Report for the Hearing in Case C-199/91

I — Legal background

Article 1(2) of Council Decision 85/516/EEC of 17 October 1983, which defines the tasks of the European Social Fund, provides in particular that the Fund is to participate in the financing of operations concerning vocational training and guidance.

According to Article 3(1), 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.

By virtue of Article 3(2) of the decision, Fund assistance may be granted for specific operations carried out with a view to encouraging the implementation of innovatory projects.

Under 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.

The decision further provides in Article 4(2) that Fund assistance may be granted to promote employment for persons over the age of 25, in particular for unemployed people, those who are threatened with unemployment or who are underemployed and in particular the long-term unemployed.

Council Regulation (EEC) No 2950/83 of 17 October 1983 defines the types of expenditure for which Fund assistance may be granted, which include the costs of preparing, operating and administering vocational training measures.

Article 5 of the regulation provides that:

On completion of the vocational training measure, the organizer draws up a final report on its implementation and sends it to the competent authorities in the Member State together with any payment claim. Under Article 5(4) of Regulation No 2950/83:

Lastly, according to Article 6 of that regulation:

Applications for financial assistance are submitted on behalf of the relevant Member State by a body governed by public law, generally that which is co-funding the project. That body submits the application on behalf of the institution that will ultimately receive the financial assistance requested.

The Fund deals only with the Member State: a financial relationship is created between the Commission and the Member State on the one hand, and between that Member State and the institution which is the recipient of the financial assistance on the other.

II — Facts and written procedure

The Belgian Ministry for Labour and Employment submitted, on behalf of Belgium and for the benefit of the Foyer Culturel du Sart Tiiman — Canal Emploi, several applications for assistance from the Fund for various training activities.

By successive decisions, the Commission granted assistance from the Fund for Projects 84/3643/B6, 85/0077/B4, 85/0186/B6, 87/0295/B2 and 87/0296/B2.

On 30 November 1988 the Commission issued an order for the recovery of BFR 926513 against the applicant in respect of Project 84/3643/B6.

By letter of 2 December 1988, the Director General of the Belgian Ministry for Labour and Employment informed the Commission that the applicant company was being wound up and asked the Commission to freeze all payments relating to the applicant's training measures as listed in the letter and to inform it of sums still to be paid in respect of those measures.

The Commission first drew up a statement on 30 October 1989 showing a negative balance of BFR 1096053 in respect of all the applicant's training measures. Subsequently, in a letter to the Ministry dated 18 October 1990, it drew attention to the existence of a sum of BFR 11558135 by way of ineligible expenses and a sum of BFR 12129897 by way of eligible expenses, resulting in a positive balance of BFR 571762 for all the applicant's projects. The Commission stated that that amount would shortly be paid into the Ministry's account.

On 7 June 1991 the Ministry sent to the applicant's liquidators the Commission's letter setting out the positive balance in question.

(1). Project 84/3643/B6 relating to a specific innovatory measure involving the instruction of trainers had been approved by the Commission, which granted assistance amounting to BFR 31000000.

(2). In the case of Project 85/0077/B4 Fund assistance of BFR 14337241 was granted in respect of a training measure for persons aged over 25 who had been unemployed for more than twelve months. An advance of BFR 7168620 was agreed to by the Fund.

(3). In the case of Project 85/0186/B6 relating to a specific measure for training young people, the Fund advanced the sum of BFR

(4). In the case of Project 87/0295/B2 relating to vocational training based on new technologies and telematics, the Commission had granted assistance of BFR 6305005 and paid an advance of BFR 3152502. The applicant submitted a final payment claim for BFR 1535019 as it considered that the European Social Fund's contribution should be BFR 4687521. The Commission reduced the balance claimed by BFR 204004.

(5). Project 87/0296/B2 relating to a vocational training measure based on new technologies had been approved by the Fund and the sum of BFR 5707392 set aside for it. The organizer had received an advance of BFR 2853696. The Commission agreed to a claim for BFR 1667815.

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

A — Admissibility

1. The Commission maintains that the action is inadmissible in so far as it seeks an order requiring the Commission to pay the applicant the sum of BFR 21707839, representing the balance of the amount to which the applicant considers itself to be entitled.

2. The Commission further argues that the action is inadmissible because it challenges the Commission's decision on Project 84/3643/B6 inasmuch as it simply confirms the order for the recovery of BFR 926513 which the Commission served on the applicant. A decision confirming an earlier decision is not an act against which an action for annulment may be brought.

B — Substance

1. Infringement of essential procedural requirements

(a) Failure to consult the Member State involved

The applicant maintains that the contested decision is in breach of Article 6(1) of Regulation No 2950/83. Under that provision, the contested decision could only be taken after the Member State concerned had been given an opportunity to comment. However, that provision has manifestly not been complied with.

The Commission recognizes that the Fund may deal only with the Member State and that the opportunity for that Member State to submit its observations prior to the adoption of a final decision reducing a particular amount constitutes an essential procedural requirement.

The Commission points out, however, that Article 6(1) of Regulation No 2950/83 does not lay down a formal consultation procedure but requires only that the authorities of the Member State concerned have the opportunity of making their comments before a final decision is adopted.

The processing of the applicant's specific measures gave rise to frequent informal contacts between the relevant Belgian Ministry and the Fund's departments, both by telephone and at meetings. The Commission cites as an example the meeting between a Fund official and a representative of the relevant Belgian Ministry to draw up the final ; account for a specific measure, namely Project 84/3643/B6.

The reductions relating to Projects 87/0295/B2 and 87/0296/B2 did not result in official letters being sent to the Member State at the time of the decisions on the claims, since the former were only provisional pending notification of the Member State's decision either to terminate the freeze on payments from the Fund or to assess all the cases still outstanding.

The Fund's departments are unable to produce minutes of the working meetings which took place between the Belgian Ministry, the Fund and the financial controller in order to establish the applicant's final accounting situation, but the statements entitled State of the projects on 30 October 1989 and State of the projects in December 1989 constitute the outcome of those meetings.

It would therefore appear that the Member State concerned not only had the opportunity to make observations but took part in the preparation of the final account establishing the positive balance to be paid to the applicant.

In its reply, the applicant states that the Commission has not substantiated any of its allegations which, furthermore, are refuted by all the correspondence from the relevant Belgian ministry, from which it is apparent that the latter received no information from the Commission regarding the applicant's projects.

(b) Lack of a statement of reasons

The applicant claims that the contested decision lacks any statement of reasons. The deductions, reductions or rejections are left unexplained, whereas under Article 6(2) of Regulation No 2950/83 the reasoning should be based on the decision granting approval.

According to the Commission, the case-law of the Court reconciles the requirement to state reasons and the practical constraints to which the Community institutions are subject.

The Commission observes that the Member State to which the decision is addressed takes part in the drawing up of the decision and must therefore be aware of the reasons underlying it.

In view of the number and complexity of the projects covered by a single decision, it would seem appropriate to base the decision on the documents in principle annexed to it. That was the case here, since Annex I to the contested decision sets out the state of the projects and Annex II the sums refused.

Furthermore, it is clear from the case-file that the contested decision is based on objective and reasonable grounds.

In its reply, the applicant maintains that the Member States are in no way associated with the decisions taken by the Commission. It is a pure fiction to claim, as the Commission does, that there has been any consultation with the Member State.

2. Unlawfulness of the setoff effected by the contested decision

The applicant argues that in this case the Commission has effected a setoff whereas Article 6(2) of Regulation No 2950/83 provides that sums paid which are not used in accordance with the conditions laid down in the decision of approval are to be refunded and that the concepts of refund and setoff are mutually exclusive.

Normally the sums owing should actually be paid to the organizer and the sums unduly paid should be reclaimed, which would entail a disbursement and not a setoff.

The Commission's practice runs directly counter to the general principle of assistance which arises when a company goes into liquidation, the right to assistance being unanimously recognized by all the legal systems of the Member States.

According to the Commission, it follows from the wording of Article 6(2) of Regulation No 2950/83 that the concept of repayment consists in the right to a refund of sums unduly paid.

In private law in the Member States, setoff is always viewed as a mechanism for the payment of mutual debts between the same people. It is therefore a method of payment, and repayment — which is the obligation to refund — may be effected by setoff.

3. Infringement of the rules governing the European Social Fund

(1) Project 84/3643/B6

The applicant considers that a balance of BFR 16735095 remains to be paid.

Contrary to the Commission's assertion, the application for assistance does not specify that agreements were to be made with the Centre Audio-Visuel de la Ville de Liège and the Centre de Méthodologie de la Province de Liège.

Furthermore, the application for assistance contemplated the involvement in the project of a hundred or so persons whereas the Commission refers to 1116 people without justifying that figure.

Even allowing for the Commission's reasoning relating to the salaries paid by the University on the basis of an average of 80 persons receiving training, instead of the 100 envisaged, the final claim to be met by the Fund would amount to BFR 36837452, half of which, namely BFR 18418726, to be borne by the Fund, subject to deduction of the advance of BFR 9300000, leaving a final claim for BFR 9118726.

In reply the Commission states that the agreements in question do not seem to be connected with the project and were excluded from the final calculation as they could not in any event be considered eligible. Furthermore, the two salaries paid by the University of Liège constitute expenditure chargeable to the University and not to the applicant.

The Commission calculated the training hours completed on a pro rata basis (48000 hours) in relation to the number of training hours planned for (109250 hours).

The accounts were drawn up and all the documents were checked with and in the presence of a representative of the relevant Belgian ministry.

In its reply, the applicant argues that even if the expenditure allowed by the Fund were taken into consideration, the pro rata calculation would result in a total of BFR 30493452, subject to deduction of the advance received, namely BFR 5946726.

(2) Project 85/0077/B4

The applicant maintains that the reduction in financial assistance should be made on the basis of the number allowed, namely 277 out of 289. The Fund gave its agreement for the training of long-term unemployed persons without reference to age and it was only after commencement of the training operation that it gave notice that its assistance would be limited to unemployed persons aged over 25.

According to the Commission, the application for assistance specified that the operation was for persons aged 25 and over. In addition, among the 189 adults included in the payment claim, 12 were not long-term unemployed, so the payment had to be calculated on the basis of 1 77 trainees. The proportional calculation therefore reduced the revised amount of expenditure to 177/189ths of BFR 11977879, namely BFR 11217379. The revised assistance from the Fund, after deduction of the official Belgian contribution of BFR 6073225, amounts to BFR 5144154. Since the advances paid amount to BFR 7168620, the negative balance is BFR 2024466.

(3) Project 85/0186/B6

The applicant considers that the ground relied upon by the Commission in support of its claim for repayment of the advance and based on the inadequacy of the replies received is incorrect since the Belgian authorities sent all the details requested and that, in the absence of any cogent justification, the balance of BFR 8814506 sought should be allowed.

If the Fund's agent considered that the note from the Belgian authorities was insufficient, it was up to him, in the spirit of cooperation vaunted by the Commission, to seek the clarification he needed since the request for information had in any event been complied with.

In reply, the Commission states that the purpose of its request for supplementary information was to obtain details regarding certain obscure or doubtful points. However, the reply given by the Belgian authorities did not enlighten the Commission in the way it would have wished.

The Commission cannot be required to stretch the will to cooperate to the extent of seeking further information regarding an unsatisfactory response to a request for supplementary information.

(4) Project 87/0295/B2

The applicant argues that actual expenditure was clearly set out in summary form in a table giving details of the expenditure and that the outstanding balance amounts to BFR 1535019.

The Commission contends that there is a difference of BFR 400009 between the expenditure declared and the amount substantiated and it has consequently halved the Fund's contribution to BFR 200004.

(5) Project 87/0296/B2

The applicant considers that a further BFR 212448 is payable to it.

In reply, the Commission states that the balance had to be reduced on the ground that a number of trainees had not completed a minimum of 200 hours' training, as required in paragraph 1.4.2 of the Fund's guidelines in force at the time. Non-priority hours accounted for 1244 hours out of a total of 26476 hours of training.

The eligible expenditure was reduced in proportion to the number of priority hours, with the result that the sum of BFR 9467918 in respect of those hours was reduced to BFR 9043023, of which 50% is payable by the Fund.

After deduction of the advance of BFR 2853696, the balance payable by the Fund amounts to BFR 1667815.

In its reply, the applicant argues that the payment claim signed by the relevant Belgian authorities refers to a total of 27720 training hours and not 26476.

There is no reason to reduce the amount in question on the ground that a number of trainees did not undergo a minimum of 200 hours' training, since the Commission approved and met expenditure relating to trainees who had completed fewer than 200 training hours in at least 7 cases.

V — Replies to the Court's requests for information

At the Court's request, the applicant produced copies of the documents received from the Belgian authorities.

At the Court's request, the Commission explained its reasoning in the rejoinder as regards Project 87/0295/B2.

Furthermore, in response to the Court's request to produce the letters from the liquidator establishing the balances on Projects 87/0296/B2 and 87/0295/B2, the Commission produced the final payment claim forms relating to both projects.

The Belgian Government failed to reply within the set period to the Court's question as to whether it was able to certify that it had been given the opportunity to comment on the statement of the outstanding balance in respect of the applicant's projects, before it had received notification of the Commission's letter (No 013650) of 18 October 1990 concerning the projects at issue.

1 Language of the case: French.

2 OJ 1983 L 289, p. 38.

3 OJ 1983 L 289, p. 1.

4 Case C-310/84 EISS v Commission [1984] ECR 1341, paragraph 15.

5 Case C-44/59 Fidelaar v Commission [1960] ECR 1077.

6 Joined Cases C-166/86 and C-220/86 Irish Cement Limited v Commission [1988] ECR 6473.

7 Case C-310/81 EISS v Commission [1984] ECR 1341, paragraph 15.

8 Case C-291/89 interhotel v Commission [1991] ECR I-2257, paragraph 17.

9 Opinion of Advocate General Tesauro in Case C-200/89 FUNOC v Commission [1990] ECR I-3669.