C-453/98

the other party to the proceedings being:

Commission of the European Communities, represented by T. Figueira and K. Simonsson, of its Legal Service, acting as Agents, with an address for service in

* Language of the case: Portuguese.

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Luxembourg at the office of C. Gómez de la Cruz, also of its Legal Service, Wagner Centre, Kirchberg,

Order

1 By application lodged at the Court Registry on 11 December 1998, the company Eugenio Branco Ld.a lodged an appeal under Article 49 of the EC Statute of the Court of Justice against the judgment of the Court of First Instance of 15 September 1998 in Case T-142/97 Branco v Commission [1998] ECR 11-3567 ('the judgment under appeal'), in which that Court dismissed Branco's application for the annulment of Commission Decision C (96) 3170 of 16 December 1996 ('the contested decision'). Under that decision the Commis- I - 8041

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sion reduced the financial assistance granted to the appellant by the European Social Fund ('ESF').

Legislative framework

2 Article l(2)(a) of Council Decision 83/516/EEC of 17 October 1983 on the tasks of the European Social Fund (OJ 1983 L 289, p. 38) provides for the ESF to participate in the financing of operations concerning vocational training and guidance.

7 Article 7(1) of Regulation No 2950/83 provides that the Commission may, without prejudice to any controls carried out by the Member States, make on-the- spot checks.

8 Article 6 of Commission Decision 83/673/EEC of 22 December 1983 on the management of the European Social Fund (OJ 1983 L 377, p. 1) requires Member States' final payment claims to reach the Commission within 10 months of the date of completion of the operations concerned. It is stated that no payment may be made in respect of aid for which the application is submitted after the expiry of that period.

Facts of the case

9 The facts, as set out in the judgment under appeal, are as follows.

10 The Departamento para os Assuntos do Fundo Social Europeu (Department of European Social Fund Affairs) ('DAFSE') represents the Portuguese State in matters relating to the ESF. It is the sole and mandatory point of contact between I - 8043

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relevant rules of national and Community law and with the conditions set out in the approval decision.

16 On 12 August 1988 the appellant received, pursuant to Article 5(1) of Regulation No 2950/83, an advance of 50% of the assistance granted by the ESF together with 50% of that granted by the OSS/IGFSS, amounting to PTE 31 095 749 and PTE 25 441 977 respectively.

17 On completion of the training programme, the appellant established that the total final cost of the programme came to PTE 104 289 500, an amount lower than that initially forecast. It accordingly submitted to the DAFSE a final payment claim of PTE 20 527 598 due from the ESF and PTE 16 795 307 due from the OSS/IGFSS.

18 On its initial examination of that claim, the DAFSE had doubts as to the accuracy of the information which it contained. It accordingly requested the Inspecção Geral de Finanças (General Tax Inspectorate) ('the IGF') to examine the final payment claim, pursuant to Article 7(1) of Regulation No 2950/83.

19 While that examination was in progress, the DAFSE, on 2 August 1989, certified the accuracy of the facts and accounts in the final payment claim pursuant to Article 5(4) of Regulation No 2950/83. It paid out to the appellant the sum of PTE 16 795 307, representing the balance of the assistance to be paid by the OSS/ IGFSS, but pointed out that this payment did not prejudge the Commission's final decision.

24 By letter of 15 December 1993, received on 17 December 1993, the DAFSE notified the appellant of that decision.

25 On 23 February 1994 the appellant brought an action before the Court of First Instance seeking annulment of that decision.

26 Since the Commission failed to lodge a statement of defence within the prescribed period, the Court of First Instance, on 12 January 1995, delivered a judgment by default (Case T-85/94 Branco v Commission [1995] ECR II-45) ('the judgment of I - 8046

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12 January 1995'). Taking the view that the plea in law alleging a breach of the obligation to state reasons was well founded, the Court of First Instance annulled the Commission's decision without examining the other pleas in law put forward by the appellant.

27 On 22 February 1995 the Commission applied to have that judgment set aside, pursuant to Article 122(4) of the Rules of Procedure of the Court of First Instance.

IGF report and to its own letter of 30 May 1996, the Commission concluded that the ESF's financial assistance ought to be reduced to the same amount as that accepted in its decision of 29 March 1993, that is to say, PTE 30 672 242.

33 By letter of 24 February 1997 the D AFSE notified the contested decision to the appellant, requesting it to repay within 30 days the sums of PTE 423 507 and PTE 17 141 813 due to the ESF and the OSS/IGFSS respectively.

34 By letters received on 25 October 1996 and 6 May 1997, the Tribunal Criminal do Porto (Porto Criminal Court) and the DAFSE informed the Commission that, following the audit report drawn up by the IGF, the DAFSE had instituted proceedings against the appellant before that court for misappropriation of funds and fraud committed with a view to securing funds.

35 On 29 April 1997 the appellant brought an action for the annulment of the contested decision.

The judgment under appeal

36 In the judgment under appeal, the Court of First Instance dismissed the appellant's action, which was based on five pleas in law: breach of Regulation No 2950/83; misappraisal of the facts; infringement of the principles of protection of legitimate expectations and of legal certainty; breach of acquired rights and, lastly, infringement of the principle of proportionality. In addition, the I - 8048

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the result that final payment of the aid could not be made. It followed, in the Court of First Instance's view, that, in some cases, certification of the accuracy of the facts and accounts in a final payment claim prior to a check to establish conformity or before its completion might be in the interest of the aid recipient.

41 The Court of First Instance added in paragraph 49 of the judgment under appeal that there was nothing to preclude an authority such as the DAFSE from having recourse to a professional auditing body in order to assist it in checking the accuracy of the facts and accounts in a final payment claim. It held that it appeared from the case-file that the IGF was a professional auditing body and that, under Portuguese law, it was empowered to conduct investigations in cases where irregularities such as those in this case were suspected. Moreover, in the view of the Court of First Instance, it was not disputed that the IGF audited the appellant's file at the request of the DAFSE and in accordance with the powers conferred on it by Portuguese law. In those circumstances, the Court of First Instance held that the IGF's involvement in the procedure which led to the adoption of the contested decision could not be criticised.

44 As regards the errors allegedly contained in the IGF report, the Court of First Instance addressed the appellant's criticisms regarding subcontracting. It stated first, in paragraph 78 of the judgment under appeal, that recourse to a subcontractor cannot be used to inflate artificially the costs of a training programme, contrary to the requirements of sound financial management. It went on to state in paragraph 79 that it appeared from the IGF report that E.B. Ld.a, a company with the same shareholders as the appellant company, had confined itself to engaging independent operators to provide certain services. It concluded that this subcontractor could not be regarded as being truly 'specialised' in the work entrusted to it by the appellant and that it served solely as an intermediary, thereby making a profit.

45 The Court of First Instance also pointed out in paragraphs 80 and 83 of the judgment under appeal that it was apparent from the report that certain costs incurred by E.B. Ld.a were not connected with the training programme, having regard both to the description on the relevant invoices (consultancy services) and the dates on which they were issued (one before the programme began, another after it had ended), and that the reason why the amount received by another subcontractor, Açorlis Ld.a, was accepted in full was that it was not large and did not therefore merit an in-depth examination. The Court of First Instance therefore concluded in paragraph 84 of the judgment under appeal that the Commission did not commit a manifest error of appraisal in reducing, on the basis of the IGF report, the assistance granted to the appellant under the entry concerning the subcontract awarded to E.B. Ld.a.

50 As regards the third plea, alleging infringement of the principles of protection of legitimate expectations and of legal certainty, the Court of First Instance held in paragraph 97 of the judgment under appeal that the appellant could not rely on the former principle since it had not carried out the training in accordance with the conditions to which the award of the assistance had been made subject. Moreover, the Court of First Instance stated in paragraph 98 that the judgment of 12 January 1995 also could not have given rise to any legitimate expectation on the appellant's part, in so far as the Court of First Instance had not set out its views, in that judgment, on the legality of the reduction in the assistance but had ruled only that the contested decision did not contain a statement of reasons. Lastly, as to the length of time which the Commission had taken to adopt the contested decision, the Court of First Instance pointed out in paragraph 99 of the judgment under appeal that since the appellant had not challenged the period

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within which the Commission had adopted the decision of 29 March 1993, annulled by the Court of First Instance in its judgment of 12 January 1995, only the period subsequent to that judgment could be taken into account in determining whether the length of time was reasonable. The Court of First Instance held in paragraphs 100 and 101 that two years was a reasonable period in view of the measures which the Commission had taken during that period.

51 As regards the fourth plea, alleging breach of rights ostensibly acquired following the Commission's approval decision, the Court of First Instance held in paragraphs 105 to 107 of the judgment under appeal that since the appellant had not complied with the conditions governing the training programme it could not claim such rights.

55 In support of its appeal, the appellant claims that the Court of First Instance infringed certain principles and rules of Community law which should lead to annulment of the judgment under appeal and consequently to annulment of the contested decision. It raises essentially five pleas.

56 First, it argues that the Court of First Instance committed a manifest error of appraisal regarding the origin of the IGF report.

57 Second, it claims that the Court of First Instance infringed Article 6(3) of the European Convention for the Protection of Human Rights and Fundamental Freedoms ('the ECHR') by refusing to remove a document from the file.

58 Third, the appellant submits that the Court of First Instance infringed Article 5(4) of Regulation No 2950/83 in holding that, one year after certification of the final payment claim, the DAFSE could claim that the appellant had submitted certain ineligible expenses.

59 Fourth, it argues that the Court of First Instance infringed the principles of protection of legitimate expectations and of legal certainty when it held that the period within which the contested decision had been taken was reasonable. I - 8054

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64 In actual fact, the appellant claims, the DAFSE had expressed no doubts as to the accuracy of the payment claim, nor did it mention that it had requested the IGF to I - 8055

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conduct an examination when it certified the accuracy of the facts and accounts in the final payment claim on 2 August 1989 and paid the balance of its share of the assistance on 11 September 1989.

65 According to the appellant, the IGF report is a coincidental document which was produced at the initiative of the IGF alone and was not requested by the DAFSE. The administrative order under which the IGF report was prepared was therefore an internal IGF document. The appellant also states that the Commission, although called on to specify the origin of the document at the hearing before the Court of First Instance, did not reply and did not prove that the administrative order came from the DAFSE.

66 In this connection, it should be pointed out that Article 168a of the EC Treaty (now Article 225 EC) and the first paragraph of Article 51 of the EC Statute of the Court of Justice state that an appeal is to be limited to points of law and must be based on grounds of lack of competence of the Court of First Instance, breach of procedure before it which adversely affects the interests of the appellant or infringement of Community law by the Court of First Instance.

67 It also follows from the foregoing provisions that an appeal may be based only on grounds relating to the infringement of rules of law, to the exclusion of any appraisal of the facts. The Court of First Instance has exclusive jurisdiction, first, to establish the facts except where the substantive inaccuracy of its findings is apparent from the documents submitted to it and, second, to assess those facts (see, in particular, judgment in Case C-7/95 P Deere v Commission [1998] ECR I-3111 paragraph 21, and order in Case C-436/97 P Deutsche Bahn v Commission [1999] ECR I-2387, paragraph 18).

72 In this connection, paragraph 33 of the judgment under appeal does not refer to the document but merely states that the Tribunal Criminal do Porto and the DAFSE informed the Commission that the DAFSE had instituted proceedings against the appellant before that court for misappropriation of funds and fraud committed with a view to securing funds. Communication of that information constitutes, as the Commission has emphasised, an issue of fact which does not fall within the jurisdiction of the Court. Furthermore, it does not appear from either the operative part or the grounds of the judgment under appeal that the I - 8057

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Court of First Instance relied on the document in question for the purpose of resolving the dispute before it.

73 The second plea must therefore be dismissed as being manifestly unfounded.

The third plea

74 The appellant considers that the Court of First Instance infringed Article 5(4) of Regulation No 2950/83.

77 As the Court of First Instance stated in paragraph 48 of the judgment under appeal, Article 6 of Decision 83/673 provides in this regard that applications for final payment must reach the Commission within 10 months of the date of completion of the training operations and that no payment may be made in respect of aid for which the application is submitted after the expiry of that period. As the Court of First Instance rightly held, if checks to establish conformity could be made only before certification that the facts and accounts in a final payment claim were accurate, the Member State might not be in a position to submit that claim to the Commission within the above 10-month period, with the result that final payment of the aid could not be made. The Court of First Instance therefore rightly concluded that, in some cases, certification of the accuracy of the facts and accounts in a final payment claim prior to a check to establish conformity or before its completion might be in the interest of the aid recipient.

78 It was therefore permissible for the Court of First Instance to state that there was nothing to preclude the DAFSE from having recourse to a professional auditing body such as the IGF in order to check, following the certification date, the accuracy of the facts and accounts in the final payment claim.

79 That being so, the third plea must be dismissed as manifestly unfounded.

The fourth plea

80 The appellant claims that the Court of First Instance breached the principles of protection of legitimate expectations and of legal certainty when it held in I - 8059

85 According to the appellant, the question of a reasonable period may be raised at any time. Moreover, that possibility is all the more evident in the present case since, as the Commission's first decision was annulled on grounds of failure to I - 8060

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state reasons, the appellant did not have all the information needed in order to challenge it. In addition, the appellant considers that, following the annulment ordered by the Court of First Instance, the Commission could give effect to the judgment of 12 January 1995 only by adopting a new decision allowing the application for payment of the claim.

86 As regards, second, the period of two years which elapsed between 12 January 1995 and 16 December 1996, the appellant considers that this constitutes an unreasonable period. In its view, the proceedings brought by the Commission against the judgment of 12 January 1995 were intended purely to delay matters and it claims that the only action taken during that period was the Commission's application to the DAFSE to arrange a hearing for the appellant.

87 No action or inaction on the part of the Commission or the DAFSE could have given rise to a legitimate expectation on the appellant's part that the Commission would endorse the DAFSE's certification.

88 First, under Article 6(1) of Regulation No 2950/83 it is the Commission which adopts the final decision and takes sole legal liability for such a decision as against the beneficiaries (see Case C-32/95 P Commission v Lisrestal and Others [1996] ECR1-5373, paragraph 29). Certification by the DAFSE was not therefore an act which was binding on the Commission.

92 The appellant claims that the Court of First Instance, like the IGF in its report, found that some of the expenses set out in the claim for payment were ineligible on the following erroneous grounds: first, that the IGF's auditing method was acceptable; second, that E.B. Ld.a did not need to subcontract since it was not an undertaking which specialised in the work entrusted to it by the appellant; third, that the Commission was entitled to take the view that E.B. Ld.a had achieved a very high level of profits; fourth, that the payment made by E.B. Ld.a to the Cooperative de Serviços da Area Administrativa de Empresas CRL was relevant; fifth, that the expenses of the subcontracting company Açorlis Ld.a had been I - 8062

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accepted on the grounds that the amount concerned was not significant; sixth, that the hourly rate of pay for trainees was not in accordance with Portuguese domestic law; seventh, that the regular attendance bonuses were awarded at rates higher than those authorised by law; and, eighth, that the amounts relating to computer equipment were calculated and other assets written off over twelve months instead of six.

93 The appellant considers that the Court of First Instance therefore infringed Articles 5 and 6 of Regulation No 2950/83 and the principles of proportionality, protection of legitimate expectations, and legal certainty.

94 It should be noted in this regard that these complaints are based on an allegedly incorrect appraisal of the facts by the Court of First Instance and that they actually seek to obtain from the Court of Justice a fresh appraisal of the facts established by that Court. The appellant is merely repeating the arguments that it put forward before the Court of First Instance.

Costs

99 Under Article 69(2) of the Rules of Procedure, which is applicable to the appeal procedure pursuant to Article 118 thereof, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission has applied for costs and the appellant has been unsuccessful, the appellant must be ordered to bear the costs. I - 8064

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On those grounds,

THE COURT (Fourth Chamber)

hereby orders: