62019TJ0688_RES
Case T‑688/19
VeriGraft AB
v
European Innovation Council and SMEs Executive Agency
Judgment of the General Court (Ninth Chamber), 2 March 2022
(Arbitration clause – Grant agreement concluded in the context of the ‘Horizon 2020’ Framework Programme for Research and Innovation – Termination of the agreement – Misconduct – Capacity as beneficiary of the grant or as a natural person acting in its name or on its behalf)
Judicial proceedings – General Court seised under an arbitration clause – Jurisdiction of the General Court defined exclusively by Articles 256 TFEU and 272 TFEU and the arbitration clause – Jurisdiction to hear an action for a declaration of invalidity of the termination of a grant agreement – Assessment
(Arts 256 and 272 TFEU)
(see paragraphs 52, 53)
Judicial proceedings – General Court seised under an arbitration clause – Determination of the law applicable to the contract – Application EU law primarily – Application of national law in the alternative – Application of the Charter of Fundamental Rights independently of the applicable law stipulated in the contract – Jurisdiction of the General Court to examine an alleged infringement of the applicant’s rights of defence
(Art. 272 TFEU; Charter of Fundamental Rights of the European Union, Art. 41; European Parliament and Council Regulations No 966/2012 and No 1291/2013)
(see paragraphs 55, 61-63)
Judicial proceedings – Introduction of new pleas during the proceedings – Plea raised for the first time at the reply stage – Plea based on matters which have come to light in the course of the procedure – Admissibility
(Rules of Procedure of the General Court, Art. 84(1))
(see paragraphs 59, 60)
Industry – Actions necessary to ensure the competitiveness of industry – Research and technological development – Horizon 2020 Framework Programme for Research and Innovation – Grant agreement – Termination decision issued by the Executive Agency for Small and Medium-sized Enterprises (EASME) – Administrative procedure leading to the adoption of an individual measure – Rights of the defence – Obligation to hear the person concerned before adopting a decision adversely affecting him or her – Scope
(Charter of Fundamental Rights of the European Union, Art. 41(2)(a))
(see paragraphs 65, 66, 72, 73)
Industry – Actions necessary to ensure the competitiveness of industry – Research and technological development – Horizon 2020 Framework Programme for Research and Innovation – Grant agreement – Termination decision issued by the Executive Agency for Small and Medium-sized Enterprises (EASME) – Termination under Article 50.3.1 of the grant agreement – Conditions – Scope
(see paragraphs 99-102, 108, 109)
Résumé
The applicant, VeriGraft AB, is a Swedish biotechnology company founded in 2005 by A and B, two professors of a Swedish university institute. It specialises in the development of personalised human-tissue-engineered transplants for use in regenerative medicine. A, who initially owned 41% of the applicant’s capital, gradually relinquished her entire shareholding from 2014; she was also a member of the applicant’s board of directors until July 2015, until her contract of employment was terminated on 1 October 2016.
In 2017, in the context of ‘Horizon 2020 – the Framework Programme for Research and Innovation’ (
1
) and of the implementation of the instrument to support innovation in small and medium-sized enterprises (SMEs), (
2
) the applicant was awarded a grant by the Executive Agency for Small and Medium-sized Enterprises (EASME). (
3
) Indeed, it had submitted a proposal concerning the commercialisation of an individualised cardio-vascular product corresponding to the project ‘Personalised Tissue Engineered Veins as the first Cure for Patients with Chronic Venous Insufficiency – P‑TEV’. The grant agreement signed between the applicant and EASME required compliance with the ‘highest standards of research integrity’ (Article 34.1) and specific ethical requirements for ‘activities raising ethical issues’ (Article 34.2).
Following an investigation by the University of Gothenburg, involving the Central Ethics Review Board of Sweden (‘CEPN’), concerning allegations of misconduct in the scientific research carried out by A, her dismissal had been recommended. After having reviewed the progress of the P‑TEV project and carried out several ethics checks in respect thereof, EASME had, for its part, informed the applicant by letters, further to the procedure set out in Article 50.3.2 of the grant agreement, and after having sought its observations in that respect, of its intention to terminate that agreement: first of all, in October 2018, on the ground that five unresolved ethical issues remained amounting, according to EASME, to a ‘serious breach’ by the applicant of its obligations under Article 50.3.1(l) of the agreement and, next, in February and April 2019, on the ground that the CEPN had found A, the applicant’s co-founder, guilty of misconduct in the publications which had then been used to substantiate the scientific evaluation carried out by EASME for the award of the grant; that misconduct amounted, according to EASME, to a ‘serious breach of obligations’ by the applicant under Article 50.3.1(f) of the agreement. Before the Court, the applicant claimed, pursuant to Article 272 TFEU, that the termination of the grant agreement by EASME was invalid.
In its judgment, the Court first of all declares that it has jurisdiction to examine a plea alleging infringement of the rights of the defence in an action brought on the basis of Article 272 TFEU. In addition, the present case is, in substance, the first case in which the Court finds that an EU agency was wrong to terminate, on grounds of professional misconduct, a grant agreement concluded under the Horizon 2020 Framework Programme.
Findings of the Court
As regards the plea in law alleging infringement of the rights of the defence, the Court notes, as a preliminary point, that the fact that the law applicable to the contract does not ensure the same safeguards as those conferred by the Charter of Fundamental Rights of the European Union (‘the Charter’) and the general principles of EU law does not exempt EASME from ensuring that they are respected in relation to the parties. If the parties decide to confer on the EU judicature, by means of an arbitration clause, jurisdiction over disputes relating to that contract, that judicature will have jurisdiction, independently of the applicable law stipulated in that contract, to examine any infringement of the Charter and of the general principles of EU law. Consequently, the Court has jurisdiction to examine that plea. As to the substance, it observes that, in accordance with Article 41 of the Charter, the right to be heard is of general application. Where an individual measure is liable to affect adversely the person concerned, that right involves the person concerned being put in a position, prior to the decision affecting him or her, effectively to make known his or her views on the truth and relevance of the facts and circumstances of the case. In the present case, the Court observes that the reasons for the termination of the grant agreement were indicated to the applicant in the second pre-information letter of 18 February 2019 and that the applicant had an opportunity to comment on the matter, so that EASME did not infringe the applicant’s right to be heard.
Next, as regards the plea alleging infringement of Article 50.3.1(f) of the grant agreement, the Court finds, as the pre-information letter indicates, that it was on the basis of that article that EASME based the termination of the grant agreement on the ground that A had been found guilty of professional misconduct. The Court notes, moreover, that EASME considered that it was A’s professional misconduct that called into question the applicant’s capacity to implement the P‑TEV project, and not some misconduct on the part of the applicant itself. Moreover, since (i) A’s employment contract was terminated by the applicant in December 2016, (ii) A had left the applicant’s board of directors in July 2015 and (iii) A’s shareholding in the applicant’s capital was, at the time when the application for the grant for the P‑TEV project was submitted and until all those shares were sold, inferior to the threshold allowing, under Swedish company law, decisions to be taken on behalf of the applicant, the Court finds that A did not fall within the category of persons referred to in Article 50.3.1(f) of the grant agreement. It concludes that the termination of the grant agreement by EASME under Article 50.3.1(f) of that agreement, on the ground relied on by that agency, was unfounded. In that regard, it notes, concerning the arguments put forward by EASME during the judicial proceedings, that they constitute a new ground for terminating the grant agreement which, if it were to be accepted, would necessarily undermine the effectiveness of the termination procedure provided for in Article 50.3.2 of that agreement. Finally, the Court also rejects the arguments put forward by EASME based on the incorrect premiss that the applicant knowingly concealed from it research misconduct affecting the work mentioned in the proposal relating to the P‑TEV project.
In the light of those considerations, the Court rules that EASME’s termination of the grant agreement concluded with VeriGraft is invalid.
(
1
)	Regulation (EU) No 1291/2013 of the European Parliament and of the Council of 11 December 2013 establishing Horizon 2020 – the Framework Programme for Research and Innovation (2014-2020) and repealing Decision No 1982/2006/EC (OJ L 347, 20.12.2013, p. 104) (’the Horizon 2020 Framework Programme’)
(
2
)	Council Decision 2013/743/EU of 3 December 2013 establishing the specific programme implementing Horizon 2020 – the Framework Programme for Research and Innovation (2014-2020) and repealing Decisions 2006/971/EC, 2006/972/EC, 2006/973/EC, 2006/974/EC and 2006/975/EC (OJ 2013 L 347, p. 965).
(
3
)	Established by Commission Implementing Decision 2013/771/EU of 17 December 2013 establishing the ‘Executive Agency for Small and Medium-sized Enterprises’ and repealing Decisions 2004/20/EC and 2007/372/EC (OJ 2013 L 341, p. 73), that agency became, as from 1 April 2021, the European Innovation Council and SMEs Executive Agency (Eismea).