In Case T-74/05

ORDER OF THE COURT OF FIRST INSTANCE (Fourth Chamber)

3 April 2006 (*)

(Research and technological development programme entitled ‘Promotion of innovation and encouragement of SME participation’ – Community financing – Articles 230EC and 238EC – Arbitration clause – Action for annulment – Admissibility)

In Case T-74/05,

The International Institute for the Urban Environment, established in Delft (Netherlands), represented by P.terBurg, lawyer,

applicant,

v

Commission of the European Communities, represented by L.Ström van Lier, acting as Agent, assisted by J.Stuyck, lawyer, with an address for service in Luxembourg,

defendant,

APPLICATION under Articles 230EC and 238EC, concerning the remuneration claimed by the applicant in connection with the performance of the two contracts IPS-1999-00016 and IPS-1999-00022, concluded in the framework of the research and technological development programme entitled ‘Promotion of innovation and encouragement of SME participation’,

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (Fourth Chamber),

composed of H.Legal, President, P.Lindh and V.Vadapalas, Judges,

Registrar : E.Coulon,

makes the following

Order

Facts of the case and legal background

1On 31 March 2000, the Commission entered into two contracts with a number of contracting parties including, in particular, ‘The International Institute for the Urban Environment’ (‘Eenmanszaak’ (a one-man business) owned and managed by MrDeelstra) (‘the applicant’ or ‘the IIUE’) for the implementation of a research and technological development programme entitled ‘Promotion of innovation and encouragement of SME participation’, part of the Fifth Framework Programme of the European Community for research, technological development and demonstration activities (1998-2002) (jointly ‘the contracts’).

2The first contract, which has reference number IPS-1999-00016 (‘contract 00016’), specifies detailed rules concerning the Commission’s financial contribution to a project called ‘Innovation strategies to assess S & T impact in industrial cluster’ and the second contract, which has reference number IPS-1999-00022 (‘contract 00022’), specifies detailed rules concerning its financial contribution to a second project entitled ‘Partnerships for Societal and Technological Innovation in Post-war High-rise Areas (ITTAKES2)’.

3Article 5(1) of the contracts stipulates that Belgian law is the applicable law and Article 5(2) stipulates that the Court of First Instance of the European Communities and, in the case of an appeal, the Court of Justice of the European Communities, have sole jurisdiction to hear any disputes between the Community and the principal contractors as regards the validity, the application or any interpretation of the contracts.

4According to Article 8 of the contracts, the general conditions are an integral part of the contract.

5Article 14(1)(b) of the general conditions annexed to contract 00016 and Article 23(1)(b) of the general conditions annexed to contract 00022 govern the calculation of personnel costs, which ‘comprise … the actual costs (gross remuneration and related charges)’ or the ‘average employment costs, where these correspond to the normal practices of the principal contractor concerned, provided that such costs do not differ significantly from the actual costs and that such practices are regarded as acceptable by the Commission’.

6At the material time, the Commission gave the auditing firm Internationaler Blömer the task of carrying out an audit concerning the performance of the contracts pursuant to Article 17 of the general conditions annexed to contract 00016 and Article 26 of the general conditions annexed to contract 00022. The objective of the audit was in particular to check the compatibility of the statements concerning personnel costs submitted by the applicant with Article 14(1)(b) of the general conditions annexed to contract 00016 and Article 23(1)(b) of the general conditions annexed to contract 00022.

7In its draft report communicated to the applicant on 24 November 2003, the auditing firm stated that it had found irregularities in the performance of the contracts, due in particular to the fact that the rates charged for personnel costs were average rates instead of actual rates based on time-sheets for the periods for which invoices were submitted.

8By letter of 8 January 2004, the applicant contested that finding.

9Following an exchange of letters concerning the applicant’s objections to the draft audit report, the Commission informed the applicant, by letter of 17 December 2004 (‘the contested letter’), that it considered the audit as closed.

10In the contested letter, signed by the responsible official of the External Audit Sector of the ‘Budgetary Resources’ Unit in the ‘Resources’ Directorate of Directorate-General (DG) ‘Information Society’, the Commission stated the following:

‘… with regard to your point concerning the personnel rate, we are of the opinion that the initial audit conclusions should be maintained. The reasons … are as follows:

As stated in the report, the [IIUE] has charged labour rates on the basis of averages. These average rates have proven to deviate significantly from actual rates as stated in the audit report on … pages 15-18. The cost reimbursement is based on the principle of “actual costs”. Following Art. 23.1(b) of Annex II average rates can only be accepted if they do not deviate significantly from the actual costs. As this has not been the case your cost claims require adjustment in this respect.

Regarding your comments referring to the adequacy of the conducted audit I can inform you that in our … view the audit has been correctly, comprehensively and adequately performed. All information and documentation which has been made available by you … during the audit-field work and in line with the 30-day period (Art. 26.3 of Annex II) to the auditors has been duly considered for the conclusions of the audit. On that basis I see no reason to re-conduct this audit as suggested in your note.

We now consider the audit as closed.

The final results of the audit will be distributed to the relevant Commission services in order for these to make the necessary adjustments to the costs over-claimed. These adjustments could affect future payments due on this contract, or result in the issuing of a recovery order for all amounts overpaid. In addition, you may be requested to submit revised cost statements for any of the non-audited periods to which the audit findings apply. The audit findings might also be applicable to non-audited contracts, where appropriate.

You should ensure that in future all cost statements submitted [to us] comply with the relevant contractually-agreed financial provisions and conform to the principles stemming from these audit results.’

11By letter of 15 February 2005, addressed to the Commission by the auditing firm PricewaterhouseCoopers on behalf of the applicant, the latter restated its disagreement with the findings of the audit, in particular about the Commission’s refusal to take into account all the hours which the IIUE claimed to have spent on the contracts.

Procedure and forms of order sought

12By application lodged at the Registry of the Court of First Instance on 16 February 2005, the applicant brought the present action.

13On 3 June 2005, the Commission, by separate document, raised an objection of inadmissibility pursuant to Article 114(1) of the Rules of Procedure of the Court of First Instance and lodged a statement of defence.

14The applicant submitted its observations on the objection of inadmissibility on 25 August 2005.

15The applicant claims that the Court should:

–annul the Commission’s decision concerning the financial audit of the IIUE, contained according to it in the contested letter;

–rule that the sum which it claims is justified and in accordance with the contracts;

–in the alternative, authorise it to claim the number of hours spent on the contracts;

–order the Commission to adopt a reasoned decision, in accordance with the common rules of sound administration applicable in the present case;

–order the Commission to pay the costs.

16The Commission contends, as set out in its objection of inadmissibility, that the Court should:

–dismiss the application as manifestly inadmissible;

–in the alternative, dismiss the application as manifestly unfounded;

–order the applicant to pay the costs.

Law

17Under Article 114(1) of the Rules of Procedure, where a party so requests, the Court of First Instance may decide on inadmissibility without going into the substance of the case. Under Article 114(3) of those Rules, the remainder of the proceedings is to be oral unless the Court decides otherwise.

18In the present case the Court considers that it has sufficient information from the documents in the file to decide on the application submitted by the Commission and that there is no need to open the oral procedure.

19By its objection of inadmissibility, the Commission submits that the first head of claim, seeking annulment of the contested letter, is erroneously based on Article 230EC, and that the second and third heads of claim, concerning the interpretation of the contracts, as well as the fourth head of claim, concerning the application for an order, do not comply with Article 44(1) of the Rules of Procedure.

The first head of claim, seeking annulment of the contested letter

Arguments of the parties

20The Commission submits, in substance, that the contested letter is an act adopted in a purely contractual context. Therefore, as it was not adopted by the Commission in the exercise of its prerogatives as a public authority, the letter cannot be treated in the same way as a measure such as those covered by Article 249EC, the annulment of which may be sought before the Court pursuant to Article 230EC.

21The applicant takes the view that this head of claim is admissible. In support of its claim, it puts forward three arguments.

22First, it submits that the manner in which the Commission has acted and the prerogatives which the contracts confer on it mean that it has acted in the exercise of its prerogatives as a public authority and not solely within the ambit of the performance of contractual obligations.

23In that respect, the applicant submits that, in concluding the contracts, the Commission was not acting as a party to a commercial contract, but in its capacity as a public authority granting subsidies for the partial funding of research and technological development projects. The fact that the subsidy was granted on the basis of a contract does not invalidate this conclusion. As evidence of what it puts forward, it relies on Case T-102/03 CIS v Commission [2005] ECR II-0000, in which the Court held that the Commission had acted in the exercise of its prerogatives as a public authority despite the fact that the conditions for the award of the subsidies had been laid down in a contract.

24This is illustrated by the fact that, in the Technical Annex to Contract 00022, the Commission is identified as the organisational head of the project, and that the results obtained in the context of the performance of the contracts were published without the applicant having derived any profit therefrom.

25The exercise of prerogatives as a public authority is confirmed moreover by the fact that Article 17(3) of the general conditions annexed to Contract 00016 and Article 26(3) of the general conditions annexed to Contract 00022 give the Commission the power, in particular, to order the recovery of overpayments, a measure which, according to Article3(4) of the general conditions annexed to the contracts, is enforceable within the meaning of Article 256EC.

26In fact, given that such a recovery order is directly enforceable against the applicant, without any ruling by the Court of First Instance on the merits of the case pursuant to Article 238EC or, where appropriate, a recovery order issued by it in respect of overpayments, the only legal remedy available to the applicant to contest the findings of the audit is an action under Article 230EC. The Commission recognised the merits of this analysis in its submissions in Case T‑28/03 Holcim (Deutschland) v Commission [2005] ECR II-0000, paragraph 19).

27Moreover, Article 256EC is applicable only if the relationship involved is not purely contractual, which the Commission recognised in its submissions in the case which led to the order of the President of the Court of First Instance in Case T-149/00 R Innova v Commission [2000] ECR II-2941, paragraph 13.

28These arguments are reinforced by the fact that, in the contested letter, the Commission informed the applicant that the findings of the audit concerning the present case could also be applied to non-audited contracts.

29Finally, Article 230EC gives the Court a broad authority to review the legality of acts adopted by the Commission. This authority may however be exercised only where the applicant respects mandatory time-limits. In that respect, it must be noted that, if the Commission had acted in the exercise of its prerogatives as a public authority, the applicant would be time-barred as regards its right to contest the audit, since the time-limit of two months laid down in Article 230EC has expired.

30Secondly, the applicant takes the view that, having regard to the fact that the Commission omitted, in breach of point 3 of the Code of good administrative behaviour for staff of the European Commission in their relations with the public, annexed to the Commission’s Rules of Procedure (OJ2000 L308, p.26; ‘the Code of good behaviour’), to inform the applicant correctly and clearly of the capacity in which it acted as well as of the legal remedies available to the applicant to contest the findings of the audit, the application should be considered under Article 230EC and not under Belgian law.

31Thirdly, the Commission has no valid interest in the application being declared inadmissible. In fact, to the extent that it takes the view that it has not acted in the exercise of its prerogatives as a public authority, it must bring an action before the Court in order to recover the sums which it believes it has overpaid. Therefore, it would be contrary to the principle of economy of procedure to declare the application inadmissible.

Findings of the Court

32It should be noted that, pursuant to Article 230EC, the Community Courts review the legality of acts, adopted by the institutions under the EC Treaty, which are intended to produce legal effects vis-à-vis third parties.

33According to settled case-law, acts adopted by the institutions which form part of a purely contractual framework from which they are not separable are not, by their very nature, among the acts referred to in Article 249EC, the annulment of which may be sought before the Community Courts pursuant to Article 230 EC (orders in Case T-186/96 Mutual Aid AdministrationServices v Commission [1997] ECRII-1633, paragraphs 50 and 51, and Joined Cases T-314/03 and T-378/03 Musée Grévin v Commission [2004] ECRII-1421, paragraph 64). Therefore, applications seeking the annulment, on the basis of Article 230EC, of acts of a purely contractual nature are not admissible (orders in Mutual Aid Administration Services v Commission, paragraph 51, and Musée Grévin v Commission, paragraph 87).

34Therefore, it should be examined whether the contested letter is one of the acts referred to in Article 249EC, an application for the annulment of which is within the jurisdiction of the Community Courts pursuant to Article 230EC or whether, on the contrary, it is of a purely contractual nature.

35In this respect, the view must be taken that the contested letter forms part of a contractual framework from which it is not separable. In fact, there is no factor which indicates, on reading it, that the Commission acted making use of rights other than those conferred by the contracts. By the said letter, the Commission, in substance, confined itself, on the basis of the interpretation of the relevant facts and stipulations in the contracts, to informing the applicant that, after examining the objections which it had made concerning the audit of the performance of the contracts, it confirmed its finding that the rates applied by the applicant to determine personnel costs were not in accordance with the contracts. Finally, it warned the applicant that the possible consequences of the said finding could consist in the adjustment of the sums to be paid in the future or the recovery of sums overpaid.

36Replying to the plea of inadmissibility raised by the Commission against the first head of claim, the applicant nevertheless insists that the contested letter was in the nature of a decision, which it infers, essentially, from the objectives of general interest pursued by the Commission through the conclusion of contracts, that is, the granting of subsidies for research and technological development projects, and from the prerogatives conferred on the Commission by the said contracts in relation to the recovery of sums overpaid.

37In this respect, it should be pointed out first of all that, if the Commission, in concluding the contracts, pursued an objective of general interest, that is, Community participation in the financing of research projects on technological development, the fact nevertheless remains that the framework of which the contested letter forms part is purely contractual.

38In fact, contrary to the characteristics of the case giving rise to the judgment in CIS v Commission, relied on by the applicant, the conditions and the detailed rules concerning the realisation of the projects in the present case, that is, in particular, the Community contribution and the work that the applicant had to carry out in return, are entirely governed and defined by contracts.

39Moreover, the applicant’s contention that the contracts confer on the Commission the right to recover overpayments and stipulate that such measures are enforceable within the meaning of Article 256EC also does not affect the finding that the framework of which the contested letter forms part is purely contractual.

40In fact, to the extent that Article 17(3) of the general conditions annexed to Contract 00016 and Article 26(3) of the general conditions annexed to Contract 00022 give the Commission the right, in particular, to issue a recovery order in respect of payments which it believes were improperly made, such a possibility being moreover reiterated in the contested letter, this right is exclusively based on the contracts and limited to any pecuniary obligation arising from the performance thereof.

41Similarly, it should be pointed out that, contrary to what the applicant contends, nor does the reference, in Article 3(4) of the general conditions annexed to the contracts, to Article 256EC affect the purely contractual nature of the present dispute. In fact, without it being necessary to rule on the applicability of Article 256EC in circumstances such as those of the present case or, more generally, on the validity of the clause relied on, the latter simply reveals the parties’ common intention to attribute to any recovery order issued by the Commission pursuant to the contracts the same enforceability as that attributed to the decisions referred to in that article.

42Finally, the applicant has not put forward any other matter of fact or of law which can call in question the finding that the contested letter forms part of a contractual framework from which it is not separable.

43Therefore, it must be held that the first head of claim is inadmissible.

The second and third heads of claim, concerning the interpretation of the contracts

Arguments of the parties

44The Commission submits that the applicant’s second and third heads of claim, concerning the interpretation of the contracts, do not comply with Article 44 of the Rules of Procedure in that they are not sufficiently clear and precise to enable the Commission to defend itself and the Court to decide the case.

45It points out, in this respect, that the applicant has not, with regard to the second head of claim, quantified the sum which it claims is justified in the present case and, with regard to the third head of claim, quantified the number of working hours which it claims to have spent on the contracts.

46The Commission adds that, in support of its application, the applicant essentially restricts itself to submitting that the Commission infringed, first, the contracts, by rejecting the method of calculation of personnel costs used by the applicant, that is, the ‘ABCmethod’, and, second, its fundamental rights, without however indicating the clauses of the contracts or the provisions, applicable in the present case, which it alleges were infringed.

47The applicant maintains that the submissions and arguments set out in the application are sufficiently clear and precise to enable the Commission to prepare its defence and the Court to decide the case, which the Commission implicitly admitted by filing, simultaneously with its objection of inadmissibility, a detailed statement of defence.

48Concerning the second head of claim, it explains that the sum which it asked the Court to declare to be justified and in compliance with the contracts is that which it claimed in its cost statements listed on page 2 of the audit report annexed to the statement of defence.

49Concerning the third head of claim, presented as an alternative, concerning the working hours spent on the contracts, it refers to the reasons set out in the letter of 15 February 2005, sent on its behalf to the Commission by the auditing firm PricewaterhouseCoopers and annexed to the application.

50With regard to the submissions set out in the application, the applicant submits that the subject-matter of the dispute essentially concerns factual rather than legal questions. It maintains moreover that the dispute concerns the application of general principles of Belgian contract law, to the exclusion of the application of any specific rule of the said law.

51In this respect, the Commission was, by letters from the applicant of 27 October and 1 December 1999, fully informed, before the conclusion of the contracts, that the ‘ABCmethod’ would be applied and, consequently, of the rates that would be used to calculate personnel costs. Therefore, in performing the contracts, the Commission accepted the application of the rates resulting from the use of this method. Alternatively, the applicant maintains that it had grounds for believing, in good faith, that the Commission had accepted their application.

52As was recalled in the letter from the auditing firm PricewaterhouseCoopers of 15February 2005, sent to the Commission on behalf of the applicant, the latter states that it did not count the total number of working hours spent on the contracts since, using the ‘ABC method’, the remuneration limit had in any case been reached. This is no longer the case following the audit, given the reduction in the applicable rates used to calculate personnel costs.

53It is in this context that the applicant takes the view that the Commission did not respect the principle of good administration in that it did not, by reasoned answer, take into consideration the applicant’s request, sent to the Commission towards the end of April 2004, that its remuneration be calculated on the basis of the total number of hours spent on the contracts, including those which it had not mentioned prior to the audit.

54Finally, the applicant submits that it has sufficiently set out the principle of Belgian law on which its submissions are based. Under Belgian law, the rules of good administrative behaviour apply if a public authority acts in a contractual relationship. It adds, in this respect, that Belgian administrative law lays down rules of good administrative conduct, such as, in particular, the duty to give reasons for decisions.

Findings of the Court

55It should be noted first of all that, by its second and third heads of claim, proposed as alternatives, the applicant asks the Court to rule that the sum which it claims is justified and in accordance with the contracts, or to authorise it to claim the number of hours spent on the contracts.

56Since these claims arise from the contracts or are directly connected with the obligations arising therefrom (Case 426/85 Commission v Zoubek [1986] ECR4057, paragraph 11), the Court has jurisdiction pursuant to Article 238EC, given that Article 5 of the said contracts gives it sole jurisdiction to hear at first instance any disputes between the Community and the applicant as regards the validity, the application or any interpretation of the contracts.

57However, it must be held that the submissions made on this ground are also inadmissible.

58In this respect, it should be noted that, pursuant to Article 44(1)(c) of the Rules of Procedure, the application initiating proceedings must state the subject-matter of the proceedings and contain a summary of the pleas in law on which it is based. This summary must be sufficiently clear and precise to enable the defendant to prepare its defence and the Court to exercise its power of review. In order to guarantee legal certainty and the sound administration of justice, it is necessary, if submissions are to be admissible, that the essential matters of fact and law on which they are based are indicated, at least in summary form, coherently and intelligibly in the application itself (Case T-113/96 Dubois etFils v Council and Commission [1998] ECRII‑125, paragraph 29, and Case T-195/00 Travelex Global and Financial Servicesand InterpaymentServices v Commission [2003] ECRII-1677, paragraph 26; see, in addition, order in Case T-110/98 RJB Mining v Commission [2000] ECRII‑2971, paragraph 23).

59In the present case, as the Commission correctly maintains, the applicant has not, in its application, quantified the amount which it considered ‘justified and in accordance with the contract’ or the number of working hours which it claims to have spent on the contracts. In support of its submissions, the applicant limited itself, in substance, to stating that the Commission had accepted the ‘ABC method’ at the time the contracts were concluded or performed or, alternatively, that it had the right to include the additional hours worked in the calculation of its contractual remuneration.

60In so doing, the applicant has not, in its application, set out in a sufficiently detailed manner the relevant matters of fact and law to enable the Commission properly to prepare its defence and the Court to assess whether the sums paid to the applicant or the number of working hours spent on the contracts were in accordance with the agreement concluded between the parties under Belgian law which governed the contracts.

61It must also be recalled that, whilst the body of the application may be supported and supplemented on specific points by references to extracts from documents annexed thereto, a general reference to other documents, even those annexed to the application, cannot make up for the absence of the essential arguments in law which, in accordance with the abovementioned provision, must appear in the application (Case T‑333/99 X v ECB [2001] ECR II-3021, paragraph 115, Case T‑127/02 Concept v OHIM(ECA) [2004] ECR II-1113, and order in Case T‑154/98 Asia Motor Franceand Others v Commission [1999] ECRII-1703, paragraph 49). Therefore, the applicant cannot properly make reference, a fortiori subsequently to the submission of the statement of defence, to documents annexed to the application or to the said statement.

62In these circumstances, it must be held that the second and third heads of claim contained in the application as well as the submissions presented in support thereof lack the clarity and precision necessary to enable the Commission properly to prepare its defence and the Court to exercise its power of review and, therefore, are inadmissible.

The fourth head of claim, on the application for an order

63As set out in its fourth head of claim, the applicant asks the Court to order the Commission to adopt a reasoned decision, in accordance with the rules of sound administration applicable in the present case.

64In that respect, in support of its action and, in particular, of that claim, the applicant makes reference to the obligation to give reasons, by which it considers the Commission to be bound pursuant to the fundamental principle of good administration as set out in Article 41(2) of the Charter of fundamental rights of the European Union, proclaimed at Nice on 7 December 2000 (OJ 2000 C364,p.1), as well as Article 3 of the Code of good behaviour. It follows that that claim does not arise from the contracts and cannot be regarded as having a direct connection with the obligations deriving therefrom (Commission v Zoubek, paragraph11). Consequently, it does not come within the jurisdiction of the Court, under Article 238EC.

65Therefore, the fourth head of claim and, consequently, the application in its entirety, should be declared inadmissible.

Costs

66Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the applicant has been unsuccessful, it must be ordered to pay the costs, as applied for by the Commission.

On those grounds,

THE COURT OF FIRST INSTANCE (Fourth Chamber)

hereby orders:

1.The application is dismissed as inadmissible.

2.The applicant shall pay the costs.

Luxembourg, 3 April 2006.

* Language of the case: English.