C-462/98

MEDIOCURSO V COMMISSION

OPINION OF ADVOCATE GENERAL MISCHO delivered on 25 November 1999 *

1. Mediocurso — Estabelecimento de ment of the Court of First Instance, which Ensino Particular SA (hereinafter 'Medio- has already been published in European curso'), a company incorporated under Court Reports, I shall not reproduce them Portuguese law, established in Lisbon, has here. brought an appeal against the judgment delivered by the Court of First Instance on 15 September 1998 in the proceedings which it brought against the Commission, 1 claiming that that judgment should be set aside to the extent to which it dismissed the actions brought by the applicant. 4. In this appeal, Mediocurso relies on the following three grounds:

2. Those actions sought the annulment of — breach of the principle requiring a prior Commission Decisions C (96) 1185 and C hearing and breach of the rights of the (96) 1186, both of 14 August 1996, redu- defence; cing aid granted to Mediocurso by the European Social Fund (hereinafter 'the ESF') for various vocational training pro- jects.

— manifest error of assessment in the conclusions drawn by the Court of First Instance from the examination of the documents submitted;

3. Since the facts and legal context are set out in detail in the abovementioned judg-

'49 According to settled case-law, the rights of defence of a beneficiary of 52 It must be pointed out that the appli- ESF aid must be respected where the cant did not formally submit observa- Commission reduces such aid (see, tions on that letter, as the contested among others, Case C-32/95 P Com- decisions rightly indicate. It in fact mission v Lisrestal and Others [1996] merely commenced proceedings against ECR I-5373, paragraphs 21 to 44). the letter before the Portuguese admin- istrative courts. However, in this case, the applicant should also have formally submitted such observations so that they could be notified to the Commis- sion by DAFSE. In such circumstances, 50 It should also be noted that, at para- the applicant cannot complain that its graph 49 of its judgment in Lisrestal v observations were not notified to the Commission, cited above, the Court of Commission since that fact was attri- First Instance, without being criticised butable to its own omission. on that point by the Court of Justice in Case C-32/95 P Commission v Lisres- tal, stated that the Commission, which alone assumes legal liability to the beneficiary of ESF aid for decisions to reduce such aid, was not entitled to 53 The Court considers that the applicant adopt such a decision without first was thus given the possibility of "effec- giving the beneficiary the possibility, tively" setting forth its views on the or ensuring that it had the possibility, findings against it within the meaning of effectively setting forth its views on of the judgment of the Court of First the proposed reduction. Instance in Lisrestal v Commission, cited above.'

party against whom a decision adversely 10. Mediocurso is of the opinion that the affecting his interests is taken has not been Court of First Instance therefore erred in observed. That principle was reiterated in finding that the applicant should have the judgment of the Court of Justice in formally submitted observations on that Commission v Lisrestal and Others, cited letter, for forwarding to the Commission by above. Mediocurso claims that it learned of DAFSE, and that the applicant could not the observations and reservations con- complain that its observations were not tained in the audit reports drawn up by notified to the Commission since that fact the firm Audite only at a meeting held on was attributable to its own omission. 10 September 1991. Yet, as early as 11 September 1991, DAFSE sent Medio- curso a letter ordering it to repay certain sums. 11. The Commission considers that the Court of First Instance was correct in finding that Mediocurso could have set forth its views effectively on the letter of 7. With regard to the meeting of 10 Sep- 11 September 1991. It notes that, following tember 1991, Mediocurso claims that it that letter, Mediocurso did not submit any was in no position effectively to set forth its observations and that it should have done views on the content of the audit reports so, so that they could be notified to the until it had analysed them in the light of the Commission, as the Court observes in documents in its possession. It points out paragraph 52 of the contested judgment. that any observations which it may have been able to make during the meeting — of which no written record exists — can in no way be confused with the effective exercise of the right to be heard. 12. It states that this complaint has already been disposed of by the Court of First Instance and that this is therefore a ques- tion of fact which is not a matter for the 8. With regard to the letter of 11 Septem- Court of Justice. ber 1991, Mediocurso asks how, given that it contained an order for repayment, it could be regarded as inviting its addressee to submit observations by way of the exercise of the right to be heard. 13. The Commission adds that, in choosing to bring the case before the Portuguese courts, Mediocurso itself waived the right to be heard by the Commission. 9. It points out that, faced with that order for repayment (which the Supreme Admin- istrative Court ruled unlawful, moreover), the only possible reaction was to bring an action before the court of competent jur- 14. Finally, the Commission claims that, in isdiction. point 38 of the reply submitted at first

instance by Mediocurso, the latter states 17. As the Court of Justice stated in its that it had the opportunity to submit its judgment of 6 July 1993, 2with regard to observations after the notification, in 1991, the remission of import duties, it is neces- of DAFSE's proposed reduction and during sary to make a distinction between fields the meetings with Audite. In that regard the such as competition law or the collection of Commission quotes paragraph 104 of the anti-dumping duties, where it is the Com- contested judgment: 'The applicant also munity institutions which decide to insti- conceded in its written reply to the ques- tute the procedure which may lead to the tions put to it by the Court and at the punishment of an economic agent who has hearing that the essential content of the contravened the provisions of the Treaty, audit reports prepared by Audite was and other situations. brought to its notice by letter of 11 Sep- tember 1991...'. The Commission further points out, referring to paragraph 51 of the contested judgment, that, both in its appli- cation and in its written reply to the question put to it by the Court, Mediocurso recognised that it was heard by DAFSE before the letter of 11 September 1991 was 18. In the context of the ESF, it is under- formalised. takings or private individuals who submit applications for aid from the Fund. That aid is granted subject to certain conditions. If those conditions are not observed, a reduction may be made in the aid. In accordance with the distinction made by the Court of Justice, that situation is not to be treated in the same way as the proce- dures for penalising an economic agent, in Assessment which the audi alteram partem rule there- fore assumes special importance. It is there- fore sufficient, in order for that rule to be observed, for the beneficiary to have had the possibility of making known to the 15. It should be noted, first of all, that the Commission, either directly or through the decisions contested by Mediocurso before competent national body, the reasons for the Court of First Instance are those which it considers that the reduction of aid adopted by the Commission on 14 August is not justified, before the Commission 1996. takes its final decision. On the other hand, contrary to what the appellant claims, the audi alteram partem rule does not mean that the beneficiary must have been sent a formal invitation to submit its observa- tions. 16. The question which arises is therefore whether, before adopting those decisions, the Commission first gave Mediocurso an 2 —Joined Cases C-121/91 and C-122/91 CT Control (Rotter- dam) and JCT Benelux v Commission [1993] ECR I-3873, opportunity, or ensured that it had an which concerned the remission of import duties pursuant to opportunity, of effectively setting forth its Council Regulation (EEC) No 1430/79 of 2 July 1979 on the repayment or remission of import or export duties views on the proposed reduction. (OJ 1979 L 175, p. 1).

25. It is clear from paragraph 28 of the judgment of the Court of First Instance that 21. The fact nevertheless remains that, in 'On 6 March 1996, DAFSE informed the those proceedings, which were directed applicant that the Commission had taken a against DAFSE, Mediocurso was able to decision on its two final payment applica- make known to that body, in detail, the tions and had confirmed the results of the objections which it had to a reduction of financial audit which had already been aid. notified to it on 11 September 1991'.

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26. The Court of First Instance's judgment letter addressed to the Commission, Med- then states, at paragraph 29: iocurso opted for legal proceedings and brought actions against that institution before the Court of First Instance. 3

'On 4 April 1996 the applicant asked DAFSE for a copy of the Commission decision. It also sought leave to consult 30. In any case, through those actions, the the ESF administrative file. The applicant appellant was able to make known to the was granted access to the administrative Commission, in an even more formal file on 24 April 1996 and found that there manner than by means of a letter, the were no documents in the nature of a reasons for which it found the reduction of decision other than the Commission's debit aid unacceptable. notes determining the amounts which it was to reimburse...'

31. Those actions, moreover, induced the Commission to withdraw the 'debit notes' 27. It can be concluded from those pas- which were the subject of the two actions sages of the judgment, the accuracy of (paragraph 30 of the judgment of the Court which is likewise undisputed, that DAFSE's of First Instance). letter of 6 March 1996 was referring, not to Commission decisions in the prescribed form, but to 'decisions in principle' which had still to be formalised. The Commis- sion's internal procedure had therefore not yet been concluded. 32. The appellant was therefore not only able to make its views known to the Commission, but even induced it to adopt decisions drafted in the correct form.

sions of 14 August 1996, to bring its views 37. In accordance with its consistent case- directly to the attention of the Commission. law, 4 the Court of Justice should therefore, according to the appellant, set aside the judgment of the Court of First Instance in so far as it is based on substantively inaccurate findings of fact. 34. The ground of appeal based on breach of the rights of the defence must therefore be rejected. 38. The Commission, on the other hand, contends that the Court of First Instance correctly established the facts relating to the two posts in question on the basis of the documents contained in the files. There are therefore no grounds, in this case, for The ground of appeal based on inaccuracy claiming that its findings are substantively of the findings of fact made by the Court of inaccurate. First Instance with regard to sub-headings 14.3.1a and 14.3.13 of the final payment claim ('remuneration of the teaching staff' and 'taxes and charges') 39. The Court of First Instance was there- fore fully entitled to consider that the Commission did not commit a manifest 35. The appellant is of the opinion that, by error of assessment in considering that the declaring that 'the documents produced by appellant had not demonstrated that the the applicant to indicate the kind of course documentation produced by it did in fact provided in relation to the first file and the relate to the courses covered by the relevant identity of the training staff who took part file. (Annexes 21 and 22 to the application) are, when scrutinised, so imprecise as to raise serious doubts as to whether the pro- grammes in question were actually carried out...', and by making the same statement, 40. The appellant criticises paragraphs 134 mutatis mutandis, about the second file, the and 172 of the Court's judgment, which Court drew incorrect conclusions from its concern Case T-180/96 and Case T-181/96 analysis of those documents. respectively and are identically worded as follows:

kind of course provided in relation to the 43. The appellant's argument is also aimed first file and the identity of the training staff at persuading the Court of Justice to over- who took part (Annexes 21 and 22 to the rule the Court of First Instance's conclusion application) are, when scrutinised, so that the Commission was entitled to con- imprecise as to raise serious doubts as to sider that it had not been established that whether the courses in question were the documents produced did in fact relate actually held, as DAFSE rightly observed to the courses covered by Community in point 14.3.1a of its letter of 22 Septem- assistance. ber 1995. The Commission therefore com- mitted no manifest error of assessment by considering that the applicant, which ran a large number of different training courses involving numerous staff, had not demon- 44. It is clear from the case-law cited in strated that the documentary evidence point 37 above that, when an appeal is produced by it in fact related to the courses brought before it, the Court of Justice is not covered by the first file 5 and by conse- entitled to call in question the assessment of quently refusing to accept in their entirety the facts made by the Court of First the expenses claimed in that regard'. Instance, except where the substantive inaccuracy of the latter's findings is appar- ent from the documents in the file.

41. The appellant reiterates on several 45. However, in the present case, the occasions its claim that, contrary to what appellant has not established that those is stated by the Court of First Instance, the documents show that the Court of First documents which it produced leave no Instance manifestly misapprehended the room for the slightest doubt that the facts. The appellant merely contests the courses in question were actually held. conclusion drawn by that Court from its examination of the documents produced in support of the claim.

The ground of appeal based on inconsis- in question did in fact take place. It must tency of the grounds of the judgment and therefore be assumed that teaching staff breach of the principle of proportionality were employed and remunerated for that purpose. The inevitable conclusion is, therefore, that the Commission does not seek to dispute the fact that expenditure 48. The appellant claims, first, that it was was incurred to that end, but that it contradictory for the Court of First considers that, since the amount of that Instance to cast doubt on the fact that the expenditure was not evidenced by vouchers training programmes were actually carried relating absolutely incontestably thereto, out while at the same time accepting that that expenditure must be regarded as the Commission should treat as eligible ineligible in its entirety. certain expenditure, other than the remu- neration of teaching staff, relating to those same courses.

51. The Commission states emphatically that it accepts that the training programmes 6 — Case T-142/97 Branco v Commission [1998] ECR II-3567.

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may be considered that the lack of diligence withholding the whole of the sum claimed shown by a beneficiary who fails to adduce in respect of the remuneration paid to the sufficient proof must entail a penalty, that teaching staff (sub-heading 14.3.1a) as well penalty is clearly excessive if it leads, for as the amount relating to the VAT charge- the beneficiary, to the same result as if he able thereon (sub-heading 14.3.13). Con- had not carried out at all the operations sequently, the contested judgment should covered by the heading in question. be set aside in that respect.

55. The disproportionate nature of the 58. In view of the fact that the Court of refusal to treat any of the expenditure at Justice has before it all the evidence neces- issue as eligible is all the more apparent sary to dispose of the substantive issue, I since the Commission was in a position to propose that it should annul the Commis- make the beneficiary bear certain conse- sion's decisions with which Cases T-180/96 quences of its inability to produce satisfac- and T-181/96 are concerned, to the extent tory evidence, and to avoid paying out to which they treat the abovementioned certain sums which were not due, while at sums as ineligible in their entirety. Indeed, the same time proceeding in a manner less that consequence necessarily follows from unfavourable to the interests of the bene- the foregoing considerations. ficiary.

— annul paragraph 5 of the operative part of that judgment and direct that each party is to bear its own costs in Case T-181/96;

— dismiss the remainder of the appeal;

— annul Commission Decision C (96) 1185 of 14 August 1996 reducing the aid granted in Decision C (89) 0570 of 22 March 1989 and Commission Decision C (96) 1186 of 14 August 1996 reducing the aid granted in Decision C (89) 0570 of 22 March 1989 to the extent to which they treat as ineligible, in their entirety, the sums claimed in respect of the remuneration paid to the teaching staff (sub-heading 14.3.1a) as well as the amount relating to the VAT chargeable thereon (sub-heading 14.3.13);

— direct that each party is to bear its own costs in respect of the appeal.

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