JUDGMENT OF THE COURT (Third Chamber)
16 July 2020 (*)
(Appeal — Arbitration clause — Grant agreements concluded in the context of the Specific Programme ‘Civil Justice’ for the period 2007-2013 — Audit reports questioning the eligibility of certain costs — European Commission decision to recover unduly paid sums — Article 299 TFEU — Power of the Commission to adopt an enforceable decision within contractual relationships — Jurisdiction of the EU judicature — Effective judicial protection)
In Case C‑584/17 P,
APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 4 October 2017,
ADR Center SpA, established in Rome (Italy), represented by A. Guillerme and T. Bontinck, avocats,
applicant,
the other party to the proceedings being:
European Commission, represented by J. Estrada de Solà and A. Katsimerou, acting as Agents,
defendant at first instance,
THE COURT (Third Chamber),
composed of A. Prechal, President of the Chamber, J. Malenovský, and F. Biltgen (Rapporteur), Judges,
Advocate General: J. Kokott,
Registrar: L. Hewlett, Principal Administrator,
having regard to the written procedure and further to the hearing on 27 February 2019,
after hearing the Opinion of the Advocate General at the sitting on 7 November 2019,
gives the following
Judgment
1 By its appeal, ADR Center SpA (‘ADR’) requests that the Court of Justice set aside the judgment of the General Court of the European Union of 20 July 2017, ADR Center v Commission (T‑644/14, ‘the judgment under appeal’, EU:T:2017:533), by which the General Court dismissed its action for, first, annulment of Commission Decision C(2014) 4485 final of 27 June 2014 concerning the recovery of part of the financial contribution paid to ADR under three grant agreements concluded in the context of the Specific Programme ‘Civil Justice’ (‘the contested decision’), and, second, an order directing the Commission to pay the balance due to it under the three grant agreements, in an amount of EUR 49 172.52 together with damages.
Legal context
2 Article 2(b) of Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002 (OJ 2012 L 298, p. 1, ‘the Financial Regulation’) provides that, for the purposes of that regulation, ‘institution’ means, inter alia, the Commission.
3 Article 79(2) of the Financial Regulation states:
‘The institution may formally establish an amount as being receivable from persons other than Member States by means of a decision which shall be enforceable within the meaning of Article 299 of the [TFEU].
…’
4 Article 90 of the Financial Regulation provides:
‘1. Payment shall be made on production of proof that the relevant action is in accordance with the provisions of the basic act or the contract and shall cover one or more of the following operations:
(a) payment of the entire amount due;
(b) payment of the amount due in any of the following ways:
(i) pre-financing, which may be divided into a number of payments after the signature of the delegation agreement, the contract or grant agreement or after notification of the grant decision;
(ii) one or more interim payments as a counterpart of a partial execution of the action;
(iii) payment of the balance of the amounts due where the action is completely executed.
…’
Background to the dispute
5 The background to the dispute is set out in paragraphs 1 to 42 of the judgment under appeal. For the purposes of these proceedings, it can be summarised as follows.
6 ADR is a company established in Italy that provides services in the field of amicable settlement of disputes.
7 In December 2008, the Commission concluded three grant agreements (‘the grant agreements’) with consortia, coordinated by ADR, pursuant to Decision No 1149/2007/EC of the European Parliament and of the Council of 25 September 2007 establishing for the period 2007-2013 the Specific Programme ‘Civil Justice’ as part of the General Programme ‘Fundamental Rights and Justice’ (OJ 2007 L 257, p. 16).
8 In accordance with Article I.6 of the grant agreements, read in conjunction with Article II.15.4 thereof, the coordinator was to submit, within two months following the closing date of the action concerned (i) a final report on the technical implementation of the action, (ii) a final financial statement of the eligible costs actually incurred, following the structure of the estimated budget and using the same description and (iii) a full summary statement for the receipts and expenditure of the action.
9 Article I.9 of the grant agreements stipulated that the grants were governed by the terms of the agreements themselves, the EU rules applicable and, on a subsidiary basis, by the law of Belgium relating to grants. It specified that beneficiaries may bring legal proceedings regarding decisions by the Commission concerning the application of the provisions of the grant agreement and the arrangements for implementing it before the EU judicature.
10 Article II.14.1 of the grant agreements stipulated the general criteria which costs had to satisfy in order to be considered as eligible costs for the action concerned.
11 Article II.19.5 of the grant agreements informed beneficiaries that, under Article 256 EC (now Article 299 TFEU), the Commission could adopt an enforceable decision formally establishing an amount as receivable from persons other than States. That decision was subject to appeal before the General Court.
12 Article II.20 of the grant agreements contained detailed clauses on controls and audits.
13 Following the submission of the final reports and in the light of their content, the Commission informed ADR of its intention to recover certain sums paid as pre-financing payments that it had made under the grant agreements.
14 Furthermore, following contradictory audits carried out by the Commission, the latter communicated to ADR, on 10 June 2013, the amounts of the sums which it had decided to recover because of the ineligibility of certain costs declared for each of the agreements in question. The Commission also informed ADR that it would send it debit notes within one month and that it would proceed, if necessary, either by offsetting those notes or by enforcement proceedings to recover the sums unduly paid.
15 By letter of 9 July 2013, ADR disputed the findings of the final audit reports and argued that the Commission’s recovery orders were null and void on the ground of their being issued more than two years after the audits had been completed.
16 On 16 October 2013, the Commission communicated to ADR three debit notes, each relating to one of the agreements in question, for amounts of EUR 62 649.47, EUR 78 991.12 and EUR 52 634.75 respectively. These debit notes specified that, in the event of failure to pay by the due date, late payment interest would accrue on the debt.
17 On 27 June 2014, after sending ADR reminder letters on 16 December 2013 and letters of formal notice on 26 February 2014, the Commission adopted the contested decision on the basis of Article 299 TFEU and Article 79(2) of the Financial Regulation. By that decision, the Commission ordered the recovery from ADR of the amount of EUR 194 275.34 in respect of the capital owed by it pursuant to the grant agreements, together with late payment interest to 30 April 2014 of EUR 3 236, and an additional amount of EUR 21.30 for each additional day of delay from 1 May 2014 onwards. Article 4 of the contested decision stated, inter alia, that that decision was enforceable within the meaning of the first paragraph of Article 299 TFEU.
The procedure before the General Court and the judgment under appeal
18 By application lodged at the Court Registry on 30 August 2014, ADR brought an action seeking annulment of the contested decision, payment of the balance outstanding under the grant agreements in the amount of EUR 49 172.52 and payment of damages as a result of the harm done to its reputation and the time devoted by its staff to defending its interests in administrative and judicial proceedings.
19 As regards the admissibility of the action brought by ADR, in relation to the request for payment of the balance outstanding, the General Court recalled, in paragraph 56 of the judgment under appeal, that the admissibility of that request depended on the legal nature of the action. According to the General Court, if this is an action brought on the basis of Article 263 TFEU, that request is inadmissible in so far as it is not for the EU judicature, when exercising judicial review of the legality of acts of the Union, to issue directions to the institutions of the Union or to assume the role assigned to those institutions, which are responsible for adopting the necessary measures to implement a judgment given in proceedings for annulment.
20 However, in paragraphs 59 and 60 of the judgment under appeal, the General Court stated that an action may, despite its being expressly founded on Article 263 TFEU, have in reality a dual objective, seeking not only annulment of the contested decision, but also a declaration by the General Court that the Commission did not hold the contractual claim in question. In that regard, the General Court held that, where the contract contains an arbitration clause, within the meaning of Article 272 TFEU, it may determine whether it is possible to partially reclassify the action brought. According to the General Court, such reclassification is possible, without the rights of defence of the defendant institution being affected, where, first, the applicant does not expressly preclude it and, secondly, at least one plea alleging infringement of the rules governing the contractual relationship in question is raised in the application pursuant to the provisions of Article 44(1)(c) of the Rules of Procedure.
21 After having partially reclassified, in paragraph 61 of the judgment under appeal, the action brought before it as an action brought both under Article 263 TFEU and under Article 272 TFEU, the General Court concluded, in paragraph 62 of the judgment under appeal, that Article 272 TFEU, under which ‘the Court enjoys full jurisdiction’, enabled it, ‘in contrast to a review of legality of an act under Article 263 TFEU’, to hear and determine any type of action under an arbitration clause and, therefore, also an application seeking, inter alia, that the General Court order the immediate payment by the Commission of the balance due. The claim by ADR for payment of the balance due under the grant agreements was therefore considered admissible by the General Court.
22 As regards the claim for payment of damages to compensate for the loss allegedly suffered by ADR, the General Court, in paragraph 67 of the judgment under appeal, dismissed it as inadmissible, in so far as it did not meet any of the three conditions set out in the case-law for the European Union to incur liability for damage caused by one of its institutions, bodies, offices or agencies.
23 As regards the assessment of the merits of the action brought by ADR, the General Court began, in paragraph 70 of the judgment under appeal, by pointing out that, when an action for annulment is brought before it on the basis of the provisions of Article 263 TFEU, the EU judicature must assess the lawfulness of the contested act in the light of the TFEU or of any rule of law relating to its application, and, consequently, of EU law. It added that, on the other hand, in the context of an action brought on the basis of Article 272 TFEU, an applicant can only complain that the institution in question failed to perform the terms of the contract concerned or infringed the law applicable to that contract. The General Court then examined the nature of the five pleas in law raised by ADR in order to determine whether the arguments relied on in support of those pleas were intended to challenge the legality of the contested decision, within the meaning of Article 263 TFEU, or whether, on the other hand, those arguments involved, in essence, a dispute of a contractual nature and, therefore, had to be examined in the light of failure to perform the grant agreements or infringement of the law applicable to them.
24 Since the contested decision merely made enforceable the contractual claim allegedly held by the Commission against ADR, the General Court considered it appropriate to rule first on the existence and amount of that claim.
25 In paragraphs 91 to 116 of the judgment under appeal, the General Court examined the third plea in law, alleging infringement by the Commission of its obligation to discharge the burden of proof incumbent on it in that regard.
26 In that context, the General Court recalled, in paragraph 93 of the judgment under appeal, that, according to a fundamental principle governing European Union financial aid, the latter could subsidise only expenses which have actually been incurred. According to the General Court, it is not sufficient for the beneficiary of a grant to show that a project has been carried out for the grant to be justified, but that beneficiary must also prove that it has incurred the costs declared in accordance with the financial conditions laid down for the allocation of that grant, as only duly justified costs may be regarded as eligible. In that regard, the General Court found that the obligation to respect those conditions was thus one of the ‘essential commitments’ of the recipient of a grant and, as such, determined the allocation of the grant.
27 Having noted, in paragraph 94 of the judgment under appeal, that that principle was reflected in the grant agreements and having found, in paragraph 96 of the judgment under appeal, that the final audit reports constituted evidence in support of the Commission’s claims relating to the implementation of those agreements, the General Court examined the various arguments put forward by ADR with regard to the rejection of certain expenses.
28 The General Court concluded in paragraph 103 of the judgment under appeal that, in the light of the concrete findings made by the auditors, it was for ADR to submit evidence showing that the costs in question met the eligibility criteria laid down in the grant agreements. Since ADR did not produce any evidence either during the preliminary procedure or before the General Court, that court dismissed the third plea as unfounded.
29 As regards the fourth plea, alleging errors in the final audit reports, the General Court also dismissed it as unfounded. In particular, in paragraph 157 of the judgment under appeal, it rejected the argument put forward by ADR that the auditors and the Commission had not taken account of the quality of the work carried out and the results obtained, relying on the fundamental principle governing European Union financial aid set out in paragraph 93 of the judgment under appeal.
30 The first plea, alleging the lack of agreement between the parties concerning the audit rules to be followed, and the second plea, alleging the failure to communicate the final audit reports within a reasonable period of time and the Commission’s mismanagement of the actions concerned, were also rejected by the General Court as unfounded.
31 As regards the fifth plea, alleging that the Commission lacked competence to adopt the contested decision, the General Court recalled, in paragraph 192 of the judgment under appeal, that that decision had as its legal basis Article 299 TFEU and Article 79(2) of the Financial Regulation.
32 In that regard, the General Court noted, in paragraphs 195 and 196 of the judgment under appeal, that Article 79(2) of the Financial Regulation is included in a chapter of that regulation which is intended to apply to all operations under the budget of the Union, including those carried out in the context of contractual relations, and not only to a particular field of Union action, as is also apparent from Article 90 of that regulation.
33 The General Court concluded, in paragraphs 197 and 198 of the judgment under appeal, that, in accordance with case-law, both Article 299 TFEU and Article 79(2) of the Financial Regulation confer on the Commission the power to adopt an enforceable decision, notwithstanding the fact that the claim in question is contractual in nature.
34 In paragraphs 199 to 213 of the judgment under appeal, the General Court stated that that conclusion was not contrary to the judgment of 17 June 2010, CEVA v Commission (T‑428/07 and T‑455/07, EU:T:2010:240), or the judgment of 9 September 2015, Lito Maieftiko Gynaikologiko kai Cheirourgiko Kentro v Commission (C‑506/13 P, EU:C:2015:562), which raised the question of whether a debit note constituted a challengeable act within the meaning of Article 263 TFEU. According to the General Court, such a finding also did not infringe Article 47 of the Charter of Fundamental Rights of the European Union (‘the Charter’), since, following the partial reclassification of the action, it examined, in the same action, both the legality of the contested decision and the merits of the Commission’s contractual claim against ADR which was at the origin of the adoption of that decision.
35 Consequently, the General Court dismissed the fifth plea in law as unfounded and therefore dismissed the action as a whole.
Procedure before the Court and forms of order sought
36 By its appeal, ADR claims, in essence that the Court should:
– set aside the judgment under appeal;
– annul the contested decision and give final judgment on the dispute, upholding the pleas in law which it raised at first instance;
– order the Commission to pay the costs connected with the proceedings before the General Court and these proceedings.
37 The Commission contends that the Court should:
– dismiss the appeal;
– order ADR to pay the costs in relation to the appeal proceedings.
The appeal
38 In support of its appeal, ADR raises two grounds of appeal, the first alleging an error of law committed by the General Court in interpreting the principle governing European Union financial aid and, the second, alleging an error of law committed by the General Court in interpreting Article 299 TFEU, Article 79 of the Financial Regulation and Article 47 of the Charter.
39 Since the second ground of appeal essentially challenges the judgment under appeal in so far as the General Court accepted the Commission’s competence to adopt the contested decision, that ground of appeal must be examined first.
The second ground of appeal
Arguments of the parties
40 In the first place, according to ADR, the General Court misinterpreted Article 299 TFEU and Article 79(2) of the Financial Regulation by holding that those articles conferred on the Commission the power to adopt an enforceable recovery order in the context of the performance of grant contracts. Those articles cannot constitute a sufficient legal basis in that regard.
41 The reasoning of the General Court, according to which Article 79(2) of the Financial Regulation is the legal basis for all the claims, whether contractual or not, is, it is claimed, contrary to the case-law of the Court of Justice according to which EU regulations related to financial rules must be interpreted strictly (judgment of 6 May 1982, BayWa and Others, 146/81, 192/81 and 193/81, EU:C:1982:146, paragraph 10). In so far as that provision does not expressly state that it applies in contractual matters, the Commission cannot be authorised to apply it in a contractual framework.
42 ADR submits that the reference made by the General Court, in paragraph 196 of the judgment under appeal, to Article 90 of the Financial Regulation, in so far as that article expressly mentions contractual matters, confirms, on the contrary, that all the provisions applicable to contractual relations are formally identified, so that all the other provisions are not applicable in that regard.
43 ADR submits that the reasoning followed by the General Court in paragraphs 200 and 201 of the judgment under appeal, leading to the adoption, in the contractual framework, of an enforceable recovery order, is based on an unbalanced view of the contractual relations between the Commission and the beneficiaries of a grant. This reasoning, it claims, infringes the principle of the protection of legitimate expectations in relation to those beneficiaries.
44 Moreover, such reasoning is contrary to the case-law of the Court, and more specifically to the judgment of 9 September 2015, Lito Maieftiko Gynaikologiko kai Cheirourgiko Kentro v Commission (C‑506/13 P, EU:C:2015:562), in which the latter challenged the legal basis and the very validity of the Commission’s practice of circumventing its obligations as a contracting party by unilaterally adopting an enforceable recovery order to avoid bringing an action before the competent court for repayment of the grant concerned on the basis of Article 272 TFEU. ADR considers that, in accordance with this case-law, the Commission is obliged to remain within the framework defined for the grant, in this case the contractual framework. Consequently, the adoption of a recovery order, it is claimed, is only conceivable in two cases: either the Commission has made the choice to award a grant by means of a grant decision, or the Commission may exceptionally leave the contractual framework defined by the grant agreement in question if its co-contractor expressly agrees and the amounts in question are not disputed — which, however, is not the case here.
45 According to ADR, the reasoning followed by the General Court, according to which an enforceable recovery order indisputably produces binding legal effects falling outside of the contractual relationship between the parties cannot be accepted, since the General Court did not, moreover, explain what those effects would be which are outside that contractual relationship.
46 In the second place, ADR submits that the General Court erred in law in holding that the recognition of the Commission’s competence to adopt enforceable recovery orders in contractual matters did not infringe Article 47 of the Charter.
47 In that regard, ADR submits that the General Court examined the complaint alleging an infringement of Article 47 of the Charter solely from the perspective of the right of access to a tribunal, but did not rule on the issue of the right to an effective remedy. By granting the Commission the right to adopt unilateral measures, even though the Commission’s co-contracting party has brought an action under Article 272 TFEU before the competent court, be it the EU judicature or the national courts, the General Court would allow that institution to circumvent the action brought by that co-contracting party. This would considerably reduce the effectiveness of the action based on Article 272 TFEU and, since actions brought against an enforceable recovery order do not have suspensive effect, such a situation could have significant adverse consequences for grant beneficiaries, including bankruptcy or liquidation.
48 The Commission contests the arguments put forward by ADR in support of the second ground of appeal.
Findings of the Court
49 By the second ground of appeal, ADR relies on arguments based essentially on the misinterpretation, not only of Article 299 TFEU and of Article 79(2) of the Financial Regulation, but also of the principle of effective judicial protection, as enshrined in the Court’s case-law relating to Article 47 of the Charter.
– On the interpretation of Article 299 TFEU and Article 79(2) of the Financial Regulation
50 As regards the alleged misinterpretation of Article 299 TFEU and Article 79(2) of the Financial Regulation, it is necessary, first, to determine whether the Commission was entitled to adopt an enforceable decision on the basis of the first paragraph of Article 299 TFEU, even though the claim which it relied on arose from a contractual relationship.
51 In that regard, it must be recalled that it follows from the wording of the first subparagraph of Article 299 TFEU that acts of the Council of the European Union, the Commission or the European Central Bank (ECB) which impose a pecuniary obligation on persons other than States, are enforceable. That provision therefore contains no restriction as to the nature of the acts establishing a pecuniary obligation, except that it does not apply to acts addressed to Member States.
52 Moreover, given that the first paragraph of Article 299 TFEU is included in Chapter 2, entitled ‘Legal acts of the Union, adoption procedures and other provisions’, of Title I, entitled ‘Institutional provisions’, of Part Six of the TFEU, that provision is one of the general provisions relating to acts of the Union. It must be concluded that it is applicable to all acts establishing a pecuniary obligation on the part of the institutions of the European Union mentioned therein.
53 However, as the Advocate General pointed out in point 59 of her Opinion, Article 299 TFEU does not, in itself, constitute a sufficient legal basis for the adoption of enforceable measures. Indeed, the power of the institutions referred to in that provision to adopt such acts must be apparent from other provisions.
54 In the present case, the contested decision mentions not only Article 299 TFEU but also Article 79(2) of the Financial Regulation as the legal basis.
55 The latter provision, read in conjunction with Article 2(b) of the Financial Regulation, confers on the Commission the power to formally establish an amount receivable from persons other than Member States in a decision constituting an enforceable decision.
56 The General Court rightly pointed out, in paragraph 195 of the judgment under appeal, that Article 79(2) of the Financial Regulation was included in the first part of that regulation, entitled ‘Common provisions’, in a chapter entitled ‘Revenue operations’, which is followed by a chapter relating to expenditure operations. It correctly pointed out that those two chapters were not limited to a particular field of Union action, but that they were intended to apply to all operations within the European Union’s budget.
57 The General Court therefore rightly concluded, in paragraph 197 of the judgment under appeal, that neither Article 299 TFEU nor Article 79(2) of the Financial Regulation drew a distinction according to whether the claim, formally established by an enforceable decision, is of contractual or non-contractual origin.
58 Consequently, it must be concluded that Article 79(2) of the Financial Regulation may serve as a legal basis for the Commission to adopt decisions constituting an enforceable order, within the meaning of Article 299 TFEU, even though the pecuniary obligation in question is of a contractual nature.
59 That conclusion is not called into question by Article 90 of the Financial Regulation, which explicitly refers to contractual relations. Indeed, as the Advocate General pointed out in point 65 of her Opinion, that article merely provides, in a general manner, that payment may only be made where it is proved that the action in respect of which it is paid is in accordance with the provisions of the legal act on which that action is based. It cannot, therefore, be inferred from this that Article 79(2) of the Financial Regulation does not apply in contractual matters.
60 Nor can that conclusion be called into question by the case-law relied on by ADR, according to which the provisions of the Council or Commission regulations that create a right to benefits financed by European Union funds must be given a strict interpretation (see, to that effect, judgment of 6 May 1982, BayWa and Others, 146/81, 192/81 and 193/81, EU:C:1982:146, paragraph 10). That case-law applies only to the rules applicable to the defrayal of expenditure by the various European Union funds and is necessary, in particular, in order to guarantee equality between the various economic operators in the Member States (see, to that effect, judgments of 7 February 1979, Netherlands v Commission, 11/76, EU:C:1979:28, paragraph 9, and of 7 February 1979, Germany v Commission, 18/76, EU:C:1979:30, paragraph 8). However, it is not relevant for the purposes of interpreting Article 79(2) of the Financial Regulation.
61 It follows from the foregoing that the General Court did not err in law in holding, in paragraph 198 of the judgment under appeal, that Article 299 TFEU and Article 79(2) of the Financial Regulation conferred jurisdiction on the Commission to adopt the contested decision.
62 Next, it should be recalled that an action for annulment under Article 263 TFEU is generally available against all measures adopted by the EU institutions, whatever their nature or form, which are intended to have binding legal effects capable of affecting the interests of the applicant by bringing about a distinct change in his legal position (judgments of 9 September 2015, Lito Maieftiko Gynaikologiko kai Cheirourgiko Kentro v Commission, C‑506/13 P, EU:C:2015:562, paragraph 16; of 28 February 2019, Alfamicro v Commission, C‑14/18 P, EU:C:2019:159, paragraph 47; and of 25 June 2020, SatCen v KF, C‑14/19 P, EU:C:2020:492, paragraph 69).
63 However, the EU judicature shall not have jurisdiction to hear an action for annulment where the applicant’s legal position falls within the framework of contractual relationships whose legal status is governed by the national law agreed to by the contracting parties (see, to that effect, judgments of 9 September 2015, Lito Maieftiko Gynaikologiko kai Cheirourgiko Kentro v Commission, C‑506/13 P, EU:C:2015:562, paragraph 18; of 28 February 2019, Alfamicro v Commission, C‑14/18 P, EU:C:2019:159, paragraph 48; and of 25 June 2020, SatCen v KF, C‑14/19 P, EU:C:2020:492, paragraph 78).
64 Were the EU judicature to hold that it had jurisdiction to adjudicate on the annulment of acts falling within purely contractual relationships, not only would it risk rendering Article 272 TFEU — which grants the Courts of the European Union jurisdiction pursuant to an arbitration clause — meaningless, but would also risk, where the contract does not contain such a clause, extending its jurisdiction beyond the limits laid down by Article 274 TFEU, which specifically gives national courts or tribunals ordinary jurisdiction over disputes to which the European Union is a party (judgments of 9 September 2015, Lito Maieftiko Gynaikologiko kai Cheirourgiko Kentro v Commission, C‑506/13 P, EU:C:2015:562, paragraph 19; of 28 February 2019, Alfamicro v Commission, C‑14/18 P, EU:C:2019:159, paragraph 49; and of 25 June 2020, SatCen v KF, C‑14/19 P, EU:C:2020:492, paragraph 79).
65 It follows from that case-law that, where there is a contract between the applicant and one of the European Union institutions, an action may be brought before the EU judicature on the basis of Article 263 TFEU only where the contested measure aims to produce binding legal effects falling outside of the contractual relationship between the parties and which involve the exercise of the prerogatives of a public authority conferred on the contracting institution acting in its capacity as an administrative authority (judgments of 9 September 2015, Lito Maieftiko Gynaikologiko kai Cheirourgiko Kentro v Commission, C‑506/13 P, EU:C:2015:562, paragraph 20, and of 28 February 2019, Alfamicro v Commission, C‑14/18 P, EU:C:2019:159, paragraph 50).
66 In addition, the Court specified that a debit note or a formal notice, the purpose of which is to recover a debt on the basis of the grant agreement concerned, and which includes an indication of a maturity date and also the payment terms of the debt that they establish, cannot be equated to an enforcement order as such, even though it refers to enforcement pursuant to Article 299 TFEU as a possible option among others open to the Commission where a party fails to perform an obligation by the delivery date laid down (see, by analogy, judgments of 9 September 2015, Lito Maieftiko Gynaikologiko kai Cheirourgiko Kentro v Commission, C‑506/13 P, EU:C:2015:562, paragraph 23, and of 28 February 2019, Alfamicro v Commission, C‑14/18 P, EU:C:2019:159, paragraph 52).
67 It is in application of that case-law that the General Court stated, in paragraph 200 of the judgment under appeal, that, in contractual contexts, the Commission does not have the right to adopt unilateral measures and that it is not entitled to address any measure having the nature of a decision to the co-contractor concerned with a view to the latter’s performance of its contractual obligations of a financial nature, but that it is required, where appropriate, to bring a claim for payment before the court having jurisdiction. The General Court rightly inferred, in paragraph 201 of that judgment, that, pursuant to a grant agreement, the Commission could not adopt a unilateral measure seeking to recover a contractual debt.
68 However, and contrary to what is maintained by ADR, the Court did not, in the context of that case-law, call into question the Commission’s practice of unilaterally adopting an enforceable recovery order in the context of contractual relations. Indeed, as the General Court rightly pointed out in paragraph 204 of the judgment under appeal, in the same case-law, the Court confined itself to examining the legal nature of the debit notes sent in the contractual context concerned and whether they could constitute a challengeable act, without, however, addressing the question whether the Commission may, in the context of contractual relations, rely on its power to formally establish an amount as being receivable by means of an enforceable decision.
69 In that regard, it should be pointed out that, where the Commission adopts an enforceable recovery order within the meaning of Article 299 TFEU, the effects and binding force of such a unilateral decision cannot derive from the contractual clauses but derive from that article of the TFEU and Article 79(2) of the Financial Regulation.
70 Consequently, in the present case, the General Court rightly found, in paragraph 207 of the judgment under appeal, that the contested decision did not result from the grant agreements but was based on Article 299 TFEU, read in conjunction with Article 79(2) of the Financial Regulation. Moreover, the General Court was right to conclude that that decision involved the exercise of the prerogatives of a public authority conferred on the Commission in its capacity as administrative authority.
71 Consequently, it cannot be held that the General Court did not explain to what extent the contested decision produced binding legal effects falling outside of the contractual relationship between the parties.
72 Furthermore, it is important to note that, where the Commission exercises its prerogatives as a public authority by adopting measures the legal effects of which lie outside the contractual framework, those measures fall within the jurisdiction of the EU judicature. Indeed, those measures, like the Commission’s enforceable decision within the meaning of Article 299 TFEU in the present case, constitute acts of the European Union which may give rise to an objection, so that they may be challenged by means of an action for annulment brought before the EU judicature on the basis of Article 263 TFEU.
73 However, as the Advocate General noted in points 52 to 56 of her Opinion, the Commission may not adopt an enforceable decision in the context of contractual relations which do not contain an arbitration clause in favour of the EU judicature and which therefore fall within the jurisdiction of the courts of a Member State. The adoption of such a decision by the Commission in the absence of an arbitration clause would restrict the jurisdiction of those courts, since the EU judicature would become competent to rule on the legality of that decision. The Commission could thus systematically circumvent the division of powers between the EU judicature and the national courts enshrined in primary law, as recalled in paragraphs 62 to 64 of the present judgment. Therefore, the Commission’s power to adopt enforceable decisions in contractual relations should be limited to contracts which contain an arbitration clause conferring jurisdiction on the EU judicature.
74 Finally, the General Court cannot be criticised either for having infringed the principle of the protection of legitimate expectations by having accepted that, in the context of contractual relations, the Commission may make unilateral use of the power conferred on it by Article 79(2) of the Financial Regulation, read in conjunction with Article 299 TFEU.
75 In that regard, it should be recalled that the right to rely on the principle of the protection of legitimate expectations presupposes that precise, unconditional and consistent assurances originating from authorised, reliable sources have been given to the person concerned by the competent authorities of the European Union (see, inter alia, judgments of 22 June 2006, Belgium and Forum 187 v Commission, C‑182/03 and C‑217/03, EU:C:2006:416, paragraph 147, and of 7 April 2011, Greece v Commission, C‑321/09 P, not published, EU:C:2011:218, paragraph 45). By contrast, a person may not plead breach of that principle unless he has been given those assurances (judgment of 31 January 2019, Islamic Republic of Iran Shipping Lines and Others v Council, C‑225/17 P, EU:C:2019:82, paragraph 57 and the case-law cited).
76 In the present case, as the Advocate General noted in point 80 of her Opinion, ADR could not claim that the case-law of the EU judicature conferred on it any assurance that the Commission could not exercise the power conferred on it by Article 299 TFEU and Article 79(2) of the Financial Regulation in order to formally establish a contractual claim by means of an enforceable decision.
77 Moreover, in accordance with its duty of sound administration, which requires it, if it reserves the right to exercise such a power in the framework of a contractual relationship, to stipulate this expressly in a clause of the contract concerned, the Commission has, in the present case, specified in Article II.19.5 of the grant agreements that it may adopt an enforceable decision formally establishing an amount as receivable from persons other than States. It follows that ADR must have been aware that the Commission could adopt a decision such as the contested decision in the context of grant agreements.
78 Consequently, the argument based on the misinterpretation of Article 299 TFEU and Article 79(2) of the Financial Regulation must be dismissed as unfounded.
– On the principle of effective judicial protection
79 With regard to ADR’s arguments alleging infringement of the principle of effective judicial protection, enshrined in Article 47 of the Charter, the General Court rightly pointed out, in paragraph 210 of the judgment under appeal, that that principle constitutes a general principle of EU law and that it comprises various elements, including the right of access to the courts (see, to that effect, judgment of 6 November 2012, Otis and Others, C‑199/11, EU:C:2012:684, paragraphs 46 and 48).
80 In paragraph 211 of the judgment under appeal, the General Court recalled the case-law of the Court of Justice according to which, in order for a court or tribunal to determine a dispute concerning rights and obligations arising under EU law in accordance with Article 47 of the Charter, that court or tribunal must have jurisdiction to consider all questions of fact and law relevant to the dispute before it (see, to that effect, judgment of 6 November 2012, Otis and Others, C‑199/11, EU:C:2012:684, paragraph 49).
81 The case-law of the General Court referred to in paragraph 70 of the judgment under appeal has the consequence that the EU judicature must, when adjudicating on an action for annulment on the basis of the provisions of Article 263 TFEU, assess the lawfulness of the contested act in the light of EU law, whereas, in the context of an action brought on the basis of Article 272 TFEU, an applicant can only invoke infringements of contractual clauses or of the law applicable to the contract concerned.
82 It follows from this that, according to the case-law of the General Court, the EU judicature, when adjudicating on an action for annulment brought against an enforceable decision, which constitutes an act adopted pursuant to a jurisdiction which is proper and distinct from the contractual relationship between the parties, must declare inadmissible any plea alleging non-performance of the terms of the contract concerned or infringement of the provisions of the national law applicable to that contract.
83 Where the EU judicature nevertheless intends to examine a plea in law relating to that contract in the context of an action for annulment, it would be for it, again in accordance with the case-law of the General Court, to examine whether the action before it is capable of being reclassified, in particular as seeking not only annulment of the contested decision, but also a declaration that the Commission is not the holder of the contractual claim at issue. In the present case, the General Court carried out such an examination in paragraphs 56 to 62 of the judgment under appeal and concluded that such a reclassification could be carried out.
84 However, such a reclassification of the action, since it depends not only on the will of the EU judicature but is also, in accordance with that case-law of the General Court, subject to conditions independent of that reclassification, such as the fact that the applicant does not expressly oppose it and the existence of a plea alleging infringement of the rules governing the contractual relationship in question, cannot be regarded as providing effective judicial protection under Article 47 of the Charter, since that fundamental right requires, as recalled in paragraph 80 of the present judgment, that the court must consider all questions of fact and law relevant to the dispute before it.
85 Moreover, again according to the case-law of the General Court, set out in paragraph 70 of the judgment under appeal, where there is no act that can be separated from the contract concerned, the assessment of the EU judicature before which an action has been brought on the basis of Article 272 TFEU is limited, in principle, to pleas alleging an infringement of the terms of the contract concerned or of the law applicable to that contract.
86 When the Commission performs a contract, it remains subject to its obligations under the Charter and the general principles of EU law. Thus, the fact that the law applicable to the contract in question does not provide the same guarantees as those conferred by the Charter and the general principles of EU law does not exempt the Commission from ensuring that the parties with which it has concluded a contract comply with them.
87 It follows from the foregoing that that case-law, which makes a distinction according to whether the pleas in law raised in an action must be regarded by the EU judicature before which it is brought as alleging one of the infringements or cases referred to in the second paragraph of Article 263 TFEU, or, on the contrary, as alleging an infringement of the terms of the contract concerned or an infringement of the provisions of the national law applicable to that contract, cannot guarantee that all questions of fact and law relevant to the resolution of the dispute will be examined in order to ensure effective judicial protection under Article 47 of the Charter.
88 Consequently, where an action for annulment is brought before the EU judicature pursuant to Article 263 TFEU against an enforceable decision of the Commission formally establishing a contractual claim, that judicature has jurisdiction to examine that action having regard to the exercise of the prerogatives of a public authority which entails the adoption of such a decision. However, in the context of the examination of such an action, that judicature is called upon to hear not only pleas of annulment based on matters of fact and law arising from the actions of the Commission as administrative authority, but also pleas of annulment based on matters of fact and law arising from the contractual relations between the Commission and the applicant. In so far as that action also includes a counterclaim based on the performance of the contract in question, the EU judicature cannot declare such a claim inadmissible on the ground that this would constitute a direction which the court hearing the action for annulment cannot issue.
89 It follows that the General Court erred in law in holding, in paragraph 70 of the judgment under appeal, that, in an action brought under Article 263 TFEU, the European Union judicature must assess the lawfulness of the contested act solely in the light of EU law, whereas, in an action brought under Article 272 TFEU, the applicant can validly rely only on an infringement of the terms of the contract concerned or an infringement of the law applicable to that contract.
90 However, where the grounds of a judgment under appeal are in themselves sufficient to justify the operative part of that judgment, the appeal must be dismissed in its entirety (see, to that effect, judgment of 7 September 2017, France v Schlyter, C‑331/15 P, EU:C:2017:639, paragraph 85). In the context of the examination which the General Court carried out in paragraphs 72 to 80 of the judgment under appeal in order to determine the extent to which the action brought before it was capable of being reclassified, that court in the present case carried out a full analysis of all the questions of fact and law relevant to enable it to give judgment in the dispute, and the error of law thus committed had no effect on the operative part of the judgment under appeal.
91 Consequently, the argument based on infringement of the principle of effective judicial protection, enshrined in the Court’s case-law relating to Article 47 of the Charter, is inoperative and must therefore also be rejected.
92 In the light of the foregoing considerations, the second ground of appeal must be dismissed.
The first ground of appeal
Arguments of the parties
93 By the first ground of appeal, ADR submits that the General Court erred in law by interpreting, in paragraph 157 of the judgment under appeal, in a particularly strict manner, the principle governing European Union financial aid so that only expenses actually incurred could be the subject of a grant.
94 ADR considers that such an interpretation is contrary to the principle of proportionality. Where the beneficiary of a grant is able to demonstrate by other means that the costs have actually been incurred and that the quality of the services is not called into question, a grant application cannot be rejected.
95 Furthermore, according to ADR, in interpreting any fundamental principle, the purpose and general scheme of the principle must be taken into account. In this respect, ADR stresses that the interpretation made by the General Court is contrary to the will of the European Union legislature, since the Commission itself recognised in its proposal for the adoption of a new EU Financial Regulation that there was a real need to ‘simplify life’ for beneficiaries of European Union funds and that it was appropriate to focus ‘on the results and added value instead of administrative procedures’.
96 As to the alleged difference between public contracts and grant agreements put forward by the Commission, ADR claims that it was not able to freely exploit the result of the actions undertaken, nor did the property of the actions taken remain ‘in its hands’.
97 The Commission submits that, as the first ground of appeal must be regarded as calling into question the assessment of the facts carried out by the General Court, it must be dismissed as inadmissible and the remainder of that ground of appeal must be dismissed as unfounded.
Findings of the Court
98 As a preliminary point, it should be recalled that the General Court found, in paragraphs 94 to 115 of the judgment under appeal, that the Commission had discharged the burden of proof incumbent on it and that ADR had not provided any evidence to show that the contested costs had been incurred in accordance with the conditions laid down in the grant agreements. It should be noted that the findings thus made by the General Court are not disputed in the appeal and that, moreover, ADR has not alleged any distortion of the audit reports produced before the General Court in support of the Commission’s claims relating to the performance of the grant agreements.
99 In the context of the examination of the first ground of appeal, it is necessary to consider only whether the General Court was correct in interpreting the fundamental principle governing European Union financial aid to mean that only expenses which have actually been incurred may be the subject of a grant, without the quality of the services provided being taken into account.
100 In that context, it should be noted that, under Article 317 TFEU, the Commission is obliged to observe the principle of sound financial management. It also ensures the protection of the financial interests of the European Union in the implementation of its budget. The same shall apply in contractual matters, since grants awarded by the Commission come from the EU budget. In accordance with a fundamental principle governing EU financial aid, the European Union can subsidise only expenditure actually incurred (judgment of 28 February 2019, Alfamicro v Commission, C‑14/18 P, EU:C:2019:159, paragraph 65 and the case-law cited).
101 Consequently, the Commission cannot approve expenditure from the EU budget without a legal basis; otherwise it will breach those principles established by the TFEU. In the context of a grant, it is the grant agreement that governs the conditions for the allocation and use of that grant and, more particularly, the clauses relating to the determination of the amount of that grant on the basis of the costs declared by the party contracting with the Commission (judgment of 28 February 2019, Alfamicro v Commission, C‑14/18 P, EU:C:2019:159, paragraph 66).
102 Consequently, if the costs declared by the beneficiary of the grant are not eligible under the relevant grant agreement because they have been judged to be unverifiable and/or unreliable, the Commission has no choice but to recover an amount of the grant equal to the unsubstantiated amounts, since, pursuant to the legal basis provided by that grant agreement, the Commission can pay out of the EU budget only duly substantiated sums (judgment of 28 February 2019, Alfamicro v Commission, C‑14/18 P, EU:C:2019:159, paragraph 67).
103 In the present case, the Commission was therefore required to order the reimbursement of the sums corresponding to the ineligible costs, in accordance with the financial conditions laid down in the grant agreements.
104 That conclusion may not be called into question by the fact that, in the context of a proposal for a new Financial Regulation, the Commission itself would have recognised that there was a need for administrative simplification and that it was appropriate to focus on the results obtained, such a proposal being irrelevant in the context of the examination of the present case, which is governed by the Financial Regulation as defined in paragraph 2 above.
105 Consequently, the General Court cannot be criticised for having interpreted too restrictively the fundamental principle governing EU financial aid by holding, in paragraph 93 of the judgment under appeal, that the obligation to comply with the financial conditions laid down in the grant agreements constituted one of the ‘essential commitments’ of the beneficiary of the grants concerned.
106 In those circumstances, the argument put forward by ADR, concerning the question whether the beneficiary of a grant must be allowed to prove the costs incurred by means other than those provided for in the contractual clauses, must also be rejected. First, the financial conditions laid down by the contractual clauses are binding on both contracting parties and the Commission, which is bound by them in the same way as the beneficiary of the grant, cannot be obliged to derogate from them by admitting other means of proof. On the other hand, and in any event, such considerations fall within the scope of the assessment of the evidence by the General Court. The General Court has exclusive jurisdiction to find and appraise the relevant facts and to assess the evidence. The appraisal of the facts and evidence thus does not, save where they have been distorted, constitute a point of law which is subject, as such, to review by the Court of Justice on appeal (judgment of 28 June 2005, Dansk Rørindustri and Others v Commission, C‑189/02 P, C‑202/02 P, C‑205/02 P to C‑208/02 P and C‑213/02 P, EU:C:2005:408, paragraph 177 and the case-law cited).
107 Furthermore, where part of the costs have been considered ineligible because the beneficiary of the grant concerned had not complied with his contractual obligation to substantiate the use of the sums allocated to him, the fact that that beneficiary has in the meantime completed the project covered by that grant agreement does not affect the fulfilment of that obligation, since that grant does not represent the consideration for carrying out the project covered by that grant agreement (see, to that effect, judgments of 19 January 2006, Comunità montana della Valnerina v Commission, C‑240/03 P, EU:C:2006:44, paragraph 78, and of 28 February 2019, Alfamicro v Commission, C‑14/18 P, EU:C:2019:159, paragraph 68).
108 Since the grant does not represent the consideration for the project carried out, it is irrelevant whether the grant beneficiaries would be granted the material and intellectual property rights to the product developed.
109 It follows that the General Court did not infringe the principle of proportionality by holding, in paragraph 157 of the judgment under appeal, that it was not sufficient for the beneficiary of the grant to show that a project had been carried out in order to justify the award of a particular grant, but that the beneficiary had to prove that the costs declared had been incurred in accordance with the conditions laid down for the award of the grants concerned.
110 Consequently, the first ground of appeal must be dismissed as being unfounded.
111 Having regard to all of the foregoing considerations, the appeal must be dismissed in its entirety.
Costs
112 In accordance with the Article 184(2) of the Rules of Procedure of the Court, where the appeal is unfounded, the Court is to make a decision as to costs.
113 Under Article 138(3) of those Rules of Procedure, applicable to appeal proceedings by virtue of Article 184(1) thereof, where each party succeeds on some and fails on other heads, the parties are to bear their own costs. However, if it appears justified in the circumstances of the case, the Court may order that one party, in addition to bearing its own costs, pay a proportion of the costs of the other party.
114 Given that the examination of the second ground of appeal revealed an error of law on the part of the General Court, which did not, however, lead to the judgment under appeal being set aside, it seems justified to rule that ADR should bear two thirds of the costs incurred by the Commission and that the Commission shall bear, in addition to one third of its own costs, one third of the costs incurred by ADR.
On those grounds, the Court (Third Chamber) hereby:
1. Dismisses the appeal;
2. Orders ADR Center SpA to bear, in addition to two thirds of its own costs, two thirds of the costs incurred by the European Commission;
3. Orders the European Commission to bear, in addition to one third of its own costs, one third of the costs incurred by ADR Center SpA.
Prechal | Malenovský | Biltgen |
Delivered in open court in Luxembourg on 16 July 2020.
A. Calot Escobar | | A. Prechal |
Registrar | | President of the Third Chamber |