C-209/90

OPINION OF MR LENZ — CASE C-209/90

OPINION OF ADVOCATE GENERAL LENZ delivered on 22 O c t o b e r 1991 *

Mr President, necessary for the implementation of Members of the Court, approved projects.

A — The facts 3. Under Clause 1.1 of the contract, the contracting party undertook to carry out a project which was described as follows:

1. The parties are in dispute over a claim by the Commission under a contract originally concluded between the European Economic 'Piggery for production of heat required for Community and Felix Schulze Isfort-Ekel, a anaerobic processes using solar energy and farmer, in which the defendant later took conversion of sewage gas (biogas) into heat the place of the original party to the and electrical energy.' contract. In the Commission's opinion, the Court's jurisdiction in the present case is founded on Clause 13 of the contract, which contains the following provision: According to the timetable of works in Annex I (Table 3), the final phase of the project (bringing into operation, demon- stration, measurements programme) was to 'The contracting parties agree that the be completed by the end of 1984. Court of Justice of the European Communities shall have exclusive juris- diction over all disputes on the validity, interpretation and application of this contract.' 4. In Clauses 1.2 and 3 of the contract the Community undertook to pay the contracting party financial support, defined as 40% of the actual cost of the project, as checked and approved by the Commission, 2. The terms of the contract are based on excluding value-added tax and not Council Regulation (EEC) No 1302/78 of exceeding D M 240 000. 12 June 1978 on the granting of financial support for projects to exploit alternative energy sources, 1Article 8 of which provides inter alia that the Commission is to negotiate and conclude the contracts 5. Clause 14 of the contract states that it is governed by German law. The contract 'f Original language: German. further contains inter alia a series of 1 — OJ 1978 L 158, p. 3. detailed provisions concerning situations in

'In the event of failure by the contracting party to comply with an obligation under this contract, the Commission may rescind this contract, if it has given notice of default 7. It is not disputed that the project which to the contracting party by registered letter was the subject of the contract was not and he has not complied with the obligation carried out. This resulted in extensive corre- in question within one month. The contract spondence between the parties, starting in may also be terminated if the contracting 1985. The Commission first — unsuc- party has made false statements in order to cessfully — requested the defendant to obtain the financial support, in so far as he repay the said amount. In a registered letter is liable for those statements. In either case of 9 December 1986, received by the the contracting party must repay to the defendant on 17 December 1986, it then Commission without delay the financial gave the defendant notice of default and support, together with interest from expiry stated that it would rescind the contract in of the said period of one month. The the event that the defendant did not within interest rate shall be that applied by the one month prove that he had land available European Investment Bank in force at the and had obtained the necessary official time of the Commission's decision to grant permits. The defendant did not produce any the financial support for the project.' of the proof required within that time-limit.

9. The defendant conceded that the project had failed, but did not make repayment. In (2) order the defendant to pay the costs. a letter of 19 July 1988, he claimed the right to set-off D M 71 000, as he had made considerable purchases of materials in performance of the contract. In this respect, he referred in a later letter to the legal 12. The defendant contends that the doctrine of culpa in contrahendo and an application should be dismissed and the assurance of 30 April 1985 by the Commission ordered to pay the costs. Commission that '40% of purchases of materials would be accepted as reimbursable items'. With reference to this letter, the Commission states in its application, without 13. I will come back to further details of being contradicted by the defendant, that it the facts and arguments of the parties, if does indeed mean that the Commission necessary, as part of my analysis; otherwise intended to finance 40% of the purchases of I refer to the Report for the Hearing. materials, but that promise was subject to the condition that the materials had been purchased before 31 December 1984 and the purchases attested by invoices and proofs of payment; the defendant did not B — Analysis however produce any proof.

Part 1 — Jurisdiction of the Court of Justice

14. The defendant objected that the Court 10. The Commission also puts forward a of Justice lacked jurisdiction, first in an claim for interest under two heads: interest application for an extension of time made at 6% from the date when the amount of even before the lodging of the defence, and D M 72 000 was paid to the defendant's again later at the hearing. Under Article predecessor in title, and interest at 11.9% 42(2) of the Rules of Procedure, all pleas in from the expiry of one month after the law must be contained in the first written notice of default in the letter of pleading (in this case, the defence: see 9 December 1986. Article 40(1) of the Rules of Procedure).

18. This argument lacks cogency. The defendant's interpretation of Clause 14 of the contract contradicts Clause 13 of the contract, which stipulates that the Court of Justice is to have exclusive jurisdiction. In view of the Community law background of 15. Although the defendant's objection does the contract and the possibility of conferring not therefore need to be considered (either jurisdiction expressly allowed by Article 181 on the ground that it was not made in due of the EEC Treaty, it must be assumed that form or was out of time), as it is a question the parties intended to base their arbitration of jurisdiction, I consider it appropriate in clause on that article. As can be seen from this instance for the Court to dismiss the the different way it is worded, Clause 14 objection on the merits. It should apply was intended not to render that clear Article 92(2) of the Rules of Procedure and decision ineffective, but merely to determine state expressly that it has jurisdiction under the substantive law to be applied to the Article 181 of the EEC Treaty to decide on contract. Moreover, that is consistent with both the Commission's claim and the the generally recognized principle that each defendant's counterclaim. court applies its own procedural rules, including rules on jurisdiction. 2 The procedural law of the Court of Justice includes Article 181 of the EEC Treaty, but not the (corresponding) provisions in the procedural codes of individual States. Besides, Article 181 should be regarded as a special rule applying to all courts equally, 16. On this point, I would make a number taking precedence over divergent provisions of observations. of national law, and governing the particular case of the Court's jurisdiction being founded on an arbitration clause. 3 This case is therefore from the outset outside the scope of the general rules of the German Code of Civil Procedure referred to by the defendant, which consequently cannot be relied on here. The Court of 17. 1. In objecting that the Court of Justice Justice therefore has jurisdiction under lacks jurisdiction to rule on the Clause 13 of the contract combined with Commission's claims, the defendant relies on Clause 14 of the contract. The reference 2 — Krück, IN: von der Groeben/Theising/Ehlermann, in that clause to German law is understood Kommentar zum EWG-Veitrag, 4th edition, Baden-Baden, 1991, Article 181, point 18, with further references. by the defendant as including also German 3 — T h e Court also appears to have adopted this approach in procedural law, in particular the Code of Pellegrini (on Article 153 of the EAEC Treaty): see Case 23/76 Pellegrini v Commission [1976] ECR 1807, Civil Procedure. Under those provisions, paragraph 9 et seq.

Part 2 — Claim by the Commission 7 to the principal sum (DM 72 000) under Clause 8 of the contract

20. The defendant initially based his claim for set-off on two grounds: alleged fault on the part of the Commission when concluding the contract (that is, conduct 22. I. Let me first make a preliminary which in German law can found a claim, remark on the application of Clause 14 of whose basis in law is taken to be a breach of the good faith demanded in contractual 6 — See Clause 3 of the contract in conjunction with Annex I, Part B(l) and (2). negotiations), and an alleged undertaking 7 — Although in the text of the contract the Community by the Commission to finance 40% of the appears as the party with which the defendant is contracting, Clause 8 provides that the sums mentioned costs of materials (which, as can be seen there are to be repaid to the Commission. The Commission can therefore bring the claim to repayment in its own name. The problems which might arise therefrom 4 — Case 426/85 Commission v Zoubek [1986] ECR 4057. in connection with claims which go beyond the text of 5 — Zoubek judgment, paragraph 11, referring to Article 6(3) Clause 8, or in connection with claims set off by the of the Convention of 27 September 1968 on Jurisdiction defendant, are of no relevance here; as explained below, and the Enforcement of Judgments in Civil and only the claims by the Commission based on the wording Commercial Matters. of Clause 8 are justified.

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26. II. Since the use of Clause 8 of the contract as the basis for the claim 23. Similar considerations appear inci- presupposes that the contract was validly dentally to be behind the second sentence of concluded between the defendant and the Paragraph 62 of the German Verwaltungs- Community, the defendant's arguments verfahrensgesetz (Law on Administrative must first be considered, in so far as they Procedure). 8 It contains a general can be understood as addressing this point. reference, in connection with public law contracts, to the 'provisions of the Civil Code'; however, these apply only by analogy and are therefore not applicable where they are inconsistent with the nature of the public law contract. 9 27. 1. The defendant maintains to begin with that the project was 'not feasible in Germany'. As can be seen from two letters from the Hassberge local authority, copies of which are annexed to the defence, he 24. That interpretation of Clause 14 will founds this argument on problems therefore be followed below. It is of course connected with building regulations which are said to have prevented the project being 8 — Law of 25 May 1976 (Bundesgesetzblatt (Federal Gazette) carried out on a specific piece of land which I, p. 1253), as amended. the defendant intended to use for that 9 — See Stelkens/Bonk/Leonhardt, Verwaltungsverfahrens- gesetz, Kommentar, 3rd edition, Munich, 1990, Paragraph purpose. He then goes on to argue that 62, point 12. because of the Energiewirtschaftsgesetz

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29. As for the questions of energy law, the defendant has not provided any information as to what legal possibilities the project presumed in this respect and in what way this was prevented by provisions of German law. 33. All these arguments could at most be relevant in the context of Paragraph 123 of the BGB, which states that a declaration of intent can be challenged if the person making it has been induced to do so by deceit or unlawful threats. The defendant has not indicated any facts which could 30. The contract cannot therefore be constitute such deceit or threats, nor does it regarded as invalid under Paragraph 306 of appear that he has challenged the the BGB. declaration of intent on his part which led to conclusion of the contract. Paragraph 10 — Palandt, Bürgerliches Gesetzbuch, Kommentar, 50th 123 of the BGB thus cannot apply in any edition, Munich, 1991, Paragraph 306, point 3 (by Heinrichs). event.

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36. 1. Firstly, as far as the necessary declaration of rescission 1 1is concerned, 37. 2. The conditions for rescission in the parties are ultimately in dispute only on Clause 8 of the contract are: the point in time when the defendant received such a declaration, in other words whether it was already contained in the letter of 9 December 1986. The Commission considers that it was, but the defendant argues that that letter merely contains a statement (combined with the notice of default) that the contract would be rescinded, but not yet the rescission itself. — failure to comply with an obligation However, he conceded on page 3 of his under the contract; defence and at the oral hearing that the contract was ('indisputably') 'terminated' 12 by a letter of 16 September 1987. It is correct that on that date the Commission,

11 — See the first sentence of Clause 8 of the contract: ... the Commission may rescind this c o n t r a c t . . . . 12 — This obviously refers to rescission, as maintained by the Commission, rather than termination under Clause 9 of — notice of default given by registered the contract. letter;

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42. In Clause 2, he undertakes to comply with the timetable laid down in Annex 1. 39. The second of the three aforesaid Under Clause 4.1 he has 'technical and conditions (notice of default) was thus financial responsibility' for the work to be undoubtedly fully complied with; with carried out. In relation to the Commission respect to the first and third conditions he is solely liable under Clause 6 for (failure to comply with a contractual obli- gation, failure to remedy the breach within 13 — The case where the Community (negatively) fails to fulfil one month), it must be stated that these are its own obligations or (positively) prevents or delays performance of the contract is not relevant here and may met, at least objectively. be left aside.

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damage caused to third parties as a result of terminated before there is a breach of the carrying out the contract. type mentioned in Clause 8.

45. These provisions taken together yield the principle that in order to obtain the financial support the contracting party was 48. IV. It must now be considered whether to bear in full the risk involved in carrying the claim for this amount should not be out the project and would not retain a claim dismissed because of the claim which has to that support if the project was not carried been made for set-off. out (in accordance with the timetable), whereas the Community on the other hand was not to be exposed to the risk of a failure, even where there was no fault. An exception to this principle, which confirms it and at the same time slightly mitigates its 49. It is apparent, however, that the claims severity, is contemplated in Clause 9 of the put forward by the defendant by way of contract, but only if the contract is set-off are unfounded.

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50. 1. With respect to the claim on the basis et seq. and Paragraph 631 et seq. of the of fault in concluding the contract, the BGB), do not, contrary to the defendant's defendant has not stated what conduct on opinion, give rise to any claim in his favour, the part of the Commission is considered to even if account is also taken of the found such fault. entitlement under Paragraph 670 to the reimbursement of expenditure, which under Paragraph 675 may be applied in the law on contracts of employment and contracts for services.

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57. (c) Finally, the defendant argues, if I covered only the costs of materials including have correctly understood him, that there delivery 15 and assembly costs. 16 would be a breach of Paragraph 242 of the BGB if he did not have the right to reim- bursement of expenses to the extent claimed. Under that provision, a debtor is obliged to perform a contractual obligation in good faith having regard to accepted practice. 61. (b) As to the costs of equipment, which the defendant puts at DM 44 190, and other costs of materials, which in the defendant's opinion amount to DM 37 083, the Commission admittedly did not argue that they were not covered by its promise. However, the defendant has not even itemized the 'costs of equipment' of 58. However, in view of the abovemen- DM 44 190 and in particular has not shown tioned objectives of the contract, I cannot any connection between those costs and the find in the result objected to by the project in question. The same is true of the defendant, namely that he has no such other costs of materials (allegedly claims, any breach of the principle of good amounting to DM 37 083). Furthermore, in faith. accordance with the burden of proof to be applied in connection with this type of promise, the Commission imposed a condition for payment, namely that the purchases of materials should be evidenced by invoices and proofs of payment. But neither before the proceedings nor in his defence (a rejoinder was not submitted in 59. 3. The defendant also relies on the time) has the defendant produced such Commission's promise, which, it does not documents or other evidence to show dispute, was given in its letter of 30 April whether — and if so to what amount — he 1985, to finance 40% of the cost of or his predecessor in title actually incurred materials. However, this submission too the costs claimed. The letter from the fails. Gartner undertaking which has been produced in that connection merely shows that the defendant ordered the materials in question, which is also how he puts it in his defence; neither the letter from Gartner nor the defence refers to delivery or payment.

also fails. The claim for the principal sum flat-rate calculation should be carried out to must therefore be upheld. determine the interest rate, the amount of interest actually earned on the principal sum by the defendant being irrelevant. The interest rate generally prescribed in Germany for such cases is 6%. On this point the Commission refers to Paragraph Part 3 — The Commission's entitlement to 44a(3) of the Bundeshaushaltsordnung the interest claimed (Federal Budget Code). 20 That provision reflects the principle that the recipient of a subsidy from public funds should not, if that subsidy has to be repaid, retain interest gained on the sum he has been paid. 63. I. Firstly, it must be stated that the Commission is entitled under the contract to interest (on the principal sum) at the rate of 11.9% from 18 January 1987, as claimed. The claim is justified in principle, since under Clause 8 of the contract it is linked to the claim for repayment (of the principal 65. However, the claim finds no support in sum) without any further conditions, and is any of the bases cited by the Commission, also justified as to quantum, as the rate nor in any other discernible basis. claimed of 11.9% undisputedly corresponds to the terms of the contract 17 and the time-limit provided for in the third sentence of Clause 8 of the contract, namely one month from the notice of default, 18 expired on 17 January 1987, which corresponds to the Commission's claim that interest is 66. 1. With respect to the contract between payable from 18 January 1987. the parties, it must be stated that the wording of Clause 8 is clear and unam- biguous as to the effects of the rescission provided for therein, conferring on the Commission certain precisely specified rights. There is no doubt — nor is it 64. II. The Commission also claims interest, disputed — that this claim for interest is not however, for the period from 24 January one of those rights. 1983 (to 17 January 1987). In its opinion, the contract provides in the event of rescission by the Commission for a resti- tution procedure intended to restore the status quo ante. The Commission considers, referring to Zoubek, 19 that this procedure must also embrace the interest which has 67. 2. It is therefore necessary to examine accrued since payment of the advance. A the Commission's argument, referred to above, that this part of the claim follows 17 — The interest rate of the European Investment Bank in from the fact that the restitution procedure force at the time of the Commission's decision to grant under the contract is intended to restore the financial support for the project. status quo ante. 18 — It is not disputed that this reached the defendant on 17 December 1986. 19 — See note 4 above. 20 — Of 19 August 1969 (Bundesgesetzblatt I, p. 1284).

69. That provision is to be understood as 71. Accordingly, the Commission's meaning that apart from the claims to argument that rescission as defined in interest specified there, no further claims of Clause 8 of the contract is intended to that type were to be allowed. That Clause 8 restore the status quo ante is untenable. That of the contract was intended to have such a is true first of all, with no further expla- conclusive character can be deduced from nation being required, if the said argument Article 8(1) of Regulation No 1302/78, is to be understood simply as an interpre- which defines the competence and tation of the term 'rescission'. But it is also procedure for the conclusion of contracts true if the Commission was thereby for financial support as follows: referring to a principle which it believed could be found in Community law, applicable to rescission of public-law contracts involving subsidies. Even if such a principle did exist, it would scarcely be of 'The Commission shall negotiate and equal rank with the law of the EEC Treaty conclude the contracts necessary for the and legal rules equated thereto, but would implementation of projects selected pursuant rank with secondary Community law and to Article 6. To that end the Commission would here be overridden by the provision, shall draw up a model contract setting forth based on Article 8 of Regulation the rights and obligations of each party and No 1302/78, of the contract for financial in particular the procedures for any support. repayment of amounts of financial support.'

73. This passage should however be understood merely as an interpretation of the contract at issue in that particular case. This follows from the connection with 76. (a) A general principle, independent of paragraph 6 of that judgment, which states: express provisions, 23 that the recipient of a subsidy paid from public funds who is obliged to make repayment may not keep any interest which has been earned on the sum paid over to him, is not recognized in 'Article 7 of the contract, which stipulates German law. 24 The general rules of that the Commission may terminate the German administrative law on the matter — contract for non-performance or improper Paragraphs 48 and 49 of the Verwaltungs- performance on the part of the other verfahrensgesetz and Paragraph 44a of the contracting party, after giving notice to the Bundeshaushaltsordnung ·— which might latter by registered letter, constitutes an have yielded such a principle, do not apply expressed termination clause, according to to public law contracts in the first place, but which one party may, as a means of only to unilateral acts of the adminis- penalizing the other party for improper tration. 25 Precisely in the present case of performance of its obligations, terminate the the payment of a subsidy under a public-law contract without the intervention of the contract, the realization of the public courts.' interest, which would be the basis of the alleged principle (if such a principle did exist), is thus left to the contracting parties. 26

77. Moreover, a principle as described by of Paragraph 44a(3) of the the Commission cannot even be deduced Bundeshaushaltsordnung. from the aforesaid rules of administrative law. For the purposes of annulment of an administrative act which was lawful at the time it was adopted — a case which corresponds (at the level of the granting of subsidy by means of a unilateral adminis- trative act) to the present one, since there is 78. It follows that the principle on which nothing to suggest that the contract between the Commission seeks to rely cannot be the Community and the defendant was not found in German law. lawful — such an act is regarded as a 'lawful' administrative act. 27 Under Paragraph 49 of the Verwaltungsverfahrens- gesetz it can therefore only be annulled or revoked with future effect, which by defi- nition excludes the possibility of interest being payable on the claim to reim- 79. (b) The third sentence of Paragraph 347 bursement for the period before the revo- of the BGB, which states that in the event of cation. 28 Paragraph 44a of the Bundes- rescission 'interest shall be payable on a sum haushaltsordnung, the special rule for of money from the time of receipt', is voluntary subsidies, which specifically likewise not a possible basis for this part of provides in subparagraph 3 for interest to be the claim to interest, since that provision, as payable on claims to reimbursement from the above observations show, is incom- the time when they arise, also makes no patible with the nature of the contract and provision for retroactive revocation, which hence not applicable. 30 would make the claim to reimbursement arise retrospectively from the time when the administrative act was adopted. On the contrary, it is within the administrative authorities' discretion to decide whether to annul the administrative act with future or with retrospective effect. 29 Even in the event of revocation with retrospective effect Part 4 — Costs the claim to interest can be waived in the circumstances stated in the second sentence

(2) The remainder of the claim is dismissed.

(3) The defendant is ordered to pay the costs.

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