In that regard, first, under Article 52(2) of Regulation No 1307/2013, the sectors and productions listed exhaustively in that article are eligible for coupled support. Second, under Article 52(3) of that regulation, only those sectors or those regions of a Member State where ‘specific types of farming’ or ‘specific agricultural sectors’ are particularly important for economic, social or environmental reasons and, furthermore, undergo certain difficulties may benefit from such support. Article 52(3) of Commission Delegated Regulation (EU) No 639/2014 of 11 March 2014 supplementing Regulation (EU) No 1307/2013 and amending Annex X to that Regulation (OJ 2014 L 181, p. 1) provides that such difficulties require there to be a risk of abandonment or of decline of production due to, inter alia, the weak profitability of the activity carried out which negatively affects the economic, social or environmental balance in the region or sector concerned. Third, Article 52(5) of Regulation No 1307/2013 stipulates that such support must be necessary to maintain current levels of production in the sectors or regions concerned.

31A combined reading of those provisions shows that the legislature intended to restrict the option for Member States to grant coupled support by introducing cumulative conditions which limit considerably the group of eligible beneficiaries and, more generally, its material scope. Consequently, a broad interpretation of that scope would be incompatible with those conditions.

32In addition, although Article 52(3) of Regulation No 1307/2013 allows Member States a margin of discretion in establishing whether sectors or productions, first, are particularly important for economic, social or environmental reasons and, second, undergo certain difficulties and whether coupled support could prevent the worsening of those difficulties or the abandonment of production, it does not follow from that article or from any other provision of Regulation No 1307/2013 or of Regulation No 639/2014 that Member States have any such discretion as regards the definition of the sectors or productions eligible for coupled support listed in Article 52(2) of Regulation No 1307/2013. Such discretionary power would run counter to the exhaustive nature of the list contained in Article 52(2) of Regulation No 1307/2013, which the French Republic has, moreover, expressly recognised in its written pleadings.

33It should also be noted that Article 1(b) of Regulation No 1307/2013 lists various support schemes for farmers that are regulated by its provisions. It is evident from Annex 1 to that regulation that those schemes are decoupled from production, except for the coupled support scheme and the crop-specific payment for cotton, which is governed by the provisions in Chapter 2 of Title IV of that regulation.

34Consequently, coupled support is an aid scheme which constitutes a derogation from the other aid schemes governed by Regulation No 1307/2013, which are decoupled from production and which, as a rule, do not relate specifically to agricultural sectors or productions which undergo certain difficulties.

35It follows that, because coupled support constitutes a derogation, the conditions for its application are to be interpreted strictly (see, to that effect and by analogy, judgments of 13 December 2018, Sut, C‑514/17, EU:C:2018:1016, paragraph 28 and the case-law cited, and of 22 January 2020, Pensionsversicherungsanstalt (Cessation of activity after reaching retirement age), C‑32/19, EU:C:2020:25, paragraph 38 and the case-law cited).

36In the light of the foregoing considerations, it must be concluded that the eligible sectors and productions, which are listed in Article 52(2) of Regulation No 1307/2013, are to be interpreted strictly.

37Consequently, the contextual interpretation of Article 52(2) of Regulation No 1307/2013 does not corroborate the French Republic’s view concerning the eligibility of mixtures that comprise agricultural products coming under one of the sectors or productions expressly listed in that article and other products not coming under those sectors or productions.

Teleological interpretation

38For the purposes of the teleological interpretation of Article 52(2) of Regulation No 1307/2013, account should be taken of the objective of the coupled support scheme, as mentioned in recital 49 and Article 52(5) of that regulation. It is clear from that recital and that provision, read in conjunction with Article 52(3) of Regulation No 1307/2013 and Article 52(3) of Regulation No 639/2014 (see paragraph 30 above), that the objective of coupled support is not to support agricultural production in general, but to create an incentive to maintain current levels of production in specific sectors or regions of a Member State in which specific types of farming or specific agricultural sectors that are particularly important for economic and social reasons undergo certain difficulties that may lead to abandonment or the decline of production and negatively affect the economic, social or environmental balance in the region or sector concerned.

39It follows that the objective of coupled support is to support production in relation to particular agricultural sectors or particular specific productions which undergo certain difficulties in order to prevent abandonment or the decline of that production and the resulting negative impact on the economic, social or environmental balance in the region or sector concerned.

40In the present case, it should be recalled that Measure 24, entitled ‘Aid for the production of fodder legumes’, was intended to create an incentive for the production of fodder legumes as, according to the notification given by the French Republic pursuant to Article 52(4) of Regulation No 1307/2013, areas of fodder legumes had started to decline from 2010 and there had been a continuous and significant reduction in areas of fodder legumes on their own.

41The French Republic claims, in essence, that coupled support for high-protein legume crops, which include, inter alia, mixtures of legumes and grasses, meets the objective of support for a sector in difficulties that is particularly important for economic, social or environmental reasons within the meaning of Article 52(3) of Regulation No 1307/2013.

42In that regard, first, the French Republic argues that a specific feature of legumes is that they fix atmospheric nitrogen in the soil, thereby avoiding the addition of nitrogen fertilisers, and that this is why legumes are often traditionally sown with other varieties.

43It does not, however, follow from that argument that legumes are sown exclusively or mainly with grasses. Consequently, that argument is not such as to establish that the objective pursued by Measure 24, in accordance with Regulation No 1307/2013, which is to support the production of fodder legumes in order to maintain its current level (see paragraph 40 above), could be attained effectively only if such production included mixtures of legumes and grasses.

44In any event, it should be noted, as the Commission submits, that the objective of coupled support is not to support measures beneficial for the environment and that there is another support scheme envisaged by Regulation No 1307/2013 which pursues that objective (see Chapter 3, entitled ‘Payment for agricultural practices beneficial for the climate and the environment’, of Title III, entitled ‘Basic payment scheme, single area payment scheme and related payments’, of that regulation).

45Consequently, even assuming that legumes have benefits for the environment, that does not demonstrate that the objective referred to in paragraph 40 above would be effectively pursued by coupled support granted to mixtures of legumes and grasses. The French Republic’s argument referred to in paragraph 42 above must therefore be rejected.

46Furthermore, the French Republic submits in the reply that crops of mixtures of legumes with grasses has an environmental benefit per se, as the presence of grasses makes legumes fix atmospheric nitrogen better and thus avoids the addition of nitrogen fertilisers to the soil. In support of that argument, the French Republic relies on a study from 2010 by the Institut national de recherche pour l’agriculture, l’alimentation et l’environnement (National Research Institute for Agriculture, Food and Environment, France). It is not evident from the case file, however, that that argument and that study were communicated to the Commission and discussed during the administrative procedure. In those circumstances, in accordance with the case-law to the effect that the lawfulness of a Commission decision is to be assessed in the light of the information available to it when it was adopted (see, to that effect, judgment of 22 January 2020, Lithuania v Commission, T‑19/18, not published, EU:T:2020:4, paragraph 42 and the case-law cited), that argument and that study must be rejected as having no bearing on the merits of the contested decision.

47Second, the French Republic asserts that mixtures of legumes and grasses provide breeders with fodder which is more comprehensive and more easily digestible for animals. However, it must be held, as the Commission asserts, that that argument is not relevant because in the present case, Measure 24 does not relate to the livestock sector but seeks to support the production of fodder legumes. The argument put forward by the French Republic must therefore be rejected.

48It follows that the French Republic is not able to demonstrate that the grant of coupled support for mixtures of legumes and grasses met the objective of Measure 24 in accordance with Regulation No 1307/2013.

49In the light of the above, the teleological interpretation of Article 52(2) of Regulation No 1307/2013 tends to confirm that mixtures of agricultural products coming under one of the sectors or productions expressly listed in that article and agricultural products not coming under those sectors or productions are not eligible for coupled support.

50In the light of all the foregoing, the literal, contextual and teleological interpretation of Article 52(2) of Regulation No 1307/2013 precludes the broad interpretation of the concept of agricultural ‘sector’ referred to in Article 52(2) of Regulation No 1307/2013 advocated by the French Republic.

51It is nevertheless necessary to ascertain whether, as the French Republic claims, in order to define an agricultural sector for the purposes of Article 52(2) of Regulation No 1307/2013, account should be taken of all the common, established practices in a Member State for the production of crops belonging to that sector (see paragraph 16 above).

52In that regard, the French Republic maintains that under Article 52(2) of Regulation No 639/2014 the common, established practices in a Member State are relevant in defining the specific agricultural sectors referred to in Article 52(2) of Regulation No 1307/2013.

53The Commission disputes the arguments put forward by the French Republic.

54In the first place, it should be noted that, as the Commission submits, Regulation No 639/2014 is a delegated regulation the objective of which is to supplement the provisions of Regulation No 1307/2013. Its provisions cannot therefore be relied on to derogate from the provisions of Regulation No 1307/2013, on the basis of which it was adopted, or to interpret those provisions in a manner contrary to their wording and their scheme.

55In addition, Article 52(2) of Regulation No 639/2014 does not concern the definition of sectors and productions eligible for coupled support, which is given in Article 52(2) of Regulation No 1307/2013. Article 52(2) of Regulation No 639/2014 refers expressly to Article 52(3) of Regulation No 1307/2013, which imposes a cumulative condition that is distinct from the one laid down in Article 52(2) of that regulation (see paragraphs 30 to 32 above).

56A combined reading of Article 52(2) of Regulation No 639/2014 and Article 52(2) and (3) of Regulation No 1307/2013 shows that Member States are to ‘take into account in particular the relevant production structures and conditions of the region or sector concerned’ only when they identify, pursuant to Article 52(3) of Regulation No 1307/2013, ‘specific types of farming’ or ‘specific agricultural sectors’ that are particularly important for economic, social or environmental reasons and, furthermore, undergo certain difficulties.

57In the second place, the French Republic stated in the reply, in essence, that it was not seeking to demonstrate that the common, established practices in a Member State constituted a criterion for eligibility for coupled support, but that such practices were relevant in defining the specific agricultural sectors referred to in Article 52(2) of Regulation No 1307/2013. In that regard, it is sufficient to note that this is an artificial distinction. Contrary to the assertion made by the French Republic, the definition of the sectors listed in Article 52(2) of Regulation No 1307/2013 is a question that arises in determining the crops and productions eligible for coupled support under that article. As was stated in paragraph 32 above, that article does not confer any discretion on Member States as regards the definition of the sectors and productions eligible for coupled support.

58In the third place, in order to ensure legal certainty and a uniform interpretation within the European Union of the rules on coupled support, an agricultural sector for the purposes of Article 52(2) of Regulation No 1307/2013 must be defined by reference to clear and objective criteria applying to agricultural products coming under that sector. Thus, the concept of ‘sector’ cannot be defined on the basis of common, established practices in a Member State for the production of crops belonging to that sector which do not relate to the products themselves and may vary depending on the conditions prevailing in each Member State. In addition, the EU legislation does not lay down specific criteria on the basis of which the existence of a common, established practice in a Member State should be examined. Therefore, the interpretation proposed by the French Republic is incompatible with the requirements of clarity and predictability of the applicable legal rule.

59Accordingly, even assuming that mixtures of legumes and grasses constitute a common, established practice in France in the protein crops sector, those mixtures cannot be considered to belong to that sector for the purposes of Article 52(2) of Regulation No 1307/2013.

60In the light of all the foregoing, it must be held that the Commission did not err in law in interpreting Article 52(2) of Regulation No 1307/2013 as meaning that, first, products which are not listed in that article or do not belong to one of the sectors also listed, such as grasses, and, second, mixtures of such products and products coming under sectors or productions expressly mentioned in that article are excluded from coupled support.

61The single plea in law relied on by the French Republic must therefore be rejected and, consequently, the action must be dismissed in its entirety.

Costs

62Under Article 134(1) of the Rules of Procedure of the General Court, 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 French Republic has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the Commission.

Operative part

On those grounds,THE GENERAL COURT (Ninth Chamber)hereby:

1.Dismisses the action;

2.Orders the French Republic to pay the costs.

Delivered in open court in Luxembourg on 21 September 2022.