Forafrique Burkinabe v EC Commission (Case C-182/91)

• Jurisdiction: European Union
• Date: 29 April 1993
• Court: Court of First Instance

Court of Justice of the European Communities (Fifth Chamber).

(Rodríguez Iglesias, President of Chamber; Joliet, Moitinho de Almeida, Grévisse and Edward (Rapporteur), Judges; Lenz, Advocate-General)

Forafrique Burkinabe SA

and

Commission of the European Communities

International organizations — Immunity — Immunity from attachment — Protocol on the Privileges and Immunities of the European Communities, Article 1 — Attachment order issued against Commission of the European Community by national court — Whether violating provisions of Protocol — Conditions for lifting the immunity of the European Community — Authorization by the Court of Justice of the European Communities or express waiver by the Community institution concerned — Whether time-limit laid down by national law for immunity to be invoked is applicable to Community institutions — Waiver of immunity

International organizations — European Community — Non-contractual liability — Development aid to third States — Whether Community capable of incurring liability by reason of lawful payment of funds to third States under aid programme — Alleged failure by third State to transfer the relevant funds intended for payment of debt owed to private company under public works contract — Whether company entitled to claim damages against Community for failing to prevent misappropriation of funds — EC Treaty, Article 215

Economics, trade and finance — Development aid — European Community — International agreements with third States — First Lomé Convention, 1975 — Provisions relating to financial and technical cooperation — Procedure for awarding public contracts for works and supplies — Conclusion of contracts by beneficiary State — Whether Community capable of incurring liability for non-payment of debts to contractors, by reason of payment of funds to the State concerned — The law of the European Community

Summary: The facts:—The European Community (‘EC’) decided in 1987 to support a project submitted by the State of Burkina Faso to improve water supplies for its rural population. An agreement was then concluded between the EC Commission and Burkina Faso, within the framework of the first Lomé Convention, 1975, to finance the project from the resources of the Fourth European Development Fund. Burkina Faso invited tenders for drilling and awarded the contract to the National Wells and Boreholes Office (‘ONPF’), which sub-contracted to Forafrique Burkinabe SA (‘the applicant’). Ten per cent of the value of the contract was paid to the applicant in advance and the drilling was completed to the satisfaction of both the Commission and Burkina Faso. ONPF failed to comply with a formal demand by the applicant for payment of the balance due under the contract, despite the fact that the amount of the debt was never disputed. In October 1990, the applicant notified the commission that the sums due had still not been paid and asked the Commission to postpone further payments, bearing in mind that previous payments appeared to have been misappropriated. Nevertheless, the Commission continued to make further payments to Burkina Faso in respect of this and other projects for which contracts had been awarded to ONPF.

In March 1991, the applicant, in order lo secure its claim, obtained an attachment order from a Belgian court in respect of amounts owed by the EC Commission to Burkina Faso and equivalent to the debt owed to the applicant by ONPF. In June 1991, the Commission informed the applicant that it would not comply with the attachment order and invoked immunity from attachment under Article 1 of the Protocol on the Privileges and Immunities of the European Communities (‘the Protocol’).1 The applicant then brought proceedings under Article 173 of the EC Treaty for the annulment of the Commission's decision and claimed compensation under Article 215 of the Treaty.

The Commission argued that the attachment would interfere with the functioning and independence of the Communities and, pursuant to Article 1 of the Protocol, could only be given effect with the authorization of the Court of Justice of the Communities, which had not been obtained. The applicant claimed that authorization from the Court of Justice was unnecessary and, furthermore, that the delay of the Commission in responding to service of the attachment order was tantamount to a waiver of immunity as provided for by the Protocol. In its action for compensation the applicant claimed that, by continuing to make payments to Burkina Faso, without concerning itself with the proper use of the funds, the Commission had acted unlawfully and caused it loss. The Commission replied that it had only made the payments to ONPF after satisfying itself that the works had indeed been carried out and it had no power to interfere in the contractual relationship between ONPF and one of its sub-contractors.

Opinion of the Advocate-General:—Advocate-General Lenz argued that Article 1 of the Protocol was applicable and, in principle, excluded the issuing of an attachment order without the authorization of the Court of Justice. The failure of the Commission to contest the validity of the attachment order until after the period laid down by Belgian law had expired, could not amount to waiver of immunity, since failure to observe a time-limit under national law

could not remove an immunity conferred by Community law. In any case, any waiver could only be effective if it was clear and unambiguous, as required under public international law, which was not the case here. The Advocate-General considered that there was insufficient evidence of the necessary causal link between the Commission's conduct in not suspending further payments to ONPF and the damage sustained by the applicant. The Advocate-General concluded that the application should be dismissed as unfounded.

Held:—The application was dismissed.

(1) Under Article 1 of the Protocol, the property and assets of the Communities could not be the subject of any administrative or legal measure of constraint without the authorization of the Court of Justice. This immunity was automatic and, in the absence of the requisite authorization, prevented the execution of any measure of constraint against the Communities. There was no need for express reliance on Article 1 by giving notice to the person who had obtained the attachment. It was for the latter to seek authorization from the Court of Justice to waive immunity, unless the institution concerned stated that it had no objection to the measure of constraint. It followed that the possibility of obtaining the issue of an attachment order under national law was suspended until the immunity of the Communities was lifted, either by waiver on the part of the institution concerned or by authorization of the Court of Justice, irrespective of any time-limit laid down by national law (p.408).

(2) With regard to the non-contractual liability of the Community under Article 215 of the EC Treaty, the conduct of the Commission in not complying with the attachment order could not engage the liability of the Commission so long as the Commission's immunity had not been expressly waived or lifted by the Court of Justice, since immunity was designed to prevent enforcement of such an order (p. 409).

(3) It was further alleged that the Commission had acted unlawfully and caused damage to the applicant by continuing to make payments to Burkina Faso without concerning itself with the proper use of the sums in question. However, public contracts funded by the European Development Fund within the framework of the first Lomé Convention remained national contracts which the authorities of the States concerned alone were responsible for preparing, negotiating and concluding. Sub-contractors or persons awarded contracts had legal relations only with the State responsible for the contract. Since the action taken by the Commission was only intended to determine whether the conditions of Community financing were fulfilled, the payment of funds by the Commission to the State concerned in compliance with the conditions prescribed could not constitute wrongful conduct such as to give rise to liability on the part of the Community (pp. 409–10).

The text of the judgment of the Court of Justice of the European Communities commences at p. 406. The text of the opinion of Advocate-General Lenz commences at p. 392. The text of the Report for the Hearing prepared by Judge Rapporteur Edward commences on the opposite page:

REPORT FOR THE HEARING in Case C-182/91 *

I—Facts and procedure

Under the first ACP-EEC Convention, signed in Lomé on 28 February 1975 (OJ 1976 L 25, p. 1) (“the Lomé Convention”), the Community decided to finance, from the resources of the fourth European Development Fund (“the EDF”), a project submitted by Burkina Faso to provide the rural population of the Province of Comoe with 240 wells (“the project”).

On 18 December 1987 a finance agreement for the project was drawn up by the Community, represented by the Commission, and Burkina Faso pursuant to Article 40 of the Lomé Convention.

In connection with the project, an invitation to tender was issued in June 1988 by the State of Burkina Faso for drilling 210 boreholes. In August 1989 the contract was awarded to the Office National des Puits et Forages (“ONPF”). On 15 December 1989 the ONPF concluded a subcontract with the applicant for the drilling of 60 exploratory holes, 50 of which were to be productive, as part of the project. The value of the contract awarded to the applicant was estimated at FCFA 88 837 300. It is not disputed that a sum equivalent to 10% of the contract price was paid by the ONPF to the applicant on account.

The works were carried out by the applicant to the satisfaction of the State of Burkina Faso and the Commission. Nevertheless, according to the applicant, the ONPF has to this day still not paid the outstanding amount of FCFA 85 112 000, despite a formal demand for payment...