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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Commission v Trendsoft (Law governing the institutions) [2004] EUECJ C-127/03 (08 July 2004)
URL: http://www.bailii.org/eu/cases/EUECJ/2004/C12703.html
Cite as: [2004] EUECJ C-127/3, [2004] EUECJ C-127/03

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IMPORTANT LEGAL NOTICE - The source of this judgment is the web site of the Court of Justice of the European Communities. The information in this database has been provided free of charge and is subject to a Court of Justice of the European Communities disclaimer and a copyright notice. This electronic version is not authentic and is subject to amendment.

JUDGMENT OF THE COURT (Fourth Chamber)
8 July 2004 (1)

(Arbitration clause -“ Repayment of sums advanced -“ Interest for late payment -“ Judgment by default)

In Case C-127/03,

Commission of the European Communities, represented by L. Flynn and C. Giolito, acting as Agents, with an address for service in Luxembourg,

applicant,

v

Trendsoft (Irl) Ltd, established in Dublin (Ireland),

defendant,

APPLICATION by the Commission of the European Communities under Article 238 EC for repayment of the sum of EUR 21 303 paid by the Commission to the defendant in connection with the performance of contract No EP 23697 together with interest for late payment,

THE COURT (Fourth Chamber),

composed of: J.N. Cunha Rodrigues, President of the Chamber, F. Macken (Rapporteur) and K. Lenaerts, Judges,

Advocate General: M. Poiares Maduro,
Registrar: R. Grass,

having regard to the Report of the Judge-Rapporteur,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

Judgment

1. By application lodged at the Registry of the Court on 21 March 2003, the Commission of the European Communities, on the basis of Article 238 EC, brought an action for repayment of the sum of EUR 21 303 paid by it to Trendsoft (Irl) Ltd (-˜Trendsoft-™) in connection with the performance of contract No EP 23697 (-˜the contract-™), together with interest for late payment.

Factual and legal background
2. On 28 February 1997 the European Community, represented by the Commission, concluded with Trendsoft the contract concerning the implementation of a project called -˜Client Requirements Definition Improvement-™ and providing for financial support from the Community, in the context of Council Decision 94/802/EC of 23 November 1994 adopting a specific programme for research and technological development, including demonstration, in the field of information technologies (1994 to 1998) (OJ 1994 L 334, p. 24).
3. In accordance with Article 2.1 of the contract, the project was to last for 14 months from 1 March 1997.
4. Under Article 3.1 of the contract, the Commission undertook to make a financial contribution to the proper execution of the project, the total allowable costs of which were estimated at ECU 111 400. Under Article 3.2, that contribution was to cover 100% of the allowable costs, up to ECU 111 400.
5. Article 4 of the contract provided that the Commission was to pay its contribution as follows:
-“ an advance of ECU 55 700 within two months after the last signature of the contracting parties;
-“ the balance within two months after the approval inter alia of the last report and the consolidated cost statement.
6. Article 12 of Annex II to the contract provides that the allowable costs are the actual costs defined in Article 13 of that annex which are necessary for the project, which can be substantiated and which are incurred during the period of the project.
7. Article 13 of Annex II contains more detailed rules on costs. Article 13.1.2 provides that all personnel time charged must be recorded and certified. Article 13.2 provides that the costs of subcontractors and external services are to be allowable if the conditions in Article 3 of Annex II are complied with. Article 3 provides that Trendsoft may enter into associated contracts or subcontracts, subject to the prior written approval of the Commission for each associated contractor. An associated contractor is defined by Article 1(3) of Annex II to the contract as a third party contributing technically to part of the work on the project under a contractual agreement with Trendsoft; he may claim a contribution only in respect of his costs.
8. Under Article 6 of the contract, Trendsoft was to submit periodic progress reports in three copies every six months from 1 March 1997. It also undertook, under Article 9.3 of Annex II to the contract, to submit a final report within two months following the end of the project and, under Article 5 of the contract, to submit to the Commission a consolidated cost statement in three signed copies not later than three months after the approval of the last report.
9. Under Article 16.3 of Annex II to the contract, Trendsoft undertook, if the total financial contribution for the project was less than the total amount of payments made, to reimburse the difference to the Commission immediately.
10. In contrast to the provisions concerning termination of the contract by the Commission on certain grounds (Article 5 of Annex II to the contract) and those concerning the case of the project not having started within three months of the payment of the advance (Article 16.1 of Annex II), the contract does not contain any provision on interest payable on sums claimed under Article 16.3 of Annex II.
11. Article 7 of Annex II states that the Court of First Instance of the European Communities and, in the case of an appeal, the Court of Justice are to have exclusive jurisdiction in any dispute concerning the validity, application and interpretation of the contract, which, under Article 9 of the contract, is governed by the law of Ireland.
12. In accordance with Article 4 of the contract, the Commission, on 28 February 1997, paid Trendsoft ECU 55 700 as an advance.
13. On 25 June 1999, Trendsoft sent the Commission the consolidated cost statement, showing costs of ECU 57 739.20. On 27 July 1999, following a request for information from the Commission, it provided details of the persons who had worked on the project.
14. After examining the costs submitted by Trendsoft, the Commission drew up a definitive cost statement, according to which the allowable costs were only EUR 37 397 as opposed to the advance of ECU 55 700 paid, which it then sent to Trendsoft for signature, by letter of 23 September 1999, explaining that certain costs, in particular part of the personnel costs, could not be taken into consideration.
15. By letter of 14 March 2000, Trendsoft explained its position concerning the personnel costs and asked the Commission to reconsider its calculation.
16. The Commission maintained its position by letter of 30 March 2000, observing that the project had been only partially completed, as Trendsoft, contrary to its contractual obligations, had neither completed a second external dissemination nor submitted a final report.
17. On 5 April 2000, in reply to that letter, Trendsoft accepted the Commission-™s proposal.
18. On 7 June 2000 the Commission issued debit note No 3240202866 (-˜the debit note-™) to Trendsoft in the amount of EUR 21 303, payable by 31 August 2000. Under the heading -˜Payment terms-™, the Commission specified that after that date interest for late payment would be due, at the rate applied by the European Central Bank (-˜the ECB-™) for its refinancing operations in euros in August 2000 plus 1.5%. It sent reminders on 12 February and 3 December 2001 and 15 April 2002.
19. Since Trendsoft did not respond to the Commission-™s request, the Commission brought the present action.

Procedure before the Court
20. In view of the fact that Trendsoft had not submitted a defence within the prescribed period, which, after being extended, expired on 24 June 2003, the Commission requested the Court to give judgment by default in accordance with Article 94(1) of the Rules of Procedure.
21. It is indeed the case that, although the Commission-™s application was properly notified to Trendsoft, Trendsoft did not within the prescribed periods lodge a defence within the meaning of Article 40(1) of the Rules of Procedure. The Court must therefore apply the default procedure. Since the admissibility of the application is not in doubt, the Court must ascertain, in accordance with Article 94(2) of the Rules of Procedure, whether the application appears well founded.
22. The Commission claims that the Court should order Trendsoft:
-“ to pay the sum of EUR 24 751.57, corresponding to EUR 21 303 as principal sum and EUR 3 448.57 as interest for late payment as of 31 March 2003 calculated at the rate of 6.09% to 31 December 2002 and 8.09% as from 1 January 2003;
-“ to pay interest of EUR 4.72 per day from 1 April 2003 until the date on which the debt is repaid in full;
-“ to pay the costs.

Substance
Repayment of part of the advance
23. Under Article 16.3 of Annex II to the contract, Trendsoft undertook, if the total financial contribution for the project was less than the total amount of payments made, to reimburse the difference to the Commission immediately.
24. Article 13.1.2 of Annex II to the contract provides that all personnel time charged must be recorded and certified. Under Article 13.2, the costs of subcontractors and external services are allowable if the conditions in Article 3 of Annex II have been complied with. That article provides that Trendsoft may enter into associated contracts or subcontracts, subject to the prior written approval of the Commission for each associated contractor.
25. Moreover, under Article 9.3 of Annex II to the contract, Trendsoft also undertook to submit a final report within two months following the end of the project.
26. It is apparent from the information submitted by the Commission that certain costs, in particular part of the personnel costs which Trendsoft had mentioned in the consolidated cost statement and the costs of some subcontractors, were not allowable. Trendsoft also did not submit a final report. Furthermore, Trendsoft accepted by fax of 5 April 2000 the Commission-™s proposal that the allowable costs amounted to EUR 34 397 as opposed to the advance paid of ECU 55 700.
27. Pursuant to Article 2(1) of Council Regulation (EC) No 1103/97 of 17 June 1997 on certain provisions relating to the introduction of the euro (OJ 1997 L 162, p. 1), references to the ecu must be replaced by references to the euro at a rate of one euro to one ecu.
28. Consequently, the form of order sought by the Commission must be granted, as regards repayment of the overpayment of EUR 21 303.
Interest
29. In its application the Commission stated that that sum of EUR 21 303 was due on 31 August 2000, and that from that date interest for late payment was due, until payment of the debt in full.
30. However, Article 16.3 of Annex II to the contract does not provide for repayment of the overpayment by the Commission to Trendsoft to attract interest for late payment.
31. In the absence of contractual interest, and given that the contract is governed by the law of Ireland, section 22(1) of the Courts Act, 1981, must be applied, which provides that where in any proceedings a court orders the payment by any person of a sum of money (which expression includes in this section damages), the judge concerned may, if he thinks fit, also order the payment of interest at the rate per annum standing specified for the time being in section 26 of the Debtors (Ireland) Act, 1840. That interest relates to the whole or any part of the principal sum and is in respect of the whole or any part of the period between the date when the cause of action accrued and the date of the judgment.
32. Under section 26 of the Debtors (Ireland) Act, 1840, as amended, in accordance with section 20 of the Courts Act, 1981, by regulation 3 of the Courts Act, 1981 (Interest on Judgment Debts) Order, 1989 (-˜the Debtors (Ireland) Act, 1840, as amended-™), every judgment debt due upon any judgment not confessed or recovered for any penal sum for securing principal and interest is to carry interest at the rate of 8% per annum.
33. In the present case, however, the Commission has not, in support of its claim for interest on late payment, referred to any relevant provision of Irish law. It merely refers to its debit note of 7 June 2000 fixing the due date of payment at 31 August 2000, after which interest for late payment will be charged. Nevertheless, as Trendsoft, after acknowledging that it should repay the Commission the overpayment of EUR 21 303, has neither made a repayment nor contested the overpayment or the interest claimed, it must be ordered, in accordance with the relevant provisions of Irish law, to pay interest for late payment.
34. In calculating the interest claimed by it, however, the Commission applied:
-“ the interest rate applied by the ECB to its principal refinancing operations increased by 1.5 points, that is, a rate of 6.09%, for the period from 31 August 2000 to 31 December 2002,
-“ the interest rate applied by the ECB to its principal refinancing operations increased by 3.5 points, that is, a rate of 8.09%, for the period from 1 January 2003 to the date of payment of the debt in full.
35. In so far as, for the period from 31 August 2000 to 31 December 2002, the rate of interest claimed by the Commission is lower than that calculated under the Courts Act, 1981, the Commission-™s claim must be allowed in this respect.
36. For the period from 1 January 2003 to the date of the present judgment, on the other hand, the rate of interest claimed by the Commission is higher than the rate of 8% calculated under the Courts Act, 1981, so that the latter rate must be applied.
37. Finally, for the period from the date of the present judgment to the date of payment of the debt in full, Trendsoft must be ordered to pay the Commission interest calculated in accordance with Irish law, currently section 26 of the Debtors (Ireland) Act, 1840, as amended, up to a limit of 8.09% per annum.
38. It follows from all the above considerations that Trendsoft must be ordered to pay the Commission the sum of EUR 21 303 due as principal sum, together with interest for late payment:
-“ at the rate of 6.09% per annum from 31 August 2000 to 31 December 2002;
-“ at the rate of 8% per annum from 1 January 2003 to the date of the present judgment;
-“ at the annual rate applied under the law of Ireland, currently section 26 of the Debtors (Ireland) Act, 1840, as amended, up to the limit of a rate of 8.09% per annum, from the date of the present judgment.

Costs
39. Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs, if they have been applied for in the successful party-™s pleadings. Since the Commission has applied for costs against Trendsoft and Trendsoft has been unsuccessful, Trendsoft must be ordered to pay the costs.



On those grounds,

THE COURT (Fourth Chamber)

hereby:
1. Orders Trendsoft (Irl) Ltd to pay the Commission of the European Communities the sum of EUR 21 303 due as principal sum, together with interest for late payment:
-“ at the rate of 6.09% per annum from 31 August 2000 to 31 December 2002;
-“ at the rate of 8% per annum from 1 January 2003 to the date of the present judgment;
-“ at the annual rate applied under the law of Ireland, currently section 26 of the Debtors (Ireland) Act, 1840, as amended, in accordance with section 20 of the Courts Act, 1981, by regulation 3 of the Courts Act, 1981 (Interest on Judgment Debts) Order, 1989, up to a limit of a rate of 8.09% per annum, from the date of the present judgment;
2. Orders Trendsoft (Irl) Ltd to pay the costs.

Cunha Rodrigues	Macken	Lenaerts

Delivered in open court in Luxembourg on 8 July 2004.

R. Grass

J.N. Cunha Rodrigues

Registrar

President of the Fourth Chamber

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1 -“ Language of the case: English.