OPINION OF ADVOCATE GENERAL KOKOTT

delivered on 16 June 2005 ( )

Joined Cases C-138/03, C-324/03 and C-431/03

Italian Republic

v

Commission of the European Communities

(Structural Funds – Co-financing – Regulation (EC) No 1260/1999 and Regulation (EC) No 1685/2000 – Provisions concerning the eligibility of payments on account by national authorities within the framework of State aid schemes – Proof of utilisation of money by individual recipients – Acts open to challenge by action for annulment – Legal interest – Case does not proceed to judgment)

I – Introduction

1. The present proceedings comprise three applications for annulment by the Italian Republic against the Commission of the European Communities in the area of the Structural Funds. In essence, the applications seek clarification of the conditions on which payments by Member States made within the context of State aid schemes pursuant to Article 87 EC to aid recipients (‘individual recipients’) may be subsidised from Community Structural Funds.

2. Further applications for annulment at the instance of the Italian Republic on the same subject are pending before the Court of First Instance. ( ) The Court of First Instance has so far stayed its proceedings in three of these Cases pending the decision of the Court in the present proceedings. ( )

II – Legal framework

3. The legal framework for these proceedings is provided by Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds ( ) (hereinafter ‘Regulation No 1260/1999’, or ‘the basic Regulation’) and Commission Regulation (EC) No 1685/2000 of 28 July 2000 laying down detailed rules for the implementing of Council Regulation (EC) No 1260/1999 as regards eligibility of expenditure of operations co-financed by the Structural Funds ( ) (hereinafter ‘Regulation No 1685/2000’, or ‘the implementing Regulation’).

A – The basic Regulation

4. Paragraph 1(1) and (3) and Paragraph 2 of Article 32 of Regulation No 1260/1999, entitled ‘Payments’, provide inter alia as follows:

‘1. Payment by the Commission of the contribution from the Funds shall be made, in accordance with the corresponding budget commitments, to the paying authority as defined in Article 9(o).

…

Payments may take the form of payments on account, interim payments or payments of the final balance. Interim payments and payments of the balance shall relate to expenditure actually paid out, which must correspond to payments effected by the final beneficiaries, supported by receipted invoices or accounting documents of equivalent probative value.

…

2. When the first commitment is made, the Commission shall make a payment on account to the paying authority. This payment on account shall be 7% of the contribution from the Funds to the assistance in question.’

5. Article 30(3) of this regulation provides:

‘The relevant national rules shall apply to eligible expenditure except where, as necessary, the Commission lays down common rules on the eligibility of expenditure in accordance with the procedure referred to in Article 53(2).’

6. Article 9 of the Regulation lays down the following definitions:

‘(j) measure: means the means by which a priority is implemented over several years which enable operations to be financed. Any aid scheme pursuant to Article 87 of the Treaty or any aid granted by bodies designated by the Member States, or any group of aid schemes or aid grants of this type or any combination thereof which have the same purpose and are defined as a measure;

(k) operation: means any project or action carried out by the final beneficiaries of assistance;

(l) final beneficiaries: means the bodies and public or private firms responsible for commissioning operations. In the case of aid schemes pursuant to Article 87 of the Treaty and in the case of aid granted by bodies designated by the Member States, the final beneficiaries are the bodies which grant the aid;

…

(o) paying authority: means one or more national, regional or local authorities or bodies designated by the Member States for the purposes of drawing up and submitting payment applications and receiving payments from the Commission. The Member State shall determine all the modalities of its relationship with the paying authority and of the latter’s relationship with the Commission.’

7. The 43rd recital in the preamble to Regulation No 1260/1999 states:

‘… sound financial management should be assured by providing that expenditure is to be duly justified and certified …’.

B – The implementing Regulation

8. The enabling provision for Regulation No 1685/2000 is Article 30(3) of Regulation No 1260/1999. The fifth recital in the preamble to Regulation No 1685/2000 states that ‘for certain types of operation the Commission considers it necessary in order to guarantee the uniform and equitable implementing of the Structural Funds across the Community to adopt a common set of rules on eligible expenditure.’

9. These rules on eligibility are contained in the Annex to Regulation No 1685/2000. As originally enacted, ‘Rule No 1: expenditure actually paid out’ (hereinafter ‘Rule No 1 on eligibility’) stated inter alia:

‘1. PAYMENTS BY FINAL BENEFICIARIES

1.1. Payments effected by final beneficiaries within the meaning of the third subparagraph of Article 32(1) of Regulation (EC) No 1260/1999 (hereinafter “the General Regulation”) shall be in the form of cash subject to the exceptions indicated in point 1.4.

1.2. In the case of aid schemes under Article 87 of the Treaty and aid granted by bodies designated by the Member States, “payments by final beneficiaries” means aid paid to individual recipients by the bodies which grant the aid. Payments of aid by final beneficiaries must be justified by reference to the conditions and objectives of the aid.

1.3. In cases other than those referred to in point 1.2, “payments by final beneficiaries” means payments effected by the bodies or public or private firms of the type defined in the programme complement in accordance with Article 18(3)(b) of the General Regulation having direct responsibility for commissioning the specific operation.

…

2. PROOF OF EXPENDITURE

As a rule, payments by final beneficiaries shall be supported by receipted invoices. Where this cannot be done, payments shall be supported by accounting documents of equivalent probative value …’.

10. As most recently amended by Commission Regulation (EC) No 448/2004 of 10 March 2004 (hereinafter ‘Regulation No 448/2004’), retrospectively with effect from 5 August 2000, point 2 of Rule No 1 on eligibility provides inter alia the following:

‘2. PROOF OF EXPENDITURE

2.1. As a general rule, payments by final beneficiaries, declared as interim payments and payments of the final balance, shall be supported by receipted invoices. Where this cannot be done, payments shall be supported by accounting documents of equivalent probative value.’ ( )

Apart from that, Regulation No 448/2004 did not make any material changes to the substance of the rules on eligibility relevant in the present proceedings. ( )

III – Facts and procedure before the Court

A – Background

11. On 7 September 2001 the Commission issued to the Member States, including the Italian Republic, ( ) a memorandum on Article 32(1)(3) of Regulation No 1260/1999, in which it set out its interpretation of the terms ‘expenditure actually paid out’ and ‘payments effected by the final beneficiaries’ for the purposes of that provision (hereinafter ‘the 2001 Memorandum’).

12. So far as material to the present case, the 2001 Memorandum stated in essence that the Commission took the view that payments on account by a national body which granted aid (‘final beneficiary’ ( )) made within the framework of national aid schemes to an aid recipient (‘individual recipient’ ( )) were in principle not eligible, that is the Commission was of the view that the Structural Funds could not contribute to such payments. The Memorandum stated that such payments were eligible only where it was proved that the individual recipient had utilised the payments on account for expenditure actually paid out. To that end it was necessary for there to be provided receipted invoices, or where this could not be done, accounting documents of equivalent probative value.

13. After a long and detailed exchange of correspondence, the Commission indicated it would be prepared to amend the implementing Regulation so that in the future such payments would be eligible – which the Commission thought they were not. For that purpose at the end of 2002 it put a Proposal ( ) to the representatives of the Member States, inter alia in the Committee for the Development and Conversion of Regions, ( ) to amend the rules on eligibility in the Annex to Regulation No 1685/2000, including points 1.2 and 2 of Rule No 1 on eligibility. However, it did not receive the necessary consent to the measure from the Committee for the Development and Conversion of Regions, and on 19 February 2003 in the Committee’s 73rd session announced that it had abandoned its intention to make this amendment and would not take any more steps in that direction.

14. By Memorandum No 26777 dated 14 May 2003, the Commissioner for Regional Policy, Mr Barnier, notified this result to the Italian Minister for the Economy and for Finance, Mr Tremonti. ( ) The Commissioner added that the Commission maintained its original view that the payments on account in dispute in the present Case were not eligible. However, having regard to a legitimate expectation which it might have created, the Commission had decided to recognise as eligible all payments on account which had been finally approved by 19 February 2003, or had been approved in a procurement procedure concluded by that date, that is by the time the discussions in the Committee for the Development and Conversion of Regions were concluded.

15. A further Memorandum No 26777bis dated 29 July 2003 corrected a translation error in the original Memorandum No 26777 of 14 May 2003. The difference between the two Memoranda was a single clause, which contained details as to the eligibility of payments on account by Member States made up to 19 February 2003: whereas the original version contained the words, ‘procedura di gara conclusasi entro la stessa data’, ( ) the new letter referred to ‘procedura di gara, laddove il relativo bando sia stato chiuso entro la stessa data’. ( ) The Commissioner’s covering letter emphasised that the new Memorandum replaced the original one retrospectively, with effect from 14 May 2003. ( )

B – Cases C-324/03 and C-431/03

16. In Cases C-324/03 and C-431/03 the Italian Republic challenges Commissioner Barnier’s two Memoranda.

17. By its application in Case C-324/03, lodged on 25 July 2003, the Italian Republic challenges Commissioner Barnier’s Memorandum No 26777 ( ) and applies for it to be annulled in so far as it denies eligibility to payments on account made by Member States after 19 February 2003 within the State aid framework.

18. By its application in Case C-431/03, lodged on 9 October 2003, the Italian Republic challenges Commissioner Barnier’s Memorandum No 26777bis ( ) and applies for it to be annulled in so far as it denies eligibility to payments on account made by Member States after 19 February 2003 within the State aid framework.

19. In both Cases, the Italian Republic also applies for all other measures connected with or preliminary to the relevant Memorandum to be annulled and for the Commission to be ordered to pay the costs of the proceedings.

20. In both Cases the Commission applies for the action to be dismissed as inadmissible, and in the alternative as unfounded, and for the applicant to be ordered to pay the costs of the proceedings.

C – Case C-138/03

21. Whereas the parties’ dispute in Cases C-324/03 and C-431/03 as to eligibility of national payments on account does not relate to an actual application for payment, Case C-138/03 concerns such an application for payment by the Italian authorities.

22. By Memorandum No 38413 by its Ministry of Economy and of Finance dated 23 December 2002, the Italian authorities applied to the Commission for an interim payment from the Structural Funds for its operational programme ‘Ricerca Scientifica, Sviluppo Tecnologico, Alta Formazione’. ( ) This sought inter alia subsidies for payments by the Italian authorities to individual recipients within the framework of a national aid scheme.

23. By Memorandum No 100629 dated 20 January 2003 ( ) the Commission notified the Italian authorities that whether payments on account pursuant to aid schemes were eligible had not been finally determined. The Directorate-General for Regional Policy had decided to deduct the appropriate amounts from applications for payment. Accordingly, the Italian authorities were asked to quantify their payments on account, and consideration of their application for payment was suspended for the time being.

24. Subsequently, by Memorandum No 102627 dated 3 March 2003 ( ) the Commission notified the Italian authorities that its payments on account in the amount of EUR 3 163 570.18 would not be recognised as eligible and would therefore be deducted.

25. The Italian Republic’s application in Case C-138/03, lodged on 27 March 2003, challenges Memoranda Nos 100629 and 102627. The Italian Republic applies for both these Memoranda to be annulled, together with all measures connected with or preliminary to them, and for the Commission to be ordered to pay the costs of the proceedings.

26. However, after this action was raised, on 23 May 2003 ( ) the Commission notified the Italian authorities that it had instructed payment of the disputed amount and that the decision in its Memoranda Nos 100629 and 102627 refusing recognition was ‘annulled’. As regards its reasons, it referred to Commissioner Barnier’s Memorandum No 26777 dated 14 May 2003 ( ) which had been issued in the meantime and which stated that legitimate expectations in relation to payments on account up until 19 February 2003 would be met.

27. On 5 June 2003, the Commission in fact made the back payment of EUR 3 163 570.18.

28. In the light of this, the Commission applies for Case C-138/03 to be removed from the Court’s register.

D – Procedure before the Court

29. By Order dated 26 January 2004 the President of the Court joined Cases C‑138/03, C-324/03 and C-431/03 for the purposes of the oral procedure and the judgment.

30. The joint hearing took place on 21 April 2005. The opportunity was taken to raise with the parties the question whether it was necessary to proceed to judgment in Case C-138/03 (Article 91(3) in conjunction with Article 92(2) of the Rules of Procedure).

IV – Assessment

A – Case C-138/03

31. In Case C-138/03, the Commission has merely ‘applied’ for the Case to be removed from the Court’s register.

32. The removal of a Case cannot as such be applied for. It may be ordered by the President of the Court only as the procedural consequence of an extra-judicial settlement of the dispute (Article 77 of the Rules of Procedure) or the discontinuance of the proceedings (Article 78 of the Rules of Procedure).

33. However, in the present Case the parties have not intimated that they have achieved an extra-judicial settlement; nor have the proceedings been discontinued. On the contrary, the Italian Republic continues to pursue the action and maintains its applications. Thus, the requirements for removal of the Case are not satisfied.

34. If one interprets the Commission’s ‘application’ by reference to its purpose, it may be understood to be a suggestion to the Court that it should declare that there is no need to adjudicate in the Case, pursuant to Article 92(2) of the Rules of Procedure. Specifically, it appears from the Commission’s written and oral submissions that it is of the view that the dispute between the parties has become devoid of purpose.

35. As a matter of fact, on 23 May 2003 the Commission notified the Italian authorities that it had ordered the payment of the disputed amount and that its decisions in Memoranda Nos 100629 and 102627 to refuse recognition were ‘annulled’; the disputed amount was subsequently paid. Thus, all the conditions laid down in Article 92(2) of the Rules of Procedure for a declaration that it is unnecessary to adjudicate in the proceedings are satisfied.

36. However, in its reply to the Commission’s defences, and at the hearing, the Italian Republic emphasised that it was necessary to obtain a comprehensive and definitive clarification on the questions of law raised, so that in the future the Commission could not make decisions similar to those challenged in the present proceedings, that is decisions refusing co-financing from the Structural Funds for payments made within the framework of national aid schemes. ( ) It referred to a continuing uncertainty in law as regards the eligibility of such payments. ( )

37. Consistent with this the Italian Government also submitted that despite the subsequent payment of the disputed amounts it still had a legal interest in pursuing its action, in particular because there was a danger of repetition in any future applications it made for payment in similar cases.

38. On this issue it is first to be observed that the Italian Republic’s submissions as to a continuing legal interest in the proceedings were not made out of time. The consequence of Article 42(2) of the Rules of Procedure is that new pleas in law and defences may be raised in the course of proceedings if they are based on matters of law or of fact which come to light in the course of the procedure. These requirements are satisfied in the present Case. The Italian Republic’s action was lodged at the Court on 27 March 2003. It was only after that, on 23 May 2003, that by Memorandum No 106837 the Commission changed its position, and, on 5 July 2003, that the disputed amount was eventually paid. Thus, this change to the facts of the case occurred after the action had been raised, and accordingly could not be taken into account by the Italian Republic until its reply.

39. In fact, the Community Courts have repeatedly recognised that where the original purpose of a legal act has ceased but the act has not been formally set aside, there may still be an interest in having it annulled. Thus, for example, parties to mergers may raise and continue with an action to set aside prohibition notices issued by the Commission even if the prohibition has caused them to abandon their notified intention to merge. In those and similar cases the applicant’s legal interest may arise from the risk of repetition by a Community organ of the conduct (alleged to be) unlawful. ( ) In addition, an action for annulment can constitute the basis for subsequent proceedings for damages. ( ) Also, the case-law emphasises the need for conduct by organs of a Community governed by the rule of law to be reviewable by the courts. ( )

40. However, the present Case is marked by a particular feature: not only has the Commission paid the disputed amount, but by its Memorandum No 106837 dated 23 May 2003 it has also already expressly set aside (‘annulled’) the decision which is now challenged. Thus, by contrast with the examples mentioned previously, for example within the field of merger control, the disputed legal acts no longer exist. Thus, there is no longer any legal act which could still be the subject of an action for annulment.

41. The Italian Republic has already achieved the aim it pursued by its action in annulment, namely the annulment of the legal acts it challenged. In proceedings under Article 230 EC the Court of Justice cannot offer any more extensive legal protection. In particular, it cannot answer the questions of law raised in such proceedings detached from a reviewable legal act. To do so would be to give a legal opinion on an abstract legal problem, and under the system of legal protection established by the EC Treaty, with its exhaustive list of remedies, the Court of Justice does not have power to do this. Only if the Commission should in the future refuse (in part) an application for reimbursement made by the Italian authorities could the Italian Republic have the underlying questions of law answered in an action for annulment. ( )

42. In these circumstances I conclude that the Italian Republic no longer has a legal interest in continuing its application for annulment by the present action. By virtue of the Commission’s express setting aside (‘annulment’) of the Memorandum being challenged, the application in Case C-138/03 has become devoid of purpose, so that Article 92(2) of the Rules of Procedure requires a declaration that there is no need to adjudicate on it. ( )

B – Cases C-324/03 and C-431/03

1. Admissibility of the actions

43. As regards Cases C-324/03 and C-431/03, the Commission objects that each is inadmissible.

a) Case C-324/03

44. As regards Case C-324/03, the Commission submits that for two reasons Commissioner Barnier’s Memorandum No 26777 dated 14 May 2003 is not a reviewable legal act. First, it was a mere expression of opinion, and second, it merely confirmed the contents of the 2001 Memorandum. ( )

45. The Court has consistently held that any measure which produces binding legal effects such as to affect the interests of an applicant by bringing about a distinct change in his legal position is an act or decision which may be the subject of an action for annulment under Article 230 EC. ( ) Whether a measure constitutes a reviewable act for the purposes of Article 230(1) EC depends on its substance: the form in which it is promulgated is immaterial. ( )

46. The substance of the Memorandum by Commissioner Barnier being challenged may be divided into two parts. In the first part the Commission states that, following the failure of the discussions in the Committee for the Development and Conversion of Regions, it is maintaining its previous opinion as to the law, namely that in principle assistance from the Structural Funds is not available for payments on account made by national authorities within the framework of aid schemes. The second part of the Memorandum contains the exception already mentioned, namely that to protect legitimate expectations payments on account made up to 19 February 2003 will be recognised as eligible.

47. The Italian Republic’s action does not relate to the recognition of payments made up to 19 February 2003. Nor does it complain about the choice of that particular date. In essence its action seeks to have the Memorandum annulled in so far as it continues to deny the eligibility of payments by national bodies in the normal case, that is except for the time‑limit provision. ( ) Accordingly, what is challenged is not the new exception, which is favourable to the applicant, but the Commission’s re-confirmed opinion as to the general legal position, which is unfavourable to the applicant, namely that in principle, and therefore after 19 February 2003, payments on account by national bodies are not eligible. Thus, the Italian Republic challenges not the second but the first part of Commissioner Barnier’s Memorandum.

48. However, an action with this object is inadmissible, because it is not directed against a legal act which may be challenged under Article 230(1) EC.

49. This is because in reality the first part of Commissioner Barnier’s Memorandum (the part being challenged) merely restates the Commission’s obviously disputed interpretation of existing provisions; ( ) ultimately the issue is principally the interpretation of the undefined terms ‘expenditure actually paid out’ and ‘payments effected by final beneficiaries’, as was the case with the 2001 Memorandum. The present Memorandum reconfirms the Commission’s view that in principle payments on account by national bodies within the framework of aid schemes may not be co-financed by the Structural Funds, unless evidence is provided as to their utilisation by the individual recipient.

50. Such statements as regards the interpretation of existing provisions are merely expressions of opinion which do not have any binding force. ( ) They did not produce any binding legal effects such as to affect the interests of the Italian Republic by bringing about a distinct change in its legal position; far less were they intended to do so. The Memorandum is not aimed at depriving the applicant of an existing legal right, for example a claim to subsidies from the Structural Funds, nor at making the enforcement of such a right more difficult by laying down additional conditions. ( ) Instead, the Memorandum proceeds on the footing that such a legal position and such a claim have never existed.

51. Nor did the introduction of the time‑limit of 19 February 2003 transform a non-binding expression of opinion into a decision having binding legal effects. It cannot be disputed that the time‑limit improved the applicant’s legal position in the period up to 19 February 2003, since the new exception applied until that date. ( ) However, so far as the period relevant for the present proceedings is concerned, namely the period after 19 February 2003, the applicant’s legal position remained unchanged: the Commission already regarded payments on account in that period as being in principle ineligible, and it continues to consider them to be ineligible. The new time‑limit did not change that.

52. In the Memorandum being challenged, all the Commission did was to announce, again, how it intended to exercise its powers in the future, ( ) that is how it intended to decide future applications for payment. It is only when the announcement is put into effect by means of actual decisions on Member States’ applications for payment that binding legal effects are produced for the latter. ( )

53. In some circumstances, such an announcement may bind the administrative authorities and lead to an administrative practice. ( ) However, even an administrative practice can be submitted to judicial control only where actually applied in an individual case: it cannot be the subject of an action for annulment in the abstract, without reference to decisions in individual cases. ( )

54. Even if one assumed that Commissioner Barnier’s Memorandum was not a mere expression of opinion and announcement by the Commission but a legally binding decision that payments on account made after 19 February 2003 would no longer be recognised, that part of the Memorandum would not necessarily be liable to review. The Court has consistently held that an action for annulment of a measure merely confirming a previous decision which was not challenged within the prescribed period is inadmissible. ( ) A decision is a mere confirmation of an earlier decision where it contains no new factors as compared with the earlier measure and is not preceded by any re-examination of the situation of the person to whom the earlier measure was addressed. ( )

55. That is the case in the present proceedings. The Commission’s announcement in the first part of the Memorandum (the part being challenged), that in principle payments on account within the framework of national aid schemes are not eligible, is not new. It appeared in the 2001 Memorandum, which was issued inter alia to the applicant, ( ) and indeed in Memorandum No 100629 of 20 January 2003. ( ) If, contrary to my opinion, such an announcement were to be regarded as a decision, it would follow that the act liable to be challenged was the 2001 Memorandum, and not Commissioner Barnier’s Memorandum, which is challenged in the present proceedings but which merely repeated and confirmed the earlier Memorandum.

56. Admittedly, the second part of Commissioner Barnier’s Memorandum contained something new, namely the exception subject to a time-limit. However, that was a tightly restricted special provision for existing cases, namely for payments made by Member States up to 19 February 2003. For the purposes of assessing the only question in dispute in the present proceedings, namely as to the eligibility of payments made after 19 February 2003, this does not amount to a ‘new factor’. It neither improved nor worsened the Member States’ legal position in relation to payments they made after this date – that was not changed.

57. There is also no basis for the proposition that before issuing the disputed Memorandum the Commission re-examined the legal position and reconsidered its existing view. Instead, the Commission had remained of the same view from the time of publishing the 2001 Memorandum, namely that as the law stood payments on account by national bodies within the framework of aid schemes were in principle not eligible. Although in the interim the Commission had unsuccessfully attempted to have the law amendedprospectively, ( ) it appears that in doing so it had not at any time called in question its own interpretation of the existing legislation.

58. Nor did the Memorandum by Commissioner Barnier which is challenged in the present proceedings give any indication that the Commission had generally called its existing view into question. The second part merely creates a narrowly restricted exception for existing cases, namely for payments made up to 19 February 2003. Apart from that, and as is apparent from the first part of the Memorandum, the Commission expressly reconfirmed its existing view of the law.

59. Accordingly, even if, contrary to the above view, the disputed first part of Commissioner Barnier’s Memorandum were to be regarded as producing binding legal effects, it would in any event merely confirm the 2001 Memorandum. It follows that a challenge to that part of the Memorandum is incompetent.

60. The case-law of the Court relied upon by the Italian Republic does not lead to a different conclusion.

61. Admittedly, the Case of Herpels ( ) displays a certain parallel with the present one in so far as an exception was allowed for reasons of fairness: there the Commission had granted the applicant staff member a differential allowance in addition to his salary ‘ad personam’, in the same way as in the present Case it granted an exception permitting subsidies to be paid from the Structural Funds in order to protect legitimate expectations. However, the differences between the two cases are more important. First, in Herpels the Court found that there had been a new review of the facts, and indeed over a number of different stages, this being reflected in a number of letters of differing content sent in succession to the applicant. By contrast, and as already demonstrated, in the present Case there is no basis for a finding that the Commission had at any time undertaken a fundamental review of its interpretation of the existing legislation. It had taken this view consistently over a long period and a long correspondence, and had set it out again in the Memorandum by Commissioner Barnier in dispute in the present Case. Second, in Herpels the new ‘ad personam’ differential allowance was granted toreplace the previous expatriate supplement entirely, albeit that the withdrawal of the expatriation allowance was closely connected to the grant of the differential allowance, as two sides of the same coin. The present Case is different: as described above, the disputed Memorandum by no means replaced the Commission’s previous view generally with a new one, but merely introduced a narrowly restricted exception for existing cases; for the future the Commission remained of its existing view, that in principle payments on account were not eligible.

62. The Italian Republic also relied on four judgments in Cases brought by France against the Commission, ( ) but these too do not support the proposition that Commissioner Barnier’s Memorandum is liable to challenge. Apart from the fact that in these judgments the analyses of admissibility and of substance are unfortunately combined, the Cases are in substance significantly different from the present. As Advocate General Tesauro said, those Cases each concerned an act whose provisions ‘render unequivocal the intention for it to be binding on the addressees’, ( ) for example a code of conduct imposing specific obligations and time‑limits on national authorities. By contrast, from the very start Commissioner Barnier’s Memorandum being challenged in Case C-324/03 has manifestly proceeded on the Commission’s view that there had never been a right to subsidies from the Structural Funds for the disputed payments. Accordingly, as already explained, the purpose of this Memorandum was not to withdraw such a right or to make its enforcement more difficult by the imposition of additional conditions: the Memorandum did not bring about any change in the Italian Republic’s legal position. ( )

63. In result, I agree with the Commission that Case C-324/03 is inadmissible.

b) Case C-431/03

64. In Case C-431/03 the Commission argues that the action is inadmissible on account of lis pendens, as the Italian Republic’s action in Case C-324/03 has the same object. The Commission also repeats the objections to admissibility which it makes in Case C-324/03.

65. It is apparent from Commissioner Barnier’s accompanying letter that the sole purpose of his Memorandum No 26777bis of 29 July 2003 was to correct a translation error in his earlier Memorandum No 26777 of 14 May 2003.

66. This intention is not enough in itself to preclude the new Memorandum from being a legal act which is liable to challenge, that is an act having the character of a decision producing binding legal effects. It is clearly possible that, under the guise of correcting an error in translation, the content of a prior legal act having the character of a decision may be changed to something entirely different from its content as originally promulgated. In such a case it must be possible for persons affected to seek legal protection against the decision’s new content. This applies a fortiori where, as in the present case, the corrected passage is one of the material points of the Memorandum setting out in more detail the new exception for payments prior to 19 February 2003.

67. However, in the present Case it is not necessary to decide whether the correction to the wording of the passage in question is open to challenge. This is because, as in Case C-324/03, this part of the Memorandum is not the subject of the Italian Republic’s action in Case C-431/03. The actions, which are in that regard formulated identically, do not aim at the newly introduced exception, which is in any event favourable to the Italian Republic, nor at its actual structure, but rather to the Commission’s reconfirmed view as to the general legal position, which is unfavourable to the Italian Republic, that in principle payments on account by national bodies are not eligible. Accordingly, the complaint in Case C‑431/03 is directed exclusively against the part of Memorandum No 26777bis which is identical to the original Memorandum No 26777 and which was not changed.

68. It follows that the above analysis of Case C-324/03 ( ) applies mutatis mutandis to Case C-431/03. The Italian Republic’s action is inadmissible because it has as its object not a decision having binding legal effects but a mere expression of opinion or announcement by the Commission, neither of which is an act which may be challenged by proceedings under Article 230(1) EC. Moreover, even if Commissioner Barnier’s Memorandum were assumed to have binding legal effects, it would still constitute nothing more than a (further) confirmation of the 2001 Memorandum, and as a merely confirmatory act would not be liable to challenge.

69. As the Commission also submitted, the action is inadmissible in addition on account of lis pendens. The Court has repeatedly stated that a subsequent action is inadmissible if it involves the same parties, is based on the same grounds and seeks the annulment of the same legal acts, as an earlier action which is already pending. ( )

70. That is the situation in the present proceedings. The Italian Republic’s claims in Cases C-324/03 and C-431/03 involve the same parties, are based on the same pleas in law (which even are worded largely identically) ( ) and seek the annulment of the same, unamended part of Commissioner Barnier’s Memorandum. Therefore, the fact that the matter has already been brought before the Court in Case C-324/03 means that the action in Case C-431/03 is inadmissible.

71. As a result, I agree with the Commission that the action in Case C-431/03 is inadmissible.

2. Substance of the actions

72. In both Case C-324/03 and Case C-431/03 the substance of the complaint is an infringement of Article 32 of Regulation No 1260/1999 and of points 1 and 2 of Rule No 1 on eligibility. ( ) The parties disagree as to whether and, if so, subject to what conditions subsidies may be granted from Community Structural Funds for payments on account made by national bodies. To be precise, the question is whether the Commission may make proof that national payments on account have been utilised a condition of interim payments or payments of the balance applied for by Member States (Article 32(1)(3)(2) of Regulation No 1260/1999). The Italian Republic argues that this infringes the aforementioned provisions of the basic Regulation and of the implementing Regulation.

73. Having found that both actions are inadmissible, the following analysis of this issue is offered only in the alternative. I say immediately that I find the Commission’s submission more persuasive than that of the Italian Republic.

74. Admittedly, on the wording of Article 32(1)(3) of Regulation No 1260/1999 it is in principle not impossible that payments on account by final beneficiaries ( ) to individual recipients may be subsidised from the Structural Funds. Specifically, the second sentence of that provision states that it is sufficient if the Member States notify the Commission of expenditure paid out by way of assistance, and that this expenditure must correspond to payments effected by the final beneficiaries. The terms ‘payments’ and ‘expenditure’ may be interpreted widely. For example, the Community legislature understands the word ‘payments’ as the general term, which includes payments on account. ( )

75. However, as is equally apparent from Article 32(1)(3)(2) of Regulation No 1260/1999 only expenditure actually effected by national bodies is eligible to be subsidised by interim payments or payments of the balance by the Commission, and this only if such expenditure is supported by receipted invoices or accounting documents of equivalent probative value. Point 2 of Rule No 1 on eligibility provides more detail on this point. It provides that as a rule, receipted invoices must be submitted; and that where this cannot be done, accounting documents of equivalent probative value may be relied upon.

76. The rule thus described is based on the principle of reimbursement of costs. ( ) In principle, Community Structural Funds should subsidise only expenditure by national bodies for which proof of payment exists. It is therefore not enough that a national body (a final beneficiary) has effected payments: there must also be proved what the subsidies thus granted have actually been used for.

77. The purpose of the principle of reimbursement of costs is to minimise the financial risks to the Community’s budget. What it seeks to prevent is that the Community grants subsidies from the Structural Funds and then, where those subsidies are utilised wrongfully, cannot obtain repayment, or has difficulty in obtaining it. This approach is also intended to give effect to the principle of sound financial management (Article 274 EC). The 43rd recital in the preamble to Regulation No 1260/1999 emphasises the close connection between the principle of sound financial management and the requirement to produce proof of expenditure (and thus proof of utilisation).

78. Of course, national bodies are free to make payments on account (that is payments for which there is no proof of utilisation) to final beneficiaries out of their own funds. The Italian Republic was correct in submitting that individual recipients’ lack of financial resources often made it necessary to grant them such payments on account in order to ensure a smooth start to subsidised projects. ( ) However, in such cases the Member State and not the Community bears the risk that the subsidy it has paid in advance is not utilised for a permitted purpose and that it is therefore necessary to require its repayment. At the time a payment on account is made, only the national bodies are in a position to assess whether the individual recipient sufficiently guarantees that it will utilise the subsidy for the permitted purpose. Accordingly, the national authorities and not the Community should bear the risk of something going wrong and of being burdened with the difficulties of obtaining repayment. In any event, Article 32(1)(3)(2) of Regulation No 1260/1999 provides that subsidies from Community Structural Funds may be granted only once receipted invoices or accounting documents of equivalent probative value are available, that is once the subsidies paid out in advance by national bodies have actually been utilised and proof of their utilisation is available.

79. Therefore, while Member States may grant payments on account to individual recipients from national resources in a wider range of cases, in administering the Structural Funds the Community departs from the principle of (subsequent) reimbursement of costs only to a very restricted extent. Specifically, Article 32(2) of Regulation No 1260/1999 provides that the Commission can make payments on account to Member States from Structural Funds of up to only 7% of the contribution from the Funds to the assistance in question. This is the limit up to which the Community budget takes the risk that money from the Structural Funds is utilised other than for permitted purposes and accordingly has to be recovered. It is only for such payments on account that the basic Regulation permits the Commission to grant payments from the Structural Funds without receiving proof of utilisation at the same time. For all other payments, and in particular subsidies effected by way of interim payments and payments of the balance from Structural Funds, which arise in the present case, Article 32(1)(3)(2) of Regulation No 1260/1999, and thus the principle of reimbursement of costs against proof of utilisation, apply without exception.

80. Allowing the Community to make interim payments or payments of the balance from the Structural Funds to subsidise payments by national bodies for which there is (as yet) no proof of utilisation would amount to circumventing Article 32(2)(2) of Regulation No 1260/1999 and the limit it sets on the risk to the Community budget, namely 7% of the contribution from the Funds to the assistance in question.

81. The Italian Republic’s arguments in support of the proposition that proof of utilisation should be unnecessary for co-financing payments on account by final beneficiaries within the framework of national aid schemes are unconvincing.

82. In so far as it is relevant to the present Case, it is admittedly correct that the basic Regulation distinguishes between two possible means of utilising subsidies: on the one hand operations, which are carried out by the final beneficiaries, ( ) and on the other, measures, which include in particular aid schemes. ( )

83. Indeed, at first sight the requirements as to proof of payment by national bodies in the two cases differ. As regards operations, the payments to be proved to the Commission are those made by the final beneficiaries to the firms they commission (point 1.3 of Rule No 1 on eligibility); by contrast, in the case of national aid schemes the payments to be proved are the aid payments by final beneficiaries to individual recipients (point 1.2 of Rule No 1 on eligibility).

84. However, looked at more closely the principle of reimbursement of costs, and therefore the requirement to provide proof of utilisation of expenditure actually effected, applies equally for both types of payments (payments within the framework of operations and payments within the framework of aid schemes). As appears from point 2 of Rule No 1 on eligibility — the positioning of this provision in the scheme of the Regulation means that it applies to both types of structural assistance — in both cases it is as a rule necessary to submit receipted invoices, and where this cannot be done, accounting documents of equivalent probative value. ( )

85. Admittedly, as a rule in the case of aid measures within the framework of national aid schemes receipted invoices or accounting documents of equal probative value are not issued between final beneficiaries and individual recipients, but in the downstream relationship between individual recipients and third parties to obtain whose services the individual recipients utilise the subsidies. However, contrary to the Italian Republic’s submissions the purpose of the scheme is precisely to require recourse to documents passing between individual recipients and third parties. The second sentence of point 1.2 of Rule No 1 on eligibility provides that payments of aid by final beneficiaries must be justified by reference to the conditions and objectives of the aid. To provide such justification it cannot be sufficient to prove that a payment has been made to an individual recipient: there must also be proof of how the individual recipient has actually utilised the subsidies. As mentioned above, as a rule this proof must take the form of receipted invoices or, if necessary, accounting documents of equal probative value (point 2 of Rule No 1 on eligibility).

86. At the hearing, in response to a question I posed the Italian Republic added that it did not call into question generally the requirement for proof of utilisation of payments made within the framework of national aid schemes. Instead, it was disputing the time at which such proof of utilisation had to be provided.

87. In this connection it is to be recalled that the principle of reimbursement of costs is intended to relieve the Community budget of the risk in subsidising expenditure which has not been proved to have been utilised. The Member States may apply for subsidies from the Structural Funds, that is for interim payments or payments of the balance from the Commission, only once proof of utilisation has been provided for payments made within the framework of national aid schemes. Before that time, the Member States may have recourse only to funds — limited to 7% of the contribution from the Funds — the Commission makes available to them by way of payments on account and which by their nature are liable to be repaid in the absence of proof of utilisation (Article 32(1)(3)(1) in conjunction with Article 32(2) of Regulation No 1260/1999).

88. Against this background I come to the overall view that the Commission acted lawfully in requiring proof of utilisation as a condition of the grant of subsidies for payments on account by national bodies within the framework of aid schemes. Thus, the Italian Republic’s actions are not only inadmissible but also unfounded.

V – Costs

89. Article 69(2) of the Rules of Procedure provides that the unsuccessful party shall be ordered to pay the costs if the successful party has applied for them. Since the Italian Republic’s submissions have been unsuccessful in Cases C-324/03 and C-431/03, it is to be ordered to pay the costs of these proceedings, in accordance with the Commission’s application.

90. By contrast, as regards Case C-138/03, in which there is no need to proceed to judgment, Article 69(6) of the Rules of Procedure allows the Court discretion to decide on costs. In the present proceedings the Commission should be ordered to pay the costs, given that its original conduct caused the Italian Republic’s complaint and that it was only after the action had been raised that the two decisions being challenged were set aside and the disputed payment made.

VI – Conclusion

91. For the foregoing reasons, I suggest that the Court should,

– declare that there is no need to proceed to judgment in Case C-138/03 and order the Commission of the European Communities to pay the costs of the proceedings;

– dismiss the applications in Cases C-324/03 and C-431/03 and order the Italian Republic to pay the costs of the proceedings.