C-87/01

OPINION OF MR LÉGER — CASE C-87/01 P

OPINION OF ADVOCATE GENERAL LÉGER delivered on 17 September 2002 1

1. This appeal has been lodged by the I — Facts giving rise to the dispute Commission of the European Communities against the judgment of the Court of First Instance of the European Communities of 14 December 2000, 2which annulled the Commission's decision effecting set-off 4. The CEMR is an association constituted against a private body. under French law which brings together national associations of local and regional authorities in Europe.

5. On 11 February 1994 and 25 April 1995 2. The Court of First Instance took the the CEMR concluded three technical assist- view that the Commission's right to effect ance contracts with the Commission. 4 set-off was subject to the condition that it Article 8 of the contracts states that they should ascertain whether the operation was are governed by Belgian law and Article 9 such as to jeopardise activities financed by confers jurisdiction on the civil courts of the Community. The Commission disputes Brussels (Belgium) for any dispute arising the legality of that condition. between the parties.

6. In January 1997 the Commission carried out an audit of the CEMR's accounts pursuant to the MED URBS contracts and 3. The case has been brought in the context concluded that the CEMR owed it the sum of a dispute between the Commission and of ECU 195 991 by virtue of those the Council of European Municipalities contracts. The Commission made out a and Regions. 3 debit note for that amount on 30 January 1997 and, by letter of 7 February 1997, requested repayment from the CEMR. 1 — Original language: French. 2 — Case T-105/99 CEMR v Commission [2000] ECR II-4099, 'the contested judgment'. 3 — 'CEMR'. 4 — 'The MED URBS contracts'.

10. By letter of 15 February 1999, 6the Commission stated that, in its opinion, its claim was indeed real and undisputed, of an ascertainable amount and immediately payable, enabling set-off. It therefore 12. By application lodged on 28 April informed the CEMR of its decision 'to 1999, the CEMR also brought an action recover the amount of EUR 195 991 by before the Court of First Instance of the set-off against the sums... payable by way European Communities, seeking the annul- of Community contributions' relating to ment of the contested decision in so far as it sets off the sum of EUR 195 991, which is said to be owed to the Commission under 5 — T h e Commission's letter CBI-XIX/C1/D(98).56805 of the MED URBS contracts, against the sums 3 December 1998 (Annex 7 to the application lodged by the CEMR before the Court of First Instance in Case T-103/99). 6 — 'The contested decision'. 7 — 'The disputed activities'.

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owed by it in respect of the following HI — The contested judgment programmes and documents: 8

14. With its first plea in law, the CEMR argued that there was no legal basis for the contested decision. In particular, it con- — EUR 39 447.39 in respect of 'regional tended that the set-off mechanism was not seminars in the target 2 zones'; a general principle of Community law 9 and that, in any case, the conditions for apply- ing set-off (namely, that the claims are real and undisputed, of an ascertainable amount and immediately payable) were not satisfied in the present case. 10 — EUR 50 000.00 in respect of the 'Subvention Programme 1998';

right of the Commission, as the insti- individual decisions adopted by the tution responsible for the implemen- Community judicature in the context tation of the Community budget under of disputes which come before it. Article 205 of the EC Treaty (now Article 274 EC), to effect set-off against entities to which Community funds are owed but which also owe sums of Community origin. 59 In the absence of express rules on the subject and in order to determine whether the contested decision has a legal basis, it is necessary to look to the rules of Community law applicable to the activity of the Commission and to refer to the abovementioned case-law. 56 However, set-off in relation to Com- In that context, it is necessary, in munity funds is a legal mechanism particular, to take account of the whose application was regarded by principle of the effectiveness of Com- the Court of Justice as consistent with munity law to which that case-law Community law in [the judgments in refers (Jensen, paragraphs 54 and 67) Case 250/78 DEKA v EEC [1983] and the principle of sound financial ECR 421, Case 125/84 Continental management. Irish Meat [1985] ECR 3441, and Case C-132/95 Jensen and Korn- og Foder- stofkompagniet [1998] ECR I-2975].

60 The principle of the effectiveness of Community law implies that the funds of the Community must be made avail- able and used in accordance with their 57 That case-law of the Court of Justice purpose. does not contain, however, all the elements needed to resolve the present case.

61 Consequently, in the present case, before effecting set-off, the Commis- sion was required to assess whether, in spite of that operation, the use of the funds in question for the purposes 58 Moreover, it would be preferable for prescribed and the completion of the the issues raised by set-off to be dealt activities which had justified the grant- with under general provisions laid ing of the contested sums remained down by the legislature and not by assured.

62 In that regard, it should be borne in by the Commission, and that, once mind that set-off is a method of set-off had been effected, the CEMR extinguishing reciprocal obligations. was going to be able to use those funds In this case, set-off would have extin- in order to carry out the activities at guished, according to the Commission, issue. the claim on which it relies as against the CEMR in respect of the MED URBS contracts and, at least partially, that of the CEMR vis-à-vis the institu- tion in respect of Community subsidies which were to be paid to it in con- nection with the activities at issue. It 65 However, it is clear that, if the CEMR must also be observed that, in the letter no longer had access to the abovemen- of 15 February 1999, the Commission tioned funds, it could no longer finance stated that the payments made by the carrying out of those activities. means of set-off were to be regarded "as received by the CEMR with the obligations arising from them". Having done that, the Commission expressed its requirement for [the CEMR] to fulfil its obligation to carry out the activities at issue. 66 Accordingly, the contested decision had the effect of moving the problem of the recovery of an alleged debt owed to the Commission in connection with the performance of the MED URBS contracts to the carrying out of the activities at issue, which correspond to 63 However, in the absence of the actual a Community interest, now threatened payment of the sums intended for the by set-off. fulfilment of that obligation, it is clear that those sums would not be used for their purpose and that accordingly the activities at issue were in danger of not being carried out, which is contrary to the effectiveness of Community law and, more specifically, to the effective- 61 The contested sums were not intended ness of the decisions granting the con- to pay the CEMR's debts, but for tested sums. carrying out activities for which those sums had been allocated. It is necess- ary, in this respect, to stress that in the present case, unlike that which resulted in the Jensen judgment (paragraphs 38 and 59), in which the aim of the regulation in question was to guarantee 64 The Commission's position implied a certain income for farmers, the con- that the CEMR still had access to the tested sums could be used only to carry funds which were awarded under the out the activities for the purpose of MED URBS contracts and are claimed which those sums were intended. I - 7624

69 As regards the principle of sound financial management, in accordance with which the Commission must 73 Finally, the principle of sound financial implement the Community budget management must not be reduced to a under Article 205 of the Treaty, its purely accounting definition which application in this case confirms the considers as essential the mere possi- analysis above. bility of regarding a debt as formally paid. On the contrary, a correct inter- pretation of that principle must include a concern for the practical con- sequences of the acts of financial man- agement, using as a reference point, in 70 As regards the recovery of the debt particular, the principle of the effec- which [the CEMR] has vis-à-vis the tiveness of Community law. Commission, it should be pointed out that, since the CEMR was not insol- vent, that institution could have sought payment from it before the Belgian court with jurisdiction.

74 It follows from all the foregoing that the Commission was not entitled to 71 Furthermore, in order to guarantee the adopt the contested decision without proper use of the contested sums, if the first ensuring that it did not pose a risk Commission had had doubts about the for the use of the funds in question for CEMR's management of the Commu- the purposes for which they were nity funds, it could have contemplated intended and for the carrying out of the suspension, as a preventive meas- the activities at issue, when it could ure, of the payment of those sums to have acted otherwise without jeopard- that association as it did in respect of ising the recovery of [the CEMR's] other funds which were also owing to alleged debt to it and the proper use of the CEMR. the contested sums.'

20. In this case the contested set-off relates to debts which are governed by two 18. In support of its claims, the Commis- different legal systems. The Commission's sion relies on three pleas in law: claim 11 originates in the MED URBS contracts, which are governed by Belgian law. On the other hand, the CEMR's claim arises from four decisions of the Commis- sion granting the CEMR Community finance for certain activities in the field of — breach of the general principle of social policy and economic and social Community law authorising set-off; cohesion. 12 Although the documents in the file give little information on this point, it is common ground that the finance conditions are governed by Community law. 13 — breach of the principle of the effective- ness of Community law, and 11 — It must be borne in mind that, before both the Court of Justice and the Court of First Instance, the CEMR disputed the validity of the Commission's claim under the MED URBS contracts. I shall revert to this point later on (see point 119 et seq.). For the moment, however, for the sake of convenience I shall refer to 'the Commission's claim' and 'the debt owed to the CEMR' without pointing out every time that the claim or the debt is disputed. — breach of the principles of sound 12 — Annexes 10 to 13 of the application lodged by the CEMR financial management and the sound before the Court of First Instance in Case T-105/99. administration of justice. 13 — See the appeal (paragraph 42) and statement in defence (paragraph 6).

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21. That being so, the parties to the action applied the conditions laid down by Bel- have examined the question of the law gian law. Therefore the Commission applicable to the dispute. 14 They have put appears to take the view that the legality forward various arguments to determine of the contested decision must be examined whether the validity of the contested by reference to Community law and Bel- decision must be assessed by reference to gian law simultaneously. Community law or Belgian law.

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the meaning of the case-law cited above. domestic law of a Member State in the The decision cannot be dissociated from context of an action for annulment. The previous decisions of the Commission grounds of annulment are listed exhaus- whereby it agreed to grant Community tively in Article 173 of the Treaty and all finance to the CEMR. form part of Community law. In this connection it may also be noted that the refusal to assess the validity of Community acts by reference to national law is one of the foundations of the Court's case-law relating to fundamental rights. With the contested decision, the Commis- sion chose a particular method of extin- guishing its obligations. The Commission states that its debt arising from the financ- ing decisions has been extinguished by the effect of set-off, so that it will not make 28. As we know, following the judgments actual physical payment of the sums due to in the cases of Stork v High Authority 19 the CEMR. On the other hand, the obli- and Sgarlata and Others v Commission, 20 gations arising from the receipt of those the Court had to reply to arguments to the sums will have to be properly fulfilled. effect that acts of the institutions are illegal Accordingly the contested decision limits if they disregard fundamental rights guar- the CEMR's right to dispose freely of the anteed by the national legal systems. In the amounts payable by way of Community judgment in the case of Internationale contributions while maintaining the obli- Handelsgesellschaft,21 the Court rejected gations arising from the receipt of those those arguments for the following reasons: amounts. In those circumstances, the con- tested decision produces binding legal effects likely to affect the CEMR's inter- ests. 17 It is therefore an act which may become the subject of an application for annulment before the Court of Justice or 'Recourse to the legal rules or concepts of the Court of First Instance. 18 national law in order to judge the validity of measures adopted by the institutions of the Community would have an adverse effect on the uniformity and efficacy of Community law.

However, an examination should be made 31. However, this conclusion entails ascer- as to whether or not any analogous guar- taining the rule of Community law which antee inherent in Community law has been must guide the Court in determining the disregarded. appeal.

In fact, respect for fundamental rights forms an integral part of the general B — The rule of Community law for principles of law protected by the Court guiding the determination of the appeal of Justice.'

32. First of all, set-off is a means of extinguishing obligations. It has the effect

29. I think the same reasoning can be applied to the present case. If the validity 22 — On the other hand, the question whether the Commission has a claim under the MUD URBS contracts is a matter of of the contested decision were to be judged Belgian law for which the civil courts of Brussels have exclusive jurisdiction, in accordance with Articles 8 and 9 by reference to Belgian law, the uniformity of the contracts (see point 119 et seq. helów).

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34. The question which arises is therefore whether there is a general principle of Community law authorising set-off. The 37. For my part, I consider that existing parties to the action differ on this point. case-law does not justify the conclusion that the Court has already expressly recog- nised the existence of a general principle of law authorising set-off. The only judgment concerning the Commission's right of set- off against a private person is the judgment in the case of DEKA v EEC. The Conti- nental Irish Meat and Jensen judgments do 35. The CEMR considers that in Commu- not deal with the question directly, nity law there is no general principle auth- 25 — See the contested judgment, paragraphs 29 to 31, and the statement in defence, paragtaphs 22 to 30. 23 — See the Jensen judgment, paragraph 41. 26 — See the contested judgment, paragraphs 39 to 49, and the 24 — The contested judgment, paragraph 55. appeal, paragraphs 7 to 27.

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although they contain useful pointers for The Court observed that 'the Community the present dispute. 27 rules on production or export refunds may give rise not only to debts which traders may raise against the authorities entrusted with administering the system, but also to claims, directed against traders, for the reimbursement of wrongly paid sums... . Those rules may thus give rise, as between authorities and traders, to reciprocal and even related claims which are an appropri- ate subject for set-off'. 29

27 — In the Continental Irish Meat judgment, the Court found that the role of the Irish intervention agency when it paid monetary compensatory amounts upon importation, owed by another State, was no different from its role when it recovered compensatory amounts upon exportation. The purpose of the Court's judgment was to enable the 39. This judgment shows that, although the national court to find that the conditions for set-off laid Court recognised the Commission's right of down by Irish law had been fulfilled. The Jensen judgment concerned the national authorities' right of set-off The set-off against a private person, the Court national court asked whether Community law precluded a Member State from setting off an amount payable to it by did not expressly accept that there was a way of VAT against aid due to a private individual under general principle of Community law auth- Council Regulation (EEC) No 1765/92 of 30 June 1992 establishing a support system for producers of certain arable crops (OJ 1992 L 181, p. 12). This judgment is discussed in points 84 to 87 of the present Opinion. 29 — DEKA v EEC, paragraph 13. 28 — See the judgment in Joined Cases 241/78, 242/78 and 245/78 to 250/78 DGV and Others v Council and 30 — Ibid., paragraphs 15 to 19. Commission [1979] ECR 3017. 31 — Ibid., paragraph 20.

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1. The existence of a general principle of Community law authorising set-off 43. The method used to establish the exist- ence of a general principle of Community law is also settled. The Court carries out an analysis of comparative law. It compares the law of the different Member States 37 and ascertains whether there is reasonable degree of convergence between national principles. 38 The Court may also refer to 41. The role which has fallen to the general the history of the principle to emphasise principles of law is well known. The exist- that '[its] origins may be traced back to ence of those principles is elicited by the Roman law'. 39 As a general rule, it adopts courts from previous judgments in order to a progressive approach 40 and seeks guid- fill gaps in the legal system and to establish principles which are unwritten, but some- times extremely important. 32 The order in 34 — H . Kutscher, 'Méthodes d'interprétation vues par un juge à la Cour', Rencontre judiciaire et universitaire, 27-28 which principles developed in this way septembre 1976, Luxembourg, 1976, p. I-26. rank in the hierarchy of rules may vary 35 — Joined Cases 7/56 and 3/57 to 7/57 [1957] ECR 39, 55. 36 — Ibid. because some are regarded as constitutional 37 — See, for example, the judgment in Algera and Others v in nature, while others are of the nature of Common Assembly, cited above, pp. 55 and 56, and the legislation or even delegated legislation. 33 judgment in Case 32/62 Alvis v Council [1963] ECR 4 9 , 55. 38 — P. Pescatore, 'Les droits de l'homme and l'intégration européenne', Cahiers de droit européen, 1968, p. 654. 39 — See the judgment in Case 23/68 Klomp [1969] ECR 4 3 , 32 — J.-P. Puissochet, 'La Cour de justice et les principes paragraph 13. généraux du droit communautaire', La protection juridic- 40 — See the Opinions of Advocate General Lagrange in Case tionnelle des droits dans le système communautaire, 14/61 Hoogovens v High Authority [1962] ECR 2 5 3 , 284, Bruylant, Brussels, 1997, p. 3. and of Advocate General Roemer in Case 18/70 Duraffour 33 — Ibid. v Council [1971] ECR 515, 533.

41 — H. Kutscher, cited above, p. I-27. 45. It is clear from this that all the Member 4 2 — See the judgment in Case 112/77 Tapfer v Commission 11978] LCR 1019, paragraph 19. States recognise the principle of set-off. 43 — Case C-341/93 | 1 9 9 5 | ECR I-2053, points 27 to 31 of my Moreover, 13 of them 48 accept that set-off Opinion. 44 — For the purposes or the present case, I have added to my Opinion some observations on the law of certain countries which were not considered in the Danværn Production case cited above. The systems in question arc those of 46 — Germany, Austria, Denmark, Finland, the Netherlands, Austria, Spain, Greece and Luxembourg. Norway and Sweden. 45 — Belgium, Spain, France, Greece, Italy, Luxembourg and 47 — England, Scotland and Ireland. Portugal. 48 — All save Ireland and the United Kingdom.

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46. However, these particulars are not sufficient to resolve the problems raised by the present case. The foregoing sum- mary relates only to the conditions for set-off between private persons. The pres- ent dispute concerns the conditions under which a public authority (the Commission) can set off debts as against a private person 49. Set-off is often subject to more restrict- (the CEMR). Consequently it is necessary ive conditions where a public entity is to continue the examination of national involved. As a general rule, most national systems of law on that point. legal systems 53 require the debt to be real and undisputed, estimated in money and immediately payable (not subject to a suspensory period). However, some States lay down additional conditions. Accord- ingly, in spite of the principle that the State is an indivisible person, Belgium, France and Luxembourg require the two debts to be owed to and by the same authority or 47. According to my information, all the ministry. By contrast, this requirement does Member States except Ireland and the not exist in the legal systems of Germany, United Kingdom recognise the principle Austria, Finland and Greece, where the fact that a public authority may set off debts that two different authorities are involved as against a private person. However, the does not preclude set-off. In addition, the approach taken by the national legal sys- tems differs considerably from one Member State to another. 50 — Germany, Austria, Denmark, France, Greece, Luxembourg and the Netherlands. 51 — Spain. 52 — Italy, Portugal and Sweden. 49 — Belgium, Spain, France, Greece, Italy, Luxembourg and 53 •— Germany, Austria, Belgium, Denmark, Spain, Finland, Portugal. France, Greece, Luxembourg and the Netherlands.

51. However, I do not think these differ­ ences are such as to prevent the Court from recognising the existence of a general principle of Community law. 56 53. In the present case, I think the different- conditions are fulfilled. We have found that 62 13 out of 15 Member States recognised

57 — Joined Cases 56/74 to 60/74 1197ft) ECR 711. 58 — See the Opinion of Advocate General Ucischl, ibid., ECR 752 and 753. 59 — See the Kampffmeyer judgment, cited above, paragraph 6. 52. It has consistently been held that, to See also the judgment in Case 17/74 Transocean Manne recognise the existence of a general prin­ ľanu Assnaaítun v Cnnmnssion [1974] FCR 1063, paragraph 15, in which the Court recognised the existence of a general rule that 'a person whose interests are perceptibly affected by a decision taken by a public authority must be given the opportunity to make his point of view Known,' although that rule did not exist in all the 54 — In Belgium and the Netherlands set-off is excluded where Member States (see the Opinion of Advocate Genera! the mutual debts of the State and private individuals arise Warner, ibid., ECU 1089 and 1090). from taxes or duties. 55 — Germany, Belgium, Denmark, Finland, France, Lux- 60 — Case 155/79 [1982] ECR 1575, paragraphs 18 to 27. emhourg and the Netherlands. 61 — Ibid., paragraphs 19 and 2 1 . 56 — In relation to fundamental rights, sec my Opinion in Case 62 — Germany, Austria, Belgium, Denmark, Spain, Finland, C-353/99 P Coima/ v Hautala [2001] F.CR I-9565, France, Greece, Italy, Luxembourg, the Netherlands, point 69. Portugal and Sweden.

57. First, it would offer a genuine guaran- tee of payment to the institution respon- sible for the implementation of the Com- munity budget. Where the Commission is simultaneously the debtor and the creditor of a private trader, set-off enables it to 54. This conclusion is confirmed in the recover (all or part) of the amount owed to argument put forward by the different it without being exposed to the risk of the Member States which intervened in the debtor's insolvency. In the judgment in the Jensen case. In that case, which concerned case of DEKA v EEC, the Court recog- specifically the right of a (national) public nised, moreover, that 'in the case of an authority to effect set-off, the seven inter- insolvent trader, such a set-off may in fact vening governments 66 contended that 'the constitute the only practicable way open to universal right, in the Member States' legal the authorities to recover the wrongly paid systems, to set-off... should be considered sums' 69 under Community law. to give rise to a general principle of Community law in its favour'. 67 68 — For the advantages of set-off in civil law, see H. & L. Mazeaud and J. Mazeaud, Leçons de droit civil, Paris, ed. Montchrestien, 1978, sixth ed., Part II, Vol. I (paragraph 1145); G. Ripert and J. Boulanger Traité de 63 — Germany, Austria, Belgium, Denmark, Spain, Finland, droit civil, Paris, Librairie générale de droit et de juris- France, Greece, Luxembourg and the Netherlands. prudence R. Pichont and R. Durand-Auzias, 1957, Part II 64 — See the judgment in the case of AM & 5 Europe v (paragraph 1971); G. Baudry-Lacantinerie, Traité théor- ique et pratique de droit civil, Paris, Librairie de la société Commission, cited above, paragraph 19. du recueil J.-B. Sirey et du Journal du palais, 1908, third 65 — Ibid., paragraph 21. ed., Part III, Vol. XIV (paragraphs 1802 et seq.); and H. De 66 — Denmark, Ireland, Finland, France, Greece, Sweden and Page, Traité élémentaire de droit civil belge, Bruylant, the United Kingdom. Brussels, 1976, third ed., Part III (paragraph 617). 67 — See the Opinion of Advocate General Fennelly, point 23. 69 — Paragraph 14.

62. It is clear that the general principle of set-off belongs to the second category of principles. It in no way modifies the national laws of set-off, but merely governs the rights and obligations of the Commu- nity in relation to the Member States and 60. On the basis of these considerations, I private persons. Therefore the conditions think therefore there is a Community inter- est in authorising the Commission, as the 70 — Sec the Opinion of Advocate General Mancini i n the institution responsible for implementing Continental Irish Meat case, cited above, ECR 3447. the budget, to effect set-off. This would 71 — Defence, paragraph 27.

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for effecting set-off between private persons denominator. On the contrary, the Court or between a national public authority and takes a critical approach 73 and gives the a private individual are entirely governed answer which is most appropriate in by the domestic law of the Member States. relation to the structure and aims of the Community. 74

63. As I propose that the Court find the existence of a general principle of Commu- 65. In the present case, I think the Court nity law authorising set-off, it remains to cannot adopt a purely judicial concept of ascertain the conditions for applying that set-off. In many situations it may be that principle. the parties will themselves agree to recog- nise that their debts can be set off. This will probably be the case where the mutual debts are real and undisputed, fungible and immediately payable. However, if the parties in every case were required to apply 2. Conditions for applying set-off in Com- to the Community courts for an order for munity law set-off, that would make the mechanism much less useful. Such a requirement would mean that court proceedings — and the associated costs — could not be avoided in order to obtain payment of the debt.

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77 — See point 26 of this Opinion. 76 — Germany, Austria, Denmark, Finland, the Netherlands and 78 — Ibid., points 4 4 and 45. Sweden. 79 — Ibid., points 49 and 53.

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OPINION OF MR LÉGER — CASE C-87/01 P

commonly accepted requirement of 69. The four conditions listed above could fungibility would become a require- therefore be the minimum conditions for ment for the debts to be for sums of authorising the Commission to effect set- money; off against a private person. The question here is whether those conditions are suffi- cient. In the contested judgment the Court of First Instance replied in the negative on the basis of the principle of the effectiveness of Community law. It took the view that 'before effecting set-off, the Commission was required to assess whether, in spite of — the debts must be immediately payable: that operation, the use of the [Community] at the time when set-off is effected the funds in question for the purposes pre- debts must be immediately payable, scribed and the completion of the activities which excludes debts payable within a which had justified the granting of the fixed period or subject to a condition, contested sums remained assured'. 81 In its and appeal, the Commission disputes the legal- ity of this additional requirement.

72. However, in view of the position I am taking, it seems to me legitimate to com- plete this survey with a few remarks. These will be strictly limited to the points men- tioned above, 83 considered in relation to Community remedies. 74. In contrast, the question whether a private entity can effect set-off as against the Commission is more difficult. Although I have found little information on the point, it seems that the national legal systems have very different approaches. Some of them seem to exclude the possibility, 84 but set- off is permitted by others subject to more restrictive conditions. 85 In all cases, how- 73. At this stage of my survey, I am ever, national legal systems accept the inclined to agree that set-off may be existence of an imbalance between the rules effected between the Commission and the applying to public authorities and those Member States. The Commission, as the applying to individuals. Consequently sev- institution responsible for the implemen- eral approaches could be envisaged in the tation of the budget, would have a swift Community context. means of recovering debts owed to the Community by the Member States. A decision by the Commission to effect a set-off would be open to an action for annulment under the second paragraph of Article 173 of the Treaty.

75. A first approach would be simply to 82 — In my opinion, it is clear that the fact that the Court finds a general principle of Community law authorising set-off exclude the right of private persons to cannot prevent it from restricting the ambit of the principle at a later date. Accordingly, as in the national law of the set-off as against the Commission. How- Member States, set-off will probably have to be excluded in certain specified areas or particular cases (e.g. in relation to debts generally considered to be exempt from seizure or attachment). 84 — Belgium, France, Italy and the Netherlands. 83 — Point 7 1 . 85 — Germany, Austria and Greece.

C — Examination of grounds of annul- ment

A third solution could be based on Austrian law. It would require the private person to ask the Commission expressly to set off its debt. A refusal by the Commission could 77. In its appeal, the Commission contends lead to an action for annulment before the that the Court of First Instance erred in law Court of First Instance on the basis of in laying down the contested condition. Article 173 of the Treaty and, if the The Commission puts forward, in essence, Commission failed to reply to the request, three sets of arguments. the private individual could bring an action under Article 175 of the EC Treaty (now 87 — See, by analogy, the judgment in the case of Germany v Commission, cited above, paragraph 4. 88 — See the contested judgment, paragraph 61. 86 — See the contested judgment, paragraph 52. 89 — Also referred to as 'the contested condition'.

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79. Like the Commission, I think that, in Finally, the Court of First Instance is said to laying down the contested condition, there have disregarded the principle of sound was an error in law on the part of the Court financial management. By laying down the of First Instance in several respects. 93 contested condition, the Court had deprived the Commission of a useful and effective means of recovering debts owed to 90 — Sec the contested judgment, paragraph 60. the Community. 91 — Ibid., paragraph 63. 92 — Ibid., paragraph 6 1 . 9.5 — In my view, the contested judgment is also based on contradictory grounds. hirst, the Court of First I n s t a n c e authorises the Commission to effect set-off provided that this does not jeopardise the completion of the activities in question (paragraphs 61 and 74). However, secondly, the Court considers that, in the absence of actual payment of 78. It must be observed that, in the con- the sums, it is 'clear' that those activities will not be carried out (paragraphs 63 and 65). By definition, set-off never tested judgment, the Court of First Instance entails actual payment. According to the Court of First started from the principle that the effec- Instance, it is therefore always likely to jeopardise Community activities. In those circumstances, the reason- tiveness of Community law required actual ing of the judgment does not justify the contested condition, 'the reasoning ought to have led the Court to payment of the contested sums. According conclude that set-off is contrary to the principle of the to the Court, 'the principle of the effective- effectiveness of Community law.

82. In the legal context, set-off extinguishes both debts up to the amount of the lower. 85. That case related to the right of the This means that the debtors are discharged Danish State to effect set-off between a from their obligations as if they had made debt owed to it and aid payable to a private payment (in full or partly). Likewise, in the individual under Regulation No 1765/92, financial context, set-off does not lead to a which established a new support system for loss by the parties. In so far as it takes place producers of certain arable crops to com- where two parties are debtors of each pensate for the loss of income caused by a other, the financial situation is exactly the reduction in institutional prices by a com- same as if each had paid his debt. There is pensatory payment. Article 15(3) of the no difference between the effects of set-off regulation expressly required such pay- and a situation where each party pays the other the amounts owed. 94 — See, in particular, G. Baudry-Lacantinerie, cited above, who states that 'statutory set-off is equivalent to double payment... . With regard to its effects, the situation is therefore the same as if each of the two debts had been paid' (paragraph 1864); Encyclopédie Dalloz, under 'Set- off', observes that 'set-off produces the effects of double payment', (paragraph 95); H. De Page, cited above, who considers that 'set-off is equivalent to a payment' (paragraph 632); H. & L. Mazeaud and J. Mazeaud, cited above, who state that 'set-off produces the effects of a double payment. Everything takes place as if each of the two obligations had been paid' (paragraph 1155); and G. Ripert and J. Boulanger, cited above, for whom 'set-off is equivalent to a double payment' (paragraph 1998). 83. Therefore it is unanimously agreed 95 — Cited by G. Baudry-Lacantinerie, cited above, that, in civil law, set-off produces the same paragraph 1802.

87. The Court adopted the same position 89. A very simple example will be sufficient as the Advocate General. It began by to show that this is true. Suppose that the stating that Community law contained no Commission owes a sum of EUR 10 000 to general rules on the right of national auth- a private trader and that he owes the

96 — See the Opinion or Advocate General Fennelly i n the 99 — See the Jensen judgment, paragraph 35. Jensen case, points 12 and 18. 100 — Ibid., paragraphs 37 and 54. 97 — Ibid., point 2 3 . 101 — Ibid., paragraph 38. 98 — Ibid., points 39 and 49. 102 — Ibid., paragraph 6 1 , emphasis added.

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Commission the same amount. In this case, mistaken in law. In my opinion, it did not set-off has the effect of extinguishing the correctly assess the effect of the mechanism debts of the two parties. The situation is the of set-off. same as if the Commission had paid its debtor EUR 10 000 and he had used it to pay his own debt. The only difference is that set-off restricts the trader's power to dispose freely of the sum concerned.

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Community, but to allow third parties to to bring an action for repayment against a seize or attach sums paid under Commu- beneficiary of Community finance. nity law.

94. In my view, such a requirement is contrary to the Community interest and the principle of sound financial manage- ment. It is likely to paralyse the Commis- 92. Secondly, I think that the contested sion's activity, as the institution responsible condition is contrary to the principle of for the implementation of the budget, in the sound financial management. The Court of recovery of debts owed to the Community. First Instance held that, before effecting Furthermore, this condition could lead to a set-off, the Commission is required to serious imbalance as between the Commis- assess whether set-off is likely to jeopardise sion and the other creditors of the bene- 'the use of the funds... for the purposes ficiary. In so far as amounts paid under prescribed and the completion of the activ- Community law do not have the status of ities which had justified the granting of the preferential debts or debts which are contested sums'. 108 exempt from seizure or attachment under the national law of the Member States, the Commission would be bound by a con- dition (of assessment or even abstention) which is not imposed on the other credi- tors. 109

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attachment against beneficiaries of Com- 99. If the Commission grants funds to a munity aid, even by private parties. 110 solvent entity, this practically ensures that the Community activity will be completed. Contrary to what was held by the Court of First Instance, the guarantee of completion is not the result of the actual payment of the funds. It arises from the fact that the 96. Thirdly, I think the reasoning of the beneficiary's solvency is beyond doubt. Court of First Instance to some extent Therefore the fact that the Commission confuses the effects of set-off with the sets off the amount owed to it against the problems linked to the solvency of a bene- debt owed to a solvent beneficiary is not in ficiary of Community funds. itself likely to affect the completion of the Community activity.

COMMISSION v CEMR

funds. Therefore the Court of First Instance required only if the Community institution erred in law on this point. raises objections to the measure of con­ straint. Where the institution gives its consent to such a measure, the request for authorisation is devoid of purpose and need not be examined. 115

101. One final question remains. At the hearing, the present Court asked the parties whether, in their opinion, the case-law relating to garnishee orders should be applied to the mechanism of set-off.

115 — See the order of 17 June 1987 in Case 1/87 SA Universe 113 — 67/444/CEC, 67/28/Ľuratom (OJ 1967 152, p. 13). For a Tanhship v Commission [1987] ECR 2807; the judgment description of the system set up by this protocol, see in Case C-182/91 Forafrique Burkmabe v Commission C. Schmidt, 'Le protocole sur les privilèges et immunités 11993] I-2161, paragraph 12; and the order of 10 January des Communautés européennes'. Cahiers de droit euro- 1995 in Case C-1/94 SA Duplet v Commission [1995] péen, 1991, p. 67 ff.|. ECR 1-1. 114 — See the orders of 13 March 1962 in Case 4/62 Hühner v 116 — Sec, in particular, the order of 11 April 1989 in Case 1/88 High Authority (19621 ECR 4 1 , 42, with regard to a SA Générale de Banque v Commission [1989] ECR 857, garnishee order; 17 December 1968 in Case 2/68 Ufficio paragraph 13. imposte di consumo di lspra v Commission [1968] LCR 117 — Ibid., paragraphs 13 and 16. 435, 439, with regard to the inviolability of the premises of the Communities; and 6 December 1990 in Case 118 — See the order of 29 May 2001 in Case C-1/00 SA Calcata C-2/88 Iinm. Zwartfeld and Others [1990] ECR 1-4405, Inspection v C o m m i s s i o n (20011 ECR 1-4219, with regard to the inviolability of documents of the paragraphs 12 to 15. Communities. 119 — Ibid., paragraph 16.

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105. However, this case-law cannot be of common policies or the implementation applied to the mechanism of set-off. of Community action programmes. Con- sequently the case-law on garnishee orders cannot properly be applied to the mech- anism of set-off.

COMMISSION v CEMR

112. Here, it seems to me that the state of essence, the appellant sets out two lines of the proceedings permits final judgment to argument. First, it relies on case-law to be given. I therefore propose that the Court show that set-off is not a general principle examine the merits of the case and give of Community law the observance of which final judgment in the matter. is ensured by the Court. Secondly, the appellant contends that, even assuming that were the case, the conditions for applying set-off are not fulfilled in the present case because the debt owed to the Commission under the MED URBS contracts was not certain and undisputed.

VI — The merits of the case

116. Under points 47 to 60 of this Opinion 113. The CEMR seeks the annulment of I have set out the reasons why set-off must the contested decision in so far as it sets off be regarded as a general principle of the amounts in question against the sum of Community law. In my view, Community EUR 195 991 which is said to be owed to law authorises the Commission to effect the Commission under the MED URBS set-off against a private person. Therefore contracts. the CEMR's first submission, namely that such a principle does not exist, must be rejected.

114. The CEMR's appeal is based on four pleas in law, as follows: (1) lack of a legal basis for the contested decision; (2) breach of the principle of legal certainty; (3) 117. On the other hand, the appellant's breach of the principle of the protection second submission must be allowed. of legitimate expectations, and (4) breach of the obligation to state reasons under Article 190 of the Treaty.

124. In the present case, I have found that 121. In those circumstances, the Court is in the Commission's arguments in support of a position to find that the conditions for the appeal were well founded. On the other applying set-off have not been fulfilled in hand, examination of the submissions this case. According to the court with made at first instance has shown grounds jurisdiction, the Commission has no claim for annulling the contested decision. against the CEMR. Consequently there are Accordingly it is fair to decide that the CEMR shall pay the parties' costs in connection with the appeal proceedings 121 — The CEMR sent a copy of this judgment to the Court of and that the Commission shall pay the Justice by letter of 4 December 2001. parties' costs in connection with the pro- 122 —Judgment of 16 November 2001, cited above, p. 6. ceedings at first instance. I - 7652

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VIII— Conclusion

125. Having regard to the foregoing considerations, I propose that the Court give judgment as follows:

(1) The judgment of the Court of First Instance of the European Communities of 14 December 2000 in Case T-105/99 CEMR v Commission is set aside.

(2) The Commission's decision in the letter of 15 February 1999 effecting a set-off against the Council of European Municipalities and Regions is annulled.