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

JUDGMENT OF THE GENERAL COURT (First Chamber)

20 June 2018 (*)

(Grant agreements concluded in the context of the Lifelong Learning Programme (2007-2013) - ‘Green Business is Smart Business’ and ‘LadybizIT: Woman entrepreneurship on the verge of ICT’ projects - Ineligible costs - Action for annulment - Lack of jurisdiction of the Commission)

In Case T‑104/15,

KV, represented by S. Pappas, lawyer,

applicant,

v

European Commission, represented initially by C. Gheorghiu and K. Skelly, and subsequently by C. Gheorghiu, I. Rubene and J. King, acting as Agents,

defendant,

supported by

Education, Audiovisual and Culture Executive Agency (EACEA), represented initially by H. Monet and D. Homann, and subsequently by H. Monet, acting as Agents,

intervener,

APPLICATION based on Article 263 TFEU and seeking the annulment of Commission Implementing Decision C(2014) 9706 final of 16 December 2014, which dismissed as unfounded the appeal brought by the applicant against the decision of the EACEA of 23 September 2014 declaring certain staff costs to be ineligible in the light of the grant agreements concluded on 30 September 2010 and 9 September 2011 between the applicant and the EACEA for the implementation of the European projects ‘Green Business is Smart Business’ and ‘LadybizIT: Woman entrepreneurship on the Verge of ICT’,

THE GENERAL COURT (First Chamber),

composed of I. Pelikánová, President, V. Valančius (Rapporteur) and U. Öberg, Judges,

Registrar: E. Coulon,

gives the following

Judgment

 Background to the dispute

1        The applicant, KV was, before 31 July 2013, a limited partnership governed by Greek law, specialising in particular in providing training, education, advice and expertise.

2        In 2010 and 2011, the applicant took part in several European projects as part of the Lifelong Learning Programme established by Decision No 1720/2006/EC of the European Parliament and of the Council of 15 November 2006 establishing an action programme in the field of lifelong learning (OJ 2006 L 327, p. 45) and implemented by the Education, Audiovisual and Culture Executive Agency (EACEA). The applicant concluded grant agreements with the EACEA in the light of its participation in two projects.

3        In the course of the implementation of those European projects, the EACEA acted under the control of the European Commission and had to comply with Council Regulation (EC) No 58/2003 of 19 December 2002 laying down the statute for executive agencies to be entrusted with certain tasks in the management of Community programmes (OJ 2003 L 11, p. 1).

4        In that regard, Article 22 of Regulation No 58/2003 provided:

‘(1) Any act of an executive agency [injuring] a third party [could] be referred to the Commission by any person directly or individually concerned or by a Member State for a review of its legality.

Administrative proceedings [were to] be referred to the Commission within one month of the day on which the interested party or Member State concerned learnt of the act challenged.

After hearing the arguments adduced by the interested party or by the Member State concerned and those of the executive agency, the Commission [was to] take a decision on the administrative proceedings within two months of the date on which proceedings were instituted. Without prejudice to the Commission’s obligation to reply in writing giving grounds for its decision, the failure by the Commission to reply within that deadline [was to] be taken as implicit rejection of the proceedings.

…

(5) An action for annulment of the Commission’s explicit or implicit decision to reject the administrative appeal [was to] be brought before the Court of Justice ...’

5        The applicant took part in a first project entitled ‘Green Business is Smart Business’ (‘Project “Go Green”’) which aimed to improve the quality of training systems through the development of innovative methods and procedures in the field of Vocational Education and Training (VET). The grant agreement for that project was signed on 30 September 2010 by the applicant and by the EACEA for total EU funding in an amount of EUR 286 143.46.

6        The applicant participated in a second project, the ‘LadybizIT: Woman entrepreneurship on the Verge of ICT’ (‘the “Ladybiz” project’), whose purpose was to support actions aimed at encouraging female entrepreneurship. The grant agreement for that project was signed on 9 September 2011 by the applicant and by the EACEA for total EU funding in an amount of EUR 147 930.

7        The grant agreements relating to the ‘Go Green’ and ‘Ladybiz’ projects are governed by general terms and conditions comprising two parts, of which Part B, in Article II.14.2 thereof, defines ‘eligible costs’ as follows:

‘The eligible direct costs are those costs which ... are identifiable as specific costs directly linked to the performance of the action and which can therefore be booked to it direct. In particular, the following direct costs are eligible provided that they satisfy the criteria set out in the previous paragraph:

–        the cost of staff assigned to the action, comprising actual salaries plus social security charges and other statutory costs included in the remuneration, provided that this does not exceed the average rates corresponding to the beneficiary’s usual policy on remuneration.

...’

8        Article II.14.4 of Part B of the grant agreements lists those costs which are considered as ineligible, which include ‘return on capital’.

9        In addition, the Lifelong Learning Programme’s Project Handbook (‘the Lifelong Learning Project Handbook’) further describes eligible costs in point 2.3.1 thereof, which provides:

‘Costs relating to the following categories of staff are considered:

–        statutory staff, having either a permanent or a temporary employment contract with the partner;

–        temporary staff, recruited through a specialised external Agency.’

10      With regard to the grant agreements relating to the ‘Go Green’ and ‘Ladybiz’ projects, the EACEA adopted, on 11 and 15 April 2013, two decisions. By decision of 11 April 2013, the EACEA approved the final report on the ‘Go Green’ project and determined the final amount of the grant to be EUR 286 143.86. It paid an amount of EUR 77 753.86, excluding the payment of staff costs in the amount of EUR 4 687.74. By a decision of 15 April 2013 the EACEA accepted the final report on the ‘Ladybiz’ project and calculated a final grant amount of EUR 79 686.20, thereby resulting, taking into account the sums already paid to the applicant, the need for the latter to repay EUR 23 864.80.

11      In those two decisions, the EACEA took the view that the remuneration paid to the partners in the applicant in return for their services could not be viewed as staff costs eligible for EU funding.

12      The applicant disputed the lawfulness of those decisions by two complaints to the EACEA of 3 June 2013.

13      By decisions of 7 October 2013, the EACEA rejected the applicant’s complaints and confirmed its decisions of 11 and 15 April 2013 relating to the ineligibility of the remuneration of the applicant’s partners as staff costs.

14      By letter of 6 November 2013, the applicant challenged before the Commission the lawfulness of the decisions of the EACEA of 7 October 2013, on the basis of Article 22 of Regulation No 58/2003. It argued that, in the context of the ‘Go Green’ and ‘Ladybiz’ projects, the partners therein, in particular its managing director, had provided ‘additional’ services under a contract of employment concluded with it. Therefore, the EACEA incorrectly regarded the costs corresponding to the remuneration of those partners as return on capital and not as staff costs.

15      By decision of 3 January 2014, the Commission upheld the applicant’s appeal. It took the view that, in order to determine whether the costs at issue could be classified as staff costs eligible for EU funding, it was necessary to determine whether there was an employment relationship, within the meaning of Article II.14.2 of the grant agreement and point 2.3.1 of the Lifelong Learning Project Handbook, between each partner concerned and the applicant, at the time that the services at issue were provided. In that regard, it stated that, while it was not disputed that the partners had effectively provided services for which they had received remuneration, the EACEA had not established whether the second element of an employment relationship, namely the element of subordination between the partners and the applicant, was present. The Commission concluded that it was for the EACEA to examine all the relevant facts in order to determine the nature of the relationship between the applicant and each of the partners in respect of which the staff costs had been declared ineligible.

16      Following the decision of the Commission, the EACEA received from the applicant documents capable of establishing the nature of its relationship with the partners therein at the time that the services at issue were provided.

17      Having examined the documents submitted, the EACEA, on 23 September 2014, adopted a decision in which it identified and assessed the two employment relationships in question, namely that between the partners in the applicant and the managing director and between the managing director and the ‘Go Green’ and ‘Ladybiz’ project managers. It concluded that the applicant had not proved in law or in fact the existence of an element of subordination in those relationships. Therefore, it confirmed the ineligibility of the staff costs at issue.

18      Concerning the possible existence of an element of subordination between the managing director and the ‘Go Green’ and ‘Ladybiz’ project managers, the EACEA took the view that it was implausible that the managing director of the applicant had been able to work on those projects under the direction of the project managers, who were his subordinates. It also noted that the applicant’s managing director was responsible for the organisation of the work, the person signing the grant agreement and also the person accountable to the EACEA for the implementation of the project. In addition, it found that the managing director had appointed himself to work on the ‘Go Green’ and ‘Ladybiz’ projects and had himself determined his remuneration. Thus, the EACEA held that the element of subordination between the managing director of the undertaking and the project manager had not been established.

19      As regards the relationship between the other partners and the applicant’s managing director, the EACEA noted that, according to Articles 8, 12 and 14 of the applicant’s Articles of Association, no partner exercised any control over the other partners, since all decisions were to be taken by common agreement.

20      Finally, the EACEA took the view that the tasks and working conditions of the managing director and partners were not determined by a body over which they had no control, and that there was no evidence that the managing director or partners were accountable to the project managers.

21      On 23 October 2014, the applicant brought new proceedings before the Commission in order to challenge the declaration by the EACEA, in its decision of 23 September 2014, that the remuneration paid to the partners as part of the implementation of the projects was not eligible as staff costs.

22      In support of its appeal, the applicant submitted that, as regards the existence of an element of subordination between its managing director and the ‘Go Green’ and ‘Ladybiz’ project managers, the decision of 23 September 2014 precluded the managing director from providing ‘additional’ subordinated services to the applicant, relying, in essence, on his sole capacity as managing director. As regards relations between the other partners and the managing director, the applicant noted that the EACEA incorrectly based its decision on Articles 8, 12 and 14 of its Articles of Association, which related to the ‘usual’ duties provided by the partners in their capacity as partners, and not the ‘additional services’ they could provide, and which went beyond the ‘usual’ duties provided. According to the applicant, the ‘additional’ services were governed by a resolution of its general assembly of 20 December 2010. In that resolution, the general assembly had authorised the managing director to decide that, in certain cases, partners or shareholders were entitled to provide ‘additional’ services as part of a specific project.

23      By decision of 16 December 2014 (‘the contested decision’), the Commission rejected the applicant’s request for payment by the EACEA of the financial contribution which it submitted that it was entitled to, paid as compensation to the partners in the applicant as part of the implementation of the ‘Go Green’ and ‘Ladybiz’ projects, and confirmed the decision of the EACEA of 23 September 2014.

24      In its decision, the Commission took the view that the distinction made by the applicant between the ‘usual’ duties and ‘additional’ services provided by the partners was purely formal. It added that, in view of the requirement set out in Article 8 of the applicant’s Articles of Association, pursuant to which the partners were to contribute with their own work to the development of the company, any claim that the services offered by the partners in a given project exceeded the limits of that obligation had to be adequately reasoned. It found that the applicant had not substantiated its claim.

25      Moreover, as regards the relationship between the managing director of the applicant and the ‘Go Green’ and ‘Ladybiz’ project managers, the Commission held that the changes introduced by the resolution of the applicant’s general assembly were purely formal and that they could not be considered as establishing a real and genuine relationship of subordination between the managing director and the project managers.

 Procedure and forms of order sought

26      By application lodged at the Court Registry on 25 February 2015, the applicant brought the present action.

27      By document lodged at the Court Registry on 12 June 2015, the EACEA sought leave to intervene in support of the form of order sought by the Commission. On 23 November 2015, by decision of the President of the Fifth Chamber of the Court, the EACEA was granted leave to intervene in support of the Commission.

28      By document lodged at the Court Registry on 31 July 2015, the applicant submitted an application for anonymity, which was granted on 1 September 2015.

29      By decision of the President of the General Court, the present case was assigned to a new Judge-Rapporteur sitting in the Sixth Chamber.

30      Following a change in the composition of the Chambers of the Court, pursuant to Article 27(5) of the Rules of Procedure of the General Court, the Judge-Rapporteur was assigned to the First Chamber, to which the present case was accordingly allocated.

31      The applicant claims that the Court should:

–        principally, annul the contested decision and declare costs in an amount of EUR 74 155 and EUR 72 030 corresponding to the remuneration paid under the ‘additional’ services provided by the partners as part of the ‘Go Green’ and ‘Ladybiz’ projects to be eligible staff costs;

–        alternatively, declare as eligible under Article II.14 of the Grant Agreement and Annex III thereto, only the costs corresponding to the ‘additional services’ provided by the partners in implementing the ‘Go Green’ and ‘Ladybiz’ projects;

–        order the Commission to pay the costs.

32      The Commission and the EACEA contend that the Court should:

–        dismiss the action;

–        order the applicant to pay the costs.

33      In response to a question put by the Court, the applicant stated that, in the event that the present action for annulment based on Article 263 TFEU is reclassified as an action based on Article 272 TFEU, its heads of claim should be understood as seeking, in essence, that the General Court declare as eligible the staff costs corresponding to the remuneration paid to some of its partners in the implementation of the European projects in question and that the Commission incorrectly held to be ineligible.

34      By letters from the Registry of 10 November 2017, the parties were invited by the Court, by way of measures of organisation of procedure, to reply to two further questions.

35      As regards the first question, the parties were asked to submit arguments to the Court on whether the Commission was entitled, on the basis of Article 22 of Regulation No 58/2003, to adopt the contested decision on the eligibility of certain staff costs having regard to the grant agreements relating to the ‘Go Green’ and ‘Ladybiz’ projects concluded between the applicant and the EACEA, since neither Commission Implementing Decision 2013/776/EU of 18 December 2013 establishing the EACEA and repealing Decision 2009/336/EC (OJ 2013 L 343, p. 46), nor Commission Decision C(2013) 9189 final of 18 December 2013 delegating powers to the EACEA with a view to performance of tasks linked to the implementation of Union programmes in the field of education, audiovisual and culture, comprising, in particular, implementation of appropriations entered in the general budget of the Union and of the European Development Fund (EDF) allocations, appear to give the Commission the power to take that decision.

36      As regards the second question, the parties were requested to state before the Court the lessons which they drew from the case-law (order of 7 February 2017, Uniwersytet Wrocławski v Commission and REA, T‑137/16, not published, EU:T:2017:70, paragraphs 23 to 25) in relation to the applicant’s heads of claim asking the Court to declare eligible certain staff costs in view of the grant agreements relating to the ‘Go Green’ and ‘Ladybiz’ projects concluded between it and the EACEA.

37      By letters of 24 and 27 November 2017, the Commission and the applicant submitted their observations.

 Law

38      According to well-established case-law, the lack of competence of the institution which adopted the contested measure constitutes a ground for annulment for reasons of public policy which must be raised by the EU judicature of its own motion, even though none of the parties has asked it to do so (see, to that effect, judgments of 17 December 1959, Société des fonderies de Pont-à-Mousson v High Authority, 14/59, EU:C:1959:31, p. 473, and of 10 May 1960, Germany v High Authority, 19/58, EU:C:1960:19, p. 488). According to the case-law of the Court, the question as to the competence of the authority which adopted the measure must be raised by the Court of its own motion even though none of the parties has asked it to do so (see, to that effect, judgments of 30 September 1982, Amylum v Council, 108/81, EU:C:1982:322, paragraph 28, and of 13 July 2000, Salzgitter v Commission, C‑210/98 P, EU:C:2000:397, paragraph 56 and the case‑law cited).

39      In the present case, the question relating to the existence of a legal basis granting the Commission the power to take the contested decision arises.

40      In that respect, it should be noted that Regulation No 58/2003 empowers the Commission to set up executive agencies. Under Article 6(1) and (2) of Regulation No 58/2003, the Commission may entrust those agencies with the implementation of one or more Union programmes. Although the Commission continues to perform tasks requiring discretionary powers in translating political choices into action, the agency may be entrusted with managing the phases of the project, adopting the instruments of budget implementation and, on the basis of the power delegated by the Commission, carrying out the activities required to implement a Community programme, and in particular activities linked to the awarding of contracts and grants (see judgment of 11 December 2013, EMA v Commission, T‑116/11, EU:T:2013:634, paragraph 292).

41      In addition, Article 4(2) of Regulation No 58/2003 provides that an executive agency is to have legal personality, and it is apparent from Article 20 of that regulation that the implementation of the Community programmes entrusted to executive agencies shall be supervised by the Commission and that such scrutiny shall be exercised in accordance with the procedures laid down in Article 6(3).

42      In that regard, Article 6(3) of Regulation No 58/2003 states that the details of the checks to be performed by the Commission departments responsible for Community programmes in whose management the executive agency is involved, are defined by the Commission in the instrument of delegation.

43      Pursuant to Regulation No 58/2003, the Commission established, by Decision 2009/336/EC of 20 April 2009, an executive agency, the EACEA, for the management of Community action in the fields of education, audiovisual and culture (OJ 2009 L 101, p. 26). That decision was repealed by Implementing Decision 2013/776.

44      Article 1 of Decision 2009/336 and of Implementing Decision 2013/776 provides that the statute of the EACEA is to be governed by Regulation No 58/2003.

45      Furthermore, it follows from Article 4(1) of Decision 2009/336 and Article 3(2) of Implementing Decision 2013/776 that the EACEA’s duties include in particular the management of certain strands of Community programmes, among which is the action programme in the field of lifelong learning (2007-2013), approved by Decision No 1720/2006. It is also entrusted with adopting the instruments of budget implementation for revenue and expenditure and carrying out the operations necessary for the management of the programme in question (judgment of 21 October 2010, Agapiou Joséphidès v Commission and EACEA, T‑439/08, not published, EU:T:2010:442, paragraph 35).

46      In the present case, it is apparent from the documents in the file that the grant agreements relating to the ‘Go Green’ and ‘Ladybiz’ projects were concluded between the applicant and the EACEA, in its own name and not on behalf of the Commission. In addition, in response to proceedings brought by the applicant on 6 November 2013 and on 23 October 2014 against the decisions of the EACEA declaring certain staff costs corresponding to the remuneration paid to the partners to be ineligible, the Commission adopted two decisions: in the first, dated 3 January 2014, it upheld the applicant’s appeal and asked the EACEA to verify whether there was an employment relationship between the applicant and the partners and, in the second, dated 16 December 2014, which is the contested decision, it rejected the applicant’s request and upheld the EACEA’s decision of 23 September 2014. It is not disputed, moreover, that those decisions were taken by the Commission on the basis of Article 22 of Regulation No 58/2003.

47      It is clear from the very wording of Article 22 of Regulation No 58/2003 that the review of legality exercised by the Commission applies only to acts of the executive agencies which injure a third party and not to the acts of the executive agencies in their relations with their contractual partners.

48      In that regard, it should be recalled that, while Article 20 of Regulation No 58/2003 provides that the implementation of the Community programs entrusted to the executive agencies is supervised by the Commission, it states that that supervision is to follow the procedures adopted in accordance with Article 6(3). Those provisions state in particular that the details of the checks to be performed by the Commission departments responsible for Community programmes, in whose management the executive agency is involved, are defined by the Commission in the instrument of delegation.

49      However, it must be noted that neither Implementing Decision 2013/776 nor Commission Decision C(2013) 9189 final of 18 December 2013 delegating powers to the EACEA with a view to performance of tasks linked to the implementation of Union programmes in the field of education, audiovisual and culture, comprising, in particular, implementation of appropriations entered in the general budget of the Union and of the EDF allocations, in particular in Articles 4, 5, 21 and 22 thereof, empower the Commission to take decisions of the kind contested in the present case.

50      It follows that the Commission was not competent to adopt, on the basis of Article 22 of Regulation No 58/2003, the contested decision rejecting the applicant’s appeal against the decision of 23 September 2014 declaring certain staff costs relating to the grant agreements concerning the ‘Go Green’ and ‘Ladybiz’ projects concluded between the applicant and the EACEA to be ineligible.

51      As regards the second head of claim seeking a declaration that certain staff costs were eligible in the light of the provisions of the grant agreements relating to the ‘Go Green’ and ‘Ladybiz’ projects, it should be noted, as the applicant and the Commission acknowledged in their comments in response to the questions put by the Court, that the nature of the dispute is contractual, that the grant agreements at issue were concluded between the applicant and the EACEA and not between the applicant and the Commission, which did not act as a contracting party in adopting the contested decision.

52      It follows that if the present action for annulment were to be reclassified as a contractual claim under Article 272 TFEU, the action would be inadmissible in so far as it is directed against the Commission instead of the EACEA, since the grant agreements were concluded between the applicant and the EACEA.

53      In the light of all of the foregoing, it is necessary to annul the contested decision and to dismiss the remainder of the action as inadmissible.

 Costs

54      Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.

55      Since the Commission has been largely unsuccessful, it must, in accordance with the forms of order sought by the applicant, be ordered to pay, in addition to its own costs, the costs incurred by the applicant.

56      In accordance with Article 138(1) of the Rules of Procedure, Member States and institutions which have intervened in the proceedings are to bear their own costs.

57      The EACEA is to bear its own costs.

On those grounds,

THE GENERAL COURT (First Chamber)

hereby:

1.      Annuls Commission Implementing Decision C(2014) 9706 final of 16 December 2014;

2.      Dismisses the remainder of the action as inadmissible;

3.      Orders the European Commission to bear its own costs and to pay those incurred by KV;

4.      Orders the Education, Audiovisual and Culture Executive Agency (EACEA) to bear its own costs.

Delivered in open court in Luxembourg on 20 June 2018.

*      Language of the case: English.

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