Opinion of the Advocate General — ECLI:EU:C:1999:576
Date: 1999-03-25
Language of the case: German
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Energy
Procedure: Arbitration clause
Origin: Netherlands

summary of the events which took 
place between the time the contract was 
signed and the time the case was brought 
before the Court, as it emerges from the 
documents produced by the parties, may 
seem a little long, but I think it will prove 
useful when it comes to assessing the merits 
of the arguments between the parties, 
which I shall now set out. 
34. In the view of the Commission, the 
reason for its action being brought solely 
against Balkom is that, by March 1993 at 
the latest, DF and VBS were no longer 
parties to the contract. Moreover, even if 
that withdrawal were not valid, Balkom 
could, by virtue of the joint and several 
liability agreed between the Community's 
three contracting parties, still be in receipt 
of a claim for the whole amount in respect 
of which the Commission is entitled to seek 
reimbursement under Clause 9 of the 
contract. 
35. As regards the termination of the 
contract, the Commission claims that, since 
a precise timetable for performance had 
been agreed from the outset, it is not a 
contract of unspecified duration within the 
meaning of German law, which can be 
terminated only vis-à-vis all the parties. For 
that reason, the termination of the contract 
would still have been valid, although it was 
not notified to DF, even if, quod non, DF 
had still been a party to the contract on the 
date it was terminated. 
36. As regards the merits of the termina­
tion, the Commission considers that the 
conditions of Clause 9, namely a foresee­
able economic failure, were clearly satisfied 
in 1994, in view of the various problems 
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OPINION OF MR MISCHO — CASE C-156/97 
mentioned above, in particular the fact 
that, following withdrawal by DF and VBS, 
Balkom itself faced serious financial diffi­
culties and was clearly no longer in a 
position to complete the project. 
37. Although scheduled for completion in 
June 1993, the project was in any case held 
up because of the lack of permission to 
construct the facilities needed in order to 
complete it. 
38. As regards the amount claimed, the 
Commission explains that it has deducted 
from the total of the money paid to VBS, 
for which Balkom is jointly and severally 
liable, the amount corresponding to 17% 
of the cost excluding VAT of the sums 
expended, as they appear from the first 
financial report, which it audited and 
approved, and points out that, by its letter 
of 9 March 1993, it had stated that it 
would make no further payments if admin­
istrative permission to construct the facil­
ities were not obtained by 31 December 
1993 at the latest. 
39. The Commission adds that it cannot 
therefore be accused of not having taken 
action on the second financial report. It 
claims, moreover, that under the third 
paragraph of Clause 9 of the contract, on 
the basis of which it terminated the con­
tract, interest is due as from 1 July 1991, 
since it was on that date that the first phase 
of the project, the only one to have been 
actually carried out, was completed. 
40. Balkom flatly contradicts those various 
arguments. As far as it is concerned, the 
contract was never validly terminated. 
Since this is a contract which it deems to 
be of unspecified duration, termination is 
valid only if it takes effect vis-à-vis all the 
contracting parties. The Commission has 
never notified its decision to terminate the 
contract to DF which, contrary to what the 
Commission claims, was still a party to the 
contract on the day that decision was 
taken. 
4 1 . Balkom points out in this connection 
that DF's withdrawal must be regarded as 
assignment of the contract, which may be 
effected only by an agreement between all 
the parties, an agreement which, under 
Clause 7 of the contract, would have 
needed to be in writing. 
42. The Commission has failed to produce 
any such document by which the Commis­
sion itself, VBS and Balkom agreed with DF 
the conditions under which DF would 
withdraw and the transfer of its rights 
and obligations to its two partners. 
43 . However, even if the termination had 
been carried out in accordance with formal 
requirements, it would not have been at all 
justified since, according to Balkom, it is 
impossible to claim that there was a 
foreseeable economic failure. 
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COMMISSION V VAN BALICOM 
44. In order to understand the meaning of 
the term 'economic failure', it is necessary 
to refer to Annex I, A, Point 4 to the 
contract, which deals with the economic 
and technical risks of the contract and 
defines failure in terms of an amount of 
investment which is too high in relation to 
the conditions prevailing on the market. 
45. At the stage reached in the execution of 
the project, there were no grounds for 
stating that the cost of investment would 
ultimately exceed that amount. Admittedly, 
the execution of the project had encoun­
tered difficulties leading to delays in rela­
tion to a schedule based purely on esti­
mates, but that by no means supports the 
conclusion that there was a foreseeable 
economic failure within the meaning of the 
contract. 
46. Taking its argument a step further, 
Balkom contends that the Commission 
was not able to rely on the third paragraph 
of Clause 9 in order to claim repayment of 
an overpayment because, since the work 
had not been completed, it was not possible 
to calculate the amount of any overpay­
ment, and seeks to exercise a right to 
retention over part of the sums claimed by 
the Commission, on the ground that the 
Commission has not yet adopted a position 
on the second financial report submitted to 
it by VBS, which sets out expenditure for 
the period from 1 July 1991 to 30 June 
1992 which is additional to that contained 
in the first report, which means an addi­
tional payment by the Commission. 
47. In Balkom's view, the refusal to make 
any additional payment, which the Com­
mission notified to it by its letter of 
9 March 1993, cannot be regarded as a 
decision on the second financial report 
submitted by VBS. 
48. Lastly, as regards the date as from 
which interest becomes payable, Balkom 
disputes the date of 1 July 1991 since, in its 
view, the date of 30 June 1991 cannot be 
regarded as the end of the first phase of 
execution of the project, which actually 
continued well beyond that dale. 
Assessment 
49. How can one decide between these 
totally conflicting arguments? I think that, 
in order to proceed methodically towards a 
solution, it is necessary to isolate the 
various issues. In order to ascertain whe­
ther the Commission is indeed entitled to 
the amount which it is claiming from 
Balkom, it is necessary to examine, first 
of all, the validity of its decision to bring 
the contract to an end. That validity 
depends, in turn, on two conditions: did 
the Commission comply with the formal 
requirements laid clown for that termina­
tion, and was the Commission entitled, in 
view of the state of the execution of the 
project at the time when it adopted its 
decision, to exercise the option available to 
it under Clause 9 of the contract? The 
assessment I shall have to make as to 
whether the formal requirements for termi­
nating the contract were complied with will 
itself depend on whether, contrary to what, 
by the Commission's own admission, was 
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OPINION OF MR MISCHO — CASE C-156/97 
the case, DF should have been notified of 
the Commission's decision irrespective of 
the announcement of its withdrawal. 
50. Once those various questions have been 
resolved, and assuming that it is concluded 
that the Commission was entitled to exer­
cise the option to terminate granted to it 
under Clause 9, it will remain to be seen 
whether the amount to be recovered was 
calculated correctly by the Commission in 
respect of both the principal sum and the 
interest. 
The validity of the termination of the 
contract 
51. Let us begin by examining whether the 
Commission, when it terminated the con­
tract by its letter of 16 August 1994, 
complied with the contract or German 
law, in so far as German law applies in 
the absence of a different stipulation in the 
contract. No-one disputes the fact that that 
letter was sent to VBS and Balkom, but not 
to DF. Should it have been? 
52. Certainly not, if we must accept as 
proven that, on that date, of the Commis­
sion's three original contracting partners, 
there remained only one, Balkom, even if 
the termination was also notified to VBS. 
Can we consider that on that date DF no 
longer had any contractual link with the 
Commission? For my part, I should be 
tempted to reply in the affirmative in view 
of the problems mentioned above. 
53. It is true that DF's letter to the Com­
mission announcing its withdrawal, owing 
to its purely unilateral nature, could not by 
itself have the effect of ending the contrac­
tual links forged on 4 December 1990 and 
must be regarded as a declaration of intent, 
an offer of withdrawal and a renunciation 
of the rights conferred under the contract. 
Was that offer accepted by the other parties 
to the contract? 
54. It seems to me that Balkom is now 
badly placed to dispute it. The Commis­
sion's agreement is not in doubt, although it 
is perhaps surprising that the Commission 
so readily accepted the defection of a 
partner who possessed the technology to 
be implemented in the project. It seems to 
me that VBS's agreement can be inferred 
from its letter to the Commission of 
26 August 1991. 
55. Admittedly, in that letter VBS men­
tioned the talks intended to resolve the 
contractual problems associated with DE's 
involvement in the project, which means 
that those problems had not been resolved 
by that date, but it should be pointed out 
that VBS did not at any time impose 
conditions on DF's withdrawal; on the 
contrary, it regarded that withdrawal as 
an established fact, whereas it could have 
expressed reservations and made its agree­
ment to that withdrawal subject to certain 
requirements being met. 
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COMMISSION V VAN BALKOM 
56. As regards Balkom, it is true that there 
is no sign in the file of any document which 
is contemporaneous with DF's withdrawal 
and which shows for certain that Balkom 
agreed to that withdrawal. 
57. Admittedly, one might be justified in 
thinking that, if Balkom had had any 
objections to that withdrawal, of which it 
cannot have been unaware because it was 
headed by Mr Van Balkom, who was also 
director of VBS, it would have expressed 
them. However, there is no need at all to 
embark on that line of reasoning, which 
would imply that shared management pre­
vailed over the existence of two separate 
legal persons, since we have the letter, 
which could not be more explicit, from 
the Commission to Balkom, dated 9 March 
1993, in which withdrawal by DF, and also 
by VBS, is presented as an established fact, 
a letter which followed discussions in 
which Mr Van Balkom took part, on behalf 
of Balkom, and which provoked no nega­
tive reaction from Balkom. 
58. One may assume that, at that time, 
when execution of the project appeared to 
be in jeopardy, Balkom would have reacted 
strongly to a letter stating that it agreed to 
the withdrawal of two partners if that 
agreement had not been given. 
59. I believe, therefore, that we can infer 
from the various letters I have just men­
tioned, read in the light of Paragraph 157 
of the BGB, according to which contracts 
are to be interpreted on the basis of the 
principle of good faith, that, by March 
1993 at the latest, all the parties regarded 
DF's withdrawal as an established fact, and 
that it would be unjustifiably formalistic to 
consider that such an agreement should 
have taken the form of a single document 
signed by all the parties. 
60. However, even if, as Balkom claims, on 
the basis of German legal literature, the 
conditions for DF's withdrawal remain 
debatable in view of the nature of the 
contract, I do not think that it can be 
inferred from failure to notify DF of the 
Commission's decision to terminate the 
contract that that termination was invalid 
vis-à-vis Balkom. 
61 . In order for Balkom to be able to rely 
on failure to comply with a formal require­
ment, it would be necessary for it to be able 
to show that its rights and interests have 
been prejudiced. However, the only com­
pany which could, if the lawfulness of its 
withdrawal were challenged, rely on such 
prejudice, in view of the joint and several 
liability provided for in the contract, would 
be DF. 
62. It appears, however, that DF stated in 
the clearest possible manner that it was 
impossible for it to continue the contractual 
relationship and it therefore waived its 
right to be treated by the Commission as 
a party to the 1990 contract, so it would 
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OPINION OF MR MISCHO — CASE C-l J6/97 
certainly not have been in a position to 
complain to the Commission for not having 
notified it of the termination. 
63. I therefore consider that, in view of the 
developments in the contractual relation­
ship between 1990 and 1994, the Commis­
sion's termination of the contract was 
lawful from the formal point of view. 
Justification for termination of the contract 
64. Was that termination justified, how­
ever? I think, once again, that Balkom's 
objections carry little weight. Balkom states 
that the concept of economic failure refer­
red to in Clause 9 of the contract must be 
understood in relation to an annex to the 
contract relating to economic and technical 
risks. 
65. It turns out, however, that the provision 
in question, Point 4.1 of Annex I, is 
essentially descriptive. It refers to the 
amount of investment required for the 
execution of the project and states the limit 
of the financial commitment entered into 
by the three undertakings contracting with 
the Commission. It could not in any way be 
regarded as providing a definition of fore­
seeable economic failure within the mean­
ing of Clause 9 of the contract. 
66. Such an interpretation would, more­
over, be incompatible with that clause, 
which gives each of the parties the option 
to terminate the contract 'where the pro­
gramme of work set out in Annex I 
becomes inoperative by reason, in particu­
lar, of a foreseeable technical or economic 
failure or an excessive overrun on the costs 
of the project in relation to the estimates'. 
On that basis, the fact of the programme of 
work becoming inoperative cannot be trea­
ted merely as an overrun on the ,costs in 
relation to the estimates, as Balkom would 
have it. 
67. Next, once this objection by Balkom 
has been dismissed, I think there is no need 
to go into long explanations as to how we 
might legitimately consider, contrary to 
Balkom's arguments, which seem to me to 
be lacking in good faith, that the following 
constituted foreseeable economic failure: a 
project which was due to be completed in 
1993 was still, in 1994, at a stage where 
very little had been done; of the three 
undertakings initially associated, there 
remained only one which, despite its 
efforts, had not been able to find new 
partners and which itself stated that it was 
unable to continue providing the funding 
required to carry on with the project; and, 
in addition, the administrative permission 
on which progress to the second phase 
depended had still not been obtained in 
spite of legal action. 
68. It is difficult to envisage more patent 
failure. It is all the more reason to be 
amazed, yet again, that the Commission 
did not terminate the contract sooner or 
exercise sooner its option to withdraw 
under Clause 8 of the contract, with much 
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COMMISSION V VAN BALKOM 
harsher consequences for the other con­
tracting parties, or, at least, take cognisance 
sooner of that certain failure, but instead 
extended time-limits which it had itself 
previously described as mandatory. 
69. In any event, I consider that, when the 
Commission terminated the contract, that 
termination was fully justified under the 
terms of the contract. 
The amount of reimbursement sought 
70. Is the Commission thereby justified in 
claiming reimbursement of an overpayment 
which it fixes at EUR 251 649, the euro 
having replaced the ecu in the interim? The 
Commission arrived at that sum by taking 
as expenditure incurred by the other con­
tracting parties, which entitled them to 
financial assistance, only the expenditure it 
accepted when it approved the first finan­
cial report. 
71. After the first hearing, it had seemed to 
me that it must be possible for the parties to 
reach an agreement on whether certain of 
the expenditure detailed in the second 
financial report, which was sent by VBS 
to the Commission in 1992, should be 
taken into account, so that the amount 
claimed by the Commission would fall to 
be reduced. 
72. It was not evident from the file that the 
Commission had clearly adopted a position 
on the second financial report. In its reply, 
the Commission had explained that it had 
taken action on that report ('den 2. Finanz­
bericht beschieden') by setting for Balkom, 
by letter of 9 March 1993, a time-limit 
expiring on 31 December 1993 for obtain­
ing administrative permission and by 
informing Balkom that the Commission 
would not make any further payments until 
that date. However, it is one thing to 
suspend payments, but quite another to 
state that nothing more is owed. 
73. Furthermore, the Commission had, in 
an unofficial note of 20 January 1994, 
planned to acknowledge the 'Engineering' 
phase at the level of DEM 1 127 800, on 
condition that the corresponding documen­
tary evidence be available ('falls entspre­
chende Nachweise vorliegen'). 
74. At the second hearing, the Commission 
stated, however, that none of the expendi­
ture referred to in the second financial 
report could be acknowledged for the 
following reasons. 
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OPINION OF MR MISCHO — CASE C-156/97 
75. In so far as that second report men­
tioned — which was not, however, true — 
expenditure relating to the second phase of 
the programme, entitled 'Production and 
Delivery', such work could have been 
commenced only at the defendant's own 
risk because, under Point 2.2 of Annex I to 
the contract, that phase could be com­
menced only after completion of the appli­
cation procedure for permission relating to 
the construction in question. It appeared 
expressly from the second progress report 
that that procedure was held up. 
76. Second, the Commission told us during 
the second hearing that, contrary to the 
obligation under Clause 4.3.2 of the con­
tract, no documentary evidence was inclu­
ded in the second financial report, nor was 
such evidence sent subsequently, although 
the Commission, in its letter of termination 
of 16 August 1994, stated that it wished to 
obtain documentary evidence correspond­
ing to the expenditure which might be 
acknowledged ('The Commission ... would 
like to receive the corresponding state­
ments'). 
77. Finally, in a letter of 17 October 1994, 
appearing as Annex 7 to the application, 
Balkom's lawyer told the Commission the 
following: 
'My client has always assumed that in the 
past you received full financial statements 
from Van Balkom Seeliger .... 
Of course my client would be willing to 
assist you in whatever way you require, and 
to forward to you copies of the financial 
statements you requested. For reasons 
made clear to you in the abovementioned, 
you can understand, however, that this 
would present considerable problems for 
my client, as my client has never been in ... 
possession of these documents.' 
78. Since, at the hearing of 21 October 
1999, the defendant was not able to prove 
that the documents in question had been 
sent, and it merely denied that they had 
been requested, it may be concluded that 
the Commission was not given an oppor­
tunity properly to take action on the 
subject of expenditure incurred after the 
first financial report. 
79. It is very clear that the Commission, as 
accounting officer for public funds, cannot 
incur expenditure without having at its 
disposal supporting documentation which 
may be shown to the supervisory autho­
rities, and in particular to the Court of 
Auditors. 
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COMMISSION V VAN BALKOM 
80. It is Balkom which claims to be entitled 
to a certain amount, corresponding to a 
percentage, fixed by the contract, of the 
expenditure incurred in performing it, and 
it is thus for Balkom to prove the genuine­
ness of its expenditure. 
81. That burden of proof obviously goes 
beyond simply producing a financial report 
and includes the production of the financial 
statements on the basis of which it was 
drawn up. 
82. Since the hearing has shown that there 
is no point in hoping for the production of 
those statements, it is no longer necessary 
to offer the defendant a last chance to 
prove that its contentions are well founded 
as regards the sums which are still owed to 
it and which should be deducted from the 
amount claimed by the Commission. 
83. Consequently, I can only propose that 
the Court, in order to fix the principal 
amount owed by Balkom, accept the sum 
of EUR 251 649 claimed by the Commis­
sion. 
84. That solution makes superfluous any 
discussion on a possible right to retention 
which Balkom might claim. 
The date as from which interest becomes 
payable 
85. The two parlies also disagree on the 
date as from which interest should become 
payable. 
86. According to the Commission, thai-
date is clear from the third paragraph of 
Clause 9 of the contract, which stipulates: 
'If an audit reveals that the amounts paid 
by the Commission arc too high, the sum 
paid in error, plus interest due as from the 
date of ending (Abschluß) or finishing 
(Beendigung) the work stipulated in the 
contract, shall be reimbursed forthwith by 
the other party to the contract.' 
87. According to the Commission, Balkom 
finished the first phase of the project, as 
stipulated in the contract, on 30 June 1991. 
Consequently, it is as from that date, 
namely 1 July 1991, that interest should 
be calculated. 
88. Balkom contends that the first phase of 
the project, the engineering, was by no 
means completed on 30 June 1991. At 
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OPINION OF MR MISCHO — CASE C-156/97 
present, Balkom is not in a position to 
determine the date on which the engineer­
ing phase was completed. In any event, by 
letter of 29 October 1992, VBS informed 
the Commission that that phase was sched­
uled to end on 30 September 1993. 
89. For my part, I think that one may 
accept that the expression 'finishing the 
work' (Beendigung), as opposed to 'ending' 
(Abschluß), refers to the time when the 
work actually ceased, without the project 
being completed. The Commission was 
right to try to determine that date, but it 
is possible that it is later than 30 June 
1991. However, since Balkom itself 
acknowledges that that date is in any event 
not later than 30 September 1993, it is that 
date which I propose the Court should 
accept. There is, admittedly, an alternative 
solution, which is to apply Paragraph 284 
of the BGB. That provision states that 
interest is to be calculated as from the time 
at which the debtor was given formal 
notice to pay. The recovery order, which 
was issued by the Commission on 8 Feb­
ruary 1995, fixed 30 April 1995 as the date 
by which Balkom should effect repayment. 
In that case, interest would be due as from 
1 May 1995. It seems to me, however, that 
that solution should be rejected, since the 
date as from which interest due in the event 
of reimbursement is payable is governed by 
Clause 9 of the contract itself. 
90. I would add, finally, for the sake of 
completeness, that, by relying after the first 
hearing on limitation as provided for in the 
BGB, Balkom introduced a new plea in law 
which must, as the Commission claimed, be 
dismissed. 
Conclusion 
9 1 . For all those reasons, I propose that the Court should: 
(1) order Van Balkom Non-Ferro Scheiding to pay to the Commission of the 
European Communities the sum of EUR 251 649, plus interest on that sum as 
from 1 October 1993 at the percentage rates, published on the first working 
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COMMISSION V VAN HALKOM 
day of each month, which the European Monetary Cooperation Fund charges 
in respect of its euro transactions; 
(2) dismiss the application as to the remainder; 
(3) order Van Balkom Non-Ferro Scheiding BV to pay the costs. 
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