C-337/96
ECLI:EU:C:1998:355
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OPINION OF MR SAGGIO — CASE C-337/96
OPINION OF ADVOCATE GENERAL SAGGIO delivered on 14 July 1998 *
1. The Commission has applied to the Court entered into a contract with IRACO con under Article 181 of the Treaty for recovery cerning the execution of a demonstration of moneys advanced to Industrial Refuse & project for the conversion of an existing refuse Coal Energy Limited (hereinafter 'IRACO'), transfer station to electrical power generation an English company, for the execution of a from the preparation of raw urban refuse project under the terms of a contract which (hereinafter 'the contract'). the Commission unilaterally terminated in view of IRACO's non-performance.
Specifically, the Commission claims that the Court should order IRACO to pay it the sum of ECU 242 234, together with con 3. Article 13 of the contract contains an arbi tinuing interest for late payment at the annual tration clause under which the parties refer to rate of 8.15% from 20 October 1993, plus the Court of Justice all disputes concerning costs. the validity, interpretation or application of the contract. In accordance with the wishes of the contracting parties, the contract is gov erned by English law. 1
Facts
The contract
4. Under the terms of the contract, IRACO was required to complete the project by August 1989 and the Commission undertook 2. On 9 July 1987 the European Economic to provide funding equal to 26.2% of the Community, represented by the Commission, actual cost of the project, subject to a ceiling
* Original language: Italian. 1 — See Article 14 of the contract.
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COMMISSION v IRACO
of ECU 636 612. In any case, advance pay project site had to be abandoned and that the ments made by the Commission were recov search for an alternative site would delay erable until the final report and the statement completion of the project by several months. of expenditure had been approved. The Commission expressed disappointment at this delay but, by letter of 29 November 1988, agreed that the completion date could be moved back from August 1989 to Sep tember 1990. That postponement was made 5. Pursuant to Article 6 of the contract, conditional, however, on IRACO finding a IRACO accepted sole liability for any loss, suitable site and on the competent local author damage or injury suffered by it in, or in con ities giving their approval, within six months nection with, the performance of the con of receipt of the letter, failing which the Com tract. Article 7 required any variation of the mission would avail itself of its right to ter contract to be agreed in writing between the minate the contract unilaterally, on the basis contracting parties. of Article 9 thereof, since the funds com mitted could not remain frozen for a longer period.
6. Lastly, under Article 9, it was open to either contracting party to terminate the con tract on giving two months' notice, if its per formance were to serve no further purpose. In that event, if the amounts already paid by the Commission exceeded the costs actually incurred by IRACO and payable by the Com mission, IRACO was required to repay the 8. On 30 May 1989, since a project site had balance to the Commission, together with not yet been found, the Commission wrote interest calculated from the date of cessation to IRACO warning of its intention to termi of the work. nate the contract. Formal confirmation was given by letter of 23 August 1989, in which the Commission requested IRACO inter alia to send it, by 30 September 1989, a financial report with a detailed statement of all expen Conduct of the contracting parties diture incurred under the contract up to 15 December 1988, together with the sum of interest accrued meanwhile on the interest- bearing account for the advance.
7. In performance of the contract, the Com mission made two advance payments to IRACO , to the value of ECU 190 984 and ECU 11 005, respectively.
By letter of 20 November 1987, IRACO 9. Finally, on 15 May 1990 — following fur informed the Commission that the initial ther prompting from the Commission —
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IRACO sent the Commission a report justi to pay the sum of ECU 242 234, together with fying its failure to complete the project and continuing interest for late payment at the setting out a statement of the expenses incurred rate of 8.15% from 20 October 1993. under the contract.
10. The Commission asked an independent firm to carry out a technical and financial audit of the costs claimed by IRACO . The 13. IRACO lodged a document with the results of the audit were accordingly commu Court entitled 'Defence and Counterclaim', nicated to IRACO by the Commission in a in which it contested the Commission's claim letter of 4 August 1993, which stated that the for recovery of the sums paid and contended sum of ECU 242 234 was payable to the Com that the Court should order the Commission mission within two months, by way of reim to pay it the sum of ECU 445 174 by way of bursement. On 12 October 1993 the Com compensation for damage suffered as a result mission sent IRACO the appropriate demand of the Commission's breach of contract, plus for payment. the sum of ECU 1 000 000 by way of dam ages for loss of business during the period from 1987 to 1996. 2
11. By letter of 18 August 1993, IRACO contested the Commission's claim for recovery of the advance payments and raised a coun terclaim against the Commission for payment of ECU 636 612, by way of compensation for Substance additional work, damages and loss of profit as a result of the termination of the contract. IRACO also claimed payment of ECU 1 000 000 by way of damages for defa mation by Commission officials at a meeting between the parties.
14. The Commission's claim for reimburse ment is well founded and must be upheld. Its Procedure claim for payment of interest should only be allowed in part, however, as I shall explain below.
2 — The Commission's claim that the Court should declare the 12. In accordance with the arbitration clause, counterclaim inadmissible and grant judgment by default, the Commission applied to the Court of Jus pursuant to Article 94 of the Rules of Procedure, was dis missed: sec the order of 23 September 1997 in Case C-337/96 tice claiming that IRACO should be ordered Commission v IRACO, not published in the ECR.
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COMMISSION v IRACO
15. In the Commission's submission, IRA- 17. The Commission's unlawful conduct is CO's breach of contract consists in its delay- said to have culminated in the adoption of in finding a suitable site for the project, which Council Directive 89/369/EEC of 8 June 1989 extinguished any interest on the part of the on the prevention of air pollution from new 4 Community administration in prolonging municipal waste incineration plants. The contractual relations. Under Article 9 of the emission limit values set by the Community contract, the Commission was therefore justi legislation are lower than those provided for fied in terminating such relations and, accord in the project and, more generally, the Direc ingly, entitled to reimbursement of moneys tive lays down standards for the construction advanced, and to payment of the interest pro of incineration plants which are not compat vided for in the contract, less the expenses ible with the project provided for under the actually incurred by IRACO and payable by contract. the Commission.
18. Consequently, IRACO decided to do its utmost — thereby delaying completion of the 16. IRACO contends that the Commission work — to make the project compatible with failed on two counts to fulfil its contractual the terms of the Directive, which it regarded obligations. as a variation in writing of the contract for the purposes of Article 7 thereof.
First, the Commission frustrated the object of the contract by causing the planned project to 19. Secondly, the Commission breached its 3 become 'technically illegal'. More specifi contractual obligations by forewarning a third cally, it reportedly entered into discussions in party, KTI Energy Inc., of the action which 1987 with the United Kingdom authorities it proposed to take in relation to its contract responsible for environmental policy and, with IRACO . The latter refers in particular more generally, initiated research with a view to a letter of 12 June 1989 (placed before the to the adoption of a more stringent directive Court) by which the Commission, in response on environmental protection, concerning the to a request made by KTI Energy Inc., characteristics of waste incineration plants. informed that company that its participation
3 — See paragraph 10 of the counterclaim. 4 — OJ 1989 L 163, p. 32.
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in the project was out of the question, since 22. In any event, Directive 89/369 has abso the contract was about to be terminated. lutely no bearing on the parties' contractual obligations, for the following reasons:
20. IRACO's third and last argument appears, on the other hand, to rely on the Commis (A) The Directive, adopted on 8 June 1989, sion's non-contractual liability, in so far as it should have been implemented by the Member impugns the conduct of a Commission offi States by 1 December 1990. The project envis cial, who is alleged to have defamed a member aged by the contract should have been com of IRACO's managerial staff at a meeting. pleted — notwithstanding the postponement This prevented a consortium formed by agreed by the parties — by September 1990, IRACO together with other companies from and a site should have been found by May taking part in another project, which, how 1989 at the latest. It follows that IRACO's ever, falls outside the purview of the contract delay in finding a project site, thereby causing at issue here. the contract to be terminated, actually pre dated the adoption of the Directive and cannot therefore be regarded as a consequence thereof.
21. To my mind, none of IRACO's argu ments is persuasive.
(B) The measures provided for in Article 2 of the Directive apply solely to 'new ... waste- incineration plants'. These are defined in Article 1(5) as plant for which authorisation to operate is granted as from 1 December 1990. Accordingly, the plant referred to in the As regards the adoption and preparation of contract, which was to be in place by Sep Directive 89/369, the first point to note is tember 1990 at the latest, would not in any that IRACO's approach is fundamentally mis event have been subject to the new rules. conceived in so far as it confuses the Com mission's role as a contracting party subject to private law with its responsibility to par ticipate in the preparation of Community leg islation. Indeed, even if the Directive had introduced mandatory rules such that the substantive terms of the contract were varied at the instance of an external authority, that (C) The Directive cannot be regarded as a would not render the Commission liable for variation in writing of the contract for the breach of contract. purposes of Article 7 thereof, for the simple
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COMMISSION v IRACO
reason that, being a legislative measure, it was 24. As regards the third complaint, con not negotiated by the contracting parties. cerning the allegation that a Commission offi cial had defamed IRACO and a member of its managerial staff, it must be pointed out — even before emphasising that this is mere hearsay reported by IRACO, unsubstantiated by any evidence and denied by the Commis sion — that the claim for damages is inadmis sible, since it is based on circumstances which are independent of the contract at issue in 23. Turning to the alleged breach of confi this case and are merely incidental to its per dentiality — IRACO's second complaint — formance. Defamatory behaviour on the part the first point to note is that, under Article 11 of a Commission official might give rise to of the contract, only certain information was non-contractual liability on the part of the confidential, namely that which IRACO gave Community, but that is an issue wholly sepa the Commission concerning events relevant rate from the Court's determination of this to the performance of the contract, and the case in accordance with the arbitration clause, project's industrial and commercial results. under which its jurisdiction is confined to questions concerning the validity, interpreta 5 tion or execution of the contract.
In this instance, IRACO alleges that, by letter of 12 June 1989, the Commission forewarned KTI Energy Inc. of the action which it planned to take. That letter was in fact merely its response to a request from KTI Energy Inc. to take part in the project as one of IRACO's associates. The response was negative, on the ground that the contract was to be terminated 25. It follows from the above considerations on account of the failure to find a site for the that IRACO's counterclaim, in so far as it plant. However, there is nothing in that com seeks compensation from the Commission for munication to suggest any breach of confi damage caused by that institution's breach of dentiality under Article 11, since it does not its contractual obligations, must be dismissed touch on any of the circumstances covered by as unfounded. In other words, the claim for that provision. This is all the more evident if compensation from the Commission for it is borne in mind that KTI Energy Inc. and IRACO were members of a joint venture set up with a view to executing the project and that, consequently, the Commission was enti tled to assume that the former company would 5 — The Court's jurisdiction under an arbitration clause must be interpreted restrictively, solely in the light of Community law, be properly informed of any developments the national law governing the contract being irrelevant: sec Case 426/85 Commission v Zoubek [1986] ECR 4057, para concerning the contract. graphs 10 and 11.
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damage caused by conduct unconnected with by IRACO , which merely pleads the 'tragic' the performance of contractual obligations circumstances, allegedly brought about by and not directly linked thereto must be the Commission, that deprived IRACO of its declared inadmissible because it falls outside good name, its profit and its commercial busi 6 the Court's jurisdiction. ness.
The costs borne by IRACO are estimated at 26. Since it has been shown that IRACO UKL 32 151. Under Article 3 of the contract, failed without justification to fulfil its own the Commission should have paid 26.2% of contractual obligations and, in particular, the the costs, that is to say, ECU 10 551. The primary obligation to find a suitable project Commmission made advance payments site, the termination of the contract under amounting to ECU 201 989. The capital sum Article 9 thereof is justified. to be reimbursed is therefore the balance — ECU 191 438 — together with the interest calculated in accordance with the contract.
Article 9 requires, in such cases, verification of the amounts paid by the Commission and the costs actually incurred by IRACO for the Article 9 provides that interest is payable from execution of the project, the latter being under the date of completion or cessation of the a duty to repay to the Commission any excess work. The parties did not specify the date amount, together with interest. when work actually ceased. In the absence of that information, it is reasonable to refer to the date when the contract was terminated, namely 23 October 1989. The sum of ECU 191 438 is therefore subject to interest at the rate of 8.15% from 23 October 1989 until 23 November 1990, the cut-off date set by the Commission itself. 27. The quantification of the sum to be reim bursed, according to the audit commissioned by the Commission from an independent firm of consultants, has not in fact been challenged
6 — A plea with a 'non-contractual basis' falls outside the scope It follows that IRACO is required to repay of the arbitration clause and the Court is not competent to to the Commission the sum of ECU 208 340, consider it: see Case C-330/88 Grifoni vEAEC [1991] ECR I-1045, paragraph 20. A counterclaim is inadmissible where it does not arise from the contract containing the arbitration clause or is not directly connected with the obligations arising from that contract: see Case C-114/94 IDE v Commission [1997] ECR 803, paragraph 82. 7 — See paragraph 29 of the counterclaim.
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COMMISSION v IRACO
which includes interest calculated up until 23 Apart from the computation of the interest, November 1990. the calculation sent to IRACO by letter of 4 August 1993 would appear to be free of any flaws, and the Commission's claim must there fore be upheld, to the extent specified above.
Payment of the sum due was demanded by the Commission by debit note dated 12 Octo ber 1993 and received by IRACO , at the latest, on 20 October 1993, as is apparent from the letter which IRACO sent to the Com 28. Since IRACO has been unsuccessful in mission on the same day. Since no payment its pleadings, and the Commission has asked has been made, interest on the capital sum is for costs to be awarded against it, IRACO payable from that date, in accordance with must be ordered to bear the costs, pursuant the terms of the contract. to Article 69(2) of the Rules of Procedure.
Conclusion
29. In the light of the foregoing observations, I therefore propose that the Court :
— order Industrial Refuse & Coal Energy Ltd to pay the Commission the sum of ECU 208 340, together with interest calculated at the annual rate of 8 . 15 % with effect from 20 October 1993;
— dismiss the counterclaim by Industrial Refuse & Coal Energy Ltd for com pensation to be paid by the Commission for damage caused by the adoption of the Directive and breach of confidentiality under the contract ;
— declare inadmissible the counterclaim by Industrial Refuse & Coal Energy Ltd for compensation to be paid by the Commission for damage caused by a Com mission official's defamatory conduct ;
— order Industrial Refuse & Coal Energy Ltd to bear the costs of these proceed ings.
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