Case C-417/04 P

Regione Siciliana

v

Commission of the European Communities

(Appeal – European Regional Development Fund (ERDF) – Closure of Community financial assistance – Action for annulment – Admissibility – Local or regional entity – Measures of direct and individual concern to that entity – Direct concern)

Summary of the Judgment

(Art. 230, paras 2 and 4, EC)

2. Actions for annulment – Natural or legal persons – Measures of direct and individual concern to them

(Art. 230, para. 4, EC; Rules of Procedure of the Court of First Instance, Art. 113)

1. An action by a local or regional entity cannot be treated in the same way as an action by a Member State, the term Member State within the meaning of the second paragraph of Article 230 EC referring only to government authorities of the Member States. That term cannot include the governments of regions or other local authorities within Member States without undermining the institutional balance provided for by the Treaty. On the basis of the fourth paragraph of Article 230 EC, however, a local or regional entity may, to the extent that it has legal personality under national law, institute proceedings against a decision addressed to it or against a decision which, although in the form of a regulation or a decision addressed to another person, is of direct and individual concern to it.

In that respect, a regional authority which has been designated as the authority responsible for the execution of a European Regional Development Fund project cannot be regarded as directly concerned by a Commission decision, sent to the Member State concerned and relating to financial assistance from the Fund, refusing the application made by that State for an extension of the period for the submission of applications for definitive payment in respect of that aid and definitively closing that period.

(see paras 21, 24, 30)

2. The plea of inadmissibility based on the condition laid down in the fourth paragraph of Article 230 EC that proceedings brought by a natural or legal person against a decision not addressed to it are admissible only if the decision is of direct and individual concern to it raises an absolute bar to proceeding, so that the Community judicature may raise that plea of inadmissibility at any time, even of its own motion. Consequently, on the basis of Article 113 of its Rules of Procedure, the Court of First Instance may rule that an action is inadmissible for this reason even if an objection of inadmissibility has not been raised by separate document by one of the parties before it.

(see para. 36)

JUDGMENT OF THE COURT (Grand Chamber)

2 May 2006 ( * )

(Appeal – European Regional Development Fund (ERDF) – Closure of Community financial assistance – Action for annulment – Admissibility – Local or regional entity – Measures of direct and individual concern to that entity – Direct concern)

In Case C‑417/04 P,

APPEAL under Article 56 of the Statute of the Court of Justice, lodged on 24 September 2004,

Regione Siciliana, represented by A. Cingolo and G. Aiello, avvocati dello Stato, with an address for service in Luxembourg,

appellant,

the other party to the proceedings being:

Commission of the European Communities, represented by E. de March and L. Flynn, acting as Agents, with an address for service in Luxembourg,

defendant at first instance,

THE COURT (Grand Chamber),

composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas and J. Malenovský, Presidents of Chambers, J.‑P. Puissochet, R. Schintgen, N. Colneric, S. von Bahr, J.N. Cunha Rodrigues, M. Ilešič (Rapporteur), J. Klučka and U. Lõhmus, Judges,

Advocate General: D. Ruiz-Jarabo Colomer,

Registrar: H. von Holstein, Deputy Registrar,

having regard to the written procedure and further to the hearing on 15 November 2005,

after hearing the Opinion of the Advocate General at the sitting on 12 January 2006,

gives the following

Judgment

1 In this appeal, the Regione Siciliana asks the Court of Justice to set aside the order of the Court of First Instance of the European Communities of 8 July 2004 in Case T-341/02 Regione Siciliana v Commission [2004] ECR II-2877 (‘the contested order’), dismissing as inadmissible its action for annulment of Commission Decision D (2002) 810439 of 5 September 2002 closing the financial assistance (No 93.05.03.001) from the European Regional Development Fund (ERDF) for the Messina-Palermo Motorway major project (‘the contested decision’).

Legal context

2 In order to strengthen economic and social cohesion, within the meaning of Article 158 EC, the Council adopted Regulation (EEC) No 2052/88 of 24 June 1988 on the tasks of the Structural Funds and their effectiveness and on coordination of their activities between themselves and with the operations of the European Investment Bank and the other existing financial instruments (OJ 1988 L 185, p. 9), as amended by Council Regulation (EEC) No 2081/93 of 20 July 1993 (OJ 1993 L 193, p. 5; ‘Regulation No 2052/88’), and Regulation (EEC) No 4253/88 of 19 December 1988 laying down provisions for implementing Regulation (EEC) No 2052/88 as regards coordination of the activities of the different Structural Funds between themselves and with the operations of the European Investment Bank and the other existing financial instruments (OJ 1988 L 374, p. 1), as amended by Council Regulation (EEC) No 2082/93 of 20 July 1993 (OJ 1993 L 193, p. 20; ‘Regulation No 4253/88’).

3 The first subparagraph of Article 4(1) of Regulation No 2052/88 provides:

‘Community operations shall be such as to complement or contribute to corresponding national operations. They shall be established through close consultations between the Commission, the Member State concerned and the competent authorities and bodies ... designated by the Member State at national, regional, local or other level, with all parties acting as partners in pursuit of a common goal. These consultations shall hereinafter be referred to as the “partnership”. The partnership shall cover the preparation and financing, as well as the ex ante appraisal, monitoring and ex post evaluation of operations.’

4 Under the title ‘Additionality’, Article 9(1) of Regulation No 4253/88 provides that ‘[i]n order to achieve a genuine economic impact, Structural Funds … appropriations may not replace public expenditure on structural or comparable expenditure undertaken by the Member State in the whole of the territory eligible under an objective’.

5 Under Article 24 of the same Regulation:

‘1. If an operation or measure appears to justify neither part nor the whole of the assistance allocated, the Commission shall conduct a suitable examination of the case in the framework of the partnership, in particular requesting that the Member State or authorities designated by it to implement the operation submit their comments within a specified period of time.

2. Following this examination, the Commission may reduce or suspend assistance in respect of the operation or a measure concerned if the examination reveals an irregularity or a significant change affecting the nature or conditions for the implementation of the operation or measure for which the Commission's approval has not been sought.

3. Any sum received unduly and to be recovered shall be repaid to the Commission. …’

Facts of the case

6 By decision of 22 December 1993 addressed to the Italian Republic (‘the decision to grant’), the Commission of the European Communities granted financial assistance from the ERDF for the construction of a motorway between Palermo and Messina in Sicily (‘the ERDF project’). The works necessary for the implementation of the project were divided into 10 lots.

7 In accordance with Article 4(1) of Regulation No 2052/88, Community operations are established through close consultations between the Commission, the Member State concerned and the competent authorities and bodies designated by the Member State at national, regional, local or other level. In that respect, it is apparent from the annex to the decision to grant that the appellant was designated as the authority responsible for the implementation of the project.

8 By letter of 26 September 1997, the appellant asked the Commission for an extension of the times allowed for payment for several lots.

9 In its letter in response of 30 October 1997, the Commission, after pointing out that an extension had already been granted until 31 December 1997, stated that all the necessary steps were to be taken as a matter of urgency to complete the works by that date at the latest.

10 By letter of 17 June 1998, the appellant submitted to the Italian Ministry of the Treasury and to the Commission the final certification of expenditure undertaken up to 31 December 1997, the request for payment by the ERDF and the final implementation report.

11 On 23 July 1998, the Commission returned that report to the Ministry of the Treasury on the ground that it did not contain all the information necessary to close the ERDF project and asked the Italian authorities to submit a new final report containing in particular, in respect of each lot, a statement on the technical and financial progress achieved by 31 December 1997 and appropriate proof of the reasons for the delay in the execution of the works.

12 After having examined the new final report, the Commission, by letter of 10 February 1999, informed the Ministry of the Treasury that that report showed that the appellant’s commitment to finance the execution of the works relating to the said project by 31 December 1997 at the latest had apparently not been complied with, only 2 of the 10 lots provided for having been completed by that date with, moreover, a delay of two years. In those circumstances, the Commission explained that any settlement of the balance of the assistance would be made taking into account the expenditure actually incurred in respect of the two lots completed, provided that the executed works were in compliance with the original project.

13 On 21 December 2001, the Commission sent the Italian Republic a proposal for closure of the ERDF project on account of the delays established in the execution of the works. That proposal for closure was drawn up on the basis of expenditure incurred by 31 December 1997 in respect of works completed by 31 December 1999.

14 By letter of 14 February 2002, the applicant submitted its written comments on that proposal.

15 On 5 September 2002, the Commission sent to the Italian Republic the contested decision taking into account the expenditure incurred by December 1997 in respect of works completed by 5 September 2002. Under that decision, a copy of which was sent to the appellant, the unspent balance to be withdrawn is EUR 26 378 246 and the amount to be recovered is EUR 58 036 177.

The contested order

16 On 14 November 2002, the applicant brought an action for annulment of the contested decision. By the contested order, the Court of First Instance dismissed that action as inadmissible. The main grounds for that order are as follows:

‘55 [T]he contested decision … had the effect, on the one hand, of disengaging the ERDF to the extent of the amounts of assistance not yet granted in respect of expenditure which had become ineligible and, on the other, of allowing the Commission to recover the amounts already paid by the ERDF in respect of that expenditure. The contested decision thus had the effect of “cutting off” the ERDF financial assistance (order in Case T-105/01 SLIM Sicilia v Commission [2002] ECR II-2697, paragraph 47).

56 With regard to the determination of the effect of that decision on the applicant, it must be pointed out that, under the original decision granting the disputed assistance, dated 22 December 1993, the applicant was the authority responsible for carrying out the project …

57 In that situation, the contested decision could be regarded as having directly affected the applicant’s legal situation only if, by virtue of that decision, and without the Italian Republic’s having had any discretion in that regard, that applicant had, on the one hand, been deprived of payment of the withdrawn amounts corresponding to sums not yet received from the ERDF by way of the disputed assistance and relating to expenditure which had become ineligible and was, on the other hand, obliged to refund the amounts unduly paid corresponding to sums already received by way of that assistance and intended for the implementation of expenditure which had become ineligible.

58 However, the Court has already held that no such consequences derive either from a Commission decision terminating ERDF financial assistance or from any other provision of Community law intended to govern the effect of such a decision (order [of the Court of First Instance] in SLIM Sicilia v Commission … paragraph 51).

59 In that regard, it must, as a preliminary point, be recalled that, according to the institutional system of the Community and the rules which govern the relations between the Community and the Member States, it is for the Member States, in the absence of any contrary provision of Community law, to ensure that Community regulations are implemented within their territory (judgments in Joined Cases 205/82 to 215/82 Deutsche Milchkontor and Others v Germany [1983] ECR 2633, Joined Cases 89/86 and 91/86 Étoile commerciale and CNTA v Commission [1987] ECR 3005, paragraph 11 … ). As regards more particularly financing measures adopted within the framework of the ERDF, it is incumbent upon the Member States … to take the measures necessary to recover sums lost as a result of abuse or negligence.

…

61 Within that system, it is therefore for the Member States, according to the case-law of the Court of Justice, to implement the Community regulations and to take the necessary individual decisions regarding the traders concerned ...

…

65 It is clear that in this case there is nothing to prevent the Italian Republic from deciding to defray out of its own funds the withdrawn portion of the Community financing so as to finance the completion of the works relating to the project in question. In that regard, it must, in particular, be pointed out that, under Article 4(1) of Regulation No 2052/88, ERDF assistance is to be such as to complement or contribute to corresponding national operations and that Article 9 of Regulation No 4253/88 further provides that, in accordance with the principle of additionality, Community assistance may not replace public expenditure undertaken by the Member State.

66 With regard … to restitution of sums unduly paid, it must be pointed out that, in the contested decision, the Commission did no more than inform the Italian Republic that sums covered by a Community payment and corresponding to expenditure which had become ineligible had to be recovered by the ERDF. In contrast to the practice usually followed by the Commission in connection with unlawful aid declared incompatible with the common market, the contested decision does not include any provision requiring the Italian Republic to recover the sums unduly paid from their beneficiaries …

…

68 The proper implementation of the contested decision therefore requires only, as the Commission rightly maintains in its written submissions, that the Italian Republic refund to the ERDF the sums unduly paid which are indicated therein …

…

71 As regards ERDF financial assistance, the Court has already held that there [is] no evidence to indicate that the Member State has no discretion or indeed no decision-making powers as regards such reimbursement (order [of the Court of First Instance] in SLIM Sicilia v Commission … paragraph 52).

…

73 It cannot … be excluded that particular circumstances may lead the Italian Republic to decide not to claim reimbursement of the disputed assistance and itself to bear the burden of reimbursing to the ERDF the amounts which it wrongly considered itself authorised to pay …

…

Forms of order sought

17 The appellant claims that the Court should set aside the contested order and, consequently, take the appropriate measures to continue the proceedings and make an order as to costs.

18 The Commission claims that the Court should dismiss the appeal and order the appellant to pay the costs.

The application for the contested order to be set side

19 In support of its appeal, the appellant puts forward four pleas in law:

– infringement of Articles 113 and 114 of the Rules of Procedure of the Court of First Instance;

– infringement of Article 230 EC;

– infringement of the first subparagraph of Article 4(1) of Regulation No 2052/88 and of Article 9(1) of Regulation No 4253/88, and

– defective reasoning.

20 In its second and third pleas, which it is appropriate to examine together and first of all, the appellant submits that the contested order is based on a false premiss, that is, that the Regione Siciliana is a person separate from the Italian Republic, the Member State which was the recipient of the financial assistance, whereas, being a territory forming an integral part of that Republic, it has the right, in the same way as the latter, to bring an action for annulment of the contested decision.

33 The second and third pleas must therefore be rejected.

34 Nor can the first and fourth pleas put forward by the appellant, in which it complains that the contested order infringed Articles 113 and 114 of the Rules of Procedure of the Court of First Instance and was vitiated by defective reasoning, lead to the setting aside of the contested order.

38 As regards the fourth plea, in which the appellant submits that the findings of the Court of First Instance are inconsistent, arbitrary and not adequately reasoned in that they are based on an insufficient preparatory enquiry and on unsubstantiated presumptions, it is sufficient to refer to the grounds of the contested order, set out at paragraph 16 of this judgment, from which it may be seen that the Court of First Instance examined in a detailed and consistent manner whether the appellant had standing to bring proceedings.

39 It follows from all the above considerations that the appeal must be dismissed.

Costs

40 Under Article 69(2) of the Rules of Procedure, which applies to appeal proceedings by virtue of Article 118 thereof, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the appellant has been unsuccessful, the latter must be ordered to pay the costs.

On those grounds, the Court (Grand Chamber) hereby:

1. Dismisses the appeal;

2. Orders the Regione Siciliana to pay the costs.

[Signatures]

* Language of the case: Italian.