CELEX: 62002TJ0029
Language: en
Date: 2005-03-15
Title: Judgment of the Court of First Instance (First Chamber, extended composition) of 15 March 2005. # Global Electronic Finance Management (GEF) SA v Commission of the European Communities. # Arbitration clause - Non-performance of contract - Counterclaim. # Case T-29/02.

Case T-29/02
      Global Electronic Finance Management (GEF) SA
      v
      Commission of the European Communities
      (Arbitration clause – Non-performance of contract – Counterclaim)
      Judgment of the Court of First Instance (First Chamber, Extended Composition), 15 March 2005 
      Summary of the Judgment
      1.     Procedure – Referral to the Court of First Instance under an arbitration clause – Jurisdiction of the Court of First Instance
            to hear a counterclaim – Basis
      (Art. 238 EC; Rules of Procedure of the Court of First Instance, Art. 113; Council Decision 88/591, Art. 3(1)(c))
      2.     Procedure – Referral to the Court of First Instance under an arbitration clause – Application of the national law governing
            the contract – Interpretation of the contract in the light of its context – Contract granting Community financial assistance
            in return for undertakings given by the recipient – Non-implementation
      3.     Procedure – Referral to the Court of First Instance under an arbitration clause – Contract providing for Community financial
            assistance for a research and development project – Request for reimbursement of certain costs – Counterclaim by the Commission
            for reimbursement of overpayment
      (Art. 238 EC; Council Decisions 94/763 and 94/802)

      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
            
            JUDGMENT OF THE COURT OF FIRST INSTANCE (First Chamber, Extended Composition)15 March 2005(1)
         
         
               (Arbitration clause  –  Non-performance of contract  –  Counterclaim)
               
             In Case T-29/02,
            
            
            Global Electronic Finance Management (GEF) SA, established in Brussels (Belgium), represented by E. Storme and A. Gobien, lawyers, with an address for service in Luxembourg,
            
            
            applicant,
            
            v
            Commission of the European Communities, represented by R. Lyal and C. Giolito, acting as Agents, assisted by J. Stuyck, lawyer, with an address for service in Luxembourg,
            
            defendant,
            
             APPLICATION, based on an arbitration clause within the meaning of Article 238 EC, for an order that the Commission pay the
            sum of EUR 40 693 and issue a credit note in the sum of EUR 273 516, together with a counterclaim by the Commission that the
            applicant should be ordered to reimburse to it the sum of EUR 273 516, plus default interest at the rate of 7% a year as from
            1 September 2001,
            
            
            THE COURT OF FIRST INSTANCEOF THE EUROPEAN COMMUNITIES (First Chamber, Extended Composition),
            
            
             composed of B. Vesterdorf, President, M. Jaeger, P. Mengozzi, E. Martins Ribeiro and F. Dehousse, Judges,
            
             Registrar: J. Plingers, Administrator,
            
            
            
         gives the following
         
         
         Judgment
            
               The contract
            
         
         1
            
          On 21 August 1997, the European Community, represented by the Commission, entered into an agreement, entitled ‘Esprit Network
         of Excellence Working Group – 26069 – Financial Issues Working Group Support (FIWG)’ (‘the contract’), with Global Electronic
         Finance Management S.A. (‘GEF’), represented by its managing director and director of operations, Mr Goldfinger. 
         
         
         
         2
            
          The contract falls within the scope of Council Decision 94/802/EC of 23 November 1994 adopting a specific programme for research
         and technological development, including demonstration, in the field of information technologies (1994 to 1998) (OJ 1994 L
         334, p. 24). 
         
         
         
         3
            
          Annex III to Decision 94/802 provides that the programme is to be executed through indirect action, whereby the Community
         makes a financial contribution to research and technological development activities, including demonstration projects, (RTD)
         carried out by third parties or by institutes of the Joint Research Centre (JRC) in association with third parties. 
         
         
         
         4
            
          In Article 6 of Council Decision No 94/763/EC of 21 November 1994 concerning the rules for the participation of undertakings,
         research centres and universities in research, technological development and demonstration activities of the European Community
         (OJ 1994 L 306, p. 8), the Council laid down that proposals for RTD activities are to be the subject of contracts concluded
         between the Community and the participants in the activity concerned which specify, in particular, the administrative, financial
         and technical monitoring arrangements for the action. 
         
         
         
         5
            
          Under the contract, GEF, a consultancy company specialising in electronic finance, was to provide assistance for and manage
         the various tasks and activities of the ‘Financial Issues Working Group’ (‘the FIWG’). In accordance with Article 1.1 of the
         contract, the project assigned to GEF was defined in Annex I, entitled ‘Technical Annex’, (‘the Technical Annex’). According
         to the Technical Annex, the FIWG was composed of representatives of various sectors and its purpose was to stimulate the development
         and deployment of innovative payment systems and transaction mechanisms necessary for the successful growth of electronic
         commerce and electronic finance within the European Union. 
         
         
         
         6
            
          Under Article 2.1 of the contract, the duration of the project was fixed at 24 months from 4 July 1997, the commencement date
         of the contract. The financial provisions of the contract are in Articles 3 to 5 of the contract and 12 to 17 of Annex II
         entitled ‘General Conditions’ (‘the General Conditions’) 
         
         
         
         7
            
          In the version attached to the application, the Technical Annex contains, in point 7 (pages 14 and 15), five tables, four
         of which are entitled ‘Table 1: Human resources requirements per task (in man-days)’, ‘Table 2: Cost estimates per task (in
         ECU)’, ‘Table 3: Unit costs assumptions (in ECU)’, ‘Table 4: Total cost estimates per task (in ECU)’ and a fifth table relating
         to the breakdown of costs according to resource category. Those tables contain the various cost estimates and resource requirements
         necessary for carrying out the project. 
         
         
         
         8
            
          In the version attached as Annex 3 to GEF’s replies to the questions put by the Court, the Technical Annex contains, in point
         3.7, four tables entitled ‘Table 1: Human resources requirements per task (in man-day)’, ‘Table 2: Cost estimates per task
         (in ECU)’, ‘Table 4: Total cost estimates per task (in ECU)’ and ‘Table 5: Cost estimates per resource category (in ECU)’.
         Those two technical annexes differ in so far as the second contains new pages (pages 1, 3 to 16 and 25), a different heading
         numbering, includes, in point 3.7, a Table 5, has no Table 3 and gives different figures in Tables 2 and 4. 
         
         
         
         9
            
          Article 3.2 of the contract provides that the Commission is to contribute 100% of the allowable costs of the project up to
         ECU 440 000. That is the amount which, under Article 3.1 of the contract, was estimated to be the total cost of that project.
         
         
         
         
         10
            
          Article 4 of the contract provides: 
         ‘The Commission shall pay its contribution for the task in ECU as follows: 
         
         
         
          
         –
            an advance of ECU 165 000 (one hundred and sixty five thousand European currency units) within two months after the last signature
               of the contracting parties; 
            
         
         
         
         
          
         –
            by instalments, each paid within two months after the approval of the respective periodic progress reports and corresponding
               cost statements. The advance and instalments shall not cumulatively exceed ECU 396 000 of the maximum Commission contribution
               for the task; 
            
         
         
         
         
          
         –
            the balance of its total contribution due (a retention of ECU 44 000 (forty four thousand European currency units)) within
               two months after the approval of the last report, document or other task deliverables specified in [the Technical Annex] and
               the cost statement for the final period, as specified in Article 5.2’.
            
         
         
         
         
         
         11
            
          Article 5 of the contract provides that three signed cost statements are to be submitted by the contractor every six months
         from the commencement date of the project and that the cost statement for the final period is to be submitted no later than
         three months after the approval of the last report, document or other task deliverable under the contract, following which
         no further costs are to be allowable for payments. 
         
         
         
         12
            
          The second paragraph of Article 6 of the contract provides that periodic progress reports are to be submitted every six months
         from the commencement date of the term of the project. 
         
         
         
         13
            
          Article 9 of the General Conditions lays down the rules governing the submission by the contractor of, inter alia, the periodic
         progress reports and a final report. 
         
         
         
         14
            
          Under Article 12.1 of the General Conditions of the contract, ‘allowable costs are those actual costs defined in Article 13
         of [those conditions] which are necessary for the task, can be substantiated, and are incurred during the period specified
         in Article 2.1 of the contract ...’. 
         
         
         
         15
            
          According to Article 12.2 of the General Conditions, ‘the estimated costs for the work by categories shall be indicative only.
         The members may transfer the estimated budget between categories provided the scope of the task is not fundamentally affected’.
         
         
         
         
         16
            
          Article 13 of the General Conditions contains specific provisions on the costs relating to the items ‘personnel’ (Article
         13.1), ‘networking costs’ (Article 13.2), ‘other costs’ (Article 13.3), ‘significant specific task costs’ (Article 13.4) and
         ‘overheads’ (Article 13.5). 
         
         
         
         17
            
          According to Article 13.1.2 of the General Conditions:
         ‘All personnel time charged must be recorded and certified. This requirement will be satisfied by, at the minimum, the maintenance
         of time records, certified at least monthly by the designated task manager, or an authorised senior employee of the contractor.’
         
         
         
         18
            
          Article 13.3 of the General Conditions provides, inter alia, that: 
         ‘The following other costs – incurred by the contractor – may be charged to the extent they relate to the performance of the
         task: 
         
         
         
          
         –
            costs of external technical services and facilities (if previously agreed with the Commission); 
         
         
         ...
         
         
         
          
         –
            publications, including newsletters, aimed at disseminating information on the work under the Task’.
            
         
         
         
         
         
         19
            
          Under Article 13.4 of the General Conditions, ‘significant specific task costs incurred by the contractor may be charged with
         the prior written approval of the Commission (approval is deemed granted if the costs item has been specified in Annex 1 to
         the contract, or if no objections are raised by the Commission within two months of the receipt of the written request)’.
         
         
         
         
         20
            
          Article 13.5 of the General Conditions provides that:
         ‘A maximum contribution of 20% of the allowable personnel costs specified in Article 13.1 … may be charged for general costs
         related to the work carried out under the task. These include such costs as non-professional administrative and secretarial
         staff, telephone, heating, lighting, electricity, postal services, electronic mail, stationery etc. Overheads shall exclude
         items readily capable of being charged directly in accordance with Article 13.1 to 13.4 … and costs recovered from third parties.’
         
         
         
         21
            
          Article 15.1 of the General Conditions of the contract provides:
         ‘The contractor shall maintain, on a regular basis and in accordance with the normal accounting conventions of the State in
         which it is established, proper books of account and appropriate documentation to support and justify the costs and the hours
         reported. These shall be made available for audits’. 
         
         
         
         22
            
          Articles 16.2 and 16.3 of the General Conditions provide: 
         ‘16.2 Subject to Article 17 of this annex [Audit], all payments shall be treated as advances until acceptance of the appropriate
         task deliverables, or, if none are specified, until acceptance of the final report. 
          16.3 Where the total financial contribution for the task, including the result of any audit, is less than the payments made
         for the task, the contractors shall immediately reimburse the difference, in ECU, to the Commission.’
         
         
         
         23
            
          Article 17.1 of the General Conditions provides that ‘the Commission, or persons authorised by it, shall be entitled to carry
         out audits up to two years after the completion date or the termination of the contract. ...’
         
         
         
         24
            
          Finally, Article 10 of the contract states that the contract is governed by Belgian law and, under Article 7 of the General
         Conditions, any dispute relating to the contract falls within the exclusive jurisdiction of the Court of First Instance of
         the European Communities and, in the case of appeal, the Court of Justice of the European Communities. 
         
         Background to the dispute
         
         25
            
          On 12 September 1997, the Commission paid GEF an advance of ECU 165 000 in accordance with Article 4 of the contract. 
         
         
         
         26
            
          GEF subsequently submitted to the Commission four periodic progress reports and four cost statements covering the four periods
         from 4 July 1997, the commencement date of the project, to 3 July 1999, the end of the project. 
         
         
         
         27
            
          On 18 and 21 June 1999, before the fourth cost statement, which covered the contractual period from 4 January 1999 to 3 July
         1999 (‘the fourth period’), was submitted, the Commission carried out a financial audit in respect of the previous three periods
         from 4 July 1997 to 3 January 1999. 
         
         
          A – First cost statement, covering the period from 4 July 1997 to 3 January 1998
         
         28
            
          On 3 March 1998, GEF sent the Commission the first cost statement, which covered the period from 4 July 1997 to 3 January
         1998 (‘the first period’), claiming a total amount of ECU 111 193, of which ECU 25 249 represented overheads. 
         
         
         
         29
            
          By letter of 19 March 1998, headed ‘Payment Request Submission for period 4-Jul-97 to 3-Jan-98’ (‘the letter accepting costs
         for the first period’), the Commission agreed to pay an instalment of the costs declared by GEF amounting to ECU 101 432 and,
         in accordance with Article 13.5 of the General Conditions, rejected the claim for overheads in so far as it exceeded 20% of
         the allowable personnel costs. Consequently, in respect of that item, the Commission paid GEF ECU 15 488 instead of the ECU
         25 249 claimed. 
         
         
         
         30
            
          In that letter, the Commission stated that ‘the costs reported (or as amended by us) have been checked and found in line with
         the periodic progress report and in accordance with the contract (see Annex II Part D), subject to verification, adjustments
         on post calculation or audit and acceptance of the labour rates’. 
         
         
          B – Second cost statement, covering the period from 4 January 1998 to 3 July 1998
         
         31
            
          On 6 October 1998, GEF submitted to the Commission the second cost statement, which covered the period from 4 January 1998
         to 3 July 1998 (‘the second period’). The costs claimed by GEF for this period amounted to ECU 107 017, of which ECU 3 818
         related to ‘other costs’. 
         
         
         
         32
            
          By letter of 14 December 1998, headed ‘Payment request submission for period 4‑Jan-98 to 3-Jul-98’ (‘the letter accepting
         costs for the second period’), the Commission agreed to pay an instalment of the costs declared by GEF amounting to ECU 103 228
         and refused to pay the sum of ECU 3 818 claimed for ‘other costs’ on the ground that those costs were already included in
         ‘overheads’. That letter included a passage in the same terms as set out in paragraph 30 above.
         
         
          C – Third cost statement, covering the period from 4 July 1998 to 3 January 1999
         
         33
            
          On 3 June 1999, GEF submitted to the Commission the third cost statement, covering the contractual period from 4 July 1998
         to 3 January 1999 ( ‘the third period’) and amounting to EUR 104 098 (the amount of costs was converted into euros in accordance
         with 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), which provides that the ecu is to be replaced by the euro from 1 January 1999 at the rate of one euro to
         one ecu). 
         
         
         
         34
            
          By letter of 27 July 1999, headed ‘Payment Request Submission for period 4‑Jul‑98 to 3-Jan-99’ (‘the letter accepting costs
         for the third period’), the Commission accepted the costs declared by GEF up to the amount of EUR 96 214 and rejected the
         claim for EUR 7 884, which was the total declared under the item ‘other costs’, on the ground that those costs were already
         included in ‘overheads’. 
         
         
         
         35
            
          By that letter, the Commission, in order to comply with the ceiling of EUR 396 000 provided for in Article 4 of the contract
         (GEF had received an advance payment of EUR 165 000 + EUR 101 432 for the first period + EUR 103 228 for the second period
         = EUR 369 660), agreed to pay an instalment of a lesser amount than that of the costs which it had accepted, namely EUR 26
         340 instead of EUR 96 214 (EUR 396 000 - EUR 369 660 = EUR 26 340). That letter too included a passage in the same terms as
         set out in paragraph 30 above.
         
         
          D – The financial audit
         
         36
            
          On 18 and 21 June 1999, the Commission carried out a financial audit relating to the first three periods of the contract.
         
         
         
         
         37
            
          By letter of 9 July 1999, the Commission requested from GEF additional information on the remuneration of the project manager
         Mr Goldfinger. By letter of 30 July 1999, GEF sent the Commission documents and explanations concerning Mr Goldfinger’s remuneration
         and certain aspects of tax and social security. 
         
         
         
         38
            
          By letter of 12 October 1999, the Commission sent GEF the final technical review report on the project, dated 21 September
         1999. 
         
         
         
         39
            
          By letter of 21 December 1999, the Commission sent GEF a draft report on the financial audit. In that draft report, the Commission
         came to the conclusion that GEF had overclaimed a total amount of EUR 228 713, which was equivalent to 245% of the total amount
         of costs accepted of EUR 93 334. 
         
         
         
         40
            
          By fax of 31 January 2000, GEF informed the Commission that it disagreed with the content of the draft audit report, stated
         its objections and attached the analysis carried out by Mr Joseph Pirenne, its tax adviser and certified accountant (‘the
         letter from Mr Pirenne of 31 January 2000’). 
         
         
         
         41
            
          By letter of 20 March 2000, the Commission rejected the objections raised by GEF and proposed a specific technical review
         (‘the Second Technical Review’) in order to establish the precise number of hours which could be reasonably claimed for each
         of the tasks performed in accordance with the Technical Annex. The Second Technical Review took place on 24 May 2000. A copy
         of the report on that review was sent to GEF on 27 October 2000 in response to its request of 18 October 2000. 
         
         
         
         42
            
          By letter of 18 July 2000, the Commission sent GEF the final audit report of 28 June 2000. In that report, the Commission
         concluded that, for the audited period from 4 July 1997 to 4 January 1999, GEF had overclaimed a total amount of EUR 253 823,
         which was equivalent to 372% of the total costs accepted of EUR 68 224. 
         
         
         
         43
            
          The conclusions reached by the auditors in the final audit report of 28 June 2000 were based in particular on the following
         observations: 
         ‘[GEF] does not keep time records for individual employees. This is not in compliance with Article 13.1.2 of [the General
         Conditions annexed] to the contract. 
          Mr Goldfinger admitted that in fact no time sheets whatsoever are kept by GEF. During our audit, Mr Goldfinger made an overview
         of the hours spent based on an office agenda and the employment contracts. We noted that this office agenda did not contain
         any registration of hours. Consequently, we could not accept the hours charged to the EC project. Furthermore, the time sheets
         made by Mr Goldfinger were incorrect for the following reasons: the project started on 4/7/97 and not 1/7/97 and the 202 hours
         claimed for the information specialist in July 1997 and October 1997 were incorrect as this person started working for GEF
         only on 3 November 1997. 
          The analysis of the ratio turnover/personnel costs in the Financial Statements compared to what was claimed in the cost statements
         shows the following (amounts in BEF):
         
         
             
               1996/1997
                  
               
               1997/1998
                  
               
            Salary Mr Goldfinger
                  
               
               2 791 211
                  
               
               4 119 153
                  
               
            Salaries employees
                  
               
               2 711 775
                  
               
               4 599 788
                  
               
            Total Personnel Costs in Financial Statements 
                  
               
               5 502 986
                  
               
               8 718 941
                  
               
            Personnel Costs claimed on EC project (2 first periods)
                  
               
               0
                  
               
               6 428 877
                  
               
            Personnel Costs non EC projects
                  
               
               5 502 986
               
               2 290 064
               
                
                   
                   
            Turnover Financial Statements
                  
               
               13 208 003
                  
               
               15 556 779
                  
               
            Deduct: EC project (according to client accounts)
                  
               
               6 656 100
                  
               
               9 397 877
                  
               
            Turnover non EC projects
                  
               
               6 551 903
               
               6 158 902
               
             Apparently, in fiscal year 1996/1997, a turnover of BEF 6.5 million was generated by a personnel cost of BEF 5.5 million (ratio
         1.19). In fiscal year 1997/1998 almost the same turnover was generated (BEF 6.2 million) but with a personnel cost of only
         BEF 2.3 million (ratio 2.69). This is an indication that the personnel costs charged to the Commission are seriously overstated.
         
          Paragraph 3.7 of the Technical Annex to the contract gives a budgeted number of man-days for the project of 447 or 3 576 hours.
         This would mean an average of 894 hours per semester. We have noted that the total … hours claimed for the 2 first semesters
         were 2 827 and 2 878, which is more than 300% of what had been budgeted. 
          As time sheets did not exist, we were unable to assess the number of hours that could be charged to the EC project. In the
         draft audit report the accepted number of hours [was] based on the budgeted number of hours, as the final technical review
         report of 21 September 1999 did not give any indication with regard to the number of hours either ... . 
          It was therefore decided and agreed with GEF that another technical review should take place, with the objective of establishing
         the precise number of hours which could reasonably be claimed for each of the tasks performed in accordance with Annex I to
         the contract. 
          The Second Technical Review took place on 24 May 2000. The results were that for the whole contract period i.e. for the period
         from 4/7/1997 to 4/7/1999, 303 man-days can be accepted, or 2 420 hours. 
          Considering the results of this Second Technical Review, we calculated the personnel costs that could be accepted for the
         audited period, i.e. from 4/7/1997 to 4/1/1999. These calculations are based on the total number of hours for the whole contract
         period accepted by the Second Technical Review (2 420 hours) and divided by four in order to obtain the number of man-hours
         per semester (605 hours). 
          Although we acknowledge that the split of the total number of accepted man-days per semester may not conform to the work effectively
         carried out in each semester, we consider this method reasonable. Moreover, the audit revealed that the hourly personnel rates
         do not differ a lot from one semester to another. 
         ...’. 
         
         
         44
            
          By letter of 14 November 2000, GEF sent the Commission a copy of the time sheets drawn up by Mr Goldfinger and documents intended
         to prove that, contrary to the findings made by the auditors in the final audit report, GEF kept time sheets for its staff.
         
         
         
         
         45
            
          By letter of 22 November 2000, the Commission confirmed that it had received those documents and informed GEF that the audit
         file had been passed to Ms De Graef, to whom all future correspondence was to be sent. 
         
         
         
         46
            
          By letter No 502667 of 14 December 2000 relating to the third period, the Commission sent GEF the version of the accepted
         costs for the first three contractual periods as recalculated in the light of the final audit report and a consolidated cost
         statement taking account of that revision, according to which the Commission had paid GEF an excess of EUR 208 602 in respect
         of those periods. 
         
         
         
         47
            
          By letter of 21 December 2000, addressed to Ms De Graef, GEF requested a meeting in order to initiate a discussion with the
         Commission on, in particular, the content of the report on the Second Technical Review and the final audit report. 
         
         
          E – Fourth cost statement, covering the period from 4 January 1999 to 3 July 1999
         
         48
            
          On 2 December 1999, GEF submitted to the Commission its fourth cost statement, for the fourth period, for an amount of EUR
         148 148.01. 
         
         
         
         49
            
          By letter of 3 July 2000, the Commission requested from GEF additional information on the items ‘networking costs’ and ‘other
         costs’ and made observations on costs which were not allowable under the contract. 
         
         
         
         50
            
          By letter of 31 July 2000, GEF submitted to the Commission, on the basis of the comments already made by the latter, an adjusted
         version of the fourth cost statement amounting to EUR 135 819.48 and documents relating to the items ‘networking costs’ and
         ‘other costs’. 
         
         
         
         51
            
          By letter No 502668 of 14 December 2000, headed ‘Payment request submission for period 4-Jan-99 to 3-Jul-99’ (‘the letter
         accepting costs for the fourth period’), the Commission accepted the costs declared by GEF up to the amount of EUR 30 212. The costs claimed by GEF which were rejected
         by the Commission concerned part of the item ‘personnel’ amounting to EUR 83 805, part of the item ‘networking costs’ amounting
         to EUR 3 404, part of the item ‘other costs’ amounting to EUR 1 608 and a share of the item ‘overheads’ amounting to EUR 16
         790. The Commission stated that a share of the items ‘personnel’ and ‘overheads’ was rejected because, on the basis of the
         audit results, it had limited working hours to 605 hours and had used the audited labour rates. With respect to the items
         ‘networking costs’ and ‘other costs’, the Commission stated that some costs had been partially rejected because they were
         not supported by invoices. The Commission added that no payment could be ordered at that stage since the contractual retention
         ceiling had been reached. That letter included a passage in the same terms as set out in paragraph 30 above.
         
         
         
         52
            
          By that same letter No 502668 of 14 December 2000, the Commission also sent GEF a consolidated cost statement for the entire
         period covered by the contract (from 4 July 1997 to 3 July 1999). 
         
         
          F – The Commission’s request for reimbursement: the debit note of 11 July 2001
         
         53
            
          By letter of 24 January 2001, the Commission sent GEF a final consolidated cost statement for the entire term of contract,
         which was identical to that appended to abovementioned letter No 502668 of 14 December 2000. It appears from that document
         that, according to the Commission, GEF had been paid an excess of EUR 273 516, which was equivalent to the total amount of
         costs paid to GEF by the Commission of EUR 396 000, less the costs accepted by the Commission of EUR 122 484. 
         
         
         
         54
            
          By letter of 2 February 2001, the Commission informed GEF’s lawyer that the European Anti-Fraud Office (OLAF) had begun an
         investigation into the FIWG and that a meeting was to be held with GEF to review and discuss the matters arising from the
         final audit reports drawn up by the Directorate-General of the Information Society (DG InfoSoc) and the points raised in GEF’s
         letter of 21 December 2000, mentioned in paragraph 47 above, in so far as they were relevant to the Commission’s investigation.
         
         
         
         
         55
            
          In reply to the two abovementioned letters of the Commission of 24 January and 2 February 2001, GEF informed the Commission,
         by two letters dated 21 February 2001, addressed to Mr Lefebvre of DG InfoSoc and Mr Brüner of OLAF respectively, that it
         disagreed with the final consolidated cost statement to the extent to which it was based on the results of the audit reports,
         which had already been contested previously. GEF also repeated its request, made in its letter of 21 December 2000, for a
         meeting with the Commission’s representatives. 
         
         
         
         56
            
          By letter of 12 March 2001, the Commission informed GEF that it had followed the results of the audit report so that any further
         recourse was to be addressed directly to the Audit Service. 
         
         
         
         57
            
          By letter of 19 March 2001, addressed to Ms De Graef, GEF confirmed that she should explain to the Audit Service that a discussion on the contract was
         in progress. 
         
         
         
         58
            
          On 11 July 2001, the Commission addressed a debit note to GEF, by which it claimed reimbursement of the sum of EUR 273 516.
         
         
         
         
         59
            
          By letter of 25 July 2001, addressed to Mr Lefebvre, GEF formally contested the Commission’s debit note since no final agreement
         had been reached with the Commission on the final audit report on the project. In addition, it requested that the Commission
         suspend the repayment procedure until discussions with its authorised representatives had been held. 
         
         
         
         60
            
          By letter of 26 July 2001, addressed to Ms De Graef, GEF’s lawyer confirmed his client’s position and reiterated the disagreement
         which GEF had expressed as regards the audit reports in its previous correspondence (in particular in the letters addressed
         to the Commission on 14 November and 21 December 2000) and pointed out that, contrary to what the Commission had claimed in
         its letter of 2 February 2001, GEF had received no invitation to discuss matters which it had raised. 
         
         
         
         61
            
          By letter of 9 August 2001, GEF’s lawyer informed the Commission that, since the Commission had failed to honour its formal
         promise to organise a meeting in order to try to find a mutually satisfactory solution with regard to the project accounts,
         his client intended to bring an action before the Court of First Instance under the arbitration clause contained in the contract.
         
         
         Procedure
         
         62
            
          By application lodged at the Registry of the Court of First Instance on 13 February 2002, GEF brought the present action.
         
         
         
         
         63
            
          In its defence, lodged at the Registry of the Court of First Instance on 13 May 2002, the Commission made a counterclaim.
         
         
         
         
         64
            
          As measures of organisation of procedure provided for in Article 64(3)(a) and (d) of the Court’s Rules of Procedure and having
         regard to the report of the Judge-Rapporteur, the Court of First Instance (First Chamber) decided, during its deliberations
         on 11 November 2003, to put a number of written questions to the parties and to ask them to produce certain documents. The
         parties replied to the questions and produced the requested documents within the time-limits laid down.
         
         
         
         65
            
          Pursuant to Articles 14(1) and (3) and 51(1) of the Court’s Rules of Procedure, the First Chamber decided to propose to the
         Court sitting in plenary session that the present case be referred to a Chamber composed of five judges. 
         
         
         
         66
            
          By letter of 4 December 2003, the parties were asked, pursuant to Article 51(1) of the Rules of Procedure, to submit their
         observations on that referral by 9 December 2003. 
         
         
         
         67
            
          By letters of 8 and 9 December 2003, the Commission and GEF informed the Court that they had no observations to submit on
         the referral of the present case to the First Chamber, Extended Composition. 
         
         
         
         68
            
          By decision of the plenary session of 10 December 2003 on the proposal made by the First Chamber, the present case was referred
         to the First Chamber, Extended Composition.
         
         
         
         69
            
          The parties presented oral argument and answered the questions put to them by the Court at the hearing on 30 March 2004.
         
         Forms of order sought
         
         70
            
          The applicant claims that the Court of First Instance should:
         
         
         
          
         –
            declare the application admissible and well founded;
         
         
         
         
          
         –
            order the Commission to pay the applicant EUR 40 693;
         
         
         
         
          
         –
            declare the Commission’s claim for reimbursement of EUR 273 516 unfounded and therefore order the Commission to issue a credit
               note for EUR 273 516;
            
         
         
         
         
          
         –
            dismiss the Commission’s counterclaim as unfounded;
         
         
         
         
          
         –
            order the Commission to pay the costs. 
         
         
         
         
         
         71
            
          The Commission contends that the Court of First Instance should:
         
         
         
          
         –
            dismiss the action as unfounded;
         
         
         
         
          
         –
            order the applicant to pay it EUR 273 516, plus default interest at the rate of 7% a year as from 1 September 2001;
         
         
         
         
          
         –
            order the applicant to pay the costs.
         
         
         
         The jurisdiction of the Court of First Instance
         
         72
            
          Under Article 113 of its Rules of Procedure, the Court of First Instance may of its own motion consider whether there exists
         any absolute bar to proceeding with an action. Since the jurisdiction of the Court of First Instance is an issue involving
         an absolute bar to proceeding, the matter may be examined by the Court of its own motion (Case T-174/95 Svenska Journalistförbundet v Council [1998] ECR II‑2289, paragraphs 79 and 80).
         
         
         
         73
            
          In that connection, it must be pointed out that, on the date when the present action was brought, the jurisdiction of the
         Court of First Instance under Article 238 EC and Article 3(1)(c) of Council Decision 88/591/ECSC, EEC, Euratom of 24 October
         1988 establishing a Court of First Instance of the European Communities (OJ 1988 L 319, p. 1), as amended by Council Decision
         93/350/ECSC, EEC, Euratom of 8 June 1993 (OJ 1993 L 144, p. 21) to deal with an action based on an arbitration clause necessarily
         implies jurisdiction to deal with a counterclaim made by an institution in the context of the same action which derives from
         the contractual relationship or the situation on which the main application is based or has a direct link with the obligations
         deriving therefrom (see to that effect Case 426/85 Commission  v Zoubek [1986] ECR 4057, paragraph 11, and Case C‑167/99 Parliament  v SERS and Ville de Strasbourg [2003] ECR I-3269, paragraphs 95 to 104; order of the Court of 21 November 2003 in Case C-280/03 Commission  v Lior and Others,  not reported in the ECR, paragraphs 8 and 9, and Case T‑68/99 Toditec  v Commission [2001] ECR II-1443.
         
         
         
         74
            
          It follows that the Court of First Instance has jurisdiction to deal with the Commission’s counterclaim.
         
         Substance
          A – The applicant’s claim for EUR 40 693 and for the issue of a credit note for EUR 273 516
         
         75
            
          GEF claims that, under the contract, it is entitled to reimbursement of EUR 436 693, being the sum of the amounts accepted
         by the Commission in respect of its first three cost statements, namely EUR 101 432 for the first, EUR 103 228 for the second
         and EUR 96 214 for the third, and the sum of EUR 135 819 declared in the fourth cost statement. It states that, since the
         Commission has already paid EUR 396 000, its claim for reimbursement is limited to EUR 40 693 (EUR 436 693 – EUR 396 000).
         
         
         
         76
            
          In support of its claim GEF puts forward, in essence, four pleas in law, alleging, first, breach of contract by the Commission,
         second, breach of the principle of the protection of legitimate expectations, third, breach of the principle of respect for
         the rights of the defence and, fourth, breach of the principle that contractual obligations should be performed in good faith
         and of the principle of sound administration. In that connection, the latter plea, alleging as it does a failure by the Commission
         to perform the contract in good faith and breach of the principle of sound administration, should be examined second.
         
         
          1. The first plea: breach of contract
          a) Arguments of the parties
         
         
         77
            
          GEF maintains, first, that its claim for EUR 40 693, still payable to it for expenditure incurred in connection with the contract,
         is based on breach by the Commission of its obligations under the contract and infringement of the first paragraph of Article
         1134 of the Belgian Civil Code, according to which ‘agreements legally entered into operate as law for those who entered into
         them’. By having arbitrarily and unilaterally changed its position regarding acceptance of the expenses submitted and proved
         by GEF, the Commission failed in its contractual obligations. GEF correctly performed the contract, as is confirmed by the
         final technical review report, which states clearly that the project resources were properly used and gives a ‘green flag’
         (final approval of results) for the work carried out by GEF.
         
         
         
         78
            
          Second, GEF maintains in its application that the Commission has not duly proved, in accordance with the first paragraph of
         Article 1235 of the Belgian Civil Code, that the sum of EUR 273 516 which it sought to recover following a change in its position
         was paid ‘in error’. According to GEF, no payment was made in error. In its reply, GEF reformulates that position which was
         based on a mistranslation of the first paragraph of the abovementioned Article 1235. According to that article, ‘every payment
         presupposes a debt: any payment made but not due is recoverable’. The Commission has not proved that the sum claimed was paid
         but was ‘not due’. GEF considers that the payment was due and that, in case of doubt, it is incumbent upon the Commission
         to prove that it made the payment in error, which is not the case here.
         
         
         
         79
            
          Next, contrary to the Commission’s contention, and as already pointed out by GEF in its letter from Mr Pirenne of 31 January
         2000, the contract is not a subsidised contract and makes no reference to any form of subsidy under a European assistance
         programme. The Commission also accepts in its letter of 20 March 2000, in which it gave its approval for replacement of the
         words ‘Subsidies for EC 26 069’ and ‘Turnover minus subventions’ used on page three of the draft audit report by the words
         ‘of which EC contract 26 069’ and ‘Turnover minus EC contribution’ respectively. 
         
         
         
         80
            
          Finally, with regard in particular for the proof of the costs submitted to the Commission, GEF makes observations concerning
         the ‘personnel’ costs, including Mr Goldfinger’s remuneration and certain expenses under the headings ‘Travel and subsistence
         costs’ and ‘Other costs’. 
         
         
         
         81
            
          As regards personnel costs, GEF observes, as a preliminary point, that they constitute the main point on which the parties
         to the contract disagree, as highlighted by the final audit report, according to which 9 859 hours’ work were overclaimed.
         
         
         
         82
            
          In that regard, GEF claims, first, that the Commission and GEF itself underestimated the increase in the volume of work resulting
         from the speed of the changes occurring in the field of electronic financial transactions and internet financial transactions,
         those changes having made necessary constant adjustments to the scope of the tasks that were not foreseeable when the contract
         was signed.
         
         
         
         83
            
          Thus, GEF, as a result, legitimately declared a larger number of hours and substantially adjusted the hourly rates as compared
         with the initial estimates, in accordance with the detailed guidelines provided by the Commission after signature of the contract.
         Those new rates, which served as a basis for the cost statements for the first three contractual periods, were notified to
         the Commission in March 1998 through a financial questionnaire accepted by the Commission.
         
         
         
         84
            
          According to GEF, the Commission, which had closely followed the work done and planned as part of the tasks covered by the
         project and had received in each cost statement a detailed outline of the time devoted by GEF personnel to the project, was
         thus aware of the fact that, as from the first cost statement, submitted in March 1998, the number of hours initially estimated
         would be exceeded and that, as from the second cost statement, submitted in October 1998, that number of hours had in fact
         been exceeded. Moreover, at no time during the course of the project had the Commission ever made any adverse comments concerning
         the time devoted to it and the rates used by GEF to calculate personnel costs. On the contrary, all the relevant Commission
         staff had expressed positive views concerning the progress of the project and supported the manner in which GEF was carrying
         it out. That shows that the Commission accepted the larger number of working hours worked on the project and the rates applied
         by GEF and explains why the Commission made payments to it on the basis of its cost statements. The statement contained in
         the second technical review report to the effect that the Commission had not approved the additional time devoted by GEF to
         the project is therefore incorrect. 
         
         
         
         85
            
          Moreover, the fact that the estimated number of working hours was exceeded does not involve any change to the contract since,
         unlike the contractual ceiling of EUR 440 000, it is not an essential element of the contract. In that connection, GEF submits,
         first, that the Commission’s statement in the final audit report that the number of man-days provided for by the contract
         for the project is 447, or 3 576 hours, is merely an estimate and not a maximum limit of days and hours to be worked.
         
         
         
         86
            
          Also, with regard to the statement contained in the second technical review report that the number of hours worked on the
         project was initially regarded as a maximum which could not be exceeded without prior written approval from the Commission,
         GEF claims that, when the contract was concluded, it was impossible to define objectively and precisely the number of hours’
         work that would be necessary for performance of the contract. That is why the parties agreed to set an amount of EUR 440 000 
         to be apportioned among a number of tasks and categories of costs by way of maximum authorised costs, without any reference
         to a predetermined number of hours as a basis for that maximum amount. No provision of the contract indicates that the estimated
         number of hours could not be exceeded or that such an eventuality would require an amendment to the contract, as would be
         the case if GEF had called for a contribution exceeding EUR 440 000. It infers that the only criterion for payment of personnel
         costs was not the final estimate but the fact that the total expenditure should be acceptable and not exceed EUR 440 000.
         
         
         
         87
            
          Second, as regards the statements of hours worked on the project and the costs incurred, GEF considers that the Commission
         was wrong to take the view, in the draft audit report and in the final audit report, that the number of hours worked was overestimated
         because there was no recording of working time and no time sheets.
         
         
         
         88
            
          GEF states, first, that it completed all the requisite forms and complied with all the applicable legal provisions, in particular
         all the requirements of the Social Secretariat Securex (‘Securex’), the Belgian statutory social security provisions and accounting
         principles, in accordance with Article 15.1 of the General Conditions, a provision which, according to the draft audit report,
         was fully complied with.
         
         
         
         89
            
          GEF claims that it filled in and sent to the Commission the financial questionnaire concerning budgeted costs, and each cost
         statement sent to the Commission contained in an annex a detailed breakdown of personnel costs, including the number of hours
         worked and the unit rate. At the end of the period covered by the contract, GEF prepared a summary cost statement for the
         whole period and sent the Commission an updated financial questionnaire. Moreover, GEF kept the documents relating to the
         time worked on the project by each of its members of staff. To that end, it used and still uses the Securex documents. In
         addition to those documents, GEF also prepared supplementary time sheets showing the hours worked each day by each professional
         category assigned to the project, for which the Commission confirmed to it, in its letter of 20 March 2000, that no requirement
         had been imposed regarding any specific format. 
         
         
         
         90
            
          In addition, it states that, in June 1999, the documents concerning hours worked, filled in in accordance with the rules laid
         down by Securex, and the supplementary time sheets drawn up by Mr Goldfinger had already been submitted to the auditors, but
         the latter refused to take them, for which reason GEF notified them to the Commission on 14 November 2000. It also states
         that those documents were the subject of a letter from Mr Pirenne of 31 January 2000. GEF states that it would be able to
         produce to the Court evidence of all the costs incurred, including copies of all time sheets and purchase invoices.
         
         
         
         91
            
          Next, it states that Article 13.1.2 of the General Conditions does not stipulate that each employee must draw up his own time
         sheets. In this case, GEF maintains that the time records and time sheets were drawn up by the project manager and that, accordingly,
         they were also certified by him as required by the contract. Moreover, the Commission explicitly confirmed that GEF acted
         in accordance with the contract, in its letters accepting costs relating to the cost statements submitted by GEF, in which
         it stated that the ‘the costs reported (or as amended by us) have been checked and found in line with the periodic progress
         report and in accordance with the contract (see Annex II Part D), subject to verification, adjustments on post calculation
         or audit and acceptance of the labour rates’. According to GEF, the express reference to part D of the General Conditions,
         which deals with the form to be filled in for personnel costs, indicates that GEF complied with the Commission’s instructions
         regarding the manner of declaring costs.
         
         
         
         92
            
          Finally, in the event of the Court considering that the contractual provisions, in particular Articles 13.1 and 15.1 of the
         General Conditions, are not sufficiently clear, it should be concluded that GEF acted correctly and in accordance with the
         contract, pursuant to Article 1162 of the Belgian Civil Code, which provides that ‘in case of doubt, agreements are to be
         interpreted against the person who imposed the obligation and in favour of the person who assumed it’.
         
         
         
         93
            
          As regards, in particular, Mr Goldfinger’s remuneration, GEF states that the Commission took no account of the fact that his
         pay was queried at the time of the audit and GEF had showed, on the basis of the company accounts, that the cost relating
         thereto was acceptable having regard to the situation on the Belgian market.
         
         
         
         94
            
          Third, GEF contests the procedure followed in the second technical review and the result arrived at.
         
         
         
         95
            
          As regards the procedure followed for the second technical review of 24 May 2000, GEF considers that the auditors did not
         comply with the terms of reference for the examination laid down in the Commission’s letter of 20 March 2000 since they did
         not ask how much time GEF had devoted to each task or make a reasonable estimate of that time. They simply divided the total
         number of hours, as estimated when the contract was signed, among various tasks and moreover made no effort to validate those
         calculations with the project team. That approach is not in conformity with the contract, according to which the basis for
         payment by the Commission is not the initially estimated costs but the reasonable costs actually incurred and proved. Accordingly,
         GEF considers that, in so far as the final audit report was based on the second technical review report, it is not correct.
         
         
         
         96
            
          As regards the results of the second technical review, GEF states that it is not reasonable for the number of hours worked
         on the project and accepted by the Commission to be lower than the initial estimate. GEF claims that it demonstrated that
         it had expended the resources declared in its cost statements and the Commission accepted this not only in the final technical
         review but also in the draft audit report, both of which confirmed the accuracy of GEF’s accounts. GEF observes that, in the
         final technical review, cited in the draft audit report, the Commission stated that ‘the work was done and resources were
         consumed’ and it spoke of ‘good use of resources in general’. 
         
         
         
         97
            
          Fourth, GEF maintains that the Commission was wrong not to take account, when drawing up the final audit report, of the remarks
         made by Mr Pirenne in his letter of 31 January 2000 concerning the draft audit report.
         
         
         
         98
            
          Thus, first, GEF refers in particular to the statement contained in the final audit report, repeating that in the draft, to
         the effect that the 202 hours declared for an information specialist in July and October 1997 were not justified, because
         that person had not started working for GEF until 3 November 1997. However, Mr Pirenne mentioned in his letter of 31 January
         2000 that, in July, October and November 1997, the work of information specialist had been carried out successively by three
         people. In that connection, GEF also observes that the contract contains no provision preventing it from using more than one
         person to carry out a particular task and adds that, in this case, everyone who worked as an information specialist was qualified
         to do so.
         
         
         
         99
            
          GEF also refers to the analysis of the ratio between its turnover and its personnel costs and to the finding that the personnel
         costs which had been invoiced were greatly overestimated, as indicated in the draft audit report and also in the final audit
         report. In that connection, Mr Pirenne had clearly stated, in his letter of 31 January 2000, that the auditors had not correctly
         presented the remarks and the figures provided by it, in particular by failing to take account of the fact that a project
         covering successive accounting periods involves a staggering of costs and income over the entire duration of the project.
         Thus, GEF’s financial year runs from 1 October to 30 September, whereas the costs were recorded in accordance with the Commission’s
         method, under which the financial year starts in July. Even though that information may not have been clear when GEF submitted
         its accounts, it then gave explanations in its letter of 31 January 2000 and they should have been taken into account when
         the final audit report was drawn up.
         
         
         
         100
            
          Lastly, GEF examines the other expenses disallowed by the auditors, under the headings ‘Travel and subsistence’ and ‘Other
         costs’. GEF claims that the rejection of costs under those two headings in the draft audit report, in the final audit report
         and in the letter accepting costs for the fourth period is not correct, since it documented and proved all those costs. It
         also criticises the Commission for not taking account of Mr Pirenne’s observations in his letter of 31 January 2000. GEF proposes
         resubmitting the proof of all those costs in the present proceedings.
         
         
         
         101
            
          As regards in particular the EUR 3 145.05 paid for the Datamonitor study, GEF considers it to be a cost incurred in connection
         with project documentation which the auditors incorrectly classified as relating to technical assistance. The incurring of
         that cost should not therefore have been subject to prior approval by the Commission under Article 13.3 of the General Conditions.
         GEF also states that it made the study and the invoice relating to it available to the auditors, who nevertheless refused
         to rectify their error.
         
         
         
         102
            
          As to the heading ‘Other costs’ and, in particular, the cost statement for EUR 1 790.31, backed by invoices and relating to
         the purchase of small items in bookshops, GEF claims that it forms part of a series of allowable costs, specifically relating
         to documentation, up to the sum of EUR 11 056 and that the documentation in question was necessary for performance of the
         tasks involved in the project.
         
         
         
         103
            
          The Commission contends that this plea is unfounded, and maintains that it did not breach its obligations under the contract.
         
         
         
          b) Findings of the Court
          Preliminary observations
         
         
         104
            
          It should be borne in mind that, under the contract, GEF committed itself to executing the project defined in the Technical
         Annex. The project consisted in providing assistance to the FIWG, in the form of the performance of six different tasks, for
         each of which there was a list of various services to be provided.
         
         
         
         105
            
          It should also be borne in mind that, in accordance with Article 6 of Decision 94/763, the contract specifies, among other
         things, the administrative, financial and technical monitoring arrangements for the project.
         
         
         
         106
            
          Thus, GEF was, in particular, required to submit to the Commission, under Article 6 of the contract and Article 9 of the General
         Conditions, four periodical progress reports, at six-monthly intervals as from the commencement date of the contract. The
         aim was to enable the Commission to evaluate the progress made and cooperation received in connection with the project and
         any tasks relating thereto. GEF was also required to provide a final report concerning the work, objectives, results and conclusions
         of the project. Under Articles 4 and 5 of the contract GEF was required, finally, to submit to the Commission, every six months
         as from the commencement date of the contract, four cost statements corresponding to the same periods as those covered by
         the four reports mentioned above, to enable the Commission to make partial payments relating to them.
         
         
         
         107
            
          In addition, the contract laid down the conditions under which the various categories of costs borne by GEF should be reimbursed.
         
         
         
         108
            
          In view of the foregoing, and having regard to the answers given to GEF to the questions put to it on this point by the Court
         at the hearing, it must be held that the applicant has not demonstrated in what way the question whether the contract should
         be regarded as a subsidy contract might affect the outcome of the dispute. Consequently, the question of the extent to which
         the parties fulfilled their contractual obligations must be examined in the light of the contractual provisions alone (see,
         to that effect, Toditec  v Commission, cited in paragraph 73 above, paragraph 77).
         
         
         
         109
            
          Next, it is necessary to analyse the contractual provisions concerning the various categories of costs which it was permissible
         to incur in relation to execution of the project and the conditions for reimbursement of those costs.
         
         
         
         110
            
          As regards the categories of allowable costs for execution of the project, as provided for in Article 13 of the General Conditions,
         namely personnel costs, networking costs, other costs, significant specific task costs and overheads, Article 12.1 of the
         General Conditions provides that allowable costs are the actual costs necessary for the project which can be substantiated
         and are incurred during the period specified for the duration of the project. Article 12.2 provides in addition that the estimated
         costs for work by categories are to be indicative only and it is permissible for the estimated budget to be transferred between
         categories provided that the scope of the task is not fundamentally affected.
         
         
         
         111
            
          Article 13.1.2 of the General Conditions provides that the requirement that all personnel time charged must be recorded and
         certified will be satisfied by, at the minimum, the maintenance of time records, certified at least monthly by the designated
         task manager or an authorised senior employee of the contractor. Article 15.1 of the General Conditions also makes it clear
         that the contractor must maintain, on a regular basis and in accordance with the accounting conventions of the State in which
         it is established, proper books of account and appropriate documentation to support and justify the costs and the hours reported,
         and these are to be made available to the auditors.
         
         
         
         112
            
          It follows that GEF is required to produce proof that the costs reported in the various cost statements which it submitted
         to the Commission are actual costs which were in fact necessary and were incurred for execution of the project within the
         duration of the project. It also follows that, in producing such proof, GEF must comply with the requirements mentioned in
         Articles 13.1 and 15.1 of the General Conditions and keep a certified record of hours worked and accounts conforming with
         the provisions in force in Belgium.
         
         
         
         113
            
          In view of those considerations, the argument, based on the first paragraph of Article 1235 of the Belgian Civil Code, put
         forward by GEF in support of its claim that the Commission should be ordered to issue a credit note for EUR 273 516, cannot
         be upheld. That argument places on the Commission the burden of proving that the payment of EUR 273 516 to GEF, of which repayment
         was called for in the debit note issued by the Commission on 11 July 2001, was made but was not due. 
         
         
         
         114
            
          However, that claim by the Commission for reimbursement is based on Article 16.3 of the General Conditions, which provides
         that, where the total financial contribution for the task, including the result of any audit, is less than the payments made
         for the task, the contractors must immediately reimburse the difference to the Commission. The finding that the sum of the
         payments made exceeds the total financial contribution due in respect of the project is based on the proof of the costs incurred
         in the execution thereof, which, under the terms of the contract, is incumbent on GEF, not on the Commission.
         
         
         
         115
            
          It follows that the claim that the Commission should be ordered to issue a credit note for EUR 273 516, with a view to cancelling
         the amount of its debit note of 11 July 2001 is linked with the claim for reimbursement of EUR 40 693, in that both are based
         on GEF’s purported compliance with its contractual obligations. If GEF has proved that it complied with its contractual obligations,
         it would necessarily follow that GEF is entitled to payment of EUR 40 693 and that the Commission’s debit note for EUR 273 516
         would no longer have any basis.
         
         
         
         116
            
          In those circumstances, it is necessary to examine the merits of GEF’s claim in respect of each of the categories of costs
         of which it seeks reimbursement and which it claims to have substantiated, namely the ‘Personnel’ costs, including Mr Goldfinger’s
         remuneration, and certain costs under the headings ‘Travel and subsistence’ and ‘Other costs’.
         
          The ‘Personnel’ costs
         
         
         117
            
          The various arguments put forward by GEF concerning personnel costs raise, in essence, three questions: first, whether the
         Commission accepted the overstepping of the estimated number of hours worked and the adjustments to the wage rate used for
         calculation of the personnel costs initially provided for in the contract; second, whether GEF proved, in accordance with
         the contract, the hours which it claims to have worked for execution of the project, and, third, whether the auditors erred
         in their findings concerning hours worked and personnel costs contained in the second technical review report and the final
         audit report.
         
         
         – The Commission’s acceptance of the increase in hours worked and adjustment of the rates of pay initially provided for in the
         contract
         
         
         118
            
          First, it is necessary to determine whether the Commission’s acceptance of the cost statements submitted by GEF and the partial
         payments made in response to them imply acceptance of the higher figure for hours worked and the adjustment of the rates of
         pay initially estimated in the contract.
         
         
         
         119
            
          In that connection, it must be pointed out that, as regards the Commission’s contribution, Article 3.1 and 3.2 of the contract
         provide that the Commission is to contribute 100% of the allowable costs of the project up to EUR 440 000, that being the
         estimated total cost of the project.
         
         
         
         120
            
          According to Article 4 of the contract, which lays down the timetable for the Commission’s payments, the Commission’s contribution
         is to be paid, first, in the form of an advance of EUR 165 000, followed by partial payments within two months following approval
         of the periodic progress reports and corresponding cost statements. Finally, the balance of the total contribution due is
         to be paid within two months following approval of the last report, document or other task deliverables specified in the Technical
         Annex and the cost statement for the last period, as specified in Article 5.2 of the contract.
         
         
         
         121
            
          Article 16.2 of the General Conditions provides that, subject to Article 17 concerning the audit, all payments are to be regarded
         as advances until acceptance of the other task deliverables in respect of the project, or, if none are specified, until acceptance
         of the final report. Article 16.3 also provides that, where the total financial contribution due for the project, including
         the one resulting from an audit, is less than the payments made, the contractor is required immediately to reimburse the difference
         to the Commission.
         
         
         
         122
            
          It follows from all those provisions that all the payments made by the Commission by way of advances or partial payments must
         be regarded as provisional payments until certain conditions, as described above, are fulfilled.
         
         
         
         123
            
          Under Articles 16 and 17 of the General Conditions, all those payments are made by the Commission subject to verification
         and cannot therefore, before such verification takes place or the period prescribed for that purpose has expired, constitute
         definitive settlement in respect of a cost statement. The letters accepting the cost statements, sent by the Commission to
         GEF on 19 March 1998, 14 December 1998, 27 July 1999 and 14 December 2000, also expressly state that ‘the costs reported (or
         as amended by us) have been checked and found in line with the periodic progress report and in accordance with the contract
         (see Annex II Part D), subject to verification, adjustments on post calculation or audit and acceptance of the labour rates.’
         
         
         
         124
            
          Consequently, even if, as GEF asserts, the Commission followed the progress of the project closely and in detail, expressed
         positive views on the progress and made no negative observations concerning the costs reported or the labour rates applied,
         the fact that the Commission took note of the cost statements submitted to it by GEF, after some adjustments due to rejection
         of certain expenses, and paid it certain sums on that basis does not imply acceptance of the larger number of hours worked
         or the changes made to the labour rates applied. The audit undertaken by the Commission was intended specifically to establish
         the allowability of the costs claimed in accordance with the provisions of the contract. Accordingly, the cost statements
         could not be regarded as having been accepted by the Commission until after the financial audit.
         
         
         
         125
            
          Second, it is necessary to consider under what conditions it was permissible to depart from the hours of work initially estimated
         in the contract, a change which, according to GEF, was made necessary by developments in the circumstances surrounding the
         project.
         
         
         
         126
            
          In that connection, it must be observed at the outset that, as regards the labour rates applied, GEF explained at the hearing,
         in response to a question put to it by the Court, that the reference to those rates in the present proceedings derives from
         the simultaneous adjustment of the number of hours and of the hourly rates and from the combination of those two factors in
         the total amount of the costs incurred in executing the project. However, it is clear from the file that GEF neither made
         any complaint concerning the adjustments to the labour rates applied nor challenged the figures adopted for them by the Commission
         for the purposes of the audit. 
         
         
         
         127
            
          The Court’s analysis therefore will relate only to the number of hours worked on the project.
         
         
         
         128
            
          In that connection, it must be pointed out that, in the version contained in Annex 3 to GEF’s replies to the questions put
         to it by the Court, the Technical Annex contains, in point 3.7, a table entitled ‘Human Resources Requirements per Task (in
         man-days)’ (hereinafter ‘Table 1’), from which it is apparent that the number of man-days provided for by the contract for
         implementation of the six tasks described in the Technical Annex is 447, which is equivalent to 3 576 hours worked (447 man-days
         x 8 hours = 3 576 hours) and to 894 hours work per semester (3 576 hours’ work ÷ 4 semesters = 894 hours each semester). 
         
         
         
         129
            
          The table entitled ‘Cost estimates per Task (in ECU)’ (hereinafter ‘Table 2’), in the same point 3.7, contains an estimate
         of costs for each of the six tasks, broken down into categories of costs. 
         
         
         
         130
            
          A table entitled ‘Unit Costs Assumptions (in ECU)’ (hereinafter ‘Table 3’), which lays down the daily rate applicable to the
         hours worked, in particular by the Project Manager (1 050), by the Senior Consultant (1 050), by the Consultant (650) and
         by the Information Specialist (300), and which was repeated in the version of the Technical Annex appended to the application,
         no longer appears in the Technical Annex contained in Annex 3 to GEF’s replies to the questions put to it by the Court. GEF
         nevertheless attached to those replies a table containing daily rates which differed slightly from those set out above, applicable
         to the hours worked.
         
         
         
         131
            
          In addition, the same 3.7 of the version of the Technical Annex appended to GEF’S answers to the questions put to it by the
         Court contains a table entitled ‘Total cost estimates per Task (in ECU)’ (hereinafter ‘Table 4’), which indicates the costs
         for each task and the total estimated cost of the project, amounting to EUR 440 000.
         
         
         
         132
            
          It is apparent from those tables that the maximum sum of EUR 440 000, laid down in Article 3(1) and (2) of the contract, represents
         a round figure comprising the estimated numbers of hours, calculated in man-days, required to execute each task (envisaged
         in Table 1), multiplied by the rate (shown in Table 3). All those data are the basis for calculation of the maximum sum of
         EUR 440 000 and thereby constitute, like that maximum figure, essential components of the contract. 
         
         
         
         133
            
          A technical review of a project, like that of the project at issue, contained in the Technical Annex, is intended to enable
         the parties to agree on an estimate for the total budget for the project, which determines the framework within which the
         Commission will agree to make a financial contribution. In this case, the budget estimate was based on the abovementioned
         data, the estimate for each of them, in which the volume of work is the main element, having been agreed to by both parties.
         Accordingly, those data constitute objective criteria for appraising the necessity of the costs declared for due implementation
         of the project, and whether they and any adjustment made to them are in conformity with the contract.
         
         
         
         134
            
          It must also be emphasised that the only case of amendment of estimated costs, provided for in Article 12.2 of the General
         Conditions – in which costs are not increased but certain costs are merely allocated to a category different from that to
         which they were initially assigned – is permitted only if the scope of the project is not fundamentally affected.
         
         
         
         135
            
          In this case, it is clear from the file, and in particular from the final audit report, that GEF claimed for the four periods
         2 827, 2 878, 3 005 and 3 569 hours’ work respectively, instead of the 894 hours estimated by the contract for each semester.
         
         
         
         
         136
            
          It must be considered that such a large increase in the number of hours needed for execution of the project, estimated for
         each task and for each category of costs, like the reallocation of costs provided for in Article 12.2 of the General Conditions,
         is liable to affect the dimension and impact thereof, in so far as the volume of work performed on the project determines
         its characteristics. Any change to the contract made necessary by a substantial increase in the volume of work performed by
         personnel assigned to the project would have called for an amendment to the contract, pursuant to Article 8 thereof, in the
         form of a written agreement concluded between the authorised representatives of the two parties. 
         
         
         
         137
            
          That conclusion is not undermined by the fact, referred to by GEF, that its claim does not involve a contribution in excess
         of the maximum sum of EUR 440 000. Whilst that sum of EUR 440 000 constitutes a maximum which must not be exceeded, it is
         not, conversely, a minimum limit for reimbursement of costs incurred in relation to the project or the only criterion for
         appraising the declared personnel costs. Moreover, the contract makes allowable expenses subject to certain specific conditions,
         including those relating to how costs are to be substantiated, so that the Commission could not make any payment under the
         contract on the sole ground that its contribution did not exceed the maximum sum of EUR 440 000. 
         
         
         
         138
            
          Finally, it does not appear from the documents before the Court that GEF submitted any proposal to the Commission for an amendment
         to the contract with a view to departing from the working time initially estimated for the project because of changes in the
         circumstances surrounding the project. 
         
         
         
         139
            
          GEF has thus failed to prove that the statement in the second technical review report that no proof had been produced to the
         auditors to show that the substantial departure from the initially estimated working time for the project had been approved
         by the Commission was not correct. 
         
         
         – Proof of the hours worked on the project
         
         
         140
            
          As regards the question whether GEF produced proof of the personnel costs which it purportedly incurred in executing the project,
         it must be borne in mind that, as indicated in paragraphs 110 to 112 above, proof of the need for and effective application
         of the actual costs declared for execution of the project, within the period of the project, is subject to precise conditions.
         Thus, GEF was required to keep a record of hours worked, certified at least monthly by the project manager or an authorised
         senior employee. Moreover, it was required to keep accounts and appropriate documentation, which were to be made available
         for audits, in order to support and prove the costs and hours declared.
         
         
         
         141
            
          It is therefore necessary to determine whether the documents produced by GEF for the purposes of the audit fulfil the conditions
         prescribed by the contract to serve as proof of the personnel costs incurred in respect of the project.
         
         
         
         142
            
          It is clear from the file that three categories of documents must be examined. The first category concerns the accounts and
         documents which GEF must keep in accordance with the provisions applicable in Belgium, as referred to in Article 15.1 of the
         General Conditions. The second category comprises the documents indicating the total number of hours worked each month by
         each of the members of the personnel, filled in in accordance with the rules laid down by Securex, which serve as a basis
         for the payment of wages and social security contributions (hereinafter ‘the Securex time sheets’). The third category comprises
         the supplementary time sheets drawn up by Mr Goldfinger at the time of the audit on the basis of the employment contracts
         and an office diary which did not contain a record of hours; those sheets mentioned the hours worked each day by each professional
         category assigned to the project (hereinafter ‘the supplementary time sheets’).
         
         
         
         143
            
          As regards the first category of documents, the Commission does not deny that GEF filled in and sent to the Commission two
         financial questionnaires and four cost statements containing a detailed breakdown of the personnel costs, including hours
         worked and the unit rate.  It likewise does not deny that GEF kept accounting records in accordance with the provisions applicable
         in Belgium, which were made available to the auditors. It is also clear from paragraph 3 of both the draft audit report and
         the final audit report, under the heading ‘Book keeping analysis’, that the auditors found that GEF prepared a financial statement
         each year and that the costs relied on for presentation of the cost statements were mentioned in GEF’s accounts. The fact
         that the auditors verified that the cost statements were, in that respect, in conformity with the GEF accounts does not however
         mean that GEF was keeping the documentation necessary to confirm and substantiate, in accordance with the contract, the costs
         and hours declared as relating to the project. It is necessary to analyse the other two categories of documents mentioned
         above.
         
         
         
         144
            
          Thus, in the case of the second category of documents, the Commission accepts that GEF kept Securex time sheets and states
         that they were submitted to the auditors at the time of the audit of 18 and 21 June 1999, and were supplied to the Commission
         on 20 November 2000. However, as the Commission correctly points out, those time sheets cannot be regarded as a record of
         hours worked, within the meaning of Article 13.1.2 of the General Conditions, unless they specify that the hours indicated
         therein were actually spent on the project. GEF admitted at the hearing that those sheets do not contain such information.
         
         
         
         
         145
            
          Admittedly, as GEF claims and the Commission itself concedes in its letter of 20 March 2000, the contract does not require
         any specific format for the recording of hours worked. However, it is clear from Articles 13.1.2 and 15.1 of the General Conditions
         that the documentation must be appropriate to support and substantiate the costs and hours actually worked on the project.
         Since the Commission’s financial contribution is subject to the condition that the actual and necessary costs incurred by
         the contractor must relate solely to the project, the appropriateness of the documents required by the abovementioned provisions
         implies that GEF should clearly indicate in its record of expenditure that the costs and hours declared actually relate to
         execution of the project. Consequently, as the Commission has rightly pointed out, those documents must indicate specifically
         the number of hours worked, the identity of the worker, his actual remuneration and the link between the costs and the tasks
         covered by the Commission’s financial contribution.
         
         
         
         146
            
          As regards the third category of documents, GEF does not deny, in its pleadings, the Commission’s allegation that Mr Goldfinger
         drew up the supplementary time sheets during the audit on the basis of the employment contract and an office diary which contained
         neither the names of the members of staff nor a record of the hours spent on the project. Nor does it claim that those sheets
         give the names of the persons who worked on the project or bear signatures. GEF also concedes that there are discrepancies
         between those sheets and the Securex time sheets, totalled about 120 hours (letter from Mr Pirenne dated 31 January 2000).
         
         
         
         
         147
            
          It is common ground that, like the Securex time sheets, the supplementary time sheets could not be admitted as evidence of
         the time devoted to the project by each of the staff members of GEF unless it could be established that they satisfied the
         conditions referred to in paragraph 145 above.
         
         
         
         148
            
          Moreover, according to Article 13.1.2 of the General Conditions, the documents recording hours worked are to be certified
         at least monthly by the project manager or an authorised senior employee. That requirement, which is an essential aspect of
         fulfilment of the obligation to keep a certified record of declared hours worked, implies that that record is to be kept for
         the entire duration of the project, in other words, the hours worked must be recorded progressively in step with the performance
         of the tasks, and cannot therefore be reconciled with the drawing up of supplementary time sheets after the event.
         
         
         
         149
            
          In view of the foregoing considerations, neither the Securex time sheets – because of the lack of details of the costs and
         hours mentioned above – nor the supplementary time sheets produced at the time of the audit on 18 and 21 June 1999 – for the
         same reasons and because they were not certified at least monthly by the project manager or an authorised senior employee
         – cannot be regarded as meeting the requirements as to proof laid down by the contract.
         
         
         
         150
            
          Moreover, GEF’s argument, raised for the first time at the hearing, that the supplementary time sheets were drawn up, updated
         and stored on an electronic medium by Mr Goldfinger cannot be accepted. It cannot be inferred from that circumstance, even
         if proved, that those time sheets comply with the conditions mentioned in paragraph 145 above, since GEF admitted at the hearing
         that it did not at any time think of adducing evidence regarding the date on which those documents were drawn up.
         
         
         
         151
            
          Furthermore, during the second technical review, GEF did not produce other documents to justify the costs declared, so that
         the conclusions of the draft audit report were properly reproduced in the final audit report.
         
         
         
         152
            
          In those circumstances, it is unnecessary to examine the parties’ arguments concerning the statements made in the final audit
         report about the sheets drawn up by Mr Goldfinger, to the effect that they are incorrect regarding both the commencement date
         of the contract and the 202 hours declared for an information specialist in July and October 1997. Those sheets cannot be
         regarded as meeting the requirements as to proof laid down by the contract, and therefore any examination of the above errors
         would be pointless.
         
         
         
         153
            
          Consequently, it must be held that GEF was not keeping time sheets for the members of its staff in accordance with Article
         13.1.2 of the General Conditions.
         
         
         
         154
            
          As regards, in particular, Mr Goldfinger’s remuneration, it must be pointed out, first, that GEF confines itself to stating
         that the Commission took no account of the position which it set out in Mr Pirenne’s letter dated 31 January 2000 concerning
         the draft audit report. In that letter, Mr Pirenne reaffirmed the correctness of the calculation of Mr Goldfinger’s remuneration,
         contending that it constituted an acceptable cost having regard to the situation on the Belgian market, as GEF had already
         stated in its earlier letter of 30 July 1999.
         
         
         
         155
            
          Next, it is clear from the draft audit report of 21 December 1999 that the auditors recalculated that remuneration, on the
         ground that it included bonuses covering three years, so as to take account only of a bonus for two years.
         
         
         
         156
            
          Therefore, in so far as GEF makes no criticism concerning rectification of the relevant period, it has still failed to show
         that the auditors were wrong to reduce the amount received by Mr Goldfinger for those bonuses, so as to take account only
         of the bonuses for the two years within the period of the project.
         
         
         
         157
            
          It follows from all the foregoing that GEF has not produced proof either of the personnel costs declared for execution of
         the project or of any incorrectness in the calculation of Mr Goldfinger’s remuneration carried out during the audit.
         
         
         – The alleged miscalculations made by the auditors in respect of hours worked and personnel costs indicated in the second technical
         review report and the final audit report
         
         
         158
            
          It is appropriate to consider GEF’s arguments concerning the question whether the auditors made mistakes, first, regarding
         the procedure followed during the second technical review and the result for hours worked arrived at in it, and, second, in
         their findings concerning personnel costs contained in the final audit report.
         
         
         
         159
            
          So far as concerns the second technical review, of 24 May 2000,  GEF’s allegation concerning the irregularity of the procedure
         followed by the auditors must be rejected. According to GEF, the auditors did not respect the terms of reference for the examination
         mentioned in the Commission’s letter of 20 March 2000, in so far as the auditors did not question it concerning the time it
         had spent on each task or made a reasonable estimate of the time spent on the project. The approach followed, whereby the
         total number of hours’ work estimated initially for the various tasks was apportioned, is not, in GEF’s view, in conformity
         with the contract, in which the basis for payment is not the estimated costs but the costs actually incurred and substantiated.
         
         
         
         160
            
          In that connection, it must be borne in mind, first, that, in its letter of 20 March 2000, the Commission stated that the
         adjustments contained in the draft audit report were based on the total estimated number of hours which the assessors of the
         initial proposal had considered reasonable for the execution of the tasks. It was because of strong opposition from GEF concerning
         those adjustments that, in its letter of 20 March 2000, the Commission proposed that a further technical review should be
         carried out to establish the exact number of hours that could reasonably be claimed for each of the tasks carried out in accordance
         with the Technical Annex to the contract.
         
         
         
         161
            
          Secondly, Annex I to the second technical review report, according to which the purpose of the review was to re-examine the
         time reasonably needed for execution of the project, makes it clear that, given that the project had already been the subject
         of a technical review, emphasis should be placed, first, on confirmation or otherwise of the previous review, second, on an
         assessment as to whether the tasks carried out conformed with the work programme contained in the Technical Annex, third,
         on evaluation of the proper execution of the work and, fourth, on an evaluation of the number of hours which could be reasonably
         claimed for each member of staff or category of staff.
         
         
         
         162
            
          Furthermore, it is clear from the report on the second technical review, during which Mr Goldfinger gave a presentation of
         the work done on the project and answered the questions put to him during the two sessions dealing with that matter, that
         the auditors, in the first place, established that the project, for which the technical description required an initial budget
         of 22 man-months’ work, had required three times that level of resources. According to them, that change in the hours needed
         for execution of the project had not been substantiated by any documentation or approved by the Commission. Second, the auditors
         considered that it was difficult to match the work done for the project with the available documents. According to that report,
         that difficulty was admitted by Mr Goldfinger, who stated that the work had been covered by a number of documents and that
         the work had been adjusted over time to take account of surrounding circumstances that were changing very rapidly. Mr Goldfinger
         added that certain work had not been done because it was not of interest to the parties.
         
         
         
         163
            
          Third, the auditors found that no document had been produced to support those explanations. Moreover, they found no relevant
         information concerning the level of resources devoted to each group of tasks, in so far as the only information provided related
         to total costs in Belgian francs. When invited to provide information on that point, Mr Goldfinger gave no clarification.
         
         
         
         164
            
          GEF does not contest those findings, but merely states that no effort was made to validate the calculations with the project
         team. 
         
         
         
         165
            
          Lastly, it is clear from the findings in paragraphs 140 to 153 above that GEF was not keeping a record of hours worked in
         accordance with Article 13.1.2 of the General Conditions.
         
         
         
         166
            
          In view of all the foregoing, it must be observed, first, that no provision of the contract required the Commission to propose
         that an additional technical review be carried out. In that connection, it is clear from the file that at no time, even before
         the Court, did GEF deny that it consented to the conduct of that audit.
         
         
         
         167
            
          Next, it must be concluded that, as it is clear from the very terms of reference for the evaluators carrying out that audit,
         mentioned in paragraph 161 above, whereby there was to be a review of the first audit with regard to the time reasonably necessary
         for execution of the project, that audit fell within the scope of the contractual obligations entered into by the two parties.
         
         
         
         168
            
          Whilst it is true that the evaluators were unable, in performing their tasks, to reach a result conforming with the wishes
         expressed by GEF that the time which it claimed to have devoted to each task within the project should be recognised, the
         fact nevertheless remains that, following that result, GEF did not ask the Commission to arrange for an expert’s report. Nor
         did GEF at any time, as noted in paragraph 150 above, consider providing evidence concerning the date of recordal on an electronic
         medium of the supplementary time sheets intended to substantiate the hours of work claimed, in accordance with the requirements
         of the General Conditions.
         
         
         
         169
            
          Finally, in response to a question put to it by the Court at the hearing, GEF was unable to explain how the evaluators should
         have made a reasonable estimate of the hours devoted to the project in the absence of any evidence in that regard. 
         
         
         
         170
            
          The auditors were therefore right, for the purpose of verifying the costs claimed by GEF, to take the view that they could
         not determine the number of hours that could reasonably be attributed to the project and to adopt the procedure of basing
         the number of working hours allowed on the number of hours estimated initially. In those circumstances, the approach adopted,
         whereby the total number of hours of work initially estimated for the various tasks was apportioned – and was indeed apportioned
         in the same way as in the Technical Annex – is clearly compatible with the contract.
         
         
         
         171
            
          Second, the Court must reject GEF’s argument that since, in the final technical review report of 21 September 1999, the Commission
         stated that the work had been carried out and that the resources had been well used, it is not reasonable for the number of
         hours worked on the project, accepted by the Commission following the second technical review of 24 May 2000, to be lower
         than the initial estimate.
         
         
         
         172
            
          It must be observed, first of all, that that statement must be read in conjunction with the others contained in the same report.
         Thus, the evaluators stated that it was not clear that the effort deployed in implementing the project was in conformity with
         the original plans. According to the original evaluators, the project manager had not clearly matched the resources used with
         specific tasks, thereby rendering difficult any attempt to match the activities involved in each task with the corresponding
         resources. It was on the basis of those statements that they considered that, in general, the resources had been properly
         used. Moreover, in the conclusions and recommendations of the report, they added that, even though the work had been carried
         out and the resources had been used, the project manager did not keep himself sufficiently informed about the formal procedures
         for monitoring the work done and the resources used, which made their work more difficult in that they were obliged, on several
         occasions, to make assumptions about the impact and the cost of the tasks which were not well documented.
         
         
         
         173
            
          Seen in that context, GEF’s assertion clearly appears to be a general one, not supported by specific information and limited
         in scope by the finding that there were insufficient details and records concerning the work done and the resources used,
         a situation attributed to the project manager.
         
         
         
         174
            
          Next, the Commission’s assessment in the final technical review report, dated 21 September 1999, does not in this case constitute
         the Commission’s final assessment as to the propriety of the expenses incurred in executing the project. That assessment took
         place in the context of the audit. 
         
         
         
         175
            
          Finally, the definitive assessment of the hours needed and worked on execution of the project depends on the evidence produced
         by GEF concerning the costs relating thereto. Since the documents presented by GEF were not considered to be adequate to constitute
         the proof required for that purpose by the contract, the auditors relied on the values estimated initially in the contract
         for the purpose of assessing the declared hours of work and accepting the costs attributed to the project. Those values are
         not minimum estimates, and therefore the values accepted following the check carried out by the Commission may prove to be
         lower.
         
         
         
         176
            
          In this case, it is common ground that the auditors drew up the list of work involved in each project task in accordance with
         the Technical Annex and considered that the results concerning the second and third tasks had disappeared or were fragmented.
         
         
         
         177
            
          Following that examination, the number of hours initially estimated in the technical description in the contract was reduced
         for those two tasks.
         
         
         
         178
            
          In those circumstances, so far as concerns the second technical review, it must be concluded that, since GEF has produced
         no evidence such as to support the hours claimed to have been worked, the auditors properly carried out their examination
         on the basis of the technical description in the contract and reduced the number of hours by reference to the tasks not carried
         out.
         
         
         
         179
            
          As regards the final audit report of 28 June 2000, GEF is wrong to contest the auditors’ finding based on the analysis of
         the ratio between turnover and personnel costs, contained in the draft audit report and repeated in the final audit report,
         according to which the personnel costs invoiced were greatly overstated.
         
         
         
         180
            
          It is clear from the Commission’s letter of 20 March 2000 that the auditors, while considering in certain cases that staggering
         of costs was necessary, confined themselves to examining the data provided by GEF on the basis of its own accounts. The fact
         that, during the financial year 1996-1997, a turnover of BEF 6.5 million was achieved, with personnel costs of BEF 5.5 million,
         and, in the financial year 1997-1998, almost the same turnover was achieved, namely BEF 6.2 million, with personnel costs
         of BEF 2.3 million, gives an indication that the personnel costs invoiced to the Commission were overstated. Even if it is
         accepted that, as claimed by GEF, the presentation of the figures might have had an impact on the precise way the periods
         concerned were accounted for, GEF was well aware of that fact when the financial accounts were drawn up and could have presented
         them differently. Moreover, in response to a question put to it by the Court on that point, GEF admitted at the hearing that
         it was under an obligation to present the abovementioned figures in a manner that took account of the time variable referred
         to.
         
         
         
         181
            
          It follows that all the complaints concerning personnel costs must be rejected.
         
          The costs under the headings ‘Travel and subsistence’ and ‘Other costs’
         
         
         182
            
          GEF claims that it documented and substantiated all those costs. That applies, it says, to the costs of the Datamonitor study
         and the purchase of small items in bookshops, which GEF gives as examples of its non-acceptance of the Commission’s refusal.
         It is therefore necessary to consider, in respect of each of those cost headings, whether GEF produced the relevant proof.
         
         
         – ‘Travel and subsistence costs’ declared in the second cost statement
         
         
         183
            
          According to the draft audit report and the final audit report which follows the latter on this point, in its second cost
         statement GEF declared a sum of BEF 261 869 (EUR 6 450) for ‘travel and subsistence’ forming part of the item ‘networking
         costs’.
         
         
         
         184
            
          That amount included a cost of BEF 126 871 (EUR 3 145.05) relating to payment for a study provided for by Datamonitor.
         
         
         
         185
            
          The Commission reclassified the sum of BEF 62 750, declared as travel costs, and transferred it from the heading ‘Other costs’
         to the heading ‘Travel and subsistence costs’.
         
         
         
         186
            
          The figure of BEF 64 121, rejected in connection with the second cost statement, thus reflects the result of subtracting from
         the figure of 261 869 the result of the following operation, namely 261 869 -126 871 + 62 750, which gives a final result
         of 64 121.
         
         
         
         187
            
          As regards, first, the payment relating to the Datamonitor study (BEF 126 871), the reason given by the Commission for its
         refusal was that that cost was not allowable under that heading. That cost should, in its view, be classified as an external
         technical assistance service and placed under the heading ‘Other costs’, and should therefore have been approved in advance
         by the Commission in accordance with Article 13.3.1 of the General Conditions. However, it is common ground that there was
         no such prior approval in this case.
         
         
         
         188
            
          In that connection, it must be pointed out that the invoice for that cost, annexed to the application, does not disclose to
         which heading that cost relates. 
         
         
         
         189
            
          It must also be noted that, in challenging the need for prior authorisation by the Commission, GEF first contended, in response
         to a written question from the Court, that the Datamonitor study is within the scope of Task 3 of the project and that the
         cost relating thereto should be placed under the heading ‘Documentation’, for which Tables 2 and 5 in the Technical Annex
         provide for a total figure of EUR 11 056. It then stated at the hearing that the costs relating to that study fell within
         Article 13.4 of the General Conditions, according to which the Commission’s agreement is deemed to have been given if the
         Commission raises no objection within the two months following receipt of the written request.
         
         
         
         190
            
          In view of those findings, the Court considers that GEF has not produced evidence to show that the Commission’s position is
         incorrect.
         
         
         
         191
            
          First, the Datamonitor study, which was ordered in February 1998 in preparation for the financial technology workshop of 27
         March 1998, is not a publication designed to disclose information on the work done in the context of the project within the
         meaning of Article 13.3.3 of the General Conditions.
         
         
         
         192
            
          Second, even if, as GEF contended for the first time at the hearing, the Datamonitor study came under the heading ‘Significant
         specific task costs’ referred to in Article 13.4 of the General Conditions and the Commission did not raise objections within
         two months following receipt of the written request, GEF has failed to show that such a request was submitted to the Commission.
         
         
         
         193
            
          Thus, GEF has not shown that the cost relating to the Datamonitor study was not an external technical assistance service under
         the heading ‘Other costs’. Consequently, the Commission correctly refused to pay the relevant amount.
         
         
         
         194
            
          As regards, second, travel costs, GEF confines itself, in Mr Pirenne’s letter of 31 January 2000, to querying the merits of
         the rejection of the travel costs declared in the second cost statement, which, according to GEF, were documented and substantiated
         and for which the contract did not lay down authorisation procedures provided that the travel was within the EEC. In its reply
         of 20 March 2000, the Commission explains that the travel costs of BEF 62 750 were not rejected but were transferred from
         the heading ‘Other costs’ to the heading ‘Travel and subsistence costs’. The letter does not refer to any lack of proof of
         such costs.
         
         
         
         195
            
          At the hearing, GEF conceded that the costs concerned had been transferred to another heading and had been paid. It follows
         that that complaint has become devoid of purpose.
         
         
         – ‘Other costs’ declared in the second cost statement
         
         
         196
            
          It is clear from the draft audit report and the final audit report that GEF had claimed BEF 155 006 (EUR 3 818) under the
         heading ‘Other costs’.
         
         
         
         197
            
          That sum included BEF 62 750 for travel costs, transferred by the Commission to the heading ‘Travel and subsistence’ (see
         paragraphs 194 and 195 above) and BEF 92 256 for telephone and internet costs.
         
         
         
         198
            
          As regards the rejection of the latter amount, GEF confines itself, in Mr Pirenne’s letter of 31 January 2000, to stating
         that ‘as regards telephone and internet costs, this matter could be discussed in detail, since the FIWG contract provides
         for reimbursement of internet costs and in particular operations on the FIWG internet site, but [it preferred] not to deal
         with the matter …, through lack of time’. In its answers to the questions put to it by the Court, GEF stated that the contract
         and the guidelines authorised it to claim those costs since, in particular, the Technical Annex provides, in Table 2, Task
         5, for a sum of EUR 5 500 for internet expenses, that task being exclusively concerned with design and maintenance of the
         internet site. At the hearing, GEF claimed that that cost did not fall under the heading ‘Overheads’ since it involves variable
         costs, which are of a specific nature and accordingly appear in the Technical Annex.
         
         
         
         199
            
          The Commission, in its reply of 20 March 2000, explained that those costs had been rejected because, under Article 13.5 of
         the General Conditions, they came under the heading ‘Overhead costs’.
         
         
         
         200
            
          Given that, first, GEF considers to be incorrect the rejection, in general, of the costs under the heading ‘Other costs’,
         as indicated in the draft audit report and repeated in the final audit report, but that, on the other hand, it has put forward
         no specific argument to show how the Commission’s position, regarding in particular the classification of those costs under
         the heading ‘Overhead costs’, is incorrect or that, even had it been possible to identify internet costs specifically within
         the amount claimed, those costs related only to project Task 5, GEF’s arguments in that connection must be rejected.
         
         
         – ‘Other costs’ declared in the third cost statement
         
         
         201
            
          According to the draft audit report and the final audit report, GEF declared, in its third cost statement, a sum of BEF 318 034 BEF
         (EUR 7 833) under the heading ‘Other costs’.
         
         
         
         202
            
          That amount included the sum of BEF 72 221 (EUR 1 790.31) for the purchase of small items in bookshops, and the sum of BEF
         245 813 (EUR 6 093.54) for telephone and internet costs.
         
         
         
         203
            
          As regards the amount relating to the purchase of small items in bookshops (BEF 72 221), the reason given by the Commission
         for its refusal was that those items bore no specific relation to the project. 
         
         
         
         204
            
          In its pleadings, GEF merely expressed the view that there is a specific category of allowable costs for ‘documentation’ up
         to the sum of EUR 11 056 and that those purchases were necessary for performance of the tasks involved in the project. Moreover,
         GEF produced as an annex to its replies to the questions from the Court, in order to show the link between those costs and
         the project, payment vouchers for two credit cards, a cash receipt, credit card statements, invoices from two bookshops, a
         subscription and two pages of bibliographical references. 
         
         
         
         205
            
          It need merely be stated in that connection that those documents do not contain information such as to establish the requisite
         link between the book or publication purchased and the project. It follows that GEF has failed to demonstrate the necessity
         of those costs and their link with the project.
         
         
         
         206
            
          As regards the sum for telephone and internet expenses (BEF 245 813), the Commission’s position and that of GEF are identical
         to those already described in paragraphs 197 to 200 above, concerning the same expenses. Accordingly, GEF’s arguments must
         be rejected for the reasons set out in paragraph 200 above.
         
         
         – ‘Travel and subsistence’ costs rejected in the letter accepting costs for the fourth period
         
         
         207
            
          As regards the costs refused in the letter accepting costs for the fourth period, namely EUR 3 404 for ‘travel and subsistence’
         under the heading ‘Networking costs’ and EUR 1 608 under the heading ‘Other costs’, the Commission’s reason for its refusal
         was that those costs were not supported by invoices. 
         
         
         
         208
            
          It need merely be stated that GEF has produced no evidence concerning those costs, and thus has not shown that the Commission
         was wrong to reject them.
         
         
         
         209
            
          This plea must therefore be rejected.
         
         
          2. The fourth plea: breach of the principle that contractual obligations must be performed in good faith and of the principle
               of sound administration
          a) Arguments of the parties
         
         
         210
            
          GEF maintains, first, that the Commission’s conduct shows that it failed in its obligation to perform the contract in good
         faith, in breach of the third paragraph of Article 1134 of the Belgian Civil Code.
         
         
         
         211
            
          GEF states that the Commission knew, first, that the estimated number of hours needed for execution of a project would be
         exceeded and that, at a given moment, was in fact exceeded and, second, that the basis for calculating personnel costs was
         changed following the initial estimate and before completion of the financial questionnaire, but it had never made any adverse
         comment in that connection. The Commission thus accepted that GEF devoted more hours to the project than had been originally
         estimated, at significantly lower hourly rates. GEF also observes that the Commission refused to take account of its observations
         on the draft audit report when the final audit report was drawn up. The notification of the report prepared following the
         second technical review to its board on 27 October 2000 prevented it from submitting comments on the report, which was used
         as a basis for the final audit report of 28 June 2000. Finally, the Commission refused to hold the promised meeting following
         its change of attitude regarding the project costs.
         
         
         
         212
            
          Next, GEF considers that the Commission breached the principle that contractual obligations should be performed in good faith
         and the principle of sound administration by failing to tell it of its change of position regarding acceptance of the costs
         of the project within a reasonable period. The Commission, GEF maintains, informed it of its change of position in December
         1999, that is to say six months after completion of the project and three months after the final technical review report.
         However, when it presented its first cost statement to the Commission in March 1998, it stated that the estimated number of
         hours would be exceeded and, when the second cost statement was submitted in October 1998, it was clear that the number of
         hours had in fact been exceeded. It concludes from this that the Commission did not notify its objections to it within a reasonable
         period, even though it had well-equipped staff who followed the project very closely from the outset.
         
         
         
         213
            
          In support of its view, GEF refers to two judgments, one of the Hof van Beroep te Brussel (Belgium) (Brussels Court of Appeal)
         of 18 September 1991 (R.W., 1991-1992, p. 677) and the other of the Hof van Beroep te Antwerpen (Belgium) (Court of Appeal
         Antwerp) of 5 February 1992 (T.R., 1992, p. 174), according to which the principles of sound administration and good faith
         in the performance of contractual obligations require the observance of reasonable time-limits for the purpose of the obligation
         to transmit information.
         
         
         
         214
            
          The Commission rejects that plea, contending that the fact that it carried out an audit, in accordance with Article 17 of
         the General Conditions, cannot be regarded as a departure from its initial position.
         
         
          b) Findings of the Court
         
         
         215
            
          First, as is clear from paragraphs 118 to 124 above, the fact that the Commission took formal notice of the cost statements
         submitted by GEF, made certain payments relating to them and expressed positive views concerning the execution of the project
         certainly does not mean that the Commission had definitively accepted the costs declared. 
         
         
         
         216
            
          In that connection, it should be noted that the Commission’s conduct throughout the execution of the project was in conformity
         with its obligations under the contract.
         
         
         
         217
            
          As regards, second, GEF’s argument that the Commission did not take account, in the final audit report, of the observations
         sought from GEF on the draft audit report and contained in Mr Pirenne’s letter of 31 January 2000, it must be observed that
         all the points raised in that letter were answered by the Commission. By letter of 20 March 2000, it set out the reasons for
         which it considered that Mr Pirenne’s observations were unfounded.
         
         
         
         218
            
          Thus, in its letter of 20 March 2000, the Commission set out the reasons for which GEF could not support the following statements
         made in Mr Pirenne’s letter of 31 January 2000: first, the charges and allegations contained in the draft audit report had
         not been raised either during the audit or in the letter following the audit from Mr Schelling of 9 July 1999 and were in
         contradiction with the Commission’s administrative and substantive feedback concerning the project; second, the commencement
         date of the contract indicated in it was merely a reference date; third, GEF kept time sheets as required by Article 13.1.2
         of the General Conditions; fourth, the reasons put forward by the Commission in rejecting the supplementary time sheets, namely
         the date of commencement of the project and the time recorded for their information specialist, were not justified; fifth,
         the comparison made by the auditors in the table on page 4 of the draft audit report between turnover and personnel costs
         was incorrect; sixth, the calculation of Mr Goldfinger’s remuneration was incorrect. Lastly, the Commission also explained,
         first, the reasons for which it had rejected the costs relating to the Datamonitor study (BEF 126 871), travel costs of BEF
         62 750, costs for purchases in bookshops and telephone and internet costs. Second, the Commission rejected the conclusions
         reached by GEF to the effect that the Commission had accepted all the costs declared and approved that expenditure for execution
         of the project.
         
         
         
         219
            
          As is clear from its letter of 20 March 2000, the Commission did take account of Mr Pirenne’s observations. The fact that
         the Commission essentially maintained its position as set out in the draft audit report when preparing the final audit report
         certainly does not mean that it disregarded those observations, but merely that it did not consider it necessary to depart
         from its initial position after its re-examination. 
         
         
         
         220
            
          As regards, third, the allegation that it was impossible for GEF to submit its observations on the second technical review
         report as a result of not having received it until 27 October 2000, it must be pointed out, first, that that report constitutes
         an account of the meeting held between the auditors and Mr Goldfinger on 24 May 2000, during which Mr Goldfinger gave a presentation
         of progress with the project and was invited to answer questions at two meetings organised for that purpose.
         
         
         
         221
            
          As has been pointed out in paragraphs 162 and 163 above, it appears that, at the meeting at which that technical review took
         place, GEF was able to give its views on the essential issues covered by the review. Moreover, GEF does not deny that fact.
         
         
         
         222
            
          Next, it must be observed that for the most part the final audit report repeated the findings already made by the auditors
         in the draft audit report, on which GEF had expressed its views. The only difference between the calculations made in those
         two reports consists in the fact that, after the second technical review, the number of hours taken into consideration was
         adjusted. That adjustment was made by virtue of the second technical review and derives from the fact that the Commission
         reduced the estimated hours for execution of the second and third tasks. Even if it were accepted that GEF had not been able
         to give its view on the latter point during the second technical review, it has not submitted to the Court any evidence to
         show that the adjustment was not correct.
         
         
         
         223
            
          Finally, it must also be pointed out that, as is clear from the assessment made concerning the procedure for and the result
         of that technical review in paragraphs 159 to 178 above, GEF’s complaints concerning that review are unfounded. 
         
         
         
         224
            
          Lastly, the Commission cannot be criticised for not setting up a meeting with GEF before finalising the final audit report.
         
         
         
         
         225
            
          By letter of 21 December 2000, GEF asked the Commission to organise a meeting to discuss, first, the method of determining
         the project price, second, the procedure for and the content of the report of the second technical review, third, the final
         audit report and the way in which it was drawn up and, lastly, the reasons for which GEF was convinced that it had acted in
         accordance with the contract, having regard also to the Commission’s conduct throughout the execution of the project.
         
         
         
         226
            
          That request was reiterated by letters of 21 February and 26 July 2001 from GEF to the Commission.
         
         
         
         227
            
          It must be pointed out, first, that no provision of the contract requires the Commission to hold such meetings.
         
         
         
         228
            
          Second, it is true that, by letter of 2 February 2001, the Commission informed GEF, first, that OLAF had opened an inquiry
         concerning the FIWG and, second, that a meeting would be held with the latter in order to examine and discuss the issues arising
         from the final audit report and the points mentioned in the letter from GEF of 21 December 2000 in so far as they were relevant
         to the Commission’s inquiry.
         
         
         
         229
            
          Nevertheless, it follows from all the reasons set out above that if, as the Commission observes, it had all the information
         and observations notified by GEF concerning the questions raised in the abovementioned letters and to which the Commission
         had already replied and GEF had been able to discuss the auditors’ findings in particular during the second technical review,
         no meeting proved necessary. 
         
         
         
         230
            
          GEF adds that the Commission did not inform GEF of its position concerning hours worked in December 1999 within a reasonable
         time, having done so six months after completion of the project and three months after the final technical review report.
         
         
         
         231
            
          In that regard, it need merely be pointed out that, as already stated above, the Commission is entitled, under Article 17
         of the General Conditions, to undertake audits during the two years following the date of the last payment due from the Commission
         or the end of the contract. The draft audit report and the final audit report, which were sent to GEF on 21 December 1999
         and 18 July 2000 respectively, fell precisely within the period of two years provided for in Article 17 of the General Conditions.
         
         
         
         232
            
          Accordingly, the fourth plea cannot be upheld.
         
         
          3. The second plea: breach of the principle of the protection of legitimate expectations
          a) Arguments of the parties
         
         
         233
            
          GEF considers that the Commission’s conduct encouraged it to form a legitimate expectation that its method of declaring the
         costs and hours worked was in conformity with the contract, that the payments already made were justified and, therefore,
         that it was fulfilling all conditions required to receive the balance of the payment claimed.
         
         
         
         234
            
          It refers in that connection to earlier contracts with the Commission for which it had given an overall figure for the number
         of days worked on the project and the Commission had confirmed on several occasions that that procedure was adequate.
         
         
         
         235
            
          In this case, GEF claims to have filled in all the forms in the prescribed manner, in particular indicating on one of them,
         in detail, the number of hours worked and the hourly cost.
         
         
         
         236
            
          Moreover, all the cost statements submitted by GEF were examined by several Commission departments and the Commission never
         asked GEF to produce additional information concerning time spent on the project before making the relevant payment. Even
         when it was clear to the Commission that the number of hours worked would be or had been exceeded, upon submission of the
         first and second cost statements respectively, the Commission nevertheless made the relevant payment. Finally, the project
         had never been subject to an administrative ‘red light’ procedure of the kind applied by the Commission to problematical projects.
         On the contrary, during the implementation of the project, GEF had received only positive comments concerning it from the
         Commission. It is therefore beyond question that the Commission’s explicit acceptance regarding execution of the project underwent
         a total U-turn.
         
         
         
         237
            
          The Commission contests GEF’s arguments and contends that it acted entirely in accordance with the terms of the contract.
         
         
          b) Findings of the Court
         
         
         238
            
          It must be held that this plea is unfounded, since it has been determined in the examination of the first and fourth pleas
         that the Commission acted in accordance with the terms of the contract and with the principle that contractual obligations
         should be performed in good faith and the principle of sound administration.
         
         
         
         239
            
          That conclusion cannot be undermined by the fact that the Commission did not, for earlier contracts with GEF, carry out checks
         concerning the number of hours worked on the projects in question. Any indulgence shown by the Commission regarding those
         contracts cannot in any circumstances detract from its right to undertake, in this case, such checks as it considered necessary,
         in accordance with the contract.
         
         
         
         240
            
          It follows that this plea cannot be upheld
         
         
          4. The third plea; breach of the principle of respect for the rights of the defence
          a) Arguments of the parties
         
         
         241
            
          GEF considers that the Commission did not observe the principle of respect for the rights of the defence. 
         
         
         
         242
            
          First, it criticises the Commission for not disclosing the second technical review report until 27 October 2000, thereby preventing
         it from submitting its observations on that report in due time and discussing with the Commission its conclusions, which,
         moreover, conflicted with those of the final technical review report. The final audit report, which is largely based on the
         draft audit report and the second technical review report, does not therefore take account of GEF’s observations concerning
         the latter report or those of GEF and Mr Pirenne contained in the letter of 31 January 2000 concerning the draft audit report.
         It concludes from this that, because personal interests were at stake, the persons concerned should have had an opportunity
         to make their views known before the audit report was produced in its final form.
         
         
         
         243
            
          Second, GEF criticises the Commission for not arranging a meeting with it before finalisation of the audit report, despite
         its request to that effect and the Commission’s formal promise to organise such a meeting, which was repeated more than once.
         At the hearing, GEF stated that it had wished to deal at that meeting with the problem deriving from the Commission’s rejection
         of the supplementary time sheets.
         
         
         
         244
            
          The Commission considers GEF’s arguments to be unfounded.
         
         
          b) Findings of the Court
         
         
         245
            
          It need merely be stated that this plea is unfounded because it was established in the examination of the fourth plea that
         the Commission had not infringed either the principle that contractual obligations should be performed in good faith or the
         principle of sound administration (see paragraphs 215 to 229 above).
         
         
         
         246
            
          This plea cannot therefore be upheld.
         
         
         
         247
            
          It follows that the applicant’s claim must be dismissed.
         
         
          B – The Commission’s counterclaim
          1. Arguments of the parties
         
         248
            
          The Commission claims, under Article 16.3 of the General Conditions, repayment of the sum of EUR 273 516, representing the
         difference between the sums actually paid to GEF, namely EUR 396 000, and the costs accepted by it, amounting to EUR 122 484.
         
         
         
         249
            
          GEF merely contends, in its reply, that the Commission’s counterclaim is unfounded.
         
         
          2. Findings of the Court
         
         250
            
          It need merely be stated that it is clear from the file that the Commission paid GEF a total of EUR 396 000 and that, as is
         clear from the foregoing, the Commission was right to accept the sum of EUR 122 484 for costs incurred in respect of the project,
         following the financial audit. It follows that the Commission is entitled, under Article 16.3 of the General Conditions, to
         reclaim from GEF the overpayment of EUR 273 516.
         
         
         
         251
            
          As regards the claim for interest, it must be observed that, in the debit note issued to GEF, the Commission made it clear
         that it should be settled by 31 August 2001 and that, after that date, default interest would be payable at the rate applied
         by the European Central Bank for its refinancing operations in euros in August 2001, plus 1.5 points.
         
         
         
         252
            
          It must however be noted that, although the contract stipulates, for certain eventualities, application of the rate fixed
         by the European Monetary Institute (Article 5.3.3 and Article 16.1 of the General Conditions), there is no agreed rate for
         the present circumstances. 
         
         
         
         253
            
          In the absence of an agreement on interest and given that the contract is governed by Belgian law, it is therefore necessary
         to apply Article 1153 of the Belgian Civil Code, according to which:
         ‘In the case of obligations confined to payment of a sum certain, damages in respect of late performance shall in all cases
         be subject to the interest rate prescribed by law, save where otherwise provided by law. Such damages shall be payable without
         the creditor having to prove any loss. They shall be payable as from the date of the order to pay, except in cases where they
         become automatically payable by operation of law …’
         
         
         
         254
            
          Having given GEF formal notice, the Commission is entitled to claim default interest, at the statutory Belgian rate, as from
         1 September 2001.
         
         
         
         255
            
          It is therefore appropriate to uphold the Commission’s counterclaim. Consequently, GEF must, as claimed in the defendant’s
         pleadings, be ordered to pay the Commission the sum of EUR 273 516, plus default interest at the annual statutory rate applicable
         in Belgium, from 1 September 2001 until full payment of the debt.
         
         
         Costs
         256
            
          Under Article 87(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 GEF has been unsuccessful, it must be ordered to pay the costs, as
         applied for by the Commission. 
         
         
         On those grounds,
         
         
         
            
            THE COURT OF FIRST INSTANCE (First Chamber, Extended Composition)
         
         
          hereby:
         
            
            
             
               1.
                  Dismisses the applicant’s claim for reimbursement of the sum of EUR 40 693 and for the issue of a credit note for EUR 273 516;
               
            
            
            
             
               2.
                  Upholds the Commission’s counterclaim and, consequently, orders the applicant to pay the Commission the sum of EUR 273 516,
                     plus default interest, at the annual statutory rate applicable in Belgium, from 1 September 2001 until full payment of the
                     debt;
                  
               
            
            
            
             
               3.
                  Orders the applicant to pay the costs. 
               
            
            
                  Vesterdorf
               
               
                  Jaeger
               
               
                  Mengozzi
               
            
                  Martins Ribeiro
               
               
                  
               
               
                  Dehousse
               
            
                  
               
               
                  
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
            
            
            
            
            
            
            
         
         
          Delivered in Luxembourg on 15 March 2005.
         
         
         
         
                  H. Jung
               
               
                  B. Vesterdorf
               
            
         
         
         
                  Registrar
               
               
                  President
               
            
         
            Table of contents
         
         
                  The contract
                     
               
            
                  Background to the dispute
                     
               
            
                      
                        A –  First cost statement, covering the period from 4 July 1997 to 3 January 1998
                     
               
            
                      
                        B –  Second cost statement, covering the period from 4 January 1998 to 3 July 1998
                     
               
            
                      
                        C –  Third cost statement, covering the period from 4 July 1998 to 3 January 1999
                     
               
            
                      
                        D –  The financial audit
                     
               
            
                      
                        E –  Fourth cost statement, covering the period from 4 January 1999 to 3 July 1999
                     
               
            
                      
                        F –  The Commission’s request for reimbursement: the debit note of 11 July 2001
                     
               
            
                  Procedure
                     
               
            
                  Forms of order sought
                     
               
            
                  The jurisdiction of the Court of First Instance
                     
               
            
                  Substance
                     
               
            
                      
                        A –  The applicant’s claim for EUR 40 693 and for the issue of a credit note for EUR 273 516
                     
               
            
                          
                        1.  The first plea: breach of contract
                     
               
            
                              
                        a)  Arguments of the parties
                     
               
            
                              
                        b)  Findings of the Court
                     
               
            
                                  
                        Preliminary observations
                     
               
            
                                  
                        The ‘Personnel’ costs
                     
               
            
                                      
                        –  The Commission’s acceptance of the increase in hours worked and adjustment of the rates of pay initially provided for in
                           the contract
                        
                     
               
            
                                      
                        –  Proof of the hours worked on the project
                     
               
            
                                      
                        –  The alleged miscalculations made by the auditors in respect of hours worked and personnel costs indicated in the second
                           technical review report and the final audit report
                        
                     
               
            
                                  
                        The costs under the headings ‘Travel and subsistence’ and ‘Other costs’
                     
               
            
                                      
                        –  ‘Travel and subsistence costs’ declared in the second cost statement
                     
               
            
                                      
                        –  ‘Other costs’ declared in the second cost statement
                     
               
            
                                      
                        –  ‘Other costs’ declared in the third cost statement
                     
               
            
                                      
                        –  ‘Travel and subsistence’ costs rejected in the letter accepting costs for the fourth period
                     
               
            
                          
                        2.  The fourth plea: breach of the principle that contractual obligations must be performed in good faith and of the principle
                           of sound administration
                        
                     
               
            
                              
                        a)  Arguments of the parties
                     
               
            
                              
                        b)  Findings of the Court
                     
               
            
                          
                        3.  The second plea: breach of the principle of the protection of legitimate expectations
                     
               
            
                              
                        a)  Arguments of the parties
                     
               
            
                              
                        b)  Findings of the Court
                     
               
            
                          
                        4.  The third plea; breach of the principle of respect for the rights of the defence
                     
               
            
                              
                        a)  Arguments of the parties
                     
               
            
                              
                        b)  Findings of the Court
                     
               
            
                      
                        B –  The Commission’s counterclaim
                     
               
            
                          
                        1.  Arguments of the parties
                     
               
            
                          
                        2.  Findings of the Court
                     
               
            
                  Costs
                     
               
            
      
          1 –
            
            Language of the case: English.