Action brought on 24 February 2010 - Republic of Hungary v European Commission

(Case T-89/10)

Language of the case: Hungarian

Parties

Applicant: Republic of Hungary (represented by: J. Fazekas, M.Z. Fehér, K. Szíjjártó, agents)

Defendant: European Commission

Form of order sought

Annulment of Article 1(3) and (4) of and Annexes I, point 3.3, and II of Commission Decision [C(2009)10151] concerning the major project 'M43 Motorway between Szeged and Makó', forming part of the operational programme 'Transport' for Union structural assistance from the European Regional Development Fund and the Cohesion Fund under the Convergence objective in the Republic of Hungary, insofar as those provisions exclude payments of value added tax from eligible expenditure.

An order that the Commission pay the costs.

Pleas in law and main arguments

The applicant contests Commission Decision [C(2009)10151] concerning the major project 'M43 Motorway between Szeged and Makó', forming part of the operational programme 'Transport' for Union structural assistance from the European Regional Development Fund and the Cohesion Fund under the Convergence objective. In that Decision the Commission authorised the grant of a contribution from the Cohesion Fund to that major project. Furthermore, under the section on 'Non-eligible expenditure' in Annex I to the contested Decision the Commission refused the proposal of the Hungarian authorities to include payments of value added tax in the project concerned.

In the grounds for its application the applicant states that, in adopting the contested Decision, the Commission infringed the relevant provisions of European Union law, in particular Article 56(4) of Regulation (EC) No 1083/2006 ¹ and Article 3 of Regulation (EC) No 1084/2006. ²

The applicant considers that Article 3(e) of Regulation No 1084/2006 clearly establishes that recoverable value added tax is not eligible for support in the form of a contribution from the Cohesion Fund. In the opinion of the applicant it follows unequivocally from that provision that non-recoverable value added tax is eligible for support. Accordingly, having regard to the fact that, under European Union or national law on value added tax the beneficiary of the major project which is the subject of the Decision is not a taxable person, so that it cannot claim back the input value added tax charged to it, the applicant argues that, in the contested Decision, it is not open to the Commission to exclude expenditure arising from that tax.

Furthermore, the applicant complains that, given that the Commission did not consider to be eligible the expenditure which Regulation No 1084/2006 did not include under eligible expenditure whereas the equivalent national legislation expressly mentioned it as eligible expenditure, by the contested Decision, the Commission was depriving the Member States of the powers devolved on them by Article 56(4) of Regulation No 1083/2006.

The applicant also alleges that the Commission's assertion that the value added tax charged to the beneficiary will be 'recoverable' through the value added tax paid on the fee collected by the management of the infrastructure built by the beneficiary is a very wide interpretation of the concept of 'recoverable value added tax' used in Article 3(e) of Regulation No 1084/2006, which the wording of that provision does not support, and is, moreover, contrary to the legislation of the European Union on value added tax.

Finally, the applicant states that neither Regulation No 1083/2006 nor Regulation No 1084/2006 allows an interpretation to the effect that the Commission, when assessing eligible expenditure, including eligible value added tax, could base its decision on the fact that the Member State could have opted for a different legal solution as regards the organisation of the project and the management of the infrastructure. In the opinion of the applicant, running the administration of national infrastructures and related public services is, essentially, the task of the Member States. In that regard, the applicant points out that, provided that they comply with the requirements laid down by the legislation of the Union, the Commission has to accept the option chosen by the Member State, together with the consequences for the assessment of eligible expenditure entailed by the beneficiary's status as a taxable person or non-taxable person.

____________

¹ - Council Regulation (EC) No 1083/2006 of 11 July 2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Regulation (EC) No 1260/1999 (OJ 2006 L 210, p. 25).

² - Council Regulation (EC) No 1084/2006 of 11 July 2006 establishing a Cohesion Fund and repealing Regulation (EC) No 1164/94 (OJ 2006 L 210, p. 79).