**Case C-166/07**

**European Parliament**

**v**

**Council of the European Union**

(Action for annulment – Regulation (EC) No 1968/2006 – Community financial contributions to the International Fund for Ireland – Choice of legal basis)

Summary of the Judgment

1.        *Acts of the institutions – Choice of legal basis – Criteria*

*(Arts 2 EC, 3(1)(k), EC, 159, third para., EC and 308 EC; Council Regulation No 1968/2006)*

2.        *Actions for annulment – Judgment annulling a measure – Effects – Limitation by the Court*

*(Art. 231, second para., EC; Council Regulation No 1968/2006)*

1.        In the context of the organisation of the powers of the Community, the choice of the legal basis for a measure must rest on
objective factors amenable to judicial review, including, in particular, the aim and the content of the measure.

Article 308 EC may be used as the legal basis for a measure only where no other provision of the Treaty gives the Community
institutions the necessary power to adopt that measure. In addition, recourse to that provision demands that the action envisaged
should relate to the ‘operation of the common market’.

First, the objectives of Regulation No 1968/2006 concerning Community financial contributions to the International Fund for
Ireland (2007 to 2010) correspond to the objectives pursued by the Community policy on economic and social cohesion, a fact
which is also confirmed by recital 2 in the preamble to that regulation. Second, the Community’s financial contribution to
the Fund, leaving aside its legislative framework, forms part of the specific actions which, when they prove to be necessary
outside the Structural Funds in order to realise the objectives referred to in Article 158 EC, may be adopted in accordance
with the third paragraph of Article 159 EC.

However, neither the arrangements governing cooperation between the Community and the Fund nor the conditions and method of
payment in respect of the Community’s financial contribution allow the Community to prevent the use by the Fund of that contribution
to cover actions which, while complying with the objectives of the Agreement on the International Fund for Ireland, extend
beyond the scope of the Community’s policy on economic and social cohesion or, at least, are not managed in accordance with
the criteria applied by the Community within the framework of that policy. The Community legislature was entitled to take
the view, in the sixth recital in the preamble to Regulation No 1968/2006, that the range of activities financed by that regulation
would extend beyond the scope of the Community’s policy on economic and social cohesion.

Article 159 EC covers only independent action by the Community carried out in accordance with the Community regulatory framework,
and the content of which does not extend beyond the scope of the Community’s policy on economic and social cohesion. Consequently,
the third paragraph of Article 159 EC does not by itself confer on the Community the necessary power to pursue the objectives
of the Community’s policy on economic and social cohesion by means of a financial contribution under conditions such as those
provided for by Regulation No 1968/2006.

Nevertheless, the purpose of Regulation No 1968/2006 is to support the actions of an international organisation established
by two Member States, the objective of which is to strengthen economic and social cohesion. As follows from Articles 2 EC
and 3(1)(k) EC, the strengthening of economic and social cohesion constitutes, outside of Title XVII of the Treaty, an objective
of the Community. Furthermore, the objective of that directive falls within the framework of the common market, since it seeks
to bring about economic improvements in disadvantaged areas of two Member States and thus relates to the functioning of the
common market.

It follows from the foregoing that, as Regulation No 1968/2006 pursues objectives set out in Articles 2 EC and 3(1)(k) EC
and in Title XVII of the Treaty, without that title by itself conferring on the Community the power to realise those objectives,
the Community legislature ought to have had recourse to both the third paragraph of Article 159 EC and Article 308 EC, while
complying with the legislative procedures laid down therein, that is to say, both the ‘co‐decision’ procedure referred to
in Article 251 EC and the requirement that the Council should act unanimously.

(see paras 40, 42, 54, 58-59, 63-65, 67-69)

2.        Under the second paragraph of Article 231 EC, the Court, if it considers this necessary, is to state which of the effects
of a regulation which it has declared void are to be considered definitive.

Annulment of Regulation No 1968/2006 concerning Community financial contributions to the International Fund for Ireland (2007-2010),
without maintenance of its effects could have adverse consequences, particularly with regard to financial contributions made
for actions and projects planned and in the course of implementation, and would be liable to give rise to uncertainties damaging
to present and future financing operations of the Fund.

In those circumstances, important grounds of legal certainty exist which justify the Court in exercising the power conferred
on it by the second paragraph of Article 231 EC and in stating which of the effects of the annulled regulation are to be considered
definitive. It is thus appropriate to rule that the annulment of Regulation No 1968/2006 does not affect the validity of payments
made or of undertakings given under that regulation prior to the delivery of the present judgment, and that the effects of
that regulation are to be maintained until the entry into force, within a reasonable period, of a new regulation adopted on
the appropriate legal basis.

(see paras 72, 74-75)


JUDGMENT OF THE COURT (Fourth Chamber)

3 September 2009 ([\*](#Footnote*))

(Action for annulment – Regulation (EC) No 1968/2006 – Community financial contributions to the International Fund for Ireland – Choice of legal basis)

In Case C‐166/07,

ACTION for annulment under Article 230 EC, brought on 23 March 2007,

**European Parliament,** represented by I. Klavina, L. Visaggio and A. Troupiotis, acting as Agents, with an address for service in Luxembourg,

applicant,

v

**Council of the European Union,** represented by A. Vitro and M. Moore, acting as Agents,

defendant,

supported by:

**Commission of the European Communities,** represented by L. Flynn and A. Steiblytė, acting as Agents, with an address for service in Luxembourg,

**Ireland,** represented by D. O’Hagan, acting as Agent, with an address for service in Luxembourg,

**United Kingdom of Great Britain and Northern Ireland,** represented by S. Behzadi-Spencer, acting as Agent, assisted by D.W. Anderson QC, Barrister,

interveners,

THE COURT (Fourth Chamber),

composed of K. Lenaerts, President of the Chamber, T. von Danwitz (Rapporteur), R. Silva de Lapuerta, E. Juhász and G. Arestis,
Judges,

Advocate General: Y. Bot,

Registrar: R. Grass,

having regard to the written procedure,

after hearing the Opinion of the Advocate General at the sitting on 2 April 2009,

gives the following

**Judgment**

1        By its action, the European Parliament requests the Court to annul Council Regulation (EC) No 1968/2006 of 21 December 2006
concerning Community financial contributions to the International Fund for Ireland (2007 to 2010) (OJ 2006 L 409, p. 86; ‘the
contested regulation’) on the ground that it was not adopted on an appropriate legal basis.

**Legal context**

*The international legal context*

 The 1985 Anglo-Irish Agreement

2        The political negotiations between the Government of Ireland and the Government of the United Kingdom of Great Britain and
Northern Ireland in the mid-1980s, which sought to consolidate peace and reconciliation between the two communities in Northern
Ireland, resulted in the signature of an agreement between those two Governments on 15 November 1985 (*United Nations Treaty Series*, Vol. 1413, No I‐23668; ‘the Anglo-Irish Agreement’), Article 2 of which provides for the establishment of an Intergovernmental
Conference tasked to address political, security and legal matters, including the administration of justice and the promotion
of cross-border cooperation.

3        Pursuant to Article 4(a)(ii) of the Anglo-Irish Agreement, those Governments undertook to work together, within the framework
of that Intergovernmental Conference, for peace, stability and prosperity throughout the island of Ireland by promoting reconciliation,
respect for human rights, cooperation against terrorism and the development of economic, social and cultural cooperation.

4        One of the areas for action for which that Agreement provides is that of cross-border cooperation on security, economic, social
and cultural matters, on which the two Governments were to cooperate, under Article 10(a) of that Agreement, to promote the
economic and social development of those areas of both parts of Ireland which had suffered most severely from the consequences
of the instability of recent years. For that purpose, the Governments were to consider the possibility of securing international
support.

 The Agreement concerning the International Fund for Ireland

5        Pursuant to Article 10(a) of the Anglo-Irish Agreement, the Governments of Ireland and the United Kingdom adopted on 18 September
1986 the Agreement concerning the International Fund for Ireland (*United Nations Treaty Series,* Vol. 1515, No I‐26244; ‘the IFI Agreement’). By that Agreement, they established the International Fund for Ireland (‘the
Fund’), the objectives of which are, under Article 2 thereof, to promote economic and social advance and to encourage contact,
dialogue and reconciliation between nationalists and unionists throughout Ireland.

6        Article 4 of the IFI Agreement lists the following types of project to which priority is to be given by the Fund: stimulation
of private-sector investment, in particular by means of venture-capital arrangements; cross-border cooperation projects in
the economic, educational and research fields; projects to improve infrastructures, in particular in the social, health, education
and environmental areas; and projects to provide vocational training overseas.

7        According to Article 5 of the IFI Agreement, the Fund is an international organisation with legal personality, the members
of which are the two Governments involved. Article 6 of that Agreement provides that the Fund is to be administered by a Board,
the chairman and other members of which are appointed jointly by the two Governments. They are to serve on terms and conditions
decided by those Governments. Donor countries, may, if they so wish, have observer status within the Board.

8        The donors are the United States of America, Canada, New Zealand, Australia and the European Community.

*Community law*

 The contested regulation

9        The contested regulation establishes the legislative framework for the payment to the Fund of the Community’s financial contributions
for the period 2007 to 2010. It was adopted on the basis of Article 308 EC.

10      According to recital 2 in the preamble to that regulation, the Community recognises that the objectives of the Fund, to which
it has contributed financially since 1989, are a reflection of those which it itself pursues. Under recital 3 in the preamble
to that regulation, the assessments carried out in accordance with Article 5 of Council Regulation (EC) No 177/2005 of 24
January 2005 concerning Community financial contributions to the [Fund] (2005-2006) (OJ 2005 L 30, p. 1) have confirmed the
need for further support for activities of the Fund, while continuing reinforcing synergy of objectives and coordination with
Structural Funds interventions, in particular with the Special Programme for Peace and Reconciliation in Northern Ireland
and the Border Counties of Ireland (‘the PEACE programme’).

11      The main purpose of the contested regulation, as is apparent from recital 6, is to support peace and reconciliation through
a wider range of activities than those covered by the Structural Funds, and which extend beyond the scope of the Community’s
policy on economic and social cohesion. With regard to the Fund’s strategy launched for the final phase of its activities
(2006-2010), the ultimate aim of the Fund and the contested regulation is, under recital 15 in the preamble to the latter,
to encourage inter-community reconciliation. Recitals 16 and 17 in the preamble to the contested regulation provide, furthermore,
that the Community support will contribute to reinforcing solidarity between the Member States and between their peoples and
that the adoption of that regulation is considered necessary to attain the objectives of the Community in the course of operation
of the common market.

12      Article 1 of the contested regulation fixes, for the period in question, the financial reference amount for implementation
of the Fund.

13      Article 2 of the contested regulation provides:

‘The contribution shall be used by the Fund in accordance with [the IFI Agreement].

In allocating the contribution the Fund shall give priority to projects of a cross-border or cross-community nature, in such
a way as to complement the activities financed by the Structural Funds, and especially those of the PEACE programme operating
in Northern Ireland and the border counties of Ireland.

The contribution shall be used in such a way as to bring about sustainable economic and social improvement in the areas concerned.
It shall not be used as a substitute for other public and private expenditure.’

14      Article 3 of the contested regulation provides:

‘The Commission shall represent the Community as an observer at the meetings of the Board of the Fund ...

The Fund shall be represented as an observer at the Monitoring Committee meetings of the PEACE programme, and of other Structural
Funds interventions as appropriate.’

15      The eligibility of the Fund’s expenditure and the payment of the Community’s financial contributions to the Fund are subject
to a number of conditions; these are set out in Articles 6 to 11 of the contested regulation. Article 6 thus provides that
subsequent payments to the Fund are conditional on submission to the Commission of the closure strategy and on the Commission’s
approval thereof. In addition, Article 7 of the contested regulation states that the contributions to the Fund are to be administered
by the Commission and are to be paid in instalments, the first of which is to be made after the Commission has received an
undertaking, signed by the Chairman of the Board of the Fund, to the effect that the Fund will comply with the conditions
for the grant of the contribution set out in the contested regulation.

 Regulation (EC) No 1083/2006 and the PEACE programme

16      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 (EC) No 1260/1999 (OJ 2006 L 210, p. 25) lays down
the general rules governing the Structural Funds and the Cohesion Fund.

17      The PEACE programme is a Community initiative established under the Structural Funds. Pursuant to paragraph 22 of Annex II
to Regulation No 1083/2006, that programme is implemented as a cross-border programme within the meaning of Article 3(2)(c)
of Regulation No 1083/2006 under the objective of European territorial cooperation. It includes, notably, actions to promote
cohesion between communities, in order to promote social and economic stability in the areas concerned. The eligible area
corresponds to the whole of Northern Ireland and the border counties of Ireland.

**Form of orders sought**

18      The Parliament claims that the Court should:

–        annul the contested regulation;

–        order the Council of the European Union to pay the costs.

19      The Council contends that the Court should:

–        dismiss the application as unfounded;

–        order the Parliament to pay the costs;

–        in the alternative, in accordance with the second paragraph of Article 231 EC, maintain the effects of the contested regulation
until the adoption of a new regulation and rule that annulment does not affect the validity of payments made or that of the
commitments entered into on the basis of the contested regulation.

20      By order of the President of the Court of 20 September 2007, Ireland, the United Kingdom and the Commission were granted leave
to intervene in this case in support of the form of order sought by the Council.

**The action**

*Arguments of the parties*

21      The Parliament advances a single plea in support of its action, alleging infringement of the EC Treaty by reason of the erroneous
choice of Article 308 EC as the legal basis.

22      According to the Parliament, the Community legislature has the necessary powers under the third paragraph of Article 159 EC
to adopt the contested regulation. That provision, it submits, confers on the institutions the power to adopt specific actions
that prove necessary outside the Structural Funds in order to realise the objectives, referred to in Article 158 EC, of strengthening
the economic and social cohesion of the Community.

23      The term ‘strengthening ... economic and social cohesion’ in Article 158 EC covers all actions which are designed to promote
the Community’s overall harmonious development, the strengthening of social and territorial cohesion and solidarity between
the Member States and the peoples of the Community.

24      The content of the contested regulation, of Regulation No 1083/2006 and of the Report of 12 October 2006 on the Fund pursuant
to Article 5 of Regulation No 177/2005 (COM(2006) 563 final) supports the conclusion that the objectives of the Fund coincide
with those which the Community itself pursues, within the framework of the Structural Funds, through its own actions in the
relevant areas of the two parts of Ireland and that they are directed towards the strengthening of social cohesion and solidarity
between the populations of Northern Ireland and the border areas of Ireland.

25      Consequently, the strategies currently pursued both by the PEACE programme and by the Fund focus on reconciliation and the
improvement of inter-community relations. The actions to be financed for the realisation of those two strategic priorities
are perfectly homogenous in both cases.

26      Actions to support intra-community reconciliation in Ireland inevitably constitute an integral part of the cohesion policy
precisely because, without reconciliation and mutual understanding between the communities, there can be no economic and social
cohesion in the areas in question.

27      In addition, recital 6 in the preamble to the contested regulation appears to be merely a declaration of intent on the part
of the Council, designed to justify recourse to Article 308 EC. The third paragraph of Article 159 EC provides for powers
to take specific actions, without specifying either the sectors in which such actions can be instituted or the forms which
they might take, which would enable the Community to make financial contributions to the Fund.

28      The Parliament also notes that, in order to establish whether or not Article 308 EC could serve as the legal basis for the
contested regulation, it is necessary to take account of the objectives that that regulation sought to pursue in making financial
contributions to the Fund, and not to determine the objectives of the Fund itself. Therefore, it is irrelevant that the Fund
is an intergovernmental organisation which has legal personality and to which non-member countries also contribute.

29      The Council, supported by the interveners, maintains that Title XVII of the EC Treaty, which comprises Articles 158 EC to
162 EC, does not provide for the powers to act required by the Fund’s activity and therefore cannot constitute an adequate
legal basis to justify the grant of the corresponding financial contributions.

30      The Council states that the structure and the general arrangement of Articles 158 EC and 159 EC are such that the concept
of ‘specific actions’ within the meaning of the third paragraph of Article 159 EC must be understood as forming part of the
objectives referred to in Article 158 EC. Consequently, the adoption of a specific action outside the Structural Funds is
a means to be used, in the same way as Community participation through those funds, for strengthening the economic and social
cohesion of the Community in order to promote its overall harmonious development.

31      By contrast, the contested regulation has the objective of contributing financially to an international organisation working
mainly for Irish intra‐community reconciliation whilst recognising and addressing the historical, political, cultural and
religious elements of the conflict on the territory of the island of Ireland. It is quite clear that those objectives cannot
be brought within the scope of Article 158 EC, which seeks, in particular, to reduce disparities between the levels of development
of different regions. The lack of reconciliation between the nationalists and the unionists in the territories covered by
the Fund is regarded more as an obstacle to the effective pursuit, within those territories, of a policy of economic and social
cohesion.

32      The Council also observes that the legal basis of the PEACE programme does not give it powers to cover all the actions currently
covered by the Fund, even if those two instruments are complementary and should cooperate and coordinate. Those two instruments
address, in parallel, aspects of political instability, on the one hand, and of economic and social development, on the other,
but adopt a different approach, as the Fund aims at reconciliation in order to facilitate cohesion, whereas the PEACE programme
aims at cohesion in order to facilitate reconciliation. The predominant component of the Fund thus falls outside the scope
of Title XVII of the EC Treaty.

33      The Council and Ireland are of the view that this title relates to means of action which are specific to the Community and
are administered in accordance with the rules of the Community regulatory framework, including the Community’s Financial Regulation.
Furthermore, according to the Council, neither Title XVII of the EC Treaty nor the Community regulatory framework can apply
to an international organisation of which, moreover, the Community is not a member. Even if one were to suppose that, on a
given date, the Fund’s priority were economic cohesion rather than reconciliation, it would none the less be impossible to
base the Community’s contributions on Title XVII of the EC Treaty.

34      The Council adds that it did not consider it appropriate to found the contested regulation on a second legal basis deemed
to cover the objective of economic and social cohesion, given that the objective of intra-community reconciliation in Ireland
constitutes the predominate purpose of the Fund and that the latter is a body external to the Community. The objective of
economic and social cohesion is merely a consequence of the pursuit of reconciliation secured by the action of an international
organisation external to the Community.

35      The Commission takes the view that the subject-matter of the contested regulation, namely the provision of a financial contribution
by the Community to the Fund for the period 2007 to 2010 to be used in accordance with the IFI Agreement, makes necessary
a reference to the Anglo-Irish Agreement, which, according to its preamble and Articles 2(a) and 4(a)(ii) thereof, has the
sole object of peace and reconciliation in the interests of the two Contracting States and, in particular, of the people of
Northern Ireland. The starting point is political instability, not economic and social difficulties. The objectives fixed
in Article 2 of the IFI Agreement serve to contribute to the cross-border cooperation referred to in Article 10(a) of the
Anglo-Irish Agreement, that cooperation being in itself a means by which to realise the objective of that agreement, namely,
peace and reconciliation in the interests of the two Contracting States. Consequently, economic and social development, as
envisaged by the Anglo-Irish Agreement, has never been an objective in itself.

36      The Commission also points out that, even though there is, admittedly, some overlap between the activities of the Fund and
those of the Structural Funds, the former provides for a range of activities which extend beyond the scope of the Community
policy on economic and social cohesion. Article 4 of the IFI Agreement, which determines the category of projects or actions
to which priority is to be given for the purpose of financing by the Fund, in accordance with the objectives of that agreement,
is not exhaustive with regard to the listing of the categories of actions and may encompass actions coming within the scope
of the Community cohesion policy, but without being in any way limited to such actions.

37      Finally, the Commission notes that the articles of Title XVII of the EC Treaty constitute legal bases for the adoption of
Community measures designed to implement the Community cohesion policy. As the Fund is not such a measure, and as its activities
go beyond that policy, the contested regulation could not have been adopted on the basis of the provisions of Title XVII of
the EC Treaty.

38      In the view of Ireland, account has to be taken of the specific and unique character of the Fund, the objective of which is
to promote inter-community peace and reconciliation. By contrast, the Fund’s concern with economic and social development
is instrumental in nature. That development is not a goal in itself but a factor in reconciliation and political progress.
The four fundamental areas of the Fund’s strategy for the period from 2006 to 2010 illustrate the Fund’s principal function
as a mechanism for achieving reconciliation between nationalists and unionists.

39      According to the United Kingdom Government, Articles 158 EC and 159 EC are designed to address economic and social imbalances
between the regions of the Community and not to promote peace and reconciliation between different communities within one
region. The new strategy of the Fund emphasises reconciliation in clear terms. Even though the Fund and the PEACE programme
may in some respects be complementary, they are none the less different, as the PEACE programme was specifically designed
by the Community in order to promote economic and social cohesion within the Community, whereas the Fund addresses issues
of a different nature which are defined outside the Community framework.

*Findings of the Court*

40      According to settled case-law, Article 308 EC may be used as the legal basis for a measure only where no other provision of
the EC Treaty gives the Community institutions the necessary power to adopt it (Case C‐84/94 *United Kingdom* v *Council* [1996] ECR I‐5755, paragraph 48; Case C‐22/96 *Parliament* v *Council* [1998] ECR I-3231, paragraph 22; and Case C‐436/03 *Parliament* v *Council* [2006] ECR I-3733, paragraph 36 and the case-law cited).

41      That legal basis is designed to fill the gap where no specific provisions of the Treaty confer on the Community institutions
express or implied powers to act, if such powers appear none the less to be necessary to enable the Community to carry out
its functions with a view to attaining one of the objectives laid down by the Treaty (Opinion 2/94 [1996] ECR I‐1759, paragraph
29, and Joined Cases C‐402/05 P and C‐415/05 P *Kadi and Al Barakaat International Foundation* v *Council and Commission* [2008] ECR I‐0000, paragraph 211).

42      In the context of the organisation of the powers of the Community, the choice of the legal basis for a measure must rest on
objective factors amenable to judicial review, including, in particular, the aim and the content of the measure (Case C‐338/01
*Commission* v *Council* [2004] ECR I‐4829, paragraph 54 and the case-law cited, and Opinion 2/00 [2001] ECR I‐9713, paragraph 22 and the case-law
cited).

43      It is therefore necessary to examine, on the basis of the criteria set out above, whether, as the Parliament claims, the third
paragraph of Article 159 EC constitutes an adequate legal basis for the adoption of the contested regulation and whether,
therefore, that regulation ought to have been adopted with that provision as its legal basis.

 Title XVII of the EC Treaty

44      In this regard, it is necessary to examine the system established by Title XVII of the EC Treaty, which consists of Articles
158 EC to 162 EC and confers upon the Community the power to pursue a Community policy on economic and social cohesion in
order to promote the overall harmonious development of the Community.

45      Under the first paragraph of Article 159 EC, the objectives of that Community policy, as specified in Article 158 EC, are
to be taken into account by the Member States and the Community when formulating and implementing Community policies. The
Community is also required to support the realisation of those objectives, in particular by the action which it takes through
the Structural Funds. In the same context, it may, under certain conditions, act on the basis of the third paragraph of Article
159 EC by means of specific action outside those Funds.

46      It is, admittedly, true that the latter provision does not set out the form which such specific actions can take. However,
as Ireland, the Council and the Commission have essentially submitted, the Community, through all of its actions, implements
an independent Community policy, with the result that Title XVII of the EC Treaty provides adequate legal bases allowing for
the adoption of means of action which are specific to the Community, administered in accordance with the Community regulatory
framework and the content of which does not extend beyond the scope of the Community’s policy on economic and social cohesion.

 The aim and content of the contested regulation

47      Having regard to the foregoing, it is necessary to examine the aim and content of the contested regulation in order to determine
whether, at the time at which that regulation was adopted, they should have led the legislature to have recourse to the third
paragraph of Article 159 EC as a legal basis.

48      With regard to the aim of the contested regulation, it follows from recitals 6, 15 and 16 in its preamble that the contested
regulation seeks principally to encourage peace and reconciliation between the two communities in Northern Ireland, and that
the Community support is to contribute to reinforcing solidarity between the Member States and between their peoples.

49      In this context, account must also be taken of Article 2 of the contested regulation, which concerns not only the conditions,
but also the objectives, of the utilisation by the Fund of the Community’s financial contributions.

50      That latter provision provides, first, that priority is to be given to projects of a cross-border or cross-community nature,
in such a way as to complement the activities financed by the Structural Funds, especially those of the PEACE programme, and
that the contributions are to be used in such a way as to bring about sustainable economic and social improvement in the areas
concerned.

51      Article 2 of the contested regulation refers, secondly, to the IFI Agreement. Thus, the principal objectives of the IFI Agreement,
described at Article 2 of that Agreement, are to be regarded as forming part of the contested regulation. Under Article 2
of the IFI Agreement, its objectives are to promote economic and social advance and to encourage contact, dialogue and reconciliation
between nationalists and unionists throughout Ireland.

52      This finding is also confirmed by the legal framework within which the contested regulation is situated, in particular by
the Anglo-Irish Agreement, which forms the basis of the IFI Agreement. While the principal objective of the Anglo-Irish Agreement
is the promotion of peace and reconciliation between the two communities in Northern Ireland, the objective pursued by the
area of activity within which the IFI Agreement falls is, as is stated in Article 10(a) of the Anglo-Irish Agreement, the
promotion of regional economic and social development.

53      Accordingly, it follows from the contested regulation and from the reference to the IFI Agreement that the contested regulation
relates to peace and reconciliation between the two communities in Northern Ireland as well as to economic and social progress
in the areas affected by the armed conflict.

54      It follows that the objectives of the contested regulation correspond to the objectives pursued by the Community policy on
economic and social cohesion, a fact which is also confirmed by recital 2 in the preamble to that regulation.

55      With regard to the content of the contested regulation, it fixes, in Article 1, the amount of the Community’s financial contribution
to the Fund for the period from 2007 to 2010. In Articles 2 to 11, the contested regulation refers to the IFI Agreement in
respect of the use by the Fund of that contribution, while setting out the priorities relating to that use and the arrangements
for cooperation between the Community and the Fund, together with the conditions for and the method of payment of that contribution.

56      Thus, the second paragraph of Article 2 of the contested regulation provides that, in allocating the Community’s contributions,
the Fund is to give priority to projects of a cross-border or cross-community nature, in such a way as to complement the activities
financed by the Structural Funds, and especially those of the PEACE programme operating in Northern Ireland and the border
counties of Ireland. Under the third paragraph of Article 2, the contributions are to be used in such a way as to bring about
sustainable economic and social improvement in the areas concerned.

57      In this connection, it follows from Articles 6 and 10 of the contested regulation that the maintenance of payments by the
Community to the Fund and their annual release depend on the Commission’s approval of the closure strategy presented by the
Fund. In addition, if follows from Article 7 of the contested regulation that the payment of a significant portion of the
annual contribution is contingent on receipt by the Commission of an undertaking by the Fund guaranteeing compliance with
the conditions set out in that regulation and on the Commission’s approval of the Fund’s annual activity report.

58      It follows that the Community’s financial contribution to the Fund, leaving aside its legislative framework, forms part of
the specific actions which, when they prove to be necessary outside the Structural Funds in order to realise the objectives
referred to in Article 158 EC, may be adopted in accordance with the third paragraph of Article 159 EC.

59      However, neither the arrangements governing cooperation between the Community and the Fund nor the conditions and method of
payment in respect of the Community’s financial contribution allow the Community to prevent the use by the Fund of that contribution
to cover actions which, while complying with the objectives of the IFI Agreement, extend beyond the scope of the Community’s
policy on economic and social cohesion or, at least, are not managed in accordance with the criteria applied by the Community
within the framework of that policy.

60      Under Article 5 of the IFI Agreement, the Fund is an organisation with legal personality under international law. While the
Community has observer status at the meetings of the Fund’s Board, and while the contested regulation requires that there
be coordination at all levels between the Fund and the Structural Funds, and in particular the PEACE programme, the fact remains
that the Community is a member neither of that organisation nor of its Board, which acts, pursuant to Article 6 of the IFI
Agreement, in compliance with the rules and conditions laid down by the two Contracting Governments.

61      In addition, the first paragraph of Article 2 of the contested regulation provides that the financial contributions are to
be used in accordance with the IFI Agreement, which, as the Commission correctly points out, does not exhaustively determine
the activities to be financed, but merely establishes, in Article 4, the categories of activities to which priority is to
be given with regard to financing. By that reference to the IFI Agreement, the contested regulation allows the use of those
financial contributions for actions of which, at least when the contested regulation was adopted, the specific objectives
and contents were not known, since it is not for the Community to undertake either the formulation or implementation of those
activities.

62      In addition, while Articles 6, 7 and 10 of the contested regulation lay down formal conditions governing payment of the financial
contributions of the Community to the Fund, they none the less do not set out substantive conditions with regard to the activities
to be financed by those contributions which diverge from those set out in Article 2 of the contested regulation. Therefore,
those provisions of the contested regulation cannot, contrary to what the Parliament argues, guarantee that all of the interventions
of the Fund which are financed by the Community will in fact address the objectives that are specific to the Community’s policy
on economic and social cohesion.

63      In those circumstances, the Community legislature was entitled to take the view, in recital 6 in the preamble to the contested
regulation, that the range of activities financed by the contested regulation would extend beyond the scope of the Community’s
policy on economic and social cohesion.

64      As has been pointed out in paragraph 46 of the present judgment, Article 159 EC covers only independent action by the Community
carried out in accordance with the Community regulatory framework and whose content does not extend beyond the scope of the
Community’s policy on economic and social cohesion.

65      Consequently, the third paragraph of Article 159 EC does not by itself confer on the Community the necessary power to pursue
the objectives of the Community’s policy on economic and social cohesion by means of a financial contribution under conditions
such as those provided for by the contested regulation.

 The appropriate legal basis

66      In those circumstances, it is necessary to examine whether the legislature ought to have had recourse to both Article 308 EC
and the third paragraph of Article 159 EC for the purpose of adopting the contested regulation.

67      In that regard, as has been stated at paragraph 41 of the present judgment, Article 308 EC is designed to fill the gap where
no specific provisions of the EC Treaty confer on the Community institutions express or implied powers to act, if such powers
appear none the less to be necessary to enable the Community to carry out its functions with a view to attaining one of the
objectives laid down by the Treaty. In addition, as follows from Article 308 EC, recourse to that provision demands that the
action envisaged should relate to the ‘operation of the common market’ (see *Kadi and Al Barakaat International Foundation* v *Council and Commission*, paragraph 200).

68      The purpose of the contested regulation is to support the actions of an international organisation established by two Member
States, the objective of which is to strengthen economic and social cohesion. As follows from Articles 2 EC and 3(1)(k) EC,
the strengthening of economic and social cohesion constitutes, outside of Title XVII of the EC Treaty, which confers on the
Community the power to pursue a Community policy on economic and social cohesion, an objective of the Community. As is also
evident from recital 17 in the preamble to the contested regulation, the objective thereof falls within the framework of the
common market, since it seeks to bring about economic improvements in disadvantaged areas of two Member States and thus relates
to the functioning of the common market.

69      It follows from the foregoing that, as the contested regulation pursues objectives set out in Articles 2 EC and 3(1)(k) EC
and in Title XVII of the EC Treaty, without that title by itself conferring on the Community the power to realise those objectives,
the Community legislature ought to have had recourse to both the third paragraph of Article 159 EC and Article 308 EC (see,
to that effect, Case 242/87 *Commission* v *Council* [1989] ECR 1425, paragraphs 6 and 37, and *Kadi and Al Barakaat International Foundation* v *Council and Commission*, paragraphs 211 to 214), while complying with the legislative procedures laid down therein, that is to say, both the ‘co‐decision’
procedure referred to in Article 251 EC and the requirement that the Council should act unanimously.

 The request that the effects of the contested regulation be maintained

70      The Council, supported in this respect by all of the interveners, requests the Court, should it annul the contested regulation,
to maintain the effects of that regulation, pursuant to the second paragraph of Article 231 EC, until a new regulation has
been adopted and to rule that such annulment is not to affect the validity of payments made or of commitments entered into
on the basis of the contested regulation.

71      According to the Council, maintenance of the effects of that regulation is necessary on important grounds of legal certainty
connected both with current projects and with the legitimate expectations of the Fund’s management.

72      Under the second paragraph of Article 231 EC, the Court, if it considers this necessary, is to state which of the effects
of a regulation which it has declared void are to be considered as definitive.

73      In accordance with its Article 12, the contested regulation entered into force on 1 January 2007 and is to expire on 31 December
2010. Consequently, annulment of the contested regulation occurs at a time at which at least two of the four annual contributions,
and thus the bulk of the payments corresponding to those contributions, have been made and at which the Fund’s management
may legitimately expect that the remaining portion will also be paid to it.

74      Accordingly, annulment of the contested regulation without maintenance of its effects could have adverse consequences, particularly
with regard to financial contributions made for actions and projects planned and in the course of implementation, and would
be liable to give rise to uncertainties damaging to present and future financing operations of the Fund.

75      In those circumstances, important grounds of legal certainty exist which justify the Court in exercising the power conferred
on it by the second paragraph of Article 231 EC and in stating which of the effects of the annulled regulation are to be considered
as definitive. It is thus appropriate to rule that the annulment of the contested regulation does not affect the validity
of payments made or of undertakings given under that regulation prior to the delivery of the present judgment, and that the
effects of the contested regulation are to be maintained until the entry into force, within a reasonable period, of a new
regulation adopted on the appropriate legal basis.

**Costs**

76      Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been
applied for in the successful party’s pleadings. Under the first subparagraph of Article 69(3) of those Rules, the Court may
nevertheless order that the costs be shared or decide that each party is to bear its own costs where each party succeeds on
some and fails on other claims, or where the circumstances are exceptional.

77      As the Council and the Parliament have each been partially unsuccessful in this case, they shall bear their own respective
costs.

78      In accordance with Article 69(4) of the Rules of Procedure, the Member States and institutions that have intervened in the
proceedings are to bear their own costs.

On those grounds, the Court (Fourth Chamber) hereby:

1.      **Annuls Council Regulation (EC) No 1968/2006 of 21 December 2006 concerning Community financial contributions to the International
Fund for Ireland (2007 to 2010);**

2.      **Maintains the effects of Regulation No 1968/2006 until the entry into force, within a reasonable period, of a new regulation
adopted on an appropriate legal basis;**

3.      **Orders that the annulment of Regulation No 1968/2006 shall not affect the validity of payments made or of undertakings given
under that regulation;**

4.      **Orders the European Parliament and the Council of the European Union to bear their own respective costs;**

5.      **Orders Ireland, the United Kingdom of Great Britain and Northern Ireland and the Commission of the European Communities to
bear their own respective costs.**

[Signatures]

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[\*](#Footref*) Language of the case: French.