Commission v ITEC (Law governing the institutions) [2003] EUECJ C-29/03 (16 October 2003)

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