Language of document : ECLI:EU:T:1998:208

JUDGMENT OF THE COURT OF FIRST INSTANCE (Third Chamber)

15 September 1998 (1)

(European Social Fund - Approval decision - Reduction of financial assistance- Prior hearing of beneficiary - Consultation of Member State - Protection oflegitimate expectations - Legal certainty - Statement of reasons - Manifesterror of assessment)

In Joined Cases T-180/96 and T-181/96,

Mediocurso - Estabelecimento de Ensimo Particular Lda, a company incorporatedunder Portuguese law, established in Lisbon, represented by Carlos Botelho Monizand Paulo Moura Pinheiro, of the Lisbon Bar, with an address for service inLuxembourg at the Chambers of Aloyse May, 31 Grand-Rue,

applicant,

v

Commission of the European Communities, represented by Maria Teresa Figueiraand Knut Simonsson, of its Legal Service, acting as Agents, with an address forservice in Luxembourg at the office of Carlos Gómez de la Cruz, of its LegalService, Wagner Centre, Kirchberg,

defendant,

APPLICATION for the annulment of Commission Decision C (96) 1185 of 14August 1996 reducing the aid granted in Decision C (89) 0570 of 22 March 1989,and of Commission Decision C (96) 1186 of 14 August 1996 reducing the aidgranted in Decision C (89) 0570 of 22 March 1989,

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (Third Chamber),

composed of: V. Tiili, President, C.P. Briët and A. Potocki, Judges,

Registrar: B. Pastor, Principal Administrator,

having regard to the written procedure and further to the hearing on 11 June 1998,

gives the following

Judgment

Legislative background

1.
    By virtue of Article 1(2)(a) of Council Decision 83/516/EEC of 17 October 1983 onthe tasks of the European Social Fund (OJ 1983 L 289, p. 38, hereinafter 'Decision83/516‘), the Fund is to participate in the financing of operations concerningvocational training and guidance. Article 2(2) of that decision provides that therelevant Member States are to guarantee the successful completion of theoperations.

2.
    Article 1 of Council Regulation (EEC) No 2950/83 of 17 October 1983 on theimplementation of Decision 83/516 (OJ 1983 L 289, p. 1, hereinafter 'RegulationNo 2950/83‘) enumerates the expenses for which assistance may be granted fromthe European Social Fund (hereinafter 'the ESF‘).

3.
    The approval of an application for financing is to be followed, pursuant to Article5(1) of Regulation No 2950/83, by the payment of an advance of 50% of theassistance on the date on which the training action is scheduled to begin. By virtueof Article 5(4), final payment claims are to contain a detailed report on thecontent, results and financial aspects of the relevant operation and the MemberState is to certify the accuracy of the facts and accounts in payment claims.

4.
    Under Article 6(1) of Regulation No 2950/83, when ESF assistance is not used inconformity with the conditions set out in the decision of approval, the Commissionmay suspend, reduce or withdraw the aid after giving the relevant Member Statean opportunity to comment. Article 6(2) provides that sums paid which are notused in accordance with the conditions laid down in the approval decision are tobe refunded.

5.
    Under Article 6(1) of Commission Decision 83/673/EEC of 22 December 1983 onthe management of the European Social Fund (OJ 1983 L 377, p. 1, hereinafter'Decision No 83/673‘), Member States' payment applications must reach theCommission within ten months of the date of completion of the operationsconcerned. No payment is to be made in respect of aid for which the applicationis submitted after the expiry of that period.

6.
    Finally, pursuant to Article 7 of that decision, where the management of anoperation for which assistance has been granted is the subject of an investigationbecause of suspected irregularities, the Member State is to notify the Commissionthereof without delay.

Facts and procedure

7.
    The applicant is a commercial company whose main business is the organisation ofvocational training and technical specialisation courses.

8.
    In 1988 the Departamento para os Assuntos do Fundo Social Europeu(Department for ESF matters, hereinafter 'DAFSE‘) submitted severalapplications for financial assistance in favour of the applicant for a number ofvocational training projects for 1989.

9.
    The application for the first project concerned was registered under file No890583 P1 (hereinafter 'the first file‘) and is the subject of Case T-180/96. Theapplication concerning the second project was registered under file No 890588 P1(hereinafter 'the second file‘) and is the subject of Case T-181/96.

10.
    The first file concerns an application for assistance for the training of peoplespecialising in work with glass fibre reinforced polyesters, in work with automaticelectrical apparatus and in marketing and advertising, in which 30 people wereinitially to take part. The sum involved was ESC 9 592 058. At the request ofDAFSE, the number of participants was reduced to 23.

11.
    The first file, thus amended, was approved 'in accordance with the annexednotification‘ by Commission Decision notified to the applicant by a letter fromDAFSE dated 10 April 1989 (No 8149). The decision set the amount of ESF aidat ESC 7 468 207. The Portuguese State, for its part, undertook to finance thatproject in the amount of ESC 6 110 351 through the Orçamento da SegurançaSocial/Instituto de Gestão Financeira da Segurança Social (Social SecurityBudget/Institute for Financial Management of Social Security, hereinafter 'theOSS/IGFSS‘).

12.
    In August 1989 the applicant received under Article 5(1) of Regulation No 2950/83an advance of 50% of the amount of aid granted by the ESF, and of that grantedby the OSS/IGFSS, comprising ESC 3 734 103 and ESC 3 055 175 respectively.

13.
    The second file relates to an application for assistance for two training programmesfor commercial and advertising specialists and advertising and graphic artsspecialists, in which 22 people were initially to take part. The sum involved wasESC 8 627 355. At the request of DAFSE, the number of participants was reducedto 17.

14.
    The second file, thus amended, was approved 'in accordance with the annexednotification‘ by a Commission Decision notified to the applicant by a letter fromDAFSE dated 10 April 1989 (No 8154). The decision set the amount of ESF aidat ESC 6 890 635. The Portuguese State, for its part, undertook to finance thatproject in the amount of ESC 5 637 792, through the OSS/IGFSS.

15.
    In August 1989 the applicant received, under Article 5(1) of Regulation No2950/83, an advance of 50% of the amount of the aid granted by the ESF, and ofthat granted by the OSS/IGFSS, comprising ESC 3 445 317 and ESC 2 818 896respectively.

16.
    The training programmes provided for in the two files were carried out betweenJuly and December 1989.

17.
    On completion of the training programmes, the total cost of which proved to beless than that indicated in the project documents, the applicant submitted a finalapplication for payment to DAFSE in respect of each of the two files. It asked tobe paid ESC 3 337 539 for the first file and ESC 3 286 799 for the second.

18.
    According to those applications, 15 people completed the first training programmeand 12 completed the second.

19.
    By letter of 11 April 1990, relating to both files, DAFSE informed the applicantthat it 'intended suspending the payment orders [...] and possibly amending thebalance payable, following financial checks to be made in relation to the trainingprogrammes carried out by [it] covered by the files in question‘.

20.
    On 30 October 1990 the Portuguese authorities, in accordance with Article 5(4) ofRegulation No 2950/83, certified the accuracy of the facts and accounts in the finalpayment applications submitted by the applicant in respect of the two files. However, in the letters to the Commission accompanying those applications,DAFSE stated that the certification of the particulars contained in theirapplications was subject to a financial audit yet to be carried out.

21.
    By identical letters of 25 January 1991 DAFSE informed the applicant that Audite,a firm of auditors, had been instructed to verify the facts and accounts relating tothe two files at issue.

22.
    On 28 January 1991 DAFSE sent the applicant a letter in which it stated that itsfinal decision on the two files would be dependent upon the conclusions reachedin the financial audit.

23.
    On 20 February 1991 Audite sent DAFSE two audit reports, one for each file.

24.
    The applicant, DAFSE and representatives of Audite then held a meeting on 10September 1991 to discuss the two files.

25.
    On 11 September 1991 DAFSE sent the applicant a letter informing it of theconclusions of the audit. DAFSE also asked it to pay back the sums which itconsidered ineligible. The applicant immediately contested the legality of thatmeasure before the Portuguese administrative courts. However, it did not send aseparate notification to DAFSE on its objections to the reductions of aidmentioned in the letter of 11 September 1991.

26.
    DAFSE then awaited, until 22 September 1995, the outcome of the proceedingscommenced by the applicant against the letter of 11 September 1991.

27.
    By letter of 22 September 1995 DAFSE notified the Commission of the results ofthe audit carried out in 1991 and therefore forwarded to it the final paymentapplications, amended in accordance with the results of the audit.

28.
    On 6 March 1996, DAFSE informed the applicant that the Commission had takena decision on its two final payment applications and had confirmed the results ofthe financial audit which had already been notified to it on 11 September 1991.

29.
    On 4 April 1996 the applicant asked DAFSE for a copy of the Commissiondecision. It also sought leave to consult the ESF administrative file. The applicantwas granted access to the administrative file on 24 April 1996 and found that therewere no documents in the nature of a decision other than the Commission's debitnotes determining the amounts which it was to reimburse in respect of the two filesconcerned.

30.
    The applicant then instituted proceedings before the Court of First Instance againstthose measures, registered as Cases T-70/96 and T-72/96. However, theCommission withdrew the measures on its own initiative and replaced them by thetwo decisions of 14 August 1996 which are the subject of these proceedings. Consequently, the President of the Second Chamber ordered that Cases T-70/96and T-72/96 be removed from the register of the Court of First Instance and, byorders of 12 November 1996, ordered the Commission to pay the costs.

31.
    On 14 August 1996 the Commission adopted Decision C (96) 1185 in relation tothe first file. The decision was notified to the applicant by DAFSE on 20September 1996.

32.
    That decision reads as follows:

'[...] whereas the Portuguese Government submitted to the Commission on 30October 1990 a final application for the payment of ESC 3 337 532 and certifiedthe accuracy of the facts and accounts for that claim, in accordance with Article5(4) of Regulation No 2950/83;

whereas the Member State, having noted certain irregularities in the performanceof the operations financed by the ESF, decided - the Commission being keptinformed - to re-examine certain files and whereas, in those circumstances, oncompletion of re-examination of the final payment claim for file No 890583 P1 onthe basis of examination of the accounts for that operation, part of the expenditureindicated by Mediocurso [...] cannot be accepted, for the reasons set out in letterNo 10992 of 22 September 1995 sent by the Member State;

whereas the Member State notified Mediocurso [...] of the results of the audit(letter No 8739 of 11 September 1991) and Mediocurso [...] has submitted noobservations;

whereas, of the total amount of assistance approved by the Commission for file No890583 P1, which totalled ESC 7 468 207, an amount of ESC 396 572 was not usedby Mediocurso [...], and the Commission considers that certain expenses indicatedby Mediocurso [...] do not meet the conditions laid down in the approval decision, so that the assistance should be further reduced by ESC 4 819 741 and the ESF aidshould therefore be set at ESC 2 251 894 for the reasons set out in:

- the audit report and

- DAFSE letter No 10992 of 22 September 1995 and the annexes thereto;

[...]

has adopted the present decision:

Article 1

The ESF aid of ESC 7 468 207 awarded to Mediocurso [...] by Commission decisionC (89) 0570 of 22 March 1989 is reduced to ESC 2 251 894.

Article 2

The sum of ESC 1 482 209 must be repaid to the Commission [...]‘

33.
    On 14 August 1996, the Commission also adopted Decision C (96) 1186 in relationto the second file. It is essentially the same as the decision for the first file. It wasnotified to the applicant by DAFSE on 20 September 1996.

34.
    The operative part of that decision is as follows:

'Article 1

The ESF aid of ESC 6 890 635 awarded to Mediocurso [...] by CommissionDecision C (89) 0570 of 22 March 1989 is reduced to ESC 2 174 072.

Article 2

The sum of ESC 1 271 245 must be repaid to the Commission [...]‘.

35.
    By application received at the Registry of the Court of First Instance on 14November 1996, the applicant brought an action for annulment of theCommission's decision of 14 August 1996 in relation to the first file, registered asCase T-180/96.

36.
    By application lodged at the Registry of the Court of First Instance on 14November 1996, the applicant also brought an action for the annulment of theCommission's decision of 14 August 1996 in relation to the second file, which wasregistered as Case T-181/96.

37.
    By letter of 24 March 1998 the parties were invited to submit their viewsconcerning joinder of Cases T-180/96 and T-181/96. They stated that they had noobjection. Consequently, it is appropriate to join Cases T-180/96 and T-181/96 forthe purposes of this judgment, in accordance with Article 50 of the Rules ofProcedure of the Court of First Instance.

38.
    Upon hearing the report of the Judge-Rapporteur, the Court of First Instance(Third Chamber) decided to open the oral procedure without any preparatoryinquiry. However, as a measure of organisation of the procedure, it asked theparties to reply in writing to a number of questions. The parties complied.

39.
    The parties presented oral argument and answered questions put to them by theCourt of First Instance at the public hearing on 11 June 1998.

Forms of order sought

In Case T-180/96

40.
    The applicant claims that the Court should:

-    order that the Commission's administrative file and DAFSE's file be placedin the case-file;

-    annul Commission Decision C (96) 1185 of 14 August 1996;

-    order the defendant to pay the costs.

41.
    The Commission contends that the Court should:

-    dismiss the application as unfounded;

-    order the applicant to pay the costs.

In Case T-181/96

42.
    The applicant claims that the Court should:

-    order that the Commission's administrative file and DAFSE's file be placedin the case-file;

-    annul Commission Decision C (96) 1186 of 14 August 1996;

-    order the defendant to pay the costs.

43.
    The Commission contends that the Court should:

-    dismiss the application as unfounded;

-    order the applicant to pay the costs.

Substance

44.
    In both cases, the applicant puts forward five pleas in law:

-    first: breach of the applicant's rights of defence;

-    second: failure to observe reasonable time-limits;

-    third: infringement of Article 6(1) of Regulation No 2950/83, in that thePortuguese State was not given an opportunity to express its observationsbefore the adoption of the contested decisions;

-    fourth: breach of the principles of legal certainty and protection oflegitimate expectations, in that the contested decisions conflict with the priorcertification of the information contained in the final payment claims; and

-    fifth: breach of the obligation to state reasons, breach of certain generalprinciples of law and commission of a number of errors of assessment of thefacts.

The first plea: breach of the applicant's rights of defence

Arguments of the parties

45.
    The applicant considers, first, that the Commission did not give it an opportunityto express its views on the reductions of financial assistance concerned. However,respect for the rights of the defence in all proceedings which are liable to culminatein an adverse measure is a fundamental principle of Community law (CaseT-450/93 Lisrestal and Others v Commission [1994] ECR II-1177, paragraph 42). That principle is of particular importance in circumstances, such as those of thiscase, in which the contested decisions reduce financial assistance which was initiallyapproved (Case C-189/90 Cipeke v Commission [1992] ECR I-3573, paragraphs 16to 18).

46.
    It observes that, under Article 6(1) of Regulation No 2950/83, the Commission hasexclusive authority to suspend, reduce or withdraw ESF aid. Consequently, theCommission itself should have arranged for the applicant to be heard beforeadopting the contested decisions.

47.
    It concedes that a hearing was possible before another body, such as DAFSE,before the Commission adopted a preliminary position. However, such a priorhearing would be useful only if details of it were given to the Commission, and theywere not so given in this case.

48.
    The Commission contends that, since the applicant had an opportunity to submitits written observations in 1991 after notification by DAFSE of the outcome of theaudit and at the various meetings with DAFSE, it must be deemed to have beengiven the possibility of effectively expressing its views on the envisaged reductionsin assistance, in accordance with the judgment in Lisrestal v Commission, citedabove (paragraph 49).

Findings of the Court

49.
    According to settled case-law, the rights of defence of a beneficiary of ESF aidmust be respected where the Commission reduces such aid (see, among others,Case C-32/95 P Commission v Lisrestal and Others [1996] ECR I-5373, paragraphs21 to 44).

50.
    It should also be noted that, at paragraph 49 of its judgment in Lisrestal vCommission, cited above, the Court of First Instance, without being criticised onthat point by the Court of Justice in Case C-32/95 P Commission v Lisrestal, statedthat the Commission, which alone assumes legal liability to the beneficiary of ESFaid for decisions to reduce such aid, was not entitled to adopt such a decisionwithout first giving the beneficiary the possibility, or ensuring that it had thepossibility, of effectively setting forth its views on the proposed reduction.

51.
    The applicant, both in setting out the forms of order which it seeks and in itsanswer to the written question put to it by the Court, has recognised that it washeard by DAFSE before the letter of 11 September 1991 was formalised. In thatletter, DAFSE did not accept all the observations made by the applicant regardingthe proposed reductions.

52.
    It must be pointed out that the applicant did not formally submit observations onthat letter, as the contested decisions rightly indicate. It in fact merely commencedproceedings against the letter before the Portuguese administrative courts. However, in this case, the applicant should also have formally submitted suchobservations so that they could be notified to the Commission by DAFSE. In suchcircumstances, the applicant cannot complain that its observations were not notifiedto the Commission since that fact was attributable to its own omission.

53.
    The Court considers that the applicant was thus given the possibility of 'effectively‘setting forth its views on the findings against it within the meaning of the judgmentof the Court of First Instance in Lisrestal v Commission, cited above.

54.
    Accordingly, the first plea must be rejected.

The second plea: failure to observe reasonable time-limits

Arguments of the parties

55.
    The applicant considers that Regulation No 2950/83 and Decision 83/673 areincomplete in that they set no time-limit within which the Commission must adopta decision on a final claim for payment of ESF aid. It considers unacceptable theview that the Community legislature allows the adoption of such decisions to bedeferred indefinitely. It states that the Court of Justice has laid down the criterionof a 'reasonable time-limit‘ for dealing with problems of this kind (Case 59/70Netherlands v Commission [1971] ECR 639 and Case 120/73 Lorenz v Germany[1973] ECR 1471).

56.
    It infers that, since there is nothing in the applicable legislation or the factualcircumstances to show that the files in question were particularly complex, theCommission infringed the principle of the protection of legitimate expectations byadopting a decision only after seven years had passed.

57.
    Finally, it states, it is irrelevant whether it was informed of DAFSE's doubts as tothe eligibility of certain expenses. The whole purpose of the principle of legalcertainty is to ensure that uncertainty does not continue for protracted periods.

58.
    The Commission contends, first, that Article 6(1) of Regulation No 2950/83 imposesno time-limit on its power to reduce ESF aid. In its view that situation reflects thelegislature's will not to make the reduction of assistance subject to time-limitswhere there is any presumption of irregularity. The applicant could not thereforelegitimately expect that no reduction of aid would be decided upon.

59.
    It contends, secondly, that in its judgment in T-73/95 Oliveira v Commission [1997]ECR II-381 (paragraphs 45 to 47), the Court of First Instance made it clear thatthe reasonableness of a time-limit depends on the nature of the measures to beadopted and the circumstances surrounding each case.

60.
    Finally, it considers that, in this case, the period at issue cannot be regarded asexcessively long since the applicant was given fairly prompt notice of the results ofthe financial audit. Moreover, it knew that certain expenditure was regarded asineligible.

Findings of the Court

61.
    It is settled case-law that the question whether the duration of an administrativeproceeding is reasonable must be determined in relation to the particularcircumstances of each case and, in particular, its context, the various proceduralstages followed, the complexity of the case and its importance for the variousparties involved (judgments of the Court of First Instance in Joined Cases T-213/95and T-18/96 SCK and FNK v Commission [1997] ECR II-1739, paragraph 57, andOliveira v Commission, cited above, paragraph 45).

62.
    That is the approach to be borne in mind when assessing the reasonableness of thetime which elapsed between the lodging of the applicant's final payment claims inDecember 1989 and the adoption of the contested decisions on 14 August 1996.

63.
    Between December 1989 and September 1991 DAFSE carried out, in cooperationwith Audite, a financial audit to determine the accuracy of the facts and accountsrelating to the expenses incurred by the applicant.

64.
    Between September 1991 and 22 September 1995, the date of notification of theresults of that audit to the Commission, DAFSE, for understandable reasons,waited for the Portuguese administrative courts to take a decision in theproceedings brought by the applicant itself against the letter of 11 September 1991.

65.
    DAFSE then informed the applicant, by letter of 6 March 1996, that theCommission had taken a decision on its final payment claims.

66.
    Finally, having regard to the judgment of the Court of First Instance in Case T-85/94 (122) Commission v Branco [1995] ECR II-2993, the Commission withdrewthose decisions and replaced them by the two contested decisions, which set out indetail the reasons for which it had been decided to reduce the ESF aid.

67.
    It is clear from that sequence of events that each of the procedural stages prior tothe adoption of the contested decisions was completed in a reasonable time havingregard to the circumstances of which the national and Community authoritiesresponsible for running the ESF could legitimately take account in examining finalpayment claims.

68.
    In those circumstances, the second plea in law must be rejected.

The third plea: infringement of Article 6(1) of Regulation No 2950/83, in that thePortuguese State was not given an opportunity to present its views before the adoptionof the contested decisions

Arguments of the parties

69.
    The applicant submits that, under Article 6(1) of Regulation No 2950/83, theCommission may suspend, reduce or withdraw the aid after giving the relevantMember State an opportunity to comment.

70.
    It considers that in this case the Commission adopted the contested decisionswithout giving the Portuguese authorities an opportunity to comment, with theresult that essential procedural requirements were infringed (judgment of the Courtof Justice in Case C-304/89 Oliveira v Commission [1991] ECR I-2283).

71.
    The Commission considers that the contested decisions constitute confirmations ofproposals for reductions submitted by DAFSE. In those circumstances, the formalrequirement referred to in Article 6(1) of Regulation No 2950/83 should beregarded as having been fulfilled.

Findings of the Court

72.
    In support of its third plea, the applicant essentially criticises the Commission forfailing to give DAFSE an opportunity to submit afresh its comments on thereductions of aid which it proposed.

73.
    However, it is clear from the judgment of the Court of Justice in Case C-200/89FUNOC v Commission [1990] ECR I-3669, paragraph 17, that where a decision ofthe kind at issue in these cases was taken following an exchange of letters betweenthe Commission and the national authorities, which submitted their commentsbefore the final decision was adopted, the duty to consult the Member State mustbe regarded as having been discharged.

74.
    It is, furthermore, common ground that DAFSE, which represents the PortugueseState for ESF matters, gave the Commission its assessment in relation to the filesin question by letter of 22 September 1995.

75.
    It is also clear from the statements of the reasons for the contested decisions thatthe positions adopted in them by the Commission constitute mere confirmations ofproposals made by DAFSE to reduce aid.

76.
    In those circumstances, the obligation to consult the Member State must beregarded as having been discharged by the mere fact of that Member State'scommunication of its proposals to reduce the aid before the adoption of the finaldecisions of 14 August 1996.

77.
    Accordingly, the third plea must be rejected.

The fourth plea: breach of the principles of legal certainty and of protection oflegitimate expectations, in that the contested decisions conflict with the priorcertification of the accuracy of the information contained in the final payment claims

Arguments of the parties

78.
    The applicant states that the Portuguese authorities certified the accuracy of thefacts and accounts in the final payments claims in accordance with Article 5(4) ofRegulation No 2950/83. However, it considers that the contested decisions conflictwith that certification in so far as they raise doubts as to whether certainexpenditure was actually incurred and as to the accounting classification acceptedat an earlier stage.

79.
    The discrepancy between the views thus taken at different times constitutes, in itsview, a breach of the principles of legal certainty and protection of legitimateexpectations. The certification constitutes a measure definitively determining theapplicant's legal situation. Such certification may not, it accepts, prevent theCommission from withdrawing or reducing aid initially approved, but only if it doesnot call in question the actual incurring of the expenses concerned or the mannerin which they were classified.

80.
    The applicant states that it was only during the procedure before the Court of FirstInstance that the Commission alleged that the certification by the Portugueseauthorities was conditional, whereas the contested decisions were silent on thatpoint. Moreover, the applicable legislation makes no provision for any suchprovisional certification.

81.
    It considers that national authorities receiving final payment claims have only twooptions: to certify or not to certify. Since Regulation No 2950/83 sets a time-limitfor certification, the Portuguese authorities were not entitled to certify anything 'ona conditional basis‘, thereby evading that mandatory time-limit.

82.
    The Commission contends that it was to protect the applicant's interests andcomply with the ten-month time-limit laid down in Article 6(1) of Decision 83/673that the Portuguese authorities certified the payment claims in question, whilst atthe same time making it clear that any final decision was subject to a later audit.

83.
    It also submits that Article 7 of Regulation No 2950/83 provides that, withoutprejudice to any controls carried out by the Member States, final payment claimsmay be the subject of subsequent checks. Finally, under the relevant case-law, theCommission alone is responsible for reducing ESF financial assistance, irrespectiveof any proposal to that effect from the national authority concerned (Commissionv Branco, cited above, paragraphs 23 and 24).

Findings of the Court

84.
    It must first be borne in mind that, following the certification of 30 October 1990,DAFSE informed the applicant, by letters of 25 and 28 January 1991, that Auditehad been instructed to verify the facts and accounts relating to the expenditureincurred and that its final assessment would be dependent upon the outcome ofthat financial audit. The applicant was therefore promptly informed that theeligibility of the expenditure allegedly incurred was seriously in doubt.

85.
    It is then necessary to determine to what extent certification by the nationalauthorities of certain expenditure means that those authorities have taken a finalview on those matters vis-à-vis the beneficiary of the assistance and whether sucha view is binding on the Commission.

86.
    Certification by a Member State does not release it from its other obligations underthe applicable Community legislation. Thus, that Member State is required, underArticle 2(2) of Decision 83/516, to guarantee the successful outcome of ESFoperations. Moreover, Article 7 of Decision 83/673 provides that, where themanagement of an operation for which assistance has been granted is the subjectof an investigation because of suspected irregularities, the Member State is to notifythe Commission thereof without delay.

87.
    Since compliance with those obligations is not subject to any time-limit, they arebinding on the national authorities until such time as the Commission has adopteda definitive decision on final payment.

88.
    It is also clear from Articles 6 and 7 of Regulation No 2950/83, which govern theprocedure to be followed where the Commission finds that the conditions for thegrant of assistance have not been met or where it wishes to carry out certain checksfollowing a final payment claim, that the Member State must be regarded as havingprivileged access to the Commission for management of the ESF.

89.
    Consequently, the Member State must be regarded as continuing to be bound bycertain obligations, more particularly that of reporting any irregularity in themanagement of the ESF, even after carrying out the certification of facts andaccounts provided for by Article 5(4) of Regulation No 2950/83. The applicant'slegal situation was not therefore finally settled by the certification of the expensesincurred by it.

90.
    Moreover, it is clear from the case-law that the Commission alone assumesresponsibility for any decision to reduce aid, irrespective of any proposal to thateffect by the national authority concerned (Commission v Lisrestal, cited above,paragraph 29, and Commission v Branco, cited above, paragraphs 23 and 24). Theexercise of that exclusive power of the Commission cannot be made conditionalupon the certification referred to in Article 5(4) of Regulation No 2950/83. TheCommission remains entirely free to reduce Community aid even if the MemberState has certified the accuracy of all the facts and accounts in the final paymentclaim, provided that it gives an adequate statement of the reasons for its decisionto reduce the aid where that decision does not coincide with the nationalauthorities' proposal.

91.
    The applicant's argument that the Commission's power was in this case limited asregards the type of withdrawal or reduction of aid which it might decide upon afterthe accuracy of the facts and accounts relating to the expenses incurred and hadbeen certified cannot therefore be accepted.

92.
    Moreover, in view of the guarantee of the successful outcome of ESF operationsgiven by the national authorities on the basis of Article 2(2) of Decision 83/516 andtheir obligation to report any suspected irregularity to the Commission, containedin Article 7 of Decision 83/673, the certification referred to in Article 5(4) ofRegulation No 2950/83 must be regarded as being, intrinsically, an operationundertaken by the national authorities on an entirely uncommitted basis. If it werenot, the effectiveness of the national authorities' obligation to report irregularitiesascertained in the management of the ESF would be undermined. The certificationis thus without prejudice to the other powers which the national authorities and theCommission must be able to continue to exercise to ensure the proper use of ESFassistance.

93.
    It follows that the DAFSE properly discharged its duty to supervise the manner inwhich assistance awarded by the ESF was dealt with by arranging for theexpenditure incurred by the applicant to be audited by Audite, after it had itselfcertified the accuracy of the facts and accounts relating to those expenses.

94.
    Consequently, the fourth plea must be rejected.

The fifth plea: breach of the obligation to state reasons, breach of certain generalprinciples of law and commission of a number of errors of assessment of the facts

The first part of the fifth plea: breach of Article 190 of the Treaty

-    Arguments of the parties

95.
    The applicant states that the two contested decisions are based both on Audite'sreport for each of the files and on DAFSE's letter of 22 September 1995.

96.
    It states, however, that it does not know to which specific report the Commissionrefers in each of the files. Audite carried out various checks at its premises anddrew up several reports, containing sometimes contradictory conclusions. Each ofAudite's reports had, moreover, subsequently been amended by that firm. It alsosubmits that the amounts of which repayment is required by the Commission in thetwo contested decisions do not correspond to those appearing in Audite's reports.

97.
    Finally, although the Court of First Instance has accepted the principle of a'referential‘ statement of reasons, its case-law requires a decision containing sucha statement of reasons to refer with sufficient clarity to the measure containing theexplanation (Commission v Branco, cited above, paragraph 27). In this case,however, the references to the audit reports do not meet that condition in so faras those reports were not sufficiently identifiable and their content had not beenpreviously disclosed to the applicant. In those circumstances, the contesteddecisions infringe Article 190 of the Treaty.

98.
    The Commission considers that the contested decisions clearly mention the specificdocuments on which they are based.

-    Findings of the Court

99.
    According to settled case-law, the statement of reasons required by Article 190 ofthe Treaty must show clearly and unequivocally the reasoning of the institutionwhich enacted the measure so as to inform the persons concerned of thejustification for the measure adopted and to enable the court to exercise its powersof review (Case C-22/94 The Irish Farmers Association and Others v Minister forAgriculture, Food and Forestry, Ireland, and the Attorney General [1997] ECR I-1809,paragraph 39; and Case T-81/95 Interhotel v Commission [1997] ECR II-1265,paragraph 72). The extent of that obligation depends on the nature of the measurein question and on the context in which it was adopted.

100.
    Moreover, it was held in Case T-89/94 Branco v Commission [1995] ECR II-45,paragraph 36, that in a situation where, as in the present case, the Commissionpurely and simply confirms the proposal of a Member State to reduce assistanceinitially granted, its decision may be regarded as adequately reasoned, for thepurposes for Article 190 of the Treaty, if it either clearly sets out itself the reasonswhich justify the reduction in assistance or, failing that, refers with sufficient clarityto a measure of the competent national authorities of the Member State concernedin which those authorities set out clearly the reasons for such a reduction.

101.
    Those are the principles to be borne in mind when examining the applicant'sarguments.

102.
    It must be observed, first, that the applicant's allegation that there were severalcontradictory audit reports for each of the files is unfounded. Audite issued onlyone report in respect of each of the two files. Those two reports, annexed to thedefence in each of the cases, were registered at DAFSE on 20 February 1991.

103.
    The differences between the amounts given in those two audit reports and thoseappearing in the contested decisions are due to changes made, admittedly, afterthose reports were lodged with DAFSE but before notification to the applicant ofthe final results of the check carried out by DAFSE on 11 September 1991 - withwhich the applicant was, moreover, very closely involved.

104.
    The applicant also conceded in its written reply to the questions put to it by theCourt and at the hearing that the essential content of the audit reports preparedby Audite was brought to its notice by letter of 11 September 1991, although thatletter did not contain a copy of the reports as such.

105.
    The applicant was thus given an opportunity to apprise itself of the statement ofreasons to which the Commission refers in the contested decisions, particularlysince its decisions referred also to DAFSE's letter of 22 September 1995 whichlikewise indicated in detail the reasons for which the contested reductions had beenmade.

106.
    It follows that, subject to the results of the detailed examination of the individualitems of the accounts carried out below in relation to the third part of the presentplea, the contested decisions show clearly and unequivocally the general reasoningadopted by the Commission, referring generally as they do to clearly identifieddocuments of DAFSE.

107.
    Consequently, the first part of the fifth plea must be rejected.

The second part of the fifth plea: breach of the principles of protection oflegitimate expectations and legal certainty

-    Arguments of the parties

108.
    The applicant claims that the contested decisions are in reality based onirregularities in the supporting documentation submitted or on inappropriateclassification in the accounts of the expenses in question. It considers that suchreservations regarding use of the assistance should have come to light no later thanthe time of approval of the assistance, not ex post facto at the time of approval ofthe final payment, as in this case. It states in that connection that Article 6(1) ofRegulation No 2950/83 provides that it is only when assistance is not used inconformity with the conditions set out in the approval decision that the Commissionmay suspend, reduce or withdraw it.

109.
    Consequently, in many instances, the withdrawal of assistance in the contesteddecisions infringes the principles of the protection of legitimate expectations andlegal certainty because it is not based on legal rules known when the assistance wasapproved (Case 170/86 Von Deetzen [1988] ECR 2355 and Case 84/85 UnitedKingdom v Commission [1987] ECR 3765).

110.
    In the Commission's view the applicant cannot claim that the principles of legalcertainty and protection of legitimate expectations have been infringed. Anapproval decision can cause a beneficiary of assistance to entertain legitimateexpectations only where the assistance has been used in conformity with theconditions laid down by that decision. However, in this case, the assistance wasused only partly in conformity with those conditions.

111.
    It also states that, by virtue of Order No 6/88, published in the Diário da Repúblicaof 18 February 1988:

'1. DAFSE shall accept only invoices and receipts as vouchers for expensesincurred in respect of the operations in question.

2. The documents mentioned in the foregoing paragraph must contain thenecessary details and breakdowns corresponding to the items indicated in point 14of the form for European Social Fund Final Payment Claims.‘

-    Findings of the Court

112.
    In view of the powers granted to them for verification and monitoring (seeparagraphs 84 to 93 above), both the Member State and the Commission must beauthorised to remark on any disregard, fraudulent or otherwise, by the beneficiaryof the conditions imposed when the Community financial assistance was granted.

113.
    The Court also notes that in the statements of acceptance of the decisions grantingassistance signed by the applicant (Annex 9 to each of the applications, paragraph1(b)), the applicant itself undertook to comply with the applicable national andCommunity conditions.

114.
    It is, furthermore, undisputed that both Portuguese Law and Community Law makethe use of public funds subject to the requirement of sound financial management. The Commission has referred in its pleadings to Order No 6/88 (paragraph 111),which specifically requires the beneficiary of assistance to provide supportingdocuments for expenditure incurred in the operations in question and to indicatethe account items to which they relate.

115.
    Contrary to the applicant's submission, the irregularities complained of were thusnot based on a criterion not included among the requirements upon observance ofwhich grant and payment of the assistance was conditional. Moreover, theapplication of criteria of 'reasonableness‘ of the expenditure incurred by thebeneficiary and 'sound financial management‘ of the assistance clearly falls entirelywithin the scope of the control which the Member State is required to exerciseunder Article 7 of Decision 83/673 where it suspects the existence of irregularities. The application of those criteria simply involves verifying that the expensesallegedly incurred by the beneficiary properly reflect the services for which theywere incurred.

116.
    Accordingly, the second part of the fifth plea must be rejected

The third part of the fifth plea: alleging, essentially, manifest errors of assessmentby the Commission in deciding to reduce, in accordance with DAFSE's letter of 22September 1995, the amount of assistance initially granted

-    Preliminary observations

117.
    In the third part of the fifth plea in both of the present cases, the applicant alleges,essentially, that the Commission erred in law and in its assessment of the facts inaccepting the content of DAFSE's letter of 22 September 1995. Essentially, theapplicant criticises the Commission for reducing the amount of assistance initiallygranted by relying, wrongly, on DAFSE's objection to the manner in which itclassified its various items of expenditure in its final payment claims and/or theprobative value of the information produced by it to prove that expenditure.

118.
    Before the various arguments put forward on this point by the applicant in bothcases are examined, it should again be pointed out that, under Article 6(1) ofRegulation No 2950/83, where ESF assistance has not been used in conformity withthe conditions set by the approval decision, the Commission may suspend, reduceor withdraw that assistance.

119.
    Moreover, the Commission may suspend, reduce or withdraw ESF assistance on thebasis of a national or Community rule not complied with in the performance of theoperation in question. It is significant here that, when accepting the approvaldecisions, the applicant stated that the assistance would be used in accordance withthe applicable national and Community rules (see paragraph 113 above).

120.
    Furthermore, the application of Article 6(1) of Regulation No 2950/83 may renderit necessary for the Commission to undertake an evaluation of complex facts andaccounts. When undertaking such an evaluation, the Commission must thereforeenjoy a considerable measure of latitude. Consequently, this Court must, inexamining this part of the plea, confine itself to examining whether the Commissioncommitted a manifest error in assessing the information in question (see, to thateffect, Case C-122/94 Commission v Council [1996] ECR I-881, paragraph 18, andJoined Cases T-39/92 and T-40/92 CB and Europay v Commission [1994] ECR II-49,paragraph 109).

121.
    The decisions at issue in this case are based entirely on DAFSE's letters of 11September 1991, reiterating the essential particulars of the audit report of Audite,and of 22 September 1995. In those circumstances, it is necessary to determinewhether, by accepting the content of those letters from DAFSE, the Commissioncommitted a manifest error of assessment.

-    The merits of the applicant's arguments in Case T-180/96

122.
    As regards, first, the teaching material (sub-heading 14.2.1), the applicant claimsnot to understand why the expenditure for the purchase of chairs and tables wasregarded as ineligible, in contrast to previous practice.

123.
    The Commission observes that such furniture must be regarded as durable goods. Consequently, the relevant amounts were placed under heading 14.6 'normaldepreciation‘, and a rate of depreciation of 10% was applied.

124.
    The Court does not consider that the Commission committed any manifest errorin considering that tables and chairs are durable goods and not teaching materialand by therefore transferring the amount relating to those goods to the headingcovering normal depreciation.

125.
    Moreover, the fact that the inclusion of expenditure under an account heading mayhave been accepted in the past does not necessarily imply that the sameclassification will also be approved at a later stage where it is incompatible with theconditions imposed by the approval decision or with the provisions of national orCommunity law. In any event, no illegal act committed in the past can cause anapplicant to entertain legitimate expectations (see, to that effect, Case T-156/89Valverde Mordt v Court of Justice [1991] ECR II-407, paragraph 76).

126.
    Consequently, the first argument must be rejected.

127.
    As regards, second, the specialised work (sub-heading 14.2.7), the applicantconsiders, first, that there was no reason to limit the remuneration of the technicalspecialists who provided services for the preparation of courses and manuals. Itthen observes that it also included under that sub-heading an amount ofESC 374 400, evidenced by an invoice. That invoice related to services which hadto be placed under several different account headings, which is not prohibited byany rules.

128.
    The Commission considers that the reduction of the remuneration paid to thosetechnical specialists was based on an analysis of the four receipts for preparation,by the applicant, of manuals and exercise books. They were not shown under theappropriate account heading and furthermore contain no specific reference to theircontent. Consequently, a rational approach was adopted. As regards the sum ofESC 374 400, the Commission observes that the invoice produced contains adescription so lacking in detail that it was regarded as ineligible in its entirety.

129.
    The Court observes that, as is clear from the documents before it, the invoices inquestion are not sufficiently detailed to establish the reality of the expenditurewhich they are supposed to prove. The Commission did not therefore commit anymanifest error of assessment by taking the rational approach to that expendituredescribed in point 14.2.7 of the letter of 22 September 1995. The invoice forESC 374 400 drawn up by 'C. Peres Feio Lda‘ (Annex 20 to the application) is,furthermore, so vague that the Commission cannot have committed a manifesterror of assessment in considering the sum indicated in it to be wholly ineligible.

130.
    Consequently, the second argument must be rejected.

131.
    As regards, third, the remuneration of the teaching staff (sub-heading 14.3.1a), theapplicant denies that the sum of ESC 4 363 684 is entirely ineligible. It recognisesthat the 'summary tables‘ (Annex 21 to the application) produced by it do notdistinguish the theoretical course hours from the practical course hours, but doesnot understand the conclusion drawn by DAFSE from that fact.

132.
    The applicant points out that, under the applicable national legislation, theexpenditure incurred for the operations in question can be proved only by invoicesor receipts. It considers that, in view of the receipts provided by it (Annex 22 tothe application) and the certainty that the courses were held, there is nothing tojustify cancellation of the amount entered under that sub-heading. In any event,even if doubts persisted regarding the type of courses held, the principle ofproportionality requires that at least an amount based on the lowest level ofremuneration should be regarded as justified for all the courses, that it is to saythat all the courses should be regarded as practical courses.

133.
    The Commission considers that the applicant has not provided information to showthat the receipts submitted have any bearing on the courses at issue, since thedocuments submitted do not indicate clearly either the identity of the staff or thetype of courses held. Moreover, the sum of the expenditure documents submitteddoes not coincide with the sum declared. Finally, it points out that Order No18/MTSS/87, published in the Diário da República of 11 May 1987, provided that'recipient organisations shall keep, for each operation, an attendance record fortrainees and training staff and course programmes, distinguishing theoreticalcourses from practical courses‘.

134.
    The Court considers that the documents produced by the applicant to indicate thekind of course provided in relation to the first file and the identity of the trainingstaff who took part (Annexes 21 and 22 to the application) are, when scrutinised, so imprecise as to raise serious doubts as to whether the courses in question wereactually held, as DAFSE rightly observed in point 14.3.1a of its letter of 22September 1995. The Commission therefore committed no manifest error ofassessment by considering that the applicant, which ran a large number of differenttraining courses involving numerous staff, had not demonstrated that thedocumentary evidence produced by it in fact related to the courses covered by thefirst file and by consequently refusing to accept in their entirety the expensesclaimed in that regard.

135.
    Consequently, the third argument must be rejected.

136.
    As regards, fourth, the administrative staff (sub-heading 14.3.1c) the applicantconsiders that the reduction made by the Commission for that item is based on amisunderstanding, since the disputed receipts were signed and stamped, as is clearfrom Annex 23 to the application. It considers that the evidential value of thereceipts concerned is not in any event affected by the absence of signatures orstamps.

137.
    The Commission observes that the reduction at issue was prompted by the fact thatthe receipts concerned bore neither stamps nor signatures when the financial audittook place.

138.
    The Court considers that the applicant has not demonstrated that it produced toDAFSE the stamped and signed documents annexed to the application beforeDAFSE completed its financial audit. Consequently, the Commission committedno manifest error of assessment by refusing to take account of receipts which, whenpresented, did not meet the national legal requirements intended, inter alia, toensure that such receipts relate to an expense actually incurred.

139.
    Consequently, the fourth argument must be rejected.

140.
    As regards, fifth, the specialised work (sub-heading 14.3.8), the applicant considersthat the disqualified expenditure is proved by the invoice appended as Annex 20to the application. It states once more that there is no reason why a single receiptshould not cover services attributable to different account headings.

141.
    The Commission states that the item concerned was not taken into considerationbecause of the lack of supporting documents: the invoice produced by the applicant related to other items.

142.
    The Court observes that the amounts shown in the documents submitted by theapplicant as Annex 20 to its application do not correspond with those whichaccompanied its final payment claim. The Commission did not therefore commitany manifest error of assessment by refusing to take account of the documentsconcerned in determining the final payment of assistance to be made to theapplicant.

143.
    Consequently, the fifth argument must be rejected.

144.
    As regards, sixth, rental for moveable and immoveable items (sub-heading 14.3.9),the applicant considers that the statement of reasons in the letter of 22 September1995 does not enable it to understand the grounds on which the Commission madethe first two reductions for that item. As regards the third reduction, it refers tothe considerations which it put forward in relation to sub-heading 14.2.7 (seeparagraph 127).

145.
    The Commission states that the first reduction related to the acquisition of durablegoods which could not, under the applicable national legislation, qualify fordepreciation in the year of acquisition. The second amount related to a designcourse not covered by the first file. The third amount was refused because theinvoice relating to it did not properly indicate the services provided.

146.
    The Court considers that the reasons provided by DAFSE's letters of 11 September1991 and 22 September 1995 concerning the first two reductions made in respectto that item, although indeed concise, nevertheless enabled the applicant, whichknew the details of the file concerned, to challenge the content thereof. However,the applicant has produced no evidence to show that the Commission in any waycommitted a manifest error of assessment in that regard. As regards the thirdreduction, the Court refers to paragraph 129 above.

147.
    Consequently, the sixth argument must be rejected.

148.
    As regards, seventh, the raw materials, auxiliary materials and consumables (sub-heading 14.3.12), the applicant states that, under Portuguese social legislation,expenditure attested by invoices dated no later than the fifth working day ofJanuary in the year following that in which the expense was incurred must beaccepted. The invoice at issue (Annex 24 to the application) fulfilled thatcondition.

149.
    The Commission considers that the invoice does not fall within the period actuallycovered by the financing for the operation. Under the national VAT code, aninvoice of that kind should have been issued when the goods in question weresupplied and should have been accompanied by delivery documents. However,neither of those conditions was fulfilled in this case.

150.
    The Court finds that neither the Commission's precise reasoning nor the nationallegislation on which it relied in rejecting the expenditure indicated in the invoiceat issue can be identified from an analysis, in the light of the documents before theCourt, of the contested decision and of the relevant paragraphs of the DAFSEletters of 11 September 1991 - which essentially repeats the objections raised in thereport by Audite - and of 22 September 1995, to which that decision refers. Consequently, the Court is not in a position to undertake the requisite judicialreview of the contested decision, as required by the case-law cited in paragraph 99above. Therefore, the contested decision infringes Article 190 of the Treaty to theextent to which it relates to sub-heading 14.3.12 of the final payment claim.

151.
    Consequently, the seventh argument must be upheld. The contested decision musttherefore be annulled to the extent to which it relates to sub-heading 14.3.12.

152.
    As regards, eighth, taxes and charges (sub-heading 14.3.13), the applicant statesthat it included in that item the amounts paid in respect of VAT to the teacherswho were VAT registered, the VAT having been deducted from theirremuneration, shown under sub-heading 14.3.1a.

153.
    Since the Court has taken the view above (paragraph 134) that the Commissioncommitted no manifest error of assessment in refusing to take account of expensesclaimed by the applicant in respect of teachers' remuneration, this eighth argument,concerning the VAT applicable to that remuneration, must be rejected for thesame reasons.

154.
    As regards, last, normal depreciation (sub-heading 14.6), the applicant denies thatits activity can be assessed solely on the basis of the number of workers'employed‘, that number being particularly low in its case because providers ofoccasional services play a significant role.

155.
    The Commission states that DAFSE applied the usual criteria to that item, namelya coefficient based on time and physical factors, which reflects the proportion ofthe normal business activity of an undertaking accounted for by training.

156.
    Although it is indeed conceivable, as maintained by the applicant, that depreciationmethods can be based more specifically on the actual proportion of anundertaking's turnover accounted for by training rather than on the total numberof employees assigned to such training activities, the Court considers that thetraditional method used by DAFSE in this case, and accepted by the Commission,in itself takes sufficient account of the relative importance of training amongst theoverall activities of the recipients of ESF assistance. Since the method used isreasonable, the Commission committed no manifest error of assessment by applyingit.

157.
    Consequently, this last argument must be rejected.

-    The merits of the applicant's arguments in Case T-181/96

158.
    As regards, first, the teaching material (sub-heading 14.2.1), the applicant maintainsthat DAFSE wrongly considered that some of that material constituted 'durablegoods‘, not eligible for inclusion under the heading 'teaching material‘. Thecriterion used for that exclusion had no legal basis.

159.
    The Commission states that the applicant included under the heading of 'teachingmaterial‘, purchases of chairs, cupboards, desks and tables, which are durablegoods.

160.
    The Court considers that the Commission committed no manifest error byconsidering that the chairs, cupboards, desks and tables concerned constituteddurable goods and not teaching material or by consequently transferring theamounts relating to those goods to the heading 'normal depreciation‘ (see alsoparagraphs 124 and 125).

161.
    Consequently, the first argument must be rejected.

162.
    As regards, second, advertising of the courses and the recruitment of trainees (sub-headings 14.2.2 and 14.2.3), the applicant considers that, contrary to the viewexpressed by DAFSE in its letter of 22 September 1995, it is not possible to requirethe content of newspaper advertisements to be specified in the invoices for thoseadvertisements. It observes that the invoices and receipts submitted (Annex 18 tothe application) indicate precisely the newspapers in which the announcementswere published.

163.
    The Commission observes that the receipts produced by the applicant do notdescribe the nature or substance of the expenditure concerned. Nor did theapplicant annex to those receipts a copy of the advertisements in question, as is thenormal practice.

164.
    The Court does not consider it unreasonable to require a recipient of ESFassistance to provide copies of advertisements published in newspapers to promoteits training activities. The sole purpose of that requirement is to make certain thatexpenditure was actually incurred for that purpose. The Commission did nottherefore commit any manifest error of assessment by accepting the positionadopted by DAFSE on that point in its letter of 22 September 1995.

165.
    Consequently, the second argument must be rejected.

166.
    As regards, third, the specialised work (sub-heading 14.2.7), the applicant observesthat the letter of 22 September 1995 states that the invoices produced indicate'neither the hours nor the technical specialists concerned‘. Such a requirement,it says, is not imposed by the applicable Portuguese tax legislation. As regardsmore particularly the 'TV Europa‘ invoice (Annex 20 to the application), thenature of the services provided is clear from the words 'repairs to electricalequipment‘ appearing on that invoice.

167.
    The Commission considers that the receipt issued by TV Europa does not specifythe nature of the expenditure concerned. In so far as it may have related to therepair of a video recorder, that expenditure was, in any event, ineligible.

168.
    The Court observes that the applicant has not produced evidence to showincontestably that the invoices produced to DAFSE were sufficiently detailed toenable it to verify the reality of the expenses concerned. As regards moreparticularly the invoice from TV Europa, the Court notes that it makes no mentionof the specific type of repair to which it relates. The Commission thereforecommitted no manifest error of assessment by accepting the position adopted byDAFSE regarding those various reductions in its letter of 22 September 1995.

169.
    Consequently, the third argument must be rejected.

170.
    As regards, fourth, the remuneration of teaching staff (sub-heading 14.3.1a), theapplicant contests the view that the full sum relating to that item is ineligible. Itputs forward the same arguments as in Case T-180/96 (see paragraphs 131 and132).

171.
    The Commission considers that the applicant has not produced evidence that thereceipts submitted bore any relation to the courses in question.

172.
    The Court considers, as it has already observed with regard to Case T-180/96(paragraph 134), that the documents produced by the applicant to indicate the kindof course provided in relation to the second file and the identity of the training staffwho took part are, when scrutinised, so imprecise as to raise serious doubts as towhether the courses in question were actually held, as DAFSE rightly observed inparagraph 14.3.1a of its letter of 22 September 1995. The Commission thereforecommitted no manifest error of assessment by considering that the applicant, whichran a large number of different training courses involving numerous staff, had notdemonstrated that the documentary evidence produced by it in fact related to thecourse covered by the second file and by consequently refusing to accept in theirentirety the expenses claimed in that regard.

173.
    Consequently, the fourth argument must be rejected.

174.
    As regards, fifth, the administrative staff (sub-heading 14.3.1c), the applicant agreesthat Mrs Irene Vaz Lopes did indeed attend one course while providing trainingin another, but denies that she was thereby prevented from providing assistance forthe second course.

175.
    The Court observes that, since one and the same person cannot attend one courseand at the same time assist in the teaching of another, the Commission cannot havecommitted any manifest error of assessment by refusing to take account of theremuneration of the person concerned as an administrative assistant.

176.
    Consequently, the fifth argument must be rejected.

177.
    As regards, sixth, budgetary control and management (sub-heading 14.3.7), theapplicant accepts that it erroneously included a receipt (Annex 24 to theapplication) under heading 14.3.1, whereas it should have appeared under heading14.3.7. It considers, however, that the auditors were informed of that fact in duetime.

178.
    The Commission contends that a receipt produced at the stage of proceedingsbefore the Court of First Instance cannot be taken into consideration.

179.
    Since the applicant has not been able to establish that, as it claims, it produced thereceipt annexed to its application during the administrative procedure beforeDAFSE, the Court considers that the Commission committed no manifest error ofassessment in refusing to take account of the amount in question.

180.
    Consequently, the sixth argument must be rejected.

181.
    As regards, seventh, the specialised work (sub-heading 14.3.8), the applicant statesthat DAFSE took the view that an invoice drawn up by the company Novafarm wasnot sufficiently specific. However, the description of the services provided is briefbecause a description of that kind is sufficient for tax purposes.

182.
    Since the applicant itself concedes that the invoice at issue is in summary form, theCommission cannot have committed any manifest error of assessment by refusingto take account of the expense in question.

183.
    Consequently, the seventh argument must be rejected.

184.
    As regards, eighth, rental for moveable and immoveable items (sub-heading 14.3.9),two receipts are involved. The first receipt, the applicant states, was includedunder that heading at the suggestion of DAFSE itself. Nor does it understand thelegal basis on which the second receipt was considered partially ineligible, thecriterion of rationality applied being unknown.

185.
    The Commission states that the sum shown on the first receipt was transferred tothe item 'normal depreciation‘ (sub-heading 14.6) because it related to a durablegood. The second sum corresponded to the ineligible part of a receipt concerningthe rental of computers which had been dealt with on the basis of a criterion ofrationality.

186.
    The Court considers, with regard to the first receipt, which is accepted as relatingto data-processing equipment, that the Commission committed no manifest errorof assessment in considering that such equipment constituted 'durable goods‘ tobe included under heading 14.6, 'normal depreciation‘. As regards the secondreceipt, the Court finds that the applicant's argument is not sufficiently well set outto meet the requirements of Article 44(1)(c) of the Rules of Procedure of theCourt of First Instance, under which every application must contain, in particular,a summary of the pleas in law on which it is based. In that connection, theapplicant essentially does no more than claim not to understand the basis of thecriterion of rationality applied, even though specific details of it are given in theletter of 22 September 1995. Under those circumstances, the applicant's argumentin its application, as amplified in the reply, does not enable the Court to examineits merits (see, to that effect, Case T-84/96 Cipeke v Commission [1997] ECR II-2081, paragraph 30 et seq.).

187.
    Consequently, the eighth argument must be rejected.

188.
    As regards, ninth, non-durable materials and goods (sub-heading 14.3.10), theapplicant states that, by refusing that expenditure with respect to the purchase ofoffice equipment, DAFSE glossed over the fact that the management and operationof courses necessarily involve the expense of purchasing items of that kind.

189.
    The Court considers that the sum concerned was properly refused, inasmuch as itconstitutes a duplication of expenses included in item 14.2.3 (paragraph 160). Consequently, the Commission committed no manifest error of assessment inrejecting that expense.

190.
    Consequently, the ninth argument must be rejected.

191.
    As regards, tenth, taxes and charges (sub-heading 14.3.13), the applicant states thatit included under that item amounts paid in respect of VAT to VAT registeredteachers, the VAT having been deducted from their remuneration, included undersub-heading 14.3.1a.

192.
    Since the Court has taken the view above (paragraph 172) that the Commissioncommitted no manifest error of assessment by refusing to take account of expensesclaimed by the applicant in respect of teachers' remuneration, this tenth argument,concerning the VAT applicable to that remuneration, must be rejected on the samegrounds.

193.
    As regards, eleventh, general administrative expenses (sub-heading 14.3.14), theapplicant states that office equipment is necessary for the various stages of training,thus justifying the inclusion of that type of equipment under various headings.

194.
    The Commission merely points out that, since the sums in question have alreadybeen taken into account in items 14.2.3 and 14.3.10, they cannot be regarded asqualifying twice.

195.
    The Court considers that, since the applicant has not demonstrated that, contraryto what is stated in the letter of 22 September 1995, the expenditure included byit under that heading had not already been included under other headings, theCommission cannot have committed any manifest error of assessment by refusingto take account, a second time, of the same type of expenses under heading14.3.14.

196.
    Consequently, the eleventh argument must be rejected.

197.
    As regards, twelfth, other operating and management expenses (sub-heading14.3.15), the applicant denies that the invoice for the first contested amount wasnot presented. The other two amounts refused corresponded to equipment to beused for the courses and were not durable goods.

198.
    The Commission states that the evidence concerning the first amount was notproduced in due time. The other two amounts relate to furniture falling within theheading 'normal depreciation‘, to which the annual rate of depreciation of 10%was applied.

199.
    The Court considers that, in the absence of any documents showing that the firstreceipt was forwarded to DAFSE during the administrative procedure and that theother amounts involved related to non-durable goods, the applicant has not provedthat the Commission committed any manifest error of assessment in withdrawingaid for the expenditure at issue.

200.
    Consequently, the twelfth argument must be rejected.

201.
    As regards, lastly, normal depreciation (sub-heading 14.6), the applicant claims notto understand the calculation method on the basis of which DAFSE consideredcertain amounts to be 'unconfirmed‘. It then puts forward the same argumentsas in Case T-180/96 (see paragraph 154).

202.
    The Commission states that DAFSE applied the usual criterion to that item,namely a coefficient based on time and physical factors, which reflects theproportion of the normal business activity of the undertaking accounted for bytraining.

203.
    Although it is indeed conceivable, as maintained by the applicant, that depreciationmethods can be based more specifically on the actual proportion of anundertaking's turnover accounted for by training rather than on the total numberof employees assigned to such training activities, the Court considers that thetraditional method used by DAFSE in this case, and accepted by the Commission,in itself takes sufficient account of the relative importance of training amongst theoverall activities of the recipients of ESF assistance. Since the method used isreasonable, the Commission committed no manifest error of assessment by applyingit.

204.
    Consequently, this last argument must be rejected.

The request for the production of documents

205.
    In each of its applications, the applicant claims that the Court should order theproduction both of the Commission's administrative files and of DAFSE'sadministrative files.

206.
    It is clear from the foregoing considerations that the Court has effectively been ableto reach a decision in these proceedings on the basis of the documents producedby the parties in the written procedure and those provided by the Commissionpursuant to measures of organisation of procedure.

207.
    It is not therefore necessary to order the Commission to produce the administrativefiles relating to the two cases.

208.
    Nor is it necessary to request the Portuguese authorities, pursuant to the secondparagraph of Article 21 of the EC Statute of the Court of Justice, to produce intheir entirety the national administrative files relating to the two files in question.

209.
    The applicant's request for the production of documents must, for those reasons,be rejected.

Costs

210.
    Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to beordered to pay the costs if they are asked for in the successful party's pleadings. However, under Article 87(3), the Court may order that the costs be shared whereeach party succeeds on some and fails on other heads.

211.
    Since the application in Case T-180/96 has been partially upheld and each party hasapplied for costs, it is appropriate to order the parties to bear their own costs inthat case.

212.
    Since the applicant has been unsuccessful in Case T-181/96 and the Commissionhas asked for costs, the applicant should be ordered to pay the costs.

On those grounds,

THE COURT OF FIRST INSTANCE (Third Chamber)

hereby:

1.
    Joins Cases T-180/96 and T-181/96 for the purposes of judgment;

2.
    In Case T-180/96, annuls Commission Decision C (96) 1185 of 14 August1996 to the extent to which it relates to sub-heading 14.3.12 of theapplicant's final payment claim, and for the rest dismisses the application;

3.
    Dismisses the application in Case T-181/96;

4.
    Orders the parties to bear their own costs in Case T-180/96;

5.
    Orders the applicant to pay the costs in Case T-181/96.

Tiili
Briët
Potocki

Delivered in open court in Luxembourg on 15 September 1998.

H. Jung

V. Tiili

Registrar

President


1: Language of the case: Portuguese.