(Appeal — Arbitration clause — Grant agreements concluded in the context of the Seventh Framework Programme for research, technological development and demonstration activities (2007-2013) and of the Competitiveness and Innovation Framework Programme (2007-2013) — MARE, Senior and ECRN projects — Commission decision to recover sums unduly paid — Jurisdiction of the EU judicature)
SOURCE: Court of Justice of the European Union, Annual report 2020
In its judgment in Inclusion Alliance for Europe v Commission, delivered on 16 July 2020, the Court of Justice set aside the order of the General Court, by which the latter had dismissed the action brought by the Romanian company, Inclusion Alliance for Europe GEIE (‘IAE’), for annulment of a decision of the Commission concerning the recovery of part of the financial contribution paid to IAE under three grant agreements concluded with it.
In 2007 and 2008, the Commission concluded with IAE, a company operating in the health and social-inclusion sector, three grant agreements in the context of projects concerning, inter alia, research, technological development and demonstration activities and competitiveness and innovation. Under those contracts, IAE received from the Commission funding for the implementation of the projects in question. Having determined, based on the results of an audit which identified problems in the financial management of those projects, that IAE had not complied with the contractual conditions, the Commission launched a procedure for the recovery of the sums unduly paid. Since IAE did not repay those amounts, the Commission adopted, on 17 July 2013, an enforceable decision within the meaning of Article 299 TFEU. After the General Court dismissed the action brought against that decision, IAE lodged an appeal with the Court of Justice. IAE argued that the General Court, in particular, had incorrectly classified its action by holding that that action was wrongly based on Article 263 TFEU and that it should have been brought on the basis of Article 272 TFEU, since the pleas raised by IAE alleged failure to perform contractual obligations or infringement of the law applicable to the contracts at issue.
The Court, first of all, pointed out the limits of the jurisdiction of the EU judicature over an action for annulment under Article 263 TFEU. It stated that the EU judicature does not have jurisdiction over such an action where the applicant’s legal position falls entirely within contractual relationships. Were the EU judicature to hold that it had jurisdiction over such an action, it would, on the one hand, risk rendering Article 272 TFEU – under which jurisdiction may be conferred on the Courts of the European Union by means of an arbitration clause – meaningless and, on the other hand, where the contract does not contain such a clause, risk extending its jurisdiction beyond the limits laid down by Article 274 TFEU, which gives national courts or tribunals ordinary jurisdiction over disputes to which the European Union is a party. Consequently, the Court pointed out that, where there is a contract between an individual and one of the EU institutions, an action may be brought before the EU judicature on the basis of Article 263 TFEU only where the contested measure aims to produce binding legal effects falling outside the contractual relationship between the parties and which involve the exercise of the prerogatives of a public authority conferred on the contracting institution acting in its capacity as an administrative authority. It also stated that the Commission cannot adopt an enforceable decision in the context of contractual relationships that do not contain an arbitration clause in favour of the EU judicature and therefore fall within the jurisdiction of national courts or tribunals.
Next, the Court of Justice recalled the case-law of the General Court, according to which an applicant can rely on failure to perform contractual obligations or infringement of the national provisions applicable to the contract concerned only in the context of an action brought on the basis of Article 272 TFEU, without it being possible for that applicant to raise such a plea in the context of an action based on Article 263 TFEU. Consequently, the EU judicature, adjudicating on an action for annulment brought against an enforceable decision adopted under a power that is distinct from the contractual relationship between the parties, will declare inadmissible any plea alleging failure to perform the contractual obligations or infringement of national provisions, unless it is possible to reclassify such a plea. However, according to the Court of Justice, that case-law of the General Court would not ensure that all the questions of fact and law that are relevant to the dispute are examined, such as to afford the applicant effective judicial protection under Article 47 of the Charter. Accordingly, to ensure that protection, it is for the EU judicature, adjudicating on an action for annulment in the context of a dispute concerning an enforceable decision, to hear and determine both the pleas calling into question that decision on the ground that the EU institution exercised its prerogatives of a public authority and those calling into question the contractual obligations that led to the adoption of that decision.
The Court also pointed out that if the parties decide, in their contract, to confer on the EU judicature, by means of an arbitration clause, jurisdiction over disputes relating to that contract, that judicature will have jurisdiction, independently of the applicable law stipulated in the contract, to examine infringements of the Charter or of general principles of EU law. Consequently, the Court of Justice found that the General Court had erred in law in ruling that, in the context of an action brought on the basis of Article 263 TFEU, the EU judicature must assess the legality of the contested measure solely in the light of EU law and that a failure to perform the clauses of the contract concerned or an infringement of the law applicable to that contract may be relied on only in the context of an action brought on the basis of Article 272 TFEU. The Court of Justice therefore set aside the order of the General Court and referred the case back to the latter.