Contents
Judgment of the Court (First Chamber)29 February 2024note(Reference for a preliminary ruling — Agriculture — Common agricultural policy — Support for rural development by the European Agricultural Fund for Rural Development (EAFRD) — Protection of the financial interests of the European Union — Regulation (EC, Euratom) No 2988/95 — Article 7 — Administrative measures and penalties — Regulation No 1306/2013 — Articles 54 and 56 — Delegated Regulation (EU) No 640/2014 — Article 35 — Recovery of sums unduly paid to persons who have taken part in the irregularity — Concept of beneficiary)In Case C‑437/22,REQUEST for a preliminary ruling under Article 267 TFEU from the Riigikohus (Supreme Court, Estonia), made by decision of 1 July 2022, received at the Court on 4 July 2022, in the criminal proceedings againstTHE COURT (First Chamber),composed of A. Arabadjiev, President of the Chamber, T. von Danwitz, P.G. Xuereb (Rapporteur), A. Kumin and I. Ziemele, Judges,Advocate General: G. Pitruzzella,Registrar: A. Calot Escobar,having regard to the written procedure,after considering the observations submitted on behalf of:– the Estonian Government, by M. Kriisa, acting as Agent,– the Danish Government, by C. Maertens, acting as Agent, and by P. Biering, advokat,– the European Commission, by F. Blanc, E. Randvere and A. Sauka, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 26 October 2023,gives the following
Judgment
1This request for a preliminary ruling concerns the interpretation of Article 7 of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests (OJ 1995 L 312, p. 1 and corrigendum OJ 1998 L 36, p. 16), of Article 54(1) and the first paragraph of Article 56 of Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008 (OJ 2013 L 347, p. 549, and corrigendum OJ 2016 L 130, p. 6), and of Article 35(6) of Commission Delegated Regulation (EU) No 640/2014 of 11 March 2014 supplementing Regulation (EU) No 1306/2013 of the European Parliament and of the Council with regard to the integrated administration and control system and conditions for refusal or withdrawal of payments and administrative penalties applicable to direct payments, rural development support and cross compliance (OJ 2014 L 181, p. 48).
2The request has been made in criminal proceedings brought in Estonia against R.M. and E.M., accused, respectively, of perpetrating three counts of subsidy fraud for the benefit of X OÜ (‘company X’) and of being an accomplice for two of those counts.
Legal context
European Union law
Regulation No 2988/95
3The fourth recital of Regulation No 2988/95 states:‘Whereas the effectiveness of the combating of fraud against the Communities’ financial interests calls for a common set of legal rules to be enacted for all areas covered by Community policies’.
4Article 1 of that regulation provides:1. For the purposes of protecting the European Communities’ financial interests, general rules are hereby adopted relating to homogenous checks and to administrative measures and penalties concerning irregularities with regard to Community law.2. “Irregularity” shall mean any infringement of a provision of Community law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by them, either by reducing or losing revenue accruing from own resources collected directly on behalf of the Communities, or by an unjustified item of expenditure.’
5Article 2 of that regulation provides:1. Administrative checks, measures and penalties shall be introduced in so far as they are necessary to ensure the proper application of Community law. They shall be effective, proportionate and dissuasive so that they provide adequate protection for the Communities’ financial interests.…3. Community law shall determine the nature and scope of the administrative measures and penalties necessary for the correct application of the rules in question, having regard to the nature and seriousness of the irregularity, the advantage granted or received and the degree of responsibility.4. Subject to the Community law applicable, the procedures for the application of Community checks, measures and penalties shall be governed by the laws of the Member States.’
6Article 4 of that regulation, which clarifies the scope of the concept of ‘administrative measures’ referred to in Article 2, is worded as follows:1.As a general rule, any irregularity shall involve withdrawal of the wrongly obtained advantage:– by an obligation to pay or repay the amounts due or wrongly received,– by the total or partial loss of the security provided in support of the request for an advantage granted or at the time of the receipt of an advance.…4. The measures provided for in this Article shall not be regarded as penalties.’
7Article 5 of Regulation No 2988/95, which clarifies the scope of the concept of ‘administrative penalties’ referred to in Article 2, provides, in paragraph 1 thereof, that intentional irregularities or those caused by negligence may lead to the administrative penalties provided for in that provision, inter alia, the payment of an administrative fine.
8Article 7 of that regulation provides:‘Community administrative measures and penalties may be applied to the economic operators referred to in Article 1, namely the natural or legal persons and the other entities on which national law confers legal capacity who have committed the irregularity. They may also apply to persons who have taken part in the irregularity and to those who are under a duty to take responsibility for the irregularity or to ensure that it is not committed.’
Regulation No 1306/2013
9Recital 39 of Regulation No 1306/2013 stated:‘In order to protect the financial interests of the [European] Union’s budget, measures should be taken by Member States to satisfy themselves that transactions financed by [the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD)] are actually carried out and are executed correctly. Member States should also prevent, detect and deal effectively with any irregularities or non-compliance with obligations committed by beneficiaries. To this end, [Regulation No 2988/95] should apply. In cases of infringement of the sectoral agricultural legislation, where detailed rules on administrative penalties have not been laid down by Union legal acts, Member States should impose national penalties which should be effective, dissuasive and proportionate.’
10Article 2(1)(g) of that regulation defined the concept of ‘irregularity’, within the meaning of that regulation, as being an irregularity within the meaning of Article 1(2) of Regulation No 2988/95.
11Article 54 of that regulation, entitled ‘Common Provisions’, provided:1. For any undue payment following the occurrence of irregularity or negligence, Member States shall request recovery from the beneficiary within 18 months after the approval and, where applicable, reception, by the paying agency or body responsible for the recovery, of a control report or similar document, stating that an irregularity has taken place. The corresponding amounts shall be recorded at the time of the recovery request in the debtors’ ledger of the paying agency.…3.On duly justified grounds, Member States may decide not to pursue recovery. A decision to this effect may be taken only in the following cases:…(b) where recovery proves impossible owing to the insolvency, recorded and recognised under national law, of the debtor or the persons legally responsible for the irregularity.…’
12Article 56 of that regulation, entitled ‘Provisions specific to the EAFRD’, provided, in the first paragraph thereof:‘Where irregularities or negligence are detected in rural development operations or programmes, Member States shall make financial adjustments by totally or partially cancelling the Union financing concerned. Member States shall take into consideration the nature and gravity of the irregularities detected and the level of the financial loss to the EAFRD.’
13Article 58 of Regulation No 1306/2013, entitled ‘Protection of the financial interests of the Union’, provided, in paragraph 1 thereof:‘Member States shall, within the framework of the [Common Agricultural Policy (CAP)], adopt all legislative, regulatory and administrative provisions and take any other measures necessary to ensure effective protection of the financial interests of the Union, in particular to:…(e) recover undue payments plus interest, and bring legal proceedings to that effect as necessary.’
14Article 92 of that regulation, entitled ‘Beneficiaries concerned’, stated, in the first paragraph thereof:‘Article 91 shall apply to beneficiaries receiving direct payments under 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)], payments under Articles 46 and 47 of 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)] and the annual premia under points (a) and (b) of Article 21(1), Articles 28 to 31, 33 and 34 of Regulation (EU) No 1305/2013 [of the European Parliament and of the Council of 17 December 2013 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) and repealing Council Regulation (EC) No 1698/2005 (OJ 2013 L 347, p. 487)].’
Delegated Regulation No 640/2014
15Point 1 of the second subparagraph of Article 2(1) of Delegated Regulation No 640/2014 defined the concept of ‘beneficiary’ as ‘a farmer as defined in Article 4(1)(a) of [Regulation No 1307/2013] and referred to in Article 9 of that Regulation, the beneficiary subject to cross-compliance within the meaning of Article 92 of [Regulation No 1306/2013] and/or the beneficiary receiving rural development support as referred to in Article 2(10) of [Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006 (OJ 2013 L 347, p. 320)]’.
16Article 35 of that delegated regulation, entitled, ‘Non-compliance with the eligibility criteria other than the size of area or number of animals, commitments or other obligations’, provided, in paragraph 6 thereof:‘Where it is established that the beneficiary provided false evidence for the purpose of receiving the support or failed to provide the necessary information due to negligence, the support shall be refused or withdrawn in full. Furthermore, the beneficiary shall be excluded from the same measure or type of operation for the calendar year of [the] finding and for the following calendar year.’
Regulation No 1303/2013
17Under Article 2, entitled ‘Definitions’, of Regulation No 1303/13, as amended by Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 (OJ 2018 L 193, p. 1):‘For the purposes of this Regulation, the following definitions apply:…(10) “beneficiary” means a public or private body or a natural person, responsible for initiating or both initiating and implementing operations, and:(a) in the context of State aid, the body which receives the aid, except where the aid per undertaking is less than EUR 200000, in which case the Member State concerned may decide that the beneficiary is the body granting the aid, without prejudice to Commission Regulations (EU) No 1407/2013 [of 18 December 2013 on the application of Articles 107 and 108 [TFEU] to de minimis aid (OJ 2013 L 352, p. 1)], (EU) No 1408/2013 [of 18 December 2013, on the application of Articles 107 and 108 [TFEU] to de minimis aid in the agriculture sector (OJ 2013 L 352, p. 9)] and (EU) No 717/2014 [of 27 June 2014 on the application of Articles 107 and 108 [TFEU] to de minimis aid in the fishery and aquaculture sector (OJ 2014 L 190, p. 45)]; and(b) in the context of financial instruments under Title IV of Part Two of this Regulation, the body that implements the financial instrument or the fund of funds as appropriate;…’
Regulation No 1307/13
18Article 4 of Regulation No 1307/13, entitled ‘Definitions and related provisions’, provides, in paragraph 1 thereof:‘For the purposes of this Regulation, the following definitions shall apply:(a) “farmer” means a natural or legal person, or a group of natural or legal persons, regardless of the legal status granted to such group and its members by national law, whose holding is situated within the territorial scope of the Treaties, as defined in Article 52 TEU in conjunction with Articles 349 and 355 TFEU, and who exercises an agricultural activity;…’
Estonian law
19Under Paragraph 381(2) of the kriminaalmenetluse seadustik (Code of Criminal Procedure), a public authority may, in criminal proceedings, bring an action for recognition of a public law claim if the fact giving rise to that claim is largely based on the same material elements that constitute the offence that is the subject of the proceedings.
20Paragraph 111 of the Euroopa Liidu ühise põllumajanduspoliitika rakendamise seadus (Law on the implementation of the [CAP], RT I 2014, 3), entitled ‘Recovery of subsidies’, provides, in paragraph 1 thereof:‘If, after the payment of the subsidy, it appears that the subsidy, as a result of irregularities or negligence, has been unduly paid and, in particular, if it has not been used for the intended purpose, all or part of the subsidy must, for the reasons and within the time limits provided for in [Regulations No 1303/2013 and No 1306/2013] and other relevant EU regulations, be recovered from the beneficiary of the subsidy and in particular from the beneficiary of a subsidy chosen following a selection procedure.…’
The dispute in the main proceedings and the questions referred for a preliminary ruling
21Company X was entered in the business register in Estonia on 7 November 2005 and was removed from it on 20 June 2019 following its merger with Y OÜ (‘company Y’). R.M. was the managing director of company X until 18 December 2015 and then became an agent thereof. E.M., his spouse, was the managing director of that company from 18 December 2015 until its removal from the business register.
22By decision of the Viru Maakohus (Court of First Instance, Viru, Estonia) of 15 March 2021, R.M. was convicted, inter alia, on three counts of subsidy fraud. According to that court, R.M. had, as the representative of company X, intentionally made false statements to the Põllumajanduse Registrite ja Informatsiooni Amet (Agricultural Registers and Information Board; ‘PRIA’) in order to obtain aid under Estonia’s rural development programmes for 2007 to 2013 and for 2014 to 2020 (‘the aid at issue’). Consequently, PRIA had wrongly paid company X the total amount of EUR 143 737.38 by way of the aid at issue. In two of the three counts of subsidy fraud, in addition to R.M., E.M. was convicted as an accomplice.
23In addition, that court ordered R.M. and E.M., under the action for recognition of a public law claim brought by the Republic of Estonia, represented by PRIA, to pay that Member State the amount of the aid at issue wrongly received by company X. In that regard, R.M. was ordered to pay EUR 87340 and R.M. and E.M. were ordered to pay, jointly and severally, the remaining amount of EUR 56 397.38.
24R.M. and E.M. brought an appeal against that decision, in so far as it convicted them of subsidy fraud and granted the action for recognition of a public law claim.
25By decision of 15 September 2021, the Tartu Ringkonnakohus (Court of Appeal, Tartu, Estonia) upheld the decision of the Viru Maakohus (Court of First Instance, Viru).
26R.M. and E.M. brought appeals on a point of law against that decision before the Riigikohus (Supreme Court, Estonia), the referring court. In support of those appeals, they submit, inter alia, that the action for recognition of a public law claim brought by the Republic of Estonia should be declared inadmissible on the ground that aid wrongly received can be legitimately recovered only from the beneficiary of that aid. However, although company X was removed from the business register, company Y succeeded it in its rights and obligations following the merger of those two companies. The Republic of Estonia did not, however, seek recovery of the aid at issue from company Y.
27On 20 May 2022, the referring court delivered a partial judgment by which it definitively upheld the decision of the Tartu Ringkonnakohus (Court of Appeal, Tartu) and that of the Viru Maakohus (Court of First Instance, Viru), inter alia, in so far as, by those decisions, R.M. and E.M. had been convicted of subsidy fraud.
28However, as to the question whether it is possible to request that R.M. and E.M. repay the aid at issue which was wrongly received by company X, the referring court considers it necessary to refer questions to the Court on two points.
29In the first place, the referring court is uncertain as to whether there is a legal basis for requesting recovery of that aid from R.M. and E.M., in the light of company Y’s difficult financial situation, which appears to prevent it from repaying the aid wrongly received by company X.
30In the present case, according to the referring court, the EAFRD contributed to financing the Republic of Estonia’s rural development programmes for 2007 to 2013 and for 2014 to 2020, under which the aid at issue was granted. It is apparent from the Court’s case-law that Regulation No 1306/2013 forms the basis for the recovery of such subsidies, even where the aid was granted and paid before that regulation entered into force.
31More specifically, the recovery of the aid at issue, wrongly received by company X, has its legal basis in the first paragraph of Article 56 of Regulation No 1306/2013, read in conjunction with Article 54(1) of that regulation and with the first sentence of Article 35(6) of Delegated Regulation No 640/2014. Although those provisions do not expressly lay down a basis for requesting repayment of the aid from a person other than the beneficiary, such a possibility is provided for in Article 7 of Regulation No 2988/95.
32The referring court accordingly considers that the answer to the question whether the recovery of the aid at issue may or may not be requested from R.M. and E.M. depends on whether the first paragraph of Article 56 and Article 54(1) of Regulation No 1306/2013 and the first sentence of Article 35(6) of Delegated Regulation No 640/2014 can be read, in conjunction with Article 7 of Regulation No 2988/95, as meaning that the obligation to repay that aid could, in the circumstances of the present case, also be applied to persons who, whilst not being beneficiaries of that aid, took part in the irregularity which led to the undue payment thereof. The answer to that question depends, in turn, on whether Article 7 of Regulation No 2988/95 has direct legal effect in that regard.
33Neither the wording of Regulation No 2988/95 nor the Court’s case-law relating to Article 7 of that regulation allows for any clear conclusions to be drawn in that regard.
34It is true that the Court, in its judgment of 28 October 2010, SGS Belgium and Others (C‑367/09, EU:C:2010:648), ruled out any direct effect for Regulation No 2988/95 as regards the administrative penalties provided for in Article 5 thereof, having regard to the wording of that provision and that of Article 7 of that regulation. Moreover, it is apparent from paragraphs 44 to 62 of that judgment that penalties for adversely affecting the financial interests of the European Union cannot be imposed on the persons referred to in Article 7 of that regulation unless they have a clear and unambiguous legal basis adopted at EU or Member State level. However, the obligation to repay the amount of aid wrongly received does not constitute an ‘administrative penalty’ within the meaning of Article 5 of Regulation No 2988/95, but rather an ‘administrative measure’ within the meaning of Article 4 of that regulation. That obligation is merely the consequence of the finding that the conditions required to obtain the advantage derived from EU law have not been complied with, which renders the aid undue. The Court nevertheless held, in its judgment of 18 December 2014, Somvao (C‑599/13, EU:C:2014:2462), that, since Regulation No 2988/95 merely lays down general rules for supervision and penalties for the purpose of safeguarding the European Union’s financial interests, the recovery of undue aid must occur on the basis of other provisions, namely, where appropriate, sector-specific provisions.
35According to the referring court, a number of arguments support the interpretation to the effect that Article 7 of Regulation No 2988/95, read in conjunction with the relevant sectoral provision governing the recovery of aid unduly paid, provides, in the circumstances of the present case, a relevant legal basis for requesting recovery of the aid at issue from R.M. and E.M. First, the present case concerns a situation in which the irregularity that led to the aid being granted follows from the persons from whom recovery is requested intentionally making false statements to the national authorities. Secondly, the aid cannot be recovered from the beneficiary because it no longer exists, company X having been wound up, whilst the prospect of recovering the aid from that beneficiary’s successor is, prima facie, uncertain. The referring court adds that, in the circumstances of the present case, R.M. and E.M. may be regarded as the persons who have taken part in the irregularity committed by company X within the meaning of Article 7 of Regulation No 2988/95.
36The EU legislature itself appears to consider that, in certain cases, the repayment of aid paid following irregularities under programmes co-financed by the EAFRD may also be requested from persons who are not themselves the stated beneficiaries of that aid, as is apparent, inter alia, from Article 54(3)(b) of Regulation No 1306/2013.
37The referring court adds that accepting a situation in which the winding up or insolvency of a beneficiary legal person would always make it impossible, in essence, to recover aid unduly paid following an intentional irregularity would seriously harm the financial interests of the European Union.
38In the second place, the referring court notes that R.M. and E.M. were not only representatives of company X, but also acted alternately as the sole shareholders of that company when the fraud was perpetrated, with R.M. being the sole shareholder and sole managing director of that company from 10 November 2005 to 18 December 2015 and E.M. taking over those two duties from the latter date until company X was removed from the business register. R.M. nevertheless continued to act on behalf of that company as an agent of E.M. even after relinquishing his shares and stepping down from the management of that company. The fact that R.M. and E.M. were married to each other during the period in which company X obtained the aid at issue must also be noted, so that it should be considered that R.M. and E.M. were the beneficial owners of that company, which operated under their management and control.
39The question therefore arises as to whether those circumstances may be considered sufficient to categorise not only company X, but also R.M. and E.M., as beneficiaries of the aid at issue. In that case, it would not be necessary to rely additionally on Article 7 of Regulation No 2988/95 to recover that aid.
40In those circumstances, the Riigikohus (Supreme Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:(1) In circumstances such as those in the main proceedings, does a basis with a direct legal effect flow from Article 7 of [Regulation No 2988/95], read in conjunction with [the first paragraph of Article 56] and Article 54(1) of [Regulation No 1306/2013] and with Article 35(6) of [Delegated Regulation No 640/2014], for the recovery of fraudulently obtained aid financed by the [EAFRD] from the representatives of a beneficiary legal person who intentionally made false declarations with a view to fraudulently obtaining [that] aid?(2) In circumstances such as those of the main proceedings, in which aid to be financed by the EAFRD was, as a result of fraud, set and paid to a limited liability company (Osaühing), can the representatives of the beneficiary company who carried out the fraud and who, at the time when the aid was fraudulently obtained, were simultaneously the beneficial owners of that company, also be regarded as beneficiaries within the meaning of Article 54(1) of [Regulation No 1306/2013] and Article 35(6) of [Delegated Regulation No 640/2014]?’
Consideration of the questions referred
The first question
41According to the settled case-law of the Court, in the procedure laid down in Article 267 TFEU, which provides for cooperation between national courts and the Court of Justice, it is for the latter to provide the referring court with an answer which will be of use to it and enable it to decide the case before it. With that in mind, the Court may have to reformulate the questions referred to it. The fact that a national court has, formally speaking, worded a question referred for a preliminary ruling with reference to certain provisions of EU law does not prevent the Court from providing the national court with all the points of interpretation which may be of assistance in adjudicating on the case pending before it, whether or not that court has referred to them in its questions. In that regard, it is for the Court to extract from all the information provided by the national court, in particular from the grounds of the decision referring the questions, the points of EU law which require interpretation, having regard to the subject matter of the dispute (judgment of 21 September 2023, Juan, C‑164/22, EU:C:2023:684, paragraph 24 and the case-law cited).
42In that regard, it should be noted that, under Article 4(1) of Regulation No 2988/95, as a general rule, where aid has been wrongly received, any irregularity is to involve the obligation to repay that aid. Article 7 of that regulation provides that such an administrative measure may also be applied to persons who have taken part in the irregularity at issue and to those who are under a duty to take responsibility for the irregularity or to ensure that it is not committed.
43It is apparent from the Court’s case-law, however, that Regulation No 2988/95 merely lays down general rules for supervision and penalties for the purpose of safeguarding the European Union’s financial interests. Misused funds must be recovered on the basis of other provisions, that is to say, where appropriate, on the basis of sector-specific provisions (judgment of 26 May 2016, Județul Neamț and Județul Bacău, C‑260/14 and C‑261/14, EU:C:2016:360, paragraph 32 and the case-law cited).
44It also follows from that case-law that, where the recovery of sums unduly paid in the context of an aid programme, approved and co-financed by the EAFRD for the 2007-2013 programming period, takes place after the programming period has come to an end, namely after 1 January 2014, recovery must be based on the provisions of Regulation No 1306/2013 (judgment of 18 January 2024, Askos Properties, C‑656/22, EU:C:2024:56, paragraph 40 and the case-law cited).
45In the present case, since the aid at issue benefited from EAFRD financing, the recovery of such aid must be based on Article 56 of that regulation, which lays down, as is apparent from its title, the provisions specific to the EAFRD.
46That provision, which lays down that, as regards the EAFRD, where irregularities or negligence are detected in rural development operations or programmes, Member States are to make financial adjustments by totally or partially cancelling the Union financing concerned, must be read in conjunction with, first, Article 54(1) of that regulation, which provides, in general, that, for any undue payment following the occurrence of irregularity or negligence, Member States are to request recovery from the beneficiary, and secondly, the first sentence of Article 35(6) of Delegated Regulation No 640/2014, which states that the support is to be withdrawn in full where it is established that the beneficiary provided false evidence for the purpose of receiving that support.
47In those circumstances, as the Advocate General observed, in essence, in point 28 of his Opinion, it must be considered that, by its first question, the referring court seeks to ascertain, in essence, whether the first paragraph of Article 56 of Regulation No 1306/2013, read, first, in conjunction with Article 54 of that regulation and the first sentence of Article 35(6) of Delegated Regulation No 640/2014 and, secondly, in the light of Article 7 of Regulation No 2988/95, must be interpreted as meaning that the recovery of aid financed by the EAFRD and wrongly received as a result of fraud may be sought not only from the beneficiary of that aid, but also from persons who, although they cannot be regarded as beneficiaries of that aid, intentionally made false statements in order to obtain it.
48In order to answer that question, it must be recalled that, in accordance with settled case-law, in interpreting a provision of EU law, it is necessary to consider not only its wording, but also the context in which it occurs and the objectives pursued by the rules of which it is part (judgment of 13 July 2023, G GmbH, C‑134/22, EU:C:2023:567, paragraph 25 and the case-law cited).
49As regards, in the first place, the wording of the relevant provisions of Regulation No 1306/2013 and of Delegated Regulation No 640/2014, it should be observed that that wording does not, in itself, clarify whether the recovery of undue aid referred to in those provisions may be requested from persons other than the economic operators who committed the irregularity at issue.
50Whilst Article 54(1) of Regulation No 1306/2013 provides that the recovery of any undue payment must be requested ‘from the beneficiary’, Article 56 of that regulation merely indicates the intended use of the amounts recovered by the Member States without, however, specifying the persons from whom they must be recovered. Article 35(6) of Delegated Regulation No 640/2014 refers to the ‘beneficiary’ of the aid, but does not provide any specific indication.
51In the second place, as regards the context of which those provisions form a part, it must be noted, first, that recital 39 of Regulation No 1306/2013 emphasises the need for Member States to prevent, detect and deal effectively with any irregularities and that, to that end, they should apply Regulation No 2988/95. It follows, as observed by the Danish Government in its written observations, that the provisions of Regulation No 1306/2013 must be interpreted in a manner that is consistent with the general rules of Regulation No 2988/95.
52Secondly, in so far as Article 54(3)(b) of Regulation No 1306/2013 permits Member States not to pursue recovery of aid wrongly received on account of an irregularity where that recovery proves impossible owing to the insolvency of the debtor ‘or the persons legally responsible for the irregularity’, it should be noted that that provision would be deprived of its effectiveness in respect of those persons if it was not possible to seek recovery of the aid concerned from them as well.
53In the third place, as regards the objectives of the rules at issue, the Court notes that, by laying down an obligation for Member States to recover aid wrongly received on account of an irregularity unless there are good reasons not to pursue such recovery, Articles 54 and 56 of Regulation No 1306/2013 and Article 35(6) of Delegated Regulation No 640/2014 pursue the objective of protecting the financial interests of the Union, as confirmed by Article 58(1)(e) of Regulation No 1306/2013. The possibility of seeking recovery of wrongly received aid from not only the beneficiary thereof, but also, in accordance with Article 7 of Regulation No 2988/95, from the ‘persons who have taken part in the irregularity and [from] those who are under a duty to take responsibility for the irregularity or to ensure that it is not committed’, is clearly capable of contributing to the attainment of that objective, in particular where the beneficiary is a legal person which no longer exists or does not have sufficient resources to repay that aid. That interpretation is justified, more specifically, in the light of the objective of effectively combating fraud, referred to in the fourth recital of Regulation No 2988/95.
54It follows that the interpretation of the first paragraph of Article 56 of Regulation No 1306/2013, read in conjunction with Article 54(1) of that regulation and the first sentence of Article 35(6) of Delegated Regulation No 640/2014, as well as in the light of Article 7 of Regulation No 2988/95 and the objective of the rules of which it forms a part, leads to the conclusion that that article allows the recovery of aid financed by the EAFRD and wrongly received as a result of fraud to be sought not only from the beneficiary of that aid, but also from persons who, although they cannot be regarded as beneficiaries of that aid, intentionally made false statements in order to obtain it.
55It must however be ascertained whether such an interpretation complies with the principle of legal certainty, since the Court has held that the recovery of amounts unduly paid cannot be carried out except in accordance with that principle, which requires EU rules to enable those concerned to know precisely the extent of the obligations which are imposed on them (see, to that effect, judgment of 18 December 2014, Somvao, C‑599/13, EU:C:2014:2462, paragraphs 50 and 51 and the case-law cited).
56In that regard, it is apparent from the Court’s case-law that, under the CAP, when the European Union legislature fixes conditions for eligibility in respect of the award of aid, the exclusion entailed by the failure to observe one of those conditions is not a penalty, but merely the consequence of failure to fulfil those conditions laid down by the law (judgment of 13 December 2012, FranceAgriMer, C‑670/11, EU:C:2012:807, paragraph 64 and the case-law cited).
57Consequently, the obligation to give back an advantage wrongly received by means of an irregular practice does not breach the principle of legality. A finding that the conditions required to obtain the advantage derived from the European Union law were created artificially makes, on any view, the advantage received a payment that was not due and thus justifies the obligation to repay it (see, to that effect, judgment of 13 December 2012, FranceAgriMer, C‑670/11, EU:C:2012:807, paragraphs 63 to 65 and 67 and the case-law cited).
58In that regard, Article 4(4) of Regulation No 2988/95 provides expressly that the measures provided for in Article 4(1) of that regulation, including, inter alia, an obligation to repay wrongly received aid, are not to be regarded as penalties.
59As regards persons other than the beneficiary who come under Article 7 of Regulation No 2988/95, the obligation to repay the aid at issue is a distinct obligation coming in addition to the beneficiary’s repayment obligation.
60In that context, the Court finds that the relevant rules in the present case are sufficiently clear as regards the existence of an obligation to repay aid for persons who, although they cannot be regarded as beneficiaries of aid which benefited from EAFRD financing, intentionally made false statements in order to obtain that aid, in particular where the beneficiary of the aid concerned or its possible successor in law is not in a position to repay the amount at issue.
61While Article 56 of Regulation No 1306/2013 does not expressly lay down such an obligation, it must be read in the light of recital 39 of that regulation, which states clearly that Member States should prevent, detect and deal effectively with any irregularities committed by beneficiaries and that, to that end, Regulation No 2988/95 should apply. Furthermore, Article 2(1)(g) of that regulation refers expressly to Regulation No 2988/95 as regards the definition of the term ‘irregularity’. Moreover, as is apparent from paragraph 42 above, under Article 7 of Regulation No 2988/95, the repayment of the aid may be imposed on persons who have taken part in the irregularity at issue.
62As a result, persons such as those in the dispute in the main proceedings who, subject to the verifications to be carried out by the referring court in that regard, intentionally made false statements in order to obtain aid financed by the EAFRD, must therefore anticipate that they may be requested to repay that aid. Accordingly, requesting those persons to repay such wrongly received aid does not breach the principle of legal certainty.
63In the light of the foregoing, the answer to the first question is that the first paragraph of Article 56 of Regulation No 1306/2013, read, first, in conjunction with Article 54(1) of that regulation and the first sentence of Article 35(6) of Delegated Regulation No 640/2014 and, secondly, in the light of Article 7 of Regulation No 2988/95, must be interpreted as meaning that the recovery of aid financed by the EAFRD and wrongly received as a result of fraud may be sought not only from the beneficiary of that aid, but also from persons who, although they cannot be regarded as beneficiaries of that aid, intentionally made false statements in order to obtain it.
The second question
64By its second question, the referring court asks, in essence, whether Article 54(1) of Regulation No 1306/2013 and Article 35(6) of Delegated Regulation No 640/2014 must be interpreted as meaning that, where a legal person has obtained agricultural aid as a result of fraud attributable to its representatives, those representatives may, in so far as, in reality, they receive the profits generated by that legal person, be regarded as being ‘beneficiaries’ of that aid within the meaning of those provisions.
65The concept of ‘beneficiary’ is defined in point 1 of the second subparagraph of Article 2(1) of Delegated Regulation No 640/2014, which supplements Regulation No 1306/2013, as being a farmer as defined in Article 4(1)(a) of Regulation No 1307/2013, the beneficiary subject to cross-compliance within the meaning of Article 92 of Regulation No 1306/2013 and/or the beneficiary receiving rural development support as referred to in Article 2(10) of Regulation No 1303/2013.
66It is clear, subject to the verifications to be carried out by the referring court, that R.M. and E.M., in their capacity as representatives of company X which obtained the aid at issue, are not covered by any of those three categories of person.
67Whilst it is true that, as is apparent from the answer to the first question, the recovery of aid financed by the EAFRD and wrongly received by a legal person as a result of fraud attributable to representatives of that person may also be sought from those representatives, the fact remains that it cannot be inferred from that answer that those representatives may be categorised as ‘beneficiaries’ within the meaning of point 1 of the second subparagraph of Article 2(1) of Delegated Regulation No 640/2014, where the conditions laid down for that purpose are not satisfied. On the contrary, as is apparent, in particular, from paragraph 62 above, those same representatives may be required to repay such aid, even where they acted on behalf of that legal person without having the status of ‘beneficiary’.
68In the light of the foregoing, the answer to the second question is that Article 35(6) of Delegated Regulation No 640/2014 must be interpreted as meaning that, where a legal person has obtained agricultural aid as a result of fraud attributable to its representatives, those representatives cannot, for that reason, be regarded as being ‘beneficiaries’ of that aid, within the meaning of that provision, read in conjunction with point 1 of the second subparagraph of Article 2(1) of that delegated regulation, if they are not covered by any of the three categories of person referred to by the latter provision, even if, in reality, they receive the profits generated by that legal person.
Costs
69Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
Operative part
On those grounds, the Court (First Chamber) hereby rules:
1.The first paragraph of Article 56 of Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008, read, first, in conjunction with Article 54(1) of that regulation and the first sentence of Article 35(6) of Commission Delegated Regulation (EU) No 640/2014 of 11 March 2014 supplementing Regulation (EU) No 1306/2013 of the European Parliament and of the Council with regard to the integrated administration and control system and conditions for refusal or withdrawal of payments and administrative penalties applicable to direct payments, rural development support and cross compliance, and, secondly, in the light of Article 7 of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests,must be interpreted as meaning that the recovery of aid financed by the European Agricultural Fund for Rural Development and wrongly received as a result of fraud may be sought not only from the beneficiary of that aid, but also from persons who, although they cannot be regarded as beneficiaries of that aid, intentionally made false statements in order to obtain it.
2.Article 35(6) of Delegated Regulation No 640/2014must be interpreted as meaning that where a legal person has obtained agricultural aid as a result of fraud attributable to its representatives, those representatives cannot, for that reason, be regarded as being ‘beneficiaries’ of that aid, within the meaning of that provision, read in conjunction with point 1 of the second subparagraph of Article 2(1) of that delegated regulation, if they are not covered by any of the three categories of person referred to by the latter provision, even if, in reality, they receive the profits generated by that legal person.
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