C-310/81

The financing procedure of the Eu­ In order that, in such a situation, liability ropean Social Fund creates a financial on the part of the Community towards relationship between the Commission the recipient institution may arise, it is and the Member State on the one hand incumbent on the latter to adduce and between that Member State and the evidence capable in fact and in law of institution which is the recipient of the sustaining a causal link between the financial assistance on the other. damage alleged by it and specific wrongful acts which may be imputed to the Community.

In Case 310/81

ENTE ITALIANO DI SERVIZIO SOCIALE (EISS), in the person of its Commissario Governativo, Francesco Lattari, represented and assisted by Nicola Catalano ol the Rome Bar, with an address for service in Luxembourg at the Chambers of Ernest Arendt, 34 B Rue Philippe-Il,

applicant, 1 — LanguagcofthcCasc:Italian.

JUDGMENT OF 15. 3. 1984 — CASE 310/81

V

JUDGMENT

Facts and Issues

The facts of the case, the course of the hereinafter referred to as "the Board"] procedure and the conclusions, sub­ for intervention by the European Social missions and arguments of the parties Fund pursuant to Article 5 of Council may be summarized as follows: Decision 71/66/EEC of 1 February 1971 on the reform of the European Social Fund (Official Journal, English Special I — Facts and written procedure 'Edition 1971 (I), p. 52), to support a project intended to promote the training On 10 July 1973 the Italian Republic of some 1150 unemployed young submitted a request to the Commission persons from the Mezzogiorno on behalf of the Ente Italiano di Servizio [Southern Italy] as social workers or Sociale [Italian Social Services Board, assistants to be re-employed in that

EISS / COMMISSION

The Commission made its commitment subject to the requirement that the (a) a large number of the trainees were project must comply with Community over 40; rules and that such compliance must be established by documentation to be supplied by the Italian Republic and by checks on the spot to be effected jointly (b) the requirement with regard to by Community officials and Italian unemployment was not fulfilled in officials. the majority of cases, since many trainees were performing regularly paid duties as assistant social workers The execution of the programme fell in outlying offices of the Ministry of behind schedule, and the Commission by Labour itself, with Alitalia or with decisions of 30 December 1974 and other bodies, under agreements 18 May 1976 allowed requests by the which the latter had made with the Italian Government to amend the Board; apportionment of the contribution between financial years. The result in brief was that the payments provided for­ (c) the geographical origin of the by the three decisions, the second of trainees did not satisfy the re­ which reduced the total to LIT quirements laid down, since the

JUDGMENT OF 15. 3. 1984 — CASE 310/81

trainees did not come from the sum when it was required, the Board Mezzogiorno; was made to incur a large overdraft at the bank and suffered con­ (d) moreover, the number, the content sequential damage in the form of and the progress of the courses considerable charges for interest, provided did not comply with the particulars of which will be furnished terms of the scheme. in the course of the proceedings.

The written procedure followed the (b) in any event, dismiss the application normal course. as unfounded; Upon hearing the report of the Judge- (c) order the applicant to pay the costs. Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any In its reply the applicant claims that the preparatory inquiry. Finding that, no Court should : Member State and no Community (a) order the Commission, after the institution had requested that the case be examination of witnesses requested decided in plenary session, it decided by in the reply and any other measure order of 23 March 1983 to assign the of inquiry which it thinks appro­ case to the First Chamber. priate, to pay damages to make up the total amount of LIT 719 909 560, together with the interest provided II — Conclusions of the parties for until final discharge, an equal sum remaining charged to the Italian The applicant claims that the Court State; should : (b) order the defendant to pay the costs. Order the Commission of the European Communities to pay compensation to the applicant for damage caused: Ill — Submissions and arguments (a) by not having placed at its disposal, of the parties pursuant to Article 2 (2) of Commission Decision No 2203/ In its application, the Board argues that def./27 of 27 December 1973, the the Commission, by virtue of, its decision full sum of LIT 371 649 981 which of 27 December 1973, unconditionally was the balance which the Board accepted the request made on its behalf should have received in April 1978; by the Italian Republic, in virtue of (b) by virtue of the fact that, as a result Article 5 of the Council's decision of of not having had the use of that 1 February 1971.

The Board requests in addition that the Commission should be called upon to In connection with the foregoing supply all the documentation showing arguments the Board submits copies of the reasons on which it relies, which letters to and from the Italian Ministry conflict, according to the Board, with of Labour in support of its claims. the results of the checks previously carried out, for the refusal of any assistance in 1973. In its defence, the Commission takes the view that under the relevant Community provisions which it cites, its decision It reserves the right to submit its giving its approval, which it addressed to complaints in detail until it has been the Italian Republic, creates a legal acquainted with the documentation relationship between itself and the Italian referred to. In the meantime it observes Republic. In such a case the body that by Article 1 of the decision at issue, appointed to cany out the project must assistance had been agreed, not only for organize the training scheme in strict the training of social workers or conformity with the Commission's assistants in the Mezzogiorno, but for decision in order to obtain the those in areas with a high proportion reimbursement of its chargeable ex­ of immigrant workers from the penditure up to the amount of the Mezzogiorno. Equally, according to the assistance available from national and Board, the aid would not have been Community sources. misused if the courses had been organized in another Member State in the Community. There is therefore, in the Commission's view, no contractual relationship be­ tween itself and the Board. An ap­ The Board states that it brought an plication under Article 175 of the Treaty action against the Italian Government necessarily presupposes the proven before the District Court, Rome, on failure of the relevant institution to 10 April 1981 reserving the right to adopt a mandatory measure, which request that court, in accordance with clearly is not the case here. Furthermore,

Turning to the substance of the application, the Commission notes that The Board lays before the Court the the Italian Republic made the appro­ programme which it drafted and de­ priate requests for payments by in­ livered to the Ministry of Labour, as it stalment and for the final balance, was not supplied by the Commission, together with supporting documents, and and requests that the latter should itself that the requisite checks were carried out be called upon to supply the application jointly by national and Community of the Italian Republic with the relevant officials on the spot. The Commission annexes. The proposals contained in that made its payments in due time, and the programme, which were adopted by difference between the aid originally the Italian Republic and agreed to projected and the sums actually paid was unconditionally by the Commission, are solely due to the fact that it appeared an integral part of the decision at issue. that in the execution of the project there was a failure to comply with the conditions laid down. The Board is perfectly aware of this state of affairs Turning to the checks carried out by and has only itself to blame. officials of the Commission and the Italian Ministry of Labour, the applicant explains that of the 115 participants in the course, 64 were less than 30 years of In its reply, the Board takes formal note age, 40 more were under 40, and of the that the statement of defence constitutes remaining 11 only four were more than a negative reply to its invitation to act 45 years old. Again, it stresses that under under Article 175. its programme, the trainees were to have received a monthly allowance of LIT 250 000, which however was not paid to Regarding the damage it has suffered, any of the 115 trainees mentioned above, the Board argues that it had a legitimate who had no regular employment and

who were about to be released at the end the outstanding balance of 15% of of the course. Thus the fact that four the contributions at issue; the whole trainees of the total of those mentioned amounting in all to LIT 743 299 382, took the course without being entitled half of which is to be charged to the is of negligible practical significance. European Social Fund and half to However that may be, and though the the Italian Republic; Board considers that it made a mistake in not challenging the reductions for 1973 at the relevant time, the penalties imposed for any irregularities established (b) the other damage resulting from were excessively severe and could only the substantial' indebtedness of the justify a reduction in the assistance for Board, and arising from the un­ that year, and not its cancellation. justified withholding of payment, may be assessed at LIT 692 519 738 at 31 December 1981, which may be apportioned to the Commission for The Board points out that the Com­ the share attributable to it and to the mission does not express a view on its Italian authorities for the share attri­ claim to compensation for the damage butable to the Italian Republic. arising from its failure to pay a final instalment of 15% based on all the contributions received. The amount of the claim for compen­ sation is therefore LIT 1435 819 120 The argument in law may be confined to in total, which should be increased by the following: the Commission has any interest chargeable until the final completely failed to demonstrate that the settlement of all the monies clue which claim for compensation is unfounded, have not already been paid. since the Commission relies solely on facts which were obviously supplied to it by the departments responsible. If its With regard to a possible joinder of this statement of the facts were accurate, it action with a reference from the District would have appeared on the face of the Court, Rome, the Board confirms that it record that the Board's claim foi- has requested a reference to the Court of compensation was unfounded. However, Justice. the fact is that the full liability of the Commission is clear, on the contrary, on the face of the evidence as correctly With reference to the examination of explained and interpreted. witnesses, the Board names Alberto Ghergo, Salvatore Bianco, Wilma Posati and Messrs Barbacini and Zambelli as At all events, the Board specifies that its the witnesses called for questioning, and claim for compensation involves : considers that they may be usefully heard on the following points:

(d) it is a fact that the reduction in the contribution to the running expenses (b) to specify whether the Commission's for 1973, which followed joint consistent practice is to give effect findings made by Community and to the allocations ordered by the national officials, has not hitherto European Social Fund solely for been the subject of a formal de­ each individual financial year, in cision; which case the tacit or implied revocation of previous decisions relating to earlier financial years is (e) it is a fact that, in accordance with inconceivable. the practice of the Commission, the decisions adopted at the end of the year allocating the funds relate only In its rejoinder, the Commission takes the to the contributions for the current view that the request for an examination year and, in some cases, to the of witnesses depends on a series of following year, but never entail the assertions which do not tally with the implied revocation or the amendment position in the Community pursuant to of allocations laid down for the the rules in force. Requests made by the preceding year; Member States to the European Social Fund are considered in the first place (f) it is a fact that, despite the from the point of view of their Commission's practice in all other admissibility and in the second place as cases of intervention by the Eu­ to their eligibility for a favourable or ropean Social Fund, the Board has unfavourable decision. In the case of a not received the expected payment favourable decision, it is a matter of

EISS / COMMISSION

decision itself. The decision therefore with the programme between 1973 and creates a legal nexus between the 1976 are governed by the provisions Commission and the Member State to which were in force before 1 January which it is addressed, and in such a 1978. It is therefore clear that the context the body appointed to carry out scheme applicable is not one of advances the project must comply with what the but of payments on account, which latter Commission has decided, not with what might be paid (as indeed they were) as a it has requested through its national partial reimbursement of chargeable government, and must faithfully carry expenditure already incurred by the out the training programme in order to Board on presentation of the appropriate obtain reimbursement of its chargeable application by the Italian Republic and expenditure up to the amount of national subject to such verifications and checks

by national officials and Community officials, does not represent, as the Board believes, the 85 % granted as the sum of the payments on account. Those amounts represent 84.4% of the credits The arrangements for the payment of allocated for 1974, 87.7% of those for assistance by the Community were sub 1975, 53.3% of those for 1976, and stantially altered as from 1 January 1978. together they constitute payment in full Until that date, there was provision for including the final balance after the payments to be made on account as the auditing of the accounts and after the operation progressed on submission by appropriate checks had been carried out. the Member State of a detailed statement of the chargeable expenditure; the total of such payments could never exceed 85 % of the assistance allocated, since the settlement of the final balance was held Credits which were allocated to the over to a date subsequent to the programme for 1973, which were not completion of the project.

JUDGMENT OF 15. 3. 1984 — CASE 310/81

IV — Questions put by the Court The Court also asked the Italian Government whether it agreed with the Commission on the amount of the The Court requested the Commission to assistance which fell to be paid in this submit to it a memorandum (together case. with supporting documents) relating to the requests for payment made by the The Italian Government replied that in Italian Government and the reductions the circumstances it could not do imposed by the Commission following otherwise than to state that it had the checks which it carried out jointly accepted the Commission's decision with the Italian Government, and to state refusing the requests of the Board. whether the amount determined on that basis was recognized by the Italian Government as constituting the financial assistance in question. V — Oral procedure

The Commission submitted the mem­ The Commission of the European orandum requested, and made the point Communities, represented by its Legal that sums advanced by the Italian Adviser, A. Toledano Laredo, acting as Government to the Board for 1973 were Agent, submitted oral argument at the subsequently recovered by the Ministry sitting on 9 June 1983. of Labour, so that the sums paid by the Commission perfectly matched those The Advocate General delivered his finally paid by the Italian Government opinion at the sitting on 29 September throughout the period of the project. 1983.

Decision

1 By application lodged at the Court Registry on 8 December 1981 pursuant to Article 178 and the second paragraph of Article 215 of the EEC Treaty the Ente Italiano di Servizio Sociale [Italian Social Services Board , hereinafter referred to as " the Board "] claimed compensation for the damage caused by the Commission's not having placed at its disposal, under Article 2 (2) of the Commission's decision of 27 December 1973 , the sum of LIT 371 649 981 which it should have received as a final balance by April 1978, and for the damage arising from the fact that , as a result of not having had the use of that sum when it was required , the Board was made to incur a large overdraft at the bank and suffered consequential damage in the form of considerable charges for interest.

7 In a decision of 27 December 1973 addressed to the Italian Republic, the Commission allowed the request for assistance submitted by the Italian Republic, "to carry out a training project in the period from 1 January 1973 to 31 December 1974 for some 1 150 unemployed young persons from the Mezzogiorno to be re-employed as social workers or assistants in the Mezzogiorno or in areas with a high proportion of immigrant workers from the Mezzogiorno". The decision put at the disposal of the Board LIT 1 726 207 592 designated as assistance by the European Social Fund in order to carry out the operations referred to in the decision. That sum was allocated as to LIT 274 721 810 for 1973 and as to LIT 1 451 485 782 for 1974.

JUDGMENT OF 15. 3. 1984 — CASE 310/81

8 It appears from the preamble to that decision that on 10 July 1973, the Italian Republic had submitted a request to the European Social Fund on behalf of the Board to support, in the period from 1 January 1973 to 31 December 1974, a project intended to promote the training of some 1 150 unemployed young persons from the Mezzogiorno as social workers or assistants to be re-employed in that capacity in the Mezzogiorno itself or in areas with a high proportion of immigrant workers from the Mezzogiorno. The Commission found that that request was in accordance with the provisions governing the operation of the European Social Fund, subject to checks being carried out in the course of the project's execution on its compliance with the rules in force.

9 It appears from the file that after a check was carried out in June and July 1974 by officials of the Commission and the Italian Ministry of Labour, the Commission took the view that the criteria which it had laid down in its decision were not satisfied by the Board's activities in 1973. The Commission accordingly refused the assistance which had been allocated by the European Social Fund for 1973.

H It should be recalled that the financing procedure of the European Social Fund is as follows. Requests for assistance are submitted by Member States to the Commission. If the Commission considers that the request falls within the objectives of the European Social Fund and that it should be given priority, the Commission addresses a decision to the Member State concerned after receiving the opinion of the European Social Fund Committee. That decision places the applicant Member State under a number of obligations. In particular that State undertakes to assume a financial burden equal to the amount requested from the Commission as a reimbursement for the cost of the project, to obtain all documents regarding the project and to verify their accuracy, to request payments on account from the European Social Fund as the operation progresses and the payment of the final balance, and to facilitate the checks made by the Commission to establish whether the activities completed or in course of completion comply with the relevant provisions.

is It follows that this procedure creates a financial relationship between the Commission and the Member State on the one hand and between that Member State and the institution which is the recipient of the financial assistance on the other.

i6 In order that, in such a situation, liability on the part of the Community towards the recipient institution may arise, it is not enough to state, as does the applicant, that it is entitled to a "balance" from the Commission on the ground that "acts" or "conduct" on the part of that institution — none of which is specified in the application or the reply — are invalid or illegal. For this purpose it is not sufficient merely to mention that the result of checks carried out by Commission officials did not show as many irregularities as

THE COURT (First Chamber)

hereby:

1. Dismisses the application;

2. Orders the applicant to pay the costs.

Koopmans O'Keeffe Bosco

Delivered in open court in Luxembourg on 15 March 1984.