62006TJ0402_EN
Parties
Grounds
Operative part
Parties
In Case T‑402/06,
Kingdom of Spain,
represented initially by J.M. Rodríguez Cárcamo, and subsequently by A. Rubio González, abogados del Estado,
applicant,
v
European Commission, represented initially by A. Steiblytė and L. Escobar Guerrero, and subsequently by A. Steiblytė and S. Pardo Quintillán, acting as Agents,
defendant,
APPLICATION for annulment of Commission Decision C(2006) 5105 of 20 October 2006 reducing the assistance granted by the Cohesion Fund for the eight projects under way in the territory of the Autonomous Community of Catalonia (Spain),
THE GENERAL COURT (First Chamber),
composed of J. Azizi (Rapporteur), President, S. Frimodt Nielsen and M. Kancheva, Judges,
Registrar: J. Palacio González, Principal Administrator,
having regard to the written procedure and further to the hearing on 12 and 13 November 2012,
gives the following
Judgment
Grounds
Legal context
Provisions concerning the Cohesion Fund
1. Article 158 EC provides:
‘In order to promote its overall harmonious development, the Community shall develop and pursue its actions leading to the strengthening of its economic and social cohesion.
In particular, the Community shall aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions or islands, including rural areas.’
2. Under the second paragraph of Article 161 EC:
‘A Cohesion Fund set up by the Council ... shall provide a financial contribution to projects in the fields of environment and trans-European networks in the area of transport infrastructure.’
3. The Cohesion Fund was created by Council Regulation (EC) No 1164/94 of 16 May 1994 establishing a Cohesion Fund (OJ 1994 L 130, p. 1, ‘the Cohesion Fund Regulation’).
4. Article 4 of the Cohesion Fund Regulation, as amended, lays down the amounts of financial resources which may be assigned to projects eligible for assistance from the Cohesion Fund for the period from 2000 to 2006.
5. Article 7(1) of the Cohesion Fund Regulation, as amended, provides that the rate of Community assistance granted by the Cohesion Fund is 80 to 85% of public or equivalent expenditure.
6. Article 8(1) of the Cohesion Fund Regulation, as amended, provides:
‘Projects financed by the [Cohesion] Fund shall be in keeping with the provisions of the Treaties, with the instruments adopted pursuant thereto and with Community policies, including those concerning environmental protection, transport, trans-European networks, competition and the award of public contracts.’
7. Article 12(1) of the Cohesion Fund Regulation, as amended, includes the following provision:
‘Without prejudice to the Commission’s responsibility for implementing the Community budget, Member States shall take responsibility in the first instance for the financial control of projects. To that end, the measures they take shall include:
(a) verifying that management and control arrangements have been set up and are being implemented in such a way as to ensure that Community funds are being used efficiently and correctly;
...
(c) ensuring that projects are managed in accordance with all the applicable Community rules and that the funds placed at their disposal are used in accordance with the principles of sound financial management;
(d) certifying that the declarations of expenditure presented to the Commission are accurate and guaranteeing that they result from accounting systems based on verifiable supporting documents;
(e) preventing and detecting irregularities, notifying these to the Commission, in accordance with the rules, and keeping the Commission informed of the progress of administrative and legal proceedings. ...;
...
(g) cooperating with the Commission to ensure that Community funds are used in accordance with the principles of sound financial management;
(h) recovering any amounts lost as a result of an irregularity detected and, where appropriate, charging interest on late payments.’
8. The management rules for the Cohesion Fund are set out in Annex II to the Cohesion Fund Regulation, as amended.
9. Article H of Annex II to the Cohesion Fund Regulation, as amended, provides:
‘Financial corrections
1. If, after completing the necessary verifications, the Commission concludes that:
(a) the implementation of a project does not justify either part or the whole of the assistance granted to it, including a failure to comply with one of the conditions in the decision to grant assistance and in particular any significant change affecting the nature or conditions of implementation of the project for which the Commission’s approval has not been sought, or
(b) there is an irregularity with regard to assistance from the [Cohesion] Fund and that the Member State concerned has not taken the necessary corrective measures,
the Commission shall suspend the assistance in respect of the project concerned and stating its reason, request that the Member State submits its comments within a specified period of time.
If the Member State objects to the observations made by the Commission, the Member State shall be invited to a hearing by the Commission, in which both sides make efforts to reach an agreement about the observations and the conclusions to be drawn from them.
2. At the end of the period set by the Commission, the Commission shall, subject to the respect of due procedure, if no agreement has been reached within three months, taking into account any comments made by the Member State, decide to:
(a) reduce the payment on account referred to in Article D(2), or
(b) make the financial corrections required. This shall mean cancelling all or part of the assistance granted to the project.
These decisions shall respect the principle of proportionality. The Commission shall, when deciding the amount of a correction, take account of the type of irregularity or change and the extent of the potential financial impact of any shortcomings in the management or control systems. Any reduction or cancellation shall give rise to recovery of the sums paid.
3. Any sum received unduly and to be recovered shall be paid to the Commission. Interest on account of late repayment shall be charged in accordance with the rules to be adopted by the Commission.
4. The Commission shall lay down the detailed rules for implementing paragraphs 1 to 3 and shall inform the Member States and the European Parliament thereof.’
10. Articles 17 to 21 of Commission Regulation (EC) No 1386/2002 of 29 July 2002 laying down detailed rules for the implementation of the Cohesion Fund Regulation as regards the management and control systems for assistance granted from the Cohesion Fund and the procedure for making financial corrections (OJ 2002 L 201, p. 5, ‘Implementing Regulation No 1386/2002’) define the subject-matter and scope of the Cohesion Fund Regulation and contain the detailed provisions on the procedure to be followed in making corrections to assistance received from the Cohesion Fund from 1 January 2000.
11. Article 17(1) and (2) of Implementing Regulation No 1386/2002 provides, inter alia, as follows:
‘1. The amount of financial corrections made by the Commission under Article H(2) of Annex II to [the Cohesion Fund Regulation] for individual or systemic irregularities shall be assessed, wherever this is possible and practicable, on the basis of individual files and shall be equal to the amount of expenditure wrongly charged to the [Cohesion] Fund, having regard to the principle of proportionality.
2. When it is not possible or practicable to quantify the amount of irregular expenditure precisely, or when it would be disproportionate to cancel entirely the expenditure in question, and the Commission therefore bases its financial corrections on extrapolation or a flat rate, it shall proceed as follows:
(a) in the case of extrapolation, it shall use a representative sample of transactions with like characteristics;
(b) in the case of a flat rate, it shall assess the importance of the infringement of rules and the extent and financial implications of any shortcomings in the management and control system that have led to the irregularity established.
...’
12. Article 18 of Implementing Regulation No 1386/2002 includes the following provision:
‘1. The period of time within which the Member State concerned may respond to a request under the first subparagraph of Article H(1) of Annex II to Regulation (EC) No 1164/94 to submit its comments shall be two months, except in duly justified cases where a longer period may be agreed by the Commission.
2. Where the Commission proposes financial corrections on the basis of extrapolation or at a flat rate, the Member State shall be given the opportunity to demonstrate, through an examination of the files concerned, that the actual extent of irregularity was less than the Commission’s assessment. In agreement with the Commission, the Member State may limit the scope of this examination to an appropriate proportion or sample of the files concerned.
Except in duly justified cases, the time allowed for this examination shall not exceed a further period of two months after the two-month period referred to in paragraph 1. The results of such examination shall be examined in the manner specified in the second subparagraph of Article H(1) of Annex II to Regulation (EC) No 1164/94. The Commission shall take account of any evidence supplied by the Member State within the time-limits.
3. Whenever the Member State objects to the observations made by the Commission and a hearing takes place under the second subparagraph of Article H(1) of Annex II to Regulation (EC) No 1164/94, the three-month period within which the Commission may take a decision under Article H(2) of Annex II to that regulation shall begin to run from the date of the hearing.’
13. Under its Article 23, Implementing Regulation No 1386/2002 entered into force on 7 August 2002.
14. The Guidelines on the principles, criteria and indicative scales to be applied by Commission departments in determining financial corrections under Article H(2) of Annex II to Regulation (EC) No 1164/94 establishing a Cohesion Fund of 29 July 2002 (C(2002) 2871) (‘the 2002 Guidelines’) set out criteria and general principles to guide the Commission of the European Communities in determining those financial corrections.
Relevant provisions concerning public contracts
15. The relevant legislation for public contracts under Article 8(1) of the Cohesion Fund Regulation (see paragraph 6 above) is, first, Council Directive 93/37/EEC of 14 June 1993 concerning the coordination of procedures for the award of public works contracts (OJ 1993 L 199, p. 54, ‘the Public Works Contracts Directive’) and, second, Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts (OJ 1992 L 209, p. 1, ‘the Public Service Contracts Directive’).
16. Under Article 1(b) of the Public Service Contracts Directive:
‘For the purposes of this Directive:
...
(b) contracting authorities shall mean the State, regional or local authorities, bodies governed by public law, associations formed by one or more of such authorities or bodies governed by public law.
Body governed by public law means any body:
– established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character, and
– having legal personality and
– financed, for the most part, by the State, or regional or local authorities, or other bodies governed by public law; or subject to management supervision by those bodies; or having an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities or by other bodies governed by public law.
...’
17. Article 30 of the Public Works Contracts Directive, which regulates the criteria for the award of works contracts, provides inter alia:
‘1. The criteria on which the contracting authorities shall base the award of contracts shall be:
(a) either the lowest price only;
(b) or, when the award is made to the most economically advantageous tender, various criteria according to the contract: e.g. price, period for completion, running costs, profitability, technical merit.
2. In the case referred to in paragraph 1(b), the contracting authority shall state in the contract documents or in the contract notice all the criteria it intends to apply to the award, where possible in descending order of importance.
...
4. If, for a given contract, tenders appear to be abnormally low in relation to the works, the contracting authority shall, before it may reject those tenders, request, in writing, details of the constituent elements of the tender which it considers relevant and shall verify those constituent elements taking account of the explanations received.
...’
18. The relevant criteria for the award of service contracts are defined, inter alia, in Articles 36 and 37 of the Public Service Contracts Directive.
19. Under Article 36 of the Public Service Contracts Directive:
‘1. Without prejudice to national laws, regulations or administrative provisions on the remuneration of certain services, the criteria on which the contracting authority shall base the award of contracts may be:
(a) where the award is made to the economically most advantageous tender, various criteria relating to the contract: for example, quality, technical merit, aesthetic and functional characteristics, technical assistance and after-sales service, delivery date, delivery period or period of completion, price; or;
(b) the lowest price only.
2. Where the contract is to be awarded to the economically most advantageous tender, the contracting authority shall state in the contract documents or in the tender notice the award criteria which it intends to apply, where possible in descending order of importance.’
20. Under Article 37 of the Public Service Contracts Directive:
‘If, for a given contract, tenders appear to be abnormally low in relation to the service to be provided, the contracting authority shall, before it may reject those tenders, request in writing details of the constituent elements of the tender which it considers relevant and shall verify those constituent elements taking account of the explanations received.
The contracting authority may take into consideration explanations which are justified on objective grounds including the economy of the method by which the service is provided, or the technical solutions chosen, or the exceptionally favourable conditions available to the tenderer for the provision of the service, or the originality of the service proposed by the tenderer.
If the documents relating to the contract provide for its award at the lowest price tendered, the contracting authority must communicate to the Commission the rejection of tenders which it considers to be too low.’
Background to the dispute
Projects concerned
21. By several decisions adopted between 2002 and 2004, the Commission granted aid from the Cohesion Fund to eight projects under way in the territory of the Autonomous Community of Catalonia (Spain).
22. Project No 2001.ES.16.C.PE.058 concerns the extension of the Besos purification station with a view to the secondary biological treatment of waste water and the treatment of sludge from the Barcelona region (aid granted by Decision C(2002) 1767 of 6 August 2002 (‘the decision granting aid’)), which is managed by Depuradora del Baix Llobregat SA (‘Depurbaix’).
23. The other seven projects are managed by the Agencia Catalana del Agua (Catalonian Water Agency, ‘ACA’) and by the Agencia de Residuos de Cataluña (Catalonia Waste Agency, ‘ARC’), which are both controlled by the Comunidad Autónoma de Cataluña. They are:
– project No 2003.ES.16.C.PE.005 concerning waste-water disposal infrastructures in small towns in Catalonia (aid granted by Decision C(2003) 4384 of 19 November 2003);
– project No 2001.ES.16.C.PE.054 concerning purification, treatment of sludge and reuse of urban waste water in Catalonia (aid granted by Decision C(2002) 3519 of 29 November 2002, amended by Decision C(2005) 1523 of 17 May 2005);
– project No 2000.ES.16.C.PE.112 concerning drainage and water treatment in the Ebro Basin: Monzón, Caspe and inland river basins of Catalonia (aid granted by Decision C(2000) 4325, amended by Decision C(2004) 597 of 20 February 2004);
– project No 2002.ES.16.C.PE.006 concerning desalination of sea-water in the Tordera delta (aid granted by Decision C(2003) 1543 of 6 May 2003);
– project No 2001.ES.16.C.PE.055 concerning the construction and improvement of the infrastructures for treating municipal solid waste in Catalonia (aid granted by Decision C(2002) 1766 of 6 August 2002);
– project No 2001.ES.16.C.PE.057 concerning municipal waste-treatment plants in the districts of Urgell, Pallars Jussa and Conca de Barberá (aid granted by Decision C(2003) 1478 of 29 April 2003);
– project No 2002.ES.16.C.PE.041 concerning the establishment and improvement of the network of infrastructures for the treatment of municipal waste in Catalonia (aid granted by Decision C(2002) 4660 of 20 December 2002).
Administrative procedure
24. During the period from 6 to 10 October 2003, the Commission conducted an audit mission in Spain to review the project for the extension of the Besos river purification station managed by Depurbaix and to inspect the management and control systems set up by the Catalonian authorities in connection with the Cohesion Fund.
25. On 27 January 2004, the Commission sent the Spanish authorities a report identifying irregularities concerning the projects in question, as established during the audit mission. Those irregularities related, first, to the ineligibility of expenditure invoiced by Depurbaix in respect of the ‘management charge’ in the expenditure certificates and, second, the failure by the Catalonian authorities to comply with certain EU procurement rules in the seven projects mentioned in paragraph 23 above.
26. After an exchange of several items of correspondence with the Spanish authorities, the Commission proposed a financial correction for each of the projects concerned and invited those authorities to a hearing. At the hearing on 27 and 28 June 2006, the Spanish authorities requested a time-limit of three weeks to provide additional evidence. The Commission fixed that time-limit at 21 July 2006. It received that evidence on 25 July 2006.
Contested decision
27. On 20 October 2006, the Commission adopted Decision C(2006) 5105 reducing the assistance granted by the Cohesion Fund for the eight projects mentioned in paragraphs 22 and 23 above (‘the contested decision’), which was notified to the Kingdom of Spain on 23 October 2006.
28. In the contested decision, the Commission stated that in the course of its audit mission it had identified irregularities relating, first, to the ineligibility of certain expenditure and, second, to the failure by the Spanish authorities to comply with certain EU public procurement rules (paragraph 15 of the contested decision).
29. With regard to project No 2001.ES.16.C.PE.058, the Commission noted that it had identified, in contracts concluded between the central administration of the Spanish State and Depurbaix, ineligible expenditure described as a ‘management charge’, which consisted in adding a flat-rate amount of 4% to the cost of the works. According to the Commission, that flat-rate amount should be classified as ineligible overhead or administrative costs under the penultimate indent of paragraph 2 of section IV of Annex IV to the decision granting aid (paragraph 17 of the contested decision).
30. With regard to the other seven projects, the Commission found irregularities on account of the failure by the ACA and by the ARC to comply with EU procurement rules. For the grant of all the works contracts concerned, those bodies used award criteria which were not consistent with Article 30 of the Public Works Contracts Directive. Similarly, all the service contracts were awarded in contravention of Article 36 of the Public Service Contracts Directive (paragraph 18 of the contested decision).
31. Thus, first, the Commission considered that the application by the ACA, in the context of the tendering procedure for the projects in question, of the suitability criterion of experience of previous works was not consistent with those rules in so far as that criterion did not relate to the subject-matter of the contract in question. In this regard, it stated that a clear distinction had to be drawn between suitability criteria, which are relevant to the selection of tenderers, and award criteria, which are intended to determine the most economically advantageous tender. According to the Commission, whilst experience of previous works could be regarded as a relevant qualitative selection criterion, it is not allowable as a criterion for determining the most economically advantageous tender, otherwise the principle of equal treatment would be undermined (paragraph 18 and paragraph 24(b) of the contested decision).
32. Second, the Commission took the view that the use by both the ACA and the ARC of the average price method as an award criterion for determining the most economically advantageous tender infringed Article 30 of the Public Works Contracts Directive in the case of the works contracts and Article 36 of the Public Service Contracts Directive in the case of the service contracts. The average price method is liable, all other criteria being equal, to penalise less expensive tenders compared with other tenders that are closer to the calculated average and its application is therefore contrary to the principle of equal treatment (paragraph 18 and paragraph 24(c) of the contested decision).
33. Third, the Commission noted that the procurement directives require, in the case of abnormally low tenders, provision to be made for an inter partes procedure with the tenderers to allow them to explain the ‘viability’ of their tender. Neither the ACA nor the ARC observed such a procedure, which is contrary to Article 30(4) of the Public Works Contracts Directive for the works contracts and Article 37 of the Public Service Contracts Directive for the service contracts (paragraph 24(d) of the contested decision).
34. The Commission thus considered that, in so far as the declarations of expenditure made by the Spanish authorities included ineligible expenditure and there were supervision deficiencies on the part of those authorities, the application of financial corrections was justified and appropriate (paragraph 25 of the contested decision).
35. In this regard, the Commission stated that it considered it generally appropriate to apply flat-rate corrections to all declared expenditure for a project where it detects serious deficiencies in the management and control systems which result in large-scale infringements of the legislation in force or where it establishes individual infringements. The specific rate to be applied depends on the seriousness of the deficiency identified and may be increased in the case of repeat infringements. The Commission nevertheless took the view that in the present case a flat-rate correction applying to all the projects was a disproportionate penalty (paragraph 26 of the contested decision).
36. Accordingly, as regards the ineligible ‘indirect expenditure’ invoiced by Depurbaix in respect of the ‘management charge’, the Commission stated that that expenditure had been charged to three projects managed by Depurbaix, the total amount of which, at the time of the audit mission in October 2003, was EUR 9 298 055. According to the Commission, this fact reveals a deficiency in the management and control system set up by the Spanish Ministry of the Environment. It therefore adopted, having regard to the principle of proportionality, a financial correction of 2% of the co-financing (85%) granted to project No 2001.ES.16.C.PE.058, the amount of which it fixed at EUR 2 324 414 (paragraph 27 of the contested decision).
37. With regard to the projects managed by the ACA and by the ARC, the Commission stated that the experience of previous works criterion and the average price method were systematically included in the contracts in question. Consequently, it requested the Catalonian authorities to conduct an assessment of the tenderers contract by contract, a request with which the authorities complied. For contracts whose value exceeded the thresholds under Directives 92/50 and 93/37, the average price method was replaced by a linear price evaluation method which awarded the best score to the lowest tender and the minimum score to the highest tender. Furthermore, the experience of previous works criterion was eliminated from the technical evaluation and a new technical and economic weighting was introduced. For contracts whose value was below the threshold under those directives, the new assessment was based on a linearisation of prices and the experience of previous works criterion was retained in the technical evaluation (paragraph 28 of the contested decision).
38. On the basis of the new assessments by the Catalonian authorities, the Commission decided to apply a financial correction for each project equivalent to 100% of the difference in terms of EU co-financing between the tenders selected and those recalculated contract by contract. For the seven projects concerned, the Commission fixed the total amount of the financial correction at EUR 4 490 021 (paragraph 28 of the contested decision).
39. The Commission thus concluded that the amount of EUR 6 814 435 should be considered to have been wrongly declared and should therefore be repaid by the Kingdom of Spain (paragraph 32 of the contested decision).
Procedure and forms of order sought
40. By application lodged at the Registry of the General Court on 27 December 2006, the Kingdom of Spain brought the present action.
41. The Kingdom of Spain claims that the Court should:
– annul the contested decision;
– order the Commission to pay the costs.
42. The Commission contends that the Court should:
– dismiss the application;
– order the Kingdom of Spain to pay the costs.
43. By letter of 5 January 2012, by way of measures of organisation of procedure under Article 64 of the Rules of Procedure of the General Court, the General Court, first, asked the Kingdom of Spain to submit certain documents and, second, put questions in writing to the Kingdom of Spain and to the Commission, inviting them to reply in writing. Those parties complied with those measures of organisation of procedure within the prescribed periods.
44. As the Judge-Rapporteur was unable to sit, on 22 March 2012 the President of the General Court reallocated the case to another Judge-Rapporteur and, pursuant to Article 32(3) of the Rules of Procedure, designated another Judge to complete the Chamber.
45. By letter of 18 July 2012, by way of measures of organisation of procedure under Article 64 of the Rules of Procedure, the General Court put questions in writing to the Kingdom of Spain and to the Commission, inviting them to reply in writing. Those parties complied with those measures of organisation of procedure within the prescribed periods.
46. Upon hearing the report of the Judge-Rapporteur, the General Court (First Chamber) decided to open the oral procedure.
47. The parties presented oral argument and replied to the oral questions of the Court at the hearing on 12 and 13 November 2012. At the hearing, the General Court decided to leave the oral procedure open and, by way of measures of organisation of procedure under Article 64 of the Rules of Procedure, invited the parties to produce, within a period of three weeks, certain documents and information on which they were invited to submit observations, note of which was made in the record of the hearing.
48. Since those documents, that information and those observations were received within the prescribed periods, the General Court ordered the end of the oral procedure on 28 January 2013.
Law
Summary of the pleas for annulment
49. In support of its action, the Kingdom of Spain relies on four pleas in law, the second and third pleas in law being raised in the alternative.
50. By its first plea in law, which is subdivided into three parts, the Kingdom of Spain essentially alleges that the contested decision is vitiated by a misinterpretation and a misapplication of the Public Works Contracts Directive and the Public Service Contracts Directive in respect of the tender procedures for the seven projects managed by the ACA and by the ARC.
51. By its second plea in law, raised in the alternative, the Kingdom of Spain claims a breach of the princi ple of proportionality within the meaning of Article H(2) of Annex II to the Cohesion Fund Regulation in the determination of the financial correction for those projects.
52. By its third plea in law, raised in the alternative, the Kingdom of Spain claims an infringement of the rights of the defence, essential procedural requirements and the principle of ‘sound administration’.
53. By its fourth plea in law, the Kingdom of Spain alleges an infringement of Article 17 of Implementing Regulation No 1386/2002 on the ground that there were no real irregularities and, in the alternative, a breach of the principle of proportionality in the determination of the financial correction for project No 2001.ES.16.C.PE.058 managed by Depurbaix.
The first plea in law, alleging an infringement of the Public Works Contracts Directive and the Public Service Contracts Directive
Preliminary remarks
54. In its first plea in law, the Kingdom of Spain contests the finding made in the contested decision to the effect that the criteria applied by the ACA and by the ARC in awarding the contracts relating to the seven projects mentioned in paragraph  above were not consistent with EU public procurement rules, in particular Article 30 of the Public Works Contracts Directive and Article 36 of the Public Service Contracts Directive. By the first part of the plea, the Kingdom of Spain claims that the contested decision is erroneous in that it considers that the application of the average price method was contrary to those rules and to the principle of equal treatment. By the second part of the plea, it argues that that decision is based on a misinterpretation of Article 30(4) of the Public Works Contracts Directive and of Article 37 of the Public Service Contracts Directive as regards the handling of abnormally low tenders. By the third part of the plea, the Kingdom of Spain claims that the decision is based on a misinterpretation of Article 30(1) and (2) of the Public Works Contracts Directive and of Article 36(1) and (2) of the Public Service Contracts Directive as regards the application of the experience of previous works criterion in the assessment of the most economically advantageous tender.
55. Before assessing these various complaints, consideration should be given to the main characteristics of the tender procedures run by the ACA and the ARC with a view to awarding the contracts for the seven projects in question.
56. For the purposes of those procedures, the ACA and the ARC decided to apply the criterion of the most economically advantageous tender rather than the criterion of the lowest price (see Article 30(1)(a) and (b) of the Public Works Contracts Directive and Article 36(1)(a) and (b) of the Public Service Contracts Directive). According to the contract documents drawn up by the ACA and by the ARC, the contracts in question were to be awarded on the basis of the criterion of the most economically advantageous tender, which was to be assessed using certain methods and on the basis of certain economic and technical parameters, each of which was given a weighting coefficient.
57. The relevant methods and economic parameters included the average price method, which was applied by the contracting authority in three stages. In a first stage, each tender was compared against the contracting authority’s budget for the contract in question, called the base price, which was predetermined by an independent engineering firm after a market study. The average price method was applied at this stage to calculate the ‘reduction’ (Bi), as a percentage, of each tenderer’s tender in relation to the base price, using the equation ‘Bi = (base price — tender)/base price’. If the tender was lower than the base price, the tenderer was considered to have made a ‘positive reduction’ (Bi > 0). On the other hand, if the tender was higher than the base price (Bi < 0), the tenderer was considered to have made an ‘increase’. In a second stage, the average reductions made by each of the tenderers, called the ‘average reduction’ (Bm), was calculated. Similarly, the ‘reckless reduction’ (Bt) was determined, designating the percentage reduction from which the tender was deemed to be lacking in credibility, either because the project could not reasonably be expected to be implemented at that price or because the price was so low that the services offered were not likely to achieve a minimum technical quality. In a third stage, a mathematical formula was used to award points to the various tenders.
58. In the vast majority of the contracts awarded by the ACA, the ‘reduction’ made by each tender (Bi) was compared either with the ‘average reduction’ (Bm) or with a ‘corrected reduction’. The ‘corrected reduction’ was generally the result of applying a correction factor to the ‘average reduction’, increasing it by five percentage points. According to the Kingdom of Spain, the purpose of that correction was to prevent tenders with a ‘reduction’ higher than the ‘average reduction’ but corresponding to the base price and displaying a high technical quality from being disadvantaged by the fact that other tenderers had submitted excessively high tenders. Tenderers who submitted tenders higher than the base price, whose ‘reduction’ was therefore negative, did not score any points. On the other hand, tenderers who submitted tenders equal to or lower than the base price, whose ‘reduction’ was thus ‘positive’, were dealt with as follows. First, tenders whose ‘reduction’ exceeded the ‘reckless reduction’, namely very low tenders with a very large ‘positive reduction’, did not score any points for their economic quality. Second, tenders with a ‘reduction’ lower than the ‘average reduction’ (corrected if necessary) scored an increasing number of points the closer they were to the ‘average reduction’. Third, tenders whose ‘reduction’ was higher than the ‘average reduction’ (corrected if necessary), but lower than the ‘reckless reduction’, that is to say lower than the base price and higher than the ‘average reduction’, but which were not excessively low, were awarded an increasing number of points the closer they were to the ‘average reduction’ and the further they were from the ‘reckless reduction’. In other words, those tenders were awarded a decreasing number of points the further they were from the ‘average reduction’ and the closer they were to the ‘reckless reduction’.
59. As regards the contracts awarded by the ARC, similarly, in a first stage, each tender was compared with the base price in order to determine the ‘reduction’ made by each tenderer. Tenders exceeding the base price were eliminated. For tenders equal to or lower than the base price, namely those with a ‘positive reduction’, the ‘average reduction’ and the ‘reckless reduction’ were then calculated using identical methods to those applied by the ACA in order to award points to the different tenders on the basis of the following formula. First, 15 points were awarded to tenders with a ‘zero reduction’, that is to say those whose price coincided with the base price (Bi = 0). Second, tenders with a ‘positive reduction’ which were lower than the ‘reckless reduction’ scored between 15 and 30 points, the number of points increasing the closer they were to the ‘reckless reduction’ and the further they were from the ‘zero reduction’. Third, reductions higher than the ‘reckless reduction’ scored a decreasing number of points, ranging from 30 to zero, the further they were from the ‘reckless reduction’. Thus, a tender equal to or lower than 90% of the tender corresponding to the ‘reckless reduction’ was excessively low, with the result that it did not score any points as from that threshold. According to the Kingdom of Spain, the ‘loss of points’ beyond that threshold was higher than the loss corresponding to reductions between zero and the ‘reckless reduction’ in order to penalise excessively low tenders.
The first part of the first plea in law, alleging a breach of the principle of equal treatment and an infringement of Article 30 of the Public Works Contracts Directive and Article 36 of the Public Service Contracts Directive
60. In the first part of the first plea in law, the Kingdom of Spain disputes that the application of the average price method is contrary to the principle of equal treatment and to Article 30 of the Public Works Contracts Directive and Article 36 of the Public Service Contracts Directive.
61. All tenderers were treated in the same way. They were informed in advance of the eligibility and award criteria for the contracts in question, including the application of the average price method, and were accorded similar treatment in the course of the assessment of tenders. According to the Kingdom of Spain, even though, when they submitted their tenders, tenderers did not know the average price, they were aware of the base price, as specified in the contract documents and in the contract notice and determined on the basis of a market study which was published and therefore available to tenderers at that stage. Furthermore, the average price method was applied equally to all tenders irrespective of their origin. The Kingdom of Spain states that it has identified from the 173 contracts concerned 25 contracts which were awarded to the least expensive tender, which is lower than would have resulted from the application of the linear price evaluation method required by the Commission. In 78 cases, the successful tender was the same as would have been identified by that linear method. These examples show, among other things, that the Commission is wrong to claim that the average price method did not guarantee that the contract was awarded to the tenderer offering the best quality-price ratio, but only to the tenderer offering the best quality-average price ratio. The Kingdom of Spain adds, in essence, that the application by the contracting authority of a mathematical criterion, such as the anomaly threshold of the ‘reckless reduction’, based on the average of the tenders received, has been recognised by case‑law. The determination of such a threshold is used, among other things, to ‘weight’ the extent to which a tender complies with the average price method and, indirectly, the criteria ensuring the quality and the technical viability of the project.
62. In the alternative, the Kingdom of Spain claims that, even if there were unequal treatment, which is not the case, it would be justified by objective reasons. If the contracting authorities awarded to low-price tenders a number of points that was variable or equal to zero, it was precisely in order to protect the public interest and to ensure the technical viability of projects in question, since tenders with an excessively low price were likely to jeopardise the proper execution of the works. With regard to tenders with high prices (higher than those offered by other tenderers and therefore above the ‘average reduction’), the number of points was reduced gradually in order to safeguard the Union’s financial interests. Lastly, the Kingdom of Spain challenges the appropriateness of the linear price evaluation method required by the Commission, which neither is more effective nor offers more protection of the Union’s financial interests than the average price method. On the contrary, its application would result in the selection of less expensive tenders than those that were selected by the ARC and by the ACA using the average price method, as the Commission itself acknowledged at the hearing on 27 and 28 June 2006.
63. The Commission disputes the arguments put forward by the Kingdom of Spain and contends that the first part of the first plea in law should be rejected.
64. The General Court recalls, first of all, the settled case‑law, which has recognised that the Public Service Contracts Directive and the Public Works Contracts Directive are essentially aimed at protecting the interests of traders established in a Member State who wish to offer goods or services to contracting authorities established in another Member State and, to that end, to avoid both the risk of preference being given to national tenderers or applicants whenever a contract is awarded by the contracting authorities and the possibility that a body governed by public law may choose to be guided by considerations other than economic ones. The primary aim of those directives is thus to open up public works and service contracts to competition. It is exposure to competition within the Union in accordance with the procedures provided for those directives which avoids the risk of the public authorities indulging in favouritism (see, to this effect, Joined Cases C‑285/99 and C‑286/99 Lombardini and Mantovani [2001] ECR I‑9233, paragraphs 35 and 36 and the cited case‑law).
65. In addition, in procedures for the award of public contracts, both works contracts and service contracts, the contracting authority is required to comply with the principle that tenderers should be treated equally, as indeed is expressly shown by Article 3(2), Article 27(4) and Article 37 of the Public Service Contracts Directive (see, to this effect, Case C‑532/06 Lianakis and Others
[2008] ECR I‑251, paragraph 33) and Article 22(4), the fourth subparagraph of Article 30(4) and Article 31(1) of the Public Works Contracts Directive ( Lombardini and Mantovani, paragraph 64 above, paragraph 37).
66. More specifically, under the principle of equal treatment as between tenderers, which is merely a specific expression of the principle of equal treatment (see, to this effect, Case C‑458/03 Parking Brixen
[2005] ECR I‑8585, paragraphs 46 and 48 and the cited case‑law, and Case T‑332/03 European Service Network
v Commission, not published in the ECR, paragraph 72) and the aim of which is to promote the development of healthy and effective competition between undertakings taking part in a public procurement procedure, all tenderers must be afforded equality of opportunity when formulating their tenders, which therefore implies that the tenders of all competitors must be subject to the same conditions (Case C‑496/99 P Commission
v CAS Succhi di Frutta
[2004] ECR I‑3801, paragraph 110). Accordingly, the contracting authority must, at each stage of the tendering procedure, act in accordance with the principle of equal treatment of tenderers (Case T‑203/96 Embassy Limousines & Services
v Parliament
[1998] ECR II‑4239, paragraph 85) and tenderers must be in a position of equality both when they formulate their tenders and when those tenders are being assessed by the contracting authority (see, to this effect, Case C‑213/07 Michaniki
[2008] ECR I‑9999, paragraph 45, and Case C‑251/09 Commission
v Cyprus, not published in the ECR, paragraph 39 and the cited case‑law).
67. Furthermore, the principle of equal treatment implies, in particular, an obligation of transparency in order to allow the contracting authority to ensure that it has been complied with (see Lombardini and Mantovani, paragraph 64 above, paragraph 38, and Commission
v Cyprus, paragraph 66 above, paragraph 38 and the cited case‑law). The principle of transparency, which is the corollary of the principle of equal treatment, is essentially intended to preclude any risk of favouritism or arbitrariness on the part of the contracting authority ( Commission
v CAS Succhi di Frutta, paragraph 66 above, paragraph 111) and the impartiality of procurement procedures to be reviewed (see Parking Brixen, paragraph 66 above, paragraph 49 and the cited case‑law). It implies that all the conditions and detailed rules of the award procedure must be drawn up in a clear, precise and unequivocal manner in the notice or contract documents so that, first, all reasonably informed tenderers exercising ordinary care can understand their exact significance and interpret them in the same way and, secondly, the contracting authority is able to ascertain whether the tenders submitted satisfy the criteria applying to the relevant contract ( Commission
v CAS Succhi di Frutta, paragraph 66 above, paragraph 111). Lastly, the principles of equal treatment and transparency constitute the basis of the directives on procedures for the award of public contracts. The duty of contracting authorities to ensure that they are observed lies at the very heart of those directives (see Michaniki, paragraph 66 above, paragraph 45 and the cited case‑law).
68. It is in the light of these principles that the complaints raised by the Kingdom of Spain in the first part of its first plea in law should be assessed.
69. For the purposes of the award of the contracts relating to the seven projects mentioned in paragraph 23 above, the Catalonian authorities opted to apply the criterion of the most economically advantageous tender pursuant to Article 36(1)(a) of the Public Service Contracts Directive and Article 30(1)(b) of the Public Works Contracts Directive, taking account of both economic and technical criteria. However, in the contested decision, the Commission called into question the lawfulness, having regard to those provisions and the principle of equal treatment, of using, in determining the most economically advantageous tender, the average price method, whose operation is explained in paragraphs 57 to 59 above, on the ground that, all other criteria being equal, its application would penalise less expensive tenders compared with others that were closer to the calculated average (paragraph 24(c) of the contested decision).
70. With regard to the alleged breach of the principle of equal treatment, it should be noted, as a preliminary point, that it is common ground that, before their tenders were submitted, tenderers were informed both of the application of the average price method and the base price for each project, as specified in the contract documents and in the contract notice. Nevertheless, at that stage of the tender procedure, tenderers could not know the average price, as it was to be calculated, as the arithmetical average of the percentage ‘reductions’ in relation to the base price for all accepted tenders, only after those tenders for the contract in question had been received.
71. In this regard, it should be borne in mind that the contracting authorities are subject to an obligation of transparency which is essentially intended to preclude any risk of favouritism or arbitrariness on the part of the contracting authority. In particular, where the award of a contract depends on the determination of the most economically advantageous tender within the meaning of Article 30(2) of the Public Works Contracts Directive or Article 36(2) of the Public Service Contracts Directive, the contracting authority must define and specify in the tender specifications the applicable award criteria. Those provisions thus seek to ensure compliance with the principles of equal treatment and transparency at the stage of evaluation of tenders with a view to award of the contract (see, by analogy, Case C‑252/10 P Evropaïki Dynamiki
v EMSA, not published in the ECR, paragraph 29).
72. Furthermore, whilst case‑law has not recognised a total or absolute ban on contracting authorities specifying in more detail, after expiry of the time-limit for submitting tenders, an award criterion for the contract previously brought to the tenderers’ attention, such a subsequent determination is nevertheless possible only if three cumulative conditions are strictly respected. First, that subsequent determination must not alter the criteria for the award of the contract set out in the contract documents or contract notice; second, it must not contain elements which, if they had been known at the time the tenders were prepared, could have affected that preparation; and, third, it must not be adopted on the basis of matters likely to give rise to discrimination against one of the tenderers (see, to this effect, Lianakis and Others, paragraph 65 above, paragraph 43 and the cited case‑law, and Evropaïki Dynamiki
v EMSA, paragraph 71 above, paragraphs 32 and 33).
73. In the present case, it must be stated that the application of the average price method assumed the need for a subsequent determination of an essential, or even decisive, element for the decision on the award of the contracts, namely the average price against which all tenders were to be compared after they had been received by the contracting authority. Consequently, not knowing that average price when they submitted their tenders, tenderers were deprived of an element which, if they had known it previously, could have affected that preparation within the meaning of the second condition mentioned in paragraph 72 above, in so far as it would have allowed them to boost their chances of scoring the maximum number of points according to the criteria set out in paragraphs 58 and 59 above. Not knowing this element prevented them from tailoring their respective tenders to the assessment of those tenders. On the contrary, the lack of transparency regarding the average price produced a situation of ‘irrational’ competition for the most competitive tenderers, who, if they wished to maintain their chances of winning the contract, were forced to submit a tender at a higher price than they could have offered, namely a tender including a price corresponding to the foreseeable average price of all the tenders and not the least expensive tender. In those circumstances, the Commission was right to state, in the contested decision, that the application of the average price method was contrary to Article 30(1) and (2) of the Public Works Contracts Directive and Article 36 of the Public Service Contracts Directive.
74. The Kingdom of Spain cannot call into question this assessment by invoking paragraph 70 of the judgment in Lombardini and Mantovani
(paragraph 64 above), whose factual and legal elements are not comparable to those in the present case. It is true that, in the words of that judgment, the fact that an anomaly threshold resulting from a calculation based essentially on the average of the tenders submitted for that contract is not known to tenderers at the time when they make their tender, since it is not determined until all the tenders have been submitted, is not capable of affecting the compatibility of that anomaly threshold with the Public Works Contracts Directive ( Lombardini and Mantovani, paragraph 64 above, paragraphs 68 to 70). However, that anomaly threshold was intended to identify and eliminate abnormally low tenders within the meaning of Article 30(4) of the Public Works Contracts Directive, which constitutes an absolute ground for the rejection of a tender, even though, in the present case, the average price method concerned an essential, or even decisive, element intended to establish the most economically advantageous tender as the award criterion for relevant contract, of which the tenderers were not aware when they prepared and submitted their tenders. It should also be stated, on the one hand, that it is settled case‑law that EU law precludes the automatic exclusion from public works contracts of certain tenders determined in accordance with a mathematical criterion and, on the other, that EU law does not in principle preclude a mathematical criterion from being used for the purposes of determining which tenders appear to be abnormally low, so long as the result to which application of that criterion leads is not beyond challenge, and the requirement for inter partes examination of those tenders in accordance with Article 30(4) of the directive is complied with (see, to this effect, Lombardini and Mantovani, paragraph 64 above, paragraph 73).
75. Furthermore, it is common ground that the application of the average price method could produce a situation in which, all other conditions being equal, including technical conditions, a tender at a higher price was likely to score more points for its economic quality than another less expensive tender, in particular where the first tender was closer to the average price or, in the case of the contracts managed by the ARC, to the price corresponding to the ‘reckless reduction’.
76. It should be noted in this regard that, while Article 36(1)(a), of the Public Service Contracts Directive — and similarly Article 30(1)(b) of the Public Works Contracts Directive — leaves it to the contracting authority to choose the criteria on which it proposes to base the award of the contract, that choice may, however, relate only to criteria aimed at identifying the economically most advantageous tender (see, to this effect, Case C‑513/99 Concordia Bus Finland
[2002] ECR I‑7213, paragraph 59 and the cited case‑law). The tender offering the best value for money can be defined as the one with the best price-quality ratio, taking into account criteria justified by the subject of the contract (see, to this effect and by analogy, Case T‑148/04 TQ3 Travel Solutions Belgium
v Commission
[2005] ECR II‑2627, paragraph 48). Accordingly, where the contracting authorities choose to award the contract to the most economically advantageous tender, they must assess the tenders in order to determine the one which offers the best value for money (see, by analogy, Case C‑368/10 Commission
v Netherlands
[2012] ECR, paragraph 86, concerning the third paragraph of recital 46 in the preamble to Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 2004 L 134, p. 114)).
77. Although the most economically advantageous tender is not always the tender with the lowest price, the fact remains that, where all tenders are perfectly equal as regards all the other relevant criteria, including technical criteria, a less expensive tender must be regarded, from an economic point of view, as being more advantageous than a more expensive tender. In such a case, the application of the average price method, which would result in the contract being awarded to a more expensive tender, cannot be considered to satisfy the criterion of the most economically advantageous tender.
78. The other arguments put forward by the Kingdom of Spain cannot alter that assessment.
79. First, the argument alleging that the contracting authorities weighted the economic criteria, including the average price criterion, and the technical criteria equally must be rejected as irrelevant. That argument does not alter the fact that, in the present case, the average price method constituted an essential or even decisive criterion for determining the most economically advantageous tender, which could, all tenders being perfectly equal as regards the other criteria, among other things result in the contract being awarded to a more expensive tender (see paragraphs 75 to 77 above).
80. Second, the argument that the average price method was applied to all tenderers irrespective of their nationality is equally irrelevant, since that argument has no bearing on the finding that the application of that method is incompatible with the criterion of the most economically advantageous tender (see paragraphs 73 to 77 above).
81. Third, the existence of the ‘correction’ tool of the ‘average reduction’, resulting in five additional points being awarded to tenders of high technical quality (see paragraph 58 above), cannot justify the application of the average price method. In this regard, the Kingdom of Spain merely claimed that it was a unilateral correction made by the contracting authority in connection with the assessment of certain tenders which it considered to demonstrate high technical quality, excluding, inter alia, tenders regarded as excessively low. However, in the absence of clarification of the assessment criteria allowing such a correction, which is in itself contrary to the principle of transparency and to the prohibition on conferring on the contracting authority an unrestricted freedom of choice as regards the award of the contract to a tenderer (see Concordia Bus Finland, paragraph 76 above, paragraph 61 and the cited case‑law), such a justification cannot be accepted.
82. Fourth, the argument that in several tender procedures the contract was nevertheless awarded to the tenderer who had submitted the least expensive tender must also be rejected as irrelevant, as that fact alone cannot prove that the average price method was consistent with the principle of transparency and the provisions of Article 30(1) and (2) of the Public Works Contracts Directive and Article 36 of the Public Service Contracts Directive.
83. Fifth, the argument, put forward in the alternative, that any unequal treatment was justified by objective reasons relating to the objective of protecting the public interest and the Union’s financial interests and the need to ensure the technical viability of the projects must be rejected. In this regard, it is sufficient to note that the grant of a contract to a tenderer who had submitted a more expensive tender, which is otherwise equivalent, is in itself contrary to the public interest and incapable of protecting the Union’s financial interests.
84. Sixth, without prejudice to the observations set out in paragraphs 122 and 123 below, the argument relating to the inappropriateness of the linear price evaluation method required by the Commission also cannot cast doubt on the incompatibility of the average price method with the principle of transparency and with the provisions of Article 30(1) and (2) of the Public Works Contracts Directive and Article 36 of the Public Service Contracts Directive and must therefore be rejected as irrelevant.
85. In the light of the foregoing considerations, it must therefore be concluded that the application of the average price method is contrary to the principle of transparency and to Article 30(1) and (2) of the Public Works Contracts Directive and Article 36 of the Public Service Contracts Directive and that the first part of the present plea in law must be rejected.
The second part of the first plea in law, alleging a misinterpretation of Article 30(4) of the Public Works Contracts Directive and Article 37 of the Public Service Contracts Directive as regards abnormally low tenders
86. The Kingdom of Spain claims that the contested decision is unlawful in so far as it finds, in paragraph 24(d), that the tendering system used by the ACA and by the ARC is incompatible with Article 30(4) of the Public Works Contracts Directive and Article 37 of the Public Service Contracts Directive. Even though Article 30(4) of the Public Works Contracts Directive provides for an inter partes procedure for examining tenders which the contracting authority intends to reject as abnormally low, that provision is not applicable in the present case because the average price method does not prescribe such rejection, even de facto, of abnormally low tenders. Accordingly, in the assessment of the most economically advantageous tender, the ACA and the ARC were not required to implement the inter partes procedure laid down in Article 30(4) of the Public Works Contracts Directive and in the first and second paragraphs of Article 37 of the Public Service Contracts Directive.
87. The Commission contends that the arguments put forward by the Kingdom of Spain and, thus, this part of the first plea in law should be rejected.
88. The General Court points out, first of all, that under the first subparagraph of Article 30(4) of the Public Works Contracts Directive, ‘[i]f, for a given contract, tenders appear to be abnormally low in relation to the works, the contracting authority shall, before it may reject those tenders, request, in writing, details of the constituent elements of the tender which it considers relevant and shall verify those constituent elements taking account of the explanations received’. Under the second subparagraph of Article 30(4), ‘[t]he contracting authority may take into consideration explanations which are justified on objective grounds including the economy of the construction method, or the technical solution chosen, or the exceptionally favourable conditions available to the tenderer for the execution of the work, or the originality of the work proposed by the tenderer’. Aside from the fact that they refer to the provision of services, the first and second paragraphs of Article 37 of the Public Service Contracts Directive have an almost identical wording.
89. In this regard, the case‑law has made clear that it was in order to enable tenderers submitting exceptionally low tenders to demonstrate that those tenders were genuine ones, and thus to ensure the opening up of public works contracts, that the Council laid down a precise, detailed procedure for the examination of tenders which appear to be abnormally low ( Lombardini and Mantovani, paragraph 64 above, paragraph 48).
90. In consequence, Article 30(4) of the Public Works Contracts Directive necessarily presupposes the application of an inter partes a procedure for examining tenders regarded by the contracting authority as abnormally low, placing the latter under an obligation, after it has inspected all the tenders and before awarding the contract, first to ask in writing for details of the elements in the tender suspected of anomaly which gave rise to doubts on its part in the particular case and then to assess that tender in the light of the explanations provided by the tenderer concerned in response to that request. It is essential that each tenderer suspected of submitting an abnormally low tender should have the opportunity effectively to state his point of view in that respect, giving him the opportunity to supply all explanations as to the various elements of his tender at a time — necessarily after the opening of all the envelopes — when he is aware not only of the anomaly threshold applicable to the contract in question and of the fact that his tender has appeared abnormally low, but also of the precise points which have raised questions on the part of the contracting authority ( Lombardini and Mantovani, paragraph 64 above, paragraphs 51 and 53).
91. The above interpretation is the only one which complies with both the wording and the purpose of Article 30(4) of the Public Works Contracts Directive. It is apparent from the very wording of that provision, drafted in imperative terms, that the contracting authority is under a duty, first, to identify suspect tenders, secondly to allow the undertakings concerned to demonstrate their genuineness by asking them to provide the details which it considers appropriate, thirdly to assess the merits of the explanations provided by the persons concerned, and, fourthly, to take a decision as to whether to admit or reject those tenders. It is therefore not possible to regard the requirements inherent in the inter partes nature of the procedure for examining abnormally low tenders, within the meaning of Article 30(4) of the Public Works Contracts Directive, as having been complied with unless all the steps thus described have been successively accomplished. Furthermore, the existence of a proper exchange of views, at an appropriate time in the procedure for examining tenders, between the contracting authority and the tenderer constitutes a fundamental requirement of the directive, in order to prevent the contracting authority from acting in an arbitrary manner and to ensure healthy competition between undertakings ( Lombardini and Mantovani, paragraph 64 above, paragraphs 54 to 57).
92. In the present case, it is clear from the description of the tendering systems in question provided by the Kingdom of Spain itself that both the contracts awarded by the ACA and the contracts awarded by the ARC provided for the determination of a threshold called the ‘reckless reduction’, which designated the percentage price reduction from which the tender was deemed to be lacking in credibility (see paragraph 57 above). It is also clear that, in the case of the contracts awarded by the ACA, tenderers who submitted a tender whose reduction exceeded the ‘reckless reduction’ did not score any points for economic quality. Similarly, in the case of the contracts awarded by the ARC, a tender equal to or lower than around 90% of the tender corresponding to the ‘reckless reduction’ was considered to be excessively low with the result that it did not score any points from that threshold.
93. It is also common ground that the tendering systems in question did not provide for a procedure allowing a tenderer who had submitted a tender whose reduction exceeded the ‘reckless reduction’ effectively to state its point of view and to supply explanations as to the various elements of his tender.
94. In the light of the foregoing, the argument put forward by the Kingdom of Spain that the provisions contained in Article 30(4) of the Public Works Contracts Directive and in the first and second paragraphs of Article 37 of the Public Service Contracts Directive are not applicable in the present case cannot be accepted. Even though those tendering systems did not provide for the automatic rejection of tenders whose reduction exceeded the ‘reckless reduction’, the fact remains that tenders that were considered to be too low did not score any points for their economic quality. As was confirmed by the parties at the hearing and by the documents subsequently produced by the Kingdom of Spain, the determination of the most economically advantageous tender was to be based on two main criteria, namely economic quality and technical quality, the precise weighting of which admittedly varied depending on the project and the contract in question. In addition, in view of the relative importance of economic quality, which was often 50%, the award of zero points for economic quality must inevitably result in the tender concerned being rejected since, even it did justify the grant of the maximum number of points for technical quality (also weighted at 50%), the tenderer could never score a total number of points allowing it to be awarded the contract. It follows that the grant of zero points to such a tender produces the same result as the rejection of a tender as abnormally low. Lastly, as the Kingdom of Spain itself states in its description of the tendering systems in question, that method, based on the ‘reckless reduction’ threshold, has the same purpose as Article 30(4) of the Public Works Contracts Directive and the first and second paragraphs of Article 37 of the Public Service Contracts Directive, namely to prevent the contract being awarded to a tenderer whose price offer is disproportionally low in view of the services or works offered and is not likely to ensure proper execution or the required minimum technical quality (see paragraph 57 above).
95. Accordingly, since the tendering systems used by the Catalonian authorities did not provide for an inter partes procedure for examining tenders which were considered to be so low that they were not awarded any points for their economic quality and, consequently, those systems did not give the tenderers concerned the opportunity effectively to state their point of view and to supply explanations as to the various elements of their tenders, it must be concluded that the Commission was justified in considering that those systems infringed the first and second subparagraphs of Article 30(4) of the Public Works Contracts Directive and the first and second paragraphs of Article 37 of the Public Service Contracts Directive.
96. Consequently, it must be stated that the Commission did not commit an error in paragraph 24(d) of the contested decision and that the second part of the first plea in law must be rejected.
The third part of the first plea in law, concerning the application of the experience of previous works criterion to determine the most economically advantageous tender
97. By the third part of the first plea in law, the Kingdom of Spain challenges the Commission’s assessment set out in paragraph 18 and in paragraph 24(b) of the contested decision, according to which the experience of previous works criterion is not allowable as a criterion to determine the choice of the most economically advantageous tender and infringes Article 30 of the Public Works Contracts Directive and Article 36 of the Public Service Contracts Directive. The Kingdom of Spain considers, in essence, that, before 2002 there was not yet any settled case‑law to the effect that the use of that criterion was contrary to EU law with the result that, up to that time, it was not to be regarded as unlawful. After clarification was given in case‑law, the ACA had stopped applying that criterion.
98. The Commission disputes the arguments put forward by the Kingdom of Spain and claims that the third part of the present plea in law should be rejected.
99. The General Court points out, first of all, that Article 23 of the Public Service Contracts Directive provides that the contract is to be awarded on the basis of the criteria laid down in Articles 36 and 37 of that directive, taking into account Article 24, after the suitability of the service providers not excluded under Article 29 has been checked by the contracting authorities in accordance with the criteria referred to in Articles 31 and 32. Similarly, Article 18 of the Public Works Contracts Directive provides that contracts are to be awarded on the basis of the criteria laid down in Articles 30 to 32 of that directive, taking into account Article 19, after the suitability of the contractors not excluded under Article 24 has been checked by contracting authorities in accordance with the criteria of economic and financial standing and of technical knowledge or ability referred to in Articles 26 and 27.
100. Second, it has consistently been held that, whilst those directives do not, in principle, preclude the examination of the tenderers’ suitability and the award of the contract from taking place simultaneously, the two procedures are nevertheless distinct and are governed by different rules (see, to this effect, for works contracts, Case 31/87 Beentjes
[1988] ECR 4635, paragraphs 15 and 16, and, for service contracts, Lianakis and Others, paragraph 65 above, paragraph 26).
101. The suitability of tenderers is to be checked by the authorities awarding contracts in accordance with the criteria of economic and financial standing and of technical capability (the qualitative selection criteria) referred to, respectively, in Articles 31 and 32 of the Public Service Contracts Directive and Articles 26 and 27 of the Public Works Contracts Directive. By contrast, the award of contracts is based on the criteria set out, respectively, in Article 36(1) of the Public Service Contracts Directive and Article 30 of the Public Works Contracts Directive, namely, the lowest price or the economically most advantageous tender (see, for works contracts, Beentjes, paragraph 100 above, paragraphs 17 and 18, and, for service contracts, Lianakis and Others, paragraph 65 above, paragraphs 27 and 28).
102. Although in the case of the choice of the most economically advantageous tender, Article 36(1) of the Public Service Contracts Directive and Article 30(1) of the Public Works Contracts Directive do not set out an exhaustive list of the criteria which may be chosen by the contracting authorities, and therefore leaves it open to the authorities awarding contracts to select the criteria on which they propose to base their award of the contract, their choice is nevertheless limited to criteria aimed at identifying the tender which is economically the most advantageous. Therefore, award criteria do not include criteria that are not aimed at identifying the tender which is economically the most advantageous, but are instead essentially linked to the evaluation of the tenderers’ ability to perform the contract in question (see Lianakis and Others, paragraph 65 above, paragraphs 29 and 30 and the cited case‑law).
103. Clearly, the experience of previous works criterion used by the ACA as an award criterion concerns the tenderers’ suitability to perform the contract and therefore does not have the status of an award criterion pursuant to Article 36(1) of the Public Service Contracts Directive and Article 30(1) of the Public Works Contracts Directive (see, to this effect, Lianakis and Others, paragraph 65 above, paragraph 31). Accordingly, the Commission rightly considered in paragraph 18 and in paragraph 24(b) of the contested decision that in the present case that criterion could not be used as an award criterion in the tender procedures in question, which is, moreover, not contested by the Kingdom of Spain.
104. With regard to the argument put forward by the Kingdom of Spain that the Commission is not entitled to find such an irregularity until case‑law clarified the point of law mentioned in paragraph 102 above, it must be borne in mind that the interpretation which the Court of Justice gives of a provision of EU law is limited to clarifying and defining the meaning and scope of that provision as it ought to have been understood and applied from the time of its entry into force. It follows that the provision as thus interpreted may, and must, be applied even to legal relationships which arose and were established before the judgment in question and it is only exceptionally that, in application of a general principle of legal certainty which is inherent in the Union legal order, the Court may decide to restrict the right to rely upon a provision, which it has interpreted, with a view to calling in question legal relationships established in good faith. Those considerations apply to the EU institutions when they, in turn, are required to implement the provisions of EU law which are subsequently interpreted by the Court of Justice (Case T‑289/03 BUPA and Others
v Commission
[2008] ECR II ‑81, paragraph 159).
105. Accordingly, the Kingdom of Spain cannot claim that a possible absence of settled case‑law before 2002 concerning the prohibition on using the experience criterion as an award criterion means that the use of that criterion could be considered to be lawful up to that time.
106. In addition and in any event, the argument put forward by the Kingdom of Spain that it could not be inferred from previous case‑law that the use of the experience criterion as an award criterion was contrary to the relevant public procurement rules must be rejected. The distinction between qualitative selection criteria and award criteria stems directly from the Public Service Contracts Directive and the Public Works Contracts Directive (see, inter alia, Chapters 2 and 3 of Title VI of each of those directives). Furthermore, the principle that examination of the tenderer’s suitability and the award of the contract are two distinct procedures governed by different rules had been recognised in 1988 in Beentjes (paragraph 100 above, paragraph 16). In that judgment, the Court also stated that the criterion of specific experience for the work to be carried out is a legitimate criterion of technical ability and knowledge for the purpose of ascertaining the suitability of contractors (paragraph 37 of that judgment).
107. Furthermore, in Concordia Bus Finland (paragraph 76 above, paragraph 59), the Court held that in so far as a tender necessarily relates to the subject-matter of the contract, the award criteria must themselves also be linked to the subject-matter of the contract. Accordingly, the award criteria used by the contracting authorities must be objective criteria linked directly and exclusively to the characteristics of the tender and to the inherent qualities of goods or services, and not to the ability of tenderers. With specific regard to previous experience criterion, in Case T‑169/00 Esedra
v Commission
[2002] ECR II‑609, paragraph 158, the General Court ruled that the quality of tenders must be evaluated on the basis of the tenders themselves and not on that of the experience acquired by the tenderers with the contracting authority in connection with previous contracts or on the basis of the selection criteria (such as the technical standing of candidates) which were checked at the stage of selecting applications and which cannot be taken into account again for the purpose of comparing the tenders ( TQ3 Travel Solutions Belgium
v Commission, paragraph 76 above, paragraph 86). Similarly, in Case C‑315/01 GAT
[2003] ECR I‑6351, paragraph 66, the Court reaffirmed that an element relating to the experience of a tenderer, like a list of references containing the names and number of the suppliers’ previous customers, could provide any information to identify the offer which was the most economically advantageous and therefore could not constitute an award criterion. In these circumstances, the Kingdom of Spain cannot simply invoke the judgments of the General Court in Case T‑183/00 Strabag Benelux
v Council
[2003] ECR II‑135, paragraphs 75 to 79, and in Case T‑4/01 Renco
v Council
[2003] ECR II‑171, paragraph 68, which could give a different interpretation.
108. The other arguments put forward by the Kingdom of Spain cannot alter the above assessment.
109. First, in so far as the Kingdom of Spain alleges contradictory conduct on the part of the Commission in that it published, itself, even after 2002, contract notices in which the experience of the tenderer was among the award criteria, that argument, which is, moreover, unsubstantiated, must be rejected as irrelevant, since such possible unlawfulness cannot justify unlawfulness in the present case in the contracts managed by the ACA.
110. Second, the argument put forward by the Kingdom of Spain that the use of the experience of previous works criterion did not affect the selection of the successful tenderers must also be rejected as irrelevant, as such a possible circumstance cannot call into question the above assessment regarding the existence of the irregularity identified by the Commission. The finding of unlawfulness in the implementation or in the application of the directives in question cannot depend on the possible factual consequences of such unlawful conduct.
111. Third, with regard to the complaint alleging a breach of the principle of the protection of legitimate expectations, it should be noted that that complaint was only raised by the Kingdom of Spain in the reply and that, consequently, in the absence of an explanation and a declaration by it at the hearing, it must be rejected as being out of time and admissible under Article 48(2) of the Rules of Procedure. In any event, in support of its complaint the Kingdom of Spain has not relied on a precise, unconditional and consistent assurance within the meaning of the case‑law (Case T‑145/06 Omya
v Commission
[2009] ECR II‑145, paragraph 117) which could justify the finding of a breach of the principle of the protection of legitimate expectations in its case.
112. In the light of all the above considerations, the Kingdom of Spain has not established that the contested decision was vitiated by an error in so far as the Commission considered that the contracts awarded by the ACA were not consistent with the relevant EU public procurement rules on the ground that they included the experience of previous works criterion as an award criterion.
113. Accordingly, the third part of the first plea in law and, therefore, the first plea in law in its entirety must be rejected.
The second plea in law, raised in the alternative, alleging a breach of the principle of proportionality within the meaning of Article H(2) of Annex II to the Cohesion Fund Regulation
114. By its second plea in law, raised in the alternative, the Kingdom of Spain alleges a breach of the principle of proportionality, as enshrined in the third paragraph of Article 5 EC and in Article H(2) of Annex II to the Cohesion Fund Regulation. The Kingdom of Spain challenges in particular paragraph 32 of the contested decision in so far as it orders the repayment of a sum of EUR 4 490 021 ‘wrongly declared’ for the ACA and ARC projects and paragraph 28 of that decision in which the Commission proposes ‘a financial correction for each project equivalent to 100% of the difference in terms of the Community contribution between the tenders selected and those recalculated contract by contract’ .
115. First, the Kingdom of Spain claims that the linear price evaluation method required by the Commission is not more appropriate, does not offer more protection of the Union’s financial interests and does not comply more fully with the relevant public procurement rules than the average price method. The application of that linear method resulted, in some cases, in the selection of a price higher than or equal to that of the tenders selected by the ACA and by the ARC using the average price method. However, in order properly to assess the financial impact of the alleged irregularity, consideration had to be given to all the contracts concerned, including those for which the ACA’s or the ARC’s decision to apply the latter method entailed a saving for the Union. Thus, the net financial correction, which takes into consideration both positive and negative results, should have been EUR 2 895 884.80 for the ACA and EUR 112 900.52 for the ARC. The request for repayment of EUR 4 490 021 in respect of the ‘wrongly declared’ sum therefore breaches the principle of proportionality.
116. Second, the Kingdom of Spain considers that, in using the linear price evaluation method, the Commission should have corrected the new weighting of the technical and economic criteria. However, the new weighting mentioned in paragraph 28 of the contested decision took account of only the elimination of the experience criterion. According to the Kingdom of Spain, if the ACA and the ARC had chosen to give the highest ‘score’ for economic quality to the least expensive tender, they would not have maintained the weighting between the technical and economic criteria, but would have necessarily accorded greater weight to the technical criterion. Since the average price method is intended precisely to ensure the technical viability of the tenders submitted, a new weighting was essential. In contrast, maintaining the initial weighting would have produced a ‘technical distortion’ and would not have ensured that the selected tender was actually the best from a technical point of view and, thus, the most economically advantageous tender.
117. Third, according to the Kingdom of Spain, there are less restrictive ways to protect the Union’s financial interests than the application of a financial correction of 100%. The Commission disregarded paragraph 2.3 of the 2002 Guidelines according to which such a correction is envisaged only when the deficiencies identified in the management and control system or the irregularity in question are ‘so serious as to constitute a complete failure to comply with [Union] rules’, so rendering all the payment irregular. However, in the present case, there was no such ‘complete’ failure, especially in view of the minimal nature of the distortion stemming from the application of the average price method by the ACA and by the ARC. Consequently, the Commission breached the principle of proportionality, since an appropriate financial correction taking into account a new weighting of the technical and economic criteria should be EUR 976 000.
118. The Commission disputes the arguments put forward by the Kingdom of Spain and contends that the present plea in law should be rejected.
119. The General Court points out that the principle of proportionality, as enshrined in Article 5 EC, is one of the general principles of Union law and requires that measures adopted by EU institutions do not exceed the limits of what is appropriate and necessary in order to attain the objectives legitimately pursued by the legislation in question; where there is a choice between several appropriate measures, recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued (see Case T‑308/05 Italy
v Commission
[2007] ECR II‑5089, paragraph 153 and the cited case‑law). In particular, having regard to the principle of proportionality, the infringement of obligations observance of which is of fundamental importance to the proper functioning of a Union system may be penalised by forfeiture of a right conferred by EU legislation, such as entitlement to aid (Case T‑199/99 Sgaravatti Mediterranea
v Commission
[2002] ECR II‑3731, paragraphs 134 and 135, and Case T‑404/05 Greece
v Commission, not published in the ECR, paragraph 89).
120. Under Article 17(1) of Implementing Regulation No 1386/2002, the amount of financial corrections made by the Commission under Article H(2) of Annex II to the Cohesion Fund Regulation for individual or systemic irregularities is to be assessed, wherever this is possible and practicable, on the basis of individual files and is equal to the amount of expenditure wrongly charged to the Cohesion Fund, having regard to the principle of proportionality. Under Article 17(2) of that regulation, when it is not possible or practicable to quantify the amount of irregular expenditure precisely, or when it would be disproportionate to cancel entirely the expenditure in question, the Commission may base its financial corrections on extrapolation or a flat rate.
121. Furthermore, it should be noted that, under paragraph 28 of the contested decision, in order to determine the financial corrections for the seven projects managed by the ACA and by the ARC, the Commission had decided, first, to replace the average price method with the linear price evaluation method which awarded the best score to the lowest tender and, second, to eliminate the experience criterion from the technical evaluation. On the basis of the new assessments prepared by the Catalonian authorities, it then proposed a financial correction for each project equivalent to 100% of the difference in terms of the Union contribution between the tenders selected and those recalculated contract by contract.
122. It must thus be stated that, in this case, in accordance with Article 17(1) of Implementing Regulation No 1386/2002, the total amount of the financial correction was calculated individually for each of the contracts in question taking into account the linear price evaluation method and eliminating the experience criterion from the technical evaluation and that the Commission did not base its correction on extrapolation or a flat rate. In addition, it is clear from the replies by the parties to the written and oral questions asked by General Court that, in the new weighting of the technical and economic criteria for those contracts, the Commission did not modify the respective weight of those criteria as adopted for the purposes of their initial weighting.
123. With regard to the first complaint raised by the Kingdom of Spain to the effect that the linear price evaluation method required by the Commission is not more appropriate, does not offer more protection of the Union’s financial interests and does not comply more fully with the relevant public procurement rules than the average price method, it should be noted that the Kingdom of Spain bases that complaint inter alia on the claim that the application of that linear method resulted, in some cases, in the selection of more expensive tenders than those actually selected using the average price method. However, in this regard the Commission stated, without this point being expressly refuted by the Kingdom of Spain, that these results were due to the abandonment of the technical criterion of the previous experience in the new assessment of tenders. Furthermore, the fact remains that the Kingdom of Spain does not show either how the linear price evaluation method is contrary to EU public procurement rules or why its application would lead the Commission to adopt financial corrections in breach of the principle of proportionality. In particular, in view of the fact that, under the linear price evaluation method, the best score is awarded to the lowest tender, the Kingdom of Spain has failed to explain convincingly whether and under what conditions that method could have resulted, all other criteria being equal, in a tender being selected whose price was higher than the price of a tender that would have been selected for the same contract if the average price method were applied.
124. In so far as, in this same context, the Kingdom of Spain alleges that the Commission failed to take into account the purported savings to the Union’s budget resulting from the fact that, for certain contracts, the ACA or the ARC selected less expensive tenders than those which would have been chosen using the linear price evaluation method required by the Commission, it is sufficient to note that it is not possible to take into consideration, in the calculation of financial corrections, such purposed savings resulting precisely from the application of the average price method. Even assuming that such savings existed, they were made in contravention of the relevant EU public procurement rules (see paragraphs 71 to 77 above). A Member State whose authorities have set up an unlawful tendering system cannot rely on such an unlawful practice in support of its position.
125. In this regard, according to paragraph 1 of the 2002 Guidelines, the purpose of financial corrections is to restore a situation where 100% of the expenditure declared for co-financing from the Cohesion Fund is in line with the applicable national and EU rules and regulations. In accordance with the principle of conformity, as enshrined in Article 8(1) of the Cohesion Fund Regulation, only expenditure made in keeping with the relevant rules is to be borne by the Union’s budget. Consequently, where the Commission identifies the existence of an infringement of EU legislation in payments made by a Member State, like the payment in the present case based on the application of the average price method, it is required to correct the accounts submitted by the Member State (see, to this effect, Case T‑81/09 Greece
v Commission, not published in the ECR, paragraph 63 and the cited case‑law).
126. In the light of the foregoing, the first complaint must be rejected.
127. The Kingdom of Spain has not substantiated its second complaint alleging that the Commission should have implemented a new relative weighting of the economic and technical criteria, in particular on the ground that the average price method was intended to ensure the technical viability of the tenders submitted and to select the best tender from a technical point of view and, thus, the most economically advantageous tender. First, it is not proven that the use of the average price method, which is in itself contrary to the relevant EU public procurement rules (see paragraphs 70 to 76 above), was a method which specifically ensured the technical viability of the projects in question and made a new weighting of the technical and economic criteria essential. Second, the Kingdom of Spain has not demonstrated that the damage to the Union’s financial interests from the use of the average price method, in so far as it permitted, all tenders being equal as regards the other criteria, the contract to be awarded to a more expensive tender, could be compensated by a supposed benefit in its technical quality.
128. It is for the Member State to demonstrate and prove that, in the new assessment of the tenders or the determination of financial corrections, aside from the elimination or replacement of evaluation criteria which are contrary to EU law — in this instance, the elimination of the experience of previous works criterion and the replacement of the average price method by the linear price evaluation method — additional changes should be made to the relevant evaluation criteria and that those changes are themselves in keeping with that legislation. In the present case, it is common ground that the Commission had regard to the respective initial weightings of the technical and economic criteria for all the contracts in question, and the Kingdom of Spain has failed to show that another weighting should or could have been lawfully implemented in order to the determine the financial corrections.
129. Consequently, the second complaint must also be rejected.
130. With regard to the third complaint, alleging that Commission disregarded the 2002 Guidelines and imposed disproportionate financial corrections, it should be pointed out that, by adopting rules of administrative conduct designed to produce external effects, like those Guidelines, and announcing by publishing them, in this case on the internet, that it will henceforth apply them to the cases to which they relate, the institution in question imposes a limit on the exercise of its own discretion and cannot depart from those rules, if it is not to be found, in some circumstances, to be in breach of general principles of law, such as the principles of equal treatment, of legal certainty or of the protection of legitimate expectations. It cannot therefore be precluded that, on certain conditions and depending on their content, such rules of conduct of general application may produce legal effects and that, in particular, the administration may not depart from them in an individual case without giving reasons that are compatible with the general principles of law such as equal treatment or the protection of legitimate expectations, provided that such an approach is not contrary to other superior rules of EU law (see, to this effect and by analogy, Joined Cases C‑189/02 P, C‑202/02 P, C‑205/02 P to C‑208/02 P and C‑213/02 P Dansk Rørindustri and Others
v Commission
[2005] ECR I‑5425, paragraphs 209 to 211, and Case T‑374/04 Germany
v Commission
[2007] ECR II‑4431, paragraph 111 and the cited case‑law).
131. It must be stated that it is only in relation to flat-rate corrections that paragraph 2.3 of the 2002 Guidelines provides that a 100% financial correction may be envisaged when the deficiencies identified in the management and control system or the irregularity in question are ‘so serious as to constitute a complete failure [by the Member State concerned] to comply with [Union] rules’, so rendering all the payment irregular. However, in the present case, as is made explicit by paragraph 28 of the contested decision, the Commission did not apply a flat-rate correction, but calculated the financial correction on the basis of specific amounts determined for each of the contracts in question (see paragraph 122 above). In accordance with Article 17(1) of Implementing Regulation No 1386/2002, which provides that the ‘amount of financial corrections made by the Commission ... shall be equal to the amount of expenditure wrongly charged to the [Cohesion] Fund’, the contested decision refers here to a correction of ‘100% of the difference’ between the tenders selected and those recalculated contract by contract, and not to a flat-rate correction, with the result that the third complaint raised by the Kingdom of Spain is irrelevant.
132. Accordingly, the third complaint and, thus, the second plea in law in its entirety must be rejected.
The third plea in law, raised in the alternative, alleging an infringement of the rights of the defence, essential procedural requirements and Article H of Annex II to the Cohesion Fund Regulation by reason of a breach of the principle of ‘sound administration’
133. By its third plea in law, raised in the alternative, the Kingdom of Spain claims that the contested decision is vitiated by an infringement of the rights of the defence, essential procedural requirements and a breach of the principle of ‘sound administration’ in so far as the Commission failed to take into account the content of the hearing on 27 and 28 June 2006 and comments made by the representatives of the Catalonian authorities on that occasion. At that hearing, the Commission had itself acknowledged that the linear price evaluation method caused distortions, since its application resulted, in some cases, in the selection of tenders which were more expensive than those actually selected by the ACA and by the ARC, and it stated that, for that reason, it was prepared to make a ‘net’ financial correction. In this regard, the Commission cannot claim that the written and oral comments made by the Catalonian authorities were made out of time, otherwise the hearing would be deprived of its essential substance and purpose. Consequently, the Commission infringed an essential procedural requirement under Article H of Annex II to the Cohesion Fund Regulation. Similarly, in the light of the contradictory conduct of the Commission between its position at the hearing on 27 and 28 June 2006 and the position ultimately taken in the contested decision, it infringed the rights of the defence of the Catalonian authorities. In particular, if the contested decision had taken into consideration the arguments made by the authorities on that occasion, which it recognised as being justified, it would have achieved a more favourable result, namely a ‘net’ financial correction. Lastly, in doing so, the Commission also breached the principle of ‘good administration’, which it is required to observe in its capacity as guardian of EU law.
134. The Commission disputes the arguments put forward by the Kingdom of Spain and contends that the present plea in law should be rejected.
135. The General Court points out that Article H of Annex II to the Cohesion Fund Regulation, in conjunction with Article 18 of Implementing Regulation No 1386/2002, provides for an inter partes procedure between the Commission and the Member State in respect of irregularities identified by the Commission in the course of its checks on projects co-financed by the Cohesion Fund. In that procedure, under the second subparagraph of Article H(1), ‘if the Member State objects to the observations made by the Commission, [it] shall be invited to a hearing ..., in which both sides make efforts to reach an agreement about the observations and the conclusions to be drawn from them’. In addition, point (b) of the first subparagraph of Article H(2) provides that ‘[a]t the end of the period set by the Commission, the Commission shall, subject to the respect of due procedure, if no agreement has been reached within three months, taking into account any comments made by the Member State, decide to ... make the financial corrections required. This shall mean cancelling all or part of the assistance granted to the project’. Furthermore, if a hearing relating to the financial corrections envisaged by the Commission is not to be meaningless, that hearing must enable both parties to debate all the issues in dispute and all the issues discussed must be taken into account by the Commission (see, to this effect and by analogy, Case C‑346/00 United Kingdom
v Commission
[2003] ECR I‑9293, paragraph 70).
136. Clearly, in the present case, at the hearing on 27 and 28 June 2006 relating to the irregularities identified by the Commission in connection with the projects in question, the representatives of the Catalonian authorities had the opportunity to explain their point of view, including their views on the supposed need to make a ‘net’ financial correction, on the alleged irregularities and on the financial corrections envisaged by the Commission for all the projects in question, as is mentioned in a report drawn up by the Commission staff and then communicated to the Permanent Representation of the Kingdom of Spain by letter of 8 September 2006. It is also apparent from that report that, after assessing the arguments made by the representatives of the Catalonian authorities, the Commission concluded that there was no need to modify its initial position. Consequently, at that hearing the Commission enabled both parties to debate all the issues in dispute, which the Kingdom of Spain does not contest, and it took into account the comments made by the Catalonian authorities on that occasion.
137. The complaint made by the Kingdom of Spain to the effect that the Commission infringed essential procedural requirements by rendering meaningless the hearing provided for in point (b) of the first subparagraph of Article H(2) of Annex II to the Cohesion Fund Regulation in conjunction with Article 18 of Implementing Regulation No 1386/2002 must therefore be rejected.
138. The Kingdom of Spain also cannot claim an infringement of the rights of the defence by virtue of the Commission’s contradictory conduct between its position at the hearing and the position ultimately taken in the contested decision, since that assertion is not supported by any evidence and is not corroborated by the abovementioned report. In addition, it is not apparent either from the case-file or from the contested decision that the Commission rejected the written comments made by the Spanish authorities following the hearing on 27 and 28 June 2006 as out of time. In any event, the Kingdom of Spain itself acknowledges that those comments did not put forward new arguments, but merely confirmed in writing the arguments made at the hearing. Accordingly, the complaint alleging an infringement of the rights of the defence must also be rejected.
139. Lastly, the complaint alleging a breach of the principle of ‘good administration’, the content of which desired by the Kingdom of Spain remains vague, is limited to a general reference to other arguments made in connection with the present plea in law, with the result that it must likewise be rejected.
140. Consequently, the third plea in law must be rejected in its entirety.
The fourth plea in law, alleging an infringement of Article 17 of Implementing Regulation No 1386/2002 on the ground that there were no real irregularities and, in the alternative, a breach of the principle of proportionality in the determination of the financial correction for the project managed by Depurbaix
Preliminary remark
141. By its fourth plea in law, the Kingdom of Spain disputes the financial correction for project No 2001.ES.16.C.PE.058 managed by Depurbaix. In the first part of the plea, it calls into question the existence of an irregularity in respect of the ineligibility of expenditure connected with the ‘management charge’. In the second part of the plea, raised in the alternative, the Kingdom of Spain claims a breach of the principle of proportionality in the determination of the financial correction.
The first part of the fourth plea in law, alleging an infringement of Article 17 of Implementing Regulation No 1386/2002
– Summary of the arguments of the parties
142. The Kingdom of Spain disputes the alleged systematic irregularity which, in the Commission’s view, is based on the fact that the ‘management charge’ covers Depurbaix’s overhead or administrative costs which are ineligible under the decision granting aid.
143. The Kingdom of Spain submits, in essence, that the decision granting aid distinguishes four scenarios, depending on whether the works are executed by third parties, by employees of the administration, by the body responsible for implementation of the project or by the public administration. If the works are executed by the body responsible for implementation of the project, which is distinct from the public administration, like Depurbaix in the present case, it is not mandatory to have recourse to public procurement procedures. For project planning and design works, management and supervision works and groundwork and construction works, the decision granting aid makes a clear distinction between the scenario where the responsible body implements the works using its own resources, without recourse to employees of the administration, and the scenario where such employees are involved. Depurbaix, a trading company formed for the sole purpose of executing the project to which financial assistance was granted and having no activity other than the implementation of that project, is not required to observe a public procurement procedure in so far as it carries out the abovementioned works using its own resources and performs its functions of financial control, financial and physical monitoring and prevention of irregularities even if, in the latter case, it has recourse to the staff of the administration. The Kingdom of Spain argues, with invoices as evidence, that the flat-rate amount of 4% of the costs of the works constitutes the consideration for the works management function performed by Depurbaix and the mandatory control, monitoring and prevention activities with the result that it cannot be regarded as ineligible overhead or administrative costs. Thus, the eligible activities performed by Depurbaix were covered by either ‘remuneration for work in connection with construction’, ‘compensation for expenditure in respect of financial control, financial and physical monitoring and prevention of irregularities’, ‘compensation for project management and supervision expenses’, or ‘compensation for communication and publicity expenditure.
144. The Commission disputes the arguments put forward by the Kingdom of Spain and contends that the present plea in law should be rejected.
– Summary of the content of the contested decision and of the decision granting aid
145. The General Court points out that, with regard to project No 2001.ES.16.C.PE.058 managed by Depurbaix, it is stated, in essence, in paragraph 17 of the contested decision, that the Commission had identified expenditure in respect of a ‘management charge’ which consisted in adding a flat-rate amount of 4% to the costs of the works and that that expenditure had to be regarded as ineligible on the ground that it represented overhead or administrative costs in accordance with the penultimate indent of paragraph 2 of section IV of Annex IV to the decision granting aid. It is clear from the documents before the Court that, in accordance with point VII of the Reglamento de contractación del consejo de aministración de Depurbaix
(Rules governing the award of contracts for the board of directors of Depurbaix, ‘the rules governing the award of contracts’), Depurbaix was entitled to charge the undertaking awarded the contract, in connection with the performance of the contracts for the execution of works, a flat-rate amount amounting to 4% of the total cost of the works, exclusive of VAT, as a contribution to its maintenance and structural expenditure.
146. In addition, paragraph 2 of section IV of Annex IV to the decision granting aid, which is entitled ‘Participation by the public administration’, provides, inter alia:
‘Where employees of the public administration participate in the activities mentioned in paragraph 1(a) of the present section, the Commission may consider to be eligible ... expenditure ... which fulfils the following criteria:
...
– the tasks to be performed under this contract must not cover general administrative functions as defined in paragraph 1 of section IX;
...’
147. Section II of Annex IV to the decision granting aid, entitled ‘Definitions and basic concepts’, defines, in paragraph 1, the body responsible for implementation of the project. Under paragraph 1(a), ‘[i]n projects subsidised by the Cohesion Fund, “body responsible for implementation” means the public or private body responsible for the organisation of the contracts relating to the projects’. Under paragraph 1(b), ‘[t]hat body shall be designated as the final beneficiary of financial assistance from the Cohesion Fund’. In addition, paragraph 2 of section II defines the concept of ‘public administration’, which comprises three levels, namely central administration (national level), regional administration and local administration.
148. The definition of the notion of ‘expenditure’ is set out in the first subparagraph of paragraph 5(a) of section II of Annex IV to the decision granting aid, under which expenditure must ‘correspond to certified payments actually made by the body responsible for implementation of the project, supported by paid invoices or accounting documents with equivalent probative value’. In addition, paragraph 5(b) of section II of Annex IV to the decision granting aid states that if a project generates revenue, the expenditure may exceptionally correspond to the certified invoices and that, in such a case, it is necessary to obtain the prior agreement of the Commission.
149. Section III of Annex IV to the decision granting aid lays down the ‘main categories of eligible expenditure’, including expenditure in relation to planning and design, the purchase of land, groundwork where the works are to be executed, building and construction, machinery and plant permanently installed in the project and measures connected with the management of the project. Furthermore, section IV of Annex IV to the decision granting aid, entitled ‘Planning and design of projects’, provides in paragraph 1(a), inter alia, that ‘[e]xpenditure arising from planning, expert assessments and project design shall, as a general rule, be eligible ..., provided it is connected with the project’.
150. Section IX of Annex IV to the decision granting aid, entitled ‘Administrative expenditure’, provides in paragraph 1(a) that ‘[a]s a general rule, it shall not be possible to obtain assistance in respect of expenditure incurred by public administrations, including the salaries of national, regional and local civil servants, except in respect of duly certified expenditure which has been effected under the obligation to perform financial controls and activities relating to financial and physical monitoring and prevention of irregularities’.
151. Lastly, section X of Annex IV to the decision granting aid, entitled ‘Other types of expenditure’, provides that ‘[a]s a general rule, expenditure relating to project management and supervision shall be eligible ... and shall be subject to the provisions mentioned in paragraphs 1 and 2 of section IV’.
152. In the light of the foregoing, it must therefore be assessed, first, whether or not Depurbaix constitutes a ‘public administration’ within the meaning of paragraph 2 of section II of Annex IV to the decision granting aid; second, whether or not the ‘management charge’ which consisted in adding a flat-rate amount of 4% to the costs of the works must be regarded as ‘expenditure incurred by a public administration’; and, third, assuming that to be the case, whether it nevertheless constitutes ‘duly certified expenditure which has been effected under the obligation to perform financial controls and activities relating to financial and physical monitoring and prevention of irregularities’ within the meaning of paragraph 1 of section IX of Annex IV to the decision granting aid.
– The status of Depurbaix as a public administration
153. According to the documents before the Court, Depurbaix is a sociedad mercantil estatal (public commercial company), in whose capital the Spanish State and the ACA have respective shareholdings of 85% and 15% and which, under the relevant Spanish legislation, is governed by private law. In addition, under paragraph 3 of Annex I to the decision granting aid, Depurbaix is the body responsible for implementation of the project for the extension of the Besos purification station with a view to the secondary biological treatment of waste water and the treatment of sludge from the Barcelona region (project No 2001.ES.16.C.PE.058) and, thus, the final beneficiary of financial assistance from the Cohesion Fund.
154. As the Commission rightly claims in its replies to the written and oral questions asked by the General Court, Depurbaix must not only be regarded as a ‘body governed by public law’ within the meaning of Article 1(b) of the Public Service Contracts Directive, but must also be treated as a public administration within the meaning of the eligibility conditions set out in the decision granting aid.
155. For a body to be considered as a body governed by public law within the meaning of Article 1(b) of the Public Service Contracts Directive, as interpreted by case‑law, three cumulative conditions must be satisfied. First, that body must be established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; second, it must have legal personality; and, third, it must be closely dependent on the State, regional or local authorities or other bodies governed by public law (see, to this effect, Case C‑44/96 Mannesmann Anlagenbau Austria and Others [1998] ECR I‑73, paragraphs 20 and 21, and Case C‑237/99 Commission
v France
[2001] ECR I‑939, paragraphs 40 and 41). In addition, the case‑law has stated that the concept of ‘contracting authority’, including a ‘body governed by public law’, must be interpreted, in the light of those objectives, in functional terms (Case C‑337/06 Bayerischer Rundfunk and Others
[2007] ECR I‑11173, paragraph 37).
156. It is clear that Depurbaix satisfies the three abovementioned cumulative conditions. Thus, under Direct management agreement No 2 of 11 December 2001 between the Spanish Ministry of the Environment and Depurbaix, Depurbaix is a public undertaking formed by the Spanish Council of Ministers in order to ‘provide direct management of the construction and/or operation of certain public hydraulic engineering works’ relating to the purification of waste water from Bas Llobregat. According to the second recital in the preamble to that agreement, by Decree-Law No 3 of 26 February 1993, those works were declared to have a general interest. It must be concluded that Depurbaix was established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character, namely, in this case, an environmental character in accordance with the first of the conditions mentioned in paragraph 155 above. Furthermore, it is not disputed that Depurbaix has legal personality, as a public limited company whose capital held is exclusively by public authorities, namely 85% by the Spanish State and 15% by the ACA and which is answerable to the administration of the Comunidad Autónoma de Cataluña, a fact that also demonstrates its close link with the Spanish State and one of its autonomous regions. Therefore, the second and third conditions mentioned in paragraph 155 above are also satisfied.
157. Consequently, contrary to the view taken by the Kingdom of Spain, as a body governed by public law within the meaning of Article 1(b) of the Public Service Contracts Directive, Depurbaix must be regarded as a ‘contracting authority’ for the purposes of that directive, with the result that it is obliged to observe the public procurement procedures provided for by that directive.
158. It also follows that Depurbaix must be considered to form an integral part of the ‘public administration’ within the meaning of paragraph 1(a) of section IX of Annex IV to the decision granting aid. This assessment is confirmed by clause 5.2.c of Direct management agreement No 2, which makes Depurbaix responsible, for the purposes of performing the task assigned to it under that agreement, for awarding contracts to third parties for the execution of the works, having due regard to the provisions of the ‘Law on contracts awarded by public administrations’. In addition, according to the first and second recitals in the preamble to the implementation contract for the project in question, dated 14 June 2002, that contract ‘formalises the terms of reference’ granted by the Spanish State to Depurbaix on 30 November 2001 for the implementation of the works for the extension of the Besos purification station with a view to the biological treatment of waste water.
159. The argument put forward by the Kingdom of Spain claiming that Depurbaix, as the body responsible for implementation of the project in question, is distinct from the public administration cannot therefore be accepted.
160. Furthermore, it follows that, in accordance with paragraph 1(a) of section IX of Annex IV to the decision granting aid, as a body forming part of the ‘public administration’, Depurbaix cannot claim co-financing from the Cohesion Fund for its ‘administrative expenditure’ except where it is ‘duly certified expenditure which has been effected under the obligation to perform financial controls and activities relating to financial and physical monitoring and prevention of irregularities’.
– The eligibility of expenditure incurred by Depurbaix as a public administration
161. With regard to the question whether or not the ‘management charge’ which consisted in adding a flat-rate amount of 4% to the costs of the works must be regarded as ‘expenditure incurred by a public administration’, it should be noted that the Kingdom of Spain argues, in essence, that that ‘charge’ does not correspond to Depurbaix’s overhead or administrative costs, but constitutes remuneration which it receives as a consideration for certain services allegedly provided to the undertaking awarded the contract after it has executed the works relating to the proje ct in question. In reply to a written question asked by the General Court, the Kingdom of Spain clarified, with invoices from Depurbaix as evidence, that the charge was a ‘payment for carrying out optional works relating to planning, management, inspection, set-up, acceptance, and settlement of works, and monitoring expenditure for quality control and studies’.
162. However, that claim is called into question, first, by point VII of the Rules governing the award of contracts (paragraph 145 above), under which Depurbaix was entitled to charge the undertaking awarded the contract a flat-rate amount amounting to 4% of the total cost of the works, exclusive of VAT, as a ‘contribution to its maintenance and structural expenditure’ and, second, by paragraph 2.4(c) of the implementation contract for the project in question, dated 14 June 2002, between Depurbaix and the undertaking awarded the contract, which states that it was a ‘contribution to Depurbaix’s overheads, such as monitoring expenditure for quality control and studies’, and not compensation for precise costs connected with specific services of that kind. Furthermore, it is clear from the invoices produced by the Kingdom of Spain that Depurbaix had invoiced that ‘charge’ in a uniform and general manner to the undertaking awarded the contract, admittedly varying its rate between 3 and 4%, stating on each occasion, using a standard wording, that it was intended as compensation for ‘carrying out optional works relating to planning, management, inspection, set-up, acceptance, and settlement of works, and monitoring expenditure for quality control and studies’, without further specifying those services or the date on which they were provided. In these circumstances, the Kingdom of Spain cannot call into question the general and uniform scope the ‘management charge’, the purpose of which was mentioned only in purely general and abstract terms in Depurbaix’s invoices, stating that it was intended as compensation for specific services provided to the undertaking awarded the contract.
163. Accordingly, the argument put forward by the Kingdom of Spain that the flat-rate amount of 4% corresponding to the ‘management charge’ constituted compensation for specific services must be rejected.
164. In addition, even if that flat-rate amount were remuneration for specific services provided by Depurbaix and irrespective of the actual nature of those services, the payments made by the undertaking awarded the contract in respect of the ‘management charge’ cannot be classified as eligible expenditure incurred by the public administration within the meaning of paragraph 1(a) of section IX of Annex IV to the decision granting aid. Having regard to the definition of the notion of ‘expenditure’ set out in the first subparagraph of paragraph 5(a) of section II of Annex IV to the decision granting aid, according to which the expenditure must ‘correspond to certified payments actually made by the body responsible for implementation of the project, supported by paid invoices or accounting documents with equivalent probative value’, eligible expenditure must necessarily be based on such ‘payments’. On the other hand, it is clear that revenue, such as that invoiced and received by Depurbaix in respect of the ‘management charge’, does not come under that definition of ‘expenditure’, which led the Commission to classify it, in paragraph 27 of the contested decision, as ‘indirect expenditure invoiced by Depurbaix’. It is in fact clear from paragraph 5(b) of section II of Annex IV to the decision granting aid that, if a project generates revenue, the expenditure may correspond to certified invoices only exceptionally and that it is necessary to obtain the prior agreement of the Commission, which was not the case here. Nevertheless, the classification of the revenue received by Depurbaix in respect of the ‘management charge’ as eligible expenditure would amount to double compensation for the costs supposedly connected with the services claimed, first, by the payments made by the undertaking awarded the contract to Depurbaix as the contracting authority and the public administration within the meaning of paragraph 1(a) of section IX of Annex IV to the decision granting aid and, second by the financial assistance from the Cohesion Fund. Lastly, at the hearing, the Kingdom of Spain was not able to explain for what reason and on what legal basis it could claim such double compensation for expenses in connection with such services.
165. In the light of all the above considerations, the Commission rightly took the view, in paragraph 17 of the contested decision, that the expenditure in respect of the ‘management charge’ which consisted in adding a flat-rate amount of 4% to the costs of the works was ineligible for co-financing from the Cohesion Fund. Accordingly, there is no need to give further consideration to the purpose of the different services allegedly provided by Depurbaix or to their possible eligibility within the meaning of section III of Annex IV to the decision granting aid, which is not applicable in the present case.
166. Consequently, the first part of the fourth plea in law must be rejected in so far as it alleges an infringement of Article 17 of Implementing Regulation No 1386/2002 on the ground that there was no irregularity.
The second part of the fourth plea in law, raised in the alternative, alleging a breach of the principle of proportionality
167. In the alternative, the Kingdom of Spain claims that the flat-rate financial correction for project No 2001.ES.16.C.PE.058 infringes Article 17 of Implementing Regulation No 1386/2002 and breaches the principle of proportionality. In the course of the administrative procedure, without any justification, the Commission changed its mind and decided to apply a flat-rate financial correction. However, in this case it was possible to carry out a precise quantification and to make a correction based on the quantified amount. The financial correction should have been made on the basis of all the amounts certified up to the date of the audit in accordance with the proposal made by the Kingdom of Spain, as enclosed with the application, and not on the basis of a flat-rate amount.
168. The Commission disputes the arguments put forward by the Kingdom of Spain and contends that the second part of the present plea in law should be rejected.
169. The General Court points out that, in paragraph 27 of the contested decision, the Commission explained, in essence, that the ineligible ‘indirect expenditure’ invoiced by Depurbaix in respect of the ‘management charge’ had been charged to three projects managed by Depurbaix, whose total amount at the time of the audit mission in October 2003 stood at EUR 9 298 055. According to the Commission, this fact reveals a deficiency in the management and control system set up by the Spanish Ministry of the Environment. It therefore adopted, having regard to the principle of proportionality, a (flat-rate) financial correction of 2% of the co-financing (85%) granted to project No 2001.ES.16.C.PE.058, that is to say an amount of EUR 2 324 414.
170. Under Article 17(2) of Implementing Regulation No 1386/2002, the Commission may base financial corrections on a flat rate only when it is not possible or practicable to quantify the amount of irregular expenditure precisely, or when it would be disproportionate to cancel entirely the expenditure in question.
171. In this regard, it should also be pointed out that, by producing the 2002 Guidelines, the Commission adopted rules of administrative conduct designed to produce external effects, announced by publishing them that it would henceforth apply them to the cases to which they relate and thus imposed a limit on the exercise of its own discretion, including for the purposes of the application of the principle of proportionality (see the case‑law cited in paragraph 130 above).
172. Under paragraph 2.3 of the 2002 Guidelines, the Commission considers that it is entitled to make a maximum (flat-rate) financial correction of 100% when the deficiencies identified in the management and control system or the irregularity in question are ‘so serious as to constitute a complete failure [by the Member State concerned] to comply with [Union] rules’, so rendering all the payment irregular. However, it applies only a minimum (flat-rate) financial correction of 2%, in view of the lower risk of loss to the Cohesion Fund and the lesser seriousness of the infringement, when performance in the cases concerned is adequate in relation to the key elements of the system, but there is a complete failure to operate one or more ancillary elements.
173. In addition, the second subparagraph of paragraph 2.5 of the 2002 Guidelines states inter alia that ‘the rate of correction should [normally] be applied to that part of the expenditure placed at risk’ and that ‘when the deficiency results from a failure by the authorities concerned to adopt an appropriate control system, then the correction should be applied to the entire expenditure for which that control system was required’. According to the same subparagraph, ‘the correction should normally concern the expenditure over the period being examined, for example one financial year [, but,] when the irregularity results from systemic deficiencies, which are evidently long-standing and affecting several years’ expenditure, then the correction should concern all the expenditure declared by the Member State while the system deficiency obtained until the month in which it was remedied’.
174. It must be stated that, in the present case, the Commission has asserted, both in the contested decision and in its written pleadings before the General Court, without this point being refuted by the Kingdom of Spain, that it is clear from the information provided by the Spanish authorities themselves that, on the date of the audit mission, the cumulative amount invoiced by Depurbaix in respect of the ‘management charge’ for all the projects managed by it was more than EUR 9 million. In particular, paragraph 27 of the contested decision states that the Commission applied, having regard to the principle of proportionality, the lowest percentage financial correction, namely a rate of 2%, as provided for in paragraph 2.3 of the 2002 Guidelines, and only respect of project No 2001.ES.16.C.PE.058. According to the explanations provided by the Commission in its written pleadings, that approach sought to take into account, first, the fact that the audit had been the first conducted in the region in question after the entry into force of Implementing Regulation No 1386/2002 and, second, the fact that the Spanish authorities had withdrawn the certificates for all expenditure corresponding to the ‘management charge’ for all the projects managed by Depurbaix. These explanations have not been refuted by the Kingdom of Spain in the course of the proceedings.
175. Furthermore, the Kingdom of Spain has not put forward any evidence to demonstrate that in the present case the Commission disregarded the principle of proportionality or the rules of conduct which it had imposed on itself with a view to the observance of that principle. Under those rules, the limitation of the flat-rate correction to the minimum percentage of 2% and its limited application to a single project managed by Depurbaix was, having regard to the irregularity identified, the lowest possible penalty that could be imposed by the Commission. In these circumstances, the Kingdom of Spain cannot claim a breach of the principle of proportionality. In addition, it has not put forward any arguments to call into question the lawfulness of the relevant rules of the 2002 Guidelines in the light of that principle or disputed that the weakness of the management and control system set out in paragraph 27 of the contested decision constituted ‘a complete failure to operate one or more ancillary elements’ within the meaning of paragraph 2.3 of the 2002 Guidelines.
176. As regards the argument put forward by the Kingdom of Spain that a financial correction should be based on all the amounts certified up to the date of the audits made by the Commission and not on a flat-rate amount, it is sufficient to note that the Kingdom of Spain has not put forward any evidence in support of that argument. On the contrary, under Article 17(2) of Implementing Regulation No 1386/2002, the Commission was entitled to make, as it did in the present case, a flat-rate correction limited to project No 2001.ES.16.C.PE.058, on the ground that it would have been disproportionate to cancel entirely the expenditure, including the expenditure relating to the other projects managed by Depurbaix. In addition, the second subparagraph of paragraph 2.5 of the 2002 Guidelines states that the rates provided for therein for determining the flat-rate corrections for certain types of irregularities are normally applied to ‘that part of the expenditure placed at risk’ and not to the amounts certified at the time of the audit. Similarly, from a temporal point of view, that provision also states that the financial correction should normally concern the expenditure over the period being examined, for example one financial year; consequently, the Commission was not, as the Kingdom of Spain claims, limited to taking into consideration the period up to the time it conducted its audit.
177. Accordingly, the Kingdom of Spain cannot allege that the Commission breached the principle of proportionality in so far as it failed to calculate the flat-rate correction in question on the basis of all the amounts certified up to the date of the audit.
178. Consequently, the second part of the fourth plea in law and, thus, that plea in law as a whole must also be rejected.
179. In the light of all the above considerations, the present application must be dismissed in its entirety.
Costs
180. Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.
181. Since the Kingdom of Spain has been unsuccessful in all of its pleas in law and the Commission has applied for costs, the Kingdom of Spain must be ordered to bear its own costs and to pay those incurred by the Commission.
Operative part
On those grounds,
THE GENERAL COURT (First Chamber)
hereby:
1. Dismisses the application;
2. Orders the Kingdom of Spain to bear its own costs and to pay those incurred by the European Commission.