Judgments nº T-81/95 of Court of First Instance of the European Communities, July 14, 1997

• Resolution Date: July 14, 1997
• Issuing Organization: Court of First Instance of the European Communities
• Decision Number: T-81/95

JUDGMENT OF THE COURT OF FIRST INSTANCE (First Chamber)

14 July 1997 (1) (Social policy — European Social Fund — Assistance for the financing of

vocational training measures — Action for annulment — Notification of decision

of approval — Decision on the final payment claim — Legal certainty —

Legitimate expectations — Statement of reasons)

In Case T-81/95,

Interhotel, Sociedade Internacional de Hotéis, SARL, a company governed by

Portuguese law, established in Lisbon, represented by José Miguel Alarcão Júdice,

Nuno Morais Sarmento and Gabriela Rodrigues Martins, of the Lisbon Bar, with

an address for service at the Chambers of Victor Gillen, 16 Boulevard de la Foire,

applicant,

v

Commission of the European Communities, represented by António Caeiro, Legal

Adviser, and Günter Wilms, of its Legal Service, acting as Agents, with an address

for service in Luxembourg at the office of Carlos Gómez de la Cruz, of its Legal

Service, Wagner Centre, Kirchberg,

defendant,

APPLICATION for the annulment of Commission Decision C(94)1410/11 of 12

July 1994 (Case No 870840/P1), notified to the applicant on 27 December 1994,

concerning financing from the European Social Fund for vocational training

measures,

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (First Chamber),

composed of: A. Saggio, President, V. Tiili and R.M. Moura Ramos, Judges,

Registrar: J. Palacio González, Administrator,

having regard to the written procedure and further to the hearing on 15 January

1997,

gives the following

Judgment

Facts and procedure

1.

A project (to which was assigned Case No 870840/P1) containing an application for

financial assistance for the applicant, which the Departamento para os Assuntos do

Fundo Social Europeu (Department for the Affairs of the European Social Fund,

hereinafter 'the Department‘), Lisbon, proposed in respect of 1987, was approved

by the Commission by decision of approval of 30 April 1987, subject to certain

changes. The applicant had applied to the European Social Fund (hereinafter 'the

ESF‘) for ESC 152 466 071 for vocational training for 284 persons but was granted

financial assistance by the ESF amounting to ESC 121 647 958 for the training of

277 persons.

2.

The Commission sent to the Department a memorandum entitled 'Annex

to Commission Decision C(87)0860‘ (Annex 1 to the defence) containing the

following information:

Number of persons concerned

277

Amount applied for

ESC 152 466 071

Amount granted

ESC 121 647 958

Ineligible

ESC 27 766 349

Reduction

ESC 3 051 763

Total amount refused

ESC 30 818 112

3.

The Department notified that decision to the applicant on 27 May 1987, indicating

the amount granted and the number of persons approved (Annex 4 to the

application). It was stated in that communication that assistance from the

European Social Fund (hereinafter 'the ESF‘) comprises credits which are

conditional upon completion of the training measures in accordance with the

Community rules and that failure to comply with that condition would entail the

repayment of sums advanced and non-payment of the balance. It was also made

clear that any change affecting the application as submitted would have to be

notified to the Department.

4.

The training measures were completed in 1987. By circular 10/87 dated 8 January

1987 which, according to the applicant, was received by it on 29 June 1987, the

Department asked the recipients of the ESF assistance to reduce the periods of

practical training to the same length as that of the periods of theoretical instruction.

To meet the requirements of the circular, the applicant reduced the planned

number of hours of theoretical instruction by 36.13%. It claims that it also, on its

own initiative, made a proportional reduction of 36.13% of the costs under all

headings of the training budget.

5.

The applicant received an advance of 50% of the ESF assistance, namely an

advance of ESC 60 823 979. When the training was completed, it submitted a final

payment claim, in which it claimed from the ESF the sum of ESC 73 496 941,

namely the amount of the advance plus ESC 12 672 962.

6.

On 19 July 1989 the Department informed the applicant that, pursuant to a

Commission decision which it enclosed with its letter, the ESF assistance could not

ultimately exceed ESC 42 569 539 on the ground that certain expenses relating to

points 14.1, 14.2, 14.3, 14.6 and 14.8 on the form were ineligible 'since there was

no proportional reduction in the training time and certain aspects of the initial

proposal were not complied with (14.1)‘.

7.

Following an action brought by the applicant, the first decision was annulled by the

Court of Justice on the ground that the Commission had not given the Portuguese

Republic an opportunity to comment before the adoption of the final decision

reducing the assistance (Case C-291/89 Interhotel v Commission [1991] ECR I-2257).

8.

With a view to adopting a new decision on the applicant's final payment claim, on

6 August 1991 the Commission forwarded to the Department a first draft decision.

By letter of 26 August 1991 the Department informed it that it did not agree with

certain proposed reductions.

9.

On 9 February 1993 the applicant asked the Commission to adopt a new decision

within the time-limit laid down by the Treaty, namely within two months following

the request.

10.

Following the observations from the Department and the request from the

applicant referred to in the foregoing paragraph, the Commission organized an

inspection visit on 19 February 1993, with a subsequent visit on 18 March 1993, to

examine on the spot the evidence indicating that the training measures had been

completed. The applicant was granted a hearing during that inspection visit.

According to the Commission, the evidence available was limited and difficult to

rely on, particularly because the applicant had entrusted certain measures to a sub-contractor, Partex, which in turn had employed two sub-contractors Europraxis and

Fortécnica. In those circumstances, an examination was made of financial and

accounting records of the sub-contractors used by the sub-contractor employed by

the applicant. The results of that examination were considered from 24 to 26 May

1993 by a working party on which the Commission and the Department were

represented.

11.

Then, on 12 November 1993, by memorandum No 22917, the Commission notified

to the Department a new draft decision, according to which the ESF assistance was

to be ESC 41 190 905 unless the Department's comments justified adjustment of

that amount.

12.

Memorandum No 22917 contains a number of explanations regarding the proposed

reductions. First, it draws attention to divergences between the durations indicated

in the final payment claim, the attendance record of the trainees and the reports

drawn up by the instructors. The note adds that it was not possible to confirm the

breakdown of the duration of training as between the theoretical and practical

parts. Finally, it had not been possible to identify the training periods in terms of

timetables and objectives.

More specifically, with respect to the various headings of the final payment claim,

the reasons given for the proposed reductions were as follows:

14.1 Salaries of trainees

Training aid

ESC 3 180 878

— It was found that 56 trainees had not received eligible practical

training, hence a corresponding reduction, supporting calculation

attached.

14.2 Preparation of the courses

Recruitment and selection of trainees

ESC 1 456 000

— It was found that the Partex invoice and the final payment claim

referred to 490 tests at a unit price of ESC 7 000, whereas that work

had been carried out by an outside organization which had invoiced

Partex for carrying out 282 tests at a unit cost of ESC 12 000.

Consequently, because Partex had provided no additional service, it

was considered reasonable to fix the costs for the 282 trainees at

ESC 7 000 each.

Copying of documents

ESC 1 183 680

— That expense was not included in the decision of approval and was

not justified, in view of the amounts indicated in respect of teaching

materials and the type of measures carried out.

14.3 Functioning and management of the courses

Teaching staff

ESC 21 705 954

— This heading concerns salaries, and teaching staff's travel expenses,

board and lodging.

The amount in respect of teaching staff was invoiced in its entirety by

Partex which, in turn, used a sub-contractor. The check carried out

at the sub-contractor's premises showed that Partex had concluded a

contract under which the sub-contractor was to organize courses for

measures undertaken both by Interhotel and by another undertaking,

Grão-Pará without any difference of value. The maximum amount

eligible for training measures was determined on the basis of the costs

borne by the sub-contractor in respect of the teaching staff who gave

courses to Interhotel trainees, plus a gross margin of 50%. The

maximum amount eligible for the training measures was thus ESC 10

613 646.

As regards the cost of board and lodging of teaching staff, the initial

application referred to two specialists and a manager. The costs

relating to the first two were rejected in the decision of approval, so

that, as regards the balance, only the costs in respect of one staff

member were regarded as eligible. The eligible amount of ESC 462

000 was calculated on the basis of the envisaged and approved cost

of ESC 700 per day.

Administrative staff

ESC 2 912 955

— The expenses indicated in the final payment claim related to the work

of one specialist and two secretaries, whereas in the decision of

approval only the amount for one secretary had been approved.

Board and lodging and travel expenses for non-teaching staff

ESC 2 409 940

— The expenses for non-eligible, non-teaching, administrative and

technical staff (11 persons) were totally rejected in the decision of

approval.

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