Judgment — ECLI:EU:T:2010:240
Date: 2010-06-17
Language of the case: French
Court formation: Sixth Chamber
Subject matter: Research and technological development
Procedure: Action for annulment - unfounded
Origin: France

summary ‘time sheets’ drawn up, project by project, by the fraud squad of the Rennes criminal investigation department that the difference between the ‘time sheets’ and the cost statements was only 6% as regards the Seahealth and Biopal projects. 103 The smaller differences thereby highlighted confirm that the errors contained in the ‘time sheets’ were not sufficiently serious to justify the application of Article 3(5) of Annex II. The claim for repayment of all the sums paid is therefore disproportionate. 104 In the further alternative, the applicant asks the Court to appoint an expert to review the calculation of the times which it made by applying its new management control system to the contracts in question (see paragraph 101 above). At the hearing, the applicant stated that a scientific expert would be able to make a costing of the working times necessary, taking account of the scientific tasks required and of the resources to be applied under the two contracts in question. 105 The Commission contends, in the first place, that the applicant does not allege that it infringed, in any way, its contractual obligations or a provision of Belgian law. The claims seeking reduction of the amount of the sums to be returned and the appointment of an expert should therefore be rejected as contrary to the terms of Article 44(1)(c) of the Rules of Procedure. 106 In the second place, and in any event, due to the seriousness of the financial irregularities committed, the claim for full repayment of the sums paid, pursuant to Article 3(5) of Annex II, is justified. At the hearing, the Commission pointed out that the existence of an intentional element, characteristic of fraud, was not necessary in order to require such repayment where serious financial irregularities such as those discovered in this case are involved. Findings of the Court 107 As a preliminary point, with regard to the admissibility of the present plea, it is sufficient to note that, contrary to the Commission’s contentions, the plea has been put forward in a manner consistent with the provisions of Article 44(1)(c) of the Rules of Procedure (see paragraph 63 above). 108 As regards the claims in the alternative, seeking the appointment of an expert, it must be pointed out that, in accordance with the principle that each court applies its own procedural rules (Opinion of Advocate General Kokott in Commission v AMI Semiconductor Belgium and Others, cited above, point 56), those claims must be examined by the Court in the light of the provisions of Articles 65 to 67 of the Rules of Procedure, concerning measures of inquiry. The applicant therefore cannot be accused of not having based such claims on the proper law of the contracts. 109 On the basis of the conclusions of a financial audit, the Commission is authorised, under the last subparagraph of Article 26(3), to take all appropriate measures which it considers necessary, including the issuing of a recovery order regarding all or part of the payments made by it under the contracts in question. 110 In this case, as a result of the financial audit, the Commission terminated the two contracts in question, in accordance with Article 7(4)(b) of Annex II, and decided, in accordance with Article 3(2) of that annex, to make no further payments under those contracts. Those decisions are not contested by the applicant. 111 In this case, the applicant contests the recovery by the Commission, under Article 3(5) of Annex II, of all the financial contributions which had already been paid to it under the contracts in question. It complains that the Commission did not apply Article 3(4) of Annex II, which provides that the contractor concerned is to reimburse only the difference where, taking into account any adjustments, including those made as a result of a financial audit referred to in Article 26 of Annex II, the payments received exceed the total amount of the Community contribution due. 112 It must be observed that, whereas the Seahealth and Biopal contracts were duly performed from 2003 to 2005, as stated by the applicant without being contradicted by the Commission, it is apparent from the final audit report that the audit, carried out in May 2006, covered only 2003 and 2004. 113 As regards 2003 and 2004, a reading of that final audit report shows that the personnel costs were not justified by the applicant in accordance with the provisions of the contracts and were therefore declared ineligible. On the other hand, the costs other than those related to personnel expenses were considered eligible (see paragraph 19 above) 114 Moreover, it is apparent from the Commission’s replies to the questions put by the Court during the hearing that that institution did not have at its disposal, at the time of the financial audit, the cost statements for 2005, which were completed after expiry of the time‑limit. Those cost statements were rejected automatically following the audit report, since the Commission took the view, in the light of the serious doubts concerning 2003 and 2004, that the applicant was no longer fulfilling its financial obligations, including in 2005. 115 It is thus apparent that the present disputes involve, on the one hand, the costs declared for 2003 and 2004, which were checked during the audit (see paragraph 16 above) and, on the other, the cost statements relating to 2005, which were rejected automatically. 116 It must therefore be established whether, in the circumstances of this case, the provision laid down in Article 3(5) of Annex II, in conjunction with Article 26(3) and Article 7(6)(c) of that annex authorised the Commission to request the repayment of all the financial contributions paid under the two contracts in question. 117 Article 26(3) and Article 7(6)(c) of Annex II merely provide for the possibility for the Commission to recover all those financial contributions, as a result, respectively, of an audit or of termination of the contract. However, they do not set out the conditions to which such full recovery is subject. 118 Those conditions are set out in Article 3(5) of Annex II, which provides that the Commission may or must, as relevant, where fraud or serious financial irregularities have been discovered during a financial audit, claim from the contractor the repayment of all the financial contribution paid to him. 119 It is apparent from the wording of Article 3(5) of Annex II that, even in the event of fraud or serious financial irregularities discovered during an audit, the Commission is not required in all cases to recover all of the financial contribution granted to the contractor in question. It is, on the other hand, required to examine, ‘as relevant’, whether, in the light of the circumstances of the particular case, such a measure is obligatory or appropriate, having regard to the clauses of the contract. 120 In that regard, the interpretation of Article 3(5) of Annex II mentioned by the Commission at the hearing, according to which the obligation to require repayment of the whole of the financial contribution in question refers only to cases where the contract has been terminated for fault, whereas the Commission has a discretion allowing it to take into account the contractor’s good faith if the contract has not expired, cannot be accepted. 121 The Commission’s argument based on the concept of termination for fault lacks precision. Even conceding that the Commission was referring to a situation where a contract has been terminated, as with the Seahealth and Biopal contracts, under Article 7(4)(b) of Annex II, which refers to false declarations for which the contractor may be held responsible and to the deliberate withholding of information in order to obtain the Community’s financial contribution, the relevant clauses of Annex II clearly do not establish any automatic link between such termination under the abovementioned article and any obligation to recover the whole of the financial contribution in question under Article 3(5) of Annex II. 122 In this case, it follows that the mere fact that the contracts in question were terminated under Article 7(4)(b) of Annex II and that that termination was not contested by the applicant was not such as to impose on the Commission an obligation to recover the total amount of the sums paid to the applicant, pursuant to Article 3(5) of Annex II. It should moreover be pointed out that, whereas the Commission acted, in the termination decision, on the basis of Article 7(4)(b), rather than on the basis of Article 7(3)(e), of Annex II, which confers on it the power to terminate a contract in the event of a serious financial irregularity, it alleges only, in the present proceedings, the existence of serious financial irregularities and does not, on the other hand, refer to fraud, as it confirmed at the hearing. 123 It must therefore be determined whether, in the light of the flagrant gaps in the recording of hours, which is acknowledged by the applicant, the Commission was, at the very least, authorised by Article 3(5) of Annex II to require repayment of all the sums which it had granted under the contracts in question. If the conditions for such full recovery were not satisfied, the Commission would be entitled only to request, under Article 3(4) of Annex II, on the basis of an assessment of all eligible costs, reimbursement of the difference between the sums paid by and the sums due from the Union. 124 That assessment must be made in the light of the contractual obligations binding upon contractors as regards the justification of their costs. 125 In this case, it was for the applicant to justify its personnel costs in accordance with the clauses of Article 23(1)(a) of Annex II, stipulating in essence that all the working time charged to the contract must be recorded throughout the duration of the contract, or, in the case of the coordinator, no later than two months after the end of the duration of the project, and be certified at least once a month by the project manager or by the duly authorised responsible financial officer of the contractor. 126 In that regard, it must be recalled that the Commission’s obligation to ensure the sound financial management of Community resources, in accordance with Article 274 EC, and the need to combat fraud in connection with Community financing endow the obligations relating to financial conditions with fundamental importance (see, to that effect, Case T‑500/04 Commission v IIC [2007] ECR II‑1443, paragraphs 93 to 95, and judgment of 12 September 2007 in Case T‑448/04 Commission v Trends, not published in the ECR, paragraph 141). In this case, the contractor’s obligation to submit cost statements in accordance with the specific requirements laid down in Article 23(1) of Annex II, relating to personnel costs, is therefore one of his fundamental obligations, designed to enable the Commission to have at its disposal the necessary data in order to satisfy itself that the contributions in question have been used in accordance with the provisions of the contracts. 127 That is the reason why the Commission is authorised by Article 3(4) of Annex II to require, where appropriate, the reimbursement of sums paid corresponding to costs which it considers ineligible on the ground that they have not been justified in accordance with the provisions of the contract. 128 By contrast, where fraud or serious financial irregularities are discovered during a financial audit, Article 3(5) of Annex II provides for the possibility for the Commission to recover the whole of the financial contribution paid by the Union and thus has a deterrent purpose (see, by analogy, Case T‑199/99 Sgaravatti Mediterranea v Commission [2002] ECR II‑3731, paragraph 136). 129 However, the objective pursued by Article 3(5) of Annex II, which is to deter against fraud and serious financial irregularities, does not entitle the Commission to avoid the principle that contracts must be performed in good faith and that contractual clauses must not be applied unfairly, by assuming a discretionary power in the interpretation and application of those clauses. 130 In this case, it must therefore be established whether, having regard to the findings made in the final audit report and to the documents in the file which were produced and commented upon in the parties’ replies to the Court’s written questions and debated between the parties at the hearing, the financial irregularities committed by the applicant were sufficiently serious to justify, in the light of the principle that contracts must be performed in good faith, the recovery, under Article 3(5) of Annex II, of the whole of the financial contribution paid. 131 Admittedly, the final audit report finds only the personnel costs for 2003 to 2004 ineligible, in so far as the audit covered the period between 1 January 2003 and 31 December 2004, as has already been pointed out (see paragraph 112 above). However, it is evident from that report that the grounds on which the auditors based their finding of the absence of justification for the personnel costs declared in respect of 2003 and 2004 are capable of being applied to the personnel costs relating to 2005. 132 It is apparent from the final audit report that the ‘time sheets’ relating not only to 2003 and 2004, but also to 2005, contained in a box handed over to the auditors contained only an aggregate weekly and monthly statement of all the working hours completed by each member of staff for all the current projects. The working times chargeable to the Seahealth and Biopal projects had not been recorded. Those ‘time sheets’, signed by the former director of CEVA, were neither signed by the personnel working on the projects nor countersigned by the project managers. Moreover, they were neither dated nor numbered, so that it was not possible to identify the date on which they had been drawn up and signed by the applicant’s former director. Furthermore, the auditors found that there were different versions of sets of ‘time sheets’ for different projects, revealing significant contradictions between them. 133 Finally, the final audit report indicates that the person in charge of the Biopal project confirmed that he was unable to determine exactly how much of the working time of each member of the personnel was chargeable to each project, since, according to him, no recording system existed. 134 In those circumstances, the auditors took the view that the ‘time sheets’ were not reliable and that they had no sound basis for calculating the number of hours chargeable to the projects in question. Consequently, they considered that all the personnel costs declared in respect of 2003 and 2004, analysed during the audit, were ineligible. 135 Moreover, the Court observes that the applicant did not put forward, either in its written replies to the Court’s questions or at the hearing, any serious argument invalidating the factual findings and conclusions contained in the audit report. The applicant failed, inter alia, to adduce any evidence capable of casting doubt on the fact, which is alleged against it by the Commission, that it did not undertake any recording of the working times chargeable to the contracts in question. 136 In particular, the applicant does not dispute that the ‘time sheets’ were reconstructed retrospectively, after the completion of the contracts, by its former director. As for the ‘time sheets’ described as ‘summary’, drawn up by the fraud squad of the Rennes criminal investigation department, which are relied on by the applicant, it is common ground that they merely summarise the time sheets thus reconstructed and compare them with the declared costs. They do not contain any evidence concerning the working times actually chargeable to the contracts in question. 137 Moreover, the fact that the abovementioned reconstruction of the ‘time sheets’ lacks any reliability is confirmed by the significant discrepancies between the content of those ‘time sheets’, as it appears from the summary table of the abovementioned summary sheets which was drawn up by the applicant, in its reply to the Court’s written questions, and the statements of certain witnesses recorded in the fraud squad’s report of 31 March 2008, produced by the Commission. Consequently, whereas, according to one of the witnesses, a project manager, the time sheets mentioned a total of 685 working hours spent on the Biopal project, that same witness stated, during his examination by the fraud squad, that he had never worked on that project. 138 Furthermore, as regards, more specifically, the advances paid in respect of 2005, it is not apparent, either from the documents in the file or from the parties’ written replies to the Court’s questions or their oral observations at the hearing, that the applicant sent to the Commission any supporting documents concerning the personnel costs incurred during 2005 in respect of the contracts in question. Nor, indeed, does the applicant claim to have produced any such supporting documents. 139 In those circumstances, the mere absence of properly kept time records with regard to 2003, 2004 and 2005 constitutes an infringement of Article 23(1) of Annex II, which is sufficient for all the personnel costs concerned to be considered ineligible (Commission v Premium, cited above, paragraph 44). 140 In addition, in view of the scale and gravity of the manifest financial irregularities discovered in the course of the audit and confirmed by the documents from the criminal investigation which have been discussed in this case between the parties, the recovery by the Commission of the whole of the financial contribution paid to the applicant under the contracts in question cannot be regarded as an unfair application of the clauses of Article 3(5) of Annex II. Contrary to the applicant’s claims, that recovery is therefore not disproportionate to the objectives pursued by the relevant clauses of the contracts in question (see paragraphs 126 to 128 above). 141 As regards the applicant’s claims in the alternative seeking the appointment of an expert, they cannot be accepted, in so far as it is for the applicant, by virtue of its contractual obligations, to adduce proof of its personnel costs in accordance with the specific evidential requirements of Article 23(1) of Annex II (see, to that effect, Commission v IIC, cited above, paragraph 105). 142 It follows that the present actions must be dismissed as unfounded. Costs 143 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. 144 Moreover, the first subparagraph of Article 87(3) of the Rules of Procedure provides ‘that where each party succeeds on some and fails on other heads, or where the circumstances are exceptional, the Court may order that the costs be shared or that each party bear its own costs.’ 145 In this case, although the applicant has failed in all of its pleas, account must be taken of the fact that, following the seizure of the ‘time sheets’ by OLAF, it was not in a position to comment with full knowledge of the facts on the existence and gravity of the financial irregularities alleged against it. It was only at the end of the written procedure before the Court that it had access to those documents (see paragraphs 89 and 96 above). Each party must therefore be ordered to bear one half of its own costs and to pay one half of those incurred by the other party. On those grounds, THE GENERAL COURT (Sixth Chamber) hereby: 1. Dismisses the actions; 2. Orders each party to bear one half of its own costs and to pay one half of those incurred by the other party. Meij Vadapalas Truchot Delivered in open court in Luxembourg on 17 June 2010. E. Coulon President Registrar * Language of the case: French.