Report for the Hearing in CaseC-189/90
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 whose business centres around paper and the graphic arts. In the course of its business, it was an associate member of a group of undertakings led by PARTEX, Compontia Portuguesa de Serviços, 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 concerned young people under the age of 25.
The project, the file for which was allocated the number ESF 871012 Pl, was approved on 30 April 1987 by Commission Decision C(87)0860 subject to an amendment relating to the level of assistance, the overall amount of which was fixed at ESC 300665191, of which the applicant received ESC 71309280.
In accordance with Article 5(1) of Regulation No 2950/83, the sum of ESC 32089174 was paid to the applicant in two instalments: ESC 17649045 from the Fund and ESC 14440128 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 46006289. The final payment claim took account of the real cost of the measure, which amounted to ESC 22773114 charged to the Fund, along with ESC 18632547 charged to the IGFSS, and this was submitted by the DESFA at the same time as a quantitative and qualitative evaluation report.
By a letter of 15 March 1990 from DESFA, received on 3 April 1990, the applicant was informed of the decision taken by the staff of the Commission Fund which referred to ESC 11104748 of expenditure in respect of points 14.2, 14.3 and 14.4 on the application form for assistance.
As a result of this decision, the applicant was required to repay a total of ESC 2084518, ESC 1146485 of which had to be paid to the Fund and ESC 938033 to IGFSS.
By lener of 4 April 1990 the applicant requested DESFA to inform it of the reasons on which that decision had been based.
On 20 April 1990, the applicant received a telefax message containing the response by DESFA relating to the group of undertakings which included the applicant. In this, DESFA reproduced the following text of a communication from the Commission:
In those circumstances, the total amount approved for File No. 871012 PI had to be reduced by ESC 30004656, and the applicant was accordingly required to repay the sums referred to in the letter of 15 March 1990.
By an application lodged at the Court Registry on 13 June 1990, the applicant, pursuant to Article 173 of the EEC Treaty, applied for a declaration that the decision of 15 March 1990 was void.
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
The applicant claims that the decision in question is addressed to it. In so far as that decision imposes on it an obligation to make certain payments and does not allow it to receive certain amounts, it affects its legitimate interests by depriving it of a right and by imposing on it obligations. The decision therefore concerns it directly and individually. In the circumstances, DESFA is simply a representative of the Commission. Even if the decision in question was addressed to the Portuguese State, it would still be the case that that decision concerns the applicant directly and individually. The applicant consequently has capacity to bring the present application.
Since the applicant is at least one of the parties to which the decision is addressed, the fact that DESFA did not request information from the Commission cannot be of any consequence. Furthermore, since the costs of the courses were met by the Fund and by the Portuguese State, any reduction in the budget of those courses would necessarily benefit the Portuguese State, whose own contribution would thereby inevitably be reduced.
In the view of the applicant, a failure to state reasons constitutes infringement of an essential procedural requirement, in particular of Article 190 of the EEC Treaty, and this accordingly vitiates the decision. No reasons were ever provided for the contested decision, which was notified to the applicant by way of letter and confirmed by telefax message. Although the Court has ruled that the obligation to give reasons is not absolute, it is beyond question that such reasons, even if in summary form and not detailed, must be explicit, clear and relevant. In the light of this, it would have been necessary for the reasoning to indicate which expenditure was regarded as ineligible, what the amount of such expenditure was, who had incurred it and the grounds on which it was considered to be ineligible. Without such information, the applicant could not have been in a position to assess the lawfulness of the decision.
Furthermore, the decision taken by the Commission relating to the ineligibility of certain expenditure incurred by the applicant lacks any basis whatsoever. The reduction appears to be an overall reduction for the entire file and applied to each participating undertaking in proportion to the corresponding amount submitted each heading of the form. It appears that there has not been any individual examination of the amounts spent by each undertaking. Although the expenditure which was not accepted cannot be imputed to the applicant, but rather to other undertakings and in respect of measures other than those undertaken by the applicant, it is the applicant which has had to suffer a reduction in the amounts due to it corresponding to expenditure which it incurred and which had been deemed eligible. The applicant believes that it is at variance with the most basic principles of justice to penalize individual parties for acts committed by others. Furthermore, the amounts spent by the applicant were lower than those envisaged and approved in the initial application.
According to the applicant, the alleged reasons given by the Commission are all the more incomprehensible when it is borne in mind that point 14.3.10 dealing with perishable items and other supplies, that is to say, photographic material and paper, was not taken into consideration at all, even though such expenditure was absolutely fundamental to the completion of a course intended for photomechanical operators. In addition, the other amounts considered ineligible were provided for in the initial project, which was approved by the Commission.
The Commission does not dispute the facts as outlined by the applicant and does not contend that the applicant lacks the capacity to act as such.
It takes the view that, in the light of the parameters laid down by the settled case-law of the Court, the contested decision was sufficiently well reasoned.
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 deemed as adequate a summary statement of reasons for decisions in respect of which the persons to whom those decisions were addressed are permitted subsequently to request any additional information deemed necessary.
The contested decision was notified to DESFA. Pursuant to Article 6(1) of the Regulation, that body, in so far as it represents the Portuguese State, could have sought additional information from the Commission if it had formed the view that one of the decisions taken in connection with the Fund was unlawful.
The Commission confirms that DESFA did not make use of this option since it did not express any reservation as to the decision at issue and in particular did not refer to any absence of reasons in connection with that decision. In other words, DESFA, by subsequently notifying the applicant of the decision, regarded it as being properly founded.
The Commission points out that the application for assistance and application for final payment must be submitted using the forms provided for in Commission Decision 83/673. It ought for that reason to be stressed that the staff of the Fund are required to deal with many such decisions within very short periods of time. It is for that reason that the Commission found itself obliged to adopt these decisions simply by referring to the points in the abovementioned forms, while reserving to itself the right to request more detailed information in the event that Member States should submit their comments pursuant to Article 6(1) of the Regulation.
The Commission submits that it provided four reasons on which the contested decision was based. Expenditure was declared ineligible because it unjustifiably exceeded that specified in the application for assistance and had not been approved or provided for in that application. Furthermore, since the application was one which concerned a number of undertakings, the Commission limited itself to making a reduction which was in proportion to the relative importance of the applicant as inferred from the various points on the form.
In any event, the applicant may only rely on the absence of reasons for the contested decision and may not base its argument on the reasons chosen by the Commission. None the less, so far as the reasons outlined above are concerned, the first three follow from the provisions of Article 6(1) of the Regulation, under which Fund assistance must be used in conformity with the conditions set out in the decision of approval. The contested decision specified both the expenditure which had failed to comply with the conditions laid down in the decision approving the application for assistance and the reasons for that failure to comply.
In view of the aggregate submission of expenditure and since the apparent amount for each undertaking had to be individually calculated, the reduction was necessarily made on the basis of total expenditure. It is a matter for the Commission to select a criterion for the apportionment of this reduction among the various undertakings. It has so far been unable to come up with any criterion other than that of proportional allocation of reductions among the different undertakings based on their relative importance as determined in the light of each heading on the form.
V — Replies to the 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 cooperation phase has been completed.
In the present case, a proposal for a decision finding the existence of ineligible expenditure amounting to ESC 116216042 was notified to DESFA, in accordance with Article 6 of the Regulation by letter of 10 January 1990. By letter of 5 February 1990 DESFA requested certain further particulars which were given to it by letter of 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 15 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; Case 16/65 Schwarze v Einfuhr-wnd Vorratsstelle für Getreide und Futtermittel [1965] ECR 877; and Case C-213/87 Gemeente Amsterdam and VIA v Commission [1990] ECR I-221.
6 See judgment in Case 310/81 EISS 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 Betten v Commission [1987] ECR 5301.