Case C-46/03

United Kingdom of Great Britain and Northern Ireland

v

Commission of the European Communities

(Structural funds – Decommitment of amounts – Conditions – Manchester/Salford/Trafford 2 (‘MST 2’) Programme)

Summary of the Judgment

Economic and social cohesion – Structural assistance – Community financing – Management and supervision – Transitional provisions – Time-limit for applying for final payment of the sums granted – Application for final payment – Definition – Attestation by the Member State confirming the information supplied in the application for payment and the reports – Not included – Automatic decommitment of a sum where attestation not produced within the time-limit for application for final payment – Not permissible

(Council Regulations Nos 4253/88, Art. 21(4), third indent, and 1260/1999, Art. 52(1) and (5))

In automatically decommitting a sum for expenses incurred in the context of a Community aid programme on the ground that a Member State has not submitted to it, before the time-limit for applying for final payment laid down in Article 52(5) of Regulation No 1260/1999 laying down general provisions on the Structural Funds, certification of the information supplied within the meaning of Article 21(4) 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, the Commission misapplies the said Article 52(5), and a decision by the Commission to decommit that sum must therefore be annulled.

Even though applications for final payment within the meaning of the said Article 52(5), submitted by Member States to the Commission, must at least contain the information which the Commission needs in order to proceed with the final conclusion of those projects and payment of the sums claimed, that provision does not contain any indication that the set of formalities prescribed in Article 21(4) of Regulation No 4253/88 and in the decision to grant the aid, on which formalities payment of the balance of each commitment is made conditional, must necessarily be fulfilled in order to avoid decommitment of the sums committed by virtue of that first provision. Moreover, the words ‘application for final payment’, appearing in Article 52(5) of Regulation No 1260/1999, correspond more closely to the words ‘request for payment’, which appear respectively in the first and third indents of Article 21(4) of Regulation No 4253/88. It is clear from the wording of that latter provision that the attestation or the certificate from the Member State confirming the information supplied in the application for payment and the reports, and which is at issue in the third indent of the latter, does not form part of the application for payment proper. Therefore, Article 52(5) of Regulation No 1260/1999 cannot be regarded as requiring a Member State to fulfil, before a certain date and on pain of incurring automatic decommitment, a formality, such as that of submitting a certification of the information supplied, if such an obligation is not clearly laid down by that provision.

(see paras 30, 43-46)

JUDGMENT OF THE COURT (Second Chamber)

1 December 2005 ( )

(Structural funds – Decommitment of amounts – Conditions –Manchester/Salford/Trafford 2 (‘MST 2’) Programme)

In Case C-46/03,

ACTION for annulment under Article 230 EC, brought on 31 January 2003,

United Kingdom of Great Britain and Northern Ireland, represented by P. Ormond, R. Caudwell and K. Manji, acting as Agents, assisted by D. Lloyd-Jones QC and S. Lee, barristers,

applicant,

v

Commission of the European Communities, represented by L. Flynn, acting as Agent, with an address for service in Luxembourg,

defendant,

supported by:

Council of the European Union, represented by M. Balta and F. Florindo Gijón and J. Carbery, acting as Agents,

intervener,

THE COURT (Second Chamber),

composed of C.W.A. Timmermans (Rapporteur), President of the Chamber, J. Makarczyk, R. Silva de Lapuerta, P. Kūris and G. Arestis, Judges,

Advocate General: C. Stix-Hackl,

Registrar: M. Ferreira, Principal Administrator,

having regard to the written procedure and further to the hearing on 28 April 2005,

after hearing the Opinion of the Advocate General at the hearing on 9 June 2005,

gives the following

Judgment

1 In its application, the United Kingdom of Great Britain and Northern Ireland requests the Court:

– to annul:

(a) the decision of the Commission of the European Communities, contained in a letter of 22 November 2002, to decommit the sum of EUR 11 632 600 in respect of expenditure incurred on the Manchester/Salford/Trafford 2 operational programme (‘MST 2’);

(b) the subsequent decision, taken on a date unknown to the United Kingdom, in December 2002 or January 2003, to decommit that sum;

(c) all steps taken pursuant to those decisions, including the act of decommitting that sum;

(d) the Commission’s decision, contained in that letter of 22 November 2002, ordering repayment to the European Regional Development Fund (‘ERDF’) of the sum of EUR 9 272 767 already paid to the United Kingdom in respect of expenditure incurred on MST 2, and

(e) all steps taken pursuant to that decision;

– to declare each of those decisions and measures void under Article 231 EC;

– to declare, pursuant to Article 241 EC, that, in the event of the Commission’s interpretation of Article 52(5) of Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds (OJ 1999 L 161, p. 1) and/or of Article 10 of the Annex to the Commission’s Decision C(92) 1358/8 of 6 July 1992 being correct, those provisions are inapplicable against the United Kingdom.

Legal context

2 Article 21(4) of Council Regulation (EEC) No 4253/88 of 19 December 1988, laying down provisions for implementing Regulation (EEC) 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 (OJ 1988 L 374, p. 1), headed ‘Payments’, provides:

‘Payment of the balance in respect of each commitment shall be conditional on:

– submission to the Commission by the designated authority referred to in paragraph 1 of a request for payment within six months of the end of the year concerned or of completion in practice of the operation concerned,

– submission to the Commission of the relevant reports referred to in Article 25(4),

– transmission by the Member State to the Commission of a certificate confirming the information contained in the request for payment and the reports.’

3 Article 52 of Regulation No 1260/1999, headed ‘Transitional provisions’, provides:

‘1. This Regulation shall not affect the continuation or modification, including the total or partial cancellation, of assistance approved by the Council or by the Commission on the basis of Council Regulations (EEC) No 2052/88 and (EEC) No 4253/88 or any other legislation which applied to that assistance on 31 December 1999.

…

5. Partial sums committed for operations or programmes approved by the Commission before 1 January 1994, but in respect of which no application for final payment has been received by 31 March 2001, shall be automatically decommitted no later than 30 September 2001, giving rise to the repayment of amounts unduly paid, without prejudice to operations or programmes which have been suspended on account of legal proceedings.

…’

Factual background

4 On 6 July 1992, the Commission adopted Decision C(92) 1358/8, approving Community assistance from the European Regional Development Fund (‘ERDF’) and the European Social Fund (‘ESF’) for an integrated operational programme for Manchester, Salford and Trafford, within the Community support framework for North West England under Objective 2 in the United Kingdom for the period from 1 January 1992 to 31 December 1993. Article 3 of that decision fixed the contribution from the ERDF at ECU 56.51 million.

5 Article 10 of the Annex to Decision C(92) 1358/8 provides:

‘Payment of the balance in respect of each commitment shall be conditional on the following cumulative conditions:

– submission to the Commission by the designated authority of the request for payment within six months following the end of the year concerned or of completion in practice of the operation concerned; this demand shall be put forward on expenditure actually incurred by the final beneficiaries and for which supporting documents exist;

– submission to the Commission of the relevant reports referred to in Article 25(4) of Regulation (EEC) No 4253/88, in a standard form to be agreed;

– transmission by the Member State to the Commission of a certificate confirming the information contained in the request for payment and the reports.’

6 By Commission Decision C(93) 3804 of 17 December 1993, modifying operational programmes for Objective 2 regions in the United Kingdom to take account of changes requested by the Member State in respect of the annual distribution of Community structural assistance, the award of previously unallocated resources to priority measures and the transfer of resources between certain operational programmes, the ERDF contribution in respect of MST 2 was increased from ECU 56.51 million to ECU 58.163 million.

7 By letters of 11 June 1999 and 31 July 2000, the Government Office for the North West (‘the GONW’) submitted draft final reports on MST 2.

8 On 26 February 2001, the GONW sent a letter to the Commission stating, inter alia:

‘We are currently preparing the final financial tables for these two programmes. They will be e-mailed to you by Paul [D.] on completion of first MST 1 and then MST 2. In advance of the e-mail I enclose hard copies of original documents so that you will have a full set of documents ahead of the 31 March 2001 de‑commitment deadline’.

9 On 15 March 2001, the GONW sent the following letter to the Commission:

‘Further to my note on 26 February 2001 I enclose hard copies of the original documents on MST 2. The final financial tables for MST 1 and 2 will be e-mailed to you by Paul [D.] when Ian [J.] has cleared outstanding issues with Manchester [City Council] ahead of the 31 March 2001 de-commitment deadline. Included with the financial tables will be lists of approved projects by applicant and priority.

The drawdown table and financial out-turn table show the balance of funds due to the [United Kingdom] Government. We will agree a formal application for financial drawdown when your Finance Team have taken a view on the figures submitted.

These tables reflect the position as shown in the revised reports submitted to [the Commission] on 31 July 2000’.

10 A report on MST 2, headed ‘Final Report’, was enclosed with that letter.

11 On 21 March 2001, the GONW sent an e-mail to the Commission in the following terms:

‘Please find attached four spreadsheets which I have been asked to forward to yourself by Paul [I.], to enable you to close down the two programmes.

…’

12 Attached to that e-mail were various tables containing financial information relating to MST 2. Appendix 4, showing approved projects by priority, stated a total eligible expenditure of GBP 111 735 335.

13 Following an exchange of e-mails between the Commission and the GONW, some corrections were made to the financial tables during the summer of 2001, without that total of eligible expenditure being amended.

14 Subsequently, a major exchange of e-mails took place between the GONW and the Commission, which this time insisted that the United Kingdom authorities send a final certificate of expenditure.

15 By letter of 6 February 2002, the GONW sent the Commission such a certificate, stating eligible expenditure of GBP 111 735 335.

16 By letter of 18 April 2002, signed by the Director‑General of the Regional Policy Directorate-General, the Commission informed the United Kingdom authorities of its intention to decommit the balance of the ERDF assistance for MST 2, amounting to EUR 11 632 600. It explained that the document submitted on 6 February 2002 had not been accepted as a request for payment because it had not been transmitted before the deadline of 31 March 2001 laid down in Article 52(5) of Regulation No 1260/99. The Commission gave the United Kingdom two months to submit its observations.

17 By letter of 12 June 2002, the United Kingdom authorities wrote to the Commission challenging the proposal to decommit the balance allocated to MST 2. They argued in particular that a draft final report had been submitted in July 2000, the financial tables had been submitted on 21 March 2001 and all relevant information had been submitted by the deadline of 31 March 2001.

18 By letter of 22 November 2002, the Commission contested those arguments and confirmed that it had given instructions for the decommitment of the remaining balance of EUR 11 632 600.

19 On 31 January 2003, the United Kingdom brought the present action. The Commission contends that the Court should dismiss it as partially inadmissible and unfounded as to the remainder, or, in the alternative, dismiss it as unfounded in its entirety.

20 By order of the President of the Court of 25 March 2003, the Council of the European Union was granted leave to intervene in support of the Commission.

The action

The subject-matter of the action

21 Concerning the pleas for annulment in the first indent, subparagraphs (d) and (e), of the forms of order sought by the United Kingdom, the Commission has indicated in its defence that it has decided no longer to demand repayment of the sum of EUR 9 272 767, that decision having been communicated to the United Kingdom Government by letter of 13 March 2003.

22 Since the United Kingdom Government does not deny receipt of that decision, the action must be regarded as having become devoid of purpose in relation to those pleas for annulment.

Admissibility

23 The Commission argues that the pleas in the first indent, subparagraphs (b) and (c), of the forms of order sought by the United Kingdom are inadmissible because they concern measures which are not autonomous decisions but unavoidable consequences of the letter of 22 November 2002, referred to in the first indent, subparagraph (a) of the same pleading.

24 The Court notes that, according to that letter, the Commission gave instructions to the relevant department to decommit the remaining balance of EUR 11 632 600. As the Advocate General has pointed out in point 46 of her Opinion, that letter therefore constitutes a measure producing legal effects in relation to the United Kingdom.

25 In those circumstances, the measures referred to in the first indent, subparagraphs (b) and (c), of the forms of order sought by the United Kingdom constitute, at the most, a confirmatory measure and an implementing measure respectively in relation to the decision already contained in the letter of 22 November 2002. They cannot, therefore, be challenged separately.

26 The pleas for annulment of the measures referred to in the first indent, subparagraphs (b) and (c), of the forms of order sought by the United Kingdom are therefore inadmissible.

The merits

27 In its application, the United Kingdom makes four pleas in law in support of its action. The first claims infringement of Article 52(5) of Regulation No 1260/1999. In its second plea, the United Kingdom Government raises an objection of illegality, alleging unlawfulness of that provision and/or of Article 10 of the Annex to Decision C(92) 1358/8. The third plea claims infringement of the principle of the protection of legitimate expectations and of Article 10 EC, and the fourth claims that there has been an insufficient statement of reasons. By letter of 23 March 2005, the United Kingdom Government announced that it was abandoning its second plea.

28 In its first plea, the United Kingdom Government argues that, as is demonstrated by their wording and context, the documents which it sent to the Commission in February and March 2001 constituted an application for final payment within the meaning of that provision, which allowed the Commission to close MST 2. In its submission, that same provision, interpreted in the light of the principles of legal certainty, proportionality, sound administration, Community solidarity and regional partnership, and of cooperation between the Community institutions and Member States within the meaning of Article 10 EC, does not require that an application for final payment must be made by using the standard form for certification of ERDF expenses. The Commission therefore erred in law by holding that failure to produce an application for final payment in that form before 31 March 2001 entailed application of the penalty referred to in Article 52(5) of Regulation No 1260/1999.

29 The Commission replies that, for that provision to be effective, it had to have all the information necessary for closing the assistance before 31 March 2001 and that those documents are in the form required to enable it to do that. In its submission, an uncertified statement of expenditure, sent by electronic mail in the form of an ‘Excel’ file, cannot be regarded as an application for final payment, not only because it was not submitted in accordance with the standard form, but also because such an application must be signed and certified in accordance with Article 21(4) of Regulation No 4253/88 and Article 10 of the Annex to Decision C(92) 1358/8.

30 In that connection, it should be noted that applications for final payment within the meaning of Article 52(5) of Regulation No 1260/1999, submitted by the Member States, must at least contain the information which the Commission needs in order to proceed with the final conclusion of those projects and payment of the sums claimed (see, to that effect, Case C-84/96 Netherlands v Commission [1999] ECR I‑6547, paragraph 57).

31 The documents before the Court show that, within the deadline of 31 March 2001, the United Kingdom had sent the Commission a large amount of information concerning MST 2 by letters of 26 February and 15 March 2001, supplemented by annexes and by an e-mail of 21 March 2001.

32 It should be noted that, as it stated at the hearing, the Commission does not blame the United Kingdom for having sent certain information to it by electronic mail.

33 Nor does the Commission claim that there was any incoherence in the figures communicated, which prevented it from closing the programme concerned, or that the information was sent to it by an authority that was not authorised to do so.

34 It does, however, argue that the report, which, as the documents submitted by the United Kingdom Government show, was annexed to the letter of 15 March 2001, was a provisional report.

35 The Court finds nothing in the documents before it to show that that report, headed ‘Final Report’, had the status of a provisional report. Nor does the Commission specify on what points that report is supposed to have been incomplete.

36 Moreover, in relation to the corrections made to the information during the summer of 2001, and described by the United Kingdom as minor without being seriously contradicted by the Commission, the Court can in any event find no evidence from the documents on file, and more particularly from the letter of 18 April 2002, that those corrections could have played a part in the Commission’s decision to proceed to decommitment.

37 The Commission considers that the United Kingdom did not make an application for final payment within the meaning of Article 52(5) of Regulation No 1260/1999 before 31 March 2001, on the ground that it did not, before that date, submit a certification of the information supplied.

38 The Commission argues that an obligation to certify the supplied information before that deadline in Article 52(5) of Regulation No 1260/1999 arises under the third indent of Article 21(4) of Regulation No 4253/88 and the third indent of Article 10 of the Annex to Decision C(92) 1358/8, which provide that Member States must send the Commission an attestation or a certificate confirming the information supplied and the application for payment and the reports.

39 That argument of the Commission cannot, however, be accepted.

40 It is true that the third indent of Article 21(4) of Regulation No 4253/88, which, as is apparent from Article 52(1) of Regulation No 1260/99, continues to govern assistance such as that at issue in this case, and the third indent of Article 10 of the Annex to Decision C(92) 1358/8 impose a set of formalities on the United Kingdom in order to obtain payment of the balance of each commitment, including that of sending the Commission an attestation confirming the information supplied in the application for payment and the reports.

41 However, neither those provisions, nor Article 52(5) of Regulation No 1260/1999 support the conclusion that the attestation must be sent before 31 March 2001.

42 Concerning, first, the third indent of Article 21(4) of Regulation No 4253/88 and the third indent of Article 10 of the Annex to Decision C(92) 1358/8, suffice it to say that these do not impose the deadline of 31 March 2001.

43 Concerning, next, Article 52(5) of Regulation No 1260/1999, it should be noted that that provision does not contain any indication that the set of formalities prescribed in Article 21(4) of Regulation No 4253/88 and in the third indent of Article 10 of the Annex to Decision C(92) 1358/8, on which formalities payment of the balance of each commitment is made conditional, must necessarily be fulfilled in order to avoid decommitment of the sums committed by virtue of that first provision.

44 Moreover, the words ‘application for final payment’, appearing in Article 52(5) of Regulation No 1260/1999, correspond more closely to the words ‘request for payment’, which appear respectively in the first and third indents of Article 21(4) of Regulation No 4253/88 and of Article 10 of the Annex to Decision C(92) 1358/8. It is clear from the wording of those two latter provisions that the attestation or the certificate at issue in the third indent of the latter do not form part of the application for payment proper.

45 Therefore, Article 52(5) of Regulation No 1260/1999 cannot be regarded as requiring a Member State to fulfil, before a certain date and on pain of incurring automatic decommitment, a formality, such as that of submitting a certification of the information supplied, if such an obligation is not clearly laid down by that provision.

46 It follows from the above that the Commission erred in its application of Article 52(5) of Regulation No 1260/1999 by proceeding to automatic decommitment, on the ground that the United Kingdom had not submitted to it, before 31 March 2001, certification of information supplied within the meaning of the third indent of Article 21(4) of Regulation No 4253/88 and the third indent of Article 10 of the Annex to Decision C(92) 1358/8.

47 The first plea raised by the United Kingdom is therefore well founded.

48 On those grounds, and without there being any need to examine the other pleas raised by the United Kingdom, the action by the latter must be upheld.

Costs

49 Under Article 69(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. As the United Kingdom has applied for costs against the Commission and the latter has been unsuccessful, the Commission must be ordered to pay the costs. Pursuant to Article 69(4) of the Rules of Procedure, the Council, which has intervened in this dispute, must bear its own costs.

On those grounds, the Court (Second Chamber) hereby:

1. Annuls the decision of the Commission of the European Communities, contained in the letter of 22 November 2002, decommitting the sum of EUR 11 632 600 in respect of expenditure incurred under the Manchester/Salford/Trafford 2 operational programme;

2. Orders the Commission of the European Communities to pay the costs;

3. Orders the Council of the European Union to bear its own costs.

[Signatures]