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

Legal background

'The Community shall grant to the USSR and its constituent Republics a medium-term loan of not more than ECU 1 250 million in principal, in three successive instalments and for a maximum duration of three years, in order to enable agricultural and food products and medical supplies ... to be imported.'

'... the Commission is hereby empowered to borrow, on behalf of the European Economic Community, the necessary resources that will be placed at the disposal of the USSR and its constituent Republics in the form of a loan'.

'The loan referred to in Article 2 shall be managed by the Commission.'

'1. The Commission is hereby empowered to finalise, in concert with the authorities of the USSR and its constituent Republics ..., the economic and financial conditions to be attached to the loan, the rules governing the provision of funds and the necessary guarantees to ensure loan repayment.

...

3. Imports of products financed by the loan shall be effected at world market prices. Free competition shall be guaranteed for the purchase and supply of products, which shall meet internationally recognised standards of quality.'

'The loans shall be concluded on the basis of agreements entered into between the Republics and the Commission which shall include, as conditions for disbursement of the loan, the requirements set out in Articles 3 to 7.'

'1. The loans shall only finance the purchase and supply under contracts that have been recognised by the Commission as complying with the provisions of Decision 91/658/EEC and with the provisions of the agreements referred to in Article 2.

2. Contracts shall be submitted to the Commission for recognition by the Republics or their designated financial agents.'

'(1) The contract was awarded following a procedure guaranteeing free competition ...

(2) The contract offers the most favourable terms of purchase in relation to the price normally obtained on the international markets.'

'The proceeds of the loan, less commissions and costs incurred by the EEC, shall be disbursed to the borrower and applied, according to the terms and conditions of the Loan Agreement, exclusively to cover irrevocable documentary credits issued by the borrower in international standard form pursuant to delivery contracts provided that such contracts and documentary credits have been approved by the Commission of the European Communities as complying with the Council decision of 16 December 1991 and the present Memorandum of Understanding.'

Facts and procedure before the Court of First Instance

'8 The applicant, an international trading company, was contacted, together with other companies, in connection with an [informal] invitation to tender organised by Exportkhleb, a State-owned company charged by the Russian Federation with the negotiation of wheat purchases.

9 On 28 November 1992 the applicant signed a contract with Exportkhleb for the sale of wheat, whereby it undertook to supply 325 000 tonnes of milling wheat at a price of US $140.50 per tonne, CIF free out one safe Baltic Sea discharge port. That contract stipulated that the goods were to be shipped by 28 February 1993.

10 Following signature of the loan agreement ... the VEB requested the Commission to approve the contracts concluded between Exportkhleb and the exporting companies, including the contract signed with the applicant.

11 After the Commission had obtained from the applicant various additional items of essential information, concerning in particular the ecu/US$ exchange rate, which had not been fixed in the contract, it finally gave its approval on 27 January 1993, in the form of a notice of confirmation addressed to the VEB. According to the applicant, that notice of confirmation modified the contract in two respects, namely the shipment period, which the Commission automatically extended until 31 March 1993, and the ecu/US$ exchange rate, which was neither that proposed by the applicant to Exportkhleb on 25 January 1993 (ECU 1 = US $1.1711) nor that agreed between them on 28 January 1993 (ECU 1 = US $1.1714, bringing the agreed price up to ECU 119.94 per tonne).

12 According to the applicant, the documentary credit was set up by the VEB on 4 February 1993 but the letter of credit did not become effective until 16 February 1993, that is to say, approximately two weeks before the end of the shipment period provided for by the contracts (28 February 1993).

13 Although a substantial part of the goods had been delivered or was in the course of shipment, it was becoming clear, according to the applicant, that it would not be possible to deliver all the goods by 28 February 1993.

14 On 19 February 1993 Exportkhleb invited all the exporters to attend a meeting in Brussels, which was held on 22 and 23 February 1993. At that meeting Exportkhleb requested the exporters to submit fresh quotations for delivery of what it termed the "foreseeable balance", that is to say, the quantities which could not reasonably be expected to be delivered by 28 February 1993. According to the applicant, the price of wheat on the world market rose considerably between November 1992, when the sale contract was concluded, and February 1993, when the fresh negotiations took place, going up from US $132 in November 1992 to US $149.50 in February 1993.

15 Following negotiations in which the exporting companies had to align themselves to the lowest bid, namely US $155 per tonne, agreement was reached between Exportkhleb and its contracting partners regarding the allocation of the fresh quantities to be supplied by each company. The applicant was awarded a contract for 185 000 tonnes of milling wheat. Under that informal agreement, the shipment period was to end on 30 April 1993.

16 By reason of the urgency arising from the seriousness of the food situation in Russia, it was decided that those modifications would be formalised by a simple [addendum] to the initial contract, which was dated - for the sake of convenience, according to the applicant - 23 February 1993, the date of the meeting in Brussels, even though, as the applicant acknowledges, it was not actually signed until the third week of March.

17 On the strength of the new terms agreed with Exportkhleb and - according to the applicant - the Russian organisation's verbal assurances that the Commission would accept the new amendments, the applicant recommenced deliveries of wheat bound for Russia from 4 March 1993 onwards.

18 On 9 March 1993 Exportkhleb informed the Commission, first, that the contracts concluded with five of its suppliers had been amended and, second, that the deliveries still to be made would henceforth be effected at a price of US $155 per tonne (CIF free out Baltic port), to be converted into ecus at a rate of 1.17418 (ECU 132 per tonne).

19 On 12 March 1993 Mr Legras, Director General in the Directorate-General for Agriculture (DG VI), replied to Exportkhleb, stating that he wished to draw its attention to the fact that, since the maximum value of those contracts had already been set by the Commission's notice of confirmation and the whole available amount of credits for wheat was already contracted, such a request could only be accepted by the Commission if the total value of the contracts was maintained, which could be done by a corresponding reduction in outstanding quantities to be delivered. He further stated that the request for approval of the amendments could only be considered by the Commission pursuant to an official request from the VEB.

20 According to the applicant, that information was interpreted as confirming the Commission's agreement in principle, subject to scrutiny for the purposes of formal approval once the documentation was sent by the VEB. It was for that reason that the applicant continued to ship the cargoes of wheat bound for Russia.

21 According to the applicant, the documentation containing the new bids and the amendments to the contract were officially sent by the VEB to the

Commission on 22 and 26 March 1993. The applicant maintains that on 5 April 1993 it was informed by Exportkhleb of the Commission's refusal to approve the amendments to the contract as initially concluded; that refusal was given concrete form by a letter sent to the VEB on 1 April 1993 by the Agriculture Commissioner. On that same day, 5 April 1993, the applicant decided to stop its deliveries of wheat.

22 The contents of the letter of 1 April 1993 may be summarised as follows. The Commissioner, Mr R. Steichen, stated that, having examined the amendments to the contracts concluded between Exportkhleb and various suppliers, the Commission was prepared to accept those relating to the postponement of the final dates for delivery and payment. On the other hand, "the magnitude of the price increases is of such a nature that we cannot consider them as a necessary adaptation but as a substantial modification of the contracts initially negotiated". He went on to state: "In fact, the present level of prices on the world market (end of March 1993) is not significantly different from the level which prevailed at the time when the initial prices were agreed (end of November 1992)." The Commissioner pointed out that the need, first, to ensure free competition between potential suppliers and, second, to secure the most favourable purchase terms constituted one of the main factors governing the approval of contracts by the Commission. He found that, in the present case, the amendments had been negotiated directly with the companies concerned, without any competition with other suppliers, and concluded: "The Commission cannot approve such major changes as simple amendments to existing contracts." The Commissioner stated that he would be willing to approve the amendments relating to the postponement of delivery and payment, subject to compliance with the usual procedure. On the other hand, he stated that "should it be considered necessary to modify the prices or quantities, it would then be appropriate to negotiate new contracts to be submitted to the Commission for approval under the full usual procedure (including submission of at least 3 offers)".

...

23 It was in those circumstances that, by application lodged at the Registry of the Court of Justice on 9 June 1993 ..., the applicant brought the present action.

24 By order of 27 September 1993 the Court of Justice referred the case to the Court of First Instance pursuant to Council Decision 93/350/Euratom, ECSC, EEC of 8 June 1993 amending Decision 88/591/ECSC, EEC, Euratom establishing a Court of First Instance of the European Communities (OJ 1993 L 144, p. 21).

25 ... By document lodged at the Registry on 15 September 1993 the Commission raised an objection of admissibility.'

'- declare the application for annulment inadmissible on the ground that the matter is not of direct concern to the applicant;

- declare either that the contested decision does not give rise to liability on the part of the Commission or that the action is inadmissible since it concerns a complaint which does not put the Commission's non-contractual liability in issue' (paragraph 29).

The contested judgment

Admissibility of the action for annulment

'46 According to the fourth paragraph of Article 173 of the Treaty, any natural or legal person may institute proceedings against a decision which, although in the form of a decision addressed to another person, is of direct and individual concern to the former.

47 It is necessary, therefore, to determine whether the letter sent by the Commission to the VEB on 1 April 1993 is of direct and individual concern to the applicant.

48 First of all, the Commission has not denied that the applicant is individually concerned. Having regard to the circumstances of the case, the Court considers that only the question whether the contested decision is of direct concern to the applicant need be examined.

49 The Community rules and the agreements concluded between the Community and the Russian Federation provide for a division of powers between the Commission and the agent appointed by the Russian Federation to arrange the purchase of wheat. It is for that agent - in the present case, Exportkhleb - to select the other contracting party by means of an invitation to tender and to negotiate and conclude the contract. The Commission's role is merely to verify that the conditions for Community financing are fulfilled and, where necessary, to acknowledge, for the purposes of the disbursement of the loan, that such contracts are in conformity with the provisions of Decision 91/658 and with the agreements concluded with the Russian Federation. It is not for the Commission, therefore, to assess the commercial contract with reference to any other criteria.

50 It follows that the undertaking to which a contract is awarded has a legal relationship only with the party with whom it contracts, namely Exportkhleb, which is authorised by the Russian Federation to conclude contracts for the purchase of wheat. The Commission, for its part, has legal relations only with the borrower, namely the Russian Federation's financial agent, the VEB, which notifies it of commercial contracts so that their conformity can be recognised, and which is the addressee of the Commission's decision in that regard.

51 The action of the Commission does not therefore affect the legal validity of the commercial contract concluded between the applicant and Exportkhleb; nor does it modify the terms of the contract, particularly as regards the prices agreed by the parties. Thus, irrespective of the Commission's decision not to recognise the agreements as being in conformity with the applicable provisions, the amendment which the parties made on 23 February 1993 to their contract of 28 November 1992 remains validly concluded on the terms agreed between them.

52 The fact that the Commission was in contact with the applicant or with Exportkhleb cannot affect that assessment of the legal rights and obligations which each of the parties involved has under the applicable legislation and contractual agreements. Moreover, as regards the admissibility of the application for annulment, the exchanges relied on by the applicant do not show that the Commission went beyond its proper role. Thus, the letter sent by the Commission to Exportkhleb on 12 March 1993 expressly states that the amendments required an official request from the VEB. Similarly, the sole purpose of the alleged contacts between the Commission and the applicant in January 1993 was to have the parties include in their contract a condition which was indispensable for acceptance of conformity but it was left to the parties alone to modify their contract if they wanted to secure the financing provided for. Lastly, the fact that, several weeks before the

adoption of its decision, the Commission held a meeting in Brussels with the applicant in order to explain its position does not as such establish that that decision was of direct concern to the applicant.

53 Whilst it is true that, on receiving from the Commission a decision finding that the contract is not in conformity with the applicable provisions, the VEB cannot issue a documentary credit capable of being covered by the Community guarantee, nevertheless, as stated above, the decision affects neither the validity nor the terms of the contract concluded between the applicant and Exportkhleb. The Commission's decision does not take the place of a decision taken by the Russian national authorities, since the Commission may only examine the conformity of contracts for the purposes of Community financing.

54 Lastly, in order to establish that the contested decision is of direct concern to it, the applicant cannot rely on the presence in the commercial contracts of a suspensory clause making performance of the contract and payment of the contract price subject to acknowledgement by the Commission that the criteria for disbursement of the Community loan are fulfilled. Such a clause is a link which the contracting parties decide to make between the contract concluded by them and a contingent future event; their agreement will be binding only if the latter occurs. The admissibility of an application under the fourth paragraph of Article 173 of the Treaty cannot, however, be made to depend on the intention of the parties. The applicant's argument must therefore be rejected.

55 In view of the foregoing, the Court considers that the Commission's decision of 1 April 1993, addressed to the VEB, is not of direct concern to the applicant, within the meaning of the fourth paragraph of Article 173 of the Treaty. Consequently, the application for annulment of that decision must be declared inadmissible.'

(1) dismissed the application for annulment as inadmissible;

(2) dismissed the objection of inadmissibility inasmuch as it concerned the claims for compensation for the material and non-material damage allegedly suffered by the applicant;

(3) ordered the procedure relating to those claims for compensation to be continued in relation to the substance;

(4) reserved the costs.

The appeal

The first plea

Russian national authorities, since the Commission may only examine the conformity of contracts for the purposes of Community financing' (paragraph 53). Relying on the judgment in International Fruit Company, cited above, the appellant maintains on the contrary that, in the absence of any discretion exercisable on the part of the Russian authorities in implementing the contested decision, that decision directly and automatically affected the appellant's legal situation under the contract. Consequently, the Russian authorities had no alternative but to note that the Commission had not given its approval and, thus, to pay for the supplies of wheat at the old price under the initial contract and not at the new price agreed on in the addendum to the contract.

on 6 April 1993 to Exportkhleb and in which it pressed it for payment, notwithstanding the contested decision, in these terms:

'We trust you will understand that we consider we have with you a firm contract ... and must insist on fulfilment of your obligations under the contract.'

agreed between them' (paragraphs 51 and 53). It added that the presence in the contract of a 'suspensory clause making performance of the contract and payment of the contract price subject to acknowledgment by the Commission that the criteria for disbursement of the Community loan are fulfilled' resulted from the intention of the parties themselves, on which the admissibility of an action under the fourth paragraph of Article 173 could not be made to depend (paragraph 54).

Instance, was therefore not sufficient to prevent the appellant from being directly concerned by the contested decision.

The second plea

Referral back of the case to the Court of First Instance