CELEX: 62003CJ0029
Language: en
Date: 2003-10-16
Title: Judgment of the Court (Third Chamber) of 16 October 2003. # Commission of the European Communities v Instituto Tecnológico para a Europa Comunitária (ITEC). # Arbitration clause - Non-performance of contract - Recovery of moneys advanced - Procedure in default. # Case C-29/03.

Case C-29/03 Commission of the European CommunitiesvInstituto Tecnológico para a Europa Comunitária (ITEC)
            «(Arbitration clause – Non-performance of contract – Recovery of moneys advanced – Procedure in default)»
            
               
                  Judgment of the Court (Third Chamber), 16 October 2003  
                     
               I - 0000 
               
            
                   
               
               
            
            Summary of the Judgment
         
         
                  
                  Procedure – Proceedings brought before the Court on the basis of an arbitration clause – Contract granting Community funding for a project in the field of research and technological development, including demonstration – Total financial contribution to the project less than the amount paid out by the Commission – Right to partial reimbursement of an advance payment together with default interest(Art. 238 EC)
      

      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
            
            JUDGMENT OF THE COURT (Third Chamber)16 October 2003  (1)
         
         
            
         
               ((Arbitration clause – Non-performance of contract – Recovery of moneys advanced – Procedure in default))
               
            In Case C-29/03, 
            
            
             Commission of the European Communities,   represented by G. Braga da Cruz and C. Giolito, acting as Agents, with an address for service in Luxembourg,
            
            
            applicant, 
            
            v
             Instituto Tecnológico para a Europa Comunitária (ITEC),  a private establishment established in Lisbon (Portugal),
            
            defendant, 
            
            APPLICATION by the Commission under Article 238 EC to recover EUR 62 236.65 advanced by it to the defendant in relation to
            performance of Contract No IN10278I 20364/0, together with default interest, 
            
            
            THE COURT (Third Chamber),,
            
            composed of: J.-P. Puissochet, President of the Chamber, F. Macken and J.N. Cunha Rodrigues (Rapporteur), Judges, 
            
            Advocate General: S. Alber, Registrar: R. Grass, 
            
            
            having regard to the report of the Judge-Rapporteur,
            
            having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
         gives the following
         
         
         Judgment
         1
            
         By application lodged at the Court Registry on 17 January 2003 the Commission of the European Communities brought an action
         under an arbitration clause based on Article 238 EC against the private research establishment Instituto Tecnológico para
         a Europa Comunitária (
         ITEC) for recovery of an advance payment of a principal amount of EUR 62 236.65, paid by the Commission under Contract No IN10278I
         20364/0 (hereinafter  
         the contract), together with EUR 6 853.19 by way of default interest at the rate of 6.28% as from 31 December 2002, giving a total of
         EUR 69 089.84, to which should be added EUR 10.71 by way of interest at the same rate as from 31 December 2002 for each day
         until full payment is made. 
         
            
               Facts and legal framework
            
         
         2
            
         On 18 December 1996 the European Community, represented by the Commission, concluded the contract with ITEC, as coordinator
         of the Associação Nacional de Formação Electrónica Industrial ─ ANFEI, Novageo, Lda, OCT-ON Campus Technology SA, Sodit SA
         and TMN-Telecomunicação Móveis Nacionais, SA. 
         
         
         3
            
         The contract provided for the implementation of a research project called  
         TRIO, with financial support from the Community under Council Decision 94/917/EC of 15 December 1994 adopting a specific programme
         for the dissemination and optimisation of the results of activities in the field of research and technological development,
         including demonstration (1994 to 1998) (OJ 1994 L 361, p. 101). 
         
         
         4
            
         Under Article 2(1) of the contract, the duration of the project was to be 27 months as from 1 January 1994. 
         
         
         5
            
         Under Article 3(1) of the contract, the Commission undertook to contribute financially to the proper execution of the project,
         the total allowable costs of which had been estimated at ECU 1 338 740.  Under Article 3(2), that contribution could cover
         up to 50% of the total allowable costs or, if need be, 100% of additional costs, with a ceiling of ECU 669 370. 
         
         
         6
            
         Under Article 4 of the contract, the Commission was to finance the project as follows: 
         
         
         ─
            an initial advance of ECU 200 819, to be paid within two months following the last signature by the parties to the contract;
            
         
         
         
         ─
            periodical payments to be made within two months following approval of interim reports and corresponding statements of costs,
            with the total amount of the initial advance and the periodical payments not exceeding 90% of the maximum amount of the Commission's
            financial contribution to the project;  
         
         
         
         ─
            the remainder of the total contribution (balance of 10%) to be paid within two months as from the time of approval of the
            final report, documents or other results to be presented for the project and of the statement of costs for the final period.
            
         
         
         
         
         7
            
         Article 9(2.3) of the contract provides that all payments to be made by the Commission are to be made through the project
         coordinator, who also has the obligation to transfer immediately the amount of the payment to the contracting party for whom
         it is intended. 
         
         
         8
            
         Article 2(1)(a) of Annex II to the contract provides that ITEC, in its capacity as coordinator, is to be the only party to
         liaise with the Commission for the transmission of all documents pertaining to the contract, and also undertakes to submit
         periodical reports every 12 months, with each report to be filed within a month following the end of the period to which it
         pertains, as well as a final report to be submitted within two months following expiry of the contract. 
         
         
         9
            
         Under Article 23(3) of Annex II to the contract, the contracting parties undertook, in the event that the total financial
         contribution to the project was less than the total amount of payments made, to reimburse the difference to the Commission
         immediately. 
         
         
         10
            
         Under Article 7 of Annex II to the contract, the parties agreed that all disputes concerning the validity, performance and
         interpretation of the contract would be referred to the Court of First Instance of the European Communities.  Article 10 of
         the contract provides that the contract is governed by Portuguese law. 
         
         
         11
            
         In accordance with the provisions of the contract, the Commission made the following payments to ITEC: 
         
         
         ─
            in January 1997, ECU 200 819 by way of initial advance;  
         
         
         
         ─
            in September 1997, ECU 48 849.12 following submission, on 31 July 1997, of the statement of costs for the period from 1 January
            1997 to 30 June 1997;  
         
         
         
         ─
            in April 1998, ECU 152 592.58 following submission, on 31 December 1997, of the statement of costs for the period from 1 July
            1997 to 31 December 1997; 
         
         
         
         ─
            in March 1999, ECU 58 527.42 following submission, on 31 July 1998, of the statement of costs for the period from 1 January
            1998 to 30 June 1998. 
         
         
         
         
         12
            
         ITEC submitted the following supporting documents for the initial advance by the Commission: 
         
         
         ─
            on 31 January 1999, the fourth report for the period from 1 July 1998 to 31 December 1998, for which the contribution set
            by the Commission totalled ECU 33 339.59; 
         
         
         
         ─
            on 31 July 1999, the fifth report for the period from 1 January 1999 to 30 June 1999, for which the contribution set by the
            Commission totalled ECU 68 988.13;  
         
         
         
         ─
            on 30 September 1999, the final report, comprising a statement of expenses incurred in the period from 1 July 1999 to 30 September
            1999, for which the contribution set by the Commission totalled ECU 36 254.63. 
         
         
         
         
         13
            
         By letter to ITEC of 17 March 2000, the Commission claimed recovery of ECU 62 236.65, corresponding to the difference between
         the ECU 460 788.12 actually paid out and the ECU 398 551.47 which should have been the Commission's total contribution, based
         on the statements of costs submitted. 
         
         
         14
            
         Subsequently, on 13 February 2001 the Commission issued debit note No 3240210406 in the amount of EUR 62 236.65 against ITEC,
         payable by 31 March 2001.  Under the heading  
         Conditions of payment, the Commission stated that, after that date, default interest would be due at the rate applied by the European Central Bank
         to its refinancing operations in euros in March 2001, plus 1.5%.  It sent two new reminders on 14 May and 29 June 2001. 
         
         
         15
            
         On 14 December 2001, ITEC sent the Commission a fax, confirming its interest in finding a solution to the problem.  On 14
         January 2002, the Commission replied, reiterating the amounts paid out for the project and the grounds on which it was claiming
         reimbursement of the overpayment. 
         
         
         16
            
         Since ITEC did not respond to that claim, the Commission brought the present action. 
         Procedure before the Court
         
         17
            
         Under Article 238 EC and Council Decision 88/591/ECSC, EEC and Euratom of 24 October 1988 establishing a Court of First Instance
         of the European Communities (OJ 1988 L 319, p. 1), the Court of Justice alone has jurisdiction to rule on an application by
         an institution pursuant to an arbitration clause. 
         
         
         18
            
         The Commission's application was duly notified to ITEC.  Considering that ITEC had not lodged a defence within the prescribed
         time-limit, the Commission requested that the Court give judgment by default in its favour in accordance with Article 94(1)
         of the Rules of Procedure of the Court. 
         
         
         19
            
         ITEC, having been properly notified, did not lodge a defence within the time-limit prescribed by Article 40(1) of the Rules
         of Procedure.  The Court must therefore give judgment by default.  Since there is no doubt as to the admissibility of the
         application, it is incumbent on the Court, in accordance with Article 94(2) of the Rules of Procedure, to consider whether
         the forms of order sought by the applicant appear well founded. 
         
         
         20
            
         The Commission claims that the Court should order ITEC: 
         
         
         ─
            to pay the applicant EUR 69 089.84 consisting of the principal amount of EUR 62 236.65 together with EUR 6 853.19 by way of
            default interest at the rate of 6.28% as from 31 December 2002; 
         
         
         
         ─
            to pay EUR 10.71 by way of interest at the same rate as from 31 December 2002 for each day until full payment is made;  
         
         
         
         ─
            to pay the costs. 
         
         
         Reimbursement of part of the advance
         
         21
            
         Under Article 23(3) of Annex II to the contract, the contracting parties undertook, if the total financial contribution to
         the project was less than the total amount of payments made, to reimburse the difference to the Commission immediately. 
         
         
         22
            
         It is apparent from the information provided by the Commission that ITEC received a total of ECU 460 788.12 and that, on the
         basis of the various statements of costs it submitted, the Commission's total contribution should have been only ECU 398 551.47,
         corresponding to 50% of the total cost of the project. 
         
         
         23
            
         Accordingly, it is appropriate to grant the forms of order sought by the Commission as regards reimbursement of the overpayment
         of ECU 62 236.65. 
         Interest
         
         24
            
         In the debit note issued against ITEC, the Commission stated that it was payable by 31 March 2001 and that, after that date,
         default interest would be due at the rate applied by the European Central Bank to its refinancing operations in euros in March
         2001, plus 1.5%. 
         
         
         25
            
         The Court notes, however, that Article 23(3) of Annex II to the contract does not provide that the reimbursement of overpayments
         made by the Commission to ITEC is to bear default interest. 
         
         
         26
            
         Since no contractual rate of interest is provided for, and since the contract is governed by Portuguese law, it is appropriate
         to apply Article 806 of the Portuguese Civil Code, paragraphs (1) and (2) of which provide, respectively, that  
         in obligations involving sums of money, the compensation shall correspond to the interest as from the date of the debtor's
         being put on notice and that  
         interest shall be at the legally prescribed rate, unless ... the parties have stipulated a different rate of default interest. 
         
         
         27
            
         Since it put ITEC on notice, the Commission is entitled to claim default interest at the legal rate prescribed by Portuguese
         law, as from 31 March 2001. 
         
         
         28
            
         Portaria No 263/99 of 12 April 1999 (
          Diário da República  I, Series B, No 85 of 12 April 1999, hereinafter  
         Decree No 263/99) set the legal interest rate at 7%.  That rate was modified by Portaria No 291/2003 of 8 April 2003 (
          Diário da República  I, Series B, No 83 of 8 April 2003, hereinafter  
         Decree No 291/2003), which set it at 4% as from 1 May 2003. 
         
         
         29
            
         Pursuant to Article 2(1) of Council Regulation (EC) No 1103/97 of 17 June 1997 on certain provisions relating to the introduction
         of the euro (OJ 1997 L 162, p. 1), references to the ecu must be replaced by references to the euro at a rate of one euro
         to one ecu. 
         
         
         30
            
         Consequently, ITEC must be ordered to pay the Commission the sum of EUR 62 236.65, together with default interest at the rate
         prescribed by Portuguese law, calculated in accordance with the provisions of Decree No 263/99 until 30 April 2003 and Decree
         No 291/2003 as from 1 May 2003, until the debt is paid in full. 
         
         Costs
         31
            
         According to 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.  Since ITEC has been unsuccessful and the Commission has applied for
         costs, ITEC must be ordered to pay the costs. 
         
         On those grounds, 
         
         
         
            
            THE COURT (Third Chamber)
         
         
         hereby:  
         
            
            1.
              Orders Instituto Tecnológico para a Europa Comunitária (ITEC) to repay to the Commission of the European Communities the sum
               of EUR 62 236.65, together with default interest at the rate prescribed by Portuguese law, calculated in accordance with the
               provisions of Portaria No 263/99 of 12 April 1999 until 30 April 2003 and Portaria No 291/2003 of 8 April 2003 as from 1 May
               2003, until the debt is paid in full;  
            
            
            2.
              Orders Instituto Tecnológico para a Europa Comunitária (ITEC) to pay the costs. 
            
            
                  Puissochet
               
               
                  Macken 
               
               
                  Cunha Rodrigues 
               
            
                  
               
               
                  
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
            
            
            
            
            
            
            
         
         
         Delivered in open court in Luxembourg on 16 October 2003. 
         
         
         
         
                  R. Grass 
               
               
                  V. Skouris  
               
            
         
         
         
                  Registrar
               
               
                  President
               
            
      
      
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             Language of the case: Portuguese.