SOURCE: Monthly Case-law Digest - February 2021
Arbitration clause – Tempus IV Programmes – Grant agreements – Contractual nature of the dispute – Reclassification of the action – Eligible costs – Systemic and recurrent irregularities – Full repayment of amounts paid – Proportionality – Right to be heard – Obligation to state reasons – Article 41 of the Charter of Fundamental Rights
Universität Koblenz-Landau (Germany) (‘the applicant’) is a German higher-education institution governed by public law. In 2008 and 2010, within the framework of the European Union’s cooperation with third countries for the modernisation of the higher-education systems of those countries, the applicant signed three grant agreements. The first one was signed between the applicant, as sole beneficiary, and the European Commission. The last two agreements were signed inter alia between the applicant, as coordinator and co-beneficiary, and the Education, Audiovisual and Culture Executive Agency (EACEA). The EACEA paid grants to the applicant under these three agreements.
By two letters of 21 December 2017 and 7 February 2018, the EACEA informed the applicant that it had decided to recover the grants paid in whole or in part. The total sum claimed under the three agreements amounted to EUR 1 795 826.30. In 2018, the applicant brought an action under Article 263 TFEU seeking annulment of the two letters of the EACEA relating to the amounts paid to the applicant in the context of the grant agreements. In support of its action, the applicant relied in particular on three pleas in law, alleging (i) infringement of the right to be heard, (ii) ‘misapplication of EU law’ and (iii) failure to state reasons. By its judgment, the General Court, sitting in extended composition, dismisses the action by making, in particular, the availability of the right to be heard and the obligation to state reasons in the context of a dispute of a contractual nature clear and by examining the question whether the full recovery of a grant complies with the provisions of the applicable Financial Regulation.
Assessment of the General Court
After finding the claim in annulment inadmissible for lack of a challengeable act within the meaning of Article 263 TFEU and reclassifying the action seeking a declaration that the debts claimed under the grant agreements do not exist as being based on Article 272 TFEU, the General Court examines the first and the third pleas together. In this respect, it rejects the EACEA’s argument that the right to be heard and the obligation to state reasons cannot be usefully relied on in the context of a dispute of a contractual nature. Those rights have been enshrined in Article 41(2)(a) and (c) of the Charter of Fundamental Rights of the European Union (‘the Charter’), which forms part of primary law. According to the case-law of the Court of Justice and the General Court, the fundamental rights of the Charter are designed to preside over the exercise of the powers conferred on the EU institutions, including in contractual matters, in particular during the execution of the contract. In addition, the General Court recalls that, if, as in the present case, an arbitration clause included in the contract confers jurisdiction on the EU judicature to hear disputes relating to that contract, that judicature will have jurisdiction, independently of the applicable law stipulated in that contract, to examine any infringement of the Charter or of the general principles of EU law. As for the possible infringement of the right to be heard, the General Court determines whether the EACEA has allowed the applicant the opportunity to make its views usefully and effectively known before communicating the letters at issue and the debit note issued under the first grant agreement to it. The General Court recalls that, according to the settled case-law of the Court of Justice, EU institutions, bodies, offices and agencies are required, in accordance, in particular, with the requirements of the principle of good administration, to respect the principle of adversarial proceedings in the context of an audit procedure, such as that in the present case. Those entities must obtain all relevant information, in particular that which the other party to the contract is in a position to provide, before taking a decision to proceed with recovery. The General Court points out, in that regard, that the EACEA communicated to the applicant the relevant documents and informed it of its intention to recover the grants at issue on the basis of the possibly systemic and recurrent nature and the seriousness of the irregularities found. Since it found that the applicant was requested to put forward its position concerning the auditors’ findings, which it actually did in a detailed manner, the General Court rejects the plea alleging infringement of the right to be heard as unfounded. As for the possible infringement of the obligation to state reasons, the General Court recalls that the reasons given for a measure are sufficient if that measure was adopted in a context which was known to the addressee concerned and which enables him or her to understand the scope of the measure concerning him or her. The General Court finds that the letters in question clearly identify the legal basis for the intended recovery and that the numerous written exchanges between the parties allowed the applicant to understand the reasons why the EACEA decided to claim the repayment in question and the manner in which the amounts to be repaid were determined. In this respect, the EACEA relied on the final audit report which took account of all of the applicant’s observations and evidence submitted by it, examined them, and rejected them individually, explaining on each occasion the reasons why those observations or evidence did not call into question the findings reached by the auditors. Accordingly, the General Court also rejects that plea as unfounded.
In addition, the General Court rejects the plea alleging misapplication of EU law, under which the applicant claims that neither the contested agreements nor EU law allows the EACEA to recover in full the amounts paid to it under the contested agreements. After an assessment of the contractual provisions and the relevant provisions of the applicable Financial Regulations, as interpreted by the EU judicature, according to their respective wording, it finds that they do not, in principle, prevent the EACEA from recovering the full amounts paid to the applicant under the contested agreements.