Case T-60/03

Regione Siciliana

v

Commission of the European Communities

(Action for annulment – Admissibility – Fourth paragraph of Article 230 EC – Natural or legal persons – Acts of direct concern to them – European Regional Development Fund (ERDF) – Commission decision cancelling and requiring repayment of financial assistance – Article 24 of Regulation (EEC) No 4253/88 – Manifest error of assessment)

Summary of the Judgment

1.      Actions for annulment – Natural or legal persons – Measures of direct and individual concern to them – Whether directly concerned – Decision of the Commission addressed to a Member State cancelling and requiring repayment of financial assistance – Regional authority the beneficiary of the assistance – That authority directly concerned

(Art. 230, fourth para.)

2.      Economic and social cohesion – Structural assistance – Community financing – Retrospective effect of a substantive rule – Conditions

(Council Regulations Nos 1787/84, Art. 32(1), and 4253/88, as amended by Regulation No 2082/93, Art. 24)

3.      Economic and social cohesion – Structural assistance – Community financing – Condition – Operational state of works financed

(Council Regulations Nos 1787/84, Art. 18(1), and 4253/88, as amended by Regulation No 2082/93, Art. 24)

1.      A decision of the Commission, addressed to a Member State, cancelling financial assistance granted by the European Regional Development Fund and ordering repayment of the advance on that assistance paid by the Commission, is of direct concern within the meaning of the fourth paragraph of Article 230 EC to a regional authority which is the beneficiary of that assistance.

With regard first of all to the alteration of that authority’s legal situation, the decision has the initial direct and immediate effect of changing the authority’s financial situation by depriving it of the balance of the assistance remaining to be paid by the Commission. Whereas, before that decision was adopted, the authority could count with certainty on that sum in order to carry out the project, it has been forced, once the decision was taken, first to accept that it had been deprived of that sum and, second, to seek alternative funding in order to meet its obligations undertaken in connection with the work concerned. The contested decision also directly alters that authority’s legal situation with regard to the duty to repay the sums paid by way of advances. In point of fact, the effect of the decision is directly to change the applicant’s legal status from that of unarguably being a creditor in respect of those sums to that of debtor, at least potentially, for it is no longer impossible for the national authorities under both Community and domestic law to demand repayment from the applicant of the sums advanced. The second direct and automatic effect of the decision is thus to change that authority’s legal situation vis-à-vis the national authorities.

As regards, next, the criterion that the contested decision should be automatically applicable, it is automatically and of itself that the latter produces the twofold effect described. That twofold effect follows from Community law alone, namely, the provisions of the third indent of Article 211 EC in conjunction with the fourth paragraph of Article 249 EC. In this connection the national authorities enjoy no discretion in their duty to implement the decision.

(see paras 48, 53-54, 56-57, 63)

2.      The conditions in which financial assistance granted by the Community under the Structural Funds system may be cancelled are not governed by procedural rules but by substantive rules. Those aspects are therefore, in principle, governed by the legislation applicable when the assistance was granted. Thus, withdrawal of Community assistance due to the irregularities alleged against a beneficiary is by way of being a penalty when it goes beyond repayment of amounts that have been wrongly paid as a result of those irregularities. It is therefore permissible only if it is justified having regard to both the legislation applicable when the assistance was granted and that in force when the decision to cancel it was taken.

(see para. 73)

3.      In order to ensure the proper operation of the system of Community structural funds and their sound financial management, the carrying out of any project cofinanced by Community Funds in that connection must lead towards that project’s becoming operational, that requirement underlying the decision to grant Community financing.

When the works covered by the project are neither operational nor capable of being brought into use at the date of a decision of the Commission cancelling and requiring repayment of financial assistance, it is obviously contrary to Article 18(1) of Regulation No 1787/84 on the European Regional Development Fund, which provides that the financing of infrastructure investment projects is to relate to infrastructure projects which will contribute to the development of the region or area in which they are located, to authorise the beneficiary of the assistance to keep the Community financing granted for the purpose of carrying out the works although those works are in fact not fit for use. Such an approach would not, moreover, be consistent with the objective of the proper management of the Community structural funds.

(see paras 82-83)