Case T-199/99

Sgaravatti Mediterranea Srl

v

Commission of the European Communities

‛EAGGF — Cancellation of financial assistance — Article 24 of Regulation (EEC) No 4253/88 — Prior hearing of the beneficiary — Appropriate examination of the case by the Commission — Rights of the defence — Manifest error of assessment — Statement of reasons — Principle of protection of legitimate expectations — Principle of legality of penalties — Principle of proportionality’

Judgment of the Court of First Instance (Fiftli Chumbei), 26 September 2002 II-3736

Summary of the Judgment

Economic and social cohesion — Structural assistance — Community funding — Financial obligations of the beneficiary set out in the decision granting the assistance — Commission's power to provide for cancellation of the Community contribution in its entirety in the event of infringement

As regards checks to verify compliance with the financial obligations of beneficiaries of Community financial assistance, Article 23 of Regulation No 4253/88 laying down provisions for implementing Regulation No 2052/88 as regards coordination of the activities of the different Structural Funds between themselves and with the operations of the European Investment Bank and the other existing financial instruments, as amended by Regulation No 2082/93, entitled ‘Financial control’, institutes a system of close cooperation between the Commission and the Member States. Thus, under Article 23(2) of that regulation, the Commission may carry out checks ‘[w]ithout prejudice to checks carried out by Member States, in accordance with national laws, regulations and administrative provisions’. Furthermore, the same provision also requires the Member State concerned and the Commission to exchange immediately any relevant information concerning the results of the checks carried out. Lastly, the system for monitoring the use of Community financial assistance is based on cooperation between the Commission and the competent national authorities, who are required to assist it in the achievement of its tasks, pursuant to Article 10 EC. In this context, when the national authorities have carried out an in-depth check of whether a beneficiary of Community assistance has complied with its financial obligations, the Commission may legitimately rely on their detailed findings of facts and determine whether those findings serve to establish the existence of irregularities justifying penalties pursuant to Article 24(2) of Regulation No 4253/88, as amended. It cannot be required to carry out a fresh inquiry. A repeat check would undermine the cooperation with the national authorities and run counter to the principle of sound administration. (see paras 43-45)

Pursuant to Article 253 EC, the reasons stated for a measure must disclose clearly and unequivocally the reasoning of the Community authority which adopted it, so as to make the persons concerned aware of the reasons for the measure and thus enable them to defend their rights, and so as to enable the Community judicature to exercise its supervisory jurisdiction. The extent of the obligation to state reasons must be assessed in the light of its context and of all of the legal rules applicable to the subject-matter in question. In view, in particular, of the fact that a decision reducing the amount of Community financial assistance has serious consequences for the beneficiary ofthat assistance, the decision must clearly show the grounds which justify a reduction of the amount of the assistance initially authorised. Moreover, a decision of the Commission reducing financial assistance may be regarded as adequately reasoned if it either clearly sets out itself the reasons which justify the reduction in assistance, or refers with sufficient clarity to a measure of the competent national authorities of the Member State concerned in which those authorities set out clearly the reasons for such a reduction, in so far as the undertaking in question has been able to take cognisance of the measure. (see paras 100-102)

The right to rely on the principle of protection of legitimate expectations extends to any economic operator to whom an institution has given justified hopes. However, the principle of protection of legitimate expectations may not be relied upon by an undertaking which has committed a manifest infringement of the rules in force. (see para. Ill)

In the system for the granting of structural funds assistance and control of the projects subsidised under Regulation No 4253/88 laying down provisions for implementing Regulation No 2052/88 as regards coordination of the activities of the different Structural Funds between themselves and with the operations of the European Investment Bank and the other existing financial instruments, as amended by Regulation No 2082/93, the Commission is empowered to grant assistance with a view to assisting the carrying-out of a specific project approved by it, in its entirety, in the decision to grant assistance. The financial obligations of the beneficiary set out in that decision form part of the fundamental obligations which constitute the consideration for the Community financial contribution, and compliance with which is a precondition for the granting of the assistance, which is at the discretion of the Commission pursuant to Community law and within the framework of the partnership with the Member State concerned. The obligation to comply with the financial conditions in the decision to grant the assistance constitutes one of the beneficiary's fundamental obligations, on the same footing as the obligation to carry out the project. It follows that, in that system, Article 24(1) and (2) of Regulation No 4253/88, as amended, must be interpreted as authorising the Commission to provide for the cancellation of the financial assistance granted in its entirety in the event of infringement of the financial provisions laid down in the decision to grant assistance. (see paras 130-131)

The principle of proportionality requires that the measures adopted by Community institutions must not exceed what is appropriate and necessary for attaining the objective pursued. In particular, under that principle, the infringement of obligations observance of which is of fundamental importance to the proper functioning of a Community system may be penalised by forfeiture of a right conferred by Community legislation, such as entitlement to aid. In addition, in a case of manifest infringement of the financial conditions, any penalty other than the cancellation of the assistance would be likely to invite fraud, since intending beneficiaries would be tempted to inflate the investment amount stated in their application for the granting of the aid in order to obtain greater Community financial assistance, at the risk only of having that aid reduced by the amount of the overvaluation contained in the decision to grant the assistance. (see paras 134-136)