Comunità montana della Valnerina v Commission of the European Communities.

• Jurisdiction: European Union
• Date: 19 January 2006
• Court: Court of Justice (European Union)

Case C-240/03 P

Comunità montana della Valnerina

v

Commission of the European Communities

(Appeal – EAGGF – Withdrawal of financial assistance – Article 24 of Regulation (EEC) No 4253/88 – Principle of proportionality – Statement of reasons – Rights of the defence – Cross-appeal – Designation of two bodies responsible for the implementation of a project – Demand addressed to only one of them to repay the full amount of the assistance – Discretionary power of the Commission – Objective limits of the dispute before the Court of First Instance)

Summary of the Judgment

1. Economic and social cohesion – Structural assistance – Community financing – Decision to withdraw financial assistance because of irregularities – Powers of the Commission

(Council Regulation No 4253/88, Art. 24(2))

2. Appeals – Grounds of appeal – Incorrect assessment of the facts – Inadmissibility – Review by the Court of Justice of assessment of evidence – Excluded unless the clear sense of the evidence has been distorted

(Art. 225 EC; Statute of the Court of Justice, Art. 58, first para.)

3. Economic and social cohesion – Structural assistance – Community financing – Decision to suspend, reduce or withdraw assistance because of irregularities

(Council Regulation No 4253/88, Art. 24(2))

4. Economic and social cohesion – Structural assistance – Community financing – Obligation to provide information incumbent on beneficiaries of financial assistance – Scope

(Council Regulation No 4253/88, Art. 24)

5. Economic and social cohesion – Structural assistance – Community financing – Financial obligations of beneficiary laid down in decision to award assistance

(Council Regulation No 4253/88, Art. 24)

6. Appeals – Grounds – Mere repetition of the pleas and arguments raised before the Court of First Instance – Inadmissible – Challenge to the interpretation or application of Community law by the Court of First Instance – Whether permissible

(Art. 225 EC; Statute of the Court of Justice, Art. 58, first para.; Rules of Procedure of the Court of Justice, Art. 112(1)(c))

7. Economic and social cohesion – Structural assistance – Community financing – Decision to withdraw financial assistance because of irregularities – Power of the Commission to demand repayment of the assistance – Condition

(Council Regulation No 4253/88, Art. 24)

1. Article 24(2) of Regulation No 4253/88 laying down provisions for implementing Regulation 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, as amended by Regulation No 2082/93, authorises the Commission to request the complete withdrawal of Community financial assistance. Limiting the possibilities open to the Commission to reduce that assistance in proportion exclusively to the amount to which the irregularities found to exist relate would have the effect of encouraging fraud on the part of applicants for financial assistance, since they would then risk only the loss of the benefit of the sums unduly paid

(see para. 53)

2. The Court of First Instance alone has jurisdiction to find the facts, save where a substantive inaccuracy in its findings is attributable to the documents submitted to it, and also to appraise the facts. The appraisal of the facts therefore does not, save where the clear sense of the evidence submitted to it has been distorted, constitute a point of law which is subject, as such, to review by the Court of Justice on appeal.

(see para. 63)

3. In accordance with a fundamental principle governing Community aid, the Community can subsidise only expenditure actually incurred. The charging to a project of expenditure which in fact has not been incurred in carrying out the project seriously undermines that principle and can therefore be regarded as an irregularity within the meaning of Article 24 of Regulation No 4253/88 laying down provisions for implementing Regulation 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, as amended by Regulation No 2082/93, which authorises the Commission to reduce, suspend or withdraw Community financial assistance when the examination of the operation or the measure for which that assistance was awarded reveals an irregularity.

(see para. 69)

4. In order that the Commission may perform a monitoring function, the beneficiaries of Community financial assistance must be able to demonstrate that the costs charged to the projects for which such assistance has been granted are genuine. Consequently, for the proper working of the system for carrying out checks and acquiring evidence to verify that the conditions for the grant of the assistance are being fulfilled, it is essential that applicants for, and beneficiaries of, such assistance provide reliable information.

Similarly, the measures relating to the withdrawal of financial assistance and recovery of sums paid but not due provided for in Article 24 of Regulation No 4253/88 laying down provisions for implementing Regulation 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 as amended by Regulation No 2082/93, are not reserved for breaches that compromise the implementation of the project concerned or entail a significant change affecting the nature and very existence of the project. Consequently, it cannot be argued that the penalties provided for by that provision apply only where the operation being financed has not been carried out in whole or in part.

It follows that it is not sufficient to show that a project was implemented to justify the award of a specific grant. On the contrary, the beneficiary of the aid must prove that it has incurred the costs in question, in accordance with the terms and conditions laid down for the award of the assistance in question.

(see paras 76-78)

5. Within the system for the awarding of assistance from Structural Funds and monitoring of assisted operations established by Regulation No 4253/88 laying down provisions for implementing Regulation 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, as amended by Regulation No 2082/93, the obligation to comply with the financial conditions set out in a decision awarding Community aid constitutes, in the same way as the substantive obligation to carry out the project concerned by the aid, one of the beneficiary’s essential commitments and is therefore a precondition for the grant of Community financial assistance.

(see para. 86)

6. An appeal which merely repeats or reproduces verbatim the pleas in law and arguments previously submitted to the Court of First Instance, including those based on facts expressly rejected by that Court, does not satisfy the requirement to state reasons under Article 225 EC, the first paragraph of Article 58 of the Statute of the Court of Justice, and Article 112(1)(c) of the Rules of Procedure. Such an appeal amounts to no more than a request for a re-examination of the application submitted to the Court of First Instance, a matter which falls outside the jurisdiction of the Court of Justice.

However, provided that the appellant challenges the interpretation or application of Community law by the Court of First Instance, the points of law examined at first instance may be discussed again in the course of an appeal. Indeed, if an appellant could not thus base his appeal on pleas in law and arguments already relied on before the Court of First Instance, an appeal would be deprived of part of its purpose.

(see paras 105-107)

7. When a decision is made to withdraw assistance from Structural Funds based on Article 24 of Regulation No 4253/88 laying down provisions for implementing Regulation 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, as amended by Regulation No 2082/93, the Commission is not required to request repayment of the financial assistance in full, but at its discretion may or may not decide to request such repayment and, where appropriate, to set the proportion to be repaid. In the light of the principle of proportionality, the Commission must exercise this discretion in such a way that repayments which it orders are not disproportionate to the irregularities committed. However, the Commission is not required to confine itself to requesting the repayment of only the grants that have proved unjustified because of those irregularities. On the contrary, with the aim of ensuring effective management of Community aid and deterring fraud, a request for repayment of grants which are only partly affected by irregularities may be justified. In that regard, the infringement of obligations whose observance is of fundamental importance to the proper functioning of a Community system may be penalised by forfeiture of a right conferred by Community legislation, such as entitlement to aid.

(see paras 140-143)

JUDGMENT OF THE COURT (Third Chamber)

19 January 2006 (*)

(Appeal – EAGGF – Withdrawal of financial assistance – Article 24 of Regulation (EEC) No 4253/88 – Principle of proportionality – Statement of reasons – Rights of the defence – Cross-appeal – Designation of two bodies responsible for the implementation of a project – Request addressed to only one of them to repay the full amount of the assistance – Discretionary power of the Commission – Objective limits of the dispute...