ORDER OF THE GENERAL COURT (Second Chamber)
30 June 2011 (*)
(Action for annulment – Sixth framework programme for research, technological development and demonstration activities – Letter confirming the findings of an audit report and informing the applicant of the next steps in the procedure – Contractual and non-decision-making character of the letter – Inadmissibility)
In Case T‑252/10,
Cross Czech a.s., established in Prague (Czech Republic), represented by T. Schollaert, lawyer,
applicant,
v
European Commission, represented by R. Lyal and W. Roels, acting as Agents,
defendant,
ACTION for annulment of the Commission letter of 12 March 2010, reference number INFSO-O2/FD/GVC/Isc D (2010) 208676, confirming the findings of financial audit report 09-BA74-006 concerning the financial statements declared by the applicant over the period 1 February 2005 to 30 April 2008 for three contracts concluded between the applicant and the Commission under the sixth framework programme of the European Community for research, technological development and demonstration activities, contributing to the creation of the European research area and to innovation (2002-06), and informing the applicant of the next steps in the procedure,
THE GENERAL COURT (Second Chamber),
composed of N.J. Forwood, President, F. Dehousse (Rapporteur) and J. Schwarcz, Judges,
Registrar: E. Coulon,
makes the following
Order
Background to the dispute
1 The applicant Cross Czech a.s. concluded with the Commission of the European Communities, acting on behalf of the European Community, a number of contracts under the sixth framework programme of the European Community for research, technological development and demonstration activities, contributing to the creation of the European research area and to innovation (2002-06) (the ‘FP6 contracts’, namely, Contract No 028051, relating to eMapps.com, Contract No 015942 relating to the CEEC IST NET project, and Contract No 027767 relating to the Transfer-East project).
2 Article 12 of Contract No 028051 designates Luxembourg law as the applicable law, while Article 12 of Contracts No 015942 and No 027767 designate Belgian law for that purpose. In addition, Article 13 of those three contracts stipulates that the courts of the European Union (Court of Justice or General Court) are to have exclusive jurisdiction to settle any dispute arising between the parties relating to the validity, performance or interpretation of those contracts.
3 According to Article 14 of those contracts, the general conditions in Annex II thereto (‘the FP6 general conditions’) form an integral part of those contracts.
4 Under Article II.29.1 of the FP6 general conditions, the Commission entrusted to an external audit firm the task of undertaking a financial audit of the costs declared by the applicant under those contracts.
5 In the draft audit report, sent to the applicant on 27 November 2009, the audit firm found that the latter had inflated its claims for personnel costs. Of a total of EUR 765 351.14 claimed by the applicant under Contracts No 028051, No 015942 and No 027767 for the periods from 1 October 2005 to 31 March 2008, 1 February 2005 to 31 January 2007 and 1 January 2006 to 30 April 2008 respectively, the audit firm estimated that eligible costs came to a total of only EUR 81 125.86.
6 By letters of 8 and 11 December 2009, the applicant submitted its comments on the draft audit report.
7 On 9 February 2010, after having taken those comments into consideration, the external auditor finalised its audit report.
8 By letter of 3 March 2010, the Commission informed the applicant that, in the light of the audit report and the content of the comments submitted by the applicant on that report, the latter appeared to be guilty of serious professional misconduct. The Commission informed the applicant of its intention to exclude it from the ongoing public procurement procedures relating to the Carare and Progr‑East projects in accordance with Articles 93(1)(c) and 114(3) of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (OJ 2002 L 248, p. 1) (‘the Financial Regulation’). The period of exclusion considered was five years. The Commission invited the applicant to submit comments on that exclusion and its duration within 14 days of receipt of the letter.
9 By letter of 12 March 2010, which is the contested act in the present proceedings, the Commission informed the applicant that it was confirming the conclusions of the audit report with respect to the necessary corrections to be made for Contracts No 028051, No 015942 and No 027767 and for the periods concerned by the audit, and it informed the applicant of the next steps in the procedure.
10 In that letter, the Commission indicated, as regards the periods concerned by the audit, that the audit report would be communicated to the relevant Commission services for its findings to be implemented.
11 As regards the periods and contracts not concerned by the audit, the Commission, which regarded certain errors mentioned in the audit report as being of a systematic nature, took the view that it was appropriate to extrapolate the findings of the audit report to those periods and contracts and, therefore, to make the necessary corrections also with respect to those periods and contracts.
12 The Commission therefore requested the applicant to consider whether those systematic errors did indeed affect the contracts and periods not concerned by the audit and provided it with various methods in order to correct any errors.
13 In addition, the Commission informed the applicant of the rules to be followed and the information to be provided to the Commission when making the corrections. The Commission also invited the applicant, if it took the view that the findings of the audit report could not be extrapolated to all or part of the periods and contracts not concerned by the audit, to explain to the Commission why those periods and contracts do not suffer from the errors detected in the audit.
14 The Commission indicated how the adjustments resulting from corrections by extrapolation would be implemented by it, as regards ongoing and closed contracts. It stated that, at that stage, those adjustments would not entail the application of liquidated damages or financial penalties, if the adjustments were performed in accordance with the instructions contained in its letter. It requested the applicant to send within three months the result of any corrections by extrapolation, in order that that result could be sent to the relevant Commission services in order to implement the necessary financial adjustments.
15 The Commission added that it reserved the right to proceed to further audits if the applicant did not react to the request for extrapolation within the deadlines, and the right to perform follow-up audits in order to ascertain if the extrapolation had been carried out. It stated that, if such complementary audits revealed the existence of non-eligible costs not corrected when the extrapolation was made, or any other non-eligible costs, liquidated damages and financial penalties might be applied. It also reserved the right to suspend payments due under any ongoing project until extrapolation was performed or it was explained why the audit findings could not be extrapolated to those projects.
16 The Commission reminded the applicant that its financial statements had to comply with the relevant, contractually agreed, financial provisions and requested it to comply with the findings and recommendations in the audit report in all future financial statements to be submitted by it with respect to projects under the sixth framework programme.
17 Finally, the Commission stated that it regarded the intentional inflation of personnel costs detected by the audit as a ‘(substantial) irregularity’, within the meaning of Article II.1.11 of the FP6 general conditions, Article II.1.10 of the general conditions of the grant agreements under the seventh framework programme of the European Community for research, technological development and demonstration activities (2007-13) (‘the FP7 general conditions’) and within the meaning of Article II.1 of the general conditions of the grant agreements under the multiannual Community programme eContentplus to make digital content in Europe more accessible, usable and exploitable (‘the eContentplus general conditions’). The Commission stated that, as a consequence of that irregularity, it proposed to terminate the applicant’s participation in all the ongoing projects with the Directorate-General (DG) for the Information Society and Media in accordance with Article II.16.2 of the FP6 general conditions, Article II.38.1(c) of the FP7 general conditions and Article II.9.3(e) of the eContentplus general conditions.
18 By letter to the applicant of 15 March 2010, the Commission agreed to a request from the applicant for an extension of the time-limit in which to submit its comments in response to the letter of 3 March 2010 (see paragraph 8 above). Furthermore, the Commission informed the applicant that a provisional exclusion notice concerning it, valid until 12 September 2010, would be registered in the central exclusion database established by Commission Regulation (EC, Euratom) No 1302/2008 of 17 December 2008 (OJ 2008 L 344, p. 12).
19 By letter to the Commission of 23 March 2010, responding to the letter of 15 March 2010, the applicant disputed the findings of the audit report, produced documents in that regard, and claimed that there were no reasons to exclude it from the public procurement award procedures, either as regards the Carare and Progr-East projects or any other projects.
20 By letter of 6 April 2010, the applicant sent the Commission various additional documents.
21 By letter of 19 April 2010, the Commission replied to an e-mail from the applicant of 29 March 2010 requesting information on the ongoing administrative procedure resulting from the audit.
22 On 23 April 2010, the applicant submitted to the Commission its comments on the exclusion procedure in a meeting organised at its request in Brussels.
23 By letter of 27 April 2010, referring to Contract No 027767, the Commission informed the applicant that a recovery process was to be initiated for the amount of EUR 86 158.38. The Commission added that the purpose of its letter was to invite the applicant to make comments within two weeks and that, in the absence of any such comments, it would continue the process.
24 By letter of 3 May 2010, the applicant replied that it was still waiting for the minutes and conclusions of the meeting of 23 April 2010 and the notification of further stages in the procedure. It stated that it wished to have that information available before submitting its comments and it requested that, in the meantime, its letter of 23 March 2010 should be regarded as provisional comments.
25 By letter of 11 May 2010, the Commission sent the applicant the minutes of the meeting of 23 April 2010.
Procedure and forms of order sought
26 By application lodged at the Registry of the General Court on 28 May 2010, the applicant brought the present action.
27 By separate document, lodged at the Registry of the General Court on 18 June 2010, the applicant sought suspension of operation of the contested document by way of interim relief. By order of 29 July 2010 in Case T‑252/10 R Cross Czech v Commission, not published in the ECR, the President of the General Court dismissed that application and reserved the costs.
28 The applicant claims that the Court should:
– declare the letter of 12 March 2010 null and void;
– order the Commission to pay the costs.
29 By separate document lodged at the Registry of the General Court on 10 September 2010, the Commission raised a plea of inadmissibility under Article 114(1) of the Rules of Procedure of the General Court.
30 The Commission claims that the Court should:
– declare the action inadmissible;
– order the applicant to pay the costs.
31 The applicant submitted its observations on the plea of inadmissibility on 27 October 2010. It contends that the Court should declare the action for annulment admissible.
32 By letter of 21 January 2011, the Court asked the Commission, by way of measures of organisation of procedure, to produce certain contractual documents, which the Commission did by letter lodged at the Court Registry on 8 February 2011.
Law
33 Under Article 114(1) of the Rules of Procedure, if a party so requests, the Court may make a decision on admissibility without considering the substance. Under Article 114(3), unless the Court otherwise decides, the remainder of the proceedings is to be oral.
34 In the present case, the Court considers that it has sufficient information from the documents before it, so that there is no need to open the oral procedure.
35 It must be observed that the applicant has expressly brought its action on the basis of Article 263 TFEU.
36 Under that article, the Community Courts review the legality of acts of the institutions intended to produce legal effects vis-à-vis third parties by bringing about a distinct change in their legal position (orders of 10 April 2008 in Case T‑97/07 Imelios v Commission, not published in the ECR, paragraph 21, and 6 October 2008 in Case T-235/06 Austrian Relief Program v Commission, not published in the ECR, paragraph 34, and judgment in Joined Cases T-428/07 and T-455/07 CEVA v Commission [2010] ECR II-0000, paragraph 51).
37 According to settled case-law, that jurisdiction concerns only decisions to which Article 288 TFEU relates and which the institutions find it necessary to adopt in the circumstances provided for by the Treaty (orders in Case T-149/00 Innova v Commission [2001] ECR II-1, paragraph 28, Case T-387/00 Comitato organizzatore del convegno internazionale v Commission [2002] ECR II-3031, paragraph 39, and Joined Cases T-314/03 and T-378/03 Musée Grévin v Commission [2004] ECR II-1421, paragraph 63).
38 By contrast, measures adopted by the institutions in a purely contractual context from which they are inseparable are, by their very nature, not among the measures covered by Article 288 TFEU, annulment of which may be sought before the Community judicature pursuant to Article 263 TFEU (orders in Musée Grévin v Commission, paragraph 64, and Austrian Relief Program v Commission, paragraph 35, and judgment in CEVA v Commission, paragraph 52).
39 In the present case, it is therefore necessary to consider whether the letter of 12 March 2010 is among the measures covered by Article 288 TFEU, applications for the annulment of which fall within the exclusive jurisdiction of the Community Court pursuant to Article 263 TFEU, or whether, on the contrary, it is contractual in nature (see, to that effect, orders in Musée Grévin v Commission, paragraph 66, of 26 February 2007 in Case T-205/05 Evropaïki Dynamiki v Commission, not published in the ECR, paragraph 42, and Imelios v Commission, paragraph 23).
40 In the present case, in the letter of 12 March 2010, the Commission informed the applicant that following the communication to it of the draft audit report, its observations and the adjustments to that draft made in consequence by the auditors, the Commission took the view that the findings presented in the audit report, annexed to the letter of 12 March 2010, were appropriate and therefore the audit was henceforward closed (page 1 of the letter of 12 March 2010).
41 In the remainder of that letter, the Commission first informed the applicant that the audit report would be sent to its competent services in order to give effect to the findings of the report as regards the contracts and period concerned by the audit (page 2 of the letter of 12 March 2010).
42 Second, the Commission called on the applicant to extrapolate the findings of the audit report to the periods and contracts not concerned by the audit (pages 2 to 6 of the letter of 12 March 2010).
43 Third, and with regard to future periods, the Commission reminded the applicant that its financial statements had to comply with the contractually agreed financial provisions and requested it to comply with the findings and recommendations in the audit report in all future financial statements to be submitted by the applicant in the context of projects under the sixth framework programme (page 6 of the letter of 12 March 2010).
44 Fourth, the Commission, after making certain observations regarding the importance of submitting reliable audit certificates with financial statements, informed the applicant that it regarded the intentional inflation of personnel costs detected as a ‘(substantial) irregularity’ within the meaning of the general conditions of the FP6, FP7 and eContentplus and that, taking account of that irregularity, it proposed to terminate the applicant’s participation in all ongoing projects with the Information Society and Media DG in accordance with those general conditions (pages 6 and 7 of the letter of 12 March 2010).
45 First of all, as regards the information in the letter of 12 March 2010 set out in paragraphs 40 and 41 above and relating both to the acceptance by the Commission of the findings of the audit report and the transmission of that report to the competent services of the Commission, it must be held that they form part of the contracts concluded with the applicant.
46 In that connection, it is clear from Article II.29 of the FP6 general conditions that ‘[t]he Commission may, at any time during the contract and up to five years after the end of the project, arrange for audits to be carried out … relating to the proper execution of the project and the contract’. That contractual provision also provides that ‘[a]ny amounts due to the Commission as a result of the findings of any such audit may be the subject of a recovery as mentioned in Article II.31’.
47 Next, as regards the information in the letter of 12 March 2010, set out in paragraphs 42 and 43 above, the reminder of the need to comply with the financial stipulations of the contracts clearly forms part of the contractual relations. As to the requests to extrapolate the findings of the audit to the periods and contracts not concerned by the audit and to comply in the future with the recommendations of that audit, they are also inseparable from the contractual relations between the applicant and the Commission. Those requests derive directly from the Commission’s right to supervise the proper execution of the contract (Article II.29.1 of the FP6 general conditions), the contractor’s obligation to make available to the Commission the information requested in the course of those checks (Article II.3.2(c) and Article II.29.2 of the FP6 general conditions), and the applicant’s obligation to declare only costs which are actually eligible (Articles II.19 and II.30 of the FP6 general conditions read in combination).
48 Finally, as regards the information in the letter of 12 March 2010, set out in paragraph 44 above, relating to the fact that the Commission proposed to terminate the applicant’s participation in all the ongoing contracts (FP6, FP7 and eContentplus) with the Information Society and Media DG, it suffices to state that the applicant does not challenge the existence of a contractual basis for the termination by the Commission of such contracts if the contracting party commits an irregularity in the context of another contract with the Commission.
49 The foregoing considerations, which clearly show the purely contractual nature of the letter of 12 March 2010, are in no way called into question by the various arguments put forward by the applicant in its observations on the objection of inadmissibility, which are a hotchpotch of comments alleging that the letter of 12 March 2010 is non-contractual in nature and that it is a decision.
50 First of all, as regards the applicant’s assertion that, in its view, extrapolation is an obligation which has no contractual basis whatsoever, it has already been held that the request to extrapolate findings forms part of the contractual relations (see paragraph 47 above).
51 In any event, contrary to the applicant’s assertions, the Commission did not in any way oblige the applicant to carry out the extrapolation. The Commission requested the applicant to do so or, if not, to explain why it took the view that extrapolation was inappropriate.
52 As to the fact, mentioned by the applicant, that the Commission may claim the payment of liquidated damages and financial penalties in the case of uncorrected errors, that fact in no way converts the invitation to extrapolate, expressed in the letter of 12 March 2010, into an obligation. It is only the expression of the right contractually guaranteed to the Commission to obtain, in all circumstances, the payment of liquidated damages and financial penalties if a contractor has received an unjustified financial contribution.
53 It is clear from the foregoing considerations that the applicant wrongly submits that the present annulment action should be regarded as admissible in so far as it challenges an alleged Commission decision, adopted outside the provisions of the contract requiring the applicant to undertake the extrapolation.
54 Next, as regards the argument that the letter of 12 March 2010 has the direct consequence of excluding the applicant from all the ongoing projects with the Information Society and Media DG, it suffices to state that the applicant does not deny the existence of a contractual basis for the termination of the other ongoing contracts with the Information Society and Media DG (see paragraph 48 above). However, contrary to the applicant’s assertions, the letter of 12 March 2010 does not contain any decision terminating the ongoing contracts, but at the most contains information for the applicant in that respect.
55 Finally, as regards the argument that the letter of 12 March 2010 has the direct consequence that the applicant is excluded from all the ongoing public procurement procedures, even though that is not provided for in the three contracts which were the subject of the audit, it must be observed, as the Commission submits, that the letter of 12 March 2010 does not mention such exclusion anywhere. The letter of 12 March 2010 cannot in any way constitute an exclusion decision.
56 The exclusion of the applicant from ongoing public procurement procedures is mentioned by the Commission only in its letters of 3 and 15 March 2010. In the first of those letters (see paragraph 8 above), the Commission informed the applicant of its intention to exclude it and invited the applicant to submit its comments. In the second of those letters (see paragraph 18 above), the Commission granted an extension of the time-limit for submitting those comments and informed the applicant of its entry, on a provisional basis until 12 September 2010, on the central exclusion database.
57 Regardless of whether one or other of those two letters might constitute an act challengeable by way of an annulment action, it must be stated that neither is the subject of the present action.
58 It follows that since the exclusion of the applicant from the ongoing public procurement procedures is not the subject-matter of the contested letter, the considerations put forward and the evidence produced by the applicant concerning such exclusion are irrelevant.
59 In conclusion, none of the arguments put forward by the applicant successfully challenges the fact that the letter of 12 March 2010 is part of a purely contractual framework from which it is inseparable and therefore not capable of being the subject of an annulment action brought under Article 263 TFEU. In any event, in the contrary case, which is not the case in the present proceedings, in which the letter of 12 March 2010 were to be regarded as falling outside the purely contractual framework, it must be held that that letter does not contain any decision capable of being the subject-matter of an annulment action brought under Article 263 TFEU, but has at the most the characteristics of a preparatory act.
60 Therefore, the present action, as it seeks the annulment of the letter of 12 March 2010 on the basis of Article 263 TFEU is inadmissible.
61 It must be added that, admittedly, when hearing an action for annulment when the dispute is, in point of fact, contractual in nature, the Court has already consented to reclassify the action (Case T-26/00 Lecureur v Commission [2001] ECR II-2623, paragraph 38).
62 However, in the present case, there is no need to undertake such a reclassification.
63 When faced with a dispute which is contractual in nature, the Court considers itself unable to reclassify an action for annulment either where the applicant’s express intention not to base his application on Article 272 TFEU precludes such a reclassification or where the action is not based on any plea alleging infringement of the rules governing the contractual relationship in question, whether they be contractual clauses or provisions of the national law designated in the contract (CEVA v Commission, paragraph 59).
64 In the present case, the applicant, confronted with an objection of inadmissibility based on the contractual nature of the letter of 12 March 2010, merely defends the admissibility of the action in so far as it is based on Article 263 TFEU. Unlike the applicant in the case which gave rise to the judgment in CEVA v Commission, the applicant in the present case never requested the action to be reclassified as an action based on Article 272 TFEU. It is for the applicant to choose the legal basis of its action and not for the European Union judicature itself to choose the most appropriate legal basis (judgment in Case C-160/03 Spain v Eurojust [2005] ECR I-2077, paragraph 35; orders in Evropaïki Dynamiki v Commission, paragraph 38; Imelios v Commission, paragraph 19; Austrian Relief Program v Commission, paragraph 32, and judgment in CEVA v Commission, paragraph 46).
65 It follows from all of the foregoing considerations that the present action must be dismissed as being inadmissible.
Costs
66 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.
67 Since the applicant has been unsuccessful, and the Commission has applied for costs, the applicant must be ordered to pay the costs, including those incurred in the proceedings for interim relief.
On those grounds,
THE GENERAL COURT (Second Chamber)
hereby orders:
1. The action is dismissed as inadmissible.
2. Cross Czech a.s. is to bear its own costs and to pay those of the European Commission, including the costs incurred in the proceedings for interim relief.
Luxembourg, 30 June 2011.