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

JUDGMENT OF THE GENERAL COURT (Ninth Chamber)

18 October 2023 (*)

(Arbitration clause - Loan agreement concerning a project for the rehabilitation of saline soils and the prevention of further salinisation of agricultural lands in a third country - Non-performance of the agreement - Repayment of the sums advanced - Default interest - Procedure by default)

In Case T‑467/22,

European Investment Bank (EIB), represented by T. Gilliams, R. Stuart and F. Oxangoiti Briones, acting as Agents, and by D. Arts and E. Paredis, lawyers,

applicant,

v

Syrian Arab Republic,

defendant,

THE GENERAL COURT (Ninth Chamber),

composed of L. Truchot, President, R. Frendo (Rapporteur) and M. Sampol Pucurull, Judges,

Registrar: V. Di Bucci,

having regard to the written part of the procedure,

gives the following

Judgment

1        By its action based on Article 272 TFEU, the European Investment Bank (EIB) requests that the Syrian Arab Republic be ordered to pay the European Union, which it represents, the sum of EUR 1 959 745.31, together with interest, under Loan Agreement No 80211 concerning the financing of a project for the rehabilitation of saline soils and the prevention of further salinisation of agricultural lands in the lower Euphrates valley (Syria) (‘the loan agreement’).

 Background to the dispute

2        Subsequent to the Cooperation Agreement between the European Economic Community and the Syrian Arab Republic of 18 January 1977 (OJ 1978 L 269, p. 2) and its protocols, the European Economic Community, represented by the Commission of the European Communities, concluded, on 20 April 1986, the loan agreement with the Syrian Arab Republic.

3        By virtue of Articles 1.01 and 1.02 of the general conditions of the loan agreement, read in conjunction with Article 1.01 of the special conditions thereof, the European Economic Community granted the Syrian Arab Republic a loan of 9 300 000 European Currency Units to be disbursed on request. That loan was disbursed in tranches in full between 14 November 1986 and 12 January 1996.

4        According to Article 4.01 of the general conditions of the loan agreement, read in conjunction with Annex C thereto, the Syrian Arab Republic was to repay the loan in 60 half-yearly instalments, as from 1 September 1996, with interest:

–        on the outstanding balance of the loan half-yearly in arrears, at the nominal annual rate of 1% (Article 3.01 of the general conditions) (‘contractual interest’);

–        in the event of any delay in repayment, on any sum that has fallen due at an annual rate of 3.5%, which is to take the place of the aforementioned rate of 1% (Article 3.02 of the general conditions) (‘default interest’).

5        Since March 2012, the Syrian Arab Republic has failed to pay the instalments due under the loan agreement.

6        By judgment of 6 June 2019, EIB v Syria (T‑588/17, not published, EU:T:2019:387), the Syrian Arab Republic was ordered to repay the European Union, represented by the EIB, first, the sum of EUR 2 184 271.58 in respect of the instalments that had not been paid by it on the due dates between 1 March 2012 and 1 March 2017 and the contractual and default interest for the period from 1 March 2012 to 25 August 2017, and, secondly, default interest from 25 August 2017 until the date that payment is made.

7        Between 25 August 2017 and 30 June 2022, 10 instalments under the loan agreement fell due and, since the Syrian Arab Republic failed to make the payments due, the EIB issued a payment reminder on each occasion as follows:

8        Nonetheless, the Syrian Arab Republic remained in default of payment.

 Procedure and form of order sought by the EIB

9        By application lodged at the Court Registry on 22 July 2022, the EIB brought the present action.

10      By letter of 1 August 2022, the application was served on the Syrian Arab Republic by registered post with acknowledgement of receipt. In accordance with Article 12.01 of the special conditions of the loan agreement, service was effected at the embassy, where the premises of the mission of the Syrian Arab Republic to the European Union in Brussels (Belgium) are located.

11      Since the Syrian Arab Republic did not lodge a defence within the period prescribed in Article 81 of the Rules of Procedure of the General Court, the EIB, by document lodged on 26 November 2022, applied to the Court for judgment by default, in accordance with Article 123(1) of those rules.

12      The EIB claims, in essence, that the Court should:

–        declare that the Syrian Arab Republic failed to fulfil its contractual obligations under the loan agreement in so far as concerns payment of the principal amounts, contractual interest and default interest on each of the instalments due and unpaid between 1 September 2017 and 1 March 2022, and, consequently, order the Syrian Arab Republic to pay the European Union, which it represents, first, the sum of EUR 1 959 745.31 by way of the principal amount, contractual interest and default interest for the period from 25 August 2017 to 30 June 2022, and, secondly, additional default interest from 30 June 2022 up to the time that payment is made;

–        order the Syrian Arab Republic to pay the costs.

 Law

13      Under Article 123(1) of the Rules of Procedure, where the Court finds that a defendant on whom an application initiating proceedings has been duly served has failed to respond to the application within the prescribed time limit, the applicant may apply to the Court for judgment by default.

14      In the present case, it should be noted that, in accordance with Article 12.01 of the special conditions of the loan agreement, the application was served on the embassy, where the premises of the mission of the Syrian Arab Republic to the European Union in Brussels are located.

15      However, as is apparent from paragraph 11 above, although the EIB’s application was duly served on the Syrian Arab Republic, the latter did not lodge a defence within the time limit prescribed in Article 81 of the Rules of Procedure.

16      Since the applicant has applied to the Court for judgment by default, it is appropriate to apply Article 123(3) of the Rules of Procedure, under which the Court is to give judgment in favour of the applicant, unless it is clear that the Court has no jurisdiction to hear and determine the action or that the action is manifestly inadmissible or manifestly lacking any foundation in law.

 The jurisdiction of the General Court

17      In accordance with Article 272 TFEU, the Court of Justice of the European Union is to have jurisdiction to give judgment pursuant to any arbitration clause contained in a contract concluded by or on behalf of the European Union, whether that contract be governed by public or private law.

18      As is apparent from paragraph 2 above, the loan agreement was concluded by the European Economic Community, subsequently the European Community, which the European Union replaced and succeeded in accordance with the last sentence of the third paragraph of Article 1 TEU.

19      Article 11.03 of the general conditions of the loan agreement contains an arbitration clause under which any disputes concerning that agreement are to be submitted to the Court of Justice of the European Union.

20      In addition, in accordance with Article 256(1) TFEU, the General Court is to have jurisdiction to hear and determine at first instance actions brought on the basis of an arbitration clause, as referred to in Article 272 TFEU.

21      In the light of the foregoing, it must be held that the General Court does not manifestly lack jurisdiction to hear and determine the present action.

 Admissibility of the action

22      By the action, the EIB seeks that the Syrian Arab Republic be ordered to pay the European Union, which it represents, the sum of EUR 1 959 745.31 by way of the principal amount and the contractual and default interest under the loan agreement and a sum representing the additional default interest from 30 June 2022 up to the time that payment is made.

23      It is apparent from the preliminary considerations of the loan agreement that, upon conclusion of that agreement, the European Commission gave a mandate to the EIB to take all the measures necessary to ensure repayment of the loan granted to the Syrian Arab Republic under that agreement.

24      To that end, on 8 August 2017, the EIB was instructed by the Commission to initiate recovery procedures in the name and on behalf of the European Union with regard to the amounts due under the loan agreement and to represent the European Union in the judicial proceedings in the present case.

25      Thus, it does not appear that the present action, brought by the EIB on behalf of the European Union on the basis of Article 272 TFEU, is manifestly inadmissible.

26      Furthermore, the present action does not raise any other difficulties which would be such as to give reason to consider it manifestly inadmissible.

27      Consequently, it must be held that the present action is not manifestly inadmissible.

 Substance of the action

28      In the first place, it is apparent from the documents before the Court that, on the basis of the loan agreement, the European Economic Community granted the Syrian Arab Republic a loan repayable on the due dates referred to in paragraph 7 above.

29      In addition, it is apparent from the information provided by the EIB that the Syrian Arab Republic failed to make repayments on those due dates, in breach of Article 4.01 of the general conditions of the loan agreement.

30      Consequently, the claim that the Syrian Arab Republic be ordered to repay the sum of EUR 1 680 510.04 in respect of the principal amount that was borrowed by the Syrian Arab Republic and that should have been repaid between 1 September 2017 and 1 March 2022 inclusive, is not manifestly lacking any foundation in law.

31      In the second place, it is apparent from Article 3.01 of the general conditions of the loan agreement that contractual interest is payable on the outstanding balance of the loan half-yearly in arrears, at the nominal annual rate of 1%, and that, under Article 3.02 of the general conditions of the loan agreement, in the event of any delay in repayment of the loan, the nominal annual rate of default interest is set at 3.5%.

32      Consequently, the claims that the Syrian Arab Republic be ordered to pay, first, the sum of EUR 279 235.27 in respect of the contractual and default interest for the period from 25 August 2017 to 30 June 2022, and, secondly, the default interest due on the sum of EUR 1 680 510.04, at the annual rate of 3.5%, from 30 June 2022 until the date that payment is made, are also not manifestly lacking any foundation in law.

33      Accordingly, it is necessary to uphold the form of order sought by the EIB, and to give a judgment by default against the Syrian Arab Republic, in accordance with Article 123 of the Rules of Procedure.

 Costs

34      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. Since the Syrian Arab Republic has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the EIB.

On those grounds,

THE GENERAL COURT (Ninth Chamber)

hereby:

1.      Orders the Syrian Arab Republic to repay the European Union, represented by the European Investment Bank (EIB), the sum of EUR 1 959 745.31 representing the principal amounts and the contractual and default interest due on 30 June 2022;

2.      Declares that the sum of EUR 1 680 510.04 comprising the principal amounts is to bear default interest at the annual rate of 3.5% from 30 June 2022 until the date that payment is made;

3.      Orders the Syrian Arab Republic to pay the costs.

Delivered in open court in Luxembourg on 18 October 2023.

*      Language of the case: English.

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