Commission v ITEC (Law governing the institutions) [2003] EUECJ C-30/03 (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 (hereinafter ITEC) for recovery of an advance payment of a principal amount of EUR 26 105.97, paid by the Commission under Contract No PRO 036 (hereinafter the contract), together with EUR 3 432.04 by way of default interest at the rate of 5.25% as from 31 December 2002, giving a total of EUR 29 538.01, to which should be added EUR 3.75 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 1 July 1997 the European Community, represented by the Commission, concluded the contract with ITEC, as coordinator, CPIN - Centro Promotor de Inovação e Negócios, NET - Novas Empresas e Tecnologias, CIEBI - Centro de Inovação Empresarial da Beira Interior and CEIA - Centro de Inovação Empresarial do Alentejo. The contract provided for the implementation of a research project called TEC+, 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 18 months as from 1 August 1997. Under Article 4(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 555 590. Under Article 4(2), that contribution could cover up to 75% of the total allowable costs or, if need be, 100% of additional costs, with a ceiling of ECU 327 795. Under Article 4(3) of the contract, the Commission was to finance the project as follows: - an initial advance of ECU 81 949, 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 75% of the maximum amount of the Commission's financial contribution to the project; - the remainder of the total contribution (balance of 25%) to be paid within two months as from the time of approval of the final report and of the statement of costs for the final period. Article 4(5) of the contract provided that all payments to be made by the Commission are to be made through the project coordinator, who also had the obligation to transfer immediately the amount of the payment to the contracting party for whom it is intended. Articles 1(4) and 3(1) of the contract provide, respectively, 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 six months as from the time performance of the contract begins, accompanied by statements of costs, as well as a final report to be submitted within two months following expiry of the contract. Under Article 4(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 12 of 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. The same article provides that the contract is governed by Luxembourg law. In accordance with the provisions of the contract, the Commission made the following payments to ITEC: - in July 1997, ECU 81 949 by way of initial advance; - in March 1998, ECU 44 778.02 following submission, on 20 March 1998, of the statement of costs for the period from 1 August 1997 to 31 January 1998; - in November 1998, ECU 42 554.99 following submission, on 30 August 1998, of the statement of costs for the period from 1 February 1998 to 31 July 1998; - in April 1999, ECU 46 901.21 following submission, on 27 February 1999, of the statement of costs for the period from 1 August 1998 to 31 January 1999. On 24 September 1999, ITEC submitted by way of supporting documents for the initial advance by the Commission the fourth periodical report for the period from 1 February 1999 to 31 March 1999, for which the contribution requested from the Commission totalled ECU 55 843.03. Accordingly, the Commission paid ITEC an initial amount of ECU 81 949, whereas the amount should have been only ECU 55 843.03. By letter of 27 October 1999, the Commission informed ITEC that it had to reimburse the overpayment of ECU 26 105.97 made by the Commission to it. Subsequently, on 15 May 2000 the Commission issued debit note No 3240202551 in the amount of EUR 26 105.97 against ITEC, payable by 30 June 2000. 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 June 2000, plus 1.5%. It sent two new reminders on 29 January and 14 May 2001. On 14 December 2001, ITEC sent the Commission a fax, confirming its interest in finding a solution to the problem. Since ITEC did not respond to the Commission's claim, the Commission brought the present action. Procedure before the Court Under Article 238 EC and 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), 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 29 538.01 consisting of the principal amount of EUR 26 105.97 together with EUR 3 432.04 by way of default interest at the rate of 5.25% as from 31 December 2002; - to pay EUR 3.75 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 4(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 EUR 216 183.22 and that, on the basis of the various statements of costs it submitted, the Commission's total contribution should have been only EUR 190 077.25. Accordingly, it is appropriate to grant the forms of order sought by the Commission as regards reimbursement of the overpayment of ECU 26 105.97. Interest In the debit note issued against ITEC, the Commission stated that it was payable by 30 June 2000 and that, after that date, default interest would be due at the rate applied by the European Central Bank to its refinancing operations in EUR in June 2000, plus 1.5%. The Court notes, however, that Article 4(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 Luxembourg law, it is appropriate to apply Article 1153 of the Luxembourg Civil Code, which provides that where liability is limited to the payment of a certain sum, damages for late performance cannot exceed an order to pay interest at the legal rate ... . Such damages shall be due without the creditor's being obliged to demonstrate any loss. They shall be due only as from the day of the order to pay, except in cases where the law provides that they shall accrue automatically .... Since it put ITEC on notice, the Commission is entitled to claim default interest at the legal rate prescribed by Luxembourg law, as from 30 June 2000. The Grand-Ducal Regulation of 21 January 2000 ( Mémorial A 2000, p. 282) set the legal rate of interest for the year 2000 at 5%. That rate was modified by the Grand-Ducal Regulation of 22 December 2000 ( Mémorial A 2000, p. 3290), which set it at 5.75% for the year 2001. For the years 2002 and 2003, the Grand-Ducal Regulations of 21 January 2002 and 24 January 2003 ( Mémorial A 2002, p. 225, and A 2003, p. 380) set the interest rate at 5%. 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 26 105.97, together with default interest at the rate prescribed by Luxembourg law, calculated in accordance with the provisions of the Grand-Ducal Regulations of 21 January and 22 December 2000, 21 January 2002 and 24 January 2003, until the debt is paid in full. Costs 32. 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 26 105.97, together with default interest at the rate prescribed by Luxembourg law, calculated in accordance with the provisions of the Grand-Ducal Regulations of 21 January and 22 December 2000, 21 January 2002 and 24 January 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. 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