Report for the Hearing in Case C-200/89

Legal background to the dispute

Article 1(2) of Council Decision 83/516/EEC of 17 October 1983 on the tasks of the European Social Fund provides that the Fund is to participate in the financing of operations concerning, inter alia, vocational training and guidance.

Article 3 of that decision provides:

Article 5 of Council Regulation (EEC) No 2950/83 of 17 October 1983 on the implementation of the abovementioned decision provides:

Finally, Article 6 of the abovementioned Regulation provides:

Facts and written procedure

In September 1983, Funoc — Association pour le développement à Charleroi d'actions collectives de formation pour l'université ouverte (Association for the development in Charleroi of collective training projects for the open university) — submitted to the Fund an application for assistance for an innovatory project within the meaning of Article 3(2) of Decision 83/516, cited above, spread over three years (1984, 1985 and 1986) with the aim of providing training in new information technology for young people in the Charleroi area with limited qualifications.

In its description of the proposed training programme and its essential innovatory features, Funoc planned:

The project presented by the applicant was to comprise three phases:

After a meeting with the promoter on 12 June 1984 at the Fund's offices, the Commission received a note from Funoc on 15 June 1984 providing further details of the project presented to supplement the initial application.

The project, reference No 843246 B5, was approved for the amount applied for — BFR 16500000 — by Commission Decision C(84) 1076 of 23 July 1984.

An initial advance of BFR 4950000 (30% of the amount approved) was paid in December 1984, and a second advance of BFR 4950000 in May 1987.

In May 1987, a request for payment of the balance of BFR 6600000 was submitted via the Belgian Ministry of Labour and Employment, together with all the supporting documents and the completion report.

On 6 June 1988, Funoc received a registered letter from the Ministry of Labour and Employment forwarding a note from the Commission together with an explanatory letter. The Commission requested the reimbursement of the BFR 9900000 advanced on the ground that, according to the completion report, the promoter had decided as early as January 1984 to modify the project without informing the Fund, and that the modification was in conflict with the initial structure of the project.

On 10 June 1988, Funoc wrote to the Ministry of Labour and Employment requesting a reexamination of the file and a review of the Commission's decision.

On 30 June 1988, the Ministry of Labour and Employment asked the Fund for further details and stated its reservations as to the decision taken.

By letter of 16 September 1988, the Commission confirmed that, before the first stage of training in March 1984 and without requesting approval of the modification, Funoc had significantly modified its project with the result that the training modules were repeated.

In the meantime, by letters of 16 August 1988 and 2 February 1989, the Belgian Ministry of Social Affairs and Finance Ministry also submitted their observations.

By letter of 21 April 1989 to the Ministry of Labour and Employment, the Fund reduced its demand for the reimbursement of the advances of BFR 9900000 paid to Funoc to BFR 6579334.

In that letter, the Fund stated:

That letter was passed on to Funoc under cover of a letter from the Ministry of Labour and Employment of 2 May 1989.

By application lodged at the Court Registry on 26 June 1989, the applicant brought an action under Article 173 of the EEC Treaty seeking a declaration that the decision was void, together with a claim for compensation under Article 178 of the Treaty.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, by decision of 21 February 1990, the Court assigned the case to the Second Chamber in accordance with Article 95 of the Rules of procedure and opened the oral procedure without any preparatory inquiry.

Conclusions of the parties

The applicant claims that the Court should:

The Commission contends that the Court should:

Submissions and arguments of the parties

A — The application for a declaration that the decision is void

1. Lack of power

The applicant claims that the contested decision was taken by E. L. Vermelho, a Head of Division in Directorate-General V, the Directorate-General for Employment, Social Affairs and Education, whereas it should have been taken by the responsible authority, the Commission itself, as provided in Article 6(1) of Regulation No 2950/83, cited above.

Apart from the breach of that provision, it is hardly conceivable that a decision of such importance should be delegated to the level of a Head of Division, who would also have the power to decide the amount of the sums to be refunded.

The decision was not taken by virtue of an authorization, nor was it in any way approved by the Director-General who, on the contrary, was inclined to adopt a less drastic solution.

According to the Commission, the decision in question was taken by the Commission, as provided for in Article 6(1) of Regulation No 2950/83, cited above, and in accordance with its Rules of Procedure and with Commission Decision 75/461/EEC of 23 July 1975 amending the provisional rules of procedure of the Commission of 6 July 1967. Article 27 of those rules provides:

In the present case, the decision was taken within the context of the management of the Fund, for which Directorate-General V is responsible, in cooperation with Financial Control, in accordance with the internal rules governing the implementation of the general budget of the European Communities.

In those circumstances, the decision was that of the Commission, since it was taken by the competent management department.

The letter of 21 April 1989 signed by Mr Vermelho merely constituted the notification of the decision taken by the competent department in accordance with the internal rules in force.

Furthermore, the allocation of powers within the Commission is a purely internal matter. If any department goes beyond its powers, the question of the responsibility of the official concerned may arise in a disciplinary context.

In any event, the letter signed by Mr Vermelho, in his capacity as an official of the Commission, is binding on the institution.

2. Infringement of the rules governing the Fund

The applicant claims that, contrary to Article 6(1) of Regulation No 2950/83, cited above, the Commission merely presented the Belgian employment authorities with a debit note claiming the reimbursement of BFR 9900000, that is to say an implementing measure following on a decision already taken, without in any way asking them to comment thereon. The note accompanying that bill contained no request for consultation with the Belgian Government, but merely outlined the grounds on which the decision had been taken.

Although certain Belgian ministers did subsequently react, they did not do so within the procedure set up by Regulation No 2950/83, which requires prior consultation, but solely as a result of the applicant's protests. The Commission thus presented the Belgian Government, and consequently the applicant, with a fait accompli. That was all the more serious in that, when requesting the Commission to pay the second advance, the Belgian Government expressly approved the way in which the operation was being conducted in accordance with the conditions set out in the decision of approval, as required in the second sentence of Article 5(2) of Regulation No 2950/83, cited above.

The Commission replies that the decision in question was preceded by an exchange of letters between the Commission and the Belgian authorities, which gave them an opportunity to comment in accordance with Article 6(1) of Regulation No 2950/83, cited above.

Moreover, that article does not require the decision to be taken after hearing the State concerned. No specific procedure is provided for. What is required is that the competent authorities of the Member State concerned should be given an opportunity to comment on any differences of opinion. That opportunity was provided in the present case.

3. Manifest error of appraisal and error of law

1. The applicant denies having introduced a change into its initial project, which was complied with, although it proved to be necessary, in the interest of achieving the aim of the project, to modify some of the details of its implementation.

2. The criteria of non-repetitivity is nowhere laid down in the legislation governing the management of specific innovatory operations. Funoc was first made aware of the existence of that criterion in the Commission's letter dated 16 September 1988, one year and eight months after the project was completed.

3. The applicant claims to have stated orally that it had begun with 30 young people and that it intended to continue with successive intakes. Both the Commission and the representatives of the Belgian Government replied that it was wise and prudent to proceed in that way, in view of the inevitable delays in the payment of advances. At that time, no reference was made in the applicant's presence to the problem of repetitivity. When Funoc inquired whether any particular procedure had to be followed, it was told that an innovatory project could be considered not to have been modified if there was no change in the nature of the project, the number of hours of training or the number of trainees. Funoc's representatives were also informed that they should mention any change in their report and that the Commission would draw up a note.

Moreover, the Commission acknowledges, in its own report relating to the results of innovatory projects, that a certain flexibility of implementation is necessary and that it is necessary to take into account the way the project is adapted to meet any difficulties encountered. That was the basis on which Funoc implemented its project and, for the reasons described in its final report, took the steps necessary for the completion of the project in accordance with the training programmes for which it had given an undertaking to the Fund.

1. The Commission contends that the applicant's claim that the aims of the project were adhered to although the details of its implementation differed from those stated in the application for assistance cannot be accepted, either in fact or in law.

2. In the Commission's view, the reason that the criterion of non-repetitivity is not mentioned anywhere in the legislation is that it is clear from the use of the word innovatory. If an innovatory project is repeated, it ceases to be innovatory.

3. The Commission did not become aware of the repetition of the training programme until the applicant submitted its completion report in June 1987, in which it first informed the Commission of the need to modify considerably the course of the operation. The Commission cannot, therefore, acknowledge that the applicant informed it orally that it had begun with 30 young people and was intending to continue with successive intakes.

4. Breach of the principle of proportionality

In the alternative, the applicant claims that the reimbursement of the greater part of the amount of the advances and the withholding of payment of the balance are disproportionate in view of the work it carried out in implementing its project.

The most it could be taxed with is a problem of procedure and of communication. The Commission should not normally have rectified such a procedural irregularity by withdrawing the Fund's assistance but rather by warning the applicant that, in future, it should be informed from the outset of any modifications made to an innovatory project.

The Commission's final decision was in flagrant contrast to the understanding attitude it had shown during prior discussions with the Belgian authorities.

Furthermore, the principle of proportionality should also be viewed in the light of the damaging effects which a decision may have on the addressee's position. In the present case, Funoc's very survival is at stake.

The Commission replies that Article 6(1) of Regulation No 2950/83, cited above, made it necessary to withdraw the decision of approval which, because of an essential modification of the original project, was affected by illegality and not by a mere procedural irregularity. Withdrawal of the decision did not go beyond what was appropriate to protect the public interest in legality and in the sound management of public funds.

However, taking into consideration the applicant's private interests and in order to be fair, the Commission decided exceptionally to replace the illegal decision with a new decision approving the first training session in part.

B — The claim for compensation

In the applicant's submission, the Commission acted unlawfully in failing to react to the applicant's oral announcement that the project would be carried through with three successive intakes and in failing to acknowledge the innovatory nature of the project, which was completed in full accordance with the new methods and did in fact include the number of hours of teaching and of supervised activities provided for in the application for assistance from the Fund.

The applicant assesses the material damage it incurred at BFR 10730173.

In its Reply, the applicant further claims that the Commission has not paid the balances on other files outstanding with the Fund (a total of BFR 5753257 + BFR 1942150 = BFR 7695407), with the result that the applicant has been deprived since 27 July 1989 of the interest on that sum. Interest thereon at 8%, to be applied as of the date of the judgment or the date of payment, must therefore be added to the amount of the material damage.

In addition to the damage suffered, the applicant's financial situation is now, as a result of the contested decision, so insecure that its very survival is in jeopardy.

The applicant also claims to have suffered, as a result of the publicity given in the press, of the effects on the association and its staff and of the repercussions this may have on its future, nonmaterial damage which may reasonably and fairly be assessed at BFR 5000000.

The Commission contends that it stayed within the legal rules in force at the relevant time and did not, therefore, act unlawfully.

The further claim for compensation for the material damage alleged to have been suffered in respect of the other outstanding files does not fall within the scope of the present proceedings.

The Commission adds that the amount of the alleged damage has not been adequately established. In that connection, the Commission points out that the applicant's activities were not confined to the operation in issue. In fact, other operations have been granted assistance by the Fund, which means that the applicant has remained in constant activity.

1 Language of the case: French.

2 OJ 1983 L 289, p. 38.

3 OJ 1983 L 289, p. 1.

4 OJ 1975 L 199, p. 43.

5 Joined Cases 7/56 and 3/57 to 7/57 Algeta v Common Assembly [1957] ECR 39, Joined Cases 42/59 and 49/59 Snupat v High Authority [1961] ECR 53 and Case 15/85 Consorzio cooperative d'Abruzzo v Commission [19871 ECR 1005.

6 Case 14/61 Hoogovent v High Authority [1962] ECR 253.