JUDGMENT OF THE GENERAL COURT (First Chamber)
25 September 2018 (*)
(Arbitration clause — Sixth and seventh framework programmes for research, technological development and demonstration activities (2002-2006 and 2007-2013) — Letters requesting reimbursement of part of the grants awarded — Debit note — Setting off of claims — Amendment of application — Admissibility —Eligibility of expenses — Funds held in trust — Duty to record costs in contractor’s accounts — Compliance with accounting rules in the State in which the contractor is established — Legal certainty — Legitimate expectations — Good governance — Transparency — Right to be heard — Proportionality)
In Case T‑10/16,
GABO:mi Gesellschaft für Ablauforganisation:milliarium mbH & Co. KG, established in Munich (Germany), represented by M. Ahlhaus and C. Mayer, lawyers,
applicant,
v
European Commission, represented initially by S. Delaude, S. Lejeune and M. Siekierzyńska, subsequently by S. Delaude and M. Siekierzyńska, acting as Agents,
defendant,
APPLICATION, first, under Article 272 TFEU for a declaration that a claim mentioned in two information letters dated 2 December 2015 and in a debit note dated 2 December 2015 relating to a claim of EUR 1 770 417.29 does not exist and, second, under Article 263 TFEU for annulment of set-off decisions contained in seven letters dated 16 and 21 December 2015, 14 January, 26 April and 3 May 2016 seeking to offset each payment concerned against the applicant’s alleged debt and of that debit note and those information letters,
THE GENERAL COURT (First Chamber),
composed of I. Pelikánová, President, V. Valančius and U. Öberg (Rapporteur), Judges,
Registrar: P. Cullen, Administrator,
having regard to the written part of the procedure and further to the hearing on 13 December 2017,
gives the following
Judgment
I.      Background to the dispute
A.      Events prior to the action
1        The applicant, GABO:mi Gesellschaft für Ablauforganisation:milliarium mbH & Co. KG, is a company established under German law specialising in the administrative management of collaborative research projects in the health sector. It has participated in various projects in the context of the following European Community framework programmes:
–        the sixth framework programme established by Decision No 1513/2002/EC of European Parliament and the Council of 27 June 2002 concerning the sixth framework programme of the European Community for research, technological development and demonstration activities, contributing towards the creation of the European Research Area and to innovation (2002 to 2006) (OJ 2002 L 232, p. 1; ‘the 6th Framework Programme’);
–        the seventh framework programme established by Decision No 1982/2006/EC of the European Parliament and of the Council of 18 December 2006 concerning the Seventh Framework programme of the European Community for research, technological development and demonstration activities (2007-2013) (OJ 2006 L 412, p. 1; ‘the 7th Framework Programme’).
2        In the context of those framework programmes, the European Commission signed grant agreements with consortia of beneficiaries such as universities, scientific institutions, and small and medium-sized enterprises. Those consortia were responsible for carrying out the scientific work and were administered by coordinators.
3        In that context, the applicant did not carry out any research work, but performed a support role for various coordinators, in particular, in financial management and control, legal assistance, scientific coordination, communication and event organisation. To that end, the applicant signed several grant agreements with the Commission and thereby benefited from payments for the purposes of financing the costs relating to the performance of its administrative tasks.
4        In 2013, the costs declared by the applicant were audited on two occasions by the Commission. The first related to two projects implemented under the 6th Framework Programme and their respective grant agreements, in particular for certain costs declared between 1 February 2007 and 31 July 2012. The second related to 12 projects implemented under the 7th Framework Programme and their respective grant agreements, in particular for certain costs declared between 1 February 2008 and 30 September 2012.
5        The Commission auditors issued their provisional audit reports, by which they informed the applicant that the financial management of the projects had not been carried out in an acceptable manner and in compliance with the requirements of the grant agreements. To that end, they recommended that the Commission recover part of the amounts already paid to the applicant under the programmes referred to.
6        Following observations submitted by the applicant, the Commission sent it, in 2014 and 2015, two final audit reports essentially confirming the findings of the provisional audit reports and classifying as ineligible certain staff and travel costs declared by the applicant. By two letters of 28 September 2015, the Commission then sent the applicant pre-information notices concerning the amounts which it intended to recover, for a total amount of EUR 1 770 417.29.
7        By two letters of 4 November 2015, one concerning the grant agreements related to the 6th Framework Programme, the other concerning the grant agreements related to the 7th Framework Programme, the applicant opposed the recovery envisaged by the Commission. It argued that the recovery was unlawful and contested the findings of both audit reports.
8        By two letters dated 2 December 2015, the Commission responded to the applicant’s arguments and informed it of the recovery of the sum of EUR 1 770 417.29, representing the total amount of ineligible expenses identified by the audit reports (‘the information letters’). In those information letters, it stated that an action could be brought on the basis of Article 272 TFEU for the purposes of challenging their content.
9        On the same day, the Commission issued debit note No 3241514917, requesting the applicant to pay, by 15 January 2016 at the latest, the total sum of EUR 1 770 417.29, with a view to reimbursing the claim pertaining to the 2 grant agreements under the 6th Framework Programme, and 7 of the 12 grant agreements under the 7th Framework Programme (‘the debit note’). The sum of EUR 1 770 417.29 included liquidated damages provided for in Article II.30 of Annex II ‘General conditions’ to the grant agreements under the 6th Framework Programme (‘the general conditions of the grant agreements under the 6th Framework Programme’) and in Article II.24 of Annex II ‘General conditions’ to the grant agreements under the 7th Framework Programme (‘the general conditions of the grant agreements under the 7th Framework Programme’), subject to a ceiling of 10% of the value of the financial contributions received deemed to be unjustified.
10      The two grant agreements under the 6th Framework Programme which are the subject of the recovery are Imagen-37286 and BrainNet Europe II-503039. The seven grant agreements under the 7th Framework Programme which are the subject of the recovery are ARISE-201024, Euripides-201380, EuroDSD‑20144, Cardiorisk-211403, BetaImage-222980, OSPI-Europe-223138 and SICA-HF‑241558.
11      The Commission then proceeded to recover the claim by means of set-offs and sent the applicant a series of seven set-off letters, including three letters dated 16 December 2015, one letter dated 21 December 2015, one letter dated 14 January 2016 and two letters dated 15 January 2016, by which it deducted the amounts of the suspended payments from the amount of the claim stated in the debit note and, in so doing, reduced the amount of the claim from EUR 1 770 417.29 to EUR 587 774.81.
12      Regarding the suspension of payment by the Commission in August 2015, it should be pointed out that it was the subject of a separate action for annulment brought by the applicant. However, by order of 13 June 2016, GABO:mi v Commission (T‑588/15, not published, EU:T:2016:383), the Court found that there was no longer any need to adjudicate on that action in so far as the Commission had, in the meantime, withdrawn that suspension.
B.      Events subsequent to the bringing of the action
13      Following the lodging of the application, the Commission pursued the offsetting of the debt stated in the debit note.
14      By letter of 26 April 2016, it deducted an amount of EUR 48 051.33 and, by letter of 3 May 2016, an amount of EUR 137 511.97 from the claim (taken together, ‘the set-off decisions postdating the bringing of the action’). It thus reduced the amount of the original claim from EUR 1 770 417.29 to EUR 402 211.51.
15      Following the applicant’s request for insolvency proceedings to be initiated, the Amtsgericht München (Local Court, Munich, Germany) appointed a preliminary liquidator by decision of 27 April 2016.
II.    Procedure and forms of order sought
16      By application lodged at the Court Registry on 14 January 2016, the applicant brought the present action.
17      By bringing the present action, the applicant seeks to challenge the following decisions of the Commission:
–        the information letters;
–        the debit note;
–        the set-off letters dated 16 and 21 December 2015, and 14 January 2016, seeking to set off the amount of the claim stated in the debit note (‘the set-off decisions preceding the bringing of the action’).
18      By separate document lodged at the Court Registry on the same day, the applicant brought an application for interim measures by which it essentially sought suspension of operation of the information letters and debit note as well as the adoption of any other supplementary provisional measure regarded as necessary to obtain such suspension.
19      On 15 January 2016, it filed an addendum to the application for interim measures in which it invoked the extreme urgency of the suspension of operation sought.
20      By order of 18 January 2016, the President of the General Court granted, on the basis of Article 157(2) of the Rules of Procedure of the General Court, the suspension of operation requested until the adoption of the order terminating the proceedings for interim measures, and ordered the Commission to desist from offsetting the claim against sums due from the applicant pending that order.
21      By order of 6 April 2016, GABO:mi v Commission (T‑10/16 R, not published, EU:T:2016:197), the President of the General Court dismissed the application for interim measures on grounds of lack of urgency and absence of a prima facie case, cancelled the order of 18 January 2016 in Case T‑10/16 R and reserved the costs.
22      On 30 March 2016, the Commission lodged its defence.
23      On 23 May 2016, the applicant lodged its reply.
24      The applicant requested, in its reply, annulment of the set-off decisions postdating the bringing of the action. It did not, however, request annulment of the two set-off decisions of 15 January 2016. In total, the final amount in relation to which the applicant contests recovery by set-off is EUR 1 119 980.78.
25      On 11 July 2016, the Commission lodged its rejoinder.
26      By decision of the President of the General Court of 3 October 2016, the present case was assigned to a new Judge-Rapporteur, sitting in the First Chamber.
27      By letters of the Court Registry of 6 November 2017, the parties were requested by the Court, by way of measures of organisation of procedure adopted by the Court on the basis of Article 89(2)(b) and (c) and (3)(a) and (d) of the Rules of Procedure, to respond to certain questions and provide certain documents.
28      The parties complied with the Court’s requests within the prescribed period.
29      After the reopening of the oral part of the procedure by order of the Court (First Chamber) of 10 April 2018, the applicant was requested, by letter of the Court Registry of 16 April 2018, to regularise its request for annulment of the set-off decisions postdating the bringing of the action, by submitting it by separate document.
30      The applicant complied with that request within the period prescribed.
31      The applicant claims that the Court should:
–        declare that the claim under the information letters and debit note does not exist;
–        annul the set-off decisions prior and subsequent to the bringing of the action as well as the debit note and the information letters;
–        order the Commission to pay the costs, including those relating to the proceedings for interim measures.
32      The Commission contends that the Court should:
–        dismiss the action as partly inadmissible and, in any event, as unfounded;
–        order the applicant to pay the costs of the present proceedings and of the proceedings for interim measures.
III. Law
A.      Admissibility
33      The Commission, while not raising a formal plea of inadmissibility within the meaning of Article 130 of the Rules of Procedure, challenges the partial admissibility of the application.
34      First, it contends that the applicant is not entitled to challenge either the information letters or the debit note on the basis of Article 263 TFEU.
35      Second, it argues that the action is inadmissible as regards the application for annulment of the set-off decisions postdating the bringing of the action, on the ground that the application for annulment was lodged by the applicant only in the context of its reply and does not meet the material and formal conditions, set out in Article 86(1), (2) and (4) of the Rules of Procedure, enabling the amendment of the application in order to take account of new evidence.
36      The applicant clarified its form of order in its answer to the Court’s written questions. It requests, first, on the basis of Article 272 TFEU, that the Court declare that the claim at issue in the information letters and debit note does not exist and, second, on the basis of Article 263 TFEU, annulment of the set-off decisions prior and subsequent to the bringing of the action, of the debit note and of the information letters.
1.      Admissibility of the form of order, as presented in the application and clarified in the answer to the Court’s written questions
37      In the present case, according to its application and its answer to the Court’s written questions, the applicant has based its action on both Article 263 TFEU and Article 272 TFEU.
38      Under Article 272 TFEU, read in conjunction with Article 256 TFEU, the Court has jurisdiction to give judgment, at first instance, pursuant to any arbitration clause contained in a contract concluded by or on behalf of the European Union, whether that contract is governed by public or private law.
39      In the case at hand, all the grant agreements signed by the applicant and on the basis of which the Commission proceeded with the contested recovery contain an arbitration clause. That clause provides that the Court of Justice of the European Union has sole jurisdiction to consider a dispute between the parties in relation to the interpretation, application or validity of grant agreements, which are governed by EU law, supplemented, if need be, by Belgian law.
40      Regarding the debit note, it is not disputed that the grants that are the subject of the recovery request were paid by the Commission to the applicant under the grant agreements. Moreover, it is apparent from Article II.31 of the general conditions of the grant agreements under the 6th Framework Programme and from Article II.21 of the general conditions of the grant agreements under the 7th Framework Programme that the Commission is entitled to demand repayment from the applicant of any sum which is unduly paid or the recovery of which is justified under those agreements, which it did by requesting the applicant, via the sending of the debit note, to reimburse it the sum of EUR 1 770 417.29.
41      In addition, the Court notes that the debit note also specifies the deadline for repayment and the conditions of payment as well as the rate of default interest. The debit note must therefore be viewed as the applicant’s formal notice and must be regarded as being inseparable from the contractual relationship existing between the parties (see, to that effect, judgments of 9 September 2015, Lito Maieftiko Gynaikologiko kai Cheirourgiko Kentro v Commission, C‑506/13 P, EU:C:2015:562, paragraphs 23 and 24, and of 24 October 2014, Technische Universität Dresden v Commission, T‑29/11, EU:T:2014:912, paragraphs 37, 38, 48 and 67).
42      Thus, to the extent that it is being brought on the basis of Article 272 TFEU, the action is admissible as it seeks a declaration that the claim mentioned in the debit note does not exist.
43      Likewise, the information letters by which the Commission terminated the audit procedure and validated the auditors’ conclusions must be regarded as being inseparable from the contractual relationship existing between the parties, such that the action, to the extent that it is being brought on the basis of Article 272 TFEU, is admissible as it seeks a declaration that the claim mentioned in the information letters does not exist (see, to that effect, order of 14 June 2012, Technion and Technion Research & Development Foundation v Commission, T‑546/11, not published, EU:T:2012:303, paragraphs 54 and 55, and judgment of 5 October 2016, European Children’s Fashion Association and Instituto de Economía Pública v EACEA, T‑724/14, not published, EU:T:2016:600, paragraph 43).
44      As regards set-off decisions preceding the bringing of the action, the Court recalls that an act whereby the Commission effects an out-of-court set-off between debts and claims arising from different legal relationships with the same person is a challengeable act for the purposes of Article 263 TFEU (see judgment of 6 October 2015, Technion and Technion Research & Development Foundation v Commission, T‑216/12, EU:T:2015:746, paragraph 53 and the case-law cited).
45      In the case at hand, although the Commission has, pursuant to Article II.31 of the general conditions of the grant agreements under the 6th Framework Programme and Article II.21 of the general conditions of the grant agreements under the 7th Framework Programme, the possibility of effecting recovery of the claims due to it by setting off, the Court finds that the set-off decisions preceding the bringing of the action concern debts and claims arising from the various agreements between the parties.
46      Consequently, the action, to the extent that it seeks annulment of the set-off decisions preceding the bringing of that action, is admissible since it is based on Article 263 TFEU.
47      On the contrary, the Court declares inadmissible the action in so far as it seeks annulment based on Article 263 TFEU of the debit note and the information letters. As has been explained in paragraphs 40 to 43 above, the debit note and the information letters must be regarded as being inseparable from the contractual relationship existing between the applicant and the Commission.
2.      Admissibility of the application for annulment of the set-off decisions postdating the bringing of the action
48      It must be recalled, as a preliminary point, that it follows from Article 76(1)(d) and (e) in conjunction with Article 84 of the Rules of Procedure, the subject matter of the claim must be defined in the application. Although Article 84 of those rules authorises, in certain circumstances, new pleas in law to be introduced in the course of proceedings, that provision cannot in any circumstances be interpreted as authorising the applicant to bring new claims before the Court and thereby to modify the subject matter of the proceedings (see, by analogy, judgment of 8 September 2015, Amitié v Commission, T‑234/12, not published, EU:T:2015:601, paragraph 84 and the case-law cited).
49      Moreover, Article 86(1) and (2) of the Rules of Procedure provides that ‘where a measure the annulment of which is sought is replaced or amended by another measure with the same subject matter, the applicant may, before the oral part of the procedure is closed, ... modify the application to take account of that new factor’ and states that ‘the modification of the application must be made by a separate document within the time limit laid down in the sixth paragraph of Article 263 TFEU within which the annulment of the measure justifying the modification of the application may be sought’.
50      It follows also from the case-law that an amendment of the claims in the application in the course of proceedings is permissible only if that amendment is based on matters of fact and law which come to light in the course of the written procedure (see judgment of 8 September 2015, Amitié v Commission, T‑234/12, not published, EU:T:2015:601, paragraph 85 and the case-law cited).
51      In the present case, however, the set-off decisions both prior and subsequent to the bringing of actions are being challenged on the basis of Article 263 TFEU. Moreover, the claim recovered by the Commission by means of the set-off decisions postdating the bringing of the action is that which is the subject of the debit note, which constitutes the legal basis of the recovery referred to. In that regard, it should be recalled that, in paragraph 84 of the order of 6 April 2016, GABO:mi v Commission (T‑10/16 R, not published, EU:T:2016:197), it was found that the Commission ‘must be regarded as being contractually entitled to proceed with the recovery of the remaining [debt] owed by the applicant’. It follows that the form of order by which the applicant challenges the set-off decisions postdating the bringing of the action does not modify the subject matter of the proceedings, referred to in the application.
52      It should be recalled, moreover, that, if the General Court considers that a request to modify the application does not comply with the form required by its Rules of Procedure, it is under an obligation, at the very least, to inform the applicant of its error and to place it in a position of being able to rectify it. As the Court of Justice has found, while it is perfectly in order for modification of the application to be subject to certain formal requirements, such formal requirements do not apply for their own sake but are, on the contrary, intended to ensure the adversarial nature of proceedings and the sound administration of justice (judgment of 9 November 2017, HX v Council, C‑423/16 P, EU:C:2017:848, paragraphs 22, 23 and 27).
53      Following a measure of organisation of procedure, the applicant regularised, under Article 86 of the Rules of Procedure, its request for modification of the application by filing a separate document.
54      It follows that the applicant’s application for annulment of the set-off decisions postdating the bringing of the action is admissible, which means that the plea of inadmissibility raised by the Commission must be rejected.
B.      Substance
55      In support of its action, the applicant puts forward four pleas in law. The first plea can be subdivided into two parts, the first alleging that recovery of the claim by the Commission is unlawful, the second consisting in the argument that the approval of the handling of the ‘central travel/meeting budget’, in the context of past audits, constitutes an assurance from the Commission that future costs would be regarded in the same way, such that the latter infringed the principles of the protection of legitimate expectations and of legal certainty. The second plea alleges infringement of the rules of good governance, of the principle of transparency and of the right to be heard. The third plea alleges infringement of the principle of proportionality and the fourth plea alleges that the imposition of liquidated damages is unlawful.
56      During the hearing, the applicant argued that the pleas were being put forward both in the context of the claim for annulment on the basis of Article 263 TFEU and in the context of the claim brought on the basis of Article 272 TFEU.
57      In the first place, however, the arguments of the applicant under the second part of the first plea, which is based on infringement of the principle of the protection of legitimate expectations and on infringement of the principle of legal certainty, and under the second plea, alleging infringement of the rules of good governance, of the principle of transparency and of the right to be heard, actually seek to have the Court exercise its powers to examine legality, which it cannot do in the context of a contractual dispute (see, to that effect, judgments of 9 September 2015, Lito Maieftiko Gynaikologiko kai Cheirourgiko Kentro v Commission, C‑506/13 P, EU:C:2015:562, paragraphs 95 and 96 and the case-law cited, and of 27 September 2012, Applied Microengineering v Commission, T‑387/09, EU:T:2012:501, paragraph 40 and the case-law cited).
58      Therefore, the second part of the first plea and the second plea are inadmissible, in that they are put forward in the context of the action in so far as it is brought on the basis of Article 272 TFEU.
59      However, those pleas may be examined in the context of the action in so far as it is based on Article 263 TFEU.
60      In the second place, the first part of the first plea, alleging the unlawfulness of the recovery at issue, and the third and fourth pleas, alleging infringement of the principle of proportionality and the unlawfulness of the imposition of liquidated damages, respectively, seek to have the Court, on considering the complaints raised, to exercise its powers in the context of a contractual dispute, on the basis of Article 272 TFEU, with the result that they are admissible in that the action is based on that provision, but must be rejected as inadmissible in the context of the action based on Article 263 TFEU.
61      Consequently, it is necessary to examine, in the first place, the action in so far as it is based on Article 272 TFEU, namely the first part of the first plea and the third and fourth pleas and, in the second place, the action in so far as it is based on Article 263 TFEU, namely, the second part of the first plea and the second plea.
1.      The action in so far as it is based on Article 272 TFEU, concerning the debit note and the information letters
(a)    The first part of the first plea: unlawfulness of the recovery
62      The applicant argues that all the expenses declared under the grant agreements that are the subject of the audit reports were lawfully incurred and represent eligible costs.
63      According to the Commission, the applicant does not advance a single argument capable of calling into question the findings on ineligible costs set out in the final audit reports for the audited projects under the 6th and 7th Framework Programmes.
64      In that regard, to the extent that proceedings have been instituted pursuant to an arbitration clause on the basis of Article 272 TFEU, the Court must resolve the dispute on the basis of the substantive rules of the law applicable to the contract (see judgment of 1 March 2017, Universiteit Antwerpen v REA, T‑208/15, not published, EU:T:2017:136, paragraph 53 and the case-law cited).
65      As has been recalled in paragraph 39 above, pursuant to the arbitration clause that they contain, the grant agreements at issue are governed by EU law, supplemented, if need be, by Belgian law.
66      In that regard, in so far as the grants under those agreements are financed by the EU budget and awarded by the Commission, they fall outside the scope of the specific rules of Belgian law framing the grants awarded by Belgian administrative entities. The supplementary rules applicable in the present case can therefore only be those of the general law on Belgian contracts and bonds, which are intended to compensate for any absence of such rules at EU level.
67      On that point, it should be noted that the third paragraph of Article 1134 of the code civil belge (Belgian Civil Code) provides that agreements must be performed in good faith. Article 1135 of the same code provides that ‘agreements are binding not only as regards what is expressed therein but also as regards all consequences that equity, usage or law impose upon the obligation according to its nature’.
68      Article 1156 of the Belgian Civil Code shows the principle of good faith being applied in the interpretation of agreements. According to that provision, ‘in agreements, it is necessary to seek the common intention of the contracting parties, rather than stop at the literal meaning of the words’.
69      However, it should also be pointed out that Article II.19.1 of the general conditions of the grant agreements under the 6th Framework Programme and Article II.14.1 of the general conditions of the grant agreements under the 7th Framework Programme provide that the eligible costs for the implementation of projects must be inter alia in compliance with the accounting rules used in the State where the contractor is established. Consequently, in that regard, it is not Belgian law that is relevant, but rather German law, given that the applicant is established in Germany.
70      It is in the light of those considerations that it is necessary to examine whether the applicant has met its obligations under the grant agreements.
71      The final audit reports criticise the applicant for nine errors which call into question the eligibility of the costs declared. These fall into three categories of costs, namely, costs relating to the ‘central travel/meeting budget’, direct and indirect costs.
(1)    Costs relating to the ‘central travel/meeting budget’
72      The Commission decided to recover the amounts already paid to the applicant under the consortia’s ‘central travel/meeting budget’, on the ground that the funds held in trust by the applicant in that regard were not recorded within its accounts. In response to questions asked by the Court during the hearing, the Commission confirmed that it was not invoking other reasons of ineligibility of the expenses at issue.
73      In essence, the applicant argues that it always maintains separate bank accounts for each project it manages. The recording of the expenses relating to the consortia’s ‘central travel/meeting budget’ in a separate account is explained by the fact that, in accordance with the applicable German accounting rules, the funds held in trust could not be recorded in the trustee’s own financial accounts and had to be recorded in a sub-ledger, formally separate from its own accounts.
74      Furthermore, the applicant argues that its management of that budget is totally neutral from a financial point of view. It adds that even treating the budget in the manner proposed by the Commission would not lead to complete fulfilment of the eligibility criteria.
75      According to the Commission, the applicant does not dispute that the funds it holds in trust for the consortia’s ‘central travel/meeting budget’ were not recorded in its accounts. Those costs are therefore ineligible under Article II.19 of the general conditions of the grant agreements under the 6th Framework Programme and under Article II.14 of the general conditions of the grant agreements under the 7th Framework Programme.
76      The Commission contends that a beneficiary cannot rely on its own accounting principles in order to justify its non-compliance with the eligibility criteria set out in the general conditions of the grant agreements.
77      In that connection, the Commission asserts that it has never proposed that the applicant record the funds held in trust in its accounts in breach of German accounting practices or of the applicant’s own usual accounting principles. If, under German accounting rules, funds held in trust could not be recorded in the balance of accounts of the trustee, that is to say, in the applicant’s accounts in this case, the applicant should not have undertaken to handle the ‘central travel/meeting budget’ in that way. In proceeding with a separate recording of those amounts despite that, it should have been aware that it constituted a violation of eligibility criteria and could therefore lead to the rejection of costs as ineligible.
78      In the present case, the costs eligibility criteria are listed in Article II.19.1 of the general conditions of the grant agreements under the 6th Framework Programme and in Article II.14.1 of the general conditions of the grant agreements under the 7th Framework Programme.
79      Article II.19.1 of the general conditions of the grant agreements under the 6th Framework Programme provides:
‘1.       Eligible costs incurred for the implementation of the project must fulfil all of the following conditions:
…
(d)      they must be recorded in the accounts of the contractor that incurred them, no later than at the date of the establishment of the audit certificate referred to in Article II.26. The accounting procedures used in the recording of costs and receipts shall respect the accounting rules of the State in which the contractor is established as well as permit the direct reconciliation between the costs and receipts incurred for the implementation of the project and the overall statement of accounts relating to the overall business activity of the contractor.’
80      Similarly, Article II.14.1 of the general conditions of the grant agreements under the 7th Framework Programme provides:
‘1.       Costs incurred for the implementation of the project shall meet the following conditions in order to be considered eligible:
…
(d)      they must be determined in accordance with the usual accounting and management principles and practices of the beneficiary. The accounting procedures used in the recording of costs and receipts shall respect the accounting rules of the State in which the beneficiary is established.
…
(f)      they must be recorded in the accounts of the beneficiary; in the case of any contribution from third parties, they must be recorded in the accounts of the third parties.’
81      In the information letters and final audit reports, the Commission found that the funds held in trust by the applicant were not recorded in its accounts and that, consequently, they were ineligible.
82      The applicant argues that, according to German accounting principles, assets — such as the ‘central travel/meeting budget’ — that are administered on a trust basis, that is to say, the funds held in the bank in this case, cannot be included in the balance of accounts of the trustee, which in this case is the applicant, but must be recorded in the balance of accounts of the trustor(s), which in this case are the consortia’s beneficiaries.
83      By way of evidence, the applicant submitted to the Commission auditors an expert opinion, issued in 2013 by its tax adviser, and an expert opinion from an audit company, which primarily concerned the applicant’s financial accounts and the accounting rules in German law, as well as a sample of the sub-ledger. It also produced comparative tables to demonstrate that ‘[its] management of this budget ... is fully neutral from a financial perspective’. In the view of its tax adviser, ‘according to the dominating opinion on the national book keeping and accounting rules, any assets which are handed over to a trustee have to be shown in the balance sheets of the trustor, as these assets are considered to be his economic property ... According to national book keeping and accounting rules, there is no basis for a disclosure of the bank balance in the balance sheet of the trustee’.
84      The Court notes that, if one were to follow the line of argument of the Commission, the costs in question would be, formally speaking, ineligible, under the general conditions of the grant agreements under the 6th and 7th Framework Programmes, since the recording of annotations on a bank account or other kinds of accounts, such as accounts relating to projects, cannot be considered sufficient for the purposes of compliance with the eligibility criteria in question. Thus, even without any financial impact on individual projects, a proposition which the Commission does not seem to dispute in this case, the costs declared by the applicant would remain ineligible.
85      That approach by the Commission cannot be accepted. The very fact that the trustee — namely, the applicant — must separate its own accounts from the assets it holds in trust on behalf of another serves to protect that other party from the bankruptcy the trustee might incur. Separation of the trustee’s accounts clearly does not preclude it from having to acknowledge in its accounts, solely for information purposes, the fact that it holds assets in trust.
86      Certainly, the mere circumstance that the method used is in conformity with the applicant’s usual accounting principles does not suffice to prove its conformity with the provisions of the grant agreements and their general conditions (see, to that effect, judgment of 19 February 2016, Ludwig-Bölkow-Systemtechnik v Commission, T‑53/14, not published, EU:T:2016:88, paragraph 54).
87      However, it must be recalled that Article II.19.1 of the general conditions of the grant agreements under the 6th Framework Programme and Article II.14.1 of the general conditions of the grant agreements under the 7th Framework Programme provide that eligible costs for the implementation of projects must be inter alia in compliance with the accounting rules used in the State where the contractor is established, namely, in the present case, Germany.
88      The Commission has not been able to explain the rationale of the rule disputed in the case at hand, whereby costs must be recorded in the applicant’s accounts. The Commission simply refers to the literal meaning of the terms of the grant agreements. Moreover, it did not take account of the fact that the funds were held in trust, of the common intention of the contracting parties and of the circumstance that the applicant acted in accordance with the other criteria contained in the general conditions, in particular that of compliance with the accounting rules applicable in Germany, where the applicant is established.
89      In view of all the foregoing, it is necessary to conclude that, contrary to what was stated in the debit note and the information letters, the expenses declared by the applicant relating to the ‘central travel/meeting budget’ are eligible, without it being necessary to examine the other complaints raised by the applicant in respect of those costs.
(2)    Direct costs
90      With regard to the direct staff costs that were rejected as ineligible, the applicant states that there is no legal basis for their classification as indirect ‘by nature’ and, therefore, as ineligible. The applicant maintains that all productive hours worked — regardless of who worked those hours — were recorded on timesheets, all of which were provided to the auditors and met all the applicable eligibility criteria. Contrary to what the Commission supposes, the reliability of the hours recorded cannot be called into question.
91      In that connection, the applicant takes the view that it is necessary to take into account the direct participation of the applicant’s managing directors and their contribution to specific projects — and thus the reliability of their time recordings — as is proved by the statements given by coordinators and employees in the course of the audit procedure.
92      As for the Commission’s assumptions that the managers related their full earnings to their productive work on projects, without receiving remuneration for their overall — indirect — company work, they are neither correct nor relevant. Besides their regular earnings as managing directors, the two directors also benefited from a company car and all related costs in addition to bonus payments. As all those extra gratifications were not taken into account in the productive hours worked for certain projects, they are thus part of the remuneration of the applicant’s directors for their overall work for the company.
93      In addition, the applicant argues that, according to its own calculations, its project management is far more cost-efficient and economic than that of its competitors.
94      In the case at hand, the Court recalls that, in order for the Commission to be able to exercise its power of review, the beneficiaries of grants are required to demonstrate that the costs attributed to subsidised projects are genuine. The communication of reliable information by the latter is essential for the proper functioning of the system for examining evidence introduced to verify whether eligibility conditions are fulfilled.
95      It is not sufficient, therefore, to show that a project has been carried out for the allocation of a specific subsidy to be justified. The beneficiary must produce evidence that it has incurred the expenses declared in accordance with the conditions laid down, with only those expenses which are properly justified being capable of being regarded as eligible. The obligation to satisfy the prescribed financial conditions is even one of the beneficiary’s essential commitments so as to enable the Commission to have at its disposal the data necessary to ascertain whether the contributions made are eligible for financing and order, if appropriate, the recovery of amounts established (see judgment of 11 September 2014, Commission v ID FOS Research, T‑170/08, not published, EU:T:2014:772, paragraph 57 and the case-law cited).
96      In addition, it is apparent from Article II.20 of the general conditions of the grant agreements under the 6th Framework Programme and from Article II.15 of the general conditions of the grant agreements under the 7th Framework Programme that direct costs are all those eligible costs which can be attributed directly to the project and are identified by the beneficiary as such, in accordance with its accounting principles and its usual internal rules.
97      In order to demonstrate the eligibility of the direct costs, the applicant produced the following evidence before the Court:
–        letters from the coordinators attesting the success of various projects to its contribution;
–        statements from its own employees confirming that success;
–        the fact that it managed its projects in a particularly cost-effective and economic manner.
98      The Court considers, as the Commission does, that the pieces of evidence provided, first, are too general, in that they do not enable the staff costs specifically to be deemed eligible and, second, were provided by persons exposed to a risk of a conflict of interest. The eligibility of the various costs ought to have been demonstrated by the applicant by means of accounting records in conformity with the technical conditions set for the issue of the grants concerned, amenable to review in the context of an audit.
99      Furthermore, the applicant itself acknowledges that the applicable eligibility criteria require inter alia evidence, first, that the costs declared were incurred during the course of the project in question, second, that they were determined in accordance with the beneficiary’s usual accounting and management principles and practices, third, that they were incurred for the sole purpose of achieving the objectives of the project and obtaining its expected results in a manner consistent with the principles of economy, efficiency and effectiveness, fourth, that they are entered into the beneficiary’s accounts and, fifth, that they are indicated in the total estimated budget.
100    So far as concerns the comparison of efficiency with its competitors, it is irrelevant. The efficiency and cost-effectiveness of the applicant as compared with its competitors are not called into question by the findings of the audit reports. It is only compliance with the provisions contained in the grant agreements that is relevant to establishing whether the costs declared by a beneficiary are eligible.
101    Therefore, the Court is of the view that the applicant has not provided adequate evidence to demonstrate the eligibility of the direct costs. Consequently, the first plea must be rejected as far as those costs are concerned.
(3)    Indirect costs
102    The applicant argues that, even though indirect costs were calculated using a flat-rate fee of 20% of the total of all eligible direct costs, it produced detailed calculations showing that all productive hours worked — regardless of the staff involved — were recorded on timesheets. Consequently, neither the eligibility of the direct costs nor that of the indirect costs can be called into question.
103    In the first place, it is apparent from Article II.21 of the general conditions of the grant agreements under the 6th Framework Programme and from Article II.15 of the general conditions of the grant agreements under the 7th Framework Programme that indirect costs are all those eligible costs which cannot be directly attributed to the project, but which can be identified and justified by the beneficiary’s accounting system as being incurred in direct relationship with the eligible direct costs attributed to the project. Moreover, Article II.22 of the general conditions of the grant agreements under the 6th Framework Programme and Article II.15 of the general conditions of the grant agreements under the 7th Framework Programme provide for the option of declaring those costs on a flat-rate basis.
104    In the second place, since it is undisputed that the applicant declared its indirect costs using a flat-rate fee of 20% of all eligible direct costs, rejecting the direct costs as ineligible automatically results in the rejection of the indirect costs.
105    In the third place, as has been explained in paragraph 101 above, since the applicant did not provide adequate evidence to demonstrate the eligibility of the direct costs, the additional argument and evidence put forward by the applicant before the Court in relation to the indirect costs, namely, the balance sheets of the total allocation of the indirect costs, are not adequate to demonstrate the eligibility of those indirect costs. Consequently, the first plea must be rejected as far as indirect costs are concerned.
(b)    The third plea, alleging infringement of the principle of proportionality
106    The applicant is of the view that the measures adopted by the Commission in its information letters are disproportionate, given that it did not take into account any of the elements outlined by the applicant in its letters of 4 November 2015, namely, in particular, the impact of recovery on current projects and the impact on all the consortia partners involved, including the applicant, which has had to lodge a request for the initiation of insolvency proceedings.
107    According to the case-law, the principle of proportionality is intended to regulate all the means of action of the European Union, whether contractual or non-contractual (see judgment of 18 November 2015, Synergy Hellas v Commission, T‑106/13, EU:T:2015:860, paragraph 89 and the case-law cited).
108    In the context of the performance of contractual obligations, respect for that principle contributes to the more general obligation of the parties to a contract to perform it in good faith. Under Belgian law, which is applicable to the grant agreements at issue, the obligation to perform those agreements in good faith prohibits parties from exercising their rights in a manner that manifestly exceeds the limits of the normal exercise of that right by a person exercising all due care.
109    As has been explained in paragraph 94 above, in order for the Commission to be able to exercise its power of review, the beneficiaries of grants are required to demonstrate that the costs attributed to subsidised projects are genuine.
110    In the light of those principles and in view of all the findings made by the Commission, it cannot be argued that the latter disregarded the principle of performance of agreements in good faith in requesting the applicant for repayment of a part of the sums that it had paid it on account of the expenses’ ineligibility, other than those sums relating to the ‘central travel/meeting budget’. The fact that recovery has affected the applicant’s financial situation does not alter that conclusion in this case.
111    Moreover, the applicant was given the opportunity to comment in a comprehensive manner on the auditors’ findings and its observations were integrated into the two final audit reports and, subsequently, in the information letters.
112    In the light of all of the foregoing, the third plea must be rejected as unfounded.
(c)    The fourth plea, alleging unlawfulness of the liquidated damages
113    The applicant argues that any liquidated damages are calculated on the basis of potentially unjustified financial contributions. As no such unjustified financial contributions were made to the applicant, the mandatory precondition for any claim of liquidated damages is not satisfied.
114    It is appropriate to point out that Article II.30 of the general conditions of the grant agreements under the 6th Framework Programme and Article II.24 of the general conditions of the grant agreements under the 7th Framework Programme provide that the Commission is entitled to claim liquidated damages from a beneficiary which is found to have overstated eligible costs and consequently received an unjustified financial contribution.
115    As is apparent from paragraphs 72 to 105 above, the Court finds that, apart from the declared expenses relating to the ‘central travel/meeting budget’, the applicant has not demonstrated that the other expenses in respect of which it is claiming reimbursement are eligible. It thus received an unjustified financial contribution. Consequently, the Commission was entitled to claim liquidated damages from the applicant, in accordance with the abovementioned rules, apart from that which concerned the expenses relating to the ‘central travel/meeting budget’.
116    It will be necessary, however, that the Commission draw the consequences from the conclusion relating to the eligibility of the declared expenses relating to the ‘central travel/meeting budget’ and accordingly adjust the calculation of liquidated damages.
117    It is therefore necessary to uphold the plea alleging unlawfulness of the liquidated damages so far as concerns the liquidated damages relating to the ‘central travel/meeting budget’ and to reject as unfounded the remainder of the plea.
118    It follows from all the foregoing that it is necessary to uphold the request for a declaration of the non-existence of the claim stated in the debit note and the information letters so far as concerns the declared expenses relating to the ‘central travel/meeting budget’ and the liquidated damages relating to it. The remainder of the request must be rejected.
2.      The action in so far as it is based on Article 263 TFEU, seeking annulment of the set-off decisions prior and subsequent to the bringing of the action
(a)    The second part of the first plea: infringement of the principle of the protection of legitimate expectations and of the principle of legal certainty
119    The applicant claims that the handling of the expenses relating to the ‘central travel/meeting budget’ has been approved by past audits of the Commission in various other projects.
120    By way of evidence, it refers, in particular, to an audit carried out in 2009 for the two projects at issue under the 6th Framework Programme. It also mentions an audit carried out in 2011 for three projects at issue under the 7th Framework Programme.
121    According to the applicant, the approval by past audits of the Commission constitutes precise assurances. The Commission infringed the principles of the protection of legitimate expectations and of legal certainty by handling the expenses that are the subject of the contested recovery differently.
122    Without it being necessary to rule on the issue of the admissibility of this new plea introduced in the course of proceedings under Article 84 of the Rules of Procedure, the Court recalls that three conditions must be met in order to claim entitlement to the protection of legitimate expectations. First, precise, unconditional and consistent assurances originating from authorised and reliable sources must have been given to the person concerned by the Community authorities. Second, those assurances must be such as to give rise to a legitimate expectation on the part of the person to whom they are addressed. Third, the assurances given must comply with the applicable rules (see judgments of 30 June 2005, Branco v Commission, T‑347/03, EU:T:2005:265, paragraph 102 and the case-law cited, and of 18 November 2015, Synergy Hellas v Commission, T‑106/13, EU:T:2015:860, paragraph 66 and the case-law cited).
123    In that regard, the applicant has not provided any evidence supporting the conclusion that it received assurances such as to give rise to a legitimate expectation in the context of the past audits invoked. The non-recovery of funds in the context of past projects cannot as such be regarded as giving assurances such as to give rise to a legitimate expectation on the part of the applicant.
124    Accordingly, the second part of the first plea must, in any event, be rejected as unfounded.
(b)    The second plea, alleging infringement of the rules of good governance, of the principle of transparency and of the right to be heard
125    The applicant argues that the rules of good governance, which include the principle of transparency and the right to be heard, entitle the beneficiary concerned to have the possibility of presenting submissions at the time of the audit procedure and to have its observations taken into account by the Commission when the latter decides on the appropriate measures to adopt. It argues that the Commission did not sufficiently analyse its observations in the context of the audit procedure. In that regard, it cites two statements on costs relating to one of its employees, which in its view the Commission failed to take into account.
126    So far as concerns the opportunity for the applicant to present its observations during the audit procedure, the Court notes that the draft audit reports were communicated to it, that it thus had the opportunity to comment in a comprehensive manner on the auditors’ findings and that its observations were integrated into the two final audit reports.
127    The applicant also had the opportunity to put forward additional arguments during a meeting between the parties held on 23 September 2015 and following the sending of the information letters, before the adoption of the set-off decisions.
128    Contrary to what the applicant claims, the Commission did accept a certain number of comments submitted by the applicant during the adversarial procedure and amended the two final audit reports as a result. The observations later made by the applicant in its two letters of 4 November 2015 were analysed in the information letters, which contain the final position of the Commission before the adoption of the other contested acts.
129    In addition, so far as concerns the statements submitted by the applicant in respect of one of its employees, the final audit reports mention those statements and explain why they were not accepted. They note that the statements do not correspond to the descriptions of the work carried out, as indicated on the timesheets.
130    Moreover, the applicant has not explained in what respect the Commission did not sufficiently analyse its comments or how it breached the formal requirements in connection with the set-off letters.
131    It is thus established that the rules of good governance, the principle of transparency and the right to be heard were fully observed by the Commission. The Court accordingly rejects the second plea in its entirety.
132    It follows from the foregoing that all the pleas examined specifically in the context of the action for annulment must be rejected. However, it follows from paragraph 118 above that the claim that gave rise to the contested set-off decisions existed only in part.
133    Consequently, in execution of the present judgment, it will be necessary, for the Commission, in recovering the remainder of its claim, to take due account of the amount it had wrongly ordered and, if appropriate, to reimburse the applicant the amounts offset which exceed its rectified claim.
Costs
134    Under Article 134(3) of the Rules of Procedure, the parties are to bear their own costs where each party succeeds on some heads and fails on others.
135    In the present case, the applicant has been unsuccessful in the proceedings for interim measures. In the present proceedings, however, the parties have both been unsuccessful on some of their heads of claim. Consequently, each party shall bear its own costs.
On those grounds,
THE GENERAL COURT (First Chamber),
hereby:
1.      Declares unfounded the claim of the European Commission against GABO:mi Gesellschaft für Ablauforganisation:milliarium mbH & Co. KG mentioned in debit note No 3241514917 dated 2 December 2015 and in the two information letters dated 2 December 2015 so far as concerns the declared expenses relating to the ‘central travel/meeting budget’ and the liquidated damages relating to it;
2.      Dismisses the action as to the remainder;
3.      Orders each party to bear its own costs.
Pelikánová
Valančius
Öberg
Delivered in open court in Luxembourg on 25 September 2018.
E. Coulon
I.  Pelikánová
Registrar
President
*      Language of the case: English.