Case C-193/02: Action brought on 27 May 2002 by the Kingdom of the Netherlands against the Commission of the European Communities
Date: 2002-08-10
Institutions: Court of Justice
Subjects: EU aid, European Commission, Netherlands, Structural Funds, action for annulment (EU), coordination of aid, financial aid, fine, management audit

C 191/16

EN

Official Journal of the European Communities

10.8.2002

Appeal brought on 21 May 2002 against the judgment
delivered on 6 March 2002 by the Third Chamber,
Extended Composition, of the Court of First Instance of
the European Communities in Joined Cases T-92/00 and
T-103/00 (not yet published) between Territorio His-
to´ rico de A´ lava — Diputacio´ n Foral de A´ lava and Others
and Commission of the European Communities

(Case C-188/02 P)

(2002/C 191/27)

An appeal against the judgment delivered on 6 March 2002
by the Third Chamber, Extended Composition, of the Court of
First Instance of the European Communities in Joined Cases
T-92/00 and T-103/00 between Territorio Histo´ rico de A´ lava
— Diputacio´ n Foral de A´ lava and Others and Commission of
the European Communities was brought before the Court of
Justice of the European Communities on 21 May 2002 by
Territorio Histo´ rico de Alava — Diputacio´ n Foral de Alava,
represented by Antonio Creus Carreras and Begon˜ a Uriarte
Valiente, Abogados, of Calle Vela´zquez no 63, Madrid.

The appellant claims that the Court should:

1.

2.

3.

4.

5.

declare the present appeal admissible and consequently:

set aside the judgment of the Court of First Instance of
6 March 2002;

itself give final judgment in the matter on the basis of the
appellant’s pleadings at first instance and, in particular,
annul the decision of the Commission of 22 December
1999 inasmuch as the tax credit of 45 % of investment
and the reduction of the taxable amount provided for by
Alava regional legislation in respect of newly-established
undertakings does not constitute aid within the meaning
of Article 87 EC or, if it should be deemed so to be, is
existing aid, pursuant to Article 88 EC and Article 1 of
the State aid Rules;

in the alternative, refer the case back to the Court of First
Instance for judgment, if the Court of Justice should deem
that appropriate;

order the Commission to pay the costs in both sets of
proceedings.

Pleas in law and main arguments

are similar to those put forward in Case C-187/02 P.

Action brought on 27 May 2002 by the Kingdom of the
Netherlands against the Commission of the European
Communities

(Case C-193/02)

(2002/C 191/28)

An action against the Commission of the European Communi-
ties was brought before the Court of Justice of the European
the
Communities on 27 May 2002 by the Kingdom of
Netherlands, represented by H.G. Sevenster, acting as agent.

The applicant claims that the Court should:

1. Annul Commission Decision C(2002) 970 of 12 March
to say by
2002 reducing by 31,3 %,
the assistance granted from the
EUR 147 459 365,
European Social Fund under Commission decisions
approving certain programme documents for Com-
munity structural measures in the Netherlands under
objectives 1, 2, 3 and 5b;

that

is

2. Order the Commission to pay the costs.

Pleas in law and main arguments

implementation of

— Commission’s lack of competence: The Commission
bases the financial sanction on an (alleged) infringement
of
the obligation imposed on the Netherlands by
Article 23 of Council Regulation (EEC) No 2082/93 (1) to
establish an adequate management and control system in
order to ensure the efficient
the
programmes. However, Article 24 of Regulation
No 2082/93, on which the financial sanction at issue is
based, does not refer to that obligation but merely
authorises the Commission to reduce or suspend the
assistance for the relevant operation or measure if an
irregularity occurs ‘in respect of the operation or measure’.
Thus, a financial correction, as referred to in that article,
may be applied only in the event of irregularities relating
to implementation itself or to ‘the nature or conditions
for the implementation’ of a (specific) operation or a
(specific) measure. At most the financial correction may
relate to the amounts established to have been unduly
paid; in that connection, therefore, each irregularity must
be established individually. A financial correction cannot
be based on general failings or defects in the management
and control system governing the implementation of one
or (as in this case) several operations or measures. Even if
there is a defect in a management and control system,
that does not mean that that shortcoming affects the

10.8.2002

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Official Journal of the European Communities

C 191/17

‘nature’ or the ‘conditions for the implementation’ of the
operation or measure. It was only in Article 39 of Council
Regulation No 1260/1999 (2)
the Commission
acquired competence in regard to financial corrections
which take account of ‘the extent and financial impli-
cations of the shortcomings found in the management or
control systems of the Member States’.

that

— Infringement of Article 24(2) of Regulation No 2082/93:
To the extent to which the Commission is also authorised
to apply a financial correction in the event of a short-
coming in the management and control system and
provided an interpretation of Article 24 of Regulation
No 2082/93 in its internal guidelines of 15 October
1997, the Commission is bound from the point of view
of predictability and legal certainty by those guidelines
notified to the Member States concerning the approach
to be followed in regard to financial corrections. The
Commission has not demonstrated that the shortcoming
in the Netherlands system at that time, namely that the
external accountants ‘merely applied the normal national
accountancy rules and did not check whether the relevant
provision of Community law had been observed, such
as the applicable regulations and certain programme
documents’, gave rise to the irregularity of the lack of any
project administration or other documents. Since the
irregularity of the lack of project administration is not of
a systematic nature the Commission cannot extrapolate
the percentage figure of 23,7 % based on it.

— Infringement of Article 23(3) of Regulation No 2082/93:
The allegation of a lack of project administration at the
time of the audit by the departmental accountants service
was in breach of Article 23(3) of Regulation No 2082/
93. In regard to the individual projects conducted and
completed in the years 1994 to 1996 the project
administration only had to keep available records for
three years following the last payment in respect of the
project. At the time of the audit by the departmental
accountants service in Summer 2000 that period had
already expired.

In respect of the new programme period from 2000 to
2006 Article 38(6) of Regulation No 1260/1999 now
provides expressly and unambiguously that the support-
ing documents must be kept available for a period of
three years (...) following the payment by the Commission
of the final balance in respect of any assistance. The
fact that the Community legislature plainly intended
unambiguously to couple commencement of the period

during which records must be kept with payment by
the Commission of the final balance confirms, in the
Netherlands Government’s view, that in the preceding
programme period that period was likewise coupled to
the last payment by the Member States in respect of the
specific project.

If nevertheless at the time of the audit by the departmental
accountants service the period during which records had
to be kept must be deemed not
to have expired,
infringement of Article 23(3) of Regulation No 2082/93
does not warrant a full reduction in assistance.

On the basis of the data provided by the Netherlands
Government in the context of the Article 24 procedure,
viewed separately but also together, it is fully and in detail
proven that
the reduction of 23,7 % made by the
Commission is incorrect. The photocopies of the original
decisions collated (by the external accountant in the
course of his auditing activities, including those made by
him) have the same evidentiary value as the original
decisions themselves. The alleged limited value of an
external audit does not affect the probative value of the
photocopies made by an external accountant and is not
relevant in this context.

— Infringement of the principles of proportionality and
protection of legitimate expectations: In view of the fact
that, after approval of the new management control
system in May 1997, the Commission expressed no
reservations in regard to the years 1994 to 1996,
it
aroused the expectation that the requisite and appropriate
corrective measures had already been adopted. The
Netherlands Government was no longer required to
expect that a correction in the form of an extrapolation
could be applied on the basis of a shortcoming established
by the Commission in the previous management and
control system. It was only in the context of the Article 24
procedure that
interpretation of
the Commission’s
Article 23(3) of Regulation No 2082/93 became apparent
together with the consequences attached by it to an
infringement of obligation there under, irrespective of the
fact that at the time when the project was being carried
out it was being soundly administered. Those conse-
quences go beyond what is appropriate and necessary in
order to attain the objective of the obligation to keep
records (which was not clearly and plainly formulated in
Regulation No 2082/93).

(1) Amending Regulation (EEC) No 4253/88 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
1993 L 193, p. 20).
(2) OJ 1999 L 161, p. 1.