Report for the Hearing in Case C-181/90
I — Legal background to the dispute
Article 1(2) of Council Decision 83/516 of 17 October 1983, which defines the tasks of the European Social Fund (hereinafter the Fund), provides, inter alia, that the Fund shall participate in the financing of operations concerning vocational training and guidance. Article 3(1) provides that Fund assistance may be granted for operations carried out within the framework of Member States' labour market policies and in particular those intended to improve employment opportunities for young people.
According to Article 4(1), Fund assistance may be granted to promote employment for young people under the age of 25, in particular those whose chances of employment are especially poor, in particular because of a lack of vocational training or inadequate training and those who are long-term unemployed.
Council Regulation No 2950/83 of 17 October 1983 (hereinafter the Regulation) defines the types of expenditure which may be the subject of Fund assistance; these include the costs of the preparation, operation and administration of vocational training measures.
Article 5(1) of the Regulation provides that:
Upon completion of the training measure, the promoter is required to draw up and send to the national authorities the final report relating to its completion and accompanied, if necessary, by a final payment claim. According to Article 5(4) of the Regulation:
Finally, according to Article 6 of the Regulation:
Article 5 of Commission Decision 83/673 of 22 December 1983 on the management of the European Social Fund provides that:
II — Facts and written procedure
The applicant is a limited company which provides consultancy services and technical and professional assistance. In the course of its business, it was an associate member of a group of undertakings led by CERAMICMosaicos Cerâmicos Ld.% the objective of which was to organize joint training measures during 1987.
The Department of European Social Fund Affairs in Lisbon (hereinafter DESFA), acting in the name of the Portuguese Republic and on behalf of this group of undertakings, which included the applicant, made an application for Fund assistance in respect of 1987. It appears from the standard form used that the training measure in respect of which assistance was requested was based on Article 3(1) of Decision 83/516 and related to young people under the age of 25.
The project, the file for which was allocated the number ESF 871106 Pl, was approved on 30 April 1987 by Commission Decision C(87)0860 subject to amendments relating to the number of trainees and the level of assistance, which was fixed at ESC 337749326 and of which the applicant received ESC 188934925.
In accordance with Article 5(1) of the Regulation, the sum of ESC 85020716 was paid to the applicant in two instalments: Esc 46761394 on 15 July 1987 from the Fund and ESC 38259322 on 14 September 1987 from the Institute for Financial Management of Social Security Matters (hereinafter IGFSS).
It appears from the documents before the Court that the real cost of the measure to the applicant was less than ESC 177129810. The final payment claim took account of the real cost of the measure, which amounted to ESC 87679256 charged to the Fund, along with ESC 71737573 charged to IGFFS, and this was submitted to DESFA at the same time as a quantitative and qualitative evaluation report.
On 12 September 1989, the Commission sent to DESFA a letter relating to the whole group of undertakings which included the applicant. According to that letter:
Pursuant to that decision, ESC II 768379 were made available to the applicant, ESC 6472608 of which came from the Fund and ESC 5295771 from IGFSS.
By letter of 25 May 1990 from DESFA, the applicant was informed of the content of the letters sent by the Commission in respect of File No 871106 PI and which confirmed the above decision of 30 March 1990.
By application lodged at the Court Registry on 8 June 1990, the applicant, pursuant to Article 173 of the EEC Treaty, brought an action for annulment of the decision of 30 March 1990.
Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court, by decision of 22 October 1991, assigned the case to the Second Chamber in accordance with Article 95 of the Rules of Procedure and decided to open the oral procedure without any preparatory inquiry.
III — Forms of order sought by the parties
The applicant claims that the Court should:
The Commission contends that the Court should:
IV — Pleas in law and arguments of the parties
According to the applicant, the contested decision imposes a pecuniary obligation enforceable under Article 192 of the Treaty and is accordingly in breach of Article 190 of the Treaty in so far as the reasons on which it was based are not explicit, clear and relevant. Furthermore, the approval given to the project created a legitimate expectation in the present case. The applicant spent the entire amount initially approved by the Commission in running and administering the training operations provided for in the project.
The notification of the contested decision does not contain any objective indication or even a hint of the grounds on which the decision was based. The wording of the contested decision does not enable the applicant to assess the relevance of the reasons which led to the view that at least the greater part of the expenditure not taken into consideration was ineligible, nor does it make it possible for the applicant to comment on the soundness of those reasons. With regard to the 17% reduction in the number of practical hours designed to bring them down to the same number as that of hours dealing with theory, the final payment claim submitted by the applicant envisaged precisely the opposite situation. In any event, this expenditure represents at least 10% of the reductions made.
According to the applicant, most of the expenditure which had not been approved in the application for assistance was regarded as ineligible without any justification whatever being offered for such exclusion. The bare declaration that the expenditure had not been approved cannot properly be regarded as a reason on which the decision could be based. The complete absence of reasons for which the measure at issue therefore constitutes an infringement of an essential procedural requirement and vitiates the decision in its entirety.
The Commission does not dispute the facts as outlined by the applicant, except for the relationship between the number of hours allocated to theoretical training and the number of hours of practical training. Reference is made on the claim form for final payment to a number of hours of practical training which is higher by one-third than the number of hours allocated to theoretical training.
It contends that, on the basis of the parameters laid down by the settled case-law of the Court, the contested decision sets out in sufficient detail the grounds on which it is based.
In the context of the Fund, there is a financial relationship between the Commission and the Member State concerned on the one hand and between that Member State and the institution which is the recipient of the financial assistance on the other. It is only after receiving a detailed report on the relevant operations after they have been carried out that it is possible to calculate the precise amount of eligible expenditure; in this regard the Commission enjoys a degree of discretion. The Court has regarded as sufficient a summary statement of the reasons on which decisions have been based in respect of which the persons to whom those decisions are addressed are permitted subsequently to request any additional information deemed necessary.
The contested decision was notified to DESFA. Under Article 6(1) of the Regulation, that body, in so far as it represents the Portuguese State, could have sought further information from the Commission if it had regarded as unlawful one of the decisions taken in connexion with the Fund.
The Commission states that DESFA did make use of this option but that, after it had received such additional information, it did not express any reservations as to the decision in question. In other words, DESFA, by subsequently communicating the decision to the applicant, treated the decision at issue as being properly founded.
The Commission points out that the application for assistance and the final payment claim must be submitted on the forms provided for in Commission Decision 83/673. It is for that reason necessary to emphasize that the staff of the Fund are required to make a large number of decisions within very short periods. That is why the Commission found itself obliged to take decisions simply by referring to the points on the abovementioned forms, while reserving its right to examine matters in more detail if the Member States should submit comments under Article 6(1) of the Regulation.
The Commission has relied on two grounds in support of its decision to reduce assistance. With regard to the first of those grounds, the requirement of identical periods of practical and theoretical training is derived from the internal rules governing Fund participation in training programmes, which are, moreover, subject to the discretion which the Commission enjoys in the management and administration of the Fund. The disallowance or reduction of non-approved expenditure clearly follows from the rules governing the Fund. Article 6 of the Regulation means that only such expenditure as has been agreed in the decision approving the application for assistance may be submitted in the claim for final payment.
With regard to the second ground, invoked in support of the contention that certain expenditure which had not previously been approved was ineligible, a comparison of Forms I and II, included as annexes to Decision 83/673, will immediately make clear the reasons for the decision taken to treat certain expenditure as ineligible. Such a comparison enables the parties concerned, including the applicant, to safeguard their rights and makes it possible for the Court to review the legality of the decision.
V — Replies to questions put by the Court
The Commission was requested to state whether it gave the Portuguese Republic an opportunity to submit its comments, in accordance with Article 6(1) of the Regulation, before the decision of 15 March 1990 adopted in the context of the implementation of request for assistance 871106 PI.
The Commission states that, after analysing each final payment claim, the officers of the Fund submit to the Member State concerned their conclusions containing a proposal for reducing, suspending or withdrawing the aid. The authorities of the Member State may accept those conclusions in which case they are then deemed to have submitted a final payment claim taking account of the amendment proposed. On the other hand, they may submit their comments, thus indicating that they do not accept the proposal of the officers of the Fund. If the latter do not, in their turn, accept the Member State's arguments, a new phase of cooperation is initiated which may involve an inspection visit following which the officers of the Fund and the authorities of the Member State decide, by common accord and on the basis of the factual checks carried out, to suspend, reduce or withdraw the aid.
If the Member State does not agree with the Fund's proposal, the final decision is not notified to the beneficiaries of the aid until after the abovementioned concertation phase has been completed.
In the present case, a proposal for a decision finding the existence of ineligible expenditure amounting to ESC 62894639 was notified to DESFA, in accordance with Article 6 of the Regulation, by letter of 5 September 1989. By letter of 18 September 1989, DESFA requested certain further particulars which were given to it by letter of 27 October 1989.
On 12 February 1990 DESFA asked for still further particulars which the Commission sent it on 2 March 1990.
It was only after being duly informed that DESFA, accepting the Commission's proposal, notified it to the applicant. Since no specific formality is required for the application of Article 6(1) of the Regulation, the Commission considers that the exchange of correspondence between its officers and DESFA satisfies the requirement laid down in that provision, particularly since it precedes the contested decision of 30 March 1990.
1 Language of the case: Portuguese.
2 OJ 1983, L 289, p. 38.
3 OJ 1983, L 289, p. 1.
4 OJ 1983 L 377, p. 1.
5 See the judgments in Case 32/86 Sisma v Commission [1987] ECR 1645, paragraph 8; in Case 16/65 Schwane v Einfuhrund Vorratsstelle für Getreide und Futtermittel [1965] ECR 877; and in Casc C-213/87 Gemeente Amsterdam and VIA v Commission [1990] ECR I-221.
6 Judgment in Case 310/81 E ¡SS v Commission [1984] ECR 1341, paragraph 15.
7 Judgment in Case 84/85 United Kingdom v Commission [1987] ECR 3765, paragraph 23.
8 Judgment in Case 206/85 Beiten v Commission [1987] ECR 5301.