Judgment of the Court (Sixth Chamber) of 25 May 1993. - Société Générale d'Entreprises Electro-Mécaniques and Roland Etroy v European Investment Bank. - Public works contract in an ACP State - Co-financing by the EIB - Non-contractual liability towards an unsuccessful tenderer. - Case C-370/89.



European Court reports 1993 Page I-02583



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

++++

International agreements ° Third Lomé ACP-EEC Convention ° Provisions relating to financial and technical cooperation ° Procedure for the award of public works contracts ° Respective roles of the ACP State and the Community ° Refusal by the European Investment Bank to grant financing in the event of a contract' s being awarded to the lowest tenderer ° Justification ° Tender not appearing to be economically the most advantageous ° Liability of the Community ° None

(EEC Treaty, Art. 215, second para.; Third Lomé ACP-EEC Convention of 8 December 1984, Arts 192 and 225)

Summary

The system of the procedure for the award of public works contracts within the framework of the financial and technical cooperation set up by the Third ACP-EEC Convention is such that under Articles 192(2) and 225(3) of that Convention it is for the authorities of the ACP States to prepare, negotiate and conclude public works contracts financed by the Community, whereas any intervention by the Community bodies responsible for taking, on the Community' s behalf, financing decisions on such contracts within the meaning of Article 192(4) of that Convention is intended solely to determine whether the conditions for Community financing are met or not. It is not intended to interfere with the principle that the contracts in question remain national contracts and cannot have that effect.

In that respect, the Community bodies have not only the right but also the duty, in fulfilment of the responsibilities conferred upon them for the proper administration of Community funds, to ensure that the relevant procedural rules are complied with and that the tender selected is economically the most advantageous, taking into account in particular the qualifications of and the guarantees offered by the tenderers, the nature and conditions of execution of the works and the price, utilization costs and technical value of those works. Finally, the Community bodies have not only the right but also the duty to obtain the information necessary to ensure the economical administration of Community resources.

No unlawful conduct giving rise to liability on the part of the Community may therefore be ascribed to the European Investment Bank when it refuses to finance a project if the contract is awarded to the lowest tenderer and when that refusal is based on the fact that, in the light of reservations expressed by an independent consultant, the tender in question does not appear to be economically the most advantageous.

Parties

In Case C-370/89,

1. Société Générale d' Entreprises Électro-Mécaniques (SGEEM), whose registered office is at Champs-sur-Marne,

2. Roland Etroy, residing at Champs-sur-Marne,

represented by Alexandre Vandencasteele, of the Brussels Bar, and Simon Cohen, of the Paris Bar, with an address for service in Luxembourg at the Chambers of E. Arendt, 8-10 Rue Mathias Hardt,

applicants,

v

European Investment Bank, represented by Xavier Herlin, Manager of its Legal Directorate, acting as Agent, assisted by R.O. Dalcq, of the Brussels Bar, with an address for service in Luxembourg at its provisional seat,

defendants,

supported by

Commission of the European Communities, represented by Hans Peter Hartvig, Legal Adviser, acting as Agent, with an address for service in Luxembourg at the office of Nicola Annecchino, of its Legal Service, Wagner Centre, Kirchberg,

intervener,

APPLICATION under Article 178 and the second paragraph of Article 215 of the EEC Treaty, for compensation in respect of damage allegedly suffered by the applicants by reason of the unlawful conduct of the EIB in connection with the award of a public works contract in Mali,

THE COURT (Sixth Chamber),

composed of: C.N. Kakouris, President of the Chamber, J.L. Murray, G.F. Mancini, F.A. Schockweiler and P.J.G. Kapteyn, Judges,

Advocate General: C. Gulmann,

Registrar: H.A. Ruehl, Principal Administrator,

having regard to the Report for the Hearing,

after hearing oral argument from the parties at the hearing on 23 October 1991,

after hearing the Opinion of the Advocate General at the sitting on 26 January 1993,

gives the following

Judgment

Grounds

1 By application lodged at the Court Registry on 12 December 1989, Société Générale d' Entreprises Électro-Mécaniques, a limited company governed by French law, whose registered office is at Champs-sur-Marne, France, ("the applicant company") and Roland Etroy, its Chairman and Managing Director, brought an action for damages under Article 178 and the second paragraph of Article 215 of the EEC Treaty, seeking an order that the European Investment Bank ("the Bank"), as representative of the European Economic Community, make good the damage which they claimed it had caused them by preventing the applicant company from being chosen as successful tenderer for a public works contract to be carried out in the Republic of Mali.

2 The Republic of Mali decided to construct a high-voltage electricity line between Bamako and Segou and to give responsibility for the work to Electricité du Mali ("EDM"), a partly State-owned company governed by Malian law, to be assisted by a committee responsible for examining tenders ("the ad hoc committee").

3 The Quebec international consultancy firm Hydro-Quebec International ("HQI") was appointed by EDM as its agent to assist it in assessing tenders and in choosing the successful tenderer.

4 On the basis of the provisions relating to financial and technical cooperation in the Third ACP-EEC Convention signed at Lomé on 8 December 1984 ("the Convention", OJ 1986 L 86, p. 3), the Republic of Mali sought financing by the Bank for the erection of the line, Lot 1A of the project, in the form of a conditional loan by way of risk capital as provided for in Article 199 of the Convention.

5 Such risk capital transactions are financed from the resources of the Sixth European Development Fund set up by Article 1(1) of the Internal Agreement of 19 February 1985 on the financing and administration of Community aid ("the Agreement", OJ 1986 L 86, p. 210) and are managed by the Bank on behalf of the Community pursuant to Article 10(2) of the Agreement.

6 Under a financing contract, which referred, inter alia, to Article 199(3) of the Convention and Article 10(2) of the Agreement, the Bank granted the Republic of Mali a loan of ECU 11 000 000. Payment was conditional upon receipt by the Bank from the final beneficiary (EDM) of copies of the contracts for the work, equipment and supplies, entered into by EDM on terms considered satisfactory by the Bank.

7 Through the intermediary of EDM, the Republic of Mali issued its invitation to tender for the lot in question (OJ 1987 S 207, p. 63).

8 The applicant company submitted its tender in good time, and its bid proved to be appreciably lower than those of the other tenderers.

9 Initially, HQI recommended that the applicant' s tender should not be accepted, pointing to its serious lack of technical experience, confirmed by the unrealistic programme and costs which it had submitted, leaving doubts of too grave a nature about its capacity to carry out the project in accordance with its estimate. HQI therefore proposed that the contract should be awarded to the second lowest tenderer, subject to certain changes to its tender, to be negotiated before the award was made.

10 That opinion was at first shared both by EDM and by the ad hoc committee in its report to the Malian Government in August 1988. The ad hoc committee pointed out, inter alia, that the applicant company had proposed the lowest cost for the shortest period of execution with very inadequate or inappropriate material and personnel, without proposing its working methods, and that it had limited experience in comparison with the other tenderers. The ad hoc committee also therefore recommended the second lowest tenderer' s bid.

11 However, following a further examination of the tenders and the receipt of clarifications from certain tenderers, the ad hoc committee subsequently changed its opinion and recommended to the Malian Government that the contract be awarded to the applicant company. In September 1988, the ad hoc committee drew up its final report confirming its latest conclusions in the applicant' s favour. That report was forwarded to the Bank on 30 September 1988 by the Malian Government, which concurred with those conclusions.

12 At the Bank' s request, the Malian Government forwarded HQI' s report to the Bank on 5 November 1988, accompanied by highly critical comments in support of its refusal to approve the report.

13 By telex message to the Malian Government of 15 November 1988, the Bank noted the Government' s choice of the applicant company but pointed out that the absence of technical, economic and financial justification acceptable to the Bank for not taking into consideration the tender found to be the best by HQI, an independent consultant, on the basis of the usually accepted criteria would mean that the Bank would be unable to finance the project.

14 After checking, at the request of the Malian authorities, the genuineness of the applicant company' s tender, HQI confirmed in a telex message to the Malian Government of 9 February 1989, the tenor of which it communicated to the Bank, that the applicant would not be able to carry out the work at the price in its tender.

15 Nevertheless, following a meeting between the competent Malian Minister and the Vice-President of HQI, the consultancy firm agreed to reconsider its opinion and finally recommended that the applicant company' s tender be accepted subject to certain additional guarantees or securities to ensure adherence to the timetable and prices, which HQI still considered too low.

16 Following a request by the Bank for an explanation of the new line taken in its conclusions, HQI replied by telex message of 27 April 1989 that as a result of further investigations it had been able to conclude that the applicant company had a proper grasp of the extent of the work and that its technical capacity was much more apparent than had been shown in its tender. HQI still showed concern, however, as to whether the timetable and prices in the tender could be adhered to. It had therefore proposed to the ad hoc committee to support the choice of the applicant company provided that a better guarantee could be obtained in those two regards.

17 The details given to the Bank by HQI at a joint meeting held in Luxembourg on 4 July 1989 were not sufficient to reassure the Bank on the financial and technical aspects of the applicant company' s tender. The Bank therefore confirmed in a telex message to the Malian Government of 20 July 1989 that, notwithstanding the clarification provided by HQI, the applicant company' s tender displayed obvious weaknesses likely to jeopardize the execution of the project and could therefore not be accepted for the award of the contract. The Bank therefore requested the Malian Government to negotiate, in collaboration with HQI and EDM, a contract with one of the other tenderers and to refer to the Bank for its opinion before concluding the contract.

18 The ad hoc committee thus opened negotiations with the second lowest tenderer in order to dispose of the points on which its tender did not comply with the invitation to tender.

19 Those negotiations led to a contract signed on 6 September 1989 stipulating, inter alia, that the total price of the contract was increased, at EDM' s request, by a 10% contingency allowance, with justification to be provided, and that the contractor' s remuneration was to be determined on the basis of the quantities completed and the unit prices specified in the price list.

20 By letter of 23 August 1989, the applicant company asked the Bank what measures it contemplated taking to make good the damage it had suffered by the Bank' s action.

21 Following a letter of 21 September 1989 in which the Bank replied that the question was a matter for the Malian authorities alone, the applicants brought the present action for damages.

22 By order of 10 May 1990, the Court granted the Commission leave to intervene in support of the Bank.

23 The Sixth Chamber, to which the case was first assigned, decided, pursuant to Article 95(3) of the Rules of Procedure, to refer the case back to the Full Court for a preliminary decision on the Court' s jurisdiction in the present action.

24 By interlocutory judgment of 2 December 1992 (Case C-370/89 SGEEM and Etroy v EIB [1992] ECR I-6211), the Court held that the Bank had acted in this instance in the Community' s name and on its behalf and that any acts and omissions towards the applicants for which it might have been responsible were attributable to the Community. The Court therefore held that it had jurisdiction under Article 178 of the Treaty to determine the present action for damages, referred the case back to the Sixth Chamber for a decision on the substance and reserved the costs.

25 Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the procedure and the pleas and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

26 It must first of all be pointed out that, as the Court has consistently held (see, inter alia, Case C-55/90 Cato v Commission [1992] ECR I-2533, paragraph 18), it follows from the second paragraph of Article 215 of the Treaty that the Community may incur non-contractual liability and the right to compensation for damage suffered may arise only if a series of conditions regarding the illegality of the alleged conduct of the Community institutions, the reality of the damage and the existence of a causal link between the conduct of the institution and the alleged damage have first been met.

The illegality of the conduct alleged against the Bank

27 As regards the first of those conditions, the applicants claim first of all that the Bank misused the powers conferred upon it under the title of the Convention relating to financial and technical cooperation by interfering unlawfully in the negotiation and conclusion of the contract by the Malian authorities, forcing them to exclude the lowest and, in the opinion of the experts, economically most advantageous tender in favour of a higher tender which was patently inconsistent with the conditions in the invitation to tender.

28 The Bank, supported by the Commission, argues in substance that because of HQI' s persistent doubts over the genuineness of the applicant company' s tender, it confined itself to alerting the Malian authorities to the fact that it could not finance the project under conditions which did not appear to it to amount to the choice of the economically most advantageous tender as provided for in Article 236(1) of the Convention. The Bank thus complied with its duty to ensure that the conditions for Community financing of the project were met.

29 It is settled case-law that, whereas under Articles 192(2) and 225(3) of the Convention it is for the authorities of each ACP State to prepare, negotiate and conclude public works contracts financed by the Community within the framework of the financial and technical cooperation set up by the Convention, any intervention by the Community bodies responsible for taking, on the Community' s behalf, financing decisions on such contracts within the meaning of Article 192(4) of the Convention is intended solely to determine whether the conditions for Community financing are met or not. It is not intended to interfere with the principle that the contracts in question remain national contracts and cannot have that effect (see, inter alia, Case 267/82 Développement SA and Clemessy v Commission [1986] ECR 1907, paragraph 25).

30 In that respect, the Community bodies have not only the right but also the duty, in fulfilment of the responsibilities conferred upon them for the proper administration of Community funds, to ensure that the relevant procedural rules are complied with and that the tender selected is economically the most advantageous, taking into account in particular the qualifications of and the guarantees offered by the tenderers, the nature and conditions of execution of the works and the price, utilization costs and technical value of those works (Développement SA and Clemessy, paragraph 27).

31 Finally, the Community bodies have not only the right but also the duty to obtain the information necessary to ensure the economical administration of Community resources in fulfilment of the responsibilities conferred upon them in the interest of the Community (see Case 118/83 CMC v Commission [1985] ECR 2325, paragraph 47).

32 Suffice it to say in that regard that the applicants have in no way established that by refusing to finance the project in the event of its being awarded to the applicant company the Bank unlawfully encroached on the powers of the Malian authorities or stepped beyond the bounds of those conferred upon it for the proper administration of Community funds.

33 On the contrary, it is clear from the facts of this case that the Bank could have good reasons for considering that the applicant company' s tender was not economically the most advantageous, in the light of the reservations which, despite the change in the line it took in its conclusions, HQI continued to entertain with regard to that tender and regardless of whatever opinion the Malian authorities may have held in that regard (see CMC, paragraphs 45 and 46).

34 HQI finally recommended to the ad hoc committee that the contract be awarded to the applicant company, the lowest tenderer, only on the express condition that it should provide a better guarantee to ensure adherence to the timetable and prices, which HQI still considered too low.

35 The interventions alleged against the Bank were therefore entirely compatible with the rules allocating functions laid down in the Convention; their aim was merely to ensure that the conditions for Community financing were met. The Bank' s conduct cannot, therefore, be held to be unlawful in that respect.

36 The first of the applicants' claims must therefore be dismissed.

37 The applicants further claim that the Bank infringed the requirement that tenderers be placed on an equal footing by accepting the opening of negotiations with the second lowest tenderer with a view to changing substantive aspects of its tender. Had the applicant company also had an opportunity to bring its tender into compliance with the invitation to tender, the order of tenders decided upon by HQI could certainly have been changed.

38 As the Bank rightly points out, the 10% increase in the overall price of the contract requested by EDM and accepted by the Bank in order to cover justified contingencies falls within Clause 2.22 of the invitation to tender, which allows the proprietor to increase or reduce by 25% the quantities of supplies and services specified in the invitation to tender, without change in the unit price given in the price list or other terms and conditions.

39 The applicants' second claim must therefore be dismissed.

40 Finally, the applicants claim that by failing to exercise adequate supervision over the acts of its staff and to take any action on the letters sent to it by the applicant company the Bank infringed the principle of proper administration, thereby incurring liability towards the applicants.

41 There is no need to examine that claim, which is merely a reformulation in different terms of the first two claims dismissed above.

42 The application must therefore be dismissed as unfounded, without there being any need to consider whether the other conditions required for the Community to incur non-contractual liability are met.

Decision on costs

Costs

43 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Since the applicants have been unsuccessful, they must be ordered jointly to pay the costs.

44 In accordance with the first subparagraph of Article 69(4) of the Rules of Procedure, the Commission, as intervener, must bear its own costs.

Operative part

On those grounds,

THE COURT (Sixth Chamber)

hereby:

1. Dismisses the application;

2. Orders the applicants jointly to pay the costs;

3. Orders the Commission to bear its own costs.