Court of Justice of the European Communities (including Court of First Instance Decisions)

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Social policy - European Social Fund - Assistance in the financing of vocational training measures - Decision reducing assistance originally granted - Opportunity for the Member State concerned to comment prior to the adoption of the decision - Essential procedural requirement - Infringement - Unlawfulness
(Council Regulation No 2950/83, Art. 6(1) )

In the procedure for the grant by the European Social Fund of financial assistance for vocational training and guidance given in a Member State the Member State concerned is the sole interlocutor of the Fund and assumes responsibility in so far as it certifies the accuracy of the facts and accounts in payment claims submitted by the beneficiaries and in so far as it may even be required to guarantee that training measures are properly implemented and concluded. In view of its central role and the importance of the responsibilities which it assumes in the presentation and supervision of the financing of training measures, a Member State' s opportunity which it has under Article 6(1) of Regulation No 2950/83 to comment before a definitive decision to reduce assistance is adopted constitutes an essential procedural requirement the disregard of which renders the contested decision void.

In Case C-291/89,
Interhotel, Sociedade Internacional de Hotéis, SARL, a company incorporated under Portuguese law, represented by José Miguel Júdice, of the Lisbon Bar, with an address for service in Luxembourg at the Chambers of Victor Gillen, 16 A Boulevard de la Foire,
applicant,
v
Commission of the European Communities, represented by Herculano Lima, Legal Adviser, with an address for service in Luxembourg at the office of Georgios Kremlis, a member of its Legal Service, Wagner Centre, Kirchberg,
defendant,
APPLICATION for a declaration that the Commission decision of 19 July 1989 disallowing expenditure of an amount of ESC 62 479 600 relating to Application for Assistance No 870840/P1 from the European Social Fund is void,
THE COURT (Second Chamber),
composed of: T.F. O' Higgins (President of the Chamber), G.F. Mancini and F.A. Schockweiler, Judges,
Advocate General: M. Darmon,
Registrar: H.A. Ruehl, Principal Administrator,
having regard to the Report for the Hearing as amended following the hearing on 15 January 1991,
after hearing the oral argument of the parties at the said hearing,
after hearing the Opinion of the Advocate General at the sitting of 5 March 1991,
gives the following
Judgment

1 By application lodged at the Court Registry on 21 September 1989 Interhotel sought a declaration pursuant to the second paragraph of Article 173 of the EEC Treaty that the Commission decision of 19 July 1989 disallowing expenditure which the European Social Fund (hereinafter referred to as "the Fund") had originally granted for a training programme on behalf of the applicant was void.
2 Article 1(2)a of Council Decision 83/516/EEC of 17 October 1983 on the tasks of the European Social Fund (Official Journal 1989 L 289, p. 38) provides that the Fund is to participate in the financing of operations concerning vocational training and guidance.
3 Article 5(1) of Council Regulation (EEC) No 2950/83 of 17 October 1983 on the implementation of Decision 83/516 (Official Journal 1983 L 289, p. 1) provides that approval by the Fund of an application for assistance is to be followed by the payment of an advance of 50% of the assistance approved on the date on which the operations are scheduled to begin. Article 5(4) provides that final payment claims are to contain a detailed report on the content, results and financial aspects of the relevant operations.
4 Article 6(1) of Regulation No 2950/83 provides that when Fund assistance is not used in conformity with the conditions set out in the decision of approval, the Commission may suspend, reduce or withdraw the aid after having given the relevant Member State an opportunity to comment. Article 6(2) provides that sums paid which are not used in accordance with the conditions laid down in the decision of approval are to be refunded and that the Member State concerned has secondary liability for the repayment of the sums, unwarranted payment of which was made for operations to which the guarantee referred to in Article 2(2) of Decision 83/516 applies.
5 The Business Department of the European Social Fund (hereinafter referred to as "the Department"), Lisbon, acting for the Portuguese Republic and on behalf of the applicant company, submitted to the Fund an application for financial assistance.
6 The training project for which assistance was requested was approved by a Commission decision subject to certain amendments relating to the amount of assistance and the number of persons trained. That decision was communicated to the Department and, subsequently, by the Department to the applicant.
7 Once the training measures had been completed the applicant submitted to the Department the documents certifying that the operations had been completed, the final payment claims and the detailed report on the content and results referred to in Article 5(4) of Regulation No 2950/83.
8 Pursuant to that provision the Portuguese Republic certified the accuracy of the facts and accounts in the payment claims and forwarded the claims to the Commission.
9 After analysing the final payment claim the Commission drew attention to a certain amount of ineligible expenditure. In consequence, by the contested decision, which was communicated to the Department and by the Department to the applicant, the Commission held that there was no balance due to the applicant and that part of the assistance paid as a first advance should be revoked and it ordered a certain sum to be refunded.
10 In support of its application for annulment the applicant puts forward two pleas in law based on the inadequacy of the statement of the reasons on which the contested decision is based and an infringement of the legislation relating to the Fund.
11 Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the procedure and the pleas in law and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.
12 It appears that the contested decision was communicated by the Commission to the competent Portuguese authorities in the form of a reasoned measure advising them in substance that pursuant to Article 6(1) of Regulation No 2950/83 assistance from the Fund was reduced to an amount less than the amount originally approved.
13 To that extent the contested decision, although addressed to the Portuguese Republic, is of direct and individual concern to the applicant within the meaning of the second paragraph of Article 173 of the Treaty inasmuch as it deprives the applicant of part of the assistance which had originally been granted to it, the Member State not having any discretion of its own in that respect.
14 The Court has held that it may of its own motion consider the question of infringement of essential procedural requirements (see judgments in Case 1/54 France v High Authority [1954] ECR 1, in Case 2/54 Italy v High Authority [1954] ECR 37 and in Case 18/57 Nold v High Authority [1959] ECR 41).
15 It is not disputed that, before adopting the contested decision, the Commission did not give the Portuguese Republic an opportunity to comment, thus infringing its clear obligation under Article 6(1) of Regulation No 2950/83.
16 It is further undisputed that the Member State is the sole interlocutor of the Fund (see judgment in Case 310/81 EISS v Commission [1984] ECR 1341, paragraph 15) and that it assumes responsibility in so far as it certifies the accuracy of the facts and accounts in final payment claims and in so far as it may even be required to guarantee that training measures are properly implemented and concluded.
17 Having regard to the central role of the relevant Member State and to the importance of the responsibilities which that State assumes in the presentation and supervision of the financing of training measures, the opportunity for it to comment before a definitive decision to reduce assistance is adopted constitutes an essential procedural requirement the disregard of which renders the contested decision void.
18 It follows that the contested decision to reduce assistance must be declared void without its being necessary to consider the pleas in law put forward by the applicant.

Costs
19 Under Article 69(2) of the Rules of Procedure the unsuccessful party is to be ordered to pay the costs if they have been asked for in the successful party' s pleading. Since the Commission has failed in its submissions it must be ordered to pay the costs.

On those grounds,
THE COURT (Second Chamber)
hereby:
1. Declares void the decision of 19 July 1989 declaring ineligible expenditure of an amount of ESC 62 479 600 relating to Application for Assistance No 870840/P1, submitted to the European Social Fund;
2. Orders the Commission to pay the costs.