C-107/99

Commission of the European Communities, represented by E. de March, Legal Adviser, K. Simonsson and H. Speyart, of its Legal Service, acing as Agents, with an address for service in Luxembourg at the office of C. Gómez de la Cruz, of its Legal Service, Wagner Centre, Kirchberg,

defendant,

supported by Ireland, represented by J. Payne, Legal Adviser, Office of the Attorney General, acting as Agent, assisted by D. McGuinness SC and E. Kent, Solicitor, with an address for service in Luxembourg at the Irish Embassy, 28 Route d'Arlon,

* Language of the case: Italian.

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Order

1 By application lodged at the Court Registry on 29 March 1999 the Italian Republic brought an action under Article 173 of the EC Treaty (now, after amendment, Article 230 EC) for annulment of the Commission's decision of 16 December 1998 approving amendments to the indicative allocation of Community initiatives, which was communicated to the applicant by letter from the Secretary-General of the Commission dated 19 January 1999 ('the contested decision'), and of all measures on which that decision is based or which are connected with it, in particular the opinion of the Management Committee of 22 September 1998 and the table annexed to that letter ('the contested measures'). I - 4013

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2 By a separate document lodged at the Court Registry on 21 April 1999 the Italian Republic applied pursuant to Articles 185 and 186 of the EC Treaty (now Articles 242 EC and 243 EC) for suspension of operation of the contested decision and the contested measures and, in the alternative, for the adoption of other interim measures which would allow the applicant to avoid the serious and irreparable damage caused thereby.

3 The Commission submitted its written observations on the application for interim measures on 12 May 1999.

4 By applications lodged at the Court Registry on 17 and 27 May 1999 Ireland and the United Kingdom of Great Britain and Northern Ireland sought leave to intervene in the interlocutory proceedings in support of the form of order sought by the Commission. Those applications to intervene were granted pursuant to the first and fourth paragraphs of Article 37 of the EC Statute of the Court of Justice and Article 93(1) and (2) of the Rules of Procedure.

7 In order to achieve those aims and to regulate the tasks of the funds, the Council adopted Regulation (EEC) No 2052/88 of 24 June 1988 on the tasks of the Structural Funds and their effectiveness and on coordination of their activities between themselves and with the operations of the European Investment Bank and the other existing financial instruments (OJ 1988 L 185, p. 9), as amended in particular by Regulation (EEC) No 2081/93 of 20 July 1993 (OJ 1993 L 193, p. 5, hereinafter 'Regulation No 2052/88'), and Regulation (EEC) No 4253/88 of 19 December 1988 laying down provisions for implementing Regulation (EEC) No 2052/88 as regards coordination of the activities of the different Structural Funds between themselves and with the operations of the European Investment Bank and the other existing financial instruments (OJ 1988 L 374, p. 1), as amended in particular by Regulation No 2082/93 of 20 July 1993 (OJ 1993 L 193, p. 20, hereinafter 'Regulation No 4253/88').

8 The first subparagraph of Article 4(1) of Regulation No 2052/88 provides:

'Community operations shall be such as to complement or contribute to corresponding national operations. They shall be established through close consultations between the Commission, the Member State concerned and the competent authorities and bodies... designated by the Member State at national, regional, local or other level, with all parties acting as partners in pursuit of a common goal. These consultations shall hereinafter be referred to as the "partnership". The partnership shall cover the preparation and financing, as well as the ex ante appraisal, monitoring and ex post evaluation of operations.'

5. For the period [1994-99], 9% of the commitment appropriations for the Structural Funds shall be devoted to funding assistance undertaken on the initiative of the Commission in accordance with Article 5(5).'

12 Last, according to Article 17(2) of Regulation No 2052/88:

'In implementing assistance undertaken on its own initiative in accordance with Article 5(5), last subparagraph, the Commission shall be assisted by a manage- ment committee composed of representatives of the Member States.' I - 4016

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13 Reference must also be made to a number of provisions of Regulation No 4253/88.

14 Article 11(1) of Regulation No 4253/88, which deals with Community initia- tives, provides:

2. Following this examination, the Commission may reduce or suspend assistance in respect of the operation or measure concerned if the examination reveals an irregularity or a significant change affecting the nature or conditions for the implementation of the operation or measure for which the Commission's approval has not been sought.

...'

17 Article 25 of Regulation No 4253/88 provides:

'1. Within the framework of the partnership, the Commission and the Member States shall ensure effective monitoring of implementation of assistance from the Funds, geared to the Community support framework and specific operations (programmes, etc.)....

3. Monitoring committees shall be set up within the framework of the partner- ship, by agreement between the Member State concerned and the Commission.

5. The monitoring committee shall, if necessary, without modifying the total amount of the Community contribution and within harmonised limits by Objective, adjust the procedure for granting assistance as initially approved, as I - 4018

20 For 1999 the Commission decided to amend the indicative allocation of Community initiatives in order to release the sum of ECU 100 million to finance a Community initiative consisting in a special aid programme for peace and I - 4019

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reconciliation in Northern Ireland and in the border counties of Ireland (hereinafter the 'PEACE initiative').

21 In taking account of the various criteria, in particular the state of implementation of the various Community initiatives in the Member States, the Commission drew up a proposal for the alteration of the allocation of Community initiatives, in the form of a working document which was approved by the management committee at its meeting of 22 September 1998.

22 That working document shows that the financial redistribution of ECU 100 million in favour of the PEACE initiative was to entail, for the Italian Republic, a reduction of ECU 44.7 million, while the other substantial reductions affected France (ECU 18.1 million), the United Kingdom (ECU 16.4 million), Portugal (ECU 6.8 million) and Germany (ECU 6 million).

23 As regards the Italian Republic, the initiatives affected by the reduction of ECU 44.7 million were as follows: Interreg (ECU 21 million), PME (ECU 17.8 million), Urban (ECU 3.2 million), Leader (ECU 2 million) and Konver (ECU 0.7 million).

The new table enclosed herewith replaces the corresponding tables enclosed with the letters from Mr Williamson dated 13 July 1994 and 13 June 1996.)

26 The letter was accompanied by a table entitled 'Stanziamenti indicativi per iniziativa comunitaria e per Stato membro (in MECU, prezzi 1999)' (Indicative allocations per Community initiative and per Member State (in MECU, 1999 prices)), which set out for each Member State the total amount indicatively allocated to it and the allocation of that amount between the various Community initiatives. In the case of the Italian Republic an asterisk referred to a footnote stating that 'Tali stanziamenti potranno essere programmati nella loro totalità I - 4021

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solo qualora lo Stato membro confermi il suo accordo ad una riduzione delle risorse programmate all'interno dell'Iniziativa PMI' (These appropriations can only be programmed in full where the Member State confirms that it agrees to a reduction of the resources programmed within the framework of the PME initiative).

Arguments of the main parties

The existence of a prima facie case

31 The fourth plea alleges that in adopting the contested decision the Commission infringed the partnership principle provided for in Article 4 of Regulation No 2052/88. The Commission failed to consult the applicant and acted without the latter's consent. Such conduct constitutes a breach of the legitimate expectation which the applicant had acquired in relation to the funds allocated since 1994 and 1996.

32 By its fifth plea the applicant claims that, in so far as it affects Italy more than the other Member States, the contested decision was adopted in breach of the principles of economic and social cohesion and solidarity between Member States provided for in Article 2 of the EC Treaty (now, after amendment, Article 2 EC) and of the principle of non-discrimination.

33 According to the sixth plea, the Commission also acted ultra vires and in an inconsistent manner. In order to examine the state of implementation of the Community initiatives, the Commission initially sought information from the applicant concerning the 'legally binding commitments', whereas its final decision was based on the broader concept of 'commitments in place'. According to the applicant, other Member States may have provided information based on the I - 4023

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latter concept, so that the state of advancement of the initiatives was ascertained on the basis of heterogeneous data.

37 In accordance with that method, which was applied in two stages, it was decided, first of all, that the Italian Republic was to bear 4 4 . 7 % of the amount to be

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reallocated to the PEACE initiative. The purpose of the second stage was to allocate the amount of that reduction between the Community initiatives in that Member State by identifying those programmes the state of implementation of which had not yet reached a sufficiently advanced stage. In the working document submitted to the management committee the Commission provided, in the case of certain programmes, for a reduction in the funds allocated but not yet granted, and 'suggested' a reduction in respect of funds already granted within the framework of the PME, Urban and Konver initiatives.

38 The new indicative allocation was then adopted by means of the contested decision. The Commission points out that in the absence of positive contacts with the Italian Republic it applied to that Member State the indicative allocation suggested in the working document. The Commission observes that it did not, therefore, reduce assistance which had already been granted but suggested that such a reduction be effected, and that it was fully aware of the fact that the applicant's consent was required.

39 The Commission also makes the following observations in regard to each of the seven pleas invoked by the applicant.

43 In response to the applicant's fourth plea, alleging a violation of the partnership principle, the Commission states that that principle does not extend to the exercise of the discretion conferred on it by Article 12(4) of Regulation No 2052/88. It points out that, furthermore, it ensured that all the Member States participated in preparing the indicative allocation by consulting the management committee and that it invited the Member States to attend bilateral discussions in connection with the second stage of determining that allocation, an invitation which the applicant did not accept. As regards the alleged infringement of the principle of the protection of legitimate expectations, the Commission considers that, inasmuch as they are purely indicative, the allocations cannot give rise to such expectations and that, in any event, its earlier correspondence with the applicant had prevented the latter from harbouring such expectations.

44 As regards the infringement of Article 2 of the Treaty and of the principle of non- discrimination, which is alleged in the fifth plea, the Commission points out, first of all, that that provision includes cohesion and solidarity in the list of the objectives of the Community but does not create any specific rights and obligations on the part of the Member States and the various institutions. The method followed in the present case did not entail any discrimination against the applicant but allowed differentiated treatment of the Member States according to objective and transparent criteria which were capable of being verified.

47 The applicant claims that if suspension is not ordered it will definitively lose the amount of ECU 44.7 million in respect of the reduction provided for in the contested decision, even if the judgment subsequently delivered on the substance of the case is in its favour.

48 First, the reduction in question concerns Community initiative programmes which have already been approved, and in respect of which the Italian Republic is required to meet its legal obligations and financial commitments before 31 December 1999, failing which it will no longer be able to commit or spend the funds concerned. Second, the contested decision has blocked any examination of the proposals for the reallocation of the funds presented by the applicant, so that, if a judgment annulling the relevant measures is delivered after 31 Decem- ber 1999, it will no longer be possible to launch and implement the programmes to which those reallocation proposals relate.

49 The applicant maintains that this situation is liable to give rise to serious and irreparable harm, since the reduction of ECU 44.7 million may have a significant impact on the level of employment, the standard of living and the creation of infrastructures in the areas concerned. I - 4027

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50 The Commission replies that even if the operation of the contested decision were suspended the applicant would not have any right as regards specific finance which has not yet been granted. For the rest, the alleged damage is the consequence not of the contested decision but of the applicant's inability to implement in good time the programmes provided for by the Community initiatives. Even if the contested decision were suspended, the applicant would not be capable of validly committing the amounts resulting from the new indicative allocation, not to mention the initial allocation, in the light of the limited extent to which the operations have to date been implemented in Italy.

54 They rely, in particular, on the political and economic importance of the PEACE initiative in the context of bringing peace to Northern Ireland, and emphasise the excellent degree of implementation of the projects financed within the framework of that initiative.

55 Ireland also maintains that the fact that the sum of ECU 100 million has been entered in the general budget of the European Union for 1999 in favour of the PEACE initiative establishes a binding legal commitment on the part of the Community institutions.

56 The United Kingdom claims, in particular, that if the Court were to suspend the operation of the contested decision it would prejudge the effects of the decision to be given in the main action.

Assessment

57 Pursuant to Articles 185 and 186 of the Treaty the Court may, if it considers that circumstances so require, order that application of the contested act be suspended or prescribe any necessary interim measures in actions brought before it. I - 4029

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62 At the hearing the Commission stated that, as regards the reduction of ECU 44.7 million which the new indicative allocation of Community initiatives I - 4030

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represented for the applicant, a sum of approximately ECU 19 million related to funds which had already been granted, essentially in connection with the PME initiative but also in connection with the Urban and Konver initiatives.

63 The Commission also acknowledged that it was not empowered unilaterally to reduce funds which had already been granted, and that, in order to do so, it must have the consent of the Member State concerned. That, incidentally, is the meaning of the footnote to the table referred to in paragraph 26 of this order, which, although it refers only to the PME initiative, is equally valid for all funds already granted, including those granted in connection with other initiatives.

64 In answer to a question put at the hearing, the Commission stated that even if the Italian Republic refused to consent to the reduction in respect of funds already granted there was nothing to prevent that Member State from proceeding to implement specific operations covered by the funds already granted.

65 At the same time, the Commission admittedly reiterated its considered view that, having regard to the present state of implementation of the operations in Italy, that Member State was not in a position to absorb within the prescribed period the amounts provided for in the initial indicative allocation or even those arising from the contested decision.

69 That applies, first, to the argument expounded in the context of the first plea to the effect that the statement of reasons on which the contested decision is based should be even more precise and complete because the decision reduces funds which have already been granted.

70 The same also applies to the second plea, which turns on an alleged infringement of Article 24 of Regulation No 4523/88. That provision refers to cases in which assistance which has already been granted is reduced, suspended or cancelled.

71 As regards the remaining pleas advanced by the applicant in support of its application for annulment, it is appropriate to consider whether they are capable of founding a prima facie case sufficient to justify granting the application for suspension. I - 4032

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72 As regards, first, the plea relating to the failure to state reasons for the contested decision, it should be noted that the decision was adopted following a copious exchange of correspondence between the applicant and the Commission and after consultation of the competent committee. Taken as a whole, the explanations provided in those circumstances, which must be taken into consideration for the purpose of assessing the reasoning of the contested decision, tend, at first sight, to confirm that the applicant was adequately informed of the reasons on which the contested decision was based when it received notification of it.

73 As regards, second, the conditions on which the Commission is authorised to alter indicative allocations within the meaning of Article 12(4) of Regulation No 2052/88, it must be accepted, without prejudice to the assessment to be made in the main action, that the existing rules appear to confer on the Commission a certain discretion which is subject only to limited judicial review.

77 As regards, fourth, the seventh plea advanced in support of the claim for annulment, concerning the indexation of the amount of assistance, it was not possible, on the basis of the hearing in the proceedings for interim measures, to discern clearly the relevance of that plea. Furthermore, although the applicant failed to specify the relative proportion of indexation in the total amount in issue, that aspect appears at first sight to be of only marginal importance.

78 As regards, last, the procedural rules according to which a Commission decision altering an initial indicative allocation should be taken, the Court finds that the applicant scarcely specified the defects vitiating the contested decision, whereas the Commission, without being contradicted on that point, explained that its proposal had first been submitted to and approved by the management committee.

79 In the absence of a specific provision in the Community rules, it is impossible to concur unreservedly with the applicant's argument that the procedure laid down in Article 25 of Regulation No 4253/88 is applicable.

80 Nor does the applicant's argument that the Commission should have fulfilled the commitment given by it in a letter to the Italian Republic dated 15 December I - 4034

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1997 — by which it undertook to examine with each Member State the possibility of diverting appropriations to other programmes in the process of implementation before making proposals for the reallocation of those appro- priations between the various Community initiatives at the level of the European Union as a whole — suffice to call in question, on an initial analysis, the validity of the procedure which the Commission followed when adopting the contested decision.

85 The urgency pleaded by the applicant must be assessed in the light of the scope of the contested decision as defined in paragraph 67 of this order. The question whether the urgency of the situation is such as to entitle the Italian Republic to an order suspending the operation of the contested decision must therefore be assessed on the basis that the contested decision reduced the amount allocated to the Italian Republic by approximately ECU 26 million.

86 As regards the seriousness of the alleged harm, it must be pointed out, first, that the applicant merely referred in. very general terms to the disadvantages which the reduction in issue would entail for the areas concerned and, second, that the effect of the contested decision may be qualified by the finding in paragraph 67 of this order that the reduction concerns only an amount of approximately ECU 26 million, and not ECU 44.7 million as the applicant claims.

87 However, the precise scope of the potential harm requires a very thorough examination of the actual prospects which the Italian Republic has of using the amounts involved during the period to 31 December 1999, which goes beyond the ambit of the present proceedings for interim measures.

88 It is not a priori inconceivable that the contested decision may produce certain effects which could not easily be made good were the applicant to succeed in its action for annulment, and the Commission itself argued at the hearing in favour of a more restrictive approach to the actual consequences which it might be able to draw in favour of the applicant from annulment of the contested decision.

92 It follows from all the foregoing that the conditions necessary for the grant of the interim measures applied for are not fulfilled.

On those grounds,

THE PRESIDENT OF THE COURT

hereby orders:

1. The application for interim measures is dismissed.

2. The costs are reserved. I - 4037