CELEX: 62021TJ0330
Social policy
Grants for actions to promote corporate governance initiatives
Call for proposals VP/2020/008
Exclusion of European works councils not having legal personality
Article 197(2)(c) of Regulation (EU) 2018/1046

By its action under Article 263 TFEU, the applicant, EWC Academy GmbH, seeks annulment of the decision of the European Commission of 14 April 2021 by which the Commission rejected the application for a grant which it had submitted, as coordinator of a consortium, in the context of call for proposals VP/2020/008 relating to employee participation in corporate governance (‘the contested decision’).
Background to the dispute
Call for proposals
On 2 June 2020, call for proposals VP/2020/008 (information, consultation and participation of representatives of undertakings) (‘the call for proposals’) was published concerning the award of grants for actions to promote corporate governance initiatives.
That publication followed on from Commission Decision C(2019) 6522 final of 16 September 2019 on the adoption of the 2020 annual work programme for grants and procurement concerning the prerogatives and specific competencies of the Directorate-General for Employment, Social Affairs and Inclusion, serving as a financing decision.
Under point 2.1 of the call for proposals, the appropriations available are intended, in essence, to finance measures enabling the social partners and social actors to familiarise themselves with EU law and policies in the area of employee involvement in companies and to work towards the definition and implementation of concrete responses to the challenges posed by such involvement. In that regard, the priorities set for the financial year 2020 concerned, among others, the promotion of transnational cooperation between the social partners, the exchange and dissemination of knowledge and good practice and the development of actions aimed at supporting transnational information, consultation and participation mechanisms and bodies, including European works councils.
In that context, the call for proposals specifies in point 6.1(b) that single applicants, lead applicants and co-applicants eligible to participate in this call must be, inter alia, legal entities or workers’ representatives, such as works councils. Similarly, organisations of social partners without legal personality under the applicable national law are also eligible to submit applications pursuant to Article 197(2)(c) of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014 and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 (
OJ 2018 L 193, p. 1
, ‘the Financial Regulation’) and provided that the conditions of that regulation are met.
Under point 8.1 of the call for proposals, single applicants, lead applicants and co-applicants must have strong financial capacity to maintain their activities for the period of the action and to help finance it as necessary.
Administrative procedure
The applicant is a training and consultancy company specialising in issues relating to employee representation in a cross-border context.
The applicant and the European works councils of Mayr-Melnhof Packaging and DS Smith plc joined together in a consortium to respond to the call for proposals. The consortium’s project concerned, in essence, the development and implementation of workshops, conferences and training courses for workers in the packaging industry.
On 30 July 2020, the applicant submitted an application for a grant and designated the European works councils of Mayr-Melnhof Packaging and DS Smith as co-applicants (‘the co-applicant works councils’). The application was accompanied, inter alia, by a declaration on their honour by the chairs of those works councils stating that they had the required financial and operational capacity, in accordance with the conditions set out in the call for proposals.
On 14 September 2020, the Commission asked the applicant to provide evidence that the co-applicant works councils were registered with the national public authorities.
On 15 September 2020, the applicant replied that the bodies were European works councils that did not require registration and that they were represented by their chairs.
By letter of 20 January 2021, the Commission informed the applicant that the consortium’s application had passed the substantive assessment stage and invited it to submit additional documents, including the ‘Legal Entity’ form.
On 25 January 2021, the applicant declared to the Commission that the co-applicant works councils were not legal entities and that, consequently, no document could be produced to that effect.
On the basis of Article 197(2)(c) of the Financial Regulation, the Commission called on the applicant to provide evidence of the financial capacity of the European works council of Mayr-Melnhof Packaging by requesting, in an email dated 24 March 2021, the balance sheet and profit and loss account of that council.
In its letter of 29 March 2021, the applicant stated that it was not in a position to provide evidence of the financial capacity of the co-applicant works councils because, with the exception of France, the European works councils did not have their own bank accounts and did not draw up balance sheets.
By letter Ares(2021) 2519314 of 14 April 2021, the Commission adopted the contested decision rejecting the applicant’s application for a grant submitted in the context of the call for proposals, as the consortium’s coordinator.
In the contested decision, the Commission noted that, despite the declarations on their honour produced by the co-applicant works councils indicating that they had sufficient financial capacity to carry out the action which gave rise to the call for proposals, they had neither annual accounts (balance sheet and/or profit and loss account) nor bank accounts. Therefore, the Commission considered that the two works councils did not fulfil the conditions set out in Article 197(2)(c) of the Financial Regulation or those relating to point 8.1 of the call for proposals.
Following the finding that the co-applicant works councils were ineligible, the Commission considered that the applicant did not meet the minimum eligibility criterion set out in point 6.1(b) of the call for proposals, and that therefore the application must be rejected in its entirety.
Forms of order sought
The applicant claims that the Court should:
–
annul the contested decision;
–
oblige the Commission to adopt a lawful grant decision;
–
order the Commission to pay the costs.
The Commission contends that the Court should:
–
declare the action inadmissible as regards the order addressed to it to adopt a decision to make the grant in accordance with the law;
–
as to the remainder, dismiss the application as unfounded;
–
order the applicant to pay the costs of the proceedings.
Law
The jurisdiction of the General Court
The Commission submits that the General Court does not have jurisdiction to rule on the second head of claim, since the applicant seeks a declaration concerning the effects of any judgment annulling a measure, which would constitute a direction as to the manner in which it is to be complied with.
It must be noted that the Court is in fact being asked, under this head of claim, to order the Commission to adopt a lawful decision to award a grant.
In that regard, it is sufficient to recall that, when exercising judicial review of legality under Article 263 TFEU, the Court does not have jurisdiction to issue directions against the institutions, bodies, offices or agencies of the Union (order of 22 September 2016, Gaki v Commission,
C‑130/16 P
, not published,
EU:C:2016:731
, paragraph
), even where they concern the manner in which its judgments are to be complied with (order of 19 July 2016, Trajektna luka Split v Commission,
T‑169/16
, not published,
EU:T:2016:441
, paragraph
).
It follows that the second head of claim should be dismissed on the ground that the Court is not competent to hear it.
Substance
In support of its action, the applicant puts forward, in essence, three pleas in law, the first alleging infringement of Article 197(2)(c) of the Financial Regulation, read in conjunction with point 8.1 of the call for proposals, the second alleging infringement of Article 197(3) of that regulation and the third alleging infringement of the principle of the protection of legitimate expectations.
As regards the first plea, the applicant submits, in essence, that the Commission has infringed Article 197(2)(c) of the Financial Regulation, read in conjunction with point 8.1 of the call for proposals. It considers that the Commission cannot require European works councils without legal personality to demonstrate that they have their own bank accounts or annual balance sheets.
In that regard, the applicant submits that proof of sufficient access to financial resources was provided by all the members of the consortium. The applicant also submits that the Commission did not take into account in its analysis the fact that Austrian and United Kingdom law, applicable respectively to the European works council of Mayr-Melnhof Packaging and the European works council of DS Smith, provided for the possibility for those councils to assert against the company a right to reimbursement of expenses resulting from their activity, including the right to the maintenance of the remuneration of the chairs and members participating in the project.
Furthermore, it argues that Article 197(2)(c) of the Financial Regulation does not require, for entities without legal personality, evidence similar to that required of legal persons, but equivalent evidence.
Finally, the applicant submits that the Commission’s interpretation of Article 197(2)(c) of the Financial Regulation in the contested decision not only excludes the applicant consortium from the call for proposals, but also the majority of European works councils in the Member States that do not have legal personality.
The Commission maintains that the proof of financial capacity referred to in Article 198(2) of the Financial Regulation is required of all applicants, whether or not they have legal personality.
According to the Commission, the verification of financial capacity must be carried out on the basis of the information and supporting documents referred to in Article 196(1)(c) of the Financial Regulation. In the Commission’s view, the purpose of the verification is to provide information on the stability and financial solvency of the applicant concerned.
As such, the Commission takes the view that there is greater uncertainty regarding the financial capacity of entities without legal personality. That circumstance, it submits, increases the financial risk involved in awarding a grant, as far as the general budget of the Union and its financial interests are concerned. In that context, by requiring evidence equivalent to that referred to in Article 196(1)(c) of the Financial Regulation, Article 197(2)(c) of the regulation is, in the Commission’s view, designed merely to offset the uncertainties associated with the legal status of those entities, and that is the reason for imposing a higher requirement than that required in respect of legal persons.
In the Commission’s view, it was incumbent on the co-applicant works councils to provide not only evidence comparable to that listed in Article 196(1)(c) of the Financial Regulation, but also evidence of their equivalence, in accordance with Article 197(2)(c) of the regulation. The Commission considers that evidence is equivalent if it corresponds to that required of a legal person and includes, in that sense, the information required by Article 196(1)(c) of the regulation.
According to the Commission, the contested decision does not assess the equivalence between the financial capacity of the co-applicant works councils and that of a legal person, since the councils were not able to prove such capacity under Article 198 of the Financial Regulation. In that regard, the Commission took the view that latter did not demonstrate that they had financial resources at their disposal.
It should be recalled that Article 198(2) of the Financial Regulation provides that an applicant for a grant must have ‘stable and sufficient sources of funding to maintain his or her activity throughout the period for which the grant is awarded and to participate in its funding (‘financial capacity’)’. Under paragraph 4 of that article, financial capacity is to be verified in particular on the basis of an analysis of any information or supporting documents referred to in Article 196 of the Financial Regulation, on the content of grant applications, including, in particular, the profit and loss account and the balance sheet for up to the last three financial years for which the accounts were closed.
Furthermore, Article 197(2)(c) of the Financial Regulation provides that entities which do not have legal personality shall be eligible to participate in a call for proposals provided that they offer guarantees for the protection of the financial interests of the Union equivalent to those offered by legal persons. As such, the applicant must have financial capacity equivalent to that of legal persons and must prove, through its representatives, that those conditions are satisfied.
Having regard to the content of Article 197(2)(c) of the Financial Regulation, the aim of which is to enable entities which do not have legal personality to participate, in the same way as legal persons, in Union calls for proposals, the information and supporting documents referred to in Article 196(1)(c) of the regulation as necessary to demonstrate financial capacity in the context of a grant application and which consist, in particular, of the profit and loss account and the balance sheet for up to the last three financial years for which the accounts were closed, cannot be interpreted as meaning that those elements alone are sufficient to demonstrate the existence of that capacity.
Moreover, an interpretation of Article 197(2)(c) of the Financial Regulation that would have the effect of requiring entities without legal personality to submit evidence generally associated with the possession of such personality would undermine the useful effect of that provision by creating obstacles to their participation in grant applications.
While proof of financial capacity equivalent to that of a legal person can thus be provided by means other than those cited, by way of example, in Article 196(1)(c) of the Financial Regulation, the fact remains that the evidence provided to demonstrate the existence of such capacity must make it possible to verify that the entity without legal personality is able to offer guarantees for the protection of the financial interests of the Union equivalent to those offered by a legal person, as is clear from the wording of Article 197(2)(c) of the Financial Regulation.
In the present case, the Commission ruled in the contested decision that the co-applicant works councils did not fulfil the conditions of Article 197(2)(c) of the Financial Regulation or point 8.1 of the call for proposals, under which single applicants, lead applicants and co-applicants must have sound financial capacity to maintain their activity throughout the period of the action and to help finance it if necessary, solely on the ground that those works councils did not have annual accounts (balance sheets and/or profit and loss accounts) or bank accounts (see paragraph 17 above). It follows from the contested decision that, in the Commission’s view, the demonstration of sound financial capacity requires the submission of evidence associated with the existence of annual accounts (balance sheets and/or profit and loss accounts) or a bank account.
As noted in paragraphs 36 to 39 above, Article 197(2)(c), read in conjunction with Article 196(1)(c) of the Financial Regulation, does not provide that the evidence of the financial capacity of entities without legal personality is limited to proof that they have annual accounts (balance sheets and/or profit and loss accounts) or own bank accounts.
The contested decision was therefore adopted in breach of Article 197(2)(c) of the Financial Regulation.
Furthermore, despite the arguments put forward by the Commission to the effect that, inter alia, the co-applicant works councils were unable to provide evidence of their financial capacity, the contested decision is not based on that circumstance, which it does not mention and, consequently, it does not explain the reasons why any information submitted by the applicant on behalf of the consortium does not constitute admissible evidence of financial capacity within the meaning of Article 197(2)(c) of the Financial Regulation.
It follows from the foregoing that the plea in law alleging infringement of Article 197(2)(c) of the Financial Regulation, read in conjunction with point 8.1 of the call for proposals, must be upheld.
The contested decision must therefore be annulled, without it being necessary to examine the second or third pleas in law or the question, raised at the hearing, concerning an alleged change to the amount of the grant application originally submitted.
Costs
Under Article 134(1) of the Rules of Procedure of the General Court, 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 Commission has been unsuccessful, it must be ordered to bear, in addition to its own costs, those incurred by the applicant, in accordance with the forms of order sought by the latter.

On those grounds,
THE GENERAL COURT (Ninth Chamber)
hereby:

1.
Annuls the decision of the European Commission of 14 April 2021 rejecting an application for a grant submitted by EWC Academy GmbH under call for proposals VP/2020/008;

2.
Orders the Commission to bear, in addition to its own costs, those incurred by EWC Academy.

Costeira
Perišin
Zilgalvis
Delivered in open court in Luxembourg on 21 December 2022.
[Signatures]
(
*1
)	Language of the case: German.