T-491/93

Commission of the European Communities, represented by Berend Jan Drijber and Nicholas Khan, of its Legal Service, and, at the hearing, by Marie-José Jonczy, Legal Adviser, of its Legal Service, acting as Agents, with an address for service in Luxembourg at the office of Carlos Gómez de la Cruz, of its Legal Service, Wagner Centre, Kirchberg,

defendant,

A P P L I C A T I O N for (i) annulment of the decision of the Commission of 1 April 1993 addressed to the Vnesheconombank and (ii) damages for the loss allegedly suffered by the applicant by reason of the contested decision,

•* Language of the case: Dutch.

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RICHCO v COMMISSION

Legal background

1 O n 16 December 1991, having established the need to provide food and medical aid to the Soviet Union and its constituent Republics, the Council adopted Decision 91/658/EEC granting a medium-term loan to the Soviet Union and its constituent Republics (OJ 1991 L 362, p. 89, hereinafter 'Decision 91/658'), which provides as follows:

'Article 1

1. The Community shall grant to the USSR and its constituent Republics a medium-term loan of not more than E C U 1 250 million in principal, in three suc- cessive instalments and for a maximum duration of three years, in order to enable agricultural and food products and medical supplies (...) to be imported.

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(...)

3. Imports of products financed by the loan shall be effected at world market prices. Free competition shall be guaranteed for the purchase and supply of prod- ucts, which shall meet internationally recognized standards of quality.'

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2 O n 9 July 1992 the Commission adopted Regulation (EEC) N o 1897/92 laying down detailed rules for the implementation of a medium-term loan to the Soviet Union and its constituent Republics (OJ 1992 L 191, p. 22, hereinafter 'Regulation N o 1897/92'), which provides:

'Article 2

Recognition referred to in Article 4 shall only be granted subject to fulfilment of, in particular, the conditions referred to in this Article.

1. The contract was awarded following a procedure guaranteeing free competition. (...) II-1137

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2. The contract offers the most favourable terms of purchase in relation to the price normally obtained on the international markets.'

3 O n 9 December 1992 the E E C , the Russian Federation and its financial agent, the Vnesheconombank ('VEB') signed, pursuant to Regulation N o 1897/92, a Memo- randum of Understanding, on the basis of which the European Community was to grant to Russia the loan provided for by Decision 91/658. It was provided that the E E C as lender would grant to the VEB, as borrower, under the guarantee of the Russian Federation, a medium-term loan of the principal sum of E C U 349 million for a maximum term of three years. The Memorandum of Understanding states:

'6. The proceeds of the loan, less commissions and costs incurred by the EEC, shall be disbursed to the Borrower and applied, according to the terms and condi- tions of the Loan Agreement, exclusively to cover irrevocable documentary credits issued by the Borrower in international standard form pursuant to delivery con- tracts provided that such contracts and documentary credits have been approved by the Commission of the European Communities as complying with the Council decision of 16 December 1991 and the present Memorandum of Understanding.'

5.1 Procedure

(a) The Borrower shall notify the Lender of a proposed Disbursement by issuing an Approval Request (...)

(b) If the Drawing Period has commenced and if the Lender is satisfied, on the basis of the information contained in the Approval Request and in its absolute discretion, that the purpose of the proposed Disbursement is in accordance with Clause 3 and the Memorandum of Understanding and the Advising/ Confirming Bank named in the Approval Request is acceptable to the Lender, it shall within a reasonable time issue a Notice of Confirmation substantially in the form of Schedule 3.

(c) Following receipt of a Notice of Confirmation in respect of a proposed Dis- bursement the Borrower shall issue a Disbursement Request within the Dis- bursement Period in accordance with the provisions of Clause 5.3.

(...)

5.3 Disbursement

(ii) be signed by the Borrower;

(iii) request the relevant payment to be made not later than the last Business Day of the Drawing Period to the Approved Confirming Bank by having the account of such bank credited with the amount of such payment;

(iv) be accompanied by documents as specified in Schedule 4.'

6 The irrevocable documentary credit machinery provided for is in accordance with the 'uniform customs and practices for documentary credits' elaborated by the Paris International Chamber of Commerce and adopted by the Community as the standard form of documentary credit to be used by issuing banks.

7 O n 15 January 1993, in accordance with Article 2 of Decision 91/658, the Com- mission as borrower concluded on behalf of the Community a loan agreement with a consortium of banks led by Credit Lyonnais.

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1 2 According to the applicant, the documentary credit did not become effective until 22 February 1993, that is to say, one week before the end of the shipment period provided for by the contracts (28 February 1993).

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13 Although a substantial part of the goods had been delivered or was in the course of shipment, it was becoming clear, according to the applicant, that it would not be possible to deliver all the goods by 28 February 1993.

i4 O n 19 February 1993 Exportkhleb invited all the exporters to attend a meeting in Brussels, which was held on 22 and 23 February 1993. At that meeting Export- khleb requested the exporters to submit fresh quotations for delivery of what it termed the 'foreseeable balance', that is to say, the quantities which could not rea- sonably be expected to be delivered by 28 February 1993. According to the appli- cant, the price of wheat on the world market rose considerably between Novem- ber 1992, when the sale contract was concluded, and February 1993, when the fresh negotiations took place.

is Following negotiations in which the exporting companies had to align themselves on the lowest bid, namely US$155 per tonne, reflecting, according to the appli- cant, the price on the world market at that date, agreement was reached between Exportkhleb and its contracting partners regarding the allocation of the fresh quantities to be supplied by each company. Richco Commodities was awarded a contract for 450 000 tonnes of milling wheat for delivery during the period from March to April 1993. Applying the new rate of exchange fixed by the parties, the price agreed was E C U 132.

20 According to the applicant, the documentation containing the new bids and the amendments to the contracts was officially sent by the VEB to the Commission on 23 and 26 March 1993. The applicant maintains that on 7 April 1993 it was informed by Exportkhleb of the Commission's refusal to approve the amendments to the contract as initially concluded; that refusal was given concrete form by a let- ter sent to the VEB on 1 April 1993 by the Agriculture Commissioner.

Procedure and forms of order sought

22 It was in those circumstances that, by application lodged at the Registry of the Court of Justice on 5 July 1993 and registered under number C-343/93, the appli- cant brought the present action.

23 By order of 27 September 1993 the Court of Justice referred the case to the Court of First Instance of the European Communities pursuant to Council Decision 93/350/Euratom, ECSC, E E C of 8 June 1993 amending Decision 88/591/ECSC, E E C , Euratom establishing a Court of First Instance of the European Communi- ties (OJ1993 L 144, p. 21).

24 The case was registered in the Registry of the Court of First Instance under num- ber T-491/93. By document lodged at the Registry on 30 September 1993 the Commission raised an objection of inadmissibility.

25 U p o n hearing the Report of the Judge-Rapporteur, the Court of First Instance (Third Chamber) decided to open the oral procedure without any preparatory inquiry.

26 At the hearing on 25 April 1996 the parties presented oral argument and answered questions put to them by the Court.

28 In its objection of inadmissibility, the Commission contends that the Court should:

— declare the application for annulment inadmissible;

— declare the application for damages inadmissible;

— order the applicant to pay the costs.

29 In its observations on the objection of inadmissibility, the applicant claims that the Court should:

— dismiss the objection of inadmissibility as regards both the application for annulment and the application to establish non-contractual liability;

30 The Commission raises an objection of inadmissibility on the ground that the con- tested measure is not of direct concern to the applicant within the meaning of the fourth paragraph of Article 173 of the Treaty.

3i The Commission first presents lengthy explanations describing the machinery of the rules and agreements in issue. It points out that the very nature of the arrange- ments made is such as to render the claim inadmissible under Article 173 of the Treaty.

32 The Commission observes that the Memorandum of Understanding constitutes the basis of the agreement between the Community and the Russian Federation for the grant of the loan. The Memorandum of Understanding fixes the amount of the loan (ECU 349 million) and lists the conditions for approval of contracts.

33 As regards the loan agreement, the Commission points out, first, that there is nothing to suggest that the facility for which it provides was to become available with effect from 15 January 1993, since clause 4 requires various conditions to be fulfilled prior to its becoming operational, and, second, that that agreement does not confer on it any role in the conclusion of the supply contracts, its involvement being limited to verifying that those contracts qualify for the Community loan.

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RICHCO v COMMISSION

36 As regards the notice of confirmation, the Commission states that it examined the contract submitted by the VEB in the light of the provisions of the loan agreement and drew up its note on 27 January 1993, that is to say, before the contract was modified.

37 Continuing with its opening remarks, the Commission notes the analogies between that system and the system governing the financing of development projects in the context of the Lomé Convention. As the Court of Justice stated in

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its judgment in Case 126/83 STS v Commission [1984] ECR2769, Article 120 of the Lomé Convention lays down the principle that States have sole responsibility for implementing projects and action programmes. Accordingly, they are respon- sible for preparing, negotiating and concluding the necessary contracts for the implementation of those operations. The Commission asserts that the position is the same as regards the system set up for the financing of imports of wheat, since the Memorandum of Understanding provides that the loan is to cover irrevocable documentary credits issued by the borrower pursuant to supply contracts. It main- tains that it plays an even greater role within the Lomé system than in the context of the Russian loan, inasmuch as it takes no part, in the present case, in the award of the contract.

38 In the Commission's view, the contested letter of 1 April 1993 cannot be regarded as being of direct concern to the applicant within the meaning of the fourth para- graph of Article 173 of the Treaty. According to the Commission, the applicant is completely confusing the role of the Commission, which is solely to authorize dis- bursement of the Russian loan, with its contractual relationship with Exportkhleb. Thus the Commission's refusal had no legal effect on that contractual relationship; regardless of the Commission's decision, Exportkhleb was bound to pay the increased price. The consequence of the Commission's letter is merely that the loan can no longer be used to pay for the deliveries of wheat in accordance with the revised terms of the contract.

43 Second, the VEB, as the addressee of the Commission's decision, had no discretion in the event of refusal by the Commission to approve the contract. Having regard to the reasoning applied by the Court of Justice in its judgment in Joined Cases 41/70, 42/70, 43/70 and 44/70 International Fruit Company and Others v Commis- sion [1971] ECR 411, the Commission's decision is indeed of direct concern to the applicant.

44 Third, the Commission has no discretion concerning the application of the condi- tions set out in Regulation N o 1897/92, which has direct effect. Consequently, contracting undertakings have the right to require the Commission to adopt a decision, whether favourable or unfavourable, concerning approval of the contract. If they are deprived of that right, their interests are prejudiced and they are con- sequently directly concerned.

45 F o u r t h , the very n a t u r e and scope of t h e C o m m i s s i o n ' s decision p r o m p t t h e c o n - clusion that the applicant is directly c o n c e r n e d (judgment of the C o u r t of Justice in C a s e 100/74 CAM v Commission [1975] E C R 1393). T h e decision w a s i n t e n d e d t o enable the Russian F e d e r a t i o n t o acquire essential p r o d u c t s u n d e r n o r m a l s u p p l y c o n d i t i o n s . A refusal decision m a y m e a n that the c o n t r a c t falls t h r o u g h or,

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as in the present case, that a supplier is obliged to deliver at prices not in line with market conditions.

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conclude the contract. The Commission's role is merely to verify that the condi- tions for Community financing are fulfilled and, where necessary, to acknowledge, for the purposes of disbursement of the loan, that such contracts are in conformity with the provisions of Decision 91/658 and with the agreements concluded with the Russian Federation. It is not for the Commission, therefore, to assess the com- mercial contract with reference to any other criteria.

si It follows that the undertaking to which a contract is awarded has a legal relation- ship only with the party with whom it contracts, namely Exportkhleb, which is authorized by the Russian Federation to conclude contracts for the purchase of wheat. The Commission, for its part, has legal relations only with the borrower, namely the Russian Federation's financial agent, the VEB, which notifies it of the commercial contracts so that their conformity can be recognized, and which is the addressee of the Commission's decision in that regard.

52 The action of the Commission does not therefore affect the legal validity of the commercial contract concluded between the applicant and Exportkhleb; nor does it modify the terms of the contract, such as the prices agreed between the parties. Thus, irrespective of the Commission's decision not to recognize the agreements as being in conformity with the applicable provisions, the amendment which the par- ties made on 23 February 1993 to their contract of 28 November 1992 remains val- idly concluded on the terms agreed between them.

55 Furthermore, as regards the direct applicability of Regulation N o 1897/92, on which the applicant relies, the Court observes that Article 5 of that regulation lists on a non-exhaustive basis — as is apparent from the use of the adverbial phrase 'in particular' — the conditions which contracts must fulfil in order to qualify for Community financing; in addition, Article 4(1) of the regulation expressly refers to the provisions of the agreements concluded between the Russian Federation and the Commission. As regards the loan agreement, which sets out in precise terms the detailed rules pursuant to which Community financing is granted, Article 5.1 thereof refers to the absolute discretion of the Commission. In those circum- stances, the applicant's argument does not appear to be well founded.

56 Lastly, in order to establish that the contested decision is of direct concern to it, the applicant cannot rely on the presence in the commercial contracts of a suspen- sory clause making the performance of the contract and payment of the contract price subject to acknowledgement by the Commission that the criteria for dis- bursement of the Community loan are fulfilled. Such a clause is a link which the contracting parties decide to make between the contract concluded by them and a

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contingent future event: their agreement will be binding only if the latter occurs. The admissibility of an application under the fourth paragraph of Article 173 of the Treaty cannot, however, be made dependent on the intention of the parties. The applicant's argument must therefore be rejected.

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60 Lastly, the Commission points out that a substantial proportion of the deliveries in respect of which the applicant is seeking compensation was made before the VEB sought the Commission's approval of the amendments. The applicant could obtain from Exportkhleb the difference in price it claims only on the basis of the contrac- tual obligations agreed with Exportkhleb. The Commission cannot be held liable for a breach of contract by Exportkhleb or the VEB at a time when the Commu- nity had not yet entered into any commitment in relation to the documentary credit.

6i The applicant points out that an action for damages is an independent legal rem- edy. Its action based on Article 215 of the Treaty is distinct from its action for annulment, since it seeks not the annulment of the decision but compensation for the loss caused by the Community (judgment of the Court of Justice in Case 175/84 Krohn v Commission [1986] ECR 753). The application for damages was not made in order to obtain payment of the revised price agreed with Export- khleb but with a view to making good the damage caused to it by the Commis- sion's refusal, in breach of the law and contrary to the principle of the protection of legitimate expectations, to approve that agreed price.

Findings of the Court

62 The Commission advances, in essence, three arguments in support of its objection to the admissibility of the claim for damages for the loss allegedly suffered by the applicant as a result of the decision of 1 April 1993. First of all, that decision was perfectly legal; next, it cannot be held liable for a breach of contract by Export- khleb or the VEB at a time when it had not yet entered into any commitment; and lastly, the claim for damages in the present case is not separate from the claim for annulment.

66 In the present case, the Court considers that the Commission has not discharged that burden. First, the defendant has simply asserted that the applicant is merely seeking to obtain the same price as it would have obtained if the Commission had approved the amendment to the contract. Second, as the Court of Justice held in its judgment in CMC v Commission, which concerned an invitation to tender under the Lomé Convention, it would be wrong, in circumstances such as those of the present case, to dismiss the possibility that acts or conduct of the Commission or its officials or agents might cause damage to third parties. Any person who claims to have been injured by such acts or conduct must therefore have the pos- sibility of bringing an action, if he is able to establish liability, that is, the existence of damage caused by an illegal act or illegal conduct on the part of the Community (judgment in CMC v Commission, paragraph 31).

67 In view of all the foregoing considerations, the claim for compensation for the pecuniary damage allegedly suffered by the applicant as a result of the Commis- sion's decision must be declared admissible.

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Costs

6s Under Article 87(1) of the Rules of Procedure, a decision as to costs is to be given in the final judgment or in the order -which closes the proceedings.

4. Reserves the costs.

Briët Vesterdorf Potocki

Delivered in open court in Luxembourg on 24 September 1996.

H. Jung C. P. Briët

Registrar President

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