Information;Judgment — ECLI:EU:T:2023:388
Date: 2023-07-12
Language of the case: English
Court formation: First Chamber
Subject matter: Research and technological development
Procedure: Arbitration clause - unfounded;Arbitration clause - successful
Origin: Finland

JUDGMENT OF THE GENERAL COURT (First Chamber) 12 July 2023 (*) (Arbitration clause – Seventh Framework Programme for research, technological development and demonstration activities (2007-2013) – Personnel costs – Reimbursement of sums paid – Eligibility of costs relating to in-house consultants – Burden of proof) In Case T‑358/20, Net Technologies Finland Oy, established in Helsinki (Finland), represented by S. Pappas, lawyer, applicant, v European Research Executive Agency (REA), represented by S. Payan-Lagrou and V. Canetti, acting as Agents, and by M. Le Berre, lawyer, defendant, THE GENERAL COURT (First Chamber), composed, at the time of the deliberations, of H. Kanninen (Rapporteur), President, M. Jaeger and M. Stancu, Judges, Registrar: V. Di Bucci, Registrar, having regard to the order of 18 August 2020, Net Technologies Finland v REA (T‑358/20 R, not published, EU:T:2020:369), having regard to the written part of the procedure, having regard to the fact that no request for a hearing was submitted by the parties within three weeks after service of notification of the close of the written part of the procedure, and having decided to rule on the action without an oral part of the procedure, pursuant to Article 106(3) of the Rules of Procedure of the General Court, having regard to the decision of 28 October 2022 to reopen the written part of the procedure, having regard to the Court’s written questions to the parties and their replies to those questions lodged at the Court Registry on 1 December 2022 and 6 January and 3 March 2023, having regard to the close of the written part of the procedure on 31 March 2023 and the Court’s decision to rule on the action without an oral procedure, gives the following Judgment 1 By its action based on Article 272 TFEU, the applicant, Net Technologies Finland Oy, seeks a declaration that, first, the costs for in-house consultants are eligible and, secondly, that the claim for reimbursement of the amounts of EUR 171 342.97 and EUR 17 134.30 in respect of an unjustified contribution and liquidated damages, respectively, is unfounded. Background to the dispute 2 The applicant is a limited liability company incorporated under Finnish law whose business activity covers the area of telecommunications (networks design, development, implementation, operation and maintenance). 3 The Grant Agreement FP7SEC2012312484 (‘the grant agreement’) was concluded on 30 August 2013 in the context of the Seventh Framework Programme for research, technological development and demonstration activities (2007-2013) (‘the Seventh Framework Programme’) with a view to carrying out the project ‘Inter System Interoperability for Tetra – TETRAPOL Networks’ (‘the project’) between the consortium’s coordinating company responsible for implementing the project and the European Research Executive Agency (REA). 4 The grant agreement entered into force on 30 August 2013. The project was carried out between 1 September 2013 and 31 December 2016. 5 The consortium responsible for the implementation of the project included national administrations, universities and private commercial companies. 6 Net Technologies Etaireai Periorismenis Efthynis was one of the members of the consortium responsible for the implementation of the project. It had signed the grant agreement as a beneficiary. 7 On 1 May 2014, the applicant assumed the rights and obligations of Net Technologies Etaireia Periorismenis Efthynis and thus became a member of the consortium. The grant agreement was amended accordingly. 8 On the same day, the applicant concluded, within the framework of the grant agreement, five service contracts with telecommunications engineers: [confidential]. (1) The duration of the contracts was from 1 May 2014 until 31 December 2016. 9 In accordance with Article 1 of those contracts, ‘the [co-contractor] shall follow all and any instructions of the [applicant] for the performance of the services’, ‘the services are to be carried partly at the project location (Helsinki, Finland) or elsewhere upon mutual agreement’ and ‘the [co-contractor] will apply methods and work disciplines of the [applicant]’. Article 2 provides that the ‘Contractor will provide his services in full compliance with the [applicant’s] methods and procedures and under full guidance of the project manager’ and that ‘[the co-contractor] will keep time sheets, according to the [applicant’s] templates which will be approved by the Project Manager’. 10 Article 3 of those contracts sets out the maximum amount which the applicant may be required to pay to its co-contractor. In addition, that article provides that the applicant is to pay the co-contractor at monthly intervals according to the time sheet accepted by the applicant. 11 On 16 March 2018, the REA informed the applicant of the launch of a financial audit concerning its activities in the context of the project. The audit took place from 24 to 26 April 2018. 12 On 30 January 2019, the REA sent the draft audit report to the applicant, giving it the opportunity to submit its comments within 30 days of its receipt. The draft report envisaged that the costs for service [confidential] were not eligible under the grant agreement, since they constituted subcontracting concerning core parts of the project and the use of subcontracting had not been included in Annex I to the grant agreement. By contrast, the service costs provided by [confidential], also regarded as subcontracting costs, are eligible, since the relevant contribution to the project had to be regarded as minor. 13 By letter of 28 February 2019, the applicant submitted its comments on the draft audit report. It disputed, inter alia, the draft findings concerning the ineligibility of the costs relating to the services of the four persons referred to in paragraph 12 above. 14 By letter of 11 April 2019, the REA replied to the applicant’s arguments and sent it the final audit report. 15 In the final audit report, the REA considered that [confidential]’s service costs were eligible under the grant agreement as subcontracting costs, on the ground that the relevant contribution to the project was considered to be minor. By contrast, it considered that the costs of the services of the other four consultants (EUR 184 642.84) were ineligible, on the ground that the criteria relating to the equivalence between the costs of the consultants and the personnel costs, as defined in the Guide to financial issues related to FP7 indirect actions under the Seventh Framework Programme (‘the FP7 guide’), were not satisfied. The REA considered that those costs amounted to de facto subcontracting since the activities at issue were not listed in Annex I to the grant agreement as approved subcontracting activities. 16 By letter of 2 May 2019, the applicant acknowledged receipt of the final audit report and disputed the findings of that report concerning the ineligibility of the costs relating to the service contracts of the four consultants. 17 By letter of 24 October 2019, the REA replied to the applicant, confirming the findings of the final audit report. 18 By letter of 18 November 2019, the applicant again disputed the findings of the final audit report. 19 On 21 November 2019, the REA sent the applicant a pre-information letter indicating its intention to recover from it EUR 171 342.97 in respect of an unjustified contribution and EUR 17 134.30 in respect of liquidated damages. 20 By letter of 23 December 2019, the REA acknowledged receipt of the applicant’s letter of 18 November 2019 and replied to its arguments, by referring to the clarifications it had already provided in its letter of 24 October 2019 and by providing additional information. 21 On 8 April 2020, the REA sent the applicant a new pre-information letter, with the same content as that sent on 21 November 2019, and granted it a period of 15 days to submit its final comments. 22 On 7 May 2020, the REA issued debit note No 3242005825 concerning the reimbursement of the amount of EUR 171 342.97 in respect of an unjustified contribution and debit note No 3242005872 concerning the reimbursement of the amount of EUR 17 134.30 in respect of liquidated damages (‘the contested debit notes’), setting the deadline for payment as 22 June 2020. Forms of order sought 23 The applicant claims that the Court should: – declare that the REA failed to fulfil its contractual obligations under the grant agreement; – declare that the claims made in the contested debit notes are unfounded; – declare that the costs for in-house consultants are eligible; – order the REA to pay the costs. 24 The REA contends that the Court should: – dismiss the action; – order the applicant to pay the costs of the proceedings, including those incurred in the proceedings for interim measures. Law The applicable law 25 Where seised under an arbitration clause pursuant to Article 272 TFEU, the Court must resolve the dispute on the basis of the substantive law applicable to the contract (see judgment of 2 March 2022, VeriGraft v Eismea, T‑688/19, EU:T:2022:112, paragraph 55 and the case-law cited). 26 In the present case, in accordance with the first paragraph of Article 9 of the grant agreement, that agreement is governed by its own terms, by the acts of EU law relating to the Seventh Framework Programme, Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002 (OJ 2012 L 298, p. 1), Commission Delegated Regulation (EU) No 1268/2012 of 29 October 2012 on the rules of application of Regulation No 966/2012 (OJ 2012 L 362, p. 1), other provisions of EU law and, on a subsidiary basis, the law of Belgium. 27 As an annex thereto, the general conditions of that agreement form an integral part of the grant agreement (‘the general conditions’). In accordance with Article II.2(1) of the general conditions, in any communication between the REA and the European Commission, the members of the consortium are represented by the coordinator of the consortium, subject to the exceptions expressly provided for in the grant agreement. 28 Article II.7 of the general conditions provides as follows: ‘1. A subcontractor is a third party which has entered into an agreement on business conditions with one or more beneficiaries, in order to carry out part of the work of the project without the direct supervision of the beneficiary and without a relationship of subordination. … 2. Where it is necessary for the beneficiaries to subcontract certain elements of the work to be carried out, the following conditions must be fulfilled: – subcontracts may only cover the execution of a limited part of the project; – recourse to the award of subcontracts must be duly justified in Annex I having regard to the nature of the project and what is necessary for its implementation; …’ 29 Article II.14(1) of the general conditions, entitled ‘Eligible costs of the project’, provides as follows: ‘1. Costs incurred for the implementation of the project shall meet the following conditions in order to be considered eligible: (a) they must be actual; (b) they must be incurred by the beneficiary; … (d) they must be determined in accordance with the usual accounting and management principles and practices of the beneficiary … The beneficiary’s internal accounting and auditing procedures must permit direct reconciliation of the costs and receipts declared in respect of the project with the corresponding financial statements and supporting documents; (e) they must be used for the sole purpose of achieving the objectives of the project and its expected results, in a manner consistent with the principles of economy, efficiency and effectiveness; …’ 30 Article II.15(1) of the general conditions, relating to direct costs, provides that: ‘1. Direct costs are all those eligible costs which can be attributed directly to the project and are identified by the beneficiary as such, in accordance with its accounting principles and its usual internal rules. With regard to personnel costs, only the costs of the actual hours worked by the persons directly carrying out work under the project may be charged. Such persons must: – be directly hired by the beneficiary in accordance with its national legislation, – work under the sole technical supervision and responsibility of the latter, and – be remunerated in accordance with the normal practices of the beneficiary.’ 31 Article II.22 of the general conditions lays down provisions on financial audits and controls. 32 Article II.24 of the general conditions concerns liquidated damages. Paragraph 3 of that article provides that ‘the REA shall inform the beneficiary which it considers liable to pay liquidated damages in writing of its claim by way of a registered letter with acknowledgement of receipt. The beneficiary shall have a period of 30 days to answer the claim of the Union’. The interpretation of the applicant’s heads of claim 33 By its first head of claim, the applicant asks the Court to declare that the REA failed to fulfil its contractual obligations under the grant agreement. In the light of the content of the application, that head of claim must be interpreted as having, in essence, the same purpose as the second and third heads of claim submitted by the applicant. Accordingly, there is no need to adjudicate on the first head of claim, since it duplicates the applicant’s second and third heads of claim. The pleas in law 34 In support of its action, the applicant relies on three pleas in law, alleging, first, infringement of the rules regarding eligibility of costs, secondly, abuse of rights and performance of the agreement contrary to the principle of good faith and, thirdly, infringement of the principle of proportionality. 35 By its first plea, the applicant submits, in essence, that the REA misinterpreted and misapplied the provisions applicable to the grant agreement, since it considered that the costs relating to four in-house consultants did not comply with the eligibility criteria laid down in the grant agreement and therefore should give rise to claims for reimbursement. 36 That plea is divided, in essence, into three parts. The first part concerns the relevance, in the present case, of the provisions of the FP7 guide. The second part concerns infringement of the adversarial principle. The third part concerns the eligibility of the costs relating to the four in-house consultants (‘the costs at issue’). First part of the first plea in law 37 In the first part of the first plea, the applicant complains that the REA relied exclusively on the provisions of the FP7 guide and in particular on the criteria for establishing equivalence between the consultancy costs and the personnel costs which it lists in order to conclude that the disputed costs are ineligible. 38 The applicant submits that the criteria applied by the REA are not provided for in the general conditions, in particular Articles II.14 and II.15 relating to the eligibility of costs. The FP7 guide is merely an interpretative instrument. Therefore, by introducing additional conditions, which are not provided for in the general conditions, that guide unlawfully limited the scope of the provisions of Articles II.14 and II.15 of those conditions, and of the provisions of Regulation No 966/2012. The applicant observes, moreover, that that guide is not referred to in Article 9 of the grant agreement relating to the applicable law. 39 Finally, the applicant maintains that, in any event, the FP7 guide was brought to its attention only after the project had been completed. 40 The REA disputes that it relied solely on the FP7 guide in order to classify the costs at issue as ineligible. It relied on that guide to interpret Article II.15 of the general conditions. More specifically, the REA states that, as regards the consultancy costs, the criteria laid down in that guide serve to determine whether certain costs which are not explicitly covered by the conditions laid down in Article II.15 of the general conditions can nevertheless be declared eligible. 41 The REA also asserts that the applicant has not at any time disputed the existence or relevance of the FP7 guide. According to the REA, that guide had formerly been brought to the applicant’s attention in 2011 and 2012, by means of various documents which referred to it, that is to say well before the entry into force of the grant agreement. 42 It is appropriate to examine, first, the legal value of the FP7 guide and, secondly, whether the FP7 guide was brought to the applicant’s attention. – The legal value of the FP7 guide 43 It is apparent from the first paragraph of Article 9 of the grant agreement that that agreement does not expressly refer to the FP7 guide as a source of the applicable law. In general, it should be noted that the FP7 guide is not referred to in either the grant agreement or the general conditions. 44 It should be noted that the FP7 guide cannot be regarded as an EU act relating to the Seventh Framework Programme within the meaning of the first paragraph of Article 9 of the grant agreement. In that regard, the guide states that its purpose is to help participants understand and interpret the provisions of grant agreements and that it cannot derogate from the legal texts. It is also stated that the guide reflects the interpretation of the Commission of the provisions of grant agreements and that only the provisions of those agreements are binding. 45 It follows that the FP7 guide is merely a policy instrument for projects selected for funding, which cannot under any circumstances derogate from the conditions laid down in the general conditions and, more particularly, from the requirements stemming from the wording of Articles II.14 and II.15 thereof (see, by analogy, judgment of 21 December 2021, EKETA v Commission, T‑177/17, not published, EU:T:2021:929, paragraph 139). 46 The fact remains that, although it is not binding, the FP7 guide falls within the framework in which the grant agreement was concluded, since it is intended to provide, inter alia, concrete examples and suggestions relating to good financial practice to be applied when implementing projects financed under the Seventh Framework Programme. In accordance with the principle that contracts must be performed in good faith, the information provided in the FP7 guide must therefore be taken into account (see, by analogy, judgments of 10 March 2021, Ayuntamiento de Quart de Poblet v Commission, T‑539/18, not published, EU:T:2021:123, paragraph 57, and of 20 October 2021, Lito Maieftiko Gynaikologiko kai Cheirourgiko Kentro v Commission, T‑191/16, not published, EU:T:2021:707, paragraph 90 and the case-law cited). – The question whether the FP7 guide was brought to the applicant’s attention 47 The applicant claims that it was not informed of the existence and content of the FP7 guide until the audit stage, more specifically on 30 January 2019 when it received the draft audit report. That claim must be understood as meaning that the FP7 guide cannot be relied on against it, since it was not aware of it when the project was carried out. 48 It is apparent from the file that, by letter of 16 July 2012, the REA informed the representative for the proposal, who, following the signature of the grant agreement, became the coordinator of the consortium, of the documents necessary for the preparation of the grant agreement, providing him with an electronic link referring to those documents. Those documents included the FP7 guide. In addition, under the heading ‘Key information for negotiation’, reference was made to Section B.1 of the FP7 guide in so far as concerns Article II.15 of the general conditions, relating to the identification of direct and indirect costs. Finally, the letter of invitation referred to the guidance notes for the negotiations, which cited the FP7 guide as a document to be consulted during the negotiations. Those notes also made several references to that guide as regards the specific issues relating, inter alia, to direct and indirect costs and subcontracting costs. 49 Furthermore, even though that invitation was addressed only to the coordinator of the consortium, the applicant must be regarded as having been informed of the relevance of the FP7 guide by means of the invitation to negotiations. 50 In the first place, it should be noted that the invitation to negotiations included a list of the participants in the project which featured the name of the applicant’s predecessor in title. In that regard, the invitation asked the representative of the proposal to inform the other participants of the situation in question. Above all, in accordance with Article 1(1) of the grant agreement, the coordinator of the consortium was required to ensure that each legal entity participating in that agreement as a beneficiary assumed the rights and obligations established by the grant agreement with effect from the date on which that agreement entered into force. 51 In the second place, in accordance with Article II.2(1) of the general conditions, in communication with the REA and the Commission, the members of the consortium are represented by the coordinator of the consortium, subject to exceptions expressly provided for in the grant agreement. 52 Therefore, even if the applicant had not been informed by the coordinator of the consortium of the relevance of the FP7 guide, that issue would fall within the scope of the relationship between the participants in the consortium and the consortium contract concluded for that purpose, with the result that that fact is irrelevant for the purposes of the present case. 53 In the light of the foregoing, it must be concluded that the FP7 guide was duly brought to the applicant’s attention before the grant agreement was signed. 54 The first part of the first plea must therefore be rejected, without it being necessary to examine the REA’s argument that the call for proposals under the Seventh Framework Programme already referred to the FP7 guide. Second part of the first plea in law 55 The applicant alleges that the REA infringed the adversarial principle, as it arises from Article 133 of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision 541/2014/EU and repealing Regulation No 966/2012 (OJ 2018 L 193, p. 1), and Article II.24 of the general conditions, since it was not in a position to submit its comments before the contested debit notes were issued. More specifically, it criticises the REA for not acknowledging that it received the comments which it attempted, on several occasions, to send between 17 December 2019 and 24 April 2020, and for having sent, on 8 April 2020, a second pre-information letter granting it only a period of 15 days to submit its comments. 56 The REA disputes that line of argument. 57 Article II.24(3) of the general conditions provides that, in the event of an application for liquidated damages, the REA is to inform the beneficiary of that claim by registered letter with acknowledgement of receipt, who has 30 days to reply. 58 In the present case, on 21 November 2019, the REA sent the applicant a pre-information letter informing it of its intention to recover from it EUR 171 342.97 in respect of an unjustified contribution and EUR 17 134.30 in respect of liquidated damages, and specifying the arrangements for recovery. It stated that the applicant had the opportunity to submit its comments within 30 days of receipt of that letter. 59 The applicant submits that it sent its comments to the REA by email on 17 December 2019. 60 It is common ground between the parties that, between 30 December 2019 and 30 January 2020, they exchanged emails concerning the sending and receipt of the applicant’s comments. Thus, in response to the applicant’s email of 30 December 2019, which referred to its comments of 17 December 2019, the REA replied, on 8 January 2020, that it appeared that it had not received them and asked the applicant to send them to it. On 22 January 2020, the REA again invited the applicant to submit its comments. In its reply of the same date, the applicant stated that it had sent its comments electronically on 9 January 2020, but that it was going to send them again by means of another email. On 29 January 2020, REA asked the applicant to submit its reply of 9 January 2020. Lastly, on the same day, the applicant replied that it had already sent the comments with attachments in two emails and stated that it was going to try again the following day. On 30 January 2020, the REA reminded the applicant that it had not received its emails and asked the applicant to attach its emails to its reply. 61 The applicant produced before the Court the email dated 17 December 2019 by which it sent its comments to the REA. That email includes, as attachments, the applicant’s comments and annexes thereto. In addition, the applicant produced, as annexes to the application, its emails of 9 and 30 January 2020 by which it again sent its comments of 17 December 2019. The email of 30 January 2020 states that the applicant also sent its comments in an email of 22 January 2020. 62 On 8 April 2020, the REA sent the applicant a new pre-information letter, identical in content to that sent on 21 November 2019 regarding the claim for reimbursement and liquidated damages. That letter set a period of 15 days for the submission of comments. That letter stated, inter alia, that the REA had taken the decision to continue to implement the findings of the audit, no new evidence having been put forward by the applicant. The REA stated that it had not received any reply, either by post or email, to its email of 30 January 2020, which invited the applicant to send the letter with its comments which it claimed to have sent on 17 December 2019. 63 The applicant claims to have submitted its comments by email on 24 April 2020, through the law firm representing it. In that regard, it produced before the Court that email, which states that it contains, in attachments, the comments dated 17 December 2019, annexes and emails. Again, REA denies having received that email and, to that end, produced a certificate from the Commission’s IT services. 64 It is apparent from the material referred to above that the applicant was well informed that, according to the REA, it had not received its comments dated 17 December 2019. Moreover, the REA repeatedly asked the applicant to send them to it. 65 Even though the applicant sought to send its emails to a variety of recipients, within the REA, it does not appear to have been concerned about the reasons which could have explained the difficulties encountered in its electronic communication and did not make use of other means of communication to send its comments, such as sending them by courier, by post or by fax. 66 In that regard, it should be noted that sending an e-mail does not guarantee that it is actually received by the person to whom it is addressed. An e-mail may not reach that person for technical reasons. Even if the sender does not receive a ‘not- received’, ‘undelivered’ or similar type of message, that does not necessarily mean that the email actually reached the person to whom it was addressed (see, to that effect, judgment of 8 September 2008, Sogelma v EAR, T‑411/06, EU:T:2008:419, paragraph 77). It is clear that, if the sender of an e-mail who does not receive any confirmation of receipt takes no further action, he or she is normally not able to prove that that e-mail was received and, when necessary, on which date (see, to that effect, judgment of 8 September 2008, Sogelma v EAR, T‑411/06, EU:T:2008:419, paragraph 78). 67 In the present case, the applicant has not produced any evidence to establish that the REA actually received its comments or, at the very least, that it took appropriate steps to ensure that the REA actually received its comments. 68 Furthermore, it should be noted that the REA acted diligently by repeatedly affording the applicant the opportunity, even though the initial period of 30 days had already expired, to remedy the situation by sending its comments again. That diligence is also demonstrated by the sending of the second pre-information letter. 69 In the light of all the foregoing, it must be concluded that the REA did not infringe the adversarial principle, as it follows from Article II.24 of the general conditions. In that regard, the fact that the second pre-information letter granted only 15 days to send the comments is irrelevant. 70 As regards Article 133 of Regulation 2018/1046, relied on by the applicant, it should be noted that the first paragraph thereof provides that ‘adopting any measure adversely affecting the rights of a participant or a recipient the authorising officer responsible shall ensure that the participant or the recipient has been given the opportunity to submit observations’. Thus, that provision does not add anything new to the examination of the present part of the first plea, without it being necessary to rule on its applicability ratione temporis. 71 The second part of the first plea in law must therefore be rejected. Third part of the first plea in law 72 The applicant maintains that the first of the three criteria established by Article II.15 of the general conditions, namely that of being directly hired by the beneficiary in accordance with the national legislation, cannot be applied to in-house consultants. Since the other two criteria, namely working under the sole technical supervision and responsibility of the beneficiary and being remunerated in accordance with the latter’s normal practices, are met in the present case, that is sufficient to consider that the costs at issue are eligible. 73 The applicant also claims that the final audit report refers exclusively to the criteria laid down in the FP7 guide and does not refer to the provisions of Articles II.14 and II.15 of the general conditions. It adds that, in so doing, the REA appears to seek to apply cumulatively the requirements of Articles II.7 and II.15 of the general conditions concerning subcontracting costs and personnel costs. 74 The REA disputes the applicant’s arguments. 75 It should be noted first of all that, under the grant agreement, personnel costs differ from subcontracting costs. 76 Article II.15(1) of the general conditions states, with regard to personnel costs, that only the costs of the hours worked by the persons directly carrying out work under the project may be charged on condition that those persons, first, are directly hired by the beneficiary in accordance with the national legislation, secondly, work under the sole technical supervision and responsibility of the beneficiary and, thirdly, are remunerated in accordance with the normal practices of the beneficiary. 77 By contrast, under the first sentence of Article II.7(1) of the general conditions, a subcontractor is a third party which has entered into an agreement on business conditions with one or more beneficiaries, in order to carry out part of the work of the project without the direct supervision of the beneficiary and without a relationship of subordination. 78 According to paragraph 2 of Article II.7 of the general conditions, recourse to the award of subcontracts must be duly justified in Annex I. 79 In the present case, first, the applicant does not dispute the finding of the final audit report that, under Article II.7 of the general conditions, the costs at issue could not be regarded as eligible as subcontracting, since such subcontracting had not been provided for in Annex I to the grant agreement. 80 Secondly, as regards the personnel costs, the applicant argues that the first condition laid down in Article II.15(1) of the general conditions cannot be satisfied, but nevertheless suggests that the eligibility of the disputed costs as personnel costs may be examined in the light of the other two conditions laid down in that article alone. 81 In that regard, it should be noted that FP7 guide interprets the other two conditions laid down in Article II.15 of the general conditions by stating that consultancy costs may be regarded as equivalent to personnel costs and, therefore, eligible if seven cumulative equivalence criteria are met. 82 Therefore, if the criterion of direct recruitment is not met, only the application of the equivalence criteria laid down in the FP7 guide could allow the costs at issue to be regarded as equivalent to personnel costs. 83 It is apparent from the file that the REA’s analysis of the eligibility of the costs at issue was carried out in two stages. Since the applicant classified them as personnel costs, the REA first examined the merits of that classification in the light of the seven equivalence criteria laid down in the FP7 guide. Since, according to the REA, all those criteria were not satisfied, it then assessed whether the costs at issue could be regarded as eligible subcontracting costs within the meaning of Article II.7 of the general conditions. 84 Therefore, it is necessary to examine the merits of the REA’s grounds for finding that the costs at issue do not satisfy all the criteria laid down in the FP7 guide for regarding consultancy costs as equivalent to personnel costs. 85 It is apparent from the final audit report and the REA’s written pleadings before the Court that the REA took the view that the costs at issue did not satisfy two of the seven cumulative criteria. According to the first of those two criteria, the natural person must work on the beneficiary’s premises, except in specific cases where teleworking has been agreed between both parties and provided such a practice is in full compliance with the provisions regarding teleworking and instructions given by the beneficiary. According to the second criterion, the remuneration is based on working hours rather than on the delivering of specific outputs or products and should be recorded in the accounts of the beneficiary. 86 More specifically, according to the final audit report, the first of those two criteria was not met for any of the four consultants in question (see paragraphs 12 and 15 above), whereas the second of the two criteria was not met in the case of two of them [confidential]. 87 As regards the first criterion, the applicant does not dispute that the natural person must work on the beneficiary’s premises, except in specific cases where the possibility of teleworking has been agreed between the two parties and provided that that practice is carried out in full compliance with the provisions on teleworking and the instructions given by the beneficiary. However, the applicant argues that, in a modern globalised working environment, which allows remote working, the requirement to work on site seems to be far too restrictive, since teleworking may be as effective as on-site work. 88 In addition, the applicant maintains that several other factors militate in favour of the finding that the in-house consultants in question actually worked under its instructions and close supervision. In that context, it produces the service contracts concluded with the consultants, which provide that they are to follow all and any instruction of the company for the performance of the services and to provide their services under full guidance of the beneficiary, as well as certain emails which it exchanged with the consultants, which show the monitoring carried out by the applicant and the instructions it gave them. It also relies on the fact that the consultants had an email address in the domain name of the beneficiary company, that some of them mentioned, in their electronic signature, the site and contact details of the beneficiary and that their names appeared in the project deliverables. 89 The REA contends that there is no evidence to show that any part of the consultants’ work was carried out at the applicant’s premises in Helsinki. In that regard, it also points out that no evidence of the conclusion of teleworking agreements has been adduced, although it is apparent from the applicant’s argument that the consultants made extensive use of teleworking. 90 In addition, the REA claims that the applicant does not provide any relevant information to substantiate its claim that the consultants worked under the close supervision of the beneficiary. 91 It is apparent from the final audit report that the REA considered that the criterion according to which ‘the natural person must work on the beneficiary’s premises, except in specific cases where the possibility of teleworking has been agreed between the two parties and provided that that practice is carried out in full compliance with the provisions on teleworking and the instructions given by the beneficiary’ was not satisfied for the four consultants. In that regard, the final audit report emphasises the importance of that criterion as evidence of the beneficiary’s supervisory task over in-house consultants. It should be noted, however, that REA did not claim that the applicant had failed to comply with the separate criterion, laid down in the FP7 guide, according to which the natural person must work under the beneficiary’s instructions. 92 According to the case-law, the FP7 guide is not limited, in establishing the requirement to work on the beneficiary’s premises, to the correct interpretation of Article II.15 of the general conditions, but formally adds an additional requirement which that provision does not lay down (see, to that effect, judgment of 17 January 2019, Aristoteleio Panepistimio Thessalonikis v ERCEA, T‑348/16 OP, not published, EU:T:2019:14, paragraphs 105 and 106). As was pointed out in paragraph 45 above, the FP7 guide cannot derogate from the conditions laid down in the general conditions and, more particularly, from the requirements arising from the wording of Articles II.14 and II.15. 93 It follows that the REA was wrong to consider that the costs at issue could not be declared eligible on the ground that the criterion relating to work at the beneficiary’s premises was not satisfied. 94 As regards the criterion that ‘the remuneration is based on working hours rather than on the delivering of specific outputs/products and should be recorded in the accounts of the beneficiary’, the final audit report first sets out considerations concerning the five consultants referred to in paragraph 8 above. First, it is noted that none of the service contracts specified the working hours. Secondly, the final audit report states that the consultants recorded their working hours. According to that report, that fact alone does not, however, make it possible to conclude decisively that the remuneration was based on the hours recorded in the records. The report adds that the hourly rates merely represented the quotients of the approximated remuneration stated in the contracts or the sum of a consultant's invoices and the hours recorded in the time sheets. Secondly, it is noted that the multiplication of the hours spent on the project by that hourly rate resulted in the approximated contractual remuneration or the amounts invoiced. 95 It is apparent from the final audit report that those considerations did not, in themselves, lead the REA to find that the criterion in question is not satisfied. The final audit report states that that criterion is not met for three of the five consultants referred to in paragraph 8 above, including [confidential], on the ground that ‘the services were invoiced to the beneficiary’ and that ‘this has a character of de facto subcontracts, where payments are done against delivery of contracted work (i.e. invoices), rather than with labour contracts in which payments are done against performance of certain tasks’. 96 The applicant considers that the criterion that remuneration must be paid on the basis of working hours is satisfied in the present case. 97 In particular, it considers that the mere issuing of invoices by the in-house consultants cannot lead to the conclusion that they were not remunerated on the basis of their working hours, but following the performance of contractual work. The applicant also points out that the issue of invoices is normal for independent workers who have concluded service contracts and not employment contracts. 98 The REA disputes the applicant’s arguments by referring to the explanations provided in the final audit report. It adds that the time sheets provided by the applicant show that most consultants had been working full-time for a few months, followed by several months of complete inactivity on the project, which confirms that the consultants’ activities focused on carrying out specific works. As regards the invoices, the REA observes that they should be regarded as proof that the consultants were remunerated for carrying out works rather than on the basis of their working hours. 99 In that regard, it is settled case-law that, in the context of an agreement which contains an arbitration clause within the meaning of Article 272 TFEU, it is for the party which has declared the costs to the REA for the award of a financial contribution from the European Union to produce evidence that the costs in question meet the financial conditions of the grant agreements (see, to that effect, judgment of 27 April 2022, Sieć Badawcza Łukasiewicz – Port Polski Ośrodek Rozwoju Technologii v Commission, T‑4/20, EU:T:2022:242, paragraph 114 and the case-law cited). 100 As regards the burden of proof, since the REA has not directly witnessed the performance of the applicant’s tasks, it does not have, in checking the accuracy of the personnel costs declared by the applicant, any resources other than those deriving inter alia from the production of reliable time sheets (see judgment of 21 December 2021, Datax v REA, T‑381/20, not published, EU:T:2021:932, paragraph 68 and the case-law cited). 101 It is only if the applicant provides cost statements and other relevant information that it is for the REA to demonstrate that it was necessary to exclude the expenditure at issue, justifying their rejection, in particular because those cost statements are not accurate or credible (see, to that effect, judgments of 10 March 2021, Ayuntamiento de Quart de Poblet v Commission, T‑539/18, not published, EU:T:2021:123, paragraph 64, and of 14 April 2021, SGI Studio Galli Ingegneria v Commission, T‑285/19, not published, EU:T:2021:190, paragraph 50). 102 Thus, where the REA presents, on the basis of findings set out in an audit report, concrete evidence of the existence of a risk that the working time declared does not meet the eligibility criteria, ineligibility is presumed and it is for the co-contractor to show – with probative evidence – that those eligibility criteria have, on the contrary, indeed been met (see, to that effect, judgments of 10 March 2021, Ayuntamiento de Quart de Poblet v Commission, T‑539/18, not published, EU:T:2021:123, paragraph 65, and of 14 April 2021, SGI Studio Galli Ingegneria v Commission, T‑285/19, not published, EU:T:2021:190, paragraph 51). 103 An audit report must, in that regard, be analysed as evidence justifying the ineligibility of expenditure (judgment of 14 April 2021, SGI Studio Galli Ingegneria v Commission, T‑285/19, not published, EU:T:2021:190, paragraph 51). 104 Finally, it follows from the case-law that failure to comply with the obligation to submit reliable time sheets to justify the personnel costs declared constitutes sufficient grounds for rejecting all those costs (see judgment of 27 April 2022, Sieć Badawcza Łukasiewicz – Port Polski Ośrodek Rozwoju Technologii v Commission, T‑4/20, EU:T:2022:242, paragraph 116 and the case-law cited). 105 The parties’ arguments must be examined in the light of those observations. 106 It is not disputed that time sheets were produced by the applicant for the four consultants whose costs were declared ineligible by the REA. As noted in paragraph 94 above, the REA set out, in the final audit report, certain considerations in order to cast doubt on the reliability of those time sheets, but did not, however, consider that they established, in themselves, that the criterion in question was not satisfied. 107 According to the audit report, the decisive factor, which concerned only two of the four consultants, was the issuing of invoices for their services. That shows that the payments were made on the basis of services provided rather than on the basis of working hours. As the applicant rightly submits, the issuing of invoices does not constitute an abnormal practice in the case of self-employed workers who have concluded service contracts and not employment contracts. In that regard, the FP7 guide expressly provides that consultancy costs may be regarded as personnel costs even if the consultants are self-employed or employed by a third party. Therefore, it cannot be inferred from that fact alone that the two consultants were not remunerated on the basis of their working hours. 108 It follows that the REA was wrong to consider that the costs at issue could not be declared eligible on the ground that the criterion according to which the beneficiary’s remuneration must be based on working hours rather than on the delivery of specific outputs or products was not satisfied as regards those two consultants. 109 It follows from all of the foregoing that the REA was not entitled, on the basis of the reasons set out in the final audit report, first, to declare the costs at issue ineligible and, secondly, to impose liquidated damages. 110 In those circumstances, the third part of the first plea and, consequently, the applicant’s second and third heads of claim must be upheld, without it being necessary to examine the second and third pleas in law. 111 Accordingly, the action must be upheld in its entirety. Costs 112 Under Article 134(1) of the Rules of Procedure of the General Court, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the applicant has been unsuccessful, it must be ordered to pay the costs, including those relating to the interim proceedings, in accordance with the form of order sought by the REA. On those grounds, THE GENERAL COURT (First Chamber) hereby: 1. Declares that the costs for internal consultants, rejected by the Research Executive Agency (REA) in the amount of EUR 184 642.84, constitute eligible costs under the grant agreement, bearing the reference FP7SEC2012312484, concluded with a view to carrying out the project ‘Inter System Interoperability for Tetra – TetraPol Networks'; 2. Declares that debit notes No 3242005825 concerning the recovery of the sum of EUR 171 342.97 in respect of an unjustified contribution and EUR 17 134.30 in respect of liquidated damages, issued by the REA are unfounded; 3. Orders the REA to pay the costs, including those relating to the interim proceedings. Kanninen Jaeger Stancu Delivered in open court in Luxembourg on 12 July 2023. V. Di Bucci S. Papasavvas Registrar President * Language of the case: English. 1 Confidential data omitted.