Portuguese Republic v European Commission.

• Jurisdiction: European Union
• Celex Number: 62007TJ0387
• Court: General Court (European Union)
• ECLI: ECLI:EU:T:2011:71
• Docket Number: T-387/07
• Date: 03 March 2011
• Procedure Type: Cláusula compromisoria

Case T-387/07

Portuguese Republic

v

European Commission

(ERDF – Reduction of financial assistance – Global grant for local development in Portugal – Action for annulment – Expenditure actually incurred – Arbitration clause)

Summary of the Judgment

1. Acts of the institutions – Statement of reasons – Obligation – Scope

(Art. 253 EC)

2. Economic and social cohesion – Structural assistance – Global grant for local development

(Council Regulation No 4253/88, Art. 21(1))

3. Economic and social cohesion – Structural assistance – European Union funding – Amount resulting directly from the grant decision – Agreement concluded between the Commission and the body entrusted with management of financial assistance that provides for an arbitration clause – Exclusion from its scope of disputes relating to irregularities in the performance of the agreement

(Council Regulations Nos 4253/88, Arts 20(1) and 21(1), and 4254/88, Art. 6(2))

1. The statement of reasons required by Article 253 EC must be appropriate to the measure at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted that measure, in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent Court to exercise its power of review.

The requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question.

(see para. 58)

2. An agreement concluded between the Commission and an intermediary body entrusted with the management of local development support, laying down the conditions for the use of such support, cannot be interpreted as contravening the Community rules governing the grant in question.

Article 21(1) 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, clearly states that the payment of financial assistance granted on the basis of the provisions of that regulation must relate exclusively to expenditure actually incurred.

In the context of a global grant, the concept of ‘expenditure actually incurred’ can be defined by specific provisions in the Community framework of the Structural Funds. In an interest subsidy scheme, the intermediary pays a subsidised loan to the final beneficiary. The interest subsidies represent the amounts resulting from the difference between the interest at the market rate and the interest actually paid by the final beneficiaries. Accordingly, the interest subsidies are actually incurred at the time when the interest payments fall due, which may take several years. Thus, the interest subsidies follow the payment of the interest by the final beneficiaries for the duration of the loans. Consequently, in the light solely of Article 21(1) of Regulation No 4253/88, the interest subsidies may be treated as expenditure actually incurred when the interest instalments relating to them are paid.

The mere existence of the financial obligations resulting from the loan contracts concluded between the body entrusted with the management of support and the final beneficiaries is not sufficient for the interest subsidies payable after the final date for acceptance of expenditure provided for in the grant decision to be treated as expenditure actually incurred within the meaning of Article 21(1) of Regulation No 4253/88. First, at the time of conclusion of those contracts, all that exist, with regard to that provision, are the obligations between the parties to the loan contract, which must be distinguished from the expenditure actually incurred in order to fulfil those obligations. Secondly, whereas it follows from the grant decision that the acceptance of the expenditure does not relate to the liabilities arising from the loan contracts, but rather to the actual expenditure incurred as a result of those contracts, those can only be the interest subsidies actually incurred at the time of payment of the interest instalments by the final beneficiaries.

(see paras 81-83, 87, 98)

3. As is clear from Article 20(1) and Article 21(1) 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, the payment of the financial assistance granted on the basis of the provisions of that regulation is made in accordance with the budgetary commitments made on the basis of the decision approving the measure concerned. Whereas the amount of assistance results from the grant decision, an agreement entered into between the Commission and the body entrusted with management of the support, intended to establish certain procedures for its use, in accordance with Article 6(2) of Regulation No 4254/88, laying down provisions for implementing Regulation No 2052/88 as regards the ERDF, cannot give rise to a financial obligation on the part of the Community.

In those circumstances, a dispute relating to irregularities in the performance of the agreement does not come within the scope of the arbitration clause provided for under that agreement.

(see para. 115)

JUDGMENT OF THE GENERAL COURT (Eighth Chamber)

3 March 2011 (*)

(ERDF – Reduction of financial assistance – Global grant for local development in Portugal – Action for annulment – Expenditure actually incurred – Arbitration clause)

In Case T‑387/07,

Portuguese Republic, represented by L. Inez Fernandes, S. Rodrigues and A. Gattini, acting as Agents,

applicant,

v

European Commission, represented by P. Guerra e Andrade and L. Flynn, acting as Agents,

defendant,

APPLICATION for partial annulment of Commission Decision C (2007) 3772 of 31 July 2007 reducing the financial assistance granted by the European Regional Development Fund (ERDF) towards the global grant for local development in Portugal pursuant to Commission Decision C (95) 1769 of 28 July 1995,

THE GENERAL COURT (Eighth Chamber),

composed of M.E. Martins Ribeiro, President, S. Papasavvas and A. Dittrich (Rapporteur), Judges,

Registrar: N. Rosner, Administrator,

having regard to the written procedure and further to the hearing on 18 June 2010,

gives the following

Judgment

Legal framework

1 Council Regulation (EEC) No 2052/88 of 24 June 1988 on the tasks of the Structural Funds and their effectiveness and on coordination of their activities between themselves and with the operations of the European Investment Bank and the other existing financial instruments (OJ 1988 L 185, p. 9), as amended by Council Regulation No 2081/93 of 20 July 1993 (OJ 1993 L 193, p. 5) (‘Regulation No 2052/88’), defines the rules relating to the implementation of the policy of economic and social cohesion set out in Article 158 EC.

2 Under Article 4(1) of Regulation No 2052/88, Community operations are to complement or contribute to corresponding national operations. They are to be established through close consultations between the Commission, the Member State concerned and the competent authorities and bodies – including, within the framework of each Member State’s national rules and current practices, the economic and social partners – designated by the Member State at national, regional, local or other level, with all parties acting as partners in pursuit of a common goal. Those consultations are referred to as ‘the partnership’. The partnership is to cover the preparation and financing, as well as the ex ante appraisal, monitoring and ex post evaluation, of operations.

3 Point (c) of the first subparagraph of Article 5(2) of Regulation No 2052/88 provides, inter alia, that in the case of the Structural Funds, financial assistance may be provided in the form of the provision of global grants, as a general rule managed by an intermediary designated by the Member State in agreement with the Commission and allocated by the intermediary in the form of individual grants to final beneficiaries. Under the second subparagraph of Article 5(2), the forms of assistance may only be those established by the Member State or the competent authorities designated by the Member State and submitted to the Commission by that Member State or any other body it may, should the need arise, designate to do so.

4 Under the first subparagraph of Article 13(3) of Regulation No 2052/88, the Community contribution granted under the ERDF is limited to a maximum of 75% of the total cost of public expenditure.

5 Provisions concerning the Structural Funds are also laid down in Council Regulation (EEC) No 4253/88 of 19 December 1988 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 (OJ 1988 L 374, p. 1), as amended by Council Regulation (EEC) No 2082/93 of 20 July 1993 (OJ 1993 L 193, p. 20) (‘Regulation No 4253/88’), and Council Regulation (EEC) No 4254/88 of 19 December 1988 laying down provisions for implementing Regulation (EEC) No 2052/88 as regards the ERDF (OJ 1988 L 374, p. 15), as...