CELEX: 61998CJ0359
Appeal
Regulation (EEC) No 4028/86
Community financial aid
Procedure for discontinuing the aid
Suspension of payment of the aid originally granted
Actionable measure

Grounds
1 By application lodged at the Court Registry on 7 October 1998, Ca' Pasta Srl (hereinafter Ca' Pasta) brought an appeal pursuant to Article 49 of the EC Statute of the Court of Justice against the order of the Court of First Instance of 16 July 1998 in Case T-274/97 Ca' Pasta v Commission [1998] ECR II-2925 (hereinafter the contested order), by which that Court dismissed as inadmissible Ca' Pasta's application for annulment of the measure adopted by the Commission in the form of its letter to the applicant of 4 August 1997 in which it confirmed to the applicant the continuation of an internal procedure with a view to discontinuing a grant of Community aid (hereinafter the letter at issue).
The relevant legislation
2 Article 1(1)(b) of Council Regulation (EEC) No 4028/86 of 18 December 1986 on Community measures to improve and adapt structures in the fisheries and aquaculture sector (OJ 1986 L 376, p. 7) provides that the Commission may grant Community financial aid for the development of aquaculture and the establishment of protected marine areas with a view to improved management of inshore fishing grounds.
3 Under Article 12 of Regulation No 4028/86, which refers to Annex III to the regulation, Community aid for aquaculture projects in the Italian region of the Veneto is to be 40% of the amount of the investment, and the contribution from the Italian Republic must be between 10% and 30%.
4 Further, Article 44 of Regulation No 4028/86 provides that:
1. Throughout the period for which aid is granted by the Community, the authority or agency appointed for the purpose by the Member State shall send to the Commission on request all supporting documents and all documents showing that the financial or other conditions imposed for each project are satisfied. The Commission may decide to suspend, reduce or discontinue aid, in accordance with the procedure laid down in Article 47:
...
- if certain conditions imposed are not satisfied
...
Decisions shall be notified to the Member State concerned and to the beneficiary.
The Commission shall take steps to recover any sums unduly paid.
2. Detailed rules for applying this article shall be adopted by the Commission in accordance with the procedure laid down in Article 47.
5 Under Article 47 of Regulation No 4028/86:
1. Where the procedure laid down in this Article is to be followed, matters shall be referred to the Standing Committee for the Fishing Industry, by its chairman, either on his own initiative or at the request of the representative of a Member State.
2. The representative of the Commission shall submit a draft of the measures to be taken. The Committee shall deliver its opinion within a time limit to be set by the chairman according to the urgency of the matter. ...
3. The Commission shall adopt the measures which shall apply immediately. However, if these measures are not in accordance with the opinion of the Committee, the Commission shall forthwith communicate them to the Council. In that event the Commission may defer their application for not more than one month from the date of such communication. The Council, acting by a qualified majority, may adopt different measures within one month.
6 In order to establish the detailed rules for applying Article 44(2) of Regulation No 4028/86, the Commission adopted Regulation (EEC) No 1116/88 of 20 April 1988 laying down detailed rules for the application of decisions granting aid for projects concerning Community measures to improve and adapt structures in the fisheries and aquaculture sector and in structural works in coastal waters (OJ 1988 L 112, p. 1).
7 According to the sixth recital in the preamble to Regulation No 1116/88, the procedure for suspending, reducing or terminating aid should not be initiated without the Member State concerned first having been asked for its views and the beneficiaries having been given the opportunity to submit their comments.
8 In that connection Article 7 of Regulation No 1116/88 provides that:
Before initiating a procedure for suspending, reducing or terminating aid in accordance with Article 44(1) of Regulation (EEC) No 4028/86, the Commission shall:
- inform the Member State on whose territory the project was to be carried out, so that it may express its views on the matter,
- consult the competent authority responsible for forwarding supporting documents,
- ask the beneficiary to provide, through the authority or agency, an explanation for the failure to comply with the conditions laid down.
The facts
9 With respect to the facts underlying the dispute, the Court of First Instance found as follows, at paragraphs 6 to 12 of the contested order:
6 By decision of 29 April 1991, pursuant to Regulation No 4028/86, the Commission granted the applicant financial aid for a project for the modernisation of an aquaculture production unit in Contarina (Veneto) (hereinafter "the approval"). The Commission undertook to finance 40% of the cost of the project and the Italian Republic undertook to finance 30% of the cost.
7 It was specified in the conditions annexed to the approval that:
"... the proposed works may not be changed or altered without the prior consent of the national authorities and, where appropriate, the Commission. If they are significantly altered without the Commission's agreement, and the national authorities or the Commission finds the alterations unacceptable, the contribution may be reduced or discontinued."
8 The applicant presented an initial document reporting the state of progress of the works on 18 March 1992, after which the Commission paid it the first instalment of the Community aid. The Italian State paid the first instalment of the State contribution.
9 On 10 March 1997, during an inspection at the applicant's offices, the Italian State and the Commission learned that the applicant company had been sold during the spring of 1995.
10 Subsequently, by letter dated 24 June 1997, the Commission informed the applicant that because the sale of the business fell within the class of fundamental changes requiring the prior consent of the national and Community authorities, it had breached the conditions laid down in the approval. Accordingly, referring to Regulation No 4028/86, the Commission notified the applicant of its intention to initiate the procedure for the discontinuance of the contribution and the recovery of the sum already paid, and invited the applicant to state, within 30 days, the reasons why it had failed to comply with the conditions laid down.
11 By letter dated 21 July 1997 the applicant replied that neither Regulation No 4028/86 nor the approval required that the sale of a business which had received a contribution under the said regulation should be made conditional upon obtaining the prior agreement of the national and Community authorities.
12 By letter dated 4 August 1997 ... the Commission disputed the applicant's contentions and informed it that:
"... the Commission's staff confirm the continuation of the internal procedure with a view to discontinuing the contribution and recovering the amount already paid."
Proceedings before the Court of First Instance
10 Taking the view that the letter of 4 August 1997, that is to say, the letter at issue, amounted to an act adversely affecting it, on 16 October 1997 Ca' Pasta brought before the Court of First Instance an application for its annulment, alleging inter alia infringement of Article 44 of Regulation No 4028/86 and Article 7 of Regulation No 1116/88.
11 By a separate document lodged on 22 December 1997, the Commission raised an objection of inadmissibility with regard to that application under Article 114(1) of the Rules of Procedure of the Court of First Instance, on the ground that the letter at issue was merely a letter providing information and was not in the nature of a decision. It could not, therefore, be the subject-matter of an action for annulment under Article 173 of the EC Treaty (now, after amendment, Article 230 EC).
12 In its observations of 20 March 1998, Ca' Pasta asked that the Commission's objection of inadmissibility be dismissed, putting forward two pleas in that regard.
13 First, Ca' Pasta argued that, in the letter at issue, the Commission expressed its definitive view as to the outcome of the procedure concerning the discontinuance of the contribution and the recovery of the amount already paid.
14 Secondly, relying on Joined Cases 8/66, 9/66, 10/66 and 11/66 Cimenteries CBR and Others v Commission [1967] ECR 75 and Case C-47/91 Italy v Commission [1992] ECR I-4145, Ca' Pasta argued that the decision contained in the letter entailed such adverse effects that it should be regarded as a measure open to challenge. In that connection, Ca' Pasta stated that de facto the payment of both the Community aid and the national contribution had been suspended and would remain so for as long as the procedure under Article 47 of Regulation No 4028/86 was pending, with detrimental effect as far as it was concerned. Thus the letter at issue amounted to an implied decision not to accede to the request for payment of the second instalment of the Community aid and the instalment payable on completion of the works.
The contested order
15 By the contested order the Court of First Instance dismissed the application as inadmissible, on the ground that the letter at issue was not a measure capable of forming the subject-matter of an action under Article 173 of the Treaty, and ordered Ca' Pasta to pay the costs.
16 With respect to the first plea in law made by Ca' Pasta, the Court held as follows:
24 According to settled case-law, any measure which produces binding legal effects such as to affect the interests of an applicant by bringing about a distinct change in his legal position is an act or decision which may be the subject of an action under Article 173 for a declaration that it is void (see, for example, Case T-154/94 CSF and CSME v Commission [1996] ECR II-1377, at paragraph 37).
25 In the case of acts or decisions drawn up in a procedure involving several stages, and particularly at the end of an internal procedure, it is only those measures which definitively determine the position of the institution upon the conclusion of that procedure which are open to challenge and not intermediate measures whose purpose is to prepare for the final decision (see, for example, Case T-212/95 Oficemen v Commission [1997] ECR II-1161, paragraph 53).
26 In the letter at issue, the Commission informed the applicant of the "continuation of the internal procedure with a view to cancelling the contribution [granted to the applicant] and recovering the amount already paid".
27 That wording shows clearly that the Commission had not yet taken a final decision on the discontinuance of the financial aid granted to the applicant, but that it was preparing such a decision.
28 The letter is therefore not a measure which produces binding legal effects such as to affect the interests of the applicant by bringing about a distinct change in his legal position within the meaning of the judgment in CSF and CSME v Commission, cited above. As the Commission rightly maintains, it is merely a letter providing information.
17 In response to the second plea made by Ca' Pasta, the Court held, at paragraph 29 of the contested order, that:
As to the adverse effects which the applicant claims to suffer as a result of the procedure pending before the Commission ... they are merely the logical consequence of the commencement of that procedure. Even if, as in the present case, the Commission adopts temporary measures in the context of that procedure, such effects do not indicate the existence of a measure which produces binding legal effects such as to affect the interests of the applicant.
The appeal
18 In its appeal, Ca' Pasta claims that the Court should:
- set aside the contested order,
- annul the measure adopted in the form of the letter at issue, and
- order the Commission to pay the costs.
19 Ca' Pasta makes two pleas in law in support of its appeal.
20 In its first plea, Ca' Pasta argues that the Court of First Instance breached general principles applying to actions against decisions brought under Article 173 of the Treaty and the principle of the rule of law, and that it infringed Regulation No 4028/86, Regulation No 1116/88 and Council Regulation (EEC) No 4253/88 of 19 December 1988 laying down provisions for implementing Regulation (EEC) No 2052/88 as regards coordination of the activities of the different Structural Funds between themselves and with the operations of the European Investment Bank and the other existing financial instruments (OJ 1988 L 374, p. 1). According to Ca' Pasta, by failing to take into account the said principles and regulations, the contested order disregarded the fact that the decision to suspend the aid implicit in the letter at issue was a final decision.
21 In its second plea, Ca' Pasta argues that the statement of the reasons on which the contested order is based is inadequate, that the order contains contradictions, and that it breaches the general principle of the rights of the defence. Ca' Pasta asserts that it is obvious that the contested order is unlawful from the brevity of its grounds, which are so succinct as to make it impossible even to follow the logic on which it is based or, specifically, to understand the reasons why the letter at issue could and should be regarded as simply a letter providing information.
22 The Commission contends that the appeal should be dismissed and that Ca' Pasta should be ordered to pay the costs.
Findings of the Court of Justice
23 The first plea alleges that, by refusing to acknowledge that the letter at issue contains an implied decision to suspend aid, the Court of First Instance disregarded several regulations and principles of Community law, including Regulations Nos 4028/86 and 1116/88 on which Ca' Pasta relied at first instance. It is therefore appropriate to consider, as a preliminary point, whether or not application of those regulations was disregarded in the contested order.
24 In order to ascertain that, it is necessary first to establish what powers the Commission enjoys and what obligations fall upon it under Regulations Nos 4028/86 and 1116/88.
25 As the Court held in Case C-10/98 P Le Canne v Commission [1999] ECR I-6831, at paragraph 25, in connection with the reduction of Community financial aid previously granted, Article 44(1) of Regulation No 4028/86 confers on the Commission the power to suspend, reduce or discontinue aid in the event of one of the four conditions laid down in that article being met.
26 Also at paragraph 25 of that judgment, the Court held that, in conferring such a power on the Commission, Regulation No 4028/86 clearly aims to cover all decisions by the Commission which reduce, entirely or in part, the amount of the aid initially granted when one of the above conditions is met.
27 That objective applies equally to any decision suspending Community financial aid covered by the regulation, given that under Article 44(1) the Commission's powers include the power to decide to suspend ... aid.
28 Such an objective implies that, whilst the Commission is not bound to exercise the power conferred upon it by Article 44(1) of Regulation No 4028/86, that article explicitly requires that, should the Commission do so, it must do so in accordance with the procedure laid down in Article 47. It is equally clear from Article 7 of Regulation No 1116/88 that the procedures it mentions must also be followed before aid can be suspended, reduced or discontinued under Article 44 of Regulation No 4028/86 (see Le Canne v Commission, cited above, at paragraph 25).
29 In the present case it is established that, quite independently of the suspension of the national contribution consequent upon the letter at issue, the Commission, having thus confirmed to Ca' Pasta the continuance of the procedure for discontinuing the aid, paid neither the second nor the final instalment of the Community aid.
30 It follows that, in addition to advising of the continuance of the procedure for discontinuing the aid, the letter at issue necessarily resulted in non-payment of the final two instalments of the financial aid originally promised by the Commission. The letter thus definitively caused Ca' Pasta to suffer all the economic consequences of the suspension of the aid. Consequently, it affected its legal position.
31 In this connection, it is appropriate to observe that, once an initial application for Community aid is approved, any act suspending the aid originally granted might have serious consequences for the applicant. As the Court observed at paragraph 27 of its judgment in Le Canne v Commission, such consequences highlight the importance of applying a procedure such as that laid down in Articles 44 and 47 of Regulation No 4028/96 and Article 7 of Regulation No 1116/88.
32 Consequently, the letter at issue must be seen as containing an implied decision to suspend aid, within the meaning of Article 44(1) of Regulation No 4028/86. That decision adversely affected Ca' Pasta and ought to have been taken in accordance with Articles 44 and 47 of Regulation No 4028/86 and Article 7 of Regulation No 1116/88.
33 Arguing against the application of those provisions to cases where Community aid is suspended while a procedure for discontinuing the aid is pending, the Commission maintains that, if a measure such as that suspending aid were to be regarded as an actionable measure, the Commission's administrative activity would be impeded and procedures for reducing or discontinuing aid would become meaningless.
34 In this connection, it is sufficient to observe that where, as in the case of Regulations Nos 4028/86 and 1116/88, a regulation imposes obligations upon the Commission for the protection of the interests of individuals, administrative difficulties cannot constitute a valid basis for altering the legal effects of that regulation, including the specific procedural guarantees established by the Community legislature (see, to that effect, Le Canne v Commission, paragraph 28).
35 It follows from all the foregoing considerations that, by suspending payment of the aid granted to Ca' Pasta without having followed the procedures laid down in Articles 44 and 47 of Regulation No 4028/86 and Article 7 of Regulation No 1116/88, the Commission was not acting in conformity with its obligations under those articles.
36 By failing to accept that the suspension of the last two instalments of the financial aid originally awarded constituted an implied decision that the Commission ought to have taken in accordance with the said provisions of Regulations Nos 4028/86 and 1116/88 and by taking the view that, in the present case, the Commission had adopted interim measures in the context of a procedure for discontinuing aid, the Court of First Instance disregarded the definitive nature of the suspension of the aid, within the meaning of Article 44 of Regulation No 4028/86, which was of such a kind as to affect the interests of the appellant. It follows that the contested order must be annulled.
37 There is therefore no need to ascertain whether there was any infringement of the other regulations and principles referred to in the context of the first plea, or to consider the second plea raised in the appeal.
38 Pursuant to the second sentence of the first paragraph of Article 54(1) of the EC Statute of the Court of Justice, where it quashes the decision of the Court of First Instance, the Court of Justice may itself give final judgment in the matter, if the state of the proceedings so permits.
39 In those circumstances, the implied decision to suspend aid contained in the letter at issue must be annulled on the ground that the procedure laid down in Articles 44(1) and 47 of Regulation No 4028/86 and Article 7 of Regulation No 1116/88 was not followed.
Decision on costs
Costs
40 Under Article 69(2) of the Rules of Procedure, which is applicable to the appeal procedure by virtue of Article 118 of those rules, 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 appellant has applied for costs to be awarded against the Commission and since that institution has been unsuccessful, it must be ordered to pay the costs including those incurred at first instance.
Operative part
On those grounds,
THE COURT (Second Chamber)
hereby:
1. Sets aside the order of the Court of First Instance of 16 July 1998 in Case T-274/97 Ca' Pasta v Commission;
2. Annuls the implied decision suspending Community aid contained in the Commission's letter of 4 August 1997 to Ca' Pasta Srl;
3. Orders the Commission of the European Communities to pay the costs, including the costs at first instance.