JUDGMENT OF THE COURT (Fourth Chamber)
14 November 2013(*)
(Structural Funds – European Regional Development Fund (ERDF) – Financial contribution from a Structural Fund – Criteria for the eligibility of expenditure – Regulation (EC) No 1260/1999 – Article 30(4) – Principle of durability of the operation – ‘Substantial modification’ of an operation – Award of a concession contract without advertisement or a competitive tendering procedure)
In Case C‑388/12,
REQUEST for a preliminary ruling under Article 267 TFEU from the Tribunale amministrativo regionale per le Marche (Italy), made by decision of 21 June 2012, received at the Court on 16 August 2012, in the proceedings
Comune di Ancona
v
Regione Marche,
THE COURT (Fourth Chamber),
composed of L. Bay Larsen, President of the Chamber, K. Lenaerts, Vice‑President of the Court, acting as Judge of the Fourth Chamber, M. Safjan, J. Malenovský (Rapporteur), and A. Prechal, Judges,
Advocate General: Y. Bot,
Registrar: A. Impellizzeri, Administrator,
having regard to the written procedure and further to the hearing on 11 July 2013,
after considering the observations submitted on behalf of:
– the Comune di Ancona, by A. Lucchetti, avvocato,
– the Portuguese Government, by L. Inez Fernandes, S. Rodrigues and A. Gattini, acting as Agents,
– the European Commission, by A. Steiblytė and D. Recchia, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 5 September 2013,
gives the following
Judgment
1 This reference for a preliminary ruling concerns the interpretation of Article 30(4) of Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds (OJ 1999 L 161, p. 1).
2 The request has been made in proceedings between the Comune di Ancona and the Regione Marche concerning the latter’s decision to withdraw and recover the financial assistance paid to the Comune di Ancona in respect of a project for the building of a slipway.
Legal context
3 Recital 4 in the preamble to Regulation No 1260/1999 is worded as follows:
‘[I]n order to increase the concentration and simplify the operation of the Structural Funds the … [the priority] objectives should be redefined as promoting the development and structural adjustment of regions whose development is lagging behind, economic and social conversion of areas facing structural difficulties and adapting and modernising policies and systems of education, training and employment.’
4 Recital 7 in the preamble to that regulation states:
‘[T]he European Regional Development Fund (ERDF) is the primary contributor to attaining the objective of promoting the development and structural adjustment of the regions whose development is lagging behind and economic and social conversion of areas facing structural difficulties.’
5 According to recital 41 in the preamble to that regulation:
‘… in order to ensure the efficiency and durable impact of the Funds’ assistance, all or part of the assistance from a Fund should remain attached to an operation only where its nature or its implementation conditions do not undergo a substantial modification which would result in diverting the assisted operation from its original objectives’.
6 Paragraph 4 of Article 30 of Regulation No 1260/1999, entitled ‘Eligibility’, provides:
‘The Member States shall ensure that an operation retains the contribution from the Funds only if that operation does not, within five years of the date of the decision of the competent national authorities or the managing authority on the contribution of the Funds, undergo a substantial modification:
(a) affecting its nature or its implementation conditions or giving to a firm or a public body an undue advantage;
and
(b) resulting either from a change in the nature of ownership in an item of infrastructure or a cessation or change of location in a productive activity.
The Member States shall inform the Commission of any such modification. Where such a modification occurs, Article 39 shall apply.’
7 Paragraph 1 of Article 38 of that regulation, entitled ‘General provisions’, provides:
‘Without prejudice to the Commission’s responsibility for implementing the general budget of the European Communities, Member States shall take responsibility in the first instance for the financial control of assistance. To that end, the measures they take shall include:
…
(e) preventing, detecting and correcting irregularities, notifying these to the Commission, in accordance with the rules, and keeping the Commission informed of the progress of administrative and legal proceedings;
…
(h) recovering any amounts lost as a result of an irregularity detected and, where appropriate, charging interest on late payments.’
8 Paragraph 1 of Article 39 of that regulation, entitled ‘Financial corrections’, provides:
‘The Member States shall, in the first instance, bear the responsibility for investigating irregularities, acting upon evidence of any major change affecting the nature or conditions for the implementation or supervision of assistance and making the financial corrections required.
The Member State shall make the financial corrections required in connection with the individual or systemic irregularity. The corrections made by the Member State shall consist in cancelling all or part of the Community contribution. The Community funds released in this way may be re-used by the Member State for the assistance concerned, in compliance with the arrangements to be defined pursuant to Article 53(2).’
The facts in the main proceedings and the questions referred for a preliminary ruling
9 The Regione Marche, managing authority for an operational programme for European Union (‘EU’) structural assistance in the Marches region, published, in accordance with the ERDF, a call for various infrastructure projects in the local port areas for the 2002 to 2006 programming period.
10 Responding to that call, the Comune di Ancona applied for funding for three projects relating respectively to the construction of a slipway, the purchase of a lorry-mounted mobile crane and development works to improve the esplanade abutting the slipway. All three applications were approved.
11 In January 2005, after the slipway had been constructed and the lorry-mounted mobile crane installed, the Comune di Ancona – as beneficiary of the funding in question – consulted the Regione Marche concerning the possibility of contracting out the management of that slipway to a third party. The Regione Marche saw no obstacle to this, but drew attention to the need to comply with the legislation in force concerning the award of public service concessions.
12 By decision of its municipal council of 19 April 2005, the Comune di Ancona granted management of the slipway to the Cooperativa arl Pescatori e Motopescherecci di Ancona (‘the Pescatori cooperative’), subject to a number of conditions. These included the obligation to pay the Comune di Ancona an annual charge calculated in such a way as to avoid substantial net revenue being generated for either the concession-granting authority or the concessionaire; a prohibition on modifying the implementation conditions of the operation eligible for funding; a prohibition on engaging in profit-making activity; the obligation to comply with all the applicable EU directives and standards; and the obligation to maintain the public-service function and intended use of the structure at issue. It was also stated that the slipway was to remain, in any event, the property of the Comune di Ancona.
13 In June 2010, the Regione Marche found a number of irregularities in the Comune’s management of the slipway:
– the slipway is also used by pleasure craft, accounting for an estimated 18% of usage;
– part of the structure at issue remains unused; and
– most importantly, the concession for the management of the structure had been awarded directly, that is to say, without a public tendering procedure.
14 On the basis of those findings, the Regione Marche adopted a decision ordering withdrawal and recovery of the funding granted to the Comune di Ancona.
15 The Comune di Ancona thereupon brought an action before the Tribunale amministrativo regionale per le Marche (Regional Administrative Court for the Marche Region) for annulment of that decision.
16 In support of its action, the Comune di Ancona made, inter alia, the following submissions:
– failure to comply with the public tendering procedures with respect to the concession management of the slipway does not constitute grounds for forfeiture of the funding;
– it was not necessary, for the purposes of granting a concession for management of the slipway, to publish a call for tenders, in so far as no operators apart from the Pescatori cooperative were interested in that concession; and
– the use of the slipway by pleasure craft is not contrary to the objectives pursued by the ERDF.
17 In those circumstances, the Tribunale Amministrativo Regionale per le Marche decided to stay proceedings and to refer the following questions to the Court for a preliminary ruling:
‘1. Must Article 30(4) of [Regulation No 1260/1999] be interpreted as meaning that it is not possible to undertake an assessment of whether the grant of the concession generates substantial revenue for the contracting authority or undue advantage for the concessionaire without first establishing whether the works under concession have undergone substantial modification?
2. If the answer to Question 1 is in the affirmative, what is meant by “substantial modification”, that is to say, does [Article 30(4) of Regulation No 1260/1999] refer only to physical modifications — in the sense that the structure set in place is not as specified in the project approved for funding — or does it also include modifications with regard to function, in which case has there been “substantial modification” if the structure is used “also” — but not predominantly — for activities other than those envisaged in the call for projects or in the application to participate in the call for projects?
3. If the answer to Question 1 is in the negative, does Article 30(4) of [Regulation No 1260/1999], with reference to those cases in which the public funding is used to carry out works the management of which is likely to be of economic interest, apply only to the construction stage of the project, or does the requirement to comply with the rules on competitive tendering procedures continue to apply when a management concession is granted?
4. Lastly, must Article 30(4) of [Regulation No 1260/1999] be interpreted as meaning that the process of establishing whether the concession of the management to a third party actually generates substantial net revenue or gives undue advantage to a firm or a public body constitutes a stage which, logically and legally, follows on after the preliminary question (that is to say, the question whether a competitive tendering procedure must be held), or must account also be taken, in determining the existence of the obligation to hold a competitive tendering procedure, of the actual rules governing the concession relationship?’
Consideration of the questions referred
Preliminary observations
18 Article 30(4) of Regulation No 1260/1999 sets out a principle according to which the contribution from the Structural Funds to an operation is to be definitively retained only where the operation in question does not undergo a ‘substantial modification’ within five years of the decision of the competent national authorities or the managing authority on the contribution of those funds. In the main proceedings, the parties disagree in particular as to whether the modifications noted by the Regione Marche are covered by that provision.
19 It should be stated at the outset that it is not for the Court to classify specifically the modifications at issue in the main proceedings. That falls within the exclusive jurisdiction of the national court. The Court’s role is confined to providing an interpretation of EU law which will be useful to that court for the purposes of adjudicating the dispute before it. That said, the Court may determine the relevant factors capable of assisting the referring court in its assessment (see Case C‑348/10 Norma-A and Dekom [2011] ECR I‑10983, paragraphs 57 and 58).
20 In that context, it should be noted that, in order for it to be found that a modification falls within the scope of Article 30(4) of Regulation No 1260/1999, it must first be established that the operation thus modified is covered by that provision and, if so, it must then be determined whether the modification meets the conditions laid down in points (a) and (b) of the first subparagraph of Article 30(4), account being taken of the fact that the use of the conjunction ‘and’ to link the two conditions set out in those points means that a modification must meet both conditions cumulatively.
21 The first step in making that determination is to consider whether the contested modification meets the condition laid down in point (b) of the first subparagraph of Article 30(4) of Regulation No 1260/1999, under which the modification must result either from a change in the nature of ownership in an item of infrastructure or a cessation or change of location in a productive activity. In checking that that condition is met, it is necessary to assess the factors which gave rise to the contested modification and which can therefore be said to constitute its causes.
22 The second step is to consider whether the modification in question is covered by one of the cases referred to in point (a) of the first subparagraph of Article 30(4) of that regulation, that is to say, whether it affects the nature or implementation conditions of the operation concerned or gives an undue advantage to a firm or public body, those being cases which relate to the effects of the modification.
23 The third step, once the conditions laid down in points (a) and (b) of the first subparagraph of Article 30(4) of Regulation No 1260/1999 have been examined, is to assess whether the contested modification is significant.
24 That is the order in which the Court will address the various questions put by the referring court.
Question 3
25 By its third question, which should be addressed first, the referring court asks, in essence, whether Article 30(4) of Regulation No 1260/1999 must be interpreted as meaning that the modifications referred to in that provision are solely those that take place during the performance of a project or that they also include modifications that take place afterwards, in particular in the course of the project’s management.
26 In that regard, first, it is apparent from the wording of Article 30(4) of Regulation No 1260/1999 that it covers the modifications made to an operation within five years of the date of the decision of the competent national authorities or the managing authority on the contribution of the funds. Given that it is conceivable – in the case of a works project, for example – that the time needed for completion of the project is less than five years, the necessary inference is that the modifications covered are not limited to those that take place during performance of a project, but include – as the case may be and without prejudice to those time-limits – modifications made afterwards, in particular in the course of the project’s management.
27 Secondly, it can be seen from recital 4 in the preamble to Regulation No 1260/1999 that the provision of Structural Funds is to meet priority objectives, namely ‘the development and structural adjustment of regions whose development is lagging behind, economic and social conversion of areas facing structural difficulties and adapting and modernising policies and systems of education, training and employment’. In the case of the ERDF, those objectives are, more specifically, according to recital 7 in the preamble to Regulation No 1260/1999, the development and structural adjustment of the regions whose development is lagging behind and economic and social conversion of areas facing structural difficulties.
28 It follows that the Structural Funds pursue objectives that cannot be achieved unless the grants made by those funds and the related controls cover not only the measures and expenditure connected with the carrying out of an operation, but also the measures and expenditure connected with the procedures for the operation’s implementation and management, within the five-year period specified in Article 30(4) of Regulation No 1260/1999. That is the only way of ensuring that action under the funds is efficient, by preventing them from being used to fund projects which, once carried out, undergo a modification to their management, as a result of which they no longer contribute to the objectives for which the funding was granted.
29 In the light of all those considerations, the answer to Question 3 is that Article 30(4) of Regulation No 1260/1999 must be interpreted as meaning that the modifications referred to in that provision include, not only those that take place during the performance of a project, but also those that take place afterwards, in particular in the course of the project’s management, provided that those modifications take place within the five-year period specified in that provision.
Question 1
30 By its first question, which should be addressed in second place, the referring court seeks to establish whether Article 30(4) of Regulation No 1260/1999 must be interpreted as meaning that, in order to undertake an assessment as to whether the grant of the concession generates substantial revenue for the contracting authority or undue advantage for the concessionaire, it is first necessary to determine whether the project has undergone a substantial modification.
31 In that regard, it follows from the wording of Article 30(4) of Regulation No 1260/1999 that the existence of an undue advantage is one of the factors which potentially constitute a substantial modification for the purposes of that provision.
32 Accordingly, before making a finding as to the existence or not, in the circumstances of the case before it, of a substantial modification for the purposes of Article 30(4) of Regulation No 1260/1999, the referring court must, in particular, determine whether the contested modification has given rise to an undue advantage and/or whether it has affected the nature or implementation conditions of the operation.
33 In the light of the foregoing, the answer to Question 1 is that Article 30(4) of Regulation No 1260/1999 must be interpreted as meaning that, in order to undertake an assessment as to whether the grant of the concession generates substantial revenue for the contracting authority or undue advantage for the concessionaire, it is not first necessary to establish whether the works under concession have undergone a substantial modification.
Question 2
34 By its second question, which should be addressed in third place, the referring court asks whether Article 30(4) of Regulation No 1260/1999 must be interpreted as referring only to physical modifications – in the sense that the structure set in place is not as specified in the project approved for funding – or whether it also covers modifications with regard to function. If modifications of the latter kind are covered, the referring court asks whether there has been ‘substantial modification’ if the structure is used, in part, but not predominantly, for activities other than those envisaged in the call for projects or in the application for funding made in response.
35 First of all, in view of the fact that the EU legislature took care to add the qualification ‘substantial’ in order to indicate the kind of modification covered, a modification must, if it is to fall within the scope of Article 30(4) of Regulation No 1260/1999, not only satisfy the two conditions laid down in that provision, but also be fairly significant.
36 In that regard, it can be seen from recital 41 in the preamble to Regulation No 1260/1999 that all or part of the assistance from a fund should remain attached to an operation only where the nature or implementation conditions of the operation do not undergo a substantial modification which would result in diverting the assisted operation from its original objectives.
37 Consequently, where a modification meets the condition laid down in point (a) of the first subparagraph of Article 30(4) of Regulation No 1260/1999, in that it affects the nature or implementation conditions of an operation, that modification may be classified as a ‘substantial modification’ for the purposes of Article 30(4) of that regulation only if it significantly reduces the capacity of the operation at issue to attain its designated objective.
38 Since a modification that is both physical and functional can significantly reduce the capacity of an operation to attain its designated objective, it must be concluded that the inspection of modifications made to a project, for the purposes of Article 30(4) of Regulation No 1260/1999, covers not only differences between a works project and the works carried out, but also modifications made to the functioning of the works in question.
39 It follows from the foregoing that the fact that the various elements which go to make up an operation have been modified in quantitative terms cannot be regarded as conclusive in itself.
40 It is for the referring court, therefore, to assess on the basis of the facts before it whether the modifications made – in particular, the fact that the slipway constructed by the Comune di Ancona is used by pleasure craft, accounting for an estimated 18% of usage, despite the fact that such use was not envisaged in the project submitted for funding – were of such a kind as significantly to alter the use of the works concerned by accommodating activities different from those envisaged and, accordingly, significantly to reduce the capacity of the operation at issue to attain its designated objective.
41 In the light of the second condition laid down in point (b) of the first subparagraph of Article 30(4) of Regulation No 1260/1999, it must also be pointed out that, for it to be possible to classify the modification consisting in the use of the works for activities other than those envisaged in the project submitted for funding as a ‘substantial modification’ for the purposes of Article 30(4) of that regulation, that modification must have been brought about as a result of the – at least partial – cessation of some of the activities envisaged in the project submitted for funding.
42 Consequently, the answer to Question 2 is that Article 30(4) of Regulation No 1260/1999 must be interpreted as referring both to physical modifications – where the works carried out are not as specified in the project approved for funding – and to modifications affecting function, it being understood that, in the case of a modification consisting in the use of works for activities other than those originally envisaged in the project submitted for funding, such a modification must be capable of significantly reducing the capacity of the operation in question to attain its designated objective.
Question 4
43 By its fourth question, the referring court asks, in essence, whether EU law precludes a municipality from directly awarding to a third party – that is to say, without publishing a call for tenders – a public service concession relating to works, where that concession is incapable of generating either substantial revenue or an undue advantage for that third party or for the public contracting authority.
44 In that regard, it should be noted, first of all, that, if it transpires that the modifications at issue cannot be classified as ‘modifications’ for the purposes of Article 30(4) of Regulation No 1260/1999, the fact remains that, in accordance with the obligations laid down in Article 38(1)(e) and (h) of that regulation, the Member State concerned must assess whether that modification constitutes an irregularity for the purposes of Articles 38 and 39 of that regulation, in respect of which it will accordingly be necessary to make the requisite financial corrections and to recover the corresponding amounts lost, applying default interest where appropriate.
45 Next, it should be noted that public service concessions are not governed by any legislation at EU level. In the absence of legislation, the law applicable to service concessions must be assessed in the light of primary law and, more specifically, the fundamental freedoms laid down in the Treaty on the Functioning of the European Union (see Case C‑324/98 Telaustria and Telefonadress [2000] ECR I‑10745, paragraph 60).
46 In that context, the Court has held that the principles of equal treatment and of non-discrimination on grounds of nationality impose, particularly on the contracting authority, a duty of transparency, consisting in the duty to ensure, for the benefit of any potential tenderer, a degree of publicity sufficient to enable the award procedure to be opened up to competition and the impartiality of that procedure to be reviewed, without necessarily implying an obligation to call for tenders (Case C‑260/04 Commission v Italy [2007] ECR I‑7083, paragraph 24, and Case C‑324/07 Coditel Brabant [2008] ECR I‑8457, paragraph 25).
47 More specifically, it has been held that, to the extent that a concession may also be of interest to an undertaking located in a Member State other than the Member State of the contracting authority, the award, in the absence of any transparency, of that concession to an undertaking located in the latter Member State amounts to a difference in treatment to the detriment of the undertakings located in other Member States. In the absence of any transparency, the undertakings located in those other Member States have no real possibility of manifesting their interest in obtaining the concession in question (see, to that effect, Case C‑231/03 Coname [2005] ECR I‑7287, paragraphs 17 and 18).
48 Unless justified by objective circumstances, such a difference in treatment, which operates mainly to the detriment of undertakings located in another Member State, amounts to indirect discrimination on grounds of nationality, prohibited under Articles 49 TFEU and 56 TFEU (Case C‑347/06 ASM Brescia [2008] ECR I‑5641, paragraph 60).
49 In those circumstances, in order to assess whether the award of the concession relating to the slipway is in conformity with EU law, it is for the referring court to determine whether the award of the public service concession by the Comune di Ancona met transparency requirements of such a kind as to ensure, in particular, that an undertaking located in the territory of a Member State other than that of the Italian Republic could have access to appropriate information regarding that concession before it was awarded, so that, if that undertaking had so wished, it would have been in a position to express its interest in obtaining the concession (see Coname, paragraph 21).
50 In the main proceedings, the Comune di Ancona has not invoked any objective facts capable of explaining the lack of any transparency in the award of the concession. On the contrary, it maintained that the concession was not liable to interest undertakings located in other Member States, in so far as the concession granted to the Pescatori cooperative was designed so as not to be capable of generating substantial net revenue for its beneficiary or an undue advantage for the latter or for the municipality.
51 However, the fact that a concession is not capable of generating substantial net revenue or an undue advantage for an undertaking or for a public body does not, in itself, support the inference that the concession is of no economic interest for undertakings located in Member States other than that of the contracting authority. In the context of an economic strategy to extend part of its activities to another Member State, an undertaking may take the tactical decision to seek the award in that State of a concession despite the fact that that concession is incapable as such of generating sufficient profit, since that opportunity could nevertheless enable the undertaking to establish itself on the market of that State and to make itself known there with a view to preparing its future expansion.
52 In view of the foregoing, the answer to Question 4 is that, in circumstances such as those of the case before the referring court, EU law does not preclude the award, without a call for tenders, of a public service concession relating to works, provided that that award is consistent with the principle of transparency, observance of which, without necessarily entailing an obligation to call for tenders, must make it possible for an undertaking located in the territory of a Member State other than that of the contracting authority to have access to appropriate information regarding that concession before it is awarded, so that, if that undertaking so wishes, it would be in a position to express its interest in obtaining that concession – it being for the referring court to determine whether that was the position in the case before it.
Costs
53 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Fourth Chamber) hereby rules:
1. Article 30(4) of Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds must be interpreted as meaning that the modifications referred to in that provision include, not only those that take place during the performance of a project, but also those that take place afterwards, in particular in the course of the project’s management, provided that those modifications take place within the five-year period specified in that provision.
2. Article 30(4) of Regulation No 1260/1999 must be interpreted as meaning that in order to undertake an assessment as to whether the grant of the concession generates substantial revenue for the contracting authority or undue advantage for the concessionaire, it is not first necessary to establish whether the works under concession have undergone a substantial modification.
3. Article 30(4) of Regulation No 1260/1999 must be interpreted as referring both to physical modifications – where the works carried out are not as specified in the project approved for funding – and to modifications affecting function, it being understood that, in the case of a modification consisting in the use of works for activities other than those originally envisaged in the project submitted for funding, such a modification must be capable of significantly reducing the capacity of the operation in question to attain its designated objective.
4. In circumstances such as those of the case before the referring court, EU law does not preclude the award, without a call for tenders, of a public service concession relating to works, provided that that award is consistent with the principle of transparency, observance of which, without necessarily entailing an obligation to call for tenders, must make it possible for an undertaking located in the territory of a Member State other than that of the contracting authority to have access to appropriate information regarding that concession before it is awarded, so that, if that undertaking so wishes, it would be in a position to express its interest in obtaining that concession – it being for the referring court to determine whether that was the position in the case before it.
[Signatures]