Judgments nº T-384/10 of The General Court, May 29, 2013

Resolution DateMay 29, 2013
Issuing OrganizationThe General Court
Decision NumberT-384/10

(Cohesion Fund — Regulation (EC) No 1164/94 — Projects involving water supply to settlements in the Guadiana basin in the Andévalo area, drainage and water treatment in the Guadalquivir basin and water supply to multi-municipal systems in the provinces of Granada and Malaga — Partial cancellation of financial assistance — Public works contracts and public service contracts — Definition of work — Splitting of contracts — Determination of financial corrections — Article H(2) of Annex II to Regulation No 1164/94 — Proportionality)

In case T‑384/10,

Kingdom of Spain, represented initially by J.M. Rodríguez Cárcamo, and subsequently by A. Rubio González, abogados del Estado,

applicant,

v

European Commission, represented by A. Steiblytė, D. Kukovec and B. Conte, acting as Agents, assisted initially by J. Rivas Andrés, X. García García, avocats, and M. Vilarasau Slade, solicitor, and subsequently by J. Rivas Andrés and X. García García,

defendant,

APPLICATION for annulment of Commission Decision C(2010) 4147 of 30 June 2010, reducing the financial assistance granted from the Cohesion Fund to the following (groups of) projects: ‘Water supply to settlements in the Guadiana basin: Andévalo area’ (2000.ES.16.C.PE.133), ‘Drainage and water treatment in the Guadalquivir basin: Guadaira, Aljarafe and the areas of natural protection of the Guadalquivir’ (2000.16.C.PE.066) and ‘Water supply to multi-municipal systems in the provinces of Granada and Malaga’ (2002.ES.16.C.PE.061),

THE GENERAL COURT (First Chamber)

composed of J. Azizi, President, S. Frimodt Nielsen and M. Kancheva (Rapporteur), Judges,

Registrar: J. Palacio González, Principal Administrator,

having regard to the written procedure and further to the hearing on 12 November 2012,

gives the following

Judgment

Legal context

Provisions relating to the Cohesion Fund

1 Article 158 EC (now, after amendment, Article 174 TFEU) provides:

‘In order to promote its overall harmonious development, the Community shall develop and pursue its actions leading to the strengthening of its economic and social cohesion.

In particular, the Community shall aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions or islands, including rural areas.’

2 Pursuant to the second paragraph of Article 161 EC (now, after amendment, the second paragraph of Article 177 TFEU):

‘A Cohesion Fund set up by the Council … shall provide a financial contribution to projects in the fields of environment and trans-European networks in the area of transport infrastructure.’

3 The Cohesion Fund was created by Council Regulation (EC) No 1164/94 of 16 May 1994 establishing a Cohesion Fund (OJ 1994 L 130, p. 1).

4 Article 4 of Regulation No 1164/94, as amended, sets out the total amount of financial resources which may be allocated to projects eligible for assistance from the Cohesion Fund for the period 2000 to 2006.

5 Article 7(1) of Regulation No 1164/1994, as amended, provides that the rate of Community assistance granted by the Cohesion Fund shall be 80 to 85% of public or equivalent expenditure.

6 Under Article 8(1) of Regulation No 1164/94, as amended:

‘Projects financed by the Fund shall be in keeping with the provisions of the Treaties, with the instruments adopted pursuant thereto and with Community policies, including those concerning environmental protection, transport, trans-European networks, competition and the award of public contracts.’

7 Article 12(1)(c) of Regulation No 1164/94, as amended, provides:

‘1. Without prejudice to the Commission’s responsibility for implementing the Community budget, Member States shall take responsibility in the first instance for the financial control of projects. To that end, the measures they take shall include:

(c) ensuring that projects are managed in accordance with all the applicable Community rules and that the funds placed at their disposal are used in accordance with the principles of sound financial management;

…’

8 The rules on the management of the Cohesion Fund are detailed in Annex II to Regulation No 1164/94, as amended.

9 Article H of Annex II to Regulation No 1164/94, as amended, states:

‘Financial corrections

  1. If, after completing the necessary verifications, the Commission concludes that:

    (a) the implementation of a project does not justify either part or the whole of the assistance granted to it, including a failure to comply with one of the conditions in the decision to grant assistance and in particular any significant change affecting the nature or conditions of implementation of the project for which the Commission’s approval has not been sought, or

    (b) there is an irregularity with regard to assistance from the Fund and that the Member State concerned has not taken the necessary corrective measures, the Commission shall suspend the assistance in respect of the project concerned and stating its reason, request that the Member State submits its comments within a specified period of time.

    If the Member State objects to the observations made by the Commission, the Member State shall be invited to a hearing by the Commission, in which both sides make efforts to reach an agreement about the observations and the conclusions to be drawn from them.

  2. At the end of the period set by the Commission, the Commission shall, subject to the respect of due procedure, if no agreement has been reached within three months, taking into account any comments made by the Member State, decide to:

    (a) reduce the payment on account referred to in Article D(2), or

    (b) make the financial corrections required. This shall mean cancelling all or part of the assistance granted to the project.

    These decisions shall respect the principle of proportionality. The Commission shall, when deciding the amount of a correction, take account of the type of irregularity or change and the extent of the potential financial impact of any shortcomings in the management or control systems. Any reduction or cancellation shall give rise to recovery of the sums paid.

  3. Any sum received unduly and to be recovered shall be paid to the Commission. Interest on account of late repayment shall be charged in accordance with the rules to be adopted by the Commission.

  4. The Commission shall lay down the detailed rules for implementing paragraphs 1 to 3 and shall inform the Member States and the European Parliament thereof.’

    10 Articles 17 to 21 of Commission Regulation (EC) No 1386/2002 of 29 July 2002 laying down detailed rules for the implementation of Regulation No 1164/94 as regards the management and control systems for assistance granted from the Cohesion Fund and the procedure for making financial corrections (OJ 2002 L 201, p. 5) specify the subject-matter and scope of the regulation and contain detailed provisions on the procedure to be followed for correcting assistance received from the Cohesion Fund as from 1 January 2000.

    11 Article 17(1) and (2) of Regulation No 1386/2002 provides:

    ‘1. The amount of financial corrections made by the Commission under Article H(2) of Annex II to [Regulation No 1164/94] for individual or systemic irregularities shall be assessed, wherever this is possible and practicable, on the basis of individual files and shall be equal to the amount of expenditure wrongly charged to the Fund, having regard to the principle of proportionality.

  5. When it is not possible or practicable to quantify the amount of irregular expenditure precisely, or when it would be disproportionate to cancel entirely the expenditure in question, and the Commission therefore bases its financial corrections on extrapolation or a flat rate, it shall proceed as follows:

    (a) in the case of extrapolation, it shall use a representative sample of transactions with like characteristics;

    (b) in the case of a flat rate, it shall assess the importance of the infringement of rules and the extent and financial implications of any shortcomings in the management and control system that have led to the irregularity established.

    …’

    12 The guidelines on the principles, criteria and indicative scales to be applied by Commission departments in determining financial corrections under Article H(2) of Annex II to Regulation No 1164/94 establishing a Cohesion Fund (C(2002) 2871) (‘the 2002 guidelines’) set out the general principles and criteria used by the European Commission in practice to determine those financial corrections. In addition, the guidelines for determining financial corrections to be made to expenditure co-financed by the Structural Funds or the Cohesion Fund for non-compliance with the rules on public procurement (‘the 2007 guidelines’) lay down the amounts and scales to be applied specifically to irregularities detected in the application of the Union’s regulations on public procurement to contracts co-financed by the Cohesion Fund.

    Provisions relating to public contracts

    13 In accordance with Article 8(1) of Regulation No 1164/94 (see paragraph 6 above), the relevant legislation on public contracts comprises, in particular, Council Directive 93/37/EEC of 14 June 1993 concerning the coordination of procedures for the award of public works contracts (OJ 1993 L 199, p. 54) and Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts (OJ 1992 L 209, p. 1).

    Directive 93/37

    14 In accordance with the provisions of its preamble and recital two, Directive 93/37 aims to abolish restrictions on freedom of establishment and the free movement of services as regards public procurement with a view to opening up the contracts concerned to effective competition. Recital ten of that directive states that to ensure development of effective competition, it is necessary that ‘contract notices drawn up by the contracting authorities of Member States be advertised throughout the Community’.

    15 As set out in Article 1(c), (e), (f) and (g) of...

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