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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Commission / Gal-Or (Arbitration clause) [2010] EUECJ T-136/09 (07 October 2010)
URL: http://www.bailii.org/eu/cases/EUECJ/2010/T13609.html
Cite as: [2010] EUECJ T-136/09, [2010] EUECJ T-136/9
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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 GENERAL COURT (Seventh Chamber)
7 October 2010 (*)
(Arbitration clause – Contract for financial assistance concluded under a specific research and technological development programme in the field of non-nuclear energy sector – Failure to comply with the contract – Reimbursement of advance payments – Default interest – Default procedure)
In Case T-136/09,
European Commission, represented initially by A.-M. Rouchaud-Joët and F. Mirza, acting as Agents, and by B. Katan and M. van der Woude, lawyers, then by A.-M. Rouchaud-Joët and F. Mirza, acting as Agents, and by B. Katan, lawyer,
applicant,
v
Benjamin Gal-Or, residing at Jupiter, Florida (United States),
defendant,
ACTION, on the basis of an arbitration clause, seeking an order that Mr Gal-Or reimburse the amount of EUR 205 611 advanced to him by the Commission in the context of contract IN/0042/97, together with default interest, and for payment of default interest on the amount of EUR 9 231.25, which is the amount of the costs incurred in an action brought by Mr Gal-Or against the Commission before the courts in the Netherlands,
THE GENERAL COURT (Seventh Chamber),
composed, at the time of the deliberation, of N.J. Forwood, President, E. Moavero Milanesi and J. Schwarcz (Rapporteur), Judges,
Registrar: E. Coulon,
having regard to the written procedure,
gives the following
Judgment
Background to the dispute
1 On 23 December 1997, the European Community, represented by the Commission of the European Communities, concluded with Mr Benjamin Gal-Or and other contractors contract IN/0042/97 (‘the contract’) in relation to the project entitled ‘Self Upgrading of Old Design Gas Turbines in Land & Marine Industries by Energy-Saving Clean Jet Engine Technologies’ (‘the project’), in the context of Council Decision 94/806/EC of 23 November 1994, adopting a specific programme for research and technological development, including demonstration, in the field of non-nuclear energy (1994 to 1998) (OJ 1994 L 334, p. 87). Mr Gal-Or was appointed technical coordinator and project manager.
2 The project was aimed at demonstrating the self-upgrading of old gas turbines based on military jet-engine technology to increase the life of gas turbines designed to produce electricity. The ultimate aim of the project was to reduce renewal costs, air pollution and fuel costs. Three different gas turbines widely used in the Community were to be upgraded in the context of three demonstrations carried out in close collaboration with three associated contractors in the Community.
3 Under Articles 3.1 and 3.2 of the contract, the Commission committed itself to contributing financially for the proper execution of the project, the total allowable costs of which had been estimated at ECU 2 788 858. The Commission’s financial participation in the project was to amount to 40% of the allowable costs, that is to say, a maximum of ECU 1 115 543.
4 In accordance with Article 4 of the contract, the Commission had to pay the contractors an advance of ECU 334 663. Later payments were to be made only after approval of periodic progress reports and corresponding costs statements. In that regard, Article 6 of the contract stipulated that the contractors had to submit a financial report and a technical report every six months. A final technical and financial report had to be submitted at the end of the project.
5 Those reports had to follow specific guidelines set out in Article 10 of Annex II to the contract (‘the General Conditions’). In particular, the information in the reports had to enable the Commission to evaluate the progress and cooperation. To that end, the reports had to be of a suitable quality to enable direct reproduction. In addition, the third paragraph of Article 10.3 of the General Conditions indicated that the final report was deemed to be approved two months after its receipt by the Commission, unless there were observations on it submitted by the Commission. A time-limit of one month was fixed for the other reports.
6 Articles 18 to 22 and part D of the General Conditions, as amended by Article 9 of the contract, specified which costs would be covered by the Community’s contribution, the detailed rules for justifying those costs and the auditing rules applicable to the statements and financial reports. For example, under Article 19.1.1 of the General Conditions, all staff working hours had to be registered and certified, whilst under Article 21.2 of the General Conditions, the cost statements had to comply with the format specified in part D of the General Conditions.
7 The Commission was entitled to terminate the contract by written notice, either immediately or following a notice period of two months, inter alia:
– under Article 5.1 of the General Conditions, where there were major technical or economic reasons substantially affecting the project;
– under Article 5.3(a)(i) of the General Conditions, where it had requested remedial action to rectify non-performance of the contract within a reasonable period of not less than one month and as specified in writing, and where that action had not been carried out satisfactorily;
– under the same provision, in the event of a financial irregularity of a serious nature.
8 The reimbursement of advance payments could be required by the Commission:
– under the first subparagraph of Article 5.4 of the General Conditions, where the advance paid by the Commission exceeded the costs borne by the contractors relating to project deliverables and other costs which were fair and reasonable;
– under the third subparagraph of Article 5.4 of the General Conditions, in the event of an immediate termination of the contract pursuant to Article 5.3(a);
– under the second indent of Article 23.1 of the General Conditions, where the project had not effectively commenced within three months of the payment of the advance;
– under Article 23.3 of the General Conditions, where the total financial contribution paid by the Commission to the project was higher than the allowable costs borne by the contractors in the context of the project.
9 The entry into force 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), had the effect that, pursuant to Article 2(1) of that regulation, every reference to the ECU was replaced by a reference to the euro at a rate of one euro to one ECU.
10 On 26 May 1998, the Commission paid the first advance to the contractors by transferring the amount of EUR 334 663 to the bank account of the project coordinator. Having received the advance on behalf of all four contractors in accordance with Article 2.1(b) of the General Conditions, the project coordinator subsequently paid EUR 205 611 to Mr Gal-Or.
11 On 22 September 1998, the Commission received the first periodic technical and financial reports, both dated 31 August 1998.
12 By decision of 16 November 1998, the Commission refused to approve those reports. The reasons given for not approving the technical report were, inter alia:
– instead of reporting real progress, the report mainly set out the same general ideas of the project, which were already known to the Commission;
– no progress had been achieved in selecting the three associated contractors who were to supply the old gas-turbines for the experiments;
– the manufacturing phase of the project, which had been scheduled for 1 April 1998 in the contract, had still not been started;
– the technical report was not drawn up according to the Commission’s guidelines as laid down in the General Conditions.
13 As regards the financial report, the Commission pointed out that:
– the hourly costs for staff were unusually high and not shown to be linked to their actual involvement in the project;
– receipts for declared costs, such as air travel tickets, were not annexed to the report;
– the roles of the four contractors and the costs linked to their activities were not made clear.
14 Since the project was still in its early phase of development, the Commission decided not to terminate it immediately, but merely to suspend the payment of advances.
15 As Mr Gal-Or and the initially-envisaged associated contractor could not agree on the involvement of the latter in the project, the Commission gave the contractors an additional period, until March 1999, to find a new associated contractor. On 15 March 1999, Mr Gal-Or informed the Commission that he had found a new candidate associated contractor. The Commission made no objection to the change of associated contractor. However, by letter of 28 May 1999, it requested all the contractors to supply to it, at the latest by 15 July 1999, inter alia, an agreement with a new associated contractor containing a detailed work programme. Furthermore, the Commission specified that its letter was a notification for the purposes of Article 5.3 of the General Conditions.
16 Mr Gal-Or replied by facsimile on 6 July 1999. However, the Commission was not satisfied with that reply inasmuch as it considered the new candidate associated contractor’s gas turbine was not an old design that could be upgraded, but a new design that was hardly out of its development phase. It was therefore, according to the Commission, unsuitable for the project. In addition, the Commission took the view that the change in the type of turbine involved would substantially affect the project. For those reasons, and because no progress had been made in one and a half years, the Commission, by letter of 4 October 1999, terminated the contract pursuant to Article 5.1 of the General Conditions. It specified that the termination would take effect two months following receipt of its letter.
17 In that same letter, which, according to the Commission, Mr Gal-Or received on 20 October 1999 at the latest, the Commission informed all of the contractors that its contribution to the costs of the project could only be paid to them if the costs in question related to project deliverables. For that purpose, and relying on Article 5.6 of the General Conditions, the Commission requested the contractors to supply to it, within the period set out in paragraph 16 above, a final technical and financial report.
18 By letter of 10 December 1999, Mr Gal-Or asked for a postponement of the deadline on the ground that his books and records needed to be approved by accountants both in the Netherlands and in Israel. The Commission acceded to that request and granted him, by letter of 7 February 2000, an additional period until 29 February 2000. The Commission informed Mr Gal-Or that if no satisfactory report had been sent to it by that date, the Community’s advance payment would have to be reimbursed.
19 On 17 February 2000, Mr Gal-Or sent the Commission the final technical and financial report. The report was not approved by the Commission, on the grounds that:
– the new associated contractor’s gas turbine was not suitable for the project and no other suitable turbine had been provided for the project;
– several chapters of the report were irrelevant for the project;
– no progress had been made in conducting research.
20 By email of 14 November 2001, the Commission informed the project coordinator that it was initiating the procedure for recovery of the advance of EUR 334 663. On 26 November 2001, the coordinator sent the Commission details of the costs which it had incurred and of how the advance had been distributed among the four contractors. As stated in paragraph 10 above, the amount paid by the project coordinator to Mr Gal-Or totalled EUR 205 611.
21 Mr Gal-Or initiated proceedings before the Rechtbank Arnhem (Arnhem District Court, Netherlands) against the Commission for payment of the amount of EUR 780 080, corresponding to the total expected contribution less the advance already paid. The Commission contested the jurisdiction of the Rechtbank Arnhem, on the ground that Article 7 of the General Conditions stated that the Court of First Instance of the European Communities (now ‘the General Court’) was the court having exclusive jurisdiction in respect of any dispute between the parties.
22 By judgments of 18 July and 5 September 2002, the Rechtbank Arnhem declined jurisdiction and ordered Mr Gal-Or to pay the costs which the Commission had incurred in those proceedings, in the amount of EUR 4 022.25. Mr Gal-Or lodged an appeal against that judgment with the Gerechtshof te Arnhem (Arnhem Court of Appeal). That court dismissed his appeal and ordered Mr Gal-Or to pay the costs incurred by the Commission in the appeal, in the amount of EUR 5 209.
23 By letter of 16 December 2002, the Commission informed Mr Gal-Or that it was initiating the procedure for recovery of the advance which had been paid to him by the project coordinator, namely EUR 205 611. In that regard, on 14 January 2003 Mr Gal-Or was sent a debit note, which set 1 March 2003 as the deadline for payment. On 26 January 2003, Mr Gal-Or sent that debit note back to the Commission with handwritten notes accusing the Commission and its collaborators of fraud and corruption. The Commission replied by letter of 10 March 2003, giving Mr Gal-Or formal notice to pay the amount requested. He replied by letter of 19 March 2003, claiming a minimum payment from the Commission in the amount of EUR 695 351 plus default interest for 44 months, damages and interest, legal costs and expenses. Following that letter, contact between Mr Gal-Or and the Commission ceased.
24 Furthermore, on 13 January 2003 Mr Gal-Or sent a letter to the Director General of the European Anti-Fraud Office (OLAF), in which he accused the Commission of fraud and other underhand machinations in the management of the project. He further claimed that he had properly performed all his obligations, both in relation to the work to be completed in the context of the project and in relation to the technical and financial reports which were to be submitted.
25 By letter of 26 February 2007, the Commission sent Mr Gal-Or a letter demanding that he repay, by 10 March 2007, the advance and the Commission’s costs relating to the proceedings in the Netherlands plus interest. The Commission indicated that that letter was also intended to interrupt the limitation period. Although Mr Gal-Or signed for receipt of the letter, he did not reply.
Procedure and forms of order sought by the Commission
26 By application lodged at the Registry of the Court on 7 April 2009, the Commission brought the present action.
27 Mr Gal-Or, having received notification of the application, did not lodge his defence within the prescribed period. On 30 July 2009, the Commission applied to the Court for judgment by default pursuant to Article 122(1) of the Rules of Procedure of the General Court. The Registry served that application on Mr Gal-Or.
28 The Court must, therefore, give judgment by default.
29 The Commission claims that the Court should:
– order Mr Gal-Or to reimburse it the amount of EUR 205 611 plus default interest calculated in accordance with Article 6:119 of the Burgerlijk Wetboek (Netherlands Civil Code; ‘the Civil Code’) for the period from 1 March 2003 until the date on which the Community has received full payment;
– order Mr Gal-Or to pay it default interest on the costs relating to the proceedings brought by him before the courts in the Netherlands, calculated in accordance with Article 6:119 of the Civil Code, on the amount of EUR 9 231.25 from 2 September 2003 or, in the alternative, from 10 March 2007, until the date on which the Community has received full payment;
– order Mr Gal-Or to pay the costs.
Law
Admissibility
30 Under Article 122(2) of the Rules of Procedure, before giving judgment by default the Court is to consider, inter alia, whether the application initiating proceedings is admissible.
31 In that regard, it must be borne in mind that the General Court may adjudicate at first instance on contractual disputes only where these are brought before it on the basis of an arbitration clause. Otherwise, it would be exercising jurisdiction beyond the limits placed by Article 240 EC on the disputes of which it may take cognisance, since that article specifically gives national courts or tribunals ordinary jurisdiction over disputes to which the European Union is a party (order in Case T-186/96 Mutual Aid Administration Services v Commission [1997] ECR II-1633, paragraph 47; order of 12 December 2005 in Case T-360/05 Natexis Banques Populaires v Robobat, not published in the ECR, paragraph 12; and order of 5 November 2008 in Joined Cases T-213/08 and T-213/08 AJ Marinova v Commission and Université Libre de Bruxelles, not published in the ECR, paragraph 13).
32 The jurisdiction of the Community courts to determine, on the basis of an arbitration clause, a dispute concerning a contract falls to be determined, according to the case-law, solely with regard to Article 238 EC and the terms of the arbitration clause itself (Case C-209/90 Commission v Feilhauer [1992] ECR I-2613, paragraph 13, and order of 17 February 2006 in Case T-449/04 Commission v Trends and Others, not published in the ECR, paragraph 29). That jurisdiction derogates from the ordinary rules of law and must therefore be given a restrictive interpretation (Case 426/85 Commission v Zoubek [1986] ECR 4057, paragraph 11).
33 In that regard, Article 7 of the General Conditions states:
‘The Court of First Instance of the European Communities, and in cases of appeal the Court of Justice of the European Communities, shall have exclusive jurisdiction in any dispute between the Commission and the Contractors concerning the validity, application and interpretation of this contract.’
34 In the present case, it is clear from the foregoing that the Commission’s claim for an order that Mr Gal-Or pay default interest on costs relating to proceedings which he brought before the Rechtbank Arnhem and the Gerechtshof te Arnhem does not come within the scope of Article 238 EC. That claim does not seek performance of the parties’ contractual obligations but, rather, seeks the enforcement of the judgments given by those courts. Accordingly, the debt on which the Commission is relying does not originate from its contractual relations with Mr Gal-Or, but only from those judgments.
35 It follows that the Court has no jurisdiction to rule on that claim.
36 As regards the other claims made by the Commission, as their admissibility is not in doubt and as the appropriate formalities have been duly complied with, it is for the Court, in accordance with Article 122(2) of the Rules of Procedure, to consider whether the Commission’s application appears well founded.
Substance
The reimbursement of the advance
– Commission’s arguments
37 The Commission claims that it was entitled to terminate the contract pursuant to Article 5.1 of the General Conditions, given that the new candidate associated contractor’s gas turbine was not suitable for the project.
38 The right to claim reimbursement of the advance payment is, according to the Commission, based primarily on Article 5.3(a)(i) in conjunction with the third paragraph of Article 5.4 of the General Conditions. In this case, the final technical and financial report did not comply with Articles 10 and 18 to 22 of the General Conditions, or with Part D of those General Conditions.
39 The Commission also relies on Article 23.1 of the General Conditions, which authorises it to demand reimbursement of the advance plus interest thereon if the project has not effectively commenced within three months of payment of that advance. The project had not made any progress.
40 In the alternative, the Commission claims that it has set aside the contract pursuant to Article 6:265(1) of the Civil Code, which provides that ‘[e]very failure by one of the parties in the performance of one of its obligations gives the other party the right to set aside the contract in whole or in part, unless that failure, on account of its special nature or minor significance, does not justify the setting aside of the contract and the consequences flowing therefrom.’
41 Under Article 6:267(1) of the Civil Code, a contract is set aside by way of a written declaration from the person entitled to set aside. The Commission considers that it did so by letter of 4 October 1999.
42 Mr Gal-Or is therefore required to reimburse the advance pursuant to Article 6:271 of the Civil Code, which provides that ‘[t]he setting aside releases the parties which it affects from their obligations. Where those obligations have already been performed, the legal basis for that performance remains intact, but the parties are thereafter required to undo the obligations already performed’. According to the Commission, the Community obligation which Mr Gal-Or had to undo was the payment of the advance. Conversely, as Mr Gal-Or had not performed any of his obligations, the Community was under no obligation to ‘undo’ those.
43 In the further alternative, the Commission claims damages and interest from Mr Gal-Or for his failure to perform the contract pursuant to Article 6:74 of the Civil Code, paragraph 1 of which provides that ‘[a]ny failure to perform an obligation requires the obligor to indemnify the loss caused to the obligee as a result of that non-performance, unless the non-performance is not attributable to the obligor’ and paragraph 2 of which provides, ‘[w]here it is established that performance is and remains impossible, paragraph 1 shall apply only subject to the provisions of section 2 on the default of obligors’.
44 The Commission paid an advance of EUR 205 611 to Mr Gal-Or for him to coordinate the project and ensure supervision of the research to be carried out under the contract. The Commission considers that Mr Gal-Or has failed to perform the contract, despite the notice of default which he received. The Community thus suffered loss which gives rise to an obligation of reparation.
– Findings of the Court
45 As a preliminary point, it should be borne in mind that disputes arising from the performance of a contract must be resolved, in general, on the basis of the contractual provisions (see, to that effect, Case T-68/99 Toditec v Commission [2001] ECR II-1443, paragraph 77, and Case T-29/02 GEF v Commission [2005] ECR II-835, paragraph 108).
46 Thus, interpreting the contract in the light of provisions of national law is justified only where there is doubt on the content of the contract or on the meaning of some of its provisions, or where the contract alone does not enable all aspects of the dispute to be resolved. Therefore, the assessment of the merits of the application must be carried out in the light of the contractual provisions alone and recourse must be had to the applicable national law, namely Netherlands law, only if those provisions do not enable the dispute to be resolved (see, to that effect, judgment of 12 July 2007 in Case T-312/05 Commission v Alexiadou, not published in the ECR, paragraph 29).
47 It is clear from the second paragraph of Annex 3 to the facsimile of 6 July 1999 from Mr Gal-Or to the Commission that, contrary to the aim of the project, which was to examine the possibility of upgrading old gas turbines, the turbine of the new candidate associated contractor, recommended by Mr Gal-Or, was actually a new type of turbine which was barely out of its development phase. That fact must, therefore, be regarded as substantially affecting the project, at the very least from a technical point of view. It therefore appears that the Commission was entitled to terminate the contract pursuant to Article 5.1 of the General Conditions.
48 In addition, it is apparent from the letter of 10 December 1999 sent by Mr Gal-Or to the Commission that he did not contest the termination of the contract or the reasons given by the Commission.
49 In relation to the right to reimbursement of the advance paid to Mr Gal-Or, it cannot be based on the third subparagraph of Article 5.4 of the General Conditions, contrary to what the Commission claims, inasmuch as that provision applies only where the contract is terminated under Article 5.3(a)(i). The contract was terminated pursuant to Article 5.1 of the General Conditions, as is clear from the Commission’s letter of 4 October 1999 to the contractors. In addition, the Commission itself claims in the application that it is relying on Article 5.1 of the General Conditions for termination of the contract.
50 However, the reimbursement of the advance may be claimed, as the Commission has also argued, under Article 23.1 of the General Conditions, as the application of that provision is not subject to the termination of the contract pursuant to a specific clause. It allows the Commission to require the reimbursement of the advance where the project has not effectively commenced within three months of the receipt of the advance by the contractors (see, to that effect, judgment of 8 July 2009 in Case T-182/08 Commission v Atlantic Energy, not published in the ECR, paragraph 65).
51 As the aim of the project was to examine the possibility of upgrading old gas turbines, concluding a contract with an associated contractor who would provide such a turbine was a prerequisite for the effective commencement of the project. It is apparent from the case-file that such a contract had not been concluded by 4 October 1999, that is to say, the date on which the Commission sent its letter terminating the contract. Accordingly, it appears to be established that the project had not effectively commenced 16 months after the advance was paid.
52 In that regard, it is apparent from Annex I to the contract, adopting the project’s work programme and the duration of its various phases (‘the work programme’), that the project consists, in essence, of three demonstrations and validations, entitled ‘DEMO 1’, ‘DEMO 2’ and ‘DEMO 3’, each one based on a different type of old gas turbine. The first phase of DEMO 1 is dedicated to the design of the three demonstrations and validations. That phase comprises, in turn, step 1.1 relating to coordination and management of the project, step 1.2 relating to the development of DEMO 1 with the first associated contractor and step 1.3 relating to the design of DEMO 2 and DEMO 3 with two other associated contractors. The failure to conclude a contract with the first contractor therefore seems to render the design and execution of DEMO 1 impossible. According to the project’s schedule, the performance of step 1.3 is provided for only after the completion of step 1.2. It follows that the designs for DEMO 2 and DEMO 3 also could not have been carried out. At the very least, it does not appear from the case-file that the tasks laid down in step 1.3 were ever carried out, or indeed started. Lastly, in accordance with the work programme, the tasks of coordination and management of the project under step 1.1 required the participation, and sometimes the collaboration, of the first associated contractor. Accordingly, it must be held that that step also could not have been carried out.
53 Any possible administrative, organisational or managerial actions which Mr Gal-Or may have taken are irrelevant to the issue whether Article 23.1 of the General Conditions is applicable in the present case. Apart from the fact that it is apparent from the Commission’s decision not to approve the final technical and financial report that it considered the project to be badly organised and confused, the taking of such actions could not actually have been categorised as effectively commencing the project, since that concept refers, by necessity, to a stage in the project by which real progress has been made in relation to the initial position (see, to that effect, Commission v Atlantic Energy, paragraph 60). The same goes for ‘tests at zero’ carried out by the project coordinator and intended to measure how an old gas turbine model functions normally.
54 Therefore, the fact that the decision not to approve the first periodic technical report from Mr Gal-Or was out of time, having regard to Article 10.3 of the General Conditions, cannot prevent the Court from finding that the project had not effectively commenced before the termination of the contract. In any event, it is not apparent from that report that a task coming within the first phase had been carried out.
55 The conditions for application of Article 23.1 of the General Conditions appear therefore to be met.
56 The fact that the Commission did not request reimbursement of the advance immediately after the three-month period following its payment, but only later, cannot invalidate the finding made in paragraph 55 above. First, neither the contract nor the General Conditions set a time-limit for requesting reimbursement. Second, the Commission does not lose its right to rely on Article 23.1 of the General Conditions on the sole ground that it had shown benevolence and good will by granting its contractors additional time to perform their obligations.
57 As regards the amount to be reimbursed, it must be noted that Article 23.3 of the General Conditions states, in essence, that, where the financial contribution paid to the project by the Commission exceeds the allowable costs borne by the contractors, the contractors must immediately reimburse the Commission for the difference. In addition, Article 5.4 of the General Conditions provides that, at the end of the contract, the Community contribution to the costs of the project are to be paid only if they relate to project deliverables which the Commission accepted or if they are other costs which are fair and reasonable.
58 It is necessary to examine whether Mr Gal-Or could have justified expenses eligible for Community financing. In that regard, it is apparent from the combined provisions of the first paragraph of Article 5.4, and Articles 5.6 and 23.3 of the General Conditions, that, in order to be able to retain the advances paid by the Commission, the contractors must present to it a final technical and financial report for approval.
59 Such a report was actually sent by Mr Gal-Or to the Commission on 17 February 2000, but the Commission did not accept it.
60 It is necessary to examine whether that refusal by the Commission was well founded.
61 The Commission argues that the new candidate associated contractor’s gas turbine was not suitable for the project and that another suitable gas turbine could not have been supplied, that there is no link between a number of chapters of the report and the project, and that no progress has been made in relation to the research work. On the other hand, it is apparent from the letter sent by Mr Gal-Or to the Director General of OLAF that he considered that he had performed all his obligations under the contract, both as regards the coordination and performance of research work and as regards the drafting of the final report.
62 In that regard, and without its being necessary to rule on the formal compliance of the final technical and financial report with the contractual requirements, it is apparent from the work programme that the deliverables for which Mr Gal-Or was responsible, in relation to the first phase of the project, were the intermediary and final reports on DEMO 1, and the design of DEMO 2 and DEMO 3. However, as is apparent from paragraphs 51 to 53 above, it appears that that phase of work clearly could not have been carried out, with the result that the possible reports which might relate to it are of no real use or value for the Commission. The mere drafting of a report concerning a task which has not been carried out cannot be regarded as the performance of any kind of obligation on the part of the person responsible for that task, including the obligation to draft a report.
63 It follows that the Commission is entitled to claim reimbursement of the total amount of the advance which it paid to Mr Gal-Or.
Interest
– Commission’s arguments
64 Relying on Article 6:119 of the Civil Code, the Commission considers that Mr Gal-Or should pay it default interest on the principal amount owing. That should be calculated from 1 March 2003, the deadline for reimbursement of the advance and at the rate published in the Staatsblad van het Koninkrijk der Nederlanden.
65 The Commission points out that Article 6:119 of the Civil Code provides that ‘[c]ompensation for damages due on account of a delay in the payment of a sum of money shall consist of statutory interest on that sum for the period in which the debtor has been in default of payment’, and that ‘[a]t the end of each year, the amount on which statutory interest is calculated shall be increased by the interest due over that year’.
66 The Commission adds that the rate of default interest is set down in the Staatsblad van het Koninkrijk der Nederlanden as follows:
– from 1 January 2002 to 31 July 2003: 7%;
– from 1 August 2003 to 31 January 2004: 5%;
– from 1 February 2004 to 31 December 2006: 4%;
– from 1 January 2007: 6%.
– Findings of the Court
67 As pointed out in paragraphs 45 and 46 above, the assessment of the merits of the application must be carried out in the light of the contractual provisions alone and recourse must be had to Netherlands law only if those provisions do not enable the dispute to be resolved. The present case may be resolved on the basis of the contractual provisions alone.
68 Article 23.1 of the General Conditions provides that, where the project has not effectively commenced within three months of receipt of the advance by the contractors, the Commission may demand not only reimbursement of the advance but also interest on the amount owing, at the monthly rate fixed by the European Monetary Institute (EMI).
69 Given that, under Article 123(2) EC, the EMI was abolished following the creation of the ECB, that is to say on 1 June 1998, and given that, where necessary, the ECB is to take over the tasks of the EMI, it must be held that Article 23.1 of the General Conditions refers, from that date, to the interest rates applied by the ECB to its capital financing operations in euro (see, to that effect, Case C-323/02 Commission v Hydrowatt [2003] ECR I-9071).
70 In relation to the date from which default interest is due, it is apparent from the case-file that the deadline for reimbursement of the advance was 1 March 2003. As Mr Gal-Or was under an obligation to reimburse that advance but did not do so, he is in default of payment since 2 March 2003.
71 The applicable interest rate was fixed by the ECB from 2 March 2003 as follows:
– 2.75% from 2 March 2003;
– 2.50% from 7 March 2003;
– 2.00% from 6 June 2003;
– 2.25% from 6 December 2005;
– 2.50% from 8 March 2006;
– 2.75% from 15 June 2006;
– 3.00% from 9 August 2006;
– 3.25% from 11 October 2006;
– 3.50% from 13 December 2006;
– 3.75% from 14 March 2007;
– 4.00% from 13 June 2007;
– 4.25% from 9 July 2008;
– 3.75% from 15 October 2008;
– 3.25% from 12 November 2008;
– 2.50% from 10 December 2008;
– 2.00% from 21 January 2009;
– 1.50% from 11 March 2009;
– 1.25% from 8 April 2009;
– 1.00% from 13 May 2009.
72 It follows that Mr Gal-Or must be ordered to pay to the Commission interest on the principal amount owing, calculated in accordance with Article 23.1 of the General Conditions.
Costs
73 Under Article 87(3) of the Rules of Procedure, where each party succeeds on some and fails on other heads, or where the circumstances are exceptional, the General Court may order that the costs be shared or that each party bear its own costs. In the present case, Mr Gal-Or must be ordered to pay all of the costs.
On those grounds,
THE GENERAL COURT (Seventh Chamber)
hereby:
1. Orders Mr Benjamin Gal-Or to pay to the European Commission the principal amount owing of EUR 205 611, together with interest at the rate of:
– 2.75% from 2 March 2003;
– 2.50% from 7 March 2003;
– 2.00% from 6 June 2003;
– 2.25% from 6 December 2005;
– 2.50% from 8 March 2006;
– 2.75% from 15 June 2006;
– 3.00% from 9 August 2006;
– 3.25% from 11 October 2006;
– 3.50% from 13 December 2006;
– 3.75% from 14 March 2007;
– 4.00% from 13 June 2007;
– 4.25% from 9 July 2008;
– 3.75% from 15 October 2008;
– 3.25% from 12 November 2008;
– 2.50% from 10 December 2008;
– 2.00% from 21 January 2009;
– 1.50% from 11 March 2009;
– 1.25% from 8 April 2009;
– 1.00% from 13 May 2009;
2. Dismisses the action as to the remainder;
3. Orders Mr Gal-Or to pay the costs.
|
Forwood |
Moavero Milanesi |
Schwarcz |
Delivered in open court in Luxembourg on 7 October 2010.
[Signatures]
* Language of the case: English.