61999C0315

I - Introduction

1. Ismeri Europa Srl (hereinafter Ismeri) brought an application for damages, under Articles 178 and 215 of the EC Treaty (now Articles 235 and 288 EC), for injury allegedly suffered following criticisms made against it by the Court of Auditors in Special Report No 1/96 on the MED programmes.

2. The application made three claims, for:

(1) a declaration that the Court of Auditors had infringed the fundamental principle of the right to a hearing and to proceedings inter partes and had therefore acted unlawfully;

(2) as a consequence of the above, a declaration that the said Community institution was non-contractually liable; and

(3) that the Court of Auditors be ordered to publish the company's observations in the Official Journal of the European Communities and to communicate them officially and formally to the Parliament without delay, affording Ismeri the same right to express its view in respect of the MED programmes as is afforded to the various institutions monitored by the Court of Auditors pursuant to Article 206(1) of the Treaty establishing the European Community.

3. By judgment of 15 June 1999, the Court of First Instance dismissed the application and, by a document submitted on 24 August 1999, Ismeri appealed against the judgment.

II - Facts

4. For the purposes of this appeal, the following facts, contained in that judgment, are particularly relevant:

- The MED programmes form part of the policy of providing aid from the European Union to the Mediterranean non-member countries and are a reflection of the Community's desire to develop multilateral cooperation with and between those countries. They were designed to make it possible to develop specific sectors through decentralised cooperation, on the basis of the approval of projects for which the Commission provides the necessary additional financing and technical assistance.

- The Commission subcontracted the administration and financial management of the funds allocated to the MED programmes to a Belgian non-profit-making organisation created specifically for this task, the Agence pour les réseaux transméditerranéens (Agency for Trans-Mediterranean Networks, hereinafter ARTM). The technical monitoring functions were contracted out to technical assistance bureaux, which are usually consultancy firms.

- Projects are approved by a Commitment Committee, made up of representatives of both the ARTM and the technical assistance bureaux, the latter attending discussions in order to give technical advice but without voting rights. The committee is presided over by the Commission official responsible.

- In Special Report No 1/96, adopted on 30 May 1996, the Court of Auditors severely criticised the management of the MED programmes, referring, in particular, to the confusion of interests in the overall management system. It pointed out that two of the four administrators of the ARTM were, until April 1995, also managers of two technical assistance bureaux responsible for monitoring the programmes; it so happened that those two companies were awarded contracts which they, as members of the management board of the ARTM, had been involved in preparing. One of those two consultancy firms, which were mentioned by name in the report, is Ismeri.

- On 31 January 1997 Ismeri made a request to the Court of Auditors that the inaccuracies contained in the report be rectified. It also considered that it ought to have been consulted before the report was published. The request was denied and it was informed that the correct procedure had been observed. It repeated the request twice, on 24 April and 12 June 1997, and was refused on both occasions.

- At its session on 17 July 1997, the European Parliament adopted a Resolution on Special Report No 1/96 of the Court of Auditors, in which it supported the findings and pointed out that 62% of the expenditure on technical assistance went to two bureaux, the two whose managers were on the board of the ARTM. The Parliament inferred from this that for several years an obvious case of confusion of interests had been in existence, and that the administrators came to be in a situation which could be a criminal offence under the penal code of the Member States concerned. The Parliament ended by pointing out that the case was instructive and called on the Commission, whose credibility is in question, to take forceful measures in order to ensure that similar difficulties did not arise in the case of other cooperation programmes.

- On 20 October 1997 Ismeri lodged the application which has been dismissed by the judgment it is now contesting.

III - The judgment under appeal

5. As to the substance of the action, the judgment of the Court of First Instance is divided into two distinct parts. One deals with the alleged infringement of the principle that proceedings should be inter partes and the other concerns the claim that the criticisms in Special Report No 1/96 of the Court of Auditors are defamatory to Ismeri.

6. With regard to the infringement of the principle that proceedings should be inter partes, the Court of First makes the following observations:

- the unlawful conduct of a Community institution does not suffice to establish the Community's non-contractual liability for financial loss; a person who claims to have suffered damage must prove the fact of the damage and also the existence of a causal link between that conduct and the damage complained of;

- even if the Court of Auditors had been under an obligation to allow Ismeri to make its view known before the adoption of the Special Report and had therefore acted unlawfully by not doing so, the content of the report would have been the same. The Court of First Instance bases that conclusion on the fact that the Court of Auditors refuted all the observations made by Ismeri in its letter of 31 January 1997. It is clear from the tenor of its reply that the Court of Auditors would not have rectified the report if the company had been able to submit its observations before the report was adopted.

7. As regards the defamatory nature of the criticisms of Ismeri contained in the report, the Court of First Instance reasons as follows:

- the concern to ensure that its tasks are properly carried out may lead the Court of Auditors, exceptionally, to make a full report on the facts established and give the names of any third parties involved. The naming of those involved is all the more necessary where anonymity may give rise to confusion or doubt as to their identity, which is liable to harm the interests of those concerned by the investigation of the Court of Auditors but not implicated by its written observations. In any event, the assessments made concerning third parties are fully subject to review by the Court of First Instance and may constitute unlawful conduct giving rise to non-contractual liability on the part of the Community;

- in the exercise of its duties, the Court of Auditors was obliged to report a situation in which a public contract was awarded to a person who had helped to evaluate and select the tenders. Since one of Ismeri's directors was part of the ARTM, the company was in a position to influence the decision-making process and further its own interests. The situation in which Ismeri found itself therefore involved a conflict of interests;

- the statements made in the Special Report concerning Ismeri's reluctance to comply with the Commission's requests that the directors of the two technical assistance bureaux should leave the management board of the ARTM refer to established facts which were correctly interpreted. The Ismeri director resigned from the management board of the ARTM two years after the Commission had requested and after the conditions to which resignation had been made subject, which related to the appointment of a successor and the awarding of a technical assistance contract, had been fulfilled;

- assessment of the quality of the work carried out by Ismeri and of the results achieved is not a criterion which is capable of calling into question the relevance of the observations made by the Court of Auditors in Special Report No 1/96.

IV - The appeal

8. Ismeri divides its appeal into six pleas. In the following lines I shall set out their content and the response given to each by the Court of Auditors. I shall analyse them in Part V of this Opinion.

First plea: flaws in the procedure before the Court of First Instance (failure to rule on the application for a hearing of witnesses and an inadequate preparatory inquiry)

9. Ismeri maintains that the failure of the Court of First Instance to rule on its application for a hearing of witnesses constitutes a procedural irregularity because the Court is required, by general legal principles, to give a ruling on all the matters submitted for its consideration. This implicit refusal to admit proposed evidence constitutes an inadequate inquiry into the matter, in that the Court of First Instance has made it clear that it doubts the credibility of certain documents and has preferred to rely on the version of events given in Special Report No 1/96 of the Court of Auditors.

10. The Court of Auditors contends that this plea is inadmissible, because it seeks to obtain the intervention of the Court of Justice in a sphere - the appraisal of evidence - which does not concern it and which lies within the absolute discretion of the Court of First Instance, unless, in its assessment, it distorts the sense of the evidence, and that has not been alleged. In the alternative, the Court of Auditors argues that it is unfounded, both because the inquiry was adequate and because the Court is under no obligation to state, in the judgment, its reasons - which, in any event, were obvious in this case - for not giving a ruling on an application for a hearing of witnesses.

Second plea: breach of Community law, and failure to state sufficient reasons, regarding the principle that proceedings should be inter partes

11. Ismeri complains that the contested judgment did not rule on the application of the principle of inter partes in the proceedings before the Court of Auditors, and that its main argument was that consideration by the auditors would not have changed the tenor of their report, even if Ismeri had been given a hearing before it was published. Ismeri considers that observance of the principle that proceedings should be inter partes, which requires that the persons concerned be heard before the decision is taken, is a fundamental condition of the exercise by a public authority of its discretionary power. Under Article 206 of the EC Treaty (now, after amendment, Article 276 EC), the right to a hearing must be afforded both to the institutions and to the other persons who are subject to monitoring by the Court of Auditors. A prior hearing is also a necessary part of the discharge proceedings before the European Parliament.

12. The Court of Auditors points out that the subject-matter of the proceedings is a declaration of non-contractual liability, not the determination of an unlawful act. Since that declaration requires the presence of three factors (unlawful conduct, damage and a causal link between the two), the absence of one (a causal link) makes it possible to decide that there is no liability, without having to give a ruling on the other two (unlawfulness and damage). The Court of Auditors takes the view that, apart from that, the appellant company merely reproduces the arguments it put forward in the proceedings at first instance, without criticising the grounds of the judgment on the matter, which renders the plea inadmissible.

Third plea: failure to adjudicate (failure to address the claim concerning the right to a hearing and to proceedings inter partes)

13. Ismeri states that the Court of First Instance failed to address a crucial point in the dispute, which it had raised in its application. It is the matter of the operation of the right to a hearing and for the proceedings before the Court of Auditors to be inter partes.

14. The respondent replies that the Court of First Instance was not required to deal with the matter once it had been declared that, even if the principle that the proceedings must be inter partes had been applied, the content of the Special Report would have been the same. It considers that the plea is unfounded.

Fourth plea: breach of Community law, and failure to state sufficient reasons, regarding defamation

15. The view expressed by the Court of First Instance regarding the notion of defamation seems, in Ismeri's opinion, to have neither grounds nor substance. The identification by name, in the Special Report, of the two technical assistance bureaux and the reference to the possibility of criminal liability infringe the principles of confidentiality and proportionality.

16. The Court of Auditors considers that this plea is inadmissible since it is not specifically directed against the reasoning of the judgment under appeal and merely reproduces the arguments put forward in the application, as well as introducing into the case factors which, because they are new (the fact that the other two members of the ARTM's management board do not belong to any technical assistance bureau responsible for monitoring the MED programmes; the obligation to be discreet; the principle of proportionality), are also inadmissible.

Fifth plea: distortion of the facts relating to the alleged confusion of interests and failure to state sufficient reasons or to define the legal situation correctly

17. Ismeri considers that the statement made by the Court of First Instance regarding the decisive role played by the management board of the ARTM in the award of contracts to the technical assistance bureaux, its findings in respect of the two contracts awarded to Ismeri and its views on the so-called trial phase are the consequence of a manifest distortion of the facts and, furthermore, there is no statement of reasons. It also considers that the Court's legal interpretation of the term confusion of interests is incorrect and unsupported by a statement of reasons.

18. The Court of Auditors maintains that the plea is inadmissible because it seeks to dispute the assessment of the facts made by the court hearing the case at first instance, even though there is no factual inaccuracy or distortion of the clear sense of the evidence. With regard to the debate concerning the term confusion of interests, it states that the plea is inadmissible because it repeats a plea put forward in the proceedings at first instance without any critical analysis of the judgment; apart from that it is also unfounded, since the Court of First Instance has given an appropriate definition of that term in the present case.

Sixth plea: distortion of the facts, and failure to state sufficient reasons, relating to the alleged reluctance of Ismeri's representative to resign from the management board of the Agency for Transmediterranean Networks

19. The appellant company considers that the Court of First Instance could not merely cast doubt on the credibility of a document which shows that the Commission had waived its request that Ismeri's representative should resign from the ARTM, and denies that the representative resigned only after certain conditions had been accepted following prolonged negotiations.

20. In the opinion of the Court of Auditors, the plea is inadmissible, since there is nothing to show that, by reaching the above conclusions, the Court of First Instance has distorted the clear sense of the evidence on which it relied to make its decision.

V - Analysis of the appeal

21. The six pleas into which Ismeri divides its appeal are, in fact, more than that, because some of them cover various grounds. Nevertheless, they may be arranged into three groups:

- those concerning the procedural regularity of the proceedings or of the judgment: the first and third pleas;

- those by which Ismeri disputes the findings of fact contained in the judgment: part of the fifth plea and all of the sixth plea;

- finally, the substantive pleas, by which the appellant company challenges the legal interpretation given by the Court of First Instance: the second and fourth pleas and the second part of the fifth plea.

22. The only virtue of this classification is that it brings a certain clarity to the debate, but it may turn out to be artificial since the arguments put forward in some pleas are repeated in others. They all have points in common so, on more than one occasion, I shall have to look back and pick up a thread of argument which has been momentarily suspended.

1. Pleas relating to procedure

A. Failure to address the application for a hearing of witnesses (first plea)

23. The right to a fair and equitable hearing is a general principle of Community law inspired by Article 6(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms of 4 November 1950. The right to proof, the right to use the means necessary to establish the facts which are at the basis of the legally relevant interest defended by every litigant, forms part of the range of options which make up the right to a fair hearing. It is, of course, true that this right does not prevent the court from assessing the relevance of the evidence adduced and rejecting that which seems irrelevant or not pertinent to the subject-matter of the case; but it is also true that the grounds for such rejection must be stated and there can be no greater failure to state reasons than to keep silent.

24. However, the formalities, even the procedural formalities, are a tool, not an objective. For an appeal to succeed on a plea of this kind, it is not enough for the procedural flaw to have occurred; it also has to be shown that, as a consequence of its existence, the means of defence of the party who invokes the plea have actually been restricted. Furthermore, a person who claims that he is not afforded a proper defence because there has been a procedural error must have been aware of it when it happened and reported it at the earliest opportunity.

25. Ismeri states that it suggested, in its application, that witness evidence be taken from nine persons and that the Court of First Instance did not give an express reply to that request. Both statements are true but they do not reflect the whole truth. What Ismeri does not say is that, in the reply, it repeated the request for a hearing of witnesses, but only if the Court considers that the documents submitted by the applicant and the defendant do not provide an adequate basis on which to reconstruct the facts and establish that the observations made by the Court of Auditors with regard to Ismeri's conduct were unfounded. It also fails to mention that, from that moment onwards, it did not remind the Court of First Instance that it had a duty to rule on the application for evidence.

26. It may be inferred from the above that this ground of appeal is unfounded. Firstly, because, in its reply, the applicant itself made the hearing of witnesses conditional on the Court of First Instance considering that the documents presented by the parties were insufficient, which, according to the content of the judgment (in particular, paragraphs 95 to 147), was not the case. However, even more significantly, Ismeri itself cannot have thought that that evidence was necessary. After the written stage of the proceedings had been completed and before judgment was pronounced, it apparently did not feel the need to remind the Court of First Instance that the evidence, which was of interest at first, should be heard, or, much less, that Ismeri might be left without a proper defence. I think that a party cannot complain that he lacks a proper defence if, through passivity or negligence, he has contributed to the situation. Since Ismeri lost the case, it has been compelled to formulate this ground of appeal, using the pretext of a procedural flaw which even the party concerned considered to be irrelevant at the time.

27. Underlying the way in which this ground of appeal is raised there is a recurring point in Ismeri's arguments: the Court of First Instance preferred to follow the version of the facts provided by the Court of Auditors and refrained from taking the evidence suggested by Ismeri. Expressed in these terms, the ground of appeal is manifestly inadmissible. It is for the Court of First Instance to determine the facts in the case by evaluating the available evidence. The appeal court may intervene in this regard only if, in the acquiring of evidence, there has been an infringement of a provision or general principle of Community law, or if, in the appraisal of the evidence, there has been an infringement of the rules governing the burden of proof and the appraisal of evidence, because it is illogical or arbitrary and distorts the evidence. The Court of Justice may only redress the legal infringement committed by the court of first instance; it may never determine the facts, subject always to its right to review the legal characterisation of the facts.

B. Failure to adjudicate (third plea)

(a) Failure to adjudicate on Ismeri's request for a declaration that its right to be heard by the Court of Auditors had been infringed

28. The failure to adjudicate on a request is a denial of justice which goes straight to the core of the right to due process. If any person has the right to put his case, silence is the most serious infringement of that right.

29. Ismeri made three claims before the Court of First Instance. The first is complex in content and seeks recognition of Ismeri's right to be heard by the Court of Auditors before publication of the report which concerns it, and a declaration that the institution has infringed that right. The second claim seeks to obtain compensation for the damage and loss which, in Ismeri's view, the Court of Auditors has caused it by infringing its right to a hearing. In its third claim it requests that the institution be ordered to publish its observations on Special Report No 1/96. I shall examine the first claim now and consider the other two later on.

30. Ismeri complains that the Court of first Instance did not address its first claim. It is true that the judgment under appeal does not mention it and goes directly to an examination of the second of the claims, which it rejects on the basis that, even if the Court of Auditors ought to have given Ismeri a hearing before publishing its report and therefore, by not doing so, acted unlawfully, there is no non-contractual liability because there is no causal link between that supposed unlawful conduct and the losses which that company claims it has sustained.

31. However, for there to be failure to adjudicate, the claim disregarded must be relevant and, consequently, deserve to be processed and answered. Otherwise, the Court's silence on the matter is irrelevant. A person who does not have the right to have his case heard cannot complain if it is not heard.

32. Ismeri introduced its application by stating that it was bringing an action for a declaration of non-contractual liability under the second paragraph of Article 215 and Article 178 of the Treaty. However, when it formulated its claims, it went further and not only sought a declaration that the Court of Auditors was liable, but also requested acknowledgment of its right to be heard by that institution, a declaration that its right had been infringed and an order requiring the auditing body to publish its observations on Special Report No 1/96. These claims are articulated not only on the assumption that the declaration of liability would be made, and as its consequence, but also as independent claims.

33. There is nothing to prevent this procedural course of action. It is wholly acceptable to join several causes of action in one case, provided that they are connected and are not incompatible. This is in response to a metalegal rule, which requires the economical use of resources. However, there are also legal reasons for joining them: to avoid splitting the subject-matter of the action and the risk of contradiction.

(b) The action for annulment and the Court of Auditors

34. The question arises whether it is possible to bring a declaratory action like the one initiated by Ismeri, that is to say, whether the Court of First Instance may be asked to acknowledge its right to a hearing in relation to Special Report No 1/96 and, if appropriate, to declare that that right has been infringed. What Ismeri seeks is a review of the legality of the procedure followed by the Court of Auditors in adopting the abovementioned report and a declaration that there have been significant procedural defects.

35. On first consideration of the matter, a negative answer ought to be given to that question. In proceedings under Article 173 of the Treaty (now, after amendment, Article 230 EC) the Court can do no more than annul the measure at issue, and no mere declaration may be sought on matters of fact or of law. What Ismeri seeks is the annulment of Special Report No 1/96 (a different question is whether such a procedure may be subject to annulment, which I shall consider later). A declaration that the right to a proper defence and to proceedings inter partes was infringed in the procedure followed for the adoption of Special Report No 1/96 would render it invalid and it would therefore have to be annulled.

(i) Is it possible to bring actions for annulment against acts of the Court of Auditors?

36. Article 173 of the Treaty refers only to acts adopted jointly by the European Parliament and the Council, to acts of the Council, of the Commission and of the Central European Bank other than recommendations or opinions, and to acts of the European Parliament designed to produce legal effects vis-à-vis third parties. There is no mention of the Court of Auditors. Therefore, according to the wording of that provision, the report of the Court of Auditors and the procedure followed for its adoption are not subject to judicial review and, on this point, Ismeri's action would be inadmissible. The silence of the Court of First Instance would be irrelevant since the plea would be unfounded.

37. Nevertheless, I think that the reasoning cannot stop there; it must go further and analyse the provision's rationale in order to determine whether the acts of the Court of Auditors may not, in fact, be the subject of an action for annulment. It may be inferred from an examination of Article 173 of the Treaty that an action for annulment has a dual aim: to monitor compliance with Community law by the institutions and to safeguard the rights of the applicants (other Community institutions, Member States or individuals) in respect of the acts of those institutions; an exception cannot therefore be made for the acts of one of them, namely the Court of Auditors. It is unquestionably an institution because the Treaty of the European Union conferred that status on it, by including it in Article 4 of the EC Treaty (now Article 7 EC), although it is paradoxical that it should be afforded that standing, since it does not participate in the exercise of any of the fundamental powers of the Community, as the other institutions do, but is self-governing, has legal capacity and the ability freely to adopt its own internal rules.

38. This is not the first time that the Court of Justice has had to consider whether Article 173 of the Treaty is applicable to the acts of institutions which are not specifically mentioned in its text. The matter first arose in Luxembourg v Parliament, in which the Court avoided answering whether the provision could be given a wide interpretation allowing actions for annulment to be brought against acts of the Parliament. It was later, in Les Verts v Parliament, that the Court acknowledged that it had jurisdiction to hear an action for annulment brought under Article 173 of the Treaty against an act of the European Parliament intended to produce legal effects vis-à-vis third parties. Since that judgment, the criterion has remained unaltered.

39. In its judgment in Les Verts v Parliament, the Court emphasised that the European Community is a Community based on the rule of law, inasmuch as neither its Member States nor its institutions can avoid review of whether the measures adopted by them are in conformity with the constitutional charter represented by the Treaty. In Articles 173 and 164 (now Article 220 EC), on the one hand, and in Article 177 (now Article 234 EC), on the other, the Treaty establishes a complete system of legal remedies and procedures designed to permit the Court of Justice to review the legality of measures adopted by the institutions. This system makes a direct action available against all measures adopted by the institutions which are intended to have legal effects.

40. The Court overcame the obstacle posed by the absence of an express mention of the Parliament in Article 173 by stating that the provision's silence in that respect was explained by the fact that, in its original version, the EEC Treaty merely granted the Parliament powers of consultation and political control rather than the power to adopt measures intended to have legal effects vis-à-vis third parties. Where the Parliament was given the opportunity to adopt provisions of that kind, an action for annulment might lie. This was the case under Article 38 of the ECSC Treaty. Consequently, it had to be concluded that measures and provisions adopted by the Parliament in the context of the EEC Treaty, which could have effects outside that institution, were subject to review by the Court of Justice under Article 173. An interpretation of that provision which excluded measures adopted by the European Parliament ... would lead to a result contrary both to the spirit of the Treaty, as expressed in Article 164, and to its system.

41. This case-law was incorporated into the first paragraph of Article 173 by Article G, point 53, of the Treaty on European Union, and is now Article 230 EC. According to the new text, the Court of Justice also reviews acts of the European Parliament intended to produce legal effects vis-à-vis third parties.

42. It is thus clear that, as far as the action for annulment is concerned, the Court of Auditors is in the same position now as the Parliament was in 1986 and that the reasons put forward by the Court in its judgment in Les Verts v Parliament, cited above, are applicable today to the Court of Auditors.

43. The institutions, each within the limits of the powers conferred upon it by the Treaty, are to carry out the tasks entrusted to the Community (Article 4 of the Treaty). The achievement of those tasks, which are set out in Article 2, requires the implementation of policies and activities which, like those prescribed in Article 3, may affect the legal position of individuals in the various Member States. The citizenship of Europe described in Articles 8 to 8 E of the EC Treaty (now, after amendment, Articles 17 to 22 EC) would not be a reality if the ultimate beneficiaries (Article 8(2)) were to lack appropriate means of claiming judicial protection against the acts of the institutions. This is required by the fundamental right recognised in Article 6(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms, which the European Union has undertaken to observe.

44. The intention of the Community legislature is that the activities of all the institutions be subject to review by the Court of Justice in so far as they may produce legal effects vis-à-vis third parties. Since the Court of Auditors is a Community institution, there is no obstacle to allowing actions for annulment to be brought against its acts. But, what is meant by acts which produce legal effects vis-à-vis third parties?

(ii) The definition of acts having legal effects vis-à-vis third parties

45. In order to answer that question, we need to look at the case-law of the Court of Justice, which supports the conclusion that the name or form of the measure is irrelevant. What is crucial is its content and scope. All measures which have binding legal effects and may affect the applicant's interests, changing his legal position, may be contested. In line with this, the Court has taken cognizance of an action for annulment brought against proceedings of the Council calling upon the Member States to conclude an international agreement on behalf of the Community, or against a Commission communication which, on the pretext of interpreting the provisions of a directive, created new obligations for the Member States.

46. The form of the measure is irrelevant, since the Court has considered admissible an action against a letter and even against a verbal decision.

47. On the other hand, actions brought against measures which do not inherently create rights and obligations affecting third parties are inadmissible. Consequently, the Court has dismissed actions brought against measures of an internal character, which do not produce effects outside the domestic sphere of the institution which adopts them. Nor are actions admissible if they are brought against the measures which are prior or subsequent to a final decision in a complex procedure. Defects in the preparatory measures for an act adopted subsequently, which contains the institution's decision, must be pointed out when the action is brought against the latter act, subject always to the fact that preparatory acts may be contested separately in so far as, by producing legal effects, they have a decisive influence on an issue in the main procedure. For the same reason, actions cannot be brought against measures which merely reproduce or confirm previous decisions or which are purely implementing measures.

48. We have established that all the Community institutions, without exception, may be subject to review by the Court of Justice and the Court of First Instance, by means of an action for annulment, when they adopt measures which produce legal effects vis-à-vis third parties; the question we now need to ask is whether the Court of Auditors is able to adopt decisions of this nature; or, to be more specific, whether the reports it prepares are measures capable of producing legal effects ad extra. To find the answer, we need to consider the nature of that institution's work.

(a) The nature of the work of the Court of Auditors

49. The Court of Auditors has a dual role: auditing and consultative. In the first of these, it checks the Community's accounts by examining all its revenue and expenditure. It also considers the legality and regularity of the revenue and expenditure transactions and whether the financial management has been sound. In particular, it is required to report any case of irregularity. In order to gather the information it requires to fulfil its function, the Court of Auditors may carry out the necessary accounting investigations in the appropriate departments of the other Community institutions, on the premises of any body which manages revenue or expenditure of the Community, and on the premises of any natural or legal person in receipt of payments from the budget. They, for their part, are required to forward to the Court of Auditors any document or information necessary for that purpose. This work is presented in reports and observations. The work it does in its other, consultative, role is submitted in the form of opinions.

50. The (annual or special) reports of the Court of Auditors contain its opinions and observations on the financial management which is the subject of examination. They are the final stage in a procedure in which, after the necessary audits have been carried out, the results are evaluated, but not before the audited body's views on the Court's comments have been obtained, since this helps to ensure the accuracy and correctness of their findings. However, the reports, by their very nature, are unable directly to create rights and obligations, for the audited institutions or bodies. They do not contain a decision, but merely express an opinion.

(b) The auditing function and the monitoring of the implementation of the Community budget

51. The auditing work carried out by the Court of Auditors is part of a much larger process - the monitoring of the implementation of the Community budget - which is the responsibility of the Council and the European Parliament and which takes the form of a rendering of accounts or discharge in which the Court of Auditors plays an indispensable, though auxiliary, role: that of assisting those two institutions by giving them its opinion of the implementation of the budget. The final decision to approve the management of the budget lies with the Parliament, on the recommendation of the Council.

52. Consequently, a report of the Court of Auditors is not, in my view, a measure capable of producing legal effects vis-à-vis third parties and, according to the case-law of the Court of Justice, may not be the subject of an action for annulment. Therefore, that the Court of First Instance failed to give a ruling on Ismeri's claim is irrelevant because, in any event, it was inadmissible and the plea remains unfounded.

(iii) The time-limit for bringing an action for annulment

53. It might be argued that the Court of Justice does not require that the measure adopted by the institution has a direct effect on the legal position of those to whom it is addressed, such as to change it, but merely that it has an impact, even an indirect impact, such as an unfavourable mention in a report of the Court of Auditors published in the Official Journal of the European Communities.

54. However, even if that were the case, Ismeri's first claim would be inadmissible because it was time-barred. Under the fifth paragraph of Article 230 EC, Ismeri had to bring its claim within two months of the date on which the report was published in the Official Journal of the European Communities, which it did not do. Special Report No 1/96 was published on 19 August 1996 and the application was lodged with the Court of First Instance on 20 October 1997. By the latter date, the claim had already lapsed and was therefore inadmissible, and the report became, from that point of view, a final measure.

55. As I have pointed out on another occasion, the general rule that final measures are unchallengeable cannot be relied upon as against measures which are ipso jure void, that is to say, which have a defect which cannot be rectified, even given time and the tacit agreement of the person affected. I mentioned as classic examples of measures which are ipso jure void those adopted with total disregard for the prescribed legal procedure or by a body which is manifestly not empowered to do so. I also pointed out that this legal category and its effects have been acknowledged, although very restrictively, by the Court of Justice, in the concept of the non-existent measure.

56. In my view, the procedural irregularity which Ismeri attributes to the Court of Auditors in the adoption of Special Report No 1/96 is not such as to make it, in practical terms, a non-existent measure. At most, it would be a measure which was voidable inasmuch as the appellant company had only a limited opportunity to present a defence, because it had not been granted a hearing before the measure was adopted. However, it would have had to react within the time-limit laid down in the Treaty and, as we have seen, it did not do so.

57. In short, there is no chance by which Ismeri's first claim could be admissible and, consequently, by which the silence of the Court of First Instance could be regarded as a denial of justice owing to failure to adjudicate.

2. Refutation of the facts established by the Court of First Instance (sixth plea and first part of the fifth plea)

58. I have already noted, in point 27 of this Opinion, that, in the context of an appeal, the Court of Justice is precluded from determining the facts of the case. I shall now examine the grounds on which Ismeri contests the findings of fact made by the Court of First Instance, in order to ascertain whether they provide the key to open that door which must, otherwise, remain closed.

59. Ismeri maintains that the Court of First Instance errs in stating that the ARTM played a decisive role in the award of technical assistance contracts, in its observations with regard to the contracts awarded to Ismeri and in its description of the trial phase, in which contracts were awarded directly.

60. As regards the decisive role played by the ARTM in the award of the contracts, the terms of the appeal (points 91 to 98) suffice to show that what the appellant company is doing is, purely and simply, disagreeing with the findings of fact made by the Court of First Instance. That decisive intervention by the ARTM in the award of the contracts is a piece of information which the Court of First Instance obtains from facts not disputed by Ismeri relating to the Agency's composition, functions and operation. Since the Court's conclusion does not appear to be arbitrary, improbable or absurd, the plea is inadmissible.

61. The errors which Ismeri considers the Court of First Instance has made in respect of the end of the trial phase, during which the contracts were awarded directly, and of the two technical assistance contracts which Ismeri won after the ARTM had been established, and which it acknowledges were awarded to it, are irrelevant.

62. In order to evaluate the significance of these alleged errors, we must keep a sense of perspective. The factual statements which Ismeri is challenging occur in the Court of First Instance's reasoning in relation to the conflict of interests to which the Court of Auditors draws attention in Special Report No 1/96. In its judgment, the Court of First Instance considers that that conflict is genuine, in the light of facts which are not disputed: the ARTM's functions, its composition, the presence on its management board of a director of Ismeri, the award to that company of several technical assistance contracts. Facts such as the date on which the so-called trial phase ended or whether one of the contracts was awarded at the ARTM's suggestion or as the result of a direct order from the Commission are therefore irrelevant.

63. Even if the Court of First Instance has erred on this point, its mistake would not have implications for the outcome of the case; the plea is therefore unfounded.

64. Ismeri's disagreements with the Court of First Instance regarding the determination of the facts in the case do not end there. In the last plea in the appeal it denies that its representative on the ARTM's management board was reluctant to resign. The reasoning in the appeal (paragraphs 122 et seq.) shows that there is, in fact, disagreement with regard to the evaluation of the evidence and to the credibility which the Court of First Instance has given to the documents which it had at its disposal in order to give a decision. Such reasoning is inappropriate in an appeal and therefore this plea - the sixth - must also be declared inadmissible.

3. Substance (second and fourth pleas and second part of the fifth plea)

A. The definition of confusion of interests

65. I shall begin my examination of the pleas relating to the legal interpretation contained in the contested judgment with the claim made in the second part of the fifth plea, in which Ismeri discusses the definition of confusion of interests.

66. There is confusion when there is a lack of clarity and disorder ensues. The ambiguity inherent in confused situations arises when an individual occupies a legal position from which he has to uphold interests - public or private - which clash with his own. Nobody, not even Ismeri, would deny that there is a conflict of interests in, for example, the situation of a member of the Court of Auditors who, as head of a company, receives funds from the Community budget which that institution has to audit. Similarly, nobody, not even Ismeri, can doubt that this situation arises when a person who has to act as a consultant (or who forms part of the consultancy body) for the award of public contracts is a director of one of the companies taking part in the tendering procedure. In both cases, the task of protecting the public interest - to which end the financial monitoring or consultancy activities must be directed - is hampered by the personal interest of the person responsible for administering and managing it.

67. There is, therefore, nothing to complain of in the statements made on this point in the contested judgment, in particular those contained in paragraphs 112 and 119. The factual basis on which the Court of First Instance makes those statements is a different matter but, as I have already pointed out, the Court of Justice must leave that question aside because it has not been given reasons by the appellant which would justify its interference in that area, which, in principle, it is forbidden to enter.

B. The reports of the Court of Auditors, identification by name and the hearing procedure

68. The other two pleas which concern the substance of the dispute may be dealt with together and, consequently, receive the same response. Ismeri disputes the findings of the Court of First Instance in relation to:

- the irrelevance of the hearing procedure to a ruling on the claim of liability; this, in Ismeri's view, disregarded the rationale of the principle that proceedings must be inter partes and the fact that it must be applied in proceedings before the Court of Auditors (second plea);

- references to persons by name in the reports of the Court of Auditors (fourth plea).

Closer inspection shows that the question raised by these pleas is whether the Court of Auditors may mention persons by name in its reports and whether those persons must be given a hearing.

69. Let it be said, first of all, that this resurrects indirectly an issue which was defunct and which Ismeri raised, out of time, as the first claim in its application. In my view, this is not right, especially as the reply given by the Court of First Instance to the claim for compensation on the basis of non-contractual liability is legally correct, even if it is debatable whether it was desirable for it to evade the crux of the issue.

70. Nevertheless, conscious as I am of my judicial function of assisting the Court of Justice in the performance of its task (second paragraph of Article 222 EC), I shall set out my view on the matter below.

(a) Identification by name

71. In order to decide whether the Court of Auditors may identify in its reports the persons responsible for the irregularities it detects, it is necessary to bear closely in mind its function, which I have already mentioned above, and, in particular, the logical reason for the existence of its auditing responsibilities. The Court of Auditors examines and considers all the revenue and expenditure of the Community, but it does so in order to ensure that the financial management is sound. For this purpose it liaises with the European Parliament and the Council, and a feature of that cooperation is its duty to report any irregularities it finds. It must draw attention to any malfunction it notices, in order that this may be corrected in the future by the appropriate person, and may not reoccur. Its position is that of an assistant: it informs and, if necessary, advises, but does not take decisions; nor does it impose threats or sanctions.

72. Consequently, in order to carry out the task entrusted to it, the Court of Auditors must make known all the facts which establish an irregularity or malpractice, but does not need to identify the perpetrators. An objective description of the situation suffices for those with jurisdiction to adopt the relevant measures to rectify it.

73. The general rule must be, therefore, that the Court of Auditors may not identify, in its reports, the natural or legal persons responsible for the financial malpractices and irregularities it detects. This is required by the principle of confidentiality, which is present in Community law both in legislation and case-law and reproduces the fundamental right established in Article 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms. However, there are exceptions to every rule.

74. A first exception is imposed by the same reasons which preclude third persons being mentioned by name in the reports of the Court of Auditors. If, in order to achieve the objective it is sought to attain by reporting the irregularities detected, it is essential to identify the person at fault, the Court of Auditors not only may, but must, do so. The protection of the Community public interest, which is the foundation for its functions, requires that, in such cases, the Court of Auditors indicate the person or persons responsible.

75. The specific matter with which the Court of Justice now has to deal is one of those which must be affected by that exception. As we know, the irregularity consisted in the fact that two technical assistance bureaux which were awarded contracts to monitor the MED programmes each had a director on the ARTM's management board, which led, at least, to a situation involving a confusion of interests. The solution was not only the resignation of those directors, which was achieved, though not without difficulty, before the report was issued, but also the redesigning of the way in which the MED programmes were formulated, managed and implemented. It those circumstances, it was essential to identify both bureaux in order to keep in mind in the future their previous involvement in the formation of the programmes.

76. The Court of First Instance refers to the second exception in its judgment (paragraph 109), finding justification for it in the same consideration which imposes the general rule of secrecy with regard to the identity of those responsible for irregularities in the management of the budget. When anonymity may create doubts and responsibility for budgetary malpractices may insidiously attach to persons who are not involved in them, confidentiality must yield to clarity where obscurity is liable to harm the legitimate interests of those who have had nothing to do with the situation which is being criticised.

77. Only two of ARTM's four administrators were in the situation of confusion of interests reported by the Court of Auditors. An objective description of the facts, which did not specify which two administrators were involved, would have cast doubt on the conduct of those who were unconnected with the irregularity.

78. The abovementioned exceptions apply to officials and agents of the audited Community institutions and also to those who do not hold those positions but, nevertheless, manage, administer, and even receive, Community public funds. The Court of Auditors has power to examine all the revenue and expenditure of the Community and is entitled to the cooperation of those who manage funds from the budget, to whose offices it may have access in order to carry out its task. Those who administer and, as the case may be, receive those funds do so in order to achieve the objectives of the Community and, in so far as they act by delegation from the Community institutions, remain subject to monitoring by the Court of Auditors.

79. The general rule is secrecy, but with exceptions. However, if it is necessary to reveal the identity of those responsible for the irregularities, who are criticised by the Court of Auditors, the principle of proportionality must be observed; this requires that measures adopted by Community institutions should not exceed the limits of what is appropriate and necessary in order to attain the objectives pursued, so that, when there is a choice between several appropriate measures, recourse must be had to the least onerous. The principle dictates that identification, and also the scope and content of the value judgments expressed in the report, must be no more than is strictly necessary to protect the values which give a reason for the general rule of confidentiality to yield and make way for the exception.

80. In the present case it was necessary to eliminate, and to avoid in the future, the confusion of interests which existed in two of the technical assistance bureaux owing to the fact that they each had a director on the ARTM's management board and, as I have already pointed out, to that end it was necessary to name them; also, it was only fair, in order to prevent the conduct of the other two administrators being called in question. The Court of Auditors did it in the way which was least onerous for everyone: it identified the two administrators concerned by naming the technical assistance bureaux of which they were directors, thus achieving both aims. In my view, the principle of proportionality and the least onerous solution was fully observed.

81. Ismeri states that, in any event, the Court of Auditors infringed the principle of proportionality by alluding in its report to the criminal liability which might arise from the facts it describes. It so happens, however, that, of the main language versions of the report, the only one which uses a term specifically related to liability of a criminal nature is the Italian version. The others contain less definite expressions, which may be used to refer to any kind of charges, whether civil or criminal, or merely administrative.

82. In any event, the Court of Auditors merely stated that, in view of the seriousness of its findings, it immediately informed the Commission of them, so that it could take the necessary measures and examine the need to bring a criminal action against those responsible, and that the Commission replied that it intended to open an investigation and, if necessary, to bring criminal proceedings. There is no unnecessary and, therefore, disproportionate, value judgment here. The auditing body describes how the MED programmes were managed, how its task of monitoring the system had developed, particularly with regard to the delegation of powers, and how, in the process, it realised that it needed to inform the Commission that the irregularities were serious and that it was advisable to clarify responsibilities. On the other hand, there is no statement of this kind or the slightest criminal accusation made against Ismeri's directors in either the conclusions or the recommendations of the report, in which the Court of Auditors expresses its intention and gives its opinion.

(b) The hearing procedure

83. Another question is whether, when the Court of Auditors includes in its reports criticisms of the conduct of companies and individuals, and mentions them by name, it must give them the opportunity to express their views and defend themselves against the accusations made against them.

84. The answer to this question is not found by automatically reproducing the hearing procedure laid down in the fourth paragraph of Article 248 EC and the first paragraph of Article 276 EC, and developed in Article 88 of the Financial Regulation and Article 32 of the Rules of Procedure of the Court of Auditors. Under those provisions, there are two occasions on which the monitored institutions are called upon to express their views on the observations made by the Court of Auditors:

(1) The first is when the report is only at the draft stage and before the Court of Auditors converts it into the definitive text (Article 32 of the abovementioned Rules of Procedure).

(2) The second opportunity arises after the Court of Auditors has approved the report; it sends its observations to the institutions in order that they may formulate any replies they consider appropriate; these may be published immediately following the report (Article 248(4) EC and Articles 88(1) and (3) and 90 of the Financial Regulation).

85. These hearings are not instruments to guarantee the right to a hearing for the institutions and bodies subject to monitoring. The purpose is to render more correct and appropriate the observations of the Court of Auditors and the decision taken in due course by the European Parliament with regard to management of the budget.

86. In my view, Ismeri is wrong to say that it ought to have been given a hearing, because the procedure is provided for for the institutions. It is the Commission which is being monitored in Special Report 1/96 and, if reference is made to Ismeri, it is because, through one of its directors, it assisted in the implementation of the budget and was also in receipt of Community funds.

87. In spite of that, we cannot say that Ismeri was not entitled to a hearing during the preparation and adoption of the aforementioned report. However, the reasons for this are different from those for allowing the institutions a hearing, and are, therefore, of a very different scope.

88. The right to a hearing, which is a general principle of Community law, requires that a person must be given the opportunity to be heard, before the adoption of a decision which will adversely affect him, directly and individually, not only in legal but also in administrative proceedings, in order to express his views before the adoption of the measure which will affect him, even in the absence of any rules governing the proceedings in question.

89. Here, the term affect has a much wider sense than that which I have used to deny the possibility of bringing an action for the annulment of a report of the Court of Auditors. To affect means to have an adverse impact on the addressee's legal position, an impact which may occur when someone is unfavourably assessed by the Court of Auditors in a report which is to be published in the Official Journal of the European Communities for general consumption or to be widely circulated. It is true, as I have already noted, that the report does not directly impose obligations and burdens on Ismeri, but it is no less true that the mention which is made of it may damage its reputation and cause serious harm to its legitimate interests.

90. I take the view, therefore, that in circumstances which, in accordance with the above considerations, justify naming, in a report of the Court of Auditors, the person or body responsible for budgetary irregularities, they must be afforded the opportunity to defend themselves, provided that the report is to be published or widely circulated. The Court of Auditors must keep this in mind and, if appropriate, open a hearing procedure.

91. In the present case, the Court of Auditors did not formally offer Ismeri the opportunity to express its views before approving and circulating Special Report No 1/96. If the judgment were to consider that it is necessary to examine these pleas, it should uphold them and declare that the right to proceedings inter partes has been infringed.

C. Rejection of the claim for damages and for publication of the applicant's comments on the report of the Court of Auditors

92. If the appeal were allowed on that ground, it would be necessary to uphold the first claim presented by Ismeri in the application and, after acknowledging that Ismeri had that right, to declare that it has been infringed by the Court of First Instance. However, the second and third claims are destined to fail.

93. The third will fail because, whereas the aim of the hearing which should have been given to Ismeri is to safeguard the right to a hearing, the intervention of the institutions is intended to promote the accuracy and appropriateness of the reports of the Court of Auditors in order to provide better protection for the general interests of the Community. There is not, therefore, a similar reason to justify publication in the Official Journal of the European Communities of Ismeri's views or its communication to the European Parliament. The appellant company's right to a hearing requires that it be heard by the Court of Auditors, but not that its observations be published and communicated to the institution responsible for approving the implementation of the Community budget.

94. The second claim, that of non-contractual liability, must be rejected, because there is not the necessary causal link between the unlawful conduct of the Court of Auditors and the damage which Ismeri states it has suffered. This is not for the reasons given by the Court of First Instance, but because if Ismeri has sustained any loss it is its own fault.

95. The damage and loss which Ismeri claims to have suffered would be as a result of the statements contained in Special Report No 1/96 of the Court of Auditors. However, those statements are true, at least from a procedural point of view. The ARTM, its functions, the presence of one of Ismeri's directors on the management board, the award of several contracts and the director's delay in resigning are facts which have either not been denied by the appellant or have been declared proven by the Court of First Instance, in the proper exercise of its power to evaluate all the evidence before it. Furthermore, it has already been noted that the mentions and value judgments contained in the report of the Court of Auditors do not exceed the limits within which it must operate. The origin of the damage for which Ismeri claims compensation lies not in the failure of the Court of Auditors to grant it a hearing but, long before, in Ismeri's own conduct. In my view, the Community's rules on non-contractual liability would be distorted if, on the pretext of a formal irregularity, a person were afforded the right to compensation because an institution, in the exercise of its duties, recounted what he had done.

96. Furthermore, the fact of the matter is that, even though Ismeri was not given a hearing, it did not suffer any restriction of its right to a hearing other than that for which it was itself responsible. During the work of preparing and drawing up Special Report No 1/96 it had at least one opportunity to express its views. The draft Special Report arrived at the ARTM by way of the Commission, so Ismeri was able to know its content and the accusations made against it since, as a founder member of the ARTM, it took part in its general meeting. If it did not react at the time, it must accept the consequences of its passivity.

97. At the end of this Opinion, the reasoning is the same as at the beginning. The Court of Auditors commits an irrelevant procedural irregularity, whose adverse consequences for the appellant originate in its own conduct, which breaks the causal link which, for the Community to incur liability for payment of compensation, must exist between the alleged unlawful conduct of the Court of Auditors and the damage suffered by Ismeri.

VI - Costs

98. Under Article 122 in conjunction with Article 69(2) of the Rules of Procedure, applicable to appeals pursuant to Article 118, the unsuccessful party is to be ordered to pay the costs. Consequently, if, as I suggest, the pleas put forward by the appellant or, if appropriate, the claims presented in the application, are rejected, the appellant should be ordered to pay the costs of this appeal and, if it is necessary to give a decision on that point, the costs of the proceedings at first instance also.

VII - Conclusion

99. On the grounds set out above, I propose that the Court of Justice should declare that the appeal is partially inadmissible and partially unfounded. If the Court upholds one of the grounds of appeal and, consequently, gives final judgment in the case, I suggest that the claims presented by the applicant should be rejected and that it should be ordered to pay the costs of the proceedings at first instance and of this appeal.