JUDGMENT OF THE GENERAL COURT (Ninth Chamber)
18 October 2023 (*)
(Arbitration clause – Loan agreement concerning the design, construction or installation and commissioning of infrastructure and equipment in a third country – Non-performance of the agreement – Repayment of the sums advanced – Default interest – Procedure by default)
In Case T‑456/22,
European Investment Bank (EIB), represented by T. Gilliams, R. Stuart and F. Oxangoiti Briones, acting as Agents, and by D. Arts and E. Paredis, lawyers,
applicant,
v
Syrian Arab Republic,
defendant,
THE GENERAL COURT (Ninth Chamber),
composed of L. Truchot, President, R. Frendo (Rapporteur) and M. Sampol Pucurull, Judges,
Registrar: V. Di Bucci,
having regard to the written part of the procedure,
gives the following
Judgment
1 By its action based on Article 272 TFEU, the European Investment Bank (EIB) requests that the Syrian Arab Republic be ordered to pay the European Union, which it represents, the sum of EUR 18 440 034.97, together with interest, under Loan Agreement No 22057 concerning the design, construction or installation and commissioning of infrastructure and equipment in the multi-purpose port of Tartous (Syria) (‘the loan agreement’), and to pay it the sum of EUR 5 405.54, which has not been called, representing the default interest on the instalment due on 20 May 2022, accrued up to 14 June 2022, the date on which the European Union paid the related instalment of principal and contractual interest.
Background to the dispute
2 On 22 May 2003, the EIB concluded the loan agreement with the Syrian Arab Republic. That agreement, which was amended on 17 May 2006, 21 May 2007 and 10 July 2008, followed three texts, namely:
– Council Regulation (EC) No 1488/96 of 23 July 1996 on financial and technical measures to accompany (MEDA) the reform of economic and social structures in the framework of the Euro-Mediterranean partnership (OJ 1996 L 189, p. 1);
– the framework agreement between the Syrian Arab Republic and the EIB of 17 May 1999 governing EIB activities in Syria;
– the framework convention of 17 May 1999 on the implementation of financial and technical cooperation under the MEDA programme as well as other EIB financing agreements in Mediterranean countries.
3 Under Articles 1.01, 1.02 and 1.04 of the loan agreement, the EIB granted the Syrian Arab Republic a loan of EUR 50 000 000 to be drawn down on request. The loan was drawn down in tranches between 22 June 2003 and 22 May 2009.
4 Under Article 4.01 of the loan agreement, the Syrian Arab Republic was to repay the loan in several instalments in accordance with the amortisation table supplied by the EIB.
5 In accordance with Article 3.01 of the loan agreement, the outstanding balance of any tranche, on a semi-annual basis, is to bear contractual interest at a rate to be determined as at the date of issue of the disbursement notice, on the basis of the standard interest rate applicable to comparable loans made by the EIB, denominated in euros and subject to the same conditions (‘contractual interest’).
6 Under Article 3.02 of the loan agreement, default interest is to accrue on any overdue sum at the Euro Interbank Offered Rate (Euribor) plus 2% or at the fixed rate payable under Article 3.01 of the loan agreement, plus 0.25%, with the higher of the two rates being applied (‘default interest’).
7 Furthermore, in accordance with the guarantee agreement concluded on 24 July 2000 by the EIB and the European Community concerning the loans to be granted by the EIB for investment projects carried out in the countries of central and eastern Europe, the Mediterranean countries, the countries of Latin America and Asia and in the Republic of South Africa (‘the guarantee agreement’), the European Union guarantees loans granted by the EIB in the context of the European Union’s financial commitments towards certain third countries, including the Syrian Arab Republic, and is subrogated to the EIB’s rights immediately upon making each payment to the EIB under the guarantee (Article 1.01).
8 Under the recovery agreement between the European Union and the EIB, signed in Brussels on 3 October 2018, governing modalities and procedures for recovery of payments made by the European Union under the guarantees granted by it to the EIB against losses under financing operations supporting investment projects outside the European Union, as amended on 10 August 2021, whenever the European Union has made a payment under the guarantee agreement and is subrogated to the rights and remedies of the EIB under and pursuant to, inter alia, a loan agreement, the EIB is to initiate recovery proceedings without undue delay on behalf and in the name of the European Union (Article 3.1).
9 Since May 2012, the Syrian Arab Republic has failed to pay the instalments due under the loan agreement.
10 By judgment of 6 June 2019, EIB v Syria (T‑542/17, not published, EU:T:2019:394), the Syrian Arab Republic was ordered to repay the European Union, represented by the EIB, first, the sum of EUR 20 609 429.45 in respect of the instalments that had not been paid by the Syrian Arab Republic on the due dates between 21 May 2012 and 22 May 2017 and the contractual and default interest for the period from 21 May 2012 to 9 August 2017, and, secondly, default interest calculated in accordance with the method laid down in Article 3.02 of the loan agreement from 9 August 2017 until the date that payment is made.
11 Between 9 August 2017 and 30 June 2022, 10 instalments under the loan agreement fell due and, since the Syrian Arab Republic failed to make the payments due, the EIB issued a payment reminder on each occasion as follows:
Due date | Principal amount | Contractual interest | Reminder |
20 November 2017 | EUR 1 254 441.23 | EUR 398 724.19 | 30 November 2017 |
21 May 2018 | EUR 1 283 620.58 | EUR 369 544.84 | 31 May 2018 |
20 November 2018 | EUR 1 313 480.03 | EUR 339 685.39 | 30 November 2018 |
20 May 2019 | EUR 1 344 035.46 | EUR 309 129.96 | 4 June 2019 |
20 November 2019 | EUR 1 375 303.13 | EUR 277 862.29 | 2 December 2019 |
20 May 2020 | EUR 1 407 299.67 | EUR 245 865.75 | 2 June 2020 |
20 November 2020 | EUR 1 440 042.11 | EUR 213 123.31 | 1 December 2020 |
20 May 2021 | EUR 1 473 547.89 | EUR 179 617.53 | 1 June 2021 |
20 November 2021 | EUR 1 507 834.79 | EUR 145 330.63 | 7 April 2022 |
20 May 2022 | EUR 1 542 921.11 | EUR 110 244.31 | 30 May 2022 |
12 Nonetheless, the Syrian Arab Republic remained in default of payment.
13 In accordance with the guarantee agreement, by 10 letters sent to the Commission between 21 November 2017 and 30 May 2022, the EIB requested that the guarantee in question be activated in respect of the principal amounts and the contractual interest concerning the instalments relating to the due dates referred to in paragraph 11 above, plus default interest in respect of each instalment, with the exception of the instalment due on 20 May 2022. The Commission complied with those requests by making the payments of the amounts at issue (‘the amounts disbursed by the European Union’).
14 On the date on which the amounts claimed in the present application were calculated, the EIB had not yet called on the EU guarantee in respect of the default interest on the instalment due on 20 May 2022. Therefore, subrogation has not been implemented in respect of an amount of EUR 5 405.54 corresponding to the default interest due on 14 June 2022, which has not been called by the EIB (‘the uncalled amount’).
Procedure and form of order sought by the EIB
15 By application lodged at the Court Registry on 22 July 2022, the EIB, acting on its own behalf and on behalf of the European Union, brought the present action.
16 By letter of 1 August 2022, the application, which is addressed, in accordance with Article 10.03 of the loan agreement, to the ambassador of the Syrian Arab Republic to the European Union in Brussels (Belgium), was duly served on the Syrian Arab Republic by registered post with acknowledgement of receipt.
17 Since the Syrian Arab Republic did not lodge a defence within the period prescribed in Article 81 of the Rules of Procedure of the General Court, the EIB, by document lodged on 26 November 2022, applied to the Court for judgment by default, in accordance with Article 123(1) of those rules.
18 The EIB claims, in essence, that the Court should:
– declare that the Syrian Arab Republic failed to fulfil its contractual obligations under the loan agreement in so far as concerns payment of the principal amounts, contractual interest and default interest on each of the instalments due and unpaid between 20 November 2017 and 20 May 2022, and, consequently, order the Syrian Arab Republic to pay the European Union, which it represents, first, the sum of EUR 18 440 034.97 by way of the amounts disbursed by the European Union and default interest for the period from 9 August 2017 to 30 June 2022, excluding the default interest on the instalment due on 20 May 2022, and, secondly, additional default interest at a rate equal to the Euribor rate plus 2% or at the fixed rate indicated in Article 3.01 of the loan agreement, plus 0.25%, per annum, with the higher of the two rates being applied (for any successive period of one month), from 30 June 2022 up to the time that payment is made;
– declare that default interest amounting to a sum of EUR 5 405.54 in respect of the instalment due on 20 May 2022, accrued up to 14 June 2022, has not yet been called by the EIB under the guarantee, and, consequently, order the Syrian Arab Republic to pay it the uncalled amount;
– order the Syrian Arab Republic to pay the costs.
Law
19 Under Article 123(1) of the Rules of Procedure, where the Court finds that a defendant on whom an application initiating proceedings has been duly served has failed to respond to the application within the prescribed time limit, the applicant may apply to the Court for judgment by default.
20 In the present case, it must be noted that the application, which, in accordance with Article 10.03 of the loan agreement, was to be addressed to the ambassador of the Syrian Arab Republic to the European Union in Brussels, was duly served at the address of the embassy, where the premises of the mission of that State are located.
21 However, as is apparent from paragraph 17 above, although the EIB’s application was duly served on the Syrian Arab Republic, the latter did not lodge a defence within the time limit prescribed in Article 81 of the Rules of Procedure.
22 Since the applicant has applied to the Court for judgment by default, it is appropriate to apply Article 123(3) of the Rules of Procedure, under which the Court is to give judgment in favour of the applicant, unless it is clear that the Court has no jurisdiction to hear and determine the action or that the action is manifestly inadmissible or manifestly lacking any foundation in law.
The jurisdiction of the General Court
23 In accordance with Article 272 TFEU, the Court of Justice of the European Union is to have jurisdiction to give judgment pursuant to any arbitration clause contained in a contract concluded by or on behalf of the European Union, whether that contract be governed by public or private law.
24 It should be noted that it is apparent from the preliminary provisions of the loan agreement that that agreement was concluded, inter alia, following Regulation No 1488/96, with the result that it must be regarded as having been concluded on behalf of the European Union.
25 Article 10.02 of the loan agreement contains an arbitration clause under which any disputes concerning that agreement are to be submitted to the Court of Justice of the European Union.
26 In accordance with Article 256(1) TFEU, the General Court is to have jurisdiction to hear and determine at first instance actions brought on the basis of an arbitration clause, as referred to in Article 272 TFEU.
27 In the light of the foregoing, it must be held that the General Court does not manifestly lack jurisdiction to hear and determine the present action.
Admissibility of the action
28 As regards the first head of claim, it is apparent from paragraph 13 above that, following the failure of the Syrian Arab Republic to fulfil its contractual obligations under the loan agreement, the EIB recovered the amounts paid by the European Union under the guarantee agreement.
29 It follows that, in accordance with Article 4.01 of the guarantee agreement, the European Union is subrogated to the rights that the EIB has against the borrower under the loan agreement as regards the sums referred to in the first head of claim.
30 It must be noted that the effects of that subrogation with regard to the Syrian Arab Republic are not governed by the loan agreement and that the guarantee agreement, under which subrogation took place, does not contain any provisions regarding the applicable law.
31 In that regard, first of all, it should be borne in mind that Article 13(1) of the Convention on the law applicable to contractual obligations opened for signature in Rome on 19 June 1980 (OJ 1980 L 266, p. 1) provides as follows:
‘Where a person (“the creditor”) has a contractual claim upon another (“the debtor”), and a third person has a duty to satisfy the creditor, or has in fact satisfied the creditor in discharge of that duty, the law which governs the third person’s duty to satisfy the creditor shall determine whether the third person is entitled to exercise against the debtor the rights which the creditor had against the debtor under the law governing their relationship and, if so, whether he may do so in full or only to a limited extent.’
32 In the present case, since the guarantee agreement was concluded by the European Union and the EIB, it is appropriate to refer to the national provisions governing subrogation as set out in the civil codes of the States in which the guarantee agreement was signed, respectively, by the Commission, on behalf of the European Union, and the EIB, namely the Belgian and Luxembourg Civil Codes.
33 Under those national laws, which do not require the debtor to have consented to subrogation, subrogation may be effective against third parties provided that the party performing the obligation to repay a loan that is due, which has a legitimate interest in the performance, is subrogated to the rights of the creditor. As a consequence of subrogation, the contractual right of the EIB to reimbursement of the sums due under the loan agreement is transferred to the European Union, which is accordingly entitled to make a contractual claim against the Syrian Arab Republic (judgment of 6 June 2019, EIB v Syria, T‑542/17, not published, EU:T:2019:394, paragraph 23).
34 Next, it should be noted that, under Article 4.03 of the guarantee agreement, after subrogating the European Union to its rights and actions, the EIB, at the request of the European Union, must agree on the arrangements for administering and servicing the loan.
35 In that regard, it is apparent from Article 3.1 of the recovery agreement referred to in paragraph 8 above that, whenever the European Union makes a payment under a guarantee agreement and is subrogated to the rights and remedies of the EIB under and pursuant to, inter alia, a loan agreement, the EIB is to initiate recovery proceedings without undue delay on behalf and in the name of the European Union.
36 In those circumstances, it should be held that the first head of claim, brought by the EIB on behalf of the European Union, is not manifestly inadmissible.
37 By its second head of claim, the EIB seeks a declaration that the sum of EUR 5 405.54 representing the default interest on the instalment due on 20 May 2022, accrued up to 14 June 2022, has not yet been called under the guarantee agreement, and, consequently, an order that the Syrian Arab Republic pay it the uncalled amount.
38 In that regard, it should be borne in mind that, in order to ensure the proper administration of justice, any person bringing legal proceedings must have a vested and current interest in doing so (judgment of 30 September 2009, Lior v Commission and Commission v Lior, T‑192/01 and T‑245/04, not published, EU:T:2009:365, paragraph 247). That interest is evaluated as at the date on which the action is brought (see judgment of 20 September 2007, Salvat père & fils and Others v Commission, T‑136/05, EU:T:2007:295, paragraph 34 and the case-law cited) and must continue until the final decision, which presupposes that the action must be capable, having regard to its purpose and if it is successful, of procuring an advantage for the party bringing it (see judgment of 13 November 2014, Jaber v Council, T‑653/11, EU:T:2014:948, paragraph 55 and the case-law cited).
39 In the present case, it is apparent from the information provided by the EIB that, on 30 June 2022, the date on which the amounts claimed in the present action were calculated, it had not yet called on the European Union to pay the default interest on the instalment due on 20 May 2022, and no such call is apparent from the documents before the Court.
40 Thus, the uncalled amount remained, at the time the action was brought, a debt owed to the EIB and it is not apparent from the documents before the Court that the situation has changed in the meantime.
41 It follows that the second head of claim put forward by the EIB on its own behalf is also not manifestly inadmissible.
42 Furthermore, the present action does not raise any other difficulties which would be such as to give reason to consider it manifestly inadmissible.
43 Consequently, it must be held that the present action is not manifestly inadmissible.
Substance of the action
44 In the first place, it is apparent from the documents before the Court that, on the basis of the loan agreement, the EIB granted the Syrian Arab Republic a loan repayable on the due dates referred to in paragraph 11 above.
45 In addition, it is apparent from the information provided by the EIB that the Syrian Arab Republic failed to make repayments on those due dates, in breach of Article 4.01 of the loan agreement.
46 Consequently, the claims that the Syrian Arab Republic be ordered to repay, first, the European Union the sum of EUR 13 942 526 in respect of the principal amount that was borrowed by the Syrian Arab Republic and that should have been repaid between 20 November 2017 and 20 May 2022, and, secondly, the EIB the sum of EUR 5 405.54 representing the uncalled amount owed to it are not manifestly lacking any foundation in law.
47 In the second place, it is apparent from Article 3.02 of the loan agreement that default interest is to accrue on any overdue sum at the Euribor rate plus 2% or at the fixed rate payable under Article 3.01 of that agreement, plus 0.25%, with the higher of the two rates being applied.
48 Consequently, the claims that the Syrian Arab Republic be ordered to pay, first, the sum of EUR 4 497 508.97 in respect of the contractual and default interest for the period from 9 August 2017 to 30 June 2022, and, secondly, the default interest due on the sum of EUR 13 942 526 from 30 June 2022 until the date that payment is made, are also not manifestly lacking any foundation in law. Default interest is to be calculated in accordance with the method laid down in Article 3.02 of the loan agreement.
49 Accordingly, it is necessary to uphold the form of order sought by the EIB, and to give a judgment by default against the Syrian Arab Republic, in accordance with Article 123 of the Rules of Procedure.
Costs
50 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. Since the Syrian Arab Republic has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the EIB.
On those grounds,
THE GENERAL COURT (Ninth Chamber)
hereby:
1. Orders the Syrian Arab Republic to repay the European Union, represented by the European Investment Bank (EIB), the sum of EUR 18 440 034.97 representing the principal amounts and the contractual and default interest due on 30 June 2022 and the EIB the sum of EUR 5 405.54 representing the default interest on the instalment due on 20 May 2022, accrued up to 14 June 2022, which has not been called by the EIB;
2. Declares that the sum of EUR 13 942 526 comprising the principal amounts is to bear default interest, in accordance with the method laid down in Article 3.02 of Loan Agreement No 22057 concerning the design, construction or installation and commissioning of infrastructure and equipment in the port of Tartous (Syria), entered into by the EIB and the Syrian Arab Republic on 22 May 2003 and amended on 17 May 2006, 21 May 2007 and 10 July 2008, from 30 June 2022 until the date that payment is made;
3. Orders the Syrian Arab Republic to pay the costs.
Truchot | Frendo | Sampol Pucurull |
Delivered in open court in Luxembourg on 18 October 2023.
V. Di Bucci | | M. van der Woude |