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

Law

'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.'

'For the purposes of Article 1, 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 Community 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 [must be] awarded following a procedure guaranteeing free competition. To this end, the purchasing organisations of the Republics shall, when selecting supplier firms within the Community, seek at least three offers from firms independent of each other ...

2. The contract [must offer] 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's agent 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

'8 Following signature of the loan agreement, the VEB requested the Commission to approve each of the contracts concluded between Exportkhleb and the applicants.

9 After the Commission had obtained from the applicants various additional items of essential information, concerning in particular the ECU/USD exchange rate, which had not been fixed in the contracts, it gave its approval on 27 January 1993, in the form of notices of confirmation addressed to the VEB.

10 According to the applicants, the letters of credit on the basis of which the financing was to be provided did not become effective until the second half ofFebruary 1993, that is to say, only a few days before the end of the shipment period provided for by the contracts.

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

12 By telex of 19 February 1993 Exportkhleb invited 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 applicants, the price of wheat on the world market rose considerably between November 1992, when the sale contracts were concluded, and February 1993, when the fresh negotiations took place.

13 Following that meeting in Brussels, the applicants reached agreement with Exportkhleb for the supply of further shipments of wheat, which were to be delivered by the end of April 1993. ... Glencore Grain undertook to supply 450 000 tonnes of milling wheat at the ... price [of USD 155]. Lastly, Compagnie Continentale (France) was awarded a contract for the supply of 300 000 tonnes of milling wheat, of which 120 000 tonnes were to be supplied at the price initially agreed and 180 000 tonnes at a price of USD 155, together with 20 000 tonnes of durum wheat or milling wheat at the same price.

14 According to the applicants, it was decided at the request of Exportkhleb, by reason of the urgency arising from the seriousness of the food situation in Russia, that those modifications would be formalised by simple riders to the initial contracts.

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

16 By fax of 12 March 1993 the Director-General of the Directorate-General for Agriculture (DG VI) pointed out to Exportkhleb 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.

17 According to the applicants, 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.

18 The riders to the contracts were then officially agreed, albeit that they were notionally dated 22 February 1993, the date of the meeting in Brussels. Whilst the price per tonne was not changed from that which had been announced on 9 March 1993, the volumes were altered in order to prevent the total [cost] from exceeding the [cost] initially provided for. The applicants then resumed or continued with their shipments.

19 The documentation containing the new bids and the amendments to the contracts were officially sent by the VEB to the Commission on 22 and 26 March 1993.

20 By letter of 1 April 1993, signed by the Agriculture Commissioner, the Commission informed the VEB of its refusal to approve the amendments to the contracts as initially concluded.

21 In that letter, the Commissioner 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. He further 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).'

The procedure before the Court of First Instance and the judgment under appeal

The procedure before the Court of First Instance

Case T-491/93

Case T-494/93

The judgment under appeal

The application for annulment

'56 The parties are ... agreed that one of the conditions imposed by the relevant provisions for the purposes of obtaining the Commission's approval relates to the price agreed, whilst another concerns adherence, in the conclusion of the contract, to the precepts of free competition. It is apparent from the contested decision that, in the Commission's view, neither of those conditions has been fulfilled.

57 Moreover, it is not disputed by the parties that those two conditions are cumulative, with the result that the non-fulfilment of either of them is enough to justify the decision not to approve the contracts.

58 In the circumstances of the present case, it is appropriate, first of all, to consider the second condition.'

'65 The Court observes, as a preliminary point, that the criterion requiring adherence to the principle of free competition in the conclusion of contracts is crucial to the proper functioning of the lending mechanism established by the Community. In addition to being aimed at the prevention of fraud and collusion, it is designed, more generally, to guarantee the optimum use of the funds made available by the Community for aid to the Republics of the former Soviet Union. In actual fact, it is intended to protect both the Community as lender and the Republics in question as recipients of food and medical aid.

66 Consequently, fulfilment of that criterion is clearly not merely a formal obligation but in fact an essential element of the implementation of the lending mechanism.

67 In those circumstances, it is necessary to verify whether the Commission, when adopting the contested decision, was correct in finding that the condition of free competition had not been fulfilled upon the conclusion of the riders to the contracts. The legality of the decision must be assessed in the light of all the rules needing to be complied with by the Commission in the matter, including those relating to the agreements concluded with the Russian authorities.

68 The riders concluded with the various Community undertakings constitute, in relation to one another, specific contracts, each of them requiring the Commission's authorisation. It is necessary, therefore, to examine whether each applicant, upon agreeing new contractual terms with Exportkhleb, was required to compete with at least two independent undertakings.

69 It should be noted in that regard, first, that the telex sent by Exportkhleb to the applicants, inviting them to attend a meeting in Brussels on 22 and 23 February 1993, cannot be regarded as proof that each undertaking, prior to concluding the riders, was required to compete with at least two undertakings independent of each other.

70 It is true that the applicable Community legislation does not require the call for bids to be in any particular form. However, the question which arises in the present case is not whether a telex may constitute a valid call for bids but whether the telex in question shows that each undertaking was required to compete with others before the new terms were concluded. Clearly, the telex from Exportkhleb, which was worded in a general way and which did not state,in particular, the quantities to be supplied or the delivery terms, does not constitute the necessary evidence in that regard.

71 Similarly, the extracts from the trade press produced by the applicants, which report the arrival in Europe of representatives of Exportkhleb for discussions on, inter alia, supplies of wheat in the context of the Community loan, do not in any way show that the riders were concluded with undertakings which had previously been required to compete with at least two other independent undertakings.

72 As Glencore Grain has pointed out, it is true that the applicable legislation requires Exportkhleb merely to seek at least three competing offers. Consequently, the possibility cannot be ruled out that certain undertakings, despite having been invited to submit a bid, may have declined to do so.

73 In the present case, however, the documentation does not even show that, for every rider finally concluded, at least two competing undertakings declined to respond to Exportkhleb's invitation.

74 Thus, in the telefax which it sent to the Commission on 9 March 1993 in order to point out the changes made to the contracts, Exportkhleb merely referred to the contracts concluded with each undertaking. In respect of each contract, mention was made only of the bid submitted by the undertaking to which the contract was awarded and the terms agreed following the negotiations between Exportkhleb and the undertaking in question. In relation to each of those contracts, no indication is given of at least two other responses, even negative ones, having been given to the invitations to submit offers. That telefax merely states that each undertaking had concluded with Exportkhleb a contract corresponding to the tonnage still to be delivered by it as at the date of the meeting in Brussels. In actual fact, although offers were indeed annexed to the telefax of 9 March 1993, these were separate offers for separate contracts, and not for one and the same contract. Consequently, that telefax likewise provides no proof that each rider was concluded after competing offers had been solicited from at least three undertakings independent of each other.

75 Furthermore, the Commission has stated, without being challenged in that regard, that, upon being officially notified by the VEB of the new contractual terms on 22 and 26 March 1993, it did not receive the responses, favourable or unfavourable, given by at least three independent undertakings.

76 The applicants claim, however, that the principle of free competition was adhered to, since each of them was obliged to match the lowest price offered.

77 It is true that the telefax sent by Exportkhleb to the Commission on 9 March 1993 shows that, whilst the prices offered ranged from USD 155 toUSD 158.50, the price ultimately agreed with Exportkhleb was USD 155 in respect of all the undertakings.

78 Nevertheless, that shows, at most, that negotiations took place between Exportkhleb and each applicant before each of the contracts was concluded. On the other hand, also taking into account the foregoing, it does not show that the price in question was the result of at least three undertakings independent of each other having competed for each of the contracts to be awarded.'

The claim for damages

The appeals

Restriction of the review to the condition relating to free competition

Arguments of the parties

Findings of the Court

The findings of the Court of First Instance on observance of the principle of free competition

Arguments of the parties

Findings of the Court

Infringement of Article 68(1) of the Rules of Procedure of the Court of First Instance

Arguments of the parties

Findings of the Court

'The Court of First Instance may, either of its own motion or on application by a party, and after hearing the Advocate General and the parties, order that certain facts be proved by witnesses. The order shall set out the facts to be established.

The Court of First Instance may summon a witness of its own motion or on application by a party or at the instance of the Advocate General.

An application by a party for the examination of a witness shall state precisely about what facts and for what reasons the witness should be examined.'

The claim for damages

Arguments of the parties

Findings of the Court

Costs