Opinion of the Advocate General — ECLI:EU:C:2009:677
Date: 2009-10-29
Language of the case: Italian
Subject matter: Economic, social and territorial cohesion;European Regional Development Fund (ERDF)
Procedure: Action for annulment;Appeal - unfounded;Action for damages
Origin: Italy

Summary of the legal assessment VII – Costs VIII – Conclusion 1. By this appeal, Sviluppo Italia Basilicata SpA (‘the appellant’) seeks to have set aside the judgment of the Court of First Instance of the European Communities of 8 July 2008 in Sviluppo Italia Basilicata v Commission (2) (‘the judgment under appeal’). In that judgment, the Court of First Instance dismissed the appellant’s application seeking annulment of Commission Decision C(2006) 1706 of 20 April 2006 reducing the financial assistance from the European Regional Development Fund in favour of an overall allocation for the purposes of implementing measures to support small and medium-sized enterprises operating in the Basilicata Region of Italy (‘the contested decision’), and damages for the harm caused to the appellant by that decision. I – Legal context 2. Article 158 EC provides that the Community is to aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions, in order to promote the overall harmonious development of the Community. In accordance with Articles 159 EC and 160 EC, the Community is to support the achievement of these objectives by the action it takes through the Structural Funds, in particular the European Regional Development Fund (ERDF), which is intended to help redress the main regional imbalances. A – Basic Community regulations 3. Article 1 of Regulation (EEC) No 2052/88 of 24 June 1988 on the tasks of the Structural Funds and their effectiveness and on coordination of their activities between themselves and with the operations of the European Investment Bank and the other existing financial instruments, (3) as amended by Council Regulation (EEC) No 2081/93 of 20 July 1993, (4) provides that, in order to support the achievement of the general objectives set out in Articles 158 EC and 160 EC, the Structural Funds are to contribute to the attainment of five priority objectives. Of these, Objective 1 consists in ‘promoting the development and structural adjustment of regions whose development is lagging behind’. According to the annex to that regulation, Basilicata is one of the regions concerned by that objective. 4. Article 5 of Regulation No 2052/88 lists the possible forms in which financial assistance may be provided under the Structural Funds. Among these, Article 5(2)(c) mentions the possibility of assistance in the form of a ‘global grant’, as a general rule managed by an intermediary designated by the Member State in agreement with the Commission of the European Communities and allocated by the intermediary in the form of individual grants to final beneficiaries. 5. The relevant rules of procedure governing assistance are laid down by Council Regulation (EEC) No 4253/88 of 19 December 1988 laying down provisions for implementing Regulation No 2052/88 as regards coordination of the activities of the different Structural Funds between themselves and with the operations of the European Investment Bank and the other existing financial instruments, (5) as amended by Council Regulation (EEC) No 2082/93 of 20 July 1993, (6) and by Council Regulation (EEC) No 4254/88 of 19 December 1988 laying down provisions for implementing Regulation No 2052/88 as regards the European Regional Development Fund, (7) as amended by Council Regulation (EEC) No 2083/93 of 20 July 1993. (8) 6. Article 6 of Regulation No 4254/88 provides that the procedures for the use of global grants are to be the subject of an agreement concluded, in agreement with the Member State concerned, between the Commission and the intermediary; the agreement must detail, in particular, the types of measure to be carried out, the criteria for choosing beneficiaries, the conditions and rates of ERDF assistance and the arrangements for monitoring use of the global grants. 7. Article 24 of Regulation No 4253/88 provides, under the title ‘Reduction, suspension and cancellation of assistance’, as follows: ‘1. If an operation or measure appears to justify neither part nor the whole of the assistance allocated, the Commission shall conduct a suitable examination of the case in the framework of the partnership, in particular requesting that the Member State or authorities designated by it to implement the operation submit their comments within a specified period of time. 2. Following this examination, the Commission may reduce or suspend assistance in respect of the operation or a measure concerned if the examination reveals an irregularity or significant change affecting the nature or conditions for the implementation of the operation or measure for which the Commission’s approval has not been sought. ...’ 8. Articles 25 and 26 of Regulation No 4253/88 lay down the rules governing the monitoring and assessment of implementation of financial assistance. In particular, Article 25(1) and (3) establish that: ‘1. Within the framework of the partnership, the Commission and the Member States shall ensure effective monitoring of implementation of assistance from the Funds, geared to the Community support framework and specific operations (programmes, etc.). … … 3. Monitoring committees shall be set up within the framework of the partnership, by agreement between the Member State concerned and the Commission. The Commission and, where appropriate, the EIB may delegate representatives to those committees.’ B – The Commission decisions setting out the rules applicable to the Community assistance at issue 9. On 29 July 1994, the Commission adopted Decision 94/629/EC on the establishment of the Community support framework for Community structural assistance for the Italian regions concerned by Objective 1, which are Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia and Sicily, (9) for the period from 1 January 1994 to 31 December 1999. 10. By Decision 97/322/EC of 23 April 1997, (10) the Commission established the rules governing eligible expenditure for the various Community programmes in respect of Italy. The annex to that decision contains Datasheet No 19 concerning the eligibility of expenditure within the framework of the Structural Funds for financial engineering operations entailing venture capital funds (VCFs) (‘Datasheet No 19’). 11. The general principles concerning the financial engineering measures covered by that datasheet provide as follows: ‘… (vii) the ways in which such funds are run must be appropriate to the financial implementing provisions of the assistance, in particular with regard to commitment of resources and expenditure incurred as well as termination of the operation; (viii) VCFs assist firms which are economically and financially viable. ... …’ 12. With regard specifically to venture capital funds, Section B, entitled ‘VCF operations’, of Datasheet No 19 provides as follows: ‘… 2. VCF activities consist in the acquisition of shareholdings, e.g. subscription of share capital in firms supported, loans (where appropriate, equity loans), bonds (where appropriate, convertible). … … 8. During the period of Community assistance, the revenue of the VCF (more particularly any dividends, capital gains and interest on investments) must be credited to the fund and be used for the purpose of financing acquisitions of holdings as well as management costs within the limits set out below. … 10. Reports on the activities of the VCF must be produced for each calendar year and submitted to the Commission after the Monitoring Committee has given its opinion. This report must contain a balance sheet and an analysis of the revenue and losses of the VCF, a detailed breakdown of management costs incurred, an analysis of repayments made to the fund, a detailed list of the holdings acquired (investments made, loans granted, etc. by firm and by sector, with due respect for the principles of confidentiality) and the problems encountered together with any solutions proposed or decided on. 11. The Commission and the Court of Auditors have a right to inspect the activities of the VCF, including the right to perform or have performed audits in firms in which the VCF has held or holds a stake. ...’ 13. Section C of Datasheet No 19 defines ‘legal and financial commitment’ as ‘the legal act of forming or increasing the initial capital of a VCF’. ‘Expenditure actually incurred’ is defined in that section as ‘the payment in cash of the paid-up capital of the VCF by the participants (share capital) in strict relation to the performance reports mentioning the acquisitions made which serve as proof of the progress of the measure’. 14. Section D of Datasheet No 19 provides, under the heading ‘Termination of assistance’, as follows: ‘1. The VCF has to be established for an appropriate length of time compatible with the aims pursued. The minimum lifespan of a VCF is that of the assistance measure concerned. 2. When the Community operation is terminated (after the final date for payments), the net financial position of the VCF must be calculated by comparing the use made of the total paid-up capital with the total sum of assistance to firms during the period. – If the resultant sum of the cumulative total of assistance to firms during the period is found to cover at least 100% of the paid-up capital (> or =), the measure is considered to have been performed in full. ... – If, despite the surveillance of the Monitoring Committee, at the time of termination, the total sum of assistance to firms during the period is found to be less than the total paid-up capital, the amount corresponding to the excess will be deducted from the final balance paid to the Member State by the Community in respect of the assistance measure concerned. 3. Once the final balance of the assistance measure has been paid, the Commission no longer intervenes in the implementation or monitoring of the measure ... …’ 15. Finally, Datasheet No 19 states that venture capital fund operations part-financed by the ERDF are carried out exclusively in small and medium-sized enterprises (SMEs). II – Background to the dispute A – Measures relating to the allocation of the global grant to the Basilicata Region 16. In implementation of the basic regulation on the Structural Funds, namely Regulation No 2052/88, the Commission, by Decision 94/629, approved the Community legal framework applicable to assistance measures adopted in favour of the regions of Italy concerned by Objective 1, which include Basilicata, for the period from 1 January 1994 to 31 December 1999. 17. On 24 February 1998, with a view to stimulating the development of the SMEs established in Basilicata, the Italian Government applied to the Commission for Community assistance in the form of a global grant. (11) Measure 2 covered by the application provided for the formation of a venture capital fund (‘VCF’), to be financed by the ERDF and the private sector, to carry out financial operations (shareholdings, equity loans and convertible bonds), in favour of undertakings established in that region or intending to establish themselves there (‘Measure 2 of the global grant’). 18. By Decision C(1999) 314 of 2 March 1999 on the granting of a contribution from the European Regional Development Fund to an overall allocation for the purpose of implementing measures to support small and medium-sized enterprises operating in the Basilicata Region, granted under the Community support framework for structural assistance covered by Objective 1 in Italy, the Commission approved the grant of assistance sought by the Italian authorities (‘the decision to grant assistance’). Under Article 5 of that decision, the ‘Community assistance relates to expenditure in connection with operations covered by the global grant, which, in the Member State concerned, are the subject of legally binding commitments and for which the requisite finance has been specifically allocated no later than 31 December 1999’ and ‘the final date for taking account of expenditure on those measures is 31 December 2001’. 19. The global grant proposal sent to the Commission by the national authorities in order to obtain assistance was annexed to the decision to grant assistance (‘the global grant proposal’) and forms an integral part of it. The proposal provided that the measure was to be implemented in three stages, referred to, respectively, as the ‘promotion’, ‘creation’ and ‘management’ of the VCF (paragraph 5.2.2). It also pointed out, at paragraph 5.2.5, that the fund was EUR 9.7 million, EUR 4.7 million of which came from the ERDF, and, in accordance with Datasheet No 19, annexed to Decision 97/322, defined ‘commitment’ as ‘the legal act of forming the capital fund’ and ‘expenditure’ as ‘the payment in cash of the paid-up capital of the VCF by the participants’. Finally, the proposal provided that the commitments were to be entered into ‘by 31 December 1999’ (paragraph 5.2.6) and that the fund had a lifespan of 10 years from the date of its formation. 20. The procedures for granting the global grant were set out in an agreement concluded on 22 July 1999 between the Commission and the Centro europeo di impresa e innovazione Sistema BIC Basilicata, which was initially the intermediary of the global grant and was replaced by the appellant (‘the Agreement’). Article 9 of the Agreement provided for the setting-up of a Monitoring Committee, composed of representatives of the Commission, the competent national authorities and the intermediary. 21. Article 13 of the Agreement provides as follows: ‘… 2. … payment of the final balance is subject to the following cumulative conditions: – presentation to the Commission by the Basilicata Region of a request for payment, duly certified [by the Ministry of the Economy and Finance] within the six months following actual completion of the operation in question; … 4. Decisions to commit expenditure for initiatives which are to benefit from assistance under the global grant (decision to grant assistance, conclusion of contracts for external activities) must be taken no later than 31 December 1999. Payments by the intermediary in implementation of the global grant shall be made no later than 31 December 2001 and the accounts in respect of the expenditure incurred by the intermediary in implementing the grant shall be presented to the Commission no later than 30 June 2002.’ 22. Article 16(5) of the Agreement provides as follows: ‘If the intermediary fails to fulfil one of the obligations under the Agreement or fails to perform such an obligation correctly, the Commission – in consultation with the Basilicata Region – may give it formal notice, by registered letter, to fulfil the obligation in question. If that obligation is not fulfilled within one month of the notification, the Commission, together with the Basilicata Region, may, irrespective of the consequences specified in the legislation applicable to the Agreement, terminate the Agreement without further formalities.’ 23. Article 18 of the Agreement provided that the Agreement was to terminate on 30 June 2002. B – How the VCF was formed and brought into operation 24. The VCF was formed on 16 December 1999, with funding of EUR 9.7 million, EUR 4.7 million of which was provided by the ERDF and EUR 5 million by private investors. The share capital was fully paid up between February 2000 and December 2001. 25. By letter of 18 March 2003, the Basilicata Region sent to the Italian Ministry of the Economy and Finance the final statement of expenditure and the request for payment submitted by the appellant. On 20 March 2003, the ministry forwarded those documents to the Commission. 26. By letter of 10 February 2004, the Commission informed the Italian authorities and the appellant that it considered that, under Section D of Datasheet No 19, part of the assistance granted was not justified since it had not been invested in SMEs before 31 December 2001. 27. On 20 April 2006, after an exchange of letters with the appellant, the Commission adopted the contested decision. Considering that part of the assistance from the ERDF had not been used to acquire shareholdings in the undertakings before the deadline imposed in the decision to grant assistance, namely 31 December 2001, it reduced the assistance granted under the global grant in the Basilicata Region by EUR 4 554 108.91 and sought to recover the sum of EUR 3 434 108.91. III – The judgment under appeal 28. By application lodged at the Registry of the Court of First Instance on 30 June 2006, the appellant brought an application for annulment of the contested decision and for damages. 29. In support of its application for annulment, the appellant put forward six pleas in law, alleging, respectively: – that the contested decision lacked logic, was inadequate and lacked any proper legal or factual basis; – infringement of Datasheet No 19; – infringement of the procedural rules laid down in Article 16 of the Agreement and of Articles 25 and 26 of Regulation No 4253/88; – infringement of the principles of legitimate expectations and legal certainty; – infringement of the principle of proportionality, and of – the obligation to state reasons. 30. The appellant based its claim for damages on fault-based liability, on the basis that the contested decision is unlawful, and on no-fault liability. 31. The Court of First Instance considered that it was necessary, in the interests of procedural economy, to examine at the outset the pleas raised by the appellant in its action for annulment, without first ruling on the admissibility of that action. It went on to hold that the action for annulment was unfounded. Finally, it dismissed the claim for damages as unfounded. IV – Procedure before the Court of Justice and forms of order sought by the parties 32. The appellant brought an appeal against the judgment under appeal by document lodged at the Court Registry on 19 September 2008. In its appeal, it claims that the Court should: – set aside the judgment under appeal and refer the case back to the Court of First Instance for an adjudication on the substance in the light of any guidance which the Court of Justice may provide; and – order the Commission to pay the costs of the present proceedings and the proceedings in Case T‑176/06. 33. The Commission contends that the Court should: – dismiss the appeal; and – order the appellant to pay the costs of the present proceedings and the proceedings at first instance. 34. After the conclusion of the written procedure, a hearing was held on 3 September 2009 in which the representatives of the appellant and the Commission took part. At the hearing, the representatives of the appellant and the Commission supplemented their written observations. V – The Commission’s arguments concerning the inadmissibility of the action before the Court of First Instance 35. In its reply, the Commission set out arguments concerning the inadmissibility of the action for annulment before the Court of First Instance. It considers that the appellant was not directly concerned by the contested decision for the purpose of the fourth paragraph of Article 230 EC. 36. I do not think it is necessary to examine the substance of those arguments in the present case. First of all, it should be pointed out that arguments regarding the inadmissibility of an action for annulment before the Court of First Instance may only be accepted in appeal proceedings which seek the annulment of the judgment under appeal. A party which seeks to replace a judgment of the Court of First Instance which finds that an action for annulment is unfounded by a judgment to the effect that the action is inadmissible is required to ask the Court of Justice to set aside the judgment of the Court of First Instance and to give a final ruling on the action in the proceedings before the Court of First Instance. (12) However, it should be pointed out that, in its reply, the Commission did not formulate a cross-appeal seeking the setting-aside of the judgment under appeal. (13) On the contrary, it expressly requested the Court of Justice to uphold the judgment under appeal in its entirety. I infer from that that the Commission intended to make certain observations concerning the way in which the Court of First Instance dealt with the question of the inadmissibility of the action, without, however, seeking the setting-aside of the judgment under appeal. Since the Commission confirmed that interpretation at the hearing, there is no need to examine the substance of those arguments put forward by the Commission. VI – The appeal 37. The appellant puts forward 10 grounds in support of its appeal. It relies on eight grounds challenging that part of the judgment under appeal in which the Court of First Instance rejected its application for annulment of the contested decision (see Section A) and two grounds challenging that part of the judgment in which the Court rejected its claim for damages (see Section B). A – The eight grounds of appeal relating to the rejection of the application for annulment 1. The first ground of appeal, alleging distortion of the contested decision and distortion of the action brought by the appellant 38. By its first ground, the appellant refers to paragraphs 36 and 68 of the judgment under appeal. 39. At paragraph 36 of the judgment under appeal, the Court of First Instance held that the appellant’s action at first instance focused in essence on the Commission’s conclusion that acquisitions of shareholdings by the VCR in SMEs were to be completed no later than 31 December 2001. It considered that that question related in particular to the plea alleging infringement of Datasheet No 19 and that it was therefore necessary to examine first the plea alleging infringement of Datasheet No 19. The Court examined that plea at paragraphs 37 to 59 of the judgment under appeal. 40. Next, at paragraphs 60 to 75 of the judgment under appeal, the Court of First Instance examined the appellant’s plea alleging that the Commission based the contested decision on a ‘condition as to use’, which is not present in the provisions applicable to Community financial assistance. At paragraph 68 of the judgment under appeal, that court rejected that plea. It found that the Commission had based the contested decision in particular on the provisions of Datasheet No 19 and that the purpose of the other grounds was simply to lend support to its interpretation of those provisions. Referring to its previous examination of the plea alleging infringement of Datasheet No 19 at paragraphs 37 to 59 of the judgment under appeal, the Court of First Instance held that the Commission was entitled to reduce the Community assistance on the basis of the provisions of Datasheet No 19. On the basis of that finding, it held that, even if the complaint alleging that no ‘condition as to use’ existed was founded, that could not lead to the annulment of the contested decision. At paragraph 69 of the judgment under appeal, that court held that, in any event, the appellant’s plea was unfounded. a) Arguments of the parties 41. The appellant complains, first, that the Court of First Instance distorted the contested decision at paragraph 68 of the judgment under appeal by finding that the Commission had based the contested decision in particular on the provisions of Datasheet No 19 and that the purpose of the other grounds was simply to lend support to its interpretation of those provisions. It states that the Commission based the contested decision first and foremost on the ‘condition as to use’ referred to at paragraph 22 of the grounds of the contested decision and that the following paragraphs concerning Datasheet No 19 contain a substantive examination of that ‘condition as to use’. 42. Secondly, the appellant complains that the Court of First Instance distorted the meaning and, consequently, the scope of its action at first instance. In its action at first instance, it argued, principally, that the contested decision was based on a non-existent ‘condition as to use’. By holding that its application focused in essence on the Commission’s conclusion that the acquisitions of shareholdings by the VCF in SMEs were to be completed no later than 31 December 2001, the Court of First Instance distorted the meaning of its action at first instance. The appellant complains that the Court’s reversal, at paragraph 36 of the judgment under appeal, of the order for examining its pleas is based on that incorrect appraisal of its action at first instance. In its view, that court could not have found, without reversing the order of the pleas, that its complaint alleging that the ‘condition as to use’ was non-existent was ineffective. The Court of First Instance therefore distorted the scope of its action. 43. The Commission considers, first, that the Court of First Instance did not distort the contested decision. The Commission based the contested decision on Datasheet No 19. The ‘condition as to use’ mentioned in the contested decision is not the basis on which the contested decision was adopted, but a concept to explain the logic underlying the rules governing the manner in which the VCF was to be operated and provided a key to the interpretation of those rules. 44. Secondly, it maintains that the statements made by the Court of First Instance at paragraph 36 of the judgment under appeal simply reflect the logic and organisation of that court’s thinking and have no effect on the judgment under appeal. In any event, that court carried out a separate examination of the complaint alleging that the ‘condition as to use’ was not imposed. b) Legal appraisal 45. The appellant bases its first ground of appeal on two complaints, alleging, respectively, distortion of the contested decision and distortion of the meaning and scope of its action at first instance. i) The complaint alleging distortion of the contested decision 46. This complaint is admissible because it is possible to allege distortion of a Commission decision in appeal proceedings. (14) However, it is unfounded. The Court of First Instance did not distort the meaning of the contested decision by holding that the Commission had based it in particular on the provisions of Datasheet No 19. 47. The grounds on which the Commission based the contested decision cannot be determined by taking account only of paragraph 22 et seq. of that decision. As the Commission correctly maintains, the whole statement of reasons must be analysed. An analysis of all the reasons set out in the contested decision shows that the decision is based first and foremost on the conditions laid down in Datasheet No 19. Accordingly, it is apparent from the last sentence of paragraph 8 and from paragraph 10 of the grounds of the contested decision that the Commission based its decision on the conditions laid down in Datasheet No 19 in the closure procedure culminating in the contested decision. Moreover, the Commission expressly referred to non-compliance with the conditions laid down in Datasheet No 19 in the section entitled ‘Nature of the irregularities found’ at paragraphs 14 and 15 of the grounds of the contested decision. The Commission therefore referred to Datasheet No 19 several times, and not only at paragraph 22 of the grounds of the contested decision. 48. Moreover, the Commission was fully entitled to consider that the reference to the ‘condition as to use’ at paragraph 22 of the grounds of the contested decision is a reference to a general concept, which is a principle underlying the applicable provisions. It is therefore not a ‘condition’ in the strict sense of the term, but rather an aid to interpreting the rules applicable to Community assistance. 49. Therefore, the Court of First Instance did not err in law by finding that the Commission based the contested decision first and foremost on non-compliance with Datasheet No 19. The first complaint must therefore be rejected. ii) The complaint alleging distortion of the meaning and scope of the action at first instance 50. The appellant complains that the Court of First Instance distorted the meaning and scope of its action at first instance. It maintains that the effect of reversing the order for examining the pleas in its action at first instance was to distort its action. 51. That complaint is unfounded. It is apparent from Article 225 EC and the first paragraph of Article 58 of the Statute of the Court of Justice that an appeal must be based on the grounds of lack of competence of the Court of First Instance, breach of procedure before it which adversely affects the interests of the appellant, or infringement of Community law by that court. However, a mere reversal of the order for examining the pleas which does not affect the outcome of the proceedings is a purely organisational measure, which does not adversely affect the interests of the appellant. (15) The reversal of the order of the appellant’s pleas effected by the Court at paragraph 36 of the judgment under appeal does not therefore in itself constitute an error of law which may be invoked in an appeal. 52. According to the appellant, the reversal affected the outcome of the proceedings. Without that reversal, the Court of First Instance could not have found, at paragraph 68 of the judgment under appeal, that the appellant’s complaint alleging that the ‘condition as to use’ did not exist could not lead to the annulment of the contested decision, even if it were well founded. 53. This criticism is unfounded. It is true that the Court of First Instance referred, at paragraph 68 of the judgment under appeal, to its earlier interpretation of the contested decision at paragraphs 52 to 59 of the judgment. In formal terms, that reference to a previous interpretation was therefore a consequence of that court’s reversal of the order for examining the pleas. However, the appellant clearly gives no persuasive reason why the reversal of the order for examining the pleas may have had a significant impact on the outcome of the proceedings, in particular on the interpretation of the contested decision. It is therefore merely a reversal of the order for examining the pleas which has no effect on the outcome of that court’s examination and cannot be challenged in an appeal. (16) 54. The complaint alleging distortion of the meaning and scope of the action at first instance must therefore be rejected. 55. In any event, it is clear that the Court of First Instance examined the plea alleging that the ‘condition as to use’ did not exist at paragraph 69 of the judgment under appeal and rejected it. iii) Interim conclusion 56. The first ground of appeal must therefore be rejected. 2. The second ground of appeal, alleging misinterpretation of the provisions of Datasheet No 19 57. In its second ground, the appellant refers to paragraphs 42 to 59 of the judgment under appeal. In that part of the judgment, the Court of First Instance rejected the appellant’s plea alleging infringement of the provisions of Datasheet No 19. 58. Section D of Datasheet No 19 refers to the period ‘[w]hen the Community operation is terminated’ as the final date for payments. In the contested decision, the Commission stated, first, that payments for the purpose of Section D were not only the payments necessary for the formation of the VCF but also the acquisitions by the VCF of shareholdings in SMEs and, secondly, that the deadline for payments for the purpose of Section D was 31 December 2001. 59. The appellant considers that this interpretation is incorrect. It is based on a misinterpretation of the objective of Measure 2 of the global grant. Measure 2 of the global grant consists only in the formation and funding of the VCF. The finance necessary to fund the VCF should therefore have been paid by 31 December 2001. On the other hand, shareholdings in SMEs could have been acquired by the VCF after 31 December 2001. The deadline for acquisitions by the VCF of shareholdings in SMEs was therefore the date on which the VCF terminated, that is, 16 December 2009. 60. At paragraphs 47 to 59 of the judgment under appeal, the Court of First Instance confirmed the Commission’s interpretation. At paragraphs 47 to 50 of the judgment under appeal, that court rejected the appellant’s argument that the duration of the assistance was the same as that of the VCF. At paragraphs 51 to 55 of the judgment under appeal, it held that shareholdings in SMEs had to be acquired by 31 December 2001. The Court of First Instance based that interpretation on the provisions of Datasheet No 19, paragraph 5.2.5 of the global grant proposal, Article 5 of the decision to grant assistance and Article 13(4) of the Agreement. At paragraphs 56 to 58 of the judgment under appeal, the Court of First Instance rejected the appellant’s argument that only its own interpretation of Datasheet No 19 is rational from an economic point of view. 61. Since the appellant criticises the interpretation of the Court of First Instance without indicating clearly which part of the judgment under appeal it is referring to, these complaints should be rejected as inadmissible under Article 225 EC, the first paragraph of Article 58 of the Statute of the Court of Justice and Article 112(1)(c) of the Rules of Procedure. (17) 62. Since the appellant contests paragraphs 52, 53, 55, 57 and 58, as well as paragraph 48, of the judgment under appeal, its ground of appeal may be divided into five parts. a) The first part (the complaints relating to paragraph 52 of the judgment under appeal) 63. At paragraphs 51 and 52 of the judgment under appeal, the Court of First Instance held that, contrary to what the appellant claimed, the definitions of ‘commitment at national level’ and ‘expenditure actually incurred’ in Section C of Datasheet No 19 leave no room for doubt that shareholdings in SMEs had to be acquired by 31 December 2001. Although the definition of ‘commitment’ in Section C of Datasheet No 19 may be interpreted as meaning that that definition refers only to the legal act of forming the VCF, the definition of ‘expenditure actually incurred’, which had to be completed by 31 December 2001, cannot refer only to the expenditure relating to the initial formation of the VCF, but also covers, as well as the expenditure in respect of the contribution to the VCF, that relating to the acquisitions of shareholdings in SMEs. i) Arguments of the parties 64. The appellant considers that the definition of the Court of First Instance of the term ‘expenditure actually incurred’ within the meaning of Section C of Datasheet No 19 is marred by errors of law. 65. First, it complains that, at paragraph 52 of the judgment under appeal, the Court of First Instance substituted its own reasoning for that of the Commission. It is apparent from paragraph 23 of the grounds of the contested decision that the Commission disregarded the appellant’s argument relating to the difference between the terms ‘commitment’ and ‘expenditure actually incurred’. By distinguishing between those two terms at paragraph 52 of the judgment under appeal, the Court of First Instance substituted its own reasoning for that of the Commission. 66. Secondly, that court’s interpretation is contradicted by the applicable provisions. The wording of the provisions of Datasheet No 19 does not refer directly to acquisitions of shareholdings. Furthermore, the interpretation of the term ‘expenditure actually incurred’ adopted by the Court of First Instance is the same as that in Commission Regulation (EC) No 1685/2000 of 28 July 2000 laying down detailed rules for the implementation of Council Regulation (EC) No 1260/1999 as regards eligibility of expenditure of operations co-financed by the Structural Funds. (18) Since that regulation was not yet applicable in the present case, the interpretation of the Court of First Instance constitutes a retroactive application of that regulation, which is contrary to the intention of the Community legislature. 67. Thirdly, the definition of the Court of First Instance departs from the Commission’s practice. In a letter of 4 June 2004, the Commission pointed out that eligible expenditure consists of the payment in cash of the paid-up capital of the VCF. 68. The Commission counters by saying, first, that the Court of First Instance did not formulate, at paragraph 52 of the judgment under appeal, a new definition of the term ‘expenditure actually incurred’ which contradicted the definition given in the contested decision. That court based its interpretation on the principle that there should be some correspondence between the rules governing the operation of the VCF, on the one hand, and the rules relating to the participation of the Structural Funds, on the other. It is apparent from paragraphs 12 and 13 of the grounds of the contested decision that the Commission applied the same concept. 69. Secondly, the Commission maintains that Datasheet No 19 already establishes the principle that ‘expenditure actually incurred’ is expressly linked to actual financial engineering assistance for SMEs. It is not therefore a new concept introduced by Regulation No 1685/2000. 70. Thirdly, it stated in its letter of 4 June 2004 that the financial assistance granted is justified only if the financial measures to support SMEs are implemented, and that those conditions were explained by the Community legislature in Datasheet No 19. ii) Legal appraisal – The complaint alleging substitution of grounds 71. The complaint alleging substitution of grounds is unfounded. 72. It is true that the Court of First Instance does not have the right to substitute its own reasoning for that set out in a Commission decision. (19) However, a response from that court to the arguments put forward by a party in the course of its action does not constitute per se a substitution of grounds, provided that that court does not replace the grounds of the contested decision with its own grounds. 73. It is apparent from paragraphs 37, 38, 51 and 52 of the judgment under appeal that, at paragraph 52 of the judgment, the Court of First Instance simply rejected the appellant’s arguments that the Commission misinterpreted the term ‘expenditure actually incurred’ in Section C of Datasheet No 19, without, however, replacing the grounds of the contested decision with its own grounds. It is clear that the definition of the term ‘expenditure actually incurred’ adopted by the Court of First Instance at paragraph 52 of the judgment under appeal is the same as that adopted by the Commission at paragraphs 12, 13, 15, 18 and 19 of the grounds of the contested decision. Like the Commission, that court found that that term covers the acquisitions of shareholdings in the SMEs. 74. The complaint alleging substitution of grounds must therefore be rejected – The complaint alleging distorted interpretation 75. The complaint alleging that the interpretation of the term ‘expenditure actually incurred’ was distorted is unfounded. The interpretation of the Court of First Instance at paragraph 52 of the judgment under appeal is based on the provisions of Datasheet No 19. That court rightly held that, according to the definition in Section C of Datasheet No 19, ‘expenditure actually incurred’ consists of the payment in cash of the paid-up capital of the VCF by the participants in strict relation to the performance reports mentioning the acquisitions made which serve as proof of the progress of the measure. Moreover, it correctly inferred from paragraph (vii) of the general principles set out in Datasheet No 19 that the ways in which the VCF is run must be appropriate to the financial implementing provisions of the assistance, in particular with regard to commitment of resources and expenditure actually incurred, and that ‘expenditure actually incurred’ must therefore include acquisitions of shareholdings in SMEs. – The complaint alleging retroactive application of Regulation No 1685/2000 76. The complaint alleging retroactive application of Regulation No 1685/2000 must also be rejected as unfounded. As the Commission rightly pointed out, the provisions of Datasheet No 19 establish the same principle as Rule No 8 of Regulation No 1685/2000, even though they do so differently. Therefore, Rule No 8 of Regulation No 1685/2000 does not establish a new concept. It is also clear that the Court of First Instance made no reference to Regulation No 1685/2000 in the judgment under appeal. Its reasoning is based solely on the rules applicable ratione temporis. – The complaint alleging a contradiction between the interpretation of the Court of First Instance and the Commission’s practice 77. Finally, the complaint alleging a contradiction between the interpretation of the Court of First Instance and the Commission’s practice must be rejected. Even if the Commission’s letter of 4 June 2004 contained an indication that the Commission shared the appellant’s interpretation (which the Commission denies), that would not in itself be enough to prove that that court’s interpretation is marred by an error of law. The relevant question is not whether that court’s interpretation accords with the Commission’s interpretation, but rather whether it accords with the applicable rules. – Interim conclusion 78. The first part of the second ground of appeal must therefore be rejected. b) The second part (the complaint relating to paragraph 53 of the judgment under appeal) 79. By the second part, the appellant refers to paragraph 53 of the judgment under appeal. At that paragraph, the Court of First Instance found that the definitions in paragraph 5.2.5 of the global grant proposal reproduced those in Section C of Datasheet No 19. 80. The appellant maintains that the definition given by the Court of First Instance of the term ‘expenditure actually incurred’ in Section C of Datasheet No 19 is contradicted by the definition of ‘expenditure’ in paragraph 5.2.5 of the global grant proposal. In contrast to that court’s finding, paragraph 5.2.5 of the global grant proposal does not merely repeat the definition given in Section C of Datasheet No 19, but clearly excludes acquisitions of shareholdings in SMEs from its content and scope. 81. That complaint is unfounded. According to the definition in paragraph 5.2.5 of the global grant proposal, ‘expenditure’ means the payment in cash of the paid-up capital of the VCF in accordance with the provisions of Section C of Datasheet No 19. The term ‘expenditure’ in paragraph 5.2.5 therefore refers to ‘expenditure actually incurred’ in Section C of Datasheet No 19. 82. The second part of the second ground of appeal must therefore be rejected. c) The third part (the complaints relating to paragraph 55 of the judgment under appeal) 83. By the third part, the appellant challenges paragraph 55 of the judgment under appeal. At that paragraph, the Court of First Instance observed that Article 13(4) of the Agreement clearly runs counter to the appellant’s interpretation. It held that that provision provides that decisions to commit expenditure for initiatives which are to benefit from assistance under the global grant (decision to grant assistance, conclusion of contracts for external activities) must be taken no later than 31 December 1999 and that the payments made by the intermediary in implementation of the global grant are to be made no later than 31 December 2001. The Court of First Instance also held that the ‘initiatives which are to benefit from assistance under the grant’ are, as is apparent from paragraph 54 of the judgment under appeal, the requests for acquisitions of shareholdings made by SMEs and ‘the payments made by the intermediary’ can only be those acquisitions of shareholdings. i) Arguments of the parties 84. The appellant considers, first, that the Court of First Instance misinterpreted the content and objectives of Measure 2 of the global grant. It argues that, since the purpose of Measure 2 was to form and fund the VCF, the terms ‘commitments’ and ‘payments’ in Article 13(4) of the Agreement must be interpreted as referring to the formation and funding of the VCF. In that connection, the appellant refers to paragraphs 5.2.1 and 5.2.3 of the global grant proposal. 85. Secondly, the appellant submits that the Court erred in holding that the initiatives which were to benefit from assistance under the grant are the requests for acquisitions of shareholdings made by the SMEs. That is contradicted by the fact that the beneficiary of Measure 2 of the global grant is the intermediary body, not the SMEs. In that connection, the appellant refers to paragraph 5.2.7 of the global grant proposal. 86. The Commission contends that the wording of Article 13(4) of the Agreement is very clear and that the appellant bases its argument on an artificial distinction between an ‘implementation stage’ and an ‘operational stage’ of Measure 2 of the global grant. The objective of Measure 2 of the global grant cannot be limited to the implementation stage but also includes the operational stage. The general principle underlying all Structural Fund interventions is that Community part-financing should achieve a specific objective within a specific period of time. The objective of Measure 2 of the global grant is to strengthen the capitalisation of SMEs in the Basilicata Region. ii) Legal appraisal 87. The appellant’s complaints are unfounded. 88. First, it is apparent from the wording of Article 13(4) of the Agreement that the payments made by the intermediary (therefore the appellant) in implementation of the global grant were to be made no later than 31 December 2001 and that the accounts relating to the expenditure incurred by the intermediary in that implementation were to be presented to the Commission no later than 20 June 2002. 89. Secondly, neither paragraph 5.2.1 nor paragraph 5.2.3 of the global grant proposal contains anything which could cast doubt on the interpretation of the Court of First Instance, which is based on Datasheet No 19 and the very clear wording of Article 13(4) of the Agreement. According to paragraph 5.2.1 of the global grant proposal, the VCF responsible for granting financial assistance to SMEs established in Basilicata or intending to establish themselves there was to be formed in accordance with Datasheet No 19. Moreover, the purpose and aim of Measure 2 of the global grant referred to in that provision clearly refer to the promotion of SMEs in the Basilicata Region. Paragraph 5.2.3 of the global grant proposal provides that the implementation of the measure was to consist in the formation of a VCF in accordance with the legal framework referred to above. The legal framework referred to is Datasheet No 19. 90. Thirdly, an interpretation of Article 13(4) of the Agreement according to which only the appellant is covered by the expression ‘initiatives which are to benefit from’ is not compatible with the wording of that provision, which stated that the payments by the intermediary for initiatives which were to benefit from assistance in implementation of the global grant were to be made no later than 31 December 2001. 91. The third part of the second ground of appeal must therefore be rejected. d) The fourth part (the complaints relating to paragraphs 57 and 58 of the judgment under appeal) 92. In the fourth part, the appellant refers to paragraphs 57 and 58 of the judgment under appeal. At paragraphs 56 to 58 of the judgment under appeal, the Court of First Instance examined the appellant’s arguments that only its own interpretation is rational from an economic point of view because it would have been difficult, if not impossible, to complete the financial operations by 31 December 2001, since that date was very close to 31 December 1999, the date on which the VCF itself was formed. The Court of First Instance rejected those arguments. 93. At paragraph 57 of the judgment under appeal, the Court of First Instance found that the global grant proposal provided, in paragraph 5.2.2, that there was to be an initial stage for the introduction of the Community assistance, referred to as the ‘fund promotion’ stage. It held that, during that stage, which was prior to the ‘fund creation’ stage, it was necessary to do the preparatory work consisting in identifying the undertakings potentially affected by the VCF and carrying out a pre-assessment. It inferred from that that the fact that the deadline for acquiring shareholdings was 31 December 2001 did not necessarily have the effect of making it impossible to complete the financial assistance measures. It also held that, given that the maximum sum that could be invested in SMEs was EUR 1 million, it was not necessary to carry out a large number of operations to exhaust the total amount of the Community assistance, which was approximately EUR 5 million. 94. At paragraph 58 of the judgment under appeal, the Court of First Instance responded to the appellant’s argument that payments of the capital of the VCF could be made up to 31 December 2001. It held that, even though a date other than 31 December 2001 was not specified for those payments, it was apparent from the applicable rules that those payments into the VCF had to be made sufficiently in advance to allow all the Community funds to be used for investment in SMEs before the deadline imposed for the payments. i) Arguments of the parties 95. According to the appellant, the Court of First Instance suggested, at paragraph 57 of the judgment under appeal, that five operations would have been sufficient to exhaust the Community assistance, since the investments could be as much as EUR 1 million each. The appellant considers that that interpretation is not compatible with the wording of the proposal, which required a minimum of 10 companies to be financed, or with the objective of financing as large a number of undertakings as possible. 96. The appellant also submits that the reasoning of the Court of First Instance at paragraph 58 of the judgment under appeal is contradictory. On the one hand, that court recognised that there was no legal obligation to fund the VCF before 31 December 2001. On the other hand, it considered that there was a legal obligation to place the appellant in funds before 31 December 2001. In that context, the appellant argues that paragraph 5.2.6 of the global grant proposal provides that the ‘expenditure’, that is, only payments into the VCF, was to be incurred within the two years following the deadline laid down for commitments, namely by 31 December 2001. 97. The Commission submits that the appellant’s fourth complaint is ineffective. It maintains that the Court of First Instance based its conclusion principally on the ground, stated at paragraph 56 of the judgment under appeal, that the applicable provisions are precise. The grounds set out at paragraph 57 of the judgment under appeal are only secondary reasons. 98. In any event, that court’s statement with regard to the limited number of financial operations necessary to exhaust the part-financing is but one aspect of a much more structured reasoning. The primary finding of that court was that the global grant proposal provided for an initial fund promotion stage and that that stage made it possible to carry out preparatory work prior to the fund creation stage. 99. Moreover, the Commission considers that the reasoning of the Court of First Instance at paragraph 58 of the judgment under appeal is not contradictory. As the term ‘expenditure’ includes acquisitions of shareholdings in SMEs, it is clear that the payments had to be made sufficiently in advance to enable all the Community funds to be used for investment in SMEs before the deadline imposed for payments. ii) Legal appraisal – The fourth part is ineffective 100. As the Commission rightly maintains, the fourth part is ineffective. It is apparent in particular from paragraph 56 of the judgment under appeal that the Court of First Instance based the rejection of the appellant’s plea first and foremost on the clear and consistent nature of the provisions at issue. Paragraphs 57 and 58 of the judgment under appeal therefore contain only secondary grounds. The complaints made against those paragraphs must therefore be rejected as ineffective, because, even if they were well founded, they could not lead to the judgment under appeal being set aside. (20) 101. In any event, the various complaints in the fourth part cannot succeed. – The complaint alleging non-compliance with the provision which requires the financing of a minimum of 10 companies 102. The complaint alleging non-compliance with a provision which required the financing of a minimum of 10 companies must be rejected as ineffective not only for the reason mentioned in point 100 of this Opinion, but also for the following reason. As the Commission correctly points out, the Court of First Instance rejected the appellant’s argument that it was impossible to acquire shareholdings by 31 December 2001 on the basis, first, that there was a fund promotion stage, during which the appellant could have carried out the preparatory work. This reasoning alone justifies the findings of that court. As that reasoning has not been called into question by the appellant, the complaint alleging non-compliance with a provision which required the financing of a minimum of 10 companies must be rejected as ineffective. 103. In any event, the appellant’s criticism is unfounded. 104. Contrary to the appellant’s assertions, the Court of First Instance did not find that the appellant had to finance only five companies. At paragraph 57 of the judgment under appeal, that court referred only to the financial contribution from the ERDF to the VCF, which was EUR 4.7 million. It should be pointed out that the total funding of the VCF was EUR 9.7 million. Even if the appellant had acquired shareholdings in the maximum amount of EUR 1 million, (21) a minimum of 10 financial operations would have been necessary to invest all the funds in the VCF. The Court of First Instance did not therefore suggest an interpretation which was contrary to the global grant proposal, according to which a minimum of 10 companies was to be financed. 105. Moreover, the Court of First Instance did not suggest, at paragraph 57 of the judgment under appeal, that the smallest possible number of SMEs should be financed. It simply demonstrated that the appellant’s argument that it was impossible to acquire the shareholdings in SMEs was unfounded. 106. The complaint must therefore be rejected. – The complaint alleging contradictory reasoning 107. The complaint alleging contradictory reasoning at paragraph 58 of the judgment under appeal is unfounded. The reasoning of the Court of First Instance is not contradictory. It is true that that court held, at paragraph 58 of the judgment, that the applicable provisions did not impose a specific deadline for the funding of the VCF. However, it correctly held that 31 December 2001 was the deadline for the VCF to acquire shareholdings in the SMEs (22) and that the funding of the VCF was a prerequisite for those acquisitions. Its deduction that the funding of the VCF had to be completed sufficiently in advance to enable shareholdings to be acquired by the deadline of 31 December 2001 therefore seems perfectly logical to me. The complaint alleging contradictory reasoning must therefore be rejected. 108. Since the appellant bases its complaint on a misinterpretation of the term ‘expenditure’ in paragraph 5.2.5 of the global grant proposal, the complaint must be rejected in the light of point 81 of this Opinion. e) The fifth part (the complaints relating to paragraph 48 of the judgment under appeal) 109. By the fifth part, the appellant refers to paragraph 48 of the judgment under appeal. At that paragraph, the Court of First Instance rejected the appellant’s argument that the duration of the assistance measure was the same as the minimum duration of the VCF, so that shareholdings in SMEs could have been acquired up to 16 December 2009. The Court of First Instance held that it was apparent from Sections D.1 and B.8 of Datasheet No 19 that the duration of the VCF and the duration of the assistance measure were not necessarily the same, and that the duration of the assistance measure could have been shorter than that of the VCF. i) Arguments of the parties 110. The appellant considers that paragraph 48 should be disregarded as invalid on the ground that it is insufficiently reasoned. The Court of First Instance simply proposed an alternative solution to that proposed by the appellant. The reasoning of that court does not enable the Court of Justice to understand why it preferred its own solution to that proposed by the appellant. The appellant’s solution is not incorrect and seems more in keeping with Measure 2 of the global grant. In that context, the appellant repeats its complaints concerning the deadline for funding the VCF and the deadline for the acquisitions of shareholdings. 111. The Commission submits that the Court of First Instance stated unequivocally that it is clear from the applicable provisions that the duration of the VCF is not necessarily the same as the duration of the assistance measure. ii) Legal appraisal 112. The appellant’s complaints are unfounded. At paragraph 48 of the judgment under appeal, the Court of First Instance clearly rejected the appellant’s argument that the duration of the assistance measure and that of the VCF had to be the same. In that regard, that court relied on a persuasive interpretation of Sections D.1 and B.8 of Datasheet No 19, which the appellant does not challenge. 113. Furthermore, it should be pointed out that at paragraphs 47 to 50 of the judgment under appeal, the Court of First Instance simply rejected the appellant’s argument that the duration of the assistance measure and that of the VCF had to be the same. However, it did not simply propose an alternative solution. At paragraphs 51 to 55 of the judgment under appeal, it stated that the final date for the acquisition of shareholdings in SMEs was 31 December 2001, not 16 December 2009. It therefore established unequivocally that the interpretation proposed by the appellant was incompatible with the applicable provisions. 114. Since the appellant repeats its complaints regarding the findings of the Court of First Instance concerning the deadline for the funding of the VCF and for the acquisition of shareholdings, it is necessary to reject these complaints, by reference in particular to points 75, 81 and 87 to 90 of this Opinion. 115. The fifth part of the second ground of appeal must therefore be rejected. f) Interim conclusion 116. The second ground of appeal must therefore be rejected in its entirety. 3. The third ground of appeal, alleging misinterpretation of the condition as to use 117. By its third ground, the appellant refers to paragraphs 69 and 70 of the judgment under appeal. At paragraphs 66 to 72 of the judgment, the Court of First Instance rejected the appellant’s plea in which it complained that the Commission had based its decision on the condition as to use. It found, first, at paragraph 68 of the judgment, that the Commission based its decision first and foremost not on the condition as to use but on Section D of Datasheet No 19. It went on to state, at paragraph 69 of the judgment under appeal, that, in any event, even though the term ‘condition as to use’ does not appear in the provisions governing the global grant at issue, the condition that ERDF assistance must finance specific operations in the field and not remain tied up in a VCF until the assistance measure is terminated is clearly apparent from all the applicable provisions and is not new. a) Arguments of the parties 118. The appellant considers, first, that the Court of First Instance erred in law at paragraph 70 of the judgment under appeal. It criticises the fact that that court inferred the existence of a condition as to use from provisions which merely fix a deadline for making the various payments into the VCF. None of the provisions or documents mentioned by that court refers to such a condition. Furthermore, the Court of First Instance did not refer to a precedent that would confirm the existence of a condition as to use. The appellant maintains that this error is an inevitable corollary of the misunderstanding of Measure 2 of the global grant. 119. Secondly, the appellant refers to paragraph 75 of the judgment in Germany v Commission, (23) according to which the discretion granted to the Commission in deciding whether or not to reduce assistance cannot extend to enabling it to adopt decisions which depart from its acts and that the conduct of the Commission constitutes, for operators, a key factor for assessing the fairness and validity of their action. 120. According to the Commission, the Court of First Instance found that the term ‘condition as to use’ does not appear in the applicable provisions, but inferred from those provisions that the ERDF assistance had to finance specific operations in the field and not remain tied up in a VCF until the assistance measure was terminated. The Court of First Instance cited paragraphs 92 and 93 of the judgment in Regione Marche v Commission (24) by way of precedent. b) Legal appraisal 121. The complaint alleging that the condition as to use did not exist must be rejected. 122. First, this complaint is ineffective. As the Court of First Instance rightly held at paragraph 68 of the judgment under appeal, the Commission based its decision primarily on Section D of Datasheet No 19. (25) That ground alone is sufficient justification for that court’s conclusion. Any error made by that court in its examination of the subsidiary grounds at paragraphs 69 and 70 of the judgment under appeal cannot therefore affect the judgment under appeal. 123. Secondly, this complaint is unfounded. 124. As the Court of First Instance rightly held, the condition as to use was not a new condition of which the appellant had no knowledge. Even though the term ‘condition as to use’ does not appear in the applicable rules, it is apparent from Article 1 of Regulation No 4254/88 that ERDF assistance is intended to support the activities of SMEs, inter alia by improving access for firms to capital markets. Those objectives were stated, for VCFs, in Datasheet No 19, Sections C and D of which provide that shareholdings in SMEs were to be acquired by 31 December 2001. (26) 125. In so far as the appellant complains that the Court of First Instance misunderstood Measure 2 of the global grant, that criticism must be rejected by reference to points 75, 81 and 87 to 90 of this Opinion. 126. The appellant’s criticism that the Commission departed from its acts is unfounded. In the procedure culminating in the adoption of the contested decision, the Commission considered whether the assistance was justified under the rules applicable to Community assistance. The Commission did not introduce new conditions a posteriori. 127. Finally, the fact that the Court of First Instance makes no reference to a legal precedent does not in itself constitute an error of law which may be relied upon in appeal proceedings. It is therefore only as an additional point that it should be stated that, contrary to what the appellant maintains, the Court of First Instance did refer to a legal precedent by mentioning paragraphs 92 and 93 of the judgment in Regione Marche v Commission, (27) according to which SMEs and not the VCFs are the ultimate recipients and, therefore, the beneficiaries of the Community assistance and the eligibility of the expenditure therefore concerns the investments actually made in favour of SMEs. 128. The third ground of appeal must therefore be rejected. 4. The fourth and fifth grounds of appeal. 129. By its fourth and fifth grounds, the appellant refers to paragraphs 79 and 80 of the judgment under appeal. In those paragraphs, the Court of First Instance rejected the appellant’s argument that the Commission was not entitled to initiate the procedure to reduce Community assistance pursuant to Article 24 of Regulation No 4253/88 without first raising objections regarding implementation during the implementation stage of the global grant, in particular at the meetings of the Monitoring Committee. 130. At paragraph 79 of the judgment under appeal, the Court of First Instance held, first, that the provisions of Regulation No 4253/88 do not lay down any procedural rule making the Commission’s right to reduce or suspend Community assistance subject to the condition that it has raised doubts as to the proper implementation of the project before the termination of the assistance measure. Next, that court held that procedural rules not expressly provided for by the Community legislature can be inferred by the Community Courts only when they are essential in order to comply with fundamental principles, such as the rights of the defence, and only to the extent necessary to ensure compliance with those principles. 131. At paragraph 80 of the judgment under appeal, the Court of First Instance used an alternative argument to reject the appellant’s argument. It held that a procedural rule such as that proposed by the appellant would have the effect of preventing the Commission, in very many cases, from adopting a decision to suspend or reduce Community assistance. It considered that, given the large number of projects financed by the Community, the Commission would find it difficult, if not impossible, to detect most of the irregularities occurring in the implementation of the projects, particularly where they concern the justification or classification of eligible expenditure. a) The fourth ground of appeal, alleging misinterpretation and consequent non-application of the principles laid down by the Court of Justice in the judgment in Mediocurso v Commission i) Arguments of the parties 132. By its fourth ground, the appellant refers to paragraph 79 of the judgment under appeal. 133. The appellant maintains, first, that the Court of First Instance erred in law by limiting the possibility of inferring procedural rules not expressly provided for by the legislature to circumstances in which they are essential and necessary to safeguard the rights of the defence. 134. Secondly, the Court of First Instance erred in law in holding that the appellant should have pleaded that the procedural rule was necessary to safeguard its rights of defence and in finding that the appellant did not consider that compliance with the procedural rules laid down in Articles 25 and 26 of Regulation No 4253/88 was necessary in order to safeguard its rights of defence. 135. The Commission counters by saying that the appellant’s rights of defence were not at issue, since there were no proceedings liable to culminate in a measure adversely affecting the appellant. Moreover, Article 24 of Regulation No 4253/88, on the one hand, and Articles 25 and 26 thereof, on the other, do not come under the same heading. The aim of Articles 25 and 26 is simply to ensure effective monitoring and assessment of the implementation of the Structural Funds. The Court of First Instance therefore correctly held that Articles 25 and 26 of Regulation No 4253/88 do not lay down any procedural rule requiring the Commission to raise doubts concerning the proper implementation of a programme before the assistance is wound up. Finally, there is no lacuna in the law which may adversely affect the rights of the defence. ii) Legal appraisal 136. The criticisms alleging an excessively restricted application of Articles 25 and 26 of Regulation No 4253/88 and of the principle of the rights of the defence must be rejected as unfounded. – The complaint alleging failure to have regard to the relationship between the reduction procedure and the monitoring and assessment obligations 137. The complaint alleging failure to have regard to the relationship between the procedure for reducing assistance pursuant to Article 24 of Regulation No 4253/88 and the monitoring and assessment obligations as provided for in Articles 25 and 26 of Regulation No 4253/88 must be rejected. The Court of First Instance correctly held that the initiation of the procedure for reducing assistance pursuant to Article 24 is not subject to compliance with the monitoring and assessment obligations under Articles 25 and 26 of Regulation No 4253/88. (28) 138. First of all, the wording of Article 24 of Regulation No 4253/88 does not provide that the initiation of the procedure to reduce assistance pursuant to Article 24 is subject to compliance with the monitoring and assessment obligations under Articles 25 and 26 of that regulation. 139. Furthermore, from a schematic point of view, Article 24 of Regulation No 4253/88 clearly comes under Title VI of that regulation, entitled ‘Financial provisions’, whereas Articles 25 and 26 of the regulation come under Title VII, entitled ‘Monitoring and assessment’. 140. Finally, an interpretation according to which compliance with the monitoring and assessment obligations for the purpose of Articles 25 and 26 of Regulation No 4253/88 is an essential precondition for initiating the procedure for reducing assistance under Article 24 of that regulation seems to me to place an excessive restriction on the effectiveness of Article 24. That provision is intended to ensure effective compliance with the conditions for granting Community assistance. The possibility of reducing Community assistance in the event of irregularity is an important instrument in the decentralised management of ERDF interventions. It allows for the review a posteriori of the intermediary’s use of the Community assistance. The interpretation proposed by the appellant would have the effect of eroding the intermediary’s responsibility for any irregularities which have not been raised by the Commission during the implementation of the measure. I do not think that such an erosion of responsibility on the part of the intermediary can be reconciled with the objective of ensuring effective compliance with the conditions for granting Community assistance. 141. In my view, the Commission may therefore initiate the procedure to reduce assistance pursuant to Article 24 of Regulation No 4253/88, even if it has not complied with its monitoring and assessment obligations for the purpose of Articles 25 and 26 of Regulation No 4253/88. The complaint expressed by the appellant in its fourth ground must therefore be rejected as unfounded. 142. However, it is necessary to distinguish between the question whether non-compliance with the monitoring and assessment obligations precludes the initiation of the procedure to reduce assistance pursuant to Article 24 of Regulation No 4253/88 and the question whether the Commission may be required to take account, within the framework of that procedure, of its failure to comply with its monitoring and assessment obligations. The latter question is not relevant to the fourth ground of appeal. It will be analysed in connection with the eighth ground, at points 213 to 217 of this Opinion. – The application of procedural rules not expressly laid down by the Community legislature 143. The complaint alleging failure to apply procedural rules not laid down by the Community legislature must also be rejected. The Court of First Instance did not err in law by holding that procedural rules not laid down by the Community legislature can be inferred by the Community Courts only if they are essential in order to comply with fundamental principles, such as the principle of the rights of the defence, and only to the extent necessary to ensure compliance with those principles. 144. First of all, it should be pointed out that the role of the Court of First Instance is limited to interpreting and applying rules. In so far as that court mentioned the rights of the defence at paragraph 79 of the judgment under appeal, it referred to a general principle of law, and therefore to a rule of primary law, (29) which applies even if it has not been expressly stated by the Community legislature in the relevant secondary legislation. 145. The appellant seems to suggest that the Court of First Instance ought to apply a procedural rule even if such a rule is neither laid down by the Community legislature nor essential and necessary to ensure compliance with the rules of primary law. That approach is wrong. The consequence would be that the Court of First Instance would itself create a new rule of law and therefore exceed its powers. Contrary to what the appellant claims, neither the judgment in Mediocurso v Commission (30) nor the other judgments cited by it (31) call into question that principle, which seems to me both clear and elementary. 146. The Court of First Instance was therefore right to find that the procedural rule suggested by the appellant, which was not laid down by the Community legislature, could be applied only if it was essential and necessary to ensure compliance with primary law, such as the rights of the defence. – The complaint relating to the obligation to plead the need for respect for the rights of the defence 147. The appellant criticises the finding of the Court of First Instance, at paragraph 79 of the judgment under appeal, that the appellant should have pleaded that the procedural rule which it proposed is necessary for ensuring observance of the rights of the defence. This criticism is unfounded. It stems from a misinterpretation of paragraph 79 of the judgment under appeal. The Court of First Instance did not state that the appellant should have pleaded that it was necessary to apply the procedural rule which it proposed in order to ensure respect for the rights of the defence. I believe, instead, that the Court of First Instance intended to convey, at paragraph 79 of the judgment under appeal, that even the appellant had not maintained that that procedural rule is necessary to guarantee its rights of defence. – The complaint alleging infringement of the principle of the rights of the defence 148. Finally, the appellant criticises the finding of the Court of First Instance that it did not plead the principle of the rights of the defence in its action at first instance. 149. That complaint is unfounded. 150. First, it must be pointed out that, in its action at first instance, the appellant based its argument on a procedural rule inferred from a misinterpretation of Articles 25 and 26 of Regulation No 4253/88. It made no reference to respect for the rights of the defence. It was the Court of First Instance which considered whether such a procedural rule, which is not expressly provided for in Articles 25 and 26 of the regulation, could be inferred from primary law. 151. Secondly, it is clear that the procedural rule proposed by the appellant is not necessary to guarantee respect for the rights of the defence. Respect for the rights of the defence requires that in all proceedings initiated against a person which are liable to culminate in a measure adversely affecting that person, the person in question should be placed in a position in which he may effectively make known his views. (32) As is apparent from paragraphs 24 to 29 of the judgment under appeal, the appellant was placed in a position in which it could make known its views in writing and orally in the procedure which culminated in the contested decision. It is clear from those paragraphs in the judgment under appeal and from the contested decision that the appellant raised objections which generated an exchange of arguments before the contested decision was adopted. In those circumstances, the Court of First Instance was entitled to consider that the rights of the defence had been respected and that the rule proposed by the appellant therefore went beyond what was necessary to guarantee those rights. – Interim conclusion 152. The fourth ground of appeal must therefore be rejected in its entirety. b) The fifth ground of appeal, alleging infringement of Articles 25 and 26 of Regulation No 4253/88 relating to the Commission’s supervision and monitoring obligations 153. By its fifth ground, the appellant refers to paragraph 80 of the judgment under appeal. (33) i) Arguments of the parties 154. The appellant submits that the reasoning at paragraph 80 of the judgment under appeal encourages the non-application and non-observance of the supervision and monitoring system laid down in Articles 25 and 26 of Regulation No 4253/88, on the ground that, in practice, the Commission is unable to accomplish that task. That reasoning runs counter to the intention of the legislature, which intended to create a monitoring system to be implemented in partnership with the Member States. 155. The Commission considers that the appellant’s ground is based on a clear and specious distortion of the judgment under appeal. The Court of First Instance did not encourage the Commission not to comply with Articles 25 and 26 of Regulation No 4353/88. It simply pushed to the limit the appellant’s proposition that Articles 25 and 26 of Regulation No 4253/88 contain a procedural rule which makes the Commission’s right to reduce or cancel assistance subject to compliance with the monitoring and assessment obligations. 156. According to the Commission, the appellant’s proposition is not consistent with the division of tasks between the Commission and the Member States in connection with the management of the Structural Funds. Interventions under the Structural Funds are subject to decentralised management, which places at the forefront the authorities of the Member States. It therefore falls primarily to the Member States – and, in the present case, to the appellant as an intermediary body designated by the Member State – to supervise the proper application of the Community assistance and, in particular, the eligibility of expenditure. ii) Legal appraisal 157. The fifth ground of appeal is ineffective. The Court of First Instance relied principally on the argument at paragraph 79 of the judgment under appeal that Articles 25 and 26 of Regulation No 4253/88 do not establish any procedural rule which makes the Commission’s right to reduce or cancel assistance subject to the condition that it has raised doubts as to the proper implementation of the project before the termination of assistance measure. The fifth ground of appeal therefore could not succeed, even if it were well founded. (34) 158. In any event, that ground is unfounded. 159. First, the ground stems from an incorrect reading of the judgment under appeal. At paragraph 80 of the judgment, the Court of First Instance did not hold that the Commission did not have to comply with Articles 25 and 26 of Regulation No 4253/88 because it was unable to comply with those provisions. It simply found that a procedural rule such as that which the appellant seeks to infer from those provisions would have the effect of preventing the Commission, in very many cases, from adopting any decision to cancel or reduce assistance under the Community funds. The Court of First Instance therefore simply outlined the consequences of a procedural rule such as that proposed by the appellant (which, in any event, cannot be inferred from Articles 25 and 26 of Regulation No 4253/88). (35) Contrary to what the appellant claims, that court neither limited the application of an existing procedural rule nor encouraged the Commission to infringe Articles 25 and 26 of that regulation. 160. Secondly, it should be pointed out that the procedural rule proposed by the appellant, according to which failure to comply with the monitoring and assessment obligations in Articles 25 and 26 of Regulation No 4253/88 precludes the initiation of the procedure to reduce assistance under Article 24 of the regulation, is not the only way to penalise any failure to comply with the monitoring and assessment obligations. In that regard, I refer to my analysis of this question in points 213 to 217 of this Opinion. 161. The fifth ground of appeal must therefore be rejected. 5. The sixth and seventh grounds of appeal 162. By its sixth and seventh grounds, the appellant refers to paragraphs 88 to 92 of the judgment under appeal. In those paragraphs, the Court of First Instance rejected the appellant’s plea alleging infringement of the principles of legitimate expectations and legal certainty. It found, first, that in order for a claim to entitlement to the protection of legitimate expectations to be well founded, three conditions must be satisfied: first, specific, unconditional and consistent assurances must be given by authorised and reliable sources; second, those assurances must be such as to create a legitimate expectation in the mind of the person to whom they are addressed; and, third, the assurances must comply with the applicable rules. a) The sixth ground of appeal, alleging infringement of the principles of legitimate expectations and legal certainty 163. In its sixth ground, the appellant refers to paragraph 90 of the judgment under appeal. At that paragraph, the Court of First Instance held that the third condition for establishing the existence of legitimate expectations (assurances which comply with the applicable rules) was not satisfied, because any assurances given by the Commission would have been at odds with the applicable provisions. In that context, it held that, under the applicable rules, shareholdings in SMEs had to be acquired by 31 December 2001. 164. The appellant submits that the finding of the Court of First Instance is based on an incorrect appraisal of the content and implementation of Measure 2 of the global grant. The beneficiary of Measure 2 of the global grant was the VCF, not SMEs. The deadline for acquiring shareholdings in SMEs was 16 December 2009, not 31 December 2001. 165. The Commission considers that that court’s interpretation of Measure 2 of the global grant and the closure date for assistance is correct. It adds that it never gave the appellant the specific, unconditional and consistent assurances to which it refers. 166. This ground of appeal is unfounded. It should be pointed out, by reference in particular to points 75, 81 and 87 to 90 of this Opinion, that the appraisal of the Court of First Instance of the content and implementation of Measure 2 of the global grant is not marred by error, particularly with regard to the identification of the beneficiary of Measure 2 of the global grant and the deadline for acquiring shareholdings in SMEs. b) The seventh ground of appeal, alleging distortion of the clear sense of the evidence and infringement of the general principles relating to the burden of proof 167. By its seventh ground, the appellant refers to paragraph 91 of the judgment under appeal. At that paragraph, the Court of First Instance held that, according to the statements made by the Commission, the information sent to the Monitoring Committee had given the impression that the whole of the grant could be invested in SMEs by 31 December 2001. The Court of First Instance also pointed out that the appellant had not provided either the twice-yearly reports sent to the Monitoring Committee, which, according to the appellant, clearly show that no financial operation had been concluded, or the report concerning the update which took place on 21 November referred to in the minutes of the meeting of the Monitoring Committee of 10 December 2001. It therefore concluded that, in those circumstances, it was unable to examine whether the Monitoring Committee had been informed of the fact that not all of the paid-up capital had been invested in SMEs by 31 December 2001. i) Arguments of the parties 168. The appellant bases its ground of appeal on manifest infringement of the general principles relating to the assessment of evidence, on the distortion of that evidence and on the refusal of the Court of First Instance to take account of the evidence adduced by the appellant. 169. First, it states that it provided, at first instance, documents relating to the decisions of the Monitoring Committee which show its approval, expressed in December 2001, with regard to the progress of the global grant proposal. 170. Secondly, it complains that the Court of First Instance did not take account of established facts. It was not disputed between the parties that the twice-yearly reports showed that the Commission was perfectly well aware of the state of progress of the project, that it approved the action taken by the intermediary body, and that it shared the appellant’s interpretation of the applicable provisions. 171. Thirdly, the appellant considers that the Court of First Instance should have asked for the twice-yearly reports submitted to the Monitoring Committee and the report concerning the update which took place on 21 November referred to in the minutes of the meeting of the Monitoring Committee of 10 December 2001 during the proceedings at first instance, if it in fact considered them to be necessary. By omitting to do so, it had deprived the appellant of the benefit of inter partes proceedings. 172. Fourthly, the appellant refers to documents in Annexes 4, 5, 6 and 7 to its appeal which show that the Commission approved the eligibility and regularity of the expenditure incurred by the appellant, and also its interpretation. 173. Fifthly, the appellant criticises the Court of First Instance for not taking account of the fact that the Commission paid several instalments of the assistance. It should have inferred from that that the Commission had confirmed the eligibility of the appellant’s expenditure. 174. Sixthly, the appellant complains of a lack of reasoning. The Court of First Instance did not take account of all the arguments put forward by the appellant. 175. The Commission considers that the appellant’s seventh ground of appeal is ineffective. The Court of First Instance based its reasoning concerning the infringement of the protection of legitimate expectations primarily on the argument set out at paragraph 90 of the judgment under appeal, according to which any assurance from the Commission would have been at odds with the applicable provisions and therefore could not have given rise to a legitimate expectation on the part of the appellant. 176. With regard to the substance, the Commission considers that the ground is based on a misinterpretation of the judgment under appeal. It states that the Court of First Instance did not indicate that it was unable to establish that, by 30 June 2001, no operation had been completed and that the first operation was to be concluded on 19 November 2001. That court simply held that it was not in a position to ascertain whether the Monitoring Committee had been informed of the fact that the acquisition of shareholdings in SMEs was not going to be concluded by 31 December 2001. The Commission maintains that the documents produced by the appellant at first instance did not contain clear evidence on that point. Therefore, the Court of First Instance did not commit an error of assessment or distort the evidence. 177. The Commission considers that the documents in Annexes 4, 5, 6 and 7 to the appeal should be rejected as inadmissible, because they were produced out of time and their content relates to facts. 178. Finally, it was for the appellant to support the pleas put forward in response to the objections raised by the Commission and to substantiate them. ii) Legal appraisal – The seventh ground of appeal is ineffective 179. First, it must be stated that the seventh ground, which refers to paragraph 91 of the judgment under appeal, is ineffective. (36) As the Commission rightly maintains, the Court of First Instance rejected the appellant’s plea alleging infringement of the principle of the protection of legitimate expectations primarily on the basis of the argument expounded at paragraph 90 of that judgment, according to which the assurances given must comply with the applicable law. Since the sixth ground, which refers to paragraph 90 of the judgment under appeal, must be rejected, (37) the finding at paragraph 90 justifies, of itself, the rejection of the appellant’s plea alleging infringement of the principle of the protection of legitimate expectations. The appellant’s complaints referring to paragraph 91 of the judgment under appeal can therefore be rejected as ineffective, without it being necessary to examine their validity. 180. In any event, the complaints are unfounded. – The first complaint, relating to the fact that the appellant provided documents relating to the decisions of the Monitoring Committee 181. The appellant maintains that it provided documents relating to the decisions of the Monitoring Committee which show the Commission’s approval, expressed in December 2001, with regard to the progress of the global grant proposal. 182. Since the appellant has not specified exactly the error of law on which it bases this complaint, it should first be pointed out that, under Article 225(1) EC and Article 51 of the Statute of the Court of Justice, the Court’s function in an appeal is limited to considering whether the Court of First Instance made an error of law. An appeal may therefore be based only on grounds relating to the infringement of rules of law, to the exclusion of any appraisal of the facts. (38) In so far as the appellant’s complaint must be interpreted as a criticism of the appraisal of the facts made by the Court of First Instance, it is therefore inadmissible. Unless there has been a clear distortion of the evidence, the Court of First Instance has exclusive jurisdiction to assess the evidence. (39) The appellant has not adduced any evidence showing distortion of the documents which it produced at first instance. 183. In so far as the appellant criticises the fact that the Court of First Instance did not take account of the documents relating to the decisions of the Monitoring Committee which it had provided, this complaint is admissible, because it concerns a procedural error. However, this complaint is unfounded. It is apparent from paragraph 91 of the judgment under appeal that the Court of First Instance did take account of the documents relating to the decisions of the Monitoring Committee. It considered, however, that, in the absence of the twice-yearly reports and the report concerning the update which took place on 21 November 2001, it could not infer from those documents that the Monitoring Committee had been informed of the fact that not all the paid-up capital would be invested in SMEs by 31 December 2001. 184. The first complaint must therefore be rejected. – The second complaint, alleging that the Court of First Instance failed to base its decision on established facts 185. According to the appellant, the parties agree that the twice-yearly reports show that the Commission, first, was perfectly well aware of the state of progress of the project, secondly, approved of the appellant’s action and, thirdly, shared its interpretation of the applicable provisions. The appellant complains that the Court of First Instance did not base its decision on those established facts. 186. That complaint is unfounded. Contrary to what the appellant affirms, those facts were not agreed between the parties. It is apparent from paragraph 90 of the judgment under appeal and from paragraphs 83 to 91 of the Commission’s defence at first instance that the Commission challenged the respective claims made by the appellant. – The third complaint, alleging lack of measures of inquiry 187. By its third complaint, the appellant complains that the Court of First Instance failed to order measures of inquiry. It failed to ask the appellant to submit the twice-yearly reports during the proceedings. The appellant considers that that court should have asked for those documents during the proceedings, rather than wait until judgment to complain of their absence. The Court is required to use procedural instruments of its own initiative in order to bring up to date all the information which may be decisive in the case. 188. That complaint is unfounded. 189. First, it should be pointed out that the burden of proof lies with the appellant. In its application at first instance, it invoked the principle of the protection of legitimate expectations. Consequently, it had the task of substantiating its claims and of proving that the conditions justifying protection of legitimate expectations were satisfied. 190. As regards the power of the Court of First Instance to contribute to the finding of facts by prescribing measures of inquiry in accordance with Article 66(1) of its Rules of Procedure, it is apparent from the case-law of the Court of Justice that this power is, as a rule, optional and additional, since the Court of First Instance is the sole judge of whether it is necessary to supplement the information available to it concerning the cases before it. (40) In exceptional circumstances, the Court of Justice has held that the Court of First Instance was required to prescribe measures of inquiry. (41) However, I consider that the circumstances in the present case cannot give rise to such an obligation. The appellant, which bore the burden of proof, did not plead exceptional circumstances which may give rise to such an obligation, such as, for example, the inability to produce the reports in question. – The fourth complaint, relating to documents provided by the appellant 191. In so far as the appellant relies on the documents in Annexes 4, 5, 6 and 7 to its appeal, it is clear that it did not produce them at first instance. Furthermore, the appellant seeks a new assessment of the facts. The complaints which are based on those documents must therefore be rejected as inadmissible. – The fifth complaint, alleging failure to take account of the payments made by the Commission 192. The appellant’s complaint that the Court of First Instance did not take account of the fact that the Commission had made several payments of Community assistance and thereby confirmed the correctness of the appellant’s interpretation, as well as the regularity and eligibility of the expenditure incurred, is admissible but unfounded. 193. It seems to me that this complaint does not refer only to the assessment of the facts made by the Court of First Instance but, rather, concerns the legal classification of the facts in the light of the conditions to be met for protection of legitimate expectations. It is therefore a question of law, which is admissible in appeal proceedings. 194. However, this complaint is unfounded. The fact that the Commission paid several instalments of Community assistance could not constitute a specific and unconditional assurance capable of giving rise to a legitimate expectation on the part of the appellant. First, it is apparent from Article 24 of Regulation No 4253/88 that the payments are made provided that there is no irregularity or significant change affecting the nature or conditions of the implementation of the operation. (42) Secondly, the appellant did not establish that the Commission was aware of the fact that it was no longer possible to acquire shareholdings by 31 December 2001, the burden of proof in that regard lying with the appellant. 195. The fifth complaint must therefore be rejected. – The sixth complaint, alleging failure to state reasons 196. Finally, the sixth complaint, alleging failure to state reasons, is unfounded. The conclusion reached by the Court of First Instance is not unreasoned. The burden of proof lay with the appellant. At paragraph 91 of the judgment under appeal, the Court of First Instance clearly based its decision on the finding that the evidence adduced by the appellant did not enable it to ascertain whether the Commission had been aware of the fact that it was no longer possible to acquire shareholdings in SMEs by 31 December 2001. – Interim conclusion 197. The seventh ground of appeal must therefore be rejected in its entirety. 6. The eighth ground of appeal, alleging infringement of the Community case-law relating to the application of the principle of proportionality in cases in which Community assistance is reduced 198. By its eighth ground, the appellant refers to paragraph 93 of the judgment under appeal. At that paragraph, the Court of First Instance found that the Commission had no discretion in respect of the conclusions to be drawn from the fact that, by 31 December 2001, part of the paid-up capital of the VCF had not been invested in SMEs. In that regard, the Court of First Instance referred to paragraphs 22, 23 and 47 of the judgment in Netherlands v Commission. (43) 199. It also found that if account were taken of the facts relied on by the appellant that would amount to an infringement of Datasheet No 19 and that it would not be acceptable for the appellant to obtain an advantage from its misinterpretation, an advantage which could not be enjoyed by other intermediary bodies, which, in the same situation, would have refrained from requesting payment of that part of the assistance which they had been unable to invest within the time-limits. a) Arguments of the parties 200. The appellant considers that Article 24 of Regulation No 4253/88 contains no reference to an automatic recovery system which leaves the Commission no discretion. It criticises the Court of First Instance for basing its decision on Netherlands v Commission, (44) which concerns Article 12 of Regulation No 4253/88 not Article 24 of that regulation. 201. According to the appellant, the Commission must take account of the conduct of the appellant, in particular the fact that it did not act fraudulently. It considers that the reduction in assistance must be commensurate with the gravity and amount of the infringement committed by the appellant. In that context, it refers to paragraphs 135 to 153 of the judgment in Conserve Italia v Commission. (45) 202. The Commission considers that it must act pursuant to Article 24 of Regulation No 4253/88 where it finds an irregularity or significant change. It is required to fulfil specific obligations with regard to the proper management of the Community budget. 203. It considers that paragraph 130 et seq. of the judgment in Conserve Italia v Commission (46) confirmed that the Commission must simply make a financial adjustment, irrespective of any consideration as to culpability or possible attempted fraud on the part of the appellant. Paragraphs 135 to 138 of that judgment do not invalidate that principle. They relate to a different method of calculation from the method employed by the Commission in the present case. The Court of First Instance therefore did not infringe the case-law relating to the principle of proportionality by stating that the Commission had no discretion in regard to the reduction of the part-financing. 204. In any event, the Commission is not required to be represented on the Monitoring Committee. b) Legal appraisal 205. The appellant’s eighth ground of appeal cannot succeed. Although the appellant rightly acknowledges that the Commission has discretion in a procedure to reduce assistance under Article 24 of Regulation No 4253/88, it has not adduced any evidence capable of establishing abuse of such discretion. i) The Commission’s discretion under Article 24 of Regulation No 4253/88 206. First of all, it should be pointed out that the system established in Regulation No 4253/88 is based inter alia on the fulfilment of a series of conditions governing entitlement to receipt of the financial assistance provided for. If those conditions are not all met, Article 24 of Regulation No 4253/88 authorises the Commission to reconsider the extent of its obligations under the decision to grant that assistance. (47) 207. The extent to which a subsidy scheme has been implemented constitutes a very important criterion for the Commission in any procedure to reduce assistance. The principle that the Community budget should be properly managed provides a strong argument in favour of a reduction in Community assistance where Community funds have not been used as provided for by the applicable rules. 208. However, the appellant rightly observes that a decision to reduce assistance under Article 24 of Regulation No 4253/88 is not an automatic exercise. The wording of Article 24, in particular the word ‘may’, indicates that the Commission has discretion. This interpretation is confirmed by the case-law of the Court of Justice. (48) The reasoning of the Court of First Instance at paragraph 93 of the judgment under appeal, to the effect that the Commission had no discretion, is therefore marred by an error of law. 209. However, although the reasoning of the Court of First Instance at paragraph 93 of the judgment under appeal is marred by an error of law, I consider that that court’s conclusion, that the Commission did not err in law by deciding to reduce the assistance under the ERDF because the appellant did not acquire the shareholdings by 31 December 2001, is correct. The appellant did not establish facts which could have obliged the Commission not to follow the conclusion indicated by the principle that the Community budget should be properly managed, namely that the Community assistance should be reduced because the VCF had not acquired shareholdings by 31 December 2001. ii) The complaint relating to absence of fraud 210. The appellant maintains that the Court of First Instance erred in law by not penalising the Commission for failing to take account of the fact that the appellant did not act fraudulently. 211. That criticism is unfounded. As stated above, the objective of Article 24 of Regulation No 4253/88 is to recover that part of Community assistance which is not justified under the conditions for granting Community assistance. The Commission is therefore not required to take account of the absence of fraud as a mitigating circumstance. On the contrary, it is apparent from settled case-law that an irregularity may be penalised not only by reducing Community assistance by an amount corresponding to that irregularity but also by completely cancelling the assistance. This case-law, which is based on the need to produce the deterrent effect required to ensure the proper management of Community resources, applies even in cases in which fraud is not established. (49) 212. The Commission therefore did not abuse its power of discretion by not taking account of the absence of fraud on the part of the appellant. iii) Whether account should be taken of any failure on the part of the Commission to comply with its monitoring and assessment obligations 213. As I have mentioned above, an infringement by the Commission of its monitoring and assessment obligations under Articles 25 and 26 of Regulation No 4253/88 does not preclude the initiation of a procedure under Article 24 of that regulation. However, that question must be distinguished from the question whether the Commission must take account of an infringement of those obligations in a decision to reduce assistance based on Article 24 of Regulation No 4253/88. 214. The Commission appears to wish to separate entirely the application of Article 24 of Regulation No 4253/88, on the one hand, and the application of Articles 25 and 26 of that regulation, on the other. It considers that any failure to comply with Articles 25 and 26 of Regulation No 4253/88 therefore has no effect on a decision to reduce assistance under Article 24 of that regulation. The Court of First Instance appears to interpret those provisions in the same way, when it states that the Commission’s failure to comply with its monitoring and assessment obligations under Articles 25 and 26 of that regulation has no effect on the assessment of the legality of a decision to reduce assistance. (50) 215. I do not find that approach convincing. It is apparent from Articles 25 and 26 of Regulation No 4253/88 that the monitoring and assessment of VCF assistance is carried out within the framework of a partnership between the Commission and the Member States. I think that this notion of a partnership between the Commission and the Member States precludes a complete separation between, on the one hand, Article 24 of Regulation No 4253/88 and, on the other, Articles 25 and 26 of that regulation. In my view, it is therefore impossible to preclude, a priori, that a failure to comply with the monitoring and assessment obligations under Articles 25 and 26 of Regulation No 4253/88 may be taken into account by the Commission in a decision to limit assistance on the basis of Article 24 of that regulation. 216. However, the situations in which the Commission is required to take account of its failure to comply with its monitoring and assessment obligations under Articles 25 and 26 of Regulation No 4253/88 should be very limited. Such situations presuppose, first, that an infringement of the Commission’s monitoring and assessment obligations has been proved. In order not to place an excessive restriction on the effectiveness of Article 24 of Regulation No 4253/88, I consider that, secondly, non-compliance with the monitoring and assessment obligations must be one of the main causes of the irregularity in the management of the Community assistance and that this must therefore be primarily attributable to the Commission. In that regard, it should be recalled that Structural Fund interventions are subject to decentralised management, which places at the forefront the authorities of the Member States and the intermediaries designated by them. The Member States or the intermediaries designated by them are therefore under an obligation to provide information and to act in good faith which requires them to satisfy themselves that they are submitting to the Commission reliable information which is not liable to mislead it, without which the system of controls and evidence set up to determine whether the conditions for granting assistance are fulfilled cannot function properly. (51) 217. In the present case, it is apparent from paragraph 91 of the judgment under appeal that the Court of First Instance was unable to examine whether the Monitoring Committee had been informed of the fact that not all of the paid-up capital would be invested in SMEs by 31 December 2001. It is clear that infringement of the monitoring and assessment obligations has not been proved. iv) Interim conclusion 218. Contrary to the findings of the Court of First Instance, the Commission has discretion when taking a decision to reduce assistance under Article 24 of Regulation No 4253/88. However, the principle that the Community budget should be properly managed provides a strong argument in favour of a reduction in Community assistance where it is not justified. The appellant has not established facts which the Commission was required to take into account. The Commission therefore did not abuse its power of discretion. Ultimately, the Court of First Instance was therefore correct to find that the contested decision was not vitiated by error. 219. The eighth ground of appeal must therefore be rejected. 7. Conclusion 220. The eight grounds of appeal relied on by the appellant in relation to the dismissal of its application for annulment must therefore be rejected. B – The two grounds relating to the claim for damages 221. At paragraphs 111 to 118 of the judgment under appeal, the Court of First Instance rejected the appellant’s claims for damages based on the Commission’s non-contractual liability under both the system providing for liability for an unlawful act and the system providing for liability in the absence of unlawful conduct. 1. The ninth ground of appeal 222. At paragraphs 112 to 115 of the judgment under appeal, the Court of First Instance rejected the appellant’s claim based on liability for an unlawful act. It pointed out, first, that, in order for the Community to incur non-contractual liability, three conditions must be met, namely the unlawfulness of the conduct of which the institutions are accused, the occurrence of actual damage and the existence of a causal link between the conduct complained of and the damage alleged. It then held that the examination of the pleas put forward by the appellant had not revealed any unlawfulness vitiating the contested decision and that one of the conditions necessary for establishing liability was therefore not met. a) Arguments of the parties 223. The appellant submits that the reasoning of the judgment under appeal is erroneous and manifestly inadequate. First, it considers that it established that the Commission erred in law and therefore believes that it has proved that the contested decision is unlawful. Secondly, it criticises the fact that the Court of First Instance did not take account of its arguments regarding the damage and the causal link. 224. The Commission considers that the Court of First Instance, having established that one of the three conditions necessary to give rise to non-contractual liability on the part of the institutions was not met, was perfectly entitled not to carry out an examination of the other two conditions. b) Legal appraisal 225. The appellant’s complaints are unfounded. 226. It is apparent from settled case-law that the three conditions referred to at paragraph 112 of the judgment under appeal must all be met in order for the Community to incur liability for an unlawful act. (52) At paragraph 114 of the judgment under appeal, the Court of First Instance was correct to find that the appellant had failed to establish that the contested decision was in any way unlawful. Since the first condition for establishing non-contractual liability for an unlawful act was not met, that court was not required to examine the other conditions. 2. The 10th ground of appeal 227. By its 10th ground, the appellant challenges paragraphs 116 and 117 of the judgment under appeal. In those paragraphs, the Court of First Instance rejected the appellant’s claim based on the conduct of the Commission, which was not unlawful. 228. At paragraph 116 of the judgment under appeal, the Court of First Instance stated, first, that liability for an act which is not unlawful may be incurred where three cumulative conditions are met, namely, first, the occurrence of actual damage, second, a causal link between the damage and the conduct of the Community institutions and, third, the unusual and special nature of the damage in question. It then stated that damage is unusual where it goes beyond the economic risks associated with the activities in the sector concerned and that it is special where it affects a particular category of economic operators disproportionately by comparing it with other operators. The Court of First Instance found that the damage suffered by the appellant is neither unusual nor special. At paragraph 117 of the judgment under appeal, it pointed out that the appellant had not put forward any argument regarding the special nature of the damage it had suffered. It went on to find that the Commission simply applied the provisions of Datasheet No 19 and that the appellant could not therefore claim that the Commission had altered the conditions for use of the assistance, thus rendering its damage unusual because it could not have either foreseen it or avoided its occurrence. Similarly, the appellant cannot claim that the fact that the Commission carried out no checks or verifications and never expressed the least criticism concerning the management of the global grant prevented it from avoiding the damage it alleges. a) Arguments of the parties 229. The appellant accuses the Court of First Instance of erroneous and manifestly inadequate reasoning in the judgment under appeal. 230. First, it criticises the fact that that court refused to accept that the damage was unusual and unforeseeable on the ground that the Commission simply applied the provisions of Datasheet No 19. The Commission erred in law concerning the interpretation and application of the provisions of Datasheet No 19. 231. Secondly, it criticises the finding of the Court of First Instance that the appellant cannot claim that the fact that the Commission carried out no checks or verifications and never expressed the least criticism concerning the management of the global grant prevented it from avoiding the damage it alleges. In that regard, the appellant claims that the lack of any dispute and, in particular, the Commission’s approval rendered the decision to recover the assistance unforeseeable. 232. Thirdly, the appellant states that the special nature of the damage lies in the fact that it was discriminated against owing to the Commission’s failure to act diligently in respect of its supervision obligations and its misinterpretation of Datasheet No 19. 233. The Commission makes the preliminary point that the principle of liability for lawful acts within Community law is far from being firmly established. Furthermore, it considers that the appellant bases its claim primarily on unlawful conduct on the part of the Commission. 234. Moreover, the appellant was not exposed to an unusual risk which went beyond the risk normally associated with the activities of VCFs in connection with global grants. The appellant’s arguments regarding legitimate expectations have no bearing on the Community’s liability. 235. Finally, since the appellant bases its criticism concerning the Court of First Instance’s finding that the damage is not special on a comparison with other economic operators, that criticism is new and, accordingly inadmissible. b) Legal appraisal i) The existence of liability in respect of lawful acts. 236. In FIAMM and Others v Council and Commission, (53) the Court of Justice precluded, as Community law currently stands, the existence of Community liability for lawful acts in respect of legislative measures. More generally, the Court pointed out that it has not recognised the existence of liability for lawful acts, but it specified some of the conditions under which such liability could be incurred in the event of the principle of Community liability for a lawful act being recognised in Community law. (54) Those conditions include the unusual and special nature of the damage suffered. 237. I do not think that it is necessary, in the present case, to analyse in detail the existence of liability for a lawful act in respect of non-legislative measures. Even if such a liability were recognised, the Court of First Instance rightly found that the conditions for such liability are not met, since the damage claimed by the appellant is neither unusual nor special. ii) The complaints relating to the unusual nature of the damage 238. The appellant’s complaints relating to the unusual nature of the damage must be rejected. 239. Since the appellant bases its argument that the damage it has suffered is unusual on a misinterpretation of the provisions of Datasheet No 19, this complaint is unfounded. First, the Commission did not err in law with regard to the interpretation and application of the provisions of Datasheet No 19. (55) Secondly, the Commission rightly points out that the unlawfulness of conduct cannot in itself be a determining factor in establishing the unusual nature of damage in connection with liability for a lawful act. 240. Next, in so far as the appellant submits that the Court of First Instance, when assessing the unforeseeable nature of the contested decision, did not take account of the fact that the Commission did not carry out checks or verifications or raise objections and even indicated its approval, this criticism must also be rejected. It has not been established that the appellant bears a risk which goes beyond the economic risks associated with the activities in the sector concerned. First, the examination of the applicable provisions, in particular Datasheet No 19, has shown that they were sufficiently clear to rule out any reasonable doubt as to their interpretation. (56) Secondly, the Court of First Instance found, at paragraph 91 of the judgment under appeal, that the appellant had not established that the Commission was aware of the fact that it was no longer possible for shareholdings to be acquired in SMEs by 31 December 2001. In that regard, it should be pointed out that the intermediaries are under an obligation to provide information and to act in good faith, which requires them to satisfy themselves that they provide the Commission with reliable information which is not liable to mislead it, without which the system of controls and evidence set up to determine whether the conditions for granting assistance are fulfilled cannot function properly. (57) As the appellant did not establish that it had fulfilled that obligation, the fact that the Commission did not raise any objections does not constitute an unusual risk. 241. The complaint relating to the unusual nature of the damage must therefore be rejected. iii) The complaint relating to the special nature of the damage 242. In so far as the appellant alleges that the Court of First Instance erred in law by refusing to recognise the special nature of the damage alleged, as a result of the Commission’s misinterpretation of the provisions of Datasheet No 19 and its failure to act diligently with regard to its obligations of control and sound administration, these criticisms must be rejected. The unlawfulness of conduct is not in itself a relevant factor for the purpose of establishing the unusual nature of damage in connection with liability for a lawful act. In any event, the examination of the appellant’s submissions has not revealed either a misinterpretation of Datasheet No 19 or a failure to act diligently on the part of the Commission. The 10th ground of appeal must therefore be rejected. C – Summary of the legal assessment 243. It is apparent from the foregoing considerations that the appellant’s appeal is unfounded. It should therefore be dismissed in its entirety. VII – Costs 244. Under Article 69(2) of the Rules of Procedure, which applies to appeals by virtue of Article 118 of those rules, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since, in my view, the appellant has been unsuccessful, it must be ordered to pay the costs. VIII – Conclusion 245. In the light of the foregoing considerations, I propose that the Court should: – dismiss the appeal of Sviluppo Italia Basilicata SpA; and – order Sviluppo Italia Basilicata SpA to pay the costs. 1 – Original language: French. 2 – Case T-176/06. 3 – OJ 1988 L 185, p. 9. 4 – OJ 1993 L 193, p. 5 (‘Regulation No 2052/88’). 5 – OJ 1988 L 374, p. 1. 6 – OJ 1993 L 193, p. 20 (‘Regulation No 4253/88’). 7 – OJ 1988 L 374, p. 15. 8 – OJ 1993 L 193, p. 34 (‘Regulation No 4254/88’). 9 – OJ 1994 L 250, p. 21. 10 – Commission decision modifying the decisions approving the Community support frameworks, the single programming documents and the Community initiative programmes in respect of Italy (OJ 1997 L 146, p. 11). 11 – Assistance under the Structural Funds, which is as a general rule managed by an intermediary designated by the Member State in agreement with the Commission and is allocated by the intermediary in the form of individual grants to final beneficiaries, is regarded as a ‘global grant’ (see Article 5(2)(c) of Regulation No 2052/88). 12 – See Case C-141/02 P Commission v max.mobil [2005] ECR I-1283, paragraphs 74 and 75. It is therefore not a question of substitution of grounds. 13 – See point 34 of this Opinion. 14 – Case C-164/98 P DIR International Film and Others v Commission [2000] ECR I‑447, paragraphs 43 to 49. 15 – See the orders in Case C-19/95 P San Marco v Commission [1996] ECR I-4435, paragraph 36, and Case C‑345/00 P FNAB and Others v Council [2001] ECR I-3811, paragraph 28, and the order of 25 October 2007 in Case C-495/06 P Nijs v Court of Auditors, paragraph 64. 16 – It is therefore unnecessary to examine whether the Court of First Instance made an incorrect assessment concerning what the appellant regarded as the key aspect of its action. 17 – See the order in Case C-173/95 P Hogan v Court of Justice [1995] ECR I‑4905, paragraph 20. 18 – OJ 2000 L 193, p. 39. 19 – DIR International Film and Others v Commission, cited in footnote 14, paragraph 49. 20 – Joined Cases C-302/99 P and C-308/99 P Commission and France v TF1 [2001] ECR I‑5603, paragraphs 26 and 27. 21 – More specifically: nine acquisitions of shareholdings of EUR 1 million and one of EUR 700 000. 22 – See points 88 to 90 of this Opinion. 23 – Joined Cases T-349/06, T-371/06, T-14/07, T-15/07 and T-332/07 [2008] ECR II-2181. 24 – Judgment of 18 January 2006 in Case T-107/03. 25 – See points 46 to 49 of this Opinion. 26 – See also point 75 of this Opinion. 27 – Cited in footnote 24. 28 – See, also, to that effect Case T-180/01 Euroagri v Commission [2004] ECR II‑369, paragraph 72. 29 – For a more detailed analysis of the concept of the general principles of law, see points 66 to 73 of my Opinion in Case C-101/08 Audiolux and Others [2009] ECR I-0000. As regards their status as primary law within the hierarchy of rules in the Community legal order, see point 70 of that Opinion. 30 – Case C-462/98 P [2000] ECR I-7183. 31 – Case C-287/02 Spain v Commission [2005] ECR I‑5093, paragraph 37; Case C‑44/06 Gerlach [2007] ECR I‑2071, paragraphs 37 and 38; and judgment of 27 June 2007 in Case T-65/04 Nuova Gela Sviluppo v Commission, paragraphs 53 to 55. 32 – Mediocurso v Commission, cited in footnote 30, paragraph 36, and Case C-240/03 P Comunità montana della Valnerina v Commission [2006] ECR I‑731, paragraph 129. 33 – See point 131 of this Opinion. 34 – See the case-law cited in footnote 20. 35 – See points 137 to 142 of this Opinion. 36 – See the case-law cited in footnote 20. 37 – See points 163 to 166 of this Opinion. 38 – Joined Cases C-204/00 P, C-205/00 P, C-211/00 P, C-213/00 P, C-217/00 P and C‑219/00 P Aalborg Portland and Others v Commission [2004] ECR I‑123, paragraphs 47 and 48. 39 – Order in Case C-488/01 P Martínez v Parliament [2003] ECR I‑13355, paragraph 53, and order of 26 January 2005 in Case C-153/04 P Euroagri v Commission, paragraph 62. 40 – Order in Euroagri v Commission, cited in footnote 39, paragraph 61. 41 – See, inter alia, Case C-119/97 P Ufex and Others v Commission [1999] ECR I‑1341, paragraphs 107 to 111. 42 – See Case T-461/93 An Taisce and WWF UK v Commission [1994] ECR II-733, paragraph 36. As the Court of First Instance rightly held, any other interpretation of Article 24 of Regulation No 4253/88 would undermine the effectiveness of the obligation imposed on the Commission and the Member States to monitor the proper use of Community financial assistance. 43 – Case C-84/86 [1999] ECR I‑6547. 44 – Cited in footnote 43. 45 – Case T-306/00 [2003] ECR II-5705. 46 – Cited in footnote 45. 47 – Order of the President of the Court of First Instance in Case T-141/01 R Entorn v Commission [2001] ECR II‑3123, paragraphs 41 and 42. 48 – See Comunità montana della Valnerina v Commission, cited in footnote 32, paragraph 140. 49 – Case C-500/99 P Conserve Italia v Commission [2002] ECR I‑867, paragraphs 100 and 101, and Comunità montana della Valnerina v Commission, cited in footnote 32, paragraph 144. 50 – See, to that effect, Euroagri v Commission, cited in footnote 28, paragraph 72. 51 – Case T-180/00 Astipesca v Commission [2002] ECR II‑3985, paragraph 93, and the case-law cited, and Case T-290/02 Ascontex v Commission [2004] ECR II‑3085, paragraph 65. 52 – See Case 153/73 Holtz & Willemsen v Council and Commission [1974] ECR 675, paragraph 7. 53 – Joined Cases C-120/06 P and C-121/06 P [2008] ECR I-6513, paragraph 169. 54 – See paragraph 168 of the judgment cited in footnote 53. 55 – See points 75, 81 and 87 to 90 of this Opinion. 56 – See points 75, 81 and 87 to 90 of this Opinion. 57 – Astipesca v Commission, cited in footnote 51, paragraph 93, and the case-law cited, and Ascontex v Commission, cited in footnote 51, paragraph 65.