Joined Cases T-141/99, T-142/99, T-150/99 and T-151/99

Vela Srl and Tecnagrind SL

v

Commission of the European Communities

‛Agriculture — EAGGF — Withdrawal of financial assistance — Articles 23 and 24 of Regulation (EEC) No 4253/88 — Principles of legal certainty and of protection of legitimate expectations — Principle of proportionality’

Judgment of the Court of First Instance (Third Chamber), 7 November 2002   II-4554

Summary of the Judgment

1. Economic and social cohesion — Structural assistance — Community funding for national projects — Powers of the Commission to carry out on-thespot checks and inspections — Scope

   (Art. 158 EC; Council Regulations Nos 2052/88 and 4253/88, Art. 23(2))

2. Economic and social cohesion — Structural assistance — Community funding for national projects — Powers of the Commission to carry out on-thespot checks and inspections — Legal basis

   (Council Regulations Nos 4253/88, 2988/95 and 2185/96)

3. Economic and social cohesion — Structural assistance — Community funding for national projects — Decision to suspend, reduce or withdraw assistance initially granted — Failure of Member State to take the opportunity to submit its comments within a fixed period — Duty of the Commission to state that fact in its decision — None

   (Council Regulation No 4253/88, Arts 23 and 24)

4. Acts of the institutions — Statement of reasons — Obligation — Scope

   (Art. 253 EC)

5. Economic and social cohesion — Structural assistance — Community funding for national projects — Examination by the Commission of the lawfulness of any invoice declared to relate to a subsidised project — Expenditure invoiced by subcontractors to a recipient of EAGGF assistance — Included

6. Economic and social cohesion — Structural assistance — Community funding for national projects — Applicants for, and recipients of, EAGGF financial assistance required to provide information and to act in good faith

7. Community law — Principles — Protection of legitimate expectations — Protection refused to any person committing a manifest infringement of the rules in force

8. Economic and social cohesion — Structural assistance — Community funding for national projects — Commission decisions withdrawing EAGGF financial assistance as a result of irregularities — Infringement of the principle of legal certainty — None

   (Council Regulation No 4253/88, Art. 23(2))

9. Community law — Principles — Proportionality — Withdrawal of financial aid granted by the EAGGF on account of the recipients' noncompliance with the financial conditions for the investment laid down in the decisions granting the aid — Infringement — None

   (Council Regulation No 4253/88, Art. 23(2))

1.  Under Article 23(2) of Regulation No 4253/88 laying down provisions for implementing Regulation No 2052/88 as regards coordination of the activities of the different Structural Funds between themselves and with the operations of the European Investment Bank and the other existing financial instruments, as amended by Regulation No 2082/93, Commission officials or servants may carry out on-thespot checks, including sample checks, in respect of operations financed by the Structural Funds.

   It is clear from the general nature of its wording that Article 23(2) provides the Commission's officials and servants with a legal basis for checking projects which are receiving or have received assistance from a Structural Fund. In the absence of any indication to the contrary, it must be held that the provision applies to operations financed by any Structural Fund whatsoever, including the EAGGF, Guidance Section. There is no reason for claiming that the provision under consideration applies only to operations which are the subject of financial assistance decided by the Member State concerned, or by the authorities designated by it, and submitted to the Commission by that Member State, and not to projects which receive financial assistance decided by the Commission.

   In the absence of clear information to the contrary, it must also be held that an on-thespot check based on Article 23(2) of Regulation No 4253/88 may be carried out by any Commission official or servant, may take place during the implementation of the project concerned — for example, after a request for payment of an instalment of assistance —, or subsequently, and may examine both whether the project has been carried out in accordance with the objectives laid down by the Community legislation and by the decision granting the aid, and also whether the conditions for implementing the project, particularly those relating to its financial and accounting management, are in order.

   There is no basis for inferring from Article 23(2) of Regulation No 4253/88 that the Commission is prevented from carrying out another on-thespot check, pursuant to that provision, after the project has actually been completed, even though it has already been the subject of one or more checks of that nature, for example, in connection with requests for payment of the assistance. Nor are Commission officials or servants precluded from carrying out, pursuant to the aforementioned provision, crosschecks relating simultaneously to several projects subsidised by the EAGGF.

   Any other reading of Article 23(2) of Regulation No 4253/88 would have the consequence of rendering redundant the Commission's obligation, under Regulation No 2052/88, to contribute to the effectiveness of the operation carried out by the Community with the help of the Structural Funds in order to attain the objective of economic and social cohesion specified in Article 158 EC.

   (see paras 97-101)

2.  The provisions of Regulations No 2988/95 on the protection of the European Communities' financial interests and No 2185/96 concerning on-thespot checks and inspections carried out by the Commission in order to protect the European Communities' financial interests against fraud and other irregularities establishing the Commission's powers to carry out on-thespot checks and inspections are designed to apply on a supplementary basis, without prejudice to the Community sectoral rules such as Regulation No 4253/88 laying down provisions for implementing Regulation No 2052/88 as regards coordination of the activities of the different Structural Funds between themselves and with the operations of the European Investment Bank and the other existing financial instruments. Those provisions cannot therefore set aside the legal bases which those rules afford to the Commission for carrying out on-thespot checks in order to protect the Community's financial interests.

   (see para. 115)

3.  Article 24(1) of Regulation No 4253/88 laying down provisions for implementing Regulation No 2052/88 as regards coordination of the activities of the different Structural Funds between themselves and with the operations of the European Investment Bank and the other existing financial instruments requires the Commission — if an operation or measure appears to justify neither part nor any of the assistance allocated and causes it to carry out a suitable examination of the case — to request the Member State concerned to submit its comments within a specified period of time. That provision must be interpreted as requiring the Commission to give the Member State concerned the opportunity of submitting its comments within a given period of time and not to take any decision before the end of that period, in order not to negate the effectiveness of the obligation. On the other hand, once the time-limit has expired, the Commission is justified, if the examination which it has carried out has confirmed the existence of an irregularity, in adopting one or other of the measures provided for in Article 24 of that regulation even though the Member State has not taken the opportunity it has been offered to submit comments within a certain period of time. Any other interpretation would be tantamount to allowing a Member State to block indefinitely the adoption of a Commission decision by failing to respond to a letter from the Commission inviting it to submit its comments.

   Moreover, although it is true that the duty to state reasons requires the Commission to reply, where appropriate, in the decision suspending, reducing or withdrawing the assistance, to any observations made by the Member State concerned during the administrative procedure, neither the provisions of Articles 23 and 24 of Regulation No 4253/88, which the applicants allege, in the part of the plea now under consideration, has been infringed, nor the duty to state reasons require the Commission to state that the national authorities concerned have not submitted comments during that procedure.

   (see paras 156-158)

4.  Since the statement of reasons required by Article 253 EC must be appropriate to the act at issue, decisions which have serious consequences for the applicants must show clearly and unequivocally the reasoning of the Community authority which adopted the measure so as to inform the persons concerned of the justification for the measure adopted so that they may defend their rights and to enable the Court to exercise its powers of review. Moreover, the requirement to state reasons must be appraised on the basis of the particular features of the case in point, such as the content of the measure in question and the nature of the reasons given. It is not required that the reasoning should go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question.

   (see paras 168-170)

5.  If a project receives Community funding, the Commission is entitled to examine the lawfulness of any invoice declared to relate to that project and, if appropriate, to declare that there is an irregularity, whether the invoice was issued by the beneficiary of the funding or by a natural or legal person whom it used in connection with the implementation of the subsidised project. To deprive the Commission of the oppotunity to review the lawfulness of expenditure invoiced by subcontractors to a beneficiary of EAGGF aid would risk that beneficiary receiving undue payments on the basis of statements of expenditure whose economic basis could not be verified.

   (see para. 270)

6.  Applicants for, and beneficiaries of, EAGGF aid are required to satisfy themselves that they are submitting to the Commission reliable information which is not liable to mislead it, since otherwise the system of controls and evidence established to determine whether the conditions for granting the aid are fulfilled cannot function properly. In the absence of reliable information, projects which do not fulfil the conditions required could become the subject of aid. It follows that the obligation on applicants for, and beneficiaries of, aid to provide information and act in good faith is inherent in the EAGGF aid system and essential for its effective functioning.

   (see para. 322)

7.  The right to rely on the principle of protection of legitimate expectations extends to any economic operator to whom an institution has given justified hopes. However, the principle of protection of legitimate expectations may not be relied upon by an undertaking which has committed a manifest infringement of the rules in force.

   (see paras 387-388)

8.  The principle of legal certainty, which requires that legal rules be clear and precise and aims to ensure that situations and legal relationships governed by Community law remain foreseeable, cannot be regarded as infringed by Commission decisions withdrawing EAGGF aid, since the applicable legislation provides for the possibility for the Commission — in the event that irregularities are proved — to withdraw the financial aid and request reimbursement of the sums unduly paid by the EAGGF.

   (see para. 391)

9.  Given the very nature of financial aid granted by the Community, the obligation to comply with the financial conditions for the investment as indicated in the decision granting the aid constitutes one of the essential duties of the beneficiary, in the same way as the obligation actually to carry out the project, and is therefore a condition for the award of Community aid. Moreover, it is essential for the properworking of the system for carrying out checks and acquiring evidence to verify that the conditions for the grant of the aid are being fulfilled, for Community aid applicants and beneficiaries to provide information which is reliable and not likely to mislead the Commission.

   In the light of the serious breaches of obligations committed by the beneficiaries, it was reasonable for the Commission to take the view that any sanction other than the total withdrawal of the aid and recovery of the sums paid by the EAGGF might invite fraud, in that potential beneficiaries would be tempted either artificially to inflate the amount of the expenditure charged to the project with the aim of evading their obligation to provide part-financing and of obtaining the maximum amount of EAGGF aid provided for in the decision granting the aid, or to provide false information or conceal certain data, with the aim of obtaining aid or of increasing the amount of aid requested, and risk only that the aid would be reduced to the level at which it would have been if the beneficiary had declared the correct amount of the expenditure and/or the information it gave the Commission had been accurate.

   (see paras 399-400, 402)