JUDGMENT OF THE GENERAL COURT (Eighth Chamber)
16 September 2013 (*) (1)
(Arbitration clause – Contracts for financial assistance concluded in the context of the Fifth and Sixth Framework Programmes for Community activities in the field of research and technological development and in the context of the eTEN Programme – Highway, J WeB, Care Paths, Cocoon, Secure-Justice, Qualeg, Lensis, E-Pharm Up, Liric, Grace, Clinic and E2SP projects – Termination of contracts – Reimbursement of amounts paid – Debit notes – Counterclaim – Representation of the applicant)
In Case T‑435/09,
GL2006 Europe Ltd, established in Birmingham (United Kingdom), represented by M. Gardenal and E. Bélinguier-Raiz, lawyers,
applicant,
v
European Commission, represented initially by S. Delaude and N. Bambara, and subsequently by S. Delaude, acting as Agents, and by R. Van der Hout, lawyer,
defendant,
ACTION brought by GL2006 Europe Ltd pursuant to Article 238 EC, on the basis of arbitration clauses, whereby the applicant disputes the checks carried out by OLAF at its premises in December 2008, the decision in the letter of 10 July 2009 whereby the Commission terminated the applicant’s participation in two research and technological development projects, and 12 debit notes issued by the Commission on 7 August 2009, seeking the reimbursement of the sums paid by the Commission to the applicant for its participation in 12 research and development projects, and a counterclaim for the reimbursement of those sums,
THE GENERAL COURT (Eighth Chamber),
composed of L. Truchot (Rapporteur), President, M.E. Martins Ribeiro and A. Popescu, Judges,
Registrar: S. Spyropoulos, Administrator,
having regard to the written procedure and further to the hearing on 13 December 2012,
gives the following
Judgment
Background to the dispute
1 The applicant, GL2006 Europe Ltd, is a company established in the United Kingdom and is a business and management consultancy.
2 Between 2000 and 2006, the European Community, represented by the Commission of the European Communities, concluded 12 contracts with the applicant concerning its participation in research and development projects in exchange for a financial contribution from the Commission intended to cover certain costs incurred in the performance of the contracts at issue.
3 The following four contracts were concluded in the context of the fifth framework programme of the European Community for research, technological development and demonstration activities (1998-2002) (‘the Fifth Framework Programme’):
– the IST-2000-26039 contract, concluded on 19 December 2000, concerning the performance of the Lensis project (‘Leveraging Non-profit Sector towards the Information Society’);
– the IST-2000-29419 contract, concluded on 28 February 2002, concerning the performance of the E‑Pharm Up project (‘Best Practice e-Marketplace in Romanian Pharmaceutical Sector’);
– the IST-2001-33190 contract, concluded on 3 July 2002, concerning the performance of the Liric project (‘Leveraging Intra and Inter Countries Territorial Marketing in Eastern Manufacturing Sector’);
– the IST-2001-38100 contract, concluded on 30 August 2002, concerning the performance of the Grace project (‘GRID Search and Categorisation Engine’).
4 The following six contracts were concluded in the context of 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 (2002-2006) (‘The Sixth Framework Programme’):
– contract No 507126, concluded on 7 December 2003, concerning the performance of the Cocoon project (‘Building Knowledge Driven & Dynamically Adaptive Networked Communities within European Healthcare Systems’);
– contract No 507188, concluded on 18 December 2003, concerning the performance of the Secure-Justice project (‘Secure Communication and Collaboration Framework for the Judicial Co-operation Environment’);
– contract No 507767, concluded on 19 December 2003, concerning the performance of the Qualeg project (‘Quality of Service and Legitimacy in e‑Governement’);
– contract No 507017, concluded on 18 May 2004, concerning the performance of the Care Paths project (‘An intelligent support environment to improve the quality of decision processes in health communities’);
– contract No 027195, concluded on 13 December 2005, concerning the performance of the Highway project (‘Intelligent Co-operative System in Cars for Road Safety’);
– contract No 045331, concluded on 18 December 2006, concerning the performance of the J WeB project (‘Collaboration Environment for Judicial European Network in Western Balkans’).
5 The following two contracts were concluded in the context of the eTEN programme (‘Trans-European Telecommunications Networks’):
– the C517375 contract, concluded on 5 April 2005, concerning the performance of the E2SP project (‘Environmental Enterprises Service Provider’);
– the C517372 contract, concluded on 30 June 2005, concerning the performance of the Clinic project (‘Collaborative platform for supporting knowledge management processes in the Healthcare sector’).
6 From 22 to 24 January 2007, CK, a firm of auditors, carried out an audit on behalf of the Commission at the applicant’s premises. The audit concerned three of the 12 projects in which the applicant participated, namely the projects Cocoon, Qualeg, and Secure-Justice. The audit report of 29 October 2007 concluded that the management of the projects had been carried out in compliance with the contracts.
7 In November 2007 the European Anti-Fraud Office (OLAF) requested a meeting with the Commission’s Directorate-General (DG) for the Information Society and Media following suspicions of fraud allegedly committed by the applicant in carrying out the contracts in question. On the basis of an OLAF file note of 3 December 2007 concerning that meeting, the Commission decided to suspend the evaluation of the draft audit report in order to carry out additional checks.
8 From 8 to 12 December 2008 OLAF carried out checks at the premises of the applicant and of TCS, a company established in Birmingham (United Kingdom), which houses the applicant’s offices and provides administrative services to it. On that occasion, the representative of TCS, Mr K., who is also the director of the applicant, was interviewed by the OLAF inspectors. Copies of administrative documents and electronic copies of information were also made.
9 On 19 December 2008, the Commission sent the applicant a draft audit report following the on-the-spot check by OLAF, which stated that:
‘(a) … [W]e did identify material weaknesses in the internal controls relevant to the preparation and control of the financial statements submitted for funding to the European Commission since we understand that [the applicant] is neither involved in the preparation [nor] the control of the financial statements submitted for funding to the European Commission. … In our opinion the system is therefore not adequate to record properly the costs of the projects claimed by [the applicant] …
(b) We believe that [the applicant] does not dispose of the required internal skills and resources to carry out the research work …
(c) We believe that the personnel costs claimed for funding towards the European Commission as in-house consultants do not meet the conditions to be eligible as in-house consultants in view of the contractual provisions of the European co‑funded research contracts. In particular, the physical people have not worked under the instructions of [the applicant] (i.e. the work is not decided, designed and supervised by [the applicant]). Indeed, [the applicant] does not have any employee and the design and supervision of the work to be carried out by [the applicant] is done by the project leader who is also subcontracted. As a result thereof, [the applicant] does not have the internal capacity and resources to monitor the research work carried out in the European co-funded research contracts in which [it] is involved. Therefore, we believe that these personnel costs, when duly justified and incurred, should be considered as subcontracting costs.
(d) The subcontracting of all the research work … has not been notified for prior approval to the European Commission as foreseen in contractual provisions of the European co-funded research contracts …
(e) Since all the costs declared as personnel costs [should be considered as the result of subcontracting, the applicant is not entitled to claim that they should be covered as indirect costs by the European Commission.]
…
[The Commission] believe[s] that [the applicant] has not respected the provisions of the European co-funded research contracts and propose[s] to reject all the costs claimed by [the applicant] [from] the European Commission in the context of the Research Framework Programmes on the [12] audited projects.’
10 By letter of 19 January 2009, the applicant set out some observations on the draft audit report, to which OLAF replied by letter of 19 March 2009.
11 On 25 March 2009 the Commission replied to the applicant’s observations in the letter of 19 January 2009. It asserted that the applicant had deliberately tried to conceal from the Commission the links which it had with another company and, to that end, had made false declarations in its proposal submission forms prior to signature of the contract. The Commission also sent the applicant a final audit report, which confirms on every point the draft audit report of 19 December 2008. In the final report the Commission added that the applicant had misrepresented itself by signing contract preparation forms certifying that it possessed the necessary resources needed to participate in the projects in question.
12 On 15 May 2009 the Commission informed the applicant of its intention to terminate the applicant’s participation in the Qualeg and Cocoon projects because of the breaches of contract referred to in the final audit report and requested the applicant to present its observations within 30 days.
13 By letter of the same date, the applicant disputed the legality of the manner in which the on-the-spot check had been conducted at its premises by the OLAF inspectors from 8 to 12 December 2008 and it asked to be sent certain documents. The Commission replied to those observations by letters of 2 and 3 June 2009.
14 On 22 June 2009 the Commission informed the applicant of its intention to recover, as a consequence of the breaches of contract evidenced in the final audit report, the sum of EUR 2 258 456.31, which represents the financial contribution paid to the applicant under the 12 contracts concluded with it.
15 By letter of the same date, the applicant repeated the observations it had made in the letter of 15 May 2009.
16 On 10 July 2009 the Commission sent a letter to the applicant’s lawyers informing them that, first, it was finally terminating the applicant’s participation in the Qualeg and Cocoon projects, which were still running, and, secondly, that it would recover the sums paid to the applicant on the basis of its participation. The applicant disputed that decision by letter of 14 July 2009.
17 On 7 August 2009 the Commission sent the applicant 12 debit notes with the object of obtaining repayment of the sums which it had paid the applicant under the 12 contracts concluded with it, that is to say, a total of EUR 2 258 456.31.
Procedure and forms of order sought
18 By application lodged at the Registry of the Court on 22 October 2009, the applicant brought the present action.
19 By separate document lodged at the Court Registry on 3 November 2009, the applicant lodged an application for suspension of the execution of the decision in the Commission’s letter of 10 July 2009 and of the 12 debit notes issued on 7 August 2009. As the requirement of urgency was not fulfilled, the application was dismissed by order of the President of the Court of 15 March 2010 and the costs were reserved.
20 In its statement in defence, lodged at the Court Registry on 26 January 2010, the Commission made a counterclaim for the sums referred to in the debit notes.
21 The applicant claims that the Court should:
– declare the action admissible;
– declare that the on-the-spot check carried out by OLAF from 8 to 12 December 2008, the subsequent draft audit report and the final audit report, the decision, in the letter of 10 July 2009, to terminate the contracts under which the applicant participated in the Qualeg and Cocoon projects, and the debit notes of 7 August 2009 are affected by irregularities and are, consequently, unlawful, null and void;
– declare that all the contracts concluded by the applicant with the Commission are valid;
– in addition, declare that the Commission’s allegations are unfounded;
– order the Commission to pay the costs.
22 The Commission contends that the Court should:
– declare the action inadmissible;
– declare that the decision to terminate the contracts under which the applicant participated in the Qualeg and Cocoon projects contained in the letter of 10 July 2009, and the debit notes of 7 August 2009, comply with the terms and conditions of the contracts in question;
– by way of counterclaim, order the applicant to reimburse the Commission for the sum of EUR 2 258 456.31, corresponding to the amount shown in the debit notes, to be increased by interest as from the deadline for payment fixed in the respective debit notes;
– order the applicant to pay the costs.
23 In the reply, the applicant essentially repeats the claims set out in the application and adds a claim that the Court should dismiss the Commission’s claims.
Law
I – The action
24 Under Article 113 of the Rules of Procedure, the Court may at any time, of its own motion, after hearing the parties, decide whether there exists any absolute bar to proceeding with an action or declare that there is no need to adjudicate on the action.
25 Article 19 of the Statute of the Court of Justice, which applies to the General Court under Article 53 of that Statute, provides that parties other than the Member States, the States which are parties to the Agreement on the European Economic Area (EEA), the EFTA Surveillance Authority, and the institutions of the European Union are to be represented by a lawyer authorised to practise before a court of a Member State or of another State which is a party to the EEA.
26 By letter of 6 March 2012, the lawyers authorised to represent the applicant informed the Court that they no longer wished to represent it, on the grounds that they could no longer contact it, that it was no longer registered in the registry of companies, and that it had not fulfilled its pecuniary obligations to them.
27 By letter of 26 March 2012, the Court Registrar informed those lawyers that, until the applicant appointed new representatives, all correspondence relating to the present case would continue to be sent to them.
28 By way of measure of organisation of procedure of 13 June 2012, the Court asked those lawyers to:
– provide proof that they had communicated to the applicant their decision to no longer represent it in the present case;
– by registered letter with acknowledgment of receipt:
– request the applicant to appoint new representatives by 2 July 2012 at the latest;
– inform the applicant that in the absence of such appointment within the prescribed period, the General Court would be minded to declare of its own motion that the application has become devoid of purpose;
– produce evidence that the abovementioned letter had been sent.
29 Those lawyers complied with the Court’s request by letter of 20 June 2012.
30 The period granted to the applicant to appoint a new representative expired at midnight on 2 July 2012, without it informing the Court of any such appointment.
31 By way of measure of organisation of procedure of 10 July 2012, the Court asked the parties to submit their observations on the possibility of the Court finding, of its own motion, that the action had become devoid of purpose and that there was no need to adjudicate on it, since, having failed to appoint a new representative within the period prescribed by the Court, the applicant was no longer represented by a lawyer.
32 The Commission submitted observations by letter of 25 July 2012. The applicant did not submit observations.
33 In view of the applicant’s silence following the measure of organisation of procedure of 13 June 2012, referred to in paragraph 28 above, the Court must declare, of its own motion, in accordance with Article 113 of the Rules of Procedure, that the action has become devoid of purpose and that there is no need to adjudicate on it (see, to that effect, order of 20 June 2008 in Case T‑299/06 Leclercq v Commission, not published in the ECR, paragraph 15, order of 2 September 2010 in Case T‑123/08 Spitzer v OHIM – Homeland Housewares (Magic Butler), not published in the ECR, paragraph 8, and order of 16 May 2012 in Case T‑444/09 La City v OHIM – Bücheler and Ewert (citydogs), not published in the ECR, paragraph 12).
34 Consequently, there is no need to adjudicate on the Commission’s claim that the Court should declare the action inadmissible.
II – The Commission’s counterclaim
35 By letters of 2 and of 25 July 2012, the Commission requested the Court to adjudicate on its counterclaim even if it found that there was no need to adjudicate on the applicant’s action. In its counterclaim, the Commission claims that the Court should order the applicant to reimburse EUR 2 258 456.31 to the Commission, corresponding to the sum of the amounts paid to the applicant in the context of the performance of the 12 contracts concluded between them, to be increased by interest as from the deadline fixed in the debit notes issued on 7 August 2009.
A – Preliminary observations
36 Before examining whether the present decision that there is no need to adjudicate on the action brought by the applicant precludes the Court from adjudicating on the Commission’s counterclaim, it is necessary to determine whether the Court has jurisdiction to hear the present case.
37 Under Article 238 EC the Courts of the European Union have jurisdiction to give judgment pursuant to any arbitration clause contained in a contract concluded by or on behalf of the European Union, whether that contract be governed by public or private law.
38 According to the case-law, the jurisdiction of the Court, under an arbitration clause, to hear a case concerning a contract is to be assessed in the light of Article 238 EC and the terms of the clause itself (Case C‑209/90 Commission v Feilhauer [1992] ECR I‑2613, paragraph 13, and judgment of 9 February 2010 in Case T‑340/07 Evropaïki Dynamiki v Commission, not published in the ECR, paragraph 76). That jurisdiction derogates from the ordinary rules of law and must therefore be given a restrictive interpretation (Case 426/85 Commission v Zoubek [1986] ECR 4057, paragraph 11, and judgment of 16 December 2010 in Case T‑259/09 Commission v Arci Nuova associazione comitato di Cagliari and Gessa, not published in the ECR, paragraph 39). Thus, the Court can, first, adjudicate on a contractual dispute only if the parties have expressed their will to confer that jurisdiction on the Court (Commission v Arci Nuova associazione comitato di Cagliari and Gessa, paragraph 39) and, secondly, hear only claims arising from the contract which contains the arbitration clause or claims that are directly connected with the obligations arising from that contract (Commission v Zoubek, paragraph 11).
39 In the present case, it is undisputed that each of the 12 contracts concluded between the applicant and the Commission contains an arbitration clause conferring jurisdiction on the Court to hear disputes as regards the validity, the application or the interpretation of those contracts. Such a clause is contained in Article 13 of the contracts concluded in the context of the Sixth Framework Programme and in Article 5 of the contracts concluded in the context of the Fifth Framework Programme and that of the eTEN Programme.
40 Moreover, the Commission has, in its defence, referred to the contractual terms on which its counterclaim is based, namely Article 26(3) of the general conditions applicable to the contracts concluded in the context of the Fifth Framework Programme, Article 29(1), and Article 31(1) of the general conditions applicable to contracts concluded in the context of the Sixth Framework Programme and Article 17(4) of the general conditions applicable to the contracts concluded in the context of the eTEN Programme. Those terms authorise the Commission to request the reimbursement of amounts unduly paid.
41 The counterclaim is therefore based on the contracts at issue and the rights and obligations which arise therefrom, in accordance with the case-law referred to in paragraph 38 above.
42 Furthermore, according to the case-law, in the Community system of legal remedies, the jurisdiction to hear the main action implies the existence of a jurisdiction to hear any counterclaim made in the course of the procedure which is derived from the same act or circumstance that is the subject of the application. That jurisdiction is based on the interests of procedural economy and on the priority of the court first seised, considerations that are also recognised in the procedural systems of the Member States (see order of 27 May 2004 in Case C‑517/03 Commission v IAMA Consulting, not published in the ECR, paragraph 17 and the case-law cited).
43 It follows that the Court has jurisdiction, in principle, to hear the counterclaim submitted by the Commission.
44 Moreover, since it is aimed at obtaining an order requiring the applicant to pay the sums referred to in the debit notes of 7 August 2009, the Commission’s counterclaim has a purpose distinct from the mere dismissal of the applicant’s claims, which seek inter alia the annulment of the debit notes.
45 The decision that there is no need to adjudicate on the action brought by the applicant is not capable of satisfying the Commission claim, since it does not entail an order requiring the applicant to pay the sums referred to in the debit notes.
46 It follows that, first, the Commission’s counterclaim still has a purpose, even though the applicant’s action does not, and, secondly, the Commission still has an interest in its counterclaim being upheld.
47 In addition, if the Court adjudicates on the Commission’s counterclaim, the Commission is not required to bring a new action, and, as it stated in its letter of 25 July 2012, the parties have in fact already exchanged all of the arguments on which they intended to rely in the present case. Such an approach is therefore justified by reasons of procedural economy.
48 Moreover, as the Commission rightly pointed out in the abovementioned letter, if the Court decides on the counterclaim, it would not infringe the applicant’s rights of the defence. At the time that the cause of the Court’s finding that that there is no longer any need to adjudicate on the action occurred, namely the failure to appoint new representatives in the prescribed period, the written procedure was closed. The applicant had therefore been in a position to submit, in the reply, arguments in response to the Commission’s counterclaim, which it did. Furthermore, the applicant was informed, through its representatives, of the opening of the oral procedure and the holding of a hearing on 13 December 2012.
49 It follows from the foregoing that it is necessary to adjudicate on the counterclaim submitted by the Commission.
B – The substance of the counterclaim
50 In its counterclaim, the Commission claims that the Court should, first, order the applicant to reimburse all of the sums unduly received in the context of the 12 contracts it concluded with the Commission and, secondly, order the applicant to pay the Commission the interest which those amounts would have produced as from the deadline for payment fixed in the 7 August 2009 debit notes.
51 The details of the amounts referred to in the debit notes concerning each of the projects at issue are as follows:
– Lensis: EUR 257 598.49;
– E-Pharm Up: EUR 153 227.00;
– Liric: EUR 36 694.12;
– Grace: EUR 493 735.91;
– Cocoon: EUR 201 387.39;
– Secure-Justice: EUR 217 564.26;
– Qualeg: EUR 291 371.53;
– Care Paths: EUR 144 352.41;
– Highway: EUR 76 000.00;
– J WeB: EUR 70 807.45;
– E2SP: EUR 120 717.75;
– Clinic: EUR 195 000.00;.
1. The recovery of the amounts unduly paid
52 The Commission’s claim is based on Article 26(3) of the general conditions applicable to contracts concluded in the context of the Fifth Framework Programme, Article 29(1) and Article 31(1) of the general conditions applicable to contracts concluded in the context of the Sixth Framework Programme and Article 17(4) of the general conditions applicable to contracts concluded in the context of the eTEN Programme.
53 Article 26(3) of the general conditions applicable to contracts concluded in the context of the Fifth Framework Programme and Article 17(4) of the general conditions applicable to contracts concluded in the context of the eTEN Programme, the wording of which is identical, provide that ‘[o]n the basis of the conclusions of [an] audit, the Commission shall take all appropriate measures which it considers necessary, including the issuing of a recovery order regarding all or part of the payments made by it’.
54 Article 29(1) of the general conditions applicable to contracts concluded in the context of the Sixth Framework Programme provides that ‘Any amounts due to the Commission as a result of the findings of [an] audit may be the subject of a recovery as mentioned in Article … 31.’ Article 31(1) provides that ‘[i]f any amount is unduly paid to the contractor or if recovery is justified under the terms of the contract, the contractor undertakes to repay the Commission the sum in question on whatever terms and by whatever date it may specify.’
55 The Commission claims that the findings in the draft audit report of 19 December 2008, following the checks carried out by OLAF at the applicant’s premises and in the final audit report of 25 March 2009, justify the reimbursement by the applicant of all of the amounts which were paid to it in the context of the 12 projects in which it participated.
56 It is clear from those reports, and from the defence, that the Commission makes, in essence, three allegations concerning the applicant in the context of its participation in the projects at issue. It alleges, first, that the applicant did not exercise any financial and technical control over the performance of those projects, secondly, that the applicant did not have the human resources necessary for that purpose and, thirdly, that the costs that it declared in order to obtain the Community’s financial contribution provided for in those contracts did not fulfil the conditions laid down therein under which they could be taken into account for the purposes of that contribution.
a) The lack of financial and technical control over the performance of the projects at issue
Preliminary observations
57 It is necessary, as a preliminary, to note the applicable contractual framework relating to the conditions in which the tasks set out in the contracts were to be carried out, the content of the audit report established by OLAF as regards the applicant’s compliance with those conditions, and the Commission’s responses to the applicant’s observations on that report.
– The contractual framework for the performance of the projects at issue
58 Article 23(1) of the general conditions applicable to the contracts concluded in the context of the Fifth Framework Programme and Article 14(1) of the general conditions applicable to the contracts concluded in the context of the eTEN Programme make the eligibility of the personnel costs to the financing provided for in those contracts subject to several conditions. They provide, in identical terms:
‘With regard to personnel costs,
(a) Only the costs of the actual hours worked by the persons directly carrying out the scientific and technical work under the project may be charged to the contract.
… [S]uch persons must:
– be directly employed by the contractor in accordance with his national legislation,
– be under the sole technical supervision of the latter.’
59 Article 6 of the general conditions applicable to contracts concluded in the context of the Sixth Framework Programme provides:
‘Contractors shall ensure that the work to be performed, as identified in Annex I, can be carried out by them. … During the implementation of the project, contractors may subcontract other [subordinate] services, which do not represent core elements of the project work …’
60 Article 6.1.1 of the Guide to financial issues relating to contracts concluded in the context of the Sixth Framework Programme provides, as regards the eligibility of the costs of in-house consultants, that:
‘– The [in-house consultant] must work under the instructions of the contractor (i.e. the work is decided, designed and supervised by the contractor);
– The [in-house consultant] must work in the premises of the contractor;
– The results of the work belong to the contractor …’.
61 Article 16(2) of the General Conditions applicable to those contracts provides:
‘2. The Commission may immediately terminate the participation of a contractor:
(a) where the contractor has deliberately or through negligence committed an irregularity in the performance of any contract with the Commission. …’
62 Article 1(11) of the general conditions applicable to those contracts defines ‘irregularity’ as ‘any infringement of a provision of Community law or any breach of a contractual obligation resulting from an act or omission by a contractor which has, or would have, the effect of prejudicing the general budget of the European Communities or budgets managed by it through unjustified expenditure.’
63 It follows that the contractor’s supervision of the personnel charged with performing the tasks set out in the contracts is one of the conditions of eligibility for financing by the Commission of the personnel costs in the context of the three programmes under which the contracts between the applicant and the Commission were concluded.
64 However, as regards contracts concluded in the context of the Sixth Framework Programme, it is clear from the obligation set out in Article 6 of the general conditions applicable to those contracts that the work must be carried out by the contractors themselves and that only subordinate tasks, which do not represent core elements of the project at issue, may be subcontracted to third parties.
– The findings of the final audit report and the Commission’s responses to the applicant’s observations on the draft audit report
65 The findings of the final audit report concerning the technical and financial control over the performance of the contracts are set out in section (a) of that report.
66 In that section, OLAF noted weaknesses in the internal controls relevant to the preparation and control of the financial statements submitted to the Commission for funding, which would suggest that the applicant was involved in neither the preparation nor the control of those financial statements, those tasks being carried out by staff who do not belong to the applicant but to companies A and S. It indicated that, consequently, the applicant’s system of preparation and control of financial statements was not adequate to record properly the costs it declared.
67 In its response to the applicant’s observations on the draft audit report, the Commission added that the director of the applicant, Mr K., exclusively acted at the request of GL2006 Europe Ltd’s shareholders and was not in a position to answer any question on the substance and the organisation of the research activities to be carried out by the applicant. It added that not only the preparation and control of the financial statements submitted for funding to the Commission under the contracts at issue, but also the project’s research activities and the scientific, administrative and financial project management and supervision had been delegated to companies A and S.
Findings of the Court
68 The parties disagree as to whether the applicant’s participation in the projects at issue complies with the contracts, as regards the scope and the existence of its control over the performance of the tasks set out in the contracts.
69 The Commission claims that the applicant did not employ any employees for the purposes of the performance of the projects in which it participated, but rather used external consultants, to whom it delegated all of the core elements of the project, that is to say the preparation and control of financial statements and of activities relating to those projects, and their scientific, administrative and financial management and supervision.
70 Moreover, the applicant indicated, in its submissions on the draft audit report established in 2007 by CK, that the ability to read and present data resided with companies A and S and that those companies had always supported the projects at issue and managed their preparation and control.
71 The Commission claims, lastly, that the audit report established by CK should not be taken into consideration by the Court. It submits that the suspicions of fraud as regards the applicant, of which it was informed by OLAF in its note of 3 December 2007, had required that further investigations be carried out, which meant that the audit report established by CK was not approved. The purpose of an audit such as that carried out by CK is to verify the proper performance of projects and contracts, in particular whether the declared costs are in accordance with the provisions of the contract, but not to detect irregularities. The auditors of CK could not, therefore, have had access to the same information as the agents of OLAF, who carried out an in-depth investigation. Furthermore, that audit concerned only 3 of the 12 contracts concluded between the applicant and the Commission, whereas the on-the-spot checks carried out by OLAF concerned all of those contracts.
72 The applicant disputes the existence of weaknesses in its internal control system in relation to the preparation and the control of the financial statements submitted to the Commission, as well as the substance of the latter’s arguments regarding the absence of control over the work carried out in the context of its participation in the projects at issue.
73 It is clear from the minutes of OLAF’s interview with Mr K. during the verifications carried out at the applicant’s premises on 8 to 12 December 2008 that the applicant did not supervise the performance of the tasks linked to its participation in the projects at issue.
74 In response to the question of the OLAF agents, Mr K. affirmed that, since 2000, the applicant had no employees and did not carry out any research activity. He added that it was not for him to understand the work of the project managers and that ‘the controlling shareholder’ decided the applicant’s role in the performance of projects. He also stated that, for the purpose of carrying out the work linked to the projects, the applicant concluded contracts, which it merely signed, with independent consultants included on a list provided by the ‘controlling shareholder’. He stated moreover that the applicant had no control over the work, or the consultants, as it was not its responsibility.
75 Furthermore, the applicant does not claim to have exercised any control over the performance of the projects. On the contrary, the argument that, at the time of the checks carried out by OLAF at its premises, it was no longer involved in the ‘final administrative phase’ of the projects at issue, because of the completion of its participation or the transfer of that participation to other companies since 2007, corroborates the Commission’s allegations regarding the applicant’s lack of control over performance of those projects.
76 Moreover, as the Commission points out, the applicant indicated in its observations on the draft audit report that companies A and S had always managed the projects in which it participated.
77 Nor are the applicant’s arguments based on the draft audit report drawn up by CK capable of establishing that the applicant controlled the performance of work relating to the projects at issue.
78 As the applicant noted, CK, unlike OLAF, had found no weakness in the internal controls relevant to the preparation and the presentation of financial statements to the Commission with a view to obtaining the financial contribution under the contracts and was of the opinion that the system of control was adequate to record properly the costs eligible for that contribution.
79 The applicant and the Commission disagree as to which audit report should be taken into account. The Commission, for the reasons indicated in paragraph 71 above, claims that only the OLAF report is relevant in the present case. The applicant contends that only the report drawn up by CK should be taken into account, since, in its view, it is complete, detailed and impartial, in contrast to the OLAF report, which is incomplete and drafted in a biased and hasty manner.
80 It must be pointed out that the OLAF audit report takes account of elements of which CK was unaware or to which it did not have access during the 2007 audit.
81 Since the CK audit report was drawn up prior to the interview with Mr K., held during the check carried out in December 2008 at the applicant’s premises, it could not have taken into account the information collected in that interview. As is clear from paragraphs 73 to 76 above, that information is such as to establish that the applicant exercised no control over the tasks, set out in the contracts, relating to its participation in the projects at issue. Moreover, the audit carried out by CK concerned only 3 of the 12 contracts concluded between the applicant and the Commission, whereas the on-the-spot check carried out by OLAF concerned all of those contracts, a fact which the applicant has not disputed.
82 It follows from the foregoing that since the applicant’s arguments are based on CK’s draft audit report, they cannot invalidate the Commission’s arguments and the conclusions of OLAF’s final audit report, of 25 March 2009, according to which the applicant did not exercise any technical or administrative control over the performance of the projects in which it participated.
b) The adequacy of the applicant’s human resources for the performance of the projects
83 The Commission claims that the applicant had no employees and infers from this that it must therefore have delegated the performance of all the essential tasks allocated to it under the contracts to third-party consultants, over which it, moreover, exercised no control. In the Commission’s view, those circumstances show that the applicant did not have the human resources necessary to perform the contracts, in breach of Article 6 of the general conditions applicable to contracts concluded in the context of the Sixth Framework Programme.
84 The applicant disputes the Commission’s arguments and the conclusions of the audit report according to which it did not have the internal skills and resources necessary to carry out the research work allocated to it under the contracts.
85 As is clear from paragraph 64 above, it follows from Article 6 of the general conditions applicable to contracts concluded in the context of the Sixth Framework Programme that the work carried out for the purposes of a project must be done by the contractors themselves and that only subordinate tasks, which do not represent core elements of the project at issue, may be subcontracted to third parties.
86 It follows that a contractor which has third parties carry out the tasks which the contract requires him to carry out himself not only cannot claim a financial contribution from the Commission for those costs but also breaches an obligation arising from the contract, thereby committing an irregularity within the meaning of Article 1(11) of the general conditions applicable to contracts concluded in the context of the Sixth Framework Programme.
87 In the present case, the findings in the final audit report relating to the assessment of the applicant’s human resources, which are contained in section (b) of that report, note OLAF’s belief that the applicant did not have the required internal skills and resources to carry out the research work allocated to it in the contracts at issue.
88 As noted in paragraph 74 above, it is clear from the minutes of Mr K.’s interview that the applicant did not carry out any research activity, and that, since 2000, it had no employees and used consultants as independent contractors, inter alia, for managing its participation in the projects at issue. Those consultants were chosen from a list drawn up by the applicant’s shareholders and the applicant had no control over those consultants, or over the work that they carried out in the context of the projects at issue.
89 It has been inferred from the facts, in paragraphs 77 and 82 above, that the applicant had no control over the work of the consultants to which it entrusted the performance of the contracts. Moreover, it must be inferred from the applicant’s lack of paid employees that all of the tasks set out in the contracts at issue were carried out by those consultants and not by the applicant itself.
90 Those circumstances confirm the finding in the final audit report that the applicant did not have the human resources necessary to perform the contracts to which it was a party.
91 That finding cannot be invalidated by the applicant’s claim that the concept of ‘necessary resources’ for the performance of contracts is an extensive concept, which could designate various types of work relationships, or the fact that the consultants carried out their activity at the applicant’s premises, since the applicant’s lack of any control over the tasks set out in the contracts at issue preclude a finding that the applicant itself performed those contracts.
92 Nor, moreover, are the applicant’s arguments concerning the alleged misstatements made by Mr K. in his interview and the correct interpretation to be given to his answers capable of changing the meaning of his statements in his interview. According to the applicant, Mr K. wrongly indicated that it used subcontractors, whereas it actually employed consultants. Further, in stating that the applicant had never had any employees, Mr K. referred only to paid employees and not to the consultants which were employed on a full-time basis.
93 It must be noted that the information given by Mr K. concerns the overall organisation of the applicant’s activity, and not details of that activity, with the result that he, a director of the applicant, could not have erred in that regard. Moreover, in signing the minutes of the interview, Mr K. indicated his agreement with the content of those minutes and, accordingly, confirmed his answers.
94 Moreover, the applicant has not called into question the accuracy of the other information provided by Mr K. during his interview, nor the interpretation that should be given to that information.
95 It follows from the foregoing that Commission is correct to claim that the applicant did not have the human resources necessary to participate in the projects at issue and that, accordingly, it did not comply with the obligation, laid down in Article 6 of the general conditions applicable to contracts concluded in the context of the Sixth Framework Programme, to ensure that it could itself perform those contracts, thereby breaching that provision.
c) The eligibility of the costs declared by the applicant
Preliminary observations
96 As noted in paragraph 2 above, the financial contribution granted by the Commission in the context of projects such as those which are the subject of the contracts concluded between the applicant and the Commission consists in amounts paid from the budget of the European Union to cover certain costs incurred by the contractors in the context of their performance of the projects at issue.
97 In the present case, the parties disagree on the character, and the eligibility for the financing provided for in the contracts, of the costs declared by the applicant in the performance of the 12 contracts that it concluded with the Commission.
98 The Commission claims that the consultants to whom the applicant delegated the performance of the contracts cannot, with regard to those contracts, be considered as internal consultants and that the costs that they have incurred cannot be eligible for the financial contribution provided for in the contracts as either personnel costs, as the result of subcontracting, or as indirect costs, in accordance with the contracts.
99 The applicant, however, contends that the costs that it declared with a view to obtaining the financial contribution were eligible for that contribution as internal consultant costs or as subcontracting costs.
100 Before ruling on the eligibility of the costs for the financing provided for in the contracts, it is necessary to examine, in turn, the eligibility criteria of costs for the financing provided for in the contracts at issue, the consequences of the potential ineligibility of certain costs, the findings in the audit report on that issue, and the content of the Commission’s responses to the applicant’s observations on that report as regards the eligibility of the costs declared by the latter.
– The eligibility criteria for personnel costs, internal consultants and subcontracting
101 The eligibility criteria for personnel costs and internal consultants are set out in Article 23(1) of the general conditions applicable to contracts concluded in the context of the Fifth Framework Programme, and in Article 14(1) of the general conditions applicable to contracts concluded in the context of the eTEN Programme. Those provisions provide:
‘With regard to personnel costs,
(a) Only the costs of the actual hours worked by the persons directly carrying out the managerial and technical work under the project may be charged to the contract.
In compliance with Article 8(3) of this Annex, such persons must:
– be directly employed by the contractor in accordance with his national legislation,
– be under the sole technical supervision of the latter, and
– be remunerated in accordance with the normal practices of the contractor, provided that these are regarded as acceptable by the Commission.’
102 As regards the eligibility criteria for costs relating to internal consultants in the context of the performance of contracts concluded in the context of the Sixth Framework Programme, Article 6.1.1 of the Guide to financial issues provides:
‘There are three possible ways of classifying the costs of in-house consultants (in any event costs will only be eligible if they fulfil the conditions of the contract (Article … 19)):
(1) they can be considered as personnel costs; regardless of whether the intra‑muros consultants are self-employed or employed by a third party, if the following cumulative criteria are fulfilled:
(a) The contractor has a contract to engage a physical person to work for it and some of that work involves tasks to be carried out under the EC project,
(b) The physical person must work under the instructions of the contractor (i.e. the work is decided, designed and supervised by the contractor),
(c) The physical person must work in the premises of the contractor,
(d) The result of the work belongs to the contractor ... ,
(e) The costs of employing the consultant are not significantly different from the personnel costs of employees of the same category working under labour law contract for the contractor.
(f) Travel and subsistence costs related to such consultants’ participation in project meetings or other travel relating to the project would have to be paid directly by the contractor in order to be eligible. Moreover only the actual costs of the consultant should be charged to the project.
(2) They can be considered subcontracting costs if the contractor has to enter into subcontract to hire these consultants to perform part of the work to be carried out under the project and the ... provisions of Article … 6 of Annex II relating to subcontracting are fulfilled. In these cases, the contractor’s control over the work to be performed by the subcontractor is determined by the nature of the subcontract – the subcontractor does not usually work at the premises of the contractor and the terms of the work [are] not so closely carried out under the direct instruction of the contractor.
(3) The last possibility is that the consultant participates in the project as a contractor ...’
103 As regards the costs incurred by subcontracting, Article 1(8) and (9) of the general conditions applicable to contracts concluded in the context of the Fifth Framework Programme define, respectively, the concepts of subcontract and subcontractor:
‘8. “Subcontract” means an agreement to provide services, supplies or goods concluded between a contractor and one or more subcontractors for the specific needs of the project.
9. “Subcontractor” means a legal entity, an international organisation or the Joint Research Centre, which has concluded a subcontract’.
104 Article 23(3) of those general conditions provides, as regards the eligibility for financing of subcontracting costs:
‘With the exception of costs charged to the contract pursuant to paragraph 1 of this article the actual costs of subcontracts may be charged to the contract if:
– they are incurred in compliance with the conditions set out in Article 5 [of the present general conditions, namely, inter alia, the Commission’s prior written approval, in particular where the cumulative amount of the contractor’s subcontracts exceeds 20% of his estimated eligible costs or EUR 100 000, whichever amount is the lowest and/or where the subcontractor is established in a third country];
– the subcontracts are awarded and concluded in accordance with the usual procedures of the contractors,
– they are in accordance with market prices and,
– the copies of the relevant invoices certified by the contractors concerned are attached to the corresponding cost statements.’
105 Article 1(7) and (8) of the general conditions applicable to contracts concluded in the context of the eTEN Programme define respectively the concepts of subcontract and subcontractor:
‘7. “Subcontract” means an agreement to provide services, supplies or goods concluded between a participant and one or more subcontractors for the specific needs of the project.
8. “Subcontractor” means a legal entity, an international organisation or the Joint Research Centre which has concluded a subcontract.’
106 As regards the eligibility of subcontracting costs incurred in the context of the performance of the contracts at issue, Article 14(3) of the general conditions applicable to contracts concluded in the context of the eTEN Programme provides:
‘With the exception of costs charged to the grant agreement pursuant to paragraph 1 of this Article, the actual costs of subcontracts may be charged to the grant agreement if:
– they are incurred in compliance with the conditions set out in Article 5 [of the present general conditions, namely, the Commission’s prior written approval, in particular where the cumulative amount of the subcontracts of a participant exceeds 20% of his estimated eligible costs or EUR 100 000, whichever amount is the lower, and/or, where the subcontractor is established in a third country],
– the subcontracts are awarded to the tender offering best value for money, i.e. the one offering the best price-quality ratio, in compliance with the principles of transparency and equal treatment for potential subcontractors, care being taken to avoid any conflict of interests,
– they are in accordance with market prices, and
– the copies, certified by the beneficiaries concerned, of relevant invoices are attached to the corresponding financial statements’.
107 As regards contracts concluded in the context of the Sixth Framework Contract, Article 19 of the general conditions applicable to those contracts, which defines the eligible costs, provides:
‘1. Eligible costs incurred for the implementation of the project must fulfil all of the following conditions:
…
(e) in the case of contributions made by third parties established on the basis of an agreement between the contractor and the third party existing prior to its contribution to the project, and for which the tasks and their execution by such a third party are clearly identified in Annex I, the costs must:
(i) be incurred in accordance with the usual accounting principles of such third parties and the principles set out in paragraph (d) above;
(ii) meet the other provisions of this Article and [the present general conditions], and
(iii) be recorded in the accounts of the third party no later than the date of the establishment of the audit certificate referred to in Article … 26.
2. The following non-eligible costs may not be charged to the project:
…
(i) any cost which does not meet the conditions established in Article … 19(1)’
108 Further, Article 6(2) of those general conditions provides:
‘2. Any subcontract, the costs of which are to be claimed as an eligible cost, must be awarded to the bid offering best value for money (best price-quality ratio), under conditions of transparency and equal treatment.’
– The consequences of the ineligibility of certain costs
109 Article 31 of the general conditions applicable to contracts concluded in the context of the Sixth Framework Programme and Article 19(1) of the general conditions applicable to contracts concluded in the context of the eTEN Programme provide that where any amount is unduly paid to the contractor or if recovery is justified under the terms of the contract, the contractor undertakes to repay the Commission the sum in question on whatever terms and by whatever date the Commission may specify.
110 Article 26(3) of the general conditions applicable to contracts concluded in the context of the Fifth Framework Programme and Article 17(4) of the general conditions applicable to contracts concluded in the context of the eTEN Programme provide that, on the basis of the conclusions of the financial audit, the Commission is to take all appropriate measures which it considers necessary, including the issuing of a recovery order regarding all or part of the payments made by it.
111 The first subparagraph of Article 3(4) of the general conditions applicable to contracts concluded in the context of the Fifth Framework Programme and the first subparagraph of Article 3(5) of the general conditions applicable to contracts concluded in the context of the eTEN Programme provide that where the total financial contribution due from the Community, taking into account any adjustments, including as a result of a financial audit, is less than the total amount of the payments, the contractors are to reimburse the difference, in euro, within the time-limit set by the Commission.
– The findings of the final audit report and the Commission’s replies to the applicant’s observations on the draft audit report
112 The findings of the final audit report relating to the eligibility of the costs declared by the applicant are set out in sections (c), (d), and (e) of that report.
113 Section (c) of that report contains OLAF’s findings following its assessment of the sufficient and appropriate nature of the applicant’s supporting documentation to justify the costs claimed for funding by the Commission.
114 In that section, OLAF found that the personnel costs claimed for funding by the Commission as in-house consultants’ costs did not meet the eligibility conditions in that respect in view of the contractual provisions of the contracts, but should, when duly justified and incurred, be considered as subcontracting costs. The persons involved had not worked under the instructions of the applicant, which had no employees and did not decide, design, and supervise the work carried out by those persons. Those tasks, for which the applicant was responsible, were carried out by a project director, who was a subcontractor.
115 The Commission added in section (c), entitled ‘ineligibility of in-house consultants’ costs claimed as personnel costs’, of its replies to the applicant’s observations on the draft audit report, that the work was decided on, designed and supervised by A and S.
116 Section (d) of the audit report contains OLAF’s findings, following the check, as to the eligibility of in-house consultants’ costs for financing by the Commission, under Articles 19 and 20 of the general conditions applicable to contracts concluded in the context of the Sixth Framework Programme.
117 In that section, OLAF stated that the subcontracting of all of the work to be carried out by the applicant had not been notified to the Commission for prior approval, as required under the contracts. Accordingly, the eligibility conditions for subcontracting costs had not been met, with the result that financing of those costs should be refused.
118 The Commission noted, in section (d) of its replies to the applicant’s observations on the draft audit report, entitled ‘ineligibility of in-house consultants’ costs as subcontracting’, that, under Article 6(1) of the general conditions of contracts concluded in the context of the Sixth Framework Programme, the work should be carried out by the contractors themselves, with the result that subcontracting is a derogation from that general rule. It added that, in order to be eligible, the subcontracting costs should have complied with the provisions of Article 19 and Article 6 of those general conditions. However, the Commission stated that, in the present case, first, tasks relating to core elements of the projects (including project management) had been subcontracted; secondly, the subcontracted tasks were not identified in Annex I to the contracts concluded in the context of the Sixth Framework Programme and the applicant had not sought authorisation for the envisaged subcontracting from the Commission, which would not, in fact, have granted such authorisation; and thirdly the subcontracts were not awarded to the bid offering the best value for money, under conditions of transparency and equal treatment.
119 Section (e) of the audit report contains OLAF’s findings, following the inspection, concerning the indirect costs declared by the applicant for financing, in the light of Articles 19 and 21 of the general conditions applicable to contracts concluded in the context of the Sixth Framework Programme.
120 In that section, OLAF affirmed that since all the costs declared as personnel costs by the applicant, even if they were duly justified and incurred, should be considered as subcontracting costs, the applicant was not entitled to declare any indirect costs to the Commission.
121 The Commission, in section (e) of the replies to the applicant’s observations on the draft audit report, entitled ‘ineligibility of indirect costs’, justifies that affirmation on the basis of Article 6.1.4 of the Guide to Financial Issues, which provides that, whatever the cost model used, indirect costs cannot be based on direct subcontracting costs.
Findings of the Court
122 The Commission submits that the consultants to whom the applicant entrusted the performance of the contracts cannot be regarded as in-house consultants for the purpose of the contracts and that the costs to which they gave rise cannot be eligible for the financial contribution provided for in the contract.
123 It adds that those costs might, however, have been financed as subcontracting costs if the eligibility conditions for such costs had been fulfilled, but they were not in the present case. The applicant never notified the Commission of its subcontracting. In addition the subcontracted tasks were not clearly defined and the applicant provided no guarantee that, in accordance with the contracts, the work was subcontracted to the bid offering the best value for money.
124 The applicant contests the findings in the audit report relating to the ineligibility of the personnel costs that it declared with a view to obtaining a financial contribution and, accordingly, the debit notes issued on 7 August 2009.
125 It is necessary to ascertain whether, as the Commission claims, the costs declared by the applicant were not eligible for the financing by the European Union budget provided for in the contracts.
126 It is undisputed that the applicant had no employees. Moreover, as pointed out in paragraph 77 above, it exercised no control over the performance of the contracts concluded with the Commission.
127 It is clear from the provisions set out in paragraphs 101 and 102 above that only those costs incurred by persons placed under the supervision of the contractor are eligible for the Commission’s financial contribution as personnel or internal consultant costs.
128 It follows that the costs incurred by the consultants to whom the applicant had entrusted the performance of the projects were not eligible for financial assistance as personnel costs.
129 Moreover, the Commission rightly submits that the same costs could not be considered eligible as subcontracting costs.
130 As regards the contracts concluded in the context of the Sixth Framework Programme, the applicant, as is clear from paragraph 89 above, in breach of Article 6(2) of those general conditions, subcontracted core elements of the projects at issue. In addition, the applicant has not established that, in accordance with Article 6(2) of those conditions, it chose the subcontractors which had made the most economically advantageous offer. First, Article 19(1) of those general conditions provides that, in the case of tasks carried out by third parties on the basis of an agreement with a contractor, only those costs incurred in accordance with the other provisions of the general conditions are eligible and, secondly, Article 19(2) of those general conditions provides that costs which do not meet the conditions set out in Article 19(1) are not eligible.
131 As regards the contracts concluded in the context of the Fifth Framework Programme, it is clear from a combined reading of Article 23(3) and Article 5 of the general conditions applicable to those contracts, referred to in paragraph 104 above, that, for subcontracting costs in excess of EUR 100 000 or 20% of all the estimated eligible costs – that is to say, the costs declared for the financial contribution – the subcontracting in question had to have the Commission’s prior written approval.
132 In the present case, it is undisputed that, first, all of the costs declared by the applicant with a view to financing concern the personnel which carried out the work relating to the projects at issue and, secondly, each debit note issued by the Commission concerns all of the costs declared by the applicant in the context of the contract concerned. It follows that the amounts indicated in the debit notes are equal to the costs declared by the applicant as costs of the personnel which carried out the tasks set out in the contracts. Therefore, it is those amounts which must be taken into account in order to verify whether the costs declared by the applicant, viewed as subcontracting costs, were eligible for the financial contribution from the European Union.
133 The debit note relating to the applicant’s participation in the Lensis project concerns the reimbursement of EUR 257 598.49, the debit note relating to the E‑Pharm Up project, EUR 153 227.00, the debit note relating to the Grace project, EUR 493 735.91 and the debit note relating to the Liric project, EUR 36 694.12.
134 As regards the Lensis, E-Pharm Up and Grace projects, those amounts, equal to the costs declared by the applicant, exceed EUR 100 000. As regards the Liric project, the amount is less than EUR 100 000, but it is nevertheless greater than 20% of the costs declared, since it corresponds to all of the costs.
135 It follows that, in the light of a combined reading of Article 23(3) and of Article 5 of the general conditions applicable to contracts concluded in the context of the Fifth Framework Programme, referred to in paragraph 104 above, the subcontracting of work which gave rise to those costs should have been submitted to the Commission for prior written authorisation. As is clear from paragraphs 117 and 118 above, the audit report, the Commission’s replies to the applicant observations on the draft audit report, and the Commission’s arguments in support of its counterclaim, since they are not contested by the applicant in that respect, show that the latter never sought such authorisation from the Commission.
136 As regards the contracts concluded in the context of the eTEN Programme, it is clear from a combined reading of the provisions of Article 5 and Article 14(3) of the general conditions applicable to those contracts, referred to in paragraph 106 above, that the applicable conditions of eligibility of subcontracting costs are the same as those indicated in paragraph 131 above, with the additional obligation, laid down in Article 14(3) of those general conditions and recalled in paragraph 106 above, to subcontract only with the companies which made the most economically advantageous tender.
137 The debit note relating to the applicant’s participation in the Clinic project concerns the reimbursement of EUR 195 000 and that relative to the E2SP project, EUR 120 717.75. Therefore, since the subcontracting of work incurred costs greater than EUR 100 000, it should have been submitted to the Commission for prior written authorisation, which the applicant did not do, as is clear from paragraphs 117 and 118 above.
138 Moreover, the applicant has not established that it used the subcontractor which made the most economically advantageous tender.
139 It follows from the foregoing that the Commission is correct in claiming that the costs declared by the applicant as personnel or subcontracting costs were not eligible for the financing provided for in the contracts at issue.
140 It is also correct in claiming that, even considered as indirect costs, the costs declared by the applicant were not eligible for that financing.
141 As regards the contracts concluded in the context of the Fifth Framework Programme and the eTEN Programme, it is clear from Article 24 and Article 15 respectively of the general conditions applicable to those contracts that indirect costs may relate to either general costs, which may include the costs of administration and management, depreciation of buildings and equipment, water, electricity, telecommunications and postal charges, and office supplies, or a part of the personnel costs eligible for financing, or a part of all the other eligible costs, excluding the costs of subcontracting. In the present case, the costs declared by the applicant relate to the personnel who carried out the tasks relating to the projects at issue. As is clear from paragraphs 128 and 139 above, those costs were not eligible as such, nor as costs linked to subcontracting. Therefore, they do not belong to the category of general costs mentioned above. Accordingly, none of those costs were eligible for financing as indirect costs.
142 As regards the contracts concluded in the context of the Sixth Framework Programme, it is clear from the definition of indirect costs in Article 21 of the general conditions applicable to those contracts that those costs must, in order be eligible for the financial contribution provided for in the contract, meet the criteria established in Article 19 of those general conditions. As noted in paragraph 130 above, it is apparent from Article 19 that, in the case of tasks carried out by third parties on the basis of an agreement with a contractor, only those costs incurred in accordance with the other provisions of the general conditions are eligible. As is clear from paragraph 89 above, the applicant breached Article 6 of the general conditions applicable to those contracts in subcontracting core elements of the projects at issue. Therefore, the costs declared by the applicant do not meet the criteria established in Article 19 and, accordingly, were not eligible for the financial contribution provided for in the contracts as indirect costs.
143 It follows from the foregoing that the costs declared by the applicant did not fulfil the conditions laid down in the eligibility conditions for the financial contribution provided for in the contracts at issue.
144 It follows from the Commission’s letter to the applicant of 22 June 2009 that the debit notes sent by the Commission were based, pursuant to the contracts concerned, on Article 26(3) of the general conditions applicable to contracts concluded in the context of the Fifth Framework Programme, which refers to Article 31 thereof, on Article 29(1) of the general conditions applicable to the Sixth Framework Programme or on Article 17(4) of the general conditions applicable to the contracts concluded in the context of the eTEN Programme.
145 As is clear from paragraphs 109 and 110 above, those provisions require the contractor to reimburse to the Commission the amounts unduly paid, on the terms and by the date specified by the latter.
146 Since the costs declared by the applicant were not eligible for the financing provided for in the contracts, it must be concluded that the applicant received that financing unduly.
147 Moreover, no contractual provision prevents the Commission from issuing debit notes in order to recover amounts which it considers due to it.
148 Therefore, it is in accordance with the contracts concluded with the applicant that the Commission sought, by 12 debit notes sent to the applicant on 7 August 2009, the reimbursement of EUR 2 258 456.31, the sum of all of the amounts paid to the applicant under those contracts.
149 Furthermore, as the applicant does not contest the amounts referred to in the debit notes, the Commission’s claim that the Court should order the applicant to reimburse the unduly paid amount of EUR 2 258 456.31 to the Commission should be granted.
2. Late payment interest
150 The Commission claims that the applicant should be ordered to pay the interest that the amounts referred to in the debit notes of 7 August 2009 would have produced as from the deadline for payment fixed in them.
151 That claim is based on Article 3(4) of the general conditions applicable to contracts concluded in the context of the Fifth Framework Programme, Article 28(7) and Article 31(2) of the general conditions applicable to contracts concluded in the context of the Sixth Framework Programme, and Article 3(6) and Article 19(2) of the general conditions applicable to contracts concluded in the context of the eTEN Programme.
152 The second subparagraph of Article 3(4) of the general conditions applicable to contracts concluded in the context of the Fifth Framework Programme provides that in the event of non-reimbursement of amounts due by a contractor within the time-limit set by the Commission, the latter shall add interest to the amounts from the day after the expiry of the time-limit set by the Commission until the date of receipt of the funds to be reimbursed, at the rate applied by the European Central Bank (ECB) for its main refinancing operations, as published in the Official Journal of the European Union, on the first calendar day of the month during which the time-limit set by the Commission has expired, plus one and a half percentage points.
153 As regards the contracts concluded in the context of the Sixth Framework Programme, it is clear from a combined reading of Article 28(7) and the first subparagraph of Article 31(2) of the general conditions applicable to those contracts that any amount due by a contractor under the contract is to bear interest from the date set for payment by the Commission at the rate applied by the ECB to its principal refinancing operations, as published in the Official Journal of the European Union, in force on the first calendar day of the month in which the due date falls, plus three and a half percentage points.
154 The same rule is clear from a combined reading of Article 3(6) and the first subparagraph of Article 19(2) of the general conditions applicable to contracts concluded in the context of the eTEN Programme.
155 It is necessary, therefore, to order the applicant to pay the interest provided for, in accordance with the contracts concerned, in the provisions referred to in paragraphs 152, 153 and 154 above, from the time-limits laid down in the corresponding debit notes.
156 Moreover, in reply to a question from the Court, the Commission stated, by letter of 19 November 2012, that if the Court found that there was no longer any need to adjudicate on the application and ruled on the counterclaim, it would withdraw the head of claim for a declaration that the decision, in the letter of 10 July 2009, to terminate the contracts under which the applicant participated in the Qualeg and Cocoon projects, and the debit notes of 7 August 2009, comply with the contracts at issue.
157 Since the Court has found, in paragraph 33 above, that there is no longer any need to adjudicate on the action brought by the applicant, it must be held that the Commission has withdrawn its head of claim referred to in paragraph 156 above. Accordingly, there is no need to adjudicate on that head of claim.
Costs
158 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. Furthermore, under Article 87(6) of those rules, where a case does not proceed to judgment the costs are in the discretion of the Court.
159 Since the applicant has been unsuccessful in the context of the Commission’s counterclaim and the Court has held that there is no longer any need to adjudicate on its action, it must be ordered to pay the costs in accordance with the form of order sought by the Commission.
On those grounds,
THE GENERAL COURT (Eighth Chamber)
hereby:
1. Declares that there is no longer any need to adjudicate on the action brought by GL2006 Europe Ltd;
2. Orders GL2006 Europe to pay to the European Commission the sum of EUR 2 258 456.31, along with interest calculated from the time-limits set out in the debit notes of 7 August 2009;
3. Orders GL2006 Europe to pay the costs.
Truchot | Martins Ribeiro | Popescu |
Delivered in open court in Luxembourg on 16 September 2013.
[Signatures]
Table of contents
Background to the dispute
Procedure and forms of order sought
Law
I – The action
II – The Commission’s counterclaim
A – Preliminary observations
B – The substance of the counterclaim
1. The recovery of the amounts unduly paid
a) The lack of financial and technical control over the performance of the projects at issue
Preliminary observations
– The contractual framework for the performance of the projects at issue
– The findings of the final audit report and the Commission’s responses to the applicant’s observations on the draft audit report
Findings of the Court
b) The adequacy of the applicant’s human resources for the performance of the projects
c) The eligibility of the costs declared by the applicant
– The eligibility criteria for personnel costs, internal consultants and subcontracting
– The consequences of the ineligibility of certain costs
– The findings of the final audit report and the Commission’s replies to the applicant’s observations on the draft audit report
Findings of the Court
2. Late payment interest
Costs