# 62013CJ0410

JUDGMENT OF THE COURT (Second Chamber)

3 September 2014 (
  *1
  )

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‛Reference for a preliminary ruling — Structural funds — Economic, social and territorial cohesion — Regulation (EC) No 1260/1999 — Article 38 — Regulation (EC) No 2792/1999 — Article 19 — Fisheries — Court proceedings at national level — Obligation on the part of the Member State to take the measures necessary to ensure the successful implementation of the decision relating to the grant of funds following court proceedings’

In Case C‐410/13,

REQUEST for a preliminary ruling under Article 267 TFEU from the Vilniaus apygardos administracinis teismas (Lithuania), made by decision of 25 June 2013, received at the Court on 19 July 2013, in the proceedings

‘Baltlanta’ UAB

‘Baltlanta’ UAB

v

Lietuvos valstybė,

Lietuvos valstybė,

intervening parties:

Nacionalinė mokėjimo agentūra prie Žemės ūkio ministerijos,

Nacionalinė mokėjimo agentūra prie Žemės ūkio ministerijos,

Lietuvos Respublikos žemės ūkio ministerija,

Lietuvos Respublikos žemės ūkio ministerija,

Lietuvos Respublikos finansų ministerija,

Lietuvos Respublikos finansų ministerija,

THE COURT (Second Chamber),

composed of R. Silva de Lapuerta, President of the Chamber, K. Lenaerts (Rapporteur), Vice-President of the Court, J.L. da Cruz Vilaça, J.-C. Bonichot and A. Arabadjiev, Judges,

Advocate General: Y. Bot,

Registrar: A. Calot Escobar,

having regard to the written procedure

after considering the observations submitted on behalf of:

| — | the Lithuanian Government, by D. Kriaučiūnas and G. Taluntytė, acting as Agents, |
| --- | --- |

—

the Lithuanian Government, by D. Kriaučiūnas and G. Taluntytė, acting as Agents,

| — | the European Commission, by Z. Malůšková and A. Steiblytė, acting as Agents, |
| --- | --- |

—

the European Commission, by Z. Malůšková and A. Steiblytė, acting as Agents,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

Judgment

Judgment

| 1 | This request for a preliminary ruling concerns the interpretation of Article 38 of Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds (OJ 1999 L 161, p. 1), Article 19 of Council Regulation (EC) No 2792/1999 of 17 December 1999 laying down the detailed rules and arrangements regarding Community structural assistance in the fisheries sector (OJ 1999 L 337, p. 10), and Sections 6 and 7 of the Guidelines on the closure of assistance (2000 to 2006) from the Structural Funds, adopted by Commission Decision COM(2006) 3424 final of 1 August 2006 (‘the Commission guidelines’). |
| --- | --- |

1

This request for a preliminary ruling concerns the interpretation of Article 38 of Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds (OJ 1999 L 161, p. 1), Article 19 of Council Regulation (EC) No 2792/1999 of 17 December 1999 laying down the detailed rules and arrangements regarding Community structural assistance in the fisheries sector (OJ 1999 L 337, p. 10), and Sections 6 and 7 of the Guidelines on the closure of assistance (2000 to 2006) from the Structural Funds, adopted by Commission Decision COM(2006) 3424 final of 1 August 2006 (‘the Commission guidelines’).

| 2 | The request has been made in the course of proceedings between ‘Baltlanta’ UAB, a private limited company established under Lithuanian law (‘Baltlanta’) and Lietuvos valstybė (Lithuanian State) concerning that company’s application for damages for material and non-material loss suffered by it as a result of being prevented from obtaining financial assistance from the European Union Structural Funds. |
| --- | --- |

2

The request has been made in the course of proceedings between ‘Baltlanta’ UAB, a private limited company established under Lithuanian law (‘Baltlanta’) and Lietuvos valstybė (Lithuanian State) concerning that company’s application for damages for material and non-material loss suffered by it as a result of being prevented from obtaining financial assistance from the European Union Structural Funds.

Legal context

Legal context

EU law

EU law

Regulation No 1260/1999

| 3 | Recital 52 in the preamble to Regulation No 1260/1999 read:
  ‘Whereas the responsibility of the Member States for the pursuit and correction of irregularities and infringements, and that of the Commission where the Member States do not comply with their obligations, should be specified.’ |
| --- | --- |

3

Recital 52 in the preamble to Regulation No 1260/1999 read:

‘Whereas the responsibility of the Member States for the pursuit and correction of irregularities and infringements, and that of the Commission where the Member States do not comply with their obligations, should be specified.’

| 4 | Article 8(3) and (4) of that regulation read as follows:
  ‘(3)   In application of the principle of subsidiarity, the implementation of assistance shall be the responsibility of the Member States, at the appropriate territorial level according to the arrangements specific to each Member State, and without prejudice to the powers vested in the Commission, notably for implementing the general budget of the European Communities.
  (4)   Member States shall cooperate with the Commission to ensure that Community Funds are used in accordance with the principles of sound financial management.’ |
| --- | --- |

4

Article 8(3) and (4) of that regulation read as follows:

‘(3)   In application of the principle of subsidiarity, the implementation of assistance shall be the responsibility of the Member States, at the appropriate territorial level according to the arrangements specific to each Member State, and without prejudice to the powers vested in the Commission, notably for implementing the general budget of the European Communities.

(4)   Member States shall cooperate with the Commission to ensure that Community Funds are used in accordance with the principles of sound financial management.’

| 5 | Article 9 of that regulation defined the concepts of ‘development plan’ and ‘operation’ in the following terms:
  ‘For the purposes of this Regulation:
  ...





  (b) | development plan (hereinafter referred to as “the plan”: means the analysis of the situation prepared by a Member State in the light of the objectives referred to in Article 1 and the priority needs for attaining those objectives, together with the strategy, the planned action priorities, their specific goals and the related indicative financial resources; |
| --- | --- | --- |

5

Article 9 of that regulation defined the concepts of ‘development plan’ and ‘operation’ in the following terms:

‘For the purposes of this Regulation:

...

(b)

development plan (hereinafter referred to as “the plan”: means the analysis of the situation prepared by a Member State in the light of the objectives referred to in Article 1 and the priority needs for attaining those objectives, together with the strategy, the planned action priorities, their specific goals and the related indicative financial resources;

...

| (k) | operation: means any project or action carried out by the final beneficiaries of assistance’. |
| --- | --- |

(k)

operation: means any project or action carried out by the final beneficiaries of assistance’.

| 6 | Under Article 30(1), (2) and (4) of that regulation:
  ‘(1)   Expenditure in respect of operations shall be eligible for a contribution from the Funds only if these operations form part of the assistance concerned.
  (2)   Expenditure may not be considered eligible for a contribution from the Funds if it has actually been paid by the final beneficiary before the date on which the application for assistance reaches the Commission. That date shall constitute the starting point for the eligibility of expenditure.
  The final date for the eligibility of expenditure shall be laid down in the decision to grant a contribution from the Funds. It shall relate to payments made by the final beneficiaries. It may be extended by the Commission at the duly justified request of the Member State in accordance with Articles 14 and 15.
  ...
  (4)   The Member States shall ensure that an operation retains the contribution from the Funds only if that operation does not, within five years of the date of the decision of the competent national authorities or the managing authority on the contribution of the Funds, undergo a substantial modification:





  (a) | affecting its nature or its implementation conditions or giving to a firm or a public body an undue advantage;
  and |
| --- | --- | --- |

6

Under Article 30(1), (2) and (4) of that regulation:

‘(1)   Expenditure in respect of operations shall be eligible for a contribution from the Funds only if these operations form part of the assistance concerned.

(2)   Expenditure may not be considered eligible for a contribution from the Funds if it has actually been paid by the final beneficiary before the date on which the application for assistance reaches the Commission. That date shall constitute the starting point for the eligibility of expenditure.

The final date for the eligibility of expenditure shall be laid down in the decision to grant a contribution from the Funds. It shall relate to payments made by the final beneficiaries. It may be extended by the Commission at the duly justified request of the Member State in accordance with Articles 14 and 15.

...

(4)   The Member States shall ensure that an operation retains the contribution from the Funds only if that operation does not, within five years of the date of the decision of the competent national authorities or the managing authority on the contribution of the Funds, undergo a substantial modification:

(a)

affecting its nature or its implementation conditions or giving to a firm or a public body an undue advantage;

and

| (b) | resulting either from a change in the nature of ownership in an item of infrastructure or a cessation or change of location in a productive activity. |
| --- | --- |

(b)

resulting either from a change in the nature of ownership in an item of infrastructure or a cessation or change of location in a productive activity.

The Member States shall inform the Commission of any such modification. Where such a modification occurs, Article 39 shall apply.’

| 7 | Article 38 of Regulation No 1260/1999 provided:
  ‘(1)   Without prejudice to the Commission’s responsibility for implementing the general budget of the European Communities, Member States shall take responsibility in the first instance for the financial control of assistance. To that end, the measures they take shall include:





  (a) | verifying that management and control arrangements have been set up and are being implemented in such a way as to ensure that Community funds are being used efficiently and correctly; |
| --- | --- | --- |

7

Article 38 of Regulation No 1260/1999 provided:

‘(1)   Without prejudice to the Commission’s responsibility for implementing the general budget of the European Communities, Member States shall take responsibility in the first instance for the financial control of assistance. To that end, the measures they take shall include:

(a)

verifying that management and control arrangements have been set up and are being implemented in such a way as to ensure that Community funds are being used efficiently and correctly;

...

| (e) | preventing, detecting and correcting irregularities, notifying these to the Commission, in accordance with the rules, and keeping the Commission informed of the progress of administrative and legal proceedings; |
| --- | --- |

(e)

preventing, detecting and correcting irregularities, notifying these to the Commission, in accordance with the rules, and keeping the Commission informed of the progress of administrative and legal proceedings;

...

| (h) | recovering any amounts lost as a result of an irregularity detected and, where appropriate, charging interest on late payments. |
| --- | --- |

(h)

recovering any amounts lost as a result of an irregularity detected and, where appropriate, charging interest on late payments.

...

(3)   The Commission and the Member States shall on the basis of bilateral administrative arrangements cooperate to coordinate plans, methods and implementation of checks so as to maximise the usefulness of those carried out. They shall immediately exchange the results of the checks carried out.

At least once a year and, in any event, before the annual review provided for in Article 34(2) the following shall be examined and evaluated:

...

| (c) | the financial impact of the irregularities noted, the steps already taken or still required to correct them and, where necessary, adjustments to the management and control systems. |
| --- | --- |

(c)

the financial impact of the irregularities noted, the steps already taken or still required to correct them and, where necessary, adjustments to the management and control systems.

(4)   Following this examination and evaluation and without prejudice to the measures to be taken immediately by the Member State under this Article and Article 39, the Commission may make observations, particularly regarding the financial impact of any irregularities detected. These observations shall be addressed to the Member State and the managing authority of the assistance concerned. The observations shall be accompanied, where necessary, by requests for corrective measures to remedy the management shortcomings found and correct those irregularities detected which have not already been corrected. The Member State shall have the opportunity to comment on these observations.

...

(5)   Without prejudice to this Article, the Commission, after due verification, may suspend all or part of an interim payment if it finds that the expenditure concerned is linked to a serious irregularity which has not been corrected and that immediate action is needed. The Commission shall inform the Member State concerned of the action taken and the reasons for it. If, after five months, the reasons for the suspension remain or the Member State concerned has not notified the Commission of the measures taken to correct the serious irregularity, the provisions laid down under Article 39 shall apply.

...’

| 8 | Under Article 39(1) of that regulation:
  ‘The Member States shall, in the first instance, bear the responsibility for investigating irregularities, acting upon evidence of any major change affecting the nature or conditions for the implementation or supervision of assistance and making the financial corrections required.
  The Member State shall make the financial corrections required in connection with the individual or systemic irregularity. The corrections made by the Member State shall consist in cancelling all or part of the Community contribution. The Community funds released in this way may be re-used by the Member State for the assistance concerned, in compliance with the arrangements to be defined pursuant to Article 53(2).’ |
| --- | --- |

8

Under Article 39(1) of that regulation:

‘The Member States shall, in the first instance, bear the responsibility for investigating irregularities, acting upon evidence of any major change affecting the nature or conditions for the implementation or supervision of assistance and making the financial corrections required.

The Member State shall make the financial corrections required in connection with the individual or systemic irregularity. The corrections made by the Member State shall consist in cancelling all or part of the Community contribution. The Community funds released in this way may be re-used by the Member State for the assistance concerned, in compliance with the arrangements to be defined pursuant to Article 53(2).’

| 9 | Council Regulation 1260/1999 was repealed with effect from 1 January 2007, by virtue of Article 107 of Council Regulation (EC) No 1083/2006 of 11 July 2006 laying down general provisions on the European Regional Development Fund, the European Social Fund, and the Cohesion Fund and repealing Regulation No 1260/1999 (OJ 2006 L 210, p. 25). Article 105(1) of that regulation provides:
  ‘This Regulation shall not affect the continuation or modification, including the total or partial cancellation, of assistance co-financed by the Structural Funds or of a project co-financed by the Cohesion Fund approved by the Commission on the basis of [Regulation No 1260/1999] or any other legislation which applies to that assistance on 31 December 2006, which shall consequently apply thereafter to that assistance or the projects concerned until their closure.’ |
| --- | --- |

9

Council Regulation 1260/1999 was repealed with effect from 1 January 2007, by virtue of Article 107 of Council Regulation (EC) No 1083/2006 of 11 July 2006 laying down general provisions on the European Regional Development Fund, the European Social Fund, and the Cohesion Fund and repealing Regulation No 1260/1999 (OJ 2006 L 210, p. 25). Article 105(1) of that regulation provides:

‘This Regulation shall not affect the continuation or modification, including the total or partial cancellation, of assistance co-financed by the Structural Funds or of a project co-financed by the Cohesion Fund approved by the Commission on the basis of [Regulation No 1260/1999] or any other legislation which applies to that assistance on 31 December 2006, which shall consequently apply thereafter to that assistance or the projects concerned until their closure.’

Regulation (EC) No 438/2001

| 10 | The first subparagraph of Article 4 of Commission Regulation (EC) No 438/2001 of 2 March 2001 laying down detailed rules for the implementation of Council Regulation (EC) No 1260/1999 as regards the management and control systems for assistance granted under the Structural Funds (OJ 2001 L 63, p. 21) provided:
  ‘Management and control systems shall include procedures to verify the delivery of the products and services co-financed and the reality of expenditure claimed and to ensure compliance with the terms of the relevant Commission decision under Article 28 of [Regulation No 1260/1999] and with applicable national and Community rules on, in particular, the eligibility of expenditure for support from the Structural Funds under the assistance concerned, public procurement, State aid (including the rules on the cumulations of aid), protection of the environment and equality of opportunity.’ |
| --- | --- |

10

The first subparagraph of Article 4 of Commission Regulation (EC) No 438/2001 of 2 March 2001 laying down detailed rules for the implementation of Council Regulation (EC) No 1260/1999 as regards the management and control systems for assistance granted under the Structural Funds (OJ 2001 L 63, p. 21) provided:

‘Management and control systems shall include procedures to verify the delivery of the products and services co-financed and the reality of expenditure claimed and to ensure compliance with the terms of the relevant Commission decision under Article 28 of [Regulation No 1260/1999] and with applicable national and Community rules on, in particular, the eligibility of expenditure for support from the Structural Funds under the assistance concerned, public procurement, State aid (including the rules on the cumulations of aid), protection of the environment and equality of opportunity.’

| 11 | Regulation No 438/2001 was repealed with effect from 16 January 2007, by virtue of Articles 54 and 55 of Commission Regulation (EC) No 1828/2006 of 8 December 2006 setting out rules for the implementation of Council Regulation (EC) No 1083/2006 and of Regulation (EC) No 1080/2006 of the European Parliament and of the Council on the European Regional Development Fund (OJ 2006 L 371, p. 1). Article 54(1) of Regulation No 1828/2006 provides:
  ‘...
  The provisions of [Regulation No 438/2001] shall continue to apply to assistance approved under [Regulation No 2792/1999].’ |
| --- | --- |

11

Regulation No 438/2001 was repealed with effect from 16 January 2007, by virtue of Articles 54 and 55 of Commission Regulation (EC) No 1828/2006 of 8 December 2006 setting out rules for the implementation of Council Regulation (EC) No 1083/2006 and of Regulation (EC) No 1080/2006 of the European Parliament and of the Council on the European Regional Development Fund (OJ 2006 L 371, p. 1). Article 54(1) of Regulation No 1828/2006 provides:

‘...

The provisions of [Regulation No 438/2001] shall continue to apply to assistance approved under [Regulation No 2792/1999].’

Regulation No 2792/1999

| 12 | Article 19 of Regulation No 2792/1999, entitled ‘Notification of aid schemes’, in its original version, was worded as follows:
  ‘(1)   The Member States shall notify the Commission of the aid schemes provided for in the plans referred to in Article 3(3) and defined in Article 9(b) of [Regulation No 1260/1999], in accordance with Articles 87 to 89 of the Treaty.
  (2)   Within the scope of this Regulation, Member States may introduce supplementary aid measures subject to conditions or rules other than those laid down in this Regulation, or covering a sum in excess of the maximum amounts referred to in Annex IV, provided they comply with Article 87, 88 and 89 of the Treaty.’ |
| --- | --- |

12

Article 19 of Regulation No 2792/1999, entitled ‘Notification of aid schemes’, in its original version, was worded as follows:

‘(1)   The Member States shall notify the Commission of the aid schemes provided for in the plans referred to in Article 3(3) and defined in Article 9(b) of [Regulation No 1260/1999], in accordance with Articles 87 to 89 of the Treaty.

(2)   Within the scope of this Regulation, Member States may introduce supplementary aid measures subject to conditions or rules other than those laid down in this Regulation, or covering a sum in excess of the maximum amounts referred to in Annex IV, provided they comply with Article 87, 88 and 89 of the Treaty.’

| 13 | Regulation No 2792/1999 was, inter alia, amended by Council Regulation No 2369/2002 of 20 December 2002 (OJ 2002 L 358, p. 49), which entered into force on 1 January 2003. |
| --- | --- |

13

Regulation No 2792/1999 was, inter alia, amended by Council Regulation No 2369/2002 of 20 December 2002 (OJ 2002 L 358, p. 49), which entered into force on 1 January 2003.

| 14 | Recital 11 in the preamble to Regulation No 2369/2002 is worded as follows:
  ‘Articles 87, 88 and 89 of the Treaty should apply to aid granted by Member States to the fisheries and aquaculture sector. However, in order to speed up the reimbursement by the Commission of funds advanced by the Member States, an exception to that principle should be introduced for the obligatory financial input by Member States towards measures co-financed by the Community and provided for under the development plans defined in [Regulation No 1260/1999].’ |
| --- | --- |

14

Recital 11 in the preamble to Regulation No 2369/2002 is worded as follows:

‘Articles 87, 88 and 89 of the Treaty should apply to aid granted by Member States to the fisheries and aquaculture sector. However, in order to speed up the reimbursement by the Commission of funds advanced by the Member States, an exception to that principle should be introduced for the obligatory financial input by Member States towards measures co-financed by the Community and provided for under the development plans defined in [Regulation No 1260/1999].’

| 15 | Article 1(3)(b) of Regulation No 2369/2002 provided that Article 3(3) of Regulation No 2792/1999 was to be replaced by the following text:
  ‘The development plans defined in Article 9(b) of [Regulation No 1260/1999] shall demonstrate that public aid is necessary with regard to the objectives pursued, in particular that, without public aid, the fishing vessels concerned could not be modernised, and that the planned measures will not jeopardise the sustainability of fisheries.
  ...’ |
| --- | --- |

15

Article 1(3)(b) of Regulation No 2369/2002 provided that Article 3(3) of Regulation No 2792/1999 was to be replaced by the following text:

‘The development plans defined in Article 9(b) of [Regulation No 1260/1999] shall demonstrate that public aid is necessary with regard to the objectives pursued, in particular that, without public aid, the fishing vessels concerned could not be modernised, and that the planned measures will not jeopardise the sustainability of fisheries.

...’

| 16 | Article 1(15) of Regulation No 2369/2002 provided that Article 19 of Regulation No 2792/1999 should be replaced by the following text:
  ‘Obligatory financial contributions and State aid
  (1)   Without prejudice to paragraph 2, Articles 87, 88 and 89 of the Treaty shall apply to aid granted by Member States to the fisheries and aquaculture sector.
  (2)   Articles 87, 88 and 89 of the Treaty shall not apply to obligatory financial contributions by Member States to measures co-financed by the Community and provided for under the development plans referred to in Article 3(3) of this Regulation and defined in Article 9(b) of [Regulation No 1260/1999] or under Article 5 of Regulation (EC) No 2370/2002 of 20 December 2002 [establishing an emergency Community measure for scrapping fishing vessels (OJ 2002 L 358, p. 57)].
  (3)   Measures which provide for public financing exceeding the provisions of this Regulation or of Regulation [No 2370/2002] concerning obligatory financial contributions, as referred to in paragraph 2, shall be treated as a whole on the basis of paragraph 1.’ |
| --- | --- |

16

Article 1(15) of Regulation No 2369/2002 provided that Article 19 of Regulation No 2792/1999 should be replaced by the following text:

‘Obligatory financial contributions and State aid

(1)   Without prejudice to paragraph 2, Articles 87, 88 and 89 of the Treaty shall apply to aid granted by Member States to the fisheries and aquaculture sector.

(2)   Articles 87, 88 and 89 of the Treaty shall not apply to obligatory financial contributions by Member States to measures co-financed by the Community and provided for under the development plans referred to in Article 3(3) of this Regulation and defined in Article 9(b) of [Regulation No 1260/1999] or under Article 5 of Regulation (EC) No 2370/2002 of 20 December 2002 [establishing an emergency Community measure for scrapping fishing vessels (OJ 2002 L 358, p. 57)].

(3)   Measures which provide for public financing exceeding the provisions of this Regulation or of Regulation [No 2370/2002] concerning obligatory financial contributions, as referred to in paragraph 2, shall be treated as a whole on the basis of paragraph 1.’

| 17 | Regulation No 2792/1999 was repealed with effect from 1 January 2007, by virtue of Article 104(1) of Council Regulation (EC) No 1198/2006 of 27 July 2006 on the European Fisheries Fund (OJ 2006 L 223, p. 1). Article 103(1) of Regulation No 1198/2006 provides:
  ‘This Regulation shall not affect either the continuation or modification, including the total or partial cancellation, of assistance approved by the Commission on the basis of [Regulation No 2792/1999] or any other legislation applying to that assistance on 31 December 2006, which shall consequently apply thereafter to that assistance or the projects concerned until their closure.’ |
| --- | --- |

17

Regulation No 2792/1999 was repealed with effect from 1 January 2007, by virtue of Article 104(1) of Council Regulation (EC) No 1198/2006 of 27 July 2006 on the European Fisheries Fund (OJ 2006 L 223, p. 1). Article 103(1) of Regulation No 1198/2006 provides:

‘This Regulation shall not affect either the continuation or modification, including the total or partial cancellation, of assistance approved by the Commission on the basis of [Regulation No 2792/1999] or any other legislation applying to that assistance on 31 December 2006, which shall consequently apply thereafter to that assistance or the projects concerned until their closure.’

The Commission guidelines

| 18 | Sections 6 and 7 of the Commission guidelines are worded as follows:





  ‘6. | Projects which are unfinished and non-operational at the time of closure
  The managing authority, intermediate body, paying authority and Member State have a duty to ensure the delivery of co-financed products and services and to ensure the reality and correctness of expenditure claimed, in accordance with the principles of sound financial management.
  The Member State must set out in the final report a list of operations by measure that are unfinished or non-operational at the time of closure, having regard to the stated aims of the operation, the decision awarding assistance to the operation and any conditions related to the operation. ... This list should identify:





  — | operations that will not be co-financed from Community funds under the next programming period: the Member State should undertake to complete or render operational, at its own expense, all unfinished or non-functional operations not later than two years after the deadline for submission of the final report. The Member State should advise the Commission at the end of this two year period whether each such project has been completed or rendered functional. For operations that have not been completed or rendered functional by end of that period, the Commission will take the steps necessary to recover Community funds. |
| --- | --- | --- | --- |

18

Sections 6 and 7 of the Commission guidelines are worded as follows:

‘6.

Projects which are unfinished and non-operational at the time of closure

The managing authority, intermediate body, paying authority and Member State have a duty to ensure the delivery of co-financed products and services and to ensure the reality and correctness of expenditure claimed, in accordance with the principles of sound financial management.

The Member State must set out in the final report a list of operations by measure that are unfinished or non-operational at the time of closure, having regard to the stated aims of the operation, the decision awarding assistance to the operation and any conditions related to the operation. ... This list should identify:

—

operations that will not be co-financed from Community funds under the next programming period: the Member State should undertake to complete or render operational, at its own expense, all unfinished or non-functional operations not later than two years after the deadline for submission of the final report. The Member State should advise the Commission at the end of this two year period whether each such project has been completed or rendered functional. For operations that have not been completed or rendered functional by end of that period, the Commission will take the steps necessary to recover Community funds.

operations that will not be co-financed from Community funds under the next programming period

| — | operations envisaged to be co-financed from Community funds under the next programming period: a separate and detailed description of the operation must be clearly drawn up by the Member State’s authorities for each programming period. The operation should be divided into at least two distinct, identifiable financial and physical or development stages corresponding to the two “forms of assistance” concerned. This is to be done with the aim of ensuring transparent implementation and monitoring and to facilitate controls. If the first part of the operation is not completed or functional in the first programming period, expenses related to its completion or its becoming functional may be accepted in the second programming period, provided that the co-financing and eligibility conditions are met (inclusion in the second programme, legal and financial commitment by decision of the responsible authority). In such cases, the Member State should ensure that the same work will not be financed twice from Community funds. |
| --- | --- |

—

operations envisaged to be co-financed from Community funds under the next programming period: a separate and detailed description of the operation must be clearly drawn up by the Member State’s authorities for each programming period. The operation should be divided into at least two distinct, identifiable financial and physical or development stages corresponding to the two “forms of assistance” concerned. This is to be done with the aim of ensuring transparent implementation and monitoring and to facilitate controls. If the first part of the operation is not completed or functional in the first programming period, expenses related to its completion or its becoming functional may be accepted in the second programming period, provided that the co-financing and eligibility conditions are met (inclusion in the second programme, legal and financial commitment by decision of the responsible authority). In such cases, the Member State should ensure that the same work will not be financed twice from Community funds.

operations envisaged to be co-financed from Community funds under the next programming period

| 7. | Operations suspended as a result of judicial or administrative proceedings
  For each operation that is the subject of a judicial procedure or an administrative appeal having suspensory effects, the Member State must decide, before the deadline for submission of the certified statement of final expenditure, including a final payment application, and the final report on implementation for the programme, whether the operation should, wholly or partly, be:





  — | withdrawn from the programme and/or replaced by another operation (possibly from over-programming) before the deadline; after the Commission is notified of the withdrawal or replacement, the Member State remains responsible for any repercussions from the withdrawn or replaced operations, such as the financial consequences or irrecoverable amounts due; or |
| --- | --- | --- |

7.

Operations suspended as a result of judicial or administrative proceedings

For each operation that is the subject of a judicial procedure or an administrative appeal having suspensory effects, the Member State must decide, before the deadline for submission of the certified statement of final expenditure, including a final payment application, and the final report on implementation for the programme, whether the operation should, wholly or partly, be:

—

withdrawn from the programme and/or replaced by another operation (possibly from over-programming) before the deadline; after the Commission is notified of the withdrawal or replacement, the Member State remains responsible for any repercussions from the withdrawn or replaced operations, such as the financial consequences or irrecoverable amounts due; or

| — | retained in the programme. After submission of the final certified statement of expenditure for a programme, an operation that is the subject of a judicial procedure or an administrative appeal having suspensory effects, may not be replaced, not even by another operation included in over-programming which may have been completed before the final date for eligibility of expenditure. |
| --- | --- |

—

retained in the programme. After submission of the final certified statement of expenditure for a programme, an operation that is the subject of a judicial procedure or an administrative appeal having suspensory effects, may not be replaced, not even by another operation included in over-programming which may have been completed before the final date for eligibility of expenditure.

Replacement operations should be selected in accordance with Article 9(2)(b)(ii) of [Regulation No 438/2001]. Member States must ensure that replacement operations comply with all applicable European and national regulatory provisions, including, but not limited to, rules on management and control systems, eligibility, information and publicity, as well as procurement, competition and environmental rules.

...’

Lithuanian law

Lithuanian law

| 19 | Point 16 of the Guidelines for applicants submitting projects for assistance in 2007 within Lithuania’s 2004-2006 single programming document (SPD) Rural and fisheries development priority measure ‘Permanent withdrawal of fishing vessels from fishing activities’ in the activity area ‘Fishing fleet related actions’ [Gairės pareiškėjams, teikiantiems projektus paramai gauti 2007 metais pagal Lietuvos 2004-2006 metų bendrojo programavimo dokumento (BPD) Kaimo plėtros ir žuvininkystės prioriteto priemonės ‘Veikla, susijusi su žvejybos laivynu’ veiklos sritį ‘Laivų žvejybinės veiklos nutraukimas visam laikui’], approved by Order No 3D-96 of 28 February 2007 of the Ministry of Agriculture (‘the Ministry of Agriculture Guidelines’), provides:
  ‘LTL 8000000 (eight million Lithuanian litas) is allocated to this call for applications within the SPD measure “Permanent withdrawal of fishing vessels from fishing activities” in the activity area “Fishing fleet related actions”.’ |
| --- | --- |

19

Point 16 of the Guidelines for applicants submitting projects for assistance in 2007 within Lithuania’s 2004-2006 single programming document (SPD) Rural and fisheries development priority measure ‘Permanent withdrawal of fishing vessels from fishing activities’ in the activity area ‘Fishing fleet related actions’ [Gairės pareiškėjams, teikiantiems projektus paramai gauti 2007 metais pagal Lietuvos 2004-2006 metų bendrojo programavimo dokumento (BPD) Kaimo plėtros ir žuvininkystės prioriteto priemonės ‘Veikla, susijusi su žvejybos laivynu’ veiklos sritį ‘Laivų žvejybinės veiklos nutraukimas visam laikui’], approved by Order No 3D-96 of 28 February 2007 of the Ministry of Agriculture (‘the Ministry of Agriculture Guidelines’), provides:

‘LTL 8000000 (eight million Lithuanian litas) is allocated to this call for applications within the SPD measure “Permanent withdrawal of fishing vessels from fishing activities” in the activity area “Fishing fleet related actions”.’

| 20 | Point 23.4.5 of the Ministry of Agriculture Guidelines is worded as follows:
  ‘A vessel has fished at sea (that is to say, has been at sea for the purpose of fishing) at least for 75 days over the course of the two last periods of 12 months preceding the submission of an application (those periods start to run on the day preceding the registration of an application with the Agency), or has been at sea for the purpose of fishing for a number of days amounting to 80% of the number of days authorised for that vessel under national law.’ |
| --- | --- |

20

Point 23.4.5 of the Ministry of Agriculture Guidelines is worded as follows:

‘A vessel has fished at sea (that is to say, has been at sea for the purpose of fishing) at least for 75 days over the course of the two last periods of 12 months preceding the submission of an application (those periods start to run on the day preceding the registration of an application with the Agency), or has been at sea for the purpose of fishing for a number of days amounting to 80% of the number of days authorised for that vessel under national law.’

| 21 | Point 114 of the Rules on the financing and administration of measures under Lithuania’s 2004-2006 single programming document and projects financed through those measures (Lietuvos 2004-2006 m. bendrojo programavimo dokumento priemonių ir projektų, finansuojamų įgyvendinant šias priemones, administravimo ir finansavimo taisyklės), approved by Decision No 1K-033 of the Ministry of Finance of 28 January 2004 provides that ‘the intermediate and implementing authorities shall conclude an assistance agreement with applicants whose projects are to be awarded assistance’. |
| --- | --- |

21

Point 114 of the Rules on the financing and administration of measures under Lithuania’s 2004-2006 single programming document and projects financed through those measures (Lietuvos 2004-2006 m. bendrojo programavimo dokumento priemonių ir projektų, finansuojamų įgyvendinant šias priemones, administravimo ir finansavimo taisyklės), approved by Decision No 1K-033 of the Ministry of Finance of 28 January 2004 provides that ‘the intermediate and implementing authorities shall conclude an assistance agreement with applicants whose projects are to be awarded assistance’.

The facts in the main proceedings and the questions referred for a preliminary ruling

The facts in the main proceedings and the questions referred for a preliminary ruling

| 22 | Following a call, published between 9 March and 30 March 2007, for applications within the SPD measure ‘Permanent withdrawal of fishing vessels from fishing activities’ in the activity area ‘Fishing fleet related actions’ of the ‘Rural and fisheries development’ priority measure, three applications were submitted, including that of Baltlanta. |
| --- | --- |

22

Following a call, published between 9 March and 30 March 2007, for applications within the SPD measure ‘Permanent withdrawal of fishing vessels from fishing activities’ in the activity area ‘Fishing fleet related actions’ of the ‘Rural and fisheries development’ priority measure, three applications were submitted, including that of Baltlanta.

| 23 | On 15 March 2007, Baltlanta submitted its request for financial assistance of LTL 8000000 for the ‘Permanent withdrawal of fishing vessel Kiras-I from fishing activity’ project. |
| --- | --- |

23

On 15 March 2007, Baltlanta submitted its request for financial assistance of LTL 8000000 for the ‘Permanent withdrawal of fishing vessel Kiras-I from fishing activity’ project.

Kiras-I

| 24 | All applications for financial assistance were to be submitted in accordance with the Guidelines of the Ministry of Agriculture. |
| --- | --- |

24

All applications for financial assistance were to be submitted in accordance with the Guidelines of the Ministry of Agriculture.

| 25 | By decision of 3 August 2007, the Nacionalinė mokėjimo agentura (the National Payment Agency at the Ministry of Agriculture) (‘the Agency’) rejected Baltlanta’s application on the ground that the project submitted did not satisfy the eligibility criterion laid down in point 23.4.5 of the Guidelines of the Ministry of Agriculture, since it was apparent from a preliminary criminal investigation that the information supplied by Baltlanta about the fishing activities of the fishing vessel Kiras-I was incorrect. |
| --- | --- |

25

By decision of 3 August 2007, the Nacionalinė mokėjimo agentura (the National Payment Agency at the Ministry of Agriculture) (‘the Agency’) rejected Baltlanta’s application on the ground that the project submitted did not satisfy the eligibility criterion laid down in point 23.4.5 of the Guidelines of the Ministry of Agriculture, since it was apparent from a preliminary criminal investigation that the information supplied by Baltlanta about the fishing activities of the fishing vessel Kiras-I was incorrect.

Kiras-I

| 26 | Since the two other applications submitted pursuant to the call for applications, published between 9 March and 30 March 2007, also failed to satisfy that eligibility criterion, the unallocated assistance of LTL 8000000 for the period September 2007 to June 2008 was allocated to applications submitted under other calls for applications. |
| --- | --- |

26

Since the two other applications submitted pursuant to the call for applications, published between 9 March and 30 March 2007, also failed to satisfy that eligibility criterion, the unallocated assistance of LTL 8000000 for the period September 2007 to June 2008 was allocated to applications submitted under other calls for applications.

| 27 | Baltlanta appealed against the Agency’s decision of 3 August 2007 before the Vilniaus apygardos administracinis teismas (Vilnius Regional Administrative Court), which, after finding that Kiras-I satisfied the criterion laid down in point 23.4.5 of the Guidelines of the Ministry of Agriculture, upheld the appeal. By judgment of 27 December 2007, it therefore annulled the Agency’s decision. |
| --- | --- |

27

Baltlanta appealed against the Agency’s decision of 3 August 2007 before the Vilniaus apygardos administracinis teismas (Vilnius Regional Administrative Court), which, after finding that Kiras-I satisfied the criterion laid down in point 23.4.5 of the Guidelines of the Ministry of Agriculture, upheld the appeal. By judgment of 27 December 2007, it therefore annulled the Agency’s decision.

Kiras-I

| 28 | By judgment of 14 May 2012, the Lietuvos vyriausiasis administracinis teismas (Supreme Administrative Court of Lithuania) confirmed the judgment of 27 December 2007, which, on that date, became res judicata. |
| --- | --- |

28

By judgment of 14 May 2012, the Lietuvos vyriausiasis administracinis teismas (Supreme Administrative Court of Lithuania) confirmed the judgment of 27 December 2007, which, on that date, became res judicata.

res judicata

| 29 | In the course of implementing those judgments, the Agency examined Baltlanta’s application once again and declared that its project was eligible for aid of LTL 8000000 under the SPD measure. |
| --- | --- |

29

In the course of implementing those judgments, the Agency examined Baltlanta’s application once again and declared that its project was eligible for aid of LTL 8000000 under the SPD measure.

| 30 | By letter of 17 January 2013, the Ministry of Agriculture nevertheless informed Baltlanta that its application could not be processed further, on the grounds that, first, the assistance agreements under the SPD measure had to be concluded by 1 July 2008, secondly, the eligibility period for financing expenditure from the SPD had ended on 30 June 2009 and, third, the activity ‘Permanent withdrawal of fishing vessel Kiras-I from fishing activity’ had not been paid with SPD funds by that date and had not been recognised as necessary for declaration to the Commission. |
| --- | --- |

30

By letter of 17 January 2013, the Ministry of Agriculture nevertheless informed Baltlanta that its application could not be processed further, on the grounds that, first, the assistance agreements under the SPD measure had to be concluded by 1 July 2008, secondly, the eligibility period for financing expenditure from the SPD had ended on 30 June 2009 and, third, the activity ‘Permanent withdrawal of fishing vessel Kiras-I from fishing activity’ had not been paid with SPD funds by that date and had not been recognised as necessary for declaration to the Commission.

Kiras-I

| 31 | On 20 February 2013, Baltlanta brought an action before the Vilniaus apygardos administracinis teismas seeking compensation for LTL 8000000 by way of material loss and LTL 2000000 by way of non-material loss. It claims that the Ministry of Agriculture, by its failure to act, wrongly prevented it from receiving financial assistance. According to Baltlanta, the Ministry of Agriculture failed to take all the measures possible in good time, to inform the Commission that the question of the eligibility of its application for assistance was the subject of court proceedings, to establish an assistance scheme, and to provide funds for the period following that period when the question concerning the grant of assistance had been settled. That inaction therefore caused it damage. |
| --- | --- |

31

On 20 February 2013, Baltlanta brought an action before the Vilniaus apygardos administracinis teismas seeking compensation for LTL 8000000 by way of material loss and LTL 2000000 by way of non-material loss. It claims that the Ministry of Agriculture, by its failure to act, wrongly prevented it from receiving financial assistance. According to Baltlanta, the Ministry of Agriculture failed to take all the measures possible in good time, to inform the Commission that the question of the eligibility of its application for assistance was the subject of court proceedings, to establish an assistance scheme, and to provide funds for the period following that period when the question concerning the grant of assistance had been settled. That inaction therefore caused it damage.

| 32 | For its part, the Ministry of Agriculture, which represents the Lithuanian State in the main proceedings, considers, in the first place, that Article 19 of Regulation No 2792/1999 does not impose an obligation on the Member States to provide funding for SPD measures in excess of that provided for in that regulation. In the second place, it is not the alleged unlawfulness of its inaction which prevented Baltlanta from receiving financial assistance, but the fact that the period for the implementation of the SPD had expired while the legal proceedings concerning the Agency’s decision of 3 August 2007 were ongoing. The ministry states, in the third place, that the mere fact of the submission of a project application does not mean that the assistance sum requested in the application for the project will be paid unconditionally to the applicant. It notes that lump-sum compensation is to be paid to the recipient of assistance only where the latter has fulfilled the obligations laid down in the assistance agreement and in the Guidelines of the Ministry of Agriculture no later than by the date laid down in the assistance agreement. |
| --- | --- |

32

For its part, the Ministry of Agriculture, which represents the Lithuanian State in the main proceedings, considers, in the first place, that Article 19 of Regulation No 2792/1999 does not impose an obligation on the Member States to provide funding for SPD measures in excess of that provided for in that regulation. In the second place, it is not the alleged unlawfulness of its inaction which prevented Baltlanta from receiving financial assistance, but the fact that the period for the implementation of the SPD had expired while the legal proceedings concerning the Agency’s decision of 3 August 2007 were ongoing. The ministry states, in the third place, that the mere fact of the submission of a project application does not mean that the assistance sum requested in the application for the project will be paid unconditionally to the applicant. It notes that lump-sum compensation is to be paid to the recipient of assistance only where the latter has fulfilled the obligations laid down in the assistance agreement and in the Guidelines of the Ministry of Agriculture no later than by the date laid down in the assistance agreement.

| 33 | The Ministry of Finance, intervening in support of the Lithuanian State, states that no assistance agreement has been signed with Baltlanta and consequently the Republic of Lithuania was under no obligation to inform the Commission about the legal proceedings connected with that application in accordance with Article 38(1)(e) of Regulation No 1260/1999. In addition, it argues that it was not legally open to the Ministry of Agriculture to reserve funds for projects that are the subject of legal proceedings. |
| --- | --- |

33

The Ministry of Finance, intervening in support of the Lithuanian State, states that no assistance agreement has been signed with Baltlanta and consequently the Republic of Lithuania was under no obligation to inform the Commission about the legal proceedings connected with that application in accordance with Article 38(1)(e) of Regulation No 1260/1999. In addition, it argues that it was not legally open to the Ministry of Agriculture to reserve funds for projects that are the subject of legal proceedings.

| 34 | In those circumstances, the Vilniaus apygardos administracinis teismas decided to stay the proceedings and refer the following questions to the Court for a preliminary ruling:





  ‘(1) | Is Article 38 of Regulation No 1260/1999 laying down an obligation of the Member State to inform the European Commission of the progress of administrative and legal proceedings and to cooperate with the European Commission to be interpreted as requiring the Member State to inform the Commission of all legal disputes concerning the actions or inaction of the implementing, intermediate, managing or paying authorities connected with the assessment of an application, with selection, with adoption of the decision on the award of the assistance or with implementation of the project? |
| --- | --- | --- |

34

In those circumstances, the Vilniaus apygardos administracinis teismas decided to stay the proceedings and refer the following questions to the Court for a preliminary ruling:

‘(1)

Is Article 38 of Regulation No 1260/1999 laying down an obligation of the Member State to inform the European Commission of the progress of administrative and legal proceedings and to cooperate with the European Commission to be interpreted as requiring the Member State to inform the Commission of all legal disputes concerning the actions or inaction of the implementing, intermediate, managing or paying authorities connected with the assessment of an application, with selection, with adoption of the decision on the award of the assistance or with implementation of the project?

| (2) | Is Article 19 of Regulation No 2792/1999 to be interpreted as requiring a Member State to have aid schemes established and to provide funds, in agreement with the European Commission, for those cases in which the courts are examining legal disputes concerning the actions or inaction of the implementing, intermediate, managing or paying authorities connected with the assessment of an application, with selection, with adoption of the decision on the award of the assistance or with implementation of the project? |
| --- | --- |

(2)

Is Article 19 of Regulation No 2792/1999 to be interpreted as requiring a Member State to have aid schemes established and to provide funds, in agreement with the European Commission, for those cases in which the courts are examining legal disputes concerning the actions or inaction of the implementing, intermediate, managing or paying authorities connected with the assessment of an application, with selection, with adoption of the decision on the award of the assistance or with implementation of the project?

| (3) | Are sections 6 and 7 of [the Commission guidelines] to be interpreted as requiring a Member State to inform the European Commission about all legal disputes concerning the actions or inaction of the implementing, intermediate, managing or paying authorities connected with the assessment of an application, with selection, with adoption of the decision on the award of the assistance or with implementation of the project, and to decide whether the operation should, wholly or partly, be withdrawn from the programme and/or replaced by another operation and so forth, or the operation should be retained in the programme, or to take other action to ensure the appropriate implementation of a decision on the award of assistance once the court proceedings have been concluded? |
| --- | --- |

(3)

Are sections 6 and 7 of [the Commission guidelines] to be interpreted as requiring a Member State to inform the European Commission about all legal disputes concerning the actions or inaction of the implementing, intermediate, managing or paying authorities connected with the assessment of an application, with selection, with adoption of the decision on the award of the assistance or with implementation of the project, and to decide whether the operation should, wholly or partly, be withdrawn from the programme and/or replaced by another operation and so forth, or the operation should be retained in the programme, or to take other action to ensure the appropriate implementation of a decision on the award of assistance once the court proceedings have been concluded?

| (4) | Is the fact that, in the case examined in the national court, no specific measures have been laid down providing for the functions of the relevant State authorities when there are legal disputes concerning the actions or inaction of the implementing, intermediate, managing or payment authorities connected with the assessment of the application, with selection, with adoption of the decision on the award of the assistance or with implementation of the project, that is to say, there is no provision that the relevant State authorities have an obligation to inform the European Commission about court proceedings that are taking place and to take measures so that funds that have been provided are reserved for the disputed assistance until the question of the award of the assistance has been finally decided, compatible with the Member State’s obligation under Article 38 of Regulation No 1260/1999 to inform the European Commission about the progress of administrative and legal proceedings and to cooperate with the European Commission, with Article 19 of Regulation No 2792/1999, and with the requirements of sections 6 and 7 of [the Commission guidelines]?’ |
| --- | --- |

(4)

Is the fact that, in the case examined in the national court, no specific measures have been laid down providing for the functions of the relevant State authorities when there are legal disputes concerning the actions or inaction of the implementing, intermediate, managing or payment authorities connected with the assessment of the application, with selection, with adoption of the decision on the award of the assistance or with implementation of the project, that is to say, there is no provision that the relevant State authorities have an obligation to inform the European Commission about court proceedings that are taking place and to take measures so that funds that have been provided are reserved for the disputed assistance until the question of the award of the assistance has been finally decided, compatible with the Member State’s obligation under Article 38 of Regulation No 1260/1999 to inform the European Commission about the progress of administrative and legal proceedings and to cooperate with the European Commission, with Article 19 of Regulation No 2792/1999, and with the requirements of sections 6 and 7 of [the Commission guidelines]?’

The questions referred

The questions referred

| 35 | First of all, it should be noted that, in its original version, Article 19 of Regulation No 2792/1999, interpretation of which is requested by the referring court, does not apply ratione temporis to the main proceedings, since, as is apparent from the documents submitted to the Court, Baltlanta submitted its application for financial assistance in the context of assistance which was approved after Regulation No 2369/2002 entered into force, namely on 1 January 2003, Article 1(15) of which amends Article 19 of Regulation No 2792/1999. |
| --- | --- |

35

First of all, it should be noted that, in its original version, Article 19 of Regulation No 2792/1999, interpretation of which is requested by the referring court, does not apply ratione temporis to the main proceedings, since, as is apparent from the documents submitted to the Court, Baltlanta submitted its application for financial assistance in the context of assistance which was approved after Regulation No 2369/2002 entered into force, namely on 1 January 2003, Article 1(15) of which amends Article 19 of Regulation No 2792/1999.

ratione temporis

| 36 | Consequently, it is necessary to examine the questions referred relating to the interpretation of Article 19 of Regulation No 2792/1999, in the version brought into force by Regulation No 2369/2002. |
| --- | --- |

36

Consequently, it is necessary to examine the questions referred relating to the interpretation of Article 19 of Regulation No 2792/1999, in the version brought into force by Regulation No 2369/2002.

| 37 | By its questions, which must be examined together, the referring court accordingly asks, in essence, whether Article 38(1)(e) of Regulation No 1260/1999, Article 19 of Regulation No 2792/1999, as amended by Regulation No 2369/2002, and Sections 6 and 7 of the Commission guidelines must be interpreted as obliging the State authorities concerned to inform the Commission of the existence of court proceedings relating to an administrative decision on the eligibility of an application for financial assistance such as that at issue in the main proceedings, and to take the measures necessary so that funds that have been provided are reserved for the disputed assistance until the question of the award of the assistance has been finally decided. |
| --- | --- |

37

By its questions, which must be examined together, the referring court accordingly asks, in essence, whether Article 38(1)(e) of Regulation No 1260/1999, Article 19 of Regulation No 2792/1999, as amended by Regulation No 2369/2002, and Sections 6 and 7 of the Commission guidelines must be interpreted as obliging the State authorities concerned to inform the Commission of the existence of court proceedings relating to an administrative decision on the eligibility of an application for financial assistance such as that at issue in the main proceedings, and to take the measures necessary so that funds that have been provided are reserved for the disputed assistance until the question of the award of the assistance has been finally decided.

| 38 | In the first place, as regards Article 38(1) of Regulation No 1260/1999, the latter provides that, without prejudice to the Commission’s responsibility for implementing the general budget of the European Communities, Member States are to take responsibility in the first instance for the financial control of assistance. That article contains a non-exhaustive list of measures which the Member States must take for that purpose. |
| --- | --- |

38

In the first place, as regards Article 38(1) of Regulation No 1260/1999, the latter provides that, without prejudice to the Commission’s responsibility for implementing the general budget of the European Communities, Member States are to take responsibility in the first instance for the financial control of assistance. That article contains a non-exhaustive list of measures which the Member States must take for that purpose.

| 39 | Those measures include that provided for in Article 38(1)(e) of Regulation No 1260/1999, which states that the Member States are to prevent, detect and correct irregularities. In accordance with the legislation in force, the latter notify these to the Commission, and keep it informed of the progress of administrative and legal proceedings. |
| --- | --- |

39

Those measures include that provided for in Article 38(1)(e) of Regulation No 1260/1999, which states that the Member States are to prevent, detect and correct irregularities. In accordance with the legislation in force, the latter notify these to the Commission, and keep it informed of the progress of administrative and legal proceedings.

| 40 | For the sake of clarity, as regards the situations referred to in Article 38(1)(e) of Regulation No 1260/1999, it should be noted that that regulation does not define the concept of ‘irregularity’ appearing in that article. |
| --- | --- |

40

For the sake of clarity, as regards the situations referred to in Article 38(1)(e) of Regulation No 1260/1999, it should be noted that that regulation does not define the concept of ‘irregularity’ appearing in that article.

| 41 | Consequently, since Regulation No 1269/1999 does not define ‘irregularity’, the meaning and scope of that phrase must, as the Court has consistently held, be determined by considering its usual meaning in everyday language, while also taking into account the context in which it occurs and the purposes of the rules of which it is part (see judgment in Diakité, C‐285/12, EU:C:2014:39, paragraph 27 and the case-law cited). |
| --- | --- |

41

Consequently, since Regulation No 1269/1999 does not define ‘irregularity’, the meaning and scope of that phrase must, as the Court has consistently held, be determined by considering its usual meaning in everyday language, while also taking into account the context in which it occurs and the purposes of the rules of which it is part (see judgment in Diakité, C‐285/12, EU:C:2014:39, paragraph 27 and the case-law cited).

Diakité

| 42 | The usual meaning in everyday language of irregularity is a situation in which a provision of law, in the present case, of EU law, is infringed. |
| --- | --- |

42

The usual meaning in everyday language of irregularity is a situation in which a provision of law, in the present case, of EU law, is infringed.

| 43 | With regard to the objective pursued by Regulation No 1260/1999, it should be noted that Article 8(3) of that regulation provides that in application of the principle of subsidiarity, and without prejudice to the powers vested in the Commission, notably for implementing the general budget of the European Union, the implementation of assistance must primarily be the responsibility of the Member States, at the appropriate territorial level according to the arrangements specific to each Member State. That principle is thus reflected in Article 38(1) of that regulation. |
| --- | --- |

43

With regard to the objective pursued by Regulation No 1260/1999, it should be noted that Article 8(3) of that regulation provides that in application of the principle of subsidiarity, and without prejudice to the powers vested in the Commission, notably for implementing the general budget of the European Union, the implementation of assistance must primarily be the responsibility of the Member States, at the appropriate territorial level according to the arrangements specific to each Member State. That principle is thus reflected in Article 38(1) of that regulation.

| 44 | By taking responsibility for such financial control, the Member State concerned takes on primary responsibility for the efficient use of European Union funds, which, without prejudice to the powers vested in the Commission, contributes to proper implementation of the general budget of the European Union. |
| --- | --- |

44

By taking responsibility for such financial control, the Member State concerned takes on primary responsibility for the efficient use of European Union funds, which, without prejudice to the powers vested in the Commission, contributes to proper implementation of the general budget of the European Union.

| 45 | Article 38(1)(e) of Regulation No 1260/1999 thus aims to protect the general budget of the European Union against any act or omission which could be detrimental to it. |
| --- | --- |

45

Article 38(1)(e) of Regulation No 1260/1999 thus aims to protect the general budget of the European Union against any act or omission which could be detrimental to it.

| 46 | As regards the regulatory context of which Article 38(1)(e) of Regulation No 1260/1999 is a part, it should be noted that Article 38(3) and (4) of that regulation provides that the Member State concerned is to inform the Commission of the financial impact of irregularities detected. The Commission may then make observations. Likewise, Article 38(5) of that regulation provides that the Commission may suspend all or part of an interim payment if it finds that the expenditure concerned is linked to a serious irregularity which has not been corrected and that immediate action is needed. |
| --- | --- |

46

As regards the regulatory context of which Article 38(1)(e) of Regulation No 1260/1999 is a part, it should be noted that Article 38(3) and (4) of that regulation provides that the Member State concerned is to inform the Commission of the financial impact of irregularities detected. The Commission may then make observations. Likewise, Article 38(5) of that regulation provides that the Commission may suspend all or part of an interim payment if it finds that the expenditure concerned is linked to a serious irregularity which has not been corrected and that immediate action is needed.

| 47 | Furthermore, it should be noted that, in paragraph 44 of the judgment in Comune di Ancona, C‐388/12, EU:C:2013:734, the Court held that in accordance with the obligations laid down in Article 38(1)(e) and (h) of Regulation No 1260/1999, the Member State concerned must assess whether a modification which is not within the scope of Article 30(4) of that regulation constitutes an irregularity for the purposes of Articles 38 and 39 of that regulation, in respect of which it will accordingly be necessary to make the requisite financial corrections and to recover the corresponding amounts lost, applying default interest where appropriate. |
| --- | --- |

47

Furthermore, it should be noted that, in paragraph 44 of the judgment in Comune di Ancona, C‐388/12, EU:C:2013:734, the Court held that in accordance with the obligations laid down in Article 38(1)(e) and (h) of Regulation No 1260/1999, the Member State concerned must assess whether a modification which is not within the scope of Article 30(4) of that regulation constitutes an irregularity for the purposes of Articles 38 and 39 of that regulation, in respect of which it will accordingly be necessary to make the requisite financial corrections and to recover the corresponding amounts lost, applying default interest where appropriate.

Comune di Ancona

| 48 | It is apparent from the general scheme of Article 38 of Regulation No 1260/1999 that the concept of ‘irregularity’ refers to the unlawful use of European Union funds. |
| --- | --- |

48

It is apparent from the general scheme of Article 38 of Regulation No 1260/1999 that the concept of ‘irregularity’ refers to the unlawful use of European Union funds.

| 49 | In the light of the above analysis, the concept of ‘irregularity’ referred to in Article 38(1)(e) of Regulation No 1260/1999 must be interpreted as concerning any infringement of EU law as a result of an act or omission which could be detrimental to the general budget of the European Union. |
| --- | --- |

49

In the light of the above analysis, the concept of ‘irregularity’ referred to in Article 38(1)(e) of Regulation No 1260/1999 must be interpreted as concerning any infringement of EU law as a result of an act or omission which could be detrimental to the general budget of the European Union.

| 50 | In the light of that definition of ‘irregularity’, Article 38(1)(e) of Regulation No 1260/1999 must be interpreted as obliging the Member States to prevent, detect and correct irregularities of EU law resulting from an act or omission which could be detrimental to the general budget of the European Union, to inform the Commission of such irregularities, and to keep it informed of the progress of administrative and legal proceedings concerning those irregularities. |
| --- | --- |

50

In the light of that definition of ‘irregularity’, Article 38(1)(e) of Regulation No 1260/1999 must be interpreted as obliging the Member States to prevent, detect and correct irregularities of EU law resulting from an act or omission which could be detrimental to the general budget of the European Union, to inform the Commission of such irregularities, and to keep it informed of the progress of administrative and legal proceedings concerning those irregularities.

| 51 | In addition, it should be noted that Article 9(k) of Regulation No 1260/1999 defines the concept of ‘operation’ as ‘any project or action carried out by the final beneficiaries of assistance’. The inclusion of a project or action in the assistance concerned is, therefore, an intrinsic element of that concept. |
| --- | --- |

51

In addition, it should be noted that Article 9(k) of Regulation No 1260/1999 defines the concept of ‘operation’ as ‘any project or action carried out by the final beneficiaries of assistance’. The inclusion of a project or action in the assistance concerned is, therefore, an intrinsic element of that concept.

| 52 | In accordance with Article 30(1) of Regulation No 1260/1999, ‘expenditure in respect of operations shall be eligible for a contribution from the Funds only if these operations form part of the assistance concerned’. It follows from the wording of that provision that only ‘operations’, within the meaning of Article 9(k) of that regulation, are eligible for a contribution from those funds. |
| --- | --- |

52

In accordance with Article 30(1) of Regulation No 1260/1999, ‘expenditure in respect of operations shall be eligible for a contribution from the Funds only if these operations form part of the assistance concerned’. It follows from the wording of that provision that only ‘operations’, within the meaning of Article 9(k) of that regulation, are eligible for a contribution from those funds.

| 53 | It follows that only irregularities connected with ‘operations’, within the meaning of Article 9(k) of Regulation No 1260/1999, are capable of being detrimental to the general budget of the European Union. |
| --- | --- |

53

It follows that only irregularities connected with ‘operations’, within the meaning of Article 9(k) of Regulation No 1260/1999, are capable of being detrimental to the general budget of the European Union.

| 54 | It is necessary, consequently, to assess whether a project, such as that submitted by Baltlanta in the context of the main proceedings, is covered by the concept of ‘operation’, within the meaning of Article 9(k) of Regulation No 1260/1999. |
| --- | --- |

54

It is necessary, consequently, to assess whether a project, such as that submitted by Baltlanta in the context of the main proceedings, is covered by the concept of ‘operation’, within the meaning of Article 9(k) of Regulation No 1260/1999.

| 55 | Under Article 38(1)(a) of Regulation No 1260/1999, the Member States are to verify that management and control arrangements have been set up and are being implemented in such a way as to ensure that European Union funds are being used efficiently and correctly. Article 4 of Regulation No 438/2001 states that those arrangements are to include procedures to ensure compliance with applicable national and EU rules on, in particular, the eligibility of expenditure for support from the Structural Funds under the assistance concerned. |
| --- | --- |

55

Under Article 38(1)(a) of Regulation No 1260/1999, the Member States are to verify that management and control arrangements have been set up and are being implemented in such a way as to ensure that European Union funds are being used efficiently and correctly. Article 4 of Regulation No 438/2001 states that those arrangements are to include procedures to ensure compliance with applicable national and EU rules on, in particular, the eligibility of expenditure for support from the Structural Funds under the assistance concerned.

| 56 | It should, moreover, be noted that the system of subsidies developed in the EU rules is based, inter alia, on compliance by the recipient with a series of conditions of entitlement to financial assistance (see judgment in Vereniging Nationaal Overlegorgaan Sociale Werkvoorziening and Others, C‐383/06 to C‐385/06, EU:C:2008:165, paragraph 56 and the case-law cited). |
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56

It should, moreover, be noted that the system of subsidies developed in the EU rules is based, inter alia, on compliance by the recipient with a series of conditions of entitlement to financial assistance (see judgment in Vereniging Nationaal Overlegorgaan Sociale Werkvoorziening and Others, C‐383/06 to C‐385/06, EU:C:2008:165, paragraph 56 and the case-law cited).

Vereniging Nationaal Overlegorgaan Sociale Werkvoorziening and Others

| 57 | Therefore, in the context of the procedures provided for by the national management and control arrangements, it is for the competent national authorities to ensure that the recipient commits itself to complying with the conditions of entitlement to financial assistance. |
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57

Therefore, in the context of the procedures provided for by the national management and control arrangements, it is for the competent national authorities to ensure that the recipient commits itself to complying with the conditions of entitlement to financial assistance.

| 58 | To that end, the competent national authorities are permitted to require that such a commitment is made by the applicant to whom financial assistance has been granted for the purpose of carrying out its project, before that project is included in the assistance concerned. |
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58

To that end, the competent national authorities are permitted to require that such a commitment is made by the applicant to whom financial assistance has been granted for the purpose of carrying out its project, before that project is included in the assistance concerned.

| 59 | That is the case of the procedure at issue in the main proceedings, set up under Lithuanian law and which provides that an aid contract must be concluded with the applicant to whom financial assistance has been granted. |
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59

That is the case of the procedure at issue in the main proceedings, set up under Lithuanian law and which provides that an aid contract must be concluded with the applicant to whom financial assistance has been granted.

| 60 | It follows that in the absence of such a contract, a project such as that submitted by Baltlanta cannot be included in the assistance concerned and, therefore, may not be classified as an ‘operation’, within the meaning of Article 9(k) of Regulation No 1260/1999. |
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60

It follows that in the absence of such a contract, a project such as that submitted by Baltlanta cannot be included in the assistance concerned and, therefore, may not be classified as an ‘operation’, within the meaning of Article 9(k) of Regulation No 1260/1999.

| 61 | Therefore, since no ‘irregularity’ connected with ‘operations’, within the meaning of Article 9(k) of Regulation No 1260/1999, has been committed, Article 38(1)(e) of that regulation is not applicable to the dispute in the main proceedings. |
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61

Therefore, since no ‘irregularity’ connected with ‘operations’, within the meaning of Article 9(k) of Regulation No 1260/1999, has been committed, Article 38(1)(e) of that regulation is not applicable to the dispute in the main proceedings.

| 62 | In the second place, with regard to Article 19 of Regulation No 2792/1999, as amended by Regulation No 2369/2002, it should be noted that that provision contains a derogation from the obligation to notify under Article 108 TFEU, according to which the Member States are not required to notify the Commission of the aid schemes provided for in the plans referred to in Article 3(3) of Regulation No 2792/1999, as amended by Regulation No 2369/2002, and defined in Article 9(b) of Regulation No 1260/1999. By contrast, the other aid granted by Member States in the fishing sector must be notified to the Commission. |
| --- | --- |

62

In the second place, with regard to Article 19 of Regulation No 2792/1999, as amended by Regulation No 2369/2002, it should be noted that that provision contains a derogation from the obligation to notify under Article 108 TFEU, according to which the Member States are not required to notify the Commission of the aid schemes provided for in the plans referred to in Article 3(3) of Regulation No 2792/1999, as amended by Regulation No 2369/2002, and defined in Article 9(b) of Regulation No 1260/1999. By contrast, the other aid granted by Member States in the fishing sector must be notified to the Commission.

| 63 | Consequently, Article 19 of Regulation No 2792/1999, as amended by Regulation No 2369/2002, does not in any way oblige the Member State concerned to implement an aid scheme with the purpose of financing a project which had been wrongly prevented from receiving financial assistance. |
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63

Consequently, Article 19 of Regulation No 2792/1999, as amended by Regulation No 2369/2002, does not in any way oblige the Member State concerned to implement an aid scheme with the purpose of financing a project which had been wrongly prevented from receiving financial assistance.

| 64 | In the third place, with regard to Sections 6 and 7 of the Commission guidelines, it should be noted, first, that, even if those guidelines are not intended to produce binding effects, the national courts are bound to take them into consideration in order to decide disputes submitted to them, in particular where they cast light on the interpretation of national measures adopted in order to implement them or where they are designed to supplement binding European Union provisions (see, by analogy, the judgments in Grimaldi, C‐322/88, EU:C:1989:646, paragraph 18, and Altair Chimica, C‐207/01, EU:C:2003:451, paragraph 41). |
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64

In the third place, with regard to Sections 6 and 7 of the Commission guidelines, it should be noted, first, that, even if those guidelines are not intended to produce binding effects, the national courts are bound to take them into consideration in order to decide disputes submitted to them, in particular where they cast light on the interpretation of national measures adopted in order to implement them or where they are designed to supplement binding European Union provisions (see, by analogy, the judgments in Grimaldi, C‐322/88, EU:C:1989:646, paragraph 18, and Altair Chimica, C‐207/01, EU:C:2003:451, paragraph 41).

Grimaldi

Altair Chimica

| 65 | It should be noted, secondly, that those guidelines must be interpreted in accordance with the binding European Union provisions which they seek to supplement, namely Regulation No 1260/1999. |
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65

It should be noted, secondly, that those guidelines must be interpreted in accordance with the binding European Union provisions which they seek to supplement, namely Regulation No 1260/1999.

| 66 | In that regard, Sections 6 and 7 of those guidelines refer respectively to ‘operations which are unfinished and non-operational at the time of closure’ and to ‘operations suspended as a result of judicial or administrative proceedings’. It follows that the concept of ‘operation’, within the meaning of the Commission Guidelines, must be interpreted in accordance with the concept of ‘operation’ in Article 9(k) of Regulation No 1260/1999. |
| --- | --- |

66

In that regard, Sections 6 and 7 of those guidelines refer respectively to ‘operations which are unfinished and non-operational at the time of closure’ and to ‘operations suspended as a result of judicial or administrative proceedings’. It follows that the concept of ‘operation’, within the meaning of the Commission Guidelines, must be interpreted in accordance with the concept of ‘operation’ in Article 9(k) of Regulation No 1260/1999.

| 67 | Since the scope of application of the Commission Guidelines is limited to ‘operations’ which form part of the assistance concerned, it should be found that those guidelines are also not applicable to the main proceedings. |
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67

Since the scope of application of the Commission Guidelines is limited to ‘operations’ which form part of the assistance concerned, it should be found that those guidelines are also not applicable to the main proceedings.

| 68 | Therefore, an applicant for financial assistance such as Baltlanta may not rely on Article 38(1)(e) of Regulation No 2369/2002, or on Article 19 of Regulation No 2792/1999, as amended by Regulation No 2369/2002, or on Sections 6 and 7 of the Commission Guidelines in proceedings involving State responsibility, such as those arising in the main proceedings. |
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68

Therefore, an applicant for financial assistance such as Baltlanta may not rely on Article 38(1)(e) of Regulation No 2369/2002, or on Article 19 of Regulation No 2792/1999, as amended by Regulation No 2369/2002, or on Sections 6 and 7 of the Commission Guidelines in proceedings involving State responsibility, such as those arising in the main proceedings.

| 69 | However, it should be noted that those European Union provisions do not affect actions for damages brought against a State on the basis of an alleged infringement of national law. |
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69

However, it should be noted that those European Union provisions do not affect actions for damages brought against a State on the basis of an alleged infringement of national law.

| 70 | In the light of the foregoing, the answer to the questions referred is that Article 38(1)(e) of Regulation No 1260/1999, Article 19 of Regulation No 2792/1999, as amended by Regulation No 2369/2002, and Sections 6 and 7 of the Commission guidelines must be interpreted as neither obliging the State authorities concerned to inform the Commission of the existence of court proceedings relating to an administrative decision on the eligibility of an application for financial assistance such as that at issue in the main proceedings, nor to take the measures necessary so that funds that have been provided are reserved for the disputed assistance until the question of the award of the assistance has been finally decided. |
| --- | --- |

70

In the light of the foregoing, the answer to the questions referred is that Article 38(1)(e) of Regulation No 1260/1999, Article 19 of Regulation No 2792/1999, as amended by Regulation No 2369/2002, and Sections 6 and 7 of the Commission guidelines must be interpreted as neither obliging the State authorities concerned to inform the Commission of the existence of court proceedings relating to an administrative decision on the eligibility of an application for financial assistance such as that at issue in the main proceedings, nor to take the measures necessary so that funds that have been provided are reserved for the disputed assistance until the question of the award of the assistance has been finally decided.

Costs

Costs

| 71 | Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. |
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71

Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

| | On those grounds, the Court (Second Chamber) hereby rules: |
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On those grounds, the Court (Second Chamber) hereby rules:

| | Article 38(1)(e) of Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds, Article 19 of Council Regulation (EC) No 2792/1999 of 17 December 1999 laying down the detailed rules and arrangements regarding Community structural assistance in the fisheries sector, as amended by Council Regulation (EC) No 2369/2002 of 20 December 2002, and Sections 6 and 7 of the Guidelines on the closure of assistance (2000 to 2006) from the Structural Funds, adopted by Commission Decision COM(2006)3424 final of 1 August 2006, must be interpreted as neither obliging the State authorities concerned to inform the European Commission of the existence of court proceedings relating to an administrative decision on the eligibility of an application for financial assistance such as that at issue in the main proceedings, nor to take the measures necessary so that funds that have been provided are reserved for the disputed assistance until the question of the award of the assistance has been finally decided. |
| --- | --- |

Article 38(1)(e) of Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds, Article 19 of Council Regulation (EC) No 2792/1999 of 17 December 1999 laying down the detailed rules and arrangements regarding Community structural assistance in the fisheries sector, as amended by Council Regulation (EC) No 2369/2002 of 20 December 2002, and Sections 6 and 7 of the Guidelines on the closure of assistance (2000 to 2006) from the Structural Funds, adopted by Commission Decision COM(2006)3424 final of 1 August 2006, must be interpreted as neither obliging the State authorities concerned to inform the European Commission of the existence of court proceedings relating to an administrative decision on the eligibility of an application for financial assistance such as that at issue in the main proceedings, nor to take the measures necessary so that funds that have been provided are reserved for the disputed assistance until the question of the award of the assistance has been finally decided.

Article 38(1)(e) of Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds, Article 19 of Council Regulation (EC) No 2792/1999 of 17 December 1999 laying down the detailed rules and arrangements regarding Community structural assistance in the fisheries sector, as amended by Council Regulation (EC) No 2369/2002 of 20 December 2002, and Sections 6 and 7 of the Guidelines on the closure of assistance (2000 to 2006) from the Structural Funds, adopted by Commission Decision COM(2006)3424 final of 1 August 2006, must be interpreted as neither obliging the State authorities concerned to inform the European Commission of the existence of court proceedings relating to an administrative decision on the eligibility of an application for financial assistance such as that at issue in the main proceedings, nor to take the measures necessary so that funds that have been provided are reserved for the disputed assistance until the question of the award of the assistance has been finally decided.

| | [Signatures] |
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[Signatures]

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(
  *1
  )	Language of the case: Lithuanian.

*1