C-107/99

IV — Assessment I-1101

Admissibility I -1101

A — The grounds of inadmissibility invoked by the Irish Government I-1101

B — The legal effects of the contested decision I -1103

C — The existence of the contested decision I -1108

Substance I-1112

V — Conclusion I -1127

1 — Original language: French.

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1. The Italian Republic requests that the selves and with the operations of the Court of Justice annul the decision of the European Investment Bank and the other Commission of the European Communities existing financial instruments, 2 as of 16 December 1998 approving amend- amended in particular by Regulation (EEC) ments to the indicative allocation of Com- No 2081/93 of 20 July 1993 3(hereinafter munity initiatives ('the contested decision'), 'Regulation No 2052/88'), and Regulation communicated to the Italian Republic by (EEC) No 4253/88 of 19 December 1988 letter from the Secretary-General of the laying down provisions for implementing Commission of 19 January 1999, and of all Regulation (EEC) No 2052/88 as regards measures on which it is based or with coordination of the activities of the dif- which it is connected. ferent Structural Funds between themselves and with the operations of the European Investment Bank and the other existing financial instruments, 4as amended in par- ticular by Regulation No 2082/93 of 20 July 1993 5 (hereinafter 'Regulation No 4253/88').

I — Legislative background

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the ex ante appraisal, monitoring and ex Objectives, the needs of rural develop- post evaluation of operations.' ment. ...

5. Under the third subparagraph of Article 5(5) of that regulation:

For the period [1994-99], 9% of the commitment appropriations for the Struc- 'Assistance [under the Structural Funds] tural Funds shall be devoted to funding shall be undertaken on the initiative of the assistance undertaken on the initiative of Member States or of the Commission in the Commission in accordance with agreement with the Member State con- Article 5(5): cerned.'

8. Last, according to Article 17(2) of 6. It is assistance provided on the initiative Regulation No 2052/88: of the Commission that is known as 'Community initiatives'.

10. Article 20(1) of that regulation pro- [...]' vides:

12. Article 25 of Regulation No 4253/88 provides: 'Budgetary commitment shall be made on the basis of the Commission decisions approving the measures concerned. ...'

'1. Within the framework of the partner- ship, the Commission and the Member States shall ensure effective monitoring of implementation of assistance from the 11. Moreover, according to Article 24 of Funds, geared to the Community support that regulation, entitled 'Reduction, sus- framework and specific operations (pro- pension and cancellation of assistance'·. grammes, etc.). ...

'1. If an operation or measure appears to justify neither part nor the whole of the assistance allocated, the Commission shall conduct a suitable examination of the case in the framework of the partnership, in particular requesting that the Member State 3. Monitoring committees shall be set up or authorities designated by it to implement within the framework of the partnership, the operation submit their comments by agreement between the Member State within a specified period of time. concerned and the Commission.

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These amendments shall be notified 14. Article 16 of the Rules of Procedure is immediately to the Commission and the worded as follows: Member State concerned. They shall become effective as soon as confirmation has been provided by the Commission and the Member State concerned; such confir- mation shall be given within a period of 20 working days from receipt of this notifi- 'Instruments adopted by the Commission in cation, the date of which will be confirmed the course of a meeting shall be attached, in by the Commission by acknowledgment of the authentic language or languages, in receipt. such a way that they cannot be separated, to the minutes of the meeting at which they were adopted. They shall be authenticated by the signatures of the President and the Secretary-General on the first page of the minutes. Other amendments required shall be decided by the Commission, in collabor- ation with the Member State concerned, 6 — Rules of Procedure of the Commission of 17 February 1993 (93/492/Euratom, ECSC, EEC), OJ 1993 L 230, p. 15, as after the monitoring committee has amended by Commission Decision of 8 March 1995 amending its Rules of Procedure (95/148/EC, Euratom, delivered its opinion. ECSC) (OJ 1995 L 97, p. 82).

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Instruments adopted by written procedure 16. Correspondence was subsequently shall be attached, in the authentic language exchanged on a regular basis between the or languages, in such a way that they Italian Republic and the Commission in cannot be separated, to the day note connection with the monitoring of the referred to in Article 10. They shall be implementation of the Community ini- authenticated by the signature of the Sec- tiatives in that Member State. retary-General on the last page of the day note.

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while the other substantial reductions minutes and contained the proposal for the affected France (ECU 18.1 million), the decision. Table 1, entitled 'Proposal for United Kingdom (ECU 16.4 million), Por- financial reallocation of Community ini- tugal (ECU 6.8 million) and Germany tiatives (in MECU, 1999 prices)', was, at (ECU 6 million). least in so far as concerns the final result for Italy, identical to Table 5 attached to the aforementioned working document.

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22 September 1998. The decision takes into 26. Italy, the applicant, requests that the account the state of advancement of the Court should: initiatives and the need to allocate further financial resources for 1999 to the "Peace and Reconciliation in Ireland and Northern Ireland" initiative.

— annul the Commission's decision of 16 December 1998 approving amend- ments to the indicative allocation of Community initiatives and all measures on which it is based or with which it is The new table enclosed herewith replaces connected; the corresponding tables enclosed with the letters from Mr Williamson dated 13 July 1994 and 13 June 1996).'

— order the defendant to pay the costs.

24. The letter was accompanied by a table which, apart from its translation, was identical to Table 2 attached to the afore- mentioned minutes, except in so far as 27. The Commission, the defendant, con- concerns the amounts relating to the Refex tends that the Court should: programme in the United Kingdom.

order of the President of the Court of A — The grounds of inadmissibility 29 June 1999. 7 invoked by the Irish Government

30. The Irish Government invokes two grounds of inadmissibility.

IV — Assessment

31. Firstly, according to the Irish Govern- ment, the Italian Republic lodged its appli- cation out of time. The time-limit for contesting the Commission's decision had Admissibility begun to run on 20 January 1999 and 'therefore, any action under Article 230 [EC] should have been brought before or on 19 March 1999'. In the present case, the application was not lodged until 29 March 29. On this point, I shall consider three 1999. different problems, namely:

32. Secondly, the Irish Government refers to the 1999 budget 'under which the funds — the grounds of inadmissibility invoked originally earmarked as an indicative allo- by the Irish Government; cation to Italy were, in fact and in law, reallocated to the Peace initiative'. It main- tains that, 'since the applicant Government has not contested the 1999 budget in an action against the Parliament and/or the Council and the Commission, it cannot now be permitted to do so indirectly when — the legal effects of the contested it has not done so or has opted not to do so decision; directly and when the legality of the adoption of the budget is indisputable at this stage'.

— the existence of the contested decision.

34. I share the view of the Italian Govern- ment. 37. However, since the Irish Government's first plea, which alleges that the application was lodged out of time, is an objection involving public policy considerations, 10 'the Court should examine it of its own motion under Article 92(2) of the Rules of Procedure'. 11 35. Indeed, in its judgment in Matra v Commission,8 the Court held that '... it must be noted that under the third para- graph of Article 37 of the Protocol on the Statute of the Court of Justice of the EEC, submissions made in an application to 38. However, in that regard, it need only intervene are limited to supporting the be stated that that, since the Italian Repub- submissions of one of the parties. More- lic had received on 20 January 1999 the over, under Article 93(4) of the Rules of letter from the Secretary-General of the Procedure, the intervener must accept the Commission dated 19 January 1999 notify- case as he finds it at the time of his ing it of the contested decision, the time- intervention. It follows that the interveners limit for bringing an action, taking into have no standing to raise a plea of inadmis- account the extension of the time-limit on sibility and the Court is thus not obliged to account of distance established in Article 1, examine the pleas put forward by them ....' third indent, of Annex II of the Rules of Procedure of the Court of Justice, as in force on the date the action was brought, expired on 30 March 1999. As the appli- cation was lodged on 29 March 1999, the action cannot therefore be regarded as out of time. 36. More recently, the Court has also declared that Article 37 of the EC Statute of the Court of Justice does not prevent an 9 — Case C-200/92 P ICI v Commission [1999] ECR I-4399, intervener from using arguments different paragraph 31, Case C-227/92 P Hoechst v Commission [1999] ECR I-4443, paragraph 33, and Case C-245/92 P from those used by the party it is suppor- Chemie Linz v Commission [1999] ECR I-4643, ting, provided the intervener seeks to sup- paragraph 32. 10—Joined Cases 193/87 and 194/87 Maurissen and Public Service Union v Court of Auditors [1989] ECR 1045, paragraph 39, and order in Case C-44/00 P Sodima v Commission [2000] ECR I-11231, paragraph 51. 8 — Case C-225/91 [1993] ECR 1-3203, paragraphs 11 and 12. 11—CIRFS and Others v Commission, cited above, See also the judgment in Case C-313/90 CIRFS and Others paragraph 23. See also Matra v Commission, cited above, v Commission [1993] ECR I-1125, paragraphs 19 to 22. paragraph 13.

43. In actual fact, the two acts are therefore independent of each other and the fact that one has not been contested cannot prevent the other from being contested. 41. The argument starts from the premiss that the 1999 budget constitutes the act which, factually and legally, reallocated to the Peace initiative the funds originally earmarked as an indicative allocation to Italy. However, this reasoning does not take account of the fact 'that, in the system of the Treaty, any implementation of expenditure by the Commission in principle B — The legal effects of the contested presupposes, in addition to the entry of the decision relevant appropriation in the budget, an act of secondary legislation (commonly called the "basic act") from which the expendi- ture derives'. 12 The reason for that is that, in the 'system of the Treaty, ... the con- 44. It is apparent from the arguments put ditions governing the exercise of legislative forward by the Italian Republic, on the one powers and budgetary powers are not the hand, and by the Commission, on the same'. 13 other, that these two parties disagree about the legal effects of the contested decision. At the hearing, during submissions by the 12 —Case C-106/96 United Kingdom v Commission [1998] Commission that the contested decision ECR 1-2729, paragraph 22. was not a decision within the meaning of 13 — United Kingdomv Commission, cited above, paragraph 28. Article 189 of the EC Treaty (now See also Case 242/87 Commission v Council (1989] ECR 1425, paragraph 18. Article 249 EC), the question was even

47. I have referred in extenso above to point 8 in the minutes of the Commission's meeting held on 16 December 1998, and 51. In so far as concerns the second stage in also to the letter from the Secretary-Gen- the adoption of the decision, the Commis- eral dated 19 January 1999. sion explains that 'once the result of the first stage in the adoption of the decision has been obtained, it is necessary to make an optimum allocation of the available funds between the different Community initiative programmes implemented in 48. In its pleadings, the Commission Italy. ... That is where the footnote is explains at length how these two docu- inserted making conditional the part of ments should be construed. the contested allocation which, according to the applicant, refers to the second stage. Since it was a question of deciding which 14 —Case 22/70 Commission v Council [1971] ECR 263, programmes could be reduced in order to paragraph 39 (the 'AETR' case). find the ECU 44.7 million ..., the Commis-

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sion's staff considered that the fact of mented in each Member State and contains knowing which amounts had already been the aforementioned footnote. allocated was less important, for the pur- poses of making an objective evaluation of the state of progress of the various pro- grammes, than the percentage of legally binding commitments which had actually 54. It follows, in my opinion, that the been undertaken. ... [T]his method led to Italian Government's interpretation, that reductions relating partly to increases not 'the contested decision has ... reduced the yet granted and partly to increases already funds already granted to the PME, URBAN granted.' and KONVER initiatives' cannot be upheld.

56. Since this consent has not been given by the Italian Government — which is not disputed by the parties — the allocation proposed in Table 2 has not been imple- 53. The truthfulness of these statements mented for Italy, as the Commission also seems to me to be confirmed by the two confirmed at the hearing. Consequently, tables which were annexed to documents there has been no reduction in funds SEC(1998)2152 and SEC(1998)2152/4 already granted. Furthermore, the Italian referred to in the minutes of the Commis- Government adduces no evidence to show sion's meeting of 16 December 1998. These that, for one of the projects concerned, a tables reflect, in fact, these two stages in the reduction was actually made in funds adoption of the decision, in the sense that already granted. Table 1 contains the allocation between the Member States of all the funds available for Community initiatives and mentions the reduction of ECU 44.7 million for Italy, while Table 2 shows the allocation between 57. It is apparent from the foregoing that the various Community initiatives imple- the 'second stage in the adoption of the

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decision' has produced no effect. Indeed, 62. Now, to the extent that this argument the condition precedent necessary for its of the Italian Government means that the implementation, namely, the consent of the contested decision affected, up to the Italian Government, has never been fulfil- amount of ECU 44.7 million, any entitle- led. ment to Community funds, I must concur with the Irish Government's reply to that argument, that the indicative allocations 'do not constitute 15 the grant of aid to the Member State concerned for the total 58. What is, then, the legal effect of the amount in question. Still less do they contested decision? constitute the approval of one or more projects not yet formulated ...'.

61. According to the Italian Government, 64. According to the Commission, the this deduction, in its effect, amounts to effect of the contested decision is therefore, 'reductions or alterations to the intended use of the funds for Community initiative programmes'. 15 — Emphasis added in the original text.

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as has already been pointed out above, 'a 66. In so far as concerns the sum of EUR cut [of ECU 44.7 million] in the approxi- 1.4 million referred to in that letter, it must mate level of financing which might be be stated that this is, in fact, approximately available to the applicant for implementing equal to the difference between the afore- Community initiative programmes'. To put mentioned sums of ECU 46.3 million and it another way, the Commission had ECU 44.7 million, that is, ECU 1.6 million; imposed on itself a duty not to exceed a the difference of ECU 0.2 million may be certain level, albeit an approximate one, in attributed to the fact that the sum of ECU respect of the funding, in a given Member 46.3 million corresponded to the part of the State, for specific projects within the resources not yet programmed in December framework of the various Community 1998, whereas the aforementioned letter is initiative programmes. dated two months later.

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C — The existence of the contested 72. In its rejoinder, the Commission replied decision that the fact that it did indeed decide to establish the contested allocations at its meeting of 16 December 1998 'is ... clearly evidenced by the minutes of that meeting, 69. In connection with the first branch of read together with the proposal for a its first plea, alleging infringement of the decision to which it refers'. duty to provide a statement of reasons, the Italian Government pleads the non-exist­ ence of the contested decision. I think it is appropriate to consider this plea under the section on admissibility. Indeed, if the Italian Government were successful on this point, the contested decision should be 73. At the request of the Court, the Com­ declared non-exisžent and, consequently, mission submitted a copy of the minutes the action should be dismissed as inadmiss­ signed by the President and by the Sec­ ible. 1 6 retary-General of the Commission.

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75. What are we to make of these argu- 79. The Commission considers, for the ments? reasons already stated above, that it was not necessary to explain the content of the contested decision in an instrument insep- arably annexed to the minutes.

76. In its judgment in Commission v BASF and Others, cited above, the Court held that 'acts tainted by an irregularity whose 80. However, I am not convinced by this gravity is so obvious that it cannot be argument. tolerated by the Community legal order must be treated as having no legal effect, even provisional, that is to say that they must be regarded as legally non-existent'.17

grammes on its territory, and procedurally, 87. F u r t h e r m o r e , the decision of since it is stated in the minutes that the 28 October 1993 is unquestionably a Member States will be informed of the decision within the meaning of the fourth decision. paragraph of Article 189 of the Treaty. Indeed, we need only refer to Article 2 of that decision, which contains the standard sentence: 'this Decision is addressed to the Member States.'

84. I therefore consider, on the basis of an analysis of the definition of a decision given in the fourth paragraph of Article 189 of 88. If the fixing of the indicative allo- the Treaty, that the contested decision does cations on the basis of Article 12(4) of constitute a decision within the meaning of Regulation No 2052/88 gave rise, in 1993, that provision. to the adoption of a decision within the meaning of the fourth paragraph of Article 189 of the Treaty, I cannot under- stand why that was not the case in 1998, when the contested decision was adopted. In any event, the mere fact that the Com- mission chose a different form for the two 85. Two other considerations confirm my decisions does not matter, since the choice view. of form may not alter the nature of a measure. 19

93. It should be added that the problem is not only theoretical. Indeed, as I have pointed out above, it is apparent, from a 90. To put it another way, I believe there is comparison of Table 2 which was annexed a conflict between, on the one hand, the to the proposal for a decision and, more importance which the Court attaches to the particularly, to document SEC(1998)2152, authentification of acts adopted by the with the same Table 2, which was com- Commission with the aim of guaranteeing municated to the Italian Republic by letter legal certainty and, on the other, the of the Secretary-General dated 19 January restrictive interpretation suggested by the 1999, that there is a difference between Commission of the scope of the acts for these tables, which are supposed to be the which such authentication is necessary. same, in so far as concerns two sums relating to the Refex programme in the United Kingdom. Therefore, in least in respect of these two sums, it is impossible, in the absence of authentication, to know which sum was approved by the college of 91. Therefore, the aforementioned case- Commissioners. law leads me rather towards a broad interpretation of the fourth paragraph of Article 16 of the Commission's Rules of Procedure which defines the instruments which require authentification. 94. It still remains for me to consider whether the irregularity committed by the Commission is so serious that it renders the contested decision non-existent. 92. I therefore consider, in the light of all the above, that, under Article 16 of its Rules of Procedure, the Commission should have inseparably annexed to the minutes

98. In this connection, I consider that the fact that, as the minutes show, the Com- mission did approve the indicative allo- 101. In so far as concerns the first part, cations is significant. I base this point on alleging the non-existence of the contested the judgment in Commission v BASF and decision, I have just considered this and Others, cited above, in which the Court reached the conclusion that the contested held that the measure contested in that case decision infringed essential procedural did exist, having regard to the fact that 'at requirements because the Commission did the meeting of 21 December 1988, as is not observe the authentication procedure shown by the relevant minutes, the Com- provided in Article 16 of the Rules of mission did decide to adopt the operative Procedure. part of a decision as set out in those minutes, whatever defects may have affected that decision'. 22

21 — Paragraph 50. 102. I am therefore moved to propose the 22 — Paragraph 51. annulment of the contested decision.

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103. However, in order to deal with the 107. In the present case, it must be said matter fully, it is also necessary to examine that the document which, as far as concerns the other pleas put forward by the Italian the contested decision, expresses the inten- Government. tion of the college of Commissioners, namely, point 8 of the minutes of the meeting held on 16 December 1998, does not contain any statement of reasons. It merely mentions that the Commission approves the indicative allocations and 104. In the second part of the plea, the decides to inform the Member States, in Government alleges a complete failure to particular, of them. state reasons for the contested decision.

106. It must be stated that the duty to provide a statement of reasons is a pro- 109. It is also true that the Italian Govern- cedural requirement. 'In imposing upon the ment, having been involved in the work Commission the obligation to state reasons which culminated in the contested decision, for its decisions, Article 190 is not taking for example through its attendance at the mere formal considerations into account meeting of the management committee held but seeks to give an opportunity to the on 22 September 1998, was aware of the parties of defending their rights, to the reasons on which the Commission based Court of exercising its supervisory func- the adoption of the contested decision. tions and to Member States and to all However, this fact is not enough, in my interested nationals of ascertaining the opinion, to remedy the complete failure to circumstances in which the Commission state reasons in the act itself. has applied the Treaty.' 23

24 — Commission v BASF and Others, cited above, 23 — Case 24/62 Germany v Commission [1963] ECR 131. paragraph 67.

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110. Indeed, as is apparent from the judg- with regard not only to its wording but also ment in Germany v Commission, cited to 29 its context and to all the legal rules above, the statement of reasons has the governing the matter in question.' aim not only of giving the parties the opportunity to defend their rights, but also, amongst others, of enabling the Court to exercise its supervisory power. Therefore, the fact that one of the parties before the Court, in this case the Italian Government, 113. The wording of a decision must there- may be aware, in one way or the other, of fore contain at least the basic consider- the reasons for the decision is not sufficient ations which have led to its adoption. Only basis for a finding that the decision is in addition to that is it possible to refer to adequately reasoned. its factual and legal context.

117. In my view, this plea should therefore be rejected. 120. In its rejoinder, the Commission states, however, that '[i]t is necessary ... to correct the assertion that Article 12 of Regulation [No 2052/88] applies directly to Community initiatives. As is apparent from the text of that article, the Commission makes indicative allocations "for each of the Objectives 1 to 4 and 5(b)", that is to C — The third plea, alleging infringement say, for the main structural assistance and of Article 12 of Regulation No 2052/88 not expressly for Community initiatives. In spite of that, the Commission decided to apply that article, by analogy, to Commu- 118. After first stating that '[t]he complete nity initiatives, in the belief that the indica- failure to provide a statement of reasons in tive allocations were a programming instru- the contested decision makes it imposs- ment which could also be relevant to those ible ... to know what legal basis the Com- initiatives.' mission intended to use', the Italian Gov- ernment, in its application, considered that 'the expression "indicative allocations" was probably taken from Article 12 of Regulation No [2052/88]', It inferred from that that, by adopting the contested decision, the Commission applied that provision. However, according to the Ita- 121. When the Commission repeated this lian Government, the Commission remark at the hearing, the Italian Govern- infringed the provision by not following ment submitted that, in those circum- the procedure laid down in Article 25 of stances, the contested decision had no legal Regulation No 4253/88. basis.

127. On the basis of Article 12(4) alone, I might be tempted to endorse the Commis- sion's argument that the reference to 'each of the Objectives 1 to 4 and 5(b)' implies that only the main structural assistance, 124. In spite of the statement made at the that is to say, Community assistance under- hearing, I do not consider that it is a new taken on the initiative 'of the Member plea, which would be out of time under States' within the meaning of the third Article 42(2) of the Rules of Procedure. In paragraph of Article 5(5) of Regulation the light of the exchange of arguments No 2052/88 is involved, and not Commu- described above, the plea is, in my view, an nity initiatives, that is to say, assistance expansion of the plea initially raised by the undertaken on the initiative 'of the Com- Italian Government. Furthermore, if this mission in agreement with the Member were not the case, it would seem to me that State concerned', within the meaning of the fact that the plea was not put forward that same provision. Owing to their interest until the hearing is the consequence of a for the Community in general, these Com- fact revealed during the proceedings, munity initiatives are perhaps less well namely, the Commission's aforementioned suited to allocation by objective in each of remark, which was made for the first time the Member States. in the rejoinder.

128. If this argument were upheld, it would lead to the conclusion that the indicative allocations relating to assistance under- 125. I must therefore examine whether the taken 'on the initiative of the Commission' contested decision has its legal basis in have no legal basis but are only general Article 12(4) of Regulation 2052/88. policy guidelines which the Commission has laid down for itself.

133. Furthermore, it may be inferred from Article 12(4) that the Council takes the view that the fixing of indicative allo- cations by the Commission constitutes a necessary tool in the management of the 131. Indeed, it must be stated that, by Funds. It is not certain that it is necessary Article 12(1), the Council first of all deter- only for the main structural assistance and mines all the resources available for com- not for Community initiatives. mitment of the Structural Funds and the financial instrument for fisheries guidance which, at 1992 prices, is ECU 141.471 million for the period 1994-99. After giving a few details, in Article (2) and (3), about Objective 1, the Council gives the Commission the authority, in Article 12(4), 134. Therefore, in the absence of a clear to fix indicative allocations 'of the Struc- indication in the text of Regulation tural Funds commitment appropriations'. No 2052/88 that the obligation to fix Only afterwards, in Article 12(5), does the indicative allocations does not cover Com- Council decide to apportion 1.9% of the munity initiatives, and in the light of the commitment appropriations to Community structure of Article 12 of the regulation, I initiatives. consider that Article 12(4) of Regulation

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No 2052/88 constitutes an adequate legal D — The fourth plea, alleging infringe- basis on which the Commission may fix ment of Article 4 of Regulation No 2052/88 Community allocations for Community and of the principle of legitimate expec- initiatives. tations

141. Nor, contrary to what the Italian Government claims, do I believe that the Commission infringed the partnership prin- ciple by not following the procedure laid down in Article 25 of Regulation 138. It is therefore clear from all the above No 4253/88. Indeed, as I have already that I consider this plea to be unfounded. stated above, it is clear from the wording of

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that provision that it applies in the case of 146. Not only is this interpretation not amendment to the detailed rules relating to apparent from the aforementioned provi- assistance already granted and not in the sion; it also seems to me to be contrary to case of amendment to the indicative allo- the principle of sound financial manage- cations. ment.

142. Moreover, as the Commission points 147. Indeed, the Commission states that out, it involved Member States to a sig- the new indicative allocations have not nificant degree in the preparation of the been fixed only with a view to releasing the contested decision, in particular by submit- sum of ECU 100 million for the Peace ting the proposal for the decision to the programme, but also in response to a management committee for its opinion. request from the committee on budgets of the European Parliament to the Commis- sion to assess the state of implementation of the Community initiatives in each Member State and also possible opportun- ities for reallocation which might ensure a 143. It is apparent from all the foregoing better rate of outlay of the amount entered that it cannot, in my view, be held that the in the budget for those initiatives. Commission infringed the partnership prin- ciple.

154. According to the Italian Government, the Commission 'did not feel the obli- gation, imposed on it by Article 2 of the Treaty, to put forward a proposal for 150. Therefore, since an adjustment to the implementing [the policy, common to all indicative allocations is possible, a Member the Member States, of giving tangible State cannot claim that the indicative expression to their solidarity with the peace allocations originally adopted have created process in Northern Ireland], by calling legitimate expectations on its part. upon the whole Union to contribute spe- cifically and proportionately to the funds needed to achieve that objective. The Commission, on the contrary, chose a solution which, based on totally irrelevant criteria, breached the principles of social 151. Furthermore, the Commission sub- cohesion and solidarity among Member mits documents proving that, during the States. Furthermore, the solution chosen preparation of the initial allocations in the with the contested decision also breaches course of the meeting of the management the principle of non-discrimination, given committee held on 25 and 26 May 1994, that the reduction in the allocation already and also in the letter in which the Member made to Italy is higher than that of all the States were notified of those allocations, other Member States.' the right to make subsequent amendments to the financial allocations was expressly reserved.

155. The Italian Government therefore considers that the reduction in the indica- tive allocations had a disproportionate effect on the Italian Republic, which con- 152. In the circumstances, I consider that it stituted an infringement of Article 2 of the cannot be held that the initial allocations Treaty and also of the principle of equality had created legitimate expectations on the of treatment. part of the Italian Government.

159. I do not therefore consider that there has been an infringement of Article 2 of the Treaty. 157. I believe reference should be made to the Court's judgment in Giménez Zaera, 31 in which it was held that '[w]ith regard to [the objective stated in Article 2 of the EEC Treaty and consisting in] the promotion of an accelerated raising of the standard of 160. In so far as concerns the principle of living, it should ... be stated that this was equal treatment, the Italian Government one of the aims which inspired the creation points out that, out of the total amount of of the European Economic Community and the reductions made, ECU 83.6 million, which, owing to its general terms and its Italy suffered a cut of ECU 44.7 million systematic dependence on the establish- although it receives only about 13% of the ment of the common market and progress- total resources. ive approximation of economic policies, cannot impose legal obligations on Member States or confer rights on individ- uals'.

161. It takes the view that 'the Commission should have tried to find funds to finance the Peace programme — with the involve- ment of all the Member States, naturally — 158. By analogy, I am of the opinion that the aim of strengthening economic and 32 — The Italian Government refers to the aims of economic and social cohesion and solidarity among Member States. These appear tn Article 2 EC, which was not yet applicable on the date on which the contested decision was adopted, 31 — Case 126/86 Giménez Zaera [1987] ECR 3697, since the Treaty or Amsterdam was not yet in force on that paragraph 11. date.

162. In its reply, the Italian Government criticises the criterion used by the Commis- sion to calculate the new allocations, namely, the state of implementation of the 165. In that connection, I am of the Community initiatives at 31 December opinion, first of all, that the argument 1997. In its view, '[t]his criterion is dis- concerning the delay in taking the decisions criminatory. It places at an advantage those to make the grants does not constitute a Member States which, by chance, have had new plea. It is clear, in fact, from the their programmes approved at the right wording of this argument that it forms part time, and at a disadvantage those which, of the plea alleging breach of the principle like Italy, have suffered very long delays in of equal treatment and, what is more, the approval of the programmes sub- expands that plea in response to the mitted.' explanations, given by the Commission in the defence, regarding the calculation method. In my view, this argument should therefore be examined in the context of the present case. 163. The Commission replies that the cal- culation method used was in accordance with the principles of sound financial management laid down in Article 2 of the 166. Secondly, it should be noted that, Financial Regulation of 21 December 1977 according to settled case-law, the general applicable to the general budget of the principle of equality, which is one of the European Communities,33 as last amen- fundamental principles of Community law, ded, at the date of the contested decision, precludes comparable situations from being by Council Regulation (EC, ECSC, Eura- treated in a different manner unless the tom) No 2548/98 of 23 November 1998. 34 difference in treatment is objectively justi- fied.35

States, it is necessary to examine whether 1999, in accordance with the annual allo- this difference in treatment was objectively cation fixed by the Edinburgh European justified. Council and codified in Annex II of Regu- lation No 2052/88. The result of this calculation gave the share and, therefore, the specific liability, of each Member State in the event that the desirable rate of 65% were not achieved.' 168. The difference in treatment is the consequence of the calculation method used by the Commission. Referring to the working document presented to the man- agement committee at its meeting on 22 September 1998, the Commission explains that it took the average of two values. The first value was the result of a 170. It cannot be denied that the calcu- calculation reflecting 'the comparison lation method used by the Commission to between the actual state of implementation determine the new allocations is objective of the various programmes and the mini- in nature. Moreover, it seems to me that the mum36 rate of implementation at which method is also justified, in particular in they were viable: if, between 1994 and relation to the principle of sound financial 1997, the Member State concerned had management, the importance of which is been unable to commit more that 25% of confirmed not only by Article 2 of the the appropriations which had been allo- Financial Regulation but also by Article 205 cated to it, it was particularly unlikely that of the EC Treaty (now, after amendment, these programmes would qualify for a Article 274 EC). Indeed, this calculation subsidy (taking into consideration commit- method, unlike the Italian Government's ment and payment dates). In the interests of suggestion that the unprogrammed sound financial management, it had been resources and indexation should be used appropriate to put an end to those pro- proportionately, takes account of the like- grammes and to reconsider their funding.' lihood that the various programmes will be implemented correctly.

173. This paragraph shows, in fact, that — contrary to what the Commission states — the delays were not due only to the fact that 172. Since the Court of Justice has made it the applications did not satisfy the con- clear that the reports of the Court of ditions laid down in Article 14(2) and (3) of Auditors constitute relevant evidence,39 Regulation No 4253/88. However, it must this paragraph should be studied carefully. also be inferred that the problem of the It is worded as follows: delays attributable to the Commission was a general problem affecting not only Italy but also other Member States. Indeed, Italy was mentioned only by way of example in the aforementioned paragraph. Moreover, in the context of that example, the Court of Auditors refers to the approval rate for aid at 31 December 1994 in Italy, which still does not lead to the conclusion that the 'The weakness of some programmes sub- problem was the same at 31 December mitted to the Commission and the efforts 1997. made by the latter to improve their quality have resulted in delays in their adoption. However, in many cases, these delays are disproportionate to the improvements that have to be made. They stem more from the Commission's difficulties in managing the 174. Accordingly, I consider that the Ita- plethora of forms of intervention that have lian Government has not proved that the been proposed, in coordinating its depart- calculation method and, in particular, the ments and in building up an effective criterion of the state of implementation of partnership culture with the Member the Community initiatives at 31 December States. In some cases, it took several 1997, had been distorted, to the detriment months or even years for the detailed rules of the Italian Republic, by wrongful con- for implementing the individual projects to duct on the part of the Commission which be laid down, following exchanges of affected the Italian Republic to a greater correspondence and discussions which did extent than the other Member States. not make much headway. As regards Italy, for example, at 31 December 1994, only 5 130.3 Mio ECU of aid had been approved

176. In this plea, the Italian Government claims that the Commission acted incon- sistently. It states that '[i]n his letter of 15 December 1997 ..., Commissioner Wulf-Mathies asked the Italian authorities, 178. The Italian Government infers from within the framework of the examination this that the state of advancement of the of the state of advancement of the Com- initiatives was ascertained on the basis of munity initiatives, to "arrange for the heterogeneous data, in the sense that the verification and supplementation, on the Italian Republic provided the Commission basis of the situation at 31 December 1997, with information regarding the state of of the enclosed information relating to the advancement of the initiatives for which commitments and payments currently legally binding commitments had already entered in the accounts by the authorities been made whereas other Member States administering each of the programmes ...".' may have used the other criterion, which The Italian Government infers from that was much vaguer. that the Commissioner concerned was referring, for the purposes of that examin- ation, to the concept of legally binding commitments, 'as contained in Commission Decision No C(97)1035/640 ... in particu- lar in datasheet 3 ... '.

179. The Commission replies that the term 'commitments in place' is the term usually used to refer to the single concept used in the management of the Structural Funds, 177. According to the Italian Government, which is that of 'commitment at Member this concept was not used as a criterion at State level', defined in eligibility datasheet 3, annexed to Decision 97/322, as the legally binding commitment which is 40 — Commission Decision 97/322/EC of 23 April 1997 mod- ifying the decisions approving the Community support entered into by the final beneficiary and frameworks, the single programming documents and the which must be accompanied by the com- Community initiative programmes in respect of Italy (OJ 1997 L 146, p. 11). mitment of the public funds required.

41 — Commission Regulation (EEC) No 1866/90 of 2 July 1990 on arrangements for using the ecu for the purposes of the 182. I therefore consider that the sixth plea budgetary management of the Structural Funds (OJ 1990 L 170, p. 36), as amended by Article 1 of Regulation is unfounded. No 2745/94 (OJ 1994 L 290, p. 4).

I - 1126

ITALY v COMMISSION

185. I consider that Regulation No 1866/90, partnership principle or the rules governing which is a regulation adopted by the the reduction of resources, namely, Commission pursuant to Article 22 of Articles 24 and 25 of Regulation Regulation No 4253/88, cannot affect the No 4253/88. conditions upon which the Commission fixes, on the basis of Article 12(4) of Regulation No 2052/88, the indicative allocations. It follows that Regulation No 1866/90, on its own, cannot alter the conclusion which I have reached above, 186. I therefore consider that the seventh that the Commission did not infringe the plea is unfounded.

V — Conclusion

187. I propose that the Court should: