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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Dover v Parliament (Law governing the institutions) [2011] EUECJ T-149/09 (24 March 2011)
URL: http://www.bailii.org/eu/cases/EUECJ/2011/T14909.html
Cite as: [2011] EUECJ T-149/09, [2011] EUECJ T-149/9
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JUDGMENT OF THE GENERAL COURT (Eighth Chamber)
24 March 2011 (*)
(Rules governing the payment of expenses and allowances to Members of the European Parliament – Review of the use of allowances – Parliamentary assistance allowance – Justification of expenditure – Recovery of undue payments)
In Case T-149/09,
Densmore Ronald Dover, former Member of the European Parliament, residing in Borehamwood, Hertfordshire (United Kingdom), represented by D. Vaughan QC, M. Lester, Barrister, and M. French, Solicitor,
applicant,
v
European Parliament, represented by H. Krück, D. Moore and M. Windisch, acting as Agents,
defendant,
APPLICATION for annulment of Decision D (2009) 4639 of the Secretary-General of the European Parliament of 29 January 2009 concerning the recovery of sums paid to the applicant by way of parliamentary allowances,
THE GENERAL COURT (Eighth Chamber),
composed of S. Papasavvas (Rapporteur), acting as President, N. Wahl and A. Dittrich, Judges,
Registrar: N. Rosner, Administrator,
having regard to the written procedure and further to the hearing on 11 May 2010,
gives the following
Judgment
Legal context
1 Article 13(1) of the Rules governing the payment of expenses and allowances to Members of the European Parliament (‘the PEAM Rules’) provides that:
‘Members shall be entitled to a monthly lump sum allowance at the rate currently fixed by the Bureau to meet expenditure resulting from their activities in their capacity as Members not covered by other allowances under these Rules (hereinafter referred to as the “general expenditure allowance”).
All payments under the general expenditure allowance shall be made directly to the Member concerned.
This allowance is intended to cover, inter alia, the following expenses incurred in the Member State of election:
– travel and ancillary expenses,
– office management and running costs, in particular rent and related charges (heating, lighting, insurance, cleaning),
– the cost of purchasing or renting office equipment,
– telephone and postage,
– the purchase of office supplies,
– the cost of purchasing books, periodicals and newspapers,
– the cost of using public data consultation networks,
– the expenses involved in equipping Members of Parliament with communications equipment …,
– the cost of a subscription to the Internet and to databases,
– the cost of purchasing, using or maintaining a telecopier.
The allowance may not be used to cover personal expenses or to finance subsidies or gifts of a political nature.’
2 Under Article 14(1) to (5) of the PEAM Rules, in the version in force in July 1999:
‘1. Subject to compliance with the provisions of paragraphs 2 and 3, Members shall be entitled to an allowance (hereinafter called the secretarial assistance allowance) to cover the expenses arising from the employment of or the engagement of the services of one or more assistants. …
2. All payments under the secretarial assistance allowance shall be paid directly on the Member’s personal instructions and on his responsibility either to the assistant or to a paying agent instructed by the Member to manage the Member’s secretarial assistance allowance. Only payments made by the Member in respect of his assistant in his capacity as employer may be reimbursed to him on production of duly receipted supporting documents: social security, taxes, pensions contributions, travel expenses or paying agent’s fees. …
3. Members shall submit to the Members’ Allowances Service a signed application for a secretarial assistance allowance, certifying that a contract has been duly concluded, in accordance with relevant national legislation, between the Member and an assistant. This contract is a private legal contract, and the European Parliament may under no circumstances be considered to be the employer or contractual partner of the assistant. The Member shall be required to comply with the relevant legal provisions, including tax and, where appropriate, social security provisions. …
4. The application shall at all events include the following information:
(a) the name of the Member and the name, address, nationality and the country, date and place of birth of the assistant;
(b) the length of the period of payment of the allowance, the amount(s) to be paid and the schedule for payment;
(c) the name and address of the bank(s) and the name(s) and number(s) of the bank account(s) to which the payments are to be transferred;
(d) the signature of the assistant confirming that the information relating to the contract concluded with the Member is correct and agreeing to all the terms laid down in the application.
5. The Member shall send the Members’ Allowances Service details of any changes to be made in respect of the application, and shall inform the assistant thereof. A new application must be submitted, however, for the continuation or renewal of the allowance. …’
3 Under Article 14(1) to (6) of the PEAM Rules, as amended by the decision of the Bureau of the Parliament of 13 December 2006:
‘[1] Members shall be entitled to the reimbursement of expenses arising from the employment or from the engagement of the services of one or more assistants in accordance with the conditions laid down in the Codex [for Parliamentary Assistants in the European Parliament]. Expenditure incurred in connection with traineeship agreements, as referred to in Part II of the Codex [for Parliamentary Assistants in the European Parliament] may also be reimbursed.
2 (a) To obtain reimbursement of parliamentary assistance expenses in accordance with paragraph 1, the Member shall submit an application for reimbursement accompanied by a copy of the employment contract concluded between the Member and an assistant, together with, where appropriate, a copy of the contract with a paying agent or a copy of the contract for the provision of services concluded between the Member and a service provider.
(b) Where, pursuant to Article 4 of the Codex [for Parliamentary Assistants in the European Parliament], several Members have jointly employed or engaged the services of a single assistant, a separate application shall be submitted by each Member, giving details of the amounts of all payments.
3. The application, signed and dated by the Member, shall be deposited with the management service and processed under the authority of the Quaestors. It shall include the following information:
– the attached contract(s) and the type of assistance concerned;
– the Member’s instructions as to the payments and identification of the beneficiary/beneficiaries.
4. The Member shall notify to the management service any changes to be made in respect of the application for reimbursement and/or to the contract by submitting an application for amendment. He or she shall inform the other contracting party (or parties) thereof.
5(a) In respect of employment contracts, the Member shall forward to the management service, within three months of the assistant taking up his or her duties, a certificate of the assistant’s membership of a social security scheme and, where the national law applicable so provides, a certificate of insurance covering accidents at work, failing which payments relating to the assistant concerned shall be suspended.
(b) In addition, the Member shall, for the period laid down by the applicable national legislation and for no less than one year after the end of the parliamentary term, keep a pay statement record book itemising sums paid by way of remuneration and tax and social security deductions (paid by the employee and the employer).
(c) Where the Member has contracted a paying agent to handle the administrative management of contracts, the paying agent shall forward to the Member, at least once a year, as well as on expiry of the contract, statements of the expenditure incurred in respect of salaries, social security contributions, tax payments or any other refundable expenditure. Copies of those statements drawn up in accordance with the professional standards laid down by the national law applicable shall be forwarded to the management service.
(d) Members may apply for all or part of the parliamentary assistance expenses to be paid to a political group in the European Parliament only if the latter acts as a paying agent within the meaning of subparagraph 5(c) and provided that an application for reimbursement has been submitted in accordance with paragraphs 2 and 3.
6(a) The service contract may provide for monthly payments being made as advance payments. The invoices or fee statements showing the provision of services and, where appropriate, regularising the advance payments made and determining any outstanding balance, shall be drawn up, in accordance with the national law applicable, for a period not exceeding 12 months. The Member shall keep the invoices or fee statements for the period laid down by the applicable national legislation and for no less than one year after the end of the parliamentary term.
(b) The service provider shall forward to the Member at least once a year, as well as on expiry of the contract, a statement of the amounts invoiced, accompanied by a declaration certifying that all tax and social security obligations resulting from the applicable national legislation are complied with. The Member shall forward a copy of the statement and the accompanying declaration to the management service, authorising the regularisation of the advance payments made.’
4 Under Article 15(1) of the PEAM Rules, in the version in force in July 1999:
‘The maximum amount of the secretarial assistance allowance shall be at the rate currently fixed by the Bureau.’
5 Under Article 15(1) of the PEAM Rules, as amended by the decision of the Bureau of the Parliament of 13 December 2004:
‘The maximum amount of the secretarial assistance allowance shall be fixed annually by the Bureau.’
6 Article 27(3) and (4) of the PEAM Rules, in the version in force since 12 February 2003, provides:
‘3. Where the Secretary-General, in consultation with the Quaestors, is satisfied that undue sums have been paid by way of allowances provided for Members by these Rules, he shall give instructions for the recovery of such sums from the Member concerned.
4. In exceptional cases, and on a proposal submitted by the Secretary General after consulting the Quaestors, the Bureau may, in accordance with Article 73 of the Financial Regulation and its implementing rules, instruct the Secretary-General temporarily to suspend the payment of parliamentary allowances until the Member has repaid the sums improperly used.
The Bureau’s decision shall be taken with due regard for the effective exercise of the Member’s duties and the proper functioning of the Institution, the views of the Member concerned having been heard before the adoption of the said decision.’
Background to the case
7 The applicant, Mr Densmore Ronald Dover, a British national, was a Member of the European Parliament from July 1999 to June 2009.
8 On 15 July 1999, the applicant entered into a parliamentary assistance agreement with MP Holdings Ltd. That company was set up in Hertfordshire (United Kingdom) in 1991 by the applicant and his wife, who were directors of the company. According to the applicant, the object of the company was transportation surveying and the retail sale of sports goods.
9 When the applicant was elected as a Member of the Parliament he resigned his directorship in MP Holdings, which he had held since 1991, and transferred all his shares to his wife and daughter, who became directors of that company.
10 Under the contract of 15 July 1999, MP Holdings acted as paying agent pursuant to Article 14(2) of the PEAM Rules, as in force at that time. The parties to that contract terminated it on 31 December 2000 and entered into a new contract with effect from 1 January 2001, which was renewed on 28 June 2004, following the applicant’s re-election to the Parliament. Under the latter two contracts, MP Holdings was no longer a party as a paying agent but as a provider of parliamentary assistance services. Those contracts, governed by English law, were based on the standard contracts prepared by the Parliament’s services for use by Members, and were required to be attached to applications for reimbursement, with effect from 1 January 2001, under the amendments to Article 14 of the PEAM Rules.
11 Following his election to the Parliament, the applicant submitted, under Article 14(2) of the PEAM Rules, applications for reimbursement of the parliamentary assistance expenses incurred by MP Holdings. Those applications resulted in the monthly reimbursement of the relevant expenses.
12 By letter of 20 December 2006, the President of the College of Quaestors asked the applicant to indicate the reasons why his contractual link with MP Holdings was not characterised by a conflict of interests.
13 By e-mail of 29 March 2007, the applicant explained, inter alia, that he had no interest in MP Holdings.
14 By letter of 6 June 2008, the Secretary-General of the Parliament asked the applicant to state whether he or one of his first-degree relatives owned or had owned MP Holdings since 1999, whether any of those persons participated or had participated during that period on the board of directors of that company, whether any of those persons had or had had access to the bank accounts of that company and, finally, whether any of those persons had or had had any other personal interest in that company.
15 In the event of a reply in the affirmative to any of those questions, the Secretary-General asked the applicant to provide documents showing that the sums paid to MP Holdings were used solely to cover parliamentary assistance expenses incurred. The Secretary-General also informed the applicant that, in the event of failure to demonstrate that fact, the sums in question might be recovered. Moreover, the applicant was informed that the competent services of the Parliament had been instructed to suspend all payments to MP Holdings.
16 At a meeting held on 25 June 2008 with the Head of Cabinet of the Secretary-General of the Parliament, the applicant submitted to the Parliament’s services a set of documents relating to the use of the parliamentary assistance allowance.
17 By letter of 14 October 2008, the Secretary-General acknowledged receipt of those documents and set out the relevant findings of the Parliament’s services.
18 Those findings were as follows: first, there was no clear distinction between the expenses of MP Holdings, on the one hand, and the personal expenses of the applicant and his family, on the other hand. Secondly, the applicant and his wife and daughter were financially involved in MP Holdings in ways which could not be defined with precision on the basis of the documentation provided by the applicant. Thirdly, according to the documentation which the Parliament’s services had received, some categories of expenditure should not have been covered by the parliamentary assistance allowance. Fourthly, certain expenses were not sufficiently substantiated by supporting documents. Fifthly, there were a number of inconsistencies in MP Holdings’ accounts. Sixthly, the Parliament’s services received no explanation of the failure to invoice value added tax (VAT) for the parliamentary assistance services provided to the applicant by MP Holdings, despite the fact that, in respect of other transactions, MP Holdings was liable to VAT.
19 In conclusion, the Secretary-General observed that it was very difficult, if not impossible, to determine on the basis of the documents presented by the applicant whether the amounts paid by the Parliament had been spent in compliance with the PEAM Rules. Those documents did not contain adequate justification for all the sums in question.
20 Thus, of the GBP 959 446.48 which MP Holdings had received by way of parliamentary assistance allowances for the period from August 1999 to June 2008, only GBP 421 156 could be considered to be properly justified in terms of miscellaneous emoluments, social security contributions and travel allowances paid to the applicant’s wife and daughter.
21 The Secretary-General made it clear that, if additional justification of the difference between those two amounts, namely GBP 538 290.48, GBP 538 290 in round figures, were not produced by 31 October 2008, he would inform the European Anti-Fraud Office (OLAF) and would initiate the recovery procedure laid down in Article 27(3) of the PEAM Rules.
22 By letter of 15 October 2008, the applicant informed the Secretary-General that he would endeavour to justify all the sums in question, that he had terminated the contract he had with MP Holdings with effect from 14 October 2008 and that he agreed to repay the sum of GBP 36 012.53.
23 By letter of 24 October 2008, the Secretary-General welcomed the applicant’s willingness to repay the sum of GBP 36 012.53 but reminded him that, in the absence of appropriate responses to all the questions raised in the letter of 14 October 2008 (see paragraphs 17 to 21 above), he would initiate the recovery procedure under Article 27(3) of the PEAM Rules and submit the case to OLAF.
24 By letter of 28 October 2008, the applicant informed the Secretary-General that he had, on the previous day, provided certain documents to his Head of Cabinet and that he was willing to repay the Parliament the sum of GBP 104 894.67.
25 By letter of 5 November 2008, the Secretary-General raised doubts as to the applicant’s use of cars for the purposes of his parliamentary duties. He also noted that certain expenditure should have been covered by the general expenditure allowance in accordance with Article 13 of the PEAM Rules and made further comments concerning the costs of sending information material and of travel, as well as the failure of MP Holdings to invoice VAT. The Secretary-General concluded that, in those circumstances, he was still obliged to request the repayment of GBP 538 290, as stated in his letter of 14 October 2008 (see paragraphs 17 to 21 above).
26 By letter of 8 November 2008, the applicant referred to a meeting with the Secretary-General’s Head of Cabinet on 5 November and confirmed his intention expressed at that meeting to repay the amount of GBP 538 290 before the end of the then current parliamentary term in full and final settlement.
27 By letter of 11 November 2008, the Secretary-General, in his capacity as the Parliament’s Principal Authorising Officer sent the applicant a debit note, within the meaning of Article 78(3) of Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities (OJ 2002 L 357, p. 1), in the sum of GBP 538 290. That sum was to be repaid no later than 13 July 2009, the date of the end of the applicant’s mandate, and could also be partially offset against certain claims which the applicant retained vis-à-vis the Parliament. Finally, the Secretary-General informed the applicant that he would forward that letter and supporting evidence to OLAF.
28 By letter of 19 November 2008, the applicant informed the Secretary-General of the withdrawal of his agreement to pay GBP 538 290 for two reasons. First, the Secretary-General had informed OLAF and, secondly, the confidentiality of the case had been broken and the British press had published reports of the matter.
29 On 3 December 2008 the applicant submitted to the Parliament an application for reimbursement of parliamentary assistance expenses based on parliamentary assistance contracts which he had signed directly with his wife and his daughter. Under that application, the payments would be made to a chartered accountant acting as paying agent.
30 By letter of 23 December 2008, the applicant made a number of comments on the procedure and on the substance of the case.
31 By a note dated 14 January 2009, the Secretary-General informed the Quaestors and proposed the application of the procedure provided for by Article 27(3) of the PEAM Rules. To that end, the Secretary-General attached a draft decision to that note. In addition, the Secretary-General sought the Quaestors’ opinion on the application of Article 27(4) of the PEAM Rules in the present case.
The contested decision
32 By letter of 30 January 2009, the Secretary-General notified the applicant of a decision dated 29 January 2009 (‘the contested decision’). Under the contested decision, the Secretary-General decided, in particular, that the amount of GBP 538 290 had been unduly paid to the applicant and that the authorising officer by delegation was to take all necessary steps to recover that sum. In addition, the Secretary-General stated that the contested decision might be reviewed in the light of any new evidence submitted by the applicant or gathered by OLAF and any decision of a national judicial or tax authority.
33 A new debit note was attached to the letter of 30 January 2009, replacing the debit note of 11 November 2008 (see paragraph 27 above) and asking the applicant to repay the sum in question by 25 April 2009.
34 According to the fifth and sixth citations in the preamble to the contested decision, the Secretary-General held a hearing with the applicant and consulted the Quaestors on 9 October 2008 and 14 January 2009 respectively.
35 According to recitals 17 to 23 in the preamble to the contested decision, the parliamentary assistance allowance is exclusively intended to pay expenses resulting from parliamentary assistance contracts and must not therefore be misused so as to amount to disguised remuneration of the recipient Member. Any sum paid by way of parliamentary assistance allowance but used for purposes not covered by Article 14 of the PEAM Rules must therefore be considered to have been unduly paid and should therefore be recovered.
36 In that regard, recital 24 in the preamble to the contested decision states that the parliamentary assistance allowance provided for in Article 14 of the PEAM Rules does not cover the purchase or maintenance of movable property, such as cars used for private purposes, equipment intended for the office in the Member’s country of origin, or communication costs. Moreover, the allowance in question does not cover the purchase, rent or renovation of immovable property belonging to or used by a Member, or subsistence costs for travel, or expenses for the production and dispatch of information material. Also excluded from that allowance are donations to a political party and entertainment expenses. Most of those cost categories are, however, covered by other parliamentary allowances.
37 In the light of those considerations, recital 25 in the preamble to the contested decision states that the following sums had been unduly paid, at the very least, under the terms of Article 14 of the PEAM Rules:
– GBP 101 068 in respect of expenses for running three cars;
– GBP 15 404 in respect of expenses for the purchase and maintenance of office supplies and equipment;
– GBP 89 235 in respect of printing, postage and stationery costs;
– GBP 100 735 in respect of the rental costs and costs of renovation work to the property of the applicant used as his office space;
– GBP 200 in respect of donations made to the UK Conservative party;
– GBP 17 880 in respect of the applicant’s entertainment expenses;
– GBP 20 767 in respect of the applicant’s telephone expenses.
38 According to recital 26 in the preamble to the contested decision, those examples of undue payments illustrate continuing misuse of monies paid by the Parliament since 1999. Consequently, the Parliament should recover all sums which have not been duly justified by the applicant as having been used for the proper purposes of Article 14 of the PEAM Rules.
39 Recitals 27 to 33 in the preamble to the contested decision deal with the question of the invoicing of VAT by MP Holdings in respect of services provided to the applicant and with the subsequent payment of that VAT to the United Kingdom tax authority.
40 In that regard, recital 29 in the preamble to the contested decision refers to the applicant’s letter of 24 October 2008, in which he stated that MP Holdings had never issued invoices for the services it had provided and that, by those means, the imposition of value added tax had been avoided. That situation was a breach of both Community law on VAT and Article 14 of the PEAM Rules, which required invoices to be issued.
41 In those circumstances, according to recital 31 in the preamble to the contested decision, the Parliament should decline to recover such sums paid to a provider of parliamentary assistance services by way of VAT in respect of those services only where the Member concerned provides evidence that the company has paid the national authority the sums due in accordance with the applicable legislation. It follows, according to recital 32 in the preamble to the contested decision, that all sums which ought to have been paid by MP Holdings to the United Kingdom authorities from August 1999 to June 2008 must be recovered.
42 The total amount to be recovered, on the basis of a VAT rate of 17.5% applied to the total of GBP 959 446.48, is GBP 167 903.13 (recital 33 in the preamble to the contested decision).
43 Moreover, according to recitals 34 to 39 in the preamble to the contested decision, the circumstances underlying the payment of the parliamentary assistance allowance must not be characterised by conflicts of interest, such as might arise where the Member concerned concludes contractual relations with entities in which he has a financial or other interest.
44 Conflicts of interest may be observed where members of the Member’s family are on the board of a provider of parliamentary assistance services, where the offices of that provider are situated in a property owned by the Member, for the use of which the provider pays costs, or even where the Member concerned lends sums of money to that provider which are reimbursed using the amounts received by way of parliamentary assistance allowance.
45 It is clear from the documents reviewed by the Parliament’s services that the applicant still made loans to MP Holdings, even after he ceased to be a director of that company, and that a large number of invoices issued in the name of the applicant or members of his family were paid by MP Holdings and vice versa (recitals 42 and 43 in the preamble to the contested decision).
46 It is also stated in the contested decision that the two premises used by MP Holdings are moreover the property of the applicant and his family members and part of the related costs is attributed to MP Holdings each year on a lump-sum basis using a system of loans, while some repairs to the premises have also been paid for by the company. Finally, the statements for the credit cards used by the applicant’s wife and daughter for the payment of the expenses of MP Holdings are in the name of the applicant (recitals 44 and 45 in the preamble to the contested decision).
47 On the basis of the above considerations, it was concluded that the applicant had not provided adequate justification for all the amounts received by MP Holdings by way of parliamentary assistance allowance. In particular, the applicant had produced evidence justifying the use of GBP 421 156 for the purposes of parliamentary assistance, but GBP 538 290 had to be refunded to the Parliament on the three grounds identified in paragraphs 36 to 38, 39 to 42 and 43 to 46 above respectively (recitals 48 to 53 in the preamble to the contested decision).
48 Thus, according to the operative part of the contested decision, the amount of GBP 538 290 was unduly paid to the applicant and the authorising officer by delegation of the Parliament is instructed to take all necessary steps to recover the sum from the applicant. It is also stated that the Parliament reserves the right to review the contested decision if new evidence is submitted to it by the applicant, by OLAF or by any other national judicial or tax authority.
Facts subsequent to the contested decision
49 By letter of 5 February 2009, the Secretary-General informed the applicant of his decision to initiate the procedure under Article 27(4) of the PEAM Rules, under which the recovery of the amount of GBP 538 290 may also be effected by offsetting against certain sums payable to the applicant by the Parliament.
50 That procedure resulted in a decision of the Secretary-General dated 28 April 2009, under which he decided to recover the sums due to the Parliament by offsetting them against certain sums payable to the applicant by the Parliament.
Procedure and forms of order sought
51 By application lodged at the Court Registry on 10 April 2009, the applicant brought the present action.
52 By letter of 25 June 2009, the Parliament, in accordance with Article 114(1) of the Rules of Procedure of the Court, applied for the removal from the file of two documents produced by the applicant and annexed to his application, namely an opinion of the Parliament’s Legal Service dated 25 April 2006 and an internal audit report dated 9 January 2008.
53 By order of 9 October 2009, the Court decided to remove the opinion of the Parliament’s Legal Service from the file and reserved a decision on the removal of the internal report for the final judgment.
54 On hearing the report of the Judge-Rapporteur, the Court decided to open the oral procedure and, by way of measures of organisation of procedure provided for in Article 64 of the Rules of Procedure, to put a question to the parties, to which the parties responded within the time-limit specified.
55 The parties submitted their oral argument and their answers to questions put by the Court at the hearing on 11 May 2010.
56 The applicant claims that the Court should:
– annul the contested decision;
– ask the Parliament, within the framework of measures of organisation of procedure, to produce a number of documents;
– order the Parliament to pay the costs.
57 The Parliament contends that the Court should:
– dismiss the application as inadmissible or unfounded;
– order the applicant to pay the costs.
Law
1. The application for removal of the internal audit report from the file
Arguments of the parties
58 The Parliament maintains that internal audit report No 6/02 of 9 January 2008, produced by the applicant in Annex A.11 to the application (‘the contested report’), should be removed from the file since its disclosure and production were not authorised by the Parliament and the applicant obtained it without the Parliament’s prior authorisation.
59 The applicant disputes the Parliament’s contentions, claiming that the contested report was widely available on the internet and in the press and that he obtained it perfectly properly. He objects to the removal of that document from the file in view of its relevance for the outcome of the case.
Findings of the Court
60 As a preliminary, it should be noted that the Parliament’s application is based on two grounds: first, the internal and confidential nature of the contested report and second, the allegedly improper means by which that report was obtained.
61 It must be observed in that connection that neither the fact that the documents in question may be confidential nor the fact that they may have been obtained improperly precludes their remaining in the file. First, there is no provision that expressly prohibits evidence obtained unlawfully from being taken into account (Case T-48/05 Franchet and Byk v Commission [2008] ECR II-1585, paragraphs 74 and 75).
62 Second, the Court of Justice has not excluded the possibility that even internal documents may, in certain cases, be lawfully placed in a case-file (orders of 19 March 1985 in Case 232/84 Tordeur and Others (not published in the ECR), paragraph 8, and of 15 October 1986 in Case 31/86 LAISA v Council (not published in the ECR), paragraph 5).
63 It must be held that, in the particular context of the present case, since the contested report was relied on in support of the pleas concerning misapplication by the Parliament of Article 14 of the PEAM Rules and the sums reclaimed in respect of VAT, it should remain in the file (see, to that effect, Franchet and Byk v Commission, paragraph 61 above, paragraph 79).
64 Hence, the Parliament’s application for removal of that report must be rejected.
2. Substance
65 The applicant puts forward five pleas, alleging in essence: (i) misapplication of Article 14 of the PEAM Rules, (ii) inapplicability of the concept of conflict of interests, (iii) infringement of Article 27 of the PEAM Rules, (iv) infringement of the rules on VAT and (v) infringement, through the decision to refer the case to OLAF, of Article 7 of Regulation (EC) No 1073/1999 of the European Parliament and of the Council of 25 May 1999 concerning investigations conducted by OLAF (OJ 1999 L 136, p. 1).
First plea: misapplication of Article 14 of the PEAM Rules
Arguments of the parties
66 The applicant claims that the total amount for which repayment is claimed has not been calculated in a way that enables him to identify the specific sums said to have been paid unduly. In particular, the contested decision contains only a list of examples of expenditure which are stated not to have been duly justified. The amounts included in that list do not add up to the total amount reclaimed by the Parliament, even when the amount reclaimed as VAT is added to it. Moreover, the method of calculating the amounts allegedly owed is different from that used to calculate VAT.
67 According to the applicant, the Parliament must at the outset set out precisely every item of expenditure which it considers to be unjustified and state the reasons, with supporting documents if appropriate, for its assessment that the associated payments were made unduly, in order to enable the applicant properly to defend himself and the Court to exercise its power of review as to the legality of the contested decision.
68 Furthermore, the requirement to provide supporting documents for each item of expenditure since 1999 did not exist when the relevant expenses were incurred. Imposing such a requirement on the applicant retroactively is contrary to the principles of legality, legal certainty, non-retroactivity and proportionality, given the consequences which follow from the contested decision. According to the applicant, neither domestic law nor Community law requires the applicant to keep documentary evidence for such a long period.
69 Thus, as regards the burden of proof, the applicant considers that he is obliged to provide the Parliament with the information which is required under the PEAM Rules in order to receive the parliamentary assistance allowance at the time when the relevant claim is made. Accordingly, it is unacceptable to rely on an ex post power of review in order to recover sums paid in a manner consistent with the requirements in force at the time when the relevant claims were made.
70 The applicant adds that the Parliament has never implemented a transparent system setting out clear preconditions for reimbursement of parliamentary assistance expenditure nor has it required Members to produce documentary evidence of their parliamentary assistance expenditure. Moreover, the amendments made to the system over the years have not been consistently applied by the Parliament. Those circumstances have given rise to criticism from the Court of Auditors of the European Union. To penalise the applicant for not complying with requirements which were neither provided for nor applied at the material time is contrary to the principles of legal certainty and transparency. Furthermore, the Parliament was aware that the applicant’s wife and daughter held managerial positions in MP Holdings and also knew the nature of the expenses for which reimbursement was being claimed pursuant to Article 14 of the PEAM Rules, and never questioned the justification for the claims for reimbursement.
71 What is more, the applicant complied with the requirements in force at the time when the expenditure was incurred. Between 1999 and 2004, the applicant signed an agreement with MP Holdings and submitted claims for reimbursement in accordance with the applicable rules. From 1999 onwards, MP Holdings kept detailed accounts in accordance with accounting procedures applied by a chartered accountant and auditor, and each year the accounts were returned to Companies House. From 2004 onwards, the applicant provided the Parliament with fee statements and declarations certifying that all tax and social security obligations resulting from the applicable national legislation had been complied with. The applicant also submitted cost statements and statements of the amounts invoiced for all periods as required by the Parliament in the context of the regularisation process for expenditure.
72 In addition, the Parliament does not dispute that the requirement to justify every item of parliamentary assistance expenditure is not a precondition that was imposed on the Member concerned for receiving the allowance in question. Nor does the Parliament dispute that Members are not required to keep the relevant documentary evidence indefinitely.
73 If the Parliament considered that the documentation submitted was inadequate, it should have asked the applicant for additional evidence instead of unconditionally meeting all the claims for reimbursement submitted by the applicant. The Parliament’s conduct therefore adversely affects the applicant’s legitimate expectations concerning the regularity of the expenditure in question.
74 Even though the applicant could not provide documentary evidence for all the expenditure incurred, which is not in the least surprising, that fact does not demonstrate a consistent misuse of funds or that any amount not justified must be repaid, when the applicant has never been required to supplement the documentation which he had submitted.
75 Nor can the applicant be criticised for claiming reimbursement of certain sums under Article 14 of the PEAM Rules rather than under Article 13 of those rules since, according to the guidance given by the Parliament, the latter article is intended to cover expenses not covered by other provisions of those rules. In any event, the PEAM Rules are not clear regarding the appropriate legal basis for the reimbursement of expenses.
76 With regard to the examples of expenditure cited in the contested decision (see paragraph 37 above), the applicant provided evidence demonstrating that the costs relating to cars were incurred by MP Holdings exclusively for the purpose of providing parliamentary assistance services and that, therefore, they were properly reimbursed under Article 14 of the PEAM Rules, while the applicant’s personal expenses were also properly reimbursed under Article 13 of those rules. The third car identified by the Parliament was used for private purposes and no expenses were claimed in connection with it.
77 The applicant moreover produced evidence demonstrating that all the expenditure identified by the Parliament related solely to his parliamentary activities. Thus, of the two offices belonging to the applicant, one functioned as a constituency office, the costs of which were reimbursed under Article 13 of the PEAM Rules, and the other as the registered office of MP Holdings, the costs of which were reimbursed under Article 14 of those rules. Similarly, the printing, postage and stationery costs related to the applicant’s constituency office were reimbursed under Article 13 of the PEAM Rules, while the equivalent costs relating to the registered office of MP Holdings were reimbursed under Article 14 of those rules. The entertainment costs related moreover to subsistence for the applicant’s assistants while travelling in the course of their duties.
78 The applicant disputes that the concept of parliamentary assistance can be interpreted by the Parliament so restrictively as to exclude a range of services from it, and that this can be done retroactively.
79 Furthermore, the fact that the procedure initiated against the applicant is not criminal but administrative should not result in unjustified and disproportionate restrictions on his right to property, which is at stake where a decision imposes such significant obligations on him.
80 The Parliament contends, first of all, that the central question in this dispute is whether the applicant used the allowances received under Article 14 of the PEAM Rules for purposes other than those covered by that article. The contested decision is not based on the rules concerning the documentation which must be submitted by Members in order to receive the appropriate amounts in respect of parliamentary assistance allowance, but solely on the rules relating to checks on the use of those amounts which the Parliament may conduct ex post, in accordance with Article 27(3) of the PEAM Rules. It cannot be accepted that the Parliament does not have the right to verify the use of the sums paid by way of parliamentary assistance allowance solely because the Member concerned attached to his application the supporting documents required in order to receive that allowance. Article 14 of the PEAM Rules must therefore be interpreted in the light of its wording, its context and its purpose.
81 Despite the many changes to that provision since 1999, of which the Members were clearly informed, its purpose, consisting exclusively in the payment of the precise costs actually incurred by Members in employing or engaging the services of parliamentary assistants, remains unchanged. In those circumstances, the applicant’s claims that the Parliament is attempting to apply a new interpretation retroactively must be dismissed.
82 Unlike other provisions of the PEAM Rules, Article 14 of those rules does not provide for the payment to Members of a lump sum which they are free to dispose of as they see fit. It is Article 13 of the PEAM Rules which provides for the monthly payment of a lump sum to be used to cover running costs, which are very different in nature from the expenditure covered by the parliamentary assistance allowance.
83 Payments under Article 14 of the PEAM Rules are made to the assistants, possibly via a paying agent, on the responsibility of the Member concerned. The allowances in question may not, under any circumstances, constitute disguised remuneration of Members or be used to acquire, maintain or renovate their own personal property. Thus all the applicant’s claims that Article 14 of the PEAM Rules confers a property right on him are without foundation.
84 It also follows from the above considerations that any sum paid under Article 14 of the PEAM Rules and used for a purpose not covered by that provision must be considered to have been unduly paid and should therefore be recovered.
85 As regards the applicant’s first argument, namely that the contested decision does not contain any reasoning covering the total sum of GBP 538 290 (see paragraphs 66 and 67 above), the Parliament points out that the examples cited in the contested decision (see paragraph 37 above) amount to 64% of that sum, a fact which demonstrates a significant and consistent misuse of funds justifying further investigations.
86 If account is taken, first, of the fact that the total sum of GBP 538 290 is being reclaimed from the applicant on three inter-related grounds (see paragraphs 36 to 38, 39 to 42 and 43 to 46 above, respectively) and, secondly, of the fact that the Parliament assessed the amounts duly paid at GBP 421 156, it should be concluded that the Parliament acted in accordance with the rules governing the calculation of the sum to be recovered. Moreover, account should also be taken of the fact that the applicant had an obligation to provide the Parliament with any documentation demonstrating that the funds paid had been used in accordance with Article 14 of the PEAM Rules. It follows that the applicant’s argument based on failure to state adequate reasons for the contested decision does not take into account all the explanations contained therein and should therefore be rejected. At the hearing the Parliament contended that reference should also be made to the part of the contested decision relating to conflict of interest in order to discern the reasoning for all the amounts reclaimed.
87 As regards the length of the period involved in the enquiry in question, the Parliament observes that the applicant was able to provide evidence dating back to March 2000. He therefore had no difficulty providing such old documentation. The problem, in this case, lies in the fact that the documentation provided shows that the use of the funds does not comply with the objectives of Article 14 of the PEAM Rules. The applicant is therefore wrong to claim that the Parliament retroactively imposed on him onerous requirements in order for him to be granted the parliamentary assistance allowance. In fact the Parliament merely carried out its task of ex post control of the use of that allowance.
88 With regard to the criticisms expressed by the Court of Auditors, the Parliament states that that complaint is ineffective since the Court of Auditors criticised the provisions concerning the documents which Members are required to produce in order to receive the parliamentary assistance allowance and not those concerning the ex post controls conducted by the Parliament. Following the same line of reasoning, the Parliament rejects the applicant’s claims that it never required documentary evidence of the use of the sums paid by way of parliamentary assistance allowance. The applicant refers once again to the documents required in order to obtain that allowance and not to those required in monitoring its use. The same is true of the applicant’s claims, first, that he complied with the requirements laid down by the PEAM Rules throughout the period concerned and, secondly, that the Parliament accepted at the time the allowance was granted that all the relevant requirements had been met. In any event, the Parliament observes that the first of those claims does not correspond to the facts.
89 The Parliament adds that the contested decision is based on documents which the applicant himself provided and on which he had ample opportunity to comment.
90 As regards the applicant’s arguments against the examples cited in the contested decision, the Parliament points out that the applicant had himself admitted that some of the amounts paid to MP Holdings had been used to pay for travel expenses of persons who did not work for that company. The applicant also stated that he used cars owned by MP Holdings himself. It is, moreover, highly suspect to claim that MP Holdings, which employed only two people, one of whom only part-time, used three cars for its own account, and only for professional purposes. In any event, Article 14 of the PEAM Rules does not cover the costs of cars used by the Member or members of his family for private purposes.
91 As for the expenditure relating to office supplies and equipment, the Parliament points out that the offices in question were owned by the applicant and members of his family, which blurs the distinction between the expenditure of the office of the applicant, covered by Article 13 of the PEAM Rules, and of the office of MP Holdings. The applicant also stated during the administrative procedure that funds paid to MP Holdings were intended to cover the expenditure of both offices. In any event, even if the costs of the applicant’s offices were incurred for the purposes of his assistants, they would not be covered by Article 14 of the PEAM Rules.
92 With regard to the costs of printing, postage, stationery, renting and renovating a property and telephone costs, the Parliament points out that they are covered by Article 13 of the PEAM Rules, and the limit imposed by that provision was circumvented by the applicant in this case.
93 As regards the entertainment costs, the Parliament states that they relate to events hosted by the applicant for third parties and therefore cannot be regarded as subsistence costs for the applicant or his assistants.
94 All of the costs in question here clearly relate to the acquisition and maintenance of movable and immovable property and not to the employment or the engagement of the services of parliamentary assistants, and as such clearly fall outside the scope of Article 14 of the PEAM Rules.
95 Moreover, the applicant is wrong to claim that Members were not required to file with the Parliament’s administration copies of parliamentary assistance contracts, for that requirement had applied since January 2001.
96 The statements of amounts invoiced to which the applicant refers (see paragraph 71 above) were produced by him in 2008, following a request from the Parliament. In fact, under the change to the rules on the justification of expenditure which occurred in 2006, Members were allowed to regularise their expenses for 2004 and 2005 by producing such statements instead of the invoices or salary statements which were required before.
Findings of the Court
– The statement of reasons for the contested decision
97 In his arguments concerning the application of Article 14 of the PEAM Rules, the applicant raises, first, a complaint alleging failure to state the reasons on which the contested decision was based, since the total sum which is being reclaimed has not been calculated in a way that enables the applicant to identify precisely which items of expenditure are said to have been paid unduly. The amounts included in the list of examples given in the contested decision do not add up to the total amount reclaimed by the Parliament, even when the amount reclaimed as VAT is added to it. Furthermore, the method of calculating the amounts allegedly owed is different from that used to calculate VAT.
98 In that regard, the statement of reasons required by Article 253 EC must be appropriate to the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent Court to exercise its power of review. The requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (Case T-268/06 Olympiaki Aeroporia Ypiresies v Commission [2008] ECR II-1091, paragraph 79).
99 Therefore, although it is incumbent on the Member to prove, with the help of supporting documents, that he has used the sums he has received by way of parliamentary assistance allowance in accordance with the PEAM Rules, it is still necessary for the statement of reasons for a decision declaring that certain sums paid in that respect have not been used for purposes complying with those rules to give the reasons why, according to the institution which adopted the measure, the supporting documents produced by the Member in question do not prove that the sums received have been properly used. Consequently, where the contested decision finds that a total amount covering a number of different items must be recovered, and there are particular reasons why each of those items is incompatible with the PEAM Rules, the sum of those items must be equal to the total amount in respect of which recovery is sought. If this were not so it would be tantamount to allowing the Parliament to seek repayment of amounts without explaining why such amounts need to be repaid.
100 It should also be noted that a decision of that nature may be considered to contain sufficient reasons where it makes express reference to an audit report notified to the applicant (Case T-146/04 Gorostiaga Atxalandabaso v Parliament [2005] II-5989, paragraph 135).
101 In the present case, it should be noted, first of all, that, according to recitals 2 and 51 in the preamble to the contested decision, the Parliament paid the applicant, during the period from August 1999 until June 2008, a total of GBP 959 446.48 by way of parliamentary assistance allowance.
102 Moreover, it is apparent from recital 52 in the preamble to the contested decision that a sum of GBP 421 156, out of a total payment of GBP 959 446.48, was considered to be justified, on the basis of documents produced by the applicant relating to certain services supplied by his provider of parliamentary assistance services, in accordance with Article 14 of the PEAM Rules.
103 Secondly, the part of the contested decision relating to the scope of Article 14 of the PEAM Rules, and in particular recital 25, lists seven items totalling GBP 345 289 (see paragraph 37 above). The reasons why, according to the Secretary-General, those amounts must be excluded from the allowances that may be received under Article 14 of the PEAM Rules are adequately given in recital 24 in the preamble to the contested decision (see paragraph 36 above). It is clear from consideration of recitals 24 and 25 in the preamble to the contested decision that the reasoning for each of the amounts listed in recital 25 is to be found in recital 24.
104 It is clear also from recitals 27 to 33 in the preamble to the contested decision that the Secretary-General considers that the sum of GBP 167 903.13 is owed to the Parliament on the ground that the VAT payable by MP Holdings to the United Kingdom authorities was not paid to them (see paragraphs 39 to 42 above). Those recitals also contain adequate reasoning with regard to that amount.
105 Lastly, it is clear from the preamble to the contested decision (recital 53) that the Parliament is claiming repayment of a total of GBP 538 290 on three inter-related grounds: (i) expenses amounting to GBP 345 289 which are not covered by Article 14 of the PEAM Rules, (ii) a breach of VAT legislation resulting in the applicant owing GBP 167 903.13, and (iii) a conflict of interests through the applicant’s relationship with MP Holdings.
106 With regard to the amount of GBP 167 903.13 reclaimed in respect of VAT, it is clear from footnote 23 to recital 33 in the preamble to the contested decision that it was calculated applying a rate of 17.5 % to the amount of GBP 959 446.48, which corresponds to the total sums paid to the applicant by the Parliament as parliamentary assistance allowance. At the hearing, the Parliament stated that the amount of GBP 167 903.13 was not included in the sum of GBP 959 446.48, but was additional to it. However, that interpretation is not in accordance with the interpretation to be given to the contested decision. It is clear from recital 53 in the preamble to the contested decision that the sum of GBP 538 290 which is being reclaimed by the Parliament also covers the sums payable in respect of VAT, that is to say, GBP 167 903.13. Moreover, if that were not the case it would be necessary to conclude that the contested decision does not give any reasons for any of the amounts being reclaimed from the applicant by the Parliament over and above the GBP 345 289 in respect of which it was found that the contested decision contains express reasoning (see paragraph 103 above).
107 Hence, contrary to what was asserted by the Parliament at the hearing, it must be held that the GBP 167 903.13 is included in the sum of GBP 193 001, which is the difference between the sum of the amounts listed in recital 25 in the preamble to the contested decision (GBP 345 289) and the total sum being reclaimed by the Parliament by virtue of the contested decision (GBP 538 290).
108 In those circumstances, it must be found that the contested decision does contain reasons which meet the criteria set out in paragraphs 98 and 99 above in respect of the sums of GBP 345 289 and GBP 167 903.13, that is to say, a total of GBP 513 192.13. However, as regards the difference of GBP 25 097.87 between that amount and the total amount for which repayment is claimed (GBP 538 290), the contested decision does not contain reasons. The arguments put forward by the Parliament in that regard (see paragraphs 85 and 86 above) do not alter that finding.
109 With regard to the Parliament’s argument that the examples provided in recital 25 in the preamble to the contested decision represent 64% of the total sum reclaimed, a situation which would demonstrate consistent misuse of funds by the applicant, it must be held that that argument is irrelevant. As was stated in paragraphs 98 and 99 above, the contested decision must contain adequate reasoning in respect of all the amounts regarded as unjustified for which repayment is claimed, in order to permit the applicant to contest the validity of that reasoning before the Courts and to enable the latter to review the lawfulness of the act. The finding made in recital 26 in the preamble to the contested decision (see paragraph 38 above) that the continuing misuse of monies entails the obligation to repay all sums which have not been justified as having been used for the proper purposes of Article 14 of the PEAM Rules, is an extrapolation. Such a general lack of justification does not permit the applicant to know the reasons why he is being ordered to repay those sums. Consequently, that finding does not satisfy the requirements as regards the statement of reasons called for by the nature and content of the contested decision, since it does not make reference to the specific evidence on the basis of which the Parliament found that expenditure was not in accordance with that provision.
110 Moreover, the fact that the Parliament was able to provide reasons for certain items of expenditure that were considered not to comply with Article 14 of the PEAM Rules shows that there are other amounts that were not expressly mentioned in the contested decision, in respect of which it cannot be established whether they were used in accordance with those rules, and, if that were the case, why they were not investigated by the Parliament.
111 Accordingly, the argument that, if the Parliament considered that the amounts that were justified were GBP 421 156 out of a total of GBP 959 446.48 received by the applicant by way of parliamentary assistance allowance during the period concerned GBP 538 290 should necessarily be considered to be unjustified in the light of the PEAM Rules, cannot be accepted. As was held in paragraphs 98 and 99 above, the statement of reasons for the contested decision must give the reasons why the Parliament considers that the supporting documents produced do not prove that the amounts paid as parliamentary allowances have been used in accordance with the PEAM Rules. It follows that the finding that since some of the amounts were identified as being used for purposes that complied with those rules the remainder of the sums paid were not does not provide sufficient reasoning for recovering those sums under Article 14 of the PEAM Rules.
112 The Parliament’s argument put forward at the hearing that reference should also be made to the part of the contested decision concerning conflict of interest in order to discern the reasoning relating to all the amounts must also be rejected.
113 In that regard, it should be noted that at the hearing the Parliament accepted that there was a difference of GBP 25 097.87 (see paragraph 108 above) between the sum of the amounts listed in recitals 25 and 33 of the contested decision (GBP 345 289 and GBP 167 903.13) and the total reclaimed (GBP 538 290), which was not expressly mentioned in the contested decision. It maintained none the less that the statement of reasons relating to that amount is contained in the part of the contested decision concerning the conflict of interest involved in the applicant’s relationship with MP Holdings. That argument cannot be accepted. It is clear from recital 47 in the preamble to the contested decision that the conflict of interest in question appears to concern in a general way the relationship between the applicant and MP Holdings. It thus affects all the sums paid by the Parliament as parliamentary assistance allowance, and no particular amount can be regarded as being concerned specifically. The fact that from a reading of the contested decision it is impossible to attach a specific sum to the alleged conflict of interest, apart from the combined sums for which repayment is claimed, clearly contradicts the Parliament’s argument that the reasoning relating to the sum of GBP 25 097.87 is set out in the part of the contested decision concerning conflict of interest.
114 Furthermore, it should be noted that the Parliament maintained in recital 52 in the preamble to the contested decision that the applicant had justified the use of a total of GBP 421 156 as parliamentary assistance allowance. Therefore, although according to the contested decision the conflict of interest affects all the sums received by the applicant as parliamentary assistance allowance, that finding is not sufficient, according to that decision, to claim repayment of those sums in full. Since it has been demonstrated that the amounts paid were used in accordance with the PEAM Rules, the Parliament cannot claim repayment of them on any other basis, despite the existence of a conflict of interest.
115 In those circumstances, it must be concluded that, contrary to the Parliament’s assertion at the hearing, even if the part of the contested decision concerning the conflict of interest involved in the relationship between the applicant and MP Holdings could be relied upon as constituting a statement of reasons, that part of the decision does not disclose in a clear and unequivocal fashion, within the meaning of paragraphs 98 and 99 above, the reasons why the applicant must repay the Parliament the sum of GBP 25 097.87.
116 Lastly, it cannot be inferred from the Parliament’s argument, set out in paragraph 86 above, that it is incumbent on the applicant to produce documentation to justify use of the allowances received in accordance with the PEAM Rules, that it maintained that the applicant had not provided documents to substantiate that amount. The contested decision makes no reference to that fact. Moreover, that argument cannot be raised for the first time before the General Court, according to settled case-law which states that, other than in exceptional circumstances, the statement of reasons must be contained in the decision itself, and it is not sufficient for it to be explained subsequently for the first time before the Court (see Joined Cases T-374/94, T-375/94, T-384/94 and T-388/94 European Night Services and Others v Commission [1998] ECR II-3141, paragraph 95 and the case-law cited).
117 The same applies with regard to the Parliament’s argument, put forward for the first time at the hearing, that the existing supporting documents do not establish clearly to what type of expenses that sum had been allocated, since it is not by any means apparent from the contested decision that the amount of GBP 25 097.87 should be repaid because the supporting documents produced by the applicant were unclear.
118 In addition, it should be noted that no audit report was prepared in the present case which could have been notified to the applicant during the administrative procedure and supplemented the reasoning contained in the contested decision (see paragraph 100 above).
119 In those circumstances, it must be held that the contested decision does not contain any reasons for the amount of GBP 25 097.87 and the reasoning relied on for the first time before the European Union Court cannot be accepted.
120 It follows from the foregoing that the contested decision must be partly annulled on the ground that the statement of reasons was inadequate as regards the amount of GBP 25 097.87, and the complaint alleging failure to state adequate reasons for the remainder of the amount being reclaimed should be rejected.
– The complaints concerning the validity of the reasons on which the contested decision is based
121 With regard to the applicant’s complaints concerning the validity of the contested decision, since the Secretary-General found that the amounts listed in recital 25 in the preamble to that decision had not been used in accordance with the PEAM Rules, it should be observed that all the applicant’s arguments relating to the fact that he produced the documents needed in order to be granted the contested amounts must be rejected.
122 As the Parliament has maintained, the question whether the applicant fulfilled the conditions required in order to receive the parliamentary assistance allowance at the time he applied for it is different from the question whether, having received that allowance, he used it in accordance with Article 14 of the PEAM Rules. Thus, the fact that he fulfilled the conditions for that allowance to be granted does not prejudge his actual use of the allowance, which the Parliament must be able to review under Article 27(3) of the PEAM Rules.
123 It is also necessary to reject the applicant’s argument that he has at all times complied with the provisions of Article 14 of the PEAM Rules, since he fulfilled the conditions for granting the secretarial assistance allowance, and the argument that he was required, in the context of an ex post review, only to produce the documents needed for the secretarial assistance allowance to be granted. In the event of a review of the use of the secretarial assistance allowance the Member concerned must, however, be able to prove that the amounts received have been used to cover the expenses arising from the employment or from the engagement of the services of one or more parliamentary assistants, as provided in Article 14(1) of the PEAM Rules. The arguments relating to that question are considered in paragraphs 129 and 130 below.
124 The argument alleging retroactive application of conditions other than those applying at the time the parliamentary assistance allowance was granted must be rejected on the same grounds. As was noted in paragraphs 122 and 123 above, the conditions for granting the allowance in question are separate from the evidence which the Member must provide regarding the actual use of the amounts received.
125 It is also necessary to reject the applicant’s argument that the contested decision infringes his right to property. It must be stated in that regard that if amounts received under Article 14 of the PEAM Rules are not used to cover the expenses arising from the employment or from the engagement of the services of one or more parliamentary assistants, the Member concerned is under an obligation to repay them to the Parliament. That obligation cannot be affected by any property right to the payment of sums of money, relied upon by the applicant, where those sums have not been used for purposes that comply with the PEAM Rules.
126 With regard to the argument concerning the length of time a Member is required to keep invoices relating to parliamentary assistance, it should be noted that, according to Article 14(6)(a) of the PEAM Rules, as amended by the Decision of the Bureau of the Parliament of 13 December 2006, ‘[t]he Member shall keep the invoices or fee statements for the period laid down by the applicable national legislation and for no less than one year after the end of the parliamentary term’.
127 The fact that that obligation did not apply until that date does not affect the assessment of the validity of the applicant’s argument. Even in the absence of an internal rule of the Parliament in respect of the period prior to 13 December 2006, there is no doubt that the question was governed by United Kingdom law, as is also the case since the amendment of the PEAM Rules which took place in 2006.
128 As the Parliament contends in the present case, the applicant has produced documents dating back to March 2000, on the basis of which the Parliament has made the calculations necessary for its review. In those circumstances, even if the applicant had kept those documents for longer than the minimum time provided for under United Kingdom law, that would not limit the Parliament’s powers, since the applicant provided it with the evidence in question.
129 With regard to whether the use of the amounts listed in recital 25 in the preamble to the contested decision (see paragraph 37 above) is in accordance with Article 14 of the PEAM Rules, it should be noted that, under Article 14(1), expenses eligible for reimbursement are those arising from the employment or from the engagement of the services of one or more parliamentary assistants. Consequently, since the definition of ‘parliamentary assistance’ is not a matter for the discretion of Members, the latter are not free to apply for reimbursement of expenses that have no connection with the employment or engagement of the services of such assistants.
130 In those circumstances, it must be held that the amounts listed in recital 25 in the preamble to the contested decision do not, according to the purposes to which they were allocated as stated in that recital, which have not moreover been questioned by the applicant, relate either to the employment or to the engagement of the services of parliamentary assistants.
131 The applicant’s arguments relating to them must therefore be rejected.
The third plea: infringement of Article 27 of the PEAM Rules
Arguments of the parties
132 In the application, the applicant claims that the Secretary-General failed to consult the Quaestors before adopting the contested decision and that, as a result, he infringed Article 27(3) of the PEAM Rules.
133 However, further to the information submitted by the Parliament in the defence, the applicant accepts, in the reply, that the Secretary-General consulted the Quaestors on 14 January 2009, but claims that the Parliament should be ordered to pay the costs in that connection.
134 As regards the application of Article 27(4) of the PEAM Rules, the Parliament did not explain, in support of its decision to suspend payment of the parliamentary assistance allowance, why this was an exceptional case within the meaning of that provision or hear the applicant’s views before its decision was taken. In addition, there is no indication that the Bureau was involved in the procedure. Thus the applicant claims that the Court should adopt the measures of organisation of procedure necessary in order to ascertain whether the procedural requirements laid down in Article 27(4) of the PEAM Rules were satisfied in this case.
135 The Parliament disputes the applicant’s arguments.
Findings of the Court
136 Following the restriction of the scope of the applicant’s arguments (see paragraphs 132 and 133 above), examination of this plea will be limited to the matter of the application of Article 27(4) of the PEAM Rules in the present case.
137 In that regard, so far as the applicant’s complaint in respect of the Parliament’s decision to ‘suspend’ payments to MP Holdings is concerned, the applicant seems to be referring either to the decision taken in June 2008 (see paragraph 15 above), or the decision of 28 April 2009 (see paragraphs 49 and 50 above) to apply Article 27(4) of the PEAM Rules. However, neither of those decisions is contested in the present action.
138 It should also be observed that, as the Parliament argues, the contested decision is not based on that provision, so fulfilment of the requirements it contains is not a precondition for its legality. It follows that the applicant’s arguments must be rejected, without there being any need to accede to the applicant’s request for measures of organisation of procedure.
The fourth plea: infringement of the VAT rules
Arguments of the parties
139 The applicant argues that there is no provision permitting the recovery from him of any amounts owed to the United Kingdom tax authority by MP Holdings, a separate entity, over a ten-year period. Even if MP Holdings were required to pay a certain amount to the national tax authorities, that would not change the amount which the Parliament would be required to pay that company, which would include VAT, if applicable. The fact that the Parliament has a direct legal relationship with the applicant does not mean that he is required to repay any amount allegedly owed by MP Holdings in respect of VAT.
140 Moreover, the applicant denies that MP Holdings infringed United Kingdom VAT law and denies that the Parliament is competent to assess such a situation. In addition, he alleges that the Parliament’s position in that regard is based on assumptions rather than evidence.
141 The Parliament is not, in any event, justified in demanding repayment of the VAT owing since 1999, as the national legislation provides for a three-year limitation period and the provisions which extend that period to 20 years do not apply in this case. That means that no amount relating to the period prior to 10 April 2006 is recoverable.
142 The Parliament has also made payments to MP Holdings since 1999 without ever purporting to deduct an amount in respect of VAT, so that the Parliament’s present position is contrary to the principles of non-retroactivity and of protection of the right to property.
143 The Parliament points out that it does not seek to recover from the applicant any sum in respect of VAT. The VAT on the services provided by MP Holdings should be settled by the latter with the United Kingdom tax authority, a measure which would result in the contested decision being revised accordingly.
144 The problem in this case is that MP Holdings has never invoiced VAT on the value of the services provided to the applicant, although that company is subject to the rules on VAT, and the applicant has not produced evidence to the contrary. The applicant has also confirmed that MP Holdings did not pay VAT to the national authorities in order to avoid reducing the amount of the allowance.
145 The Parliament insists on the settlement of all tax obligations resulting from the payment of the parliamentary assistance allowance, as demonstrated by the fact that the statements of amounts invoiced contain a declaration to that effect made by the representative of the provider of parliamentary assistance services and countersigned by the Member concerned.
146 Thus, where sums paid by the Parliament in order that VAT obligations should be covered have not been used for that purpose, it is appropriate to conclude that amounts paid under Article 14 of the PEAM Rules have not been used in accordance with that provision and may therefore be recovered from the Member concerned.
147 Lastly, the Parliament contends that the applicant’s arguments concerning the limitation period cannot be upheld since the question is not governed by United Kingdom law but by the relevant provisions of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (OJ 2002 L 248, p. 1) and Regulation No 2342/2002. In any event, national law lays down a limitation period of up to 20 years.
Findings of the Court
148 It should be noted from the outset that the parties agree on the fact that MP Holdings did not issue invoices to the applicant for the services it provided.
149 As a result, MP Holdings did not include in its VAT returns to the United Kingdom authorities the amounts which it should have invoiced to the applicant and received from the Parliament as VAT in respect of the services it provided.
150 The fact that a provider of parliamentary assistance services does not comply with its tax obligations in respect of the fees for those services does not make the Member concerned liable vis-à-vis the Parliament.
151 In that regard, it should be observed that Article 14(1) of the PEAM Rules is not concerned with the discharge of tax obligations towards the national authorities, solely the payment by the Parliament of the expenses arising from the employment or from the engagement of the services of one or more parliamentary assistants (see paragraphs 129 and 130 above). Thus, the amounts paid to a provider of parliamentary assistance services are intended to ensure the provision of the services in question. However, the tax obligations in connection with the receipts at issue arise under the national law relating to VAT or to other taxes such as income tax and not under Article 14 of the PEAM Rules, which merely makes reference to the national provisions. Hence, the Parliament cannot take Article 14 of the PEAM Rules as a basis for deducting those sums from amounts paid as parliamentary assistance allowance and ordering their recovery where the service provider has not complied with his tax obligations.
152 Moreover, in a case where a Member uses sums received as parliamentary assistance allowance to obtain services or goods unrelated to that type of assistance, those expenses are not eligible for funding by the Parliament and any amount received from the Parliament which has been used in the performance of such services must be repaid. However, the fact that a provider of parliamentary assistance services has failed to comply with its VAT obligations towards the national authorities, either because it has not issued invoices to the Member receiving those services, or because it has issued invoices but not subsequently paid the appropriate amounts to the tax authorities in respect of the VAT received, does not in any way mean that the Parliament has funded expenses that are not eligible under Article 14 of the PEAM Rules. In particular, whilst, in the first case, compliance with the PEAM Rules means that expenses not incurred in order to receive parliamentary assistance services are not charged to the Parliament, in the second case VAT rules mean that the company should issue invoices and/or pay VAT to the national authorities. That duty does not affect the financial obligations of the Parliament, which may inform the national authorities of the breach of the relevant national law that has been established.
153 In those circumstances, the Parliament cannot rely on paragraphs 161 and 162 of Gorostiaga Atxalandabaso v Parliament, paragraph 100 above, since, in that case, the applicant had received the parliamentary assistance allowance, through his paying agent, without ever paying it to his assistants, which means he did not use it for the purposes laid down in Article 14 of the PEAM Rules.
154 If it were to be held that the Parliament’s interpretation (see paragraph 146 above) is correct, the consequence would be that the Member concerned would be held liable, vis-à-vis the Parliament, for the conduct of a third party, in this case, his service provider, with regard to tax. In such a case, the receipts from the Parliament could give rise, under national law, to obligations not only with regard to VAT, but also with regard to other taxes, such as corporation tax, employees’ income tax deducted at source, or even social security contributions. That would mean that, if the service provider did not declare or did not pay his income tax the Member would be required to reimburse the Parliament for the portion of that tax relating to income from the Parliament. Such liabilities can be imposed only on a clear legal basis specifying what they involve. Article 14(3) of the PEAM Rules (see paragraph 2 above) manifestly does not constitute such a basis since it concerns the tax obligations imposed on the Member himself and not on the provider of parliamentary assistance services, who is a separate person from the Member in question.
155 Lastly, the Parliament’s argument that the applicant declared that all the tax obligations of MP Holdings had been complied with by ‘countersigning’ the statements of amounts invoiced (see paragraph 145 above) stems from a misrepresentation of those documents. It is clear from the statements in question that, when signing them, a Member is not certifying that the declaration by the representative of the service provider that his tax and social security obligations have been complied with is true, but rather, he is authorising the Parliament to pay the provider in question the amounts set out in the statement relating to those obligations. That finding is borne out by the wording of Article 14(6)(b) of the PEAM Rules, as amended by the decision of the Bureau of the Parliament of 13 December 2006 (see paragraph 3 above).
156 It would moreover also be unreasonable to require a Member to certify that his provider of parliamentary assistance services has complied with his obligations vis-à-vis the national authorities since, first, no obligation of that nature is imposed on him by the PEAM Rules and, second, to certify that fact presupposes tax scrutiny which the Member is not in a position to carry out.
157 Lastly, the fact stated by the Parliament in the part of the contested decision concerning conflict of interest that the applicant’s wife and daughter occupy posts as directors on the board of the provider of parliamentary assistance services does not affect those findings. Even though the involvement of members of the family of the Member concerned with the service provider may constitute evidence of that Member’s control over the company in question, it is also necessary, first, for such control to be proven or else presumed by virtue of a provision of the PEAM Rules and, second, for the responsibility of the Member to be founded on a clear legal basis. These conditions are manifestly not fulfilled in the present case.
158 Hence, without it being necessary to consider the applicant’s arguments in the context of the first plea concerning the way in which VAT was calculated, the contested decision must be annulled in so far as the Secretary-General requires the applicant, by that decision, to repay to the Parliament the amount of GBP 167 903.13.
The plea alleging non-application of the concept of conflict of interest
Arguments of the parties
159 The applicant claims that, in the contested decision, the Parliament does not define the concept of conflict of interest relied upon for the purposes of recovering the sum claimed. Moreover, different definitions of that concept are given in various communications from the Parliament.
160 The applicant adds that the PEAM Rules contain no provision preventing Members from entering parliamentary assistance contracts with companies managed by members of their families, which, on the contrary, has long been an extremely commonplace practice. The mere fact that members of the family of the Member concerned control the way in which the funds paid under Article 14 of the PEAM Rules are spent is not in itself evidence of a conflict of interests, which would presuppose that the Member concerned is unable to carry out his functions in an objective and impartial manner. There is no evidence of that in this case.
161 Indeed, the Codex for Parliamentary Assistants in the European Parliament, which was drawn up by decision of the Bureau of the European Parliament of 25 September 2006, provides that each Member may employ or engage the services of an assistant of his or her choice. Thus, in the absence of a prohibition on members of the Members’ families, the Parliament issued two press releases on 11 and 15 July 2008, according to which no close member of a Member’s family could thereafter be employed as his or her assistant, although the contracts of those already employed could be extended for a further parliamentary term provided that that fact was noted in the declaration of interests of the Member concerned.
162 Whatever the legal force of that prohibition, the Parliament cannot seek retroactively to apply it to the detriment of the applicant without infringing the principles of non-retroactivity, legal certainty and the protection of property.
163 In any event, even if there had been a conflict of interests, neither the PEAM Rules, nor the above-mentioned press releases provide that that fact would have the various legal consequences set out by the Parliament during the administrative procedure. A clear legal basis would be essential for consequences having such a radical effect on the applicant’s right to property to be compatible with the principle of legal certainty. Neither Article 52 of Regulation No 1605/2002 nor the case-law relied upon by the Parliament establishes that, in the event of a conflict of interests, whatever the meaning of that term, the Member concerned is not entitled to reimbursement of parliamentary assistance, that he must repay any sum received or that he must submit documentary evidence going back ten years, in particular where there is no evidence that he protected interests other than those of the Parliament. Moreover, the information referred to in the contested decision in no way demonstrates any conflict of interest.
164 Finally, the applicant requests the Court to adopt a measure of organisation of procedure requiring the Parliament to disclose the other cases in which it found that there were conflicts of interest on the part of Members, in order to verify observance of the principle of equal treatment vis-à-vis the applicant.
165 The Parliament disputes the applicant’s arguments.
Findings of the Court
166 It should be noted first of all that, as was stated in paragraphs 113 to 115 above, a conflict of interest, as described in recitals 34 to 47 in the preamble to the contested decision, cannot relate to a specific sum paid to the applicant by way of parliamentary assistance allowance, but affects all the amounts paid by the Parliament to the applicant.
167 It should also be noted that no rule in force during the material period precluded the conclusion of parliamentary assistance contracts with companies controlled by family members of the Members concerned or even direct recruitment of family members as parliamentary assistants. Thus, no payment made by way of parliamentary assistance allowance can be challenged merely because it was made to such a company or to the family member concerned.
168 It follows that, as the Parliament maintained in its pleadings, it must be held that the main issue in the present case is to establish whether the amounts received by MP Holdings were actually used for the purposes of providing parliamentary assistance services within the meaning of Article 14(1) of the PEAM Rules. It is according to that principle that the Court found in paragraphs 129 and 130 above, that the amounts reclaimed in recital 25 in the preamble to the contested decision were properly reclaimed. However, the contested decision has been annulled in part for failure to state reasons, in as much as it orders the recovery of a sum of GBP 25 097.87, and in part because it is vitiated by an error of law, in as much as it claims the recovery of a sum of GBP 167 903.13 in VAT owing to the United Kingdom authorities. Reliance by the Parliament on a conflict of interest has not therefore had substantive consequences as regards the amounts reclaimed.
169 In those circumstances, it must be concluded that the arguments put forward by the applicant concerning the concept of conflict of interest are not such that they affect the outcome of the case. It follows that the applicant’s arguments in support of the present plea must be rejected as ineffective, without there being any need to accede to the applicant’s request for measures of organisation of procedure.
The plea alleging infringement of Article 7 of Regulation No 1073/1999 by the decision to refer the case to OLAF
Arguments of the parties
170 The applicant claims that Regulation No 1073/1999 does not oblige the Parliament to disclose to OLAF, in the circumstances of this case, personal financial information relating to him.
171 The Parliament did not explain the nature of the fraud, corruption or illegal activity justifying the referral of the case to OLAF before even hearing the applicant’s views on the matter. The contested decision, which refers to the decision to refer the case to OLAF, is open to challenge in that regard. The applicant claims moreover that since the Court did not have the letter in which the Parliament referred the applicant’s case to OLAF it was impossible for it to assess the effect of that referral on the applicant’s legal position.
172 In those circumstances, the applicant asks the Court to adopt the measures of organisation of procedure necessary to require the Parliament to disclose the evidence on which it based its decision to refer the case to OLAF.
173 The decision to refer the case to OLAF is therefore unjustified, premature and without legal foundation and was adopted in breach of the applicant’s right of defence.
174 The Parliament disputes the applicant’s arguments.
Findings of the Court
175 It should be observed that, as the Parliament pointed out, the referral of the facts of the present case to OLAF was not made by means of the contested decision, adopted on 29 January 2009, but by a letter dated 19 December 2008. Clearly, the purpose of the present action is not the annulment of that letter. Furthermore, the possible unlawfulness of that referral cannot affect the fact that the applicant did not use the amounts listed in recital 25 in the preamble to the contested decision in accordance with Article 14 of the PEAM Rules.
176 It follows that the latter plea must be rejected, without there being any need to accede to the applicant’s request for measures of organisation of procedure.
177 In the light of the foregoing, the contested decision must be annulled on the ground that the statement of reasons was inadequate as regards recovery of the sum of GBP 25 097.87 and in so far as it claims repayment of a sum of GBP 167 903.13 in VAT which the applicant’s service provider did not pay to the United Kingdom tax authorities. The contested decision is therefore annulled in so far as it claims repayment of a total of GBP 193 001.
Costs
178 Under Article 87(3) of the Rules of Procedure, where each party succeeds on some and fails on other heads, the General Court may order that costs be shared or that each party bear its own costs.
179 In this case the form of order sought by the applicant has been partly accepted and the interlocutory application of the Parliament for the removal of two documents from the file has been partly rejected.
180 Therefore an order that the parties are to bear their own costs will constitute a fair reflection of the circumstances involved.
On those grounds,
THE GENERAL COURT (Eighth Chamber)
hereby:
1. Annuls Decision D (2009) 4639 of the Secretary-General of the European Parliament of 29 January 2009 as regards the recovery of the sum of GBP 193 001;
2. Dismisses the action as to the remainder;
3. Orders the Parliament and Mr Densmore Ronald Dover each to bear their own costs.
|
Papasavvas |
Wahl |
Dittrich |
Delivered in open court in Luxembourg on 24 March 2011.
[Signatures]
Table of contents
Legal context
Background to the case
The contested decision
Facts subsequent to the contested decision
Procedure and forms of order sought
Law
1. The application for removal of the internal audit report from the file
Arguments of the parties
Findings of the Court
2. Substance
First plea: misapplication of Article 14 of the PEAM Rules
Arguments of the parties
Findings of the Court
– The statement of reasons for the contested decision
– The complaints concerning the validity of the reasons on which the contested decision is based
The third plea: infringement of Article 27 of the PEAM Rules
Arguments of the parties
Findings of the Court
The fourth plea: infringement of the VAT rules
Arguments of the parties
Findings of the Court
The plea alleging non-application of the concept of conflict of interest
Arguments of the parties
Findings of the Court
The plea alleging infringement of Article 7 of Regulation No 1073/1999 by the decision to refer the case to OLAF
Arguments of the parties
Findings of the Court
Costs
* Language of the case: English.