C-23/76

v

COMMISSION OF THE EUROPEAN COMMUNITIES­ represented by Gianluigi ,

Campogrande, a member of its Legal Department, with an address for service in Luxembourg at the offices of Mario Cervino, Legal Adviser to the

Commission, place de la Gare,

defendant,

and

composed of: H. Kutscher, President, A. M. Donner and P. Pescatore, Presidents of Chambers, J. Mertens de Wilmars, M. Sørensen, Lord Mackenzie

Stuart and A. O'Keeffe, Judges,

Advocate-General: H. Mayras Registrar: A. Van Houtte

gives the following

PELLEGRINI v COMMISSION

JUDGMENT

which took place with Mr Sempels, we

The cleaning work at the establishment confirm to you that we instruct you to

of the Joint Nuclear Research Centre at provide the cleaning services of the

Ispra (hereinafter referred to as 'the establishment for January and February

JNCR') was carried out from 1960 by 1972. Luigi Pellegrini, a private company. It appears that the work was originally The defined in the draft services placed with it by 'direct agreement'

(a agreement which is now in your

attractive may be freely chosen, taking This agreement shall be concluded for a

into the from 1 account cost of performance, term of 36 months January 1972. running costs involved and technical

merit, together with the financial Article 3 — Unilateral repudiation guarantees and the guarantees of

professional competence put forward by The Commission may at any time each of the tenderers and the time for repudiate this agreement without (Article 53). performance'

incurring any liability for damages days'

provided only that it gives 90 The applicant company submitted an

Article 15 — Law applicable and clause which they were provided with any co nfe rring ju­ risdictio n information requested.

(a) This agreement shall be governed by The decision-making stage included Italian law. obtaining the compulsory opinion of the (b) The Court of Justice of the European Purchases and Contracts Advisory Communities shall have jurisdiction Committee (Article 62 of the Financial in any dispute between the Regulation). As the authority empowered Commission and the contractor to take the decision, the Director of the

to this agreement. establishment complied with this relating assessment.

Letters in terms similar to that of 20 December 1971 were sent to the By registered letter of 15 January 1976, applicant on 22 February 1972, 27 the Directorate of the establishment at

February 1973, 25 June 1974 and 18 Ispra informed the applicant that

September 1975 but relating to the

services, two copies of the draft out in the past as well as for your able

agreement relating to the cleaning collaboration on all occasions'.

services, requesting it to submit a tender The opinion of the Purchases and in response to the fresh invitation to Contracts Advisory Committee in favour tender for 1976/1977 which was subject of choosing a company from Venice to a possible one year extension.

states two reasons for that choice: it is

The applicant duly submitted a tender. the only company of 'fully satisfactory industrial and commercial size and it alone makes provision for the training of The date fixed in the conditions laid specialist staff. down by the invitation to tender for performance of the contract to begin was It is not in dispute that the carrying out 1 January 1976. Although not obliged to of the cleaning work at the establishment do so, the authorizing officer requested by Pellegrini was fully satisfactory and beforehand the opinion of the Purchases that the tender of the company from and Contracts Advisory Committee on Venice, which was accepted, was higher, the content and the wording of the from the point of view of price, than that invitation to tender and on the procedure of Pellegrini. However the Commission to be followed. maintains that Pellegrini's tender was not

the lowest. All those taking part in the request for tenders were able to carry out an By a registered letter of 22 January 1976, inspection of the establishment, during the applicant addressed a complaint to

establishment on the unequivocal The Commission expresses a doubt as to months'

condition that three notice the validity of the arbitration clause as should be given by registered letter. It regards its form. An arbitration clause asked that this period of notice be under Article 153 of the EAEC Treaty observed. constitutes a genuine loss of jurisdiction, by making it possible to exclude

By a letter of 23 January 1976, the potential disputes from the jurisdiction Directorate-General rejected that of all the national courts.

complaint.

While care must be taken to avoid

On 9 March 1976 the applicant lodged making the procedure onerous to no

Commission must implement the jurisdiction of the national courts; contract in question by recognizing the applicant s right to receive the Secondly, as far as possible to avoid three month's notice stipulated and uncertainties with regard to order the Commission to pay interpretation for the national courts damages, which will be determined before which such a case may be and established during the brought. proceedings; 2. On the basis of Article 146 of the

Euratom, declare Indeed, in view of the total absence of a Treaty establishing form of procedure, those courts might be unlawful, with all the consequences in prompted to declare that they had law, the measure whereby the jurisdiction or, at the expence of Commission, by granting to the procedural economy, would be obliged to company from Venice the contract for have recourse to the procedure laid down cleaning the interior of the in Article 150 of the EAEC Treaty in establishment, refused to place the order to obtain the interpretation of implementation of the contract for Article 153, whilst subsequently retaining the of services with the supply jurisdiction over the case which was applicant. before them. 3. Order the Commission to bear the

costs.

However, in view of the intention of

The Commission contends that the Court both parties from the outset that the

should: Court of Justice should have jurisdiction, (a) Dismiss the action; in this respect the Commission leaves

acknowledgement of the intention of the from time to time.

parties to confer jurisdiction on that

Court, amounts to full acceptance of its The applicant was informed only at the

jurisdiction. Indeed, Community law, end of December 1975 of the

which spurns all formalism, contains no Commission's decision to conclude the

provision as to the form which a special new contract with another undertaking.

jurisdiction from so doing. was to last one month.

The law applicable This legal situation is provided for by Italian law. Article 1563 (2) of the Italian The applicant and the defendant agree Civil Code provides that, 'If the person to

that as regards the application for the whom services are provided periodically implementation of the contract, Italian has the power to fix the date for the

law applies. performance of the various services, he shall give the person providing the

The substance of the case services reasonable advance notice of the

date The 'draft lays agreement'

it (the Pellegrini its months'

three notice when to continue providing Commission) had decided not to renew services, but it cannot do so without the cleaning contract any further. Under having regard to Pellegrini's right to a

the contract, the relations between the reasonable period of notice in order to

parties were governed by the draft dismantle its organization without

agreement and by Italian law. That draft incurring loss. for months'

provides three notice.

months, and that such fixing made the Pellegrini until the end of December that notice clause ineffective in the case of a it had chosen another company, while at

contract of two or three months duration the same time asking it to keep its own since the period prescribed by the clause organization in working order and to was either longer than or the same operate for a further month: the period

PELLEGRINI v COMMISSION

of notice was too short, taking into contracts of indeterminate length, account the precise provisions of the fixed-term contracts being governed by draft agreement, as well as of the the general principle that they terminate

agreements taken as a whole, which had upon the expiry of the prescribed period.

always provided for an extension of the

include both the loss sustained by the previously supplied, and agreed to do so, creditor and the loss of profit, in so far as the applicant therefore knew, without a

they are a direct and immediate shadow of a doubt, that it was given no

consequence thereof (Article 1223 of the guarantee of a further extension of the

Italian Civil Code). old contract or the award of the new

contract.

If the exact amount of the damages The Commission contends that it cannot cannot be proved, the court shall be complained that it has failed to fulfil quantify the loss suffered according to any of its obligations. Therefore there are the rules of natural justice (Article 1226 no grounds on which to base a judgment of the Italian Civil Code). ordering it to carry out an obligation or

made in that provision of the right to fix cleaning services at the establishment in the date for the various occasions on spite of the conclusive proof adduced by which services are to be provided, it is Pellegrini which follows, apart from a intended to refer to the right to fix the large number of documents, from the various dates for performance and not registered letter of 16 January 1976 from the right to repudiate the contract. In the Directorate-General, and even

fact the possibility of repudiation is though Pellegrini submitted a tender

provided for and regulated further by with a price which was much more

Article 1569, but only in respect of favourable to the Community.

JUDGMENT OF 7. 12. 1976 — CASE 23/76

Thus, instead of pursuing the specific Commission claims that all those who

The measure is also vitiated by a further to make an assessment of the advantages

misuse of powers, in so far as the lack of and disadvantages of the choice made by foresight and negligence shown by the the Commission. Not only did the

Commission amounts to a failure to have Commission observe the rules laid down regard to the legal purpose of the by the provisions in force for the purpose measure. of ensuring that the decision was

consistent with the interests of the

In its defence the Commission asserts service, but it went to the trouble of

that an administration which organizes a the opinion of a technical seeking request for tenders is not bound to award advisory body even though that was not

upon that which, in practice, gives the choice made: only the company from most substantial guarantees of meeting Venice was, according to the opinion, of the interests of the public authority. 'fully satisfactory commercial and

industrial size'

and it alone makes

An infinitely more advantageous offer provision for the training of specialist

from the point of view of cost may well staff. It was not found that the company be deemed far less attractive if account is from Venice was the only one which

taken of the structure and the possessed the other qualifications, working methods of the tenderer's undertaking references and financial requirements

The ground of misuse of powers does not concern itself with obtaining more

appear to be supported by objective, economical service of equal quality; such

relevant and concordant evidence apt to is the specific purpose of the measure.

prove that the aim of the Commission's decision was another than that of the Pellegrini's antecedents offered every interests of the service. guarantee of a fully satisfactory performance of the services; no actual

As regards the ground based on the clear comment was made as to the inadequacy lack of foresight and care, the of that undertaking's industrial size,

PELLEGRINI v COMMISSION

measure, since the Commission had in decision was not to obtain services equal

the first place to concern itself with in quality at a lower price. On the

concluding a contract enabling the contrary the Commission had to aim at

cleaning services to be adequately obtaining on appropriate economic terms

provided. The grounds distort the facts in such services as was deemed best suited

that they conflict with a point of fact, to the requirements of the Centre. The the commendable performance contract was not awarded as the result of namely of the previous services, from which it an adjudication procedure, but as the

cleaning service only in the Euratom pursuant to Article 59 (2) of the Financial establishment in Italy. It is the Regulation of 25 April 1973 (OJ L 116, applicant's submission that these p. 1) is based upon a threefold technical

arguments completely refute the line of and economic assessment.

argument embodied in the compulsory opinion, in which the Commission This is from the point of view of the

concurred. The least that was required service tendered which is best suited to

was to show, by means of appropriate, meet the needs of the administrative

detailed and comparative examination, authority, taking account of technical

that it ended in a defective measure. obligation which he undertakes to

discharge. In its rejoinder the Commission asserts

that the party relying upon a misuse of The compulsory opinion of the

powers must show, at least by means of Purchases and Contracts Advisory objective, relevant and concordant Committee carries out a more thorough

evidence, that the measure was taken for examination and a more considered

an exclusive or at least determining assessment of each of these technical and

procedure in itself raises a presumption

of lawfulness in respect of the decision Continued employment for the staff of

adopted. This presumption appears to be the undertaking holding the contract is all the stronger when, not only has the in fact a problem with economic as well procedure been formally followed, but as social implications which the

also the three processes of decision, Commission must take into account in consultation and supervision have come order to avoid the direct repercussions on

to identical conclusions regarding the the establishment which conflicts on this

merits, and concurin acknowledging the subject could have. Therefore when

piece of relevant evidence of the alleged There is no doubt that the chosen misuse of powers to which the request

undertaking is capable of ensuring for tenders at issue gave rise. At all thorough performance of the particularly events, its arguments are, moreover, not

cleaning services. The larger size of the supported by the many objective and undertaking, from the commercial and concordant pieces of evidence which, industrial point of view and the according to the case-law of the Court, retraining of its staff for their part are necessary to establish that the guarantee in particular, in the application is well founded.

relationship between the Commission and the holder of the contract, more flexible management than that which IV — Oral procedure could be obtained in the case of the

other tenderers, and less dependent on The parties were heard at the hearing on external factors than had been the case 5 October 1976. The advocate with the relationship with Pellegrini. Management and mobility of staff in a representing Flexon-Italia, to which the

contract for the cleaning of the climate of social tranquillity constitute a establishment of the JNRC at Ispra for primary requirement for the Ispra 1976 was awarded, appeared before the Centre, which is perpetually subject to Court to support the conclusions of the the hazards of decisions on programmes. Commission. Precisely by virtue of its capacity for increasing its work-force without

the performance of the cleaning work on a rival firm. conferring

2 Having decided in 1971 to bring the previous contractual commitments to an end, the Commission issued a request for tenders with a view to awarding a

new contract for the of the said establishment for a period of cleaning 36 months from 1 January 1972, on the basis of a draft agreement drawn up by it.

3 The applicant duly took part in the request for tenders, but its tender was not accepted.

4 When a competing firm, whose offer had been accepted, repudiated the contract before beginning performance of it, the Commission orally requested the applicant to carry out the cleaning of the establishment for the months of

January and February 1972 under the terms and conditions set out in the

to carry out the cleaning of the establishment during January 1976 in order

to facilitate the transition.

JUDGMENT OF 7. 12. 1976 — CASE 23/76

The action on the contract

Jurisdiction

8 The applicant takes the view that the Court has jurisdiction to give a ruling on the first head of its conclusions by virtue of an arbitration clause contained

9 Both parties agree that the agreement reached between them in December 1971 involved conferring jurisdiction on the Court.

However, while declaring itself prepared to accept this jurisdiction, the

Commission expressed a doubt as to the formal validity of the clause

conferring jurisdiction.

10 Article 38 (6) of the Rules of Procedure stipulates that any application

submitted under Article 153 of the Euratom Treaty shall be accompanied by a copy of the arbitration clause.

govern the contractual relationship in so far as they were not excluded or

amended by the express terms of the letters.

Thus the clause in Article 2 which fixed the term of the contract at 36

months was excluded.

PELLEGRINI v COMMISSION

12 First, the applicant invoked Article 3 of the 'draft agreement'

instance.

14 In fact the letter of 18 September 1975 specifies that the applicant remained

responsible for the cleaning work only until 31 December 1975.

is Furthermore, the applicant was notified, by a letter of 18 September 1975, of the issue of a request for tenders, in which it took part by submitting an offer to the Directorate of the Centre.

16 Under these circumstances, the contractual relationship was to come to an

end on 31 December 1975.

reasonable advance notice informing the party providing the services of such dates.

19 Even if this provision were applicable to the contract in question, the

applicant must have known, from the moment when the Commission had informed it in September 1975 that its services would no longer be required

after 31 December 1975 and that a request for tenders had been issued with a

view to a new contract, that the contractual would expire on relationship 31 December 1975, that is in three months'

time.

By that means, it was proposing, for a short period, a new fixed-term contract which Pellegrini accepted.

22 Accordingly, in so far as the application is based upon the alleged breach of

the contract, it must be dismissed as unfounded.

The application for annulment

23 The applicant seeks the annulment of the measure by which the Commission decided to conclude the new cleaning contract for the establishment at Ispra

with Flexon-Italia.

undue advantage.

PELLEGRINI v COMMISSION

26 Under Article 59 (2) of the Financial Regulation of 1973 (OJ L 116, 1973, p. 15) the administrative authority may freely choose the offer 'thought to be

the most attractive', which leaves it a certain margin of discretion.

27 This provision does not stipulate that the price must constitute the only decisive factor in the evaluation of the financial and technical aspects of the

offers.

30 In order to find that there has been a misuse of powers, it would have to be shown that the reasons for the Commission's choice were extraneous to the

interests of the service.

Although the applicant's statements may give rise to doubts in this

connexion, it has nonetheless not proved this fact sufficiently in law.

The admissibility of the conclusions directed against

Flexon-Italia

32 As regards the submissions for annulment based on Article 146 of the EAEC

Treaty, the only possible defendant is the institution from which the

contested measure emanates.

33 Therefore, in so far as the action is directed against the company Flexon-Italia, it is not admissible.

Costs

34 Article 69 (2) of the Rules of Procedure provides that the unsuccessful party shall be ordered to pay the costs if they have been asked for in the successful

consider itself justified in asking the Commission to explain before the Court the grounds for its choice.

In these circumstances, instead of ordering the applicant to bear all the costs,

it should be ordered only to bear its own costs.

On these grounds,

THE COURT

hereby:

A. Van Houtte H. Kutscher

Registrar President

OPINION OF MR ADVOCATE-GENERAL MAYRAS <apnote>1</apnote> DELIVERED ON 27 OCTOBER 1976

Mr President, asks you to decide the issue on the

Members of the Court, basis of an arbitration clause included in the agreement between the

This case involves, first, a contractual Commission and the applicant

of 1975, the Commission named a this Court is incomplete in certain

competing firm, the Flexon company, to respects and some of the documents carry out the same work from 1 February produced may be misleading.

1976. I shall therefore endeavour first to clarify It is clear from this that the jurisdiction the factual situation before pursuing the of the Court will have to be examined legal discussion. from two different legal aspects:

—

first, as regards the contractual It is not disputed that from 1960

dispute, the Pellegrini undertaking onwards the cleaning services in respect