Case T‑298/16

East West Consulting SPRL

v

European Commission

(Non-contractual liability — Pre-Accession Assistance Instrument — Non-member State — National public procurement — Decentralised management — Decision 2008/969/EC, Euratom — Early warning system (EWS) — Activation of an EWS warning — Protection of the financial interests of the Union — Commission’s refusal of ex ante approval — Failure to award the procurement — Jurisdiction of the General Court — Admissibility of evidence — No legal basis for the warning — Rights of the defence — Presumption of innocence — Sufficiently serious breach of a rule of law conferring rights on individuals — Causal link — Material and non-material damage — Loss of the procurement — Loss of opportunity to obtain other procurements)

Summary — Judgment of the General Court (First Chamber), 14 December 2018

1. Actions for damages — Admissibility criteria — Jurisdiction of the EU judicature — Considered of the Court’s own motion

   (Art. 268 TFEU)

2. Actions for damages — Subject matter — Compensation for damage allegedly suffered by reason of a Commission decision to list the applicant in the early warning system (EWS), leading to non-conclusion, by a national contracting authority, of a contract relating to public procurement awarded to the consortium led by the applicant — Admissibility

   (Arts 268 and 340, second para. TFEU)

3. Actions for damages — Admissibility criteria — Considered of the Court’s own motion — Limits

   (Art. 268 TFEU; Rules of Procedure of the General Court, Art. 113)

4. Judicial proceedings — Application initiating proceedings — Formal requirements — Identification of the subject matter of the dispute — Brief summary of the pleas in law on which the application is based — Application for compensation for damage allegedly caused by an EU institution — Minimum requirements — Difficult to express the loss in figures

   (Rules of Procedure of the General Court, Art. 76(d))

5. Judicial proceedings — Production of evidence — Time limit — Evidence lodged out of time — Conditions

   (Rules of Procedure of the General Court, Art. 85(1) and (3))

6. Non-contractual liability — Conditions — Unlawfulness — Damage — Causal link — Cumulative conditions — One of the conditions not satisfied — Claim for compensation dismissed in its entirety

   (Art. 340, second para. TFEU)

7. Non-contractual liability — Conditions — Unlawfulness — Sufficiently serious breach of EU law — Requirement that the institutions manifestly and seriously disregard the limits of their discretion — Continuation of the breach of EU law in spite of a judgment finding the breach to be established or in spite of settled case-law of the Courts of the European Union — Included

   (Art. 340, second para. TFEU)

8. Commission — Powers — Implementation of the Community budget — Decision to institute an early warning system enabling the listing, as entities representing a financial risk to the Union, of persons subject to investigation by the European Anti-Fraud Office (OLAF) — Lack of legal basis — Lack of jurisdiction of the Commission

   (Art. 5 TFEU; Commission Decision 2008/969)

9. Acts of the institutions — Statement of reasons — Obligation — Scope — Assessment of the duty to state reasons by reference to the circumstances of the case

   (Art. 296, second para. TFEU; Charter of Fundamental Rights of the European Union, Art. 41(2)(c))

10. Own resources of the European Union — Protection of the European Union’s financial interests — Fight against fraud and other illegal activities — Early warning system for the use of Commission authorising officers and executive agencies — Failure to communicate the reasons for registration to the person entered in the system — Breach of the rights of the defence and the duty to state reasons

    (Art. 296, second para. TFEU; Commission Decision 2008/969, Art. 12(2) and (3))

11. Own resources of the European Union — Protection of the European Union’s financial interests — Fight against fraud and other illegal activities — Early warning system for the use of Commission authorising officers and executive agencies — Activation of a warning in the system with respect to a person who is not the subject of any investigation or judicial proceeding — No legal basis for the warning — Infringement of the presumption of innocence

    (Charter of Fundamental Rights of the European Union, Art. 48(1); Commission Decision 2008/969)

12. Non-contractual liability — Conditions — Unlawfulness — Sufficiently serious breach of a rule of law conferring rights on individuals — Rule of law conferring rights on individuals — Concept — Rights of the defence and the principle of presumption of innocence — Included

    (Art. 340, second para. TFEU; Charter of Fundamental Rights of the European Union, Art. 48)

13. Non-contractual liability — Conditions — Unlawfulness — Sufficiently serious breach of a rule of law conferring rights on individuals — Rule of law conferring rights on individuals — Concept — System of the division of powers between the institutions and the Member States — Included — Condition

    (Arts 5 and 340, second para. TFEU)

14. Non-contractual liability — Conditions — Causal link — Concept — Burden of proof

    (Art. 340, second para. TFEU)

15. Non-contractual liability — Conditions — Actual and certain damage — Burden of proof

    (Art. 340, second para. TFEU)

1.  See the text of the decision.

   (see para. 84)

2.  The Courts of the European Union have jurisdiction to hear an action seeking compensation for the damage allegedly suffered by a company as a result of the Commission’s decision to include it in the Early Warning System (EWS) and of the subsequent refusal, on the basis of that decision, of an EU Delegation, to endorse a contract relating to a decentralised public contract organised by a Non-member State which had been awarded to the consortium led by the applicant and was to be financed by the European Union. Even if the decision to cancel the tender procedure for the procurement at issue was taken by the national contracting authority, the illegality relied on in support of the action was taken by an institution, body, agency or office of the Union and cannot be regarded as attributable to a national public authority.

   (see paras 86, 91)

3.  Under Article 113 of the Rules of Procedure, the Court may of its own motion examine the conditions of admissibility of the action, which are a matter of public policy. However, the Courts of the European Union cannot, as a general rule, base their decisions on a plea raised of their own motion — even one involving a matter of public policy — without first having invited the parties to submit their observations on that plea.

   (see para. 92)

4.  In an action to establish non-contractual liability, it is for the applicant to adduce evidence before the Courts of the European Union to establish the reality and the extent of the damage which it claims to have sustained. In certain cases, particularly where it is difficult to express the alleged loss in figures, it is not absolutely necessary to state its precise extent in the application or to specify the amount of the compensation claimed.

   (see paras 96, 97)

5.  See the text of the decision.

   (see paras 101-103)

6.  See the text of the decision.

   (see paras 109, 112)

7.  See the text of the decision.

   (see paras 122-124, 145-147)

8.  The principle of allocation of powers set out in Article 5 TFEU requires that each institution is to act within the limits of the powers conferred on it by the Treaty. In addition, the principle of legal certainty requires that any act intended to have legal effects must be derived from a provision of EU law that prescribes the legal form to be taken by that act and which must be expressly indicated therein as its legal basis.

   It is, therefore, unlawful to register a W3b warning for a company in the Early Warning System (EWS) in application of the provisions of Decision 2008/969, on the EWS for the use of authorising officers of the Commission and the executive agencies, since no existing legal basis authorises the Commission to adopt such provisions, which are capable of having negative consequences for the legal position of the persons to whom that type of warning applies. Furthermore, in so far as the W3b warning on the EWS in relation to that company had undeniable consequences for its legal position, the Commission cannot validly maintain that the provisions of Decision 2008/969 governing that type of warning are merely internal rules on the implementation of the general budget of the European Union. Nor, likewise, can the Commission validly claim that the lack of a legal basis for Decision 2008/969 had not yet been established at the time when it placed the applicant in the EWS. The fact that the lack of a legal basis had not been established does not in any way prevent that company, in the context of an action for damages, from pleading the illegality of that decision in order to obtain compensation for the damage which it claims to have sustained as a result of being placed in the EWS.

   (see paras 127-130)

9.  See the text of the decision.

   (see paras 132, 133, 135)

10.  The purpose of the obligation to state reasons is to provide the person concerned with sufficient information to make it possible to ascertain whether the decision is well founded or whether it is vitiated by a defect which may permit its legality to be contested before the Courts of the European Union and to enable those Courts to review the legality of that act. It follows that the statement of reasons must in principle be notified to the person concerned at the same time as the decision adversely affecting him and that a failure to state reasons cannot be remedied by the fact that the person concerned learns the reasons for the decision during the proceedings before the Courts of the European Union.

    That is the case as regards a letter by which the Commission formally informs a company that it is the subject of a W3b warning on the Early Warning System (EWS), without first hearing it, but merely recalls the general and abstract circumstances, mentioned in Article 12(2) of Decision 2008/969, on the EWS for the use of authorising officers of the Commission and the executive agencies. In doing so, the Commission fails to communicate to the company the reasons for registering the W3b warning on the EWS in its regard at the actual time of the warning. Such reasoning is all the more necessary as there are no judicial proceedings concerning the company and national proceedings concerning persons with whom the company is linked are only at the investigation stage, and not at the trial stage, which is the only stage of the proceedings capable, in the Member States concerned, of concluding in a judgment having the force of res judicata. Furthermore, the precise scope of Article 12 of Decision 2008/969 is uncertain. In particular, it is not clear, in the light of Article 12(3) of that decision, that W3b warnings may apply, in an inquisitorial system, at the investigation stage.

    (see paras 134, 137)

11.  Registering a W3b warning with respect to a company in the Commission’s Early Warning System (EWS) in application of the provisions of Decision 2008/969, on the EWS for the use of authorising officers of the Commission and the executive agencies, infringes the principle of the presumption of innocence, enshrined in Article 48(1) of the Charter of Fundamental Rights of the European Union, where there is no existing legal basis authorising the Commission to adopt such provisions and where, at the time the warning is registered, no investigation or judicial proceedings directly concern that company and the judicial proceedings concerning persons linked with the company are only at the investigation stage. The company was treated as being guilty of serious administrative errors or fraud without its guilt, whether direct or indirect, for such conduct having been established by a court or tribunal.

    In that regard, the principle of the presumption of innocence means that, if the Commission considered it necessary to take preventive measures at an early stage, it would need a legal basis that would allow such a warning system to be set up and the relevant measures to be taken, and that system would have to respect the rights of the defence, the principle of proportionality and the principle of legal certainty, which means that the rules of law must be clear, precise and predictable in their effect, in particular where they might have adverse consequences for individuals.

    (see paras 140, 141)

12.  See the text of the decision.

    (see paras 142, 143)

13.  Whilst a failure to observe the system of the division of powers between the various institutions of the European Union, whose aim is to ensure that the balance between the institutions provided for in the Treaties is maintained, and not to protect individuals, cannot be sufficient on its own to render the European Union liable towards the individuals concerned, the position is different if a measure of the European Union is adopted which not only disregards the division of powers between the institutions but also, in its substantive provisions, disregards a rule of law intended to confer rights on individuals.

    (see para. 144)

14.  See the text of the decision.

    (see para. 159)

15.  See the text of the decision.

    (see paras 163, 164)