Judgment of the General Court Ninth Chamber of 13 July 2022 Extracts, VeriGraft AB v European Innovation Council and SMEs Executive Agency, T-457/20

• Date: 13 July 2022
• Year: 2022

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XII. BUDGET AND SUBSIDIES OF THE EUROPEAN UNION: GRANT AGREEMENT

Judgment of the General Court (Ninth Chamber) of 13 July 2022 (Extracts), V eriGraft AB v

European Innovation Council and SMEs Executive Agency, T-457/20

Link to the judgment as published in extract form

Arbitration clause – ‘Horizon 2020 – Framework Programme for Research and Innovation’ (2014-2020) –

Grant Agreement ‘Personalised Tissue-Engineered Veins as the first Cure for Patients with Chronic Venous

Insufficiency – P-TEV’ – Unforeseen subcontracting costs – Simplified approval procedure – Subcontracting

mentioned in the periodic technical reports – Approved periodic technical reports – Eligible costs

The applicant, VeriGraft AB, is a Swe dish biotechnology company specialising in the dev elopment of

personalised human tissue-engineered transplants for use in rege nerative medicine.

In 2017, VeriGraft and the European Union, represented by the Executive Agency for Small and

Medium-sized Enterprises (EASME), concluded a Grant Agreement

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by which VeriGr aft was awarde d

a grant for the project ‘Personalised Tissue Engineered Veins as the first Cure for Patients with

Chronic Venous Insufficiency – P-TEV’. That agreement provided that the grant would reimburse 100%

of the eligible costs.

Under that agreement, VeriGraft was required periodically to submit to EASM E technical and financial

reports. The ac tion was divided into a first reporting period (‘RP1’) and a second reporting period

(‘RP2’).

VeriGraft submitted to EASME the technical and financial reports for the P-TEV project covering RP1

and RP2. EASME informe d VeriGraft that, on the basis of the reports drafted by external experts

concerning those periods, EASME considered the implementatio n of that project to be satisfactory.

However, as it took the view subsequently that certain subcontracting costs were not provided for in

the Grant Agreement and were there fore ineligible, EASME informed VeriGraft that they would be

recovered. It provided for that recovery to be carried out by relying, first, on the contribution of

VeriGraft to the guarantee fund and, second, on a debit note.

By its action, VeriGraft claims that the subcontracting costs rejected by EASME should be regarded as

eligible under the Grant Agreement and that the debit note and the recovery of a corresponding s um

from the guarantee fund should be regarded as unfounded.

The General Court upholds the action brought by VeriGraft in its entirety. In its judgment, it examines

the novel question of whether the European Union, represented initially by EA SME, now Eismea,

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may reject as ineligible costs linked to sub contracting contracts on the ground that they are

unforeseen, where the use of those contracts had not be en mentioned in the description of the

project annexed to the Grant Agreement, but w as justified in the periodic technical reports approved

by EASME, in accordance with the accelerated approval procedure provided for in that agreement.

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Under the instrument to support innovation in small and medium-sized enterprises (SMEs) referred to in Article 22(2) of Regulation (EU)

No 1291/2013 of the European Parli ament and of the Council of 11 December 2013 establishing Horizon 2020 – the Framework Programme

for Research and Innovation (2014-2020) and repealing Decision No1982/2006/EC (OJ 2013 L 347, p. 104) and defined in Council Decision

2013/743/EU of 3 December 2013 establishi ng the specific programme implementing Horizon 2020 – the Framework Programme for

Research and Innovation (2014-2020) and repealing Decisions 2006/971/EC, 2006/972/EC, 2006/973/EC, 2006/974/EC and 2006/975/EC ( OJ

2013 L 347, p. 965).

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As of 1 April 2021.