Republic of Austria v European Commission (T-501/22)

Contents

Judgment of the General Court (Tenth Chamber)7 February 2024^note(EAGF and EAFRD — Expenditure excluded from financing — Expenditure incurred by Austria — Reduction coefficient — Article 24(6) of Regulation (EU) No 1307/2013 — Article 30(7)(b) of Regulation No 1307/2013 — Article 52(4)(a) of Regulation (EU) No 1306/2013 — Obligation to state reasons)In Case T‑501/22,Republic of Austria, represented by J. Schmoll and A. Kögl, acting as Agents,vEuropean Commission, represented by J. Aquilina and A. Becker, acting as Agents,THE GENERAL COURT (Tenth Chamber),composed of O. Porchia, President, L. Madise (Rapporteur) and S. Verschuur, Judges,Registrar: S. Jund, Administrator,having regard to the written part of the procedure,further to the hearing on 11 July 2023,gives the following

JudgmentOnly the paragraphs of the present judgment which the Court considers it appropriate to publish are reproduced here.

1By its action based on Article 263 TFEU, the Republic of Austria seeks the annulment of Commission Implementing Decision (EU) 2022/908 of 8 June 2022 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 2022 L 157, p. 15; ‘the contested decision’), in so far as it excluded from EU financing expenditure declared under the EAGF by the Republic of Austria in the amount of EUR 68 146 449.98.

Background to the dispute

2In the context of the introduction of the basic payment scheme established by 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), the Republic of Austria decided to apply Article 24(6) of that regulation.

3Pursuant to that provision, Member States may decide to apply, for the purpose of establishing the number of payment entitlements to be allocated to a farmer, a reduction coefficient to those eligible hectares which consist of permanent grassland located in areas with difficult climate conditions (‘the reduction coefficient’).

4The Republic of Austria decided to apply the reduction coefficient to parcels classified under Austrian law as ‘pastures’ and as ‘alpine pastures’.…

Investigation AA/2016/007/AT

6The European Commission carried out an investigation, bearing the reference AA/2016/007/AT, intended to verify, for the claim years 2015 and 2016, whether the management and control of area-related aid schemes were carried out by the Austrian authorities in accordance with EU law.

7At the end of that investigation, the Commission found, inter alia, that the Austrian authorities had incorrectly applied Article 24(6) of Regulation No 1307/2013 as regards ‘pastures’.…

9On the basis of Article 52 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), the Commission adopted Implementing Decision (EU) 2019/265 of 12 February 2019 excluding from European Union financing certain expenditure incurred by the Member States under the EAGF and the EAFRD (OJ 2019 L 44, p. 14). By that decision, the Commission, as regards the Republic of Austria, excluded from EU financing expenditure incurred under the EAGF in the amount of EUR 8031282 for the claim years 2015 and 2016, as a result of non-compliance linked to the incorrect application of Article 24(6) of Regulation No 1307/2013 as regards ‘pastures’.

10With a view to drawing the appropriate conclusions from that financial correction, which it did not dispute, the Republic of Austria adopted the following corrective measure.

11The Bundesgesetz, mit dem das Marktordnungsgesetz 2007 – MOG 2007 geändert wird (Federal Law amending the Law on Market Organisation of 2007) (BGBl. I, 46/2018) amended Paragraph 8a of the Law on Market Organisation by adding a subparagraph 2a providing, in respect of farmers with parcels classified as ‘pastures’, in addition to the payment entitlements initially allocated with a reduction coefficient of 80%, for the allocation of additional payment entitlements with a reduction coefficient of 20%. In other words, the Republic of Austria granted the farmers concerned 0.8 additional payment entitlement for each eligible hectare of ‘pastures’, with effect from 2017.

12Those additional payment entitlements for ‘pastures’ were allocated from the national reserve which it is for the Member States to establish pursuant to Article 30(1) of Regulation No 1307/2013. The value of those additional entitlements was set at 60% of the national unit value.…

Investigation AA/2018/010/AT

14The Commission opened a new investigation, bearing the reference AA/2018/010/AT, concerning the claim years 2015 et seq., in the context of which it carried out an on-the-spot check from 27 to 31 August 2018.…

25The Commission sent its summary report dated 26 April 2022 to the Austrian authorities.

26In that document, the Commission stated that the Republic of Austria had not applied Article 24(6) of Regulation No 1307/2013 correctly. According to the Commission, the implementation of that provision by the Austrian authorities had led to differences in treatment of parcels located in the same geographical area. Thus, the Commission stated that the reduction coefficient had been applied only to permanent grassland parcels registered as ‘alpine pastures’ and not to other neighbouring parcels that were nevertheless subject to the same climate conditions. According to the Commission, that finding showed that the classification of a parcel as an ‘alpine pasture’ was not linked to the existence of difficult climate conditions, within the meaning of Article 24(6) of Regulation No 1307/2013. The Commission concluded from that that the application of that provision by the Austrian authorities was not based on objective criteria and that, consequently, equal treatment of farmers in the allocation of payment entitlements was not ensured.

27Furthermore, as regards the corrective measure adopted following investigation AA/2016/007/AT, the Commission stated, in the summary report, that Article 30(7)(b) of Regulation No 1307/2013, under which the national reserve may be used to allocate payment entitlements to farmers in order to compensate them for specific disadvantages, could not lawfully be applied in a situation arising, as in the present case, from a deficiency in the management and control system of the Member State concerned. According to the Commission, that would mean that the European Union would have to finance the consequences of a deficiency attributable to the Member State. Moreover, the Commission considered that the Republic of Austria could not reduce all the direct payments provided for in Article 7 of Regulation No 1307/2013 in order to replenish the national reserve. The Commission found that the reduction of all direct payments with a view to financing the corrective measure had led to all farmers bearing the burden of the deficiency on the part of the Austrian authorities. Accordingly, the Commission considered that the corrective measure taken by the Austrian authorities had not ensured the protection of farmers’ rights, which was at the heart of the common agricultural policy. The Commission also stated that the Republic of Austria should, by way of a corrective measure, have recalculated the value of all payment entitlements by correctly applying Articles 25 and 26 of Regulation No 1307/2013.

28In respect of the financial consequences of the instances of alleged non-compliance on the part of Austrian authorities, as regards the ‘administrative checks of payment entitlements when the basic payment scheme was introduced’, the Commission identified two financial risks for the EAGF, one in relation to the application of the reduction coefficient and the other to the corrective measure adopted following investigation AA/2016/007/AT.

29First, the Commission found that the incorrect application of the reduction coefficient, which, in its view, led to the allocation of an insufficient number of payment entitlements, affected the unit value of the payment entitlements of all Austrian farmers as from 2015. According to the Commission, the risk to the EAGF corresponded, in respect of the claim years 2015 to 2019, to the excess payments that had been made because the unit value of those payment entitlements had been set at too high a level.

30Second, the Commission found that the allocation of additional entitlements as from 2017 to farmers working ‘pastures’, which could not lawfully be financed by funds from the national reserve, had given rise to a separate financial risk for the EAGF in respect of the claim years 2017 to 2019.…

35By the contested decision, the Commission excluded from EU financing certain expenditure incurred by the Member States under the EAGF and the EAFRD.

36As regards the Republic of Austria, the Commission excluded from EU financing expenditure declared under the EAGF totalling EUR 68 270 562.18, which includes, in the amount of EUR 68 146 449.98, the financial consequences from the two instances of non-compliance referred to in paragraph 34 above, which alone are at issue in the present case.

Forms of order sought

37The Republic of Austria claims that the Court should:– annul the contested decision, inasmuch as it excludes from EU financing expenditure which that Member State declared under the EAGF in the amount of EUR 68 146 449.98;– order the Commission to pay the costs.

38The Commission contends that the Court should:– dismiss the action;– order the Republic of Austria to pay the costs.

Law…

The first plea in law, alleging infringement of Article 52(1) of Regulation No 1306/2013 resulting from a financial correction based on a misinterpretation of Article 24(6) of Regulation No 1307/2013

53By this plea in law, the Republic of Austria challenges the first financial correction, which concerns the application of Article 24(6) of Regulation No 1307/2013.

54The Republic of Austria submits that, by applying the reduction coefficient to parcels classified as ‘alpine pastures’ under the relevant provisions of national law, which, according to it, make that classification subject to the existence of difficult climate conditions, it correctly applied Article 24(6) of Regulation No 1307/2013. Consequently, it submits that, by imposing a financial correction on the ground that that provision was not correctly applied, the Commission infringed Article 52(1) of Regulation No 1306/2013.…

56As has been noted in paragraph 26 above, the first financial correction is, as is apparent from the summary report, based on the ground that the application by the Austrian authorities of Article 24(6) of Regulation No 1307/2013 was said to lead to unjustified differences of treatment in so far as, within the same zone, the reduction coefficient was not applied to all parcels subject to the same climate conditions. That conclusion is based in particular on a satellite image from which it is apparent that parcels classified as ‘alpine pastures’, to which the reduction coefficient was applied, are located in the immediate vicinity of other permanent grassland parcels which were not so classified and to which the reduction coefficient was not applied. Furthermore, as has been stated in paragraph 50 above, the Commission took the view, in the light of those findings, that the argument by which the Republic of Austria claimed that the classification of the parcels as ‘alpine pastures’ was based on objective criteria laid down by the relevant provisions of the Austrian Länder could not lead to the conclusion that the Austrian authorities had not applied Article 24(6) of Regulation No 1307/2013 correctly being called into question.…

76In the second place, the Republic of Austria submits that, by applying the reduction coefficient to parcels registered as ‘alpine pastures’, it ensured a consistent and uniform application of Article 24(6) of Regulation No 1307/2013.…

79In that regard, it must be noted that the Republic of Austria does not dispute, in its written pleadings, the accuracy of the Commission’s finding that the parcels classified as ‘alpine pastures’ were treated differently as compared to neighbouring permanent grassland parcels which had not been so classified. Nor does the Republic of Austria claim that that situation is the result of an one-off error or that the example chosen by the Commission from the satellite image referred to in paragraph 56 above is not representative of the overall situation in Austria.

80By contrast, the Republic of Austria submits, in essence, that the difference in treatment referred to by the Commission is justified by objective differences in terms of the situation of the parcels concerned from the point of view of the climate conditions to which they are subject.

81Thus, the Republic of Austria submits that neighbouring parcels may be subject to different microclimatic conditions. While the Commission stated, in particular in the communication of 27 November 2018, that parcels classified as ‘alpine pastures’ were subject to the same climate conditions as neighbouring parcels located at the same altitude, the Republic of Austria asserts that altitude is not a sufficient criterion for assessing the actual climate conditions to which the parcels are subject. By way of example, it submits that south-facing parcels enjoy better sunlight conditions and are therefore warmer and drier than north-facing parcels, which have longer periods of snow cover. The Republic of Austria asserts that, when registering parcels in the Alpine cadastre, the competent authorities take account of those microclimatic conditions to which the parcels concerned are subject and take into consideration, inter alia, the slope inclination, the soil structure, the humidity and the duration of the snow cover.

82Nevertheless, that argument is not such as to call into question the Commission’s conclusion.

83It is true that, while it follows from Article 24(6) of Regulation No 1307/2013 that the existence of difficult climate conditions must, as the Commission submits, be assessed within a given area, and not at the level of an individual parcel, that provision does not contain any details as to the extent of the areas in respect of which it is necessary to assess whether the criterion of difficult climate conditions is satisfied. Consequently, in particular in mountain areas, it cannot in principle be ruled out that neighbouring parcels may be regarded as belonging to separate areas with different climate conditions linked, for example, to the steepness or the orientation of the parcel. Therefore, the fact that the reduction coefficient was applied to ‘alpine pastures’ and not to neighbouring parcels does not necessarily show an incorrect application of Article 24(6) of Regulation No 1307/2013.

84Nevertheless, apart from the assertion that the competent authorities must take account of microclimatic conditions for the purpose of registering a parcel in the Alpine cadastre, the Republic of Austria has not adduced evidence to establish that such an approach was specifically and systematically applied when the parcels were registered in the Alpine cadastre. In that regard, it must be noted that the Republic of Austria does not explain, by referring, for example, to the satellite image used by the Commission, what specific microclimatic conditions justified the registration of some parcels in the Alpine cadastre but not that of neighbouring permanent grassland parcels.…

87Consequently, as the Commission submits, the Austrian authorities’ approach, consisting in applying the reduction coefficient only to parcels classified as ‘alpine pastures’, does not make it possible to ensure that that coefficient was applied to all parcels located in areas with difficult climate conditions, or to ensure that that coefficient was applied only to parcels which actually meet that criterion.

88Thus, the arguments put forward by the Republic of Austria do not invalidate the Commission’s conclusion that the reduction coefficient was not applied in accordance with Article 24(6) of Regulation No 1307/2013.

89It follows from the foregoing that the first plea in law, alleging that the financial correction at issue was made by the Commission on the basis of a misinterpretation of Article 24(6) of Regulation No 1307/2013, must be rejected.

The second plea in law, alleging infringement of Article 52(1) of Regulation No 1306/2013 resulting from a financial correction based on a misinterpretation of Article 30(7)(b) and Article 7 of Regulation No 1307/2013

90By this plea in law, the Republic of Austria challenges the second financial correction, relating to the corrective measure adopted following investigation AA/2016/007/AT.…

The first part, alleging incorrect interpretation of Article 30(7)(b) of Regulation No 1307/2013

94It is apparent from the case file, in particular from the statement of reasons in the summary report, referred to in paragraph 27 above, that the second financial correction is based on a first ground, alleging that the Republic of Austria could not, on the basis of Article 30(7)(b) of Regulation No 1307/2013, finance from the national reserve the corrective measure consisting in the allocation of additional payment entitlements to farmers working ‘pastures’. The Commission found that the national reserve could not, on the basis of that provision, be used to remedy a situation resulting from an error made by the Austrian authorities in the application of EU law.

95The Republic of Austria disputes the merits of that first ground.

96Under Article 30 of Regulation No 1307/2013:1. Each Member State shall establish a national reserve. In order to do so, Member States shall proceed, in the first year of implementation of the basic payment scheme, to a linear percentage reduction of the basic payment scheme ceiling at national level.…4. Member States shall allocate payment entitlements from their national or regional reserves in accordance with objective criteria and in such a way as to ensure the equal treatment of farmers and to avoid distortions of the market and of competition.…6. Member States shall use their national or regional reserves to allocate payment entitlements, as a matter of priority, to young farmers and to farmers commencing their agricultural activity.7.Member States may use their national or regional reserves to:(a) allocate payment entitlements to farmers in order to prevent land from being abandoned, including in areas subject to restructuring or development programmes relating to a form of public intervention;(b) allocate payment entitlements to farmers in order to compensate them for specific disadvantages;(c) allocate payment entitlements to farmers who were prevented from being allocated payment entitlements under this Chapter as a result of force majeure or exceptional circumstances;(d) allocate, in cases where they apply Article 21(3) of this Regulation, payment entitlements to farmers whose number of eligible hectares that they declared in 2015 in accordance with point (a) of the first subparagraph of Article 72(1) of Regulation … No 1306/2013 and that are at their disposal on a date fixed by the Member State, which shall be no later than the date fixed in that Member State for amending such an aid application, is higher than the number of owned or leased-in payment entitlements established in accordance with Regulation (EC) No 1782/2003 and with Regulation (EC) No 73/2009 that they hold on the final date for submission of applications to be set in accordance with point (b) of the first subparagraph of Article 78 of Regulation … No 1306/2013;(e) linearly increase, on a permanent basis, the value of all payment entitlements under the basic payment scheme at national or regional level if the relevant national or regional reserve exceeds 0,5% of the annual national or regional ceiling for the basic payment scheme, provided that sufficient amounts remain available for allocations under paragraph 6, under points (a) and (b) of this paragraph and under paragraph 9 of this Article;(f) cover the yearly needs for payments to be granted in accordance with Article 51(2) and Article 65(1), (2) and (3) of this Regulation.For the purpose of this paragraph, Member States shall decide on the priorities between the different uses referred to herein.…’

97The Republic of Austria submits that the initial allocation of insufficient payment entitlements to farmers working ‘pastures’, as a result of the incorrect application of the reduction coefficient, constituted a specific disadvantage for those farmers within the meaning of Article 30(7)(b) of Regulation No 1307/2013. According to the Commission, the concept of a specific disadvantage cannot, however, apply in a case where, as in the present case, the disadvantage suffered by some farmers results from the Member State concerned disregarding the provisions of EU law.

98According to settled case-law, in interpreting a provision of EU law it is not only its wording but also the context in which it occurs and the objectives of the rules of which it forms part that must be considered (see, to that effect, judgment of 26 September 2018, Baumgartner, C‑513/17, EU:C:2018:772, paragraph 23 and the case-law cited).

99In the first place, as regards the wording of the provision at issue, it must be noted that Article 30(7) of Regulation No 1307/2013 provides an exhaustive list of the cases in which the national reserve may be used, as permitted by that provision. Thus, in order to be regarded as authorised by Article 30(7) of Regulation No 1307/2013, the use of the reserve must necessarily fall within one of the cases referred to in points (a) to (f) of that provision, which is not disputed by the parties, in particular by the Republic of Austria, which considers that it used the national reserve in accordance with Article 30(7)(b) of Regulation No 1307/2013.

100Furthermore, it must be noted that the concept of ‘specific disadvantages’ is not defined in Regulation No 1307/2013. In everyday language, the term ‘disadvantage’ refers to harm or to a person being in a position of inferiority. The use of the verb ‘compensate’ in the provision at issue confirms that the disadvantages in question amount to harm suffered by the farmer.

101Account must also be taken of the fact that the adjective ‘specific’ is used by the provision in question to characterise the disadvantage suffered by the farmer. That term, which, in its literal sense, refers to what is particular to a case or common to all individual instances of the same kind, supports an interpretation according to which the disadvantages in question concern certain categories of farmers who are distinguished from others by virtue of characteristics that are inherent in their situation.

102By contrast, the fact that farmers suffer the consequences of an error committed by a Member State in the application of EU law does not appear sufficient to support the conclusion that those farmers fall within a particular category and that the disadvantage which they suffer as a result of that error should, for that reason, be regarded as being specific to them. That is all the more so since, according to the provision in question and the nature of the irregularity on the part of the Member State, the error in question can affect a greater or lesser number of farmers, or, in some cases, all the farmers in the Member State concerned.

103Accordingly, the wording of Article 30(7)(b) of Regulation No 1307/2013 supports an interpretation of that provision according to which the concept of ‘specific disadvantages’ does not include disadvantages resulting from an error committed by a Member State in the application of EU law.

104Nevertheless, a definitive conclusion cannot be reached on the basis of a literal interpretation of the provision at issue, with the result that the context in which it occurs and the objectives of the rules of which it forms part must be analysed.

105In the second place, as regards the context in which the provision at issue occurs, it is necessary, as the Commission suggests, to examine the relationship between paragraphs 6 and 7 of Article 30 of Regulation No 1307/2013. The use, in paragraph 6, of the words ‘as a matter of priority’ must be understood as meaning that it is only if sufficient funds remain in the national reserve after the priority allocation provided for in that paragraph that the Member States have the option of using the reserve funds for the subsidiary purposes referred to in paragraph 7 (see, to that effect, judgment of 10 March 2021, Staatliches Amt für Landwirtschaft und Umwelt Mittleres Mecklenburg, C‑365/19, EU:C:2021:189, paragraph 29). It follows from that relationship of priority between paragraphs 6 and 7 of Article 30 of Regulation No 1307/2013 that the cases in which the reserve provided for in paragraph 7 is used, which are subsidiary to those provided for in paragraph 6, must not be construed broadly.

106Similarly, in respect of the context in which the provision at issue occurs, it must be noted that Commission Delegated Regulation (EU) No 639/2014 of 11 March 2014 supplementing Regulation (EU) No 1307/2013 of the European Parliament and of the Council and amending Annex X to that Regulation (OJ 2014 L 181, p. 1) contains clarifications on the concept of ‘specific disadvantage’ within the meaning of Article 30(7)(b) of Regulation No 1307/2013.

107Article 31(2) of Delegated Regulation No 639/2014 provides that, where a farmer enjoys a number of payment entitlements below a fixed percentage of his or her eligible hectares, as a result of the application of one or several limitations on the allocation of payment entitlements laid down in Article 24(3) to (7) of Regulation No 1307/2013, he or she may be considered to be in a situation of ‘specific disadvantage’ under Article 30(7)(b) of Regulation No 1307/2013.

108Thus, Article 31(2) of Delegated Regulation No 639/2014 supports the interpretation that the concept of ‘specific disadvantages’ refers more specifically to disadvantages inherent in the particular situation of certain farmers, which can result, inter alia, from the – lawful – application of certain provisions of Regulation No 1307/2013.

109That situation appears to be different from that in the present case, in which a Member State, at the time of the first allocation of payment entitlements in the context of the implementation of the basic payment scheme, misapplied the provisions of Regulation No 1307/2013, and decided, in order to correct that situation, to allocate to certain farmers payment entitlements which they should have received from the outset if the relevant provisions had been correctly applied.

110By contrast, although the Commission submits, as regards the context in which the provision at issue occurs, that the other cases of use of the reserve provided for in Article 30(7) of Regulation No 1307/2013 are intended to compensate farmers for the disadvantages inherent in their situation, that is not the case with Article 30(7)(e) and (f) of that regulation. Therefore, a comparison of Article 30(7)(b) of that regulation with the other cases of use of the reserve provided for in that paragraph does not support one or the other of the interpretations put forward by the parties.

111In the third place, as regards the objectives of the rules of which the provision at issue forms part, it must be noted that the objective pursued by the EU legislature with regard to the implementation of national or regional reserves is set out in recital 24 of Regulation No 1307/2013, according to which ‘national or regional reserves should be used, as a matter of priority, to facilitate the participation of young farmers and farmers commencing their agricultural activity in the scheme and using them should be allowed in order to take account of certain other specific situations’. Thus, the implementation of the reserve is intended to enable Member States to provide support to farmers in specific situations, as a matter of priority young farmers and those commencing their agricultural activity.

112In the present case, the disadvantage suffered by the farmers working ‘pastures’, to whom the reduction coefficient had been unfairly applied, was not inherent in their situation or linked to a characteristic specific to them, but resulted from the fact that the Austrian authorities, by incorrectly applying Article 24(6) of Regulation No 1307/2013, had deprived them of payment entitlements which should have been allocated to them from the outset.

113The fact, relied on by the Republic of Austria, that the incorrect application of EU law affected only the holders of ‘pastures’, which is, moreover, disputable given that, as the Commission correctly points out, the irregularity at issue had consequences for the value of the payment entitlements of all Austrian farmers, cannot, therefore, lead to the conclusion that the holders of ‘pastures’ were in a situation constituting a specific disadvantage allowing the Republic of Austria to allocate additional payment entitlements to them from the national reserve on the basis of Article 30(7)(b) of Regulation No 1307/2013.

114It follows from the foregoing that the Commission was entitled to consider that the allocation of additional payment entitlements to farmers working ‘pastures’ in order to remedy the incorrect application of the reduction coefficient could not be financed from the national reserve on the basis of Article 30(7)(b) of Regulation No 1307/2013.…

118It follows from the foregoing that the Republic of Austria is not justified in challenging the validity of the first ground on which the second financial correction is based and that, consequently, the first part of its second plea in law must be rejected.…

The third plea in law, alleging infringement of Article 52(4)(a) of Regulation No 1306/2013

135By this plea in law, the Republic of Austria submits that the Commission infringed Article 52(4)(a) of Regulation No 1306/2013, inasmuch as the expenditure excluded from EU financing by the contested decision includes payments made before 27 November 2016.

136This plea concerns the first financial correction, which covers the claim years 2015 to 2019, that is to say, the financial years 2016 to 2020.

137Article 52(4) of Regulation No 1306/2013 reads as follows:‘Financing may not be refused for:(a) expenditure as indicated in Article 4(1) which is effected more than 24 months before the Commission notifies the Member State in writing of its inspection findings;…’

138The notification of the result of the Commission’s checks corresponds to the communication, referred to in the first subparagraph of Article 34(2) of Implementing Regulation No 908/2014, by which the Commission informs the Member State of the findings of its investigation, specifying the corrective measures needed to ensure future compliance with the rules, and indicating the provisional level of financial correction which at that stage of the procedure it considers corresponds to its findings.

139It is clear from the case-law that, in order to fulfil its function as a warning thus described, that communication must inform the Member State concerned fully about the Commission’s reservations. Consequently, that communication must identify, with sufficient precision, the purpose of the investigation carried out by the Commission and the deficiencies found by it during that investigation, which may be invoked subsequently as evidence of the serious and reasonable doubt it entertains about the checks carried out by the national authorities or about the figures submitted by them, and which may, accordingly, justify the financial corrections applied in the final decision excluding from EU financing certain expenditure incurred by the Member State concerned under the EAGF (see, by analogy, judgments of 7 June 2013, Portugal v Commission, T‑2/11, EU:T:2013:307, paragraphs 58 and 59 and the case-law cited, and of 25 September 2018, Sweden v Commission, T‑260/16, EU:T:2018:597, paragraphs 39 and 40).

140Thus, the communication referred to in the first subparagraph of Article 34(2) of Implementing Regulation No 908/2014, where it meets the requirements set out in paragraph 139 above, constitutes the reference point for calculation of the period of 24 months laid down in Article 52(4)(a) of Regulation No 1306/2013 (see, by analogy, judgment of 3 May 2012, Spain v Commission, C‑24/11 P, EU:C:2012:266, paragraph 31).

141It is also apparent from the case-law that the limitation of the period during which the Commission may exclude certain expenditure from EU financing is intended to protect Member States against the absence of legal certainty which would exist if the Commission were able to call into question expenditure incurred several years before the adoption of a conformity clearance decision (see, to that effect, judgment of 21 March 2002, Spain v Commission, C‑130/99, EU:C:2002:192, paragraph 133).

142In the present case, although investigation AA/2016/007/AT concerned, inter alia, compliance with Article 24(6) of Regulation No 1307/2013, the Commission had, during that investigation, as the Republic of Austria submits, specifically identified that there was non-compliance linked to the incorrect application of the reduction coefficient solely in respect of ‘pastures’. Although the situation of ‘alpine pastures’ had also been referred to during that investigation, no failure to comply was identified on that basis at the end of that investigation. In that regard, it must be noted that, in the context of investigation AA/2018/010/AT, the Commission stated, in its communication of 27 November 2018, that it had hitherto taken the view, on the basis of the explanations given by the Austrian authorities in the context of investigation AA/2016/007/AT, that the criterion of difficult climatic conditions, laid down in Article 24(6) of Regulation No 1307/2013, had been correctly applied with regard to the ‘alpine pastures’.

143It follows from the foregoing that it was the communication of 27 November 2018, addressed to the Republic of Austria in the context of investigation AA/2018/010/AT, which, for the first time, identified with sufficient precision the non-compliance found by the Commission as regards the incorrect application of the reduction coefficient to ‘alpine pastures’.

144Furthermore, although the specific situation of ‘alpine pastures’ had been referred to during the first investigation, without, however, the Commission concluding at that stage that there was a deficiency on that point, that fact cannot, in any event, as the Republic of Austria maintains, affect the application of the temporal limitation on financial corrections laid down in Article 52(4)(a) of Regulation No 1306/2013.

145It follows that, as the Republic of Austria maintains, including as regards the financial consequences of the non-compliance linked to the incorrect application of the reduction coefficient to ‘alpine pastures’, which gave rise to the first financial correction, the communication of 27 November 2018 constituted the starting point of the period of 24 months referred to in Article 52(4)(a) of Regulation No 1306/2013. Consequently, the Commission could not exclude from EU financing expenditure incurred before 27 November 2016.

146It is apparent from the case file, and in particular from the contested decision, that, in respect of the first financial correction, identified in the table annexed to that decision by way of the reason ‘allocation of entitlements convergence’, the Commission excluded from EU financing expenditure incurred in the financial years 2016 and 2017, which began on 16 October 2015 and 16 October 2016, respectively. The Commission thus excluded from EU financing expenditure incurred before 27 November 2016. In so doing, it infringed Article 52(4)(a) of Regulation No 1306/2013.…

152Consequently, the contested decision must be annulled in so far as, as regards the first financial correction at issue, it excluded from EU financing expenditure incurred prior to 27 November 2016.…

Operative part

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

1.Annuls Commission Implementing Decision (EU) 2022/908 of 8 June 2022 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), in so far as it excludes from EU financing, as regards the financial correction identified in the table annexed to that decision by way of the reason ‘allocation of entitlements convergence’, concerning the financial years 2016 to 2020, expenditure incurred by the Republic of Austria under the EAGF prior to 27 November 2016;

2.Dismisses the action as to the remainder;

3.Orders the Republic of Austria and the European Commission to bear their own costs.

Delivered in open court in Luxembourg on 7 February 2024.