Judgment — ECLI:EU:C:2006:60
Date: 2006-01-26
Language of the case: English
Court formation: Fifth Chamber
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Research and technological development
Concepts: Proceedings relating to a contract
Procedure: Arbitration clause;Application to set aside judgment by default - unfounded
Origin: United Kingdom

JUDGMENT OF THE COURT (Fifth Chamber) 24 February 2005 (1) (Arbitration clause – Reimbursement of an advance payment – Default interest – Default proceedings) In Case C-279/03, ACTION under Article 238 EC brought on 26 June 2003, Commission of the European Communities, represented by R. Lyal and C. Giolito, acting as Agents, with an address for service in Luxembourg, applicant, v Implants (International) Ltd, established in Cleveland (United Kingdom), defendant, THE COURT (Fifth Chamber), composed of R. Silva de Lapuerta, President of the Chamber, C. Gulmann and J. Klučka (Rapporteur), Judges, Advocate General: P. Léger, Registrar: R. Grass, having regard to the written procedure, having decided, after hearing the Advocate General, to proceed to judgment without an Opinion, gives the following Judgment 1 By its application, the Commission of the European Communities seeks reimbursement of the sum of EUR 284 000 which it paid in the performance of Contract No G5ST-CT-2001-50071 (hereinafter ‘the Contract’), together with default interest. Legal and factual context 2 On 8 May 2001 the European Community, represented by the Commission, concluded with Implants (International) Ltd (hereinafter ‘Implants’) and other contractors a contract relating to the carrying out of a project called ‘Surface Engineering Approaches to Improved Orthopaedic Devices’ (hereinafter ‘the project’), within the framework of Council Decision 1999/169/EC of 25 January 1999 adopting a specific programme for research, technological development and demonstration on competitive and sustainable growth (1998 to 2002) (OJ 1999 L 64, p. 40) (hereinafter ‘the RTD programme’). 3 Under Article 2(1) of the Contract, the duration of the project was 24 months from the first day of the month after the last signature of the contracting parties, namely 1 June 2001. 4 In Annex II to the Contract (hereinafter ‘the General Conditions’), Article 1 provided that Implants was the coordinator of the project. 5 By virtue of Article 3(1) of the Contract, the Commission undertook to contribute financially to the proper execution of the project, for which the total eligible costs had been estimated at EUR 1 420 000. Article 3(2) provided that the Commission would fund up to 50% of the eligible costs, that is to say EUR 710 000. 6 According to Article 3(3) of the Contract, the Commission was to pay its financial contribution to the project to Implants in its role as coordinator. 7 Under Article 3 of the General Conditions, payment of the Commission’s contribution was to be made as follows: – an initial advance of EUR 284 000 within 60 days of the last signature of the contracting parties; – payments within 60 days of approval of each of the periodic reports and corresponding cost statements or other ‘project deliverables’; – final payment within 60 days of approval of the last ‘project deliverable’. 8 Under Article 2(1)(e) of the General Conditions, Implants was required to distribute the initial advance among the contractors and/or the RTD programme performers within 30 days of receipt of the funds. 9 Pursuant to Article 3(3) of the General Conditions, all payments made by the Commission are to be treated as advances until the last ‘project deliverable’ is approved. 10 Under Article 4(2) of the Contract, Implants was required to submit to the Commission periodic reports and corresponding cost statements, covering successive periods of 12 months from the date of commencement of the project. By virtue of Article 4(2) of the General Conditions, the cost statements were to be expressed in euro and to correspond to the format specified in Part E-2 of the General Conditions. Under Article 4(3) of the General Conditions, the cost statements were to be submitted within two months of the end of the relevant period. 11 Article 7 of the General Conditions stipulates: ‘… 2. The Commission shall not object: … (b) to the withdrawal of a contractor from the project where all the other contractors have given their prior agreement in writing, unless this withdrawal substantially affects the carrying out of the project. … 6. … In the event of termination of the contract or of the participation of a contractor: (a) pursuant to paragraph 2, first subparagraph, point (b), paragraph 3(b) or (d) or paragraph 4(c) of this Article, the Commission may require reimbursement of all or part of the Community’s financial contribution, taking into account the nature and results of the work carried out and its usefulness to the Community in the context of the specific programme concerned, …’ 12 Article 5(2) of the Contract stipulates that the Court of First Instance of the European Communities and, in the case of an appeal, the Court of Justice are to have sole jurisdiction to hear any disputes concerning the validity, the application and the interpretation of the Contract, which, under Article 5(1) thereof, is governed by Belgian law. 13 On 16 May 2001 the Commission, pursuant to Article 3(1)(a) of the General Conditions, paid to Implants the initial advance of EUR 284 000. However, that company did not distribute it among the contractors or the RTD programme performers. 14 On 15 April 2002 Implants notified the Commission that it wished to withdraw from the project and indicated that it would forward to the Commission details of its costs incurred up to that date in connection with the project. 15 By letter of 19 April 2002, the Commission informed Implants that a recovery order for the advance payment would be made and requested it to submit, by 15 May 2002, the technical reports and the costs statements for its expenditure incurred in connection with the project so that account could be taken thereof when calculating the amount of the recovery order, failing which a recovery order would be issued for the full amount of the advance payment. 16 On 12 May 2002 Implants submitted a statement of its costs to the Commission. However, by letter of 17 May 2002 the Commission informed it that the statement could not be accepted since it was not in the form prescribed by the General Conditions. The Commission therefore informed Implants of its decision to start the procedure for recovery of the full amount of the advance payment, stating that any amount due by way of costs incurred on the project would be transferred to it upon receipt and review of the requisite technical report and of the costs statements in the prescribed form. 17 On 26 June 2002 the Commission issued Implants with Debit Note No 3240404230 (hereinafter ‘the Debit Note’) for the sum of EUR 284 000 payable by 31 August 2002, specifying under the heading ‘Payment terms’ that after that date default interest would be payable, at the rate applied by the European Central Bank (hereinafter ‘the ECB’) to its refinancing operations in euro in August 2002 increased by 1.5 percentage points. 18 However, by letter of 30 July 2002, the Commission informed Implants that, despite issue of the Debit Note for the full amount, its costs would be taken into account provided that the Commission received the abovementioned documents no later than 31 August 2002. 19 Since the Commission did not receive those documents, on 17 October 2002 it sent Implants a reminder of the Debit Note and gave it formal notice to pay the sum demanded, failing which legal proceedings would be instituted. 20 On 13 November 2002 further information regarding the costs was forwarded to the Commission. However, this document was submitted after the deadline of 31 August 2002 and was not in the form required by the General Conditions. On 11 December 2002 the Commission thus informed Implants that the recovery procedure was being continued. 21 In those circumstances, the Commission decided to bring the present action. Procedure before the Court 22 In view of the fact that Implants’ defence was not submitted by a lawyer authorised to practice before a court of a Member State, on 28 October 2003 the Commission applied for judgment by default pursuant to Article 94(1) of the Rules of Procedure. 23 Implants has indeed not responded to the application initiating proceedings in accordance with the formal requirements prescribed by the third and fourth paragraphs of Article 19 of the Protocol on the Statute of the Court of Justice and Articles 40(1) and 38(2) to (5) of the Rules of Procedure of the Court of Justice. The Court must, therefore, rule on the application for judgment by default. Since there is no doubt as to the admissibility of the action, the Court has the task, in accordance with Article 94(2) of the Rules of Procedure, of considering whether the application initiating proceedings appears well founded. 24 The Commission claims that the Court should order Implants: – to pay it the sum of EUR 294 958.51, corresponding to EUR 284 000 as the amount due and EUR 10 958.51 as default interest; – to pay it EUR 52.91 per day by way of interest from 1 May 2003 until the date on which the debt is repaid in full; – to pay the costs of the action. Substance Reimbursement of the advance payment 25 Under Article 7(6)(a) of the General Conditions, in the event of termination of a contractor’s participation in the project the Commission may require, taking into account the results and usefulness of the work already carried out by that contractor, reimbursement of all or part of the Community’s financial contribution if, inter alia, as provided for in Article 7(2)(b) of the General Conditions, withdrawal from the Contract has been requested by the contractor and accepted by the Commission. 26 Implants withdrew from the Contract in accordance with Article 7(2)(b) of the General Conditions, following the Commission’s acceptance of a request to this effect made by it. 27 In addition, contrary to Article 4(2) of the Contract and Article 4(2) of the General Conditions and notwithstanding the Commission’s reminders, Implants did not submit to the Commission periodic reports and corresponding cost statements in the prescribed form. The Commission was therefore not in a position to assess the nature and results of the work carried out or its usefulness to the Community. Furthermore, Implants did not, before withdrawing from the project and contrary to the obligation laid down in Article 2(1)(e) of the General Conditions, distribute the initial advance among the contractors and/or the RTD programme performers either within 30 days of receipt of the funds or subsequently. 28 Consequently, the Commission’s claims must be upheld so far as concerns reimbursement of the entire advance payment amounting to EUR 284 000. Default interest 29 The Commission states that default interest must be added to the principal sum. In its submission, the interest rate to be taken into account until 31 December 2002 is that applied by the ECB for its refinancing operations in euro in August 2002, increased by one and a half percentage points, that is to say an interest rate of 4.8% (3.3 + 1.5). As regards interest payable from 1 January 2003, the Commission contends, relying on Article 71(4) of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (OJ 2002 L 248, p. 1) and Article 86(2)(b) of Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of Regulation No 1605/2002 (OJ 2002 L 357, p. 1), that the rate to be taken into account is that applied by the ECB to its refinancing operations in euro in force on the first calendar day of the month in which the due date fell, namely 1 August 2002, increased by three and a half percentage points, that is to say an interest rate of 6.8% (3.3 + 3.5). 30 As to those submissions, neither the Contract nor the General Conditions provide for the possibility of default interest being added to the principal sum in the case covered by Article 7(6)(a) of the General Conditions. 31 In the absence of contractual interest and since the Contract is governed by Belgian law, Article 1153 of the Belgian Civil Code should be applied, under which, in the event of failure to perform an obligation relating to payment of a sum of money, the creditor is entitled, from the day of the order to pay, to demand statutory default interest without being obliged to demonstrate any loss. 32 Since the Commission required Implants to reimburse the entire advance payment on 31 August 2002, it is justified in claiming payment of default interest from that date. 33 By virtue of Article 1 of the Royal Decree of 4 August 1996 amending the rate of statutory interest (Moniteurbelge of 15 August 1996, p. 21613), the rate of statutory interest was set at 7% from 1 September 1996, the date of the decree’s entry into force. 34 Since, for the entire period between 31 August 2002 and the date of this judgment, the rates of interest claimed by the Commission are lower than those set by Belgian law, the Commission’s claims must be upheld in this regard. 35 In view of all the foregoing considerations, Implants must be ordered to pay to the Commission the principal sum due of EUR 284 000, together with default interest: – at the rate of 4.8% per annum from 31 August 2002 until 31 December 2002; – at the rate of 6.8% per annum from 1 January 2003 until the sums payable have been reimbursed in full. Costs 36 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. Since the Commission has applied for costs and Implants has been unsuccessful, the latter must be ordered to pay the costs On those grounds, the Court (Fifth Chamber) hereby: 1. Orders Implants (International) Ltd to pay to the Commission of the European Communities the principal sum due of EUR 284 000, together with default interest: – at the rate of 4.8% per annum from 31 August 2002 until 31 December 2002; – at the rate of 6.8% per annum from 1 January 2003 until the sums payable have been reimbursed in full; 2. Orders Implants (International) Ltd to pay the costs. [Signatures] 1 – Language of the case: English.