T-271/94

BRANCO v COMMISSION

J U D G M E N T O F T H E C O U R T O F FIRST I N S T A N C E (Fifth Chamber) 11 July 1996*

In Case T-271/94,

Eugênio Branco Ld. a , a company incorporated under Portuguese law, having its registered office in Lisbon, represented by Bolota Belchior, of the Bar of Vila Nova de Gaia, with an address for service in Luxembourg at the Chambers of Jacques Schroeder, 6 Rue Heine,

applicant,

v

letter from the defendant of 16 June 1994 rejecting a claim for final payment of financial assistance granted to the applicant by the European Social Fund for two training programmes, reducing such assistance and seeking repayment of the advances previously paid by the European Social Fund and the Portuguese State,

T H E C O U R T O F FIRST INSTANCE O F T H E E U R O P E A N C O M M U N I T I E S (Fifth Chamber),

composed of: R. Schintgen, President, R. Garcia-Valdecasas and J. Azizi, Judges,

Registrar: B. Pastor, Administrator,

having regard to the written procedure and further to the hearing on 4 June 1996

gives the following

2 Article 1 of Council Regulation (EEC) N o 2950/83 of 17 October 1983 on the implementation of Decision 83/516/EEC on the tasks of the European Social Fund (OJ 1983 L 289, p. 1) sets out the types of expenditure eligible for assistance from the ESF.

3 Pursuant to Article 5(1) of the regulation, ESF approval of an application for financial assistance is to be followed by payment of an advance of 50% of the assistance on the date on which the training operation is scheduled to begin. Article 5(4) provides that final payment claims must contain a detailed report on the content, results and financial aspects of the relevant operation and requires the Member State concerned to certify the accuracy of the facts and accounts in pay- ment claims.

4 According to Article 7(1) of the regulation, both the Commission and the Member State concerned may check the use to which the aid is put. Article 7 of Commis- sion Decision 83/673/EEC of 22 December 1983 on the management of the Euro- pean Social Fund (OJ 1983 L 377, p. 1, requires the Member State investigating the use of aid because of suspected irregularities to notify the Commission thereof without delay.

5 Finally, Article 6(1) of the regulation provides that when ESF assistance is not used in conformity with the conditions set out in the decision granting approval, the Commission may suspend, reduce or withdraw the aid after having given the rel- evant Member State an opportunity to comment. Under Article 6(2), sums paid which are not used in accordance with the conditions laid down in the decision

8 O n completion of the training operations, which took place from 1 January 1987 to 31 December 1987, it submitted to the DAFSE claims for final payment of the aid.

9 By two letters of 24 April 1989, it informed the defendant that, pursuant to Article 7 of Decision 83/673, it had suspended payment of the balance.

io O n 30 July 1990, the DAFSE informed the defendant that it considered certain expenditure to be ineligible and that it had authorized the repayment of corre- sponding amounts which it had paid to the applicant by way of advances.

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BRANCO v COMMISSION

ii By two letters of the same date, received the following day, the D AFSE instructed the applicant to repay within 10 days the advances amounting to ESC 1 535 946 (file N o 870302 P3) and ESC 4 399 475 (file N o 870301 PI), paid by the ESF, and to ESC 1 256 683 (file N o 870302 P3) and ESC 3 599 570 (file N o 870301 PI), paid by the Portuguese State by way of national contribution. The demand for repay- ment stated that it not prejudge in any way the adjustments which might be deemed necessary following investigations carried out by the competent bodies or, with respect to file N o 870301 P I , a decision of the defendant.

JUDGMENT OF 11. 7. 1996 — CASE T-271/94

2. However, the Commission's decision depends on the outcome of the certifica- tion, to be carried out by the Member States, of the accuracy of the facts and accounts contained in the claims for final payment (Article 5(4) of Regulation N o 2950/83). The Commission considers that the Member States are better able to assess whether the costs attributed by the recipient bodies to the operations con- cerned are lawful, eligible, reasonable and have actually been incurred.

3. At national level, it is for the DAFSE itself to certify on the basis of the facts and accounts the accuracy of the information contained in payment claims (Article 2(d) of Decree-Law N o 37/91 of 18 January 1991) or to do so by means of a third party accredited for the purpose, other than the Inspecção-Geral de Finanças (Inspectorate General for Finances) which is empowered to carry out financial audits.

4. The operations carried out by Eugênio Branco in the context of files 870301 PI and 870302 P3 were accordingly audited by the Inspectorate General for Finances.

5. Following a further examination b y its officials of the final payment claims in question, the DAFSE, taking account of the outcome of the abovementioned audit, forwarded to the Commission its decision on the claims by letters Nos 8241 and 8243 of 30 July 1990, copies of which are attached hereto.

6. Furthermore, the Commission transmits its decision only where it does not agree with the decisions of the Member State or where the decision granting approval entails payment of a specific amount by way of balance.

16 The defendant replied by letter of 16 June 1994 as follows:

c

I wish to inform you that the Portuguese authorities have informed the European Social Fund that the files in question fall within the scope of Article 7 of Com- mission Decision 83/673/EEC of 22 December 1983, which provides that:

"where the management of an operation for which assistance has been granted is the subject of an investigation because of suspected irregularities, the Member State shall notify the Commission thereof without delay".

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JUDGMENT OF 11. 7. 1996 — CASE T-271/94

20 The applicant replied that it had not instituted proceedings before the national courts.

2i The defendant stated that '...the Commission did not adopt a formal decision either not to pay the balance or to reduce the aid under Article 6 of Council Regulation (EEC) N o 2950/83 ... Since the Member State found, through its agency, the DAFSE, that there had been irregularities in the management of the training operations at issue, it suspended payment of the balance pursuant to Article 7 of Decision 83/673'.

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BRANCO v COMMISSION

22 By order of 14 July 1995, the President of the Third Chamber reserved its decision on the objection on inadmissibility until final judgment.

23 Subsequently, the Judge-Rapporteur was assigned to the Fifth Chamber, to which the case was accordingly assigned.

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(b) in respect of file N o 870301 P i to repay ESC 4 399 475 to the ESF and ESC 3 599 570 to the Portuguese State, while prohibiting the applicant from receiving ESC 8 589 002 from the ESF and ESC 7 027 365 from the Portuguese State;

— order the Commission to pay the costs.

27 The defendant contends that the Court should:

— declare the action inadmissible or, in any event, unfounded;

BRANCO v COMMISSION

accounts by the Member State pursuant to Article 5(4) of the regulation, it discov- ers excessive or unjustified expenditure that it is incumbent upon it to adopt a rea- soned decision to reduce the aid. O n the other hand, it cannot change the final payment claim in order to make it more favourable to the beneficiary. It follows from those principles that disputes arising from a reduction by the national authorities, where the defendant's rights have been transferred to them, fall within the scope of national law. The Court therefore has no jurisdiction in such cases.

30 In the present case, the defendant claims not to have taken any decision against which an action may be brought before the Community judicature and, more par- ticularly, any decision to reduce aid. Such decisions were taken by the DAFSE in exercise of powers devised from the defendant's rights which had been transferred to it.

3i Even on the assumption that it did take such decisions, they were incorporated in the letters from the DAFSE of 30 July 1990. Any reference to a decision by the competent bodies does not deprive them of their definitive nature since that detail only refers to possible accounting adjustments to be made by the relevant authori- ties. It follows that from 1 August 1990 the applicant was aware that it had to return the amounts in dispute. Accordingly, the action is out of time.

32 Finally, the DAFSE's letter of 25 May 1994 and its own of 16 June 1994 are merely for information and are consequently not decisions which may be the subject of an action under Article 173 of the EC Treaty. Even if they include decisions, those letters contain only acts confirming the transfer of rights of which the applicant would have been aware, at the latest, following the DAFSE's decisions Nos 82/83 and 84/93, notified to it on 13 September 1993, and the proceedings for recovery initiated against it in respect of the files at issue. The defendant requests the Court

36 The applicant had awaited the outcome of the inquiries and the defendant's final decision, but was never informed of the existence of such a decision nor of any payment or refusal to pay. Article 5(5) of the regulation requires such information to be provided.

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37 Finally, the applicant points out that it was not aware of any proceedings for recovery having been brought against it.

Findings of the Court

38 The defendant is essentially arguing that it did not take any decision in the present case, since it is not for it to take decision to reduce aid where the national auth- ority considers certain expenditure to be ineligible and repays to the Commission the advances improperly paid to the recipient. In such a case, it maintains, the rights of the Commission, including the right to reduce aid, are transferred to the national authority.

43 Those rights are transferred to the Member State to the extent to which it repays to the Commission the sums owed by the body financially responsible for an operation (Article 6(2) in fine). Only sums paid to the recipient which have not been used in accordance with the conditions laid down in the decision granting approval are to be refunded (first sentence of Article 6(2)). Since it is for the Com- mission alone to assess whether the financial assistance has been properly used, the transfer of rights presupposes a prior Commission decision.

44 In the present case, it must be considered whether the defendant took a decision to reduce aid within the meaning of Article 6(1) of the regulation.

45 The Court observes that, for a measure to amount to a decision, those to whom it is addressed must be enabled to recognize clearly that they are dealing with such a measure (Usines Henricot v High Authority, referred to above, at p. 224).

46 It is not apparent from the DAFSE's letter of 25 May 1994 that the defendant took any decision to reduce aid or not to pay the balance thereof. On the contrary, the DAFSE set out in its letter the reasons why the Commission considered that it did not have to take a decision where, as in the present case, the national authority itself decides to reduce the assistance. Consequently, it cannot be taken as notifica- tion of such a decision.

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53 In any event, since it is the Commission alone which has the power to reduce ESF assistance, the decisions of the DAFSE of 30 July 1990 and of 1 September 1993 reducing the national financial contribution and demanding the repayment of

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certain sums (see paragraphs 11 and 12, above) are purely national decisions and are in no way attributable to a Community institution. They fall outside the pur- view of the Community judicature since it is for the competent national court to review the validity of national measures implementing Community acts relating to the aid at issue. In this case, the national court may, pursuant to Article 177 of the Treaty, refer to the Court of Justice a question as to the validity of those Commu- nity acts.

54 Accordingly, the action for annulment is inadmissible in the absence of an act against which an action may be brought within the meaning of Article 173 of the Treaty, without there being any need to grant the defendant's request seeking the adoption of the measure of inquiry referred to in paragraph 32 above.

55 Even on the assumption that the action could be considered to be an action for failure to act, pursuant to the third paragraph of Article 175 of the Treaty, directed against the Commission's failure to take a decision on the final payment claims, it would be inadmissible by reason of the fact that the essential procedural require- ments provided for in the second paragraph of Article 175 of the Treaty have not been complied with.

O n those grounds,

T H E C O U R T O F FIRST INSTANCE (Fifth Chamber)

hereby:

1. Dismisses the action as inadmissible.

2. Orders the defendant to pay the costs.

Schintgen Garcia-Valdecasas Azizi