C-59/99

OPINION OF MR GEELHOED — CASE C-59/99

OPINION OF ADVOCATE GENERAL GEELHOED delivered on 12 June 2001 1

1. By this action brought under Article 181 gramme), provided for by Regulation of the EC Treaty, the Commission seeks (EEC) No 2008/90. 2 repayment of an advance, together with interest, as a result of the termination of a contract concluded as part of the Thermie programme. The Commission terminated the contract on the ground that the defen- dants had failed to fulfil their contractual 3. Two annexes form an integral part of the obligations. contract. Annex I concerns the technical and financial specifications. Annex II sets out the general conditions ('the general conditions').

more particularly specified in the contract. 9. The contract contained a series of provi- For example, under Article 5(1) of the sions under which the contractors were contract, the coordinator was required to required to provide information. Pursuant supply the Commission with half-yearly to the first sentence of Article 2(2), the progress reports containing information Commission had to be informed of any about the technical and financial situations. delay in the performance of the contract. That obligation is further specified in Under Article 1(4) of the general condi- Article 6(1 )(a) of the general conditions. tions, the coordinator was required to inform the Commission, on behalf of the contractors, of the date of commencement of work on the project under the contract and also to inform it without delay of completion or cessation and of any event or circumstance liable to affect significantly 6. Pursuant to Article 4(1) of the contract, the performance of the contract. the Commission was to finance the project in accordance with a programme provid- ing, in particular, for the payment of an advance of ECU 357 813.

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defaulting contractor to make any reim- 15. On 22 February 1993, the Commission bursement under Article 8(4) of the general paid an advance of ECU 357 813 to MPR, conditions, if it can show to the reasonable in its capacity as project coordinator. This satisfaction of the Commission that it has sum was transferred to bank account not contributed to the default and has number 2702410/000/001 (Banco Fonsecas complied with Article 1(4) of the general & Burnay, Leira). conditions.

12. If the contract is terminated under 16. On 20 September 1993, the Commis- Article 8(2)(d), Article 8(4) of the general sion carried out a technical audit and conditions provides that the Commission investigation at MPR's premises. may require reimbursement of all or part of its financial contribution under the con- tract. The Commission may also claim interest from the date on which the con- tractor received the financial contribution.

18. In reply, MPR sent a letter to the period Article 8 of the contract would be Commission which was received on applied with immediate effect. 7 December 1993. In the letter, MPR denied that the contract had not yet been commenced, stating that 1ST and KTG had already carried out work on the project. Any delay, MPR claimed, was due to late payment of the Commission's financial contribution and to unforeseeable circum- 21. By a letter dated 14 June 1994, MPR stances, about which MPR claims the requested the Commission, in light of a Commission had been fully informed. The number of special circumstances, to post- coordinator also stated that it was agree- pone the decision communicated in the able to the possibility of studying alterna- letter of 16 May 1994. MPR stated that it tive ways of ensuring continuance of the intended to carry out a project which was contract as part of an amended plan. MPR part of the restructuring of 'Indústria was willing to exchange ideas in this Portuguesa de Cristais', which was to begin respect with the Commission in Brussels. one month later. MPR also stated that it was also undergoing a restructuring phase. MPR went on to say that, in the meantime, KTG had become insolvent and that it would therefore have to look for a new partner.

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23. According to the Commission, MPR obligation. On 18 March 1997, MPR and IST did not act upon the letter of 7 July received the demand by registered post. 1994. On 4 July 1997, the Commission again requested repayment of the advance. In the same letter, the Commission stated that it would take legal action to recover the monies advanced.

24. On 7 June 1995, the Commission noti- fied MPR and IST in writing of its decision to terminate the contract, in line with the notice it had given in the letter of 7 July 1994. In the letter of 7 June 1995, the 27. On 16 February 1999, the Commission Commission observed that: (i) the advance had still not received a reply from the payment was not available in the appro- contractors. priate bank account; (ii) work on the project had still not commenced; and (iii) there was no information or guarantee regarding the execution of the project. The Commission stated that termination would take effect two months following receipt of the letter. I I I— The procedure and the claims of the parties

25. On 11 November 1995, the Commis- sion sent MPR a demand for payment, requesting reimbursement of the advance 28. The Commission's application was payment of ECU 357 813. Since, by received by the Court of Justice on 22 Feb- 17 October 1996, that sum had still not ruary 1999. been transferred, the Commission then sent MPR a reminder in which it called for the advance payment to be reimbursed imme- diately.

29. In its application, the Commission claims that the Court should:

34. The Commission states that MPR (b) order the defendants to pay the costs. failed to perform its obligations under Article 2 of the contract, since it failed to adhere to the timetable set out in Annex I thereto. The grant of additional time-limits, in respect of which the Commission was 30. 1ST contends that the action should be under no obligation, did not alter that dismissed and that the Commission should situation. The Commission states that it be ordered to pay the costs in full. took all necessary steps to seek repayment of the advance of ECU 357 813. It then terminated the contract in accordance with Article 2 thereof and with Article 8 of the general conditions. In the Commission's view, once the time-limit indicated in its 31. MPR did not lodge a defence. Accord- letter of 4 July 1997 had expired, the ingly, on 25 June 1999, the Commission contract was terminated. applied to the Court for judgment in its favour against MPR, in accordance with the procedure for judgment by default contained in Article 94(1) of the Rules of Procedure. 35. The Commission also claims that, under Article 2 of the general conditions, the defendants are jointly and severally liable to it. That joint and several liability is 32. The application could not be served on also recognised in Portuguese law. KTG owing to the lack of information as to the correct address of that company. It appears from the case-file that this con- tractor has since become bankrupt. In a document dated 26 April 1999, the Com- mission indicated that it wished to continue 36. The Commission also relies on Arti- the proceedings against MPR and 1ST cle 4(3) of the contract. Under this provi- alone. sion, the coordinator is responsible for transferring the appropriate portion of the advance to the other contractors and the Commission cannot, under any circum- stances, be held liable for any delay by the coordinator in performing this obliga- 33. At the hearing, which was held on tion. Moreover, it follows from the recent 15 March 2001, the Commission and 1ST case-law of the Court that the joint and presented oral argument. several liability of each of the contractors

41. Second, as a subsidiary point, 1ST claims that in the present case the Commis- 39. In IST's opinion, the Commission also sion may not rely upon the principle of erred in seeking to recover the advance joint and several liability to require pay- payment, together with interest, from it. ment in full from each of the contractors. Even if joint and several liability were held This plea in law is founded on certain to apply in this case, 1ST cannot be held articles of the Portuguese Civil Code liable for payment of the sums in question ('CC'). 1ST interprets Article 519(1) of the since it fulfilled the requirements for CC as meaning that, where a creditor sues exemption set out in Article 2 of the all the co-debtors simultaneously, the general conditions. In the light of those applicable legal position changes from joint requirements, 1ST asserts that the facts and several liability to joint liability, prove indisputably that it did not contri- because Article 519 of the CC provides that a creditor has the right to demand the full sum from each joint and several debtor 3 — Judgment in Case C-65/97 Commission v Cascina Laura or to demand a portion of it from each of and Garibaldi [1999] ECR I-1017, paragraphs 21 to 23.

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them, but that, where the creditor has it cannot be held liable for payment of sought satisfaction from one of the debtors compensation in the form of interest, through the courts, he may not sue the because the failure to repay the advance is remaining debtors for the sum he has wholly attributable to MPR. claimed from the first debtor, except where there are reasonable grounds why he is unable to obtain satisfaction from the first debtor.

43. In its reply, the Commission argues that there is a reasonable ground in this case, namely the fact that it is unable to recover the advance from MPR, which became 46. Article 39 of the Rules of Procedure insolvent on 26 April 1999. 1ST rejects this provides that an application must be served argument, stating that, in its opinion, it was on the defendant. The Commission's appli- submitted out of time and must therefore cation was not served on KTG. Conse- be ruled inadmissible. quently, the requirement of notification was not fulfilled and the action against KTG must accordingly be ruled inadmissi- ble. The Commission itself has indicated that it has abandoned the action against KTG and that it only wishes to proceed 44. Finally, as regards the payment of against MPR and 1ST. I will therefore interest, 1ST relies on Article 520 of the confine my assessment to those parties. CC. Under this provision, the responsibility for restitution falls only to the jointly and severally liable debtor to whom the non- 4 — Cases C-172/97 Commission v SIVU and Hydro-Réahsa nons [1199] ECR I-3363 a n d C - 3 3 4 / 9 - Commission v performance is attributable. 1ST states that Montuno [1999] ECK I-3387.

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47. The differences in the factual and legal payment order in favour of MPR, dated circumstances warrant a separate examina- 22 February 1993, for the sum of tion of MPR and 1ST in this Opinion. ECU 357 813 in favour of MPR, which was credited to bank account number 2702410/000/001 (Banco Fonsecas & Bur- nay, Leira). Consequently, in accordance with Article 17(2)(a) of the general condi- tions, the advance was transferred within the time-limit of two months from 8 Jan- uary 1993, this being the date on which A — MPR KTG, as the last contractor, signed the contract.

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COMMISSION v PEREIRA ROLDÃO & FILHOS AND OTHERS

53. In my opinion, the four requirements denied that performance of the contract have been fulfilled in this case. had not yet commenced during that first phase, stating that 1ST and KTG had already carried out work. In its letter, MPR did not deny that it had not actually commenced work on the project itself. 54. With regard to the performance of Furthermore, by citing force majeure rea- contractual obligations, in its letter of sons and by suggesting to the Commission 20 October 1993, the Commission refers that they search together for alternative to two provisions which MPR allegedly ways of ensuring that the contract contin- failed to fulfil, namely, Article 2(2) of the ued, MPR essentially acknowledged its contract and Article 17(2)(a) of the general breach of its obligations. conditions.

59. Second, in the letter of 20 October 57. In its letter which was received by the 1993, the Commission alleges that MPR Commission on 7 December 1993, MPR used the advance payment for purposes

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other than those set out in the contract, 63. Third, the non-performance cannot be contrary to Article 17(2)(a) of the general regarded as justified on technical or eco- conditions. In the correspondence which nomic grounds. Despite the fact that MPR ensued between MPR and the Commission, stated in its letter of 14 June 1994 that it in particular the letters of December 1993 was undergoing internal restructuring, a and June 1994, that fact is not disputed. reason of this kind cannot be relied on since Although the Commission regularly urged it relates to circumstances specific to the MPR to transfer the advance back to the company concerned and not to technical or original bank account, MPR did not com- economic problems relating to execution of ply with that request. In my opinion, the research project. 5 therefore, it follows that the claim that the provision in question was breached is also well founded.

64. Consequently, I deduce from the case- file that, in its letter of 7 June 1995, the Commission acted correctly in deciding to 60. As to the other three requirements for terminate the contract unilaterally, in termination of the contract, it is sufficient accordance with Article 8 of the general to make the following observations. conditions.

66. Therefore, the Commission's claims are well founded and comply with the require- ments of Article 94(1) of the Rules of Procedure, with regard to the claim for repayment by MPR of the advance of ECU 357 813, received on 22 January 1993, 69. Therefore, it is perfectly clear that, with together with interest. respect to the Commission, all the contrac- tors undertook to guarantee that all the obligations under the contract would be discharged by each of them. By signing the contract, the contractors freely accepted that the risk of failure by one of them to fulfil the contract, irrespective of the rea- B — IST son, could not be relied upon against the Commission.

71. None of the above is altered in any respect by either IST's defence, in which it states that it was unaware that the advance 74. The Commission alleges that in the had been paid until October 1993, or by months immediately following the signa- that party's claim that it did not receive any ture of the contract, 1ST acted negligently in portion of the advance from MPR. Speci- that, in its capacity as a contractor, it was fically in relation to the advance payment, unaware of certain facts relevant to the the second sentence of Article 4(3) of the project, and because some time passed contract expressly provides that the Com- before agreement was reached between mission cannot be held responsible for any the contractors as to how the project was failure by the coordinator to transfer to the to be executed. However, at the hearing the other contractors their share of the monies Commission acknowledged that IST acted advanced. in good faith when it entered into the contract. Nor does the Commission dispute that 1ST had a great deal of interest in carrying out the project. Nevertheless, to my mind it is more significant that IST subsequently submitted several letters and a 72. Under the contract, 1ST has only one fax, which are dated, respectively, 25 Jan- means of avoiding being held jointly and uary 1993, 19 February 1993, 22 June severally liable for reimbursement of the 1993 and 20 July 1993, from which it advance payment. The final sentence of emerges that 1ST regularly encouraged Article 2 of the general conditions provides MPR to continue executing the project that a contractor is not jointly and severally and to discharge its contractual obligations. liable for the reimbursement of financial A letter from MPR to IST, dated 13 June contributions which have been received 1994, also demonstrates that, at least until from the Commission, within the meaning that date, 1ST was entitled to believe that of Article 8(4) of the general conditions, if MPR intended to continue with the project. it can prove, to the reasonable satisfaction of the Commission, that it did not contri- bute to the default and that, in addition, it has complied with Article 1(4) of the general conditions. It must therefore be examined whether 1ST fulfilled those requirements in the present case. 75. In my opinion, IST has thus succeeded in reasonably convincing the Commission that it did not contribute to MPR's failure 7 — In this regard, see the judgment in Commission v Cascina Laura and Garibaldi, cited in footnote 3, paragraph 23. to perform its obligations.

77. IST's contention that it cannot be regarded as bound by that obligation to 80. The first event was the receipt of the provide information on the ground that it Commission's letter of 20 October 1993, applies exclusively to the coordinator is which was addressed to all the contractors founded, in my opinion, on an erroneous and in which the Commission noted that interpretation of the aforementioned provi- work on the project had still not been sion. The first part of Article 1(4) of the commenced and that MPR had used the general conditions provides that the coor- advance payment for inappropriate pur- dinator, on behalf of all the contractors, has poses. a duty to notify the Commission when work on the project begins. The second part of the same clause also provides that each contractor must inform the Commis- sion without delay of the completion or the cessation of the work or of any event or 81. 1ST does not dispute the fact that circumstances liable significantly to affect between 1 January 1993, the date on which the performance of the contract. Accord- the period for performance of the contract ingly, this latter obligation, which is set out began to run, and receipt of the letter of in Article 1(4) of the general conditions, 20 October 1993, it took no steps to also applies to IST. inform the Commission about the delay which had arisen in executing the project. 1ST contends that until the latter date it too had been unaware of MPR's problems. IST claims that, during the period in question, it merely encouraged MPR to execute the project properly. According to 1ST, during that period, it expressly asked MPR whe- ther the Commission had paid the advance, 78. I am of the opinion that IST has failed to which MPR replied in the negative. to establish, by means of the evidence it has submitted, that it fulfilled that obligation. In order to have done so, it would have needed to prove that it had immediately notified the Commission about the difficul- ties which had arisen in executing the 82. In my opinion, it is clear that at that project. point IST ought immediately to have con¬

87. However, the Commission has stated that no such 'representative of the DG 83. In any event, after it received the XVII' ever existed and that Ms Virginia Commission's letter of 20 October 1993, Correia is probably a national civil servant there can be no doubt that 1ST was aware who represents Portugal on a committee set of the Commission's complaints about up as part of the Thermie programme. MPR and of MPR's failure to discharge According to the Commission, Ms Virginia its contractual obligations. Correia had no authority whatsoever to represent the Commission, either in a general sense or in connection with the contract. At the hearing, 1ST did not dispute this point but stated that it had assumed that Ms Virginia Correia would pass on the information to the appropriate 84. I consider that the second important Commission officials. moment for 1ST occurred when it received the Commission's letter of 7 July 1994 in which, in the light of special circumstances, the Commission allowed MPR and 1ST a further opportunity to fulfil their contrac- tual obligations by 31 December 1994. 88. In my view, IST's argument is implau- sible and is wholly inadequate to discharge the contractors' obligation under the con- tract to inform the Commission should problems arise.

85. 1ST has attempted to demonstrate that between receiving the letters of 20 October 1993 and 7 July 1994, it contacted the Commission on two occasions and 89. Second, 1ST has submitted a list of the informed the latter about the problems names of five officials who, it claims, work which had arisen. for the DG XVII of the Commission and

whom it purportedly contacted by tele- 92. Between the beginning of July 1994 phone during the period in question. 1ST and the end of December 1994, it should states that during those conversations it have been clear to 1ST that the Commis- indicated that it wished to continue the sion's patience had run out with respect to project in Portugal after MPR had reim- the performance of the contract and that bursed the monies advanced. 31 December 1994 was the final deadline for saving the project. If the project could not be saved, termination of the contract would be unavoidable. By that stage, it should have been obvious to 1ST that MPR had become an untrustworthy partner and an unreliable project coordinator. MPR had 90. I find this evidence too flimsy. In the failed to fulfil its contractual undertakings absence of specific additional details, it is and the monies advanced by the Commis- doubtful that the information which it is sion had not been used for the purposes laid claimed was provided would have clarified down in the contract. While, in the pre- sufficiently the actual problems which had ceding period, 1ST, in accordance with its arisen in the execution of the project. contractual obligations, and in particular Furthermore, 1ST does not dispute the with the fact that it was jointly and Commission's contention that one of the severally liable, should already have five officials no longer worked for the DG informed the Commission by registered XVII, which does not reinforce the plausi- post about the status of the work under bility of its claim to have contacted the said the contract, that requirement was perhaps officials. In addition, it appears quite clear even more important during the period that 1ST should have made written record now in question. In its letter of 7 July 1994, of the problems which had arisen and the Commission also expressly required the should have notified them to the Commis- contractors to inform it about possible sion in a registered letter. The obligation to problems. provide information, in the first sentence of Article 2(2), in conjunction with the exemption clause, together with IST's joint and several liability, mean that IST had a duty to observe such a formality. 93. However, 1ST has completely failed to demonstrate that, during the second half of 1994, it informed the Commission about the difficulties which had arisen. It did not even attempt to do so. 91. Therefore, IST has been unable to prove convincingly that, during the period from the end of October 1993 to the beginning of July 1994, it informed the Commission about the problems which had arisen. Nevertheless, in its letter of 7 July 94. Subsequently, by a letter dated 7 June 1994, the Commission gave the contractors 1995, the Commission informed 1ST that the opportunity to discharge their obliga- the contract had in fact been terminated. tions by 31 December 1994. IST distanced itself from the conduct of

98. In this regard, we must first of all mention Article 8(4) of the general condi- 95. As a result of the foregoing, I conclude tions, which does not limit the sum which that between October 1993 and July 1995, may be claimed — jointly and severally — 1ST did not inform the Commission with- to the amount of the advance, but instead out delay about the problems which had provides that the Commission is entitled to arisen in executing the project, which it was claim interest from the date on which MPR bound to do under the final sentence of received the advance payment. Article 2 of the general conditions, in conjunction with Article 1(4) of the general conditions. Thus, 1ST did not make use of the opportunity to exonerate itself vis-à-vis the Commission and to avoid being held jointly and severally liable by means of a reply, such as the one it provided in its letter of 17 July 1995, in which it clearly 99. Consequently, it must be observed that explained the problems which had arisen Portuguese law does not, as such, preclude and the reason behind them, and demon- debtors from being held jointly and sever- strated how it had taken all reasonable ally liable, as is provided for by the contract steps to fulfil its contractual obligations. in the case of the contractors, and particu- Such a reaction would have been all the larly by Article 2 of the general conditions. more natural in view of the fact that 1ST claims to be a professional contractor which had already acquired the necessary experience in other projects financed by the European Union.

creditor is entitled to seek from each debtor legal action if the advance payment is not full or partial satisfaction of the debt, reimbursed within the period laid down. irrespective of whether the share of the The judicial phase of the matter only began debtor who is sued is proportional. If the with these proceedings before the Court of creditor seeks to recover all or part of the Justice. debt from one of the debtors through the courts, he may not sue the other debtors for the amount he has claimed from the first debtor, unless that debtor is insolvent or is at risk of insolvency, or if there is some other reason why the creditor is unable to 103. Therefore, under the provisions of the recover the debt from the said debtor. contract, Portuguese law does not preclude the Commission, as the creditor, from suing the contractors jointly and severally for reimbursement of the advance, even though it had already sent letters of formal notice and demands for payment to MPR.

101. IST's argument presupposes that, by bringing a joint action against the contrac- tors, the Commission has waived the opportunity to take action against each of them jointly and severally for reimburse- 104. Finally, IST relies on Article 520 of ment of the full amount. the CC in support of its claim that it is exempt from any obligation to pay the interest owed to the Commission.

110. Article 2(1) of Council Regulation (EC) No 1103/97 of 17 June 1997 on 108. I will be brief on the subject of these certain provisions relating to the introduc- arguments put forward by 1ST. In my tion of the euro 8 provides that any refer- opinion, it can be inferred from the fore- ence to the ecu shall be replaced by a going that both MPR and 1ST contributed reference to the euro at a rate of one euro to to the non-performance and, therefore, to one ecu. the termination of the contract. In the case of 1ST, suffice it to point out that it failed to discharge its obligation, under Article 2(2) of the general conditions, to inform the Commission within an appropriate period about the delays in executing the contract. 1ST can also be said to have permitted the amount of interest owed to increase. 1ST must have been aware of MPR's problems VI — Costs from an early stage and, in any event, from August 1995, when the Commission finally terminated the contract, it must have known that the contract provided that the Commission was entitled to recover the 111. Under Article 69(2) of the Rules of advance, together with interest, from each Procedure the unsuccessful party is to be of the contractors. ordered to pay the costs. Since the Com- mission applied for an order for costs against both MPR and 1ST, and since the pleas put forward by both those parties have been dismissed, MPR and 1ST must be ordered jointly and severally to pay the 109. Even on the supposition that 1ST did costs. not receive any advance, in such a situa- tion, as the final section of Article 520 of the CC provides, each contractor who is 8 — OJ 1997 L 162, p. 1.

(3) Order Instituto Superior Técnico to pay jointly and severally to the Commission of the European Communities the sum of EUR 357 813, together with EUR 185 833.78 by way of interest to 1 January 1999, plus interest accrued until the date of full payment.

(4) Order Instituto Superior Técnico to pay jointly and severally the costs of the proceedings.

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