JUDGMENT OF THE GENERAL COURT (Third Chamber)
13 December 2023 (*)
(Arbitration clause – Seventh Framework Programme for research, technological development and demonstration activities (2007-2013) – Grant agreement – The SANAD Project – Staff costs – Burden of proof – Eligible costs – Recovery demand – Debit note – Counter-claim)
In Case T‑409/22,
Global Nanotechnologies AE schediasmou anaptyxis paraskevis kai emporias ylikon nanotechnologias (Glonatech), established in Lamía (Greece), represented by N. Scandamis, lawyer,
applicant,
v
European Research Executive Agency (REA), represented by S. Payan-Lagrou and V. Canetti, acting as Agents, and by M. Le Berre, lawyer,
defendant,
THE GENERAL COURT (Third Chamber),
composed of F. Schalin (Rapporteur), President, P. Škvařilová-Pelzl and I. Nõmm, Judges,
Registrar: V. Di Bucci,
having regard to the written part of the procedure,
having regard to the fact that no request for a hearing was submitted by the parties within three weeks after service of notification of the close of the written part of the procedure, and having decided to rule on the action without an oral part of the procedure, pursuant to Article 106(3) of the Rules of Procedure of the General Court,
gives the following
Judgment
1 By its action pursuant to Article 272 TFEU, the applicant, Global Nanotechnologies AE schediasmou anaptyxis paraskevis kai emporias ylikon nanotechnologias (Glonatech), seeks, first, a declaration that it correctly fulfilled its contractual obligations and that it is fully entitled to the payment of claimed costs of the ‘Synthesis of Advanced top Nano-coatings with improved Aerodynamic and De-icing behaviour’ (SANAD) project and, second, that debit note No 3242113938, of 22 December 2021, be set aside.
2 The counter-claim by the European Research Executive Agency (REA) seeks an order that the applicant repay the sum of EUR 202 883.48 and that the corresponding claim, as stated in debit note No 3242210194 of 29 September 2022 (‘the new debit note’), be rendered enforceable.
Background to the dispute
3 The applicant is a company governed by Greek law and operating in the sector of nanotechnologies.
4 On 20 December 2012, the applicant, as coordinator of a consortium, concluded with the REA Grant Agreement No 324443 for the execution of the SANAD project (‘the grant agreement’), as part of the Seventh Framework Programme for research, technological development and demonstration activities (2007-2013). That agreement, which entered into force on the same day, provided for a maximum financial contribution by the European Union to that project of EUR 2 872 668.87 (Article 5), the project being required to be completed within a period of 48 months, starting from 1 January 2013, divided into two reporting periods of 24 months (Articles 3 and 4).
5 The objective of the SANAD project was to improve the efficiency of air transport by having selected coatings tested for improved de-icing behaviours and reduced retention of condensation by aircraft, that testing to be done by researchers in participating organisations, and by promoting knowledge sharing between participants in the project and collaboration between universities and small and medium-sized enterprises (SMEs).
6 On 7, 15, 17 and 28 January 2013, four other participants in the SANAD project acceded, in turn, to the grant agreement as beneficiaries, including a university intended to host researchers on secondment (‘the host university’).
7 On 31 December 2016, the SANAD project was completed.
8 Under the grant agreement, the beneficiaries of the SANAD project received pre-financing from the European Union in the sum of EUR 1 867 234.77 and an interim payment of EUR 718 167.21, namely EUR 2 585 401.98 in total.
9 On 8 October 2018, in the context of the final payment of the EU contribution to the SANAD project, in an email sent to the applicant the REA raised a number of discrepancies and gaps in supporting documents that it had provided.
10 On 21 August 2019, the REA informed the applicant that it was launching, in its regard, a financial audit of the grant agreement for the period between 1 January 2013 and 31 December 2016, with the reference RAIA 201901 (‘the financial audit’). The REA set out a detailed list of data and documents to be made available for the purpose of the audit.
11 The financial audit was carried out between 22 and 24 October 2019.
12 On 22 July 2019, the REA communicated to the applicant a draft audit report setting out the result of the financial audit and covering both reporting periods of the SANAD project: the first from 1 January 2013 to 31 December 2014, and the second from 1 January 2015 to 31 December 2016. That draft concluded, inter alia, that certain categories of costs incurred by the applicant in that project should be regarded as ineligible under the provisions of the grant agreement, in particular the monthly living allowances of EUR 177 074.80, and the mobility allowances of EUR 22 202.88, relating to the secondment of researchers to the host university.
13 On 23 September 2020, following an extension of the time limit to provide observations, the applicant contested the findings of the draft audit report.
14 On 30 March 2021, the REA communicated to the applicant the final audit report (‘the final audit report’) which stated that the sum of EUR 224 463.00 had been over-claimed by the applicant having regard to the requirements of the grant agreement. In that regard, it was stated that, while the sum of EUR 33 129.76 for management activities should be held to be eligible, by contrast it was necessary to reject the following costs: EUR 177 074.80 for the monthly living allowance; EUR 22 202.88 for the monthly mobility allowance; EUR 36 840.00 for the contribution to the ‘research/training/transfer of knowledge programme expenses’; EUR 1 069.35 for management activities; and EUR 20 405.73 for the contributions to overhead costs.
15 Thus, in the final audit report, the REA maintained the findings of the draft audit report as regards, in particular, the ‘monthly living and mobility allowances claimed for secondments’, which concerned four researchers seconded by the applicant to the host university, and also the findings in relation to the ‘research/training/transfer of knowledge programme expenses’, which related to the secondments of three researchers from the host university to the applicant. It also stated that the financial audit was regarded as closed and that the adjustments set out in it would be put into effect, including an order for the recovery of the amounts overpaid and the calculation of liquidated damages pursuant to Article II.24 of the general conditions of the grant agreement.
16 On 22 April 2021, the REA adopted the assessment report on the performance of the second reporting period of the SANAD project (years 2015 and 2016).
17 On 5 May 2021, the REA communicated to the applicant a pre-information letter stating that it approved the final audit report and that it would proceed with the recovery of the outcome of the financial audit regarding the expenditure under the grant agreement and confirming the amount of EUR 224 463.00 as the claim to be recovered from the applicant. The REA also invited the applicant to indicate in writing, within two months, any objections as regards the findings following that audit.
18 On 17 May 2021, the applicant contested the final audit report.
19 On 18 May 2021, the REA sent a response to the applicant.
20 On 28 May 2021, the applicant again wrote to the REA stating its disagreement with the final audit report and explained the reasons why it considered that it had satisfied its obligations under the grant agreement.
21 On 1 July 2021, the applicant wrote to the REA repeating that it disputed the findings of the final audit report and repeating its position that requirements under the grant agreement had been satisfied and that the evidence produced regarding the contested costs was sufficient and conclusive.
22 On 22 December 2021, the REA wrote to the applicant addressing the arguments set out in its letters of 17 May, 28 May and 1 July 2021, and explaining that those arguments were not capable of changing the conclusions of the final audit report. It attached to its letter relating to the financial audit debit note No 3242113938, also dated 22 December 2021, demanding payment of a sum totalling EUR 681 364.81 for the SANAD project to all the participants in that project, of which EUR 224 463.01 was claimed from the applicant.
23 On 22 June 2022, the applicant informed the REA of an updated allocation of the total amount of the claim of EUR 681 364.81 to be recovered from the various participants in the SANAD project. Whilst stating that it maintained its challenge in principle, it stated that its share amounted to EUR 202 833.48 and that of the other participants to EUR 211 855.32 and EUR 266 626.01 respectively.
24 On 29 September 2022, the REA communicated to the applicant, first, credit note No 3234220185 for the amount of EUR 681 364.81 cancelling, inter alia, debit note No 3242113938 and taking account of the allocation of its claim between the various participants in the SANAD project in accordance with the applicant’s letter of 22 June 2022, and, secondly, the new debit note specific to its claim against the applicant.
Forms of order sought
25 The applicant claims that the General Court should:
– declare that it has correctly fulfilled its contractual obligations and is fully entitled to payment of claimed costs of the SANAD project, and set aside debit note No 3242113938;
– order the REA to pay the costs of the proceedings before the Court, or, in the event that the orders sought in the present action are not granted, refrain from ordering the applicant to pay the costs in view of the complexity of the present case.
26 The REA contends that the Court should:
– dismiss the action as a whole as unfounded;
– declare that its claim in the amount of EUR 202 883.48 against the applicant, as stated in the new debit note, was established in accordance with the grant agreement;
– consequently, make the claim of EUR 202 883.48, as stated in that debit note, which was issued under that agreement, enforceable;
– order the applicant to pay to it that debit note in the sum of EUR 202 883.48;
– order the applicant to pay the costs.
Law
27 In support of its action, the applicant raises four pleas in law, alleging, in essence, (i) an infringement of the scope of the grant agreement, (ii) an infringement of the means of verifying expenditure, (iii) an infringement of the principle of good faith having led to a reversal of the burden of proof, (iv) an infringement of the principle of proportionality.
Preliminary observations
The applicable law
28 The Court must resolve this dispute on the basis of the substantive law applicable to the grant agreement. In the present case, in accordance with the first paragraph of Article 9 of the grant agreement, that agreement is governed by its own terms, by the acts of EU law relating to the Seventh Framework Programme for research, technological development and demonstration activities (2007-2013), by the financial regulation applicable to the general budget of the European Union and its implementing rules, by other provisions of EU law and, on a subsidiary basis, by Belgian law.
29 The substantive rules governing the grant agreement are laid down by Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002 (OJ 2012 L 298, p. 1) (‘the Financial Regulation 2012’).
30 As stated in paragraph 4 above, the grant agreement was concluded and entered into force on 20 December 2012. However, in accordance with Article 214 of the Financial Regulation 2012, that regulation entered into force on 27 October 2012, namely a day after its publication in the Official Journal of the European Union, and was applicable, apart from exceptions, from 1 January 2013.
31 The procedural rules governing the financial audit are laid down by Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 (OJ 2018 L 193, p. 1) (‘the Financial Regulation 2018’), Article 282 of which provides for its entry into force and application with effect from 2 August 2018.
32 As regards Belgian law, it is necessary to refer to the Civil Code in the version in force at the conclusion and performance of the grant agreement. That code provides, inter alia, in the third paragraph of Article 1134 thereof, that agreements ‘must be performed in good faith’; in Article 1156 that ‘in agreements, it is necessary to seek the common intention of the contracting parties, rather than stop at the literal meaning of the words’; in Article 1161 that the provisions of the agreement must be interpreted ‘the ones in relation with the other in a way to confer on each the meaning deriving from the whole’; in Article 1162 that ‘in case of doubt, the agreement is to be interpreted against the party who imposed and in favour of the party who undertook the obligation’; in Article 1163 that ‘no matter how general the terms in which the contract is conceived, it includes only those matters on which it appears that the parties intended to contract’; and, in Article 1315, that ‘the party that seeks the performance of an obligation must prove the obligation’ and ‘conversely, a party that claims to have been released from an obligation must prove that it has made the payment or performed the act which has brought about the extinction of its obligation’.
The applicant’s first head of claim, seeking the setting aside of debit note No 3242113938
33 As is clear from paragraph 25 above, by its first head of claim, the applicant seeks, in essence, not only that the Court declares eligible the expenses whose recovery the REA has demanded, but also that debit note No 3242113938 is ‘set aside’.
34 As regards the second part of the first head of claim, it must certainly be held that it is admissible notwithstanding use of terminology relevant in a review of legality, since it also constitutes an extension of the first part of that head of claim with which it is combined, to the extent that it seeks, in essence, a finding that the contractual claim demanded by debit note No 3242113938 pursuant to the grant agreement and to retain, in its entirety, the financial assistance that was allocated to it for performance of its obligations under that agreement. Therefore, despite use of terminology characteristic of actions brought pursuant to Article 263 TFEU, the action does not seek the annulment of an administrative act, but must be regarded as being clearly based on Article 272 TFEU and as raising a contractual dispute and being combined with the first part of the first head of claim (see, to that effect, judgment of 14 December 2022, Green Power Technologies v Key Digital Technologies Joint Undertaking, T‑533/20, not published, EU:T:2022:805, paragraphs 35 to 37, 39 and 40).
The first plea in law, alleging, in essence, an infringement of the scope of the grant agreement
35 The applicant disputes both the methods used to draw up the final audit report and its content, which, according to it, are outside the scope of the grant agreement to the extent that that report was exceptionally ordered by the REA with regard to flat-rate financing, which is appropriate for results-based research and which is not therefore subject to ex post verification.
36 The applicant considers that it was the subject of an audit contrary to the rules that apply in this case, and that the evidence sought was not required. The financial audit, carried out by the REA’s personnel, was undertaken belatedly and was not conducted in good faith, nor in accordance with Article 41 of the Charter of Fundamental Rights of the European Union (‘the Charter’) or Article 1134 of the Belgian Civil Code. In that regard, the obligation of retaining exhaustive evidence was introduced at the completion of the SANAD project and the distinction between the flat-rate allowances and the events relating to those allowances in the context of that audit does not take into account the overlap between those two concepts. According to the applicant, only the lack of a secondment should be the subject of an examination in the context of that audit and a deeper examination of the secondments amounts to an assessment of the substance that goes beyond the framework of such an audit. The REA denies the very existence of secondments of staff whilst claiming the benefit of the corresponding scientific work, free of cost. The audit in question is also a belated and therefore inappropriate reaction by the REA and was established in a visibly inquisitorial manner in suspecting that there were systematic errors.
37 The applicant submits in particular that, in the case of flat-rate financing, for which no evidence is required, it must dispel the doubt raised a posteriori as to the reality of the expenses incurred by carrying out an examination of all the evidence available that could establish the physical presence of the seconded researchers, even approximately, so long as that evidence, cumulatively or separately, dispelled those doubts. The fact of requiring, a posteriori, that every type of evidence, such as boarding passes, contribute to complete proof of the expenses in question is abusive and constitutes excessive formalism by an attempt to give a literal interpretation to the grant agreement.
38 The REA observes that the applicant does not dispute the fact that, under Article II.21 of the general conditions of the grant agreement, audits may be conducted without it amounting to an infringement of its contractual obligations under Article 1134 of the Belgian Civil Code or Article 41 of the Charter, it not being possible, moreover, to rely on the latter in contractual matters. It submits that it did not carry out its contractual obligations in bad faith or inquisitorially, and that that allegation is not substantiated. According to it, the applicant does not moreover challenge the obligation, under Articles II.21.2 and II.21.3 of the general conditions of that agreement, to retain evidence and make it available. In addition, it considers that, even if the secondments of personnel gave rise to allowances based on a flat rate, that does not remove the possibility of carrying out an ex post verification, by means of various types of evidence, of the fact of those secondments and of their compliance with the specific conditions referred to in Articles III.2 to III.4 of that agreement, without being restricted to the unilateral undertakings of the applicant.
39 According to the REA, the expenses relating to the secondments at issue have not been rejected in their entirety, contrary to what the applicant suggests. In addition, it submits that the assertions alleging an unjust enrichment on its part or the inappropriateness of the financial audit are unfounded.
40 In the present case, it must be recalled that the grant agreement is first governed by its own stipulations. Those stipulations provide, in Article II.17 of the general conditions, under the heading ‘The financial contribution of the Union’, that secondment expenses may give rise to flat rate funding, under the following terms:
‘1. The financial contribution of the Union to the project shall be determined per activity and per beneficiary on the basis of the actual eligible costs and/or to the flat rates and/or lump sums accepted by the REA.
2. The conditions for the application of the flat rates and/or lump sums are indicated in Annex III. The maximum amount of the flat rates and/or lump sums is determined according to the reference rates established in the Work Programme and the total estimated amount of the financial contribution of the Union is indicated in Annex I.
3. The financial contribution of the Union shall be calculated by reference to the cost of the project as a whole and its reimbursement shall be based on the accepted costs of each beneficiary.
4. The financial contribution of the Union cannot give rise to any profit for any beneficiary. For this purpose, at the time of the submission of the last financial statement, the final amount of the financial contribution of the Union will take into account any receipts of the project received by each beneficiary. For each beneficiary, the financial contribution of the Union cannot exceed the eligible costs minus the receipts for the project.
…
7. Financing in the form of flat rates and/or lump sums is limited to the amounts established in Annex I. If the conditions or grounds for granting these contributions are not fulfilled or are only partially fulfilled on completion of the project, the REA shall withdraw or reduce the contribution in line with the actual extent of fulfilment of the conditions or requirements.’
41 In addition, the stipulations of the grant agreement, in Article II.21 of the general conditions, under the heading ‘Financial audits and controls’, lay down the conditions under which financial audits may be conducted:
‘1. The REA or the Commission may, at any time during the implementation of the project and up to five years after the end of the project, arrange for financial audits to be carried out, by external auditors, or by the REA or the Commission services themselves including OLAF. The audit procedure shall be deemed to be initiated on the date of receipt of the relevant letter sent by the REA or the Commission. Such audits may cover financial, systemic and other aspects (such as accounting and management principles) relating to the proper execution of the grant agreement. They shall be carried out on a confidential basis.
2. The beneficiaries shall make available directly to the REA or the Commission all detailed information and data that may be requested by the REA or the Commission or any representative authorised by any of them, with a view to verifying that the grant agreement is properly managed and performed in accordance with its provisions and that costs have been charged in compliance with it. This information and data must be precise, complete and effective.
3. The beneficiaries shall keep the originals or, in exceptional cases, duly authenticated copies – including electronic copies – of all documents relating to the grant agreement for up to five years from the end of the project. These shall be made available to the REA or to the Commission where requested during any audit under [that agreement].
4. In order to carry out these audits, the beneficiaries shall ensure that the REA or the Commission services and any external body(ies) authorised by any of them have on-the-spot access at all reasonable times, notably to the beneficiary’s offices, to its computer data, to its accounting data and to all the information needed to carry out those audits, including information on individual salaries of persons involved in the project. They shall ensure that the information is readily available on the spot at the moment of the audit and, if so requested, that data be handed over in an appropriate form.
5. On the basis of the findings made during the financial audit, a provisional report shall be drawn up. It shall be sent by the REA or the Commission or the authorised representative to the beneficiary concerned, [which] may make observations thereon within one month of receiving it. The REA or the Commission may decide not to take into account observations conveyed or documents sent after that deadline. The final report shall be sent to the beneficiary concerned within two months of expiry of the aforesaid deadline.
6. On the basis of the conclusions of the audit, the REA or the Commission shall take all appropriate measures which it considers necessary, including the issuing of recovery orders regarding all or part of the payments made and the application of any applicable sanction.
…’
42 A reading of the requirements of the grant agreement makes clear that the payment of eligible costs, including secondment costs, on a flat-rate basis does not have any effect on the option for the REA or the Commission to carry out a financial audit and, in that context, to ask the applicant, as beneficiary, to submit evidence to show the real nature of the expenses incurred in order to verify that ‘[that agreement] is properly managed and performed in accordance with its provisions’, as provided in Article II.21(2) of the general conditions of that agreement.
43 In so doing, the request for that supporting evidence, which nothing in the case indicates was made belatedly, does not call into question, contrary to the applicant’s submission, the flat-rate nature of the payment of the costs in question, but solely for the objective of showing that those costs, in particular those relating to the secondment of researchers, were in fact incurred, which gives rise to the entitlement for them to be paid on the basis of a flat rate.
44 The applicant’s arguments disputing that approach can only be rejected.
45 First of all, as regards the alleged infringement of Article 1134 of the Belgian Civil Code, it must be recalled that, according to the Cour de cassation (Court of Cassation, Belgium), the principle enshrined in that article, under which grant agreements must be performed in good faith, prohibits a party from abusing a right conferred on it by the contract. An abuse of rights consists in exercising a right in a manner that manifestly exceeds the limits of the normal exercise of that right by a person exercising all due care. It is possible that it constitutes an abuse of rights where the holder of a right invokes it after having caused the other party to entertain the legitimate expectation that it will not exercise it by conduct which is objectively incompatible with the normal exercise of that right (see judgment of 21 December 2021, Datax v REA, T‑381/20, not published, EU:T:2021:932, paragraph 122 and the case-law cited).
46 The applicant, who relies principally on the flat-rate nature of the payment being incompatible with the ex post requests made for evidence, clearly misunderstands the clear and unambiguous language of the contractual provisions which do not in any way exclude such a possibility and lay down, in particular, the obligation for the beneficiary of the funding to retain, up until five years after the end of the project, the originals or, in exceptional cases, electronic copies of all documents relating to the grant agreement. Furthermore, the latter provides that financial audits may be conducted by the personnel of the REA or of the Commission, which the applicant now puts at issue on principle, by alleging a lack of impartiality of that personnel, without producing the slightest evidence in that regard, with the result that its line of argument on this point is unfounded.
47 The applicant does not moreover demonstrate that it received any assurances from the REA capable of giving rise to a legitimate expectation on its part that, in the context of a financial audit, supporting evidence to show that expenses connected with the secondment of researchers to the host university were incurred could not be requested of it.
48 Next, as regards the applicant’s argument alleging, in essence, that all the expenses assumed on a flat rate basis are justified because it has properly completed the SANAD project, or that the completion of the project would have been impossible if the secondments had never, or only very partially, taken place, it should be recalled that, in accordance with Article 121 of the Financial Regulation 2012, which applied at the time that the grant agreement was signed, that agreement has the objective, in essence, of promoting a certain activity within the beneficiary and not of obtaining ownership or a part of the subsidised project. That principle is expressly recalled in Article II.25.1 of the general conditions of that agreement, according to which the ownership of the results of the project in question are retained by its beneficiary (see, by analogy, judgment of 14 December 2022, Green Power Technologies v Key Digital Technologies Joint Undertaking, T‑533/20, not published, EU:T:2022:805, paragraph 106).
49 Thus, since, under a grant agreement, funds are not advanced in exchange for the completion of a project, the financial contribution of the European Union does not represent the consideration for the SANAD project, but rather it seeks to promote the completion of that project (see, by analogy, judgment of 14 December 2022, Green Power Technologies v Key Digital Technologies Joint Undertaking, T‑533/20, not published, EU:T:2022:805, paragraph 107).
50 It follows that the fact that, technically and in compliance with the requirements of the grant agreement, the SANAD project has been properly carried out does not suffice for the applicant to be entitled to the financial aid provided for. It is also necessary for the applicant to have properly carried out its obligation under that agreement so as to enable the REA, in accordance with Article II.21 of the general conditions, to verify, notably during a financial audit, that the costs declared are eligible and substantiated by evidence (see, by analogy, judgment of 14 December 2022, Green Power Technologies v Key Digital Technologies Joint Undertaking, T‑533/20, not published, EU:T:2022:805, paragraph 108 and the case-law cited).
51 Therefore, if there is a breach of the financial obligations laid down in the grant agreement, the beneficiary of the financial aid loses the right to payment of those grants and, hence, pursuant to Article II.21(6) of the general conditions of that agreement, the co-contractor of the applicant is required to take all appropriate measures in that regard, including the complete or partial recovery of the grant, irrespective of whether the SANAD project has technically been properly carried out (see, by analogy, judgment of 14 December 2022, Green Power Technologies v Key Digital Technologies Joint Undertaking, T‑533/20, not published, EU:T:2022:805, paragraph 109).
52 Thus, the fact that it was possible for the SANAD project to have been completed successfully does not mean that the conduct of a financial audit or the conditions under which it was conducted by the REA may be called into question.
53 Finally, as regards the alleged infringement of Article 41 of the Charter, it should be recalled that such an infringement cannot, in principle, be validly relied on in a dispute which, as in the present case, is contractual in nature and is covered by Article 272 TFEU to the extent that the applicant may only raise infringements of contractual requirements or of the law applicable to the contract where, as in the present case, the General Court is not simultaneously seised, pursuant to Article 263 TFEU, of an action for annulment against an enforceable decision of the Commission formally establishing a contractual claim. It must be observed that it has not been established, nor has the applicant moreover submitted, that debit note No 3242113938, of which annulment is sought, constitutes an enforceable decision (see, by analogy, judgment of 16 July 2020, ADR Center v Commission, C‑584/17 P, EU:C:2020:576, paragraph 88).
54 The present plea is therefore unfounded and must be rejected.
The second plea in law, alleging, in essence, an infringement of the methods for verifying expenditure
55 The applicant submits that, if the inspection that led to the final audit report must, nevertheless, be regarded as falling within the scope of the grant agreement, it should have been carried out by the authorising officer of the financial aid as an ex ante verification based on evidence drawn from electronic inspection mechanisms, in particular the ‘Reporting and Participants Portal’, established within the host university, which was specifically entrusted with periodically collecting secondment data in its own premises and which should have been monitored by the REA, which in turn should also have provided, in good time, information on the nature of evidence required and not, in extremis, during the financial audit. In failing to proceed in that way, the latter infringed the terms of the grant agreement as they should have been assessed having regard to the applicable law.
56 The REA submits in response that, pursuant to Article II.21.3 of the general conditions of the grant agreement, the applicant was required to retain for five years the original or copies of supporting documents. Taking account of the lacunae in the evidence initially produced, it considers that it was obliged to request evidence such as boarding passes. In that regard, the applicant notes that the periodic reports on the progress of the project were not intended to provide evidence of the reliability of the costs incurred and that the objective of the financial audit was to seek evidence that could substantiate the costs declared to have been incurred in accordance with the information already provided by the beneficiaries in the context of the periodic reports. That audit brought to light the divergences between the periodic reports and the documents later submitted that led to the partial rejection of the secondment costs of some researchers.
57 It must be noted that, by its argument, the applicant relies, in essence, on an unjustified reversal of the burden of proof by the REA, to the extent that it was incumbent upon the latter, using the information to which it was able to access directly while the SANAD project was being carried out, to verify by itself that the secondments of the four researchers concerned to the host university complied with the rules of the grant agreement, which would have rendered unnecessary the ex post request, which was moreover made too late, for substantiating evidence.
58 Thus, without disputing that, after the financial audit, the REA had doubts as to the compliance of the secondments of the four researchers in question to the host university, the applicant merely submits that it was for the REA to dispel those doubts itself by analysing the information resulting from the ‘Reporting and Participants Portal’.
59 In that regard, as the REA submits, it should be recalled that under the requirements of Article II.21.2 of the general conditions of the grant agreement, like the right of audit which accompanies it, the beneficiary is obliged to be in a position to produce ‘all detailed information and data’ to prove the costs and activities as well as their compliance with that agreement (see paragraph 41 above).
60 The financial audit had brought to light certain omissions, or inconsistencies, in the request for payments for the secondments at issue. It was notably found in the final audit report that, as regards one of the researchers concerned, the duration of his secondment, which was less than two months, did not give rise to payment, whereas, as regards the three other researchers concerned, only part of their secondments was substantiated by evidence consistent with the periodic reports of the project and with the financial statements that had been produced.
61 Since those irregularities in the request for payment, whether or not on a flat-rate basis, had been found, it was incumbent on the REA to request supporting evidence which could take the form, as regards proof of travel to the destination of the host university, of transport tickets, boarding passes or other items, and, as regards staying there, receipts for the costs of accommodation or other items. Those items of supporting evidence appear, in the present case, to be entirely relevant as regards the nature of the expenses that they are intended to substantiate and, as the REA essentially submits, they could be regarded as particularly probative to the extent that, unlike the declarations found in the ‘Reporting and Participants Portal’, they were not drawn up on the basis of the mere certified statements of the participants in the SANAD project.
62 According to a fundamental principle of EU financial aid, the European Union can subsidise only expenses which have actually been incurred. It follows from that principle that it is not sufficient for the beneficiary of the aid to show that a project has been carried out for the allocation of a specific grant to be justified. The beneficiary of the aid must, in addition, produce evidence that it has incurred the expenses declared in accordance with the conditions laid down for the award of the grant or financial aid concerned, with only those expenses which are properly justified being capable of being regarded as eligible. Its obligation to satisfy the prescribed financial conditions is one of its essential commitments and accordingly determines the allocation of the EU grant (see judgment of 21 December 2021, Datax v REA, T‑381/20, not published, EU:T:2021:932, paragraph 52 and the case-law cited).
63 In addition, to the extent that the applicant submits that the burden of proof must be reversed in view of the norm fixed by Article 1315 of the Belgian Civil Code, it must also be recalled that, in so far as the allocation of the burden of proof as to the eligibility of costs incurred by the beneficiary of a grant is governed by that article, it provides that the party that seeks the performance of an obligation must prove the obligation and, conversely, a party that claims to have been released from an obligation must prove that it has made the payment or performed the act which has brought about the extinction of its obligation.
64 It is established case-law that, in the context of an agreement containing an arbitration clause within the meaning of Article 272 TFEU, it is for the party which, in order to be awarded a financial contribution by the European Union, has declared costs to the entity granting that finance to produce evidence that those costs meet the financial conditions of the grant agreement in force (see, to that effect, judgment of 27 April 2022, Sieć Badawcza Łukasiewicz – Port Polski Ośrodek Rozwoju Technologii v Commission, T‑4/20, EU:T:2022:242, paragraph 114 and the case-law cited).
65 Thus, it appears that, by its argument, the applicant wrongly submits that, as regards the means of verifying expenses, the REA unduly reversed the burden of proof when, in order to supplement the evidence initially produced, it sought from the applicant additional evidence such as boarding passes or receipts for the costs of accommodation.
66 It is therefore necessary to dismiss the present plea as unfounded.
The third plea in law, alleging, in essence, an infringement of the principle of good faith
67 By this plea, which comprises four parts, the applicant submits that, even if it is found that the financial audit falls within the scope of the grant agreement and that on principle it bears the burden of proof, the applicant sent all the documents sought on time and the rejection, on the ground of systematic errors, of the secondment costs in the context of a verification made ex post, which was inappropriate for that verification since it relates to flat-rate financing, was conducted in breach of the principle of good faith.
68 By the first part of the third plea, the applicant submits, in essence, that the REA has infringed the principle of good faith by failing, unjustifiably and arbitrarily, to authorise the payments at issue where the concrete output or results were achieved, even though that was possible and appropriate under Article 181(2) of the Financial Regulation 2018.
69 By the second part, the applicant submits, in essence, that the REA infringed the principle of good faith by unilaterally and belatedly modifying the terms of the grant agreement, in breach of Article 1134 of the Belgian Civil Code. In particular, it states that, by a letter of 8 October 2018, which must be regarded as a guideline, the REA indicated to it, as the coordinator of the consortium, that, as regards the secondment costs, it was not necessary to collect all the evidence, whereas, in an earlier note of 6 May 2015, the REA had warned it to retain all the supporting evidence to demonstrate the eligibility of the secondments and that, in a letter of 22 December 2021, the REA finally considered that the majority of the supporting evidence was missing, which rendered the costs in question ineligible.
70 By the third part, the applicant submits, in essence, that the REA infringed the principle of good faith by focusing, in the context of its assessment of the evidence, in particular on the absence of some travel documents, which deprived the applicant of the right to define the extent of its obligations in a context where the conditions for the conduct of the financial audit and the contractual requirements were unclear, in breach of Articles 1162 and 1163 of the Belgian Civil Code.
71 By the fourth part, the applicant submits, in essence, that the REA infringed the principle of good faith by disregarding all forms of evidence other than travel documents, in breach of Article 1161 of the Belgian Civil Code. It states that that type of abusive conduct could be remedied only by taking the solution adopted by the new Article 8.4 of the Belgian Civil Code, namely by reversing the burden of proof for exceptional reasons, which was not done in the present case and so the applicant was deprived of its right of interpreting its contractual obligations in its favour.
72 The REA considers that the applicant’s argument must be rejected as ineffective or, in the alternative, unfounded, in that, without giving further details, it merely disputes the grant agreement or its interpretation thereof.
73 In the first place, the REA submits that Article 181(2) of the Financial Regulation 2018 is not relevant since that provision concerns the application of the flat rate and not the controls that may be applied. The ex post verification carried out in this case has its legal basis in Article 183 of that financial regulation, which allows ex post controls to be made even for grants in the form of flat rates.
74 In the second place, the REA observes that, in its letter of 21 August 2019 announcing the financial audit, it confirmed the applicable provisions of the grant agreement without introducing any new requirements with regard to evidence. In addition, on that date, it stated that it disregarded only the declared secondments that did not correspond to the timesheets submitted during the audit, with the result that evidence such as boarding passes would be necessary. The REA thus disputes having acted in bad faith, since it was bound by the principle of sound financial management laid down in Article 317 TFEU, and it considers that it complied with the provisions of that agreement. Finally, it submits, the applicant does not demonstrate that, having regard to Articles 1134, 1156 and 1163 of the Belgian Civil Code, the meaning and the scope of the relevant provisions of that agreement have been infringed.
75 In the third place, the REA submits that the applicant attempts to rely on provisions of the grant agreement which are irrelevant. It states that, if it requested additional evidence, its aim in so doing was to remedy the gaps with regard to the requirements of the financial audit in order to confirm the dates of secondment of the researchers as claimed by the applicant, which was done in the absence of secondment agreements that were however compulsory. It emphasises also that the applicant did not adduce any evidence in support of its allegation that the REA acted in bad faith or abused its contractual rights. The REA maintains its position that, despite the obligation that the applicant was under, it did not provide secondment agreements or employment contracts which met the conditions of the grant agreement. The request to produce travel documents was not excessive, since the applicant could not provide that evidence itself.
76 In the fourth place, the REA disputes that there was any reversal of the burden of proof. It states that, according to Article 8.4 of Book 8 of the new Belgian Civil Code, the party claiming the funding of an activity must be able to prove that the activity in question satisfied the conditions of the grant agreement.
77 In the present case, as regards the first part of the third plea, it should be recalled that, under the heading ‘Lump sums, unit costs and flat-rate financing’, Article 181(2) of the Financial Regulation 2018 provides that ‘where possible and appropriate, lump sums, unit costs or flat rates shall be determined in such a way as to allow their payment upon achievement of concrete outputs and/or results’.
78 Thus, Article 181(2) of the Financial Regulation 2018, as the REA submits, concerns the possibility of determining a flat rate for the payment of EU financial assistance and is therefore not relevant to the determination of the checks that may be carried out ex post in the context of a financial audit.
79 On the other hand, such checks may perfectly well be carried out in the context of flat-rate financing and they have a legal basis in Article 183 of the Financial Regulation 2018, pursuant to which ‘the authorising officer responsible shall check, at the latest before the payment of the balance, the fulfilment of the conditions triggering the payment of lump sums, unit costs or flat-rates, including, where required, the achievement of outputs and/or results[;] the fulfilment of those conditions may [also] be subject to ex post controls’.
80 Moreover, it must be borne in mind that, as is apparent from paragraph 50 above, it is not sufficient that ‘concrete outputs and/or results [have been achieved]’ in the context of the SANAD project from a scientific or technical point of view and in a manner consistent with the requirements of the grant agreement to enable the automatic payment of the flat-rate EU financial assistance or to render unnecessary a financial audit which, as in the present case, was intended to verify, not the implementation of the specific objectives assigned to that project, but the accuracy of the information giving rise to the entitlement to payment of that assistance.
81 Consequently, the first part of the third ground of appeal must be rejected as ineffective and, secondarily, as unfounded.
82 As regards the second part of the third plea, it should be noted that, in support of it, the applicant relies on a unilateral and late amendment of the terms of the grant agreement, in particular because the REA sent it, during the performance of that agreement, contradictory information concerning the supporting documents intended to demonstrate the correct performance of the agreement.
83 It must, however, be recalled that the relationship between the parties is governed, primarily, by the requirements of the grant agreement, of which Article II.21(2) and (3) of the general conditions provides for the possibility for the REA or the Commission, in the context of a financial audit being carried out, to request that the applicant, as beneficiary, submit supporting documents, up to five years after the end of the SANAD project, in order to demonstrate that the expenses incurred were genuine.
84 It appears that, contrary to what the applicant claims, the REA never intended to alter its rights under the grant agreement, or to renounce any part of them, as regards the option available to it of requiring the production of supporting documents from the applicant.
85 In that regard, the letter of 8 October 2018 sent by the REA to the applicant, which, according to the applicant, should be classified as ‘Guidelines on keeping evidence’, merely states, in essence, that the actions of the SANAD project include a category of costs, entitled ‘Travel costs’, which corresponds to ‘a flat-rate contribution (allowance) for the benefit of the [researchers] and which is, as such, not subject to a check that actual costs have occurred, but only that the researchers have received this contribution in full less the related tax and social security social contributions’.
86 Contrary to the applicant’s submission, it is not possible to find that the wording of the REA’s letter of 8 October 2018 contradicts that which appears, inter alia, in the REA’s subsequent letter of 21 August 2019, which announced that the financial audit was to be carried out and contained, in an annex, the list of documents required for that purpose. Although the first letter mentions that a check is not intended to verify the actual costs incurred in connection with travel, since the corresponding costs are assumed on a flat-rate basis, it is by no means excluded that the documents required must make it possible to verify the actual dates of the secondments. In that regard, the verification of the dates of the flights taken by the seconded researchers, by means, inter alia, of boarding passes, makes it possible to verify that those researchers actually attended the host university and that the secondments did indeed take place in accordance with the requirements of the grant agreement.
87 Furthermore, with regard to the applicant’s obligation to conclude secondment agreements with the researchers on secondment in order to satisfy the requirements of Article III.1.1, Article III.2.2, Article III.2.3(a) and Article III.4 of the general conditions of the grant agreement, the intention was, as the REA rightly explains, to prove that the secondments in question took place.
88 While it is true that the applicant produced employment contracts which had been concluded with the researchers concerned, those contracts do not make it possible to establish that those researchers had actually been seconded, in particular because, as the REA points out and as is apparent from the financial audit, the dates to which those contracts refer do not correspond specifically to the dates of secondments, with the result that the production of additional documents, such as boarding passes, was entirely necessary in order to demonstrate that those secondments in fact took place.
89 Accordingly, the second part of the third plea must be rejected as unfounded.
90 As regards the third part of the third plea, it should be noted that, the applicant relies on the REA’s focus, in its assessment of the evidence, on the absence in particular of some travel documents, which deprived it of the right to define the scope of its obligations in a context where the conditions for carrying out the financial audit and the contractual terms were unclear, in breach of Articles 1162 and 1163 of the Belgian Civil Code.
91 However, although the contractual provisions do not expressly lay down an obligation for the applicant to produce evidence of transport and accommodation for seconded researchers, it is apparent inter alia from the general conditions of sale that the parties intended to require the applicant to prove that the secondments in question took place. The applicant’s argument alleging an infringement of Article 1162 of the Belgian Civil Code must therefore be rejected as ineffective. Furthermore, to the extent that, as was found in the context of the second part of the third plea, the employment contracts produced by the applicant did not make it possible to verify which expenses were in fact incurred, the REA cannot be criticised for having requested, for that purpose, the production of additional evidence in order to demonstrate that those secondments took place, with the result that no infringement of Article 1163 of that code can be found in the present case.
92 The third part of the third plea must therefore be rejected as unfounded.
93 As regards the fourth part of the third plea, it should be noted that the applicant argues, in support of it, that the REA disregarded any form of evidence other than travel documents, in breach of Article 1161 of the Belgian Civil Code, even though the fact that the grant agreement is directed towards achieving scientific or technical objectives should have led the REA to reverse the burden of proof on exceptional grounds.
94 It must be borne in mind in that regard that, in order for the costs declared to be eligible and substantiated and for the right to the financial assistance provided for to be automatically acquired in favour of the applicant, it is not sufficient that the SANAD project was carried out technically properly and in accordance with the requirements of the grant agreement (see paragraph 50 above).
95 In addition, the applicant’s assertion that the REA disregarded any form of evidence other than travel documents has no factual basis. The REA took into consideration the employment contracts of the seconded researchers produced by the applicant, and it was only because those contracts did not make it possible to ascertain whether expenses had actually been incurred that it requested the production of additional evidence in order to demonstrate that those secondments in fact took place, in accordance with the meaning to be given to the applicant’s obligation to conclude secondment agreements with seconded researchers in order to satisfy the requirements of Article III.1.1, Article III.2.2, Article III.2.3(a) and Article III.4 of the general conditions of the grant agreement, as is clear from that agreement considered as a whole. No infringement of Article 1161 of the Belgian Civil Code can therefore be found. Lastly, the new Article 8.4 of the Belgian Civil Code, pursuant to which, according to the applicant, the burden of proof should have been reversed for exceptional reasons, did not in any event apply in the present case.
96 The fourth part of the present plea must therefore be rejected as unfounded and, consequently, that plea must be rejected in its entirety.
The fourth plea in law, alleging, in essence, an infringement of the principle of proportionality
97 The applicant claims that, if the various items of concurring evidence, both internal and external, and also the misleading guidance before and during the implementation of the grant agreement are correctly examined, any mismatches and lacunae detected in the evidence should be disregarded or, at the very least, reduced to their appropriate dimension. By contrast, those mismatches and lacunae cannot lead to a rejection of the expenditure in question on the ground that they are systematic in particular where, in accordance with the general principle of proportionality, they are unfounded or have negligible effect.
98 The REA contends, first of all, that the applicant’s claim that the evidence provided was not treated in good faith and fairly is not substantiated. On the contrary, that evidence was properly analysed, which, moreover, made it possible to confirm that certain researchers concerned were in fact seconded in accordance with the grant agreement. In addition, even if the SANAD project had been correctly performed from a technical point of view, that would have been insufficient to allow the beneficiary being audited to benefit from the contribution provided for under the agreement. It was also necessary to prove that the costs had been incurred in accordance with that agreement. Next, the REA submits that, as regards the secondment of the three researchers involved in that project, the evidence submitted did not make it possible to confirm the actual dates of secondment as advanced by the applicant, nor to verify that the specific provisions governing those secondments had been complied with. Finally, in the light of the case-law, the concept of ‘flat-rate financing’ cannot be interpreted as a reason to be exempted from the specific requirements for the eligibility expenditure, which renders ineffective the applicant’s argument alleging infringement of the principle of proportionality.
99 In the present case, it must be recalled that there is no infringement of the principle of proportionality where an authorising officer for expenditure, which takes the form of financial assistance from the European Union, considers that it was not sufficient for the beneficiary of that financial assistance, in order to justify the award of that assistance, to show that a project had been carried out, and requires that the beneficiary had to prove that the costs declared had been incurred in accordance with the conditions laid down for the award of the grant concerned (see, by analogy, judgment of 16 July 2020, ADR Center v Commission, C‑584/17 P, EU:C:2020:576, paragraph 109).
100 While the applicant claims, in essence, that the technical and scientific objectives of the SANAD project were achieved, nevertheless, as is apparent from the examination of the first three pleas in the action, the REA was fully entitled to find that the evidence initially submitted by the applicant and relating to the travel and stay expenses of several seconded researchers did not meet the requirements of the grant agreement. In addition, following the financial audit, the REA did not err in taking the view that it was for the applicant to provide additional documents. Those additional documents have also failed to make it possible to establish that the applicant had received all the financial assistance in accordance with the terms of that agreement.
101 In the light of its obligations as the authorising officer for expenditure (see paragraph 99 above), the REA therefore had no choice but to seek repayment from the applicant of part of the financial assistance it had unduly received.
102 Thus, the REA cannot be criticised as having infringed the principle of proportionality when it merely complied with its obligation to demand repayment of the financial assistance granted to the applicant, in proportion to the latter’s failure to comply with its contractual obligations. Only the expenses in respect of travel and stay which could not be proven to have actually been incurred were rejected.
103 Furthermore, it must also be recalled, as is apparent from the examination of the second part of the third plea and contrary to the applicant’s submission, that the REA cannot be criticised as having provided the applicant with misleading guidance on the implementation of the grant agreement.
104 Since the applicant has not demonstrated that the REA infringed the principle of proportionality, the present plea must be rejected as unfounded.
105 In the light of the foregoing considerations, in so far as none of the applicant’s pleas has been upheld, its action must be dismissed and the counter-claim brought by REA in the present proceedings under Article 272 TFEU must be examined.
The counter-claim
106 By its counter-claim, the REA asks the Court to declare that its claim in the amount of EUR 202 883.48, as set out in the new debit note, was established in accordance with the grant agreement and that, consequently, it renders it enforceable.
107 In the rejoinder, the REA observes that, in its response, the applicant did not challenge the counter-claim and so it must be considered to have accepted it by default, by analogy with the rule in Article 123 of the Rules of Procedure, which provides that the Court may deliver a judgment in default.
108 In the present case, in so far as none of the pleas in law raised by the applicant has been upheld, it must be held that the REA’s refusal of the eligibility and reimbursement of the costs in the context of the SANAD project, the recovery of which it demands, is well founded.
109 The applicant must therefore be ordered to pay the REA the disputed amount, in accordance with the form of order sought.
110 Furthermore, it should be recalled that, under Article 280 TFEU, ‘the judgments of the Court of Justice of the European Union shall be enforceable under the conditions laid down in Article 299 [TFEU]’.
111 Article 299 TFEU provides that ‘acts of the Council, the Commission or the European Central Bank which impose a pecuniary obligation on persons other than States, shall be enforceable’.
112 In the present case, it is sufficient to note that, in accordance with Article 280 TFEU, the present judgment is enforceable under the conditions laid down in Article 299 TFEU (see, by analogy, order of 25 May 2023, Classen Holz Kontor v EUIPO – Deutsche Steinzeug Cremer & Breuer (DRYTILE), T‑307/21 DEP, not published, EU:T:2023:290, paragraph 48).
113 There is therefore no need to give a formal ruling on the request that the Court declare the REA’s claim enforceable.
Costs
114 Under Article 134(1) 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.
115 It follows that, since the applicant has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the REA.
116 As regards the applicant’s claim that it should not be ordered to pay the costs on account of the complexity of that case, it suffices to observe, in any event, that the points decided in the present judgment do not raise new or particularly complex questions of law and are easily dealt with on the basis of clear and settled case-law. The same applies to the facts of the present case, which do not raise any particular difficulties of assessment. In those circumstances, there is no need to apply the provisions of Article 135(1) of the Rules of Procedure on which the applicant seeks to rely.
On those grounds,
THE GENERAL COURT (Third Chamber)
hereby:
1. Dismisses the action;
2. Upholds the counter-claim brought by the European Research Executive Agency (REA);
3. Orders Global Nanotechnologies AE schediasmou anaptyxis paraskevis kai emporias ylikon nanotechnologias (Glonatech) to pay to the REA the principal sum of EUR 202 883.48 sought by the REA in its counter-claim;
4. Orders Glonatech to pay the costs.
Schalin | Škvařilová-Pelzl | Nõmm |
Delivered in open court in Luxembourg on 13 December 2023.
V. Di Bucci | | S. Papasavvas |